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2013-05-23 The Labor Force Participation Puzzle by David Kelly of J.P. Morgan Funds

Slow growth and mediocre job creation have been common themes used to describe the U.S. economy in recent years, as both the labor market and broader economy failed to produce the snap-back rebound many expected following the deep recession seen in 2008 & 2009. Despite that lackluster growth, the unemployment rate has now fallen to 7.5% after peaking at 10% in October of 2009, a much faster decline than expected, given average employment growth of less than 125,000 per month.

2013-05-22 Is There Value in Today's Stock Market by Bill Smead of Smead Capital Management

Due to the recent strength in the US stock market, we thought it would be helpful to followers of Smead Capital Management to understand the history of our core investment beliefs and where our portfolio is in relation to those core beliefs. A review of the ongoing tension between valuation mattering dearly and the enormous benefits of long-term business ownership is especially interesting after a significant upward move in the stock market. How do you keep turnover and trading expense low, while maintaining a meaningful margin of safety?

2013-05-22 Cyprus and the Eurozone...Still Stuck in the Middle by Gregory Hahn of Winthrop Capital Management

The debt crisis in the Eurozone turned another chapter as Cyprus finally reached the point of requiring a bailout from the European Union. The wisdom of Gerry Rafferty’s hit song “Stuck in the Middle with You” which was written in 1973, rings true today as we watch the EU and the European Central Bank navigate the mess in Europe. With each attempt at containment, there appears some plot twist, the proposed Cyprus bank bailout is no exception. While the bailout of Cyprus and its banks is not large in size, only 10 billion, relative to the Cyprus economy, it is significant.

2013-05-22 Malaysia's Post-Election Investment Outlook by Scott Klimo of Saturna Capital

Earlier this year we identified ASEAN as the most attractive region within the emerging markets universe. That prediction has proved accurate. Market indices (USD returns) year-to-date through April in the Philippines, Thailand, and Indonesia are 23%, 22%, and 16%, respectively. Singapore (which we do not consider an emerging market) gained 6%, while Malaysia rose only 3.9%. So what’s the outlook for Malaysia?

2013-05-22 How to Turn the ECB Straggler into a Central Bank Pacemaker by Myles Bradshaw of PIMCO

In our opinion, the ECB will be most effective if it can design a programme that helps banks deleverage more quickly to stimulate growth in the real economy. To have a meaningful impact on Europe’s broken transmission mechanism, any ECB programme needs to not only lower the cost of credit, but also be regionally tailored or big enough to be effective. Long-term investors should remain focused on the quality of issuers’ balance sheets rather than simply taking more risk because of lower prospective returns.

2013-05-21 Developed Europe: Regional Economic Review 1Q 2013 by Team of Thomas White International

After withdrawing into the background in late 2012, the Euro-zone sovereign debt crisis resurfaced in the first quarter with the Italian elections and Cyprus’ banking crisis. In late February, Italy’s national elections resulted in a fractured mandate, and Italians voted out the incumbent, the main architect of the country’s austerity and reforms agenda.

2013-05-21 Capitalism and Democracy by Bill O'Grady of Confluence Investment Management

In the Italian elections, the party that showed the strongest results was the Five Star Movement, led by the comedian Beppe Grillo. Despite this strong showing, the party failed to form a government and refused to participate in any coalitions. This decision not to participate in the political process has been exhibited by other protest groups, such as Occupy Wall Street, the Israeli Tent Movement, and the Spanish “Indignant” movement.

2013-05-21 General Electric Looks Like It's Becoming The Shareholder-Friendly Company It Once Was by Chuck Carnevale of F.A.S.T. Graphs

General Electric (GE) was once revered as one of the bluest of all blue-chip companies in the world. During its glory days, GE was respected as an industrial conglomerate that manufactured some of the world’s best jet engines, locomotives, appliances and even the highly regarded General Electric light bulb. However, as best I can determine, the roots of General Electric’s ultimate demise were established in 1930 when the company, responding to the great depression, formed GE Finance in order to help their customers finance GE appliances over time.

2013-05-20 The President's Proposed Future Tax Changes and Some Questions About Past Ones by Andy Friedman of The Washington Update

The United States government has once again hit its borrowing limit. The government is permitted to borrow through May 18, after which it can continue to operate without additional borrowing for about three months. By fall, Congress will have to raise the debt limit to prevent the United States defaulting on outstanding debt.

2013-05-18 All Japan, All the Time by John Mauldin of Millennium Wave Advisors

This week we again focus on Japan. Their stock market has been on a tear, and their economy grew 3.5% last quarter. Is Abenomics really the answer to all their problems? Is it just a matter of turning the monetary dial a little higher and voila, there is growth? Why doesn’t everyone try that? And what would happen if they did?

2013-05-17 Recession Watch: ECRI\'s Weekly Leading Indicator Declines by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-05-16 Searching For a New Investment Paradigm by Philip Lawton of Research Affiliates

Investment management is supposed to be built on brilliant minds’ novel insights and innovative approachesor so our training and traditions have led us to believe. We celebrate our best investors, such as Warren Buffett, Peter Lynch, and Bill Gross, and our best financial theories, such as modern portfolio theory (MPT) and the efficient markets hypothesis (EMH).

2013-05-16 The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued by Chuck Carnevale of F.A.S.T. Graphs

The Dow Jones industrial average sits above 15,000, an all-time high. But don’t be fooled, this doesn’t mean that stocks are expensive. I understand that it seems logical to assume that

2013-05-16 Everybody Wants Some: Central Banks and Bond Funds Step up Buying of Stocks by Liz Ann Sonders of Charles Schwab

The stock market has broken out of its "triple top" formation, which started in 2000, yet remains reasonably valued. Supply within the stock market has been dwindling thanks to near-record company buybacks. Demand for stocks is coming from some seemingly unlikely sources: global central banks and bond mutual funds.

2013-05-15 Things My Mother Told Me and Some She Didn't by Jerry Wagner of Flexible Plan Investments

Today the phrases I’m most likely to hear are very different. A couple of them are well worth heeding. They’re all well known on Wall Street but they never passed over my mother’s lips.

2013-05-15 Speaking of a Great Week... by Blaine Rollins of 361 Capital

I left the office each day thinking that I just saw another walk off game winning home run by the S&P500. The bears were given their chance in April with the weak economic data and slightly less than exciting earnings, but they just couldn’t break it. In return, the employment data was a bit better, the global central banks came out swinging (ECB, Australia, and South Korea), then the markets broke the Yen, Bonds, and Gold, and the Bulls absolutely skinned the Bears.

2013-05-14 Framing the Referral Discussion by Beverly Flaxington (Article)

Last week, I was training a group of very successful Florida-based advisors who brought up what is a common issue with regard to client referrals. Even the best advisors, with the most satisfied clients, offering the highest levels of service often struggle with obtaining referrals.

2013-05-14 Letter to the Editor by Various (Article)

A reader responds to Robert Huebscher’s article, Niall Ferguson: Four Reasons Why the U.S. is Failing, which appeared last week.

2013-05-14 Nassim Taleb on the Anti-Fragile Portfolio and the Benefits of Taking Risks by Ben Huebscher (Article)

As we recover from the most recent financial crisis, how we can we learn from the mistakes to best prepare for the future? Nassim Taleb tackled this very question in his latest book, Antifragile: Things That Gain From Disorder, which built off his previous works and applies the lessons learned to today’s biggest challenges. Taleb examined how small doses of volatility can help systems handle larger disruptors in the future.

2013-05-14 Inflation Update by Team of North Peak Asset Management

Basing investment decisions on inaccurate measurements of the inflation rate can result in investors unknowingly positioning their portfolios to lose purchasing power over time. This mis-measurement could be especially dangerous when yields are low. For example, evaluating a nominal 3% investment opportunity using an inaccurate 2% inflation rate indicates a marginally attractive 1% real return opportunity. However, if inflation is actually running at 5%, this becomes a deeply unattractive negative 2% real return investment.

2013-05-13 Whither Interest Rates and \"Safe\" Investments? by Charles Lieberman of Advisors Capital Management

It was an interesting week for comments from notables regarding the future direction for interest rates. Bill Gross suggested yields had bottomed recently. Warren Buffett "pitied" bond investors, (but not so much he was unwilling to supply them with more bonds issued by Berkshire.) High yield bond yields declined below 5% and risk spreads continued to erode. The "Great Rotation" from bonds into stocks has not really even begun yet. Still, it only seems like a matter of time before interest rates begin to rise, severely hurting investors looking for safety.

2013-05-10 A Tale of Two Markets: Equity Bulls and Bond Bears by Douglas Cote of ING Investment Management

Surging equity markets absent an accompanying rate rally is a red flag, as Treasury yields remain well below “normal”. While investors’ renewed enthusiasm for equities is warranted, they must be careful to avoid the “folly of gaming diversification”. Corporate earnings have impressed, though revenue has struggled due in part to a moribund Europe. Divergent markets mean investors should stay broadly diversified in equities and real bonds not near-cash and ever alert to the fundamentals.

2013-05-10 The Importance of Being Different by Franois Sicart of Tocqueville Asset Management

In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about how superior investment managers outperform their market benchmarks -- by taking advantage of volatility, among other things -- as well as how to properly evaluate investment performance.

2013-05-10 DICK's Sporting Goods Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of DICK’s Sporting Goods Inc through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-05-10 Recession Watch: ECRI\'s Weekly Leading Indicator Continues to Show Improvement by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-05-10 Countries Should Be Careful Not to Overstimulate Their Housing Markets by Team of Northern Trust

Countries should be careful not to overstimulate their housing markets. Credit extension is improving, but remains modest.

2013-05-09 BlackRock Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of BlackRock Inc through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-05-09 The Effect of Negative Interest Rates in Europe by Zach Pandl of Columbia Management

In his press conference last week, European Central Bank (ECB) President Mario Draghi signaled that policymakers may be more open to a cut in the central bank’s deposit rate. Although Mr. Draghi acknowledged this move could have negative side effects, he added “we will be able to deal with the negative consequences we will look at this with an open mind.” Several major central banks considered negative deposit facility rates during and after the financial crisis, but so far, all have determined that the idea did not pass the cost/benefit test.

2013-05-08 Europe (and Italy's Rivals) Appear on Road to Recovery by Par Rostom of Franklin Templeton Investments

When Europe’s debt disease spread to Cyprus, accompanied by bank runs and public unrest, some doubted the European Central Bank’s (ECB) ability to contain the contagion. And, even more recently, Slovenia turned up sick, warning of escalating debt problems and faltering banks. But with the setbacks have come some surprising steps forward, too, including progress in Italy, which recently formed a new coalition government.

2013-05-08 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs

It has been years since we have seen new highs on the Dow Jones Industrial Average and the S&P 500. Although the wait can be traumatizing, it’s nice to get proof that market prices ultimately recognize growth of business value.

2013-05-08 Is Your Investing One Dimensional? by Jerry Wagner of Flexible Plan Investments

At the National Association of Active Investment Managers (NAAIM) Uncommon Knowledge Conference in Denver last week, a reporter from Financial Planning magazine asked us, “What is active investing’?” Many confuse the phrase with the simple act of running a mutual fund populated with stock picks within the strict guidelines of a prospectus, as opposed to running an index fund, where the manager simply buys and holds the shares making up a particular stock or bond index.

2013-05-07 Breakaway Brokers: What the Data Really Say by Bob Veres (Article)

For the past 15 years, and especially since 2008, few assumptions have been accepted as widely or confidently in the financial services world as the idea that brokers are leaving the wirehouse environment in increasing numbers – and taking their clients with them. Underlying that assumption is another: that the trend is accelerating, and will continue to do so until the brokerage industry’s retail footprint has been severely diminished. The more extreme projections see the entire brokerage asset gatherer/sales model following Lehman, E. F. Hutton and Bear Stearns into extinction.

2013-05-07 How to Construct a Low-Cost Conservative Portfolio by Geoff Considine (Article)

One of the greatest challenges for investors today is constructing low-risk portfolios that provide the best returns using low-cost funds or ETFs. Doing so requires advisors to define risk as the potential for retirees to fail to achieve their financial goals, instead of as volatility, as it is traditionally measured. I will show how to construct a low-cost portfolio that minimizes this definition of risk while generating a reasonable real return.

2013-05-07 Mutual Fund Companies Need to Prepare for a Changing Environment Fund Industry Turbulence Ahead by Paul Franchi (Article)

The mutual fund industry grew explosively from the 1980s on a rare tonic of a low-inflation credit expansion powered indirectly by international trade flows. That run reached a peak in 2008 when the application of quantitative easing (QE) served to prevent industry collapse with a softer form of transition, which continues today but must end when inflation returns.

2013-05-07 Deere & Co: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of Deere & Co through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-05-07 Investing for Income and Capital Appreciation by Giorgio Caputo, Rob Hordon, Ed Meigs, Sean Slein of First Eagle Investment Management

A Q&A with First Eagle Investment Management’s senior members and their market views and strategic insights.

2013-05-07 Quarterly Letter by Team of Grey Owl Capital Management

In his April 2013 commentary, PIMCO’s Bill Gross wrote, “PIMCO’s epoch1, Berkshire Hathaway’s epoch, Peter Lynch’s epoch, all occurred or have occurred within an epoch of credit expansion What if an epoch changes? What if perpetual credit expansion and its fertilization of asset prices and returns are substantially altered? What if a future epoch favors lower than index carry or continual bouts of 2008 Lehmanesque volatility ?”

2013-05-06 Aligning Market Exposure With the Expected Return/Risk Profile by John Hussman of Hussman Funds

Some risks and market conditions are more rewarding than others. My objectives for this week’s comment are very specific. First, to demonstrate using a very simple model that investment returns do indeed vary systematically with market conditions. Second, to demonstrate that overvalued, overbought, overbullish conditions have historically dominated trend-following measures when they have emerged. Third, to demonstrate the impact of accepting investment exposure in proportion to the return/risk profile that is associated with a given set of market conditions.

2013-05-06 The Narrative Changes Yet Again by Charles Lieberman of Advisors Capital Management

The April employment report suggests that the economy continues to expand at a moderate pace, as had been the common view prior to the March employment report. While sequestration and the hike in the payroll tax at the beginning of the year may have taken a bite out of growth, hindsight indicates the economy entered 2013 with enough momentum to overcome these new forms of fiscal drag. Growth should strengthen over the coming months, as lower oil prices and time overcome the negative influences.

2013-05-04 The QE Sandpile by John Mauldin of Millennium Wave Advisors

Sell in May and go away? What about "risk off?" And ever more QE? Today’s letter is a quick note and a reprise of a popular letter from yesteryear (with a bit of new slant), as I am at my conference in Carlsbad.

2013-05-03 Oracle Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graphs on Oracle Corp shows a picture of undervaluation based upon the historical earnings growth rate of 18.5% and a current P/E of 13.7. Analysts are forecasting the earnings growth to continue at about 10%, and when you look at the forecasting graph below, the stock appears undervalued (it’s inside of the value corridor of the five orange lines - based on future growth).

2013-05-03 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

I’ve now updated this commentary to include April Nonfarm Employment, which included the prior month revision. As the adjacent thumbnail illustrates, this indicator has trended upward in a relatively smooth trajectory over the past 13 months.

2013-05-02 Nu Skin Enterprises: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of Nu Skin Enterprises through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-05-02 Europe at a Minimum Speed by Scott Minerd of Guggenheim Partners

Market forces are correcting the growth dichotomy between the European Union’s core and periphery, thus improving the outlook for the region.

2013-05-02 Disconnect: Why Stocks and Economy Often Move in Opposite Directions by Liz Ann Sonders of Charles Schwab

The stock market hit all-time highs during the first quarter, yet the economy again underperformed expectations. Is the disconnect an aberration or the norm?

2013-05-01 The Road to Omaha: Volatility or Wealth Creation by Bill Smead of Smead Capital Management

This is the last installment in our five part series called “The Road to Omaha”. In this series of missives we have looked at the keys to the investing success of Warren Buffett leading up to the 2012 annual meeting.

2013-04-30 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)

Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.

2013-04-30 Is May Really the Time to Go Away? by Chris Maxey, Ryan Davis of Fortigent

As investors near the witching hour of May, the oft-asked question once again comes to the foreground is it best to sell in May and walk away? This year could prove the exception to recent history, but a number of trends are beginning to take shape inside the market’s inner workings.

2013-04-30 ProVise Bullets by Ray Ferrara of ProVise Management Group

With the passage of the American Taxpayer Relief Act of 2012, a lot of people felt that things were set as it related to estate taxes. Apparently everyone believed that except the President, who has proposed several changes to estate tax law in his fiscal 2014 budget.

2013-04-30 Beware of the New Systemic Risk by Ashwin Alankar, Michael DePalma of AllianceBernstein

It felt like there was nowhere to hide from the market declines last Monday, April 15, when stocks, bonds and commodities fell in unison across the world, well before the Boston bombings that day. We believe that this failure of diversification was instigated by increasingly powerful multi-asset funds, many of which use leverage, which may have become a new source of systemic risk for investors.

2013-04-29 Did You Blink and Miss the Correction? by Charles Lieberman of Advisors Capital Management

A stock market correction has been widely talked about for more than a month and the 2% decline in stock prices during the week of April 15 may have been it. Why so short and shallow? Many investors have not participated in the equity rally since it started in March 2009. They were too fearful of stocks because of the 2008 meltdown and they sought refuge in bonds. Despite the four year long rally, stocks remain cheap and many investors wish for a decline so they have a chance to get back in.

2013-04-27 The Cashless Society by John Mauldin of Millennium Wave Advisors

A cashless future might be farther off than we either fear or hope. Not only is it farther away than some think, we are actually seeing an increase in the use of cash all over the world (and this is not just a US phenomenon). We will look at some interesting factoids that make for thought-provoking discussions, but when we couple them with research on the rise of the unreported economy (aka the underground economy) and the number of people who get some form of government assistance, we may find problematic consequences resulting from hidden incentives that work in unintended ways.

2013-04-26 Coach Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graphs on Coach Inc shows a picture of undervaluation based upon the historical earnings growth rate of 27.3% and a current P/E of 13.7.Analysts are forecasting the earnings growth to continue at about 13.5%, and when you look at the forecasting graph below, the stock appearsundervalued (it’s inside of the value corridor of the five orange lines - based on future growth).

2013-04-26 Recession Watch: ECRI\'s Weekly Leading Indicator Rises Again by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-26 The Race of Our Lives by Jeremy Grantham of GMO

Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action.

2013-04-26 Many Of My Dividend Growth Stocks Have Become Overvalued, What Do I Do Now? by Chuck Carnevale of F.A.S.T. Graphs

To me, there’s almost nothing better than finding a great company that I truly want to own at a fair valuation, or better yet, undervalued. In the long run, it has been my experience that this usually leads to outsized future returns, especially if you buy stocks when they are undervalued at the time. But there is quite often a side effect that can prove very disconcerting. Once an undervalued stock starts moving to the upside, momentum will often carry it above what prudent fair valuation would dictate.

2013-04-26 The Yin and the Yang of Commodity Price Trends by Team of Northern Trust

In recent weeks, financial press headlines have centered on the sharp drop in the price of gold. Of greater importance, however, are the significant price declines of oil, wheat, corn and copper. The S&P Goldman Sachs Commodity Index is down 6.1% year-to-date after a nearly steady reading in 2012 and gains exceeding 20% in both 2010 and 2011. It is essential to recognize the different nuances buried in these commodities’ price trends. First we will focus on the implications of declining commodity price trends and then discuss gold specifically in more depth.

2013-04-26 Why The Fed's Balance Sheet Matters Neosho Capital Takes On Alan Blinder by Chris Richey of Neosho Capital

We anticipate the Fed will begin slowing, but not eliminating, its QE purchases later this year, barring another severe downturn in the intervening period. As such, we expect macro-economic factors such as currency, interest rates, growth, and inflation to continue to be a significant influence on stock market returns and that the long-term benefits of active portfolio management and individual company performance will continue to be masked by these macro influences.

2013-04-25 Murkier Prospects for Merkel by Milton Ezrati of Lord Abbett

An anxious German electorate may make it harder for the chancellor to continue her pro-cooperation approach to Europe’s fiscal crisis.

2013-04-25 The End of “Expansionary Austerity?” by Scott Brown of Raymond James

A few years ago, an economic paper by Harvard professors Carmen Reinhart and Kenneth Rogoff helped fuel the push for austerity. It was met with some criticism from economists, but was widely embraced by the press and by politicians on both sides of the Atlantic. The study has now been demonstrated to have had serious flaws, but will those in power fold? Or will they double down on bad economic policy?

2013-04-25 Like Air Out of An Untied Balloon... by Blaine Rollins of 361 Capital

Earnings hit the market like a ton of bricks this week. It wasn’t that the reported numbers were a disaster, but that the new data points did not change the trajectory of the current buying and selling patterns. Investors rewarded the defensive earners (bought more Coca-Cola, Johnson & Johnson, and Microsoft) and sold their shares in more cyclical stocks (Industrials, Semis, and Oil Services). Financial stocks survived the week, but few owners went home Friday feeling better about their bank names than at the start of the week.

2013-04-25 Safe Harbor Is Safe for Secure Lifetime Income Default Investments by Daniel Notto of AllianceBernstein

The new frontier in US defined contribution (DC) plans involves qualified default investment alternatives (QDIAs) with a secure lifetime income component. Will such vehicles retain their safe-harbor protections? Yes.

2013-04-25 Living in Lake Wobegon by Jim Goff of Janus Capital Group

Are we normal? For many quarters, I have counseled investors that we are going through extreme market conditions and that patience was the best strategy. As the panic fades in the rear-view mirror and the road ahead looks less bumpy, I stand by the advice. But I don’t need to repeat it.

2013-04-24 The Road To Omaha by Bill Smead of Smead Capital Management

We have been discussing keys to the investment success of Warren Buffett and Berkshire Hathaway as we approach the 2013 annual meeting. In this week’s edition, we are considering a company which might make a good “elephant” for Berkshire to buy.

2013-04-24 An Awesome Gift For Your Kids, Grandkids, or You by Gary Halbert of Halbert Wealth Management

This week, I veer from our usual economic and investment themes to tell you about what I believe is one of the greatest gifts you can ever give your children, grandchildren or others who are dear to you (or maybe even yourself). What I am about to describe is something that has literally changed the lives of dozens of my friends and relatives over the last 30+ years.

2013-04-24 Europe's Sovereign Debt Problem: A Call for a Clear Destination by Andrew Bosomworth, John Henning Fock of PIMCO

Without political commitment to a common fiscal destination, the long-term instability and market distortions within Europe’s capital markets are likely to intensify. To preserve the euro, the eurozone must develop federal fiscal policies that tackle significant economic, cultural and societal differences and define a credible roadmap to achieving structural reforms, a banking union, political union and fiscal union. Historical precedents in Europe may help guide the way.

2013-04-23 Looking Back at Peak Oil: The Coming Crisis in Energy Supplies by Richard E Vodra, JD, CFP® (Article)

Peak Oil – the maximum sustainable rate of global oil production – happened in 2012. That’s one of the main conclusions of a new report, Fossil and Nuclear Fuels – The Supply Outlook, released in March 2013 by the Energy Watch Group. This event will have profound long-term implications for how advisors should manage clients’ portfolios, and how clients should plan their future expenses.

2013-04-23 Dividend Growth and Stock Returns by Peter Nielsen of Saturna Capital

The compounding impacts of dividends have historically been significant in terms of market returns for long-term investors. The importance of these cash flows to investor returns can be seen across countries and industries.

2013-04-23 The Next Steps For the Euro: What Is Needed to Ensure Its Survival? by Keith Wade of Schroders Investment Management

The near term outlook for the Eurozone remains bleak, with the latest International Monetary Fund (IMF) forecasts showing 2013 as another year of falling output for the region. Better growth is desperately needed and there is a case for more cyclical support through easier monetary policy, but there are also structural obstacles to stronger growth. Unless these are addressed, any pick-up in growth will ultimately flounder. In this Talking Point I look beyond the near term cyclical challenges and consider what the Eurozone needs to do to ensure its long term viability.

2013-04-22 “Covenant-Lite” Loans: Credit Quality Is Still the Dominant Factor by John Bell, Kevin Perry of Loomis Sayles

As portfolio managers for bank loan products at Loomis Sayles, we are often asked about “covenant-lite” bank loans, and in particular whether they represent a dangerous trend that suggests loans are overheated and should be avoided. This paper describes our views on what covenant-lite loans are and are not; it is based more on reasoning and experience than proof, because covenant-lite loans have not been offered over a long enough period to establish a meaningful fact pattern.

2013-04-22 Will Emerging-Market Stocks Close Gap with Global Equities? by Morgan Harting of AllianceBernstein

Companies in emerging markets are more profitable and less debt burdened than their developed-market peers, and their shares trade at a deep discount. So when will emerging-market stocks close the gap with global equity markets?

2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors

Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.

2013-04-19 Fast Emerging Asia by Taizo Ishida of Matthews Asia

Over the past 20 years, Asia has come a long way to evolve into an asset class in itself. China and India have famously led the way as symbols of emerging nations. But when I think about seeking growth in Asia, I am particularly drawn to the region’s smaller equity markets as attractive hunting grounds for investment opportunities. Asia continues to change at a rapid pace, and this change is not restricted to China’s ever-changing landscape, but to many other areas that may see fewer media headlines.

2013-04-19 Archer Daniels Midland Co: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

For more than a century, the people of Archer Daniels Midland Company (ADM) have transformed crops into products that serve vital needs. Today, 30,000 ADM employees around the globe convert oilseeds, corn, wheat and cocoa into products for food, animal feed, industrial and energy uses. This article will reveal the business prospects of Archer Daniels Midland Co through the lens of F.A.S.T. Graphs fundamentals analyzer software tool.

2013-04-19 CSX Corp Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graphs on CSX Corp shows a picture of undervaluation based upon the historical earnings growth rate of 21.2% and a current P/E of 13.5. Analysts are forecasting the earnings growth to continue at about 12.5%, and when you look at the forecasting graph below, the stock appears undervalued (it’s inside of the value corridor of the five orange lines - based on future growth).

2013-04-19 Recession Watch: ECRI\'s Weekly Leading Indicator Rises by Doug Short of Advisor Perspectives (dshort.com)

Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-17 S&P 500 Index Is It Really a Broad Market Index? by Stephen Hammers, Daniel Banaszak of Compass EMP Funds

The S&P 500 is one of the most widely-followed market indexes across the globe with over 1 trillion U.S. dollars in assets tracking its performance. Despite its widespread acceptance, it contains some inefficiencies One of the chief inefficiencies, and the main focus of this commentary, is in how weights are assigned to members in the index as a market capitalization-weighted index.

2013-04-17 The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans by Team of Hotchkis & Wiley

In its first quarter 2013 newsletter, "The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans," Hotchkis & Wiley’s high yield team analyzes the behavior of the high yield market and the bank loan market in different interest rate environments to determine whether they can make sensible assumptions about the future.

2013-04-16 Why Landing Clients is Like Dating – and Seven Other Rules for Prospecting by Dan Richards (Article)

In the last 10 years, the dynamics of acquiring clients has fundamentally changed. Today’s article outlines eight new rules for prospecting; among them why gravity no longer moves prospects through a funnel and the need for a communications catalyst as a result.

2013-04-16 Making the Numbers by Steven Grey (Article)

Among the innumerable clichés littering the financial pages, few are as perversely ironic as the phrase “making the number.” Anyone unfamiliar with investing would almost automatically take this as an explicit warning: ’Beware! These numbers are made.’ And yet the same declaration is almost universally received by the investment community as reassurance. It’s a twisted, dangerous dynamic that only reinforces careless reliance on the most potentially manipulated of all available financial information.

2013-04-16 Dealing with an Obnoxious Wholesaler by Beverly Flaxington (Article)

We have a wholesaler who calls on our office. He is completely and utterly obnoxious. I understand they are supposed to sell but he is over the top. I don’t like to be pushed into things. Is there a right way to tell a salesperson like this to back off?

2013-04-16 Tax Day as Polarizing as Ever by Chris Maxey, Ryan Davis of Fortigent

Tax season is once again upon the American population, and this year, just as in years past, people are less than enthusiastic. It is estimated that the average taxpayer contributed slightly more than $11,000 dollars to federal taxes in 2012 and those figures are on the rise. As might be expected in the current backdrop, however, not everyone shares the same opinion on taxes.

2013-04-16 The Asian Economic Crisis and the IMF by Bill O'Grady of Confluence Investment Management

In May 1997, a speculative run against the Thai baht became the first clear signal that a problem was developing in Asia. Over the next three years, Asia and other emerging markets, including Russia and Brazil, were rocked by a historic financial crisis. These nations recovered strongly in the following eight years and generally made it through the 2007-09 global financial crisis in relatively good shape. However, the impact of the Asian economic crisis remains a major factor in the behavior of these emerging nations.

2013-04-15 Valuation Based Equity Market Forecasts - Q1 2013 Update by Doug Adam Butler, Mike Philbrick, Rodrigo Gordillo of Butler|Philbrick|Gordillo & Associates

Click to viewWe endorse the decisive evidence that markets and economies are complex, dynamic systems which are not reducible to normal cause-effect analysis. However, we are willing to acknowledge the likelihood that the future is likely to rhyme with the past. Thus, we believe there is substantial value in applying simple statistical models to discover average estimates of what the future may hold over meaningful investment horizons (10+ years), while acknowledging the wide range of possibilities that exist around these averages.

2013-04-15 Is Gold Signaling a Secular Bull Market in Common Stocks? by Mark Ungewitter of Charter Trust Company

Gold is an asset that some people love to hate. Intelligent investors, however, should keep an open mind toward the shiny metal and the message it conveys.

2013-04-12 ECRI\'s Weekly Leading Indicator Shows a Small Improvement by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is now at 130.1, up from 129.1 last week (revised from 129.2). The WLI annualized growth indicator (WLIg) remains unchanged at 6.2%.

2013-04-12 The Truth About The Impact Of Dividend Reinvesting by Chuck Carnevale of F.A.S.T. Graphs

What follows will be several examples of different kinds of dividend paying stocks offered in order to provide deeper insight into several commonly held notions. With each example, I will focus on how much return comes from dividends and how much comes from capital appreciation. I will also illustrate the precise benefits and effects of dividend reinvestment as it applies to different types of dividend paying stocks.

2013-04-12 How a Landslide Shifts Copper Supply by Frank Holmes of U.S. Global Investors

The U.S. mining industry was dealt a devastating blow as Kennecott Utah Copper’s Bingham Canyon Mine experienced a pit wall failure causing a massive landslide with rocks and dirt covering the bottom of the mine pit. It’s a miracle no one was hurt due to the vigilance of its owner, Rio Tinto. The landslide is just one example of how quickly and unexpectedly the supply and demand factors facing the red metal can shift, which underscores the need for nimble active management.

2013-04-12 Assume a Perfect World by John Mauldin of Millennium Wave Advisors

Waiting for our forecasts to be wrong before we adopt a yet another “solution” based on a temporary fix of yet another forecast that turned out to be wrong is no way to run a railroad, unless you want your train running off a cliff. I applaud the recent attempts in DC to come to a solution on the deficits and budget, but where are the leaders who want to get real with those forecasts?

2013-04-10 The Road To Omaha: Being a Business Owner by Bill Smead of Smead Capital Management

In this five-part series leading up to the Berkshire Hathaway Annual Meeting, we discuss the keys to Warren Buffett’s investment success. We believe these keys are available to all of us and are a part of the discipline of stock-picking at Smead Capital Management.

2013-04-09 The Myth of the Casually Competent Investor by Steven Grey (Article)

The greatest trick the Devil ever pulled was convincing the world he didn’t exist.”- Verbal Kint, The Usual Suspects. Under certain circumstances, a myth becomes so embedded in the popular mindset that it transcends the illusion of truth and assumes the gravity of gospel. The capital markets at the heart of the American economy rely on just such a fallacy: The Myth of the Casually Competent Investor.

2013-04-09 MLPs: Winning Streak Broken, Growth Story Intact by Sponsored Content from Legg Mason ClearBridge
by Chris Eades, Portfolio Manager (Article)

After an off year clouded by investors’ concerns about future tax policy, ClearBridge’s outlook for MLPs is again brightening. Oil and natural gas production are both ahead of estimates and the resulting infrastructure build-out is continuing.

2013-04-08 The Theology of Inflation by John Mauldin of Millennium Wave Advisors

We begin this week with a simple pop quiz. Is inflation good or bad? Answer quickly. I’m sorry your answer is wrong. Or rather, we can’t know if your answer is right or wrong because we are not sure what is meant by the question. We may think we know and we may be right but we can’t be sure, because the word inflation has different meanings for different people in different places and different times. In fact, even the same people in the same place and time can’t agree on a precise definition.

2013-04-05 The Stockman Backlash by Peter Schiff of Euro Pacific Capital

This week, while economists should have been closely considering the implications of the actual bankruptcy of Stockton, California, they instead heaped scorn on the perceived ideological bankruptcy of David Stockman. In other words, Stockman trumped Stockton.

2013-04-05 ECRI\'s Recession Indicators Decline from the Previous Week by Doug Short of Advisor Perspectives (dshort.com)

Today ECRI has added a new headline on the website, Employment Growth Hits New Low, based on data from today’s jobs report. Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."

2013-04-05 Eye of the Beholder: Dissecting the Variety of Price-Earnings Ratios by Liz Ann Sonders of Charles Schwab

There are many ways to value the stock market. Here, a look at several popular metrics, along with my view on the attractiveness of stocks.

2013-04-04 The Road To Omaha: Valuation Matters Dearly by Bill Smead of Smead Capital Management

Valuation is the topic that will begin a month-long series we’re calling, “The Road to Omaha.” In the next five weeks as we build to the Berkshire Hathaway annual shareholder meeting, we will present a picture of Mr. Warren Buffet and his investments through the Smead Capital Management lens. There is one central fact on which Warren Buffett, efficient market theorists, and Smead Capital Management agreevaluation matters dearly.

2013-04-03 Spring Economic Commentary by Larry Maddox of Horizon Advisors

The Fiscal Cliff We loudly went over the cliff and received a largely quiet and unexpected market reaction? Risk of rising interest rates After a 30 year period of declining interest rates, caution is in order. Our thoughts on portfolio fixed income positioning. The heightened awareness of uncertainty Despite lingering uncertainty investors should be committed to long term well diversified porftolios.

2013-04-03 Surprise! 2013 Rally Pales in Comparison to 2012 “Stealth” Rally by Douglas Cote of ING Investment Management

Despite the hoopla over first quarter market performance, it paled in comparison to the first three months of 2012. Driven in part by an extremely accommodative Fed, the U.S. economy is gaining traction, but Europe continues to flounder. After their first negative print in three years during the third quarter, S&P 500 companies returned to positive earnings growth in the fourth. A broad, globally diversified portfolio is the best way to balance the desire for wealth accumulation with an appreciation of volatility.

2013-04-03 A Man in the Mirror by Bill Gross of PIMCO

Am I a great investor? No, not yet. To paraphrase Ernest Hemingway’s “Jake” in The Sun Also Rises, “wouldn’t it be pretty to think so?” But the thinking so and the reality are often miles apart. When looking in the mirror, the average human sees a six-plus or a seven reflection on a scale of one to ten. The big nose or weak chin is masked by brighter eyes or near picture perfect teeth. And when the public is consulted, the vocal compliments as opposed to the near silent/ whispered critiques are taken as a supermajority vote for good looks.

2013-04-03 Learning from Douglas H. Bellemore One Great Teacher and Investment Counselor by Kendall Anderson of Anderson Griggs

Sometimes, I think those of us in the investment business strive to obtain the abilities of Star Trek’s Mr. Spock. Spock, the half-human half-Vulcan, learned to ignore the human emotions buried inside his self and use logic in order to solve the problems before him. Just think, what great investors we could be if we could simply control our human nature. As a Vulcan, we could construct an investment portfolio that would produce higher returns than any human could produce.

2013-04-02 New Research on Investor Behavior by C. Thomas Howard, PhD (Article)

Market theory passed through two distinctly different paradigms in the past 80 years and is experiencing the rise of a third. Those transitions have marked the introduction of improved ways to explain price movements. The ascendant paradigm, based on new research in the field of behavioral economics, promises to offer superior guidance to investors and advisors who hope to exploit market inefficiencies.

2013-04-02 The Online Advantage: Findings from the Advisor Perspectives Mutual Fund-Site Survey by Nina Eisenman and Jeff Briskin (Article)

New research from Advisor Perspectives shows that offering outstanding online research and due-diligence capabilities is key for fund companies that wish to win the competitive battle for the time and attention of financial advisors.

2013-04-02 When the Boss is the Bottleneck by Beverly Flaxington (Article)

I have a thriving practice and am very proud of the way it has grown. I have reached a point where everything has to come through me. Every decision, new idea and project needs my attention or response. I have a competent staff, but I don’t have someone to whom I can delegate.

2013-04-02 Is the Vix Still an Adequate Measure of Risk? by Chris Maxey, Ryan Davis of Fortigent

The 30-day implied volatility index for the S&P 500 calculated by the Chicago Board of Options Exchange (CBOE), known as VIX, has long been used as an indicator of market sentiment. Commonly referred to as the “fear index,” the VIX often portends periods of stress in equity markets, as options traders price in higher volatility in the future. The shape of the VIX futures curve, in particular, has historically been used as an indicator of future volatility levels.

2013-04-02 Flying High on Borrowed Wings by Peter Schiff of Euro Pacific Capital

After selling off an astounding 56% between October of 2007 and March 2009, the S&P 500 has staged a rally for the ages, surging 120% and recovering all of its lost ground too. This stunning turnaround certainly qualifies as one of the more memorable, and unusual, stock market rallies in history. The problem is that the rally has been underwritten by the Federal Reserve’s unconventional monetary policies But for some reason, this belief has not weakened the celebration.

2013-04-02 The Crisis in Cyprus by Bill O'Grady of Confluence Investment Management

Over the weekend of March 16, Cyprus announced it was taxing deposits in order to recapitalize its banking system. The proposal, which levied a tax of 9.9% for deposits under 100k and 12.5% for amounts over that level, caused a severe political backlash. The Cypriot legislature would not approve the measure. In the days following, a banking holiday was put in place to prevent banking runs. The Troika (the EU, the IMF and ECB), who approve bailouts for the Eurozone, negotiated into late Sunday, March 24, before reaching a deal.

2013-04-01 Again and Again. by Scotty George of du Pasquier Asset Management

My work has always been predicated upon using quantitative modifiers to enhance portfolio value through greater efficiency of information processing and the creation of momentum-driven asset allocation models. But because so many investors quizzically suffer from a herd mentality, they find it difficult to digest common sense solutions to diffuse problems. And yet, our methodology and its consistent point of view has enabled clients to benefit without compromising investment expectations.

2013-04-01 Look Beyond the U.S. Budget Bluster by Milton Ezrati of Lord Abbett

Believe it or not, prospects for better fiscal developments out of Washington appear positive. Here’s why.

2013-04-01 Plan Sponsors and Participants Need HELP by Jon Vogler of Invesco

The Senate Committee on Health, Education, Labor & Pensions (HELP Committee) held a hearing titled “Pension Savings: Are Workers Saving Enough for Retirement?” on Jan. 31, 2013. Witnesses shared successful initiatives and highlighted areas that need improvement to help workers achieve a financially secure retirement.

2013-03-29 ECRI Recession Indicator: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) to one decimal place is unchanged from last week. It is now at 129.7, the same as last week’s downward revision from 129.8. The WLI annualized growth indicator (WLIg) has risen fractionally to 6.6%, up from last week’s 6.3%. Those of us who regularly follow ECRI’s publicly available data and commentaries understand that there is no logical connection between ECRI’s proprietary indicators and their "pronounced, pervasive and persistent" recession call of September 2011.

2013-03-29 Market Resilience by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab

After a stellar first quarter performance from US stock markets, which showed impressive resilience to continued headwinds, a pullback is certainly possible but we don’t suggest investors who need to add to allocations wait. In a relative world, the US stock market continues to look like an attractive place to invest, although there may also be opportunities in Japan and Europe as well. The upcoming earnings season could tell the story for the market over the next couple of months, but we continue to advocate a long-term point of view and maintaining a diversified portfolio.

2013-03-28 China Talks of Trimming the Fat by Winnie Chwang of Matthews Asia

China’s new leaders are talking tough about fighting government corruption and imposing a culture of frugality among Communist Party cadres. Sensitive to growing criticism about government excess, incoming President Xi Jinping has promised to crack down on officials who abuse their power and engage in illicit behavior, regardless of their rank.

2013-03-28 What\'s the Best Investment Advice You Received? by Frank Holmes of U.S. Global Investors

Throughout my years in the financial industry, I’ve been fortunate to meet many wonderful people who helped shape my philosophies about life, business and investing. One such role model has been Seymour Schulich. While some may have never heard of the Canadian entrepreneur, those who meet him, don’t forget him and his straightforward approach to the resources industry. He’s one significant person who continues to be an inspiration to me.

2013-03-27 You Can't Be Serious by John Mauldin of Millennium Wave Advisors

I admit to being surprised by Cyprus. Oh, not the banking crisis or the sovereign debt crisis or the fact that its banks were eight times larger than the country itself or even the fact that the banks were bloated with Greek debt that had been written down. I wrote about all that a long time ago. What surprised me was that all the above was apparently a surprise to European leaders.

2013-03-27 Mark Hulbert: Our Kindred Spirit by Bill Smead of Smead Capital Management

Mark Hulbert and I started in the investment business in 1980. He chose to create a business out of analyzing the results and psychological implications of investment newsletter writers. At Smead Capital Management, we formed a business to analyze publicly-traded US common stocks through the prism of our eight proprietary criteria. We enjoy his unbiased third-party opinions on current circumstances and his consistently good historical perspective.

2013-03-26 Smart People's Opinions, The Data Says and Some Looming Deadlines by Gregg Bienstock of Lumesis

Being on the road gives me a lot of time to read the views and opinions of many very smart people (Faber, Mauldin, Hussman, Hunt and Zhao this week citations below as they all are worth a read). An interesting thread runs through much of what I absorbed this week: they don’t believe the hype.

2013-03-25 Energy: Perilous Present, Promising Future by Milton Ezrati of Lord Abbett

For oil and gas, an era of abundant supplies and lower prices awaits. But investors will have to weather a tricky geopolitical situation before it arrives.

2013-03-25 Still Bullish by Richard Golod of Invesco

Global equities (as measured by the MSCI All Country World Index) fell modestly in February amid reignited fears about the euro’s future, signs of distress in China’s economy and the looming sequester deadline in the US. Nevertheless, I believe the US, Japan and emerging markets may offer compelling opportunities, while Europe requires a more selective approach.

2013-03-22 ECRI’s "Recession" Indicators: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)

The only new ECRI-related news since last Friday’s update is a CBS Moneywatch commentary, Can the stock market rise while the economy stalls? ECRI liked the commentary well enough to reprint it on the company’s website. It basically reiterates Achuthan’s point in the "Yo-Yo Years" essay that it’s possible for the market to rise during a recession, citing three such instances (of the 15 recessions) since the Roaring Twenties.

2013-03-21 Will the Real Unemployed Please Raise Your Hands? by John Mauldin of Millennium Wave Advisors

This week’s letter will be a very short part of a book I am writing with Bill Dunkelberg (the Chief Economist of the National Federation of Independent Businesses) on the future of employment. It has taken longer to write than I initially anticipated, for a host of reasons, chief among which is that the future is not as obvious as I originally thought. Diving into the data has brought a few surprises.

2013-03-21 The Constancy of Dividends by Bill Smead of Smead Capital Management

The payout ratio on the S&P 500 Index currently hovers around 30% of the after-tax profits of companies in the indexat the low end of the last 100 years. In comparison, the capital appreciation portfolio here at Smead Capital Management has a payout ratio of 27%. This is important because most studies show that over 40% of the returns provided by common stocks come from dividends over long stretches of time. With those figures in mind, we reasoned that this is a good juncture to remind everyone about our vision of the next ten years as it pertains to dividends.

2013-03-21 Debt-Friendly Stimulus by Robert Shiller of Project Syndicate

With much of the global economy apparently trapped in a long and painful austerity-induced slump, it is time to admit that the trap is entirely of our own making. We have constructed it from unfortunate habits of thought about how to handle spiraling public debt.

2013-03-19 Five Steps to Demonstrate Your Value Today by Dan Richards (Article)

Of the broad trends facing the financial service industry, the most powerful will be greater transparency. It will force everyone – and advisors in particular – to clearly demonstrate the value they provide. How advisors respond to this shift to a value-driven world will determine whether they succeed or fail.

2013-03-19 Understanding the Role of SPIAs in a Retirement Portfolio by David B. Loeper (Article)

Wade Pfau’s recent article, Breaking Free from the Safe Withdrawal Paradigm, was well researched. Its goal was to accurately calculate the benefits of using SPIAs based on certain assumptions. I fear, however, that many readers may have not fully grasped the impact of a few key assumptions that drive his results.

2013-03-19 How My Firm Hires Great Employees by Teresa Riccobuono (Article)

Adding a team member is a big decision. If you are thinking the time is right to add to your roster, here are a few things to consider.

2013-03-19 The Eurozone Crisis: Time for a Reset by Giles Conway-Gordon of Cogo Wolf Asset Management

The crisis in the Eurozone (EZ) has reached a dangerously unstable condition, politically, socially, financially and economically. Without a return to growth in the peripheral economies a disorderly outcome is becoming probable as the debtor countries approach the 100% debt-to-GDP default horizon. They will not return to growth while they share a currency with Germany. It is time for a reset.

2013-03-19 The Outlook for Equities by Howard Marks of Oaktree Capital Management

It doesn’t take much to get me started on a memo. In this case one sentence was enough, in an article from the February 4 online edition of Pensions & Investments, as described by FierceFinance on February 28: “The long-term equity risk premium is typically between 4.5% and 5%.”

2013-03-19 Keeping Up With Changes In Emerging Market ETFs by Jun Zhu of Leuthold Weeden Capital Management

In this report, we highlight benchmark changes in a major player, a potential substitute (with cheaper fees) for another major player, a new player with an innovative weighting scheme and provide an overview of the Emerging Market ETF space available to investors.

2013-03-19 Adios Hugo by Bill O'Grady of Confluence Investment Management

On the afternoon of March 5, the vice president of Venezuela, Nicolas Maduro, announced that President Hugo Chavez, who had led the country since 1999, had died. His death did not come as a great surprise. He had been suffering from cancer for nearly two years. Last year, declaring himself “cured,” he ran for president and won a third term handily. However, by December, he needed additional treatment in Cuba. As he prepared for what proved to be the final round of therapy, he appointed Maduro as the leader of Venezuela in his absence.

2013-03-18 Little Hope for the Government Budget by Charles Lieberman of Advisors Capital Management

The President spoke to Republicans this week to see if they could find common ground to overrule the budget sequester and form the basis for a new agreement over the budget, taxes and government spending going forward. Instead, the meeting crystallized how far apart the two sides are in their vision for a deal. Since there is no budget or broader economic crisis looming, there is nothing to force the two sides into an agreement.

2013-03-15 ECRI’s Recession Call: Proprietary Indicators Still Not Cooperating by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in today’s update. It is now at 129.9 versus the previous week’s 129.5 (revised upward from 129.3). The WLI annualized growth indicator (WLIg) has eased, now at 6.3, down from last week’s 6.4 (an upward revision from 6.2).

2013-03-15 The Big Four Economic Indicators: Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)

With the exception of Real Personal Income Less Transfer Payments (e.g., Social Security, Supplementary Security Income, workers compensation, etc.), the Big Four continue to show expansion. The seemingly bizarre income data is the result of the end-of-year strategy of early bonuses and moving forward of 2013 income to avoid higher taxes. We’ve seen this situation before in the 1990s. The PI anomaly is the reason the average for the Big Four (the gray line above) has shows contraction for the past two months.

2013-03-13 What's Your Advantage? by Bill Smead of Smead Capital Management

In the March 9, 2013 issue of Barron’s, writer Jonathon Laing wrote an excellent piece about Howard Marks. This article provides the base from which we can discuss the main components of investment portfolio composition. These components are information, analysis of information, and decisions made from information and analysis. In doing so, we will bring to light why we believe today’s best opportunity is in long-duration common stock investing.

2013-03-13 Some Stunning Demographic Trends in Employment by Doug Short of Advisor Perspectives (dshort.com)

I spent much of yesterday reviewing the latest employment report from the Bureau of Labor Statistics (BLS). They have a wealth of employment data, much of which stretches back to 1948. My focus was the Labor Force Participation Rate (LFPR) with some specific attention to gender and age. The LFPR is a simple computation: You take the Civilian Labor Force and divide it by the Civilian Noninstitutional Population. The result is the participation rate expressed as a percent.

2013-03-13 Feared Copper "Flood" More Likely a Trickle by Jon Ruff of AllianceBernstein

Investors have turned bearish on commodities, particularly in the case of copper, where recent talk of a looming surge in new supply has sparked fears of a price rout. We’re skeptical about the copper supply-glut story and don’t think what’s happening in copper is a "canary in the coal mine" for the rest of the metals markets.

2013-03-12 Three Ways to Turn Referrals into Clients by Dan Richards (Article)

In the perfect world, every prospect who's been given your name would immediately call you. But the real world doesn't work that way, something I was reminded of by a recent email from a financial advisor. Here's how to address that situation.

2013-03-12 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Although ecstasy reigned supreme last Tuesday as the Dow crossed into record territory, not everyone felt as if they shared in the bounty. It's at times like these that we must be mindful of the distinction between economic recovery and market recovery. Two phenomena which fly in tandem, on parallel tracks, are not always inextricably linked, and in this case the parallel disconnect is wide and obvious.

2013-03-12 The Retirement Income Problem by Rob Isbitts of Sungarden Investment Research

The most vital and pervasive issue investors will face in the next decade is how to wring out enough income from the savings they have amassed to maintain or enhance their lifestyle. To do so, they will need to be far more flexible in their investment approach. They also must adapt to an environment for "high quality bonds" (Treasuries, Municipals and Corporates) that does not at all resemble that which they are accustomed to.

2013-03-12 The 2030 Increasing Inequality Scenario by Bill O'Grady, Kaisa Stucke of Confluence Investment Management

Last month we started looking at the 2030 alternative world development scenarios as laid out by the National Intelligence Council (NIC). The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. In its most recent report, the NIC projects four possible global political and economic states based on expected trends. Last time, we presented the most likely best case scenario. This week, we will explore the third scenario, under which the world gets wealthier as a whole, but inequalities increase.

2013-03-11 Emerging-Market Debt: Pure High-Grade Strategies Gain Popularity by Marco Santamaria of AllianceBernstein

Investors in hard-currency emerging-market (EM) bonds are starting to change the way they think about the opportunity. For some, this means moving to investment-grade-only strategies.

2013-03-08 Flying High by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners

The media has made a spectacle out of the Dow Jones Industrial Average reaching new all-time highs. The Dow Jones Industrial Average and the S&P 500 indices do not include the compounding effect of dividends paid by member companies. Any retiree will tell you that dividends represent a return of capital and useful income in the real economy. If you had reinvested those dividends back in the index as they were paid, the old time highs reached in October of 2007 likely would have been passed some time ago.

2013-03-08 Our Five Year Forecast by Kendall Anderson of Anderson Griggs

We believe that predicting short term swings in the market is an exercise in humility. Longer-term market predictions can have some value, but they should be based on a form of valuation methodology of the underlying securities which make up the market of choice, and a consideration of the current mood of the market participants should also be included.

2013-03-08 ECRI "Recession" Update: Lakshman Achuthan Stands his Ground by Doug Short of Advisor Perspectives (dshort.com)

The big news this week is the ECRI's Chief Operating Officer and spokesman, Lakshman Achuthan, returned to the media circuit with interviews yesterday on Bloomberg, CNBC and Yahoo's Daily Ticker. In addition, ECRI has published a new commentary available to the general public.

2013-03-08 Spasmodic Stupidity: The Wile E. Coyote Congress by Cliff Draughn of Excelsia Investment Advisors

I predict the Ides of March will find us in a continued sequestration, and Congress will use the time between now and the debt ceiling deadline on March 27th to debate the merits of true tax reform as opposed to governing by crisis. In the end, though, the reform conversation will revert to governance by crisis, with another stop-gap measure to avoid government shutdown during Holy Week and Easter, which will tide us over to the elections of 2014. Do you expect any different?

2013-03-07 Guanxi, Mianzi, and Business: The Impact of Culture on Corporate Governance in China by David Smith of Aberdeen Asset Management

There are two key cultural and sociological issues of particular importance when evaluating Chinese companies: guanxi (relationships and networks) and mianzi (face). When analyzing the potential of a Chinese company, it's important to understand how guanzi and mianzi affect transactions, board composition and deliberations, and shareholder engagement, among other issues.

2013-03-07 Freewheeling? by Dimitri Balatsos of Tesseract Partners

Ignoring threatening clouds in the distant horizon, the financial markets are wrapped in a blanket of complacency. Consider the following. The Dow Jones Index has been flirting with the 2007 record peak. Implied stock market volatility, as measured by the VIX Index, is in the basement. Junk bond yields are at record lows, compressing spreads to within shouting distance of risk-free Treasuries. Securitization is back from the dead, while the drought in M&A activity is now getting plenty of rainfall.

2013-03-07 New Highs by Team of Janus Capital Group

The Dow Jones Industrial Average closed at a new record high the first week of March, breaking its previous closing high reached in October of 2007. The new record is symbolic more than anything else, but it still has some positive implications for equity markets.

2013-03-06 Lessons Learned by Jerry Wagner of Flexible Plan Investments

The need for taking precautions, preparing for emergencies, having "just-in-case" options, was a much discussed topic...right after the 2000 and 2008 market crashes. Not so much anymore.

2013-03-06 Smooth Returns by Bill Smead of Smead Capital Management

Harry Markopolos was working for a hedge fund of funds and attempting to put a portfolio together that would "smooth" long-term returns. In the process of marketing what his company was doing, he ran into a client who already had a money manager doing that for him. The money manager the client used was Bernie Madoff. When Markopolous looked at the long-term track record of Madoff's client, he instantly knew that it was mathematically impossible to have a return that high with as little year-to-year variance in the return. We at Smead Capital Management would like to ask a few questions.

2013-03-06 Why Our Best Ideas Come In The Shower and Why They Are So Hard To Remember by Gary Halbert of Halbert Wealth Management

I don't know about you, but I have had some of my best and most creative ideas while in the shower. But the shower is not the only place or activity where we tend to be more creative. Our creative juices can frequently be stimulated when doing other things as well such as driving home from work, during or after exercise, cooking, meditating, etc.

2013-03-05 Selecting Truly Active Equity Funds by C. Thomas Howard, PhD (Article)

In a recent Advisor Perspectives article, Joe Tomlinson reported evidence showing that 401(k) plan sponsors add value in selecting funds, but their risk-adjusted alpha is not enough to beat a comparable index portfolio. Tomlinson then pointed out the need for additional research to help advisors improve upon the fund selection process. As a step in this direction, I will report on research conducted by my firm and other academics.

2013-03-05 You’re The Cream of the Crop: Key Findings from the 2012 Advisor Perspectives Reader Survey by Jeff Briskin (Article)

Experienced. Results oriented. Focused on serving the needs of individuals and families. Confident in your abilities. Eager to expand your knowledge. If this sounds like you, you're not alone. These are the traits that stand out among Advisor Perspectives readers, based on the findings of our 2012 Reader Survey.

2013-03-05 Absolute Return Letter: Expect the Unexpected by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners

With real interest rates being negative in many countries we expect low returns on both equities and bonds going forward. Many investors have responded to that by allocating more and more of their assets to passive strategies such as ETFs. We believe it is the wrong approach for this type of environment.

2013-03-04 Reminiscences of Marty Zweig: What I Learned From a Market Great by Liz Ann Sonders of Charles Schwab

Wall Street loses one of its greats. Remembering Marty's contributions to my career... and investors everywhere. Marty epitomized humility and civilityboth in short order today.

2013-03-04 Out On A Limb - An Investor's Guide to X-treme Monetary and Fiscal Conditions by John Hussman of Hussman Funds

Massive policy responses, directed toward ineffective ends, are scarcely better than no policy response at all. A look at the current monetary and fiscal policy environment, as well as more effective policy initiatives, and why they make sense.

2013-03-04 Health Care Reform: A Q&A With Our Municipal Bond Experts by Shari Sikes, Art Schloss of Invesco

Health care reform took center stage in the last year as the Supreme Court upheld the Patient Protection and Affordable Care Act of 2010 (ACA), affirming the constitutionality of portions of the law. The decision made it possible for major health care reform to proceed. This January, health care spending again was at the forefront during the fiscal cliff debate as a means to reduce government spending. Health care is poised to remain at the center of this discussion until a federal budget deal is reached.

2013-03-01 Wait for Your Pitch in Today's Market by John West of Research Affiliates

Great hitting in baseball depends in part on waiting for the right pitch. In today's market, most asset classescoming off their impressive 2012 recordare "high and outside" the valuations necessary for future big league returns. Patience is the name of the game today.

2013-03-01 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance.

2013-03-01 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

I've now updated this commentary to include the January Personal Income data, the red line in the chart below. As expected, the January brought the inevitable reversal of the dramatic advance in the November and December data, which was a result of moving income forward to manage the tax risk in anticipation of the Fiscal Cliff. The -4.7% decline in January essentially cancels the 1.4% rise in November and 3% rise in December.

2013-03-01 Is China's Health Care on the Mend? by Sherry Zhang of Matthews Asia

Despite the many challenges facing Chinas health care sector, I believe the recent initiatives and the markets continued growth could create many future investment opportunities in areas ranging from medical device manufacturing, insurance, pharmaceutical and a range of general and specialized care facilities.

2013-02-28 What Italy's Election Result May Mean for the Markets and Your Investment Portfolio? by Team of Thomas White International

Global equity and bond markets have reacted sharply to the outcome of Italy's elections on February 24-25. The poll result is inconclusive, with no clear winner. And apparently, Italians have voted against the austerity measures and reforms that are widely believed to have improved international confidence in Italy last year.

2013-02-27 The Difficult Transition to Democracy by Bill O'Grady of Confluence Investment Management

The Arab Spring has turned into something of a disappointment. In Tunisia, the recent assassination of Shokri Belaid, a secularist opposition leader, has increased tensions. S&P recently downgraded the countrys sovereign risk due to rising political turmoil. In Egypt, protests have returned, this time against the Muslim Brotherhood-led government. Yemen remains in chaos. Syria is essentially in a civil war. Unrest continues in Bahrain but the minority Sunni leadership remains entrenched, mostly due to military support from Saudi Arabia.

2013-02-27 Rational Temperance by Bill Gross of PIMCO

While the market was indeed moving in the direction of "dot-com" fever three to four years later, the Dow Jones Industrial Average at the time was a relatively anorexic 6,000, and the trailing P/E ratio was only 12x. For a central bank that was then more concerned about economic growth and inflation as opposed to stock prices, risk spreads, and artificially suppressed interest rates, the Chairman's query made global headlines, became a book title for Professor Robert Shiller and a strategic beacon for portfolio managers thereafter.

2013-02-27 The Healthcare Blues by John Mauldin of Millennium Wave Advisors

It has been some time since we peeked into my worry closet. A few questions this weekend prompted me to think about things I am paying attention to but have not written about, and one thing that I am not worried about at all, despite the apparent media hysteria.

2013-02-27 Ignore the Noise. Equities Offer Income Potential. by Joe Kringdon of Pioneer Investments

Common prospectus disclosure reads, "past performance is no guarantee of future results." Yet, this crowd of naysayers seems to be projecting the paranoia associated with the "lost decade(s)" onto the current environment and beyond. They are preparing for the future by fighting the last few wars all over again. Their sentiments and actions (or inactions) are emblematic of an American looking the wrong way for traffic on a London street. Given wrongfully configured context, these people are looking in the wrong direction for the wrong things. I continue to be positive on the equity markets.

2013-02-26 2013, Losing the Bid by Bill Smead of Smead Capital Management

Many times in my 32-year career people ask me to comment on whether an established trend for a popular investment will stay intact. My answer is always the same. We don't know when the hot streak will end for the popular investment and we don't feel comfortable with popular securities. In our view, there is a dramatic difference in what you do with popular investments based on whether they areto use terms borrowed from Warren Buffett currency assets, unproductive assets, or productive assets. It has to do with the ability to sell and the liquidity you have when the popularity disappears.

2013-02-25 Tupperware Brands Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2013-02-22 Muscle Memory or Muscle Training by Bill Smead of Smead Capital Management

Interest rates have gone down on US Treasury bonds off and on for 31 years. This means that the coupon you are being paid has been joined by significant capital gains. Jim Grant argues that the only thing going for bonds is how well handlers of money have done on them; Warren Buffett calls it "rear-view mirror investing".

2013-02-22 Frontier Markets: Today's Models of Fiscal Prudence by Paul Herber of Forward Management

Say you are evaluating the markets of two countries in a search for investment growth opportunities. One country's sovereign debt is 120% of its gross domestic product (GDP), while the other has outstanding sovereign debt that represents only 11% of its GDP. Saddled with sovereign debt, the first country faces painful fiscal austerity measures, inflationary ones, or bothany of which will no doubt stifle economic growth.

2013-02-22 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)

ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-22 Is it Time to Review Your European Investment Strategy? by Team of Thomas White International

A sharp equity and bond market reaction is likely expected in response to the outcome of Italy's February 24-25 general elections, several media sources such as THE GLOBE AND MAIL have reported. While the poll result is uncertain, these reports indicate that in the event of a clear victory for Silvio Berlusconi's political party, buying interest in equities and lower-quality debt may be affected.

2013-02-21 General Dynamics Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of General Dynamics Corp through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-02-21 Tapping China's Growth via Dividends by Yu Zhang of Matthews Asia

When the long-term historical performance of global equity markets is considered, investors can see that the contribution of dividends to total return is significant. In this regard, China has been no exception. Between 1999 and 2012, 46% of the total return of the MSCI China Index was derived from dividends received and reinvested. This month, Yu Zhang, CFA, explores the ways in which a dividend-investing approach can be an effective investment strategy in China.

2013-02-20 Whatever It Takes by John Mauldin of Millennium Wave Advisors

Was it only a few years ago I visited the Emerald Isle of Ireland? The collapse of its largest banks foreshadowed the demise of many other European banks that had borrowed money from British, German, and other European banks to lend against homes and property. The Irish government had to guarantee deposits and bond holders in order to prevent a bank run. I think I am correct when I state that the Central Bank of Ireland was the first central bank to avail itself of large-scale use of the Emergency Liquidity Assistance (ELA) provision of the European Central Bank.

2013-02-19 Six Recommendations for Working with Widows by Kathleen M. Rehl, Ph.D., CFP (Article)

Widows are a fast-growing segment of the U.S. population, with almost 12 million women currently widowed and another 800,000 joining their ranks each year. Working with a widow, especially in the early stages of her grief, requires a non-traditional approach to financial advising.

2013-02-19 Letter to the Editor by Various (Article)

A reader responds to Gary Halbert's commentary, The Economy: Worst Five Years Since the Depression, which appeared on February 13.

2013-02-19 Expanding the Toolkit for Monitoring Your Equity Managers by Markus Aakko, Andrew Pyne of PIMCO

Investors may want to consider active share when assessing whether and how their active equity managers add value beyond a passive benchmark. The methods for monitoring investment managers are well established. But given the importance of getting portfolio allocation right in a low-growth, low-return world, it's worth examining new ways to assess risk and value added. While tracking error has been held as a key measure for active risk, it may include elements that reflect market conditions rather than managers' actual decisions on risk.

2013-02-19 On Competitive Devaluations by Scott Brown of Raymond James

Aggressive monetary policy moves in recent years have been accompanied by a growing fear of a currency war. In a currency war, or competitive devaluation, countries attempt to weaken their currencies to boost exports, but each devaluation leads to counter devaluations. That's not what's going on now. However, whether a country is purposely devaluing its currency or is merely pursuing accommodative monetary policy is irrelevant, the consequences are the same. The recent meeting of G-20 finance ministers and central bankers highlights the lack of coherent policies to boost growth.

2013-02-16 How To Remain Solvent Longer Than The Market Is Irrational by Team of F.A.S.T. Graphs

I believe it is extremely important that investors focus on the value of what they own more than they do on the day-to-day machinations of price volatility. However, I also believe, and even recognize, that very few investors are capable of ignoring volatile stock price movements. When the price of a stock that they own is rising or falling, especially when the swings are large and/or violent, it is very difficult for people to maintain a steady head and hand. Instead, emotions take over reason which often cause otherwise rational investors to make irrational decisions.

2013-02-15 ECRI "Recession" Update: Propietary Indicators Take a Pause by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in today's update. It is now at 129.6 versus the previous week's 130.2.The WLI annualized growth indicator (WLIg) also eased, now at 8.3, down from last week's 8.9. WLIg has been in expansion territory since August 10th of last year, but is is fractionally off its interim high set last week.

2013-02-15 Hyperinflations, Hysteria, and False Memories by James Montier of GMO

In the past, Ive admitted to macroeconomics being one of my dark, guilty pleasures. To some value investors this seems like heresy, as Marty Whitman1 once wrote, Graham and Dodd view macro factors...as crucial to the analysis of a corporate security. Value investors, however, believe that macro factors are irrelevant. I am clearly a Graham and Doddite on this measure (and most others as well).

2013-02-14 Understanding Derivative Overlays, in All Their Forms by Markus Aakko, Rene Martel of PIMCO

Passively managed overlays are typically based on a simple formula, while active approaches involve more complex algorithms or decision-making. Overlay examples include portable alpha, LDI, currency, completion, rebalancing, and tactical asset allocation overlays -- as well as tail-risk hedging and hedge fund replication. Potential benefits include the ability to effectively manage cash, reduce costs and risk exposure, simplify manager transitions and express tactical views.

2013-02-13 Our Job: Whether; Market's Job: When by Bill Smead of Smead Capital Management

Warren Buffett describes the stock market's purpose as being "a wonderfully efficient mechanism for transferring wealth from the impatient to the patient". We are reminded of this by a series of news reports and commentaries on subjects greatly influenced by basic economics. In today's missive, we consider what the law of supply and demand says about China, oil, and housing in the USA.

2013-02-12 Consumers Less Enthused to Bail Out the Economy by Chris Maxey, Ryan Davis of Fortigent

Following recent recessions, it was commonplace to rely on American consumers to bail out the economy. The reliance on the American consumer was widely understood as the best remedy for an ailing economy. We are not as fortunate this time around and our dependence on consumers is one reason for the sluggish rate of recovery since 2008.

2013-02-11 Distracting Dividends by John Petrides of Advisors Capital Management

With interest rates at historic lows, bonds have become a difficult place to find income (although paradoxically, in 2012, asset flows into bond mutual funds have outpaced that of stock mutual funds yet again), so investors have looked to other assets for yield, most notably high dividend paying stocks. Stocks continue to be attractively valued relative to fixed income and cash. In addition, high dividend paying stocks offer investors the ability to grow the income to help offset inflation, whereas in bonds, the income is fixed.

2013-02-08 Unconventional Policies and Capital Flows by Ben Emons of PIMCO

Although quantitative easing has grabbed the headlines, a number of central banks around the world have enacted other extraordinary measures in attempts to manage their economies. The Swiss National Bank (SNB), for example, adopted an exchange rate peg versus the euro while increasing its foreign exchange reserves to almost 80% of Swiss GDP.

2013-02-08 ECRI "Recession" Update: Leading Index Growth Sets Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

First a flashback for those of us who have followed ECRI's media appearances: we know that the company adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...

2013-02-08 Overcoming 3 Bad Investing Behaviors by Russ Koesterich of iShares Blog

Do you avoid the stock market? Shun diversification? Trade inefficiently? Russ and guest blogger Nelli Oster an investment strategist on Russ' team examine three common bad behaviors among investors and provide tips for potentially mitigating their impact.

2013-02-06 Too Active, Too Passive: Too Little Understanding by Bill Smead of Smead Capital Management

The wealth management and institutional consulting communities have allowed indexing to be called "passive" investing and stock-picking disciplines to be called active management. This implies a mindless approach to indexing and a great deal of busyness to stock picking. We at Smead Capital Management believe these labels are at the heart of a great deal of confusion about what works and what doesn't work in both equity mutual funds and separately managed accounts.

2013-02-06 The Good, the Bad, and the Greek (Risks) by John Mauldin of Millennium Wave Advisors

Greece is a small country with large implications. Last week we began to explore what I learned from my recent trip to Greece. In this week's letter we will finish those observations and in particular look at some of the comments from my meetings with over 40 people: owners of small businesses and large ones, billionaires, taxi drivers, politicians, central bankers, investors, ex-patriots, wives, and mothers. I believe we can arrive at some small understanding of the problems Greece faces. Then we will consider the broader consequences for Europe.

2013-02-05 Why Don’t Satisfied, Happy Clients Refer? by Beverly Flaxington (Article)

Many factors underlie this issue, and here are the four most important of them.

2013-02-05 Eurozone: Divorce, Italian Style? by Milton Ezrati of Lord Abbett

The upcoming election may determine whether Italy continues its austerity and reform programs. The fate of the currency union may hang in the balance.

2013-02-05 Ditto by Howard Marks of Oaktree Capital Management

Anyone who reads my memos of the last 23 years will see I return often to a few topics. This is due to the frequency with which themes tend to recur in the investment world. Humans often fail to learn. They forget the lessons of history, repeat patterns of behavior and make the same mistakes. As a result, certain themes arise over and over. Mark Twain had it right: "History doesn't repeat itself, but it does rhyme." The details of the events may vary greatly from occurrence to occurrence, but the themes giving rise to the events tend not to change.

2013-02-04 A Gross Underestimate by Jonathan Coleman, Soonyong Park of Janus Capital Group

As we enter 2013, we felt it would be an appropriate time to revisit one of last years most controversial predictions of future equity performance. We acknowledge that equities in general may not continue to deliver the same real rate of return they have over the last century; however, we believe the glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross' pessimistic prediction.

2013-02-04 2013 Annual Forecast by Clyde Kendzierski of Financial Solutions Group

It's that time again. January will be over by the time you read this which means we are out of holiday excuses or "just ramping up for the new year" reasons for not getting back to work. Having said that, I'd like to offer my excuse for the Annual Forecast getting to you in February instead of the first week of the year. Hand over my heart, we started early this go-round.

2013-02-01 Monthly Investment Bulletin by Team of Bedlam Asset Management

Financial discipline is collapsing and with it, trust in the value of money. Many heavyweight thinkers in America, such as Nobel laureate Paul Krugman have suggested that a solution to avoid national debt ceilings imposed by Congress would be to mint a trillion dollar platinum coin. Meanwhile, heavyweights close to policy makers in Britain and Japan have been musing whether their central banks should write-off the mountains of government bonds they have bought recently.

2013-02-01 ECRI "Recession" Update: Leading Index Growth Hits Another Interim High by Doug Short of Advisor Perspectives (dshort.com)

ECRI posts its proprietary indicators on one-week delayed basis to the general public, but ECRI's Lakshman Achuthan has switched focus to his company's version of the Big Four Economic Indicators I've been tracking for the past several months. See, for example, this November 29thBloomberg video that ECRI continues to feature on their website. Achuthan pinpoints July as the business cycle peak, thus putting us in at the beginning of the eighth month of a recession.

2013-02-01 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)

Note from dshort: This commentary has been revised to include the latest Nonfarm Employment data released today.... Nonfarm Employment rose 0.12% in January, following 0.15% and 0.18% gains in December and November, respectively. The Year-over-year increase is 1.52%. Nonfarm employment has been the tortoise of the Big Four, slow and steady. The average MoM change over the past 12 months has been 0.13%, and the range has been 0.07% to 0.20% -- no contractions.

2013-02-01 A Gross Underestimate by Jonathan Coleman and Soonyong Park of Janus Capital Group

The glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross pessimistic prediction.

2013-02-01 Protests of the Common Man by Sunil Asnani of Matthews Asia

At times, some recent protests have been criticized for a lack of organization and demands that may seem irrational such as the death penalty for juvenile suspects of serious crimes. But for all their faults, Indias recent demonstrations are an essential step toward a more participative democracy, and may help to spur an overhaul of the countrys judicial and administrative machinery that I believe has not kept pace with its economic development.

2013-01-31 Making Sense of Low Volatility Investing by Feifei Li of Research Affiliates

Why do low volatility stocks outperform riskier ones over time? Dr. Feifei Li, our Head of Research and my long-time collaborator, has focused on understanding the theoretical foundation underpinning the low volatility anomaly and documenting the strategy's risk-return characteristics in developed and emerging markets. In this issue of Simply Stated, our newsletter focusing on investor education, she summarizes the literature on the low volatility effect as well as provides additional insights from her own research based on an expanded global data set.

2013-01-31 Q4 2012 Letter by Team of Grey Owl Capital Management

During the second half of 2012, central banks turned their massive and coordinated monetary intervention "up to eleven." This is the overwhelmingly dominant economic and market force today. Despite the long-term consequences (which are very real), we believe the central bankers commitment is steadfast. It has and will likely continue to mute both real economic and financial market volatility (at the expense of long-term growth). A deeper analysis of what has changed, our assessment of the impact, and our portfolio response follows.

2013-01-31 Elliott's Paul Singer On How Money Is Created ... And How It Dies by Team of TimeCapital

When we launched our series into the US Shadow Banking system in the summer of 2010 we had one simple objective: to demonstrate just how little the process of modern (and by modern we mean circa 2004 not 1981) money creation was understood.

2013-01-30 The Complicated Case of Mali by Bill O'Grady of Confluence Investment Management

On January 11, 2013, French President Francois Hollande announced the French military was intervening in Mali at the request of the government. The Mali military was reeling in the face of jihadist rebels from the north who were making rapid inroads toward the south. Although the U.N. Security Council had authorized an African-led military intervention in Mali to contain the rebels, it had been ineffective. Thus, France "piggybacked" off that resolution to justify its intervention.

2013-01-30 Taking a Dip? by Jerry Wagner of Flexible Plan Investments

In the cold Midwest in January, the only talk of dips tends to be at Super Bowl parties or during the annual Polar Bear Club celebrations when a few hardy, scantily clad individuals jump into the frigid winter waters. Of course, in the summer those dips are much more inviting, following which a double "dipped" cone from the ice cream parlor has plenty to recommend it. But tune in to any financial news program or pick up your favorite financial read and you'll see that dips are all the rage. In this case, the reference is to "buying on dips."

2013-01-30 An Apple's First Worm by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners

Writing about Apple is painful. Not because I have lost money in recent months or have no insight to provide, but because the media will likely report on it ad nausea for the next few days. It is perhaps human nature that the news which is most readily produced is also the news that is most easily consumed. If you want to be read, it's best to write words that people will read. While this makes for great entertainment and advertising, it hasn't typically been the best way to get new investment ideas.

2013-01-29 Predicting Asset Class Returns: Recommendations for Financial Planners by Joe Tomlinson (Article)

Developing reasonable estimates for stock and bond returns requires more than just historical data or the assumptions provided in financial software packages. Inappropriate assumptions can doom retirees to outliving their savings or forgoing a life style they could otherwise afford. There are better ways to forecast, and in this article I'll suggest a few of them.

2013-01-29 Your Most Important Resolution for 2013 by Dan Richards (Article)

With the first month of 2013 behind us, many of those New Year resolutions relating to diet, weight or exercise are distant memories. That's why this is an opportune time to make a new resolution for 2013 for your business: This is the year that you will excel at bringing new clients on board.

2013-01-29 Letter to the Investment Committee by Emilio Vargas (Article)

The following is a thousand words on investing that will irritate most every investment professional. Most forms of active portfolio management incur fees, transaction costs and taxes. Whole industries exist due to these costs, and their proponents will argue that they are adding value. In aggregate they cannot; they are all costs. That I am proposing an investment that could take food from the mouths of the children of an army of accountants, brokers and investment professionals will, no doubt, cause them to find flaws in what follows.

2013-01-25 Feeding the Dragon: Why China's Credit System Looks Vulnerable by Edward Chancellor, Mike Monnelly of GMO

Edward Chancellor and Mike Monnelly, members of GMO's Asset Allocation team, write to institutional clients in a new white paper about China's credit boom and outlines some worrying recent developments in its financial system. In GMO's view, "China's credit system exhibits a large number of indicators associated with acute financial fragility," including China's debt and real estate bubbles, the belief that the government is underwriting financial risk, the shadow banking system, a proliferation in credit guarantees, among others.

2013-01-25 Pension Liabilities Time to Get Real by Christian Stracke of PIMCO

Creeping pension liabilities are an increasing concern for credit investors. Companies should provide more granular information on both sides of their pension balance sheets, as well as use more realistic assumptions. A few companies have improved their disclosures in recent years, but in general the information available to investors is still far from what we need.

2013-01-25 ECRI "Recession" Update: Leading Index Growth Hits a New Interim High by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article,The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-25 Opine Less, Think More by Francois Sicart of Tocqueville Asset Management

In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at investing from a broad perspective and goes over in detail some of the macro themes he is examining as he tries to help the reader make sense of what 2013 will bring. He discusses potential "black swans" that he has his eye on, the bounceback of American and European stock markets, the sometimes overlooked lack of a correlation between economic growth and stock market performance, what P/E ratios tell us both historically and in the present, and where valuations can go from here.

2013-01-24 Get Your Funk Out by Jim Goff of Janus Capital Group

I manage investment professionals for a living. When an analyst gives me the positives on one hand and the negatives on the other hand, but offers no conclusion, I want to cut one of those hands off. The best analysts understand all the issues but come to well-founded views.

2013-01-23 Is the European Crisis Over? by Chris Maxey, Ryan Davis of Fortigent

The European sovereign debt crisis that first erupted in 2010 and stoked almost three years of intense market volatility has all but faded from the front pages. Overshadowed by domestic policy issues and European Central Bank (ECB) President Mario Draghi's pledge to do "whatever it takes" to save the Eurozone, fears that the monetary union would crumble and unleash a maelstrom of financial distress appear to have dissipated.

2013-01-23 PIMCO's Secular Forum Preview by Mohamed El-Erian of PIMCO

It is almost time again for PIMCO's Secular Forum a critical part of the firm's investment process. This annual event, which takes place each May, brings together our investment professionals from around the world to debate and specify the key themes that we believe will affect the global economy and, consequently, our investment strategies over the next three to five years from asset allocation and relative value positioning to returns expectations and risk management.

2013-01-23 Norfolk Southern Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

Norfolk Southern Corp (NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers.

2013-01-23 It's What You Learn After You Know It All That Counts. by Jeffrey Saut of Raymond James

January is the time of year when strategists, economists, gurus, etc. all join in on the annual nonsense of predicting "What's going to happen in the markets for 2013?" For many, this ritual is an ego trip, yet as Benjamin Graham inferred forecasting where the markets will be a year from now is nothing more than rank speculation. Or as I have noted, "You might as well flip a lucky penny."

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.

2013-01-22 Overcoming a Lazy Coworker by Beverly Flaxington (Article)

One of my co-workers is lazy. He doesn't come in on time, he never does the work he is asked to do and he won't answer the phone. The rest of us take care of everything. It frustrates me that the owners do not see how hard we work and how he never helps out. Is there some way I can let them know about the inequities without coming across as a tattler?

2013-01-22 Puppet Show by John Hussman of Hussman Funds

What's fascinating is that in the presence of what are not thin strings, but massive cables supporting the economy like a puppet, the only response that Wall Street can muster is "Hey! He's walking!" as if the puppet is capable of motion without being propped up to a nearly reckless extent.

2013-01-22 Fossil Inc Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

Fossil Inc. (FOSL) is a global design, marketing and distribution company that specializes in consumer fashion accessories. The Company's principal offerings include an extensive line of men's and women's fashion watches and jewelry sold under proprietary and licensed brands, handbags, small leather goods, belts, sunglasses, soft accessories, shoes and clothing.

2013-01-18 ECRI's Public Indicators Continue to Undermine Their Insistance That We're in a Recession by Doug Short of Advisor Perspectives (dshort.com)

For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article, The Tell-Tale Chart, makes clear their public focus on the Big Four.

2013-01-18 VF Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of VF Corp through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.

2013-01-17 Investing in Africa: Misconceptions and Realities by Mark Mobius of Franklin Templeton Investments

It's easy to fall prey to misconceptions and generalizations about places we've never been: to assume everyone in the United States drives big cars, all the French love croissants and all Canadians play hockey. There are many misconceptions about investing in developing markets, and Africa certainly has its fair share, but it's dangerous to make sweeping generalizations.

2013-01-16 Obama Claims We Don't Have A Spending Problem by Gary Halbert of Halbert Wealth Management

There's a lot to talk about this week. A lot of my contemporaries are offering their predictions for the New Year. But with our nation now over $16 trillion in debt and annual budget deficits over $1 trillion, I don't think there is any way to accurately predict what will happen this year. Another financial crisis could rear its ugly head just about any time.

2013-01-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production Both Rise by Doug Short of Advisor Perspectives (dshort.com)

The charts don't all show us the individual behavior of the Big Four leading up to the 2007 recession. To achieve that goal, I've plotted the same data using a "percent off high" technique. In other words, I show successive new highs as zero and the cumulative percent declines of months that aren't new highs. The advantage of this approach is that it helps us visualize declines more clearly and to compare the depth of declines for each indicator and across time (e.g., the short 2001 recession versus the Great Recession). Here is my own four-pack showing the indicators with this technique.

2013-01-15 Courting Your Communications by Wendy Cook (Article)

How are your communications like a courtship? In both cases, it's crucial to proceed in the proper manner, at the proper time. Otherwise, like proposing marriage during a blind date, what might otherwise be a smooth move could flop fast.

2013-01-15 Dealing with an Unreasonable Compliance Department by Beverly Flaxington (Article)

I am in a very successful practice within a B/D. The firm brought in 'new guns' to oversee our compliance. I got along fine with our old team. Now everything we do is scrutinized and most of the time we are told 'no.' How should I deal with an unreasonable compliance officer?

