More on Related Themes
2013-05-24 Recession Watch: ECRIs Weekly Leading Indicator Up Slightly by Doug Short of Advisor Perspectives (dshort.com)
TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) is at 130.6, up slightly from last weeks 130.1 (a downward revision from 130.2). The WLI annualized growth indicator (WLIg) dropped to 6.8% from 7.0% last week.
2013-05-24 The Biggest Loser Wins by Peter Schiff of Euro Pacific
While the world’s economies jockey one another for the lead in the currency devaluation derby, it’s worth considering the value of the prize they are seeking. They believe a weak currency opens the door to trade dominance, by allowing manufacturers to undercut foreign rivals, and to economic growth, by fighting deflation. On the other side of the coin, they believe a strong currency is an economic albatross that leads to stagnation. But the demonstrable effects of currency strength and weakness reveal the emptiness of their theory.
2013-05-24 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The two Asian giants have a challenging year ahead. The Fed will be challenged to keep the bond market under control.
2013-05-24 The Love Trade for Gold is Still On! by Frank Holmes of U.S. Global Investors
The more important demand for gold, in my opinion, comes from the enduring Love Trade, as countries like China and India buy the precious metal out of love and tradition.
2013-05-24 Bifurcation Blues by Herbert and Randall Abramson of Trapeze Asset Management
Bifurcation. A very technical sounding word. It merely means “a division into two parts”, which is what we are witnessing in many areas related to investment, both macro and micro. And it is exhibiting to value investors those areas to avoid and the most attractive to embrace. And giving rise to a wide range of disparate opinions among economic and investment professionals as to what outcomes are likely. Needless to say, we have our own strong views.
2013-05-24 Remarkable Resilience by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
We saw how the prospect of a sooner pullback in purchases in bonds by the Fed rattled the market both in the US and globally, but the picture, to us, has not changed to any great degree. A very gradual pullback, not even going to zero, in quantitative easing due to an improved economic situation doesn’t spell disaster to us. We continue to urge investors to pay attention to both sides of the risk equation when making decisions and to keep the longer-term perspective in mind. Short-term swings are inevitable, but should not be the basis for sound decision making.
2013-05-23 The Labor Force Participation Puzzle by David Kelly of J.P. Morgan Funds
Slow growth and mediocre job creation have been common themes used to describe the U.S. economy in recent years, as both the labor market and broader economy failed to produce the snap-back rebound many expected following the deep recession seen in 2008 & 2009. Despite that lackluster growth, the unemployment rate has now fallen to 7.5% after peaking at 10% in October of 2009, a much faster decline than expected, given average employment growth of less than 125,000 per month.
2013-05-23 QE from 35,000 Feet by Scott Minerd of Guggenheim Partners
Quantitative easing has benefited from global macro events and appears likely to continue for the rest of the year. Markets, though, will continue to anticipate how the current policies will eventually be unwound.
2013-05-23 ING Fixed Income Perspectives May 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
How do you like them apples? By pointing out some Excel blunders in the data of Harvard economists Reinhart and Rogoff, a UMass-Amherst grad student appears to have gotten their number and in the process discredited their seminal work touting the merits of austerity. Though Good Will Hunting fans may be amused to see a couple of Harvardians get their comeuppance, you don’t need the titular character’s wicked smarts to deduce that harsh government spending cuts may not be the best way to pick up your economy.
2013-05-22 Is There Value in Today's Stock Market by Bill Smead of Smead Capital Management
Due to the recent strength in the US stock market, we thought it would be helpful to followers of Smead Capital Management to understand the history of our core investment beliefs and where our portfolio is in relation to those core beliefs. A review of the ongoing tension between valuation mattering dearly and the enormous benefits of long-term business ownership is especially interesting after a significant upward move in the stock market. How do you keep turnover and trading expense low, while maintaining a meaningful margin of safety?
2013-05-22 Cyprus and the Eurozone...Still Stuck in the Middle by Gregory Hahn of Winthrop Capital Management
The debt crisis in the Eurozone turned another chapter as Cyprus finally reached the point of requiring a bailout from the European Union. The wisdom of Gerry Rafferty’s hit song “Stuck in the Middle with You” which was written in 1973, rings true today as we watch the EU and the European Central Bank navigate the mess in Europe. With each attempt at containment, there appears some plot twist, the proposed Cyprus bank bailout is no exception. While the bailout of Cyprus and its banks is not large in size, only 10 billion, relative to the Cyprus economy, it is significant.
2013-05-22 Waiting for the Great Rotation: Why Interest Rates Could Stay Low Even Longer by Nanette Abuhoff Jacobson of Hartford Funds
The number-one question I get from investors is, “When will rates go up?” While this concern has been top of mind for the last few years, investors’ anxiety and sense of risk has intensified amid the threat of the “Great Rotation”the anticipated en masse reallocation out of bonds into equities. But so far, rates have yet to rise, leaving many people to wonder where we stand now and what may happen next. To answer these questions, I’d like to make three points.
2013-05-22 Malaysia's Post-Election Investment Outlook by Scott Klimo of Saturna Capital
Earlier this year we identified ASEAN as the most attractive region within the emerging markets universe. That prediction has proved accurate. Market indices (USD returns) year-to-date through April in the Philippines, Thailand, and Indonesia are 23%, 22%, and 16%, respectively. Singapore (which we do not consider an emerging market) gained 6%, while Malaysia rose only 3.9%. So what’s the outlook for Malaysia?
2013-05-22 A Whiff of Confidence by David Kelly of J.P. Morgan Funds
The single biggest on-going survey of consumer confidence in the United States is conducted by Rasmussen, who survey 500 consumers every night on their views of the U.S. economy and their personal finances. Since October 2007, there has not been a single month in which the index produced by this survey has exceeded 100. However, since the start of May it has averaged well above this level.
2013-05-22 Where is inflation headed? What will it mean for investors? by Russ Koesterich of BlackRock Investment Management
Slow economic growth and long-term headwinds should keep inflation contained. Low inflation should help support equity markets and high yield bonds, but may be a negative for gold prices. The inflation environment should also help prevent interest rates from rising too fast.
2013-05-22 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Once again stock prices moved higher last week despite mostly poor economic data and a background in Washington DC of multiple scandals. The latter begging the question as to whether substantive policy actions are now off the table for the year.
2013-05-22 Is Japan's Economic Rebound For Real? by Daisuke Nomoto of Columbia Management
The two phrases “Abenomics” and the “BOJ’s Shock and Awe Monetary Easing” are all over the headlines about Japan. Prime Minister Abe unveiled his economic policy late last year calling for a 3% annual nominal gross domestic product (GDP) growth target and an aggressive monetary easing by the BOJ (The Bank of Japan) to achieve 2% inflation. The BOJ unleashed the world’s most intense burst of monetary stimulus last month promising to double the monetary base to 270 trillion yen ($2.7 trillion) by the end of 2014 to defeat deflation.
2013-05-21 Federal Spending, the Deficit and Debt Ceiling by Gregg Bienstock of Lumesis
As our regular readers know, we have a level of concern with regard to the budget deficit, the debt ceiling and all things related thereto. And, while many of us have concerns regarding maintenance of the tax-exemption for muni debt and the tax-deductibility of muni fixed income interest, this week we are approaching the world from a slightly different angle. The focus: how reliant are States and counties on the Federal Government and who is most reliant.
2013-05-21 Developed Europe: Regional Economic Review 1Q 2013 by Team of Thomas White International
After withdrawing into the background in late 2012, the Euro-zone sovereign debt crisis resurfaced in the first quarter with the Italian elections and Cyprus’ banking crisis. In late February, Italy’s national elections resulted in a fractured mandate, and Italians voted out the incumbent, the main architect of the country’s austerity and reforms agenda.
2013-05-21 Why the Lack of Inflation Is a Problem by Chris Maxey, Ryan Davis of Fortigent
Given the outsized role central banks are playing in today’s financial markets, inflation watching has taken on increased significance.It is widely assumed that continued easy money policies are only possible as long as price increases remain under control.At the same time, for a global economy trying to escape an extended period of weak growth and burdensome debt loads, low inflation is a double-edged sword.
2013-05-21 Capitalism and Democracy by Bill O'Grady of Confluence Investment Management
In the Italian elections, the party that showed the strongest results was the Five Star Movement, led by the comedian Beppe Grillo. Despite this strong showing, the party failed to form a government and refused to participate in any coalitions. This decision not to participate in the political process has been exhibited by other protest groups, such as Occupy Wall Street, the Israeli Tent Movement, and the Spanish “Indignant” movement.
2013-05-21 Are Equity Investors Pushing the Gas Pedal Too Hard? by Norman Boersma of Franklin Templeton Investments
Whatever previous reticence investors may have had about equities last year seems to have evaporated and, with remarkable speed, turned into fear over having missed the equity rally. Some major market averages have accelerated at a pace some say is reckless, so as we head toward the mid-point of the year, Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at reasons investors might continue to push the gas pedalor tap the brakes.
2013-05-21 Don't Set Much Store in the Equity Risk Premium by Christian Thwaites of Sentinel Investments
An old measure but a useful one. It should give us some indication of the market after the 23% gain in the S&P since November. The measure is simple enough: the forward price earnings yield less the yield on the GT30. This makes sense because the duration of equities is around 16.5, which is close to the GT30 of 19. By the way, other sources, notably the New York Fed use different approaches, for example Cyclically Adjusted Price Earnings and a shorter duration risk-free rate. But it’s the vectors that matter not the scale.
2013-05-20 Reinvigorating Egypt's Economy by Mohamed El-Erian of Project Syndicate
While blaming the revolution is not a persuasive explanation for Egypt’s current economic woes, its appeal to many Egyptians is understandable. Over the last few months, their economic situation has gone from bad to worse.
2013-05-20 A European Vacation from Austerity? by Milton Ezrati of Lord Abbett
Recession-wracked governments in the eurozone are rethinking fiscal constraints.
2013-05-20 Bernanke's JEC Testimony by Scott Brown of Raymond James
On Wednesday, May 22, Federal Reserve Chairman Ben Bernanke will testify on “The Economic Outlook.” The next monetary policy meeting is four weeks away, but Bernanke is likely to provide a preview of what will be discussed at that time specifically, on the issue of when to begin reducing the rate of asset purchases. The short answer may be “it depends.”
2013-05-20 Still Bullish by Brian Wesbury, Bob Stein of First Trust Advisors
Like Rip Van Winkle, imagine you went to sleep on October 9, 2007 and didn’t wake up until yesterday. On 10/9/2007, equities were at record highs: 14,165 for the Dow Jones Industrial Average and 1,565 for the S&P 500.
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 Recession Watch: ECRI\'s Weekly Leading Indicator Declines by Doug Short of Advisor Perspectives (dshort.com)
Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-05-16 Searching For a New Investment Paradigm by Philip Lawton of Research Affiliates
Investment management is supposed to be built on brilliant minds’ novel insights and innovative approachesor so our training and traditions have led us to believe. We celebrate our best investors, such as Warren Buffett, Peter Lynch, and Bill Gross, and our best financial theories, such as modern portfolio theory (MPT) and the efficient markets hypothesis (EMH).
2013-05-16 The Truth about April's Budget Surplus by Marie Schofield of Columbia Management
The Truth about April’s Budget Surplus
Columbia Management
By Marie Schofield
May 16, 2013
Washington finally had some good news to report, specifically on the budget deficit. The Treasury reported a $113 billion surplus, the biggest in five years. April is a critical month for the budget because of tax filing and payment deadlines. While some attribute the surplus to reduced outlays on sequestration, it was mainly due to growing revenues courtesy of a build in individual and corporate tax receipts.
2013-05-16 Saving for College: A Family Affair by Team of Franklin Templeton Investments
The language of personal finance isn’t especially racy, but “debt” certainly has taken on the negative tone of other “four-letter words.” Even so, with college costs on the rise and many parents feeling especially pinched in this challenging economic environment, student loans rather than college savings have become the solution for many.
2013-05-15 And That\\\'s the Week That Was by Ron Brounes of Brounes & Associates
Fiscal Cliff. Sequester. Different names for similar budgetary issues that both basically resulted in games of Congressional “kick the can.” Now in a stroke of luck for non-compromising politicos, the budget deficit is shrinking as higher payroll taxes and paybacks from previously bailed out entities (thanks Fan) have enhanced government revenues since the beginning of the year.
2013-05-15 Speaking of a Great Week... by Blaine Rollins of 361 Capital
I left the office each day thinking that I just saw another walk off game winning home run by the S&P500. The bears were given their chance in April with the weak economic data and slightly less than exciting earnings, but they just couldn’t break it. In return, the employment data was a bit better, the global central banks came out swinging (ECB, Australia, and South Korea), then the markets broke the Yen, Bonds, and Gold, and the Bulls absolutely skinned the Bears.
2013-05-15 Consumers: The Great Sobriety by Milton Ezrati of Lord Abbett
Americans have cut debt, boosted savings, and held spending in checkall of which should aid the economy.
2013-05-14 David Rosenberg – My Love Affair with Bonds is Over by Robert Huebscher (Article)
The chorus of rate-spike-fearing inflationists has a new member. David Rosenberg, a stalwart advocate of fixed-income investing for the last quarter century, publicly declared on May 3 that his “love affair with the bond market has come to an end.” Prepare for a redux of 1970s stagflation, he said, and he advised investors how to construct portfolios to prepare for that scenario.
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 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 The Budget Deficit by Scott Brown of Raymond James
The Monthly Treasury Statement showed a large budget surplus for April. Some of that may prove to be temporary. Income was pulled forward into 2012 ahead of expected tax increases in 2013 and that was reflected in higher tax payments in April. Some of it is payback from the bailouts of a few years ago (for example, earnings from Fannie Mae and Freddie Mac). However, much of the improvement reflects a rebound from a severe recession. Tax revenues are recovering and recession-related expenses are trending lower.
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 Skills, Education, and Employment by John Mauldin of Millennium Wave Advisors
It is graduation time, and this morning finds me swimming in a sea of fresh young faces as a young friend graduates, along with a thousand classmates. But to what? I concluded my final formal education efforts in late 1974, in the midst of a stagflationary recession, so it was not the best of times to be looking for work. It turned out that I had a far different future ahead of me than I envisioned then. But I would trade places with any of those kids who graduated today, as my vision of the next 40 years is actually very optimistic.
2013-05-13 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.
2013-05-13 Tenuous Times? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
US stocks continue to make new highs, yet commodities have struggled and Treasury yields remain low, albeit up from recent near-record lows. Although not the standard playbook, we remain optimistic but acknowledge an equity pullback can occur at any time. Manufacturing data has been soft, the employment picture is mixed, and housing continues to improve. The European Central Bank (ECB) has joined the easing arty, illustrating the continued disappointments coming out of the eurozone.
2013-05-13 The Cash Conundrum by Ric Dillon of Diamond Hill Investments
In an effort to keep interest rates low, the Federal Reserve, along with other global central banks, is flooding the financial markets with liquidity. This additional liquidity is pushing prices for most financial and real assets higher. At some point, the Fed’s policy of easing will end and in some ways will be reversed. Purchases of government-backed securities may end this year (QE3); however, the Fed has signaled that the near zero interest rate policy for Fed Funds is likely to continue into 2015.
2013-05-13 Americas: Regional Economic Review 1Q 2013 by Team of Thomas White International
Weaker global demand and prices for energy and commodities, as well as softer than expected domestic consumption have restricted the growth outlook for most economies in the Americas region during the first three months of the year. Fewer monthly job additions in the U.S. have dented consumer confidence, and growth for the current year is now forecast to be moderately lower than earlier expectations.
2013-05-10 A Tale of Two Markets: Equity Bulls and Bond Bears by Douglas Cote of ING Investment Management
Surging equity markets absent an accompanying rate rally is a red flag, as Treasury yields remain well below “normal”. While investors’ renewed enthusiasm for equities is warranted, they must be careful to avoid the “folly of gaming diversification”. Corporate earnings have impressed, though revenue has struggled due in part to a moribund Europe. Divergent markets mean investors should stay broadly diversified in equities and real bonds not near-cash and ever alert to the fundamentals.
2013-05-10 2013 US Financial Markets: Part 2 - The TINA Hypothesis by Clyde Kendzierski of Financial Solutions Group
Contrary to the “Bernanke Illusion” (money market funds are a zero return investment), history indicates that money market funds are likely to provide investors with returns approximating inflation over the next decade. As I pointed out in our last letter, the markets are pricing in inflation levels significantly higher than the prospective total returns of 10 year TBonds. The small additional return achieved by corporate bonds or US stocks (at current prices) is unlikely to compensate a buy and hold investor with sufficient gains to justify the interim risks.
2013-05-10 Weekly Research Briefing by Blaine Rollins of 361 Capital
This week’s focus was squarely on central bank policy decisions and the U.S. April payrolls data. Mid-week the FOMC reinforced the "Bernanke put" by stating explicitly that quantitative easing can be increased if conditions worsen.
2013-05-10 Recession Watch: ECRI\'s Weekly Leading Indicator Continues to Show Improvement by Doug Short of Advisor Perspectives (dshort.com)
Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company calls it a "mild" recession, which is quite a shift from their original stance 19 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-05-10 Symptoms Don\'t Lie by Peter Schiff of Euro Pacific Capital
A good doctor will not simply make a diagnosis based on measurements. The symptoms and complaints expressed by the patient are at least as important in making a determination as the data provided by diagnostic tools. When the data says one thing and the symptoms continuously say another, it makes sense to question the reliability of the instruments. This would be particularly true if the instruments are furnished by a party with a stake in a favorable diagnosis, say an insurance company on the hook for treatment costs. The same holds true for the U.S. economy.
2013-05-10 The U.S. Economy Stands to Gain from Actions of Central Banks by Team of Northern Trust
Recent central bank meetings have resulted in a reiteration of accommodative monetary policy from the Federal Reserve and new initiatives from its counterparts overseas.
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 Europe (and Italy's Rivals) Appear on Road to Recovery by Par Rostom of Franklin Templeton Investments
When Europe’s debt disease spread to Cyprus, accompanied by bank runs and public unrest, some doubted the European Central Bank’s (ECB) ability to contain the contagion. And, even more recently, Slovenia turned up sick, warning of escalating debt problems and faltering banks. But with the setbacks have come some surprising steps forward, too, including progress in Italy, which recently formed a new coalition government.
2013-05-08 Germany Under Pressure To Create Money by John Browne of Euro Pacific Capital
Currently, central banks around the world are walking in lock step down a dangerous path of money creation. Led by the Federal Reserve and the Bank of Japan, economic policy is driven by the idea that printed money can be the true basis of growth. The result is an unprecedented global orgy of currency creation. The only holdout to this open ended commitment has been the hard money bias of the German-dominated European Central Bank. However, growing political pressure from around the world, and growing dissatisfaction among domestic voters have shaken, and perhaps cracked, the German resolve.
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.
2013-05-08 US Economy Should be \"Good Enough\" for Stocks by Russ Koesterich of BlackRock Investment Management
The April employment report confirms that the US is on a slow-but-positive course of economic growth. This environment should be conducive to further gains in equity prices. Europe, in contrast, continues to struggle and investors should approach that region with caution.
2013-05-08 6.7 Million “Missing Workers” Where Did They Go? by Gary Halbert of Halbert Wealth Management
Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.
2013-05-08 Absolute Return Letter: In the Long Run We Are All in Trouble by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
In the long run we are all dead, said Keynes. Maybe so, but we could be in trouble long before then. Investors appear preoccupied with central bank policy. We argue that investors are quite right in keeping their eye on the ball but, to us, it looks as if they are focusing on the wrong ball. The real worries for the long term are demographics and negative real interest rates and the effect these factors may have on equity returns.
2013-05-07 Mutual Fund Companies Need to Prepare for a Changing Environment Fund Industry Turbulence Ahead by Paul Franchi (Article)
The mutual fund industry grew explosively from the 1980s on a rare tonic of a low-inflation credit expansion powered indirectly by international trade flows. That run reached a peak in 2008 when the application of quantitative easing (QE) served to prevent industry collapse with a softer form of transition, which continues today but must end when inflation returns.
2013-05-07 Meredith Whitney – State-issued GO Muni Bonds are Safe by Ben Huebscher (Article)
Meredith Whitney has softened her tone regarding muni bonds. The analyst who famously predicted disaster for the entire market on national TV now she says that new governors have been elected and states have begun reforming. There will be problems in four key states, but she is not predicting a disaster. In fact, she said investors will be safe in general obligation bonds.
2013-05-07 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The trend is your friend (and the current trend is a “friend with benefits” for investors). After a record-setting first quarter for stocks, analysts were skeptical that the “party” would continue. And yet, the Dow Jones enjoyed a fifth straight month of gains in April, while the S&P 500 and Nasdaq one-upped the Blue Chips with six month winning streaks.
2013-05-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Financial markets got the news they wanted last week as Europe cut interest rates, while here at home the Federal Reserve hinted they might do even more when it comes to money printing. To top it off, Friday’s employment report showed improvement from March although the details caused most to discount the excitement.
2013-05-07 Central Banks Steal the Spotlight Once Again by Chris Maxey, Brian Payne of Fortigent
Central banks around the world continue to provide increased stimulus to their respective economies. Increased conviction over pro-stimulus policies comes in light of recent flaws found in the Reinhart, Rogoff January 2010 paper, which suggested that government debt of more than 90% of GDP is detrimental to economic growth. The latest week brought another round of news in the world of central banking, although it seems the number of options left on the table is running short. What central bankers hope for now is that economies will finally enter recovery mode.
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 Aligning Market Exposure With the Expected Return/Risk Profile by John Hussman of Hussman Funds
Some risks and market conditions are more rewarding than others. My objectives for this week’s comment are very specific. First, to demonstrate using a very simple model that investment returns do indeed vary systematically with market conditions. Second, to demonstrate that overvalued, overbought, overbullish conditions have historically dominated trend-following measures when they have emerged. Third, to demonstrate the impact of accepting investment exposure in proportion to the return/risk profile that is associated with a given set of market conditions.
2013-05-06 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.
2013-05-06 All's Well That Ends Well by Scott Brown of Raymond James
The economic data reports were decidedly mixed last week. However, the April Employment Report exceeded expectations, which provided a good excuse for share prices to move higher. Bonds were whipsawed, encouraged by the view that the Fed was less likely to taper its asset purchases, but then hit hard by the better-than-expected payroll figures.
2013-05-06 That Was the Week That Was by Jeffrey Saut of Raymond James
Informally the TV show, “That Was The Week That Was,” is referred to as TW3and was a satirical comedy program first aired in the early 1960s. The program was considered a lampooning of the establishment. At the time it was considered a radical departure from legitimate television, but it set the stage for many more such radical departures. I revisit TW3 this morning because I have had so many requests for a formal repartee of a number of last week’s Morning Tacks woven into a more formal strategy letter.
2013-05-06 The Narrative Changes Yet Again by Charles Lieberman of Advisors Capital Management
The April employment report suggests that the economy continues to expand at a moderate pace, as had been the common view prior to the March employment report. While sequestration and the hike in the payroll tax at the beginning of the year may have taken a bite out of growth, hindsight indicates the economy entered 2013 with enough momentum to overcome these new forms of fiscal drag. Growth should strengthen over the coming months, as lower oil prices and time overcome the negative influences.
2013-05-06 Beyond the Headlines: Job Growth, Exports and Housing by Gregg Bienstock of Lumesis
Congress has done something for the American public. FAA, sequester, flight delays we can fix that! While I would usually take a cynical swipe at Congress (something like, “did they act because they, too, were impacted by their own stubbornness”), I’ll let well enough alone and simply pass on a heartfelt thanks. Perhaps this is the start of something. I hear they are working closely on immigration reform and an exemption for Congress and their staff from the Affordable Care Act (aka Obamacare). Ok, so two of three initiatives garnering bi-partisan support are purely self-ser
2013-05-06 The Economy: Why Interest Rates Shouldn't Rise Anytime Soon by Ron Sloan of Invesco
Real is irrelevant. The US Federal Reserve (the Fed) is unconcerned about real GDP the inflation-adjusted measurement of US economic growth. Rather, without inflation in our economy, the Fed is focused on raising nominal GDP. And that priority means that interest rates should stay low for the foreseeable future.
2013-05-04 Don't Sell in May: Here are Reasons to Extend Your Stay by Frank Holmes of U.S. Global Investors
During the first week of May every year, the maxim, “Sell in May and Go Away,” gets taken out, dusted off and powered up as a reason to sell stocks. The rhyme is more than just a catchy urban legend: June, July, August and September have historically been the weakest months of the year for the S&P 500 Index.
2013-05-03 Pring Turner Approach to Business Cycle Investing by Team of AdvisorShares
Like the seasons of the year, the environment for bonds, stocks, and commodities progress in a repeatable and sequential fashion. A gardener understands it is difficult to plant in the winter because nothing grows. The same is true for the financial seasons in the business cycle, where investors can use knowledge of the sequence to create a financial market roadmap. This paper from Pring Turner Capital Group, one of our valued sub-advisors, takes you through the six-stages of the business cycle.
2013-05-03 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)
I’ve now updated this commentary to include April Nonfarm Employment, which included the prior month revision. As the adjacent thumbnail illustrates, this indicator has trended upward in a relatively smooth trajectory over the past 13 months.
2013-05-03 Job Creation May Be More Robust Than Official Statistics Suggest. by Team of Northern Trust
Job creation may be more robust than official statistics suggest; U.S. employment situation; Central bank meetings
2013-05-02 Europe at a Minimum Speed by Scott Minerd of Guggenheim Partners
Market forces are correcting the growth dichotomy between the European Union’s core and periphery, thus improving the outlook for the region.
2013-05-01 While the Bears Fight... by Blaine Rollins of 361 Capital
While corporate earnings outlooks and released economic data remained soft, the world moved to declare Austerity a failure and quickly assumed that the ECB could ease further at this week’s meetings. The recent collapse in commodity prices and slowdown in China does put a high card in their hand. With these new thoughts, European equities and bonds both surged on the week...
2013-05-01 Emerging Asia Pacific: Regional Economic Review by Team of Thomas White International
Major emerging Asia Pacific economies, which picked up growth momentum during the latter half of 2012, struggled to carry forward the economic pace during the initial months of 2013. China, India, and Indonesia, some of the most populous countries in the region and in the world, faced significant headwinds to growth as key engines of the economy investment, consumption, and exports came under strain.
2013-05-01 The \"Real\" Unemployment Rate Doesn\'t Look Too Good by Steve Rumsey of Optimus Advisory Group
The "real" unemployment rate is hardly mentioned in the media. With the headline unemployment rate standing at 7.6% (single-digit unemployment rates always seem somewhat tolerable) after tagging 10% in 2009, is it any wonder that the employment picture seems to be decent?
2013-05-01 May 2013 Commentary by Team of Sadoff Investment Management
The slow growing economy will cause the Federal Reserve to stay the course with continued stimulus via low interest rates and Quantitative Easing (QE) for some time. This environment continues to be bullish for stocks.
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.
2013-04-30 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks rebounded from the previous week. Earnings were not bad, and investors now appear to be focusing on this week’s Federal Reserve and European Central Bank meetings.
2013-04-30 Zebras?! by Jeffrey Saut of Raymond James
We saw many “outside zebras” gorging themselves on stocks in late 2007 as the D-J Industrial Average (DJIA) made a new all-time high and then registered a Dow Theory “sell signal” in November 2007. Subsequently, those outside zebras ended up as “lion lunch” when the senior index shed an eye-popping 53% over the ensuing 17 months.
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 Employment Trending the Right Way and the DC Two-Step by Gregg Bienstock of Lumesis
Spring is in the air and it has nothing to do with the lovely weather we are experiencing here on the east coast. Congress both houses have done something for the American public. FAA, sequester, flight delays we can fix that! While I would usually take a cynical swipe at Congress (something like, “did they act because they, too, were impacted by their own stubbornness”), I’ll let well enough alone and simply pass on a heartfelt thanks. Perhaps this is the start of something.
2013-04-29 Developed Asia Pacific: Regional Economic Review by Team of Thomas White International
After facing subdued economic conditions for the most part of 2012, developed Asia Pacific economies started 2013 on a cautious note. While most countries opined that downside risk to GDP growth declined substantially, challenges to growth arose from a recessionary scenario in key developed economies, especially from the European Union.
2013-04-29 Cruel Top Line Growth by Christian Thwaites of Sentinel Investments
The current earnings season is a very mixed bag. Start with the economic background where nominal growth decelerated in 2012 from around 4.4% to 3.6%. The first quarter may be marginally higher but some of that is from a low base effect. It’s very difficult for companies to raise prices, increase share or volumes when demand is simply deficient. Sure, balance sheets are in much better shape, as evidenced by robust bond issuance, but many companies are in excess savings mode. Here are undistributed corporate profits as a percent of GDP.
2013-04-29 When Rich Valuations Meet Poor Economic Data by John Hussman of Hussman Funds
Given the full set of market conditions that we observe, including the persistent overvalued, overbought, overbullish syndrome that has developed in recent months, our concerns about stocks are not dependent on the direction of the economy over the coming quarters. An economic downturn would simply add immediacy to those concerns.
2013-04-27 The Cashless Society by John Mauldin of Millennium Wave Advisors
A cashless future might be farther off than we either fear or hope. Not only is it farther away than some think, we are actually seeing an increase in the use of cash all over the world (and this is not just a US phenomenon). We will look at some interesting factoids that make for thought-provoking discussions, but when we couple them with research on the rise of the unreported economy (aka the underground economy) and the number of people who get some form of government assistance, we may find problematic consequences resulting from hidden incentives that work in unintended ways.
2013-04-26 An Update on the Global Business Cycle by Investment Strategy Group of Neuberger Berman
Understanding where we are in the an important aspect of investing, as the behavior of asset classes may vary throughout that cycle. Recent data indicate that the U.S. remains in its fourth year of expansion, but payroll and retail numbers have disappointed. Outside the U.S., Europe continues to be mired in recession while China’s growth rebound recently has appeared to sputter. In this edition of Strategic Spotlight, we review what these developments mean for the global business cycle and how to position portfolios accordingly.
2013-04-26 The Sustainability of U.S. Interest Rates Rising by Paresh Upadhyaya of Pioneer Investments
Investors are growing concerned, with good reason, we think, that yields have bottomed for the 10-year Treasury and will surge as the economy gains strength. Prices, which move inversely to yields, would fall, and the question is whether rising rates in 2013 could trigger a bond bear market along the lines of the Great Bond Bear Market of 1994. We don’t think so.
2013-04-26 Recession Watch: ECRI\'s Weekly Leading Indicator Rises Again by Doug Short of Advisor Perspectives (dshort.com)
Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-04-26 The 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 Why The Fed's Balance Sheet Matters Neosho Capital Takes On Alan Blinder by Chris Richey of Neosho Capital
We anticipate the Fed will begin slowing, but not eliminating, its QE purchases later this year, barring another severe downturn in the intervening period. As such, we expect macro-economic factors such as currency, interest rates, growth, and inflation to continue to be a significant influence on stock market returns and that the long-term benefits of active portfolio management and individual company performance will continue to be masked by these macro influences.
2013-04-26 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 Financial Repression: Why It Matters by Shane Sheperd of Research Affiliates
Financial repression refers to a set of governmental policies that keep real interest rates low or negative, with the unstated intention of generating cheap funding for government spending. The ramifications of these policies will be measured in decades, not years.
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.
2013-04-26 Changing the Conversation by Peter Schiff of Euro Pacific Capital
It has been estimated that if the government used the same methodology to measure inflation that it used during the 1980’s, we would be currently dealing with official inflation that would be many times higher than today’s official 1.5% rate. But now the government appears ready to distort the figures even further.
2013-04-25 Questioning Quantitative Easing by Scott Minerd of Guggenheim Partners
Speculation over the reduction or expansion of quantitative easing largely amounts to market noise.
2013-04-25 The End of “Expansionary Austerity?” by Scott Brown of Raymond James
A few years ago, an economic paper by Harvard professors Carmen Reinhart and Kenneth Rogoff helped fuel the push for austerity. It was met with some criticism from economists, but was widely embraced by the press and by politicians on both sides of the Atlantic. The study has now been demonstrated to have had serious flaws, but will those in power fold? Or will they double down on bad economic policy?
2013-04-24 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 Europe's Sovereign Debt Problem: A Call for a Clear Destination by Andrew Bosomworth, John Henning Fock of PIMCO
Without political commitment to a common fiscal destination, the long-term instability and market distortions within Europe’s capital markets are likely to intensify. To preserve the euro, the eurozone must develop federal fiscal policies that tackle significant economic, cultural and societal differences and define a credible roadmap to achieving structural reforms, a banking union, political union and fiscal union. Historical precedents in Europe may help guide the way.
2013-04-24 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 The New Challenges to Reinhart and Rogoff by Robert Huebscher (Article)
Advocates for debt reduction and austerity have had no more authoritative sources than Carmen Reinhart and Ken Rogoff. But last week, these two professors had to defend claims that errors in their research – ranging from a typo in a spreadsheet to the failure to include data from New Zealand – invalidated their much-acclaimed findings.
2013-04-23 Letters to the Editor by Various (Article)
A reader responds to Michael Edesess’ article, Will Germany Lead the World’s Energy Revolution?, and a reader responds to Robert Huebscher’s article, Michael Pettis - Can China Save Itself?, both of which appeared last week.
