More on Related Themes
2013-05-17 Making the Most of Equity Allocations by Andrew Pyne, Sabrina Callin of PIMCO
We believe slowing global growth and deleveraging are likely to result in lower long-term returns for equities. Traditional approaches to building equity portfolios may not be enough for investors to meet their return goals. We have found three complementary ways investors can enhance equity return potential: fundamental indexes, index-plus strategies and high active share stock selection approaches.
2013-05-17 Weekly Economic Commentary by Team of Northern Trust
Predictions of an American manufacturing renaissance may be premature. Does the Fed have to worry about deflation? The U.S. fiscal deficit is narrowing rapidly.
2013-05-17 Finding Opportunity Far and Near by Frank Holmes of U.S. Global Investors
Would it surprise you to learn that a vast majority of equity valuation models state that stocks should head much higher over the next five years?
2013-05-16 Investors Living in Emerging Markets are a Bullish Bunch! by Mark Mobius of Franklin Templeton Investments
Part of my job involves putting myself out on a limb at times, and I have taken the risk of being subject to contrary (sometimes enthusiastically so) viewpoints. I’ve even been accused of being too optimistic about emerging markets, perhaps partly because my views often represent a stark contrast to dramatic news headlines. So when I took a look at the findings of Franklin Templeton Investments’ 2013 Global Investor Sentiment Survey (GISS),1 I was pleased to discover my longstanding optimism about emerging markets seems to be spreading among investors.
2013-05-15 Things My Mother Told Me and Some She Didn't by Jerry Wagner of Flexible Plan Investments
Today the phrases I’m most likely to hear are very different. A couple of them are well worth heeding. They’re all well known on Wall Street but they never passed over my mother’s lips.
2013-05-15 Dissecting the Rally: What Sectors Look Attractive? by Russ Koesterich of BlackRock Investment Management
The current rally has been fueled by investors looking for relatively "safe" areas of the market. As such, the classic defensive sectors, such as utilities, consumer staples and healthcare, have been outperforming. This trend may be changing, indicating that sectors such as energy and technology are growing more attractive.
2013-05-15 Yen Weakness: Buffett\'s \"Shot Heard Round the World\'\" by Bill Smead of Smead Capital Management
We returned recently from the Berkshire Hathaway Annual Shareholder Conference. The most exciting and profound comment to us was what Warren Buffett said about the unprecedented actions the last three years by the Federal Reserve Board. Buffett was asked about the risks of the Federal Reserve’s current plan to buy Treasuries to keep interest rates very low.
2013-05-15 Pacific Basin Market Overview by Team of Nomura Asset Management
Pacific Basin equity markets continued to rally in April, led by Japan where the central bank announced that it intends to double the monetary base and inject liquidity into the markets. The MSCI AC Asia Pacific Free Index including Japan gained 4.9% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.6% higher in April. (All performance figures are based on MSCI indices in U.S. dollar terms with dividends included unless otherwise stated.)
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 Mohamed El-Erian: The Three-Speed Global Economy by Robert Huebscher (Article)
The global economy is operating at three distinct speeds, according to Mohamed El-Erian, and investors need to understand the implications of the divergent paths that key countries are following. Japan and most European countries are going backward, he said, and could continue in that direction for decades. The U.S. is “healing,” but not quickly enough to get to “escape velocity.” Certain emerging markets, meanwhile, are adapting technology and innovation and are growing rapidly.
2013-05-14 Guide to Working with Monetary Napalm by Scott Colyer of Advisors Asset Management
Napalm is a highly incendiary form of jellied fuel. It was used extensively in the Vietnam War to quickly ignite massive fires over large areas of land. In the world of financial incendiaries, the Fed’s overwhelming monetary stimulus has ignited asset prices in the United States with the force and effectiveness of napalm. Is the fire short lived? Are the gains in asset prices temporary or can they be believed? Are the housing and stock markets on fire just because of the Fed’s quantitative easing (QE) or could there be a much more fundamental reason?
2013-05-14 Housing Finally Breaks Free by Chris Maxey, Ryan Davis of Fortigent
Housing, which for so many years represented everything bad about the credit crisis, is finally beginning to have its day back in the sun. Trends in housing markets around the country are improving, to the benefit of the overall economy. It appears that trend is set to continue.
2013-05-14 Cyclical and Emerging Market Strength May Be Pointing to Better Growth by Bob Doll of Nuveen Asset Management
Last week U.S. equities advanced as the S&P 500 increased by 1.3%. We have been amazed bythe market’s ability to continue to rally in an environment in which sales growth has been anemic and earnings gains have been largely based on companies’ abilities to manage margins and utilize financial engineering.
2013-05-14 New Normal ... Morphing by Mohamed El-Erian of PIMCO
The New Normal has morphed to include consequential elements of a "stable disequilibrium." In the midst of notable multi-speed dynamics, the global economy as a whole is muddling along a road that will give way over the next three to five years to one of two stark alternatives: either sustainable global growth, institutional and political renewal in the West and safe deleveraging; or growth shortfalls that cause financial instability, fuel greater social tensions, accentuate political dysfunctions and complicate debt traps.
2013-05-13 Investment Bulletin: Global Equity Strategy by Team of Bedlam Asset Management
Equity markets remained strong and the portfolio continued to outperform well, with a monthly gain of 3.2% vs 0.6% for the index. After two decades of policy torpor, Japan’s government has rapidly adopted a trio of policies to kick start the economy: monetary and fiscal stimulus, plus a weak yen. This is shock and awe’ relative to GDP, being far greater than any experiment in any developed country since the Second World War.
2013-05-10 3 Reasons to Explore the Frontier by Russ Koesterich of iShares Blog
Though frontier markets have outperformed developed and emerging markets so far this year, it’s not too late to explore the frontier. Russ offers three reasons to consider having a small strategic allocation to “pre-emerging” world equities.
2013-05-09 Make Way for the MIPS by Scott Minerd of Guggenheim Partners
Emerging markets still provide excellent opportunities for outperformance in equities, with Malaysia, Indonesia, the Philippines and Singapore being among the best positioned for the decade ahead.
2013-05-08 Are Investors Breathing a Sigh of Relief? by Bob Doll of Nuveen Asset Management
Last week U.S. equities delivered another gain as the S&P 500 increased by 2.0%.1 On Friday, the U.S. jobs report offered relief from fears of an accelerating weakness caused by prior softness during this time in each of the last three years. However, the full set of economic data for the week supports our view of a slower second quarter in a post-sequestration environment.
2013-05-07 Attractive Dividends? Earnings Growth? A Way to Get Both by Team of Lord Abbett
International equities provide broader opportunities for combining appealing divided yields and earnings growth.
2013-05-07 Global Bonds: A Flexible Solution for an Uncertain Market by Olivia Albrecht, Michael Story of PIMCO
The recent rallies in both safe-haven and risk assets have left many investors in a quandary. We believe alpha, or above-market return, will have to play a greater role for investors seeking to meet return targets. In our view, the current environment affords many opportunities for generating alpha.
2013-05-07 Bail-Ins, Bernanke, and Buyouts: Assessing Key Event Risks for Fixed-Income Investors by Team of Hartford Funds
While the eventual shift to less accommodative central-bank policy and a rise in global interest rates are perhaps the greatest focuses of concern today for bond investors, other risks also merit scrutiny. European sovereign debt worries have resurfaced as the tiny nation of Cyprus, representing just 0.3% of euro-area gross domestic product (GDP), joined the list of bailout recipients. Recent rhetoric from the Fed has prompted investors to consider the impact of an eventual winding down of its asset purchases.
2013-05-07 Quarterly Letter by Team of Grey Owl Capital Management
In his April 2013 commentary, PIMCO’s Bill Gross wrote, “PIMCO’s epoch1, Berkshire Hathaway’s epoch, Peter Lynch’s epoch, all occurred or have occurred within an epoch of credit expansion What if an epoch changes? What if perpetual credit expansion and its fertilization of asset prices and returns are substantially altered? What if a future epoch favors lower than index carry or continual bouts of 2008 Lehmanesque volatility ?”
2013-05-06 Dispelling Dollar Doubts by Milton Ezrati of Lord Abbett
Will the U.S. dollar, almighty no longer, be supplanted as the world’s reserve currency? Not anytime soon.
2013-05-02 “Twin Peaks” Target Achieved, What\'s Left? by Doug Ramsey of Leuthold Weeden Capital Management
Pithy sound bites aren’t our forte. So when we came up with the “Twin Peaks” idea (last decade’s S&P 500 highs of 1527 and 1565) a few months back, we hoped we’d stumbled on a market theme that might last a while. That wish was dashed on March 28th, when the S&P 500 exceeded its October 2007 peak of 1565.15.
2013-05-02 The Great Gold Redemption by Peter Schiff of Euro Pacific Precious Metals
The most puzzling part of the investment business is seeing how the vast and largely economically illiterate masses interpret any given piece of news. Take the recent gold selloff: many large players were motivated to sell by news that Cyprus will have to liquidate its gold stockpiles to pay off acute debt obligations. But just a moment’s reflection shows this reaction to be knee-jerk. The real story behind Cyprus’ deal has much more profound ramifications - and they are positive for gold.
2013-04-30 Stockman to America: Sinners, Repent! by Laurence B. Siegel (Article)
In a massive volume that melds economic history and social criticism, the former Reagan administration budget director David Stockman has documented countless ways in which America went astray over the last century. Most notably, he decried the corruption of free-market capitalism by those seeking effortless profits at the public’s expense. This is the source of his book’s title, The Great Deformation.
2013-04-29 New Highs Bring New Worries by Richard Golod of Invesco
The sustainability of the rallies in US and Japanese equities this year so far is looking uncertain amid slowing year-over-year earnings growth and mixed global economic signals. European and emerging market shares have traded lower year to date and seem likely to continue lagging in the near term. However, on balance, I remain optimistic about global equities, seeking yield opportunities and investments with an actively managed, more selective approach.
2013-04-29 The Trapdoors at the Fed's Exit by Nouriel Roubini of Project Syndicate
It may be too soon to say that many risky assets have reached bubble levels, and that leverage and risk-taking in financial markets is becoming excessive. But the reality is that credit and asset/equity bubbles are likely to form in the next two years, owing to loose US monetary policy.
2013-04-29 Economic Slowdown Has Not Weakened Share Prices by Bob Doll of Nuveen Asset Management
U.S. equities rebounded last week as the S&P 500 increased by nearly 1.8%,1 despite continued weak economic data. We believe recent data is not yet weak enough to change forecasts. The relative stability of data and forecasts - supported by stimulative monetary policies, an improving U.S. housing market and fading political polarization in the U.S. and Europe - sends a message of reasonably low volatility and manageable downside risks.
2013-04-26 The Return of the Asian Tigers: Guinness Atkinson Asset Management Asia Brief by Edmund Harriss, James Weir of Guinness Atkinson Asset Management
Often overlooked by international investors, South East Asia encompasses some of the world’s best performing equity markets in recent years, putting the more established emerging markets in the shade. This performance is backed by good economic results and the favourable demographics of some of these countries, with youthful populations ready to improve productivity and increase consumption. One catalyst for future growth is the Association of Southeast Asian Nations (ASEAN) free trade area, which will bring down trade barriers between the South East Asian nations.
2013-04-26 Asia\'s Reverse Innovation Trend by Beini Zhou of Matthews Asia
In recent years, the rate of acquisitions of local Asian firms by multinational companies has generally increased, particularly in China. This has happened across many industries such as industrials, medical devices and consumer staples. In many cases, if the multinational firms are not acquiring an entire company outright, they are taking a controlling stake, rather than a minority stake as a passive shareholder.
2013-04-26 The Yin and the Yang of Commodity Price Trends by Team of Northern Trust
In recent weeks, financial press headlines have centered on the sharp drop in the price of gold. Of greater importance, however, are the significant price declines of oil, wheat, corn and copper. The S&P Goldman Sachs Commodity Index is down 6.1% year-to-date after a nearly steady reading in 2012 and gains exceeding 20% in both 2010 and 2011. It is essential to recognize the different nuances buried in these commodities’ price trends. First we will focus on the implications of declining commodity price trends and then discuss gold specifically in more depth.
2013-04-26 No Escape by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Global economic growth has weakened, while the US economy hasn’t reached "escape velocity." US stocks have held up relatively well. With few other attractive alternatives, domestic equities appear to be the best house in a rough neighborhood. With the Fed committed to easing, housing improving, and valuations reasonable, the trend should continue. Risks remain and diversification and some hedging strategies are recommended.
2013-04-26 A Playbook for Investors: How to Shoot, Score, Win by Frank Holmes of U.S. Global Investors
So, in the competitive spirit of the NBA playoff season, I’ve gathered a series of plays that investors can use to shoot, score and win during this year’s market. I’m happy to say they include all the elements of an exciting game, including a comeback kid, an upset and an underdog.
2013-04-26 Like Baseball in the Snow by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners
As has occurred in each of the last three years, the economy should continue to plug along, not as we might like it to be, but as we can reasonably expect. Growth scare or not, we suspect that the end of 2013 will show that continued progress lies ahead, but perhaps not exactly in the same pattern as it has thus far.
2013-04-24 The 5% Problem: Double Jeopardy for Traditional Bond Investors by Nathan Rowader of Forward Management
Investors have suffered with low yields, but profited from rising bond values during the 30-year bull market for bonds. We believe the bond market is moving into a bearish phase, putting the value of existing bond holdings at risk. A variety of income-producing options are available for those who want to diversify bond portfolios and seek better yields. Historical analysis shows that a diversified portfolio would have outperformed traditional bonds during the last bear bond market and in periods of rising interest rates.
2013-04-24 What's Behind China's Economic Slowdown? by Weili Huang of Columbia Management
China’s economy grew by 7.7% year over year (yoy) in the first quarter of 2013, against the market expectation of 8.0% yoy and a prior quarter’s 7.9% yoy. Gross domestic product (GDP) expanded 1.6% quarter on quarter (qoq), with an annualized growth rate of 6.6%, a step down from the 2.0% qoq and 8.2% annualized growth seen in 4Q 2012.
2013-04-24 Growth From the Ground up in Iskandar by Mark Mobius of Franklin Templeton Investments
Our emerging markets team isn’t too keen on following crowds. Part and parcel of Templeton’s contrarian approach is traveling to places others aren’t, and thinking about the long-term potential in specific industries and companies that may not be on others’ radar screens. One place we’ve had our eye on for several years now is Iskandar, Malaysia, which has recently been attracting more investor attention. I think it could be viewed as an example of the potential we see in Southeast Asia.
2013-04-24 Indian Milk Helps Quench Thirst for Emerging-Market Growth by Tassos Stassopoulos of AllianceBernstein
Evolving trends in emerging markets are not always driven by macro-economic policies or demographics. Sometimes, something as simple as a fridge can change millions of people’s lives and re-define an entire industry.
2013-04-23 Enhancing Credit Returns in 2013 by Andreas Berndt, Ryan Blute of PIMCO
While credit achieved exceptional returns in 2012, achieving such returns in 2013 will be challenging in light of less upside potential and limited spread compression. Challenged by continued loose central bank monetary policies, alpha generation plays an increasingly significant role in seeking attractive total returns within credit portfolios.
Encouraging investors to provide managers with a variety of innovative approaches and flexibility may enhance the return potential of a European corporate bond portfolio without materially changing overall credit or interest rate risks.
2013-04-23 Dividend Growth and Stock Returns by Peter Nielsen of Saturna Capital
The compounding impacts of dividends have historically been significant in terms of market returns for long-term investors. The importance of these cash flows to investor returns can be seen across countries and industries.
2013-04-22 Strategy for a Second Gear Economy by David Kelly of J.P. Morgan Funds
American investors could be forgiven for feeling just a little confused. One week after the stock market posted its strongest first-quarter gains since 1998, the Bureau of Labor Statistics announced the weakest monthly job growth in nine months. Real GDP growth was just 0.4% in the fourth quarter but appears to have been much stronger in the first. So is the economy getting stronger or weaker, how is the Federal Reserve likely to react to it and what, if anything, should investors do about it?
2013-04-22 Will Emerging-Market Stocks Close Gap with Global Equities? by Morgan Harting of AllianceBernstein
Companies in emerging markets are more profitable and less debt burdened than their developed-market peers, and their shares trade at a deep discount. So when will emerging-market stocks close the gap with global equity markets?
2013-04-22 Commodity Declines and Weak Data Startle Investors by Bob Doll of Nuveen Asset Management
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-19 Fast Emerging Asia by Taizo Ishida of Matthews Asia
Over the past 20 years, Asia has come a long way to evolve into an asset class in itself. China and India have famously led the way as symbols of emerging nations. But when I think about seeking growth in Asia, I am particularly drawn to the region’s smaller equity markets as attractive hunting grounds for investment opportunities. Asia continues to change at a rapid pace, and this change is not restricted to China’s ever-changing landscape, but to many other areas that may see fewer media headlines.
2013-04-19 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 F.I.R.S.T.: Bond Market Outlook by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Amid heightened political uncertainty in Europe and subdued global growth expectations, global investors owe Hiroki Kuroda a big domo arigato for his pledge to inject about $1.4 trillion into the moribund Japanese economy by the end of 2014. The newly appointed BOJ governor’s unprecedented plan to buy Japanese government bonds,
2013-04-19 The Pharaoh's Dream by Andrew Bosomworth of PIMCO
As yields on assets decline, central banks’ ultra-loose monetary policies are effectively forcing investors further out the concentric circles into lower quality, more illiquid sectors in search of positive yielding assets after deducting inflation. In order to achieve 6%-7% returns in the future, investors may be required to take on more risk. Allocating part of a portfolio away from “middle circle” asset classes into assets with higher return potential as well as assets offering liquidity is the right strategy in our opinion.
2013-04-19 India\'s Gas Sector Dilemma by Siddharth Bhargava of Matthews Asia
In India, the fertilizer sector has long depended on gas as a key input. Over the last decade, several power plants that run on gas have been set up as well. Demand has grown 10% each year since 2002 while supplies, largely managed by state-owned enterprises (SOEs), have failed to keep pace. Inefficient capital allocation, lack of incentives and populist policies aimed at maintaining low prices have led the country to import 25% of its gas needs. This has further exacerbated India’s current account deficit, which now stands at 6.7% of GDP.
2013-04-19 First Quarter Investment Commentary by Team of Litman Gregory
Looking ahead, significant uncertainty surrounds fiscal and monetary policy in terms of what policies will be adopted and their ultimate economic and financial market impacts. More broadly, still-high global debt levels pose an economic headwind. Against this backdrop, our outlook for stocks has not improved. If anything, given the sharp run-up in stock prices, we are getting closer to reducing our U.S. equity exposure further than we are to increasing it.
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.
2013-04-18 The Lure of Hedge Funds by John West of Research Affiliates
Investors often buy what they think is exciting, sophisticated, and complex with the embedded assumption that all of these attributes will lead to greater returns. We see this today where we witness the continued explosive growth of hedge funds. But, a careful examination of the data reveals that these fancy lures fail to hook as much in excess, after-fee returns as more time tested strategies.
2013-04-18 Emerging Markets Investment Bulletin by Team of Bedlam Asset Management
The benefits of focusing on attractively priced, well managed and growing businesses, irrespective of their inclusion in an index, continued to aid fund performance. Thus it was virtually flat in March, capping a strong quarter in absolute and relative terms with a gain of over 10%, again beating the 5% gain by the index. These - achieved through a combination of a valuation discipline that sets the entry and exit prices and the focus on quality businesses. Not surprisingly, stock selection has been a consistent factor behind the outperformance, both this year and previously.
2013-04-17 Hyperactive Monetary Policy: The Good, the Bad and the Ugly by Lupin Rahman, Mohit Mittal, Josh Thimons of PIMCO
Hyperactive monetary policy (HMP) is in full force as fiscal policy retreats. The benefits of HMP outweigh the costs for now. Despite cyclical growth, we will likely not achieve escape velocity and eventually the costs will likely overtake the benefits.
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.
2013-04-17 What\'s Driving Emerging Markets? by James McDonald, Daniel Phillips, Phillip Grant of Northern Trust
Emerging market (EM) equities have historically outperformed as the global economy gained momentum, as shown in Exhibit 1. After a great catch-up rally in the second half of 2012, the stocks finished the year as global outperformers only to lose that momentum in the first quarter of 2013. What is behind the recent underperformance, and what does it say about the outlook? Our research points to a number of contributors to the recent weakness.
2013-04-17 Emerging Markets Equity Commentary by Team of Thomas White International
Emerging market equities corrected for the second successive month in March, on concerns that continuing weakness in European demand could hurt export growth for several countries in Asia and Latin America. These economies had seen a revival in their export fortunes during the second half of last year as U.S. consumer demand turned healthier. However, the moderation in U.S. consumer sentiment during March has somewhat dulled the optimism.
2013-04-16 All That Glitters Is Not Gold by Scott Colyer of Advisors Asset Management
This quote from Shakespeare’s Merchant of Venice is apropos given the nosedive in the gold markets today. In our 2013 Best Ideas piece we labeled gold a neutral as gold had not had a significant correction since 2008. Our research indicated a significant slowing of bullion purchases by gold Exchange Traded Funds (ETFs) in 2012 versus 2011. We looked for a correction and now need to contemplate whether we are in the end of the commodity bull market or merely a pause that refreshes.
2013-04-16 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, was up 1.03% for the month of March, as the high yield market continued to benefit from stable U.S. economic growth and steady asset reflation driven by the Fed and global central banks.
2013-04-16 The Asian Economic Crisis and the IMF by Bill O'Grady of Confluence Investment Management
In May 1997, a speculative run against the Thai baht became the first clear signal that a problem was developing in Asia. Over the next three years, Asia and other emerging markets, including Russia and Brazil, were rocked by a historic financial crisis. These nations recovered strongly in the following eight years and generally made it through the 2007-09 global financial crisis in relatively good shape. However, the impact of the Asian economic crisis remains a major factor in the behavior of these emerging nations.
2013-04-15 The (Up) Beat Goes On, Part II by Bob Doll of Nuveen Asset Management
We wrote Part I of this theme on February 11 during the first quarter rally, when the S&P 500 closed the week at 1518. This past week the S&P ended at 1589, after increasing 2.3%. Global stock prices continue to push to new highs and thus provide support for a pro-equity bias. One nuance is that the composition of the equity rally has been abnormally defensive.
2013-04-12 Asia\'s E-Commerce Evolution by Michael Oh of Matthews Asia
Korea and Japan have been trailblazers in terms of making the virtual marketplace platform, through which merchants and manufacturers of all sizes can sell goods to consumers, an e-commerce model in Asia. Unlike in the U.S. and Europe, where many retailers sell directly to customers from their own websites and handle the details of commerce themselves, most Asian e-commerce takes place on “megasites” or virtual markets.
2013-04-12 Soft Patch - Part Four? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks continue to trade at all-time highs, but concerns are rising over a possible pullback and downturn in economic growth. A consolidation of gains is likely, but trying to trade around a pullback can be quite difficult. A potential tapering of Fed asset purchases continues to be discussed, but the Fed also appears nervous over the potential for a spring downturn. Cooler heads appear to be gaining traction in Washington and at least some marginal progress is being made. Economic improvement is gaining traction in Japan, raising hopes of sustainable change, while Europe continues to suffer.
2013-04-11 The Ripple Effect of Abenomics by Scott Minerd of Guggenheim Partners
Monetary policy in Japan will continue to drive investors in that country to overseas markets, which will affect global asset prices and bond yields.
2013-04-11 Bank of Japan Surprises Market and Yen Reacts by Team of Nomura Asset Management
We recently indicated on March 14, 2013 that we believed the Yen would remain range bound near the level of PPP (purchasing power parity), which we estimated to be between 90 to 95 Yen/USD. We wrote at the time that though currency movements will be affected by various factors, the monetary policies of both Japan and the U.S. are the most important.
2013-04-11 Global Investing in 2013: Policy Dominance, Active Management and a New Paradigm in Currencies by Scott Mather of PIMCO
We expect that the impact of ongoing global policy experimentalism on real economic growth and financial markets will likely vary substantially from country to country, creating both risks and opportunities. With flexible, active global strategies investors can potentially benefit from a broader opportunity set and the ability to go off benchmark in an effort to both avoid risks and tap opportunities.
2013-04-10 Economic Slowdown Halts Equity Rally by Bob Doll of Nuveen Asset Management
The latest softness in economic indicators probably means that more consolidation in the equity markets is required before we can advance beyond the recent all-time highs. During March, nearly all of the activity for the S&P 500 was within 1% of 1550. Equities may move lower due to deteriorating technical conditions and the possibility of weak first quarter earnings reports.
2013-04-10 Surprising Surge!! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Momentum from 2012’s surprisingly strong performance continued into the first quarter of 2013 with stocks rising sharply. Our portfolios did well but lagged behind our benchmarks in the quarter. Taking a little longer view, over the trailing 12 and 36 months we mostly matched the double-digit gains of our benchmarks, which we are very pleased with since we usually underperform during strong market advances. So far this year small- & mid-capitalization, value, and domestic stocks were the market leaders, while international, growth, commodity stocks and Apple were laggards.
2013-04-10 Looking for Warm Milk and a Blanket by Blaine Rollins of 361 Capital
Conspiracy theory economists would say that the Government fudged the data weaker so that it could help sell $60-70 billion in U.S. debt this week. Whatever the outcome, last week we had a perfect storm of high expectations for the data + very below average March weather + the payroll tax hike impact + the upcoming sequester worry. Economic data will move violently from month to month, but unfortunately last week, it was mostly in the WEAKER THAN EXPECTED direction and investors did not hesitate to bring pain on risk assets.
2013-04-10 Pacific Basin Market Overview by Team of Nomura Asset Management
Supportive U.S. economic data drove most markets higher during the first quarter of 2013. China underperformed the region amid concerns that the economic recovery may not be as robust as previously expected, while the National People’s Congress in March failed to provide any incentives to the equity market given the absence of pro-growth policies. The MSCI AC Asia Pacific Free Index including Japan gained 5.5% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.0% higher during the quarter.
2013-04-10 Financial Markets Review and Outlook First Quarter 2013 by Team of Managers Investment Group
Risk-based assets rallied sharply during the first quarter on the heels of a fiscal tax-cliff compromise that overhung the market in the latter half of 2012. U.S. equities posted their best quarterly returns since 1998, with both the Dow Jones Industrial Average and S&P 500 Index reaching all-time highs. While the equity market rally extended abroad, returns overseas were muted by a strengthening U.S. Dollar. Bond markets, with the exception of high-yield investments, failed togenerate anything beyond middling returns, as investors’ risk appetites started the year strong.
2013-04-10 Don't Pay Too Much for That Bordeaux - Or That Bond by Jeff Helsing of PIMCO
The financial market’s reliance on ratings agencies and benchmarks, along with regulations, can cause distortions in the value of some securities. These price distortions can create potential opportunities for some investors. Investors should consider aligning capital allocation with outcome-oriented objectives that aren’t influenced by credit ratings or benchmarks.
2013-04-09 Labor Markets Stumble in March by Ryan Davis, Chris Maxey of Fortigent
In an unexpected development, labor markets fell flat during March. Following several months of healthy job growth, the economy was only able to muster 88,000 new jobs in March, well below economists’ expectations for nearly 200,000 jobs.
2013-04-09 Investment Bulletin: Global Equity Strategy by Team of Bedlam Asset Management
Another good month and a strong quarter, with the portfolio gaining by 3.5% and 15.2% (net) respectively, outperforming the rises in the index of 1.8% and 14.0%. Conspiracy theorists could be forgiven for believing that most political/central bank action is designed to support equity prices. The Cyprus fiasco is an example: whatever the legal frameworks, from government guarantees of bank deposits to the repayment of sovereign bonds, all are merely non-binding statements of intent, thus a wake-up call to buy real, income-producing assets.
2013-04-09 PIMCO Cyclical Outlook for Asia: How Leadership Changes Are Shaping Asia's Outlook by Q&A with Ramin Toloui, Tomoya Masanao and Robert Mead of PIMCO
For Asia, “slow but not slowing” global growth will likely keep external demand neutral, and policy developments will therefore help shape the economic outlook. In Japan, we see a significant boost to aggregate demand coming from the concerted monetary and fiscal expansion of the new Abe government. In China, concerns about inflation, housing market excesses, and long-term financial stability are prompting policy restraint that should keep growth below 8% this year.
2013-04-08 Good Start to 2013. Domestic Stocks Earn 11% In First Quarter. by Ron Surz of PPCA
2013 stock markets started like 2012 stock markets with a bang. U.S. stock markets kicked off 2013 with a very good 10.7% return. Also like 2012’s first quarter, foreign markets didn’t fare as well, earning only 3.5% in the quarter. If we merely hold onto these gains for the remainder of the year we’ll do fine.
2013-04-08 Europe Stumbles to a Cyprus Solution by Milton Ezrati of Lord Abbett
After several late-night meetings and considerable angst, the members of the eurozone have settled on something for Cyprus that looks very much like a typical bankruptcy. It is comical in a way that people worked so hard to arrive at an already widely known, well-established process. Still, this result may have value. Because Europe through these four years of crisis has strived to tailor settlements for each new challenge, it has always left people in doubt about each outcome, particularly where the pain would fall.
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 Could Consumers Change Japan\'s Tide? by Team of Matthews Asia
This year, investor attention has focused on Japan and its macroeconomic policy with hopes that rising inflation expectations might spur businesses to invest and consumers to spend. Since Prime Minister Shinzo Abe and Japan’s ruling Liberal Democratic Party (LDP) regained power late last year and proposed more aggressive monetary policies, including an ambitious inflation target, the yen has weakened more than 20% against the U.S. dollar and more than 15% against the euro.
2013-04-05 Ask Russ: All About Emerging Markets by Russ Koesterich of iShares Blog
Russ answers more client and reader questions this time about emerging market equities and debt.
2013-04-05 China's Uncertainties Won't Stop Renminbi's Rise by Hayden Briscoe of AllianceBernstein
Recent data releases and the transition to new political leadership have created some uncertainty about China’s short-term economic outlook. While positive growth surprises are unlikely in 2013, we still think nothing can stop the long-term appreciation of China’s currency, the renminbi (RMB).
2013-04-05 Dodging Soccer Balls and Sharks in Recife, Brazil by Mark Mobius of Franklin Templeton Investments
Recife, in Brazil’s northeast Pernambuco state, is known to many as the “Venice of Brazil” given its many waterways and bridges. A welcome winter stop for our emerging markets team, the city is blessed with a tropical climate that’s as warm and sunny as its people. While the residents in this area of Brazil are often regarded as being extremely laid back given the balmy weather, we found them to be very hard workers. We found this seaside and shipping hub was not only a hotbed of tourist activity, but of potential investment opportunities as well.
2013-04-04 Absolute Return Letter: The Need for Wholesale Change by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
The seeds of the next crisis have probably already been sown as a consequence of the lax monetary policy currently being pursued. Frustrated with the lack of direction from political leaders, most recently witnessed in the handling of the crisis in Cyprus which was a complete farce, central bankers from around the world are likely to demand change, but politicians will have to be pushed into a corner before they will respond to any such pressure. Hence nothing decisive will happen before the next major crisis erupts.
2013-04-03 First Quarter Recap by Bob Doll of Nuveen Asset Management
This past month marked the fourth anniversary of the global equity market bottom on March 9, 2009. U.S. stocks have clawed back all of the losses from the Great Recession and are near historical highs. Most other major markets are still well below their 2007 peaks, but have rebounded sharply since last June and look increasingly resilient. However, there is tremendous anxiety about the economic outlook, and many investors fear equities and other risk assets are floating on a sea of liquidity rather than solid fundamentals. We are more constructive and maintain a pro-growth investment stance.
2013-04-03 Hello 2nd Quarter and Hello Baseball by Blaine Rollins of 361 Capital
Hello 2nd Quarter and Hello Baseball. It’s ’Go’ time for both players and stat geeks...
It was a very good First Quarter for U.S. Equities. As you can see from the Year to Date charts below, risky sectors did well, but so did many lower risk sectors like Health Care, Consumer Staples, Utilities and MLPs. The Q1 goal as an asset allocator was to be fully invested, but not in Gold, Long Bonds, Emerging Markets and Apple.
2013-04-01 Currency and Emerging Markets: What Can We Expect? by Giordano Lombardo of Pioneer Investments
Currency markets are making headlines again after taking a low profile amid the crises and the turmoil in financial markets of the last five years or so. I asked Greg Saichin, Head of High Yield and Emerging Markets Fixed Income Portfolio Management here at Pioneer, to provide his views about what is going on, and what he sees as the drivers of investment flows into emerging markets.
2013-04-01 The Discipline of Buy and Sell Decisions by Mark Mobius of Franklin Templeton Investments
The thought of giving up a once-treasured possession can be an emotional exercise for anyone, even if the object of affection has outlived its use. As investors, we can find it difficult to sell a once-favored holding even more difficult than the decision to purchase it. But sometimes, you just have to let go.
2013-03-29 Market Resilience by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
After a stellar first quarter performance from US stock markets, which showed impressive resilience to continued headwinds, a pullback is certainly possible but we don’t suggest investors who need to add to allocations wait. In a relative world, the US stock market continues to look like an attractive place to invest, although there may also be opportunities in Japan and Europe as well. The upcoming earnings season could tell the story for the market over the next couple of months, but we continue to advocate a long-term point of view and maintaining a diversified portfolio.
2013-03-28 Emerging Markets Investment Bulletin by Team of Bedlam Asset Management
The increases in the portfolio’s net asset value continue easily to beat the hardly exacting returns from the index. The fund has gained 10.4% gross for the year to date (to 22 March), vs. a 3.0% rise for the MSCI Emerging Index. This outperformance (replicated over rolling 1- and 3-year periods) has been achieved by choosing investments irrespective of index country or sector weightings or where they are listed, so long as they derive the majority of income and profits from developing countries.
2013-03-28 2 Factors Keeping a Lid on Interest Rates by Russ Koesterich of iShares Blog
Investors have been expecting interest rates to rise, but with the yield on the 10-year Treasury bond back below 2%, Russ explains two structural factors that are slowing the rate rise.
2013-03-28 What Maslow and Rand Would Tell Investors Today by Frank Holmes of U.S. Global Investors
While gold’s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.
2013-03-27 What Happened to That Export-Led Recovery? by Mike Amey of PIMCO
With nearly 50% of the UK’s total exports going to Europe, an economic area constantly flirting with its own recession, it is no surprise to see that UK trade performance has been challenged.As the US continues to re-heal, and trade becomes more geographically diversified, we should see exports start to grow once more, albeit off a modest base. The easing in sterling is undoubtedly welcome and will improve prospects for exports, but it is unlikely to be a “game changer”.
2013-03-26 A Cry for Help from Income Investors by Legg Mason Global Income Survey (Article)
Confronted with the stark realities of income investing now, affluent investors all over the world are rethinking their approach, notes Legg Mason’s just-released Global Income Survey. Yet the Survey also found income investors hungry for more knowledge and ideas -- creating opportunities for savvy financial advisors.
2013-03-26 Currencies in a Race to Debase by Chris Maxey, Ryan Davis of Fortigent
Since the start of the year, investors have seen rapid shifts of sentiment in currency markets. The debasement that for so long was assumed to be a purely Western phenomenon is beginning to impact countries globally, driving changes in expected returns and growth prospects.
2013-03-25 Energy: Perilous Present, Promising Future by Milton Ezrati of Lord Abbett
For oil and gas, an era of abundant supplies and lower prices awaits. But investors will have to weather a tricky geopolitical situation before it arrives.
2013-03-25 Cyprus Reminds Us of Threats and Improving Global Economy by Bob Doll of Nuveen Asset Management
Equity averages sagged slightly last week. Strength later in the week made up for earlier weakness as the equity rally paused for the Cyprus crisis. We (and the consensus) perceive Cyprus as mainly a local problem and believe it supports our view to remain cautious with Eurozone weightings.
2013-03-25 Still Bullish by Richard Golod of Invesco
Global equities (as measured by the MSCI All Country World Index) fell modestly in February amid reignited fears about the euro’s future, signs of distress in China’s economy and the looming sequester deadline in the US. Nevertheless, I believe the US, Japan and emerging markets may offer compelling opportunities, while Europe requires a more selective approach.
2013-03-22 ING Fixed Income Perspectives March 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Developed sovereigns are still broadly unattractive, but global central banks appear poised to ease. We prefer EM currencies that will continue to benefit from positive global growth and tolerate further upward pressure on the U.S.
2013-03-22 Happy Clients; Terrified Prospects by David Edwards of Heron Financial Group
Four years ago, on March 9th, 2009, US stocks collapsed to a 12 year low. A financial crisis rooted in overleveraged purchases of junk (or even fraudulent) securities claimed, in quick succession, Bear Stearns, Lehman Brother, Merrill Lynch (forced into a shotgun marriage with Bank of America) and AIG. Investors panicked, selling good securities at deep discounts to fair value.
2013-03-22 Deep Value Diving in the Eurozone by Katrina Dudley of Franklin Templeton Investments
Greece’s tale of financial woe may well go down as a modern Greek tragedy, with people in power falling prey to a tragic flaw which brings about their catastrophic reversal of fortune. It’s all quite dramatic and dire, but if the real life Greek financial system stays true to the classical formula, the conclusion means recognition of that tragic flaw and potential course correction. For those hardy and/or contrarian souls who suspect opportunity may be sprouting from Greece’s great mess, this would be good news.
2013-03-22 Insights on India: Land of Paradoxes by Chetan Sehgal of Franklin Templeton Investments
Technology has made it easy for our emerging markets team to stay in contact from nearly every corner of the globe, but electronic communications can’t replace human interaction through a face-to-face exchange of ideas. Twice a year, our 50+ analysts gather together in a single location to share opinions on companies, discuss global events, and conduct a peer review and evaluation. I’ve invited my colleague, Chetan Sehgal, to pen his thoughts on India and why we chose it as the location for our most recent gathering.
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.
2013-03-20 Investors Need to Pivot by William Benz of PIMCO
Fixed income investors need to think differently in the current environment. Investors may want to consider pivoting to strategies that are less focused on traditional benchmarks and more oriented to generating income and providing greater flexibility to hedge against rising rates, widening credit spreads or higher inflation.
2013-03-19 Paul Matlack from Delaware Investments on the Direction of the Bond Market by Robert Huebscher (Article)
Paul Matlack is senior vice president, senior portfolio manager and fixed income strategist for Delaware Investments. His firm oversees $145 billion in fixed-income strategies, and in this interview Matlack discusses his outlook for the economy and the bond market, and how advisors should be positioning client portfolios.
2013-03-19 Rising Political Risk and Ongoing Economic Weakness Challenge a Difficult Journey to Recovery by Andrew Balls of PIMCO
Looking ahead, it will continue to be a very bumpy journey as we anticipate economic contraction in the eurozone by -0.75% to -1.25% over the next year, hampered by growing political risk and fiscal tightening. Although we expect the pace of contraction in the eurozone to diminish over 2013, the duration of the recession is likely to be longer than consensus forecasts.
2013-03-19 A Tired Equity Market Crawls Higher by Bob Doll of Nuveen Asset Management
U.S. equities rose again last week as the S&P 500 increased 0.66%, with an overall gain for the year of 9.96%.1 The remarkable resilience of the U.S. economy against fiscal cliff headwinds has boosted equity investor sentiment. The U.S. macroeconomic outperformance has also helped U.S. equities outperform global counterparts. Investor preference toward the U.S. has largely been confirmed by rising flows into U.S. equities.
2013-03-19 Why Are Emerging Markets Struggling in 2013? by Ryan Davis of Fortigent
Despite one of the sharpest rallies in US equities in recent memory, emerging market equities have been left curiously behind in 2013. Through last Friday, the market segment was down 1.0%, compared to an S&P 500 index that was up 10.0%. This seems to violate the regime that investors have gotten used to over the past 10 years, whereby the emerging markets equity index served as a high beta proxy for the US equity market.
2013-03-19 Keeping Up With Changes In Emerging Market ETFs by Jun Zhu of Leuthold Weeden Capital Management
In this report, we highlight benchmark changes in a major player, a potential substitute (with cheaper fees) for another major player, a new player with an innovative weighting scheme and provide an overview of the Emerging Market ETF space available to investors.
2013-03-18 Finding the Sweet Spot by Mark Kiesel of PIMCO
Where is the investment “sweet spot” in today’s global financial markets? The uneven global growth outlook means there are opportunities and risks for both credit and equity investors.
2013-03-18 Outlook for the Yen by Team of Nomura Asset Management
For several quarters ahead, we estimate that the Yen will remain range bound near the level of PPP (purchasing power parity), which is estimated to be between 90 to 95 Yen/USD. Though currency movements will be affected by various factors, we think the monetary policies of both Japan and the U.S. are the most important.
2013-03-18 Don’t Forget About Emerging Market Equities by Russ Koesterich of iShares Blog
While emerging market stocks are underperforming US stocks, Russ explains why longer-term investors may want to give EM markets another look.
2013-03-18 Currencies: A 1970s Flashback? by Milton Ezrati of Lord Abbett
Four decades ago, a currency war and significant Fed easing were followed by a bout of high inflation. Now investors are worried that history could repeat itself.
2013-03-15 Emerging Markets Equity Commentary by Team of Thomas White International
Emerging market equities saw a moderate correction in February, broadly similar to the rest of the world. Prices reacted negatively to renewed concerns of a worsening European fiscal crisis as the results of the recent Italian elections turned out to be inconclusive.
2013-03-15 Washington May Be Ready to Take a Break From the Brink by Josh Thimons, Libby Cantrill of PIMCO
With Washington’s dysfunction not in the forefront, the economy could be more unencumbered to grow, with markets trending in a similar direction. The Fed’s proactive policies should continue to favor overweight positions in the five-year through 10-year part of the Treasury yield curve and support interest-rate-sensitive sectors of the economy most notably housing. In the longer term, however, we would advise investors to be cautious: Without meaningful long-term structural deficit reform, real growth will inevitably lag in the U.S.
2013-03-15 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 0.46% in February, as the high yield market finished on a positive note, after experiencing heightened volatility throughout the month.
2013-03-15 China\’s Next Stop by Frank Holmes of U.S. Global Investors
Would it surprise you to discover that China is planning to add 800 miles to its subway system over the next two years? That’s the distance equivalent to building a network from Dallas to Chicago in less time than the U.S. Congress can resolve a budget!
2013-03-15 Finally!! Now What? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Surprise! We don’t know what’s going to happen in stocks over the next few weeks. But we are seeing an environment that we believe can foster further gains in the US as economic data remains generally positive, the Fed maintains its accommodative stance, and small progress is being made in the fiscal realm. Investors concerned about a pullback may want to hedge their portfolios, but maintain adequate exposure to equities.
2013-03-14 DC Plan Sponsors: Now's the Time to Get More From Bonds by Stacy Schaus of PIMCO
Long on equities and light on bonds, today’s DC plan lineups may expose participants to extreme market risks. Plan sponsors could potentially improve retirement outcomes by trimming choices for stocks and considering additional options for bonds. The inclusion of active fixed income strategies with global exposure or additional income opportunities could help participants reach their retirement goals.
2013-03-14 3 Reasons It's Not Too Late to Consider Emerging Market Bonds by Russ Koesterich of iShares Blog
After the recent rally in emerging market bonds, is it too late to allocate to this asset class? Not for long-term investors, says Russ and he offers 3 reasons why.
2013-03-12 Bill Ackman on What Makes a Great Investment by John Heins (Article)
In addition to commenting on his high-profile current investments, Pershing Square Capital's Bill Ackman in a recent interview with Value Investor Insight describes the general company traits he looks for in both active and passive investments, why a high public profile is an important element of his strategy, whether his thesis on J.C. Penney has evolved, what lessons he's learned from a few prominent mistakes, and why his short conviction on Herbalife is as high as ever.
2013-03-12 Pacific Basin Market Overview February 2013 by Team of Nomura Asset Management
Monthly returns for February 2013 were somewhat mixed, but the Pacific Basin regional markets generally ended in positive territory this month. Outside of Asia, political instability in Italy and concerns that the Federal Reserve might begin to scale back its monetary stimulus in the U.S. led to weaker investor sentiment. Economic data from China was weak, largely due to the effect of the Chinese New Year.
2013-03-12 U.S. Dominates World Markets for the Trifecta by Douglas Cote of ING Investment Management
While large-cap indices get all the headlines, mid and small caps have continued to excel. Frontier markets have picked up the slack as major emerging markets stumble. Global risks persist, though U.S. fundamentals appear solid. The move toward U.S. energy independence should soon result in a trade surplus, boosting GDP.
2013-03-11 Italy: Welcome to the Bungle by Milton Ezrati of Lord Abbett
Results of the recent election increase the likelihood of a eurozone breakupand disruptions to financial markets.
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.
2013-03-07 Guanxi, Mianzi, and Business: The Impact of Culture on Corporate Governance in China by David Smith of Aberdeen Asset Management
There are two key cultural and sociological issues of particular importance when evaluating Chinese companies: guanxi (relationships and networks) and mianzi (face). When analyzing the potential of a Chinese company, it's important to understand how guanzi and mianzi affect transactions, board composition and deliberations, and shareholder engagement, among other issues.
2013-03-07 80's Bull Redux by Richard Bernstein of Richard Bernstein Advisors
We have thought for some time that the current bull market might be one of the strongest of our careers, and could potentially rival the 1980s bull market. Although this current cycles construction is quite different from the 1980s bull market, there are many aspects of this market that are curiously similar.
2013-03-07 A New Chapter for Turkey? by Frank Holmes of U.S. Global Investors
In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent.
2013-03-05 Is Now the Time to Diversify? by Chris Maxey, Ryan Davis of Fortigent
The use of global diversification in constructing client portfolios has come under fire in recent years due to the underperformance of many risk assets. Traditionalists who stuck to their familiar S&P 500 and BarCap Aggregate Bond index blends generally outperformed their diversified peers in 2011 and 2012, as historic risk premiums failed to materialize and various alternative investment strategies faced headwinds.
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.
2013-03-05 The Magic of Compound Interest by Jeffrey Saut of Raymond James
When compound interest works in your favor, it is a blessing. When it works against you, it's a curse! That is a "Jeffreism" I learned the hard way back in the bear market of the early 1970s when I was working for a $100 per week in this business and consequently had my credit cards levered to the "max." The interest rate at the time was 18%.
2013-03-01 The Walk of Life: Stepping Away From Dire Straits and Toward Active Short-Term Mgmt Strategies by Jerome Schneider, Andrew Spottiswoode of PIMCO
Money market investors may find the benefits of recent regulatory and industry reforms bittersweet at best, as they are still tolerating borderline zero percent yields in a persistent low rate environment. Without creative strategies for liquidity management, many investors are finding themselves in the "dire straits" of actual negative real returns on their cash allocations even with modest current levels of inflation.
2013-03-01 Wait for Your Pitch in Today's Market by John West of Research Affiliates
Great hitting in baseball depends in part on waiting for the right pitch. In today's market, most asset classescoming off their impressive 2012 recordare "high and outside" the valuations necessary for future big league returns. Patience is the name of the game today.
2013-03-01 Health Is Wealth: Health Care Spending As An Emerging Market Growth Engine by Amit Bhartia, Alvaro Pascual of GMO
Amit Bhartia and Alvaro Pascual, members of GMO's Emerging Markets Equity team, write to institutional clients in a new white paper about the correlation in emerging markets between public healthcare spending and domestic consumption.
2013-03-01 Critical Juncture? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Headwinds have reemerged and investor concern is heightened yet again. We still believe stocks can run further, but a pullback is more likely in the near-term. The sequestration is now in affect but that doesn't necessarily mean it's here to stay and more budget fights loom, particularly in advance of the potential government shutdown on March 27. Meanwhile, some members of the Fed are in favor of scaling back its quantitative easing (QE) program, rattling markets a bit.
2013-03-01 Greetings from Istanbul! by Frank Holmes of U.S. Global Investors
As I travel around Turkey, I am reminded how vital good government policies are to the health of a nation. Following a decade of fiscally responsible actions, Turkey is the picture of a growing prosperity. Perhaps Americas elected officials could take a tip from this vibrant country overseas.
2013-02-28 Jeremy Siegel on Why Stocks Are -- and Will Remain -- the Best Bet by Team of Knowledge @ Wharton
Though stock market volatility continues to rattle investors' nerves, the future looks bright for equities in the U.S. and many emerging markets, according to Wharton finance professor Jeremy Siegel. That's not so for bonds, which could become money-losing investments as rising interest rates drive bond prices down. In an interview with Knowledge@Wharton, Siegel says that investors should think about reducing their bond holdings, buying more stocks and keeping just enough cash for a rainy day and other liquidity needs, since interest rates on cash are near zero.
2013-02-27 ING Fixed Income Perspectives February 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Despite its diminutive size, February has been a whirlwind. Eat and drink too much on Fat Tuesday, be reminded of our corporeal nature on Ash Wednesday, receive a sappy Hallmark card on Thursday, and cap it all off with a memorial for a bunch of ex-presidents on Monday. Unfortunately, the next several weeks don't appear to offer any relief from this calendar whiplash.
2013-02-27 Love, Money or Disappointment: What Will Asian Credit Investors Find in Their Red Envelopes? by Robert Mead, Raja Mukherji of PIMCO
Our cyclical economic outlook for Asia in 2013 is unusually dependent on breakthroughs in structural policies. Although we continue to favor select opportunities in key sectors, in general Asian credit spreads are trading historically tight. Bottom-up research is critical, along with careful top-down views on shifting economic conditions, and investors need adequate compensation for taking credit risk. Some sectors and companies can grow significantly faster than their respective economies.
2013-02-26 Global Investment Review First Quarter 2013 by Team of Bedlam Asset Management
At the beginning of last year the prospects for capital markets were grim yet the results surprisingly good: positive returns and modest economic growth. The cause was central banks in developed countries acting as a backstop for sovereign and other large debts, through direct purchasing funded by accelerated money printing. This also ensured low interest rates. Subsequently, mountainous debt problems are slowly being tackled, even as they appear to increase.
2013-02-25 Dodging the bullets by Team of Bedlam Asset Management
Although the year is barely a month old there are already signs that the long-awaited rotation out of the perceived safety of bonds and into inflation-proofed equities may have begun. Given the dismally low yields on offer it seems likely that, at the very least, it is the beginning of the end of the bond market bubble. Some of the biggest bubbles in the bond market, and thus most at risk from a sell-off, are in high yield and emerging market debt.
2013-02-22 Emerging Markets Outlook: Will Emerging Markets Continue Their Run in 2013? by Scott Klimo of Saturna Capital
A number of times we have been asked whether emerging markets will continue their run in 2013. Our response typically begins with the following clarification: "Emerging markets" may be a handy way to refer to the countries that constitute a generally recognized asset class, but this group is far from monolithic. Widely differing levels of development, economic drivers, opportunities to invest, and returns exist under the emerging markets umbrella. For this reason it's not entirely correct to imply that "emerging markets" had a run in 2012.
2013-02-22 Muscle Memory or Muscle Training by Bill Smead of Smead Capital Management
Interest rates have gone down on US Treasury bonds off and on for 31 years. This means that the coupon you are being paid has been joined by significant capital gains. Jim Grant argues that the only thing going for bonds is how well handlers of money have done on them; Warren Buffett calls it "rear-view mirror investing".
2013-02-22 Frontier Markets: Today's Models of Fiscal Prudence by Paul Herber of Forward Management
Say you are evaluating the markets of two countries in a search for investment growth opportunities. One country's sovereign debt is 120% of its gross domestic product (GDP), while the other has outstanding sovereign debt that represents only 11% of its GDP. Saddled with sovereign debt, the first country faces painful fiscal austerity measures, inflationary ones, or bothany of which will no doubt stifle economic growth.
2013-02-22 Finding What's Real in Real Estate by Team of Franklin Templeton Investments
The U.S. financial crisis in 2008-2009 left many investors with a reluctance to take investment risks, particularly those related to any of the world's wilted housing markets. However, as your local real estate agent would likely tell you, the market in one location can be vastly different than it is in another. Wilson Magee, co-manager of Franklin Global Real Estate Fund would agree that the adage "location, location, location" applies not only to individual home buyers and sellers, but to investors seeking opportunities in the commercial real estate sector, too.
2013-02-22 The 4 New Defensive Strategies by Russ Koesterich of iShares Blog
Waiting for a market correction? Wondering how to potentially protect your gains? Forget merely opting for traditional defensive sectors. Instead, consider Russ' four suggestions.
2013-02-22 A Test of Strength for Gold by Frank Holmes of U.S. Global Investors
This week, we saw the gold bears growling louder and gaining strength, as the worlds largest gold-backed ETF, the SPDR Gold Trust, experienced its largest one-day outflows since August 2011. The Fear Trade fled the sector following the Federal Reserves meeting that revealed a growing dissension among some of its members over the central banks bond-buying program.
2013-02-20 Two New Country Views for a Two-Speed Global Economy by Russ Koesterich of iShares Blog
The global economy is stuck in a two-speed regime: Developed markets like Europe, Japan and the United States are stalling, while China is re-accelerating. Russ explains what this divergent growth landscape means for his country outlooks.
2013-02-19 Kyle Bass on Inflation and How to Protect Against It by Mark Quam (Article)
Kyle Bass, the founder of Hayman Capital, foresaw the collapse of the sub-prime mortgage bond market in 2008 and the foreign sovereign debt crisis in Greece. Bass' latest warning is about looming Inflation – and he advises how to protect against it.
2013-02-19 Asset Class Allocation and Portfolios by Adam Jared Apt (Article)
Asset class allocation has been so thoroughly absorbed into the culture of investing that today, most investment guidance is built around it, and you may even have heard that it is the foundation of an investment plan. And like nearly all respectable investment ideas, it is misunderstood and abused. One misconception is that asset class allocation and portfolio management are the same thing. I'll explain why they aren't later, but let's start by considering another misconception.
2013-02-19 Too Great Expectations by Richard Golod of Invesco
Global investors entered the year with newfound enthusiasm. Across the board, global equities traded higher in January, and retail money flows into global equities were the best in 17 years. Media reports about a "Great Rotation" from fixed income into equities are raising expectations about the possibility of a new secular bull market. However, I believe a little perspective is in order.
2013-02-16 When It Comes to Gold, Stick to the Facts by Frank Holmes of U.S. Global Investors
During short-term gold corrections, its much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.
2013-02-15 Latest OECD Data Shows Global Economy in State of Flux by Steve Rumsey of Optimus Advisory Group
According to the OECD ("Organisation for Economic Co-operation and Development"), the US economy managed to stage a leading indicator "rally" into the most favorable northeast quadrant. The red six month lagging tail on the graph clearly shows the economic leading indicators moving from expansion to slowdown, only to move back to the expansion quadrant in late 2012.
2013-02-15 High Yield Market Overview January 2013 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 1.38% in January, as the high yield market continued to rally into the new year.
2013-02-15 International Equity Commentary January 2013 by Team of Thomas White International
International equity prices sustained the uptrend in January, helped by data releases that supported the growing optimism over healthier global economic growth. Though the U.S. and U.K. economies declined unexpectedly during the fourth quarter of last year, the pace of growth improved in several Asian countries, including China, during the period.
2013-02-15 Thailand: Land of the Smiles by Mark Mobius of Franklin Templeton Investments
China and India may be Asia's largest economies, but they aren't the only countries with growth potential on the continent. Southeast Asian countries can also offer compelling investment opportunities. Thailand, known as the land of the smiles because of the expression its natural beauty and friendly people inspire, is a country where we believe the economic prospects could give investors reasons to smile too.
2013-02-14 Pacific Basin Market Overview January 2013 by Team of Nomura Asset Management
Improving expectations for global economic growth underpinned a solid start to 2013 for the Asia Pacific equity markets. In Asia, interest focused on China, as economic data showed further signs of recovery. On the other hand, the depreciating Japanese yen drew concerns that Asia's main exporters, which include Korea and Taiwan, will become relatively less competitive. The MSCI AC Asia Pacific Free Index including Japan gained 3.0% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.6% higher during the month.
2013-02-14 Emerging Markets Consolidate After Last Year's Gains by Team of Thomas White International
After the strong relative performance towards the end of last year, emerging market equities settled with moderate gains during the month of January as global investor sentiment remained optimistic. Global economic data continue to be mostly positive, sustaining the trend from the second half of last year.
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.
2013-02-11 When to Worry About Inflation by Russ Koesterich of iShares Blog
Though the Fed continues to flood the US economy with money, Russ explains why inflation isn't likely to be a problem until 2014 and what investors can do in the meantime to prepare.
2013-02-08 The Year in Review: 2012 by Richard Bernstein of Richard Bernstein Advisors
Politicians crave the spotlight, but it is unfortunate that investors watch the show. 2012, like 2011, was another year in which Washington theatrics scared investors. As a result, investors largely missed out on above average equity returns. Corporate profits and valuations, and not Washington, continue to be the primary drivers of equity returns. We think there are several important points to consider when reviewing 2012 performance, and when structuring portfolios for 2013.
2013-02-08 Unconventional Policies and Capital Flows by Ben Emons of PIMCO
Although quantitative easing has grabbed the headlines, a number of central banks around the world have enacted other extraordinary measures in attempts to manage their economies. The Swiss National Bank (SNB), for example, adopted an exchange rate peg versus the euro while increasing its foreign exchange reserves to almost 80% of Swiss GDP.
2013-02-08 A Different Playbook by Equity Investment Team of Janus Capital Group
Asia's handset market is developing quite differently than in Europe or the U.S., creating an entirely different playing field for Apple and other handset makers. Major brands are being challenged by the rise of cheap, but very capable generic smartphones. If major brands cannot innovate above and beyond the new offerings of these emerging cheap smartphones, they will not be able to command the high prices, and corresponding high profit margins, that have underpinned their success.
2013-02-08 Out With the Dragon In With the Snake by Frank Holmes of U.S. Global Investors
Over 2013, we expect the Chinese government to continue its accommodative efforts, which should reinforce the equity rally. In addition, the new pyramid of power is focused on growth, as it seeks to improve and reform policies that will provide its residents with opportunities and social security, increase incomes and raise standards of living, which should encourage domestic consumption. Growth is set to be considerable over the next several years.
2013-02-07 Commodities: Correlating Trends with Opportunities by Mark Mobius of Franklin Templeton Investments
Commodity price inflation is both a social and an economic issue. In emerging markets in particular, food and energy costs take a deeper slice out of consumers' income, which can lead to the type of unrest that causes governments to topple. In addition to the potential impact of extreme weather on food supplies, central banks around the world are printing a flood of money, which could lead to inflated prices for other goods and services.
2013-02-07 Investing in a Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2013-02-07 We Have Met the Enemy, and He Is Us by Ben Inker of GMO
If modern portfolio management has a single defining urge, it is almost certainly diversification. We look for diversifying assets, strategies, and managers. A thoughtful investor can argue against almost any asset class stocks, bonds, hedge funds, private equity, commodities, you name it but arguing against diversification is like arguing against indoor plumbing. I dont want to sound like I'm calling for a return to chamber pots and outhouses, so I'm not actually going to argue against diversification.
2013-02-05 The 2030 Outlook by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Over the next several weeks we will look into the more distant future, to the year 2030. We will explore the long-term strategic alternative world development scenarios as laid out by the National Intelligence Council (NIC) and present our views regarding the developments. The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. The NIC projects four possible global political and economic states based on these expected trends.
2013-02-05 2012 Equity Market Market Year in Review by Natalie Trunow of Calvert Investment Management
Equities started the year strong as global inflation remained tame, and aggressive, accommodative monetary policy by central banks around the globe helped equity markets rally hard off their lows posted in the fall of 2011. Continuously improving U.S. economic data, strong corporate earnings, and policy steps toward mitigation of the sovereign debt crisis in Europe also provided support for the equity markets worldwide.
2013-02-05 Fourth Quarter 2012 Equity Market Review by Natalie Trunow of Calvert Investment Management
With the excitement of the QE3 announcement wearing off in the fourth quarter, market participants refocused on the less-than-stellar earnings season in the U.S. and uncertainties surrounding the U.S. presidential election and impending fiscal cliff, while the negative impact of Hurricane Sandy further dampened investor sentiment. Despite a double-dip recession in the eurozone, there was some progress on the European policy front and China's economy continued to show signs of stabilizing, which helped international stocks outperform their U.S. counterparts.
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 Shifting Sentiment? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
Is investor sentiment shifting in favor of equities, which could help to continue the recent rally?
2013-02-01 Q412 Portfolio Commentary by Jay Compson of Absolute Investment Advisers
While much of the fundamental picture has played out as we expected over the past 18-24 months, the financial markets appear to be concerned solely with the existence or non-existence of macro headlines and events. There seems to be a disconnect between market movements and fundamentals which means doing real work based on intellectual honesty and logic puts you at a disadvantage. Chasing momentum and profiting from central bank market manipulation appear to be the current winning strategies.
2013-02-01 Feasting in a Time of Famine: The South African Consumer by Maria (Masha) Gordon, Richard Flax of PIMCO
South Africa's consumer sector has been on a strong run for the past several years, but there are signs the consumer is now coming under pressure. For all the challenges that have faced the South African economy, most listed consumer companies have enjoyed a great run since 2008. However, a combination of factors strong growth in retail sales and credit along with the rise in consumer debt levels and weak employment growth suggest the South African consumer sector may have pulled consumption forward in a way that could prove ultimately unsustainable.
2013-02-01 Monthly Investment Bulletin by Team of Bedlam Asset Management
Financial discipline is collapsing and with it, trust in the value of money. Many heavyweight thinkers in America, such as Nobel laureate Paul Krugman have suggested that a solution to avoid national debt ceilings imposed by Congress would be to mint a trillion dollar platinum coin. Meanwhile, heavyweights close to policy makers in Britain and Japan have been musing whether their central banks should write-off the mountains of government bonds they have bought recently.
2013-02-01 Dow To 14,000 and Beyond? by Frank Holmes of U.S. Global Investors
So will the Dow go beyond 14,000? Although you cant predict how hot the weather will be this summer, the clouds appear to be parting to reveal the sun today. Make sure your asset allocation positions your portfolio to shine.
2013-01-31 China's Market Ups and Downs by Mark Mobius of Franklin Templeton Investments
China's stock market was a roller coaster in 2012, and those investors with a weak stomach for unpredictability probably found the ride unpleasant. Its true that by many measures last year's weak market performance in China's A share market was disappointing, but in a market of this size the story isn't all good or all bad, so unlike the market masses, I remain confident about China's prospects and continue to search for long-term investment opportunities in China.
2013-01-31 Credit Supernova! by Bill Gross of PIMCO
They say that time is money. What they don't say is that money may be running out of time. There may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a "big freeze" trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence.
2013-01-31 Hasenstab: Little Value in U.S. Treasuries Right Now by Team of Franklin Templeton Investments
The financial markets may have let out a collective sigh of relief on January 1 when U.S. politicians managed to avoid falling off the fiscal cliff, but the fact is the fundamental issue plaguing the U.S. still hasn't been addressed mounting debt. As a result, Dr. Michael Hasenstab, co-director of the International Bond Department and portfolio manager for the Templeton Global Bond Fund, says he doesn't see much value in U.S. Treasuries right now. He does see it elsewhere in the world, though, including Ireland and select emerging markets where fiscal houses appear in much better order.
2013-01-31 A Look Back at My 2012 Calls by Russ Koesterich of iShares Blog
It's time again for Russ K's annual look back at the investment calls he made in 2012. Find out what he got right and the couple of things he got wrong.
2013-01-28 Global Market Commentary: Follow the Money, Again by Richard Golod of Invesco
Global equity market performance in 2012 was driven by accommodative monetary policy around the world, as well as a decline in investor fear after policymakers in Europe reduced the risk of a financial crisis. Global equity markets are likely to respond to the same stimulus this year but maybe not to the same degree. I believe the dominant factor that will drive equity prices in 2013 will likely surprise investors: inflation.
2013-01-25 Feeding the Dragon: Why China's Credit System Looks Vulnerable by Edward Chancellor, Mike Monnelly of GMO
Edward Chancellor and Mike Monnelly, members of GMO's Asset Allocation team, write to institutional clients in a new white paper about China's credit boom and outlines some worrying recent developments in its financial system. In GMO's view, "China's credit system exhibits a large number of indicators associated with acute financial fragility," including China's debt and real estate bubbles, the belief that the government is underwriting financial risk, the shadow banking system, a proliferation in credit guarantees, among others.
2013-01-25 Americas: Regional Economic Review 4Q 2012 by Team of Thomas White International
The outlook for most economies in the Americas region improved during the fourth quarter as domestic consumption growth was sustained and the anticipated revival in global demand has lifted the prospects for export growth this year. Partly helped by fiscal and monetary policy measures introduced since 2011, consumer demand has held up across most countries in the region.
2013-01-25 Resource Investors: Why You Can Expect Sunnier Days Ahead by Frank Holmes of U.S. Global Investors
During the current commodity supercycle, there have been occasionstoo many to countwhen investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe. Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.
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.
2013-01-24 Searching for Growth in a Low-Growth World by Austin Graff of PIMCO
We believe corporate profit growth will fall short of sell-side consensus estimates. But companies with inflation-linked revenues and supply side advantages to drive revenue growth, and those with ample cost levers to improve margins, are positioned for sustained earnings growth in the New Normal.
2013-01-24 10-Year Shiller P/E Exposes Cyclical Overvaluation and Undervaluation by Bill Smead of Smead Capital Management
Last week we spoke to the Washington Hay Growers Convention in Kennewick, Washington. Those who grow hay have enjoyed a very similar boom in the last twelve years that wheat and corn growers have enjoyed. The parking lot was full of nearly new heavy duty trucks and the convention floor was packed with $400,000 to $700,000 farm implements from major manufacturers. These farmers have been feasting in the boom and it got me thinking about how to correctly value cyclical businesses, because at Smead Capital Management valuation matters dearly.
2013-01-23 High Yield Market Overview December 2012 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 1.59% in December, as the high yield market rallied on the perceived benefits of a fiscal compromise in the U.S.
2013-01-23 The Year of the American Consumer by Philip Tasho of TAMRO Capital
It was an above-average year for stock returns across the domestic market cap spectrum. Ultimately, unconventional and accommodative monetary policy trumped investor concerns over fiscal policy, the Presidential election and weakness overseas. The Federal Reserve (the Fed) entered uncharted waters when it announced open-ended quantitative easing through the ongoing purchasing of government securities. Importantly, other central banks globally waded in by mimicking the Fed in word if not deed and the global liquidity cycle continued apace.
2013-01-23 Inflated Expectations? by Kristina Hooper of Allianz Global Investors
Investors should prepare themselves for higher long-term inflation because the market may be ignoring it, a mistake that could come back to haunt. On the heels of encouraging economic data, central bankers are projecting only modest price increases for goods and services over the next 10 years. But history tells us that an inflation spike is inevitable when governments print money so aggressively. As such, investors with long-term time horizons should have substantial exposure to inflation-hedging asset classes. Now, more than ever, real returns matter.
2013-01-23 PIMCO's Secular Forum Preview by Mohamed El-Erian of PIMCO
It is almost time again for PIMCO's Secular Forum a critical part of the firm's investment process. This annual event, which takes place each May, brings together our investment professionals from around the world to debate and specify the key themes that we believe will affect the global economy and, consequently, our investment strategies over the next three to five years from asset allocation and relative value positioning to returns expectations and risk management.
2013-01-22 The Economic Fundamentals of 2013 by Nouriel Roubini of Project Syndicate
The global economy this year will exhibit some similarities with conditions prevailing in 2012 no surprise there. But there will be some important differences, as fiscal austerity spreads to more advanced economies, the risk of a hard landing in China rises, and the threat of war in the Middle East grows.
2013-01-22 Invesco Fixed Income 2013 Outlook by Greg McGreevey of Invesco
While the Great Financial Crisis of 2008 is long behind us, the ensuing consequence of ongoing systemic deleveraging remains a dominant force in global financial markets. Central banks continue to respond with monetary stimulus to support regional economies and counterbalance the impact of deleveraging relative to growth and asset valuations. Such activity was especially evident in the eurozone and the US throughout the entirety of 2012.
2013-01-22 Ten for '13 by Investment Strategy Group of Neuberger Berman
Last year, despite the noise surrounding the U.S. elections and the ongoing European debt crisis, the main drivers of asset prices arguably were the large-scale bond-buying programs put in place by global central banks to alleviate systemic pressures. In 2013, we anticipate fewer aggressive central bank actions as the pace of global growth gradually picks up. We believe the largest influential factors to our outlook are premature fiscal tightening in the U.S. and a potential resurgence of eurozone problems.
2013-01-22 Year-End Investment Commentary by Team of Litman Gregory
Stocks shrugged off numerous worries to log a very good year in 2012, but can markets continue to climb? Certainly the worries remain. The most immediate has to do with the spending side of the fiscal cliff. The cliff deal made permanent the Bush tax cuts for all but high-income taxpayers but it did not address spending. So while the worst case of the cliff was avoided, the work is not nearly done. In this commentary we discuss our current assessment of the investment environment including a detailed look at what could go right, and tie it all back to our portfolio positioning.
2013-01-18 2013 International Outlook by Colin Moore of Columbia Management
We continue our outlook for 2013 with a review of select international economies and financial markets. Similar to the U.S. the road to recovery will be bumpy and we expect financial markets to continue being affected by macroeconomic uncertainties. While the overall environment remains uncertain, some of the significant headwinds in 2012, e.g. the Chinese leadership transition and a complete disintegration of the eurozone, are perhaps less concerning for markets than they were a year ago.
2013-01-18 Equity Investment Outlook January 2013 by Team of Osterweis Capital Management
Despite many headwinds and amid great uncertainty, both the U.S. economy and stock market enjoyed a rather good year in 2012. Real Gross Domestic Product ("GDP") grew around 2%, and the stock market, as measured by the S&P 500 Index, returned 16%. At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013.
2013-01-18 4 Sensational Facts About Gold Investing That You Might Not Know by Frank Holmes of U.S. Global Investors
1. Gold has been a consistent performer over the decades. 2. Gold should remain a hot commodity in 2013. 3. Gold is the least volatile commodity on the table. 4. The last four years were better than you thought.
2013-01-17 Signs of a Rotation by Scott Minerd of Guggenheim Partners
As yields continue to dwindle and risks in the fixed income market come into clearer focus, investors have begun to regard equities as a compelling alternative to bonds.
2013-01-17 The Year Past, The Year Ahead by Michael Gomez of PIMCO
The multiyear run of performance by emerging market (EM) sovereign external debt has been remarkable but residual valuations look either just fair (investment grade) or expensive (high yield) versus other comparable credits. We still see abundant opportunities in EM local markets, while EM equities are poised to benefit from a relatively low starting point for both earnings and earnings expectations.
2013-01-16 3 Reasons the Stock Market Rally Could Falter by Russ Koesterich of iShares Blog
Enjoy the US stock market rally while it lasts. Russ Koesterich has three reasons why investors should remain cautious in the near term.
2013-01-15 Template for a Year-End Client Letter 2012 in Review: Learning from the Past, Looking to the Future by Dan Richards (Article)
Client concerns about whether you're on top of things can be reduced by sending regular overviews of what's happened in the immediate past and the outlook for the period ahead. That's why each year since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead.
2013-01-15 It's Not What Happens That Matters by Bill Smead of Smead Capital Management
Late in 2008 and in early 2009, a group of what we like to call "brilliant pessimists" hit the airwaves with their economic theories. The prognosticators' vision of the future was and is predicated on the history of similar situations and the mathematical realities of the huge debt overhang from the prior ten years of profligate economic behavior. They put very effective names on their visions like "new normal" and "seven lean years". They marketed their visions incredibly well to the point of shaming anyone who might disagree with their theories.
2013-01-15 The Year Past, The Year Ahead by Michael Gomez of PIMCO
While not immune to global economic headwinds, emerging market investments remain well positioned to outperform their developed world counterparts over time. The multiyear run of performance by emerging market (EM) sovereign external debt has been remarkable but residual valuations look either just fair (investment grade) or expensive (high yield) versus other comparable credits. We still see abundant opportunities in EM local markets, while EM equities are poised to benefit from a relatively low starting point for both earnings and earnings expectations.
2013-01-15 Emerging Markets Equity Commentary: December 2012 by Team of Thomas White International
Emerging market equities outperformed during the month of December, helped by signs of further improvement in the economic growth outlook. Economic data released over the month were largely positive for most emerging countries, and strengthened the optimism that these markets could see a moderate improvement in growth rates during 2013.
2013-01-14 The More Things Change... by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
One crisis averted...another one on the way? Of course, but we're still positive on the US economy and stock market.
2013-01-14 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The final quarter of 2012 was the icing on the cake of an exceptional year for the credit sectors. Fourth quarter credit gains stemmed in part from uncommonly aggressive monetary policy responses in the third quarter. As economic growth continued to undershoot expectations, major central banks made clear that they were dissatisfied with the status quo of tepid economic growth and high unemployment. The Federal Reserve went so far as to tie its monetary policy to the level of the unemployment rate.
2013-01-14 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
While the S&P 500 Index posted a slightly negative fourth-quarter return, the Index's 16.0% return for all of 2012 was notable in the face of a long list of global fundamental concerns. Midcap and small cap stocks performed better during the final three months of the year, posting gains of roughly 2.0%-3.0%. The fourth quarter outperformance of smaller stocks was enough to overtake the S&P 500 for the year, but just fractionally.
2013-01-11 On the Road in India by Mark Mobius of Franklin Templeton Investments
India appears to be on its way to becoming a major market for motor vehicles. Annual car and truck sales currently in India are roughly one third of the 15 million units produced in the U.S., but the pace of growth has been high. The total population of registered motor vehicles in India numbered more than 100 million in 2008- 2009, with consumer vehicles (passenger cars, motorcycles and scooters) accounting for about 4/5 of the total.
2013-01-11 2 Reasons to Stick With Emerging Markets by Russ Koesterich of iShares Blog
Think emerging markets equities have run their course? Not so fast despite recent strong performance, Russ explains why there's room for further EM gains in 2013.
2013-01-11 Pacific Basin Market Overview - December 2012 by Team of Nomura Asset Management
Equity markets ended the year on an upbeat note, shrugging off concerns over the impending "fiscal cliff" while focusing on better economic data from the U.S. and China. In Japan, expectations of a higher inflation target and a depreciating yen brought some overseas investors back to the Tokyo stock market. The MSCI AC Asia Pacific Free Index including Japan gained 5.6%, while the MSCI AC Asia Pacific ex Japan Free Index also closed 5.6% higher in the October-December quarter of 2012.
