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

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2014-04-18 Quarterly Review and Outlook by Van Hoisington, Lacy Hunt of Hoisington Investment Management

After examining much of the latest scholarly research, and conducting in house research on the link between household wealth and spending, we found the wealth effect to be much weaker than the FOMC presumes. In fact, it is difficult to document any consistent impact with most of the research pointing to a spending increase of only one cent per one dollar rise in wealth at best. Some studies even indicate that the wealth effect is only an interesting theory and cannot be observed in practice.

2014-04-16 An Uncomfortable Discussion by Scott Brown of Raymond James

Income inequality is a touchy subject. Its hard to have a polite conversation, but like it or not, we are going to have a discussion this year. I will not take a position here (this is largely a political question). Rather, I will try to illustrate what the data say and to present the different points of view.

2014-04-15 5 Things You Need to Know About the Selloff by Kristina Hooper of Allianz Global Investors

Kristina Hooper puts the sharp pullback in the stock market in perspective for investors who may be wondering about a correction.

2014-04-15 2016 (Part 2, The Political Situation) by Bill O'Grady of Confluence Investment Management

As we survey the political landscape for 2016, the next presidential election could be historic. In this report, we will examine the domestic political situation using four different archetypes to describe the U.S. political landscape. We will then offer a history of the interaction between these groups and address the likelihood of various policy outcomes based on the relative strengths and weaknesses of the four political groups. Unlike our usual reports, we will not conclude with market ramifications but instead discuss the transition to Part 3 of this analysis.

2014-04-10 "I Will Gladly Pay You Tuesday for a Hamburger Today" by Robert Mark of Castle Investment Management

In October of 2013, Robert Shiller won the Nobel Prize in economics for his research on spotting market bubbles. Shiller, an economist and professor at Yale University who accurately predicted the housing bubble, is a pioneer of behavioral finance, or the understanding of how psychology causes us to act irrationally with our money.

2014-04-08 Overcoming Fear and Loathing in Lost Wages by Kristina Hooper of Allianz Global Investors

Personal income, not job growth, may have drawn the ire of investors as stocks sold off on Friday. But look for the market to rebound on continued economic progress and soothing remarks from the Fed, writes Kristina Hooper.

2014-04-08 On Cruise Control by Richard Michaud of New Frontier Advisors

The first quarter was a relatively calm start to the year. The Dow was down 0.7%, the S&P up 1.3%, and the NASDAQ up 0.5%. International equities were nearly flat as well with the MSCI ACWI ex US down 0.1%. European equities were up 1.5% and Pacific equities were moderately negative, with the MSCI Pacific down 3.3% for the quarter. Emerging market equity indices were down 0.8% for the quarter, with China down 6.7%.

2014-04-05 Investing for Retirement: The Defined Contribution Challenge by Ben Inker and Martin Tarlie of GMO

Target date funds are rapidly becoming the workhorse for DC plans. These funds have grown substantially in recent years, partly as a result of automatic enrollment made possible by the Pension Protection Act of 2006. By and large, current target date funds resemble the old investment advisor adage that stock weight should be about 110 minus a person’s age. While this satisfies the common-sense intuition that, all things being equal, weight in stocks should go down as a person ages, there are a number of problems with this approach. In this paper we focus on two in particular.

2014-04-05 The Lions in the Grass, Revisited by John Mauldin of Millennium Wave Advisors

Today we explore a few things we can see and then try to foresee a few things that are not quite so obvious. The simple premise is that it is not the lions we can see lounging in plain view that are the most insidious threat, but rather that in trying to avoid those we may stumble upon lions hidden in the grass.

2014-04-03 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Last week saw a correction in many of the high-flying groups, but overall another quiet week with investors unsure of the economic outlook.

2014-04-01 Investing is Hard by David Wismer of Flexible Plan Investments

Or better put, successful investing is hard. So says author, speaker, and CIO Robert Seawright of Madison Avenue Securities in a recent series of Investment Belief columns on his award-winning blog, Above the Market.

2014-03-31 Will Jobs Benefit From a Spring Thaw? by Kristina Hooper of Allianz Global Investors

The upcoming jobs report, a bellwether for the health of the US economy, could reveal that the harsh winter has created a coiled spring in the labor market, writes Kristina Hooper.

2014-03-29 When Inequality Isn\'t by John Mauldin of Millennium Wave Advisors

We’ve discovered so far that income inequality is a fact; however, income mobility has remained roughly the same over the last 40 years. That is, a person’s chances of rising from a lower stratum of wealth distribution to a higher stratum is approximately the same as it was in 1975.

2014-03-24 Market Had Its Way With Yellens Words by Kristina Hooper of Allianz Global Investors

Fed Chair Janet Yellen got a taste for how sensitive investors are to her public remarks last week, but the kneejerk response was probably an overreaction, writes Kristina Hooper.

2014-03-22 China\'s Minsky Moment? by John Mauldin of Millennium Wave Advisors

In speeches and presentations since the end of last year, I have been saying that I think the biggest macro problem in the world today is China. China has run up a huge debt, and the payments are coming due. They seem to be proactive, but will it be enough? How much risk do they pose for the global system?

2014-03-20 Exploration & Production: An Evolving Business Model by Suken Patel of Diamond Hill Investments

The successful development of shale crude oil and gas has led to one of the most rapid and unexpected increases in production in the history of the energy sector. This remarkable turn of events is in complete contrast to the previous popular belief that the country was running out of both resources.

2014-03-19 A Preference for Discomfort by Chris Brightman of Research Affiliates

Is the stock market inefficient or do investors have varying preferences? How does behavior affect wealth accumulation? Unpopular choices can result in improved outcomes....

2014-03-19 A Kids Market? by Jeffrey Saut of Raymond James

The Great Winfield goes on to say, in Adam Smiths classic book from 1967, The strength of my kids is that theyre too young to remember anything bad, and they are making so much money they feel invincible. He rented kids with the idea that one day the music will stop (it partially did in 1969-1970 and completely did in 1973-1974) and all of them will be broke but one.

2014-03-18 Can the Fed Fend Off the Ides of March? by Kristina Hooper of Allianz Global Investors

Mid-March hasnt been associated with much good luck in Europe historically. And with Ukraine mired in conflict, this years no different. But investors should resist the urge to react to geopolitical uncertainty and expect steady guidance from the Fed.

2014-03-16 Inequality and Opportunity by John Mauldin of Millennium Wave Advisors

Today we will continue our thinking about income inequality, and I will respond to some of your letters, as they make good launching points for further discussion of the topic.

2014-03-13 Beware of Earnings Gimmicks by Jason Wang of Columbia Management

Since the global financial crisis, economic recovery worldwide has been slow. Over the last three years, annual gross domestic product (GDP) growth in the U.S. was limited to 2.1%, significantly below its long-term average of 3.3%. In this low growth environment, for a majority of companies, churning out high earnings-per-share (EPS) growth rates, either through top-line growth or margin expansion, has become increasingly more difficult.

2014-03-12 Reflections on Ukraine by Bill O'Grady of Confluence Investment Management

Over the past five weeks there have been a number of significant events that have occurred in Ukraine. A president has fled, a revolutionary government is forming and Russia has taken de facto control over the Crimea. The events themselves are momentous but the broader effects are significant as well. In this report, we will offer three reflectionsPutins Gambit, The U.S. Adrift and A Dangerous New World. Although any of these could be a topic in themselves, we will shorten these issues to offer a single journey through the current crisis. As always, we will conclude with market ramifications

2014-03-11 Thirsty for Income? Try Dividend Growth by Frank Caruso of AllianceBernstein

Chasing yield has become a challenging mission for investors in recent years. As yields collapsed in fixed income, investors flocked to bond-like substitutes such as high dividend-yielding stocks. Now that these stocks have become a bit pricey, we think companies with strong dividend-growth potential offer a better way to source equity income.

2014-03-10 With Fed in Charge, 5-Year Bull Run Poised to Continue by Kristina Hooper of Allianz Global Investors

The Federal Reserves loose monetary policy and gradual improvement in the economy are two big reasons the stock market can keep moving higher, says Kristina Hooper. Will it be reflected in this weeks consumer sentiment and spending data?

2014-03-10 How Much Slack Is in the U.S. Economy? The Inflation Jury Should Decide by Jeremie Banet of PIMCO

The unemployment rate may not be a reliable indicator of output slack in the U.S. economy. Well know (with a lag) if the economy has reached the end of the cyclical downturn when inflation picks up. The Fed will have to choose between risking a hawkish mistake or being behind the curve, waiting to see inflation actually increase. We expect it will choose the latter.

2014-03-09 The Problem with Keynesianism by John Mauldin of Millennium Wave Advisors

Keynes himself would appreciate the irony that he has become the defunct economist under whose influence the academic and bureaucratic classes now toil, slaves to what has become as much a religious belief system as it is an economic theory. Men and women who display an appropriate amount of skepticism on all manner of other topics indiscriminately funnel a wide assortment of facts and data through the filter of Keynesianism without ever questioning its basic assumptions. And then some of them go on to prescribe government policies that have profound effects upon the citizens of their nations.

2014-03-05 2014: A Transition Year - Back to Fundamentals by Lorenzo Pagani of PIMCO

The past several years have seen multiple regime changes in financial markets in Europe, each dominated by different factors and requiring a distinct approach to fixed income investing. As spreads tighten to pre-2008 levels, it is now time to ask whether a shift in investment style is due. Macroeconomic developments and inflation expectations are likely to be key determining factors in whether 2014 will be a good year for European bond investors.

2014-03-04 What the Jobs Report Will Tell Us-And What It Won't by Kristina Hooper of Allianz Global Investors

Kristina Hooper puts the soon-to-be-released February employment report in context, including what it means for Fed policy, consumer confidence and stocks.

2014-03-01 Black Swans and Endogenous Uncertainty by John Mauldin of Millennium Wave Advisors

John is in Florida and feeling a bit under the weather, so this week we’re bringing back one of his most popular letters, from December 2007. In the letter he discusses the work of Professor Graciela Chichilnisky of Columbia University, one of whose key insights is that the greater the number of connections within an economic network, the more the system is at risk. Given the current macroeconomic environment, it is important to remind ourselves of how complacent we were back in 2007 and how it all fell apart so quickly, just as John outlined in this rather prescient piece.

2014-02-26 Is It Time for the Fed to Level With Markets? by Richard Clarida of PIMCO

If unemployment continues to diminish and quantitative easing tapers to its expected conclusion, the Federal Reserve will likely feel compelled if not by consensus, then by markets to refine the forward guidance that it provides to the public today. With inflation running below 2%, the Fed may consider a price level target, together with more holistic measures of the state of the labor market, as a replacement for the unemployment threshold in offering guidance on the future pace of policy normalization.

2014-02-26 What Columbus Missed: Royce Rediscovers India by David Nadel of The Royce Funds

In 1492, Italian explorer Christopher Columbus set sail to discover India. He missed his mark, however, landing in America instead. The rest, as they say, is history-with the exception that more than 500 years later India is still worthy of discovery for many Western investors.

2014-02-26 A CAPE Crusader by James Montier of GMO

In a new white paper today, James Montier of GMO's asset allocation team reviews a range of valuation measures to assess current U.S. equity market valuations. He concludes: "We continue to believe that the weight of valuation evidence suggests the S&P 500 is significantly overvalued at its current levels."

2014-02-25 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

A quiet four days for stocks last week. Between the holiday, school vacations and winter weather; there just were not many catalysts for the stock marker.

2014-02-23 The Worst Ten-Letter Word by John Mauldin of Mauldin Economics

A new word is achieving ubiquity. The word has always been with us and at times has been a beacon to attract the friends of liberty and opportunity. But now Im afraid it is beginning to be used as a justification for social and economic policies that will limit the expansion of both liberty and opportunity. The word? Inequality.

2014-02-20 Meeting an Economic Need by William Smead of Smead Capital Management

At heart, Smead Capital Management is a stock picking organization. On top of our bottoms-up stock picking discipline, we are driven by our belief and respect for the laws of economics. One example of this is the subject of demographics. As long-duration investors, we want to understand where the aging process is taking demand in major product categories and how it will shape spending and production in the US. In other words, what economic needs will grow at the margin and who out there among companies that fit our other seven criteria can meet that marginal demand.

2014-02-20 The Fed: Yellen's Tapering Tightrope by Milton Ezrati of Lord Abbett

In reducing quantitative easing, the Federal Reserve chairwoman faces a big challenge: preventing asset bubbles at home without pressuring developing economies.

2014-02-15 The Economic Singularity by John Mauldin of Millennium Wave Advisors

Today, let’s think about central banks and liquidity traps and see if we agree that central bankers are driving the car from the back seat based upon a fundamentally flawed theory of how the world works. That theory helped produce the wreck that was the Great Recession and will have its fingerprints all over the next one.

2014-02-14 These Gold Charts Will Make Your Heart Beat Faster by Frank Holmes of U.S. Global Investors

So while gold may correct over the next several months as the metal enters its seasonally weak period of the year, this looks promising for gold investors.

2014-02-12 Grey Owl Capitals Third Quarter Letter by of Grey Owl Capital Management

2013 was a banner year for the US stock market. Despite equities meager fourteen-year record of accomplishment, investors, broadly speaking, are limited to short-term memory. Last years performance was enough to generate significant enthusiasm for stocks. We continue to believe, the current environment warrants a more balanced approach.

2014-02-11 Triple Witching Hour Proves Benign by Kristina Hooper of Allianz Global Investors

Markets yawned their way past two big reports and one key deadline last week, but investors are still fleeing stock funds overall. Its a strange brew that signals continued volatility ahead, says US Investment Strategist Kristina Hooper.

2014-02-09 A Most Dangerous Era by John Mauldin of Millennium Wave Advisors

This week we were confronted with a rather troubling appendix in the Congressional Budget Office (CBO) analysis of the Affordable Care Act, which suggests that the act will have a rather profound impact on employment patterns.

2014-02-07 What\'s the Game Changer for Gold? by Frank Holmes of U.S. Global Investors

What will break gold of its losing streak? Will inflation, which is a lagging indicator, be stronger than expected? In one of my most popular posts last year, I said that based on the jobs market, the limited housing recovery and regulations slowing down the flow of money, the Fed would have no choice but to start tapering and raising rates very gradually to keep stimulating the economy.

2014-02-06 So Cruel: Pullback Could Become Correction by Liz Ann Sonders of Charles Schwab

For now, the EM tail is wagging the dog, but the US remains the world’s big dog and should ultimately get through the latest turmoil. "January Barometer" has sent mixed signals for the remainder of the year historically. More technical and sentiment recovery is likely needed before a market recovery is likely.

2014-02-04 Groundhog Day for Investors by Kristina Hooper of Allianz Global Investors

As investors, we’re hard-wired to bow to our emotions, which cause us to repeat the same mistakes over and over. But one tough month for stocks shouldn’t scare us away, says Kristina Hooper. Here are four tips for investors following the January selloff.

2014-02-04 Investors Should Focus on Wages, Not Jobs by Chris Maxey, Ryan Davis of Fortigent

This Friday investors receive the first official labor market report of 2014. Following a highly disappointing jobs figure in December, many market participants hope to see a rebound - particularly one that will help justify the Fed’s decision last week to continue tapering its asset purchases.

2014-01-31 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

China’s shadow banking products are coming under the spotlight. Emerging markets: Be sure to differentiate. The fixed income sector’s surprising strength.

2014-01-30 Quarterly Review and Outlook - Fourth Quarter 2013 by Van Hoisington, Lacy Hunt of Hoisington Investment Management

In The Theory of Interest, Irving Fisher, who Nobel Laureate Milton Friedman called America’s greatest economist, created the Fisher equation, which states the nominal bond yield is equal to the real yield plus expected inflation. It serves as the pillar of macroeconomics and as the foundational relationship of the bond market. It has been reconfirmed many times by scholarly examination and by the sheer force of historical experience. Examining periods of both low and high inflation offers insight into how each variable in the Fisher equation affects the outcome.

2014-01-28 The TTIP and the TPP by Bill O'Grady of Confluence Investment Management

The Transatlantic Trade and Investment Partnership (TTIP) is a trade and investment treaty being negotiated between the European Union (EU) and the U.S. The Trans-Pacific Partnership (TPP) is a similar pact between the U.S. and various Pacific Rim nations. We will examine overall details of each, focusing on how they’re different from traditional trade agreements. From there, we will present an analysis of the controversy surrounding the proposals, followed by a look at the geopolitical aims and likelihood that these treaties will be enacted. We conclude with potential market ramificatio

2014-01-28 Winter Quarterly Commentary by John Prichard of Knightsbridge Asset Management

John Kenneth Galbraith was a force in the fields of politics and economics. He wrote into his 90s, with many of his 48 books covering economic history, a subject we find to be the oft forgotten friend of investors. His work made it clear that economics is not a hard science which can be reduced to simple trustworthy mathematical equations. Galbraith constantly challenged the "conventional wisdom", and in fact pioneered the term. Galbraith came to dismiss the then, and still now, common notion that individuals and markets always act rationally...

2014-01-22 Market Outlook by Scotty George of Alexander Capital

One of the most common themes we hear from political pundits and market observers these days is about either the demise or rise of the middle class, an amorphous, non-homogeneous group of people not quite rich but also not too poor. This class is often cited as the reason either to be for or against legislation, fiscal policy, social norms, or the price of a gallon of gasoline at the pump!

2014-01-22 4 Simple Truths About US Consumers by Kristina Hooper of Allianz Global Investors

The December employment report called into question the momentum of the jobs recovery, which has clear implications for consumers. While further clarity on jobs is needed, here are some key observations that help frame the consumer-sentiment discussion.

2014-01-22 Market Share: The Next Secular Investment Theme by Richard Bernstein of Richard Bernstein Advisors

It is well known that corporate profit margins are at record highs. US margings, developed market margings, and even emerging market margins are generally either at or close to record highs. A myopic focus on profit margins may miss an important investment consideration. Whereas most investors remain fearful of margin compression, we prefer to search for an investment theme that could emerge if margins do indeed compress. Accordingly, our investment focus has shifted toward themes based on companies who might gain market share.

2014-01-22 What to Expect in 2014 (And Beyond) by Jack Rivkin of Altegris

Each year, I take Alfred Lord Tennyson’s advice and "ring out the old, ring in the new" by creating a list of expectations about the markets. My list involves events that the average investor thinks have only a one-in-three-chance of happening, but which I believe have more than a 50% chance of occurring. If this approach sounds familiar, it should. It’s modeled after Byron Wien’s annual list of "surprises." Like his, my expectations are designed to provoke thought and discussion.

2014-01-18 Forecast 2014: \'Mark Twain!\' by John Mauldin of Millennium Wave Advisors

The surface of the market waters looks smooth, but the data above suggest caution as we proceed. Perhaps slowing the engine and taking more frequent soundings (or putting in closer stops!) might be in order. The cry should be "Mark twain!" Let’s steam ahead but take more frequent readings and know that a course correction may soon be necessary.

2014-01-17 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

The U.S. budget deal reduces policy uncertainty. The fiscal state of the states is better, but challenges remain. Meeting the new cast at the Fed.

2014-01-16 EM Sovereign Debt 2014: Neither Phoenix nor Failure by Paul DeNoon of AllianceBernstein

Emerging-market (EM) sovereign bonds were burned badly in 2013. Will they rise from the ashes in 2014? We believe some will and some won’t. The watchword for 2014 will be selectivity.

2014-01-14 Fed Taking a More Holistic View of Data by Kristina Hooper of Allianz Global Investors

Recently released FOMC minutes and jobs numbers show why the Fed wants to add a qualitative dimension to its forward guidance, writes Kristina Hooper: The unemployment rate can fall significantly, but it may be for the wrong reasons.

2014-01-12 Forecast 2014: The Killer Ds by John Mauldin of Millennium Wave Advisors

We’ll continue our three-part 2014 forecast series this week by looking at the significant economic macrotrends that have to be understood, as always, as the context for any short-term forecast. These are the forces that are going to inexorably shift and shape our portfolios and businesses. Each of the nine macrotrends I’ll mention deserves its own book (and I’ve written books about two of them and numerous letters on most of them), but we’ll pause to gaze briefly at each as we scan the horizon.

2014-01-09 The Price Action of Stocks Trumps Fundamentals by Robert Mark of Castle Investment Management

Perhaps the best argument that one can make for stocks is that many hold doubts about the continuing bull market. The reasons for these doubts are understandable, as the economic recovery has been anemic and growth has slowed significantly - likely leading to lower profits in the future. As a result, corporations have aggressively cut costs, increased productivity and preserved cash - pushing profit margins to historically high levels.

2014-01-08 Rehab World by Niall Ferguson of Project Syndicate

The late English chanteuse Amy Winehouse sang, "They tried to make me go to rehab, but I said ’No, no, no.’" Perhaps 2013 should be known as the year of Winehouse economics, with the singers being the world’s most important central banks, led by the Federal Reserve.

2014-01-07 More Jobs to Turn Up the Taper Dial - But Not Yet by Kristina Hooper of Allianz Global Investors

The job market is a focal point for the Fed and early signs point toward further progress in reducing unemployment. But don’t expect central bankers to speed up the tapering process until there’s more evidence of a turnaround, writes Kristina Hooper.

2014-01-07 A Healing Economy by Richard Michaud of New Frontier Advisors

The quarter continued the theme of the year, with U.S. equities continuing their dramatic performance. For the quarter, the Dow was up 9.6%, the S&P 9.9%, and the NASDAQ 10.7%. The year’s returns substantially exceeded last year"s "expert predictions" and much of this year’s punditry with the Dow up 26.5%, S&P up 29.6%, and NASDAQ up 38.3%.

2014-01-06 Foreign-Aid Follies by Kenneth Rogoff of Project Syndicate

The huge gap between the world’s richest and poorest countries remains one of the great moral dilemmas for the West. It also poses one of the toughest questions for development economics: Do we really know how to help countries overcome poverty?

2014-01-04 Forecast 2014: The Human Transformation Revolution by John Mauldin of Millennium Wave Advisors

It is that time of the year when we peer into our darkened crystal balls in hopes of seeing portents of the future in the shadowy mists. This year I see three distinct wisps of vapor coalescing in the coming years. Each deserves its own treatment, so this year the annual forecast issue will in fact be three separate weekly pieces.

2014-01-02 2013 in Review: Best of the \"Silver Bullet\" Awards by Jeff Miller of New Arc Investments

Regular readers of my "Weighing the Week Ahead" series know that I occasionally give the Silver Bullet Award. This recognizes writers who take it upon themselves to debunk dangerously misleading financial analysis. Their often thankless work reminds me of the Lone Ranger, whose adventures often upheld the notion that "...that all things change but truth, and that truth alone, lives on forever."

2013-12-31 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)

Great articles don’t always get the readership they deserve. We’ve posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.

2013-12-30 Predictions for the 2014 U.S. Financial Markets by Dawn Bennett of Bennett Group Financial Services

I’ve had so many phenomenal and diverse guests on my syndicated radio show, Financial Myth Busting, this year: Steve Forbes, Mort Zuckerman, David Stockman, Michael Belkin, David Walker, Dr. Ben Carson, Marc Faber, and even Ted Nugent. This is a very eclectic group, but they all have certain opinions in common. They all share the same concerns that the U.S. economic growth remains anemic and the continued economic instability and political deadlock along with business community’s mistrust of the U.S. government will continue to destroy America’s bottom line in the future.

2013-12-30 Plow Horse, Trotting by Brian Wesbury, Bob Stein of First Trust Advisors

What a year 2013 has been. Remember how it started, with the media hyperventilating over the "fiscal cliff" deal and spending sequester? The vast majority of economists, pundits and politicians believe in Keynesian economics. So, it’s not surprising that higher tax rates and spending cuts sent them into an intellectual and theoretical funk.

2013-12-27 Gary Shilling: Review and Forecast by John Mauldin of Millennium Wave Advisors

It’s that time of year again, when we begin to think of what the next one will bring. I will be doing my annual forecast issue next week, but my friend Gary Shilling has already done his and has graciously allowed me to use a shortened version of his letter as this week’s Thoughts from the Frontline. So without any further ado, let’s jump right to Gary’s look at where we are and where we’re going.

2013-12-26 Does the CAPE Still Work? by William Hester of Hussman Funds

We feel no particular obligation defend the CAPE ratio. It has a strong long-term relationship to subsequent 10-year market returns. And it’s only one of numerous valuation indicators that we use in our work - many which are considerably more reliable.

2013-12-26 Newsletter by Harold Evensky of Evensky & Katz

I admit it, I do occasionally pick on Money Magazine and other consumer financial publications, but as I’ve written in the past, for the most part, Money does a great job of educating consumers. Its story on Lessons from the Crash "Lehman Brothers’ collapse in September 2008 sent stocks on a terrifying ride. A year-by-year look back reveals five key takeaways you need to heed today" is an excellent example. Here are Money’s "Lessons."

2013-12-24 The Price America Pays for Global Leadership by Bob Veres (Article)

America’s political debates inevitably default to finding ways to contain our federal deficits, and our investment debates focus on whether we’re facing a secular bear or bull market - and how to maneuver within that environment. I had never imagined that these two debates could be related until I heard a presentation by Bill O’Grady, of Confluence Investment Management in St. Louis, MO at the Insider’s Forum conference in Dallas.

2013-12-24 How Much Should We Pay to Emit Carbon? by Michael Edesess (Article)

Many consider emissions of greenhouse gases to be what economists call a ’negative externality,’ meaning that they are likely to impose a cost on society through climate change and ocean acidification. The cost of that externality should, in principle, be borne by the emitters, who should pay a price to emit. But what should that price be?

2013-12-24 A Spoonful of Sugar by Peter Schiff of Euro Pacific Capital

The press has framed Ben Bernanke’s valedictory press conference last week in heroic terms. It’s as if a veteran quarterback engineered a stunning come-from-behind drive in his final game, and graciously bowed out of the game with the ball sitting on the opponent’s one-yard line. In reality, Bernanke has merely completed a five-yard pass from his own end zone, and has left Janet Yellen to come off the bench down by three touchdowns, with no credible deep threats, and very little time left on the clock.

2013-12-23 2013 Festivus Airing of Grievances - I\'ve Got a Lot of Problems with You People! by Paul Kasriel of Econtrarian, LLC

I often hear this from some of the cable news hosts and their guests. You see, according to these "economic theorists", when the unemployed and/or lower-income populace receive various types of funds from the government, they spend these funds, thus increasing nominal aggregate spending in the economy. What could be wrong with that in an economy that is operating below its potential?

2013-12-20 The Challenges of Year-End Forecasting by Jason Hsu of Research Affiliates

Many investors piled on the equity bandwagon this year, pushing prices up to dizzying heights. With current yields for U.S. equities at record lows, is it time to get off the bandwagon?

2013-12-19 The Great Experiment by Miguel Perez-Santalla of BullionVault

After 100 years of the US central bank, does it deserve another try...?

2013-12-17 Will 2014 Bring an End to Central Bank Intervention? by Chris Maxey, Ryan Davis of Fortigent

Nearing the final two weeks of the year, it is customary to look forward to the trends and events that will shape the coming year. A theme that may come to the fore in 2014 revolves around central bankers, specifically the diverging fates in various economies of the world.

2013-12-17 The Monster That Is Europe by John Mauldin of Millennium Wave Advisors

This week, Geert Wilders and his Party for Freedom in the Netherlands and Marine Le Pen of the Front National (FN) of France held a press conference in The Hague to announce that they will be cooperating in the elections for the European Parliament next spring and hope to form a new eurosceptic bloc.

2013-12-17 5 Takeaways from the Mini-Budget Deal by Kristina Hooper of Allianz Global Investors

The bi-partisan budget agreement inked last week has real implications for investors, including its impact on consumers, the stock market and the Fed, writes Kristina Hooper.

2013-12-16 The Power of the Platform: The Promise and Peril of Technology Investing by Ryan Jacob of Jacob Asset Management

Without question, technology’s rapid development during the past 20 years has played an incredibly powerful and largely positive role in furthering the progress and productivity of modern economies throughout the world. Technology’s track record as a profitable investment theme, however, is a bit cloudier.

2013-12-11 Muddling Through: The \'Realpolitik\' of the Eurozone Crisis by Andrew Bosomworth of PIMCO

The long-term cost of Europe’s economic recovery is likely to challenge social tolerance and political will to achieve a fully integrated fiscal and political union. Although able to exploit the untapped potential of European treaties, the soon-to-be-elected 8th European Parliament looks more likely to continue to muddle through. We see low medium-term risk for government and corporate bonds with maturities of up to three years, but caution may be required for securities with longer maturities and lower down in the capital structure.

2013-12-10 Best Consumed Below Zero? by Bill O'Grady, Kaisa Stucke of Confluence Investment Management

In this report, we will turn our attention to Denmark to study its decision to undertake the below-zero rate, the specifics of the situation that prompted it and the effects of the negative rate on financial conditions and the broader economy. We will then briefly look at the possibility of a below-zero rate policy for the ECB and, most importantly, the geopolitical ramifications of the decision by the world’s second largest currency block to ease into unknown consequences of negative rates to stimulate the economy.

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

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

2013-11-30 Arsonists Running the Fire Brigade by John Mauldin of Millennium Wave Advisors

In the old days, central banks raised or lowered interest rates if they wanted to tighten or loosen monetary policy. In a Code Red world everything is more difficult. Policies like ZIRP, QE, LSAPs, and currency wars are immensely more complicated. Knowing how much money to print and when to undo Code Red policies will require wisdom and foresight. Putting such policies into practice is easy, almost like squeezing toothpaste. But unwinding them will be like putting the toothpaste back in the tube.

2013-11-26 Letters to the Editor by Various (Article)

A reader responds to Bob Veres’ article, Why Deficits Don’t Matter, which appeared on October 29, and a reader responds to Robert Huebscher’s article, Reflections on a Week in Cuba, which appeared on November 12.

2013-11-26 QE: Not That Big of a Deal by Brian Wesbury, Bob Stein of First Trust Advisors

The most frequent question we get lately is "what happens to long-term interest rates when quantitative easing ends?" Many analysts argue that the Federal Reserve is buying and holding a huge share of Treasury debt and once QE ends other buyers will suddenly have to absorb more. This will cause interest rates to soar, bust the housing market, undermine stocks, and possibly cause a recession.

2013-11-26 Elections in Chile by Bill O'Grady of Confluence Investment Management

On November 17, Chileans went to the polls to vote on a new president and parliament. In this report, we offer short biographies of the two Chilean presidential candidates, focusing mostly on Michelle Bachelet. From there, we will provide a short history of Chile, primarily to highlight the tensions between the forces of liberalization and reaction. An examination of the Allende-Pinochet period will detail the factors that have affected Chile’s political structure over the past five decades. As always, we will conclude with market ramifications.

2013-11-26 For Whom the Nobel Tolls: Efficient Market or Irrational Exuberance? by Francois Sicart of Tocqueville Asset Management

In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at the work of two of the recent recipients of the Nobel Prize in Economic Science. While the work of Eugene Fama and Robert Shiller might at first seem to be in direct conflict, Sicart explores how simultaneously recognizing Fama’s "efficient market hypothesis" and Shiller’s work on investor psychology may be "less of a contradiction than meets the eye."

2013-11-25 An Open Letter to the FOMC: Recognizing the Valuation Bubble in Equities by John Hussman of Hussman Funds

The Fed has done enough, and perhaps dangerously more than enough. The prospect of dismal investment returns in equities is an outcome that is largely baked-in-the-cake. The only question is how much worse the outcomes will be as a result of Fed policy that has few economic mechanisms other than to encourage speculative behavior.

2013-11-24 Game of Thrones - European Style by John Mauldin of Millennium Wave Advisors

The Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion - like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.

2013-11-21 Two Nobel Laureates...Two Tales of Value by Vitali Kalesnik of Research Affiliates

How can you build a better value stock portfolio? The key is discerning whether the value premium stems from mispricing or risk.

2013-11-19 Asset Class Allocation and Portfolios: Critique and Complication by Adam Jared Apt (Article)

In Part 1 of this essay, I explained that for asset class allocation to become an investment practice, it required a foundation of theory. And Modern Portfolio Theory was that foundation. But today, most financial journalists and investment advisors who proffer advice centered on asset class allocation areif I may judge from their writingsoblivious of this. And why shouldn’t they be? Theory is abstract and difficult to apprehend.

2013-11-19 Where Will the Holiday Shopping Season Lead Us This Year? by Chris Maxey, Ryan Davis of Fortigent

The unofficial start to the holiday shopping season kicks off in a few short days. Economic uncertainty abounds, raising fears that consumers will pull back from spending, but some positive developments suggest consumers will be just fine.

2013-11-19 A Glimpse of a Yellen-Led Fed by Kristina Hooper of Allianz Global Investors

Kristina Hooper highlights some key takeaways from incoming Federal Reserve chair Janet Yellen’s testimony before the Senate last week, including when the Fed is likely to taper its bond-buying program.

2013-11-19 Ignoble Prizes and Appointments by Jeremy Grantham of GMO

Chief investment strategist Jeremy Grantham comments on this year’s Nobel Prize in economics and "the most laughable of all assumption-based theories, the Efficient Market Hypothesis"; candidates to succeed Chairman Bernanke at the Fed; the impact of commodity price rises and the housing bubble in the crash of 2008; and prospects for the U.S. equity market.

2013-11-19 France and the Iranian Negotiations by Bill O'Grady of Confluence Investment Management

Earlier this month, negotiations between Iran and the P5+1 failed to reach an agreement despite great hopes that one was near. In this report, we will examine the reasons behind French objections to a nuclear deal with Iran. We will begin with an examination of France’s relations with the Middle East, focusing on its relations with Israel. Using this history as a guide, we will analyze why the French scotched the potential agreement. A short discussion will follow of the impact of France’s objection on the evolution of U.S. policy with Iran. As always, we conclude with market ramif

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

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

2013-11-14 No Man is an Island by Mark Mobius of Franklin Templeton

When your territory spans hundreds of countries on just about every continent and time zone, the importance of teamwork cannot be underestimated. I am extremely fortunate to have the support of a tremendous team of currently 90 professionals in the Templeton Emerging Markets Group, including 52 analysts and portfolio managers, spanning 26 countries and speaking 24 languages. I couldn’t do what I do without them! For the past 25 years, I’ve had the pleasure of working with Tom Wu, whose research responsibilities include companies in Hong Kong and the Philippines, as well as the bank

2013-11-14 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Here in the United States, we had local and regional elections last Tuesday. Several of the ballot initiatives, and many of the candidates, addressed what has commonly been phrased as “the inequality gap”. To be sure, in an ideal world, everyone has access to, and participation in, the bounty that this country has to offer. From “sea to shining sea” we do have a plentitude of idea-makers and resources available.

2013-11-12 Beware of Financial Planning’s Misguided Rules-of-Thumb by Joe Tomlinson (Article)

Lacking better insights, financial planners cling to rules of thumb, such as allocating a percentage of assets to fixed income based on a client’s age. More recently, those rules have been institutionalized through products like target-date funds, which maintain a fixed glide path for all investors. But new research has led to the development of software products that allow advisors to easily improve on the suboptimal outcomes to which clients were previously destined.

2013-11-12 Currency Markets Show Signs of Reversal by Chris Maxey, Ryan Davis of Fortigent

A mixture of surprising economic data and changing central bank policy led to sharp moves in currency markets last week. This came after several gyrations in FX markets earlier this year. Looking forward, volatility is likely to remain, but many signs point towards a strengthening U.S. dollar.

2013-11-12 Let's Party Like it's 1978 by Bill OGrady, Kaisa Stucke of Confluence Investment Management

A twice yearly meeting of the Chinese government officials, formally known as the third plenary session of the 18th CPC Central Committee, started on Saturday and will end tomorrow. Chinese General Secretary Xi Jinping has indicated that this session could be as consequential as the plenary session in 1978 which introduced policies that set in motion the Chinese growth engine. We are going to take a closer look at the changes from the plenary session 35 years ago, the circumstances leading up to the session and how China changed following the meeting.

2013-11-10 What Would Yellen Do? by John Mauldin of Millennium Wave Advisors

In advance of this week’s confirmation hearings for Federal Reserve Board Chairperson-nominee Janet Yellen, let’s pretend we are prepping our favorite Banking Committee senator for his or her few questions. What would you like to know? In this week’s letter I offer a few questions of my own.

2013-11-08 U.S. Shale Oil: A Central Banker\'s Best Friend by Charles Wilson of Thornburg Investment Management

After nearly a decade of sustained high energy prices , U.S. oil and natural gas producers responded to the market’s call for supply with newly exploitable shale resources. The fresh supply helped reduce concerns about global spare production capacity and limited upward pressure on energy prices. Central bankers around the world were able to maintain highly accommodative monetary policies for prolonged periods as a result.

2013-11-08 China at a Crossroads by Anthony Chan of AllianceBernstein

Expectations are high that President Xi Jinping and Premier Li Keqiang, nearly one year into their likely 10-year reign, will unveil reform policies that will define China’s social and economic development over the next decade and beyond. After the proposals are made public, the new leaders must prove that they can implement substantial change without derailing the growth of the world’s second-largest economy.

2013-11-08 Equality of Opportunity by Michael Kayes of Willingdon Wealth Management

Countless statistics show that the gap between the rich and poor has widened considerably and continues to widen. To an extreme, an economics professor at George Mason recently published a book in which he predicts the population will be divided into two groups: those who are good at working with intelligent machines, and those who can be replaced by them. This is obviously a scary outcome, but are we focusing on the wrong thing?

2013-11-08 Should You Walk Away from a Fed that Prints Money? by Tad Rivelle of TCW Asset Management

Either the markets or the Fed itself will come to accept that financial repression is a “box canyon” whose only escape is by climbing out through higher rates and wider spreads on risk assets. Staying “risk on” requires the investor to underwrite the exacerbating risks inherent in an economy that is being given bad signals and is accumulating a menagerie of mispriced assets and bad loans. Yes, you should walk away from a Fed that prints money.

2013-11-06 Is Economics a Science? by Robert Shiller of Project Syndicate

Though economics presents its own methodological problems, the basic challenges facing researchers are not fundamentally different from those faced by researchers in other fields. As economics develops, it will broaden its methods and sources of evidence, the science will become stronger, and the charlatans will be exposed.

2013-11-05 Combating Climate Change - And Responding to Skeptics by Michael Edesess (Article)

The climate-change threat is real, even if it is only a matter of probabilities. What action we should take, and how action should be brought about, are knotty problems. Harvard Business School’s Business and Environment Initiative (BEI) says they can be attacked with a business approach.

2013-11-05 Letters to the Editor by Various (Article)

Several readers respond to Bob Veres’ article, Why Deficits Don’t Matter, which was published last week. A reader responds to Adam Apt’s article, Is Gold Overpriced?, which was published Oct. 15, and a reader responds to the commentary, Scrooge McDucks, by Bill Gross of PIMCO, which appeared Oct. 31.

2013-11-05 The Saudi Tribulation by Bill OGrady of Confluence Investment Management

In this report, we will discuss the basic history of U.S. and Saudi relations, focusing on the historical commonality of goals between the two nations. We will detail how the aims of the two nations have diverged since the Cold War ended and use this to examine America’s evolving plans for the Middle East. We will discuss how the evolution of U.S. policy is affecting Saudi Arabia and the pressures these changes are bringing to the kingdom. As always, we will conclude with market ramifications.

2013-11-04 Steve Jobs Didn\'t Give a *!@% About the Debt Ceiling by Jeffrey Bronchick of Cove Street Capital

A quick nod to Bloomberg columnist Caroline Baum from whom we lifted our title. Anything else you might have been (or will be) subjected to on the subject of how the government operates pales in materiality to the headline. And as miserable as our predicament seems to anyone over the age of 13, it really and truly is old and increasingly dull news. To wit, I present the following, highly curated list of quotes-please note the timeline.

2013-11-04 Leash the Dogma by John Hussman of Hussman Funds

It’s fascinating to hear central bankers talk about the economy, because in the span of a few seconds they can say so many things that simply aren’t supported by the evidence. For anyone planning to watch the confirmation hearings for the next Fed Chair, the evidence below is provided as something of a leash to restrain the attacking dogma.

2013-11-02 Bubbles, Bubbles Everywhere by John Mauldin of Mauldin Economics

The froth and foam on markets of all shapes and sizes all over the world. It is an exhilarating feeling, and the pundits who populate the media outlets are bubbling over with it. There is nothing like a rising market to help lift our mood. Unless of course, as Prof. Kindleberger famously cautioned, we are not participating in that rising market. Then we feel like losers. But what if the rising market is a bubble? Are we smart enough to ride and then step aside before it bursts? Research says we all think that we are, yet we rarely demonstrate the actual ability.

2013-11-01 Where Do Profits Go from Here? Up. Here's Why. by Joseph Tanious, Anthony Wile of J.P. Morgan Funds

After record-setting earnings in the first two quarters of 2013, the S&P 500 is on track to hit another historic high in profits for 3Q13. If this occurs, the first three quarters of this year will have been the most profitable ever in the 56-year history of the S&P 500. Future earnings growth through margin expansion seems unlikely, as an improving labor market and higher interest rates will most likely squeeze margins. However, stable revenue growth, share buybacks and the additional use of debt financing should support modest earnings gains in the year ahead.

2013-10-30 The Thermometer of the Stock Market by Bill Smead of Smead Capital Management

As long-duration owners of common stock, we believe it is the wealth created by the businesses which causes the owners to prosper. We have also been participants in the US stock market since 1980 and are very aware of big swings in enthusiasm for owning common stocks. So we thought it would be helpful to share our opinion on the current temperature of the market. To take the temperature of the market we need to examine the thermometer readings.

2013-10-29 Why Deficits Don’t Matter by Bob Veres (Article)

Stephanie Kelton, Associate Professor of Economics at the University of Missouri/Kansas City, believes that the root of our deficit problems can be found in a fundamental misunderstanding shared by Democrats, Republicans and mainstream voters alike about the government’s balance sheet. She argues, plausibly, that the whole idea that we should control the deficit at all is costing our nation trillions of dollars in lost output. The result is lost income, savings, wealth and prosperity.

2013-10-28 Crawling, Economic Impact of Stubbing Your Toe and Employment by Gregg Bienstock of Lumesis

I have to admit, I had a lot of trouble figuring out where to start this week -- unemployment from last week, post-shutdown observations, exports or sobering observations around expected growth of the US economy and expected implications. It was a Barron’s article, “Slowing to a Crawl” that pushed me to address the latter first. Why? Much of what the article focuses on hit very close to home the impact of demographics and economic data on our economies.

2013-10-28 Fear of Debt Spiral Misplaced by Brian Wesbury, Bob Stein of First Trust Advisors

Now that things have settled down in Washington DC, politicians are focusing on a “grand compromise” to fix the budget. Without reform, growth in entitlements will eventually push federal spending back to levels last seen in World War II.

2013-10-28 The Website is Fixable, Obamacare Isn't by Peter Schiff of Euro Pacific Capital

Since Obamacare made its debut, discussions have focused on Ted Cruz’ efforts to defund the law and the shockingly bad functionality of the Website itself. Fortunately for Obama, polling indicates that Senator Cruz has lost, at least for now, the battle for hearts and minds. The President has not been nearly so lucky on the technological front.

2013-10-25 Weekly Economic Commentary by Team of Northern Trust

The upcoming check-up of eurozone banks is long overdue. Quantitative easing is having little impact on U.S. bank lending. China needs to do more to stress consumption.

2013-10-25 Quarterly Review and Outlook by Van Hoisington, Lacy Hunt of Hoisington Investment Management

When an economy is excessively over-indebted and disinflationary factors have forced central banks to make overnight interest rates as close to zero as possible, central bank policy has repeatedly proved powerless to further move inflation or growth metrics. Four considerations suggest the Fed will continue to be unsuccessful in engineering stronger growth and higher inflation with their continuation of the current program of Large Scale Asset Purchases.

2013-10-24 Glory Days: Could They Come Back for US Equities? by Liz Ann Sonders of Charles Schwab

A "great rotation" may not be underway by individual investors; even amid record-breaking outflows from bond funds this summer. But fund flow data do show some shift in preferences and highlight the sensitivity of investors to any rise in longer-term interest rates. A more interesting place to look is at the fiduciary community; that has decidedly shifted its attention away from traditional equities (and fixed income) over the past decade.

2013-10-23 Can Kicked Down the Road Once Again... by Blaine Rollins of 361 Capital

Donkeys 1, Elephants 0, Congress -535. The can was kicked down the road once again. We would all like to think that Congress will avoid another last minute battle in early 2014, but unfortunately we can’t put it past the current list of non-negotiators. The only thing that is certain in the future is that it will be many election cycles before a member of Congress makes it into the World Series of U.S. Presidential ballots.

2013-10-23 Cirque du Ben by Liam Molloy, Charlie Mas of Galway Investment Strategy

The Cirque du Ben will soon be leaving town for good. Some have cheered while others have watched in horror waiting for the disaster, but all were treated to a high wire act unlike any other Fed chairman has ever performed. Fed chairmen are often defined by the consequences of the previous performer. Bernanke had a couple of tough acts to follow in Volcker and Greenspan. Volcker had to guide an economy out of stagflation while Greenspan presided over 9/11, two recessions, and a full market crash in 1987. By the end of his his show, Greenspan had an oversized influence on policy.

2013-10-22 Revisiting the Debate Over the DFA Research by Scott MacKillop (Article)

DFA’s supporters have elevated that firm’s investment philosophy to the level of religious doctrine. The pitch and fervor expressed in the recent debate over its research suggest that Michael Edesess sinned mightily by questioning the faith. However, an examination of DFA’s approach to investing suggests a more measured reaction: The firm’s approach is sound, but it falls short of the magic that its disciples impart to it.

2013-10-22 Venerated Voices by Various (Article)

Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has announced its Venerated Voices awards for articles published in Q3 2013.

2013-10-22 The Boys Are Back in Town by Jeffrey Saut of Raymond James

The boys are indeed back in town as Washington D.C. opened its doors for business as usual last week following a contentious debt ceiling debate and a 16-day shutdown of the government. This outcome had been anticipated in these letters for often-stated reasons, and just like when the ”fiscal cliff” was averted, I now expect the media to turn its focus to the next Armageddon.

2013-10-20 The Damage to the US Brand by John Mauldin of Millennium Wave Advisors

There is no doubt that the image what I will refer to in this letter as the "brand" of the United States has been damaged in the past month. But what are the actual costs? And what does it matter to the average citizen? Can the US recover its tarnished image and go on about business as usual? Is the recent dysfunction in Washington DC now behind us, or is it destined to become part of a bleaker landscape?

2013-10-18 Fall is in the Air by Christopher Singleton of Kanawha Capital Management

Autumn has arrived, and many creatures have been making dutiful preparations to survive the winter months. But not all are so inclined, particularly our political leaders. Indeed, along with crisper air temperatures and more vibrant colors, it would just not feel like fall without the annual Washington squabbles to fund the federal government and increase its borrowing authority.

2013-10-18 Weekly Economic Commentary by Christopher Molumphy of Northern Trust

Closing the books on the U.S. budget... for now; Do we need a debt ceiling?; Study of financial market function earns the Nobel Prize.

2013-10-15 Is Gold Overpriced? by Adam Jared Apt (Article)

New research, based on an econometric model of gold prices, has attempted to answer the question, “Is gold overpriced?”

2013-10-15 6 Truths About D.C.'s Debt Debacle by Kristina Hooper of Allianz Global Investors

Kristina Hooper highlights what every investor should know about the ongoing fiscal crisis in Washington and what to expect from Congress and the Fed.

2013-10-15 The Turmoil in Washington by Bill OGrady of Confluence Investment Management

At the time of this publication the budget situation has not been resolved, although it appears that both parties are backing away from the default abyss. However, given that these crises seem to come once or twice a year, it seemed appropriate to weigh in on the geopolitical impact of the intractable problems of American government.

2013-10-15 Equity Markets to Congress: “What, me worry?” by Sam Wardwell of Pioneer Investments

President Obama said he was willing to have discussions, though he said he wouldn’t engage in negotiations. (Comment: I guess it depends of what the meaning of "is" is.) So far, those discussions haven’t produced a deal, but at least they’ve started talking.

2013-10-12 These Could be the Most Lucrative Energy Plays by Frank Holmes of U.S. Global Investors

Sometimes the most attractive energy assets aren’t found in the ground. Rather, at times like today, they are listed on the stock exchange.

2013-10-12 Sometimes They Ring a Bell by John Mauldin of Millennium Wave Advisors

Three items have come across my screen in the past month that, taken together, truly do signal a major turning point in how energy is discovered, transported, and transformed. And while we’ll start with a story that most of us are somewhat aware of, there is an even larger transformation happening that I think argues against the negative research that has come out in the last few years about the reduced potential for growth in the world economy.

2013-10-08 Listen to the 10th Man by Kristina Hooper of Allianz Global Investors

There’s no shortage of short-term risks in today’s market or conventional wisdom on how they will play out. But prepping for the unexpected could limit the number of surprises and better insulate investors’ portfolios, writes Kristina Hooper.

2013-10-05 The Road to a New Medical Order by John Mauldin of Millennium Wave Advisors

I will aim to dwell simply on the economic ramifications of the implementation of the Affordable Care Act, as it exists today. We are changing the plumbing on 17.9% of the US GDP in profound ways. Many, if not most, of the changes are absolutely necessary.

2013-10-04 The Malfunctioning United States Government by Gene Goldman of Cetera Financial Group

Overall, we are entering a potentially volatile period for the financial markets. Increased uncertainty combined with below-trend economic growth will likely lead to sharp market fluctuations. To mitigate the risk of volatility, we remain committed to increased diversification. Within equities, we would begin reducing exposure to U.S. stocks and instead focus on better areas of opportunity international developed markets. Within fixed income, we would maintain a bias toward spread product, such as corporate bonds, which generally pay a higher yield compared to similar Treasuries.

2013-10-04 Introducing the Tortoise Economy by Sam Stewart of Wasatch Funds

All things considered, large U.S. companies that operate globally appear to be particularly attractive right now. Because many of these companies are generating significant portions of their sales outside the U.S., investors are effectively getting some international exposure with what I consider to be more-quantifiable risks.

2013-10-02 The Death Knell of Global Synchronized Trade by Bill Smead of Smead Capital Management

At Smead Capital Management, we believe the interest on September 18th in emerging markets, oil and gold are the last gasps of a dying trend. Our discipline demands that you must avoid popular investments and completely avoid investments attached to a perceived “new era.” We argue that the international investment markets reaction to Bernanke’s reprieve on September 18th is proof of a vision we have of the future.

2013-10-02 ProVise Bullets by Ray Ferrara of ProVise Management Group

Effective October 1st, the health exchanges are open for business and enrollment can occur over the next 90 days. It will be interesting to see just how many people feel compelled to sign up under the individual mandate. While the premiums are not inexpensive for most of the eligible people, many will receive tax credits to help offset the cost. Nonetheless, others will find it a significant burden to the budget, and there is great debate over just how this will affect the economy long-term.

2013-10-01 Bracing for a Beltway Bombshell by Kristina Hooper of Allianz Global Investors

With Washington mired in a fiscal gridlock, investors need to be prepared for short-term volatility. But buying on the dip and boosting exposure to risk assets can keep their long-term goals from getting jammed up, says Kristina Hooper.

2013-10-01 Money Can Buy Happiness by Justin Kermond (Article)

Extensive research has shown that the act of buying life experiences and giving money away can make people happier than buying material items does.

2013-10-01 The Key Succession Issues for an Advisory Practice by Bob Veres (Article)

Succession planning has moved to the top of the practice management priority list for tens of thousands of advisory firms. As the average age of founder/advisors creeps ever closer to traditional retirement age, the profession is asking itself a lot of hard questions about how to keep these businesses alive and take care of clients after the founder retires.

2013-09-30 October Plus Shutdowns And The Debt Ceiling Equals More Volatility by John Rothe of Riverbend Investment Management

Upcoming Congressional debates on the U.S. budget and debt ceiling may cause an increase in volatility in global markets over the next few weeks.

2013-09-27 3 Reasons the Labor Market Will Continue to Frustrate the Fed by Russ Koesterich of iShares Blog

The Fed’s decision to delay tapering is an implicit acknowledgment that the labor market is far from healed. Russ explains why the labor market is likely to continue to frustrate the Fed and gives two implications for investors.

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

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

2013-09-24 The U.S. Deficit Shrank, but Will It Come Back Bigger Than Ever? by Team of Knowledge@Wharton

The U.S. deficit has fallen to its lowest level since 2008. Experts weigh in on how this will affect upcoming budget negotiations.

2013-09-24 Has the Fed Lost Its Credibility? by Chris Maxey, Ryan Davis of Fortigent

Any economics student will tell you central banks must achieve three things to effectively implement monetary policy: (1) independence; (2) credibility; and (3) transparency.For most of the Fed’s history, the first two characteristics were arguably well attained.However, the group was never well known for clarity into its thinking.