2013-04-23 Middle East/Africa: Regional Economic Review by Team of Thomas White International
According to a World Bank (WB) report, global growth in 2013 will remain sluggish as economic recovery in the developed nations is likely to be slow. Lower business and consumer confidence, government spending cuts, as well as high rates of unemployment may delay the recovery, the report says. The report has also noted that developing nations may experience slower growth due to structural and monetary policy challenges.
2013-04-23 Federal Funds, Interest Rates and Defaults and Bankruptcies by Gregg Bienstock of Lumesis
This week we focus on Federal Funds delivered to the States and consider some interesting data points to contemplate as folks pretend to get a bit more serious about addressing fiscal issues at the National level. We move on to an interesting and surprising quote on rates and then a look at some facts and figures around bankruptcies and defaults.
2013-04-23 Ugly Week All Around Bombings, Explosions and Selloffs by John Buckingham of AFAM
It was a miserable week, what with the Boston bombings, lockdown and shootout, the horrific fertilizer plant explosion in Texas and the ricin-laden letters sent to elected officials providing vivid reminders that we still live in a dangerous world. True, the week ended about as well as it could as Friday night’s incredible drama in Watertown brought some closure in Boston and the come-from-behind victory for the Red Sox on Saturday was right out of Hollywooda three-run go-ahead home run after Neil Diamond leads Fenway Park in a rendition of Sweet Caroline!
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 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The end to another tax season; a hectic week on the earnings calendar; a number of key domestic economic releases; and ongoing developments on the global economic frontand yet, much of the country (and world for that matter) was focused on the events in Boston and the aftermath of the bombing that led to a massive manhunt and a shootout with police. Early in the week, the celebrated Boston Marathon came to an abrupt halt as terror again reigned throughout the country and nearby residents were sent into lockdown mode.
2013-04-22 Weekly Commentary & Outlook by Scotty George of du Pasquier Asset Management
Despite recent gains in portfolio valuations, I question whether we are really “profiting” from the upward surge. To be sure, there is more money in your account, according to your last three monthly statements. And who’s to argue that doesn’t translate to “real” dollars, “real” well-being.
2013-04-22 Emerging Europe: Regional Economic Review by Team of Thomas White International
The European Bank for Reconstruction and Development (EBRD) was established in 1992 to help Russia and former communist states such as Poland, Hungary, and Czech Republic among others in their transition to market-based economies. In its January forecast, the London-headquartered bank sounded optimistic over the economic prospects of most of the countries covered in this review, which also include Turkey.
2013-04-22 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity market’s most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-19 Equity Investment Outlook by Team of Osterweis Capital Management
Every so often we write an Investment Outlook with conclusions that prove to be both accurate and worth repeating. Such is the case with our prior outlook issued in January 2013. In it we stated that “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. We are not blind to the challenges and uncertainties that still face us, nor do we believe that the year ahead will be devoid of volatility.
2013-04-19 Fixed Income Investment Outlook by Team of Osterweis Capital Management
Based on the nearly 2,500-point rise in the Dow Jones Industrial Average since last June, it appears that Mr. Bernanke has been successful in increasing demand for risk assets and creating some exuberance in the stock market. Short-term volatility in the markets may be driven by questions about the Fed’s eventual exit strategy and how effectively the politicians will deal with U.S. fiscal issues. The good news is that that the U.S. economy is growing, albeit slowly, unemployment is falling, again slowly, and consumer confidence is improving.
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 Fed to End QE, Obama's Tax & Spend Budget by Gary Halbert of Halbert Wealth Management
Today I tackle several topics, each of which could take up an entire E-Letter. But these topics are very important, and I want to address them today. The first is the minutes from the March 19-20 Fed Open Market Committee meeting that were released last Wednesday. Those minutes definitively confirm that the Fed is ready to chart an end to quantitative easing.
2013-04-19 Recession Watch: ECRI\'s Weekly Leading Indicator Rises by Doug Short of Advisor Perspectives (dshort.com)
Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-04-19 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The world’s public debt is much larger than it may appear. The lines have been drawn in the U.S. budget debate. Rates of disability are affecting labor force participation.
2013-04-19 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.
2013-04-18 Reversing Quantitative Easing by Richard Bernstein of Richard Bernstein Advisors
The Fed is likely to lag the markets, as they do in most cycles. The markets will probably anticipate the Fed reversing QE. The Fed will surprise few investors. The Fed should reverse QE in a yield curve-neutral way, in our view. Steepening the curve risks perversely stimulating the economy by making carry trades and loan spreads more profitable. This cycle will probably end as do most cycles. The Fed will be behind the curve, play catch-up, tighten too much, invert the curve, and cause a recession. That end result, however, is probably quite far in the future.
2013-04-18 Inflation and Interest Rates by Scott Brown of Raymond James
The Federal Reserve began its first asset purchase program in the fall of 2008, during the depth of the financial panic. Some observers feared that the Fed’s actions would fuel higher inflation. However, the Fed is now well along in its third asset purchase program and inflation (as measured by the PCE Price Index) has remained low. In fact, Fed officials expect that inflation will trend at or below the 2% target for the next couple of years. That hasn’t stopped the inflation worrywarts from predicting that inflation is still “just around the corner.”
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 The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans by Team of Hotchkis & Wiley
In its first quarter 2013 newsletter, "The Interest Rate Environment: Comparing High Yield Bonds and Bank Loans," Hotchkis & Wiley’s high yield team analyzes the behavior of the high yield market and the bank loan market in different interest rate environments to determine whether they can make sensible assumptions about the future.
2013-04-16 Michael Pettis - Can China Save Itself? by Robert Huebscher (Article)
Most analysts predict China’s growth will slow; they disagree only as to the depth and timing of its eventual recession. A rare exception to that group is Michael Pettis. Pettis, who describes himself as a skeptic, believes China can rebalance its economy.
2013-04-16 Five Warning Signs of a Coming Market Correction by Dawn Bennett of Bennett Funds
There are no positive fundamentals driving the U.S. stock market. No one has ever gotten rich by chasing markets by buying at the top, which is how this market feels.but it seems everybody feels they can’t afford to miss being in the U.S. equity markets. People should instead be focused on the true facts of the U.S. economy and corporations and tune out the hype and happy talk from the media and Fed heads. Instead investors should focus on the real data.
2013-04-16 Tax Day as Polarizing as Ever by Chris Maxey, Ryan Davis of Fortigent
Tax season is once again upon the American population, and this year, just as in years past, people are less than enthusiastic. It is estimated that the average taxpayer contributed slightly more than $11,000 dollars to federal taxes in 2012 and those figures are on the rise. As might be expected in the current backdrop, however, not everyone shares the same opinion on taxes.
2013-04-15 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Another dayAnother record. With last week’s poor unemployment releases suddenly a distant memory, investors looked forward (and not backward) and took the Dow Jones and S&P 500 back into record-setting territory with a four-day winning streak. By week’s end, however, some key earnings reports disappointed and analysts became more concerned about the state of the consumer (though there is clearly no consensus on that front either).
2013-04-15 Housing Is it Getting Better, A Second Look by Gregg Bienstock of Lumesis
This week we take a quick look at some of what is in the President’s budget and then focus on the housing market (the title harkens back to something we wrote a few months back). You may sense, as you read on, I’m a bit cranky this week. As you read through the housing section you’ll understand why.
2013-04-15 Keynes And Retail Sales by Brian Wesbury, Bob Stein of First Trust Advisors
No, just because retail sales fell 0.4% in March does not mean Keynes was right. Sequestration did not cause the decline. Nor did the end of the temporary 2% payroll tax cut, back in January, cause it either.
2013-04-12 ECRI\'s Weekly Leading Indicator Shows a Small Improvement by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is now at 130.1, up from 129.1 last week (revised from 129.2). The WLI annualized growth indicator (WLIg) remains unchanged at 6.2%.
2013-04-12 Housing Bubble II? by Russ Koesterich of iShares Blog
It might seem like the housing bubble just burst, but as the housing market stages a comeback, investors are asking if we’re already facing another bubble. Russ explains why home prices aren’t in a bubble but home builder stock valuations may be.
2013-04-12 The Great Secret by Jeffrey Saut of Raymond James
When I was a young boy, I remember my father coming home looking very ashen from a visit with a dear friend dying in the hospital. His name was Dell Zink and he was one of my father’s closest friends. Mr. Z, as we kids affectionately called him, was a very religious man; a man who was regarded by his friends as intelligent and philosophical.
2013-04-12 March Jobs Report: Disappointing, But Not Terrible by Scott Brown of Raymond James
The economic added 759,000 jobs in March before seasonal adjustment, that is. That translated into a disappointing 88,000 gain in the seasonally-adjusted number. Figures for January and February were revised higher. The slower March figure could reflect a lagged impact from the payroll tax hike or February may have simply borrowed some strength from March.
2013-04-12 Everyone Wants More Financial Stability, But at What Cost? by Carl Tannenbaum of Northern Trust
For all the good intentions, there is no guarantee that the rush to re-regulate will be successful. The next crisis may look nothing like the one just past, and the political will to take tough preventative steps during good times cannot be taken for granted.
2013-04-12 Assume a Perfect World by John Mauldin of Millennium Wave Advisors
Waiting for our forecasts to be wrong before we adopt a yet another “solution” based on a temporary fix of yet another forecast that turned out to be wrong is no way to run a railroad, unless you want your train running off a cliff. I applaud the recent attempts in DC to come to a solution on the deficits and budget, but where are the leaders who want to get real with those forecasts?
2013-04-12 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 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.
2013-04-11 Telling (Taper) Time by Tony Crescenzi of PIMCO
Investors need be alert for signs of progress in the many employment indicators the Fed is watching, and listen closely to what the Fed is saying to know when bond buying will be tapered. The failure to achieve “escape velocity” is why the Fed is using its printing press to purchase $85 billion of securities monthly. These purchases will continue, the Fed says “until the outlook for the labor market has improved substantially.” The Fed has made progress toward achieving escape velocity but the progress must be sustained for the Fed to throttle back on its stimulus.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks were slightly lower last week as the troubles in Europe, Asia (Japan & North Korea) dovetailed with a really lousy employment report here at home on Friday.
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 Time to Flee Equities for Bonds...and Japan? by John Rothe of Riverbend Investment Management
Last week’s string of bad economic data may finally be the tipping point we have been waiting for. For the past few weeks, I have become more and more bearish on the US economy and stock market. Payroll tax hikes, sequestration, and slowing global growth mixed with a euphoria for a rising stock market have pushed the markets into a high risk environment.
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.
2013-04-09 BLS Revisions Include 464K More Jobs Than Previously Reported by Ali Wolf of John Burns Real Estate Consulting
The largest 358 metros created 464,000 more jobs in 2012 than the 1,472,000 jobs previously estimated, a 32% increase from initial employment gain figures. 310 of the 358 metros showed job growth.
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 Morning in Japan by Christian Thwaites of Sentinel Investments
There were two very important central bank meetings last week, one from the Bank of Japan the other the ECB. Bank of Japan press conferences have been soporific affairs for years with a few QE programs not leading to much and no changes to inflation targets. Deflation, a declining workforce and falling aggregate demand have been pretty much the unbroken story for the best part of two decades.
2013-04-09 Twins by Jerry Wagner of Flexible Plan Investments
Any thoughts that the stock market was going to extend its rally were also shortened last week by a truly horrendous jobs report. In an economy that needs 250,000 new jobs each month just to replace retirees, we only had slightly more than 80,000 in March. The economists’ expectations were bunched around 200,000, so the disappointment in the air was palpable when the market opened and swiftly sank 150 points on the Dow Industrials.
2013-04-08 The Theology of Inflation by John Mauldin of Millennium Wave Advisors
We begin this week with a simple pop quiz. Is inflation good or bad? Answer quickly. I’m sorry your answer is wrong. Or rather, we can’t know if your answer is right or wrong because we are not sure what is meant by the question. We may think we know and we may be right but we can’t be sure, because the word inflation has different meanings for different people in different places and different times. In fact, even the same people in the same place and time can’t agree on a precise definition.
2013-04-08 “Country Roads, Take Me Home,To The Place I Belong ” by David Lieberman of Advisors Capital Management
Recently, I was listening to a Pod Cast from This American Life about the increasing disability rolls in the United States. The story itself was excellent and I would highly recommend it, but the implications of the numbers are equally remarkable. In the past 20 years, the number of people on disability in the United States has soared, even recently when the unemployment rate has declined materially. Rather than focus on the policy decisions, causes of this phenomena, or even whether they are logical, good, or bad, I’m going to focus purely on the unemployment and economic ramifications
2013-04-08 Repealing Tax Exemption and Illinois Settlement Guest Commentaries by Gregg Bienstock, Ron Bernardi of Lumesis
This week we are pleased to present two guest commentaries both from Ron Bernardi, President and CEO of Bernardi Securities, Inc. The first is an excellent white paper entitled “Repealing Tax Exemption Impact on Small and Medium Sized Communities” and highlights the impact of a repeal of tax exemption. The second covers three topics, Ron’s home turf, Illinois, a bit about Stockton and a bit on the Ways and Means hearing regarding tax-exemption.
2013-04-08 Taking Distortion at Face Value by John Hussman of Hussman Funds
The U.S. stock market presently reflects two unstable features. One is that extraordinary monetary policy specifically quantitative easing has created an ocean of zero-interest money that someone has to hold at each point in time, and that provokes a speculative reach for yield. The other is that extraordinary fiscal policy, coupled with household savings near record lows, have joined to elevate profit margins more than 70% above their historical norm, as the deficit of one sector has to emerge as the surplus of another.
2013-04-05 ECRI\'s Recession Indicators Decline from the Previous Week by Doug Short of Advisor Perspectives (dshort.com)
Today ECRI has added a new headline on the website, Employment Growth Hits New Low, based on data from today’s jobs report. Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-04-05 This Week's Central Bank Meetings Revealed a Range of Behavior by Team of Northern Trust
This week’s central bank meeting revealed a range of behavior. The U.S. employment report fell well short of expectations. Does China have a property bubble?
2013-04-05 Federal Judge Green-Lights Stockton Bankruptcy by Michael Brooks of AllianceBernstein
Stockton, California, made headlines last June when it filed for a Chapter 9 bankruptcy. Now, a federal judge has not only given his okay to proceed; he’s also thrown retiree pension benefits into the debate. The big question is whether these benefits can be cut. The outcome could be a groundbreaking decision that would encourage other municipalities to adopt this approachparticularly those with pension problems.
2013-04-04 Sound Fundamentals but Fatigue in the Markets by Scott Minerd of Guggenheim Partners
Although economic fundamentals continue to strengthen, the run-up in asset prices that has unfolded over the past half-year appears to be at risk of a temporary set-back.
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.
2013-04-04 Teachings from Recovered Markets by Richard Michaud of New Frontier Advisors
Domestic indices’ all-time record highs indicate that U.S. domestic equity markets have largely recovered from the 2008 Great Recession. It may have taken four years but it still seems a remarkable achievement given the Dow’s low of 6620 in March 2009. It is worth noting that prior highs were attained in an era with a poor savings rate and wide use of levered strategies. The last four years were widely characterized by a “low return” market mantra and fear of equities stoked by many doomsayers, pundits, and strategists who greeted every upturn with pessimism.
2013-04-03 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 Will Bonds Repeat the \"Massacre\" of 1994? by Mark Ungewitter of Charter Trust Company
At last year’s Contrary Opinion Forum in Vermont, Michael Aronstein of Marketfield Asset Management outlined the case for brisk economic recovery as one of the most contrary of all possible opinions. With this thesis in mind, I recently examined the behavior of 30-year Treasury bonds, comparing today’s environment with that of 1994.
2013-04-03 Minor Crisis...Not Too Many Hurt by Christian Thwaites of Sentinel Investments
Cyprus proved, over the last two weeks, that markets often overlook the small stuff. Very few commentators we follow saw any of it coming and the theories that sprang up in the interim (Cyprus as vassal state to Russia, return to the Cypriot pound, imminent EU break up, twin euros in circulation, utter disaster for the economy, German intransigence and Schrecklichkeit) were absurd.
2013-04-03 Surprise! 2013 Rally Pales in Comparison to 2012 “Stealth” Rally by Douglas Cote of ING Investment Management
Despite the hoopla over first quarter market performance, it paled in comparison to the first three months of 2012. Driven in part by an extremely accommodative Fed, the U.S. economy is gaining traction, but Europe continues to flounder. After their first negative print in three years during the third quarter, S&P 500 companies returned to positive earnings growth in the fourth. A broad, globally diversified portfolio is the best way to balance the desire for wealth accumulation with an appreciation of volatility.
2013-04-03 F.I.R.S.T.: Made in the U.S.A. by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Not just the preamble for the “machine-wash-in-cold-water-and-eat-celery-only” instructions on the inside of your skinny jeans, “Made in the U.S.A.” is a brand in vogue these days as the Stars and Stripes looks to dawn a manufacturing renaissance to go with that snazzy new housing recovery everyone’s been talking about.
2013-04-03 Why This Economic \"Recovery\" is So Weak by Gary Halbert of Halbert Wealth Management
We start today with an excellent editorial I read last week written by Mort Zuckerman, Editor-In-Chief of U.S. News & World Report. My goal every week is to do a lot of reading and summarize what I’ve learned in these pages week in and week out. But every now and then I run across something so good that it just makes sense to reprint it in its entirety, even if it’s not my own work. Not many of my contemporaries are willing to do that, as they think it makes them look less scholarly. I don’t have that problem.
2013-04-02 Bernanke’s Motives Behind Quantitative Easing by Paul Franchi (Article)
We are at a turning point: away from one global monetary standard, to a yet-to-be-determined new form.
2013-04-02 Is the Vix Still an Adequate Measure of Risk? by Chris Maxey, Ryan Davis of Fortigent
The 30-day implied volatility index for the S&P 500 calculated by the Chicago Board of Options Exchange (CBOE), known as VIX, has long been used as an indicator of market sentiment. Commonly referred to as the “fear index,” the VIX often portends periods of stress in equity markets, as options traders price in higher volatility in the future. The shape of the VIX futures curve, in particular, has historically been used as an indicator of future volatility levels.
2013-04-02 Flying High on Borrowed Wings by Peter Schiff of Euro Pacific Capital
After selling off an astounding 56% between October of 2007 and March 2009, the S&P 500 has staged a rally for the ages, surging 120% and recovering all of its lost ground too. This stunning turnaround certainly qualifies as one of the more memorable, and unusual, stock market rallies in history. The problem is that the rally has been underwritten by the Federal Reserve’s unconventional monetary policies But for some reason, this belief has not weakened the celebration.
2013-04-01 A More Mature Bull Market by Scott Minerd of Guggenheim Partners
One of the characteristics of a more mature bull market, such as the one we are in today, is that asset prices become more susceptible to contractions due to negative news.
2013-04-01 Employment 401, Muni Index Says and New Data by Gregg Bienstock of Lumesis
This week we spend time looking back at employment data (promised two weeks back) and offer some perspective from a soon to be published book. We take a look at the DIVER Muni Index and conclude with an introduction of some new and meaningful data now available to our subscribers.
2013-04-01 U.S. Stock Market: Too Good to Be True? by Dawn Bennett of Bennett Funds
There is nothing worse than buying at the top of the market. Think back to the last two economic cycles. If you bought the US stock market or real estate in late 2007, you are way under on those purchases and that is after sweating it out for the last 5 years. Even with the 2009-2012 rebound, we have not seen real estate values or the Dow Index back to even. You have to ask yourself, how can this be?
2013-04-01 Plan Sponsors and Participants Need HELP by Jon Vogler of Invesco
The Senate Committee on Health, Education, Labor & Pensions (HELP Committee) held a hearing titled “Pension Savings: Are Workers Saving Enough for Retirement?” on Jan. 31, 2013. Witnesses shared successful initiatives and highlighted areas that need improvement to help workers achieve a financially secure retirement.
2013-03-29 ECRI Recession Indicator: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) to one decimal place is unchanged from last week. It is now at 129.7, the same as last week’s downward revision from 129.8. The WLI annualized growth indicator (WLIg) has risen fractionally to 6.6%, up from last week’s 6.3%. Those of us who regularly follow ECRI’s publicly available data and commentaries understand that there is no logical connection between ECRI’s proprietary indicators and their "pronounced, pervasive and persistent" recession call of September 2011.
2013-03-29 Learnings From the Cyprus Saga by Carl Tannenbaum of Northern Trust
There are important differences between the situation in Cyprus and the challenges other southern European nations face that should limit the transfer of financial trauma. The hope remains that the ECB’s promise to do whatever it takes to solve the sovereign debt crisis will ultimately settle markets. But access to certain types of ECB support requires reaching agreement on restructuring with the same European officials who have handled the situation in Cyprus so maladroitly.
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 On the Fed, the Keystone Pipeline & the War On Jobs by Gary Halbert of Halbert Wealth Management
The Fed Open Market Committee (FOMC) met as scheduled last Tuesday and Wednesday to review monetary policy and its massive “quantitative easing” effort. The official policy statement released at the end of the meeting on Wednesday was little changed from those in previous months.
2013-03-28 Today's Good News Isn't Bad for US Stocks by Daniel Loewy of AllianceBernstein
Believe it or not, recent US housing market gains, the slight reduction in jobless rates and other signs of a revival in US economic growth are making some investors bearish about US stocks. We think their fears are misplaced.
2013-03-28 What Will Drive the Market? by Charlie Dreifus of The Royce Funds
The sequester adds to the economic headwinds caused by ending the payroll tax holiday and the boost in tax rates. However, even with the sequester, total federal government outlays will rise this fiscal year. Finally, after more than a month of daily increases for a gallon of unleaded gasoline, prices are now declining. This has been of concern as rising oil and gasoline prices were yet another headwind facing the U.S. economy. (Oil prices have also declined.)
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 Why Not a Quantitative Target for Quantitative Easing? by Paul Kasriel of Econtrarian, LLC
When I should have been practicing my bass guitar in preparation for my band class Thursday evening, I, instead, watched the first few minutes of Federal Reserve Chairman Bernanke’s post-FOMC press conference. A number of press inquiries were related to adding specificity to the FOMC’s criteria for modifying its current $85 billion per-month purchases of securities. In the short time that I watched the press conference, Chairman Bernanke did not seem to satisfy the press on this issue.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks were flat last week as investors were mesmerized by the goings on in Cypress and the European Union.
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.
2013-03-26 Smart People's Opinions, The Data Says and Some Looming Deadlines by Gregg Bienstock of Lumesis
Being on the road gives me a lot of time to read the views and opinions of many very smart people (Faber, Mauldin, Hussman, Hunt and Zhao this week citations below as they all are worth a read). An interesting thread runs through much of what I absorbed this week: they don’t believe the hype.
2013-03-26 The Stimulus Trap by Peter Schiff of Euro Pacific Capital
For years we have been warned by Keynesian economists to fear the so-called "liquidity trap," an economic cul-de-sac that can suck down an economy like a tar pit swallowing a mastodon. They argue that economies grow because banks lend and consumers spend. But a "liquidity trap," they argue, convinces consumers not to consume and businesses not to borrow. The resulting combination of slack demand and falling prices creates a pernicious cycle that cannot be overcome by the ordinary forces that create growth, like savings or investment.
2013-03-26 In Gold, Not Cyprus, We Trust by Frank Holmes of U.S. Global Investors
Global investors had to muster the courage to keep calm as news of Cyprus’ proposed partial theft of all bank deposits took Wall Street by surprise, closed the country’s banks and drove the price of gold higher.
2013-03-25 The Hook by John Hussman of Hussman Funds
At the 2000 peak, Richard Russell observed "Every bull and bear market needs a hook.’ The hook in a bear market is whatever the bear serves to keep investors and traders thinking that everything is going to be all right. There is always a hook."
2013-03-25 Fed Outlook: Cautiously Optimistic or Just Hopeful? by Scott Brown of Raymond James
The Federal Open Market Committee’s latest policy meeting generated few surprises. The FOMC maintained its forward guidance on the federal funds rate target, which is still not expected to start rising until 2015, and did not alter its asset purchases plans ($40 billion per month in agency mortgage-backed securities and $45 billion in longer-term Treasuries). However, in his press briefing, Bernanke indicated that the pace of asset purchases could be varied as progress is made toward the Fed’s goals or if the assessment of the benefits and potential costs of the program were to cha
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 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 Is Plan B for Cyprus an Exit from the Euro? by Michelle Gibley of Charles Schwab
Having rejected an initial bailout package that would have imposed a levy on bank deposits, Cyprus now faces some difficult choices in exchange for continued emergency bank funding.
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 ECRI’s "Recession" Indicators: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)
The only new ECRI-related news since last Friday’s update is a CBS Moneywatch commentary, Can the stock market rise while the economy stalls? ECRI liked the commentary well enough to reprint it on the company’s website. It basically reiterates Achuthan’s point in the "Yo-Yo Years" essay that it’s possible for the market to rise during a recession, citing three such instances (of the 15 recessions) since the Roaring Twenties.
2013-03-22 The Success of Central Bank Policy Is Not Measured By The Revenue It Generates by Team of Northern Trust
The success of central bank policy is not measured by the revenue it generates. Cyprus is a small country that could cast a long shadow. The U.S. dollar’s fortune is changing
2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors
Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.
2013-03-21 Will the Real Unemployed Please Raise Your Hands? by John Mauldin of Millennium Wave Advisors
This week’s letter will be a very short part of a book I am writing with Bill Dunkelberg (the Chief Economist of the National Federation of Independent Businesses) on the future of employment. It has taken longer to write than I initially anticipated, for a host of reasons, chief among which is that the future is not as obvious as I originally thought. Diving into the data has brought a few surprises.
2013-03-21 Cyprus as a Pandora’s Box by Scott Minerd of Guggenheim Partners
The attempt to levy a deposit tax on Cypriot accounts has the potential to further destabilize the European Union, with contagion risk elevating for other peripheral member states.
2013-03-21 Fed Still Inching Toward Optimism by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made no changes to monetary policy today and only some small changes to the language of its statement. Once again, the Fed’s comments were slightly more optimistic about the economy than they were after the prior meeting.
2013-03-21 Global Markets’ Time Factor by Mohamed El-Erian of Project Syndicate
In recent months, the dichotomy between booming financial markets and sluggish economies (and dysfunctional politics) has loomed large. The critical element of time and who controls it could well mean the difference between an orderly global resolution of today’s ongoing financial problems and a return to serious trouble.
2013-03-20 Spending Patterns Paint Half Truth by John Browne of Euro Pacific Capital
On March 13th, the Commerce Department announced a 1.1 percent increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6 percent. This new data has led to a fresh wave of enthusiastic commentaries that the US economy is set for a strong recovery. Less examined were the underlying factors that supported the increase.
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 The Eurozone Crisis: Time for a Reset by Giles Conway-Gordon of Cogo Wolf Asset Management
The crisis in the Eurozone (EZ) has reached a dangerously unstable condition, politically, socially, financially and economically. Without a return to growth in the peripheral economies a disorderly outcome is becoming probable as the debtor countries approach the 100% debt-to-GDP default horizon. They will not return to growth while they share a currency with Germany. It is time for a reset.
2013-03-19 How Strong? by Scott Brown of Raymond James
The recent economic reports have been mixed. The stock market seems to have embraced the strength and ignored the weakness. The bond market typically approaches the information in a more balanced way. How might the differences between the two markets be resolved?
2013-03-19 Gambler’s Fallacy by Jeffrey Saut of Raymond James
“My luck has gotta change” is a famous lament that has buried many a player on the crap tables. But as shown in the aforementioned “coin toss” quote, “The outcomes in different tosses are statistically independent and the probability of any outcome is still 50%.” While that’s true in gambling, it is not so true in the stock market. The fact is, there are certain historic precedents in the stock market that can tilt the odds of success decidedly in your favor.
2013-03-19 Things Could Get Bumpy But Hang in There? by Christian Thwaites of Sentinel Investments
The quality of the Fed’s Flow of Funds data is about as comprehensive a balance sheet assessment of corporate and private America as you could wish for. It’s also great for looking at trends rather than the hot spots over which the market frets. Here are some of the findings:
2013-03-18 And That’s the Week That Was by Ron Brounes of Brounes & Associates
Move over Dow Jones, here comes the S&P. What few thought possible a year ago is coming to fruition as the major indexes continue to push toward record territory. The S&P 500 is close (but no cigar) to besting its personal high set in late 2007, before this whole banking mess emerged and sent equities into a tailspin. Confident investors seemed to be overlooking the numerous concerns (budget/sequester, payroll taxes, Europe, China) so they can participate in the record run.
2013-03-18 M&A and Dividends Likely Drivers of the Market by Charlie Dreifus of The Royce Funds
The sequester adds to the economic headwinds caused by ending the payroll tax holiday and the boost in tax rates. However, even with the sequester, total federal government outlays will rise this fiscal year. Finally, after more than a month of daily increases for a gallon of unleaded gasoline, prices are now declining. This has been of concern as rising oil and gasoline prices were yet another headwind facing the U.S. economy. (Oil prices have also declined.)
2013-03-18 Conflicting Data and Market and Credit Risk by Gregg Bienstock of Lumesis
Conflicting data and information is everywhere. The equity markets make new highs, the talking heads on the various business shows talk of the new bull run, unemployment is down and a recent article in Barron’s highlights the fact that “State tax revenues have increased for 11 quarters running fueled by a recovery in home prices” (citing BlackRock). Others challenge the recently released employment numbers saying the headlines do not tell the whole story and, once the Fed steps back and the inevitable budget cuts (less increases) come, the economy’s true status will b
2013-03-18 Investment, Speculation, Valuation, and Tinker Bell by John Hussman of Hussman Funds
The most important questions investors should be asking are these: what do they know that can be demonstrated to be true; and what do they believe that can be demonstrated to be untrue. It is best to make these distinctions deliberately, lest the financial markets clarify these distinctions for investors later, against investors’ will, and at great cost.
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.
2013-03-18 5 Reasons to Still Like (but not Love) Stocks by David Kelly of JP Morgan Funds
While investors have been justifiably worried that the combination of the big tax hikes of January and the Sequester in March could lead to an economic slump, so far the numbers are reassuring.
2013-03-15 Waiting on Weakness? by Mike Boyle of Advisors Asset Management
On Tuesday, March 5, The Dow Jones Industrial Average (DJIA) set a new record close at a level of 14,253.8 (old record of 14,164.5 was set on 10/09/07). Since then it has gone on to set four more consecutive record-closing highs. The S&P 500, at a closing level of 1556.2 on 3/11/13, is still about nine points shy of its record high of 1565.2 (also set on 10/09/07), but it is up seven days in a row and the odds of that occurring are about 1.17%.
2013-03-15 ECRI’s Recession Call: Proprietary Indicators Still Not Cooperating by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in today’s update. It is now at 129.9 versus the previous week’s 129.5 (revised upward from 129.3). The WLI annualized growth indicator (WLIg) has eased, now at 6.3, down from last week’s 6.4 (an upward revision from 6.2).
2013-03-15 The Big Four Economic Indicators: Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)
With the exception of Real Personal Income Less Transfer Payments (e.g., Social Security, Supplementary Security Income, workers compensation, etc.), the Big Four continue to show expansion. The seemingly bizarre income data is the result of the end-of-year strategy of early bonuses and moving forward of 2013 income to avoid higher taxes. We’ve seen this situation before in the 1990s. The PI anomaly is the reason the average for the Big Four (the gray line above) has shows contraction for the past two months.
2013-03-15 Global Economic Overview by Team of Thomas White International
Global economic trends largely remained positive during February, though the stalemate after the Italian elections and the failure by policymakers to reach a deal to avoid the U.S. sequester heightened the political and policy risks. The U.S. GDP figure for the last quarter of 2012 was revised higher, showing the world’s largest economy managed to avoid a decline.
2013-03-15 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Despite exceptionally easy monetary policy, inflation risk remains low. Record stock market levels are boosting consumer spending. U.S. capital spending is poised to be a bright spot this year.
2013-03-15 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 Excess Liquidity Finds a Home by Scott Minerd of Guggenheim Partners
U.S. home prices appear likely to continue to rise as the Federal Reserve injects more liquidity into the system. Given housing’s unique characteristics, this will have positive effects for consumption and growth.
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 Global Currency Battles: A Waiting Disaster or a Win for All? by Team of Knowledge @ Wharton
To many, Japan’s recent moves to devalue the yen looked like the spark that could ignite a global currency war -- a series of competitive devaluations that, last century, helped plunge the world into the Great Depression. Until now, central bankers have been resisting the urge to politicize exchange rates. However, while currency skirmishes can be dangerous and require monitoring, they are also necessary for establishing equilibrium in markets and will help in the global economic recovery, some experts say.
2013-03-13 Some Stunning Demographic Trends in Employment by Doug Short of Advisor Perspectives (dshort.com)
I spent much of yesterday reviewing the latest employment report from the Bureau of Labor Statistics (BLS). They have a wealth of employment data, much of which stretches back to 1948. My focus was the Labor Force Participation Rate (LFPR) with some specific attention to gender and age. The LFPR is a simple computation: You take the Civilian Labor Force and divide it by the Civilian Noninstitutional Population. The result is the participation rate expressed as a percent.
