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Debt, Taxes and Politics
by Doug Short,
Doug Short provides charts of gross federal debt as a percentage of GDP, with estimates to 2015. As the charts illustrate, there is logic to the ratio increases within the historical context of two World Wars and the Great Depression. Likewise, the steadily decreasing ratio over the next 35 years enabled the tax cuts in 1964. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the direction of future tax rates? Who knows? This is, after all, a congressional election year.
Market Thoughts and the Long-Term Outlook for Inflation
by David A. Rosenberg of Gluskin Sheff,
The bull market in bonds will end reasonably close to the point in time that inflation (or deflation) bottoms. This is because the major economic factor that correlates consistently with the direction of market-determined interest rates, at least for long term Treasury Bonds, is CPI Inflation. Core inflation should recede from around 1 percent now to near 0 percent in the next 12-to-24 months, which would imply an ultimate bottom in the long bond yield of 2.5 percent and 2 percent for the 10-year T-note.
Why Immediate Annuities Make Sense
As they approach retirement, baby boomers are increasingly concerned about how best to manage their portfolios during the decumulation phase of their lives. One of the challenges for advisors and investors is understanding what role annuities should play, if any. Geoff Considine shows that immediate annuities should be an important part of a decumulation strategy.
The Opportunity in Build America Bonds
by Jeff Westergaard,
While the unique aspects of Build America Bonds (BABs) and recent Treasury Department actions are meaningful, the risks to investors have been over-emphasized. BABs remain an attractive vehicle for investors and issuers, and the market for them is likely to grow.
Jeremy Siegel on Why Stocks are Undervalued
by Dan Richards,
The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. In the transcript of this interview, Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios.
It's Always Darkest Before the Dawn (of Earnings Reports)
The gold market looks like yet another bubble. Over the last three years gold gained 85 percent while the broader Commodities Index declined 19.8 percent. The current surge, however, is related to 'fear factor' trade compounded by huge hedge buying of gold futures. Meanwhile, even after the rally of the last week, stocks still look cheap. The S&P 500 should close out 2010 with a gain of 8 percent, which is 9 percent higher than current levels. Corporations flush with cash and with surging revenues and earnings are a buy.
Deficits Monetary and Moral
by Michael Lewitt,
"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."
Improving on Morningstar's Ratings: Moving Beyond Past Performance
Past returns provide little or no help in choosing the best fund going forward, and Morningstar's stars are the best known example of this failure. In this guest contribution, Tom Howard presents new evidence of the failure of past performance to predict future returns, and shows how his strategy-based rating methodology offers measurably better predictive power.
Niall Ferguson on Japan, China, and the US
by Dan Richards,
Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.
Debt-to-GDP, Federal Tax Brackets and Politics
by Doug Short,
Doug Short provides charts of gross U.S. federal debt as a percentage of GDP since 1900, with key historical events and presidential administrations highlighted. As the charts illustrate, the recent financial crisis and steep market decline triggered a dramatic acceleration in the ratio. With the 2001 and 2003 tax cuts expiring this year, will the gross federal debt be a factor in determining the future direction of the country's tax rates? Who knows? This is, after all, a congressional election year.
Asset Allocation Matters, But Not as Much as You Think
by Robert Huebscher,
The market downturn has caused a rethinking of many core principles underpinning investment advice, chief among them the role of asset allocation. We talk with Yale's Roger Ibbotson about the impact of market returns and active management in explaining return variance and the role of asset allocation going forward.
Why Wall Street Won't be Reformed
by Robert Huebscher,
Michael Lewitt, author of the highly respected HCM Market Letter, has just released a new book, The Death of Capital. In this interview, he identifies the challenges facing those who seek to regulate Wall Street, and why most of the proposed reforms are likely to fail.
Insight on the Current Status of the Housing Market
by Team of American Century Investments,
Both existing and new residential homes sales have seen impressive increases in volume over the past several months ending in April. Two factors will likely weigh on residential home sales for the remainder of this year, however. The first factor is the expiration of the homebuyer tax credit. The second is the rate of economic recovery and growth in employment for the remainder of this year. Over the next one to three years, little can contribute more to recovery in the residential housing market than reduced unemployment accompanied by rising incomes and increased consumer confidence.
Europe: Value or Value Trap?
by Dan Trosch, CFA,
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
Three Ways to Improve Safe Withdrawal Rates
Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.
Market Musings: Manic-Depressive Mondays
by Doug Short,
On Friday CNBC ran a piece observing that Mondays have strongly outperformed the other days of the week in 2010. Doug Short provides two pairs of tables that allow us to compare the behavior of weekdays during two nasty bear markets and the rallies that followed. Monday has indeed behaved strangely over the past decade. The key factor is whether we're in a bull or a bear market. Now that CNBC has publicized the 'buy on Friday, sell on Monday concept,' however, Short wouldn't put much 'stock' in this strategy going forward.