2013-09-23 Shake & Bake and Pension Woes, One Man's “Thoughts From the Frontline” by Gregg Bienstock of Lumesis

This week I take a departure from form. After a few brief words around the Fed’s Shake and Bake maneuver and a very quick look at Food Stamp data, I return you to the capable hands of John Mauldin to dive into the Pension woes. We are honored that Mr. Mauldin based his work on DIVER’s data and some of our tools. If you decide to follow John’s advice around your city, let us know if we can help. Be sure to check out the “Data Released this Week” as our data team was hard at work.

2013-09-23 Post Fed, Expect More Surprises by Kristina Hooper of Allianz Global Investors

Kristina Hooper says investors should brace for more big market swingsand some fiscal curveballsin the wake of the FOMC’s decision not to taper in September. But the economy is throwing some good surprises our way too.

2013-09-21 Rich City, Poor City by John Mauldin of Millennium Wave Advisors

This week we will conclude our look at pension plans for the nonce with a 30,000-foot overview of the states and then take a deeper dive into one city: mine. This will give you at least one version of how to do your own homework about your own hometown. But fair warning, depending on your locale, you may need medical help or significant quantities of an adult beverage after you finish your research.

2013-09-18 Smart Beta and the Pendulum of Mispricing by Vitali Kalesnik of Research Affiliates

The Research Affiliates approach to equity investment management is based upon the insight that stock prices are “noisy” and “mean-reverting.”

2013-09-18 The End Times for Strategic Ambiguity by Bill O'Grady of Confluence Investment Management

Strategic ambiguity is defined as a condition where various parties say something similar but believe something entirely different. A good example of this is U.S. and Chinese policy toward Taiwan. Both nations say Taiwan is part of China. The U.S. believes that Taiwan’s democratic government should become the model for the mainland, whereas China believes Taiwan should be part of its nation as it is currently structured. Because both nations say the same thing, the policy difference is not publicly obvious and thus not a problem, at least as long as the ambiguity lasts.

2013-09-17 The Debate on DFA’s Research by Various (Article)

We received many responses to Michael Edesess’ article, Why DFA’s New Research is Flawed, which appeared last week. We provide the responses from individuals who disagreed with Edesess’ findings, followed by Edesess’ response and then by responses in agreement with his findings.

2013-09-17 Tidbits Foreclosure, BK Signs and John Mauldin's “Unrealistic Expectations” by Gregg Bienstock of Lumesis

Some tidbits to start and then on to an outstanding guest commentary from the renowned John Mauldin. Our tidbits focus on Foreclosures and some insights around our review of some bankruptcy warning signs published by S&P Capital IQ. Our guest commentary, “Unrealistic Expectations” (I might have called it “Unrealistic Assumptions”), focuses on the daunting reality of underfunded pension plans.

2013-09-17 The Upside of Low Expectations by Kristina Hooper of Allianz Global Investors

The stock market has benefited from a pessimistic outlook recentlyand so could the consumer, writes Kristina Hooper.

2013-09-14 Nothing But Bad Choices by John Mauldin of Mauldin Economics

Crises in government funding don’t simply arrive on the doorstep unannounced. Their progress toward the eventual Bang! moment is there for all the world to see. The root cause is almost always the same: debt. And whether that debt is actually borrowed or is merely promised to the populace, when the market becomes worried that the ability of the government to fund its promises is suspect, then the end is near. Last week we began a series on what I think is an impending crisis in the unfunded pension liabilities of state and local governments in the United States.

2013-09-12 The Best Time to Own Cash: No Return is Better than a Negative Return by Francois Sicart of Tocqueville Asset Management

In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about "the best time for an investor to own cash," which somewhat counter-intuitively, he believes is when that cash pays nothing.

2013-09-10 Why DFA’s New Research is Flawed by Michael Edesess (Article)

DFA is a company with a laudable history, founded on solid principles and a valuable product concept. From its launch, the investment firm identified and filled a need at low cost to the client, based on elementary but sound theory and simple, compelling, transparent empirical research. It later increased its value to clients by pioneering passive trading strategies. I admire its founders and their accomplishments. But I am afraid the company has succumbed to a dreadful descent into scientism.

2013-09-10 Oil Has Too Many Plumbers by Bill Smead of Smead Capital Management

We’ve never quite understood why most sensible people don’t apply the same economic logic to investing that they do to any other business. Take plumbing for example. If your town has 10 main plumbing companies and 10 more move into town, your economic mind tells you that the added competition will drive down profits. On the other hand, if five of the plumbing companies go out of business, profits should rise over time.

2013-09-10 Check or Checkmate... by Blaine Rollins of 361 Capital

The White House’s goal is to persuade Congress to authorize a limited military strike against Syria to punish it for a deadly chemical weapons attack. But after a frenetic week of wall-to-wall intelligence briefings, dozens of phone calls, and hours of hearings with senior members of Mr. Obama’s war council, more and more lawmakers, Republican and Democrat, are lining up to vote against the president.

2013-09-09 The Shape of Things to Come by Kristina Hooper of Allianz Global Investors

With a week to go before the September FOMC meeting, there’s little that stands in the way of Fed tapering. Friday’s jobs report didn’t impress but it probably wasn’t bad enough to stop central bankers from pulling some punch, writes Kristina Hooper.

2013-09-07 Unrealistic Expectations by John Mauldin of Millennium Wave Advisors

Two well-respected analysts of pension funds have produced reports this summer suggesting that pensions are now underfunded by more than $4 trillion and possibly more than $5 trillion. I would like to tell you that the underfunding is all the bad news, but when you probe deeper into the problems facing pension funds, it just gets worse.

2013-09-04 4 Signposts To Watch for an Emerging Markets Turnaround by Russ Koesterich of iShares Blog

When will we see a significant and prolonged reversal in emerging markets (EM) stock performance? Russ says to watch for four signposts that could signify the EM underperformance tide is turning.

2013-09-03 Did Steve Jobs Really Build That? by Michael Edesess (Article)

The conventional wisdom is that only the private sector can marshal the entrepreneurial energy to create innovation and growth, while government can do little more than shift around the wealth that the private sector creates. But is that really true?

2013-09-03 How a Menu of Services Generates Revenue by Teresa Riccobuono (Article)

Very few advisors do as good a job as possible articulating their value proposition and the ways they can be of service to their clients. If clients purchase products or services from competitors, it may be because they are unaware of the full range of your offerings.

2013-08-31 How Do I Hate Thee? by John Mauldin of Millennium Wave Advisors

I will list a number of reasons why I hate this market and then suggest a few reasons why that should get you excited. We will look at some charts, and I’ll briefly comment on them. No deep dives this week, just a survey of the general landscape.

2013-08-27 Why Bad Decisions Happen to Good People: An Introduction to Behavioral Finance by Scott Clemons (Article)

Cognitive biases frequently cause even skilled investors to make irrational decisions. Thankfully, irrationality is fairly predictable. Here are four behavioral biases that investors face and techniques for recognizing and overcoming them.

2013-08-26 The Case for More Mortgage QE by Kristina Hooper of Allianz Global Investors

Disappointing new home sales don’t mean that tapering is less likely to occur in September. Rather, it may only mean that when tapering begins, the Fed’s likely to start small and only trim Treasuries.

2013-08-25 France: On the Edge of the Periphery by John Mauldin of Millennium Wave Advisors

Charles de Gaulle said that "France cannot be France without greatness." The current path that France is on will not take it to renewed greatness but rather to insolvency and turmoil. Is France destined to be grouped with its Mediterranean peripheral cousins, or to be seen as part of the solid North Atlantic core? The world is far better off with a great France, but France can achieve greatness only by its own actions.

2013-08-23 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

India: Broken promise or temporary hiccup? Bond markets appear unmoved by central bank guidance. Rising mortgage rates are taking some of the steam out of housing.

2013-08-21 Trickle-Up Economics by Bill Smead of Smead Capital Management

Major magazines have a history of putting a topic on their cover at the end of a long-term trend. For example, “The Death of Equities” was a Business Week cover in late 1979, near the end of a miserable stretch in the US stock market. Time’s recent cover story, “The Childfree Life”, got us wondering about the economics of childbearing in the US? Does Time’s cover mark the end of a trend? Can the US economy succeed without homegrown population increases? Will economic success driven by the current demographics in the US trickle down to unemployed blue collar

2013-08-21 Asia Brief: On Economic Evolution in Cambodia by Edmund Harriss, James Weir of Guinness Atkinson Asset Management

Cambodia’s recent national Assembly elections offer hope that the country may be able to achieve a peaceful political transition in the coming years. The country’s political turmoil has held it back behind its neighbors, but tourism and gar- ment assembly are driving an acceleration in economic output growth. However, Cambodia is at risk from inflation through imported petroleum, and its youthful population will want to see improving GDP per capita feeding through into higher living standards, rather than a higher hydrocarbon bill.

2013-08-20 Part-Timers and the Labor Market by Brian Wesbury, Bob Stein of First Trust Advisors

Over the past few weeks we keep getting the same two questions about the labor market. Basically, investors want to know whether the labor market is really improving if so many of the jobs are going to part-timers and if the more expansive definition of the unemployment rate (the one that includes discouraged workers and part-timers who want to work full-time) is about double the regular unemployment rate.

2013-08-19 A Warning Regarding Broken Speculative Peaks by John Hussman of Hussman Funds

We presently observe what might best be called a “broken speculative peak” a strenuously overvalued, overbought, overbullish, rising yield syndrome followed by a breakdown in market internals.

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

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

2013-08-13 A Better Way to Measure Systemic Risk by Michael Edesess (Article)

The economics profession has faced harsh criticism since the financial crisis of 2007-09 not least from its own membersfor relying on mathematical models that failed to foresee the crisis and in some cases abetted its onset. Is the criticism justified, and what can be done about it?

2013-08-13 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Despite the market’s jittery, almost daily, responses to the Federal Reserve’s inferences about “taking their foot off the pedal”, the reality is that secular changes, like the kind considered, occur very slowly and give us enough time to prepare for, and analyze, the consequences real and imagined.Most importantly, we need to see significant changes in data, and perception of that data, over the long term in order to corroborate the Fed’s decision.

2013-08-13 The Gordon Dilemma by Bill O'Grady of Confluence Investment Management

In this report, we will discuss Professor Gordon’s thesis, examine the geopolitical impact if he is correct and offer some criticisms of his thesis. We will conclude with potential market ramifications.

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

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

2013-08-09 Futures Markets Signal Gold Ready to Erupt by Peter Schiff of Euro Pacific Capital

With gold recouping some losses in its most recent trading sessions, many are asking whether or not the bottom has finally formed for the yellow metal. Most of these gains have been simply chalked up to short-covering and dovish remarks by Bernanke during the recent Federal Open Market Committee meetings; however, there are some key indicators for gold which are overshadowed by the media hubbub. Two of them in particular are important to understand, because they reveal a renewed investment demand for physical gold over paper gold or fiat currencies.

2013-08-09 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

The global productivity "bust" is largely cyclical. The Bank of England tries forward guidance. Will low labor force participation keep the Fed from tapering?

2013-08-08 Quarterly Letter by Team of Grey Owl Capital Management

To begin, let us state that we are tired of writing about macroeconomic issues. We suspect you are tired of reading about them. We would like nothing more than to send out a quarterly letter full of updates on the companies we own and the rationale for individual buy and sell decisions. Nevertheless, we must address the market action following Federal Reserve Chairman Ben Bernanke’s May 22nd testimony before Congress, where he merely floated the idea of “tapering” the Fed’s quantitative easing efforts.

2013-08-08 Looking Farther Down the Road by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners

The stock market has continued to do very well over the summer months, reaching new, all-time highs and proving to even the most stubborn of skeptics that Great Recessions can become Great Recoveries for those with the appropriate time horizon. While our industry spends a great deal of time and effort focused on relative performance results compared to appropriate benchmarks, the greatest value any financial advisor or money manager can provide is usually addressed far less often; simply keeping you in the game.

2013-08-08 Coming Soon: September Volatility by Russ Koesterich of iShares Blog

Since spiking earlier this summer, market volatility is now back to spring lows. Investors, however, shouldn’t expect this calm to continue come September. Russ has four reasons why.

2013-08-08 The Role of Confidence by Howard Marks of Oaktree Capital

The so-called wealth effect plays an important and well recognized part in the functioning of an economy. When assets appreciate in value, the owners translate their increased wealth into increased spending. While at first glance this is unsurprising, it should be noted that this is true even if the appreciation is unrealized, and thus the increased wealth exists solely on paper. The relationship can be stated as follows: the richer people feel, the more they spend. Changes in confidence have an impact on behavior similar to the wealth effect. That’s what this memo is about.

2013-08-06 Human Capital in the Digital Economy by Alan Winger (Article)

Human capital is a key asset that planners manage as they strive to maximize consumption throughout clients’ lives. Human capital, or lifetime income, often peaks in value early in their careers. Moreover, today’s digital economy means human capital is more volatile and less predictable than in the past, and that carries important implications for financial planners.

2013-08-05 Can It Get Any Better Than This? by John Mauldin of Millennium Wave Advisors

What in the world is going on?! As I write this letter from the Maine woods, the S&P 500 has just cleared 1,700 for the first time. The German DAX continues to set all-time highs above 8,400. The United Kingdom’s FTSE 100 is quickly approaching its 1999 record high of 6,930, and its mid-cap cousin, the FTSE 250, just broke through to its all-time level above 15,000. And last but not least, Japan’s Nikkei 225 is extending its gains once more, toward 14,500.

2013-08-01 The Fed's Balance Sheet by Scott Minerd of Guggenheim Partners

The value of the Fed’s portfolio has fallen by about $192 billion as a result of the rise in interest rates over the past quarter. Further losses from rising interest rates could compromise the Fed’s ability to engage in monetary tightening should market conditions warrant such action.

2013-07-30 Revisiting “The Cost of Socially Responsible Investing” by Paul A. Ruud (Article)

Endowments have been warned that socially responsible investing incurs a financial cost, based on research by two prominent academicians. But that research which has been presented and debated in this publication is based on a tenuous model that is highly sensitive to its assumptions. Change those assumptions reasonably, as I did in my research, and the cost of SRI becomes trivial.

2013-07-29 Will a New Fed Chairman Derail the Stock Market Rally? by Kipley Lytel of Montecito Capital Management

Over the past two years, investor exuberance has poured over $150 billion into equity funds. The perception of market risk has been sharply lowered over the past years by the central bank’s supportive activities in the capital markets and the high octane fuel of near zero interest rates. Meanwhile, Bernanke’s buyback of treasury and mortgage back securities is at a pace of moving the Fed’s balance sheet to over $4 trillion.

2013-07-29 Baked in the Cake by John Hussman of Hussman Funds

Once the risk premium is beaten out of stocks, there is no way out, and nothing that can be done about it. Poor subsequent returns, market losses, and the associated destruction of financial security (at least for the bag-holders) are already baked in the cake. This should have been the lesson gleaned from the period since 2000, but because it remains unlearned, it will also become the lesson of the coming decade.

2013-07-27 A Lost Generation by John Mauldin of Millennium Wave Advisors

This week we will briefly look at why weak consumer spending is going to become an even greater problem in the coming years, and we will continue to look at some disturbing trends in employment.

2013-07-26 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

Income inequality is rising, but it’s not clear what to do about it. Brazil’s struggles come at a delicate time. Detroit’s road to bankruptcy does not set a path for others to follow.

2013-07-25 Summer Quarterly Commentary by John Prichard of Knightsbridge Asset Management

Recently the Fed indicated it may begin returning control over market pricing and interest rates to Adam Smith’s invisible hand... and borderline chaos erupted. The episode began mid-day May 22nd as Congress questioned Fed Chairman Bernanke and suddenly the cat was out of the bag and a paradigm shift ensued. Bond funds suffered some of their largest weekly redemptions on record. Rates spiked and markets swooned around the world through late June as investors assumed the worst.

2013-07-23 Fantasy versus Factors by Michael Nairne (Article)

Investors who wish to earn market-beating returns have a choice. They can indulge in the fantastical quest for “alpha” via high-cost active managers or they can construct factor tilts in their equity allocations via low-cost exchange traded or enhanced index funds. It doesn’t take a PhD in mathematics to determine which route is more likely to take an investor to higher performance.

2013-07-23 More Summer Storms? by Jerry Wagner of Flexible Plan Investments

don’t know about your part of the country but I think this summer has been the wettest in some time around Detroit. We have had soooo much rain. Our Great Lakes began the year well below their long-term average depth. After months of rain, all of the Great Lakes are now above their levels from last year, and nearby Lake Ontario has gained ten inches in height in just the last month. Ontario is 11″ higher than one year ago and 5″ ABOVE the century average. Yet its previous below average condition had existed for years and had been worsening quite a change!

2013-07-23 Will Buffett Be Right on Wells Fargo? by Bill Smead of Smead Capital Management

A long time friend once said, "Bill, on the stocks that worked it didn’t make any difference what you paid!" What he was referring to were the stocks which rose to many times your original purchase price and the investors who participated over the long run in the shares ended up happy and wealthier. Is Wells Fargo (WFC) one of those companies and will Warren Buffett’s recent purchases get vindicated? As we enter the second half of 2013, this is a great discussion point for long-duration common stock investors in a market which has been strong since September of 2011.

2013-07-22 The Purgatory of Low Returns by James Montier of GMO

This might just be the cruelest time to be an asset allocator. Normally we find ourselves in situations in which at least something is cheap; for instance when large swathes of risk assets have been expensive, safe haven assets have generally been cheap, or at least reasonable (and vice versa). This was typified by the opportunity set we witnessed in 2007.

2013-07-22 If the Fed Wants to Lower Bond Yields, Perhaps It Should Switch to QT by Paul Kasriel of Econtrarian, LLC

Whenever I forget to mute CNBC or Bloomberg TV, I invariably hear some wag explaining to us that the goal of the Fed’s policy of quantitative easing (QE) is to lower bond yields in order to stimulate borrowing by the nonbank public and thus, increase aggregate spending. If, in fact, the Fed’s paramount goal is to lower bond yields, then I suggest that it might want to consider quantitative tightening (QT). Why?

2013-07-20 Any Bonds Today? by John Mauldin of Millennium Wave Advisors

Given the acknowledged limitations of the CPI, we nevertheless use it in myriad ways. It governs cost-of-living adjustments for Social Security beneficiaries, government employees, and many labor union members. CPI is baked into the general cake, even though we know it is an imperfect fit in almost every situation.

2013-07-15 Beneath the Noise, a Resilient Demand Trend and Clear Fed Plan by Alan Levenson of T. Rowe Price

Available data point to real GDP growth of less than 1% in the second quarter, yet we are looking through the dip: core demand data have been firmer (watch June retail sales on Monday), and a Q2 inventory correction will likely be followed by current quarter re-stocking. The sharp upward adjustment in mortgage rates will not derail the housing recovery. The FOMC has provided substantial clarity, in our view, regarding the monetary policy path that it intends to follow if the economy evolves in line with its expectations.

2013-07-15 Rock-A-Bye Baby by John Hussman of Hussman Funds

I’ve always thought that singing “Rock-a-bye baby” offers a bizarre lesson to our young, encouraging them to be lulled gently to sleep by describing a scene that should have them wide-eyed with terror.

2013-07-13 The Bang! Moment Shock by John Mauldin of Millennium Wave Advisors

This week we resume our musings about Cyprus, to see what that tiny island can teach us about our own personal need to engage in ongoing critical analysis of our lives and investment portfolios. Cyprus is not Greece or France or Spain or Japan or the US or (pick a country). I get that. No two situations are the same, but there may be a rhyme or two here that is instructive.

2013-07-12 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (

ECRI posts its proprietary indicators on a one-week delayed basis to the general public, but last year the company switched its focus to a version of the Big Four Economic Indicators I’ve been tracking for the past year. In recent months, however, those indicators have slipped below the fold, replaced by the mixed bag of whatever Indicator du Jour might look recessionary, as in the "Yo-Yo Years" commentary.

2013-07-10 Employer Mandate: A Pharma Bump in the Road by Bill Smead of Smead Capital Management

As long-duration value investors, we at Smead Capital Management have been very attracted to the conservative accounting, shareholder friendly dividends/buybacks and bright pipeline futures of major pharmaceutical/biotech companies like Merck (MRK), Pfizer (PFE) and Amgen (AMGN). Lately, there has been weakness in these shares and we’d like to review our best theory for recent fears and price weakness, while reviewing the merit of these high quality shares.

2013-07-10 Are You Financially Literate? Take the Test! by Gary Halbert of Halbert Wealth Management

For over a decade, numerous studies have found that most Americans are lacking in their basic knowledge regarding finance and investments. I first reported on this back in 2003 and have done so every few years since then. Unfortunately, things have not gotten better over the years, despite the fact that we went through a major financial crisis in 2008-2009.

2013-07-05 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 130.4, down slightly from last week’s 130.6. The WLI annualized growth indicator (WLIg) fell to 5.3% from 5.8% last week.

2013-07-05 A Venture Investor from Bell Labs Channels the Noise and the Knowledge by John Mauldin of Millennium Wave Advisors

Alpha is found on the edges, away from common knowledge. It is in new technologies, and it can surely be found there, although there are different risks at the edge. But there are other sources of alpha, which can be found not by looking at what has happened but at what is likely to happen, not just in technology but in markets and the actions and reactions of those who would try to move markets.

2013-07-02 The Practical Application of Behavioral Finance by Mitchell D. Eichen and John M. Longo (Article)

From the Dot-Com bubble onward, traditional investment models have repeatedly disappointed those who relied on them. When compared to mathematically based models, behavioral finance provides a superior foundation. Here is an alternative investment paradigm, grounded in behavioral finance, that is practical and effective over time periods that are relevant for a significant portion of investors.

2013-07-02 The 2013 Mid-Year Geopolitical Update by Bill O'Grady of Confluence Investment Management

At mid-year, we customarily publish our geopolitical outlook for the second half of the year. This list is not designed to be exhaustive. As is often the case, a myriad of potential problems in the world could become issues in the second half of the year. The lineup listed below details, in our opinion, the issues most likely to have the greatest impact on the world. However, we do recognize the potential for surprises which we will discuss throughout the year in upcoming weekly reports.

2013-07-01 \"This Country is Different\" by John Mauldin of Millennium Wave Advisors

Cyprus is a very small country, some 800,000 people. Among the leadership, everyone knows everyone. There is much to admire, as we will see. But Cyprus has had a gut-wrenching crisis, proportionately more dire than any in other European countries recently; and precedents are being established here for how future problems will be dealt with in the Eurozone and elsewhere.

2013-07-01 Watching Nominal GDP by Brian Wesbury, Bob Stein of First Trust Advisors

One of the most important foundations of modern macroeconomics is something called the “equation of exchange.” It dates all the way back to John Stuart Mill but, in the past couple of generations, was popularized by free-market icon Milton Friedman.

2013-06-27 Mind the (Expectations) Gap: Demographic Trends and GDP by Rob Arnott, Denis Chaves of Research Affiliates

Demographics provided a tailwind to economic growth in the developed world during the past 60 years. Now, as a result of Boomers heading toward retirement and low birth rates of recent decades, demographics may present a headwind to future growth. This issue of Fundamentals, which is excerpted from a forthcoming article in The Journal of Indexes, explores the implications of such changes for economic growth around the world.

2013-06-26 The QE Lemon Has Been Squeezed Dry by Tad Rivelle of TCW Asset Management

We’ve just witnessed the dress rehearsal for the end of the Fed’s Quantitative Easing (QE). Markets that had learned to stop worrying and love the financial repression have been given reasons to fear the interest rate cycle. For five years we have lived with a central bank that has used, or abused, a zero rate policy and QE to effectuate the Great Risk-On trade to cure the ills of the Great Recession.

2013-06-26 When I Suggested it May Be Time To Go Fishing... by Blaine Rollins of 361 Capital

When I suggested that it may be time to go fishing, I didn’t think that everyone would sell their bonds, notes, and bills to buy a new boat...

2013-06-25 The Great Debate on Inequality: Stiglitz versus Krugman by Michael Edesess (Article)

Economics Nobel laureate Joseph Stiglitz is the chief alarmist warning that income and wealth inequality in the U.S. is a very serious threat to the economy. So it comes as a surprise that his fellow Nobelist Paul Krugman Stiglitz’s intellectual comrade-in-arms disagrees with him. Their disagreement goes to the heart of today’s economic problem.

2013-06-24 Market Internals Suggest a Shift to Risk-Aversion by John Hussman of Hussman Funds

Our primary attention here is on market internals. If they improve, I expect that we’ll adopt at least a moderately constructive view. Presently, however, my impression is that investors have shifted from risk-seeking to risk-aversion. This shift is not because of a hawkish Fed, but in spite of a dovish one - something more appears to be going on. It’s tempting to wait until a stronger and more specific “catalyst” emerges, but the financial markets have demonstrated repeatedly over time that market losses come first, and the catalyst becomes evident afterward.

2013-06-21 ECRI Recession Watch: Weekly Update by Doug Short of Advisor Perspectives (

Ultimately my opinion remains unchanged: The ECRI’s credibility depends on major downward revisions to the key economic indicators -- especially the July annual revisions to GDP -- that will be sufficient to validate their early recession call. Of course, the July revisions will be quite controversial this year, with some major accounting changes and revisions in annual GDP back to 1929. So if we don’t get the downward revisions to support ECRI, they can always question the accounting changes in the revision process.

2013-06-21 Austerity is a Four-Letter French Word by John Mauldin of Millennium Wave Advisors

The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the crowds out in force.

2013-06-20 The Best Time to Invest by Mark Mobius of Franklin Templeton Investments

I frequently speak at investment conferences around the world, and get questions ranging from my outlook for a particular market to highly sophisticated investment concepts. One seemingly simple question asked by a young lady years ago at a conference in Canada which I attended with the founder of Templeton Investments, the late Sir John Templeton, was particularly timeless. She asked: “I’ve just inherited some money from my grandfather. When is the best time for me to invest it?”

2013-06-19 Pride: In the Name of the US Manufacturing/Energy Renaissance by Liz Ann Sonders of Charles Schwab

Manufacturing/energy renaissance in the United States is a long-term theme; not a short-term trade but it’s underway. The list of companies "reshoring" to the United States are powerful and growing. Can the United States become a global exporting powerhouse?

2013-06-17 The Price of Distortion by John Hussman of Hussman Funds

Corporate profits have benefited in recent years from enormous fiscal distortions that have bloated margins 70% above their historical norms. Stock prices have benefited in recent years from enormous monetary distortions that have suppressed interest rates and encouraged investors to “reach for yield.” Combining those effects, investors have been encouraged to chase stocks, placing elevated price/earnings multiples on already elevated earnings. Investors who value stocks on the basis of these distortions are likely to discover in hindsight that they have paid a very dear price.

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

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

2013-06-14 The Sustainability of Managed Futures Returns by Robert Keck of 6800 Capital

Many investors have begun to question the efficacy of an investment in managed futures given the most recent two years of negative performance for the industry as a whole at a time when U.S. equity prices have been achieving multi‐year highs. The concern is not so much the magnitude of the losses incurred by the managed futures industry during this period; in many cases they are relatively small in comparison to the size of the drawdowns experienced by many other asset classes such as equities, real estate, fixed income, etc., during peak periods of market stress.

2013-06-14 ECRI Recession Watch: New Update by Doug Short of Advisor Perspectives (

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is at 131.3, up slightly from last week’s 131.0 (revised from 130.9). The WLI annualized growth indicator (WLIg) rose to 6.6% from 6.4% last week (revised from 6.3%).... Two weeks ago the company took a new approach to its recession call in its most recent publicly available commentary on the ECRI website: What Wealth Effect? More...

2013-06-11 Letters to the Editor by Various (Article)

A number of readers responded to Adam Kanzer’s article, Exposing False Claims about Socially Responsible Investing, which appeared last week. Kanzer’s article was in response to Adam Apt’s article, Measuring the Cost of Socially Responsible Investing, which appeared the week before. Several readers responded to other articles as well.

2013-06-10 2009 vs. 2013 by John Hussman of Hussman Funds

One of the most strongly held beliefs of investors here is the notion that it is inappropriate to “Fight the Fed” reflecting the view that Federal Reserve easing is sufficient to keep stocks not only elevated, but rising. What’s baffling about this is that the last two 50% market declines both the 2001-2002 plunge and the 2008-2009 plunge occurred in environments of aggressive, persistent Federal Reserve easing.

2013-06-08 Banzai! Banzai! Banzai! by John Mauldin of Millennium Wave Advisors

In practice it may be harder for Japan to grow and generate inflation than it might be for other major nations. Today we’ll focus on Japanese demographics. While the letter is full of graphs and charts, it does not paint a pretty picture. The forces of deflation will not go gently into that good night.

2013-06-06 The Risk of Government Policies and the Rationing of Retirement by Jason Hsu of Research Affiliates

In late April, a group of leading economists and investment practitioners assembled in La Jolla, California, for Research Affiliates’ 2013 Advisory Panel. Our theme this year touched on two topics that have been front-and-center in recent public debates: the risk of government intervention and the potential rationing of retirement.

2013-06-06 The Wisdom of Crowds by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners

Are markets efficient? This is a debate that has been on-going for decades. In one corner you have the proponents of the Efficient Markets Hypothesis. In their world alpha does not exist, or at the very least it is not sustainable. In the other corner you have the supporters of behavioural finance who see investors as being mostly irrational and suffering from all sorts of behavioural biases which create alpha opportunities galore. Out of this long lasting stand-off a new paradigm is emerging called the Adaptive Markets Hypothesis which aims to reconcile the two.

2013-06-06 More Than a Feeling by Team of AdvisorShares

Tangible signs of fundamental weakness are appearing everywhere, yet financial market participants are simply choosing to ignore these signs. There remains a significant disconnect between the real economy and financial markets. Read this paper by Peritus Asset Management to learn how to navigate the weak fundamental picture in what they believe to be the beginning of a 15-20 year positive technical backdrop, which will put yield generating assets, such as high yield bonds, in the sweet spot.

2013-06-05 Certainty, Rates and the Year Ahead by Peritus Asset Management of AdvisorShares

The government tells us not to worry, as the Federal Reserve comes to rescue with QE-Forever. Certainty with fiscal policy doesn’t seem to change the demand equation and cheapened money doesn’t do anything if demand isn’t present. Treasury rates remain at 0% for the foreseeable future making yield hard to find. Read this position paper by Peritus Asset Management scrutinizing how all this has come to pass and what indicators are foretelling the near future effects on the high yield asset class.

2013-06-04 An Advisor’s Perspective on Prophets and Profits by Gary Moore (Article)

More than 30 years on Wall Street have proven to me that many advisors could do more business and do more good for our clients, profession and the world if we considered the moral views of investors, whether we agree with those views or not.

2013-06-03 A Taste of What Tapering Might Mean by Christian Thwaites of Sentinel Investments

A week on from the sparks of the FOMC minutes and we can see how the market handles the subtler parts of Fed communication. Not well. Most of the dove camp talked about adjusting purchases up or down depending on economic conditions (all very reasonable and consistent) but stressed there was really nothing in the data for change. The hawk that counts, Bullard of the St. Louis Fed, even called for continued QE given low inflation. So the “employment is too low, continue” and "inflation is too low, continue” camps agree.

2013-06-01 Central Bankers Gone Wild by John Mauldin of Millennium Wave Advisors

For the last two weeks we have focused on the problems facing Japan, and such is the importance of Japan to the world economy that this week we will once again turn to the Land of the Rising Sun. I will try to summarize the situation facing the Japanese. This is critical to understand, because they are determined to share their problems with the world, and we will have no choice but to deal with them. Japan is going to affect your economy and your investments, no matter where you live; Japan is that important.

2013-05-31 Japan: Gauging the Stimulus Response by Milton Ezrati of Lord Abbett

The Japanese patient seems to be responding well to Prime Minister Shinzo Abe’s attentions. Equities have rallied strongly. The yen, as the government desires, has retreated from export-crushing highs. The economy has shown signs of a genuine cyclical pickup. The good news has buoyed spirits in Japan. It will likely continue for a while longer, too. But the picture for the country is not yet all joy, because Abe’s policies fail to address the country’s significant, longer-term, fundamental problems.

2013-05-30 Are We There Yet? by Vitaliy Katsenelson of Investment Management Associates

I started writing my first book, Active Value Investing: Making Money in Range-Bound Markets, in 2005; finished it in 2007; and published the second, an abridged version of the first (The Little Book of Sideways Markets), in 2010. In both books I made the case that there is a very high probability that we are in the midst of a secular sideways market a market that goes up and down, with a lot of cyclical volatility, but ends up going nowhere for a long time.

2013-05-30 Reflation in the Balance by Richard Clarida of PIMCO

Four of the world’s major central banks are now “all in” when it comes to ballooning their balance sheets in correlated, if not coordinated, efforts to achieve escape velocity in their economies. In accounting for the impact of quantitative easing on two key balance sheets, we are able to interpret, monitor and calibrate the programs currently in place. This in turn can help us prepare portfolios if or when sentiments and inflation expectations shift.

2013-05-28 Is Austerity a Bad Idea? by Michael Edesess (Article)

There are strong arguments for and against both austerity and Keynesianism. However, some recent writings should make us remember to question the terms of the argument itself. While evidence-based economics is important, it can also mislead.

2013-05-28 State and Local Pensions: What Now? by John Minahan (Article)

Alicia Munnell’s book, State and Local Pensions: What Now? is a comprehensive introduction to public pension funds for the newcomer and a useful reference for seasoned professionals. Munnell stakes out a position on an important debate between economists and actuaries regarding liability valuation, and develops a background narrative portraying economists as impulsive, argumentative and clueless.

2013-05-25 The Mother of All Painted-In Corners by John Mauldin of Millennium Wave Advisors

Japan has painted itself into the mother all corners. There will be no clean or easy exit. There is going to be massive economic pain as they the Japanese try and find a way out of their problems, and sadly, the pain will not be confined to Japan. This will be the true test of the theories of neo-Keynesianism writ large. Japan is going to print and monetize and spend more than almost any observer can currently imagine. You like what Paul Krugman prescribes? You think he makes sense? You (we all!) are going to be participants in a real-world experiment on how that works out.

2013-05-24 Recession Watch: ECRIs Weekly Leading Indicator Up Slightly by Doug Short of Advisor Perspectives (

TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) is at 130.6, up slightly from last weeks 130.1 (a downward revision from 130.2). The WLI annualized growth indicator (WLIg) dropped to 6.8% from 7.0% last week.

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.

2013-05-23 Investing in Gold: Does It Stack Up? by Team of Knowledge@Wharton

Gold has a timeless allure -- especially if you worry about stock market volatility, inflation, a decay of ordinary currency or the collapse of civilization. Yet not everyone agrees that gold offers the safe haven its promoters describe. How reliable can demand be for a commodity that very few people actually need? What is the proper role for gold in an investment portfolio? Why has its price been falling?

2013-05-21 Don't Set Much Store in the Equity Risk Premium by Christian Thwaites of Sentinel Investments

An old measure but a useful one. It should give us some indication of the market after the 23% gain in the S&P since November. The measure is simple enough: the forward price earnings yield less the yield on the GT30. This makes sense because the duration of equities is around 16.5, which is close to the GT30 of 19. By the way, other sources, notably the New York Fed use different approaches, for example Cyclically Adjusted Price Earnings and a shorter duration risk-free rate. But it’s the vectors that matter not the scale.

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 Open-Access Economics by Barry Eichengreen of Project Syndicate

The brouhaha over Carmen Reinhart’s and Kenneth Rogoff’s article “Growth in a Time of Debt” has raised troubling questions not only about the efficacy of austerity, but also about the reliability of economic analysis. If a flawed study could appear in a prestigious working-paper series, why should anyone trust economic research?

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

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).

2013-05-14 Is Kyle Bass Wrong About Japan? by Robert Huebscher (Article)

It’s standard practice for short sellers to kick dirt on their targets, and Kyle Bass is doing just that by asserting that Japan’s economy is on the verge of a financial crisis. In a talk on May 3, he said that Japan’s demise is imminent. So far, though, Bass has been wrong and he has his detractors, who are far less certain of Japan’s destiny.

2013-05-14 Nouriel Roubini: Four Reasons Investors Should be Worried by Robert Huebscher (Article)

Despite a modest recovery from the nadir of the financial crisis, the global economy still faces tail risks, according to Nouriel Roubini. Roubini’s forecast is not as gloomy as the one that earned the moniker “Doctor Doom,” when he correctly predicted the housing market collapse and the ensuing global recession. But, in a talk May 1, he identified today’s biggest danger points in Europe, the U.S., China and geopolitics which he said threaten to destabilize the global economy.

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 Changing Face of High Yield by Christian Thwaites of Sentinel Investments

High yield has been on a tear. A series of fortunate events have made this one of the best asset classes in recent years. It has outperformed the S&P[1] nine out of the last thirteen years. In those that it lagged, underperformance averaged 1.9%. Outperformance averaged 9.7%. From 1985 to 2012, high yield had five down years averaging (-8.8%). The S&P had five down years averaging (-16.6%). Over the entire period, high yield underperformed the S&P by around 180bp but with about half the risk and a 0.58 correlation.

2013-05-13 Skills, Education, and Employment by John Mauldin of Millennium Wave Advisors

It is graduation time, and this morning finds me swimming in a sea of fresh young faces as a young friend graduates, along with a thousand classmates. But to what? I concluded my final formal education efforts in late 1974, in the midst of a stagflationary recession, so it was not the best of times to be looking for work. It turned out that I had a far different future ahead of me than I envisioned then. But I would trade places with any of those kids who graduated today, as my vision of the next 40 years is actually very optimistic.

2013-05-10 The Importance of Being Different by Francois 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 2013 US Financial Markets: Part 2 - The TINA Hypothesis by Clyde Kendzierski of Financial Solutions Group

Contrary to the “Bernanke Illusion” (money market funds are a zero return investment), history indicates that money market funds are likely to provide investors with returns approximating inflation over the next decade. As I pointed out in our last letter, the markets are pricing in inflation levels significantly higher than the prospective total returns of 10 year TBonds. The small additional return achieved by corporate bonds or US stocks (at current prices) is unlikely to compensate a buy and hold investor with sufficient gains to justify the interim risks.

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

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."

2013-05-09 Why Reinhart & Rogoff Still Matter by Russ Koesterich of iShares Blog

Despite Reinhart and Rogoff’s methodology mistakes, their widely cited paper’s basic conclusion still holds. Russ K warns that both policy makers and investors ignore it at their own peril.

2013-05-07 On Trees and Forests by Guy Cumbie (Article)

A reader responds to Robert Huebscher’s article, The New Challenges to Reinhart and Rogoff, which appeared last week.

2013-05-06 Sell in May But Stick Around by Christian Thwaites of Sentinel Investments

A bit odd, perhaps, to worry about deflation as the S&P hits all time highs. But the whiff of deflation is in the air. The YOY PCE core (the one the Fed likes) came in at 1.1% which is the lowest it has ever been.

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.

2013-04-30 The Most Underappreciated Threat to the Advisory Business by Bob Veres (Article)

Financial advisors have often heard the warning that their investment management services are going to become commoditized so often, in fact, that you can forgive them for ceasing to pay attention. But if you don’t believe that an online algorithm can replace the sophisticated advice offered by a flesh-and-blood advisor, then check out the Wealthfront USA website.

2013-04-30 Electric Vehicles: The Devil is in the Battery by Michael Edesess (Article)

Electric cars are part of the vision of a clean energy society, in which Americans would use few fossil fuels, emit limited greenhouse gases and depend less on foreign sources of energy. Will that vision be realized and are electric cars even necessarily part of that vision? Are electric cars environmentally friendly? Are they an economical means of transportation now? How likely are they to capture the market in the coming years?

2013-04-30 Letters to the Editor by Various (Article)

A number of readers responded to Robert Huebscher’s article, The New Challenges to Reinhart and Rogoff, which appeared last week.

2013-04-29 Cruel Top Line Growth by Christian Thwaites of Sentinel Investments

The current earnings season is a very mixed bag. Start with the economic background where nominal growth decelerated in 2012 from around 4.4% to 3.6%. The first quarter may be marginally higher but some of that is from a low base effect. It’s very difficult for companies to raise prices, increase share or volumes when demand is simply deficient. Sure, balance sheets are in much better shape, as evidenced by robust bond issuance, but many companies are in excess savings mode. Here are undistributed corporate profits as a percent of GDP.

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 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 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.

2013-04-26 Why Demographics Will Keep the U.S. Ahead by Randall McLaughlin of Baird Investment Management

The aging of the developed world does give us some powerful information about which industries might do well in the future. The increased use of healthcare services as a population ages is well-documented. In addition, as people age, they transition from accumulating possessions to using their wealth to buy experiences. Travel companies are examples of companies that could benefit. The favorable demographic profile of the United States supports our manufacturing renaissance thesis as companies tend to want to locate manufacturing close to the end client.

2013-04-25 Closed-End Fund Review by Jeff Margolin of First Trust Advisors

The first quarter of 2013 was a solid quarter for many closed-end funds, with the average fund up 4.31% on a share price total return basis, according to Morningstar. As you would expect, with the Dow Jones Industrial Average rocketing 11.25% in the quarter, which represented the best first quarter for the index since 1998, and with the Standard and Poor’s 500 up 10.03%, domestic equity funds were up on average 11.80% during the quarter on a share price total return basis.

2013-04-24 Will Abenomics' Ensure Japan's Revival? by Team of Thomas White International

According to a World Bank (WB) report, global growth in 2013 will remain sluggish as economic recovery in the developed nations is likely to be slow. Lower business and consumer confidence, government spending cuts, as well as high rates of unemployment may delay the recovery, the report says. The report has also noted that developing nations may experience slower growth due to structural and monetary policy challenges.

2013-04-23 The New Challenges to Reinhart and Rogoff by Robert Huebscher (Article)

Advocates for debt reduction and austerity have had no more authoritative sources than Carmen Reinhart and Ken Rogoff. But last week, these two professors had to defend claims that errors in their research ranging from a typo in a spreadsheet to the failure to include data from New Zealand invalidated their much-acclaimed findings.

2013-04-23 Harsh Words on Gold by Christian Thwaites of Sentinel Investments

As a graduate trainee in a London accepting house in the fall of 1981, I was given the tour and history of my new, 130 year old bank. It was one of the banks that set the daily gold price and had large bullion deposits somewhere under its location at 114 Old Broad Street. But the tour stopped at the vault door. No one went further (probably someone did but it was beyond my pay grade) and further discussion discouraged. Such was the mystery of gold.

2013-04-22 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity market’s most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.

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 Quarterly Review and Outlook by Van Hoisington, Lacy Hunt of Hoisington Investment Management

“The Federal Reserve is printing money”. No statement could be less truthful. The Federal Reserve is not, and has not been, “printing money” as defined as an acceleration in M2 or money supply. A review of post-war economic history would lead to a logical assumption that the money supply would respond upward to this massive infusion of reserves into the banking system. The reality is just the opposite. Printing money? No.

2013-04-19 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

The world’s public debt is much larger than it may appear. The lines have been drawn in the U.S. budget debate. Rates of disability are affecting labor force participation.

2013-04-19 Gold Buyers Get Physical As Coin and Jewelry Sales Surge by Frank Holmes of U.S. Global Investors

Even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high. This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins.

2013-04-17 Present and Emerging Risks to the Gold Trade by Amit Bhartia, Matt Seto of GMO

The notion of gold as a hedge against systemic risks is flawed. We believe that the concept of gold’s role as an insurance policy needs to be narrowed significantly.

2013-04-15 The Counter-Inflation Playbook Part 1 by Jeffrey Jones of Cornice Capital

One of the most important lessons I learned during my days at UCLA came from my freshman philosophy professor. He told us that should you find yourself engaged in a debate, the surest way to defeat your opponent is to attack his base principles. If those base principles aren’t fundamentally sound, any case built on top of it, no matter how convincing, is at risk of crumbling all at once.

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?

2013-04-11 Stockton is Bankrupt: Now What? by James Dearborn of Columbia Management

Although we have no exposure to Stockton, California debt, we thought it would be useful to comment on the city’s financial plight in the wake of the recent bankruptcy court ruling allowing the city to file a “plan of adjustment” or the equivalent of Chapter 11 reorganization. We, and other municipal bond participants, will be watching this process closely to see how the court treats various creditors.

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 John Hussman Why Prospective Returns Are Low by Robert Huebscher (Article)

Monetary and fiscal policies have driven our economy into an unstable equilibrium, pushing investors into higher-yielding securities, according to John Hussman. But those higher yields are illusory, he said, because corporate profit margins are too high to be sustainable.

2013-04-09 Morning in Japan by Christian Thwaites of Sentinel Investments

There were two very important central bank meetings last week, one from the Bank of Japan the other the ECB. Bank of Japan press conferences have been soporific affairs for years with a few QE programs not leading to much and no changes to inflation targets. Deflation, a declining workforce and falling aggregate demand have been pretty much the unbroken story for the best part of two decades.

2013-04-08 Cypriot Chaos Assists EU Centralization by John Browne of Euro Pacific Capital

Remarks by members of the European Union’s elite suggesting that banking deposit seizures may become standard practice appear to have heightened the risk of a European bank run and perhaps even a catastrophic collapse of the euro. Any threat to the euro is a threat to the European public’s conception of the Union’s manifest destiny. As such, I believe members of the EU elite may be purposefully leveraging the crisis to push for a centralized European banking system to cement the political framework of an EU superstate.

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 This Week's Central Bank Meetings Revealed a Range of Behavior by Team of Northern Trust

This week’s central bank meeting revealed a range of behavior. The U.S. employment report fell well short of expectations. Does China have a property bubble?

2013-04-04 Teachings from Recovered Markets by Richard Michaud of New Frontier Advisors

Domestic indices’ all-time record highs indicate that U.S. domestic equity markets have largely recovered from the 2008 Great Recession. It may have taken four years but it still seems a remarkable achievement given the Dow’s low of 6620 in March 2009. It is worth noting that prior highs were attained in an era with a poor savings rate and wide use of levered strategies. The last four years were widely characterized by a “low return” market mantra and fear of equities stoked by many doomsayers, pundits, and strategists who greeted every upturn with pessimism.

2013-04-03 Minor Crisis...Not Too Many Hurt by Christian Thwaites of Sentinel Investments

Cyprus proved, over the last two weeks, that markets often overlook the small stuff. Very few commentators we follow saw any of it coming and the theories that sprang up in the interim (Cyprus as vassal state to Russia, return to the Cypriot pound, imminent EU break up, twin euros in circulation, utter disaster for the economy, German intransigence and Schrecklichkeit) were absurd.

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.

2013-04-01 Employment 401, Muni Index Says and New Data by Gregg Bienstock of Lumesis

This week we spend time looking back at employment data (promised two weeks back) and offer some perspective from a soon to be published book. We take a look at the DIVER Muni Index and conclude with an introduction of some new and meaningful data now available to our subscribers.

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.

2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors

Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.

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.

2013-03-19 Mila Kunis, Euphoria, and the Stock Market by John Rothe of Riverbend Investment Management

Are we in the “euphoria” stage of the market right now? This past week, as the S&P 500 nears a record level, financial news pundits were fascinated with the following headlines.

2013-03-19 Things Could Get Bumpy But Hang in There? by Christian Thwaites of Sentinel Investments

The quality of the Fed’s Flow of Funds data is about as comprehensive a balance sheet assessment of corporate and private America as you could wish for. It’s also great for looking at trends rather than the hot spots over which the market frets. Here are some of the findings:

2013-03-15 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust

Despite exceptionally easy monetary policy, inflation risk remains low. Record stock market levels are boosting consumer spending. U.S. capital spending is poised to be a bright spot this year.

2013-03-14 Tightening the Noose: Can the SEC and Its New Chairman Be Tougher on Wall Street? by Team of Knowledge @ Wharton

Although the SEC has always been the federal government’s chief guardian of integrity in the financial markets, critics have a long list of grievances, including claims that the agency is too unsophisticated and too soft on wrongdoers. Assuming she is confirmed as the new SEC chairman, Mary Jo White will need almost superhuman skills to make the SEC more effective. Can she -- or anyone, for that matter -- accomplish this?

2013-03-13 Argentina on Sale by John Mauldin of Millennium Wave Advisors

(From Cafayate, Argentina) There are some who worry whether the path that Argentina has taken to monetary ruin on multiple occasions (and that it seems intent on taking again) is one that the US may also find itself on. That worry has crossed my mind a few times, I must confess. Today we will look at Argentina more in depth. From a monetary perspective, it deserves attention. And once again there will be opportunity.

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 We Made It. Now What? by Christian Thwaites of Sentinel Investments

What looks like a fairly settled policy in Europe is fast becoming a very dangerous situation, according to Christian Thwaites in his latest "Thought of the Week" -- "We Made It. Now What?" -- adding that the outlook for the world's second largest economic bloc is pretty week.

2013-03-11 The Job Market: Not As Strong As It Looks by Scott Brown of Raymond James

With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.

2013-03-08 Labor Policy Needs to Help, Not Hinder Employment. by Team of Northern Trust

Labor policy needs to help, not hinder employment. The U.S. employment report surprised on the upside. Watch the shadows behind China's official credit measures

2013-03-08 How to Keep Calm and Invest On by Frank Holmes of U.S. Global Investors

The market noise of today will not be going away. However, investors can gain confidence in the following wisdom of the crowd. As famous investor Benjamin Graham said, "The individual investor should act consistently as an investor and not as a speculator. Keep calm and invest on.

2013-03-06 Pain Aversion by Pamela Rosenau of HighTower Advisors

As the equity market continues to rally, the consensus among investors has called for a 3-5% pullback. Unfortunately for the market bears, "the pain trade remains higher right now." There are many who claim that equities are "overbought" or that stocks are "too extended." As market strategist Barry Ritholtz stated, "We find it hard to believe that after hiding under a rock for nearly five years, that a few months of equity inflows means investors have gone from petrified to exuberant. That process in our opinion is a longer arc, not a singular event."

2013-03-06 An Infinite Amount of Money by John Mauldin of Millennium Wave Advisors

The three major blocs of the developed world are careening toward a debt-fueled denouement that will play out over years rather than in a single moment. And contrary to some opinion, there is no certain ending. There are multiple paths still available to Europe and especially the US, though admittedly none of them are bright and carefree.

2013-03-05 Weave a Circle Round Us Thrice by Christian Thwaites of Sentinel Investments

There was plenty of news to threaten the recent market rallies but, as of writing, we're within a whisper of all time highs in US stocks and managing to have a very orderly consolidation in bonds. This is surprising because the political process has once again taken careful aim and shot itself in the foot. The sequester has become the dumb answer to difficult questions and will initiate, mostly indiscriminate, across-the-board cuts.

2013-03-05 Currencies: The Winds of War by Milton Ezrati of Lord Abbett

In this conflict, the collateral damage could include asset bubbles and accelerating inflation.

2013-03-04 Federal Government Employment, Tax Exemption and the Drought by Gregg Bienstock of Lumesis

This week we focus very briefly on the sequester and Federal government employment and then revisit a subject that has faded but has the potential to reappear this Spring and Summer (the drought) and conclude with a quick look at housing prices. Well, as expected (how awful that this is what I've come to expect from our elected officials), the can was kicked down the road.

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.

2013-02-26 Looking For A Reason To Sell-Off by Christian W. Thwaites of Sentinel Investments

Markets were looking for a reason to correct. Risk assets had outpaced themselves since mid November and in the first seven weeks the S&P[1] had outperformed the US Treasury 10-year note by 12% and the 30-year bond by 15%. The markets will lumber through the sequester and face the next test on the debt ceiling and first quarter results. Below the surface, the outlook is mildly optimistic. Why the qualifier? Because everything, in Europe, US and Japan, must be set in the context of the asset deflation and deleveraging going on and that will go on for some years.

2013-02-26 Sudden Discomfort by Scott J. Brown of Raymond James

Minutes of the January 29-30 meeting of the Federal Open Market Committee showed a growing discomfort with the Feds Large-Scale Asset Purchase program (QE3). Thats not all that surprising. Even those who strongly favor the program arent exactly happy with it. However, thats a far cry from wanting to end the program anytime soon. We should learn more this week as Fed Chairman Bernanke delivers his semiannual monetary policy testimony (Tuesday and Wednesday).

2013-02-20 Stock Market Lingers At A Precarious Place by Gary Halbert of Halbert Wealth Management

The Dow Jones Industrial Average has flirted with its all-time high of 14,198 twice in February as the Dow managed to rise above the 14,000 mark but then fell back. The S&P 500 Index is not quite as close to its all-time high, but it is within striking distance. There is widespread optimism that both indexes can break-out to new record highs, which would likely spark a new buying surge.

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.

2013-02-14 How Not to Run a Pension by John Mauldin of Millennium Wave Advisors

For all the focus on the unfunded liabilities of Social Security and Medicare, there is another unfunded crisis brewing, and this one is in your own back yard. It's coming to you even if you live outside of the US; it just might take a little longer to get there. I wrote ten years ago that state and local pension funds might be underfunded by as much as $2 trillion. It turns out that I was being overly optimistic. New government research suggests that the figure might be as high as $3 trillion. But what if you take into account that retirees are living longer?