2013-03-13 Argentina on Sale by John Mauldin of Millennium Wave Advisors
(From Cafayate, Argentina) There are some who worry whether the path that Argentina has taken to monetary ruin on multiple occasions (and that it seems intent on taking again) is one that the US may also find itself on. That worry has crossed my mind a few times, I must confess. Today we will look at Argentina more in depth. From a monetary perspective, it deserves attention. And once again there will be opportunity.
2013-03-13 Dow--Then and Now by Frank Holmes of U.S. Global Investors
The Dow Jones Industrial Average is making record highs, knocking the 2007 peak off its pedestal, but investors aren’t celebrating.
2013-03-12 Gundlach: Investors are asking the Wrong Question by Robert Huebscher (Article)
If you're trying to assess the Federal Reserve's so-called exit strategy from quantitative easing, then you're asking the wrong question, according to Doubleline's Jeffrey Gundlach. Quantitative easing is a permanent policy tool, he said, and investors should be asking what that means for their investment strategy.
2013-03-12 Finally, a Jobs Report Worth Reading by Chris Maxey, Ryan Davis of Fortigent
Surprisingly, the February employment report showed a labor market growing at a reasonably healthy rate. Concerns that the sequester would spill into the broader economy have yet to materialize and if recent trends hold, the economy may finally be approaching a point of robust and sustainable job growth.
2013-03-12 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks rose each day last week as the notion of a ho-hum global economy was reassuring to those who fear either a recession or a surge in economic activity.
2013-03-12 The Plow Horse is Trotting by Brian Wesbury, Bob Stein of First Trust Advisors
In October 2012, we raised our recession odds from 10% to 25%. We saw an increase in uncertainty and fear over the election and the fiscal cliff as having the potential to cause a drop in velocity. Panics (falling velocity) are rare. As a result, our base case (75% odds) was for a 2.5% to 3% increase in real GDP for 2013. Real GDP increased just 0.1% in Q4, but now it appears the Plow Horse is starting to trot a little.
2013-03-12 We Made It. Now What? by Christian Thwaites of Sentinel Investments
What looks like a fairly settled policy in Europe is fast becoming a very dangerous situation, according to Christian Thwaites in his latest "Thought of the Week" -- "We Made It. Now What?" -- adding that the outlook for the world's second largest economic bloc is pretty week.
2013-03-12 The Retirement Income Problem by Rob Isbitts of Sungarden Investment Research
The most vital and pervasive issue investors will face in the next decade is how to wring out enough income from the savings they have amassed to maintain or enhance their lifestyle. To do so, they will need to be far more flexible in their investment approach. They also must adapt to an environment for "high quality bonds" (Treasuries, Municipals and Corporates) that does not at all resemble that which they are accustomed to.
2013-03-12 The 2030 Increasing Inequality Scenario by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
Last month we started looking at the 2030 alternative world development scenarios as laid out by the National Intelligence Council (NIC). The NIC forecasts the likely paths that are either currently underway or are forecast to occur in the future. In its most recent report, the NIC projects four possible global political and economic states based on expected trends. Last time, we presented the most likely best case scenario. This week, we will explore the third scenario, under which the world gets wealthier as a whole, but inequalities increase.
2013-03-12 Spring Thaw by Jerry Wagner of Flexible Plan Investments
The first thing you notice when you are landing at Detroit Metro Airport in the winter after two weeks in the Caribbean is whether or not there is snow on the ground. I am pleased to report that other than a few clumps left by the snow plows or swept by the wind into the empty furrows and fenced-in corners of a farmer's field, the six inches that covered everything when I left have largely disappeared.
2013-03-11 Two Myths and a Legend by John Hussman of Hussman Funds
The present market euphoria appears to be driven by two myths and a legend. Make no mistake. When investors cannot possibly think of any reason why stocks could decline, and are convinced that universally recognized factors are sufficient to drive prices perpetually higher, euphoria is the proper term.
2013-03-11 In-Plan Roth 401(k) Conversions Part 1 by Jon Vogler of Invesco
A January 2013 survey by Aon Hewitt found that an increasing number of US employers plan to add a Roth option to their retirement plans over the next 12 months. The survey results come shortly after a provision in the American Taxpayer Relief Act (the "fiscal cliff" tax act adopted in January) gave workers a chance to stockpile more tax-free earnings as long as their employers' 401(k) plans include a Roth option, along with the ability to move assets accumulated in tax-deferred 401(k) accounts.
2013-03-11 And That's the Week That Was by Ron Brounes of Brounes & Associates
Stocks moved to record highs (Dow Jones) early in the week and never looked back. Some favorable economic data, particularly from labor, renewed investors' confidence and others jumped on as the week progressed to participate in the friendly trend. Even with the spending cuts from sequester threatening to weaken the economy, investors focused more on the present than the future. Though naysayers scoff at the recent moves and claim the economic strength is at least partially artificially Fed induced, their voices have been silenced for now.
2013-03-11 The Job Market: Not As Strong As It Looks by Scott Brown of Raymond James
With headwinds fading, the U.S. economic recovery appeared poised to pick up more substantially in 2013. Unfortunately, fiscal policy is going in the wrong direction.
2013-03-11 Spring is in the Air, Who's Buying Fixed Income and Exports by Gregg Bienstock of Lumesis
This week we start with a look at some bizarre coincidences that have us wondering if it is Spring that is the cause. We next look at who is buying so much debt and to contemplate the implications for the muni market. We conclude with a look at Exports and a reminder that the world really is a small place.
2013-03-08 Three Trends Will Shake American Businesses Out Of Paralysis by Mike Temple of Pioneer Investments
On-shoring, energy infrastructure reinvestment and plant replacement are three trends in the making that will shake American business out of paralysis. In the last "Bond Deer in the Headlights," I outlined the "Monetary Abolitionists" assertion that out-of-control government spending, made acceptable by historically low interest rates, was responsible for corporate paralysis in investing and hiring.
2013-03-08 Flying High by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners
The media has made a spectacle out of the Dow Jones Industrial Average reaching new all-time highs. The Dow Jones Industrial Average and the S&P 500 indices do not include the compounding effect of dividends paid by member companies. Any retiree will tell you that dividends represent a return of capital and useful income in the real economy. If you had reinvested those dividends back in the index as they were paid, the old time highs reached in October of 2007 likely would have been passed some time ago.
2013-03-08 Spasmodic Stupidity: The Wile E. Coyote Congress by Cliff Draughn of Excelsia Investment Advisors
I predict the Ides of March will find us in a continued sequestration, and Congress will use the time between now and the debt ceiling deadline on March 27th to debate the merits of true tax reform as opposed to governing by crisis. In the end, though, the reform conversation will revert to governance by crisis, with another stop-gap measure to avoid government shutdown during Holy Week and Easter, which will tide us over to the elections of 2014. Do you expect any different?
2013-03-08 Labor Policy Needs to Help, Not Hinder Employment. by Team of Northern Trust
Labor policy needs to help, not hinder employment. The U.S. employment report surprised on the upside. Watch the shadows behind China's official credit measures
2013-03-08 How to Keep Calm and Invest On by Frank Holmes of U.S. Global Investors
The market noise of today will not be going away. However, investors can gain confidence in the following wisdom of the crowd. As famous investor Benjamin Graham said, "The individual investor should act consistently as an investor and not as a speculator. Keep calm and invest on.
2013-03-07 When Will the Music Stop? by Scott Minerd of Guggenheim Partners
The investment environment is in transition, with uncertainty around policy moves contributing an increasing amount of uncertainty for asset prices.
2013-03-06 How Big a Problem will the Sequester be for the U.S. Economy? by Sam Wardwell of Pioneer Investments
Having dodged the fiscal cliff and postponed the debt ceiling deadline, Congress decided to let the spending sequesters happen. Will the result be to throw the economy into recession or cause an economic catastrophe? We don't think so, and neither does Congress.
2013-03-06 Liquidity Tiering for Higher Yields in the Tax-Free Market by Duane McAllister, John Bortizke of BMO Global Asset Management
In today's low-yield environment, investors need a fresh approach to managing their portfolios for higher income. Liquidity tiering provides a framework that can help you achieve both principal stability and yields sufficient to meet your goals.
2013-03-06 Why Our Best Ideas Come In The Shower and Why They Are So Hard To Remember by Gary Halbert of Halbert Wealth Management
I don't know about you, but I have had some of my best and most creative ideas while in the shower. But the shower is not the only place or activity where we tend to be more creative. Our creative juices can frequently be stimulated when doing other things as well such as driving home from work, during or after exercise, cooking, meditating, etc.
2013-03-05 What Economists can Learn from Downton Abbey by Robert Huebscher (Article)
Economists warn that the U.S. economy could be heading toward one of two catastrophes: the two-decade long stagnation that has befallen Japan, or the hyperinflation that struck Zimbabwe and the Weimar Republic. Such cautionary tales alert policymakers to the failed efforts of their predecessors. But the most relevant comparison is rarely cited – to Great Britain in the 1920s, as depicted in the highly popular PBS series Downton Abbey.
2013-03-05 Understanding the Risk in Bonds by Charles Lieberman of Advisors Capital Management
Treasury bond prices rallied this past week, as sequestration promised to act as a drag on growth, while a very messy election result in Italy also pushed safe haven investors into Treasuries. Both factors are likely to be short lived insofar as they support bond prices. Interest rates are likely to head higher even with Fed policy likely to remain highly accommodative. Initially, longer maturity bond prices will decline and the yield curve will steepen.
2013-03-05 Weave a Circle Round Us Thrice by Christian Thwaites of Sentinel Investments
There was plenty of news to threaten the recent market rallies but, as of writing, we're within a whisper of all time highs in US stocks and managing to have a very orderly consolidation in bonds. This is surprising because the political process has once again taken careful aim and shot itself in the foot. The sequester has become the dumb answer to difficult questions and will initiate, mostly indiscriminate, across-the-board cuts.
2013-03-05 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks drifted last week, buffeted by concerns over Europe due to the Italian elections and worries here at home as the "dreaded" sequester begins to take effect.
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 Reflections on Sequester by Bill O'Grady of Confluence Investment Management
Over the past several weeks, the notion of sequester, a plan of across the board spending cuts, has been dominating the news. The sequester was a program designed to never go into effect. In the dark days of 2011, when the debt ceiling debate threatened to cause the U.S. to default on its debt, the administration and the House GOP made a deal. In return for a higher debt ceiling, one high enough to ensure that it would not be hit before the 2012 presidential elections, a commission was tasked to make significant cuts to fiscal spending.
2013-03-04 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The sky is falling. The sky is falling. It's the millennium all over again. (How did those fears work out?) With politicos unable to reach any agreement on the budget (taxes), the "dumb, arbitrary" spending cuts began to take effect to the tune of $85 billion this year. (So much for a military preparedness.) Though the impact on the economy will not be felt overnight, some areas will begin to suffer sooner than others and biz/consumer confidence could become an issue in the near future.
2013-03-04 Federal Government Employment, Tax Exemption and the Drought by Gregg Bienstock of Lumesis
This week we focus very briefly on the sequester and Federal government employment and then revisit a subject that has faded but has the potential to reappear this Spring and Summer (the drought) and conclude with a quick look at housing prices. Well, as expected (how awful that this is what I've come to expect from our elected officials), the can was kicked down the road.
2013-03-04 Out On A Limb - An Investor's Guide to X-treme Monetary and Fiscal Conditions by John Hussman of Hussman Funds
Massive policy responses, directed toward ineffective ends, are scarcely better than no policy response at all. A look at the current monetary and fiscal policy environment, as well as more effective policy initiatives, and why they make sense.
2013-03-04 What is Italy Saying? by Joseph Stiglitz of Project Syndicate
The outcome of the Italian elections should send a clear message to Europe's leaders: the austerity policies that they have pursued are being rejected by voters. Indeed, it will take a decade or more to recover the losses that austerity has wrought.
2013-03-04 Health Care Reform: A Q&A With Our Municipal Bond Experts by Shari Sikes, Art Schloss of Invesco
Health care reform took center stage in the last year as the Supreme Court upheld the Patient Protection and Affordable Care Act of 2010 (ACA), affirming the constitutionality of portions of the law. The decision made it possible for major health care reform to proceed. This January, health care spending again was at the forefront during the fiscal cliff debate as a means to reduce government spending. Health care is poised to remain at the center of this discussion until a federal budget deal is reached.
2013-03-01 What Are The FOMC Minutes Telling Us? by Zach Pandl of Columbia Management
The release of the minutes of the January Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) caused a tremor in the bedrock of investor euphoria last week. The minutes confirmed that the cost/benefit analysis of quantitative easing (QE) is at center of policy debate right now. However, the minutes did not provide a definitive signal that the program may be cut short. In particular, it is not clear where Chairman Bernanke and Vice Chair Yellen stand. I believe the level of debate slightly raises the odds that QE will end this year.
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 ProVise Bullets by Ray Ferrara of ProVise Management Group
With the battle over sequestration going on in Washington, the President has made it clear he wants to raise more revenue. Just what does he have in mind? First, he would like to limit itemized deductions beginning at the 28% tax bracket. This means that taxpayers in the top three brackets would lose some of the benefit of their itemized deductions. Of course, these deductions have a phase out, so the effect may not be as great as is perceived.
2013-03-01 The Fed's Tightening Pipe Dream by Peter Schiff of Euro Pacific Precious Metals
Testifying before the US Senate this past Tuesday, Fed Chairman Ben Bernanke made an extraordinary claim about its bloated balance sheet: "We could exit without ever selling by letting it run off." What Bernanke means here is that the Fed could simply hold its Treasuries and agency bonds until they mature, at which point the government would then be forced to pay the Fed back the principal amount. Through this process, the Fed's unprecedented and inflationary position will be gradually and placidly unwound.
2013-03-01 The Big Four Economic Indicators: Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)
I've now updated this commentary to include the January Personal Income data, the red line in the chart below. As expected, the January brought the inevitable reversal of the dramatic advance in the November and December data, which was a result of moving income forward to manage the tax risk in anticipation of the Fiscal Cliff. The -4.7% decline in January essentially cancels the 1.4% rise in November and 3% rise in December.
2013-03-01 There Are More Sellers Than Buyers in the World Economy. by Team of Northern Trust
There are more sellers than buyers in the world economy. The recent Italian election may usher in renewed instability. US bank lending is finally expanding, but not everyone is happy about it.
2013-03-01 Global Volatility by Josh Thimons of PIMCO
The Fed's new communication strategy may, in fact, be a more sensible policy prescription than calendar rate guidance. We expect increased market volatility, particularly around economic data releases. Investors with an understanding of the Fed's now increasingly transparent reaction function will find opportunities to profit in the volatility markets. According to our model of the Feds reaction function, presently every .25 of a percent unexpected change in the unemployment rate is likely to lead to roughly an 11 basis point change in the five-year Treasury yield.
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.
2013-02-28 An Ephemeral Swoon by Scott Minerd of Guggenheim Partners
Although volatility is likely to stay relatively high going forward, the recent move in the markets to risk-off mode appears to be a temporary condition.
2013-02-28 What Italy's Election Result May Mean for the Markets and Your Investment Portfolio? by Team of Thomas White International
Global equity and bond markets have reacted sharply to the outcome of Italy's elections on February 24-25. The poll result is inconclusive, with no clear winner. And apparently, Italians have voted against the austerity measures and reforms that are widely believed to have improved international confidence in Italy last year.
2013-02-27 Impending Decline in Stock Prices by Charles Lieberman of Advisors Capital Management
It is a popular view that stocks have run up excessively, rising more than 125% off the March 9 2009 low, and are now highly vulnerable to a sizable retrenchment. This is a sexy idea, but also quite contentious. Nonetheless, it is worth considering seriously.
2013-02-27 Rational Temperance by Bill Gross of PIMCO
While the market was indeed moving in the direction of "dot-com" fever three to four years later, the Dow Jones Industrial Average at the time was a relatively anorexic 6,000, and the trailing P/E ratio was only 12x. For a central bank that was then more concerned about economic growth and inflation as opposed to stock prices, risk spreads, and artificially suppressed interest rates, the Chairman's query made global headlines, became a book title for Professor Robert Shiller and a strategic beacon for portfolio managers thereafter.
2013-02-27 The Healthcare Blues by John Mauldin of Millennium Wave Advisors
It has been some time since we peeked into my worry closet. A few questions this weekend prompted me to think about things I am paying attention to but have not written about, and one thing that I am not worried about at all, despite the apparent media hysteria.
2013-02-27 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 Pew: Americans Have Little Will to Cut Spending by Gary Halbert of Halbert Wealth Management
The Pew Research Center released a new national poll on Friday and the results are quite surprising. As the March 1 deadline for a possible budget sequester approaches, the new Pew survey finds limited public support for reducing spending for a wide range of government programs, including defense, entitlements, education and health care.
2013-02-27 The Great Migration by Herbert Abramson, Randall Abramson of Trapeze Asset Management
We are value investors dedicated to creating portfolios for clients, whether growth (equities), income or a balanced blend of both, of undervalued securities with meaningful upside potential and a margin of safety to guard against permanent loss. For us, the bottom-up factors are the most compelling, but we are also mindful that we need to take account of the top-down macro factors. We know how the Crash of ꞌ08 and the accompanying recession created havoc for investors, including us, no matter how undervalued stocks were.
2013-02-27 Singapore A Wise Owl Among Currency Snakes by John Browne of Euro Pacific Capital
As China enters the "Year of the Snake," Singapore stands as a beacon of sound currency in a world gone mad. China's renminbi remains pegged to the US dollar, while even steadfast Switzerland has followed the US, UK, EU, and Japan into an impoverishing strategy of currency debasement. Singapore, alone, has been able to sustain genuine economic growth in the context of a strong national currency.
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.
2013-02-26 Looking For A Reason To Sell-Off by Christian W. Thwaites of Sentinel Investments
Markets were looking for a reason to correct. Risk assets had outpaced themselves since mid November and in the first seven weeks the S&P[1] had outperformed the US Treasury 10-year note by 12% and the 30-year bond by 15%. The markets will lumber through the sequester and face the next test on the debt ceiling and first quarter results. Below the surface, the outlook is mildly optimistic. Why the qualifier? Because everything, in Europe, US and Japan, must be set in the context of the asset deflation and deleveraging going on and that will go on for some years.
2013-02-26 Sudden Discomfort by Scott J. Brown of Raymond James
Minutes of the January 29-30 meeting of the Federal Open Market Committee showed a growing discomfort with the Feds Large-Scale Asset Purchase program (QE3). Thats not all that surprising. Even those who strongly favor the program arent exactly happy with it. However, thats a far cry from wanting to end the program anytime soon. We should learn more this week as Fed Chairman Bernanke delivers his semiannual monetary policy testimony (Tuesday and Wednesday).
2013-02-25 Fed Will Make Excuses About Inflation by Brian S. Wesbury and Robert Stein of First Trust Advisors
Inflation is tame. For now. The CPI was flat in January and is up only 1.6% from a year ago. The PPI rose a small 0.2% in January and is up just 1.4% from a year ago. And even though energy prices spiked in February, the year ago comparisons are likely to stay tame. The consensus expects the February CPI to rise 0.6% - the largest in 44 months. Nonetheless, it would still show just 1.9% inflation in the past year, which is still below the Federal Reserves target of 2%. This wont last. With the Fed loose; we expect consumer prices to rise toward 3% during 2013.
2013-02-22 Only Do What Only You Can Do by Satya Patel of Matthews Asia
Sri Lanka is a tiny country of approximately 21 million people, with roughly the same population as the city of Mumbai and a total land mass nearly as big as Ireland and slightly bigger than the U.S. state of West Virginia. Despite being diminutive relative to other Asian countries, exports are an important part of Sri Lanka's economy, just as they are for its neighbors.
2013-02-22 January 2013 Market Commentary by Andrew Clinton of Clinton Investment Management
The municipal bond market continues to perform well in the face of significant political, financial and economic uncertainty, once again, demonstrating the importance of consistent, competitive tax-free cash flow. Municipal bonds proved to be one of the best performing asset classes during 2012.
2013-02-22 Central Banks Are Factoring Financial Stability into Their Decision Making by Team of Northern Trust
Central banks are factoring financial stability into their decision making. The FOMC is taking a critical look at its asset purchase strategy. Don't look now, but the sequester is coming.
2013-02-22 Is it Time to Review Your European Investment Strategy? by Team of Thomas White International
A sharp equity and bond market reaction is likely expected in response to the outcome of Italy's February 24-25 general elections, several media sources such as THE GLOBE AND MAIL have reported. While the poll result is uncertain, these reports indicate that in the event of a clear victory for Silvio Berlusconi's political party, buying interest in equities and lower-quality debt may be affected.
2013-02-22 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.
2013-02-21 Fed Must Tune in to Changing US Economy by Joseph Carson of AllianceBernstein
With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What's changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble?
2013-02-20 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Tick Tick Tick. The President has plans for improving life in America. Tick Tick Tick. Republicans want to fix the middle class (and restricting taxes on the upper class may help). Tick Tick Tick. Earnings reports look good, but forecasts for the current quarter have been lowered. Tick Tick Tick. Weekly jobless claims keep falling, but major corporations are announcing layoffs. Tick Tick Tick. Sales figures show growth, but Wal-Mart and others are worried. Tick Tick Tick.
2013-02-20 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The single biggest predictor of financial growth is not how much money we have stashed away in secret savings accounts, but how much confidence we feel about a fair return for the deployment of those dollars. In that sense, corporations and individuals alike uniformly adhere to a quid pro quo matrix. Investing must be fair; it must be reasonable; and, win or lose, it must be swathed in aspiration that makes us feel worth making the investment in the first place.
2013-02-20 Stock Market Lingers At A Precarious Place by Gary Halbert of Halbert Wealth Management
The Dow Jones Industrial Average has flirted with its all-time high of 14,198 twice in February as the Dow managed to rise above the 14,000 mark but then fell back. The S&P 500 Index is not quite as close to its all-time high, but it is within striking distance. There is widespread optimism that both indexes can break-out to new record highs, which would likely spark a new buying surge.
2013-02-20 Whatever It Takes by John Mauldin of Millennium Wave Advisors
Was it only a few years ago I visited the Emerald Isle of Ireland? The collapse of its largest banks foreshadowed the demise of many other European banks that had borrowed money from British, German, and other European banks to lend against homes and property. The Irish government had to guarantee deposits and bond holders in order to prevent a bank run. I think I am correct when I state that the Central Bank of Ireland was the first central bank to avail itself of large-scale use of the Emergency Liquidity Assistance (ELA) provision of the European Central Bank.
2013-02-19 Letter to the Editor by Various (Article)
A reader responds to Gary Halbert's commentary, The Economy: Worst Five Years Since the Depression, which appeared on February 13.
2013-02-19 The Pound Gets Pounded by Peter Schiff of Euro Pacific Capital
As the global currency war intensifies, the majority of attention has been paid to the 17% fall of the Japanese yen against the U.S. dollar over the past few months. The implosion has given cover to the sad performance of another once mighty currency: the British pound sterling. But in many ways the travails of the pound is far more instructive to those pondering the fate of the U.S. currency.
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.
2013-02-19 On Competitive Devaluations by Scott Brown of Raymond James
Aggressive monetary policy moves in recent years have been accompanied by a growing fear of a currency war. In a currency war, or competitive devaluation, countries attempt to weaken their currencies to boost exports, but each devaluation leads to counter devaluations. That's not what's going on now. However, whether a country is purposely devaluing its currency or is merely pursuing accommodative monetary policy is irrelevant, the consequences are the same. The recent meeting of G-20 finance ministers and central bankers highlights the lack of coherent policies to boost growth.
2013-02-16 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
The recent energy dividend is not likely to last. Crafting a single monetary policy for Europe is challenging.
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 ProVise Bullets by Ray Ferrara of ProVise Management Group
So, what is the top tax bracket next year? For couples with earnings over $450,000, it is 39.6%. Oh, no. We're sorry. It's potentially another 1.19% which is the amount that is added to the marginal rate due to the cut-backs in itemized deductions. Therefore, the top tax rate is 40.79%. Oh, no. We're sorry. You could also lose your personal exemptions, which will add as much as another 1.05%, so the top tax bracket is 41.84%. Oh, no. We're sorry. We forgot the Medicare surtax on high wage earners of 0.9%, making the top tax bracket 42.74%. Oh, no. We're sorry.
2013-02-15 Hyperinflations, Hysteria, and False Memories by James Montier of GMO
In the past, Ive admitted to macroeconomics being one of my dark, guilty pleasures. To some value investors this seems like heresy, as Marty Whitman1 once wrote, Graham and Dodd view macro factors...as crucial to the analysis of a corporate security. Value investors, however, believe that macro factors are irrelevant. I am clearly a Graham and Doddite on this measure (and most others as well).
2013-02-14 When Politics Trump Economics by Scott Minerd of Guggenheim Partners
The U.S. economic expansion continues, but increasing attention to political risks, and currency wars, in particular, indicate a period of heightened volatility could be ahead.
2013-02-14 A Bold New Direction for Japan\'s Economy by Team of Knowledge @ Wharton
Newly elected Prime Minister Shinzo Abe wants to take Japan's economy in a daring new direction to end 20 years of stagnation and deflation. His policies resemble past efforts -- but with far more firepower behind them. That means even looser monetary policies and a sharp rise in government spending to boost demand. Some analysts say it's just the medicine Japan needs and, on the spending side at least, the opposite of what Europe and the U.S. are doing.
2013-02-14 Quarterly Commentary by Robert Sanborn of Sanborn Kilcollin Partners
In the macro sense, 2012 was the ultimate "kick the can"/"keep the lid on" year. The US elections validated the status quo, as prediction markets such as Intrade indicated they would throughout the entire year. In Europe, the most important event of the year was ECB head Mario Draghi's July statement that the ECB would do "whatever it takes" to keep the Euro-zone together, and the second half of the year was relatively quiet on that front.
2013-02-13 Concerned by Recent Economic Data? Look Closer by Marco Pirondini of Pioneer Investments
We've seen a lot of GDP data recently that, at first look, may seem a bit concerning. But if we take a moment for analysis, much of the news is actually good for the economy and the markets.
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.
2013-02-13 Global Economic Overview January 2013 by Team of Thomas White International
Global economic trends continued the moderate positive momentum from earlier months and helped sustain investor sentiment in January. The unexpected decline in U.S. economic output for the fourth quarter of last year was mostly due to a sharp fall in government spending and a smaller inventory buildup, while consumer and business spending exceeded forecasts. Also, recent data suggest that U.S. labor market gains during last year were better than earlier estimates.
2013-02-13 The Economy: Worst Five Years Since the Depression by Gary Halbert of Halbert Wealth Management
While the many facts and figures below are disappointing, even depressing, Americans need to know the truth about the real state of our economy and our union. Consider what follows as a rebuttal to President Obama's speech tonight. Feel free to forward this to as many people as you wish.
2013-02-12 The Milton Friedman Centenary: One Hundred Years of Surprisingly Little Solitude by Laurence B. Siegel (Article)
Milton Friedman was once a lonely voice for capitalism in a collectivist era, and seemed doomed to a hundred years of solitude. Instead, he arguably became the preeminent public intellectual of the hundred years that followed his 1912 birth.
2013-02-12 Currency Wars? What Currency Wars? by Christian Thwaites of Sentinel Investments
There's much talk of currency wars right now. We think they're way overblown. The source of the problem lies with Japan, which has made explicit a strategy to lower the yen, increase domestic demand and increase inflation. It needs to do all three. The twenty year old balance sheet recession and deflation in Japan has been a costly error in targeting inflation and not much else.
2013-02-11 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.
2013-02-11 There the Bears Go Again by Brian Wesbury, Bob Stein of First Trust Advisors
The S&P 500 is up 6% since the start of the year and 12% from a year ago. On cue, the bears have started to claim this run-up in stocks is just plain crazy, based on unreasonable euphoria or "it's just technical." It cant possibly last because "the fundamentals are bad."
2013-02-08 World War C: Neosho Capital On The Currency War by Chris Richey of Neosho Capital
This summer, Brad Pitt will star in a new film called "World War Z", an action-horror film about a post-zombie apocalypse Earth, hence the "Z" in the title. Zombie films are not our cup of tea at Neosho (we thought the genre was dead), so it is debatable whether we will see this film, but one thing is clear to us, we are perched on the precipice of "World War C", where "C" stands for "currency".
2013-02-08 Investing In a World of Make Believe by John Browne of Euro Pacific Capital
In recent years, a high degree of economic, financial, and political uncertainty has resulted in acute volatility in stocks, real estate, commodities and precious metals. I believe that another aggravating factor has been the increasing skepticism through which the investing public views government statistics and statements.
2013-02-08 Weekly Economic Commentary by Team of Northern Trust
Immigration reform would help the US economy at many levels. There is much going on with the US labor force participation rate. Will leadership change usher in a new era at the Bank of Japan?
2013-02-07 Echoes of 2004 by Scott Minerd of Guggenheim Partners
Rising equities and tightening credit spreads define the near-term investment outlook, but this is not the first time we have seen this cycle play out in recent memory.
2013-02-07 Investing In a World of Make Believe by John Browne of Euro Pacific Capital
In recent years, a high degree of economic, financial, and political uncertainty has resulted in acute volatility in stocks, real estate, commodities and precious metals. I believe that another aggravating factor has been the increasing skepticism through which the investing public views government statistics and statements.
2013-02-06 The January Barometer by Jeffrey Saut of Raymond James
It's that time of year again when the media is abuzz with that old stock market saying, "so goes the first week of the new year, so goes the month and so goes the year." With the S&P 500 (SPX/1513.17) better by 2.17% over the first five trading sessions of this year, and up 6.10% for the month of January, it is worth revisiting the January Barometer. Devised by Yale Hirsch in 1972, the January Barometer states that as the S&P 500 goes in January, so goes the year.
2013-02-06 The Job Market Data and the Fed by Scott Brown of Raymond James
Nonfarm payrolls fell by 2.8 million in January before seasonal adjustment, that is. Adjusted, payrolls advanced 157,000, about as expected. However, annual benchmark revisions showed a more rapid pace of job growth over the last two years a pace at odds with the Household Survey data. How might the Fed view the range of job market data?
2013-02-06 GDP Report Tanks - Is A Recession Looming? by Gary Halbert of Halbert Wealth Management
We will cover a lot of ground today. We begin with a new report from Goldman Sachs which argues that the US economy will remain the strongest in the world for many more years. The report rebuts claims that America is a nation in decline. Quite the contrary, say Goldman analysts who claim that there is a growing"awarenessof the key economic, institutional, human capital and geopolitical advantages the U.S. enjoys over other economies."
2013-02-06 What Happens When the Fed Loses Money by Zach Pandl of Columbia Management
The Federal Reserve's exit from ultra-easy monetary policy still looks very far offby most accounts, rate hikes will not begin for more than two years and asset sales for even longer. However, the exit strategy could matter for markets well before that point. Fed officials have said that they will consider the costs and risks associated with quantitative easing (QE) when deciding how long to continue their purchases, and one factor they will be looking at will be whether the program could "complicate the Committee's efforts to eventually withdraw monetary policy accommodation."
2013-02-06 The Good, the Bad, and the Greek (Risks) by John Mauldin of Millennium Wave Advisors
Greece is a small country with large implications. Last week we began to explore what I learned from my recent trip to Greece. In this week's letter we will finish those observations and in particular look at some of the comments from my meetings with over 40 people: owners of small businesses and large ones, billionaires, taxi drivers, politicians, central bankers, investors, ex-patriots, wives, and mothers. I believe we can arrive at some small understanding of the problems Greece faces. Then we will consider the broader consequences for Europe.
2013-02-06 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Earnings have come in pretty well, but the news on the economy remains dreary despite the cheerleaders in the financial media.
2013-02-05 In Uncertain Environment, Jobs Grow Tepidly by Chris Maxey, Ryan Davis of Fortigent
For the 35th consecutive month, private payrolls registered positive growth. It was hardly the robust report economists would prefer, but the labor market continues to mend. However, there are still plenty of reasons to be concerned, especially with sequestration on the horizon.
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.
2013-02-04 A Gross Underestimate by Jonathan Coleman, Soonyong Park of Janus Capital Group
As we enter 2013, we felt it would be an appropriate time to revisit one of last years most controversial predictions of future equity performance. We acknowledge that equities in general may not continue to deliver the same real rate of return they have over the last century; however, we believe the glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross' pessimistic prediction.
2013-02-04 2013 Annual Forecast by Clyde Kendzierski of Financial Solutions Group
It's that time again. January will be over by the time you read this which means we are out of holiday excuses or "just ramping up for the new year" reasons for not getting back to work. Having said that, I'd like to offer my excuse for the Annual Forecast getting to you in February instead of the first week of the year. Hand over my heart, we started early this go-round.
2013-02-04 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?
2013-02-04 A Look at California, Thoughts on Employment and Why I Worry by Gregg Bienstock of Lumesis
This week we consider recent information and data regarding California, GDP and the employment picture. We also touch on why I worry about the next six months (at least). We conclude with a wrap up of the data imported into DIVER last week and coming road trips. Also, be on the lookout for a Lumesis press release and "Topic of Interest" paper later this week.