Correction Should Be Nearing Completion
The worst of the downturn should be behind us, but it will likely take some additional time before markets can repair themselves. Looking ahead, one positive factor is that market valuations have become more attractive in recent weeks, as prices have dropped while earnings have increased. Over time, additional clarity around the situation in Europe and financial market reform in the US should provide a measure of stability; and a sense that the economic recovery remains on track should help spark a turnaround in the recent aversion to higher-risk assets.
Search Engine Marketing for Financial Advisors
by Dan Sommer,
How do you take advantage of search engine marketing as a financial advisor? The goal of search engine marketing is to ensure that your website appears on as many results pages as possible for queries that relate to your business, and in this guest contribution Dan Somer explains the details of Search Engine Optimization (SEO) and Pay-Per-Click (PPC) advertising.
The Number One Way to Stay Motivated Breakthrough Research from the Harvard Business Review
by Dan Richards,
In a multi-year study, researchers at the Harvard Business School asked 600 managers from dozens of different companies to rank the impact of five factors that are normally associated with motivation - recognition, incentives, support from managers and colleagues, clear goals and a sense of making progress. Dan Richards discusses their findings and the takeaways for financial advisors.
Investors Face a New Health Care Landscape: An Interview with Michael Liss
After a year of intense partisan combat and fiery debates on Capitol Hill, President Obama signed a massive, nearly $1 trillion health care bill on March 23 that reshapes an industry that accounts for one-sixth of the U.S. economy. No one at American Century Investments® has followed the health care reform bill more closely than Michael Liss, vice president and portfolio manager for American Century Value, the company's flagship value portfolio, and he offers his thoughts on legislation. We thank American Century Investments for their sponsorship.
How Much is that Investment Worth in Real Money?
by Adam Jared Apt,
In the latest installment of his series of articles geared to the educated layman, Adam Apt looks at the topic of the time value of money, and how discount rates can be used to determine the value of a security. He shows the practical applications of present value calculations and its limitations.
Lacy Hunt: Keynes was Wrong (and Ricardo was Right)
by Robert Huebscher,
Underpinning the Obama administration's economic policies is the work of John Maynard Keynes, the legendary British economist who called for large fiscal and monetary interventions to counter the Great Depression. On this critical issue, Keynes was wrong, says Lacy Hunt, the internationally renowned economist with Texas-based Hoisington Investment.
Investing Insights from Doctors
by Dan Richards,
Dan Richards works out in the early mornings with a psychiatrist, who recently forwarded an article in the New York Review of Books by Jerome Groopman, a physician and frequent writer on the challenges of modern day medicine. As Dan read it, he was struck by the parallels between the things that cause doctors and investors to go wrong.
Unconventional Wisdom: An Interview with Robert Shiller
by John Heins,
"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.
Shameless
by Michael Lewitt,
The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.
behavioral leapfrog
by tom brakke of the research puzzle,
Analyst projections of earnings per share values help define the market's expectations. Analysts, however, tend to factor in the estimates of other analysts when making their projections, and this leads to a game of behavioral leapfrog that can drive estimates up or down over time independent of actual performance. This leaves investors with a choice. We can adopt strategies that take advantage of the game of leapfrog that we observe, or we can do our homework and, if the time is right, get out ahead of the army of frogs by taking the biggest leap we can.
Fixed Income Short Duration Bonds
The fixed-income team at American Century Investments doesn't foresee sudden surges in inflation or interest rates in the immediate future, but they are on the horizon. "Near-term inflation concerns remain low due to lingering weak economic fundamentals," says David MacEwen, chief investment officer for fixed income. "However, looking long-term, the unprecedented levels of fiscal and monetary stimulus used to fight the recession will eventually result in higher inflation." (This is sponsored content.)
Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry
by Dan Richards,
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
Building High Net Worth Client Loyalty with Social Security
Long dismissed as a supplemental income stream only for retirees with fewer assets, Social Security benefits can be important for clients of all asset levels, including high net worth (HNW) investors. As you are well aware, HNW clients are often particularly sensitive to government taxation and are usually interested in strategies which can help them retain or reclaim their money. We thank BlackRock for this article and their sponsorship.
The Potemkin Market
by Michael Lewitt,
We are again privileged to publish the current issue of Michael Lewitt's newsletter, titled The Potemkin Market. Lewitt updates his forecast for the S&P 500, criticizes the current financial reform efforts and the ongoing GSE bailout and Fed Chairman Bernanke. Lewitt argues that risk is overpriced in many segments of the market.
