ACTIONABLE ADVICE FOR FINANCIAL ADVISORS: Newsletters and Commentaries Focused on Investment Strategy

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2014-05-29 A Stealth Recovery by Pamela Rosenau of HighTower Advisors

In the fall of 2010, I had written that several indicators suggested the U.S. was entering “stealth economic recovery” mode. This “stealth” recovery coupled with low interest rates and changing demographics were going to usher us into “the age of the Dividend Darlings -- companies that pay sizeable, sustainable, and growing dividends.” Investors would not only replace their income exposure to lower yielding bonds, but also focus on growing income in the equity market.

2014-04-15 Running Backwards to Catch Up by Jerry Wagner of Flexible Plan Investments

Did you ever try to run backwards? I find walking backwards difficult enough. Running in reverse can send you tumbling.

2014-02-07 Knockout Punch for the Stock Markets? by Robert Isbitts of Sungarden Investment Research

Boxers are tough. So are secular bear markets. Whether or not we have been in one since back in 2000 (we say yes) is a subject of constant debate in the investment advisory industry. What is more important to investors today is whether past market behavior tells us anything important about the current environment? We think the answer is yes - human behavior repeats itself over and over again.

2013-12-21 What Has QE Wrought? by John Mauldin of Millennium Wave Advisors

Now that we have begun tapering, we will soon see lots of analysis about whether QE has been effective. What will the stock market do? The US economy seems to be moving in the right direction, but the Fed has forecast Nirvana (seriously) - do we dare hope they can finally get a forecast right? Or have they jinxed us?

2013-12-07 Interview with Steve Forbes by John Mauldin of Millennium Wave Advisors

For whatever reason, Steve Forbes seems to bring out the passion in me. When I think about what central bank policies are doing to savers and investors, how we are screwing around with the pension system, circumventing rational market expectations because of an untested economic theory held by a relatively small number of academics, I get a little exercised. And Steve gives me the freedom to do it.

2013-11-17 The Unintended Consequences of ZIRP by John Mauldin of Millennium Wave Advisors

Two recently released papers make an intellectual and theoretical case for an extended period of very low interest rates and, in combination with other papers from both inside and outside the Fed from heavyweight economists, make a strong case for beginning to taper sooner rather than later, but for accompanying that tapering with a commitment to an even more protracted period of ZIRP. We are going analyze these papers, as they are critical to understanding the future direction of Federal Reserve policy. Secondly, we’ll look at some of the unintended consequences of long-term ZIRP.

2013-10-26 A Code Red World by John Mauldin of Millennium Wave Advisors

The heart of this week’s letter is the introduction of my just-released new book, Code Red. It is my own take (along with co-author Jonathan Tepper) on the problems that have grown out of an unrelenting assault on monetary norms by central banks around the world.

2013-10-22 Bond Legend Dan Fuss on Rising Rates by Robert Huebscher (Article)

Having just celebrated his 80th birthday, Dan Fuss can claim a unique achievement ? his tenure in the fixed income markets has spanned a full market cycle, from the great bear market that began in the early 1950s through the equally great bull market that commenced in 1981. Fuss said today’s environment most closely resembles what he confronted in the late 1950s, when long-term rates were 3% and beginning their march upwards.

2013-10-01 The Eight Principles of Value Investing by Scott Clemons and Michael Kim (Article)

In any environment, but especially one characterized by uncertainty, eight principles of investing are critical. These bedrock beliefs help guide our thinking at the levels of asset allocation, security selection and identification of the third-party managers we engage to help manage our clients’ assets.

2013-09-25 Japanese Equities: Is the Bear Market Over? by Mark Ungewitter of Charter Trust Company

Japanese equities have spent the last twenty-four years in a secular bear market defined by lower lows and lower highs in market price. There is now hope that a new Prime Minister, and a new brand of economics, will reverse this multi-decade trend.

2013-09-24 William Bernstein ? “Stocks for the Long Run” by Michael Edesess (Article)

William Bernstein’s reading of history is that if you want to build a nest egg and protect against the “four horsemen” that threaten it over the long term, the best thing to do is invest in a globally diversified stock portfolio.

2013-09-17 Investing for Real People by Sponsored content by Oppenheimer Funds (Article)

Investor goals are the same, but solutions have changed. Today, aiming to meet basic needs requires new solutions. Laser focus on investor goals will help uncover appropriate investment opportunities. Expanding the opportunity set beyond the usual suspects will be critical to long-term success.

2013-08-24 US Equities: Secular Bull Market? by Mark Ungewitter of Charter Trust Company

The Dow’s 10-year moving average currently near 11,500 provides one measure of risk in today’s uncertain environment. Though impossible to predict, a reversion to (or through) this long-term average would be entirely normal from a behavioral perspective.

2013-08-17 Signs of the Top by John Mauldin of Millennium Wave Advisors

The investment media seems obsessed with the question of whether the Fed will taper. The real question should be not about "tapering" but about credibility. What happens when fundamentals become the narrative as opposed to what the central bank is doing? What happens if the Federal Reserve throws a liquidity party and nobody comes? Today we look at some of the fundamentals. The market is in fact overvalued, but that doesn’t mean it can’t become more overvalued. Is this August 1987 or August 1999?