2013-01-11 Invest In Equities: Your Future Self May Thank You by Frank Holmes of U.S. Global Investors
Investors have had an illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward. This turned out to be a mistaken belief.
2013-01-10 A New Years Vantage Point: Michael Hasenstab by Michael Hasenstab of Franklin Templeton Investments
As we ring in a new year, it's a good time to gain some perspective on where we've been, and where we might be headed. In the first few weeks of January, Beyond Bulls & Bears will be featuring a series of investment commentaries from select Franklin Templeton investment management teams. These professionals provide their insights on the market ups and downs of 2012, and the potential challenges and opportunities that may lie ahead from their respective vantage points. Today we hear from Michael Hasenstab, portfolio manager and co-director of the International Bond Department.
2013-01-10 Will Emerging Market Earnings Rebound in 2013? by Morgan Harting of AllianceBernstein
For two years, emerging markets companies have delivered inferior earnings growth and investment returns compared to peers in sluggish developed market economies. Now, the consensus is that earnings growth will catapult from near-zero in 2012 to 13 per cent in 2013. Hopes were high at the end of 2010 and 2011, too, yet analysts were then forced to revise down their earnings estimates. Will 2013 represent another triumph of hope over experience? To answer that question, let's look at what investors got wrong about emerging markets in recent years.
2013-01-09 Financial Markets Review and Outlook: Fourth Quarter 2012 by Team of Managers Investment Group
As expected the fourth quarter economic landscape was dominated by the U.S. Presidential and Congressional elections and their collective impact on the fiscal cliff. After the elections were completed, markets nervously awaited the outcome of the fiscal cliff negotiations as economists generally predicted dire consequences for the U.S. economy in 2013 if a timely resolution was not reached by the end of the year.
2013-01-08 2012: Resumption of the Stock Market Recovery by Ronald Surz (Article)
Let's take a close look at the details of what occurred in 2012 so we can assess the opportunities and prepare for the surprises that 2013 will bring. I'll give you my opinions, and you should form your own.
2013-01-08 The Forecast for Risk in 2013 by Geoff Considine (Article)
With the new year upon us, pundits are issuing their forecasts of market returns for 2013 and beyond. But returns don't occur in a vacuum – meeting clients' goals requires an asset allocation that appropriately balances return and risk. So what follows are my predictions for risk across major asset classes, based on a theoretically sound approach that has proven to be reliable in the past.
2013-01-08 Crystal Ball Gazing by Team of Bedlam Asset Management
Several recent government announcements are likely to impact the global economy and equity markets over the medium term. In order of importance these are: the Federal Open Market Committee pledge to target zero interest rates until unemployment reaches 6.5%; the new government in Japan, under an increasingly monetarist LDP leadership; commitments by the new Chinese leadership to boost domestic infrastructure and consumption; and finally, the softening line of the Republicans on the fiscal cliff.
2013-01-08 Early 2013 Looks to Feature Slow Growth and Ongoing Fiscal Drama by Russ Koesterich of BlackRock Investment Management
Stock markets started 2013 off with a bang, as investors expressed relief over the down-to-the-wire agreement on the fiscal cliff that came on January 1. For the week, the Dow Jones industrial average jumped 3.8% to 13,435, the S&P 500 index rose 4.6% to 1,466 and the Nasdaq composite advanced 4.8% to 3,101. Although the deal reached last week was good news for the markets, Washington's fiscal soap opera is far from over.
Although the deal reached last week was good news for the markets, Washingtons fiscal soap opera is far from over.
2013-01-07 Fixed Income Asset Allocation Post-Apocalypse by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
December 21, 2012 the day the Earth was prophesized to collide with a black hole of kaputness has come and gone in defiance of the Mayan calendar. The more upbeat interpretation of the 5,125-year Mayan cycle, however, is that the end date doesn't signify Armageddon but rather the beginning of a new time for positive change here on earth. So allow us to suggest an investment playbook to cash in on this silver lining. In short, the sweetness of the metaphorical fortune cookie in your hand will depend on how you allocate your fixed income assets in 2013.
2013-01-07 An Unconstrained Approach to Bond Market Investing by Sabrina Callin, Lisa Kim of PIMCO
Investors are increasingly focused on alternatives to traditional investment strategies. Unconstrained bond portfolio construction should be driven by an outcome-oriented goal, with strategies assessed on an individual risk/reward and correlation basis, and each investment in the portfolio evaluated rigorously for the expected risk and return as well as the potential impact of the correlation to other investments in the portfolio.
2013-01-04 Ring in the New by Mark Mobius of Franklin Templeton Investments
The "year of the dragon" in 2012 certainly didnt disappoint, as the global markets battled one financial dragon after another. From the Eurozone's sovereign debt crisis to persistently high unemployment in the U.S. and a mayday call from many who worried that China's growth rate was headed for a "hard landing," 2012 certainly was interesting. As we turn the calendar page to 2013, the Eurozone seems to be in less-critical condition and China's economic growth still appears to be flying but as of this writing, the U.S. debt problems still haven't been solved.
2013-01-04 In 2013, Resolve to Follow the Money by Frank Holmes of U.S. Global Investors
During these first days of January, many adopt an out with the old, in with the new, approach to shed bad habits or extra pounds. Washington opted for its same ol strategy when averting the fiscal cliff, as the addictive nature of can-kicking is a transatlantic sport, according to The Economist. The short-term fix did nothing to control the unsustainable path of entitlement spending on pensions and health care nothing to rationalize Americas hideously complex and distorted tax code... and virtually nothing to close Americas big structural budget deficit.
2013-01-03 A Year on the Brink by Joseph Stiglitz of Project Syndicate
The two main surprises in 2012 were the slowdown in emerging markets, which was slightly sharper and more widespread than anticipated, and Europe's embrace of some truly remarkable reforms though still far short of what is needed. Looking to 2013, the biggest global economic risks are there and in the US.
2013-01-03 Outlook 2013: Fiscal Cliff Remains Unresolved, but Opportunities Still Exist by Russ Koesterich of BlackRock Investment Management
As we look ahead to 2013, it is impossible to make any sort of forecast without first turning our attention to the still-unresolved fiscal cliff debate. We have long said that unless we were to see significant movement on the issues of tax rates and entitlement spending, the most likely outcome would be some sort of bare-bones deal. At the time of this writing, congress and the President were still negotiating, but our analysis suggests that such a bare-bones resolution remains the most probable result, even if it does not come before the January 1 deadline.
2013-01-03 Grin and Bear It. by Scotty George of du Pasquier Asset Management
Without question, the financial markets yielded better in 2012 than what most had believed possible at the beginning of the calendar year. At that time, embroiled in a U.S. Presidential election and ongoing turmoil in the Middle East, many analysts would have been happy if we simply avoided catastrophe.
2013-01-03 High Yield Market Overview December 1, 2012 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 0.74% in November, as high yield investors focused on the fiscal cliff and the risk that the U.S. government fails to negotiate a resolution.
2013-01-03 2013 Forecast: Good Economy, Challenged Markets by Douglas Cote, Karyn Cavanaugh of ING Investment Management
We enter 2013 bombarded by conflicting signals. While fundamentals have been mixed of late, longer-term themes our "tectonic shifts" like the energy revolution are gaining momentum and promising to make positive contributions sooner rather than later. And while salutary measures taken by policymakers have eased global risks and lessened fears of Armageddon, there is considerable work yet to be done.
2013-01-03 5 Investment Ideas for a Post-Fiscal Cliff Deal World by Russ Koesterich of iShares Blog
As discussed in previous posts, Congress kicked off the New Year with a bare bones deal to avert (or at least delay) the fiscal cliff. Though markets responded positively to the news Wednesday morning, the euphoria isn't likely to last.
2013-01-02 Brian McMahon on Thornburg’s Investment Income Builder Fund by Robert Huebscher (Article)
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he the co-portfolio manager for the $11.4 billion Thornburg Investment Income Builder Fund (TIBAX). The fund's goal is income production, and it has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last ten years (10.87% versus 2.88%). In this interview, he offers his views on the economy and the markets, and how he has positioned his fund.
2013-01-02 Emerging Markets Outlook by Armando Armenta of Invesco
There are a number of factors effecting the flows into emerging market economies. I'd like to review several of them in the medium term outlook and let you know why I doubt they will recede soon.
2012-12-28 Readers' Golden Nuggets Focused on Gold, Resources and Overcoming Negativity by Frank Holmes of U.S. Global Investors
The past few days Ive been counting down the most popular commentaries over the past year. China, commodities and bond fund popularity were big hits; so were the Surprises in Gasoline, Oil and Resources Stock Prices. Here are the top four.
2012-12-26 Gundlach's High-Conviction Investment Idea by Robert Huebscher (Article)
Count Jeffrey Gundlach among those who expect Japan's currency to collapse because it can't service its debt. Japan's challenges may parallel those that the US faces, and Gundlach feels strongly that they have created a compelling investment opportunity.
2012-12-26 Assessing ISG's "Ten for '12" by Investment Strategy Group of Neuberger Berman
Earlier this year, we offered a forward-looking view of 10 macro themes that we anticipated for 2012. These ideas were meant not to be "surprises" but rather guideposts within the context of a longer-term strategic allocation. At year-end, we are pleased to note that seven of our 10 themes fully materialized. We provide a brief look below.
2012-12-24 Emerging Markets Equity - Monthly Product Commentary: November 2012 by Team of Thomas White International
Sustained domestic demand growth and a revival in export demand are anticipated to drive expansion next year.
2012-12-21 The Outlook for Commodity Stocks by Doug Ramsey of Leuthold Weeden Capital Management
Popular sentiment holds that commodities remain in a secular uptrend, but commodity-oriented stocks (Energy and Materials) have been underperforming for more than a year-and-a-half. Were increasingly convinced their 2008 relative strength highs won't be challenged for a very long time. Yes, Emerging Market demand may rebound next year. But remember Econ 101, and the day your professor discussed supply? This side of the equation doesn't look as good. Among the two commodity-based sectors, Energy looks cheaper and appears much more washed out from a sentiment perspective.
2012-12-21 Egypt's Arab Winter by Mark Mobius of Franklin Templeton Investments
It's been almost two years since the "Arab Spring" swept North Africa and the Middle East, and with it, grand hopes for change. Sometimes, change doesn't happen as quickly as the people would like, and oftentimes it can be a messy process. That is certainly true in Egypt right now, a country that is still in the throes of shaping its future. The ousting of Hosni Mubarak in 2011 didn't instantly transform the nation into a model of democracy, and the country is currently deliberating the best way forward via public debates, protests and the election process.
2012-12-21 Lights, Camera and Action in China by Winnie Phua of Matthews Asia
More than a decade ago, China reached a turning point in its film industry with the co-production of its first internationally acclaimed movie hit, "Crouching Tiger, Hidden Dragon." The film, directed by Academy Award winning Taiwanese American director Ang Lee, raked in more than US$213 million globally, and became the highest grossing foreign language film in U.S. history. Pretty good for a movie made in China on a US$17 million budget.
2012-12-21 Light at the End of the Tunnel for Gold by Frank Holmes of U.S. Global Investors
Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasnt only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually brutal with quite a few confused participants with some seemingly positive aspects of the market not having an impact.
2012-12-21 The Japanese Economy: The Result of the Lower House Election by Team of Nomura Asset Management
The Liberal Democratic Party (LDP) reclaimed power in a landslide victory. Together with coalition partner, the New Komeito Party, the LDP secured 325 seats giving it two-thirds of the total seats, which allows them to pass legislation by using the supermajority position in the lower house. This will enable them to overrule the upper house where no party currently holds an overall majority, otherwise requiring the LDP to consult with opposing parties. In addition, on an individual case by case basis, the LDP would be able to seek cooperation from the third party Japan Restoration Party.
2012-12-20 The Ghosts of Fiat Currencies Past by Frank Holmes of U.S. Global Investors
Nearly 600 paper forms of money created over the past several centuries are no longer in circulation, according to research summarized by Gold Silver Worlds recently. While the reasons vary from declarations of independence, monetary unions, war or hyperinflation, these ghosts of currencies past portray a haunting history for paper currencies backed only by the trust of a government.
2012-12-20 2012 in Review by Investment Strategy Group of Neuberger Berman
As we approach the New Year and contemplate the opportunities the investment landscape may offer in 2013, it helps to look back at the performance trends of 2012. Overall, the year-to-date period has seen impressive results from various risk assets, which is in line with the projections of our Asset Allocation Committee. However, ongoing concerns about volatility and Europe hampered the markets at times. Here, we provide a performance scorecard and consider potential developments in the year ahead.
2012-12-19 PIMCO's Cyclical Outlook for Asia: Awaiting the Policy Breakthrough by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
Our base case for China includes incremental policy reform, but we also see an increased chance of a potential positive surprise on reform, resulting from the recent changes in leadership. Japan's new government will likely focus on reflating the structurally impaired economy, but policy effectiveness will remain questionable. Australia is being burdened by the unintended consequences of the policy responses of others, accompanied by the impending rebalancing of the Chinese economy.
2012-12-19 2013: A Year in Multi-Asset Investing by Johanna Kyrklund of Schroders Investment Management
Extreme political risk is reduced but the cyclical environment remains challenging. Safe havens are expensive and we are increasingly incentivized to take on more risk. Equity valuations are attractive. Our core emphasis remains on quality although there is tactical opportunity
in pockets of extreme value.
2012-12-19 PIMCO Cyclical Outlook for Europe: Policy Developments Will Shape Growth Prospects and Risks by Andrew Balls of PIMCO
Policy developments in particular, the European Central Banks acceptance of its role as a lender of last resort have helped to normalize European financial markets but been insufficient to promote decent growth. Eurozone leaders recently laid out a long-term roadmap to achieve stability, but the plan faces great execution risk, technically and politically, and in cross-border coordination. We continue to take a cautious approach and underweight European credit risk and European financials in general, looking for specific opportunities rather than broad exposure.
2012-12-19 ING Fixed Income Perspectives December 2012 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
While all the good little boys and Cindy Lou Whos dream of sugar plums and new iPhone 5s in blue, the adults in our modern-day Christmas story can't sleep but a wink, as visions of getting Scrooge'd by the fiscal cliff are making hearts sink. No matter if this political humbug cease or persist, down the chimneys of a recuperating housing market Ol' Saint Bernanke-olas will continue to gift $85 billion of Treasury and MBS purchases per month or more until the labor market can finally get over the hump and deliver 6.5% unemployment and inflation of 2.5% and no more.
2012-12-19 The Consumer Catalyst in Asia's Emerging Markets by Andrew Sleeman of Franklin Templeton Investments
There may be no better evidence of the economic power of the consumer than the spending frenzy that occurs this time of yearthe sparkling lights, the must-have gifts and gadgets, the indulgent meals. Whether online, brick and mortar, big box or mom-and-pop, retailers count on the year-end consumer boom.
2012-12-18 Pulling Back the Lens in Emerging Markets by Western Asset Management (Article)
Emerging markets remain resilient, according to Western Asset Portfolio Manager Rob Abad. But in the face of so much global uncertainty, investors would be wise to consider the latest trends and dynamics impacting this maturing asset class.
2012-12-18 Central Bank Insurance by John Mauldin of Millennium Wave Advisors
Possibly, the question I am asked the most is, "What do you think about gold?" While I have written brief bits about the yellow metal, I cannot remember the last time I devoted a full e-letter to the subject of gold. Longtime readers know that I am a steady buyer of gold, but to my mind that is different from being bullish on gold. In this week's letter we will look at some recent research on gold and try to separate some of the myths surrounding gold from the rationale as to why you might want to own some of the "barbarous relic," as Keynes called it.
2012-12-17 The Fed's New Math and What It Means by Kristina Hooper of Allianz Global Investors
Central bankers are scrapping the use of a timeline to determine how long to keep interest rates at record lows. Rather, they will tie rate increases to specific unemployment and inflation targets. There is definitely more clarity around the Fed's decision making now than ever. The question is, will such "outcome targeting" really change the outcome? In looking at the last three economic recoveries, the average time it took for unemployment to fall from 7.7%, our current level, to 6.5%, was 26.6 months.
2012-12-17 2013: A Year in Global Emerging Markets by Allan Conway of Schroders Investment Management
We expect emerging market equities to deliver solid performance during 2013 and perform even better over the longer term. Emerging markets look extremely attractive in terms of valuations. We believe the Chinese economy has stabilised and will see a modest recovery next year and that tail risks in the developed world have been reduced for now by central bank policy.
2012-12-15 The Cost of Viewing the US as a Safe Haven by Russ Koesterich of iShares Blog
Since exiting the recession in mid-2009, US stocks have significantly outperformed international markets. But can the United States still be viewed as a safe port in a storm? Russ K explains why it might be time for investors to consider raising their allocation to international stocks.
2012-12-15 A Face-Off Between Passive and Active Investing by Frank Holmes of U.S. Global Investors
Exchange-traded funds continued to attract assets in 2012 while money has been exiting mutual funds. Still a majority of assets continue to be invested in actively managed products: As of the end of 2011, of the nearly $13 trillion invested in funds, index and exchange-traded funds comprise only about 8 percent, according to the Investment Company Institute.
2012-12-14 2013: A Year in Global Equities by Virginie Maisonneuve of Schroders Investment Management
Global equities are very attractively valued and we are positive for their prospects in 2013 as the global economy normalises. Progress in Europe, the end of China's growth slowdown and continued momentum in the US economic recovery will support global equities. Longer-term investors must position themselves for a growth-saturated world in which sustainability and innovation will be even more important.
2012-12-13 2012 in Review by Investment Strategy Group of Neuberger Berman
As we approach the New Year and contemplate the opportunities the investment landscape may offer in 2013, it helps to look back at the performance trends of 2012. Overall, the year-to-date period has seen impressive results from various risk assets, which is in line with the projections of our Asset Allocation Committee. However, ongoing concerns about volatility and Europe hampered the markets at times. Here, we provide a performance scorecard and consider potential developments in the year ahead.
2012-12-13 3 Potential Scenarios for 2013 by Russ Koesterich of iShares Blog
Despite getting lucky in 2012, many of the major risks that economies and markets faced this year remain. With the current environment in mind, Russ K shares his 3 potential scenarios for 2013 along with potential investment strategies for each.
2012-12-13 Pacific Basin Market Overview - November 2012 by Team of Nomura Asset Management
Asian equity markets ended higher this month, although they were heavily influenced by events elsewhere. Improved economic data from Germany, coupled with expectations that Greece will receive a further round of financial support from the European Union (EU), helped to lift sentiment. Meanwhile, investors were paying close attention to the American congressional budget negotiations to avoid the looming year-end "fiscal cliff" risk to the economy, although U.S. economic data was generally positive.
2012-12-13 2013: A Year in Emerging Market Debt (Relative Strategies) by James Barrineau of Schroders Investment Management
Perhaps the biggest positive for emerging market debt investors is the deteriorating fiscal and economic fundamentals in the developed world. As the asset class has evolved, the opportunity set for investors has grown rapidly. Local currency in emerging markets has attracted tremendous interest but we think returns will moderate in
2013, possibly significantly.
2012-12-12 Does China Pass the Smell Test? by Bill Smead of Smead Capital Management
We at Smead Capital Management believe that prolonged faith in China's economy and the belief that emerging market growth will be an elixir for developed market multi-national companies is the erroneous gift that just keeps giving. If China's economy has been successfully soft landed from its boom, why is the internal Shanghai Composite index making new lows as recently as last week (November 29th, 2012)?
2012-12-11 Fine Wine - Why it's for More than Just Drinking by Mark E. Ricardo, JD, LLM, AAMS (Article)
For many investors, an ideal asset class would combine superior long-term absolute and risk-adjusted returns with a hedge against inflation and stock market volatility. There's a way to get all of that, in an asset class you might never have thought of until now: fine wine. Investment-grade wine deserves careful consideration, particularly now that - unlike other collectibles, such as art and rare books - it can be traded on a regulated exchange.
2012-12-11 Tax Reform: A First Step by Clyde Kendzierski of Financial Solutions Group
I rarely use this space to rant about political issues, but the recent election made it obvious just how dysfunctional the American political process has become. The ongoing financial crisis in the US will never get fixed as long as both political parties remain focused on solutions that make the problem worse. The Democrats want to give people more money to spend, claiming this will grow the economy. The Republicans want to cut taxes, so that people have more to spend, claiming that will grow the economy
2012-12-10 13 for '13 by Richard Bernstein of Richard Bernstein Advisors
Each December we publish a list of investment themes that we feel are critical to the coming year. We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982's bull market. It is hard to be bearish when one considers the following.
2012-12-08 How Gold Miners Can Leverage the Price of Gold by Frank Holmes of U.S. Global Investors
Gazing into their crystal balls this week, Wall Street firms interpreted differing futures for gold next year. Morgan Stanley awarded gold the best commodity for 2013 while Goldman Sachs called the end of the metals hot streak. After seeing 11 consecutive years of positive performance from gold, one needs to be wary of research analysts price forecasts, as they have consistently underestimated the shifting dynamics driving the precious metal higher.
2012-12-05 Waiting for Signs on the Fiscal Cliff and From the Fed by Russ Koesterich of iShares Blog
Investors are stuck between a rock and a hard place: Theyre trying to plan for the end of 2012, while also looking ahead to 2013. Its being reflected in the questions Im getting from clients right now, who are worried both about the fiscal cliff and the outlook for interest rates in 2013. As we saw last week, the markets are focused on every utterance out of Washington on the fiscal cliff. For better or worse, this is unlikely to change until we have a deal. And in terms of getting to one, the truth is we did not see much progress last week.
2012-12-04 Strawberry Fields Forever? by Bill Gross of PIMCO
As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will take you down and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-11-30 Active Management: Don't Drop the Pilot by Patrick Rudden of AllianceBernstein
For years, we've advised clients to hold diversified portfolios with balanced allocations to stocks, bonds and other assets. Lately, it's been a hard sell, especially after years of underperformance by active equity managers. But the tide may be turning.
2012-11-30 3 Reasons to Hold Off on Holiday Sales Celebrations by Russ Koesterich of iShares Blog
Is the US consumer saying goodbye to the Great Recession and hello to a heady holiday season? Initial holiday sales results may paint a rosy picture, but Russ K explains why investors shouldn't be prematurely uncorking the New Year's champagne.
2012-11-30 Where Are We in the Boom/Bust Liquidity Cycle? by Thomas Fahey of Loomis Sayles
In an often cynical world, standard financial and macroeconomic quantitative models give people the benefit of the doubt. Fundamental economic theory assumes the best of us, supposing that human beings are perfectly rational, know all the facts of a given situation, understand the risks, and optimize our behavior and portfolios accordingly. Reality, of course, is quite different.
2012-11-29 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 Small-Caps Pack Big Punch in Emerging Markets by Frank Holmes of U.S. Global Investors
In October, the International Monetary Fund painted a gloomier picture for global investors, as it projected slower growth due to slumping world trade and uncertainty in the West. Despite the forecast, big gains can still be unlocked in the faster-growing emerging markets. We believe the smaller stocks are holding the key.
2012-11-28 November 2012 Monthly Investment Bulletin by Team of Bedlam Asset Management
Equities have rarely been so attractive yet any investor acting on the perceived wisdom of the last 50 years would scoff and keep selling: the bad news will worsen for economic activity, growth in credit, wages, consumption, employment and in several countries, political stability. Few indices are glaringly cheap as measured by Cyclically Adjusted Price to Earnings multiples (CAPE: chart p.4) with many expensive, especially in many emerging markets.
2012-11-27 Better Fundamentals & Attractive Valuations - Why Now is a Good Time to Increase EME Exposure by Michael Zinkand of Managers Investment Group
U.S. equity markets have continued to rise during 2012. As of September 30, 2012, the S&P 500 Index was up 16.4%, with some segments of the U.S. market surpassing their 2007 highs. Emerging market equities have also produced decent returns and benefited from increased investor interest. Through September 30, 2012, however, the MSCI Emerging Markets Index has returned only 11.1% in U.S. Dollars year-to-date, compared with 16.4% for the S&P 500. This may be somewhat surprising since "riskier assets", like small-cap equities and emerging market equities, often lead when stock markets rise.
2012-11-27 Fixed Income Perspectives by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A wise American once said "Life is hard; it's harder if you're stupid." A good example is when your pals in Washington are so busy pushing their partisan agendas that they lose sight of what could happen to the American economic Thunderbird if it goes all Thelma and Louise over the fiscal cliff. With the latest elections in the books, it remains to be seen if a Democratic president and acrimonious Republican House can put on their thinking caps to devise a way to delicately pump the brakes of fiscal restraint.
2012-11-26 Deja Vu All Over Again by Tony Crescenzi, Andrew Bosomworth, Lupin Rahman, Ben Emons of PIMCO
If the eurozone is to endure, it will require reduced economic differences among countries and larger common fiscal capacity. Emerging market central banks are likely to remain in wait-and-see mode while looking to the U.S. for clarity on the fiscal negotiations and domestic macro prints for signs of moderation in both inflation and activity. While central banks in advanced economies have not traditionally used explicit policies to target exchange rates, the European debt crisis may change all that.
2012-11-26 Fiscal Cliff: An Emerging Markets' View by Mark Mobius of Franklin Templeton Investments
Now that the U.S. presidential election is over and President Barack Obama has been re-elected to serve a second four-year term, we're able to do what we always do after a major election or regime change, and that's examine the potential implications of policy changes on our investments. As our team sees it, there are two main factors for global investors to consider: the U.S. economy's future health, and President Obama's foreign policy stance toward key countries, particularly China.
2012-11-26 Japan: After the Quake, After the Floods by Richard Mattione of GMO
Japan's recovery from the Tohoku earthquake and tsunami of March 11, 2011 has been so astounding that people rarely even think about the tsunami anymore. Even fewer remember that heavy rains in Thailand further disrupted the global production chain at the end of 2011. With so much accomplished, why do so few Japanese companies see bright days ahead?
2012-11-23 Five Amazing Global Consumer Trends by Frank Holmes of U.S. Global Investors
Fifth Avenue no longer the worlds most expensive retail location. China set to be the second largest luxury market by 2017. Viva Macau is gaming capital of the world. Inexpensive Indian Aakash 2 could revolutionize tablet industry. Emerging market residents don't need a bank account to pay with their mobile wallet.
2012-11-22 Emerging Asias Rising Productivity by Robert Horrocks of Matthews Asia
Per capita GDP in China has tripled in purchasing power parity terms in the last decade yet Chinese workers still likely have their most productive years ahead of them. Asia as a whole has seen consumption increase by a third since the global financial crisis, even as the West has languished. This month, Robert Horrocks, writes about what is key to the emerging opportunities in Asia: Productivity.
2012-11-20 Emerging Markets Equity -- Monthly Product Commentary: October 2012 by Team of Thomas White International
Economic data from major emerging markets suggested a moderate reversal from the weak trends of recent months.
2012-11-19 4 Reasons Not to Taiwan On by Russ Koesterich of iShares Blog
Russ K shares four reasons hes downgrading his view of Taiwan from overweight to neutral and shares potential single country solutions he prefers instead.
2012-11-19 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Fortunately, no one is compelled to invest money. They do so in a climate of tranquility, or turmoil, in an attempt to utilize their specific discipline, their risk/reward tolerances, and their expectations in order to achieve capital gains. There is no "one size fits all" system, nor is everyone suited for an all-in, win or lose, paradigm.
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.
2012-11-15 Pacific Basin Market Overview - October 2012 by Team of Nomura Asset Management
Equity markets derived support this month from improved U.S. economic data and an impression that China's economy might be bottoming out. In addition, the Euro Area Industrial Production numbers came in above consensus. The MSCI AC Asia Pacific Free Index including Japan declined by 0.39% while the MSCI AC Asia Pacific ex Japan Free Index gained 0.44% in October 2012.
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 Emerging Markets: Maintaining Perspective by Robert O. Abad (Article)
In this Q&A, Western Asset Portfolio Manager Robert Abad discusses the latest dynamics and trends within emerging markets (EM). Although EM continue to demonstrate resiliency, Mr. Abad believes that given the amount of global uncertainty today, it is important that investors evaluate opportunities alongside a manager equipped to guide them through the risks and rewards of this evolving asset class.
2012-11-13 Europe: Opportunity of a Generation by David Marcus of Evermore Global Advisors
A difficult political and economic backdrop is masking exceptional opportunities in European markets for discerning, long-term oriented investors. Evermore believes that there is a generational opportunity to build significant wealth by selectively investing in catalyst-driven, deep value European securities, trading at depressed valuations.
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 Roots of Economic Karma by Vivek Tanneeru of Matthews Asia
I'm a strong believer that bad governance (yes, bad) is a natural part of the process of socio-political empowerment, and one that is actually necessary at times in order for some democracies, such as India, to achieve faster economic growth. Typically, during times of great socio-political transformation economic governance takes a backseat as newly empowered segments of society view redistribution of power and patronage as the first order of business. Their attention turns to good economic governance only after they feel fully assimilated. Allow me to explain.
2012-11-09 Looking Past the Election by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
The election results are in, removing at least one area of uncertainty from the equation. For the near term, economic data in the United States may take a back seat. Growth around the world appears soft, but some pockets are more encouraging than others.
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?
2012-11-08 Emerging Asia Pacific: Economic Review 3rd Quarter 2012 by Team of Thomas White International
Emerging Asia Pacific economies faced a challenging third quarter in 2012 as exports to key developed markets such as the Euro-zone came under pressure. As the austerity policies implemented by many of the countries in the Euro-zone caused a significant slump in demand, emerging market economies, which serve as the workshop of the world faced significant difficulties. Almost all major export-dependent nations like China, South Korea, Taiwan and Malaysia faced pressure to export growth. Still, most of the economies possessed both monetary and fiscal ammo to overcome the slowdown.
2012-11-08 Alternative Thoughts - All That Volatility For Nothing? by Lawrence Epstein, Josh Rowe of Orinda Asset Management
In 2011, the S&P 500 had one of the smallest price changes in its history, but investors experienced significant daily volatility. Stock investors experienced an extraordinarily tumultuous 2011 marked by the collapse of governments, standoffs over raising the national debt ceiling, and an escalation of the sovereign credit crisis in Europe. Markets rose and fell several percentage points in minutes on the barest of rumors from Washington and Brussels and frequent surprises in economic data around the globe.
2012-11-05 3 Reasons to Consider Russia by Russ Koesterich of iShares Blog
With US investors largely focused on domestic matters these days, it can be easy to miss potential opportunities in international investing. Here, Russ K discusses the pros and cons of one such opportunity Russian equities.
2012-11-05 China Forges Ahead by Team of Janus Capital Group
Economic headwinds loom on the horizon as we approach 2013, including a sovereign debt crisis in Europe and pending fiscal cliff in the U.S., but we think you can cross China off your list of worries. Economic data pointing to a slowdown in China has troubled investors. Many even question the reliability of that data, and suggest things could be worse than reported.
2012-11-02 World's Economies Come of Age by Mark Mobius of Franklin Templeton Investments
As we grow and age, our needs and habits often change. The same is true of economies, which grow and change along with their people. Short-term statistics that impact a country's economic growth rate, such as consumer spending, exports and the like are certainly important, but there are also long-term shifts that can have significant economic implications for the future. Changing demographics is one of them. As a long-term investor, I have to look not only at today's opportunities, but also plan for tomorrow's developments.
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.
2012-10-31 The Role of Risk in Asset Allocation by Jason Hsu of Research Affiliates
A traditional asset allocation framework allocates to various asset classes with the goal of matching important risk exposures. In reality, many asset classes share exposures to common risk factors and thus are highly correlated, particularly with equities. This article explains how investors can achieve more intuitive and perhaps more sensible portfolios with an approach based on risk factors.
2012-10-30 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
2012-10-30 Weekly Update: Commentary and Statistics by Team of ING Investment Management
U.S. equity markets fell back into decline during the week, as earnings reports and more specifically, forward outlooks inspired investor caution. Meanwhile, a potential "Frankenstorm" has the East Coast on edge for the coming week.
2012-10-29 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 The China Debate by Robert Horrocks of Matthews Asia
It seems to me that pretty much the only thing you can get Democrats and Republicans to agree on these days is that China is bada job-destroying exporter of cheap goods. And indeed, at the most recent two presidential debates, both candidates spoke of the trade deficit with China and described China as a rule-breaker, including the way it has managed its currency. They phrased their views as if trade were a competition between nations and that exports are obviously superior to imports. U.S. manufacturers might agree but consumers may demur.
2012-10-26 Will South Africa's Struggles Overshadow its Potential? by Mark Mobius of Franklin Templeton Investments
Africa is a continent many investors bypass, but from my perspective as a long-term investor, I think that's a mistake. South Africa has faced some struggles recently, but I think they can be overcome, and a brighter future could be ahead there for its people. South Africa is the largest economy in Africa, and is the only country on the continent where I think the "frontier" market label doesn't apply. Some have added an "S" to the end of the "BRIC" acronym to include South Africa in the grouping of emerging market economies of Brazil, Russia, India and China.
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.
2012-10-24 Emerging Markets Local Currency Bonds: Reducing Risk and Improving Returns in a Global Fixed Income by Marcela Meirelles, Blaise Antin of TCW Asset Management
Emerging market (EM) local currency bonds broaden the scope for income generation and risk diversification in a global fixed income portfolio. The asset class offers a unique opportunity to access higher income and potential for capital appreciation through a basket comprised of mostly investment grade credits with an average yield spread of 475 basis points over US Treasuries.
2012-10-22 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
With negative sentiment toward China reaching an extreme in recent months, patient investors have been rewarded with recent news of improving data from the Asian giant.
2012-10-22 3 Investment Strategies for the New World by Russ Koesterich of iShares Blog
No doubt about it the investment climate has changed, and it's unlikely to change back anytime soon. Russ K gives 3 possible solutions for investors seeking to adjust to the new investment world.
2012-10-19 Monthly Investment Bulletin by Team of Bedlam Asset Management
In their efforts to support growth, governments and central bankers have steadily chipped away at the free market. Through increased regulation, financial suppression and monetary intervention they have accentuated the lack of supply in quality fixed income paper, driving bond yields down to previously unthinkable levels. Policy makers are almost pathological in their belief that the end justifies the means as they try to inflate away their debt by keeping interest rates below nominal growth.
2012-10-19 Blurring Lines: Positioning for Developed and Emerging Market Realignments by David Fisher, Julie Salsbery of PIMCO
The demographic, financial and political lines separating developed and emerging countries are increasingly blurred, and we believe bond investors will need to adapt. Not only do investors need to take a more holistic approach to analyzing and investing in sovereign debt, they also need to reconsider their strategic thinking regarding benchmarks and their tactical approach to seeking returns. PIMCO Global Advantage Strategy utilizes a GDP-weighted benchmark and capitalizes on PIMCO's global resources to create a portfolio designed to reflect the evolving international opportunity set.
2012-10-19 Global Overview: September 2012 by Team of Thomas White International
Aggressive policy action by the U.S. Federal Reserve and the European Central Bank (ECB) helped lift investor sentiment further in September, even as economic signals from across the world continued to be jaded. The Fed has committed to buy mortgage backed securities and keep interest rates low until U.S. economic growth becomes more vigorous and the unemployment rate declines to more comfortable levels.
2012-10-19 Educating India by Siddharth Bhargava of Matthews Asia
India has long been a country where entrepreneurs have stepped in to fill gaps in the market, and their role in primary education has been no different. Over the last decade, an estimated 300,000 low-cost private schools have sprung up across India. And as counterintuitive as it seems, many poor parents are willing to pay for their children's schooling to avoid the country's free education system.
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.
2012-10-19 ECB Needs to Rescue German and French Banks More than European Periphery: Global Macro View by George Bijak of GB Capital
Whenever we talk about rescuing overleveraged Europe it is always about Spain, Italy, Portugal, Ireland, and Greece the European periphery loaded with debt that they cannot possibly repay. But a closer look at the recent IMF data reveals that German and French banks need rescue more than anybody
2012-10-18 As Global Growth Falters, Consider Emerging Markets by Russ Koesterich of iShares Blog
Global growth this year is forecast to lag that of both 2011 and 2010, and the outlook for 2013 isn't much better. These sobering forecasts are bolstering Russ K's view that investors should consider being overweight emerging market stocks.
2012-10-18 Emerging Markets Equity - Monthly Product Commentary: September 2012 by Team of Thomas White International
Investment inflows and low interest rates helped emerging market equities. Emerging market equities saw a healthy recovery during the month of September, as the U.S. Federal Reserve and the European Central Bank rolled out aggressive monetary measures to support their respective economies. As the U.S. and Europe are the biggest markets for exports from emerging market countries, it is hoped that the latest monetary stimulus measures will help these countries revive the export growth that has slackened in recent months.
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 Q3 Investor Letter by Team of HORAN Capital Advisors
At the beginning of the third quarter, investors following the "sell in May" strategy felt vindicated as the S&P 500 Index declined over 9.0% from May 1st to June 4th. The June 4th date turned out to be the intra-year market low and the equity rally was almost uninhibited throughout the remainder of the third quarter. We have been experiencing mixed global economic data over the past several months and in response, the Federal Reserve announced a third round of quantitative easing. While the market initially responded favorably, it ultimately declined through the end of the quarter.
2012-10-15 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Global equity markets performed well in the third quarter after posting modest losses in the second quarter. The soft second quarter, which followed back-to-back double-digit quarterly gains, proved to be a pause rather than a signal that the equity bull market was ending. Though defensive sectors garnered favor in the second quarter, economically sensitive sectors have generally led performance this year, with technology, financials and consumer discretionary topping the list year to date.
2012-10-15 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
Aggressive policy responses from major central banks were dominant forces in the third quarter. The European Central Bank (ECB), Federal Reserve (Fed), Bank of Japan (BoJ) and other central banks took decisive action, prompted by the escalating European sovereign debt crisis, slowing global growth, financial market volatility, and the impending US "fiscal cliff."
2012-10-15 Lender of Last Resort Move Crucial to Regional Stability by Andrew Balls of PIMCO
While the ECB's engagement as a lender of last resort is crucial, Europe's big four governments must provide political commitments supportive of ECB policy to counter the lingering threat of a Greek exit, address convertibility risk, and build a more stable union. However, this will require sustained growth. Faced with capital flights from the periphery and lowered credit ratings, the key challenge remains crowding-in private and foreign official investors to buy peripheral sovereign debt.
2012-10-15 Commodity Inflation Complicating Pro-Growth Policies by Ryan Davis of Fortigent
The return of commodity inflation raises several questions, primary among them being the impact it will have on emerging markets. While rising commodity prices are generally bullish for equity prices in emerging markets, it may also inhibit central bank flexibility at a time when many developing countries are experiencing decelerating economic growth. This issue was paramount in 2010, leading to underperformance in many EM stock markets. Since then, however, commodity prices have generally moved sideways, allowing those fears to subside.
2012-10-12 Teetering on the Edge? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
Concerns about a possible US recession remain elevated in light of the pending "fiscal cliff," resulting in some lackluster stock market action. The fiscal cliff and uncertainty around tax and regulatory policy appear to be influencing business decisions to the detriment of economic growth. While worst-case scenarios for Europe may have been taken off the table by the ECB, Spain's reluctance to ask for aid is causing consternation. And although we see continued weak growth in China, signs indicate the global slowdown may be turning around.
2012-10-12 Long/Short Investing: Bon Apptit by Geoffrey Johnson of PIMCO
Long/short equity is a distinct investment approach that seeks to reduce downside risk while still capturing much of the equity markets upside potential. By removing the long-only constraint, long/short managers have an expanded opportunity set with the potential to generate returns and mitigate risk from both long and short investment ideas. Long/short equity strategies have a lower long-term volatility and risk profile than the market as a whole and have captured a good percentage of price movement in up markets and a smaller percentage in down markets.
2012-10-12 The Golub Group Commentary by Team of The Golub Group
High-quality businesses that have the ability to pay and increase their dividends are even more attractive in this low yield environment and the valuations of these businesses are cheap on an historic basis and relative basis to the alternatives.
2012-10-11 Inflation Regime Shifts: Implications for Asset Allocation by Nicholas Johnson, Sebastien Page of PIMCO
Investors who are concerned about inflation should focus on increasing their exposure to asset classes that provide a positive beta to changes in inflation. We believe that asset prices are much more sensitive to inflation surprises than actual inflation levels themselves. Given the current macro environment, investors face the possibility that low growth and high inflation may coexist. Commodities provide a levered response to inflation. Investors can hold a relatively small amount of commodities to hedge a much larger portfolio.
2012-10-10 Will South Africas Struggles Overshadow its Potential? by Mark Mobius of Franklin Templeton Investments
Africa is a continent many investors bypass, but from my perspective as a long-term investor, I think that's a mistake. South Africa has faced some struggles recently, but I think they can be overcome, and a brighter future could be ahead there for its people. South Africa is the largest economy in Africa, and is the only country on the continent where I think the "frontier" market label doesn't apply. Some have added an "S" to the end of the "BRIC" acronym to include South Africa in the grouping of emerging market economies of Brazil, Russia, India and China.
2012-10-10 Pacific Basin Market Overview by Team of Nomura Asset Management
Regional equity markets remained largely directionless and volatile during the third quarter amid the summer trading lull. Government policy action towards the end of the quarter triggered the biggest market moves. However, the euphoria was short lived following the announcements of the European Central Bank's Outright Monetary Transactions and the Federal Reserve Board's third round of quantitative easing.
2012-10-10 Third Quarter Surge Caps 12-Month Relentless Risk Rally by Douglas Cote of ING Investment Management
Despite the rally of the past year, equity markets still look cheap. Weakening manufacturing data suggest the 12-quarter streak of positive earnings growth may come to an end in the third quarter.
Housing has turned the corner, providing consumers with cause for confidence. Though fundamentals have wavered a bit, we are constructively bullish on risky assets, as "successful investing demands a choice between prudent risk control and outright risk avoidance".
2012-10-09 The Yin and Yang of 2012 Stock Markets Through September by Ron Surz (Article)
Despite investor concerns about the economy, stock markets delivered substantial returns in the year-to-date, with the S&P 500 returning more than 16% and Europe, Australasia, Far East (the EAFE index) delivering more than 10%. This growth has been in the face of investor withdrawals from equity mutual funds. So if mutual fund investors are selling, who is buying?
2012-10-09 Global Investment Outlook by Team of Aberdeen Asset Management
Global growth remains positive but momentum is lacking. Central bank action has eased tensions. Markets are calmer but future direction is uncertain
2012-10-08 3Q Financial Markets Review and Outlook by Team of Managers Investment Group
The summer months were dominated by the anticipation of a Federal Reserve (the Fed) action in the form of another round of quantitative easing in response to muted economic growth and a sluggish domestic job market. Investors' expectations were met when the Fed announced their third round of quantitative easing (QE3) in September with a promise of increased purchases of agency mortgage-backed securities and an extension of the promise to keep short-term interest rates at "exceptionally low levels" until mid-2015.
2012-10-05 Harmony and Turmoil by Sherwood Zhang of Matthews Asia
Since Japan's recent purchase of the disputed Diaoyu/Senkaku Islands a few weeks ago, anti-Japan protests erupted in various Chinese cities, with some turning violent and targeting Japanese shops, cars and factories.
2012-10-04 Priming the Liquidity Pump by Mark Mobius of Franklin Templeton Investments
The global economy is often like a line of dominos. One piece tumbles, causing others to fall too. This year, weak economic growth and heavy debt burdens in many developed markets had a domino effect on emerging economies, and many investors lost confidence in both. In response, central banks have taken actions to boost economic growth and prime the liquidity pump.
2012-10-04 Collective Action Clauses: No Panacea for Sovereign Debt Restructurings by Ben Emons of PIMCO
Beginning next year, collective action clauses (CACs) will become mandatory for sovereign bonds issued by European countries under U.K. law. CACs, which allow a supermajority of bondholders to agree to changes in bond payment terms, became popular following Argentina's default in 2001 and even more so after the financial crisis of 2008. On balance, the introduction of CACs in European government bond markets in 2013 is positive for investors.
2012-10-04 Overtime, Then (not so) Sudden Death by Jerome Schneider of PIMCO
The FDIC's unlimited insurance coverage on demand deposits is set to expire on December 31. While the expiration by itself might not be a game changer, it adds to the uncertainty that looms over liquidity strategies as global interest rates continue to be squeezed. We believe that actively managed short-term strategies that dynamically adjust to market conditions are viable solutions, with more attractive risk and return characteristics than money markets.
2012-10-04 When Career Risk Reigns by Neils Jensen of Absolute Return Partners
In this month's Absolute Return Letter we pick up the baton from last month. How does the current crisis actually affect financial markets? How do you overcome the low returns? What can you do to protect the downside risk in a high correlation environment? We argue that career concerns often lead to irrational decisions by professional money managers and that this provides opportunities for those who can afford to deviate from the norm.
2012-10-03 Where are the Global Winners? by Louie Nguyen of Soledad Investment Management
In today's ber-dreary and volatile global market condition, it can be difficult to imagine how the various markets around the world will eventually right themselves. It is worth noting, however, that the global market has righted itself before, from predicaments that seem just as, if not even more, dire than what we face today. Think Thailand and Korea in 1997, Mexico in 1994 and the Dot-Com Bubble in 2000. The following is the latest in our annual Global Price to Earning (P/E) analysis. It is part of our on-going effort to find compelling investments from around the world.
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-01 And That's the Week That Was by Ron Brounes of Brounes & Associates
Bad news from Spain (no good news, no bad news.) Investors spent the week trying to make heads or tails about the headlines out of Europe, while analyzing the news from a suddenly resurging housing sector and a suddenly ailing manufacturing sector. For the most part, however, many were booking profits from a successful third quarter, while reallocating positions for the final stretch of the year. (Surely the Prez election and the "fiscal cliff" must enter into their decision-making moving forward).
2012-10-01 If Its All About Macro These Days, Why Havent EM Stocks Done Well? by Morgan Harting of AllianceBernstein
It doesn't seem to make sense. Superior macroeconomic fundamentals in emerging countries have not led to stronger-or even positive-equity returns over the last two years. Since the beginning of 2011, the unhedged return in US dollars of the MSCI Emerging Markets (EM) Index has been (10)%, while the MSCI World Index has delivered 6.5%. What's going on?
2012-10-01 Dont Be Fooled By September's Market Rally by Russ Koesterich of iShares Blog
September has historically been the worst month of the year, but this time around it did not play to script. The surprising rally distracted complacent investors from signs of increasing volatility. Russ K explains.
2012-09-28 The American Industrial Renaissance by Richard Bernstein of Richard Bernstein Advisors
The "American Industrial Renaissance" remains one of our favorite investment themes. We prefer to implement this theme through small US-centric industrial companies and small financial institutions that lend to public and private industrial firms. It is unlikely that the United States will again be the manufacturing powerhouse that it was during the 1950s and 1960s, but many factors are suggesting that the US industrial sector will gain market share over the coming decade.
2012-09-28 Alternative Thoughts: Macro Investing - What is macro investing and investing in a macro strategy? by Lawrence Epstein, Josh Rowe of Orinda Asset Management
Macro investing has long been the focus of investors in search of non-correlated investment strategies. Orinda Asset Management believes that macro strategies have the potential to produce positive absolute returns across market cycles. In addition, the strategy has historically exhibited low correlation to traditional equity and fixed income indices, and has provided effective diversification benefits when incorporated as part of a long-term investment plan.
2012-09-28 Schwab Market Perspective: Disrespected RallyCan It Continue? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
US equities are trading near five-year highs but numerous measures show investors remain skeptical. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus.
2012-09-28 No Free Lunch? The Real Impact of Lower Rates in Brazil by Maria (Masha) Gordon, Richard Flax of PIMCO
The Brazilian government wants to keep interest rates low but also guard against inflation; so the authorities have moved down a path of "macro-prudential" measures, with a broad range of implications for equity investors. In reality, as the cost of capital in Brazil falls, the returns and cash flows from regulated businesses are coming under pressure. In this environment, we find that consumer businesses are the most appealing, especially if growth accelerates.
2012-09-28 Commodity Stocks: Improving Returns With No Extra Volatility by Frank Holmes of U.S. Global Investors
Not every investment is the same. Even within the commodities space, when looking at measures such as correlation, performance and risk, two indexes can have very different effects on a portfolios results.
2012-09-27 PIMCO'S Cyclical Outlook for Asia: Structural Slowdown Shaping Near-Term Growth Dynamics by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
Rather than a hard landing for China, we foresee a structural downshift that could be called a "New Normal with Chinese characteristics." Australia has considerable scope for additional rate cuts and more expansionary fiscal policy to address regional weaknesses. The Japanese economy will be affected by weak economic growth in China, which will add more pressure for the Bank of Japan to respond.
2012-09-27 Dividend Yield vs. Dividend Growth by Ashvin Viswanathan of O'Shaughnessy Asset Management
Investor demand for high-yielding companies has grown even stronger because of the perception that these companies are more defensive and recent news that the Federal Open Market Committee (FOMC) has extended its forecast of low rates until 2015. We believe buying a portfolio of high-quality, global, market-leading companies with superior valuations and high dividend yields provides investors with an excellent opportunity to consistently beat the market, while providing high income relative to fixed income securities in the current environment.
2012-09-26 The Predictive Power of Dividends by Bill Smead of Smead Capital Management
In an article published by Marketwatch.com on September 21, 2012, Mark Hulbert asks the question, "Where do you think the stock market will be ten years from now?" It was as a lead into the results of a predictive model from Rob Arnott, founder of Research Affiliates. His model argues that current dividend yields go a long way to predicting ten-year forward returns. Other than a big glitch in the 1990's, it appears to have some value.
2012-09-26 Are BRICs Hitting a Growth Wall? by Mark Mobius of Franklin Templeton Investments
A global pattern of easing economic growth in the first half of 2012 has impacted the "BRIC" nations Brazil, Russia, India and China. However, I don't think the BRIC economies have hit a brick wall. While some market participants have been waiting impatiently for governments to undertake further stimulus measures, others have wondered whether something more fundamentaland less within governmental controlmight be at work.
2012-09-24 If youre a partisan Republican, skip this commentary by David Edwards of Heron Financial
In June after stocks slumped over concerns about Europe, we wrote "US stocks however, were a good value a month ago and a better value today. With the weak hands forced out by the recent 10% pullback, we are moving forward with investments in stocks." With two and half months remaining in the year, our "buying panic" forecast is starting to look prescient.
2012-09-24 The Impact of Rising Interest Rates on Fixed Income Investments by Michael Zinkland of Managers Investment Group
In this ManagersInsight, we examine how bonds have historically performed during periods of rising rates and what investors can do to limit the impact of rising rates. We find that all is not lost for investorshistory suggests bonds could perform better than many expect when rates begin to increase.
2012-09-21 Growth for the Long Run by Jonathan Coleman, Brian Demain, Nick Thompson of Janus Capital Group
"I skate to where the puck is going, not where its been." Wayne Gretzky. Many investors would love to be as successful as The Great One when it comes to their portfolios. Yet investors are often heavily influenced by the past, losing sight of where they need to be going. This seems to be especially true today: mistrust of equities is running high after a decade of disappointing returns and excessive volatility.
2012-09-21 Testing Indonesia's Coal Boom by Xin Jiang of Matthews Asia
On a recent trip to Indonesia, small talk with my taxi driver led to an interesting proposal: an offer to buy a coal mining license. I wasn't in the market for one but it just goes to show how much Indonesia's coal mining industry has grown in recent years. The country's rapid and significant development in this area has been due partly to privatization efforts, but more so to a sharp uptick in demand from countries like China. Nearly 80% of the output from Indonesian mining firms is exported, with China as the largest individual importer.
2012-09-21 The Volatility Risk Premium by Graham Rennison, Niels Pedersen of PIMCO
Amid elevated global macroeconomic uncertainty and market turbulence, investors are searching for ways to diversify portfolios with non-traditional asset classes. Volatility risk premium strategies aim to capture a return premium over time as compensation for the risk of losses during sudden increases in market volatility. We believe investors seeking to diversify their equity risk exposures should consider adding volatility risk premium strategies to their portfolios, albeit with appropriate diversification across major option markets, active risk management and prudent scaling.
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.
2012-09-19 Global Investment Bulletin by Team of Bedlam Asset Management
If America's Federal Reserve Bank were a battleship, it is losing off every available piece of ordnance. The portfolio has been positioned for such an event. The USS Fed does not know who or where the enemy is, or whether its attack will hit anything for several quarters.
2012-09-19 Farmland: The New Gold? by Randy Bateman of Huntington National Bank
Yes, it's just 'dirt', but life on this planet wouldn't exist as it does today unless it didn't comprise a third of the world's surface. Unfortunately much of that 'dirt' is in areas too wet, dry, rocky, salty, devoid of nutrients, or covered by snow for agricultural production. With only 14 percent of the world's landmass considered fertile, and that shrinking at a significant pace, there's a realization that increased farm production is essential to satisfy the increasing demand for food products.
2012-09-18 Fed Delivers another Big Dose of QE by Scott Colyer of Advisors Asset Management
Yesterday, the Fed delivered the much anticipated dose of Quantitative Easing (QE) announcing that it would continue to buy U.S. Agency Mortgage Backed Securities (MBS) in an effort to further drive growth in the U.S. economy and decrease the ranks of the unemployed. The monthly purchase rate of $40 billion will be in addition to the already $10 billion that is being reinvested from QE 1&2 in mortgage-backed securities. This new money balance sheet expansion by the Fed accompanies additional guidance that the Fed would stay low on interest rates likely until mid-year 2015.
2012-09-17 Emerging Markets Equity Monthly Product Commentary: August 2012 by Team of Thomas White International
Emerging market equities saw a marginal price correction during the month of August, as concerns about growth moderation in these economies persisted. The economic downturn in Europe, one of the largest markets for export-oriented emerging market countries, continues to force policy makers in emerging economies to come up with programs to support domestic growth. However, renewed optimism over aggressive policy action to stem the fiscal crisis in Europe helped the emerging markets in.
2012-09-17 Global Overview: August 2012 by Team of Thomas White International
Signs of emerging political consensus in Europe over supporting further action by the European Central Bank (ECB) and a closer banking union helped sustain investor sentiment during the month of August. Germany and select other countries that were skeptical of open ended policy measures by the ECB now appear to be scaling down their opposition.
2012-09-17 "QE" Stands for Quality Employment by Kristina Hooper of Allianz Global Investors
The Fed's expansive and open-ended quantitative easing program centers on building up a depleted workforce and quickening the pace of the housing recovery, but higher inflation and tight credit could play the role of spoiler. Buying mortgage-backed securities and pushing interest rates lower is designed to boost the housing sector, help loosen lending standards, stimulate corporate spending and increase foreign demand for U.S. products. This is a tall order and there are many "ifs" in this scenario, but the flexibility and breadth of QE3 increases the likelihood of its effectiveness.
2012-09-14 The Cure for Baldness by Neel Kashkari of PIMCO
Rarely does one find market commentators offering moderate, balanced investment advice these days. More likely one will find extreme headlines designed to capture maximum attention.
We believe it is worthwhile to take time to craft an investment strategy that can withstand a range of market outcomes.
In a lower-return world, we look to buy companies that are attractively priced and that can grow faster than the market as a whole, and we actively manage downside risks.
2012-09-14 Australias Second-largest Export It Isnt Coal by Adam Bowe of PIMCO
With growth in China now moderating, and the price of commodities and Australias terms of trade now declining, many investors are questioning how the Australian dollar has managed to remain well-supported. The explanation lies mainly in the changing structure of the funding of the current account deficit. Going forward this will likely have important implications for monetary policy in Australia if the decline in national income growth is not offset by a similar decline in the Australian dollar.
2012-09-14 Central Banks Take Center Stage by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Accommodative central banks have traditionally been good for equities and stocks have responded positively to recent action. However, each market reaction to US Fed action has been shorter in length and challenges persist. Although recent economic data has been beating relatively low expectations, it is still not meeting the Fed's hopes. We appreciate the sentiment of wanting to stimulate growth, but the Fed's power is limited. It's down the street in Washington where the real power to stimulate growth lies.
2012-09-12 Pacific Basin Market Overview - August 2012 by Team of Nomura Asset Management
Pacific Basin equity market performances were mixed during August 2012 and generally underperformed markets in Europe and North America, largely due to the drag caused by concerns surrounding Chinas slowing economic growth rate. Numerous statements made by European leaders to support the Euro helped to allay fears and brought yields on sovereign bonds lower during the month.
2012-09-12 Equity Monthly: Drought Aftermath by Team of Janus Capital Group
Ramifications of this summer's once-in-a-generation drought in the United States stretch much farther than Midwestern farms. The drought's impact will be felt most in emerging markets, and how leaders in those countries choose to interpret higher food prices in the context of overall inflation will merit close watching in the next 12 months. While rising food prices will pinch consumer budgets and wreak havoc on input costs for food service companies, we also see some investment opportunities tied to the drought.
2012-09-11 The Winds of Market Change by Mark Mobius, Michael Hasenstab of Franklin Templeton Investments
As we cross the mid-way point of the year, you might say the equity and fixed income markets have been a lot like the recent weather in much of the world: uncertain, and tending toward extremes. The perception of a stormy economic climate has driven some equity valuations to extremely low levels, particularly in Europe, and investors have been pouring into fixed income despite extremely low yields.
2012-09-11 US Stock Market Sentiment in a World of Wide Asset Allocation by Bill Smead of Smead Capital Management
Our long-time readers are aware that we are stingy when it comes to trading and big believers of keeping trading costs low at Smead Capital Management. Despite these natural inclinations, we do try to keep the pulse of sentiment in the US stock market.
2012-09-10 When Bad Is Good by Kristina Hooper of Allianz Global Investors
Faith in the Fed is growing more devout. Despite another disappointing jobs report, stocks drifted higher Friday to close out a strong week for the major averages as investors pinned their hopes to an imminent policy move from central bankers. It is becoming more apparent every day that the U.S. economy is sputtering. While housing appears to have stabilized, jobs and manufacturing are areas of concern.
2012-09-07 Eating Las Vegas' Lunch by Satya Patel of Matthews Asia
Since opening its casino industry to international companies in 2002, Macau has become a global gaming center. In 2011, Macaua special administrative region of Chinabrought in US$33.5 billion in gaming revenue, more than five times that of the Las Vegas Strip. Gaming operators have gladly built multibillion dollar facilities in Macau because each new casino seems to attract increasing mass market and VIP gamblers.
2012-09-07 Policymakers Report Card on Competitiveness by Frank Holmes of U.S. Global Investors
The U.S. dropped to No. 7 on the World Economic Forums newly released 2012 Global Competitiveness Index report. Switzerland retained its top position as the most competitive nation, followed by Singapore, Finland, Sweden, the Netherlands and Germany. Asian countries continue to be among the most competitiveand many are gaining strength. Among the top 20, five are from Asia.
2012-09-07 Chinas Next Act by Frank Holmes of U.S. Global Investors
World markets may not have to wait much longer for Chinese policymakers to act, as the government recently announced new infrastructure projects. According to Bloomberg, China approved 25 new subway construction projects, with related investments estimated to be more than 840 billion yuan. Railway, subway and construction stocks in China increased on the news. China is in much better shape than the rest of the world. A powerful rebalancing strategy offers the structural and cyclical support that will allow it to avoid a hard landing.
2012-09-06 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Pessimism about the next administration's impact on the emerging markets is held in check by the likely convergence of US and Chinese economic interests. More than ever, Ms. Smith needs Ms. Wong. To borrow a recent Financial Times headline, "Obama should pray that China overtakes the US."
To us, Indonesia and Malaysia look pretty promising by this standard. Other stories include a look at timber and an update on Bahrain's economy.
2012-09-04 Postcard from India: Taking Frugal Engineering to the World by Team of Thomas White International
The first 25 ton truck that rolled out of Daimler's new Indian manufacturing plant in June this year was similar in most respects to other trucks the company sells across the globe. Even on a closer look, the only major difference seemed to be the name and logo on the front grill. The iconic Mercedes three pointed star logo had been replaced by a new round logo and brand name, BharatBenz.
2012-09-01 The Case for Emerging Europe by Frank Holmes of U.S. Global Investors
If history had turned out differently, the USSR wouldve taken home the most Olympic medals this year, as the total awarded to athletes from the area was 163, according to a blog on Foreign Policys website. As we all know, the Wall came down, the Soviet Union collapsed, and now Russia has to be content with its third-place position of 82 medals. Athletes from the United States were awarded the most medals (104), followed by participants from China, who took home 88.
2012-09-01 Schwab Market Perspective: Back to Work by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
As summer winds down, we expect things to heat up as policymakers get back to work, resulting in a challenging investment environment.
2012-08-31 Prepare Now for the Looming Fiscal Cliff by Russ Koesterich of iShares Blog
The general election season is finally upon us, and investors should begin shifting their focus from theoretical discussions about the impending fiscal cliff of potential tax hikes and spending cuts to more concrete action plans of what to do about it.
2012-08-31 While Everyone Worried About Europe by Robert Horrocks of Matthews Asia
We all do it. We all refer to Asia as an export-driven economy. It's one of those seemingly useful bits of shorthand. Unfortunately, I believe it has come to do more harm than good. Along with "emerging economies," I would like to banish the phrase to the ranks of outlawed jargon.
2012-08-27 Inside the Feds Head by Kristina Hooper of Allianz Global Investors
Now more than ever, investors are getting a glimpse into the minds of policy makers. While economic forecasts remain foggy, recent FOMC minutes reveal why the Fed is sharpening its tools and which ones it is likely to use.
2012-08-24 Emerging Markets Real Estate Securities: Review & Outlook by Jason Yablon of Cohen & Steers
We would like to share with you our review and outlook for emerging markets real estate securities as of July 31, 2012. For the month, the FTSE EPRA/NAREIT Emerging Real Estate Index had a total return of 2.2% in U.S. dollars (net of dividend withholding taxes), compared with 3.6% for the FTSE EPRA/NAREIT Developed Real Estate Index (net), a broad measure of the global real estate securities market. Year to date, the indexes returned 19.0% and 18.9%, respectively.
2012-08-23 The Emerging Story in Europe by Mark Mobius of Franklin Templeton
There's a unique and often overlooked story coming out of some of Europe's emerging markets that interests me more. While much of developed Europe is still struggling to get its fiscal house in order, much of emerging Europe already has. Some of the emerging markets in Europe deserve to be a greater part of the European story, and in my view, can offer compelling investment opportunities at attractive valuations.
2012-08-22 What Will it Take for the Rally to Continue? by Bob Doll of BlackRock Investment Management
One of the factors underlying the upturn in stock prices over the past couple of months has been a modestly improving trend in US economic data. Last week, retail sales advanced 0.8%, well ahead of expectations. This was the first increase in four months, which suggests that while households remain generally cautious, spending levels are beginning to tick higher.
2012-08-22 5 Counterintuitive Reasons Why the Investment Vehicle of the the Decade is ... Stocks by Rob Isbitts of Sungarden Investment Research
These days there are more varieties and combinations of investments than selections on a Starbucks menu -- but that's not necessarily a good thing. Now, you can invest in emerging markets, dividend-paying stocks, bonds from Africa and commodities that only farmers and professional speculators used to traffic in. Heck, clients can even tell an advisor they would like a double-long, midcap equity ETF.
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 Is Now the Time to Take Stock in Europe? by Norm Boersma of Franklin Templeton
Being a value manager in the equity space this year hasn't been an easy job. When investors are focused on capital preservation and risk is said to be "off" the table, the value proposition can certainly require some conviction. Templeton Equity Group CIO Norm Boersma knows that when certain sectors are out of favor, that's often when the best opportunities surface. To position for a time when risk is back "on," he is embracing the low market valuations present in Europe and elsewhere.
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.
2012-08-20 The Magic of Compound Interest by Jeffrey Saut of Raymond James
When compound interest works in your favor, it is a blessing. But when it works against you, it is a curse. Just ask Washington Mutual, or General Motors. More recently ask Greece, whose "debt chickens" have come home to roost. When yields are double-digits the power of compound interest working against the borrower is awesome.
2012-08-17 Evaluating the Wisdom of Buying Gold by Frank Holmes of U.S. Global Investors
At the end of January 2008, I posted a discussion about how the book The Wisdom of Crowds by James Surowiecki could explain gold's price climb. The book's premise was basically that "large groups of people are smarter than an elite few."
Even before the height of the global crisis, there was a "wise crowd" of investors who had been buying gold as a safe haven from currency risks and the trillions of dollars invested in derivatives, and as a way to recycle petrodollars.
2012-08-17 Groundhog Day: Will Septembers Sell-off Repeat? by Russ Koesterich of iShares Blog
Investors might feel they are trapped in their own version of Groundhog Day this year as Russ K expects September, which has historically been the worst month of the year for capital markets, to once again fall victim to its well-documented negative seasonal bias.
2012-08-17 Love Trade Cools as Central Banks Gold Demand Heats Up by Frank Holmes of U.S. Global Investors
Although the Love Trade (purchasing gold for coins or jewelry) is on ice for now, a relatively new gold buyer has been warming up to gold. Central bank purchases hit a record high since the official sector became gold buyers three years ago. If this trend continues over the remainder of 2012, central banks will be entering a new territory of gold buying that has not been seen since the early 1960s and since the end of the Bretton Woods System in 1971.
2012-08-16 The ECB Is Too Tight Absolutely and Relatively by Scott Mather, Dirk Jeschke of PIMCO
Looking at measures of the quantity of money and its transmission into the real economy reveals that ECB policy is quite tight. Growth hardly stands a chance under this scenario. Relatively tight monetary policy would perhaps be understandable if the eurozone were threatened by inflation. However, inflation is low and falling in the Eurozone. The ECB may be playing a game of chicken with European policymakers. If true, this is a dangerous strategy.
2012-08-16 Monthly Investment Bulletin by Team of Bedlam Asset Management
A good month: a gross increase of 3.13%, over twice the index at .49%. Opinion polls the morning after the opening ceremony for the London Olympic Games estimated that 2.5% of the television audience (or 30m viewers) actually believed that the Queen and James Bond parachuted into the Olympic arena. Even if true (the poll was tiny and perhaps respondents had a better sense of irony), such gullibility is understandable on live TV. But naivety in financial markets is unforgivable.
2012-08-15 Preparing Portfolios for Inflation by Ronit Walny, Kevin Winters of PIMCO
Although disinflation has seemed the more likely scenario in recent years, PIMCO expects inflation to accelerate from recent levels over the next three to five years, but double-digit rates are unlikely. An understanding of the constituents of the Consumer Price Index can help us design portfolios that seek to better defend against inflation. The core building blocks of such portfolios are commodities, Real Estate Investment Trusts and Treasury Inflation-Protected Securities.
2012-08-13 Which Way Will the Pendulum Swing for Gold? by Frank Holmes of U.S. Global Investors
One of the most fascinating aspects when watching a sporting event like the Olympics is the historical statistics highlighting the tremendous advances in athleticism over the years. In the spirit of the events this summer, BTN Research compared gold's advancement from the beginning of the games in Beijing to the London Olympics.
2012-08-13 Commodities to Power Emerging Markets Higher by Dawn Bennett of Bennett Funds
In Latin America, Brazil leads as a natural supplier of copper and crude oil, which it is now able to extract and export on competitive terms. Nations rich with natural resources perform well during times of global economic expansion. In particular, countries rich with industrial commodities tend to outperform those without.
2012-08-10 Global Telecom Stocks Lose Luster by Russ Koesterich of iShares Blog
As their prices have increased in recent months, global telecommunication stocks have started to lose some of their luster. Russ K explains why factors such as valuation and profitability have prompted him to change his view of the sector.
2012-08-10 Reports of the Death of Equities Have Been Greatly Exaggerated: Explaining Equity Returns by Ben Inker of GMO
Where do equity returns come from? As questions go, it may not be quite as profound as "Why are we here?" or as embarrassingly baffling to most of us as "Why is the sky blue?", but considering the number of people out there who spend their working lives dealing in the financial markets, it is a question asked less often, and usually answered less well, than it should be.
2012-08-10 2012 2Q Economic - Capital Market Summary by Greg Hahn of Winthrop Capital Management
The single biggest driver for the economy and investment returns is the deleveraging process which we are currently struggling through. Arguably, we have successfully transferred debt from the financial sector to the U.S. government through the Fed's QE programs. As we move through the long process of reducing debt, economic growth inevitably moderates as resources are applied to debt reduction rather than fixed investment and consumption within the economy. As a result, expected returns on financial assets are lower.
2012-08-10 Dog Days by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
We now appear to be firmly in the dog days of summer. Low volume and little conviction may dominate but investors need to stay vigilant and now is a good time to prepare for the fall. The recent Fed meeting yielded no new action, but policy makers reiterated that they will act if necessary. We are skeptical that more stimulus measures will have a lasting impact. A waiting game has ensued in Europe as investors look for action following hopeful comments from various officials. But despite concerns over corn prices, central banks will continue to ease, helping to support global growth.
2012-08-09 Viva Reforma en Mxico by Mark Mobius of Franklin Templeton
Elections come and go, but the real test of a candidate might be whether the promises made on the campaign trail are actually put into place. Enrique Pea Nieto and his Institutional Revolutionary Party (PRI) emerged victorious in Mexico's July 1 presidential election on the promise of reform and the end to old, "undemocratic" ways.
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 Emerging Markets Equity Monthly Product Commentary: July 2012 by Team of Thomas White International
Emerging market equities made modest gains during the month of July, as global markets sustained the optimism from the last week of the previous month. Select markets in Asia, such as Indonesia, Korea, and Malaysia, as well as Turkey and South Africa outperformed during the month. Repeated assurances by European policymakers over further policy action helped assuage market concerns about the region's fiscal crisis worsening, though economic data continues to be relatively weak.
2012-08-08 Monthly Product Commentary: International Equity - July 2012 by Team of Thomas White International
International equities made modest gains during the month of July on repeated assurances from European policymakers that they will explore all possible steps to prevent a collapse of the monetary union and arrest further economic decline. Developed markets in Europe's Nordic region and the Asia Pacific, excluding Japan, as well as select emerging markets in Asia ended with healthy gains for the month.
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.
2012-08-06 Diamonds in the Rough by Mark Kiesel of PIMCO
The demand for most high-quality, income-producing assets continues to exceed supply due to a weaker growth outlook and aggressive policy action by global central banks. Yet we are still finding numerous opportunities globally through our bottom-up research that targets areas around the world where fundamentals are supportive and the outlook remains constructive.
2012-08-06 Global Overview: July 2012 by Team of Thomas White International
Global equity prices made modest gains in July, helped by strong gains in the developed markets in Europe's Nordic region as well as in the Asia Pacific, excluding Japan. Most major emerging markets in Asia also saw price gains during the month, while Spain, Italy, and select other markets in Europe lost further ground. U.S. GDP growth for the second quarter declined below the previous quarter's pace, but was marginally ahead of expectations.
2012-08-06 Are Stocks Too Expensive Now? by Seth Masters of AllianceBernstein
Not in our view. Although we recognize that the US and global economies continue to be scarred by the credit crunch that began in 2008, we think stock prices already discount the risks. Investors today have good reason to worry about stocks. Europe, the US and emerging markets are facing real problems todayand economic recoveries after financial crises almost always take longer than recoveries after ordinary downturns.
2012-08-06 Yogi Berra by Jeffrey Saut of Raymond James
"It's hard to make predictions, especially about the future." ... Yogi Berra. To be sure, "It's hard to make predictions, especially about the future," and last week was no exception. I began the week noting that there would be a trifecta of potentially market moving news events. The first was the two-day FOMC meeting where I thought the Fed would change its policy statement with a lean toward more accommodation. WRONG.
2012-08-05 2012 Outlook: Signposts for the Second Half by Russ Koesterich of iShares Blog
Continued slow global growth or a recession? Russ offers some signs investors can watch for to help determine which scenario is likely to play out in 2012.
2012-08-03 Is Buy-and-Hold Dead? by Richard Bernstein of Richard Bernstein Advisors
If one searches in Google for Does buy-and-hold work?, more than 191 million results will appear.If one searches for Is buy-and-hold dead?, more than 81 million results will appear.However, if one searches for Successful buy-and-hold strategies, only about 9 million results will appear.Its pretty clear that the investing world believes that buy-and-hold strategies are basically dead and gone.
2012-08-03 2nd Quarter Small Cap Newsletter by Team of 1492 Capital Management
The stock market posted a strong start for the year but quickly surrendered most of its gains as the macro environment (European debt concerns and China’s slowing economy) caused near-panic selling pressure until the last week of the quarter.
2012-08-03 Hedging Against (and Profiting From) A Prospective Decline In The U.S. Dollar by Team of Emerald Asset Advisors
The U.S. dollar has remained the world's reserve currency due to several factors: 1. Its large circulation (roughly $1.1 trillion); 2. The denomination of many transactions (especially commodities such as oil and other natural resources) being in USD; 3. The stability of its political system; and 4. The lack of any other viable options. However, that may not always be the case.
2012-08-03 The Race for Resources by Frank Holmes of U.S. Global Investors
The world watched in awe as American swimmer Michael Phelps became the most decorated Olympian of all time. It's inspiring to see the incredible results of his tremendous sacrifice and commitment. Investing in global markets requires the same sort of stamina, especially at times like this week, when the month's reading on the manufacturing industry was not encouraging. The J.P. Morgan Global Manufacturing PMI of 48.4 for July was the lowest since June 2009.
2012-08-01 Whither Global Stocks? Be Sure to Track This Data by Russ Koesterich of iShares Blog
Sometimes, either weak economic numbers or strong economic numbers can point to a surge in US and global equities. This could be one of those weeks. Russ has his eye on two important economic reports that are being released this week, and he explains why weak data may be positive for global equities.
2012-08-01 Real Estate Portfolio Construction for Individual Investors by Casey Frazier of Versus Capital Management
Commercial real estate is an asset class that includes many different strategies and approaches. Investors segment real estate investments into a few categories. This segmentation is done by several key factors including income profile, leverage, operational risk and potential returns. The most important segmentation is core versus non-core, or properties with stable income versus properties that have unstable or no income.
