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Waiting for Godot
Like the enigmatic title character in Waiting for Godot, clear signals of U.S. economic health remain much anticipated but elusive. The year 2012 saw consumers and businesses mimicking the Samuel Beckett play?? - with optimists waiting for things to get better and pessimists waiting for things to get worse.
Energy and the End of Growth
by Michael Edesess,
Is economic growth coming to an end? That's been a hot topic of discussion, thanks to a paper by Robert J. Gordon. It had a simple but striking thesis: 'There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely.' But before 1750 there were no fossil fuels either. Only once humans tapped the large deposits of coal and oil did economic growth truly awaken. The history of economic growth is, so far, the history of fossil fuels. This causes us to wonder whether economic growth will end when it is no longer powered by fossil fuels.
From Cliff to Ceiling: No Clear Signal for Investors
We expect the last minute deal in the lame duck session to result in about 1.3% of GDP contraction, slightly less than our earlier prediction of about 1.5%. The compromise eliminated (or at least delayed) the possibility of the most damaging equity market outcomes. The deal failed to set up a framework for structural deficit reform in 2013. Almost immediately, Congress must address the debt ceiling, the sequester and the continuing resolution to keep the government funded.
Surging EM Corporate Bond Issuance: Cause for Concern?
by Shamaila Khan of AllianceBernstein,
New bond issuance by emerging-market companies boomed in 2012, leading to fears of a bubble. But we think this market growth is positive for investors, rather than a harbinger of soaring debt levels or deteriorating credit quality.
Another Look at Small-Cap Myths
by Francis Gannon of The Royce Funds,
A few years ago we wrote about several small-cap myths. As we begin the New Year, we thought it might be helpful to revisit some of the more prominent misconceptions about our chosen asset class and to examine how they have factored into recent performance.
2013 Forecast: Good Economy, Challenged Markets
We enter 2013 bombarded by conflicting signals. While fundamentals have been mixed of late, longer-term themes our "tectonic shifts" like the energy revolution are gaining momentum and promising to make positive contributions sooner rather than later. And while salutary measures taken by policymakers have eased global risks and lessened fears of Armageddon, there is considerable work yet to be done.
And That's the Quarter that Was
by Ron Brounes of Brounes & Associates,
Politics ruled the day over the past three months (and beyond) and unfortunately the trend may very well continue as the averted "fiscal cliff" was merely postponed for another two months. For now, investors are happy, but what will tomorrow bring? (That's a question for you, Prez Obama and Speaker Boehner.) Happy New Year
Is Fracking a ?Happy Solution? to our Energy Needs?
A few weeks ago, John Mauldin called fracking a 'happy solution' that will produce jobs, potentially solve our trade deficit and generate new tax revenue, though energy prices may rise in the process. But how excited should we be about the 'shale revolution'?
Somewhere Over the Rainbow
We are 13 years into a secular bear market in the United States. The Nasdaq is still down 40% from its high, and the Dow and S&P 500 are essentially flat. European and Japanese equities have generally fared worse. The average secular bear market in the US has been about 11 years, with the shortest to date being four years and the longest 20. Are we at the beginning of a new bull market or another seven years of famine? What sorts of returns should we expect over the coming years from US equities?
Getting the Most from Your Investment Committee
by Bob Veres,
Investment committees are a little bit like fingerprints: they come in all shapes and sizes, and no two are exactly alike in form or function. So advisory firms that have investment committees ? or are considering creating one ? can learn a lot from one another. My research has identified some best practices for this flexible management tool, by comparing notes among advisors on how they are managing their IC teams.
ECRI Update: Flunking Recession 101
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 127.2. Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.4, up from last week's 4.6. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.
Comparing Long-Term Care Alternatives
by Joe Tomlinson,
Should clients buy expensive long-term care insurance they might never need, or go without insurance and risk a big hit to their life savings? For advisors whose clients face this critical dilemma, there's now a third option: life insurance and annuity products that also incorporate long-term care insurance.