2013-08-10 We Can't Take the Chance by John Mauldin of Millennium Wave Advisors

What would it have been like to be a central banker in the midst of the crisis in 2008-09? You’d know that you won’t have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that’s coming at you, and none of it is good. Major banks are literally collapsing, the interbank market is nonexistent and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we’ll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the nex

2013-06-25 The Price Your Clients Pay for Using Safe Withdrawal Rates by David B. Loeper (Article)

Safe-withdrawal rates (SWRs) are perhaps the most extensively studied topic in financial planning literature. But applying a single SWR-driven methodology to all clients neglects their unique and individual needs. A better approach is for advisors to assist clients in defining their ideal and acceptable goals and the relative priorities among them. Then they can demonstrate through Monte Carlo simulation the likelihood of the recommended plan becoming over- or under-funded relative to those goals.

2013-06-15 Economists Are (Still) Clueless by John Mauldin of Millennium Wave Advisors

The economic forecasts of mainstream economists are quite positive, if not enirely optimistic, reflecting the current data. Should we not take heart from that? Alas, no. This week we look at some of our recent musings on that topic, triggered by a letter from a very serious economist who took umbrage when I wrote disparagingly about economists and forecasting a couple months ago.

2013-06-11 Bursting the Bond Bubble Babble by Andy Martin (Article)

Interest rates will eventually go up. The 50-basis-point spike in May on the 10-year Treasury bond may have been the beginning. But despite industry and media assertions, history shows that there is nothing to fear from rising rates.

2013-05-28 Economic Climate Change & the Long-Term View on Yields by Sponsored Content from Loomis Sayles (Article)

Will rates rise? It’s a logical question. US Treasury yields have been in a secular downward trend since the 1980s and almost frozen at historic lows for the last several months. While recent cyclical improvements suggest the US economy is heating up, we do not expect interest rates to start soaring to record highs. The interest rate environment will eventually undergo climate change, but the process will be gradual. There are secular headwinds cooling rates, and we expect them to persist for years to come.

2013-03-12 Letters to the Editor by Various (Article)

Two readers respond to Joe Tomlinson's article, Can Advisors Add Value Through Fund Selection?, which appeared on February 26, and a reader responds to Wade Pfau's article, Breaking Free from the Safe Withdrawal Rate Paradigm: Extending the Efficient Frontier for Retirement Income, which appeared last week.

2013-03-07 Three Dimensions of Discipline by Team of Franklin Templeton Investments

As New Year's resolutions fade into guilty memories, it's a bitter reminder that maintaining discipline, in life and investing, is just plain hard. Despite best intentions, bear markets can tempt investors to sell everything, while bull markets can whip people into a buying frenzy, both courses of action that rarely end happily.

2013-02-27 Specializing in Tax-Friendly Investment Strategies by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup

Since the turn of the century (2000) investors have not had to think much about tax-friendly investment strategies due to two major bear markets. But times have changed. The stock market is near all-time highs and many, if not all, of investors' loss carry forwards have been used up. More importantly, the Obama administration has already raised tax rates on the wealthy and the outlook is for tax increases to broaden as part of the solution to taming our debt and deficit problems. The bottom line is that investors need a new strategy for this environment.

2013-02-05 Comparing Advisors to Jim Cramer: Measuring your Professional Alpha by Bob Veres (Article)

Jim Cramer, Suze Orman and other so-called investment pundits and gurus are constantly telling consumers that they can do a great job of managing their portfolios on their own. Let's look at what the research has to say about the various investment performance benefits that advisors should be able to give their clients during the accumulation phase of their lives ? excess returns above what do-it-yourself investors could obtain on their own. I call those excess returns 'professional alpha.'

2013-01-22 Sunglasses and Cockroaches ? Six Rules for Surviving in a Bear Market by Michael Skocpol (Article)

After more than three decades investing in Japanese securities, Peter Tasker has little patience for other investors' self-pity ? and he doesn't want to hear your horror stories from 2008. Overcoming the challenges posed by bear markets requires the adaptive instincts of a cockroach, and Tasker identified six lessons investors can take away from those lowly insects.

2013-01-07 Investments That May Keep Me Up at Night in 2013 by Charles Lieberman (Article)

The outlook for 2013 is quite improved compared with 2012. Domestic economic growth prospects are significantly less troublesome. The election is over. Europe has (painfully) slowly made progress in reducing its own budget problems. It is not all clear sailing, however. (It never is.) Europe remains a work in progress. All of the geopolitical risks of 2012, notably North Korea, Iran, and all of the rest of the Middle East, remain on the docket in 2013. And the battle over the U.S. budget will resume in the near future.

2013-01-03 Lessons Learned by Jeffrey Saut of Raymond James

Beginning of the year letters are always hard to write because there is a tendency to talk about the year gone by, or worse, attempt to predict the year ahead. Therefore, we are titling this year's letter in an attempt to share some of the lessons that should have been learned over the past few years.

2012-09-18 The Trend is Your Friend by Keith C. Goddard, CFA (Article)

John Hussman's recent market commentary, The Trend is Your Fickle Friend, highlighted the limitations of trend-following investment strategies that rely on moving-average crossover rules as a primary filter. But an extensive study conducted by our firm demonstrated that a simple moving-average crossover system outperforms buy-and-hold, while reducing drawdown risk and volatility.

2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)

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.

2012-07-24 Optimal Strategies for Secular Market Cycles by Michael Kitces (Article)

With alternative investments and active management strategies growing ever more popular, an advisor recently told me, 'It's just a fad and will end with heartache as all investment fads do. I've watched it play out over and over during my 30-year career.' But I am not persuaded. The secular market cycle today is different from the bear market 30 years ago, and not all market cycles favor the same investment strategies.