2013-01-15 The Markets and the Cult of Now by Joseph Paul of AllianceBernstein

Crisis-battered investors continue to favor the relative certainty of current income over the "maybe" of future capital appreciation. If you ask me, however, this hyperfixation on Now is creating some provocative opportunities in Later.

2013-01-15 Declaring Victory at Halftime by John Hussman of Hussman Funds

Present overvalued, overbought, overbullish, rising-yield conditions fall within a tiny percentage of market history that is associated with dismal market outcomes, on average. Its true that we've observed extreme conditions since about March 2012 with little resolution aside from short-term declines. But the S&P 500 remains only a few percent from its March 2012 high, and if history is any guide, the extension of these unfavorable conditions is not likely to reduce the depth of the market loss that can be expected to resolve them.

2013-01-15 From Cliff to Ceiling! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup

When it was all said and done not much happened in the final quarter of 2012. Anxiety picked up immediately after the election as the bickering over the fiscal cliff escalated. In the end, the worst-case scenario was avoided at least for a couple of months and stocks ended about where they began the quarter.

2013-01-14 The More Things Change... by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab

One crisis averted...another one on the way? Of course, but we're still positive on the US economy and stock market.

2013-01-14 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles

The final quarter of 2012 was the icing on the cake of an exceptional year for the credit sectors. Fourth quarter credit gains stemmed in part from uncommonly aggressive monetary policy responses in the third quarter. As economic growth continued to undershoot expectations, major central banks made clear that they were dissatisfied with the status quo of tepid economic growth and high unemployment. The Federal Reserve went so far as to tie its monetary policy to the level of the unemployment rate.

2013-01-14 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles

While the S&P 500 Index posted a slightly negative fourth-quarter return, the Index's 16.0% return for all of 2012 was notable in the face of a long list of global fundamental concerns. Midcap and small cap stocks performed better during the final three months of the year, posting gains of roughly 2.0%-3.0%. The fourth quarter outperformance of smaller stocks was enough to overtake the S&P 500 for the year, but just fractionally.

2013-01-14 The 'Dark Continent' is Shining Bright by Team of Thomas White International

From a recipient of aid, Africa has transformed itself into a magnet attracting capital and investment.

2013-01-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Another quiet week in early January as the earnings season is about to gear up.

2013-01-11 ECRI's Imaginary Recession: Now in Its Seventh Month by Doug Short of Advisor Perspectives (dshort.com)

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 126.6 (which is an upward revision from 126.4). Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.1, up from last week's 5.0. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.

2013-01-11 Winter Quarterly Commentary by John Prichard of Knightsbridge Asset Management

While a last minute compromise may have been reached on taxes, it represents only a brief rest stop on a required road of repair. On the positive side, we should see less annual wrangling with tax rates having been made permanent, meaning they will not automatically change at some future date (but rather only when Congress feels like changing them), with many areas also sensibly indexed for inflation.

2013-01-11 Special Edition: The Outlook for 2013 by Team of Northern Trust

At this time of the year we typically get warm and generous wishes for the New Year and, of course, numerous questions about what our crystal ball has in store for 2013. While many economists publish their perspectives prior to January 1, we opted to wait in the hope of having a clear fiscal picture for the United States. A lot of good that did us...

2013-01-10 Things Can Only Get Better by Bill Smead of Smead Capital Management

As long-duration common stock owners, we at Smead Capital Management don't put much emphasis on predicting the year-to-year movements in the stock market. We expect at least a 10 percent or greater decline during each year and a greater than 20 percent decline at least once every five years. With that caveat in place, we will throw our two cents into the debate about what the US stock market will do in 2013.

2013-01-08 The Forecast for Risk in 2013 by Geoff Considine (Article)

With the new year upon us, pundits are issuing their forecasts of market returns for 2013 and beyond. But returns don't occur in a vacuum – meeting clients' goals requires an asset allocation that appropriately balances return and risk. So what follows are my predictions for risk across major asset classes, based on a theoretically sound approach that has proven to be reliable in the past.

2013-01-08 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.

2013-01-04 Newsletter by Harold Evensky of Evensky & Katz

As always I hope you will enjoy this issue, as much as I have enjoyed putting it together. Most important though I wish one and all a very happy, prosperous and healthy new year!

2013-01-03 Money for Nothin' Writing Checks for Free by Bill Gross of PIMCO

It was Milton Friedman, not Ben Bernanke, who first made reference to dropping money from helicopters in order to prevent deflation. Bernanke's now famous "helicopter speech" in 2002, however, was no less enthusiastically supportive of the concept. In it, he boldly previewed the almost unimaginable policy solutions that would follow the black swan financial meltdown in 2008.

2013-01-03 And That's the Week That Was by Ron Brounes of Brounes & Associates

Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).

2013-01-03 High Yield Market Overview December 1, 2012 by Team of Nomura Asset Management

The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 0.74% in November, as high yield investors focused on the fiscal cliff and the risk that the U.S. government fails to negotiate a resolution.

2013-01-03 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

2013-01-02 Getting the Most from Your Investment Committee by Bob Veres (Article)

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.

2013-01-02 Is Fracking a ‘Happy Solution’ to our Energy Needs? by Richard Vodra, JD, CFP (Article)

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'?

2013-01-02 Where Munis and Government Budgets Meet by Rafael Costas of Franklin Templeton Investments

In the realm of municipal bonds, if you had been focusing on the bankruptcy filings or threats facing a few California cities that dominated the news headlines earlier this year, you couldn't have been blamed for concluding that the sector was a minefield. But then, as year-end approached, the state and local government story became more upbeat, and investors were flocking to the municipal market. Rafael Costas, co-director of the Franklin Municipal Bond Department, has ridden this kind of headline carousel before and he's used to seeing these types of stories cycle through.

2012-12-31 What's in a Name. by Dan Ariely of Dan Ariely Blog

Runners run, teachers teach, and cheaters cheat. It's all there in the name, right? Despite the obvious logic, one could argue that even those who aren't "runners" per se do, on occasion, run (even if it's just across a busy street), and that we all occasionally teach our kids or friends something they didn't know before. So what about cheaters?

2012-12-31 And That's the Week That Was by Ron Brounes of Brounes & Associates

Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).

2012-12-28 Capitol "Cliffhanger": Thriller or Chiller? by Milton Ezrati of Lord Abbett

Whatever the outcome of the last-minute jockeying in Washington, meaningful fiscal reform remains unlikely.

2012-12-28 ECRI Update: Flunking Recession 101 by Doug Short of Advisor Perspectives (dshort.com)

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.

2012-12-24 And That's the Week That Was by Ron Brounes of Brounes & Associates

Down to the homestretch. While investors generally spend the last few days of the year window-dressing and setting positions for the next, this year they face the added uncertainties of the "fiscal cliff" and the negative implications for the economy. Though the data of the week seemed positive and reflective of "solid" (too strong?) growth, the budgetary matters and inability of our "best and brightest" to work together do not bode well. So much for Plan B. Perhaps a late year holiday gift is still in order?

2012-12-21 The Outlook for Commodity Stocks by Doug Ramsey of Leuthold Weeden Capital Management

Popular sentiment holds that commodities remain in a secular uptrend, but commodity-oriented stocks (Energy and Materials) have been underperforming for more than a year-and-a-half. Were increasingly convinced their 2008 relative strength highs won't be challenged for a very long time. Yes, Emerging Market demand may rebound next year. But remember Econ 101, and the day your professor discussed supply? This side of the equation doesn't look as good. Among the two commodity-based sectors, Energy looks cheaper and appears much more washed out from a sentiment perspective.

2012-12-21 Egypt's Arab Winter by Mark Mobius of Franklin Templeton Investments

It's been almost two years since the "Arab Spring" swept North Africa and the Middle East, and with it, grand hopes for change. Sometimes, change doesn't happen as quickly as the people would like, and oftentimes it can be a messy process. That is certainly true in Egypt right now, a country that is still in the throes of shaping its future. The ousting of Hosni Mubarak in 2011 didn't instantly transform the nation into a model of democracy, and the country is currently deliberating the best way forward via public debates, protests and the election process.

2012-12-21 ECRI Update: The Recession Call Is Further Undermined by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the latest public data. It is now at 127.2 versus the previous week's 127.4. However, the WLI annualized growth indicator (WLIg) rose, now at 4.6, up from last week's 3.9. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-21 How to Screen for Wonderfully Boring Stocks by Bill Smead of Smead Capital Management

In a December 7, 2012 piece for Barrons.com, Mark Hulbert shared the research from a study called "Low Risk Stocks Outperform within All Observable Markets of the World." The study, written by Nardin Baker and Robert Haugen, convincingly made the argument that boring stocks are wonderful for superior compounded returns regardless of which country you measure.

2012-12-21 The Big Four Economic Indicators: Real Personal Incomes Improve Significantly By Doug Short by Doug Short of Advisor Perspectives (dshort.com)

The weight of these four in the decision process is sufficient rationale for the St. Louis FRED repository to feature achart four-packof these indicators along with the statement that "the charts plot four main economic indicators tracked by the NBER dating committee." Here are the four as identified in the Federal Reserve Economic Data repository. See the data specifics in the linkedPDF filewith details on the calculation of two of the indicators.

2012-12-20 Rolling Tail Hedges: The Dynamic Tradeoff between Cost and Potency by Vineer Bhansali of PIMCO

In our hypothetical illustration, rebalancing tail risk hedges more frequently than once a year offers some benefit under all volatility curves (ignoring transaction costs) but the benefits are greatest when the volatility curve is flat or steep. Some of the benefits of rebalancing can quickly disappear if the transactions costs are large. Two key points for investors to consider: Hedging has to be a systematic, repeated, asset allocation decision to obtain best long-term benefits, and the hedge program has to be active and consider pricing levels so efficient rebalancing can be implemented.

2012-12-20 Can China Double National Income by 2020? by Daisuke Nomoto of Columbia Management

Xi Jinping, China's newly elected president, was the featured speaker at the recent National Congress. However, I felt the most interesting point to come out of the event was outgoing President Hu Jintao's announcement of a plan to double Chinas national income by 2020. This plan is reminiscent of a similar program launched in Japan in the 1960s, spearheaded by Prime Minister Ikeda, where the goal was also a doubling of national income. The two programs have a number of parallels despite the multi-decade time gap between them.

2012-12-19 Accenture: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of Accenture (ACN) through the lens of FAST Graphs fundamentals analyzer software tool.

2012-12-19 Energen Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of Energen Corp (EGN) through the lens of FAST Graphs fundamentals analyzer software tool.

2012-12-19 The Consumer Catalyst in Asia's Emerging Markets by Andrew Sleeman of Franklin Templeton Investments

There may be no better evidence of the economic power of the consumer than the spending frenzy that occurs this time of yearthe sparkling lights, the must-have gifts and gadgets, the indulgent meals. Whether online, brick and mortar, big box or mom-and-pop, retailers count on the year-end consumer boom.

2012-12-18 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)

Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.

2012-12-18 Central Bank Insurance by John Mauldin of Millennium Wave Advisors

Possibly, the question I am asked the most is, "What do you think about gold?" While I have written brief bits about the yellow metal, I cannot remember the last time I devoted a full e-letter to the subject of gold. Longtime readers know that I am a steady buyer of gold, but to my mind that is different from being bullish on gold. In this week's letter we will look at some recent research on gold and try to separate some of the myths surrounding gold from the rationale as to why you might want to own some of the "barbarous relic," as Keynes called it.

2012-12-17 The Fed: Targets, Thresholds, Guideposts, and Goals by Scott Brown of Raymond James

As expected, Federal Open Market Committee announced that purchases of Treasuries will be added to QE3 in 2013 (the Fed will continue to buy $40 billion per month in mortgage-backed securities and $45 billion per month in long-term Treasuries). Fed policymakers also announced threshold guidance on the overnight lending rate, which will make the Fed's policy intentions clearer, and that's a good thing.

2012-12-15 Looking Back to Look Ahead by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab

Markets have been more focused on short-term forces; not least being Washington and the fiscal cliff negotiations. But taking a step back and gaining some longer-term perspective can help investors better weather short-term volatility. Even beyond the fiscal cliff, Washington and fiscal policy will likely remain in focus next year. Monetary policy is also front-and-center with the Fed maintaining its extremely accommodative policy and targeting specific economic conditions instead of providing calendar guidance. Europe managed to make it through the year, but challenges and risks remain.

2012-12-14 ECRI Weekly Update: Walking the Recession Plank by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data to its highest level since early August of 2011. It is now at 127.7, up from a downwardly revised 126.7 in the previous week. See the WLI chart. The WLI annualized growth indicator (WLIg) also rose, now at 4.4 from last week's 3.5. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.

2012-12-14 The Big Four Economic Indicators: Industrial Product and Retail Sales Brighten the Picture by Doug Short of Advisor Perspectives (dshort.com)

This morning I've added two more of the Big Four for November: Industrial Production from the Federal Reserve, the purple line in the chart below and Real Retail Sales, the green line.

2012-12-14 Fiscal Friction is Taking a Toll on Confidence in Washington and Rome by Carl Tannenbaum of Northern Trust

Fiscal friction is taking a toll on confidence in Washington and Rome. What inflation rate should be used to index entitlements? Our updated US forecast assumes a budget resolution before year end.

2012-12-12 Nu Skin Enterprises: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article will reveal the business prospects of Nu Skin Enterprises (NUS) through the lens of FAST Graphs fundamentals analyzer software tool.

2012-12-12 Low Volatility, Attention & Asset Growth by Matt Malgari of Knight Capital Group

Infused with the vicissitudes of quarreling politicians, growing mountains of debt and stagnant economies in much of the developed world, investors have been faced with a virtual bull market in "worry" and, oddly, an actual bull market in U.S. equities over the last couple of years. Chief among the beneficiaries of the newfound obsession with geometric returns appears to be "low-volatility" products which have begun showing up in force across the investment universe.

2012-12-11 Luck versus Skill in Investing: New Insights from the World of Sports and Beyond by Michael Skocpol (Article)

Skill exists in investing. Indeed, the most skilled managers today are likely the most skilled there have ever been. But there's more to it.

2012-12-11 The Next Generation of Income Guarantee Riders: Part 3 (The Income Phase) by Wade Pfau (Article)

In this third and final installment in my series on guarantee riders, I'll focus on the post-retirement income supported by income guarantee riders for variable annuities (VA/GLWBs), stand-alone living benefit riders (SALBs), and an unguaranteed portfolio of mutual funds. I'll highlight how differences among these products affect their end results, while also investigating what roles guarantees can most appropriately play in a retirement portfolio.

2012-12-11 Letters to the Editor by Various (Article)

Readers respond to a series of articles that appeared over the last several weeks.

2012-12-11 The Muslim Brotherhood Consolidates Power by Bill O'Grady of Confluence Investment Management

On November 22nd, Egyptian President Mohammed Morsi issued a decree that effectively gave him unchecked power. The decree allowed him to unilaterally legislate without oversight by the judiciary. This action clearly rattled those opposed to the president and his political party. Demonstrations ensued and there were numerous threats from the judiciary to obstruct the president's newly declared power.

2012-12-11 Tax Reform: A First Step by Clyde Kendzierski of Financial Solutions Group

I rarely use this space to rant about political issues, but the recent election made it obvious just how dysfunctional the American political process has become. The ongoing financial crisis in the US will never get fixed as long as both political parties remain focused on solutions that make the problem worse. The Democrats want to give people more money to spend, claiming this will grow the economy. The Republicans want to cut taxes, so that people have more to spend, claiming that will grow the economy

2012-12-10 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Economics is a science in a constant state of flux. While it is true that any science is defined by its immutable laws, few disciplines are as influenced by emotion and perception as the science of "money."

2012-12-10 13 for '13 by Richard Bernstein of Richard Bernstein Advisors

Each December we publish a list of investment themes that we feel are critical to the coming year. We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982's bull market. It is hard to be bearish when one considers the following.

2012-12-07 ECRI Weekly Update: More Recession Flag Waving by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.8, up from an upwardly revised 126.2 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) also rose, now at 3.5 from last week's 3.4. WLIg has been in expansion territory since August 24th, althout it is off its high at 6.0 on October 12th.

2012-12-07 Saving for Retirement: Stage 1 by Team of Franklin Templeton

Most of us have certain expectations about our retirement. We may daydream of the golden years as a time to explore exotic locales, perfect a golf swing, or just relax. The reality is often quite different, particularly for those whove done more daydreaming than planning, or who have suffered setbacks to their portfolios in 2008-2009 and feel a sense of paralysis. Knowing where to begin can be confusing, and as with most things, overcoming inertia to take that first step certainly isnt easy.

2012-12-07 Archer Daniels Midland Co: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-07 Ball Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-07 Dillards Inc: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-07 Hormel Foods Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-06 Meet the New Boss by Bill OGrady of Confluence Investment Management

On November 14th, the new Politburo Standing Committee (PSC) was unveiled. The composition of this new group had been anxiously awaited for months. Although most of the members (all men, by the way) had been anticipated, there were some surprises. This committee is the most powerful group in China; it is essentially the legislative and executive branch of the country. And, given that the judiciary is not really independent, the PSC effectively rules China.

2012-12-06 Regal-Beloit Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-06 United Technologies Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-06 Questions and Answers Surrounding the Fiscal Cliff by Team of Northern Trust

There is no resolution yet to the US fiscal cliff. It is probably unfair to have expected one by now; the clock is too far from midnight. But as the negotiations continue, several questions have been raised that deserve some reflection. 1. The two sides seem to be making statements that reflect stark disagreement. Are talks failing? 2. Is our fiscal path a cliff, or a slope? 3. There is a proposal to limit the deductions claimed by high income taxpayers. How would these work, and what are the consequences? 4. The cliff has been in the news for a long time. Why isnt everyone prepared for it?

2012-12-05 Nordstrom Inc: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs

This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.

2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)

By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.

2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)

Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.

2012-12-04 How to Turn Acquaintances into Clients by Dan Richards (Article)

The transition from a casual social conversation to a business-related one is tricky, requiring us to do it in a way that's not intrusive and doesn't make the person uncomfortable. Here's an approach that worked for one advisor.

2012-12-04 Economics 101: Little Return without Risk by Bill Smead of Smead Capital Management

A tremendous amount of energy and effort has been expended in the US on behalf of wealthy investors to secure returns while reducing risk. Like any useful endeavor, it started out as a wise thing and reached its stride in the late 1990s as a way to deal with a massive asset misallocation. As Warren Buffett always says, What the wise man does at the beginning, the fool does at the end. It appears to us that the efforts to eliminate risk in the US capital markets have reached the foolish point.

2012-12-04 Strawberry Fields Forever? by Bill Gross of PIMCO

As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will take you down and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.

2012-12-04 Intrinsic Value from Ben Graham to Anderson Griggs With an example; Emerson Electric (EMR) by Kendall J. Anderson of Anderson Griggs

Ben Graham may not have been the first to use the term intrinsic value as a form of analysis for stocks and bonds. But, through his teachings and the successful application of this approach by his many students and practitioners (including Warren Buffett, John Templeton, Seth Klarman, Mason Hawkins, Howard Marks and yours truly) he is given the credit. Understanding the concept of intrinsic value is necessary for an intelligent investor. Without understanding intrinsic value, its offspring, margin of safety, has no meaning.

2012-12-03 CVS Caremark Corp: Fundamental Stock Research Analysis by FAST Graphs of FAST Graphs

This article is going to look at CVS Caremark Corp (CVS) through the lens of FAST Graphs - fundamentals analyzer software tool. The 12-year historical chart on CVS Caremark Corp shows that the company is undervalued. The prudent investor seeking growth and a rising income stream might want to look more in-depth at CVS Caremark Corp for possible addition to his own portfolio.

2012-12-01 A Fresh Start (Hopefully) by Howard Marks of Oaktree Capital

For years I kept these memos away from anything related to politics. But more recently I began to discuss issues facing the US, and this has required some mention of policy and thus of politics. Ive tried very hard to be non-partisan, with a goal of not having readers know my leanings. I hope Ive succeeded; at least no one has complained. Because I found Americas recent presidential election and especially the results so fascinating, Im going to move explicitly to the field of politics, but with the same goal of non-partisan expression.

2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors

The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.

2012-12-01 The How Matters by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab

Market focus has clearly been on fiscal cliff negotiations. An agreement that averts the cliff would likely ignite a further near-term rally, but the ultimate solution and its components could have longer term consequences that may not be as market-friendly. US economic data has been impacted by Hurricane Sandy, but it appears modest growth is continuing; although business investment has fallen off. Housing continues to provide support and the Fed is staying the course. There are some signs of growth stabilization globally, notably in some of the emerging economies, including China.

2012-11-30 3 Reasons to Hold Off on Holiday Sales Celebrations by Russ Koesterich of iShares Blog

Is the US consumer saying goodbye to the Great Recession and hello to a heady holiday season? Initial holiday sales results may paint a rosy picture, but Russ K explains why investors shouldn't be prematurely uncorking the New Year's champagne.

2012-11-30 Where Are We in the Boom/Bust Liquidity Cycle? by Thomas Fahey of Loomis Sayles

In an often cynical world, standard financial and macroeconomic quantitative models give people the benefit of the doubt. Fundamental economic theory assumes the best of us, supposing that human beings are perfectly rational, know all the facts of a given situation, understand the risks, and optimize our behavior and portfolios accordingly. Reality, of course, is quite different.

2012-11-30 ECRI Weekly Update: Beating the Recession Drum by Doug Short of Advisor Perspectives (dshort.com)

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.3, up from 125.4 in the previous week. The WLI annualized growth indicator (WLIg) declined to 3.4, down from last week's 3.6. WLIg has been in expansion territory since August 17th, although it is now at a six-week low, with the high at 6.0 on October 12th.

2012-11-29 The 13th Labour of Hercules: Capital Preservation in the Age of Financial Repression by James Montier of GMO

James Montier, a member of GMO's asset allocation team, writes to institutional clients in a new white paper on the prospects for preserving and growing capital in a world of slowing growth. Defining financial repression loosely "as a policy that results in consistent negative real interest rates," Mr. Montier poses the question "how does a value investor respond to this? It certainly appears as if the assets one would normally associate with capital preservation are expensive. So can and/or should you substitute other assets such as equities into the role of safe-haven value store?"

2012-11-28 November 2012 Monthly Investment Bulletin by Team of Bedlam Asset Management

Equities have rarely been so attractive yet any investor acting on the perceived wisdom of the last 50 years would scoff and keep selling: the bad news will worsen for economic activity, growth in credit, wages, consumption, employment and in several countries, political stability. Few indices are glaringly cheap as measured by Cyclically Adjusted Price to Earnings multiples (CAPE: chart p.4) with many expensive, especially in many emerging markets.

2012-11-27 Capital Formation and the Fiscal Cliff by John Mauldin of Millennium Wave Advisors

In today's economic environment, we often complain about volatility and uncertainty, but there is one thing I think we can be fairly certain of: taxes are going up. I constantly try to impress upon my kids, most of whom are now adults, that ideas and actions have consequences. In todays letter we will look at some of the consequences of an increase in taxes. Please note that this is different from arguing whether taxes should rise or fall. For all intents and purposes that debate is over

2012-11-27 Beta The One Trick Unicorn by Liam Molloy, Bethany Carlson of Galway Investment Strategy

For a long time investors have been told the only free lunch is diversification. In a hurry to buy into the mythical free lunch investors jumped in without asking enough questions, like what is diversification. Instead everyone hurried to fill buckets and cover the style boxes with about as much thought as someone filling out a March Madness office bracket.

2012-11-27 Over the Cliff: Alan Simpson and Erskine Bowles on the Looming Deficit Crises by Michael Skocpol (Article)

As President Obama and Congressional leaders hurtle Thelma-and-Louise-style toward a budgetary precipice, another deficit-tackling duo hit the road earlier this month to deliver a simple message: This all could have been avoided.

2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)

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.

2012-11-26 Median Household Incomes: The "Real" Story by Doug Short of Advisor Perspectives (dshort.com)

The traditional source of household income data is the Census Bureau, which publishes annual household income data each September for the previous year. Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates.

2012-11-26 Negativity Creates Value; What if the Mayans are Wrong? by Charles Lieberman of Advisors Capital Management

Being negative is easy and sophisticated, so it is attractive for pundits, analysts and the media to play the part. But, it also creates tremendous opportunity. The market seems to be discounting the possibility that the world will come to an end along with the Mayan calendar in near term. If the market is correct, investment strategy doesn't matter. But if the market is incorrect, there are tremendous investment opportunities.

2012-11-23 ECRI Weekly Leading Index: Index Rises, Growth Diminishes by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data (released Wednesday in advance of the Thanksgiving holiday). It is now at 125.7, up from 125.4 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) declined to 3.8, down from last week's 4.3. WLIg has been in expansion territory for thirteen weeks, although it is now at a seven-week low, with the high at 6.0 on October 12th.

2012-11-22 Emerging Asias Rising Productivity by Robert Horrocks of Matthews Asia

Per capita GDP in China has tripled in purchasing power parity terms in the last decade yet Chinese workers still likely have their most productive years ahead of them. Asia as a whole has seen consumption increase by a third since the global financial crisis, even as the West has languished. This month, Robert Horrocks, writes about what is key to the emerging opportunities in Asia: Productivity.

2012-11-21 Reflections: Primate in Distress by John Gilbert of GR-NEAM

The enthusiastic response of the capital markets to the Federal Reserve's announcement of the third quantitative easing program is, of course, just what they intended. It recalls the even more ebullient response to the ECB's Long Term Refinancing Operation announcement late last year.

2012-11-21 The Most Wonderful Time of the Year...for Stocks by Frank Holmes of U.S. Global Investors

November hasn't been living up to its reputation as one of the best months for U.S. stocks. Equity investors have been fed a cornucopia of negative news that has been difficult to digest, including the outcome of the "fiscal cliff," the front page photos of rioting in the eurozone, and the escalation of geopolitical risk in the Middle East.

2012-11-20 Euro Crisis: Major Implications For Investors by John Browne of Euro Pacific Capital

The euro crisis has begun to feel like an everlasting steeplechase with high hedges and water obstacles blocking the path to economic resurgence on the Continent. Each time a hurdle has been cleared another problem emerges to potentially block the track. The latest developments involve ugly anti-austerity riots across the southern tier and open rifts emerging among the creditors, most notably between the International Monetary Fund and northern nations.

2012-11-20 Syria: The Problem of Intervention by Bill O'Grady of Confluence Investment Management

The situation in Syria continues to deteriorate. The rebels, though divided, are acquiring heavy weapons (there have been reports they have some tanks), mostly by taking them from the regime. Apparently, the rebels are also attracting former soldiers who can operate such weapons. Still, there is nothing to suggest that either side is about to dominate the other and so the current civil conflict will likely continue.

2012-11-19 Little Dutch Boy by John Hussman of Hussman Funds

In the Mary Mapes Dodge book titled Hans Brinker, there is a fictional story within the story of a little Dutch boy who, on his way to school, notices a hole in the dyke. Having nothing else to fix the leak, he plugs the hole with his finger and stays there through the night until workers come to repair it. We are now into the fourth year of efforts to print trillions of little Dutch boys out of dollars and euros in order to stop a tide from crashing through a fundamentally damaged dyke. All of this has bought time, but no workers have arrived, and no real repairs have been done.

2012-11-16 ProVise Bullets by Ray Ferrara of ProVise Management Group

With the elections behind us, we must now look ahead to the next six weeks of a Lame Duck Congress. Given the fact that the President was re-elected, the Republicans maintained control of the House, and the Democrats gained in the Senate, we know there will either be collaboration or chaos in Washington. The positioning has already started. The more things change, the more they stay the same.

2012-11-16 ECRI Weekly Leading Index: The Slippage Continues by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined again in the numbers released today. It is now at 125.4, down from its interim high of 127.6 set five weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 4.4, down from last week's downard revision to 5.0. WLIg has been in expansion territory for twelve weeks, although it is now at a five-week low, with the revised high at 6.0 on October 12th.

2012-11-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

2012-11-15 Russia and China's Neighborly Interests by Mark Mobius of Franklin Templeton Investments

Whether our neighbors are as close as the airplane seat next to us or across a national border, most would probably agree that while we may not see eye to eye, peaceful cooperation makes more sense than tense relations. China and Russia share some 4,000 miles of common border, and their neighborly relationship has certainly had some ups and downs. But it's clear to me that the opportunities for cooperation between these two nations have enormous potential mutual benefits, particularly in the trade of natural resources.

2012-11-13 How Well Does the Next Generation of Guarantee Riders Protect Your Income? Part 2 - Starting the Inc by Wade Pfau (Article)

Unlike traditional VA/GLWBs, the future payments from stand-alone income riders are tied to 10-year Treasury rates. That's bad news for retirees, who may find their future benefits compromised if interest rates remain at historically low levels - regardless of how the stock market performs.

2012-11-13 The Downside to Socially Responsible Investing by Robert Huebscher (Article)

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.

2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)

Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.

2012-11-13 Voyages by Michael Lewitt (Article)

Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.

2012-11-13 Quarterly Letter by Team of Grey Owl Capital Management

The multiple hurricanes of fiscal deficits and monetary malfeasance are headed our way. Unfortunately, financial market models that seek to assess the magnitude, direction, and timing of economic tempests are far less precise than those of our scientific brethren. So, we prepare for the worst, but we dont immediately evacuate. There are still plenty of opportunities for solid investment returns and we will describe two new investments in the pages that follow. Yet, the risks are real, as we have discussed frequently in these letters, so our overall portfolio structure remains conservative.

2012-11-13 China's Transition Occurring at a Critical Time by Chris Maxey, Ryan Davis of Fortigent

While the presidential election in the U.S. was on the forefront of most investors' minds, current events in China could be equally important to the global economy. China is going through a political transition at the same time as it seeks to re-balance its economy. Whether those efforts will be successful remains a great unknown.

2012-11-13 Argo and Ethel: America Has Never Been a "Rose Garden" by Bill Smead of Smead Capital Management

We recently had the pleasure of seeing a movie, Argo, and a documentary on HBO, Ethel. Argo is the story of the rescue of the six Americans from the Canadian Ambassador's residence at the time of the Iranian takeover of the US Embassy in Teheran. Ethel is a documentary which tells the story of Ethel Kennedy, the wife of Senator Robert Kennedy. It was produced, directed and narrated by Ethel Kennedy's youngest daughter, Rory. I rate both of these films highly and believe they tell US investors something they need to be reminded of.

2012-11-13 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors

Last Friday, President Obama addressed the two topics that have been on many equity investors' minds since election night: the economy and the dreaded "fiscal cliff." In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. That's "how we did it in the 1990s, when Bill Clinton was president," says the president.

2012-11-12 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

And so, we move on. Not simply the collective "we" of the markets, nor the political parties, nor any special agenda groupings, but, really, the global tapestry which can now divert its attention from American politics and focus once again on capitalism, peace-making and common ground solutions.

2012-11-12 Housing Recovery - A Dose of Realty Reality by Milton Ezrati of Lord Abbett

Media and the investment community have made much of recent good news on housing. Certainly, the recent upturn in sales, building, and real estate prices is welcome. But if the 1980's housing bust is any guide, popular references to strength and imminent recovery grossly overstate. That older experience suggests that health in the sector will return only slowly. Residential real estate may well have turned a corner, but major gains and price recovery will likely wait for some time.

2012-11-09 ECRI Weekly Leading Index: Off Its Interim High by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined in the numbers released today. It is now at 126.2, down from its interim high of 127.6 set four weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 5.1, down from last week's 5.9. WLIg has now spent eleven consecutive weeks in expansion territory, although it is now at a five-week low.

2012-11-08 Alternative Thoughts - All That Volatility For Nothing? by Lawrence Epstein, Josh Rowe of Orinda Asset Management

In 2011, the S&P 500 had one of the smallest price changes in its history, but investors experienced significant daily volatility. Stock investors experienced an extraordinarily tumultuous 2011 marked by the collapse of governments, standoffs over raising the national debt ceiling, and an escalation of the sovereign credit crisis in Europe. Markets rose and fell several percentage points in minutes on the barest of rumors from Washington and Brussels and frequent surprises in economic data around the globe.

2012-11-07 US Olympic Swim Team and Warren Buffett: Buy and Hold by Bill Smead of Smead Capital Management

The US swim team has their own criteria for developing young athletes. We assume in every ten-year stretch that they support the swimming efforts of 25 to 30 young athletes in hopes of finding an occasional Mark Spitz or Michael Phelps. Most of them share the characteristics we described about Michael Phelps. The US Olympic team is the most successful swim team portfolio manager in the world. What can we learn from them as portfolio managers?

2012-11-06 Lacy Hunt on Our Economic Future by Robert Huebscher (Article)

Last week I spoke with Lacy Hunt, an unequivocal advocate of deficit reduction. Hunt defended – as persuasively as few others can – the need to address our fiscal imbalances. But equally respected economists are advocating for the other extreme, and he shares some common ground with them.

2012-11-06 The Three Most Important Hours for Your Business by Dan Richards (Article)

Rocky markets mean that you can't rely on referrals alone. If you've built a significant client base, you want to continue to dedicate the bulk of your time to communicating with them. But for your business to stay healthy, you need to bring in new clients – advisors need to carve out three hours a week to focus on reaching out to prospective clients.

2012-11-06 Six Technology Integration Disasters to Avoid by Jennifer Goldman (Article)

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.

2012-11-05 How to Stop Illegal Downloads by Dan Ariely of Dan Ariely Blog

Three days after publication of my new book , The (Honest) Truth About Dishonesty, I was able to find electronic copies on a few websites that specialize in illegal content. These were high quality versions of the book, including the images of the cover, the references, andmy favorite partthe copyright notice.

2012-11-05 Want to learn Mandarin and Hindi? Go to Australia by Team of Thomas White International

Australia has planned an ambitious 'Asian Literacy' program aimed at boosting cultural and economic ties with Asia.

2012-11-02 ECRI Weekly Leading Index: Still Jogging in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the numbers released today. It is now at 126.6, down from last week's 126.7 (revised from 126.8). Likewise, the WLI growth indicator (WLIg) slipped slightly, now at 5.9, down from last week's 6.0. WLIg has now spent ten consecutive weeks in expansion territory, although it is off its interim high of 6.1. But for the past six weeks the WLI has been jogging in place in a narrow range (126.2 to 126.7).

2012-11-02 Time Heals U.S. Equities' Wounds by Milton Ezrati of Lord Abbett

As long-term performance measures may improve, investor attitudes toward stocks may brighten.

2012-11-01 Invesco Fixed Income Investment Insights: October 2012 by Darren Hughes, Scott Roberts of Invesco

High yield bond mutual funds have received $38.9 billion of inflows year-to-date through August, the second largest net inflow in the US retail bond category as measured by Lipper. Given known search activity and anecdotal evidence, we believe institutional flows into the asset class have been strong as well. Given this backdrop, we'd like to provide some insight into what's driving these flows, the likelihood of this continuing and the value in the asset class.

2012-10-30 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)

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.

2012-10-30 The Essential Skill for Advising Women: Building Trust by Kathleen Burns Kingsbury (Article)

Creating trust with a client is not a one-time event. It is a journey that starts at the first meeting and continues throughout the life of the advisor-client relationship. And, while trust is an integral part of any client relationship, it's especially important for your female clients.

2012-10-30 Weekly Update: Commentary and Statistics by Team of ING Investment Management

U.S. equity markets fell back into decline during the week, as earnings reports and more specifically, forward outlooks inspired investor caution. Meanwhile, a potential "Frankenstorm" has the East Coast on edge for the coming week.

2012-10-30 A Bombing in Lebanon by Bill O'Grady of Confluence Investment Management

The larger issue is related to Syria's civil war and the growing potential for the conflict to regionalize. In this report, we will offer a short history of Lebanon and Syria, examine the current state of the conflict in Syria and discuss the potential for the Syrian civil war to become a regional conflict. As always, we will conclude with potential market ramifications.

2012-10-30 A Europe of Solidarity, Not Only Discipline by George Soros of Project Syndicate

The decision at the EU summit in June to form a banking union, and the ECB's commitment to unlimited intervention in the sovereign-bond market, could be a turning point for Europe were these steps reinforced with additional measures. Unfortunately, the EU's unfolding tragedy characteristically feeds on such glimmers of hope.

2012-10-30 Bond Market Primer by Kendall Anderson of Anderson Griggs

For years, our tag line "Common Sense Portfolio Management for Intelligent Investors" has served us well. There are times, though, that "Common Sense" can steer us in the wrong direction. Take driving. When a teenager sits behind the wheel of a car for their very first attempt at driving they know, from years of watching Mom and Dad drive, that when they want the car to go to the right, they turn the steering wheel to the right. Even someone who has never driven an automobile knows this. It is common sense.

2012-10-29 The Quest for Certainty by John Mauldin of Millennium Wave Advisors

The last two weeks we have been looking at the problems with models. First we touched on what I called the Economic Singularity. In physics a singularity is where the mathematical models no longer work. For example, models based on the physics of relativity no longer work if one gets too close to a black hole. If we think of too much debt as a black hole of sorts, we may understand why economic models no longer work. Last week, in "The Perils of Fiscal Cliff," we looked at the use of fiscal multipliers by economists in order to argue for or against governmental economic policies.

2012-10-26 ECRI Weekly Leading Index: Running in Place by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally in the numbers released today. It is now at 126.8, up from last week's 126.6 (revised from 126.7). However, the WLI growth indicator (WLIg) slipped slightly in expansion territory, not at 6.0, down from last week's 6.1. WLIg has now spent nine consecutive weeks of in expansion territory. But essentially the WLI has been running in place for the past five weeks.

2012-10-26 How Can I Know If My Stocks Are Fairly Valued? by Chuck Carnevale of F.A.S.T. Graphs

When the operating results of a business, i.e. its earnings and cash flows, do not represent an attractive rate of return on investment, it should be instantly obvious to the prudent investor that fair valuation is not present. Conversely, when the earnings yields are very high based on reasonable assumptions, the opportunities this represents should be readily apparent as well.

2012-10-25 The Arithmetic of Equities by Andrew Redleaf of Whitebox Advisors

t is a first principle at Whitebox to be security agnostic: to penetrate the labels like bond and stock and hybrid and assess the real status of a security by the risks and rewards that flow from the combination of economic circumstances and the details of capital structure. For most of the last decade it was quite clear to us that equities bore all their traditional risk but bolstered only bond-like rewards (at best), while high yield bonds often offered equity-like returns that could be shielded from default risk by shorting the all too risky stock of the same or a similar firm.

2012-10-25 October 2012 Newsletter by Harold Evensky of Evensky & Katz Wealth Management

Oh the joys of driving to a baseball game; sitting in endless traffic four miles from the stadium, inching past full lot after full lot, or not finding your car when it's time to go home (was it D-4 or 404 Green?). Now you can streamline your parking experience with ParkWhiz, a Chicago-based company that's recently gone national. This and other missives from Harold Evensky.

2012-10-24 Based on Real Math The S&P 500 Is Fairly Valued by Chuck Carnevale of F.A.S.T. Graphs

As investors, we do not believe in forecasting stock markets or stock prices on individual stocks. Instead, we approach investing as the process of calculating intrinsic value based on fundamentals. To us, the most important fundamental to be considered when evaluating the True Worth of a market or a common stock is earnings. Therefore, it's important that the reader understands that this article is offered as a mathematical calculation of what the S&P 500 is actually worth based on earnings.

2012-10-23 Understanding the Central Issue behind Entitlements by Michael Edesess (Article)

How should our government assure that its citizens have enough to get by - enough food, enough shelter, good enough health, etc.? It is easy to forget that today's fiercest political battles ultimately revolve around this simple question.

2012-10-23 When Portfolio Managers are Asked to be Marketers by Beverly Flaxington (Article)

I work for a large firm as a portfolio manager. We are increasingly asked to make sales presentations and find new business. Is managing money no longer important in this business?

2012-10-23 She Turns Sea Shells by the Sea Shore by Mariko Gordon (Article)

I love the sea. Always have. I explain how my seaside search for shells while unplugging on the Gulf Coast of Florida led to some useful insights related to uncovering an investment manager's process.

2012-10-22 Cracker Barrel: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

This article is going to examine the home-style country restaurant Cracker Barrel (CBRL) through the lens of FAST Graphs - fundamentals analyzer software tool, which shows us a picture of a company that is currently in value. The prudent growth and dividend investor may want to do their own due diligence into this fine company for possible addition to their own portfolio.

2012-10-22 Eggs Are Not Enough: The Truth About Diversification by Feifei Li of Research Affiliates

We learn in finance theory that diversification simply means not putting all your eggs in one basket. Simple as the idea is, most investors do not hold portfolios that are even close to being truly diversified. Two reasons make this sensible objective difficult to achieve. First, most investors are not disciplined enough to implement diversification. To illustrate my point, pause and check whether you are willing to reduce equities when the trailing 12-month return on stocks is 20+ percentage points higher than bonds?

2012-10-22 The Little Country That Could by Bill O'Grady, Kaisa Stucke of Confluence Investment Management

In this geopolitical report we will take a brief look at Estonia's history, its economy after the break-up of the Soviet Union, its remarkable economic growth in the 1990s and early 2000s, and the ensuing downturn in 2008. The country stands out for choosing a different path to deal with the recession than many other European countries.

2012-10-19 Cyclical and Turnaround Stocks: There Is A Lot Of Value In This Market: Part 5 by Chuck Carnevale of F.A.S.T. Graphs

This article represents the final installment in our "There Is A Lot of Value In This Market" series. In some ways, this article represents prima fascia evidence supporting some of our main hypotheses. First of all, this article will clearly support the notion that not all common stock are the same, and therefore, they should all not be painted with the same broad brush stroke (generalities or opinions).

2012-10-19 ECRI Weekly Leading Index: Index Slips, But Growth Rises by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute declined in the numbers released today. It is now at 126.7, down from last week's 127.6 (revised from 127.7). However, the WLI growth indicator rose further in expansion territory to 6.1, up from last week's 5.7. WLIg has now posted sixteen consecutive weeks of improvement and is at its highest level since May 20, 2011. The divergence between the WLI and its growth derivative is probably attributable to apparent anomaly in the BLS's weekly unemployment data over the past two weeks.

2012-10-18 Quest Diagnostics, Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

In this article we are going to examine Quest Diagnostics Inc (DGX) through the lens of FAST Graphs - fundamentals analyzer software tool. Quest Diagnostics, Inc. is the world's leading provider of diagnostic testing, information and services. FAST Graphs shows us a picture of a company that is current undervalued.

2012-10-18 Macro View: Europe's Glacial Move To Federalization by Scott Minerd of Guggenheim Partners

Uncertainty continues to weigh on European markets but the continent is still drifting toward federalization. Recent trends and political developments are constructive for an eventual return to growth for the region.

2012-10-17 Great US Companies: Tomorrow's Foundation by Bill Smead of Smead Capital Management

Fears of a collapse in European economies and of a US recession subsided. Residential real estate appears headed for a comeback (Surprise?) in the US and nothing gives American consumers more confidence than knowing that their house is becoming more valuable.

2012-10-17 Fuzzy Math from the Continent of Peace by Christian Thwaites of Sentinel Investments

Whoops! The IMF made two announcements last week that caught our attention. But to set up the joke in all this, it's worth remembering that for decades the IMF preached austerity economics to any country that needed balance of payments assistance.

2012-10-16 Will Bonds Be ‘Burnt to a Crisp?’ by David Schawel, CFA (Article)

Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being “burnt to a crisp.” This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.

2012-10-16 When Strong Client Relationships Aren’t Enough by Beverly Flaxington (Article)

Building strong personal relationships with your clients and consistently exceeding their expectations for direct, personal service – these traditionally were the best ways to generate referrals. But what if that's no longer enough?

2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)

In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.

2012-10-16 China's Pyramid of Power by Frank Holmes of U.S. Global Investors

China celebrated another achievement last week, as Mo Yan became the first Chinese citizen to win a Nobel Prize for literature. The selection of Mo was praised by a Chinese nationalist tabloid as a sign that mainstream China could "no longer be refused by the West for long."

2012-10-16 The Big Four Economic Indicators: Updated Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)

The latest updates to the Big Four was today's release of the September Industrial Production, which rose 0.4 percent over the previous month following a 1.4 percent decline the month before. Yesterday the Census Bureau's Retail Sales number was released, and with today's release of the Consumer Price Index we can calculate Real Retail Sales. The latest 0.6% increase gives us a strong three-month upward trend after four months of flat or contracting data. Both indicators beat analysts' expectations.

2012-10-15 Should We Bail Out (of) Europe? by Joni Clark of Loring Ward

The troubling headlines from Europe just keep on coming, and the seemingly-never-ending string of economic summits has failed so far to develop a comprehensive solution. This has led some investors to wonder if they should reduce their exposure to investments in the eurozone.

2012-10-15 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles

Global equity markets performed well in the third quarter after posting modest losses in the second quarter. The soft second quarter, which followed back-to-back double-digit quarterly gains, proved to be a pause rather than a signal that the equity bull market was ending. Though defensive sectors garnered favor in the second quarter, economically sensitive sectors have generally led performance this year, with technology, financials and consumer discretionary topping the list year to date.

2012-10-15 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles

Aggressive policy responses from major central banks were dominant forces in the third quarter. The European Central Bank (ECB), Federal Reserve (Fed), Bank of Japan (BoJ) and other central banks took decisive action, prompted by the escalating European sovereign debt crisis, slowing global growth, financial market volatility, and the impending US "fiscal cliff."

2012-10-15 Passed Pawns by John Hussman of Hussman Funds

I've long been fascinated by the parallels between Chess and finance. Years ago, I asked Tsagaan Battsetseg, a highly ranked world chess champion, what runs through her mind most frequently during matches. She answered with two questions "What is the opportunity?" and "What is threatened?" At present, I remain convinced that the key opportunity lies in closing down exposure to risk.

2012-10-15 QE3Back to the Future by Milton Ezrati of Lord Abbett

The broad scope and open-ended nature of the Federal Reserve's third round of quantitative easing raises questions about what exactly Fed chairman Ben Bernanke has in mind. Some insight, remarkably, emerges from a speech he gave in November 2002 to the National Economists Club in Washington, D.C., when he was simply a Fed board member. Taking his cue then from fears of a Japanese-style deflation, he laid out a path for monetary stimulus in an extreme situation, outlining nontraditional policy tools that have since become common.

2012-10-15 Economic Singularity by John Mauldin of Millennium Wave Advisors

There is considerable disagreement throughout the world on what policies to pursue in the face of rising deficits and economies that are barely growing or at stall speed. Both sides look at the same set of realities and yet draw drastically different conclusions. Both sides marshal arguments based on rigorous mathematical models "proving" the correctness of their favorite solution, and both sides can point to counterfactuals that show the other side to be insincere or just plain wrong.

2012-10-12 Blue-Chip Dividend Aristocrats - There is a Lot of Value in this Market: Part 4 by Team of F.A.S.T. Graphs

This is the fourth in a series of articles designed to counter a pervasive attitude that common stocks are expensive today. Furthermore, we would agree with those that contend that we have been in a stealth bull market for the last 18 months or more. However, would also contend that stocks were so cheap prior to this stealth bull-run that even though they have risen, there are still many stocks that remain fairly priced and even many that are undervalued. Blue-chip Dividend Aristocrats represent one of the best examples of our thesis.

2012-10-12 ECRI Weekly Leading Indicators: Time to Recant the Recession Call? by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week's 126.2 (revised from 126.3). See the WLI chart below. The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week's 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011.

2012-10-12 Chinas Pyramid of Power by Frank Holmes of U.S. Global Investors

We've been able to witness Chinas incredible growth, with GDP averaging 10 percent per year and more than 500 million people moving out of poverty over the past 30 years. Now after three decades of tremendous expansion, this new generation of leaders will have to carefully maneuver the country into the next decade, towing the line between maintaining the stability created during the previous Hu-Wen administration and continuing the political and economic reform necessary to adjust to the countrys slowing growth.

2012-10-12 Should We Bail Out (of) Europe? by Joni Clark of Loring Ward

Though the eurozone has its share of ongoing challenges and uncertainty, this doesn't mean investors should exit Europe entirely.

2012-10-12 U.S. Economic and Interest Rate Outlook - October 2012 by By Carl Tannenbaum and Asha Bangalore of Northern Trust

Budget negotiations in the US and Europe are attempting to balance austerity, prosperity, and posterity. US exports and imports are showing the strains of sluggish conditions overseas. Our updated economic forecast reflects some "cliff" effects, but not a renewed recession.

2012-10-12 Long/Short Investing: Bon Apptit by Geoffrey Johnson of PIMCO

Long/short equity is a distinct investment approach that seeks to reduce downside risk while still capturing much of the equity markets upside potential. By removing the long-only constraint, long/short managers have an expanded opportunity set with the potential to generate returns and mitigate risk from both long and short investment ideas. Long/short equity strategies have a lower long-term volatility and risk profile than the market as a whole and have captured a good percentage of price movement in up markets and a smaller percentage in down markets.

2012-10-10 The Muni Minefield by Neeraj Chaudhary of Euro Pacific Capital

Municipal bonds have long been viewed as a staple asset class for conservative, income-seeking investors. "Munis," as they are known, are a large, liquid market of credit-rated securities that provide tax-exempt (from Federal taxes) income to millions of American investors. Towns, school districts, and other public sector authorities across the country have issued an estimated $3.7 trillion dollars worth of these bonds.

2012-10-10 Munis and Tax Reform: Tempest in a Teapot or Taxmageddon? by Team of Neuberger Berman

We've heard increased dialogue recently about the future of the tax exemption for municipal bond income. While it has long been commonly thought that taxing municipal bond income would result in higher borrowing costs to governments potentially impairing their ability to operate the current political landscape, upcoming election and looming "fiscal cliff" have opened for debate the prospect of changes to longstanding provisions of the U.S. tax code.

2012-10-09 Dividend Income: Music to Our Ears by ClearBridge Advisors (Article)

The hunger for income among investors is helping put dividends in the spotlight, say Hersh Cohen and Mike Clarfeld of ClearBridge.

2012-10-09 High-Dividend Yield Strategy under the Microscope by Michael Nairne (Article)

High-dividend yield stocks have become the favorite recommendation of a host of advisors, but an undue focus on income alone obscures the irreducible fact that long-term investment success is based on the total return of a portfolio including both income and capital growth. This raises two questions. How has the total return of a high-dividend yield strategy fared relative to the market? How does its total-return performance compare to the returns of other possible stock-selection strategies?

2012-10-09 How to Manage an Overextended Team by Beverly Flaxington (Article)

I work for a large financial firm. I am continually frustrated by the fact that we generate lots of good ideas and talk about what we need to do, but rarely get things done. Many things stay open-ended, or up for discussion. I am part of the problem because I am so busy, as is my team. How can I be more of a doer and less of a talker?

2012-10-09 A Small Business Complex by Chris Maxey, Ryan Davis of Fortigent

Despite the release of the September labor report on Friday, small business owners seemed to take the biggest proportion of the spotlight last week. According to the Huffington Post, Romney and Obama mentioned the phrase "small business" a total of 29 times throughout the Presidential debate. The issues and importance placed on small business are unlikely to be as cut and dry as both candidates made them seem.

2012-10-09 A Case Study of a Fiduciary Breakdown by Robert Rafter, Matt Sommer of Janus Capital Group

A recent case offers several lessons for Plan Sponsors and Service Providers. One of the most critical issues in the case was the failure of the company to follow its own Investment Policy Statement. This case illustrates the need for plans to create a proper process for Fiduciary Risk Management - emphasizing the Investment Policy Statement as the foundation for a prudent process.

2012-10-09 This Fortress built by Nature for Herself by Dennis Gibb of Sweetwater Investments

It has been some time since I have taken keyboard in hand in any attempt to inform anyone of my thoughts on the world of investing. I am taking the time to write now because we are embarked on some events that are, in my humble opinion, truly historic. As these events play out the United States may not be a fortress built by nature for herself. So hang on this could get rough and as usual it will be opinionated with a different perspective.

2012-10-09 Median Household Income Growth: Deflating the American Dream by Doug Short of Advisor Perspectives (dshort.com)

What is the single best indicator of the American Dream? Many would point to household income growth. My study of the Census Bureau's data shows a 600.7% growth in median household incomes from 1967 through 2011. The ride has been bumpy, but it equates to a 4.5% annualized growth rate. Sounds impressive, but if you adjust for inflation using the Census Bureau's method, that nominal 600.7% total growth shrinks to 19.0%, a "real" annualized growth rate of 0.4%.

2012-10-09 High Yield and Equities Mind the (Equity) Gap by Hozef Arif of PIMCO

High yield bonds returned 12% through September, even as corporate defaults continued to rise, albeit gradually. While the default rate is an important market metric, it has been a lagging indicator of high yield bond total return performance. Investors should closely monitor equity markets for signals on where high yield spreads may go.

2012-10-08 Bogus Bonuses and C.E.O. Salaries by Dan Ariely of Dan Ariely Blog

One of the most common justifications for hefty C.E.O. compensation packages is that if the leaders of industry are not paid well, the so-called best and brightest will no longer flock to fill the corporate ranks, and will instead go elsewhere. High salaries (and bonuses, etc) are said to both motivate and retain these brilliant minds.

2012-10-08 The Unemployment Surprise by John Mauldin of Millennium Wave Advisors

The unemployment number surprisingly dropped to 7.8% last Friday, and the shoot-from-the-hip crowd came out in force. To say that the jobs report was met with skepticism would be a serious understatement. The response that got the most immediate airplay was ex-GE CEO Jack Welch (who knows a few things about making a number say what you want it to say) tweeting, "Unbelievable job numbers ... these Chicago guys will do anything ... can't debate so change numbers."

2012-10-05 Market Performance and the Party in Power: Is There Really a Connection? by Team of Janus Capital Group

The relationship between domestic securities market returns and U.S. Presidential elections is a favored topic of Wall Street commentators. As the 2012 Presidential election heads toward the tape, the pundits are in full swing once again, and claims about the impact of a Democratic or Republican victory on U.S. stock and bond markets pop up almost as frequently as political ads. In this paper, we address the question, Should investors take these prognostications to heart and, more importantly, apply them to their asset allocations?

2012-10-05 High-Yield Buys: There Is a Lot of Value In This Market: Part 3 by Chuck Carnevale of F.A.S.T. Graphs

In this part 3, we turn our attention to the highest yielding stocks that are constituents on the S&P 500. However, we submit that there are essentially two primary reasons that explain why these stocks offer such high yields.

2012-10-05 ECRI Weekly Leading Indicators: Mixed Signals in Latest Data by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally after eight consecutive weeks of growth. It is now at 126.3, down from last week's 126.6 (revised from 126.7). See the WLI chart below. However, the WLI growth indicator (WLIg) now marks its seventh week in expansion territory at 4.7, up from last week's 3.8. WLIg has now posted fourteen consecutive weeks of improvement and is at its highest level since June 3, 2011.

2012-10-05 Union Pacific Corp:Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs

With this article we are going to examine Union Pacific Corp (UNP) through the lens of FAST Graphs - fundamentals analyzer software tool. Union Pacific Corp is a company that is currently in value. With analysts from Capital IQ forecasting earnings growth to continue at about 15.2%, this may be an opportune time for the prudent dividend and growth investor to look into this fine company further for possible addition to their portfolio.

2012-10-04 Thrown in Over Their Heads: Understanding 401(k) Participant Risk Tolerance vs. Risk Capacity by Stacy Schaus, Ying Gao of PIMCO

Our analysis suggests as investors in target-date strategies near retirement they become more attuned to market swings. We believe 401(k) plans cannot succeed if participants jump out of markets at the bottom and possibly miss a rebound. Plans need to have tolerable downside risk, so participants can ride the market waves. The way to manage target-date assets, in our view, is to focus first on the risk capacity of participants relative to meeting an income goal. We ask, how much of one's final income will need to be replaced in retirement?

2012-10-04 Collective Action Clauses: No Panacea for Sovereign Debt Restructurings by Ben Emons of PIMCO

Beginning next year, collective action clauses (CACs) will become mandatory for sovereign bonds issued by European countries under U.K. law. CACs, which allow a supermajority of bondholders to agree to changes in bond payment terms, became popular following Argentina's default in 2001 and even more so after the financial crisis of 2008. On balance, the introduction of CACs in European government bond markets in 2013 is positive for investors.

2012-10-04 Median Household Incomes: The Grim Reality by Doug Short of Advisor Perspectives (dshort.com)

Last month I posted a pair of commentaries on median household incomes based on latest annual data released by the Census Bureau. The first looked at the distribution of household incomes by quintile and the top 5 percent. The second examined median household incomes by age bracket. More recently Sentier Research, an organization that focuses on income and demographics, published a fascinating report on median household incomes. The data in their report differs from the Census Bureau's data in three key respects.

2012-10-04 Nothing's Perfect by Jerry Wagner of Flexible Plan Investments

On September 21, the Apple iPhone 5 made its debut simultaneously on four continents. Its first weekend saw over five million in sales! And the current inventory was sold out within a week a perfect product introduction. Wellnot quite. Soon articles like iPhone 5′s Biggest Problems started showing up, talking about scratching, chipped exteriors, lens flares and others. Then there were complaints about its faulty Maps application that even drew a rare corporate apology last week. It just proves the point of this weeks Hotline: Nothings Perfect.

2012-10-04 Market Dimensions by James Damschroder of Gravity Capital Partners

An interesting and perhaps volatile fourth quarter is upon us. We have elections and the fiscal cliff straight ahead. Markets dislike uncertainly, making asset prices potentially marginally lower.

2012-10-03 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs

Warren Buffett, Ben Graham's most famous student has said, "[Ben Graham] also taught me to see a stock not as something with a ticker symbol that wiggles around but to think about it as part of a business. Dont get elated because something had gone up or depressed because it went down. If I knew the facts, and it went down, I bought more of it". Although these two forces of investment beliefs are in constant battle, there is one common belief; Both believe that any attempt to "time the market" is not an intelligent approach to investment management.

2012-10-03 Don't Bring Me Down: Not Swayed by Pessimism at BCA Conference by Liz Ann Sonders of Charles Schwab

We present highlights, key takeaways and perspective on the recent BCA Research Investment Conference. The eurozone crisis and China's slowdown remain risks, but are somewhat offset by optimism about US markets. Politics will remain a force underpinning uncertainty and volatility.

2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)

Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.

2012-10-02 Woody Brock on Why to Own Stocks Now by Robert Huebscher (Article)

Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions and the author of American Gridlock. In a recent talk, he explained why investors should own stocks - particularly those with stable dividends - and why bonds are very risky in today's environment. This is the transcript; a video of this talk is also available.

2012-10-02 Lessons from Scandinavia by Kaisa Stucke, Bill OGrady of Confluence Investment Management

During the late 1980s and early 1990s, Scandinavian nations suffered through balance sheet recessions. Commentators have suggested that U.S. policymakers could use the Scandinavian response to their crises as a roadmap for resolving the current U.S. situation. As part of our own analysis, we have studied several earlier events to understand the underlying similarities and differences to develop insights into the current event.

2012-10-02 The 2010, 2011, 2012 Corrections Were P/E Multiple Related; Earnings Were Sound by George Bijak of GB Capital

We had nasty stock market corrections in the middle of 2010, 2011 and 2012 caused by political uncertainty about Europe's debt. In times of market declines it is good to remind ourselves the difference between a correction and a bear market.

2012-10-02 The Risk in Safety by Greg Nejmeh of HS Management Partners

The "risk on/risk off" sound bite is routinely applied by financial commentators when attempting to explain inexplicable market fluctuations. As the pendulum oscillates between greed (risk on) and fear (risk off), the fulcrum the pivot point where the scale rests in perfect balance can best be characterized as safety. It is from that state of equilibrium that the market begins each trading day...

2012-10-01 Leap of Faith by John Hussman of Hussman Funds

Both the economy and the financial markets will do fine in the longer-term, but to imagine that there will not first be major challenges and disruptions is a leap of faith and a leap over a century of economic and financial history that screams otherwise.

2012-10-01 Moral Hazard. by Scotty George of du Pasquier Asset Management

Overall, equity market risk is dissipating. There appears to be a stronger momentum ameliorating a global tapestry of "ills." What may have been a domino effect when the credit crisis began has stopped short of a cataclysm and turned closer to equilibrium. As a result, equities might be poised to perform. The question is when?

2012-10-01 Quantitative EasingBernanke Sizes Up the Risks by Milton Ezrati of Lord Abbett

Bernanke acknowledged four potential pitfalls in policywith a fifth lurking in the shadows.

2012-09-29 Uncertainty and Risk in the Suicide Pool by John Mauldin of Millennium Wave

Investors in the stock market, especially professionals, are obsessed with risk, your humble analyst included. We try to measure risk in any number of ways, looking for an edge to improve our returns. Not only do we try to determine probable outcomes, we also look for the 'fat tail' events, those things that can happen which are low in probability but will have a large impact on our returns.

2012-09-28 Falling Off the Fiscal Cliff? by Libby Cantrill, Josh Thimons of PIMCO

When we look at how the fiscal debate is likely to play out, rather than how it should play out, our base case is the fiscal cliff will likely be resolved in a short-term deal before the end of the year, making what was a cliff more like fiscal black diamond still dangerous, but not likely to land the economy in a body cast.

2012-09-28 The Danger of Safety by Owen Murray of Horizon Advisors

Investors have become cautious and anxious following the bear market of the past twelve years and the recent bouts of extreme volatility. We examine risks and opportunities in light of the difficult market environment in our special report The Danger of Safety."

2012-09-28 Is Negativity Contagious? by Frank Holmes of U.S. Global Investors

Negativity persists among investors, as evidenced by the ongoing stream of money leaving equity funds into bond funds. It's challenging to pinpoint the origin of the pessimism because it comes from all over the globe. Daily polls finding Americans at an extreme political division, scenes of anti-austerity riots in Greece and Spain, and the Shanghai Composite Index falling to new lows are only three recent examples.

2012-09-28 The Big Four Economic Indicators: Updated Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process.

2012-09-28 ECRI Weekly Leading Index Growth at Highest Level Since June 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the eighth consecutive week, now at 126.7, up from last week's 125.3 (revised from 124.7). See the WLI chart below. The WLI growth indicator (WLIg) now marks its sixth week in expansion territory at 3.8 (up from last week's 2.7). It has now posted thirteen consecutive weeks of improvement and is at its highest level since June 10, 2011.

2012-09-28 Growth Stocks: There is a Lot of Value in this Market Part 2 by Chuck Carnevale of F.A.S.T. Graphs

In part one of this series we introduced the notion that in all markets whether bear or bull, there will always exist individual stocks that are fairly valued, overvalued or undervalued. In this same vein we argued that it's a market of stocks, not a stock market. To put this into context, we are simply suggesting that the discerning investor can always find bargains if they are willing to look and do their homework. However, we should also add that bargains can come from many different types of equities.

2012-09-28 Alternative Thoughts: Macro Investing - What is macro investing and investing in a macro strategy? by Lawrence Epstein, Josh Rowe of Orinda Asset Management

Macro investing has long been the focus of investors in search of non-correlated investment strategies. Orinda Asset Management believes that macro strategies have the potential to produce positive absolute returns across market cycles. In addition, the strategy has historically exhibited low correlation to traditional equity and fixed income indices, and has provided effective diversification benefits when incorporated as part of a long-term investment plan.

2012-09-27 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

The investment outlook for large swaths of the Islamic world may actually strengthen, because of or in spite of, events of recent weeks. Stock-price buoyancy on the Egyptian and Karachi exchanges, amid continuing public outrage, may presage coming improvements. Also this week, we take a look at Turkey, given the exceptional gains seen on the Istanbul Stock Exchange.

2012-09-26 The Predictive Power of Dividends by Bill Smead of Smead Capital Management

In an article published by Marketwatch.com on September 21, 2012, Mark Hulbert asks the question, "Where do you think the stock market will be ten years from now?" It was as a lead into the results of a predictive model from Rob Arnott, founder of Research Affiliates. His model argues that current dividend yields go a long way to predicting ten-year forward returns. Other than a big glitch in the 1990's, it appears to have some value.

2012-09-25 A Woman's View of Choosing a Financial Advisor by Beverly Flaxington (Article)

Here are five things I've learned about what women seek in the marketplace.

2012-09-25 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)

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.

2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)

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.

2012-09-24 Eating the Future by John Hussman of Hussman Funds

Every security on Earth works like this. The higher the price you pay for a given set of expected future cash flows, the lower your prospective future rate of return. Higher prices essentially take from future prospective returns and add to past returns. Conversely, lower prices take from past returns and add to future prospective returns.

2012-09-24 Alice in Euroland by Giles Conway-Gordon of Cogo Wolf Asset Management

If you have a taste for make-believe, fantasy and unreason the shifts and contortions of the European elite in the face of the Eurozone (EZ) crisis, culminating in the latest plan for the European Central Bank (ECB) to purchase unlimited quantities of the bonds of EZ members in financial difficulties, have left you spoilt for choice over the last few months.

2012-09-24 Energen Corp: Stock Research Analysis by Team of F.A.S.T. Graphs

With this article we are going to examine Energen Corp (EGN) through the lens of FAST Graphs - fundamentals analyzer software tool, which shows us a picture of a company that is currently in value. The prudent investor might want to do their due diligence on this company as a possible addition to their portfolio.

2012-09-21 Growth for the Long Run by Jonathan Coleman, Brian Demain, Nick Thompson of Janus Capital Group

"I skate to where the puck is going, not where its been." Wayne Gretzky. Many investors would love to be as successful as The Great One when it comes to their portfolios. Yet investors are often heavily influenced by the past, losing sight of where they need to be going. This seems to be especially true today: mistrust of equities is running high after a decade of disappointing returns and excessive volatility.

2012-09-21 There is a Lot of Value in this Market: Part 1 by Chuck Carnevale of F.A.S.T. Graphs

Whenever there is a rise in stock values as we have experienced over the past year or so, it seems to be human nature to automatically assume that valuations have become too high. However, although it is possible that this is true, it is not necessarily so. A lot has to do with where valuations were before the run-up occurred. For example, if valuations were extremely low, then even after a rise, they can continue to be low or perhaps only have risen to becoming fairly valued.

2012-09-21 Short-term Gratification and Long-term Return by Franois Sicart of Tocqueville Asset Management

Over time, I have tried to learn from my investment experiences. As a result, my style has become influenced less by greed and fear and more by patience and realism. Here are a few of the lessons I have learned and passed along.

2012-09-21 ECRI Weekly Leading Index Growth at Highest Level Since July 2011 by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.

2012-09-20 QE n+1 What The Fed Is Really Up To by JJ Abodeely of Sitka Pacific Capital Management

As I survey the news stories and other analysis on the Feds recent announcement, most fall short of describing what the Fed is really up to. Here is a hint: it's not really about employment. It's not really about "price stability" or really about growth either.

2012-09-20 Real-world Endowment by Dan Ariely of Dan Ariely Blog

One of economists' common critiques of the study of behavioral economics is the reliance on college students as a subject pool. The argument is that this populations lack of real-world experience (like paying taxes, investing in stock, buying a house) makes them another kind of people, one that conceptualizes their decisions in altogether different ways. One area where we can test this assumption is with the endowment effect.

2012-09-19 Fed to Debase Dollar? by Alex Merk of Merk Funds

Is the Fed's goal to debase the U.S. dollar? The Federal Reserve's announcement of a third round of quantitative easing (QE3) might have been the worst kept secret, yet the dollar plunged upon the announcement. Is Bernanke intentionally debasing the dollar?

2012-09-19 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell, Kevin Perry of Loomis Sayles

Fixed income investors may be stymied by the current mix of interest rate projections and global macroeconomic news. Interest rates remain near historical lows, and investors continue to move between risky assets and relative safe havens like Treasurys based on the latest market headlines. We believe that bank loans can be a compelling addition to fixed income portfolios in this environment and, more importantly, over the long term.

2012-09-19 Technology Dividends: Oxymoron No More by Ryan Issakainen of First Trust Advisors

In recent years, equity income ETFs have gained in popularity, as investors seeking growth and income have poured billions of dollars into these strategies. While each of these ETFs takes slightly different approach for selecting and weighting stocks, there is one common characteristic shared by all: an underweight position in the technology sector relative to broad equity benchmarks. While this allocation may seem intuitive to some, we believe it's time to include technology stocks in equity income strategies.

2012-09-18 The Question that Prevents Client Defections by Dan Richards (Article)

Unless you take action, even the best advisors are going to lose more clients than you'd like. Fortunately, you can ask your clients a simple question that will counteract the dynamics causing those defections.

2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)

This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.

2012-09-18 Selling Your Practice – After Negotiations Fall Apart by Beverly Flaxington (Article)

I was hoping to sell my firm to another financial advisor. When the time came to close the deal, he turned into a different person, trying to negotiate for all kinds of things and generally being very nasty. The deal fell apart. How do I find a suitable buyer who will treat me with respect and negotiate fairly?

2012-09-18 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Last week the stock market got all it wanted from the Central Banks of Europe and here at home. The money presses have been put on full power. The result was a continuation of the stock market rally along with commodities while bonds suffered a setback as investors swapped out.

2012-09-18 Buckle Inc: Stock Research Analysis by Team of F.A.S.T. Graphs

This article is going to analyze Buckle Inc (BKE) through the lens of FAST Graphs. Buckle announced at its quarterly meeting of the Board of Directors, held on September 17, 2012, the Board authorized a $0.20 per share quarterly dividend to be paid to shareholders of record at the close of business on October 15, 2012, with a payment date of October 26, 2012.

2012-09-17 Low-Water Mark by John Hussman of Hussman Funds

As of Friday, our estimates of prospective return/risk for the S&P 500 have dropped to the single lowest point we've observed in a century of data. There is no way to view this as something other than a warning, but it's also a warning that I don't want to overstate. This is an extreme data point, but there has been no abrupt change; no sudden event; no major catalyst. We are no more defensive today than we were a week ago, because conditions have been in the most negative 0.5% of the data for months.

2012-09-14 ECRI Defends Its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose for the 6th consecutive week, now at 124.9 from last week's 124.1. The WLI growth indicator now marks its fourth week in expansion territory at 2.1. It has now posted eleven consecutive weeks of improvement. The big news is yesterday's Bloomberg TV interview, in which Lakshman Achuthan, ECRI's COO, reasserted his company's recession call made a year ago on September 21st and his belief that the recession has already begun.

2012-09-14 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

The prominent US trade mission has been in Cairo at a particularly challenging moment politically. At-hand circumstances will remind these business leaders just how volatile the country can be, especially in the absence of growth. Egypt is probably the largest emerging market with the most uncertain economic direction, at least for the time being. We also take a closer look this week at Turkish-Iranian trade relations and policy developments in Indonesia.

2012-09-14 Australias Second-largest Export It Isnt Coal by Adam Bowe of PIMCO

With growth in China now moderating, and the price of commodities and Australias terms of trade now declining, many investors are questioning how the Australian dollar has managed to remain well-supported. The explanation lies mainly in the changing structure of the funding of the current account deficit. Going forward this will likely have important implications for monetary policy in Australia if the decline in national income growth is not offset by a similar decline in the Australian dollar.

2012-09-14 Dont Be the Equivalent of a Stock Market Racist by Team of F.A.S.T. Graphs

Common stocks are very different and come in all assortments, sizes, shapes and flavors. Consequently, we encourage investors to think more specifically and rely more on the precise characteristics of the individual company or companies they are contemplating. Worrying about the general state of the economy or the stock market, or their future direction, is not only an exercise in futility, but an unnecessary exercise as well.

2012-09-12 PIMCO Cyclical Outlook: Building Rickety Bridges to Uncertain Outcomes by Saumil Parikh of PIMCO

Without structural change aided by well-planned fiscal policy, we are afraid the nominal bridges of monetary policy will fail to reach their desired outcomes. The probability of a deflationary left-tail outcome emanating from the eurozone has declined substantially in the short run, yet outright economic growth in the eurozone will remain elusive in 2013.The much-publicized "fiscal cliff" is set to hit the U.S. economy on January 1, 2013, and could reduce U.S.

2012-09-11 Hedged Equity Value Goes Beyond Performance by Emmett Maguire III, CFA (Article)

Advisors often overlook the value a hedged equity manager can inject into a portfolio, as recent outperformance of long only indices (S&P 500) has overridden other considerations. The case for hedged strategies, however, goes beyond relative returns.

2012-09-11 The Problem of Proxies by Bill O'Grady of Confluence Investment Management

In this report, we will discuss the role of proxies and their use by governments, including a historical perspective of their positive and negative aspects. A short discussion of the regional factors of the Syrian situation will follow, focusing primarily on Iran's problem if the Assad regime is replaced by a Sunni-led government. Interestingly enough, these regional factors also affect the proxy groups, making them more difficult for their sponsors to control.

2012-09-11 US Stock Market Sentiment in a World of Wide Asset Allocation by Bill Smead of Smead Capital Management

Our long-time readers are aware that we are stingy when it comes to trading and big believers of keeping trading costs low at Smead Capital Management. Despite these natural inclinations, we do try to keep the pulse of sentiment in the US stock market.

2012-09-10 The Siren Song of Growth: Why Investors Willfully Set Sail for the Rocks by Matt Malgari of Knight Capital Group

Gaining an informational edge through more efficient and effective tools of fundamental company financial analysis and relative valuation is still a crucial goal for active equity managers. This should be even truer in a lower return world, particularly when investment returns may be under transition, driven in part by difficulties in maintaining long-term growth opportunities of a given company's own capital investments.

2012-09-10 As the Euro Tumbles, Spaniards Look to Gold by Peter Schiff of Euro Pacific Precious Metals

The unremitting deterioration of the eurozone's sovereign debt landscape continues to fuel uncertainties about the longevity of the euro as a strong currency. Such uncertainties are not only leading to capital flight from the EMU's periphery to the core and destabilizing markets worldwide, but they are also beginning to frighten southern European savers into seeking refuge outside their 10-year-old currency.

2012-09-08 Debt Be Not Proud by John Mauldin of Millennium Wave

The unemployment numbers came out yesterday, and the drums for more quantitative easing are beating ever louder. The numbers were not all that good, but certainly not disastrous. But any reason will do, if what you want is more stimulus to boost the markets ever higher. Today we will look first at the employment numbers, because deeper within the data is a real story. Then we look at how effective any monetary stimulus is likely to be.

2012-09-07 Economic Data Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fifth consecutive week, now at 123.7 from last week's 123.5 (revised from 123.6). See the WLI chart below. The WLI growth indicator (WLIg) is in its second week in expansion territory at 1.0 (up from last week's 0.5). It has now posted ten consecutive weeks of improvement.

2012-09-07 Chinas Next Act by Frank Holmes of U.S. Global Investors

World markets may not have to wait much longer for Chinese policymakers to act, as the government recently announced new infrastructure projects. According to Bloomberg, China approved 25 new subway construction projects, with related investments estimated to be more than 840 billion yuan. Railway, subway and construction stocks in China increased on the news. China is in much better shape than the rest of the world. A powerful rebalancing strategy offers the structural and cyclical support that will allow it to avoid a hard landing.

2012-09-06 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

Pessimism about the next administration's impact on the emerging markets is held in check by the likely convergence of US and Chinese economic interests. More than ever, Ms. Smith needs Ms. Wong. To borrow a recent Financial Times headline, "Obama should pray that China overtakes the US." To us, Indonesia and Malaysia look pretty promising by this standard. Other stories include a look at timber and an update on Bahrain's economy.

2012-09-05 Profit Motive: If Earnings/Margins Are Peaking, What About Stocks? by Liz Ann Sonders of Charles Schwab

Earnings growth has peaked, but don't necessarily assume the same about margins. Present pace of earnings growth has historically been accompanied by decent market performance. Margins are increasingly driven by domestic and foreign earnings, but peaking margins have historically been accompanied by strong market performance.

2012-09-04 Risks in the Search for Yield by Charles Lieberman of Advisors Capital Management

Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.

2012-09-04 Risk Mitigation by Bill Smead of Smead Capital Management

How did the job of an asset allocator move from seeking out undervalued asset classes and securities to one of seeking to mitigate risk? Is risk mitigation a worthy goal or even possible without abandoning real return goals? When and why did wealth creation become wealth management? What opportunities exist today for those who seek wealth creation through intelligent risk taking?

2012-08-31 Risks in the Search for Yield by Charles Lieberman of Advisors Capital Management

Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.

2012-08-31 Rethinking How We Invest by Matt Scales of Columbia Management

Building portfolios to meet individual objectives is or should be a customized exercise, so this article should not be considered advice for any individual. Instead, it is an alternative philosophy to how investors have traditionally approached building portfolios. For the vast majority of us, we allocate our capital to asset classes with the highest expected returns.

2012-08-31 ECRI's Embarrassing Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fourth consecutive week, now at 123.6 from last week's 123.3. See the WLI chart below. The WLI growth indicator (WLIg) has risen into expansion territory at 0.6 after nine consecutive weeks of improvement.

2012-08-30 The ESM: Saviour, Super SIV or End of the Road? by Andrew Bosomworth of PIMCO

So long as the fundamental issues about the future of the eurozone remain unsolved, the extra supply of ESM bonds will likely drive up the borrowing costs of its weaker stakeholders. Without a cap on or exit clause from additional capital calls, the ESM could lead northern eurozone countries down a difficult and unsustainable path.

2012-08-30 Dividends: The Next Bubble? by Ed Perks, Don Taylor of Franklin Templeton

Dividend-paying stocks have received a good deal of attention this yearand for good reason. Ed Perks, senior vice president and director of the Core Hybrid Portfolio Management Group at Franklin Templeton, and Don Taylor, senior vice president and portfolio manager for Franklin Equity Group, suspect it's these fearful prognostications that are overinflated, not the asset class. As they see it, the dividend-paying stock universe is expanding, and deserves investor attention.

2012-08-29 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

The Non-Aligned Movement summit in Tehran is probably the most important conference hosted there since the 1979 revolution. Iran is doing its best to use the forum as an opportunity to assert its position in world affairs. In market activity, we think fundamentals in India call for less exuberance in gold than some would suggest. Our outlook for South Asia meanwhile recognizes valuation opportunities in the smaller markets of Sri Lanka and Bangladesh.

2012-08-28 Who Benefits from High-Speed Trading? by Michael Edesess (Article)

Speed is a virtue in most competitive pursuits; the combination of speed and accuracy is almost always the ultimate advantage. No one knows this better than the purveyors of high-speed trading technology, who have profited mightily -not only by executing rapid-fire algorithmic trades, but also by exploiting the arcane rules that govern the stock exchanges. But at whose expense are they profiting, and how long is their advantage likely to persist?

2012-08-28 The Wrong Way to Ask for Referrals by Dan Richards (Article)

There's no shortage of ideas about how advisors should operate - which means you have to be discerning about whose guidance you take. Recently, though, I disagreed with some advice from a top practice-management expert on the topic of referrals.

2012-08-28 Why Don't Your Female Clients Like You? by Kathleen Burns Kingsbury (Article)

Over the next 40 years, women will inherit 70% of the $41 trillion in intergenerational wealth transfers, and the first thing they will probably do after receiving the money is fire you. The reasons are not what you think: not poor investment performance, not lack of expertise.

2012-08-28 Who’s Fooling Whom? by Michael Lewitt (Article)

Equity markets are exhibiting a remarkable degree of complacency. The VIX is currently at extremely low levels and it can maintain those levels for a long period of time. The worse things get in terms of the economic data, the higher the market goes on hopes of central bank stimulus. At this rate, the Dow will peak just as the world is coming to an end!

2012-08-28 Real Estate Resiliency: the REIT Model Proves its Mettle by Josh Olazabal, Amit Arora of PIMCO

REIT unsecured debt has been one of the best-performing sub-sectors in the entire investment-grade credit area. When insurance companies began to look at REIT unsecured debt, they asked for the same type of covenants associated with property-level mortgages. These requirements have coalesced into a standard REIT covenant package. We believe low default rates and relatively high recovery rates make the sector attractive over the long term particularly for buy-and-hold investors.

2012-08-28 General Mills Inc: Stock Research Analysis by Team of F.A.S.T. Graphs

General Mills Inc (GIS) is a high quality blue-chip dividend growth stock with a consistent long-term record of earnings growth averaging approximately 8% per annum.

2012-08-28 Behavior Modification by Kendall Anderson of Anderson Griggs

The last few years have caused a number of us to modify our financial behavior. It is hard to believe that the financial crisis is over five years old. According to S&P Case-Shiller, the good times ended in June of 2006 when home prices peaked. By April of 2007 the big subprime mortgage lender New Century Financial Corporation filed for bankruptcy.

2012-08-28 Permanent Portfolio Shakedown Part 2 by Adam Butler and Mike Philbrick of Butler|Philbrick|Gordillo & Associates

In our Permanent Portfolio Shakedown Part 1 we investigated the history of the approach, tracing it back to Harry Browne in 1982. The company he helped to found, The Permanent Portfolio Family of Funds, has been running their version of the strategy in a mutual fund for almost 30 years, with fairly impressive results. Harry's thoughts about the portfolio are worth repeating in this second installment.

2012-08-27 The Trend is Your Fickle Friend by John Hussman of Hussman Funds

Typically, the best that can be achieved with popular moving-average crossover systems is a moderate reduction in drawdown risk, but zero or negative incremental long-term return versus a buy-and-hold.

2012-08-27 Inside the Feds Head by Kristina Hooper of Allianz Global Investors

Now more than ever, investors are getting a glimpse into the minds of policy makers. While economic forecasts remain foggy, recent FOMC minutes reveal why the Fed is sharpening its tools and which ones it is likely to use.

2012-08-27 FPA Crescent: Steve Romick's Semi-Annual Report by Steven Romick of FPA Fund

FPA Crescent Fund has released its Semi-Annual report on the state of the fund and its investments. The piece also delves into portfolio manager Steve Romick's market outlook and thoughts regarding the fund's positioning moving forward.

2012-08-24 Economic Data Continues to Refute ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 123.3 from last week's 123.0 (an upward revision from 122.8). See the WLI chart below. The WLI growth indicator (WLIg) is at -0.1, less negative than the -0.4 for last week, which is an upward revision from the previously reported -0.6.