2013-02-14 When Politics Trump Economics by Scott Minerd of Guggenheim Partners

The U.S. economic expansion continues, but increasing attention to political risks, and currency wars, in particular, indicate a period of heightened volatility could be ahead.

2013-02-14 Pressure Points: Where Tax Reform Can Be Most Effective by Team of Knowledge @ Wharton

The deficit deal that averted the fiscal cliff crisis at the start of the year raised taxes on the wealthiest and postponed -- for two months -- government spending cuts that threatened to derail the economic recovery. But the problem remains: Spending far exceeds revenue. So what's to be done? Five Wharton faculty members offer their 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 The Milton Friedman Centenary: One Hundred Years of Surprisingly Little Solitude by Laurence B. Siegel (Article)

Milton Friedman was once a lonely voice for capitalism in a collectivist era, and seemed doomed to a hundred years of solitude. Instead, he arguably became the preeminent public intellectual of the hundred years that followed his 1912 birth.

2013-02-12 Currency Wars? What Currency Wars? by Christian Thwaites of Sentinel Investments

There's much talk of currency wars right now. We think they're way overblown. The source of the problem lies with Japan, which has made explicit a strategy to lower the yen, increase domestic demand and increase inflation. It needs to do all three. The twenty year old balance sheet recession and deflation in Japan has been a costly error in targeting inflation and not much else.

2013-02-08 Weekly Economic Commentary by Team of Northern Trust

Immigration reform would help the US economy at many levels. There is much going on with the US labor force participation rate. Will leadership change usher in a new era at the Bank of Japan?

2013-02-07 From QE to Queasy: Fiscal Policy and the Risk of Inflation by Jason Hsu of Research Affiliates

Quantitative easing does not directly cause inflation. Rather, by enabling the government to issue low-cost debt, it fosters undisciplined spending, says Jason Hsu, CIO of Research Affiliates, LLC in this commentary. This spending, in turn, generates inflation, transferring wealth from future taxpayers to the current generation. Hsu argues that Americans are more likely to follow the European model of insufficient saving than to imitate the Japanese practices of private sector belt-tightening, high savings rates, and international lending.

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 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 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.

2013-02-04 Some Seasonal Blips by Christian Thwaites of Sentinel Investments

We had a week of big numbers last week of which GDP, Personal Income, Durable Goods, the Conference Board's Consumer Confidence, payrolls and the FOMC were the ones that had our attention. We went to print a little earlier this week, so missed the NFPs. But this is what came at us. First GDP. There's a spin to be told but here are the raw numbers with the center column the one that caught markets wrong-footed.

2013-02-01 The Biggest Loser by Peter Schiff of Euro Pacific Capital

For the past few generations Switzerland has enjoyed some of the strongest economic fundamentals in the world. The country boasts a high savings rate, low taxes, strong exports, low debt-to-GDP, balanced government budgets, and prior to a few years ago one of the most responsible monetary policies in the world. These attributes made the Swiss franc one of the world's "safe haven" currencies. But in today's global economy, no good deed goes unpunished.

2013-01-31 Closed-End Fund Review: Fourth Quarter 2012 by Jeff Margolin of First Trust Advisors

Following a year (2011) when the average closed-end fund was up a respectable 5.37% on a share price total return basis, closed-end funds posted even better performance in 2012, with the average fund up 14.00% (according to Morningstar) on a share price total return basis. The strong performance was broad and deep with many categories posting double-digit total returns. There were many factors which contributed to the strong results posted in 2012 and while I have written and spoken about them before, I want to reiterate them here.

2013-01-31 Fiscal Cliff: Making Decisions in Crisis Part II by Brian Singer of William Blair

Having set a framework using strategic decision theory to interpret the choices of US politicians in response to their incentives around the "fiscal cliff," we now similarly turn our attention to the incentives (or disincentives) around the choices facing investors. While the general rise of uncertainty around changes to the rules of a game slow down the decision making process of investors, we consider the implications of a shifting tax burden on longer run equity valuations.

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.

2013-01-29 Strategies for Speculating on the Crisis in Japan by Simit Patel (Article)

Bears on Japan are finally, after nearly two decades of being on the wrong side of the market, getting some vindication. The end of 2012 was marked by a significant decline in the Japanese yen and a rise in the yield on 30-year Japanese Government Bonds (JGBs). Should those trends continue, the conventional wisdom is that investors will do best by shorting JGBs. But a superior strategy is to short the yen itself.

2013-01-29 Economics and the Maximization of Profit (and Lies). by Dan Ariely of Dan Ariely Blog

When a friend sent me this paper the other day, I admit that I took a long hard look at myself and my economist friends. According to this study, economists, it seems, are worse than most when it comes to truth telling. This discovery was made by researchers Ral Lpez-Prez and Eli Spiegelman, who wanted to examine whether certain characteristics (for instance religiosity or gender) made people averse to lying. They measured the preference for honesty by canceling out other motivations, such as altruism or fear of getting caught.

2013-01-29 What Budget Problems? by Christian Thwaites of Sentinel Investments

"Vickers falls on fear of peace." There's an apocryphal story of how on the day after D-Day, the stock of Vickers, a large defense contractor, abruptly fell. I can't find the source but it was a good story going around the City some, ahem, 30 years ago. Last week there was not a lot of price action in bonds until Friday when economic upticks replaced budgets as the main driver. We saw a one point correction in treasuries. The market is right to push budget concerns into the background for now.

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.

2013-01-25 Prisoner of the Bureaucracy by John Mauldin of Millennium Wave Advisors

I wrote some time ago that Greece had a choice between Disaster A: staying in the euro; and Disaster B: leaving the euro. I have recently come back from four days in Greece, meeting with lots of people at all levels of society, and will share with you in this letter my analysis of their choices and the results. I'll also have a few things to say about what the developments in Greece might mean for the rest of Europe and the developed world.

2013-01-25 Housing Is Off the Floor, But Faces Ceilings. by Team of Northern Trust

Housing is off the floor, but faces ceilings. The cost of housing could be a source of increased inflation. January's FOMC meeting should not break any new ground.

2013-01-25 The Case for Japan with a Caveat by Russ Koesterich of iShares Blog

While Im optimistic that Japanese stocks can move higher in coming months, Id advocate investing in them only if dollar-based investors have the flexibility to hedge the currency effect of a weaker yen (more on that below). So with that caveat out of the way, here are four reasons why I think Japanese stocks can move higher in the near term.

2013-01-25 Japan: Another Season of Downturn Abe? by Milton Ezrati of Lord Abbett

The returning prime minister is trying to spark the moribund economy with the same old remediesbut bolder action is needed.

2013-01-24 German Gold Claw Back Causes Concern by John Browne of Euro Pacific Capital

Last week the Bundesbank (the German central bank) surprised markets around the world by announcing that it will repatriate a sizable portion of its gold bullion reserves held in France and the United States. To many, the news from the world's second largest holder of gold signaled a growing, if clandestine, mistrust among central banks, possibly fueled by diverging policy goals. The Germans have attempted to tamp down the alarm by highlighting the myriad of logistical, practical and historical reasons that qualified the announcement as unremarkable.

2013-01-24 Quick Takes on the Investing Year Ahead by Sam Wardwell of Pioneer Investments

We covered a lot of market and investment topics at Pioneer's National Sales and Marketing Meeting last week. Here are some notes on a few that were popular: GDP Growth for the U.S.. Expectations for rates: Fed Funds Rate and the 10-year Treasury, EM equities favored over U.S. Equities?, Things that keep us up at night (outside of the debt ceiling, Europe, and Middle East tension.

2013-01-23 Avoid Disappointment, Aim Low by Christian Thwaites of Sentinel Investments

No, it's not a life aspiration. But it can work when it comes to investing. We had a rush of gains coming into the end of the year with the S&P up 22% over the year. But it's also one of the more relaxed markets and start we've had in years. The political agenda is still front and clear and we're in a lull until the debt ceiling arguments gain steam. The markets know this but seem comfortably complacent. They're probably right to be.

2013-01-22 Dylan Grice: Witch Hunts, Inflation Fears, and Why Im Bearish in 2013 by Michael Skocpol (Article)

For someone who started his remarks proposing to 'kill all the economists,' Dylan Grice can wax surprisingly sentimental, with a fresh, human take on monetary policy that leads him to some worrisome conclusions. Making a case for gold, cash, and other safe havens, Grice said the biggest threat to investors today is a problem that has plagued societies throughout history mistrust.

2013-01-18 Quarterly Review and Outlook by Van Hoisington, Lacy Hunt of Hoisington Investment Management

The American Taxpayer Relief Act has lifted the immediate uncertainty of the fiscal cliff. Nevertheless, tax increases that are already in effect from this act, as well as the Affordable Care Act, impose a major obstacle to growth for the U.S. economy in the first half of 2013. The result of these taxes is considerable, especially in light of the poor trend in household income. In addition, these tax increases will continue to act as a drag on economic growth until late in 2015 and are unlikely to produce the revenue gains advertised.

2013-01-16 Haka Politics and the Slow Crawl by Christian Thwaites of Sentinel Investments

In the last few months we have seen the rise of Haka politics. Familiar to any All Blacks fan, this is the ritualistic Maori war dance, full of noise, bluster and theater. But it rarely intimidates and most opponents sit it out with some amusement. So it is with the political interventions last year. We saw countless announcements and intentions from EU leaders and solemn pledges with little follow-through. And in the US we had a soporific election and a squalid squabble over the fiscal cliff that caught the public but not the market's attention.

2013-01-15 The Nothing That Is by Michael Lewitt (Article)

The world is awash in money. But money isn't what it used to be. I would point to two characteristics of modern money that should be keeping portfolio managers up at night (they certainly keep me up at night).

2013-01-15 Land of the Rising Dead by Christian Thwaites of Sentinel Investments

Yes, you knew we were going to talk about Japan. It's all the rage and the big standout in market performance in the last few weeks. Since November the broad Nikkei-225 average has risen 24% because there's new thinking in town. It's hard to describe Japan's 20 year malaise. Once proud companies shaken, the shattering of a property market and total collapse of stocks. Even if the market rises at the same level of the last few months, it will take six years to re-reach its peak. A more reasonable 10% growth rate will take 14 years. Weird things happen when economies enter deflation.

2013-01-15 Forecast 2013: Unsustainability and Transition by John Mauldin of Millennium Wave Advisors

As we begin a new year, we again indulge ourselves in the annual rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.

2013-01-11 The Margin Debate by Mebane Faber of World Beta

One of the more interesting debates regarding stock valuations is the state of profit margins. One one side you have Hussman and GMO lining up, and on the other Jeremy Siegel and Redleaf. Im on the side of the former, and this is one of the reasons we have moved the majority of our equity allocations to foreign markets (valuations being another).

2013-01-10 Market Perspectives Q4 2012: Politics vs. Economics by Richard Michaud of New Frontier Advisors

The major news of the quarter was that a fiscal cliff deal passed in the final hours of the 112th Congress and was signed by President Obama. The deal averts tax increases on most Americans and prevents large indiscriminate cuts in spending in many government programs. It also averted, by nearly universal consensus among macroeconomists, tipping the American economy into recession with attendant global implications.

2013-01-08 Energy and the End of Growth by Michael Edesess (Article)

Is economic growth coming to an end? That's been a hot topic of discussion, thanks to a paper by Robert J. Gordon. It had a simple but striking thesis: 'There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely.' But before 1750 there were no fossil fuels either. Only once humans tapped the large deposits of coal and oil did economic growth truly awaken. The history of economic growth is, so far, the history of fossil fuels. This causes us to wonder whether economic growth will end when it is no longer powered by fossil fuels.

2013-01-08 Brave New Start to the Year by Christian Thwaites of Sentinel Investments

Well that was fun. Negotiations went to the brink, we had politicians dropping the "F" bomb a few steps from the Oval Office, the Senate described as "sleep deprived octogenarians" by a congressman and an all around feeling that it was better than nothing. Welcome to the American Taxpayer Relief Act, which actually, er...raises taxes for everyone. That's right. No one in 2013 pays less than they paid in 2012. This is our best estimate of the fall out. It's definitely better than what was at risk back in November but it's still a net drag on the economy of around 1.0%.

2013-01-03 The Political Economy of 2013 by Mohamed El-Erian of Project Syndicate

Watching America's national leaders scramble in the closing days of 2012 to avoid a "fiscal cliff" that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of global economic developments. This will become even more evident worldwide in 2013.

2013-01-03 Taking Care of Business, DC-Style, to Avert the Fiscal Cliff by Liz Ann Sonders of Charles Schwab

No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.

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 Somewhere Over the Rainbow by John Mauldin of Millennium Wave Advisors

We are 13 years into a secular bear market in the United States. The Nasdaq is still down 40% from its high, and the Dow and S&P 500 are essentially flat. European and Japanese equities have generally fared worse. The average secular bear market in the US has been about 11 years, with the shortest to date being four years and the longest 20. Are we at the beginning of a new bull market or another seven years of famine? What sorts of returns should we expect over the coming years from US equities?

2013-01-02 The Unstarvable Beast by Kenneth Rogoff of Project Syndicate

As US President in the 1980's, the conservative icon Ronald Reagan described his approach to fiscal policy as "starve the beast": cutting taxes will eventually force people to accept less government spending. So why has the cost of government not only in the US continued to rise inexorably?

2012-12-27 The Ten Most-Read Articles in 2012 by Robert Huebscher (Article)

As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months. In decreasing order, based on the number of unique readers, those are

2012-12-27 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)

Great articles don't always get the readership they deserve. We've posted the 10 most-widely read articles for the past year. Below are another 10 that you might have missed, but I believe merit reading.

2012-12-26 Looking on the Bright Side by John Mauldin of Millennium Wave Advisors

It is Christmas Eve and not the time for long letters just a brief note on why the fiscal cliff is not the End of All Things, and to point out a worthy cause led by some good friends of mine who are helping people who truly have no options in life. And we'll start things off with a movie review of sorts to launch us into a positive take on the year behind and the year ahead.

2012-12-21 Greedy Innkeeper or Generous Capitalist? by Brian Wesbury, Bob Stein of First Trust Advisors

Over the centuries, people have come to believe that because Jesus was born in a stable, and not in a hotel room, Mary and Joseph must have been mistreated by a greedy innkeeper. This narrative persists even though the Bible records no complaints at the time and there was apparently no charge for the use of the stable. It may be that the stable was the only place available. Bethlehem, like other small towns, was overflowing with people who were forced to return to their ancestral homes for the census - ordered by the Romans for the purpose of levying a tax.

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 The Barbarous Relic Expresses an Opinion by John Gilbert of GR-NEAM

Gold has a long and varied history in economics and finance. Otherwise sensible people lose rationality and logic when conversation turns to the subject, with some rising to passionate romance, and others to apoplexy. It elicits neither for us, which allows us an attempt at a reasoned view. That is more important today than usual, because there is a message in gold's price behavior, and it is not an encouraging one. That message is that not only are rates of return low at the moment, but they may remain there for some time.

2012-12-18 Better Angels by Michael Lewitt (Article)

If all else fails, President Obama should lock the members of Congress inside the Capital about a week before Christmas, post the military at the door, hang big-screen television in each chamber, tune them to CNBC, and turn up the volume up. Faced with listening to endless repetitions of the words "rising above" or "fiscal cliff" or "kick the can down the road," our legislators will have no trouble reaching a compromise quickly.

2012-12-18 The Fed's Giant Stride by Christian Thwaites of Sentinel Investments

FOMC: The news from this meeting was widely telegraphed (see Yellen, Evans, etc. last month) but produced some real and welcome developments. Here's the quick summary.

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.

2012-12-15 Saving for Retirement Stage 2: The Sandwich Generation by Team of Franklin Templeton

Youve probably heard of the term sandwich generation, a time at mid-life when many individuals find themselves caring simultaneously for their children and their aging parents. Its a time when investment dollars can get squeezed out by day-to-day and unexpected expenses, a mortgage and possibly even a college savings plan. In this second of our three-part Investing for Retirement series, we take a look at some retirement savings strategies for individuals coping with these mid-life challenges as they themselves begin to look toward transitioning into retirement.

2012-12-13 The Fed and The Fiscal Cliff by Evan Schnidman of Fed Playbook

President Obama and Speaker Boehner are Thelma and Louise getting ready to drive the car off the cliff with the U.S. public locked in the trunk. While the Fed may not have the power to hit the breaks for them, they could simply refuse to fill the car with gas. Instead, the FOMC decided today to top off the tank and sup-up the engine in hopes that the President can floor it to clear the ravine.

2012-12-12 The Fiscal Cliff Doesn't Arrive on December 31 by Sam Wardwell of Pioneer Investments

The news media is breathlessly counting down the days until the arrival of the fiscal cliff on December 31. It may make for good television (tune in tomorrow) but it's not good economics...or good political analysis. Here's why.

2012-12-12 Mish Shedlock Exposed by Peter Schiff of Euro Pacific Capital

In January 2009, just as the "Peter Schiff was Right" YouTube video that catalogued my previously derided predictions about a coming financial collapse was racking up views and attracting mainstream attention, a blogger and investment advisor named Mike Shedlock (aka "Mish") saw an opportunity to make an unethical grab at my current and prospective clients by breaking the nascent wave.

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 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

2012-12-11 Peak Oil or Peak Energy? A Happy Solution by John Mauldin of Millennium Wave Advisors

A consistent theme in this letter has been the connections between items that may seem to be far removed from each other but are actually linked at the very core. If you push on one end you get a reaction in what would seem to be the most unlikely spots. Today we explore the connection between the fiscal deficit and energy policy.

2012-12-11 PIMCO Cyclical Outlook: At Policy Crossroads by Saumil Parikh of PIMCO

The maturation of the global cyclical growth phase suggests we look to a handoff to more secular drivers of growth. But strong secular drivers remain elusive due to the continuation of New Normal headwinds.Policies are at important crossroads in every major economy. 2013 will be the year of policy change, with policymakers in major economies challenged to enact structural changes that spur private sector growth before government-balance-sheet-led growth is exhausted.

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 Have the New Paper Clips Arrived, Enid? by Christian Thwaites of Sentinel Investments

If there's one economic stat that spans the economic/political spectrum, it's jobs. Last week's NFPs had a headline of 146,000, way above estimates, and an unemployment rate of 7.7%, the best since December 2008 and a comfortable one point below a year ago.

2012-12-07 The Keynesian Depression by Scott Minerd of Guggenheim Partners

Five years have passed since the beginning of the Great Recession. Growth is slow, joblessness is elevated, and the knock-on effects continue to drag down the global economy. The primary difference between today and the 1930s, when the U.S. experienced its last systemic crisis, has been the response by policymakers. Having the benefit of hindsight, policymakers acted swiftly to avoid the mistakes of the Great Depression by applying Keynesian solutions. Like the last depression, we are likely to live with the unintended consequences of the policy response for years to come.

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 Americas Hope Against Hope by Joseph E. Stiglitz of Project Syndicate

After a hard-fought campaign, it seems that not much has changed in American politics. The main cause for celebration is that America has avoided policies that would have pushed it closer to recession and increased inequality further.

2012-12-05 Headline Roulette by Christian W. Thwaites of Sentinel Investments

That Fiscal Thing dominated the week. Every twitch out of Washington was greeted with over analysis by the press and us. Less so the markets. Truth is, markets are not very good at discounting political uncertainty. Sure, a tax scare here and a debt ceiling impasse there might lead to a sell-off but ultimately it's about earnings, corporate health and outlook and on those metrics, nothing last week really upset the markets in a major way. The bond market tends to get this right.

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 Cliff Diving by Michael Lewitt (Article)

While there may be compromise to avoid the self-inflicted crisis of the fiscal cliff, the course of fiscal policy is unlikely to alter significantly. There is a great deal of bold talk about tax reform, but the odds of our current leaders replacing our profoundly flawed tax regime with one that would breed economic growth and productivity are low. Congress will be lucky to avoid the fiscal cliff; asking it to alter the economy's DNA is unrealistic.

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.

2012-11-30 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.

2012-11-29 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?"

2012-11-29 Ready for Takeoff by Team of Janus Capital Group

Rising fuel costs grounded airline stocks for much of the last two decades, but we think those costs were the impetus for significant structural changes that have positioned them to take off.

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 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.

2012-11-21 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 ...'Til Debt (Limit) Do Us Part by Gary Halbert of Halbert Wealth Management

Last week I discussed the "fiscal cliff" and the political battle that entails. If lawmakers cant come together for a solution before the end of the year, the economy is almost certainly headed for a recession or worse in 2013 and beyond. But there's a potentially even bigger battle coming up in the next couple of months.

2012-11-20 Kyle Bass on the Next Big Crisis by Robert Huebscher (Article)

If economics could be studied in a laboratory, scientists might concoct something like the circumstances now unfolding in Japan and policymakers should be paying close attention. According to Kyle Bass, Japan's currency and its bond market are about to collapse under the weight of the country's unsustainable fiscal deficit.

2012-11-20 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors

For the last year, as I travel around, it seems a main topic of conversation is "Where will my kids find jobs?" It is a topic I am all too familiar with. Where indeed? Youth unemployment in the US is 17.1%. If you are in Europe the problem is even more pronounced. The basket case that is Greece has youth unemployment of 58%, and Spain is close at 55%. Portugal is at 36% and in Italy its 35%. France is over 25%. Is this just a cyclical symptom of the credit crisis?

2012-11-17 Three Events That Sum Up the Week by Frank Holmes of U.S. Global Investors

India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounceback in demand due to improved sentiment during the festival season. The Federal Housing Administration reported that it has exhausted its reserves, possibly requiring a bailout from U.S. taxpayers for the first time ever in its nearly 80-year history. The global economic picture came into focus a little more this week with the announcement of Chinas new leadership.

2012-11-16 November Fundamentals by Chris Brightman of Research Affiliates

For the second half of the 20th century, U.S. gross domestic product growth averaged 3.3% per year. This growth was driven by a combination of rising population and employment rates and increased productivity. But all three of these factors are slowing or declining. What does this mean for future growth?

2012-11-16 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles

Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011.

2012-11-14 Helplessly Hoping...That a Market Riot Isn't Needed for Fiscal Cliff Fix by Liz Ann Sonders of Charles Schwab

A status-quo election puts the "fiscal cliff" front and center. The stock market's knee-jerk reaction was to sell; could further weakness light a fire under politicians? Good news has come from recent economic numbers, but sentiment will remain under pressure until the fiscal cliff is resolved.

2012-11-14 The Sun Also Rises by James Hunt of Tocqueville Asset Management

In his latest "Insights" piece, James Hunt, portfolio manager of Tocqueville International Value Fund, explains why Japanese equities, despite the country's poor demographics, huge public debt and weak growth prospects, still harbor some excellent opportunities. Mr. Hunt writes: "Everyone thinks Japan is sinking into obscurity and this negative sentiment provides us with the opportunity to buy what I consider to be excellent global franchise businesses at knock down valuations."

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 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 Central Bank Insurance by John Mauldin of Millennium Wave Advisors

"If you want to enjoy life, go to Buenos Aires. If you want to do business, go to Sao Paulo," the saying goes. It is hard to get an impression of a country by going to a city of 20 million people. It is like visiting New York City and thinking you can understand the United States. But I never fail to enjoy myself in Brazil.

2012-11-12 A Man Without a Plan by Robert Shiller of Project Syndicate

During the US presidential campaign, Mitt Romney accused Barack Obama of having no "plan to get the economy going." But Romney had no such plan, either, and the electorate was wise to resist the temptation to wishful thinking that his proposals represented.

2012-11-12 What If US Economic Growth Is Over? by Russ Koesterich of iShares Blog

A new research paper argues that investors may be grossly overestimating how fast the United States is likely to expand in the coming decades. Could this be the case? Russ K weighs in.

2012-11-09 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors

On 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. Thats how we did it in the 1990s, when Bill Clinton was president, says the president.

2012-11-09 What If US Economic Growth Is Over? by Russ Koesterich of iShares Blog

A new research paper argues that investors may be grossly overestimating how fast the United States is likely to expand in the coming decades. Could this be the case?

2012-11-09 Will China Ditch Mao To Save The Party? by James Gruber of Asia Confidential

Maintaining the status quo isn't an option. It'd jeopardize the future of the Communist Party itself. But the party has a habit of reinventing itself and I am cautiously optimistic that it'll do so again. You're likely to see China move more and more towards a Singaporean-style economic and political model.

2012-11-08 Overcoming the Brake Light Shockwave by Christian Thwaites of Sentinel Investments

Big democratic breakthroughs, say Egypt, Tunisia are halting and fall far short of the hopes they embodied. Technology is a race over mobility and brevity but hardly elicits the same wonder from years past. Governments are polarized. The US had almost no voting overlap in recent years so big ideas are on the wane. In Europe, the supra-national organizations like the EU are swift to talk and slow to act. No we're not reactionaries. We think all this is explained by the deepest drop in output in the post-war period and the slowest recovery.

2012-11-06 The Absolute Return Letter: The Era of Kakistocracy by Neils Jensen of Absolute Return Partners

We are now five years into a crisis that just doesn't want to go away. Paraphrasing Charles Gave of GaveKal who wrote a supremely succinct paper on this topic only last week, policy makers continue to tamper with interest rates, foreign exchange rates and asset prices in general. They continue to permit deposit-taking banks to operate like casinos. They issue new debt to pay for expenditures when we are already drowning in debt. They just don't seem to get it. Albert Einstein once defined insanity as doing the same experiment over and over again, expecting a different result.

2012-11-06 Favorable Reports Post Sandy by Christian Thwaites of Sentinel Investments

The devastation of Sandy blighted the week. We were lucky in that most of our employees escaped the worst effects. We had some evacuations and plenty of lost power. But the images of devastation were overwhelming and we hope our clients and friends of the firm are safe. Perhaps, as a non-native, my perspective is warped but in the US we have an uncanny ability for industry, problem-solving, drive, inventiveness and optimism. Sometimes the very best of us comes out in these times.

2012-11-05 Three Men Make a Tiger by John Mauldin of Millennium Wave Advisors

In a few hours we will know the outcome of the US elections (hopefully without a repeat of 2000!). So, given that eventuality, why should we bother to explore the rather significant disparity in the models being used to create the polls to predict the outcome of the elections? Because doing so will help us understand why the models we use to predict the effects on our investments of market behavior and macroeconomics so often fail us, and why we should approach the use of such models with a full measure of wariness and skepticism.

2012-11-02 Who Will Lead America Over the Next Four Years? by Frank Holmes of U.S. Global Investors

If President Obama is reelected, it could be a negative for certain energy companies involved in natural gas fracking, says International Strategy & Investment (ISI). Conversely, a Governor Mitt Romney win could be significant for energy companies. In its Romney Portfolio ISIs rationale is that Romney and the GOP will try to do more to promote traditional forms of energy, including offshore drilling, approving the Keystone pipeline, and exploiting the nations coal resources.

2012-11-02 What Would Happen at the Fed Under a Romney Presidency? by Josh Thimons of PIMCO

Between now and the election expect markets to continue to reflect the changing election probabilities. Expect Treasury yields to climb if Romneys probability of victory increases due to fear of what he will do when it comes to Fed nominations. However, any substantial rise in Treasury yields based upon a Romney victory is likely to be a buying opportunity, because Fed policy will be accommodative regardless of who controls the White House.

2012-10-31 Macro View: Natural Disaster Economics by Scott Minerd of Guggenheim Partners

"Super-Storm" Sandy will distort economic activity and data over the coming months.

2012-10-30 The Next Generation of Income Guarantee Riders: Part 1 - The Deferral Phase by Wade Pfau (Article)

Clients no longer need to move their assets to a variable annuity with a rider to guarantee lifetime withdrawal benefits, thanks to the RetireOne stand-alone living benefit (SALB) rider from Aria Retirement Solutions, which can be applied to a portfolio of mutual funds and ETFs. Despite this enticing promise, however, the SALB may not offer as much downside protection as advisors and clients expect.

2012-10-30 Nice Speech, Tough Crowd by Christian Thwaites of Sentinel Investments

Sandy is pummeling everything we know on the eastern seaboard. I hope everyone stays safe and we can ride this out without too much damage. Thankfully markets are closed. Meanwhile, here's our views on capital markets on Monday.

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.

2012-10-29 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.

2012-10-29 The Shifting Investment Environment: Picking Growth Stocks in a "Saturated" World by Virginie Maisonneuve, Katherine Davidson of Schroders Investment Management

Is the global economy close to reaching a tipping point? The impacts of our key themes (demographics, climate change and the emerging market supercycle) are combining with the ramifications of the global financial crisis to create an environment where growth is reaching a point of "saturation". In this world, focusing on the sustainability of growth becomes more important than ever. This is important for investors as the global economy painfully adjusts to new realities and follows a rocky path to normalization.

2012-10-26 Don't Fear a Normal Gold Correction by Frank Holmes of U.S. Global Investors

Dont let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, these are the positive dynamics driving higher prices for gold and gold stocks.

2012-10-26 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore and James Pressler of Northern Trust

Fiscal policy is a matter of multiplication. US GDP growth accelerated in the third quarter, but remains less than ideal. Recent reports out of China reassured the markets, but underlying trends are not so promising.

2012-10-25 In or Out? The Case for - and Against - the Stock Market by Team of Knowledge @ Wharton

Given ongoing volatility in the stock market, it's no surprise that investors are increasingly bearish on the market's prospects, beset by a lack of confidence in its institutional underpinnings and a general pessimism about the direction of the economy. But is that distrust misplaced? Wharton experts are mixed about the future fortunes of the stock market, with some saying that investors are withdrawing at the worst possible time and others noting that many people had entrusted too much of their retirement savings to the fate of equity markets.

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.

2012-10-23 Six Unexpected Ways to Boost Productivity by Dan Richards (Article)

If vacations don't boost productivity, then what does?

2012-10-23 The Perils of the Fiscal Cliff by John Mauldin of Millennium Wave Advisors

In today's letter we'll peek over the Fiscal Cliff and see what economic models can tell us about government spending. And if we have time we'll quickly look at an interesting study that uses economics to predict the outcome of this US presidential election.

2012-10-23 Silver Anniversary by Jeffrey Saut of Raymond James

It was Friday October 16, 1987 as I looked across Wheat First Securities' trading desk only to see a stark look on the face of my second in command, Art Huprich. At the time the D-J Industrials (INDU/13343.51) were down about 100 points with 30 minutes left in the trading session. And, as stocks swooned I said to Art, "Today is just for practice!" Little did I know how prophetic that statement would prove.

2012-10-22 More traction...Just Look Through the Earnings by Christian Thwaites of Sentinel Investments

Last week saw an important debate on how the US has fared in the post recession recovery. The short answer is, "not well" if measured by a return to GDP growth trends or per capita income. But the counter, as explained by Reinhart and Rogoff, is "faster than you would expect." We're in the second camp.

2012-10-19 Getting Trampled by the Herd by Team of Franklin Templeton Investments

Many people are programmed to assume the consensus view is the correct one. They see a particular movie based on a number of positive reviews, buy a particular phone because people have camped out in front of a store to get it, or change their hairstyle based on the latest fad. It's extremely hard to go against the crowd, even if you can't afford that fancy new phone, or that new hairstyle isn't actually so attractive on you. It may be easy to laugh off falling prey to a gadget trend or a hairstyle, but what happens when it's your investments that have been trampled by following the herd?

2012-10-19 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors

This appears to be a good time to be investing in China, as stocks are historically cheap. Chinese stocks are also cheap compared to emerging markets.

2012-10-18 Quarterly Review and Outlook - Third Quarter 2012 by Hoisington and Hunt of Hoisington Investment Management

Entering the final quarter of the year, domestic and global economic conditions are extremely fragile. Across the globe, countries are in outright recession, and in some instances where aggregate growth is holding above the zero line, manufacturing sectors are contracting. The only issue left to determine is the degree of the downturn underway.

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.

2012-10-17 Economics is Such a Drag by Fred Copper of Columbia Management

At least in Europe it is. Central bankers around the world are doing everything they can to try and pump up the global economy. Mario Draghi, President of the European Central Bank, has been incredibly aggressive and creative in trying to rectify the imbalances plaguing Europe.

2012-10-16 Stiglitz vs. Bremmer: Whats Next for the Global Economy? by Ben Huebscher (Article)

On October 3rd, the same night Barack Obama and Mitt Romney were clashing in their first debate, two equally polarized men met in New York City's Kaufmann Concert Hall to discuss the future of economics, both here and abroad.

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."

2012-10-15 Seven Varieties of Deflation by A. Gary Shilling of Gary Shilling & Associates

Inflation in the U.S. has historically been a wartime phenomenon, including not only shooting wars but also the Cold War and the War on Poverty. That's when the federal government vastly overspends its income on top of a robust private economyobviously not the case today when government stimulus isn't even offsetting private sector weakness. Deflation reigns in peacetime, and I think it is again, with the end of the Iraq engagement and as the unwinding of Afghanistan expenditures further reduce military spending.

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 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.

2012-10-11 When Averting Loss Can Lead to Averting Gains by Team of Franklin Templeton Investments

Think about something you'd really hate to lose, something of value to you such as a treasured possession. Now imagine you're told that if you lay that object on the line in a bet, you have a good shot at doubling its value, but there's also a possibility you'll lose it. How low would the chance of loss have to be before you'd be willing to take the risk? Maybe 10 percent? Less than that? The answer may lie in a behavioral economic theory called "loss aversion."

2012-10-10 A Kid's Market by Jeffrey Saut of Raymond James

Last week a particularly wily Wall Street wag asked me, "Hey Jeff, do you know why everyone is underperforming the S&P 500?" "Not really," I responded. He said, "Because the S&P has no fear!" That exchange caused me to recall an excerpt from the book The Money Game. I like this story...

2012-10-09 Riding Into The Sunset or a Brick Wall? by Peter Schiff of Euro Pacific Precious Metals

A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn't predict with certainty that he would do so - only the few men at the FOMC knew that for sure - but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve.

2012-10-09 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

Stocks advanced last week as the impact of the Fed's monetary easing combined with some better economic data persuaded traders to continue to buy.

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.

2012-10-08 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."

2012-10-08 Strong Employment But Still Lots of Slack by Christian Thwaites of Sentinel Investments

The ECB's dearth of tools came through loud and clear last week. Rates remained unchanged not because the economies have a ghost of a chance of recovery but because inflation, at 2.7%, scored well above the 2% target. There's a certain amount of in-built inflation in European economies not present in the US, for example, indexing across many industries and pensions, VAT and euro denominated commodity costs. The combination of higher oil costs and a weaker euro put some of the YOY increases in energy costs as high as 40%.

2012-10-05 When Do You Ignore Your Gut? by Team of Franklin Templeton Investments

Anyone who took an introductory psychology class probably remembers the classic study in which different people witnessing the same crime each report a different take on what happened. Though each presumably sane, sober person witnessed the events with his or her own two eyes, individual expectations and biases influenced how they perceived what happened. Sure, you say, but what does this have to do with investing? Well, it turns out that our individual expectations and biases influence how we view investments, too.

2012-10-03 Understanding How "Debt Deleveraging" Works by Gary Halbert of Halbert Wealth Management

For many years, I have warned that our massive explosion in federal debt (up 50% just since Obama took office) would one day stifle economic growth. Obviously economic growth is currently stifled, what with the weakest post-recession recovery in decades. But the question remains as to whether our massive national debt and trillion-dollar budget deficits are the main reason for the disappointing recovery.

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.

2012-10-01 Typical Post-QE by Christian Thwaites of Sentinel Investments

We have typical post-QE market behavior. GTs sold off, then rallied. Equities rose, then flattened. The dollar sold off then strengthened. Gold crept up. Other commodities rose, yawned and gave up most of their gains. Earlier QEs took several months for this to play out. It now all happens in quick time.

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 The Housing Market: For Real or Fakeout? by Jeffrey Dow Jones of Jones & Company

Most of you guys know that I bought a new house last summer. I spent two years looking at properties with the lovely (and patient!) Mrs. Concord, and eventually we found one that had what we each were looking for. My #1 criteria was value. Not price, but value.

2012-09-26 Will Solar Ever Reach "Grid Parity"? by Catherine Wood of AllianceBernstein

The coming of grid parity keeps receding into the distance like a desert mirage. Over the last six years, executives at solar energy firms and their consultants have projected repeatedly that solar energy will reach grid paritybecome cost competitive with other power sourcesin three to five yearsonly to push its expected time of arrival further into the future. My colleague Brett Winton explains why.

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 Clear Progress by Christian Thwaites of Sentinel Investments

Two weeks into a new era of ECB and Fed policy and it is a tie between the gains in equities, with the US and European broad indexes up around 2.2%. But it's the lack of follow-through and opacity of the ECB moves which are perhaps the most disconcerting and so, probably, the more short-lived. While both central banks reported easing in the form of securities purchases they had very different origins and aims.

2012-09-21 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors

Could a transaction tax have unintended consequence for American banks? While the jury is still out on that answer, Hungarys example is a reminder to policymakers to comprehensively consider the rewards of collecting a Robin Hood tax along with the risks. Profits and bank credit growth rates across Hungary plummeted due to the hefty bank levies imposed.

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.

2012-09-18 Your Clients' Toughest Retirement Decision by Wade Pfau (Article)

Want to trigger an impassioned debate? Ask a group of advisors about the choice between systematic withdrawal plans and single-premium immediate annuities. Fee-only advisors are loath to cede control of client assets to an insurance company that might someday default, while annuity advocates fire back that only their strategies provide a lifetime income guarantee.

2012-09-14 Open-Ended Easing by Carl Tannenbaum and Asha Bangalore of Northern Trust

The Federal Open Market Committee (FOMC) took a very forceful set of steps this week, designed to stimulate what officials have called a "frustrating" job market. Our updated forecast suggests that the growth trajectory of the US economy is positive but sufficiently sub-par for the Fed to have initiated additional monetary policy support. There are increasing signs that China's economy is slowing more than the official readings would suggest.

2012-09-12 On Uncertain Ground by Howard Marks of Oaktree Capital

I'm going to devote this memo to the uncertainty in the world and the investment environment and then offer my take on the appropriate strategy response. This will require me to touch on a large number of topics, but I will try to dwell less than usual on each of them.

2012-09-11 Ponzi Games by Michael Lewitt (Article)

Whatever schemes the European Central Bank may cook up over the next few months will only prove short-term liquidity relief to what are long-term insolvency problems. Like any Ponzi scheme, the last money in is going to be hurt the worst when the charade comes to an end. In the meantime, investors proceed at their own risk.

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 The Fed's Campaign by Peter Schiff of Euro Pacific Precious Metals

This past Friday, as Fed Chairman Ben Bernanke delivered his annual address from Jackson Hole - the State of the Dollar, if you will - I couldn't help but hear it as an incumbent's campaign speech. While Wall Street was hoping for some concrete announcement, what we got was a mushy appraisal of the Fed's handling of the financial crisis so far and a suggestion that more 'help' is on the way.

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.

2012-09-07 Recent Speech Given by Lacy Hunt, Ph.D. by Lacy H. Hunt of Hoisington Investment Management

The most sensible recognition of budget policy came from David Hume, one of the greatest minds of mankind. In his 1752 paper Of Public Finance, Hume advocated running budget surpluses in good times so that they could be used in time of war or other emergencies. Such a recommendation would, of course, prevent policies that would send countries barreling toward the bang point. Countries would have to live inside their means most of the time, but in emergency situations would have the resources to respond.

2012-09-04 New Research - How to Help Clients Make Better Decisions by Joe Tomlinson (Article)

Making decisions is not something human beings are very good at. We do a poor job of predicting what will make us happy in the future, we often misjudge our ability to handle risk, and our decisions are plagued by subtle biases that throw us unwittingly off course. Because the essence of financial planning is making decisions about the future, it's critical that clients and advisors understand how decision-making biases can be identified and overcome.

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 Whos 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 Curious Repetition by Christian Thwaites of Sentinel Investments

Greece had a bond payment in the middle of the week that was paid with no drama and then announced that it had enough cash to finance its needs through October. However, it is using cash set aside to recapitalize banks in order to meet general obligations. The bond buying proposals are still priced into the market.

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.

2012-08-25 Boomers are Breaking the Deal by John Mauldin of Millennium Wave

We look at the trends in employment as well as take note of a signpost we passed on the way to finding out that we cant pay for all the future entitlements we have been promised.

2012-08-24 Gold: First Mover Advantage by Frank Holmes of U.S. Global Investors

This week, gold bugs were rewarded with the long-awaited positive momentum in the yellow metal, and on Friday, bullion rose to about $1,670. After falling below the 200-day moving average, gold had been stuck in quicksand for several months. With the jumps in the price this week, bullion swiftly rose above this critically important long-term moving average.

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.

2012-08-21 Secrets of a Great PowerPoint Presentation by Wade Pfau (Article)

Achieving your goals as a public speaker is never easy, and modern tools - especially Microsoft PowerPoint - can hinder as much as help, if used improperly. But a carefully prepared presentation with a clear underlying message, memorable visuals and a focus on making the message useful for the audience can strongly differentiate your speech and help you make a lasting impression.

2012-08-21 Letters to the Editor by Various (Article)

A reader responds to the commentary, Maybe This Time is Different, by Andrew Redleaf of Whitebox Advisors, which was published on August 14, and a reader responds to Michael Edesess' article, Why Hedge Funds Destroy Investor Wealth, which was published last week.

2012-08-21 Anniversary Weaks by Christian Thwaites of Sentinel Investments

A couple of anniversaries last week: five years since the start of the credit crunch and one year since the US downgrade. The ramifications of both are still evident daily, of course. We're still living the consequences. So this is as good a time as any to take stock.

2012-08-21 U.S. Equities After the Earnings Season: Is There Still an Opportunity? by Joseph Tanious of J.P. Morgan Funds

Now in its fourth year of recovery following the financial crisis, the S&P 500 is once again testing the 1400 level, having rallied over 100% from its March 2009 lows. Meanwhile, earnings have hit an all-time high, but it is becoming clear that earnings growth is slowing. All of this has occurred against a backdrop of global economic uncertainty, unprecedented central bank action, and the most polarized U.S. political landscape we have ever seen.

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 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.

2012-08-14 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."

2012-08-14 Careful With That Beehive, Eugene by Christian Thwaites of Sentinel Investments

When you move a beehive, you must move it more than three miles or not less than three feet. Anything else confuses the bees. Markets can be the same. And that's why President Draghi's comments reverberate still after two weeks. No one seems to understand what he meant.

2012-08-11 And Then There Is Disaster C by John Mauldin of Millennium Wave

I have contended for some time that Europe is faced with two choices: Disaster A, which is the break-up of the eurozone, or Disaster B, which is the creation of a fiscal union, which keeps the euro more or less intact. Over the last few months I have come to realize that there is indeed a third option, which now looks increasingly possible. European leaders might do nothing more than deal with the problem immediately in front of them, moving from crisis to crisis in a slow-motion drift toward fiscal union.

2012-08-10 Citius, Altius, Fortius by Carl Tannenbaum of Northern Trust

Countries across the globe seek faster, higher, stronger growth. Central banks in the United States and Europe are both seeking new ways to stimulate economic activity. Recent news from the housing market has been encouraging, but the race to recovery is likely to be a marathon, not a sprint. Headwinds blowing from Europe and China will continue to present significant downside risks to U.S. economic growth.

2012-08-09 Pacific Basin Market Overview - July 2012 by Team of Nomura Asset Management Co.

Most equity markets in the Pacific Basin region recovered somewhat in July after a weak second quarter on expectations of further monetary easing and measures by the European Central Bank to forestall a Euro currency crisis. However, when we examine the sector results, it is hard to conclude that the recovery was accompanied by an improvement in sentiment.

2012-08-08 How Hoover Caused the Euro Crisis by Christian Thwaites of Sentinel Investments

There is a Burkean principle that many sorts of change must be regarded with skepticism. In the last few months in Europe we have seen new maxims, new ideas, new commitments, new resolves, lots of new acronyms, yet very little has changed from two years ago when Greece surfaced as the first casualty of the banking/sovereign crisis.

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?

2012-08-07 Mixed Signals Color Downgrade Anniversary by Kristina Hooper of Allianz Global Investors

Two trouble spots for the economy, the job market and housing, generated some good vibes amid gloom over no action from central banks and manufacturing weakness. Unfortunately, it wasnt enough to push the stock market into positive territory for the week. But looking through a longer-term lens, stocks have been resilient since last year's debt-ceiling drama and Standard & Poors downgrade of U.S. debt.

2012-08-07 All That and Nothing To See by Christian Thwaites of Sentinel Investments

The ECB learned a tough media lesson last week. If you say, as Mr. Draghi did in a pre-Olympic euphoria, that you will do "whatever it takes to preserve the euro" then markets will take you at your word.

2012-08-06 From Resource Curse to Blessing by Joseph Stiglitz of Project Syndicate

New discoveries of natural resources in several African countries including Ghana, Uganda, Tanzania, and Mozambique raise an important question: Will these windfalls be a blessing that brings prosperity and hope, or a political and economic curse, as has been the case in so many countries?

2012-08-03 Time to Row, or Sail? by John Mauldin of Millennium Wave Advisors

Earnings are a topic of great debate. At any given time, you can hear someone on TV talking about how "cheap" the market is, while the person on the next channel goes on about how expensive the market is. Today we look at the cycle of earnings, rather than a specific point in time. Let me give you a little preview. In terms of time, this earnings cycle is already longer than average, and in terms of magnitude it is projected to go to all-time highs.

2012-08-02 Two Inflection Points by Andrew Redleaf of Whitebox Advisors

I'm generally happiest, professionally, when I have at least one strong investment conviction. Currently I have two. I want to be long large-cap equities and short small-cap equities. And I want to be long cheap options on natural gas, mostly by owning E&P (exploration and production) firms that have become attractively cheap with the collapse of gas prices.

2012-08-01 Housing: Good Vibrations by Liz Ann Sonders of Charles Schwab

It's time for an update to January's report on housing, and the news continues to get better. Household formations are key. Household formations are moving higher but housing completions aren't keeping pace. Real mortgage rates plunge into negative territory. Key housing market index indicates continued sales (and pricing) recovery.

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 Dealing with Elderly Clients by Beverly Flaxington (Article)

What do you do when your client base is largely made up of elderly people and they are starting to fail - especially mentally? I have a number of clients who seem to be suffering from early dementia and memory loss. I don't want to be offensive to them, but I don't trust they even understand what I am saying sometimes about their financial situation.

2012-07-31 Uncertainty Reigns Supreme by Chris Maxey, Ryan Davis of Fortigent

With the first half of the year in the rearview mirror, investors might be lulled into thinking the most active period of the year is also in the rearview. Fast forward to year-end, though, and investors may beg for a return to the sanguine days of early 2012. A range of events in the coming months will likely dictate market optimism for 2012, 2013 and possibly beyond.

2012-07-31 An ECB Rally by Christian Thwaites of Sentinel Investments

We remain dependent on European statements but what a difference a year makes. This time last year we saw softening economic data and increasingly poor news coming out of Europe. But then we had a diffident ECB president who had just finished a round of rate increases as Europe slumped. This time we have combative words from Mario Draghi to support the euro, apparently at all costs.

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.

2012-07-28 Gambling in the House? by John Mauldin of Millennium Wave

The problem that gave rise to the LIBOR scandal is the lack of transparency. Why would banks want to reveal how much profit they are making? The last thing banks want is transparency. This week I offer a different take on LIBOR, one which may annoy a few readers, but which I hope provokes some thinking about how we should organize our financial world.

2012-07-25 Top Line Growth Stalling Amid Global Weakness by Chris Maxey, Ryan Davis of Fortigent

At this juncture, positive catalysts seem few and far between. According to FactSet, 18 of 22 companies have already guided lower for the third quarter. Analysts are also ratcheting down forecasts quickly, with flat earnings growth expected in Q3. While growth is expected to pick back up in the fourth quarter, analysts have not cut those estimates aggressively yet. If the economic picture does not improve in the next few months, expect a pattern of downgrades to follow suit.

2012-07-25 Low Interest Rates Are Not Enough by Mohamed El-Erian of PIMCO

Welcome to what could be called "GGIRC," the great global interest rate convergence whereby interest rates steadily converge to zero in many countries around the world, both advanced (other than the crisis European economies) and emerging (other than the persistent financial basket cases). In theory this is a good thing for a global economy. In practice, however, the situation is much more complicated and not so benign.

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 Weaker Headlines by Christian Thwaites of Sentinel Investments

Well, the whole Spanish banking solution from a few weeks ago was not destined to last. Back in late June, the EU welcomed, along with the ECB, EBA and IMF that the EFSF /ESM would provide around 50bn of capital, provided the financial sector gave certain conditions and horizontal restructuring plans. And, even better, the FROB would receive the funds and ensure at the time of the capital infusion, Spain would honor its Excessive Deficits Procedures. Got that?

2012-07-24 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

I want to dispel the notion that I am an investment bear. There is nothing wrong with expressing an opinion, bullish or bearish, particularly when the consensus says its alright. Proof of one's courage, though, lies at the margins, during undetectable inflection points, before the consensus has arrived. My track record versus the benchmarks demonstrates a successful delineation between bearishness and being opportunistic.

2012-07-24 A Growing Water Crisis Creates Investment Opportunities in Agriculture by Jon Brorson, Geoffrey Lutz of Mesirow Financial

Water is ubiquitous, the ultimate source for life and the most important commodity for human existence. No less importantly, water is a critical input for food. Yet only a small fraction of total global water less than 1% is usable for food production, due to salinity and glaciers. As a result, water represents one of the single most important determinants of the value of today's investment opportunities in food production and farmland.

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."

2012-07-21 The Lion in the Grass by John Mauldin of Millennium Wave

Today we'll explore a few things we can see and then try to foresee a few things that are not so obvious. This is a condensation of a speech I gave earlier this afternoon in Singapore for OCBC Bank, called "The Lion in the Grass." The simple premise is that it is not the lions we can see that are the problem; but rather, in trying to avoid them, it is often the lions hidden in the grass that we stumble upon that become the unwelcome surprise.

2012-07-20 America's Competitive Spirit by Frank Holmes of U.S. Global Investors

We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.

2012-07-17 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles

Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before. If this is indeed another rerun, we should expect central bank and other policy responses to help limit the fallout. As we see it, hesitancy and solvency traps are the main obstacles to recovery.

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?

2012-07-14 The Beginning of the Endgame by John Mauldin of Millennium Wave Advisors

For the last year I have been writing that it is not clear that Europe (with the probable exception of Greece) will in fact break up. The forces that would see a strong fiscal union are quite powerful. In today's letter, I will try to bring you up to date on some insights I have had in the 18 months since Jonathan Tepper and I did the final edits on our book, The Endgame.

2012-07-13 Looking Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors

Tremendous population growth, changes in government policies, development of new technologies, urbanization trends work the same way. Its what Jeremy Grantham called the great paradigm shift and they have equally dramatic effects on how we invest in commodities, change opportunities and adjust for risk. Smart investors look past the rampant negativity in the media to see these patterns and anomalies to determine where the opportunities and threats lie.

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?

2012-07-07 Into the Matrix by John Mauldin of Millennium Wave Advisors

What does the current environment of earnings and valuations tell us about the prospects for the US stock markets in general over the next 3-5-7-10 years? This week we have part two of "Bull's Eye Investing Ten Years Later," which we started last week. These two letters have been co-authored with Ed Easterling of Crestmont Research. We take a look at research we did almost ten years ago as part of my book Bull's Eye Investing, updating the data and asking,"Are we there yet? When will we get to the end of the secular bear market?"

2012-07-06 Market Perspectives Q2 2012: A Long Road Ahead by Richard Michaud of New Frontier Advisors

The most important economic news in the quarter occurred in the last two business days. Investors were losing patience with seemingly endless and ineffectual eurozone summitry. But the resolutions by the four major eurozone members at the end of the quarter were different. The agreements allow recapitalization of Spanish banks and purchase of Italian sovereign bonds. The proposals appear to effectively address short- and long-term problems in the eurozone economies.

2012-07-03 A Crisis Is Not An Emergency by Christian Thwaites of Sentinel Investments

Some crises linger for years. The sterling crisis began in 1964 and, despite periodic respites, was not solved until the early 1990s. The oil crisis burned for over ten years until the political and economic stars realigned and restored order. Latin America lingered for over ten years before a breakthrough of sorts...not for everyone though, as Argentina's GDP per capita is the same as it was in 1960. A crisis is not the same as an emergency.

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.

2012-06-30 Bull's Eye Investing (Almost) Ten Years Later by John Mauldin of Millennium Wave Advisors

The current valuation of the stock market is relatively high, but it is not overvalued, considering today's conditions. Low inflation-rate conditions should be accompanied by relatively high P/Es. But if deflation or high inflation (or both) are likely upcoming, the market is very expensive. On the other hand, if the inflation rate happens to remain near price stability, then this secular bear could remain active a while longer but how likely is that?