2013-02-04 Retirement Landscape: Cliff, Clamor, Clarity and (Dis)closure by Jon Vogler of Invesco
With the November election in the rearview mirror, it's a good time to scan the retirement landscape. What can plan sponsors and plan participants expect on the regulatory and legislative fronts in the coming year? While I don't claim to have a crystal ball, there are some likely developments on the near-term retirement horizon.
2013-02-04 Some Seasonal Blips by Christian Thwaites of Sentinel Investments
We had a week of big numbers last week of which GDP, Personal Income, Durable Goods, the Conference Board's Consumer Confidence, payrolls and the FOMC were the ones that had our attention. We went to print a little earlier this week, so missed the NFPs. But this is what came at us. First GDP. There's a spin to be told but here are the raw numbers with the center column the one that caught markets wrong-footed.
2013-02-04 A Reluctant Bear's Guide to the Universe by John Hussman of Hussman Funds
In recent years, I've gained the reputation of a "perma-bear." The reality is that I'm quite a reluctant bear, in that I would greatly prefer market conditions and prospective returns to be different from what they are. There's no question that conditions and evidence will change, unless the stock market is to be bound for the next decade in what would ultimately be a low-single-digit horserace with near-zero interest rates. For my part, I think the likely shocks are larger, and the potential opportunities will be greater than investors seem to contemplate here.
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 Crystallization at Davos by Scott Minerd of Guggenheim Partners
The euphoria among my fellow Davos attendees was palpable, but short and long-term risks for the world's advanced economies, including competitive currency devaluation, remain concerning.
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 Moving the Hurdles by Scott Brown of Raymond James
The ink of my weekly piece was not even dry last Friday, when the House announced that it would vote on a three-month delay in the debt ceiling showdown. Congress now has until May 19 to raise the debt ceiling. So, the most dangerous hurdle has been moved down the track. Other hurdles remain in place.
2013-02-01 For All the Sad Words of Tongue and Pen... by Jeffrey Saut of Raymond James
"For all the sad words of tongue and pen, the saddest are these: It might have been." ... John Whittier; an influential American Quaker poet. Certainly, American poet John Greenleaf Whittier's apothegm has stood the test of time, serving as a universal lament for what "might have been." I was reminded of this maxim last week as Wall Street heard increasing laments from investors on the Street of Dreams.
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 Fiscal Cliff: Making Decisions in Crisis Part III by Brian Singer of William Blair
The December 31 fiscal cliff was averted, but by the narrowest of conceivable margins. The resolution is consistent with our November analysis, but the narrowness leaves much to be resolved and prolongs uncertainty through March.
2013-02-01 ECRI "Recession" Update: Leading Index Growth Hits Another Interim High by Doug Short of Advisor Perspectives (dshort.com)
ECRI posts its proprietary indicators on one-week delayed basis to the general public, but ECRI's Lakshman Achuthan has switched focus to his company's version of the Big Four Economic Indicators I've been tracking for the past several months. See, for example, this November 29thBloomberg video that ECRI continues to feature on their website. Achuthan pinpoints July as the business cycle peak, thus putting us in at the beginning of the eighth month of a recession.
2013-02-01 2013 Economic & Capital Market Outlook by Gregory Hahn of Winthrop Capital Management
It took our country 229 years to accumulate $8 trillion in federal debt. It only took the next eight years to double it to $16 trillion. History shows that when a country accumulates debt at this rapid pace, economic growth languishes. Not surprisingly, Congress is pursuing policies that attempt to inflate the economy. Five years after the Financial Crisis, we really havent fixed much. Instead, we've issued more debt in order to pay our bills and sustain a quality of life society cannot afford long term.
2013-02-01 The Big Four Economic Indicators: Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)
Note from dshort: This commentary has been revised to include the latest Nonfarm Employment data released today.... Nonfarm Employment rose 0.12% in January, following 0.15% and 0.18% gains in December and November, respectively. The Year-over-year increase is 1.52%. Nonfarm employment has been the tortoise of the Big Four, slow and steady. The average MoM change over the past 12 months has been 0.13%, and the range has been 0.07% to 0.20% -- no contractions.
2013-02-01 The Biggest Loser by Peter Schiff of Euro Pacific Capital
For the past few generations Switzerland has enjoyed some of the strongest economic fundamentals in the world. The country boasts a high savings rate, low taxes, strong exports, low debt-to-GDP, balanced government budgets, and prior to a few years ago one of the most responsible monetary policies in the world. These attributes made the Swiss franc one of the world's "safe haven" currencies. But in today's global economy, no good deed goes unpunished.
2013-02-01 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.
2013-02-01 Weekly Economic Commentary by Team of Northern Trust
Is the world engaged in a currency war? Januarys job report had some pleasant surprises, but more progress is needed. Purchasing managers surveys suggest growth in the US, retreat for Europe
2013-02-01 A Gross Underestimate by Jonathan Coleman and Soonyong Park of Janus Capital Group
The glum outlook for the asset class forecasted by Bill Gross last year misses the mark. Our estimates of future equity returnsbased on three different approachesall point to a meaningfully higher forecast than Gross pessimistic prediction.
2013-02-01 Look at the Bears! Look at the Bears! by Christine Hurtsellers, Matt Toms and Mike Mata of ING Investment Management
Yes, the grumbling of bond bears is reverberating in Treasury yields, but that sound isnt the death knell of a grizzly; at this point, the closest ursine analogue is Boo-Boo Bear.
2013-01-31 Q4 2012 Letter by Team of Grey Owl Capital Management
During the second half of 2012, central banks turned their massive and coordinated monetary intervention "up to eleven." This is the overwhelmingly dominant economic and market force today. Despite the long-term consequences (which are very real), we believe the central bankers commitment is steadfast. It has and will likely continue to mute both real economic and financial market volatility (at the expense of long-term growth). A deeper analysis of what has changed, our assessment of the impact, and our portfolio response follows.
2013-01-29 And That's the Week That Was by Ron Brounes of Brounes & Associates
The trend is your friend...so hopefully it will continue for a little (lot) longer. With the uncertainty of the fiscal cliff on the backburner (for now), investors seem to like what they are seeing from earnings season and in the economy. They continued to take stocks higher as the S&P 500 settled above 1500 for the first time in five years and is currently riding a eight session winning streak.
2013-01-29 Q4 2012 Market Commentary by Team of Altegris Advisors
With the end of a historically challenging year for alternative investment strategies, signs emerge of a potentially more favorable environment.
2013-01-29 How Much Help from Housing? by Alan Levenson of T. Rowe Price
We expect the ongoing recovery in new housing construction from unsustainably low levels to contribute roughly percentage point to real GDP growth this year, and emphasize the risks to the upside of this forecast. Imminent employment growth in housing-related industries will provide an important channel for secondary "multiplier" effects of the housing recovery. Applying recent house price increases to the entire stock of owner-occupied housing overstates their likely wealth effect on consumer spending.
2013-01-29 Investment Basics by Michael Kayes of Willingdon Wealth Management
I've always been curious about how famous people would have done had they pursued completely different careers. Some of our former presidents make excellent examples. For instance, Abe Lincoln towered over his contemporaries. I wonder how he would have fared as a basketball player had the game existed during his life. Our heaviest president, William Howard Taft weighed well over 300 pounds. Had football risen to prominence a few decades earlier, could gridiron greatness have been part of his resume?
2013-01-29 What Budget Problems? by Christian Thwaites of Sentinel Investments
"Vickers falls on fear of peace." There's an apocryphal story of how on the day after D-Day, the stock of Vickers, a large defense contractor, abruptly fell. I can't find the source but it was a good story going around the City some, ahem, 30 years ago. Last week there was not a lot of price action in bonds until Friday when economic upticks replaced budgets as the main driver. We saw a one point correction in treasuries. The market is right to push budget concerns into the background for now.
2013-01-28 Capitulation Everywhere by John Hussman of Hussman Funds
The bears are gone, extinct, vanished. Among the ones remaining, many are people whom even I would consider to be either permabears or nut-cases. And yet, the historical evidence for major defensiveness has rarely been stronger.
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.
2013-01-28 A Few Things to Consider. Plus a Look at Maine and Illinois by Gregg L. Bienstock of Lumesis
This week's commentary is a slight departure from our standard format. It's been a few weeks since we mentioned the fiscal cliff, sequestration and the like. This is due to our collective saturation and the perspective of so many that the problem was solved. Well, we want to provide a reminder or two and throw a few thoughts at you to kick around. We conclude with a quick look at Maine and Illinois.
2013-01-28 Is the Fed Doing the Right Thing? by Mark Oelschlager of Oak Associates Funds
After a strong 2012, the stock market is off to a good start in 2013, rising more than 5% so far in January and currently riding an eight-day winning streak (the longest since 2004). Encouraging economic data has a lot to do with this. Unemployment claims are at a 5-year low, home sales and prices are up, and consumer credit and retail sales are growing. Research firm ISI says that the current level of unemployment claims is consistent with 4% real GDP growth for the first quarter, which would be an acceleration from the sluggish growth of recent years.
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 Will Resolution of the Fiscal Cliff Squelch Consumption? by Paresh Upadhyaya of Pioneer Investments
The U.S. averted the Fiscal Cliff with passage of the "American Taxpayer Relief Act of 2012" on December 31. Economists think resolution of the Fiscal Cliff will lead to a fiscal drag of 1% on GDP and adversely affect the mainstay of the economy: the American Consumer. We're not convinced this will happen and believe tax increases overstate the related negative consumption impacts. While we expect some weakness in consumption, it is likely to be transitory and confined in the first half of 2013, before recovering above-trend in the second half.
2013-01-25 ECRI "Recession" Update: Leading Index Growth Hits a New Interim High by Doug Short of Advisor Perspectives (dshort.com)
For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article,The Tell-Tale Chart, makes clear their public focus on the Big Four.
2013-01-25 Prisoner of the Bureaucracy by John Mauldin of Millennium Wave Advisors
I wrote some time ago that Greece had a choice between Disaster A: staying in the euro; and Disaster B: leaving the euro. I have recently come back from four days in Greece, meeting with lots of people at all levels of society, and will share with you in this letter my analysis of their choices and the results. I'll also have a few things to say about what the developments in Greece might mean for the rest of Europe and the developed world.
2013-01-25 Housing Is Off the Floor, But Faces Ceilings. by Team of Northern Trust
Housing is off the floor, but faces ceilings. The cost of housing could be a source of increased inflation. January's FOMC meeting should not break any new ground.
2013-01-25 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.
2013-01-24 Beggar Thy Currency Or Thy Self? by Mohamed El-Erian of Project Syndicate
One need not be an economist to figure out that, while all currencies can depreciate against something else (like gold, land, and other real assets), by definition they cannot all depreciate against each other. Yet, when push comes to shove, country after country is being dragged into a negative dynamic of competitive depreciation.
2013-01-24 Quick Takes on the Investing Year Ahead by Sam Wardwell of Pioneer Investments
We covered a lot of market and investment topics at Pioneer's National Sales and Marketing Meeting last week. Here are some notes on a few that were popular: GDP Growth for the U.S.. Expectations for rates: Fed Funds Rate and the 10-year Treasury, EM equities favored over U.S. Equities?, Things that keep us up at night (outside of the debt ceiling, Europe, and Middle East tension.
2013-01-24 Get Your Funk Out by Jim Goff of Janus Capital Group
I manage investment professionals for a living. When an analyst gives me the positives on one hand and the negatives on the other hand, but offers no conclusion, I want to cut one of those hands off. The best analysts understand all the issues but come to well-founded views.
2013-01-24 Escape Velocity in the Economy by Scott Minerd of Guggenheim Partners
The broad improvement in U.S. economic data indicates that the economy is likely to continue to expand, supporting earnings growth and pointing to an eventual return of leveraged buy outs.
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 Is the European Crisis Over? by Chris Maxey, Ryan Davis of Fortigent
The European sovereign debt crisis that first erupted in 2010 and stoked almost three years of intense market volatility has all but faded from the front pages. Overshadowed by domestic policy issues and European Central Bank (ECB) President Mario Draghi's pledge to do "whatever it takes" to save the Eurozone, fears that the monetary union would crumble and unleash a maelstrom of financial distress appear to have dissipated.
2013-01-23 PIMCO's Secular Forum Preview by Mohamed El-Erian of PIMCO
It is almost time again for PIMCO's Secular Forum a critical part of the firm's investment process. This annual event, which takes place each May, brings together our investment professionals from around the world to debate and specify the key themes that we believe will affect the global economy and, consequently, our investment strategies over the next three to five years from asset allocation and relative value positioning to returns expectations and risk management.
2013-01-23 Avoid Disappointment, Aim Low by Christian Thwaites of Sentinel Investments
No, it's not a life aspiration. But it can work when it comes to investing. We had a rush of gains coming into the end of the year with the S&P up 22% over the year. But it's also one of the more relaxed markets and start we've had in years. The political agenda is still front and clear and we're in a lull until the debt ceiling arguments gain steam. The markets know this but seem comfortably complacent. They're probably right to be.
2013-01-23 It's What You Learn After You Know It All That Counts. by Jeffrey Saut of Raymond James
January is the time of year when strategists, economists, gurus, etc. all join in on the annual nonsense of predicting "What's going to happen in the markets for 2013?" For many, this ritual is an ego trip, yet as Benjamin Graham inferred forecasting where the markets will be a year from now is nothing more than rank speculation. Or as I have noted, "You might as well flip a lucky penny."
2013-01-23 Developed Asia Pacific: Regional Economic Review - 4Q 2012 by Team of Thomas White International
Developed Asia Pacific economies witnessed mixed economic fortunes during the fourth quarter of 2012. While the group's largest economy, Japan, suffered from stubborn deflation and slumping trade due to a bitter territorial dispute with China, Singapore and Hong Kong managed to fare better.
2013-01-22 Sunglasses and Cockroaches – Six Rules for Surviving in a Bear Market by Michael Skocpol (Article)
After more than three decades investing in Japanese securities, Peter Tasker has little patience for other investors' self-pity – and he doesn't want to hear your horror stories from 2008. Overcoming the challenges posed by bear markets requires the adaptive instincts of a cockroach, and Tasker identified six lessons investors can take away from those lowly insects.
2013-01-22 The Political Cliff by Lawrence Grossman (Article)
Cliff-dwelling politicians are sending our country toward insolvency. Averting this crisis requires unconventional yet bold thinking. I propose such a plan.
2013-01-22 2013 Investment Outlook by Jeremy Boynton of Laureate Wealth Management
I would like to focus this commentary on three trends which I believe will have a larger positive impact on the US economy going forward than the broader investment community expects.
2013-01-22 And That's The Week That Was by Ron Brounes of Brounes & Associates
Tragedy in Algeria brought another reminder about just how dangerous the world can be. Oil prices rose on the enhanced turmoil in the region as well as on news that supplies unexpectedly dropped in the recent gov report. Financials led earnings season in a mostly positive way, though several releases included reminders about the financial crisis and the greed factor of certain professionals. The favorable economic data was well received as S&P 500 index again hit a five-year high though even the optimists remain cautious as the budget negotiations yield little positive results.
2013-01-22 Equities Set to Break Out of the Bear Trap by Catherine Wood of AllianceBernstein
In the face of significant uncertainties, US and global equities rallied in 2012 and at the start of the New Year. We think there might be more to come as stocks break out of the bear trap.
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 Consumer Staples: Don't Overpay for Safety by Russ Koesterich of iShares Blog
Many investors have flocked to the perceived safety of defensive sectors over the past few years, including consumer staples. But Russ gives three reasons they might want to think twice about the sector now.
2013-01-22 Puppet Show by John Hussman of Hussman Funds
What's fascinating is that in the presence of what are not thin strings, but massive cables supporting the economy like a puppet, the only response that Wall Street can muster is "Hey! He's walking!" as if the puppet is capable of motion without being propped up to a nearly reckless extent.
2013-01-22 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.
2013-01-19 France and the UK Could Be the Lynchpins of Europe by John Browne of Euro Pacific Capital
While the problems of Europe appear to be contained, under the surface the problems are getting more dire by the day.
2013-01-18 Middle East/Africa: Regional Economic Review 4Q 2012 by Team of Thomas White International
According to the International Monetary Fund's Regional Economic Outlook report, countries in the Middle East and North Africa region are expected to grow at different rates. Oil exporting nations are cashing in on high energy prices and production, and are projected to expand 6.6 percent in 2012 before tempering in 2013. On the other hand, oil importers such as Jordan, Morocco and Tunisia among others are expected to clock growth just over 2 percent as the slowdown in the world economy and political tensions continue to hinder expansion for some of these countries in transition.
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 Quarterly Review and Outlook by Van Hoisington, Lacy Hunt of Hoisington Investment Management
The American Taxpayer Relief Act has lifted the immediate uncertainty of the fiscal cliff. Nevertheless, tax increases that are already in effect from this act, as well as the Affordable Care Act, impose a major obstacle to growth for the U.S. economy in the first half of 2013. The result of these taxes is considerable, especially in light of the poor trend in household income. In addition, these tax increases will continue to act as a drag on economic growth until late in 2015 and are unlikely to produce the revenue gains advertised.
2013-01-18 ECRI's Public Indicators Continue to Undermine Their Insistance That We're in a Recession by Doug Short of Advisor Perspectives (dshort.com)
For a few months, ECRI's indicators cooperated with their forecast, but that has not been the case in the second half of 2012 -- hence, I surmise, their switch to the traditional Big Four recession indicators. ECRI's December 7th article, The Tell-Tale Chart, makes clear their public focus on the Big Four.
2013-01-18 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 Are Central Banks Easing Off Prematurely? by Team of Northern Trust
Are central banks easing off prematurely? Washington is girding for another budget imbroglio; Inflation is contained, for now.
2013-01-18 Fixed Income Investment Outlook by Team of Osterweis Capital Management
We continue to feel that the mismatch between yield and interest rate exposure means that investment grade bonds are less attractive compared with the non-investment grade universe, especially in shorter maturities. Treasury, investment grade corporate and high yield bonds have yields and effective durations that are virtually unchanged compared to levels three months ago. Yields on short-dated high yield paper have actually risen a bit and are still, in our opinion, the most attractive sector we look at in terms of interest rate risk.
2013-01-17 Is the US Consumer Back? by Russ Koesterich of iShares Blog
Some market watchers are interpreting Tuesday's better-than-expected US retail sales report as a sign that the US consumer is coming back. But as Russ explains, a closer look at the numbers shows this much heralded return is likely to be delayed a bit longer.
2013-01-17 Rehab: An Update on Housing Recovery by Liz Ann Sonders of Charles Schwab
The National Association of Home Builders' Housing Market Index has staged a record-breaking run higher. Home prices have been rising and are feeding into real mortgage rates, consumer confidence, household net worth...and pushing fence-sitters off the fence. Housing's contribution to job growth could push the unemployment rate down more quickly than many believe.
2013-01-16 ProVise Bullets by Ray Ferrara of ProVise Management Group
By now you may have read more than you care to about the changes to income taxes. We avoided rushing to get you something as so many others did, so that we could provide you with some comprehensive and practical information. It is a long read, but we hope you find it to be worth your time.
2013-01-16 Haka Politics and the Slow Crawl by Christian Thwaites of Sentinel Investments
In the last few months we have seen the rise of Haka politics. Familiar to any All Blacks fan, this is the ritualistic Maori war dance, full of noise, bluster and theater. But it rarely intimidates and most opponents sit it out with some amusement. So it is with the political interventions last year. We saw countless announcements and intentions from EU leaders and solemn pledges with little follow-through. And in the US we had a soporific election and a squalid squabble over the fiscal cliff that caught the public but not the market's attention.
2013-01-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production Both Rise by Doug Short of Advisor Perspectives (dshort.com)
The charts don't all show us the individual behavior of the Big Four leading up to the 2007 recession. To achieve that goal, I've plotted the same data using a "percent off high" technique. In other words, I show successive new highs as zero and the cumulative percent declines of months that aren't new highs. The advantage of this approach is that it helps us visualize declines more clearly and to compare the depth of declines for each indicator and across time (e.g., the short 2001 recession versus the Great Recession). Here is my own four-pack showing the indicators with this technique.
2013-01-15 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 Land of the Rising Dead by Christian Thwaites of Sentinel Investments
Yes, you knew we were going to talk about Japan. It's all the rage and the big standout in market performance in the last few weeks. Since November the broad Nikkei-225 average has risen 24% because there's new thinking in town. It's hard to describe Japan's 20 year malaise. Once proud companies shaken, the shattering of a property market and total collapse of stocks. Even if the market rises at the same level of the last few months, it will take six years to re-reach its peak. A more reasonable 10% growth rate will take 14 years. Weird things happen when economies enter deflation.
2013-01-15 Forecast 2013: Unsustainability and Transition by John Mauldin of Millennium Wave Advisors
As we begin a new year, we again indulge ourselves in the annual rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.
2013-01-15 Are Investors Buying into the Equity Story? by Chris Maxey, Ryan Davis of Fortigent
Last week we discussed the debate over active versus passive management. We believe active managers can add tremendous value in particular segments of the market, despite recent challenges. Outside of the active management discussion, many investors are deciding whether equities are a prudent place to allocate capital at this point in the market cycle. The first week of the year answered investors' opinions on that question loud and clear.
2013-01-15 Japan: Tip of the Spear by Bill O'Grady of Confluence Investment Management
On Sunday, December 16, 2012, Shinzo Abe, the leader of the Liberal Democratic Party (LDP), led his coalition to a decisive electoral victory in Japan. The LDP won 294 out of 480 seats and, with the additional 29 seats captured by its coalition partner, the New Komeito Party, will control the lower house in the Japanese Diet. Abe was named the new prime minister ten days later.
2013-01-15 New Year's Vantage Point: Christopher Molumphy by Christopher Molumphy of Franklin Templeton Investments
For a view on the U.S. and global fixed income market and potential opportunities therein, we turn to Christopher Molumphy, CFA, chief investment officer of Franklin Templeton Fixed Income Group.
2013-01-15 Inflation, Still Not Taking Off Anytime Soon by Scott Brown of Raymond James
A few years ago, amid exceptionally large federal budget deficit and extraordinarily accommodative Fed policy, a number of pundits warned of impending hyperinflation. Instead, inflation has stayed low. That hasn't stopped the inflation worrywarts. It's just a matter of time, they say. Inflation "has to show up at some point." That's not an argument. There are a number of reasons to expect inflation to stay low.
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 Declaring Victory at Halftime by John Hussman of Hussman Funds
Present overvalued, overbought, overbullish, rising-yield conditions fall within a tiny percentage of market history that is associated with dismal market outcomes, on average. Its true that we've observed extreme conditions since about March 2012 with little resolution aside from short-term declines. But the S&P 500 remains only a few percent from its March 2012 high, and if history is any guide, the extension of these unfavorable conditions is not likely to reduce the depth of the market loss that can be expected to resolve them.
2013-01-14 And That's the Week That Was by Ron Brounes of Brounes & Associates
Finally, a week not totally dominated by "fiscal cliff" discussions (though politicos now have their hands full with a gun control debate...what are the chances of compromise there?). Alcoa kicked off earnings season as usual and the early results lend credence to the thought that China will again be relied upon to lead any global recovery. Major banks announced major settlements as they continued to try to close the (negative) books on the financial crisis. Oil rose on Saudi production cuts.
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 Population Trends, The Labor Force and a Look at the Muni Index by Gregg Bienstock of Lumesis
We start this week with a look at the DIVER Muni Index and then jump into a discussion about population trends, employment and wages. If you get no further than this opening, the short of it is that you really need to look closely at the data and where things are getting better really and where things are perceived to be better. This is especially so as some pundits suggest the higher tax rate on the wealthy will be beneficial to muni-land as more wealthy people seek to offset the increased tax burden.
2013-01-14 The 'Dark Continent' is Shining Bright by Team of Thomas White International
From a recipient of aid, Africa has transformed itself into a magnet attracting capital and investment.
2013-01-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Another quiet week in early January as the earnings season is about to gear up.
2013-01-11 Thanks, Everybody...We'll be Right Back! by Colin Moore of Columbia Management
The Washington Comedy Club has taken a brief intermission and will be back in session shortly to resume the show. Please enjoy the facilities of this great country, free of charge, while you wait. Ignore the "Nero" character in the far corner playing the fiddle. Apparently, he isn't part of the show. Economic uncertainty emanating from fears of the U.S. fiscal cliff has been deferred but not avoided.
2013-01-11 Charting the U.S. Employment Situation by Matt Lloyd of Advisors Asset Management
The continuing jobless claims relative to past measurements has been a chart we like to detail to show the more psychological impact of where we stand and the sentiment about the employment situation. As we have shown, the current level is just below the high points of past recessions (recessions denoted by gray rectangles). Although we are approaching the long-term average, currently 6.7% above the 30-year average, the negative sentiment is understandable.
2013-01-11 No Dividend Cliff in Sight by Meggan Walsh of Invesco
Washington's last-minute agreement on a fiscal cliff deal concentrated primarily on tax policy including a higher dividend tax rate for high-income investors. History has shown, however, that the tax treatment of dividends has not hindered the relative outperformance of dividend-paying stocks over the long term.
2013-01-11 ECRI's Imaginary Recession: Now in Its Seventh Month by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data. It is now at 128.3 versus the previous week's 126.6 (which is an upward revision from 126.4). Likewise the WLI annualized growth indicator (WLIg) rose, now at 5.1, up from last week's 5.0. WLIg has been in expansion territory since August 24th, although it is off its 6.0 interim high on October 12th.
2013-01-11 Fed Policy Update: Waiting for Clearer Criteria for Open-Ended Asset Purchases by Alan Levenson of T. Rowe Price
The FOMC's shift from dates to economic conditions as the basis for policy rate guidance clarified the criteria for beginning rate hikes. The criteria for ceasing open-ended asset purchases are not clear, and may reflect not only the evolution of the labor market recovery but also concerns about financial stability and the size of the Fed's balance sheet. We expect the Fed to try to clarify these criteria in the months ahead. Asset purchases will end a "considerable time" before policy rate hikes commence, and rate hikes will commence before asset sales.
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 Special Edition: The Outlook for 2013 by Team of Northern Trust
At this time of the year we typically get warm and generous wishes for the New Year and, of course, numerous questions about what our crystal ball has in store for 2013. While many economists publish their perspectives prior to January 1, we opted to wait in the hope of having a clear fiscal picture for the United States. A lot of good that did us...
2013-01-10 Market Perspectives Q4 2012: Politics vs. Economics by Richard Michaud of New Frontier Advisors
The major news of the quarter was that a fiscal cliff deal passed in the final hours of the 112th Congress and was signed by President Obama. The deal averts tax increases on most Americans and prevents large indiscriminate cuts in spending in many government programs. It also averted, by nearly universal consensus among macroeconomists, tipping the American economy into recession with attendant global implications.
2013-01-10 Finally, a Solution to the Income Investing Dilemma by Gary Halbert of Halbert Wealth Management
There's an endangered species in the investment industry today and it goes by the name of "yield." With continued downward pressure from the Federal Reserve, both short-term and long-term interest rates have been held to artificially low levels. And each new announcement from the Fed seems to extend the outlook for low interest rates farther into the future.
2013-01-10 A Brighter Picture for Jobs and the Economy by Scott Minerd of Guggenheim Partners
Promising fundamental developments suggest that U.S. economic expansion is likely to continue and equities will rise in the first quarter.
2013-01-10 Defense as a Good Offense by Brian Frank of Frank Capital Partners
Oddly, defensive names that ordinarily trade at premiums to the market are trading at big value discounts. These companies that have the ability to grow in any economic environment are a part of the portfolio, as well as companies riding pockets of growth around the globe. There is a lot to be excited about in 2013 for value stocks.
2013-01-09 Waiting for Godot by Sam Stewart of Wasatch Funds
Like the enigmatic title character in Waiting for Godot, clear signals of U.S. economic health remain much anticipated but elusive. The year 2012 saw consumers and businesses mimicking the Samuel Beckett play - with optimists waiting for things to get better and pessimists waiting for things to get worse.
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.
2013-01-09 Ten Acts for Chairman Bernanke in January 2013 by Tony Crescenzi of PIMCO
Federal Reserve Chairman Ben Bernankes term ends in January 2014, and it is unclear whether he will stay on for another. We expect Bernanke will muster every means he can over the next year to help the U.S. and indeed the world emerge from a gloomy time.Here, then, are 10 items we suggest for Ben Bernankes to-do list in 2013.
2013-01-08 Should Bonuses be Tied to Performance? by Beverly Flaxington (Article)
We do performance reviews for our staff every year. I do not believe performance should be directly linked to bonuses – they are different topics. But my COO says that we should divvy up the profit pool based on everyone's performance. Who is right?
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 Brave New Start to the Year by Christian Thwaites of Sentinel Investments
Well that was fun. Negotiations went to the brink, we had politicians dropping the "F" bomb a few steps from the Oval Office, the Senate described as "sleep deprived octogenarians" by a congressman and an all around feeling that it was better than nothing. Welcome to the American Taxpayer Relief Act, which actually, er...raises taxes for everyone. That's right. No one in 2013 pays less than they paid in 2012. This is our best estimate of the fall out. It's definitely better than what was at risk back in November but it's still a net drag on the economy of around 1.0%.
2013-01-08 The Cliff, the Fed, and the Economy by Scott Brown of Raymond James
The budget deal removes a major uncertainty for the financial markets. We now know what tax rates will be. However, the American Taxpayer Relief Act (ATRA) has a number of drawbacks. The December 11-12 FOMC policy meeting minutes showed a split among Fed officials, but that doesn't necessarily mean that asset purchases will end any sooner. The economic data reports have been mixed but generally indicate that the recovery is in reasonable shape.
2013-01-08 From Cliff to Ceiling: No Clear Signal for Investors by Libby Cantrill, Josh Thimons of PIMCO
We expect the last minute deal in the lame duck session to result in about 1.3% of GDP contraction, slightly less than our earlier prediction of about 1.5%. The compromise eliminated (or at least delayed) the possibility of the most damaging equity market outcomes. The deal failed to set up a framework for structural deficit reform in 2013. Almost immediately, Congress must address the debt ceiling, the sequester and the continuing resolution to keep the government funded.
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.
2013-01-08 Another Lost Year for Active Management by Chris Maxey, Ryan Davis of Fortigent
There is no doubt that 2012 will be remembered by many investors, for reasons both good and otherwise. One group less likely to remember the good of 2012 is active managers. Across the universe of hedge funds and mutual funds, relatively few were able to outperform their comparative benchmarks. This continues a long running trend of active managers lagging their less active counterparts and raises many questions about the efficacy of active management.
2013-01-07 Restricted Room for Higher Rates by Scott Minerd of Guggenheim Partners
Interest rates should rise through 2013, however, the level to which they can increase will be limited by the Federal Reserve's ongoing attempt to stimulate activity in the housing market.
2013-01-07 Jobless Claims, a Surprising Result, Philly Fed and Ambr by Gregg Bienstock of Lumesis
This week we provide some thoughts on the recent Cliff deal and plunge into some surprising data regarding jobless claims. We conclude with a look at the Philly Feds Leading Index.
2013-01-07 White Noise? by Jeffrey Saut of Raymond James
"Investing in the financial markets necessarily involves one's ability to change perspectives over time... And there's more of the white noise than ever before."... The Contrary Investor.com. So said the Contrary Investor; and I could not agree more given my sense that the media remains "long" volatility. Indeed, every time volatility increases, so do my phone calls from the financial media as they feel "compelled to come up with rationales for daily movements in asset prices;" last week was no exception.
2013-01-07 Investments That May Keep Me Up at Night in 2013 by Charles Lieberman of Advisors Capital Management
The outlook for 2013 is quite improved compared with 2012. Domestic economic growth prospects are significantly less troublesome. The election is over. Europe has (painfully) slowly made progress in reducing its own budget problems. It is not all clear sailing, however. (It never is.) Europe remains a work in progress. All of the geopolitical risks of 2012, notably North Korea, Iran, and all of the rest of the Middle East, remain on the docket in 2013. And the battle over the U.S. budget will resume in the near future.
2013-01-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market has started the New Year in fine shape, relieved that President Obama's threat to raise taxes to the moon on capital gains and dividends were thwarted with the deal agreed to on New Year's Day.
2013-01-06 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to a new beginning, a new yeara new optimistic investor, a new bipartisan Congress, (well, maybe not). The more things change, the more they stay the same. While investors embraced the budget deal (that is less of a deal than a procrastination), the pragmatists realize that very little has changed other than the "fiscal can" has been kicked down the road for two months. Stocks skyrocketed; bonds plunged; politicos bickered. Welcome to 2013.
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.
2013-01-04 The US Congress Kicked the Fiscal Cliff Down the Road by Team of Northern Trust
The US Congress kicked the fiscal cliff down the road. Holiday sales in the US were tepid. December's job report will not impress the Fed
2013-01-03 ProVise Bullets by Ray Ferrara of ProVise Management Group
HAPPY NEW YEAR EVERYONE!We don't know what you did on Monday night to ring in 2013, but the U.S. Senate was in session as they were attempting to avoid the so-called "fiscal cliff".At 2:07 a.m. on New Year's Day the Senate passed a bill, 89 to 8, which does a number of different things.Then late that same morning, the House also passed the bill.We are going to touch on a few of the highlights in this opening Bullet and promise to give a more detailed analysis in our mid-month Bullets.