2012-08-23 The Emerging Story in Europe by Mark Mobius of Franklin Templeton

There's a unique and often overlooked story coming out of some of Europe's emerging markets that interests me more. While much of developed Europe is still struggling to get its fiscal house in order, much of emerging Europe already has. Some of the emerging markets in Europe deserve to be a greater part of the European story, and in my view, can offer compelling investment opportunities at attractive valuations.

2012-08-23 No Recession Now - But When? by Lance Roberts of Streettalk Live

There have been a few calls as of late (Hussman, ECRI, Shilling) stating that we are currently in the next recession. Then there is everyone else. While the "optimistic" outlook is always more enjoyable to listen to - the problem is that the current "no recession" view is primarily predicated on current quarter growth rates looked at in isolation. These data points are then extrapolated into continuous future economic expansion.

2012-08-22 Dividends Provide A Return Bonus by Team of F.A.S.T. Graphs

With all things being equal, dividend paying common stocks provide their shareholders a return bonus, or what some might like to call a kicker, over an equivalent common stock that pays no dividend. Many investors do not see it this way, as they tend to think of the dividend providing them their return. However, the stock market capitalizes earnings whether a company pays a dividend or not.

2012-08-22 Relative Value by Bill Smead of Smead Capital Management

Everyone wants to wait for the perfect time to buy into the stock market or into any major investment market. They want to enter at historically cheap prices or at "absolute values". We at Smead Capital Management believe that these people are kidding themselves and everybody else. At the time of historical lows and "absolute value" those same folks are too mortified to pull the trigger and always come up with the reason that "it's different this time". Inertia rules the day.

2012-08-22 Mistrust Fuels Continued Gold Demand by John Browne of Euro Pacific Capital

In the face of growing fears of a renewed global plunge into economic depression and a climate of low apparent price inflation, investors might expect commodities and precious metals to be falling in price. Instead, gold continues to hover around a relatively high $1,640 an ounce and silver at $29. At the same time, central banks - including those of the ever more important China, Russia and India - continue aggressively to buy gold.

2012-08-22 The Faustian Bargain by Scott Minerd of Guggenheim Partners

In Goethe's 1831 drama Faust, the devil persuades a bankrupt emperor to print and spend vast quantities of paper money as a short-term fix for his country's fiscal problems. As a consequence, the empire ultimately unravels and descends into chaos. Today, governments that have relied upon quantitative easing (QE) instead of undertaking necessary structural reforms have arguably entered into the grandest Faustian bargain in financial history.

2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)

In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.

2012-08-21 Is Too Much Vacation Bad for Your Business? by Dan Richards (Article)

Advisors face two big traps when it comes to vacations. The one that gets the most attention is not taking enough time off and burning out as a result; this is especially common in the early years of building a business. But there's a second, more subtle trap: Taking so much vacation that you compromise your ability to grow your business.

2012-08-21 The Persistence of Profits: The Quality Conundrum, Part I by Matt Malgari of Knight Capital

As avid consumers of a wide variety of investment material, we have to admit that certain firms have demonstrated such proficiency at lucid commentary they have become in-house favorites. In some cases, the writing has such a profound impact that we find ourselves entangled in visceral debates post publication, vexing our wonderful programmers with follow-up questions seeking further clarification or insight. In our opinion, Grantham Mayo (GMO) is one of these firms.

2012-08-20 QE3: Tackling the Big Questions by Milton Ezrati of Lord Abbett

Will the Fed launch another round of quantitative easing? If so, when? Here are the factors that could influence the central bank's decision.

2012-08-20 Europe's Unstable Hammock by Mohamed El-Erian of PIMCO

This summer I have been asked a lot about Europe -- not so much by economists but by others concerned that the lingering crisis there would make their daily economic life even more challenging. In responding to these questions, I have often struggled to summarize in a few sentences the causes of Europe's existential crisis, let alone what is likely to occur next (including elements of a solution) -- that is until I tried to use a hammock.

2012-08-20 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

In the common parlance of Wall Street, youre either a bull or a bear. It's difficult to be both at the same time, yet this market has as many agnostics as it does true believers. What you believe, however, is another story altogether.

2012-08-20 Eaton Corp: Stock Research Analysis by Team of F.A.S.T. Graphs

We believe Eaton Corp (ETN) currently represents an above-average dividend yield opportunity. The company can be purchased at a discount to its earnings justified fair value, and offers a dividend yield of over 3.3% (light blue highlighting). We recommend doing your own due diligence, but Eaton Corp looks like a classic buy low today to sell later at a higher value with a nice yield to sweeten the pot.

2012-08-17 Disconnected Markets Confound Investors by John Browne of Euro Pacific Capital

The current environment for investors is perhaps one of the most confusing that many have ever encountered. Unpredictable markets now appear to take no clue whatsoever from underlying economic data, and maxims long cherished by traditional money managers are being abandoned in favor of seemingly illogical choices. While such an environment is enough to encourage many to cash out completely, we believe that investors should remain focused on the fundamentals.

2012-08-17 Fiscal Cliffhanger by Brian Horrigan of Loomis Sayles

In the famous 1955 movie Rebel Without a Cause, troubled high school student Jim Stark (played by James Dean) winds up playing a game of chicken with his classmates. The US economy is at risk of driving, so to speak, over a "fiscal cliff" starting January 1, 2013, an event that threatens to wreck the economy. There are fewer than five months to avoid going over this cliff.

2012-08-17 Press Play by Liam Molloy, Bethany Carlson of Galway Investment Strategy

The Treasury has doled out approximately $10.5 billion on excess bank reserves over the last four years. The emergency Fed policy of paying 25 basis points on excess reserves was enacted on October 6, 2008 to incentivize banks to hold them in the midst of the financial crisis. It worked. But the policy also introduced another headwind to velocity of money.

2012-08-17 ECRI Weekly Leading Index Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index of the Economic Cycle Research Institute rose slightly to 122.8 from last week's 122.5. See the WLI chart below. The WLI growth indicator is at -0.6, less negative than the -1.1 for last week, which is an upward revision from the previously reported -1.3. As of today, the ECRI website continues to feature Lakshman Achuthan's July 10th Bloomberg TV interview, in which he reaffirmed his company's recession call and stated that we're already in a recession.

2012-08-17 How Change Happens by John Mauldin of Millennium Wave

This is an encore appearance of the letter that is clearly the most popular one I have ever written, updated with a few thoughts from recent times (it was also part of a chapter in Endgame). Numerous reviewers have stated that this one letter should be read every year. As you read, or reread, Ill be enjoying a week off.

2012-08-15 Going for Gold: Lessons from London by Colin Moore of Columbia Management

Fiercely competitive professional athletes were able to join together for a common purpose of achieving gold for the U.S. Small teenagers were prepared to sacrifice family life to win gold for the U.S. If only our politicians could find a way to set aside traditional rivalries and find a team plan to reduce our debt and spur higher levels of growth on a equitable basis. Unfortunately, the opposite is occurring.

2012-08-14 How Safe are Annuities? by Joe Tomlinson (Article)

For many advisors, the possibility that insurance companies will run into financial difficulties makes recommending annuities a nonstarter. But annuities are the best way to mitigate longevity risk, which may pose a greater danger, and advisors can take steps to help protect clients from insurers' financial problems.

2012-08-14 How One Advisor Adds Three Clients a Month by Dan Richards (Article)

I've had several emails in response to last week's article on how investors are using LinkedIn to help select advisors. Indeed, one advisor told me of a systematic approach that is consistently yielding new business. Let's look at how this advisor is capitalizing on his online presence to attract an average of three new clients per month.

2012-08-14 Blind Faith by Michael Lewitt (Article)

Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.

2012-08-14 Maybe This Time is Different by Andrew Redleaf of Whitebox Advisors

This Time Is Different, the catchy title of the popular book by economists Carmen Reinhart and Kenneth Rogoff, has also become a catchphrase summing up the world-weary wisdom of our time. Reinhart and Rogoff, in recounting eight hundred years of financial follies and investment bubbles, gleefully point out that in every case experts offered plausible arguments for dispensing with traditional rules of valuation, i.e., "this time it's different."

2012-08-13 Begging for Trouble by John Hussman of Hussman Funds

Investors remain so addicted to the temporary high of monetary intervention that they are practically begging to be shot, mauled by dogs, and diced by a Veg-O-Matic so they can get their next fix of pain-killers.

2012-08-13 Double Dip? Doubtful by Milton Ezrati of Lord Abbett

The flow of economic news is hardly encouraging. Jobs growth remains disappointing. Recent readings on consumer spending and business activity show weakness as well. If the picture of the housing market has improved a bit, it still hardly portrays strength. Talk of an imminent recessionary dip has become common, for the third time now in as many years. While some recent economic reports have been discouraging, underlying fundamentals do not point to a return to recession.

2012-08-13 Commodities to Power Emerging Markets Higher by Dawn Bennett of Bennett Funds

In Latin America, Brazil leads as a natural supplier of copper and crude oil, which it is now able to extract and export on competitive terms. Nations rich with natural resources perform well during times of global economic expansion. In particular, countries rich with industrial commodities tend to outperform those without.

2012-08-13 The Fundamental Case for the 20,000 Dow by Seth Masters of AllianceBernstein

While some people deem stocks expensive relative to 10-year trailing earnings, we take a forward-looking approach. It starts with the premise that the stock market is not a casino and stock prices are not pulled out of thin air: they reflect the intrinsic value of companies' future earnings.

2012-08-10 Ross Stores Inc: Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graph on Ross Stores Inc shows a picture of overvaluation based upon the historical earnings growth rate of 19.6% (orange circle) and a current PE of 21.3 (red circle). Another interesting note is that Ross' price follows its Historical PE of 15 rather than following its Operating Earnings Growth Rate of 19.6%.

2012-08-10 Cheating in Online Courses by Dan Ariely of Dan Ariely Blog

A recent article in The Chronicle of Higher Education suggests that students cheat more in online than in face-to-face classes. The article tells the story of Bob Smith (not his real name, obviously) who was a student in an online science course. Bob logged in once a week for half an hour in order to take a quiz. He didn't read a word of his textbook, didn't participate in discussions, and still got an A. Bob pulled this off, he explained, with the help of a collaborative cheating effort.

2012-08-10 ECRI Recession Call: Weekly Leading Index Improves, Growth Index Little Changed by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 122.5 from last week's 122.1 (a tiny revision from the previously reported 122.2). See the WLI chart below. At one decimal place, the WLI growth indicator (WLIg) is unchanged at -1.3 as reported in Friday's public release of the data through August 3. At two decimal places, WLIg is slightly less negative at -1.28 compared to last week's -1.35.

2012-08-09 Big Lots Inc: Stock Research Analysis by Team of F.A.S.T. Graphs

As a special request of a reader, we are reviewing Big Lots Inc. (BIG) through the lens of FAST Graph with this article. In an instant, the Earnings and Price Correlated graph on Big Lots tells a story of a cyclical company with a rather erratic operating history. We believe this is important information for prospective investors to know.

2012-08-09 Is Dodd-Frank the Death of Preferreds? by Mariela Jobson of iShares Blog

Investors wonder whether new regulations will impact the supply of preferred stocks, but iShares Portfolio Manager Mariela Jobson explains what the changes really mean for the future of preferreds.

2012-08-09 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

India's massive power failure was a gift to both investment bankers and asset managers. There will likely be a surge in infrastructure-related financing and investment activity directed at South Asia. We also look at sovereign wealth fund transparency; the UAE funds rank comparatively well. Our allocation guidelines for North Africa focus on Morocco, where we believe we will see sustained gains for both portfolio and direct investors once the European situation stabilizes.

2012-08-08 Stock Pickers: "Somebody I Used to Know" by Bill Smead of Smead Capital Management

Art has a tendency to express culture. One of today's catchiest songs does a great job of explaining the relationship between institutional/individual investors and US common stock picking. The song captures what has happened since the summer of 1999, when Warren Buffett warned investors about forward stock market returns because of a love affair that institutional and individual investors were having with US large cap stocks.

2012-08-08 Investing in Innovation by Matthew Moberg of Franklin Templeton

When you think about the rise of the technology sector, the dot.com boom of the 1990sand its dramatic bustprobably comes to mind. Matthew Moberg, portfolio manager for the Franklin DynaTech Fund, sees investing in the technology sector as more than just jumping on the latest fad. He looks for innovative companies that have long-term potential for growth, even if they are not what spring to mind when thinking about technology.

2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)

If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.

2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)

It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?

2012-08-06 Family Dollar Stores Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graph on Family Dollar Stores (FDO) shows a picture of overvaluation based upon the historical earnings growth rate of 15.2%. Analysts are expecting the earnings growth to continue at about 15%, and when you look at the forecasting graph the stock appears overvalued, (it's at the top of the value corridor of the five orange lines - based on future growth).

2012-08-06 What You Might Not Know About REIT Dividends by Team of Managers Investment Group

Mutual fund investors often fail to understand how the components of REIT distributions can lead to muddled yield comparisons among funds. In this analysis, we shed light on the components of REIT distributions and explain how the Managers Real Estate Securities Fund's distribution yield pay-out method compares with those of its peers.

2012-08-06 TJX Companies Inc Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graph on TJX Companies shows a slight picture of overvaluation based upon the historical earnings growth rate of 18.6% (orange circle) and a current PE of 20.4 (blue circle). Analysts are forecasting the earnings growth to continue at about 12%, and when you look at the forecasting graph below, the stock appears overvalued, (it' outside of the value corridor of the five orange lines - based on future growth).

2012-08-05 Erasers by John Hussman of Hussman Funds

Moderate losses may be a necessary feature of risk-taking, but deep losses are erasers. A typical bear market erases over half of the preceding bull market advance. It is easy to forget - particularly during late-stage bull markets - how strongly this impacts full-cycle returns.

2012-08-03 Priced for Collapse by Peter Schiff of Euro Pacific Capital

Where is the gold price today? If you're like many Americans, you have no idea whether it went up, down, or sideways. Fortunately, I know my readers to be more informed - you likely know that after falling from almost $1900, gold has been trapped around $1600 since early May. But you may still be curious why despite continued money-printing and abysmal US economic reports, gold hasn't been able to hit new highs.

2012-08-03 GDP Report: "Good News" - You've Got to be Kidding! by Gary Halbert of Halbert Wealth Management

We dissect last Fridays controversial 2Q GDP report, which most found disappointing but some in the mainstream media found encouraging (ie at least were not in a recession). From there, well discuss the Feds latest monetary policy meeting that ends tomorrow. The stock markets rallied strongly last week, partly on perceived good news from Europe, and partly because of renewed expectations that the GDP report would be weak enough to move the Fed to enact QE3.

2012-08-03 ECRI Recession Call: Weekly Leading Index Slips But Growth Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 122.2 from last week's 122.7 (a tiny revision from the previously reported 122.8). See the WLI chart below. However, the WLI growth indicator (WLIg) improved, now at -1.3 as reported in Friday's public release of the data through July 27, an improvement over the previous week's -1.7, which was an upward revision from -2.3.

2012-08-03 How to Avoid the Bursting of the Bond Market Bubble by Gary Halbert of Halbert Wealth Management

This letter is the first in a series that I hope you will take very seriously. U.S. interest rates are at record lows. Meanwhile, Obama and Congress are sky-rocketing the national debt. We all know this cant go on much longer.

2012-08-03 Family Dollar Stores - Stock Research Analysis by Team of F.A.S.T. Graphs

A quick glance at the historical earnings and price correlated FAST Graphs on Family Dollar Stores (FDO) shows a picture of overvaluation based upon the historical earnings growth rate of 15.2%. Analysts are expecting the earnings growth to continue at about 15%, and when you look at the forecasting graph the stock appears overvalued, (it's at the top of the value corridor of the five orange lines - based on future growth).

2012-08-03 Hedging Against (and Profiting From) A Prospective Decline In The U.S. Dollar by Team of Emerald Asset Advisors

The U.S. dollar has remained the world's reserve currency due to several factors: 1. Its large circulation (roughly $1.1 trillion); 2. The denomination of many transactions (especially commodities such as oil and other natural resources) being in USD; 3. The stability of its political system; and 4. The lack of any other viable options. However, that may not always be the case.

2012-08-02 Mythbusting: How Elections Affect Markets by Russ Koesterich of iShares Blog

Elections do matter for the markets, but not necessarily for the reasons that investors tend to believe. Ahead of the next presidential election, Russ debunks some common myths surrounding markets and elections.

2012-08-01 Remarks to the NBER-Sloan Conference on the European Crisis by Mohamed El-Erian of PIMCO

We believe that this intersection between what economists and policymakers know - is a critical one to get right, and not only for a long-term investor like PIMCO. You see, unless there is a strong economic anchor, policymakers (and their political bosses) will lack the conviction and foundation needed to take difficult decisions and explain them well to citizens. So it is crucial for both sides to know what is known - and also to recognize, to the extent possible, the known unknowns.

2012-07-31 The False Promise of Gold as an Inflation Hedge by Michael Edesess (Article)

If you were a time traveler, hopping from one point in history 2,000 years forward or back, you'd best carry with you - if your time machine will allow it - a small stash of gold. Gold has been an effective hedge against inflation over the very, very long term. But that's about all it's good for. The other common reasons for owning gold - in particular, to use as a short-term or even a long-term hedge against inflation - are baseless.

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.

2012-07-31 Cult Figures by William Gross of PIMCO

The long-term history of inflation adjusted returns from stocks shows a persistent but recently fading 6.6% real return since 1912. The legitimate question that market analysts, government forecasters and pension consultants should answer is how that return can be duplicated in the future. Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades.

2012-07-31 The Price of Glamour by Bill Smead of Smead Capital Management

The list of glamorous growth stocks getting hit by what we call "minefield" price declines is getting fairly long. Some of the more influential names which have suffered sharp, swift declines include Nike (NKE), Chipotle (CMG ), Facebook (FB), Coinstar (CSTR), Starbucks (SBUX) and the King of the Glam stocks, Apple (AAPL). Is there a pattern here that matters? If earnings growth is hard to come by, what are the most important themes for long-duration common stock investors?

2012-07-30 No Such Thing as Risk? by John Hussman of Hussman Funds

In the face of present enthusiasm over central bank interventions, one almost wonders why nations across the world and throughout recorded history have ever had to deal with economic recessions or fluctuations in the financial markets.

2012-07-30 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Our collective mood is souring, particularly in light of falling wages, increased competition for jobs, portfolio (net worth) depreciation, and daily news about politics, terrorism, and business corruption. Wheres the good news?

2012-07-30 Partisan Standards of Ethics by Dan Ariely of Dan Ariely Blog

We say that politicians are slimy, our noses wrinkling with disdain but is that the way we like them? It seems the answer depends on whether we agree with their agenda. With the 2012 election steadily approaching, I wondered whether Democratic and Republican voters hold their preferred candidate and the opposing candidate to similar ethical standards. To find out, Heather Mann (a graduate student working with me) and I conducted a little survey on American voters.

2012-07-30 The Euro's Survival Requires German Engineering by Milton Ezrati of Lord Abbett

As Europe's paymaster, Berlin faces a tricky task: promoting austerity among economically stressed peripheral nations but not too much. In Europe's seemingly endless debt negotiations, Berlin would seem to hold all the cards. It is, after all, Europe's largest economy, its most powerful, and its most financially sound. But in reality, Berlins options are highly constrained and require a remarkably delicate policy balance.

2012-07-30 Whitney, Revenue and Defaults by Team of Managers Investment Group

Shortly after Meredith Whitney's appearance on 60 Minutes, we published a Q&A with Gannett Welsh & Kotler, LLC, in which they discussed their view that Ms. Whitney's concerns were overblown. During the last 1 1/2 years, GW&K's view has proven to be correct and we have taken this opportunity to once again seek their thoughts on the financial challenges governments face today through a Q&A.

2012-07-27 Will the Markets Direction Determine the Presidency? by Frank Holmes of U.S. Global Investors

After the first few months of President Barack Obama's term in office, I wrote about the carnival rollercoaster the market was riding. Looking at the blue line below, that post may have foreshadowed his tenure! The average of four-year presidential cycles from 1953 through 2008 shows that the S&P 500 Index generally remains flat for almost the first two years, before heading higher in the second half.

2012-07-27 ECRI Recession Call: Weekly Leading Index Improves by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose to 122.8 from last week's 121.8 (a tiny revision from the previously reported 121.9). See the WLI chart below. The WLI growth indicator (WLIg) also improved, now at -1.6 as reported in Friday's public release of the data through July 20, an improvement over the previous week's -2.3.

2012-07-27 Who is Muhammad Lee? by John Scott of Saturna Capital

Who is this Muhammad Lee? (So named, as these are the most common first and last names in the world.)1,2 Where is he from? How many brothers and sisters will Muhammad Lee have in the future? What are the implications of his arrival for U.S. investors?

2012-07-27 Buffalo Wild Wings Inc - Stock Research Analysis Is It Too Saucy? by FAST Graphs Team of FAST Graphs, Inc.

A quick glance at the historical earnings and price correlated FAST Graphs on Buffalo Wild Wings (BWLD) shows a picture of slight undervaluation. However, since analysts are expecting the earnings growth to somewhat slow down, when you look at the forecasting graph the stock appears modestly overvalued - its just within the value corridor of the five orange lines - based on future growth.

2012-07-24 Deciphering the Annuity Puzzle: Practical Guidance for Advisors by Wade Pfau (Article)

Economists love to try to explain why people may act irrationally; such 'puzzles' inspire numerous researchers to probe their possible solutions. The annuity puzzle, which ponders why retirees do not buy more annuities, is a classic example. After describing the basic theory behind why this is so puzzling, I will address a variety of potential explanations, and then turn to the practical guidance the puzzle offers for advisors and their clients.

2012-07-24 Integrating a Salesperson into Your Practice by Beverly Flaxington (Article)

I'm about to hire a salesperson for the first time. We need a go-getter who will find us new business. How do I avoid conflict between this new person and my advisors? I want everyone to work together. Do I wait for tensions to dissipate or are there things I can do to set up for success?

2012-07-24 The Upside of Low Interest Rates for Pension Plans: Issuing Debt to Fund Pension Liabilities by Jared Gross, Seth Ruthen of PIMCO

Issuing debt allows a sponsor to de-risk without waiting for market events or cash contributions to reach the level of funding that triggers a shift in asset allocation. There are a number of ways in which a sponsor may benefit from replacing inefficient debt (in the form of a pension deficit) with the tax and accounting advantages of marketable debt.

2012-07-24 Wesbury vs. Krugman by Brian Wesbury, Bob Stein of First Trust Advisors

Today, on Bloomberg with Tom Keene, Brian Wesbury was asked about Paul Krugman. Wesbury said Krugman was wrong - government spending does not boost growth, if it did there would be no poverty in the world. This was reported on BusinessInsider...BusinessInsider then reported that Krugman fired back...quoting his New York Times blog. In it, he claims it all "depends on the situation."

2012-07-23 Quarterly Market Overview by Robert Carey of First Trust Advisors

While it is nice to get the news in real time, the need for speed on the information superhighway can lead to incomplete or erroneous reporting. Look no further than the current election campaign season where the finger pointing has already started between President Obama and Mitt Romney. Good thing the Internet has also brought us some fact-checkers to help sort things out. Helping to sort things out is what we strive to do for our clients, as well.

2012-07-22 How 5 Seriously Overworked Buzzwords Can Come Between You and Your Client by Rob Isbitts of Sungarden Investment Research

In my experience, several investing buzzwords have done more harm than good for investors. While they are important concepts, they have been so commoditized by the financial planning industry that their true meaning has been misinterpreted. All the while, Wall Street firms have reaped the benefits by mass-customizing portfolio management. What started as a concerted effort to help investors has been reduced to a marketing pitch and investors keep falling for it.

2012-07-20 July 2012 Newsletter by Harold Evensky of Evensky & Katz

FRANK SINATRA FAN? Mena chided me for starting my last NewsLetter on a negative note so I thought Id repent this time and start with something more positive. Even if youre not a Sinatra fan, this lovely and moving piece of music by Andre Rieu," a renowned Dutch violinist, conductor and composer, and his orchestra is a tribute to Frank Sinatra with My Way on his Stradivarius violin at Radio City Music Hall New York.

2012-07-20 The Evolution of Beijing's SoHo by Gerald Hwang of Matthews Asia

With each visit to New York Citys SoHo art galleries over the past 15 years, I have grown stronger in my suspicion that the freshest, most interesting contemporary art is coming from mainland China. The old guard of expatriate Chinese artists, with their sly indictments of Mao, has been gradually replaced by a new generation who remain in China. Their work is visually exciting and accessible, even for unschooled portfolio managers.

2012-07-20 ECRI Recession Call: Weekly Leading Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.9 from last week's 122.9, a downward revision from 123.2. See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.3 as reported in Friday's public release of the data through July 13, an improvement over the previous week's -2.7 (a downward revision from -2.2).

2012-07-18 Peaks and Valleys by Carl Tannenbaum of Northern Trust

Second quarter economic activity disappointed on many fronts. The drama in Europe has taken its toll on exports, markets, and confidence. The 2012 election is starting to take shape, amid the approach of a huge fiscal "cliff" at the national and local level. The negativity and uncertainty which often surround Presidential campaigns may hinder economic and market performance. This months special focus is on the Fed's recent Survey of Consumer Finances, and what it means for our economy.

2012-07-18 How to Look Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors

Among investors these days, a fellow commodity bull is about as rare as finding a positive story in the media, especially when you look at the results of metals and natural resources during the first half of 2012. Only four commodities on our periodic table pulled off a positive return. Wheat grew the most, rising 13 percent, followed by single-digit rises from corn, gold and copper.

2012-07-18 Taking Short Cuts to Higher Returns with AQRs Capital Antti Ilmanen by Kendall Anderson of Anderson Griggs

On November 2-3 of 2011 the CFA Institute and CFA France sponsored the Fourth Annual European Investment Conference in Paris, France. Antti Ilmanen, Ph.D. was one of the presenters. The title of his Presentation was Understanding Expected Returns. This months letter is based on this presentation as it appeared in the June 2012 publication CFA Institute Conference Proceedings Quarterly.

2012-07-18 The LIBOR Mess: How Did It Happen - and What Lies Ahead? by Team of Knowledge @ Wharton

When regulators in the United Kingdom and United States announced a settlement with Barclays bank over its manipulation of LIBOR, the benchmark interest rate used around the world, there were plenty of reasons for jaws to drop. First and foremost was the whopping fine of $450 million, reflecting the seriousness of the case, along with analysts' predictions that LIBOR rates could influence interest rates on between $350 trillion and $800 trillion in loans and investments.

2012-07-17 How to Forecast Future Stock Returns: Part 3 by Chuck Carnevale of F.A.S.T. Graphs

A lot of what Part 1 & Part 2 attempted to convey is the logical and common sense nature of valuation in regards to sensible stock investing. Once you have determined that fair valuation, plus or minus, exists, then the prudent investor should look to future earnings growth as the likely source of future long-term returns. By applying the same principles that we presented and discussed in Parts 1 & 2, we can calculate within a reasonable range of predictability what our future returns might be.

2012-07-16 The Third Law of Randomness by John P. Hussman of Hussman Funds

Proper investing doesn't rule out randomness and unpredictability, particularly when it comes to individual events. It instead diversifies against randomness both across holdings at each point in time, and across time by repeatedly acting on the basis of averages instead of individual forecasts.

2012-07-16 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

A strong day last Friday salvaged the week for stocks despite continuing evidence of a global slowdown related to the sovereign debt crisis which shows no sign of improving in Europe. It was kind of a quiet week from the European leaders. There werent any concrete developments, of course, just a few confusing new twists and turns. The most important one is that Germanys highest court must now rule as to whether it is constitutional to agree to what was supposedly agreed to previously.

2012-07-16 Still Drifting by Christian Thwaites of Sentinel Asset Management

We are in earnings season. This is a welcome relief from the macro and political world that has dominated markets and sentiment for several weeks. Earnings allow us to look at what companies are seeing and how they're reacting. We know they're operating in world of miserable nominal GDP growth so we will look at margins, sales, pricing power, management and cash positions. But first, why so listless and skittish?

2012-07-13 Mid-year Market Review by Rob Isbitts of Sungarden Investment Research

After one of the most trying years for investors in 2011, the first half of 2012 had a similar feel. The split-personality of optimism about a slow but visible recovery in the U.S. and weekly do-or-die drama in Europe produced the type of half-year that, frankly, we expected. Specificially, a continued pattern of news-driven, unsustainable moves in both directions landed much of the U.S. stock market in a tight price range.

2012-07-13 End Game: What Happens to Residential Mortgage-Backed Securities if There's a Eurozone Exit by Rod Dubitsky of PIMCO

An exit would substantially affect euro-denominated RMBS mortgage collateral. Currency redenomination and devaluation would likely wipe out the entire available credit enhancement for most deals. Losses of redenominated loans could overwhelm credit support, even for well-performing deals.

2012-07-13 ECRI Recession Call: Weekly Leading Index Improves Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 123.2 from last week's 121.9. The WLI growth indicator (WLIg) rose fractionally, now at -2.2 as reported in Friday's public release of the data through July 6, an improvement over the previous week's -2.8 (a slight upward revision from -2.9).

2012-07-13 Muddling Through, But for How Long? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab

Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.

2012-07-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles

Following back-to-back double-digit quarterly gains, US stocks took a breather in the second quarter, with the S&P 500 Index declining 2.8%. It could have been worse. At the quarters low point in early June, the Index had declined 10.0% from the first-quarter close. June was a strong month for stock performance, leading to a welcome recovery from the early quarter decline. However, positive returns from the first quarter prevented the Index from becoming negative on a year-to-date basis.

2012-07-12 Bond Market Review & Outlook by James Balfour of Loomis Sayles

The liquidity-driven rush into riskier assets that dominated the first quarter faded during the second quarter. The European sovereign debt and banking crisis was once again the primary catalyst, but softer economic data in the US and China also fed negative investor sentiment. Global liquidity suffered following the end of the European Central Banks (ECBs) long-term refinancing operation (LTRO).

2012-07-12 The Intersection of Monetary Policy and Volatility Markets by Josh Thimons of PIMCO

When the Fed exhausted the power of its traditional monetary policy tools, it turned to increasingly creative and innovative policy measures. During periods of Fed balance sheet expansion, both interest rate and equity implied volatility experienced significant declines. The opportunities presented by the intersection of monetary policy and volatility markets are often compelling, because most options market participants are not looking at the world through a policy lens.

2012-07-12 Math, History and Psychology - Part 3 by Bill Smead of Smead Capital Management

Over the years, we have heard Charlie Munger state that Psychology is the most underrated and underutilized of the major academic disciplines in business and investing. Andy Grove backed this up in a Fortune magazine interview by telling about the best business advice he had ever received. His City College of New York professor told him, When everybody knows that something is so, it means nobody knows nothin.

2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)

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?

2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)

Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.

2012-07-10 Insights into the First Half of 2012 by Ron Surz (Article)

U.S. stock markets at mid-year have earned a respectable 9.5% return. A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold's performance.

2012-07-10 Only the Lonely Can Play by Bill Smead of Smead Capital Management

Human beings prefer to buy shares of a common stock which have gone up in price recently. They prefer to participate in styles and sectors which have done better in the most recent five to seven years. Lastly, human beings prefer to make money sooner, rather than later. Fortunately for us, THE MOTELS wrote and performed a song back in the early 1980s (Only the Lonely), which explains what we need to do in the marketplace as we look out into the second half of 2012.

2012-07-09 Disappointing, but Not Terrible by Charles Lieberman of Advisors Capital Management

Job growth has slowed to a disappointing pace over the past three months, insufficient to bring down unemployment, but not so weak that recession is much of a threat. This mediocre performance also leaves the Fed in a quandary, neither making an obvious case to leave policy unchanged or a clear case to implement yet another form of policy accommodation.

2012-07-06 ECRI Recession Call: Weekly Leading Index Again Improves by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 121.9 from last week's 121.7 (which was a slight upward revision from 121.5). See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.9 as reported in Friday's public release of the data through June 29, an improvement over the previous week's -3.6.

2012-07-06 Mid-Year 2012 Economic Update by Team of Horizon Advisors

The questions we hear most often from our clients have to do with the Eurozone, U.S. politics, and closely related, the so-called fiscal cliff. We thought we would approach each of these in turn.

2012-07-05 How to Know What Rate of Return to Expect from your Stocks: Part 2 by Chuck Carnevale of F.A.S.T. Graphs

In this Part 2, we will focus on how to utilize current valuation in conjunction with earnings growth rates in order to come up with a reasonable expectation of the future total returns a stock can be expected to provide. The point is that neither can be looked at in isolation. In other words, the price you pay to buy the growth that the company ultimately delivers, will determine not only how much money you make (the percentage return on investment), but how much risk you took to make it.

2012-07-05 Math, History and Psychology - Part 2 by Bill Smead of Smead Capital Management

Last week we wrote about the math of common stock investing and the effectiveness of mathematical discipline to portfolio management. This week we will focus on history and the importance of that academic discipline to us as common stock portfolio managers here at Smead Capital Management (SCM).

2012-07-04 What Next For The Euro-Zone? by Victoria Marklew of Northern Trust

The European Union has just completed its 20th make or break Summit in a little over two years, and actually managed to beat expectations. Two key agreements were reached on June 28-29: expanding the remit of the two bailout funds to include sovereign debt purchases and eventually direct banking sector support; and creating a unified banking regulator for the Euro-zone under the auspices of the European Central Bank (ECB).

2012-07-03 Regaining Confidence Amid Layoffs by Beverly Flaxington (Article)

We had to lay off a couple of people in our investment firm. As the founder and leader of the firm, the turmoil that resulted upsets me but I don't know what to do to give everyone confidence that I don't feel myself. Can you give me some tips about how to minimize the fear without being dishonest?

2012-07-03 The 2012 Mid-Year Geopolitical Update by Bill OGrady of Confluence Investment Management

As is our custom, we use this early July report to offer our outlook for the next six months. In this issue, we will discuss what we see as the key geopolitical issues that will affect the markets for the rest of 2012. This list is not exhaustive but highlights our greatest concerns.

2012-07-03 Gleanings by Jeffrey Saut, Art Huprich, Scott Brown of Raymond James Equity Research

With this Gleanings report, we begin a monthly chart presentation and discussion, which attempts to pull together the separate disciplines of Economics, Fundamentals, Technical analysis, and Quantitative analysis. The report contains what we think are currently some of the most important charts. We will have an overview and then highlight some of the key near-term variables that we believe could have a measurable effect on where the various markets are going.

2012-07-03 Let's Twist Again by Daniel Kurland of Corby Asset Management

Ben Bernanke must be nostalgic for his childhood. On June 19th in the summer of 1961, when Chairman Bernanke was only 8 years old, Chubby Checker released his smash hit, Lets Twist Again. Chairman Bernanke, citing decreased inflationary concerns and heightened employment weakness, announced that Operation Twist, which had been set to expire at the end of June, would be extended until the end of the year.

2012-07-02 Nightmare on Wall Street: This Secular Bear Has Only Just Begun by Ed Easterling of Crestmont Research

Secular bull markets are great parties. Investors arrive from secular bears really wanting to take the edge off. As the bull proceeds, above-average returns become intoxicating. By the time it is over, the past decade or two has delivered bountiful returns. In contrast, secular bears seem like hangovers. They are awakenings that strip away the intoxication, leaving a sobering need for an understanding of what has happened.

2012-07-02 This film is rated "R" by Scotty George of du Pasquier Asset Management

This is not your fathers stock market. Nor really is it yours, the one you envisioned two decades ago. Instead we may have leveraged, in a literal sense, all the financial details to our heirs. The bad news is that we have become marginalized. Our goals and expectations have been sequestered, postponed, for another time.

2012-06-29 Winds of Change by Sharat Shroff of Matthews Asia

The Jakarta air felt unusually comfortable as I stepped out of Soekarno Hatta International Airport earlier this month. It was certainly still hot and muggy but cool breezes made the evening a bit more bearable. It brought to mind Europe's economic chill, and I wondered if perhaps Indonesian businesses were facing a gloomier outlook due to global concerns.

2012-06-29 How to Know What Rate of Return to Expect from your Stocks: Part 1 by Team of F.A.S.T. Graphs

We believe there are two critical attributes that the prudent investor should consider before investing in a company (stock). Furthermore, these same two attributes can be used to calculate a reasonable expectation of the future return the stock is capable of generating on their behalf. These two attributes are valuation and the rate of change of earnings growth.

2012-06-29 ECRI Recession Call: Weekly Leading Index Up Fractionally by Doug Short of Advisor Perspectives (dshort.com)

Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.5 from last week's 121.2 (a slight downward revision from 121.3). See the chart below. However, the WLI growth indicator (WLIg) declined fractionally, now at -3.6 as reported in Friday's public release of the data through June 22, down from the previous week's -3.5.

2012-06-29 Unmasking the Asian Giant by Frank Holmes of U.S. Global Investors

China is far from perfect: While actors can perfect their lines and use masks to captivate an audience, smart investors know better to use a wealth of information across numerous sources to guide investment decisions. Weigh the evidence and judge for yourself. As my friend, Investment Strategist Keith Fitz-Gerald recently said in an interview, A powerful China is coming, and we have two choices. Either we're at the table, or we're on the menu. To him this means, Good news from China is good news for the U.S.; bad news from the Chinese economy is bad news here.

2012-06-27 United States of Europe has Arrived! by Axel Merk of Merk Funds

A fiscal union, a banking union, a United States of Europe has arrived! Dont believe it? Just like many newborns, this one has its shares of wrinkles, but what you see is what you get. We discuss a tough love approach to move forward in Europe, as well as implications for currencies.

2012-06-26 Math, History and Psychology by Bill Smead of Smead Capital Management

In my 32 years in the investment business, success in common stock investing seems to come down to math, history and psychology. At Smead Capital Management (SCM), we have built our investment discipline and our eight proprietary criteria around these academic subjects. With the stock markets gyrating wildly the last few weeks, we thought it would be helpful to see where we are today in each of these disciplines. We will start this week with our view on the math section.

2012-06-26 Playing Against the House by Shane Shepherd of Research Affiliates

Some observers have compared the stock market to gambling in a casino. This issue of Fundamentals examines how investing in sovereign debt markets can resemble playing against the house.

2012-06-22 Its All a Big Mistake by Howard Marks of Oaktree Capital

Mistakes are a frequent topic of discussion in our world. Its not unusual to see investors criticized for errors that resulted in poor performance. But rarely do we hear about mistakes as an indispensable component of the investment process. Im writing now to point out that mistakes are all that superior investing is about. In short, in order for one side of a transaction to turn out to be a major success, the other side has to have been a big mistake.

2012-06-22 ECRI Recession Call: Weekly Leading Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.3 from last week's 121.8 (a slight downward revision from 121.9). See the chart below. The WLI growth indicator (WLIg) also declined, now at -3.5 as reported in Friday's public release of the data through June 15, down from the previous week's -3.0.

2012-06-22 An Ending Made For Gold by Frank Holmes of U.S. Global Investors

Hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5 to 10 percent of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system.

2012-06-21 H.B. Fuller Co - Can you Stick with Them? by Team of F.A.S.T. Graphs

Founded in 1887, H.B. Fuller Co (FUL) is a world leader in adhesives and specialty chemicals. H.B. Fuller has generated an above-average growth rate, although results have been somewhat cyclical since 1998. The current consensus estimate shows that leading analysts believe earnings are expected to accelerate over the next five years. Prospective shareholders may want to review this company.

2012-06-21 Selling Hope by Jason Hsu of Research Affiliates

Many of us in the investment management business are fond of telling our clients that "hope is not a strategy." Ironically, selling hope has worked out to be a fantastic strategy for investment managers. In our new newsletter, "Simply Stated," I suggest that investors may want to think twice about how much they are willing to pay for hope.

2012-06-21 Will Quantitative Easing Lead to Higher Inflation? by Keith Wade, James Bilson of Schroder Investment Management

In certain circles, talk of Quantitative Easing (QE) immediately triggers thoughts of Weimar Germany and Zimbabwe. The only beneficiaries of turning to the printing presses, it is suggested, will be wheelbarrow salesmen. Whilst extreme inflation seems an exceptionally low risk event, there are legitimate concerns over the impact of the huge expansion of the monetary base on future inflation. In this Talking Point, we examine the key signals to watch out for in assessing future inflation risks.

2012-06-20 Is AutoZone A Little Out Of The Zone? by Team of F.A.S.T. Graphs

A good growth company is always a nice addition to a portfolio, but you have to watch to make sure you are not paying too much. The old saying is: You make your money on the buy side. Looking at AutoZone (AZO) at a glance, we see that it normally trades (Normal Historical PE the blue line) at or below its historical operating earnings growth rate (the orange line). Therefore, it appears that AutoZone may be trading at a slight premium to its historical valuation.

2012-06-20 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital

The OPEC meeting in Wien came-and-went, masked by bigger problems. Perhaps Iran, Iraq, and Venezuela decided that they would do injustice to their international standing if they aimed to tighten output quotes as Europe was on the cusp of imploding. We also look at how inexpensive emerging markets appear to be, while we consider the implication of Arab-market uncertainty on Turkey. Ghana may be an attractive story for the specialist investor.

2012-06-20 Growth Versus Austerity: A U.S. Dollar Perspective by Axel Merk of Merk Funds

Austerity versus Growth? Which economic model is sustainable? If it werent for those pesky bond vigilantes, it may be only politics. Lets not get too excited that either path will work. Lets look at the implications for investors with a focus on the U.S. dollar.

2012-06-19 How to Follow Up Without Being a Pest by Dan Richards (Article)

How do you value your business? We all know the obvious candidates: assets, income, recurring revenue, client loyalty or the extent to which you've built a strong team. But a recent discussion with some top-performing advisors illuminated one metric that is absolutely critical - and typically overlooked.

2012-06-19 Likelihood Ratios and their use in Recession Indicators by Georg Vrba, P.E. (Article)

In medicine, likelihood ratios improve patient outcomes and refine drug regimens by assessing the reliability of common diagnostic tests. In finance, likelihood ratios can quantify the reliability of an economic indicator such as one designed to identify recessions.

2012-06-19 Will Policy Response Follow Policy Rumor? by Bob Doll of BlackRock Investment Management

The past two weeks have been better for stocks, with the major indices up in consecutive weeks for the first time in more than a month. Europe remains stuck in a cruel cycle of recession, a banking system in need of life support, frozen policymakers, too much debt and a downward confidence spiral. In the United States, economic growth slowed this spring (likely due to poor weather and the earlier spike in gasoline prices), but remains intact.

2012-06-19 The R Word in Emerging Markets by Mark Mobius of Franklin Templeton

No matter what decision we face in our lives, there is always some type of risk involved. But when you take a few risks, the experience can often be quite rewarding. When it comes to investing, some risks are present no matter what market youre in. Its also true that there are risks that are especially important to consider when it comes to the emerging markets.

2012-06-19 Down and Out in Wenzhou by Bill Smead of Smead Capital Management

Much like in the US in 2006, the Chinese government officials and the worldwide media need to believe that what is going on in Wenzhou is not the first domino in a series of dominos which fall over the next two years. The Chinese economy and its miracle of the last 30 years were originally driven by the competitive advantage of cheap labor.

2012-06-18 A Brief Primer on the European Crisis by John P. Hussman of Hussman Funds

Europe has repeatedly been successful at addressing its recurring liquidity crises with the help of other central banks, but its still an open question whether they can durably solve the solvency crisis without more disruption and more restructuring of both government debt and troubled banks. In my view, the hope for an easy solution is misplaced, and the likelihood of recurring disruptions from Europe will remain high.

2012-06-18 Japanese Equity The Impact of Global Instability by Team of Nomura Asset Management

Mainly owing to fears of a potential Euro break up, the decline in the global stock markets in April 2012 continued through May as well. On June 4th, the Japanese equity market (TOPIX) sank to its lowest level in 29 years, declining even further below the bottom set in the aftermath of the Lehman shock in Japanese yen (JPY) terms. However, in U.S. dollar (USD) terms, the level of the Japan equity market is still above its post Lehman low recorded in March 2009.

2012-06-15 Its Not Just Dinah In The Kitchen Anymore At Williams-Sonoma! by Team of F.A.S.T. Graphs

Founded in 1956, Williams-Sonoma (WSM) is not just a quality kitchen store, but a specialty leading home furnishing retail store. Williams-Sonoma has historically grown earnings at a compounded rate of 12.9% since 1998, resulting in a 3.4 billion dollar market cap. Williams-Sonomas earnings per share have risen from $0.51 per share in 1998, with a drop in 2008 to $0.22 per share, to a current forecast earnings per share of approximately $2.49 for fiscal 2012. The current dividend yield is 2.6% and the dividend has increased each year for the past 7 years.

2012-06-15 Falling Equity Prices Reflect the European Crisis and Slower Economic Growth by Team of Thomas White International

Heightened concerns over the European fiscal crisis and slower economic growth dragged down emerging market equity prices during May. The emergence of political parties opposed to short-term austerity measures in recent elections in countries such as France and Greece has upset the political consensus that paved the way for an agreement on tackling the crisis last year. Borrowing costs of some of the troubled countries such as Spain have increased substantially, while countries that are in better fiscal health such as Germany remain hesitant about the issuance of common euro bonds.

2012-06-15 Equity Prices Reflect Concerns over Global Growth Slowdown by Team of Thomas White International

International equity prices corrected in May on heightened worries over a further global growth slowdown as the European fiscal crisis worsened. Political consensus on ways to address Europes fiscal problems dissipated after political parties opposed to austerity measures gained popularity in countries such as France and Greece earlier this year. However, Germany and select other countries continued to insist that structural reforms agreed as part of last years pact should be adhered to.

2012-06-15 Global Outlook Dampened Further by the European Crisis by Team of Thomas White International

Apprehensions over a worsening European fiscal crisis and concerns about slower growth in the emerging economies continued to dampen investor sentiment in May. Europes political leadership is yet to find a common ground that would accommodate the opposition to short-term austerity measures expressed in recent elections in countries such as France and Greece. There is growing expectation of a possible Greek exit from the monetary union while borrowing costs of troubled countries such as Spain have increased further, following credit rating downgrades.

2012-06-15 ECRI Recession Call: Weekly Leading Index Up Slightly, But Growth Index Declines by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.9 from last week's 121.3 (a downward revision from 122.3). See the chart below. However, the WLI growth indicator (WLIg) slipped, now at -3.0 as reported in Friday's public release of the data through June 8, down from the previous week's -2.2 (a sizable downward revision from -0.7).

2012-06-15 Schwab Market Perspective: Time for Action by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.

2012-06-14 Out of Order by Peter Schiff of Euro Pacific Capital

I was invited to testify about the Federal Housing Administration's (FHA) policy in the apartment lending market. Although this was a fairly narrow issue, I told the congressmen the same thing I did last year when I was invited by a different subcommittee to testify about job creation: government programs don't solve problems, they just create new ones. While I thank the Committee for inviting me, I believe the congressmen may have gotten more than they bargained for.

2012-06-14 Field Notes on Non-Traditional Markets by Douglas Clark Johnson of Codexa Capital

Saudi Arabia is now the worlds third largest holder of foreign-exchange reserves. It may be their quiet attempt to counter Irans influence with Shiism. We further offer views on China, Jordan, and Tunisia. Investors heralded Chinas rate cut last week, however modest in scope. Its common wisdom that China has the worlds largest slice of foreign exchange reserves, followed by Japan. But few appreciate that Saudi Arabia now ranks third, ahead of Russia and Taiwan. Importantly, Saudi Arabias reserve growth rate leads the world.

2012-06-14 The US Economy Sitting on the Threshold of a New Golden Age: Part Two by Chuck Carnevale of F.A.S.T. Graphs

In part one of this multipart series on the US economy I offered the following basic opinion: The majority of the positive aspects underpinning the US economy are being mostly ignored by mainstream media in favor of the smaller, but more titillating, negative aspects. Consequently, I believe that many Americans, and since this is an investing blog, many investors, are holding a much more negative view of the strength of the American economy than is warranted. I offer massive outflows from equity funds into Treasury bonds as evidence supporting my thesis.

2012-06-13 Europe - Will the Greek Election Shift German Direction? by Milton Ezrati of Lord Abbett

As the Europeans meet and speak and summit, it becomes ever clearer just how intense and complex matters have become. Greece will determine, later this month, whether it will stay in the eurozone or perhaps even the European Union (EU). In or out, Europe and Greece will have to cope with the aftermath of the decision. Even as Greek questions remain open, an even broader drama has grown around recent proposals for the union to issue eurozone bonds that would draw on the generalized credit of all members in common.

2012-06-13 Can Nu Skin Keep The Wrinkles Out Of Earnings? by Team of F.A.S.T. Graphs

Founded in 1984, Nu Skin Enterprises (NUS) is a distributor in clean personal care products. Nu Skin has historically grown earnings at a compounded rate of 6.1% since 1998, resulting in a 2.71 billion dollar market cap. The companys earnings per share have risen from $1.49 per share in 1998, to current forecast earnings per share of approximately $3.06 for fiscal 2012. The company started paying a dividend about 11 years ago and has raised their dividend every year.

2012-06-13 The by Gary D. Halbert of Halbert Wealth Management

Today we revisit the subject of the so-called fiscal cliff that our country faces at the end of this year if a Lame Duck Congress fails to pass a number of new laws by December 31. (I last wrote about this subject on March 27.) Some analysts are arguing that nothing really bad will happen if the Lame Duck Congress fails to get the job done. I disagree and I will tell you why below.

2012-06-13 Saving the Euro by Axel Merk of Merk Funds

The management of the Eurozone debt crisis is dysfunctional. In our assessment, to save the Euro, policy makers must focus on competitiveness, common sense and communication. If policy makers strived to achieve just one of these principles, the Euro might outshine the U.S. dollar.

2012-06-13 Creative Destruction by Robert McConnaughey of Columbia Management

Creative Destruction is always at play in competitive markets of all kinds. Given the metamorphic pressures caused by todays over-levered and structurally low- growth global economy, the forces of Creative Destruction are perhaps far greater than normal. Low overall growth and historically high profit margins create a particularly potent environment in which corporations compete for their share of a potential profit pool. Revenue growth is increasingly hard to come by and cost-reduction opportunities may have been stretched to their outer limits.

2012-06-12 The End of Economics by Michael Edesess (Article)

If Australian economist Steve Keen's book, Debunking Economics, doesn't end, once and for all, the terminally convoluted discourse that afflicts mainstream economics, nothing will. Although the book's purpose is to show that neoclassical economics is all bunk, however, it is also, remarkably, as good an introduction to neoclassical economics as any you're likely to find.

2012-06-12 Modern Day Fairy Tale of 3 Economic Wizards (Except It's True) by Mike "Mish" Shedlock of Sitka Pacific Capital Management

Once upon a time (today), in a land not so far away (USA), there lived a trio of economic wizards (economists), whose names shall remain anonymous (Paul Krugman, Greg Mankiw, Ben Bernanke). A fourth wizard, Murry Rothbard, is no longer among the living but resides in the netherworld. The above wizards seldom agree with each other because they come from competing schools of wizardry. (1) Keynesian School of Fiscal Voodoo and Witchcraft (2) Monetarist School of Monetary Voodoo and Witchcraft (3) Austrian School of Sound Money, Sound Economic Principles and Common Sense.

2012-06-12 Bemis Co Inc - Attractive Value, Yield and Growth by Team of F.A.S.T. Graphs

Bemis Co Inc (BMS) has achieved a moderate record of long-term earnings growth in a semi-cyclical fashion. However, even though earnings growth had faltered slightly during our last two recessions, the company remained highly profitable. We believe the company appears reasonably valued at its current quotation. This article looks at Bemis Co Inc, a Dividend Champion, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures.

2012-06-11 Bertha and Casey by Christian Thwaites of Sentinel Investments

Markets braced last week for a bailout on Spain which came this weekend. Its banking sector is in wretched condition and joins other European banks at 25 year lows in share price. The official downgrades came long after the stock market had voted with its feet. European leaders had little to add to the debate. There's some talk of a twin track: some European countries pressing on to further integration, some coping with contraction and austerity on their own.

2012-06-09 A Dysfunctional Nation by John Mauldin of Millennium Wave Advisors

European leaders launched the euro project in the last century as an experiment to see whether political hope could become economic reality. What they have done is create one of the most dysfunctional economic systems in history. And the distortions inherent in that system are now playing out in an increasingly dysfunctional social order. Today we look at some rather disturbing recent events and wonder about the actual costs of that experiment. What type of "therapy" will be needed to treat the dysfunctional family that Europe has become?

2012-06-08 The Global Debt Crisis by Greg Hahn of Winthrop Capital Management

The Financial Crisis of 2008 represented a turning point for the capital markets, financial regulation and global central bank policies. For the twenty years leading up to the Financial Crisis, accommodative monetary policies of the developed countries resulted in prosperity, higher wages, increased asset prices and an overall higher standard of living. However, this false sense of perpetual prosperity resulted in unbalanced social service and pension benefits that are now more difficult to rationalize in the economic environment following the Financial Crisis.

2012-06-08 The US Economy Sitting On The Threshold Of A New Golden Age: Part One by Chuck Carnevale of F.A.S.T. Graphs

In the past, Ive written numerous articles positing a long-term optimistic outlook for both our economy and the attractive future growth prospects of our great American businesses. Even though I hate to forecast the market in general, I have even presented evidence indicating that the general market as represented by the S&P 500 is currently reasonably priced and even slightly undervalued. My most recent contribution can be found here.

2012-06-08 ECRI Recession Call Update: Weekly Leading Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 121.6 from last week's 122.3 (a downward revision from 122.4). See the chart below. The WLI growth indicator (WLIg) also slipped, now at -2.0 as reported in Friday's public release of the data through June 1, down from the previous week's -0.7 (a downward revision from -0.6). The ECRI numbers are extremely close to the RecessionAlert estimates, posted yesterday, which anticipated 121.9 and -1.9% for the WLI and WLIg metrics.

2012-06-07 European Government Bonds Investment Outlook Update by Mark Nash of Invesco

The muted market reaction to the Greek bailout package unveiled on 20 February suggested that investors retained scepticism about the solvency of Greece looking forward. And for good reason, as the implementation risk of the package is tremendous given the European Union (EU) stipulates that Greece makes debt repayment a priority over basic public services. This package, and the deteriorating economy, led to inconclusive Greek elections in May and, more importantly, a clear rise in the popularity of the leftist anti-bailout parties.

2012-06-07 Spain & Weak US Economy Dominate Markets by Gary D. Halbert of Halbert Wealth Management

Stock markets around the world have been pummeled in recent weeks amidst the growing reality that were in a global recession, especially in Europe. Fears that the US will also fall into recession have intensified, particularly in light of last weeks very disappointing economic reports. At the same time, the European debt crisis has once again raised its ugly head, this time with the spotlight on Spain. Spains own Prime Minister has admitted that the country is in a state of emergency, and money is gushing out of Spanish banks.

2012-06-07 Remarks to the 12th Annual International Seminar on Policy Challenges for the Financial Sector by Mohamed A. El-Erian of PIMCO

Let me start with what I will refrain from doing specifically, I will not pre-empt the detailed discussions that you may have on such topical issues as regulatory principles, SIFIs, market infrastructure, stress testing and, of course, the rapidly changing nature of sovereign risk in advanced countries. Instead, I will try to touch on three more general topics that, in addition to your critical detailed analysis, I believe are important in assessing the potential impact of regulatory reform in terms of the past, present and future.

2012-06-06 Liquidity Lessons: The Critical Importance of Budgeting for Overlay Strategies by Markus Aakko, Jared Gross of PIMCO

One approach is to tier liquidity into current and contingent tiers, where some assets are kept in more liquid form and others are kept in higher-yielding investments. Quantifying how much of the immediate category is needed is a relatively straightforward risk-management exercise involving estimating the potential mark-to-market change in value of the overlay. Our view is that locating the liquidity pool internally has a number of potential advantages over an external model.

2012-06-06 Energize The Growth Component Of Your Portfolio With Chicago Bridge & Iron Co by Team of F.A.S.T. Graphs

Chicago Bridge & Iron Co (CBI) potentially offers high growth at a very reasonable price. Although the company does exhibit the occasional bout of cyclicality, long-term earnings growth has averaged over 16% per annum. Consequently, long-term buy and hold shareholders have earned returns that have exceeded the market by a large margin. Some of the best advances are achieved coming out of weak periods as earnings explode off of cyclical lows.

2012-06-05 The Father of Efficient Markets: Is Warren Buffett Smart or Lucky? by Dan Richards (Article)

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.

2012-06-05 Letters to the Editor by Various (Article)

A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.

2012-06-05 On Their 30th Anniversary - Get Your Dividend Portfolio Rolling with Norfolk Southern Corp. by Team of F.A.S.T. Graphs

Like most railroads, concerns regarding the coal industry have driven Norfolk Southern Corp.s share price to one of its lowest levels since 1998. Nevertheless, strength in other areas of their business seems to support continued confidence in long-term earnings growth. Therefore, current weakness in the share price may represent an excellent long-term opportunity.

2012-06-05 Reynolds American Inc. - Reasonably Priced with a High Yield by Team of F.A.S.T. Graphs

Even though Reynolds American Inc. (RAI) has risen substantially off of its lows in 2009, the company looks reasonably valued at todays quotations. Therefore, the dividend growth investor looking for above-average dividend yield with moderate growth might want to look closer. The company claims to be transforming the tobacco industry, and maybe it can transform your income portfolio as well.

2012-06-04 My Best Investment Advice - Watch Your Fellow Investors And Do The Opposite by Chuck Carnevale of F.A.S.T. Graphs

In my opinion, the recent selloff in stocks defies commonsense and logic, but in truth and fact it usually does. In other words, its not uncommon to see investors selling at precisely the time they should be buying and vice versa. Moreover, when investor pessimism is at a high, like it is today, stocks become cheap causing people to panic and sell. Now when I review the data, I get optimistic and immediately began to suspect that all this pessimism is creating a great long-term opportunity for investors with a more optimistic view of the future.

2012-06-04 Opportunities in Credit Higher Quality High-Yield Bonds by Team of Columbia Management

One of the more compelling opportunities across todays fixed-income landscape is within the higher quality segment of the high-yield market bonds rated BB and B. Strong underlying fundamentals driven by a wave of refinancing and solid operating performance have greatly diminished credit risk among these issuers, as demonstrated by exceptionally low current and expected default rates. Despite this, spreads, or yield premiums relative to Treasuries, are generally higher than long-term averages.

2012-06-02 ECRI Recession Call Update: Another Weekly Leading Index Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 122.4 from last week's 123.0 (a slight downward revision of 123.1). The WLI growth indicator also slipped, now at -0.6 as reported in Friday's public release of the data through May 25, down from the previous week's 0.1. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-05-31 Wall Street Food Chain by Bill Gross of PIMCO

Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of such previously sacrosanct debt represent a potential breaking point in our now 40-year-old global monetary system. Bond investors should favor quality and clean dirty shirt sovereigns (U.S., Mexico and Brazil), for example, as well as emphasize intermediate maturities that gradually shorten over the next few years.

2012-05-30 McGraw-Hill It Provides A Lot of Information, So Let The Pictures Do The Talking! by Team of F.A.S.T. Graphs

McGraw-Hill Companies (MHP) looks like a good addition for the dividend growth investor. The market has historically applied a premium valuation to this company. Its historically above-average earnings growth had pushed the company to trade at premium, until recently.At its current valuation, McGraw-Hill sits at a fair valuation.Therefore, we believe today's price represents a sound valuation given McGraw-Hills quality and consistency.

2012-05-30 Delayed Entitlement: The Changing Economics of Retirement by Tom Streiff of PIMCO

Its a foregone conclusion that Baby Boomers retirements will be very different from the retirements of their parents. To understand how, we need to explore the impact of the most recent financial events on Baby Boomers. The conventional wisdom is that as the leading edge of Boomers converged on age 65, their associated retirements are well underway and the economic and societal effects of this demographic-driven, transfer-payment-promised contingent are just beginning. In the next three to five years we should face a rapid and unprecedented expansion of entitlement expenditures.

2012-05-30 The What-Why-When-How Guide to Owning Emerging Country Debt by Tina Vandersteel of GMO

As GMO looks forward to its 20th year managing emerging debt portfolios, we offer our perspectives on the frequently-asked questions that have come up over the years, including: What is meant by emerging debt (external, local, corporate)? Why and when to own it: portfolio fit considerations, alpha, and absolute and relative value. How to own it: dedicated external, local, or corporate; blended; or multi asset (including emerging equities).

2012-05-30 Gannett: Where Buffett Meets Zillow by Bill Smead of Smead Capital Management

You will be surprised to hear that I am somewhat addicted to keeping track of the value of the home we have in the Seattle area and the one in Scottsdale, Arizona. It seems that Zillow uses comparisons to recent sales as the primary vehicle to come up with their Zestimates. We believe at Smead Capital Management (SCM) that comps are a useful tool in valuing common stocks. They are even more useful if the transactions are recent and spectacularly useful if the comps come from a savvy buyer. We would like to run our version of a Zillow estimate on Gannett (GCI).

2012-05-29 The Bargains in Europe's Great Oversell by Bob Veres (Article)

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.

2012-05-29 Letters to the Editor - An Attack on Paul Krugman by Various (Article)

Two readers respond to Michael Edesess' article, An Attack on Paul Krugman, which appeared on May 15.

2012-05-29 Into the Great Unknown by Andrew Balls of PIMCO

Amid great uncertainty and huge challenges in Europe, it can be helpful to cut through all the detail and map out what we know and what we dont know. This is at best depressing and, at worst, terrifying. Taking together the known knowns and the known unknowns, it seems likely that the eurozones big four Germany, France, Italy and Spain as well as other German satellite countries will find a way to hang together in a smaller currency union backed by stronger regional co-ordination and financing mechanisms.

2012-05-29 Hopes, Dreams and College Savings Solutions by Roger Michaud of Franklin Templeton

Its one of those universal truths that from the day their babies are born parents are filled with hopes, dreams and fears for their children. Those hopes and dreams typically include a successful career which often starts with a college education. The thought of a college education can lead to one of parents biggest fearsnot being able to foot the bill. Given the rising cost of college, financing a four-year degree for one or more children can be a daunting prospect for parents juggling day-to-day living expenses while trying to save for other investment goals like their own retirement too.

2012-05-29 Amid Uncertainty, What is an Investor to Do? by Chris Maxey and Ryan Davis of Fortigent

Markets rebounded last week after a two-week slide. The S&P 500 and Dow Jones Industrial Average rose 1.7% and 0.7%, respectively, in a choppy trading period. Discussion of a potential Greek exit from the Eurozone rattled investors, while economic data in the US was modestly positive.

2012-05-29 Crazy Markets - Remember That Old Standby: Municipal Bonds by Tom Dalpiaz of Advisors Asset Management

Sometimes it takes heightened uncertainty and increased market volatility to help investors rediscover an old friend in the investment universe. We thought it would be useful in todays difficult market conditions to list a series of questions as a reminder of what municipal bonds, properly selected and managed, can do for investors. Dont worry; the questions we pose arent tough. In fact, it should come as no surprise, given the title of this blog, that you can receive an A grade on the following quiz by answering municipal bonds to each of the questions in this article.

2012-05-26 ECRI Recession Call Update: Weekly Leading Index Declines Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 123.1 from a slight downward revision of 124.4 (see the fifth chart below). The WLI growth indicator also slipped, now at 0.1 as reported in Friday's public release of the data through May 18, down from the previous week's 0.4. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.

2012-05-25 Caterpillars Earnings Look Like And Act Like A Caterpillar; Moving Slowly But Steady by Team of F.A.S.T. Graphs

This article looks at Caterpillar Inc, a Dividend Contender, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures. In order to provide you the opportunity to research this company deeper and faster we are providing a link to a live, fully functioning earnings and price correlated set of graphs.

2012-05-25 Searching for European Solutions, and Dividends by Team of Franklin Templeton

As the European debt crisis rages on, people in the eurozone are voicing their opinions about austerity measures, bailouts and such, not just on the streets, but also at the polls. As the winds of political change swirl, the future of the eurozone seems to hang in the balance. Tucker Scott, portfolio manager of Templeton Foreign Fund, and a vocal fan of a thorough vetting process, says hes focusing on long-term outlooks, not just todays headlines. And, hes finding select European stocks with dividend-growth potentialin some cases even better opportunities than in the U.S.

2012-05-25 General Mills: Food for Thought! by Team of F.A.S.T. Graphs

General Mills has an impressive dividend yield for the income investor. Its estimated earnings growth is on the mark at about 7.2% and would make a nice contribution to an income portfolio. This article looks at General Mills Inc (GIS), a Dividend Challenger, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures.

2012-05-25 Sysco - Building A Case For A Return To Growth by Team of F.A.S.T. Graphs

Sysco Corp is an extremely high quality powerful franchise that is positioning itself for long-term future growth. Currently, the company controls about 17 % of the $225 billion North American food service distribution market. Since this industry is currently experiencing stress, it seems only logical that Sysco is best positioned among its peers to survive and prosper. On the other hand, many of its smaller local and regional competitors may not.

2012-05-25 Convertibles Market Review and Outlook by Ellen Gold and Ramez Nashed of Invesco

2012 will continue to be a good year for convertible bonds. New issuance will remain on its current path and increase as companies take advantage of low interest rates to raise capital to fund stock buybacks and mergers and acquisitions activity. Avoiding issue-specific underperformers still remains the key to performing well. This will prove to be even more important than picking the issue specific winners, given the asymmetric risks that are present in the market.

2012-05-24 Blue-Chip Dividend Growth Stocks Todays Strong Option For Retirement Portfolios - Part 1 by Chuck Carnevale of F.A.S.T. Graphs

There is a confluence of factors that are painting a very odd picture of current investor behavior. Common sense and a careful analysis of the market dynamics between equities and bonds today would indicate that investors should be acting in the exact opposite manner than they are. Interest rates are hovering at a 100-year low, which creates two problems for investors. First, there is not enough return from bonds to fund a retirees income needs or to fight inflation. Second, investing in bonds with interest rates so low makes it riskier to own bonds today than it has been in over a century.

2012-05-24 Repair Your Dividend Portfolios With Genuine Parts by Team of F.A.S.T. Graphs

Genuine Parts Co (GPC) has over 80 years of distribution expertise in replacement parts for automotives and industrial parts, as well as office and electrical materials. It appears to be a company poised for continued earnings and dividend growth. The company is a Dividend Champion with 25 years of raising its dividend. The strong dividend yield should attract a conservative investor looking for income and steady growth.

2012-05-23 Market Gut Check Time, Again by Mike Boyle of Advisors Asset Management

Our research of the last 50 years shows 3% pullbacks occur on average four times a year. So, clearly pullbacks are commonplace during a normal bull market; however, every time they occur they still set investor emotions on edge and test their resolve. At times like this we like to try and decipher what drove the selloff and try to resolve if we think it is just a normal correction or the beginning of a longer trend down and possibly the start of a new bear market.

2012-05-22 Finding Alpha with Active Managers by Jay Feeney of Robeco Investment Management

Many investors are convinced that alpha has disappeared from U.S. equity markets and prefer to use passive investment tools such as exchange traded funds (ETFs) to broadly gain exposure to these markets. The problem with this approach is that it gives up any chance of outperformance and forces an investor to settle for benchmark returns minus fees. It also ignores the fact that alpha potential does exist. Although many active managers have not done a good job in capturing alpha, there are many who have outperformed over time, producing very sizeable excess returns.

2012-05-22 What Weve Learned from Municipal Distress by Douglas J. Peebles of AllianceBernstein

Is the municipal bond market on the verge of collapse? You might think so, given the blaring headlines about a few big disasters in the last year. But as my colleague Joe Rosenblum explains below, poor decision making, not systemic issues, has caused the most serious problems. There is no question that state and local governments are facing financial hardship as a result of the weak economic recovery and its impact on tax receipts. But this is not the first time local governments have been challenged or have defaulted on their debt or filed for bankruptcy protection.

2012-05-21 Liquidation Syndrome by John P. Hussman of Hussman Funds

Presently, the market remains richly valued on normalized earnings, and is coming off of a speculative peak with an abrupt and persistent initial decline. All of this reflects what might be called a "liquidation syndrome" that is selective for awful drops that began in 1969, 1972, 1987, 2000, 2007, and the more moderate but still steep losses in 1998, 2010, and 2011.

2012-05-21 A Worthy Scapegoat by Charles Lieberman of Advisors Capital Management

The $2 billion trading loss reported by J.P. Morgan Chase has unleashed a torrent of comments suggesting an even greater need to impose Dodd-Frank, that bank trading operations need to be reined in, that banks managers are badly overpaid and suffer from hubris that gets them into trouble, that our largest banks are too big to fail and too big to manage, and that regulators need to do a better job of keeping banks from taking too much risk with depositor money.

2012-05-21 Gilead Sciences Inc Strong Growth At An Unreasonably Low Price by Team of F.A.S.T. Graphs

Gilead Sciences Inc (GILD) is an innovative healthcare company with a strong record of historical earnings growth and expectations for above-average growth into the future. Nevertheless, Mr. Market seems unwilling to recognize the past and future earnings power of this niche pharmaceutical growth stock. Consequently, the company trades at a single digit PE ratio that we believe significantly undervalues both the companys past and future potential. Therefore, investors seeking high growth at a reasonable level of risk might want to look further into this undervalued growth opportunity.

2012-05-19 Dr. Frankensteins Europe by John Mauldin of Millennium Wave Advisors

We explore the options that the eurozone faces in order to stay together, and what it all means for some of the countries involved. While I have written for a very long time about the probability of Greece exiting the eurozone, the actuality is fraught with risk, not just for Europe but for the world economy. What happens in the next few months will impact us all for a very long time. Indeed, this is one of those years, as Lenin noted, when decades happen.

2012-05-18 Blue-Chip Dividend Growth Stocks Todays Strong Option For Retirement Portfolios - Part 1 by Chuck Carnevale of F.A.S.T. Graphs

There are many pundits and prognosticators that never weary of attempting to convince investors on how risky it is to invest in equities, even high-quality dividend blue-chip paying equities. Invariably, they will always point to volatility as the evidence supporting their thesis that stocks are too risky of an investment for retirees. I believe this is a great travesty that is prominently promogulated upon an unwary investing public. The inevitable interruptions in the business cycle have conditioned people into believing that stocks are riskier than they really are, at least in my opinion.

2012-05-17 Our Fixed Income Insights on Yield Traps by Team of American Century Investments

From a fixed income perspective, we explain why aggressive yield-enhancing strategiesresulting from this extended period of historically low U.S. interest rates and yieldscan threaten the potentially valuable long-term portfolio benefits from holding fixed income positions. In particular, chasing yieldand stumbling into yield trapscan derail the important volatility reduction and diversification benefits offered by carefully selected and well-managed fixed income holdings.

2012-05-17 Restoring Trust by Kendall J. Anderson of Anderson Griggs

Conflicts always exist between clients and managers. Requiring full disclosure is a step in the right direction towards minimizing these conflicts. Rules alone will not be enough to restore trust between you and those of us who considered themselves professional advisers. My suggestion is that all advisers live their life, both professional and personal under an older rule than the current body of laws. That rule is Do unto others as you would have them do unto you.

2012-05-16 A Taylor-ed View of Dividends by Team of Franklin Templeton

The baby boomer generation, people born in the U.S. from 1946 19601, numbers some 78 million and is now moving into retirement. Taylor challenges this group in particular to think differently about their investments given the current economic climate. We are currently in a low-growth, very low interest rate environment and I really dont think thats going to change too much anytime soon. Dividends and dividend yield in the equity market matter a lot more than they did before..."

2012-05-16 The Vision Thing II by Bill Smead of Smead Capital Management

In May of 2010 we wrote about how important it was for the companies which meet our eight criteria to have a strong vision and clear agenda for their business. We believe that every five to ten years those who manage money need to "cast a vision" of where they want to take investors and then backtrack from there to put a portfolio together to best take advantage of the vision cast. We believe there are three main roadblocks to the casting of a vision for the execution of a portfolio plan. In the absence of more attractive titles, we will call these roadblocks fog, bog and smog.

2012-05-16 Keep Your Portfolio Rolling Along With Canadian National Railway by Team of F.A.S.T. Graphs

We believe at its current quotation CNI offers dividend growth investors an above-average total return at below levels of risk. Although the company only offers a market average dividend rate, we would expect its dividend to grow commensurate with its above-average expected earnings growth. We consider this a high quality dividend growth stock that is ideally suited for the long-term buy and hold conservative investor. As always, we recommend you conduct your own thorough due diligence.

2012-05-16 Quarterly Review: 1st Quarter 2012 by Robert L. Worthington of Hatteras Funds

Overall economic conditions are slowly improving in certain developed markets like the U.S. This could result in decent and probably better than expected earnings results for Q1 2012, which of course are announced throughout the early-mid part of the coming quarter. Risks are still prevalent and meaningful in regards to the European debt crisis and may continue to mute economic activity for this part of the world. Finally, while evidence suggests that the major developing economies of China, India and Brazil are slowing, risk of hard landings in these countries is small.

2012-05-16 The Facebook IPO: A Note to Mark Zuckerberg; or, With Friends Like Morgan Stanley, Who Needs Enemi by Dan Ariely of Predictably Irrational

I just received this letter from a friend in the banking industry. Dear Mark, Theres been a lot of ballyhoo recently about your IPO and your choice of investment bankers. Indeed, a war was fought by the banks to win your deal of the decade. As reported in the press, the competition was so intense banks slashed their fees in order to win your business. Facebook is only paying a 1% commission for its IPO rather than the 3% typically charged by the banks. Congratulations, Mr. Zuckerberg! On the surface it appears your pals in investment banking have given you a quite a deal!Or have they?

2012-05-15 An Attack on Paul Krugman by Michael Edesess (Article)

A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.

2012-05-15 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)

Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more – and less productive – debt are weakening our economy and creating unstable conditions.

2012-05-15 Ponzi's Children by Michael Lewitt (Article)

Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.

2012-05-15 The Surprising Way to Deepen Client Relationships by Dan Richards (Article)

Among the countless ways advisors have attempted to increase client loyalty, I've found a simple approach that deepens relationships.

2012-05-15 McDonald's Back In Value, Above Average Growth And Yield by Team of F.A.S.T. Graphs

McDonald's represents an excellent choice for the prudent dividend growth investor seeking both capital appreciation, and above-average current yield and the opportunity to grow both in the future. With its recent pull-back, McDonald's is priced at the upper end of our valuation corridor. Therefore, although the company is not cheap, we do consider it a sound long-term investment at these levels. Furthermore, we would suggest that if the stock continued to drop from these levels, the prudent investor could use the lower price as an opportunity to average down their cost basis.

2012-05-15 The world is not ending. Nor is it by Christian Thwaites of Sentinel Investments

Last week saw more dire talk on the end of the euro, the lowest ever GT10 auction, a 2.2% swing in SPX[1] and an overly dramatic reaction to hedging losses at JPM[2]. But these are not big enough to push aside the broad positives: i) Europe will cobble together some compromise...there's already broad agreement that pure austerity needs dilution and the Bundesbank even made soothing noises on inflation ii) US economic data was broadly helpful iii) market metrics remain solid and iv) the federal government is in budget surplus. Yes, no lies. Read on.

2012-05-15 Cummins Inc: Gear Up Your Dividend Portfolio For Strong Growth With A Dividend Kicker by Team of F.A.S.T. Graphs

The recent pull-back in Cummins' stock price has created an excellent opportunity for prudent investors seeking growth and income an opportunity to achieve above-average long-term results. The company has little debt on their balance sheet, the potential for strong growth and a recent history of increasing their dividend consistent with their earnings growth. A quick glance at their historical earnings and price correlated graph show that anytime the company could be purchased at a PE ratio below 14, like it is today, represents an excellent long-term buying opportunity.

2012-05-15 Earnings Seasons Recap: Is Corporate Strength Fading? by Chris Maxey and Ryan Davis of Fortigent

Strength in the corporate sector since the recession ended has been well documented. In the face of general economic malaise, record profits have been achieved through aggressive cost-cutting and low financing costs. This phenomenon has been one of the major pillars propping up the markets (with the other being central bank policy). Now with Q1 earnings season all but over, it is not unreasonable to question whether that corporate strength is fading. Initial impressions of first quarter earnings season were very favorable after the first big wave of earnings releases.

2012-05-15 Policy Confusions & Inflection Points by Mohamed A. El-Erian of PIMCO

During this important annual event, PIMCO colleagues from around the world debate the major trends that will play out over the next three to five years, focusing not on what should happen, but what is likely to happen. Based on the 2012 Secular Forum discussions, we expect three themes to play out: continued policy and political confusion, overly incremental public and private sector responses and, therefore, greater potential for inflection points. In terms of regions, the status quo is no longer an option for Europe.

2012-05-14 Time to Face Reality by Charles Lieberman of Advisors Capital Management

European markets remain in turmoil, even as these governments prefer to keep their heads buried in the sand. Sooner or later, reality intrudes. Greece and Spain are in the vanguard of being forced out of their fantasy world and a second default, following closely on the first, now appears likely. Greece is small enough so its problems will impinge little on markets, if Spain can handle its bank issues sensibly. Europe's attention will soon shift towards protecting Spain.

2012-05-14 Adaptive Asset Allocation: A True Revolution in Portfolio Management by Adam Butler and Mike Philbrick of Butler, Philbrick, Gordillo & Associates

Modern Portfolio Theory has been derided by practitioners, academics, and the media over the past ten years because the dominant application of the theory, Strategic Asset Allocation, has delivered poor performance and high volatility since the millennial technology crash. Strategic Asset Allocation probably deserves the negative press it receives, but the mathematical identity described by Markowitz in his 1967 paper is axiomatic in the same way Pythagoras' equations describe the properties of right triangles, or Schrodinger's equations describe the positional probabilities of electrons.

2012-05-12 Waving the White Flag by John Mauldin of Millennium Wave Advisors

Europe has embarked on a program that will require multiple trillions of euros of freshly minted money in order to maintain the eurozone. But the alternative, European leaders agree, is even worse. Today we will look at the recent German shift in policy, why it was so predictable, and what it means. This is a Ponzi scheme that makes Madoff look like a small-time street hustler.

2012-05-11 Spring Quarterly Commentary by John G. Prichard of Knightsbridge Asset Management

U.S. GDP rose at a disappointing 2.2% annual rate during the first quarter of 2012; so far this recovery has been too weak to reduce relative government debt levels through growth. A step toward austerity is next years fiscal cliff which features automatic spending cuts and tax increases. We have been told one-third of the entire tax code is expiring at the end of this year, with payroll, income, capital gain and dividend tax burdens all set to increase. Simultaneously, automatic cuts to defense and other discretionary areas of the Federal budget are set to take effect.

2012-05-11 ECRI Update: Reaffirming the Recession Call ... Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in todays public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below). The big news this week, however, is not the weekly data update but ECRI's latest reaffirmation of its recession call in a Bloomberg interview with ECRIs Lakshman Achuthan earlier this week. Ive embedded a link to the nine-minute video on the Bloomberg website.

2012-05-11 Here We Go Again....or Not? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.

2012-05-10 Diversification 301: Tailored Solutions for Your Portfolio by Team of American Century Investments

We continue our discussion of diversification and its application to investor portfolios. We explain how there is no single universal diversified portfolio suited to all investors and occasions. Instead, diversification is a highly customizable framework that can and should be uniquely tailored to suit each individual investors goals and risk tolerances. Earlier articles in the series discussed the basic benefits and rationale for diversification and a discussion of alternative investments that can be used to diversify a traditional balanced portfolio of stocks and bonds.

2012-05-10 Speed Up Your Portfolio Performance With Comcast by Team of F.A.S.T. Graphs

Comcast has been a very consistent growth stock since 2004. However, as we previously stated, overvaluation kept shareholders from earning the returns that Comcasts excellent operating achievements deserved. However, valuation became aligned with earnings in late 2008, and the company instituted a dividend in calendar year 2008. Today the combination of above-average past and expected future growth with an above market and potentially growing yield, position the company for attractive future returns.

2012-05-10 I Question, Therefore I Am by Francois Sicart of Tocqueville Asset Management

Historically, the attraction of value investing has been that, by purchasing stocks whose price does not incorporate a large hope premium over intrinsic value, the downside would be muted. Conversely, the potential for the premium to increase should investors perceptions change would promise worthwhile returns even in the absence of spectacular growth by the company. These assumptions suffered a severe setback in 2007-2009, when practically all stocks were caught into the same panic-driven downward spiral. But it does not entirely negate their validity.

2012-05-09 Going Global Can Pay Dividends by Brad Kinkelaar, Cliff Remily and Raji Manasseh of PIMCO

In todays low yield environment, many investors now include dividend-oriented equities in their portfolios in an effort to reach their income goals. U.S. investors with home market bias risk severely limiting their income potential because in the U.S., dividend payout ratios are on the decline, taxes are potentially on the rise, and valuations in sectors that typically offer attractive dividends are near historical highs. In our view, global equities can provide more attractive dividend income opportunities and offer potential for additional benefits, including diversification

2012-05-08 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)

Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.

2012-05-08 Three Qualities that Define Top Performers by Dan Richards (Article)

Regardless of market conditions or the business environment, some advisors inevitably expand their business at the expense of their peers. A new research report identified three common traits among those who were able to show sustained growth in their practices.

2012-05-08 Why the Best Conductors Sent Us Home Early by Justin Locke (Article)

As a professional speaker, I focus on leadership and management. But I have a major handicap to overcome: the conventional wisdom that a core goal of leadership is to motivate greater effort.

2012-05-08 Baidu Inc: High Priced or Valued to Buy? by Team of F.A.S.T. Graphs

Baidu Inc is most commonly referred to as the Chinese version of Google. On the one hand, the stock is cheap relative to expected growth. While on the other hand, its current valuation is more than twice the average company. Therefore, we believe that although the company appears attractively valued based on earnings growth, it should be recognized that it is only appropriate for the aggressive investor seeking maximum capital appreciation. Furthermore, there are additional risks that the discerning investor should consider before investing in Baidu Inc.