2012-06-28 European Leaders Play With Fire by John Browne of Euro Pacific Capital

The world economy today stands at the doorstep of great change. A gathering crisis looms in Europe, splitting the Continent into two competing blocs. While leaders there face off against one another in a high stakes game of chicken, the rest of the world powerlessly watches the train wreck slowly unfold.

2012-06-27 An Ending Made For Gold by Frank Holmes of U.S. Global Investors

Over the past several months, the markets have tested investors conviction to gold. Since February, the price of the yellow metal has steadily stepped lower, rallying somewhat in May before falling again when Ben Bernanke disappointed by not providing the U.S. with more stimulus. Meanwhile, the dollar gained ground as global investors fled the euro.

2012-06-26 A Top Analyst: North America Heading to Energy Independence by Robert Huebscher (Article)

Ed Morse, a managing director of Citigroup Global Markets, said last week that by the end of this decade the US and Canada will have a surplus of oil, leaving it with 'no room for imports.' But the longer-term picture is far less certain, as extraction moves from conventional wells to newer sources, such as deepwater fields and shale-based oil.

2012-06-25 Enter, the Blindside Recession by John P. Hussman of Hussman Funds

The joint evidence suggests that the U.S. economy has entered a recession that will eventually be marked as having started presently. In recent months, our measures of leading economic pressures have indicated the likelihood of an oncoming U.S. recession.

2012-06-25 12 Reasons US Recession Has Arrived (Or Will Shortly) by Mike "Mish" Shedlock of Sitka Pacific Capital Management

I am amused by the Shadow Weekly Leading Index Project, which claims the probability of recession is 31%. I think it is much higher. When the NBER, the official arbiter of recessions, finally backdates the recession, May or June of 2012

2012-06-25 Jilted Investors Unsure Where to Turn by Chris Maxey and Ryan Davis of Fortigent

Institutional and individual investors are at an uncertain juncture, waiting to see what the next shoe to drop is. With an important series of events occurring soon, such as the US Presidential election this fall and the fiscal cliff facing the US at years end, investors may need to wait to get more clarity on the market outlook.

2012-06-25 Timid Actions, Fearful Times by Christian Thwaites of Sentinel Investments

Since 2010, investors have traveled between optimism and pessimism every three months. It's negative right now. Here's why: A very timid move by the Fed. What was glaring was the entire board revised down their expectations on the economy: i) GDP down by $500bn ii) unemployment up 500,000 and iii) lower core and PCE inflation. Not just for 2012 but next year as well. That takes complacency to a new level.

2012-06-23 Daddy's Home by John Mauldin of Millennium Wave Advisors

This week we will look at the recent action of the Fed and use that as a springboard to think about how effective Fed policy can be in an age of deleveraging. And we simply must look at Europe.

2012-06-22 Trickle Up Economics by Peter Schiff of Euro Pacific Capital

The political left wing has long tried to cast doubt on the fairness, and even the efficacy, of free market capitalism by branding it as a "trickle down" system. This epithet is meant to show how the middle and lower classes are dependent on scraps of wealth that happen to fall from the buffet table of the rich. This characterization of an unfair and inefficient system has helped them demonize policies that lower taxes (if they also extend to the wealthy) and reduce regulation on business.

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.

2012-06-21 50 Potential Investment Opportunities to Participate in the New Golden Age: Part Three by Chuck Carnevale of F.A.S.T. Graphs

In parts one and two of this three-part series I presented a case that focused on the long-term potential for a bright future of economic strength and growth. Moreover, I pointed out that I felt that the best of what our economic future holds goes mostly ignored, in favor of a focus on our problems. Therefore, I concluded that there exists a general pessimistic view of our future that I believe is wrong.

2012-06-19 Retirement Floors and Implications for Evensky's Cash-Reserve Strategy by Wade Pfau (Article)

Does sensible retirement planning call for funding basic needs with less volatile assets and investing more aggressively for aspirational goals? Or, with client goals clearly defined and prioritized, does sensible planning call for a total returns approach? Multiple schools of thought have emerged, but there is not yet any consensus about what constitutes a proper retirement income floor. These lingering unresolved disagreements reinforce the benefits of Harold Evenskys and Deena Katz popular strategy.

2012-06-19 Letters to the Editor by Various (Article)

Readers response to Richard Vodra's article, Energy and the Wealth of Nations, which appeared on June 5 and to John Hussman's commentary, The Heart of the Matter, which appeared on June 11.

2012-06-18 I Like These Calm Little Moments Before the Storm by Christian Thwaites of Sentinel Investments

It is the job of investment managers to look beyond the gloom. There's plenty of it. The big list last week was the slow hand clap the market gave to the Spanish bank rescue, the probable downgrade of India, one of the dead cert BRICs we all read about, and queasy economic data from the US. Now we don't just jump in and buy on all the bad news. We're not likely to retain clients that way.

2012-06-16 The Bang! Moment is Here by John Mauldin of Millennium Wave Advisors

We know that money is simply flying out of Greek banks. A number of them are clearly insolvent, yet they are meeting demands for withdrawals. Where is the cash coming from? The answer is in the form of yet another acronym from Europe, called the ELA.

2012-06-15 Every Economists Career Ends in Failure - The Irony of Hyman Minsky by John Gilbert of GR-NEAM

The economist Hyman Minsky held that capitalist economies are inherently unstable because investments are financed with debt, and the financial markets pricing of debt is volatile. Economies are prone to booms and busts as the cost of financing falls too far, or rises too much, revealing poor investment decisions. This has always been obvious to observers of business cycles, of which Minsky was one. Too many of his colleagues in economics ignore this, which we have found puzzling.

2012-06-15 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles

Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011. If this is indeed another rerun, we should expect central bank and other official policy responses to help limit the fallout. As we see it, hesitancy and solvency trapsnot a liquidity trapare the main obstacles to a lasting economic recovery.

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.

2012-06-12 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.

2012-06-11 Profits for the Long Run: Affirming the Case for Quality by Chuck Joyce, Kimball Mayer of GMO

Low-risk investing is one of the hot topics in equity investing these days. This is a far cry from the environment that prevailed when we launched the Quality Strategy in early 2004. Back then, low-risk investing was a nascent concept. Arguing that risk was priced backwards was a rarity in our industry (although, oddly, it was more accepted in academia). With the passing of time, the benefits of low-risk investing have become more widely accepted. Today, a wide array of low-risk strategies is now available.

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 Damn the Torpedoes by Peter Schiff of Euro Pacific Capital

Given what most economists now know, few would actively argue that Greece's entrance into the Eurozone back in 2001 was a good idea. Much has been written about how the fundamental misfit between Greece's economy and currency gave birth to a deeply flawed system that was destined to run off the rails.xThe same "damn the torpedoes" mentality dominates economic thinking with respect to the U.S. economy as well.

2012-06-05 Daniel Kahneman on the Two Kinds of Thinking - Fast and Slow by Laurence B. Siegel (Article)

When advisors want to understand why their clients make seemingly irrational financial choices, odds are they will find answers in the research of Nobel-winning behavioral economist Daniel Kahneman. But guiding clients toward a better financial future is only one way to apply behavioral finance. Kahneman says we solve virtually all problems, not just financial ones, with two distinct types of thinking.

2012-06-05 Energy and the Wealth of Nations by Richard Vodra, JD, CFP (Article)

It is time for a new and different approach to understanding the economy, according to ecologist Charles Hall and economist Kent Klitgaard, who together are pioneering the discipline of biophysical economics. They advocate a novel methodology that properly accounts for the realities of global energy supplies and consumption.

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.

2012-06-04 After Disappointing Jobs Data, Now What? by Russ Koesterich of iShares Blog

Stocks tumbled Friday after particularly disappointing May jobs data. Russ provides his take on what the report means for the US economy and stocks going forward. First, the implications for the economy: As jobs numbers tend to lag broader economic activity, the report doesnt in itself suggest that the United States is slipping back into recession. In addition, its worth calling out that according to the new data, the United States created only 69,000 net new jobs in May, less than half of what economists were expecting and the slowest rate of net new job creation in a year.

2012-06-04 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

More importantly than not, it is vital to focus upon a bigger broader landscape when evaluating the condition of ones portfolio, than to focus upon tinier exogenous noise as those factors which indicate the probability of outperformance. Too often, and with more frequency, I have seen micro-analysis paralyze investors decision-making, rendering them incapable of reasonable response.

2012-06-02 First Deflation, Then Inflation. But the Timing? by John Mauldin of Millennium Wave Advisors

One of the more frequent questions I am asked in meetings or after a speech is whether I think we will have inflation or deflation. My ready answer is, Yes. Then I stop, which I must admit is rather fun, as the person who asked tries to digest the answer. And while my answer is flippant, its also the truth, as I do expect both outcomes. So the follow-up question (after the obligatory chuckle from the rest of the group) is for a few more specifics. And the answer is that I expect we will first see deflation and then inflation, but the key is the timing.

2012-06-01 Are my methods unsound?...I don't see any method at all, sir. by Christian Thwaites of Sentinel Investments

This week we can add the lowest ever level of GT10, which touched 1.44%, and the 7-year note firmly below 1%. German 10-Year Bunds fell to 1.12%, brining the total return close to 20% over the last year. Over in Switzerland, it will cost you nearly 0.5% for the privilege of holding a two year bond. If negative rates are on offer, distress and fear are not far behind.

2012-05-31 Institutionalizing Courage by Robert Arnott of Research Affiliates

Most investors measure wealth in terms of the value of their portfolio. We believe it is better to measure wealth in terms of the portfolios ability to support sustainable spending. This months Fundamentals explores why this approach requires courage.

2012-05-30 The Eurozone Crisis: 8 Key Events to Watch by Russ Koesterich of iShares Blog

Be prepared for another volatile summer. From now until July, there are a number of pivotal events from votes to meetings that could help dictate Greece and the eurozones future, and will most certainly drive market sentiment. But because the outcome of many of these events is so hard to predict, I expect markets will remain especially volatile in the days leading up to these key dates. Among the 8 pivotal moments highlighted, key events include a May 31 Irish referendum on the Stability Treaty, and the June 17 Greek elections, among others.

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 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 Can Krugman Fix Our Economy? by Robert Huebscher (Article)

Our economy faces depression-like conditions, according to Paul Krugman, in its alarmingly high unemployment rate. It neednt be that way, though, Krugman says a few simple steps could quickly solve our problems.

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 Unraveling the Mess in Europe by Charles Lieberman (Article)

There is considerable nonsense written about the European debt crisis. Greece must balance its books, whether they remain inside the Euro or not. There are major benefits and costs to both remaining inside the Euro and to exiting. There is no silver bullet that will solve their problems easily. More broadly, banks need to be recapitalized all across Europe. This has not been done as yet, perhaps for political reasons, which only compounds the economic problems and allows them to fester. It seems like the Europeans are working towards solutions, but painfully slowly.

2012-05-29 Europe Is Near Term Driver of Market Movements by John Buckingham of AFAM

Plenty of uncertainty surrounds developments in Europe, so Ive chosen to pen this Memorial Day version of our Market Commentary on Monday afternoon rather than the usual Sunday evening. Of course, had the U.S. stock markets been open today, we might have seen a modest advance, given that the equity futures were suggesting that gains of some 40 or 50 Dow Jones Industrial Average points would be in the cards when trading resumes.

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.

2012-05-25 There's No Place Like America by Frank Holmes of U.S. Global Investors

Investors arent endorsing U.S. equities today. With all the positive aspects mentioned above, todays low participation in the U.S. stock market is perplexing. Here are two more reasons to invest today: 1) About 620 companies in the S&P 1500 Index are growing their revenues at more than 10 percent; and 2) 428 stocks in the index have an annualized dividend yield higher than the 10-year Treasury.

2012-05-24 Europe's Tragedy Nears the End of Act One, but the Drama Continues by Team of Knowledge @ Wharton

What a difference a year can make. When a group of European Union experts met at a workshop in Italy's Tuscan hills in the spring of 2011, the center of attention was Greece and its ever-growing sovereign debt crisis. Could it, should it, default on debt repayments? And what would happen then? The delegates wondered whether the result might be a meltdown not just of the Greek economy but of Europe as a whole.

2012-05-24 Through the Economic Lens: 2012 Looks More Like 2010 by Robert Stein of Astor Asset Management

The recent selloff in the market, with nervous investors made all the more so because of the medias obsession with financial issues in Europe, is renewing talk about bear markets and recessions as people head for cover. In the midst of their misguided fears of a contagion effect, there is also concern about the fiscal cliff, spending cuts and higher tax rates that, at this point, will take effect on January 1. (Funny how that sounds like it would be a good idea for our debt problem.)

2012-05-23 Greece Poised to Default & Exit the Euro by Gary D. Halbert of Halbert Wealth Management

Weve all heard horror stories about the global financial crisis that could unfold if tiny Greece defaults on its debts later this year. There are genuine fears that if Greece defaults, that leaves the door open to similar defaults by Portugal, Ireland and possibly even Spain. Some fear, in this nightmare scenario, that even Italy could default (although I doubt it). Will the ECB pony up even more taxpayer money for Greece this time around? Most agree that this will be decided largely by Germany.

2012-05-22 New Lows and a Dud IPO by Christian Thwaites of Sentinel Investments

We're testing all sorts of lows: 1) record low for GT10 auction last week 2) GT30 yield, same level as Dec 2008 3) European banks are at same price level as 25 years of gains wiped out 4) euro stocks same level as March 2009, so all the gains gone 5) US safest and best place to be 6) China stocks at same level as 2006, since then the Chinese economy has doubled and 7) to cap it all we had an IPO that should never have happened. We're back in risk territory and markets don't want to extend or commit.

2012-05-22 Niall Ferguson - The West's Six Killer Apps by Robert Huebscher (Article)

For five centuries, the West dominated Eastern economies. But, beginning with the fall of the Berlin Wall in 1989, the East has now caught up, according to Niall Ferguson. It did so by downloading six "killer apps."

2012-05-22 Life-cycle Finance and the Dimensional Managed DC Pension by Wade Pfau (Article)

Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.

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 My Speech to the Finance Graduates by Robert J. Shiller of Project Syndicate

At this time of year, at graduation ceremonies in America and elsewhere, those about to leave university often hear some final words of advice before receiving their diplomas. For those contemplating a career in finance or related careers in insurance, accounting, auditing, law, or corporate management the message is simple: the world needs you to reinvent the industry.

2012-05-21 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Its not simply the magnitude of the number, two billion dollars, nor the redundancy of these tales of corporate hubris. No, its the laissez-faire manner in which business continues to ignore its customers that encapsulates a feeling of angst, disrespect and depression that overtakes an average observer when confronted with headlines about oil companies, pharmaceutical firms, technology megaliths, or financial institutions.

2012-05-21 Global Shipping: Any Port in a Storm? by Sai Devabhaktuni and Gregory Kennedy of PIMCO

With the exception of LNG tankers, all three major shipping categories have been suffering from a supply glut. This, combined with higher fuel costs, has led many shipping companies into financial distress. Although banks have worked with ship owners through this down cycle, they have also pulled back from financing the industry. We believe downside risks are likely minimized in the shipping industry for new lenders and investors. Vessel values are depressed by rates that are sometimes below owners' operating costs and by an oversupplied market that suppresses secondary market values.

2012-05-18 Gold: The World's Friend for 5,000 Years by Frank Holmes of U.S. Global Investors

Investors have defriended gold recently in favor of the dollar, as Greek and French voters rejected austerity measures. Greeks have been responding to their escalating debt issues for a while by steadily pulling money from overnight deposits. I often say, money goes where it is best treated, and these deposits will need to find a safe haven.

2012-05-17 You should worry about EM inflation. Not US inflation. by Richard Bernstein of Richard Bernstein Advisors

Investors seem overly concerned about US inflation. Both market-derived expectations and actual rates of US inflation remain very subdued, yet we are consistently asked about inflation and whether our investment strategies are adequately structured for high US inflation. Across the board, these data do not support structuring investment strategies for the US inflation that investors, oddly enough, feel is inevitable. The data do, however, suggest that investors recent rush into emerging market debt is much riskier than they anticipate.

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 Optimizing Social Security Benefits by Wade Pfau (Article)

My dissertation was about Social Security reform, so I've read more of the Social Security Handbook than any human being should be forced to digest. Despite this background, William Reichenstein and William Meyer's new book, Social Security Strategies: How to Optimize Benefits, taught me a lot about how to strategize to get the most out of Social Security.

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 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.

2012-05-14 A Taste of Reality by Kristina Hooper of Allianz Global Investors

There was nothing fun loving about the spoonful of bad news overseas last week that left investors with a bad taste in their mouths. New wrinkles to Europes debt crisis and slower growth in key emerging markets have shaken the stock market and put the U.S. recovery in doubt. The recovery may be weakening and there is a good chance we will see more negative surprises in the near term. This challenging environment calls for investors to be selective in choosing risk assets. Still, shunning stocks altogether could undermine long-term financial goals and, ultimately, is a recipe for disaster.

2012-05-14 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Celebrations normally reserved for heroic events or political ascension have been breaking out during earnings season, as first quarter (2012) portfolio valuations accelerated and year-over-year comparisons show margin expansion. Doing what they do best, market pundits have been turning flax into gold, proclaiming that the recovery has begun. Another anecdotal elixir. One always wonders whether the chicken or the egg comes first. In this case, proclaiming it to be so precedes the actual fact.

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 The US: Stuck in the Slow Lane How Long? by Russ Koesterich of iShares Blog

A slow growth world does not necessarily mean the death of equities or the absence of opportunities. It does, however, suggest that investors need to have realistic expectations for the US economy, and for most of the developed world. Slower growth, lower interest rates and lower multiples are arguably consequences of higher public debt. And this may be an issue were still contending with in two decades time.

2012-05-10 The Easy Money Has Been Made by Rich Rosen of Columbia Management

As investment professionals, we chafe whenever we hear that expression. Why? Because in this business, there is no such thing as easy money. All our investment decisions are the end result of a great deal of research. Rarely are our greatest expectations realized, but neither are our greatest fears. In either case, it is never easy. Having said that, we feel confident in forecasting that an investment in natural gas (once it bottoms this spring/early summer) will perform substantially better going forward than it has for the last several years and with less risk.

2012-05-10 Q112 Portfolio Commentary for the Absolute Strategies Fund by Jay Compson of Absolute Investment Advisers

It is no secret the structural problems and crises throughout the global economy stem from excess debt. This letter attempts to explain why we think the global economy is in this situation, why the process for creating the problems continues to this day, why financial markets are not out of the woods. We are extremely optimistic about the future investing climate, but only after we get through the final stage of the credit bubble. In our view, the root of the problem stems from the willingness of a broad swath of investors and money managers to bid up asset prices to extreme levels.

2012-05-08 Richard Bernstein: US Assets will Outperform over the Next Decade by Robert Huebscher (Article)

Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.

2012-05-08 Why Be Scared Of A Hat by Christian Thwaites of Sentinel Investments

Markets tend to overreact and the last few weeks in France were no exception. Equities fell around 9% on the expectation of a change in government. On close look, the Hollande manifesto is modest...a change in retirement age here, a year difference to a balanced budget, a non-descript growth pledge, tax banks more, reduce immigration. Markets also have notoriously short memories: socialist (i.e. left of center) governments are good for markets. Stocks rose vigorously in the years after leftist governments took control of France in 1981, Sweden in 1998, the UK in 1997, the US in 1992.

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 6 Reasons Why a Soft Landing in China Matters by Russ Koesterich of iShares Blog

World markets and financial media seem to react to every new data point about Chinas economy, whether its manufacturing reports or gross domestic product numbers. This market sensitivity isnt very surprising given how important China has become for the global economy. But it also means that it will be hard for the global recovery to continue without a soft landing in China.

2012-05-02 Digbys Umbrella and a Dinner to Remember by Christian Thwaites of Sentinel Investments

The US economy is on a painfully slow road. It is recovering. Jobs numbers are better, even though some hiring in the first quarter may have been brought forward by mild weather. Production, manufacturing and exports, all signs of regained competitiveness in the US, are showing steady improvements. And the government sector is contracting. Not on purpose mind you, but jumping off a cliff and letting inertia do the work result in the same end. Above all of this, we have a Fed using every monetary policy at their disposal to try and promote growth and employment.

2012-05-01 The Future of the Automobile by Robert Huebscher (Article)

If you hailed a cab in New York at the turn of the last century - say, around 1900 - it's likely that it would have been an electric car, built by the Electric Wagon Company of Philadelphia. The technology behind those taxis, which became the first electrified fleet in 1897, is likely to power the next generation of cars - sometime in this century.

2012-05-01 Don't End the Fed, Mend the Fed by Paul Kasriel of Northern Trust

Congressman Ron Paul has written a book entitled End the Fed. I have to admit that I have not read his book. But I have read many of Congressman Pauls excellent (in my opinion) essays on monetary theory and policy. Congressman Paul likely argues in End the Fed that the Fed and other central banks have created monetary "mischief" in the past and are likely to continue to do so in the future. Because of this monetary mischief, I assume that Congressman Paul would like to replace the Fed and other central banks with some form of a gold standard. I share Congressman Pauls sentiments.

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.

2012-04-30 Growing Concerns by Scott Brown of Raymond James Equity Research

Real GDP rose less than expected in the advance estimate for 1Q12. However, the details were a mixed bag. The report added little to the debate about where the economy is headed. The first thing to remember about the advance GDP report is that the figures will be revised, and revised again. There is often a larger difference between the advance estimate and subsequent estimates. However, the underlying story behind the numbers typically does not change much. Consumer spending, which accounts for about 70% of GDP, helped by mild weather. Yet, the personal income figures suggest caution.

2012-04-28 A Gold Standard? by John Mauldin of Millennium Wave Advisors

Here is a speech by Jim Grant to the New York Federal Reserve. The always erudite Grant takes us back in time to the very beginnings of the Federal Reserve, to show us how far we have strayed from the original intent. Grant argued for a return to the gold standard in the very halls of fiat money! It seems the New York Fed is asking some of its critics to come and speak.

2012-04-26 Why Eurozone Woes are Creating Headwinds for Global Firms by Team of Knowledge @ Wharton

Europe is in crisis -- and that has major implications for multinational firms with significant operations in the region. In fact, while much is written about the race by corporations to penetrate emerging markets like China and Brazil, the reality is that the investment by multinationals in Europe dwarfs the assets they have in those fast-growing economies. And the sovereign debt crisis in Europe, along with weak economic growth, is sparking changes in how these firms operate -- altering everything from manufacturing strategies to marketing to financial maneuvers.

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 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)

Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.

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

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

2012-04-24 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.

2012-04-24 Real Career Risk by Bill Smead of Smead Capital Management

Real career risk is too many people doing what you do for a living. Granthams problem is that every day three million brilliant people get up and spend most of their waking hours trying to practice wide asset allocation. Most of those three million brilliant people have strong backgrounds in economics and lean on their ability to make macroeconomic predictions. Too many people are doing the same thing at the same time for a living. Therefore, they need to either move to another town or wait patiently for most of the other bright people to take up another profession.

2012-04-23 Middle East/Africa First Quarter 2012 Economic Review by Team of Thomas White International

While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the regions trade, tourism, remittances and other exports receipts. According to the World Banks Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.

2012-04-23 Spring 2012 Quarterly Commentary by Jonathan A. Shapiro of Kovitz Investment Group

Theres an old adage about a six-foot tall man who drowned crossing a stream that was five feet deep on average. We believe the lesson here is well worth heeding. In investing, its not enough to survive on average. Investment survival depends not on how well one performs during periods of market euphoria, but how well you navigate through the rocky episodes. One of the byproducts and, indeed, one of the most important aspects of investing scared is that it obliges us to make sure the downside risk of our portfolios is limited in bad times.

2012-04-23 Fewer Workers: A Drag on US Growth by Russ Koesterich of iShares Blog

The March non-farm payroll report left investors disappointed by the low level of job creation. Yet the number in the report that may prove the most relevant over the long term was largely ignored the proportion of the US population currently in the labor force, a number now at 63.8% and close to a thirty-year low. Over the long term, a countrys economic growth is determined by the rate of increase in the labor force and productivity growth. If fewer people are working growth slows. This is exactly what has happened over the past dozen or so years in the United States.

2012-04-23 A Seesaw of Surprises by Kristina Hooper of Allianz Global Investors

It was a week full of surprisesboth good and bad. Corporate profits in the United States have come in stronger than expected. U.S. consumers are spending more money than anticipated. But continued housing weakness, higher-than-expected jobless claims and deeper disruptions in Europes debt crisis have raised some eyebrows. Adding to uncertainty are the events in the Netherlandsone of only a few AAA-rated lenders in Europeas its government rejected a fiscal austerity plan and now is in jeopardy of collapsing. Here is how to put such a mixed bag in perspective.

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 Weighing the Evidence of Oil and Gold Stocks by Frank Holmes of U.S. Global Investors

We believe in thinking contrarian and keeping a close eye on historical trends to discover inflection points, as stocks tend to eventually revert to their means. For example, in March 2009, we noted significant changes signaling the market had hit rock bottom; following that time through the end of the first quarter, the S&P 500 Index rose more than 100 percent. Todays extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.

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 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 Wheres the Beef for Gold Equities? by Frank Holmes of U.S. Global Investors

If you plan on shopping for bargains in the gold miner department, youre going to fight a crowd. Numerous global investors have been pounding the table for gold stocks, including Marc Faber who said gold shares have become extremely oversold and could rebound in the next few days and Global Portfolio Strategist Don Coxe, who reiterated that gold equities are undervalued compared to the precious metal. A big buyer has been the miners themselves. Mergers and acquisitions in the mining sector have been at an all-time high over the past two years. Theyve been willing to pay a premium too.

2012-04-12 Jobs Data a Reminder of the Slow, Fitful US Recovery by Russ Koesterich of iShares Blog

While last Fridays disappointing monthly jobs report doesnt herald the end of the US recovery, its a reminder of the recoverys fragility and that improvement in the US economy will most likely continue to be slow and characterized by fits and starts. When you view the jobs data in a context of longer than one month, there is evidence that the US labor market has improved since last year. However, its improving from a very low base at an agonizingly slow pace. There is also some evidence that the labor market has structural problems that may prove to be a drag on growth for some time.

2012-04-11 Taxes and Cheating by Dan Ariely of Predictably Irrational

Will Rogers once said that The income tax has made liars out of more Americans than golf and I worry that he was correct. During his confirmation hearing to become the Treasury Secretary, it was revealed that Tim Geithner failed to pay Medicare, Social Security, and payroll taxes for several years while he worked for the IMF. When asked by Senator John Kyl during the hearing about the $40,000 mistake, which Geithner blamed on the tax software he was using it was very clear that this was an avoidable mistakeI had many opportunities to see it. But he didnt, apparently, and that was that.

2012-04-10 HBS Research: The Role of Business in Society by Michael Edesess (Article)

Many people believe that society needs to change for market capitalism to be sustainable - and it turns out a surprising number of business leaders are among them. That's the finding of a recent series of forums, organized by three Harvard Business School professors. Based on these discussions, the HBS professors advance a bold proposal - that business itself - not government, or even public-spirited nonprofits - should lead the charge to make the necessary changes to our capitalist system.

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 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.

2012-04-09 "On Your Own" Economics by Brian S. Wesbury and Robert Stein of First Trust Advisors

The genius of capitalism is that it harnesses self-interest to get people to cooperate. Most observers, including us, describe capitalism as a system of competition. But on a day-in, day-out basis, this competition is not direct hand-to-hand combat to find a victor; its a race to see who can provide the best products at the best price. Its about service to others, not finding ways to force others to bow to our will. More importantly, we work in cooperative effort with others to accomplish these tasks. Government has a role, but economic growth is always strongest where it governs least.

2012-04-09 Policy, Numbers and Markets. Still good. by Christian Thwaites of Sentinel Investments

Commentary continues to use pre-2008 data as a baseline, whether for economic data, household behavior or corporate prosperity. This is a mistake. We remain in a liquidity trap. This happens 1) when asset prices fall 2) the private sector delevers 3) credit demand becomes inelastic, i.e. immune to price 4) savings increase 5) income balances between the private, corporate, net export and government sectors distort and vi) the reluctant leakages destroy aggregate demand. Throw in higher credit standards and necessary re-regulation and you can see why austerity economics is the final bullet.

2012-04-09 Investment Grade Bonds Still Attractive by Tom Murphy of Columbia Management

We continue to find investment grade corporate bonds attractive. Even after a strong start to the year, corporate bond spreads are anywhere from 20-90 basis points above their 20 year averages. This historical absolute valuation advantage is also buoyed by attractive relative valuations versus Treasuries spreads as a percentage of overall yield are currently from 1.8 to 2.4 standard deviations above their 20 year averages. Aggregate corporate credit metrics are also basically as good as they have been any time over that 20 year period, and companies maintain tremendous financial flexibility.

2012-04-07 It's All About Jobs by John Mauldin of Millennium Wave Advisors

Friday's employment numbers were decidedly soft, but the unemployment rate went down anyway, and that is about the best you can say. And this being a holiday weekend, it provides us an opportunity to look deep into the employment numbers, while we put off thinking about Spain for at least a week. And who knew that being an unmarried Asian-American in the US was a risk for unemployment? Plus a few other interesting items will make for an interesting letter.

2012-04-05 NewsLetter - April 2012 by Harold Evensky of Evensky & Katz

Although we continue to believe in the tenets of Modern Portfolio Theory, the concept is Buy-and-Manage not Buy-and-Forget. As a consequence, we made numerous adjustments to our strategic allocations over the years. And, consistent with our buy-and-manage philosophy, for the last few years weve been studying investment markets and have come to believe that long-term future returns are likely to be even lower then we estimated in 2002, market risk will be higher and the benefits from diversification less (i.e., correlations will be higher).

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.

2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)

When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.

2012-04-02 Supremes Hear No Limiting Principle by Brian S. Wesbury and Robert Stein of First Trust Advisors

Those who followed last weeks Supreme Court arguments on President Obamas health care law got a primer in Constitutional Law. The scope of the three-day hearings was breathtaking. While legal issues dominated the conversation, economics also came into play. The question: Is the market for health insurance so unique that the federal government can penalize someone for not buying it.

2012-03-31 All Spain All the Time by John Mauldin of Millennium Wave Advisors

The events of the last 24 hours compel me to once again look "across the pond" at the problems that not only plague Europe but will be a drag on world growth as well, as Europe goes through its continued painful adjustment as a consequence of trying to adopt a single currency. Since Spain is going to be on the front page for some time, it will be useful to look at some of the problems it is facing, to put it all into context. And what I heard while in Europe in private meetings is troubling.

2012-03-30 Kasriels Parting Thoughts Mary Matlins Economics by Paul Kasriel of Northern Trust

There is a controversy about whether one should use real GDP or real GDI to evaluate the performance of the U.S. economy. Real GDP is obtained by adding up spending across the economy and real GDI is computed by adding up income earned. Conceptually, GDP and GDI are identical but the source data for each is different and they yield different numbers. The GDI measure is gaining attention; Jeremy Nalewaik of the Fed has pointed out the National Bureau of Economic Research uses monthly indicators, GDI and GDP to determine official dates of business cycle peaks and troughs.

2012-03-29 China's Gravity-defying Economy: How Hard Will It Fall? by Team of Knowledge @ Wharton

As China's high-octane economy shifts into lower gear, virtually everyone agrees that the double-digit, super-charged boom years are drawing to a close. Speculation over the possibility of a so-called "hard landing" for the country flourishes with each boom and bust cycle, only to die down as China's growth revs up again. This time, however, both external and internal factors -- including global conditions, domestic politics and financial trends -- are reinforcing the downturn. Many experts warn that without some painful reforms, there will be worse trouble to come.

2012-03-29 Should you be Concerned About the U.S. Government Debt? by Jason Hsu of Research Affiliates

Should investors be concerned about the size of the U.S. government debt? Does it matter who owns the debt? This months Fundamentals, authored by Research Affiliates CIO Jason Hsu, examines the implications for future consumption and investors portfolios.

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 Questions of Character by Michael Lewitt (Article)

As a long-time investor in leveraged companies, the character of management has long informed my decisions of where to direct capital. There is no margin of safety when you invest in a company managed by dishonest or reckless managers, or a management team that has a history of placing its own interests before those of its shareholders or creditors. The same is true of choosing an investment manager.

2012-03-27 Letter to the Editor Jeremy Grantham by Various (Article)

A reader responds to Michael Edesess' article, Jeremy Grantham: This Time is Different, which appeared last week.

2012-03-27 Housing Boom? Not Yet by Russ Koesterich of iShares Blog

Despite some recent signs the US housing market may be stabilizing, Russ explains why he doesnt expect a strong housing rebound in the near term and doesnt advocate aggressively leveraging to housing-related investments.

2012-03-27 Investors Still Not Showing Stocks Much Love, U.S. Numbers Pretty Good by John Buckingham of AFAM

Given that the equity markets have been overdue for at least some sort of a pullback, we cant complain too much about the modest three-day selloff that occurred midweek, especially when stocks bounced back nicely on Friday. True, the Dow Jones Industrial Average fell over 150 points on the week, but losses in the other major indexes were generally smaller and with the equity futures on Sunday night signaling that trading in the new week will get off to a decent start, we might argue that last weeks action was a pause that refreshes as opposed to a warning shot across the bow.

2012-03-26 Patience by Jeffrey Saut of Raymond James Equity Research

I continue to exercise patience with the equity markets while I sit on the cash raised over the past number of weeks. Unlike many, I consider cash an asset class. Indeed, to assume the investment opportunity sets that are available to you today are better than ones that will present themselves next week or next month is nave. To take advantage of those opportunity sets one needs to have some cash. For those wishing to be more aggressive, it looks to me as if the U.S. dollar is in the process of breaking down.

2012-03-23 Regressing to the Mean Asset Values Returning to Low Correlations by Robert Stein of Astor Asset Management

Asset values are finally marching, once again, to the beat of their own drummers. This is a welcome change of tune. Among the many investing challenges of the past few yearsbeyond the aftermath of a near-meltdown of the financial system and a global economy that went into a deep recessionwas the high degree of correlation among different assets. Assets moved in tandem, whether in lockstep or with inverse moves, based largely on risk on/risk off investment decisions. Concerned about Europe? Sell stocks, buy bonds. Think the EU ministers will reach a deal? Buy stocks, sell bonds.

2012-03-22 Special Report Oil - "Nothing to Spare?" by Team of Erste Group Research

We see the risks for the oil price heavily skewed to the upside. At the moment, the market is well supplied, but the smouldering crisis in the Persian Gulf could easily push oil prices to new all-time-highs should it escalate. We believe that new all-time-highs can be reached in H1, at which point we could see demand destruction setting in. We forecast an average oil price (Brent) of USD 123 per barrel between now and March 2013.

2012-03-22 Why Gold Can Go the Distance by Frank Holmes of U.S. Global Investors

Golds been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback. Since the beginning of 2012, gold has trailed its precious metals peers, gaining only about 6 percent compared to double-digit returns for silver and platinum. At the end of February, gold was especially hard hit, following Ben Bernankes announcement that there would be no additional quantitative easing and the European Central Bank offering additional LTRO loans to banks.

2012-03-21 US Treasuries: This is the End? by Russ Koesterich of iShares Blog

Last week, the US Treasury market suffered its worst losing streak since 2006. This rapid rise in yields has prompted investors to wonder whether the 30 year rally in bonds is finally coming to an end, and if so how high will rates rise? The answer may surprise you.

2012-03-21 What Goes Up Must Come Down! by James Montier of GMO

Whilst we at GMO fret over evidence of the strained nature of profit margins, the ever bullish Wall Street analysts expect profit margins to continue to rise! Witness Exhibit 4. In our search for evidence of a structural break, this simple-minded extrapolation gives us some comfort because the Wall Street consensus has a pretty good record of being completely and utterly wrong.

2012-03-20 Jeremy Grantham: This Time is Different by Michael Edesess (Article)

Jeremy Grantham is a paradox. A man who has said many times, 'This time it's different are the four most dangerous words in the English language,' is now saying - loud and clear - this time it really is different.

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.

2012-03-19 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 Heart of March Madness by Frank Holmes of U.S. Global Investors

Everyone agrees that its unethical to put the firms interest ahead of its clients. More importantly, a self-serving financial attitude is a breach of fiduciary duties. It may be possible that Goldman Sachs has moral issues, but not all financial firms are morally bankrupt. Nor are thousands of executives and professionals employed in the industrymoms, dads, uncles, aunts, daughters, sonswho are hard-working and acting in the best interest of their customers.

2012-03-15 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

Instead of playing old fashioned fundamentals, gamblers are trying to pre-empt the true north of the markets by risking cash on dangerous bets about real estate, commodities, energy and bonds. In the meantime, the game continues for those who seek cover from the mayhem. Right now, there is little support for bonds or stocks. Yields are too low, and equity valuations have gone through a dangerous cycle. Thus, one might expect turmoil to continue. My risk rankings suggest that there is still more potential for the secular (bear) cycle to continue than there is momentum to reverse that course.

2012-03-13 How Do Spending Needs Evolve During Retirement? by Wade Pfau (Article)

Most people's spending patterns change over the course of retirement - expenses look very different at 90 than they do at 65. Yet most research on retirement withdrawal rates relies on constant inflation-adjusted withdrawals to develop a client's forward-looking budget. Such an unrealistic, one-size-fits-all approach can be disastrous if a client inadvertently retires with insufficient savings. Is there a better way?

2012-03-13 Europe Needs a Good Crisis by Michael Edesess (Article)

When it comes to economies in general and financial crises in particular, it's remarkable how little we actually understand. While global financial actors struggle to restructure Greece's debt and to avoid contagion throughout Europe's periphery, we should recall the lessons of the Asian-Russian crisis 15 years ago. As the writings of Joseph Stiglitz and Martin Wolf remind us - and those events illustrate - crises are part of an evolutionary process, and the afflicted economies often emerge with surprising vigor.

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 Investor Communications: Are You Upbeat, or Upfront? by Wendy J. Cook (Article)

When discussing scary markets with your clients, how do you combine the upbeat inspiration they may want with the upfront, honest information they may need to hear? Striking the right balance makes all the difference.

2012-03-09 Appreciating China to its Fullest by Frank Holmes of U.S. Global Investors

While most analysts dont expect another moon shot rise in China's GDP this year, a 7.5 percent growth rate still exceeds most emerging economies and all developed nations. Advanced economy growth is expected to be meager, slowing from 1.6 percent to 1.3 percent in 2012, according to The Conference Board. For long-term investors learning to appreciate the finer points of the country, we believe China is somewhat like fine wine; it only gets better with age.

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 Bernanke Spooks Gold by John Browne of Euro Pacific Capital

Regardless of who wins the reserve currency race, a key issue will be the gold conversion price. To accommodate the world economy without being recessive, many have concluded that the price of gold would need to be far higher than it is today. In any case, if China continues to pursue a path towards a fully convertible Yuan, investors might be wise to pursue a buy and hold strategy. This of course discounts the possibility that their holdings are not confiscated by debtor governments with plummeting fiat currencies.

2012-03-08 Inflation Inferno? Maybe in 2013 and Beyond by Russ Koesterich of iShares Blog

In a controversial new paper, a staff economist at the Federal Reserve Bank of St. Louis warns that conditions are ripe for a spike in inflation. While Russ shares many of the economists concerns, he explains why its too soon to make significant changes to a portfolio based on inflation fears.

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 Big Headlines...Not Much Action by Christian Thwaites of Sentinel Investments

Bottom Line: Volume: There's still no major conviction in the rally. Too many cautious investors out there keeping a wary eye on their gains. Russell 2000: has broken down recently; the mega caps have overshadowed it. Employment: Still the most sensitive number. Anything above 150,000 is fine but confidence will be shaken if it's much below. AAPL: The most over-owned stock in the market and accounted for about 20% of February gains. The Fed is sticking to its script: and with the growth numbers, this means that GT10s are likely to remain exactly where they are today.

2012-03-05 Dancing with PIIGS by Jim Carroll of Long Run Capital Management

A euro is a euro, right? Worth the same in Ireland, Portugal, Germany, France and Greece? Well, maybe not. There is a lot of political and economic dancing going on in Europe these days and the name of that tune appears to be Love Can Keep Us Together. And it sounds just as vapid and schmaltzy as the original by the Carpenters. But I have become convinced that something else is going on namely a monumental effort to restructure the EU by removing the weakest links in as orderly a fashion as possible. Greece is the first to be loaded into the cannon so lets use them as the guinea PIIG.

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.

2012-03-03 Unintended Consequence by John Mauldin of Millennium Wave Advisors

This week we wonder about the consequences of the European Central Bank (ECB) issuing over 1 trillion in short-term loans to try and postpone a banking credit crisis and lower sovereign debt costs for certain peripheral countries in Europe. What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely? That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.

2012-03-02 Jeremy Lin and the Political Economy of Superstars by Kenneth Rogoff of Project Syndicate

High salaries for athletes and movie stars are easily accepted by the public. So why, if a financial trader or a corporate boss is paid a fortune, does the public suspect that he or she must be undeserving or, worse, a thief.

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.

2012-02-29 Dirt Economics: Demographics Matter! by Shane Shepherd of Research Affiliates

Generations ago, people had large families, ensuring an adequate supply of labor to work the farm and provide a comfortable retirement. Now, families are small and we face a mountain of debt and soaring deficits. This months Fundamentals examines the implications for the economy and investors portfolios.

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 A Simple Strategy to Triple Client Savings Rates by Dan Richards (Article)

Whether dieting, exercising, turning off American Idol to read that book on our side table or spending versus saving, maintaining focus on our resolutions is a universal issue. While attending the American Economic Association meeting in early January, I had three conversations with leading academics concerning experiments to help people stick to their plans, including one that tripled savings rates among employees.

2012-02-28 ARRA, Three Years On by Scott Brown of Raymond James Equity Research

The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. Did it help? Yes, but estimates of the impact vary. Before Barack Obama took office, he selected Christina Romer to be the chair of the Council of Economic Advisors. Romer, a professor of economics at the University of California, Berkeley and an expert on the Great Depression, is exactly the sort of person youd want advice from in combating a severe recession. Its long been rumored that Romer had requested a significantly larger stimulus package than the roughly $800 billion in ARRA.

2012-02-28 The Big Picture Through a Small-Cap Lens by Kristina Hooper of Allianz Global Investors

Things are looking up for investors as a recovery in the job market and a rosier consumer outlook have helped fuel optimism. But spiking oil prices could spoil the party in the short run. A look at small-cap stocks may offer perspective. The rally, Oct. 4 - Feb. 23, has seen the Russell 2000 jump 37%, well ahead of both the Russell Mid-Cap and the Russell 1000 indices. The small-cap rally may be headed for a hiccup, however, one foreshadowed by last weeks slight decline in the Russell 2000. Still many portfolios can benefit from a long-term allocation to small-cap and even micro-cap stocks.

2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates

Earning season plods along with consumer-driven companies like Walt Disney and Coca Cola highlighting the calendar. Investors get a break on the economic front as the mad rush of releases slows, allowing them time to digest this weeks data, particular the news from the labor front. (Surely consumers should be more confident after the favorable developments?)

2012-02-27 Weekly Market Commentary by Ron Brounes of Brounes & Associates

The spectre of Dow 13,000 haunted the market last week. In the midst of a political debate, a moral dilemma, and a global debt conflagration, nothing could be less significant than a numerical integer whose relevance is highly overrated. As numbers crunchers go, there are integers and there are integers. More to the point is the location of the integer and the trend within which it is contained. For example, if Dow 13,000 represents the end of a cycle, a destination, then its significance is diminished as opposed to a breakout on the way to somewhere else.

2012-02-27 Brute Force and Two Serious Problems by Christian Thwaites of Sentinel Investments

The brute force of liquidity driven markets is waning. Earnings season draws in and there were enough negative surprises, about 30% of reporting companies, to take the edge off the rally. As of writing, we're up over 6% YTD on SPX [1] but with little decisive break out in the last three weeks. Why? Well, the culprits are: Greece: Greece has been punching well above its weight as a pain for some time. China: After a pretty awful 2011, when stocks fell 20% and remain at about half the 2007 peak, inflation, housing and net exports remain a problem.

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

2012-02-21 Woody Brock on Solving America's Fiscal Problems by Robert Huebscher (Article)

Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In this interview, he discusses his recently published book, American Gridlock, and how America can grow its economy through 'good' deficit spending.

2012-02-18 Payroll Tax Cut Deal: The Good News and the Bad News by Russ Koesterich of iShares Blog

The good news is that extensions of the payroll tax holiday and unemployment benefits will remove a near-term risk for the US and global economies. But the bad news is that significant economic risks remain.

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.

2012-02-16 American Housing: Falling Prices, But Rising Value by John Gilbert of GR-NEAM

American house prices are approaching a bottom.In certain cases, they are already there. For the better part of the last years we have watched the improving economics of rental cash flow with interest, as monthly rents have risen rapidly while purchase prices have languished. The Fed issued a paper in early January reviewing conditions in the U.S. housing market for the purpose of imploring Congress to make structural changes that would remove barriers to a more rapid recovery.For the Feds pump priming to work, the pump must be capable of functioning properly, they said essentially.

2012-02-14 The Safety-first, Goals-based Approach to Financial Planning by Wade Pfau (Article)

Little of what is taught in traditional investment textbooks is of value in personal financial planning. Risk is not standard deviation; it is the probability and consequences of not meeting one's goals. That real-world perspective animates a new book by Zvi Bodie and Rachelle Taqqu that implores advisors and their clients to lock in the funding of their essential expenses before worrying about their discretionary goals.

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.

2012-02-11 The Answer We Dont Want to Know by John Mauldin of Millennium Wave Advisors

This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable.

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 Missed Opportunities? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab

Investors eased back into stocks to start the year. This is the start of a sustainable trend, but equities rarely go up in a straight line and near-term caution may be warranted. Another deadline is approaching for Congress and the President to make a deal. Something will get done, but any hopes for substantial action remain dim. Markets appear to be more comfortable with the European debt crisis and the risks associated with it. Central banks around the world are easing, which could help support international stocks in the coming months.

2012-02-10 Theres Value in Russias Future by Frank Holmes of U.S. Global Investors

Increasingly, Russian companies have begun paying dividends, with some companies paying as much as a 10% annual dividend. As interest rates around the world will remain low or even negative for years to come, dividends offer investors the opportunity to earn income with the potential of appreciation. Although political risks remain, we believe Russia continues to be a hotbed of opportunity for emerging market investors.

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 Order and Progress on the Rise in Brazil by Mark Mobius of Franklin Templeton

My worldwide pursuit of good investing bargains takes me to some magnificent countries. In my view, Brazil is certainly among the most beautiful and economically vibrant in the western hemisphere. Its Portuguese-speaking multiracial population of almost 200 million1 represents a growing and upwardly mobile consumer market. Brazil is the fifth most populated country in the world and is chock-full of natural resources and rich farmland. Appropriately, the countrys name comes from the wood that grows along the coast, which was greatly valued by the European textile industry.

2012-02-06 Capturing the ECB by Joseph E. Stiglitz of Project Syndicate

There are several explanations for the ECBs insistence on a "voluntary" restructuring of Greece's sovereign debt, none of which speaks well for the institution. Indeed, as we have seen elsewhere, institutions that are not democratically accountable tend to be captured by special interests.

2012-02-03 The Unlikely Bull Market by Niels C. Jensen of Absolute Return Partners

Europe is going from crisis to crisis at the same time as stock markets climb higher. Meanwhile, investors are left confused. The key to understanding the apparent disconnect between stock market behavior and economic fundamentals is the aggressive policy being pursued by the ECB which has eased credit conditions in the crisis-stricken European banking industry. With more QE from the ECB in the pipeline, we expect equity prices to benefit.

2012-02-03 Drudge, Tyler Durden and Economic Ignorance by Brian S. Wesbury of First Trust Advisors

There is a group of influential people (meaning that they get lots of hits on their blogs or websites) who may be articulate and have an ax to grind, but at the same time know little about economics, mathematics and data. A classic example is the Drudge Report link today to a headline and blog post by Tyler Durden that says, Record, 1.2 million people fall out of labor force in one month

2012-02-02 The U.S. Economy: This is How Our Game is Played by Team of American Century Investments

In an election year, it is impossible to escape the bombardment of political rhetoric. Politicians typically have little compunction as they encroach into the arena of economics. As a result, people from all walks of life, including investors, are often left confused and wondering which of the various economic theories and norms remain relevant. The goal of this piece is to consider what recompense we receive from government intervention in the economy. Some bitter divisions exist regarding the style of play that should be adopted to guide our nation as the slow economic recovery continues.

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 Why Target-Date Funds Fail by Robert Huebscher (Article)

New research explains why target-date funds have failed to meet investors' objectives. While most of the criticism has been directed to overly aggressive glide paths, that is merely a symptom of the underlying problem - the misalignment of incentives between investors and fund companies.

2012-01-31 Q4 2011 Market Commentary by John G. Prichard of Knightsbridge Asset Management

The proposed restructuring for private creditors of Greece has been called voluntary. Who voluntarily takes 30 cents on the dollar? The government authorities involved have insisted that any deal be deemed voluntary to avoid triggering credit default swaps (CDS) written on Greek debt. These CDS could accurately be called insurance contracts that are supposed to pay out if the Greek government defaults or changes the terms of its debt. The ISDA, the entity who decides these things, has more or less already said they wont consider the default a default.

2012-01-26 Journey to the Center of the (Fed's) Mind by Liz Ann Sonders of Charles Schwab

The Federal Reserve opted to keep short-term interest rates on the floor and extended the period of time during which rates are likely to remain near zero. Newly published forecasts show slightly better growth, a bit less inflation and a lower unemployment rate. Fed Chairman Ben Bernanke got hit with a lot of questions about the risks of extending zero-rate policy for 2 more years.

2012-01-24 Dale Mortensen on Addressing Unemployment by Dan Richards (Article)

Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the transcript.

2012-01-20 Emerging Consumers Drive Gold Prices: Who Knew? by Amit Bhartia and Matt Seto of GMO

Conventional wisdom has it wrong. The prevailing view is that the rapid rise of gold prices over the past 10 years has been caused by monetary authorities in the developed world debasing their currencies. By this logic, investors in the developed world have hedged debasement risk by pouring money into gold, both in the form of direct purchases and via ETFs. We believe that gold is an emerging markets asset as much as it is a bet against the Fed and that much of the rise in gold prices has been driven by purchases by emerging consumers, who are driven primarily by financial repression.

2012-01-20 The Deleveraging Myth Part 2: Behind Consumer Deleveraging by Russ Koesterich of iShares Blog

The rise in transfer payments can, and probably should, continue in the near term as wage growth is still anemic. However, if previous credit bubbles are any guide, it will take a long time for the labor market to rebound, meaning the consumer is likely to remain dependent on help from the government in the long term. While this will allow consumer deleveraging to continue, it comes at the expense of more government debt and a net effect of more US non-financial debt.

2012-01-18 Rock Bottom: Housing May Have Already Hit It by Liz Ann Sonders of Charles Schwab

A comprehensive (read: long) and chart-filled update on housing suggests the bottom may largely be in. Pricing may have more downside and real mortgage rates need to decline further, but most other metrics are flashing green. New themes: housing becoming "local" again, and for now, renting is trumping buying.

2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)

Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.

2012-01-17 A Nobel Laureates View on the US A Debt Problem, but an Unemployment Crisis by Dan Richards (Article)

Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the transcript of the interview.

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 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).

2012-01-14 The End of Europe? by John Mauldin of Millennium Wave Advisors

The peripheral countries have no choices that allow them to grow and prosper without first suffering (for perhaps a long time) some very real economic pain. Leaving the eurozone has severe consequences; but the economic pain of leaving would go away sooner and allow for quicker adjustments, than if they stayed. However, the initial pain would be worse than the slow pain they'd suffer by staying in the euro. Their choice is, simply, which pain do they want or maybe, which pain do they think they want? Because whatever they choose, they are not going to like it.

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.

2012-01-10 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 Bad Medicine, Bad Policies by Christian Thwaites of Sentinel Investments

We can see the results of sensible monetary policy and not so sensible fiscal policy: slow recovery of manufacturing and service jobs, decline in all government jobs and gradually lower participation rates. Expect these trends to continue. We find 30-year bonds with a near 20 duration very tradable. The YTD price swing is already over 4% and with a 3.0% yield; we must be careful that price changes not wipe our coupon returns. Stocks offer attractive entry points but we look at individual companies, balance sheets and management more than the overall asset class.

2012-01-07 2012: A Year of Choices by John Mauldin of Millennium Wave Advisors

2012 will the year that the consequences of the choices made by the developed world will begin to manifest themselves in the economic realm. We are in the closing chapters of the current Debt Supercycle, with different countries strewn out along the path, and all headed for a destination that will force major decisions if politically painful actions are not taken. Some countries (e.g., Greece) have a choice between the dire and the disastrous. The option for merely difficult choices was long ago, and there is no going back to where you started without a different but equally painful outcome.