2013-01-03 Money for Nothin' Writing Checks for Free by Bill Gross of PIMCO
It was Milton Friedman, not Ben Bernanke, who first made reference to dropping money from helicopters in order to prevent deflation. Bernanke's now famous "helicopter speech" in 2002, however, was no less enthusiastically supportive of the concept. In it, he boldly previewed the almost unimaginable policy solutions that would follow the black swan financial meltdown in 2008.
2013-01-03 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).
2013-01-03 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 And That's the Quarter that Was by Ron Brounes of Brounes & Associates
Politics ruled the day over the past three months (and beyond) and unfortunately the trend may very well continue as the averted "fiscal cliff" was merely postponed for another two months. For now, investors are happy, but what will tomorrow bring? (That's a question for you, Prez Obama and Speaker Boehner.) Happy New Year
2013-01-03 Korea's First Female President by Michael Han of Matthews Asia
South Korea's president-elect Park Geun Hye will become the country's first female leader when she takes office in late February for a single five-year term. The tight December race drew much attention as well as the highest voter turnout (over 70%) for Korea in over a decade. Park defeated Moon Jae In, a human rights lawyer who was once jailed for opposing the dictatorial regime of Park's father, Park Chung Hee.
2013-01-02 Washington Squanders its Gift of Time by John Browne of Euro Pacific Capital
As the clock winds down on 2012, the Fiscal Cliff is all anyone seems capable of discussing. Right now it appears that some sort of narrow deal has just emerged that will include raising tax rates on family income over $450,000 a year, increasing the estate tax rate, extending unemployment benefits for one year, and delaying spending cuts. But the prospect of higher taxes and the great uncertainty that has surrounded this fiscal fiasco has been acting like sand in the gears of the complex but sputtering U.S. economy.
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.
2012-12-31 Brief Holiday Update by John Hussman of Hussman Funds
Though our concerns still weigh heavily toward the defensive side, there are hints of progress toward the resolution of the lopsided market conditions we've seen.
2012-12-31 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).
2012-12-28 The Year's Surprises in Gasoline, Oil and Resources Stock Prices by Frank Holmes of U.S. Global Investors
On Wednesday, I talked about three of the top 10 commentaries that were popular over 2012. Here are a few more to highlights.
2012-12-28 Capitol "Cliffhanger": Thriller or Chiller? by Milton Ezrati of Lord Abbett
Whatever the outcome of the last-minute jockeying in Washington, meaningful fiscal reform remains unlikely.
2012-12-26 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 The Ten Key Benefits of Investment Committees by Bob Veres (Article)
In this first part of a two-part report, I'll identify ten core purposes that investment committees serve in different types of firms, ranking them in order of the number of responses I received. If your investment committee is serving all ten purposes, based on the survey, you're among a select minority - which means that many advisors may find new ways to use this versatile new tool in their RIA practices.
2012-12-26 Looking on the Bright Side by John Mauldin of Millennium Wave Advisors
It is Christmas Eve and not the time for long letters just a brief note on why the fiscal cliff is not the End of All Things, and to point out a worthy cause led by some good friends of mine who are helping people who truly have no options in life. And we'll start things off with a movie review of sorts to launch us into a positive take on the year behind and the year ahead.
2012-12-26 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.
2012-12-26 Why China is a Reason for Optimism by Robert Horrocks of Matthews Asia
"China has taught me how to think about growth. Consider its stable political environment: it has gone from revolutionary upheaval to smooth (almost boring) transitions of power."
2012-12-26 Over The Cliff by Scott Brown of Raymond James
Leaders in Washington failed to reach an agreement on the fiscal cliff. What does that mean for the 2013 outlook?
2012-12-24 Aspirin for a Broken Femur by John Hussman of Hussman Funds
The Federal Reserve under Bernanke is like a bad doctor facing a patient with a broken femur. Being both unable and unwilling to restructure the broken bone, he announces that he will keep shoving aspirin down the patient's throat until the bone heals.
2012-12-21 Farewell to Inflation Targeting? by Mohamed El-Erian of Project Syndicate
In a four-day period in mid-December, three seemingly unrelated developments suggested that modern central banking is in the midst of an historic change. To the extent that this shift gains momentum which appears likely it will affect economic performance, the functioning of markets, and asset-price valuations.
2012-12-21 Year-End Capital Markets Forecast by Jason Hsu of Research Affiliates
What looks best for 2013? Given financial repression in developed marketspolicies that prolong negative real interest ratesemerging market local currency sovereign bonds are likely to outperform their developed market counterparts. For equities, both developed (ex-U.S.) and emerging markets offer more attractive valuations and better dividend yields than U.S. stocks.
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 The Big Four Economic Indicators: Real Personal Incomes Improve Significantly By Doug Short by Doug Short of Advisor Perspectives (dshort.com)
The weight of these four in the decision process is sufficient rationale for the St. Louis FRED repository to feature achart four-packof these indicators along with the statement that "the charts plot four main economic indicators tracked by the NBER dating committee." Here are the four as identified in the Federal Reserve Economic Data repository. See the data specifics in the linkedPDF filewith details on the calculation of two of the indicators.
2012-12-21 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.
2012-12-20 The Limits of Monetary Policy by Scott Minerd of Guggenheim Partners
With unemployment levels remaining stubbornly elevated, investors should not expect a reversal of quantitative easing by the Federal Reserve in 2013.
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.
2012-12-18 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-18 Three Takeaways from the Fed by David Rosenberg (Article)
The equity market likes the prospect of more money printing and the Fed's more forceful efforts to reflate the economy, and stocks are a far better inflation hedge than bonds.
2012-12-18 What's Going Right? by Chris Maxey, Ryan Davis of Fortigent
Discussions of the fiscal cliff are capturing investor's attention, largely at the expense of trends pointing in the right direction. Year-end is synonymous with future prognostications, but current indicators suggest there is reason to be optimistic about the turn of the calendar this holiday season.
2012-12-18 The Fed's Giant Stride by Christian Thwaites of Sentinel Investments
FOMC: The news from this meeting was widely telegraphed (see Yellen, Evans, etc. last month) but produced some real and welcome developments. Here's the quick summary.
2012-12-18 The 2013 Geopolitical Outlook by Bill O'Grady of Confluence Investment Management
As is our custom, in mid-December, we publish our geopolitical outlook for the coming year. This list is not designed to be exhaustive. As is often the case, a myriad of potential problems in the world could become issues in the coming year. The lineup listed below details, in our opinion, the issues most likely to have the greatest impact on the world. However, we do recognize the potential for surprises which we will discuss throughout the year in the weekly reports.
2012-12-17 And That's the Week That Was by Ron Brounes of Brounes & Associates
Time for some year-end window dressing (before investments fall off the fiscal cliff). With little to no progress to report on the budget, politicos continue trying to earn brownie points at home, while losing them in the press. Investors still seem to believe a deal will be reached, but with the holidays (and vacations) approaching, time is really of the essence. Retailers and manufacturers rebounded in November from superstorm Sandy, but the cliff still looms as a definite possibility.
2012-12-17 Roach Motel Monetary Policy by John Hussman of Hussman Funds
Monetary policy has become a roach motel easy enough to get into, but impossible to exit.
2012-12-17 Fed Talks Louder, To Little Avail by Brian Wesbury, Bob Stein of First Trust Advisors
When someone doesn't speak your language, yet you must communicate, funny things can happen. At first, most just talk normally, hoping the message somehow gets through with a hand gesture or two. If that doesn't work, some people start talking really slowly. And if all else fails, how about saying it REALLY LOUDLY, and emphatically, to finally get our point across. That's where the Federal Reserve is today. In its own collective mind, it has a very important message to convey: that monetary policy is going to be as expansionary as necessary to get this economic recovery off the ground.
2012-12-17 Growing Dividends by Charles Lieberman of Advisors Capital Management
Dividends are rising rapidly. I'm not referring to the surge in special dividend payments that are intended to get ahead of the expected hike in tax rates on dividends in 2013, although that's also significant. I am referring to the ongoing week after week hike in regular dividends being reported by companies, as firms cope with high level of cash flow that adds to their record cash position. Stocks are cheap and growing dividends will only make them appear even cheaper.
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.
2012-12-17 The Fed: Targets, Thresholds, Guideposts, and Goals by Scott Brown of Raymond James
As expected, Federal Open Market Committee announced that purchases of Treasuries will be added to QE3 in 2013 (the Fed will continue to buy $40 billion per month in mortgage-backed securities and $45 billion per month in long-term Treasuries). Fed policymakers also announced threshold guidance on the overnight lending rate, which will make the Fed's policy intentions clearer, and that's a good thing.
2012-12-17 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
It's not surprising that the markets responded with a resounding "so what" to Fiscal Cliff negotiations in Congress, and a Federal Reserve pronouncement that it intends to tie low interest rates to low unemployment for the foreseeable future, in order to maintain whatever stimulus effect low-cost borrowing might be having upon economic development.
2012-12-15 Looking Back to Look Ahead by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Markets have been more focused on short-term forces; not least being Washington and the fiscal cliff negotiations. But taking a step back and gaining some longer-term perspective can help investors better weather short-term volatility. Even beyond the fiscal cliff, Washington and fiscal policy will likely remain in focus next year. Monetary policy is also front-and-center with the Fed maintaining its extremely accommodative policy and targeting specific economic conditions instead of providing calendar guidance. Europe managed to make it through the year, but challenges and risks remain.
2012-12-15 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.
2012-12-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
So help us understandwhere did 2012 go? While we know time really fly, it sure feels like it does when we think that 12 months have almost passed. We want to wish you and your family the happiest of holidays! Please remember the women and men serving in our Armed Forces, especially those overseas.
2012-12-15 Fed Announces QE4 Starting Next Year by Gary Halbert of Halbert Wealth Management
I continue to believe that President Obama is willing to let the economy go over the cliff and blame the Republicans. Obama is hell-bent on raising taxes on those in the top two brackets; he campaigned on it; and I dont think he will back off. It remains to be seen if the Republicans will cave.
2012-12-14 FOMC Laying the Groundwork for an Exit Strategy? Investment Implications. by Paresh Upadhyaya of Pioneer Investments
Yesterday's FOMC meeting was a surprisingly eventful one that injected some volatility into financial markets. As expected, the Fed left its target rate of 0 - .25 percent unchanged and implemented more quantitative easing (QE). It announced additional monthly purchases of agency mortgage-backed securities of $40 billion per month and stated that "The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year at a pace of $45 billion per month."
2012-12-14 The Big Four Economic Indicators: Industrial Product and Retail Sales Brighten the Picture by Doug Short of Advisor Perspectives (dshort.com)
This morning I've added two more of the Big Four for November: Industrial Production from the Federal Reserve, the purple line in the chart below and Real Retail Sales, the green line.
2012-12-14 No Way Out by Peter Schiff of Euro Pacific Capital
By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve's Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. At his press conference this week, Fed Chairman Bernanke explained how the easiest policy stance in Fed history has just gotten that much easier. First it gave us zero interest rates, then QEs I and II, Operation Twist, and finally "unlimited" QE3.
2012-12-14 Fiscal Friction is Taking a Toll on Confidence in Washington and Rome by Carl Tannenbaum of Northern Trust
Fiscal friction is taking a toll on confidence in Washington and Rome. What inflation rate should be used to index entitlements? Our updated US forecast assumes a budget resolution before year end.
2012-12-13 FOMC: More of the Same on QE, But New Language to Guide It by Team of Northern Trust
The Fed's decision to increase the scope and size of the quantitative easing program following the two-day FOMC meeting was largely expected. Its choice of new wording to express its posture came sooner than expected.
2012-12-13 Decoupling From the Eurozone by Scott Minerd of Guggenheim Partners
Recent positive data releases from the U.S. and Asia seem to indicate that global investors should not expect to be severely affected by the ongoing problems in the eurozone.
2012-12-13 The Fed and The Fiscal Cliff by Evan Schnidman of Fed Playbook
President Obama and Speaker Boehner are Thelma and Louise getting ready to drive the car off the cliff with the U.S. public locked in the trunk. While the Fed may not have the power to hit the breaks for them, they could simply refuse to fill the car with gas. Instead, the FOMC decided today to top off the tank and sup-up the engine in hopes that the President can floor it to clear the ravine.
2012-12-13 Rescuing the Bond Deer from the Bond Bear by Mike Temple of Pioneer Investments
It's the season to talk about the man who delivers presents. No, not Santa Claus, but Fed Chairman Bernanke who has been delivering the green stuff for the past four years in a helicopter, not a sleigh... My last installment introduced the Fixed Income Bond Deer the investor caught in the headlights confused about what to do. This week we contemplate the following: should "Bond Deer" be grateful for the green stuff or frightened by the possibility that it is fueling the next bond "bear" market? The answer: it depends on how long this experiment continues.
2012-12-13 Conditional: Fed Drops 2015 in Favor of 6.5% and 2.5%185 by Liz Ann Sonders of Charles Schwab
The Fed announced it's adding $45 billion in US Treasury purchases to QE3s $40 billion in MBS purchases and moving to economic versus calendar targets.
2012-12-12 Jobs Growth, Cliff Negotiations Continue Slow Pace by Russ Koesterich of iShares Blog
As Russ K has said in the past, the danger posed by the fiscal cliff is not solely whether we go over the side or not it also matters what shape our economy is in before the plunge. Last week's jobs report may have seemed like good news for the latter, but unfortunately a closer look at the numbers revealed a mixed bag.
2012-12-12 To QE Infinity, and Beyond! by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made two big changes today, but changes that were mostly anticipated by the markets.
2012-12-11 Loomis Sayles' Matt Eagan on the Macro and Fixed Income Outlook by David Schawel, CFA (Article)
In this interview, Loomis Sayles' Matt Eagan discusses the fixed income universe, Fed policy and issues facing the global macro economy. Eagan is the co-manager, along with Dan Fuss, of the Loomis Sayles Bond Fund and he manages the Loomis Sayles Strategic Alpha Bond Fund.
2012-12-11 The Death of Managed Futures? by Chris Maxey, Ryan Davis of Fortigent
Managed futures strategies, or systematic trend followers, have long been an important component of diversified high net worth portfolios. Because of their ability to go both long and short in more than 100 global futures markets spanning equities, currencies, commodities, rates, and bonds managed futures have historically generated very uncorrelated performance to traditional investments.
2012-12-11 Tax Reform: A First Step by Clyde Kendzierski of Financial Solutions Group
I rarely use this space to rant about political issues, but the recent election made it obvious just how dysfunctional the American political process has become. The ongoing financial crisis in the US will never get fixed as long as both political parties remain focused on solutions that make the problem worse. The Democrats want to give people more money to spend, claiming this will grow the economy. The Republicans want to cut taxes, so that people have more to spend, claiming that will grow the economy
2012-12-11 Peak Oil or Peak Energy? A Happy Solution by John Mauldin of Millennium Wave Advisors
A consistent theme in this letter has been the connections between items that may seem to be far removed from each other but are actually linked at the very core. If you push on one end you get a reaction in what would seem to be the most unlikely spots. Today we explore the connection between the fiscal deficit and energy policy.
2012-12-11 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market continues to have one eye on Washington DC and the other on the various global concerns of slowing growth and European disintegration. The net result was another quiet and slow week of trading.
2012-12-11 Fiscal Cliff-Hanger by Scott Brown of Raymond James
The recent economic data are consistent with a moderate pace of growth in the near term. The manufacturing sector is mixed, but generally weak, reflecting a global slowdown and an inventory correction. The consumer appears to be hanging in there. The Bureau of Labor Statistics said that Hurricane Sandy did not have a significant impact on the November employment data. However, other economic indicators did reflect weather-related disruptions, which appear to have been only temporary. Meanwhile, the economy heads toward the fiscal cliff.
2012-12-10 Secular Bear Markets - Volatility Without Return by John Hussman of Hussman Funds
There is enormous risk, in my view, in the temptation to accept zero interest rates and low single-digit prospective market returns as an enduring characteristic of the financial markets while ignoring the unsustainable distortions that have produced this environment.
2012-12-10 Dwelling on a "Cliff" Deal by Milton Ezrati of Lord Abbett
After the brinksmanship runs its course, Congress will jury-rig a fiscal compromise.
2012-12-10 Have the New Paper Clips Arrived, Enid? by Christian Thwaites of Sentinel Investments
If there's one economic stat that spans the economic/political spectrum, it's jobs. Last week's NFPs had a headline of 146,000, way above estimates, and an unemployment rate of 7.7%, the best since December 2008 and a comfortable one point below a year ago.
2012-12-10 Is QE4 Really Coming? by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve meets this week. Analysts are supposing and predicting what the statement will say and if the Fed will change its economic projections.
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.
2012-12-08 Weekly Economic Commentary by Team of Northern Trust
What are the margins of monetary policy? The November job report showed only modest improvement. Japan continues to struggle, with a change of government on the horizon.
2012-12-07 ECRI Weekly Update: More Recession Flag Waving by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.8, up from an upwardly revised 126.2 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) also rose, now at 3.5 from last week's 3.4. WLIg has been in expansion territory since August 24th, althout it is off its high at 6.0 on October 12th.
2012-12-07 The Keynesian Depression by Scott Minerd of Guggenheim Partners
Five years have passed since the beginning of the Great Recession. Growth is slow, joblessness is elevated, and the knock-on effects continue to drag down the global economy. The primary difference between today and the 1930s, when the U.S. experienced its last systemic crisis, has been the response by policymakers. Having the benefit of hindsight, policymakers acted swiftly to avoid the mistakes of the Great Depression by applying Keynesian solutions. Like the last depression, we are likely to live with the unintended consequences of the policy response for years to come.
2012-12-06 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks continued to bounce back from their post-election sell off. In fact for the entire month of November the popular averages were virtually unchanged. For the past week one can see from the charts above that the Dow Jones Industrial Average was flat and the NASDAQ Composite gained 1.5% as Apple starts to regain some of the ground it has lost since September.
2012-12-06 From a Fiscal Cliff to a Fiscal Speed Bump by Scott Minerd of Guggenheim Partners
More granular analysis of the line items in the fiscal cliff tells a less harrowing story than what Congress and the media are presenting. The official projections are showing scary numbers for the fiscal cliff, but when we dig into the details we see that the real impact will likely be materially less significant. According to the Congressional Budget Office, the fiscal cliff adds up to a total increase in tax revenue of $631 billion, which is approximately 4% of GDP. Going through the report line by line tells a different story.
2012-12-06 Questions and Answers Surrounding the Fiscal Cliff by Team of Northern Trust
There is no resolution yet to the US fiscal cliff. It is probably unfair to have expected one by now; the clock is too far from midnight. But as the negotiations continue, several questions have been raised that deserve some reflection. 1. The two sides seem to be making statements that reflect stark disagreement. Are talks failing? 2. Is our fiscal path a cliff, or a slope? 3. There is a proposal to limit the deductions claimed by high income taxpayers. How would these work, and what are the consequences? 4. The cliff has been in the news for a long time. Why isnt everyone prepared for it?
2012-12-05 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.
2012-12-05 Argentinas Trials & Trubulations by Chris Maxey and Ryan Davis of Fortigent
Equity markets climbed higher for a second straight week, extending a rally that began November 16. For the week, the S&P 500 rose 0.6% and the Dow Jones Industrial Average gained 0.2%. In the post-mortem on Q3 earnings season, much has been made of the first quarter of negative earnings growth in three years. However, analysis by Morgan Stanley reveals an even more disturbing picture of corporate America: just 10 companies in the S&P 500 delivered 88% of the indexs earnings growth. Of those 10, four accounted for more than half and Apple alone made up nearly one-fifth of the indexs growth.
2012-12-05 Headline Roulette by Christian W. Thwaites of Sentinel Investments
That Fiscal Thing dominated the week. Every twitch out of Washington was greeted with over analysis by the press and us. Less so the markets. Truth is, markets are not very good at discounting political uncertainty. Sure, a tax scare here and a debt ceiling impasse there might lead to a sell-off but ultimately it's about earnings, corporate health and outlook and on those metrics, nothing last week really upset the markets in a major way. The bond market tends to get this right.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-12-04 Cliff Diving by Michael Lewitt (Article)
While there may be compromise to avoid the self-inflicted crisis of the fiscal cliff, the course of fiscal policy is unlikely to alter significantly. There is a great deal of bold talk about tax reform, but the odds of our current leaders replacing our profoundly flawed tax regime with one that would breed economic growth and productivity are low. Congress will be lucky to avoid the fiscal cliff; asking it to alter the economy's DNA is unrealistic.
2012-12-04 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Obama meets with the nations governors and speaks before the Business Roundtable to continue drumming up support for his budget deal. (Arent most governors counted among the countrys wealthy?) Expect the bickering and blame-placing to continue until finally a small deal is reached with the majority of the work tabled for later in 2013. (How will Moodys and S&P perceive that move?) The economic calendar heats up with critical news from labor and manufacturing and retailers share insight into the holiday shopping season thus far. And Europe is never far from the radar screen.
2012-12-04 Strawberry Fields Forever? by Bill Gross of PIMCO
As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will take you down and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.
2012-12-04 How to Build a Time Machine by John P. Hussman of Hussman Funds
With industrial production, capacity utilization, real disposable income, real personal consumption, real sales retail and food service sales, and real manufacturing and trade sales uniformly declining in their latest reports, coincident economic indicators having generally peaked in July are now following through on the weakness that weve persistently observed in leading economic measures. We continue to believe that the U.S. economy joined a global economic downturn during the third quarter of this year.
2012-12-03 Paintballs?! by Jeffrey Saut of Raymond James
Alas, if only it was that easy to paintball the rapidly approaching fiscal cliff. For those of you traveling the North Yungas Road in Bolivia and unaware of the approaching dangerous cliff, let me explain. Before beginning, however, let me preface by recalling Bill Buckleys famous lament that he would rather be governed by folks listed in the Boston phone book than Harvard professors. To be sure, there are some good politicians inside the D.C. Beltway, but not many!
2012-12-03 Housing, GDP, Lumesis Muni Index & Federal $ to the States by Gregg L. Bienstock of Lumesis
While the media is fixated on the looming cliff and having everyone and their mother opine, information about the status of our economy is of as much importance. This week we take a look at housing prices, GDP, the Coincident Index, the DIVER Muni Index and how much of each States revenue comes from the Federal Government. We keep hearing how much better the housing market is. In this regard, we routinely remind our readers that better or worse depends on from where you start. Starting pre-recession to date, only Texas, Oklahoma and the Dakotas have seen positive housing price trends.
2012-12-03 Economic Insights: Is Capital Spending Spent? by Milton Ezrati of Lord Abbett
Once an area of considerable relative strength, business spending on capital goods has weakened of late. When the spending pickup began earlier in this recovery, utilization rates of existing facilities were so low that many expressed surprise. Only little of the spending went for increased capacity, of coursemost of it aimed at labor-saving equipment. But though this concentration held back the pace of hiring, it did contribute to economic growth. Now, however, it looks as though this surge has run its course, and the capital spending sector, too, has fallen into the slow slog.
2012-12-03 Watching for Cliff to Fade, Jobs to Appear by Bob Doll of BlackRock Investment Management
Investors are likely to remain volatile as the focus on the fiscal cliff will remain intense.
Progress on the cliff needs to happen quickly if a compromise is to be reached.
Given the sluggish nature of jobs growth, we are unlikely to see the Fed change its stance anytime soon.
2012-12-01 A Fresh Start (Hopefully) by Howard Marks of Oaktree Capital
For years I kept these memos away from anything related to politics. But more recently I began to discuss issues facing the US, and this has required some mention of policy and thus of politics. Ive tried very hard to be non-partisan, with a goal of not having readers know my leanings. I hope Ive succeeded; at least no one has complained. Because I found Americas recent presidential election and especially the results so fascinating, Im going to move explicitly to the field of politics, but with the same goal of non-partisan expression.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-12-01 Weekly Economic Commentary by Team of Northern Trust
Many nations are being reminded that when times are tough, so is budgeting. Americas energy picture is changing for the better. The EU took an "extend and pretend" strategy with Greece.
2012-12-01 The How Matters by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Market focus has clearly been on fiscal cliff negotiations. An agreement that averts the cliff would likely ignite a further near-term rally, but the ultimate solution and its components could have longer term consequences that may not be as market-friendly. US economic data has been impacted by Hurricane Sandy, but it appears modest growth is continuing; although business investment has fallen off. Housing continues to provide support and the Fed is staying the course. There are some signs of growth stabilization globally, notably in some of the emerging economies, including China.
2012-11-29 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.
2012-11-29 Sizing Up the Fiscal Cliff by Team of Neuberger Berman
As year-end approaches, the U.S. is inching closer to a potentially defining moment in its post-debt crisis economic recovery. A series of expiring tax cuts, spending reductions and new taxes equating to over $600 billion (or 4% of GDP), popularly known as the "fiscal cliff," are slated to take effect in early 2013.
2012-11-29 42 Days to the Fiscal Cliff! by Michael Martin of Financial Advantage
On the morning of the election, U.S. stocks sported a year‐to‐date return of 15%. Seven trading days later that figure had shrunk to 9.7%. What's going on?
2012-11-28 How Low Can They Go? by Mark Newlin of Mesirow Financial
Mesirow Financial's Fixed Income team provides insight that can help bond investors put in perspective the current low interest rate environment.
2012-11-28 November 2012 Monthly Investment Bulletin by Team of Bedlam Asset Management
Equities have rarely been so attractive yet any investor acting on the perceived wisdom of the last 50 years would scoff and keep selling: the bad news will worsen for economic activity, growth in credit, wages, consumption, employment and in several countries, political stability. Few indices are glaringly cheap as measured by Cyclically Adjusted Price to Earnings multiples (CAPE: chart p.4) with many expensive, especially in many emerging markets.
2012-11-27 Capital Formation and the Fiscal Cliff by John Mauldin of Millennium Wave Advisors
In today's economic environment, we often complain about volatility and uncertainty, but there is one thing I think we can be fairly certain of: taxes are going up. I constantly try to impress upon my kids, most of whom are now adults, that ideas and actions have consequences. In todays letter we will look at some of the consequences of an increase in taxes. Please note that this is different from arguing whether taxes should rise or fall. For all intents and purposes that debate is over
2012-11-27 Ten (Near?) Certainties to Invest Around by David Rosenberg (Article)
The ten key trends that should guide your investment decisions.
2012-11-27 Over the Cliff: Alan Simpson and Erskine Bowles on the Looming Deficit Crises by Michael Skocpol (Article)
As President Obama and Congressional leaders hurtle Thelma-and-Louise-style toward a budgetary precipice, another deficit-tackling duo hit the road earlier this month to deliver a simple message: This all could have been avoided.
2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-26 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 Median Household Incomes: The "Real" Story by Doug Short of Advisor Perspectives (dshort.com)
The traditional source of household income data is the Census Bureau, which publishes annual household income data each September for the previous year. Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates.
2012-11-26 Employment, Jobs and the Next Generation by Gregg Bienstock of Lumesis
Thanksgiving offers us a time to reflect on all we have to be thankful for and to share time with family and friends. There is so much to be thankful for while misfortune is evident when you check the news we live in democracy, the wealthiest country on the planet and have a resiliency that is demonstrated every time we, as a nation, are tested.
2012-11-26 Monetary and Fiscal Policy in Early 2013 by Scott Brown of Raymond James
The fiscal cliff refers to a substantial tightening of fiscal policy in 2013. Monetary policy cannot offset the cliffs negative effect on the economy. However, it would be surprising if a deal were not reached, if not by the end of this year, then in early 2013. Due to concerns about the long-term budget picture, some of the cliff is almost certain to get through.
2012-11-26 Buying Treasuries and Avoiding Stocks Not the Way to Go by John Buckingham of AFAM
While we know better than to make too much out of a low-volume rally, especially during a holiday-shortened trading week, it was interesting to hear what The Wall Street Journal had to say one week ago at this time. As the publication helped ready investors for the week ahead, one story advised folks to head toward the safety of U.S. Treasury securities: "Expect safe-haven Treasurys to draw demand at the expense of stocks in the coming weeks, bucking a seasonal trend that has often favored riskier assets."
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 Overlooking Overvaluation by John Hussman of Hussman Funds
Presently, on the basis of smooth fundamentals such as revenues, book values, dividends and cyclically-adjusted earnings, the S&P 500 is somewhere between 40-70% above pre-bubble valuation norms, depending on the measure. That's about the same point they reached at the beginning of the 1965-1982 secular bear period, as well as the 1987 peak.
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?
2012-11-26 And That's the Week That Was by Ron Brounes of Brounes & Associates
Investors breathed a sigh of relief (perhaps temporarily) and expressed thanks in the form of the strongest week in the market in several months (though on light volume). Domestically, housing data confirmed strength in the sector and retailers opened their doors earlier than usual with the hope that "if you open, they will come." Overseas, Europe's struggles continued, though manufacturing in China looked to be on the mend. Happy Thanksgiving and enjoy the weekend; after all, next week starts the home stretch for the end of the year...(and the fiscal cliff).
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.
2012-11-23 ECRI Weekly Leading Index: Index Rises, Growth Diminishes by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data (released Wednesday in advance of the Thanksgiving holiday). It is now at 125.7, up from 125.4 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) declined to 3.8, down from last week's 4.3. WLIg has been in expansion territory for thirteen weeks, although it is now at a seven-week low, with the high at 6.0 on October 12th.
2012-11-22 Emerging Asias Rising Productivity by Robert Horrocks of Matthews Asia
Per capita GDP in China has tripled in purchasing power parity terms in the last decade yet Chinese workers still likely have their most productive years ahead of them. Asia as a whole has seen consumption increase by a third since the global financial crisis, even as the West has languished. This month, Robert Horrocks, writes about what is key to the emerging opportunities in Asia: Productivity.
2012-11-22 Economic Update by Carl Tannenbaum and Asha Bangalore of Northern Trust
A look beneath the surface reveals a housing sector still struggling with post-crisis transition. The Federal Reserve is intent on promoting a broader recovery in this area.
2012-11-21 Reflections: Primate in Distress by John Gilbert of GR-NEAM
The enthusiastic response of the capital markets to the Federal Reserve's announcement of the third quantitative easing program is, of course, just what they intended. It recalls the even more ebullient response to the ECB's Long Term Refinancing Operation announcement late last year.
2012-11-21 ...'Til Debt (Limit) Do Us Part by Gary Halbert of Halbert Wealth Management
Last week I discussed the "fiscal cliff" and the political battle that entails. If lawmakers cant come together for a solution before the end of the year, the economy is almost certainly headed for a recession or worse in 2013 and beyond. But there's a potentially even bigger battle coming up in the next couple of months.
2012-11-20 Fix the Debt! by Team of Franklin Templeton Investments
In the "normal" course of a U.S. election, investors typically breathe a sigh of relief when the results come in, with at least one layer of market uncertainty removed. This time around, the political squabbling hasn't ended with the close of the polls on November 6. The debate about the "fiscal cliff," a combination of spending cuts and tax hikes set to go into effect on January 1, 2013, has heightened. Market volatility since the election seems to have heightened, too.
2012-11-20 Companies Grapple With Pressure from All Sides by Chris Maxey, Ryan Davis of Fortigent
As we move closer to closing the books on another earnings cycle, it is time to look back at the hits and misses for the quarter. Unfortunately, this quarter brought more misses than investors have seen in quite some time, despite a greatly reduced bar. The outlook also leaves something to be desired, with companies cutting forward guidance and analysts ratcheting down estimates for the next two quarters.
2012-11-20 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors
For the last year, as I travel around, it seems a main topic of conversation is "Where will my kids find jobs?" It is a topic I am all too familiar with. Where indeed? Youth unemployment in the US is 17.1%. If you are in Europe the problem is even more pronounced. The basket case that is Greece has youth unemployment of 58%, and Spain is close at 55%. Portugal is at 36% and in Italy its 35%. France is over 25%. Is this just a cyclical symptom of the credit crisis?
2012-11-20 Bumpy End To The Year by Christian Thwaites of Sentinel Investments
Europe would like to have America's problems. Here we have declining public spending, increasing receipts, falling debt to GDP ratios and unemployment 3% below the European average. This puts the Fiscal Cliff (and I was so hoping to avoid that clich) debate somewhat in context. It's serious enough to draw the attention of corporate CEOs, put a heavy dampener on business confidence, which we saw in the recent NFIB report, and postpone hiring plans and capital investment, which showed up in last week's Empire and Philly Fed surveys.
2012-11-19 Little Dutch Boy by John Hussman of Hussman Funds
In the Mary Mapes Dodge book titled Hans Brinker, there is a fictional story within the story of a little Dutch boy who, on his way to school, notices a hole in the dyke. Having nothing else to fix the leak, he plugs the hole with his finger and stays there through the night until workers come to repair it. We are now into the fourth year of efforts to print trillions of little Dutch boys out of dollars and euros in order to stop a tide from crashing through a fundamentally damaged dyke. All of this has bought time, but no workers have arrived, and no real repairs have been done.
2012-11-19 Q3 2012 Market Commentary by Jon Sundt of Altegris
Decisive actions by central bankers altered the course of global markets in the third quarter of 2012 at least temporarily.