2012-05-08 Use Snail Mail to Place Your FedEx Order by Team of F.A.S.T. Graphs

After suffering from shrinking earnings during the great recession, FedEx (FDX) appears on track to once again deliver the goods profitably. However, the market seems to have already recognized the current opportunity and pushed valuation to the outer limits of fair value. Therefore, FedEx may be an investment that requires patience. Aggressive investors could take a position here, but more conservative investors may want to wait for a more attractive entry point.

2012-05-07 Economic Insights: Earnings GrowthIs It Enough? by Milton Ezrati of Lord Abbett

After two-plus years of exceeding expectations, earnings this year seem poised to reflect the plodding nature of this economic recovery. In 2010 and 2011, even as the real economy managed only a paltry 2.4% average annual rate of expansion, the earnings of S&P 500 companies soared, rising more than 47% in 2010 and almost 20% in 2011. This year, the slow fundamentals will surely assert themselves. There is nothing ominous in the pattern. It is, after all, well-established historically that earnings should come into line with slower-growing revenues in this, the third year of economic recovery.

2012-05-07 Q1 2012 Letter by Team of Grey Owl Capital Management

The overall equity markets strong first quarter rally was narrowly focused and, from our perspective, fragile. Cutting to the chase, we think both stocks and bonds are expensive. During the quarter, we used opportunities presented by Mr. Market to trim some of our lower quality positions and to add starter positions in a few high quality businesses. We also added to our short-term, high-yield fixed income holdings, sources of return that we expect to show less volatility but results equal to or better than the broad equity market indices.

2012-05-07 European Elections Complicate Outlook by Mohamed A. El-Erian of PIMCO

Markets will likely price in a larger risk premium following Sundays election outcomes on account of political uncertainty and the related range of specific risk factors, including greater concerns about creditworthiness and eurozone exit. This speaks, first and foremost, to the spreads of certain European sovereigns, with negative spillover effects on equities and other risk assets. Fortunately, there is a silver lining, though it will take some time. It comes in the form of a hope that the electorates message on Sunday will be interpreted by Europes leaders as a call for bold action.

2012-05-04 Southern Co: A Solid Dividend Choice Worth Waiting For by Team of F.A.S.T. Graphs

We believe that Southern Company represents an extremely high-quality option for the investors seeking a high level of current income with an opportunity to grow moderately. However, we believe the current valuation is a little extended. Although Southern Co's current stock price is currently within our corridor of value, it is at the high end. Therefore, we would be more comfortable in recommending Southern Company if the PE ratio were a couple of points lower. On the other hand, Southern Company is an extremely high-quality and stable utility that may be worth waiting for.

2012-05-04 Apple is a WantGlobal Resources are Needs by Frank Holmes of U.S. Global Investors

Investors seem to be overlooking the fact that Apples products are wants, not needs. Millions of consumers want an iPad and many want a computer, yet, every single person in the world needs global resources. We need companies to grow our food; we need oil, natural gas and coal to fuel our cities. And so do the other 7 billion people on the planet. To outperform the S&P 500 over the long term, we believe investors should overweight their portfolio to the global products and services that people need, not want.

2012-05-04 Mongolia's Treasure Chest by Taizo Ishida of Matthews Asia

There has been much hype recently over the treasure chest of natural resources in Mongolia. Dubbed the next Saudi Arabia of coal, Mongolia claims more coal than China, which produced nearly 4 billion tons last year. At the same time, however, there continue to be conflicting reports from the Mongolian government over who may be allowed to develop and ultimately own the rights to the country's precious resources. One key concern among global investors is natural resource nationalism, a term used to describe the tendency of governments to assert control over these resources.

2012-05-04 ECRI Weekly Leading Indicator: Third Consecutive Decline by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0 as reported in today's public release of the data through April 27. This is the third consecutive week-over-week decline since January 6th. However, the underlying WLI again rose fractionally from an adjusted 124.0 to 124.7.

2012-05-04 Watchful Waiting by Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman of PIMCO

Today, the Federal Reserve itself faces an unusually uncertain period because it lacks a complete understanding of the potential side effects of its unconventional policy actions; in particular the elongated timeline of its zero interest rate policy and its massive money printing. What matters in shaping market expectations about inflation and deflation are the credibility of fiscal policy, the prospect for real economic growth and the central banks commitment to step back from the punch bowl.

2012-05-03 How Big is Almost? by Andrew J. Redleaf, Blaise Morton, an Richard Vigilante of Whitebox Advisors

For decades the fondest wish of the finance professoriate has been to prove that money managers who believe they earn alpha are kidding themselves and their customers. The latest attempt, titled Active Portfolio Management and Positive Alphas: Fact or Fantasy? is the work of Cornells Robert A. Jarrow, a prestigious name in mathematical finance. Jarrow, based on some previous work with Philip Protter, sets out to prove that the source of all (or nearly all) alpha must be a true arbitrage. Since true arbitrage is vanishingly rare, he then argues alpha must be as well.

2012-05-03 Renewed Eurozone Concern as Liquidity Injections Dont Solve Solvency Woes by Thomas D. Higgins of Standish Mellon Asset Management

As investors recognize that the ECB's long-term refinancing operation is doing nothing to address the regions underlying solvency problems. Resolving those problems through monetary policy is complicated by the large disparities in economic growth and inflation across the eurozones economies, rendering both loosening and tightening inappropriate for certain parts of the region. As a result, Standish remains cautious about the European economic outlook and fears that renewed uncertainty over Europes fiscal stability could lead to another bout of global financial market volatility.

2012-05-03 A Troika of Problems by Team of BondWave Advisors

The troika of the International Monetary Fund (IMF), European Union (EU), and European Central Bank (ECB) has continued to prescribe austerity. But at the end of what is now a lengthy cycle of agreements and ever-increasing austerity measures, the debt still remains significant and much of the region has either been plunged into recession or is heading that way. We discuss these ongoing problems and provide additional insight on the US Treasury, Corporate and Municipal Bond Markets.

2012-05-01 A Proven Route to Business Breakthroughs by Dan Richards (Article)

Having ambitious goals is one thing - translating them into reality is another. And that's where most advisors stumble. Two recent articles provide insight on how to achieve progress towards lofty goals.

2012-05-01 Tuesday Never Comes by Bill Gross of PIMCO

The current acceleration of credit via central bank policies will likely produce a positive rate of real economic growth this year for most developed countries, but the structural distortions brought about by zero bound interest rates will limit that growth and induce serious risks in future years. Gradually higher rates of inflation should be the result of QE policies and zero bound yields. Focus on securities with shorter durations bonds with maturities in the 5-year range and stocks paying dividends that offer 3%4% yields. Real assets/commodities should occupy an increasing percentage.

2012-05-01 Bernanke: Be Humble! by Axel Merk of Merk Funds

To Bernanke, being humble means to keep strong monetary policy support to avoid deflation. This humbleness creates a lot of debt whether that be out of thin air on the Feds balance sheet, or across the economy as consumers, businesses and the government alike are enticed to borrow evermore money. What we consider monetary largess, as well as fiscal unsustainability, may ultimately lead to deterioration of the US purchasing power. We have encouraged investors to take a diversified approach to cash. A basket of hard currencies or gold might serve to mitigate the risks of a declining dollar.

2012-05-01 New Cure All! by Dan Ariely of Predictably Irrational

Im excited to announce an innovative new therapy that will be released in tandem with my new book The Honest Truth About Dishonesty. I developed it with a team of medical doctors and behavioral economists to treat a broad spectrum of disorders. Cureall (Fixeverything) works to combat the tendency toward self-deception and dishonesty, which, like bacteria in the human body, affect everyone (some more than others).

2012-04-30 ProVise Bullets by Team of ProVise Management Group

What part of leadership are our elected officials in Washington not getting? Last month the Supreme Court heard the case regarding the Affordable Care Act and a ruling is likely to happen sometime in late June. Regardless of how the Supreme Court rules, healthcare reform is a topic which is here to stay. First of all it is estimated that by 2020 healthcare will account for one in every nine jobs in the U.S., adding 4.2 million jobs during this decade. As the Baby Boomers move into retirement there will be a need for an ever-increasing number of physicians, nurses, home health aides, etc.

2012-04-30 Here We Go Again by Brian S. Wesbury and Robert Stein of First Trust Advisors

We are not saying the negative data is meaningless. Its not. But some of the reaction is, once again, overdone. Debating the worry-warts has become a full-time job and we cant prove them wrong until the future becomes the present. So, lets look back to last year when we said in a few months we will be looking back at recent reports as just statistical noise. Sounded good then, so lets not mess with success. The more things change, the more they stay the same.

2012-04-27 High Yield and Bank Loan Outlook April 2012 Sector Report by Team of Guggenheim Partners

The leveraged credit market began the year strong with yields across the credit spectrum approaching historical lows. Investors should realize that it is no longer early in the credit market rally. We are coming into the seventh inning stretch and it is getting tougher to find opportunities. It is also important to watch for signs of overheating and to remain focused on fundamental credit work and security selection. As we look ahead, we continue to see room for further price appreciation as investor demand should remain robust, while new issue supply wanes from its record first quarter pace.

2012-04-27 Yes, They Do: Low Interest Rates Do Make Stocks Cheap by Chuck Carnevale of F.A.S.T. Graphs

Im inspired to write this article because I am so frustrated by the plethora of all the so-called expert market prognosticators that continuously bombard the public with negative forecasts. I consider this to be both erroneous and irrational. When the markets are doing well, we are immediately inundated with articles talking about how the market has surely topped and a big drop is imminent. The real truth of the matter is that nobody really knows. Not the Fed, nor any of the so-called experts. Pessimism is pervasive, but optimism is, in fact, more accurate and rational in my opinion.

2012-04-27 Happy (Third) Anniversary: Now What? by Jon Quigley of Advanced Investment Partners

During the trading day on March 6th, 2009, the S&P 500 Index hit its intraday bottom of 666.79. In the ensuing three years the Index has advanced over 100%. Along the way, weve witnessed the collapse of some of the older and more hallowed names in the financial industry buh-bye Lehman Brothers, so long Merrill), endured the most severe recession in at least 25 years, suffered through incredible spates of market volatility, and gathered a few gray hairs (or lost some hair) along the way.

2012-04-27 ECRI Weekly Leading Indicator: The Growth Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.6 as reported in today's public release of the data through April 20. This is the second consecutive week-over-week decline since January 6th. However, the underlying WLI rose fractionally from an adjusted 123.8 to 124.1.

2012-04-27 Bond Market Reflections Spring 2012 by Bruce A. Weininger of Kovitz Investment Group

Faced with the prospect of loaning money out for eight years knowing that our best case return over that time was 2%, we decided that, for a while anyway, wed rather hold onto to cash in hopes that pricing will become more rational over the coming weeks or months.

2012-04-26 Shareholder Letter and Commentaries by Robert Horrocks of Matthews Asia

How the markets behave in the near future, including the size and duration of any pullback, is unknowable. However, we remain confident in the long-term growth and prosperity of Asia. Therefore, our approach, in the midst of what are admittedly absorbing macro discussions, has been to focus on finding good businesses, rather than try to speculate on events. As much as we all like to discuss the big issues of the day, the real excitement and challenge comes in discovering businesses whose future prospects are underappreciated by the average view of the investment community.

2012-04-26 The Bernanke-Krugman Smackdown by Mike "Mish" Shedlock of Sitka Pacific Capital Management

Bernanke is trying like a madman to get banks to increase lending but Bernanke and Krugman both do not understand economic reality. Banks cannot lend because they are still capital impaired, hiding losses yet to come, and holding assets that are marked-to-fantasy instead of marked-to-market. Consumers are busted and holding interest rates at 0% when prices of food and gasoline are soaring exacerbates the problem. There are few credit-worthy businesses that want to borrow in this environment. The businesses that do want to borrow are not credit-worthy and banks would be foolish to lend to them.

2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)

Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.

2012-04-24 SteelPath MLP Alpha Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds

Though the MLP sector provided positive returns this quarter, the sectors performance lagged that of the broader markets. The MLP sector, as measured by the Alerian MLP Index, produced a total return of 1.97% for the quarter versus the 12.59% total return of the S&P 500 Index. The broader market rally appeared to have been sparked by some encouraging domestic economic data and seeming improvement in the Eurozone. Given that the industries represented by the S&P 500 Index often have greater exposure to general economic trends than MLPs, this broader market outperformance is not surprising.

2012-04-24 SteelPath MLP Income Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds

Looking forward, we expect to see varied performance across MLP sub-sectors. We believe headwinds remain for propane, natural gas storage and coal, and growth opportunities are likely limited for interstate natural gas pipelines. However, growth opportunities related to growing domestic natural gas liquids and crude oil production are varied and substantial in our opinion. We continue to expect robust acquisition activity within the sector as traditional owners of midstream assets continue to rationalize their asset portfolios.

2012-04-24 SteelPath MLP Select 40 Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds

Sector performance for the quarter was characterized by a continued appreciation for partnerships exposed to oil and NGL rich shale plays and the corresponding growth opportunities. Additionally, both sectors and names that were neglected last year received attention during the quarter while investors took profits in investments that had outperformed over the past several months.

2012-04-24 In the Long Run with Dividend-Paying Stocks by Meggan Walsh and Clint Harris of Invesco

A healthy level of skepticism and the conviction to go against consensus when it is supported by sound fundamental research is a strong combination for successful investing. We have little exposure to energy, an area investors favor. Financials is one of our largest weightings, an area thats out of favor. We prefer dividend sustainability and growth while investors are currently focused on high yielders alone. Its important to remember that history has shown that dividend-paying stocks are part of an enduring, fundamental approach to value investing and not a thematic allocation.

2012-04-24 Is 2012 the Year for Hedge Funds? by Chris Maxey of Fortigent

Prior to the financial crisis, hedge funds were largely viewed as alpha generating, high return seeking, portfolio diversifiers. In 2008, that model came under attack from multiple angles fraud, illiquidity, and poor returns being the primary culprit. Ever since that time, the value proposition of hedge funds and alternative investments remains in question, causing some to wonder if this is a make or break year for the space. There is reason to think the environment for hedge funds and active managers is improving.

2012-04-24 Following the (Dividend) Yield Signs by Team of Franklin Templeton

Flush with cash on their balance sheets, many U.S. companies have increasingly been rewarding shareholders in the form of dividends over the past year. Thats good news to the many investors who have sought out dividend-paying stocks for potential relief in todays yield-scarce environment. Alan Muschott, is a vocal fan of not just dividends, but growing dividends. In a recent interview he shared his views on the dividend, including technophile-favorite Apples announcement that it plans to declare a dividend for the first time in more than two decades. Read on to see what he had to say.

2012-04-24 Finance, Meet Pharma by Dan Ariely of Predictably Irrational

I think we need an FDA-like entity and process for financial products, because if we dont have a counterfactual, we cant compare and measure the value of their products. We could call it the FPA, for Financial Product Administration. One example of a financial tool that the FPA could test is high frequency trading. Companies are going all out to profit by being the fastest to buy and sell stocks, owning them for fractions of a second; they even go so far as to buy buildings closer to the stock market to make trading faster.

2012-04-23 Global Policy Remains a Critical Catalyst by Bob Doll of BlackRock Investment Management

The economic backdrop continues to be mixed, but the overall trend continues to be one in which the US economy appears to be growing slowly. One interesting pattern that has emerged is that the US household sector has been picking up at the same time that the industrial side has been weakening. While an improving household sector is critical to ensuring long-term growth, there are some caveats to this trend. First, households have been dipping into their savings to boost spending, which is clearly not sustainable. Additionally, some of the growth may have been "borrowed" from summer quarter.

2012-04-20 Maybe Diversification Is Not All It's Cracked Up To Be by Chuck Carnevale of F.A.S.T. Graphs

As I began digging into the many faces of diversification, I quickly learned that it is a much more complex concept than at first meets the eye. I feel I learned that there is no one-size-fits-all or even a set of universally applicable rules or principles. To a great extent, diversification turns out to be a very personal issue. How much or how little depends more on your goals and objectives, the knowledge and experience you possess, the time you can allocate to your investment portfolio, and of course, your tolerance for risk. Some of us need a great deal of diversification.

2012-04-20 The Good Life Comes at a Cost by Bill Mann of Motley Fool

If we see so little vitality from Europe, why do we invest there? First of all, the fact that Europe has been in crisis is obvious, which means that investors everywhere have been looking for other places to put their money. When this happens, investors tend not to differentiate between the great and the not-great. And second, even if Europe were toast (which it isn't), that doesn't mean that every company in Europe is equally hosed. Many of the worlds great brands are European, and many of them generate much, if not most of their revenues in other markets around the world.

2012-04-20 Small Cap Outlook 1Q12 by 1492 Investment Team of 1492 Capital Management

While weve seen the markets advance nicely, we think the market could gain more than 25% this year as the U.S. economy continues to move ahead and the rest of the world is in stimulus mode. Most importantly, there are still plenty of bears calling for recession, despite an ongoing barrage of better economic statistics. No doubt the remainder of the year will give the stock market plenty to ponder like the U.S. Presidential election, ongoing European debt crisis fallout and concerns about Chinas economic growth. Read on to understand why were so bullish on the U.S. stock market.

2012-04-20 ECRI Weekly Leading Indicator: The Growth Index Slip by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.2 as reported in today's public release of the data through April 13. This is the first week-over-week decline since January 6th, over three months ago. The underlying WLI contracted more dramatically from an adjusted 125.9 to 123.9 (see the fourth chart below). This is the largest decline, in percentage terms, since August 19th of last year.

2012-04-20 U.S. Real Estate Securities Review and Outlook, First Quarter 2012 by Team of Cohen & Steers

We have a very favorable view of specific office markets, including life sciences, technology and media, as well as New York offices broadly. We also continue to like prime retail and self storage owners, which are seeing very strong fundamentals. In contrast, we remain cautious toward health care properties and secondary retail. We have also reduced our allocation to apartment REITs on the margin following their strong run in 2011.

2012-04-19 Price and Waistline Stability Prove Elusive as Inflation Creeps Up by Scott Colyer of Advisors Asset Management

The long-time trends are firmly in support of consistent price inflation during the history of the US. Inflation is a natural inclination for people, businesses, politicians and central banks. Given the Feds ultra-easy monetary policy aimed at creating inflation, we will eventually see it. Higher inflation requires investors to rethink where they invest. Cash and fixed income do little to cope with inflation and actually can be losers if held at times of higher than normal inflation rates. We think investors should take advantage of current bargains in real estate and equity asset prices.

2012-04-18 Stock Picking in a World of Profit Margin Mean Reversion by Bill Smead of Smead Capital Management

We feel investors should avoid capital intensive companies which are tied to commodities or emerging markets. As interest rates rise and capital becomes dear, those who eat capital lose and those with strong balance sheets and who generate high and consistent free cash flow, should win. As Buffet, Grantham, Hutchinson and Stein pointed out, someone loses in the reversion to the mean of profit margins when compared to GDP. Lastly, dont be fooled by those who are bearish on the stock market because of their belief in profit margin reversion.

2012-04-18 Balancing Perception, Reality, Equities and Fixed Income by Team of Franklin Templeton

Never underestimate the power of perception to influence peoples fiscal behavior. Perception is such a significant influence, in fact, that economic tea-leaf readers have developed a myriad of surveys and indicators to monitor individuals perceptions of the investing environment because perceptions canand domove markets. When sentiment is negative, investors tend to shift out of assets they perceive as risky and into assets they perceive as safe. Ed Perks, portfolio manager of Franklin Balanced Fund and Franklin Income Fund, is well aware of the role perception plays in the markets.

2012-04-18 Quirky Tales and Waves of Change by Doug MacKay and Bill Hoover of Broadleaf Partners

While almost all commodities (ag, chemicals, and energy) have tended to move up and down together in price, oil has always beat to a different drummer, likely as a function of the ebb and flow of geopolitical concerns and the physical location of most known reserves. I would guess, however, if natural gas is in such abundance domestically, it could very well be the case around the globe. The prospect for $200 oil might be as remote as NASDAQ 5000.

2012-04-17 Rethinking Safe Withdrawal Rates: The Meaning of Failure by Wade Pfau (Article)

Merely knowing the probability that an investor's wealth will be depleted at some point is not enough to build a retirement strategy. That is the traditional measure of failure in safe withdrawal studies, and it's time to move beyond it.

2012-04-17 Muppet Capers by Michael Lewitt (Article)

Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.

2012-04-17 Letters to the Editor by Various (Article)

We have several letters from readers, including one in response to Lisa Keung's article on myths about women and investing and one in response to a recent commentary by Dan Ariely.

2012-04-17 Is China Serious about Currency Reform? by Milton Ezrati of Lord Abbett

Chinas central bank governor, Zhou Xiaochuan, made comments that drew less attention than they deserve. First, he suggested that market forces would play a bigger role in setting the value of Chinas currency, the yuan. He also mused that the yuan should rise further against the dollar and on foreign exchange markets generally. An announcement by the People's Bank of China relating to increased flexibility in the trading band of the currency would appear to confirm Zhou's intent. There is room for two responses to this new Chinese positioning, one cynical and the other much more positive.

2012-04-17 Question for the ECB: What Now? by Fred Copper of Columbia Management

The ECB tipped its hand last week in terms of which direction it is likely to go. Board member Benoit Coeure indicated the ECB could step in and buy Spanish bonds. It is unlikely to be a sustainable solution. It wouldnt be surprising to see renewed stresses emanating from the peripheral sovereign debt markets. There is a limit to how much the ECB is going to be able to do in this situation. Ultimately, the real burden is going to have to be borne by politicians through substantial fiscal adjustments.

2012-04-17 Earnings on a Hot Plate by Chris Maxey of Fortigent

While the economy has displayed fits and starts of entering a sustained recovery over the past several years, there has been no doubt about the ability of companies to reshape their balance sheets and refocus their businesses. In the midst of first quarter earnings season, there are some concerns that the corporate hot streak will come to an abrupt end, but the reduction in earnings expectations since late last year appears to be favoring another positive earnings season.

2012-04-17 Celebrating April 15th (17th) by Dan Ariely of Predictably Irrational

Our attention is directed toward ending the irritating procedure. So how can we fix this problem? The first step is to simplify and clarify the tax code to make the process less confusing. The process of figuring and filling out tax forms is so exasperating its hard not to direct that feeling toward someone or somethingand generally speaking, that something is the agency that seems responsible for your suffering, which in this case is the IRS. After all, its difficult to maintain a cheerfully civic-minded outlook, or even an even-keeled neutral outlook, in the face of such frustration.

2012-04-17 Quarterly Review and Outlook First Quarter 2012 by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

From both economic theory and historical experience the answer is clear; austerity is the solution to too much debt. McKinsey Global Institute examined 32 cases where extreme leverage caused financial crises since the 1930s. In 24, or 75% of these cases austerity was required, which McKinsey defines as a multi-year and sustained increase in the saving rate. Public and/or private borrowers took on too much debt because they lived beyond their means, or they consumed more than they earned. Thus, to reverse the problem spending had to be held below income, increasing the saving rate.

2012-04-14 The War for Spain by John Mauldin of Millennium Wave Advisors

The inflection point that I thought the ECB had pushed down the road for at least a year with their recent 1 trillion LTRO is now rushing toward us much faster than Draghi had in mind when he launched his massive funding operation. So, we must pay attention to what Spain has done this week which, to my surprise, seems to have escaped the attention of the major media. It may be considered a tipping point when the crisis is analyzed by some future historian. And then we'll get back to some additional details on the US employment situation, starting with a few rather shocking data points.

2012-04-13 Dutch Disease Lite in Australias Economy by Robert Mead of PIMCO

Australia is probably more likely to feel the effects of an extended structural change in the economy as resources continue to be reallocated, rather than the effects of a full-fledged, but transitory, case of Dutch disease. China is Australias largest trading partner, and Chinas historical focus on infrastructure building has amplified the divergence in Australias two-speed economy. We believe Australias strong initial conditions should help ensure that Commonwealth Government Bonds remain one of the worlds cleanest dirty shirts for risk-averse investors.

2012-04-13 ECRI Weekly Leading Indicator: The Growth Index Continues to Improve by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.4 as reported in today's public release of the data through April 6. This is the thirteenth consecutive week of improving data for the Growth Index and the highest reading since August 5th of last year. However, underlying WLI contracted slightly, decreasing from an adjusted 126.3 to 125.7

2012-04-12 Newtonian Profits by Neel Kashkari of PIMCO

Today many equity investors are asking whether corporate profit margins can stay strong. Stock prices today are anchored on strong profits, hence investors intense focus on the sustainability of those profits. If they fall, stock prices are likely to follow. No doubt individual companies and sectors will face margin pressure. But for the equity market as a whole, our central scenario is for corporate margins to remain strong in the near future. We are buying individual companies we like based on our analysis of their own fundamentals in the context of the economic environment they are in.

2012-04-12 Benjamin Graham's The Intelligent Investor: Chapter Eight by Kendall J. Anderson of Anderson Griggs

There are only five pages dedicated to bonds in Chapter Eight. But, these five pages had such major influence on my early years as an advisor. And once again, it is those pages that are sending me a reminder as to why I should not buy bonds today. Given the current interest rates, I would strongly suggest any and all bond investors read these pages. I can assure you that Mr. Buffett has.

2012-04-12 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles

Central banks around the world sent a rush of liquidity into the global financial system, and this coordinated effort helped stem the risk of a major European credit crunch that was brewing at the close of 2011. In our view, the liquidity provision has improved the macroeconomic outlook and buys some much needed time for sovereigns, banks and other indebted private sector agents to try to get their balance sheets in order. Risk assets have generally responded very well to easy money policies over the last two quarters, while negative real interest rates have piqued the global thirst for yield.

2012-04-11 Cullen/Frost Bankers Inc.: A Financial Institution Investors Can Bank On by Team of F.A.S.T. Graphs

We believe Cullen/Frost Bankers Inc. represents an excellent opportunity for investors seeking a well-managed financial with an above-average dividend yield and excellent track record based on conservative and prudent business practices. The fact that this financial has strung together 18 years of dividend increases through the financial services industrys most difficult times is a testament to the quality and management of this banking institution. Therefore, investors seeking an attractive and growing dividend yield might want to consider a position in Cullen/Frost Bankers Inc.

2012-04-11 Carlisle Companies Inc.: Accelerated Earnings Potential and a Growing Dividend by Team of F.A.S.T. Graphs

Carlisle Companies Inc. appears to be poised for accelerated earnings and dividend growth. Even though this company offers a below-market current yield, it is a Dividend Champion with 25 years of raising their dividend. On the other hand, the accelerated expected earnings growth should lead to a rapidly increasing future growth yield that could reward shareholders that are more concerned with future income than current. Investors seeking above-average capital appreciation, coupled with a dividend that could grow at above market rates might want to look deeper into Carlisle Companies Inc.

2012-04-11 Reversing Europes Renationalization by George Soros of Project Syndicate

At the onset of the euro crisis, a eurozone breakup was inconceivable: assets and liabilities were so intermingled that a breakup would have led to an uncontrollable meltdown. But, as the crisis has progressed, the eurozone financial system has been progressively reoriented along national lines.

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.

2012-04-10 Advisor Networking for Fun and Profit by Wendy J. Cook (Article)

Over the years, I've seen what works well and what doesn't for advisors. I've noticed that even the best-intentioned, highest-minded advisor usually struggles if he or she operates in a vacuum.

2012-04-10 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors

It was a challenging week for gold investors. Although the yellow metal has been on a spectacular 11-year bull run, some think golds heyday is over. This March, there seemed to be one main driver eight thousand miles away negatively affecting gold prices. I often say that government policy is a precursor to change, and fiscal policy strongly affected the Love Trade in India last month. To trim its current account deficit, Indias finance minister proposed doubling the customs tax on the precious metal. As a result, gold imports into the worlds largest gold market fell 55 percent.

2012-04-10 Which Stocks Win on Main Streets Comeback? by Bill Smead of Smead Capital Management

We are very excited about the next three to five years because we believe it is likely that Main Street will start to compete with Wall Street for capital and economic growth will accelerate. Unemployment rates would fall in that scenario and pent-up demand for goods and services could come out of the woodwork among average American households. What we mean by saying this is that capital will begin being demanded for business activities. As capital gets demanded for business activities ranging from housing to business expansion, the cost of capital will rise and bond prices would fall.

2012-04-06 If You Think All Utility Stocks Are The Same - Think Again by Chuck Carnevale of F.A.S.T. Graphs

Utility stocks, especially regulated utility stocks share certain characteristics that differentiate them from the typical dividend growth stock. On the plus side, utilities are thought of as predictable stocks with low volatility characteristics. Utility stocks also tend to provide a higher current yield than many dividend growth stocks. On the other hand, all of this consistency comes at a sacrifice of growth. Since the typical utility has a significant portion of their businesses regulated, their ability to grow earnings and dividends is restricted.

2012-04-06 ECRI Weekly Leading Indicator Growth Is Now Positive by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.0 as reported in today's public release of the data through March 30. This is the twelfth consecutive week of improving data for the Growth Index and the first postive reading since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.8 to 126.5 (see the fourth chart below).

2012-04-05 Our National Debt Is Scarier Than You Think by Gary D. Halbert of Halbert Wealth Management

The US national debt stands at just over $15.6 trillion as compared to the $15.1 trillion gross domestic product in 2011. This means that our national debt is now 103.3% of GDP, a feat which has not happened in the Post-WWII era. To put $15.6 trillion into perspective, this means that every man, woman and child in America owes just over $50,000 toward the national debt. If we use an estimated budget deficit of $1.1 trillion for 2012, the national debt will have grown by just over $5 trillion in the last four years.

2012-04-05 CACI - Growth at a Ridiculously Low Price by Chuck Carnevale of F.A.S.T. Graphs

We believe that CACI it is extremely high-quality Defense Company with a niche that is currently being unfairly discounted by Mr. Market. The company possesses a predictable and consistent opportunity for continued double-digit earnings growth that is significantly in excess of the average company. Nevertheless, it can currently be purchased at a significant discount to the average company. This company pays no dividends; it is purely an opportunity for growth that can currently be purchased at a significant discount to its True Worth.

2012-04-05 Calm After the Storm by Richard Michaud of New Frontier Advisors

The Fed has announced that it stands ready to promote economic growth with all the tools at its disposal. The Fed policy of low interest rates and cheap credit may still be needed to help the job market heal for some time to come. However, the inevitability of a rise in interest rates at a foreseeable point may encourage investors to avoid fixed income securities. The financial reality is that markets clear and prices depend on buyers as well as sellers. Time horizons and global forces are always considerations. The importance of diversification is always prudent for long-term investors.

2012-04-04 What Shall We Do with All Our New Natural Gas? by Team of American Century Investments

Youre probably aware of the revolution taking place in natural gas technology and supply. Horizontal drilling along with hydraulic fracturing has created the ability to capture huge quantities of natural gas trapped within large shale formations across the U.S. And so the United States is faced with an energy policy challenge and question not related to dealing with scarcity but instead what to do with this sudden windfall of new domestic energy. How we address this question will have important economic consequences for our various industries, employment and our economy overall.

2012-04-04 What Goldmines and Landmines Lie Ahead for Investors in Burma? by Patricia Higase of Link Road Capital Management

The events of the last few months in Burma, in particular the countrys decision to float its currency and allow foreign press to observe elections were unprecedented and clearly a divergence from the past. It appears the difference in this election in Burma to previous times is that parties involved are more economically driven. Aung San Su Kyis decision to move ahead for the people despite her dissatisfaction with the way the elections were conducted was another signal of a more practical approach to moving the country forward.

2012-04-04 Drilling Into Fuel Prices by Team of Franklin Templeton

Gasoline, deodorant, dishwashing, liquid, eye glasses, crayons.What does this list of seemingly random items have in common? They are all made from refined crude oil.1 So even if you dont feel pain at the gas pump, you probably rely on more products made with or from crude oil than youd think. And of course even non-oil based products are generally shipped via fuel-consuming transport vehicles, so youre bound to feel the pinch in the form of fuel surcharges or price hikes sooner or later.

2012-04-04 Time Heals All Wounds by Robert Stimpson of Oak Associates

The US stock market enjoyed a strong first quarter of 2012. Fueled by better economic data and a calming of fears over Europe, the stock market surged higher. For the first quarter, the S&P 500 rose 12.6%. Oak Associates accounts did much better, gaining on average more than 17%. The strongest performing sectors of the market were financials, technology, and consumer discretionary. These three groups are the most cyclical and their strong performance bodes well for a broader economic recovery through 2012.

2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)

Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.

2012-04-03 Gassed Up but No Place to Go by Geoff Considine, PhD (Article)

When a great investor points to a vastly underpriced asset, a natural first reaction is to devise the best strategy for buying it. Sometimes, however, the impediments to that strategy prove too great, something anyone will soon discover who listens to Jeremy Grantham's assertion that 'everyone who has a brain should be thinking of how to make money' long-term on natural gas.

2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)

Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.

2012-04-03 Christine Lagarde: Emerging Market Nations Will Get More Power in the IMF by Team of Knowledge @ Wharton

Christine Lagarde, managing director of the IMF, sees no alternative to the strict austerity policies being imposed on many peripheral European countries, says the double dip recessions in Italy and Ireland just announced come as no surprise, and notes that IMF reforms will shift 6% of current quotas to dynamic emerging and developing countries. Lagarde's comments came in an exclusive interview with Knowledge@Wharton and media partner ParisTech Review late last week, as BRIC countries demanded more voting power in return for the larger financial contributions being requested by the IMF.

2012-04-03 The Value of Sentiment Polls by Bill Smead of Smead Capital Management

In our opinion, those who are very bearish about the US stock market need a substantial price increase to trigger historically extreme newsletter writer sentiment. Those who are optimistic should prefer a temporary correction or sideways movement to reinforce fear on the part of the crowd. This would cause the bullish and bearish readings to gravitate to toward each other and remove the risk of having some temporary hell to pay for those of us who seek to practice long-duration common stock investing.

2012-04-02 Too Little to Lock In by John P. Hussman of Hussman Funds

At present, investors have no reasonable incentive at all to "lock in" the prospective returns implied by current prices of stocks or long-term bonds.

2012-03-30 ECRI Weekly Leading Indicator Is Poised for Growth by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0, the pivot point between growth and contraction, as reported in today's public release of the data through March 23rd. This is the eleventh consecutive week of improving data for the Growth Index and the highest level since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.4 to 125.9 (see the fourth chart below).

2012-03-28 Auctions Never Fail! by Lorenzo Pagani of PIMCO

The increase in volatility can reach a breaking point when dealers are no longer willing to absorb risk and the issuer loses market access, irrespective of whether an auction fails or not. Individual countries are working to regain credibility and address their debt-sustainability but what is needed is an explicit collective commitment towards fiscal union. Catalysts for uncertainty may only be a few weeks away with the elections in Greece, France and a referendum in Ireland looming. Foreign investors who preferred to remain on the sidelines during the rally may reappear as sellers.

2012-03-28 Revisiting the Liquidity Cycle with the Minsky Model by Thomas Fahey of Loomis Sayles

Once an extreme event occurs, standard models offer limited insight as to how the ensuing crisis could play out and how it should be managed, which is why policy responses can seem disjointed. The latest policy responses to the European crisis have been no exception. To understand and respond to a crisis like the one in Europe, perhaps we need to consider some new models that include the human factor. Economic historian Charles Kindleberger can offer some insight

2012-03-28 Challenges and Change in Brazil by Team of Franklin Templeton

Brazils economy is grappling with some interesting challenges right now, such as shifts in monetary policy to cope with a possible economic slowdown and preparing to host two major events on the international stagethe 2014 FIFA World Cup Brazil and the Olympics in 2016. Marco Freire, Franklin Templetons CIO, Brazil Fixed Income for the Local Asset Management team based in Sao Paulo, isnt sharing any locals-only secrets about either event, but hes happy to share his insights on how Brazil is approaching these challenges, and to clear up some common misconceptions about Brazils markets.

2012-03-27 The Top Three Myths about Women Investors by Lisa Kueng (Article)

Successful marketing requires an understanding of your target market. Too often, however, advisors are misled by outdated industry ideas and strategies that have shifted over time. Advisors who target women investors should avoid myth-based errors that others have made.

2012-03-27 Success: The Enemy of Creativity by Justin Locke (Article)

Creativity and imagination are universal human traits, yet it's a common idea that certain countries are more creative than others. Can this notion have any basis in fact?

2012-03-27 Caviar for the General by Jeffrey Bronchick of Cove Street Capital

The stock market as measured by the S&P 500 is up almost 30% over the last 6 months, and has doubled from the March 2009 lows and yet most investors remain underinvested. Despite this temporary risk aversion, we remain convinced that stocks remain a unique species: the higher the price and less compelling the value, the more they seem to be desired by investors. In addition to the number of reasonably valued assets that can be found in financial markets, this represents an anecdotally strong underpinning for a reasonable intermediate future in our opinion.

2012-03-26 A False Sense of Security by John P. Hussman of Hussman Funds

As we examine the present evidence relating to both the financial markets and the global economy, the aspect that strikes us most is the extent to which Wall Street continues to emphasize superficially positive data in preference for deeper analysis, to extrapolate short-term distortions as if they were long-term trends, and to misconstrue freshly printed wallpaper and thin supporting ice as if they were solid walls and floors.

2012-03-26 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Hard data hasnt been collected, but its a safe bet that we waste more food and energy resources than we think. A green boom is a common dialogue amongst some communities but, not universal. In fact, green technology is often a luxury that only wealthy nations can talk about. And yet with so much money being wasted, there are no permanent solutions for spreading the bounty. Alternative energy and agricultural science are in their gestational periods, historically, and far from being the immediate solution to environment mis-management.

2012-03-23 Preferred Securities - February 2012 Review and Outlook by Team of Cohen & Steers

We are encouraged by the trajectory of U.S. economic data and credit trends, as well as positive developments in Europe that have somewhat brightened the outlook for risk assets. However, we are closely monitoring various macro risks that could weigh on the global economic recovery, including a recession in Europe, high oil prices and slowing growth in China. Our portfolio remains more heavily weighted towards domestic issuers and is somewhat conservative relative to credit. That said, we continue to add to certain European issues and other higher-beta securities.

2012-03-23 ECRI Indicators Improve, But Beware the ''Yo-Yo Years'' by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -0.4 in today's public release of the data through March 16th. This is the tenth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 12th of last year. The underlying WLI also improved, increasing from an adjusted 125.0 to 125.7 (see the fourth chart below).

2012-03-22 Dont Wait Too Long to Inflation-Proof Your Portfolio by Kevin D. Mahn of Hennion & Walsh

Most media outlets, in addition to the Fed, focus on core inflation readings. We think that this could be very misleading because mainstream America does not have the luxury of excluding food and energy from their everyday lives. Hence, if food and energy prices are rising (and not being picked up by the core inflation readings), Americans are likely to have less disposable income, unless commensurate increases in wages occur to offset the price increases. Less disposable income generally leads to lower overall consumer sentiment/confidence which translates into lower consumer spending.

2012-03-22 Brazil Retail Sector Riding the Wave of Middle Class Growth by Team of Thomas White International

Even in the late 1990s, Brazil was just like any other emerging economy, characterized by extremes of wealth and abject poverty with no social class dividing the bridge between. A decade and more down the line, the effervescence in the middle cannot be missed. Yes, the great Brazilian middle class defined as those who earn between $690 and $2,970 a month has arrived and is here to stay. If Brazil has made a name in the global retail sector, it had better thank these late comers, empowered with good purchasing power and access to credit.

2012-03-21 Why Convertible Bonds Should Be Part of Your Asset Allocation by Gary D. Halbert of Halbert Wealth Management

Im going to let you hear from Greg Miller about convertible bonds. Not only will Greg tell you how they work, but also why they can be an important diversification technique in your portfolio even now when other types of bonds are falling out of favor. I believe that many of you will want to have convertible bonds in your portfolio before long. The interest rate increases weve seen over the last couple of weeks may be a sign that the long bull market in traditional bonds is rolling over to the downside. Convertible bonds offer opportunity even during periods of rising interest rates!

2012-03-20 The Wages of Denial by Michael Lewitt (Article)

Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.

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.

2012-03-20 International Equity Product Commentary February 2012 by Team of Thomas White International

The optimism in international equity markets remained unabated in February, as macroeconomic trends continued to allay concerns over a significant decline in global economic activity. At the same time, the worst fears about the risk of a disorderly default by any of the troubled European countries and their withdrawal from the common currency have also eased. Equity price gains during February were more even across regions and emerging markets outperformed the developed markets again, though by a smaller margin when compared to the previous month.

2012-03-20 An Actively Passive Debate by Chris Maxey of Fortigent

The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.

2012-03-20 Apple Does Not Need its Cash to Grow as Much as its Shareholders Need it to Spend by Chuck Carnevale of F.A.S.T. Graphs

The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.

2012-03-20 Transmission Channels by Neel Kashkari of PIMCO

We believe the European debt crisis will likely flare up again, and equity investors should consider positioning portfolios to be more resilient against such a shock. A disorderly Greek default, if it occurs, would likely shock the eurozone and the globe via at least four transmission channels: the European banking system, European sovereign debt markets, corporate financing markets and regional trade. The shock of a massive Greek default would likely swing investor sentiment strongly toward risk off, putting pressure on equity markets globally.

2012-03-19 The Search for Yield in a Low-Rate Environment by Team of Franklin Templeton

There are always opportunities to capture yieldif you are willing to shoulder the price of the associated risk. In their words: We look at the return profile for a company historically, and we project that out three to five years. A low-interest rate environment generally benefits heavy borrowers, whose cost of borrowing will be kept low. We believe investors tired of little return may move out on the risk spectrum in search of more potential return. Dividends can indicate a company cares about its shareholders. Dividends look like theyre here to stay.

2012-03-19 Western Medicine by Neel Kashkari of PIMCO

Liquidity is buying time for European countries, but their economies are growing too slowly to support their debt loads. Just as there is no reason to assume U.S. household debt levels will continue to climb, there is also no reason to assume companies that benefitted from that debt-fueled spending will grow at historical rates. Until we see sustainable, real economic growth in America, we believe equity investors should carefully scrutinize the assumptions underlying consumer discretionary stocks and consider global companies that are selling into higher growth markets.

2012-03-16 The Truth About Earnings and How They Drive Stock Values and Shareholder Returns by Chuck Carnevale of F.A.S.T. Graphs

I wanted to clearly establish the importance of a comprehensive fundamental analysis before an investment decision is made. However, determining fair value from the perspective of the right market price to pay to buy a stock is a function of applying the appropriate PE ratio to reported earnings, and the recognition that, long-term rates of return are going to be a function of the companys earnings. Finally, my objective was to provide, conclusive and undeniable evidence that this theory actually works under real-world conditions. Fair market value is clearly a function of earnings.

2012-03-16 ECRI Reaffirms Its Recession Call with New Analysis by Doug Short of Advisor Perspectives (dshort.com)

The WLI growth indicator of the ECRI came in at -1.4 in today's public release of the data through Mar. 9th. This is the 9th consecutive week of improvement data for the Growth Index and the highest level since Aug. 5th of last year. The underlying WLI also improved, increasing from an adjusted 124.6 to 125.1. The big news this week is the ECRI commentary: Why Our Recession Call Stands. The most interesting revelation in the commentary involved a shift to the year-over-year WLI change from ECRI's favored, and rather arcane, method of calculating the WLI growth series from the underlying WLI.

2012-03-15 Everyone Hates Stocks ...and That's Why You Shouldn't by Bill Mann of Motley Fool

I dont tend to put currency into market moves, particularly short-term ones. But it has to be said that the tenor of the news regarding economies worldwide has been unambiguously bad. Why in the world would stocks go up in the face of such misery? Havent people heard about whats going on in Greece? Of course they have -- its why so many rushed out of risk assets last October and November. But while the caterwauling has done its job in spooking people, the underlying facts belie the news cycle: the American economy is booming.

2012-03-14 Why U.S. Investors Should Look Beyond Dividend Yield by Patrick O'Shaughnessey of O'Shaughnessey Asset management

Many investors are fed up with yields on fixed income securities and are in search of higher yield. As a result, U.S. stocks with high yields have become very popular with individual and professional investorsbut we believe that investors are looking at the wrong kind of yield. Though dividend yield works very well internationally, investors in U.S. stocks should instead focus on shareholder yield, a factor we have long advocated that has provided considerably stronger returns for U.S. stocks for more than 80 years.

2012-03-13 Breakthrough Success Lies Outside your Comfort Zone by Dan Richards (Article)

Standout success is rare in every industry, including ours. That is the reality - by definition most companies are average performers. To achieve breakthrough results, you need to be willing to change your business model, as two top business strategists advocate.

2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)

Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.

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.

2012-03-13 Home Prices and Inflation, Part 1 by Mike "Mish" Shedlock of Sitka Pacific Capital Management

Various charts show home prices are now back to levels last seen in September-October 2002. I posted such a chart constructed from the LPS Home Price Index (HPI) in LPS Home Price Index Shows U.S. Home Prices Accelerated Decline.

2012-03-12 EuropeAll Talk, Little Action by Milton Ezrati of Lord Abbett

Europes heads of state have done a lot of summiting and deal- making of late. Greece has voted for still more austerity. But on balance, the results have, again, disappointed. Though Europes monetary authorities have staved off Greek default, the more significant help for Europes sovereign debt troubles has come from the European Central Bank (ECB), which, at last, has begun to provide markets much needed liquidity. Otherwise, Europes leaders, though they have managed something, seem incapable of thinking broadly enough even to begin grappling with the continents underlying problems.

2012-03-12 Unlocking Concentration Risk by Nick Reilly, Mark Bennett, and David Templeton of HORAN Capital Advisors

We contend the best time to seek portfolio protection is when its cheapest. This would be comparative to purchasing life insurance when premiums are least expensive. Similarly, one should evaluate stock concentration risk when markets are positive and sentiment is good. The intent of this report is to outline the challenges associated with concentrated holdings and to introduce potential solutions to help reduce the risks associated with such holdings.

2012-03-09 Trading Volume's Disappearing Act by Frank Holmes of U.S. Global Investors

What do investors in the stock market need? Trading volume. After daily trading volumes in the S&P 500 Index hit a high in July 2002, volume quickly declined before leveling off, bouncing between 20 and 30 billion shares on a daily basis for a few years. Since its January 2009 high, daily shares traded have quickly spiraled downward. Today, volume is at a 15-year low, with only 7 billion shares traded.

2012-03-09 Investors In Common Stocks Must Get Valuation Right; Heres How by Chuck Carnevale of F.A.S.T. Graphs

Investors should be careful and willing to always run the numbers out to their logical conclusions. But, it all starts with knowing what you are buying (investing in) in the first place. True investors, like Peter Lynch, and many of the other renowned investing greats such as Phil Fischer, Warren Buffett, etc., all invest as owners in businesses with a focus on the strength of the business behind the stocks they buy. Therefore, these investor greats are always buying the earnings power of the respective businesses they are investing in, relative to their goals and objectives.

2012-03-09 Earning Real Income With Real Estate by Team of Emerald Asset Advisors

The oldest mantra about investing in real estate holds that the key to success is location, location, location. While there is always the chance that real estate investments will produce capital gains (or losses), we believe a better reason to consider real estate investments is for income, income, income. That's especially true in today's ultra low rate environment. While the words "real estate" conjure images of the woeful state of the residential real estate market, the commercial real estate market is in much better fundamental shape.

2012-03-09 ECRI's Weekly Leading Index Improves (Slightly) Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -2.6 in today's public release of the data through March 9th. This is the eighth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, increasing from an adjusted 124.1 to 124.3 (see the third chart below). Here again is a recent media appearance by Lakshman Achuthan, the Co-founder of ECRI, defending ECRI's recession call on with CNNMoney.

2012-03-09 The Road to Hades Is Paved with Partisan Politics by Gregory Yencharis of Neuberger Berman

Over the last year, we have become more guarded on GARVEE bonds based on changing dynamics in the municipal market that have been driven largely by fiscal pressure and dysfunctional Washington politics. In this piece, we discuss why our views have changed and the assumptions we use in our proprietary stress test model that help the Neuberger Berman Municipal Research Team avoid potentially problematic bonds.

2012-03-08 Picking Stocks, Stock-by-Stock by Team of Franklin Templeton

Katrina Dudley, co-manager for Mutual European Fund, is a savvy stock shopper with both patience and resources. Here is a taste of her stock-picking approach as inspired by Mutual Series guiding principle: buy a dollars worth of assets at a discount. 1. Macro considerations are important, but they dont change our stock-by-stock selection process 2. Volatility is here to stay, but it can create opportunity 3. Were looking at the company-level impact of macro influences like eurozone austerity 4. Many European companies are readjusting their cost base, becoming more competitive.

2012-03-08 Of Tulips and Treasuries. Treasuries Securities Entering Bubble Zone. by Scott Colyer of Advisors Asset Management

U.S. Treasury securities could take their place alongside other bubble assets like tulip bulbs did in the 1630s. There are signs of a secular change afoot in the U.S. Treasury market as rates set historic lows. The U.S. Treasury market is indeed a crowded market as Euro-singed capital is being tucked behind the ultimate safety of the U.S. obligations. Add to that the Feds own record setting buying binge in these securities and you have an asset that may have well crossed the line of what its long-term value could possibly be.

2012-03-07 Winning the War in Europe by Scott Minerd of Guggenheim

Given my view on the global liquidity glut, it probably will come as no surprise that I remain bullish on U.S. investments, including equities, high yield bonds, bank loans and other risk assets, as well as art and collectibles. I believe the United States has entered a period of self-sustaining economic expansion, driven primarily by the aggressive monetary policy of the Fed, which is now being reinforced by the ECB. U.S. growth is necessary to reduce domestic unemployment and to provide support to the struggling economies in Europe and Asia.

2012-03-06 The Biggest Celebrity Estate Planning Disasters by Robert Huebscher (Article)

The lives of socialite Brooke Astor and the Grateful Dead's Jerry Garcia may have had little in common, but what happened after both of their deaths is unfortunately similar. A look at the disastrous probate wars that engulfed them – and other celebrities – carries important lessons for all of us.

2012-03-06 Why Invest? - Part 2 by Adam Jared Apt (Article)

Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.

2012-03-06 Defining Risk: Warren Buffetts Three Kinds of Investments by Bill Smead of Smead Capital Management

In his 2011 letter, Warren Buffett explained the purpose behind investing, the real definition of risk, and the three types of investments which congregate the marketplace. We believe Mr. Buffett struck at the core of the problem that most investors are having. They are defining risk primarily by what happens in the next twelve months, while the Oracle of Omaha is thinking in five to ten-year time frames, at a minimum. These short time frames are combined with eyes locked on the rearview mirror, inhibiting investors from participating in wealth creation as we look out into the future.

2012-03-05 Choosing the Right REIT Can Benefit Diversification by Team of American Century Investments

The quest for consistently high risk-adjusted return is an arduous, never-ending journey. This outline introduces the basics of Real Estate Investment Trusts (REITs). That REITs can serve as a useful portfolio diversifier can easily be made apparent. The next issue becomes which type of REIT? The emphasis of this write-up is on identifying the different types of REITs. Outfitted with this information, investors can make better REIT choices, aiding portfolio diversification now and into the future.

2012-03-05 Dipping a Toe Back Into the Market by Team of Franklin Templeton

After the rollercoaster that was 2011, trying to explain why now seems like a good time to venture back in still sounds a little crazy. But for those who are looking for some perspective, youve come to the right place. Read on for why Ed Jamieson, president/CIO of Franklin Equity Group, Peter Langerman, president/CEO of Mutual Series, Gary Motyl, president/CIO of Templeton Global Equity Group, and Mark Mobius, executive chairman of Templeton Emerging Markets Group, all think it might be time for investors to consider taking the plunge.

2012-03-05 Is Popularity Ruining Indexing? by Bill Smead of Smead Capital Management

Scarcity creates value in economics. In our view, what is scarce today is an equity manager doing long-term/long duration equity analysis and institutions/individual investors willing to employ them. Since 33% of the stock market is indexed and most of the other 67% works in very short analytic time frames, we believe the market must be as inefficient as it has ever been. Time is the ally of the long-duration common stock investor and we believe more so now, because indexing is getting too popular and investing in short durations is at epidemic levels.

2012-03-02 ECRI Continues to Defend its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.0 in today's public release of the data through February 24th. This is the seventh consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, incresing from an adjusted 123.1 to 124.2 (see the third chart below).

2012-03-02 TARGET2: A Channel for Europe's Capital Flight by Andrew Bosomworth of PIMCO

The Eurosystem's TARGET2 transaction system introduces elements of fiscal union via the back door. The large TARGET 2 positions developing among national central banks in the eurozone reflect capital flight from the periphery to the core and de facto introduce transfer and burden sharing elements of a common fiscal policy. Monetary policy ends up substituting for fiscal policy without going through the same democratic channels that governments' expenditure and taxation decisions entail. Taxpayers in the eurozone are contingently liable for losses incurred by monetary policy operations.

2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors

We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.

2012-03-01 Cures for the Apathetic Investor by Frank Holmes of U.S. Global Investors

A lack of faith and trust has driven investors to the sidelines and halted the flow of capital in the U.S. According to the Investment Company Institute, investors pulled more than $130 billion from equity mutual funds during 2011. This is a common reaction in the cycle of market emotions where investors generally move from a fear of losing money, to becoming apathetic about the markets, to feeling confident about investments, and finally, to irrational exuberance. Right now, many investors appear to be stuck in an apathy sandpit.

2012-02-29 The Difference Between Knowing and Doing by Stephen Dodson of Bretton Fund

Theres a significant disconnect between what investors say is the right approach and how they invest in reality. Many funds claim to be long-term, but the average holding period for the average stock mutual fund is only 10 months. Part of the reason for this dissonance is the incentive for fund managers to invest a particular way to attract institutions, who often want low variances to market movements, not necessarily maximum returns. The desire to collect assets can cause a divergence of interests between fund shareholders and fund managers.

2012-02-28 Woody Brock on Healthcare Reform and Trade Relations with China by Robert Huebscher (Article)

Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In the second part of this two-part interview, he discusses his recently published book, American Gridlock, and focuses on how to fix two of our nation's most pressing problems: the crisis in health care - made worse by ObamaCare - and our trade relations with China.

2012-02-28 Globalization: Its Saboteurs and Its Chicken Littles by Michael Edesess (Article)

The word 'globalization' provokes both excitement and fear. The excitement has sold millions of Tom Friedman books and turned a drab annual business conference, the World Economic Forum, into one of the hottest events of the year. It is front-and-center in recent tensions between the U.S. and China, and makes the European Union's economic crisis a concern for the whole world. Should we fear or embrace globalization?

2012-02-28 The Problem with Target-Date Fund Glide Paths by James A. Colon, CFA (Article)

The attack on target-date funds (TDFs) continues to gain steam, and for good reason. Virtually all TDFs offer a mechanical approach to glide-path management, unnecessarily exposing investors to risk - most noticeably when they are on the verge of retirement. A superior approach would keep the long- and short-term volatility of an investor's portfolio within appropriate ranges by actively managing the glide path.

2012-02-28 De-Fence by Bill Gross of PIMCO

Over the past 30 years, an offensively minded Federal Reserve and their global counterparts were printing money, lowering yields and bringing forward a false sense of monetary wealth. Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills. The PIMCO defensive strategy playbook: Recognize zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. Emphasize income we believe to be relatively reliable/safe; seek consistent alpha.

2012-02-25 Tax That Other Guy by John Mauldin of Millennium Wave Advisors

Last week's letter on taxes drew more response than any letter I have written in years. Questions that were raised simply beg for an answer, and some of the replies were very thoughtful, well-written suggestions for alternatives. This week I am going to do something I can't ever remember doing, and that is to use the entire letter to involve and respond to my readers.

2012-02-24 Convertibles Market 2011 Review and 2012 Outlook by Ellen Gold and Ramez Nashed of Invesco

U.S. GDP growth slowed in 2011 as the European financial crisis, U.S. legislative gridlock, the persistently weak housing market, and sustained elevated unemployment weighed on consumer confidence and consumer spending. These factors are expected to persist and, while we are cautiously optimistic that they should improve throughout 2012, this is by no means certain and the path could be turbulent. Given this potentially volatile economic backdrop, the convertible bond sector may be considered a risk controlled avenue to gaining exposure to the equity market.

2012-02-24 Investment Advice from Your Uncle Polonius by Jeremy Grantham of GMO

Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time its a new high plateau or a permanently higher level of productivity. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience, it will go back to fair value. Your task is to survive until that happens. Heres how.

2012-02-24 ECRI Defends its Recession Call by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.5 in today's public release of the data through February 10th. This is the sixth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. However, the underlying WLI decreased fractionally from an adjusted 123.4 to 123.2 (see the third chart below). This is the second week of slippage in the underlying index.

2012-02-23 Uncertainty and Change Dominate Markets by Daniel C. Chung of Fred Alger & Company

US companies are doing an admirable job in difficult times. Uncertainty is not an acceptable management strategy, so businesses are continuing to move for-ward and seek opportunities to grow, even as Washington dithers. Despite our many concerns about the state of US policy-making, we remain confident in the fundamental strength of our economic system and the vitality and creativity of corporate American its people and in its structure

2012-02-23 Is America Over-Regulated? by Frank Holmes of U.S. Global Investors

The cover story of this week

2012-02-22 Our Five Year S&P 1500 and Sector Forecast by Kendall J. Anderson of Anderson Griggs

Emotions are and will continue to be the drivers of short-term demand for stocks and bonds. At the individual stock level, we believe we can isolate certain human traits which drive this demand. However, at the broader market levels, we believe that the method to judge emotions is more intuitive than quantitative. In other words, it pays to be somewhat of a contrarian and to try not to become a member of the Buy High/Sell Low Club. History of markets can be a helpful guide to understanding the emotions that have driven previous investor buying decisions after major market declines.

2012-02-21 Inflation Held in Check by Fear by John Browne of Euro Pacific Capital

Out of control money supply creates inflation. In light of the trillions of synthetic dollars that have been injected into the economy by the Fed over the past five years, most observers had expected prices to spiral upward. But in making these determinations, many of us forgot to factor in the supply side of the supply/demand equation. Inflation remains low now because of game changing events that have reduced the demand for money. So beware of the recovery. Any wakening of animal spirits in the U.S. will likely stir the threat of inflation, which may very well short-circuit the recovery.

2012-02-18 The Cancer of Debt and Deficits by John Mauldin of Millennium Wave Advisors

We will explore some options to actually resolve the deficit and debt crisis. Cutting spending or raising taxes have consequences, but not all cuts and not all taxes are the same. For those who have been wanting more specific solutions from me, I am going to address the issues surrounding taxation and offer my thoughts as to what we should do.

2012-02-17 ECRI's Controversial Recession Call: Fifth Consecutive Improvement in the Growth Index by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.7 in today's public release of the data through February 10th. This is the fifth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. The underlying WLI decreased fractionally from an adjusted 123.6 to 123.5

2012-02-16 Weekly Market Update: Introduction to Alternative Investments by Team of American Century Investments

Alternative investments (or alts as they are commonly known) have exploded in popularity in recent years. What began as specialty investment strategies utilized by only the most sophisticated institutional investorssuch as pension plans and university endowmentsare now readily available to retail investors through a number of mutual funds and exchange-traded funds. Here we try to explain alts appeal in broad terms, discussing how these strategies are used and what role alts may play in an individual investors portfolio.

2012-02-15 When Capital Shrugged by David Baccile of Sextant Investment Advisors

if I were given a time horizon of 10 years or more and had only two options, own 100% bonds or 100% stocks, I would choose stocks. But we are not limited to those two choices. The current fragility of the global economic and financial environments will surely create opportunities for investors to shift funds between asset classes in a way that should substantially improve their risk-adjusted rates of return over the next ~10 years. With equities, individual stock selection also provides investors with real possibilities to earn an acceptable rate of return now.

2012-02-15 Not in My Lifetime by Bill Smead of Smead Capital Management

The weak dollar and international economic fears have sparked multi-year bull markets in gold, oil and most major commodities. This has forced asset allocators at the largest institutions, consulting firms, registered advisory firms and financial advisor networks to over-emphasize all aspects of the capital eaters and the longer-term Treasury bonds which compete for these dollars. In effect, the Federal Reserve Board caused the last of the unbelievers to give up in early February because it does not appear that rates will rise in our lifetime.

2012-02-15 Double Recovery? by Neil Hennessy of Hennessy Funds

The past three years have certainly had their low points, but they have also seen a number of amazing high points, and I believe those highs have been adding up to a true recovery in the financial markets. Since the market lows of March 2009 the markets have rallied back, with the Dow Jones Industrial Average returning over 110% (through February 6th). I am not an analyst or an economist, I am an economic realist. Using common sense as my guide I continue to see signs of recovery.

2012-02-14 Boosting the Liquidity of the Market Engine: Horsepower vs. Torque by Robert A. Jaeger, Ph.D. (Article)

Everything you need to know about market liquidity you can learn from the engine of your car. Liquidity is often viewed as market lubrication, but lubrication isn't everything, and, even more importantly, horsepower is different from torque. This fact leads us to appreciate the importance of contrarian investing and enables us to think more clearly about the impact of potential regulatory changes, such as the Volcker Rule and the Tobin Tax.

2012-02-14 The Dividend Yield Love Affair by Michael Nairne (Article)

Employee share-based compensation is now a significant expense deduction for public companies and hence, is already accounted for on the financial statements. Concerns that options-related stock issuance nullifies the impact of stock buybacks are accordingly overstated. This bolsters the view that you need to look at stock buybacks as an additional form of cash remittance to shareholders and not simply at dividends.

2012-02-14 Keynesians Jump The Gun on Inflation by Peter Schiff of Euro Pacific Capital

Regardless of what the triumphant Keynesians would have you believe, my analysis continues to be that the current combination of monetary and fiscal stimulus is driving us toward disaster. Instead of a real recovery, the US will experience an inflationary depression. Europe, on the other hand, will suffer much less, precisely because it was not seduced by the short-term appeal of stimulus.

2012-02-10 The Quiet After the Storm by Frank Holmes of U.S. Global Investors

Its all quiet on the equity front. For the past month, the S&P 500 Index has experienced an unusually calm period of lower volatility. Bespoke Investment Group says the timeframe between December 28 and January 26 has been remarkably lacking in 1 percenters. The firm found that its been more than a year since the S&P 500 has gone 26 trading days without declining one percent. We believe government policies are precursors to change, which is why our investment team continually monitors and tracks the fiscal, monetary and regulatory policies of countries.

2012-02-10 Western Medicine by Neel Kashkari of PIMCO

Liquidity is buying time for European countries, but their economies are growing too slowly to support their debt loads. In the U.S., household debt is declining, but remains high. There is also no reason to assume companies that benefitted from that debt-fueled spending will grow at historical rates. Until we see sustainable, real economic growth in America, we believe equity investors should carefully scrutinize the assumptions underlying consumer discretionary stocks and consider global companies that are selling into higher growth markets.

2012-02-10 Nike (NKE): Just Do It - Sell by Chuck Carnevale of F.A.S.T. Graphs

A close examination of the earnings and price correlated graphs, coupled with the historic valuations that the market has applied to Nike shares, it becomes clear and obvious that Nike shares are overpriced today. Even with its high expected future earnings growth, the headwind of such overvaluation seems likely to make it extremely difficult to achieve any acceptable long-term rate of return. On the other hand, its also obvious that the market has decided to price Nike at todays rich valuation, and therefore, its at least possible that it can continue to do so.

2012-02-10 ECRI's Puzzling Recession Call: The Growth Index Contraction Eases Yet Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -4.3 in its latest reading, data through February 3rd. The latest public data point is a reduced contraction from last week's -5.3 (a slight downward revision from the previously reported -5.2). This is the highest level (i.e., least negative) since August 26th of last year. The underlying WLI increased fractionally from an adjusted 123.0 to 123.3.

2012-02-10 Bikes to Beemers and Bimmers by Satya Patel of Matthews Asia

A shift to redividing the pie in favor of the masses could further fuel Chinas domestic consumption and contribute to its rising middle class. Changes that enable Chinas bicycle owners to trade up, swapping their bikes for motorbikes and then motorbikes for luxury cars would likely help temper unrest and foster greater growth in Chinas economy.

2012-02-09 Our Budget Deficit and the Coming Elections by Team of American Century Investments

One week ago, the CBO released its latest federal budget and economic outlook for the U.S. In the associated report, they explain that their ten year baseline budget projection is not a forecast of future events. Instead, it is provided as a policy benchmark that reflects what will occur to the federal budget and deficits if the existing taxation and spending laws are kept intact without additional legislative actions. Of course, we are now within nine months of a major election where a key issue will be what changes are needed to address our present fiscal woes.

2012-02-09 Syria, Assad and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.

2012-02-09 Private Equity: Fact, Fiction and What Lies in Between by Team of Knowledge @ Wharton

What good is private equity, anyway? Critics say these investment pools make money the wrong way -- buying "target companies," slashing jobs, piling on debt and selling the remnants, which by then are doomed to fail. Defenders say PE is a strong creator of jobs and value, and a vital source of outsized returns for pension funds, university endowments and other investment pools that serve ordinary people. Who's right?

2012-02-08 Notes from the CES: As Old Tech Tries to Stay Relevant, Investors Need to Be Careful by Terrence L. Ing of PIMCO

Revenue growth rates at many large investment grade technology companies have declined in recent years while debt issuance has risen, in part because of nearly full market penetration in certain high-tech products but also due to less innovation. PIMCO is very selective in the investment grade tech sector, favoring companies with strong and growing patent portfolios in areas of secular growth, strong free cash flow generation and low leverage.

2012-02-07 Market Dimensions by James Damschroder of Gravity Capital Partners

We estimate there is a 15% to an upwards of 31% opportunity for some reasonable re-inflation to normal valuation to be had in emerging equity securities. It wouldnt be too aggressive to even call 60%. That would bring us to an implied P/E of only 15. I dont know if itll take six months or several years to accomplish this, but this was the logic I used in getting back into the international markets quickly after having correctly anticipating the start of the sovereign debt crisis. In retrospect, we came back a little early; but I believe this move will be very fruitful in the long run.

2012-02-07 Inflection Point: The Start of a New Cycle in Real Estate? by Joel Beam, Ian Goltra, and Michael McGowan of Forward Management

Commercial real estate markets appear to be entering an extended cycle of recovery. The recovery is expected to play out unevenly across U.S. and international markets, with the first wave focused on knowledge-based, gateway cities and technology corridors. Commercial real estate is currently inexpensive by historical standards. Unlike residential markets, commercial real estate markets appear healthy, with rising liquidity and transaction levels. Institutional and private-equity funds are ratcheting up their real estate commitments, seeking 6.5%-8% returns in line with historical averages.

2012-02-07 Fed Policies Pay Off by Christian W. Thwaites of Sentinel Investments

The forces of disillusion have glowed recently. We have had unsubtle debates on the Fed debasing money, the ECB providing unwarranted support and threats that the economy was going to lurch into a double dip (a reasonable but narrow view) or accelerate into hyperinflation (yes, really). So this was a week of unequivocal good news.

2012-02-07 A Tribute to Dr. Irwin Jacobs and Qualcomm by Kendall J. Anderson of Anderson Griggs

Any business cannot survive without more cash coming into the business than is being spent. For many new companies, especially technology companies, when the cash ran out they would just close the doors. Not for Dr. Jacobs and his fellow owners. When the cash ran out, they chose a different route to stay afloat, one that was contrary to accepted business practices and possibly the most important contribution any company has made in the development of the wireless industry. Their solution was to license all of their patents as a portfolio in return for a royalty payment.

2012-02-06 Notes on Risk Management - Warts and All by John P. Hussman of Hussman Funds

Presently, there seems to be an unusually wide gap between hindsight and foresight, both in the financial markets and in the economy. In both cases, forward-looking evidence suggests weak outcomes, but recent trends encourage optimism and risk-taking. Rather than sugar-coat these uncertainties and minimize the messy divergences in the data, I think the best approach is to review the evidence, warts and all, including economic risks, market conditions, and the strengths and limitations of our own investment approach.

2012-02-03 American Creativity by Doug MacKay and Bill Hoover of Broadleaf Partners

We remain bullish on the stock market. In an environment of low or non-existent bond yields, stocks may not only represent a compelling alternative source of income, but likely have a far better risk reward profile when it comes to upside return potential. After more than a decade of being the cellar dweller of annual asset class returns, domestic common stocks may finally be due for some positive mean reversion. This doesnt mean were headed back to an era of multi-year, double digit returns but, that given a choice among alternatives, stocks should prove to be the best game in town.

2012-02-03 ECRI Recession Call: Growth Index Contraction Eases Again by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -5.2 in its latest reading, data through January 27. The latest public data point is a reduced contraction from last week's -6.6 (a slight downward revision from -6.5). This is the highest level (i.e., least negative) since late August. The underlying WLI increased fractionally from an adjusted 122.7 to 123.2 (see the third chart below).

2012-02-03 FDIC-Insured Structured Certificates of Deposit & Investors Reaching Their Financial Goals by Dave Siebert of Advisors Asset Management

The safety that Structured CDs provide, in terms of the return of principal when held to maturity in addition to FDIC insurance, may have the calming effect that an investor who has reached their destination is looking for while the performance of said CD linked to some underlying asset class (commodity, currency, equity or fixed-income) may be what the investor who is still traveling to their destination is seeking in order to reach said destination.

2012-02-02 Has McDonalds Become Too Pricey To Buy or Hold? by Chuck Carnevale of F.A.S.T. Graphs

There are two primary reasons for writing this particular article at this particular time. First of all, weve seen a running debate regarding whether McDonalds (MCD) is fairly valued or overvalued at todays valuation levels. Second, weve been challenged to write articles that were depicting full value or overvaluation because we have typically only written articles on undervalued selections. We believe that because McDonalds had such a strong run in calendar year 2011, that many people believe that it now must be overvalued after rising so much.

2012-02-02 ProVise Bullets by Team of ProVise Management Group

If you dont think there is a huge disconnect between government spending and government revenues, perhaps some of the following facts will convince you. This information is important given discussions in Congress during the month of February regarding extending the payroll tax holiday to the end of the year, and how that will be paid for. For the fiscal year ending Sept 30, 2011 government spending equaled 24% of GDP, taxes collected were 15% of GDP. Combine the two and you can understand why the country is moving in the wrong direction.This cannot be sustained and it will require sacrifice.

2012-02-02 Royce Looks Back at 2011, a Year of Correlation, Capitulation, and Consternation by Team of The Royce Funds

Twenty-eleven saw disasters both natural and human. There were threats of European default, failures of political leadership, worries over recession, and the ever-present specter of staggering debt. All of these events contributed to one of the wildest years for stocks in recent memory. It seems likely that 2011 will be remembered not for the severity of its losses, which weren't nearly as bad as one might think, but for its daily drama of extreme volatility.

2012-02-01 Life and Death Proposition by Bill Gross of PIMCO

When interest rates approach zero they may transition from historically stimulative to potentially destimulative/regressive influences. Recent central bank behavior, including that of the U.S. Fed, provides assurances that short/intermediate yields will not change, and therefore bond prices are not likely threatened on the downside. Most short to intermediate Treasury yields are dangerously close to the zero-bound which imply limited potential room, if any, for price appreciation. We can't put $100 trillion of credit in a system-wide mattress, but we can move in that direction by delevering.

2012-02-01 What is a Moat? by Bill Smead of Smead Capital Management

Our investment committee talks about the moat of a business a great deal. We believe that a wide moat is provided by the aspects of the company and their business which prevent competition from damaging highly sustainable profitability. Wide moat is one of our eight proprietary criteria for selecting common stocks. We have seen a number of organizations begin to include logic associated with moats into their equity research formats. Unfortunately, we believe many market participants confuse the by-products of a moat with the actual moat itself. We think this spells opportunity.

2012-01-31 Barry Eichengreen on the End of the Dollar by Dan Richards (Article)

Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. In this interview, he discusses the future of the dollar as the reserve currency and the role of the IMF in the Eurozone crisis. This is the transcript of the interview.

2012-01-31 To Fight or Not to Fight the Worlds Central Banks by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Isaac Meng of PIMCO

We are skeptical that fiscal austerity alone is sufficient for all eurozone countries to grow and remain solvent. We thus expect the ECB to continue supporting the euro area with liquidity in 2012. Recent central bank policy in China is oriented toward stabilizing growth in a political succession year, while balancing lingering inflation and medium-term systemic risks. Investors may want to hedge portfolios by looking to select emerging markets with the ability and willingness to cut policy rates both from a cyclical as well as structural perspective.

2012-01-31 The ECB to the Rescue by Milton Ezrati of Lord Abbett

Though a good deal of concern over European downgrades has emerged, markets actually have received reason to anticipate relief in Europes financial crisis. The old risks and fears remain, of course, but the ECB has at least changed the equation, signaling that it had jettisoned its former hands-off policy and begun, at last, to support European financial markets. The remarkable nature of the change received only a few headlines, and even less commentary, but it deserved then and deserves now more attention. The ECBs help is crucial.

2012-01-30 Sector Insights Focus: Consumer Staples by Mark H. Dawson and Daniel M. Brewer of Rainier Funds

After steadily rising in terms of market capitalization in the 1980s, the consumer staples sector shrank in the 90s as technology shares swelled in market value. Over the most recent decade, staples representation has crawled back to about 10% in the large growth and value indices, while inclusion in small-cap indices ranges between a mere 3-6%. The theme of consolidation within industries continues today and the sector is increasingly dominated by a small number of mega-cap corporations often seeking to acquire small- and mid-cap companies.

2012-01-30 Fourth Quarter Investor Letter by Mark Bennett, David Templeton and Nick Reilly of HORAN Capital Advisors

We have our reservations about world economic output, but stand by our past comments about slow U.S. growth without a recession. We do believe equities offer attractive return opportunities for the foreseeable future in the context of historical valuation and relative valuation. We acknowledge the structural issues prevalent in developed economies and the risk that comes with debt hurdles, demographic challenges and potential deflation, but there are many data points that make us optimistic about equity returns in 2012 and for long-term strategic investment allocations of capital.

2012-01-27 Preferred Securities Investment Commentary - December 2011 by Team of Cohen & Steers

In terms of preferreds broad performance potential, we note that bond yields are at or near historic lows, and that the Federal Reserve is likely to hold interest rates steady until 2013. In such an environment, the income offered by preferreds (78% or more) will be hard to come by, likely resulting in good investor demand in the year ahead. At the same time, the high income these securities produce is also likely to continue to factor meaningfully into their total return and dampen returns volatility.

2012-01-27 What the Bond Market Knows That You Dont by Matt Tucker of iShares Blog

On the back of improving US economic data, equities have rallied off of autumn lows, and yet US Treasury yields have continued to surf bottom with the 10-year note trading below 2% for the first time on record. Why havent interest rates recovered in support of improving data? Do US Treasury investors know something that equity investors dont? The answer may lie across the pond in Europe. The European crisis intensified significantly in the fall, causing equity markets (and most risky assets for that matter) to sell off and US Treasury rates to fall, despite the August downgrade.

2012-01-27 ECRI Recession Call: Growth Index Contraction Eases Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -6.5 in its latest reading, data through January 20. The latest public data point is a reduced contraction from last week's -7.6 (a slight downward revision from -7.5). This is the highest level (i.e., least negative) since early September. However, the underlying WLI declined fractionally from an adjusted 123.3 to 122.8 (see the third chart below).

2012-01-26 2011 A Difficult Year for Active Investors by Owen Murray of Horizon Advisors

Actively managed mutual funds greatly underperformed their respective benchmarks in 2011. This was primarily due to extreme market conditions triggered by the European debt crisis. Investment managers were not rewarded for good fundamental decision making as fear dominated trading activity in the global markets. Active manager underperformance / outperformance trends tend to be cyclical, but over time, good active managers add value. We expect actively managed funds to outperform once market volatility subsides and fundamental factors reemerge as a key consideration for investors.

2012-01-26 Questions and Answers About S&Ps European Downgrades by David Fisher, Michael Story and Olivia Albrecht of PIMCO

Sovereign downgrades will likely be another trigger for cuts in the ratings of European banks. Nearly all major eurozone banks are on negative watch. Even those securities guaranteed by eurozone sovereigns that were not downgraded are also in the ratings agencies crosshairs. The most significant downgrade for benchmark compositions was Portugal -- downgraded to below investment grade by S&P, consistent with Moodys and Fitch.

2012-01-26 The Price of a Good Nights Sleep by Russ Koesterich of iShares Blog

Even with the recent market rally, investors are still placing a significant premium on those assets perceived as safe. Case in point: the US Treasury market. By one measure-real yields measured against core inflation long-dated Treasuries are offering the worst returns in over 30 years. The flip side of this trade is a persistent aversion to assets perceived to be the most risky, particularly Europe. Even in the more stable, northern parts many markets are trading at 8 times earnings, with dividend yields at 4% to 5%. In a low yield world, this strikes us as a long-term opportunity.

2012-01-25 Rise of the Dragon by Mark Mobius of Franklin Templeton

With the debt situation in Europe continuing to further unravel and dim economic prospects in the U.S., many have come to believe that the star of the dragon descendants has the potential to rise even further in the coming years. Chinas GDP growth is expected to moderate to around 8.2% in 2012, which is high compared to developed economies. In this highly connected world, China is unlikely to be immune to the global slowdown, but I believe the Chinese government will utilize their substantial reserves and banking system to stimulate the domestic economy, as they did in 2009.

2012-01-24 Michael Lewis on the True Depth of the Crisis in Europe by Larry Siegel (Article)

Michael Lewis is a financial writer and author, most recently of Boomerang: Travels in the New Third World, in which he reported on the European debt crisis from several of the affected countries. In this interview, he discusses a range of topics, including the future of Wall Street and the challenges of great financial writing.

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.

2012-01-24 Contrarian Concern Too Much Bullishness? by John Buckingham of AFAM

While we expect volatility to remain elevated this year, and we have to concede that the markets have come a long way quickly, we see no reason to alter our 1400 year-end S&P 500 price target. Of course, that level actually might be a little low, considering where we stand today, but we focus our attention on the companies in which we are invested. After all, we own businesses like International Business Machines (IBM - $188.52), Intel (INTC - $26.38) and Microsoft (MSFT - $29.71), all of which posted impressive Q4 results last week, and not index funds.

2012-01-24 The Global Economic Outlook: Diverging Paths by Thomas D. Higgins of Dreyfus

The global economy can weather a mild eurozone recession, but is too fragile to absorb a severe financial shock such as a breakup of the euro. Higgins expects Central and Eastern Europe are likely to be most negatively affected by a eurozone recession, followed by the UK, the US and other advanced economies, given their respective trade dependencies. The least vulnerable regions would be Asia and Latin America. Long-term value in popular safe havens such as U.S. Treasuries and gold, preferring to focus on U.S. non-financial corporate credit as well as emerging market local currency debt.

2012-01-23 Dodging a Bullet, from a Machine Gun by John P. Hussman of Hussman Funds

The interpretation best supported by the data is that recession risk remains very high based on the leading evidence and the typical outcomes that have resulted, but that the rate of deterioration has eased significantly, and it is simply unclear whether this is a temporary pause or a reversal. Rather than overstating the case one way or another, we remain strongly concerned about recession risk, but recognize the recent stabilization and the potential for a low-level continuation of that.

2012-01-20 ECRI Recession Call: Growth Index Contraction Eases by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.5 in its latest reading, data through January 13. The latest public data point is a reduced contraction from last week's -8.6, and the underlying WLI rose from an adjusted 121.1 to 123.4 (see the third chart below). The growth index had slipped lower over the past two weeks, but the latest data point is the highest (i.e., least negative) since early September.

2012-01-20 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

The first full week of trading in the New Year was uneventful but positive as the market awaits corporate earnings and next weeks Federal Reserve Board Meeting. As the charts above illustrate, the Dow Jones Industrial Average extended its gains for the year by an additional half of one percent last week, while the NASDAQ Composite jumped nearly 1.4% on excitement in many of the technology shares.

2012-01-20 Becton Dickinson- A Healthy Dividend Growth Stock On Sale by Chuck Carnevale of F.A.S.T. Graphs

Becton Dickinson & Co. is a blue-chip dividend growth stock that is on sale. Becton Dickinson is also a Dividend Aristocrat and Dividend Champion, that Value Line Investment Survey has awarded high scores for financial strength, price stability, earnings predictability and price growth persistence and a low beta of .65. The company has shown great persistence and strength through the last two recessions, and we believe that estimates for future growth are well reasoned and well defined.

2012-01-19 Net1 UEPS Technologies (UEPS) Rises Over 30 Percent Rewarding Undervaluation by Chuck Carnevale of F.A.S.T. Graphs

Primary reason this is happening is because the market was grossly undervaluing this company shares. Consequently, a piece of good news stimulated an incredible 30% advance in one single trading day. Common sense would tell us that the intrinsic value of a business, even a small business like Net1 UEPS Technologies, could not logically change by a magnitude of over 30% that quickly. Unless of course, it was through a merger, that increased the size and the value of the business by that much. The win of a contract would be unlikely to have such an impact.

2012-01-18 A Little Cold Water Thrown on the Recovery by John Buckingham of AFAM

The economic data out last week was hardly terrible, but the positive momentum seen in the past couple of months was slowed as the Commerce Department reported that higher prices for imported oil and a 7% drop in exports to Europe caused the U.S. trade deficit to expand sharply in November.

2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)

A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.

2012-01-17 An Essential Client Conversation “Will I be able to pay for my hip replacement at age 85?” by Dan Richards (Article)

Advisors face a big challenge in planning for boomers. Your assumptions about how long they'll live and the nature and cost of their lifestyle as they age will dramatically impact your planning decisions. Conversations with boomers about those topics and about the implications of funding health care are difficult but important.

2012-01-17 Letters to the Editor - the Misreading of Reinhart and Rogoff by Various (Article)

Many readers responded to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared last week.

2012-01-17 Thinking About the Implications of Rising Euro-Exit Risks by Myles Bradshaw of PIMCO

Even if the euro survives this crisis intact, the market will price in uncertainty as the crisis evolves. Scenario planning is indispensable for investors. Politics may prevent the European Central Bank from buying government bonds, but it could provide funding support via a special government or banking intermediary. This balance sheet expansion could be a negative for the euro. Within the eurozone we believe investors should look at alternatives to the government sector, including agency, regional government and covered bonds.