2012-07-30 Legends of the Fall 2012 by Nicholas Field of Schroder Investment Management
Are there any lessons from history for global stock markets, including emerging markets? Despite strong economic fundamentals, emerging stock markets have been negatively impacted by the global financial crisis and the European crisis. The outcome for all stock markets, including emerging markets, significantly depends on how these problems are resolved. In this context can previous crises, including the 1930's, give us any clues regarding timing?
2012-07-27 Equity Implications for a Modest-Return World by Andrew Pyne of PIMCO
With equities likely to see modest returns over the secular horizon, we believe that capturing alpha will be critical for investors seeking to meet target portfolio returns. Equity valuations appear reasonable, but volatility is likely to remain elevated amid slowing global economic growth and macroeconomic risks. As macro events drive markets, the probability of fundamental mispricing increases, providing opportunity for active managers to add value.
2012-07-27 Secular Outlook: Implications for Investors by William Benz of PIMCO
For investors, the biggest challenge now is moving from a world of normal distributions, with expected occurrences around the mean, to one of bi-modal distributions where more extreme scenarios prevail. Key institutions, including governments and central banks, were previously stabilizing forces but are now helping to accelerate underlying, destabilizing trends in the global economy and financial markets.
2012-07-27 Who is Muhammad Lee? by John Scott of Saturna Capital
Who is this Muhammad Lee? (So named, as these are the most common first and last names in the world.)1,2 Where is he from? How many brothers and sisters will Muhammad Lee have in the future? What are the implications of his arrival for U.S. investors?
2012-07-27 Challenging the Paradigms of Investing by Frank Holmes of U.S. Global Investors
Global investors constantly need to be watchful of individual biases, impaired thinking and emotional reactions that can have an adverse effect on a portfolio. One of our values at U.S. Global Investors is to always be curious to learn and improve, and the Investor Alert was borne from a belief that shareholders want to understand the very subtle nuances of biases and misconceptions. I have selected a few that I believe challenge the paradigms of investing.
2012-07-27 Bringing it Back Home by Philip Tasho of TAMRO Capital
Our financial system has been cleaned up and recapitalized; consumers have paid down debt and seem to be looking to buy houses again. A large part of the improvement in the domestic economy is centered on the housing revival. It is not rapid - again, its a slow recovery - but at least we seem to be moving forward.
2012-07-27 Treading Water by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
2012-07-26 Wage Inflation in China: Implications for Inflation and Global Investing by Team of American Century Investments
The transformation of China's economy since the late-1970s when the country opened up to foreign investment and began to take steps to participate fully in the global economy has been nothing short of remarkable. The Asian giant has undergone a dramatic transformation from a comparatively small, underdeveloped, rural economy to a dynamic, urban, manufacturing-based economy that is now the second largest in the world.
2012-07-25 US Utilities: Don't Overpay for Yield by Russ Koesterich of iShares Blog
As short-term interest rates remain at or close to zero, investors starved for income should be wary of overpaying for yield, particularly when it comes to US utilities. In the search for yield, Russ believes investors have pushed US utilities prices too high. His advice: Don't overpay for yield.
2012-07-25 Economic Review: Americas - 2Q 2012 by Team of Thomas White International
Among the developed economies in the region, growth forecasts for both the U.S. and Canada have been revised lower. Though the U.S. outlook has weakened, the Mexican economy has so far remained unaffected, as manufactured goods from the country remain competitive in export markets. Brazil is yet to see a recovery even after a series of monetary and fiscal measures taken since the second half of last year to support the economy.
2012-07-25 Caterpillars aQuantive by Bill Smead of Smead Capital Management
One of our eight proprietary criteria for stock selection is shareholder friendliness. Buying another company whose industry has enjoyed unusual prosperity is not shareholder friendly. Recently, as an example, Microsoft (MSFT) admitted what most of us already knew. Microsofts online business is a massive destroyer of capital and shareholder value. They wrote down the value of their acquisition of aQuantive by $6.2 billion.
2012-07-25 One More Dance by Neel Kashkari of PIMCO
We are witnessing a synchronized slowdown worldwide that is beginning to affect corporate profits. The most likely right-tail event is the Federal Reserve launching another round of quantitative easing. We dont believe liquidity alone can engineer sustainable, real economic growth in the context of a secular deleveraging cycle. But we acknowledge that equity portfolios would likely benefit should the Fed keep the music playing a little longer.
2012-07-24 Friday Decline Ruins a Solid Week in the U.S., AAII Flashing a Buy Signal by John Buckingham of AFAM
What was shaping up as a fine week ended with a really crummy Friday that included the horrific movie-theatre massacre in Colorado and, on an entirely different plane, yet another act (the Spanish region of Valencia asked for government help, while Madrid again lowered its economic projections) in the long-playing European sovereign debt crisis that caused yields on the 10-year Spanish bond to move further above the important 7% threshold.
2012-07-24 Litman Gregory Mid-Year Commentary by Team of Litman Gregory
High debt levels in developed countries create headwinds that are likely to hamper global economic growth in the years ahead. Europe's debt woes raise the risk of a damaging financial crisis, and global stock markets reflected these concerns in the second quarter. Why are we discussing this now? It is partly a reflection on having reached a quarter of a century in business and thinking about how we have conducted our business.
2012-07-23 Investing off the Beaten Track in an Uncertain Global Economy by Dan Ivascyn of PIMCO
The global economy remains in a multiyear period of global deleveraging; it will be an uncertain and, at times, volatile process. The substantial uncertainty and volatility affecting interrelationships across different markets are providing relative-value opportunities. Alternative strategies can be enticing, but the decision to use them needs to be fully informed and weighed against all the options.
2012-07-23 Housing, Profits Shine Amid Rain in Spain by Kristina Hooper of Allianz Global Investors
Despite continued crisis in Europes periphery pressuring stocks, a rebound in housing, surprisingly strong profits and a spike in M&A activity may point to a healthier U.S. economy. And institutional equity managers are more optimistic on the stock market. However, with employment still showing weakness and the euro-zone crisis remaining a critical concern, one has to wonder why these institutional investors are becoming more bullish. Heres some insight into why they may be keeping the faith.
2012-07-20 No Armageddon, but Consequences by Michael Hasenstab of Franklin Templeton
In a time of severe stress and crisis, its easy to come to the conclusion that Armageddon is upon us. Those who believe the European Union is going to split up and Chinas growth will come to a screeching halt are probably building bunkers and sharpening their survival skills right about now. Hasenstab isnt in panic mode. In fact, hes optimistic the eurozone will survive, and that no, China wont move back into the feudal age.
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.
2012-07-19 Equity Investment Outlook by Team of Osterweis Capital Management
In the politically correct atmosphere that permeates many of our college campuses, the euro-centric view of world history is regarded as hopelessly anachronistic, small-minded and possibly even racist. In the last year, they have become hopelessly euro-centric, rising or falling in concert with the news coming from the eurozone. A few years ago the markets focused on growth in emerging markets. Today, they focus on problems in the developed world.
2012-07-19 Europe Risk Preparedness by William De Leon of PIMCO
PIMCO's risk management process is dynamic and flexible, allowing us to evolve to understand, quantify and manage risks in broad scope and at the portfolio level. We are particularly focused on preparation for multiple potential scenarios, from a one-country redenomination to a full break-up of the eurozone into 17 separate currencies.
2012-07-18 Emerging Markets Equity: Monthly Product Commentary by Team of Thomas White International
Emerging market equities saw a moderate recovery during the month of June, as reduced fears about the European fiscal crisis led to a rebound in global markets. The latest agreement by European policymakers is expected to address some of the short-term challenges faced by countries such as Spain and Italy, as well as the troubled banks in the region.
2012-07-18 How to Look Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors
Among investors these days, a fellow commodity bull is about as rare as finding a positive story in the media, especially when you look at the results of metals and natural resources during the first half of 2012. Only four commodities on our periodic table pulled off a positive return. Wheat grew the most, rising 13 percent, followed by single-digit rises from corn, gold and copper.
2012-07-18 Readers Questions Answered by Mark Mobius of Franklin Templeton Investments
People who follow me know that one of my favorite things to do to really get to know a city is to walk or cycle the streets and interact with the locals. The great questions you readers submit are kind of like a digital version of that experience, providing me with invaluable perspectives and ideas from around the world. Thank you! Please read on for my answers to a few of your recent questions.
2012-07-17 Gundlach – Avoid Riskier Assets by Robert Huebscher (Article)
Since early this year, Jeffrey Gundlach has warned investors to avoid exposure to riskier assets – among them, equities, non-dollar-denominated securities and sovereign debt. Still reluctant to move to a more aggressive position, Gundlach said on Thursday that 'substantial opportunities await,' but they may be as much as a year away.
2012-07-17 Dependence Day by John Browne of Euro Pacific Capital
The Fourth of July week brought unwelcome birthday gifts to the United States in the form of poor domestic jobs data and similarly gloomy information from other major economies. Amidst the heat and festivities, it has become difficult to deny that the economy is deteriorating. Politicians appear helpless, thrashing about for a solution and blaming everything and everyone but themselves.
2012-07-17 Is a U.S. Recession Looming? by Scott Colyer of Advisors Asset Management
There are many indicators that we look for that tends to define cyclical market bottoms and give us signs of an upturn. Recent investor lack of volume and record high cash balances can also point to a change toward higher market valuations. Every day I hear about the relative cheap valuations of U.S. equities. We know that valuations can stay depressed for years, even decades. Why would we be thinking that a potential melt-up might be about ready to happen?
2012-07-16 Rethinking Asset Allocation by Curtis Mewbourne of PIMCO
As risk and return characteristics evolve, we believe investors need to adapt the way they think about using asset classes. Asset classes are likely to be affected by the situation in Europe and, more broadly, by high debt levels in developed countries. The related political debate about austerity vs. growth is also critical. Fixed income investors should note whether countries control their own currencies and can monetize their debts. Those that can may be greater inflation risks.
2012-07-16 2nd Quarter 2012 Newsletter by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Stock markets retreated in the second quarter of 2012 but the damaged was minor due to a rally in June. After falling almost -9% by June 4th the S&P 500 ended the quarter off by only -2.75%. Our emphasis of Blue Chip stocks helped our performance during the quarter. Small and mid-cap stocks did a little worse, down around -4%, but the real damage continued to be European and emerging market stocks, falling by about -8% and -10%, respectively. The All World Index (ex US) fell over 16%.
2012-07-16 Pacific Basin Market Overview by Team of Nomura Asset Management
Europe's sovereign debt crisis continued to hound the global equity markets throughout the second quarter, while economic data from the U.S. was also lackluster. Despite a late recovery, the Japanese equity market fell during the April-June quarter, owing to instability in the European financial system, economic distress in Europe, the U.S. and China, and the yens appreciation.
2012-07-13 UK Perspectives: The Labour Market's Mixed Blessings by Mike Amey of PIMCO
Although UK unemployment has held at a much lower level than in previous recessions, employment among workers under 25 has fallen significantly since 2008. There is already a whiff of stagflation about the UK economy, and we need to take steps to support youth employment before we end up with longer-term unemployed. In this environment, UK investors should seek inflation protection and exposure to countries and companies without stressed balance sheets or secular growth challenges.
2012-07-13 Mid-year Market Review by Rob Isbitts of Sungarden Investment Research
After one of the most trying years for investors in 2011, the first half of 2012 had a similar feel. The split-personality of optimism about a slow but visible recovery in the U.S. and weekly do-or-die drama in Europe produced the type of half-year that, frankly, we expected. Specificially, a continued pattern of news-driven, unsustainable moves in both directions landed much of the U.S. stock market in a tight price range.
2012-07-13 End Game: What Happens to Residential Mortgage-Backed Securities if There's a Eurozone Exit by Rod Dubitsky of PIMCO
An exit would substantially affect euro-denominated RMBS mortgage collateral. Currency redenomination and devaluation would likely wipe out the entire available credit enhancement for most deals. Losses of redenominated loans could overwhelm credit support, even for well-performing deals.
2012-07-13 Muddling Through, But for How Long? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.
2012-07-13 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 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Following back-to-back double-digit quarterly gains, US stocks took a breather in the second quarter, with the S&P 500 Index declining 2.8%. It could have been worse. At the quarters low point in early June, the Index had declined 10.0% from the first-quarter close. June was a strong month for stock performance, leading to a welcome recovery from the early quarter decline. However, positive returns from the first quarter prevented the Index from becoming negative on a year-to-date basis.
2012-07-12 Bond Market Review & Outlook by James Balfour of Loomis Sayles
The liquidity-driven rush into riskier assets that dominated the first quarter faded during the second quarter. The European sovereign debt and banking crisis was once again the primary catalyst, but softer economic data in the US and China also fed negative investor sentiment. Global liquidity suffered following the end of the European Central Banks (ECBs) long-term refinancing operation (LTRO).
2012-07-12 4 Reasons to Like China by Russ Koesterich of iShares Blog
The Chinese central bank last week announced its second surprise rate cut within a month. The action from the central bank was an acknowledgement that the worlds second largest economy is slowing. Despite Chinas economic slowdown, Russ continues to hold an overweight view of Chinese equities for four reasons.
2012-07-10 A Mid-Year Client Letter: Wisdom from Three Wall Street Veterans by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients an overview of the past 90 days and the outlook for the period ahead.
2012-07-10 Insights into the First Half of 2012 by Ron Surz (Article)
U.S. stock markets at mid-year have earned a respectable 9.5% return. A euphoric first quarter 12.6% gain gave way to a 2.8% minor setback in the second quarter. Foreign markets have not fared as well, earning only 3.4% over the first half of the year. The graph below provides the details, and adds a look at gold's performance.
2012-07-10 Swimming with Black Swans: The Volatile Decade Ahead by Russ Koesterich of iShares Blog
So long smooth sailing. Russ Koesterich explains why he expects the rest of this decade to be characterized by more market volatility and why seemingly out-of-the-ordinary Black Swan events could become more frequent.
2012-07-10 Investing and the Euro Crisis by David Kelly of J.P. Morgan Funds
In the summer of 2012, the Euro Zone crisis continues to dominate financial markets as it has done over each of the past two summers. While the solution to the problem remains relatively straightforward, it requires a level of economic understanding, political courage and communication among policymakers that has been absent thus far. Without this, the crisis is likely to lurch forward with only a very slow and painful resolution.
2012-07-09 Equity Investing in a Lower-Return, Volatile World by Charles Lahr, Brad Kinkelaar, Maria (Masha) Gordon of PIMCO
Company balance sheets in developed markets are generally in good health and many are well positioned to generate growth even in difficult times.
We expect growth to moderate in emerging markets, although still outpace the trajectory in the developed world. Certain companies may temporarily face lower capacity utilization.
A focus on quality is invaluable. We define quality by clean balance sheets, high operating margins and access to high-growth markets with barriers to entry.
2012-07-09 Mixed Picture for the Consumer, ISM Numbers Weak Data on Factory and Service Sectors by John Buckingham of AFAM
While the major market averages ended in the red, though only modestly so, there was plenty of volatility in a holiday-shortened trading week that was replete with the release of quite a few economic statistics.
2012-07-09 2Q Financial Markets Review and Outlook by Team of Managers Investment Group
Debt and growth issues dominated the headlines again causing a muted version of the risk off trade to return to prominence. Greece was the main culprit due to elevated debt levels, rising yields, social unrest and two elections. To the delight of many, disaster appears to have been avoided as the pro-austerity party won. Greece has a long road ahead, but this was a positive step forward to begin efforts to decrease debt levels and spur growth.
2012-07-06 Are You Limited by Linear Thinking? by Frank Holmes of U.S. Global Investors
Dont be limited by linear thinking in your portfolio. As an alternative to low yielding Treasury bonds, consider resources stocks that pay dividends. Weve found that most materials, utilities and energy stocks in the S&P 500 Index pay a dividend higher than the 10-year Treasury: Materials and utilities companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy stocks pay an average yield of 2.2 percent. Nonlinear thinkers have historically benefited from the inclusion of natural resources as part of a balanced portfolio.
2012-07-05 Looking for Bubbles by Niels Jensen, Nick Rees, Tricia Ward, Thomas Wittenborg of Absolute Return Partners
This month's Absolute Return Letter picks up on the question we left hanging in the air back in May - is Asia a potential re-run of Europe? Although policy rates appear to be dangerously low, and thus encouraging further borrowing, Asia has come a long way since 1997 and there is no immediate risk of a financial meltdown. Australian property prices and commodity prices - in particular crude oil prices - are more likely 'credit event' candidates in our opinion.
2012-07-05 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Investors focused on emerging markets may be well positioned to benefit from a "barbell" strategy, favoring sukuk and Southeast Asian equities. While in Afghanistan, were more inclined to tilt toward optimism than despair in the wake of military right-sizing. Both India and some Middle East countries are set to be active there. We offer other comments on high dividend yields in GCC stock markets and emerging trends in Ghanas timber industry.
2012-07-03 Jump: Market Rallies Sharply on EU Summit News by Liz Ann Sonders of Charles Schwab
Friday's sharp rally on better European news is followed by weaker economic news this week, keeping debate alive about what the market's priced in. When markets expect nothing and get something it can be a recipe for a rally. Investors of every ilk have de-risked, unleashing a scramble last Friday. The US economy is at stall speed, but still looks better than much of the world.
2012-07-03 The Next Frontier by Mark Mobius of Franklin Templeton
In a recent interview, I was asked whether I was becoming a frontiersman in my quest for the next big investment opportunity. Its true that many of my recent investment adventures have taken place in frontier markets the smaller, less-developed cousins of the emerging markets.
2012-07-02 U.S. Economic Outlook: Potential for Growth, Vulnerability to Policy Mistakes by Saumil Parikh of PIMCO
There are very early signs of improvement in the housing market. Another plus is the shift in U.S. energy supply from imported oil to domestic oil and natural gas. The U.S. economy still faces significant headwinds from over-indebtedness, large imbalances, growing inequality and policy incrementalism. In our view, investors need to consider the implications of rising forward tax rates and that price inflation will play a greater role in generating nominal GDP growth than in the past.
2012-06-29 Fat Tails by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have moved modestly higher and may now be in a relatively large trading range. US economic growth remains sluggish and is drifting dangerously close to stall speed. Policymakers in Europe appeared to make some progress in the most recent summit, but much is left to be done and time is running out. Meanwhile, global growth is slowing and central banks are attempting to stem the decline.
2012-06-29 Unmasking the Asian Giant by Frank Holmes of U.S. Global Investors
China is far from perfect: While actors can perfect their lines and use masks to captivate an audience, smart investors know better to use a wealth of information across numerous sources to guide investment decisions. Weigh the evidence and judge for yourself. As my friend, Investment Strategist Keith Fitz-Gerald recently said in an interview, A powerful China is coming, and we have two choices. Either we're at the table, or we're on the menu. To him this means, Good news from China is good news for the U.S.; bad news from the Chinese economy is bad news here.
2012-06-28 Focusing on Capital Preservation: Stable Value and Possible Alternatives by Brett Gorman, Henry Kao, Stacy Schaus of PIMCO
Stable value, which combines an actively managed fixed income portfolio with a contract to help assure principal and income, offers capital preservation potential and historically higher risk-adjusted returns than money market and low duration strategies.
2012-06-28 The Counterrevolution in Egypt by Bill OGrady of Confluence Investment Management
In this report we will begin with a geopolitical history of Egypt, concentrating on the unique geography that has historically shaped its governance. We will discuss the role of the military in Egyptian political life, focusing on its self-perception and its goals. We will also detail the role of the MB as an organized political group in the country. Following this analysis, we will offer our forecast for Egypt and its potential effects on the region.
2012-06-27 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Without external support for Egypt, there are few choices for reconfiguring national output. The country is an oil importer; its agricultural industry fragmented and inefficient; private wealth is suspicious. We also look at the growth implications of the fiasco at the G-20 meeting. In Pakistan, foreign names could rally behind exceptional investment-return potential once an election is called and a new government is in place.
2012-06-27 Long-Term Investing in a Short-Term World by Mark Mobius of Franklin Templeton
In this electronic age, news and rumors can spread like wildfire across the globe, heightening market volatility as markets react in real time. It can be difficult for investors to see the forest for the trees as they try to dodge the downdrafts immediately in front of them, sometimes making hasty missteps.
2012-06-27 What the Price of Gas Tells Us by Frank Holmes of U.S. Global Investors
A few months ago, we created two visuals we felt captured the emotions of how people respond to gasoline prices around the U.S. With an increased dependency on our cars these days to get to work, school and grocery stores, the price of gas is a constant reminder of how rich we feel. When it seems as if filling the SUV costs an arm and a leg, we shift patterns by carpooling, forgoing the trip to the beach or decreasing spending elsewhere.
2012-06-27 Q3 2012 Outlook by Asset Allocation Committee of Neuberger Berman
The second quarter experienced a return to volatility as heightened concerns over the European sovereign debt crisis and an aura of pessimism around the pace of global economic growth have reverberated through financial markets. The year began on a positive note, with all major equity indices posting strong double-digit gains.
2012-06-26 Jeremy Grantham: US Stocks are Expensive and Bonds are Disgusting by Robert Huebscher (Article)
Jeremy Grantham, who has consistently identified overpricing in the US equity markets - he flagged both the Dot Com bubble and the irrational pricing that preceded the financial crisis, for instance - said last week that US stocks are 'a little expensive' and bonds are 'disgusting.' But his sternest warning to investors concerned the longer-term threat posed by global resource constraints.
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.
2012-06-26 Where in the World is Risk Today by Russ Koesterich of iShares Blog
With the sovereign debt crisis centered in the developed world, the traditional notion that all developed markets are less risky for investors than all emerging markets doesnt hold up anymore. Today, while developed markets certainly top the list of the least risky countries and vice versa for emerging markets, some developed markets are now just as risky as emerging markets. At the same time, some emerging countries are now just as safe as their developed market counterparts.
2012-06-25 Emerging Markets Converge With the Developed World by Michael Gomez, Lupin Rahman of PIMCO
We expect to see growth moderating in emerging economies over the secular horizon, but still outpace growth rates in Europe and the U.S. Emerging economies entered this period of global uncertainty with relatively clean balance sheets, reasonably high degrees of policy flexibility, and substantial dry powder in the form of international currency reserves. Emerging markets are likely to be affected by the considerable growth headwinds and uncertainty emanating from the developed world.
2012-06-25 Let's Twist Again by Kristina Hooper of Allianz Global Investors
It looks like the Fed is finally facing up to the facts. The U.S. economic recovery has stalled and policymakers have realized that they need to step in. Despite a favorable election outcome in Greece, a renewed commitment to austerity and staying in the euro zone, the Fed has lowered its outlook for growth and extended Operation Twist.
2012-06-22 Abandon the Panic, Not the Eurozone by Mark Mobius of Franklin Templeton
I truly believe it pays to be an optimist in life. As a long-term investor, its practically part of the job description. You can fearfully view a crisis as a time of loss and peril, or you can choose to view it as a time of opportunity with potential for positive change. The Eurozone crisis has triggered a ripple effect across global markets, and many investors are expressing pessimism about the economic health and sustainability of the region. Me? Im an optimist.
2012-06-22 Dont Expect A Double Dip This Year by Russ Koesterich of iShares Blog
Renewed fears of a US double dip are making the rounds. While Russ gives four reasons why the United States is not likely to tip back into recession this year, he has a word of caution about a risk looming over 2013.
2012-06-22 An Ending Made For Gold by Frank Holmes of U.S. Global Investors
Hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5 to 10 percent of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system.
2012-06-21 Will Quantitative Easing Lead to Higher Inflation? by Keith Wade, James Bilson of Schroder Investment Management
In certain circles, talk of Quantitative Easing (QE) immediately triggers thoughts of Weimar Germany and Zimbabwe. The only beneficiaries of turning to the printing presses, it is suggested, will be wheelbarrow salesmen. Whilst extreme inflation seems an exceptionally low risk event, there are legitimate concerns over the impact of the huge expansion of the monetary base on future inflation. In this Talking Point, we examine the key signals to watch out for in assessing future inflation risks.
2012-06-20 Not-So-Indian Summer: 5 Reasons to Underweight India by Russ Koesterich of iShares Blog
Russ elaborates on his underweight view of India with a BlackRock Investment Institute list of five things wrong with the Indian economy, and shares how investors can be positioning portfolios as a result.
2012-06-20 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
The OPEC meeting in Wien came-and-went, masked by bigger problems. Perhaps Iran, Iraq, and Venezuela decided that they would do injustice to their international standing if they aimed to tighten output quotes as Europe was on the cusp of imploding. We also look at how inexpensive emerging markets appear to be, while we consider the implication of Arab-market uncertainty on Turkey. Ghana may be an attractive story for the specialist investor.
2012-06-19 The R Word in Emerging Markets by Mark Mobius of Franklin Templeton
No matter what decision we face in our lives, there is always some type of risk involved. But when you take a few risks, the experience can often be quite rewarding. When it comes to investing, some risks are present no matter what market youre in. Its also true that there are risks that are especially important to consider when it comes to the emerging markets.
2012-06-19 After the Greek Vote, Now What? by Russ Koesterich of iShares Blog
The relief rally Monday following Sundays Greek election was short lived. To be sure, the outcome of Sundays election is near-term good news for investors. A government led by the pro-bailout New Democracy is likely to follow more of the austerity program and to try, at least for now, to keep Greece in the euro. That said, there are two main reasons why markets arent continuing to celebrate the Greek vote.
2012-06-19 Cohen & Steers Emerging Markets Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for emerging markets real estate securities as of May 31, 2012. For the month, the FTSE EPRA/NAREIT Emerging Real Estate Index had a total return of 9.7% in U.S. dollars (net of dividend withholding taxes), compared with 6.4% for the FTSE EPRA/NAREIT Developed Real Estate Index (net), a broad measure of the global real estate securities market. Year to date, the indexes returned +9.8% and +7.9%, respectively.
2012-06-18 Mood by Jeffrey Saut of Raymond James Equity Research
M-O-O-D: That is the important word right here. And, what a difference a few weeks makes for last week the markets seemed to switch from the glass being half-empty to half-full leaving Mr. Market in a more forgiving mood. Importantly, market mood frequently sets the near-term trend. If the mood is positive, all things are possible; if it is negative, little is.
2012-06-18 Cohen & Steers Global Infrastructure Securities Strategy by Team of Cohen & Steers
We would like to share with you our review of the global infrastructure securities market as of May 31, 2012. The UBS Global 50/50 Infrastructure & Utilities Index had a total return of 6.2% (net of dividend withholding taxes) for the month. Year to date, the index returned 2.1%.
2012-06-18 Japanese Equity The Impact of Global Instability by Team of Nomura Asset Management
Mainly owing to fears of a potential Euro break up, the decline in the global stock markets in April 2012 continued through May as well. On June 4th, the Japanese equity market (TOPIX) sank to its lowest level in 29 years, declining even further below the bottom set in the aftermath of the Lehman shock in Japanese yen (JPY) terms. However, in U.S. dollar (USD) terms, the level of the Japan equity market is still above its post Lehman low recorded in March 2009.
2012-06-18 Why Inflation Could Rise Over the Long Term by Mihir Worah of PIMCO
In developed markets, there is a serious debt problem, and inflation is one of the only "solutions" we see as likely to occur. We see a secular rise in global commodities prices, with some cyclical dips as the middle class expands in merging markets in the years ahead, consuming more commodities. Structuring portfolios in an attempt to guard against high inflation should be a central element of any investment strategy.
2012-06-18 Choosing the Right Asset Class in Emerging Markets: Why it Matters by Ignacio Sosa, Christopher Getter of PIMCO
Depending on individual risk tolerances during the past five years, it may have made more sense to overweight one or two EM asset classes and at times to avoid one or two EM asset classes altogether. In general, asset classes are better viewed as carriers of risks rather than each being considered a risk in its own right. This phenomenon is readily apparent in the emerging market space. We have advocated that asset allocation in EM should be dynamic with respect to both segment and country.
2012-06-15 Theres No Place Like America by Frank Holmes of U.S. Global Investors
One should not underestimate what it means to be American; you dont find a feeling quite like it outside the nation. In fact, emerging countries such as Singapore and China are now striving to replicate what my friend Alexander Green calls American exceptionalism. On the Organisation for Economic Cooperation and Development (OECD) Your Better Life Index based on 11 diverse measures of well-being, the U.S. is highly ranked. Each element measures a feeling of satisfaction with life, including health, education, environment, personal security, life satisfaction, and work-life balance.
2012-06-15 Falling Equity Prices Reflect the European Crisis and Slower Economic Growth by Team of Thomas White International
Heightened concerns over the European fiscal crisis and slower economic growth dragged down emerging market equity prices during May. The emergence of political parties opposed to short-term austerity measures in recent elections in countries such as France and Greece has upset the political consensus that paved the way for an agreement on tackling the crisis last year. Borrowing costs of some of the troubled countries such as Spain have increased substantially, while countries that are in better fiscal health such as Germany remain hesitant about the issuance of common euro bonds.
2012-06-15 Schwab Market Perspective: Time for Action by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
2012-06-15 Speed Up or Slow Down--Don't Exit the Commodities Highway by Frank Holmes of U.S. Global Investors
A positive signal received this week came from Goldman Sachs, when the firm recommended stepping back into the markets in its latest Commodity Watch. Goldman is anticipating a 29 percent return for the S&P GSCI Enhanced Commodity Index over the next 12 months and suggests investors might want to increase their position in commodities.
2012-06-14 The Pitfalls of Protectionism by Mark Mobius of Franklin Templeton
Free, fair and open trade is essential to fostering a thriving global economy. In the past, when economic conditions have deteriorated, weve seen governments in developed and emerging economies alike engage in protectionist policies. With growth in many countries slowing this year (tied in part to the crisis in the Eurozone), Im concerned that protectionism could be on rise. In the end, I believe these policies dont really protect anyone.
2012-06-14 Chart of the Week: Growth Dichotomys Diminished Influence by Team of American Century Investments
Despite weaker-than-expected U.S. employment data for May (released June 1) and other signs of slow economic growth, the Fixed Income Macro Strategy Team at American Century Investments does not believe the U.S. economy is headed toward another recession (though the marginal possibility of recession has increased). Rather, the team believes the economy remains on a sub-par recovery/slow (1-3%) growth path, with headwinds.
2012-06-13 Three Years and Counting by Neel Kashkari of PIMCO
In addition to muted economic growth, record low interest rates, and sustained high unemployment, extraordinary equity market volatility has been a repeated feature of the past three years. As heightened volatility persists, many equity investors remain on the sidelines. We think a better investment approach is to invest globally, across asset classes, reflecting the likelihood of the various outcomes.
We believe managing against downside shocks is enormously beneficial to compounding attractive returns over the long term.
2012-06-12 The Problems with Trying to Benchmark Unconstrained Portfolios by Ken Solow (Article)
Benchmarking unconstrained, 'go-anywhere' managers is difficult. Common methods to determine an appropriate benchmark - such as an ex-post regression of how the fund was invested - can obscure the actions of the manager. Is the only solution to simply select an arbitrary benchmark and proceed accordingly?
2012-06-12 Asia's Role in Global Economic and Portfolio Rebalancing by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
We expect that the reallocation of global investor portfolios toward more balanced allocations to emerging market bonds the Great Migration to support Asia in the coming years. To pivot to a growth model that emphasizes domestic demand, China must alter government policy on taxes, profits of state-owned enterprises as well as make other structural changes. Japans growth will continue to be challenged by secular dynamics, and by the countrys inability to respond to them.
2012-06-12 Pacific Basin Market Overview - May 2012 by Team of Nomura Asset Management
Depressed market sentiment, high volatility, and low trading volume together resulted in another difficult month for the Pacific Basin regions equity markets. Following a great start to the year, Asian markets gave most of these gains back during May, as worries about the health of the Spanish banking system stoked deeper concerns about the progress of the eurozone debt crisis, with Greek elections looming on June 17th as well. U.S. data continued to disappoint, raising fears that the economic recovery could be stalling.
2012-06-12 Frontier Markets: The New Emerging Markets by Allan Conway, Edward Evans of Schroder Investment Management
In this paper, we summarise the attractive investment case for frontier markets both over the long term but also for an investment today. Frontier markets provide access to some of the most dynamic and fastest-growing economies in the world, supported by strong secular growth drivers. The investment opportunities are similarly benign as market liberalisation is accelerating and valuations look attractive in absolute terms and versus the developed and emerging world.
2012-06-08 The Purveyors of Notgeld by Tony Crescenzi of PIMCO
It is through this emergency money and repressively low interest rates that the worlds central banks create conditions that compel investors to seek out value in real assets and move outward along the risk spectrum. Investors should focus on assets that are likely to benefit from central bank policies designed to reflate deflated economies: commodities, land, equipment and software, for example. In equities, this means favoring entities in the developing world over those of the developed world in particular those reliably expected to pay a dividend.
2012-06-08 Waiting for Clarity and Action in the Euro Zone by Neil Dwane, Stefan Hofrichter of Allianz Global Investors
Poor economic data and the collapse of a Spanish bank have kept the pressure on Europe and the financial markets, but we believe Greece will stay in the euro and the European Union. U.S. investors should know that Germany is pro-Europe and recognizes the need for growth, not just fiscal austerity. It is also important to point out that ECB policy has been supportive, but they do not want to do the job of the government. U.S. investors should look to high-quality dividend-paying stocks in this uncertain environment...
2012-06-07 Real Challenges in Brazil by Mark Mobius of Franklin Templeton
Brazil, the B in the emerging markets entities known as the BRIC countries (Brazil, Russia, India, China), has entered what I think can fairly be described as a rough patch of sluggish growth. Since my last update on Brazil, the country has experienced heightened economic challenges that threaten its competitive position to slip. In 2011, Brazils growth eased to 2.7% after having reached 7.5% in 2010.1 The Eurozone crisis and the impact of a stronger Real on the competitiveness of Brazilian industry are partially to blame for this growth slowdown.
2012-06-06 Our House: Is the United States the Best House in a Bad Neighborhood? by Liz Ann Sonders of Charles Schwab
I won't try to put lipstick on the pig that was last Friday's May jobs report, but I will try a little lip gloss. Somewhat lost in the mire of the dire reaction to the report were several other more-positive readings on the economy. That's testament to the likelihood that there are many more drivers to today's malaise than just jobs growth, or lack thereof. It seems clear we're in the midst of the third consecutive mid-year economic slowdown, driven by similar forces, most dominantly the eurozone debt crisis.
2012-06-05 Finding the Best Dividend Fund by Geoff Considine (Article)
Assets are flowing into dividend-stock funds. But many experts are warning that those investors are setting themselves up for significant losses. Using an objective methodology that assesses tradeoff between yield and risk, we can determine those funds that investors should prefer - and a few they should avoid.
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 It's All Relative by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Equities have pulled back and are flirting with correction (-10%) territory. We believed this was a needed process, and remain modestly optimistic that economic data will rebound and the market will eventually resume its move higher over the next several months. The Federal Reserve has made clear that it stands ready to act should the US economy deteriorate, or the European debt crisis escalate, but we remain skeptical. The more important issue in our view is how the coming "fiscal cliff" is addressed.
2012-06-04 Why Smaller Banks Are Attractive by Richard Bernstein of Richard Bernstein Advisors
We continue to prefer smaller, US domestic banks to larger, multinational banks. A backdrop of anemic yet improving US employment and stabilizing housing markets will likely benefit domestic lenders, but the continued deflation of the global credit bubble could continue to hurt the growth prospects for global financial institutions. Although the vast majority of the risks related to the deflation of the US credit bubble seem well-known, investors still appear to be underestimating the risks of credit deflation in Europe and in the Emerging Markets.
2012-06-04 Tomorrows Europe by Andrew Balls, Andrew Bosomworth, Mike Amey of PIMCO
Our secular view is that the status quo is not an option for the eurozone. In the near term, we believe it is more likely than not that Greece will exit the eurozone. While a Greek exit would likely be messy and volatile, our baseline view is that a smaller union will persist. To be sustainable, it will have to be underpinned by much stronger fiscal union, greater support for the banking system, and mutualization of debt to mitigate cross-border capital flight risks.
2012-06-02 Will the ECB and Fed Follow Where China Leads? by Frank Holmes of U.S. Global Investors
Every month, policymakers track purchasing managers indices (PMI) around the world as they consider fiscal and monetary actions. To us, a PMI is a measure of health of companies around the world, because it includes output, new orders, employment and prices across manufacturing, construction, retail and service sectors. Historically, weve seen Chinas PMI number leading the year-over-year change in exports by three to four months, so when the PMI has increased, a few months later, Chinese exports have historically risen, and vice versa.
2012-06-01 Civil Disobedience Hong Kong Style by Robert Horrocks of Matthews Asia
Walking around Hong Kong a couple of weeks ago, I was struck by the citys own version of the Occupy Wall Street movement.
Directly underneath the HSBC tower, in the center of Hong Kongs vibrant financial district, is a small paved area, a portion of which is home to Hong Kongs anti-capitalist, anti-Wall Street movement. In the skyscraper above, thousands of banking and financial employees toil away daily, not overly disturbed by the protesters directly beneath their feet. Why? Because the civil disobedience below is just sowell, civil.
2012-05-31 The Global Industrial Sector: Have Profit Margins Peaked? by John Longhurst of PIMCO
Factors driving profit margin expansion in the industrial sector include globalization, EM capital expenditures, a focus on profitability and global labour arbitrage.
Potential headwinds include a slowdown in global growth drivers, rising labour rates and global deleveraging.
We believe profit margins are most at risk in product areas where EM companies are benefiting from state capitalism and seek to take local advantages global.
2012-05-31 The Eurozone Crisis: 4 Developments to Watch by Russ Koesterich of iShares Blog
With the future of Greece and the eurozone still so uncertain, many investors are asking how they might predict what the most likely outcome is.
While I dont have a crystal ball, in addition to paying attention to eight pivotal eurozone events happening from now until July, Im also watching for four critical developments in the run-up to the second Greece election on June 17. Heres my watch list.
2012-05-31 The Sense and Sensibility of Global Investors by Mark Mobius of Franklin Templeton
The worlds financial markets are like a spiders web; inter-linked and highly connected, strong and flexible, but sometimes fragile, too. The global financial markets have gone through rapid change in the last ten years. Large, emerging economies such as China and India have increased their contribution to global GDP and become true global powers1, causing individuals perceptions of the global economy to shift, as well. Perception has the tendency to impact market reality, which is why I was intrigued to see the results of our 2012 Global Investor Sentiment Survey.
2012-05-31 Wall Street Food Chain by Bill Gross of PIMCO
Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of such previously sacrosanct debt represent a potential breaking point in our now 40-year-old global monetary system. Bond investors should favor quality and clean dirty shirt sovereigns (U.S., Mexico and Brazil), for example, as well as emphasize intermediate maturities that gradually shorten over the next few years.
2012-05-31 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.
2012-05-31 Charting the Benefits of a Diversified Approach by Team of American Century Investments
Weve written quite a bit about diversification recently. Rather than tell you about the potential benefits of a diversified approach, we thought wed use this initial issue of Chart of the Week to show you how a diversified portfolio can potentially smooth out performance and improve cumulative returns over time.
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 The What-Why-When-How Guide to Owning Emerging Country Debt by Tina Vandersteel of GMO
As GMO looks forward to its 20th year managing emerging debt portfolios, we offer our perspectives on the
frequently-asked questions that have come up over the years, including: What is meant by emerging debt (external, local, corporate)? Why and when to own it: portfolio fit considerations, alpha, and absolute and relative value.
How to own it: dedicated external, local, or corporate; blended; or multi asset (including emerging equities).
2012-05-29 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 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.
2012-05-25 Searching for European Solutions, and Dividends by Team of Franklin Templeton
As the European debt crisis rages on, people in the eurozone are voicing their opinions about austerity measures, bailouts and such, not just on the streets, but also at the polls. As the winds of political change swirl, the future of the eurozone seems to hang in the balance. Tucker Scott, portfolio manager of Templeton Foreign Fund, and a vocal fan of a thorough vetting process, says hes focusing on long-term outlooks, not just todays headlines. And, hes finding select European stocks with dividend-growth potentialin some cases even better opportunities than in the U.S.
2012-05-25 Loss Capacity Drives 401(k) Investment Default Evaluation by Stacy Schaus and Ying Gao of PIMCO
Based on our research, we believe retirement plan participants capacity for loss may be much lower than many investment default options accept as tolerable.
Regardless of asset allocation structure, an investment default option should maximize the likelihood that each plan participant will meet his or her retirement income needs.
One of the keys to meeting a set income replacement goal is to understand how much plan participants can afford to lose at every age as they approach retirement.
2012-05-25 India's Demographic Dividends by Sunil Asnani of Matthews Asia
Fortunately, Indias vast population of 1.21 billion, considered a time bomb not long ago, is increasingly being viewed as a positive. While its population has grown by roughly 18% over the past decade, the percentage of its children has actually fallen during this same period.looking to base manufacturing operations in other countries.India would do well to realize that this period of demographic shift is not merely a stroke of luck, but a window of opportunity. For growth to be sustainable requires some reforms in the way people live and work.
2012-05-25 Going Defensive With Dividend Funds by Russ Koesterich of iShares Blog
With markets likely to remain volatile in the near term, investors should consider dividend paying stock funds as a defensive play.
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 Why Invest in Asian Credit? by Showbhik Kalra of PIMCO
Asian sovereign and corporate credit offer more attractive yields than a number of other global fixed income sectors as investors take on additional risk. Given Asian markets diversity and the global macroeconomic environment, investors may wish to consider investment managers with a strong global macro process coupled with strong relationships with local stakeholders and experience in local portfolio management and markets.
2012-05-24 Pocket of Strength: Turkey Retail Stocks Rally by Frank Holmes of U.S. Global Investors
To add alpha, we believe investors need to continually seek pockets of strength amidst todays mire of pessimism. One bright spot weve seen lies just east of Greece: Turkey. Many investors believe banks are the only investment play in Turkey. The sole question for those investors is to hold or not to hold banks. Heres what we think is a better strategy: Invest in undervalued, diverse, smaller companies that will benefit from a resilient consumer, low unemployment rate and sound government policies.
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.
2012-05-23 Global Investment Outlook by Mike Turner of Aberdeen Asset Management
Investors continue to focus on the global macroeconomic backdrop, which is still relatively positive despite slightly disappointing data recently. There are signs that some of the imbalances within the Eurozone are starting to ease as competitiveness is improving in some of the peripheral countries and this is beginning to be reflected in trade figures. Looking further ahead, we feel that global consumption should be supported by falling headline inflation.
2012-05-22 The Achilles Heel of the US Economy by Russ Koesterich of iShares Blog
The Achilles Heel of the US economy may just be that entitlement programs havent kept pace with US demographics, a fact that has long-term implications for investors.
According to a recent annual government report on entitlement programs, the Social Security trust fund is likely to run out of money in 2033, three years earlier than previously projected. Meanwhile, both Social Security and Medicare arent sustainable in the long term without structural changes.
2012-05-22 Goodbye Planet Rates, Hello Planet Quantity: Credit Markets in a Zero Rate World by Luke Spajic of PIMCO
There is a sense that developed market economies are somehow undergoing a reversed metamorphosis reverting from butterfly back to caterpillar where growth is crawling as opposed to flying. The fear of credit destruction, perhaps triggered by deflationary scares, becomes a bigger obsession for central banks. The culture of credit risk-taking changes as rates go lower and approach zero with a perennial risk of the economy tipping into deflation.
2012-05-21 I Should Have?! by Jeffrey Saut of Raymond James Equity Research
The brilliant Lee Cooperman, captain of hedge fund Omega Advisors, quoted Joe Rosenberg on CNBC last week, You can have cheap equity prices, or you can have good news, but you cant have both! Clearly, we currently have bad news, which in my opinion has resulted in cheap equity prices. Playing to that quote, my father always told me, Good things tend to happen to cheap stocks. As stated, the real question is, If we get a rally from this oversold condition is it the start of a new up leg, or is it just a compression rally that will be brief followed by still lower prices?
2012-05-19 On Corruption by Bill Mann of Motley Fool
Several large countries have little or no presence in our portfolios that have international mandates. A major reason for this is our fear of corruption in those markets. Our heightened concerns about the treatment of foreign capital in Argentina, for example, convinced us that we should greatly reduce our exposure to companies generating large amounts of revenue there.
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.
2012-05-18 Emerging Markets Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
In a global economy characterized by moderating inflation and tepid growth in developed markets, we believe emerging markets real estate securities offer attractive upside potential on a risk-adjusted basis. Policymakers in emerging economies have indicated increasing comfort with accommodative monetary policies, while domestic demand remains robust, creating a positive operating environment for both landlords and developers. On a relative value basis, we are finding more opportunities in residential developers, as we believe share prices remain depressed following their poor 2011 returns.
2012-05-18 Global Listed Infrastructure Investment Review and Outlook April 2012 by Team of Cohen & Steers
The predictable income, modest volatility and long-term growth potential of infrastructure securities continue to offer an attractive combination in the present market environment. We remain focused on subsectors we believe offer attractive relative valuations and compelling growth dynamics, such as pipelines, water and communications infrastructure. We are significantly underweight electric utilities given continued sector-specific fundamental and regulatory risks.
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.
2012-05-16 Can Government and the Corporate Sector work together again? by Mike Kayes of Willingdon Wealth Management
Can we find the right balance between government regulation and corporate entrepreneurship? History has shown that too much government intervention can strangle the creative energy of the private sector. Yet more recent history has shown that too little or perhaps ineffective regulation can have dire economic consequences as well. Is it possible to combine these opposing forces for our collective good, and for the collective good of the world? Sadly, in the midst of never-ending political rancour in this election year, it would appear to me that these forces are moving ever farther apart.
2012-05-16 Core Alternatives Fund Quarterly Review by Josh Parrott of Hatteras Funds
A balanced position seems prudent given liquidity is slowing, credit spreads have tightened considerably and equity valuations have jumped. The destabilizing market force of deleveraging still exists and many economist have predicted that the coming months might produce some drawbacks in the markets like last summer, but also new entry points for growth areas such as Emerging Markets, Technology, Mortgage Backed Securities and possibly European distressed debt.
2012-05-15 Fancy Hut by Liam Molloy and Bethany Carlson of Galway Investment Strategy
Frontier markets are not going to wait 30 years to take the global economy by storm. The parallels drawn between Africa today and 1980s China are apt, but the pace of the emerging market life cycle is likely to be accelerated by technology, investment, demographics, and other factors. The lack of a one-child policy leads to more favorable demographics. Africas workforce will be the worlds largest by 2040, surpassing both China and India. The payment-with-infrastructure investment approach favored by China can mean better transportation, utilities, and communication for whole communities.
2012-05-15 Equity Investing: From Style Box to Global Unconstrained by Andrew Pyne of PIMCO
PIMCO sees greater potential benefit to global portfolios in strategies that are unconstrained by a benchmark, and with managers who think about absolute return at least as much as they think about relative return. We believe the style box approach resulted in too great a focus on returns relative to a very narrow index and led investors to have too short of an investment time horizon in which to evaluate their managers, and that the cycles of style performance and the narrow benchmarks in the style box world encourages manager turnover and undermines long-term portfolio return potential.
2012-05-15 Policy Confusions & Inflection Points by Mohamed A. El-Erian of PIMCO
During this important annual event, PIMCO colleagues from around the world debate the major trends that will play out over the next three to five years, focusing not on what should happen, but what is likely to happen. Based on the 2012 Secular Forum discussions, we expect three themes to play out: continued policy and political confusion, overly incremental public and private sector responses and, therefore, greater potential for inflection points. In terms of regions, the status quo is no longer an option for Europe.
2012-05-14 Brazil: Compelling Opportunities for the Long Term by Brigitte Posch of PIMCO
Although economic growth has moderated somewhat in recent years, Brazils growth story remains compelling.
Underpinned by favorable GDP growth, Brazilian bank fundamentals are solid; banks are closely regulated and well-capitalized.
PIMCO believes several key corporate sectors oil, gas, utilities, infrastructure and major banks will dominate the outlook for Brazil over a secular horizon thanks to stronger pricing power and improved profitability.
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.
2012-05-11 Chart of the Week: Where Global Industrial Production Is Coming From by Frank Holmes of U.S. Global Investors
Many have compared todays economic recovery to the slow, stagnant growth Americans lived through in the 1970s. I argue theres at least one significant difference: Four decades ago, the world couldnt depend on emerging market growth like it can today. Take a look at Macquarie Researchs chart comparing industrial production (IP) following the 1970s with the output after the downturn in late 2008. The output during the mid-1970s and todays cycle looks very similar over the first two years. The decline experienced around the 31-month mark today also mirrors the drop of the 1970s.
2012-05-11 Here We Go Again....or Not? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
2012-05-11 Looking to China to Fire Up its Economy by Frank Holmes of U.S. Global Investors
Following on the heels of renewed concern over Europes debt situation, China released its monthly economic data. Fixed asset investment, industrial production and retail sales all rose in April, yet growth was not as strong as analysts anticipated. Weak is the word to describe Chinas April figures, says CLSAs Andy Rothman in his Sinology Report. But China wants the ability to manage a stable decline to promote medium-to-long-term structural reforms as well as avoid a hard landing, says CEBM.
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 A Mixed Fixed Landscape by Team of Franklin Templeton
The lingering low-rate environment in the U.S, Eurozone, Japan and some other nations has many yield-seeking investors feeling stuck in the mud. At its April policy meeting, the Federal Reserve pledged to keep its key short-term interest rate exceptionally low at least through late 2014. Some other global central banks, even in emerging nations, have pushed their rates lower too this year to spur growth. On top of that, many countries are also still trying to dig out of debt, but seem to be spinning their wheels.
2012-05-10 Emerging Markets Equity: Monthly Product Commentary April 2012 by Team of Thomas White International
Emerging market equity prices were subdued for the second successive month in April as renewed concerns over the European fiscal crisis dulled the outlook for exports from some of the leading emerging economies. The moderate correction in energy and other commodity prices also dampened the optimism over economic growth in some of the leading resource exporting countries. Among the major emerging markets, Brazil declined the most followed by India and Taiwan. Most emerging markets in Europe also underperformed during the month.
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.
2012-05-09 Pacific Basin Market Overview - April 2012 by Team of Nomura Asset Management
In April, risk-averse sentiment prevailed throughout the global financial markets amid fresh concerns about the prospects for European sovereign debt. Recent economic indicators have presented mixed signals, with signs that the Western economies are at a standstill together with a recovery for Asian industrial countries. Our outlook for global economic growth remains reasonably optimistic, and financial markets in the near future will be highly dependent on monetary policy. In the developed economies, we believe the authorities will probably take additional easing measures.
2012-05-09 The Bond Market\'s Changing Face by Tom Seay of Heartland & Co.
Many investors think of the bond market as a sleepy backwater of the investable universe. But since interest rates peaked in the early 80s, financial innovation in the bond market has spawned countless new investment vehicles (junk bonds, zero-coupon bonds, collateralized debt obligations and other derivative products), democratized lending (think subprime borrowers and emerging countries) and brought Central Bankers our of dark paneled, smoke-filled rooms into the media spotlight (think Fed Chairman Ben Bernanke on 60 Minutes). All this has occurred during a 30-year bull market in bonds.
2012-05-09 Going Global Can Pay Dividends by Brad Kinkelaar, Cliff Remily and Raji Manasseh of PIMCO
In todays low yield environment, many investors now include dividend-oriented equities in their portfolios in an effort to reach their income goals.
U.S. investors with home market bias risk severely limiting their income potential because in the U.S., dividend payout ratios are on the decline, taxes are potentially on the rise, and valuations in sectors that typically offer attractive dividends are near historical highs.
In our view, global equities can provide more attractive dividend income opportunities and offer potential for additional benefits, including diversification
2012-05-08 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 Q2 Outlook: "Sell in May" May Not Work This Year by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-05-08 When Quality Pays: A Fundamental Approach to Pursuing Lower Risk and Higher Returns by Chuck M. Lahr of PIMCO
Determining which fundamentals may lead to higher returns would give equity investors a useful tool for constructing portfolios.
Quality can be defined for equities by analyzing fundamental factors, such as operating margin, leverage (debt to equity ratio) and dividend yield.
The factors that define quality tend to lead to lower risk in individual equities.
As these fundamental factors in part lead to lower volatility, they may also lead to higher returns to the extent the stocks participate in the low volatility anomaly.
2012-05-08 Dont Fight the Last War Lessons from the Battlefields of Risk Management by Niels C. Jensen of Absolute Return Partners
Investors often behave as if they operate in a world of logic and certainty even when that is not the case. For that reason, history is littered with investors who have failed miserably. In this month's Absolute Return Letter we look at many of the pitfalls facing risk managers and we take a stab at where the next big crisis is going to surface. Our conclusion may surprise a few readers.
2012-05-08 A New Economic Era: The Usual Rules No Longer Apply by Dawn Bennett of Bennett Group Financial Services
Against this backdrop of economic woes in the U.S. and Europe, business activity in Asia and Latin America is on the rise. The developing economies and emerging markets are where we see the better metrics, not in the US, Europe or Japan. One needs to look at the BRIC countries connection to commodities growth, and understand how they are getting on top of inflation. We believe China will lead the emerging markets in 2012. They will lean towards easing so their consumers will not be hurt by the less than healthy European export business as well as the weaknesses in the exports to the U.S.
2012-05-05 Late Bull Stampede Turns Bears Into April Fools by Douglas Cote of ING Investment Management
April should have derailed the market, but it didnt; a temporary pullback was the best the bears could muster. The bears normally make money by betting against the crowded trade; by being on the sidelines, the bears now are the crowded trade and in foolish fashion. The bulls, meanwhile, find themselves in the odd position of being seen as contrarians, even though fundamentals are setting records and equity market performance over the last two quarters has been spectacular. Let the stampede continue!
2012-05-05 A Graphic Presentation by John Mauldin of Millennium Wave Advisors
The job market is still in a deep hole. At April's rate of job gains, it would take well over three years to return to December 2007's employment level, without adjusting for population growth; at the average rate of the last six months, it would take about two years. Earnings are weak, and the strongest sectors aren't those of which economic miracles are spun. QE3 looks like more of a possibility than it did a few days ago.
2012-05-04 Do Emerging Markets Win, Place or Show in Your Portfolio? by Frank Holmes of U.S. Global Investors
The recovery in U.S. stocks is significant and helps restore confidence in equities. Were pleased to see markets improving, especially following a rough finish in 2011. Yet there lingers a persistent negativity toward emerging markets growth and commodities that prevents many investors from jockeying their portfolios into a position for growth. Rather, they remain spectators on the sidelines, with equity fund outflows continuing.
2012-05-04 Watchful Waiting by Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman of PIMCO
Today, the Federal Reserve itself faces an unusually uncertain period because it lacks a complete understanding of the potential side effects of its unconventional policy actions; in particular the elongated timeline of its zero interest rate policy and its massive money printing. What matters in shaping market expectations about inflation and deflation are the credibility of fiscal policy, the prospect for real economic growth and the central banks commitment to step back from the punch bowl.
2012-05-03 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Earnings season continues (with the likes of Humana, AIG, Kraft), though investors may shift gears to focus on the economy next week as the new month brings key releases from manufacturing and labor. The recent jobless claims release has cast some doubt on the employment picture and last months lower-than-expected nonfarm additions have worried some analysts for the past month. (At least, it should look better than the picture in Spain?)
2012-05-03 Rethinking Best Practices for Bank Investment Portfolios by Sabrina Callin and Justin Ayre of PIMCO
The turmoil in capital markets and changes in the regulatory environment have sparked changes in bank investment portfolios and caused many banks to reevaluate portfolio management practices. Banks without the resources to develop new processes may be forced to limit their investment opportunity set, possibly limiting earnings and diversification potential in the securities portfolio. The investment portfolio may represent an opportunity to improve bank revenues and risk-adjusted performance by expanding into investments with improved return and diversification potential.
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 Chinas Landing Pattern by Mark Mobius of Franklin Templeton
Our main investment themes in general have been focused on consumers and commodities. It is our belief that Chinese consumers are likely to continue gaining clout, and Chinese macroeconomic policy has increasingly been moving from an export-based model to one fueled by domestic demand. We also expect that demand for hard and soft commodities should remain strong as China and many other emerging markets industrialize, gain wealth and increase spending on infrastructure, which tends to tilt the balance between supply and demand in favor of producers.
2012-05-01 Q2 Outlook: by OppenheimerFunds (Article)
Chief Economist Jerry Webman explains why he believes the U.S. economic recovery is real and CIO Art Steinmetz talks about how stocks are as cheap compared to bonds as they have been in decades.
2012-05-01 The Income Hunt: Opportunities Abroad by Russ Koesterich of iShares Blog
When it comes to fixed income portfolios, investors are often too reliant on domestic debt issues. However, as Russ explains, today there are a number of reasons why US investors should consider looking outside their own country particularly toward emerging markets for their fixed income needs.
2012-04-27 Happy (Third) Anniversary: Now What? by Jon Quigley of Advanced Investment Partners
During the trading day on March 6th, 2009, the S&P 500 Index hit its intraday bottom of 666.79. In the ensuing three years the Index has advanced over 100%. Along the way, weve witnessed the collapse of some of the older and more hallowed names in the financial industry buh-bye Lehman Brothers, so long Merrill), endured the most severe recession in at least 25 years, suffered through incredible spates of market volatility, and gathered a few gray hairs (or lost some hair) along the way.
2012-04-27 What are ETF and Mutual Fund flows telling us? by Kevin Mahn of Hennion & Walsh Asset Management
On the ETF front, while we did see some positive net flows into bond-oriented ETFs (notably High Yield Bonds), we also observed significant funds flowing into domestic and international emerging market equity products. In terms of outflows, or redemptions in this case, funds were flowing out of a wide variety of Morningstar categories, albeit only slightly on the bond-oriented front. I believe that the divergence in fund flow information for the first quarter of 2012 may primarily be related to the types of investors who generally invest in the products.
2012-04-27 Roller Coaster Returns by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
2012-04-27 Sell in May and Go Away? Not this Year by Frank Holmes of U.S. Global Investors
One catchy investing maxim thats popular this time of year is sell in May and go away, the notion that investors should cash in their investments and take the summer off. We believe its a much better market this year. After following a similar trajectory as the previous year from October to the beginning of March, improving economic data pushed the S&P 500 over 3 percent higher in March 2012 after trending sideways during the same time period last year.
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 Newlyweds Dilemma by John West of Research Affiliates
Before marriage, men and women enjoy a lot more free time. Married life represents a huge shift in their habits and schedules. Similarly, a new world of lower expected returns signals a major break from mainstream investment approaches. This months Fundamentals examines how investors can position their portfolios for the future.
2012-04-25 Readers Questions Answered Part IX by Mark Mobius of Franklin Templeton
I agree with your outlook on the emerging economies. My concern is the Eurozone, where there is political and currency instability. There is talk that one or more countries may leave the Eurozone. This could be a shock to the financial world, affecting currencies, and banks with exposure may tumble. How would you assess this risk? I believe the Europeans are on the right track and are addressing the fiscal issues facing not only Greece, but other countries in the Eurozone. Ultimately, these are issues impacting all developed countries, includng the U.S. and Japan.
2012-04-24 Why a 60/40 Portfolio isn’t Diversified by Alex Shahidi (Article)
Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.
2012-04-24 Fixed Income Commentary First Quarter 2012 by John E. Villela, David W. Seeley and Barbara J. McKenna of Longfellow Investment Management
The ever‐changing regulatory environment must be watched closely. The new, onerous capital requirements directed at the broker‐dealer community will make it more costly for broker‐dealers to hold inventory on their balance sheets. This will affect the cost of liquidity by making transactions more expensive in the marketplace. In addition, potential changes to money market regulations, which could include allowing the net asset value to float, could force a number of market participants to seek alternative fixed income solutions such as cash or short duration strategies.
2012-04-24 In the Long Run with Dividend-Paying Stocks by Meggan Walsh and Clint Harris of Invesco
A healthy level of skepticism and the conviction to go against consensus when it is supported by sound fundamental research is a strong combination for successful investing. We have little exposure to energy, an area investors favor. Financials is one of our largest weightings, an area thats out of favor. We prefer dividend sustainability and growth while investors are currently focused on high yielders alone. Its important to remember that history has shown that dividend-paying stocks are part of an enduring, fundamental approach to value investing and not a thematic allocation.
2012-04-24 Is 2012 the Year for Hedge Funds? by Chris Maxey of Fortigent
Prior to the financial crisis, hedge funds were largely viewed as alpha generating, high return seeking, portfolio diversifiers. In 2008, that model came under attack from multiple angles fraud, illiquidity, and poor returns being the primary culprit. Ever since that time, the value proposition of hedge funds and alternative investments remains in question, causing some to wonder if this is a make or break year for the space. There is reason to think the environment for hedge funds and active managers is improving.
2012-04-24 A Risky Business by Russ Koesterich of iShares Blog
In todays low yield environment, fixed income investors face a stark choice: accept lower income or take on additional risk to generate incremental yield. In assessing these two options, investors must start with their own tolerance for risk and investment objectives. For those willing to take on additional risk, I continue to advocate reducing duration risk, for which investors are not being adequately compensated, and modestly increasing exposure to spread products. I currently see opportunities in Investment Grade US Corporate Debt and Emerging Market Bonds.
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 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.
2012-04-20 The Good Life Comes at a Cost by Bill Mann of Motley Fool
If we see so little vitality from Europe, why do we invest there? First of all, the fact that Europe has been in crisis is obvious, which means that investors everywhere have been looking for other places to put their money. When this happens, investors tend not to differentiate between the great and the not-great. And second, even if Europe were toast (which it isn't), that doesn't mean that every company in Europe is equally hosed. Many of the worlds great brands are European, and many of them generate much, if not most of their revenues in other markets around the world.
2012-04-20 Small Cap Outlook 1Q12 by 1492 Investment Team of 1492 Capital Management
While weve seen the markets advance nicely, we think the market could gain more than 25% this year as the U.S. economy continues to move ahead and the rest of the world is in stimulus mode. Most importantly, there are still plenty of bears calling for recession, despite an ongoing barrage of better economic statistics. No doubt the remainder of the year will give the stock market plenty to ponder like the U.S. Presidential election, ongoing European debt crisis fallout and concerns about Chinas economic growth. Read on to understand why were so bullish on the U.S. stock market.
2012-04-20 Outsized Outsourcing Opportunity in the Philippines? by Frank Holmes of U.S. Global Investors
Our investment team has reported in the weekly Investor Alert about a number of positive trends coming out of the Philippines lately, including a narrowing of the budget deficit, easing inflation and rising export numbers. In addition, CLSA reported last fall that, the Philippines increasingly looks like it could be where Indonesia was five years ago in terms of the potential for a multi-year credit and investment cycle to kick in after years of post-Asian Crisis de-leveraging.
2012-04-20 Equity Investment Outlook April 2012 by Team of Osterweis Capital Management
We think stocks are reasonably priced on an absolute basis and extremely attractive relative to bonds. Bonds have performed well over the past three decades, but with interest rates at record lows, there is not much room for bonds to continue outpacing stocks on a total return basis. Meanwhile, companies are steadily increasing dividends. Even Apple recently instituted a dividend. For some time, investors have been lowering their exposure to U.S. equities. We believe this trend should reverse, especially once interest rates start to rise and bond market returns turn negative.
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.
2012-04-20 Emerging Markets Real Estate Securities Investment Review & Outlook First Quarter 2012 by Team of Cohen & Steers
A general moderation in inflation pressures is giving emerging market authorities more liberty to pursue policy stimulus, auguring well for domestic growth. We believe this will create opportunities for residential developers in various markets and we have increased our allocation to these companies.
2012-04-20 Global Listed Infrastructure Investment Commentary by Team of Cohen & Steers
Infrastructure securities predictable income, modest volatility and long-term growth potential have always attracted income-focused, risk-averse investors. If market volatility increases in the second half of the year, we expect these qualities will exert an even greater pull.
2012-04-18 Stock Picking in a World of Profit Margin Mean Reversion by Bill Smead of Smead Capital Management
We feel investors should avoid capital intensive companies which are tied to commodities or emerging markets. As interest rates rise and capital becomes dear, those who eat capital lose and those with strong balance sheets and who generate high and consistent free cash flow, should win. As Buffet, Grantham, Hutchinson and Stein pointed out, someone loses in the reversion to the mean of profit margins when compared to GDP. Lastly, dont be fooled by those who are bearish on the stock market because of their belief in profit margin reversion.
2012-04-18 Q2 Markets: Dont Expect Smooth Sailing by Russ Koesterich of iShares Blog
While valuations still appear reasonable, inflationary pressures remain well contained and the economy is stabilizing, Russ explains why he expects more market volatility in the second quarter and details how investors may want to position their portfolios as a result.
2012-04-18 Emerging Market Brands: From Backstage to Center Stage by Mark Mobius of Franklin Templeton
If the growth of the emerging market consumer class persists, it should translate into more clout for local consumer brands. The global emerging markets middle class is anticipated to grow from 430 million in 2000 to 1.2 billion by 2030.3 By some estimates, China and India are expected to account for two-thirds of the expansion in emerging markets.2 Its not a given, but such a large group of people with diverse tastes in consumer goods could be a boon to emerging brands over the long term.
2012-04-18 Monthly Product Commentary: Emerging Markets Equity March 2012 by Team of Thomas White International
After gaining during the first two months of the year, emerging market equity prices saw a moderate correction in March and underperformed the developed markets. There are renewed concerns that domestic consumption growth in some of the larger emerging economies could be lower than currently expected, and could restrict aggregate economic growth in the coming quarters. Signs of the European fiscal crisis worsening again have also dampened investor sentiment as further economic weakness in the Euro-zone would cloud the export prospects of several emerging economies, especially China.
2012-04-18 Monthly Product Commentary: International Equity March 2012 by Team of Thomas White International
After the robust gains during the first two months of the year, international equity markets corrected marginally during March as the markets waited for further economic data and trends from first quarter earnings announcements. Emerging markets underperformed on renewed concerns that domestic consumption growth in some of the larger emerging economies could be lower than current expectations. The lack of investor interest for a new issue of Spanish bonds drew renewed attention to the European fiscal crisis.
2012-04-18 Global Overview: March 2012 by Team of Thomas White International
Select indicators showing a possible worsening of the European fiscal crisis and slower domestic demand growth in some of the emerging economies have dulled the global economic optimism in recent weeks. After Spain faced difficulties in finding enough buyers for a new issue of bonds, several distressed European countries have seen their bond yields rise. Inflation and retail sales data from China for the month of February suggested weaker than expected consumer demand, and slower growth in March imports strengthened these concerns.
2012-04-17 How to Invest in the Best Equity Region in the World by Monty Agarwal of MA Capital Management
I believe that over the next several years, the single best region to buy and hold patiently will be Africa. Africas biggest lure are its vast hordes of natural resources. It is home to: 13% of the global reserves for oil, 50% of proven gold reserves, 50% of proven iron ore reserves, and 60% of cobalt. China, perhaps one of the hungriest consumer of natural resources and a savvy investor, is buying up mining rights and signing land deals everywhere in Africa. Here are a few more metrics that look very attractive for Africa.
2012-04-17 Asia-Pacific Portfolio Committee on PIMCOs Cyclical Outlook by Robert Mead, Tomoya Masanao and Ramin Toloui of PIMCO
We do not expect to see aggressively expansionary policy to combat the incremental economic slowdown in China. We believe that most countries in emerging Asia will continue to put their currency appreciation on hold, as inflation is expected to remain subdued over the cyclical horizon.
We are concerned about the sustainability of Japans economic growth beyond 2012, as the governments reconstruction spending will fade in 2013. Relatively speaking, Australia is indeed a beneficiary of higher commodity prices as a result of the strong demand for coal, iron ore and liquid natural gas.
2012-04-17 The Elusive Equilibrium: How Financial Markets Shape Global Rebalancing by Ramin Toloui of PIMCO
The mental and organizational infrastructure in the asset management industry has been built for a world with a sharp dichotomy between developed countries and emerging markets. Effective portfolio management requires an integrated approach that eschews the traditional dichotomy between developed and emerging markets. Emerging markets account for about 36% of global output and 68% of global GDP growth, but only represent about 4% of the equity portfolios of U.S. investors. We believe the representation in bond portfolios is even lower.
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.
2012-04-16 The Time Between Too Early and Too Late: Monthly Commentary by David Kelly of J.P. Morgan Funds
After three years of market gains, a record year for corporate profits, and in the midst of solid monthly job gains, it is difficult to argue that it is still too early to get back to a more balanced approach to long-term investing. But some may now argue that it is too late and that perhaps the market has run too far. However, while there is always the risk of a correction, it is hard to see why March 2012 should represent a market peak.
2012-04-16 Can Foreign Trade Cure America's Ills? by Kristina Hooper of Allianz Global Investors
A narrower international trade gap could be the elixir that helps speed the recovery. A shrinking trade deficit suggests the economy may have grown faster than expected in the first quarter. The news prompted the New York Feds William Dudley to boost his GDP estimate. While headlines on employment, Europes debt issues and Chinas slower-than-expected growth have hurt stocks, they are likely to cause only short-term market disruptions. The correlation between international trade and corporate profitability point to improved earnings and economic growth over the longer stretch, however.
2012-04-13 Pacific Basin Market Overview - March 2012 by Team of Nomura Asset Management
Our outlook for global economic growth remains reasonably optimistic. The U.S. in particular has exhibited some surprisingly buoyant conditions driven by improvements in the job market and stronger consumption. Europe for now appears to have disproved the more pessimistic forecasts, whilst Japan will benefit from reconstruction activity. Our sector allocation strategy remains biased towards growth. We hold overweight positions in the Industrials, Consumer Cyclical, and to a lesser extent, Technology, while we remain underweight in the Telecommunications and Utilities sectors.
2012-04-13 Dutch Disease Lite in Australias Economy by Robert Mead of PIMCO
Australia is probably more likely to feel the effects of an extended structural change in the economy as resources continue to be reallocated, rather than the effects of a full-fledged, but transitory, case of Dutch disease. China is Australias largest trading partner, and Chinas historical focus on infrastructure building has amplified the divergence in Australias two-speed economy. We believe Australias strong initial conditions should help ensure that Commonwealth Government Bonds remain one of the worlds cleanest dirty shirts for risk-averse investors.
2012-04-13 Schwab Market Perspective: Concern or Correction? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has softened a bit lately but still indicates growth in the US. After a long stretch of relative calm in the markets, we've seen the markets pull back, possibly fulfilling the correction that was overdue. We believe the longer-term trend is higher but near-term risks continue to be elevated and earnings season could bring more volatility. The minutes from the most recent meeting of the Fed seemed to solidify that another round of quantitative easing (QE3) is not in the offing. Although the stock and bond markets initially reacted negatively, we are heartened by the rhetoric.
2012-04-12 Newtonian Profits by Neel Kashkari of PIMCO
Today many equity investors are asking whether corporate profit margins can stay strong. Stock prices today are anchored on strong profits, hence investors intense focus on the sustainability of those profits. If they fall, stock prices are likely to follow. No doubt individual companies and sectors will face margin pressure. But for the equity market as a whole, our central scenario is for corporate margins to remain strong in the near future. We are buying individual companies we like based on our analysis of their own fundamentals in the context of the economic environment they are in.
2012-04-12 Global Investment Outlook - March 2012 by Team of Aberdeen Asset Management
Global economic growth sustains its momentum for now. Fiscal policy remains a global focus. Further monetary policy accommodation should support markets. Recent positive momentum within the U.S. economy is driving the global economic recovery, overwhelming the negative sentiment emanating from peripheral Europe. Real incomes, boosted by employment growth and easing inflation, are showing signs of turning positive in the U.S., feeding through to the broader economy.
2012-04-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Looking out to year-end, Congress and the White House will be required to act on a long list of expiring tax measures and a debt ceiling increase is necessary as well. As we saw in 2011, compromise is very difficult to achieve and the elections introduce another level of uncertainty. However, the markets current attractive valuation builds in some of these risks. Beyond our shores, there is always the possibility of disappointment in Chinas growth trajectory, and further serious challenges with weaker members of the euro zone should be anticipated.
2012-04-11 Emerging Market Rates: A Different Cycle by Francesc Balcells of PIMCO
The business cycle in EM has been conducive to easing policy rates. Global growth decelerated noticeably in the second half of 2011, and this included most EM economies. While we expect EM local rates will move higher again as the business cycle progresses, the cyclical highs will likely be lower than the previous highs, reinforcing the secular trend towards lower rates. We like EM local rates with a strong credit quality, steep local curves and high real rates that may offer compensation for taking inflation risks. The local markets of Brazil, Mexico and South Africa all stand out.
2012-04-11 A Balancing Act by Mark Mobius of Franklin Templeton
The balancing act between inflation and growth that economies often face is perhaps even more pronounced in the emerging markets world: stimulate growth too much, and inflation could flare, but stamp out inflation too hard, and growth could freeze. The fire of inflation seems to have moderated and some central banks have taken actions to stimulate growth. I believe the fundamentals in many emerging markets look supportive of these actionsas long as it doesnt tip out of balance. Inflation is a big challenge, and I believe it will probably be a very important consideration going forward.
2012-04-11 Time to Exit Emerging Markets? by Russ Koesterich of iShares Blog
Is it time to sell emerging market equities? Thats what many investors are wondering given that emerging market stocks are up significantly since fall lows and have modestly outperformed developed markets year to date. Despite emerging markets strong recent performance, I believe there are two major reasons why investors should still consider overweighting select countries relative to their weight in the MSCI ACWI benchmark. Cheap Valuations and Falling Inflation.
2012-04-10 Allocating to Real Assets: Why Diversification Matters by Cohen & Steers (Article)
One way to extend the long-term purchasing power of a traditional stock and bond portfolio is through an allocation to real assets. But individually, categories like commodities, natural resource equities and REITs can be volatile. Cohen & Steers meets the challenge with a focus on broad asset-class diversification.
2012-04-10 China Experiencing Growing Pains by Chris Maxey and Ryan Davis of Fortigent
For most of the past two years, investors have been pre-occupied with the fiscal catastrophe in Europe and with good reason. However, the relative health of the worlds second largest economy arguably deserves more headline space. A year ago, Chinas stock market led the broader emerging markets down due to pervasive inflation concerns. Official figures reached as high as 6.5%, and some reports of pork and other food price inflation reached double-digit levels. Chinese authorities were forced to slow down the pace of their economy by raising bank reserve ratios and key lending rates.