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 A Snapshot of Where We Are Today by Don Hodges of Hodges Capital Management

History has shown time and again, cycles like this one where the news is overwhelmingly bad, is a time to make investments for the long-term. Its seed planting time. But it is not an easy thing to do. The gravitational pull because of our emotions, is to hide and do nothing, to defer until things look better. In the past, turnarounds are generally up a substantial amount from their lows before it is widely acknowledged that the turn is for real. If the past is reliable, based on the length of this decline, when the turnaround does occur, it will more than likely be swift and dramatic.

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 A Balanced Asia Strategy for 2012: Income, Quality & Growth by Carl Delfeld of Chartwell Partners

When investors think of Asia, they usually think of growth investing. When I was making my three-week swings through Tokyo, Hong Kong and Sydney to visit clients the issue of dividends and income rarely came up at all. Since then, the region has matured - representing more than a third of world GDP and world stock market value. Asia is a big deal and is at the sweet spot of dividend yield, growth and quality. But the challenge of volatility still lurks.

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 The Triumph of Optimism by Scott Minerd of Guggenheim

Over the course of history there is a certain triumph of optimism. Betting against the column of progress of human history and the innovation of mankind has always proven to be a losing proposition. In the short run, there are times to become cautious, as the past five years have exemplified. Broad-based economic expansion and its attendant outsize investment returns follow contraction and panic just as the day follows the night. As dark as the current environment may seem, the sun will come up tomorrow. When it does, I believe it will shine favorably on the optimists of today.

2012-01-03 Rethinking the Growth Imperative by Kenneth Rogoff of Project Syndicate

Modern macroeconomics often seems to treat rapid and stable economic growth as the be-all and end-all of policy. But, while that is the message from graduate classrooms to central-bank boardrooms to newspapers front pages, is it true?

2011-12-29 2012 Offers Few Reasons for Optimism by John Browne of Euro Pacific Capital

In 2011, politicians of the U.S. and EU set their economies on a rendezvous with economic and financial disaster. If one assumes as I do that no leader on either side of the Atlantic has the courage to face the music, then there can be little reason for optimism in 2012.

2011-12-27 Vitaliy Katsenelson on Krugmans Missed Call by Robert Huebscher (Article)

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

2011-12-27 Letters to the Editor by Various (Article)

Readers respond to three recent articles and commentaries: Wade Pfau's article, GLWBs: Retiree Protection or Money Illusion?, which appeared on December 13; PIMCO's commentary, Hot Potato, which appeared on December 21; and Kay Conheady's commentary, Does the Trend Matter?, which appeared on December 20.

2011-12-23 Banking Reform: Hopefully Britannia Creates A Wave by Monty Guild and Tony Danaher of Guild Investment Management

The British government has set in motion this week a future overhaul in the way that individual banks do business. British banks will be required to separate their basic lending and deposit operations from investment activities involving trading and speculation on behalf of clients and the banks themselves. This should mean that the deposits of retail customers will be shielded and protected from bank investment and trading ventures.

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

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

2011-12-20 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.

2011-12-19 Is It Irrational To Give Gifts? by Dan Ariely of Predictably Irrational

Rational economists fixate on a situation in which, say, your Aunt Bertha spends $50 on a shirt for you, and you end up wearing it once. Her hard-earned cash has evaporated, and you dont even like the present! Rational economists thus make a simple suggestion: Give cash or give nothing. But behavioral economics, which draws on psychology as well as on economic theory, is much more appreciative of gift giving. Behavioral economics better understands why people (rightly, in my view) dont want to give up the mystery, excitement and joy of gift giving. In this view, gifts arent irrational.

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.

2011-12-16 De-stressing Balanced Fund Investing by John West of Research Affiliates

Balanced fund management has largely become a benchmark-hugging exercise, with asset allocations confined within a tight band. This month's Fundamentals examines what can be done to improve the added value investors can obtain from balanced fund investments.

2011-12-15 The European Overhang and Odds of a Meltdown by Russ Koesterich of iShares Blog

Earlier this week, I noted that very elevated Italian and Spanish bond yields remaina short-term risk for both the European and global economies.Several other major European-related risks also continue to threaten markets.1)In the short-term, a key risk remains European banks. While bank funding needs have been addressed by European leaders, capital adequacy still is an issue. 2)A broader risk remains in the form of the interplay between economic policy and domestic politics. In efforts to solve Europes debt problems, domestic political considerations have too often trumped economics.

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

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

2011-12-08 Will a Eurozone Recession Put a Damper on the World's Fragile Economic Recovery? by Team of Knowledge @ Wharton

If large parts of Europe fall into a recession, as many experts are predicting, it is likely to have negative, although varied, effects on economies around the world, including those -- like the United States -- that are struggling to recover from the global financial crisis. As European leaders hammer out yet another package of solutions this week, Wharton faculty weigh in on the impact of a eurozone recession, as well as the pros and cons of the recovery measures that are up for debate.

2011-12-06 Small-Cap ETFs: Tail or Dog? by Mariko Gordon (Article)

Now that ETFs represent anywhere from 30% to 40% of small-cap trading volume, the creature that was created to shadow its master has become bigger than the index itself. Let's look at the impact of this rapid growth and the three important questions it raises.

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 Are Stars Aligned for a Year-End Rally? by Frank Holmes of U.S. Global Investors

Correlations will decrease along with volatility as we get more clarity on the eurozone crisis and see signs of stability in the global economy. Volatility fell this week, with the CBOE Volatility Index (VIX) declining 20 percent. This could be related to the news that November U.S unemployment unexpectedly dropped to 8.6 percent, U.S. auto sales in November were the strongest in more than two years, and preliminary data on holiday retail sales appears to be strong. According to Bloomberg News, Black Friday sales hit a record high this year, with consumers spending $11.4 billion.

2011-11-29 The Investment Case for Israel by Jamia Jasper (Article)

What country went into the 2008-2009 recession in a stronger position and exited sooner than any western nation? Whose stock market has outperformed the MSCI EAFE over the past 10 years?

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 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.

2011-11-22 Krugman versus Summers Will the US mirror Japan? by Robert Huebscher (Article)

Larry Summers and Paul Krugman may share ideological leanings, but they disagree sharply about our economic prospects. Both agree that political gridlock is responsible for the failure to grow our economy, but is that impasse is so severe that the US is destined to endure the slow growth, high unemployment and deflation that has plagued Japan for the last two decades? It depends who you ask.

2011-11-21 The Neuroeconomics Revolution by Robert J. Shiller of Project Syndicate

Economics is at the start of a revolution that is traceable to an unexpected source: medical schools and their research facilities. Neuroscience the science of how the brain, that physical organ inside ones head, really works is beginning to change the way we think about how people make decisions. These findings will inevitably change the way we think about how economies function. In short, we are at the dawn of neuroeconomics. Efforts to link neuroscience to economics have occurred mostly in just the last few years, and the growth of neuroeconomics is still in its early stages.

2011-11-21 No Direction Home by Christian Thwaites of Sentinel Investments

The conceit of Ancient Rome: In Imperial Rome, roads out of the city marked only the distance from the city, not to anywhere. All that counted was how far or near you were from it. The ECB adopts a similar centricity: all that matters is to keep prices stable. Nothing else. Which is why euro bonds continue to retreat with Italy and Spain hitting the 7% club for their 10-year paper. Unemployment can remain at 10% for three years. Growth can slow to 0.2%. But while inflation stays above the 2% target, all bets are off to ease the pain.

2011-11-21 No Direction Home by Christian Thwaites of Sentinel Investments

The conceit of Ancient Rome: In Imperial Rome, roads out of the city marked only the distance from the city, not to anywhere. All that counted was how far or near you were from it. The ECB adopts a similar centricity: all that matters is to keep prices stable. Nothing else. Which is why euro bonds continue to retreat with Italy and Spain hitting the 7% club for their 10-year paper. Unemployment can remain at 10% for three years. Growth can slow to 0.2%. But while inflation stays above the 2% target, all bets are off to ease the pain.

2011-11-17 A Risk Lurking in Octobers Retail Sales by Russ Koesterich of iShares Blog

October retail sales are the latest sign that the US economy is likely to avoid another recession and is experiencing what Im calling The Great Idle. But a look behind the retail numbers also reveals a major risk facing the US economy. With unemployment still high and wages growing so slowly that hourly workers are losing purchasing power at the fastest rate in 20 years, you may be wondering where consumers are getting the money to buy new cars or the latest iPhone. It turns out that surprisingly brisk retail spending is being supported by lower savings and by help from the government.

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 What Clients can Learn from the Four Worst Market Calls Ever by Dan Richards (Article)

Bad investment advice can come from many sources, but perhaps none has been worse than what was offered by four experts whose media profile exceeded their investment acumen: Irving Fisher, Joe Granville, Robert Prechter and Henry Blodget. Here's some historical context and practical advice to help clients avoid the trap of listening to the gurus who dominate newspaper headlines.

2011-11-15 Gump Pong by Doug MacKay and Bill Hoover of Broadleaf Partners

The behavior of the stock market of late has been a lot like Forrest Gump practicing ping pong-blazingly fast and completely mesmerizing. After zoning out, I had to ask myself, did that really happen? I've experienced many ups and downs in the stock market over the last twenty-five years, but rarely have I ever seen so many high speed, directional changes compressed into such a narrow period of time. By my count, the S&P 500 experienced four round trip volleys of ten percent or more since early August, before moving to higher ground in late October-all on lighter than normal volumes.

2011-11-15 An Endgame for Japans Debt? by Bryce Fegley of Saturna Capital

The Japanese government's ability to extract itself from two decades of runaway debt has become all the more challenging in the face of its shrinking tax base, rising interest payments, and social security obligations, not to mention the aftermath of its earthquake, tsunami, and nuclear disasters. The recent precedent of the country's dysfunctional political system does not bode well for making tough choices necessary to stabilize the debt. Of the possible consequences of the runaway debt, eventual monetization, high inflation, and currency devaluation are the most likely outcomes.

2011-11-12 Where is the ECB Printing Press? by John Mauldin of Millennium Wave Advisors

There is too much debt in many southern countries; France is not far from having its own crisis if they do not get back into balance. And if they lose their AAA rating, then any EFSF solution is just so much bad paper. The path of least resistance, and I use that term guardedly, is for the ECB to find its printing press. Perhaps they can borrow one from Bernanke.

2011-11-10 The Drachma is Dead: So Is the Welfare State by Brian S. Wesbury of First Trust Advisors

A weak currency cannot replace a strong currency. In other words, the existence of the euro will force the countries of Europe to confront budgetary problems fiscally, not monetarily. No wonder governments are collapsing across the continent. The Greek government, and some misguided economists, think the failure of the welfare state could be averted if Greece would only devalue its currency. A de-valuation is just a default by another name. It puts most of the burden on creditors, savers, and income earners, who face the pain and loss of reduced purchasing power.

2011-11-09 Seasick: Hanging on the Rail by Cliff W. Draughn of Excelsia Investment Advisors

For the past 22 months the question has lingered: when will Greece default? The markets are beginning to learn from the prior three Euro-crises what to expect from European policymakers. In the end it will be what Germany wants, as they are seemingly content to amputate the leg of Greece six inches at a time. Even prior to this past weekends summit, German Chancellor Merkel complimented now former Prime Minister Papandreou for stepping down but implored the new Greek policymakers to carry out the Brussels decisions completely and immediately.

2011-11-08 An International Perspective on Safe Withdrawal Rates by Wade Pfau (Article)

Prospective retirees must consider whether they are comfortable basing retirement decisions on the impressive but perhaps anomalous numbers found in historical US data. What has been safe for US retirees in the past has been far less secure for their foreign counterparts.

2011-11-05 Welcome to the Great Idle by Russ Koesterich of iShares Blog

First, there was the Great Depression. Then, there was the Great Recession. Now, the US economy is stuck idling along in neutral, temporarily unable to move beyond sluggish growth, high unemployment and a general lack of confidence.

2011-11-05 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors

What is the role of government in creating jobs? To answer that, let's look at the data that shows us where jobs come from. And we find that net new jobs for the last 15 years came from new business start-ups. Big business is a net drag on job creation, and small businesses are a wash. Governments have seen job growth, but where does the money come to pay government employees?

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 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 Will the U.S. and Europe Rise Again -- or Sink Together? by Team of Knowledge @ Wharton

In today's highly interconnected global economy, problems in one country often lead to difficulties in another. The United States and Europe are experiencing that reality up close as leaders try to deal with debt problems, investment-shy business sectors and seemingly intractable unemployment. At a recent presentation attended by Wharton board members, professors Franklin Allen, Richard Marston and Kent Smetters warned that a true recovery for either region will take time, and that conditions could get worse before they get better.

2011-10-31 Whipsaw Traps by John P. Hussman of Hussman Funds

Current market conditions cluster among a set of historical observations that might best be characterized as a "whipsaw trap." Though last week's rally triggered several widely-followed trend-following signals, the broader ensemble of data suggests a high likelihood of a failed rally. In this particular bucket of historical observations, less than 30% of them enjoyed an upside follow-through over the next 6 weeks. So while the expected return/risk profile of the market remains negative here, we have to be somewhat more tentative about taking a "hard" defensive position.

2011-10-27 FPA Crescent Fund Q3 2011 by Steven Romick of First Pacific Advisors

An unresolved European sovereign and financial dilemma, in concert with a U.S. economy thats been a disappointment compared to the once-rosy projections of most economists, caused global markets to retreat in the third quarter. Crescent declined as well, but it fell 30% less than the U.S. market for the quarter and 40% less in the year-to-date period. The U.S. markets actually fared quite favorably and Crescent more favorably still when viewed in context of the global financial upheaval.

2011-10-27 Eyes on the Prize by Richard Clarida of PIMCO

Before Nobel laureates Tom Sargent and Chris Sims developed their methods, economists and policymakers had no rigorous way to incorporate expectations into their statistical models. There is a limit to forward guidances effectiveness, which is why the Fed has pursued other policy options since hitting the zero lower bound. An uncanny correlation exists between the Feds preferred measure of the publics long-term inflation expectations and the timing or initial announcement of a quantitative easing or twist program.

2011-10-26 72% Say US Headed in the Wrong Direction by Gary D. Halbert of Halbert Wealth Management

We begin with some new Associated Press polls released. Lead among them is the poll which found that 72% of Americans now believe that the US is headed in the wrong direction. Then summarize the latest economic reports, most disappointing, but there were a few bright spots. Finally, I will address a political issue that is just beginning to make the rounds in the media. That the Republican presidential hopefuls are gravitating to a flat tax and jobs growth agenda that could stand up very well against President Obamas tax-and-spend, punish- success policies in the 2012 election.

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 Housing: A Time to Buy by David Kelly and David Lebovitz of J.P. Morgan Funds

With the debt crisis in Europe still unresolved and economic growth in the U.S. sluggish, the capital markets continue to exhibit elevated volatility. However, this does not mean that no investment opportunities exist. Although the U.S. housing market remains extremely depressed, we believe that given current valuations and demographic dynamics, now may be the time to consider an investment in housing. Few financial manias in history have had as devastating an economic impact as the American real estate bubble of the 2000s.

2011-10-21 3rd Quarter Commentary by Chuck Akre of Akre Capital Management

For almost two years now we have commented on the ideas of slower growth, the constrained consumer, high unemployment, and federal government deficit issues as reasons to remain cautious with our allocation of capital. During this time we have held higher than average amounts of cash and made opportunistic purchases along the way. As we look back to a December 2009 interview with Maria Bartiromo on CNBC, we suggested that the market was on a sugar high and that we were in a period in which it was prudent to be cautious. It seems the sugar high has subsided and reality has set in.

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.

2011-10-17 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.

2011-10-15 Can 'It' Happen Here? by John Mauldin of Millennium Wave Advisors

The beginning of the end of the Weimar Republic was some 89 years ago this week. There is a stream of opinion that the US is headed for the same type of end. How else can it be, given that we owe some $75-80 trillion dollars in the coming years, over 5 times current GDP and growing every year? Remember the good old days of about 5-6 years ago (if memory serves me correctly) when it was only $50 trillion? With a nod to Bernankes helicopter speech, where he detailed how the Fed could prevent deflation, I ask the opposite question, Can it (hyperinflation) really happen here?

2011-10-14 Fall 2011 Quarterly Commentary by Jonathan A. Shapiro of Kovitz Investment Group

The world is a mess. There, we said it. Yet we continue to hold stocks and even look to purchase more of them. Why would we do this if we just admitted what we admitted? The answer lies in the critical distinction between having an investment philosophy and having a market outlook.

2011-10-13 The US Recoverys Catch-22 by Russ Koesterich of iShares Blog

With the consumer sector unlikely to fuel a US recovery, that leaves the corporate sector as the engine of growth. At first glance, this would seem to be a safe bet. As I mentioned in early September,the silver lining of todays slow growth environmentcontinues to be the strong financial position of many US companies. But heres the catch: The domestic corporate sector relies on the US consumer. To continue growing over the next few years, companies need consumer spending to pick up. This leads us to the great economic Catch-22 of our time, So, where does that leave the US recovery?

2011-10-13 The Great Deleveraging: Will Consumer Spending Ever Recover? by Team of Knowledge @ Wharton

U.S. households are a critical contributor to economic health. But the financial downturn of recent years has hit consumers hard, and they are more hesitant than ever to spend, borrow or seek access to credit. Although a more debt-conscious outlook has positive implications for the individual, experts say the widespread deleveraging is making it difficult for the business sector and the economy as a whole to get back on its feet.

2011-10-12 Quarterly Review and Outlook by Team of Hoisington Investment Management

Negative economic growth will probably be registered in the U.S. during the fourth quarter of 2011, and in subsequent quarters in 2012. Though partially caused by monetary and fiscal actions and excessive indebtedness, this contraction has been further aggravated by three current cyclical developments: a) declining productivity, b) elevated inventory investment, and c) contracting real wage income.

2011-10-11 A Critical Look at Obamas Economic Team by Laurence B. Siegel (Article)

Confidence Men is an expos, by the reporter Ron Suskind, of what he claims is incompetence, infighting, and insubordination at the highest levels of economic leadership in the Obama administration during the global financial crisis. Those accusations are largely misdirected. After all, there was no playbook for the administration's economic thinkers to work from - the rapidly unfolding crisis forced them to improvise.

2011-10-11 The Global Old Normal by Michael Nairne (Article)

Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted. The new normal of faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.

2011-10-11 The Mists Disperse by Christian Thwaites of Sentinel Investments

In both bonds and equities, we're back to mid-August levels. It was not a pleasant ride. The trigger was the debt shenanigans (never good to threaten wage earners) and the European Spartans vs. Sybarites argument. It's quieter now, which gives us thinking time... As Jason wrote here last week, we're not sanguine on rates. Bull market sell-offs are ugly affairs. GT10s could hit 2.25% without touching the sides. With earnings season coming up, we are on the hunt for equity bargains financed with long bonds.

2011-10-08 An Irish Haircut by John Mauldin of Millennium Wave Advisors

But here is the issue for Europe. The amount of money needed for Ireland is going to be a lot more than they now think, or at least are willing to admit. When Eurozone politicians worry about 'contagion,' or one country wanting the debt relief that another country gets, it is a very real worry. And rightfully so, as voters in Portugal or Spain or (gasp) Italy who are burdened by debt that is seemingly intractable will also want relief. It is not just an Irish condition, it is a human trait.

2011-10-06 Taxes, Income and Fairness by Team of American Century Investments

From a recent address by President Obama, it is clear that it wont just be the economy that will be a key issue in next years presidential election campaign. In addition, the question of fairness regarding taxationespecially among the wealthy and highest earning Americans who he believes ought to pay a greater amount of taxeswill be a major topic of debate. His speech has sparked a broad debate over who pays federal taxes in America and whether increasing tax rates on the highest earners is a wise move to both address our massive budget deficits and stimulate the economy.

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 The Energy Expert You Shouldnt Trust by Richard Vodra (Article)

Daniel Yergin, a self-described 'leading energy expert,' has written The Quest: Energy, Security, and the Remaking of the Modern World, designed to provide information that policy-makers can rely upon in shaping energy policy for the decades ahead. This could be a dangerous reliance, for Yergin is an advocate for the fossil fuel community, not an honest broker of information.

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.

2011-09-22 The Dangerous Phase by Bill Mann of Motley Fool

A falling stock market is one of the few arenas where the human instinct of flight is a net negative. Two homilies that you hear over and over from investors are 'dont catch a falling knife" and 'wait out the uncertainty.' Consider this: August had the biggest monthly fund outflows since March 2009. It's easy to forget now, but there was nothing to signify that March was the bottom. In fact, the news during that month was horrible. People who deployed capital into the market in March 2009 were doing something extremely uncomfortable, when every sinew screamed at them to run.

2011-09-20 The Irrational Optimist by Michael Lewitt (Article)

'Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft,' writes Matt Ridley. These words hit the proverbial nail on the head. The misallocation of capital in today's economy is a severe threat to future prosperity and perhaps survival itself.

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.

2011-09-15 The Great American Economic Lie by Lance Roberts of Advisor Perspectives (

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 More of the Same by Bob Rodriguez of First Pacific Advisors

What would it take for me to shift to a more optimistic longer term outlook? First, there should be a discussion and then implementation of real and substantive congressional budgetary reforms that have a standing in law. Without this change, a future congress can overturn any of the expenditure cuts that are voted on today but are not implemented until much later. With a congressional approval rating of 13%, the American public should demand nothing less because the Congress cannot be trusted. Both parties are equally responsible for the fiscal mess the nation faces.

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.

2011-09-09 Examining Systemic Risk in the Banking System by Team of Litman Gregory

When we spoke over two years ago, we discussed credit default swaps as speculative derivative instruments, the risks these presented to the financial system, and the need to better mitigate these risks. Can you comment on the progress the industry has made in reducing the systemic risk they pose to the financial system and talk about the risks they continue to pose? Derivatives, as such, were never entirely the problem. But, in some senses, they were symptomatic of a much deeper problemwhich is why we had created a system that was highly leveraged, highly complex, and highly networked.

2011-09-08 If Some Dare Call It Treason, Was Milton Friedman a Traitor? by Paul Kasriel of Northern Trust

The principal factor accounting for the current exceptionally weak economic recovery is not unusually high uncertainty, too burdensome regulation and taxation, excessive federal government spending and/or debt or a major structural change in the economy, but rather inadequate depository institution credit creation. The reason depository institutions are not creating normal amounts of credit is that they suffered enormous losses after the residential real estate bubble burst and they remain concerned about current and/or future capital adequacy.

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.

2011-09-02 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.

2011-09-02 If Carlsberg Did Mortgages by Niels C. Jensen of Absolute Return Partners

The old world is drowning in debt. Governments are responding with austerity programmes and near zero interest rates but neither will work. Economic growth will be required to get the escalating debt under control, but policy makers need to dig deep into the tool box for different ideas as to how to create this growth. In this month's Absolute Return Letter we focus on one particular idea which will greatly benefit economic growth at no cost to the tax payer - reform the mortgage finance system across the world, using the model developed by the Danes over the past 200 years.

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.

2011-08-27 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 Boomers Are Going To Be A Real Drag by Lance Roberts of Streettalk Live of Advisor Perspectives (

Many may scoff at the Fed's report that stock prices will not recover to their 2010 highs until 2027. The migration of "baby boomers" into retirement, combined with sustained high unemployment, low savings rates and a weak economy, does not bode well for strong financial markets into the future. While there are hopes that the economy will recover in spite of the abundance of factors building against it, the reality is that we may be dealing with the "Japanese Experience".

2011-08-23 A Fundamental Investment Strategy for Today\'s Environment by Robert Huebscher (Article)

We spoke with Tim Hartch and Michael Keller, who are co-managers of the Morningstar 5-star BBH Core Select Fund (BBTEX) from Brown Brothers Harriman. The fund's strategy is strictly bottom-up, with investments in established, cash-generative businesses that are leading providers of essential products and services with strong management teams and loyal customers.

2011-08-18 The GDP Growth Downgrade by Team of American Century Investments

While much of the nation focused on events leading up to the credit rating downgrade for the U.S. by Standard & Poors last week, this was preceded by another downgrade to the estimates of our recent, past gross domestic product (GDP) growth, which was announced by the U.S. Bureau of Economic Analysis (BEA) on Friday, July 27. While garnering much less attention, this revision has some serious implications for our economic outlook at least through the end of this year.

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.

2011-08-15 Developed Asia Pacific: Economic Review July 2011 by Team of Thomas White International

Reconstruction spending in some key countries in the region, like Japan and New Zealand, also played a key role in improving labor markets. In Australia, however, labor markets turned sour as job losses inched up during the quarter. Inflationary pressures have become acute in Singapore and Hong Kong mainly due to labor shortage and a relentless rise in property prices. Economies that depend on China for their export industries are worried about a weakening in the Chinese economy in the quarters ahead.

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...

2011-08-12 Got Volatility? by Monty Guild and Tony Danaher of Guild Investment Management

The world markets have clearly stated that they want growth, and through growth, balanced budgets. Unfortunately, growth is not in the economic cards for Europe or the U.S. over the next few months. Rather, both regions will have stagnation, inflation, fear, turmoil, and two deeply opposed world views will be bandied about in political pronouncements. It does not matter what political view you have. If one wishes to survive and prosper, one must be very alert.

2011-08-11 Saying No to Keynes and Fiscal Folly by Tony Crescenzi, Ben Emons and Lupin Rahman of PIMCO

​Taxpayers have been hoodwinked into believing the cost from profligate government spending is low relative to the benefits. The Keynesian revolution ignited a decades-long abuse of the core principle of Keynesian economics: for government to increase spending when private sector aggregate demand weakens and stymies job growth. The central banker is left to shoulder the burden, seeking all the while to pressure the fiscal authority to amend the abuse of Keynesian economics and decades of fiscal folly.

2011-08-11 Saying No to Keynes and Fiscal Folly by Tony Crescenzi, Ben Emons and Lupin Rahman of PIMCO

​Taxpayers have been hoodwinked into believing the cost from profligate government spending is low relative to the benefits. The Keynesian revolution ignited a decades-long abuse of the core principle of Keynesian economics: for government to increase spending when private sector aggregate demand weakens and stymies job growth. The central banker is left to shoulder the burden, seeking all the while to pressure the fiscal authority to amend the abuse of Keynesian economics and decades of fiscal folly.

2011-08-10 Comments Regarding Recent Market Volatility by Team of Tweedy, Browne Company

Uncertainty, in our opinion, is one of the most difficult factors for professional as well as individual,investors to deal with, and it is dominating the markets currently. Uncertain markets are characterized by increased volatility and correlation between asset classes, as well as increasingly shorter time frames for investment decisions. None of this, in our opinion, will improve the probabilities of earning a satisfactory return over a reasonable period of time. Rather, we think that in most instances, these will improve the odds of the opposite outcome.

2011-08-09 What the Downgrade Means for Investors by Russ Koesterich of iShares Blog

The downgrade simply reaffirms what everyone already knew. The US fiscal situation has deteriorated rapidly since 2008. More troubling, it also reiterates that the current structure of the large US entitlement programs and the narrow nature of the US tax base mean that after a brief respite, deficits will likely get much worse in the latter part of the decade. While last weeks bi-partisan deal to raise the debt ceiling alleviated the near-term pressure, the deal explicitly did not address entitlement programs and taxes, the longer-term more troubling challenges for the US fiscal situation.

2011-08-09 S&P's Downgrade of Long Term U.S. Debt by Ronald W. Roge of R.W. Roge

Expect the markets to remain volatile between now and the 2012 election. Over the next few weeks, there will be plenty of talk about the impact of the S&P downgrade. Clearly it's not positive, but I don't buy into the catastrophic talk. Many insurance, trust companies, money market funds and municipalities (Muni Bond Issuers) will have to review their contracts and trust documents to see exactly how they are worded as far as the quality of the bonds they are required to hold. Until this legal review is completed, there is no way of assessing the impact of the downgrade on the markets.

2011-08-09 Bumped by the U.S. Downgrade by Doug MacKay and Bill Hoover of Broadleaf Partners

In an environment where the economic cycle will likely remain subdued for the foreseeable future and the credit cycle is virtually nonexistent, where are investors likely to find the greatest investment values? Barring an outright recession, the greatest wealth creation will likely accrue to those companies most focused on our third driver of stockholder value, the innovation cycle. When growth is scarce and credit is in short supply, those companies that can still grow in spite of these constraints become scarcer still, and the premiums they are afforded should climb.

2011-08-08 Why US of AA Matters by Niels C. Jensen of Absolute Return Partners

So what does it mean? Near term, other U.S. financial institutions (Fannie Mae? Freddie Mac? JP Morgan?) will be downgraded as a result - perhaps as early as today or tomorrow. Following that, if Standard & Poors wants to maintain whatever credibility it has left, it will probably have to downgrade a few sovereigns as well. France springs to mind; it is not far behind the US as far as profligacy is concerned, and it may prove difficult for Standard and Poors to justify the AAA rating it currently assigns to France.

2011-08-08 Everyone Forgot the Basic Laws of Economic by Richard Bernstein of Richard Bernstein Advisors

The consensus over the past month of so was that Washington would come to a last minute debt limit resolution and the equity markets would rally once the cloud of uncertainty regarding the US's finances was removed. Washington did come to its last minute resolution, but the markets have sold off. What happened?

2011-08-05 Advisor Alert - Placing This Week's Selloff Into Context by Frank Holmes of U.S. Global Investors

The major market indices were lower this week. The Dow Jones Industrial Average lost 5.75 percent. The S&P 500 Stock Index decreased 7.19 percent, while the Nasdaq Composite fell 8.13 percent. Barra Growth outperformed Barra Value as Barra Value finished 7.53 percent lower while Barra Growth decreased 6.88 percent. The Russell 2000 closed the week with a loss of 10.34 percent. The Hang Seng Composite Index finished lower by 6.80 percent, Taiwan fell 9.15 percent, and the KOSPI declined 8.88 percent. The 10-year Treasury bond yield closed 24 basis points lower at 2.56 percent.

2011-08-04 Insights from the 2010 Census by Team of American Century Investments

The good news is that while we are aging as a nation, we are also growing both in absolute size and the size of our young population. How quickly we grow is tied to a number of factors. But two of the most important are continued healthy economic growth (where a sense of growing affluence and economic possibility is a strong incentive for young adults to have children) and how liberal or restrictive our future immigration policy will be. Based on how these factors play out, we could easily be a nation of 450 million (or more) to 360 million (or less) just in the next four decades.

2011-08-03 Training Wreck Waiting to Happen by Bill Smead of Smead Capital Management

Someday soon, as the charade of uninterrupted GDP growth catches up with the Totalitarian Communist Government, we believe the entire Chinese banking system will have to be recapitalized to the tune of over $1.5 trillion. At that point, there wont be enough money to lend for new projects to even maintain existing GDP. In our opinion, there will be an economic contraction in China lasting three to four years. Whether China is to become a truly great economy will be determined by what they do in the aftermath of the coming economic train wreck.

2011-08-02 The Second Great Contraction by Kenneth Rogoff of Project Syndicate

Why is everyone still referring to the recent financial crisis as the Great Recession? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the United States and other countries, leading to bad forecasts and bad policy. The phrase Great Recession creates the impression that the economy is following the contours of a typical recession, only more severe. That is why, throughout this downturn, forecasters and analysts who have tried to make analogies to past post-war US recessions have gotten it so wrong.

2011-07-30 An Economy at Stall Speed by John Mauldin of Millennium Wave Advisors

The economy is at stall speed, it is quite possible well see further downward revisions to the already anemic growth numbers, and Congress and the President are dithering over the debt ceiling. It will not take much to push us into an outright recession. We can go a few days, I think, with the latter problem, but not too long or the markets will throw up.

2011-07-30 The 2011 Gold Season is Just around the Corner by Frank Holmes of U.S. Global Investors

September has traditionally been the beginning of the gift-giving season for gold. This is the time of year when gold jewelers are the busiest. The Muslim holy month of Ramadan begins in August and concludes with generous gift-giving in early September. Then its Diwali, known as the festival of lights in India, Christmas in the U.S., and Chinese New Year. The key to this seasonal strength over the past few years has been demand from China and India.

2011-07-30 The Economics of Sterilization by Dan Ariely of Predictably Irrational

When it comes to sterilization, Denmark has had a rather turbulent history. In 1929, in the midst of rising social concerns regarding an increase in sex crimes and general degeneracy, the Danish government passed legislation bordering on eugenics, requiring sterilization in some men and women. Between 1929 and 1967, while the legislation was active, approximately 11,000 people were sterilized roughly half of them against their will.

2011-07-27 Muni Bond Lessons Learned from Harrisburg and Jefferson County by Tom Dalpiaz of Advisors Asset Management

If a bankruptcy filing were to occur in any of these two cases, it wouldnotbe indicative of the wave of municipal bond defaults predicted by some.It would be simply a story of two particular issuers that made the basic mistakes. Observers who would highlight a bankruptcy filing by either of these issuers as evidence of massive problems to come in the muni market would be misreading the specific events that brought Harrisburg and Jefferson County to their present troubles. We believe it is important to be wary of those who might try to use this as evidence of a broader problem.

2011-07-25 Down to the Wire by Howard Marks of Oaktree Capital

The problem isnt the ceiling, its our behavior. The debt ceiling merely imposes a discipline that our national leaders should provide but generally havent. On this note, in his press conference on July 15, when asked about conservatives insistence on a balanced-budget amendment to the Constitution, President Obama replied, We dont need a constitutional amendment to do that [balance the budget]; what we need to do is to do our jobs. But clearly we do need some enforced discipline, because the years in which we havent run a deficit have been by far the exception of late, not the rule.

2011-07-25 Name That Tune?! by Jeffrey Saut of Raymond James Equity Research

Last week saw the U.S. Dollar Index decline by ~2.6% and gold tag a new all-time high of $1610.70. The real star of the week, however, was Sugars Surge of 7.87%. I cant imagine the President would want to go down in history as the Captain whose watch saw America lose its AAA status. Accordingly, I would continue to cautiously favor the upside, on a risk-adjusted basis, for if the debt ceiling is not raised we see another downside "hit." And this morning it looks like another hit, at least on a short-term basis, as our elected leaders continue to talk to the wind.

2011-07-25 Quarterly Letter by Team of Grey Owl Capital Management

We remain concerned about the global economy and suspect of broad asset class valuations.However, in a world of tens of thousands of securities there are always opportunities.Absent a significant market correction, we are likely to continue to hold cash or dry powder.We also continue to look to hold assets that can perform well in an inflationary environment, as dollar debasement seems to be the political path of least resistance out of our current problems.The politicians appear happy to solve the problems maana. We on the other hand are happy to make hay when the sun shines.

2011-07-21 Is There Equity Beta in Oil? by Sebastien Page and Mark Taborsky of PIMCO

Oil exposure can increase equity beta in an investment portfolio. Historically, correlations between oil prices and equity prices have varied widely, depending on economic conditions. Determining whether oil price movements are driven by changes in supply or demand can help identify when the correlation between oil and stock prices is likely to be high or low. Investors can then know when exposure to oil is tilting their portfolios toward higher or lower equity beta.

2011-07-21 Are the Housing GSEs and TBTF Banks Blocking the Economic Recovery? by Team of Institutional Risk Analyst

The housing GSEs and the largest banks are blocking the economic recovery by denying Americans from refinancing their home mortgages. If the Obama Administration wants to see the US economy recover, then we must start the real process of restructuring that Washington & Wall Street have been avoiding since 2007. Obama may not be able to turn things around before the 2012 election, but he will be remembered more kindly in the history books if he has the courage to do the right thing. As always, we are available to help in this process.

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.

2011-07-20 Tax Reform: The Overlooked Solution by Lance Roberts of Streettalk Live of Advisor Perspectives (

The "wealthy", defined by the current administration as those making more than $250,000 a year, also comprise the largest percentage of small business owners - the group that creates the majority of jobs. When you look at the data, they are already paying more than their "fair share". The top 10% of wage earners pay more than 70% of all of the taxes while the top 25% covers almost 90%. Here is my "radically moderate" view point: Tapping the people who already pay 90% of the tax bill will not create more revenue. On the contrary, it will cause further economic weakness.

2011-07-19 Sorting Out the Annuity Puzzle by Joseph A. Tomlinson (Article)

Why do so few people buy annuities? Economic theory would predict robust demand for this financial product, especially as the workforce ages, but the reality is quite the reverse. Most efforts to explain this have focused on buyer behavior. But to better understand the annuity puzzle, we need to study the sellers.

2011-07-19 Retirement Planning and Worst-Case Scenarios by Wade Pfau (Article)

New research suggests that skepticism in a 4% safe withdrawal rate (SWR) is well justified. It is perhaps due to good luck that American retirees have not yet experienced a withdrawal rate below 4%. But a better approach than worrying about SWRs is to focus on the savings rate needed to meet your retirement spending goals, not on what the safe withdrawal rate is.

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 doesnt have to be good, just not as bad as everyone believes.

2011-07-15 It Ain't Money If I Can't Print It! by Peter Schiff of Euro Pacific Capital

I have been forecasting with near certainty that QE2 would not be the end of the Fed's money-printing program. My suspicions were confirmed in both the Fed minutes on Tuesday and Fed Chairman Ben Bernanke's semi-annual testimony to Congress yesterday. The former laid out the conditions upon which a new round of inflation would be launched, and the latter re-emphasized in case anyone still doubted that Mr. Bernanke has no regard for the principles of a sound currency.

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.

2011-07-13 Thematic Investing: Forcasting Tomorrow's Forcast by Daniel Paduano, David Wilson and Sherrell Aston of Neuberger Berman

Thematic investing is all about anticipating and capitalizing on secular change. Major demographic, societal, technological and political developments around the world create abundant investment opportunities. The key is to position your portfolio to take advantage of the changing landscape before many of the changes actually happen. This requires substantial research and preparation to separate shorter-term fads from true paradigmatic shifts that have visibility of at least five to seven years. During tough periods, our themes guide our investments by providing a focus for our decisions.

2011-07-09 What Happened to the Jobs? by John Mauldin of Millennium Wave Advisors

The economy will be slowing down. A recession in 2012 is a real possibility if there is any type of shock coming from Europe. Most European leaders are basing their thinking more on hope than on reality. When Greece defaults there will be a domino effect. And you could actually see a banking crisis before we get actual sovereign defaults. The market does not get it. Neither in Europe nor in the US. When someone says the market has already priced in a default, go back and ask them how well the market priced in a crisis in the spring of 2008. The market doesnt know jack.

2011-07-08 And That's The Week That Was by Ron Brounes of Brounes & Associates

Hip hip hooray, the labor market is improving! Oops, its not. According to ADP and Macroeconomic Advisors, 157,000 new private sector jobs were created in June, a much better-than-expected showing and nice sign for this crucial area of the economy. However, before the ink was even dry on that report, the Labor Department contradicted it by revealing that only 18k jobs were added last month and the unemployment rate climbed to 9.2%, the highest level of the year. Additionally, jobless claims dropped in the latest weekly release, but still remain well in excess of 400,000.

2011-07-08 Don't Miss Your Chance to Catch a Bull Market by Frank Holmes of U.S. Global Investors

Many people missed the markets enormous appreciation during the latest equity bull market because they were late to the game or chose to sit on the sidelines. The sideline is a crowded place these days as investors have been reluctant to fully embrace equities. Household savings for the past 12 months totaled $711 billion, the highest level ever recorded in dollar terms. You can see from the chart thats roughly double the amount of savings recorded following the Tech Bubble. In fact, household debt-to-savings ratios are currently at levels so low, theyve not been seen since the mid-1990s.

2011-07-05 Essential Summer Reading - Desperate Households and More by Michael Shamosh (Article)

Summer reruns don't have to be boring and predictable. If we use a little imagination, televised repeats can depict the problems facing our economy and markets, and the storylines can become tantalizingly uncertain.

2011-07-02 China Opens World\'s Longest Cross-Sea Bridge by Frank Holmes of U.S. Global Investors

When the new Qingdao Jiaozhou Bay Bridge opened to traffic this week in China, it made the Guinness World Records for the longest cross-sea bridge in the world. The 26.4-mile long and 110-foot wide bridge stretches across the bay, linking the Huangdao district to the city of Qingdao and Hongdao Island. China spent 17 years planning and designing the engineering marvel to be able to withstand the bays high salt content and icy winters. Yet, it only took four years to build, with at least 10,000 workers on the construction team.

2011-07-02 The True Size of the Budget Deficit by Russ Koesterich of BlackRock Investment Management

While Washington debates raising the debt ceiling and cutting spending to achieve $1 to $2 trillion of savings over the next decade, its worth pointing out that these savings may never materialize because the existing official budget numbers are too optimistic across several fronts.

2011-06-30 Macroeconomics and Presidential Elections by Team of American Century Investments

Its now just 16 months until our next presidential election. Republican candidates have already begun the long process of party debates and fund-raising efforts. President Obama wasted no time as well, launching his re-election campaign effort in March. This upcoming election will likely focus on the economy and involve major debates over taxation, spending, job creation and the fundamental role of the government in our economy. As a result, the election outcome could have significant consequences for the types of policies, incentives and legislation that will be pursued post-November 2012.

2011-06-30 The Keynesian Bridge to Nowhere by Tad Rivelle of TCW Asset Management

All of us want growth and to see unemployment back down to where it belongs. In pursuit of these objectives, our national govern- ment has manufactured liabilities Treasury bills, notes, and bonds and sold them to investors, many of which are based overseas. In so doing, the U.S. Treasury laid claim to resources released by these lenders and put those re- sources to work in the U.S. today with a promise to return those resources, with interest, tomorrow. Economic pain inside the U.S. has been reduced in the here and now as a result of obtaining access to these borrowed resources.

2011-06-30 The Biggest Bear Market Rally of All? by Bill Smead of Smead Capital Management

Most stock market participants screamed bear market rally in the summer of 2009 as the US market exploded to the upside from the March 2009 low. They were referring to the phenomena whereby a major rally follows a bear market, retraces some of the prior decline and attempts to suck most investors back into the market. These sucker rallies are debilitating because they heap agony those who end up getting caught twice in the same secular decline. We believe the rally in oil to $115 is possibly the biggest bear market rally ever and we advise folks to protect their capital.

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.

2011-06-25 Playing Cat and Mouse with Global Oil by Frank Holmes of U.S. Global Investors

Oil markets took another dose of global geopolitics this week when the International Energy Agency (IEA) unexpectedly announced that it would be releasing 60 million barrels of oil from strategic petroleum reserves (SPR) around the globe. Thursdays surprise announcement gave oil prices a 4.5 percent hair cut and oil prices closed Friday at $91.25, down 20 percent from their April 29 peak.

2011-06-23 U.S. Monetary Policy: A Case of Self-Induced Paralysis? by Paul Kasriel of Northern Trust

Part of the decreased real GDP growth/increased unemployment rate central-tendency forecasts for June vs. April can be attributed to supply interruptions from Japan and higher energy prices. But given the FOMC's assumption that the supply interruptions are dissipating and that energy prices are declining, this explanation does not apply to the reduced real GDP growth and unemployment rate central-tendency forecasts for 2012. I think the central-tendency forecasts for real GDP growth and the unemployment rate are optimistic for 2011 and 2012 in the absence of continued quantitative easing.

2011-06-15 RMB Liberalization What All the Excitement is About by Kenneth Lowe of Matthews Asia

Investors tend to be a fairly excitable bunch, always looking for the latest trends and themes to try to make a profit. But many trends have little relevance or impact over the longer term. During the past 12 months, one of those more exciting topics that have been discussed is the initial stages of renminbi (RMB) liberalization in Hong Konga concept that allows foreigners to get their hands on, and trade in, Chinese currency for the first time. But how excited should long-term investors be? A roundtable discussion among Matthews managers, on the same topic, is also included.

2011-06-15 Russ Koesterich Reviews This Time is Different: Eight Centuries of Financial Folly by Russ Koesterich of BlackRock Investment Management

The recent recession has been, and will continue to be, very different from the typical post-World War II recessions. Since there are so few recent examples to guide us, its important not to draw conclusions about the current recovery just by examining the last 50 years or so. Taking a longer-term perspective is key and thats precisely what economists Carmen Reinhart and Kenneth Rogoff do. While the book came out in 2009, it is especially relevant to todays investors as it helps put the effects of the recent credit crisis in the right historical context: a very long-term one.

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.

2011-06-15 The Economy Hits a Soft PatchBut How Soft and How Long? by Team of American Century Investments

Most economists concur that the economy recently has hit a soft patch. The revised estimate of first quarter GDP1 growth was only 1.8% on an annualized basis. Nonfarm payrolls grew only 54,000 in May, a substantial downward change from February to April when approximately 200,000 new jobs were added each month. And average housing prices have now declined for six consecutive months. The question investors are asking is whether this slowdown is temporary or a sign of a longer-term slowdown that is coming just as the Fed winds down its latest round of monetary stimulus at the end of June.

2011-06-14 What Fama and Frenchs Latest Research Doesnt 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 Who's Afraid of the Big Bad Debt? by Kerry Pechter (Article)

Not Warren Mosler, bond trader, racecar dabbler, Senatorial candidate and recent author of The Seven Deadly Innocent Frauds.

2011-06-14 Letter to the Editor - Equity-Indexed Annuities, et al. by Various (Article)

A reader responds to our article about equity-indexed annuities. Guy Cumbie provides the latest installment in his exchange with Michael Edesess, which concerned Edesess' article three weeks ago, On the Wikileaks of the Economics Profession.

2011-06-13 Will the U.S. experience a Perfect Storm of fiscal woes? by Matt Lloyd of Advisors Asset Management

Right now its 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 Advisor Perspectives Acquires by Advisor Perspectives (Article)

Advisor Perspectives today announced that it has acquired the web site Featuring daily commentaries on market trends and key announcements of economic indicators, the dshort site has grown to be a leading source of analysis since its creation by Douglas Short in 2005.

2011-06-10 Searching for the Market's 'Sweet Spot' by John Derrick of U.S. Global Investors

One of U.S. Global Investors sweet spots is investing in global small-and mid-cap companies. We generally define these companies as having a market capitalization between $1 and $10 billion. Ten billion sounds like a lot but is relatively small compared to market caps of companies such as Apple ($301 billion), Johnson & Johnson ($181 billion) and Coca-Cola ($149 billion). We like small and mid-cap companies because they tend to be less volatile than micro-caps, but still nimble enough to grow at faster rates than large companies.

2011-06-07 Letters to the Editor - On the WikiLeaks of the Economics Profession by Various (Article)

This is a follow-up to last week's exchange between Guy Cumbie and Michael Edesess, which concerned Edesess' article two weeks ago, Letter to the Editor On the Wikileaks of the Economics Profession.

2011-06-07 Is It Really a Soft Patch? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The idea that the soft patch could be due to one-off events, like the tsunami in Japan is bothering quite a few people.A good question came from one of our readers and we thought it was important to post the answer. We remain convinced that the economy will accelerate in the second half of this year. The question: "Id like to believe you when you write"Never mind that much of the slowdown is so obviously tied to temporary Japan-related disruptions in manufacturing and tornado-related dips in home building."But where's the evidence of negatively affecting the U.S. economy and/or GDP?"

2011-06-03 The Eurozone Needs a Plan B, as 'Quarantining' the Weak Is Too Costly by Andrew Balls of PIMCO

The eurozones peripheral debt crisis is morphing into a tussle between politics and economics and the strains are beginning to show. Greece and Ireland are on programs that are neither restoring stable debt dynamics, nor in keeping current investors engaged or attracting new ones. Portugal is now following the same approach. The better and more realistic approach for the eurozone as a whole might be to acknowledge the Greek plan is not working and move to Plan B address the need for a restructuring of Greeces public debt and perhaps that of other countries too.

2011-06-02 Still Chugging Along: The Market that Could by Team of Eagle Asset Management

The global economic recovery is moving along but there remain some areas of concern. Our managers discussion included such things as rising commodity prices, real estate problems and perhaps most interesting to readers, how they have investment portfolios positioned. Included in the roundtable were Bert L. Boksen (Small/Mid Cap Growth); James Camp (Fixed Income); Ed Cowart (Equity Income/Value); Todd McCallister (Small/Mid Cap Core); Jack McPherson (Small Cap Core Value); Eric Mintz (Small/Mid Cap Growth); Richard Skeppstrom (Large Cap Core); and Stacey Serafini Thomas (Small/Mid Cap Core)

2011-06-01 The Growth Outlook: Long and Short by Scott Brown of Raymond James Equity Research

For decades, GDP growth has averaged a little over 3% per year, and most of the time, the level of GDP has been within 3% of this long-term trend. Theres some debate about whether this trend will continue. If it does, then we may see much stronger growth in the next several years (as we catch up). If not, then we have something to worry about. Its unclear exactly why 3% should be the norm. GDP is simply the amount of labor input times the productivity of labor. Growth in labor input and growth in productivity vary over time. Theres no special reason that they should sum to 3%.

2011-05-31 Letter to the Editor On the Wikileaks of the Economics Profession by Guy M. Cumbie, CFP, CIMA (Article)

A reader responds to Michael Edesess' article The Wikileaks of the Economics Profession, which appeared last week. The article was a review of the book, What Caused the Financial Crisis.

2011-05-28 A Random Walk Through the Minefield by John Mauldin of Millennium Wave Advisors

In the last 48 hours, so much news has come out of Europe that has me frankly shaking my head. It is a strange game of brinksmanship they are playing, and it is one we should be paying attention to (as if the brinkmanship played by US politicians over the debt ceiling is not enough). This week we look at what seems to be European leaders taking random walks through the minefield at the very heart of the European Experiment. As Paul Simon wrote, A man sees what he wants to see and disregards the rest.

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.

2011-05-25 Bull Case Nobody Makes by Bill Smead of Smead Capital Management

We feel compelled to make a US stock market bullish case which feels as good to this writer as avoiding tech stocks did in late 1999. It is so lonely that it is divine. Andy Grove, former Intel CEO, college prof John Maynard Keynes said, When everyone knows that something is so, it means that nobody knows nothin. We believe the majority has put their assets into investments that will provide defeat, insecurity and failure. Out of this comes a very optimistic bull case which is available to those who have courage to look foolish in the short run and avoid todays popular asset allocation.

2011-05-24 Robert Shiller: I'm Betting the Farm by Robert Huebscher (Article)

Yale's Robert Shiller, the economist who foresaw the implosions of the tech bubble in 2000 and the housing market in 2007, is now closely watching a different asset class. This time, however, it is one that is in an early stage of bubble formation, not of collapse.

2011-05-24 The WikiLeaks of the Economics Profession by Michael Edesess (Article)

What Caused the Financial Crisis presents the most comprehensive account I have seen of the regulations that, when considered as a whole, have incentivized unprecedented self-delusion and risk-taking in the subprime mortgage market. To put it in a manner that financial advisors will understand, the book shows that the policies and regulations greatly increased the Sharpe ratio of the financial industry - they increased the return for taking risk.

2011-05-20 The ECRI Weekly Leading Index: A Fourth Week of Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 5.3 from last week's 6.4. This is the fourth consecutive week of decline from the 11-month interim high of 7.8 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s.

2011-05-20 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

The funny thing about perpetual motion devices is that they give the impression of constant, and sometimes complicated, activity, but in reality they dont actually go anywhere. Such is the state of global bourses, traversing an active up, then down, then up again pattern, yielding a great big net-nothing. The problem, though, with such market-driven perpetual motion is that unless the axis of ascent is rising it must either be neutral or falling. And in todays climate since the run-up in markets dating back to 2008, many securities are doing just that, declining or going nowhere.

2011-05-20 Training Wheels Off, Crash Helmets On by Michael Pento of Euro Pacific Capital

Based on many pronouncements by economic policy makers, among others, it appears that the quantitative easing juggernaut that has steamed the high seas of macroeconomics for the last three years is finally pulling into portsupposedly for the last time. According to the dominant narrative, QEI and QEII helped stabilize the economy during the Great Recession and now the Federal Reserve is ready to take the training wheels off. If so, the economy may need a helmet because there is virtually no chance that it can avoid major contractions without central banking support.

2011-05-19 Profit Margin Squeeze Continues to Grip the Economy by Doug Short of Doug Short

The two charts below offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index (data through April). The other is an indicator constructed from two data series in the Philadelphia Feds Business Outlook Survey through todays release. It is the spread between the Philly Feds prices paid (input costs) and received (prices charged) data. A major risk factor for margin squeeze is the increase in commodity prices over the past several months with the price of oil and gasoline as the dominant factor.

2011-05-18 An MLP CEOs Perspective Q1 commentary by Dan Tutcher, Darrell Horn, Steven Sansom and Robert Chisholm of Center Coast Capital Advisors

The April 11, 2011 edition of Time magazine featured a cover article highlighting the emergence of shale gas and its future impacts on the US and the world. The article lays out the issues surrounding global energy. Mainly the growing demand by industrializing nations such as Brazil and India, the tragic accident at the Japanese nuclear site in Fukushima, and the ever increasing turmoil in the middle east. Each of these issues lean the US toward supplying more of its own energy which now exists in a recoverable form of shale.