2012-07-10 Letters to the Editor by Various (Article)

Several readers respond to Bob Veres' article, The Profession's Faulty Assumptions: A Top Ten List, which appeared last week. Also, a reader responds to Joe Tomlinson's article, How Safe are Annuities?, which appeared on August 14, and a reader responds to Beverly Flaxington's column, Dealing with Gossip in a Small Firm, which appeared last week.

2012-05-01 Another Story of Too Much Debt: Investing During Unsustainable Economic Conditions by Brian McAuley (Article)

US-based investors cannot ignore the macro environment, and therefore must consider the consequences of our increasing indebtedness and its impact on capital markets. We can gain valuable insights into our fiscal problems from the housing bubble and the European sovereign debt crisis - lessons which every value investor should heed.

2012-04-24 Why a 60/40 Portfolio isn?t Diversified by Alex Shahidi (Article)

Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.

2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)

Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.

2012-03-20 A Look Back at the Performance of the Holy Grail by Theodore Wong (Article)

Back-tested results often look good on paper because stellar performance could have come from curve-fitting. If that were the case, then my 'Holy Grail' model would not have withstood the test of time. But in the 32 months that have passed since its publication, investors who heeded its advice would have outperformed the market on a risk-adjusted basis.

2012-03-13 Letter to the Editor - Tactical Asset Allocation v. Behavioral Finance by Various (Article)

Ken Solow, Michael Kitces and Sauro Locatelli respond to Christopher Sidoni's article, The Conflict between Tactical Asset Allocation and Behavioral Finance, which appeared on February 21.

2012-02-28 Jim O?Shaughnessy: What Now Works on Wall Street by Katie Southwick (Article)

Understanding the science of investing has been the lifelong passion of Jim O'Shaughnessy, whose 1996 book, What Works on Wall Street, was among the first to explain the benefits of quantitative, empirical methods. Now, with the hindsight of the two bear markets since, he has refined his approach - rejecting some of his original ideas in favor of improved ways to forecast market performance. His new and improved approach finds that a dividend-oriented global strategy is best in today's environment.

2012-02-21 Gundlach: The Two Questions that Matter Most by Robert Huebscher (Article)

Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.

2012-02-07 Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns by Laurence B. Siegel (Article)

A forecast of the equity risk premium (ERP) tells you how much to save, how to allocate assets between equities and fixed income, and how much you can consume. Given its great importance, the CFA Institute recently convened a group of top-level academics and practitioners to forecast future ERPs - and to reflect on similar predictions they had made a decade ago.

2012-01-24 Must Bond Investors Fear Rising Interest Rates? by Andrew D. Martin (Article)

Thirty-one years ago, in 1981, the one-year Treasury reached its all time high of 14%. Today it hovers around 0.10%. Never before have interest rates fallen so far. Many economists and investment advisors, seeing nowhere to go but up, expect interest rates to climb from these historic lows. But that would not be the catastrophe that many bond investors fear.

2012-01-17 Letter to the Editor - GLWBs by Various (Article)

A reader responds to Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on December 13, 2011.

2011-12-27 Vitaliy Katsenelson on Krugman?s Missed Call by Robert Huebscher (Article)

Vitaliy Katsenelson is the chief investment officer at Investment Management Associates, a Denver-based money management firm, and the author of two highly acclaimed books on value investing. In this interview, he identifies what Paul Krugman failed to see with regard to China, discusses the prospects for the European and domestic economies, and explains why Microsoft is a grossly undervalued stock.

2011-12-20 Gundlach on the Key Threat to Global Economies by Robert Huebscher (Article)

If class warfare is to be the dominant theme in next year?s presidential campaign, it will revive the premise of Ernest Hemingway's 1937 novel, To Have and Have Not, which he wrote in the midst of the second downturn of the Great Depression. That was also the title Jeffrey Gundlach gave his conference call with investors last week, during which he warned that wealth inequality will threaten European and domestic economies. Last week also saw Morningstar pass over Gundlach as a candidate for its fixed-income manager of the year award, so we?ll look at whether that decision made sense.

2011-12-20 Dennis Gartman Explains His Call on Gold by Robert Huebscher (Article)

Dennis Gartman has been publishing his daily commentary, The Gartman Letter, since 1987. He's been in the news lately because of a call he made last week on the price of gold. In this interview, he discusses the reasons behind that forecast.

2011-12-13 GLWBs: Retiree Protection or Money Illusion? by Wade Pfau (Article)

One of the most popular variable annuity riders is the guaranteed lifetime withdrawal benefit (GLWB), which offers downside protection through lifetime income, upside potential with step-ups based on market performance, and minimal surrender penalties. But, examining historical data, I have found that those riders carry a cost that will not be readily apparent to retirees: their cash flows rapidly decrease on an inflation-adjusted basis.

2011-12-06 The Quality Conundrum by J.J. Abodeely, CFA, CAIA (Article)

We are witnessing the end of a remarkable and confounding era for stocks, best described by the 'quality conundrum' investors faced for much of the last two years. During that time the combined outperformance of low-quality stocks alongside the underperformance of high-quality stocks was unprecedented in the last 30 years. Now, we are embarking on an era where high-quality stocks will likely significantly outperform low-quality stocks, resolving this conundrum.