2012-04-09 Strong Fundamentals Drive Best First Quarter Since 1998 by Douglas Cote of ING Investment Management
The best first quarter since 1998 was marked by strong fundamentals and reduced volatility and global risk.Could it be that the vicious cycle of the past few years has been broken? Could we have entered into the type of virtuous cycle in which positive data beget more positive data, as has marked prior sustained bull markets? Sell in May and go away and other bear strategies that have worked in prior years will likely be ineffective this year, driven in large part by strong fundamentals and global risks that have been excessively discounted.
2012-04-06 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors
Its been a challenging week for gold investors. As I often say, investing, like life, is about managing expectations. Over the past 11 years during golds spectacular bull run, investors should remember that price action can go both ways. What helps is to look at the historical rise and fall of gold. For example, looking at the past decade of one-day 5 percent drops in gold, you can see that this event is pretty rare. In 2006, gold dropped more than 5 percent in a day only two times. In 2008, there were three such events. Another one occurred at the end of this February.
2012-04-05 Shifting Focus: Behind Country Valuations Today by Russ Koesterich of iShares Blog
As the European financial crisis raged last fall, investors were closely monitoring metrics like credit default swaps and yields on Italian bonds to determine where to place their country bets.
But 2012 has brought some stability to the eurozone and with it weve noticed a shift in the types of indicators that investors should be tracking when it comes to determining country valuations metrics that show economic growth.
2012-04-05 Global Equities: Building a Research Mosaic for the Information Age by John Longhurst of PIMCO
As a result of increasing correlations across the globe, identifying the best global franchise opportunities at attractive valuations is becoming increasingly important. We believe that taking a broader global perspective and comparing a companys valuation and growth outlook versus their global competitors is just as germane as looking at them relative to their country or region. Identifying Chinese and non-Chinese companies that will gain and lose in this process is a critical long-term challenge when constructing a global portfolio and not an easy one.
2012-04-04 Economic Update by Richard Hoey of Dreyfus
We believe that a full-scale global recession is unlikely, assuming that there is no major oil price spike from a disruption of the flow of Middle East oil. We believe that a key cause of global economic expansion will be the easy monetary policy prevailing in many regions and countries worldwide. We expect a global growth recession in 2012, with declining economic activity in Southern Europe, an economic stall or temporary declines in the U.K. and much of Northern Europe, a moderate slowdown in emerging markets and a U.S. expansion at a near-trend pace in 2012, somewhat faster than last year.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-04-03 The Long and Winding Road, Part 2 Closer to the end than the beginning by Ron Sloan and Clint Harris of Invesco
Three years ago, we published an article outlining our long-term view that a generation of economic tailwinds had become headwinds leading to a period of volatile, trendless markets that would create opportunities for disciplined investors. Were certainly closer to the end of this journey than the beginning, but we believe were facing an important transition period for earnings and valuations that will create a narrower opportunity set than the one we saw three years ago when the current cycle began. Today, companies are faced with a two-part dilemma.
2012-04-03 Beyond Bonds: The Role of Risk Assets in Liability-Driven Investing by Sebastien Page of PIMCO
In liability-driven investing, unless the plan is fully immunized or significant leverage is employed, the bond portfolio only hedges part of the liabilities. Overall, when diversifying across risk assets, there are choices that may be more attractive to pension plans than they are to liability-agnostic investors, such as risk assets with exposure to duration. Plan sponsors who choose to maintain a short duration stance on a total portfolio basis should consider alternative sources of diversification beyond equities.
2012-04-02 2012 Invesco Fixed Income and Asset Class Outlook by Greg McGreevey of Invesco
Given the increased need for yield in developed economies, driven by an aging demographic base and low interest rate environment, we expect parts of the high yield, bank loans, corporate credit and distressed debt to post solid performance over the near-term. As we look across the global landscape, the US has seen a notable reduction in debt at financial institutions and among consumers. Leverage at the government level remains high and there is no credible plan to reduce such debt going forward.
2012-03-30 The World's a Little Richer by Frank Holmes of U.S. Global Investors
The World Bank released an update to its consumption poverty estimates in developing countries, and for the first time ever, the organization found progress in all the regions they track. In terms of the number and percentage of people living on $1.25 a day at 2005 prices in 130 developing countries, the world is a little richer. The area seeing dramatic progress was East Asia, reports the World Bank. Back in the 1980s, this region had the worlds highest incidence of poverty. Nearly 80 percent of people lived on less than $1.25 each day; In 2008, the number dropped to 14 percent.
2012-03-30 Shifting Winds-Turbulence Ahead? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Treasury yields have moved somewhat higher, while stocks have largely continued to rise. Recent correlations appear to be breaking down, which could lead to increased volatility but we remain relatively confident in equities. Perception as to the next moves by the Fed appeared to be shifting, but Bernanke reiterated their easy monetary stance. Uncertainty is rising and the Feds goal of increased clarity through more transparent communication is under scrutiny. Liquidity concerns in Europe have eased but economic risks remain, while Spain and Italy face deal with their ongoing debt crises.
2012-03-30 Does China Hold the Winning Ticket? by Frank Holmes of U.S. Global Investors
Some bears may think the odds of China being the winner among emerging markets in 2012 are also remote. Over the past few years, Chinese stocks have lagged compared to its emerging market peers. However, the Periodic Table of Emerging Markets perfectly illustrates: last years loser can be this years winner. Historically, every emerging country has experienced wide price fluctuations from year to year. Over time, though, each country tends to revert to the mean.
2012-03-30 Singapore Gateway to Southeast Asia by Mark Mobius of Franklin Templeton
Viewing the region from the now 20-year old seat of our Singapore office, what we see in Southeast Asia is a generally favorable combination of rising per-capita incomes and a relatively young population, a recipe with the potential to fuel the appetite for a wide variety of consumer goods. The challenges Southeast Asian markets face must not be easily dismissed, but overall I am optimistic about the regions long-term growth potential.
2012-03-29 Asset Allocation Committee Outlook by Team of Neuberger Berman
The resurgence of risk appetite witnessed in late 2011 has continued, with most major equity indices up in double digits for the year-to-date. In contrast, fixed income indices have posted very modest and, in some cases, negative returns in the first quarter. Much has been accomplished in the U.S. and globally that has contributed to the now six-month-old equity rally. However, concerns remain. Given this picture, the Asset Allocation Committee's core view remains steadyunderweight bonds, overweight equities.
2012-03-29 Stocks: Still a Bargain by Russ Koesterich of iShares Blog
With global stocks up approximately 25% from their fall low and many market watchers endorsing equities in recent weeks, its hardly surprising that investors are wondering if stocks are still a good bargain. While some measures of sentiment notably abnormally low volatility levels could be interpreted as flashing yellow caution signs, valuations and fundamentals still favor global stocks over the long term. Currently, equities look reasonably priced. Developed market equities are trading at around 14.5x trailing earnings, while large emerging markets are trading at roughly 12x earnings.
2012-03-28 Auctions Never Fail! by Lorenzo Pagani of PIMCO
The increase in volatility can reach a breaking point when dealers are no longer willing to absorb risk and the issuer loses market access, irrespective of whether an auction fails or not. Individual countries are working to regain credibility and address their debt-sustainability but what is needed is an explicit collective commitment towards fiscal union. Catalysts for uncertainty may only be a few weeks away with the elections in Greece, France and a referendum in Ireland looming. Foreign investors who preferred to remain on the sidelines during the rally may reappear as sellers.
2012-03-28 Revisiting the Liquidity Cycle with the Minsky Model by Thomas Fahey of Loomis Sayles
Once an extreme event occurs, standard models offer limited insight as to how the ensuing crisis could play out and how it should be managed, which is why policy responses can seem disjointed. The latest policy responses to the European crisis have been no exception. To understand and respond to a crisis like the one in Europe, perhaps we need to consider some new models that include the human factor. Economic historian Charles Kindleberger can offer some insight
2012-03-28 How to Access the EM Consumer? Think Small by Russ Koesterich of iShares Blog
Investors who are looking to gain exposure to emerging market domestic consumption may want to consider the small cap segment of emerging markets. I expect emerging markets to outperform based on low relative valuations, falling inflation and stronger growth. Longer term, emerging market stocks are likely to benefit from falling volatility and rising developed market volatility. However, if youre specifically trying to capture, and profit from, the secular rise of emerging market middle class consumers, its worth considering that small cap stocks provide a more targeted exposure.
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.
2012-03-28 The End of the 30-year Bond Bull Market? by Team of Knowledge @ Wharton
Is the great 30-year bull market in bonds coming to an end? Yes, perhaps -- or maybe not: It depends on whom you ask and how flexible your timing is. While many people think of bonds as conservative holdings, they have produced stellar returns for decades, thanks to the taming of inflation and other factors. But some experts say economic recovery could now reverse the process by driving interest rates higher, causing bond prices to fall.
2012-03-27 The Great Escape: Delivering in a Delevering World by Bill Gross of PIMCO
When interest rates cannot be lowered further or risk spreads significantly compressed, the momentum begins to shift, gradually yields moving mildly higher and spreads stabilizing or moving slightly wider. In such a mildly reflating world, unless you want to earn an inflation-adjusted return of minus 2%-3% as offered by Treasury bills, then you must take risk in some form. We favor high quality, shorter duration and inflation-protected bonds; dividend paying stocks with a preference for developing over developed markets; and inflation-sensitive, supply-constrained commodity products.
2012-03-26 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Europe takes a well-deserved back seat to the global headlines as all eyes shift to China to see how the country deals with its recent economic slowdown. Consumer activity is on the hot seat domestically as a key confidence gauge is released and analysts closely dissect personal income and spending data in light of the sudden pickup in the labor market. The markets continue to test key levels as investors weigh the low yields in fixed income against the current risk in equities. Hows that speaking tour treating you, Dr. B.? Any Ron Paul sightings?
2012-03-23 Whats Next for Equities? by Matthew Rubin and Justin Gaines of Neuberger Berman
In 2011, the S&P 500 finished essentially flat on a price-return basis. That return, however, would not have been achieved without a 15% gain over the last three months of the year. Equities have since picked up where they left off and, year-to-date, most major indices are up by double digits. Front-of-mind for investors is whether this momentum can be maintained. We offer the bear and bull cases as well as our thoughts on what may lie ahead.
2012-03-23 Emerging Markets Real Estate Securities - Investment Review & Outlook February 2012 by Team of Cohen & Steers
As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures continue to moderate. Given the potential for better domestic growth in such an environment, we expect to take advantage of buying opportunities among residential developers. Our favored markets include Brazil, based on its natural resources, growing consumption trends and shareholder-friendly business environment. We particularly like the retail market, which continues to exhibit strong fundamentals.
2012-03-23 Diversification at the Core by Team of Franklin Templeton
The late Sir John Templeton was certainly a champion of diversifying ones basket of investments. And so is Tucker Scott, portfolio manager for Templeton Global Equity Group and manager of Templeton Foreign Fund. Diversification is at the core of his investment strategy. A summary of his recent remarks: We try to find stocks that we believe are undervalued, then build a portfolio thats well-diversified by industry and by country. We try to limit position sizes in an attempt to help limit potential stock-specific risk.
2012-03-23 Global Listed Infrastructure - February 2012 Review & Outlook by Team of Cohen & Steers
We have a positive near-term outlook for infrastructure securities based on improving U.S. economic data and stabilizing credit conditions in Europe. But our optimism remains tempered by rising sovereign debt levels in Europe and the United States and a likely protracted period of economic hardship in the European periphery. Emerging markets are likely to be somewhat stronger, in our view, driven by better structural demand and monetary easing. For this reason, we have increased our investments in Brazil, China and Mexico.
2012-03-23 Gold and China: Where the Bulls and Bears Square Off by Frank Holmes of U.S. Global Investors
To paraphrase the great Steve Martin, todays investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly whats happened in gold and global markets in recent weeks. While market bulls have been sniffing out data points to support their case, market bears have continued to take a glass-half-empty approach. Gold and China are two areas that have been caught in the bear trap this week, but we believe the gold and China bulls still have room to run.
2012-03-22 The Case for Chinese Stocks by Russ Koesterich of iShares Blog
Chinas recent lowering of its growth target made some investors nervous that the country may be in for a period of sluggish growth. Russ, however, believes that a hard landing can be avoided, and he continues to advocate overweighting Chinese equities for three reasons.
2012-03-22 Brazil Retail Sector Riding the Wave of Middle Class Growth by Team of Thomas White International
Even in the late 1990s, Brazil was just like any other emerging economy, characterized by extremes of wealth and abject poverty with no social class dividing the bridge between. A decade and more down the line, the effervescence in the middle cannot be missed. Yes, the great Brazilian middle class defined as those who earn between $690 and $2,970 a month has arrived and is here to stay. If Brazil has made a name in the global retail sector, it had better thank these late comers, empowered with good purchasing power and access to credit.
2012-03-21 Falling Treasuries: A Currency Perspective by Axel Merk of Merk Funds
What are the implications for the U.S. dollar and investors portfolios if bond prices continue to fall, as they have of late? Within that context, should investors care whether the U.S. retains its status as a reserve currency? Should it effect the way investors think about their own cash reserves?
2012-03-20 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-20 International Equity Product Commentary February 2012 by Team of Thomas White International
The optimism in international equity markets remained unabated in February, as macroeconomic trends continued to allay concerns over a significant decline in global economic activity. At the same time, the worst fears about the risk of a disorderly default by any of the troubled European countries and their withdrawal from the common currency have also eased. Equity price gains during February were more even across regions and emerging markets outperformed the developed markets again, though by a smaller margin when compared to the previous month.
2012-03-20 The First Sign of Weakness in Corporate America by Richard Bernstein of Richard Bernstein Advisors
Negative earnings surprises are on the rise in the US: over half of the S&P 500 has reported and 30% of the companies have reported negative earnings surprises versus a long-term average of 24%. However, negative earnings surprises are significantly higher outside the US. Additionally, recent economic data suggest that a revival of the US household sector may be underway. We expect the secular outperformance of US assets to continue.
2012-03-20 Transmission Channels by Neel Kashkari of PIMCO
We believe the European debt crisis will likely flare up again, and equity investors should consider positioning portfolios to be more resilient against such a shock. A disorderly Greek default, if it occurs, would likely shock the eurozone and the globe via at least four transmission channels: the European banking system, European sovereign debt markets, corporate financing markets and regional trade. The shock of a massive Greek default would likely swing investor sentiment strongly toward risk off, putting pressure on equity markets globally.
2012-03-19 Readers Questions Answered Part IX by Mark Mobius of Franklin Templeton
It doesnt make sense for any of the countries in the Eurozone to leave the Euro. Moving into another currency does not solve any problems. Thats why Im baffled when people say a particular country should leave the Eurozone. As I see it, the choice to exit a currency is not made by the government, its a choice made by the people. The good news is that the Europeans, in addition to providing more liquidity, are striving to get to the core of the problem by trying to impose fiscal discipline. For this reason, I think the outcome should be positive in the long term.
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.
2012-03-19 Andrew Balls Discusses PIMCO's European Cyclical Outlook by Andrew Balls of PIMCO
The ECBs intervention has helped the European system undergo a slower and more orderly deleveraging process but it does not deal with the twin underlying problems of too little growth and too much debt in the countries at the center of the crisis. The eurozone faces a daunting set of challenges, including technical and economic challenges but highest on the list are politics and coordination. Greeces potential exit from the eurozone remains a significant risk and one that could lead to contagion across the eurozone as investors reassess the potential currency risk.
2012-03-19 The Fed's March Madness by Brian S. Wesbury and Robert Stein of First Trust Advisors
The best currency to be in over the next year or so is the US dollar. Yes, the Fed is loose, but everyone already knows that. Its priced in. The issue today is whether the Fed tightens policy faster than investors previously thought. And that looks increasingly likely. Momentum is now shifting toward the US, with some global investors looking at equity returns sweetened by currency gains. Add higher US bond yields and emerging markets should be even more willing to buy US assets. A self-sustaining, virtuous cycle is emerging, the kind that often forms in long-term bull markets.
2012-03-19 Emerging Markets Equity Product Commentary February 2012 by Team of Thomas White International
The renewed market optimism that surfaced towards the end of last year persisted in February as well, as emerging market equities again outperformed the developed markets. Though GDP growth forecasts for most emerging economies have been scaled lower for the current year and for 2013, it is widely expected that the risk of a further slowdown in economic activity is limited. Emerging markets in Europe and the Middle East continued to lead during the month, followed by Asia and Latin America. Egypt sustained its recovery during the month while Thailand, Russia, and Chile also outperformed.
2012-03-16 Why Invest in Asia Bonds? by Teresa Kong of Matthews Asia
The development of Asias bond markets is one of the regions most profound economic changes of the last decade. This month Teresa Kong, CFA, writes about the diversification Asias bond markets can offer investors, and their three primary return drivers: credit, currency and interest rates.
2012-03-16 February Leaps to a Multi-Decade Market Open by Doug Cote of ING Investment Management
The markets YTD success has been fueled by a dramatic reduction in global risk and upbeat economic data. The fence to contain the euro crisis has been definitively established. Oil prices are a concern, but the real economy has the wind in its sails. Though equity fund outflows continue, its never too late for investors to do the right thing.
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 You Can No Longer Say Corporates Without EM by Brigitte Posch and Ignacio Sosa of PIMCO
In our view, the risk profile for EM corporates has improved thanks to stronger sovereign balance sheets and economic growth prospects compared with developed markets. While EM corporates generally have not garnered as much attention as sovereigns, PIMCO expects that significantly more assets will be managed against an EM corporate bond index this year. The road ahead for risk assets may be bumpy. But PIMCO believes the case for focused EM corporate bond investing remains compelling based on improved credit fundamentals, a solid macro backdrop, and potentially attractive yields.
2012-03-15 Where to Look for Dividends? Try Outside the US by Russ Koesterich of iShares Blog
With the dividend corner of the US equity market now crowded and expensive, Russ gives three reasons why investors might want to consider looking abroad for dividend income. More Reasonable Valuations: Outside of the US, dividend paying stocks still appear cheap and are trading at a significant discount to the broader equity market. More Attractive Yields: Non-US dividend companies are offering more enticing yields. Outperformance in a Slow Growth Environment: high dividend paying stocks tend to outperform during periods of slow growth like the one were experiencing this year.
2012-03-15 Market Update: A Real Recovery, or a False Start? by Team of Knowledge @ Wharton
The Dow has hit its highest level in years, loan rates are at record lows and the U.S. economy appears to be gaining momentum. Even the housing market is starting to look inviting. But is this a real recovery -- or a false start like last year's? Wharton's Jeremy Siegel and Scott Richard think the economy is showing signs of a true rebound, and predict that stocks should do well in the next 12 months. But bonds, they warn, are in dangerous waters, and economic growth will be in jeopardy if oil prices keep rising and the European credit crisis worsens. (Video with transcript)
2012-03-15 And Thats The Week That Was by Ron Brounes of Brounes & Associates
The Fed gets together next week as analysts eagerly await the (more transparent) recap of the behind-the-scenes discussions between the (dissenting) parties. Rumors have policymakers debating a new type of bond buying program (sterilized QE) in which the Fed would print money to purchase long-term securities, but investors would face certain restrictions over how those proceeds can be used. As always, the Feds aim is to keep rates low and encourage more spending and investing by consumers and biz.
2012-03-14 Par for the Investing Course by Team of Franklin Templeton
Theres a certain Hollywood mystique around the quest for The Next Great Investment. The un-glamorous truth, of course, is that unearthing hidden opportunities actually takes equal parts elbow grease and know-how. Par Rostom, is that roll-up-the-sleeves kind of guy. Hes not looking to invest in companies just because they are household names with splashy advertising campaigns. The companies are the ones he feels are best in their particular niche, but that youve probably never heard of. Surprisingly, hes finding some of them in the eurozone, a place the crowd is largely avoiding today.
2012-03-14 Systemic Risk, Multiple Equilibria and Market Dynamics What You Need to Know and Why by Mohamed A. El-Erian and A. Michael Spence of PIMCO
In assessing the possibility, duration and impact of systemic risk factors, we need to analyze the interaction of expectations with market (endogenous) and policy (exogenous) circuit breakers.
In the current environment, the prevalence of some subjective bimodal expectation distributions (e.g. Europe related) speaks to the multiple equilibrium features of sovereign debt markets.
Multiple equilibria give rise to a range of scenarios, each quite different and each with its own distribution of returns, risks, correlations, and market functioning.
2012-03-14 Chart of the Week: The Worlds Infrastructure Plans by Frank Holmes of U.S. Global Investors
Demand for access to basic needs, an emerging middle class and a never-ending use of global resourcesthese are the primary drivers of major infrastructure projects over the next several years. The infrastructure plans taking place across emerging markets emulate a 1950s America. As these governments help their residents pursue the American Dream of better homes, health care and quality of life, I believe the companies with a strong footprint in these growing markets stand to benefit.
2012-03-14 Pacific Basin Market Overview - February 2012 by Team of Nomura Asset Management
We still have a broadly positive view of the outlook for the Asia Pacific equity markets. The European Central Banks efforts to provide long-term liquidity support have alleviated the default risk among the peripheral Euro-zone countries. It also appears that the Federal Reserves easy money policy is beginning to have a positive impact on the U.S. economy. Given this optimism, we believe that equities in the region will continue to rally, particularly in the oversold cyclical sectors such as Industrials, Technology and Consumer Durables.
2012-03-13 Europe's “Back-door QE”: Good News for Global Bond Investors by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-03-13 PIMCO Cyclical Outlook: Navigating the Hurricane of Global Deleveraging by Saumil H. Parikh of PIMCO
We expect the eurozone economy to experience a recession in 2012 on the back of continuing pro-cyclical fiscal austerity measures. We expect 2012 to be the year in which the residential construction sector begins to gradually contribute to U.S. economic growth after a long and painful five-year hiatus. Major emerging market economies are struggling with domestic over-investment, rising income inequalities and inflation risks. Therefore, PIMCO expects major emerging market economies to be less of a global engine of growth in 2012-13.
2012-03-12 The King is Back by Liam Molloy and Bethany Carlson of Galway Investment Strategy
On Mar 1, Lazlo Birinyi called for the S&P500 to hit 1700 in 2012 (an increase of 35%). The 24% rise in the S&P500 between Oct 4 and Feb 29 has prompted many to review their outlook for the year. Their euphoric revisions are propelled by some tailwinds: lean company financials with high operating leverage; emerging markets consumer demand; improving jobs reports; low interest rates, and high cash balances. Many of these factors contributed to Galways relatively positive outlook. However, one lesson we have learned over the years is to start getting nervous when everyone agrees with you.
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.
2012-03-09 Market Fatigue? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market action has been relatively muted, notwithstanding the first 1% down day of this year. After the strong run to start the year, another pause or pullback would not be surprising but we continue to believe the upward trend will largely stay intact. Uncertainty abounds as to whether the Fed will unleash a new round of easing but liquidity remains abundant. Rhetoric continues in Washington but any substantial fiscal or tax policy action this year seems unlikely, despite the many challenges that are looming.Europe has stabilized somewhat but risks remain elevated.
2012-03-08 The Apple Doesn't Fall Far From the Global Resources Tree by Frank Holmes of U.S. Global Investors
After Apple reached $500 billion in market capitalization, it was inducted into a very elite club of businesses that have reached this size. Only Cisco, ExxonMobil, General Electric, Intel and Microsoft have made it to the $500 billion mark. Since October, the tech companys stock has increased nearly 40%, making it the top driver of the S&P 500 rally. This increase caught the attention of many analysts, including Thomas Lee from J.P.Morgan, who declared that the company is a sector unto itself. At a market cap of just under $500 billion, Apple represents 3.7 percent of the S&P 500 Index.
2012-03-08 Global Forecast Update: Growth Upgraded, But Problems Remain by Azad Zangana and Keith Wade of Schroder Investment Management
We have upgraded our forecasts for global growth in response to better data and a further easing of policy. In particular, the success of the European Central Banks (ECB) long term liquidity operations and surprising resilience of Germany mean that we expect the recession in Europe to be shallower than before. However, it is still a weak picture. We do not see US activity taking off as the de-leveraging process has further to run. Much of the recent improvement in growth reflects an inventory cycle as the factors which held the economy back last year fade and go into reverse.
2012-03-08 If Israel Bombs Iran How Could Stocks & Stock Markets React? by Paul Dietrich of Foxhall Capital Management
The probable results of Israel bombing Irans nuclear sites would be oil and gold prices skyrocketing, the stock market could drop precipitously and Iran would almost certainly retaliate by sending missiles raining down on Israel, close the Straits of Hormuz and even attack oil tankers or U.S. naval vessels, as they have threatened to do. Americans could also see a spike in terrorism directed against Americans and American interests overseas and here at home.
2012-03-07 The Labors of Hercules Were Never This Tough by Neil Dwane of Allianz Global Investors
Theres no shortage of insight on the ever-expanding debt drama in Europe. Despite the deluge of information, there are still a few key points to consider. Banks and hedge funds could file lawsuits against Greeces government. Protection against the ISDA declaring a default on Greeces debt could prove to be inadequate. This could mean that things may be worse than we imagine. Markets have rallied this year on positive sentiment that Greeces default has been contained. Are we being too complacent? Still, with solutions being drafted, now might be a good time to buy European equities.
2012-03-07 Winning the War in Europe by Scott Minerd of Guggenheim
Given my view on the global liquidity glut, it probably will come as no surprise that I remain bullish on U.S. investments, including equities, high yield bonds, bank loans and other risk assets, as well as art and collectibles. I believe the United States has entered a period of self-sustaining economic expansion, driven primarily by the aggressive monetary policy of the Fed, which is now being reinforced by the ECB. U.S. growth is necessary to reduce domestic unemployment and to provide support to the struggling economies in Europe and Asia.
2012-03-06 Reviving a Chinese Bull by Pamela Rosenau of HighTower Advisors
Changes in the direction of the reserve requirement ratio (RRR) for Chinese banks, or the minimum reserves a commercial bank must hold according to central bank regulations, have a major impact on the Chinese stock market. The RRR in China had steadily climbed from eight percent in mid-2006 to its peak of 21.5% in mid-2011. The decision in November 2011 by the Peoples Bank of China to cut the ratio by 50 basis points, which was subsequently followed by another cut just last month, appears to be the beginning of a long directional move downward in the RRR as the bank continues to ease.
2012-03-05 Dipping a Toe Back Into the Market by Team of Franklin Templeton
After the rollercoaster that was 2011, trying to explain why now seems like a good time to venture back in still sounds a little crazy. But for those who are looking for some perspective, youve come to the right place. Read on for why Ed Jamieson, president/CIO of Franklin Equity Group, Peter Langerman, president/CEO of Mutual Series, Gary Motyl, president/CIO of Templeton Global Equity Group, and Mark Mobius, executive chairman of Templeton Emerging Markets Group, all think it might be time for investors to consider taking the plunge.
2012-03-02 TARGET2: A Channel for Europe's Capital Flight by Andrew Bosomworth of PIMCO
The Eurosystem's TARGET2 transaction system introduces elements of fiscal union via the back door. The large TARGET 2 positions developing among national central banks in the eurozone reflect capital flight from the periphery to the core and de facto introduce transfer and burden sharing elements of a common fiscal policy. Monetary policy ends up substituting for fiscal policy without going through the same democratic channels that governments' expenditure and taxation decisions entail. Taxpayers in the eurozone are contingently liable for losses incurred by monetary policy operations.
2012-03-02 Positioning Your Portfolio When You Dont Have All the Answers by Josh Thimons of PIMCO
Faced with difficult questions like the European debt crisis, portfolio managers have two possible courses of action: feign omniscience and seek to position portfolios for one outcome, or admit to not knowing the answer and seek to position portfolios to prosper in the most likely scenarios and hold ground in the least.
We believe the latter is the better course because two extreme outcomes appear increasingly likely for almost all asset classes, which increases the risk involved in choosing the wrong answer.
2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors
We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.
2012-03-01 Cures for the Apathetic Investor by Frank Holmes of U.S. Global Investors
A lack of faith and trust has driven investors to the sidelines and halted the flow of capital in the U.S. According to the Investment Company Institute, investors pulled more than $130 billion from equity mutual funds during 2011. This is a common reaction in the cycle of market emotions where investors generally move from a fear of losing money, to becoming apathetic about the markets, to feeling confident about investments, and finally, to irrational exuberance. Right now, many investors appear to be stuck in an apathy sandpit.
2012-02-29 No Easy Fix for Gas Prices by Peter Schiff of Euro Pacific Capital
Oil and gas prices are high now for a very simple reason: the Fed has gone on a campaign to push up inflation and push down the value of the U.S. dollar. Just last week on CNBC James Bullard the President of the Federal Reserve Bank of St. Louis, stated this unequivocally. What is overlooked is the degree to which an inflationary policy at home creates inflation abroad. Many countries who peg their currencies to the U.S. dollar need to follow suit. As China prints yuan to keep it from appreciating against the dollar, prices rise in China. This is especially true for commodities like crude oil.
2012-02-29 Capitalizing on Cambodia by Mark Mobius of Franklin Templeton
Cambodia has been making strides into the capital market arena. The government has been encouraging foreign and local investment. Eventually, the local capital market should follow suit. The Cambodia Securities Exchange opened last year, making it one of the last Southeast Asian nations to open a stock exchange. Neighboring Laos opened its bourse in January 2011 and Vietnams exchange has been operating since 2000. 3 Though the Cambodian exchange has no stocks listed as I write this, the plan is to have state-owned companies in utilities, telecoms and portsto be listed.
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.
2012-02-28 The Outlook for Oil by Russ Koesterich of iShares Blog
Are we headed for another oil shock, and, if so, what are the investment implications? Russ tackles these questions, explaining what could cause an oil spike, why he believes crude prices are likely to stay elevated in the near term and what this means for his view of global energy companies.
2012-02-27 Game Changer by Mark Kiesel of PIMCO
In addition to strong secular tailwinds supporting the energy sector, highly expansionary global monetary policies from many central banks are adding cyclical support to globally traded commodities like oil.
In the U.S. energy sector, we believe that onshore natural gas shale and oil shale developments are creating opportunities to invest in energy companies that may grow significantly faster than the overall U.S. economy.
2012-02-25 The Emotions of Fear and Apathy Create Good Buying Opportunities by Frank Holmes of U.S. Global Investors
One of the reasons money has found its way back to the market is that low interest rates and a bubble in bonds have upped the attractiveness of equities relative to other asset classes. In fact, many large-cap equities come with a higher yield. This means that investors can wait for the growth, while receiving the income. Overall, it looks like the markets dark clouds are lifting and we could be in for a period of sunny skies in the months ahead.
2012-02-25 Is Decoupling for Real? by Team of Neuberger Berman
After an extended period of high correlations, U.S. and European stock markets have taken distinctive paths in recent months. In this report, we take a look at the link between underlying economic fundamentals and market results to consider whether these markets have truly decoupled or are simply going through a temporary separation.
2012-02-24 Global Listed Infrastructure - January 2012 Review & Outlook by Team of Cohen & Steers
We have a positive near-term outlook for infrastructure securities based on improving U.S. economic data and stabilizing credit conditions in Europe. But there are still headwinds. The road to Europes recovery is unlikely to be smooth; and in the United States, state and local government debt may dampen growth. Emerging markets are likely to be somewhat stronger, in our view, driven by better structural demand. For this reason, we have increased our investments in Brazil, China and Mexico.
2012-02-24 Schwab Market Perspective: Two Steps Forward... by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
US stocks and economic data appear to be moving at least two steps forward for every step back, which we believe leads to a strengthening trend for bothalthough there are inevitable bumps along the way. We believe the agreement in Washington to extend the payroll tax through 2012 may be the last substantial economic-related agreement before the election, but there are major issues looming. The Fed continues to believe another round of easing may be appropriate, which we think could be dangerous and that they should be looking to move in the other direction.
2012-02-23 Uncertainty and Change Dominate Markets by Daniel C. Chung of Fred Alger & Company
US companies are doing an admirable job in difficult times. Uncertainty is not an acceptable management strategy, so businesses are continuing to move for-ward and seek opportunities to grow, even as Washington dithers. Despite our many concerns about the state of US policy-making, we remain confident in the fundamental strength of our economic system and the vitality and creativity of corporate American its people and in its structure
2012-02-23 Emerging Markets: A 2012 Outlook by Ingrid Baker of Invesco
Emerging markets, once an asset class favored primarily by the dedicated global investor, came of age during the past decade. The Asian Crisis of the late 1990s, Russia
2012-02-23 9 Key Themes To Impact Returns in 2012 by Scott Migliori of Allianz Global Investors
A breakdown of the key drivers of market performance in 2012 including corporate profits, pricing/inflation, interest rates, economic activity, international performance, the dollar, valuations, technical/sentiment and fiscal policy. The U.S. economy is likely to grow 5%
2012-02-23 PIMCO by Ed Devlin of PIMCO
Given the bimodal nature of the expected distribution of outcomes, it is important for investors to remain nimble so they can respond to high frequency data and global public policy developments.
We expect the Bank of Canada to remain in wait-and-see mode until it is clear which way the economy is tipping.
In our base case scenario, we estimate Canadian bond market returns in the range of 2%-4%, and if we tip into a virtuous cycle of economic recovery, we anticipate the possibility of negative absolute returns.
2012-02-22 Closed End Funds - January 2012 Review and Outlook by Team of Cohen & Steers
The U.S. economic picture has brightened meaningfully since December, and we expect the trend to continue, albeit at a modest pace. We are also encouraged by progress in Europe, but continue to monitor developments closely, as the issues there are complex and will take considerable time to resolve, while economic austerity measures are likely to weigh on growth. In this period of extended easy monetary policy by the Federal Reserve, we believe the yield advantage of leveraged closed-end funds will continue to draw investor interest, as demonstrated by the IPO in January.
2012-02-22 Emerging Markets Real Estate Securities by Team of Cohen & Steers
We believe that recent developments within emerging real estate markets are consistent with our macro view. As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures moderate. Given the potential for better domestic growth, we expect to take advantage of buying opportunities among residential developers (e.g., in Brazil), and have selectively been moving in that direction.
2012-02-22 Rethinking Risk: Pension Plans Should Adjust to Global Realities by Jeff Helsing of PIMCO
Many governments are carrying higher levels of debt, which can increase both economic and asset volatility as well as default risk.
The resulting incremental increase in default risk suggests pension portfolios may have less duration than implied by traditional measures.
Pension plans with high levels of equity exposure should consider increasing durations and credit exposure.
Investment guidelines may need to be adjusted so they dont measure credit risk simply by the World Banks definition of emerging markets.
2012-02-21 Gundlach: The Two Questions that Matter Most by Robert Huebscher (Article)
Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.
2012-02-21 Inflation Held in Check by Fear by John Browne of Euro Pacific Capital
Out of control money supply creates inflation. In light of the trillions of synthetic dollars that have been injected into the economy by the Fed over the past five years, most observers had expected prices to spiral upward. But in making these determinations, many of us forgot to factor in the supply side of the supply/demand equation. Inflation remains low now because of game changing events that have reduced the demand for money. So beware of the recovery. Any wakening of animal spirits in the U.S. will likely stir the threat of inflation, which may very well short-circuit the recovery.
2012-02-21 Good News Cant Keep a Lid on Investor Fear by Kristina Hooper of Allianz Global Investors
The outlook for the stock market keeps getting brighter, but investors are still letting fear cloud their judgment. In the United States, the jobs picture a rather bleak scenario less than a year ago has improved substantially. The euro-zone debt crisis has also improved. We havent seen any real contagion from Greece, as evidenced by sovereign debt yields. And despite prominent investors such as Warren Buffett and Jeremy Grantham favoring stocks over bonds, a lot more money flowed into bond funds in January. This disconnect reveals a continued tug-of-war between fear and fundamentals.
2012-02-21 International Equity - January 201 by Team of Thomas White International
International equity prices recorded strong gains in January on increased optimism that the global economy is not headed for a significant downturn this year. Markets across all regions, led by Asia, recovered during the month. Emerging markets, which had seen price declines during the second half of last year, outperformed the developed markets. Economic indicators from most regions, except Europe, have been relatively healthy and suggest expansion. EU leaders have now agreed to set tighter fiscal rules for member countries, including limits on fiscal deficits and aggregate public debt.
2012-02-21 Emerging Markets Equity - January 2012 by Team of Thomas White International
Emerging market equities outperformed the developed markets by a wide margin in January, as investors became increasingly confident that weak data trends from the third quarter of last year were not an indication of a significant growth deceleration in the major emerging economies. The gains were well spread out as almost all regions participated in the uptrend. India, Egypt, and select markets in Europe that had seen the worst price declines during the second half of last year, recovered the most during January.
2012-02-18 The Enduring Popularity of Gold by Frank Holmes of U.S. Global Investors
For thousands of years, pharaohs, explorers, rulers and investors have been attracted to gold, as the precious metal has been a vital tool in building and protecting wealth. While gold naysayers focus on the day-to-day fluctuations in price, I believe gold equities and bullion will continue to enjoy maximum popularity, as the Oracle of Omaha puts it, for years to come. The allure of goldwhether it is from Fear or Lovecannot be underestimated.
2012-02-18 What Will be the Most Promising Emerging Market? by Frank Holmes of U.S. Global Investors
Bloomberg Markets magazine recently posted a list of the most-promising emerging and frontier markets for investors. Rankings were determined by several investment measures, including GDP growth and ease of doing business.
2012-02-17 Assessing Performance Records A Case Study by Howard Marks of Oaktree Capital
What are the non-negotiable requirements for accurately assessing investment performance? Id say: a record spanning a significant number of years, a period that includes both good years, and a benchmark or peer universe that makes for a relevant comparison. The other day, at an event for alumni and other constituents of the University of Pennsylvania, president Amy Gutmann reviewed the performance of the university during the financial crisis. Thinking about it afterward, I realized that I should share with you the story of Penns endowment and its lessons.
2012-02-17 Economic Insights: Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Europe seemingly creates new financial and economic concerns daily, while in the United States, fiscal questions and election uncertainties trouble the outlook. Still more dangerous issues surround the military and diplomatic maneuvering in the Persian Gulf. And these are just a sample of the sources of investment concern. But even as all this prompts people to hide in cash and the usual safe havens, such as U.S. Treasury bonds, these investment choices pay such poor yields that presumed safety comes at tremendous cost. Investors, then, must consider riskier investments.
2012-02-16 Hasenstab Sticks to His Guns by Team of Franklin Templeton
Michael Hasenstab, Portfolio Manager of the Templeton Global Bond Fund, doesnt scare so easily. As he reiterated recently, he actually sees times of market panic as opportunities to make investments where he sees long-term value. The key thoughts he shared: The challenge during periods of volatility is that, although investors can take a short-term hit, this volatility can create opportunity. Fears Europe will sink Asia appear overblown. China not likely to see a hard landing. The Eurozone drama continues to unfold.
2012-02-16 The Upticks Downside by Nouriel Roubini of Project Syndicate
Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. But at least four downside risks are likely to materialize this year, undermining global growth and negatively affecting investor confidence and market valuations of risky assets.
2012-02-14 ‘The Greatest Anomaly in Finance' by Geoff Considine (Article)
If I told you that there is an easy-to-exploit market anomaly that has enabled investors to consistently and substantially outperform the market with less risk for more than four decades, your first instinct might be to roll your eyes. After all, the unending quest to improve returns while lowering risk has yielded countless methods with initial promise that subsequently collapse under further scrutiny.
2012-02-14 A Dejected Asset Class Finds Its Way in 2012 by Chris Maxey of Fortigent
Investor interest is acutely focused on the developed world, specifically Europe and the US. All the while, developing countries continue to be better positioned fiscally, with lower debt and better long-term growth prospects. Despite the outlook, stock markets in emerging markets are largely at the mercy of their counterparts in Europe and the US, suffering in lockstep as opposed to embracing the decoupling phase that was supposed to have begun in 2007. According to the IMF, emerging and developing economies grew 6.2% in 2011, compared to a 1.6% growth rate in advanced economies.
2012-02-14 3 Reasons to Underweight South Africa by Russ Koesterich of iShares Blog
In my opinion, investors should consider minimizing their exposure to emerging markets in Europe, the Middle East and Africa, otherwise known as EMEA. The big reason: emerging markets in EMEA generally have close economic ties to the euro zone, which as we all know is going through a rough spot and is likely to experience at least a mild recession this year. Drilling down to the stocks of specific emerging market countries within EMEA, Im particularly focused on South Africa as its the largest country in the MSCI Emerging Markets EMEA index.
2012-02-13 Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Among those choices, credit-sensitive fixed-income instruments would seem to offer superior returns with reasonable security. Opportunities also present themselves in the equity markets. In the developed markets, North America seems to offer the best risk/reward balance. Though stock valuations are better in Europe and Japan, the former still needs to deal with its debt crisis and the likelihood of recession, while the latter faces the very fundamental matter of severely aging demographics as well as the immediate adverse impact of an expensive currency.
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 Pacific Basin Market Overview January 2012 by Team of Nomura Asset Management
The risk of a meltdown in the peripheral European economies now appears to have been alleviated due to aggressive monetary easing by the European Central Bank. We have also recently upgraded our GDP forecast for the U.S. Japan has started implementing the third supplementary budget for earthquake reconstruction. As such, the countrys growth rate will exceed those of other developed economies in the first half of 2012. A less hostile global environment will be positive for Asian stock markets as investors increasingly appreciate the regions superior fundamentals.
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.
2012-02-09 Innovation Suggests Vibrant Future for Tech Sector Innovation Innovation by Walter Price of Allianz Global Investors
We are relatively positive on technology in 2012 for a variety of reasons. In mid-2011, large-cap tech companies valuations began to stabilizemany at record lows. A number of tech companies have also built stable businesses since the early-2000 tech decline, and more have started paying dividends. Moreover, tech companies generally do well in slow-growth periods because they offer cost savings, and particularly innovative companies can get very good traction in this environment. Indeed, Facebook's IPO is likely to usher in a new era of online advertising.
2012-02-09 Economic Update by Richard Hoey of Dreyfus
For 2012, we have three themes and three risk concerns. The three main themes are (1) global growth recession, (2) lower inflation for now and (3) monetary ease. The three main risk concerns are (1) the European financial stresses, (2) the Chinese property market and (3) the Middle East risks, with oil supply vulnerabilities as the main concern. We expect a global growth recession in 2012, rather than either a strong global expansion or a fullscale global recession.
2012-02-08 Notes from the CES: As Old Tech Tries to Stay Relevant, Investors Need to Be Careful by Terrence L. Ing of PIMCO
Revenue growth rates at many large investment grade technology companies have declined in recent years while debt issuance has risen, in part because of nearly full market penetration in certain high-tech products but also due to less innovation.
PIMCO is very selective in the investment grade tech sector, favoring companies with strong and growing patent portfolios in areas of secular growth, strong free cash flow generation and low leverage.
2012-02-07 Neel Kashkari on PIMCO's Equity Strategy by John Heins (Article)
Bond titan PIMCO has been methodically building its equity-investing expertise. Here the architect of that effort, Neel Kashkari, and his first major hires describe their strategy and how they're uncovering value in today's market.
2012-02-07 Market Dimensions by James Damschroder of Gravity Capital Partners
We estimate there is a 15% to an upwards of 31% opportunity for some reasonable re-inflation to normal valuation to be had in emerging equity securities. It wouldnt be too aggressive to even call 60%. That would bring us to an implied P/E of only 15. I dont know if itll take six months or several years to accomplish this, but this was the logic I used in getting back into the international markets quickly after having correctly anticipating the start of the sovereign debt crisis. In retrospect, we came back a little early; but I believe this move will be very fruitful in the long run.
2012-02-07 Financial Markets Review and Outlook Fourth Quarter 2011 by Team of Managers Investment Group
Volatility looks like it will persist within global capital marketsat least until there is more certainty about the future of European sovereign debt. Until that time, we continue to believe that markets will react with an elevated level of volatility, with gains and losses tied primarily to investors day-to-day perception of the ability of policymakers to manage this situation. Despite the persistent negative headlines, primarily surrounding the European sovereign debt crisis and the stubbornly high unemployment here in the U.S., there are signs of improvement as we head into the New Year.
2012-02-07 Global Overview: January 2012 by Team of Thomas White International
Concerns over a significant global downturn have faded further as economic data trends from the last days of 2011 and the early days of the current year remain healthy. Global manufacturing activity expanded again in January, helped by output growth in the U.S., China, Japan, India, and Australia. Manufacturing output also improved in the Euro-zone, helped by continued gains in Germany. U.S. labor market conditions advanced again in January, raising hopes for increased consumer demand that will also help export growth in other economies such as China.
2012-02-07 Where to Find Value in Emerging Asia by Russ Koesterich of iShares Blog
Im updating my views on some of the emerging market countries in Asia. While Im upgrading Chinese equities from neutral to overweight, Im downgrading South Korean and Indian stocks from neutral to underweight. Starting with China and South Korea the two countries are both highly exposed to global growth, but China currently appears to be the better positioned and is likely to hold up much better. To be sure, South Korean equities are also cheap compared to other emerging markets. Im downgrading India in response to the countrys recent surge in valuations and persistently high inflation.
2012-02-03 Global Markets Rally on Moderating Global Risk and Positive Fundamentals by Doug Cote of ING Investment Management
The so-called January Effect typically causes equity markets to explode out of the gates only to fizzle out after the second week of the month. January 2012 was different, however, as the equity market delivered four weeks of moderate but relentlessly positive returns on the back of easing global risks. Meanwhile, volatility broke below 20 for the first time since last May. Investors on the sidelines barely noticed the explosive performance, nor did a media that nonchalantly labeled it a stealth rally There is nothing stealthy about a 4.5% monthly return!
2012-02-03 In the Bullring With Gold by Frank Holmes of U.S. Global Investors
We anticipated that the Year of the Dragon would spur an increase in the buying of traditional gifts of gold dragon pendants and coins. Gold buying did hit new records, says Mineweb, with sales of precious metals jumping nearly 50 percent from the same time last year, according to the Beijing Municipal Commission of Commerce. This should serve as a warning to all of golds naysayers. Gold bullfighters bewareyou now have to fight the gold bull while fending off a golden Chinese dragon.
2012-02-02 Knowledge is the Antidote to Fear by Team of Sloan Wealth Management
We feel investors should focus on the high probability that this could be a rewarding decade. The volatility of the market can often mask the improving fundamentals. Now two years into the decade, we are pleased that the SWM Moderate Risk Composite is up 14%. This election year will create endless entertainment, needed discussion on the future of our great nation and finally clarity for corporations and individuals. This clarity should allow corporations to loosen their purse strings and continue to fuel growth.
2012-02-02 2011: The US Year by Richard Bernstein of Richard Bernstein Advisors
The market generally proves the consensus wrong, and 2011 certainly adhered to that historical precedent because the consensus "must owns" at the beginning of 2011 generally underperformed during the year. What is somewhat startling to us, however, is that conviction has yet to be shaken. The consensus continues to favor commodities, emerging markets, and "any-bond-but-treasuries".
2012-02-01 Year-End Commentary by Steven Romick of First Pacific Advisors
We find investing especially challenging todaynot that its ever been easy. We feel like we are forced to bet on policy, and how does one do that? Particularly when we believe we are betting that too many of the wrong people will make the right decisions. We feel a little like explorers, blazing new trails, learning about the new world weve come upon, charting a different path with new information, all while trying to avoid being scalped. We continue to seek the best path, even if its new, to both protect your capital (first) and to provide a return on it (second).
2012-02-01 Investment Opportunities in the Changing Cash and Short Duration Markets by Jerome Schneider and Paul Reisz of PIMCO
Volatility has soared in the cash markets as the eurozone crisis has deepened, prompting many investors to pull cash out of prime money market strategies over the last year.
With U.S. interest rates on hold until 2014 and regulations on 2a-7 money market strategies putting pressure on yields, cash investors will likely face near-zero yields for several years.
In this environment, we believe investors should reassess their liquidity needs and consider putting cash that is not needed right away into short and low duration instruments instead of money market strategies.
2012-02-01 Will I be able to retire ever? Answers to our clients #1 question! by David Edwards of Heron Financial Group
Our clients are divided between those who are at least 65 and already retired (30%) and those clients aged 35-65 for whom retirement seems like an ever receding mirage. In this commentary, we will concentrate on the mechanism that we use to implement a clients retirement income strategy, review how this strategy has performed since January 2000, and review the lessons learned.
2012-01-31 Bob Doll Believes the Recent Equities Rally Could Continue by BlackRock (Article)
Conditions have improved compared to last quarter, with the US economy showing signs of acceleration and European policymakers moving further along the path of progress. With the bearish tone receding, investors should consider moving into "risk" assets and out of "safe" assets, especially on pullbacks.
2012-01-31 Barry Eichengreen on the End of the Dollar by Dan Richards (Article)
Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. In this interview, he discusses the future of the dollar as the reserve currency and the role of the IMF in the Eurozone crisis. This is the transcript of the interview.
2012-01-31 To Fight or Not to Fight the Worlds Central Banks by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Isaac Meng of PIMCO
We are skeptical that fiscal austerity alone is sufficient for all eurozone countries to grow and remain solvent. We thus expect the ECB to continue supporting the euro area with liquidity in 2012.
Recent central bank policy in China is oriented toward stabilizing growth in a political succession year, while balancing lingering inflation and medium-term systemic risks.
Investors may want to hedge portfolios by looking to select emerging markets with the ability and willingness to cut policy rates both from a cyclical as well as structural perspective.
2012-01-30 Sector Insights Focus: Consumer Staples by Mark H. Dawson and Daniel M. Brewer of Rainier Funds
After steadily rising in terms of market capitalization in the 1980s, the consumer staples sector shrank in the 90s as technology shares swelled in market value. Over the most recent decade, staples representation has crawled back to about 10% in the large growth and value indices, while inclusion in small-cap indices ranges between a mere 3-6%. The theme of consolidation within industries continues today and the sector is increasingly dominated by a small number of mega-cap corporations often seeking to acquire small- and mid-cap companies.
2012-01-30 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week featured continued excellent earnings reports (see our comments below on Caterpillar and Boeing) along with mixed economic news. As a result the stock market overall was flat to positive. As the charts above illustrate, the Dow Jones Industrial Average dropped by about one-half a percent while the NASDAQ Composite gained just over one percent largely due to a stellar report from Apple.
2012-01-30 Tide Turns for Structured Credit by Joshua Anderson and Carrie Peterson of PIMCO
Many investors remain skeptical, but the market environment for structured products has changed markedly since the financial crisis of 2008.
Current pricing now reflects a more realistic view of the underlying fundamentals, including weakness in the global economy and U.S. housing market.
We believe now is the time to consider entering the structured credit market.
2012-01-30 Fourth Quarter Investor Letter by Mark Bennett, David Templeton and Nick Reilly of HORAN Capital Advisors
We have our reservations about world economic output, but stand by our past comments about slow U.S. growth without a recession. We do believe equities offer attractive return opportunities for the foreseeable future in the context of historical valuation and relative valuation. We acknowledge the structural issues prevalent in developed economies and the risk that comes with debt hurdles, demographic challenges and potential deflation, but there are many data points that make us optimistic about equity returns in 2012 and for long-term strategic investment allocations of capital.
2012-01-27 Global Real Estate Securities Investment Commentary - Full Year 2011 by Team of Cohen & Steers
Our macro outlook has turned more positive given the global shift toward monetary easing as well as U.S. economic data confirming steadily improving growth. However, we expect the fiscal crisis plaguing Europe to remain an overhang, as the region is likely heading into recession, making a long-term resolution increasingly difficult. Despite these challenges, we believe fundamentals for global real estate securities will continue to improve broadly, with the lack of new supply coupling with growing demand and effective expense reduction to generate meaningful cash flow growth.
2012-01-27 International Real Estate Investment Commentary - Full Year 2011 by Team of Cohen & Steers
We remain materially underweight Europe and Japan, and overweight Asia Pacific (ex-Japan). We have selective allocations to well-established companies in emerging markets whose business models are positioned to benefit from secular growth in consumer spending among emerging middle classes. We are overweight high-quality retail and offices in major city centers globally, where tenant demand has been more resilient and supply more constrained. Finally, we have allocations in property sectors and geographies where stronger cyclical recovery is emerging as a driver of outsized cash flow growth.
2012-01-27 LCV Web Commentary - December 2011 by Team of Cohen & Steers
We continue to believe that the crisis in Europe is far from over; that the improving U.S. economic data, while encouraging, signal something well short of a robust recovery; and consequently, that the first half of 2012 remains highly uncertain. For these reasons, we still expect (1) more intervention by politicians and central bankers, (2) continued historically low interest rates in the US, (3) modestly positive U.S. economic data, (4) high but slowing growth in China and emerging markets, (5) short-term measures to address Europes long-term debt crisis.. and others.
2012-01-27 12 Trades for 2012 by Komal Sri-Kumar of TCW Asset Management
Earlier this month, I suggested that investors closely watch 12 macroeconomic and financial indicators in deciding whether the world economy is improving or worsening (12 Indicators for 2012, January 3, 2012). Some readers wrote to ask if I would discuss what those indicators would mean for investment strategies. That was the genesis of the present piece which is intended to be consistent with expectations on the economic and financial fronts.
2012-01-27 Slow Road to 'Normal?' by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volatility has fallen and tight correlations have loosened, indicating to us some calming of fears and increased attention on more traditional economic and earnings-related news. This is a good sign for stocks in the foreseeable future. The Fed unveiled its new communication strategy after its most recent meeting, reiterating that interest rates will likely remain extremely low for some time. The European picture is brightening slightly and there may be a glimmer of hope for stock market investors. After a soft patch, global growth may be turning around.
2012-01-27 Heart of China Bull Beats Strong by Frank Holmes of U.S. Global Investors
With rising incomes and increasing urbanization, we believe China is pursuing the American Dream, and the government has shown great determination to build the necessary infrastructure along with a robust urban labor market. On a purchasing power parity basis, Chinas share of world GDP has risen significantly, from around 3 percent in 1985 to a current world share of nearly 16 percent.
2012-01-25 2011 Review and Outlook by Ronald W. Roge and Steven M. Roge of R. W. Roge
While there is plenty to worry about globally, particularly the European financial crisis, Iran, and domestic policy decisions, we can take some comfort that corporate earnings continued to grow and our economy is muddling through with positive GDP numbers. Traditionally, election years are positive for equities. Since 1928 there have been 21 Presidential elections with only three of those years producing negative returns for the S&P 500. Until we have more clarity on the U.S. election, domestic policy decisions and the European financial crisis we will remain cautious and flexible.
2012-01-25 Emerging Markets Real Estate Investment Commentary Full Year 2011 by Team of Cohen & Steers
Over the long term, we believe emerging market real estate securities are well positioned to benefit from secular trends such as expanding urban centers and the rise of the consumer class. In the near term, however, we expect volatility to continue as markets grapple with uncertainty about Europe and further deceleration in economic growth. In this challenging market environment, we continue to favor commercial landlords over developers.
2012-01-24 Economic Update by Richard Hoey of Dreyfus
The most likely outlook for the world economy in 2012 is a global growth recession. The economic outlook reflects disparate trends in different regions: a full-scale recession in Europe, stagnation or moderate recession in the nearby U.K., near-trend growth in the U.S., continued expansion in Japan and moderate slowdowns in China and most other emerging market countries. While European financial stresses are serious, the global shift towards monetary ease should help mitigate the spillover effect. The result should be a global growth recession rather than either a full-scale global recession.
2012-01-24 The Global Economic Outlook: Diverging Paths by Thomas D. Higgins of Dreyfus
The global economy can weather a mild eurozone recession, but is too fragile to absorb a severe financial shock such as a breakup of the euro. Higgins expects Central and Eastern Europe are likely to be most negatively affected by a eurozone recession, followed by the UK, the US and other advanced economies, given their respective trade dependencies. The least vulnerable regions would be Asia and Latin America. Long-term value in popular safe havens such as U.S. Treasuries and gold, preferring to focus on U.S. non-financial corporate credit as well as emerging market local currency debt.
2012-01-24 The Plain Facts by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe that, while Europe will suffer a recession in 2012 on its painful path to recovery, with or without Greece, the U.S. and Canada will likely see accelerating growth this year, as will China, India and Latin America. In fact, global growth should be above 3%, supported by record high total household wealth in the world, which has doubled since 2000. China and India provide half of the worlds economic growth. And manufacturing in India and China grew in December and should continue to do so from renewed government stimulation.
2012-01-20 Equity Investment Outlook by John Osterweis and Matt Berler of Osterweis Capital Management
We believe that 2011 was an aberration in terms of stock market correlations and that gradually stocks will once again perform based more on their individual results and outlooks and less on the markets en masse risk on, risk off vacillations. Despite our near-term caution, which reflects a very uncertain economic and political climate, we are increasingly convinced that equities are poised for solid longer-term returns. Over the past ten years, stocks generally underperformed bonds. This is highly unusual. Stocks are now reasonably priced and profits are expected to expand.
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 After 2011 Hit, Are Emerging Markets Set to Recover First? by Frank Holmes of U.S. Global Investors
Our team has put together a great table ranking 19 emerging market countries by how their stocks have performed in each of the past 10 years. Most of the E-7 countriesthe most populous nations in the worldare listed, including Brazil, China, India, Indonesia, Mexico, and Russia, as well as other resource-rich and growing Asian, Eastern European and Latin American countries.
2012-01-20 It May Take a Dragon to Breathe Fire into Markets by Frank Holmes of U.S. Global Investors
Ive found many people are particularly energized about predicting a hard landing for Chinas economy, but I believe the country is no sinking ship. China isnt fast-approaching an iceberg in the dark of the night like the Titanic. Beijing has long been anticipating the ice chunks and subtly adjusting the rudder around inflation without steering the economic ship too far off course.
2012-01-19 Inflation: Wheres the Beef? by Team of American Century Investments
With inflation seemingly in check, we reevaluate the near- and longer-term inflation environment, and discuss implications for investor portfolios. It is easy to understand why this topic intrigues so many. Depending on your perspective, inflation can be said to be rising fairly rapidly from low levels seen just a few years ago; or it could be said to be quite restrained, given the calls in recent years for runaway inflation as a result of unprecedented U.S. monetary and fiscal policies and a number of pronounced global economic imbalances.
2012-01-19 Riding the Global Roller Coaster: The Outlook for Emerging Markets High Yield Corporates in 2012 by Brigitte Posch of PIMCO
Because many emerging market high yield companies were able to deleverage after the 2008/2009 crisis, we believe they are generally in a stronger position than their developed market counterparts.
Limited financing needs should provide technical support to the overall emerging markets corporate market.
In an environment where lending conditions tighten in international capital markets, domestic markets may become a source of funding for EM HY corporates.
2012-01-19 Asia-Pacific Portfolio Managers Discuss PIMCOs Cyclical Outlook by Robert Mead, Isaac Meng and Raja Mukherji of PIMCO
We expect emerging Asia growth below the market consensus due to its less aggressive policy responses compared to 2008-2009.
The Asia-Pacific region is less affected than others by eurozone turmoil but contagion is still a risk through direct trade and the regional production chains that characterize Asias export-oriented economies.
In this environment, we favor Australian government bonds for their high credit quality, low-beta currencies such as the Chinese yuan, corporate issuers that have delevered, covered bonds and mortgage-backed securities.
2012-01-17 The Mess That Is the Eurozone Inflation-Linked Bond Market by Michael Althof and Jeremie Banet of PIMCO
Italian ILBs now mostly reflect credit risk and tend to trade at a discount to compensate for the higher volatility. Unless the eurozone collectively decides to inflate their way out of their sovereign debt problems through a large increase in the ECB balance sheet, Italian inflation-linked bonds are likely to keep trading like a more volatile and less liquid version of nominal Italian bonds. A European investor looking to secure consumption of real assets in the future may wish to think about alternative measures to help protect their real purchasing power when hedging real liabilities.
2012-01-17 Thinking About the Implications of Rising Euro-Exit Risks by Myles Bradshaw of PIMCO
Even if the euro survives this crisis intact, the market will price in uncertainty as the crisis evolves. Scenario planning is indispensable for investors.
Politics may prevent the European Central Bank from buying government bonds, but it could provide funding support via a special government or banking intermediary. This balance sheet expansion could be a negative for the euro.
Within the eurozone we believe investors should look at alternatives to the government sector, including agency, regional government and covered bonds.
2012-01-17 Fed Policy Outlook More Communication Is Good by Scott Brown of Raymond James Equity Research
The Federal Open Market meets next week to set monetary policy. Its widely expected that short-term interest rates will remain unchanged and that (for the time being) there wont be another round of asset purchases (QE3). The Fed will begin publishing the range of senior Fed officials projections of the appropriate federal funds rate target (for the fourth quarter of this year and the next few years). There are more benefits than risks in making these projections public.
2012-01-13 The Year that Was and The Year to Come by Mark Mobius of Franklin Templeton
From a long-term perspective, we continue to have a positive outlook on emerging economies. In our opinion, balancing growth, inflation and global competitiveness will be the task ahead for many emerging countries in the months to come. We believe that emerging stock markets could be much larger than they are today, and over the long term, their combined value could potentially exceed the combined value of the U.S., Japanese and European equity markets.
2012-01-13 What the Next Decade Holds for Commodities by Frank Holmes of U.S. Global Investors
What will happen over the next 10 years? I believe the supercycle of growth across emerging markets will continue with rising urbanization and income rates. This bodes well for commodities, especially copper, coal, oil and gold, and well continue to focus on companies that will benefit the most from these much-needed resources.
2012-01-13 Investing in 2012: Same Issues, More Extreme Valuations by David Kelly of J.P. Morgan Funds
When all was said and done, 2011 turned out to be the metaphorical equivalent of a roller coaster ride.There were quiet positives: The addition of 1.6 million jobs with the unemployment rate falling from 9.4% to 8.5%, a gradual improvement in light vehicle sales, the demise of Bin Laden and gathering economic momentum as the year drew to a close. There were scary negatives: soaring oil prices in reaction to the Arab Spring the human and economic toll of the Japanese tsunami the inability of Europe to deal with its complicated debt issue and the inability of Washington to deal with simpler one.
2012-01-13 Time to Climb? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The US economy continues to expand and has recently picked up momentum. Investors have been focused on European and US debt problems, but that may set up an environment for stocks to move higher. Many challenges await Congress. We're not optimistic that much progress will be made, but the rhetoric will almost certainly heat up as late-year elections loom. Recent policy decisions in Europe provide some hope but the region's banks continue to struggle and are pulling back on lending, which likely impedes growth. In China, policymakers attempt to keep growth from dipping below healthy levels.
2012-01-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
We recognize that fundamental conditions in the euro zone and the aging US economic recovery make the 2012 earnings outlook somewhat less clear and less robust than it was in 2011. While equity valuation appears supportive and US economic data is moderately improving, unexpected events can upset the balance making for greater than desired volatility, as seen in 2011. We believe equity performance for 2012 will hinge as much on macroeconomic developments as on company-specific business execution. A trading range both above and below current levels should be expected for 2012.
2012-01-12 Pacific Basin Market Overview December 2011 by Team of Nomura Asset Management
For much of the fourth quarter of 2011, anxiety surrounding the ongoing European sovereign debt crisis has kept the Pacific Basin equity markets largely range bound, although most indices managed to trend higher from their October lows with the help of unexpectedly buoyant economic data from the U.S. The MSCI AC Asia Pacific Free Index including Japan gained 0.66% and the MSCI AC Asia Pacific ex Japan Free Index gained 3.96%, resulting in declines of 17.31% and 17.98%, respectively, for the full year.
2012-01-12 Global Investment Outlook by Team of Aberdeen Asset Management
Policy makers globally face the challenge of supporting growth while managing debt levels, and still remaining aware of inflation. The Eurozone crisis is a further complication, and has the potential to make matters more difficult. That being said, there is still growth in the world economy, though perhaps more disparate than in previous cycles. Given the inter-connected nature of countries in the globalized world, there are few areas truly insulated from turmoil. However, there are safer-havens where clearer policy frameworks and the ability to enact solutions more robustly are helpful.
2012-01-11 Developed Asia Pacific: Economic Review by Team of Thomas White International
Developed Asia Pacific economies faced economic headwinds for the greater part of the fourth quarter of 2011 beginning in October. Major export-oriented economies such as Japan, Hong Kong, and Singapore witnessed slowing export growth as consumer confidence in key markets such as the U.S. and the EU remained weak. Although China boosted exports from Developed Asia Pacific economies, overall exports to emerging economies across the world came under pressure. Furthermore, the resilience of the labor market was also tested by the slowing export and domestic markets.
2012-01-11 Aberdeen Chile Fund, Inc. Fund Manager Interview by Team of Aberdeen Asset Management
Chile has developed a middle class quicker than many of its Latin American peers and consequently, more robust domestic consumption trends. Chile has formed close ties with China in recent years and in 2005 became the first country in Latin America to sign a Free Trade Agreement with the Asian nation. Chile has proven to be a model to the Latin American region in regards to good corporate governance and transparency. Though Chile will not be fully insulated from the global downturn, the countrys longterm fundamentals remain sound.
2012-01-11 From Divergence to Nemesis, More 2012 Economic Scenarios by Russ Koesterich of iShares Blog
A new outlook from the BlackRock Investment Institute offers five economic scenarios for 2012. Russ describes how this outlook lines up with his expectations for the year.
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 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine’s Jeffrey Gundlach. And since the Barclay’s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 How an Advisor Doubled New Clients by Dan Richards (Article)
It's not always the bold strategic initiatives that pay dividends; rather, executing the little things makes a big difference. In the fall of 2010 I ran a workshop for advisors in which I discussed a regular focus on a short list of high priority prospects. An attendee described how he'd used this idea last year as the jumping off point to add 15 minutes to his Monday morning team meeting - and doubled the number of new clients.
2012-01-10 2011: The Famine That Followed the Feast That Followed the Fiasco by Ron Surz (Article)
Ron Surz provides his award-winning commentary on the US and global markets.
2012-01-09 Macro Matters: Incorporating Top-Down Views in Emerging Market Equities by Curtis Mewbourne and Masha Gordon of PIMCO
From 2003 to 2011, over 50% of returns of the MSCI Emerging Markets Index came from country-related and currency-related factors.
Over the next 12 months, there will be elections in countries representing just under half of global GDP. Therefore, we expect more policy experimentation, varying degrees of effectiveness, and unintended consequences.
Currencies are also an important driver of EM equity returns, and the cost of hedging currencies has meaningfully declined over time.
2012-01-09 Investment Perspective Fourth Quarter 2011 by Team of Cambridge Advisors
The concerns over Europes debt problems continued and contributed to volatility in stock prices and bond prices. Although the markets have responded favorably to the partial solutions that have emerged, the issues are not entirely resolved. In this environment where the outlook can and does change quickly based on unfolding worldwide events, volatility is likely to persist. We continue to believe diversification across asset classes is the prudent strategy in this environment. Bonds provide stability, but stock exposure is needed for long-term growth.
2012-01-09 Stock Volatility: Not What You Might Think by Charles Lahr of PIMCO
Contrary to finance theory, lower risk appears to produce the potential for higher returns over the long term.
Volatility tends to amplify stock returns so higher risk generally leads to higher returns in a positive market and greater losses in a negative market.
Over the long run, lower volatility stocks can lead to higher returns because avoiding the downside can have powerful effects on compounding.
Higher volatility stocks tend to fit the definition of speculative, while low volatility stocks can offer the potential for preservation of principal and a satisfactory risk-adjusted return.
2012-01-09 Year End 2011 Newsletter by James G. Tillar, Steve Wenstrup and Tim Roesch of Tillar-Wenstrup Advisors
Most recent economic news has surprised on the upside, including improvement on the jobs front. We are not willing to argue yet that this is the start of a long-term trend, but it is nonetheless encouraging. We see no compelling reason to make significant changes to our strategy. Well maintain a cash cushion to protect from any downside volatility and continue to emphasize traditional blue chip, high-quality, and deep value stocks. At some point it will be advisable to broaden our portfolio but the time has not yet come.
2012-01-06 Pioneering Frontier Markets by Mark Mobius of Franklin Templeton
While emerging markets were considered a niche or exotic investment when I started investing in the late 1980s, many investors are now familiar with them and Im seeing more and more investors turning to emerging markets as a way to diversify their portfolios. Yet, emerging markets themselves are not a homogeneous zone. Within the emerging markets universe, we believe frontier markets as a whole have begun to take an impressive lead in terms of growth.
2012-01-06 Burgers or Barrels--What's Your Power Play? by Frank Holmes of U.S. Global Investors
In a recent blog post, the Wall Street Journal asked its MarketBeat readers if a share of McDonalds stock or a barrel of oil made a better $100 investment. The share price of the fast-food restaurant topped $100 for the first time ever in late December and rose 30 percent over 2011, substantially beating the overall market. Crude oil prices had less sizzle, only moderately increasing over the year. The three-year picture is a little different, with crude oil more than tripling since its bottom in late 2008. Over the same time, McDonalds increased about 66 percent, says the Journal.
2012-01-06 Capturing Domestic Demand in Emerging Markets Neither Small Caps Nor Multinationals Are a Good Proxy by Arjun Divecha of GMO
As domestic demand play gains momentum, we hear increasingly that the best way to capture this theme is to buy small cap emerging stocks. We believe, however, that this is a mistake and that focusing on companies that specifically serve domestic demand is a more effective way to exploit the opportunity. Besides, why buy a proxy when you can buy the real thing?
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.
2012-01-06 Have Winds Shifted to Provide Relief to Investors? by Frank Holmes of U.S. Global Investors
We believe the winds are shifting to bring needed relief to global investors. Weve seen improving economic data from the U.S. lately, and this positive news from the worlds largest economy, along with an improving Chinathe worlds most populated countryoffsets the negativity in Europe.
2012-01-05 3 Economic Scenarios for 2012 by Russ Koesterich of iShares Blog
Russ believes that one of three economic scenarios will likely play out next year: the Great Idle will continue, the global economy will slip into a recession or global growth will accelerate. The most likely scenario is that The Great Idle continues. A severe global recession in 2012 is a second possible scenario. In fact, Im placing higher odds on another global recession than I did last year. Theres a tiny chance of a third scenario. In this scenario, emerging markets would resume stellar growth and the developed world would revert back its long-term average growth.
2012-01-05 2012 Market and Economic Commentary and Outlook by Multiple of Various
This is a compilation of economic and market forecasts from managers at 14 individual mutual fund companies.
2012-01-04 ProVise Bullets by Team of ProVise Management Group
The year 2012 is upon us and looms large for a number of different reasons. Within the next few days, the first of the Presidential primaries will begin and by early November we will know who our next President is and who controls Congress, along with many State Houses. Some astrologists believe this is the Age of Aquarius and according to the Mayan calendar, December 21st will be the end of time, or as some prefer to think of it (ourselves included) the beginning of a new age. Maybe the astrologists and Mayans have something going.
2012-01-04 Fundamentals March on Despite Global Risks in 2012 by Douglas Cote of ING Investment Management
The two primary drivers of market performancefundamentals and global risksacted in opposition in 2011. It is critical to understand the hierarchy of influence of these drivers in order to understand the current market and to forecast its future direction. Although spikes in global risk may make headlines and cause temporary shocks to investor confidence, the markets path ultimately comes down to the strength of the underlying fundamentals. We expect 2012 will mark the third consecutive year that fundamentals relentlessly march forward despite ample global risks.
2012-01-04 On Tap for 2012: More Bond Market Transparency by Matt Tucker of iShares Blog
In 2011, 102 new fixed income funds launched across exchanges in Europe, Canada, Asia and the United States. How will the landscape continue to evolve in 2012? Matt Tucker is here to provide a few insights, including his expectation that new fund launches will help to make the bond market more transparent.
2011-12-31 Remarkable Resilience by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite a remarkable series of crises, the stock market was roughly flat on the year. Earnings increasing, inflation decreasing, and economic data improving, the environment for a renewed upward move may be in place to start 2012. There seems to be little hope from DC for any relief in the near term, but 2012 brings an election cycle that will likely have a major impact on the future of the US. A near-term implosion in Europe seems to have been avoided but real solutions remain absent and the risks for a greater economic pullback are growing, which would likely have global implications.
2011-12-31 Collateral Damage by John Mauldin of Millennium Wave Advisors
The economic travails of much of the West are reaching a decisive stage as the year ends. In 2008, we predicted sluggish recovery and a long period of low growth for the West in a two-speed world. This picture does not now properly reflect the downside risks. The policy of "kicking the can down the road" is failing, as the intensifying crisis in the euro zone and the failure of the G20 summit in late October clearly demonstrate. As to December's European summit, we describe its impact later in this paper.
2011-12-30 Hockey Stick Growth: Good for the Wallet, Bad for the Globe by Jonathan Leidy of Portico Wealth Advisors
Population growth, specifically in developing nations with burgeoning middle classes, portends significant economic growth. That leads to the now somewhat hackneyed conclusion that emerging markets will make for good long-term investments. Nevertheless, the US and the rest of the developed world will continue to shrink in relative size, and hence global significance, over the next several decades; Emerging markets, and the multi-national corporations that work with them e.g. MacDonalds, Tiffanys, and Daimler-Benz, are likely to remain very attractive investments.
2011-12-30 Beyond Beasts and Bossa Nova:The Brazilian Boom by Team of Guild Investment Management
What does all this mean for those who wish to invest in Brazil? It means that when it is time to buy Brazil and the time isnt here yet you will want to consider banks and credit card companies as a way to capture the wave of consumer cash since many consumers go abroad to buy personal and pricey consumer goods. To take advantage of rising internal Brazilian spending you will probably want to consider autos, housing, and big ticket durables that will not fit into the luggage of shoppers returning from spending trips abroad.
2011-12-30 2012: A Look Ahead by Bob Doll of BlackRock Investment Management
2012 is likely to feature a slow-growth world that includes a recession in Europe. The US faces headwinds, but manages to achieve growth of between 2% and 2.5%. China and India slow somewhat, but, along with the US, make up two-thirds of global GDP growth. The big risk remains that of a financial breakdown in Europe, which would tip the developed world into recession. Inflation should also continue to move lower. Should the muddle-through environment come to pass, we believe earnings and some improvement in confidence would allow equity markets to move higher, with US stocks leading the way.