2011-05-17 Raising the Roof on Debt by Peter Schiff of Euro Pacific Capital

Today the U.S. government officially borrowed beyond its $14.29 trillion statutory debt limit. And even though the Obama administration has assured us that accounting gimmickry will allow the government to borrow for another few months, the breach has given seeming urgency to Congressional negotiations to raise the debt ceiling. Republicans are making a great show of linking their yes votes with promises for future budget cuts. But as we go through the process, many wonder why we have a debt ceiling at all when our government has never shown any inclination to respect its prior limits.

2011-05-14 Kicking the Can to the End of the Road by John Mauldin of Millennium Wave Advisors

A crisis is brewing in the US and one is coming to a slow boil in Europe. We visit Greece and Ireland and ponder how this will end. It is all well and good to kick the can down the road, but what happens when you come to the end of the road? The European answer seems to be to haul in the heavy equipment and extend the road. In short, we are watching the biggest bubble of all time, the bubble of government debt, try to keep from popping. My bet is that it cant. And while the ride will be bumpy, the world our kids get will be better off at the end of the process.

2011-05-13 Congress, The Fed Reserve, and Markets by Cliff W. Draughn of Excelsia Investment Advisors

I never did particularly care for Alice in Wonderland, watching her go down rabbit holes and discover the characters of the White King and Queen, Humpty Dumpty, Cheshire Cat, and the Mad Hatter. But when watching the ongoing budget debates I feel as if the American people are Alice and we are being subjected to a world of budgetary nonsense, spoken in a language that is incomprehensible. The American people know they are being held hostage in a strange place where our Congress orchestrates a Mad Hatter tea party for which the entertainment is kicking the can of debt down the road.

2011-05-13 The ECRI Weekly Leading Index: A Third Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.4 from last week's 6.6. This is the third week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15.

2011-05-11 Tough Love: Hawkish Contenders for Bank of Italy Governorship Line Up by Mark Willis, James Mason and Nouriel Roubini of Roubini Global Economics

Mario Draghi appears well-placed to succeed Jean-Claude Trichet as the president of the ECB in October, leading to speculation about who will replace him as governor of the Bank of Italy. Four names are floating around: Lorenzo Bini Smaghi, Vittorio Grilli, Fabrizio Saccomanni and Ignazio Visco, the deputy director general of the Bank of Italy. Eurozone horse trading could support Bini Smaghi, but domestic politics could help Grilli, and frequently new governors have been sourced from within the Bank of Italy.

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.

2011-05-07 Muddle Through, or Crisis? by John Mauldin of Millennium Wave Advisors

This week I finish the two-part letter on the Endgame and give you my thoughts on the economy over the next five years. This is the second part of a speech I gave last week at the Strategic Investment Conference in La Jolla. It is a rather bold forecast, and fraught with peril and likely errors, but that is my job here. I must offer one large caveat! If the facts change so will my forecast, but this is the view into my very cloudy crystal ball as I see it today. As always, remember that those of us in the forecasting world are often wrong but seldom in doubt. Read accordingly.

2011-05-07 Dont Turn Out the Lights on Commodities Just Yet by Frank Holmes of U.S. Global Investors

The prices for many commodities suffered the worst week in recent memory this week. Oil prices dipped below $100 per barrel, gold fell below $1,500 an ounce and silver gave back much of the past months gains by falling to the $35 an ounce level. The prices for other commodities such as sugar, tin, nickel, aluminum, lead and copper also pulled back. Immediately, headlines on websites such as Marketwatch, Bloomberg and SmartMoney read Has the Commodity Bubble Popped? and Imploding Commodities Complex. In our opinion, not likely.

2011-05-06 The ECRI Weekly Leading Index: A Second Week of Fractional Decline by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined to 6.7 from last week's 7.5. This is the second week of fractional decline from the 11-month interim high of 7.7 for the week ending on April 15. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-05-05 Entropy and the Mechanics of Reflation by Team of Institutional Risk Analyst

All we can say with some degree of certainty is that the real economy seems to be slowing rapidly from our perspective. The problem is not so much a dearth of credit as a lack of demand for credit and goods of all descriptions. Have you noticed your retailers and service providers trying harder recently? Even the major airlines are treating passengers with a degree of deference that is almost unnerving -- but the planes are mostly full.

2011-05-05 Physician-Assisted Suicide and Behavioral Economics by Arjun Khanna of Predictably Irrational

As the American population ages, the debate about the ethics of physician-assisted suicide for terminal patients becomes more important. Proponents of legalizing of physician-assisted suicide argue the practice is ethically justifiable because it can alleviate prolonged physical and emotional suffering associated with debilitating terminal illness. Opponents claim that legally sanctioned lethal prescriptions might destroy any remaining desire to continue living a sign of society having given up on the patient.

2011-05-04 What Happens When China Becomes a Net Food Importer? by Adam Wolfe of Roubini Global Economics

China is the worlds second-largest producer and largest consumer of grains, and it remains broadly self-sufficient despite rapid urbanization. Increased paychecks mean a smaller share of income goes toward food purchases, and consumers can afford more meat and dairy products. However, since it requires several calories of grains to produce a single calorie of meat for final consumption, Chinas total grain consumption has increased about 2% annually on average since 1980. Chinas ability to meet its rising grain demand with domestic production is reaching its limit.

2011-05-04 More Than 14% of Americans on Food Stamps by Team of Bespoke Investment Group

As if we needed another reminder of the depressed level of the US economy, a recent WSJ article noted that one out of every seven Americans are on food stamps. Breaking out the numbers by state shows some wide divergences. Mississippi, has the highest percentage of its residents on food stamps at 20.6%. The only other state where one in five residents are on food stamps is Oregon. On the low end of the spectrum, Wyoming has the smallest proportion of its residents on food stamps, 6.6%, and believe it or not there are only seven other states where less than one in ten people are on food stamps.

2011-04-29 FPA Crescent Fund Q1 2011 by Steven Romick of First Pacific Advisors

The optimists held sway in the first quarter of 2011 and ended the quarter on a good note, with the stock market having returned 5.9%. Crescent returned 4.7%, capturing 80% of the markets return with risk exposure at just 58% of capital during the period. Two investments Aon and Covidien accounted for more than 10% of the Funds return in the period. No investment detracted from the return to that degree. The greatest negative impact in the quarter came from Microsoft (down 19 bps), a holding we have increased to take advantage of price weakness, given the current low expectations.

2011-04-29 The Fed Terminates QE, We Lower our GDP Forecast by Asha Bangalore of Northern Trust

We have been putting a lot of emphasis on monetary financial institution (MFI) credit as a cyclical determinant of domestic demand for goods and services. We define MFI credit as the sum of the credit extended by the Fed, the commercial banking system, loan system and the credit union system. MFI credit is credit figuratively created out of thin air. There is a distinction between created credit and transfer credit. In the latter is transferred from the grantor of this credit to the recipient of credit. Transfer credit, then, is funded by the grantor by postponing some spending.

2011-04-29 The ECRI Weekly Leading Index: Down Fractionally by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined fractionally to 7.5 from last week's eleven-month high of 7.7. The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. The next chart shows the correlation between the WLI, GDP and recessions.

2011-04-29 The Endgame Headwinds by John Mauldin of Millennium Wave Advisors

By Endgame I mean the period of time in which many of the developed economies of the world will either willingly deleverage or be forced to do so. This age of deleveraging will produce a fundamentally different economic environment lasting anywhere from 4-6 years. Now, whether this deleveraging is orderly, as now appears to be the case in Britain, or more resembles what I have long predicted will be a violent default in Greece, it will create a profoundly different economic world from the one we have lived in for 60 years.

2011-04-28 Venerated Voices Update for the First Quarter of 2011 by Advisor Perspectives (Article)

Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has published a quarterly update to its 2011 Venerated Voices awards. Final results will be tallied at the end of the year. Rankings were issued in three categories: The Top 25 Venerated Voices by Firm, The Top 25 Venerated Voices by Author and The Top 10 Venerated Voices by Commentary.

2011-04-27 Turkeys Shaky Foundations: Structural Deficit Underpinned by Volatile Capital Inflows by David Rogovic of Roubini Global Economics

In 2009, at the height of the global financial crisis, a reduction in capital inflows and domestic demand caused a narrowing of external imbalances across Europe. Now, as the region returns to growth and recovers from the crisis, Turkey stands out in terms of the size and speed at which its current account deficit is expected to grow. This is due in part to a more rapid recovery, but also to a shortfall of domestic savings relative to investment. The country is more reliant now than in previous episodes on short-term and historically more volatile foreign capital to finance the deficit.

2011-04-26 Ethics Among Thieves by Michael Edesess (Article)

'Inside Job' is a thoroughgoing indictment of the financial industry that has its virtues but relies on some unsavory vices. On the one hand, through interviews, congressional testimony, and other video, the film exposes cronyism, corrupt ethics, and excessive power at the core of the financial industry. On the other, the movie at times unfortunately feels more like a polemic than a hard-hitting, fact-finding investigative reporting piece.

2011-04-26 Rude Crude by Jeffrey Saut of Raymond James Equity Research

Oil that is, black gold, Texas Tea; yet, rude crude still feels a bit stretched in the short-term given that West Texas Intermediate (WTI) is ~30% above its 200-day moving average (DMA). Indeed, over the past few weeks oil has become almost as extended above its 200-DMA as it was in July 2008, and we all know how that ended. Not that I am predicting a similar collapse in the price of Texas Tea, but rather that a consolidation/pullback period is likely, which could provide the backdrop for another leg up in stocks (even the energy stocks).

2011-04-23 The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) increased to 7.7 from a slight downward revision (6.8 to 6.7) for the previous week. This is this highest level since May 14, 2010.

2011-04-20 Is Europe at the Tipping Point? Sol Sanders & Bill Alpert on Keynes, Keynesianism -- and Keynesianit by Team of Institutional Risk Analyst

With the world preparing for the collapse of the post-WWII, post-Bretton Woods economic order, we thought it might be useful to look at what Keynes actually said. We depart from our optimism due to the situation in Europe. Forget the threat of a ratings downgrade by S&P, Washington on debt ceilings or our part-time POTUS, the final collapse of the southern states of Europe is accelerating. Most banks in the EU are insolvent and the states supposedly backing them cannot access the global markets. The collapse of the EU bank bailout effort could be the next catalyst for global contagion.

2011-04-20 S&P Outlook Downgrade Reminds Washington to Do the Right Thing by Arnab Das and Nouriel Roubini of Roubini Global Economics

S&Ps decision to cut its outlook for U.S. government debt from stable to negativea historic firstsent markets tumbling: On April 18, the Dow Jones Industrial Average and the S&P 500 both recorded their biggest one-day drops in nearly a month (though U.S. Treasurys and the dollar did well). The landmark outlook downgrade reinforces what we have been saying since 2010: The United States is on an unsustainable fiscal path from which it cannot exit without political consensus. The key question is whether the gridlocked U.S. political system can respond in time to avert a bond market revolt.

2011-04-16 The Cure for High Prices by John Mauldin of Millennium Wave Advisors

Today we once again think about the inflation/deflation debate, turn our eyes to Europe and the very interesting election happening there this Sunday, and speculate a little about what could derail the US economy. The old line is that the cure for high prices is high prices. When prices rise, businesses tend to respond by producing more. If the price of something gets too high, then people buy less, which then leads to too much supply, which lowers prices. Rinse and repeat. Last week I wrote about what I think is the potential for inflation in the US to rise to uncomfortable levels (4-5%)

2011-04-15 The ECRI Weekly Leading Index Continues to Hold Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past eight weeks. The Growth Index is now at 6.7 based on data through April 8. The average of the past eight weeks is 6.6 with a range of 6.2 to 7.1 (unchanged from last week). The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom.

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 Japan's Production Shortfall Drags on EM Asia Supply Chain by Michael Manetta, Arpitha Bykere and Adam Wolfe of Roubini Global Economics

The amplified shock from Japans March 11 earthquake, then tsunami, then nuclear crisis has rippled through the supply chain of its emerging Asia (EM Asia) neighbors. Production shutdowns and weakened demand in Japan began to register in Asias trade channels in the weeks following the disaster. As the extent and duration of disruptions to production in Japan become more apparent, the severity of regional supply chain interruptions and the effects on EM Asia's industrial production and export volumes and prices through 2011 can be better anticipated.

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

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

2011-04-12 No Help by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

If the objectives of QE2 were to: a) raise interest rates; b) slow economic growth; c) encourage speculation, and d) eviscerate the standard of living of the average American family, then it has been enormously successful. Clearly, with the benefit of hindsight these results represent the Feds impact on the U.S. economy, regardless of their claims to the contrary. Why the Fed would believe the economy could benefit from the addition of $600 billion in reserves to a banking system that already had over $1.1 trillion in unused, but potentially inflationary reserves on hand defies understanding

2011-04-11 The Rationality of One-Star Reviews by Dan Ariely of Predictably Irrational

The publisher for Michael Connellys latest thriller it decided to charge $14.99 for the Kindle version and $14.28 for the hardback version. While standard economics tells us that consumers will be willing to pay more for items they derive more utility (pleasure and usefulness) from, in practice, factors such as fairness and manufacturing costs play a role into our decisions of what to buy and how much to pay. It is not easy to focus on what we really care about (the quality of the time we spend) rather than the price. On top of that the unfairness of the differences in price can make us mad.

2011-04-08 The ECRI Weekly Leading Index: Growth Is Holding Steady by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) has held relatively steady over the past seven weeks. The Growth Index is now at 6.7 based on data through April 1. The average of the past seven weeks is 6.6 with a range of 6.2 to 7.1.

2011-04-08 Why High Oil Prices Are Likely Here to Stay by Frank Holmes of U.S. Global Investors

A number of forces continued to push oil prices higher this week, reaching their highest levels in the U.S. since September 2008. One factor fueling the run has been the continued decline of the U.S. dollar. Oil and the dollar historically are negatively correlated. This means that a rise in oil prices generally coincides with a decline in the dollar, and vice versa. The U.S. dollar has seen a dramatic decline since the beginning of the year as oil prices have moved some 30 percent higher. This could be due to fact that roughly two-thirds of the U.S. trade deficit is related to oil imports.

2011-04-06 Great Speculations: Why China Is So Bubble-Friendly by Adam Wolfe of Roubini Global Economics

China can blow bubbles faster and bigger than any other country, but the Extraordinary Salt Mania of March 2011 takes the cake for speed, size and bizarreness. Shortly after radiation was reported to be leaking from Japans nuclear plant, rumors spread that Chinas sea salt could be contaminated by radiation and that salt could prevent radiation sickness. The apparent demand and a perceived supply shock caused prices to spike upward of 85% in days. Media reported that a Mr. Guo bought 6.5 tons of salt, three days later prices collapsed after word from officials that there was no shortage.

2011-04-04 The ECRI Weekly Leading Index: Holding Steady by Doug Short of Doug Short

The published ECRI WLI growth metric has had a respectable record for forecasting recessions and rebounds therefrom. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turn negative 17 times when no recession followed, but 14 of those declines were only slightly negative and most of them reversed after relatively brief periods. Three other three negatives were deeper declines.

2011-04-04 Will the Real Phillips Curve Please Stand Up? by John P. Hussman of Hussman Funds

Much of the intellectual basis for the Federal Reserve's dual mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates" is based on the Phillips Curve. The curve, named after economist A.W. Phillips, is understood as a "tradeoff" between inflation and unemployment. The idea is so engrained in the minds of economists that it is taken as fact. High unemployment, is associated with low inflation risk, and in that environment, policy makers can pursue measures targeted at increasing employment, without consequences for inflation.

2011-04-02 The Plight of the Working Class by John Mauldin of Millennium Wave Advisors

Although the headline unemployment number went down to 8.8%, the only way you can get to that number is by not counting the millions who have dropped out of the employment pool, too discouraged to look, but who will take a job if they can get one. If you go back and take the number of people in the labor force just two years ago, the unemployment picture is back over 10% (back-of-my-napkin math).

2011-03-30 Syria: The Latest Victim of the Arab Spring by Maya Senussi and Rachel Ziemba of Roubini Global Economics

Though Syria previously looked relatively sheltered from unrest elsewhere in the region, protests, now in their second week, are shaking the legitimacy of President Bashar al-Assad's regime. The violence perpetrated by security forces is likely to undermine promises of reform and political change, putting a question mark over the ultimate survival of the regime. The biggest rallies have taken place in the impoverished southern city of Daraa. However, the uprising has spread to bigger cities around the country, including Damascus, Aleppo, Latakia, Homs and Hama.

2011-03-27 The ECRI Weekly Leading Index: Slight Moderation in Growth by Doug Short of Doug Short

The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues its rise. The Growth Index is now at 6.5 based on data through March 18. A significant decline in the WLI has been a leading indicator for six of the seven recessions since the 1960s. It lagged one recession (1981-1982) by nine weeks. The WLI did turned negative 17 times when no recession followed, but 14 of those declines were only slightly negative (-0.1 to -2.4) and most of them reversed after relatively brief periods.

2011-03-25 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

A major risk factor for margin squeeze is the increase in commodity prices over the past several months. The latest turmoil in the North Africa and the Middle East has now put oil prices in the spotlight. At present, in light of the unemployment rate and the ongoing demographic shift, the rise in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-03-24 Bernanke Ducks as Food Prices Shoot Higher by Peter Nielsen and Bryce Fegley of Saturna Capital

As rising food prices gain prominence in media headlines worldwide, Federal Reserve chairman Ben Bernanke now finds himself deflecting accusations that the Fed's $600 billion "QE2" Treasury buying program is the main culprit of global food price inflation. In his February 18, 2011, speech to governors of the Group of Twenty in Paris,1 Bernanke completely rebuffed these claims and offered up other explanations as well, but nowhere in his speech did he concede any possibility that the Fed's QE2 program is playing a role.

2011-03-23 Germany's Solid Outlook Anchors Wobbly Eurozone by Katharina Jungen of Roubini Global Economics

The German economy is set to power ahead in 2011, as indicated by high-flying business and consumer sentiment surveys and full order books. The initially export-led economic upswing, stands to broaden further given the positive outlook for investment activity and private consumption. Despite the contribution from the moderating external sector, GDP growth will remain above potential, not least due to a sizeable carryover effect from 2010. RGE expects buoyant GDP growth in 2011, boosted by a sharp rebound in construction activity following the weather-related slump at the turn of 2010/11.

2011-03-21 ProVise Bullets by Team of ProVise Management Group

Republican lawmakers may have gotten a PR boost for their attempt to cut $60 billion out of the budget. The Treasury Department announced last week that the largest monthly deficit in history was created in February, at $222.5 billion, surpassing the previous record set last February at $220.9 billion. As bad as it seems, the news wasn't all bad, as revenues were up 8.6% and spending was only up 4%. That's a move in the right direction. The biggest concern we have, and the one lawmakers have the least control over is rising interest rates.

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 Japan, by Brian S. Wesbury and Robert Stein of First Trust Advisors

While the news coverage of problems at Japans nuclear power plants was sensationalized and misleading, the death toll from the Japanese earthquake and tsunami is horrendous. Moreover, the economic damage to the affected areas is substantial and will require a large re-direction of resources. Japans economy will not gain from this shift in resources because the cost of repair only replaces what was lost. That said, after the initial economic blow is fully absorbed, Japans economy may accelerate for a time because people change their labor-leisure trade-off.

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.

2011-03-18 The ECRI Weekly Leading Index Continues Its Climb by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-17 Forgetful by Doug MacKay and Bill Hoover of Broadleaf Partners

The S&P 500 fell by roughly 16% from April to July last summer, and then moved sideways until people started to discount the prospects of the Fed engaging in QE2. As the markets picked back up following the recognition that the Fed would stay easy given high unemployment and very little inflation and the elections afforded a more balanced political agenda, leading economic indicators began to follow suit, the economy firmed once again, and the stock market finished up 15% for the year. Today, the situation, while different, nevertheless rhymes.

2011-03-16 Fukushima vs. Three Mile Island vs. Chernobyl by Mikka Pineda of Roubini Global Economics

This year marks Chernobyl's 25th anniversary, and how ironic it is that the world has a new nuclear emergency on its hands: Japan's Fukushima power plant. The situation at Fukushima continues to worsen, with explosions at two more reactors and the radiation released surpassing that of Three Mile Island. The 40-year-old reactors were due for decommissioning at the end of this month. The Fukushima nuclear incident will likely be upgraded from a level 4 to a 5 on the International Nuclear and Radiological Event Scale. Chernobyl was a level 7the only level 7 event so far.

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.

2011-03-14 It's A Natural Disaster, Not A Black Swan by Brian S. Wesbury and Robert Stein of First Trust Advisors

At times of natural disaster and personal tragedy, it can be difficult to focus on economics. However, there is an economic component to the Japanese earthquake as there is with any disaster. In Haiti, for example, decades of awful leadership have created deep-seated poverty and corruption, which amplified the size and scope of its recent earthquake. In Kobe (1995), Chile (2010), San Francisco (1989), Katrina (2005), mostly free markets, accumulated wealth and a disdain for corruption helped overcome those disasters relatively quickly. In Japan today, the same will be true.

2011-03-14 Riots, Oils, and Economics by Milton Ezrati of Lord Abbett

The turmoil in the Middle East goes on, and, though oil has continued to flow uninterrupted, understandable uncertainties have bid up crude and gasoline prices anyway. A barrel of crude now costs considerably more than straightforward supply/demand fundamentals would imply. And as long as the uncertainty persists, prices will almost certainly stay high. Despite this, three aspects of the situation seem more definite. First, fuel cost pressures may slow, but they are unlikely to stop the American and global economic recovery.

2011-03-11 The ECRI Weekly Leading Growth Index Up Slightly by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

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 Admitting to Another Irrationality by Dan Ariely of Predictably Irrational

One of the main difficulties I face on a daily basis is an inability to say no. I have always had this problem, but it used to be that nobody really asked much from me, so this weakness didnt pose a real problem. But now that behavioral economics has become more popular, I receive invitations to speak almost every day. Accordingly, my inability to say no has turned into a real challenge. So why do I, and many others, suffer from this problem? I think it is because of three different reasons: 1) Avoidance of regret 2) The curse of familiarity and 3) The future is always greener.

2011-03-09 Jasmine Dreams in China? by Adam Wolfe of Roubini Global Economics

The days of rage sweeping through the Middle East and North Africa have raised questions about the possibility of a similar movement erupting in China. At a glance, the ingredients for uprising appear to be present. Online calls for a Jasmine Revolution in China resulted in a massive staging of security forces at the planned protest sites, which could be taken as a sign of the Communist Partys insecure grip on power. Like several of the governments, Chinas ruling elite is plagued by corruption and is preparing for a transfer of power.

2011-03-08 The Clued-in, the Clueless, the Oblivious and the Conflicted by Michael Edesess (Article)

Ive now read perhaps 10 books about the financial crisis. Maybe Im 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 Quantitative Easing and the Iron Law of Equilibrium by John P. Hussman of Hussman Funds

If you think about equilibrium, it helps to clear up all sorts of fallacies that people hold about the financial markets. For example, the currency and money market securities that are held by investors will - in aggregate - never "find a home" in any other form or market. If one takes their cash and tries to buy stock, they get the stock and the seller gets the cash. Nothing disappears, and nothing is created. The money-market securities held by investors is not a reflection of "liquidity looking for a home," but is a measure of how borrowers are on short-term sources of credit.

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 worlds ills, or more pragmatically, we can try to prepare for the explosion that is likely to result.

2011-03-04 The ECRI Weekly Leading Index Moves Higher Into Positive Territory by Doug Short of Doug Short

The question had been whether the WLI decline that began the the Q4 of 2009 was a leading indicator of a recession. The published index has never dropped to the -11.0 level in July 2010 without the onset of a recession. The deepest decline without a recession onset was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director correctly predicted that we would avoid a double dip. The latest GDP for Q4 of 2010, revised down slightly to 2.8, confirms the ECRI stance.

2011-03-04 On Regulation by Howard Marks of Oaktree Capital

You can tell businesspeople precisely what to do, but you cant 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 regulations limitations.

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 companys stock price is irrationally overvalued.

2011-03-01 Understanding Variable Annuities with GMWBs by Robert Huebscher (Article)

It's very tempting: a variable annuity with minimum lifetime payout that can increase - but never decrease - based on market performance. That temptation comes in the form of an increasingly popular variable annuity rider known as a guaranteed minimum withdrawal benefit. We explain the flaws in a widely publicized study by Morningstar/Ibbotson, and provide our own analysis of the product.

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.

2011-03-01 The Good, The Bad and The Ugly by David A. Rosenberg of Gluskin Sheff

The good: The manufacturing data in the U.S. continues to improve, at least within the confines of the major diffusion indices. The bad: The U.S. income and spending numbers were hardly stellar. It remains to be seen how much of the weakness was weather-related, but consumer spending dipped 0.1% in January the first decline since Apr 2010. The fact is that consumers kept a lid on their spending even with the fiscal windfall in Jan, pushing the savings rate up to a four-month high of 5.8% from 5.4% in both Nov and Dec. The ugly: The housing sector remains in the dumpster.

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.

2011-02-23 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 similaritiesand 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.

2011-02-22 Toward an Understanding of Risk - Part 2 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. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.

2011-02-22 John Campbell on the Proposed Squam Lake Reforms by Dan Richards (Article)

In this interview, John Campbell, chairman of the economics department at Harvard, discusses his research into the underlying drivers of securities prices, and the key recommendations for reforming the financial system, based on his participation in the Squam Lake Group. This is a transcript of the interview.

2011-02-22 Profit Margin Squeeze and Inflation Risk by Doug Short of Doug Short

At present, in light of the unemployment rate and the ongoing demographic shift, the surge in commodity prices probably poses more risk of margin squeeze than run-away inflation. Some degree of cost-push inflation may be a near-term risk, but the demand-pull inflation we saw in the 1970s is difficult to evision in the US economy of this decade.

2011-02-21 Inflation or Deflation? Or is it Global Weimar? by Christopher Whalen of Institutional Risk Analyst

As we've noted in recent missives for The IRA Advisory Service, the visible volume of business flowing through the bank consumer channel seems to be receding or maintaining low levels. The commercial channel at most banks we hear from is still running at 1/3 to 1/2 of pre-2008 levels in terms of new originations and demand for credit. This is why when clients ask us about whether we worry more about inflation or deflation, our answer is "both." The chief worry bead remains revenue flowing through banks, housing and the US economy.

2011-02-20 In Praise of the Handshake by Dan Ariely of Predictably Irrational

Imagine we meet at a party, and I tell you about my research on behavioral economics. You see opportunities to use the principles to improve your business and think we could work together. You have two options: You can ask me to collaborate, with a handshake promise that if things work out, youll make it worth my while. Or you can prepare a contract that details my obligations and compensation, specifies who will own the resulting intellectual property, and so on. For most of you, the decision is obvious. The second approach, the complete contract, is the way to go. But should it be?

2011-02-19 Let Yourself Feel Good Again by Doug MacKay of Broadleaf Partners

The stock market has continued to perform exceedingly well so far in 2011 and is now up roughly 7% year to date. While an oil spill or European contagion type event could always disrupt the progression, the stock market, S&P 500 profit levels, and leading economic indicators are all pointing to a similar conclusion. The economy is likely to graduate from its recovery phase to an outright expansion sometime this year. It's time to start letting yourself feel good again.

2011-02-18 The ECRI Weekly Leading Index: Moving Higher Into Positive Territory by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.9. The current number is based on data through February 11.

2011-02-16 Washington Prepares for a New Egypt by Michael Moran of Roubini Global Economics

The resignation of Egyptian President Hosni Mubarak will resonate across the Middle East but also in the capital of his most stalwart ally, the U.S., where policy makers are reassessing the certainty that Egypt will continue to act as a moderating force in the region. Having left the Soviet Unions orbit in 1977 and signed a peace treaty with Israel in 1979, Egypt came to form the foundation of U.S. diplomacy in the regiona role that seemed so secure that its significance was widely overlooked.

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 David Laibson on the Hidden Challenges of Aging Clients by Dan Richards (Article)

In this interview, Harvard economist David Laibson discusses his research into the challenges of helping elderly clients with their financial planning. He also discusses how to overcome the procrastination and laziness that often result in inferior investment decisions. This is a transcript of the interview.

2011-02-11 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 4.5. The current number is based on data through February 4. The adjusted sequence for the last five weeks has been a steady range: 3.6, 4.1, 3.5, 3.6, 4.5.

2011-02-10 Betting Against the House; Is This the Time to be Going Long? by David A. Rosenberg of Gluskin Sheff

Housing starts are at around 550k annualized units right now and household formation averages in the 1.1 to 1.2 million range. At what point do you think this dovetails and a housing recovery takes place? Great question. This is one overextended U.S. stock market, that is for sure. We have a dividend yield on the S&P 500 of 1.8% with a 10-year bond yield at 3.7%. The dividend yield, by the way, is where it was at the market peak in October 2007. The cyclically-adjusted P/E ratio on the S&P 500 is now 23.3x, where it was back in May 2008. At the lows, it was trading at 13.3x.

2011-02-10 FPA Crescent Fund Q4 2010 by Steven Romick of First Pacific Advisors

We do not have a strong view as to what will transpire over the intermediate-term with respect to the economy or securities markets, nor do we have a great love for the opportunities the markets have to offer. In general, we require more upside than the market currently permits, because the downside (for reasons discussed) is not inconsequential. Taking a look at the S&P 400 Midcap Index gives some idea as to why that may be the case. Midcap stocks have increased 129% since the 2009 trough. That kind of move generally sucks the oxygen out of the room as far as good risk/reward investments go.

2011-02-09 Will New Regulations Bring Continued Rebalancing for Canadian Housing? by Tetiana Sears and Rachel Ziemba of Roubini Global Economics

Though Canada managed to avoid a U.S.-style housing crash, the Great White North may face its own set of difficulties, as the same ample credit extension, low interest rates and government incentives that helped the housing market rapidly recover the losses incurred during the 2008-09 downturn are contributing to increased household indebtedness.

2011-02-09 Ben Grahams famed formula for valuing a stock works in the real world! by Chuck Carnevale of EDMP

These ten examples are based on our article: A primer on valuation: Testing the Wisdom of Ben Graham's Formula (part one) published on 2/08/2011. These represent just a few examples of many we could provide. Bens formula works because it is sound. The orange line on each logarithmic F.A.S.T. Graph below represents earnings multiplied by Ben Graham's formula. As you review each F.A.S.T. Graph note how the black price line tracks and correlates to Ben Graham's calculation of intrinsic value. In some cases, the correlation is almost perfect.

2011-02-04 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to hover in the mild growth range, now at 3.7. The current number is based on data through January 28. The adjusted sequence for the last four weeks has been a steady range: 3.6, 4.1, 3.5, 3.7.

2011-02-04 An Excerpt from Endgame by John Mauldin of Millennium Wave Advisors

Growth does not look that great, and people dont feel the recovery. This is unlikely to change. The U.S. and most developed economies are currently facing many major headwinds that will mean that going forward, well have slower economic growth, more recessions, and higher unemployment. Three large structural changes have happened slowly over time that we expect to continue going forward. The U.S. economy will have higher volatility,lower trend growth, and higher structural levels of unemployment (The United States here is a proxy for many developed countries with similar problems.)

2011-02-03 Reagan for President...of China! by Axel Merk of Merk Funds

China needs to re-balance its economy to tame inflationary pressures. To achieve this, portfolio manager Axel Merk provocatively suggests Ronald Reagan needs to become the president of China. This analysis discusses the Chinese renminbi.

2011-02-02 Unrest in Egypt, Uncertainty in the Region by Rachel Ziemba and Ayah El Said of Roubini Global Economics

Egypts political direction could have profound effects on regional stabilitypotentially involving, the Israeli-Palestinian conflict and efforts to contain Irans nuclear ambitionswith broad economic and financial ramifications. The recent economic and political developments do not bode well for Egypts debt, and this contagion could continue to spread within the region, leading to the persistent underperformance of local currency debt and equity markets. Regarding wider implications, the oil market remains the key link between instability in the Middle East and the global economy.

2011-02-01 Can Economics Save the Economy? by Robert Huebscher (Article)

Christina Romer, Greg Mankiw and Paul Krugman were among a group of thought leaders who spoke at a conference in Cambridge last week. They cited a lack of sufficiently powerful and politically feasible policy options, calling into question whether economists will be able to produce the clear path to the stronger recovery that the Obama administration seeks.

2011-02-01 The Inflation the Fed Fears Most by Robert Huebscher (Article)

The term inflation is widely used but generally misunderstood. Economists, politicians and the general public understand it to mean one thing. Inflation, however, has a very different meaning to our central bank, as I will explain.

2011-02-01 Inflation is Here to Stay by Michael Pento of Euro Pacific Capital

There is no escaping the conclusion that inflation will continue to surge. Inflation is, after all, the increase in money supply. And there appears to be no escaping the likelihood of massive floods of new money rolling off presses around the world, especially in Washington. But to a degree that is virtually ignored by many economists, a currencys purchasing power is not only affected by money supply growth but also from the mere perception of it.

2011-02-01 Investors, Zombie Banks and the Valuation Gap by Christopher Whalen of Institutional Risk Analyst

Until the US government summons the courage to impose the same discipline on Bank of America, JPM and the other zombie money center banks as was applied to Western United and First Community banks, there will be no recovery in the US economy or in the housing sector -- nor in the political currency of Washington politicians. Credibility is ultimately the biggest valuation gap of all. Barack Obama's shortfall when it comes to public policy regarding the economy and financial institutions is a mile wide.

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.

2011-01-28 The ECRI Weekly Leading Index: Steady As She Goes by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement, although the latest 3.5 is slightly below the previous week's 4.1. The current number is based on data through January 21.

2011-01-26 Plan C for UK Fiscal Consolidation by James Mason and Parul Walia of Roubini Global Economics

The UK government has engaged in a forceful reduction of its fiscal deficit (Plan A) to ensure debt sustainability and thereby reduce the risk of a loss of market confidence in public finances. The move has been effectively endorsed by Bank of England Governor Mervyn King, who has said that further quantitative easing could be used to support the economy if necessary (Plan B). In RGEs view, however, the risk to the market was overstated, as the UK has enjoyed safe-haven status while pressures have intensified in eurozone countries.

2011-01-26 Strategic Redux by Richard Michaud of New Frontier Advisors

The key questions are whether the US and the global economic recovery will continue and whether it is now time for sidelined investors to return to investing in risky assets. How much return can be left of the nearly two year bull market as reflected in an 86% rise in the S&P since early March 09? Can improving market sentiment and consensus for a sustained though fragile economic recovery point to a limited opportunity? Some positive signs include a normal short and long term risk-return relationship for NFAs six risk profile funds that is consistent with normal functioning capital markets.

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 Advisor Perspectives Announces First Venerated Voices Awards by Advisor Perspectives (Article)

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

2011-01-24 A Malicious Mix of Economics and Politics by Charles Lieberman (Article)

I suspect 2011 will continue to produce its ups and downs (much like the past few years). The European debt crisis is still a big issue. The US Municipal debt (particularly in Illinois) issue is lingering. Congress is still Congress. When and if these issues present themselves and the markets react, we could view those situations as continued buying opportunities since the underlying fundamentals of stocks improve. However, long term investors should not wait for dips to begin investing, but rather start a systematic plan of redistributing cash back into the market.

2011-01-24 Muni Update by David A. Rosenberg of Gluskin Sheff

The unfunded liability that has to be closed at the lower levels of government is estimated to be $1 trillion and the combined deficit that has to be closed for this year is far higher than we initially thought at $135 billion. Second, there is reportedly talk in Congress of a broader bankruptcy bill that would give the states the power to adjust their pension obligations and rework union contracts. However, no bailouts are coming and the GOP is adamant about that. Staff cuts, service reductions, and tax hikes are coming in this critical 12% of the economy. Count on it.

2011-01-24 US Politics - Cage Match Or Pillow Fight? by Brian S. Wesbury and Robert Stein of First Trust Advisors

The good news is that because of the elections last November, the politics have changed. Politicians in Washington, of both parties, are being forced to consider more free market solutions to problems and to address the growth in government. Time will tell whether a new leaf has really been turned, but for now, the direction of policy is much better for markets and the economy than it has been in many years. Politicians have pulled out their pillows and are now debating how to shrink government, not expand it.

2011-01-23 Sixteen Cents: Pushing the Unstable Limits of Monetary Policy by John P. Hussman of Hussman Funds

Completing the Fed's planned purchases under QE2 will require a decline in 3-month T-bill yields to just 0.05% in order to avoid inflationary pressure. Otherwise, liquidity preference will not expand enough to absorb the addition to base money, even if we assume GDP growth at 4%. Given the extreme stance of monetary policy, the avoidance of inflationary pressures increasingly relies on a very persistent willingness by the public to hold the outstanding quantity of base money in the financial system. Small errors will have surprisingly large consequences. This is not a stable equilibrium.

2011-01-21 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through January 14.

2011-01-20 James Tobins Advice; Look 'Anywhere insight may be found' by Kendall J. Anderson of Anderson Griggs

For 99% of all investors in the United States, risk control can be simplified by separating your funds into buckets of risk-free and risky assets. Just remember that risk-free cannot be substituted with investments that are almost risk free. With FDIC Insurance coverage of $250,000.00 per person, and unlimited amounts available from the U.S. Treasury, the ability for most investors to incorporate risk free investments into their portfolios is easily accomplished.

2011-01-20 'The Feeling is... Mutual!' by David A. Rosenberg of Gluskin Sheff

As they chase performance, retail investors plowed a hefty $6.54 billion into equity funds in the week of January 12. TD Ameritrade has reported that margin lending has soared 31% from year-ago levels. Uh oh. The one industry that is being hammered right now is the municipal bond fund space with net outflows last week of $2.37 billion, the tenth week in a row. While there is no doubt that we remain cautious on the equity market as an asset class, we like the large-cap, blue-chip, cash flow generators and reliable dividend payers.

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 regions 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.

2011-01-15 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.

2011-01-13 Post Time by Michael Dana of Dana Investment Advisors

The financial markets by themselves do not recognize time. It doesnt matter if it is August 9 or January 2. Time does, however, matter to investors. There are always tax considerations, window dressing, estate planning and numerous other factors that coincide with the end of the year and the beginning of a new year. For many (particularly mutual funds or investment advisors) it is a horse race. Anyone in the investment business is judged on performance. In order to retain and attract new clients one must consistently outperform the popular market indexes. So here we are again: its post time.

2011-01-12 Malaysia\'s Middle-Income Malaise by Nouriel Roubini of Roubini Global Economics

Malaysias policy makers have been forced to confront the factors blocking the countrys rise to high-income status. Facing higher labor costs, the economy has been unable to maintain a growth model based on low-value-added manufacturing that was largely successful for the 30 years prior to the 1997 Asian financial crisis.

2011-01-11 The Two Elephants Facing the US Economy by Michael Lewitt (Article)

The consensus has reached the conclusion that financial markets will enjoy a strong start to 2011. This is reason enough to approach the markets with caution as the year begins. When everybody is leaning to one side of the boat, the vessel is far more likely to tip over, particularly if it hits an unexpected wave.

2011-01-11 A gentler and more logical economics by Dan Ariely of Predictably Irrational

I value standard economics. It provides important and useful insights into human endeavors. But I also think that it is incomplete, and that accepting all economic principles on faith is ill-advised. If were going to try to understand human behavior and use this knowledge to design the world around usincluding institutions such as taxes, education systems, and financial marketswe need to use additional tools and other disciplines, including psychology, sociology, and philosophy. Rational economics is useful, but relying on it alone is unlikely to help us maximize our long- term welfare.

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.

2011-01-07 The ECRI Weekly Leading Index Continues to Improve by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) continues to signal improvement. The latest weekly number is based on data through December 31.

2011-01-05 Things Are Looking Up in LatAm by Nouriel Roubini of Roubini Global Economics

In our 2011 Outlook, we revised up our growth forecasts for Latin America, in anticipation of resilient domestic demand, improved external conditions and elevated commodity prices. We now envision annual growth rates of 4.7% in 2011 (compared to the forecast of 4.1% we set in September) and 6.1% in 2010 from 5.7% previously. If we are correct, 2010 will mark Latin Americas strongest economic performance of the last decade and its fastest growth since 1980.

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 Policy Cures for Chinas Post-Stimulus Hangover by Nouriel Roubini of Roubini Global Economics

Though Chinese policy makers will spend most of 2011 cleaning up after the effects of their fiscal stimulus measures and loose monetary policies, all the while they will be laying the foundation for financial reforms that will lead to increased use of price controls in lending decisions, further internationalization of the RMB and eventually the opening of the capital account.

2010-12-29 2011 Here We Come! by Monty Guild and Tony Danaher of Guild Investment Management

There are two major trends in place that set the stage for world economics in 2011. The first is Chinas continued rise. Although the U.S. remains the most powerful economic force on earth, China will soon be replacing Europe as the second most powerful economic force. Chinas power is not built on sheer size alone: indeed, Chinas statesman-like behavior during the current economic crisis in U.S. and Europe has highlighted its maturity and greatly enhanced its image. The second major trend going into 2011 is the rise of inflation.

2010-12-28 The Ten Best Articles You Probably Missed by Robert Huebscher (Article)

Great articles don't always get the readership they deserve. Here are 10 articles that you might have missed, but we believe merit reading.

2010-12-28 Consumer Confidence Index: Down Slightly But Well Below the Historical Trend by Doug Short of Doug Short

Let's take a step back and put the Director of the Consumer Research Center's rather rosy interpretation of consumer confidence in a larger perspective. The chart below is intended to help evaluate the historical context for this index as a leading indicator of the economy. Toward this end I have included recessions and GDP. The linear regression through the index data shows the long-term trend of this very volatile indicator. Today's 52.5 reading is significantly below the 85.3 of the current regression level (38.5% below, to be precise).

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.

2010-12-23 Ten Reasons To Be Cautious For The 2011 Market Outlook by David A. Rosenberg of Gluskin Sheff

1) In Barrons look-ahead piece, not one strategist sees the prospect for a market decline. This is called group-think. 2) The weekly fund flow data from the ICI showed not only massive outflows, but in aggregate, retail investors withdrew a RECORD net $8.6 billion from bond funds during the week ended December 15. 3) Bullish sentiment has now reached a new high for the year and is now the highest since 2007 ― just ahead of the market slide.

2010-12-23 The ECRI Weekly Leading Index Turned Positive The First Time Since May by Doug Short of Doug Short

The question, had been whether the latest WLI decline that began the the Q4 of 2009 was a leading indicator of a recession or a false negative. The published index has never dropped to the current level without the onset of a recession. The deepest decline without a near-term recession was in the Crash of 1987, when the index slipped to -6.8. The ECRI managing director is now on record stating that we've avoided a double dip. The revised GDP for Q3, coming in at 2.6, confirms the ECRI stance.

2010-12-22 Will Egyptian Elections Scare Would-Be Investors? by Nouriel Roubini of Roubini Global Economics

In Egypt, although the National Democratic Party (NDP) has a solid grip on power, the election cycle is adding to policy uncertainty that could worsen prospects for the foreign investment needed to kick-start domestic investment and diversify growth away from consumption. As RGE notes in its 2011 Global Economic Outlook, policy implementation delays in Egypt could add market volatility and restrain inward FDI as investors monitor the countrys political risk.

2010-12-17 The ECRI Weekly Leading Index: A Hair\'s Breadth from Turning Positive by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 28th consecutive week, coming in at -0.1. However, the rate of contraction has been lessening for the past 20 weeks. The latest weekly number, based on data through December 10, is a tiny fraction below the positive range. How tiny? The -0.1 is rounded from -0.052.

2010-12-16 Germany in a Lose-Lose Situation by Mohamed A. El-Erian of PIMCO

The problem is that Germany's current approach centered on dealing with liquidity problems now and solvency centered later is not working. A liquidity approach that delays the day of reckoning may be good regional politics, but it's bad economics. It does not restore sustainable growth to the periphery, and it exposes the core to contamination. Rather than simply doubling up on a faltering liquidity approach, the time has come for Germany to lead a more holistic solution focused on addressing the peripherys debt overhang and competitiveness problems.

2010-12-15 Assessing the Next North Korean Flare-Up by Nouriel Roubini of Roubini Global Economics

Claiming insight into what Pyongyang will do next is self-delusion. Judging from recent revelations by WikiLeaks, this frustration and confusion goes right up to the highest levels in China and the U.S., leaving their respective intelligence agencies to make educated guesses. The current heightened tensions between North and South Korea are unlikely to erupt into an all-out military confrontation, given the inherent human and economic costs as well as the shared interest of China and South Korea in avoiding a collapse of the Norths dictatorial regime.

2010-12-15 Europe Remains a Clear Downside Risk by David A. Rosenberg of Gluskin Sheff

Europe remains a clear downside risk for the global economic outlook with the problems spreading to Spain and Portugal. Contagion risks are being underestimated by Mr. Market who has been myopically focused on irresponsible fiscal expansion in the US and recent hopes that QE2 would morph into QE3. As some proof that the recent economic data flow are over-rated, and likely exaggerated by seasonal influences, the Fed barely raised its macro outlook and actually seemed to dampen its view of the housing sector.

2010-12-14 Letter to the Editor by Various (Article)

A reader responds to our article, Black Gold, Texas Tea, which appeared on November 30.

2010-12-13 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn

The impact of the tax deal on the economy is positive. The absence of wide spread tax hikes is good but not sufficient to cause our economy to grow. For this we need more trade agreements, less regulation and a reduced presence in the private sector by the US government.

2010-12-10 Interim Update and Comment by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

Federal Reserve Chairman Ben Bernanke said in a recent television interview that economic growth was not self sustaining. This description also applies to an economy that is in a classic growth recession. A growth recession is characterized as an economy where GDP grows but the unemployment rate also moves higher. A close look at the U.S. economy bears out Chairman Bernanke's description.

2010-12-08 No Comfort in November for U.S. Employment by Nouriel Roubini of Roubini Global Economics

November data clearly calls for caution. The stall in the improvement in wages and the average workweek is especially concerning. Sustainable growth in aggregate consumption will be driven by wage growth, which needs to improve from its severely depressed levels. Most importantly, it is quite clear that future employment gains will be well below the levels required to make a meaningful dent in the unemployment rate, which will continue to be just shy of double-digit territory for some time.

2010-12-08 Second Take on The Latest Financial Stimulus Announcement by David A. Rosenberg of Gluskin Sheff

There wasnt really that much new information in the Obama announcement, except for the fact that the President ended up repealing everything he said he stood for during the election campaign, like reducing the extreme income bifurcation that was exacerbated during the Bush era. Then again, who is going to risk a renewed contraction in the economy and then take the blame? How can anyone take the U.S. seriously when the country fails to get enough votes over the weekend to bring the deficit reduction package recommended by the White House debt-reduction panel to the House and Senate floor.

2010-12-06 An Uncertain Future for Housing Prices by Robert Huebscher (Article)

A renewed decline in housing prices would surely impede economic growth. Yet that is a strong possibility, according to housing expert Laurie Goodman of Amherst Securities. Goodman was joined in Boston last week to discuss the housing market by Karl Case, who, along with Yale professor Robert Shiller, created the Case-Shiller index.

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

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

2010-12-03 The ECRI Weekly Leading Index: Still Negative But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 26th consecutive week, coming in at -2.4. However, the rate of contraction has been lessening for the past 18 weeks.

2010-12-01 A Spanish Inquisition by Nouriel Roubini of Roubini Global Economics

Spain shares some of Ireland's key vulnerabilities, including a housing bubble more pronounced than that in the United States and large nonperforming loan overhang in the banking sector. Though Spain's housing bubble is less severe than Ireland's, and though the Spanish banks' commendable loan-loss provisioning system is providing a buffer, a comparison of price-to-rent ratios shows that the bulk of the housing price correction and loss recognition has not yet come. Thus, the pressure on the banking system is bound to increase going forward.

2010-11-30 Black Gold, Texas Tea by Robert Huebscher (Article)

The flow of money into gold-related funds is, at least in part, driven by good intentions - hedging against dollar debasement, inflation, and systemic risk. As investors drive the price of gold to record levels, though, they are overlooking an equally compelling commodity hedge, one that the Beverly Hillbillies once dubbed 'black gold, Texas tea' - oil, that is.

2010-11-29 Rumors of Stock Picking's Demise Greatly Exaggerated by Peter Nielsen and Ben Bortner of Saturna Capital

We believe the market's reliability in predicting future events and their impact on the economy is overstated. The investment industry is one of the few industries where prognosticators are not treated as snake oil salesmen. Despite how many letters may come after one's name, the future will always remain uncertain.

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.

2010-11-24 Rescuing the Emerald Isle: A Q&A on the Irish Debt Crisis by Nouriel Roubini of Roubini Global Economics

RGE considers the extent of public and bank debt held by non-residents, as well as the external balance sheet of other sectors of the Irish economy, as these factors will influence negotiations and the ultimate burden sharing between domestic and foreign creditors.

2010-11-24 The Duel over the Dual Mandate by Peter Schiff of Euro Pacific Capital

Given the opposing views of the potentially parsimonious new Congress and the continuously accommodative Federal Reserve, there is a movement afoot among Republicans to eliminate the Feds dual mandate. Prior to 1977, the Fed only had one job: maintaining price stability. However, the stagflation of the 1970s inspired politicians to assign another task: promoting maximum employment. This mission creep has transformed the Fed from a monetary watchdog into an instrument of social policy. We would do well to give them back their original job.

2010-11-23 Will Municipal Bonds be the Next Disaster? by Dennis Gibb (Article)

It has been an article of faith that municipal bonds are safe investments, but this complacency about the safety of munis may soon be proven unwise.

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 The Fed Under Attack by Scott Brown of Raymond James Equity Research

Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress - nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren't helping

2010-11-22 Outside the Oval / The Case Against the Fed by John P. Hussman of Hussman Funds

Ever since the Bear Stearns bailout, I've been insistent that the Federal Reserve is increasingly operating outside of its statutory boundaries. Ensuring the legality of Fed actions is not a Democratic issue, a Republican issue or a Tea Party issue. Rather, it is about whether we want America to function as a representative democracy.

2010-11-19 The ECRI Weekly Leading Index: Negative Growth But Improving by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 24th consecutive week, coming in at -4.5. The rate of contraction has been lessening for the past 16 weeks. The latest weekly number is based on data through November 12. On October 29, economist Lackshman Achuthan, the managing director of the Economic Cycle Research Institute, gave assurances on CNBC that ''we're not going to go into a new recession anytime soon.''

2010-11-19 Gold Standard or Political Discipline? by Stan du Plessis and Andreas Freytag of VoxEU

President of the World Bank, Robert Zoellick, caused a stir this week by hinting at a need to return to the gold standard. While supporting the drive for pro-growth policies and the desire to maintain an open international trade system, this column argues that a return to gold would struggle to achieve this and could even be a destabilising force.

2010-11-17 Shifting Politics, Tightening Policies in China by Nouriel Roubini of Roubini Global Economics

The Central Economic Work Conference in early December should signal an end to the 'moderately loose' monetary policy that has allowed the long cycle to dominate the short since late 2008. There will likely be little commentary about renminbi (RMB) flexibility at the conference; nevertheless, we expect that technocratic control of China's monetary policy should marginally increase the rate of RMB appreciation against the USD.

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.

2010-11-13 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 The ECRI Weekly Leading Index by Doug Short of Doug Short

Today the Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) registered negative growth for the 23rd consecutive week, coming in at -5.7, an improvement from last week's -6.5. The rate of contraction has been lessening over the two months. The latest weekly number is based on data through November 5.

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 Never Too Big To Fail Their Customers by John Downs of Euro Pacific Capital

As a mortgage broker during the manic years of the housing boom, I witnessed reckless financial practices on a wide scale. As a result, I was not surprised by the robo-signing mess that now threatens the mortgage sector. Unfortunately, the scandal is only a small tip of the iceberg that threatens to take down the entire US banking system.

2010-11-11 The Road Ahead: Is It Inflation or Deflation by Martin J. Pring of Pring Turner Capital Group

Since the financial crash of 2008 there has been an intensive discussion amongst economists as to whether the fiscal stimulus and extraordinary monetary policy (Quantitative Easing, QE I and II) will lead to a significant inflationary wave or whether the system falls into a liquidity trap. Our objective here is not to dwell on the economic arguments, rather to examine the secular trends of commodities, bonds and their inter-market relationship to see what clues the markets themselves may be giving about the inflation/deflation outlook.

2010-11-10 Will GOP Gains Mean Ethanol Producer Losses? by Nouriel Roubini of Roubini Global Economics

Following the Republican Partys capture of the House of Representatives in the midterm elections, U.S. policy on the use of biofuels for transportation could be about to change. Current policy is based on the use of "blender credits" to encourage the mixing of biofuels with gasoline and a US$0.54/gallon tariff levied on imports of ethanol, the most widely used biofuel. These policies are due to expire at the end of this year, and Republican deficit hawks do not want them renewed, though the ethanol industry generated US$2 billion-3 billion in tax revenues (net of subsidies) in 2009.