2011-11-29 The Volatility Trap: Why Staying the Course Makes Sense by C. Thomas Howard, Ph.D. and Craig T. Callahan (Article)

Those who let emotions drive their investment decisions missed out on the October market surge, the largest monthly stock market return in 20 years. These investors have unwittingly fallen prey to the 'Volatility Trap,' failing to recognize - as our data show - that increased volatility is a precursor to higher returns.

2011-11-29 Sometimes We Lose Perspective by Scott A. MacKillop (Article)

It's been a rough ride lately for investors. Looking back over the course of my lifetime, however, what has been particularly exceptional is not recent market swings - these come and go - but rather the return one would have earned if they had been continuously invested in the stock market over the past 60-plus years.

2011-10-18 Gundlach: Markets Aren?t Cheap Enough Yet by Robert Huebscher (Article)

Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.

2011-10-04 Jeffrey Gundlach: Preparing for the Coming Crisis by Katie Southwick (Article)

Speaking at a luncheon in New York last week, Jeffrey Gundlach, the founder and chief investment officer of DoubleLine Capital, gave investors advice on how to survive pending crises at home and abroad. After outlining the current state of U.S. debt and tax policy, Gundlach advised against European investments, favoring the U.S. dollar and owning U.S. government bonds as a hedge against credit.

2011-09-20 The Power of Dividends ? And What They Say About Future Returns by Lance Paddock (Article)

The return on equities is driven by dividends, since companies must ultimately distribute their hard-earned cash to shareholders. Given that reality, recent history of dividend yields portends a disappointing future for equity investors, one of sub-par returns relative to historical averages.

2011-09-20 Letter to the Editor by Various (Article)

A reader responds to Dennis Gibb's article, The Risks of Exchange-Traded Products, which appeared last week.

2011-09-06 Predictably Incorrect by Bob Veres (Article)

I had to read through this commentary by behavioral economics researcher Dan Ariely twice before I was willing to draw the obvious conclusion. It's the biggest bunch of hooey I've ever read in the financial planning press.

2011-09-06 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)

If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?

2011-08-30 Errata and Letters to the Editor by Various (Article)

We correct a couple of errors which appeared in our article last week, The Simplest, Safest Withdrawal Strategy. A reader also responds to that article, and two readers respond to other recent articles.

2011-08-23 A Cautionary Note to my Fellow Gold Bugs by Emilio Vargas (Article)

The volume of missives I receive regarding the evolving debt-bubble collapse rises with the price of gold. The best time to buy gold was in 2001. Don't fall in love with gold now that the crisis is breaking and the price is going vertical.

2011-08-09 How Conservative Investing Threatens Retirement by Dan Richards (Article)

Just as the Great Depression left a generation with a poverty mentality that still persists, the two bear markets of the last 10 years risk shaped an entire generation's attitude to investing. That's a key finding from a survey of affluent Americans commissioned by Merrill Lynch and released earlier this year, and it raises important implications for how financial advisors should deal with conservatively-minded investors.

2011-07-26 Jeremy Siegel - Why I Changed My Mind about Index Funds by Dan Richards (Article)

Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, discusses what caused him to reject capitalization-weighted market indexes and what he chose instead. This is a transcript of the interview.

2011-07-26 Investing with a View of Significant Inflation by Bob Kargenian (Article)

Almost all the analysis we read has concluded that, with the Fed seemingly printing money out of nowhere, the inevitable consequence must be significantly higher inflation. We're not convinced, but we have identified which strategies are likely to best protect clients if inflation accelerates.

2011-06-07 How to Waste Time Effectively by Wendy Cook (Article)

Ah, the Internet. Could there be a more usefully annoying, time-sucking, time-saver? It's always there, ready to transport us to that crucial bit of information we need - or to distract us far away from what we need to be doing. How do you harness the power of the Internet without letting it gallop off with your valuable time?

2011-05-31 Fantasy-world Returns for Equity Indexed Annuities by Robert Huebscher (Article)

When research fails to meet the basic standards of academic rigor, its conclusions should be questioned. One such case is a recent paper, Real-World Index Annuity Returns, whose conclusions you should trust at your own risk.

2011-05-10 Howard Marks on the Human Side of Investing by Robert Huebscher (Article)

Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.

2011-05-10 Howard Marks on the Human Side of Investing-Q & A by Robert Huebscher (Article)

Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week. Here are excerpts from the Q&A.

2011-05-03 Gary Shilling - Five Things that can Derail the Recovery by Robert Huebscher (Article)

Die-hard deflationists - those who foresee a continued bull market in bonds - are so few in number these days they could all share an elevator, according to Gary Shilling. One is Gluskin Sheff's David Rosenberg, whose views are considered elsewhere in this issue. But the loudest such voice belongs to Shilling himself, who has advocated for a long position in Treasury bonds continuously since 1980, a stance that has always proved prescient so far.

2011-05-03 Martin Barnes - How Safe is the Equity Market? by Robert Huebscher (Article)

When members of the Federal Reserve Board seek counsel on tough issues, one of the economists to whom they turn first is Martin Barnes. Speaking publicly last week, Barnes addressed two themes in the US economy and markets: the potential for a sustained bear market in equities and the likelihood of higher taxes. These two distinct questions are both critically important to investors.

2011-05-03 P/E: Future on the Horizon by Ed Easterling (Article)

Most people expect P/E to measure current valuation and to show historical patterns. But more features are available from some versions of P/E. The methodology behind the Crestmont P/E enables investors to anticipate the future. It may not precisely predict the market ten years away, but it frames within a relatively tight range the likely outcome. One component from determining the Crestmont P/E is a means to assess the future trend line for EPS using estimates of future economic growth (GDP).