2011-12-30 A Look Back at 2011s Calls by Russ Koesterich of iShares Blog
Last December, Russ shared his economic forecast for 2011, along with a series of investment calls. Nearly every Monday since then, he has highlighted certain asset classes and market sectors in his weekly call posts. So, how did his calls perform? Read more to find out.
2011-12-30 Case for Sustained $100 Oil by Frank Holmes of U.S. Global Investors
China, along with other emerging markets, and the European Central Bank are in the early stages of a global easing cycle, primarily by cutting interest rates to spur growth. Also, the Federal Reserve should remain stimulative. These government actions set the stage for sustained, or perhaps higher, demand for oil. Geopolitical threats remain on the horizon, and could also be a positive catalyst for oil.
2011-12-28 Where Falling Inflation Means Rising Valuations by Russ Koesterich of iShares Blog
Emerging market inflation should decelerate further in 2012 thanks to a combination of continuing slower global growth and the lagged impact of monetary tightening. With the outlook for emerging market inflation improving, my team recently ran an analysis to determine which developing countries are likely to see their valuations benefit the most from falling inflation. Here is the list, with each country ranked in order of how much they should benefit. 1. Brazil 2. India 3. Egypt 4. South Africa 5. Russia 6. Turkey.
2011-12-28 PIMCOs Scott Mather Discusses the Global Implications of the Eurozone Crisis by Scott A. Mather of PIMCO
The ECB does not want to be a bridge to an unsustainable and adverse economic destination. They would rather force politicians to address the critical problems of the currency union now.
Greece will continue to have an unsustainable debt load until policymakers can come up with a credible plan to generate economic growth.
Ultimately, the eurozone countries and many other developed economies have very similar problems: unsustainably rising debt loads coupled with structurally weak and imbalanced growth.
2011-12-23 Camus and the "Implacable Grandeur" of Investing by Richard Bregman of MJB Asset Management
We have opportunistically entered the stock market when prices appear attractive; we believe the strongest values currently are in large U.S. stocks. We have continued to limit our exposure to interest sensitive bonds; we do find value in distressed securities, as they are available at comparatively inexpensive prices and have comparatively low interest rate risk. Lastly, in the face of continued high market fluctuations, we have maintained an above-average weighting to alternative strategies designed to limit volatility.
2011-12-23 Emerging Markets Real Estate by Team of Cohen & Steers
Emerging markets real estate securities had a negative return in November following an exceptionally strong October. Worries about the global economy and Europe continued to weigh on equities broadly, while signs of slowing growth in China were of particular concern to developing countries. A sharp rally in the last few days offset some of the decline, as China cut its reserve requirement ratio for the first time in three years and central banks announced a coordinated effort to provide much-needed liquidity to European banks.
2011-12-23 European Investment Commentary by Team of Cohen & Steers
Our global macro view has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, we expect Europe to struggle in the intermediate term as austerity measures introduced by a variety of governments continue to hinder growth.
2011-12-23 Global Real Estate Investment Commentary by Team of Cohen & Steers
Our macro outlook has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, Europe is likely to remain an overhang, as the region appears to be heading into recession, making a resolution to its debt crisis considerably more difficult.
2011-12-23 International Real Estate Investment Commentary by Team of Cohen & Steers
Our macro outlook has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, Europe is likely to remain an overhang, as the region appears to be heading into recession, making a resolution to its debt crisis considerably more difficult.
2011-12-23 Large Cap Value Commentary by Team of Cohen & Steers
We expect the markets to do better through year-end (although most of November gave us pause), but the outlook for the first half of 2012 remains wildly uncertain. Modestly improving U.S. economic data have not fully offset the European debt quagmire that is now inhibiting growth around the world. Recent economic news from the continent has been decidedly weaker, and is beginning to show up in data from Germany, the regions economic juggernaut and stalwart defender of a unified Europe.
2011-12-22 Continued Austerity to Hamper EU Growth by Neil Dwane of Allianz Global Investors
The euro zone will continue to struggle as fiscal dieting and debt reduction are likely to mean slim chances of economic expansion, but strong consumption trends in emerging markets may temper their ill effects. The European Central Bank (ECB) is at the heart of market solutions to the European Union (EU) crisis but stands resolute against printing money to alleviate debt. Despite the ongoing crisis, there are many growing and profitable opportunities for European corporates especially in emerging markets.
2011-12-21 Hot Potato by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Rob Mead of PIMCO
The world is playing a game of hot potato with European financial assets, and the European Central Bank is a reluctant player. Together, Europes fiscal and monetary authorities can likely avert a systemic accident, but they must act quickly and courageously. Differentiation among emerging market monetary policies is increasing. And in Australia, the central bank will likely need to ease further in 2012. If every central bank enacts similar monetary policy tools, those tools compete for the same targets (financial and inflation stability), thereby potentially eroding their effectiveness.
2011-12-20 Concussed, The Year in Review by Doug MacKay and Bill Hoover of Broadleaf Partners
We remain biased to a slow growth environment for as far as the eyes can see, an environment which continues to favor innovators. At the same time, with concerns about a slowdown in China emerging and Europe likely already in recession, the Economic Cycle may deserve some increased attention as a driver of alpha in the portfolio, particularly with a global monetary policy bias towards easing and leading economic indicators in the United State now improving.
2011-12-20 A Look Back at 2011 by Bob Doll of BlackRock Investment Management
Although 2011 started off on a relatively strong note for the global economy and markets, the past year was dominated by fears that contagion from the European debt crisis would derail the recovery. Overall global economic growth struggled as most areas of the world experienced growth slowdowns (the notable exception being the U.S.) Emerging markets were also faced with some mounting inflation pressures, which presented a challenge for policymakers. Although there have been some signs of progress regarding the debt crisis, uncertainty levels remain high going into 2012.
2011-12-19 Emerging Markets: Yesterday, Today and Tomorrow by Mark Mobius of Franklin Templeton
Almost every market move these days seems to be tied to the latest headline coming from Europe. And the U.S. political deadlock on deficit reduction, high unemployment and fear of a recession hiding under the bed are certainly not helping investor morale. But dont throw in the towel just yet. While the ongoing turbulence in the markets has investors feeling more than a little edgy, the story of robust and resilient growth in emerging markets seems cause for optimism.
2011-12-19 Pacific Basin Market Overview November 2011 by Team of Nomura Asset Management
In our assessment the market has already priced in the prospect of future earnings deterioration and credit risk spreads. Although we must be watchful for the possibility of a temporary future decline in share prices in the event that investors again become more risk averse, we believe an up-tick in investor sentiment will be enough to support a market rally. Cash levels at institutions are relatively high, valuations are very reasonable and investor sentiment is weak. Nevertheless, support for Asian markets could come from the fresh evidence that the U.S. economy has regained some momentum.
2011-12-19 Changing of the Guard: Do European and U.S. Debt Woes Signal a Shift in the Economic World Order? by Team of Emerald Asset Advisors
Industrialized nations in the West have enjoyed decades of economic prosperity and generous social safety nets. However, recent events have made it clear that shifting demographics and huge debt burdens will make it increasingly difficult, if not impossible, for many industrialized nations to maintain the same standard of living for their citizens. It seems that many formerly emerged economies are now on the verge of submerging. As citizens and political leaders in Europe and the U.S. slowly awaken to this reality, economies in many emerging markets are moving ahead at full steam.
2011-12-16 Early Santa Arrival? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have continued their seesaw pattern around developments in the European debt crisis. The major indices remain in the wide range we've been in for the last two years. Factors are setting up for a potential break above that range in the coming year. Expectations about progress in Washington are extremely low and near-term the biggest issues are the proposed extensions of the payroll tax cut and unemployment insurance. The increasing populist rhetoric is not helpful and any chance of major debt-reducing legislation occurring before the 2012 election seems remote.
2011-12-15 Eastern Europe Financial House Stronger than Debt-Ridden Neighbors by Frank Holmes of U.S. Global Investors
For some Eastern European investors the geographic proximity to the eurozone has been too close for comfort, with the Russian MICEX Index declining about 20 % year-to-date. However, stronger fiscal and monetary stances in Eastern Europe compared with its western neighbors warrant a 2nd look. Eastern European countries generally have experienced higher GDP growth along with less debt, so financing costs have less of a negative effect on GDP than in Western Europe. In most of Eastern Europe, every one percent increase in the cost of funding only detracts about 0.5 percentage points from GDP.
2011-12-13 Tale of the Tape U.S. Markets Back on Top by Philip Tasho of TAMRO Capital
As investors say goodbye to a year that will be remembered in the history of financial markets for its volatility and investors obsession with it one of the most battered, bruised and, yes, volatile, markets has quietly reclaimed its spot as the worlds best performer. It is, of course, the U.S. Through November 15, the S&P 500 is up 1.8% year-to-date; the Dow Jones Industrial Average has risen 6.9%; and the NASDAQ, 1.3%. Meanwhile, the rest of the worlds major equity indices are covered with red arrows, all pointing down.
2011-12-12 Rethinking Asset Allocation: PIMCOs Strategy for a Changing World by Mohamed A. El-Erian, Vineer Bhansali and Curtis Mewbourne of PIMCO
Alpha generation is a distinct component of the strategy because it is critical to actively seek opportunities in all global markets in this challenging environment.
Explicit tail risk hedging is essential to prepare for more frequent significant downturns, both to mitigate their effects and to potentially benefit from them.
The strategy is positioned to navigate a world of muted growth in the Western economies, significant market volatility, recurring balance sheet issues and continued income and wealth convergence of the emerging world with the developed world.
2011-12-09 2012: Politics Versus Fundamentals by Richard Bernstein of Richard Bernstein Advisors
Assessing the prospects for a coming twelve-month period is always a challenge. We rely on our broad arsenal of fundamental barometers for profits, sentiment, momentum, and our cyclical indicators to help us identify whether markets are correctly aligned relative to their economic and profits cycles.
2011-12-09 Emerging Markets Bonds and Currencies in an Uncertain World by Ignacio Sosa of PIMCO
Even if global risk deteriorates significantly, emerging markets may continue to offer compelling risk-adjusted return characteristics. Emerging markets external sovereign debt, along with receiving interest rates in higher-quality EM countries, could be the best relative performers. EM currencies would likely sell off sharply in risk-off periods but would also tend to rebound robustly when risk appetite returns. Several Asian currencies are likely to be the best relative performers. Emerging markets assets remain a risk asset class and will not be immune to waves of global jitters.
2011-12-09 You Can't Print More Gold by Frank Holmes of U.S. Global Investors
As central banks print money and increase supply, currencies become devalued. Whereas in the recent past, one currency may be reduced in value compared with other currencies, this time there is global competitive devaluation as excess liquidity is put into the system. Historically, this excess liquidity has made its way to riskier assets, i.e. stocks and commodities. Gold is generally a benefactor of this flight to riskier assets as many investors see it as a store of value. This chart illustrates the interconnectivity of gold and global money supply growth.
2011-12-08 Some Perspective on Recent Stock Market Volatility by Team of American Century Investments
Both October and November exhibited substantial price volatility. For the full month of October, the index was up 10.9% on a total return basisthe best October performance for the S&P 500 in nearly 20 years. In contrast, for November the index was down -7.5% through Friday the 25th before a substantial rally the last three trading days of the month. Well take a closer look at the volatility of the S&P 500 from a historical perspective to provide some insights about market volatility its history, trends and causes.
2011-12-08 Buying Cyclical Stocks: Wisdom or Inexperience? by Bill Smead of Smead Capital Management
Buying cyclical stocks and emerging markets under the assumption that secular forces in emerging markets will nullify the cyclical nature of sectors like energy; mining and heavy machinery exposes investors to a great deal of risk and shows a lack of understanding. It would be better to wait for 3-5 years of poor performance in these stocks and until earnings have declined quite a bit before you buy. It is just the first monetary easing move after a year of tightening in China. Besides, China could be starting its first real contraction as a quasi-capitalist country.
2011-12-08 2012: A Gut Check for Global Markets by Andreas Utermann of Allianz Global Investors
We are clearly facing a significant slowdown in economic activity in 2012, but we do not expect most developed economies to fall into recession. However, growth risks are increasingparticularly in Europe, where a recession is becoming increasingly likely. We do not expect a return of deflationary fears despite weakening growth, nor is inflation likely to be a threat in the foreseeable future. We expect rates to come down further in the euro zone and emerging markets; in the U.S., U.K. and Japan, we expect extremely low interest rates to continue.
2011-12-07 4 Portfolio Moves for a Long-Term European Debt Crisis by Russ Koesterich of iShares Blog
In recent weeks, governments around the world have stepped up efforts to solve the European debt crisis. While Russ believes European leaders will address the outstanding issues in time to avoid a sovereign debt collapse, here are four investing ideas to consider if you expect the crisis to drag on. 1. Within your international equity exposure, overweight CASSH countries. 2. Within your international equity exposure, overweight emerging markets outside of Europe. 3.) Overweight safe-haven assets. And 4.) Within fixed income, overweight investment grade and munis.
2011-12-07 Waiting for All In by Mark R. Kiesel of PIMCO
Without a more forceful and coordinated policy response, Europe now faces an increasing risk of a hard landing. In this uncertain environment, volatility will likely remain high, liquidity poor, risk premiums wide and the global economy fragile as financial and credit conditions tighten. Easier monetary policy as well as the potential for more balance sheet support from a larger consortium of global central banks is now needed over our cyclical horizon. If these actions are coordinated and timely, investors and risk takers would be more likely to move off the sidelines.
2011-12-05 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Any euphoria about last weeks intermittent triple-digit rallies has to be couched in a context of longer-term developing downtrends and a desire to see any positive news as bear-busting. Alas, the ongoing downcycle persists and is likely to be the primary determinant to market performance for the foreseeable future. As junctures go, last week represented a few days of post-holiday welcome relief, but hardly the initiation of a change in secular direction. The headwinds are too daunting when analyzing market and sector relative strength quotients.
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 What Does Risk Mean in Today's Market? by Francis of The Royce Funds
While many investors continue to focus on daily volatility, seizing on every piece of macroeconomic or political news to gain a sense of the overall shape of the economic futureand position their portfolio accordinglywe remain focused on individual companies and the opportunity each presents. From our perspective, the small-cap environment is fraught with opportunities. Today's attractive absolute valuations are an opening to find bargains that will drive results for the next three to five years.
2011-11-30 The European Crisis and Global Investing by Team of Neuberger Berman
The sovereign debt crisis in Europe has placed persistent pressure on global equity markets since first emerging as a problem in Greece in the first half of 2010 and quickly spreading to Ireland, Portugal, Spain and Italy. In a recent panel discussion, moderated by Investment Strategist Leah Modigliani, Benjamin Segal, portfolio manager and head of the Global Equity team, and Tony Gleason, portfolio manager for the MLG Group, discussed the turmoil in Europe, prospects for global growth, and some potential areas of opportunity. We share their thoughts below.
2011-11-29 Telecommunications Sector in India: Surviving the Scandals and Consolidating Past Gains for Future by Team of Thomas White International
From one of the most celebrated among emerging market success stories to a case study in corruption and nepotism, the Indian communications industry has seen a dramatic swing in fortunes in recent years. After several decades of stagnancy under a government-owned monopoly, the industry became a classic example of how the right combination of new technology, innovation, and supportive government policies can transform a sector. Through the industrys success, Indias large consumer market potential was boosted, attracting investments into several other sectors of the economy.
2011-11-28 Unexpected Encounters in Saudi Arabia by Tim Hanson of Motley Fool
Like most frontier and emerging markets, Saudi Arabia needs better infrastructure to serve its people as well as inland businesses. Further, reliance on one major export, oil, subjects the country to sharp cyclicality. And finally, the countrys strict religion likely deters knowledge workers from the country. As Saudi Arabia modernizes to more and more resemble neighbors such as Dubai and Qatar, it will undoubtedly experience growing pains. As long-term investors, however, we are willing to put up with those pains so long as we benefit from compelling long-term progress.
2011-11-28 The Global High Yield Opportunity by Matt Eagan, Kathleen Gaffney and Elaine Stokes of Loomis Sayles
The shifting characteristics of US, European, Asian and emerging markets high yield assets have contributed to an expanding opportunity set. This has prompted many institutional investors to broaden their high yield investment guidelines, often giving portfolio managers the flexibility to include exposures to these markets within one portfolio. The days of silo investing, in which non-US investors sought exposure to US high yield and emerging market debt through separate mandates, may be giving way to an era of sector allocation driven by investors.
2011-11-26 Does Europe Have a Korean Option? by Simon Johnson of Project Syndicate
On the surface, at least, the situation in the eurozone today and South Korea in the fall of 1997 look very different. Both are cases of severe economic crisis, to be sure. But the eurozones problems stem from high levels of government debt, while South Korea faced massive capital flight and a collapsing currency and almost all of the debt was in the corporate sector. Nevertheless, the eurozone could learn from the experience of South Korea, which came through its crisis more quickly than anyone expected, combining sensible reforms with a rapid recovery.
2011-11-26 American Classic Finds New Life in China by Frank Holmes of U.S. Global Investors
With a middle class that could to balloon to 1.4 billion people by 2030, China has become a lifeline for automakers looking to keep their profits afloat in a weak global economy. Through October 2011, more than 15 million new vehicles have been purchased in China. Thats about 3 percent higher than a year ago. Toyota, Audi, Volkswagen, BMW and Nissan are all searching for ways to tap into this fast-growing market. One of the countrys biggest success stories is General Motors (GM), which has positioned itself as one of the most recognizable and highly sought after cars in China.
2011-11-26 With Rising Wages, Will China Remain a Manufacturing Hub? by Frank Holmes of U.S. Global Investors
In 2010, countries such as Hong Kong, Japan, South Korea and Germany depended on China for data processing, apparel, and iron and steel exports. Chinas largest import partners in 2010 were Japan, South Korea, the U.S., Germany and Australia. For those companies not already doing business in China, theres one dominant factor that shows they should start: the vast domestic market. Companies may be able to find a cheaper workforce in Bangladesh, India or Sri Lanka, but being located in China allows convenient access to what is rapidly becoming the worlds largest consumer market.
2011-11-25 Changing the Rules in the Middle of the Game by John Mauldin of Millennium Wave Advisors
Angela Merkel is leading the call for a rule change, a rewiring of the basic treaty that binds the EU. But is it both too much and too late? The market action suggests that time is indeed running out, and so well look at the likely consequences. Then I glance over the other way and take notice of news out of China that may be of import.
2011-11-23 Unexpected Encounters in Saudi Arabia by Tim Hanson of Motley Fool
As long-term investors, however, we are willing to put up with pains so long as we benefit from compelling long-term progress. With a large and growing population, an economy backstopped by a valuable global commodity, and a variety of surprisingly well-run companies, Saudi appears to offer just that. Look for us to continue adding to our funds exposure to the country and the region in the coming months and years.
2011-11-23 Seven Surprising Stats on the Internet and Emerging Markets by Frank Holmes of U.S. Global Investors
With rising wealth in emerging markets in recent years, people in China, India and Brazil have quickly acquired a taste for mobile phone and Internet technology. The industry in developing countries is in its infancy but growth has been swift. Here are seven surprising facts about this fast-growing emerging market trend.
2011-11-23 A Super Committee in Name Only by Karen Dunn Kelley of Invesco
As long as investors perceive Europe lacks a comprehensive and detailed strategy to address their significant debt problems, this market driving status will continue to hold, and the direct impact of the super committee announcement may be muted or even hidden. Add the traditional lighter trading volumes heading into year-end, and we foresee continued market volatility as investors shift between risk-off and risk-on psychology where they either want to own seemingly any and all credit risk or purely high quality sovereign debt.
2011-11-22 Crafting a Country Call by Russ Koesterich of iShares Blog
For nearly a year, Russ has made weekly investment calls about markets across the globe. Heres a quick look at the macroeconomic approach behind his country views and a summary of where his calls now stand. Generally underweight in countries where prevailing macroeconomic conditions cannot explain high or expensive valuations, and he is typically overweight in countries where prevailing macroeconomic conditions cannot explain low or inexpensive valuations.
2011-11-22 Readers Questions Answered Part VIII by Mark Mobius of Franklin Templeton
Its been a while since I answered some readers questions. Thank you, readers, for all your responses to the blogthey have been highly encouraging. 1. Do you think there will be a recession globally or in emerging markets from a mid- to
long-term perspective? 2. What is the impact if one or more countries withdrew from the euro? 3.What is your view on Ukraine? Ukraine is one of the more interesting markets since it has a number of viable industries with growth potential.
2011-11-22 Readers Questions Answered Part VIII by Mark Mobius of Franklin Templeton
Its been a while since I answered some readers questions. Thank you, readers, for all your responses to the blogthey have been highly encouraging. 1. Do you think there will be a recession globally or in emerging markets from a mid- to
long-term perspective? 2. What is the impact if one or more countries withdrew from the euro? 3.What is your view on Ukraine? Ukraine is one of the more interesting markets since it has a number of viable industries with growth potential.
2011-11-21 Investment Outlook: November 2011 by Team of Aberdeen Asset Management
Financial crisis continues to dominate the political agenda: a credit crunch looms as Europes banks shrink balance sheets, growth momentum is diverging among different regions, investor focus on global fiscal policy will intensify in 2012 and abundant liquidity via central bank easing is likely to prevail for some time. Economic data has tended to surprise analysts over the last few weeks, encouraging the view that growth may not be as weak as some were predicting only a month ago. However the picture is very different among different regions around the world.
2011-11-21 We Are Removing Our Buy Recommendation On Emerging And U.S. Markets by Monty Guild and Tony Danaher of Guild Investment Management
German Chancellor Merkel has a new plan to reduce sovereignty for certain European nations. This will be a long involved political process and the fight over its implementation will be bad for Emerging Markets and for U.S. Markets.
2011-11-18 Getting Granular with Emerging Markets by Russ Koesterich of iShares Blog
Given todays volatile world, it may be time for investors to adopt a more nuanced approach to investing in emerging markets. Rather than using the traditional frameworks such as emerging markets versus developed markets Im advocating that investors consider creating their international allocation on a country or regional basis. Here are two reasons why.
2011-11-18 The Gold Triple Play - Volatility, Currencies and Europe by Frank Holmes of U.S. Global Investors
Resurgent investment lifted global gold demand 6 percent from the previous year to just over 1,000 tons during the third quarter of 2011, according to the latest Gold Demand Trends Report from the World Gold Council (WGC). The potent cocktail of inflationary pressures in the emerging world and the European sovereign debt fiasco left investors searching for a safe haventhey looked for it in gold.
2011-11-17 U.S. Earnings Update by Joseph S. Tanious of J.P. Morgan Funds
As 3rd quarter earnings season winds down, more than 90% of the S&P 500 market cap has reported, and it appears were headed for another quarter of record-breaking results. However, whats even more impressive is the revenue growth weve observed across all 10 S&P 500 sectors. The index is currently tracking revenue growth of roughly 13% year-over-year, a clear indicator earnings have been boosted by more than cost cutting. To be sure, margins have also widened out, which has helped fuel earnings growth over the past two years, something well touch on in more detail in the coming pages.
2011-11-17 Why The Price Of Oil Has Risen From About $75 To About $100 Over The Past Six Weeks by Team of Guild Investment Management
Many veteran observers seriously question the intelligence of ongoing policies that ignore domestic resources and keep the US sending billions of dollars a year to countries that dislike the US and actively seek Americas decline. After it's recent rise, we recommend investors take profits in oil. It can go higher but we like taking profits after a rapid rise. Also, a mechanism is being put in place that will allow financially-responsible Eurozone countries to force irresponsible members to either make necessary changes in their approach to government spending or to leave the Euro currency.
2011-11-16 As Alternative Investments Move into the Mainstream, Advisors and Investors Need to Choose Wisely by Team of Emerald Asset Advisors
We believe that having a piece of an overall portfolio that is committed to liquid alternatives is a critical component to long-term portfolio stability, capital preservation and growth. No one wants a repeat of 2008, or anything close to it. There are an abundance of liquid alternative choices available, some of which have proven themselves through various market cycles and environments. They have gone from Wall Street to Main Street for good reason. Embrace the opportunity, and you and your clients may just sleep a bit better at night during these volatile times.
2011-11-16 It Ain't Over Till It's OverAnd Thats Not Happening Soon by Team of Guild Investment Management
Dont expect the current crisis of budgetary deficits and spending restraints to stop any time soon. Instead, think in these realistic terms: the era of fiscal restraint and spending limits has come, and will be with us for ten to twenty more years. It is obvious to veteran observers that Europe and America are facing hard choices that will result in slow growth and increased suffering for the people. And for that we have our incompetent legislators past and present to thank. They have misused their mandates, grossly exceeded their budgets, and are loath to correct wayward behaviors.
2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-11-15 QE2 and Its Impact on Sterling Credit Markets by Ketish Pothalingam and Luke Spajic of PIMCO
The removal of government bond supply combined with the likely suppression of yields may encourage investors to seek out greater yield via investment grade bonds in the credit markets. The BoEs new round of QE could exacerbate the imbalance between supply and demand and leave a hole in supply that is highly unlikely to be filled by sterling credit issuance. The lack of issuance in the case of non-financials is generally due to strong corporate balance sheets, undrawn credit lines at banks and the rebirth of the loan market.
2011-11-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
News from Europe continued to roil markets on a daily basis, but when all was said and done there were new governments in Greece and Italy (same governments just different leaders), and the stock market advanced on the week as economic data and earnings continued to impress investors. As the charts above illustrate the Dow Jones Industrial Average gained 1.4% while the NASDAQ Composite was flat as concerns over Apple held back that average.
2011-11-14 The European Stutter Step by Milton Ezrati of Lord Abbett
Markets have shown a mixed response to Europes agreement on sovereign debt. On the positive side, Germany, France, European banks, and other members of the eurozone have shown more direction, control, cooperation, and concerted action than previously, and in so doing, have taken a step to avoid panic and what could easily have become a global financial meltdown. But still, Europe and, consequently, the rest of the world remain far from out of the woods. This latest step is inadequate. To get a grip on the crisis, the ECB will need to add its financial resources.
2011-11-14 Pacific Basin Market Overview October 2011 by Team of Nomura Asset Management
The Japanese equity market ended the month of October almost unchanged. Concerns about Europes sovereign debt crisis and a slowdown in the global economy initially sent the index sliding to a new year-to-date low at the outset. Subsequently, the Japanese stock market rebounded along with a steady retreat from the excessive investor pessimism surrounding overseas economic conditions. Positive U.S. economic indicators, including unexpectedly strong employment figures, housing data and solid GDP growth, boosted market confidence.
2011-11-11 The Many Factors Fueling a Return to $100 Oil by Frank Holmes of U.S. Global Investors
The IEA says trends on both the oil demand and supply sides maintain pressure on prices. We assume the average IEA crude oil import price remains high, approaching $120 per barrel (in 2010 dollars) in 2035 (over $210 per barrel in nominal terms). Thats a distant projection but it certainly illustrates why you should consider investing a portion of your wealth in oil.
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 Bill Gross' Revised Paradigm: The New Normal Minus by Robert Huebscher (Article)
Following the financial crisis of 2008, PIMCO articulated its 'new normal' forecast of slow growth and mediocre capital market returns. Appending the even drearier modifier 'minus' to that outlook, Bill Gross said that expectations now appear worse than even he previously feared. Gross was pessimistic in both the near and long terms, and he startled the audience with his premonition that 'capitalism is at risk.'
2011-11-05 Fund Manager Interview by Nick Robinson of Aberdeen Asset Management
The popular perception of Latin America as a region of weak political systems and economies is changing. Prudent fiscal and monetary policies have helped many countries stabilize their economies. The region came through the recent credit crisis relatively unscathed. Good-quality companies trading at attractive valuations can be found in the region. A local presence helps bolster our research.
2011-11-05 The Political Season Heats Up by Monty Guild and Tony Danaher of Guild Investment Management
U.S. presidential elections are a year away, while France and many other countries will be staging elections within the next twelve months. We can expect continued volatility as politicians around the globe say things to benefit their re-election chances which can have a negative impact on stock prices globally over the short run. This has made and will continue to make the tried and true method of buying and holding specific stocks for the long term a difficult road to travel anywhere in the world.
2011-11-04 Return of the Phillips Rule by Scott Minerd of Guggenheim
The U.S. remains the least-dirty shirt in the bag. In fact, its looking comparatively better all the time. In the stock market, I believe fundamental and seasonal factors could push the S&P 500 to new highs before the end of the year, despite the drama in Greece. The market has discounted some pretty nasty events that I dont believe will come to fruition. When more certainty comes, especially regarding events in Europe, investors will likely look back and wish they had paid more attention to fundamentals rather than emotions. On a historical basis, stocks are attractively valued.
2011-11-04 3 Drivers, 2 Months, 1 Gold Rally? by Frank Holmes of U.S. Global Investors
Combine the central bank purchases of gold with the fact that we are now entering the strongest months of the year for gold. While the spot gold price has differed from the S&P/TSX Composite Index of gold equities during the first 10 months of the year, their historical pattern is very similar during the last two months. November has historically been the strongest month of the year for gold equities, with mining stocks increasing 8.1 percent.
2011-10-31 Pennies from Heaven by Bill Gross of PIMCO
Growth is the commodity that the world is short of at the moment.
Once interest rates inch close to zero and discounted future cash flows are elevated in price, it's difficult to generate much more return if economic growth doesn't follow.
Equity markets should be dominated by dividend yields and the return of capital via share buybacks, as opposed to growth.
In fixed income assets, we suggest that portfolios should avoid longer dated issues where inflation premiums dominate performance.
2011-10-31 Financial Market Update & Outlook by Jonathan E. Lederer of Lederer Private Wealth Management
In this volatile environment, I consider preservation of capital to be a higher priority than speculation and am inclined to remain defensive until valuations appear more attractive. I strongly believe that we will see better opportunities in 2012 as the markets start to better reflect the global economic situation and the inevitable reduction in corporate earnings estimates. Though we run the risk of getting left behind if this rally turns into a longer-term bull market, it is a risk that Im comfortable taking in light of the global macroeconomic backdrop.
2011-10-31 Tiedemann Wealth Management 3 Qtr Market Commentary by Team of Tiedemann Wealth Management
Despite the ongoing debt crisis in Europe the news is not as grim for investors as it may seem. We believe that markets have more than discounted the risk of European recession as fallout from this crisis, which an inept political system has exacerbated. It marks the first time in many years that markets are questioning political leadership in developed world nations something they normally only consider when investing in emerging markets. We do not believe that the G-20 leaders will allow a major counterparty bank to fail, despite their apparent lack of coordination over the past few months.
2011-10-31 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market is on the verge of completing its best month since 1974. Who would have thought that just five weeks ago? The ostensible reason given for the upswing is some resolution of the European debt issues. Forget that; the reason stocks recovered is the reason they always bounce back and that is higher earnings, higher dividends and a lack of alternative asset choices. The Dow Jones Industrial Average and the NASDAQ Composite gained almost 4 percent each last week. Shorts were covering and hedge fund managers were caught underinvested into the end of the month. Too bad.
2011-10-29 Missing the Forest for the Trees? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season was good and economic data in the US has improved. Robust growth is unlikely in the near future, but the economy is improving. Investors appear to be unconvinced that the picture may be brightening. Inflation continues to run higher than we'd like to see but sustainable price gains are unlikely. The Fed continues to be extremely accommodating. Italy has the potential to be a much bigger problem than Greece. A tentative agreement has been reached for Europe, but hopes for a true long-term solution remain thin. China is likely to suffer no worse than a soft landing.
2011-10-28 U.S. Corporate Third Quarter Profits Looking GoodSo Far by Monty Guild and Tony Danaher of Guild Investment Management
The events of the past few days have proved our case that more QE will be coming. In Europe, they will not let their banking system fail and will provide the necessary liquidity to backstop their banks. They can either nationalize banks or recapitalize the banking system with new capital from several countries. The bottom line is that liquidity will be added and central banks balance sheets will expand. Growing use of QE is bullish in the short to intermediate term for stocks in the U.S. and emerging markets, and it is bullish for gold, oil, wheat, and the currencies we have recommended.
2011-10-28 Et tu, Berlusconi? The Daunting (But Not Always Insuperable) Arithmetic of Sovereign Debt by Rich Mattione of GMO
This paper sets itself two tasks. The first is to construct a simple model that would arithmeticize the dynamics of sovereign debt so as not to get hung up with all of the acronyms and programs designed to save the world. The second is to put this into the context of the European sovereign debt problem and hazard some opinions as to which options can work, and which cannot. Grand solutions may yet come, but they probably will not come soon enough. Now is the time to separate the daunting from the insuperable, and to fix both sets of nations.
2011-10-28 How China Drives the Global Economy by Frank Holmes of U.S. Global Investors
The Chinese economy is not a bubble, but that does not mean a significant slowdown wouldnt affect the global economy, especially natural resources. This is because Chinas economic transformation over the past few decades has cast the country into the forefront of demand. PIRA Energy Group says that, in 1990, Chinas share of oil and GDP was less than 5 percent; its share of world energy was just under 10 percent. Since then, Chinas share of energy, GDP and oil has risen dramatically, with each expected to be approximately 28 percent, 21 percent and 16 percent, respectively, by 2025.
2011-10-28 The Impact of Seven Billion People by Frank Holmes of U.S. Global Investors
On October 31, the world symbolically welcomes its 7 billionth. The real date the world hits that number is up for debate, but it has been symbolically chosen by the United Nations as a way to emphasize the effects a growing population will have on the globe.
2011-10-27 Third Quarter Investment Commentary by Team of Litman Gregory
Since 2008, we have been in a period where macroeconomic forces are particularly influential and must inform our portfolio strategy. This quarter's developments in which we saw heightened concerns about a global economic slowdown, political gridlock, and serious concerns about shorter-term European and longer-term U.S. debt problems are consistent with the risk scenarios we've been discussing the past several years.
2011-10-27 Outlining the U.S. Economys Growth Dichotomy by Team of American Century Investments
David MacEwen describes the growth dichotomy that has developed during the recovery from the Great Recession, and how its restricted the recovery, softened consumer sentiment, influenced the fixed income teams macroeconomic outlook, and shaped some of the teams sector outlooks. One of the key characteristics of the subpar, slow-growth recovery we have experienced since the Great Recession has been the clear divide between the recovery rates of the business and consumer sectors. Businesses have bounced back faster and stronger than the U.S. consumer who buys their goods and services.
2011-10-27 Asia-Pacific Portfolio Committee Discusses Cyclical Outlook for Globe and Region by Robert Mead, Tomoya Masanao and Isaac Meng of PIMCO
China will likely focus more on rebalancing of the investment-focused domestic economy this time, rather than on reflating of the economy to engineer higher growth as it has done in 2008 to 2009.
Japans fiscal policy will need to be expansionary to facilitate reconstruction efforts.
We believe Australian government bonds have the potential to outperform U.S. Treasuries on a local currency basis, particularly in a left-tail global economic scenario.
2011-10-26 The Long ViewBuilding The 3-D Shelter by Robert Arnott of Research Affiliates
The third quarter was harsh not only for stocks but for asset classes that provide valuable protection against inflation. Our view is that, in the long run, the combination of rising debts and deficits and aging demographics will create a 3-D hurricane affecting capital markets. In this issue of Fundamentals, we look at how investors can start erecting inflation shelters to protect themselves from the coming storm.
2011-10-26 Who Benefits from Eurozone Progress? Hint: Look North, Not South by Russ Koesterich of iShares Blog
Many investors are asking this question as speculation increases that policy makers may be moving closer to containing the crisis. While you might assume the answer would be Italy, Spain or Greece, I have a different take. In short, look to the north, not the south: Perhaps somewhat surprisingly, countries in Northern Europe not directly involved in the sovereign debt crisis will likely benefit disproportionately from any credible progress.
2011-10-25 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 On Mexicos Shores by Kate Jaquet of Seafarer Capital
Investors must exercise caution when approaching Mexico. The countrys fiscal position appears to be eroding, and this may induce greater dependence on inflows of foreign capital to cover the deficit; and this in turn may make the peso more volatile. However, with scant few safe havens left and as the flights to quality and liquidity continue across the financial markets, I am optimistic that industrial production in Mexico will be a bright spot in the emerging markets in the coming years.
2011-10-25 Time to Put Your Shades On by Pamela Rosenau of HighTower Advisors
The paradox of the stock market is that higher prices attract buyers, while lower prices attract sellers. This herd-like behavior is confirmed by peers and exaggerated even more now by social media outlets. The most important thing to acknowledge in these markets is to be tactical and buy on weakness. In our current yield starved environment, I have focused on growth and income (two such scarce resources these days) in both dividend paying large cap stocks and energy infrastructure MLPs.
2011-10-21 Emerging Markets Real Estate by Global Real Estate Team of Cohen & Steers
Emerging market real estate stocks were hit hard in the risk-averse environment that defined the third quarter. The asset class underperformed its developed-market counterpart, which also had a double-digit decline amid slowing global growth and concerns regarding Europes unresolved sovereign debt crisis. Slowing global growth is taking some pressure off emerging markets in terms of inflation containment. A trend of policy easing appears to be underway. This could result in improved performance for recently problematic sectors. We have been incrementally adding to such sectors.
2011-10-21 Global Equity OutlookFourth Quarter 2011 by Team of American Century Investments
In this edition of Weekly Market Update, presents the teams outlook for global equity markets, based on the latest research and discussions with companies from industries and countries across the economy and the globe. The team focuses on individual security selection, building portfolios from the bottom up, rather than making top-down judgments about the economy. In their view, economic trends matter to the extent that they relate to corporate earnings power. As a result, the outlook focuses on corporate earnings and other areas they deem important to successful global equity investing.
2011-10-21 How to Succeed at Auctions by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe weve suffered more from the illiquidity and greater volatility of many of our smaller cap holdings, but thats where we are finding the best values with the greatest potential. When the markets recover, that same illiquidity should boost performance on the way up. Maybe sooner than is believed.
2011-10-21 Do Bullish Investors Have an Ace in the Hole? by Frank Holmes of U.S. Global Investors
You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing. One card worth counting is the Purchasing Managers Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.
2011-10-20 U.S. Large Cap Value Market Commentary by Rick Helm of Cohen & Steers
Our outlook for the U.S. economy remains cautious in the face of Europes possible slide back into recession and slowing growth in China. Conflicting economic data are likely to persist and contribute to market volatility. On a positive note, earnings remain decent and dividend payers are well positioned to raise payouts, which should attract investors, as yield is becoming a favored strategy. However, stock buybacks have become a competing use for excess cash once again, as evidenced by Berkshire Hathaways announcement.
2011-10-20 Making the (Credit) Grade in Emerging Markets by Russ Koesterich of iShares Blog
While emerging markets are not without their share of macroeconomic problems, they are not experiencing the same sovereign debt problems as their developed market neighbors. In fact, the worlds sovereign debt problems are centered in developed markets such as Europe, the United States and Japan. Ive already mentioned this as a fact supporting emerging market equities. Its even more supportive of emerging market fixed income.
2011-10-20 Absolute Strategies Fund Q311 Portfolio Commentary by Jay Compson of Absolute Investment Advisors
Looking out over the next several weeks and months, we have no idea what to expect or where the markets will go. We feel fairly certain that there will be continued attempts to bailout XYZ country, to recapitalize the European banks, or to engage in money-printing. There will be many that will hold up the "all clear" sign and this may prompt the crowd to speculate short term, resulting in powerful market rallies. In the end, there is no money. Only the true action needed to solve the crises will result in a sustainable recovery: broad debt and asset write-downs. We remain skeptical.
2011-10-19 Equity Investment Outlook by Team of Osterweis Capital Management
During the third quarter, the stock market plunged as investors hopes for a sustained U.S. economic recovery dissipated and fears of a world-wide economic slowdown and possible U.S. double-dip recession increased. The U.S. faces several major structural headwinds including a moribund housing sector, high unemployment, bank credit restraint, and a growing and worrisome federal debt. Underlying these and other problems is the depressing effect of the end of the debt super cycle.
2011-10-19 All That Glitters Is Not a Cash Equivalent by Jerome M. Schneider of PIMCO
The latest volatility has investors asking questions about the securities they own, in particular probing any exposures to European issuers.
Cash investors often over-allocate to money market and bank investment vehicles, while the most attractive risk-adjusted opportunities might fall just outside of this space.
We currently see opportunities in short-dated, non-financial BBB-rated corporate bonds, along with dollar-hedged bonds and bills issued by sovereigns with solid balance sheets.
2011-10-19 Pacific Basin Market Overview September 2011 by Team of Nomura Asset Management
Europes inability to find a solution for its current fiscal problems and the weakening macroeconomic outlook sent equity markets into a downward spiral during the July-September quarter. In Asia, concerns about the risk of a hard landing in China resurfaced as well. All country and regional indices declined, with the MSCI AC Asia Pacific Free Index including Japan and the MSCI AC Asia Pacific ex Japan Free Index declining 16.35% and 21.28%, respectively, for the quarter. In the short term, the rush to raise cash could lead to further declines in markets
2011-10-19 Emerging Asia Pacific: Economic Review September 2011 by Team of Thomas White International
After battling inflation for over a year, many emerging Asia Pacific economies are now facing challenges over stimulating growth. A year of persistent monetary tightening in emerging Asia Pacific has unfortunately coincided with slowing growth prospects in the developed world. The U.S. and the European Union are the largest trading partners for many export-dependent emerging Asian economies like South Korea, Taiwan and even China. With economic growth slowing in the U.S. and the European Union, many emerging Asian nations are rightly worried about their export prospects.
2011-10-18 Gundlach: Markets Aren’t Cheap Enough Yet by Robert Huebscher (Article)
Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.
2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)
Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?
2011-10-18 Volatility Rears its Ugly Head by Jeremy Blackman of Hester Capital Management
The major debate in the financial markets today revolves around whether or not the U.S. is going to experience a double-dip recession. We do not expect a recession, but if that does happen it should be a shallow one. We remain cautiously optimistic that the politicians in the US and Europe will eventually do the right thing as the consequences of not acting in a prudent and responsible manner are not pretty. We anticipate that markets will continue to be volatile until Europe finds resolution for its problems and until politicians across the globe learn to compromise across party lines.
2011-10-17 Addressing Market Volatility by Mark Mobius of Franklin Templeton
With ongoing global uncertainty, I believe there are still a lot of questions surrounding the impact of market volatility in both developed and emerging markets. I recently recorded an interview discussing my views on some of these questions and want to share it with you through a video blog. I hope you like it.
2011-10-14 European Financial Crisis: Approaching Dnouement by Komal Sri-Kumar of TCW Asset Management
The French word dnouement connotes a form of final resolution of a problem or an issue. We may be approaching such an end point in the European debt crisis. After repeated bailouts of debt-ridden countries through the imposition of austerity and adding to debt levels-actions which only worsened the countries debt ratios-European leaders are discussing seriously, for the first time, the possibility of significant haircuts for creditors. Kicking the can down the road, the trite phrase used to describe the European policy reaction, may no longer be the path for debt-ridden economies.
2011-10-14 Will the Micro Matter? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Q3 earnings season is in full swing and it will be modestly positive after numerous reductions of expectations due largely to economic concerns. The US will avoid a dip into recession and, for now, the data seems to support that view. The yield curve has flattened since the announcement of Operation Twist but mortgage applications have yet to jump and companies continue to cite concern over governmental policies for their continued caution. The EU debt crisis has had some positive movement, providing some hope to the market, but concern is growing over the state of the Chinese economy.
2011-10-13 Our Fixed Income Macro OutlookFourth Quarter 2011 by Team of American Century Investments
Our economic outlook has become a bit more defensive and cautious, compared with earlier this year. After improvement last year, economic conditions have slowed. In particular, the financial sector has come under renewed pressure from the European sovereign debt crisis and continued housing market stagnation. It remains to be seen if this slowing is transitory or more significant. Both the consumer and business sectors have experienced slowing. But a subpar recovery with headwinds remains our projected most-likely scenario, not a recession.
2011-10-12 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks rebounded last week and are off to a very strong start this morning as the economic data shows few indications of recession and because Europe is beginning to disclose their intentions as to how to deal with their sovereign debt crisis. As the charts above illustrate, the Dow Jones Industrial Average gained 1.7% last week while the NASDAQ Composite did even better with a jump of 2.7%.
2011-10-12 Repeating the Future by Neel Kashkari of PIMCO
For long-term investors, meaning those prepared to stay invested for three, five and even 10 years, who can endure volatility, we believe equities can offer attractive returns.
In an extended period of slow economic growth and deleveraging, interest rates are likely to remain low. Actual income generation from investments is important.
Hopefully society can institutionalize the lessons from this crisis so that future generations dont repeat it: Individuals, corporations and countries should only borrow to fund long-term investment, not current consumption.
2011-10-11 A Q3 Client Letter Drawing on Buffett’s Optimism 'The U.S. is coming back now' - and why three inves by Dan Richards (Article)
Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles. This quarter's letter provides clients with perspective on the recent market turmoil.
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 Market See-Saw Brings Us Back to April 2010 Double-Digit Third Quarter Losses Erase Previous Gains by Ron Surz (Article)
Stock markets around the world plummeted in the third quarter, with the US market losing 16% and foreign markets faring somewhat worse with 17% losses. This quarter's loss reverses the gains of the first quarter and brings year-to-date returns below water, with domestic markets losing 11% and foreign markets losing 13%.
2011-10-11 3rd Quarter 2011 Newsletter by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
Despite our macro concerns there are opportunities in the stock market, especially in the mega-cap arena where valuations are attractive and yields are high. Investors are in a unique period of time where they can own very high-quality stocks and generate a sustainable and growing income stream well above money markets and medium term U.S. Treasury securities. High-quality stocks have started to outperform after being ignored over the past decade. We believe this asset class is underrepresented in institutional portfolios and will benefit as this group rediscovers the value in this area.
2011-10-07 Point of Maximum Pessimism? by Niels C. Jensen of Absolute Return Partners
The current level of pessimism is quite overwhelming, in particular in Europe where the eurozone crisis has taken its toll on investor confidence. This has led to valuation levels we haven't seen since the dark days of 1981-82, just before we embarked on the 1982-2000 bull market - the biggest of all time. It is our view that investors will be amply rewarded if they begin to buy European equities at current levels, although it is a strategy that shall require both a solid stomach and some patience.
2011-10-07 Third Quarter 2011 Market Commentary: This is Not 2008 by Robert Stimpson of Oak Associates
The discussion on how to contain the sovereign debt crisis torments the market, which would prefer a decisive solution administered by a powerful and determined financial authority. While stringing the situation along is painful in the near-term, it may actually allow other struggling countries in Europe time to right their budget problems and enact measured reform before bailout funds are required to force them to act. Regardless, an end to the debate will come and financial markets will recover. We intend to benefit from it.
2011-10-07 The Hunt for (Sustainable) Yield by Team of Emerald Asset Advisors
In any low-rate environment, it is easy to be seduced by any investment that can deliver high yields. But to achieve a consistent total return, you need to carefully weigh the risks and focus on investments that can deliver attractive yields that are sustainable, while also providing the potential for higher income in the future. Our answer thus far has been a combination of sources. Given the current miniscule yield environment, we expect these higher-quality asset classes to move the income-generation meter at least a little for client portfolios without exposing them to inordinate risk.
2011-10-07 Can Markets Find the Road Back to Positive Territory? by Frank Holmes of U.S. Global Investors
Can markets find the road back to positive territory? This week, wed like to point out three reasons investors should consider remaining in equities or reassessing whether to sit on the sidelines: 1. Investor sentiment is signaling the market is overextended to the downside. 2. Stocks are trading well below historical valuation trends. 3. S&P 500 dividend yields are higher than the 10-year Treasury yield.
2011-10-07 On Teflon and Emerging Market Currencies by Andrew Foster of Seafarer Capital
Investors can distinguish between the fundamental health of EM credit which is, as some have suggested, strong and the still fragile currencies of those markets. Rapid unwinding of capital flows may do quick damage to local currency EM bonds, wiping out fixed income investors expectations for current income. EM credit denominated in U.S. dollars may be a viable alternative. EM currencies may offer desirable diversification, and they may even be a good investment but they remain speculative, and should not be considered a safe haven.
2011-10-07 Nowhere to Hide in the Third Quarter by Richard Skaggs of Loomis Sayles
The S&P 500 has traded within a range of about 1,100 on the low end to 1,230 on the high end since the sharp decline of July and August. Complicating the outlook, however, is the fact that many stocks and indices have made new lows since their early August lows, suggesting the S&P 500 could do the same. Fundamental conditions make the 2012 earnings outlook far cloudier than it was one or two quarters ago.
2011-10-06 Global Investment Outlook: October 2011 by Team of Aberdeen Asset Management
Global growth momentum continues to decline but is worst in Europe. Solvency of national governments and now banks is creating fears of a crisis. Coordinated policy action is key to stemming adverse market reaction. Although economic data has continued to demonstrate slower business activity, this is most obvious within Europe which has suffered from fiscal contraction as well as diminishing export demand from the emerging world. Unemployment levels remain elevated, and the reluctance to create new jobs is proving the Achilles heel of policymakers efforts to kick start private sector demand.
2011-10-04 Jeffrey Gundlach: Preparing for the Coming Crisis by Katie Southwick (Article)
Speaking at a luncheon in New York last week, Jeffrey Gundlach, the founder and chief investment officer of DoubleLine Capital, gave investors advice on how to survive pending crises at home and abroad. After outlining the current state of U.S. debt and tax policy, Gundlach advised against European investments, favoring the U.S. dollar and owning U.S. government bonds as a hedge against credit.
2011-09-30 Schwab Market Perspective: Perception vs. Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data continues to reveal sluggish activity, and markets have been increasingly trading in a risk-on, risk-off mode. The Fed continues to try to stimulate greater economic growth, most recently with the announcement of operation twist. We have serious doubts this will engender any broad upturn. We continue to look toward Washington to move beyond short-term rhetoric and provide some serious long-term plans that allow businesses to have more confidence in the future. European policymakers continue to delay any real action, increasing the risks of an escalation of the debt crisis.
2011-09-30 Extreme Divergence Between Coal Rocks and Stocks Unwarranted by Frank Holmes of U.S. Global Investors
Coal was relatively flat for the quarter, but whats interesting is that coal companies were severely discounted. Over the last two years, coal stocks and the commodity have closely tracked each other, until this summer, when worries about a global slowdown caused coal stocks to fall off a cliff, not once, but twice, in August and again in early September. This extreme divergence between coal companies and the commodity seems unwarranted when the long-term drivers of coal remain supportive.
2011-09-30 Is a More Integrated Europe the Answer? by Andrew Goldberg and David M. Lebovitz of J.P. Morgan Funds
Germany has voted for an expanded EFSF to stabilize the European Sovereign debt crisis, an important step towards reducing near-term concerns. However, broader problems still loom. In recent weeks, mounting skepticism has exacerbated fears of recession in developed economies, sending risk assets plunging and volatility soaring. In the following update on the situation in Europe, well consider: The underlying issues plaguing Europe, A summary of steps taken to address them thus far, A look at possible next steps and solutions and a few thoughts on investing in such difficult times.
2011-09-29 PIMCO Cyclical Outlook: Growth Risks, Policy Polarization and Rethinking Returns by Saumil H. Parikh of PIMCO
Over the next 12 to 18 months, we expect the global economy to expand at a very modest real rate of 1% to 1.5%
Global imbalances have continued to rise in the post financial crisis environment, global leaders continue to fail in their policy coordination efforts, and deleveraging and reregulation continue to be critical over the course of our cyclical horizon.
We are transitioning into a world where we believe the incentives of policymakers and the divisiveness of politics will become the predominant drivers of investment returns and economics.
2011-09-28 Fed Extends Maturities by Kathy A. Jones and Rob Williams of Charles Schwab
Fed Notes-The TwistObservations and takeaways on the Fed's two day meeting this week.
Bank Bondsplus Extraordinary Calls on Trust Preferred SecuritiesWe elaborate on factors affecting the banking sector.
Obama Bill Questions Exemption on Muni bondsOur view on one piece of the job proposal presented by the Obama administration.
Liquidity- Ignore at Your PerilWe highlight some reasons why liquidity, especially in volatile markets, is an important investment factor.
2011-09-27 Chinas Escalation up the Value Chain: From Low-Cost Manufacturers to World Leaders? by Vladimir Cara and Ewan Markson-Brown of PIMCO
As labour demographics change, China could suffer a double whammy of a falling savings rate and a diminishing labour force.
The size of its domestic market allows China to spend more on research and development (R&D) and so potentially build technology and scale more quickly than many foreign competitors.
In particular, we have identified wheel loaders and excavators as two sectors where we expect the Chinese to successfully migrate up the value chain.
2011-09-26 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks jumped higher last week as the central bank took steps to ease the European sovereign debt crisis which relieved the concern about a short-term run on the European banking system. The week was a very strong one for stock prices with the Dow Jones Industrial Average moving higher by 4.7% while the NASDAQ Composite (a more growth oriented index) jumped 6.3%.
2011-09-26 Market Outlook Hinges on Europe by Bob Doll of BlackRock Investment Management
We expect the economy will muddle through in the coming year and we would place decent odds that economic growth will improve from the 1% level it experienced in the first half of 2011. This view is predicated on the assumptionand it is a big onethat there is no major additional fallout from the European debt crisis.
2011-09-23 All Eyes on Europe by Mark Kiesel of PIMCO
The longer policymakers wait, the more likely Europes financial crisis will deteriorate. The risk of a global liquidity trap has also increased as many healthy balance sheets around the world are also refusing to engage. Germany and other strong sovereign nations in Europe have to make a choice: continue to provide financial assistance to countries with more debt and assist in helping to restructure the debt of some European peripheral countries, or potentially move forward with a smaller, stronger group of countries-or at the extreme walk away from the Euro and the EU all together.
2011-09-23 Turkey Gets an Upgrade by Frank Holmes of U.S. Global Investors
The IMF offered a sober assessment of the global economy this week when it released the September 2011 update of its World Economic Outlook. The IMF stated the global economy is in a dangerous new phase, citing two main downside risks: The possibility the crisis in the eurozone will be too much for the regions policymakers to handle, and soft economic activity in the U.S. is due to a weak housing market, deteriorating financial conditions and a political impasse regarding fiscal consolidation. Accordingly, the IMF cut its projections for global growth to 4 percent through 2012.
2011-09-23 Extreme Moves Leave Markets in Rare Territory by Frank Holmes of U.S. Global Investors
Many investors have used gold and other commodities as a haven from recent volatility, buoying prices while equities sunk, but even those investments werent immune to the wave of selling. The U.S. dollar, in contrast, was up 2.2 percent. Much of the dollars rally came after the Fed announced the creatively named Operation Twist. The Fed will sell $400 billion of short-term securities and buy an equal amount of long-term debt. The goal is to push down long-term interest rates, which would spur economic activity.
2011-09-22 Talking Our Way to Recession! by David Edwards of Heron Financial Group
The Europeans do not yet have a political structure for engineering a rescue, and that will be the over-hang in Europe. They will figure it out - eventually. The risk remains whether Italy, Spain, Portugal, Ireland will require equivalent rescues. The largest unknown risk is: of all the banks and hedge funds that sold Credit Default Swaps on Greek bonds, do any have enough capital to pay off their exposure. Remember that the US Treasury directed $62 billion to AIG to cover CDS exposure at that firm in 2009. We doubt that the European central banks are prepared to do the same.
2011-09-20 Ya Gotta Believe! by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Isaac Meng of PIMCO
Central banks around the world consider easing monetary policy amid concerns of a global economic slowdown.
At least one major central bank, however, appears to be taking an opposite stance: China. Policymakers there are concerned about inflation, excessive credit and property speculation.
In other emerging nations, central bankers are generally poised to ease, but have less ammunition than they did after Lehman collapsed.
2011-09-20 Europe!? by David Kelly of J.P. Morgan Funds
Investors might wonder why global markets care so much about European debt. After all, relative to the size of their economies, both the U.S. and Japan run bigger annual budget deficits and have accumulated more government debt than the Euro Zone as a whole. The answer lies in the fact that Europe is now too integrated to be immune to the problems in any one nation, but still too divided to do anything effective to deal with them. Because of this, a very serious budget problem in one nation can undermine confidence in government debt and the banking system across the entire continent.
2011-09-19 Pacific Basin Market Overview August 2011 by Team of Nomura Asset Management
The global economic environment seems to be deteriorating rapidly. European economies are increasingly weighed down by the de-leveraging of the peripheral countries, while confidence in the U.S. is being sapped by the political paralysis in Washington. As a result, we have significantly downgraded our economic forecasts. For the U.S. economy, we are now predicting 2.0% real growth for 2012. However, we still believe that a double dip recession can be avoided.
2011-09-19 Diogenes in the Barrel by Christian Thwaites of Sentinel Investments
Its a good time to sit tight and stay with cash. Its not uncertainty. We can live with that. Its the certainty of temporary impasse. Heres why. When Europe gets it wrong it gets it really wrong. The cycle of tighter budgets, lower growth, higher deficits and higher bond yields is so manifest that you would think some coordinated policy response would be front and center. Not a bit of it. Greece is fast approaching the point where a declining economy cannot support debt repayments. It does not matter if the country embraces frugality or not. There is simply not enough juice to pay off debt.
2011-09-16 A Yuan, Euro and Dollar Walk Into a Bank... by Frank Holmes of U.S. Global Investors
Currency markets have been the pawns in central bankers chess games around the world in recent weeks, as each country looks to gain the slightest edge in todays economy. Weeks ago we saw an intervention from the Bank of Japan, which tried to stop the yens downward slide. Last week, the Swiss National Bank moved to improve the Swiss francs stature. Also recently announced was that the Hong Kong dollar will no longer be pegged to the U.S. dollar. Given the important role paper currency plays, weve developed a quiz so you can test how much you know.
2011-09-16 Is the End Near for the Eurozone? by Team of Knowledge @ Wharton
Warning signs are flashing red. Bond markets are projecting a 98% chance of default on Greece's debt. Stock prices for French banks, heavily invested in that debt, have plunged 10% in recent days. Has the European debt crisis hit the breaking point, with Greece -- and perhaps others -- soon to exit the eurozone? Or, will officials once more cobble together new agreements that keep Greece in the club and prevent a huge contagion effect likely to cripple an already slowing global economy? Wharton finance professors Franklin Allen and Bulent Gultekin offer their insight.
2011-09-16 Perfect Storm Creates Tidal Wave of Gold Demand by Frank Holmes of U.S. Global Investors
In the East, gold is not only celebrated, acquired, worn or displayed during holidays or special occasions; it is seen as an everyday symbol of wealth. Increases in demand from China and India have driven a 7.5 percent increase in demand for gold jewelry during the first half of the year despite a 25 percent increase in the price, according to a report released this week from GFMS. However, much of Indias potential gold demand remains untapped.
2011-09-15 Chinese Banks are Imitating Washington Mutual by Bill Smead of Smead Capital Management
Washington Mutual is only in existence in the world of litigation. For those of you out there who like to avoid these kinds of risks, we at Smead Capital Management recommend you avoid China, avoid the commodities which are used most heavily in construction, avoid the makers of construction and mining equipment, avoid the countries which have benefitted the most from Chinas uninterrupted growth, and avoid the vehicles used for financing all of this growth. The inevitable economic recession in China which we expect to follow will turn the asset allocation world upside down.
2011-09-14 Asian Bonds Fund Manager Interview: A Misunderstood Opportunity by Team of Aberdeen Asset Management
Global investors remain under-invested to Asian bonds. Exposure is often made through global debt benchmarks; however, these benchmarks typically have low allocations to Asia, may not be particularly active, have allocations to less creditworthy countries and possess limited local currency exposure. Many investment opportunities in the Asian region have been overlooked. Asia provides a diverse set of markets and a broad set of country issuers across the credit spectrum, offering what we believe are good opportunities for investors to enhance portfolio yields.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 The End of the Line: Eurozone Crisis Hits Tipping Point by Liz Ann Sonders & Michelle Gibley of Charles Schwab
The growing likelihood of debt default by Greece rocks markets and sentiment.
Although the banking system is healthier today than it was in 2008, contagion risks are elevated.
The grand experiment of a unified currency in Europe is facing its greatest test yet.
2011-09-10 China Fears Much Ado About Nothing by Frank Holmes of U.S. Global Investors
There are many questions surrounding the global market but the Chinese economy remains headed toward the moon. The country, of course, remains vulnerable to external forces but we believe the economys strong momentum will be enough to carry the country through, should volatile times persist.
2011-09-10 Economic Resilience of Emerging Markets by Frank Holmes of U.S. Global Investors
A boxers stamina is judged by how quickly he rebounds from a blow. Strength of a country, then, could be measured by how quickly the economy can bounce back from a crisis. The Economist provided one measure when it compared countries percentage change in real GDP per person from the fourth quarter of 2007 through the second quarter of 2011.
2011-09-09 Brazil and Chile | One for Now, One to Watch by Russ Koesterich of iShares Blog
Earlier this month, as part of my changed view of emerging markets. I initiated an overweight view of Brazil and noted that I am paying close attention to Chile. As promised, here are more of my thoughts regarding these two emerging market countries.There are a number of reasons why I like Brazil. First, from a valuation standpoint, Brazil looks attractive relative to both its own history and to other MSCI ACWI countries. I am not yet establishing an overweight view of countries in Latin America beyond Brazil, but I am watching Chile closely.
2011-09-09 Schwab Market Perspective: What's Next? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The economic debate continues between the recession and slow growth camps. We lean toward the latter but the argument may be just splitting hairs. The more important issue is what this sideways movement may mean for the market and jobs growth. There seems to be more disagreement among Fed members than we've ever publicly seen. Theyve laid out potential further stimulus but we believe their effects are likely to be limited. The European crisis continues to fester and some hard choices may need to be made sooner rather than later. Slowing European economies however, could help emerging markets.
2011-09-09 Whats Behind the Downturn? by Howard Marks of Oaktree Capital
I feel the prosperity we enjoyed in the final decades of the twentieth century was considerably better than normal, and better than were likely to see up ahead. Im not implying a world without growth or otherwise permanently negative. Just one without the prosperity, dynamism or positive feelings of past decades. In addition, the newness of the macro picture and some of the problems and the opacity of the solutions certainly make it less clear in which direction well go.
2011-09-08 Teaching to the Test by Neel Kashkari of PIMCO
Many managers are focused on beating benchmarks, rather than helping clients achieve their investment objectives. Clients save and invest their money for specific reasons, such as for retirement or childrens education and managers should focus on helping them meet those goals. Many managers are really closet indexers masquerading as active managers while charging premium fees for benchmark returns. Many equity managers deviate very little from their benchmark because they are terrified of potentially underperforming it.
2011-09-08 The Transfer Payment Paradox by Russ Koesterich of iShares Blog
You dont have to be a fan of profligate government spending to recognize the enormous paradox the United States faces in getting its economic and fiscal houses in order. The US economy is driven largely by consumptionroughly 70% of GDP comes from personal consumption. A large and growing percentage of that consumption is dependent on federal transfer paymentsdirect government payments to individuals. Yet as the US tries to get its deficit under control, these payments could be cut. That in turn could have a significant impact on disposable income and economic growth.
2011-09-08 Developed Asia Pacific: Economic Review August 2011 by Team of Thomas White International
Developed Asia Pacific countries faced increasing headwinds to economic growth during August. Lukewarm growth figures in developed Western economies such as the U.S. and the European Union are troubling the growth prospects of many export-oriented markets such as Singapore, Japan and Hong Kong. Despite some support from emerging markets, export orders for Singapore and Hong Kong have slowed down substantially. In Japan the current account surplus slid, while the Singapore government revised its export growth figures down for the rest of the year.
2011-09-08 Emerging Asia Pacific: Economic Review August 2011 by Team of Thomas White International
Emerging markets across Asia experienced flagging equity prices as fears of a global slowdown, triggered by the downgrade of the U.S. sovereign credit rating and concerns over the debt crisis in Europe, gripped markets. Stock markets in some of the emerging Asian economies flirted with yearly lows. The Asian Tigers including South Korea, Hong Kong, Taiwan, Malaysia, and Thailand reported slower growth for the second quarter ended June 2011. Even China, the worlds second largest economy, reported headwinds to growth.
2011-09-08 The Changing Landscape of Global Investing by Mohamed A. El-Erian of PIMCO
National and global realignments are fundamentally and durably changing the global investment landscape.
Investors face the challenge of recalibrating some of the traditional parameters that are key to managing risk and delivering returns.
There are also implications for investment management firms which are yet to be sufficiently reflected in the thinking and actions of the industry as a whole.
2011-09-08 Global Overview: September 2011 by Team of Thomas White International
The recovery in global equity prices towards the end of August could cover only part of the decline during the first half of the month and most markets have now given up all of their gains from earlier this year. Gold prices surged to a new high, and U.S. treasury yields fell despite the rating downgrade, as investors preferred safer assets. On the other hand, select barometers of global industrial activity, like copper prices, declined. Nevertheless, most developed economies continue to expand, though at a restrained pace, and are expected to gain speed during the second half of the year.
2011-09-07 More Readers Questions Answered by Mark Mobius of Franklin Templeton
We have begun to see signs that the overheated Chinese economy may moderate in the not-too-distant future. We believe that inflation in China could reach a peak in the near future as a result of the Chinese governments decision in July to increase pork supply by releasing a portion of their strategic pork reserves. By releasing more pork supply into the market, the government hopes to combat rising pork prices. That move, combined with an easing growth rate, could subsequently lead to the end of the central banks current tightening monetary policy cycle in the near term.
2011-09-06 Five Strategies for a Sideways Market by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
If this slow growth environment coupled with asset price volatility continues for (to steal a quote from Fed Chairman Bernanke) 'an extended period,' what additional portfolio strategies might aid the overall risk/return profile of investor portfolios? More specifically, how do you manage investments in a sideways market?
2011-09-06 Its the Jobs, Stupid! Part VI by Komal Sri-Kumar of TCW Asset Management
The zero U.S. job growth also had an impact beyond its own borders. Even though U.S. markets were closed yesterday for the Labor Day holiday, Asian and European equity markets fell sharply on growing fears that the data release signaled the beginning of a U.S. recession. (Concerns about the solvency of the European banking system were the other reason for the market setback.) The United States and the European Union each account for about one-quarter of world GDP, and emerging markets cannot maintain global growth despite their faster pace of expansion.
2011-09-03 How to Find Opportunities from Blood, Debt & Fears by Frank Holmes of U.S. Global Investors
For the long-term investor, the risk/reward profile for owning stocks appears positively skewed. Equity investors have suffered through one of the most difficult decadesrivaling even the Great Depressionwhile bond investors have enjoyed a 30-year bull market. Long-term mean reversion is a powerful tool that investors can use to help them attain their long-term goals.
2011-09-02 Dividend Growth: Volatile markets revive an old investing strategy by Kevin Feldman of iShares Blog
Lately I've been hearing a lot about the new dividend growth strategy: Simply buy the right blue chip stocks featuring rising dividends and youll be on the path to a more secure retirement. With regular headlines like Top 20 High Yielding Dividend Aristocrats and 10 Dividend-Paying Blue Chips for Your Parents, its no wonder Im hearing people at dinner parties buzzing about Coke (KO), J&J (JNJ) and P&G (PG) in a way that reminds me of my grandparents stacking up their stock certificates to keep up with dividend checks from these venerable value giants.
2011-09-01 ProVise Bullets by Team of ProVise Management Group
In the widely anticipated comments from Federal Reserve Chairman Ben Bernanke at Jackson Hole, WY, he acknowledged that, for a number of reasons, the recession was deeper than originally thought. The recovery has been more modest than he would like, notwithstanding the fact that we have had nine months of economic growth since the recession ended, albeit anemic growth. Unfortunately, the media focused on more of the negative parts of his comments. Fortunately, investors heard optimism. Why did investors see something different than the media?
2011-09-01 Q&A with Litman Gregory Research by Team of Litman Gregory
We regularly use a Q&A format to address questions from readers about our investment views and current strategy. This format permits us to address a range of different topics and allows readers to focus on areas that are of interest to them. This Q&A piece was worked on jointly by members of our research team and tackles questions received during the past several weeks. We have grouped the questions into broad categories for convenience. The main topics include the Fairholme Fund, Investment-Grade Bonds, Floating Rate Loans, Municipal Bonds, International Bonds, China and Commodity Futures.
2011-08-30 New-Fangled Love Songs by Bill Gross of PIMCO
Liquidity concerns may affect all European peripheral bond markets unless the European Central Bank counters the rush for the exits with an enlarged daily checkbook.
In the U.S., discord between rich and poor has led to lower, not higher, Treasury yields as approaching recessionary winds force the Fed and private investors to favor bonds.
We prefer investing in the cleaner dirty shirt countries of Canada, Australia, Mexico and Brazil, along with non-dollar currencies that have strong trade ties with the Asian continent.
2011-08-30 Brazil and Chile | One for Now, One to Watch by Russ Koesterich of iShares Blog
Brazil looks attractive relative to both its own history and to other MSCI ACWI countries. The MSCI Brazil index is currently trading at 1.4x book value, versus its average of 2.1x book value over the past five years. In addition, from September 2008 to July 2009, the OECD composite leading indicator for Brazil was lower than it is today; yet the Brazilian market appears cheaper today than it did during that period on average. While Chile is starting to look interesting and we currently hold a neutral view of it, there is no need to rush in.
2011-08-26 Confidence Counts by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Most of the normally historically-telling leading indicators continue to point to the US avoiding a recession. However, risks are clearly heightened as continued erosion of confidence could push perception into reality. The Fed continues to be divided on whether to attempt further monetary stimulus. We question if any efforts will have the desired impact. The Obama Administration and Congress continue to scramble to be seen as doing something to help, but also have limited policy options. European policymakers seem oblivious to the erosion of confidence.
2011-08-26 Valuation Gap Makes Gold Miners Attractive But All Miners Arent Created Equal by Frank Holmes of U.S. Global Investors
Goldwatchers were reminded golds volatility works in both directions this week, with prices falling more than $100 an ounce in just one day. We forecasted the selloff last week, explaining a 10 percent correction would be a non-event. Once again the CME Group hiked the exchanges margin requirements for gold investment to shake out overleveraged speculation. This is a positive for long-term investors.
2011-08-25 Double Dip? Not so quick. by Russ Koesterich of iShares Blog
In recent days, market watchers from Bill Gross to Morgan Stanley have warned of the high possibility of a double dip recession for reasons ranging from more regulation and policy errors, to slowing consumption, weak economic data and the likelihood of further fiscal tightening. While I do believe that the odds of a double dip have risen since the S&P downgrade of US debt, I still think the most likely outcome is a sluggish recovery, not another recession. Whats my evidence? Leading indicators and retail sales data in the US and abroad.
2011-08-25 Will the U.S. Economy Face Recession in 2011? by Scott Colyer of Advisors Asset Management
The question I am now most often asked is, Will the United States slip into a second economic recession this year? The risks have definitely risen such that the current soft patch in the U.S. economy may translate from slightly positive GDP to a negative reading. Investors are faced with a huge opportunity to buy risk assets at a great entry point. We believe that the probabilities are that the markets will be significantly higher in the future. Market participants are net short this market and cash on the sidelines is at record highs. That is a recipe for a rare opportunity.
2011-08-23 Germany's Stumble Threatens Appetite for Peripheral Support by Ryan Davis of Fortigent
Equity markets faced mostly negative economic data last week for both the US and abroad, putting a quick end to the market rebound that began the previous week. In Europe, Germanys GDP slowed markedly. The regions most powerful economy expanded by just 0.1% in Q2, the slowest since early 2009 and down considerably from 1.3% in the first quarter. It was also far lower than an expected 0.5%. This in turn weighed on Eurozone growth, which expanded just 0.2%. Slower growth than the tepid levels already anticipated puts further pressure on the deficit-plagued region.
2011-08-23 Pounded by Jeffrey Saut of Raymond James Equity Research
I have been pounded with questions about the Dow Theory sell signal I spoke of; and, that occurred three weeks ago. The ubiquitous question has been Hey Jeff, how can you tell people to buy in light of the signal? My response has been that such a huge amount of energy had been used up in rendering the Dow Theory sell signal that the market, at least on a short-term trading basis, is likely a buy. Reinforcing that view are numerous oversold readings of epic proportions.
2011-08-22 Dont Dismiss Emerging Markets by Milton Ezrati of Lord Abbett
Fears about emerging market investments have grown of late. Todays doubts have three sources. 1) Many once popular emerging equity markets have failed to keep up with their impressive past gains. 2) The emerging economies look more vulnerable than previously to the ills of inflation and the associated slowdown in the pace of growth. 3) Valuations look much less compelling than they once did. But if all these factors keep emerging markets from repeating the phenomenal gains of the last 1020 years, investors would make a mistake to dismiss them out of hand.
2011-08-22 Outlook: Cautiously Optimistic For Economy & Markets by Bob Doll of BlackRock Investment Management
Despite the overall negative tone among investors, not all of the news has been bad in recent weeks. Data regarding July pointed to the beginnings of a stronger economic second half of 2011, including better payroll figures, industrial production, unemployment claims and retail sales. Additionally the Index of Leading Economic Indicators actually rose in July and was ahead of expectations. However, it is important to remember that August is when all of the stresses in the credit markets and equities spiked, so it is very possible that this may negatively impact Augusts economic statistics.
2011-08-22 The Neverending Story of a by Frank Holmes of U.S. Global Investors
Gold continued to make headlines last week, reaching nearly $1,900 an ounce on Friday before resting around the $1,850 level. Golds 15 percent rise to new nominal highs over the past month has rekindled gold bubble talk from many pundits. Long-term gold bulls have been forced to listen to these naysayers since gold reached $500 an ounce. If you would have joined their groupthink then, you wouldve missed golds roughly 270 percent rise since. That said, gold is due for a correction.
2011-08-19 Gold's Sun Also Rises in the East by Frank Holmes of U.S. Global Investors
During the second quarter, golds rising value didnt deter Chinese and Indian buyers. In its webcast, the World Gold Council (WGC) said these predominant drivers of gold demand accounted for 52 percent of bars and coins and 55 percent of jewelry demand. Chinas demand grew 25 percent, while India saw an increase of 38 percent. WGC attributes this growth to increasing levels of economic prosperity, high levels of inflation and forthcoming key gold purchasing festivals.