2012-01-17 Global Overview by Team of Thomas White International

Fears of a recession in developed economies such as the U.S. have receded as recent data releases indicate that economic activity has not weakened as much as thought earlier. Though European economies are still expected to see a decline, there is now increased optimism that the monetary union and the common currency will survive the crisis. Large European countries such as Spain and France have been able to sell new bonds at relatively affordable costs and the European Central Bank has cut its benchmark rate again, besides extending additional liquidity support to the regions banks.

2012-01-17 The Turtle? by Jeffrey Saut of Raymond James Equity Research

The turtle makes no progress until it sticks its neck out; I have been sticking my neck out since Thanksgiving, believing the Santa rally was beginning. I stuck with that strategy until the first day of trading this year, which felt like a short-term emotional trading peak. A short-term price peak occurred on 1/10/12 at 1296.46 basis the SPX. The only question in my mind was whether we were going to get a pullback into the 1230 1240 support zone, or if we would experience a sideways correction as the overbought condition was worked off and the markets internal energy was rebuilt.

2012-01-17 Fed Policy Outlook More Communication Is Good by Scott Brown of Raymond James Equity Research

The Federal Open Market meets next week to set monetary policy. Its widely expected that short-term interest rates will remain unchanged and that (for the time being) there wont be another round of asset purchases (QE3). The Fed will begin publishing the range of senior Fed officials projections of the appropriate federal funds rate target (for the fourth quarter of this year and the next few years). There are more benefits than risks in making these projections public.

2012-01-17 A Society Moving Toward The Brink? by Chris Maxey of Fortigent

With economic growth stagnating, global indebtedness remaining stubbornly high, and unemployment refusing to budge, pressure on governments and ordinary citizens is mounting. Financial crises are notoriously difficult to recover from, but the longer-term sociological problems created by such severe declines in output pose a major headwind to the economy in 2012 and beyond.

2012-01-17 European Nations Stripped of Credit Rating by Matt Lloyd of Advisors Asset Management

S&P announced they were cutting the credit rating of nine European countries and stripping Austria and France of their AAA credit rating. Reminiscent of the removing of the AAA status from the US nearly six months ago, all eyes are on what will happen to their debt markets and currency. The markets had long expected some sort of credit rating warning or downgrade with regard to the United States. So too is the reaction from the European downgrades on Friday. Consider what has occurred in the debt markets over in Europe and you can then compare it to the United States movement.

2012-01-17 The Impact of the Falling Dollar by Jonathan A. Shapiro of Kovitz Investment Group

Regarding the progress of the businesses we own, a useful metric we track is the Price-to-Value ratio. Conceptually, this statistic measures the current price of a portfolio company to its intrinsic value, conservatively estimated through our multiple valuation techniques. For example, Wal*Marts current P-to-V Ratio is 80%, determined by taking its roughly $60 stock price divided by our current fair business value estimate of $75. This implies, based on what we know today, Wal*Mart is roughly 20% undervalued, providing approximately 25% upside from current levels (not including dividends).

2012-01-13 Quarterly Review and Outlook, Fourth Quarter 2011 by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

As the U.S. economy enters 2012, the gross government debt to GDP ratio stands near 100%. Nominal GDP in the fourth quarter was an estimated $15.3 trillion, approximately equal to debt outstanding by the federal government. In an exhaustive historical study of high debt level economies around the world, it was demonstrated that when a countrys gross government debt rises above 90% of GDP, the median growth rates fall by one percent, and average growth falls considerably more. This study sheds considerable light on recent developments in the US.

2012-01-13 ECRI Recession Call: Growth Index Contracts Further by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.4 in its latest reading, data through January 6. The latest public data point is a slightly deeper contraction from last week's -8.2, although the underlying WLI rose a point from 120.2 to 121.2 (see the third chart below). The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has slipped lower over the past two weeks.

2012-01-13 The Top 25 Best Dividend Challengers To Buy Today by Chuck Carnevale of F.A.S.T. Graphs

This is the third and final article of a series of articles we have prepared on dividend paying stocks with a history and legacy of increasing their dividends each year. Our first article covered Dividend Champions, dividend paying stocks with a history of increasing every year for 25 years. Our second article covered Contenders, companies that have increased their dividend every year for 10-24 years. This final article in the series will cover\ Challengers, companies that increased their dividend every year for a minimum of five, to up to nine consecutive years.

2012-01-13 Euro Fears by Richard Michaud of New Frontier Advisors

Global investing is likely to be very challenging in the year ahead. While the euro has so far been resilient, many eurozone countries face substantive debt refinancing in the coming year. Given the current political, structural, and economic reality there is no simple cure to the euro crisis. The ECBs evolving pursuit of liquidity policies and potential interest rate cuts may be helpful, but major political changes may be necessary. Beyond Europe, the remainder of the global economy may be very dependent on a continuing expansion of the American economy and improving consumer demand.

2012-01-12 42 Dividend Contenders for Above-Average Total Return by Chuck Carnevale of F.A.S.T. Graphs

With interest rates hovering near all-time lows, investors needing income are faced with very limited choices. The traditional high yield available from bonds and other fixed income vehicles are no longer available to meet the needs of retirees needing income to live off. Moreover, it is almost a certainty that todays low yields are not adequate enough to fight inflation. Consequently, there is a growing investor interest in dividend paying common stocks, especially those that have a long record of increasing their dividend every year.

2012-01-12 A Look Back (2011) and Forward (2012) by Team of American Century Investments

The major US equity markets ended 2011 not far from where they began in terms of their index values. Now that the New Year has arrived, the question is where these markets might be headed in 2012. Three important considerations behind this question are: 1. How key macro-factorse.g. the EU debt crisisare or arent addressed 2. Can U.S. corporations continue to deliver the earnings growth they have for the past three years 3. What are the prospects for US consumers and householdsan increasingly important consideration as the global recovery slowed in the fourth quarter of last year.

2012-01-12 Anticipating the Golden Cross by Frank Holmes of U.S. Global Investors

One trigger where we generally see money move in and out of the market is based on the golden cross, which identifies when the 50-day short-term average crosses above the 200-day long-term average of a stock or index. Over the past 20 years, the golden cross of the S&P 500 Index resulted in surprisingly bullish data. Of the nine times this event has occurred in those 20 years, the S&P 500 averaged a 23 percent increase before the market reversed.The lone exception to this trend was the unusual and very volatile market in 2010-2011. Even then, the S&P 500 only lost a third of a percent.

2012-01-11 Bear Market Cycles and Valuations by Emil Zamarelli of Emil Zamarelli

The subject for this year's investment letter is long term bull and bear market cycles in equities. I will argue that these long term cycles repeat themselves and have similar characteristics in terms of their length and their excesses of optimism and pessimism. These excesses translate into exceedingly high and low market prices at their peaks and troughs. I believe that it is now a good idea to limit your exposure to the stock market. Cash and short term bonds issued by the highest quality governments and corporations are called for.

2012-01-10 The Misreading of Reinhart and Rogoff by Robert Huebscher (Article)

If the cry for deficit reduction rests on an intellectual framework, it would be the work of Reinhart and Rogoff, whose book, This Time is Different, has been hailed for its historical study of financial crises. A key finding - that growth slows once the ratio of debt-to-GDP exceeds 90% - has been widely cited by those calling for decreased government spending. But those calling for deficit reduction have largely ignored a number of caveats that Reinhart and Rogoff gave with respect to their 90% threshold, and as a result many warn that the US faces a Greek-like sovereign-debt crisis.

2012-01-10 Safe Withdrawal Rates: A Do-It-Yourself Approach by Wade Pfau (Article)

Reconciling the assumptions that underpin safe withdrawal rate studies with one's own capital market expectations and constraints is a daunting task, since those studies rarely reflect the practical realities of an advisory practice. But new research now provides a generalized framework for determining a safe withdrawal rate for a given retirement duration, acceptable failure probability, asset allocation and capital market expectations. Advisors no longer must be constrained by the assumptions and choices of others.

2012-01-10 Using the ECRI WLI to Flag Recessions by Dwaine van Vuuren (Article)

In September 2011, the ECRI proclaimed a new U.S recession would begin sometime in the coming year. It based its prediction on a host of its own internal long-leading indexes, together with its widely followed weekly leading index (WLI). I want to focus on the proper use of the WLI and examine its accuracy in recession dating, in order to put this current recession call into context.

2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)

Ron Surz provides his award-winning commentary on the US and global markets.

2012-01-10 Chaos Theory by Neel Kashkari of PIMCO

How developed nations address their fiscal deficits will have broad implications for equity markets. Debating a future of inflation vs. deflation is radically new territory for investors. The chaotic nature of the choice facing societies is whipsawing equity markets and dominating bottom-up factors. Equity investors seem to be pricing in a combination of outcomes, with the largest weighting going to a goldilocks, mild inflation scenario. But the markets large daily swings reflect jumps back and forth as investors update the probabilities of very different destinations.

2012-01-09 Stock Volatility: Not What You Might Think by Charles Lahr of PIMCO

Contrary to finance theory, lower risk appears to produce the potential for higher returns over the long term. Volatility tends to amplify stock returns so higher risk generally leads to higher returns in a positive market and greater losses in a negative market. Over the long run, lower volatility stocks can lead to higher returns because avoiding the downside can have powerful effects on compounding. Higher volatility stocks tend to fit the definition of speculative, while low volatility stocks can offer the potential for preservation of principal and a satisfactory risk-adjusted return.

2012-01-09 A Postcard from the Middle East & Africa by Team of Thomas White International

Retail therapy may or may not make the soul happy but it sure does make the feet sore. Young Middle Easterners though have warmed up to a retail format that promises to keep both soul and feet happy. E-commerce and online retail are getting bigger by the day across the Middle East for several reasons. For one, the region recorded the worlds fastest growth in internet usage between 2000 and 2009, and it is now home to more than 60 million internet users, which makes it a huge market for online transactions.

2012-01-06 Wal-Mart - The Worlds Greatest Retailer, After a Long Hiatus, is a Solid Buy by Chuck Carnevale of F.A.S.T. Graphs

We are going to start the new year off by looking at Wal-Mart which we believe is a blue-chip growth and dividend income selection that can be purchased at a sound and attractive valuation. We believe it is currently fairly valued. Therefore, it represents a very attractive candidate for the long-term investor interested in above-average capital appreciation, with an attractive dividend yield that is greater than the 10-year Treasury bond yield and potentially growing at double-digit rates.The company represents an ideal long-term buy-and-hold investment for the prudent fundamental investor.

2012-01-06 Low Rates & the Volatility Implications of Reaching for Yield by Tom Dalpiaz of Advisors Asset Management

Interest rates fall and the temptation to reach for higher yields in longer maturity bonds is difficult for bond investors to resist. Are we again at that kind of point in the interest rate cycle? Municipal (muni) bond yields are at or close to their historical lows and it easy to see how investors might be unimpressed with the yields currently available. Dont despair. We suggest in environments such as these that muni bond investors repeat a few simple but helpful reminders to themselves.

2012-01-06 Euro Fears by Richard Michaud of New Frontier Advisors

The euro crisis has dominated financial headlines and threatened global economic growth for the last two years. The European Union (EU) has repeatedly failed to articulate an effective plan to address Europes debt problems and deteriorating finances. German demands for austerity and economic rectitude by eurozone members, while politically popular in Germany, ignore basic principles of orthodox Keynes-Samuelson macroeconomics for dealing with a financial slump. There is no historical example of austerity leading to growth.

2012-01-06 ECRI Recession Call: Growth Index Shows Further Contraction by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -8.2 in its latest reading, data through December 30. The latest public data point is a deeper contraction from last week's -7.6. The index had been hovering in a narrow range between -7.4 to -7.8 for the previous seven weeks but has now slipped lower.

2012-01-06 ChindopiaA Utopia of Sorts by Vivek Tanneeru of Matthews Asia

China, India and Indonesia have a lot in common. They represent three of the four biggest countries in the world by population and have fast-growing economies. All three were relatively unscathed by the global financial crisis and resumed rapid economic growth soon after. But they are also diametrically different in numerous ways. China has a demand deficit and India and Indonesia have supply shortfalls. China, with its low cost of capital and surplus savings, has the exact opposite problem of India and Indonesia, with their high cost of capital and a capital import dependency.

2012-01-06 Dividend Champions a Rare Undervalued Opportunity by Chuck Carnevale of F.A.S.T. Graphs

We believe that based on earnings, 2012 is starting out with the stock market undervalued. We believe in the long-term ownership of great businesses purchased at sound and attractive valuations. Consequently, we view the stock market as merely the store that we shop at in order to buy the businesses we want to own.

2012-01-06 What Will 2012 Bring? by Monty Guild and Tony Danaher of Guild Investment Management

In 2011, financial news was dominated by the turmoil in Europe. Looking ahead, the ongoing crisis will be addressed by a global money printing jamboree and coordinated funding from central banks in the developed world, including the Fed. When the money starts rolling off the presses, the liquidity infusion will create some genuine buying opportunities for American, European, and Asian stocks, as well as selected commodities. Liquidity infusions are like a rising tide of money available to buy assets. Buy stocks, commodities, and primarily gold to protect the buying power of their assets.

2012-01-06 All The Emperors Are Naked by Brian S. Wesbury of First Trust Advisors

Governments seem unwilling to deal with issues that are relatively straight-forward. Its not hard to understand. Spending needs to be paid for by taxes, but taxes undermine the incentives to produce and invest and push business to other countries. Eventually government spends so much that the economy cannot support it (no matter how much tax rates rise) and bond buyers go on strike. Many European countries have reached that point.

2012-01-05 Europea Source of so Much Pain and Distortion by Milton Ezrati of Lord Abbett

The panic from the risk of default and the possible dismantling of the euro has gained the headlines and depressed most asset prices across the globe. The austerity measures, seemingly demanded by the situation and certainly by the EU and the ECB, have clearly set Europe on a recessionary path that threatens the pace of global growth. Europes problems have also distorted currency values across the world, creating problems in yet another way. These will linger even though the ECB seems to have overcome its former objections and has begun to provide the liquidity needed to quell market fears.

2012-01-04 Fundamentals March on Despite Global Risks in 2012 by Douglas Cote of ING Investment Management

The two primary drivers of market performancefundamentals and global risksacted in opposition in 2011. It is critical to understand the hierarchy of influence of these drivers in order to understand the current market and to forecast its future direction. Although spikes in global risk may make headlines and cause temporary shocks to investor confidence, the markets path ultimately comes down to the strength of the underlying fundamentals. We expect 2012 will mark the third consecutive year that fundamentals relentlessly march forward despite ample global risks.

2012-01-03 New Measures of Risk (and why markets are now very fragile) by Adam Jared Apt (Article)

Understanding risk is essential to successful investment management, yet most common measures, like beta, capture only risk within markets - disregarding systemic risk of the markets themselves. Fortunately, new research is now shining light on "fragility" or systemic risk - how fast and how severely an unanticipated event will propagate through the markets.

2012-01-03 How Top Execs Game Retirement Plans by Michael Edesess (Article)

Corporate executives and employee-benefits consultants have engineered a cascade of arcane methods to deprive ordinary retirees of benefits they thought they were promised, in order to fatten corporate profits and the benefit packages of top executives. That is the harsh message of Wall Street Journal reporter Ellen E. Schultz's meticulously-researched book, Retirement Heist.

2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)

While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.

2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)

A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.

2012-01-03 And Thats The Week That Was by Ron Brounes of Brounes & Associates

As January goes, so goes the market for the year. While most investors look beyond such hype, many surely will be pulling for a strong start to the new year. Despite summit after summit, emergency call after emergency call, bailout after bailout, stimulus after stimulus, the European debacle appears no closer to resolution (and is maybe getting worst). Italy is hurting; Hungary could be next; Germany and France are calling the shots. Iran presents a new threat to the oil markets as a blockage at the Strait of Hormuz threatens real damage to the energy supply/demand picture.

2011-12-31 Collateral Damage by John Mauldin of Millennium Wave Advisors

The economic travails of much of the West are reaching a decisive stage as the year ends. In 2008, we predicted sluggish recovery and a long period of low growth for the West in a two-speed world. This picture does not now properly reflect the downside risks. The policy of "kicking the can down the road" is failing, as the intensifying crisis in the euro zone and the failure of the G20 summit in late October clearly demonstrate. As to December's European summit, we describe its impact later in this paper.

2011-12-30 Hirsch's Weather Vane for Markets by Frank Holmes of U.S. Global Investors

Using annual figures going back to 1950, the January Barometer says the performance of the S&P 500 Index in the first month of the year dictates where stock prices will head for the year. Jeffrey and Yale Hirsch of The Stock Traders Almanac find that the barometer has a surprisingly high accuracy ratio of nearly 90 percent. However, in the last two years, the market defied this trend. Even with these disruptions in the long-term trend, the writers at Almanac Newsletter said last February that they dont know of many indicators with such a strong track record.

2011-12-30 ECRI Recession Call: Growth Index Virtually Unchanged for Seven Weeks by Doug Short of Advisor Perspectives (dshort.com)

The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -7.6 in its latest reading, data through December 23. The latest public data point is virtually unchanged from last week's -7.7. The index has been hovering in a narrow range between -7.4 to -7.8 for the past seven weeks. Those of us who follow this indicator are nervously awaiting a confirmation or reversal of the trend.

2011-12-29 What IPOs and Buybacks are Telling Us Today About Tomorrow! by Kendall J. Anderson of Anderson Griggs

Supply and demand is the basis for technical analysis and for just about every other short-term trading method. The past years volatility of market prices is pretty good evidence on how quickly demand for shares can change. When the call of the day is risk on the market rises. When the call of the day is risk off, the market falls. The rapid change in price also tells us that in the short-term, the supply of shares is fixed. In the long term, the supply of shares will dominate market pricing. Unlike the demand for shares, which can change instantly, supply of shares changes slowly.

2011-12-28 Delayed LDI Implementation: Making it Worth Your While by Rene Martel of PIMCO

With interest rates so low, many defined benefit plan sponsors have delayed implementing or expanding LDI programs, often using intermediate duration bond portfolios instead. Traditional intermediate duration portfolios may not offer the most attractive yields or the best credit match for pension liabilities, and may make the transition to long-term bonds difficult later. We believe plan sponsors in a waiting mode should consider switching to long duration portfolios with a synthetic overlay in an effort to reduce duration exposure.

2011-12-24 Your Three Investing Opponents by John Mauldin of Millennium Wave Advisors

Recently I have been having a running conversation with Barry Ritholtz on the psychology of investing (something we both enjoy discussing and writing about). Since I am busily researching my annual forecast issue (and taking the day off), I asked Barry to share a few of his thoughts on why we do the things we do. He gives us even more, exploring the three main opponents we face when we enter the arena of investing.

2011-12-23 Twenty Years of Investing in Asia by Paul Matthews and Mark Headley of Matthews Asia

This month Asia Insight speaks with Paul Matthews and Mark Headley to get their thoughts on 20 years of investing in Asia. Why were you so convinced of Asias growth prospects at a time when few others were? Paul: As a young businessman trying to build an asset management firm focused on Asia ex Japan, the challenge for me was that Japan was 95% of the investment universe and also a majority of the market for asset gathering. While based in Hong Kong, I was given the task of looking for ways to build the business and so I was attracted to the markets that were open and growing.

2011-12-23 Rebalancing Resurrected, Part 3 by Adam Butler and Mike Philbrick of Butler Philbrick & Associates

This is a 'Canadian-ized' version of anarticlewe published on Monday, December 19, 2011, which featured a study of US equity and fixed-income markets. As we are located in Canada, we were motivated to see how well the same techniques work in our home market using the S&P/TSX Composite. As expected, it turns out that they work quite well.

2011-12-22 Value Traps and Investor Psychology by Team of American Century Investments

Many financial market participants are familiar with what is generally known as the two basic emotions felt by investors, greed and fear. Very often, over-enthusiasm is observed accompanying greed during bull markets and over-despondency is seen on the heels of fear during bear markets. Besides the cyclical aspects of investor psychology, there are other aspects of behavioral finance (another name for this branch of psychology) to explore that relate to value trap avoidance.

2011-12-22 The French Influence of our Economy With A Little Common Sense to Boot! by Kendall J. Anderson of Anderson Griggs

My history lesson is in the form of letters from years past. The first is from Jean Baptiste Colbert, Frances controller-general of finance written in 1664 to King Louis XIV of France outlining his economic policies. King Louis assumed the throne in 1643 at the age of four but he did not assume personal control until 1661. At that time, feudalism still dominated the French economy. King Louis wanting greater wealth for himself and his country and to pacify the public, who were demanding change, embraced the actions of Colbert, making them the economic model for France.

2011-12-22 The Corporate Cash Myth by Neeraj Chaudhary of Euro Pacific Capital

Despite huge amounts of cash on their balance sheets, America's largest companies are as broke as the rest of the country, and not only are they in no position to hire workers, but higher interest rates could result in more layoffs at a time when the nation can least afford it. Given these factors, economists, journalists and politicians should be applauding corporate cash reserves not deriding them. Given that a real recovery will not come until America as a country has paid down some of its debt, we should not be urging our corporations to throw caution to the wind.

2011-12-21 Seeking Absolute Return: Finding Opportunity in Overly Hyped Alternatives by Team of Litman Gregory

This commentary references and updates views originally shared in our 2003 whitepaper on hedge-fund strategies. Today, we have similar concerns about a low-return environment for stocks in the years ahead. As we concluded eight years ago, hedge-fund strategies do have the potential to add value to a portfolio. However, finding funds that are skillfully managed and offered at a reasonable cost remains a difficult challenge.

2011-12-21 Rebalancing Resurrected, Part 2 by Adam Butler and Mike Philbrick of Butler Philbrick & Associates

This is a 'Japan-amized' version of an article we published on 12/19, which featured a study of US equity and fixed-income markets. The Japanese experience since 1993 was dramatically different than the U.S. Japanese investors endured a seemingly endless series of intermediate term extremes of hope and despair as markets oscillated wildly above and below their long-term negative trend. Japans multi-decade crash and stagnation is unique among modern market economies (so far), so we wanted to see how well our volatility adjusted rebalancing framework worked in this difficult environment.

2011-12-21 Hot Potato by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Rob Mead of PIMCO

The world is playing a game of hot potato with European financial assets, and the European Central Bank is a reluctant player. Together, Europes fiscal and monetary authorities can likely avert a systemic accident, but they must act quickly and courageously. Differentiation among emerging market monetary policies is increasing. And in Australia, the central bank will likely need to ease further in 2012. If every central bank enacts similar monetary policy tools, those tools compete for the same targets (financial and inflation stability), thereby potentially eroding their effectiveness.

2011-12-20 Wall Street Journal: Three Words of Advice for Million-Dollar Producers by Dan Richards (Article)

The financial advisor careers section of Wall Street Journal asked 60 advisors from all over the U.S. for suggestions to new advisors starting in the business whose goals were to be million-dollar producers. Their advice came down to three words.

2011-12-20 Expectations Creep by Jamie Cornehlsen (Article)

Today's generation of college students have it easier, at least in one respect, than any of their predecessors. Over the years, college professors had made it easier for students to get good grades, a phenomenon known more commonly referred to as 'grade inflation.' The reasons for this erosion of expectations continue to be debated, but there is ample data showing that the trend toward more generous grading is real. Today, a similar phenomenon plagues economic expectations.

2011-12-20 Letters to the Editor by Various (Article)

Readers respond to several articles: GLWBs: Retiree Protection or Money Illusion?, Did Congress Cash In on Insider Stock Trading?, and Can this be Serious?, all which appeared last week, and to John Mauldin's commentary, The Center Cannot Hold, which appeared on Saturday.

2011-12-20 NewsLetter - December 2011 by Harold Evensky of Evensky & Katz

No question the markets have been scary and whenever that happens youll read about the value of diversification. The good news is, it works. It may not work day-to-day but over economic cycles, it works. Still, most investors do not really understand what a real diversified portfolio looks like so I did a quick and dirty evaluation of E&Ks typical investment portfolio and found: Stock positions in well over 12k different companies. The largest single position was Exxon at about 0.8% in an all equity allocation. Companies based in over 40 different countries.

2011-12-19 Rebalancing Resurrected by Adam Butler and Mike Philbrick of Advisor Perspectives (dshort.com)

This is part 1 of a 3 part series that explores optimal methods of dynamic rebalancing between stocks and bonds. This study examines these methods in the context of a US equity / Treasury basket. The next 2 posts will explore the impact of our proposed techniques on Japanese and Canadian equity / bond baskets. The investment community is in the midst of an identity crisis, though admittedly many in the industry don't know it yet. At the heart of the matter is the following misconception: Investors perceive that investment professionals add value via security selection and market timing.

2011-12-19 Americas Best Companies are Cheap - So Merry Christmas and a Prosperous New Year! by Chuck Carnevale of F.A.S.T. Graphs

Investors have been fleeing US equities at unprecedented levels. Yet, I believe there is compelling evidence that suggests that this may be the best opportunity to invest in high-quality U.S. common stocks that we have seen in many years. The list of 100 stocks presented in this article represents only a sampling of the many companies that are selling at valuations which are lower than their fundamentals justify. The only logical reason that I can come up with for this, is extreme pessimism.

2011-12-19 The Three Rs of Investing by Marc Seidner of PIMCO

The inability to achieve sustainable levels of economic growth raises the risk of recession in many developed world economies. Under financial repression, market interest rates are kept very low for a very long time period with the hope of stimulating investment, but repression also starves savers to the benefit of borrowers. Increasing risk with an uncertain distribution of possible outcomes should lead to caution regarding traditional models and asset allocation practices.

2011-12-19 And Thats The Week That Was by Ron Brounes of Brounes & Associates

Time is running out for that Santa Claus rally and the less-than-favorable tones coming from the worlds key politicos (wont call them leaders) are giving investors little reason to remain positive. Still, the recovering labor market and (hopefully) strong holiday season offer some incentive to buy (if only they can overlook the never-ending EU problems). Investors dissect an array of data before heading out for the holidays and possibly not returning until 2012. Some late-year window dressing could help bring one final surge to the markets (or not).

2011-12-16 Making Sense Of The European Chaos by Monty Guild and Tony Danaher of Guild Investment Management

Developments in Europe have dominated the worlds economic headlines in recent days and have obscured some good news from China. In this weeks newsletter, we will cover the background of these important events and their meaning to global investors. We are recommending using the gold market decline to add to gold positions, we continue to hold other long term positions.

2011-12-16 Downward Spiral by Mohamed A. El-Erian of PIMCO

Europe's crisis is morphing again -- for the third time in only 12 months -- and the implications for the global economy are even more complex, unsettling, and troubling.

2011-12-16 A Bad Year for Common Sense by Gerald Hwang of Matthews Asia

The phrase common sense can be a paradoxical concept in investment conversations. Seemingly imbued with a perverse, reverse meritocracy, the catchphrase appeals to investors as an intellectual leveler. It suggests, Let us think things through logically. Not only does this sound good, but what could be more egalitarian and humble? But when investment managers consider something to be common sense, be wary. We take a look at how common sense failed bond investors this year.

2011-12-16 Growth and Value: Esterline Technologies - a Leading Defense Contractor by Chuck Carnevale of F.A.S.T. Graphs

With the amount of volatility seen in the equity markets today, many people seem to believe that the old proven practices of investing in solid businesses for the long run no longer apply. But its important to remember that there is a significant distinction between true investing and speculating. And its even more important to recognize that the level of risk taken by speculators is significantly greater than the amount of risk assumed by investors.

2011-12-16 Striking Portfolio Balance with Gold Stocks by Frank Holmes of U.S. Global Investors

Back on August 22, I wrote that gold was due for a correction and that it would be a non-event to see a 10 percent drop in gold. I wrote, This would actually be a healthy development for markets by shaking out the short-term speculators. This mornings gold price of $1,590 is about 15 percent from the high, which is a little greater than predicted, but a non-event just the same. I believe the long-term story remains on solid ground.

2011-12-14 Estimating Future Stock Market Returns by Adam Butler and Mike Philbrick of Butler Philbrick & Associates

Investors would do much better to heed the results of robust statistical analyses of actual market history, and play to the relative odds. This analysis suggests that markets are currently expensive, and asserts a very high probability of low returns to stocks (and possibly other asset classes) in the future. Remember, any returns earned above the average are necessarily earned at someone else's expense, so it will likely be necessary to do something radically different than everyone else to capture excess returns going forward.

2011-12-13 Letter to the Editor by Various (Article)

A reader responds to Michael Edesess' article, The Unspoken Truth about Hedge Funds, which appeared last week.

2011-12-12 Hard-Negative by John P. Hussman of Hussman Funds

The present market environment warrants unusual concern, in my view. Based on a wide variety of evidence and its typical market implications over an ensemble of dozens of subsets of historical data, the expected return/risk profile of the stock market has shifted to hard-negative. This isn't really a forecast in the sense that shifts in the evidence even over a period of a few weeks could move us to adjust our investment stance, but here and now we observe conditions that have often produced abrupt crash-like plunges.

2011-12-10 A Player to Be Named Later by John Mauldin of Millennium Wave Advisors

There are two main points to be taken away from this week's European summit. First, the Germans really took control. This has been coming for a long time, and it's not like we haven't discussed it in these letters. Second, Britain either opted out or was shown the door, depending on your point of view. That is the real game-changer, long-term, for more than the obvious reasons.

2011-12-08 Myth vs Reality in the Hunt for Fixed Income Alpha by Matt Tucker of iShares Blog

Many investors rely on active managers to oversee their fixed income holdings. The belief is that in opaque markets, information asymmetry exists among investors and a skilled manager can use this asymmetry to outperform the market. Thats the theory. Now, what's the reality? Matt Tucker is here to explain.

2011-12-08 Some Perspective on Recent Stock Market Volatility by Team of American Century Investments

Both October and November exhibited substantial price volatility. For the full month of October, the index was up 10.9% on a total return basisthe best October performance for the S&P 500 in nearly 20 years. In contrast, for November the index was down -7.5% through Friday the 25th before a substantial rally the last three trading days of the month. Well take a closer look at the volatility of the S&P 500 from a historical perspective to provide some insights about market volatility its history, trends and causes.

2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)

The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.

2011-12-06 Two Simple Questions to Motivate Your Assistant by Dan Richards (Article)

High on the list of holiday wishes for many advisors would be a cheerful, motivated, efficient team, united in the common goal of moving your business forward. And while you have no control over many things, you have a great deal of influence over how well your team operates.

2011-12-06 Evaluating Optimum Currency Areas: The U.S. versus Europe by Ben Emons of PIMCO

While economic integration has progressed materially since the inception of the EMU, the U.S. scores much higher in terms of labor productivity, labor mobility and wage flexibility. Research shows that wage rigidity-defined as wage freezes or cuts as a fraction of total workers-is much lower in the U.S. than the eurozone. Eliminating these rigidities is crucial for the eurozones growth as an optimum currency area. Albeit painful, the intensity of the debt crisis in Europe may force a quicker progress of reform implementation, which could be a competitive advantage for the EMU in the future.

2011-12-06 Life Finds a Way by Neel Kashkari of PIMCO

Even the most sophisticated risk management models can't protect against scenarios we've never even contemplated. In this New Normal economic environment of slow economic growth, high volatility and enormous macro risks we don't believe ignoring major downside risks is prudent for equity investors. We believe investors are best served by employing a combination of three strategies to actively manage downside risk in equity portfolios to hedge against the risks they can see, and equally importantly, the risks they can't see.

2011-12-05 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Like a train wreck, the global markets have maintained a vicious shakeout whose collapse is frightening not only for the Europeans but for America and its trading partners. For the past several months we have been building a slow crescendo which, like a great symphony, has many codas yet to play. Clearly, a correction to overborrowing, overspending, and over-expecting is in place. Turbulence and volatility, both in the markets and political discourse, is the order of the day. The foundation of trust which underpins all capital exchange and political governance is nearly in default.

2011-12-05 Five Reasons to Buy Equities by Milton Ezrati of Lord Abbett

Amid all the risks today, and given the spotty history of stocks during the last 10 years or so, it is easy to understand why both retail and institutional investors continue to avoid the U.S. equity market. But understandable as their reluctance is, there are at least five good reasons to consider equities now: 1) There is good value. 2) There will be no double-dip recession. 3) Europe should survive. 4) Washington will not implode. 5) Nobody is buying equities.

2011-12-03 Time to Bring Out the Howitzers by John Mauldin of Millennium Wave Advisors

It is now common to use the term bazooka when referring the actions of governments and central banks as they try to avert a credit crisis. And this week we saw a coordinated effort by central banks to use their bazookas to head off another 2008-style credit disaster. The market reacted as if the crisis is now over and we can get on to the next bull run. Yet, we will see that it wasn't enough. Something more along the lines of a howitzer is needed (keeping with our WW2-era military arsenal theme). And of course I need to briefly comment on today's employment numbers.

2011-12-02 The Paradox of Active Fixed Income Management by Matt Tucker of iShares Blog

Amid this years volatile markets, many investors expected their fixed income holdings to be a source of stability in their portfolios. But some are finding the opposite has been true. In this blog, Matt Tucker explains how the Paradox of Active Management could be partly to blame.

2011-12-02 Beware the Falling Euro by Bill Gross of PIMCO

Neither the U.S. economy nor U.S. stock indexes will benefit from the euros decline. A declining euro means a rising dollar in relative terms, so our exports will necessarily become less competitive. During the Great Depression, the country that devalued its currency the quickest and the most was the country that was least affected by depression and that recovered the fastest. This truism will aid Euroland, and hinder the U.S. recovery.

2011-12-02 The Markets are Encouraged by the Actions of the Worlds Central Banks by Thomas S. White, Jr. of Thomas White International

Six of the worlds major central banks, led by the Federal Reserve, this week announced an expansion of a program to increase the availability of U.S. dollars to European banks and lower their cost of borrowing these funds. While this action was not designed to solve the central challenge the European governments are experiencing - the spiking interest rates they must pay when issuing their sovereign debt - it will likely calm the tangential problems this has caused within the European banking system.

2011-11-30 Seeking income from AAA rated Corporations by Kendall J. Anderson of Anderson Griggs

Earning interest from bonds may seem to be the safe approach to seeking income. But consider this: If you took the same $1,280,683.03 invested in the 5 year Treasury note and instead invested $320,200 (plus or minus a few dollars in each of our AAA rated companies), your dividends would be $38,878. Is the possibility of a dividend cut in the next five years so great that the excess cash from the dividends will not equal the amount of interest earned on the Treasury? As an owner of all four of these companies I believe the potential reward is worth the risk.

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 Do You Really Understand Rates of Return? Using them to look backward - and forward by Michael Edesess (Article)

The basic quantitative building block for professional judgments about investment performance is the rate of return. How well do we really understand it? And how can we use past rates to assess the prospects for future performance? You may be surprised to learn that 'expected return' may not be what you think.

2011-11-29 Is 2012 Destined to be a Repeat OF 2008 for Banks? by Chris Maxey of Fortigent

Mounting concerns in Europe and the failure of Congress supercommittee weighed on investor sentiment during the holiday-shortened week. As expected, the congressional supercommittee failed to negotiate a $1.2 trillion deficit reduction by Wednesdays deadline. The move triggers automatic cuts to the federal budget starting as early as this year. Near-term effects are mostly in the form of program non-renewals for example, the expiration of 99-week unemployment benefits, the payroll tax cut, and other Recovery Act stimulus.

2011-11-29 Deja Vu? Eurozone Crisis Today vs. 2008 Subprime Crisis by Liz Ann Sonders of Charles Schwab

News flow on the eurozone debt crisis is speedy, and the latest news of a fiscal pact brings cheers by stock investors for now. There are many similarities between the 2011 and 2008 crisesbut even more differences. The end of the "Debt Supercycle" has ushered in a period of heightened risk and shortened economic/market cycles.

2011-11-28 Are Corporate Balance Sheets Really the Strongest in History? by John P. Hussman of Hussman Funds

At an aggregate level, corporate balance sheets look reasonable, but are certainly not "stronger than they have ever been in history." Cash levels are elevated, but this is at best a second-order factor (with excess cash representing only a few percent of total assets), while debt remains near record levels relative to total assets and net worth.

2011-11-28 Stocks Buffeted by Euro Fears and Super Committee Failure by Bob Doll of BlackRock Investment Management

Equity markets sank sharply last week as the European debt crisis worsened and the US super committee failed to come to an agreement. Congress still has an opportunity to address deficit reduction, but of course the fact that all of this is occurring with the backdrop of the 2012 elections means that uncertainty levels are elevated. As a result, unless and until more clarity emerges, markets are likely to remain somewhat trendless in the near term.

2011-11-28 The Global High Yield Opportunity by Matt Eagan, Kathleen Gaffney and Elaine Stokes of Loomis Sayles

The shifting characteristics of US, European, Asian and emerging markets high yield assets have contributed to an expanding opportunity set. This has prompted many institutional investors to broaden their high yield investment guidelines, often giving portfolio managers the flexibility to include exposures to these markets within one portfolio. The days of silo investing, in which non-US investors sought exposure to US high yield and emerging market debt through separate mandates, may be giving way to an era of sector allocation driven by investors.

2011-11-26 Innovation Always Trumps Fear by J Michael Martin of Financial Advantage

While the stock market is behaving fearfully, we want to examine the thesis that the human capacity for innovation is an inexhaustible source of power that routinely topples seemingly intractable challenges. Our genius for betterment has flourished in the social arrangement known as democratic, free-market capitalism. Its promise of rewards for our efforts tends to subdue our baser instincts of fear and envy, and to stimulate the powerful creativity with which we are endowed. Capitalism has raised the standard of living wherever its been tried.

2011-11-26 A Micro Case For Future Stock Market Performance Optimism by Chuck Carnevale of F.A.S.T. Graphs

On November 14 Liz Ann Sonders, Senior VP and Chief Investment Strategist for Charles Schwab & Co. prepared a report that focuses on the stock markets micro opportunity. The following excerpts from Sonders report highlights several reasons supporting a rational shift in investors attitudes towards optimism. We will intersperse our own commentary among these excerpts in order to emphasize some of our key points. Our objective in sharing this information, is to support our thesis that common stocks are on sale today and, therefore, all the pessimism is more than likely already priced in.

2011-11-26 The Case for Optimism: Our Top 25 Dividend Growth Stocks are Dirt Cheap by Chuck Carnevale of F.A.S.T. Graphs

Within each challenge there has also been accompanying opportunity.And in most cases, the opportunities tend to dwarf the risks. The opportunities that we believe our recent challenges are bringing us are unnecessarily low valuations on some of our highest-quality companies.Yet, it is a fact that investors are flocking to bonds in droves at precisely a time when the risk of owning bonds is perhaps the greatest it has ever been. Most investors want to defy the cardinal rule of investing-buy low, sell high.

2011-11-26 With Rising Wages, Will China Remain a Manufacturing Hub? by Frank Holmes of U.S. Global Investors

In 2010, countries such as Hong Kong, Japan, South Korea and Germany depended on China for data processing, apparel, and iron and steel exports. Chinas largest import partners in 2010 were Japan, South Korea, the U.S., Germany and Australia. For those companies not already doing business in China, theres one dominant factor that shows they should start: the vast domestic market. Companies may be able to find a cheaper workforce in Bangladesh, India or Sri Lanka, but being located in China allows convenient access to what is rapidly becoming the worlds largest consumer market.

2011-11-25 Changing the Rules in the Middle of the Game by John Mauldin of Millennium Wave Advisors

Angela Merkel is leading the call for a rule change, a rewiring of the basic treaty that binds the EU. But is it both too much and too late? The market action suggests that time is indeed running out, and so well look at the likely consequences. Then I glance over the other way and take notice of news out of China that may be of import.

2011-11-23 Manipulated U.S. Rates See Saw Gold Prices by John Browne of Euro Pacific Capital

The Super Committee has followed the path of least resistance and maximum irresponsibility. Given the likely after-effects, the outcome should be judged as criminal dereliction of duty. It should now be crystal clear to even the most casual observer that a solution to the U.S. debt crisis will not come from within, but will be imposed, perhaps brutally, from without.

2011-11-22 Readers Questions Answered Part VIII by Mark Mobius of Franklin Templeton

Its been a while since I answered some readers questions. Thank you, readers, for all your responses to the blogthey have been highly encouraging. 1. Do you think there will be a recession globally or in emerging markets from a mid- to long-term perspective? 2. What is the impact if one or more countries withdrew from the euro? 3.What is your view on Ukraine? Ukraine is one of the more interesting markets since it has a number of viable industries with growth potential.

2011-11-22 Readers Questions Answered Part VIII by Mark Mobius of Franklin Templeton

Its been a while since I answered some readers questions. Thank you, readers, for all your responses to the blogthey have been highly encouraging. 1. Do you think there will be a recession globally or in emerging markets from a mid- to long-term perspective? 2. What is the impact if one or more countries withdrew from the euro? 3.What is your view on Ukraine? Ukraine is one of the more interesting markets since it has a number of viable industries with growth potential.

2011-11-22 Common Sense is Uncommon: Our Hidden Economic Resilience by Pamela Rosenau of Hightower Advisors

If one thing has become clear these days, macro factors increasingly determine the valuations at the micro level. Although the valuation of individual stocks used to determine the value of the market as a whole, stock selection is now subordinate to asset allocation. Even Bill Miller, the ultimate bottom-up investor, is going to lose his job after thirty years at the helm of Legg Mason Value Trust. Investors need to begin to focus on the positive signals that the market is sending us - better economic data will be a boon for the U.S. stock market.

2011-11-21 Why the ECB Does Not Bail Out Distressed Debt by John P. Hussman of Hussman Funds

Investors are not likely to be treated with a "surprise" announcement that the ECB is going to expand its purchases of distressed European debt. Any significant ECB intervention would likely follow a formal revision of EU treaties that trades greater ECB flexibility in return for more centralized fiscal control.

2011-11-18 Behavioral Finance (Why Watching CNBC Wont Make You Rich) by David Edwards of Heron Financial Group

The current confluence of strong and rising earnings, low stock price valuations and exceptionally low interest rates presents one of the best stock buying opportunities in 50 years. Most Americans will not take advantage of that opportunity because most invest with their hearts, not with their heads, and right now their hearts are filled with fear! To help our clients invest with their heads, we present this commentary on behavioral finance.

2011-11-18 Getting Granular with Emerging Markets by Russ Koesterich of iShares Blog

Given todays volatile world, it may be time for investors to adopt a more nuanced approach to investing in emerging markets. Rather than using the traditional frameworks such as emerging markets versus developed markets Im advocating that investors consider creating their international allocation on a country or regional basis. Here are two reasons why.

2011-11-17 Its All Very Taxing by Howard Marks of Oaktree Capital

But what is the fair share? How is it to be determined, and by whom? When Senator Reid says, its time for millionaires and billionaires to pay their fair share, he implies they havent been doing so thus far. How does he know? Whats the standard? If theres an objective standard for ones fair share, why does it only seem to be those from the left side of the political spectrum who say its not being paid? And if there isnt an objective standard, how can the fair share be determined? The truth is, fairness is almost entirely in the eye of the beholder.

2011-11-17 Alternative BetaThe Third Choice by Jason C. Hsu of Research Affiliates

New research by Research Affiliates finds that leading alternative beta strategies, including the Fundamental Index approach, outperform capitalization-weighted index funds over time. However, investors should closely examine their respective implementation costs, such as turnover and capacity constraints.

2011-11-17 Why The Price Of Oil Has Risen From About $75 To About $100 Over The Past Six Weeks by Team of Guild Investment Management

Many veteran observers seriously question the intelligence of ongoing policies that ignore domestic resources and keep the US sending billions of dollars a year to countries that dislike the US and actively seek Americas decline. After it's recent rise, we recommend investors take profits in oil. It can go higher but we like taking profits after a rapid rise. Also, a mechanism is being put in place that will allow financially-responsible Eurozone countries to force irresponsible members to either make necessary changes in their approach to government spending or to leave the Euro currency.

2011-11-16 As Alternative Investments Move into the Mainstream, Advisors and Investors Need to Choose Wisely by Team of Emerald Asset Advisors

We believe that having a piece of an overall portfolio that is committed to liquid alternatives is a critical component to long-term portfolio stability, capital preservation and growth. No one wants a repeat of 2008, or anything close to it. There are an abundance of liquid alternative choices available, some of which have proven themselves through various market cycles and environments. They have gone from Wall Street to Main Street for good reason. Embrace the opportunity, and you and your clients may just sleep a bit better at night during these volatile times.

2011-11-16 Ben Bernanke: The Decider by Tony Crescenzi of PIMCO

Amid great economic stress, policymakers have missed many opportunities to improve the situation and better the lives of people. The leadership void in the U.S. was illustrated by the dismal display of policy dysfunction that led the country to lose its AAA credit rating. European leaders have fared no better. Ben Bernanke and the Fed, however, have demonstrated leadership. What is both remarkable and instructive for the outlook for monetary policy is how active the Fed remains even though it has reached the zero-bound for interest rates.

2011-11-16 The Whole Truth and Nothing but the Truth... Kinda by Liam Molloy and Bethany Carlson of Galway Investment Strategy

Determination of fact can be a science but discerning meaning is an art. For example, we recently spoke one-on-one with a fund manager who we have a long history with. He in no uncertain terms told us to steer clear of his asset class for now and even made other suggestions. A week later, on the general shareholder call, the manager listed all the reasons why the asset class did well year to date, which was the truth-but not the whole truth.The audience did not alter the facts but it sure impacted the message. Investors need to go beyond the facts and find the substance.

2011-11-16 It Ain't Over Till It's OverAnd Thats Not Happening Soon by Team of Guild Investment Management

Dont expect the current crisis of budgetary deficits and spending restraints to stop any time soon. Instead, think in these realistic terms: the era of fiscal restraint and spending limits has come, and will be with us for ten to twenty more years. It is obvious to veteran observers that Europe and America are facing hard choices that will result in slow growth and increased suffering for the people. And for that we have our incompetent legislators past and present to thank. They have misused their mandates, grossly exceeded their budgets, and are loath to correct wayward behaviors.

2011-11-15 Are TIPS Really Safe and Worry-Free? by Wade Pfau (Article)

The Fed's aggressive monetary easing has many investors considering TIPS as a cornerstone of their retirement strategy. While TIPS' unique ability to protect against CPI-based inflation is undeniable, many investors neglect to consider the risks they pose, particularly for those who have not yet reached retirement.

2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)

Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.

2011-11-15 A Strategy with a 25-year Record of 25% Returns by Robert Huebscher (Article)

Indiana-based SBAuer Funds launched its inaugural mutual fund in December of 2007, after having established a successful track record with a separately managed account business. I spoke with Bob Auer, who has employed the same stock selection system used by the fund for the last 25 years, over which time returns have averaged 25% annually.

2011-11-15 The Problem with Many Performance Charts by Christophe Gauthron (Article)

Performance information conveyed on return charts from many financial sources is misleading. Investors reading these charts will be unfairly biased against income-producing assets.

2011-11-15 Capital Flows: Asias Quiet Revolution by Gerald Hwang of Matthews Asia

As markets evolve, so do regulations. The reflexive rebuke of capital controls once voiced by Western regulators has given way to a more flexible approach in times of extreme volatility. Asias regulators have observed the efficacy of volatility-dampening measures, and thus far, appear to have avoided the worst excesses. As fears continue over diminishing U.S. dollar power, Asias bonds remain attractive diversifiers for their yields and good credit ratings. However, one should never forget the volatile history of currencies in Asia.

2011-11-15 Occupy Yahoo by Jeffrey Bronchick of Cove Street Capital

This is the first part of a non-vampire trilogy which will explore some of our inner thinking on the juxtaposition of "business vs. value vs. people" in the investment decision making process-a process that has led us to recent investments in Yahoo, HP and News Corp in our non-small cap strategies. In this first installment, we will focus on Yahoo for no other reason than to honor the company's place within the pantheon of failed corporate governance.

2011-11-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

News from Europe continued to roil markets on a daily basis, but when all was said and done there were new governments in Greece and Italy (same governments just different leaders), and the stock market advanced on the week as economic data and earnings continued to impress investors. As the charts above illustrate the Dow Jones Industrial Average gained 1.4% while the NASDAQ Composite was flat as concerns over Apple held back that average.

2011-11-14 Hokey Pokey by John P. Hussman of Hussman Funds

Sound monetary policy requires sound fiscal policy, coupled with a habit of the private sector to allocate resources productively so that the government isn't forced to compensate for bad decisions. That's where the global economy has failed.

2011-11-14 The European Stutter Step by Milton Ezrati of Lord Abbett

Markets have shown a mixed response to Europes agreement on sovereign debt. On the positive side, Germany, France, European banks, and other members of the eurozone have shown more direction, control, cooperation, and concerted action than previously, and in so doing, have taken a step to avoid panic and what could easily have become a global financial meltdown. But still, Europe and, consequently, the rest of the world remain far from out of the woods. This latest step is inadequate. To get a grip on the crisis, the ECB will need to add its financial resources.

2011-11-11 The Beginning of the End of Fiat Money by John Browne of Euro Pacific Capital

Last week, the G-20 meetings did not produce an expanded bailout fund for the eurozone. While this may bode well for the long-term solvency of the member-states (moral hazard and all), it has also triggered a market reaction that I expect to help destabilize the common currency. Yesterday's market moves suggested that this development is good for the dollar and bad for gold. Allow me to step back from the stampeding herd to evaluate whether they are, in fact, moving in the right direction.

2011-11-11 ASEAN Cooperation by Tarik Jaleel of Matthews Asia

Given the difficulties facing the European Union, there tend to be very few die-hard proponents of economic integration, or more specifically, monetary integration. This makes the pledge by the Association of Southeast Asian Nations to move ahead with forming an ASEAN Economic Community (AEC) a surprising phenomenon. The establishment and prioritization of a move toward a common market by 2015 with free movement of resources comes in response to increased competition posed by China and India.

2011-11-10 France, Germany have"Intense Consultations" on Smaller Eurozone: Breakup Inevitable, but How? by Mike "Mish" Shedlock of Sitka Pacific Capital Management

Realization the Eurozone is no longer tenable is at long last at hand. In fact, "intense discussions" have been underway for months but are just now admitted to by senior EU officials. The Eurozone is a failed experiment. A breakup is inevitable just as it has been from the beginning. Structural flaws were too great, built up over the years. No currency union in history has ever survived unless there was also a fiscal union.

2011-11-08 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)

Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'

2011-11-08 A Unique Way to Help Clients Close the Retirement Gap by Dan Richards (Article)

Clients facing a shortfall in retirement savings can bridge that gap in many ways. But one technique is often neglected: spending reductions - even small ones - in their everyday lives. A new web site gives clients the tools to quantify and manage those reductions.

2011-11-08 Letter to the Editor by Various (Article)

A reader responds to Michael Edesess' article, The Small Cap Falsehood, which appeared last week.

2011-11-08 Is the U.S. to China what Greece is to Germany? by Colin Moore of Columbia Management

As the U.S. and peripheral Europe each try to adjust their economies to lower budget deficits, they risk recession over the next year or two. However, the impact on Germany and China may be more prolonged. Each region will struggle or refuse to adapt to a greater balance between external investment/export growth and domestic demand. An important conclusion of the book The American Phoenix Why China and Europe Will Struggle After the Coming Slump, as its title suggests, is that the U.S. will eventually deal with its issues and emerge relatively strong compared to Europe.

2011-11-08 Known Unknowns by Neel Kashkari of PIMCO

We believe investment managers can analyze numerous data sources and apply lessons learned from past economic cycles to make assessments about the global economic outlook. These managers can make reasonable judgments about asset classes over the long term and, through rigorous bottom-up research, develop an edge regarding the outlook for individual companies. However, the market is much better at aggregating all the information that could affect any of the thousands of companies in the stock market than any investor could possibly be. Hence predictions are likely to be wrong.

2011-11-07 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

A violent shakeout in global equity bourses is reverberating to U.S. shores, and exacerbating the fear that a second global credit/equity crisis is likely. In response, the domestic equity markets shook significantly last week, despite intraday bargain-hunting and attempts to forget altogether an unresponsive fundamental framework. In hindsight, my call towards a more conservative asset allocation model this past summer was fortuitous. The financial markets dont trust the underlying fundamental statistics, and the public doesnt trust the financial markets.

2011-11-07 Better in the U.S.; Worse in Europe by Charles Lieberman of Advisors Capital Management

Economic data show that the domestic economy has regained its footing after a weak performance early this year, even as political considerations in Europe delay resolution of its credit crisis. This is particularly frustrating because the basis for addressing the crisis is widely shared and agreed upon. Growth prospects have improved sharply over the span of just a few weeks. Economic growth forecasts were being downgraded at a rapid pace a month ago and forecasts of recession had become common. Instead, Q3 growth exceeded Q1 and Q2 combined and another solid advance in Q4 now seems likely.

2011-11-07 Fragile China by Milton Ezrati of Lord Abbett

There is a certain irony in this situation: Washington seems ready to start a trade war with China, while investors, for other reasons, worry over a crackup in this critical economy and crucial engine of global growth. And there is reason to worry about China. Inflationary pressures have grown, threatening to undermine that economys competitive edge, slow or stop the pace of economic growth, and jeopardize asset values. Chinas anti-inflation policies independently threaten economic growth prospects and also asset prices.

2011-11-05 The Globalization of Protest by Joseph E. Stiglitz of Project Syndicate

With globalization and modern technology, social movements can transcend borders as rapidly as ideas can. And social protest has found fertile ground everywhere: a sense that the system has failed, and the conviction that even in a democracy, the electoral process will not set things right at least not without strong pressure from the street.

2011-11-05 Two High-Yield Choices by Chuck Carnevale of F.A.S.T. Graphs

This article is the second in a series of articles designed to elaborate on the proper utilization and understanding of the PE ratio as an important investing metric. Our first article in this series looked at how the PE ratio could be used to determine overvaluation. With this article we are going to review two companies where each is fairly valued and each has similar current PE ratios. Moreover, both companies offer yields above 3 % which is greater than is available on the 30-year Treasury bond (current yield 30-year Treasury bond 3.02%).

2011-11-04 Consumer Confidence and Forward Returns of the S&P 500 by Kendall J. Anderson of Anderson Griggs

The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell, as the most important, yet the most difficult to follow, as it is almost impossible to accurately judge the state of pessimism. However, measuring the current state of pessimism has been made much easier due to The Conference Board, a global independent business membership and research association. The Conference Board releases the Consumer Confidence Index each month, which is based on a probability-design random sample survey conducted by Nielsen.

2011-11-03 Households Continue to Reduce Debt and Embrace Frugality by Team of American Century Investments

Many things are different about the current economic recovery compared with past. One of the most important differences is the lack of any meaningful resurgence in consumer spending. Households continue to reduce their debt levels, which can be good for our long-term economic outlook. But in the near term, deleveraging means consumers cannot play the same role they have of driving strong economic growth by a surge in spending that satisfies their deferred consumption during the downturn. Well take a look at how households and consumers are faring in their efforts to reduce debt.

2011-11-03 Poland's Power Play for Energy by Frank Holmes of U.S. Global Investors

Poland is setting the stage to become a rising player in the European natural gas market. Europe has long been reliant on Russia for its supply of natural gas, but domestic discoveries of shale gas might soon catapult Poland to the forefront of the energy landscape. Morgan Stanley cites several reasons for Polands likely success: a large resource base, gas pricing that is almost twice the pricing of the U.S., a developed gas market, and political support that welcomes foreign firms and hydraulic fracking permits compared to other countries in Europe.

2011-11-02 Amazon is a Great Growth Stock But Extremely Overvalued When its PE Ratio is Interpreted Properly by Chuck Carnevale of F.A.S.T. Graphs

We believe Amazon potentially has a bright and prosperous long-term future. Therefore, if we could find Amazon.com Inc. priced at a sensible valuation, we would be motivated to include it into our growth portfolios. But since we fervently believe in the sage advice that price is what you pay, value is what you get, we do not believe in investing in even the best of companies when they are being overpriced by the market. When the PE ratio is properly applied, we believe that it will protect the longterm investor from making the obvious mistake of paying too much for even the best company.

2011-11-02 A Dinner with Drug Reps by Dan Ariely of Predictably Irrational

Janet Schwartz of Tulane University and I recently spent an evening with a few pharmaceutical reps, men who used to be in the business of selling a wide range of drugs to treat all kinds of diseases and conditions, from fibromyalgia to depression to restless leg syndrome. As drug representatives, they would go from doctor to doctor attempting to convince physicians to prescribe their companys drugs. How? They would typically start by passing on informative pamphlets and give out products like pens, clipboards and notepads advertising their drugs.

2011-11-01 The Small Cap Falsehood by Michael Edesess (Article)

The supposed outperformance of small cap stocks is a foundational precept on which many respected asset managers have staked their expertise over the years – foremost among them, Dimensional Fund Advisors. A growing body of research, however, shows no such advantage for the last 30 years and, now, a new study seems to have proven that the supposed small-cap advantage may have never existed in the first place.

2011-11-01 A Better Way to do Financial Planning by Robert Huebscher (Article)

Simplicity is dangerous when it comes to financial planning. Easy-to-use tools that project your retirement savings based on minimal inputs such as your income and savings rate amount to a “bait-and-switch,” according to Larry Kotlikoff, a Boston University professor of economics. To properly prepare for retirement, one should focus on maintaining a constant standard of living throughout their life – what economists call consumption smoothing.

2011-11-01 Five Tips from Accountants on How to Get Referrals by Dan Richards (Article)

Over a recent lunch, three partners in a small accounting firm told me how financial advisors should go about getting referrals.

2011-11-01 Regulatory Armageddon by Bob Veres (Article)

Suppose you were somehow able to convince 40 advisors, who are all well-known thought leaders in the profession, to gather in the same room for a six-hour brainstorming session. The goal: to identify the single most important thing that the financial planning profession should be thinking about now. What do you think they'd come up with? Fasten your seat belts, because this may be the most important report you'll read all year.

2011-11-01 Why Invest? by Adam Jared Apt (Article)

Investing has its rational justifications, but like any human activity, it's contingent upon history. American society has come to regard investing in stocks and bonds as a matter of personal responsibility and even an obligation, which in part explains why we invest.

2011-11-01 Economic Perception or Reality? by Mike Boyle of Advisors Asset Management

October is on track to post the best monthly S&P gain of this current recovery, the first double-digit monthly gain since December 1991 and the best October gain since 1974. Though we felt the equity markets were overdue for a bounce we do feel we are now ripe for a bit of consolidation before they move higher. We think as perceptions begin to align a bit more with reality that the S&P 500 should be able to move towards the April highs We recommend investors focus on the themes of quality dividends, quality growth and quality balance sheets that we have been highlighting for quite some time.

2011-11-01 Follow the Cycle by Richard Bernstein of Richard Bernstein Advisors

It remains a mystery to us as to why investors believe each cycle is different from other cycles. The title of a very popular book right now is "This Time is Different" Some cycles are stronger and some are weaker, and some cycles last longer than others. However the investment implications at different points in the cycle remain remarkably consistent. With the exception of bubbles, we have yet to come across a truly 'different' investment cycle. Most important, the typical rotations within the global financial markets are following their normal pattern even during the current cycle.

2011-10-29 Missing the Forest for the Trees? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Earnings season was good and economic data in the US has improved. Robust growth is unlikely in the near future, but the economy is improving. Investors appear to be unconvinced that the picture may be brightening. Inflation continues to run higher than we'd like to see but sustainable price gains are unlikely. The Fed continues to be extremely accommodating. Italy has the potential to be a much bigger problem than Greece. A tentative agreement has been reached for Europe, but hopes for a true long-term solution remain thin. China is likely to suffer no worse than a soft landing.

2011-10-28 Et tu, Berlusconi? The Daunting (But Not Always Insuperable) Arithmetic of Sovereign Debt by Rich Mattione of GMO

This paper sets itself two tasks. The first is to construct a simple model that would arithmeticize the dynamics of sovereign debt so as not to get hung up with all of the acronyms and programs designed to save the world. The second is to put this into the context of the European sovereign debt problem and hazard some opinions as to which options can work, and which cannot. Grand solutions may yet come, but they probably will not come soon enough. Now is the time to separate the daunting from the insuperable, and to fix both sets of nations.

2011-10-27 Salami Tactics by Andrew Bosomworth of PIMCO

Repeated attempts to solve the eurozone's sovereign crisis have failed, reflecting a coordination problem among its fiscal authorities and between the ECB and governments. Markets will not return to supporting the eurozone as it stands, signaling the EMU's leaders to choose one of two solutions: downsize to a smaller, stronger group of countries or adopt a federation with political and fiscal union. A comprehensive solution not only needs the right tools in place, but also requires a credible commitment with regard to sequencing and executing the long-term plan.

2011-10-26 SAP AG - A European Software Giant Worth Owning by Kendall J. Anderson of Anderson Griggs

If you want to achieve above average market returns then you cant just invest in an index fund. For those willing to venture out of those index funds there are three principles you should keep in mind: You will have to accept less diversification than the market; You must recognize that short-term speculative trading normally ends with your money in someone elses pocket; You must be willing to take a contrarian stance against the majority of investors. So what would be considered a contrarian play in todays market? Based on the flow of funds out of common stocks, it is common stocks!

2011-10-26 Who Benefits from Eurozone Progress? Hint: Look North, Not South by Russ Koesterich of iShares Blog

Many investors are asking this question as speculation increases that policy makers may be moving closer to containing the crisis. While you might assume the answer would be Italy, Spain or Greece, I have a different take. In short, look to the north, not the south: Perhaps somewhat surprisingly, countries in Northern Europe not directly involved in the sovereign debt crisis will likely benefit disproportionately from any credible progress.

2011-10-26 Occupy Wall Street: A Threat to the Dollar? by Axel Merk of Merk Funds

Both T.Partiers and Occupyrs say this is all crazy and must stop-albeit they have different prescriptions. However rather than stopping policy makers are ever more engaged. The best of intentions are creating an avalanche of unintended consequences. Voting with their feet to get their voices heard, the Twitter revolution wont stop with the Arab spring but sweep across America in its own incarnation.The issues are complex, the answers appear so easy; we dont want to belittle the movements, but see a trend that fosters politicians capable of distilling their political message into a tweet.

2011-10-25 A Jeopardy Champion and our Economic Future by Robert Huebscher (Article)

Several years ago, a group of IBM scientists watched the television quiz show Jeopardy at a local bar and decided that they could develop the technology to beat a human contestant. They succeeded, and the system they built, Watson, is situated at the leading edge of a wave of breakthroughs in artificial intelligence that will lower health care costs and accelerate economic growth.

2011-10-25 Miccolis, Bengen and Evensky on the New Challenges in Portfolio Construction by Michael Skocpol (Article)

Conventional wisdom about the best way to construct a portfolio has been discredited, according to three industry thought leaders – Jerry Miccolis, Bill Bengen and Harold Evensky. Each has distinct visions of the ways in which advisors should build portfolios in the wake of the financial crisis of 2008, but all three agree that traditional methods must be scrutinized.

2011-10-25 ASEANHow Different is it This Time? by Kenneth Lowe of Matthews Asia

ASEAN nations have recently seen increases in foreign ownership, and many show attractive demographics and the potential for strong economic growth. But with ASEAN nations having been a root cause and major casualty of crises past, investors may be asking: How sustainable is this? This month Kenneth Lowe, CFA, takes a look at how ASEAN got where it is today, and what challenges may still lie ahead.

2011-10-25 Whats next for Libya? by Tom Abrams of Columbia Management

Qaddafi has left the stage so we now turn our attention to the myriad of subplots that is Libya in transition. When we think about the oil markets and the impact of Libya's return to production and exports, we invariably turn to both the political possibilities in the country as well as the physical state of their oil and gas infrastructure. We believe the future pace of political progress in Libya and the pace of the recovery in oil production will be related. More political agreement on the disbursement of oil revenues would likely mean a more coordinated and quicker recovery in production.

2011-10-25 Time to Put Your Shades On by Pamela Rosenau of HighTower Advisors

The paradox of the stock market is that higher prices attract buyers, while lower prices attract sellers. This herd-like behavior is confirmed by peers and exaggerated even more now by social media outlets. The most important thing to acknowledge in these markets is to be tactical and buy on weakness. In our current yield starved environment, I have focused on growth and income (two such scarce resources these days) in both dividend paying large cap stocks and energy infrastructure MLPs.

2011-10-24 Stocks on Sale by Milton Ezrati of Lord Abbett

In this horribly uncertain investment climate, one thing at least is clear: American equity markets have priced themselves for disaster. Stocks by almost any measure (except those carefully designed to make them look bad) do look cheap, especially relative to bonds. Such valuations, apart from what they say about sentiment, give markets upside potential even in the absence of full-fledged good news. All they need for a positive response is an abatement of the flow of bad news. And although it is possible that the stream of bad news will continue endlessly, it is not likely.

2011-10-24 The Valley of Debt: Will You Walk Away from the Fed and Its Money? by Tad Rivelle of TCW Asset Management

Regardless of your philosophy, financial crises do test the mettle of the investor and judged this way, the past three years have been among the most challenging period in decades. Perhaps because crises mean different things to different groups of investors, we have lived with the ultimate traders market, one alternately characterized by the risk on or the risk off. Interestingly, the level of the Dow Jones is within just a few points of where that index started the year. Had you just returned from the Antarctic, you might have concluded that 2011 was a snoozer.

2011-10-21 Libya, Ghaddafi and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)

While the US and Europe have remained fixated on the simmering sovereign debt crisis in Euroland, the Arab world has been experiencing waves of demonstrations, protests and civil wars that have seen the fall of three major regimes thus far in 2011, with several others struggling to find equilibrium. The underlying forces behind the Arab Spring are complex and vary from country to country. But a key factor is demographics, as a glance at the population pyramids below suggests.

2011-10-21 How to Succeed at Auctions by Herbert Abramson and Randall Abramson of Trapeze Asset Management

We believe weve suffered more from the illiquidity and greater volatility of many of our smaller cap holdings, but thats where we are finding the best values with the greatest potential. When the markets recover, that same illiquidity should boost performance on the way up. Maybe sooner than is believed.

2011-10-19 Is the Debt Super Committee Doomed to Fail? by Gary D. Halbert of Halbert Wealth Management

The Super Committee has been meeting behind closed doors for over a month, but the members have thus far said very little about any progress being made. The Committee is back in the news now because last Friday was the deadline for submitting ideas or plans for trimming at least $1.2 trillion from federal spending over the next 10 years. In other words, its now time for the Super Committee to get down to some real work.

2011-10-19 Fixed Income Investment Outlook by Team of Osterweis Capital Management

We continue to favor short-term high yield securities.While the high yield market has generally been under pressure due to fears of lower economic growth, lower gross domestic product growth does not necessarily translate into weaker credit fundamentals. In light of all the uncertainty in the market, we have generally reduced our exposure to convertible bonds and have continued to favor bonds with high coupons that we think are likely to be refinanced before maturity.In addition we are keeping some cash on the sidelines so that we are in a good position to buy as future opportunities arise.

2011-10-19 Five Policy Prescriptions for Europe by Tom Fahey of Loomis Sayles

The European sovereign debt crisis is chronic. It can not be resolved until countries can demonstrate the ability to grow and improve their budget deficits. The immediate need is to stop Europe from hemorrhaging risk into the global financial markets. That can only be done by the ECB because it is Europes most effective and high profile euro-area institution and the banking systems only lender of last resort. Until the ECB steps up to commit sufficient liquidity, the overall septic conditions of European risk will likely continue to infect the global capital markets.

2011-10-19 Thinking Long-Term by Kendall J. Anderson of Anderson Griggs

We will never be able to remove all the news that influences our investment decisions, nor should we. What we can do is recognize that rapid trading and market timing may work in the short-term, but has reduced individual returns over the long-term. We can recognize that markets regress to the mean over long periods of time, but that may be much longer than you have or want. Our approach is an attempt to reconcile the two. We are fully aware that at times, stock and bond prices exceed value and at other times they are well below value.

2011-10-19 All That Glitters Is Not a Cash Equivalent by Jerome M. Schneider of PIMCO

The latest volatility has investors asking questions about the securities they own, in particular probing any exposures to European issuers. Cash investors often over-allocate to money market and bank investment vehicles, while the most attractive risk-adjusted opportunities might fall just outside of this space. We currently see opportunities in short-dated, non-financial BBB-rated corporate bonds, along with dollar-hedged bonds and bills issued by sovereigns with solid balance sheets.

2011-10-19 Developed Europe: Economic Review September 2011 by Team of Thomas White International

With the world anxiously watching, Developed Europe battled against its sovereign debt problems on several fronts all through September. Investors became increasingly concerned as the month progressed because Euro-zone leaders delayed making a decision on paying Greece the next installment of its bailout package, despite the beleaguered country declaring that it would run out of money by mid-October without the aid tranche. News reports from the region indicated that the installment was being delayed to pressure Greece into speeding up crucial structural reforms.

2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)

Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?

2011-10-18 How to Fix Our Dysfunctional Tax Code by Robert Huebscher (Article)

Give an economist a clean slate, unencumbered by political ideology or allegiance, and charge him or her with designing an ideal tax system. What emerges will look nothing like the dysfunctional personal and corporate tax codes now administered by the IRS. Instead, it could resemble Larry Kotlikoff's 'purple tax plan,' one of five economic reform plans he designed to appeal to both Democrats and Republicans alike.

2011-10-18 Economic Data Receives Another Dose of Positive News by Chris Maxey of Fortigent

Not only was key economic data, such as retail sales, better than expected, but also the start of earnings season brought about a number of positive corporate earnings surprises.An important caveat is that analysts earnings estimates were routinely cut over the past several weeks, leading to a lowered bar and higher likelihood of upside surprise.Regardless, markets appear pleased by the news, at least for the time being. Over the latest week, each of the major indicators, excluding consumer sentiment, came in above consensus.

2011-10-18 Three Strategists Speak Out & Rare Apology From PIMCO by Scott Colyer of Advisors Asset Management

Quality in bond land is expensive and promises little return for a fair amount of risk. The Fed is punishing Treasury investors with historically-low yields. We believe the only way to generate a return in these markets is by price appreciation because these notes have very little in the way of coupon income. This lack means that they will trade more like zero coupon bonds when, and if, the Fed ever removes the buying pressure on that market. History has shown us that the market will move before the Fed does. Our discipline has thus far beaten our benchmark.

2011-10-18 Volatility Rears its Ugly Head by Jeremy Blackman of Hester Capital Management

The major debate in the financial markets today revolves around whether or not the U.S. is going to experience a double-dip recession. We do not expect a recession, but if that does happen it should be a shallow one. We remain cautiously optimistic that the politicians in the US and Europe will eventually do the right thing as the consequences of not acting in a prudent and responsible manner are not pretty. We anticipate that markets will continue to be volatile until Europe finds resolution for its problems and until politicians across the globe learn to compromise across party lines.

2011-10-17 Europe: Just Getting Warmed Up by John P. Hussman of Hussman Funds

At present, the S&P 500 is again just 10% below the high it set before the recent market downturn began. In my view, the likelihood is very thin that the economy will avoid a recession, that Greece will avoid default, or that Europe will deal seamlessly with the financial strains of a banking system that is more than twice as leveraged as the U.S. banking system was before the 2008-2009 crisis.

2011-10-17 The Happiness Dilemma by Kevin Feldman of iShares Blog

Princeton professor Angus Deaton studies the impact of the financial crisis on Americans state of mind. The good news? We may be unhappier than we should be. We all know that the financial crisis has been difficult, and I imagine its made most of us unhappy at various times. 60% of American households saw their wealth decline between 2007 and 2009. Deaton wanted to examine more precisely the relationship between the crisis and American happiness-self-reported subjective well-being, or SWB. Which parts of the crisis hit people the hardest?

2011-10-17 Stocks on Sale by Milton Ezrati of Lord Abbett

In this horribly uncertain investment climate, one thing at least is clear: American equity markets have priced themselves for disaster. Stocks by almost any measure (except those carefully designed to make them look bad) do look cheap, especially relative to bonds. Such valuations, apart from what they say about sentiment, give markets upside potential even in the absence of full-fledged good news. All they need for a positive response is an abatement of the flow of bad news. And although it is possible that the stream of bad news will continue endlessly, it is not likely.

2011-10-14 European Financial Crisis: Approaching Dnouement by Komal Sri-Kumar of TCW Asset Management

The French word dnouement connotes a form of final resolution of a problem or an issue. We may be approaching such an end point in the European debt crisis. After repeated bailouts of debt-ridden countries through the imposition of austerity and adding to debt levels-actions which only worsened the countries debt ratios-European leaders are discussing seriously, for the first time, the possibility of significant haircuts for creditors. Kicking the can down the road, the trite phrase used to describe the European policy reaction, may no longer be the path for debt-ridden economies.

2011-10-14 Most of the 10 Best Performing Dow Jones Industrial Stocks are Great Buys Today by Chuck Carnevale of F.A.S.T. Graphs

When people refer to what the stock market is doing, they are more often than not speaking about the Dow Jones Industrial average. This leading index of 30 high profile stocks serves as a proxy for the overall health of both the economy and the stock market. We have long held that thinking in generalities can be harmful. When dealing with averages the numbers we associate with it represent an average of the whole group. It's important to remember, that the individual companies or components can have materially different results and even attributes than what we glean from the average itself.

2011-10-14 The Bottom Line #6 by Paul Azeff and Kory Bobrow of Euro Pacific Capital

What we can learn from the past is that in the current environment, being nimble, buying at major fear-induced selloffs and, even more importantly, selling into strength, is a strategy that will outperform the buy-and-hold crowd. For nimble traders, volatility represents opportunity. Having someone by your side to help calm the fear and quell the exuberance helps the returns a lot. Its when you have volatility like weve seen of late, or after the Great Depression, or experienced in the Japanese market over the last 20+years, when you really need a good execution strategy to stay profitable.

2011-10-12 Prof. Schiller and CAPE, Maybe Correct Generally, But Specifically Wrong: The Market is Cheap by Chuck Carnevale of F.A.S.T. Graphs

This is the first of what will be a series of articles arguing in favor of investing in and owning quality common stocks now and for the foreseeable future. On an absolute basis, on real numbers precisely calculated, we believe that the markets in general are attractively valued today. The F.A.S.T. Graphs S&P 500 graph calculation is a current fact. Therefore, we believe that some of our finest and highest quality businesses are currently priced at the best valuations that we've seen in many years. Low valuations, represent an excellent opportunity for investors.

2011-10-07 The Legacy of Steve Jobs and the Record of Apple will Live On by Chuck Carnevale of F.A.S.T. Graphs

The first time Steve Jobs left Apple in 1985 he was fired. In short, his partners in upper management and the Board of Directors at that time did not share Steve's vision for Apple. His friend, Larry Ellison, CEO of Oracle Corp., recently quipped upon the firing of another high profile CEO: That it was the second dumbest decision by a Board of Directors next to Apple's firing of Steve Jobs. What follows, will be a review of the consequences of Steve Jobs firing, followed by what he accomplished upon his return.

2011-10-07 U.S. Awakening To Its Domestic Energy Potential? by Monty Guild of Guild Investment Management

Geologists have known about major reserves of oil and natural gas within the continental U.S. for a very long time, but the ability to access these massive energy reserves was limited in the past. These resources lie in and under rock, miles below the surface and were thought to be impossible to bring to the surface economically. This has all changed with new technologies developed over the past decade. The word is getting out to the public about the extent of these energy producing fields that are located in many areas of the country.

2011-10-07 Market Turmoil by Richard Michaud of New Frontier Advisors

A promising market expansion was stilled by ugly politics in Washington and Brussels. While both domestic and European crises were largely political rather than economic, the consequences rattled investor confidence in capital values worldwide. As in the U.S., agency issues are the root cause of the European debt crisis. The U.S. subprime mortgage crisis resulted from agents paid to issue mortgages without considering the ability of borrowers to pay back the loans. Similarly, European bank agents ignored the default risk of euro-based Greek government.

2011-10-07 The Hunt for (Sustainable) Yield by Team of Emerald Asset Advisors

In any low-rate environment, it is easy to be seduced by any investment that can deliver high yields. But to achieve a consistent total return, you need to carefully weigh the risks and focus on investments that can deliver attractive yields that are sustainable, while also providing the potential for higher income in the future. Our answer thus far has been a combination of sources. Given the current miniscule yield environment, we expect these higher-quality asset classes to move the income-generation meter at least a little for client portfolios without exposing them to inordinate risk.

2011-10-07 Nowhere to Hide in the Third Quarter by Richard Skaggs of Loomis Sayles

The S&P 500 has traded within a range of about 1,100 on the low end to 1,230 on the high end since the sharp decline of July and August. Complicating the outlook, however, is the fact that many stocks and indices have made new lows since their early August lows, suggesting the S&P 500 could do the same. Fundamental conditions make the 2012 earnings outlook far cloudier than it was one or two quarters ago.

2011-10-06 CEOs More Negative on the Economy & Jobs by Gary D. Halbert of ProFutures Investments

Consumer spending accounts for apprx. 70% of GDP, so the fact that the confidence index remained very low once again this month does not bode well for a significant upturn in the economy in the 3Q. Doug Short of Advisor Perspectives created another very interesting table in his latest report: Using historical data from the Conference Board, Doug illustrates the average levels of the Consumer Confidence Index during each of the last five recessions. As you can see, consumer confidence in the recession and financial crisis of 2007-2009 was the lowest of any time in the last 30 years.

2011-10-06 Steve Jobs, RIP by Brian S. Wesbury of First Trust Advisors

Steve Jobs and Apple were relentless in making their technology useful to everyone. And even a person who did not initially find their products helpful has been brought into the fold. We all know his storyfounder of Apple, drummed out of the company, but brought back in to save it. He was the consummate entrepreneur. The world needs more Steve Jobs. The world is celebrating his life today and mourning his passing. I will always remember him as an entrepreneurthe one who didnt give up until he found a way to get his products in my hand and convince me that they could help make me better.

2011-10-04 Value Investing Lessons from Moneyball by Laurence B. Siegel (Article)

Is baseball a metaphor for life, as many literati have suggested, or for value investing? Michael Lewis' 2003 bestseller Moneyball argues the latter. More recently, the book has been adapted to make a thoughtful movie that will be of special interest to investors who believe in trying to find hidden bargains.

2011-10-04 Fixed Income ETFs and Yield: A Game of Catch Up by Matt Tucker of iShares Blog

Whats amazing to me is how many different types of yield existfor a bond or bond fund you could quote the yield a half dozen ways and each would be different. Understanding which yield to use can be confusing. Its easy to be enticed by what looks like the highest, especially in this low rate environment where investors are searching for ways to extract extra income from their bond holdings. I want to highlight three of the most common yields investors see for fixed income ETFs, explain how they are connected and show how they have a tendency to catch up with one another over time.

2011-10-04 S&P 500 to gain 10.48% by year end: Reuters Poll by Kendall J. Anderson of Anderson Griggs

According to the poll the S&P 500 index is expected to rise slightly from current levels to 1,250 by year-end, they further state that these expectations are a huge 150-point downgrade from the 1,400 consensus three months ago. We wont question the validity of their poll, results, nor the downgrade in consensus. What we want you to do is look at the results for what they are: a positive for intelligent investors. I hope after a period of thought, intelligent investors will choose as I haveto invest any savings for the long-term by purchasing common stocks of large quality companies.

2011-10-03 Six Pac(k)in' by Bill Gross of PIMCO

Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. If global policymakers could focus on structural as opposed to cyclical financial solutions, New Normal growth as opposed to recession might be possible.

2011-10-01 Tough Choices, Big Opportunities by John Mauldin of Millennium Wave Advisors

There is a pattern, and the United States is no different than Greece or Ireland or Italy or Japan or any other country in history. Highly indebted governments, banks, or corporations can seem to be merrily rolling along for an extended period, when bang! confidence collapses, lenders disappear, and a crisis hits. There's a limit to how much the bond market is going to let us borrow. As we approach that limit and we're not there yet, we have time, thank God we can make choices about how we want to deal with the problem. But the problem is too much debt and too high a deficit.

2011-09-30 Don't Panic on Metal Tumble by John Browne of Euro Pacific Capital

Given the swift rise of gold and silver during the first half of 2011, precious metals were due for a correction especially following the parabolic increases that we saw in August. Markets never go up in a straight line, and often the biggest downward movements occur in bull markets. These sharp movements are common in gold, especially during short periods of financial panic. For instance, gold fell more than 25% in the second half of 2008, and almost 15% from February to April 2009. Yet after the dust settled in those earlier corrections, gold resumed its upward march with even more gusto.

2011-09-30 ProVise Bullets by Ray Ferrara of ProVise Management Group

As the Congressional Committee of 12 meets to figure out what to do about spending and taxes, we thought you might find the following of interest: Again, some people think it would be a good idea to distribute purchasing power by taking more millions of citizens off the federal income tax rolls entirely. While everybody wants relief from high taxes, there are at least two things wrong with this proposal.

2011-09-29 European Banks Under Pressure by Team of American Century Investments

On the surface, the European banking sectors status in the fixed-income markets should be on the upswing. The Basel III Accord strengthened capital requirements for banks and also set stricter guidelines for liquidity and debt. Helping reduce the risk profile of the banking sector, and this would normally be attractive to fixed-income investors. However, bond investors have had the opposite reaction, shunning the bonds of European banks in recent months. The gap between bank bonds and government bonds recently rose to levels not seen since the height of the 2008 Financial Crisis.

2011-09-29 Grease (Greece) is the Word by Bill Smead of Smead Capital Management

You might think that the countries in Europe like Portugal, Ireland, Greece and Spain are the source of the current consternation in the US stock market. We believe that Europe is peripheral to the core issue. American investors have spent the last ten years falling in love with the BRIC trade and feeding an infatuation with the global synchronized economy and the emerging consensus surrounding global stocks/bonds. In our opinion, it is time to go back to conventionality and leave the BRIC trade before its time is gone and investors put their capital back in motion.

2011-09-27 Reexamining Bill Gross' Decision to Sell Treasury Bonds by Geoff Considine (Article)

Bill Gross made headlines in February by asserting that Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund. The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross' decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.