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 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 The Fed's Asset Purchases by Scott Brown of Raymond James Equity Research

As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. There has been much criticism of the move in the financial press. Certainly, there are risks in the Feds strategy. However, its hardly reckless or ill-advised.

2010-11-09 There Was a Fed Chairman Who Swallowed a Fly by Peter Schiff of Euro Pacific Capital

In reality, quantitative easing will produce the exact opposite of its intended result. In the short-run, it may create the illusion of economic growth and temporarily add some service sector jobs, but once the QE ends, the growth and jobs will vanish. Then, the Fed will most likely try once again to douse the fire it started with another round of QE gasoline, creating an even larger and less manageable inferno.

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 doesnt guarantee any outcome, starting at these levels certainly stacks the probabilities firmly in our favor.

2010-11-04 I Pick The Seven Most Powerful New Economists by Dan Ariely of Predictably Irrational

Many people have contributed over the years to behavioral economics. The individuals on this list have not only changed the face of economics as we know it, but they are likely to contribute a great deal more in the years to come. Each of these individuals has tremendous creativity and insight that has enabled them to capture and explain our odd, complex, and sometimes irrational human nature. Armed with this new understanding of human behavior, and taking our human weaknesses into account, behavioral economics could help us take steps toward designing a better world.

2010-11-03 Uncertainty Now, Stability Later for Argentina by Nouriel Roubini of Roubini Global Economics

The sudden death of former president Nestor Kirchner, widely considered Argentina's most powerful politician, has called into question the sustainability of the current administration's mandate. In the short term, Kirchner's death will fuel political uncertainty, especially regarding who will represent the Peronist Party in next October's presidential elections. In the medium term, however, the death of the man widely thought to be the power behind the current president - his wife Cristina Fernandez de Kirchner - opens the door to greater political stability.

2010-11-02 A Top Economist's Nightmare Scenario by Charlie Curnow (Article)

Remember the 1970s? Stagflation like we saw then could return to the U.S. if unsustainable public debt levels trigger a selloff of government bonds and dollar-denominated holdings, according to a recent study by John C. Cochrane. Cochrane, a finance professor at the University of Chicago, is perhaps best known for his response to Paul Krugman's article in the New York Times on why mainstream economics failed to anticipate the financial crisis.

2010-11-02 The SECs 12b-1 Proposal is Based on Misguided History, Flawed Economics by John H. Robinson (Article)

The SEC's stated aims of its proposed Rule 12b-1 reform are laudable: increasing transparency, reducing investor fees, and increasing competition among mutual funds. However, John Robinson's review of its 278-page proposal found major flaws, including a misinformed historical pretext and nave economic analysis.

2010-11-02 Grey Owl Q3 Letter by Team of Grey Owl Capital Management

Uncertainty abounds and all broad asset classes are beginning to look expensive again. Unemployment shows few signs of improvement and business confidence is low, yet the stock market continues to climb the 'wall of worry.' Frankly, we have little confidence in the economy or in the broad stock market. However, we continue to find pockets of value in out-of-favor names across industries and market capitalizations. Macro uncertainty may continue to drive the market for some time, but eventually the weighing machine will win out.

2010-11-01 Looking Past the Graveyard by Scotty George of du Pasquier Asset Management

We are two months removed from the end of this year, 2010, and already investors are bracing themselves for 2012 as if next year won't count. With unemployment widening and portfolio values simply treading water, many have their sights set on a rebound year in 2012 that they think has more promise than 2011. In fact, informal opinion polling suggests that many see 2011 as nothing more than a postscript to a miserable three year cycle begun when the global credit crisis erupted.

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 Political Economics by Brian S. Wesbury and Robert Stein of First Trust Advisors

Political spin is ubiquitous these days. But it's important for investors to know that it's still just spin. The underlying economy is doing much better than recent Republican rhetoric suggests. While a 2 percent growth rate in real GDP is not worth writing home about, it certainly masks an underlying strength in demand that investors should not ignore.

2010-10-29 Four Critical Investment Themes for the Next Decade by Robert Huebscher (Article)

Four investment themes will dominate market behavior over the next decade, according to Martin Murenbeeld, the chief economist at DundeeWealth Economics, a Canadian investment manager and financial advisor. Investors, he said, would be wise to overweight gold and other commodities.

2010-10-27 Reflections: Venturing into a New Frontier by Mark Mobius of Franklin Templeton

Frontier markets are the next emerging markets. These economies are more domestic-oriented, with a limited number of publicly listed companies; hence, frontier market investments tend to be primarily limited to private equity. Quality of company management is a frequent concern. Frontier market investing therefore often requires additional time and due diligence to assess the quality of corporate management teams, including more frequent on site visits to evaluate businesses effectively.

2010-10-27 What's Ahead for the Fed? by Nouriel Roubini of Roubini Global Economics

Fiscal stimulus and the effects of the inventory-restocking cycle in 2010 will not only fade by next year, but will become a drag on growth. House prices are projected to correct downward in 2011, and consumer spending will remain anemic as consumers continue the process of deleveraging and repairing their balance sheets and the slack in the labor market depresses growth in wages. These factors point to slow growth and easing inflation in 2011.

2010-10-27 Maddisons 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.

2010-10-25 Bernanke Leaps into a Liquidity Trap by John P. Hussman of Hussman Funds

The belief that an increase in the money supply will result in an increase in GDP relies on the assumption that velocity will not decline in proportion to the increase in monetary base. Unfortunately for the proponents of 'quantitative easing,' this assumption fails spectacularly in the data - both in the U.S. and internationally - particularly at zero interest rates. Once short-term interest rates drop to zero, further expansions in base money simply induce a proportional collapse in velocity.

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.

2010-10-20 The Fed Debates: Is Unemployment Structural or Cyclical? by Nouriel Roubini of Roubini Global Economics

Federal Reserve Chairman Ben Bernanke weighed in on the unemployment debate in an October 15 speech, stating that the current elevated jobless rates are probably due more to the continued shortfalls in aggregate demand than structural reallocation of workers across industries and regions. With this pronouncement, along with the FOMC's reiteration that it will continue its efforts to return inflation to levels consistent with its mandate, Bernanke underscored the Fed's belief in additional monetary accommodation, and raised expectations for Fed actions as early as November.

2010-10-19 Bernanke's Impossible Dilemma by Robert Huebscher (Article)

David Wessel, economics editor of the Wall Street Journal, examines the challenge Ben Bernanke faces. His goal is to provide full employment and price stability. Yet he faces a slowly growing economy, unemployment close to 10%, consumers deleveraging and spending frugally, renewed fears of banking system instability, and the threat of an asset bubble is growing somewhere in the markets. Monetary and fiscal policy options have been seemingly exhausted, and the public is losing confidence in all aspects of government.

2010-10-19 Allen Sinai: US at the Crossroads by Robert Huebscher (Article)

America is at a crossroads in a shifting global economy, and it's not just our economy that is in trouble. We have moved from a mindset of prosperity to a much gloomier self-conception, and dysfunctions within our government and society are pushing us downward. That sobering assessment was delivered by Allen Sinai, the president of Decision Economics, an economic research firm he founded in 1996.

2010-10-19 Harvard Experts: Economy is Like a Bus Winding Down a Mountain Road by Charlie Curnow (Article)

Five Harvard economists, including Ken Rogoff and John Campbell, emphasized the need for U.S. policymakers and households to cut down on borrowing and increase savings during a panel discussion on Tuesday, October 13 at Harvard University in Cambridge, Massachusetts.

2010-10-19 Taxes Won't Cut It by Peter Schiff of Euro Pacific Capital

Congressional Republicans and Democrats are engaged in a heated debate over which Americans deserve not to have their taxes raised, with both claiming that some form of tax cut will stimulate the economy. The real impediment to economic growth is not taxes, however, but the government spending that makes high taxes necessary in the first place. Rather than trying to disguise another misguided round of stimulus in the cloak of a tax cut, we should deliver what the economy really needs - genuinely smaller government.

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 Weekly Market Commentary by Scotty George of du Pasquier Asset Management

After the steady run-up in natural resources equities the past year, some are concerned that the progression might come to an end. Based upon improving policies and demand worldwide, however, it is still entirely appropriate to reserve an overweight ranking for these investments. As long as industry prudently manages inventory-versus-demand cycles, upward valuations might persist. In the long term, depleting resources might provide the science and politics for an elongated trend with significant capital gains potential.

2010-10-13 Currency Wars Heat Up as Growth Chills by Nouriel Roubini of Roubini Global Economics

As global growth stagnates, governments are increasingly focusing on monetary policy as a last resort to prop up ailing economies. The U.S. Federal Reserve recently signaled that it will refocus away from eventual exit strategies and toward the possibility of further intervention in the ailing U.S. economy. Between the Fed's second round of quantitative easing, the European Central Bank's stubbornness, and a new round of currency wars as countries fight each other for export growth, the path out of the recession remains unclear.

2010-10-12 The Great Depression, the Great Recession and Lessons from 1937-1938 by Team of American Century Investments

While much shorter and less severe than the Great Depression, the recession of 1937-1938 added approximately three years to the recovery period. It is extremely unlikely that we will see a repeat of this type of recession. However, depending on the outcome of elections in November, there could be substantial shift in the fiscal and taxation policies of the federal government away from Keynesianism and toward fiscal discipline and supply side economics.

2010-10-12 Capitulation to Uncertainties Does a Bond Bubble Really Exist? by Frank Wei of FundQuest

The recent near-record low in Treasury yields may be largely attributable to investors' capitulation to today's unusual and uncertain economic environment. While investments in Treasury bonds involve less uncertainty than other asset classes, their valuation is typically rich when yields are low. There remains a vast amount of potential for more lucrative investment opportunities in this low-yield environment, with only slightly more risk involved.

2010-10-12 Small Business Sentiment, Cautious Consumers and the Stealth Recession by Doug Short of Doug Short

The National Federation of Independent Businesses small business optimism index rose fractionally this month, from 88.8 to 89.0. Doug Short presents a chart comparing the small business optimism index with the Consumer Metrics Institute's weighted composite index going back to 2005. The chart suggests that the government's stimulus measures had a temporary impact on consumer discretionary spending, but little or no impact on small business sentiment. The recession may officially be over, but the small business optimism index is still in recession territory.

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 Back to School... And This Report Gets an F! by David A. Rosenberg of Gluskin Sheff

Considering that policy rates are at zero, the Fed's balance sheet has tripled in size (with more to come), and a 10 percent deficit-to-GDP ratio that would have even made FDR blush, the unemployment situation is an unmitigated disaster that deserves the government's undivided attention. The question that has to be asked - and answered - is why the equity market would be rejoicing over today's somber piece of economic news.

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.

2010-10-07 Government Policy and the Markets: Prepare For Some Big Changes by Tony and Rob Boeckh of Boeckh Investment Letter

Proponents of gold base their arguments on predictions of eventual monetary ruin, a dollar collapse and high inflation. The bond market, however, is far bigger and more sophisticated than the gold market, and it indicates that inflation expectations are nonexistent. Bond yields are far below their long-run equilibrium levels and if anything, are forecasting deflation and possible stagnation. The huge disconnect between gold and bonds should serve as a reminder to gold bulls to tread carefully, unless they are sure that the bond market has it wrong.

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.

2010-10-06 Deflation Economics: Quantitative Easing and the Portfolio Balance Channel by Thomas Fahey of Loomis Sayles

The level of assets on central bank balance sheets has been relatively stable since the initial burst of quantitative easing in late 2008 and early 2009. As growth slows, however, money and credit numbers could drop significantly. Central banks could still do more to spur a more complete economic recovery. Until then, bond yields should remain low. Perhaps 10-year Treasury yields below 3 percent are low enough to reverse the real demand for money and force portfolio rebalancing. Investors will need to watch the corporate sector for signs of cash hoarding and hiring as evidence of that.

2010-10-04 Is it Feasible to Have Your Cake and Eat it Too? by Chris Maxey of Fortigent

Suggesting that the bond markets are in a bubble is dangerous at this point in the economic cycle. The intervention of the Federal Reserve into the government bond markets will inherently depress yields, while a lack of clarity around economic growth will encourage individuals and corporations to refrain from embracing excessive spending. This in turn could lead to stagnant growth and further desire to hold less risky assets. For now, bond investors can sleep well knowing that sometimes, just sometimes, you can have your cake and eat it too.

2010-10-02 The Morality of Chinese Growth by John Mauldin of Millennium Wave Advisors

Mauldin provides highlights from a recent conference. John Hofmeister is the former president of Shell Oil. He paints a very stark (even bleak) picture of the future of energy production in the US unless we change our current policies. David Rosenberg argues that GDP growth has been helped largely by inventory rebuilding, which is not sustainable. The analysts at GaveKal discuss the tension between Chinese policies toward economic growth and the social welfare it provides for its citizens.

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.

2010-09-29 Multiple Risks From a Multispeed Eurozone Recovery by Nouriel Roubini of Roubini Global Economics

Although the euro zone's recovery from recession has been better than initially envisaged, there are still external and domestic pressures - some persistent, some new - as potential threats to 2011 growth. The standout performance of the core and Northern European economies, particularly Germany, alongside renewed weakness in the periphery is giving rise to a multi-speed recovery. This adds a new set of risks - such as the implications of one-size-fits-all monetary policy - to the existing list.

2010-09-28 The Future of Oil by Robert Huebscher (Article)

No commodity impacts the global economy more than oil. When geopolitical threats loom, two questions often dominate discussion: Will the price of oil rise? And what will be the economic consequences? We review the key drivers of recent, current, and forecast oil prices, including a template for the necessary eventual alignment of supply and demand.

2010-09-28 Lessons in Ethics: The Incredible Story of Patrick Kuhse by Charlie Curnow (Article)

Patrick Kuhse is the last person you'd expect to give a lecture on business ethics. As a deputy bond trader for Oklahoma's $9 billion general fund during the early 1990s, Kuhse arranged kickbacks for his superiors in the state Treasurer's office. In return, he received an increase in his commissions which, over time, netted him $3.89 million more than he would normally earn, according to court estimates. But today, business ethics are his specialty.

2010-09-28 It's a Break-out! by Mike Hurley of Incline Capital

While stocks are overbought and may well pull back over the short term, market internals are in good shape and suggest stocks will likely headed higher over the intermediate term. Specifically, both breadth and leadership are confirming the break-out,' with the next key question being how they compare if and when stocks will challenge their early 2010 highs. A key factor in the strength in equites has clearly been interest rates, which have moved sharply lower over the past six months. This has not only helped stocks move higher, but gold as well.

2010-09-27 Is Deflation Still a Risk? by Team of American Century Investments

Last Friday's Consumer Price Index report found that prices rose 1.1 percent on an annual unadjusted basis in August. Because the U.S. Federal Reserve Open Market Committee noted in last week's statement that inflation is currently at levels somewhat below what it judges to be consistent with long-run price stability, some have suggested that the central bank is still concerned about deflationary pressures in the economy. Whatever happens, one thing is clear: As long as the residential housing crisis drags on without resolution, the risk of deflation should remain a concern for investors.

2010-09-24 Cash Kindling by Robert Stimpson of Oak Associates

The US stock markets potential resurgence is tied to a renewed and sustained wave of capital spending from corporate America. While consumers delever, most corporate balance sheets are tremendously well capitalized, with high levels of cash, profitability and low debt. High uncertainty levels about the economy seen today are likely to dissipate, thereby creating a more conducive environment for making spending decisions. The stock markets next chapter will be written by corporations spending the cash they have accumulated. This should unfold over the next 4 to 6 quarters.

2010-09-22 The Rule of 72 by Jeffrey Bronchick of Reed, Conner & Birdwell

The 'rule of 72' allows the lay investor to determine how long it will take for him to double the value of his investment. It is calculated by dividing the number 72 by the annual yield of an investment. For example, if one divides 72 by the current 10-year Treasury bond rate of 2.7 percent, the formula generates an output of 26.6 years to double one's money. Under almost any definition of an intelligent investment plan, that seems like a very long time. If you cannot earn a rate of return above the 3 percent after-tax cost of debt for 10 years, then you should quit.

2010-09-22 Too Soon to Call for Asian Decoupling by Nouriel Roubini of Roubini Global Economics

Even without a double-dip, weak U.S. and EU recoveries will cause export-dependent Asian economies to grow below their 2003-07 trends in the coming years. Nonetheless, widening growth differentials with the G7 countries and healthy public- and private-sector balance sheets - along with rising incomes and expanding middle classes - will drive economic growth and foreign investment in Asia and increase intra-Asia and EM trade and investment.

2010-09-21 Americas Demographic Advantages by Art Patten (Article)

Joel Kotkin's inherent optimism is a welcome antidote to the gloom and doom that's taken hold of so many in the wake of the great recession. In The Next Hundred Million: America in 2050, he uses copious reference material and broad strokes to paint a relatively cheery vision of America's future, which he believes will be driven largely by people, place, and national character.

2010-09-15 A Balancing Act For the Bank of Canada by Nouriel Roubini of Roubini Global Economics

The Bank of Canada adopted a hawkish tone at its September 8 policy meeting, despite signs of slowing growth. Less need for balance sheet repair should indeed allow Canada to continue to outgrow most of the G7. The country cannot decouple from U.S. growth, however, in part because most Canadian exports are U.S.-bound. These dynamics and a moderate core inflation rate call for the Bank of Canada to maintain the current, accommodative interest rates for the rest of 2010, despite its concerns about excessive debt practices.

2010-09-14 What the Taylor Rule Says about Interest Rates by Charlie Curnow (Article)

The Taylor Rule, a widely cited forecasting tool, predicts that the current inflation rate of 1.2 percent and the unemployment rate of 9.6 percent will keep the target federal funds rate in the range of -3.5 to -4.5 percent. We report on a presentation last week by an official at the Boston Federal Reserve Bank.

2010-09-13 It's Time for Tax Cuts, Not Tax Hikes by Charles Lieberman (Article)

The Obama Administration is considering extending the Bush tax cuts except for families with income above $250,000, as well as offering some tax cuts for business to spur investment spending. The Administration's proposed extensions of the Bush tax cuts, especially if augmented by more favorable depreciation allowances to encourage capital spending, are pro-growth. It is therefore surprising that the Administration would undermine the benefits of such proposals by failing to extend the Bush tax cuts for all households.

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.

2010-09-10 Don't Doubt the Double-Dip by Neeraj Chaudhary of Euro Pacific Capital

A few weeks ago Nouriel Roubini, widely regarded as one of the more pessimistic figures on Wall Street, made headlines by raising his forecasted likelihood of a 'double-dip recession' to a terrifying 40 percent. The vast majority of 'mainstream' economists described these predictions as far too gloomy. Roubini, however, may be right. As the high from last year's monetary and fiscal stimulus wears off, there is a good deal of evidence suggesting that the U.S. economy is weak and deteriorating, and that a renewed contraction in GDP is a near certainty.

2010-09-08 Brazil's Economy Exhales by Nouriel Roubini of Roubini Global Economics

Brazil's cooling economic growth in the second quarter resulted from the withdrawal of excess accommodation, a less benign global backdrop and a high base. Looking into the second half 2010, the country's growth could temper further if July's industrial output figures and the purchasing managers' index for August are any indication. Although demand drivers such as labor conditions, credit and consumer confidence remain resilient, they are easing, which suggests economic activity will keep settling into more sustainable levels.

2010-09-07 Looks Like a Bottom! by Mike Hurley of Incline Capital

WWhile the odds suggest stocks are most likely headed higher from here, trend-following indicators such as the 'golden cross' or the weekly MACD have yet to confirm a new intermediate term up trend. The MACD is quite close however, which would reverse the 'sell' signal it registered during the the week of May 7. Commodities are looking ready to move higher as well.

2010-09-07 It's a Depression and Other Thoughts by David A. Rosenberg of Gluskin Sheff

This is what a depression is all about - an economy that 33 months after a recession begins, with zero policy rates, a stuffed central bank sheet, and a 10 percent deficit-to-GDP ratio, is still in need of government help for its sustenance. We had this nutty debate on Friday on Bloomberg Radio in which another economist claimed that there was no evidence of any indicator pointing to renewed economic contraction. And yet, that very day, the ECRI leading economic index came in at a recessionary -10.1 percent print for last week.

2010-09-04 The Last Chapter by John Mauldin of Millennium Wave Advisors

Mauldin presents content from his forthcoming book. He reviews some fundamental precepts of economics, focusing on the Keynesian approach the US is taking to revive the economy. He presents data from Woody Brock showing that the US debt may rise by as much as $1.5 trillion per year. Ultimately, he says, the bond market will revolt and interest rates will rise and the results will be very unpleasant. Using taxes or savings to handle a large fiscal deficit reduces the amount of money available to private investment.

2010-09-02 I Renounce Monetarism (with apologies to Mr. Lippman of Pendant Publishing) by Paul Kasriel of Northern Trust

Monetarists such as Milton Friedman hold that the M2 money supply is a leading indicator of aggregate demand. Indeed, from 1960 through 1989, the price-adjusted M2 money supply had a relatively high correlation with real aggregate demand for goods and services. As charts presented in this commentary illustrate, however, from 1990 through the second quarter of 2010 the correlation between real M2 and real final sales of domestic product deteriorated dramatically.

2010-09-02 Beggar Thy Neighbor by Niels C. Jensen, Nick Rees and Patricia Ward of Absolute Return Partners

Austerity hurts domestic economic growth, and all those countries facing harsh austerity programs over the next several years will thus realize that the only way out of the current predicament is through higher exports and/or lower imports. We cannot all export our way out of our problems, however. Somebody will have to do the imports. Lower economic activity will again lead to lower tax revenues for the public sector; it is a very unfortunate and rather vicious spiral which is also very deflationary.

2010-08-31 The Alternative to Big Bonuses by Charlie Curnow (Article)

Do bankers deserve big bonuses? Economists will tell you that bonuses improve employee productivity by rewarding good work. But did the large performance-based payments given to Wall Street securities traders, for example, really steer them to better choices during the run-up to the recent financial crisis? What about financial advisors who base their fees on a percentage of the assets they manage? We take a critical look at Dan Ariely's latest research and the insights it provides.

2010-08-31 Nitty Gritty Details of the Labor Market Make Headlines by Asha Bangalore of Northern Trust

The elevated 9.5 percent official unemployment rate and the broader 16.5 percent jobless rate highlight the dire status of the labor market even after four quarters of economic growth. Financial markets have yet to follow closely the report on job openings, however, which contains information each month about the total number of job openings, the pace of hiring and separations in the economy. Harvard economics professor Robert Barro discusses the implications of the job openings report in a recent article for the Wall Street Journal.

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 Double-Dip Economy: Does Quantitative Easing Really Matter? by Christopher Whalen of Institutional Risk Analyst

While the financial markets await the latest pronouncement from Fed Chairman Ben Bernanke, the Institutional Risk Analyst features a comment from friend and former colleague at the FRBNY Richard Alford. He asks whether any of the policy options being considered by the U.S. central bank are meaningful to the American economy. As Paul Krugman wrote in the New York Times on Friday, 'policy makers are in denial.'

2010-08-27 Increasing Risks by Tony and Rob Boeckh of Boeckh Investment Letter

Capital preservation is of critical importance in this volatile, highly uncertain world. Within that conservative context, Boeckh has been relatively bullish on risk assets. The time has come to add another layer of caution to portfolios. The S&P 500 may well remain in an extended trading range, but we may be much closer to the upper boundary than the lower. Seasonally, we are heading into a period when markets tend to be weak, and some important declines have occurred.

2010-08-27 Flying Blind by Peter Schiff of Euro Pacific Capital

Today's weak GDP numbers have finally caused the mass of economists to revise downward their formerly optimistic recovery forecasts, with many finally entertaining the possibility of a "double dip" recession. It should be obvious by now that these economists only have the capacity to describe where the economy is moving in the short-term...they have no ability to explain the reasons behind the macro trends or make predictions that go beyond the next data release.

2010-08-27 On Critical Support by Mike Hurley of Incline Capital

While stocks have so far held key areas of support, there is a very real chance the equity markets are forming a cyclical top. The action in the weeks ahead will be absolutely critical.

2010-08-26 You Call This Capitulation? by David A. Rosenberg of Gluskin Sheff

The extent of the denial over U.S. double-dip risks is unbelievable. Investors Intelligence did show the bull share declining further this past week, to 33.3 percent from 36.7 percent. The bear share barely budged, however, and is still lower than the bull share at 31.2 percent. Are we supposed to believe that at the market lows, there will still be more bulls than bears out there? Hardly. At true lows, the bulls are hiding under table screaming 'uncle!.'

2010-08-25 Mel Brooks and the Bankers by Thorvaldur Gylfason of VoxEU

In Mel Brooks' hit film and Broadway musical The Producers, those charged with making their musical a success instead try to profit from making it a spectacular failure. This column argues that some bankers may have been playing the same game in the run-up to the global crisis. If so, just as in The Producers, the perpetrators should be heading to jail.

2010-08-24 What Investors Really Want by Robert Huebscher (Article)

Using a mean-variance optimizer to construct a retirement portfolio that sits on the efficient frontier is tantamount to dining on a well-prepared meal that was pureed in a blender, believes Meir Statman, a professor of finance at Santa Clara University. Statman's research focuses on behavioral finance, and how advisors can help investors make smarter decisions.

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 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.

2010-08-23 Markets Are Pricing in the 'New Normal' by Charles Gave of GaveKal

Either the upcoming U.S. elections, in a repeat of 1994, will bring about a Congress able to reduce the pace of government spending, thus triggering a massive sell-off in government bonds and a significant rally in equity markets, or the expansion of the U.S. government will continue, in which case investors in U.S. government bond markets will likely thrive in a repeat of what happened in Japan over the past two decades. You can guess which outcome the biggest fixed income investment houses are rooting for.

2010-08-20 Happy Birthday Social Security? by Neeraj Chaudhary of Euro Pacific Capital

In his weekly radio address this past Saturday, President Obama happily commemorated the 75th anniversary of Social Security. This milestone, however, is nothing to celebrate. For although the president spoke earnestly about the 'obligation to keep the promise' of Social Security, in reality, the program will wreck the government's finances within 10 years.

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.

2010-08-19 The Bond Bubble Debate: 'One Rosie' Takes on 'Two Jeremies' by David A. Rosenberg of Gluskin Sheff

What we have on our hands is a powerful demographic appetite for yield at a time when income is under-represented on boomer balance sheets. The two most significant determinants of the trend in long-term bond yields - Fed policy and inflation - continue to flash 'green' at a time when the yield curve is still historically steep and destined to flatten. Finally, the central bank has already assured us that short-term rates will remain at rock-bottom levels for as long as the eye can see. David Rosenberg also comments on growing acceptance of frugality by retailers.

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 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.

2010-08-17 Misconceptions about Risk and Return Uncovered by Geoff Considine, Ph.D. (Article)

Our beliefs about risk and return determine how we construct portfolios and manage risk. Research over the last decade suggests that a number of the ideas on which many investors and advisors rely lead to portfolios that are too highly exposed to market risk. In this article, we review a number of ideas that determine how we select assets and how we determine what to expect from those assets.

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 Politics and Pessimists by Brian S. Wesbury and Robert Stein of First Trust Advisors

The forces underlying economic growth have turned positive. At the same time, the Fed is accommodative and unlikely to change its stance. These two factors alone will prove the pessimists wrong. In addition, the political winds are howling toward a divided government. The odds of putting off a tax hike in 2011, and possibly reversing healthcare legislation, cannot be ruled out. Add this to the mix, and the future could bring a sharp boost to the upside that makes short-sellers very uncomfortable.

2010-08-14 Technical Market Take by Mike Hurley of Incline Capital

Market technical are of concern technically. Specifically, there was not only a noticeable absence of new 52-wk highs during the recent bounce in equities, but last weeks decline saw more than twice the number of new lows, than new highs (A). Most definitely action which supports the opinion that stocks may well be forming some type of cyclical top. The bottom line being, that the market continues to suggest that the wisest course of action going forward is to underweight equities (or avoid them entirely, depending on suitability) while overweighting bonds.

2010-08-10 Zvi Bodie on Stocks and Annuities in Retirement by Dan Richards (Article)

In this interview, retirement expert Zvi Bodie discusses the role of stocks and annuities in a retirement portfolio, and how advisors and clients should think about risk. This is the transcript of the interview.

2010-08-09 Systemic Regulator Risk: Does the Fed of New York Need a Haircut? by Christopher Whalen of Institutional Risk Analyst

Given its second lease on regulatory life, one might expect that the Fed's bank supervision function would be gearing-up to take a fresh, smart, and tough line with respect to financial company oversight. However, the appointment of Sarah Dahlgren as head of supervision by the Federal Reserve Bank of New York indicates this may not be the case. Ms. Dahlgren has been at the center of many of the Federal Reserve's most embarrassing failures in the area of bank supervision, including the fiasco surrounding American International Group.

2010-08-09 Some Salient Facts About the July Payroll Report by David A. Rosenberg of Gluskin Sheff

David Rosenberg outlines a number of reasons why last Friday' U.S. nonfarm payroll report was even weaker than we thought. He also comments on the recent 120 basis point decline on 10-year Treasury note yields, and its implications for the stock market.

2010-08-09 It's the Jobs, Stupid! - Part III by Komal Sri-Kumar of TCW Asset Management

The unemployment rate is a leading indicator of economic activity in this business cycle due to the potent force of discouraged consumers, rather than a lagging indicator, as we have been taught in our economics courses. That, in turn, means that we cannot ignore the large number of jobless workers in the belief that economic growth will subsequently cure the problem we won't have sustained economic growth unless we lower unemployment first. The disappointing employment numbers last Friday are indicative of this trend.

2010-08-07 A Quick Review of Gold by Mike Hurley of Incline Capital

Mike Hurley presents charts of prices for gold contracts, as well as two key gold stocks: Newmont Mining and El Dorado Gold Corporation. It looks pretty clear that gold, and the stocks shown, are in good shape technically and ready to move meaningfully higher from here - despite what many of the bears are saying. It will be a very different story once gold breaks the up trend line shown, but until then the market itself is saying that it's 'all clear ahead!'

2010-08-06 Perspective Needed by David A. Rosenberg of Gluskin Sheff

We are heading into the third quarter knowing that there was minimal growth coming from U.S. consumers. July's data on chain store and auto sales were both below expectations. Personal bankruptcies jumped 9 percent in June, and 2010 is now on track to have the largest number of consumer insolvencies in five years. If capital spending is going to do the heavy lifting, then it will have to accelerate by nearly 10 percentage points for every percentage point slowing in household spending. Now that is a daunting task.

2010-08-05 Just how risky are China's housing markets? by Yongheng Deng, Joseph Gyourko and Jing Wu of VoxEU

Reinhart and Rogoff's recent influential study of financial crises finds a recurring root - the country's property markets. This column argues that a similar housing bubble may be developing in China. Urgent research is needed to determine the risk of a full-blown crisis.

2010-08-04 No Man's Land by Mike Hurley of Incline Capital

Rallying nicely on the month of July, the U.S. markets moved back through key areas of resistance and in doing so have formed what may end up being be bear traps on their charts. While the jury remains out on the direction of equities, however, interest rates literally across the board have broken important support levels. Among these are yields on 10-year U.S. Treasury bonds, which are now below 3 percent, and are headed lower from here. This is a trend which may well have legs, and which advisors should include in their planning for clients going forward.

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 The Role of Taxes in Future Growth by Chris Maxey of Fortigent

Democrats who were previously in favor of allowing the Bush-era tax cuts to expire at the end of this year are suddenly swimming in the opposite direction, with several favoring extensions to the tax credit, given the poor economic backdrop. It is easy to find evidence to support both camps, but the simple reality is that economically restrictive policies will create a drag on growth at a time when the economy can ill afford them.

2010-08-03 Roller Coaster Economics: Prepare for the Next Downturn by Brian Reading of Boeckh Investment Letter

This commentary features a piece by Brian Reading, former advisor to the Bank of England, former economics editor of The Economist magazine and founding partner of Lombard Street research service, on what should be done about massive fiscal deficits and spiraling debt-to-GDP ratios. Reading argues that no amount of exchanging domestic imbalances within the U.S., UK and other deficit countries between the public and private sectors can prevent a resumed recession. The prerequisite for sustained global recovery is increased consumption in Eurasia and a reversal of payment imbalances.

2010-08-02 GDP Data - Better than the Spin Suggests by Brian S. Wesbury and Robert Stein of First Trust Advisors

Even though the economy should be growing faster, to say its not growing at all is just wrong. Nor is it responsible to be overtly political about it and say its all Obamas fault. Some are trying to say that the Bush stimulus and TARP were good, but what Democrats have done is bad. What a bunch of partisan malarkey! It's hard to do, but investors need to separate their politics from their economics. Staying positive is as important as fighting for what you believe in.

2010-07-28 Still Stressed After Tests by Nouriel Roubini of RGE Monitor

According to the Committee of European Bank Supervisors, only seven of the continent's banks failed to pass muster out of the 91 assessed in recent stress tests. These tests contained a crucial flaw, however: the absence of a sovereign default scenario. Optimistic commentators point to the rebound in U.S. markets after the Supervisory Capital Assessment Program, which faced significant criticism, as Europe's equivalent is now. However, while the U.S. SCAP tests modeled the key concern of the market - future property risk - and forced banks to recapitalize, the European tests did neither.

2010-07-27 Robert Shiller: A Cautious Outlook for Stocks by Dan Richards (Article)

Dan Richards recently spoke with Robert Shiller, the Yale economist who foresaw the financial crisis and created the Case-Shiller housing index. Shiller discusses the potential for a double-dip recession, valuations in the US equity market, and the outlook for a housing recovery. This is the transcript of the interview.

2010-07-27 We're All Chartists Now by David A. Rosenberg of Gluskin Sheff

Fed chairman Ben Bernanke may not be the world's best forecaster. He has the deepest rolodex, however, deeper than that of any CEO. And when he uses the phrase 'unusually uncertain' to describe the economic outlook, it is irrational to ascribe anything fundamental to the current market rally. The technical picture has indeed improved. The market gets it wrong, however, as often as it gets it right. There is still potential for many disappointments in earnings reports to come.

2010-07-26 Mike Hurleys Technical Take (7/26): A Bear Trap? by Mike Hurley of Incline Capital

While we have not yet seen a trend-following 'buy' signal in the weekly Moving Average Convergence/Divergence, stocks could continue to rally from here over the short term particularly given that the Stochastics are just now moving off oversold levels. The more important question is whether or not the strength will become anything more than a 'right shoulder' of a head and shoulders-type topping formation. Mid-cap stocks will most likely outperform on the upside should the market move higher in the weeks ahead.

2010-07-24 Some Thoughts on Deflation by John Mauldin of Millennium Wave Advisors

We face the deflation of the Depression era, and central bankers of the world are united in opposition. This is due to excess capacity, high unemployment and massive wealth destruction. Deflationary pressures are the norm in the developed world (except for Britain, where inflation is the issue). The US has mild (1 percent) inflation now, but if it trends to deflation, the Fed will react by monetizing the debt.

2010-07-24 And That's the Week That Was... by Ron Brounes of Brounes & Associates

After riding high for the first few months of the year, investors faced the uncertainty of another major market downturn and watched those early profits disappear. In more recent times, they have been clawing their way back to breakeven territory. After some favorable earnings news and some decent economic (and banking) reports from Europe, the Dow and Nasdaq are virtually flat for the year and the S&P 500 is nearing the breakeven point. The small-cap Russell 2000 has fared a bit better thus far.

2010-07-22 Failing at Resistance by Mike Hurley of Incline Capital

Technically speaking, after finding support at its 200-day moving average in February while in an uptrend, the S&P 500 is now finding resistance at that key line. This is action indicative of a down-trend, as are the 'lower highs & lower lows' which are clearly taking shape on the chart. The overseas markets are also struggling, with the most glaring example being the EAFE. In the case of the 10-yr U.S. Treasury bonds, breaking 3.2 percent moves yields out of a yearlong trading range and signals that significantly lower yields are most likely ahead.

2010-07-22 Musings on Asia by Vitaliy Katsenelson of Investment Management Associates

The popping of both the Chinese and Japanese bubble economies will lead to higher interest rates. The Japanese government will probably not be able to intervene in the economy for much longer, and so rates in that country will rise and there will be little they can do about it. China's government, meanwhile, seems to be mulling another multi-hundred-billion-dollar stimulus over the next few months. The Chinese government's actions are thus the wild card that will determine the duration and the magnitude of the bubble's pop - the longer they intervene, the direr the consequences will be.

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 No Golden Ticket by Nouriel Roubini of RGE Monitor

Why aren't we giddy about gold? In the abstract, gold is most attractive as a hedge in one of three extreme scenarios: high inflation, persistent deflation, or when the risk of global financial meltdown is large. Once national balance sheets are repaired through a protracted and gradual deleveraging of households and governments following the relatively rapid deleveraging of the financial sectors, particularly in the United States, excessive deflation and inflation fears will subside.

2010-07-20 Martin Leibowitz Failed Defense of the Endowment Model by Michael Edesess (Article)

The latest book from Martin Leibowitz, one of the most respected thinkers in the investment industry, attempts to justify the endowment model of investing. As Michael Edesess writes in this review, Leibowitz's defense is highly problematic, and that should concern any advisor utilizing a Yale-like strategy.

2010-07-20 Behavioral Finance Lesson - Frequent Flier Points? by Dan Ariely of Predictably Irrational

'Medium maximization' is when people focus on near-term concrete goals (such as frequent flyer miles), and while trying to maximize these immediate and clear goals forget or discount the real reason for their actions, such as maximizing their financial outcomes. Why do people engage in medium maximizations? Because they are easy. They give people a clear direction for behavior. Just having something measurable within reach can redirect our motivation, while having such immediate and concrete goals give us a sense of progress.

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 nave 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.

2010-07-17 The Debt Supercycle by John Mauldin of Millennium Wave Advisors

The Debt Supercycle, as posited by the Bank Credit Analyst, is the decades-long growth of debt from small and easily-dealt-with levels, to a point where bond markets rebel and the debt has to be restructured or reduced or a program of austerity must be undertaken to bring the debt back to manageable proportions. The consequences for each country will be different, and the U.S. is a long way off from "the end." A key point will be the 2014 elections, when critical budget decisions must be made.

2010-07-16 Keynesian Economics: RIP by Team of Dana Investment Advisors

The American public and many members in Congress are waking up to the fact that Keynesian economics is not working. It did not work in the 1930s either, as we actually had a recession within the depression, and suffered double-digit unemployment throughout the decade. This time can be different if the public demands and Congress enacts legislation that will lift the veil of uncertainty and help build a more conducive environment for establishing new businesses and creating new jobs in existing businesses. Then money would come out of hiding and get this economy moving again.

2010-07-15 Facts on the Ground by Paul McCulley of PIMCO

What the developed world faces is a cyclical deficiency of aggregate demand, the product of a liquidity trap and the paradox of thrift, in the context of headwinds borne of ongoing structural realignments. Front-loaded fiscal austerity would only add to that deflationary cocktail. And that's what the market vigilantes are wrapped around the axle about: They are not fleeing the sovereign debt of fiat currency countries but rather fleeing risk assets, which depend on growth for valuation support.

2010-07-14 U.S. Equity Newsletter by Team of W.P. Stewart

One thing is certain - there is a lot of bad news around and many people are now forecasting a double-dip recession. 'Bad news,' however, may already be factored into prices. Global growth is still expected to be solidly positive in 2010 and 2011, albeit somewhat skewed to the emerging markets. Corporate balance sheets are very robust, productivity has never been higher and earnings growth remains strong even on somewhat reduced estimates. Equities should therefore offer significantly better returns than bonds or cash.

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.

2010-07-13 Nouriel Roubini on Crisis Economics by Michael Edesess (Article)

There's good reason why Nouriel Roubini has been dubbed Dr. Doom. After reading his book co-authored with Stephen Mihm, Crisis Economics, one might despair for our economic system. Roubini makes the recent crisis seem inevitable, hard to stop, and very hard to keep from happening again.

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 Three Questions on Behavioral Economics by Dan Ariely of Predictably Irrational

Unlike standard economics, behavioral economics does not assume that people are rational. Instead, behavioral economists start by figuring out how people actually behave, often in a controlled lab environment, and use this as a starting point. While the Chicago economists sometimes admit that people make mistakes, they claim that people make different types of mistakes that will eventually cancel each other out in the market. Behavioral economists argue that people will often make the same mistake, and that those individual mistakes can aggregate in the market.

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 market unwinds, and the Consumer Confidence Index is down to 52.9 in June from 62.7 in May. Fair value on the S&P is 950, which would indicate another 7 percent decline in stock prices from here.

2010-07-12 The Crowd Zigs, Time to Zag? by Chris Maxey of Fortigent

When the crowd is zigging, it is best to trust one's contrarian instincts and zag. The ratio of bearish to bullish investors has steadily risen since early May, when concerns about sovereign stability began to unravel. In the week ending July 8th, 57 percent of individual investors reported being bearish in the intermediate term, against only 21 percent that hold a bullish stance. Investor sentiment is sitting at the lowest point since March 2009, and we all know what happened in the intervening months.

2010-07-09 July 2010 Newsletter by Harold Evensky of Evensky & Katz

Evensky & Katz president Harold Evensky doesn't know about you, but he's getting tired of living in interesting times. Unfortunately the market gods don't much care for his opinion. So, given the reality that the markets have been a tad exciting lately, in addition to his regular meandering tidbits, he's included a number of items that he thought might provide a little perspective on the ranting of the financial talking heads.

2010-07-07 Paper Gold vs the Dollar? Interview with James Rickards by Christopher Whalen of Institutional Risk Analyst

This commentary features an interview with James Rickards, senior managing director for market intelligence at Omnis, Inc., about the dollar and the outlook for the U.S. currency in the global economy. Mr. Rickards' career spans the period since 1976. He was a first-hand participant in the formation and growth of globalized capital markets and complex derivative trading strategies.

2010-07-06 Implications of a Likely Economic Downturn by John P. Hussman of Hussman Funds

Instead of directing savings toward investments in real, productive assets that we would observe as physical output, fixed capital, and equipment (and claims on those assets in the form of corporate stocks and bonds), our economy has been forced to choke down a massive issuance of government liabilities in order to bail out bad debt. For every dollar of debt that should have defaulted, we now have two dollars of debt outstanding: the original debt, and a newly issued government security. What appears to be 'sideline cash' is simply the evidence of past spending.

2010-06-30 Will Debt Problems Metastasize to Core European States? by Nouriel Roubini of RGE Monitor

One of the major issues is whether the problems of the PIIGS will metastasize from the eurozone periphery into the core countries of the continent. This commentary focuses specifically on Belgium, which has the third highest debt-to-GDP ratio in Europe. It is uncertain how Belgiums necessary belt-tightening measures can be implemented, particularly given the dim prospects of a durable political consensus.

2010-06-29 Market Insights by Christian Thwaites of Sentinel Investments

Christian W. Thwaites takes a deeper look at some of todays big issues. He answers the question Inflation or Deflation, investigates the Eurozone collapse and explains the plight of the U.S. consumer. As the summer begins, Thwaites gives his outlook on the market and some simple rules to follow for a strong financial future.

2010-06-25 The Big Picture by David A. Rosenberg of Gluskin Sheff

Escalating global economic imbalances have dramatically increased the vulnerability of the global recovery. The chances of a growth relapse in the second half of the year are higher than the equity market and credit market have priced in. Treasury bonds seem to be the asset class that most closely shares these cautious views. Anyone with a pro-cyclical bent has to answer for why it is that the yield at mid-point on the coupon curve is below 2 percent, a year after a whippy rally in equities and commodities and what appeared to be a sizeable policy-induced GDP jump off the bottom.

2010-06-25 Suiting Up For a Post-Dollar World by John Browne of Euro Pacific Capital

The U.S. has always benefited from its reserve-currency status, which allows it to accumulate unsustainable debts for an unusually long period without the immediate repercussions of inflation or higher borrowing costs. This false sense of security, however, may be setting us up for a truly monumental crash. After two decades as net sellers of gold, foreign central banks have now become net buyers. What's more, more than half of central bank officials surveyed by UBS didn't think the dollar would be the world's reserve in 2035.

2010-06-24 Daring to Compare Today to the 30s by David A. Rosenberg of Gluskin Sheff

Look at what we have today: No room to cut rates. No room let alone political will to cut taxes. And, in contrast to starting a new war, the U.S. is going to be pulling troops out of Afghanistan, which is a good thing for the troops and their families, but in terms of GDP impact it does represent fiscal withdrawal. The options to resuscitate the economy when it enters a 2002-03 style growth collapse are extremely thin, and probably lie on the Feds balance sheet, which means the bond-bullion barbell will likely remain a viable strategy.

2010-06-23 Deconstructing the Great Inflation Myth by Jason Doiron of Sentinel Investments

Inflation does not seem to be a serious risk, at least in the near term. Significant decreases in the velocity of money are offsetting the impact of any increase in the money supply as a result of fiscal and monetary stimulus. Capacity utilization remains at about 74 percent of potential output. And about 17 percent of workers are still either unemployed or underemployed.

2010-06-22 Niall Ferguson on Japan, China, and the US by Dan Richards (Article)

Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.

2010-06-21 Excessive Fiscal Tightening A Major Worry by Scott Brown of Raymond James Equity Research

Studies of past recessions show that downturns associated with financial crises tend to be more severe and longer-lasting, and have gradual recoveries. Studies also point to a common error made in these recoveries - that is, policy is often tightened too soon. Chairman Bernanke is a student of the Great Depression, so the Federal Reserve seems unlikely to make that mistake. However, there is a growing public mood to do 'something' about the federal budget deficit. While well-intentioned, excessive fiscal tightening is bad economics.

2010-06-21 Random Musings From a Summer Vacation by Jeffrey Saut of Raymond James Equity Research

The debate of the day centers on whether what we have experienced since the March 2009 'bottom' is just a rally in an ongoing bear market or the beginning of a new secular bull market. Since the end of 2001, Jeffry Saut has been adamant that there is a secular bull market in 'stuff stocks' (energy, agriculture, metals, water, electricity, cement, etc.), especially 'stuff stocks' with a yield, as well as a bull market in emerging and frontier markets. The rest of his portfolio is geared toward taking advantage of the various mini-bull/bear market 'swings.'

2010-06-18 Chinese Workers Force the Issue by Neeraj Chaudhary of Euro Pacific Capital

Chinese factory workers and other laborers across the country are going on strike, thus defying the orders of their government-run unions and risking dismissal by their employers. The Chinese government must find a way to nip their labor issues in the bud. The best policy approach would involve yuan revaluation. By reducing the rate of inflation of the Chinese yuan, the purchasing power of the yuan will increase, thereby allowing Chinese workers to better enjoy the fruits of their labor. As living standards rise, worker unrest will subside, and the impetus to strike will vanish.

2010-06-17 Getting a Grip on Reality by David A. Rosenberg of Gluskin Sheff

Double-dip risks in the U.S. have risen substantially in the past two months. While the economy's 'back end' of industrial production is still performing well, this lags the cycle. The 'front end' of consumer sales and housing leads the cycle. We have already endured two soft retail sales reports in a row and now the weekly chain-store data for June is pointing to subpar activity. The housing sector is going back into the tank - there is no question about it. The recovery in consumer sentiment leaves it at levels that in the past were consistent with outright recessions.

2010-06-16 The Economics of the World Cup by Nouriel Roubini of RGE Monitor

Although the short-term gains from hosting the World Cup are rather limited, if the event goes well and the country avoids labor strikes and other destabilizing events, it could provide a chance for South Africa to showcase its institutional development and help cement its longer-term recovery. There are, however, several structural challenges to overcome, such as limited access to services, transportation bottlenecks, worsening demographics and extensive inequality, which could hamper the country's potential output growth.

2010-06-15 June Economic Update by Team of Cambridge Advisors

Former hedge fund manager Keith McCullough compares America's current situation to Lehman in 2008 in that it is borrowing short to fund long-term liabilities. We can see the effect that high sovereign debt is having in Europe, and the U.S. is heading down a similar path. U.S. debt as a percentage of GDP is already higher than that of troubled Spain. Analysts have warned that higher taxes alone will not be enough to solve America's debt problem. Reduced government spending is needed and higher inflation may be unavoidable.

2010-06-15 Are You What You Eat? by Matteo M. Galizzi and Marisa Miraldo of VoxEU

Smoking, heavy drinking, and being overweight are known causes of disease. This column presents experimental evidence to try and understand why people ignore this advice. It compares lifestyle choices with people's attitudes to risk and their patience, finding that while people with an unhealthy lifestyle are no more risk-loving than other people, they are more impatient.

2010-06-15 Monthly Letter by Kendall J. Anderson of Anderson Griggs

On Friday the Dow Jones Industrial average lost 3.2 percent. The Standard & Poors 500 lost 3.4 percent, while the Nasdaq composite fell 3.6 percent. The reason for the drop was the monthly job report, as issued by the Labor Department, which indicated that only 41,000 out of 431,000 new jobs were created by the private sector. Of course this report brought with it images of an economy in trouble - that the recovery we've all been hoping for has stalled and the future is bleak. Kendall J. Anderson's response as an investor, and his suggestion to you, is to 'seize the day.'

2010-06-14 Double Dip, Anyone? by David A. Rosenberg of Gluskin Sheff

The data suggest that we are now seeing the consumer sputter with what looks like a very weak handoff into the third quarter. The housing sector is collapsing again. The export-import data are pointing to a sudden deceleration in two-way trade flows. Commercial real estate is dead in the water. Bank credit is in freefall right now. A double-dip is not yet a sure thing, however. Not only are the economists calling for 3 percent real growth, but the consensus among equity analysts is that we will end up seeing over 30 percent operating EPS growth to a new high of $95.59 for 2011.

2010-06-14 Disagreeing with Laffer About 2011 by Brian S. Wesbury and Robert Stein of First Trust Advisors

Economist Arthur Laffer recently fretted about the economic impact of the expiring 2003 Bush tax cuts, writing that the tax hikes would lift growth in 2010, but cause a double-dip recession in 2011 when the rates actually went up. The problem with economics, however, is that there are always multiple things happening at once. Back in 1993, the Federal Reserve was holding the federal funds rate at 3 percent - a clear policy of easy money. This helped offset the impact of the tax hikes and kept the economy growing.

2010-06-10 The 'Yield' Theme Continues Unabated by David A. Rosenberg of Gluskin Sheff

Fixed-income is woefully under-represented in U.S. and Canadian household balance sheets, while the average baby boomer is 55 years old and as a result is at an age where capital preservation strategies win out over a strict capital appreciation focus, which worked so well in the 80s and 90s. The market moves in 16- to 18-year cycles. Sadly, this secular down-phase in the equity market began in 2000 when the major averages hit their peak in real terms, so the best we can say now is that we are probably 60 percent of the way into it.

2010-06-07 The European Disease by Niels C. Jensen of Absolute Return Partners

It should be blatantly clear that Greece is by no means the only country at risk of falling into the much dreaded debt trap. The United Kingdom, the United States, New Zealand, Spain, France, Portugal and Australia are all in dangerous territory and Ireland is in very deep trouble on this account. This cross-European contagion risk threatens the very existence of our banking system, and it is this risk that French and German leaders are thinking about when they say that Greece will not be allowed to go down.

2010-06-07 Rajiv Sethi on High Frequency Equity Trading by Christopher Whalen of Institutional Risk Analyst

This commentary features a piece by Barnard economics professor Rajiv Sethi on high-frequency trading and its implications for the use of equity-market data, both for profit and risk management. Sethi notes that trading must be based on fundamental information rather than pure market data for prices to remain stable. Banning specific classes of algorithms is unlikely to provide a lasting solution to the problem, however, unless the advantage is shifted decisively and persistently in favor of strategies that feed information to the market instead of extracting it from technical data.

2010-06-07 China's Housing Bubble, To Be or Not To Be? by Chris Maxey of Fortigent

Market forecasters are worried about the state of the Chinese real estate market, with one publication after another declaring that an asset bubble is only moments away from popping. Clearly the recovery in the Chinese real estate market is impressive, perhaps curiously so, but the dynamics of the Chinese market indicate that an asset bubble is nowhere to be foundfor now. From an affordability standpoint, the price-to-income index is on the rise, but well below the levels seen in the U.S., the UK and even India.

2010-06-04 All We Are Sayin' Is Give Free Markets A Chance by Paul Kasriel of Northern Trust

Before we can determine whether or notfree markets have failed, we must actually have free markets. Central banks currently create or destroy credit by by holding a key short-term interest rate below or above the unobservable free-market equilibrium. The Securities & Exchange Commission determines which credit rating agencies receive official 'approval.' Lastly, without their debt being implicitly guaranteed by the federal government, Fannie and Freddie would not have been able to have consistently fund themselves at interest rates below other financial institutions.