2011-08-19 Paris Accord: Much Ado About Nothing by Komal Sri-Kumar of TCW Asset Management
As I have emphasized repeatedly in the past, none of these band-aid measures is likely to end the European debt crisis. Several countries of the region are excessively in debt, pure and simple. When that is the case, the solution ought to be a reduction in the level of debt through the exchange of existing debt for discount bonds, reduced-interest rate bonds, or equity. Unless the European powers recognize and act on this reality, European debt will continue to be a millstone around the global economys neck.
2011-08-19 The Silver Lining for Markets and the U.S. Economy by Frank Holmes of U.S. Global Investors
There is a silver lining: Despite all the negative news out there, the global economy will continue to grow. In fact, the U.S. economy has had several positive developments recently. The four-week average for unemployment claims dropped to 402,000 during the week ending August 13. There is still a large chunk of America unable to find a job, but that group has shrunk 13 percent since August 2010 and is about 40 percent of peak 2009 levels.
2011-08-19 Paper Currencies Finally Redeemed for Gold by John Browne of Euro Pacific Capital
The basic unwillingness of politicians to face economic and financial realities has caused the United States and European Union to face currency collapse. The politicians are content literally to paper over the problem with massive amounts of newly printed currency. This means that savvy investors, facing major real losses, are turning increasingly to gold. In essence, even though currencies are no longer on a gold standard, they are increasingly being redeemed for gold in the marketplace.
2011-08-17 The Common Stock Commandments of Claude N. Rosenberg, Jr. by Kendall J. Anderson of Anderson Griggs
Through the years of our parents and grandparents markets there were a few voices of reason to help guide them. One of these voices was Claude N. Rosenberg, Jr. whose legacy is kept fresh through RCM, formerly Rosenberg Capital Management, a global asset manager and a company of Allianz Global Investors. Over the years he shared his thoughts with his writings. I have chosen to highlight a few of these ideas that he called his Common Stock Commandments that I consider timeless and can guide you just as he did years ago to your parents and grandparents.
2011-08-17 Emerging Markets: The New Defensives? by Russ Koesterich of iShares Blog
Traditionally, investors looking for more defensive country-specific exposure would have opted for equities of developed world countries, while the stocks of emerging market countries would have been considered more risky options. However, lately many emerging market countries have actually become more attractive places to invest than parts of the developed world. Why are some emerging markets now more attractive? One reason is that certain countries within the developed world are at the epicenter of the recent global sovereign debt crisis.
2011-08-17 Readers Questions Answered Part VII by Mark Mobius of Franklin Templeton
Many of you may be particularly concerned about the developments related to debt in the eurozone and theU.S.over the last few weeks. Id like to take this opportunity to share my thoughts on these events and respond to a couple of reader questions. To me, the European debt situation does not seem as serious as the U.S. debt crisis, both in terms of scale and the possible impact on the global economy. As such, I believe the worlds focus should really be on the U.S. debt crisis. We also have to remember that the tolerance for debt is generally affected by investor confidence levels.
2011-08-16 Tapping into 'The Power of Three' by Dan Richards (Article)
One area on which there's a growing body of evidence is the optimum number of examples to use and alternatives to provide when talking to an existing or prospective client. You want to provide enough examples to communicate that you've done your homework without having people feel overwhelmed.
2011-08-16 Equities, Mega Caps, Germany & More by Russ Koesterich of iShares Blog
Given last weeks extraordinary volatility, my call this week focuses on the overall market today. Essentially, I still believe the odds favor slow but positive growth; equities look inexpensive; and volatility appears too high. While I would continue to expect subpar growth, leading indicators arent suggesting that were heading back into a recession. For instance, in the year leading up to the 2008 recession, leading economic indicators fell or were flat in 11 out of 12 months. In contrast, leading indicators have risen in 11 out of 12 months, including the most recent.
2011-08-16 The Case for Tail Risk Hedging in Emerging Market Equities by Vineer Bhansali and Masha Gordon of PIMCO
While our secular outlook for emerging markets is solid, we expect long-term success will be earned by those who can manage cyclical risks.
There is a tradeoff between the cost of establishing a hedge and the downside protection that it imparts to a portfolio.
The best approach to tail hedging is a flexible one; using dynamic rebalancing, diversification and affordable option-like securities.
A diversified macro approach to hedging tail risk actually may be more efficient for EM than it is for developed asset classes.
2011-08-16 Money Manager Pride Goeth Before Destruction by Bill Smead of Smead Capital Management
All great money managers reach a point in their career where adulation and self confidence detracts from their better judgment. This interruption in judgment usually coincides with the discipline in use becoming the most popular discipline in the marketplace or the investing style being overdue for a three to five-year correction. Studies of the equity managers with the best long term records show that the best underperform the S&P 500 Index 35% of the time. The pride associated with multi-decade success and an army of folks enjoying your work is probably the most dangerous thing.
2011-08-15 Return to Recession.or Recovery? by Liz Ann Sonders of Charles Schwab
Soft economic data has caused talk of a return to recession to grow, leading to a return to the risk-off trade and a spike in volatility. We believe these fears and the market reaction are overdone and indicators still point to growth, but risks are high. The chorus calling for a new quantitative easing (QE3) program from the Fed has grown. We believe it's unlikely at this point. The European debt crisis continues to damage investor confidence as policymakers appear to be consistently behind the curve. Meanwhile, the economic slowdown could ultimately help emerging markets.
2011-08-15 Is Capitalism Doomed? by Nouriel Roubini of Project Syndicate
The massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and sub-par in most advanced economies given painful deleveraging.
2011-08-12 Developed Market Banks: Why PIMCO Pathfinder Takes a Selective Approach by Charles Lahr of PIMCO
The Pathfinder Strategy is currently limited to only a handful of banks that are best characterized by PIMCO as deep value opportunities.
We generally do not see meaningful upside potential in equity positions of developed market banks over the secular horizon.
Our concerns primarily revolve around three factors: loan growth, balance-sheet risk along with capital levels and regulation.
2011-08-12 Making Sense of the Markets by Team of Neuberger Berman
It is one thing to theorize about markets. It is quite another to invest. With that sentiment in mind, we offer a sampling of views from some of our portfolio managers across our firm who each independently form their own conclusions as to what to make of the market and how to position portfolios according to their respective investment disciplines.
2011-08-12 Buy, Sell or Hold? Relax and Don't Panic by Frank Holmes of U.S. Global Investors
There was more blood in the streets Monday as the world continued to digest S&Ps downgrade of US debt, the two-week market selloff, and the likelihood the US economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 Flash Crash. While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.
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 Run, Ride or Buy? What Should Investors Do? Dont Sell on Mondays! by Frank Holmes of U.S. Global Investors
With trillions of dollars in debt acting as a ball-and-chain for much of Europe, the U.S. and the rest of the developed world, must detoxify their balance sheets before hitting the ground running. On the other hand, emerging market economies carry low levels of debt and operate like a cash business, making them the final frontier for strong economic growth. A key reason is emerging market governments have the long-term policies in place to facilitate growth of their economies.
2011-08-10 Global Investment Outlook: Aberdeen's monthly outlook for economies and markets. by Team of Aberdeen Asset Management
Eurozone crisis threatens financial stability
Global industrial production momentum may be turning back up
Fiscal policy and sovereign indebtedness is the major medium-term issue
Monetary policy remains accommodative with emerging countries becoming less restrictive
2011-08-10 The Economic Recovery Has No Clothes by Kevin D. Mahn of Hennion & Walsh
What likely transpired yesterday was that investors finally siad, The economic recovery has no clothes, despite repeated claims by the Federal Government and certain economists to the contrary over the past 6-12 months. While historical research has shown that typical stock market recoveries generally precede economic recoveries by 6-9 months; perhaps it was too soon. While many encouraging signs pointing to a sustainable economic recovery have emerged over this timeframe in terms of corporate earnings GDP growth and M&A activity, many headwinds for the U.S. economy still exist.
2011-08-10 Update on Global Economic Uncertainty by Team of Nomura Asset Management
Investors can afford to be less nervous in a market that has already declined significantly. Rather, we would recommend that investors should recognize the ability of these companies to generate earnings as well as their ability to sustain their dividends payments. Governments of all major developed and emerging countries have to deal with deteriorating economic forecasts, so until investor psychology calms down, patience may be needed. We will continue to monitor the changing investment environment and identify stocks that offer worthwhile investment opportunities.
2011-08-09 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 The U.S. Debt and Emerging Market Opportunities by Mark Mobius of Franklin Templeton
The initial market reaction will likely be a high degree of uncertainty and volatility, since investors will likely not know where to turn for assets with lower short-term volatility. During the subprime crisis, investors largely sought such assets in U.S. Dollars and Treasuries. While during the subprime crisis the USD index was high, now it is low reflecting a changed perception of markets that may be considered less volatile in the short-term. In particular, we believe currencies and stocks of emerging countries may look relatively attractive.
2011-08-09 Pacific Basin Market Overview July 2011 by Team of Nomura Asset Management
Equity markets in the Pacific Basin edged higher in July despite the ongoing sovereign debt issues troubling both Europe and the U.S. and the pressure from a slowdown in Chinas economy. Smaller ASEAN (Association of Southeast Asian Nations) economies continued to provide support this month, so the MSCI AC Asia Pacific Free Index including Japan and the MSCI AC Asia Pacific ex Japan Free Index closed 1.33% and 0.03% higher, respectively.
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?
2011-08-06 The Case for Going Global Is Stronger Than Ever by John Mauldin of Millennium Wave Advisors
If we have learned anything from the current financial mess, its that building wealth is dependent on rational analysis, careful decision making, and risk management. Thats why sticking close to home at a time when our markets are more uncertain than ever is a recipe for disaster and absolutely the wrong thing to do. Not only will you miss out on the worlds fastest-growing markets, but the odds are exceptionally high that you will miss as much as 50% or more in potential returns over the next decade.
2011-08-05 A Contagion of Bad Ideas by Joseph E. Stiglitz of Project Syndicate
There has been much concern about financial contagion between Europe and America. After all, Americas financial mismanagement played an important role in triggering Europes problems, and financial turmoil in Europe would not be good for the US-especially given the fragility of the US banking system and the continuing role it plays in non-transparent CDSs. But the real problem stems from another form of contagion: bad ideas move easily across borders, and misguided economic notions on both sides of the Atlantic. The same will be true of the stagnation that those policies bring.
2011-08-05 Urbanization: Driving Commodity Demand by Mark Mobius of Franklin Templeton
Increasing economic activity in emerging markets has continued to push up the demand and prices for key resources such as metals and oil. Infrastructure spending is a key factor driving this rising demand, as more of the working population in emerging markets move from rural areas to the cities, increasing consumption and putting upward pressure on both hard and soft commodities. Long-term commodity prices are likely to be driven by rising global demand as well as increasing costs to obtain these commodities.
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 Commodity Caution by Richard Bernstein of Richard Bernstein Advisors
The overwhelmingly bullish consensus regarding the emerging markets should be worrisome to even the most stalwart enthusiasts of emerging markets. It's hard to believe that the consensus a decade or so ago was that the emerging markets were terribly risky and should be avoided. Today, emerging markets, and ancillary asset classes like commodities, have become the cornerstone of most investment strategies.
2011-08-02 Russ K.s Market Calls | Developed & Emerging Markets by Russ Koesterich of iShares Blog
I started the year with a bias for developed market equities over emerging market equities. Year-to-date, developed equity markets have outperformed emerging markets by roughly 4%. I had two main reasons for favoring developed market equities. Emerging market equities looked expensive relative to their developed market counterparts and I felt that emerging market inflation would be a more persistent problem than the market was discounting. Now, however, these major rationales for broadly favoring developed markets no longer hold.
2011-08-02 Kings of the Wild Frontier by Bill Gross of PIMCO
The U.S. has averted a debt crisis, but there remains a stain on our reputation.
Nothing in the Congressional compromise reached over the weekend makes a significant dent in our $1.5 trillion deficit. In addition to an existing nearly $10 trillion of outstanding Treasury debt, the U.S. has a near unfathomable $66 trillion of future liabilities at net present cost. Aside from outright default, there are numerous ways a government can reduce its future liabilities. They include balancing the budget, unexpected inflation, currency depreciation and financial repression.
2011-07-30 Shifting Focus by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.
2011-07-28 Investor Question: Greek Bonds in ETFs by Matt Tucker of iShares Blog
As the Greece situation continues to develop, Ive been hearing a lot of client questions about the exposure to Greek debt in some of our iShares fixed income ETFs. With good reason, too investors are wondering whether downgraded Greek bonds will be removed from the funds in which they currently reside. Its a fair question, and it really highlights some of the points I made in my last post on index construction. Of course, last time I focused on US indexes (which are fairly straightforward). The Greece example gives me a good excuse to cover index rules for non-US bond indexes.
2011-07-28 Eurozone Leaders are Fighting Contagion, But is it Too Little, Too Late? by Andrew Balls of PIMCO
European politicians and bureaucrats may want to focus on their summer holiday plans rather than the eurozone sovereign crisis, but with Italy and Spain facing ongoing contagion they may have to forget their holidays and get to work. When the eurozone leaders finally got around to their summit on July 21, they no doubt hoped that the announcement of a new bailout plan for Greece and plans to expand the role of the European Financial Stability Facility (EFSF) would buy them some time. Unfortunately, that has not happened.
2011-07-27 From Asset Allocation Nirvana to Asset Allocation Nightmare by Bill Smead of Smead Capital Management
We believe the next 10 years will be about money moving back into non-cyclical US large cap stocks and domestic companies which enjoy lower commodity prices and the repatriation of money from highly risky asset classes with poor odds. Being widely asset allocated today prepares folks for an under-performance nightmare In our opinion, bonds are expensive, commodities are outlandish, small caps trade at a huge premium and as Chinas economic contraction occurs, the crowd will flee emerging markets.
2011-07-26 Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks by J.J. Abodeely, CFA, CAIA (Article)
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach – as Jeremy Grantham and Seth Klarman have – can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients’ capital.
2011-07-26 On Your Mind: The Debt Ceiling, US Credit Rating and Potential Default by Team of Charles Schwab
We are disappointed in the continued inability of Washington to resolve the current short- and long-term debt issues. However, we do not believe now is the time to make major portfolio adjustments given US companies' continued strong earnings reports, few signs of a double-dip recession, and few signs that the bond market currently questions the fundamental ability of the US to pay its bills. Be prepared for more volatility as the political negotiations continue. Watch the VIX index for upward spikes indicating that investors are losing patience.
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.
2011-07-22 2011 Halftime Report: Oil Outlook Remains Strong by Frank Holmes of U.S. Global Investors
Todays oil market is much different than what we experienced back in the 1970s. Back then, countries such as China, India and Russia had no global footprint; they were isolationists. Today these countries are building their economies and squeezing the existing supply of the worlds resources, including oil. These factors indicate that growth in global oil demand will likely outpace increases in production capacity and create a tighter market than what the IEA expected back in 2010.
2011-07-22 2011 Halftime Report: Oil and Copper by Frank Holmes of U.S. Global Investors
Last week we recapped commodities performance for the first six months of the year and offered our outlook on gold. This week, were discussing our outlook for two other commodities that are poised to have an exciting back half of the year.
2011-07-21 Sector Insights - Focus: Materials & Processing by James R. Margard, Peter M. Musser and Carlee J. Price of Rainier Funds
There has been a trend in the last decade for companies to increase in size through M&As, with a focus on removing competition, growing larger, and cutting costs to achieve economies of scale. In businesses that are commodity-oriented, scale is vital to success. This consolidation is occurring in part because it is becoming increasingly difficult to add economic value in this sector of the market. An agricultural revolution is underway, which is advantageous to many companies in the agricultural chain. Demand in the emerging world in particular is providing opportunities to grow revenues.
2011-07-20 Secular Outlook: Implications for Investors by Bill Benz of PIMCO
As the economy undergoes important realignments, investors will need to rethink their traditional approaches to managing their portfolios. As the lines between interest rate and credit risk become blurred, finding sources of safe spread becomes even more critical. More, not less, discretion is warranted when navigating volatile global markets, avoid sectors affected by financial repression and hedge against inflation and/or adverse tail events. We believe investors need to look at risk factors rather than traditional asset classes when making asset allocation decisions.
2011-07-19 Earning 'Extra Credit' Through Short-Term Strategies PIMCO by Jerome M. Schneider of PIMCO
Given renewed concerns over liquidity and credit, investors can potentially do better by considering actively managed short-term strategies that invest beyond traditional U.S. money-market guidelines. The current credit situation in Europe is different from that in both 2008 and 2010 because initial liquidity conditions in the short-term markets are better. In our view, investors should evaluate potential investments within the wider scope of relative value opportunities and not simply for the incremental yield they may offer above risk-free returns.
2011-07-19 Global Overview: July 2011 by Team of Thomas White International
The most recent economic indicators suggest a moderation in global economic activity growth, and forecasts for the current year have been lowered. Manufacturing activity decelerated for the second successive month in June across most major economies, except the U.S. Even Japan, which was expected to bounce back, reported slower growth. Among the emerging economies, economies suggest a decline in the pace of expansion. Consumer sentiment has weakened across the developed world over concerns about income growth as the labor market slipped again in select countries, most notably in the U.S.
2011-07-19 Urbanization: Building a New World by Mark Mobius of Franklin Templeton
Over the next few decades, I believe we are likely to see an increase in several types of infrastructure investments due to rapid urbanization, which drives the increasing global demand for resources, mainly from emerging markets. Rapid urbanization in emerging markets, driven by rural populations migrating to cities in search of work and better opportunities, has put pressure on resources and prompted governments to pump money into a range of urban infrastructure-related sectors such as housing, transportation, sanitation, water, electricity and telecommunications.
2011-07-19 The Debt Ceiling Debate & China by Russ Koesterich of iShares Blog
This week, our first call focuses on the ongoing drama over the US debt ceiling and its implications for the US Treasury Market. While the clock continues to tick towards an August 2nd deadline for raising the debt ceiling, Congress and the White House are still nowhere near a compromise. Next, heres a quick update regarding our view of China. While we remain, for now, neutral on China, and hold a negative view of emerging markets in general, our stance on China is starting to shift to a more constructive, or positive, view.
2011-07-18 Are Emerging Markets Ready to Lead the Global Economy? by Lupin Rahman of PIMCO
We forecast emerging economies will expand at a faster pace than advanced economies over the secular horizon. The challenge for emerging market central bankers is to remain ahead of inflation expectations and retain credibility on inflation targeting. We feel they are well positioned for this. We believe global investors remain significantly underweight emerging market assets. We expect this underallocation to decrease, providing multiyear support for the asset class.
2011-07-18 Equity Investment Outlook by Team of Osterweis Capital Management
As evidence of a global economic slowdown accumulated, the stock market suffered a correction during the second quarter. This is hardly surprising given the market’s strong recovery from the depths of the 2008-2009 financial meltdown. After surging just over 100% from its low in March of 2009 and nearly 30% since August of just last year through the end of the first quarter 2011, the S&P 500 Index needed a breather. The 7% correction that occurred from the April high through the June low looks relatively modest to us in light of how far and how fast the market has rallied.
2011-07-16 Commodities 2011 Halftime Report by Frank Holmes of U.S. Global Investors
Commodities don’t all perform in the same way. In any given year, a particular commodity will go gangbusters and outperform the group. However, that commodity will typically come back to Earth and underperform the following year or the year after that. This is why active management is important when investing in commodities. Active managers can benefit from rotating from winners to laggards or by investing in the companies which produce, farm or mine commodities most effectively.
2011-07-15 What a Multi-Speed World May Mean for Equities by Anne Gudefin and Masha Gordon of PIMCO
Equity investors may look in unfamiliar places as they navigate potential shifts in the global economy. An apparent rebound in risk tolerance since the financial crisis has supported higher equity valuations. Emerging market economies appear to be undergoing a mid-cycle rebalancing. We view this as a welcomed cyclical adjustment rather than the end of their growth cycle; long-term fundamentals remain intact. We believe advanced economies should continue to see headwinds to growth, and that potentially means investors may be generally willing to pay lower multiples to earnings.
2011-07-15 On Brazilian Investment by Andrew Foster of Seafarer Capital
In my last commentary, I presented some basic evidence that suggested that Brazil’s long-term record of capital investment is not particularly impressive. Specifically, Brazil’s rate of “fixed capital formation” was cumulatively 16.9% of GDP over the past two decades. This is the lowest rate among the vaunted “BRIICS” emerging markets; it also falls below that of the U.S. at 18.2%. In my view, this figure is both surprising and disappointing. It’s surprising because a developing country such as Brazil should have great scope for productive investment.
2011-07-15 Earnings Heat Up by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season is heating up and will provide a status update on the "soft patch" and where companies' confidence level lies. Stocks have been more volatile but are they telling us something about potential future direction? Debt ceiling talks continue in Washington, with a deal still likely to come in the final days before the supposed August 2 deadline. The make-up of spending cuts, tax changes, and any entitlement reform may be key to longer-term market reaction. Contagion fears are growing in Europe and solutions are difficult to come by.
2011-07-14 Pacific Basin Market Overview – June 2011 by Team of Nomura Asset Management
Faced with the imminent withdrawal of the Fed’s QE2 policy, the ongoing sovereign debt woes in the Euro-zone, and concerns over a slowdown in China, the Asian equity markets were at best only able to range trade during the second quarter. The broad indices remained relatively flat, with the MSCI AC Asia Pacific Free Index declining by 0.50% while the MSCI AC Asia Pacific declined 0.87%. As the immediate concerns over the sovereign debt crisis in Europe subsided, a steady recovery in domestic production also helped to lift the Japanese market and trigger a late rebound in equity prices.
2011-07-14 The Brightening Air by Christian Thwaites of Sentinel Investments
A casual empiricist would conclude that the US economy is troubled: weak GNP, employment, housing and slowdowns in the important ISM and Fed surveys. But a longer perspective shows this is entirely in keeping with a recovery from a deep-seated financial and borrowing crisis. There are many signs that the US is picking itself up: manufacturing productivity, private sector job creation, corporate profitability and household deleveraging. Monetary policy has saved the economy from the insidious threat of deflation. Fiscal policy is meandering. Some of the answers are right in front of us.
2011-07-14 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
In many ways, 2011 feels like a repeat of 2010, as the economy has hit a bit of a soft patch, the Federal Reserve’s quantitative easing program has come to an end, and the eurozone is faced with serious sovereign financial concerns. Stocks have pulled back, but the decline has been much more moderate than in 2010, in part because the corporate earnings cycle remains firmly positive. Companies have continued to exceed analyst estimates more often than not, and we expect the upcoming quarter to produce another round of good earnings reports.
2011-07-13 The Inflation Revival: Is it Time to Recalibrate Your Portfolio? by Richard Levine, Matthew Rubin and Tom Marthaler of Neuberger Berman
After a decades-long hiatus, inflation appears to be making a comeback. Clearly few anticipate a return to the days of the late 1970s and early 1980s when double-digit annual inflation gains were the norm. Still, the cumulative impact of inflation can be costly even during periods of modest price increases. According to Bloomberg $100 saved by the end of 1988 was “worth” only $56 by the end of 2009. Investors may wish to take into account such changes as they estimate the potential returns of their portfolios, and consider incorporating inflation hedges into their investment strategy.
2011-07-12 An End-of-Quarter Letter to Clients by Dan Richards (Article)
Given recent unrest in Europe and uncertainty about economic growth, many clients are looking to their advisors for direction. This template for an end-of-quarter letter is a starting point for your own letter to clients, one that can be a catalyst for a conversation about how to position portfolios.
2011-07-12 The Real Story behind Bond Yields by Michael Nairne (Article)
One of the most important questions that individuals should ask before making any investment is 'Am I being paid enough for the risk of this investment?' I analyze the returns available today from government bonds and answer this important question for this asset class.
2011-07-12 Second Quarter Preserves First Quarter Market Gains: We're Still Above Water and Treading by Ron Surz (Article)
In his award-winning commentary, Ron Surz looks at how the US market performed and then how foreign markets fared. He concludes on a lighter note with a couple of videos that address key topics in the investment arena.
2011-07-12 Developed Asia Pacific: Economic Review June 2011 by Team of Thomas White International
Developed Asia Pacific economies continued to face headwinds in June as the outlook for demand from both developed markets such as the U.S. and Europe, and emerging markets cooled. In the U.S., a lukewarm labor market caused concerns about the pace of economic recovery. In the emerging markets, persistent inflation fears were prompting higher interest rates. Both these factors are putting pressure on exports from Developed Asia Pacific economies. Japan, which specializes in exporting machinery and consumer durables, is feeling the heat of a slowdown in demand from consumer countries.
2011-07-12 Emerging Asia Pacific: Economic Review June 2011 by Team of Thomas White International
Emerging Asia Pacific economies continued to be troubled by persistent inflation in June. Almost every country in the region had to either hike benchmark interest rates or bank reserve requirement ratios to rein in lending and credit growth. The monetary tightening effects are largely expected to make capital more expensive and this in turn is expected to crimp growth across many emerging markets. Inflation, which thus far has been more pronounced among food and fuel items, now seems to be spilling over to structural inputs like labor as well.
2011-07-12 Balancing Debt, Value and Earnings by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
The quarter was weak. If this is due to factors like the earthquake and high energy prices, the soft patch should end in the second half of 2011. However, even if this plays out, longer term headwinds remain. What has become clear is that we are in a period of suboptimal economic activity, despite aggressive fiscal and monetary policy. Almost all rich countries are still stuck with a toxic mix of modest growth, depressed housing markets, negative real interest rates, even more asset concentration at our financial institutions, and uncomfortably high unemployment and government deficits.
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 market’s 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 that’s roughly double the amount of savings recorded following the Tech Bubble. In fact, household debt-to-savings ratios are currently at levels so low, they’ve not been seen since the mid-1990s.
2011-07-05 The End of Currency Wars? by Richard Clarida of PIMCO
International capital is flowing to countries with good growth prospects and to countries with central banks confident enough to raise interest rates.
Certain nations are placing controls on capital or intervening in currency markets with an eye to maintaining economic competitiveness.
We see central banks in the U.S. and the U.K. winding down monetary stimulus that has exacerbated the situation. Also, we see potential for emerging market currencies to appreciate, and that may give developed nations a boost.
2011-07-05 Scarce Resources by Dennis Nacken of Allianz Global Investors
For decades, investors largely ignored the commodities segment. They can no longer afford to. Commodity production can scarcely keep up with the dynamic development in global demand. The supply bottleneck could remain a sustainable driver of higher commodity prices for the foreseeable future. This applies to energy, to commodities in general and agricultural products in particular: these resources are becoming scarcer—and this is a megatrend.
2011-07-01 Emerging Markets Building Highways to Wealth by Frank Holmes of U.S. Global Investors
Last summer, IBM surveyed more than 8,000 motorists in 20 cities across 6 continents to determine the emotional and economic toll of commuting. They measured the amount of time it took to commute and time stuck in traffic along with whether there was an agreement of the following: the price of gas is already too high, traffic has gotten worse, and driving causes stress and anger. According to IBM, 13 cities other than LA cause more commuter angst. The top three hail from three different countries: Beijing and Mexico City tie as the world’s worst, with Johannesburg coming in third.
2011-07-01 On The Importance of Sustained Capital Investment Part 2 by Andrew Foster of Seafarer Capital
This commentary revisits the topic. It presents basic evidence to support the idea that sustained capital investment is critical in the context of developing markets. The data presented below is gathered from several countries, so as to allow for comparison across emerging markets. Admittedly, the workings of macro economies are highly complex, and drawing detailed conclusions about them is tricky. Nonetheless, national statistics do reveal the general outline of an economy and its underpinnings. That’s how I intend to use the data here – to make broad inferences only.
2011-07-01 Schwab Market Perspective: Dealing with Debt by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Global governments are dealing with rolling debt crises equaling shaky investor confidence. We are concerned that many of the solutions weigh on growth prospects, but are hopeful about short-term resolutions that restore business confidence and lead to more investment and hiring. The Fed continues to hold steady, keeping short rates near zero and likely reinvesting maturing Treasury securities after QE2 ends. Greece passed the austerity package required to get short-term funding but much more is needed. And while the focus has been on Europe, it may be time to focus on the Asian region.
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 Higher Commodity Prices and the End of Economic Growth Without Inflation by Mihir P. Worah of PIMCO
Global inflationary patterns may shift amid higher commodity prices.
We expect commodity prices to be generally rising going forward, though with volatility and differentiation among commodities.
Emerging markets going through a particularly commodity and energy intensive phase of growth may affect what developed-world consumers pay for commodities.
Currencies are another factor. If developed-world policymakers attempt to make their economies more competitive via a cheaper currency, that could lead to higher inflation for those that are net importers.
2011-06-25 The Malleable Market for Global Aluminum by Frank Holmes of U.S. Global Investors
Last week’s Investor Alert highlighted a Macquarie Research chart showing a recent notable upswing in aluminum production around the world. Following a huge dip in output in China and worldwide throughout 2009, China once again surpassed the rest of the world in producing the most aluminum. China’s massive production makes sense considering the country consumes the most aluminum. According to Jeremy Grantham of GMO, China uses 40 percent of the world’s aluminum as it rapidly develops its railway transportation, increasingly purchases automobiles and demands more energy.
2011-06-23 A New Era of Global Financial Repression by Scott A. Mather of PIMCO
Investors need to be especially alert to increasing financial repression. Any sovereign policy that interferes with free market activity and the pricing of debt or currency can be thought of as financial repression. Repressionary policy rates percolate through the global financial markets and affect asset prices across the risk spectrum. Many emerging market countries use repressionary tactics to capture a larger share of global growth.
2011-06-23 The Disconnect Continues by Richard Bernstein of Richard Bernstein Advisors
BRIC yield curves are on the brink of inversion, while the US has the steepest yield curve in the world. Such signals, while certainly not infallible, have historically been reliable predictors of future equity returns, but investors’ portfolios nonetheless remain generally overweight emerging markets and underweight the US. We see opportunity in this disconnect.
2011-06-22 Japan Outlook – June 2011 by Team of Nomura Asset Management
Nomura’s forecast for Japan’s CY2012 real GDP growth is 3.2%, up from an expected rate for CY2011 real GDP growth of just 0.1%. Although there has been a temporary deterioration in Japanese economic indicators due to supply side constraints, such as capital stock damage, supply chain disruption, and electricity generating capacity shortfalls, we have already started to witness signs that these constraints are easing. The supply chain will return to normal this autumn, as production bases in the disaster-affected areas are restored or the users quickly switch to substitute components.
2011-06-22 Can U.K. CPI Really Get Back to Its 2% Target? by Mike Amey of PIMCO
U.K. CPI (Consumer Price Index) will likely continue to be buffeted by food and energy inflation. To generate the conditions necessary to bring inflation down more aggressively would put even greater pressure on U.K. households. The Bank of England is right to be cautious on raising the Bank rate given the current state of the economy.
2011-06-22 High net worth families still “scared to death” of stocks by David Edwards of Heron Financial Group
US earnings reports start the second week of July. Research in Motion’s negative pre-announcement this week is the only earnings miss worth mentioning. Earnings among financial service stocks are under pressure. Without junky mortgage backed securities to sell, not much profit on Wall Street these days. Excluding financials, earnings are expected to grow 11% in Q2, though year over year revenues are expected to be flat. Most economists expect GDP growth to accelerate in the second half of the year as the Japanese supply chain issues are sorted out and commodity prices moderate.
2011-06-21 Investing Based on Jeremy Grantham's Forecast for Diminishing Resources by Robert Huebscher (Article)
In his most recent commentary, Jeremy Grantham became one of the first mainstream investment professionals to publicly forecast a world economy threatened by diminishing natural resources. A survey of our readers showed that an overwhelming majority agree with Grantham's views. But constructing a portfolio positioned to capitalize on those themes is exceedingly difficult.
2011-06-21 The Toughest Question from Clients And How to Answer It by Dan Richards (Article)
Many existing and prospective clients wonder whether they're getting their money's worth on the fees they pay. They may not say it out loud - but it's often there, casting a cloud of doubt about the advisor they work with.
2011-06-21 Turkey: A Rising Power Bridging Europe and Asia by Mark Mobius of Franklin Templeton
Turkey is the land where the European and Asian continents meet. I asked Carlos von Hardenberg, who is based in Istanbul and oversees our frontier market strategies, to share his views from the center of Eurasia: Since the implementation of the customs union agreement with the European Union (EU) in 1996, Turkey’s trade with EU countries has grown substantially in certain areas. In particular, the Turkish automobile sector has been growing at a fast pace and has become highly competitive. Between 1999 and 2008, auto production in Turkey grew by 285% to 1.15 million vehicles per year.
2011-06-21 Quick Update by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
Currently the stock market is rightly focused on the many risks emanating from the macro environment. The European debt crisis, inflation and social unrest in emerging markets, especially China, and our economy has slowed while unemployment remains elevated.Most of these conditions were peculating well before the stock market started its decline in early May. We took advantage of that period to reduce risk in our portfolios by selling some stocks, especially the more cyclically oriented companies. As aresult our portfolios are holding up better than their benchmarks in the current correction.
2011-06-20 Game Change for Bond Investors? by Scott A. Mather of PIMCO
Over the next three to five years, we argue that market behavior may be vastly different than what typical cyclical models would predict. Sovereign debt, which is at the core of our global financial system, is undergoing a seismic shift. Governments practicing financial repression may be transferring wealth from creditors (citizens) to debtors (governments) to the detriment of creditors, fixed income investors and savers.
2011-06-17 An Investor’s Road Map by Tim Shirata of Guild Investment Management
It looks as if banking regulators are finally showing some backbone. Here in the U.S. and in Europe, they are demanding less leverage. This will likely spread as there is no question that many large global banks are in trouble. The problem is that they are not addressing leverage from derivatives. It is too little and too late, especially after the moral harm created by the bank bailouts. To us, the big question remains this: what about controlling and clearing derivatives through a central exchange so the world of derivative holders and writers can clearly know the risks involved?
2011-06-17 Will Gold Equity Investors Strike Gold? by Frank Holmes of U.S. Global Investors
While the party continues for gold bullion prices, stocks of gold companies have been a no-show. The NYSE Arca Gold Bugs Index (HUI) has fallen more than 13 percent year-to-date and the Philadelphia Gold & Silver Index (XAU) has toppled more than 16 percent. Companies such as High River Gold Mines, Jaguar Mining and NovaGold Resources are off 45 percent from 2007-2008 highs. This has been exacerbated in recent weeks making it a hot topic of discussion among investors. This chart shows gold equities of all market capitalization sizes were holding up quite well until late April.
2011-06-16 U.S. Investors Overexposed to U.S. Dollar Risk? by Axel Merk of Merk Funds
The U.S. dollar has experienced significant weakness over recent years. And there is a risk the U.S. dollar will experience ongoing deterioration for an extended period of time. U.S. investors may want to take this possibility into consideration when assessing the U.S. dollar risk inherent in their investment portfolios. Our analysis into the aggregate financial asset holdings of the U.S. personal sector finds that the vast majority of investor’s financial assets are denominated in U.S. dollars and as a result, significant U.S. dollar risk exposure is evident.
2011-06-15 GOLDRelic or Real Money? by J Michael Martin of Financial Advantage
In the past 10 years, the price of one ounce of pure gold has risen from less than $300 to $1,500, far outpacing the return on stocks and bonds. And yet, in most gatherings of professional investors it is not respected. Why is that? What drives the price of gold, anyway? And is gold really an appropriate investment in the 21st century? We set out to better understand this unique metal. Well explore the reasons that some consider gold an important asset class with unique and valuable investment characteristics, while many professionals regard it as a sort of investment sideshow.
2011-06-14 A Cautionary Tale from the World's Most Influential Economist by Dan Richards (Article)
Raghuram Rajan was recently cited by The Economist as having the most important ideas for the post-crisis world. In this interview, he identifies key policy issues the Obama administration must confront. This is a transcript of the interview.
2011-06-14 Global Overview: June 2011 by Team of Thomas White International
Slower manufacturing growth triggers fears of another global economic downturn. Even as the global economy appeared to have entered a phase of stable growth, the unexpected slowdown in global manufacturing activity during the month of May has led to fears of another economic downturn. Activity indicators declined the most in developed economies where growth was expected to gain pace this year. However, unless the trend persists, it is more likely that the moderation in manufacturing activity growth is only a readjustment after several months of rapid expansion.
2011-06-14 Pacific Basin Market Overview by Team of Nomura Asset Management
Europe’s sovereign debt woes and inflation fears have plagued the Asian equity markets recently, sending indices lower during May. The eventual withdrawal of QE2 also became a real concern for the markets. Japan’s post disaster market downturn continued in May, but mainly due to negative international factors this time. Meanwhile, domestic concerns about the ongoing negative impact of supply-chain disruption on manufacturers’ earnings and the political disarray caused by a divided parliament and a weakened prime minister have continued to weigh on the market.
2011-06-13 Developed Asia Pacific: Economic Review May 2011 by Team of Thomas White International
Developed Asia Pacific economies largely managed to boost output by leaning on exports in May. For some of the economies affected by natural disasters earlier this year, exports proved to be a blessing. Australia, which was affected by floods in February this year, not only managed to increase raw material exports but also gained by the investments associated with its export-oriented mining sector. Earthquake-hit New Zealand and Japan, however, faced difficulties in increasing output. New Zealand, which depends on food exports and tourism, suffered because of a strong domestic currency.
2011-06-13 Emerging Asia Pacific: Economic Review May 2011 by Team of Thomas White International
Aggressive interest rate hikes by emerging markets in the past twelve to eighteen months have started showing some results. Although food inflation in many emerging markets remains at elevated levels, the pace of inflation seemed to slow in some countries. Further, inflation expectations are expected to cool, primarily due to anticipation of record harvest of food grains in many countries. The threat from oil prices, which grew at a menacing pace during the first quarter of the year, also subsided a bit in May. Nonetheless, many central banks across Asia were cautious over monetary policy.
2011-06-10 Why Bill Gross Doesn’t Like Stocks (or Treasury Bonds) by Sam Parl (Article)
Stocks have come to the end of a “wonderful journey,” according to PIMCO's Bill Gross, and are now on their own, like “a baby bird just released from the nest.” The journey Gross spoke of is the multi-decade decline in real interest rates, which have fueled bull markets across “risk assets,” especially in equities and bonds.
2011-06-10 Pause or Panic? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has deteriorated to the point that talk of a double dip recession has returned. The risk of another recession is low as most indicators remain well in expansion territory. Several factors are contributing to a soft patch, but a rebound is likely in the latter part of 2011. Along with talk of recession risk, chatter about the need for QE3 by the Fed has increased. The bar is quite high for QE3, but it is very likely the Fed will not let its balance sheet shrink in the near-term. Global growth is decelerating as well, with China tightening and Japan dealing with reconstruction.
2011-06-08 The Economy: When Will Happy Days Be Here Again? by Team of Knowledge @ Wharton
The latest economic reports show the U.S. recovery has faltered. But someday, surely, there will be a real recovery. What forces will drive that upturn? And will the healthy economy of the future look different from those of the past -- establishing a "new normal?" Two intertwined factors are critical to any rebound, according to many experts: Home prices must stop declining and begin to rise, and consumers must spend more freely.
2011-06-07 Monday Market Calls | US Retailers and Emerging Market Bonds by Russ Koesterich of BlackRock Investment Management
Call #1: Maintain Underweight US Retailers. Last week, the main monthly gauge for manufacturing activity and May’s non-farm payroll report both came in weaker-than-expected and both confirmed that the economy is experiencing a dramatic slowdown. Call #2: Neutral Emerging Market Bonds. The other implication of a slower global economy is that bonds should do better relative to stocks. Given what appears to be a case of extreme over valuation, we would still advocate a negative view on US Treasuries, but we are now changing our view of emerging market bonds from negative to a neutral stance.
2011-06-07 Low Volatility Equity Solutions – Is Now The Time? by K.Sean Clark of Clark Capital Management Group
Correlations converging amid the market declines of 2008 called attention to the limits of relying on diversification between assets for portfolio protection. The desire for non-correlated returns among assets had led to a significant reduction in U.S. equity exposures and accelerated flows into non-U.S. equities and alternative strategies. But the correlations of these uncorrelated assets spiked under the extreme market stress of 2007 and 2008. This shows that for downside protection, buying assets with many different risk profiles is not a substitute for buying volatility to manage risk.
2011-06-07 The Tough Transition by Cole Smead of Smead Capital Management
Stock market participants seem to be having a great deal of difficulty handling temporary economic weakness. This weakness is highly likely to be a combination of higher gasoline prices and the disruptions that supply chains suffered at the hands of the Japanese Tsunami. We are not surprised by this temporary weakness and if it hadn’t been caused by this combination it would have come to pass anyway.
2011-06-07 Modern Portfolio Theory IS Harming Your Portfolio by JJ Abodeely of Sitka Pacific Capital Management
In a recent paper, Scott Vincent argues that the flawed foundation of MPT has allowed its advocates to control the language of the debate and set the stage for the obvious conclusion that passive index-based investing is inherently superior. And don’t think for a second that this debate is simply theoretical, academic, or unimportant– the basic tenets of MPT shape the decisions of nearly all investors in profound and often disturbing ways. YOUR money is almost certainly being managed with these ideas at the core. The traditional approach to asset allocation is built on false axioms.
2011-06-03 The Eurozone Needs a Plan B, as 'Quarantining' the Weak Is Too Costly by Andrew Balls of PIMCO
The eurozone’s 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 Greece’s public debt and perhaps that of other countries too.
2011-06-03 ETF Mythbusting – Synthetic ETF Considerations by Noel Archard of BlackRock Investment Management
With headlines like “ETFs: The Next Financial Time Bomb?” I myself would be alarmed about the safety of investing in ETFs, if I didn’t understand that there’s more to the story. The FSB’s April report, entitled “Potential financial stability issues arising from recent trends in Exchange Traded Funds” focused on two risks. First, the risks associated with the structure of ‘synthetic ETFs’; and second, the use of a practice called securities lending in ETFs. For the sake of pithiness, I’m going to tackle the former issue here and the latter in another post, which you’ll see published shortly.
2011-06-03 Natural Resources Q&A with the Global Resources Fund Team by Frank Holmes of U.S. Global Investors
This week Frank Holmes and the co-managers of the U.S. Global Investors Global Resources Fund (PSPFX), Evan Smith and Brian Hicks, participated in a special webcast for the Peak Advisor Alliance. Here are some candid portions of the Q&A: Q. How are interest rates currently affecting commodity prices? A. The magic number for real interest rates is 2 percent. That’s when you can earn more than 2 percent on a U.S. Treasury bill after discounting for inflation. Our research has shown that commodities tend to perform well when rates fall below 2 percent.
2011-06-01 An Investment in Infrastructure by Team of Columbia Management
Neglecting infrastructure can have tragic consequences. Think about the I-35 bridge collapse in Minneapolis, levees breaking in Missouri or the San Bruno gas pipeline explosion. These and many other examples illustrate the type of destruction that can occur if the country’s aging infrastructure is not addressed. At the same time, demand for new infrastructure is growing exponentially in emerging markets. Data highlighting the scale of construction, transport, logistics and communications development are so large they render relevant context difficult to comprehend.
2011-06-01 Overweight Healthcare and Exiting Australia by Russ Koesterich of BlackRock Investment Management
This week, our attention turns to the recent slowdown in the global economy and what it means for investors. Over the past month, both equity and commodity markets have staged a modest retreat. One potential cause of the slowdown is the lagged impact of higher commodity prices, which have historically acted as a drag on growth. Late last year, we advocated an overweight to Australian equities, which we then reiterated in early April. Since the initial call, iShares MSCI Australia Index Fund (EWA) has gained around 6.5%. We are now changing our view to neutral for a number of reasons.
2011-06-01 The Danger of Emerging Market Inflation by Mohamed A. El-Erian of PIMCO
If left unchecked, high and accelerating inflation in emerging markets will have growing adverse economic, social and political effects. In addition to undermining overall growth and resource allocation, emerging market inflation imposes a very heavy burden on the poor and erodes political unity. Emerging economies will tap multiple policy brakes as they seek to counter mounting inflationary pressures. And they will continue to grow, but not enough to pull up decisively the sluggish advanced countries.
2011-05-28 Global Infrastructure a $6 Trillion Opportunity by Frank Holmes of U.S. Global Investors
Each week, more than one million people are either born in or migrate to cities. Much of this rapid urbanization comes from the emerging world, putting tremendous pressure on that country’s feeble infrastructure. Merrill Lynch estimates that $6 trillion will need to be spent by selected emerging market countries over the next three years to meet the basic needs of these citizens. Water, transportation and energy investments will consume the bulk of these funds, 82 percent of total projected spending. Nearly every emerging market country Merrill researched will make an investment in all three.
2011-05-28 Railway Revolution Builds China's Consumer Culture by Frank Holmes of U.S. Global Investors
China is building the world’s largest network of high speed rails. Since opening the first high speed line between Beijing and Tianjin in 2008, the country has laid down more than 4,600 miles of new tracks. This is three times more than Japan, where the bullet train was invented. Once completed near the end of this decade, the high speed rail system will connect more than 250 Chinese cities, span 18,641 miles and reach roughly 700 million people. Currently, the high speed rail network connects about one-third of China’s cities. That figure is set to nearly double over the next two years.
2011-05-27 On Stockpiling and the Commodity Cycle by Andrew Foster of Seafarer Capital
Commodity prices have been in a secular bull market for the better part of a decade–subject only to temporary, albeit violent corrections. Three main explanations have been offered for the trend. The first is that demand from emerging markets is fueling price increases, as the developing countries consume tremendous amounts of raw materials in pursuit of growth. The second is that the dollar is being debased, which in turn is stoking inflation in hard assets. The third argument is that the world is facing a crisis of limits: commodity prices are surging as finite resources are being depleted.
2011-05-27 All That Glitters by Richard Bernstein of Richard Bernstein Advisors
It is hard to find anything in the current financial landscape that has caught investors’ attention as much as gold. We were proponents of gold at times over the past decade. However, the rationale for investing in gold has changed in the last three years. The story was once a fundamental one, but today’s general enthusiasm seems more emotionally-based. Gold prices might rise further, but we prefer to sit out the current rally in favor of more fundamentally-based investments that tend to perform well during periods of sizeable nominal growth.
2011-05-26 How Quickly They Forget by Howard Marks of Oaktree Capital
Asset prices fluctuate much more than fundamentals. Rather than applying moderation and balancing greed against fear, euphoria against depression, and risk tolerance against risk aversion, investors tend to oscillate wildly between the extremes. They apply optimism when things are going well in the world (elevating prices beyond reason) and pessimism when things are going poorly (depressing prices unreasonably). If investors remembered past bubbles and busts and their causes, and learned from them, the swings would moderate. But, in short, they don’t. And they may be forgetting again.
2011-05-26 The Case for Equities by Russ Koesterich of BlackRock Investment Management
With global equity markets up over 100% from their 2009 lows, many investors are questioning whether it is time to lower their strategic allocation to stocks. While there are no shortages of risks facing global equity markets, overall we find that most markets are fairly valued and arguably already reflecting some of the risks – particularly higher inflation and interest rates – that are likely to challenge the global economy. We believe that over the long term, equities are still likely to produce higher nominal (inflation-adjusted) and real returns than other financial assets.
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 today’s popular asset allocation.
2011-05-21 The Dollar and Oil Debate on CNBC Europe by Frank Holmes of U.S. Global Investors
This week in London, I joined CNBC Europe’s Commodities Corner to discuss an earlier post regarding my Three Reasons to Believe in $100 Oil. Of the three reasons I gave, most striking to this group was my belief that higher oil prices will continue because of a weakness in the dollar. What I explained during the discussion was that a falling dollar causes short-term volatility. As the demand for a particular commodity increases and the dollar weakens, or vice versa, investors need to deal with an exaggerated movement in the price. However, I stressed the short-term nature of these events.
2011-05-21 Asian Tiger Sinks Teeth Into Gold by Frank Holmes of U.S. Global Investors
The World Gold Council (WGC) released its quarterly “Gold Demand Trends” report this week and, as always, it was filled with fascinating data on the strength of the global gold market. Gold demand grew 11 percent to 981.3 tons during the first quarter of 2011, worth $43.7 billion at quarter-end’s price levels. The increase was driven by a significant rise in demand for gold as an investment, up 26 percent from a year ago, as emerging markets look to protect their assets from rising inflation. Demand for gold bars and coins was up 62 percent and 42 percent, respectively.
2011-05-20 What’s Eating You? Global Inflation and Your Portfolio by Matt Tucker of BlackRock Investment Management
Headlines have been filled with news about inflation, from rising commodity, precious metals and gas prices to higher prints of the consumer price index. Traditionally investors have looked to US real estate, commodities and US TIPS to help protect against inflation. As news of rising foreign inflation reaches the US, investors may now be asking if they need to think this in the context of their portfolios. Is global inflation different than US inflation? Could investing in assets that help protect against global inflation increase a portfolio’s efficiency? Am I missing an opportunity?
2011-05-20 RCM China Update: Economic Indicators Signal Robust Growth by Christina Chung of Allianz Global Investors
Christina Chung—head of Chinese equities at RCM, an Allianz Global Investors company—sees few signs of a hard landing in China, as inflation concerns have likely already been discounted by the country's equity market. The latest figures show that China's GDP rose to 9.7% year-over-year in the first quarter of this year, meaning that growth was slightly higher than the market consensus of 9.4%, but slightly lower than the 9.8% in the previous quarter. For the first time in history, the Chinese National Bureau of Statistics (NBS) has issued a comparison with the previous quarter.
2011-05-20 RCM’s Spotlight on India: March 2011 by Michael Konstantinov of Allianz Global Investors
India is widely assumed to have huge catch-up potential compared with China. Yet while China’s centrally guided economy swiftly executes structural changes, India generally discusses structural reforms without executing them. Michael Konstantinov—BRIC investment style leader for RCM, an Allianz Global Investors company—recently returned from India and discusses promising changes that, finally, are just about to be implemented.
2011-05-20 More People by Bill Smead of Smead Capital Management
As value managers, we are interested in secular trends. We seek company characteristics which lead us to non-cyclical businesses which are not capital or labor intensive. For this reason, we love businesses which need more people (as customers) to become more profitable. Unfortunately, from time to time, markets massively over-capitalize industries which they believe will benefit from having more people. Historical examples: The 1929 stock market peak was built around the idea that there would be more people to listen to radio, drive cars and fly on planes. The concept was over-capitalized.
2011-05-19 Cause or Effect: ETF Trading Volume Impact on Volatility (and Vice Versa) by Noel Archard of BlackRock Investment Management
If you read Russ Koesterich’s blog post from Monday, May 12th, you already have an idea of what has been going on with the price of silver. The commodity was up over 150% over the prior 12 months before going through a downward correction and shedding 30% of value. Our iShares Silver Trust (SLV) became a focal point during the course of the week as volatility spiked, and the usual questions popped up about how people use ETFs, and whether or not ETF trading volume is caused by price volatility, or if it’s in fact a contributor to the volatility.
2011-05-19 Chart of the Week: Emerging Europe's Middle Class by Frank Holmes of U.S. Global Investors
Middle-class, affluent, bourgeois - they describe a group of people who enjoy a comfortable life, have access to healthcare and, have discretionary income. And across developing nations, there is a growing group that are just settling in to this lifestyle. A few weeks ago we discussed how economic power is gradually shifting eastward and highlighted a McKinsey Global Institute report that showed China, Latin America and South Asia are projected to account for most of the middle class children by 2025. Those regions aren’t the only ones. A surging middle class exists in Eastern Europe as well.
2011-05-17 Pippa Malmgren on Inflation and its Geopolitical Impact by Robert Huebscher (Article)
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
2011-05-17 Are we at a Market Detour or merely a Speed Bump? by Matt Lloyd of Advisors Asset Management
The market has been predisposed to a positive bias over the last quarter. This is in light of what we see as a bit of rolling over in the economic metrics and various global forces. The market has somewhat disregarded the impacts of natural disasters, the European Central Bank (ECB) turning generally hawkish and placing the rating of U.S. Treasuries on negative outlook. A few years ago, any of these events would have proven to be a detour to the markets road to higher levels, currently they are merely speed bumps.
2011-05-16 Secular Outlook: Navigating the Multi-Speed World by Mohamed A. El-Erian of PIMCO
It is a world that heals slowly and unevenly, and remains structurally impaired. Balance sheets, both across and within economies, are still out of equilibrium. We expect advanced economies will face sluggish growth and persistently high unemployment over the secular horizon. Emerging economies will achieve higher growth but face recurrent inflationary concerns. We do not expect policymakers to boldly address structural problems. By targeting negative real interest rates, they will pursue financial repression that undermines the “real return” contract that savers expect.
2011-05-13 Market Turbulence Increasing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
We are entering a traditionally tough period for the market and economic data has been raising questions about the sustainability of the recovery. While still optimistic on the longer-term outlook, there could be more choppiness in the near term as markets adjust to a changing environment. The Fed continues to buck the global trend by maintaining loose monetary policy, which contributed to a weaker dollar. But lately the dollar has gotten a lift as QE2 comes to an end, contributing to a rout in commodity prices.
2011-05-13 Three Reasons to Believe in $100 Oil by Frank Holmes of U.S. Global Investors
After selling off nearly 14% last week, oil prices finished this week slightly higher at $99.65 per barrel. While the end result was a net positive, the volatility continued. Oil reached $104/bbl, then fell to around $96, before nesting just below $100. As an investor, this volatility can be difficult to handle. Throw in the uncertainty of today’s geopolitical environment, and investors feel the need to downsize their positions in commodity investments, such as oil. Markets could remain volatile in the short-term, but here are three long-term indicators to support $100+/bbl oil prices.
2011-05-12 Pacific Basin Market Overview - April 2011 by Team of Nomura Asset Management
Equity markets in Asia continued to gain ground in April after a volatile first quarter of 2011. Stock markets ended higher as companies reported strong earnings, while expectations that inflation may have peaked out also helped to support market sentiment. Disruption to manufacturing industry supply-chains and ongoing problems surrounding the Fukushima nuclear power plant have continued to weigh on Japanese stock prices, although the market was able to stabilize from the massive sell-off that followed the Tohoku earthquake.
2011-05-11 Supreme Moment by Bill Smead of Smead Capital Management
Kairos - is an ancient Greek word meaning the right or opportune moment (the supreme moment). The world of value investing and portfolio management includes mean reversion and patience. Speculative episodes typically go on for much longer than expected. This fact forces us to take a stand by avoiding overvalued common stocks and owning undervalued shares. Everyone would love to make their adjustments at the “Kairos”. We believe that the greatest existing misallocation of capital in the world today is based on over-confidence in the uninterrupted growth of emerging markets.
2011-05-10 What Return can we Expect from Stocks? by Adam Jared Apt (Article)
What return can we expect from stocks over the long term? This sentence contains four problematic terms: 'return,' 'expect,' 'stocks,' and 'long term.' Intended for the educated laymen, this article considers each in turn.
2011-05-10 Emerging Europe: Economic Review by Team of Thomas White International
The International Monetary Fund in its latest report observed that the economic recovery in Europe as a whole is proceeding modestly. However, the agency noted that the pace of growth varied substantially across countries in the region. The large emerging European economies in the region are performing at or above capacity, according to the agency. Preliminary data showed that the Euro-zone economy expanded at a better-than-expected pace in April, allaying concerns that the recent rate hike by the European Central Bank would strengthen the euro and slow down German export growth.
2011-05-10 Emerging Asia Pacific: Economic Review April 2011 by Team of Thomas White International
Faced with persistent inflation, central banks across emerging Asian economies turned more active in the foreign exchange markets during April, aggressively raising interest rates. However, these actions have coincided with a loose monetary policy in the developed markets. Consequently, the investment capital, which typically chases high interest rates, continued to flow from the developed markets to emerging markets, pushing up the value of the currencies of emerging markets. To prevent a sudden appreciation of their respective currencies, central banks turned into buyers of the U.S. dollar.
2011-05-10 Developed Asia Pacific: Economic Review April 2011 by Team of Thomas White International
Developed Asia Pacific economies that were hit by natural disasters during the initial months of 2011 registered mixed economic performance with some countries in the group recovering faster even as other countries are still dealing with the aftermath of the crisis. While Japan, finalized a fiscal and monetary plan, investment-led growth was helping Australia recover from floods. New Zealand, which also suffered a devastating earthquake, showed a considerable rise in dairy exports. Other advanced economies continued to do well, although strong growth has been stoking inflation.
2011-05-09 Me, Lord Marlboro and the Dow!? by Jeffrey Saut of Raymond James Equity Research
While the intermediate/long-term internal stock market energy remains fully charged for a move higher, the markets short-term energy still needs some time to rebuild. This probably means another week, or two, of consolidation and/or attempts to sell stocks down before we begin another leg to the upside. Even so, I dont think any selling will gain much downside traction, implying the zone between the S&P 500s (SPX/1340.20) 50-day moving average (DMA) at 1320 and the 1340 level should provide support for stocks.
2011-05-07 Don’t 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 month’s 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 Opportunities in Southeast Asia (video) by Mark Mobius of Franklin Templeton
Asia presents a wealth of investment opportunities. Economic giants like China and India, with their increasing demand for commodities and natural resources, play a pivotal role for growth in the region, including emerging markets in Southeast Asia. I think the outlook for Southeast Asia remains very positive. Countries like Thailand and Indonesia have seen very rapid growth in the last decade, and frontier markets like Vietnam and Laos, with their strong growth potential, are also very interesting to us.
2011-05-05 A Roadmap For The Coming Changes In Fed Policy by Will Denyer of GaveKal
Last week’s FOMC statement, and Bernanke’s first press conference, were predictably anticlimactic. But they did confirm what the FOMC plans to do this summer, and what they currently think should be the next steps thereafter. Based on this apparent plan, market participants would be right to assume that Fed policy will continue, well after QE2 ends in June, to weigh on the Dollar and support the already elevated Euro, commodity prices, commodity currencies, etc… In other words, the Fed’s telegraphed trajectory would continue to contribute to the world’s biggest macro risks today.
2011-05-03 Profiting From the Urge to Merge by Team of Emerald Asset Advisors
If it seems there has been a significant uptick in mergers & acquisitions ("M&A") lately, it's not your imagination. In the first quarter of 2011, worldwide M&A activity rose 55% from the comparable period in 2010. More than 9,600 deals with a value of nearly $800 billion were announced, the highest levels since the second quarter of 2008. We believe the recent pick-up in M&A activity is more than a simple rebound off the lows of the Great Recession and is likely part of a broader, longer-term trend. A confluence of factors supports this hypothesis.
2011-05-03 RCM Sees Double-Digit Earnings Growth for S&P by Josh Orth of Allianz Global Investors
Scott Migliori, CIO of RCM U.S., of Allianz Global Investors—says U.S. equities should continue to receive support from stronger corporate profits, a high level of new orders, favorable taxes and rising capacity utilization rates—which should also boost capital spending. We believe a 2011 full-year S&P 500 earnings growth rate close to 12%–15% is attainable. Profit margins are high and vulnerable in some sectors. Unit labor costs are to remain well behaved with the unemployment rate likely to remain above 8%. We believe 2011 S&P 500 earnings can reach the $95–$96 range, with an 9% gain 2012.
2011-05-03 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Strong earnings and a benevolent report from the Federal Reserve Board combined to keep the stock market rally roaring ahead despite scant media coverage. The Dow Jones Industrial Average gained 2.44% led by our shares in Boeing and Caterpillar while the NASDAQ Composite reached multi-year highs and gained 1.84% on the week.
2011-05-02 Schwab Market Perspective: Making Sense of a Mixed Bag by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season is winding down and is largely positive and CEO confidence is high. This points toward a continued improving labor outlook but could mean more grinding in the stock market. Housing remains moribund but the market seems to be largely dismissive. A ratings warning on US debt rattled the stock market but bond markets were relatively unmoved. Issues need to be addressed, but they are more likely to affect money flowing into the economy and highly unlikely to result in failure to pay obligations. Meanwhile, the Fed is striving to communicate more effectively-but about what?
2011-05-02 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
As we have been saying for some time, U.S. economic growth is stuck in the slow lane.We have seen a serious slide in the American standard of living over the past three years, since the beginning of the recession.The slide can be measured in many ways.Food stamps recipients have increased by 48 percent and the cost of the program ballooned by 80 percent.Medicaid recipients are up 17 percent and programcosts are up36 percent.Welfare recipients are up 18 percent, and program costs up24 percent. That isnt the kind of growth thats good for any economy!
2011-04-29 This Time Isn’t Different by Richard Bernstein of Richard Bernstein Advisors
Hearing the phrase “this time is different” is often a warning signal. History demonstrates that rationalizing an overvalued market by suggesting that the economy has structurally or that we’ve entered a “new paradigm”, is not generally a fruitful strategy. Whether bullish or bearish, we believe that macro cycles rarely diverge from historical patterns. Indeed, current global economic cycles appear to be following historical trends. However, there appears to be a significant disconnect between investor sentiment regarding risk and where problems are actually emerging within the global economy
2011-04-29 We Are Not Perma-Bears, But We Are Cautious Now by Team of Litman Gregory
To understand the potential upside for stocks it's important to evaluate the factors that drive returns and how they might behave over our investment horizon. The three key variables are dividends, earnings growth, and changes in the price/earnings ratio. Our analysis focuses on assessing these key factors under several broad economic scenarios. This allows us to estimate return ranges for stocks, and to weigh these potential returns against the risks we see to make informed portfolio allocation decisions.
2011-04-29 Coal Use in China Shines Light on Growth by Frank Holmes of U.S. Global Investors
International coal prices hit $124 per ton this week, the highest levels in five months, as strong demand from reconstruction projects in Japan and reduced supply from flood-ravaged Australia has made coal supply tight. The floods in Queensland, Australia cut the country’s output of coal by 15 percent and other big coal producers such as Indonesia, South Africa and Colombia are experiencing similar production cuts due to floods of their own.
2011-04-27 Turkey’s 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 The End of QEII: It’s Time to Make the Donuts by Tony Crescenzi, Ben Emons, Andrew Bosomworth and Lupin Rahman of PIMCO
With quantitative easing the Federal Reserve has in essence picked the pockets of Treasury bond investors throughout the world. Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out. The U.S. must invest in its people, its land, and its infrastructure, as well as promote free trade, to achieve economic growth rates fast enough to justify consumption levels previously supported by debt.
2011-04-26 Portfolio Strategy by Bradley Turner of Chess Financial
At the outset of the second quarter, the major trends that have shaped our portfolio strategy since last summer remain largely intact. These include: A global economy that is experiencing a two-track recovery. Growth in the developed markets is generally subdued while growth in the emerging markets is more robust. Inflationary pressures continue to build as evidenced by price increases in many commodities, notably food and oil. Interest rates have begun to move higher, either due to central bank actions (e.g., China, India) or specific country risks (e.g., Portugal).
2011-04-26 Africa: Challenges and Outlook by Mark Mobius of Franklin Templeton
In this post, I will discuss what I think are Africa’s key challenges. Corruption is a major problem in Africa. However, accusations of corruption against African governments could also be lodged against entities in the developed world that seek to buy the influence of these governments. One important development has been the Cardin-Lugar amendment to the Dodd-Frank finance reform bill in the U.S., requiring that oil, natural gas and mining companies registered on the New York Stock Exchange disclose any payment made to a foreign government for the purpose of the commercial development.
2011-04-25 Yemen: Different Sort of Story by Douglas Clark Johnson of Codexa Capital
Yemen may now be worth a second look by the private sector, with the pending departure of Ali Abdullah Saleh from office. While the country’s distorted economy puts limits on growth, its international context could soon take a more constructive turn. The key is broad-based GCC participation in the economy, something that was never seriously on the table while President Saleh was in office.
2011-04-22 Don’t Fear a Pullback in Prices by Frank Holmes of U.S. Global Investors
The S&P credit agency sent shockwaves through the global financial system on Monday. This sent markets lower and the prices of commodities such as oil rocketing back above $110 per barrel and both gold and silver to new highs. It should be clear the S&P announcement was just a warning, the rating was affirmed at AAA. The fears quickly subsided and U.S. markets hit fresh three-year highs. Essentially there’s only a one-third chance of a downgrade and anyone who’s ever listened to the weather man knows that a 33 percent chance of rain means you probably don’t need your umbrella.
2011-04-21 Equity Market Review and Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant global strife. Most major US indices posted total returns of about +5.0% to +8.0%. Continuing the trend since the March 2009 low, small cap and mid cap stocks outperformed their larger brethren. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five- and ten-year periods.
2011-04-19 Managing Exposure to Extreme Markets by Geoff Considine (Article)
Volatility in the equity markets has subsided, courtesy of a strong bull market and fading memories of the 2008 financial crisis. Risks remain, however, ranging from the turmoil in northern Africa to sovereign debt instability in Europe. Investors can take advantage of the complacency in the equity markets by purchasing inexpensive insurance against adverse events.
2011-04-19 Emerging Europe: Economic Review March 2011 by Team of Thomas White International
Upbeat forecasts from the European Commission as well as stable financial and economic conditions in European economies indicated that the recovery is on track in the region despite the tragic developments in Japan, increasing oil prices, and the continuing political unrest in the MENA region. Equity markets also seem to be signaling that the sustained pace of global economic recovery will offset these developments. The decision by seventeen Euro governments to strengthen the €440 billion rescue fund and to lower interest rates on Greece’s bailout helped allay fears of a lingering debt crisis.
2011-04-19 Global Overview by Team of Thomas White International
While the earthquake and the tsunami have caused extensive damage in Japan, the impact on global economic growth is not expected to be significant. Though exports to Japan may slow in the short term, this will likely be offset by increased demand as the country starts rebuilding. The supply disruptions faced by manufacturers who depend on Japanese components are also likely to be short-lived. Global equity prices saw increased volatility during March, but recovered towards the end of the month as fears of slower global economic growth due to the disaster in Japan subsided.
2011-04-19 Middle East/Africa: Economic Review March 2011 by Team of Thomas White International
The turmoil in the Middle East region continues, with Libya exploding into civil war, and troops from the Gulf Cooperation Council being called in to suppress the protests in Bahrain. In terms of the economic repercussions, stock markets in the MENA are estimated to have lost around $140 billion in market capitalization during the last month. According to the Arab Monetary Fund, the market capitalization of 16 Arab bourses was valued at $862 billion on March 4, compared with $1.002 billion on January 25, a day before the political crisis in Egypt triggered upheaval across the Middle East.
2011-04-16 Will China's Economy Overheat? by Frank Holmes of U.S. Global Investors
China’s GDP growth continued at a blistering pace during the first quarter of 2011, rising 9.7 percent from the previous year. Once again this outpaced many forecasts and reignited the discussion of China’s overheating economy. While its robust growth may raise a few eyebrows, the economy isn’t in danger of “red-lining.” Andy Rothman points out that the first quarter growth figures “[aren’t] dangerously high given the GDP growth rate and strong income growth” After rising nearly 8 percent during 2010, inflation-adjusted urban incomes rose 7.1 percent during the first quarter.
2011-04-16 Inside Information by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season gives an 'insider' look at economic growth. Businesses see and react to changes in the economy before the broader macro data show a clear trend. The Fed has floated some trial balloons about reining in its extremely accommodative policies, the time for which is overdue. Budget issues remain a problem at all levels of government, but likely wont derail the recovery at this time. Despite ongoing debt problems in peripheral European nations, the ECB hiked interest rates. Europe still faces significant issues that make it more likely to underperform other areas of the world.
2011-04-14 Pacific Basin Market Overview by Team of Nomura Asset Management
Asian equity markets began the year in a particularly volatile state as they came to terms with regional inflationary pressure, unrest in the Middle East and North Africa, and the natural disaster in Japan. Notwithstanding these negative factors, most markets in Asia rebounded in late March to end the quarter on a positive note. The MSCI AC Asia Pacific Free Index including Japan, however, decreased by 1.4% in the first quarter of 2011, while the MSCI AC Asia Pacific ex Japan Free Index increased by 1.5%.
2011-04-13 Global Demographic Trends: 1950 - 2050 by Team of Bespoke Investment Group
The OECD recently issued its annual Society at a Glance report which highlights and compares trends in income, age, and other vital statistics across countries. One interesting aspect of the report highlights trends in the age of the global population. In the charts below we compare the percentage of the entire OECD population above the age of 65, as well as in BRIC and G7 countries. As shown in the top chart, 14.61% of the population within all OECD countries is currently above the age of 65 years old. Between now and 2050, this percentage of the population will increase to 25.66%.
2011-04-13 Powering Up Asia by Team of Matthews Asia
Energy is a fundamental building block of all modern economies. As such, it should not be an overstatement to say that the availability, or lack of energy has been a primary driver of growth. This is why it has been imperative for all nations, to secure stable sources of energy. With Japan’s current nuclear crisis and high oil prices causing concern, the topic has drawn recent attention. And as Asia's population continues to climb, the region’s energy demands are also set to soar. China and India, are expected to develop ever greater appetites for energy sources, such as nuclear power.
2011-04-12 Equity Market Review & Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
The global equity bull market continued in the first quarter despite significant unrest across parts of Northern Africa and the Middle East, a massive earthquake in Japan, sovereign debt issues in Europe, and inflationary pressures in certain emerging economies. US markets were among the best in the world, although the MSCI World Index also posted a solid gain of 4.9%. Emerging markets were among the weaker equity asset classes. As the returns demonstrate, however, emerging market stocks remain the winners by a wide margin over the past five and ten year periods.
2011-04-11 Bond Market Review & Outlook by Thomas Fahey, Teri L. Mason and David W. Rolley of Loomis Sayles
The power of easy money policy to dampen volatility is evident in the global bond markets. There has not been any systemic credit spread widening or major jump in risk aversion on the back of the significant political upheaval or natural disaster. The collective investor conclusion seems to be that the impact of the losses will not derail global growth, and Japanese reconstruction may even contribute to it later this year. Specifically, Chinese growth still looks on track for a strong year, and labor markets in the US have at last begun to show something like a normal recovery.
2011-04-09 Risk 3.0 Investment Solutions for the New Market Realities by Mitchell Eichen and John Longo of The MDE Group
In spite of the stock market rebound from its March 2009 lows, the 2007-2009 bear market still looms large. Investors have lost faith in the conventional methods of portfolio management. Investor confidence was not merely shaken, but shattered. Risk was either improperly measured, or considered a distant second to return. In this paper, we introduce a new approach to portfolio management that builds upon prior work. The main contribution is that specific kinds of risk are explicitly considered. The portfolio is then optimized, using human judgment, for the current market outlook.
2011-04-09 The Curve in the Road by John Mauldin of Millennium Wave Advisors
We have chosen deliberately to take the inflation road. We have not traveled that road for some time. The Fed may think they know what is around the curve and what to do if inflation comes back, but no two crises are the same. I worry about these things. If the Fed and the US government wanted a weaker dollar, the return of inflation, and the potential for yet another boom-bust, they could not have designed better policies than the ones they’re pursuing.
2011-04-08 Important Recent Developments by Louis-Vincent Gave of GaveKal
It seems obvious to us that we are approaching a tipping point. The rise in commodity prices and risk assets does not seem to be compatible. Neither does the rise in commodity prices, equity prices, and inflation expectations and overly easy central banks. The recent surge in certain currencies to two standard deviations above their purchasing parities should also have economic consequences. So the situation does not seem stable from a bottom-up perspective. And from a top down perspective, it seems obvious that the recent period of exceptionally easy fiscal policies should come to an end.
2011-04-08 Near-term Outlook For A Troubled World by Victoria Marklew, Richard Thies and James Pressler of Northern Trust
Although 2011 is only three months old, the world has changed dramatically. Along with the evolving European debt crisis, seemingly -isolated Tunisian protests grew to varying levels of upheaval throughout the Arab world, and an historic earthquake and subsequent tsunami have left Japan’s outlook under a cloud of uncertainty. Each of these situations is significant in its scope and magnitude, but by focusing on just the key elements, the main risks can be appreciated.
2011-04-08 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.
2011-04-08 Spotlight: Pivotal Peru Election by Frank Holmes and Jacek Dzierwa of U.S. Global Investors
Peruvians will take the first step in electing their new president on Sunday. The top-two finishers in this round will compete in a runoff election next month. The outcome is meaningful to improving the quality of life in Peru, continuing its strong historical GDP growth and making the most from its ample natural resources. Politics in Peru have a history of surprises and this year’s surprise is how left-wing candidate Ollanta Humala is leading in the polls, though one-third of Peru’s population is still undecided. Several local news services show Humala well ahead of opponents.
2011-04-07 100 Years of Shifting Growth by Frank Holmes of U.S. Global Investors
As part of our research, we track the fiscal and monetary policies of countries around the world. We believe government policies are a precursor to change and that this change can lead to economic devastation, such as the nationalization of oil companies in Venezuela, or generate substantial growth, such as Colombia’s successful efforts to encourage foreign investment. Historical context allows us to gauge the outcome of these situations. For example, these pie charts from Credit Suisse show the relative sizes of the world stock markets from two very different periods.
2011-04-06 Let Them Eat Crude by Robert Stimpson of Oak Associates
World events over the past month have received a lot of media attention, but few accounts have emphasized the long-term effects on equity markets. The revolts in Tunisia, Egypt, Libya, unrest in Bahrain and Yemen, and the earthquake in Japan are significant for equity investors going forward. While most of the media have focused on the human aspect of the events, the influence of food inflation, rising oil prices, and the state of the US dollar have been overshadowed by the regime changes and nuclear disaster in Japan.
2011-04-05 The Future of Investment Manager Due Diligence (and a Look Back at Q1 Performance) by Ron Surz (Article)
Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered positive results in the first quarter of 2011, as described in this capital market review. In the second part of the article, you'll discover what due diligence procedures need to change and why.
2011-04-05 Mega Caps and Russia by Russ Koesterich of BlackRock Investment Management
While we remain underweight emerging markets in general, one emerging market is looking particularly cheap. While we would be concerned about having a long-term overweight to Russia given that country’s political situation, from a short-term perspective the market looks interesting. We first mentioned Russia as a possible play in early February – since then the benchmark index is up nearly 7%, but Russia still looks cheap trading for less than 6x earnings. Also unlike China or India, which are negatively impacted by higher oil prices, Russia is a natural beneficiary of the spike in crude.