Shared Sacrifice
by David Rosenberg,
Now that everyone is focused like a laser beam on Fiscal Armageddon, it may be more appropriate to look at what is happening on Main Street rather than Washington. Looking ahead, it is going to be more about the economy, and taking it a step further, at times like these, it is important to understand where the real economic power resides, and this is with the people.
Market at Mercy of Fiscal Cliff Until Resolution
by Liz Ann Sonders of Charles Schwab,
Politics and the fiscal cliff are dominating market action and adding to the uncertainty factor.
Sentiment is better, technicals are mixed and valuation is reasonable, but until we get past the cliff, fundamentals won't matter a lot.
There are some coiled springs forming that could help offset any fiscal-cliff related contraction next year.
A Critique of Grantham and Gordon: The Prospects for Long-term Growth
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
The Fallacies in Today?s Retirement Plan Assumptions: Putting the Hedonic Pleasure Index to Work
by Bob Veres,
Are you dramatically underestimating your clients' retirement lifestyle expenditures when you use Monte Carlo software? If you stop and look at a number of important assumptions hidden in the current models, you'll suddenly have a lot less confidence in the retirement plans you?re mapping out for your clients.
The Downside to Socially Responsible Investing
by Robert Huebscher,
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
Six Technology Integration Disasters to Avoid
by Jennifer Goldman,
Technology integration is the Holy Grail for today's top-performing financial advisors. When applications talk to each other, advisors can run their practices more efficiently, save money and reduce the size of their staff. That all sounds great, but I'm writing to offer a word of caution: I've seen many such efforts end in disaster.
David Rosenberg on Hurricane Sandy: Missing the Boat
by David Rosenberg,
As I read and digest reports estimating the damage from the devastating storm, I sense that there are far too many economists who are relying too heavily on past major hurricanes as they draw their conclusions from the current experience with Sandy.
The Yield Hunt
by Michael Lewitt,
The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.
Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick
by Bob Veres,
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
Renminbi on the International Stage
For more than a decade, China's currency, the Renminbi (RMB), had been on a path of appreciation, but some weakness this year generated renewed talk about whether the currency is fairly valued against global currencies. As global equity investors, we are constantly faced with currency changes. This is an important factor when considering our investments, because currency movements impact companies' earnings and operations.
An Alternate Reality
by Robert Stimpson of Oak Associates,
The largest positive factor affecting the environment for stock prices this year has been the recovery in the housing sector. After years of struggle, the sector appears to have turned the corner. The housing market had been showing signs of improvement for some time, but the debate as to whether the recovery was legitimate weighed on the group and added to concerns over the economy.
Inflation: Washington is Blind to Main Street's Biggest Concern
by Peter Schiff of Euro Pacific Capital,
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo...except the voters.
Stiglitz vs. Bremmer: What?s Next for the Global Economy?
by Ben Huebscher,
On October 3rd, the same night Barack Obama and Mitt Romney were clashing in their first debate, two equally polarized men met in New York City's Kaufmann Concert Hall to discuss the future of economics, both here and abroad.
Collapse in UK Investment Income Is Cause for Concern
by Darren Williams of AllianceBernstein,
A collapse in direct investment income was the main factor behind the UK's record second-quarter current account deficit. It's too early to know whether this represents a permanent shift. But, if it does, it would make rebalancing the economy more difficult and have important implications for the pound.
How to Build a Portfolio
by Adams Jared Apt,
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
Stocks Should Overcome Hurdles to Continue the Bull Market
Although global economic data has been relatively weak in recent years, risk asset prices have nonetheless advanced. We would attribute this trend to the fact that weak economic growth does not, by itself, limit the potential for risk assets. In our view, the liquidity-driven reflationary policies of the world's central banks have been a more important factor for asset prices than economic growth levels have been.