2011-04-12 A Top Value Manager Looks Outside the US by Robert Huebscher (Article)

David Winters, manager of the Wintergreen Fund, began his career working for Max Heine, where Seth Klarman and Michael Price also worked. In this interview, Winter discusses the why he believes many of today's best opportunities are outside the US and how he is hedging against the threat of inflation.

2011-04-05 A Trading System that Disproves Efficient Markets by Erik McCurdy (Article)

Efficient market adherents claim it is impossible to outperform the stock market over the long term. Although their principles are the foundation of modern investment theory, other compelling models, including the one I propose here, reveal that precisely the opposite is true, supporting the thesis that markets are highly inefficient.

2011-04-05 Letters to the Editor: GMWBs and the Permanent Portfolio by Various (Article)

A reader responds to our article, Understanding Variable Annuities with GMWBs, which appeared on March 1 and another reader responds to Geoff Considine's article, What Investors Should Fear in the Permanent Portfolio, which appeared on March 22.

2011-03-22 Consensus: Groundhog Decade for Stocks by Ed Easterling (Article)

Just as Bill Murray woke up to the same thing day after day in the movie 'Groundhog Day,' it's likely that your outlook foretells a groundhog decade for the stock market that will repeat its near-breakeven returns from the past decade.

2011-02-15 Toward an Understanding of Risk by Robert Huebscher (Article)

How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process.

2011-02-15 Assessing New Tools to Protect Against Tail-Risk Events by Jerry Miccolis (Article)

Protecting against sudden, severe market drops is as crucial as it is difficult. A plethora of approaches to this problem have been brought to market in last few years, and to evaluate them my firm developed a set of rigorous criteria. These criteria led us to a solution that works for us and for our clients.

2011-01-25 Advisor Perspectives Announces First Venerated Voices Awards by Advisor Perspectives (Article)

Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, today announced its first Venerated Voices? awards, recognizing the market commentators who were most frequently read by advisors during 2010. Awards were issued in three categories: The Top 25 Venerated Voices? by Firm, The Top 25 Venerated Voices? by Author and The Top 10 Venerated Voices? by Commentary.

2011-01-18 Richard Bernstein: The Antidote to Pessimism by Robert Huebscher (Article)

For an antidote to the bearish sentiment coming from David Rosenberg, look at Richard Bernstein. In contrast to Rosenberg's vision of Japan's lost decade, Bernstein expects the S&P to outperform emerging markets, at least in the near term.

2011-01-18 Jeffrey Gundlach: The Greatest Investment Opportunity of 2011 and 2012 by Robert Huebscher (Article)

In June of 2007, against a backdrop of strong equity and corporate bond performance, Doubleline's Jeffrey Gundlach was one of the first to warn investors that sub-prime mortgages were 'a total unmitigated disaster, and they are going to get worse.' In an equally bold statement, last week he identified the asset class he considers the greatest investment opportunity for the next two years. Again, it was one for investors to avoid.

2011-01-18 Letters to the Editor by Various (Article)

A number of readers respond to Nancy Opiela's article, Tactical Asset Allocation and Market Timing: What's the Difference?, and one reader responds to Michael Lewitt's article, The Wages of Growth. Both articles appeared last week.

2011-01-11 Tactical Asset Allocation and Market Timing: What's the Difference? by Nancy Opiela (Article)

Why is it that the industry dismisses significant changes to portfolio allocations as "market timing" transactions but embraces the subtler "tactical shifts" many advisors are making in the current, transitional market? As advisors debate the nuances of that question, the more relevant question may be: How would you respond if a client asked you to explain the difference between market timing and tactical asset allocation?

2011-01-11 What's Past is Prologue by Michael Nairne (Article)

With nearly two centuries of stock market performance history now available, investors should be well-armed intellectually to deal with the vicissitudes of equity investing. Many, however, are not. I explore this history and what it means for future performance.

2011-01-11 Letter to the Editor by Various (Article)

A reader responds to the article, Return Distributions and the Shiller P/E Ratio, by Keith Goddard, which originally appeared on February 2, 2010 and was contained in The Ten Best Articles You Probably Missed on December 28.

2011-01-04 The Coming Decade of Sideways Markets by Robert Huebscher (Article)

'We are in the middle of a sideways market, and we still have another decade to go,' says Vitality Katsenelson. In this interview, Katsenelson shares his insights on the decade ahead and the many factors that may keep China from leading us out of the recession.

2010-12-21 Debunking Ken Fisher by Robert Huebscher (Article)

In his latest book, Debunkery, Ken Fisher achieves his goal of dispelling many common investment myths and, in doing so, offers his philosophy on how individuals should manage their money. While most of the advice he offers is unequivocally correct, he also makes egregious errors on some serious matters.

2010-12-06 Real Return Expectations by Michael Nairne (Article)

There is nothing more important to long-term investors than the real rate-of-return that they can reasonably expect to earn on their investments. We forecast the expected real annual return for US stocks over the next 10 years and then set out ways to potentially improve on what many will find to be a discouragingly low expected return.

2010-11-16 A Reading List for 2010: Part 2 by Vitaliy Katsenelson (Article)

Updated for 2010 and in time for the holidays, here is the latest installment of my recommended books. I originally wrote this list in 2008 and again last year. I intend to keep adding to and revising it every year. It contains seven sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, Risk and Books for the Soul. The first three sections were presented last week and the remaining four are presented here.