Ten Tips to be More Likeable
by Dan Richards,
When Dan Richards ask advisors about what it takes to attract and retain clients, they give him answers like above average returns, preserving capital in tough markets and strong communication. Those are all true - to these can be added delivering strong value and having clients trust your competence and integrity. One other factor is often overlooked, however - and that's likeability.
Risk Management through Costless Collars
by Geoff Considine,
Nassim Taleb and Zvi Bodie are among those who advocate a wealth management strategy that includes options. Despite their evangelism, though, options are rarely a part of retirement portfolios. The costless collar, a straightforward options strategy, gives investors the upside of an asset class (such as equities) while absolutely limiting the downside risk.
Ned Davis: The Cyclical Bull Rally is Not Over
by Robert Huebscher,
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
Don?t be Misled by Morningstar?s Box Score Results
by Robert Huebscher,
Morningstar has published its latest Box Score Results, showing the performance of active managers across each of the nine style boxes. We report these results, along with those of another study by William Thatcher of the Hammond Group, which explains why Morningstar's results can be highly misleading.
Luck vs. Skill in Mutual Fund Alpha Estimates
by Michael Edesess,
A long-standing research thread has shown that professionally-managed portfolio returns strongly resemble a random walk about the market average. This is interpreted to mean that professional money managers cannot predictably beat the market. A new study by Eugene Fama and Kenneth French uses a novel statistical approach to add evidence to that record- but with an important caveat.
Retailers Face the New Frugality
by Robert Huebscher,
Whether they sell high-end designer clothing or tractors and pet food, retailers across the country are girding for leaner times. Consumer spending has dropped to 10% below its historical trend line, creating a landscape with far too many stores and far too much merchandise for consumers' thinning wallets to support. Along with the CEOs of Fortune 500 retailers, we attended a conference in New York last week looking at trends in consumer behavior, and we file our report.
Taste Testing Investment Style Sausages
by Ron Surz,
Equity indexes, like those offered by Russell and S&P are the investment-world equivalent of sausages - chopped up pieces of meat in tightly wrapped packages. Most shoppers buy sausages based on brand name, as do investors when they choose their benchmarks. In this guest contribution, Ron Surz dissects these index sausages and explains the real differences in their ingredients.
The Financial Market Solution to Carbon Emissions
by Robert Huebscher,
While health care remains the hot topic on Capitol Hill, another piece of legislation is poised to gain similar attention. Regulating carbon emissions to address the threat of global warning is a top priority of the Obama administration, and its favored approach is to create a "cap-and-trade" market. John Parsons, an expert in the field, explains how this financial market solution might work.
Will Momentum Move Your Portfolio?
by Robert Huebscher,
Instead of mixing value and growth stocks, investors would be far better served by combining value and momentum stocks, according to Cliff Asness, co-founder and Managing Principal of AQR Management. In fact, momentum has "kicked butt" when compared to growth over the last 80 years, Asness said.
Are REITs Now Undervalued?
The last couple of years have been rough for real estate, but there was a time not too long ago when it seemed that this was a 'special' asset class, with REITs providing valuable diversification benefits and consistently high returns. Do today's low valuations represent an opportunity to buy? Can investors expect a return to low correlations for REITs with the major equity market indexes?
Why Credit Matters: Fixed Income Investing in a Changed Landscape
by Janus,
The recent dislocation in the fixed income market is likely to transform how investors and asset managers approach fixed income investing for years to come. The corporate credit sector may now be the single most important sector in generating risk-adjusted outperformance. In Janus' recent brief, Why Credit Matters, they discuss the structural market changes that have occurred and the importance of fundamental, bottom-up credit analysis and robust investment risk management in navigating this changed landscape. We thank them for their sponsorship.
Jim Cramer Exposed: Does He Generate Alpha?
by Adam Jared Apt,
Paul Bolster and Emery Trahan, professors of finance at Northeastern University, were curious about the Mad Money phenomenon, and applied the full force of their analytical powers to a study of Jim Cramer's advice. They published their analysis earlier this year, and it reveals answers to key questions - such as whether Cramer's picks move the market or whether Cramer can legitimately call himself a skillful stock picker.
The New Normal and Asset Allocation Merriman?s Response
by Larry Katz, CFA,
Larry Katz, Director of Research at Merriman, Inc., responds to Geoff Considine's article two weeks ago, What the New Normal Means for Asset Allocation. He has multiple objections concerning much of Considine's logic, and would not recommend his alternative portfolio to their clients.
Results 5,701–5,750
of 5,764 found.