2011-04-05 Inflation Worries? Commodities May Help by Team of Emerald Asset Advisors
Many of you may remember the movie This classic shed some interesting light on the world of commodities. Commodities include natural resources, industrial metals, precious metals, and agricultural products. Or, as Duke explained to Billy Ray Valentine, "Commodities are agricultural products...like the coffee you had for breakfast...wheat, which is used to make bread...pork bellies, which are used to make bacon, which you might find in a BLT sandwich. And then there are other commodities, like frozen orange juice...and gold. Though, of course, gold doesn't grow on trees like oranges."
2011-04-02 Above the Fray by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Attacks on Libya and recovery efforts in Japan have dominated the headlines, but behind the scenes US economic growth remains solid and we remain optimistic on the stock market. Commodity prices have backed off a bit and the Fed is likely to see QE2 through to its June 2011 end. Of particular concern is the unwillingness or inability for Congress to agree on a budget that addresses the growing deficit issues in the US. Japan has a significant debt burden with which to deal as it rebuilds, while Europe is struggling to come up with a comprehensive plan to deal with the eurozone debt crisis.
2011-04-02 Expert Roundtable on Inflation: Should You Be Worried? by Mark W. Riepe, Liz Ann Sonders, Rob Williams, Michael Iachini & Brad Sorensen of Charles Schwab
Inflation is a rise in the general level of prices of goods and services; your money buys less. With oil and other commodity prices rising, the Federal Reserve's current easy monetary policy and the economy picking up, many investors are worried about inflation. Mark Riepe, head of Financial Research and president of Charles Schwab Investment Advisory, led a roundtable discussing why Wall and Main Street may have different perspectives on inflation. The roundtable also covers our inflation outlook, ways to protect your investments and inflation-savvy investments you might want to consider.
2011-04-01 The Bedrock of the Gold Bull Rally by Frank Holmes of U.S. Global Investors
Naysayers started calling gold a bubble back when prices hit $250 an ounce and though gold’s bull market has tossed and flung the bubble callers around for almost a decade now, their voices have only gotten increasingly louder as prices broke through $1,000, $1,200 and now $1,400 an ounce. However, gold prices appear asymptomatic of the signs generally associated with financial bubbles.
2011-03-31 Why Africa, Why Now? by Larry Seruma of Nile Capital Management
There are a number of reasons that Africa is an excellent investment opportunity – Nile discusses a few that highlight why now is a good time to invest in African markets.
2011-03-30 Middle-Class Middleweights to be Growth Champions by Frank Holmes of U.S. Global Investors
Over the next 15 years, the number of children in middle-class households in emerging market cities around the world may grow 10 times faster than those in developed countries. This future generation living in places such as China, Latin America and South Asia should drive the demand for goods and services, housing and transportation that extend beyond the basic necessities of life. In McKinsey's report, “Urban world: Mapping the Economic Power of Cities,” the researchers focus on demographic and economic trends to determine which cities will provide the most economic growth in the future.
2011-03-30 “Agri”-vation by Scotty George of du Pasquier Asset Management
Recent events in the Middle East, combined with weather, have put tremendous pressure upon raw materials prices. The fear is that cyclical pricing pressure might become secular (generational) trends, accelerating inflation in energy prices, foodstuffs, and industrial components, thus undermining a tenuous uptick in consumer spending, global trade, and consumer confidence. While Wall Street rejoices that something, anything, has stimulated trading activity and profit margins, the world watches as surpluses contract and statistics become human convoys of disaster.
2011-03-29 GMO's Market Outlook: 'Disappointingly Overvalued' by Robert Huebscher (Article)
Opportunities across US and foreign assets classes are unattractive, according to Ben Inker, the head of asset allocation at the Boston-based global money manager Grantham, Mayo, van Otterloo & Co. (GMO). Neither the equity nor fixed income markets hold the potential for investors to earn acceptable inflation-adjusted returns, Inker said.
2011-03-28 A Central Bank Match by Chris Maxey of Fortigent
Equity markets donned the rally cap last week as the S&P 500 index finished higher by 2.7% and the Dow Jones Industrial Average experienced a 3.1% gain. Stability in the price of crude oil and improvement in Japan lent a helping hand to the markets, as did the announcement that AT&T would buy T-Mobile. On the domestic front, investors turned a blind eye to the slew of negative economic data. Housing, in particular, experienced the brunt of the disappointment. Existing home sales offered the first piece of bad news after falling 9.6% to 4.88mln on a seasonally-adjusted annual rate in February.
2011-03-26 Unintended Consequences by John Mauldin of Millennium Wave Advisors
Governments around the world need to be alert and make difficult choices to deal with a world excess liquidity. From an investor’s point of view, enjoy the current ride in emerging markets but recognize that they are high beta to the U.S. economy and stock markets. The next time the United States goes into recession—and there will be a next time—it is likely that emerging markets will suffer significant losses. So, emerging markets are a trade and not a long-term investment.
2011-03-26 How Capture Ratios can Help you Prepare for the Next Downturn by Isbitts of Rob Isbitts
Alpha and Beta tell us a lot, but they also lead us to an even more useful measure of performance and manager acumen, which allows you and your client to better understand the range of possibilities they are bound to experience in different types of market environments. That is what we call “Capture Ratio,” and that special topic is what we’ll focus on here.
2011-03-25 Quantitative Easing: How the Rest of the World Reacts by Komal Sri-Kumar of TCW Asset Management
The decision was made to implement new purchases of $600 billion in U.S. Treasurys by June 2011. The transactions would expand the balance sheet of the Federal Reserve to about $2.9 trillion, a multiple of the $800 billion dollar level it was at in September 2008. This paper examines how the countries which have been recipients of the newly created liquidity have responded to the Feds move. While the Fed explained that its purchase of securities was intended to make riskier assets, the excess liquidity also made its way to foreign countries to take advantage of attractive interest rates.
2011-03-25 What's Driving Russia's Outperformance? by Frank Holmes, John Derrick and Tim Steinle of U.S. Global Investors
All ten sectors of the S&P 500 Index increased this week. The best-performing sector for the week was energy which rose 4.08 percent. Other top-three sectors were technology and materials. Financials was the worst performer, up 0.50 percent. Other bottom-three performers were utilities and healthcare.
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 PIMCO Cyclical Outlook: U.S. Economy, Global by Saumil H. Parikh of PIMCO
PIMCO continues to foresee a multi-speed global recovery over the next few years. The U.S. is experiencing a cyclical economic rebound, but its strong durability is uncertain. Several countries in Europe face headwinds to growth over our cyclical horizon. Japan’s growth rate will likely fall in the near term, but reconstruction activities should stimulate growth over time. We expect real economic growth in key emerging economies to remain at a solid rate during 2011, but lower than 2010.
2011-03-22 There are Still So Many Unknowns by David A. Rosenberg of Gluskin Sheff
There are still many unknowns with regard to the global macro picture, but what we do know are the following 10 things: 1. There are more upside than downside risks to the oil price. 2. Japan was already the number-one importer of liquefied natural gas (LNG) and this status will be accentuated as replacements for a damaged nuclear grid is sought. 3. Nuclear energy development takes a near-term hit here by the politics of the Japanese crisis but not a permanent hit. 4. The aftershock in Japan will be related to contaminated food supply so we can expect to see more inflation on this score too.
2011-03-22 Emerging from Developed Profit Pools by Gregory A. Nejmeh of HS Management Partners
Much has been debated about the anticipated growth of the emerging markets and the tectonic shifts in political, economic and military force that such changes may yield. While the implications are significant, we are also mindful that economic activity in developed markets not only make them worthy of investor attention, but provide the stability of cash flows that will facilitate multinationals ability to invest in developing markets. We take a holistic perspective and appreciate the size and scope of developed market profit pools as a means of self funding developing economic participation
2011-03-21 World Near Tipping Point? by Mohamed A. El-Erian of PIMCO
Much of the potency of policy responses has been used up in the successful efforts since 2008 to avoid global depression. The longer the persistence of supply disruptions, the greater the risk of core inflation increasing. Questions about the end of quantitative easing in the U.S. pose a challenge for policymakers.
2011-03-19 Middle East Politics and Oil: The Influences on Global Interest Rates, Credit Spreads & Stock Prices by Tom Fahey, Ryan McGrail, Richard Skaggs and Joseph Taylor of Loomis Sayles
The market has added a substantial risk premium to the price of oil given the unrest in the Middle East and North Africa. Prices have increased by more than 20% since December 2010; half of that increase occurred during the past three weeks in reaction to unrest spreading to Bahrain, one of the Gulf States. Market participants have raised their probability calculations for black swan events. There may be excess pessimism in the market, as reflected in increased concerns about unrest spreading to the other Gulf States. Those concerns are potentially overblown.
2011-03-19 How the VAR Model and Japan’s Tragedy Affect Investors by Frank Holmes of U.S. Global Investors
The threat of disaster from the damaged Fukushima nuclear power plant unleashed a ferocious sell-off of Japanese equities, but the damage to other major markets has been limited. Already experiencing a slight pullback prior to the events on March 11, U.S. equities and emerging markets have held up quite well. The MSCI Emerging Markets Index has only pulled back 2 percent since the earthquake and the S&P 500 Index only 3 percent.
2011-03-14 Anatomy of a Bubble by John P. Hussman of Hussman Funds
Over the past decade, investors have seen near-parabolic advances in a variety of assets, followed by crashes. These have included dot-com stocks (which peaked and crashed well before the general market peak in 2000), technology stocks, housing, commodities, and stocks in a variety of emerging markets. These experiences have made investors somewhat more attuned to the destructive potential for speculative bubbles in various assets, but has also created something of a "casino economy" where a great deal of resources are directed in hopes of participating in these bubbles.
2011-03-14 Monday Market Calls by Russ Koesterich of BlackRock Investment Management
Call #1: Underweight European equity market (with emphasis on banks) Call #2: Overweight developed (with preference for large/mega cap) vs. emerging markets. Year-to-date, emerging markets are down roughly 1.5% while developed market mega caps are up roughly 5%. Our view is reinforced by the recent market volatility and growing unrest in the Middle East. In this type of environment, large, quality companies are likely to prove more resilient.
2011-03-12 Domestic Equity Market by Frank Holmes of U.S. Global Investors
The figure below shows the performance of each sector in the S&P 500 Index for the week. Four sectors increased and six decreased. The best-performing sector for the week was utilities which rose 1.5 percent. Other top-three sectors were telecom services and consumer staples. Energy was the worst performer, down 4.0 percent. Other bottom-three performers were materials and technology. Within the utilities sector the best-performing stock was Constellation Energy Group which rose 6.8 percent. Other top-five performers were Exelon, First Energy, DTE Energy, and Duke Energy.
2011-03-12 Volatility on the Rise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Geopolitical unrest and rising inflation concerns have conspired to increase market volatility. We remain bullish on US stocks and believe that this recent increase in consternation will ultimately be healthy for stocks. The US government keeps kicking the debt can down the road, while the Fed seems unconcerned about inflation and is intent on completing QE2. We believe changes are needed at both entities to foster sustainable economic growth. The European debt crisis is bubbling up again, while the ECB is talking interest-rate hikes. Future growth depends on the path of both issues.
2011-03-11 The Middle East: A Youthful Reawakening by Mark Mobius of Franklin Templeton
The upheavals in the Middle East and N.Africa can be attributed to rising food prices, unemployment, corruption and political stagnation. Unemployment has stayed high and waves of new young job seekers entering the labor market have not been absorbed. As in many emerging markets, the populations in MENA countries are young. Most politically explosive is that an increasing number of the unemployed are high school and university graduates. It is important to note that the recent protests have come not from the lowest income levels but from middle-class and educated Arabs seeking fair treatment.
2011-03-11 Europe: Economic Review February 2011 by Team of Thomas White International
Various data released in Feb. confirmed once again that the economic recovery in Europe is gaining momentum. Nevertheless, investor sentiment on the continent, and indeed everywhere in the world, remained largely subdued during the month due to the growing political uncertainty in the Middle East and N.Africa region. Since rising food, raw material, and crude oil prices have already pushed up inflation to worrying levels in most parts of Europe, the recent surge in oil prices amid the protests in Libya and some MiddleEastern countries eclipsed encouraging signals about the Euro-zone economy.
2011-03-11 Middle East turmoil not yet a significant threat to the global economy by Team of Thomas White International
The political unrest spreading across the Middle East and the resultant disruptions to the regional economy are not considered very significant for the global economic prospects for this year. Though oil prices have reacted on fears of lower supplies from the region, there have been no actual disruptions so far and any perceptible deceleration in global economic growth is expected only if prices shoot up further. It is widely believed that, unless the agitations spread to the region’s major oil producers like Saudi Arabia, the prospect of a sustained upsurge in energy prices is limited.
2011-03-10 Stock picking is dead? Long live stock picking by Robert McConnaughey of Columbia Management
A recent frontpage story in The Wall Street Journal was titled “Macro Forces in Market Confound Stock Pickers.” The article quoted a prominent Wall Street strategist as saying, “Stock picking is a dead art form.” The article is now prominently displayed on my office bulletin board as I believe it (and similar articles and research notes) marks a high in skepticism regarding active investing. I also believe these sentiments will be proven dramatically wrong in the months and years to come, as certain active investors take advantage of the inefficiencies that this very skepticism is causing.
2011-03-09 Searching for Growth in Asia by Taizo Ishida of Matthews Asia
There are many ways one might define “growth” and go about uncovering it. There are a few key elements I look for: main drivers of growth, sustainability and scope of growth, and market expectations. Many global investors today are seduced by the last several years of strong stock performance in China and India, fueled by robust economic growth. However, economic growth alone does not guarantee good stock performance. In fact, many studies argue that, historically, there has been little correlation between stock market performance and economic growth.
2011-03-09 Finding Low Risk Value in Today's Market by Team of GaveKal
The investment environment is transitioning from a macro-driven, reflation environment into one where earnings drive performance. US companies are well positioned at this juncture and contrary to consumers and the government have come out of this crisis in good shape. Some commentators question the outlook for corporate profitability, arguing that profits are meanreverting and that they can only weaken. We disagree, however, we acknowledge that price pressures are now showing up in import prices, and companies will need to offset these costs with increased prices or improve their productivity
2011-03-09 iShares Bi-Weekly Strategy Update Part 2 by Russ Koesterich of BlackRock Investment Management
Recently, silver prices have benefited more than gold from the economic rebound. The relative gap between gold and silver suggests that it may be time for a pause in silver’s run. One of the many ironies of markets last year was the extent to which inflation occupied investors’ attention, despite its near universal absence. While inflation has recently accelerated in emerging markets and a few developed ones, inflation was and is still largely absent in the developed world. Yet, record low inflation did not stop investors from worrying about it.
2011-03-08 Ed Hyman: The Key Threat to Economy Recovery by Robert Huebscher (Article)
Ed Hyman is not worried about China, quantitative easing or fiscal deficits. Equity market performance this year will be strong, he predicts, and the US economic recovery will proceed. But there is a caveat in his outlook – and it is an immense one.
2011-03-08 Will the Global Recovery be Brought to its Knees by Commodity Prices? by Chris Maxey of Fortigent
There is a dangerous trend developing in food and energy costs, one that threatens to derail the global recovery. Thus far, consumers are able and willing to accept higher commodity prices. With consumers still feeling the effects of the worst recession in nearly a century, though, there is only so much that people will be willing to tolerate and the second half of the year may be too far away, at least when it comes to crude prices.
2011-03-07 The Philosophy of Tops by Jeffrey Saut of Raymond James Equity Research
This week I am celebrating the two-year anniversary of the stock market's bottom by attending our institutional conference where more than 300 companies will be presenting to nearly 600 portfolio managers. It's a great conference, as well as an appropriate time to reflect on the past 24 months. Recall, the bottoming process began on October 10, 2008 when 93% of the stocks traded on the NYSE recorded new annual low prices. It was then I declared, "The bottoming process has begun."
2011-03-04 And That's The Week That Was… by Ron Brounes of Brounes & Associates
Unlike Egypt’s Mubarak, Libya’s Gadhafi is not going down without a strong fight. With tensions escalating throughout the region, the world’s oil supply and crude prices soared above $104/barrel over the past few days to levels not seen in 29 months. While optimists point out that Saudi Arabia has been quick to pick up the slack for any shortfall out of Libya, others worry that a prolonged crisis limits its ability to do so indefinitely. The bigger pessimists fear that the uprising could spread to Saudi (Anyone think it may be time to reduce our dependency on foreign oil?)
2011-03-04 Are Emerging Markets Still by Team of Emerald Asset Advisors
Political unrest in Egypt, Libya, and elsewhere in the Middle East, along with surging food prices around the world, has provided fresh reminders of the inherent risks of investing in emerging markets. Indeed, while the U.S. stock market has been inching steadily upward in recent months, emerging markets have been struggling. Year-to-date through February 28, the MSCI Emerging Markets Index is down -3.79%, while the S&P 500 Total Return Index has gained 5.88%.
2011-03-03 Driving Without Restrictor Plates by Cliff W. Draughn of Excelsia Investment Advisors
Since mid-January we have found ourselves in a quandary over “jumping in” or “diving in” to the strongly flowing bullish current of the developed markets. The warning signs have been the Mideast riots, unemployment, commodity inflation, and the US percentage of debt relative to GDP. The positives are corporate earnings, an accommodative Fed, cash-rich balance sheets, and no new taxes for now. Therefore we wanted to share with you a number of charts and statistics that are part of our process.
2011-03-03 Emerging Markets Vision 2020 by Mark Mobius of Franklin Templeton
There will always be unforeseen factors and circumstances that might become catalysts for greater changes in the global landscape, as we have seen from the current unrests in the Middle East.. No one knows what will happen in the future, but below is some of what I envision for the emerging markets landscape in the next decade.
2011-03-03 Multi-Asset Real Return: Assessing & Exploiting Price Pressures in their Many Forms by Kevin Kearns, Laura Sarlo and James Balfour of Loomis Sayles
An asset manager’s challenge is to preserve and grow the purchasing power of investors’ portfolios under a variety of economic conditions. Understanding the breadth of global inflationary or deflationary trends that can occur, and the ways different assets might perform in these environments, is critical to this objective. Based on our research, we have determined that no single asset class can protect investors from inflation. On the contrary, we believe the flexibility and diversification offered by a multi-asset-class strategy is necessary to help weather changing inflation regimes.
2011-03-01 The Absolute Return Letter by Niels C. Jensen of Absolute Return Partners
Two remarkable events unfolded during the month of February. One cleared the front pages all over the world. The other one barely got a mention - outside of its home country that is. Both have the ability to derail the economic recovery currently unfolding. The first one is not surprisingly the uprising in the Middle East and North Africa. The other one is perhaps less obvious; we are referring to the Irish elections. We take a closer look at both of those events and what the implications may be for financial markets.
2011-03-01 The 10% Problem by Nathan Rowader of Forward Management
Many investors continue to expect 10% returns — but these days, are doing well if they earn 5%. They need to understand why major shifts in the global investment climate are challenging them to reset return expectations and reboot their plans. After six decades of double-digit average U.S. stock market returns, many American investors may have come to expect that they will earn similar returns going forward. And why wouldn’t they? From 1948 to 1978, for example, the U.S. stock market generated an average annualized total return of 10.7%.
2011-02-28 Oil that is by Jeffrey Saut of Raymond James Equity Research
“Oil that is, black gold, Texas tea,” Jed Clampett (Buddy Ebsen) got rich in the hit series The Beverly Hillbillies by discovering oil on his property. Similarly, investors have become enriched recently by owning oil stocks. Verily, crude oil has surged from ~$84 per barrel in mid-February into last week’s peak of $103.41 with an ascent for most oil stocks. As stated in Friday’s verbal strategy comments, “Libya is particularly troubling because I think there is a fifty-fifty chance that Gaddafi, rather than cede power, will begin blowing up Libyan oil pipelines – it’s either me or chaos.”
2011-02-28 Pushed to Extremes by Scotty George of du Pasquier Asset Management
Among the economic havoc wrought by turmoil in the Mid East and severe weather around the globe has been the impact upon inflation and upward pressure on prices for raw (and core) materials. Today, most economists and market analysts fear that this confluence of factors could accelerate inflation in energy prices, foodstuffs, and industrial materials, thus undermining a nascent uptick in consumer spending, global trade, and consumer confidence.
2011-02-25 Asia Insights from EM Analyst Conference by Allan Lam of Franklin Templeton
Many tend to focus on China and India, the two rising Asian economic powers, and there are reasons why we believe both, which are currently among the top five largest economies in the world will likely be among the top three in 2020. Land and labor costs remain cheap in China. In addition, the country appears to have a competitive edge in terms of work ethics, relatively flexible labor laws and excellent logistics. India’s strength is in its young, growing and increasingly well-educated population, which is fluent in English. This has enabled the country to become a leader in IT consultancy.
2011-02-25 Worry ... Friend or Foe? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Interest rates have moved higher, inflation concerns are growing, debt issues remain and global tensions are heightened. All valid concerns, but in our opinion not enough to derail stocks—although they could potentially in the future. Violence in the Middle East and North Africa is creating tension in global markets, but there are other concerns for emerging markets as well. Europe is becoming a bifurcated situation, with investors distinguishing between those with debt issues and those without.
2011-02-23 2011 Outlook: Private Equity by NB Alternatives private equity team of Neuberger Berman
As a result of the financial crisis, for the latter part of 2008 and all of 2009, very few new private equity transactions were completed and portfolio company monetization was minimal. However, the operating performance of existing private-equity portfolio companies was better than generally expected and investment returns were superior to public equity benchmarks. Although some of this outperformance can be attributed to the resistance of some private equity firms, we believe the majority of the outperformance was the result of effective cost cutting, cash conservation and debt reduction.
2011-02-23 Asian Emerging Markets Will Grow on You by Peter Nielsen and Bryce Fegley of Saturna Capital
A year has passed since Saturna put staff on the ground in the heart of Kuala Lumpur, Malaysia, at the offices of our subsidiary, Saturna Sdn. Bhd. As expected, we have gained valuable insight into the emerging markets of Asia. We find the key to unlocking the opportunities these markets have to offer is an understanding of the intersection of market structure, demographics, economic growth, and asset allocation. Our analysis of trends in these four areas reveals an economic environment with favorable prospects for long-term growth.
2011-02-23 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management
It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.
2011-02-23 Right Brains and the Dismal Science by Herbert Abramson and Randall Abramson of Trapeze Asset Management
It has been said that successful investors need to employ not only the left side of their brains which is the analytical or scientific part but also the right side which is the centre for creative thinking. Thats because much of investing has to do with the unpredictable, the down cards, variables about future demand, growth, political policy changes, psychological responses, weather, oil spills, and so forth. Value investors dont want to pay for the down cards, but want to buy so cheaply in the here, that there is little or no risk of losing, and the hereafter can take care of itself.
2011-02-22 Fiscal Contraction is Coming ... This is a Key Theme by David A. Rosenberg of Gluskin Sheff
Well, if you haven’t yet heard, major budgetary restraint is coming our way in the second half of the year, and so we would recommend that you enjoy whatever fiscal and monetary juice there is left in the blender. There isn’t much that is for sure. The weekend newspapers were filled with reports of how the conservative wing of the Republican party have banded together to ensure that spending cuts will be in the offing. The state and local governments are already putting their restraint into gear.
2011-02-22 Investment Commentary by Bob Doll of BlackRock Investment Management
The bearish view of the current rally is that it is liquidity-driven and based on artificial propping-up by overly easy monetary and fiscal policy support. While we agree that the stimulus from the Federal Reserve and other policy makers has been an important pillar in helping to restore economic growth and drive risk asset prices higher, we also believe that the economy is transitioning into a self-sustaining expansion. In our opinion, this environment of improving growth, low inflation and a supportive policy backdrop continues to represent a “sweet spot” for risk assets.
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.
2011-02-17 Baby Steps in the Complex Global Recovery Wasatch Funds by Sam Stewart and Roger Edgley of Wasatch Funds
The U.S. recovery is generally headed in the right direction. The good news is that credit markets are easing and many economic indicators are slowly improving. The bad news is that unemployment remains stagnant, companies are hoarding cash, and we have a growing federal deficit to address.
The recently passed tax bill is good psychologically. People are generally pleased that their taxes won’t be going up this year, despite other concerns they may have with the bill. More importantly, this was one of several pieces of recent legislation showing the renewed possibility of bipartisanship.
2011-02-16 The Cocktail Theory by Jeffrey Saut of Raymond James Equity Research
“How can you be sure that the pullback, you have wrongly been expecting, is for buying?” Since 1940 there has never been more than one 10% or greater pullback in a bull move; we had a 17% pullback last year between April’s high into June’s low. Moreover, the retail investor is nowhere close to fully embracing this rally, which is typically what occurs around intermediate/long-term stock market “tops.”
2011-02-15 Food Chain: Do Spiking Food Prices Warn of Generalized Inflation? by Liz Ann Sonders of Charles Schwab
Food inflation has heated up and has incited global unrest. But for now, it's unlikely to become a monetary phenomenon. Investors should expect geopolitical risk to stay elevated in 2011, with implications for emerging markets performance.
2011-02-14 Fiscal Drag Coming and No More QEs by David A. Rosenberg of Gluskin Sheff
In an otherwise uneventful weekend, what did come out is that fiscal stimulus is about to turn towards restraint in a significant fashion. Even the White House recognizes the need for fiscal discipline and is on the precipice of unveiling a much more austere budget. And this will coincide with massive tax hikes and spending cuts at the lower levels of government too. The surgery is much more preferable now than becoming a banana republic down the road.The future of QE2 is looking more certain ― it will live to see June of this year but the chances of a QE3 are remote.
2011-02-14 Financial Disconnect by John Browne of Euro Pacific Capital
The printing of fiat money is likely to be able to sustain a false economic recovery for some time. But, eventually, the cost will be a rapid erosion of the value of the US dollar – not just in real terms, but also against almost every other foreign currency. Despite possible short-term corrections, gold and silver holdings are likely best to shield investors from the perils that lie ahead.
2011-02-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
No one knows what the longer-term direction of the Egyptian state will be, and as a consequence the investment outlook now has an additional source of uncertainty. As far as the global economy is concerned, the failure of the European leaders to agree on to how to handle future sovereign debt crises has cast a shadow once again over Portugal and even Ireland. The problem that Ireland poses is that the elections to be held shortly will bring about a new government who may wish to renegotiate their bailout agreement.
2011-02-12 Foreign Investments in India by Sunil Asnani of Matthews Asia
Foreign investment plays a significant role in India’s economic growth, which has historically been constrained by supply factors, and most notably, the availability of capital. Domestic savings in India have risen, but high government deficits still don’t leave enough for the private sector. The result has been a vicious cycle in which the high cost of capital prevents many businesses from flourishing, which further limits India’s capacity for capital formation. Let us examine the ways in which India can use foreign capital to emerge from this low-growth equilibrium.
2011-02-12 Balancing Act by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Strong US economic signals and solid earnings continue to provide a positive backdrop for stocks. We expect pullbacks if optimistic sentiment gets too elevated, but remain optimistic about the stock market. Inflation concerns are rising, but the Federal Reserve is unlikely to react with tighter policy. There's not much it can do to fight commodity inflation, but Treasury yields are rising in response to headline inflation, even with little near-term risk of companies passing on rising costs.
2011-02-11 Reiterating Our Investment Thesis for 2011 by David A. Rosenberg of Gluskin Sheff
For 2011, not only do I still favor credit, especially the spread compression left in the high-yield space, but relative value portfolios, hybrids with a decent running yield and exposure to Canadian dollars. The resource sector is also attractive, especially oil, with a long-term view towards buying these companies on dips and not just for the commodity price uptrend. Corporate bonds, especially BB-rated product. Hedge funds, with low correlations with the direction of the market or the economy. And precious metals as a hedge against periodic bouts of currency and monetary instability.
2011-02-10 The Two Faces of Ben Bernanke by Peter Schiff of Euro Pacific Capital
When the rest of the world no longer links their currencies to ours, the Fed will truly not have to worry about fueling global inflation. Instead, all of its inflation will burn through our banks accounts right here at home. And that blaze, so concentrated, will burn a lot hotter than the fires we see abroad.
2011-02-09 How to Play in 2011 by David A. Rosenberg of Gluskin Sheff
At the start of every year I remind myself that each individual year has its own story. For example, 2007 taught us that it never hurts to take profits after the market doubles and that if something is too good to be true (housing and credit bubble) it probably is. The 2008 lesson focused on capital preservation strategies and the urgency of managing downside risks. 2009 it was vital not to overstay a bearish stance in the face of massive fiscal and monetary stimulus. Last year’s lesson was how to handle the many post-stimulus market swings that are inherent in a post-bubble credit collapse.
2011-02-08 The Key Ingredient to Effective Communication by Dan Richards (Article)
When it comes to communicating with clients, too often we revert to the habit of using words alone. To maximize the impact of your communication, you need to help others visualize your message.
2011-02-08 Conundrum Investing by James G. Tillar and Steve Wenstrup of Tillar-Wenstrup Advisors
The range of possible outcomes for the economy and market is still wide. We believe QE2 is simply a continuation of a boom-and-bust regime. Fundamentals are good now but are unlikely to be sustainable. Printing money to support asset prices cannot go on forever and usually ends in disaster like it did after both the technology and housing busts. Therefore, we dont believe this is a time to be aggressive. We are maintaining our strategy of emphasizing steady-growth businesses, with strong balance sheets, healthy dividends, attractive valuations and exposure to emerging economies.
2011-02-08 'Conversation' by Jeffrey Saut of Raymond James Equity Research
While it’s true the DJIA and SPX have made new reaction highs many indices have not. Many emerging markets are declining, the MACD has been negatively configured since Jan 18th, Lowry’s Buying Power Index is falling and it's Selling Pressure Index is rising, and the 30-year Treasury Bond’s yield is about to break out above a spread triple top. The top gaining sector since November has been the Financials, but in the past few weeks the Financials have weakened noticeably. All of this continues to keep me cautious (but not bearish) as we enter February, a historically down month.
2011-02-08 Give ‘Em Credit; Looking at Sales, Not Just Earnings by David A. Rosenberg of Gluskin Sheff
Across many indicators, this goes down as a horrible recovery, especially in view of all the stimulus. Of course things look much better than they did in the “double dip” risk days of last summer but absent the impact of the GDP deflator’s collapse and the decline in the savings rate, Q4 real GDP would have actually come in closer to +0.5% SAAR than the posted +3.2% print. We are hearing how great S&P 500 sales are doing so far for Q4 — up 7.7% and beating estimates by the highest margin in 5 years. We scoured the data and found almost all the growth in sales is coming from outside the US.
2011-02-08 Muni Market Bargains? A Closer Look at Municipal Debt, Deficits and Pensions by Christian Stracke and Joseph A. Narens of PIMCO
Although real, pension problems will not lead to an immediate debt crisis this year or the next five years. A default by Detroit, for example, would not precipitate bankruptcy filings by large cities across the nation. The municipal market will continue to migrate from being a low-risk asset class to a credit asset class.
2011-02-07 Jobs Data Redux and Inflation Spasm Ahead by David A. Rosenberg of Gluskin Sheff
The labor market in the US is not improving. Lost in the debate over the weather impact was the benchmark revision to 2010 — overstated by 215k or 24%. The economy generated 909k jobs last year -insignificant considering that the population grew around 160k/month. The level of employment today is where it was in 2003. There have only been a handful of times in the past when both food and energy prices were rising so sharply in tandem. Since almost 25% of the CPI basket is in food and energy directly, it would seem logical to assume that we are going to get headline inflation in coming months.
2011-02-07 Strong News and Stronger Markets by Charles and Louis Vincent Gave of GaveKal
Bears have little to munch on right now: economic activity is bouncing back strongly, jobs are being created (albeit at a slow pace), global trade is soaring, the great majority of companies are reporting better than expected sales, and US profit margins are making new all-time highs. Given this plethora of good news, financial intermediaries are responding coherently and once again expanding their balance sheets.
2011-02-04 Portfolio Commentary : Fourth Quarter, 2010 by Jay Compson of Absolute Investment Advisors
For our 4Q commentary we have decided to alter our approach and provide direct insight into our managers’ thoughts by providing portions of their commentaries in a series of independent “short stories.” Collectively they represent many of the thoughts that we have utilized for writing our quarterly commentaries, but we feel the current environment offers a unique time to hear things “directly from the horse’s mouth.”
2011-02-04 Seeking Equity Dividends: Now More than Ever by Robert McConnaughey of Columbia Management
The evidence is clear that dividends have been a crucial part of total returns through history and that dividend payers (particularly sustainable dividend growers) have significantly outperformed their non-dividend-paying peers over the long haul. Couple those higher returns with the lower volatility that comes with the dividend-paying class vs. broader equity markets and it makes a clear case for the power of dividends.
2011-02-03 Regime Change: A Global Domino Effect? by Monty Guild and Tony Danaher of Guild Investment Management
We are bullish for commodities, stock markets, and for income-earning real estate. It will be most felt in those countries where governments are stable and democratic. For stock investments throughout the world, we base our recommendations on careful study of individual companies and industries, always keeping in mind that companies and sectors are at differing stages of growth. We recommend continuing to hold shares of growing companies in Canada, South Korea, and the U.S. We favor technology, metals, auto and auto-related, agriculture-related, and energy, including oil and coal.
2011-02-02 Devil’s Bargain by Bill Gross of PIMCO
Money has become the economic and political wedge for profound changes in American society. Perhaps the most deceptive policy tool to lessen debt loads is the “negative” or exceedingly low real interest rate that central banks impose on savers and debt holders. Old-fashioned gilts and Treasury bonds may need to be “exorcised” from model portfolios and replaced with more attractive alternatives both from a risk and a reward standpoint.
2011-02-02 Unrest in Egypt, Uncertainty in the Region by Rachel Ziemba and Ayah El Said of Roubini Global Economics
Egypt’s political direction could have profound effects on regional stability—potentially involving, the Israeli-Palestinian conflict and efforts to contain Iran’s nuclear ambitions—with broad economic and financial ramifications. The recent economic and political developments do not bode well for Egypt’s 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.
2011-02-02 Random Thoughts from the Lone Star State by David A. Rosenberg of Gluskin Sheff
I still consider this to be a bear market rally. With respect to the economy, the illusion of sustainable prosperity has done wonders for consumer spending in the U.S. The consumer has been an upside surprise and the ISM was a whopper too as these manufacturing indices have been in general around the globe. There are so many other headwinds out there. Dramatic cutbacks and tax hikes at the state and local government levels are in motion. Federal government austerity is next. The housing market has not yet stabilized.
2011-02-01 Market Implications of the Turmoil in Egypt by Kevin D. Mahn of Hennion & Walsh
Here are the potential implications of the events in Egypt as we see them: 1)The risk of contagion in the Middle East and the civil, political and economic unrest that could result across the globe. 2) The energy commodities sector, specifically related to crude oil prices, but this time not based upon oil production but rather based upon the importance of the Suez Canal and Sumed Pipeline to oil transportation. 3)the travel sector - travel advisories that will likely be established in the affected countries.
2011-01-31 Market Ripe for Correction by David A. Rosenberg of Gluskin Sheff
The stock market headed into this post-Egypt action terribly overbought and a correction was overdue. It is incredibly ironic that 18 months ago, President Obama gave his first foreign policy speech at the University of Cairo (the Investor’s Business Daily dubs it the “ill-conceived Muslim outreach speech” in today’s editorial), and now, Egypt is burning. Oil, gold and TIPS should be on anyone’s “buy list” if the turmoil does spread within the Arab world.
2011-01-31 The Investment Outlook: An Overview by Milton Ezrati of Lord Abbett
This is the first of a four-article series on the macro considerations behind Lord Abbett’s fixed-income and equity outlooks. This first installment offers an overview. The three pieces that follow will, in turn, take up the reasons behind 1) the general preference for credit-sensitive fixed-income issues; 2) the positive overall stance on equities; and 3) the call for a thorough capitalization mix within equities.
2011-01-31 Investment Commentary by Bob Doll of BlackRock Investment Management
At present, most investors appear to have increased their expectations for global growth and for growth levels in the United States. The words “double dip” have virtually vanished from investors’ vocabularies and while we agree with the generally optimistic tenor of the conversation, we are also somewhat uneasy about the positive shift in sentiment and growing sense of complacency. As last week’s events remind us, there are a number of risks to be wary of, including one we have not yet mentioned — monetary tightening in emerging markets.
2011-01-29 And That's The Week That Was by Ron Brounes of Brounes & Associates
Consumer confidence in January rose to its highest level in eight months as individuals seemed to overlook the ongoing labor concerns. The long-ailing housing sector received a bit of good news as new home sales jumped to the best showing since May and home prices even surged to levels not seen since early 2008. Though claims for jobless benefits rose in the most recent week, analysts believe that harsh winter weather may have temporarily halted hiring and the recent improvements on the claims front should resume in the weeks to follow.
2011-01-29 Schwab Market Perspective: Confidence Climbing by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Although still relatively low, confidence is returning to businesses and consumers. We believe this confidence is well-placed and could portend healthy gains for the economy and the market as the year matures. Risks remain: commodity prices are rising, housing is still moribund, and federal and local governments have severe fiscal budget crises to deal with. Confidence in developed international markets is still lagging.
2011-01-26 World Bank Says Developing Countries Driving Global Growth by Team of American Century Investments
During the recent Great Recession, developing countries such as China and India played a key role in sustaining global economic growth, while developed economies struggled to cope with issues such as the subprime market meltdown, sovereign debt issues, and soaring unemployment numbers. In the coming years, developing nations will continue to play an increasingly important role in driving the global economy.
2011-01-24 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
There is a lot of talk about the direction of interest rates and the cost of money. Sometimes, exogenous influences also exert influence over monetary factors. Today, tightening supplies of natural resources have created a subterranean inflation whose gross result has been to raise prices at the production and consumption sites. Corn, sugar, coffee, soybeans and other crops are at their lowest reserve levels in a generation. Demand, however, has not ebbed.
2011-01-24 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Earnings are coming in at a very strong pace. The problem is that stock prices in many cases have risen in anticipation of these results. As far as the economy is concerned the bulk of the evidence released last week was encouraging, but the impact of higher oil prices is really starting to be interpreted as a negative for future consumer spending and corporate hiring plans.
2011-01-24 Investment Commentary by Bob Doll of BlackRock Investment Management
A number of factors bear close watching for investors, including the potential for additional Chinese policy tightening, ongoing weakness in the housing market and ongoing European sovereign debt issues. The overall strength of the economy, however, suggests to us that a repeat of the environment of fear that surfaced last year when the Greek sovereign debt problem developed is unlikely. We believe the strength in profit margins coupled with a less-hostile regulatory posture from D.C., should spur increased confidence, which should lead to a pickup in employment.
2011-01-22 And That\'s The Week That Was by Ron Brounes of Brounes & Associates
With another corporate earnings season moving into high gear and equities riding a seven week winning streak, a healthy bit of skepticism (not necessary pessimism) has crept into the investor mindset. Some analysts still want to see more revenue growth as opposed to cost-cuts in the earnings reports. Others fear that “the trend is your friend” may be a nice guide, but investors may be disregarding the ongoing debt issue in the EU and the rise in interest rates throughout emerging markets.
2011-01-21 Pricey Eats by Michael Pento of Euro Pacific Capital
From all accounts it appears that the world is in the early stages of a major leg up in food prices. The major macroeconomic trend will likely drive economic policy and the investment outlook for years to come. Although mainstream pundits like to focus on cyclical drivers like the weather, the real force behind the move is secular. The U.S. is leading the world in a pandemic of monetary inflation that is helping to cause commodity prices, food in particular, to skyrocket across the globe.
2011-01-20 Word on the Street: Cautious Optimism by Eagle portfolio managers of Eagle Asset Management
The general consensus among Eagle managers is that companies are more optimistic than they have been in many years. Businesses are starting to loosen their purse strings, albeit slowly and deliberately, to take advantage of competitive opportunities. Eagle managers continue to believe independent, diligent research is paramount in selecting stocks right now and that this likely will prove to be an excellent opportunity for long-term investors.
2011-01-20 Addressing Concerns about a Two-Track World by Mark Mobius of Franklin Templeton
I recently had a conference call with our investors around the world. Depending on where they were from, some of them were concerned about inflation while others were worried about sovereign debt problems. Here are a few topics that we discussed.
2011-01-19 2011 Capital Markets Outlook by Joseph V. Amato of Neuberger Berman
During 2010, macroeconomic factors largely dominated the financial markets, creating a volatile, emotional environment as investors appeared at times to be thinking less about what stocks to own than whether they should own stocks at all. As a result, many equities with very different fundamental characteristics often showed very high correlations to one another, while valuations converged. Over time, we believe that the market will differentiate these stocks based on their individual fundamentals. A similar statement can be made about other assets as well.
2011-01-18 Richard Bernstein: The Antidote to Pessimism by Robert Huebscher (Article)
For an antidote to the bearish sentiment coming from David Rosenberg, look at Richard Bernstein. In contrast to Rosenberg's vision of Japan's lost decade, Bernstein expects the S&P to outperform emerging markets, at least in the near term.
2011-01-18 A Market Story by Robert J. Horrocks of Matthews Asia
It is not the headline rates of growth in Asia that excite me—it’s the profit-making opportunities within those economies that are necessary to sustain reasonable rates of growth and support the changing lifestyles of Asian households. And that, I hope, is a sentiment with which both the old and the reformed Scrooge might embrace.
2011-01-18 China and the Dollar by Brian S. Wesbury and Robert Stein of First Trust Advisors
The US should not take this week’s visit as an opportunity to lecture the Chinese about the yuan. If we do, Fed Chairman Ben Bernanke may find himself on the receiving end of a lecture about the importance of price stability and how to run a central bank. And he would deserve it.
2011-01-17 Adding Up the Inflation Carnage; US Consumer Hitting an Air Pocket by David A. Rosenberg of Gluskin Sheff
This is just the fifth time in modern history that BOTH food and energy prices have risen at a double-digit annual rate for any length of time ― 1979, 1980, 1996, and 2008. At this rate, the energy bill is going to create a drag U.S. household spending power by $60 billion this year. Beneath the veneer of all the enthusiasm is the reality that real organic incomes are under pressure.
2011-01-15 Further Fuel? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks may be vulnerable to a near-term pullback thanks to elevated sentiment, and earnings season could provide an impetus for some profit taking. The economy appears to be strengthening and we remain optimistic. Despite signs of growth, the Fed seems insistent on letting QE2 play out, pointing to continued high unemployment and housing. The new congress also has to deal with these issues, while attempting to pare deficit spending. International exposure is important, but we recommend taking some profits and rebalancing if your emerging-market exposure gets above your target allocation.
2011-01-14 2011 Outlook: International and Emerging Market Equities by Benjamin Segal and Conrad Saldanha of Neuberger Berman
We anticipate modest but positive global economic growth in 2011. Economic growth in emerging markets should benefit developed-market firms with global reach as well as emerging-market companies. Issues we are closely watching: the potential for currency/trade wars, asset bubbles and inflation in the emerging markets, increasing regulation and possible negative impacts of monetary tightening. Many overseas corporations are profitable and healthy, with cash available for M&A, higher dividends and other corporate activities.
2011-01-13 TW3?! by Jeffrey Saut of Raymond James Equity Research
“That Was The Week That Was,” also known as TW3, was a satirical TV comedy first broadcast on the BBC in November of 1962 and subsequently moved to America. The program was radical in that it chronicled events of the previous week and broke new ground in lampooning the establishment. It was also the first show to demonstrate it was truly television by allowing the cameras and boom microphones to be seen, giving the program an exciting and modern feel. I revisit TW3 this morning because despite last week’s holiday-like environment there were some pretty amazing headlines.
2011-01-12 Digging for Hidden Gems Among Small Caps by Mark Mobius of Franklin Templeton
Small-cap companies in emerging markets are generally under-researched and not as established as their large-cap counterparts. Some have very short track records, not much background and little publicly accessible information, therefore presenting a higher level of perceived risk and deterring many investors. But for these very reasons, share prices of small–cap companies are less likely to reflect their true value with fewer analysts covering them, thus creating attractive investment opportunities.
2011-01-12 Equity Market Review and Outlook by Richard Skaggs and Thomas Davis of Loomis Sayles
Global equity markets continued the uptrend that began in the third quarter and finished the year with solid gains across all major equity categories. Such a powerful second half of 2010 seemed improbable just last summer, when concerns over a potential double-dip recession dominated investor thinking. Other macro issues, such as the ongoing financial challenges within the European Union, remain unresolved. However, these macro concerns have remained manageable in the eyes of equity investors.
2011-01-11 Tactical Asset Allocation and Market Timing: What's the Difference? by Nancy Opiela (Article)
Why is it that the industry dismisses significant changes to portfolio allocations as "market timing" transactions but embraces the subtler "tactical shifts" many advisors are making in the current, transitional market? As advisors debate the nuances of that question, the more relevant question may be: How would you respond if a client asked you to explain the difference between market timing and tactical asset allocation?
2011-01-11 Inflation a Growing Concern for Emerging Market Countries by Team of American Century Investments
As a group, emerging market countries have rebounded from the Great Recession in much better shape than developed economies. And driven by higher commodity prices, robust domestic consumption, and a growing middle class with buying power, the emerging market asset class appears poised for more growth heading into 2011. While investors have been focusing on the European debt crisis, however, many emerging market economies have been getting a little overheated from the rapid pace of growth, and inflationary fears are quietly becoming a daily reality.
2011-01-11 Global Outlook and Strategy by Team of Loomis Sayles
After being challenged in November by renewed Eurozone sovereign debt concerns, global risk markets ended 2010 on a strong note. The key to the late-2010 and early-2011 optimism was the potential for the two biggest engines of global growth – the US and Chinese economies – to pull together this year.
2011-01-10 Investment Commentary by Bob Doll of BlackRock Investment Management
We see a number of potential risks for the economy and the markets in the year ahead, including sovereign debt issues, emerging markets inflation and the possibility of higher tax rates, but we remain positive on the overall environment. Inflation should remain low throughout 2011, economic growth should accelerate slightly with the quality of that growth improving, and corporate earnings should remain strong an environment that should provide a solid backdrop for stocks to post further gains over the course of the year.
2011-01-10 Q4 Bond Market Review and Outlook by Teri L. Mason of Loomis Sayles
The US economic picture brightened as policymakers announced additional steps to stimulate the economy. Bond yields rose, causing many sectors of the bond market to lose ground in the final quarter of 2010, though high yield bonds, selected currencies and equity markets roared ahead.
2011-01-08 Forecast 2011: Better than Muddle Through by John Mauldin of Millennium Wave Advisors
Mauldin reviews his prior-year forecast. He was right on currencies and gold, but missed the bull market in equities. For 2011, he likes gold relative to the euro, pound and yen, but is less bearish on the pound than he was a year ago. He fears the Kamchatka volcanoes (in Russia) will trigger a spate of bad wealth which will lead to scarce resources and inflation. He is optimistic about the job market and employment, and forecasts that the US economy will grow 2.5-3% in 2011. He fears, however ,that structural problems in the work force will leave many untrained for employment.
2011-01-06 Some Risks Worth Factoring In For The Year Ahead by David A. Rosenberg of Gluskin Sheff
Home price declines are an added significant risk to household wealth and spending. The Dallas Fed just published a report concluding that home prices have potential to decline more than 20% from here. Perhaps the banks can handle that, but the implications for the household wealth effect, consumer confidence and spending are hardly constructive.
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 America’s strongest economic performance of the last decade and its fastest growth since 1980.
2011-01-05 Off With Our Heads! by Bill Gross of PIMCO
American politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion-dollar annual deficit. Meanwhile, policy stimulus is focused on maintaining current consumption as opposed to making the United States more competitive in the global marketplace. Dollar depreciation will sap the purchasing power of U.S. consumers, as well as the global valuation of dollar denominated assets.
2011-01-04 Glory Days: Another Good Year in 2011? by Liz Ann Sonders of Charles Schwab
Setting targets doesn't make sense to us, but we do believe in reading the market's tea leaves, and the outlook is healthy. However, frothy sentiment has us a little concerned in the very near-term. Investors need to be mindful of complacency, but also to make sure they're not still loaded up on bonds—a major capitulation from bonds to stocks is possible.
2011-01-02 Hangovers by Isbitts of Emerald Asset Advisors
The overhang of US unemployment, long-term inflation, and risks of temporary overheating in the Commodity and Emerging markets is a wicked one, so the best posture for 2011, and most years for that matter, is to be invested, but with a net to catch you when you fall. However, the longer out one looks, and the wider the breadth of investment themes one is permitted to consider, the more the truly dynamic secular investment opportunities become visible. The ability and willingness to see the "forest" over the ever-present "trees" is the best advice I can give you.
2010-12-31 2011: A Look Ahead by Bob Doll of BlackRock
As a way of discussing our economic and market views for the coming year, we present our 10 predictions for 2011: 1. US growth accelerates as US real GDP reaches a new all-time high. 2. The US economy creates two to three million jobs in 2011 as the unemployment rate falls to 9%. 3. US stocks experience a third year of double-digit percentage returns for the first time in more than a decade as earnings reach a new all-time high. 4. Stocks outperform bonds and cash. 5. The US stock market outperforms the MSCI World Index.
2010-12-29 Deciphering Debt by Dr. Victoria Marklew, Richard Thies, James Pressler and Dr. Asha Bangalore of Northern Trust
2011 is likely to raise more issues about debt, with periodic market panics about debt sustainability and bailouts. We offer this primer on the issue of debt – specifically the various measures and the roles they play in determining a country’s risk of facing some form of debt-related crisis. Metrics to assess indebtedness of nations are classified as solvency and liquidity measures. Each are discussed, as is the special topic of the banking sector and its relation to public debt. We give our view of global public-debt-related challenges in 2011.
2010-12-28 Emerging Markets in 2011 – Strong Economies, Rising Prices by Mark Mobius of Franklin Templeton
I believe emerging markets are now in a secular bull market, and as discussed below, I expect this trend to continue into 2011. Even more money is likely to be directed into these markets as investors around the world realize that emerging economies on average are growing three times faster than developed economies, and generally have more foreign reserves and lower debt-to-GDP ratios than their developed counterparts.
2010-12-23 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
Investors should continue to hold gold for long-term investment. Food and food-related shares remain a favorite of ours and we believe that oil-related investments have promise. For long-term investment, we do not like the U.S. dollar, Japanese yen, British pound, or the Euro. As we mentioned in our September 14th letter, we like the Singapore, Thai, Canadian, Swiss, Brazilian, Chinese, and Australian currencies. In summary, investors should continue to hold shares of growing companies in India, China, and Colombia. We believe U.S. stocks can rally further.
2010-12-23 A Smoother Ride for Target-date Funds by Rob Arnott of Research Affiliates
Asset allocation is a critical step in the asset management process. No matter how diversified the portfolio, risk and reward aren’t linear. But target-date funds tacitly assume they are! Just because you are willing to take more risk doesn’t preordain higher returns, even over decades-long stretches. Rather, managing risk should be done either explicitly with active asset allocation of the glide path or implicitly through the natural contra-trading embedded in the Fundamental Index approach.
2010-12-23 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Anyone reading this commentary needs to get home for the holidays (or for some Chinese food and a movie for those non-Christmas celebrators). A few numbers, some last-minute window-dressing, announced global transactions, and a race to end with double-digit gains. Let’s close 2010 on a high note. Have a nice season and a very happy new year
2010-12-22 2011 Outlook: Fixed Income by Fixed Income Investment Team of Neuberger Berman
Entering 2011, there is no shortage of potential issues that could ignite periods of extreme market volatility. While short-term market gyrations are unsettling for both novice and experienced investors alike, for the year as a whole, we believe the outlook for the economy and the fixed income market is generally positive. In particular, certain non-Treasury sectors have compelling fundamentals going into the New Year. In our opinion, these areas could benefit generally from an increased risk appetite, should investors seek incremental yields given a continued low interest rate environment.
2010-12-20 Do You . . . Sincerely?! by Jeffrey Saut of Raymond James Equity Research
For themes in 2011, I continue to embrace no double-dip recession, slow economic growth, dividend yield, stuff (energy, agriculture, water, electricity, metals, etc.), emerging/frontier markets and their consumers (although the emerging markets are well overbought currently), technology, financials, active investment management over passive (indexing), and hedging portfolios to reduce the downside risk.
2010-12-20 Weekly Investment Commentary by Bob Doll of BlackRock
As the year is winding to a close, we thought it would be a good opportunity to take a look back at the predictions we made at the beginning of 2010 to see how they are shaping up. We didn’t get them all exactly right, but most of our predictions were on track.
2010-12-17 Capital Markets Brace for Exciting 2011 by Andreas Utermann of RCM
Andreas Utermann, global chief investment officer at RCM, a company of Allianz Global Investors, highlights key themes likely to shape the direction of capital markets in the coming year and provides a brief outlook on how he expects major asset classes to perform.
2010-12-14 The End of the Asian Bull Market by Robert Huebscher (Article)
A broadly diversified emerging market investor would have earned nearly 12% annually over the last five years, far outpacing investors in the US and other developed markets. Over the next five or even ten years, investors relying on emerging economies will not be as fortunate, however, according to Louis-Vincent Gave, CEO of the Hong Kong-based research and investment management firm GaveKal.
2010-12-14 Year-end Letter to Clients: Investment Advice from Winston Churchill by Dan Richards (Article)
For the past 18 months, my draft letters have been designed to balance some of the extreme pessimism among many investors with an objective, positive outlook - the draft year-end letter for 2010 continues with that goal. In it, I borrow from Winston Churchill's insight into the difference between optimists and pessimists.
2010-12-14 A Notable Year of Emerging Market Growth by Mark Mobius of Franklin Templeton
I view 2010 as a year of economic resurgence. Many emerging markets recorded strong GDP growth as they continued to recover from the impact of the 2008 financial crisis. In several cases, robust domestic consumption, government expenditure and intra-regional trade offset weak external demand from developed markets. This led many countries in Asia and Latin America to return to pre-crisis growth levels much faster than expected. China and India were among the world’s fastest-growing major economies during the year, with China overtaking Japan as the world’s second-biggest economy.
2010-12-13 Dr. Copper by Jeffrey Saut of Raymond James Equity Research
The most important chart patterns of December (at least so far) are the charts of the 10- and 30-year Treasury bonds, whose yields have backed up more than 10% since the end of November (see the first chart on page 3). The second most impressive chart for the month is copper, which is up 10.8%. Copper is often referred to as “Dr. Copper” for it has a better predictive record on economic growth than many economists; and last week copper came a cropper as it traded to new all-time price highs.
2010-12-13 Perception versus Reality by David A. Rosenberg of Gluskin Sheff
I've been a secular bond bull and am not yet changing my view of the fixed-income market, but the perception that the economy will grow vigorously is now extremely strong. I think it will only grow about 2% next year and that core inflation will continue declining. These are the primary downside risks: 1. The U.S. Treasury market becomes unglued. 2. Further sharp increases in energy prices. 3. Renewed fiscal problems in Europe. 4. Bad inflation news out of emerging markets. 5. U.S. state & local cutbacks become more severe. 6. Latest down-leg in home prices accelerates.
2010-12-11 Unintended Consequences by John Mauldin of Millennium Wave Advisors
The recent rise in interest rates is due to the reallocation of globally indexed funds away from sovereign debt and into something else. The may be a prelude to a sovereign default or a more rapid rise in rates, which could unfold very quickly. Global deleveraging is not over. QE2 and the nervousness of investors around the world are pushing up interest rates.
2010-12-10 Fleshing Out Our Themes for the Year Ahead by David A. Rosenberg of Gluskin Sheff
Consensus views of 1,350 on the S&P 500 and 4% real GDP growth are far too high. In my view, real GDP growth in the U.S.A. is set to slow from around 3% in 2010 to 2% in 2011, or possibly even lower. This is not a double-dip but it is a slower growth profile. The fiscal and sovereign credit problems in Europe are not going away. The U.S. dollar is likely to strengthen, particularly versus the yen. Emerging markets will struggle as central banks move more forcefully to curb accelerating inflationary pressure.
2010-12-07 Looking at the Tax Compromise Measures by David A. Rosenberg of Gluskin Sheff
The just-announced comprise tax measures along with the Fed’s pump-priming, have pretty well extinguished double-dip risks, notwithstanding the myriad of other headwinds. This amounts to a new stimulus measure. If the U.S. government opts for a series of fiscal measures that could end up adding as much as $750 billion to the existing large public debt burden, the fixed-income market is not exactly going to like it. Elsewhere, EU finance ministers ruled out an immediate aid package for Portugal or Spain (putting the onus on the ECB to restore calm).
2010-12-06 Cutting Through the Noise by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data is rarely clear-cut, but we believe the weight of the evidence indicates a strengthening US economy. The negative rhetoric surrounding the Federal Reserve's recent decision reached a crescendo, but while we were among the first to voice our belief that it wasn't necessary, we believe the dire warnings of potential consequences from a second round of quantitative easing (QE2) are overblown. The European debt crisis continues to plague world markets. Finally, we believe the European Central Bank (ECB) needs to be more proactive instead of continually reactive.
2010-12-06 Festivus by Jeffrey Saut of Raymond James Equity Research
The stock market is once again over bought so it would not surprise me to see a pause and/or pullback in the short-term. Nevertheless, I still expect the trend of buying the “dips” to continue. Watch the Financials; they may be the key to the stock market’s near-term directionality.
2010-12-06 The Worst US Employment Report of the Year? by David A. Rosenberg of Gluskin Sheff
This was arguably one of the worst employment reports of the year. It was fascinating to see what little negative market reaction there was to the data — not just nonfarm payrolls but also the news that factory orders slipped 0.9% MoM in October, the steepest decline in five months. This is why everyone seems to believe the economy is improving and it’s so easy to do that when you simply ignore the bad data points! One of the key features of the payroll report was the continued retrenchment in the state/local government sector. This promises to be a major macro theme for 2011.
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.
2010-12-04 Rebalancing the World by Mark Mobius of Franklin Templeton
We are currently witnessing a largely one-way flow of capital, as money moves from countries of disinflation or deflation to countries with inflation, possibly perpetuating the situation for both. We need to see a rebalancing of the world economy. In recent history, financial authorities in the developed world have encouraged a period of easy credit and loose monetary policy, driving a debt-fuelled rise in consumption. There needs to be more ‘balance’ in the world economy, so high-savings countries should spend more and develop their own vibrant domestic market as we see in the U.S.
2010-12-04 Short Skirts and Second Shoes by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We are in an honest-to-goodness bull market. There is much more upside ahead. Possibly for years. Tops are made in euphoria, as when the Fed decides to tighten money and raise interest rates. With the evident despondency today the Fed continues to bring on the punchmore liquidity, accommodative easing, to keep interest rates low and make credit readily availablefor consumer spending, for housing and autos and apparel and necessaries, for government borrowings. And for stocks. Well be swimming in punch.
2010-12-03 Fundamentals and the Stock Market by Matthew Rubin of Neuberger Berman
Is continued discomfort in the stock market justified? It can be argued that the economy is
relatively weak, and with high unemployment, the weak housing market and a new focus on fiscal restraint, few expect rapid expansion anytime soon — not exactly a bullish sign for an asset class that is supposed to benefit from expansion.
However, from a number of vantage points, stocks are displaying what we consider attractive characteristics that suggest the benefits of maintaining substantial exposure to equities in the current environment.
2010-12-03 The Dirty Dozen by Niels C. Jensen of Absolute Return Partners
In the following I list a number of risk factors which I believe investors should give serious consideration, but I do not for one second pretend for that list to be exhaustive. Neither should you read anything into the order of which those risk factors are listed. If you want my assessment of how to rank the various factors, you need to take a look at the risk scatter chart at the end of the letter.
2010-12-01 Allentown by Bill Gross of PIMCO
The global economy is suffering from a lack of aggregate demand. In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive. Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.
2010-12-01 Open and Shut by Howard Marks of Oaktree Capital
Today some assets are fairly priced and others are high, but there are no bargains like those of 2008. Capital and nerve can’t hold the answers in such an environment. We’re no longer in a high-return, low-risk market, especially in light of the inability to know how today’s many macro uncertainties will be resolved. Instead of capital and nerve, then, the indispensable elements are now risk control, selectivity, discernment, discipline and patience.
2010-11-30 Macro and Market Thoughts by David A. Rosenberg of Gluskin Sheff
All these “rescue” packages in euroland really do is provide bridge financing — they do not resolve the underlying structural problems or the deflating asset values in bank balance sheets. The massive selloff in government bond markets, even in countries like Belgium and Italy (let alone Portugal and Spain), is a clear sign that the bond vigilantes are now targeting the supposedly stronger governments in the eurozone. The austerity packages needed to bring intractable deficits down will fuel deflation, which will further destabilize the financial system and damage the economy.
2010-11-30 Currency Focus: QE2 and the Course Ahead by Ugo Lancioni of Neuberger Berman
We believe the dollar is likely to move higher on an intermediate-term basis. QE2, in our opinion, could lead to stronger economic growth in the U.S. and eventually drivehigher yields, making the dollar more attractive to investors. In our view, the impact of QE2 was already in the price of the U.S. dollar at the time of the announcement. And the market is generally still shorting dollars.
2010-11-29 The Debt is Still Here by Eric S. Ende of First Pacific Advisors
In the world of investment management, results are typically measured each quarter. While markets sometimes experience a dramatic shift in the course of ninety days, usually the most important influences on the economy evolve more slowly. That is the situation today, where from our perspective, little about the investment backdrop has changed in 2010. This commentary summarizes our view of the current situation, the policy options available and likely outcomes.
2010-11-29 Valuation Opportunity by Milton Ezrati of Lord Abbett
Because the fears forged during the 2008–09 crisis still linger, investors continue to avoid equities. For a while, extreme caution drove almost all new flows of funds into cash and U.S. Treasury bonds. As these flows drove down Treasury and agency yields, investors sought returns in more credit-sensitive bonds, but still, they largely avoided equities. The pattern has by now distorted valuations enough to present a special opportunity in stocks, even after their impressive rise from spring 2009.
2010-11-29 A List of Concerns – A Dozen of Them by David A. Rosenberg of Gluskin Sheff
Among Rosenberg’s concerns: China undergoing a significant, though likely brief, economic adjustment by 2012; The contagion reaching Spain, which would likely be game over for the euro; A renewed deflation in home prices in the US; State and local government budgets – the critical source of downside risk for the U.S. economy in 2011, which could easily result in 1.5-2.0 percentage points of withdrawal from GDP growth.
2010-11-29 Ripeness is All by Jeffrey Saut of Raymond James Equity Research
Shakespeare once wrote, “Ripeness is all.” And timing is “all” when it comes to Wall Street as any whipsawed investor will tell you.
2010-11-29 A Time to Invest in Africa by Nile Capital Management of Nile Capital Management
In this report, I will summarize my answer to the often-asked question: “Why is this a good time for investors to focus on Africa?” I also will explain why the best way to participate in African markets and manage their risks is through an actively managed fund that offers “feet-on-the-ground” expertise in Africa.
2010-11-29 Not Fade Away: European Debt Crisis Hits Markets by Liz Ann Sonders of Charles Schwab
Optimism is waning as global concerns are taking center stage, notably in the euro-zone. Investors shouldn't be complacent, but should heed the more-positive message coming from the US economy.
2010-11-24 A More Integrated Latin America by Claus Born of Franklin Templeton
Chile, Colombia and Peru are planning to integrate their stock exchanges, providing local investors with more investment opportunities and also allowing companies to access a broader investor base. We are likely to see increased foreign investor participation with improved liquidity. Once fully integrated, this new regional exchange should have the highest number of issuers in Latin America (before Mexico and Brazil), the region’s second-largest market capitalization (after Brazil) and its third-largest trading volume (after Brazil and Mexico).
2010-11-23 Ned Davis - Still Positive on Stocks by Robert Huebscher (Article)
Just over a year ago, Ned Davis correctly forecast a continuation of the cyclical bull market in stocks. In February of 2008, he foresaw that year's market upheaval, and a year later he predicted the rally that began in March of 2009. Today, Davis is moderately bullish on stocks, as long as the Fed maintains its policy of quantitative easing.
2010-11-23 Global Tensions Rising Over Fed's QE2 Initiative by Team of American Century Investments
QE2 represents a dramatic intervention in the capital markets, and its ultimate impact is hard to predict at this point in time. Critics of the plan, including some Fed members, believe that too much monetary stimulus might lead to runaway inflation, which in turn could derail economic growth or even create future asset bubbles. Alternatively, a weaker dollar could create incentives for other countries to implement capital controls and foreign exchange interventions that negatively impact global trade.
2010-11-23 They?! by Jeffrey Saut of Raymond James Equity Research
Jeffrey Saut analyzes the DJAI and continuously favors the upside. Thus, he states his longstanding strategy that a "profits boom" will give way to an inventory rebuild, and then a capital expenditure cycle followed by increased hiring, and then a pickup in consumption, remains "stirred," but not shaken. As for the strongest sectors, they remain Energy, Basic Materials, and Information Technology, while the best performing market capitalization class is the mid-caps.
2010-11-23 The Glad Game by Rob Arnott of Research Affiliates
In a world of low-single digit yields, a conventional 60/40 asset mix will get pension funds just over halfway toward an expected 8% return. But investors should not wring their hands: there are ways of achieving their return expectations.
2010-11-22 Europe's Latest Victim Enters the Spotlight by Chris Maxey of Fortigent
Now that Ireland’s domino is falling, what next? It turns out that the vultures are circling back to get another piece of Greece. Officials restated Greece’s budget deficit for 2009 to a whopping 15.9% of GDP. Couple that with recent rumors that Greece was hoping for a payment extension on its $150bln bailout and you have a recipe for further disaster. Not to be forgotten is Portugal, a country with a budget deficit of 9.3% of GDP in 2009. It may be a period of months before Portugal is forced to pay the piper, but make no mistake, eventually Portugal will face its day of reckoning.
2010-11-22 The Science of Risk by Scotty George of du Pasquier Asset Management
We’re in a particularly vulnerable time in world financial markets. Having just completed a significant 2 year market response (upwards) to the global credit crisis, the question of whether or not we can sustain similar economic magnitude has everyone’s attention. Although financial data seems more or less in line with a nascent recovery, investor confidence and activity are still less than robust.
2010-11-22 Commodity Prices: What is Likely Impact in the United States? by Asha Bangalore of Northern Trust
The S&P GSCI commodity index has moved up 11.3% from a year ago on November 19, 2010 (see Chart 1). The trade weighted dollar declined 1.2% from a year ago as of November 12, 2010. The immediate inference is that the extent of gains in the commodity price index is larger than the decline of the dollar. By implication, commodity price gains reflect more than the depreciation of the greenback.
2010-11-17 A Tale of Two Countries by Mark Mobius of Franklin Templeton
Argentina’s economy has been growing at a steady pace since the 2001-2002 economic crisis, typical of a recovery following a period of depression. The country has also benefited from a global environment that has allowed it to enjoy the best terms of trade in more than a century. While the external environment remains favorable, adjustments are needed to sustain Argentina’s economy in the long run.
2010-11-16 Touch of Grey: Market Takes a Breather by Liz Ann Sonders of Charles Schwab
My best guess as to the scenario that is unfolding is that the economy is gaining traction, which could cause the Federal Reserve to pull QE2 into the dock sooner than expected. It could also lead to a lift in the dollar, a related pullback in commodity prices, and rising bond yields. Given the high correlation recently between bond yields and stock prices, if yields were to continue to rise, they could take stock prices up with them; especially if the reasons are a better economy and lessened deflation fears.
2010-11-12 A Bad Plan Poorly Disguised by John Browne of Euro Pacific Capital
With our economy sagging and our international clout waning, one of the few assets upon which the US can rely is the confidence that the rest of the world has traditionally showered upon us. That confidence is the reason why the US dollar was elevated to global reserve status more than 65 years ago. With so much riding on perception, Tim Geithner’s recent statements denying the existence of a dollar debasement campaign could not be seen as anything less than foolhardy.
2010-11-12 And That\'s the Week That Was... by Ron Brounes of Brounes & Associates
Investors surveyed the landscape in the aftermath of two major market moving events (Fed stimulus and midterm election), retreated from their recent optimism, and booked profits heading into the homestretch of the year. Despite the overall success of another earnings season, investors fretted over the global progress (or lack thereof) from the G20 meeting of world finance ministers and news that China may have inflationary problems on its hands.
2010-11-12 Down the Home Stretch by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has shown signs of strengthening. We believe we could be emerging from the soft patch and that stronger-than-expected growth could be in the offing. The elections are done and the Federal Reserve made its move, but the question remains as to whether much-needed confidence returns to businesses. Additionally, housing remains a problem that may not be helped substantially by either event. Competitive currency devaluations are dominating the international conversation, while investors are flocking to emerging markets, making us a bit skittish in the near term.
2010-11-11 Ahead in the Clouds: Capturing Opportunities in Technology by Walter Price of RCM
Many corporations are finding themselves in a situation that should bode well for technology spending: They are holding record amounts of cash on their balance sheets and consuming their existing capital base as they depreciate their equipment. At the same time, many technology firms have likewise emerged from the crisis with strong balance sheets and in good financial condition. Yet the market has been slow to re-embrace the sector, keeping stock valuations at historic lows.
2010-11-11 Leadership Changes in Latin America by Mark Mobius of Franklin Templeton
In Latin America, we are seeing a large and young population moving up rapidly to the new “consumer” middle class, but at the same time having one of the lowest loan penetrations in the world. The rise of this consumer middle class and growth in per capital GDP is resulting in an increase in domestic spending, which drives the domestic economy. Secondly, the region has vast resources available at low cost.
2010-11-09 How Modern Is Your Portfolio Theory? by Direxion Funds (Article)
After 58 Years, is there Another Way to Conquer the Efficient Frontier? In the past, active or "tactical" investment management referred to jumping in and out of stocks and bonds - market timing. With the introduction of sophisticated funds that help the masses harness the power of institutional managers and alternative asset classes and strategies, today, tactical management may help to renovate your portfolios - and help you retain and attract assets.
2010-11-09 Everybody’s Happy!? by Jeffrey Saut of Raymond James Equity Research
Over the decades I have come to trust my 'day count' indicator because it has worked so well. Since the late-June “lows” there have been ten 90% Upside Days, accompanied by strong Advance-Decline readings, reflecting the durability of this rally. In fact, the New York Composite Advance-Decline Line is well above its April rally peak and Lowry’s Buying Power Index has risen to a new rally high, while the Selling Pressure Index tagged a new reaction low, late last week. All of this only reinforces my view that any correction will be shallow and brief.
2010-11-09 RCM's Global Strategic Outlook: Fourth Quarter 2010 by Andreas Utermann of RCM
Analyzing various leading indicators, there is hardly any hint of a recession. This is not to say that there is no risk of a recession happening. A continued weak labor market is weighing on household consumption in industrialized economies. The housing market in the U.S. is showing signs of weakness. There is a risk of a policy failure in emerging markets, especially of China overdoing policy tightening. Fiscal policy tightening in the West may actually turn out to be too strong. In sum, we think that structural headwinds and tailwinds could balance each other out.
2010-11-09 Chinks in the Armour by David A. Rosenberg of Gluskin Sheff
Nobody thought a year ago that things would have weakened to such an extent that we would have needed QE2 or the extension of Bush tax cuts. The Fed is doing $600bln in quantitative easing, which is about one-third what it did last year. I’m not convinced that it alone will prevent the economy from weakening, even if contraction risks have abated. Now what will it take to turn me more positive? Well, a sustained job creation for one and if we can get initial jobless claims down to 400k that would be huge. But I have to admit, QE2 does not do it for me.
2010-11-08 What Has the Fed Really Done? by David A. Rosenberg of Gluskin Sheff
In the Fed’s latest QE quest, by targeting the front- and mid-part of the U.S. Treasury curve, it is only really influencing yields that were already at microscopic levels before anything was even announced. It is hard to figure out what a 0.3% yield on the 2-year T-note or a sub 1 % yield on the 5-year T-note is really going to accomplish as far a spending stimulus is concerned. The Fed’s action seems to have unleashed a wave of speculative trading activity in risk assets — from stocks, to commodities, to emerging markets
2010-11-08 The Hail Mary Pass by David Baccile of Sextant Investment Advisors
With the announcement of $600 bn in new QE this week, Fed quarterback Bernanke has dropped back deep into the pocket and launched a last ditch Hail Mary pass with the hopes of stimulating growth to bring down persistently high unemployment. There is one major problem this view. The magnitude of the debt overhang is far greater now than at any other time in history, making the relatively trivial QE1, QE2, QE3, etc. ultimately doomed to failure. For those with a long-term approach to asset allocation, chasing a hot asset class or reacting to a 'clueless' Fed policy is not an option.
2010-11-06 Equity Valuation, Earnings and Relative Yield: A Compelling Point in the Cycle? by Richard Skaggs of Loomis Sayles
Large-cap US stocks, as represented by the Dow Jones Average, quadrupled in the 1980s and again in the 1990s. Given this historical perspective, the market’s long pause since 2000, accented by calamitous financial events, particularly in 2008, has left investors impatient and fearful. That said, investors would be wise not to wallow in this sentiment and overlook the long history of stocks returning to good form following lengthy periods of underperformance. The S&P 500 Index could be on the cusp of a positive long-term cycle based on its valuation, earnings and relative yield.
2010-11-05 More on QE2 - Will it Work? by David A. Rosenberg of Gluskin Sheff
Quantitative easing is no antidote for structural economic problems, even if it manages to give investors a short-term sugar high. Let's learn from the Japanese QE experiment. The day the Bank of Japan launched the program on March 19, 2001, the Nikkei surged 7.5 percent, from 12,190 to 13,103. Three months later, as it became painfully obvious that the real economy was not responding well to the shock therapy, the Nikkei index slid 16 percent to just over 12,000.
2010-11-05 Effects of Quantitative Easing on Asia by Teresa Kong of Matthews Asia
While the U.S. intends to stimulate its domestic economy with quantitative easing, the actual effect of QE has been to turbo-charge emerging markets, especially the markets of Asia. There is some concern that short-term portfolio flows or 'hot money' could cause sharp price volatility, and we will continue to monitor these effects and their implications on Asia.
2010-11-04 Thoughts on QE2 by David A. Rosenberg of Gluskin Sheff
While the Fed could have done more yesterday, it didn't because the economy is doing better than expected, even if it is still quite fragile. Auto sales, for example, rose to 12.3 million at an annual rate in October from 11.8 million in September (best result since August 2009). However, recall that motor vehicle sales also jumped 2.4 percent in September and all that translated into was a +0.08 percent inch-up in total real consumer spending, which was one of the weakest months of the year. Consumer spending excluding auto will now be essential to watch.