2010-11-09 How Modern Is Your Portfolio Theory? by Direxion Funds (Article)

After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.

2010-10-05 The Misguided Promise of 529 Plans by Robert Huebscher (Article)

Along with the overall market, 529 plans suffered disastrous returns in 2008, leaving many families with insufficient funds to pay their tuition costs. The real problem, though, is not with the past performance of 529s. A misguided promise underlies the vast majority of 529 plans - that their heavy allocation to equities will provide acceptable risk-adjusted returns for the time horizons over which most parents invest.

2010-10-05 Charles Brandes on Investing Lessons from Benjamin Graham by Dan Richards (Article)

In this interview, Charles Brandes, the founder and Chairman of the Brandes Investment Management, discusses the lessons he learned from legendary value investor Benjamin Graham. Brandes also offers his forecast for equity market performance, as well as why he believes value stocks have an inherent, sustainable advantage over growth stocks. This is the transcript of the interview.

2010-09-21 The Housing Elevator: Going Up or Down? by Robert Huebscher (Article)

Several prominent analysts have written recently that the bear market in housing is nearing its end. Writing with varying degrees of conviction and citing a range of statistical measures, they reach the broad conclusion that now is the time to buy a house. We provide a summary of those opinions - from James Grant of Grant's Interest Rate Observer, Dave Leonhardt of The New York Times, and Anatole Kaletsky of GaveKal Research - along with our own contrasting thoughts.

2010-09-07 The Three Factors of Fear by Bob Veres (Article)

Bob Veres presents the latest release from his new service, which provides advisors with sample letters that they can share with their clients. In this edition, he looks at human psychology and the three factors of fear to understand why markets may now appear scarier to investors.

2010-08-31 Why Mid-Cap? by RidgeWorth Investments (Article)

RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.

2010-08-31 Evaluating Unconstrained Managers by Various (Article)

How can advisors evaluate an unconstrained asset manager, such as John Hussman of the Hussman Fund? In a follow-up to a recent article on research by Roger Ibbotson, we present views from several advisors on the role of returns-based style analysis and whether it can help identify whether managers such as Hussman deliver alpha.

2010-08-17 Cerulli Survey Results: New Themes in Advisors? Portfolio Strategies by Bing Waldert (Article)

New ideas, such as tactical asset allocation and the use of alternatives, have seen some uptake even before the market crisis, particularly within large institutions, but they are receiving increased attention as solutions for risk-averse clients. This article examines some of the evolutions, using data from a Cerulli Associates survey of Advisor Perspectives readers conducted in June and July of 2010.

2010-08-10 When Active Management Matters by Kenneth R. Solow, CFP and Michael E. Kitces, MSFS, MTAX, CFP (Article)

Financial planners have eagerly awaited any research that could finally, definitively prove - or disprove - the pesky notion that active management is effective. Though no one has yet risen to that challenge, past academic studies have been improperly interpreted to show that portfolio policy, or asset allocation affects portfolio returns far more than active management. As Ken Solow and Michael Kitces write in this guest contribution, the most recent study to tackle the active management debate, by Yale professor Roger Ibbotson, shares two weaknesses with previous research.

2010-07-27 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)

In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.

2010-07-20 Jeremy Siegel on Why Stocks are Undervalued by Dan Richards (Article)

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.

2010-06-29 Timber as an Asset Class: If a Tree Falls in the Forest, Should you Buy It? by Charlie Curnow (Article)

"If the sun shines and it rains, the trees grow about on schedule," wrote Jeremy Grantham, chairman of Boston-based investment firm GMO, in his quarterly newsletter in April 2007. Grantham's enthusiasm for timber, which remains true to this day, may be excessive, despite the fact that, on the surface, historical data seems to support his optimism. If a tree falls in the forest, should you buy it?

2010-06-22 Improving on Morningstar's Ratings: Moving Beyond Past Performance by C. Thomas Howard, PhD (Article)

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.

2010-06-15 Asset Allocation Matters, But Not as Much as You Think by Robert Huebscher (Article)

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.

2010-06-08 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)

The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.

2010-04-27 Gary Shilling: America?s Lost Decade by Robert Huebscher (Article)

The US faces 10 years of slow growth and deflation that could rival Japan's "lost decade" - two words which Gary Shilling did not utter but which unmistakably characterize his forecast. Shilling is founder and President of the New Jersey-based economic consulting firm A. Gary Shilling & Co.

2010-03-30 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)

Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.

2010-03-16 The New Investment Paradigm: Graham Meets Markowitz by Bob Veres (Article)

Broadly speaking, the financial services industry has been divided into two competing paradigms since roughly 1950. One, articulated by Harry Markowitz, suggests advisors add value through diversified portfolios optimized along the efficient frontier. The other, advocated by Benjamin Graham, says advisors add value by purchasing assets at prices less than their fair value. Bob Veres reconciles those views and describes the New Paradigm that has emerged.

2009-12-29 End-of-Year Letter Templates by Bob Veres (Article)

Bob Veres is the editor and publisher of Inside Information, a publication focused on practice management and related issues for the financial planning profession. He just introduced a new monthly service, Client Articles, which will contain articles (and cartoons) that can be sent to clients, for example as part of your quarterly newsletters. He provides two sample letters.