2011-09-27 When Greece Defaults by Keith Goddard (Article)

The Greek default is indeed inevitable, but there remain two possible ways the world may learn about it, and financial markets will react very differently depending on which of these two processes for default occurs.

2011-09-27 Germanys Inner Struggle Stifles EU Action by John Browne of Euro Pacific Capital

The leaders of Europe have been criticized for their inability to deal expeditiously with the Eurozone debt crisis. Many view the paralysis through the prism of self interest: taxpayers of the EUs creditor nations are simply unwilling to finance spending of the blocs debtors. But the hesitancy can also be ascribed to the growing voter dissatisfaction with the entire structure of the Eurozone, and in particular a chasm between German voters and German leaders.

2011-09-26 Not Over by a Longshot by John P. Hussman of Hussman Funds

Unless we observe a robust improvement in market internals from current levels, which appears doubtful given further confirmation of oncoming recession, the broad ensemble of data we observe doesn't offer much latitude to establish a constructive position based on, say, weak technical reversals or other scraps that the markets might toss out in the near term. The first 13 weeks of a recession are among the most predictably hostile periods for equities in the data. We'll take our evidence as it comes, but the primary risks - recession, default and global credit strains - continue to increase.

2011-09-26 Full Twist, With 2.0 Degree of Difficulty by Charles Lieberman of Advisors Capital Management

The Feds new twist strategy applies a new (or very old) tool to lower long-term interest rates to promote easier financial market conditions and economic growth. The equity market sold off nonetheless. Investors seemed to be reacting to the Feds economic bearish assessment, which suggested that the risks of recession had increased. However, the Fed was merely acknowledging what most analysts had been saying over the past few months. The key message is that the Fed remains committed to doing whatever it can to promote a healthier pace of growth and that its actions speak louder than words.

2011-09-26 Economic Recovery Starts with Bank of America by Team of Institutional Risk Analyst

In this issue we provide a "how to" roadmap for the restructuring of Bank of America (BAC), this in response to a number of yowls of protest, spurts of indignation and outright do-not-knows. For those who've not done so, please read "A not so fictional FSOC memo for Bank of America" where we introduced the home audience to the concept of a parent-only view of BAC and other bank holding companies ("BHCs"). The restructuring of BAC creates a huge positive for credit creation in the US housing sector, the necessary condition for an economic recovery.

2011-09-23 5 Exceptional Dividend Growth Stocks - Lower Volatility and Higher Total Return by Chuck Carnevale of F.A.S.T. Graphs

For many people these are troubled times where fears about our economy and the stock market are at a heightened state. Stock price volatility is higher than we've ever seen it, adding to investor nervousness. Therefore, we searched for a safe place for conservative investors to invest. Our due diligence identified five dividend growth stocks that possess stringent quality characteristics, while at the same time have produced strong above-average historical returns. But more importantly, each candidate had to have future consensus earnings estimated growth rates greater than the S&P 500.

2011-09-20 Ya Gotta Believe! by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Isaac Meng of PIMCO

Central banks around the world consider easing monetary policy amid concerns of a global economic slowdown. At least one major central bank, however, appears to be taking an opposite stance: China. Policymakers there are concerned about inflation, excessive credit and property speculation. In other emerging nations, central bankers are generally poised to ease, but have less ammunition than they did after Lehman collapsed.

2011-09-20 Counterparty Risk in Large Total-Return Funds by Robert Huebscher (Article)

We can add another to the list of concerns facing advisors: counterparty risk – a potential loss from the failure of a bank or broker-dealer. Underscoring this threat, DoubleLine's founder and chief investment officer, Jeffrey Gundlach, recently warned advisors to avoid all funds with counterparty risk. Heeding his warning, however, is not easy; it is virtually impossible to gauge the extent of counterparty risk in most funds.

2011-09-20 A Simple Email – Today's Best Prospecting Strategy by Dan Richards (Article)

How do you use the recent market turmoil to open conversations with prospective clients? Here's how one advisor used a simple email to solidify relationships with existing clients and to attract new ones.

2011-09-20 Point & Counterpoint: Value vs. Growth by Kendall J. Anderson of Anderson Griggs

The debate over which investment philosophy is best will continue with winners promoting their own style and losers rationalizing their losses. Value vs. Growth. In 1996 the now defunct Mutual Funds Magazine invited me to contribute my thoughts in this ongoing debate in a featured article titled Speaking Out. The case for growth would be argued by John D. Gillespie. Since the debate between Value and Growth has continued to this day I am providing you, word for word, our Point and Counterpoint.

2011-09-20 Deja Vu? by Jeffrey Saut of Raymond James Equity Research

Over the past 41 years I have observed a few comparisons that have had fairly good correlations to what was occurring at the time and have used them to help allay panic among investors at inappropriate times. Most recently, I have suggested the panic lows of August 4th and 8th showed such extreme panic-selling readings that participants had to go back to May 13, 1940, when the Germany Army broke through the Maginot Line and invaded France, to find similar panic levels. That observation was consistent with the analogue I have been using for two months.

2011-09-19 The H1:2011 Economy may have been Stronger than we Thought by Brian Horrigan of Loomis Sayles

A key sector is the nonfinancial corporate sector. It excludes government, noncorporate small businesses, farmers, nonprofits, owner-occupied housing, and banks and insurance companies. Real output in the nonfinancial corporate sector surged a hot 4.5% in Q1 and a red-hot 7.5% in Q2. The weakness in the economy is predominantly in housing, banks, government, and small business. Overall, nonfinancial corporations have been doing well. Output in that sector has matched the prior peak of Q4:2007. Hows the economy doing? It depends on whom you ask. Dont count it as a lost cause just yet.

2011-09-19 Market Preview - What to Look for This Week by Mohamed A. El-Erian of PIMCO

Global markets again find themselves in the uncomfortable back seat of a car driven erratically by policymakers. The hope is that policy responses in both America and Europe will enable them to build on last week's solid gains and, thereby, improve the outlook for jobs and economic growth. This can happen if most/all of what follows materializes. Top-down issues are still important drivers of markets. It is not a comfortable place for markets given the recent history of recurrent policy shortfalls and debacles. Yet it is also reality for now.

2011-09-19 Benjamin Strong and Milton Friedman - Ironically, Something in Common? by Paul Kasriel of Northern Trust

Had Milton Friedman not passed away in 2006 and were alive and writing today, he would be arguing forcefully in favor of continued Federal Reserve quantitative easing. Friedman argued that had Benjamin Strong been alive to influence Federal Reserve policy in 1930 and 1931, the recession of 1929 would not have degenerated into the Great Depression. If Milton Friedman were alive today to influence the current Federal Reserve monetary policy debate, the near stagnant economic environment we find ourselves in would not need to persist.

2011-09-16 Investing in Uncertain Times by Larry Maddox of Horizon Advisors

Much has been made about how little the budget ceiling legislation has changed the future of our deficits. While this may be true in the short-term, it may miss the bigger point, which is that it has changed the future of our debates. There was actually a serious agreement and a new approach to reducing spending. At least we now know that this can be done. It will be up to future legislators and presidents to determine the level of follow-through, but for now, folks are focusing on the issue and we can at least acknowledge that this is progress.

2011-09-16 ProVise Bullets by Team of ProVise Management Group

In our opinion, Congress and the President need to do two things. The first is to develop a long-term, permanent solution to the Tax Code and to remove regulations that are, at best, postponing the decisions of employers to hire, and in some cases, driving jobs overseas. Heres what we would do if we were leaders in Congress: we would identify each and every one of the parts of the package where there is common agreement and pass them as quickly as we possibly could.

2011-09-16 Libya: Reconfiguring National Wealth by Douglas Clark Johnson of Codexa Capital

In Libya, economic redevelopment, understanding tribalism, and economic diversification may be more relevant to a cross section of global commercial interests, than ongoing dissection of oil production, however important that sector may be to funding reconstruction efforts.

2011-09-16 Sell your Bonds and Gold and Buy Dividend Growth Stocks Before it is Too Late by Chuck Carnevale of F.A.S.T. Graphs

Although we generally believe in the soundness of the principle of diversification, we also believe that extraordinary times require extraordinary measures. Any historian of markets or economies would agree that financial markets are currently far from behaving ordinarily. We intend to point out several markets that are behaving both inefficiently and completely out-of-sync from sound and prudent economic principles. Therefore, we will argue that certain sacred cows that would and should apply during normal circumstances need to be questioned and challenged in these very uncertain times.

2011-09-16 The Bottom Line #5 by Paul Azeff and Kory Bobrow of Euro Pacific Capital

Today marks the third anniversary of the death of Lehman Brothers, not the first, nor the last, bank or broker-dealer to require emergency meetings of exalted officials to take place over a weekend, but it is the only one that resulted in a complete loss for shareholders and significant losses for bondholders. Whether you see this as the example of the officials getting it right or stunningly wrong really depends on where you sit, and it should color your perspective on everything that has occurred since.

2011-09-16 Dividend Growth Investing: Understanding style and stock selection risks by Kevin Feldman of iShares Blog

In my last post on the resurgent popularity of dividend investing, I talked about why the strategy of buying dividend aristocrats has surged in popularity over the past decade. This time Id like to explore the challenges of picking individual stocks and the risk in shunning growth for value. First, remember that not all dividend stocks are created equal. Second, do you really want to be in the stock-picking business?

2011-09-16 And Thats The Week That Was by Ron Brounes of Brounes & Associates

Housing numbers highlight the data of the week so dont expect much positive news on the economic front. The Fed holds its policy meeting and the jury is still out over how the debate will unfold. Some investors seem to want stimulus for stimulus sake. The Fed could extend maturities on its government portfolio; it could reduce the interest paid to banks for holding excess cash in reserves. Such measures could prove more symbolic than anything. On the other hand, some Fed watchers warn of unforeseen consequences and believe it is time to let capitalism rule the day.

2011-09-16 Is the End Near for the Eurozone? by Team of Knowledge @ Wharton

Warning signs are flashing red. Bond markets are projecting a 98% chance of default on Greece's debt. Stock prices for French banks, heavily invested in that debt, have plunged 10% in recent days. Has the European debt crisis hit the breaking point, with Greece -- and perhaps others -- soon to exit the eurozone? Or, will officials once more cobble together new agreements that keep Greece in the club and prevent a huge contagion effect likely to cripple an already slowing global economy? Wharton finance professors Franklin Allen and Bulent Gultekin offer their insight.

2011-09-16 Perfect Storm Creates Tidal Wave of Gold Demand by Frank Holmes of U.S. Global Investors

In the East, gold is not only celebrated, acquired, worn or displayed during holidays or special occasions; it is seen as an everyday symbol of wealth. Increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewelry during the first half of the year despite a 25 percent increase in the price, according to a report released this week from GFMS. However, much of Indias potential gold demand remains untapped.

2011-09-15 Six Reasons to Sell Economy, Buy Stocks by Frank Holmes of U.S. Global Investors

Money supply is a key lubricant of the economy and financial markets. Historically, if money is growing faster than nominal GDP, the excess money has found its way to other uses such as investment in stocks, commodities and other financial assets. The risk/reward profile for owning stocks appears positively skewed. While bond investors have enjoyed a 30-year bull market, equity investors can now use long-term mean reversion to their advantage by buying those undervalued companies that are flush with cash, reward their shareholders with a dividend payment and have envy worthy balance sheets.

2011-09-15 The Great American Economic Lie by Lance Roberts of Advisor Perspectives (dshort.com)

The idea that the economy has grown at roughly 5% since 1980 is a lie. In reality the economic growth of the U.S. has been declining rapidly over the past 30 years supported only by a massive push into deficit spending. From 1950-1980 the economy grew at an annualized rate of 7.7%. This was accomplished with a total credit market debt to GDP ratio of less than 150%. The CRITICAL factor to note is that economic growth was trending higher during this span, going from roughly 5% to a peak of nearly 15%. The end game of three decades of excess is upon us.

2011-09-15 Chinese Banks are Imitating Washington Mutual by Bill Smead of Smead Capital Management

Washington Mutual is only in existence in the world of litigation. For those of you out there who like to avoid these kinds of risks, we at Smead Capital Management recommend you avoid China, avoid the commodities which are used most heavily in construction, avoid the makers of construction and mining equipment, avoid the countries which have benefitted the most from Chinas uninterrupted growth, and avoid the vehicles used for financing all of this growth. The inevitable economic recession in China which we expect to follow will turn the asset allocation world upside down.

2011-09-15 The Death of Common Ground by Liam Molloy and Bethany Carlson of Galway Investment Strategy

An all-or-nothing mindset has taken hold of Washington. The days when a Ronald Reagan and a Tip ONeil would hash out a compromise used to be called leadership. Neither gave up their core beliefs but that did not impair the building on common ground. Compromise is now perceived as weakness. Since the rise of cable news and other noise-creating outlets the extremes on each side of our political spectrum have become emboldened, leaving the middle a lonely place. The increase in partisanship is not just a matter of rhetoric. It can be seen clearly in how Congressmen are voting.

2011-09-13 The Handicap of Experienced Investors by J.J. Abodeely, CFA, CAIA (Article)

In the investment business, assets under management are concentrated with the largest and most established firms. Understandably, investors tend to allocate capital to managers after they've established a good track record. Unfortunately, for many, the analysis stops there. By failing to separate good results from identification of what makes a great investment manager, investors are primed for disappointment.

2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)

Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.

2011-09-13 A Response to 'A Winning Endgame' by Guy Cumbie (Article)

A Winning Endgame, Robert Huebscher's review of John Mauldin's book Endgame, made some highly problematic claims about our energy usage. Moreover, Huebscher's claim is unfounded that an energy policy, such as the cap-and-trade policy he recommended, is the right step toward solving our economic crisis.

2011-09-13 The End of the Line: Eurozone Crisis Hits Tipping Point by Liz Ann Sonders & Michelle Gibley of Charles Schwab

The growing likelihood of debt default by Greece rocks markets and sentiment. Although the banking system is healthier today than it was in 2008, contagion risks are elevated. The grand experiment of a unified currency in Europe is facing its greatest test yet.

2011-09-12 German Court Opens Door to ber-Empire and ber-Collapse by John Browne of Euro Pacific Capital

In the early days of September, financial markets worldwide were nervous. Investors and governments were waiting for a crucial ruling of the Federal Constitutional Court of Germany, a ruling that could have triggered the imminent collapse of the worlds second currency, the euro. This past Wednesday, the court ruled that the German bailout of Greece did not violate the German Basic Law (i.e. constitution), and investors breathed a collective sigh of relief.

2011-09-12 Fed Policy: No Theory, No Evidence, No Transmission Mechanism by John P. Hussman of Hussman Funds

One of the main factors prompting a benign response to what is now a recession and virtually certain Greek default is the hope that the Fed will launch some new intervention. Many view the present weakness as a replay of 2010, however, the evidence tells a different story. While we have to allow for the possibility of a knee-jerk response in the event of further Fed intervention, it is also much clearer now than it was in 2010 that quantitative easing does not work. To a large extent, the only basis for further Fed action here is superstition in the absence of either fact or theory.

2011-09-12 The G-7 Disappoints Again by Mohamed A. El-Erian of PIMCO

Unlike recent G-7 meetings of finance ministers and central bankers that were essentially ignored, there was quite a bit of interest in the one held this past weekend in Marseille. That interest turned out to be misplaced, however, as the G-7 delivered little of substance yet again. The G-7 issued a communiqu whose disappointing lack of content contrasts sharply with the deteriorating health of the global economy, the intense risks ahead, and legitimate policy confusion. The G-7 is fortunate that it is not required to justify the expenses of its meetings in terms of what is achieved.

2011-09-09 Europe on the Verge of a Political Breakdown by Barry Eichengreen of Project Syndicate

Europe is again on the precipice. The most recent Greek rescue, put in place barely six weeks ago, is on the brink of collapse. The crisis of confidence has infected the eurozones big countries. The euros survival and, indeed, that of the European Union hang in the balance. European leaders have responded with a cacophony of proposals for restoring confidence. There are several ways to recapitalize Europes weak banks. If these proposals have one thing in common, it is that they all fail to address the eurozones immediate problems.

2011-09-09 Fast and Furious in India by Sudarshan Murthy of Matthews Asia

Indian social activist Anna Hazare recently generated bipartisan debate, waging a 12-day hunger strike to pressure the government to pass stringent anti-corruption laws. It ended with a government resolution to acknowledge his key demandsmost notably, the creation of an influential anti-corruption ombudsman. Mainstream political parties have also called for such an ombudsman, however, with more limited sway due to concerns that officials may not be able to function effectively if all decisions were to fall under the purview of an intermediary.

2011-09-08 Congressional Budget Office Updates Its Economic and Fiscal Forecast by Team of American Century Investments

Two weeks ago, the non-partisan Congressional Budget Office (CBO) released an update to their Budget and Economic Outlook that forecasts U.S. fiscal and macroeconomic trends over a ten year period (2012 to 2021). This update creates a baseline for negotiations by the Joint Select Committee on Deficit Reductionthat committee of six Democrats and six Republicans from Congress created by The Budget Control Act of August 2011 which resulted from the contentious debt ceiling negotiations in July. In this Weekly Market Update, well review what this baseline

2011-09-08 Teaching to the Test by Neel Kashkari of PIMCO

Many managers are focused on beating benchmarks, rather than helping clients achieve their investment objectives. Clients save and invest their money for specific reasons, such as for retirement or childrens education and managers should focus on helping them meet those goals. Many managers are really closet indexers masquerading as active managers while charging premium fees for benchmark returns. Many equity managers deviate very little from their benchmark because they are terrified of potentially underperforming it.

2011-09-08 Bleak Outlook? MLPs May Help Cushion Against Market Volatility by Team of Emerald Asset Advisors

Professional investors spend a lot of time studying probabilities. That is because, just as the direction of the recent Hurricane Irene featured a "cone of uncertainty," the financial markets often change course without warning and can wreak havoc on investor portfolios. Alternative investments, including Master Limited Partnerships, may help limit damage from the inevitable financial storms that investors may face. In today's uncertain economy and volatile markets, MLPs - while not immune - can provide attractive yields and relatively low correlation to the stock and bond markets.

2011-09-08 Developed Europe: Economic Review August 2011 by Team of Thomas White International

Last month, major economies such as Germany and France as well as the European Central Bank (ECB) took steps to allay fears about a debt contagion in Developed Europe. Still, investor sentiment remained weak in the region, echoing worldwide concerns over the state of the American economy and the loss of momentum in the global economic recovery. Amid worries that the European Financial Stability Facility (EFSF) may not have adequate funding to bail out Italy and Spain, if the need arises, the ECB stepped in to buy the sovereign debts of the two countries for the first time.

2011-09-07 Are We There Yet? by Christian Thwaites of Sentinel Investments

A rogue summer. Markets fretted, politicos dissembled, bankers flinched. So that leads us to growth fears: 3Q is of course weaker but not enough to tip into recession. Why? i) there's no pressure in the economy and volatile measures like inventories and orders are holding up ii) personal and disposable income are barely moving; confidence is flat but that does not mean wholesale retrenchment iii) no inflation, either at the PCE, broad deflator, core or CPI level. The cumulative one year jobs story so far: private +1.7m and government -0.5m.

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 How Advisors can Improve Client Returns by Dan Richards (Article)

There's a growing body of behavioral finance research on what investors can do to improve the performance of their portfolios. But how about advisors - what can they do to improve investor returns? Some new research answers that question.

2011-09-06 Double-Dip Scorecard by Milton Ezrati of Lord Abbett

Three issues have dragged the market around of late: 1) Europes sovereign debt crisis, 2) Washingtons budget debate, and 3) fears that the American economy will fall into a second recessionary dip. This Economic Insights takes up the third of these pressing issues, offering a kind of scorecard on double-dip likelihoods by peering behind the latest, admittedly weak, economic data to assess causes and likelihoods. The conclusion admits to the possibility of a second recessionary dip, but nonetheless settles on the probability that growth will continueslow to be sure, but growth nonetheless.

2011-09-03 How to Find Opportunities from Blood, Debt & Fears by Frank Holmes of U.S. Global Investors

For the long-term investor, the risk/reward profile for owning stocks appears positively skewed. Equity investors have suffered through one of the most difficult decadesrivaling even the Great Depressionwhile bond investors have enjoyed a 30-year bull market. Long-term mean reversion is a powerful tool that investors can use to help them attain their long-term goals.

2011-09-02 Target Fixation by Kendall J. Anderson of Anderson Griggs

When it comes to portfolio management, most professionals are forced to practice target fixation with your money. Their target is normally a predefined index of common stocks or bonds and they are rewarded based on their ability to exceed the returns of their target. This target fixation leads to all kinds of problems. Your manager will invariably take on increasing risk knowing that it is one of the few ways he or she can exceed their target. You or your financial advisor tend to use this outperformance as proof of superior management instead of what it really is, just higher risk.

2011-09-02 8 Strong Growth Stocks Significantly Under-valued by Mr. Market by Chuck Carnevale of F.A.S.T. Graphs

We don't believe in investing in the stock market, we believe in investing in great businesses. Therefore, we tend to focus more on how the business is performing on an operating basis than we do on stock price volatility. True Worth valuation is what we monitor and measure most closely. Our rationale is based on the reality that any business, public or private, ultimately derives its value from the amount of cash flows and earnings it can generate for stakeholders. The bigger the income stream they can buy, the bigger the value they will eventually receive.

2011-09-01 The Blessing of Hitting the Skids First by Bill Smead of Smead Capital Management

We believe that the first country to hit bottom, the first to confess its mistakes the way Frank Blake and Howard Schultz did for their companies, and the first to cleanse the banks, corporations and households will lead to lasting prosperity long before any other country in the world does. We also believe that the investment rewards of US non-cyclical large cap common stock investing has rarely looked more attractive because of the willingness of investors to underestimate the benefit of hitting the skids before everyone else does.

2011-08-30 Austerity is not Enough by Andrew Balls of PIMCO

Before the Jackson Hole meetings over the weekend, it was no surprise that all eyes were on central banks. They have demonstrated in recent years that they can act swiftly and decisively when they choose to. While eurozone governments have failed to maintain a united front to deal with a sovereign debt crisis, and American politicians have concocted their own budget crisis, central bankers have retained the moral and operational high ground. Yet, given the problems of growth in the U.S., and of growth, solvency and the coherence of the eurozone, there is a limit to what central banks can do.

2011-08-30 New-Fangled Love Songs by Bill Gross of PIMCO

Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook. In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds. We prefer investing in the cleaner dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.

2011-08-30 Asking the right and wrong questions by Dan Ariely of Predictably Irrational

From a behavioral economics point of view, the field of financial advice is quite strange and not very useful. For the most part, professional financial services rely on clients answers to two questions: How much of your current salary will you need in retirement? What is your risk attitude on a seven-point scale? From my perspective, these are remarkably useless questions but first, lets think about the advisors business model. An advisor will optimize your portfolio based on the answers to these two questions. Not to be offensive, but I think that a simple algorithm can do this.

2011-08-30 No More Cowbell by David Baccile of Sextant Investment Advisors

Since 2008, fiscal and monetary authorities around the globe have been clamoring for more and more cowbell, government generated stimulus and financial support. But there are increasingly clear signs now that the effectiveness of more cowbell is on the wane while opposition to more cowbell is on the rise. In a world with no more cowbell, cash and high quality assets are good places to hide out in anticipation of greater opportunities to profit from market uncertainty. While it may be true that we should not fear the Reaper, a healthy dose of skepticism is essential.

2011-08-27 The End of the World, Part 1 by John Mauldin of Millennium Wave Advisors

It is only a matter of time until Europe has a true crisis, which will happen faster BANG! than any of us can now imagine. Think Lehman on steroids. The US gave Europe our subprime woes. Europe gets to repay the favor with an even more severe banking crisis that, given that the US is at best at stall speed, will tip us into a long and serious recession. Stay tuned.

2011-08-26 The US Financial Sector in an Environment of Turbulence by Team of Loomis Sayles

US financial companies have spent the past three years trying to improve their balance sheets. We saw this trend reflected in company reports of asset quality improvements, increasing capital and strengthening liquidity. Heightened anxiety about the European debt crisis, a potential slowdown in the global economic recovery and the US credit downgrade appears to have overshadowed financial company fundamentals. Fundamental improvements by financial companies have fortified the sector, leaving it substantially stronger than in 2008. Currently, we think financials are well positioned.

2011-08-26 Changing Times for China's Smaller Industries by Winnie Phua of Matthews Asia

Over the past three years, Chinas small and medium businessesparticularly export-oriented firmshave been through particularly choppy waters amid continued global economic weakness. However, the challenges they face today differ somewhat from those of the 2008 financial crisis. For starters, the former crisis brought about a meltdown across all China's small and medium enterprises (SMEs), regardless of their sector or business model. In todays environment, it is the SMEs with labor- and capital-intensive business models that are not faring as well.

2011-08-26 Confidence Counts by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Most of the normally historically-telling leading indicators continue to point to the US avoiding a recession. However, risks are clearly heightened as continued erosion of confidence could push perception into reality. The Fed continues to be divided on whether to attempt further monetary stimulus. We question if any efforts will have the desired impact. The Obama Administration and Congress continue to scramble to be seen as doing something to help, but also have limited policy options. European policymakers seem oblivious to the erosion of confidence.

2011-08-26 A Private Matter: Income ETFs by Kevin Feldman of iShares Blog

As with all things in investing, theres no free lunch in higher yields; seeking higher returns means taking on higher levels of risk. Depending on your goals, time horizon and view of the macro economy, you may choose to take those risks but its important even given the understandable desire to generate income during a challenging market not to forget that theyre there.

2011-08-25 The Fork in the Road by Lance Paddock of Thompson Creek Wealth Advisors

On a fundamental basis the US stock market is still overvalued. As discussed in our last View from the Bluff profit margins are already likely to begin retrenching. If the economy gets worse that will likely accelerate along with a slowing of sales. Narrower segments of the US market are now near fair value, especially the highest quality parts of the market. Overseas markets are another story. International and developing markets are looking reasonable on the whole. Not cheap, but around fair value. Some individual markets (such as Japan and parts of Europe) are actually looking cheap.

2011-08-24 Clearing Up Corporate Vs. Credit Bonds by Matt Tucker of iShares Blog

I often hear the terms corporate and credit used interchangeably to describe a certain segment of the bond market. However, they refer to two different types of bonds. When you buy a stock, youre buying an ownership stake in a corporation. Many of these corporations, regardless of where they are headquartered, issue debt in US dollars, and this debt is categorized as corporate. Easy enough. Where it gets tricky is that there are a number of other types of entities that also issue USD denominated debt. The term credit captures these other issuers, along with the debt of corporations.

2011-08-24 The Greatest Risk We Face: To Again Fall Into a Recession by Chuck Carnevale of F.A.S.T. Graphs

A spate of frightening headlines has led to two troubling declines in financial instruments. The first, of course, is the decline in equity prices that has everyone worried about their financial futures. The second troubling decline in financial instruments is the unprecedented drop in Treasury bond yields. This is troubling because frightened investors are fleeing to the safety of Treasury bonds at the precise time when the risk of owning them has perhaps been the highest in recorded history. This is especially true for the long bond, but also applies to shorter-term bonds.

2011-08-23 Why Investors are 'Mad as Hell' – And what you can do about it by Dan Richards (Article)

Last Friday, Jason Zweig of the Wall Street Journal wrote about fear and anger as the two dominant attitudes of American investors today – fear about their future and anger at those they see as responsible for the latest crisis. Today's investor psyche has fundamental implications that will require changes in how you interact with clients. Before getting into how to respond, let’s look at what's driving today's mindset.

2011-08-23 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

A new political dynamic is overspreading the globe. It's a force not only of political will, but fiscal interests. It sets up a defensive, cash-only paradigm which favors no one but those who have capital. Ironically, this new renaissance is concentrated not in regions of vast wealth already, but in the more distressed areas of the globe. The implications are vast. Foreign investment in these regions in agriculture, water purification, industrial development, and manufacturing could prove to be the next revolution in capital spending that saves the markets and people in need at the same time.

2011-08-22 Whack-A-Mole by John P. Hussman of Hussman Funds

What did I think of Rick Perry's comments about Ben Bernanke? Frankly, I thought they were unfortunate. Perry suggested that monetary intervention would be "playing politics," which implies that Perry believes the Fed actually has the power to benefit the Obama Administration by improving the economy with its interventions. We certainly differ on that point. In my view, QE2 was an economically baseless attempt to distort the financial markets and force the prudent into taking risk in hopes of substituting speculation for innovation. Perry gives Bernanke far more credit than I do.

2011-08-22 Libertarian-Style Investing Would Overweight Canada by David John Marotta of Marotta Wealth Management

Libertarians and economists both recognize that countries with more economic freedom experience higher GDP growth. That growth translates into higher stock returns for investors savvy enough to look for governmental fiscal restraint rather than government stimulus. The Heritage Foundation Index of Economic Freedom uses a systematic measurement of economic freedom to evaluate countries worldwide. Their conclusions clearly show that economic freedom and higher rates of long-term economic growth go together. Investors can use the study to select countries for their foreign stock allocation.

2011-08-22 The Neverending Story of a by Frank Holmes of U.S. Global Investors

Gold continued to make headlines last week, reaching nearly $1,900 an ounce on Friday before resting around the $1,850 level. Golds 15 percent rise to new nominal highs over the past month has rekindled gold bubble talk from many pundits. Long-term gold bulls have been forced to listen to these naysayers since gold reached $500 an ounce. If you would have joined their groupthink then, you wouldve missed golds roughly 270 percent rise since. That said, gold is due for a correction.

2011-08-19 Volatility Continues: Are the Markets Overreacting? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Selling pressure was heavy today as European banking fears combined with soft economic data. Risks have grown, but not all is in the negative column and markets may be overreacting. Interest rates are near record lows, indicating to us a growing concern about growth and a search for safety. Investing can be nerve-wracking in environments such as this, but we believe sticking with a well-devised long-term plan continues to be the best course of action.

2011-08-19 Paris Accord: Much Ado About Nothing by Komal Sri-Kumar of TCW Asset Management

As I have emphasized repeatedly in the past, none of these band-aid measures is likely to end the European debt crisis. Several countries of the region are excessively in debt, pure and simple. When that is the case, the solution ought to be a reduction in the level of debt through the exchange of existing debt for discount bonds, reduced-interest rate bonds, or equity. Unless the European powers recognize and act on this reality, European debt will continue to be a millstone around the global economys neck.

2011-08-19 Back to the Future: Median Home Prices Mirror Years Past by Gregory Tsujimoto of John Burns Real Estate

Prepare to take a trip back in time as you use the interactive map below to view the last time median home prices matched current median prices. Youll find some markets and regions are mirroring 2006 - when MySpace was the top website in the social networking realm. In other markets, you may have a flashback to 1997, standing in line to see the movie Titanic.

2011-08-17 The Common Stock Commandments of Claude N. Rosenberg, Jr. by Kendall J. Anderson of Anderson Griggs

Through the years of our parents and grandparents markets there were a few voices of reason to help guide them. One of these voices was Claude N. Rosenberg, Jr. whose legacy is kept fresh through RCM, formerly Rosenberg Capital Management, a global asset manager and a company of Allianz Global Investors. Over the years he shared his thoughts with his writings. I have chosen to highlight a few of these ideas that he called his Common Stock Commandments that I consider timeless and can guide you just as he did years ago to your parents and grandparents.

2011-08-17 Terminator 3: Rise of the Machines by Jeffrey Saut of Raymond James Equity Research

While people who live in glass houses should not throw rocks, I have to observe how the media has trotted out super-bear Robert Prechter at every major stock market low for the past decade. They featured him again last week. Combine such anecdotal gleanings with the aforementioned market valuation metrics and it suggests a downside inflection point may have been reached. And while the bottoming process should take weeks, many individual stocks have likely already bottomed.

2011-08-16 Matt Ridley Makes a Case for Optimism by Laurence B. Siegel (Article)

Matt Ridley's new book, The Rational Optimist, uses powerful examples from history and compelling logic drawn from economic theory to remind us that human achievement is cumulative, and the future looks bright, particularly for the less fortunate in the world. It is especially welcome at this discouraging moment in time.

2011-08-16 How Doing a Perfect Job Can Drive Clients Away by Justin Locke (Article)

Nobody is perfect, and having a plan to deal with your imperfections is just as important as improving your performance. That lesson has been deftly illustrated by my local grocer.

2011-08-16 ProVise Bullets by Team of ProVise Management Group

Volatility set a record last week when, for the first time in the Indexs 115 year history, the Dow Jones moved by more than 400 points for four consecutive days. The Index was down 635 points on Monday, up 430 points on Tuesday, down 520 points on Wednesday, and up 423 points on Thursday. We all know that the value of the underlying businesses did not change drastically even day by day. Jason Zweig said it well in his book, Your Money and Your Brain: In the short run, a stocks price will change whenever someone wants to buy or sell it and whenever something happens that seems like news"

2011-08-16 Can You Trust Retirement Calculators? by Todd Tresidder of Advisor Perspectives (dshort.com)

It's time for the truth about calculating how much money you need for retirement. Finding the answer isn't as simple as it appears on the surface. Sure, retirement calculators are easy to use. Just input a few assumptions about the future and your computer instantly provides the magic number. It's only when you dig deeper that you find the problems. Input the wrong values for the impossible-to-make assumptions and your number will be dangerously wrong, jeopardizing your retirement security.

2011-08-15 Emerging Europe: Economic Review July 2011 by Team of Thomas White International

The European Bank for Reconstruction and Development (EBRD) has sounded a cautionary note for the east European region after a new $229 billion aid package for Greece by the Euro-zone leaders was awarded in July. The bank, which was established to help the former communist states in their transition to market economies, said Eastern Europe and central Asia are at serious risk from the Euro-zone debt crisis, according to a news report published by Bloomberg. Still, the EBRD upped its economic forecast for the current year for the countries where it has investments.

2011-08-15 Two One-Way Lanes on the Road to Ruin by John P. Hussman of Hussman Funds

The reason we are facing a renewed economic downturn is that our policy makers never addressed the essential economic problem, the need for debt restructuring. There are two one-way lanes on the road to ruin, and these are unfortunately the only ones on the present policy map: 1) Policies aimed at distorting the financial markets by suffocating the yield on lower-risk investments, in an attempt to drive investors to accept risks that they would otherwise shun; 2) Policies aimed at defending bondholders and lenders who made bad loans, which they now seek to have bailed out at public expense.

2011-08-15 Panic Is Not a Strategy - Nor Is Greed by Liz Ann Sonders of Charles Schwab

Originally published in 2008, it's time for a refresher about the perils of panic. Asset allocation, diversification and rebalancing are as close to a "free lunch" as you can get as an investor. ThIn world where time horizons have shrunk precipitously, think longer-term.

2011-08-13 The Beginning of the Endgame by John Mauldin of Millennium Wave Advisors

In short, there are no easy solutions. We have just about used up all our rabbits in the hat as far as fiscal and monetary policy are concerned. We now need to focus on what we can do to get out of the way of the private sector, so it can find ways to create new businesses and jobs. And that means figuring out how to get money to new businesses, because that is where net new jobs come from. But that takes time...

2011-08-11 No Turning Back: The ECB Brings Its Balance Sheet to Bear on Italy and Spain by Andrew Balls of PIMCO

The European Central Bank has crossed the Rubicon. By buying Italian and Spanish government bonds, it has brought a much-needed and credible external balance sheet to bear. There is thus the potential for an end to damaging games of chicken between the eurozones monetary and fiscal authorities and, therefore, stabilizing the eurozones systemically important government bond markets. But there remains huge uncertainty, together with large technical and political execution risk.

2011-08-10 Run, Ride or Buy? What Should Investors Do? Dont Sell on Mondays! by Frank Holmes of U.S. Global Investors

With trillions of dollars in debt acting as a ball-and-chain for much of Europe, the U.S. and the rest of the developed world, must detoxify their balance sheets before hitting the ground running. On the other hand, emerging market economies carry low levels of debt and operate like a cash business, making them the final frontier for strong economic growth. A key reason is emerging market governments have the long-term policies in place to facilitate growth of their economies.

2011-08-10 Danger: Children at Play by Jeremy Grantham of GMO

I am not an expert in euro finance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro. So why didnt the bosses attempt to fi x it early on when it would have been so much easier? Today these problems have become much tougher, but still the decisions are only half made and the cans get kicked and kicked again.

2011-08-10 Unprecedented Fed to the Rescue by Mohamed A. El-Erian of PIMCO

After Mondays gut wrenching 635 point fall, the Dow Jones index surged an impressive 430 points on Tuesday. In the process, investors experienced a wild 640 point intra-day roller coaster! Gold prices set another record while Treasury yields fell sharply, with the 2-year closing at an eye popping 0.2% and the 5-year at an equally stunning 1.0 percent. Tuesdays combination of unusual, if not unprecedented, market moves had a lot to do with the Fed. Once again, the institution came to the rescue of an equity market under severe pressure, and did so in a bold manner.

2011-08-10 Update on Global Economic Uncertainty by Team of Nomura Asset Management

Investors can afford to be less nervous in a market that has already declined significantly. Rather, we would recommend that investors should recognize the ability of these companies to generate earnings as well as their ability to sustain their dividends payments. Governments of all major developed and emerging countries have to deal with deteriorating economic forecasts, so until investor psychology calms down, patience may be needed. We will continue to monitor the changing investment environment and identify stocks that offer worthwhile investment opportunities.

2011-08-10 Crisis Averted, A Re-focusing On Prior Worries by Scott Brown of Raymond James Equity Research

Fiscal policy in the U.S. and abroad is going the wrong way, weakening the prospects for global growth. What about monetary policy? In the U.S., Fed policymakers meet this week. As Chairman Bernanke testified in mid-July, even with the federal funds rate close to zero, we have a number of ways in which we could act to ease financial conditions further. The Fed could provide more explicit guidance on how long short-term interest rate would remain low and how long the balance sheet would be maintained at its current elevated level.

2011-08-09 Does Government Intervention in Financial Markets Slow Economic Growth? by Michael Edesess (Article)

As we saw with the Dodd-Frank legislation and the Consumer Financial Protection Bureau, the question underlying the debate over financial regulation is whether it stifles economic growth. Leo F. Goodstadt's book, Reluctant Regulators, provides useful insights from the experiences of Hong Kong and China. It also causes us to ponder whether our measurement of economic growth is fundamentally flawed.

2011-08-09 Can American Become Greece? by Keith C. Goddard, CFA (Article)

Investors face four possible implications from the recent downgrade of America's long-term credit rating by Standard & Poor's: 1) Lower prices for financial assets; 2) Higher volatility in the asset markets; 3) Greater potential for trend-following investment strategies, and 4) Attractive opportunities in 'blue chip' stocks.

2011-08-09 Do You Want Cheap Stocks? Then Take a Look at the S&P 100 by Kendall J. Anderson of Anderson Griggs

For those of you who have been sitting in cash or wanting to add to your portfolio due to the recent market decline placing a few dollars into the S&P 100 at these levels can be accomplished by purchasing an ETF. For those of you who are enterprising investors, then surely you can find a few issues from the bargain list that would meet your needs. The 52 stocks with a P/E of less than 13.3 times earnings include representation in 9 of the 10 major economic sectors of the economy. All are available to build a complete portfolio or increase diversification.

2011-08-09 Bright Spots by Milton Ezrati of Lord Abbett

The American consumer is not nearly as vulnerable as during the 200809 recession. During the past two years, American households have so restrained spending, absolutely and relative to income, that presently they maintain about a $590 billion annualized savings flow, up strikingly from the $190 billion annualized flow averaged in the middle of 2007. Since this current savings flow amounts to some 5% of outstanding household liabilities, households need make no further cutbacks to improve their balance sheets, leaving them to spend marginally more freely.

2011-08-09 A quick update on the S&P downgrade by Christian Thwaites of Sentinel Investments

Bond investors like nothing more than low growth, high unemployment and low inflation. In an asset class of finite return, their only concern is to be paid in real, non-depreciated currency. Fine. Japan is an example where gov bonds returned 600% in the two recent decades to a dollar investor, and stocks fell by two thirds. Many commentators are seemingly fine with that. We disagree. Some fiscal stimulus and inflation can be very good for the economy at large. Bond vigis have a visceral fear of both. If nothing else, the downgrade can start a sensible discussion on the growth/debt trade off.

2011-08-08 U.S. Downgrade Heralds a New Financial Era by Mohamed A. El-Erian of PIMCO

There will be endless debate on whether S&P, the rating agency, was justified in stripping America of its AAA rating and even attaching a negative outlook to the new AA+ rating. But this historic action has now taken place, and the global system must adjust. There are consequences, uncertainties, and a silver lining. Not so long ago, it was deemed unthinkable that America could lose its AAA. Indeed, risk free and US Treasuries were interchangeable terms so much so that the global financial system was constructed on the assumption that Americas AAA was a constant at the core.

2011-08-08 Recession Warning, and the Proper Policy Response by John P. Hussman of Hussman Funds

As of Friday the S&P 500 was below its level of November 2010, when the Fed initiated its second round of quantitative easing. Aside from a brief bump in demand that kicked the recession can down the road a bit, the U.S. economy is not much better off. Meanwhile, countless individuals in developing countries have been injured by predictable commodity hoarding and global price instability. The Fed has leveraged its balance sheet by over 55-to-1. As policy makers look to address the abrupt deterioration in U.S. , we should ask ourselves: Do we really long for more of the Fed's recklessness?

2011-08-05 Denominators Matter! What the Price of Gold Tells Us About the Value of Other Assets by JJ Abodeely of Sitka Pacific Capital Management

In an environment where holding either U.S. dollar cash or a broad market portfolio may be detrimental to real wealth preservation, more active asset allocation is required. Portfolio managers who have a broad toolbox of assets to choose from, nimbleness and flexibility, and an eye on the denominators that show us real value, will be in an enviable position to capitalize on the next great bull market in stocks.

2011-08-05 A Framework for the Equity Market Correction by Michael Dana of Dana Investment Advisors

Corrections of 5-10% are fairly common, even in bull markets. The major indexes usually experience corrections of this magnitude two to three times a year. As investors, we certainly fear them while they are happening, but tend to forget about them once they have passed. The current 11% correction has heightened fears due to the compressed time frame in which it has occurred.

2011-08-04 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Since the end of the internet bubble in the late 1990s, the medias search for the next it sector of the market has been incessant. Let me suggest an area for your consideration: crops and farmland. While a debate rages about climate change and global warming, it is indisputable that the search for fertile natural resources is basic to humankind. Today, any magnitude of population shift is based less upon need than vanity but a focus upon survival in some distressed areas redirects our attention to the search for replenishable natural resources.

2011-08-04 The Five Horsemen of the Economic Malaise by Craig Hester of Hester Capital Management

The unwinding of the economic malaise will take years, and it will be a painful - but necessary-process. There is much fear and anxiety reflected in the financial markets. Many of the world economies are in a state of disequilibrium, with too much debt, facing high unemployment and sluggish growth. Policy options are limited, and politicians lack the courage to act. But out of such times come opportunities. We live in a world of instant news and an acute short-term focus. One of the keys to investment prosperity is to manage money with a long-term perspective while balancing risk and return.

2011-08-04 Gold Bugs Rejoice by Frank Holmes of U.S. Global Investors

Many felt disbelief when they saw gold prices breach $1,675 an ounce in early trading, but you werent dreaming. Gold danced above $1,675 into the wee hours of the night before settling in at $1,663.45 this afternoon. Since pulling back to $1,487 an ounce on July 1, gold has surged nearly 12 percent. Over the past 10 years, golds normal volatility has been about 15 percent, so weve seen nearly a years worth of price movement in just 34 days! Does this mean were due for a correction? Possibly. Gold could easily correct 5-10 percent but I dont think thats what will happen.

2011-08-03 Yellow Jerseys by Doug MacKay and Bill Hoover of Broadleaf Partners

As an investor, it is important to realize that while you can win the occasional stage race by going it on your own and betting big on a single stock or perhaps along the outcome of a singular event like the debt ceiling, more often than not, the market like the peloton will usually catch and pass you by, leaving you in the dust. Like the peloton, evidence suggests that few investment managers outperform the market year in and year out, but over time, those that understand the race they are in significantly increase their odds of emerging victorious.

2011-08-03 The Trouble with Quants by Chris Brightman of Research Affiliates

Quant managers often over-engineer their products. When these products collapse, they leave investors confused and upset. On this fourth anniversary of the August 2007 Quant Meltdown, we look at what lessons can be learned from the past and how they may apply to some current investment strategies.

2011-08-03 Default? by Jeffrey Saut of Raymond James Equity Research

We have many great campaigners inside the D.C. Beltway, but far too few have the ability to govern given that their main concern is to get reelected. Maybe Warren Buffet had the right idea when he said, I could end the deficit in five minutes. You just pass a law that says that anytime there is a deficit of more than three percent of GDP all sitting members of congress are ineligible for reelection. As for the Nations AAA rating status, I think we are in for a downgrade no matter what happens inside the Beltway as the pendulum always swings too far in each direction.

2011-08-02 A Winning Endgame by Robert Huebscher (Article)

Reducing our nation's debt burden is no longer only the rallying cry of Tea Partiers and fiscal conservatives. As the debate over the debt ceiling proved, it is now the goal of the president and many fellow Democrats. John Mauldin and Jonathan Tepper's book, Endgame, published earlier this year, makes a compelling argument as to why reducing the deficit is so critical and why we face a long, slow and ultimately painful period of deleveraging. I will explain their thesis and then provide the counterargument.

2011-08-02 Solving the REAL Debt Crisis by Michael S. Falk, CFA, CRC (Article)

Now that the debt ceiling impasse (circus) has been resolved, it's time to address this country's real debt crises. Our leaders need to conquer the far more daunting entitlement issues we face. Our choice is simple - either reduce costs and face austerity, or raise taxes. Those alternatives need not be as painful as you or they might think, as I will demonstrate.

2011-08-02 Hitting a Moving Target: Matching Portfolio Risk to Client Expectations by Scott Smith (Article)

Much of the angst faced by investors and advisors over the last several years was caused by mismatched perceptions regarding investors' appetite for portfolio risk. Advisors overestimated the amount of risk investors were comfortable being exposed to within portfolios.

2011-08-02 Kings of the Wild Frontier by Bill Gross of PIMCO

The U.S. has averted a debt crisis, but there remains a stain on our reputation. Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at net present cost. Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.

2011-08-02 Is the US a "BBB" credit? David Woolley on the MERS land title chain fiasco by Team of Institutional Risk Analyst

In this issue of The Institutional Risk Analyst, we feature a summary of a paper by David E. Woolley, a California Licensed Land Surveyor and Certified Fraud Examiner, who is a principal of Harbinger Analytics Group in Tustin, CA. Thanks to David and Lisa Herzog, who edited the study and performed research, for summarizing the paper. But first a rant on the furious inaction of the past week.

2011-08-01 Europe's Cognitive Dissonance by Scott Minerd of Guggenheim

The latest bailout program should be successful in one regard: buying more time. Unfortunately for Europe, time is no longer an ally, and it most certainly is not healing all wounds. Across the European periphery, economic data are degenerating as the calendar marches forward. Year to date, Greeces debt burden, budget deficit, cost of funding, and unemployment rate have increased. Its economic output and tax revenues continue to depress.

2011-07-30 Shifting Focus by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.

2011-07-29 Cummins Inc. (CMI) Staggering Three-Year Annualized Performance? by Chuck Carnevale of F.A.S.T. Graphs

The recent history for Cummins Inc. (CMI) clearly illustrates that sometimes the greatest opportunities can be found during times of crisis. This gives credence to Warren Buffett's sage advice "be greedy when others are fearful, and fearful when others are greedy." Furthermore, stock price volatility is a fact that cannot be avoided when investing in publicly traded common stocks. On the other hand, we offer this analysis as evidence that over the longer run operating results are clearly more important than price volatility.

2011-07-28 Investor Question: Greek Bonds in ETFs by Matt Tucker of iShares Blog

As the Greece situation continues to develop, Ive been hearing a lot of client questions about the exposure to Greek debt in some of our iShares fixed income ETFs. With good reason, too investors are wondering whether downgraded Greek bonds will be removed from the funds in which they currently reside. Its a fair question, and it really highlights some of the points I made in my last post on index construction. Of course, last time I focused on US indexes (which are fairly straightforward). The Greece example gives me a good excuse to cover index rules for non-US bond indexes.

2011-07-28 Quarterly Commentary: 2nd Quarter by Steven Romick of First Pacific Advisors

We pay attention to the macro environment because it sometimes allows us to identify significant opportunities and, at other times, to avoid or limit catastrophic risk. We still find ourselves worrying today, particularly about unreasonable government budgets that have helped foster unmanageable burdens. Over the past three years we have witnessed a shift in financial obligations from the personal to the public (governments) that has done nothing to enhance the solvency of the overall system, although the optics appear favorable to some.

2011-07-28 The 'how' undermines the 'what' of the debt ceiling debate by Mohamed A. El-Erian of PIMCO

I am confident that Washington will find a way to compromise on a mini-deal, rather than a grand bargain, that raises the debt ceiling and avoids a debt default. They may even manage to evade a downgrade of the nations vaunted AAA credit rating, though this is more uncertain. But fiscal solvency is not merely a function of deficits and debt. It is also highly sensitive to economic growth: The lower an economys growth rate, the higher a budget deficit is likely to be, the larger the debt accumulation, and the greater the need for yet another round of fiscal austerity to safeguard solvency.

2011-07-26 Equity Allocations: Thinking outside of the Box by Ryan Larson of Research Affiliates

In this issue we will look at a different way of constructing the equity portfolio. We will use the concept of active sharea measure of how much active equity portfolios actually deviate from their benchmark indexesas well as what active share tells us about the standard equity structure alternatives. The success of an investors overall portfolio is highly dependent on how well the equity component performs; stocks are the largest allocation in most portfolios, on average half of assets or more. Therefore, paying special attention to the equity strategy decision is very important.

2011-07-23 Kicking the Can Down the Road One More Time by John Mauldin of Millennium Wave Advisors

I hope Europe pulls it off. I really do. They have done the US a huge favor by adopting this latest plan, as it keeps their banking system from imploding; because their banks are essentially insolvent with all the sovereign debt on their books. Such a banking crisis, which would be worse than 2008, in my opinion, would no doubt plunge a world already slowing down back into recession and pull our own slow-growth economy down into recession with them. How long can they kick the can down the road? My guess is that it will be longer than we suspect.

2011-07-23 Worried About the Future? by Kendall J. Anderson of Anderson Griggs

If you are worried about the current economic state of affairs you may be relieved by what research analysts are telling portfolio managers. First, they seem to be in agreement that businesses are doing fine, especially those that have a global market. Second, interest rates will be higher at some point in the future, and the majority of government debt is safe as far as the ability to pay interest on their borrowing. And most importantly, the earnings you should expect from your investments will be driven over time by the ability of companies to pay you with a little left over to reinvest.

2011-07-22 Political Calculations Distort US Government Debt by Peter Nielsen of Saturna Capital

The debate over whether to raise the debt ceiling has focused attention on the countrys poor financial health. With myriad press reports speaking to the issues surrounding our debt and deficit, it is important to keep in mind that the amount of debt reported by any given source will vary according to the political agenda served, and should therefore be consumed with a healthy dose of skepticism. A prime example is the official U.S. government calculation of the deficit, which brazenly ignores intergovernmental transfers and supplemental appropriations as well as a host of other expenses.

2011-07-22 Resource Limitations 2: Separating the Dangerous from the Merely Serious by Jeremy Grantham of GMO

Last quarter I tried to make the case that the inevitable mismatch between finite resources and exponential population growth had finally shown its true face after many false alarms. This was made manifest through a remarkably bubble-like explosion of prices for raw materials. Importantly, prices surged twice in four years, which is a most unbubble-like event in our history book. The data suggested to us that rarest of rare birds; a new paradigm. And a very uncomfortable one at that.

2011-07-22 Six Attractively Valued Dividend Growth Stocks Reporting Earnings! by Chuck Carnevale of EDMP

Investors today have instant access to minute by minute changes in the stock prices of their portfolio holdings in real time. Since stock prices tend to fluctuate wildly from one day to the next, I for one do not feel that this information overload is a good thing. What makes matters even worse is how wildly the value of a stock can change from one day to the next. It's not uncommon to see a stock rise or fall by 10% or more on any given trading day. Yet common sense would dictate that the intrinsic value of a large publicly traded company could not possibly change that much that quickly.

2011-07-21 More on the Case for Mega Caps by Russ Koesterich of iShares Blog

While the recent June non-farm payroll report offered yet another reminder of the fragile and sluggish nature of the current recovery, we continue to believe that equities offer better prospects than fixed income. A combination of high margins, low inflation and some top-line growth will continue to support stocks. For the most part, the largest companies are cheaper, more profitable and more diversified than their smaller counterparts. In fact, US and global mega-cap companies remain one of the few unambiguously cheap asset classes, trading at roughly a 15% discount to the broader market.

2011-07-21 Poor People or Old People - Who Do We Want to Help? by Paul Kasriel of Northern Trust

Milton Friedman used to talk about the "tyranny of the status quo." By that, he meant that it is difficult to change public policy because of entrenched interest groups allied with policies that have been in effect for decades. I would argue that opposition to changes in our current Social Security and Medicare programs is an example of tyranny of the status quo. The original intent of both was to provide an income support floor for our retired senior citizens. So, why do these programs supplement the income directly through Social Security and indirectly through Medicare to wealthy seniors?

2011-07-21 Kovitz Investment Group, LLC Summer 2011 Quarterly Commentary by Jonathan A. Shapiro of Kovitz Investment Group

People tend to suffer greater pain from losing a given amount of money than they experience pleasure from gaining the same amount. The typical investor is therefore a pain avoider who shuns certain stocks when there is any hint of trouble. This tendency results in consistent overreaction to bad news that we believe creates opportunity. Inefficient pricing results from the excessive focus on short-term that we believe sets up a unique time arbitrage. By capitalizing on situations where uncertainty is high, but risk is low, we can put ourselves in a position to earn above-average returns.

2011-07-21 China's New Generation of Entrepreneurs by Lydia So of Matthews Asia

As investors, we are presented with an expanding universe of small- and medium-sized entrepreneurial firms with innovative business models in China. At the same time, competitive pressures are also increasing with the growing presence of both domestic and international companies in the market. It has become increasingly critical to identify and differentiate companies with sustainable business models and viable long-term strategies.

2011-07-20 How to Orchestrate an Orderly and Credible Restructuring of Greeces Debt by Myles Bradshaw of PIMCO

​Identifying how much solvency relief Greece needs is complicated, not least because there is no magic debt ratio that is sustainable. Identifying how much political capital might be bought in European Union creditor countries and beyond is more straightforward. Contagion risks are positively correlated with any benefits Greece might experience from a potential restructuring.

2011-07-19 You and the Internet, Part II - Places to Go, People to See by Wendy J. Cook (Article)

In my last article, How to Waste Time and Influence People, we covered productive ways to wander on the Internet. You also can benefit from harnessing the Internet as it relates to your advisory practice.

2011-07-19 Since when did Debts and Deficits become One and the Same? by Chris Maxey of Fortigent

By early August, the US Treasury will run out of room under the debt ceiling and risks defaulting on its debt. There is growing concern, as evidenced by recent reports from Moody’s and Standard & Poor’s, that a deal will either not get done in time or will not suffice in fixing what is turning into a runaway fiscal freight train. Politicians are determined to play a quick and easy game of Russian roulette with the debt, not realizing that their attempts to undermine each other’s credibility in advance of next year’s elections are extremely dangerous.

2011-07-18 Matter over Mind by Herbert Abramson and Randall Abramson of Trapeze Asset Management

As the markets declined in the quarter, stocks became significantly oversold from the negative psychology resulting from the negative headlines. A mindset of fear. CNBC recently reported that investors were more concerned about the economy than at any other time during the past five years; a CBS poll found that 39% of Americans believe the economy is in a state of permanent decline. The mind can play tricks. But when perceived risk is so great it is typically reflected more than warranted in depressed share prices. The news doesn’t have to be good, just not as bad as everyone believes.

2011-07-18 The Consumer Marches On by Milton Ezrati of Lord Abbett

With recession fears again gripping financial markets, it pays to take another look at the American consumer. At more than 70% of the economy, he and she will determine the direction and the pace of the economy. And despite the current gloom abroad, the picture that emerges from this examination, though far from robust, carries the expectation of continued, if slow expansion, especially since consumer spending has good income support. Though many other economic measures have weakened of late and depressed the view of economic prospects, the consumer has shown remarkable consistency.

2011-07-18 Equity Investment Outlook by Team of Osterweis Capital Management

As evidence of a global economic slowdown accumulated, the stock market suffered a correction during the second quarter. This is hardly surprising given the market’s strong recovery from the depths of the 2008-2009 financial meltdown. After surging just over 100% from its low in March of 2009 and nearly 30% since August of just last year through the end of the first quarter 2011, the S&P 500 Index needed a breather. The 7% correction that occurred from the April high through the June low looks relatively modest to us in light of how far and how fast the market has rallied.

2011-07-18 Dabbling with Support by John P. Hussman of Hussman Funds

The market continues to have the look of a broad topping process, in which it's very common to see it's confined to a trading range of about 5-7% for 6-8 months. Near-term, tests of widely-recognized "support" are often met by a bout of short-covering, similar to what we observed two weeks ago. Given the moderate improvement in market internals produced by that rally, a retest of those lows that isn't overly hostile to market internals might provide some latitude for market exposure. Suffice it to say that constructive opportunities are likely to be limited, but not impossible to achieve.

2011-07-18 Politicians Are Playing With Fire by Charles Lieberman of Advisors Capital Management

Politicians have the ability to screw up the economy. Investors remain focused on three major concerns: the debt ceiling imbroglio, default risk in Europe and the pace of economic recovery in the U.S. All three may be disruptive and damaging to markets and the economy, although the first two are matters of policy and should be overcome with sensible policy judgments. Instead, the markets remain hostage to the political game of chicken. This will not happen if common sense prevails. Unfortunately, investors lack confidence that politicians will make good decisions.

2011-07-15 Sine Cera by Bill Mann of Motley Fool

I had a talk with a renowned short-seller who accused me of having too little imagination in considering the set of known facts about a potentially fraudulent company. In some ways hes right. In practice, if I find myself saying "hmm" Im just going to move on to the next idea. We do something I like to call "looking for ghosts," to try to find inconsistencies that even hint at things. Not that long ago a Chinese chicken producer came to pitch us on participating in its offer. The company had nice-looking financials, so nice that its gross margins were double those of Charoen Pokphand.

2011-07-14 Ben Bernanke channels Genworth Financial; Chris Laursen on bank trading under the Volcker rule by Team of Institutional Risk Analyst

This week we republish an important article by Christopher Laursen, NERA Vice President, on bank trading under the Volcker rule. And we ask whether Fed Chairman Ben Bernanke knew he was saying about the conforming loan limit yesterday before the House Financial Services Committee.

2011-07-14 Three Competing Theories by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

While the massive budget deficits and the buildup of federal debt, if not addressed, may someday result in a substantial increase in interest rates, that day is not at hand. The U.S. economy is too fragile to sustain higher interest rates except for interim, transitory periods that have been recurring in recent years. As it stands, deflation is our largest concern, therefore we remain fully committed to the long end of the Treasury bond market.

2011-07-12 The Titanic Has Sailed by Michael Lewitt (Article)

It was entirely predictable that the U.S. equity market would rally on the news that Greek would not default this month, but it does little to convince me that the long-term outlook for European sovereign debt or the global economy has improved. Markets - particularly the equity markets - are trying to pretend that the global economy is experiencing a self-sustaining recovery. A hard look at the economic numbers would tell an objective observer that no such recovery is occurring.

2011-07-12 Unexpecting the Expected by Justin Locke (Article)

This is a story of a kid who lived on a farm in the Midwest. A family friend gave him an old, beat-up plywood string bass, and he started to play it just for something to do. His family couldn't afford lessons, so he taught himself out of a method book.

2011-07-12 Americas: Economic Review June 2011 by Team of Thomas White International

The economic growth outlook in the region has moderated, as both global demand and domestic consumption growth are slowing down. Consumers are less confident than earlier this year, public spending remains restricted due to continuing fiscal challenges, and businesses have become more cautious in their hiring and investment plans. Commodity and energy prices have corrected, while manufacturing activity growth has slowed down. Even in this environment, inflation risks remain significant in some of the large emerging economies where monetary policy is being tightened further.

2011-07-12 Widespread Tail Risk Concerns Seem Bullish by Richard Bernstein of Richard Bernstein Advisors

Tail risk, as the name implies, is the risk of a highly unusual event occurring. A tail risk is often defined as an event occurring that provides a negative return at least three standard deviations below the average return. We doubt that the peak in the current stock market cycle is likely to occur when hedging tail risks is so common. After all, no one discussed tail risks at the market peaks in 2000 or 2007. Just like in previous cycles, the ultimate stock market peak will likely be accompanied by levered investments, rather than by hedged investments.

2011-07-12 Making the U.S. Dollar Safer: Return OF Your Money by Axel Merk of Merk Funds

Money market funds try to keep a stable net asset value by employing what is called amortized cost accounting: the market value is ignored, assuming the issuer of the debt will pay in full. The justification for this practice is that money market funds invest in highly rated securities of extremely short duration. That may be correct, but in case of a systemic shock and a flight from money market funds, there is a risk that money market funds would need to liquidate holdings at a loss; additionally, an outright default cannot be ruled out in light of the Lehman Brothers experience.

2011-07-12 A Common Sense approach to Biotech Novartis by Kendall J. Anderson of Anderson Griggs

A common sense approach to finding a winner in biotech is to own shares of a business that can afford the cost of R&D and have access to the brightest minds in the field. Novartis is one that can meet these requirements. In 2010 Novartis net sales exceeded $50 Billion more than all 37 of the profitable Biomed/Genetic companies combined. Their R&D spend last year exceeded $8 Billion, more than the total market value of all but 7 of the 293. Granted, this is not exclusively spent on biotech research, but what they do spend exceeds the budget of all but a few in the biomed/genetics industry.

2011-07-06 Economic Doldrums Overshadowed By Financial Markets by Chris Maxey of Fortigent

Economic data will rule the airwaves this week, especially the nonfarm payroll report on Friday. Economists are not overly confident that June was the month where employment growth finally kicked into high gear – a sentiment which is supported by relatively weak initial claims reports over the last four weeks. Central bank meetings will garner considerable attention this week as well. The European Central Bank alluded to the possibility of another 25 basis point rate hike last week and there is a strong likelihood that emerging market economies will also tighten policy rates.

2011-07-06 Greeks Buy Time for Insolvent Bankers and Delusional Politicians by John Browne of Euro Pacific Capital

Last week, the Greek parliament voted by a narrow margin to pass an economically crippling austerity plan of some $40 billion in return for some $159 billon of fresh liquidity injections. Although many hailed the event as a needed first step on a long road to recovery, I believe the austerity program will make a bad situation worse. It is a flawed solution that stems from a false premise: that Greece should continue to be part of the euro zone, and continue to use the euro as its currency. To return to national economic viability Greece must abandon its use of the euro currency.

2011-07-06 America and Britain's Economic Policies Will Soon Be Similar by Mohamed A. El-Erian of PIMCO

​By imposing austerity programs,t he U.K. is hoping to free up resources that can be devoted to pay down debt. The U.S. is hoping to create resources to pay down debt via economic growth – an approach that can have disappointingly narrow feasibility. Other options include restructuring or defaulting on debt, inflating out of it and imposing financial repression by paying creditors less than they deserve.

2011-07-05 Three Steps to a Better Web Design by Kristen Luke (Article)

You have several options for web development: hire a web designer, purchase a template website, or create your own. Whichever you choose, spending some time in the planning stages will make the process quicker, easier and perhaps even cheaper.

2011-07-05 Chutes and Ladders by John P. Hussman of Hussman Funds

We are all playing a game of Chutes and Ladders where it is not at all clear which game-board is applicable. To believe strongly in a certain investment outcome is to imagine that there is only one correct model of the world, and that the correct model is in hand. Investors appear very eager to apply post-war norms to the economy, and to apply the elevated valuation norms of the past two decades to the stock market. I doubt that these models represent the correct view of the world, but our approach is to allow for these possibilities and dozens of alternate ones.

2011-07-01 Visa and MasterCard Deserved a Higher Price by Chuck Carnevale of EDMP

Both Visa, Inc. and MasterCard, Inc. enjoyed explosive moves in their stock values on Wednesday, June 29, 2011. Visa was up over 15% and MasterCard over 11% thanks to the Fed’s more liberal-than-expected stance on debit fee regulations. In our opinion, this perceived regulatory overhang had caused the share prices of these consistent and powerful earnings generators to sit below their intrinsic value. Therefore, we believed that the Durbin Amendment, although problematic for both Visa and MasterCard, would be less impactful to their long-term business than their low stock prices indicated.

2011-07-01 On The Importance of Sustained Capital Investment Part 2 by Andrew Foster of Seafarer Capital

This commentary revisits the topic. It presents basic evidence to support the idea that sustained capital investment is critical in the context of developing markets. The data presented below is gathered from several countries, so as to allow for comparison across emerging markets. Admittedly, the workings of macro economies are highly complex, and drawing detailed conclusions about them is tricky. Nonetheless, national statistics do reveal the general outline of an economy and its underpinnings. That’s how I intend to use the data here – to make broad inferences only.

2011-07-01 Expert Roundtable on Interest Rates by Mark W. Riepe, Liz Ann Sonders, Kathy A. Jones, Rande Spiegelman & Brad Sorensen of Charles Schwab

US short-term interest rates have hovered near zero percent for a record period of time. The Fed has kept the funds rate extremely low, not only to boost economic growth, but also to ward off the threat of a deflationary spiral. Given the economy's recent soft patch, we don't expect the Fed to raise rates too soon. But, at some point rates will rise, it makes sense for clients to start planning now. With this in mind, Mark Riepe, led a roundtable discussion of investment and debt strategies for both the current low-interest rate environment and a future point when rates begin to tick up.

2011-06-30 Sunlight on U.S. Banks by Mark Kiesel of PIMCO

Among global banks, we believe U.S. banks are in a stronger position to absorb deterioration in the macroeconomic environment in Europe. U.S. banks also look attractive given their profitability, improving asset quality and capital position. Global banks vary dramatically in their asset quality and ability to meet capital requirements over time. As a result, we believe financial markets will continue to reward the strongest and safest banks and penalize the weakest. While we remain cautious on the U.S. housing market, U.S. banks appear to have the resources to manage further weakness.

2011-06-30 Quantitative Easing Versus the 1940 Fall of France by Doug Short of Doug Short

In real (inflation/deflation-adjusted) terms, when did the US market permanently regain the high reached in 1929? The first chart illustrates two answers to the question. One uses the real price and the other uses the real total return. The remaining charts compare market performance since 2000 with the equivalent elapsed time following the peak in 1929. As the final chart shows, the current real total return over the past eleven plus years has been worse than the performance over the equivalent timeframe during the Great Depression — at least until the second round of quantitative easing.

2011-06-29 Covered Bonds: Strong Demand, New Regulations Create Global Momentum by Ben Emons and Kris T. Mierau of PIMCO

Basel III’s long-term funding and liquidity coverage requirements could boost demand, create technical support for valuations. The EC has proposed an exemption excluding covered bonds from private sector participation in post-insolvency burden sharing. The Covered Bond Act could alter the way regional banks in the U.S. rely on the Federal Home Loan Bank (FHLB) system for funding.

2011-06-28 An Important Challenge to ‘Stocks for the Long Run’ by Geoff Considine (Article)

Jeremy Siegel's dictum - to invest in stocks for the long run - faces a new challenge. A recent paper by Robert Stambaugh, a Wharton colleague, and Lubos Pastor of the University of Chicago says that once you take into account the uncertainty of estimating future returns, stocks are not nearly as attractive to retirement-oriented investors as Siegel has claimed.

2011-06-28 The Diversified Portfolio Index by Charles Fahy, Sr. (Article)

Investment rates of return that are average but consistent are the products of exceptional performance. Over longer time horizons, these returns become increasingly difficult to outperform. One such example is the Diversified Portfolio Index - a buy-and-hold strategy deployed across all major asset classes.

2011-06-28 Where are Long Bond Yields Heading? The Bond Value Ratio as a Predictor of Future Yields by Georg Vrba, P.E. (Article)

Are long-maturity bond funds still a good investment? My analysis shows that there is currently a maximum potential appreciation of only about 10% for long-bond values. The 30-year bull market for bonds will be ending soon and the risk-reward ratio is too high to warrant buying long-bond funds now.

2011-06-28 A Value Investor’s Perspective on Tail Risk Protection: An Ode to the Joy of Cash by James Montier of GMO

The range of tail risk protection products seems to be exploding. Investment banks are offering “solutions” to investors and fund management companies are launching “black swan” funds. There can be little doubt that tail risk protection is certainly an investment topic du jour. The very popularity of this alone should spell caution to investors. Effectively, you should seek to buy insurance when nobody wants it. An alternative way of phrasing this is to say that insurance (and that is exactly what tail risk protection is) is as much of a value proposition as any other element of investing.

2011-06-28 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Another week of watching the Europeans deal with their flawed common-currency union as the financial media focus on all things Greek. The stock market was able to shrug off the bankruptcy of Europe as well as the continued soap opera here at home, as our government cannot find a way to trim the annual 1.6 TRILLION dollar deficit. The result was a fractional loss for the Dow Jones Industrial Average, while the NASDAQ Composite jumped out to a 1.4% gain for the week.

2011-06-27 Higher Commodity Prices and the End of Economic Growth Without Inflation by Mihir P. Worah of PIMCO

Global inflationary patterns may shift amid higher commodity prices. We expect commodity prices to be generally rising going forward, though with volatility and differentiation among commodities. Emerging markets going through a particularly commodity and energy intensive phase of growth may affect what developed-world consumers pay for commodities. Currencies are another factor. If developed-world policymakers attempt to make their economies more competitive via a cheaper currency, that could lead to higher inflation for those that are net importers.

2011-06-27 Whack! Today's Misaligned Manager Selection Process by Robert Arnott of Research Affiliates

An old golfing adage proclaims: Drive for show and putt for dough. Hiring winning active managers is fun and sparks interesting cocktail chatter. But this is an incredibly difficult and time-consuming skill to learn. We prefer alternative beta strategies, which often display the benefits of the best active managers, are far easier to research, and generally are available at a far lower cost. By no means are these strategies gimmes, but, they should help investors avoid the double bogeys of active management and traditional passive management, giving them a better chance of beating par.

2011-06-27 Will Japan’s Crisis Cause Force Long-Term Reform? by Milton Ezrati of Lord Abbett

For all the pain suffered by the Japanese as a result of the earthquake, the disaster and its ripple effects, offer them at least some smugness. The world, obsessed new, had for years dismissed Japan as a part of the past, preferring instead to enthuse over China and emerging economies. This horrible disaster has made one thing very clear: Japan still plays a critical role in the global supply chain and economy generally. How soon, if ever, will Japan recover its former productive role? And how will the shock of the recent disaster change the Japanese economy’s long-term direction?

2011-06-25 And That's the Week That Was... by Ron Brounes of Brounes & Associates

If it’s not one things, it’s another. A Greek tragedy averted (for now, perhaps?); a move to limit the rise in crude and gasoline prices (necessary or panic?); a never-ending debt crisis with political ramification (not only in Greece); an (overly) cautious assessment of the latest Fed-speak. Add it all up and you have a pretty volatile week on the equity front. The second quarter cannot end soon enough. Hey Japan…how’s that restructuring plan coming?

2011-06-24 RCM China Update: Following in the Footsteps by Mark Konyn of Allianz Global Investors

China has replaced Japan as the Asian economic champion, causing some to suggest that China will follow many of the steps taken by Japan during its economic emergence. Dr. Mark Konyn says the dynamics of the relationship between China and Japan are critical for Asian prosperity.

2011-06-23 A New Era of Global Financial Repression by Scott A. Mather of PIMCO

Investors need to be especially alert to increasing financial repression. Any sovereign policy that interferes with free market activity and the pricing of debt or currency can be thought of as financial repression. Repressionary policy rates percolate through the global financial markets and affect asset prices across the risk spectrum. Many emerging market countries use repressionary tactics to capture a larger share of global growth.

2011-06-23 Fixed Income Commentary: High Yield Takes a Pause by Gino Nucci of TCW Asset Management

Given that the current credit cycle is but 30 months old (as compared to the more typical 60+ month cycle lifespan), TCW views current conditions as reflective of a mid-cycle correction and not a harbinger of a return to recessionary conditions. As such, current high yield bond spreads are attractive.

2011-06-23 Fixed Income Commentary: Recent High Yield Selloff: Caution or Opportunity? by Jamie Farnham of TCW Asset Management

The spring season has tested the mettle of the high yield market. A common inquiry on investor minds of late is whether this is a short-term bump on a longer journey or alternatively that risk is rising for high yield investors. This note touches on (i) relative value, (ii) fundamentals and (iii) the potential interest rate effect on high yield.

2011-06-22 Can U.K. CPI Really Get Back to Its 2% Target? by Mike Amey of PIMCO

​U.K. CPI (Consumer Price Index) will likely continue to be buffeted by food and energy inflation. To generate the conditions necessary to bring inflation down more aggressively would put even greater pressure on U.K. households. The Bank of England is right to be cautious on raising the Bank rate given the current state of the economy.

2011-06-22 Five Dividend Paying Giants of Technology Trading at Absurdly Low Valuations? by Chuck Carnevale of EDMP

These five industry dominant, blue chip, leading technology stalwarts represent prima facie evidence of how absurd and irrational the stock market can be at times. The facts are that the fundamentals underpinning each of these strong and healthy technology giants are significantly better than average. Therefore, logic would dictate that the shares of these companies’ stocks should command a premium valuation relative to the average company or the S&P 500. It makes no rational or business sense that they don't.

2011-06-21 Investing Based on Jeremy Grantham's Forecast for Diminishing Resources by Robert Huebscher (Article)

In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.

2011-06-21 The Greek Comedy by Michael Lewitt (Article)

It is no longer prudent to dismiss the possibility of a worst-case outcome for the Greek debt crisis. Greece is not only laying bare the flawed structure of the European Union, but the fragility of the global financial system. An interconnected and networked global economy cannot ignore problems on its so-called periphery because there is no longer any periphery. Derivatives and other counterparty relationships have seen to that.

2011-06-21 Estimating Future Returns by Adam Butler and Mike Philbrick of Doug Short

There are several reasons why it may be useful to have a more robust estimate of future expected returns on stocks: People who are approaching retirement need to estimate probable returns in order to budget how much they need to save. A retiree's level of sustainable income is largely dictated by expected returns over the early years of retirement. And investors of all types must make an informed decision about how best to allocate their capital among various investment opportunities. Many studies have attempted to quantify the relationship between Shiller PE and future stock returns.

2011-06-21 A Replay in the Markets by Matt Lloyd of Advisors Asset Management

The one concern we cannot project, and one that every investor should be cognizant of, is the contagion risk of the potential default of Greece or any of the other troubled European issues. It won’t be necessarily the default itself but the reaction to it. This is more than likely the catalyst for the large amount of liquidity being built up in the banking system so as to mitigate another credit crunch that paralyzed the global markets in 2008. It also explains why A-rated Financials have seen their spread to the 10-Year Treasury widen from 121 basis points (bps) in May to a current 147 bps.

2011-06-21 The World Held Hostage by Credit Default Swaps? Alford on the FOMC: Watch what they say by Team of Institutional Risk Analyst

In this issue of The Institutional Risk Analyst, we feature a comment from Richard Alford on the state of thinking inside the Federal Open Market Committee regarding monetary policy -- at least based on what folks at the Fed say in public. We also comment on the latest financial bailout, in this case the apparent salvation of the European and US banks in the CDS market from taking a hit in the restructuring of Greece.

2011-06-21 Sector Insights - Focus: Technology by Mark W. Broughton, Stacie L. Cowell, Michael Emery, Peter M. Musser of Rainier Funds

A major change that has occurred in technology in recent years is the way that software is delivered, specifically to the enterprise customer base. It used to be that large companies such as Oracle and SAP sold their database and application software on a ‘perpetual license,’ where there was a large sale that recognized revenue up front. The industry has recently moved to a ‘software as a service’ model (aka “SaaS model”), where software is sold as a contract and revenue is recognized monthly. This has led to changes in the growth rates of many of the companies in this industry.

2011-06-21 The Awesomeness Continuum by Bill Mann of Motley Fool

The awesomeness continuum is essentially qualitative, and the further up the continuum a company is, the more libertine one can become about current price multiples. At the other end of the continuum are the traditional deep value stocks, what Benjamin Graham used to call the "cigar butts." We own a few of these, most notably Tokyo Electric Power, which has a list of risk factors as long and as wide as the eye can see. Unlike the awesome companies, with these it doesn't tend to pay to be patient. They're as icky as can be, and the risks facing them are not only obvious; they are also real.

2011-06-21 School Daze, School Daze Good Old Golden Rule Days by Bill Gross of PIMCO

The past several decades have witnessed an erosion of our manufacturing base in exchange for a reliance on wealth creation via financial assets. Fiscal balance alone will not likely produce 20 million jobs over the next decade. Government must take a leading role in job creation. A growing number of skeptics wonder whether college is worth the time or the cost.

2011-06-20 Sector Insights Focus: Consumer Discretionary by Daniel M. Brewer and Stacie L. Cowell of Rainier Funds

International growth is a consistent theme for companies in the consumer discretionary arena. “Consumerism” is growing globally, and those companies that are able to grow in more than just one market have more growth opportunities. Another theme in this sector is the concept of reaching the consumer in more ways than the traditional method of just providing a physical store. Retail revolves around getting the product to the consumer right at the point they want to buy it, where and how they want to purchase it. Companies have invested heavily in building out their e-commerce capabilities.

2011-06-20 Sector Insights Focus: Producer Durables by James R. Margard, Peter M. Musser and Carlee J. Price of Rainier Funds

Growth and value labels tend to be fairly subjective, and over time opportunities for growth and value tend to migrate and shift as conditions change. The producer durables sector has not historically been viewed as a “traditional growth” sector; however, there have typically been pockets of growth. Recently, this sector has begun to take on more consistent growth characteristics. We believe that the growth in producer durables could potentially be as good as other sectors of the market over the next few years. Much of this forecasted growth can be attributed to growth in the emerging world.

2011-06-20 Greek Yields: 'Certain Default, But Not Yet' by John P. Hussman of Hussman Funds

Either long- and intermediate-term Greek debt is a tremendous bargain here, or it is going to default. Unfortunately, the fiscal situation would almost inescapably require other European countries subsidize Greece for decades to come in order to avoid a debt restructuring. Taken together, the evidence surrounding Greece screams "Certain default, but not yet."

2011-06-17 The Exodus by Bill Smead of Smead Capital Management

Prices of residential real estate in Vancouver have skyrocketed. Over 70% of these purchases were from Chinese Nationals driving prices high. Compared to average household income, Vancouver is nearly twice as expensive as New York. Gordon Chang of Forbes wrote an article titled “Chinese Entrepreneurs Are Leaving China”. Here is how Gordon began to explain the phenomena:“China’s rich, driven by a sense of insecurity, are taking money out of their country. Many are actually preparing to move elsewhere" There is an exodus of the best and brightest business people coming out of the country.

2011-06-17 An Investor’s Road Map by Tim Shirata of Guild Investment Management

It looks as if banking regulators are finally showing some backbone. Here in the U.S. and in Europe, they are demanding less leverage. This will likely spread as there is no question that many large global banks are in trouble. The problem is that they are not addressing leverage from derivatives. It is too little and too late, especially after the moral harm created by the bank bailouts. To us, the big question remains this: what about controlling and clearing derivatives through a central exchange so the world of derivative holders and writers can clearly know the risks involved?

2011-06-17 Could the Eurozone Break Up? by John Mauldin of Millennium Wave Advisors

If the euro is not going to fall sharply, if reducing unit labor cost takes too long to restore competitiveness and growth and if deflation is unfeasible or (if achieved) self-defeating, there is only one other way to restore competitiveness and growth: Leave the monetary union, go back to national currencies and thus achieve a massive nominal and real depreciation. After all, in all emerging market financial crises where growth was restored, a move to flexible exchange rates was necessary and unavoidable on top of official liquidity, austerity and reform and debt restructuring and reduction.

2011-06-17 Is Gold About to Have Its Status Upgraded? by Frank Holmes of U.S. Global Investors

Central banks have been on a gold buying spree. Mexico, Russia and Thailand, were adding to their gold reserves. And in 2010, central banks became a net buyer of gold for the first time in 21 years. Central bank gold buying could soon be matched with other global banks if gold’s quality as an asset gets upgraded to Tier 1 status by the Basel Committee on Banking Supervision. The BCBS is an international banking supervisory committee that provides a forum for determining global standards to ensure that banks all around the world have adequate capital.

2011-06-17 Will Gold Equity Investors Strike Gold? by Frank Holmes of U.S. Global Investors

While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13 percent year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16 percent. Companies such as High River Gold Mines, Jaguar Mining and NovaGold Resources are off 45 percent from 2007-2008 highs. This has been exacerbated in recent weeks making it a hot topic of discussion among investors. This chart shows gold equities of all market capitalization sizes were holding up quite well until late April.

2011-06-16 On the Uses and Abuses of Discount Rates by Andrew Foster of Seafarer Capital

When investors search the world for opportunity, do they value a dollar of profit from Indonesia six times more than a dollar from South Korea? I doubt they do. Yet large and misleading discrepancies can arise when investors rely heavily on discount rates in valuation models to determine the relative attractiveness of foreign assets. Discount rates are useful when determining the intrinsic value of a single asset, but in my opinion, they should not be a primary determinant in the allocation between multiple assets.