2010-11-02 Flaws in Vanguard’s Withdrawal Strategy: Income versus Total-Return Portfolios by Geoff Considine, Ph.D. (Article)
Vanguard advertises that its mission is to simplify investors' retirement decisions. In a recently published study, however, it oversimplified the critical choices investors and their advisors face in constructing a portfolio for the withdrawal phase of retirement.
2010-11-02 November Economic Update by Team of Cambridge Advisors
We have enjoyed the recent rally, but we expect volatility to continue. Investors should remain cautious. It is not necessary to chase stocks higher as buying opportunities are expected to present themselves throughout the next year. If Bill Gross is right, government bonds may not be the safe investment they once were. To reduce risk, broad diversification across many asset classes is the best strategy during these uncertain times.
2010-10-30 Schwab Market Perspective: So Now What? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The Federal Reserve and upcoming elections are in sharp focus and results and actions in these two areas could determine whether the momentum seen since September can continue. Earnings season was better than expected and the market reacted as such. But confidence remains a major issue, with brewing mortgage-related problems and continued uncertainty around tax policy causing consternation. Debt remains a major issue that's just now being addressed and protectionism still threatens economic expansion. China remains a bright spot for global growth.
2010-10-29 Asset Allocation in an Uncertain Economy by Robert Huebscher (Article)
Advisors should not bet on whether the recession will be L-, V-, or W-shaped. Instead, Ron Albahary said they should use strategic asset allocation and overweight or underweight those asset classes that have historically done well at certain points in the economic cycle. Albahary is the CIO of Convergent Wealth Advisors, a Washington, DC-based wealth manager.
2010-10-29 Postcard from Vietnam by Taizo Ishida of Matthews Asia
As much as two-thirds of Vietnam's GDP can be attributed to strong personal consumption in a country of 86 million (with an average age of 26). Over the past 20 years, the country has shown impressive economic expansion, averaging 7.1 percent growth per year, which has pushed GDP per capita up to just over $1,000 U.S. Although Vietnam still faces potential problems with inflation, it is still encouraging to witness the real changes taking place in the country's consumer behavior.
2010-10-29 Asset Allocation: Fall 2010 by Tony and Rob Boeckh of Boeckh Investment Letter
Excess liquidity will continue to act as a tailwind for equities, commodities and non-dollar currencies well into 2011. Deflation will dominate in the short term; the inflationary threat is probably further away than most investors expect. Gold is expensive relative to the inflationary outlook. Fixed income markets are heavily influenced by government intervention. While it is likely that continued intervention will succeed in depressing bond yields below market levels, even a modest increase in inflationary expectations would undermine these actions. We recommend shortening duration.
2010-10-28 Night of the Living Fed by Jeremy Grantham of GMO
This is a summary of Grantham Mayo Von Otterloo chairman Jeremy Grantham's 3Q 2010 newsletter. Grantham notes that in the third year of a presidential cycle, risky, highly volatile stocks have outperformed low-risk stocks by an average of 18 percent per year since 1964. Levels of 1400 or 1500 on the S&P 500 one year from now are about a 50/50 bet. The biggest threats to this possibility are that Congress will initiate a new trade war, or that the Federal Reserve will start a currency dispute with quantitative easing.
2010-10-28 What the G-20 Achieved by Komal Sri-Kumar of TCW Asset Management
A key item on the agenda last weekend during the meeting of G-20 finance ministers was the U.S. desire to have member nations' current account deficits and surpluses limited to 4 percent of GDP. A country with a bigger surplus (e.g., China) would have to let its currency appreciate. The United States, however, cannot insist on deciding on the size of QE2 based purely on domestic considerations, accuse Chinese authorities of currency manipulation, and expect other countries to provide a level playing field for American exports all at the same time.
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 Run Turkey, Run by Bill Gross of PIMCO
The Fed's announcement of a renewed commitment to quantitative easing has been well-telegraphed, and the market's reaction is likely to be subdued. We are in a 'liquidity trap,' where interest rates or trillions in asset purchases may not stimulate borrowing or lending because consumer demand is just not there. The Fed's announcement will likely signify the end of a great 30-year bull market in bonds and the necessity for bond managers and, yes, equity managers to adjust to a new environment.
2010-10-26 Emerging Market Uprising: What it Means for Investors by George Magnus of Boeckh Investment Letter
This special report by George Magnus, a senior economic advisor at UBS Investment Bank, takes a look at some key economic and investment issues regarding emerging markets and China. Magnus, who has just completed a book on emerging markets, argues that while EMs have boomed in recent years, there are a number of unresolved problems which suggest the past may not repeat, and investors must be careful.
2010-10-26 Hope is Not a Strategy by John West of Research Affiliates
Most pension funds and 401(k) calculators assume total returns in the 7-8 percent range. Is this assumption realistic, however, with a mature economy saddled with unprecedented debt levels and an aging workforce? This commentary examines retirement plan assumptions and calculates that we can reach this return level only if we assume top quartile results for stocks, bonds, and alternatives over the next 10 years. That's like expecting a decade of sunshine in the markets.
2010-10-25 It's All About Earnings by David A. Rosenberg of Gluskin Sheff
The equity market has now managed to climb three weeks in a row despite the fact that the U.S. dollar has done likewise in a classic countertrend rally from oversold conditions. Almost one-third of the S&P 500 universe has reported, and the year-over-year earnings growth rate is now running at plus-28 percent from plus-24 percent last week. Fully 83 percent of the companies have beaten their bottom-line estimate, which is far above the historical norm of 62 percent; although barely over 60 percent are bettering their revenue estimates, which is below average.
2010-10-25 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The economy continues to throw off some outstanding corporate profit reports. Profits are what the stock market is all about. While the pundits and politicians talk endlessly about jobs and how to create them (like they would have a clue,) the market is most looking forward to profit growth. In that sense the lower dollar, strength in emerging markets and strong expense control are reaping huge rewards for global companies who lead their industries.
2010-10-21 Readers' Questions Answered Part IV by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on initial public offerings, non-listed entities, China's 20-year prospects, and markets in Thailand, Indonesia and Sri Lanka.
2010-10-21 North America Losing Some Serious Momentum by David A. Rosenberg of Gluskin Sheff
The U.S. economy may in fact be contracting again. The monthly data from Macroeconomic Advisers showed that real GDP contracted 0.6 percent in August. While this did follow a red-hot +1.25 percent gain in July, this marks the third decline in real activity in the past four months. Maybe the bond market does not need the Fed's help after all — the super-soft economic environment is all the Treasury bond market really needs to sustain the downward trend in yields.
2010-10-19 Developed Markets and Capitalism in Crisis by Robert Huebscher (Article)
We are not in a globalized world today, according to Ian Bremmer. "The state is back," said the 40-year old president and founder of Eurasia Group, a political consulting firm. Both in the U.S. and throughout the world, governments are exerting their influence through regulation, trade restriction, subsidies, and bailouts, and are threatening the nature of free markets.
2010-10-19 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.
2010-10-18 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.
2010-10-18 It's All About Ben, the Fed's Intent and the Market Reaction by David A. Rosenberg of Gluskin Sheff
The U.S. economy is caught in a classic liquidity trap. With additional fiscal stimulus no longer a viable political option, even though the government is better equipped to deal with many of the structural hurdles to growth than monetary policy, Mr. Bernanke clearly feels that the Fed is the only game in town. Monetary policy, even in a non-conventional form, is a very blunt tool to use to reverse a secular uptrend in the savings rate, fix chronic unemployment or induce people to spend rather than correct their debt-laden balance sheets.
2010-10-16 Malaysia: Respecting History, Embracing the Future by Mark Mobius of Franklin Templeton
As an emerging market, Malaysia presents itself as a very attractive investment destination today. The Malaysian consumer and commodity stocks are attractive and interesting. I am expecting a domestic GDP growth of 6% this year.
2010-10-15 Q310 Portfolio Commentary by Jay Compson of Absolute Investment Advisors
Asset prices appear to be solely supported by the potential effects of QE2. Global credit markets, where liquidity could be highly strained given the large flows into bond funds and the hazardous reach for yield, are particularly disconcerting. While the Fed could successfully create asset inflation in the short term, the asymmetry of these policy efforts is to the downside, and patience should be better rewarded. Additionally, a dollar rally is quite possible given current sentiment, and could create much volatility in both global equity and credit markets.
2010-10-14 Global Market Commentary by Monty Guild and Tony Danaher of Guild Investment Management
Historically, it has taken about four or five years of capital inflows into emerging markets to create an investment bubble. Thus far, we are only one year into a significant capital inflow into emerging markets, and we probably have another three or four more years to go before these markets become so popular that it is time to move on to other pastures.
2010-10-12 Beggar Thy Neighbor, Beggar Thyself by Michael Lewitt (Article)
In the latest edition of the HCM Market Letter, Michael Lewitt argues that reported attempts by countries to devalue their currencies will only result in higher inflation and not economic growth. QE2 will similarly fail, and the necessary "heavy lifting" for the economy should be through fiscal, not monetary, policy. A continuation of Keynesian policies, as advocated by Paul Krugman, will also fail. Lewitt warns of dangers in ETFs and offers his investment recommendations.
2010-10-11 In QE We Trust by Komal Sri-Kumar of TCW Asset Management
Senior monetary officials worldwide have complained about the massive inflows of capital into their financial markets resulting from expectations of monetary easing in the United States. One of the major pitfalls of quantitative easing is that beggar-thy-neighbor currency interventions do not result in increased growth for all participating countries. Instead, they sharply increase the risk to exporters and international investors and, eventually, dampen global growth.
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 Narratives vs. Facts: Why U.S. Stocks are Surging Despite Anemic Economic News by David Edwards of Heron Financial Group
Investors chasing yields have bid up the prices of corporate bonds and preferred stock, while Treasury bonds, near post-war lows, barely yield more than inflation. Emerging markets stocks and bonds are doing well, but the high returns of 2008 are unlikely to happen again. Indeed, after a decade of pariah status, perhaps the only asset class that offers a reasonable risk-adjusted return is U.S. stocks. Even so, expect no more than 8 percents returns including dividends until the debt deflation process is complete in another 5-10 years.
2010-10-07 Emerging Markets Commentary by Conrad Saldanha of Neuberger Berman
With emerging market economies posting substantially higher growth rates, many investors are increasingly attracted to emerging equity markets. Equity returns, however, tend to be driven more by earnings growth than by GDP growth. Returns are also influenced by other factors such as a country's financial market structure, fiscal and monetary policies, and legal standards. Furthermore, index or ETF investing may not capitalize on stock-specific factors that contribute to the underlying economy's performance.
2010-10-06 And That's the Week That Was... by Ron Brounes of Brounes & Associates
The economy remains unsteady as an uncertain labor picture continues to limit consumer activity. And yet, corporations have accumulated trillions of dollars in cash and money markets yielding near 0 percent have forced managers to seek other options. Looking ahead, the Fed's stimulus debate wages on although many expect a more limited bond buying program than the $1.7 trillion one offered last year. As for the markets, companies still have lots of cash looking for a home and hopefully equities have more room to run.
2010-10-05 A September to Remember by Ron Surz (Article)
In his quarterly market analysis, Ron Surz notes that September has historically been the worst performing month for US stock markets, losing 1% on average over the past 85 years, while the average return in the other 11 months was a positive 1.3%. Not so this September. Surz reviews global market performance and provides his thoughts on peer group analysis and target date funds.
2010-10-05 Commentary & Market Outlook by Jeff Spitzmiller, Jim Worden and Alan Chauhan of Iron Point Capital Management
While recent economic numbers have been low, they continue to point to growth - albeit slow growth - over the next few quarters. With the Fed poised to continue engaging in quantitative easing and more stimulus programs being promoted in Congress to help small businesses and improve payrolls, it is clear that all monetary and fiscal tools will be used to keep the economy moving on an upward trajectory.
2010-10-05 Win, Lose or Draw: Do We Have a Win-Win Scenario? by Liz Ann Sonders of Charles Schwab
U.S. stocks are not expensive and they're most certainly under-owned. Most individual investors are either pessimistic or indifferent about the stock market, suggesting the 'wall of worry' - the contrarian nature of the market to perform best when pessimism is highest - is alive and well. In the near term, the stock market is likely overbought, and a little pullback to improve the sentiment picture would be helpful. On the other hand, however, strong stock market would be a terrific confidence builder, as Alan Greenspan noted last week.
2010-10-05 Cyclical Outlook by Paul McCulley of PIMCO
The influence of emerging economies is on the rise, while developed countries are retrenching. Monetary policy in the developed countries will remain extraordinarily accommodative for an extended period, with policy rates pinned close to zero and use of quantitative easing. PIMCO will therefore position its duration and curve strategies accordingly: overweight investments in the developed world, concentrated in the 'belly' of yield curves. In contrast, an increasing share of its positioning in the 'spread sectors' will be allocated to the emerging markets, including their currencies.
2010-09-29 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 Reality Check on the Macro Outlook by David A. Rosenberg of Gluskin Sheff
More than 80 percent of the economic growth we saw from the lows of 2009 in real GDP was due to the massive amounts of federal government stimulus and the huge inventory swing. The underlying trend in organic real final sales is barely above 0.5 percent. One therefore has to therefore wonder, with an estimated 1.7 percentage point drag from fiscal withdrawal in the coming year and the evident signs of a peaking-out in the inventory contribution to growth, how can the economy not contract heading into 2011?
2010-09-27 Are 401(K) Investors Fighting Yesterday's War? by Rob Arnott of Research Affiliates
It is time for investors and their advisors to look forward, not backward, in their 401(k) investment planning. Inflation is the biggest single enemy to long-term investors. A portfolio of real return assets balanced with a stock- and bond-heavy 401(k) fund menu is the best way to build a portfolio for an uncertain future. To do this, one needs to include inflation hedges before inflation strikes and when they are least costly.
2010-09-23 Can Japan Make a Comeback? by Mark Mobius of Franklin Templeton
It seems that everyone is back to moaning and groaning about the Japanese economy. Modest 3 percent GDP growth is expected in Japan this year, compared to a disastrous 5 percent shrinkage of the economy in 2009. Japanese exporters say they are hurting from a strong yen, while the importers are having a field day. While it's true that the Nikkei 225 Index has fallen from a high of 25,000 in 1991 to a low now of less than 10,000, bargain hunters would say that this is beginning to make the Japanese stock market look reasonably cheap.
2010-09-23 Was it really a Lost Decade? by Kevin D. Mahn of Hennion & Walsh
Many have claimed that the decade of the 2000s was a lost decade for stock investors. When you look at the returns of the S&P 500 index over the decade, it is hard to challenge the validity of this claim. For the period of December 31, 1999 through December 31, 2009, the S&P 500 index had an annualized simple price return of -2.72 percent. A look at returns in categories beyond U.S. large-caps, however, including emerging markets, bonds, and U.S. mid-caps and small-caps, reveals that other types of investments actually had positive returns.
2010-09-21 Diminished Expectations, Double-dips, and External Shocks: The Decade After the Fall by Carmen M. Reinhart and Vincent Reinhart of VoxEU
Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds much slower growth, as well as several episodes of 'double-dips,' as well as many instances of plain 'bad luck' that strike at a time when the economy remains highly vulnerable.
2010-09-20 The Islamic Triangle: Tilting Toward Opportunity by Douglas Clark Johnson of Codexa Capital
The Islamic Triangle - the space between Casablanca, Istanbul and Muscat - may not be a top priority for most global money managers, but perhaps it should be. At just over $1 trillion, the Islamic Triangle's total market capitalization is just a bit less than Brazil's or India's. Among major markets, it compares with Australia or Switzerland. Relative to GDP - a sign of an equity market's importance to a local economy - the number is nearly 60 percent, relatively low, but indicative of the region's structural potential over time.
2010-09-17 Japan Invervenes to Bail Out America.com by Team of Euro Pacific Capital
This week the Japanese government decided to intervene in the foreign exchange market, initiating a vigorous campaign to buy U.S. dollars, thereby stemming the rise of the yen and pulling up the greenback. The effects were immediate, with the yen falling an astonishing 3 percent on the day of the announcement. The media spin doctors cast the Japanese decision as an attempt by the island state to prop up its own fragile economy. The intervention was actually done to help American consumers buy more cars and electronics from Japan.
2010-09-10 Do Countries 'Graduate' From Crises? Some Historical Perspective by Rong Qian, Carmen M. Reinhart and Kenneth Rogoff of VoxEU
Are declarations of victory against the global crisis premature? This column argues that 'graduation' - the emergence from recurrent crisis bouts - is a long and painful process which neither developed nor developing countries look close to completing. Two centuries of evidence suggests that most countries need 50 years before the chances of further crises subside.
2010-09-07 Jeffrey Gundlach on Bonds, Stocks and Gold by Robert Huebscher (Article)
DoubeLine's Jeffrey Gundlach recently reduced his position from "overweight" to "small underweight" in Treasury bonds, and cited "divergent behavior across the yield curve." In this interview, he discusses that behavior and the rationale behind his move, as well as his thoughts on other asset classes, including equities and gold.
2010-09-07 Cheap Labor Helps Southeast Asia Compete with China, But It Won’t Be Easy by Team of American Century Investments
Labor disputes in China and other emerging market countries have been catching global media attention. As employees in the low-cost workshops of the world fight for higher wages and better working conditions, the longer-term outcome will be better standards of living and rising disposable incomes in emerging market countries. These changes hold positive implications for many global-based companies' present and future growth. A growing consumer class with 'buying power' will certainly be beneficial.
2010-09-03 Buy and Hold Still Holds by John Browne of Euro Pacific Capital
As Americans have justifiably lost faith in the stock market, the classic buy-and-hold investment strategy has fallen from favor. The problem is that retail investors are wrongly equating the performance of stocks as a class with the trajectory of American stocks in particular. Fortunately, buy-and-hold still works in many parts of the world. Meanwhile, retail investors sitting in U.S. bonds and bank accounts will ultimately pay a steep price through inflation.
2010-09-02 Learning From Past Crises by Mark Mobius of Franklin Templeton
Although it is unrealistic to assume that the structural changes implemented in some emerging markets can completely shield them from the effects of future global crises, they seem to have borne the most recent global financial crisis reasonably well. While risks have not disappeared, things look a lot better today than they did 20 years ago. The growing use of derivatives contracts is just one of the many reasons to remain cautious, but some emerging markets' strong fiscal health is cause for hope and optimism.
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 Perception Versus Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volume continues its traditional August swoon, making it difficult to gauge much from stock market action. Economic data continues to tell a mixed story, as growth slows and risks rise. Confidence is key to consumer spending, business investment and stock market performance. The Federal Reserve and the government are attempting to instill that confidence in the American public, but so far have had little success. Emerging markets continue to show signs of growth and China's market has been performing well. Germany also has posted some nice numbers lately, but Japan remains a concern.
2010-08-24 India to Open Equity Markets to Foreign Retail Investors by Team of American Century Investments
While opening up its equity market to foreign retail investors will likely benefit India and increase capital inflows in that country, there is also more growth potential for investors who are prepared to accept the risks and invest for the long term. Over the next five years, India and emerging market economies will be driven not only by export demand from the rest of the world, but by growth in domestic consumption, including health care, technology, infrastructure, and finance. This will create huge opportunities for investors and companies doing business in these sectors.
2010-08-24 Urbanization, Past and Present by Douglas Clark Johnson of Codexa Capital
The discovery of an 18th century ship reminds us that the United States was once itself an emerging market. This suggests cues for today's investors as the world's population fills more and more megacities. Continued urbanization will have important implications for resource use and infrastructure development.
2010-08-24 Crowded Trade by Jeffrey Saut of Raymond James Equity Research
Equity markets remain mired in a wide-swinging trading range. In such an environment, stock selection, combined with the ability to sell mistakes quickly, should be the key to portfolio performance. There are also reasonable investment alternatives to the sidelines.
2010-08-20 EM Corporate Debt: Ready for Prime Time by David I. Robbins and Javier Segovia of TCW Asset Management
Emerging Market corporate debt is rapidly growing into a significant asset class backed by the world’s fastest-growing economies. These bonds benefit from strong fundamentals, improving credit quality, declining default rates and superior prospects for economic growth across most of the emerging world. One of the most compelling aspects is their consistent outperformance relative to other fixed income asset classes since 2002. Currently, they offer a yield pick-up over comparably rated corporate issues in the U.S., despite the fact that they frequently enjoy stronger credit fundamentals.
2010-08-19 An Investment Strategy for a Market in Transition by Dan Fuss, Kathleen Gaffney, Matt Eagan and Elaine Stokes of Loomis Sayles
The world is entering a period of rising interest rates on a secular basis. While inflation is not a concern in the near term, the seeds of inflation are likely being planted now, even though it could take quite some time for them to overcome powerful disinflationary forces at work today. If anything, the recent events in Europe and the deceleration of global growth suggest interest rates could remain low for longer than anticipated. The economy will likely grow at a disappointingly meager pace, but it will grow nonetheless.
2010-08-19 Debt and Growth Revisited by Carmen M. Reinhart and Kenneth Rogoff of VoxEU
With the advanced economies at a critical juncture, some economists are urging more fiscal stimulus while others argue that raising debt levels will stunt growth. This column presents the Reinhart-Rogoff findings on the relationship between debt and growth based on data from 44 countries over 200 years with a focus on the debt-growth link during high-debt episodes.
2010-08-18 Pay No Attention to the Headlines by Christian Thwaites of Sentinel Investments
Market valuations are attractive, especially after the recent correction to below 1,100 on the S&P. What should work is buying companies with strong and sustainable cash flows and proven management. What will not work is chasing risk, and investing in companies that dilute shareholders and operate with high leverage. Don't look for an immediate catalyst. This is a market where stealth, opportunity buying and stock picking work. If you hear the word 'momentum,' run.
2010-08-17 Economic, Investment and Asset Allocation Overview – July 2010 by Jeff Spitzmiller, Jim Worden and Alan Chauhan of Iron Point Capital Management
A buy-and-hold U.S. stock portfolio alone can't be expected to provide attractive returns over the coming years. Alternative asset classes and certain segments of the stock and bond markets are current areas of focus for Iron Point Capital Management. The firm currently favors high-yield bonds, floating rate securities, alternative investments and emerging market debt and equity, amongst other investments that can provide excess return, risk reduction or the ability to capitalize on long-term trends.
2010-08-17 'Promised Land?' by Jeffrey Saut of Raymond James Equity Research
Last week investors gave up on stocks, worried that Wednesday's 90 percent downside day marked the end of the summer rally, and fearing that another big decline was in the offing as we enter the dreaded months of September and October. While statistically those months tend to be the worst of the year, that wasn't the way it played last year, and it is doubtful that it will play out again that way this year. While the equity markets may pull back, none of the characteristics that mark a major 'top' are currently in place.
2010-08-16 Late Summer Slumber? by Liz Ann Sonders of Charles Schwab
The stock market rallied nicely in July after reaching the bottom of its recent range. Incoming data remains mixed but indicates that the economic expansion continues. However, risks remain elevated. The Federal Reserve downgraded its view and is discussing how to combat possible deflation, while federal and state governments continue to grapple with budget issues. Chinese growth has slowed, but the stock market is providing some positive indicators. Central banks around the world are creating a muddied picture.
2010-08-13 Russia: Insights from Templeton’s Emerging Markets Analyst Conference by Mark Mobius of Franklin Templeton
Russia was one of the hardest-hit countries during the recent global economic crisis, largely due to its huge dependence on commodity prices. The worst, however, is over. We already saw a sharp recovery for Russia's GDP growth recently when commodity prices stabilized. The Russian oil supply experienced significant growth in 2009, taking most forecasters by surprise. The International Monetary Fund is even more optimistic about Russia's growth, expecting the country's economy to grow by 4.3 percent in 2010 due to rising oil prices and an improving fiscal outlook.
2010-08-12 Asset Allocation: Volatility, Correlations and Returns in the New Environment by Tom and Rob Boeckh of Boeckh Investment Letter
Slow growth, high unemployment and weak inflation will keep interest rates very low in the short term. Rising government debt levels and heavy reliance on monetary ease from the Federal Reserve, however, suggest rising risks of price inflation later on, possibly much later. The current period of low long-term interest rates should thus be thought of as an extended base-building period for higher rates down the line. Investors should maintain a diversified portfolio, shifting equity exposure to defensive, non-cyclical sectors, and build positions in cash and safe sovereign debt.
2010-08-04 The Emerging Markets IPO Frenzy by Mark Mobius of Franklin Templeton
In recent years, we have seen a rise in initial public offerings in emerging markets as EM companies begin to recognize the advantages of going to the market to raise capital in order to expand and grow. Investors should proceed with caution, however, before chasing IPOs and short-term gains. Not all listings are created equal. There is generally a lot of promotion surrounding all new listings. It is therefore important to conduct your due diligence and evaluate the stock based on its fundamentals with a long-term investment perspective.
2010-08-04 How the Other Half Looks by Nouriel Roubini of RGE Monitor
The global adjustment process has been delayed. In order to support growth and income generation, the over-saving investment- and export-driven nations - China, emerging Asia, Germany and Japan - continue to look to the overspending countries following an Anglo-Saxon model. There is a risk of a weak recovery of global aggregate demand relative to supply, which could contribute to deflationary pressures. As such, the recovery will continue to be multi-speed and rocky, exit strategies will remain uncoordinated and the risk of policy gridlock is high.
2010-08-03 Insights from the U.S. International Balance of Trade by Team of American Century Investments
The U.S. trade deficit increased to -$42.3 billion in May. Large and increasing trade deficits are sustainable as long as the rest of the world is willing to lend money to finance them. Growing trade deficits, however, are unhealthy in the long term. Trade imbalances also cause imbalances in capital flows. There was a time when it was argued that, as the U.S. entered a post-industrial society and economy, its growing trade deficit in goods would be offset by a growing trade surplus in services. Nearly three decades of experience, however, have demonstrated that this isn't the case.
2010-08-02 Growing Federal Debt Will Cause Major Challenges in the Years Ahead by Team of Litman Gregory
A combination of sharply declining tax revenues and a surge in stimulus and bailout spending, both stemming from the financial crisis, caused the federal budget deficit to soar to almost 10 percent in 2009. Total debt to GDP ratios are climbing sharply, and could pass 90 percent by next year. The growth track of entitlement programs has led many to conclude that growing federal debt levels are unsustainable in the long term. Additionally, the Greek debt crisis could trigger increasing awareness of sovereign default risk with investors demanding higher rates for owning government debt.
2010-07-31 Bull/Bear Standoff by Liz Ann Sonders of Charles Schwab
Bulls and bears both have strong cases. With earnings results and economic data indicating continued growth, we lean toward the bullish side—although risks to the bullish case are elevated. Uncertainty and concern regarding government actions continue to weigh on sentiment, while the Federal Reserve leaves all options on the table. Some questioned the credibility of European stress tests, but the market responded favorably. Meanwhile, China's growth appears to be moderating but remains relatively robust.
2010-07-30 Inflation in 2010 and Beyond? Practical Considerations for Institutional Asset Allocation by Michael Katz and Christopher Palazzolo of AQR Capital Management
Traditional institutional portfolios with risk characteristics similar to a 60/40 stocks/bonds allocation are not well-positioned for unexpected inflation. Stocks are not effective inflation hedges, particularly in the short and medium term. Meanwhile, traditional institutional allocations resemble a 'bet' on low inflation. A risk-based approach to strategic asset allocation, however, may generate more balanced performance across both inflationary and deflationary periods.
2010-07-30 Slow Motion Recovery and What Would Make Me Bullish by David A. Rosenberg of Gluskin Sheff
Legions of economists are claiming that it is normal to see the economy take a breather at this stage of the cycle, but in truth, what is 'normal' in the context of a post-WWII recovery is that four quarters into it, real GDP expands at over a 6 percent annual rate. That puts the current 2.4 percent growth rate into a certain perspective. David Rosenberg also lists 10 economic developments that could turn him bullish.
2010-07-27 Active Managers Add More Value in Bull than Bear Markets by Jane Li, CFA, CAIA (Article)
In this guest contribution, Jane Li of FundQuest argues that both active and passive investing have their strengths and weaknesses; it depends on the market segment in question and on the economic climate. Active managers tend to add value in bull markets, but their value is shakier in bear markets.
2010-07-26 The Style Roulette and RAFI Strategy by Rob Arnott of Research Affiliates
The style merry-go-round (where value and growth are alternatively in favor) provides ample opportunity for investors to be their own worst enemy, even within the supposedly balanced broad market indexes. Make no mistake - cap-weighted index funds are stealthy returns chasers loading up on past winners. A simple periodic realignment back to financial size remarkably captures over 100 percent of a perfect style timing strategy in three major non-U.S. equity asset classes.
2010-07-23 So What Else are the Bulls Looking at Right Now? by David A. Rosenberg of Gluskin Sheff
This is still a meat-grinder of a market. The bulls have the upper hand, but only until the next shoe drops in this modern-day depression and post-bubble credit collapse. The best we can say is that we do have a tradable rally on our hands and that we are at a critical technical juncture at the 50-day moving average on the S&P 500 - but remember, in a secular bear market, these rallies are to be rented, not owned. To be sure, 140 companies have reported so far and the news overall is good … but earnings are a coincident, not a leading indicator.
2010-07-21 Readers’ Questions Answered Part IV by Mark Mobius of Franklin Templeton
Mark Mobius responds to a new batch of reader questions. Topics include Brazil's long-term economic outlook, investing in India and the qualities of a successful investment manager.
2010-07-20 Jeremy Siegel on Why Stocks are Undervalued by Dan Richards (Article)
The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. In the transcript of this interview, Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios.
2010-07-20 World Growth on the Rise but Europe's Weakened Economy Threatens Global Recovery by Team of American Century Investments
Global economic activity is improving, but significant headwinds remain, particularly within the developed world, where mounting sovereign debt threatens long-term economic gains. So far, government responses to the crisis have varied, and this lack of coordination may lead to divergent economic performance in the year ahead. Emerging markets have held up relatively well, primarily because they have managed their economies frugally throughout the past several years. Globally, corporations are generally enjoying expanding profit margins, while balance sheets remain solid.
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.
2010-07-15 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.
2010-07-15 It's Always Darkest Before the Dawn (of Earnings Reports) by David Edwards of Heron Financial Group
The gold market looks like yet another bubble. Over the last three years gold gained 85 percent while the broader Commodities Index declined 19.8 percent. The current surge, however, is related to 'fear factor' trade compounded by huge hedge buying of gold futures. Meanwhile, even after the rally of the last week, stocks still look cheap. The S&P 500 should close out 2010 with a gain of 8 percent, which is 9 percent higher than current levels. Corporations flush with cash and with surging revenues and earnings are a buy.
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 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)
Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?
2010-07-13 Cage Match by Jeffrey Bronchick of Reed, Conner & Birdwell
Contrary to public opinion, there is enormous opportunity for an investor today to focus on the business and valuation details of a particular investment while everyone else is running around trying to tie the world together into some neatly gift-wrapped strategy that can be easily quantified and traded by a computer algorithm. Yes, it can be frustrating when everything seems to go down on a day when the market goes down, but no one said this is easy. And when it gets that easy, you should be selling into it.
2010-07-12 Trade Deficits As Far As the Eye Can See by Brian S. Wesbury and Robert Stein of First Trust Advisors
As the trade deficit increases again in the next few years, and as manufacturing jobs disappear because of productivity increases, protectionism will once again become an issue. This fear about the deficit, however, ignores a major reason for it. Ultimately, the U.S. trade deficit is a by-product of an attractive investment climate. Foreigners, with assets to invest, often need to worry about the risks of exposing those assets to a local banking system that makes ours look like a pillar of strength.
2010-07-09 Emerging Market GDP Growth: The Past Two Decades, and Our Projections for the Next Decade by Monty Guild and Tony Danaher of Guild Investment Management
Even with all the problems currently experienced in Japan, Europe, and the U.S., some parts of the world continue to grow vigorously. Guild's focus will be on the countries above which have strong prospects for growth. They will also focus on high-yielding income stocks which earn cash flows from the production of oil, and from gold, which will provide an anchor to windward in the current turbulent economic times. Today's markets will continue to produce those opportunities in the form of price weakness if we remain patient.
2010-07-09 In the Shadow of the Dragon by John Downs of Euro Pacific Capital
For investors, the Chinese push into frontier markets may offer promising returns in the medium-term. For example, emerging market bonds have rallied every quarter since the end of 2008, and posted record inflows this year. Unfortunately, accessing frontier markets has historically been difficult for small investors. Poor accounting practices, corruption, lack of local knowledge, and illiquidity are risks to be considered. For the right investor, though, there are increasing opportunities to invest in these markets via enterprising Chinese firms.
2010-07-08 Update: 10 Predictions for 2010 by Bob Doll of BlackRock
Over the long term, policymakers still have a difficult job to do as they work to unwind the massive amount of stimulus that had been injected into the system without causing either inflation issues or renewed deflation threats. Over the short term, the broad macro environment will continue to be buffeted by financial and economic uncertainty that will keep volatility levels elevated. That said, the odds for a double-dip recession are low. As long as a renewed economic contraction is avoided, equity prices should grind higher over time.
2010-07-06 Stock Markets and a Sea of Change by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, analyzing performance across global markets during the first half of this year. He also addresses several other topics, including the fiduciary standard, developments in target date funds, and distortions in style assignments created as a byproduct of the financial crisis.
2010-07-02 And That's the Week That Was... by Ron Brounes of Brounes & Associates
So is the temporary pullback actually much more? Since setting recent highs in April, equities have tumbled over 15% and are dangerously close to official bear market territory (>20%). The dramatic volatility has forced many retail (individual) investors back to the sidelines and to the safe-haven of low-yielding treasuries. Then again, the summer months often bring significant price swings as traders head to the Hamptons and away from the daily grind (of flash trades).
2010-07-02 And That's the Quarter That Was... by Ron Brounes of Brounes & Associates
As the quarter began, the economy continued its trek toward recovery; confidence had returned to corporate boardrooms; and investors were pouring their “cash-on-the sidelines” back into risky assets. Just when all seemed right in the world again, tiny Greece (and huge BP) began dominating the headlines. (Remember when a mere volcano was big news?)
2010-06-30 Asset Allocation Thoughts by Tony and Rob Boeckh of Boeckh Investment Letter
This commentary provides an asset allocation framework for investor’s portfolios that reflects our macro view, concerns about the general riskiness of the financial world and a variety of issues that go into the asset allocation process. In general, we continue to be positive on risks assets in the context of our continuing focus on wealth preservation and diversification. Probabilities favor a recovery in stock and commodity prices rather than an extended bear market.
2010-06-29 Timber as an Asset Class: If a Tree Falls in the Forest, Should you Buy It? by Charlie Curnow (Article)
"If the sun shines and it rains, the trees grow about on schedule," wrote Jeremy Grantham, chairman of Boston-based investment firm GMO, in his quarterly newsletter in April 2007. Grantham's enthusiasm for timber, which remains true to this day, may be excessive, despite the fact that, on the surface, historical data seems to support his optimism. If a tree falls in the forest, should you buy it?
2010-06-29 Inflation Protection Investment Strategies by Vern Sumnicht (Article)
The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.
2010-06-28 Investment Commentary by Bob Doll of BlackRock
We entered 2010 expecting a modest cyclical recovery countered by the structural problems that faced most of the developed world. For the first part of the year, the cyclical recovery did dominate, but in recent months, structural problems (especially those in Europe) began to win out and risk assets have been struggling. Now at the mid-year point, we thought it would be a good opportunity to take a look back at the predictions we made at the beginning of the year to see where we stand.
2010-06-25 World Cup Fever in Africa by Mark Mobius of Franklin Templeton
The outlook for Africa is positive. It has stirred the interest of countries like China, India and other fast-growing emerging markets, which require increasing resources for their growing economies, as well as countries like Russia and Brazil, who look to expand their enterprises into global operations. South Africa, acting as a representative for the continent through the World Cup, has shown that it can host an international event to international standards, and this bodes well for the region's future investment prospects.
2010-06-22 Indian Economy Poised for Double-Digit Growth by Team of American Century Investments
India was not severely impacted by the global economic recession and the country is projected to grow rapidly over the next decade. For investors, a consumer-based Indian economy holds positive implications because many global companies view potential Indian demand as a ticket to future growth. Indeed, India's is one of the biggest and fastest growing consumer populations in the world. Nevertheless, the government's inability to keep building infrastructure and power generation and tackle core problems in education, land reform, corruption and social reform may temper growth.
2010-06-21 China's Currency Shift Not a Game-Changer by David A. Rosenberg of Gluskin Sheff
The big news over the weekend was the move by China to end the yuan peg to the U.S. dollar. This delink will allow the People’s Bank of China to pursue its own independent monetary policy. In turn, this will help to ease global trade imbalances, ward off the threat of trade protectionism, alleviate domestic credit strains and inflation pressures and accelerate the Chinese shift from export-led to consumer-led growth. It also suggests that the Chinese authorities have confidence in the sustainability of the global recovery.
2010-06-18 Insights on Hungary by Mark Mobius of Franklin Templeton
The Hungarian market was one of the top performers in Eastern Europe in 2009 with the MSCI Hungary Index returning 78 percent in US dollar terms. The Hungarian market significantly outperformed its regional peers - Poland and the Czech Republic. In the first five months of 2010, however, the market was down 12 percent in U.S. dollar terms, mainly due to a 23 percent decline in May alone on concerns that Hungary could face similar financial problems as Greece.
2010-06-15 Today’s Top Economic Historian: The Path to European Stability by Dan Richards (Article)
Harvard's Niall Ferguson is arguably today's leading economic historian. In this interview with Dan Richards, Ferguson discusses the current troubles and future outlook for Europe. We provide a transcript and a video.
2010-06-10 April 2010 Commentary by Bill Middleton of Sound Portfolio Advisors
Perhaps the most encouraging signs in markets today are general pessimism and lowered expectations. Mass expectations tend to be dead wrong, and are therefore excellent contra-indicators. The first- and second-best performing asset classes of the past 10 years, gold and real estate, were so ill-regarded prior to 2000 they weren't even included in the data provided by the Wall Street Journal in January of that year. The best performing asset class for the 1995-1999 period, science and technology, was by far the worst performing for the following 10 years.
2010-06-10 Addressing Investor Concerns after Heightened Volatility by Mark Mobius of Franklin Templeton
Mark Mobius shares responses to investor questions on emerging markets. Emerging markets continue to be fundamentally strong, with high growth levels, a lower debt-to-GDP ratio compared to developed markets, higher foreign reserves and declining risk. Credit default swaps in many emerging market countries now trade at lower spreads than those of some European countries. On average, however, investors still have a weighting of just 3-8 percent toward emerging markets in their portfolios, while emerging markets now represent about 30 percent of the global market capitalization.
2010-06-08 Five Strategies for a Rising Rate Environment by Kane Cotton, CFA and Jonathan Scheid, CFA (Article)
The Federal Reserve can't accommodate forever, and the global stimulus effort will likely lead to inflation. Our growing indebtedness can only result in increased borrowing costs. That much we know. What we don't know is when and how quickly interest rates will rise. In this guest contribution, Kane Cotton and Jonathan Scheid examine five strategies for a rising rate environment.
2010-06-08 Ten Ways to Improve Manager Selection by Nancy Opiela (Article)
Today's emphases on fiduciary responsibility, risk management and increased transparency require better due diligence when selecting managers. Especially in today's turbulent markets, advisors who spend more time and resources to do due diligence well can find themselves at a distinct competitive advantage. While these ten tips won't necessarily help you identify the next active management superstar, they can bolster your manager selection and due diligence program.
2010-06-08 Can Emerging Markets Save the World Economy? by Mohamed El-Erian and Michael Spence of PIMCO
High growth and financial stability in emerging economies are helping to facilitate the massive adjustment facing industrial countries. But that growth has significant longer-term implications. If the current pattern is sustained, the global economy will be permanently transformed. Specifically, not much more than a decade is needed for the share of global GDP generated by developing economies to pass the 50 percent mark when measured in market prices.
2010-06-04 The Parable of the Lifeboat by David Edwards of Heron Financial Group
Many investors are hesitant to add to their stock allocations due to negative returns over the past decade. The problem is that alternative investments have performed just as badly, if not worse. Ten thousand appears to be a hard floor for the Dow, despite investors' fears. Markets are thinner and more easily manipulated during the summer time, but July earnings reports should paint a rosy picture. NASDAQ is implementing expanded 'circuit breakers' to sideline stocks with unusually large moves - anything to reduce volatility and get investors interested in stocks again.
2010-06-01 Three Ways to Improve Safe Withdrawal Rates by Geoff Considine, Ph.D. (Article)
Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.
2010-06-01 Europe: Value or Value Trap? by Dan Trosch, CFA (Article)
European equities seem much cheaper than in the US, says Dan Trosch of Fortigent in this guest contribution. Europe trades at a 26% Price to Book discount and a 20% Price to Cash Earnings discount to the US. Some European industries and stocks are deservedly cheap and value traps; other industries and stocks are attractive and will benefit from global growth in exports and other macro trends.
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.
2010-05-28 May Volatility, Downward GDP Revision and Sputtering Labor Markets by David A. Rosenberg of Gluskin Sheff
We are still in the midst of a credit collapse. There is simply too much debt and debt service globally relative to worldwide income. The fact that we had a year-long respite does not alter this view, because that respite was induced by an unsustainable pace of bailout and fiscal stimulus in practically every country on the planet, not just in the United States. Governments bailed out the banks and stimulated the economy. But because the revenue cupboard was bare, public sector debt loads exploded at all levels of government, and to varying degrees, in every jurisdiction.
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.
2010-05-20 An Emerging Conundrum by John West of Research Affiliates
Emerging economies have nearly doubled relative to the developed world since the mid-1990s. Despite this growth, however, emerging financial markets have performed relatively poorly over the long term as measured by the traditional indices. This gap between emerging market economic and stock market performance is a direct result of the return drag from capitalization weighting. Often, one, two, or at most a handful of stocks dominate local emerging markets. Not once have these large capitalization stocks collectively outperformed the rest of the market over a five-year period.
2010-05-19 Review of First Quarter 2010 by James F. Keegan of Ridgeworth
The recovery to date has largely consisted of an inventory correction and a response to various government stimulus programs; very little of it will prove to be organic or sustainable. Consumer spending has proven more resilient than anticipated, but this has come at the expense of savings. The consumer remains over-leveraged and the balance sheet repair process can't rely again on asset appreciation; hence, further gains in spending are unlikely. Meanwhile, capital expenditure plans remain tepid, and the tailwind from the stimulus plan is also diminishing.
2010-05-18 Jeremy Grantham Guarantees Gold will Crash by Robert Huebscher (Article)
Jeremy Grantham, the investor celebrated for his ability to spot and exploit bubbles in asset classes, guaranteed yesterday that the current bull market in gold will end. His proof? He bought some - for his own account - at the end of last week. That comment was tongue-in-cheek, but he went on to identify two asset classes likely to go into bubble territory.
2010-05-18 Actively Passive or Passively Active? by Craig L. Israelsen, Ph.D. (Article)
The active-passive debate typically centers on the nature of the investment product - whether it is an actively managed fund or a passive index fund. This, however, is only one aspect of that debate, and to consider it alone represents too simplistic a view, says Craig Israelsen in this guest contribution. A broader issue, namely how a portfolio of actively or passively managed funds is managed over time, has a more profound impact on whether one is truly an active or passive investor.
2010-05-17 Volatility on the Rise by Liz Ann Sonders of Charles Schwab
Volatility in stocks has increased during the past several weeks as investors have grappled with numerous global concerns. Is this the start of a longer-term problem or is it just a short-term phenomenon? Developments in the housing and job markets hold the key to further economic improvement. Meanwhile, the European debt crisis was addressed with a massive package, but long-term issues remain, and China's rapid growth rate could lead to overheating and inflation.
2010-05-14 The Effect of Inflation on Purchasing Power by Robert Urie of Pioneer Investment Management
This paper provides an analysis of what inflation is and its effect on purchasing power. Inflation is a broad rise in the price level of goods and services that reduces purchasing power. In recent decades it has occurred in two predominant forms: rapid, steep increases in prices and a long, persistent rise in prices that gradually erodes purchasing power. Both forms result from a combination of the level of economic growth, monetary policy and unforeseen supply and demand shocks.
2010-05-13 Reader' Questions Answered by Mark Mobius of Franklin Templeton
Mark Mobius responds to reader questions on emerging markets. Mobius notes that global markets tend to react to headlines in the short-term. At the end of the day, however, each country and each company has its own set of dynamics and fundamentals. Research is about identifying the differences among them. Key differentiating factors are often the basis for success in the long run. He also comments on the Greek debt crisis, political stability in Poland, reforms in Colombia and the recent death of Nigeria's president.
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 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 Predicting Financial Crises by Charlie Curnow (Article)
MIT Sloan School senior finance lecturer Mark Kritzman thinks he has found a warning signal to predict the onset of financial crises in a new statistical model called the absorption ratio. The absorption ratio predicts systemic risk by measuring how tightly markets are coupled, and thus how vulnerable they are to the spread of negative shocks.
2010-05-11 God Is Dead: The Implications of the Goldman Sachs Case by Michael Lewitt (Article)
Michael Lewitt provides us with the most recent issue of the HCM Market Letter, where his discusses the implications of the Goldman Sachs case. Lewitt says Goldman faces a terrible dilemma, and should heed the lessons of the downfall of Drexel Burnham two decades ago. Lewitt also comments on the private equity industry, public pension funds, and bank capital requirements and the ratings agencies.
2010-05-07 The Right Page of the Right Book by Team of Beacon Pointe
The beginning of 2010 saw a continuation of the 2009 rally. Most stock exchanges around the world, with the notable exception of China, posted positive returns for the quarter and added to their gains off the March 9, 2009 trough. The major indices, however, remain well below their previous highs. The post-bear rally has been fast and furious and at this time, a pause seems justified. The exact timing and nature of this pause, however, are highly uncertain.
2010-05-07 The Big Picture, the Investment Landscape, and Our Portfolio Strategy by Team of Litman Gregory
Debt reached binge levels during the past decade. Money to reduce the debt will have to come from somewhere, and much of it will come from reduced spending. Spending cuts could produce a sluggish economy, possibly for many years to come. There are some positives that could contribute to a better outcome, however, including continued strength from emerging economies. Domestically, we could see stimulus spending, low rates, and inventory rebuilding create a virtuous circle in which businesses with strong balance sheets add jobs, and consumer and business confidence builds and feeds on itself.
2010-05-06 Chipan? by Team of Emerald Asset Advisors
In this commentary, Emerald responds to a reader question about China and Japan. Emerald says that equities in both countries are overvalued, but that this is less important than the fact that buying pressure is still outweighing selling pressure. The long-term ascension of the Chinese economy is one of the most prominent secular themes in today's markets. Japan, on the other hand, like the U.S., faces an obvious mess. The ultimate ruler is price, however, and Japanese stock prices have stubbornly risen for many months without a long-overdue correction.
2010-05-04 Four Words of Advice from a Top Advisor by Dan Richards (Article)
Last summer, Dan Richards talked to a thirty-year veteran of the business who's consistently ranked as a top advisor. The week before, he'd talked to a group of rookies just entering the business. In the question and answer period, he was been asked about the single most important thing he learned over the course of his career.
2010-05-01 Resilience Resonates by Liz Ann Sonders of Charles Schwab
The stock market has absorbed numerous body blows recently, but continues to chug along—waiting for a big price correction to buy could be detrimental. Economic data remains solid, confounding some recovery skeptics and providing the Fed ample reason to slowly return to normalcy. European debt problems are growing and concerns over contagion are rising; there's no quick fix, and some politically unpopular decisions are going to have to be made.
2010-04-27 Financial Strains and Modest Gains for the Eurozone by Team of American Century Investments
The Eurozone fell into recession later than the U.S., and thus will recover later. European factories are heavily dependent on exports for growth. Investors should note that the global economic recovery and a stronger euro have been positive factors for the Eurozone's export machine. But with exports accounting for 35 percent of Eurozone GDP and half of that number going to other countries neighboring the Eurozone, major headwinds could soon be on the horizon.
2010-04-27 The Four Horsemen of Growth: David Kelly’s 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.
2010-04-22 U.S. Politics and Bank Reform Legislation by Monty Guild and Tony Danaher of Guild Investment Management
Election years often bring wild political actions as politicians defend their poor records by blaming anything that comes to mind. If the rhetoric against banks is not too strong, the rally could continue. If the rhetoric gets out of hand, we will see a market correction for a few weeks with a resumption of stock price increases later in the year. Guild continues to invest in Asian growth countries, oil, gold, and export driven companies who can grow earnings while shipping products worldwide.
2010-04-20 Lessons from Yale’s Endowment Model and the Financial Crisis by Geoff Considine, Ph.D. (Article)
The Yale endowment's performance during the financial crisis was worse than what would be mathematically expected, but not significantly enough to question the endowment model's tenets. Moreover, Yale's performance and philosophy suggest two very important lessons for advisors and investors- to diversify beyond equities and fixed income, and that some illiquid asset classes can be an important source of alpha.
2010-04-20 A Simple Step to Get More from Your Day by Dan Richards (Article)
Many advisors struggle to get everything done that needs doing. If you're in that category, consider following the example of one successful advisor Dan Richards talked to recently ... and put a dollar value on every hour of your time.
2010-04-16 Update on Thailand by Mark Mobius of Franklin Templeton
While the current political crisis in Thailand poses big headline risks to stocks over the short term, it is not new or unexpected for the country. Since absolute monarchy was abolished in Thailand in 1932, there have been about 20 successful and failed coups, numerous unrests, and several changes in the constitution. The series of political issues from the Asian crisis in 1997 to recent fears of the Thai King’s waning health late last year, however, have not impacted the long-term growth outlook for Thailand.
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.
2010-04-16 Where is the Next Rising Tide? by Louie Nguyen of Soledad Investment Management
The S&P 500 and Russell 3000 seems closer to fair value than Europe though there may be some room left to appreciate. At the opposite extreme lie several emerging markets, including Russia, Asia ex-Japan, Mexico, and India. While emerging markets may have captured investors’ attention because of their projected economic growth potential, we think developed countries may be a source for compelling investments for long term patient value investors.
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 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles
The U.S. bond market is unlikely to offer investors the yield or capital appreciation opportunities they need to meet their investment objectives in 2010. Instead, investors will need to expand their investment universe. Investments in non-U.S., high-quality governments and supranationals could offer capital preservation, while emerging-markets debt and corporate debt might present performance prospects. In the non-dollar securities arena, investors could take advantage of securities offering capital preservation as well as performance.
2010-04-13 Today’s Number One Way to Demonstrate Your Value by Dan Richards (Article)
Advisors provide the greatest value by being an emotional anchor for clients- keeping the highs from being too high during times of untrammeled optimism, such as we saw in 2000, and the lows from being too low during periods of absolute pessimism, such as we saw a year ago and in many cases still see today. Playing that role takes more than just having an opinion - you need credible evidence to back you up, which Dan Richards offers.
2010-04-07 When the Facts Change by Niels C. Jensen of Absolute Return Partners
An echo bubble is upon us. Echo bubbles are the children of primary asset bubbles, and emerge when monetary authorities respond to the bursting of a primary asset bubble by slashing policy rates. Extraordinarily low interest rates are currently encouraging another bout of excessive risk taking. If policymakers raised rates now, however, they would almost certainly kill the fledgling recovery. The pressure is therefore on monetary authorities to keep rates low and feed the new bubble. Investors should steer toward assets that benefit from high volatility.
2010-04-06 Paul McCulley Discusses PIMCO's Cyclical Outlook by Paul McCulley of PIMCO
In an interview, PIMCO Managing Director Paul McCulley discusses his firm's cyclical economic outlook and its impact on investment strategy. PIMCO's cyclical outlook revolves around two core tensions in the global economy. The first is the huge disparity in the rate of recovery between highly leveraged developed countries and relatively balanced developing countries. The second tension is the resistance to cyclical recovery in the developed world due to deleveraging and other headwinds.
2010-04-06 A Q1 Letter to Send Clients by Dan Richards (Article)
Dan Richards provides the latest in his very popular series of quarterly letters for advisors to send to their clients. This Q1 2010 article combines the attributes he considers essential: a balanced outlook, candor, short enough for clients to get through yet long enough to be substantial, fact-based, and customizable to your own voice.
2010-04-06 Emerging Markets: High Growth does not mean High Returns by Dan Richards (Article)
Recent research explores the return payoff of investing in emerging markets such as Brazil, Russia, India and China, writes Dan Richards. Contrary to popular beliefs, investing in high-growth emerging markets has produced inferior returns to those obtained from slower growth economies.
2010-03-30 China's 2010 Growth Forecasts Upgraded by the World Bank by Team of American Century Investments
The World Bank raised China's 2010 growth forecasts to 9.5 percent last week from the 8.7 percent projected in November, but also predicted that China's growth will slow somewhat in 2011, to 8.7 percent. It also recommended higher interest rates and a stronger currency for China amidst growing concerns over rising inflation and a property sector bubble. The Chinese government emphasized the need for structural reforms in recent presentations to the National People's Congress.
2010-03-30 Multisector Strategies in a Rising Rate Environment by Dan Fuss, Kathleen Gaffney, Matt Eagan and Elaine Stokes of Loomis Sayles
For three decades, the prevailing direction for interest rates was down. This made life easy for bond investors, since principal held up well and even grew for the most part. The cost of these falling rates, however, was steadily lower coupons. One of the best defenses against this reinvestment risk is to maintain a long duration in a bond portfolio with good call protection. The good news is that reinvestment risk appears to be waning as declining interest rates possibly prepare to reverse, and this could create potential for better yields.
2010-03-30 Surprising New Research on Diversification from Emerging Markets by Dan Richards (Article)
Historically there have been two reasons to invest in emerging markets: the promise of higher returns that come with faster growing economies, albeit with greater volatility, and the prospect that emerging markets will offer diversification from the performance of stocks in developed economies. Dan Richards reports that new research into the impact of global diversification, though, has produced some surprising results.
2010-03-30 Not a Lost Decade for Diversified, Balanced Portfolios by Joni L. Clark, CFA, CFP (Article)
Did the last ten years really demolish the foundations of Modern Portfolio Theory and classic investing principles? How did portfolios that stuck to the principles of effective diversification and buy-and-hold investing actually perform during the so-called "Lost Decade?" The answers to both questions is an unqualified "no," writes Joni Clark of Loring Ward in this guest contribution, based on her analysis of a DFA-based strategy.
2010-03-25 Market Thoughts and Shiller Valuations by David A. Rosenberg of Gluskin Sheff
With a stronger U.S. dollar, rising bond yields, lower commodity prices, slower growth and the stock market flirting with post-crisis highs, the stars are aligning for something big to happen. Bond yields are rising temporarily, and this will very likely prove to be a good buying opportunity. In the near term, however, higher yield activity may well persist and the question is how the equity market is going to handle this backup in market rates. In addition, the latest Shiller data shows that the S&P 500 is overvalued by at least 30 percent, benchmarked against historical norms.
2010-03-18 Bear Stearns: The Bear That Started It all by Mark Mobius of Franklin Templeton
It is now two years since the Bear Stearns bailout, which set the stage for the global financial crisis triggered by the collapse of Lehman Brothers, another established name in the business. Some of the key issues that led to the global financial crisis, however, remain unresolved, and could give rise to future problems. While perhaps not popular, it is necessary for governments to insist upon the separation of investment banking and regular banking, and to ensure complete transparency and liquidity of all derivatives.
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.
2010-03-16 The Trifecta - Okun's Law and Unemployment - Is the Law of Supply & Demand Obsolete? by Kendall J. Anderson of Anderson Griggs
Okun's law explains the relationship between unemployment and real output, and calculates the gap between real GDP and potential GDP. Based on current GDP growth forecasts, the law predicts a one-half percentage point decline in unemployment this year and a full-point decline in 2011. Despite very positive returns, however, investors continue to allocate to bonds instead of stocks. The laws of supply and demand tell us that this is unwise.
2010-03-13 Dollar Bulls Beware by Peter Schiff of Euro Pacific Capital
The market is perfectly positioned for a massive dollar sell-off. The fundamentals for the dollar in 2010 are so much worse than they were in 2008 that it is hard to imagine that people will keep buying them once political and monetary stability returns to Europe. Indeed, the euro has recently stabilized. Once the dollar breaks decisively below last year's lows, many traders who jumped ship in the recent rally will look to reestablish their positions, and this will bring attention back to the financial disaster unfolding in the U.S.
2010-03-12 And That's the Week That Was... by Ron Brounes of Brounes & Associates
. Let the rally continue. As the country (world for that matter) celebrated the one year anniversary of the market turnaround (bull market sounds too encouraging), investors took time to reflect on just where we have been and where we may be going. Buyers emerged again (though on a smaller scale…
2010-03-02 Eurozone's Economic Recovery Loses Steam in Fourth Quarter by Team of American Century Investments
Economic growth in the 16-country eurozone stalled in the fourth quarter of 2009, raising concerns about the durability of the region's nascent recovery. Output expanded just 0.4 percent on an annualized basis in the fourth quarter, down from 1.7 percent in the third quarter. Meanwhile, after negative growth in 2009, the world economy is projected to expand by 3.9 percent in 2010 and 4.3 percent in 2011. Asia and emerging markets will lead the charge, while advanced economies such as the eurozone will remain sluggish and dependent on government stimulus measures.
2010-03-02 Asset Allocation for Grantham’s Seven Lean Years by Geoff Considine, Ph.D. (Article)
Followers of Jeremy Grantham know his consistently accurate long-term forecasts well, as well as his ability to identify and avoid asset bubbles and steer clients into high-performing asset classes. Grantham's prescience is remarkable but not irreplicable. Geoff Considine shows that his Monte Carlo simulations nearly match Grantham's forecasts, and he reviews the implications for asset allocations.
2010-03-02 Robert Pozen on the Financial Crisis, Social Security, and the Mutual Fund Industry by Dan Richards (Article)
Robert Pozen is the chairman of MFS Investment Management and a senior lecturer at the Harvard Business School. In this interview with Dan Richards, he discusses the financial crisis, Social Security, and the mutual fund Industry. We provide a transcript and a video replay of the interview.
2010-03-02 Letters to the Editor by Various (Article)
In our letters to the Editor, a reader responds to our article How to Squander $170 Billion, and another responds to a claim that clients are moving away from their existing advisory relationship as a result of recent market events.
2010-03-01 Lessons from the 'Naughties' by Rob Arnott of Research Affiliates
Sizeable real returns will be difficult in this decade, as they were in the last. Almost all asset classes are priced richly relative to historical norms. We can tilt the odds back in our favor, however, by tactically altering our portfolio risk based on measures as simple as yields and yield spreads. The surest path to success marries tactical asset allocation with a more efficient beta, such as the Fundamental Index methodology, and a full toolkit of alternative markets.
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.
2010-02-25 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles
The U.S. bond market is unlikely to offer investors enough yield or capital appreciation opportunities in 2010. Investors should instead expand their investments to include global bonds. High-quality governments and supranationals could offer capital preservation, while emerging market debt and corporate debt may present performance prospects. Non-dollar securities could offer both capital preservation and performance.
2010-02-23 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)
The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.
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 Value? by Scotty George of du Pasquier Asset Management
It is important not to get carried away with short-term bursts in the market. These bursts have not eradicated the causes of the ubiquitous bear trend. We must not measure our self-worth by the value of our portfolio at the end of the given day. The most aggressive gains emanate from prudent portfolio methodology and a long-term orientation toward economic dynamics.
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.
2010-02-18 Personal Qualities that are the Building Blocks for Good Investing by Mark Mobius of Franklin Templeton
Finance industry professionals need four things to succeed in the investment world: Motivation, humility, hard work and discipline. If investors can develop these personal qualities and maintain a healthy sense of optimism, they can succeed in emerging markets.
2010-02-16 It's the Budget, Not the European Union at Risk by Charles Lieberman of Advisors Capital Management
The Greek government will likely use continued membership in the European monetary union as an excuse to raise taxes or cut spending, while the rest of Europe will help Greece stay in the common currency. Restrictive fiscal policies in Greece, as well as Ireland, Portugal and Spain will lead Europe to lag behind the global economic recovery.
2010-02-16 Outlook Report: 2010 Searching for the Afterparty by Robert N. Stein of Astor Asset Management
Markets will grow in 2010, but foreign and domestic gains will be harder to find than they were a year ago. The market's panic and robust recovery suggest a return to growth rates closer to historical norms, with some areas outperforming others. Sectors that performed best during the recession may be the highest performers during the recovery.
2010-02-16 Emerging Economies Continue to Show Promise by Milton Ezrati of Lord Abbett
Despite recent financial turmoil in response to policy initiatives in Washington and fears surrounding the finances of Portugal, Ireland, Greece and Spain, markets are up since the beginning of 2009, and are likely to grow this year. Emerging markets have the best prospects for growth, but their success depends on the precarious recoveries in the United States, Europe and Japan.
2010-02-16 Emerging Economies Continue to Show Promise by Milton Ezrati of Lord Abbett
Despite recent financial turmoil in response to policy initiatives in Washington and fears surrounding the finances of Portugal, Ireland, Greece and Spain, markets are up since the beginning of 2009, and are likely to grow this year. Emerging markets have the best prospects for growth, but their success depends on the precarious recoveries in the United States, Europe and Japan.
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.
2010-02-14 And That's the Week That Was... by Ron Brounes of Brounes & Associates
Ron Brounes' weekly market recap
2010-02-12 Insights from CM Analyst Conference Part II by Tom Wu of Franklin Templeton
Tom Wu of Templeton Asset Management says the emerging markets of Turkey and Hungary may offer opportunities for rapid growth. Turkey has built its foreign exchange reserves to $70 billion, while the MCSI Hungary Index posted 78 percent returns in 2009. Wu notes, however, that these opportunities for growth come with higher risks.
2010-02-11 Equity Investment Outlook January 2010 by Team of Osterweis Capital Management
In its equity investment outlook, Osterweis Capital Management says it expects the economy to continue expanding this year, but notes that it might face headwinds from a double dip in the housing market and an unwinding commercial real estate sector. Stocks recovered sharply last year in the face of expected profit recovery, but may but may suffer temporary setbacks if the economy disappoints.
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 The China Conundrum by Dan Richards (Article)
Few issues divide investors today more than the investment merits of China, despite that country's tremendous potential. China's strong economic performance through the global financial crisis has reinforced this divide. Dan Richards looks at the cases for and against investment in China, and offers his own opinion.
2010-02-08 Tweedy Browne: Cautious in the Short Term, Optimistic in the Long Term by Team of Tweedy Browne
Robert Huebscher recaps a recent webinar by investment firm Tweedy Browne. The company's four managing partners explained their focus on downside risk, expressed a preference for high-quality dividend-payer stocks and
noted their emphasis on developed markets rather than emerging markets. The partners said they were optimistic about recovery in the long term, but cautious about the short term.
2010-02-03 Investment Commentary by Bruce A. Weininger of Kovitz Investment Group
Kovitz is a $1 billion Chicago-based asset manager. This commentary reviews their investment philosophy (value-driven without attempting to “time” the market), and includes a discussion of certain types of leverage that can be beneficial to the investor (e.g., operating leverage) and others that can be harmful (e.g., revaluation and multiple expansion risk). In this context, they comment that “the bond market might be a bit frothy and perhaps in some form of a bubble.”
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.”
2010-02-01 Breakfast With Dave by David A. Rosenberg of Gluskin Sheff
Rosenberg provides an update to his bearish outlook. He says credit flows remain constrained, amid new bank failures last week. The spending freeze announced by the Obama administration will provide what amounts to a “rounding error” of improvement in the context of the unemployment situation. Investors should consider a defensive allocation – similar to what would have worked in 2008 but did not work in 2009.
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.
2010-01-28 Monthly Investment Commentary by Team of Litman Gregory
When the dust settled on one of the most eventful and upended years in memory, investors had generous gains in stocks and certain segments of the bond market to salve the wounds of a disastrous 2008 a
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.
2010-01-26 The Ring of Fire by Bill Gross of PIMCO
Bill Gross reviews two recent analyses (the Reinhart/Rogoff book and the McKinsey study) of the plight of economies faced with large fiscal deficits. He says that these support PIMCO’s view of the Ne
2010-01-26 Diversification Really Does Pay Off by Geoff Considine, Ph.D. (Article)
The last decade severely tested investors' belief in the value of diversification and strategic asset allocation, leading some in the financial media to assert that diversification and asset allocation failed and were worthless during the crash of 2007-2008. Now is an ideal moment to look back and assess the carnage.
2010-01-21 Unlocking Potential Through Corporate Governance by Mark Mobius of Franklin Templeton
I cannot stress enough my belief of the strength of the correlation between good governance and good corporate performance. As a result of this connection, we often see stock prices rise as a result o
2010-01-19 Steve Leuthold: The Market will Rally This Year by Robert Huebscher (Article)
Steve Leuthold is chairman of the $4.5 billion Leuthold Group and one of the most widely-followed market analysts. In his keynote presentation at last week's Fortigent conference, he offered an upbeat forecast for the first half of 2010.
2010-01-14 Is Recovery Here to Stay? by William H. McAfee of WHM Capital Advisors
There are still high levels of uninvested cash sitting idly on the sidelines. Equity markets are likely to do well in 2010 as the perception of risk diminishes and cash flows out of low yielding mone
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
2010-01-09 2010 Forecast: The Year of Uncertainty by John Mauldin of Millennium Wave Advisors
"This will be my tenth annual forecast issue. Time has flown by, and I enter a new decade of writing Thoughts from the Frontline. And even as I write about the high level of uncertainty of the curr
2010-01-09 Forecasts by Team of State Street Global Advisors
2010-01-08 4th Quarter Commentary - Investing Proactively Without Predictions by Team of Partnervest Advisory Services
\"\'If you’re 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
2010-01-06 And That's the Week that Was by Ron Brounes of Brounes & Associates
2010-01-06 Psychology of why investors 'Buy High/Sell Low,' and how to avoid that trap! by David Edwards of Heron Financial Group
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.
2010-01-04 The Decade that Refused to go Quietly into the Night by Chris Maxey of Fortigent
2009-12-29 Jeremy Siegel on the Undervaluation in US Equities by Robert Huebscher (Article)
"I think that earnings growth next year will be stronger than anticipated and will break the all-time high for the S&P, which was in the second quarter of 2007, when earnings for the trailing 12 months were in the low 90s," says Siegel. "In 2011 or 2012 we will break that amount. With $90 in earnings and a 15 P/E ratio, you get 1,350 for the S&P."
2009-12-26 Paul McCulley Discusses PIMCO's Cyclical 2010 Outlook by Paul McCulley of PIMCO
2009-12-22 Staggered Return to Global Growth by Paul Kasriel of Northern Trust
2009-12-15 Barton Biggs on Undervaluation in the S&P 100 by Robert Huebscher (Article)
Barton Biggs, the former Chief Global Strategist for Morgan Stanley who now runs the hedge fund Traxis Partners, says the high-quality, large-capitalization stocks in the S&P 100 are now undervalued by one standard deviation. In our interview, Biggs also discusses his fears and how investors should protect themselves from the worst-case scenarios.
2009-12-08 The 529 Dilemma by Mary Ann Lambert (Article)
The recent market decline coupled with, tax, custodial, management fees and estate planning issues make the decision to use a 529 plan less than straightforward. In this guest contribution, advisor Mary Ann Lambert briefly reviews the history of college savings plans and shows how the current landscape favors 529s for some clients but not for others.
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.
2009-11-24 Interview: Brian McMahon of Thornburg Investments by Robert Huebscher (Article)
We speak with Brian McMahon, CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and the challenges of finding income-producing securities in today's markets.
2009-11-17 Ned Davis: The Cyclical Bull Rally is Not Over by Robert Huebscher (Article)
In February of last year, Ned Davis, president and senior investment strategist of an eponymous Florida-based institutional research firm, correctly forecast last year's market decline. In February of this year, he called the market rally that began in March. Now, he says, that cyclical bull rally is not over.
2009-11-10 Roubini: Fed Policies are Destabilizing the Financial System by Robert Huebscher (Article)
Nouriel Roubini, the once-obscure economist who gained celebrity and the title "Dr. Doom" after correctly forecasting the financial crisis, believes that current Fed policies are destabilizing the markets and pushing the economy toward another collapse.
2009-10-27 Managing Downside Risk in Retirement Planning by Geoff Considine, Ph.D. (Article)
Boston University professor Zvi Bodie advocates a retirement investment strategy that offers investors some of the upside potential in equities tempered with downside protection against bear markets and a low-risk inflation hedge via heavy allocation to TIPS. Geoff Considine examines Bodie's strategy and shows that it will work very effectively, including in a bear market like the one just experienced.
2009-10-27 Leveraged Index Mutual Funds Evolve to Meet Market Needs by Direxion Funds (Article)
Until recently, leveraged index funds had daily objectives, rebalancing their leverage at the end of each trading day in order to match their stated exposure rate. This characteristic made it necessary for investors to monitor them daily in order to both track and manage the exposure rates applied to their investments in the funds. Direxion Funds has released the first monthly-rebalanced leveraged funds, and they explain how they operate. We thank them for their sponsorship.
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.
2009-09-29 Strategic and Tactical Perspectives on Gold by Geoff Considine, Ph.D. (Article)
There are good reasons for investors to maintain a long-term strategic allocation to gold, which has clear, positive portfolio benefits (due to low correlation to other asset classes). That said, gold is in an historic run-up in value and has been generating unsustainably high returns. Because of its high price and rising volatility, Geoff Considine argues there is significant tactical risk in gold.
2009-09-29 Interview: Jeff Mortimer, CIO of Charles Schwab Investment Management by Robert Huebscher (Article)
Jeff Mortimer is Senior Vice President and Chief Investment Officer-Charles Schwab Investment Management, Inc. (CSIM). Mortimer has overall responsibility for approximately $240 billion in Schwab Funds and managed accounts. We spoke with Mortimer two weeks ago about the economy and why he believes the market has already priced in the bad news trumpeted by the media.
2009-09-15 Mohammed El-Erian: We Have Not Reached Escape Velocity by Robert Huebscher (Article)
Kicking off this year's Schwab Impact conference in San Diego, Mohammed El-Erian told an audience of nearly 1,000 advisors on Sunday night that the US financial system has not fully emerged from the financial crisis. El-Erian and his co-presenter, Larry Fink of Blackrock, addressed a range of topics, including the safety of the financial system, the future of regulation, and the outlook for inflation.
2009-09-01 Additional Thoughts on the “New Normal” by Geoff Considine, Ph.D. (Article)
A number of readers responded to Geoff Considine's article three weeks ago, What the New Normal Means for Asset Allocation, including Larry Katz, Director of Research at Merriman, whose response we published last week. Katz criticized Considine along a number of dimensions, and in this guest contribution Considine defends his New Normal asset allocation.
2009-08-11 What the New Normal Means for Asset Allocation by Geoff Considine, Ph.D. (Article)
Bill Gross of PIMCO forecasts a New Normal - slow economic growth, higher inflation, and increasing correlations among asset classes. If this view is correct, what should investors do? Geoff Considine examines the implications for asset allocation and financial planning by stress-testing some well-known asset allocations to see how well they will serve investors in the forecast environment.
2009-07-21 Q2 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we analyze changes in the Advisor Perspectives database - a $50+ billion universe of high- and ultra-high net worth assets managed by Registered Investment Advisors. Our analysis has three parts. We look at changes in asset allocation, the performance of the most popular mutual funds, and the mutual funds that showed significant gains or losses in popularity during the quarter.
2009-07-14 Some Signs of Life and Hope for a New Recovery by John P. Calamos and Nick P. Calamos (Article)
Calamos Investments' co-CIOs John P. Calamos, Sr. and Nick P. Calamos discuss the current market climate, implications of Fed and government actions, and investment opportunities in the shorter- and longer-term. Global governmental policies have restored a degree of confidence in the financial markets and many key financial metrics are back to pre-Lehman levels. Many investment opportunities will be available in the future. We thank them for their sponsorship.
2009-07-07 The True Cost of Volatility by Dan Richards (Article)
Most advisors and investors hate volatility - the up and down hits to clients' long term goals. (To be more accurate, we hate the downs - the ups we don't mind so much.) Dan Richards discusses the big price clients pay for that volatility - not just stress and lost sleep at night, but volatility in portfolios that induces behavior that costs many investors serious money.
2009-07-07 Riding the Stock Market Wave in the First Half of 2009 by Ron Surz (Article)
Ron Surz provides his award-winning market commentary, reviewing the first half stock market performance around the world. He looks at the past decade, to set expectations accordingly. Have markets become cheap enough yet? He concludes with a realistic and sobering look at our current debt problems - a cause for concern for both young and old.
2009-06-09 Simon Johnson on Obama’s Achilles Heel by Eric Uhlfelder (Article)
While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.
2009-06-09 Q1 2009 Performance among the Most Popular Mutual Funds in the Advisor Perspectives Universe by Robert Huebscher and Mary Pitek (Article)
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds. This analysis focuses on performance across the most popular mutual funds.
2009-06-02 Jeremy Grantham's Warnings to Investors by Robert Huebscher (Article)
Of the thousands of investment letters penned in the industry, only one draws as much readership as Warren Buffet's annual letter to his shareholders: The quarterly commentary written by Jeremy Grantham. Grantham, the Chairman of the Boston-based investment firm Grantham Mayo Van Otterloo, was a featured speaker at Morningstar's Investor Conference last week, and he spoke at two breakout sessions. Those who, like me, attended both were richly rewarded, as he gave two distinctly different talks, addressing many subjects not covered in his commentaries.
2009-06-02 Letters to the Editor What the "Missing Out" Argument Misses by Various (Article)
We publish a number of responses to Ted Wong's article last week, What the "Missing Out" Argument Misses.
2009-05-26 What the “Missing Out” Argument Misses by Theodore Wang (Article)
Market timing is discredited by passive investment advisors as a voodoo ritual. Buy-and-hold proponents argue most compellingly by citing the "missing out" scenario - they show a dramatic drop in return, to Treasury Bill levels, if investors are out of the markets for only a few good days. In this guest contribution, Ted Wong debunks the missing out argument, using 137 years of market data.