2009-12-22 The Danger of "Expert Advice" - Financial or Otherwise by Kim Snider (Article)

A study by three neuroscientists at Emory University finds that when given expert advice, the decision-making part of our brain shuts down. That's not a big deal if the advice we are receiving is good. But what if it isn't? In this guest contribution, Kim Snider explores the problems with relying too heavily on supposed experts, and how to counsel clients who fall into this trap.

2009-12-22 Morningstar Ratings ? Our Response by Robert Huebscher (Article)

Last week, we published the response from John Rekenthaler, Morningstar's VP of Research, to our recent study of Morningstar's ratings. We disagree with the Rekenthaler's analysis and provide our rebuttal.

2009-12-15 Barton Biggs on Undervaluation in the S&P 100 by Robert Huebscher (Article)

Barton Biggs, the former Chief Global Strategist for Morgan Stanley who now runs the hedge fund Traxis Partners, says the high-quality, large-capitalization stocks in the S&P 100 are now undervalued by one standard deviation. In our interview, Biggs also discusses his fears and how investors should protect themselves from the worst-case scenarios.

2009-12-15 The Next Black Swan? Underfunded Public Pensions by Robert Huebscher (Article)

The plights of California and other states reveal an ominous threat our economy faces: underfunded public pension liabilities. We examine the size and scope of this problem, focusing on whether the underlying assumptions used to calculate liabilities are realistic.

2009-12-15 Investing in Range-bound Markets by Vitaliy Katsenelson (Article)

Vitaliy Katsenelson, a frequent contributor to these pages, reviews his thesis for secular market cycles, why the US markets remain locked in a range-bound state, and what it will take for them to exit from that state.

2009-12-08 Morningstar Ratings Fail over a Full Market Cycle by Robert Huebscher (Article)

When active managers are tested, as they were during the 2008 bear market and 2009 bull market, so are the systems used to predict their performance. Perhaps no system is as widely used as Morningstar's "star" rating system. In an update to a study we originally did two years ago, we show that Morningstar's ratings fail to offer any predictive ability when measured over a full market cycle.

2009-11-17 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)

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.

2009-11-03 Absolutely ? Maybe by Robert Huebscher (Article)

Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.

2009-11-03 The Best Books on Investing by Vitaliy Katsenelson (Article)

Author and fund manager Vitaliy Katsenelson provides us with his list of the best books on investing. It contains six sections: Selling, Think Like an Investor, Behavioral Investing, Economics, Stock Market History, and Books for the Soul.

2009-10-27 Managing Downside Risk in Retirement Planning by Geoff Considine, Ph.D. (Article)

Boston University professor Zvi Bodie advocates a retirement investment strategy that offers investors some of the upside potential in equities tempered with downside protection against bear markets and a low-risk inflation hedge via heavy allocation to TIPS. Geoff Considine examines Bodie's strategy and shows that it will work very effectively, including in a bear market like the one just experienced.

2009-10-27 Stay the Course or Plot Another? by Ted A. Ponko, CFA (Article)

Is it reasonable for investors' objectives to change along with major fluctuations in their wealth? In these instances, sticking with the current portfolio may not be the best option - even for long-term investors. In this guest contribution, Ted Ponko of Klein Decisions argues advisors need a reliable way to determine when to stay the course and when to plot another.

2009-10-20 Don?t be Misled by Morningstar?s Box Score Results by Robert Huebscher (Article)

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.

2009-09-29 Strategic and Tactical Perspectives on Gold by Geoff Considine, Ph.D. (Article)

There are good reasons for investors to maintain a long-term strategic allocation to gold, which has clear, positive portfolio benefits (due to low correlation to other asset classes). That said, gold is in an historic run-up in value and has been generating unsustainably high returns. Because of its high price and rising volatility, Geoff Considine argues there is significant tactical risk in gold.

2009-09-29 A Tale of Two Investors by Brian Murphy (Article)

Just as Dickens contrasted the fortunes and misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan to accumulate wealth for their retirement and those who seek excess returns in their portfolios. In this guest contribution, advisor Brian Murphy tells the tale of two clients - one who aggressively sought alpha and the other who passively built retirement wealth.

2009-09-15 Theoretical Support for the Moving Average Crossover by Keith C. Goddard, CFA (Article)

In this guest contribution, Keith Goddard matches an appropriate descriptive theory about how asset markets work with recently published normative theory using Ted Wong's moving average crossover as an indicator for timing portfolio changes in active portfolio management strategies. He proposes that the theory of "Rational Belief Equilibrium" in asset markets, developed by Stanford professor, Mordecai Kurz, helps to explain why moving average crossovers have demonstrated predictive value in the stock market, and why they might continue to offer predictive value in the future.

2009-08-25 Building a Practice in America?s Fastest Dying City by Robert Huebscher (Article)

While many - perhaps most - advisors use client appreciation programs as part of their marketing efforts, Mo Young has embraced this idea and made it his sole marketing focus. Young's practice is based in Youngstown, Ohio - which has the distinction of losing population more rapidly than any other city in the US - yet Young has added several hundred new clients over the last four years with his strategy.

2009-08-25 Beating a Dead Dragon by Vitaliy Katsenelson (Article)

The last thing you may want to read is another article about China - how many ink cartridges have been exhausted writing about its phenomenal growth numbers in the past decade? - but what Vitaliy Katsenelson has to say may surprise you: China's economy is hardly as vibrant as everyone thinks it is.