2011-06-15 The Problem with the Misuse of Derivatives by Mark Mobius of Franklin Templeton

Market volatility is a reality of today and goes in two directions, up and down. One of the reasons we have (and are likely to continue to see) this level of volatility is because of the occasional misuse of derivatives. Of course, not all derivatives are bad. If understood and used appropriately they can be used by funds as tools to hedge or mitigate risk. For example, currency forwards or interest rate swaps are typically used to hedge out a fund’s risk related to a specific currency or interest rate exposure.

2011-06-15 Understanding the Investment Process at Jensen Investment Management - Step One: Return on Equity by Team of Jensen Investment Management

We believe that Return on Equity is a very useful criterion for identifying companies that have the potential to provide attractive returns over long periods of time. Our experience and research suggest that our requirement of consistently high Return on Equity results in a universe of high-quality, profitable companies that are able to generate returns above their costs of capital in a variety of circumstances and economic environments. This paper serves to illustrate the reasons why we use Return on Equity the way we do, and why we use it for the first step of our investment process.

2011-06-15 ProVise Bullets by Team of ProVise Management Group

The more things change, the more they remain the same. That trite expression has been applied to many different things. We are applying it to what may be an early stage tech “bubble”. Almost every investor is familiar with LinkedIn coming out at $45 per share then jumping to $120 per share in the first day of trading before settling in at $90 per share. Other examples abound. The very popular Facebook is estimated to be worth $76 billion. We have to admit that at least some of the tech companies are actually making money today with viable ideas, but the valuations still seem a bit absurd.

2011-06-14 Bruce Berkowitz - Ignoring the Crowd on Financials by Sam Parl (Article)

Bruce Berkowitz has said that his deep value and contrarian investing style will not guarantee short-term results, but he promises his shareholders will be rewarded for their patience over the long term. Last week, he explained why some of his positions - especially those in the financial services sector - are among the best opportunities in the market.

2011-06-14 What Fama and French’s Latest Research Doesn’t Tell Us by Michael Edesess (Article)

With the high name recognition and respect that the team of Eugene Fama and Kenneth French enjoys in the world of finance, anything they publish warrants attention. Their latest offering, Size, Value, and Momentum in International Stock Returns, offers some interesting data on global equity performance. But they fail to offer any insights that explain the reasons behind their findings.

2011-06-14 A Proven Path to Business Breakthroughs by Dan Richards (Article)

In my conversations with advisors, implementing change often tops the list of business challenges and frustrations. To advance your business, one proven strategy that has demonstrated remarkable success over not just years but decades is tapping into the power of peer-performance groups.

2011-06-13 Americas: Economic Review May 2011 by Team of Thomas White International

In North America, the U.S. and Canada saw contrasting economic trends during the first quarter. While first quarter GDP growth in the U.S. slowed when compared to the previous quarter, growth accelerated in Canada. The U.S. housing market remains weak while the housing recovery in Canada started last year, and the labor market has also seen a similar divergence. However, the economic outlook for the two countries is expected to converge more in the coming quarters. As growth accelerates in the U.S., Canada may find it difficult to maintain its first quarter growth pace.

2011-06-13 Emerging Europe: Economic Review May 2011 by Team of Thomas White International

According to data from EuroStat, inflation in the Euro-zone touched a 30-month high of 2.8 percent in the month of April as prices of fuel, electricity, and housing continued to soar. In line with the broader trend, the inflation gauge in the 27-member European Union, which also includes Poland, the Czech Republic, and Hungary registered an annual 3.2 percent in April, a touch above the 3.1 percent recorded in March. Among the east European economies, the Czech Republic recorded the lowest rate of inflation during the month.

2011-06-13 Will the U.S. experience a Perfect Storm of fiscal woes? by Matt Lloyd of Advisors Asset Management

Right now it’s easy to latch onto the argument that the soft patch we are entering economically will transfer into quick sand. The predisposition of retail and institutional investors is greatly formed by events over the last decade as well as the sixth straight weekly loss for equity markets. With deposits and household liquidity standing at all time highs, is there truly exuberance and overly-hyped expectations for the economy and equity markets? It appears not, which should caution those who are longer-term bearish.

2011-06-10 Postcard from China by In-bok Song of Matthews Asia

On my recent trip to China, one common focus I found among the companies I met with was product branding. Chinese firms have been swift to recognize more sophisticated consumer patterns, researching consumer segments for their varying preferences.

2011-06-08 So The Market Stinks – Just Plug Your Nose and Buy Proctor & Gamble by Kendall J. Anderson of Anderson Griggs

The road to the creation of wealth in the U.S., the greatest economic power the world has ever seen, has been paved by owning and operating a business many years, not a few weeks. When the majority thinks the market stinks and the gamblers have taken a break from the gaming tables, shrewd business buyers jump at the opportunity to gain ownership interest at an attractive price. One such opportunity today is Proctor and Gamble.

2011-06-08 Gold at $1,500 an Ounce: Speculation or Fundamental Demand? by Team of American Century Investments

We believe gold’s performance in recent years and current price above $1,500 an ounce reflect solid fundamental demand, rather than speculative fervor. A key driver of gold demand in the current environment is buying by central banks around the world. In addition, it appears that investors looking for a hedge against both the falling dollar and broader economic uncertainty have been buying gold for its diversification benefits. Jewelry demand in India and China are other, underappreciated positives.

2011-06-07 Modern Portfolio Theory IS Harming Your Portfolio by JJ Abodeely of Sitka Pacific Capital Management

In a recent paper, Scott Vincent argues that the flawed foundation of MPT has allowed its advocates to control the language of the debate and set the stage for the obvious conclusion that passive index-based investing is inherently superior. And don’t think for a second that this debate is simply theoretical, academic, or unimportant– the basic tenets of MPT shape the decisions of nearly all investors in profound and often disturbing ways. YOUR money is almost certainly being managed with these ideas at the core. The traditional approach to asset allocation is built on false axioms.

2011-06-03 Economic Whiplash by John Mauldin of Millennium Wave Advisors

The political winds in Europe are shifting. The crowd that runs the various member countries today will not long survive the changes. There will be new politicians with different mandates as it becomes clear that the costs of the bailout are going to fall on the backs of the solvent countries and that austerity is going to mean hellishly bad deflation, high and rising employment, and depression in the indebted countries. And with the US economy slowing down, it might not take much to push us over the edge.

2011-06-02 High Unemployment Remains a Substantial Challenge for the Economy by Team of American Century Investments

Continued high unemployment and weak residential housing prices are two hangovers from the Great Recession that continue to act as brakes on the economy and current recovery. Some analysts say the housing problem is a several-year process of allowing prices to fall to where demand recovers. But the housing market is closely related to the labor market and the unemployment problem. However, no one has a definitive analysis of what’s wrong or what is needed to bring unemployment down from 9%. And adopting the same laissez-faire approach as the housing market is clearly not a solution.

2011-06-02 Expert Roundtable on Risk by Mark W. Riepe, Liz Ann Sonders, Randy Frederick, Rob Williams, & Brad Sorensen of Charles Schwab

The word "risk" has a negative connotation-something to steer clear of whenever possible. However, in the investing world, risk and performance are intertwined. Market sentiment can shift quickly depending on economic or political news, geopolitical events and even natural disasters and these shifts can sometimes send investors fleeing for safety or taking on more risk as they seek higher returns. Mark Riepe, led a roundtable discussing the concept of risk in investing, strategies for reducing portfolio risk, and investment suggestions tailored to both risk-seeking and risk-averse investors.

2011-06-01 Buy Cheap Bonds with Safe Spread by Bill Gross of PIMCO

If the government is going to artificially repress yield, then focus on the parts of a bond that are less repressed! Rather than outright default, many countries attempt rather successfully to keep nominal interest rates lower than would otherwise prevail. Over the long term, this “financial repression” results in a transfer of wealth from savers to borrowers. Investors shouldn’t give their money away, and at the moment, the duration component of a bond portfolio comes close to doing just that – because it doesn’t yield enough relative to inflation.

2011-05-31 Letter to the Editor On Absolute Return, Market Neutral and Long-Short Funds by Todd Huster (Article)

A reader responds to a market commentary, What is conservative about Absolute Return, Market Neutral, or Long/Short Mutual Funds?, by Kendall Anderson of Anderson Griggs, which appeared on May 23, 2011.

2011-05-31 Hedging In an Inflationary World by Andrew Foster (Article)

These days, given the complex web of global financial transactions in which companies are enmeshed, it is unrealistic to expect management to avoid hedging. When I invest, however, I search for companies that follow simple, consistent, and short-term hedging policies – and whose business models are strong enough to adapt to the inherent volatility and uncertainty of the marketplace.

2011-05-28 Schwab Market Perspective: Shifting Sentiment by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Economic headwinds are causing growth expectations to be reevaluated, resulting in choppier action in a majority of asset classes. The Fed is moving steadily closer to ending its purchases of Treasuries but we dont believe its a major event. Normalization of monetary policy still seems slow in coming, although we believe QE2 ending on schedule is nearly certain. Europe's debt crisis continues to plague the eurozone. Solutions appear to be limited and agreement is still anything but assured. Meanwhile, China's slowdown is also weighing on investors.

2011-05-26 Everything from Oil to Silver: Are Speculators Causing Too Much Volatility? by Team of Knowledge @ Wharton

Allegations that traders manipulated oil prices in 2008 are reinforcing the buzz -- at the gas pump and elsewhere -- that speculators are driving up the price of oil, triggering wild price spikes and nail-biting volatility. Fingering speculators is a popular pastime these days, but experts at Wharton and elsewhere say the blame is often misplaced. Although speculation can affect prices, most of the recent price swings in oil and other commodities are happening for fundamental economic reasons.

2011-05-26 The Case for More Monetary Elixir by Scott Minerd of Guggenheim

Ive noticed a critical mass of groupthink growing around the expiration of the Feds asset purchase program dubbed QE2. After tripling its balance sheet in 2.5 years, the conventional wisdom is that the era of quantitative easing should now give way to the era of inflation. As a result, the foregone conclusion is that U.S. interest rates will rise and bonds will underperform significantly. While I acknowledge the potential for rising rates, I dont think the expiration of QE2 is the catalyst that most believe it to be. In fact, I believe U.S. rates should remain at historically low levels.

2011-05-25 Sector Weights: On Average Wrong, but Dynamically Right by John West of Research Affiliates

The markets have been through an extraordinarily volatile period the past five years, beginning with strong equity returns in 2006–2007, followed by the Global Financial Crisis (GFC) in 2008, and the subsequent Mother of All Recovery rallies in 2009–2010. Talk about a full market cycle! During this period, energy and financial stocks have experienced dichotomous lives. Energy stocks jumped 10% per year and led all sectors of the market. Meanwhile, the GFC pounded financial stocks. To be fair, some financial institutions caused the GFC. The other nine sectors all outperformed the broad market.

2011-05-25 Double-Invoicing and the Yuan by Andrew Foster of Seafarer Capital

It’s widely held that the Chinese yuan is a “cheap” currency, and that it is undervalued relative to the U.S. dollar. I agree, especially in light of how expensive some foreign currencies appear to be. However, I would quickly caveat my opinion by clarifying that it applies only to a long-term horizon. If you are looking for pessimism regarding the yuan, there is no shortage of popular arguments against it, but I will leave that aside for now. By examining a little-known practice called “double-invoicing,” we can observe commercial traders’ preference for the yuan versus other currencies.

2011-05-25 Global Mergers and Acquisitions Activity Continues to Rise by Team of American Century Investments

Mergers and acquisitions activity is on the rise worldwide. In the U.S. this increase has been accompanied by the return of mega-deals ($10 billion+) driven primarily by large multi-national corporations flush with cash. These deals (and the anticipation of more to come) have helped drive markets up in the first quarter of this year. But the question on the minds of many investors is whether acquiring companies are at risk of overpaying for acquisitions that—while deemed “strategic”-may only end up transferring (not creating) value from shareholders of the acquiring to the acquired companies.

2011-05-24 Stop Making 'House Calls' by Kristen Luke (Article)

If a client or prospect isn't willing to come to your office and meet, find out why and develop a solution. Below are two common excuses advisors hear and solutions that avoid having traveling around town to meet someone.

2011-05-24 Ownership in an Operating Business by David L. Blain (Article)

There was a time when the three legs of the retirement stool were Social Security, pensions, and personal savings, but those days are gone for good, and the stool needs new legs. Paper assets and real estate are classic asset classes that can help fill the void, but where else can investors turn for the stable income they need?

2011-05-24 Economy Enters A Soft Patch by Chris Maxey of Fortigent

Another volatile week resulted in the S&P 500 Index losing 0.3% and the Dow Jones Industrial Average falling 0.7%. Economic data last week continued to confirm that housing markets are sluggish and that manufacturing is entering a weak patch. Existing home sales unexpectedly fell in April. Economists expected sales of existing homes to reach 5.2 million in the month, but the actual tally for April was 5.05 million, down 0.8% from the previous month.

2011-05-24 What is conservative about Absolute Return, Market Neutral or Long/Short Mutual Funds? by Kendall J. Anderson of Anderson Griggs

The machine of Wall Street has convinced many individuals who believe they are prudent, conservative, investors that a mutual fund whose name or objective includes the terms Absolute Return, Market Neutral, Long/Short or hedged, will never lose your money. An individual whose fear of losing again from common stocks just can’t bear sitting on cash and earning a nickel of interest every three months 1k. The desire to increase returns is just too great. Before you fall for the hype there are a few things you should know. The most important item you should remember is that there is no guarantee.

2011-05-21 All for One Euro and One Euro for All? by John Mauldin of Millennium Wave Advisors

What Will the EU Do? Seriously, will Trichet really say “non” when they once again peer down at the abyss? He blinked last time. But if the desire is to acknowledge in private what they cannot say in public - that Greece should leave the eurozone and go back to the drachma - there is no better way than to not take Greek debt onto the ECB’s books. It is not a matter of whether Greece defaults, but when. It may be easier in the long run to clean up the mess they have now than continue to create even more debt that cannot be paid.

2011-05-20 Common Misperceptions about Asian Investing by Robert J. Horrocks of Matthews Asia

During my recent travels and meetings with investors around the world, I have found that interest in Asia is abundant. But what has struck me most is that certain perceptions about investing in Asia permeate regardless of whether we speak with investors in Europe, the U.S. or even Asia itself. I find this an opportune time to address three of the common "misperceptions" about investing in the region. 1: The best way to invest in Asia is by investing in multinational companies 2: To invest in Asia, I must accept higher valuations and 3: When investing in Asia, market timing is very important.

2011-05-20 More People by Bill Smead of Smead Capital Management

As value managers, we are interested in secular trends. We seek company characteristics which lead us to non-cyclical businesses which are not capital or labor intensive. For this reason, we love businesses which need more people (as customers) to become more profitable. Unfortunately, from time to time, markets massively over-capitalize industries which they believe will benefit from having more people. Historical examples: The 1929 stock market peak was built around the idea that there would be more people to listen to radio, drive cars and fly on planes. The concept was over-capitalized.

2011-05-17 Four Steps to a Top-Performing Team by Dan Richards (Article)

Over the past 25 years, I've observed many high-performing teams and spent a lot of time talking to advisors and their support staff about the keys to their success. Here are four observations about what it takes to have a well-functioning team.

2011-05-17 Your Top Priority Should Be Your Top Priority by Justin Locke (Article)

How do you determine your top priority? Too often, leaders get bogged down by routine, and they fail to meaningfully answer that question.

2011-05-17 The 5 Profit Seeking Methods by Kendall J. Anderson of Anderson Griggs

All professionals and individual investors are seeking higher returns. Each will follow one of these methods; Market Trading - your ability to anticipate changes in the market, Focused Trading - your ability to choose a derivative that will do better than the market, Buying Low and Selling High - buy only when the markets have fallen, sell when they are up, Buy and Hold - your belief that the company will prosper long into the future or Buying Bargains - buy when prices are below the "true value". Each method offers the potential to create wealth and each has its own group of believers.

2011-05-17 What 'Secular Cycle' Means by Ed Easterling of Doug Short

There is a skeptical gremlin perched on the left shoulder for many investors. He often sneers at notions of "cycles" and other presumably predictable periods. When the word "secular" accompanies the word "cycle," that gremlin becomes even more scornful. Why do we use the term "secular cycle" with the stock market and what does it mean? Figure 1 presents a view of the stock market over the past century. You will note periods of above-average returns (i.e., the green bar periods) and periods of below-average returns (i.e., the red bar periods).

2011-05-16 Ally Financial + ING Bank? Richard Alford on Lessons Forgotten at the Greenspan/Bernanke Fed by Team of Institutional Risk Analyst

This week in The Institutional Risk Analyst we feature a comment from Dick Alford on the lessons forgotten by the Fed when it comes to financial regulation. Showing his considerate nature, Dick even uses the official histories of past crises prepared by the FDIC as the timeline to make it easier for some of our former colleagues at the Fed to follow along. But first, let's have some fun with one of the toys developed for The IRA Bank Monitor, namely our pro forma M&A analysis tool.

2011-05-16 Strauss-Kahn Allegations Are Consequential for the Global Economy by Mohamed A. El-Erian of PIMCO

Should Strauss-Kahn be forced to step down, this would catch the IMF with a selection process for the top position that is still overly dominated by politics. The allegations facing Strauss-Kahn are serious and will take time to be investigated properly. In the meantime, they have caught Europe still without a sustainable solution to the debt crisis in its periphery.

2011-05-13 The Institutional Gold Rush by Peter Schiff of Euro Pacific Capital

I've worked on Wall Street my entire life, and one thing I've learned is that large institutional investors, like pension funds and endowments, rarely veer from the herd. They manage too much of other people's money to stick their necks out alone-if their investments go bad, at least they can point to everyone else who fared just as poorly. For this reason, these funds are often lagging in their perception of crucial market changes. While many of us are buying precious metals to hedge against the collapse of the dollar, gold and silver have been taboo investments on Wall Street for years.

2011-05-13 Bernanke Double Talk Creates Opportunity by John Browne of Euro Pacific Capital

Fed Chairman Bernanke’s remarks at his historic first press conference were met by a tidal wave of skepticism. Although many of the mainstream outlets characterized his performance as “serious” and “masterful," most rank-and-file Americans were left with a very different impression. Any casual glance at the broad internet coverage of the event shows that the public is deeply skeptical of Mr. Bernanke and the actions he is taking. If that skepticism runs more than skin-deep, it could herald a fundamental change in American politics and a restoration of sound finance in America.

2011-05-13 Market Turbulence Increasing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

We are entering a traditionally tough period for the market and economic data has been raising questions about the sustainability of the recovery. While still optimistic on the longer-term outlook, there could be more choppiness in the near term as markets adjust to a changing environment. The Fed continues to buck the global trend by maintaining loose monetary policy, which contributed to a weaker dollar. But lately the dollar has gotten a lift as QE2 comes to an end, contributing to a rout in commodity prices.

2011-05-11 The Strong Bond Between India and Gold by Frank Holmes of U.S. Global Investors

Casey Research’s BIG GOLD newsletter recently published a great interview that I’d like to share with you. BIG GOLD editor Jeff Clark interviewed Shanta, the mother of U.S. Global consultant and longtime friend Jayant Bhandari, on how strong the cultural bond between gold and Indians is, especially women. "When it comes to supply and demand, what you’ve been told about gold jewelry is wrong. That’s a strong statement, but I’ve got a firsthand account to back it up."

2011-05-11 Supreme Moment by Bill Smead of Smead Capital Management

Kairos - is an ancient Greek word meaning the right or opportune moment (the supreme moment). The world of value investing and portfolio management includes mean reversion and patience. Speculative episodes typically go on for much longer than expected. This fact forces us to take a stand by avoiding overvalued common stocks and owning undervalued shares. Everyone would love to make their adjustments at the “Kairos”. We believe that the greatest existing misallocation of capital in the world today is based on over-confidence in the uninterrupted growth of emerging markets.

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 What Return can we Expect from Stocks? by Adam Jared Apt (Article)

What return can we expect from stocks over the long term? This sentence contains four problematic terms: 'return,' 'expect,' 'stocks,' and 'long term.' Intended for the educated laymen, this article considers each in turn.

2011-05-10 When You Can’t Say It Nicely … But It Still Needs To Be Said by Wendy J. Cook (Article)

Perhaps because social media is so, well, social, I find it particularly painful to see someone go on a poorly rendered rant on the Internet. As Gilbert K. Chesterton says, 'A good novel tells us the truth about its hero; but a bad novel tells us the truth about its author.' How do you speak your mind about strongly help viewpoints without revealing a fool?

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.

2011-05-10 The Financial Impact of an Aging Demographic by Chris Maxey of Fortigent

A volatile week of trading resulted in the S&P 500 Index losing 1.7% and the Dow Jones Industrial Average falling 1.3%. However, those losses were tame relative to the rout experienced in commodity markets. According to the Wall Street Journal, crude oil dropped 14.7% last week, while the Dow Jones-UBS Commodity Index lost 9.1%. There was no single cause for the sudden risk aversion, but it appears that recognition of a slowing US economy, along with tighter monetary policy in developing economies, contributed to the renewed caution.

2011-05-06 Silver and Gold, Silver and Gold by Doug MacKay and Bill Hoover of Broadleaf Partners

Silver and gold may still look good as decoration but the metals have also lost some luster in the dental profession (gold vs. porcelain crowns) and for anyone who uses a digital camera instead of old guard film. (Silver is used in film processing.) As most know, silver shot to new highs last week amidst a frenzy for precious metals and perhaps, their perceived inflation hedging capacities. This week, the story was a bit different, with the metal experiencing one of the most stunning drops since the Hunt Brothers tried to corner the silver market back in the early 1980’s.

2011-05-03 ProVise Bullets by Ray Ferrara of ProVise Management Group

The news of Osama bin Laden’s death was cheered around the world – especially in the United States. Although it took 10 years to bring him to justice, his death brought a sense of victory in the war against terrorism. Our thanks go out to our intelligence gatherers, who diligently compiled leads from a variety of sources, and the team of Special Forces who carried out the risky mission inside Pakistan.

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 Financial Markets Offer Conflicting Opinions by Chris Maxey of Fortigent

Another week of encouraging corporate earnings reports allowed the equity market to continue its recent strong run. On the housing front, the disappointing streak continued. New home sales increased from a seasonally adjusted annual rate of 270,000 in February to 300,000 in March, according to the Department of Commerce. Although the gain was sizeable at 11.1%, new home sales are mired at abjectly low levels. Homebuyers are finding favorable opportunities in the form of distressed properties, reducing the chance of a significant rebound in new home sales in the months ahead.

2011-05-03 The Case for Human Ingenuity by Niels C. Jensen, Nick Rees and Tricia Ward of Absolute Return Partners

This month we take a closer look at oil and reach what many of our readers will probabaly find a surprising conclusion: We believe that we are approaching the end of the oil era and that oil prices will undergo a substantial correction over the next several years. But we cannot be very precise on timing, as there are too many variables at this stage. Our conclusion is based on 3 observations.

2011-05-02 Warm Milk and Sweet Dreams by Herbert Abramson and Randall Abramson of Trapeze Asset Management

There is a lot of scary noise out there. MENA turmoil, the Japanese nuclear crisis, European debt, U.S. debt, debasing of the U.S. dollar, commodity prices, higher inflation, a potential left wing coalition government in Canada and Donald Trump as U.S. President. Understandably, our clients, and individual investors generally, are fretting. Confidence levels are low and risk aversion has become paramount. Surveys show that individual investors believe the odds of a one-third stock market drop is over 50% in any given year where true odds are closer to 2%. Investors are too fearful.

2011-04-29 This Time Isn’t Different by Richard Bernstein of Richard Bernstein Advisors

Hearing the phrase “this time is different” is often a warning signal. History demonstrates that rationalizing an overvalued market by suggesting that the economy has structurally or that we’ve entered a “new paradigm”, is not generally a fruitful strategy. Whether bullish or bearish, we believe that macro cycles rarely diverge from historical patterns. Indeed, current global economic cycles appear to be following historical trends. However, there appears to be a significant disconnect between investor sentiment regarding risk and where problems are actually emerging within the global economy

2011-04-27 The Impact of Interest Rates on Real Estate Securities by Team of Forward Management

How interest rate movements impact real estate securities is a complex but topical matter. After studying the historical performance of these securities, our findings indicate that: Not all interest rates move together. Real estate securities have had surprisingly low correlations to interest rates. More often than not, real estate securities have generated positive performance during periods of rising interest rates. These observations indicate that credit quality, yield spreads and underlying fundamentals play an equal or more important role in investment returns than interest rates alone.

2011-04-26 A Unique Way to Engage Key Clients by Dan Richards (Article)

Many advisors struggle with ways to deepen relationships with top clients. My conversations with top-performing advisors have shown that many succeed at building those relationships by rejecting the approach most advisors employ, and instead adopting an unconventional and low-cost approach built around special events.

2011-04-26 No Child Left Behind... Until They Are Teenagers, At Least by Chris Maxey of Fortigent

News of a potential downgrade to the US credit rating caused a sudden sell off in the equity markets, but positive earnings reports led to a rebound. By the end of the week, the S&P 500 index and the Dow Jones Industrial Average both closed higher by 1.3%. S&P took the unusual step of placing the US on credit watch negative, indicating that there is now a 1-in-3 chance of an outright downgrade to the US credit rating in the next two years. The announcement by S&P resulted in a severe equity market sell off on Monday morning before investors remembered S&P’s previous track record.

2011-04-26 The Libyan No Fly Zone Needs to be Extended to Ben Bernanke's Helicopter by Martin J. Pring of Pring Turner Capital Group

There has been a lot of talk about the excessive loose monetary policy coming out of the Federal Reserve. However, most of the arguments concerning the implications take the form of generalizations as opposed to quantifiable relationships. Our objective here is to show, through the historical relationship between short-term interest rates and the economy, that the Fed has been overly generous. Moreover, we will see that the data call for much higher industrial commodity prices before this cycle runs its course. In retrospect, they will make todays elevated levels look benign by comparison.

2011-04-25 Monetary Policy in 3-D by John P. Hussman of Hussman Funds

One of the most important factors likely to influence the financial markets over the coming year is the extreme stance of U.S. monetary policy and the instability that could result from either normalizing that stance, or failing to normalize it. It is not evident that quantitative easing, even at its present extremes, has altered real GDP by more than a fraction of 1%. Moreover, it's well established that the "wealth effect" from stock market changes is on the order of 0.03-0.05% in GDP for every 1% change in stock market value, and the impact tends to be transitory at that.

2011-04-22 Don’t Fear a Pullback in Prices by Frank Holmes of U.S. Global Investors

The S&P credit agency sent shockwaves through the global financial system on Monday. This sent markets lower and the prices of commodities such as oil rocketing back above $110 per barrel and both gold and silver to new highs. It should be clear the S&P announcement was just a warning, the rating was affirmed at AAA. The fears quickly subsided and U.S. markets hit fresh three-year highs. Essentially there’s only a one-third chance of a downgrade and anyone who’s ever listened to the weather man knows that a 33 percent chance of rain means you probably don’t need your umbrella.

2011-04-21 Equity Investment Outlook by Team of Osterweis Capital Management

The bifurcation of the market, with small caps outperforming large caps, has led to a valuation disparity between overvalued small caps and undervalued large caps, which we believe can be profitably exploited. We, and others, have observed for some time that many excellent, growing large cap stocks are quite cheap relative to both the overall market and to more richly priced smaller companies. We expect that, over time, more investors will agree and large cap stocks may then begin to outperform the general market, as they have to a modest extent this year.

2011-04-19 Gundlach: Treasuries will Rally When QE2 Ends by Robert Huebscher (Article)

The bonds that PIMCO's Bill Gross sold to take a 3% short position in the Treasury market may have found a buyer in Doubleline's Jeffrey Gundlach. In a conference call with investors last week, Gundlach said that Treasury prices would rise in the near term, once QE2 expires on June 30.

2011-04-19 Rear View Mirrors by Richard Michaud of New Frontier Advisors

It was another positive quarter for U.S. equity investors. The market’s resilience in the face of the Fukushima earthquake, Middle East rebellions, and euro uncertainties was remarkable. The U.S. economy continued to demonstrate significant signs of recovery with new jobs in March and a 1% drop in the unemployment rate since November. While European markets were up 6.5% in dollar terms, Asian indices were down 2%. Bond market was mixed, with treasuries down and diversified indices flat. Oil prices were up over 16% while the dollar fell 6.4% relative to the euro but up 1.3% to the yen.

2011-04-18 Letters to the Internal Revenue Service by Kendall J. Anderson of Anderson Griggs

On April 8th our elected representatives reached a compromise to keep our federal government’s doors open. It was hailed a victory, yet we all know that this cutback (39 Billion) does nothing to alleviate the government’s need to borrow $6 Billion every working day. Every decision Congress has made concerning your money, since the beginning of this great country, has been a struggle. None of us enjoy paying taxes, yet we know it is necessary. We have deferred the decision on who will pay and who will receive, to Congress. We can only be thankful that the fight is taking place out in the open.

2011-04-18 Now Hiring by Milton Ezrati of Lord Abbett

The jobs market has begun to improve. True, the pace is much too gradual for many, but still there can be no mistake that business has at last started rehiring. Not only have payrolls increased but also other indicators foretell further fulltime hiring. What is more, the unfolding jobs recovery, despite people’s understandable impatience, seems pretty much on track with past cycles. Prospects for any continued improvement, then, should give Washington cover to cease its largely singular focus on jobs and deal with longer-term issues. Recent signs are fairly consistently positive.

2011-04-18 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Last week saw the stock market drop slightly over ongoing European default concerns as well as the sting of high oil prices feeding through into inflationary pressures. The Dow Jones Industrial Average fell just .3% while the NASDAQ Composite dropped .57%. The few earnings announcements also caused some investors to lock in some trading profits.

2011-04-16 Inside Information by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Earnings season gives an 'insider' look at economic growth. Businesses see and react to changes in the economy before the broader macro data show a clear trend. The Fed has floated some trial balloons about reining in its extremely accommodative policies, the time for which is overdue. Budget issues remain a problem at all levels of government, but likely wont derail the recovery at this time. Despite ongoing debt problems in peripheral European nations, the ECB hiked interest rates. Europe still faces significant issues that make it more likely to underperform other areas of the world.

2011-04-15 Will Precious Metals Survive the Double Dip? by John Browne of Euro Pacific Capital

It is rare for precious metals to appreciate in parallel with the broader stock market. Yet, this has been the case in the two years since the stock market began coming back from the 2008 financial crisis. Although metals have outperformed US equities over that time frame, it is noteworthy that stocks have gone up at all. Since January 2, 2009, the S&P is up about 50%. While gold is up 68% and silver is up a staggering 267%. With rising interest rates, oil at over $100 a barrel, and the recovery running out of steam, many investors are wisely asking if the markets are set for a sharp pullback

2011-04-15 Concerned About Inflation? by Brad Sorensen of Charles Schwab

Inflation has become a bigger topic of discussion among investors and in the media as of late. While we have noted in numerous publications that we don’t believe inflation is a near-term concern due to a number of factors, investors are wondering how to position themselves should inflation start to take hold. First, despite common perception, gold has not historically been a very good hedge against inflation. Due to the possibility of gold prices being a bit extended after the recent run, we don't recommend gold as an investment for those concerned about inflation.

2011-04-15 ProVise Bullets by Team of ProVise Management Group

Herb Meyer said during tough economic times family size tends to shrink because people tend not to get married, and if they do they try to avoid having children because they can’t afford them. It was only a few days after this talk that we read that the birth rate in the U.S. from 2007 through 2009 fell 4%, which was the single largest drop in any two year period since the mid 1970s. The stock market declined by 50% in the mid ‘70s and interest rates climbed to over 20%. That’s right – 20%! In short, a thriving economy creates a growing population which in turn creates a thriving economy.

2011-04-15 Not all Bonds are Created Equal by Dan Fuss, Kathleen Gaffney, Matthew Eagan & Elaine Stokes of Loomis Sayles

It has become the question of the day: If interest rates are heading higher, shouldn’t I bail out of bonds altogether? While we anticipate rates will rise, we don’t believe abandoning bonds would be prudent for most investors. Bonds can play an important role in investor portfolios by providing income potential plus diversification. In this piece, we describe why we think rates may be biased higher in coming years and how our portfolio strategies may adjust to the new environment.

2011-04-13 Finding the Energy to Succeed by Christopher J. Singleton of Kanawha Capital Management

In early March, the bull market marked its second anniversary. Stocks have rebounded from their lows of 2009, but not without some big gyrations along the way. Last spring, the rebound was briefly yet violently interrupted by fears of an economic reversal. This year we have also experienced some volatility, although the catalysts are different. The pullback in 2010 stemmed from concerns about job growth and the European debt crisis. Those fears have largely been supplanted by others. Today, the speed bump relates to the unrest in North Africa and the Middle East and the surge in oil prices.

2011-04-13 U.S. Budget Watch: Much Ado About Nothing by Russ Koesterich of BlackRock Investment Management

Friday Congress and the White House agreed to cut $39 billion in federal spending to avoid a shutdown. The agreement would fund the government for the remainder of the fiscal year, which ends on September 30th. In other words, after weeks of partisan debate, Congress and the White House were able to reach an agreement on 1% of the federal budget. What remains to be settled are three more serious and contentious issues: the imminent breach of the federal debt ceiling, the 2012 budget, and the long-term solvency of the three main entitlement programs Social Security, Medicare, and Medicaid.

2011-04-12 Sentiment Creeps Back into Overly Bullish Territory by Chris Maxey of Fortigent

Over the past six months, actions by the Federal Reserve to purchase assets through its quantitative easing program played a major role in driving market prices. As the markets prepare to transition away from quantitative easing, investors are facing the prospects of a tougher market environment. The upcoming earnings season will go a long way in determining whether this recovery is ready to stand on its own.

2011-04-08 Near-term Outlook For A Troubled World by Victoria Marklew, Richard Thies and James Pressler of Northern Trust

Although 2011 is only three months old, the world has changed dramatically. Along with the evolving European debt crisis, seemingly -isolated Tunisian protests grew to varying levels of upheaval throughout the Arab world, and an historic earthquake and subsequent tsunami have left Japan’s outlook under a cloud of uncertainty. Each of these situations is significant in its scope and magnitude, but by focusing on just the key elements, the main risks can be appreciated.

2011-04-07 The S&P 500 is Fairly Valued by Chuck Carnevale of EDMP

We do not believe in forecasting stock markets or stock prices on individual stocks. Instead, we approach investing as the process of calculating intrinsic value based on fundamentals. The most important fundamental to be considered when evaluating the True Worth of a market is earnings. Therefore, it's important that the reader understands that this article is offered as a mathematical calculation of what the S&P 500 is actually worth based on earnings. The reason we believe this to be important is because we also believe that any deviations from fair value will ultimately self-correct.

2011-04-07 Valuation Changes During the Current Bull Market by Team of Bespoke Investment Group

There is always a lot of attention paid to the price changes that sectors have experienced during the current bull market, but there's not much focus on the changes in their valuations. Below we take a look at both using a scatter chart that shows the percentage change in both price and P/E ratio since March 9th, 2009. As the price of the sector rises, earnings need to rise just as much or else the P/E ratio will increase. It's common for P/E ratios to expand during bull markets, but a sector becomes more attractive if it can keep its valuation down as its price increases.

2011-04-06 Let Them Eat Crude by Robert Stimpson of Oak Associates

World events over the past month have received a lot of media attention, but few accounts have emphasized the long-term effects on equity markets. The revolts in Tunisia, Egypt, Libya, unrest in Bahrain and Yemen, and the earthquake in Japan are significant for equity investors going forward. While most of the media have focused on the human aspect of the events, the influence of food inflation, rising oil prices, and the state of the US dollar have been overshadowed by the regime changes and nuclear disaster in Japan.

2011-04-05 Is Alpha Dead? by Andreas Steiner (Article)

While beta has been declared dead several times in the past, alpha is a survivor. My diagnosis is that alpha, however, is in very critical condition itself, even under the most optimistic interpretation. A more realistic assessment is that alpha is dead.

2011-04-05 Estimating Future Returns by Adam Butler and Mike Philbrick of Doug Short

Investors should heed the results of robust statistical analyses of actual market history, and play to the relative odds. This analysis suggests that markets are currently expensive, and asserts a very high probability of low returns to stocks (and possibly other asset classes) in the future. Remember, any returns earned above the average are necessarily earned at someone else's expense, so it will likely be necessary to do something radically different than everyone else to capture excess returns going forward.

2011-04-05 Does a Weak Dollar Cause Inflation? by Axel Merk of Merk Funds

Should investors be concerned that a weaker U.S. dollar causes inflation? The price at the gas pump should be a stark reminder that a weaker dollar may contribute to higher prices. Yet, economists tell us that food and energy inflation does not count. Why do economists have such a baffling sense of logic? Are economists really aliens in disguise, locked up in ivory towers? Let’s shed some light on the logic and why it may not merely be strange, but wrong.

2011-04-04 Confessions of an Investor by Niels C. Jensen of Absolute Return Partners

Woody Brock is advocating a regime change. Throw away the generally accepted approach of two generations of investment ‘experts’ and start again, is Woody’s recommendation. As a practitioner, I certainly recognise the limitations of MPT and I agree that, in the wrong hands, it can be a dangerous tool, but there is also a discipline embedded in MPT which carries a great deal of value. And, in fairness to Woody, he does in fact agree that you can take the best from MPT and mix it with a good dose of ‘common sense’ and actually end up with a pretty robust investment methodology.

2011-04-01 ProVise Bullets by Team of ProVise Management Group

Here we are at the end of the first quarter of 2011 and we watched the markets move basically upward for the first six weeks of the year, advancing as much as 8% in some cases. Then, uncertainty escalated around the world beginning in mid February. First, there was the fall of the Tunisian and Egyptian governments, along with unrest in other Arab countries. Then in mid March, Japan suffered its earthquake.  Meanwhile, the U.S. government kept itself running  by passing a series of continuing resolutions, while the politicians still could not come to grips with an approved budget and deficit.

2011-03-31 The New Retirement ...Are You Ready? by Ronald W. Roge of R.W. Roge

Gone are the days when you worked for a company for 35 years and received a gold watch and a monthly pension plan payment for life. Today those old fashioned Defined Benefit Pension Plans have been replaced with 401(k) Defined Contribution Plans and IRAs. These accounts require you, not your company, to determine how much to save, how to invest and manage those savings. It also requires you to assume all of the risk yourself.

2011-03-30 A special visit to Tokyo by Mohamed A. El-Erian of PIMCO

Japan is recovering from the horrible calamities, but doing so in the midst of enormous challenges and high uncertainty.

2011-03-29 Change Isn't So Hard by Justin Locke (Article)

Change always encounters resistance. While our natural instinct may be to fight back against that resistance, I have found that a better path is to lessen the original resistance, rather than trying to surmount it.

2011-03-29 Are Financial Stocks Value or Growth? by Ron Surz (Article)

Financial stocks have been hit hard by the current economic crisis, causing most index providers to categorize them as deep value. But this categorization is arbitrary, potentially misleading and can distort reported performance calculations.

2011-03-26 How Capture Ratios can Help you Prepare for the Next Downturn by Isbitts of Rob Isbitts

Alpha and Beta tell us a lot, but they also lead us to an even more useful measure of performance and manager acumen, which allows you and your client to better understand the range of possibilities they are bound to experience in different types of market environments. That is what we call “Capture Ratio,” and that special topic is what we’ll focus on here.

2011-03-24 European Debt: Another Domino Falls by Komal Sri-Kumar of TCW Asset Management

Portugal will be the third European country to be bailed out in recent months following Greece (May 2010) and Ireland (November 2010). It also follows a pattern of individual governments and the EU repeatedly asserting that no bailout is necessary, that the high bond yields and rating downgrades are unjustified, and that speculators are largely to blame for Europes problems.

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.

2011-03-22 Statistical Insights into Everyday Problems by Sam Parl (Article)

You know that the volatility of an investment matters as much as its overall return. But you may not know that research into this fundamental investment principle has been applied in many other disciplines to explain phenomena as unexpected as waiting times in lines at Disney World.

2011-03-22 Emerging from Developed Profit Pools by Gregory A. Nejmeh of HS Management Partners

Much has been debated about the anticipated growth of the emerging markets and the tectonic shifts in political, economic and military force that such changes may yield. While the implications are significant, we are also mindful that economic activity in developed markets not only make them worthy of investor attention, but provide the stability of cash flows that will facilitate multinationals ability to invest in developing markets. We take a holistic perspective and appreciate the size and scope of developed market profit pools as a means of self funding developing economic participation

2011-03-21 This Is, Because That Is by John P. Hussman of Hussman Funds

The market action of the past two weeks contrasts with the generally uncorrected advance of recent months. I suppose it's possible for investors to characterize the recent decline as a "panic" if they press their noses directly against their monitors, but in that case, they really do have a short memory. The pullback has been negligible relative to the action of the past several months, and is indiscernible in the big picture. As of Friday, the market remained in an over valued, bullish, rising-yields syndrome that has typically been cleared much more sharply than anything we saw last week.

2011-03-21 Bahrain: Distinguishing Between Objective and Risk by Douglas Clark Johnson of Codexa Capital

Many internationalists would argue that Bahrain is endangering its objective of security and stability by trying to manage risk through armed conflict. An economy that depends on regional, even global, confidence can rebuild itself by quickly addressing civic flaws and heightening commercial strengths.

2011-03-21 Saudi Arabia: More Secure Than It Appears by John Browne of Euro Pacific Capital

As revolution spreads throughout North Africa and the Middle East, many fear that the forces that toppled regimes in Tunisia, Egypt, and possibly Libya, will spread to the Gulf oil states, particularly Saudi Arabia. The specter of radicalized Islamist elements taking control of the world’s second largest oil producer is a justifiably harrowing prospect. However, Saudi Arabia’s political dynamics are very different from the Middle Eastern states that are in revolt. Understanding these forces should assure us that a doomsday scenario is unlikely.

2011-03-21 The Treasury Auction Shell Game by Peter Schiff of Euro Pacific Capital

Very few people have the time to sift through the data released by the Treasury Department in the wake of its bond auctions. But the numbers do provide direct evidence of the country’s current financial condition that in many ways mirror a financial shell game that typifies our entire economy. Despite continued deterioration of America’s fiscal health, the Treasury is still attracting buyers of its debt. Market watchers take these successful auctions as proof that our current monetary and fiscal stimulus efforts are prudent. But who’s doing the buying, and what do they do with the bonds?

2011-03-18 China's Urbanization Driving Housing Demand and Car Sales by Frank Holmes of U.S. Global Investors

It’s been an eventful week in Asia. The world turned its attention to Japan as it copes with the most powerful earthquake in the country’s history. The markets reacted, with Asian shares declining and uranium sentiment negative as investors rethink nuclear power. We are optimistic that a resilient Japan will turn from tragedy to opportunity by stimulating its economy through a reconstruction of the nation. This week, China was recognized for an achievement of its own. The country has resumed the leadership as the world’s top manufacturing country by output over Britain and the US.

2011-03-18 The Southern Classic IRC, A Reason for Ben Graham to Smile & Can Share Prices Diverge from Value? by Kendall J. Anderson of Anderson Griggs

The belief that share prices can at times diverge from underlying business value is the driving force behind security analysis as practiced by active investment managers. My example is not to lay out a case to buy or sell shares of IBM. Instead, it is to look at the value the market has placed on IBM over many years and let you decide if the price has diverged from the value of IBM as a business. To be fair, and to honor the many professional investors and students of investing who do not believe in active management, I at least need to give you their beliefs.

2011-03-17 Could Gasoline Price Increases Affect the Economic Recovery? by Team of American Century Investments

The recent political uprisings in N. Africa have had a major impact on oil and gas pricing here in the U.S. Increases in energy prices have a negative impact on consumer disposable income and confidence, not just in the U.S but globally. When gasoline prices spiked in July 2008, consumer spending posted its biggest one month decline since September 2001. Higher energy prices also contribute to increases in the overall rate of inflation. These are risk factors in terms of sustaining our current economic recovery, bringing down unemployment, and continuing to drive growth in corporate earnings.

2011-03-17 Madoff Was Right About One Thing by Bill Mann of Motley Fool

This past week, a Financial Industry Regulatory Authority (FINRA) panel ordered broker Morgan Keegan to repay $250,000 to a client whose entire investment account had been invested in Madoff's fund. That's nice. I expect there will be several more judgments and restitutions paid in the future, none of which will actually cause a change in behavior on Wall Street. Regulators failed to catch Madoff even when the evidence was dangled in front of them, and they've since failed to enact meaningful reform for how Wall Street operates.

2011-03-15 Mason Hawkins and Staley Cates on Today’s Opportunities for Value Investors by Robert Huebscher (Article)

Southeastern Asset Management's Mason Hawkins and Staley Cates, two of today's most respected value investors, discuss their portfolio and the principles behind their Graham and Dodd methodology. They explain why they like certain commodity-based companies and why they disagree with Bruce Berkowitz on the opportunities in the financial sector.

2011-03-15 Margin Shrinkage - It Can Happen to You by Vitaliy Katsenelson (Article)

Profit margins are a tick away from all-time highs and are creating the impression of cheap equity valuations. But that impression is a mirage, because today's generous margins are destined to shrink.

2011-03-15 Go Opposite to Hysteria by Jeffrey Saut of Raymond James Equity Research

September 1, 2010 to February 18, 2011 was a pretty good “year” with the D-J Industrial Average (DJIA) gaining roughly 23.7%. Indeed, the “buying stampede” that occurred over those months is now legend with today being session 132 without anything more than a one- to three-day pause/correction (recall it takes four consecutive down days to break the back of a buying stampede). Previously, the record stood at 52 sessions, and while the current stampede is not officially over, as stated three weeks ago – my hunch is it has ended.

2011-03-14 Covered Bonds and Zombie Banks by Christopher Whalen of Institutional Risk Analyst

"Toryism, Socialism and Housing Reform" a topic inspired by the good works of the members of both major parties in Congress. Rep. Scott Garrett, is a conservative Republican, but has become the latest agent of statism and zombie banks. Why this harsh appraisal? Because he comes from NJ, a state that is at least nominally pro-business but has always carried the water for Wall Street. NJ, has always produced protectors for the political interests of the big banks. And the covered bond proposal being so constantly advanced by Garrett and others is the latest triumph for financial innovation.

2011-03-11 Europe: Economic Review February 2011 by Team of Thomas White International

Various data released in Feb. confirmed once again that the economic recovery in Europe is gaining momentum. Nevertheless, investor sentiment on the continent, and indeed everywhere in the world, remained largely subdued during the month due to the growing political uncertainty in the Middle East and N.Africa region. Since rising food, raw material, and crude oil prices have already pushed up inflation to worrying levels in most parts of Europe, the recent surge in oil prices amid the protests in Libya and some MiddleEastern countries eclipsed encouraging signals about the Euro-zone economy.

2011-03-10 Turmoil in the Middle East: Should It Have Been Predicted? by Team of American Century Investments

The turmoil began, when a young Tunisian college graduate immolated himself on December 17 after being harassed by police as he attempted to sell fruit on the street. Some claim the vendor, Mohamed Bouazizi, did not have the money needed to bribe police officials to continue peddling and earn a living. He died on January 4, sparking deadly demonstrations and riots throughout Tunisia (now called the Jasmine Revolution) in protest of social and political issues in the country. And just 10 days later, on January 14, President Zine El Abidine Ben Ali was forced to step down after 23 years.

2011-03-10 Stock picking is dead? Long live stock picking by Robert McConnaughey of Columbia Management

A recent front­page story in The Wall Street Journal was titled “Macro Forces in Market Confound Stock Pickers.” The article quoted a prominent Wall Street strategist as saying, “Stock picking is a dead art form.” The article is now prominently displayed on my office bulletin board as I believe it (and similar articles and research notes) marks a high in skepticism regarding active investing. I also believe these sentiments will be proven dramatically wrong in the months and years to come, as certain active investors take advantage of the inefficiencies that this very skepticism is causing.

2011-03-08 Five Strategies for Older Clients by Robert Huebscher (Article)

What do a woman who volunteered with the Peace Corps in Africa, a teacher from Spanish Harlem who took up Samurai sword fighting, and a former IT manager who earned a medical degree at age 76 have in common? They are all part of a group that David Monday calls 'second-half champions.' Monday offers a five-part plan for building a practice that caters to today’s reinvigorated seniors.

2011-03-08 The Clued-in, the Clueless, the Oblivious and the Conflicted by Michael Edesess (Article)

I’ve now read perhaps 10 books about the financial crisis. Maybe I’m a junkie, but each has given me new information or a fresh way of looking at events. 'All the Devils Are Here' offers a treasure trove of information about company behavior during the crisis, notably Fannie and Freddie, Goldman Sachs, Merrill Lynch, AIG, Countrywide, and Ameriquest.

2011-03-07 Toryism, Socialism and Housing Reform: Real and Imagined by Christopher Whalen of Institutional Risk Analyst

This commentary is background for the presentation entitled "GSEs: The Future Role of Government Sponsored Enterprises in the US," at the Global Association of Risk Professionals event on Tuesday, March 8, 2011, in New York. The Obama Administration recently advanced some proposals to reform several government agencies that control the market for housing. Treasury/HUD plan is really a menu of possible options, eliminating what would not work and making it clear that change will happen slowly, if at all.

2011-03-07 A Little Understanding Goes a Long Way by Peter Schiff of Euro Pacific Capital

As the world confronts one of the most critical periods of economic upheaval that it has ever seen, it is clear that our most influential economic stewards have absolutely no idea what they are doing. But, like kids with a new chemistry set, they are nevertheless unwilling to let that stand in the way of their experimental fun. As they pour an ever-growing number of volatile ingredients into their test tubes, we can either hope that they magically stumble on the secret formula to cure the world’s ills, or more pragmatically, we can try to prepare for the explosion that is likely to result.

2011-03-04 Fed and ECB - A World Apart by Axel Merk of Merk Funds

The U.S. Federal Reserve and the European Central Bank are divided by a common goal: price stability. Fed Chairman Bernanke has made it clear in his recent testimony and speeches that the Fed would react should food and commodity inflation lead to an increase in core inflation. The Fed is ready to R E A C T. We are not aware of any central bank that is proud of reacting, but rather acting preemptively to mitigate inflationary concerns; a central bank may often be forced to react, but to do so by design puts the cynical view that central bankers are too far behind the curve into a new light.

2011-03-04 On Regulation by Howard Marks of Oaktree Capital

You can tell businesspeople precisely what to do, but you can’t make the economy or companies comply with policies and social aims. Regulations are limited in their scope and effect, and like a balloon, when you push in one place, self-interested behavior pops out in another. Those who enact regulation are rarely able to anticipate and control the response of those being regulated or the second-order consequences of the rules. Bubbles will lead to crashes, and the willingness to dispense with regulation and rely on free markets will never be complete, regardless of regulation’s limitations.

2011-03-03 Driving Without Restrictor Plates by Cliff W. Draughn of Excelsia Investment Advisors

Since mid-January we have found ourselves in a quandary over “jumping in” or “diving in” to the strongly flowing bullish current of the developed markets. The warning signs have been the Mideast riots, unemployment, commodity inflation, and the US percentage of debt relative to GDP. The positives are corporate earnings, an accommodative Fed, cash-rich balance sheets, and no new taxes for now. Therefore we wanted to share with you a number of charts and statistics that are part of our process.

2011-03-03 Multi-Asset Real Return: Assessing & Exploiting Price Pressures in their Many Forms by Kevin Kearns, Laura Sarlo and James Balfour of Loomis Sayles

An asset manager’s challenge is to preserve and grow the purchasing power of investors’ portfolios under a variety of economic conditions. Understanding the breadth of global inflationary or deflationary trends that can occur, and the ways different assets might perform in these environments, is critical to this objective. Based on our research, we have determined that no single asset class can protect investors from inflation. On the contrary, we believe the flexibility and diversification offered by a multi-asset-class strategy is necessary to help weather changing inflation regimes.

2011-03-02 Random Market Thoughts by David A. Rosenberg of Gluskin Sheff

Only time will tell if yesterday’s market action was a true watershed. It was the first time since last July that the stock market was down on the first day of the month. Till yesterday, the opening days in January and February had already accounted for over half the year-to-date gains in the S&P 500. It was also the first time since the last leg of the bear market rally began six months ago that “good” news failed to ignite equity prices. Yesterday we saw auto sales shoot up 6.7% to 13.4 million units, which was the best level since August 2009, and we also saw the ISM inch higher.

2011-03-02 Stop Losses are for Losers! by Chuck Carnevale of EDMP

First, the title of this article does not refer to people who use stop losses in their investing strategies. Instead, the title of this article refers to the actual status of the common stock that the stop loss is placed upon. Therefore, a specific definition of a loser is required for clarity. In general terms, our definition of a loser is a common stock that should not currently be owned in the first place. There are two primary reasons why this would be true. Either the company's fundamentals are permanently deteriorating, or the company’s stock price is irrationally overvalued.

2011-03-01 Eight Key Lessons from an Oscar Winner by Paul Rutherford (Article)

Like lost car keys, learning turns up in the most unexpected places. Sunday’s Oscars were swept by The King’s Speech – a movie which provides some powerful lessons for financial advisors.

2011-03-01 Subsuming the Efficient Market Hypothesis by Keith C. Goddard, CFA (Article)

A recent article highlighted important gaps in the efficient markets model (EMH) that limit its practical applications. It encouraged a search for a new theory of markets that builds upon EMH by rendering it as a special case within a broader, more general theory. Mordecai Kurz’ Rational Belief Equilibrium is such a theory.

2011-03-01 Simon Johnson on the Unconscionable Risks We Face by Dan Richards (Article)

Simon Johnson is a professor of economics at MIT and was the chief economist for the International Monetary Fund. In this interview, he explains why the underlying factors which led to the financial crisis remain unresolved. This is the transcript; a video is also available.

2011-02-28 When Inflation Fuels Deflation by Chris Maxey of Fortigent

Global macroecon concerns led to the sharpest weekly sell off in the S&P500 Index in three months. For the week, the S&P 500 Index was down 1.7% and the Dow Jones Industrial Average fell 2.1%. A multitude of catalysts were behind the selloff, including concerns about the situation in Africa and the Middle East, surging commodity prices, in particular crude oil, and finally, a feeling that equity valuations were moving into overbought territory. There were only a handful of important domestic economic releases last week, including several data points on housing and the state of the consumer.

2011-02-24 Our Five Year S&P 1500 and Sector Forecast by Kendall J. Anderson of Anderson Griggs

We believe that predicting short term swings in the market is an exercise in humility. Longer-term market predictions have value, but they should be based on a form of valuation methodology of the underlying securities that make up the market of choice. A consideration of the current mood of the market participants should also be included in that short term prices are driven by emotions.

2011-02-24 The Secular Case for Convertible Securities by David King of Columbia Management

The most common question from potential investors in convertible mutual funds goes something like this: “Is now a good time to get into convertibles?” The question is sincere and seems very relevant. The usual answer is: “It’s a pretty good time.” In the end, the usual result of this usual exchange is that most investors think about convertibles for a moment, and take no action. Behind any timing question about convertibles is the assumption that equities and traditional fixed­ income instruments are the core of a good portfolio and everything else is alternative.

2011-02-23 Reevaluating ‘Chindia’: The Story of the Elephant and the Dragon by Arpitha Bykere, Adam Wolfe and Arnab Das of Roubini Global Economics

The emerging market powerhouse known as “Chindia” is becoming a focal point of global attention as China and India show themselves to be growth dynamos of the coming Asian Century. But examining these countries’ intrinsic differences is more illustrative than listing their similarities—and the two countries are likely to be on a divergent path over the next five years in the areas of growth, economic policy and politics.

2011-02-23 It's All About the Timing by David A. Rosenberg of Gluskin Sheff

The calendar of events that could create recurring bouts of market volatility is coming into closer view: February 25: Irish elections. Is a default coming? March 4: U.S. government shutdown; this is the date that the latest resolution expires. The hardliners in the GOP are digging in their heels over $60 billion of spending cuts. April 1: U.S. nonfarm payroll report for March. The jobless claims data suggest no improvement from poor February results. Then end of QE2 and the knowledge that movements in the Fed’s balance sheet in the last 14 months have had an 86% correlation with the S&P 500.

2011-02-22 Bruce Berkowitz on the Exceptional Value in the Financial Sector by Robert Huebscher (Article)

Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.

2011-02-22 Stop Wasting Time and Money on Client Communication by Dan Richards (Article)

The world has changed in all kinds of ways. What worked in terms of client communication as recently as five years ago doesn't work nearly as well today. As a result, you need to fundamentally change how you communicate with clients.

2011-02-22 Winning New Business, Growing Your Firm by Michael Slemmer, CFA (Article)

How are advisors reaching prospects and winning new business today? What's working well for advisors as they seek to grow their businesses, and where are they finding challenges? To answer these questions, we conducted a survey in late November, 2010, aiming to learn the most common and successful business-building tactics for wealth managers, investment advisors and related professionals.

2011-02-21 Bahrain: Time to be Truly Business-Friendly by Douglas Clark Johnson of Codexa Capital

Now more than ever, Bahrain needs to figure out how to be truly “business friendly.” If the nation’s economic strategy relies on the enthusiasm of the international business community, regaining global confidence will be critical to providing economic opportunity of any degree, let alone parity among citizens. The government has a very full plate.

2011-02-19 Viewing Chairman Bernanke’s Remarks Through the Lens of Emerging Economies by Mohamed A. El-Erian of PIMCO

Bernanke's comments will raise eyebrows among policymakers in emerging economies. His remarks highlight persistent differences in analysis that complicate policy discussions. International cooperation will not materialize unless advanced and emerging economies converge on a common analysis of the key issues. My hope is that the G-20 meeting will take an important step in this regard, and do so by recognizing that there is more than one perspective to today’s global challenges. I fear, however, that this may not materialize as yet.

2011-02-17 Responding to the Stubbornly Steep U.S. Treasury Yield Curve by Team of American Century Investments

Disciplined, active investment managers are constantly on the lookout for capital market extremes, which can provide value-adding opportunities for investors. One such market extreme has been developing in the U.S. Treasury market for the past three years, reaching historic levels in 2010 and earlier this year. We’re talking about the very wide, stubbornly persistent gap between short- and longer-maturity U.S. Treasury yields.

2011-02-16 Politics of Inflation by Axel Merk of Merk Funds

In arguing food inflation is not the Federal Reserve’s (Fed’s) fault, Fed Chairman Bernanke points the finger at everyone but him. Just as with a lot of Bernanke’s policies, his argument may hold in an academic setting, but the real world is a bit more complicated.

2011-02-16 A Primer On Valuation: 9 Very Fast-Growing Super Stocks by Chuck Carnevale of EDMP

We hope that this primer on valuing super fast growing companies provided insights into how the market can capitalize such enormous growth. It may not always make sense, but we feel it's valuable to be able to graphically see how the market values fundamentals. It's not always logical, or even fair, but if you look hard enough there usually is some logic that can be discovered. The important thing is that statistics alone do not adequately tell the true whole story, in our opinion.

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 The Stuxnet Paradigm by Michael Lewitt (Article)

Michael Lewitt discusses the situation in Egypt, the economy, rising risk appetites in the market, sovereign debt and municipal bonds. 'It might be very easy,' he writes, 'to be impressed by the 'two years and thousands of man hours' that Ms. Whitney spent researching the fiscal condition of the 15 largest states. What in the world required so much time and effort? It shouldn't have taken nearly so long to determine that these states are in severe financial trouble and that their options for dealing with it are limited.

2011-02-15 Local Municipal Credit Quality Dissected by Chad Farrington of Columbia Management

While we believe there will likely be more credit pressure and some defaults at the local level, including counties, cities, towns and school districts, we don’t believe there are systemic risks in the market that will cause widespread defaults. Most municipalities are making the tough choices to either raise taxes and fees and/or cut expenses to ensure debt service obligations are paid on time and in full. Moreover, ultimate recovery of full principal in the event of default is viewed as very likely.

2011-02-13 Rich Valuations and Poor Market Returns by John P. Hussman of Hussman Funds

At present, my view on monetary policy is that the inflation outlook following the completion of QE2 will be quite unstable, because small changes in interest rates are likely to induce very large changes in the willingness of individuals to hold base money. Any external upward pressure on interest rates beyond a fraction of a percent will have to be rapidly offset by a large reduction in the outstanding monetary base in order to avoid a deterioration in the value of money relative to goods and services (i.e. inflation).

2011-02-12 The Future of Public Debt by John Mauldin of Millennium Wave Advisors

Mauldin looks at an important paper from the Bank of International Settlements on “The Future of Public Debt.” While the debt supercycle is still growing on the back of increasing government debt, there is an end to that process, and we are fast approaching it. Drastic measures are necessary to check the rapid growth of current and future liabilities of governments and reduce their adverse consequences for long-term growth and monetary stability. This leads the BIS to conclude that the question is when markets will start putting pressure on governments, not if.

2011-02-12 Ignorance is Confidence: Fedtalk or Newspeak? Andrew Jackson on Repealing a Central Bank by Christopher Whalen of Institutional Risk Analyst

In this issue Richard Alford, Christopher Whalen and members of the Herbert Gold Society opine on the Fed's attitude toward veracity and transparency in an age when confidence is the paramount policy concern. In the process of seeking to restore and maintain confidence, in the financial system and in the Fed as an institution, the Board of Governors in Washington led by Chairman Ben Bernanke seem to follow the last of the three slogans of the Ministry of Truth in George Orwell's book, 1984: "Ignorance is Strength."

2011-02-11 A Primer on Valuation (part 2) by Chuck Carnevale of EDMP

To us, the evidence is crystal clear, fundamentals provide a critical perspective that investors should be aware of. Possessing a clear and accurate picture of how well a business has performed on an operating basis is a vital component towards making sound and prudent investment decisions. Contrary to what some might argue, the fundamental operating results of the business tend to persist. The nature of a company's business and the industry it operates in can be reliably evaluated and understood.

2011-02-10 Inflation: Say Goodbye to Buying Power by Monty Guild and Tony Danaher of Guild Investment Management

Economy watchers see its growing presence in official government statistics. Yet you won’t hear government officials admitting it. It’s too politically unpleasant — and threatening — to do so. Official spin and fantasy aside, the reality is that inflation is here and here to stay for quite a while. That means the buying power of the dollar is declining and being experienced on a daily basis.

2011-02-09 Why the US employment situation matters more than any other indicator right now by David Edwards of Heron Financial Group

Americans are in a tough spot, but American business is in great shape with record profits, strong balance sheets and solid revenues from international operations. The stock market is getting frothy, as typified by increasing M&A activity. In 5weeks, the S&P 500 is up 5% on the year, and our forecast for the whole year is 8%, which gives us that “walking on thin ice” feeling. We’re not in the position to jump out of the market. We would turn bullish if we got sustainable job growth of 250K/month or better.

2011-02-09 Testing the Wisdom of Ben Graham’s Formula (part one) by Chuck Carnevale of EDMP

Ben Graham’s formula for valuing a company V* = EPS x (8.5 + 2g) established a solid foundation for future value investors to build upon. The small “g” in the formula represents your reasonably expected 7 to 10 year growth rate. Consequently, Ben Graham’s formula was forward-looking. In this article we looked at modern historical performance in order to test the validity of this famous value formula. Remarkably, the formula proves itself to being very precise when applied in the real world to businesses that grow earnings between zero and 5% per annum.

2011-02-08 Undoing Meredith Whitney's Damage by Hildy Richelson, Ph.D. (Article)

Meredith Whitney did the municipal bond market an immense disservice with her misguided comments on 60 Minutes when she predicted massive defaults. Two recent articles in this publication provided accurate rebuttals to her analysis, but they failed to clarify important reasons why muni bond investors do not face the imminent peril that Whitney predicted.

2011-02-08 Muni Market Bargains? A Closer Look at Municipal Debt, Deficits and Pensions by Christian Stracke and Joseph A. Narens of PIMCO

Although real, pension problems will not lead to an immediate debt crisis this year or the next five years. A default by Detroit, for example, would not precipitate bankruptcy filings by large cities across the nation. The municipal market will continue to migrate from being a low-risk asset class to a credit asset class.

2011-02-07 The Economic Recovery Pushes Ahead Despite The Strange Labor Report by Chris Maxey of Fortigent

Encouraging. Confusing. Disappointing. Mixed Bag. These were all terms used to describe the labor report for January. Ultimately, it may turn out that none of those terms are relevant and investors would be better served in pretending this report was a figment of our imaginations.

2011-02-04 Odds for the 2012 Elections, Health Care Repeal, and an NFL Lockout by Team of Bespoke Investment Group

The current Intrade odds for the Democratic Party to maintain the Presidency in 2012 stand at 62.5%. The contract for Republicans to control the Senate after 2012 last traded at 69 (or 69% odds). The odds are 50/50 for which party will control the House after the next set of elections. Odds are at 12% for the Supreme Court to rule the individual mandate unconstitutional by October 31st, 2011.

2011-02-04 Seeking Equity Dividends: Now More than Ever by Robert McConnaughey of Columbia Management

The evidence is clear that dividends have been a crucial part of total returns through history and that dividend payers (particularly sustainable dividend growers) have significantly outperformed their non-dividend-paying peers over the long haul. Couple those higher returns with the lower volatility that comes with the dividend-paying class vs. broader equity markets and it makes a clear case for the power of dividends.

2011-02-03 Regime Change: A Global Domino Effect? by Monty Guild and Tony Danaher of Guild Investment Management

We are bullish for commodities, stock markets, and for income-earning real estate. It will be most felt in those countries where governments are stable and democratic. For stock investments throughout the world, we base our recommendations on careful study of individual companies and industries, always keeping in mind that companies and sectors are at differing stages of growth. We recommend continuing to hold shares of growing companies in Canada, South Korea, and the U.S. We favor technology, metals, auto and auto-related, agriculture-related, and energy, including oil and coal.

2011-02-03 Egypt by Mark Mobius of Franklin Templeton

Stock markets in Egypt have been closed since January 30 and those in the Middle East/North Africa (MENA) region declined substantially between January 25 and February 1 as sentiment among some investors turned negative amid the political uncertainty. Other investors have been seeking an opportunity to buy stocks at low prices. The geopolitical ramifications of this unrest are many, not only for Egypt but also potentially for the rest of the world, and for the most part will probably be positive since political reform has been long overdue in the region.

2011-02-02 Devil’s Bargain by Bill Gross of PIMCO

Money has become the economic and political wedge for profound changes in American society. Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders. Old-fashioned gilts and Treasury bonds may need to be “exorcised” from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint.

2011-02-01 Four Ways to Get Prospects Off the Fence in 2011 by Dan Richards (Article)

Dithering prospects - we've all been frustrated when someone who would be a really great client takes forever to make a decision. That's why getting prospects to make faster decisions should be your first resolution for 2011.

2011-02-01 Egypt, Dollars and History by Brian S. Wesbury and Robert Stein of First Trust Advisors

When the Fed prints too many dollars, the inflation that results often shows up in commodity prices first. When it lifts energy commodities, countries and regions of the world which export oil typically benefit and have largesse to throw around. Egypt is an oil producer and a large refiner. So, rising energy prices are neutral to slightly positive for the nation’s economy. Food prices are a different story.

2011-02-01 Fourth Quarter Letter by Team of Grey Owl Capital Management

In spite of Bernanke’s objective to put a floor on asset prices, including equities, we remain conservatively positioned. Equity and credit markets appear overvalued. In addition, with the U.S. and most developed-market economies significantly more leveraged than in the last 50 years, economic growth will likely be more volatile. Further, many potential exogenous forces could negatively influence public markets: over-leveraged municipalities, the PIIGS, and continued issues in the US housing market to name a few. Finally, there is no evidence that monetary policy can create real growth.

2011-01-30 Mapping the Molecular Pathway of Autism by John P. Hussman of Hussman Funds

In recent years, much of the Hussman foundation's research has been centered on autism. Meanwhile, the finance research has been centered on "ensemble methods" to integrate the information from multiple data sets, and to better measure both risk and uncertainty*. As it happens, statistical methods can be adapted to approach difficult problems in both genetics and finance. So as we developed various approaches to integrate multiple data sets in our finance research, it was natural to extend those methods to deal with genetics data.

2011-01-29 And That's The Week That Was by Ron Brounes of Brounes & Associates

Consumer confidence in January rose to its highest level in eight months as individuals seemed to overlook the ongoing labor concerns. The long-ailing housing sector received a bit of good news as new home sales jumped to the best showing since May and home prices even surged to levels not seen since early 2008. Though claims for jobless benefits rose in the most recent week, analysts believe that harsh winter weather may have temporarily halted hiring and the recent improvements on the claims front should resume in the weeks to follow.

2011-01-29 A Bubble in Complacency by John Mauldin of Millennium Wave Advisors

The just released Q4 GDP of 3.2% may be overstated by 0.5% to 1.0% as a result of statistical adjustments. Consumer spending advanced, but that must be tempered by the support from fiscal and monetary policies. The growth in the deficit poses imminent danger of another recession, and the political landscape makes it unlikely a solution will emerge. Mauldin would like to see 'thought leadership' in the upcoming presidential election cycle, in order to build support for viable policies to revive the economy.

2011-01-28 Growth Investing with a Distinct Perspective by Aziz Hamzaogullari of Loomis Sayles

In this paper we outline the distinct elements of our process and philosophy to show how our Large Cap Growth discipline takes the traditional definition of a growth strategy and seeks to infuse it with a quality and valuation focus. These preferences play out in our focus on finding companies with sustainable cash-flow growth and profitability as well as intrinsic value. We believe this helps us exploit opportunities offered by growth companies while tempering the return volatility often associated with growth investing. Our consistent long-term approach has generated a high-growth portfolio.

2011-01-26 Pavlov’s Bulls by Jeremy Grantham of GMO

About 100 years ago, the Russian physiologist Ivan Pavlov noticed that when the feeding bell was rung, his dogs would salivate before they saw the actual food. They had been “conditioned.” And so it was with “The Great Stimulus” of 2008-09.

2011-01-25 The Power of Dividends by C. Thomas Howard (Article)

New evidence refutes long-held beliefs about the role of dividends. Research shows that the higher a stock portfolio's dividend yield, the greater its return. And just as surprising are new findings about the relationship of dividends to volatility.

2011-01-25 Should Advisors Care about Short-Term Volatility? by James Colon, John Gambla and Rob Guttschow (Article)

How can advisors construct portfolios that meet their clients' risk preferences across economic environments? You may be surprised to learn that tactical asset allocation has an important role to play.

2011-01-25 Beyond the Efficient Market Hypothesis by Michael Edesess (Article)

John Cassidy's 2009 book, "How Markets Fail," drives the final nail in the coffin of the Efficient Market Hypothesis. Well, perhaps the penultimate nail - as I'll explain. It is the most compelling argument I have read that we need a new and improved theory of markets, a theory that subsumes the efficient market hypothesis, much as Einstein's relativity theory subsumed Newtonian physics.

2011-01-25 Ten Resolutions for Greater Prosperity in 'The Year of the Fiduciary' by Jeffrey Briskin (Article)

If you think selling and servicing 401(k) plans isn't easy today, ERISA is about to make it even harder. The good news is that firms that adjust to these challenges can use them to their competitive advantage Here are ten steps your firm can take to prepare for The Year of the Fiduciary.

2011-01-24 Weapons of Mass Poverty by Mark Elliott of Elliott Asset Management

Modern financial management dogmas may be fundamentally, terminally, and irreparably flawed – and may be key ingredients in modern asset bubbles. I believe what could be the most serious catastrophe to face retirees and other investors since The Great Depression may be currently underway and, as in past recent financial catastrophes, most investors and financial “professionals” will fail to act – despite what appears to be clear writing on the wall.

2011-01-19 Question Marks in the Arab World by Rachel Ziemba of Roubini Global Economics

Two MENA governments have suffered massive blows in the past week. Extended protests in Tunisia forced long-time ruler Zine El-Abidine Ben Ali to flee the country, while Hezbollah pulled out of the deadlocked Lebanese unity government, causing its collapse. Using a selected group of economic, social and political indicators, we assess the resilience of the region’s institutions in our latest MENA Focus.

2011-01-19 House of the Rising Sun: A Check-Up on Housing by Liz Ann Sonders of Charles Schwab

Housing is becoming less national and more regional in terms of strength/weakness. Affordability is up but so are foreclosures. Employment remains key to housing, but be aware of housing's diminished impact on the economy.

2011-01-19 Quarterly Newsletter by Bob Carey of First Trust Advisors

As big proponents of owning stocks over the past two years, we are pleased to report that our sentiments have proven to be both accurate and lucrative. Believe us when we say that we caught our share of flack for being so optimistic. The S&P 500 posted a total return of 93.1% from the bear market bottom on March 9, 2009, through December 31, 2010. When you expand to include small- and mid-caps, the returns are even better. But here is the encouraging part: those investors who opted out of stocks and did not return after they bottomed have a chance to reconsider.

2011-01-18 Marketing Ideas I've Learned from My Clients by Kristen Luke (Article)

One of the favorite parts of my job is learning new ideas. Sometimes they come from campaigns that my clients have implemented over the years and sometimes these ideas come from collaborating with clients to find a solution to a problem they are facing. Here are my three favorite ideas from the past year.

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.

2011-01-18 Pundits Call For A Correction, But Where Is It? by Chris Maxey of Fortigent

Equity markets trended higher for the seventh consecutive week, raising concerns about the potential for a long overdue correction. The S&P 500 Index was up 1.7% and the Dow Jones Industrial Average rose 1.0%. Economic data proved to be somewhat mixed, but largely supportive of the move higher in equity prices. Retail sales, for instance, which reached an all-time high in December, increased 0.6% in the month, slightly below economists’ expectations for a 0.8% gain.

2011-01-18 Equity Investment Outlook by Team of Osterweis Capital Management

During the fourth quarter, the stock market staged a strong rally, reflecting both growing evidence of a sustained economic recovery and the reversal (thanks to the Republican victory in November) of the seriously anti-business tone in Washington. These two factors enabled investors to begin thinking not just of a recovery from the recent crisis and recession, but of a more sustainable and enduring expansion. As a result, they were able to bet on a longer stream of favorable corporate earnings.

2011-01-18 Fixed Income Investment Outlook by Team of Osterweis Capital Management

As for our strategy, we continue on a steady course of balancing major risk aversion while opportunistically seeking returns. Although there are no longer any soft pitches like there were in late 2008 and early 2009, we feel that there are still enough bond issues from well-run companies that offer reasonable returns without going too far out on the risk or duration curves. We do not believe it is prudent to lower quality standards or to take excessive duration exposure at this time in order to increase returns. We believe there will be better opportunities for that in the future.

2011-01-18 Bubble-Liscious by Cliff W. Draughn of Excelsia Investment Advisors

In the world of investing there is no substitute for taking action. Therefore, as your advisor, I seek to understand our bias and attempt to make rational and prudent decisions. Savvy investors understand the risks inherent in their assumptions and adopt a more businesslike approach to investing by reducing and hedging risk. Investors are typically surprised when facing a loss, and the psychological power of losses far outweighs the power of gains. Therefore remember the critical rule of compounding: Don’t lose money

2011-01-17 Landing in Jeddah by Douglas Clark Johnson of Codexa Capital

In an international environment where fiscal recovery dominates the OECD agenda, we think Saudi Arabia is a pretty strong story. We think Western and Eastern investors tend to avoid the market because of its lack of transparency and misconstrued stereotypes. These are views generally held without context. Tremendous shifts in the economy have taken place since King Abdullah ascended to the throne in 2005, and social reforms continue to evolve.

2011-01-17 Is Bank America the Most Sued Company in America? Sol Sanders on Charting the Arab Dark by Christopher Whalen of Institutional Risk Analyst

With more than half of Tunisia's population under 30, increasing unemployed youth want more. It remains to be seen who will come out on top in Tunis. But across North Africa - from Egypt to Morocco - underground religious Muslim opposition festers. Alas! in Tunisia, as elsewhere, the Iranian mullahs' total corruption and Saudi Arabian hypocritical lifestyle notwithstanding, the Islamicists' appeal is growing.

2011-01-15 Further Fuel? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab

Stocks may be vulnerable to a near-term pullback thanks to elevated sentiment, and earnings season could provide an impetus for some profit taking. The economy appears to be strengthening and we remain optimistic. Despite signs of growth, the Fed seems insistent on letting QE2 play out, pointing to continued high unemployment and housing. The new congress also has to deal with these issues, while attempting to pare deficit spending. International exposure is important, but we recommend taking some profits and rebalancing if your emerging-market exposure gets above your target allocation.

2011-01-15 Trading Secrets by Tad Rivelle of TCW Asset Management

Treasury yields are lower today than they were in the early 1930s. This is despite a paucity of evidence that prices are deflating, or that the U.S. is the beneficiary of a flight-to-quality. Furthermore, the low rates have continued notwithstanding QE2, a program of thinly disguised “money printing.” Our belief is that low rates are the product of a zero rate policy that is distorting Treasury pricing. This “artificial” propping up of Treasury pricing will last until such time that bank balance sheets are substantially repaired. As such, our outlook for Treasuries is decidedly negative.

2011-01-12 Call it the Wile E. Coyote Market by David A. Rosenberg of Gluskin Sheff

While Bob Farrell’s rule number nine warns us to be wary of widespread consensus opinions, it may well turn out that all the bullish Wall Street analysts end up being correct that 2011 proves to be another wonderful year. But the one thing we can assure you, as was the case in 2010, is that it will not be a straight line up. In fact, we would argue that there are more headwinds, potholes, and event risks this year than there were last year.

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 Managing People Who Are Already Motivated by Justin Locke (Article)

As a professional speaker, I am often confused by audiences who want to understand the secret to motivating their employees. Most professionals, including financial advisors, aren't constrained by workers who lack motivation. Their challenge is harnessing their employees' pre-existing energy and drive, and directing it toward a common goal.

2011-01-11 2010: A Truth Odyssey by Ron Surz (Article)

I review some of the lessons learned in the last two years. I review the last year, discuss 2008's lessons, and conclude with my traditional review of the longer-term history of U.S. markets over the past 85 years.

2011-01-10 "Illusory Prosperity" - Ludwig von Mises on Monetary Policy by John P. Hussman of Hussman Funds

Perhaps more than any other economist, Ludwig von Mises got the theory of money and credit right, because he made distinctions between various forms of money and credit that are often conflated by other theorists. The amount of real physical investment in the economy is, and must be, precisely equal to the amount of output not allocated to consumption but instead to savings. Unlike many other economists, Von Mises not only recognized this identity, but carried it through to what it implied for monetary policy.

2011-01-10 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

The outlook for the future of the economy remains upward. The latest from the Economic Cycle Research Institute shows the highest level of year over year growth rate since last May (see chart below). Consequently, the economy is improving, but not quickly enough to fundamentally lower the unemployment rate.

2011-01-10 The Key Asset Classes For 2011 Will Be: Oil, Gold, And Stocks by Monty Guild and Tony Danaher of Guild Investment Management

Investors are moving from bonds to stocks and the huge cash balances at money market funds will likely find their way into stock and commodity markets in 2011. This means inflation and commodities prices are likely to rise faster than wages, and those living on fixed incomes or bond interest will be affected the most, due to the fact that their money buys them less of everything; both luxuries and necessities. However, the ramifications of this inflationary trend are also serious for wage-earners. In every inflationary period in recorded history, wages have risen more slowly than inflation.

2011-01-05 11 Wishes for a Better 2011 by Komal Sri-Kumar of TCW Asset Management

The beginning of a new year is a time to make resolutions. It is also a good time to set out ones wishes regardless of whether they can be actually achieved during the following months. In that spirit, here are my top wishes for the U.S. and global economy during 2011. Achievement of even a few of them would help bring about sustainable economic growth as well as reduce the level of risk in the financial system.

2011-01-05 Medical Gray Zones by Dan Ariely of Predictably Irrational

Considering Michael Jackson and his doctor Conrad Murray, I won’t argue for the physician’s innocence, but I do think we should ask – how common is the tendency to prescribe patients what they want? Is this a singular incident, a case of a drug-pushing “bad apple,” or could there be more general forces at play?

2011-01-05 What The Bulls May Be Ignoring ... At Their Peril ... Plus Some Ideas For 2011 by David A. Rosenberg of Gluskin Sheff

The bullish case is pretty well established right now and there is no sense repeating them but what may be ignored are these half-dozen. Nothing of course says that the market can’t keep going up over the near-term. risks, I list. Just as the onus was on the double-dippers last summer given the sentiment and market action, the onus now is clearly on the V-shaped enthusiasts.

2011-01-04 Your First Resolution for 2011: A Better Alternative to Face-to-Face Meetings by Dan Richards (Article)

In 2011 you need to rethink your approach to client meetings. For larger clients who you meet with regularly, you should consider replacing some of those face-to-face meetings with structured phone meetings.

2011-01-04 The Wondrous Value of Incompetence by Justin Locke (Article)

Ignorance and incompetence are underappreciated. There may be a lot to say for training, knowledge, and expertise, but with so much emphasis being placed on acquiring more and more knowledge (especially by those in the knowledge-peddling business) a dose of ignorance these days can offer incredible value.

2011-01-04 Glory Days: Another Good Year in 2011? by Liz Ann Sonders of Charles Schwab

Setting targets doesn't make sense to us, but we do believe in reading the market's tea leaves, and the outlook is healthy. However, frothy sentiment has us a little concerned in the very near-term. Investors need to be mindful of complacency, but also to make sure they're not still loaded up on bonds—a major capitulation from bonds to stocks is possible.

2011-01-04 Getting a Grip by David A. Rosenberg of Gluskin Sheff

We can expect a showdown between the House Republicans and the Administration over the debt ceiling in Q2. At stake could be a good dose of spending restraint as ‘pay-go’ rules make a sudden reappearance after being neglected by the lame-duckers last year. There is always the reality of the payroll tax cut coming to an end in December and how that will crimp personal income in 2011. Of course, there is always the prospect of a Q4 corporate spending binge as the bonus depreciation allowance expires. The last 3 quarters of 2011 are going to be very interesting

2010-12-29 Deciphering Debt by Dr. Victoria Marklew, Richard Thies, James Pressler and Dr. Asha Bangalore of Northern Trust

2011 is likely to raise more issues about debt, with periodic market panics about debt sustainability and bailouts. We offer this primer on the issue of debt – specifically the various measures and the roles they play in determining a country’s risk of facing some form of debt-related crisis. Metrics to assess indebtedness of nations are classified as solvency and liquidity measures. Each are discussed, as is the special topic of the banking sector and its relation to public debt. We give our view of global public-debt-related challenges in 2011.