2010-06-04 Key Indicators of a New Depression by Neeraj Chaudhary of Euro Pacific Capital

During the Great Depression, the U.S. was on the gold standard like everyone else, which forced the country to live within its means. Unfortunately, because of the responses of the Obama Administration and the Federal Reserve, this recession could develop into something far more devastating than its predecessor: a hyperinflationary depression. As bad as the current downturn has been, inflation would make it immeasurably worse. It would require an honest accounting of the problems we face today to avert the disaster we see coming tomorrow.

2010-06-04 The New Economic Reality - Part II by Monty Guild and Tony Danaher of Guild Investment Management

Some investors believe that deflationary influences will lead to an immense slowdown in world economic activity, and thus thus are selling stocks, buying bonds and short-selling commodities. Others think government action to forestall the deflation will end up creating inflation, and are buying commodities, buying stocks and avoiding bonds As the two sides pull markets back and forth, volatility will continue. To deal with the volatility, Guild is holding a large percentage of client assets in cash and gold, which can rise in either an inflationary or a deflationary situation.

2010-06-01 The Burden of Choice by Charlie Curnow (Article)

Columbia business professor Sheena Iyengar, author of The Art of Choosing, is the woman behind the famous jam study. Her research, which has been cited by Dan Ariely and others, shows the implications of providing consumers with choices that are too numerous or complex to easily evaluate. Charlie Curnow reviews her book.

2010-06-01 Global Equity Markets Slip on Greek Debt Crunch by Team of American Century Investments

Fears of a Greek default have heightened concerns about the financial stability of several other peripheral European countries. Spain, Ireland, Italy and Portugal, however, are not in the same situation as Greece. Italy in particular is in a separate, stronger category than the others. It is less reliant on foreign financing, with Italians owning a high percentage of their own sovereign debt. Italy also lagged in the economic boom prior to the global recession, a blessing in disguise because its banking sector is now not as over-leveraged to the housing market as banks in other countries.

2010-05-30 The Fallacy of Fair Value Accounting; Original Sin: Peter Wallison on Bear Stearns by Christopher Whalen of Institutional Risk Analyst

In this issue of The Institutional Risk Analyst, we opine on the latest fair value accounting proposal from the FASB and why market structure is the causation of our collective woe. We then feature a comment by Peter Wallison of AEI talking about the original sin of rescuing Bear Stearns and how it made the financial crisis far worse because of the importance of narrative the very same issue that is the focus of Nassim Talebs book The Black Swan.

2010-05-28 A Focus on Marketing Research by Dan Ariely of Predictably Irrational

Businesses most often rely on small 'focus groups' to answer big questions in marketing. In doing so, they rely on the intuition of about 10-12 lay people with no relevant training, and who ultimately have no idea what they're talking about. Although statistics about how a large group of people actually behaves can tell us so much more than the intuitions of a focus group, the allure of a story is irresistible. Perhaps we should try and supplement the numbers with a story to quench our thirst for an anecdote. What we can't do is forget about the facts in favor of fairy tales.

2010-05-28 The Recovery Marches On... by Scott Brown of Raymond James Equity Research

Real GDP rose at a 3.0% annual rate in the revised estimate for Q1, down from 3.2% in the advance estimate, although the story didn't change much. This was the third consecutive quarterly increase in real GDP. More importantly, the economy appears to be transitioning to a more sustainable recovery, less reliant on the shift in inventories and the government's fiscal stimulus, and supported more by consumer and business demand. Job growth, a key element in a sustainable economic recovery, has returned. Unfortunately, the economy still faces a number of headwinds in the near term.

2010-05-27 pricing glamour by tom brakke of the research puzzle

As investors, we must constantly monitor how much we are paying for glamour versus intrinsic value. You'll often hear debates about the relative merits of growth investing versus value investing; the lingo typically found in academic studies uses the terms 'glamour' and 'value' instead. Performance evaluations inevitably favor the latter strategy, because much of the glamour is really faux growth that is misidentified for a time. As prices vary for individual stocks and sectors, the rubber band of valuation is stretched here and there as the price of glamour fluctuates.

2010-05-26 Renewed Risks and Multi-Speed Global Recovery to Restrain World Trade Flows by Nouriel Roubini of RGE Monitor

Global trade growth is unlikely to reach its pre-recession highs in the short term, with exports of several trade-dependent economies, particularly emerging markets, growing at a slower pace due to weaker import demand in the U.S. and EU amidst consumer deleveraging, fiscal austerity and slow recoveries in labor markets and household wealth. In the medium term, however, structural reforms in emerging markets and surplus countries to increase domestic demand will boost trade among emerging markets, as well as global trade flows, changing their direction and composition.

2010-05-25 Sleeping with the Enemy by John W. Pfenenger II, CFA (Article)

When it comes to investing, our worst enemy may be the one we see in the mirror every morning - ourselves. In this guest contribution, John Pfenenger looks at how emotions affect investment decisions, and how understanding behavioral economics can help advisors work with their clients.

2010-05-24 Comment: Clifford Rossi on the Need for the Office of Financial Research by Christopher Whalen of Institutional Risk Analyst

This commentary features a contribution by Clifford Rossi, managing director of the Center for Financial Policy at the Robert H. Smith School of Business, University of Maryland. Rossi writes in support of a proposal by Senator Chris Dodd to establish the Office of Financial Research, which would aggregate enterprise-wide views of risk at large financial firms. Critics say the OFR would represent an unwarranted breach of privacy. The new division was included in the Senate financial reform bill, but is in danger of being dropped during the final reconciliation process.

2010-05-24 Dr. Copper and the Pessimists by Brian S. Wesbury and Robert Stein of First Trust Advisors

Government is too big and too intrusive and it will harm the economy over time. But it will not kill the economy today, or even next year. Productivity is booming. New technology is lifting wealth, and living standards are rising. Some might say that it is not the Great Depression we should worry about, but the 1970s all over again. This, Wesbury and Stein can agree with. However, during certain periods of that decade, particularly during 1975-76, the economy and the stock market both boomed. Thats what we are experiencing right now a boom amidst an uncertain future.

2010-05-13 Driving Without a Spare by Mohamed A. El-Erian of PIMCO

Mohamed El-Erian recounts the results of last week's PIMCO Secular Forum on the three- to five-year outlook for the global economy and the markets. Participants concluded that we are heading toward a world that is re-regulated, de-levered, and growing less rapidly in the industrial countries. It will be a world in which concerns about the dark side of globalization temper enthusiasm for its net benefits, and in which politics matter a lot for markets and the economy. The drama playing out in Europe these days is a vivid illustration of this general secular characterization.

2010-05-12 Has the EMU Skirted Disaster? by Nouriel Roubini of RGE Monitor

Although many operational questions remain unanswered, the 750 billion headline number for this week's euro area stabilization mechanism - in addition to the European Central Bank liquidity facilities and quantitative easing - should help fight contagion. It is now up to euro area periphery countries to fulfill the fiscal consolidation requirements. In addition, the relatively high interest rates on joint loans should serve as an incentive for euro area members to put their fiscal houses in order without recurring to the facility.

2010-05-12 Is the U.S. Too Big to Fail? by Carmen M. Reinhart and Vincent Reinhart of VoxEU

First posted November 17, 2008, this column's analysis is more relevant than ever. It asks why investors rushed to government securities, even though the U.S. was at the epicenter of the financial crisis. This column attributes the paradox to key emerging market economies' exchange practices, which require reserves most often invested in U.S. government securities. America's exorbitant privilege comes with a cost and a responsibility that U.S. policy makers should bear in mind as they address financial reform.

2010-05-12 Eight Hundred Years of Financial Folly by Carmen M. Reinhart of VoxEU

This column, first posted on April 19, 2008, argues that sovereign debt crises have historically followed financial crises. Although data covering only the last thirty years might have given few hints about Greece's current problems, the Reinhart-Rogoff database spanning eight centuries reveals that today's event are very much in line with historical experience.

2010-05-11 Why Some Hedge Funds Made Money in 2008 by Robert Huebscher (Article)

Steven Drobny is the co-founder of Drobny Global, an international macroeconomic research and advisory firm that counts many of the leading global hedge funds and money managers as clients. He is also author of a recently released book that identifies why some hedge funds made money in the 2008 crisis, while the majority did not. In this interview, he discusses the common themes among successful strategies.

2010-05-10 After the Crisis: Planning a New Financial Structure - Learning from the Bank of Dad by Paul McCulley of PIMCO

This commentary contains remarks by PIMCO's Paul McCulley at last month's Hyman Minsky Conference on the State of the U.S. and World Economies. McCulley says that the Federal Reserve, the FDIC and the Treasury all provide public goods to banking by guaranteeing that demand for liquidity will not exceed bank assets. It's quite natural that levered-up non-bank financial intermediaries don't want to be treated like banks. If they are going to have access to the public goods associated with banking, however, then they must follow the same rules that banks do.

2010-05-04 Lacy Hunt: Keynes was Wrong (and Ricardo was Right) by Robert Huebscher (Article)

Underpinning the Obama administration's economic policies is the work of John Maynard Keynes, the legendary British economist who called for large fiscal and monetary interventions to counter the Great Depression. On this critical issue, Keynes was wrong, says Lacy Hunt, the internationally renowned economist with Texas-based Hoisington Investment.

2010-05-04 Iran, Iraq and Embracing the Devil by Robert Huebscher (Article)

Just as imbalances arise in economics, so they do in geopolitics. Its power weakened, the US now faces a difficult choice in the Mideast, where its best option is now to strike a deal with the regional player it most demonizes, Iran, according to George Friedman, founder and CEO of the geopolitical consulting firm STRATFOR.

2010-05-04 Consumer Sentiment and the Economic Outlook by Team of American Century Investments

The animal spirits John Maynard Keynes described in 1936 as a substantial force in determining the direction of the economy are still with us today. At the moment we are in a prolonged period of below-average consumer sentiment that began in mid-2007. Ultimately, consumer sentiment will rebound. When this occurs, the change in sentiment as measured by the Consumer Sentiment Index is likely to be quick and large. However, there will likely have to be some change in the environment or course of events to convince the population that our difficult times are behind us.

2010-05-04 2010 Q1 Quarterly Report by Jason Nelson of Roumell Asset Management

The national economic debate today seems to be centered on our governments response to the challenges of the past two years. In the United States, Europe, and China, the answer to plunging private demand has been strikingly similar - government spending. Critics rightly highlight the liabilities associated with the practice but rarely note that a given nation acquires assets as well that will also be passed on to future generations. The governments response has been, by and large, necessary, prudent and effective.

2010-05-04 Typical Situation: Do We Have a V-Shaped Recovery? by Liz Ann Sonders of Charles Schwab

The same leading indicators that warned of the recession in 2007 have been recently pointing to a strong recovery in the United States and globally. Ignoring them in late 2007 and again in early 2009 were both mistakes, particularly from an investment perspective. Concerns over Greece and contagion gave the market some indigestion last week, but a period of consolidation was not unexpected given prior market strength. Overly bullish sentiment (a contrarian indicator) still needs some working off, but the technical underpinnings for the market remain healthy.

2010-04-30 Reconnecting Wall Street to Main Street by Hemant Kathuria of Euro Pacific Capital

What Wall Street calls 'liquidity,' Main Street calls 'inflation.' The only way to avoid the collapse of both Wall Street and Main Street is to 'reconnect' them through a new gold standard. Returning to the gold standard may involve a painful recession, as excesses are wrung out of the U.S. economy. It could be a long and difficult process. But only by restricting Wall Street's liquidity - Main Street's inflation - can we begin to restore the foundation that made the United States the greatest industrial power in the world.

2010-04-27 The Four Horsemen of Growth: David Kellys Guide to Markets by Katie Southwick (Article)

With unprecedented volatility now largely behind us, J.P. Morgan's Chief Investment Strategist David Kelly believes that the economy is entering a period of recovery. To move forward, we must abandon our negative mindsets and focus on opportunities for expansion.

2010-04-27 Investing Insights from Doctors by Dan Richards (Article)

Dan Richards works out in the early mornings with a psychiatrist, who recently forwarded an article in the New York Review of Books by Jerome Groopman, a physician and frequent writer on the challenges of modern day medicine. As Dan read it, he was struck by the parallels between the things that cause doctors and investors to go wrong.

2010-04-26 Reputational Risk: In Goldman Sachs We Trust by Christopher Whalen of Institutional Risk Analyst

Last week during the media feeding frenzy surrounding Goldman Sachs disclosures we saw once again how the efforts in the 1980s and 1990s to deregulate Wall Street created extraordinary risks for all concerned: bankers, traders and investors. We all seem to suffer from a common, self-inflicted wound that can be summed up simply as a lack of trust. To solve this crisis, we need to restore basic rules of behavior and compensation in financial markets so that it is once again in the best interest of firms like Goldman Sachs to exercise a duty of care to all clients.

2010-04-20 Intrinsic Motivation by Dan Ariely of Predictably Irrational

This post features a video by Jeff Monday of the mondaydots blog. In his new book Drive, author Dan Pink distinguishes between extrinsic motivators such as strict schedules and large bonuses, and intrinsic motivators like autonomy, mastery and purpose. Employees performing jobs that require more than just basic cognition, he argues, are less productive when motivated by an extrinsic source than by an intrinsic source. The call for intrinsic motivators is thus really a call to move the employee-employer interaction from a market relationship to a social relationship.

2010-04-20 Unconventional Wisdom: An Interview with Robert Shiller by John Heins (Article)

"Few macroeconomic prognosticators have been as publicly right as Yale's Robert Shiller,whose first and second editions of the book Irrational Exuberance laid bare, with remarkable timing, the speculative bubbles forming first in the Internet-crazed stock market and next in residential real estate," writes the highly regarded newsletter Value Investor Insight in its preface to this interview with Shiller and excerpt from his latest book. Value Investor Insight, which bills itself as the "Leading Authority on Value Investing, offers a no-obligation, one-month free trial subscription.

2010-04-19 Complex Structural Changes in China and the Global Economy by Michael Spence of PIMCO

China has come to a point where its size and global impact are large. Policy in China will have to be set within a delicate balancing act between domestic growth and development and distributional challenges on one hand, and recognition of global impacts on the other. The large developing countries need to understand better than they currently do that their growing size and presence in trade in goods and services is forcing uncomfortable structural change in the advanced countries as well.

2010-04-16 Our Quarterly Review by Jonathan A. Shapiro of Kovitz Investment Group

With only a few temporary setbacks, the stock market has continued its move higher since touching its most recent low in early March 2009. Much hand wringing has been done over the S&P 500's approximately 75 percent move since that time, but lost in translation is the fact that prices last March implied a pending financial and social breakdown. These panic-driven prices bore little resemblance to actual or going concern business values, and measuring from that point clearly overstates and exaggerates the return. The worries facing the U.S. and many other regions are still prevalent.

2010-04-14 Will Inflation Reemerge as a Dominant Force? by Kendall J. Anderson of Anderson Griggs

The current monetary policy of developed nations is to reinvigorate consumer demand through massive monetary stimulus. There is no doubt that this policy will have its intended effect and revitalize the private sector. Increasing demand from the private sector, along with the fiscal demands of new government obligations, however, could easily create a round of inflation where the aggregate demand of government and the private sector will exceed available supply. There is therefore a real possibility that inflation will be higher in the next 10 years relative to the past.

2010-04-14 What are the Political Implications of Poland's Tragedy? by Nouriel Roubini of RGE Monitor

The April 10 plane crash that killed Polish president Lech Kaczynski and a number of other top public figures, including the head of Poland's central bank, has caused major distress in the Polish political landscape. However, the country's constitutional mechanisms should facilitate a smooth institutional transition and ensure long-term stability. The event is unlikely to cause major geopolitical tensions, and RGE thinks speculation in some media outlets about increased tension with Russia is overdone.

2010-04-14 Quarterly Review and Outlook by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

Massive government spending is unsustainable, and will not lead to economic growth. Recent research says that the multiplier for federal government spending is less than one (each dollar spent results in less than one dollar of growth), whereas the multiplier from tax reductions is greater than one. Other economic research suggests that in an extremely overleveraged economy, monetary policy does not work. With excessive levels of debt and contractionary monetary and fiscal policies in place, inflation will continue to moderate, thereby driving long term treasury yields lower.

2010-04-13 Investment Review by John K. Schneider of JS Asset Management

The great recession has ended and the recovery appears more robust than generally forecasted. The U.S. gross domestic product grew 5.6 percent in the fourth quarter, the fastest quarterly pace since 2003. The economic consensus forecast for 2010 of less than 3 percent growth is likely too low and we believe could be closer to 4 percent. While productivity generally improves after the end of a recession, the surge over the last three quarters of 7.4 percent was the highest in more than 30 years. This is yet another sign that corporate earnings leverage will be great.

2010-04-13 Are Public Employees Bankrupting the Nation? by Charlie Curnow (Article)

While markets may be recovering, public debts are still mounting. Charlie Curnow reviews Plunder, the new book by Steven Greenhut, which blames public sector unions for a large portion of these debts. To Greenhut, we the taxpayers are helpless villagers, while corrupt public employee unions are barbarians at the gate, raiding government treasuries and leaving us with nothing but unfunded liabilities.

2010-04-13 Shameless by Michael Lewitt (Article)

The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.

2010-04-13 James Heckman on the Drivers of Human Success by Dan Richards (Article)

"What we have come to learn from modern genetics, which has huge social implications, is that it's neither nature nor nurture. It's both combined," says James Heckman in this interview with Dan Richards. Heckman, who won the Nobel Prizein Economics in 2000, discusses the key drivers of success in human development.

2010-04-12 Why Business Don't Experiment by Dan Ariely of Predictably Irrational

Companies pay amazing amounts of money to get answers from consultants with overdeveloped confidence in their own intuition. And yet, companies won't experiment to find evidence of the right way forward. Ariely thinks this irrational behavior stems from two sources. One is the nature of experiments themselves. As the people at the consumer goods firm pointed out, experiments require short-term losses for long-term gains. Second, there's the false sense of security that heeding experts provides. When we pay consultants, we get an answer from them and not a list of experiments to conduct.

2010-04-12 Setting the Record Straight on the Bond Debate by David A. Rosenberg of Gluskin Sheff

Bond bears argue that the U.S. government has never before raised so much debt to finance the bloated fiscal deficit and roll over existing obligations. With credit contracting, rents deflating, the broad money supply measures now declining and unit labor costs dropping at a record rate, however, it hardly seems plausible that inflation is a risk at any time on the near- or intermediate-term forecasting horizon. Rosenberg also comments on currency, equity, commodity and corporate bond valuations, as well as money and credit contractions.

2010-04-12 Is the Renmibi Merely A Distraction? by Chris Maxey of Fortigent

It may be convenient to assume that a revaluation of the Yuan would lead to a readjustment of the US trade balance, but it is more likely that production would merely shift to the country with the next lowest costs. Gains in Chinese imports in the early 90s came at the expense of imports from other countries. In addition, politicians fail to recognize that many manufacturers in the US import production inputs from China, and so a currency revaluation would directly affect their ability to remain competitive. Fortigent also comments on rising equity markets, and the week ahead.

2010-04-09 Squeeze Play by Bill Mann of Motley Fool

Taxpayers and corporations -- which are being counted on to generate jobs and economic growth -- cannot also be expected to fund increasingly revenue-starved governments. So they won't. And as we're in the process of learning (and investors in companies such as GM have already learned), obligations are not nearly as elastic as economic circumstances can be. Insolvency happens when those obligations exceed resources at a single instance in the time series. In effect, our governments have taken some pretty scary bets that really bad stuff won't happen. Ever.

2010-04-07 Currency Manipulation: A Primer by Komal Sri-Kumar of TCW Asset Management

The air is thick with allegations that China is manipulating its currency by keeping the renmibi fixed and undervalued with respect to the U.S. dollar. All of this is in anticipation of whether Treasury Secretary Timothy Geithner will designate China as a currency manipulator in his semi-annual report to Congress on trade practices. This designation could lead to new U.S. sanctions against Chinese exports. Ultimately, however, the key to success for U.S. authorities would not be public criticism of the United States' largest creditor, but a thoughtful discussion behind closed doors.

2010-03-31 The Perils of Name-Calling by Nouriel Roubini of RGE Monitor

In mid-April, the U.S. Treasury is expected to publish its biannual report on foreign currency arrangements, and there is a higher probability than ever before that China will be branded as a currency manipulator. Such a move could start a trade war and force Chinese officials to clam up even further on the currency issue while stubbornly maintaining the peg to save face. Things have gotten so bad, however, that even traditional supporters of free trade are now saying it is time to get tough with explicit threats of trade sanctions.

2010-03-30 Gary Becker's Optimism by Brian S. Wesbury and Robert Stein of First Trust Advisors

The commentary responds to a recent Wall Street Journal interview with Nobel prize-winning economist Gary Becker. Becker is the founder, with Milton Friedman, of the Chicago school of economics. Becker said the financial crisis did not undermine his belief in free markets, and that he remained hopeful that competing interest groups would protect the country in the long run from a systematic bias toward bad policy. While Becker primarily blames new financial instruments for the economic crisis, however, Wesbury and Stein blame mark-to-market accounting rules.

2010-03-27 What Does Greece Mean to You? by John Mauldin of Millennium Wave Advisors

The potential consequences of the Greece debt crisis can be explained by chaos theory, where a small perturbation in one place (the Greek economy) can cause bigger ripples in the global economy. Greek debt is held by European banks, and a Greek default would weaken the European economy. The real crisis, though, is the impending end of a "60-year debt supercycle," which implies many years of deleveraging and a weak global economy.

2010-03-26 Inflation in 2010 and Beyond? Practical Considerations For Institutional Asset Allocation by Michael Katz and Christopher Palazzolo of AQR Capital Management

The monetary stimulus has justifiably focused investor attention on potential inflation. Despite significant growth in the U.S. monetary base, however, the money supply has grown only modestly. Furthermore, there is excess capacity in the economy, as evidenced by an approximate 70 percent capacity utilization and a 10 percent unemployment rate. Inflation rates remain below pre-crisis levels, and the trend in the CPI index is not currently showing signs of a dramatic increase in inflationary pressures.

2010-03-25 The Long-Term Effects of Short-Term Emotions by Dan Ariely of Predictably Irrational

The heat of the moment is a powerful, dangerous thing. As research going back to Festinger's cognitive dissonance theory shows, the problem with emotional decisions is that our actions loom larger than the conditions under which the decisions were made. When we confront a situation, our mind looks for a precedent among past actions without regard to whether a decision was made in emotional or unemotional circumstances. This means we end up repeating our mistakes, even after we've cooled off.

2010-03-25 Do Higher Cigarette Prices Deter Smoking? by Deliana Kostova, Hana Ross, Evan Blecher and Sara Markowitz of VoxEU

Tobacco is a leading cause of preventable death worldwide, and is expected to claim nearly a billion lives in the 21st century. The majority of the tobacco public health burden will be carried by developing countries, due to the unfortunate combination of increasing consumption and health system inadequacy. New evidence shows, however, that developing countries could reduce cigarette consumption by raising taxes. A 10 percent increase in cigarette prices would reduce youth demand by 18.3 percent.

2010-03-23 A Tale of Two Depressions: What do the New Data Tell Us? by Barry Eichengreen and Kevin H. ORourke (Article)

Barry Eichengreen and Kevin H. O'Rourke offer the fourth installment of their comparison of data from the current recession to those of the Great Depression - A Tale of Two Depressions. Global industrial production continues to recover - something for which policy deserves considerable credit. But before indulging in self-congratulation, policymakers should note that the level of industrial production is still 6% below its previous peak.

2010-03-22 An Update on Valuation and Forward Earnings Assumptions by John P. Hussman of Hussman Funds

The market's valuation looks overpriced based on widely tracked fundamentals. Price-to-normalized earnings, price-to-dividend multiples, price-to-book values and price-to-sales multiples all sit above long-term averages. Valuations based on forward operating earnings are also unfavorable. The long-term average P/E ratio based on forward operating earnings is about 12. The current multiple is 14.8, and this value assumes the continuation of near-record profit margins. Even a minor lowering of expected profits would cause the whole scale of the overvaluation to widen materially.

2010-03-20 Monkeys Like to Mix It Up by Dan Ariely of Predictably Irrational

New research shows that capuchin monkeys, when given a choice, will opt for a buffet of food options rather than their favorite food. They will even select less-preferred food from the buffet. The research shows the power of offering multiple choices to motivate behavior, and relates to Ariely's previous research that people will eat 43% more M&Ms when there are 10 colors in the bowl instead of seven.

2010-03-17 U.S.-China Tensions: Codependency Pains by Nouriel Roubini of RGE Monitor

Tensions between the U.S. and China have become increasingly exposed in recent weeks, with rhetorical barbs exchanged over trade, exchange rates and various political and strategic issues. These tensions seem to stem from attempts by both powers to find a 'new normal' in political and economic relations following the financial crisis. RGE expects the two countries to avoid a full-blown confrontation, but uncertain tit-for-tat trade policies still threaten to constrain global growth.

2010-03-17 Are Married Women Less Risk-Averse? If So, Why? by Graziella Bertocchi , Marianna Brunetti and Costanza Torricelli of VoxEU

Does marriage make people less averse to risk? This column argues that this is the case for women, but not for men. But married women's different attitude towards risk has fallen over time as the prevalence of marriage in society has faded. For women who work, marriage makes no difference.

2010-03-16 Rational Deficit: An Interview with Dan Ariely by John Heins (Article)

Through creative research and clever articulation of his ideas, behavioral economist Dan Ariely has established himself as one of the brightest thinkers today on the subject of human decision-making, particularly with respect to influences of which we are largely unaware. In this wide-ranging interview with the investment newsletter Value Investor Insight, Ariely describes the unwitting biases that can lead to bad decisions and what investors can do to guard against them.

2010-03-16 Paul Romer: What Drives Economic Growth? by Dan Richards (Article)

Paul Romer is a senior fellow at the Stanford Institute for Economic Policy Research, and the focus of his research is the drivers of economic growth. In this interview with Dan Richards, Romer identifies what sets apart fast growing countries, and which policies best stimulate economic growth. We provide a transcript and a link to a video of the interview.

2010-03-15 On OTC Derivaties: Interview with Bill King by Christopher Whalen of Institutional Risk Analyst

The Institutional Risk Analyst interviews Bill King, founder of Chicago-based derivatives firm M. Ramsey King Securities. Their conversation centers on a new report by the bankruptcy court examiner in the Lehman Brothers liquidation that provides another piece of evidence linking over-the-counter derivative structures and accounting fraud in the style of Enron and WorldCom. The IRA also examines the FDIC's recent bank securitization reform efforts, as well as the recent rally of CitiGroup, Barclay's and other large-cap financials.

2010-03-15 3 Main Lessons of Psychology by Dan Ariely of Predictably Irrational

Psychology teaches us three main lessons. First, that the environment has a large, as yet unrecognized effect on our behavior; second, that out intuitions about what drives our behaviors are flawed; and third, that our emotions play a large role in our decision-making. These lessons have important implications for economics, and show us the importance of experiments and empiricism in economic research.

2010-03-11 What the PBoC Cannot Do with Its Reserves by Michael Pettis of Michael Pettis

What the People's Bank of China does to the value of China's currency and how it invests its reserves matter a lot to China and the world, but not always in the way China and the world think. To get it right, we need to keep in mind the functioning of the balance of payments, the PBoC and other balance sheets, and the way the two are interrelated.

2010-03-10 Unlocking the Jobs Dilemma by John Browne of Euro Pacific Capital

Politicians in the U.S. and Western Europe have placed productive, private-sector jobs - the lifeblood of a sound economy - under assault. Most American job losses in recent decades resulted from outsourcing to more competitive economies because of the harmful effects of domestic government policies. Big spending will not resolve this deleterious situation. The only realistic solution is to unlock the power of the entrepreneurial spirit by shrinking government and removing subsidies and guarantees to big businesses.

2010-03-10 Aging Populations and Productivity by Jan van Ours of VoxEU

Aging populations are a concern for many developed countries, and increasing dependence on the working population is expected. Despite this, there is relatively little research on how productivity changes with age. This column argues that while older people do not run as fast, there is no evidence of a mental productivity decline and little evidence of an increasing pay-productivity gap. The negative effects of aging on productivity should not be exaggerated.

2010-03-10 V, U and W by Nouriel Roubini of RGE Monitor

Debate continues to rage over whether the U.S. economy will have a V-shaped recovery with a rapid return to above-potential growth, a U-shaped recovery with below-trend growth for the next two years, or a W-shaped double-dip recession. Poor economic data released over the past two weeks suggests a U-shaped recovery at best. Consumer confidence, home sales, construction and employment suggest significant downside risk even to the current anemic levels of growth. The eurozone debt crisis, meanwhile, presents the risk of a double-dip recession in Europe that could also drag down the U.S.

2010-03-09 More on that Federal Pay Cut by Brian S. Wesbury and Robert Stein of First Trust Advisors

Last week, Wesbury and Stein proposed a 10 percent pay cut for all civilian federal workers in order to send a signal to creditors that policymakers were concerned about the deficit. That article generated more responses than any article the two have published. Many comments were supportive, but most were negative. Many critics of the proposed pay cut pointed to the relatively low wages of younger federal workers, while others argued that a pay cut would blunt the multiplier effect. This latter argument is fallacious, because every dollar the government spends must come from somewhere else.

2010-03-08 Mark-to-Market Accounting: OneWest and WaMu by Christopher Whalen of Institutional Risk Analyst

One year ago, OneWest Bank Group purchased the banking operation of the IndyMac Federal Bank, which was being operated in conservatorship by the FDIC. As with the purchase of Washington Mutual by JPMorgan Chase, the subsidy in these deals came from the write-down of the assets of the failed bank. All of the potential claims against the parent companies of WaMu and IndyMac for rescission of securitized loans are sitting in bankruptcy court, where they will likely remain and die.

2010-03-06 Welcome to the Future by John Mauldin of Millennium Wave Advisors

Mauldin reflects on an executive program held by the Singularity University that he recently attended. He discusses the potential for new advancements in robotics, artificial intelligence, nanotechnology, water purification, biotechnology, and several other areas.

2010-03-03 Will Silver Sparkle in 2010? by Nouriel Roubini of RGE Monitor

Silver may never reach the price level of gold, but silver could gain relative to gold in the short term. The price volatility of silver compared to gold opens up short-term opportunities for higher capital gains. Silver has wider industrial applications than gold, and is therefore better positioned to benefit from the recovery in global industrial production. In the long run, however, silver is 16 times more abundant than gold, and has enjoyed increased mining production since 1999, and so gold probably always remain more precious than silver.

2010-02-26 The Global Banking Crisis Continues... by Monty Guild and Tony Danaher of Guild Investment Management

The Icelandic and Greek financial crises can be seen as the second stage of the larger global banking crisis. This second stage, which centers on European sovereign debt, was caused by years of over-borrowing and now deleveraging. Many countries will print money to help ease the crisis, and this will keep developed economies and their currencies under pressure for years. Guild and Danaher also comment on rising demand for oil and gold, the U.S. stock market rally, rising interest rates and the continued rise of China and India.

2010-02-24 Still No Tightening in China by Nouriel Roubini of RGE Monitor

A credit-fueled investment boom propelled China's 8.7 percent growth rates in 2009, but cheap money also drove up asset prices, especially in property markets. Loose money may now become inflationary, particularly if China's potential growth rate has come down. China's monetary policy has shifted toward a neutral stance in recent months, but may tighten to contain inflation and the property bubble.

2010-02-23 Rethinking the Fundamentals of Client Communication by Dan Richards (Article)

Dan Richards says advisors need to fundamentally rethink both the information they communicate and - just as importantly - how they communicate. Changing these two key dimensions of your communication strategy - what you send clients and how you send it - will be critical to future success.

2010-02-23 Jason Zweig on Protecting your Wealth by David Raileanu (Article)

Jason Zweig is a senior writer and columnist for Money magazine and frequently writes for the Wall Street Journal. In this interview, he discusses strategies for protecting client wealth, proper asset allocation, and the role of advisors in a fiduciary relationship.

2010-02-22 Financial Economics, Deregulation and OTC Derivatives: Interview with Yves Smith of Naked Capitalism by Christopher Whalen of Institutional Risk Analyst

This is an interview with author Yves Smith, the creator of Naked Capitalism. Smiths new book explores the methodological shift of economics in the 1940s and 1950s, when economists decided to make their discipline more "scientific" and thus more mathematical. This methodological shift ignored the flaws neoclassical and financial economics, and led to the deregulation of financial services, which in turn allowed for predation and looting.

2010-02-20 The Pain in Spain by John Mauldin of Millennium Wave Advisors

Mauldin examine the Greek crisis the the potential direction of the euro. Spain, he says, is a more threatening crisis because its debt is much greater than Greece's. "Pay attention to Greece and Spain and especially Japan over the next few years," he says. "Unless the US gets its fiscal house in order, we will be next."

2010-02-18 The Ultimate Buy-and-Hold Strategy: 2010 update by Paul Merriman of Merriman

An investor's choice of assets if far more important than the times he decides to buy or sell those assets. In a nutshell, the ultimate buy-and-hold strategy is this: Use no-load funds to create a sophisticated asset allocation model with worldwide equity di-versification by adding value stocks, small company stocks and real estate funds to a traditional large-cap growth stock portfolio.

2010-02-16 Boom and Bust by Michael Lewitt (Article)

The US and global economies are "trapped in a cycle of boom and bust as a result of fiscal and monetary policies from which there is no easy escape," says Michael Lewitt of Harch Capital Management. Lewitt believes the S&P will rally to 1,200-1,250, but says the long-term prognosis is "somewhere between grave and terminal." We are privileged to provide this excerpt from Lewitt's monthly newsletter and encourage our readers to subscribe to it directly.

2010-02-16 Robert Shiller on Trills, Housing and Market Valuations by Dan Richards (Article)

Robert Shiller, a professor of economics at Yale University and co-creator of the Case-Shiller Housing Index, discusses several topics in this interview with Dan Richards, including his plan for governments to finance their debts by issuing "trills," a security representing a fractional claim on the country's GDP.

2010-02-16 How Professionals Select Investments by Adam Jared Apt (Article)

In this guest contribution intended for the educated layman, advisor Adam Apt discusses the process by which investment managers select individual securities, contrasting the disciplines of fundamental and technical analysis.

2010-02-12 The Forgotten Benjamin Graham by Kendall J. Anderson of Anderson Griggs

Kendall J. Anderson of Anderson Griggs says in his monthly letter that the lessons of security analyst Benjamin Graham still apply today: Judge the risk of holdings independently of market volatility, and balance portfolios evenly between stocks and bonds.

2010-02-10 World Markets Dance to China's Tune by Monty Guild and Tony Danaher of Guild Investment Management

Monty Guild and Tony Danager of Guild Investment Management say China is now recognized as the world's engine of economic growth, with $2.4 trillion in surplus capital and a fast growth rate. They expect China's GDP to grow at least 9 percent in 2010 even if the country's real estate bubble bursts.

2010-02-10 Global Trade in Recovery Mode by Nouriel Roubini of Roubini Global Economics

In an update to its Q1 2010 global economic outlook, Roubini Global Economics says that world trade will grow by between 4.5 percent and 5 percent in 2010, led by fiscal stimulus spending, inventory restocking and slight improvements to global demand. Global trade volumes shrunk by an estimated 13 percent in 2009 in the first decline since 1982 and the sharpest in the post-war period.

2010-02-09 Chinas Quest for a Shortcut to Greatness by Vitaliy Katsenelson (Article)

The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on its economy. Author and fund manager Vitaliy Katsenelson looks back at how China got into this trouble and looks forward to China's prospects.

2010-02-09 It's Not My Fault by Emilio Vargas (Article)

In this guest contribution, Emilio Vargas says you don't need a Ph.D. in economics or a sophisticated computer model to figure out bubbles. Just look at their recent history.

2010-02-06 Greece, Spain, and the Euro Trojan Horse by Michael J. Schussele of Michael J. Schussele, CPA

Schussele provides an in-depth look at the divergent fiscal problems facing Spain and Greece. "The possibility of default is speculative hoopla and deficit hawk destructiveness. While deficits need to be controlled, targeted public spending grows an economy and the withdrawal of public spending constricts an economy. At the present time, Greece and Spain need targeted spending and financial regulatory reform. Default is not a plausible option given the domino effect."

2010-02-04 Happy Peasants and Miserable Millionaires: Happiness Research, Economics and Public Policy by Graham of VoxEU

What measures of human wellbeing are the most accurate benchmarks of economic progress and human development? This article presents new research suggesting that while people can adapt to be happy at low levels of income, they are far less happy when there is uncertainty over their future wealth. This may help explain why different societies tolerate such different levels of health, crime, and governance, and why US happiness plummeted during the global financial crisis but has since been restored despite incomes remaining lower.

2010-02-03 Obama's Recent Regulatory and Fiscal Proposals by Nouriel Roubini of RGE Monitor

Roubini supports the Obama administrations regulatory policies (e.g, the Volcker Rule) and says the proposed budget will lead to a sluggish and jobless recovery. Obama simply lacks the political support to implement aggressive fiscal reforms, he says, adding that Obamas political capital is likely to deteriorate after the 2010 elections.

2010-02-03 Does Anyone in Washington Know What Needs to Be Done to Create Jobs? by Paul Kasriel of Northern Trust

If what small- and medium-sized businesses need to increase their hiring is increased sales, then it would seem that fiscal stimulus coupled with Fed-created credit is the right medicine. The current ($787 billion) stimulus has only been partially spent, and policy makers should not push for another stimulus until more of the remaining funds have been spent.

2010-02-02 China's Strong GDP Up 10.7% in the Fourth Quarter, but is Inflation on the Horizon? by Team of American Century Investments

American Century looks at the sources of growth in the Chinese economy its future projected growth rate. Easy credit and stimulus measures are potentially leading to a real estate bubble and inflation. Exports from China grew in December, following 13 months of decline, and the world may have to continue to rely on China as the biggest engine of economic growth.

2010-02-02 Obama's Budget and Q409 GDP by Art Patten of Symmetry Capital Management

GDP was better than most expected at the end of 2009, but in line with what credit markets and other forward looking indicators were saying last year. The proposed budget calls for a deficit of $1.56 trillion, a figure that is sure to stagger the imagination, create anxiety in many voters and taxpayers, and foster a fresh round of pundit bloviation. The authors explain why they think the budget is actually positive news for markets and the economy.

2010-02-02 Stiglitz: U.S. Economy Will Falter without More Stimulus by Susan B. Weiner, CFA (Article)

The U.S. government has botched its handling of the economy over the last eight years, according to Nobel Prize-winning economist Joseph Stiglitz. He explained how the U.S. created the global recession - and how we can get out of it - in a public presentation on his new book, Freefall: America, Free Markets, and the Sinking of the World Economy.

2010-02-02 Change The Only Constant by Christina Ho (Article)

The Institute for Private Investors serves families with over $50 million in assets. Their data show wealthy investors have increased their use of tactical asset allocation and are positioning their portfolios to defend against liquidity, concentration and inflation risk.

2010-02-02 Chuck Akre on the Akre Focus Fund by Robert Huebscher (Article)

Chuck Akre is the Managing Member and Chief Executive Officer of Akre Capital Management, which he founded in 1989. He has a track record of above-average performance over the last 20-plus years managing mutual funds, separately managed accounts and partnerships, and he discusses the strategy he employs in his new Akre Focus Fund.

2010-01-30 This Time is Different by John Mauldin of Millennium Wave Advisors

Mauldin begins with an analysis of the reported Q4 GDP numbers, saying that it is not indicative of underlying growth in the economy. He then comments on the Reinhart-Rogoff book "This Time is Different," focusing on the point that governments can survive debt-fueled growth until confidence in them evaporates. He is discusses Greece's fiscal problems.

2010-01-29 Quarterly Letter by Jeffrey Erber of Grey Owl Capital Management

Jeff Erber says the S&P is now 20-30% overvalued, but with a no-end-in-sight loose monetary policy this rally could continue for quite some time. He discusses his firms investment process and add

2010-01-29 And That's the Week that Was... by Ron Brounes of Brounes & Associates

Ron Brounes weekly market recap.

2010-01-28 Insights from EM Analyst Conference by Mark Mobius of Franklin Templeton

Mobius posting has comments from analyst Dennis Lim about the role of commodities and consumer spending in the BRIC economies, notably in China.

2010-01-27 The Greece Dilemma: Sovereign Debts Imperiling the Euro and Challenging EU Ties by Christopher Whalen of RGE Monitor

Roubini discusses Greeces sovereign debt issues, noting that Greece faces two choices: either adopt fiscal tightening (budget cuts) or increased instability due to potential insolvency. Either way,

2010-01-26 Robert Merton on Regulating Derivatives by Dan Richards (Article)

Robert Merton is a professor of finance at the Harvard Business School and the 1997 winner of the Nobel Prize in economics for his work on pricing models for options and derivatives. In this interview with Dan Richards, Merton explains the role of derivatives in creating the financial crisis, and what steps regulators should take to address them.

2010-01-26 Letters to the Editor by Various (Article)

In our letters to the Editor, readers comment on recent articles about Paul Krugman, health care, John Cochrane and the need for trust in advisory relationships.

2010-01-23 Congress Sacks Samoan Economy by Peter Schiff of Euro Pacific Capital

Schiff argues that the increase in the US minimum wage caused the closing of the tuna packing industry in American Samoa. 'This just serves to highlight, once again, how inflexible central plannin

2010-01-22 Reflections Across the Pond by John Browne of Euro Pacific Capital

Having been among the economic engines of Europe for much of the past decade, it appears as if the British economy has run out of steam. Inflation is rising while bankruptcies and unemployment continu

2010-01-22 Thoughts on the End Game by John Mauldin of Millennium Wave Advisors

"As for financial markets, we have come full circle to the concept of financial fragility in economies with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubbl

2010-01-20 Political Potholes for Europe's IMF Borrowers by Nouriel Roubini of RGE Monitor

Amid the global financial crisis, several European countries faced serious economic distress and turned to external creditors, including the EU and IMF, for emergency financing. This multilateral supp

2010-01-19 G7 Weekly Economic Perspectives: 1/15/10 by Christopher Probyn of State Street Global Advisors

This weeks data were generally disappointing. They were not bad enough to believe that the recovery is in danger, but rather that despite a potential fourth-quarter growth blip caused by the invent

2010-01-19 Letters to the Editor by Various (Article)

Readers responded to a range of topics in our letters to the Editor: our Paul Krugman interview, our article last week on the causes of the financial crisis, our article on the true cost of insuring the uninsured, and our article on costless collars using options.

2010-01-16 Poland's Economy is No Joke by Peter Schiff of Euro Pacific Capital

2010-01-15 Rationalizing with Big Red, Ben Bernanke and Harry Markowitz by Anderson of Anderson Griggs

2010-01-13 Sovereign Debt: The Developed World's Next Big Problem? by Nouriel Roubini of RGE Monitor

2010-01-12 Bruce Berkowitz on the Keys to Success for the Fairholme Fund by Robert Huebscher (Article)

Bruce Berkowitz, manager of the Fairholme Fund, was just named Morningstar's US fund manager of the year. In our interview, he discusses current market conditions, the thesis behind several of his largest positions, his views on health care reform, and the elements of the macro environment that concern him most.

2010-01-12 The Financial Crisis Post-Mortem: Suicide, Accident or Murder? by Michael Skocpol (Article)

Since the stunning collapse of America's financial system in 2008, questions have swirled around how we got here and who's to blame. The subsequent finger-pointing has yielded few answers, but now one economist has taken a cue from CSI's Gil Grissom and Law and Order's Jack McCoy. He performed an autopsy.

2010-01-12 Olivier Blanchard on Global Stability by Dan Richards (Article)

Olivier Blanchard is the chief economist at the International Monetary Fund, a position he has held since September 1, 2008. In Dan Richards' interview, Blanchard discusses the steps being taken to revive the global economy and what he believes is in store for beleaguered debtor nations - particularly Greece.

2010-01-11 Economic Freebasaing by Cliff W. Draughn of Excelsia Investment Advisors

"Although the US stock markets received a tremendous boost in 2009 after a debilitating 2008, the performance of the Dow, S&P 500 and NASDAQ Composite indices was not enough to overcome a decade of

2010-01-08 4th Quarter Commentary - Investing Proactively Without Predictions by Team of Partnervest Advisory Services

\"\'If youre going to predict,\' an anonymous economist famously quipped, \'predict often.\' 2009 by all accounts was a good year. The S&P500 gained 23.4%. Emerging ma

2010-01-05 Paul Krugman on Deficits, Taxes, Inflation, and Recovery by Dan Richards (Article)

Dan Richards' interview with Paul Krugman, the 2008 Nobel prize winner in Economics, covers his views on the size of the next stimulus package, how high marginal tax rates should go, and lessons from the Japanese experience. Whether or not you agree with him, Krugman is highly influential and his views may presage future policy decisions.

2009-12-30 10 for 2010 by Nouriel Roubini of RGE Monitor

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

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

2009-12-19 The Age of Deleveraging by John Mauldin of Millennium Wave Advisors

2009-12-09 The Economics of Copenhagen by Nouriel Roubini of RGE Monitor

2009-12-01 Allen Sinai: Jobless Recovery and the Failure of Current Economic Policies by Robert Huebscher (Article)

As the Democratic leadership in Congress has looked for ways to simultaneously create jobs and reduce the deficit, a key person they have turned to and continue to rely on is Allen Sinai. Sinai now fears the US is in the "mother of all jobless recoveries" and that the economic policies of the Obama administration are not working.

2009-11-25 Roubini Global Economics - Holiday Season Kick-off by Nouriel Roubini of RGE Monitor

2009-11-17 Disheartened by Michael Lewitt (Article)

We are again privileged to publish an excerpt from Michael Lewitt's HCM Market Letter. In this issue, titled "Disheartened," Lewitt argues that the powers-that-be are making limited progress addressing the structural problems in the economy, and that the greatest challenge is to achieve budgetary discipline.

2009-11-10 Not by Return Alone: Judging Investment Performance by Adam Jared Apt (Article)

In the latest installment of his articles intended for an educated layman, Adam Apt addresses the relationship between risk and return, and shows that the connection between them is neither rigid nor obvious, and that we can be cheated of our money by disregarding risk and fixating only on return.

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

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

2009-10-20 Life in and after the NBA Financial Planning for Professional Athletes by Robert Huebscher (Article)

During a 13-year career that began in 1987, Chris Dudley was called on to defend some of the greatest centers in NBA history - among them Shaquille O'Neal, Robert Parish, and David Robinson. While developing a reputation as an exceptional shot-blocker and rebounder, Dudley also devoted time to preparing for his post-basketball career - as a financial advisor - and he shares with us his thoughts about financial planning for the professional athlete.

2009-10-13 A Tale of Two Depressions: October 2009 Update by Barry Eichengreen and Kevin H. ORourke (Article)

Barry Eichengreen and Kevin H. O'Rourke update their article, "A Tale of Two Depressions," and report that global industrial production shows clear signs of recovery, but weak consumer spending in the US may prevent a rapid recovery.

2009-10-06 So Far so Good: The Decrepit Decade Winds Down by Ron Surz (Article)

Ron Surz provides his award-winning market commentary, covering performance in the US and global markets, broken down by style, sector, and other dimensions.

2009-10-06 Ten Tips from Advisors Down Under by Terry Bell (Article)

The question for advisors is what's going to happen to their role and how they can best adapt to a changing world. Irrespective of the details, change will continue. Perhaps the Australian experience can provide a few pointers for US advisors.

2009-09-22 Predictably Irrational - How Investors Frame Decisions by Robert Huebscher (Article)

One of the most provocative sessions at last week's Schwab Impact conference was given by Dan Ariely, who deftly summarized his current research in the important field of behavioral finance. Ariely's message was that, no matter how good their intentions or how deep their experience, people - investors specifically - consistently make the wrong decisions. They behave irrationally, and predictably so.

2009-09-15 Investing Lessons from Golf and Blackjack Players by Robert Huebscher (Article)

At key moments investors refuse to take those chances that will make them money. Behavioral finance has a term for this - risk intolerance. Research supporting these claims comes from two divergent pastimes - the games of golf and blackjack.

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

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

2009-09-01 Politics and Fund Managers by Robert Huebscher (Article)

Those readers who would like to know whether to invest with Democrat or Republican fund managers finally have some guidance, thanks to a new academic study. We report the results, along with a host of reasons why you shouldn't read too much into this data. We also provide the names of the top fund manager donors to each party over the period from 1992 to 2006.

2009-08-25 Jim Cramer Exposed: Does He Generate Alpha? by Adam Jared Apt (Article)

Paul Bolster and Emery Trahan, professors of finance at Northeastern University, were curious about the Mad Money phenomenon, and applied the full force of their analytical powers to a study of Jim Cramer's advice. They published their analysis earlier this year, and it reveals answers to key questions - such as whether Cramer's picks move the market or whether Cramer can legitimately call himself a skillful stock picker.

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

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

2009-08-25 Should Investors Hold More Equities Near Retirement? by Ron Surz (Article)

A just-published paper argues that investors should hold more equities as they near retirement, contrary to conventional wisdom and to the glide paths employed by the target date fund industry. Ron Surz examines this research, and argues that the authors of the paper failed to properly consider the risks inherent in such a strategy.

2009-08-25 Letters to the Editor by Various (Article)

In our letters to the Editor, a reader responds to Dougal Williams' article last week, A Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our article on Actively Managed TIPS and to an Advisor Market Commentary on healthcare policy.

2009-08-18 Beam Me Up Scotty, Vulcans Have Taken Over Planet Finance by Mariko Gordon (Article)

You don't need to be a dyed-in-the-wool Trekkie "to boldly go where no man has gone before." In this guest contribution, Mariko Gordon explains how one of these characters - Mr. Spock - helps shine a light on the value of emotion in the never-ending quest for sound investment decision-making.

2009-08-11 At the Risk of Repeating Ourselves by Michael Lewitt (Article)

We have said before that Michael Lewitt's newsletter is a must-read, and this edition is no exception. Lewitt questions whether we are witnessing a summer calm before the storm, comments on the secured and unsecured debt asset classes, and opines on the abuses of unregulated dark pools of capital. We encourage you to subscribe to this valuable publication through the link we provide.

2009-08-11 Behavioral Finance Traps En Route to Investment Success by Dan Richards (Article)

To understand why investors fail to stick to their plans, economists and academics are studying the rapidly growing field of "behavioral finance," analyzing the patterns of behavior that cost investors serious money. Dan Richards looks at the current research and its implications for investors and advisors.

2009-08-04 Paul Krugman on the Prospects for Recovery by Eric Uhlfelder (Article)

Nobel laureate economist Paul Krugman tells Eric Uhlfelder that massive government spending is essential for generating growth, but fears the first stimulus package will not be enough to keep the economy from slipping back into recession nor reducing unemployment.

2009-08-04 How to Think about Return and Risk at the Same Time by Adam Jared Apt (Article)

In this guest contribution targeted to the educated layman, Adam Apt discusses the relationship between return and risk. Only when you can keep in mind at one and the same time these two concepts can you properly understand how to invest. And you will also understand why you should invest. Without the marriage of the concepts, you will be playing the market-or shunning it-as if it were a casino.

2009-07-14 Behavioral Finance A Three-Part Model for Client Relationships by Susan B. Weiner, CFA (Article)

Behavioral finance can improve your client relationships during market turmoil, if you recognize your clients' emotional right-brained reactions before you offer insights based on your analytical left-brained analysis. By applying a three-pronged process of Recognize-Reflect-Respond, you can adapt to new information in a thoughtful and effective framework.

2009-07-14 Billie Jean, YOU are the One by Mariko Gordon (Article)

Michael Jackson's Billie Jean wasn't the first to make headlines. Back in 1973, Billie Jean King moved the sports world a big step forward ... a step that the financial services industry is still waiting to take. Guest contributor Mariko Gordon of Daruma Asset Management explains why our overwhelming male-oriented industry necessarily leaves investment returns on the table.

2009-07-07 Marty Whitman: The Outlook for Distressed Securities by Robert Huebscher (Article)

Marty Whitman is the founder, Co-Chief Investment Officer, and Portfolio Manager of the Third Avenue Value Fund and a veteran value investor with a long, distinguished history as a control investor. In our interview, he discusses the opportunities in distressed securities created by the financial crisis.

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

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

2009-06-30 A Tale of Two Depressions: June 2009 Update by Barry Eichengreen and Kevin H. O'Rourke (Article)

In an update to an article we published two months ago, two economists compare today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.

2009-06-30 Letters to the Editor: The Road to Zimbabwe by Various (Article)

In the second set of our letters to the Editor, we publish responses to to our article, The Road to Zimbabwe.

2009-06-09 Nassim Nicholas Talebs Prescription for a Black Swan-Proof Economy by Bruce W. Fraser (Article)

According to Black Swan author Nassim Nicholas Taleb, the U.S. economy is broken - but not beyond repair - and that repair will not be a snap. It does not necessarily need more regulation, but more intelligent regulation - plus the will to let entities like Citibank and General Motors fail once they become too big and cumbersome and act irresponsibly.

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

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

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