2009-08-04 Letters to the Editor by Various (Article)

In our letters to the Editor, readers respond to last week's article, How Long is the Long Run?, Geoff Considine's article, The Retirement Portfolio Showdown: Jeremy Siegel v. Zvi Bodie , and Ted Wong's article, Moving Average: Holy Grail or Fairy Tale - Part 3.

2009-07-28 How Long is the Long Run? by Robert Huebscher (Article)

How long must one be invested in the equity markets to have full confidence that they will earn superior returns (as compared to bonds) and overcome the risks of bear markets? We look at the historical record to see how stocks have fared against bonds for various holding periods, and we look at research by Zvi Bodie and Mark Kritzman on this topic.

2009-07-28 Moving Average: Holy Grail or Fairy Tale - Part 3 by Theodore Wang (Article)

Buy-and-hold remains deeply entrenched in the financial planning community, despite many of the flaws Ted Wong's previous articles have illustrated. Although many financial advisors suffer dearly from their buy-and-hold practices, they are reluctant to change their approach. Who dares to challenge investment sages like Bogle, Siegel, and Malkiel who emphatically support this long-standing investment principle? Academic research studies overwhelmingly endorse buy-and-hold. How can they all be wrong?

2009-07-14 Beyond Grantham: Politics and Investment Strategy by Jerry Minton (Article)

Jeremy Grantham, the chairman of GMO, believes strongly in what he describes as market "inefficiencies" within the "Presidential Cycle." He is referring to the fact that stock market returns are not distributed randomly across the four-year presidential election cycle, but rather are strongly skewed to favor the pre-election year. Grantham believes - and guest contributor Jerry Minton agrees - the evidence is incontrovertible: the behavior of the political class over the election cycle effects the distribution of stock market returns.

2009-07-07 Gary Shilling: Recovery is a Year Away by Robert Huebscher (Article)

Among economists, Gary Shilling owns one of the most prescient forecasting records, having accurately predicted the credit crisis and the performance of key asset classes over the last several years. Now, he says, the chances that the current wave of "green shoots" will be the finale to the recession are "pretty low."e

2009-06-30 Moving Average: Holy Grail or Fairy Tale - Part 2 by Theodore Wong (Article)

Many renowned financial experts declare that passive investing in a diversified index like the S&P500 is the only sensible way to manage money. In a follow-up to his article two weeks ago, Moving Average: Holy Grail or Fairy Tale - Part 1, Ted Wong says that he respects their opinions but is unable to verify their claims. By examining the evidence, he shows that the Moving Average Crossover (MAC) system offers a superior risk-return profile to a buy-and-hold strategy.

2009-06-23 Compelling Evidence That Active Management Really Works by Ken Solow (Article)

The majority of academic studies conclude that active management does not add value for investors. However, a closer look at how many studies were conducted reveals several flaws in their methodology that are not as well-known as the accepted conclusion about active versus passive management. Guest contributor Ken Solow revisits work by two Yale researchers showing the value added through active management.

2009-06-16 Seth Klarman: Why Most Investment Managers Have It Backwards by Robert Huebscher (Article)

In his keynote speech last week to the Boston Security Analysts Society, Seth Klarman discussed how he repositioned his portfolio last fall to capture opportunities created in the wake of the financial crisis. Klarman is the lead editor of the sixth edition of Graham and Dodd's Securities Analysis, and his fund, The Baupost Group, is among the top performing hedge funds over its 27 year history.

2009-06-16 Moving Average: Holy Grail or Fairy Tale - Part 1 by Theodore Wang (Article)

Buying and holding a diversified portfolio works well during good times, but falls short when supposedly uncorrelated asset classes drop in unison in bear markets. Are there alternative investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to determine their effectiveness.

2009-06-09 Let?s Talk Stocks: Berkowitz, Marsico and Weitz by Robert Huebscher (Article)

Three of the industry's most accomplished value investors - Bruce Berkowitz of the Fairholme Fund, Tom Marsico of Marsico Capital Management and Wally Weitz of Weitz Funds - spoke at a panel discussion at the Morningstar Investor Conference on May 28. We present some excerpts of their thoughts on key questions raised during the panel.

2009-06-02 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)

Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.

2009-06-02 Letters to the Editor What the "Missing Out" Argument Misses by Various (Article)

We publish a number of responses to Ted Wong's article last week, What the "Missing Out" Argument Misses.

2009-05-26 What the ?Missing Out? Argument Misses by Theodore Wang (Article)

Market timing is discredited by passive investment advisors as a voodoo ritual. Buy-and-hold proponents argue most compellingly by citing the "missing out" scenario - they show a dramatic drop in return, to Treasury Bill levels, if investors are out of the markets for only a few good days. In this guest contribution, Ted Wong debunks the missing out argument, using 137 years of market data.

2009-05-19 David Swensen's Ascent by Mebane Faber (Article)

Mebane Faber provides an excerpt from his new book, The Ivy Portfolio, on the ascent of David Swensen and the development of the tools employed to manage Yale's endowment. Faber shows the data Swensen used to determine Yale's aggressive allocation to alternative asset classes.

2009-05-19 Waiting for the Fifth Wave by Robert Huebscher (Article)

In response to skepticism we've expressed in the past about technical analysis, one of our readers invited us to attend the Market Technicians Association symposium in New York last week. Our skepticism remains, but it was an enjoyable event and we report on the forecasts of Elliot Wave theorist Robert Prechter.


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