2010-12-28 The Squam Lake Report: Reforming the Financial System by Dougal Williams (Article)

Ken French and Robert Shiller were among a group of leading economists who, in the fall of 2008, convened what was to become known as the Squam Lake Group. Their recently released and much-talked about book offers its authors' collective best answer to a defining question of our day.

2010-12-27 A Fed-Induced Speculative Blowoff by John P. Hussman of Hussman Funds

Why are Treasury yields rising despite hundreds of billions of Treasury purchases by the Federal Reserve? There are two possibilities in the current debate. One is that the Fed's policy of purchasing Treasuries has scared the willies out of the bond market on fears of higher inflation, and that the policy is a failure. The other is that the policy has been such a success at boosting the prospects for economic growth that interest rates are rising on anticipation of a better economy. From our standpoint, neither of these explanations hold much water.

2010-12-27 Lessons by Jeffrey Saut of Raymond James Equity Research

Lessons, I’ve learned a few over my 40 years in this business: A fool and his money are soon parted. There is no free lunch. Don’t put all your eggs in one basket. Spend interest, never principal. You cannot eat relative performance. Don’t be afraid to take a loss. Watch out for fads. Act. Take the long view. Remember the value of common sense.

2010-12-23 No, Krugman, You're Eating America Alive by Neeraj Chaudhary of Euro Pacific Capital

Here we go again. This week, Paul Krugman, the 2008 Nobel Prize winner in economics and the go-to guy for progressives who need a morale boost, launched another misguided attack on Austrian School economists. From his New York Times soapbox, he referred to the free-market Austrian “hard money” philosophy as a “zombie idea” that is inexplicably eating the brains of the voting public.

2010-12-22 Understanding Risk Parity by Brian Hurst, Bryan W. Johnson, and Yao Hua Ooi of AQR Capital Management

The outperformance of Risk Parity strategies during the recent credit crisis has confirmed the benefits of a truly diversified portfolio. Traditional diversification focuses on dollar allocation; but because equities have disproportionate risk, a traditional portfolio’s overall risk is often dominated by its equity portion. Risk Parity diversification focuses on risk allocation. We find that by making significant investments in non-equity asset classes, investors can achieve true diversification – and expect more consistent performance across the spectrum of potential economic environments.

2010-12-21 All That Glitters by Howard Marks of Oaktree Capital

I have ave no doubt: gold is the ideal investment. It serves as a reliable store of value, especially in challenging and uncertain times. It’s a hedge against inflation, since its price rises in sympathy with the general level of prices. It exists without the involvement of man-made constructs such as governments. And it’s desired and accepted all around the world (and always has been.) The supply of gold is finite. It can’t be created out of thin air. Thus it’s not subject to dilution or debasement, as is paper currency when governments decide to print more.

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.

2010-12-21 Two Words that Get Prospects’ Attention by Dan Richards (Article)

When approaching business owners, some advisors talk about taking a wealth management approach to provide integrated advice around their finances. That approach, however, is too vague and generic.

2010-12-21 Three Ways to Tweak Your Marketing by Kristen Luke (Article)

Even the best marketers can improve upon their existing successful campaigns and marketing messages. Here are my three recommendations for how to tweak your marketing for better results.

2010-12-20 The Impact of Securities Fraud & Regulatory Overreach on Startup & Small Business Financing by Jeff Joseph of Venture Populist

The availability of risk capital for early-stage ventures has proven itself to be remarkably resilient. It has overcome the cycles and uncertainties of our economy, as well as, the myopic tax policies perpetuated by our partisan politics. But I foresee a fresh challenge to the startup ecosystem on the horizon—and it is the direct result of bad brokers, disingenuous dealers, unprincipled promoters and iniquitous issuers.

2010-12-20 The European Union—Will It Hold Together? by Milton Ezrati of Lord Abbett

With an Irish rescue seemingly in place, Europe must now look to Portugal, Spain, and Belgium. The continent’s sovereign debt crisis threatens the euro—and the EU itself. We can make some tentative conclusions: 1) Europe’s existing rescue resources are more than ample for Greece, Ireland, and Portugal. 2) The great danger lies with Spain, less because of government profligacy and more because of the potential fallout from that country’s collapsed real estate bubble. 3) The EU has shown determination to deal with the problem and protect the euro and the union.

2010-12-17 Elections Have Consequences - II by Brian S. Wesbury of First Trust Advisors

Two major developments over the past 24 hours poignantly highlight the fact that “elections have consequences.” First, late last night the House passed the Senate version of the tax deal negotiated by Republicans and President Obama (see article). As we have expected for many months, but after some final tense moments of doubt, the Bush-era tax rates on incomes and investments have been extended for two years. Under pressure of an election, Congress has admitted that “lower tax rates are better for the economy than higher tax rates.”

2010-12-14 What the Music Business Taught Me about Selling by Justin Locke (Article)

You provide a service to each of your clients, some of whom may have similar needs but all of whom are unique. Asking your clients what more you could be doing for them is the only way to make sure you're offering the advice they truly want.

2010-12-13 Bullish Sentiment Nears Extreme Levels As Investors Pile Into Equities by Chris Maxey of Fortigent

According to EPFR Global, a research provider that aggregates mutual fund flows, the week ending December 8th saw investors allocate $13.7bln of new capital to stocks funds while only investing $146mln in fixed income funds. Domestic bond funds experienced withdrawals of more than $1bln. Interestingly, money market funds picked up more than $32bln in new funds, the highest total in 22 weeks. Whether this is a wise time to jump back into equity securities remains a hotly debated issue but based on several metrics, this may not be the most opportune time to increase equity exposure.

2010-12-12 Warning - An Updated Who's Who of Awful Times to Invest by John P. Hussman of Hussman Funds

In recent weeks, the U.S. stock market has been characterized by an overvalued, overbought, overbullish, rising-yields syndrome that has historically been hostile to stocks. Last week, the situation became much more pointed. Past instances have been associated with such uniformly negative outcomes that the current situation has to be accompanied by the word "warning."

2010-12-11 And That\'s the Week That Was... by Ron Brounes of Brounes & Associates

The great compromiser…or the great traitor…depends of which party loyalist you ask. Taxes dominated the news this week as O and the Republicans reached a compromise on extending the Bush tax cuts, much to the disappointment of Dems. Investors like certainty and welcomed the move as it meant capital gains and dividends would continue to be taxed at 15% for the next two years. Oil surged on prospects of economic growth, though the threat of inflation again resurfaced. So, Obama…any interest in hiring Karl Rove as an advisor?

2010-12-10 The Liquidity Premium by Mark Hudoff and Adam Kennedy of Hotchkis and Wiley Capital Management

Since bottoming on March 9, 2009, the high yield market is up nearly 85%. That equates to a 3.2% monthly compounded return, or a doubling of your investment every 1.9 years—performance few investors would protest. We describe several common methods that high yield investors use to evaluate whether the market is over or undervalued. Next, we will discuss the pros and cons of each method. Finally, we will describe a concept we refer to as the high yield liquidity premium. We believe this is a worthwhile complement to more traditional appraisal metrics and adds valuable perspective.

2010-12-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Frankly, there are many cross currents and news items floating around today. The bailout of Europe and presumably other European countries continues to be a headline risk that impacts the currency markets greatly which heavily determine the daily direction of stock market futures. Tomorrow’s vote in the Irish parliament to ratify the conditions of the bailout package will be another reminder of the unpredictable nature of the overnight headlines.

2010-12-07 Markets Rebound Despite Poor Jobs Report by Chris Maxey of Fortigent

Earlier in the fall, pessimists were pointing towards a slowing ISM index as a surefire harbinger that a “double-dip” recession was on the way. That did not happen, fortunately, and manufacturing activity has since rebounded. Several subcomponents also provided encouraging data. In particular, the employment index finished the month at 57.5, a clear-cut sign that manufacturers are continuing to hire in order to keep up with growing demand. Somewhat less positive was the prices paid index, which remained elevated at 69.5 in November.

2010-12-06 Labor Market Update: Still Struggling by Scott Brown of Raymond James Equity Research

The November Employment Report was disappointing. The holiday shopping season apparently got off to a strong start, but that failed to translate into a corresponding jump in retail employment (at least, on a seasonally adjusted basis). Manufacturing jobs were soft. State and local government continued to shed jobs, reflecting budget strains. What’s in store for 2011? The November jobs data aren’t encouraging, but the recovery is likely to remain on track.

2010-12-06 Trade Wars by Milton Ezrati of Lord Abbett

Trade tensions seem to intensify daily, especially between the United States and China. Congress not too long ago upped the ante, labeling China a "currency manipulator." both the United States and China could get around immediate passions and politicking and find a basis for accommodation in their common, longer-term goals. In this regard, it is at least modestly encouraging that the International Monetary Fund (IMF) has become involved in the China–U.S. currency dispute.

2010-12-06 The Worst Boss in the World by Justin Locke (Article)

Since good bosses are the exception and not the rule, early in my professional life I decided to strike out and work for myself. It was an alternative that sounded great on paper, but there's one little thing that I wish someone had told me: When you work for yourself, you are working for many clients, and they are often the worst bosses imaginable.

2010-12-04 Short Skirts and Second Shoes by Herbert Abramson and Randall Abramson of Trapeze Asset Management

We are in an honest-to-goodness bull market. There is much more upside ahead. Possibly for years. Tops are made in euphoria, as when the Fed decides to tighten money and raise interest rates. With the evident despondency today the Fed continues to bring on the punchmore liquidity, accommodative easing, to keep interest rates low and make credit readily availablefor consumer spending, for housing and autos and apparel and necessaries, for government borrowings. And for stocks. Well be swimming in punch.

2010-12-04 Reframing A Case For High Yield Bonds by Tom Fahey of Loomis Sayles

Our contention is that high yield bonds are likely to continue to be a respectable store of value. We base this on their valuation profile and fixed income characteristics, which tend to stand out in the midst of a protracted economic recovery and ongoing deleveraging process that could have significant implications for economic growth and yield potential.

2010-12-01 Allentown by Bill Gross of PIMCO

The global economy is suffering from a lack of aggregate demand. In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive. Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.

2010-12-01 Open and Shut by Howard Marks of Oaktree Capital

Today some assets are fairly priced and others are high, but there are no bargains like those of 2008. Capital and nerve can’t hold the answers in such an environment. We’re no longer in a high-return, low-risk market, especially in light of the inability to know how today’s many macro uncertainties will be resolved. Instead of capital and nerve, then, the indispensable elements are now risk control, selectivity, discernment, discipline and patience.

2010-11-30 Why You Aren't Getting Referrals - And What to Do About It by Dan Richards (Article)

When it comes to attracting new clients, every advisor knows that nothing beats referrals from satisfied clients. However, many advisors hold fundamental misconceptions about what it takes to get quality referrals. As a result, they either don't talk about referrals at all or do so ineffectively.

2010-11-30 The Word that Defines Effective Communication by Dan Richards (Article)

Fairly or not, if clients initiate a call, many will believe that the conversation wouldn't have taken place otherwise ... even though it's precisely the same conversation, advisors get much more goodwill and credit if they take the first step in making that call happen.

2010-11-30 Bond "Bubble" Fears Overblown by Team of American Century Investments

In this paper, we consider the argument that there is a bond “bubble” in the context of current economic and market conditions. We examine academic literature for commonly accepted characteristics of speculative bubbles, finding little evidence to support the notion that the bond market is currently experiencing a “bubble.”

2010-11-30 Currency Focus: QE2 and the Course Ahead by Ugo Lancioni of Neuberger Berman

We believe the dollar is likely to move higher on an intermediate-term basis. QE2, in our opinion, could lead to stronger economic growth in the U.S. and eventually drivehigher yields, making the dollar more attractive to investors. In our view, the impact of QE2 was already in the price of the U.S. dollar at the time of the announcement. And the market is generally still shorting dollars.

2010-11-28 House on Ice by John P. Hussman of Hussman Funds

If our policy makers had made proper decisions over the past two years to clean up banks, restructure debt, and allow irresponsible lenders to take losses on bad loans, we would be quickly on the course to a sustained recovery. Unfortunately, however, we have built our house on a ledge of ice.

2010-11-23 Five Words that Get Emails Opened by Dan Richards (Article)

The escalating volume of email means that fewer and fewer emails are being opened. A key challenge is creating a sense of urgency around opening your emails - something that can be achieved with five key words in the subject line.

2010-11-23 The Kings of Cash Flow: Investing in Tomorrow\'s Potential Winners Today by David Vincent and Kevin Collins (Article)

Companies generating a lot of free cash flow generally represent attractive investment opportunities over time. The 'Kings' - companies with the highest free cash flow yields - have historically outperformed companies with lower free cash flow yields and are currently experiencing what may be one of their longest and most drastic periods of underperformance in the last 50 years.

2010-11-23 Why Diversify? by Adam Jared Apt (Article)

Although diversification is commonly regarded as a good thing, there are nonetheless those who regard it as a guarantee of mediocrity. It isn't, but there are right ways and wrong ways to go about diversifying a portfolio. Let's explore how diversification works.

2010-11-23 Conflicted Agents: Credit Ratings, Risk Management and Dodd-Frank by Christopher Whalen of Institutional Risk Analyst

Implementing Dodd-Frank levels the playing field for all of the producers of ratings. Banks and funds should start to create, aggregate and share two metrics - probability of default and loss given default - for all of the exposures which they touch. In creating these metrics, these institutions must both do their own work and will be able to reference any one of hundreds of external ratings and valuation sources.

2010-11-22 The Science of Risk by Scotty George of du Pasquier Asset Management

We’re in a particularly vulnerable time in world financial markets. Having just completed a significant 2 year market response (upwards) to the global credit crisis, the question of whether or not we can sustain similar economic magnitude has everyone’s attention. Although financial data seems more or less in line with a nascent recovery, investor confidence and activity are still less than robust.

2010-11-22 Economic Insights: Five Reasons to Give Thanks by Milton Ezrati of Lord Abbett

Custom at this time of the year asks people to look back for reasons to give thanks. Though for investors the political-economic turmoil and risk of the times seem at first blush to yield little along such lines, a dispassionate reprise of the last year does, in fact, offer more material for thanks. To be sure, economic and financial matters are far from perfect or even second best. But still, they have improved during the last 12 months, in some instances, dramatically. Here are five reasons for thanks.

2010-11-22 'Good Enough' with Ken Fisher, Marty Whitman and Warren Buffett by Kendall J. Anderson of Anderson Griggs

It is quite easy for us all to forget that the concepts of “good enough” and “cheap enough” have produced such consistent long term returns, at least for those who have had the fortitude to apply this theme. True, it takes training to determine what is good enough and what is cheap enough. But for many of us, our greatest failure is not paying any attention to it at all. In today’s investment world the majority of investors are making their investment decisions based on their general market outlook and their desire to obtain immediate gratification.

2010-11-22 Does the Fed Create Money? by Michael Pento of Euro Pacific Capital

Certain deflationists have recently gone on record saying that the increase in the Fed’s balance sheet is meaningless with regard to creating inflation because our central bank can’t print money, it can only create bank reserves. The problem with their view is that it both disregards the definition of money and ignores the process of creating bank reserves.

2010-11-19 into the stacks by tom brakke of the research puzzle

Wherever the stacks of information are that you find yourself in, make sure that your process is rich enough to encompass the obvious (since that’s what most of the discussion will be about) and the odd bit of discovery that is yours alone. Don’t let today’s tools obscure the good methods and lessons of the past.

2010-11-16 Through the Looking Glass with Steven Rattner by Jack Falvey (Article)

Steven Rattner, the one-time 'Car Czar' and author of Overhaul, has been busy redefining terms while trying to put his considerable spin on history. He wants to convince us that the auto industry was magically transformed from a cash-bleeding rusting hulk to a paradigm of corporate profitability. The auto industry was not overhauled. In fact, Dismembered would have been a far more accurate title.

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.

2010-11-16 Reducing Portfolio Risk through Sustainable Investing by Jon Quigley (Article)

By incorporating a broad swath of extra-financial data as a risk factor and tilting a portfolio away from companies with poor environmental, social and governance policies, we can better reduce that portfolio's risk of extremely negative outcomes.

2010-11-15 Fall Quarterly Commentary by John G. Prichard of Knightsbridge Asset Management

Economic and employment conditions remain soft amidst continued deleveraging. Developed market debt and currency issues remain. There are however offsetting positives. Corporations are in good shape with lots of cash and moderate leverage. Household finances are improving as well. Further, it is important to remain cognizant of the fact that conditions can change and equities are forward looking. Housing and autos, common drivers of economic expansion, should kick in at some future point.

2010-11-13 First, Let's Lower the Bar by John Mauldin of Millennium Wave Advisors

Mauldin responds to criticisms of a recent email he sent regarding healthcare reform. Next, he notes that for the last 18 months the trade-weighted yuan has dropped well over 10%, which he calls extraordinary. On the recently announced unemployment results, he says government "fiddling" with seasonal adjustments distorted the numbers. Last, he comments on the Irish sovereign debt issue.

2010-11-12 Analyzing China's Banking Sector Reform by Richard Gao of Matthews Asia

China's banking reform has effectively transformed its state-owned banks into commercial banks running under international practices.

2010-11-12 A Bull in China by Christian Thwaites of Sentinel Investments

On a recent trip to China, we saw encouraging and inexorable signs that the Chinese consumer is becoming a very potent force in the world economy. It wont be without volatilitybut it is happening. Heres how: demographics, changes in consumer behavior and a number of other factors.

2010-11-11 A Kind Word For Ben by Paul McCulley of PIMCO

The Fed makes policy consistent with its legislative mandate handed down by the democratically elected government of the United States. Price stability (mandate-consistent inflation) that promotes bubbles in asset prices and debt creation is a prescription for a debt-deflation bust and a subsequent liquidity trap. Acting irresponsibly relative to conventional wisdom is precisely the right approach for reversing an economy facing, or worst yet, mired in a liquidity trap.

2010-11-11 Ahead in the Clouds: Capturing Opportunities in Technology by Walter Price of RCM

Many corporations are finding themselves in a situation that should bode well for technology spending: They are holding record amounts of cash on their balance sheets and consuming their existing capital base as they depreciate their equipment. At the same time, many technology firms have likewise emerged from the crisis with strong balance sheets and in good financial condition. Yet the market has been slow to re-embrace the sector, keeping stock valuations at historic lows.

2010-11-10 On the Road Out of Ireland by Michael J. Schussele of Michael J. Schussele, CPA

Ireland has been celebrated as the European Union poster child for eurozone austerity. Yet, its efforts have received little respect from the bond market, which has become increasingly aware that austerity will not make Ireland again prosperous. In attempting to be the good European Union partner, Ireland created a "bad" bad bank which gave government guarantees to all liabilities of three private banks which had engaged in risky investment policies and poor management. In doing so, the government bailed out incompetent management and bondholders at the expense of the Irish people.

2010-11-09 New Strategies in Alternative Investments by Robert Huebscher (Article)

Alternative investments, broadly speaking, and hedge funds, more specifically, have performed as intended over the last 20 years, modestly increasing returns and significantly reducing risk when added to a traditional stock-bond portfolio. Selecting the appropriate vehicle is the challenge, and that task has been made easier by the introduction of new exchange-traded strategies.

2010-11-09 A Reading List for 2010 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 are presented below and the remaining four will be presented next week.

2010-11-09 Keynesian Confusion by Michael Lewitt (Article)

Keynesian policies are inflicting untold damage on the U.S. and global economies today. Keynes did not have to be misread. The reason that the current recovery is below par is that the economy is experiencing a massive paradox of thrift. We doubt that reducing already low rates is going to stimulate much of anything other than more frustration on the part of savers. Sooner or later, everything being earned on the upside of this liquidity-induced rally will be given back in spades - the only question is when.

2010-11-09 Finding Your Alternatives by Beverly D. Flaxington (Article)

In everyday life, you know that the first idea you think of to meet a need, or address a problem, may not always the best one. But when it comes to running a firm, far too many advisors never go through a proper brainstorming process to determine which option may be the best one for their firm.

2010-11-09 Serenity Now by Emilio Vargas (Article)

Hope has transformed into fear - not about making money but about the prospect of another bubble. The recent statements and actions of the Federal Reserve Bank may be laying the groundwork for the third massive asset mispricing in ten years.

2010-11-09 The FDIC ambushes the Fed, and gains a beachhead in Basel by Christopher Whalen of Institutional Risk Analyst

This week The Institutional Risk Analyst is on the road. We were in Merriville, IN last night to give a talk entitled "A New Deal for the American Economy." The well-attended event was sponsored by the School of Business at Indiana State University and City Securities in Indianapolis.

2010-11-08 What Has the Fed Really Done? by David A. Rosenberg of Gluskin Sheff

In the Fed’s latest QE quest, by targeting the front- and mid-part of the U.S. Treasury curve, it is only really influencing yields that were already at microscopic levels before anything was even announced. It is hard to figure out what a 0.3% yield on the 2-year T-note or a sub 1 % yield on the 5-year T-note is really going to accomplish as far a spending stimulus is concerned. The Fed’s action seems to have unleashed a wave of speculative trading activity in risk assets — from stocks, to commodities, to emerging markets

2010-11-07 Fall 2010 Quarterly Commentary by Jonathan A. Shapiro of Kovitz Investment Group

As for the next decade, we are optimistic. This view is based primarily on two factors. The first is the entry level. We believe that current valuations of our portfolio holdings are very attractive, both on an absolute level and relative to history. While it doesn’t guarantee any outcome, starting at these levels certainly stacks the probabilities firmly in our favor.

2010-11-03 We've Voted. What's Next For the Economy? by Mohamed A. El-Erian of PIMCO

With the two chambers of Congress split between Democrats and Republicans, the conventional wisdom likely to be repeated over the next few weeks is that political gridlock is good for the economy. While often true, that is not the case today. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities.

2010-11-02 Four New Ways to Beef Up Your LinkedIn Profile by Kristen Luke (Article)

If you have logged into LinkedIn in the last couple of weeks, you may have noticed some new changes. The professional networking site has new sections for individual profiles, and Kristen Luke explains how to use them.

2010-11-01 The Servicer of the First Part; Dick Alford on the Fiscal Illusion by Christopher Whalen of Institutional Risk Analyst

This week the Institutional Risk Analyst features a comment by the FRBNY's Richard Alford. Alford provides a very revealing look into the brave new world of macroeconomics and how the members of the priesthood of imprecision see the 'multiplier' associated with fiscal spending. When you realize just how poor the methodology is behind these economic debates, both in terms of the mathematical assumptions and the understanding of human action, the fact that these distinctions underpin fiscal policy is truly frightening.

2010-11-01 Investors Ready for a Ghoulishly Busy Week by Chris Maxey of Fortigent

Investors are wondering whether the recent market rally is built on a solid foundation or merely another in a long line of illusionary rallies should heed a bit of caution. Investors are largely bidding risk assets higher on the belief that the Federal Reserve will inject significant amounts of liquidity into the economy through a second round of asset purchases. This is an extremely dangerous and poor investment thesis.

2010-10-29 Be Careful What You Wish For by John Mauldin of Millennium Wave Advisors

Q3 GDP numbers were unimpressive, and it would not surprise Mauldin to see GDP growth be closer to 1% in the 4th quarter, unless we start to see evidence of more inventory building. That is not good for jobs, personal income, tax collections needed to cover deficits at all levels, or consumer confidence. A further threat is posed by large numbers of people whose 99 weeks of unemployment will soon expire. Republicans face big challenges once they gain power, and Mauldin says a VAT is the only way to reduce budget deficits.

2010-10-28 Night of the Living Fed by Jeremy Grantham of GMO

This is a summary of Grantham Mayo Von Otterloo chairman Jeremy Grantham's 3Q 2010 newsletter. Grantham notes that in the third year of a presidential cycle, risky, highly volatile stocks have outperformed low-risk stocks by an average of 18 percent per year since 1964. Levels of 1400 or 1500 on the S&P 500 one year from now are about a 50/50 bet. The biggest threats to this possibility are that Congress will initiate a new trade war, or that the Federal Reserve will start a currency dispute with quantitative easing.

2010-10-27 Maddison’s Forecasts Revisited: What Will the World Look Like in 2030? by Andrew Mold of VoxEU

Developing countries have enjoyed strong economic performance over the past decade – often growing twice as fast as OECD economies. This column asks whether developing countries will continue to outpace rich countries over the coming two decades. Updating Angus Maddison's famous projections, it forecasts a world starkly different from that of today. The world's poor countries, according to the forecast, will account for nearly 70 percent of global GDP in 2030.

2010-10-27 Where Inflation is Higher than Interest Rates, Liquidity Will Flow by Monty Guild and Tony Danaher of Guild Investment Management

Investors should continue to hold U.S. stocks for a further rally. Long-term U.S. liquidity formation through QE will create demand for many assets, including U.S. stocks. Short-term U.S. stock market indices are near resistance areas, and so traders can consider taking profits. Investors should also continue to hold gold for long-term investment, as well as oil, and food-related shares such as grains, wheat, corn, soybeans, and farm suppliers. The U.S. dollar, Japanese yen, British pound and the euro are all poor long-term prospects.

2010-10-26 An Exceptional Resource for Asset Allocation by Michael Edesess (Article)

Roger C. Gibson's fine and exemplary book, Asset Allocation: Balancing Financial Risk, Fourth Edition, shows that character and conscience-based counseling still exist, even in the financial profession. It is still possible for advisors to look out for their clients' long-term interests.

2010-10-26 What Drives High-Yield Bonds (and Why You Should Listen to the Ratings Agencies) by Robert Huebscher (Article)

High-yield bonds are attractively priced - or they aren't - depending on how likely you think a double-dip recession is and how severe you think it might be. What drives the high-yield market was the subject of a talk last week by Martin Fridson, a global credit strategist with BNP Paribas Asset Management who is a highly regarded expert on distressed debt.

2010-10-26 Identifying - and Overcoming - Obstacles Second in a Series of Five Articles by Beverly D. Flaxington (Article)

Obstacles that haven't been identified and aren't removed will rise again and again for most people and firms, and will prevent you from achieving your goals. Here is a framework to identify and categorize the obstacles you face.

2010-10-26 Improving on Buy and Hold: Buy by Georg Vrba, P.E. (Article)

Georg Vrba updated the model described in his article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on October 22, 2010, together with the most recent values of the other indicators used, have been incorporated and generated a buy signal.

2010-10-26 Have the Financial Markets and the Real Economy Become Disconnected? by Team of American Century Investments

There are solid and logical reasons why equity markets have been up substantially since the start of the third quarter. The U.S. economy remains in a fragile situation and the global financial system is far from healthy. Nonetheless, progress is being made and, barring any new crises or setbacks, the case for the market's recent rise can be justified. What's different this time is that two sectors that have traditionally led economic recoveries in the U.S. - consumer spending and real estate - will remain on the sidelines for the foreseeable future.

2010-10-25 Is Austerity the Road to Prosperity? by Chris Maxey of Fortigent

Some prominent European leaders have touted the view that fiscal austerity actually supports short-term economic growth. The root of this thinking is a study by Harvard economists Alberto Alesina and Silvia Ardagna. A recent IMF report, however, questions the credibility of that study. The IMF concluded that austerity 'clearly' inhibits growth in the short term, while a fiscal consolidation equivalent to 1 percent of GDP leads on average to a 0.5 percent decline in GDP after two years, and to an increase of 0.3 percent in the unemployment rate.

2010-10-22 Don't Fear the Euro by Michael Pento of Euro Pacific Capital

When the euro hit a low of $1.1917 against the US dollar on June 7th, 2010, the airwaves crackled with assertions that the European common currency, beset by Greek debt problems and intra-union discord, was destined to trade at parity with the greenback. They were wrong. Since then, the euro has risen over 17% against the dollar, hitting $1.3961 today. The current upswing, delivered courtesy of the Fed, has at least temporarily silenced the euro’s critics.

2010-10-21 'Unusual Uncertainty'... It's Certainly Unusual by Jason R. Graybill and Neil D. Klein of Carret Asset Management

In mid-July, Federal reserve Chairman Ben Bernanke stated there is 'unusual uncertainty' with regards to the nation's economic outlook. As interest rates trend higher over the coming years from record lows, the yield curve will flatten. And as the economy improves, spreads between higher-risk credits and Treasury bonds will narrow.

2010-10-20 Understanding Economic Indicators by Jeff Miller of New Arc Investments

Both David Rosenberg and Doug Short have used the Economic Cycle Research Institute's weekly leading index as a justification for their predictions of another recession. The problem is that the WLI itself is, by the design of the makers, a black box. Prieur du Plessis identified some of the index's likely elements in a recent series of articles. He concluded that much of the forecast is based upon the stock market, the bond market and the money supply. If someone told you that these three factors suggested 80 percent odds of a recession, would you be convinced?

2010-10-19 Developed Markets and Capitalism in Crisis by Robert Huebscher (Article)

We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.

2010-10-19 Tales of the Bull and Bear Bond Market by Kendall J. Anderson of Anderson Griggs

The investment advisory business is competing to capture retirement dollars by offering new products that emphasize income. The greatest risk to any retiree is running out of money before they die. Most retirees understand this, so the idea of income for life sounds wonderful. What good is a guaranteed income payment, however, if the payment is not enough to cover the future cost of living? Current interest rates will not allow adequate income from bonds, or protect against the risk of inflation.

2010-10-18 Equity Investment Outlook by Team of Osterweis Capital Management

Housing is still deflating, but commodities are mixed. The concern longer term is that the Fed is printing money in order to stimulate the economy. At some point, all this liquidity in the system could cause inflation to accelerate, perhaps to a level that the Fed cannot contain. We are not forecasting either serious deflation or serious inflation. On the other hand, we do not regard the probability of a negative outcome as trivial.

2010-10-18 The Recklessness of Quantitative Easing by John P. Hussman of Hussman Funds

With continuing weakness in the U.S. job market, Ben Bernanke confirmed last week what investors have been pricing into the markets for months - the Federal Reserve will launch a new program of quantitative easing, probably as early as November. Further attempts at QE are likely to have little effect in provoking increased economic activity or employment. This is not because QE would fail to affect interest rates and reserves. Rather, this policy will be ineffective because it will relax constraints that are not binding in the first place.

2010-10-18 The Metastasis of Residential Mortgage Backed Securities: Interview with Joe Mason by Christopher Whalen of Institutional Risk Analyst

This week the Institutional Risk Analyst talks to Louisiana State University finance professor Joseph Mason. While the media is printing stories about foreclosures, Mason says, the more fundamental problem facing the U.S. economy is the approaching currency crisis.

2010-10-18 Fed Ignores Gold, Targets Higher Inflation, and Plays With Fire by Brian S. Wesbury and Robert Stein of First Trust Advisors

By ignoring rising gold and commodity prices and signaling that it won't quit applying monetary stimulus anytime soon, the Fed is trying to force banks to change their behavior. If it works, look out for inflation to reach multiples of 2 percent in the years ahead. The Fed hasn’t been successful yet when it ignores gold and commodity prices.

2010-10-18 Smorgasbord by Michael Dana of Dana Investment Advisors

Now that the economy is truly now global, countries are adamant about protecting their currencies so that they can be competitive in the world market. The Bank of Japan just announced plans to limit the surging value of the yen against the dollar and the yuan. This will make their imports more attractively priced in the world market. Ben Bernanke at the Fed is considering phase two of quantitative easing for the same purpose. The exchange rate for currencies will continue to rest on the shoulders of the U.S. for some time.

2010-10-18 Is Inflation Gone Today and Here Tomorrow? by Chris Maxey of Fortigent

Inflation is arguably not an issue for the time being, but with the Fed prepared to unleash trillions in additional liquidity, the outlook for inflation is more uncertain than ever. While yields on government bonds with a maturity between 2- and 10-years are flattening, the long end of the yield curve is widening dramatically. Long-term bonds exhibit the most sensitivity to interest rates and inflation, so this may be the first indication that inflation will pose a serious threat down the road. Investors and consumers alike should tread very, very carefully.

2010-10-15 Global Currency Meltdown by John Browne of Euro Pacific Capital

The Fed is being pressured to erode the value of the U.S. dollar in order making foreign sales more lucrative in nominal terms. But this form of stealth protectionism will fail just as surely as more overt trade barriers. Only when currencies are allowed to float freely will trade imbalances be corrected. Washington's attempt to force the issue is only doing harm to the world economy by introducing uncertainty and punishing the prudent. The Fed has gone radioactive, setting off a global currency meltdown. Perhaps only gold can truly shield investors from the fallout.

2010-10-14 Baggage and Investing by Richard Bregman of MJB Asset Management

Many investors – still fearful of anything that carries risk – have piled into Treasury bonds, stunningly willing to accept paltry rates of interest in exchange for safety of principal. The strongest potential for gains right now, however, is in the common stocks of large, dividend paying multinational corporations that have repaired their balance sheets and have substantial cash on hand. Investors fearful of the stock market are leaving the prices of many of these companies at attractive levels, creating an opportunity for investors who are not as baggage-laden.

2010-10-12 Does Your Marketing Match Your Business Structure? by Kristen Luke (Article)

Marketing strategies differ depending on the structure of a firm, writes Kristen Luke. Solos and silos focus on marketing the individual advisor while ensembles market the firm. Ensembles also tend to have more sophisticated marketing campaigns since they generally have larger marketing budgets and higher revenue streams.

2010-10-11 No Margin of Safety, No Room for Error by John P. Hussman of Hussman Funds

Over the past 10 years, the S&P 500 has achieved a total return, including dividends, averaging -0.03 percent annually. Over the past 13 years, the total return for the S&P 500 has averaged just 3.23 percent. These poor returns were entirely predictable during the late 1990s based on the historical relationship between valuations and subsequent returns. What's more, current valuations suggest similarly poor returns over the next five to seven years.

2010-10-11 Shrugging Off Bad News by Jeffrey Saut of Raymond James Equity Research

With more quantitative easing on the way, the risk of another downdraft in housing has been taken off of the table. It has also boosted commodities, which is plainly good for our 'stuff stocks.' Additionally, QE2 should spur more mergers and acquisition activity, increase share repurchases, and lower the U.S. dollar (good for export companies), all of which is positive for the S&P 500.

2010-10-08 Is the Flattening Yield Curve Good For Stocks? by Liz Ann Sonders of Charles Schwab

The flattening yield curve has investors asking questions about what it means and whether it is bad for stocks. Charles Schwab is not concerned: Historically, a narrowing of the yield curve has been tied to stocks performing reasonably well.

2010-10-08 Stalled Post-crisis Reforms Must Be Restarted by Mohamed A. El-Erian of PIMCO

In the early part of this crisis, swift coordinated global policy action saw a painful economic collapse replaced by employment gains and greater financial stability. However, the marked failure to continue coordinated action reflects two critical weaknesses that now must be taken seriously: an insufficient appreciation of the mix of post-crisis forces; and a growing void at the center of the international system. For the IMF this means acting on long-standing governance and representation problems – and doing so by going well beyond what is being currently contemplated.

2010-10-08 Still Vulnerable by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

Economic growth has been largely due to an unsustainable, and probably over-extended rebuilding of inventories. The proposed QE2 is unlikely to succeed, and the U.S. economy faces four problems: excess leverage, counterproductive fiscal policies, sub-optimal tax policies and excess bureaucracy. Treasury bonds are not in a bubble and represent good long-term investments.

2010-10-06 Discounting China's Demographic Dividend by Nouriel Roubini of Roubini Global Economics

China's population will reach an inflection point in 2011: The increase in the number of retirees will start to outpace the growth of the labor pool. Roubini Global Economics projects that the rising cost of labor should translate into a higher Chinese inflation rate of 4 percent, which in turn will push up the cost of capital. As investment gradually decelerates, China's GDP growth rate should decline by about two percentage points over the next five years, with potential growth down to about 8 percent in 2015.

2010-10-05 The Information Risk Premium: A New Danger to Client Portfolios by Bob Veres (Article)

Michael Aronstein, who manages the Marketfield Fund, connected two dots that most of us are aware of intuitively, but may not have consciously considered. As Bob Veres writes, Aronstein says that the primary challenge for investment advisors, financial planners and money managers today, which is different from the challenges you faced in the past, is the sheer amount of attention that investors are now able to pay to the ups and downs in their portfolios.

2010-10-05 Leadership Lessons from the Dance Floor by Justin Locke (Article)

The classic image of leadership is the symphony orchestra conductor, who, standing tall in front of his charges, ensures the perfect synchronization necessary to create the harmony, rhythm and melody that defines great music. That idealized artistic symbolism is not unique, though. An equally compelling example of leadership can be found on the dance floor, writes Justin Locke.

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.

2010-10-05 Cyclical Outlook by Paul McCulley of PIMCO

The influence of emerging economies is on the rise, while developed countries are retrenching. Monetary policy in the developed countries will remain extraordinarily accommodative for an extended period, with policy rates pinned close to zero and use of quantitative easing. PIMCO will therefore position its duration and curve strategies accordingly: overweight investments in the developed world, concentrated in the 'belly' of yield curves. In contrast, an increasing share of its positioning in the 'spread sectors' will be allocated to the emerging markets, including their currencies.

2010-10-05 Do Past 10-Year Returns Forecast Future 10-Year Returns? by Bill Hester of Hussman Funds

The argument that above-average long-term returns typically follow periods of poor past long-term returns is not wrong, it's just incomplete.

2010-10-04 Emancipation From What... Capitalism? by Brian S. Wesbury and Robert Stein of First Trust Advisors

In a speech last week, President Obama called belief in capitalism 'blind faith.' The real problem with the economy today, however, is not capitalism, but the fact that we have moved too far away from free markets. As government spending has increased, so has unemployment. This is not a mystery; the bigger the government is, the smaller the private sector gets and the less dynamic the economy will be. If there is any emancipation needed, it's from the government, not from capitalism.

2010-10-01 China: A World-Class Act by Mark Mobius of Franklin Templeton

Investors in China continue to be concerned about overheating in select sectors, greater inflationary pressures and a widening wealth gap in the country. The Chinese property market, however, is deep and varied, average household leverage is substantially lower than that in the U.S., and the Chinese government has been quick to act to prevent bubbles. While consumer price inflation continues to rise, producer price inflation has begun to subside. Finally, the recent move to increase the flexibility of the renminbi will allow for a slight appreciation.

2010-10-01 Postcard from Japan: Before the Dawn by Andrew Foster of Matthews Asia

Matthews Asia portfolio manager Andrew Foster recently returned from Japan, where he met with companies from a variety of industries. As in past trips, many of these companies seemed to be resting on their laurels, even as present growth was flagging. During this most recent visit, however, a subset of companies in different industries seemed to share a realistic outlook, combined with a sense of urgency to improve performance. Each of these companies cited the strength of the yen as a key factor that would allow them to execute overseas acquisitions, especially in the U.S.

2010-10-01 Liquidity Flowing into Asia and Western Latin America by Monty Guild and Tony Danaher of Guild Investment Management

Liquidity will flow into the Asian region raising consumer spending, stock prices and currency values. In the following countries: India, Indonesia, Malaysia, Thailand, Singapore, and China much new liquidity will enter. It will be in the form of foreign direct investment and investment money moving into stocks and bonds. With the exception of China, which is being singled out for a trade battle by the U.S. Congress, all of these countries will see their currencies rise and their economies grow.

2010-09-30 The Economy and the Stock Market by Patrick O'Shaughnessy of O'Shaughnessy Asset Management

Patrick O'Shaughnessy examines the relationship between historical unemployment levels, GDP growth rates and marginal tax rates with subsequent equity returns. The data suggests that while worries about the economy are legitimate, those fears do not necessarily translate into weak prospects for stocks. While economic variables are not good indicators of future stock returns, the market's price-to-earnings ratio has been a good indicator in the past, and it continues to suggest the market is a good buy today.

2010-09-28 Three Traps that Chew Up Your Day by Dan Richards (Article)

Time has always been the scarcest resource for successful financial advisors. Given all the demands advisors face, today it's essential to make maximum use of your workday. To make that happen, Dan Richards says you have to overcome three common traps.

2010-09-28 Building your Digital Identity through Blogging by Stephanie Sammons (Article)

Blogging is a modern-day marketing platform for cultivating client, prospect, and center-of-influence relationships. A well-designed and properly structured blog, writes Stephanie Sammons in this guest contribution, can provide you with an opportunity to proactively manage your online reputation and attract new clients into your business.

2010-09-28 Stan Druckenmiller is Leaving by Bill Gross of PIMCO

The economic drivers that once pumped up asset prices and favored the production of paper over commodities are now retrograde. The reality during Stan Druckenmiller's 'old normal' was that prosperity and overconsumption were driven by asset inflation that in turn was correlated with leverage and interest rates. Investors are now faced with bonds yielding 2.5 percent and stocks staring straight into new normal real growth rates of 2 percent or less. There is no 8 percent there for pension funds. There are no stocks for the long run at 12 percent returns.

2010-09-28 Chain Gangs and Pipe Dreams by Doug Mackay and Bill Hoover of Broadleaf Partners

Last Friday David Tepper, who runs a very successful hedge fund, made a convincing no-lose case for stocks in an interview on CNBC. In the stock market as in sports, anytime winning seems easy, it is usually a decent signal that you might be treading in dangerous territory. During such times, it has usually paid to increase rather than decrease one's aversion to risk. Equities could indeed move higher from here and likely will, but buying under the influence of a pipe dream that they are a no-lose proposition would be as foolhardy as an offense with no defense.

2010-09-27 Not Yet Out of the Woods by John P. Hussman of Hussman Funds

While we know the Economic Cycle Research Institute data has deteriorated further since June, we won't have GDP figures for a while yet. Given the data in hand, it's clear that past growth downturns of the same extent have often gone on to become recessions. The bulk of the growth that we did observe coming off of the June 2009 economic low was driven by a burst of stimulus spending coupled with a variety of programs to pull economic activity forward. These synthetic factors are now trailing off, with little intrinsic economic activity to propel a recovery.

2010-09-27 The Bubble in Bonds by Charles Lieberman of Advisors Capital Management

Bonds can play an important role in diversifying a portfolio. The current bubble in bond values, however, places excessive stress on that benefit. Today's yields don't make sense to investors. While the Fed needs to keep interest rates at low levels to strengthen the pace of recovery, investors who flee stocks for the 'safety' of bonds will get hammered. Those who are not distracted by the equity market's volatility and focus on its exceptional current value relative to its long-term prospects will be handsomely rewarded.

2010-09-27 Hemlines and Investment Styles by Howard Marks of Oaktree Capital

High quality, large cap stocks have good potential over a range of possible scenarios, and are more attractive than bonds, which will do well in periods of economic weakness or deflation but poorly during periods of market strength or inflation. Treasury bonds and other high grade bonds currently have all environmental factors in their favor, but are priced rich. For them to do well from here, with yields so low, everything has to work out the way the bond bulls hope. Given current yield spreads, high yield bonds should outperform high grade bonds in most foreseeable long-term environments.

2010-09-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Clearly, investors understand that earnings will be decent when they are released in late October, that the Fed will be printing money starting in November and that a more business-friendly election change is just a few weeks away. These developments are all supportive of stock prices. As a result, for the next few weeks it seems that only an event out of left field could meaningfully upset the stock market apple cart.

2010-09-27 'Rules are Rules?!' (An Email From Grandma) by Jeffrey Saut of Raymond James Equity Research

Last week most of the major stock market averages broke out of their May-September trading ranges to new recovery highs (small cap indices did not). While we are not necessarily looking at a repeat of the 2009 stock market rally, the S&P 500's April highs now seem achievable. Meanwhile, the bears continue to growl 'Where's the volume?' The reply to that question is that the whole 2009 rally came on declining volume, as did this year's May mauling, begging the question: Does volume really matter?

2010-09-24 Postcard from India: Delhi Prepares for the Commonwealth Games by Sunil Asnani of Matthews Asia

The Commonwealth Games, which will be hosted this year in Delhi, offers India a distinctive brand building opportunity. The preparations for the games have surely ramped up Delhi's severely strained infrastructure. The city has made significant progress towards construction of an intra-city train network and an international airport terminal. Preparations have also given employment to hundreds of thousands of construction workers, and will likely prove positive for the country's tourism. As an offshoot, it might also inspire more investment in developing India's sporting talent.

2010-09-23 The Fed's Opponent: Deflation by Michelle Gibley of Charles Schwab

While there are downside risks, the U.S. economy will probably avoid a double-dip recession. Historically, a downward-sloping yield curve is the best recession predictor, and for now it continues to slope upward. Meanwhile, with interest rates already at historically low levels, lowering the cost of borrowing money even further is unlikely to spur economic growth and employment, and so quantitative easing is not the silver bullet for economic growth. Actions that give businesses increased certainty about how to plan for future operating costs in relation to demand growth are preferable.

2010-09-23 Was it really a Lost Decade? by Kevin D. Mahn of Hennion & Walsh

Many have claimed that the decade of the 2000s was a lost decade for stock investors. When you look at the returns of the S&P 500 index over the decade, it is hard to challenge the validity of this claim. For the period of December 31, 1999 through December 31, 2009, the S&P 500 index had an annualized simple price return of -2.72 percent. A look at returns in categories beyond U.S. large-caps, however, including emerging markets, bonds, and U.S. mid-caps and small-caps, reveals that other types of investments actually had positive returns.

2010-09-22 Economic Insights: A Dispute Over Corporate Finances by Milton Ezrati of Lord Abbett

In the midst of all the uncertainty these days, one comfort to which investors have clung is the record $1.8 trillion in cash on corporate balance sheets, by some estimates. But of late, even this bright spot has come into question. The cash holdings, some have argued, are more than offset by a continued growth in corporate debt and other liabilities. Matters are, as ever, more complicated than they appear, but corporate finances (even after considering liabilities) nonetheless look firm enough to offer something positive in the economic and investment climate.

2010-09-21 The One-Sided Fallacy by Richard E. Cripps, CFA (Article)

The current tenor of political debate has amplified one-sided arguments as each party attempts to sell their view to voters. The same polarization has become evident in approaches to investment, and market bears are exhibiting all the classic symptoms of confirmation bias. But we know better than to let these slanted arguments sway our market convictions. As Richard Cripps explains in this guest contribution, there are plenty of reasons to remain invested in equities.

2010-09-21 Diminished Expectations, Double-dips, and External Shocks: The Decade After the Fall by Carmen M. Reinhart and Vincent Reinhart of VoxEU

Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds much slower growth, as well as several episodes of 'double-dips,' as well as many instances of plain 'bad luck' that strike at a time when the economy remains highly vulnerable.

2010-09-20 Online Dating: Avoiding a Bad Equilibrium by Dan Ariely of Predictably Irrational

In a recent experiment, Dan Ariely found that when people are free to choose what type of discussions they want to have on a first date, they often gravitate toward an equilibrium that is easy to maintain but one that no one really enjoys or benefits from. The good news, however, is that if we restrict the equilibria by sticking to a predefined set of questions, we can get people to gravitate toward behaviors that are better for everyone. More generally, this suggests that some restricted marketplaces can actually yield better outcomes than unrestricted markets.

2010-09-18 The Chances of a Double-Dip by John Mauldin of Millennium Wave Advisors

This commentary features a letter from Gary Shilling on the chances of a double-dip recession. Shilling notes that investors early this year believed that rapid job creation and the restoration of consumer confidence would spur retail spending. A funny thing happened, however, on the way to super-charged growth. In April, investors began to realize that the euro zone financial crisis, which had been heralded at the beginning of the year by the decline in the euro, was a serious threat to global growth. Stocks retreated, commodities fell, Treasury bonds rallied and the dollar rose.

2010-09-16 The Woody Hayes Economy by Team of Applied Finance Group

By preventing additional redistribution policies, the split government that will likely emerge from the November U.S. midterm elections will probably loosen some purse strings to invest, hire and grow. However, we probably will not see any policies that will meaningfully change the overall economic condition or the outlook for equities as an investment. The next two years will thus most likely bring a Woody Hayes economy - 'Three yards and cloud of dust'- meaning we will have some renewed economic activity, but not the sustained, robust growth to be expected coming out of such a long slump.

2010-09-15 A Bond Bubble? by David Baccile of Sextant Investment Advisors

Longer-term interest rates may not be particularly cheap right now, but there is no indication that a bond bubble has formed and is ready to pop. When it comes to predicting what the global economy will look like in 2011 or 2012, there is still considerable uncertainty and at least some tangible risk deflationary pressures will continue to build. With yields on 10-year U.S. Treasury bonds under 3 percent, investors are not being paid enough to totally embrace long-term maturities, but to shun them altogether would not be a prudent decision either.

2010-09-15 Are High-Quality Firms Also High-Quality Investments? by Kendall J. Anderson of Anderson Griggs

The Standard and Poor's Earnings and Dividend rankings (also known as 'quality rankings') score the financial quality of several thousand U.S. stocks from A+ through D, with data going back to 1956. The better the growth and stability of earnings and dividends, the higher the ranking. A recent study found that low quality dominated high quality in 2009. This has continued into the current year with low-quality continuing to dominate. If this study is accurate, however, then the 'quality cycle' will begin to favor high-quality holdings within a short period of time.

2010-09-14 Identifying Opportunities in the Municipal Bond Market by RidgeWorth Investments (Article)

Ridgeworth Investments shares its perspective on the muni bond market in a recent white paper entitled "Identifying Opportunities in the Municipal Bond Market" which outlines the historical benefits of municipal bonds, the changing market dynamics in 2009 as well as RidgeWorth's outlook for municipal bonds in 2010 and potentially beyond. RidgeWorth concludes that despite a challenging market environment, munis still offer attractive investment opportunities. We thank them for their sponsorship.

2010-09-14 Latest Bond 'Bubble' Fears are Overblown by Team of American Century Investments

Despite considerable discussion in the financial media about the existence of a bond market bubble, the fixed-income team at American Century Investments finds little evidence to support this claim. Bond bubble proponents base their argument largely on record flows into fixed-income investments, bonds' extended outperformance over stocks, and record low interest rates. However, a confluence of economic headwinds argues for a prolonged period of low interest rates and inflation, while investor demographic and behavioral finance trends also appear to favor further bond inflows.

2010-09-10 Do Countries 'Graduate' From Crises? Some Historical Perspective by Rong Qian, Carmen M. Reinhart and Kenneth Rogoff of VoxEU

Are declarations of victory against the global crisis premature? This column argues that 'graduation' - the emergence from recurrent crisis bouts - is a long and painful process which neither developed nor developing countries look close to completing. Two centuries of evidence suggests that most countries need 50 years before the chances of further crises subside.

2010-09-07 Jeffrey Gundlach on Bonds, Stocks and Gold by Robert Huebscher (Article)

DoubeLine's Jeffrey Gundlach recently reduced his position from "overweight" to "small underweight" in Treasury bonds, and cited "divergent behavior across the yield curve." In this interview, he discusses that behavior and the rationale behind his move, as well as his thoughts on other asset classes, including equities and gold.

2010-09-07 Mistake Management Symphony Style by Justin Locke (Article)

Mistakes happen - often. Eliminating them is impossible. The real question is: How do you manage the inevitability of making them? In this guest contribution, Justin Locke shares a few lessons he learned while playing the bass in a professional orchestra.

2010-09-07 Cheap Labor Helps Southeast Asia Compete with China, But It Won’t Be Easy by Team of American Century Investments

Labor disputes in China and other emerging market countries have been catching global media attention. As employees in the low-cost workshops of the world fight for higher wages and better working conditions, the longer-term outcome will be better standards of living and rising disposable incomes in emerging market countries. These changes hold positive implications for many global-based companies' present and future growth. A growing consumer class with 'buying power' will certainly be beneficial.

2010-09-07 Mr. Market? by Jeffrey Saut of Raymond James Equity Research

There have been two 90 percent upside days in the past few weeks combined with new highs in Lowry's buying power index and new reaction lows in the selling pressure index. Since 1940 there has never been an instance when such a configuration existed five months into a bear trend; and note that we are now five months from the April highs. Additionally, over the last 16 midterm elections the stock market has never made a new reaction low post-election day. If stocks rally during the week after Labor Day, the odds that the rally will continue are high.

2010-09-03 Buy and Hold Still Holds by John Browne of Euro Pacific Capital

As Americans have justifiably lost faith in the stock market, the classic buy-and-hold investment strategy has fallen from favor. The problem is that retail investors are wrongly equating the performance of stocks as a class with the trajectory of American stocks in particular. Fortunately, buy-and-hold still works in many parts of the world. Meanwhile, retail investors sitting in U.S. bonds and bank accounts will ultimately pay a steep price through inflation.

2010-09-01 Land of Confusion … Bubbles and Omens Dissected by Liz Ann Sonders of Charles Schwab

Charles Schwab is sticking with its view that the recovery is square root shaped (a 'V' followed by a stall), and there's little question that we've entered the stall phase. In addition to the havoc the stall has wreaked on stock market volatility, it's taken yields on Treasury bonds to near all-time lows. This, of course, has generated a very strong upward price move in bonds (as bond prices and yields move inversely) and much talk about a 'bond bubble.' That could be the case if yields move higher, which could trigger a swift move out of bonds as an asset class.

2010-08-30 Hussman Funds 2010 Annual Report by John P. Hussman of Hussman Funds

At present valuations, exposure to market and credit risk is not likely to be well-compensated over the long-term, and may be associated with substantial losses in the intermediate term. Recent advances may simply be the product of a fragile post-crisis bounce, similar to those following other historical credit crises in the U.S. and abroad. The quarters immediately ahead present the greatest risk of fresh credit strains and concentrated economic risk.

2010-08-28 The Dark Side of Deficits by John Mauldin of Millennium Wave Advisors

At the start of each bull cycle, the markets had single-digit P/E ratios, with no exception. No secular bull market ever began with high P/E ratios, even though significant rallies often started from high P/E ratios. The lesson of history is that all periods of high valuations come to an unhappy end. The most significant driver of stock market returns is the valuation embedded in the P/E ratio. We are still in a secular bear market. Valuations, while lower, are still not at what could be called historical cyclical bottoms. Patience is the order of the day. We will get there.

2010-08-27 Debt Be Not Proud by Rob Arnott of Research Affiliates

The looming sovereign debt crisis may be the defining influence on capital market returns over the next 10 years. Greece recently hit a wall and had to break a lot of promises to its citizens, including retirees and prospective retirees from government employment. Greece certainly won't be the last. An exploration of the relationship between sovereign debt levels and the economic might of debtor nations reveals a scary situation, particularly for investors who cap weight their government bond market exposure.

2010-08-27 Postcard From Korea by In-Bok Song of Matthews Asia

During her recent trip to Korea, Matthews Asia research analyst In-Bok Song met with several companies that have been making consistent preparations for the next leg of growth in their core businesses. Though their success remains to be seen, there were a few commonalities in their approach. The most apparent one is their entry into China. Another is structural reorganization, which aims to generate synergies within related business and to strengthen core competitiveness. These efforts in Korea's underlying economy help define the foundation for the country's sustainable economic growth.

2010-08-25 How 'Conservative' Is Your Municipal Bond Portfolio? by Monty Guild and Tony Danaher of Guild Investment Management

It is not just the Wall Street banks and large public companies who have used financial trickery in their balance sheets. After years of fiscal manipulation, many states, counties, municipalities, school districts and public utilities are going to have trouble refinancing their debts. Some municipal bond investors, underwriters and issuers are now hoping that the federal government money-printing machine will come to the rescue of insolvent states, counties and municipalities. Hope, however, is not a valid investment strategy.

2010-08-24 This is No Way to Run a Railroad by Michael Lewitt (Article)

In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.

2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)

A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).

2010-08-24 How to Choose the Right Social Media Archiving Strategy by Blane Warrene (Article)

Advisors who have embraced social media as an important component of their marketing and service toolbox must monitor and manage the content they distribute. In this guest contribution, Blane Warrene discusses how to collect and store postings and comments made by you and others on social media platforms and store the information in a readily accessible database.

2010-08-24 India to Open Equity Markets to Foreign Retail Investors by Team of American Century Investments

While opening up its equity market to foreign retail investors will likely benefit India and increase capital inflows in that country, there is also more growth potential for investors who are prepared to accept the risks and invest for the long term. Over the next five years, India and emerging market economies will be driven not only by export demand from the rest of the world, but by growth in domestic consumption, including health care, technology, infrastructure, and finance. This will create huge opportunities for investors and companies doing business in these sectors.

2010-08-24 Bonds or Stocks - Who is Right? by Chris Maxey of Fortigent

Over the past several months, bond and equity markets have been on starkly divergent paths. Investors are growing increasingly concerned that perhaps the bond market knows something that the stock market is overlooking. One reason for this divergence is corporations. Emerging from one of the most severe recessions in the last century, companies are more than willing to hoard cash and favor a 'wait and see' approach before resuming expansion. Meanwhile, individual investors continue to sell equities in favor of fixed income securities.

2010-08-24 Mr. Gross Goes to Washington by Bill Gross of PIMCO

Americans now know that housing prices don't always go up, and that they can in fact go down by 30-50 percent in a few short years. Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending. Private mortgage lenders will demand extraordinary down payments, impeccable credit histories and significantly higher yields than what markets grew used to over the past several decades.

2010-08-23 We're Underperforming the Great Depression by Doug Short of Doug Short

Doug Short presents charts of the weekly leading index of the Economic Cycle Research Institute and the federal funds rate going back to 1967. The index registered negative growth for the 11th consecutive week on Friday, coming in at -10.0, a fractional improvement from last week's -10.2. The rate of decline from the peak in October 2009 is unprecedented in the Institute's published data. The index has never dropped to the current level without the onset of a recession.

2010-08-20 Private and Public Sectors – Motivating and Regulating Markets by Mark Mobius of Franklin Templeton

Even though the government and the private sector have different roles in society, Mobius believes both must depend on a capitalist philosophy in order to be successful. When capital is raised, be it from taxes or from the savings of individuals for investment, it must be put to productive use. A free market model with an ineffective umpire, inadequate regulation and an uneven playing field is likely no better than a government-led model with no real capitalist system of incentives to maximize productivity.

2010-08-20 And That\'s the Week That Was... by Ron Brounes of Brounes & Associates

Positive earnings AND an array of new M&A activity. Taken together, these two factors should mean one thing…strength in equities. Unfortunately, investors looked past the week’s business headlines and focused on the economic data, much of which depicted a sluggish recovery. Many skeptical investors took the easy way out and turned to the safe-haven of treasuries in lieu of the riskier equities.

2010-08-19 Bonds or Stocks? by Mark Oelschlager of Oak Associates

Since the market correction of 2008, investors have flocked to bonds and bond funds, and largely eschewed stocks and stock funds. Historically, however, investors have been the perfect reverse barometer, gravitating toward stocks or bonds at their peak and fleeing them at the bottom. This time should be no different, and it is therefore wise to bet that stocks will outperform bonds in the coming years. Of course there is no way to know when the current trend will reverse, but it will.

2010-08-19 Debt and Growth Revisited by Carmen M. Reinhart and Kenneth Rogoff of VoxEU

With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.

2010-08-18 Ten Ways to Improve The Returns on Your Portfolios by Kendall J. Anderson of Anderson Griggs

On May 25, 2010, Dr. Paul Woolley, former head of the International Monetary Fund's investment and borrowing activities and founder of the UK arm of Grantham, Mayo, van Otterloo, laid out 10 policies that if adopted, could increase annual returns after inflation by 25 percent and long-term returns by at least 50 percent. He addressed his comments to the world's biggest public pension and charitable funds. His 10-point manifesto, however, will work just as well for individuals, offering the same, if not greater, potential return benefits to their portfolios.

2010-08-18 Pay No Attention to the Headlines by Christian Thwaites of Sentinel Investments

Market valuations are attractive, especially after the recent correction to below 1,100 on the S&P. What should work is buying companies with strong and sustainable cash flows and proven management. What will not work is chasing risk, and investing in companies that dilute shareholders and operate with high leverage. Don't look for an immediate catalyst. This is a market where stealth, opportunity buying and stock picking work. If you hear the word 'momentum,' run.

2010-08-18 Risky Business by Robert J. Horrocks of Matthews Asia

Much effort has gone into trying to understand the elements of 'risk' and 'uncertainty' for investors. Matthews' Chief Investment Officer Robert Horrocks tries to bridge the gap between what academic theories define as risk and the experience of practitioners - particularly when it comes to managing Asian equity portfolios. In an environment in which risk is not clearly or reliably defined, he cautions, be humble.

2010-08-18 Dr. Keynes Killed the President by Peter Schiff of Euro Pacific Capital

Modern-day Keynesians seek to significantly increase debt levels in an effort to boost aggregate demand. In their view, only once recovery takes hold due to government spending, money printing, and borrowing does a discussion of deficits become appropriate. The U.S. has persisted under this theory for close to a century. As a consequence, Washington is now entirely dependent on the reserve currency status of the dollar and the continued hibernation of bond vigilantes. It's almost as if the federal government is daring its foreign creditors to pull the plug.

2010-08-18 Zombie Love: Do Fannie and Freddie Provide Any Benefit to the U.S. Economy? by Christopher Whalen of Institutional Risk Analyst

This commentary features a piece from Achim Duebel at Finpol Consult in Berlin criticizing U.S. fiscal intervention in the housing market. Duebel's comment was first written in 2003, when its publication in a housing finance journal was blocked by government-sponsored enterprise lobbyists. The striking thing about it is that almost nothing about the structure of the housing market has changed since it was first written. Christopher Whalen also comments on the current status of the housing sector, and double-dips both real and imagined.

2010-08-17 When Unconventional Become Conventional by Paul McCulley of PIMCO

Conventional monetary policy is undergirded by the doctrine of central bank independence, founded on the proposition that fiscal authorities, hostage to the political process, inherently are prone to an inflationary bias. When the economy suffers from private sector deleveraging and a fat-tail risk of deflation, however, conventional monetary policy is not enough. In such circumstances, the central bank has a profound duty to act unconventionally, ballooning its balance sheet by monetizing assets, either government or private, or both.

2010-08-16 The Fear and the Flight of the Individual Investor by Charles Lieberman of Advisors Capital Management

Individual investors have abandoned the equity market to the greatest extent in decades, pushed out by poor returns, unfathomable volatility, and disillusion with the political and economic environment. Instead, investors have turned to bonds as they prioritize safety and return-on-capital over investment returns. This search for safety will prove counterproductive, however, and investors will get hurt down the road once the economy recovers. Their flight from stocks has made the equity market the place to be for the foreseeable future, but only those with staying power will reap the benefits.

2010-08-16 The New Normal by Team of Dana Investment Advisors

The housing bubble is slowly winding down and inventories are being worked off. The stock market has recovered half of its losses since February 2009, while corporations have cleaned up their balance sheets, increased productivity and stand ready to expand. Consumers have cleaned up their debt and increased their savings. The government can now lead us out of a slow growth economy by cutting spending dramatically and keeping the tax cuts in place.

2010-08-13 Medicine for a New Normal by Doug MacKay and Bill Hoover of Broadleaf Partners

We could be on the cusp of a major sea change in the markets, one in which cash-rich companies - which are in far better shape than governments - begin to compete for investors through the dynamics of dividend yield. Investors who can start to capitalize on these changes now are likely to benefit as the groundswell for all things bonds begins to find a suitable and potentially even safer path towards stocks with rising dividends.

2010-08-11 Democrats Now the House Underdogs by Team of Bespoke Investment Group

For those that haven't checked the odds for the November elections over on Intrade.com lately, the odds for Republicans to win control of the House have jumped all the way up to 61 percent. At the start of 2009, the odds for Republicans to win were at just 15 percent. From mid-March to mid-June, odds for control of the House hovered around the 50/50 mark. Since mid-June, however, traders have been betting big on Republican control. At this point, we have to assume that the market is 'pricing in' a Republican victory.

2010-08-11 Real Real Returns Study by Team of Thornburg Investment Management

This commentary features Thornburg's annual look at what investors are left with after expenses, taxes and inflation take a bite out of nominal returns. Once again, common stocks and municipal bonds are the best performers. This year's study also looks at implications for retirees, a group for whom nominal returns don't mean much, since they need to be concerned about actual spending dollars to protect against outliving their retirement income.

2010-08-11 The Password Conundrum by Alon Nir of Predictably Irrational

A recent cyber-attack on a major Israeli apartment-listing website, as well as Pizza Hut's local website, led to the revealing of the credentials of more than 100,000 user accounts (roughly 2 percent of internet users in the country) on shady Turkish forums. The data reveals the extent to which people fail to think creatively and incorporate even a touch of randomness into their username and password selection.

2010-08-10 Double-Dip Double Take by Milton Ezrati of Lord Abbett

The ongoing and widespread concerns about an economic double-dip warrant still more discussion. Previous analyses here have looked at the government data and concluded that, whatever the risks, the probabilities favor continued, if moderate economic growth. This discussion extends the analysis to less common economic indicators, particularly measures of shipping. Though the picture here is mixed to be sure, it, too, leads to the conclusion that the double-dip, though possible, is not probable and that growth will likely continue, albeit slowly.

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.

2010-08-10 Public Pension Showdown: Actuaries vs. Economists by Charlie Curnow (Article)

Public pensions are severely underfunded, at least according to the economists. Actuaries disagree, and at stake is nearly $2 trillion. We look at why these groups arrive at such different valuations, and which one is likely to be correct.

2010-08-10 Taking Exception: 'Fiduciary' is Much Ado about Something! by Scott MacKillop (Article)

All financial advisors who provide investment advice directly to clients or exercise investment discretion over client assets should be subject to fiduciary standards. In this guest contribution, Scott MacKillop takes exception to the article by John Lohr entitled 'Fiduciary': Much Ado about Nothing! that appeared here last week.

2010-08-10 Confessions of a First-time Manager by Justin Locke (Article)

When you have a certain degree of skill at a given task, people often assume that you will naturally be able to manage other people who do that same task. That's how Justin Locke because a first-time manager in the orchestral business, and he shares a few important lessons to apply when you receive that important promotion that elevates you above your coworkers.

2010-08-10 Is the Market Efficient? by Adam Jared Apt (Article)

After Marxism, no economic theory today may be as derided and despised as the hypothesis of market efficiency. The idea is often misunderstood, sometimes willfully. So what does "market efficiency" mean? In the latest installment of his series for the educated layman, Adam Jared Apt provides some answers.

2010-08-10 Performance that Plan Sponsors Value Most by Jeffrey Briskin (Article)

Advisors serving 401(k) plans may successfully improve investment performance, only to find out that the plan sponsor is totally unsatisfied. In this guest contribution, Jeffrey Briskin relates a recent conversation that made that painfully obvious, and a recent study by his company confirmed that such outcomes occur all too often.

2010-08-09 The Fed Policy Outlook - Further Efforts? by Scott Brown of Raymond James Equity Research

The economic data of recent weeks has confirmed that the recovery has hit a soft patch. Overall growth still appears to be positive, but the pace has slowed. Downside risks to growth have increased. Meanwhile, the Fed has spent much of the last several months working on its endgame. One part of that, reducing its holdings of mortgage-backed securities, could be accomplished gradually over time, by simply letting securities mature. The Fed may decide this week to use these proceeds to buy more mortgage-backed securities. This would be a small step, but it would be symbolically important.

2010-08-03 Woody Brock: How to Achieve Growth without 'Bad' Deficits by Robert Huebscher (Article)

Of all the challenges facing our nation, none is as daunting as trying to achieve economic growth and reduce unemployment without adding layers of debt to our already bloated deficit. Legislators and economists have debated the merits of stimulus measures, changes in tax rates, and monetary policies, but they are no closer to a consensus than they were at the onset of the financial crisis. H. 'Woody' Brock, however, says a genuine solution is possible.

2010-08-03 'Fiduciary': Much Ado about Nothing! by John Lohr (Article)

The most overused, misused and misunderstood word in the investment industry is 'fiduciary.' Independent advisors, trade organizations and self-styled 'expert' groups have called for stockbrokers to adopt the 'fiduciary' standard to achieve a grand leveling of the playing field for those who provide investment advice. This is nothing more than unnecessary marketing hype, says securities lawyer John Lohr in this guest contribution.

2010-08-03 Ten Retirement Lessons from the Smartest People I Know by Paul Merriman (Article)

Since the mid-1960s, Paul Merriman has helped people manage their money and their lives before and during retirement. He has seen the good, the bad and the downright ugly, and in this guest contribution he shares 10 retirement lessons from the smartest people he knows.

2010-08-03 Fear and Trembling Marked the Year's First Six Months by Whitney George of The Royce Funds

In roughly two years, we have moved from a market collapse to a market malaise driven by heightened fears concerning Greek debt. A slow-growth economy could lead investors to focus on two areas - high-quality companies and fast-growing companies. Any business that looks to be capable of swimming ahead of the pace of the economy as a whole is going to be in high demand, and this could benefit small-caps that boast strong balance sheets, high returns on invested capital and the ability to generate free cash flow.

2010-08-02 Growing Federal Debt Will Cause Major Challenges in the Years Ahead by Team of Litman Gregory

A combination of sharply declining tax revenues and a surge in stimulus and bailout spending, both stemming from the financial crisis, caused the federal budget deficit to soar to almost 10 percent in 2009. Total debt to GDP ratios are climbing sharply, and could pass 90 percent by next year. The growth track of entitlement programs has led many to conclude that growing federal debt levels are unsustainable in the long term. Additionally, the Greek debt crisis could trigger increasing awareness of sovereign default risk with investors demanding higher rates for owning government debt.

2010-08-02 Valuing the S&P 500 Using Forward Operating Earnings by John P. Hussman of Hussman Funds

It is impossible to properly estimate long-term cash flows based on a single year of earnings. It is also impossible to properly value the stock market based on a single year of earnings. If you are not looking at a 'valuation' methodology accompanied by long-term, decade-by-decade evidence showing that the valuation method is actually correlated with subsequent market returns (particularly over a horizon of say, 7-10 years), then you are not looking at the sound valuation work of an investment professional.

2010-08-02 The Bubble In Bonds vs. Cheap Stocks by Charles Lieberman of Advisors Capital Management

It is disputed in a few corners, but more analysts and strategists view bonds as severely overvalued and stocks as symmetrically cheap. Advisors Capital Management shares this judgment and points to assorted different ways to reach this conclusion. Investors should be trying to inoculate their bonds holdings from losing value at some point and taking advantage of the upside potential in equities. The 'lost decade' in stocks could easily be followed by a lost decade in bonds, while stocks recover.

2010-07-30 ProVise Bullets by Ray Ferrara of ProVise Management Group

The two most important aspects of the financial reform bill: (1) Congress told the SEC to come up with rules for a common version for a standard of care when providing personalized investment advice to individuals; making everyone (financial planners, stockbrokers, insurance agents, etc.) who provide these types of services do so with a fiduciary standard of care; (2) a mandate from Congress to the GAO to do a six month study about the regulation of financial planning as a distinct business. Recent data on retirement readiness is summarized and several other topics are covered.

2010-07-30 Core|Satellite Investing with First Eagle Funds by Team of First Eagle Funds

Many practitioners of core/satellite investing use the core of their clients’ portfolios to generate market-like returns with market-level risk exposure, or beta, and use satellite investments to produce excess returns, or alpha. Within this framework, passive investment vehicles — index funds and ETFs — have become standard core investments. First Eagle questions this approach, and believes an actively managed global portfolio should be the core.

2010-07-29 Absolute Strategies Fund Q210 Portfolio Commentary by Jay Compson of Absolute Investment Advisors

If deleveraging trends persist and embed themselves into the economy, markets will need to adjust to the reality that the potential for deflation is a real risk. Labor, real estate, and state and local governments are structurally challenged as a result of weak consumer activity and limited credit availability. Heightened volatility in the credit markets is likely given the re-pricing of troubled sovereign debt and the potential for those concerns to catch up with the 'Amend, Extend & Pretend' refinancing of corporate debt.

2010-07-28 Private Eye by Bill Gross of PIMCO

The economy's New Normal of deleveraging, reregulation and deglobalization will neither be aided nor abetted by a slower-growing population, or by cyclical policy errors that thrust Keynesian consumption remedies on a declining consumer base. Current deficit spending that seeks to maintain an artificially high percentage of consumer spending can be compared to flushing money down an economic toilet. It would be far better to create and mimic other government industrial policies aimed at infrastructure, clean energy, more relevant education and less costly health care services.

2010-07-28 Grey Owl Capital Management's Q2 Letter by Team of Grey Owl Capital Management

The equity and fixed income markets are still modestly overvalued. In addition, the economic recovery may only have been a mirage that the slow dwindling of the government stimulus will reveal. The majority of Grey Owl's equity portfolio is made up of 'high quality' companies – those with consistent earnings growth and low financial leverage. Japanese-style deflation and 1970s-style stagflation are both possible given the slow private sector growth, increasing government regulations, growing government debt loads, and expansive monetary policy.

2010-07-27 Rediscovering Your Listening Skills by Justin Locke (Article)

Listening may be the most critical part of your job, both for acquiring new clients and for maintaining current relationships. Everyone's listening abilities are unique, but many common fears and anxieties can interfere with your innate listening skills. In this guest contribution, Justin Locke identifies a few common problems and suggestions for how to work around them.

2010-07-27 Stress Test Zombies: Reverting to the Global Mean by Christopher Whalen of Institutional Risk Analyst

Some of the big American zombie banks - Citigroup, JPMorgan Chase and Bank of America in particular - are seeing positive results from the Fed's net interest margin drip. Many, however, are reverting back to the global mean for performance due to the zero-interest rate policy maintained by the central bank. In the end, the carry trade enhancement allowed by low interest rates amounts to a subsidy for credit losses by banks that comes out of the pockets of savers.

2010-07-27 America, the Odd Man Out by John Browne of Euro Pacific Capital

At long last, a good portion of mainstream economists now concede that a 'double-dip' recession is in the cards for the United States. To head off the pain, 16 top economists sent an open letter to the President urging him to 'stimulate' the economy with a massive new round of government spending. We feel this is a recipe for turning a recession into a depression.

2010-07-23 Postcard From Behind the Wheel in China by Kenichi Amaki of Matthews Asia

After experiencing swift growth in 2009, China has become the world's largest auto market in terms of unit sales. With approximately 80 manufacturers now competing for a share of this immense market, China's car industry is also quickly becoming the world's most competitive. The argument for investing in this market is compelling. Not only is penetration so far still low, and thus full of potential, the industry is growing faster than China’s overall GDP. This is not to say, however, that the growth will be in a straight line

2010-07-22 California Municipal Markets - Confusion, Misconceptions and Reality by Jon Davis of HighMark Capital Management

There have been dramatic changes to the California municipal bond market over the last several years, creating new challenges for today's investor. Current state budgetary stress in California and across the U.S. may lead to a greater likelihood of possible ratings downgrades or defaults. Meanwhile, pension and entitlement obligation shortfalls will add additional pressure to future budgets. These trends have made fundamental credit analysis, valuation analysis, and a diversified portfolio vital.

2010-07-22 It's Greek to Me by Howard Marks of Oaktree Capital

The current positives for investors include moderate valuations, rising corporate earnings and the likelihood we're already in a recovery. On the other hand, consumers are still too traumatized to resume spending strongly. Conservatism, austerity and increased savings are good for individuals but bad for a stagnant overall economy. Anyone who invests today in a pro-risk fashion out of belief in the recovery must be confident he'll be agile enough to take profits before the long-term realities set in.

2010-07-21 Equity Investment Outlook by Team of Osterweis Capital Management

The economy is not headed towards a serious double-dip recession, but rather towards a slowdown or moderation of its growth rate. That is, the economy has been improving, just not as fast as investors envisioned earlier this year. Osterweis is therefore staying the course, focusing on solid companies with strong or improving balance sheets and a history of stable or growing dividends. They are also keeping some cash as a buffer against further erosion in the overall market and as a buying reserve to use when compelling bargains emerge.

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.

2010-07-20 Beyond The Stars: Improving Active Fund Selection Based On Manager Skill by Michael Ervolini (Article)

After a brief review of known shortcomings of common fund evaluation methodologies, Mike Ervolini introduces a new approach based upon analytics that his firm has developed. Rather than relying on non-predictive metrics such as past performance, his approach looks at investment processes in relation to deeper skills that managers possess regarding buying, selling, and position-sizing.

2010-07-20 The Opportunity in Build America Bonds by Jeff Westergaard (Article)

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.

2010-07-19 Deflation: Should the Fed be Buying Gold? Hugo Salinas-Price on the Silver Peso by Christopher Whalen of Institutional Risk Analyst

This piece features a commentary from Hugo Salinas-Price, founder of Mexican retailer Grupo Elektra, on his proposal for the introduction of a silver-backed peso. Legislation to that effect now is under serious consideration before the Mexican Congress. Salinas describes the Mexican peso as a 'derivative' of the dollar, a troubling prospect since the dollar itself is a derivative of nothing, at best a mere representation of a unit of work. Christopher Whalen also discusses the U.S. financial reform bill, and the latest Federal Open Market Committee meeting.

2010-07-19 The Inflation Debate Rages On by Chris Maxey of Fortigent

Last week's reports on the Consumer Price Index and the Producer Price Index only served to confirm what everyone already knows – any discussion of budding inflationary pressure is naïve at the moment. It is too early to write off a full-blown deflationary episode. In addition to weakness at the consumer and producer levels, the rate at which money changes hands (a common means of inflation) is near its slowest pace in years. Other problems facing the U.S. are a rising personal savings rate and ever-slower demand for commercial loans.

2010-07-16 Value in the Agency Mortgage Market: Modern Carry by Mitchell A. Flack of TCW Asset Management

'The road to hell is paved with carry.' We investors find ourselves facing a most unusual mortgage-backed securities market. Mortgage prices are now at or near all-time high dollar prices. And with mortgage rates also near all-time lows, are we not at the precipice of the mother of all refinance waves? Will negative convexity hit us like a Mack truck and mortgage investors suffer poor returns? The simple answer is a resounding no. While we still are walking down that proverbial 'road paved with carry,' the nature of that carry has changed.

2010-07-14 Demographics, Destiny and Equity Markets by George Magnus of Boeckh Investment Letter

This letter contains a special feature by George Magnus, senior economic advisor at UBS Investment Bank, on the coming negative change in global demographics. The world population is aging rapidly and the proportion of retired to working people is rising sharply. While these are slow-moving forces compared to, say, banking crises, they are powerful and inexorable trends that cannot be 'fixed.' Rather, we, and governments, must adjust to them, and investors must pay attention to their complex investment implications.

2010-07-14 Exports and the Economy by Milton Ezrati of Lord Abbett

Double-dip fears are on the minds of investors, and Europe’s troubles feature large. Concerns in this particular area run along three lines: first, Europe will fly apart and precipitate another financial collapse; second, stagnation in Europe will stall world growth; and third, dollar appreciation will weaken the American economy by choking off exports. Each concern is legitimate, and the risks real. But especially on the last two, the American economy is much less vulnerable than people suggest.

2010-07-14 The Battle for Investment Survival and Our Five-Year Forecast by Kendall J. Anderson of Anderson Griggs

The S&P 500 has gained 52 percent since the March 2009 lows. Although this seems extraordinary, the current recovery is still slightly less than average compared to historical bear markets. An average recovery would have the markets appreciate more than 25 percent from this level over the next two years. Meanwhile, the potential return on equities over the next five years is just slightly above the normal returns for U.S. stock markets. All of this, combined with low interest rates, suggests that it would seem logical to remain in common stocks.

2010-07-14 The Fundamental Trendline is Still Down by David A. Rosenberg of Gluskin Sheff

What we are grappling with is this: If the consensus earnings forecast is 'the market,' then the S&P 500 is de facto pricing in $96 of operating earnings next year - a new peak. That is a 35 percent increase from here, and it is extremely difficult to see profits soaring that much at a time when margins are already back at cycle highs and with the prospect of slowing nominal GDP growth. It just does not add up.

2010-07-13 A Marketing Guide for RIAs: Part 2 – Craft Your Message by Kristen Luke (Article)

As part of her series on low-budget marketing for startup RIA firms, Kristen Luke discusses how to craft your message.

2010-07-13 A Marketing Guide for RIAs: Part 3 – Build a Website by Kristen Luke (Article)

Kristen Luke discusses the steps to take to build your website.

2010-07-13 Total Return or Total Disappointment? by Doug Short of Doug Short

Doug Short provides charts of the S&P Composite since 1929 adjusted for real price and real total return. As the charts show, for the past 21 months, the secular bear market that began in 2000 has substantially underperformed the equivalent timeframe during the Great Depression.

2010-07-13 Country Risk: Building a New American Political Economy by Christopher Whalen of Institutional Risk Analyst

In a column in yesterday's New York Times, economist Paul Krugman took Fed Chairman Ben Bernanke to task for not doing more to combat deflation. And what should the Fed do according to Krugman? Print more money. More quantitative easing via purchases of private debt is the urgent recommendation of this leading American economist. While Krugman criticizes Ben Bernanke for being a Republican, however, it is worth noting that Krugman himself is not quite the socialist that he pretends to be. In fact, Krugman was once considered to be in the same political party as President Ronald Reagan.

2010-07-12 Keeping a Level Head by Jonathan A. Shapiro of Kovitz Investment Group

A downward bias toward stocks was evident throughout the quarter. This was a marked, but not unexpected, change from the seemingly straight up rise stock prices made from the year earlier (March 2009) lows. The potential for global fallout from Europe's fiscal crisis and its impact on the worldwide economic recovery served as the largest drag on the equities markets during the quarter. Other negatives included inconsistent readings in the U.S. on job growth, consumer-related sales and housing.

2010-07-12 In Search of Your Sleeping Point by Cliff W. Draughn of Excelsia Investment Advisors

Asset allocation is an art involving quantitative analysis of financial markets combined with common sense. A buy-and-hold strategy is a dead decision during markets such as these. We have had the worst May in stocks since 1940. No credit still equals no jobs, China is destined for turmoil as its real estate