2012-11-19 Monetary and Fiscal Policy in Early 2013 by Scott Brown of Raymond James
The fiscal cliff refers to a substantial tightening of fiscal policy in 2013. Monetary policy cannot offset the cliff's negative effect on the economy. However, it would be surprising if a deal were not reached, if not by the end of this year, then in early 2013. Due to concerns about the long-term budget picture, some of the cliff is almost certain to get through.
2012-11-19 On Wealth Effects of Fed Policies: Housing Is Likely The Bright Spot by Chun Wang of Leuthold Weeden Capital Management
We've mentioned before the rapidly waning effect of the Fed policies. October was a good proof of that, with the S&P 500 index down about 2% (top chart). The stock market is no doubt part of the wealth effect the Fed was trying to create, but home prices, which represent the bulk of the average person's net worth, and personal income should also be considered a big part of the wealth effect.
2012-11-19 Will the "Cliff" Steal Christmas? by Milton Ezrati of Lord Abbett
Probably not. Here's how a last-minute deal on spending cuts and tax hikes could work.
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.
2012-11-17 States and the Cliff, Todays WSJ More to Consider by Gregg L. Bienstock of Lumesis
Many State and local governments have already taken steps to trim the fat. Absent a practical and constructive solution from our elected officials, we face the prospect of businesses cutting back and the Federal Government using a hatchet when a scalpel is needed. The potential impact on our already fragile recovery is difficult to fathom.
2012-11-16 ProVise Bullets by Ray Ferrara of ProVise Management Group
With the elections behind us, we must now look ahead to the next six weeks of a Lame Duck Congress. Given the fact that the President was re-elected, the Republicans maintained control of the House, and the Democrats gained in the Senate, we know there will either be collaboration or chaos in Washington. The positioning has already started. The more things change, the more they stay the same.
2012-11-16 November Fundamentals by Chris Brightman of Research Affiliates
For the second half of the 20th century, U.S. gross domestic product growth averaged 3.3% per year. This growth was driven by a combination of rising population and employment rates and increased productivity. But all three of these factors are slowing or declining. What does this mean for future growth?
2012-11-16 China's New Guard by Robert Horrocks of Matthews Asia
The Chinese Communist Party has selected a new leader. Actually, it has anointed a new leader that it already selected some time ago. We have known for at least a year that the new leader would be Xi Jinping, son of a reformist-minded early communist revolutionary, who held power in China's southern state of Guangdong as it led China's charge to create a market-based economy open to the rest of the world. Xi's pedigree, therefore, is assumed to be pro-reformist.
2012-11-16 Central Bankers Take Steps Where Politicians Fear to Tread by John Remmert of Franklin Templeton Investments
In the past few years, many global central banks have enacted various measures to stimulate their respective economiesin some cases without the support of fiscal measuresand sometimes to little effect. John Remmert, senior vice president and senior portfolio manager for Franklin Equity Group, shares his insights on why central banks have acted in some cases where politicians seemed fearful to tread.
2012-11-16 ECRI Weekly Leading Index: The Slippage Continues by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined again in the numbers released today. It is now at 125.4, down from its interim high of 127.6 set five weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 4.4, down from last week's downard revision to 5.0. WLIg has been in expansion territory for twelve weeks, although it is now at a five-week low, with the revised high at 6.0 on October 12th.
2012-11-16 The Big Four Economic Indicators: Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
2012-11-16 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore of Northern Trust
The focus on the fiscal cliff cannot be overstated. It is very hard for the world's central banks to set rules governing monetary policy. The troika charged with addressing Greece has some internal disagreement.
2012-11-15 Too Low for Too Long by Scott Minerd of Guggenheim Partners
The Federal Reserve faces the risk of inducing a sell-off in bonds similar to that which occurred in 1994 when Dr. Greenspan tightened credit conditions after maintaining an artificially low interest rate environment for an extended period.
2012-11-15 Weekly Commentary & Outlook by Gary Halbert of Halbert Wealth Management
Obviously, I am very discouraged with the outcome of the election. The main mistake Spencer and I made (and others including Gallup, Rasmussen, Pew, Rove, Morris, etc., etc.) in our pre-election analysis was to significantly underestimate the turnout rates among Democrats. The widely-held view that Democrats were unenthused and wouldn't turn out to vote, as suggested by numerous pollsters, was simply wrong. Obama won both the popular vote and the Electoral College comfortably.
2012-11-15 Nothing Changed by Doug MacKay, Bill Hoover of Broadleaf Partners
Many events have transpired since our mid-September update, but not much has really changed. Economic growth should remain slow for as far as the eyes can see, as each region of the world struggles with its own version of the New Normal. Capitalistic animal spirits have gone the way of the modern American male and while not completely extinct, he's decidedly more metrosexual. Flannel has ceded ground to the skinny jean and ambition has given way to contentment. Save for the halls of America's top military brass, unbridled passion is simply no longer.
2012-11-14 U.S. Economic and Interest Rate Outlook - November 2012 by Carl Tannenbaum, Asha Bangalore of Northern Trust
Our updated forecast anticipates some movement on the "fiscal cliff."
2012-11-14 Helplessly Hoping...That a Market Riot Isn't Needed for Fiscal Cliff Fix by Liz Ann Sonders of Charles Schwab
A status-quo election puts the "fiscal cliff" front and center. The stock market's knee-jerk reaction was to sell; could further weakness light a fire under politicians? Good news has come from recent economic numbers, but sentiment will remain under pressure until the fiscal cliff is resolved.
2012-11-13 David Rosenberg on Obama's Victory by David Rosenberg (Article)
The election is behind us. The Fed has spent its last bullet. We are at an inflection point of the earnings and sales cycle. The fiscal cliff, the Chinese political transition and the spread of the euro zone recession to the north lie ahead.
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.
2012-11-13 Addressing the Fiscal Cliff by Scott Brown of Raymond James
The 2012 election put a major uncertainty behind us. We now know that Barack Obama will remain president and that Congress will be split. However, a major uncertainty lies ahead with the fiscal cliff. The danger is that a deal wont be reached soon and may get tangled with efforts to raise the debt ceiling
2012-11-13 Central Bank Insurance by John Mauldin of Millennium Wave Advisors
"If you want to enjoy life, go to Buenos Aires. If you want to do business, go to Sao Paulo," the saying goes. It is hard to get an impression of a country by going to a city of 20 million people. It is like visiting New York City and thinking you can understand the United States. But I never fail to enjoy myself in Brazil.
2012-11-13 China's Transition Occurring at a Critical Time by Chris Maxey, Ryan Davis of Fortigent
While the presidential election in the U.S. was on the forefront of most investors' minds, current events in China could be equally important to the global economy. China is going through a political transition at the same time as it seeks to re-balance its economy. Whether those efforts will be successful remains a great unknown.
2012-11-13 Scotland: The Same, Only Better? by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
As the Eurozone countries are trying to find the functional balance between national sovereignty and Eurozone-wide central control on the national level, fractures are also appearing within the nation states themselves. Additionally, the Northern European countries are questioning the extent to which they should be expected to bail out the Southern countries, while the wealthier regions of the nation states reason that they would be more efficient in managing their internal fiscal budgets.
2012-11-13 Sequestration - What It Means for the Municipal Bond Market by Michael Taylor of Columbia Management
If Congress fails to quickly reach an agreement on deficit reductions, automatic cuts to federal discretionary spending (sequestration) are scheduled to take effect January 2, 2013. On September 14, the U.S. Office of Management and Budget (OMB) released its report detailing how it would implement sequestration, as required by the Budget Control Act of 2011 (Act). Designed to impact defense and non-defense (domestic) program budgets equally, most agencies are subject to cuts between 7% and 11% over the next decade. The exception is Medicare which is subject to a 2% cut.
2012-11-13 Argo and Ethel: America Has Never Been a "Rose Garden" by Bill Smead of Smead Capital Management
We recently had the pleasure of seeing a movie, Argo, and a documentary on HBO, Ethel. Argo is the story of the rescue of the six Americans from the Canadian Ambassador's residence at the time of the Iranian takeover of the US Embassy in Teheran. Ethel is a documentary which tells the story of Ethel Kennedy, the wife of Senator Robert Kennedy. It was produced, directed and narrated by Ethel Kennedy's youngest daughter, Rory. I rate both of these films highly and believe they tell US investors something they need to be reminded of.
2012-11-13 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors
Last Friday, President Obama addressed the two topics that have been on many equity investors' minds since election night: the economy and the dreaded "fiscal cliff." In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. That's "how we did it in the 1990s, when Bill Clinton was president," says the president.
2012-11-12 And That's the Week That Was by Ron Brounes of Brounes & Associates
"Four more years...Four more years." While those words may be music to the ears of Obama supporters worldwide, investors seemed less than impressed (at least initially). A second Obama administration brings plenty of question marks about the global economy, the tax code, the regulatory environment, Corporate America, and, of course, the financial markets. Stocks plunged on the first day post-election, but many analysts believe that is less a statement about the Obama victory and more a concern that the "fiscal cliff" is now clearly atop the news headlines.
2012-11-12 A Man Without a Plan by Robert Shiller of Project Syndicate
During the US presidential campaign, Mitt Romney accused Barack Obama of having no "plan to get the economy going." But Romney had no such plan, either, and the electorate was wise to resist the temptation to wishful thinking that his proposals represented.
2012-11-12 Can Housing Save the U.S. Economy? by Stephen Sheehan of Columbia Management
After leading the U.S. out of the Great Recession, the manufacturing sector has recently begun to show signs of sputtering. Uncertainty surrounding the election and fiscal cliff in the U.S., decelerating growth in China and a perpetually weak Europe have led to a soft patch in the third quarter. This global hiccup has caused some U.S. companies to catch a cold, most notably those in heavy machinery, transportation, metals and mining, and general industrials.
2012-11-09 Americas: Economic Review 3rd Quarter 2012 by Team of Thomas White International
Economic trends in most countries across the Americas region saw a moderate recovery during the third quarter, though the pace of growth remains subdued. Slower global demand due to the ongoing European recession and the slower expansion in Asia continues to restrict exports from the Americas. At the same time, domestic consumption growth has been relatively more robust than expected and has helped most regional economies prevent a deeper slowdown.
2012-11-09 The Election Ends and the Lame Duck Begins by Andy Friedman of The Washington Update
The election. Billions of dollars spent, thousands of negative advertisements aired, scalding campaign rhetoric, a bitterly polarized electorate -- and we ended up where we started: President Obama in the White House, a Democratic-led Senate, and a Republican-led House of Representatives. Four more years of the same divided government.
2012-11-09 With the Election Over, Get Ready for the Fiscal Cliff by Russ Koesterich of iShares Blog
Russ Koesterich discusses how the close election could translate into more gridlock on the fiscal cliff, as well as longer-term tax and entitlement reforms.
2012-11-09 ECRI Weekly Leading Index: Off Its Interim High by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined in the numbers released today. It is now at 126.2, down from its interim high of 127.6 set four weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 5.1, down from last week's 5.9. WLIg has now spent eleven consecutive weeks in expansion territory, although it is now at a five-week low.
2012-11-09 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 Two Policy Instruments, Two Labor Market Thresholds by Alan Levenson of T. Rowe Price
Despite understandable post-election focus on the resolution of the looming fiscal cliff, there is persistent interest in the conditions under which the FOMC will end the asset purchase program initiated in September ("QE3"). The economic projections and monetary policy expectations submitted for the September 12-13 FOMC meeting indicate that a consensus for rate hikes begins to build as the unemployment rate approaches 7.0%.
2012-11-09 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore, Victoria Marklew of Northern Trust
Hurricane Sandy will impact the pattern of upcoming data, but is not likely to have a lasting economic impact. Our updated forecast anticipates some movement on the "fiscal cliff." France may be part of Europe's problem, not a source of Europe's solutions.
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.
2012-11-08 Magic 8 Ball Knows All by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
The efficacy of 1980s technology turned out to be a real bummer, huh? Flying DeLoreans and flux capacitors are the ultimate heartbreakers, but the clairvoyance promised by those iridescent black and white Magic 8 Balls is definitely a close second. Give one a few shakes today and see for yourself. "Magic 8 Ball, [SHAKE] will financial markets rally post the U.S. election?" "It is decidedly so." "Magic 8 Ball, [SHAKE] are you lying?" "Yes definitely." "Magic 8 Ball, [SHAKE] seriously?" "Reply hazy, try again."
2012-11-08 Overcoming the Brake Light Shockwave by Christian Thwaites of Sentinel Investments
Big democratic breakthroughs, say Egypt, Tunisia are halting and fall far short of the hopes they embodied. Technology is a race over mobility and brevity but hardly elicits the same wonder from years past. Governments are polarized. The US had almost no voting overlap in recent years so big ideas are on the wane. In Europe, the supra-national organizations like the EU are swift to talk and slow to act. No we're not reactionaries. We think all this is explained by the deepest drop in output in the post-war period and the slowest recovery.
2012-11-08 Make Way for Debt Mutualization in Europe by Scott Minerd of Guggenheim Partners
Hurdles and hold-ups are inevitable but recent policy developments in Europe indicate that the ECB and the Bundesbank are cooperating and greater federalization is likely.
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 Imagine That... by Michael Kayes of Willingdon Wealth Management
Congratulations to President Obama for his reelection victory. My republican friends, I suspect, are in shock this morning, and understandably depressed. Meanwhile, my friends from the other side must be elated because last night was their night. I congratulate all on their months of hard work campaigning. But today is a new day and it is a test for all of us to come together. So, whatever you were yesterday, today you are only one thing, an American. Can you imagine that for a moment?
2012-11-08 Obama Wins: What's Next? by Team of Janus Capital Group
U.S. President Barack Obama has been re-elected for another four years, while Democrats will continue to control the Senate and Republicans the House of Representatives. We believe this outcome was largely anticipated by the markets before Election Day. However, U.S. Treasury markets likely will gain and risk assets could decline as investors remain concerned about sluggish economic growth, the impact of the impending "fiscal cliff" and the effects of continued Federal Reserve (Fed) intervention.
2012-11-08 November Economic Update by Team of Cambridge Advisors
During the month of October, the S&P 500 traded within a 5% range. By the end of the month, stock returns for the S&P 500 reflected a loss of 1.8%. This decline is surprisingly low when you consider the stock market closed unexpectedly for two days and reopened after a major storm that caused extensive damage in highly populated areas along the East Coast. Treasury yields also did not significantly move during the month.
2012-11-08 A Delicate Balance by Team of Franklin Templeton Investments
You'd be hard-pressed to find someone who argues that balance is a bad thing, but in this time of austerity versus growth and political us-versus-them, you'd be equally hard-pressed to find agreement on how to achieve balance. Right now the U.S. economy is teetering on the edge of the much-publicized so-called "fiscal cliff," a one-two punch of automatic spending cuts and tax increases set to go into effect in 2013, and which threaten to tip the nation into recession.
2012-11-08 Developed Europe: Economic Review 3rd Quarter 2012 by Team of Thomas White International
Amid signs of a deepening economic slowdown in Developed Europe, three key events brought some cheer to the beleaguered region, raising hopes of a lasting solution to its debt crisis. In early September, the European Central Bank (ECB) announced its new Outright Monetary Transactions scheme, which is in effect a commitment by the ECB to buy unlimited quantities of sovereign bonds with up to three years in maturity, providing the bond-issuing member country agrees to a reform agenda.
2012-11-07 Job Market Improves, But Is It Enough? by Scott Brown of Raymond James
The economy plays a critical role in voter decisions. However, historically, it's been more about the direction than the level. The October Employment Report was stronger than anticipated, suggesting that we're doing significantly better than just treading water in the labor market. However, we have a lot of ground to make up and the pace is not especially strong. Regardless of Tuesday's election outcome, the data suggest that the ground may be set for further improvement in 2013.
2012-11-07 Forecasts & Trends by Gary Halbert of Halbert Wealth Management
Last Friday's unemployment report for October had the headline rate rising from 7.8% to 7.9%, in line with expectations. However, the pleasant surprise was that the economy created 171,000 new jobs last month, well above the pre-report consensus of 125,000 and above the average monthly increase of 157,000 jobs this year. That's the good news.
2012-11-07 October Surprise by Douglas Cote of ING Investment Management
Third quarter earnings growth for S&P 500 companies is at risk of being negative for the first time in three years. While the presidential election is important, Congress will ultimately control spending and tax legislation. Monetary stimulus alone is both inadequate and unsustainable; pro-growth taxation, spending and regulatory policy is key to our economic revival.
2012-11-06 ClearBridge Advisors - Market Commentary Q312 by Harry “Hersh” Cohen (Article)
Vibrant end demand is missing, as consumers have neither the wherewithal nor the will to spend as they did in prior periods.
2012-11-06 How the Election Will Affect the Fiscal Cliff by Russ Koesterich of iShares Blog
In the final hours before the election, Russ takes a look at potential outcomes and what they would mean for avoiding the fiscal cliff.
2012-11-06 Favorable Reports Post Sandy by Christian Thwaites of Sentinel Investments
The devastation of Sandy blighted the week. We were lucky in that most of our employees escaped the worst effects. We had some evacuations and plenty of lost power. But the images of devastation were overwhelming and we hope our clients and friends of the firm are safe. Perhaps, as a non-native, my perspective is warped but in the US we have an uncanny ability for industry, problem-solving, drive, inventiveness and optimism. Sometimes the very best of us comes out in these times.
2012-11-05 Three Men Make a Tiger by John Mauldin of Millennium Wave Advisors
In a few hours we will know the outcome of the US elections (hopefully without a repeat of 2000!). So, given that eventuality, why should we bother to explore the rather significant disparity in the models being used to create the polls to predict the outcome of the elections? Because doing so will help us understand why the models we use to predict the effects on our investments of market behavior and macroeconomics so often fail us, and why we should approach the use of such models with a full measure of wariness and skepticism.
2012-11-05 Stream of Anecdotes by John Hussman of Hussman Funds
Analysts who interpret economic data as a stream of unconnected anecdotes are likely to find recent data encouraging, and will easily dismiss any concern about a U.S. recession on that basis. For our part, the internals of the economic picture new orders, backlogs, real income growth, and even the employment components of prominent economic surveys continue to deteriorate. Based on dozens of economic variables and methods that account for leading/lagging relationships (e.g. unobserved components estimates) our view remains that the U.S. economy has already entered a recession.
2012-11-05 Want to learn Mandarin and Hindi? Go to Australia by Team of Thomas White International
Australia has planned an ambitious 'Asian Literacy' program aimed at boosting cultural and economic ties with Asia.
2012-11-05 Americans Head to the Polls Tuesday to Decide Tight Presidential Race by Matt Rubin of Neuberger Berman
As the eastern seaboard continues to recover from the aftermath of Hurricane Sandy, estimates for the economic cost of the storm continue to climb and currently stand in the range of $30 to $50 billion. In the near-term, economic activity in the region is likely to be negatively impacted by the storm; however, the rebuilding of infrastructure, housing and businesses should boost growth in areas most impacted by Hurricane Sandy over the longer term.
2012-11-05 A New Queen Bee by Jeffrey Saut of Raymond James
By the time a queen bee is five she is old and no longer reproduces, leaving her army of honeybees torn between loyalty and survival. Since the hive cannot survive without a productive queen, the beekeeper reached into the hive with a long-gloved hand and squashes the enfeebled queen. With the entire hive as witness, all know the queen is dead. Absent the scent of their leader, the honeybees panic. Something similar to that "queen bee" sequence may be happening currently. The "old queen," at least in the private sector, was driven by exports and manufacturing.
2012-11-05 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
A storm shortened trading week saw virtually no movement in the popularly followed stock market indices.
2012-11-05 And That's the Week That Was by Ron Brounes of Brounes & Associates
Superstorm Sandy overshadowed most all newsworthy stories during the week as much of the East Coast (and beyond) suffered some ill-effects and many will be fighting to overcome challenges for many days (weeks, months) to come. The stock market closed over consecutive days to start the week and uncertainty (volatility) ensued with investors enjoying the best single day performance in a month-and-a-half, only to give up those gains a day later as many set portfolios in advance of the election. Soon the campaign will be a distant memory (but the "fiscal cliff" will become a near-reality).
2012-11-05 Commentary and Statistics by Team of ING Investment Management
U.S. equity markets were mixed during an abbreviated trading week in which Hurricane Sandy forced the longest weather-related shutdown of U.S. stock trading since 1888. While the S&P 500 eked out a small gain, the DJIA and Nasdaq closed slightly lower.
2012-11-05 Election's Impact on Investors by Chris Maxey, Ryan Davis of Fortigent
Next Tuesday's election will bring some clarity to the types of policies that will shape the fiscal and economic future of America. President Obama and Mitt Romney certainly share different visions on how the US should tackle middling growth, while addressing the longer-term issues of the US fiscal deficit and seemingly unsustainable entitlement programs.
2012-11-05 Day of Reckoning by Charles Lieberman of Advisors Capital Management
Tomorrow's election is too close to call according to the polls, while Friday's jobs report was decent, blemishes notwithstanding. Super storm Sandy was and remains a severely disruptive force to the Northeast, particularly New Jersey. A few thoughts on these issues follow.
2012-11-02 Fiscal Cliff: Cataclysm or Non Event? by Team of Managers Investment Group
Now updated through 3Q. This compendium provides an historical perspective of economic data compared to today's results, and provides comments on any developing trends. We also include a synopsis of financial markets results. The OTOTM Chart Book is designed with easy-to-read graphics to tell a story and help you visualize the changes taking place in today's economy.
2012-11-02 ECRI Weekly Leading Index: Still Jogging in Place by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the numbers released today. It is now at 126.6, down from last week's 126.7 (revised from 126.8). Likewise, the WLI growth indicator (WLIg) slipped slightly, now at 5.9, down from last week's 6.0. WLIg has now spent ten consecutive weeks in expansion territory, although it is off its interim high of 6.1. But for the past six weeks the WLI has been jogging in place in a narrow range (126.2 to 126.7).
2012-11-02 The Other Financial Crisis by Mohamed El-Erian of Project Syndicate
Two variants of financial crisis are continuing to wreak havoc on Western economies: the sovereign debt crisis, involving governments; and a less visible one at the level of small and medium-size businesses and households. Until both are addressed properly, the West will remain burdened by sluggish growth.
2012-11-02 Of Varied States: Cyclical, Storm-Tossed and Swing by Alan Levenson of T. Rowe Price
The latest readings on employment growth and household formation show a firm underpinning for moderate growth, with the household sector gathering momentum toward the emergence of positive feedback loops. Despite the immense human cost of Superstorm Sandy, the adverse impact on measured economic activity is likely to be short-lived, with a compensating rebound to emerge before quarter-end. Next week's general election results should bring clarity to the route that policy makers will take to avoid the year-end fiscal cliff.
2012-11-02 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore of Northern Trust
The October employment report paints a favorable picture of the labor market.
2012-11-02 Who Will Lead America Over the Next Four Years? by Frank Holmes of U.S. Global Investors
If President Obama is reelected, it could be a negative for certain energy companies involved in natural gas fracking, says International Strategy & Investment (ISI). Conversely, a Governor Mitt Romney win could be significant for energy companies. In its Romney Portfolio ISIs rationale is that Romney and the GOP will try to do more to promote traditional forms of energy, including offshore drilling, approving the Keystone pipeline, and exploiting the nations coal resources.
2012-11-02 What Would Happen at the Fed Under a Romney Presidency? by Josh Thimons of PIMCO
Between now and the election expect markets to continue to reflect the changing election probabilities. Expect Treasury yields to climb if Romneys probability of victory increases due to fear of what he will do when it comes to Fed nominations. However, any substantial rise in Treasury yields based upon a Romney victory is likely to be a buying opportunity, because Fed policy will be accommodative regardless of who controls the White House.
2012-11-01 Growth Outlook for Europe, China and the US by Mark Nash of Invesco
Growth Outlook for Europe, China and the US Mark Nash, Senior Portfolio Manager in Invesco Fixed Income, outlines the case for global "core" government bonds amid central bank actions on growth prospects in Europe, China and the US.
2012-11-01 The Fed and the Fiscal Cliff by Zach Pandl of Columbia Management
Prospects for this quarter's results are being very closely scrutinized. After healthy growth in Q1, Q2 results proved quite sobering, as sales decelerated and operating leverage proved hard to come by. Given continued disappointing global macro growth, Q3 results seem tracking to be close to flat year over year again. Implicit in the consensus S&P500 estimate of around $103 is a reacceleration in Q4. Implicit in the 2013 consensus of around $115 is renewed healthy growth continuing consistently through the year. Such reacceleration seems highly at risk, which raises a few questions.
2012-11-01 Time To Vote! by Bill Gross of PIMCO
So I pulled out my magic lamp that for some reason works only every October 22nd, and rubbed until the Genie appeared in his red and white checkered cloak with a 10-inch diameter Flavor Flav clock hanging ceremoniously around his neck. Being a rather forward, although not disrespectful Genie, he immediately said, "Mr. G, instead of the yield on the 10-year Treasury, perhaps this year you should wish to know who is going to win the Presidential election?"
2012-10-31 What Really Happened in Benghazi on Sept. 11 by Gary Halbert of Halbert Wealth Management
I've been taking a lot of flak from the Obama supporters in this audience over the past few weeks. Some are demanding that I stick to economic and investment issues and stop criticizing the president. Sorry liberals, but I have long maintained that who we elect to run the country has a big impact on the economy and therefore investment trends.
2012-10-31 Macro View: Natural Disaster Economics by Scott Minerd of Guggenheim Partners
"Super-Storm" Sandy will distort economic activity and data over the coming months.
2012-10-31 ProVise Bullets by Ray Ferrara of ProVise Management Group
Hurricane Sandy rocked the East Coast on Sunday, Monday, and Tuesday, causing the stock exchange to be closed on Monday and Tuesday. It has re-opened today, October 31st. More importantly, however, given the strength and size of the storm, the loss of life was not nearly as great as it could have been. To all of our clients, colleagues, friends, family, and others in the region, we had you in our thoughts and prayers and we hope everyone is safe and that any inconveniences caused by the storm are not significant in nature.
2012-10-30 The Yield Hunt by Michael Lewitt (Article)
The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.
2012-10-30 Nice Speech, Tough Crowd by Christian Thwaites of Sentinel Investments
Sandy is pummeling everything we know on the eastern seaboard. I hope everyone stays safe and we can ride this out without too much damage. Thankfully markets are closed. Meanwhile, here's our views on capital markets on Monday.
2012-10-30 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 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Disgruntled investors took a look at the earnings reports and ran for the hills. With some industrial and techs issuing pessimistic reports (mainly in their outlooks), investors chose to take a hiatus. Election season is just a week-ish away and then the fiscal cliff looms in the not-so-distance future, so plenty of uncertainties and concerns remain for the time being. (And don't forget Spain.)
2012-10-29 The Quest for Certainty by John Mauldin of Millennium Wave Advisors
The last two weeks we have been looking at the problems with models. First we touched on what I called the Economic Singularity. In physics a singularity is where the mathematical models no longer work. For example, models based on the physics of relativity no longer work if one gets too close to a black hole. If we think of too much debt as a black hole of sorts, we may understand why economic models no longer work. Last week, in "The Perils of Fiscal Cliff," we looked at the use of fiscal multipliers by economists in order to argue for or against governmental economic policies.
2012-10-29 Waiting for Treasuries to Reverse Course by Chris Maxey, Ryan Davis of Fortigent
In the years since the global financial crisis, investors have funneled money into fixed income securities. This year alone, more than $260 billion found its way into fixed income mutual funds. In an environment desperate for yield-oriented solutions, such demand is not surprising. What might be considered surprising, however, is investors' willingness to embrace such yield with extraordinary risk attached.
2012-10-29 The White Hurricane by Jeffrey Saut of Raymond James
I revisit The White Hurricane this morning because it potentially looks like another 100-year storm is heading pretty close to Manhattan. So in addition to dealing with the Benghazi scandal, Syrian atrocities, Euroquake, the "fiscal cliff," a stalled U.S. economy, softening earnings momentum, waning revenues, a dysfunctional government, the nastiest campaign I have ever seen, and who Taylor Swift should date next, Wall Street now has to contend with the potential of being flooded out.
2012-10-26 October 2012: Equity Investment Outlook by Team of Osterweis Capital Management
Equity and other "risk" assets rallied in the third quarter in anticipation of further monetary easing by central banks around the world. The prospect of increased liquidity from the central banks appears to have focused investor attention, at least temporarily, away from the generally softer economic data that continue to emerge from Europe and Asia.
2012-10-26 ECRI Weekly Leading Index: Running in Place by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally in the numbers released today. It is now at 126.8, up from last week's 126.6 (revised from 126.7). However, the WLI growth indicator (WLIg) slipped slightly in expansion territory, not at 6.0, down from last week's 6.1. WLIg has now spent nine consecutive weeks of in expansion territory. But essentially the WLI has been running in place for the past five weeks.
2012-10-26 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.
2012-10-26 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore and James Pressler of Northern Trust
Fiscal policy is a matter of multiplication. US GDP growth accelerated in the third quarter, but remains less than ideal. Recent reports out of China reassured the markets, but underlying trends are not so promising.
2012-10-25 Cheap Debt is Good News for Stocks by Scott Minerd of Guggenheim Partners
The eventual return of leveraged buy-outs (LBOs) and an uptick in mergers and acquisitions (M&A) should give investors further reason to be bullish on stocks.
2012-10-25 In or Out? The Case for - and Against - the Stock Market by Team of Knowledge @ Wharton
Given ongoing volatility in the stock market, it's no surprise that investors are increasingly bearish on the market's prospects, beset by a lack of confidence in its institutional underpinnings and a general pessimism about the direction of the economy. But is that distrust misplaced? Wharton experts are mixed about the future fortunes of the stock market, with some saying that investors are withdrawing at the worst possible time and others noting that many people had entrusted too much of their retirement savings to the fate of equity markets.
2012-10-25 Picking Up Nickels by Chris Richey of Neosho Capital
Those who pursue puny returns in the face of enormous risks to their principal are said to be "picking up nickels in front of a steamroller". You would think such behavior is limited to drunkards and fools, but you will be shocked to hear that our very own Federal Reserve has undertaken just such a strategy in their well-intentioned, but, by their own admission, futile pursuit of improved U.S. employment numbers.
2012-10-24 Policy at a Crossroads by Investment Strategy Group of Neuberger Berman
On September 13, the Federal Reserve announced a third round of quantitative easing, dubbed QE3, in the hope of providing an additional boost to the slow U.S. economic recovery. Although this latest policy action reinforces the notion that the U.S. is prepared to support its economy for as long as needed, some economists question whether the stimulus can really make a difference. In this issue of Strategic Spotlight, we consider the recent effects of loose monetary policy and whether the Fed has "reached its limit."
2012-10-23 Understanding the Central Issue behind Entitlements by Michael Edesess (Article)
How should our government assure that its citizens have enough to get by - enough food, enough shelter, good enough health, etc.? It is easy to forget that today's fiercest political battles ultimately revolve around this simple question.
2012-10-23 The Perils of the Fiscal Cliff by John Mauldin of Millennium Wave Advisors
In today's letter we'll peek over the Fiscal Cliff and see what economic models can tell us about government spending. And if we have time we'll quickly look at an interesting study that uses economics to predict the outcome of this US presidential election.
2012-10-23 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks remained sluggish last week as earnings guidance more than last quarter's reports put a damper on stock prices. In addition, the European summit was a failure and investors remain hesitant before the November elections.
2012-10-22 And That's the Week That Was by Ron Brounes of Brounes & Associates
Maybe a four day work week would make some sense? Well, at least, it would have been helpful this week. After a strong start in the equity markets (and a four-day winning streak), the anniversary of Black Monday brought horrid memories of past bearish times and stocks gave up all (most) of their early gains. Major techs reported poor earnings and the Nasdaq struggled more than most as weak PC demand continues to take its toll. Good news...one bad day does not a market make.
2012-10-22 The "Fiscal Cliff" and the Election by Milton Ezrati of Lord Abbett
The fiscal cliff looms large. It should. Unless Washington does something, the 2013 budget will face a sudden and automatic fiscal restraint. The shock would almost certainly drive this economy's already enfeebled recovery into recession. It is an alarming prospect, to be sure, but still, likelihoods suggest that even this partisan Congress will steer clear of such a "cliff."
2012-10-22 An Alternate Reality by Robert Stimpson of Oak Associates
The largest positive factor affecting the environment for stock prices this year has been the recovery in the housing sector. After years of struggle, the sector appears to have turned the corner. The housing market had been showing signs of improvement for some time, but the debate as to whether the recovery was legitimate weighed on the group and added to concerns over the economy.
2012-10-22 More traction...Just Look Through the Earnings by Christian Thwaites of Sentinel Investments
Last week saw an important debate on how the US has fared in the post recession recovery. The short answer is, "not well" if measured by a return to GDP growth trends or per capita income. But the counter, as explained by Reinhart and Rogoff, is "faster than you would expect." We're in the second camp.
2012-10-22 The Little Country That Could by Bill O'Grady, Kaisa Stucke of Confluence Investment Management
In this geopolitical report we will take a brief look at Estonia's history, its economy after the break-up of the Soviet Union, its remarkable economic growth in the 1990s and early 2000s, and the ensuing downturn in 2008. The country stands out for choosing a different path to deal with the recession than many other European countries.