Jim Bianco ? Markets Will Benefit From Disastrous Fed Policy
by Robert Huebscher,
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
Investing in a Resource-Constrained World
The potential consequences of stagnant oil production and climate change for society are written about frequently, but here is a simpler question that is important to our community: How are these and related facts likely to affect investment returns going forward? How can we even frame such questions usefully?
Value Investing in a Macro-Driven Environment
by Robert Huebscher,
The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.
The Fed's "X" Factor
by Zach Pandl of Columbia Management,
The most surprising element in last week's Federal Reserve (Fed) decision was not the announcement of Mortgage Backed Securities (MBS) purchases or the extension of its funds rate guidance to "mid-2015," both of which were signaled fairly clearly in advance. Rather, it was the fact that the aggressive monetary easing occurred alongside an upgrade to the central bank's economic forecasts.
The Growth Factor
During July, the domestic economy continued to slow and Europe again appeared on the precipice of disaster. On August 3rd, the July employment report showed unemployment at 8.3%, essentially unchanged from June. We believe the real story is that the civilian labor force participation rate has fallen to 63.7%, which is down from a peak of 67.3% in 2000.
Beyond the Ultimate Death Cross
by Georg Vrba, P.E.,
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
The Plight of the Conservative Retiree
by Michael Nairne,
Today's extraordinarily low rates on top of a lower equity premium leave conservative retirees with the risk of heightened capital depletion as poorer portfolio returns may be inadequate to offset the combined impact of withdrawals and inflation.
Why Are Advisory Fees Lower Than They Have To Be?
by Bob Veres,
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
Recession is Not Imminent
Perma-bears are bombarding us with alarm bells, sounding the doom of the US economy. We find ourselves in yet another 'summer slowdown scare,' for the third year running. In 2010 and 2011, the purported slowdowns turned out to be soft landings. Investors who ran to the sidelines stared in disbelief as the stock market roared ahead, leaving them behind. We are likely in the same position now.
The Father of Efficient Markets: Is Warren Buffett Smart or Lucky?
by Dan Richards,
Eugene Fama is generally regarded the father of modern finance. His research has expanded upon the capital asset pricing model to identify the value and small-capitalization contributions to risk. Dan Richards spoke with him on May 1, the day before his guest talk at the CFA Institute annual meeting. This is the transcript of the interview.
What Does a Dividend Tax Hike Mean for Dividend-paying Stocks?
by Steve Chun,
The Bush tax cuts are due to expire at the end of this year, but owners of dividend-paying
stocks need not be afraid. Historically, changes in tax regimes have had little
effect on the value of the aggregate stock market. Historical data show that even
vulnerable asset sub-classes - high-yield stocks, for example - have not lost value
long-term as a result of similar tax increases.
The Essential Ingredient for Exceptional Success
by Dan Richards,
Advisors often ask me what they have to do to truly excel. They expect an answer
based on their value proposition, the prospective clients they focus on, how effectively
they get in front of those prospects, or their discipline and work ethic. A talk
I attended last fall provided a clear cut - and surprising - answer.
The Bargains in Europe's Great Oversell
by Bob Veres,
When was the last time we saw negative headlines drive valuations as low as they
have in Europe? Evermore's David Marcus, who succeeded Michael Price as manager
of the Mutual European Fund, says this period of obsession with Greek debt, bank
restructuring and single-digit P/Es may be known as The Great Oversell.
Weekly Market Commentary
Machines talking to machines. That is how some describe the machinations of Wall Street currently. Clearly, as volatility dissipates, the balance of orders becomes driven by execution systems and tonality that looks to outsiders as more artificial than negotiated between two parties. Thus, a chain reaction a decade in the making has supplanted the human factor, opening up new avenues for greed and opportunity. All the while, obstacles and inefficiencies are being manipulated out of financial trading. Of course, this is not an American phenomenon, it is a global one.
Results 5,651–5,700
of 5,895 found.