2012-10-19 Fall Quarterly Commentary by John Prichard of Knightsbridge Asset Management
It was a busy quarter for central bankers. A surprise statement during July by European Central Bank President, Mario Draghi, moved markets: "Within our mandate, the ECB is ready to do whatever it takes to preserve the Euro... and believe me, it will be enough." These words sparked an immediate and sharp turnaround in European bond yields (down) and world equities. Not to be outdone, Fed Chairman Bernanke announced QE3 on September 13th, promising to continue purchasing bonds, thereby increasing the money supply, until employment conditions improve.
2012-10-19 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
In his latest quarterly letter, Ron Muhlenkamp, president and portfolio manager of the Muhlenkamp Fund, re-examines Europe, China, and U.S. Politics as the major drivers of the markets. On September 7, 2012, Muhlenkamp published a Market Commentary, headlined "Threat of European Banking Crisis Recedes." In it, he discusses the Outright Monetary Transactions program, introduced by the European Central Bank. Mr. Muhlenkamp thinks this program makes credible the ECB's promise to do all it can to keep the Eurozone together.
2012-10-19 Muddling Down the Middle by Josh Thimons of PIMCO
PIMCO expects that the debate over the fiscal cliff will end in fiscal consolidation, but not a fiscal catastrophe. Unfortunately, while the Fed's monetary policy actions have been, by and large, successful in achieving its intermediate-term goal of increasing asset valuations, they have not been effective in influencing real economic outcomes. Our forecast for the drag on GDP from the fiscal cliff in the coming year is roughly negative 1.5%. Improvement in the housing market will only fill a small part in that hole.
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 ECRI Weekly Leading Index: Index Slips, But Growth Rises by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index of the Economic Cycle Research Institute declined in the numbers released today. It is now at 126.7, down from last week's 127.6 (revised from 127.7). However, the WLI growth indicator rose further in expansion territory to 6.1, up from last week's 5.7. WLIg has now posted sixteen consecutive weeks of improvement and is at its highest level since May 20, 2011. The divergence between the WLI and its growth derivative is probably attributable to apparent anomaly in the BLS's weekly unemployment data over the past two weeks.
2012-10-19 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 Not by Housing Recovery Alone by Team of T. Rowe Price
Strong August-September housing starts are a clear bricks-and-mortar response to reports of rising buyer traffic, confirming a broad-based cyclical recovery in new housing construction. This trend will contribute 0.4 percentage points (pp) to real GDP growth directly through in construction activity, and perhaps another 0.2 pp indirectly through the consumer purchases of those newly employed in housing-related industries and via wealth effects related to the nascent recovery in house prices.
2012-10-19 Stealth Mode by Stephen J. Taddie of Stellar Capital Management
After more than 30 years of declining rates, a reversal that started a longer term trend of higher interest rates, like that experienced from the late 50s to early 80s could be devastating to bond investors. In addition, interest rate increases have not treated many other income investments like fixed rate preferred stocks very well as many of these issues have extremely long maturities, and/or are perpetual. This makes stretching for yield in this type of environment both challenging and hazardous.
2012-10-19 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
This appears to be a good time to be investing in China, as stocks are historically cheap. Chinese stocks are also cheap compared to emerging markets.
2012-10-18 Investment Outlook 2013: "ABCD" Investing: Anything Bernanke Cannot Destroy by Cliff Draughn of Excelsia Investment Advisors
The Ben Bernanke and Mario Draghi concert gave the markets a double shot of their love in the month of September by promising to print as much money as needed to finance the debts of their respective countries. Ever since the financial fraternity party ended in 2008 and the world began deleveraging its massive credit hangover, the global markets have been hooked on the next shot of love from the central bankers.
2012-10-18 Macro View: Europe's Glacial Move To Federalization by Scott Minerd of Guggenheim Partners
Uncertainty continues to weigh on European markets but the continent is still drifting toward federalization. Recent trends and political developments are constructive for an eventual return to growth for the region.
2012-10-18 Triskaidekaphobia1 \tris-kī-dek-ə-fō-bē-ə\ n: Fear of the Number 13 by Gene Tannuzzo of Columbia Management
In May of this year, the Congressional Budget Office published a paper outlining the tax increases and spending cuts scheduled to be automatically implemented on January 1, 2013 under current law. The paper illustrates the real risk of recession if Congress fails to address this looming "fiscal cliff" before year end. The markets are telling us not to worry about the fiscal cliff. Are the markets right, or should investors be more concerned that 13, as in 2013, could be an unlucky number for the U.S. economy?
2012-10-17 Fuzzy Math from the Continent of Peace by Christian Thwaites of Sentinel Investments
Whoops! The IMF made two announcements last week that caught our attention. But to set up the joke in all this, it's worth remembering that for decades the IMF preached austerity economics to any country that needed balance of payments assistance.
2012-10-17 Economics is Such a Drag by Fred Copper of Columbia Management
At least in Europe it is. Central bankers around the world are doing everything they can to try and pump up the global economy. Mario Draghi, President of the European Central Bank, has been incredibly aggressive and creative in trying to rectify the imbalances plaguing Europe.
2012-10-17 Banks Punished For Central Bank and Political Errors by John Browne of Euro Pacific Capital
In recent decades politicians have increasingly followed the Keynesian prescription of economic growth through continued government borrowing and the creation of undreamt of amounts of fiat money by central banks. To facilitate this process, the larger commercial banks have acted as the central banks' de facto distribution system, and as a result have grown ever larger while accepting progressively greater risks.
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.
2012-10-17 Rise Up: US Soft Patch Appears to be Ending by Liz Ann Sonders of Charles Schwab
By definition, inflection points are characterized by maximum weakness. Many US economic readings are again suggesting notable signs of life. Will the improvement be enough to offset the "fiscal cliff"?
2012-10-16 Will Bonds Be ‘Burnt to a Crisp?’ by David Schawel, CFA (Article)
Bill Gross's recent monthly commentary painted a disturbing picture for investors - he foresees bonds being “burnt to a crisp.” This isn't just hot air. Such a conflagration is possible, and investors in bond funds, especially those that are constructed similar to the widely followed Barclays bond index, need to heed risks inherent in today''s market.
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-16 Inflation: Washington is Blind to Main Street's Biggest Concern by Peter Schiff of Euro Pacific Capital
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo...except the voters.
2012-10-16 The Big Four Economic Indicators: Updated Real Retail Sales and Industrial Production by Doug Short of Advisor Perspectives (dshort.com)
The latest updates to the Big Four was today's release of the September Industrial Production, which rose 0.4 percent over the previous month following a 1.4 percent decline the month before. Yesterday the Census Bureau's Retail Sales number was released, and with today's release of the Consumer Price Index we can calculate Real Retail Sales. The latest 0.6% increase gives us a strong three-month upward trend after four months of flat or contracting data. Both indicators beat analysts' expectations.
2012-10-15 The United States: Stability or Complacency? by Alan Levenson of T. Rowe Price
The International Monetary Fund's updated World Economic Outlook foresees a modest pace of U.S. economic expansion in 2012-2013, emphasizing significant downside risks emanating from the euro area crisis and from the domestic fiscal cliff. Weakness in the euro area and slower growth in a secularly-restructuring Chinese economy are weighing on U.S. export trends, but sturdier growth in Canada and Mexico is providing an important offset.
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 Seven Varieties of Deflation by A. Gary Shilling of Gary Shilling & Associates
Inflation in the U.S. has historically been a wartime phenomenon, including not only shooting wars but also the Cold War and the War on Poverty. That's when the federal government vastly overspends its income on top of a robust private economyobviously not the case today when government stimulus isn't even offsetting private sector weakness. Deflation reigns in peacetime, and I think it is again, with the end of the Iraq engagement and as the unwinding of Afghanistan expenditures further reduce military spending.
2012-10-15 QE3Back to the Future by Milton Ezrati of Lord Abbett
The broad scope and open-ended nature of the Federal Reserve's third round of quantitative easing raises questions about what exactly Fed chairman Ben Bernanke has in mind. Some insight, remarkably, emerges from a speech he gave in November 2002 to the National Economists Club in Washington, D.C., when he was simply a Fed board member. Taking his cue then from fears of a Japanese-style deflation, he laid out a path for monetary stimulus in an extreme situation, outlining nontraditional policy tools that have since become common.
2012-10-15 Economic Singularity by John Mauldin of Millennium Wave Advisors
There is considerable disagreement throughout the world on what policies to pursue in the face of rising deficits and economies that are barely growing or at stall speed. Both sides look at the same set of realities and yet draw drastically different conclusions. Both sides marshal arguments based on rigorous mathematical models "proving" the correctness of their favorite solution, and both sides can point to counterfactuals that show the other side to be insincere or just plain wrong.
2012-10-15 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.
2012-10-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
Some recent research by InvesTech Research shows that the performance of the Dow Jones Industrial Average can indicate who will win the White House. James Stack, President of InvesTech recently released a study that showed in elections since 1900 90% of the time the Dow has correctly predicted the outcome of the election based on its returns from Labor Day until Election Day. If the Dow posts a positive return during this time period, the party in power keeps the White House and if the return is negative, they do not
2012-10-12 China's Thousand Talents by Christian Halvorsen of Matthews Asia
Employment is one of many paradoxes of mainland China. The country has been adding approximately 6 million new college graduates annuallymore than any other country. Despite the fierce competition for entry-level work, China faces the additional challenge of attracting enough skilled labor in many key industries. Compounding this problem is the fact that China has for years experienced a severe brain drain, often with Chinese citizens staying abroad after completing their overseas studies.
2012-10-12 ECRI Weekly Leading Indicators: Time to Recant the Recession Call? by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week's 126.2 (revised from 126.3). See the WLI chart below. The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week's 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011.
2012-10-12 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 U.S. Economic and Interest Rate Outlook - October 2012 by By Carl Tannenbaum and Asha Bangalore of Northern Trust
Budget negotiations in the US and Europe are attempting to balance austerity, prosperity, and posterity. US exports and imports are showing the strains of sluggish conditions overseas. Our updated economic forecast reflects some "cliff" effects, but not a renewed recession.
2012-10-12 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 Unemployment Surprise or Conspiracy? by Marie Schofield of Columbia Management
The blogosphere is overflowing with conspiracy theories about the household survey unemployment data in this pre-election period. I do not give any credence to these stories and believe the data is the data. But it needs to be interpreted carefully as it can be complex and volatile.
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.
2012-10-11 The New TIPping Point by Jeremie Banet, Rahul Seksaria, Mihir Worah of PIMCO
The Federal Reserve's QE3 program combined with more aggressive communication are likely to have implications for Treasury Inflation Protected Securities (TIPS).
2012-10-11 Macro View: China in Transition by Scott Minerd of Guggenheim Partners
With nominal growth rates falling faster than expected, the possibility of a hard landing for China country's economy appear to be increasing. More importantly, however, there is more to this situation than is immediately observable.
2012-10-11 Alternative Investments Offer Strategies to Avoid Fed-Inflated Bond Bubble by Team of Emerald Asset Advisors
Over the past several years, investors have shifted hundreds of billions of dollars out of stocks and into investment grade corporate bonds and U.S. Treasuries. To date, this strategy has delivered solid results for many investors, as bond prices have generally continued to rally while bond yields have continued to fall.
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 The September Employment Report by Scott Brown of Raymond James
Nonfarm payrolls rose about as expected last month. However, figures for July and August were revised significantly higher. The unemployment rate fell sharply and unexpectedly, but one should take that with a grain of salt considering the seasonal adjustment issues (the start of the school year). Sifting through the details, the report suggests more of the same. Job gains have been roughly consistent with the pace of population growth. However, we're still not making up much of the ground that was lost during the economic downturn.
2012-10-10 A Kid's Market by Jeffrey Saut of Raymond James
Last week a particularly wily Wall Street wag asked me, "Hey Jeff, do you know why everyone is underperforming the S&P 500?" "Not really," I responded. He said, "Because the S&P has no fear!"
That exchange caused me to recall an excerpt from the book The Money Game. I like this story...
2012-10-10 And That's the Week That Was by Ron Brounes of Brounes & Associates
Don't bury Candidate Romney quite yet. The man looks to be in come-back mode and he has some experience in this area. Remember when Republicans preferred anyone but Mitt (Perry, Bachmann, Cain, Gingrich, Santorum) and yet he emerged victorious from the primary season.
2012-10-10 And That's the Quarter That Was by Ron Brounes of Brounes & Associates
The "quarter of Bernanke" left investors optimistic over the past three months despite the ongoing concerns at home and abroad (and a critical election).
2012-10-09 We Need a Bold Solution to Fix the Retirement System by Joe Tomlinson (Article)
Our retirement system is broken. The average American isn't saving enough to comfortably retire, and the fault lies in our reliance on defined-contribution (DC) plans, such as 401(k)s. Tinkering with DC plans won't solve the problem, and the other extreme - a federally mandated guarantee - isn't likely to gain support. But a number of compromises that lie between those approaches offer a better way forward for future generations.
2012-10-09 A Q3 Letter to Clients - Insights from a Wall Street Legend 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. In it, I draw upon investing principles articulated by the legendary Barton Biggs, who passed away earlier this year.
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 A Small Business Complex by Chris Maxey, Ryan Davis of Fortigent
Despite the release of the September labor report on Friday, small business owners seemed to take the biggest proportion of the spotlight last week. According to the Huffington Post, Romney and Obama mentioned the phrase "small business" a total of 29 times throughout the Presidential debate. The issues and importance placed on small business are unlikely to be as cut and dry as both candidates made them seem.
2012-10-09 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks advanced last week as the impact of the Fed's monetary easing combined with some better economic data persuaded traders to continue to buy.
2012-10-09 Expect Economic Sluggishness to Persist by Bob Doll of BlackRock Investment Management
Although the economy does seem to have improved a bit in recent months compared to where it was in the second quarter, growth levels in both the United States and around the world will likely remain subpar at least through the middle of next year. The base case for the United States appears to be the economy continuing to grow at around 2% (perhaps a notch higher) over the course of 2013. This growth level would be contingent on avoiding the full force of the fiscal cliff and would be underpinned by a recovery in housing and a pickup in capital spending levels.
2012-10-09 This Fortress built by Nature for Herself by Dennis Gibb of Sweetwater Investments
It has been some time since I have taken keyboard in hand in any attempt to inform anyone of my thoughts on the world of investing. I am taking the time to write now because we are embarked on some events that are, in my humble opinion, truly historic. As these events play out the United States may not be a fortress built by nature for herself. So hang on this could get rough and as usual it will be opinionated with a different perspective.
2012-10-09 No Manipulation of US Jobs Data, but the Numbers Are Noisy by Joseph Carson of AllianceBernstein
In the heat of a US election season, the sharp drop in September's unemployment rate raised some eyebrows. I think it is blatantly wrong to argue that government statisticians manipulated the data. But the jump in household jobs that triggered the drop in the unemployment rate was indeed extraordinary and requires further scrutiny.
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 Number Five by John Hussman of Hussman Funds
Examine the points in history that the Shiller P/E has been above 18, the S&P 500 has been within 2% of a 4-year high, 60% above a 4-year low, and more than 8% above its 52-week average, advisory bulls have exceeded 45%, with bears less than 27%, and the 10-year Treasury yield has been above its level of 20-weeks prior. While there are numerous similar ways to define an "overvalued, overbought, overbullish, rising-yields" syndrome, there are five small clusters of this one in the post-war record.
2012-10-08 Maybe the Wind Isn\'t Blowing.. by Michael Kayes of Willingdon Wealth Management
I begin this edition of Willingdon Views with a tribute to a great American, Neil Armstrong, who passed away last month at the age of 82. The first man to walk on the moon was from Wapakoneta, a small town in west-central Ohio. Despite his fame and extraordinary accomplishments, Armstrong maintained his small-town values throughout his life. In a statement released shortly after his death his family referred to him as "a reluctant hero who always believed he was just doing his job." Makes one wonder what they'll say about us after we're gone...
2012-10-08 Pliable Statistics by John Buckingham of AFAM
As Mark Twain once said, Facts are stubborn, but statistics are more pliable. More examples emerged last week in support of that center box quotation from this months edition of The Prudent Speculator. Indeed, Fridays monthly jobs report provided plenty of fodder for both the Obama & Romney election campaigns as the former was able to trumpet the eyebrow-raising dip in the unemployment rate to 7.8% (calculated from a survey of 60,000 individual households) while the latter could point to the less-than-stellar creation of only 114,000 jobs during September.
2012-10-08 Easing Labor Pains for Europe? by Milton Ezrati of Lord Abbett
The Continent sees the first stirrings of needed job-market reforms.
2012-10-08 Key Economic Metrics Strengthen Ahead of 3Q Earnings by Matt Rubin of Neuberger Berman
ISM Manufacturing Index expands for first time in 4 months. U.S. payrolls add 114,000; unemployment rate declines to 7.8%. Alcoa kicks off 3Q earnings season on Tuesday.
2012-10-08 The Unemployment Surprise by John Mauldin of Millennium Wave Advisors
The unemployment number surprisingly dropped to 7.8% last Friday, and the shoot-from-the-hip crowd came out in force. To say that the jobs report was met with skepticism would be a serious understatement. The response that got the most immediate airplay was ex-GE CEO Jack Welch (who knows a few things about making a number say what you want it to say) tweeting, "Unbelievable job numbers ... these Chicago guys will do anything ... can't debate so change numbers."
2012-10-08 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.
2012-10-08 Strong Employment But Still Lots of Slack by Christian Thwaites of Sentinel Investments
The ECB's dearth of tools came through loud and clear last week. Rates remained unchanged not because the economies have a ghost of a chance of recovery but because inflation, at 2.7%, scored well above the 2% target. There's a certain amount of in-built inflation in European economies not present in the US, for example, indexing across many industries and pensions, VAT and euro denominated commodity costs. The combination of higher oil costs and a weaker euro put some of the YOY increases in energy costs as high as 40%.
2012-10-05 Market Performance and the Party in Power: Is There Really a Connection? by Team of Janus Capital Group
The relationship between domestic securities market returns and U.S. Presidential elections is a favored topic of Wall Street commentators. As the 2012 Presidential election heads toward the tape, the pundits are in full swing once again, and claims about the impact of a Democratic or Republican victory on U.S. stock and bond markets pop up almost as frequently as political ads. In this paper, we address the question, Should investors take these prognostications to heart and, more importantly, apply them to their asset allocations?
2012-10-05 Election Preview by Investment Strategy Group of Neuberger Berman
Our Investment Strategy Group sizes up the approaching U.S. election and its potential impact on the "fiscal cliff."
2012-10-05 ECRI Weekly Leading Indicators: Mixed Signals in Latest Data by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally after eight consecutive weeks of growth. It is now at 126.3, down from last week's 126.6 (revised from 126.7). See the WLI chart below. However, the WLI growth indicator (WLIg) now marks its seventh week in expansion territory at 4.7, up from last week's 3.8. WLIg has now posted fourteen consecutive weeks of improvement and is at its highest level since June 3, 2011.
2012-10-05 When Do You Ignore Your Gut? by Team of Franklin Templeton Investments
Anyone who took an introductory psychology class probably remembers the classic study in which different people witnessing the same crime each report a different take on what happened. Though each presumably sane, sober person witnessed the events with his or her own two eyes, individual expectations and biases influenced how they perceived what happened. Sure, you say, but what does this have to do with investing? Well, it turns out that our individual expectations and biases influence how we view investments, too.
2012-10-05 Market Respite by Richard Michaud of New Frontier Advisors
In a period of looming macroeconomic risks and great investor uncertainty the quarter resulted in solid gains in most global equity markets. The Dow was up 4.3%, the S&P 500 5.8% and the NASDAQ 6.2% for the quarter. Year-to-date the Dow was up 10%, the S&P 14.5% and the NASDAQ 19.6%. The news internationally was encouraging though mixed with European indices up 8% for the quarter and 11.8% for the year while Pacific indices were up 2% for the quarter and 7.4% for the year.
2012-10-05 Keep up the pressure the US jobs crisis is not yet over by Mohamed El-Erian of PIMCO
The monthly US employment report has evolved steadily: once a lagging indicator of the underlying state of the economy, it is now seen more as a leading indicator of economic, political and social trends. Friday's data tell us, for once, rather good news.
2012-10-05 How Helicopter Ben Helps Jobs and, Inadvertently, Gold by Frank Holmes of U.S. Global Investors
The world's central bank leaders continue to spike the monetary punch bowl, with investors imbibing on gold once again. This flurry of gold buying prompts many curious investors and doubting media to ask me two questions: 1) How can demand for gold and gold stocks continue; and 2) How high can the precious metal go? To answer these questions, we need to look at the intentions behind the economic and political decision-making across several developed countries, analyze the causes, the effects, and the possible ramifications.
2012-10-04 Thrown in Over Their Heads: Understanding 401(k) Participant Risk Tolerance vs. Risk Capacity by Stacy Schaus, Ying Gao of PIMCO
Our analysis suggests as investors in target-date strategies near retirement they become more attuned to market swings. We believe 401(k) plans cannot succeed if participants jump out of markets at the bottom and possibly miss a rebound. Plans need to have tolerable downside risk, so participants can ride the market waves. The way to manage target-date assets, in our view, is to focus first on the risk capacity of participants relative to meeting an income goal. We ask, how much of one's final income will need to be replaced in retirement?
2012-10-04 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 Market Dimensions by James Damschroder of Gravity Capital Partners
An interesting and perhaps volatile fourth quarter is upon us. We have elections and the fiscal cliff straight ahead. Markets dislike uncertainly, making asset prices potentially marginally lower.
2012-10-03 Understanding How "Debt Deleveraging" Works by Gary Halbert of Halbert Wealth Management
For many years, I have warned that our massive explosion in federal debt (up 50% just since Obama took office) would one day stifle economic growth. Obviously economic growth is currently stifled, what with the weakest post-recession recovery in decades. But the question remains as to whether our massive national debt and trillion-dollar budget deficits are the main reason for the disappointing recovery.
2012-10-03 The Fed Plays All Its Cards by Peter Schiff of Euro Pacific Capital
There never really could be much doubt that the current experiment in competitive global currency debasement would end in anything less than a total war. There was always a chance that one or more of the principal players would snap out of it, change course and save their citizenry from a never ending cycle of devaluation. But developments since September 13, when the U.S. Federal Reserve finally laid all its cards on the table and went "all in" on permanent quantitative easing, indicate that the brainwashing is widely established and will be difficult to break.
2012-10-03 Circle the Wagons on GLD by Bill Smead of Smead Capital Management
We spoke to two small groups in Spokane on September 21st, 2012. For better or worse, when I think of Spokane I think of my cousin Gary. It was 1981 and yours truly was a young stockbroker at Drexel Burnham Lambert. Gold had been in a wonderful bull market ride in the prior five to ten years. Gary was interested in participating in gold through a gold-mining stock traded on the Spokane Stock Exchange. Spokanes proximity to the Northern Idaho mining towns and closeness to the Canadian border made it a natural place for commodity traders and mining enthusiasts to gather to transact business.
2012-10-03 A Funny Thing Happened On The Way To Economic Armageddon by Scott Colyer of Advisors Asset Management
After the recent announcement by the U.S. Federal Reserve (Fed) that they would begin to engage in what has been deemed "QE3," there has been a lot of skepticism that such a plan could actually work. The Fed is attempting to carry out their dual mandate of price stability and full employment by engaging in a new round of asset purchasing targeted at the mortgage market.
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-02 Woody Brock on Why to Own Stocks Now by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions and the author of American Gridlock. In a recent talk, he explained why investors should own stocks - particularly those with stable dividends - and why bonds are very risky in today's environment. This is the transcript; a video of this talk is also available.
2012-10-02 Lessons from Scandinavia by Kaisa Stucke, Bill OGrady of Confluence Investment Management
During the late 1980s and early 1990s, Scandinavian nations suffered through balance sheet recessions. Commentators have suggested that U.S. policymakers could use the Scandinavian response to their crises as a roadmap for resolving the current U.S. situation. As part of our own analysis, we have studied several earlier events to understand the underlying similarities and differences to develop insights into the current event.
2012-10-02 Pottersville by Tony Crescenzi of PIMCO
The excessive use of debt fueled by money printing was the pathway to the global debt crisis. Fed Chairman Ben Bernanke, an expert on the Great Depression, understands the ravages of debt deflation and his every action has been to prevent it from occurring. Greater care must be taken in the future to ensure that our fiat based, fractional reserve system does not run amok. This is why regulators are demanding that banks raise capital, reduce their proprietary trading activities, and shift their business models closer to a utility-style model.
2012-10-01 Leap of Faith by John Hussman of Hussman Funds
Both the economy and the financial markets will do fine in the longer-term, but to imagine that there will not first be major challenges and disruptions is a leap of faith and a leap over a century of economic and financial history that screams otherwise.
2012-10-01 U.S. Economy Prints 32-month Low: Recession Risks Escalate by Dwaine van Vuuren of RecessionALERT.com
It's been 4 months since the 3rd "Summer Swoon" in this expansion when many commentators were trotting out recession scares and imminent collapses in the stock market. Since then the SP-500 has risen over 9%, peaking at 12% gains some weeks back. There is now an interesting divergence developing between the leading data (stock market, money supply, credit spreads etc.) that is implying positive expansion ahead and the co-incident data that is implying a drift toward possible recession.
2012-10-01 King Ludd is Still Dead by Kenneth Rogoff of Project Syndicate
Since the dawn of the industrial age, a recurrent fear has been that technological change will spawn mass unemployment. By and large, neoclassical economists' prediction that people would find other jobs, though possibly after a long period of painful adjustment, has been proven correct but for how much longer?
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 Moral Hazard. by Scotty George of du Pasquier Asset Management
Overall, equity market risk is dissipating. There appears to be a stronger momentum ameliorating a global tapestry of "ills." What may have been a domino effect when the credit crisis began has stopped short of a cataclysm and turned closer to equilibrium. As a result, equities might be poised to perform. The question is when?
2012-10-01 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks finally fell back last week. Weak economic data combined with concerns over Apple's new phone release hurt investor confidence.
2012-10-01 Typical Post-QE by Christian Thwaites of Sentinel Investments
We have typical post-QE market behavior. GTs sold off, then rallied. Equities rose, then flattened. The dollar sold off then strengthened. Gold crept up. Other commodities rose, yawned and gave up most of their gains. Earlier QEs took several months for this to play out. It now all happens in quick time.
2012-09-29 Uncertainty and Risk in the Suicide Pool by John Mauldin of Millennium Wave
Investors in the stock market, especially professionals, are obsessed with risk, your humble analyst included. We try to measure risk in any number of ways, looking for an edge to improve our returns. Not only do we try to determine probable outcomes, we also look for the 'fat tail' events, those things that can happen which are low in probability but will have a large impact on our returns.
2012-09-28 Falling Off the Fiscal Cliff? by Libby Cantrill, Josh Thimons of PIMCO
When we look at how the fiscal debate is likely to play out, rather than how it should play out, our base case is the fiscal cliff will likely be resolved in a short-term deal before the end of the year, making what was a cliff more like fiscal black diamond still dangerous, but not likely to land the economy in a body cast.
2012-09-28 The Big Four Economic Indicators: Updated Real Personal Income Less Transfer Payments by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process.
2012-09-28 ECRI Weekly Leading Index Growth at Highest Level Since June 2011 by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the eighth consecutive week, now at 126.7, up from last week's 125.3 (revised from 124.7). See the WLI chart below. The WLI growth indicator (WLIg) now marks its sixth week in expansion territory at 3.8 (up from last week's 2.7). It has now posted thirteen consecutive weeks of improvement and is at its highest level since June 10, 2011.
2012-09-28 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 ProVise Bullets by Ray Ferrara of ProVise Management Group
The median household income adjusted for inflation is now around $50,000 for a "typical" American family. This is 8% below the all-time high, which was set in 2007. Driving these results, as reported by the Census Bureau, was the fact that 80% of Americans saw their household incomes decline, or at a minimum, remain the same, while the top 20% saw their incomes increase by 1.6%. Depending upon which side of the political spectrum you are on, an argument could be made for the policies of either President Obama or Governor Romney.
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 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 Growing Pains in the BRICs by Investment Strategy Group of Neuberger Berman
The "BRIC" countries have been a focal point of investor interest since the early 2000s. Brazil, Russia, India and China account for about half of the world's population, boast vast natural resources and are among the fastest-growing economies in the world. That said, progress at times has been uneven. Since 2010, the MSCI BRIC Index has largely underperformed the S&P 500 as economic growth flagged. In this edition of Strategic Spotlight, we discuss current conditions and the outlook for these markets.
2012-09-27 Its the (REAL, not the financial) economy, stupid! by Kane Cotton of Bellatore Financial, Inc.
The Fed is relying on the wealth effect. It can't directly bring down unemployment (i.e., part of the "real" economy), so it is focusing on the areas that it can affect, the financial economy and asset prices. Since both PCE and Core CPI inflation measures have been fairly low and are unlikely to become uncomfortably high in the near term due to the slack labor market, low capacity utilization and stagnant incomes, the Fed is again taking aim at asset prices.
2012-09-27 Congress Adjourns Until November: Election and Lame Duck Session Update by Andy Friedman of The Washington Update
Well over a year ago, I predicted that President Obama has the better chance of recapturing the Independent vote and winning the 2012 presidential election. I continue to hold that view.
2012-09-26 Bernanke Put: Beware of Easy Money by Alex Merk of Merk Funds
Central bankers around the world may be providing a backstop to the financial markets in much the same way Greenspan did during the "Goldilocks" years, but when the short-term euphoria wears off, will the negative repercussions be even more severe?
2012-09-26 Is China Becoming Less Competitive? by Dara White of Columbia Management
Concerns about the pace of economic growth in China and the imminent change in leadership have continued to escalate. At the beginning of the year, we highlighted the potential for the rate of economic growth to slow significantly. I recently visited Asia to get a clearer perspective on the situation in China specifically, and Asia generally.
2012-09-25 Jim Bianco – Markets Will Benefit From Disastrous Fed Policy by Robert Huebscher (Article)
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
2012-09-25 Bill Gross: Hedging Your Bet on Deflation versus Inflation by Ben Huebscher (Article)
Will deflation or inflation prevail? The answer to that one question determines portfolio construction, according to Bill Gross, founder, managing director, and co-CIO of PIMCO.
2012-09-25 Investing in a Resource-Constrained World by Richard Vodra, JD, CFP (Article)
The potential consequences of stagnant oil production and climate change for society are written about frequently, but here is a simpler question that is important to our community: How are these and related facts likely to affect investment returns going forward? How can we even frame such questions usefully?
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-25 Stocks Should Overcome Hurdles to Continue the Bull Market by Bob Doll of BlackRock Investment Management
Although global economic data has been relatively weak in recent years, risk asset prices have nonetheless advanced. We would attribute this trend to the fact that weak economic growth does not, by itself, limit the potential for risk assets. In our view, the liquidity-driven reflationary policies of the world's central banks have been a more important factor for asset prices than economic growth levels have been.
2012-09-24 South Korean Entrepreneurs Want Company by Team of Thomas White International
South Koreans, who have traditionally prized secure life-long employment at a chaebol, are increasingly setting out to establish their own companies.
2012-09-24 Clear Progress by Christian Thwaites of Sentinel Investments
Two weeks into a new era of ECB and Fed policy and it is a tie between the gains in equities, with the US and European broad indexes up around 2.2%. But it's the lack of follow-through and opacity of the ECB moves which are perhaps the most disconcerting and so, probably, the more short-lived. While both central banks reported easing in the form of securities purchases they had very different origins and aims.
2012-09-24 Alice in Euroland by Giles Conway-Gordon of Cogo Wolf Asset Management
If you have a taste for make-believe, fantasy and unreason the shifts and contortions of the European elite in the face of the Eurozone (EZ) crisis, culminating in the latest plan for the European Central Bank (ECB) to purchase unlimited quantities of the bonds of EZ members in financial difficulties, have left you spoilt for choice over the last few months.
2012-09-22 QE Infinity: Unintended Consequences by John Mauldin of Millennium Wave
Last Monday an op-ed in the Wall Street Journal, penned by five PhDs in economics, among them a former Secretary of the Treasury and an almost-guaranteed Nobel laureate (and most of them former members of the President's Council of Economic Advisors) minced no words in excoriating the current QE policy. We will look at that op-ed in detail below. The point is that there are grave reservations about the current policy among some very serious policy makers.
2012-09-21 ECRI Weekly Leading Index Growth at Highest Level Since July 2011 by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.
2012-09-21 Reflections: Define Exigent by John Gilbert of GR-NEAM
The world is relying upon its central banks to work wonders. Having made a mess of their balance sheets, households and governments are faced with the long and unpleasant task of reducing indebtedness. The infinite supply of money in a paper money system is the obvious solution. The question is whether, with very liberal exercise of that privilege, there is some limit to its use.
2012-09-21 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Could a transaction tax have unintended consequence for American banks? While the jury is still out on that answer, Hungarys example is a reminder to policymakers to comprehensively consider the rewards of collecting a Robin Hood tax along with the risks. Profits and bank credit growth rates across Hungary plummeted due to the hefty bank levies imposed.
2012-09-20 QE n+1 What The Fed Is Really Up To by JJ Abodeely of Sitka Pacific Capital Management
As I survey the news stories and other analysis on the Feds recent announcement, most fall short of describing what the Fed is really up to. Here is a hint: it's not really about employment. It's not really about "price stability" or really about growth either.
2012-09-20 The Fed's "X" Factor by Zach Pandl of Columbia Management
The most surprising element in last week's Federal Reserve (Fed) decision was not the announcement of Mortgage Backed Securities (MBS) purchases or the extension of its funds rate guidance to "mid-2015," both of which were signaled fairly clearly in advance. Rather, it was the fact that the aggressive monetary easing occurred alongside an upgrade to the central bank's economic forecasts.
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.
2012-09-18 Gundlach – The End of the Bond Bull Market by Robert Huebscher (Article)
Likening bullishness on Treasury bonds to a 'mass psychosis,' Jeffrey Gundlach made his strongest statement yet that interest rates are about to rise. In a conference call with investors last Tuesday, he said that the rate on the benchmark 10-year Treasury bond could increase by 100 basis points by the end of the year.
2012-09-18 Selling Your Practice – After Negotiations Fall Apart by Beverly Flaxington (Article)
I was hoping to sell my firm to another financial advisor. When the time came to close the deal, he turned into a different person, trying to negotiate for all kinds of things and generally being very nasty. The deal fell apart. How do I find a suitable buyer who will treat me with respect and negotiate fairly?
2012-09-18 Shock and Awe by Jerry Wagner of Flexible Plan Investments
Almost twenty years ago, the US initiated a campaign of "Shock and Awe" with its bombing campaign on the Iraqi capital city of Bagdad. I bring this up because some commentators are comparing the Federal Reserve announcement made last week (not to mention the shocking new Arab unrest and murder of our Ambassador!) to the "Shock and Awe" of the first day of the Iraq War. What made it "Shock and Awe" was that the new Fed policy differed, according to John Carney at CNBC, in three ways from past Fed actions.
2012-09-18 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week the stock market got all it wanted from the Central Banks of Europe and here at home. The money presses have been put on full power. The result was a continuation of the stock market rally along with commodities while bonds suffered a setback as investors swapped out.
2012-09-17 And That's the Week That Was by Ron Brounes of Brounes & Associates
Dr. B. has spoken and investor are happy (though some Republican investors probably have mixed feelings). Though not all economists were on board with QE3, the policymakers looked at the labor market and took action. With promises of more bond-buying and low fund rates into 2015, investors went on a risk asset buying spree and stocks shot up to multi-year highs. So let the over-analysis (and political bickering) begin.
2012-09-17 The Fed to the Rescue? by Scott Brown of Raymond James
Citing concerns about the pace of improvement in the labor market, the Federal Open Market Committee extended and amplified its forward guidance and started a third round of large-scale asset purchases (what most people call "QE3"). The FOMC said that economic conditions are expected to warrant exceptionally low levels of the federal funds rate target through mid-2015 (vs. "late 2014" in the previous policy statement) and added that "a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."
2012-09-17 Charlie Dreifus on the Global Economy and Its Impact on Stocks by Charlie Dreifus of The Royce Funds
Portfolio Manager Charlie Dreifus examines the data from Europe, China, and the U.S. and discusses how it may affect domestic stock prices.
2012-09-17 Ben Wants You To Spend Cash by John Petrides of Advisors Capital Management
This week the Federal Reserve launched its third round of monetary policy easing in as many years. Under QE3 (quantitative easing), the Fed will purchase $40 billion of mortgage backed securities on a monthly basis with the purpose of continuing to fuel the housing market. Under QE3, the Fed said it will keep its zero interest rate policy until mid-2015, with the goal of removing market assumptions of a rising rate environment. The Fed is and always will be data dependent, so all of these actions are subject to change.
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.
2012-09-17 Was QE3 Necessary? It Depends on Who You Ask... by Ken Taubes of Pioneer Investments
Last week Chairman Bernanke and the Fed launched another aggressive stimulus program, QE3, saying that they will buy $40 billion in mortgage debt per month and continue to purchase assets in order to boost growth and reduce unemployment. He also announced that the Fed is not likely to raise rates from the current rock bottom lows until at least mid 2015, vs. 2014 as previously stated.
2012-09-15 Truthiness and You by Dan Ariely of Dan Ariely Blog
The term truthiness gives us a way to identify certain kinds of behavior. Colbert mocks the truthiness politicians use to sell their ideas to the public; we can follow suit and mock the truthiness we use to sell rationalizations to ourselves.
2012-09-15 The Direction of the Compromise by John Mauldin of Millennium Wave
I think this election has the potential to be one of those rare times, at least in terms of economic outcomes. In Thoughts from the Frontline we cover economics and investments, money and finance. We only rarely stray into the political world, and then only glancingly. Today, we cross that gray line, but at a somewhat different angle, as we look at the economic consequences of the political decision that will come with the choices we make in November in the US.
2012-09-14 All In by Doug MacKay and Bill Hoover of Broadleaf Partners
Dissatisfied with progress on the jobs front, the Fed went "all in" yesterday in its much anticipated, most recent policy announcement. Unlike QE1, QE2 and Operation Twist, the latest addition to the monetary smorgasbord is open-ended, meaning that it has no pre-established termination date. Policy will remain stimulative for as long as it takes to see a substantial improvement in employment. Rather than keeping rates low well into 2014, it could now be well into 2015 before they tick back up.
2012-09-14 Open-Ended Easing by Carl Tannenbaum and Asha Bangalore of Northern Trust
The Federal Open Market Committee (FOMC) took a very forceful set of steps this week, designed to stimulate what officials have called a "frustrating" job market.
Our updated forecast suggests that the growth trajectory of the US economy is positive but sufficiently sub-par for the Fed to have initiated additional monetary policy support.
There are increasing signs that China's economy is slowing more than the official readings would suggest.
2012-09-14 ECRI Defends Its Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index of the Economic Cycle Research Institute rose for the 6th consecutive week, now at 124.9 from last week's 124.1. The WLI growth indicator now marks its fourth week in expansion territory at 2.1. It has now posted eleven consecutive weeks of improvement. The big news is yesterday's Bloomberg TV interview, in which Lakshman Achuthan, ECRI's COO, reasserted his company's recession call made a year ago on September 21st and his belief that the recession has already begun.
2012-09-14 The Big Four Economic Indicators: Updated Industrial Production and Real Retail Sales by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:
Industrial Production, Real Income, Employment and Real Retail Sales.
2012-09-14 ProVise Bullets by Team of ProVise Management Group
It is a heads I wintails you lose - scenario for American farmers. Everyone has heard about the drought throughout the U.S. being the worst since the 50s. However, dont feel too badly for the farmers as their net income will hit a record $122 billion this year. How can that possibly be, given all of the crops drying up? Easy. Since the supply is down and demand remains the same, the price has jumped dramatically and has offset the loss of yield per acre.
2012-09-14 All In by Bob Rodriguez of First Pacific Advisors
2013 is a critical moment in time. If a material and timely fiscal restructuring does not take place by next September, I fear and believe that it will not occur before 2017. Unfortunately, if this were to occur, my 2009 warning of a crisis of equal or greater magnitude than the Great Recession by 2017 would be a more likely outcome. My worst fear is that fiscal gridlock continues, coupled with the policies of this activist Fed Chairman. Todays Fed actions add to my anxieties. ALL IN may be a good strategy for poker but not for this economy.
2012-09-14 Dont Be the Equivalent of a Stock Market Racist by Team of F.A.S.T. Graphs
Common stocks are very different and come in all assortments, sizes, shapes and flavors. Consequently, we encourage investors to think more specifically and rely more on the precise characteristics of the individual company or companies they are contemplating. Worrying about the general state of the economy or the stock market, or their future direction, is not only an exercise in futility, but an unnecessary exercise as well.
2012-09-14 All Signs Pointing to Gold by Frank Holmes of U.S. Global Investors
So, gold investors, if you havent put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw 'massive inflows' into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.
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.
2012-09-13 Back to the Future: What's at Stake for the Economy in the Obama-Romney Contest by Team of Knowledge @ Wharton
To hear the two candidates tell it, the U.S. presidential election offers a dramatic choice on the economy: Vote for me, each says, if you want a robust recovery; pick my opponent, and we'll plunge back into recession. But given the huge problems the country currently faces, the future -- no matter who wins in November -- will look much like the present, according to several Wharton faculty.
2012-09-13 U.S. Dollar: Don't worry, be happy by Alex Merk of Merk Funds
May we suggest a Twitter version of today's FOMC statement: "Don't worry, be happy!" The Fed may want you to take a valium to stomach the ride ahead. Will the latest statement by the Fed put the U.S. dollar at risk of melting away under your feet?
2012-09-13 Fed Sets Sail on QE3 by Brian Wesbury, Bob Stein of First Trust Advisors
They did it. The Federal Reserve today announced a third round of quantitative easing, making an open-ended commitment to buy additional mortgage-backed securities at a pace of $40 billion per month. The Fed said it also will "closely monitor" the economy and financial markets and continue these purchases and possibly expand them until they see substantial improvement in the outlook for the labor market.
2012-09-12 Housing's 'Green Shoots' by Investment Strategy Group of Neuberger Berman
Headwinds in the housing market appear to be abating as the U.S. economy gradually heals.
2012-09-12 On Uncertain Ground by Howard Marks of Oaktree Capital
I'm going to devote this memo to the uncertainty in the world and the investment environment and then offer my take on the appropriate strategy response. This will require me to touch on a large number of topics, but I will try to dwell less than usual on each of them.
2012-09-12 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 Will America Be Greece in Four Years? by Gary Halbert of Halbert Wealth Management
The US national debt topped $16 trillion last week, and it was almost as if no one paid attention. At the rate we are going, the national debt will top $20 trillion just four years from now in 2016. In my August 21 E-Letter, I pointed out just how mind-boggling a trillion dollars is. Lets revisit that analogy of a trillion in terms of time.
2012-09-12 PIMCO Cyclical Outlook: Building Rickety Bridges to Uncertain Outcomes by Saumil Parikh of PIMCO
Without structural change aided by well-planned fiscal policy, we are afraid the nominal bridges of monetary policy will fail to reach their desired outcomes. The probability of a deflationary left-tail outcome emanating from the eurozone has declined substantially in the short run, yet outright economic growth in the eurozone will remain elusive in 2013.The much-publicized "fiscal cliff" is set to hit the U.S. economy on January 1, 2013, and could reduce U.S.
2012-09-11 Ponzi Games by Michael Lewitt (Article)
Whatever schemes the European Central Bank may cook up over the next few months will only prove short-term liquidity relief to what are long-term insolvency problems. Like any Ponzi scheme, the last money in is going to be hurt the worst when the charade comes to an end. In the meantime, investors proceed at their own risk.
2012-09-11 Ready, Set, Fed! Weak Jobs Report Raises QE3 Odds by Russ Koesterich of iShares Blog
Russ says the US Federal Reserve Open Market Committee has more reason to consider quantitative easing at this week's meeting, after the latest payroll report suggests the US economic recovery is likely to remain weak into the end of the year.
2012-09-11 Fed Preview: Time to Forge Ahead by Carl Tannenbaum of Northern Trust
I got home at about 8 one evening last week, and it looked like a bomb had gone off inside my house. The shrapnel included empty pop cans, open bags of snacks, and scores of used napkins. The sink was filled with dirty dishes, and laundry (clean, or dirty?) was strewn about the floor. No one was home, leading me to suspect that the explosion had done them all in.
2012-09-11 Mondays! by Jerry Wagner of Flexible Plan Investments
In 1965, John Phillips penned Monday, Monday for the first album released by The Mamas and the Papas. The song was a melancholy downer. But it is perfect for summing up the experience for most investors over the last ten years. As you can see, if one had only invested on Mondays, the result would have fallen significantly short of investments for the full market period.
2012-09-10 Better Policy, Better Recovery by Brian Wesbury, Bob Stein of First Trust Advisors
Politicians always shift the blame. So, hearing them say that "no one" could have cleaned up the so-called mess and fixed the economy in just a few years is not surprising. What else do you say when after three years of recovery the unemployment rate is still at 8.1% -- down only 1.9 points since the peak almost three years ago and real economic growth has averaged a tepid 2.2% for three years of economic recovery?
2012-09-10 Late-Stage, High-Risk by John Hussman of Hussman Funds
The market conditions we observe at present are very familiar from the standpoint of historical data, matching those that have appeared prior to the most violent market declines on record (e.g. 1973-74, 1987, 2000-2002, 2007-2009).
2012-09-10 The August Employment Report and the Fed by Scott Brown of Raymond James
The August job market report was disappointing. Nonfarm payrolls rose less than expected and previous figures were revised lower. The unemployment rate fell, but that was due to a decrease in labor force participation (dont read too much into that).
2012-09-10 Performance Anxiety?! by Jeffrey Saut of Raymond James
In last week's verbal strategy comments I suggested participants study the chart pattern of the S&P 500 (SPX/1437.92) and then think about what it would feel like if you were an underinvested portfolio manager (PM), or even worse a hedge fund that is massively short of stocks betting on a big decline. The concurrent performance anxiety would be legend because not only would you have performance risk, but also bonus risk and ultimately job risk.
2012-09-10 The Case for Real Estate by Jeff Kolitch, David Baron, David Kirshenbaum of Baron Funds
We believe we are in the early stages of a multi-year real estate recovery fueled by improving cash flows, rising demand, a scarcity of new development projects, improving credit availability, and generationally low interest rates. We believe the outlook is promising for both residential and commercial real estate.
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.
2012-09-10 Are Labor Markets the Key to Fed Easing? by Chris Maxey of Fortigent
Widely reported last week was anemic labor market growth in August. Some talking heads took this news in stride, assuming this would guarantee further market intervention by the Fed, but there is a danger in assuming any form of quantitative easing will alleviate the intermediate-term concerns of the market.
2012-09-08 Debt Be Not Proud by John Mauldin of Millennium Wave
The unemployment numbers came out yesterday, and the drums for more quantitative easing are beating ever louder. The numbers were not all that good, but certainly not disastrous. But any reason will do, if what you want is more stimulus to boost the markets ever higher. Today we will look first at the employment numbers, because deeper within the data is a real story. Then we look at how effective any monetary stimulus is likely to be.
2012-09-07 The ECB: No Rest for the Weary by Carl Tannenbaum of Northern Trust
The economic picture in Europe is worsening, exposing flaws in the foundation of the euro compact. The European Central Bank is trying its best, but remains hindered by its charter. European policy makers should focus on stabilizing the situation first, and seeking retribution later.
2012-09-07 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
2012-09-07 Economic Data Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fifth consecutive week, now at 123.7 from last week's 123.5 (revised from 123.6). See the WLI chart below. The WLI growth indicator (WLIg) is in its second week in expansion territory at 1.0 (up from last week's 0.5). It has now posted ten consecutive weeks of improvement.
2012-09-07 The Federal Reserves Next Move: QE3? Perspectives on U.S. monetary policy by Team of Janus Capital Group
We believe the Fed will take additional action by mid-September to stimulate the economy, probably through a third round of quantitative easing. U.S. economic growth remains well below potential and is slowing, and the Fed is not meeting its dual mandate to ensure price stability and full employment. We recently reduced our 2012 GDP growth estimate to between 1.5% and 1.7%.
2012-09-07 The Fed's Campaign by Peter Schiff of Euro Pacific Precious Metals
This past Friday, as Fed Chairman Ben Bernanke delivered his annual address from Jackson Hole - the State of the Dollar, if you will - I couldn't help but hear it as an incumbent's campaign speech. While Wall Street was hoping for some concrete announcement, what we got was a mushy appraisal of the Fed's handling of the financial crisis so far and a suggestion that more 'help' is on the way.
2012-09-07 Chinas Next Act by Frank Holmes of U.S. Global Investors
World markets may not have to wait much longer for Chinese policymakers to act, as the government recently announced new infrastructure projects. According to Bloomberg, China approved 25 new subway construction projects, with related investments estimated to be more than 840 billion yuan. Railway, subway and construction stocks in China increased on the news. China is in much better shape than the rest of the world. A powerful rebalancing strategy offers the structural and cyclical support that will allow it to avoid a hard landing.
2012-09-07 Recent Speech Given by Lacy Hunt, Ph.D. by Lacy H. Hunt of Hoisington Investment Management
The most sensible recognition of budget policy came from David Hume, one of the greatest minds of mankind. In his 1752 paper Of Public Finance, Hume advocated running budget surpluses in good times so that they could be used in time of war or other emergencies. Such a recommendation would, of course, prevent policies that would send countries barreling toward the bang point. Countries would have to live inside their means most of the time, but in emergency situations would have the resources to respond.
2012-09-06 Laboring a Point by Jerry Wagner of Flexible Plan Investments
Right before Labor Day each year we are treated to a major policy speech at the Federal Reserve Board's meeting of the Fed's Open Market Committee. In 2010, we were treated to suggestions from Chairman Bernanke that a new period of Quantitative Easing was near. And sure enough, the Federal Reserve announced QE2 on October 22nd of that year.
2012-09-06 How to Unscramble an Egg by Niels Jensen, Nick Rees,Tricia Ward, Thomas Wittenborg of Absolute Return Partners
This month we take a closer look at the root problems behind the current crisis. Too often root problems are confused with symptoms and the wrong medicine is prescribed as a result. We identify five root problems, all of which must be addressed before we can, once and for all, leave the problems of the past few years behind us.
2012-09-06 August 2012 Market Commentary by Andrew Clinton of Clinton Investment Management
On a year-to-date basis the municipal bond market has, once again, delivered meaningful returns both on an absolute and risk adjusted basis. While the market yield and or cash flow of a bond is typically very important to investors, it is equally important to remember that the income a bond produces is only one component of a bonds return. Investors must consider several other essential elements of a security to properly quantify a bonds relative value.
2012-09-06 September: A Rough Month for the Markets? by Gary Halbert of Halbert Wealth Management
September is often a bad month for the stock markets, historically speaking, and this year it could be especially turbulent. In addition to all the uncertainty about the weak US economy, there is uncertainty about what the Fed may do just ahead and what, if anything, will be done to address Europe's recession and debt crisis. In addition, there is the looming presidential election which no doubt will go hyperbolic this month.
2012-09-05 September Economic Update by Justin Anderson of Cambridge Advisors
August was characterized by relatively low volatility as stocks continued to grind higher and bond yields traded in a fairly narrow range. The economy saw little change as the slow growth theme continued. European officials mostly took the month off so the sovereign debt crisis fell off the radar for the month. Politics have dominated the headlines, but a close race hasn't provided an impetus for investors to make significant portfolio changes.
2012-09-04 Back-to-School Letter to the US Congress by Mohamed El-Erian of Project Syndicate
What if members of the US Congress, now returning from their summer recess, were to receive a "back to school" memorandum from concerned citizens? At a minimum, it should call on Congress and the president to converge on a multi-prong, multi-year policy initiative that makes simultaneous advances in six critical areas.
2012-09-04 The Federal Budget Outlook and the Election by Scott Brown of Raymond James
With one month remaining in the fiscal year, the federal government appears to be on track to record a deficit of about $1.130 trillion, down from $1.296 trillion in FY11 and $1.294 trillion in FY10. Such large deficits can't continue indefinitely and this year's election should, in part, be about how, and how fast, the deficit will be trimmed in the years ahead. However, it's important to look at where the deficit came from.
2012-09-04 Civility by Jeffrey Saut of Raymond James
Webster's defines "civility" as: civilized conduct; especially: courtesy, politeness. But, there was no civility last Friday afternoon. The place, CNBC; the time 3:05 p.m.; the anchors Michelle Caruso-Cabrera and Bill Griffith; the show "Closing Bell"; the guests were myself, Bill Spiropoulos, Lee Munson, and Matt McCormick. The interview started off well enough with each interviewee responding to the anchors' questions.
2012-09-04 Still No Recession in Sight by Brian Wesbury, Bob Stein of First Trust Advisors
Real GDP in the US has grown 2.3% in the past year, a mediocre rate of growth, little different than its 2.2% average since mid-2009, when the recovery officially began. It's what we call the Plow Horse economy and we expect it to continue plodding along, at least through this fall.
2012-09-04 All QE, All the Time by Chris Maxey of Fortigent
In a week of relatively light trading to wrap up the summer, equity markets trickled lower, as the Dow Jones Industrial Average lost 0.5% and the S&P 500 Index fell 0.3%. It was a mixed week of economic data in the U.S., but markets were clearly locked in on Ben Bernanke's speech in Jackson Hole, Wyoming. News on housing seems to confirm that a bottom is in place, while manufacturing data continues to move in all different directions.
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.
2012-09-01 And That's the Week That Was by Ron Brounes of Brounes & Associates
Isaac vs. Romney vs. Bernanke. Each took their turn in the limelight this week. While the Hurricane dropped plenty of rain and brought damaging winds into Louisiana, the devastation didnt compare to Katrina. Romney humbly accepted his party's nomination, while still trying to prove to T-Partiers (and women) that he should be their guy (and he can bash his opponents with the best of them.
2012-09-01 The Consequences of Easy Monetary Policy by John Mauldin of Millennium Wave Advisors
We heard from Bernanke today with his Jackson Hole speech. Not quite the fireworks of his speech ten years ago, but it does offer us a chance to contrast his thinking with that of another Federal Reserve official who just published a paper on the Dallas Federal Reserve website. Bernanke laid out the rationalization for his policy of ever more quantitative easing. But how effective is it?
2012-08-31 ECRI's Embarrassing Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the fourth consecutive week, now at 123.6 from last week's 123.3. See the WLI chart below. The WLI growth indicator (WLIg) has risen into expansion territory at 0.6 after nine consecutive weeks of improvement.
2012-08-29 International Real Estate Securities: Review and Outlook by Jon Cheigh, Rogier Quirijns, Gerios Rovers, Luke Sullivan of Cohen & Steers
We would like to share with you our review and outlook for the international real estate securities market as of July 31, 2012. The FTSE EPRA/NAREIT Developed ex-U.S. Real Estate Index had a total return of 5.2% for the month (net of dividend withholding taxes) in U.S. dollars. By comparison, U.S. REITs returned 2.0% for the month, as measured by the FTSE NAREIT Equity REIT Index. Year to date, the indexes returned 21.3% and 17.2%, respectively.
2012-08-29 Is Inflation Returning? by Martin Feldstein of Project Syndicate
Inflation is now low in every industrial country, and the combination of high unemployment and slow GDP growth removes the usual sources of upward pressure on prices. Nevertheless, financial investors are increasingly worried that inflation will eventually begin to rise, owing to the large expansion of commercial bank reserves engineered by the United States Federal Reserve and the European Central Bank (ECB).
2012-08-28 Curious Repetition by Christian Thwaites of Sentinel Investments
Greece had a bond payment in the middle of the week that was paid with no drama and then announced that it had enough cash to finance its needs through October. However, it is using cash set aside to recapitalize banks in order to meet general obligations. The bond buying proposals are still priced into the market.
2012-08-27 Still No QE3 by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve is clearly ready to do something. In recently released minutes from the 7/31-8/1 meeting and a letter from Chairman Bernanke to Congressman Darrell Issa (R-CA), the Fed argued that its actions had helped the economy already and that the Fed was ready to do more.
2012-08-27 Inside the Feds Head by Kristina Hooper of Allianz Global Investors
Now more than ever, investors are getting a glimpse into the minds of policy makers. While economic forecasts remain foggy, recent FOMC minutes reveal why the Fed is sharpening its tools and which ones it is likely to use.
2012-08-27 European Real Estate Securities: Review and Outlook by Rogier Quirijns, Gerios Rovers of Cohen & Steers
We would like to share with you our review and outlook for the European real estate securities market as of July 31, 2012. For the month, the FTSE EPRA/NAREIT Developed Europe Real Estate Index had a total return of 3.9% (in U.S. dollars, net of dividend withholding taxes). By comparison, U.S. REITs had a total return of 2.0%, as measured by the FTSE NAREIT Equity REIT Index. Year to date, the indexes had total returns of 14.0% and 17.2%, respectively.
2012-08-27 And That's the Week That Was by Ron Brounes of Brounes & Associates
When Ben Bernanke talks...investors listen, Republican moans, Romney belittles, and markets react. For now, the jury is still out about any upcoming stimulus move as the policymakers appear far from consensus. Housing continued its rebounding ways, though manufacturing again raised concerns. Europe still appears to be in disarray as Greece takes direction (and a scolding) from its stronger brethren. Stocks ended their nice winning streak, though closed the week on a high note.
2012-08-27 FPA Crescent: Steve Romick's Semi-Annual Report by Steven Romick of FPA Fund
FPA Crescent Fund has released its Semi-Annual report on the state of the fund and its investments. The piece also delves into portfolio manager Steve Romick's market outlook and thoughts regarding the fund's positioning moving forward.
2012-08-25 Boomers are Breaking the Deal by John Mauldin of Millennium Wave
We look at the trends in employment as well as take note of a signpost we passed on the way to finding out that we cant pay for all the future entitlements we have been promised.
2012-08-24 Large Cap Value: Review and Outlook by Richard Helm of Cohen & Steers
We would like to share with you our review and outlook for the U.S. large cap value market as of July 31, 2012. For the month, the Russell 1000 Value Index had a total return of 1.0%, compared with a total return of 1.4% for the S&P 500 Index.
2012-08-24 Economic Data Continues to Refute ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 123.3 from last week's 123.0 (an upward revision from 122.8). See the WLI chart below. The WLI growth indicator (WLIg) is at -0.1, less negative than the -0.4 for last week, which is an upward revision from the previously reported -0.6.
2012-08-24 Economist Expectations for GDP and Unemployment Out to Q1 2014 by Team of Bespoke Investment Group
Economist Expectations for GDP and Unemployment Out to Q1 2014.
2012-08-24 Taking Stock of Corporate Earnings by Team of Neuberger Berman
The corporate earnings season for the second quarter of 2012 has just about ended. Investors entered this period with much apprehension as the global economic slowdown set expectations for disappointing earnings. However, U.S. numbers surprised on the upside, contributing to a rally in equity markets worldwide. Given the importance of the corporate sector to the current economic recovery, we take a deeper look at recent earnings data to highlight important trends.
2012-08-23 No Recession Now - But When? by Lance Roberts of Streettalk Live
There have been a few calls as of late (Hussman, ECRI, Shilling) stating that we are currently in the next recession. Then there is everyone else. While the "optimistic" outlook is always more enjoyable to listen to - the problem is that the current "no recession" view is primarily predicated on current quarter growth rates looked at in isolation. These data points are then extrapolated into continuous future economic expansion.
2012-08-23 Setting Up for Jackson Hole by Carl Tannenbaum of Northern Trust
I was once favored with an invitation to the Federal Reserve's annual retreat in Jackson Hole, Wyoming. It was an amazing experience; the participant list was a Who's Who of global economic policy makers. I called my mother to brag, but all she wanted to talk about was the mischief that she and my father had gotten into while honeymooning in the area some fifty years earlier. Too much information.
2012-08-23 'Japanification' by Scott Mather, Dirk Jeschke of PIMCO
The same dark forces that Japan has been battling could continue to infect the developed world. During Japan's banking crisis deflationary expectations became embedded in the economy early on, preventing real short-term rates from remaining negative and thereby clogging monetary transmission. One of the chief explanations for the outbreak of deflation in Japan was the difference in the structure of the labor market.
2012-08-23 The Growth Factor by John Barr, Chris Retzler of Needham Funds
During July, the domestic economy continued to slow and Europe again appeared on the precipice of disaster. On August 3rd, the July employment report showed unemployment at 8.3%, essentially unchanged from June. We believe the real story is that the civilian labor force participation rate has fallen to 63.7%, which is down from a peak of 67.3% in 2000.
2012-08-23 Global Real Estate Securities: Review and Outlook by Jon Cheigh, Chip McKinley of Cohen & Steers
We would like to share with you our review and outlook for the global real estate securities market as of July 31, 2012. The FTSE EPRA/NAREIT Developed Real Estate Index had a total return of 3.6% for the month (net of dividend withholding taxes) in U.S. dollars. Year to date, the index returned 18.9%.
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.
2012-08-21 Hype and Reality in the Muni Bond Market by Hildy Richelson (Article)
Meredith Whitney's prediction last year of billions of dollars in municipal bond defaults stirred investors' fears. Earlier this summer, bankruptcies in three California cities reignited them, and last week a Federal Reserve study revealed that muni bonds have defaulted at a higher rate than previously reported. But no crisis has befallen the municipal bond market, and it is highly unlikely that one ever will.
2012-08-21 Anniversary Weaks by Christian Thwaites of Sentinel Investments
A couple of anniversaries last week: five years since the start of the credit crunch and one year since the US downgrade. The ramifications of both are still evident daily, of course. We're still living the consequences. So this is as good a time as any to take stock.
2012-08-21 Inflation Subdued, But Will It Last? by Chris Maxey of Fortigent
As the economy continues to grind along at a sub-optimal rate of growth, many pundits are calling for additional quantitative easing measures from the Federal Reserve. Recent inflation data keeps the door open for further easing, but pockets of higher prices exist, keeping the Fed at bay.
2012-08-21 Young Americans: The Death of Equities May be Exaggerated by Liz Ann Sonders of Charles Schwab
PIMCO founder Bill Gross believes the "cult of equity is dying" let me take the other side. Mutual-fund flows suggest that we may have lost a generation of investors. However, demographics suggest there may be another generation that could be the stock market's savior.
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 Outlook for Inflation and Fed Policy by Scott Brown of Raymond James
The odds of further accommodation from the Federal Reserve have decreased significantly in the last few weeks, as the level of fear has diminished. The financial markets now expect most of the fiscal cliff to be avoided. In Europe, leaders will still have to act against the region's crisis, but theyve also continued to express a strong resolve "to do whatever it takes" to keep the eurozone intact. Perhaps more importantly, U.S. economic data reports have generally improved.
2012-08-20 QE3: Tackling the Big Questions by Milton Ezrati of Lord Abbett
Will the Fed launch another round of quantitative easing? If so, when? Here are the factors that could influence the central bank's decision.
2012-08-20 The Basis For Fear by Charles Lieberman of Advisors Capital Management
Last week, I wrote about how stocks are cheap historically and also with respect to other asset classes, such as bonds. This week, I want to focus on the reasons for this. Stocks are not cheap by accident. Investor concerns over Europe, renewed recession in the U.S., the fiscal cliff and the huge budget deficits provide ample reason for caution. However, not all of these concerns are well placed and some of the issues can be resolved favorably.
2012-08-20 Europe's Unstable Hammock by Mohamed El-Erian of PIMCO
This summer I have been asked a lot about Europe -- not so much by economists but by others concerned that the lingering crisis there would make their daily economic life even more challenging. In responding to these questions, I have often struggled to summarize in a few sentences the causes of Europe's existential crisis, let alone what is likely to occur next (including elements of a solution) -- that is until I tried to use a hammock.
2012-08-20 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock prices have been supported by strong profits permitting buybacks and rising dividends as well as the absence of negative news from Europe. In fact, with all the leaders there taking vacations it has allowed rumors and leaks of possible steps, which have produced lower borrowing costs in Spain and Italy. This has allowed for a reflex rally there that has served as a catalyst for the continued rally in our domestic markets.
2012-08-17 Fiscal Cliffhanger by Brian Horrigan of Loomis Sayles
In the famous 1955 movie Rebel Without a Cause, troubled high school student Jim Stark (played by James Dean) winds up playing a game of chicken with his classmates. The US economy is at risk of driving, so to speak, over a "fiscal cliff" starting January 1, 2013, an event that threatens to wreck the economy. There are fewer than five months to avoid going over this cliff.
2012-08-17 Press Play by Liam Molloy, Bethany Carlson of Galway Investment Strategy
The Treasury has doled out approximately $10.5 billion on excess bank reserves over the last four years. The emergency Fed policy of paying 25 basis points on excess reserves was enacted on October 6, 2008 to incentivize banks to hold them in the midst of the financial crisis. It worked. But the policy also introduced another headwind to velocity of money.
2012-08-17 ECRI Weekly Leading Index Continues to Undermine ECRI's Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index of the Economic Cycle Research Institute rose slightly to 122.8 from last week's 122.5. See the WLI chart below. The WLI growth indicator is at -0.6, less negative than the -1.1 for last week, which is an upward revision from the previously reported -1.3.
As of today, the ECRI website continues to feature Lakshman Achuthan's July 10th Bloomberg TV interview, in which he reaffirmed his company's recession call and stated that we're already in a recession.
2012-08-17 Republicans Hope, but Don't Change by Peter Schiff of Euro Pacific Capital
While I appreciate that Ryan has the courage to take a position at the vanguard of his party in the campaign for fiscal responsibility, the modesty of his plan is just the latest reminder of how utterly divorced from reality Washington politicians remain. Like all of his brethren, Ryan is pinning his budget battling plans on the pain free "grow your way out of it plan." But as long the government consumes so much of the nation's productivity, the conditions to create that growth will never occur. Hope is not a strategy.
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 Markets Holding Up Despite Volatility by Ken Taubes of Pioneer Investments
Despite a steady stream of negative headlines and high volatility, markets are holding up pretty well. The broadest measure of the stock market, the S&P 500 Index, is up nearly 13% year-todate through today, August 13, 2012. The NASDAQ is up almost 17%. High yield bonds are up almost 9.7% while investment grade corporate bonds have gained over 7%. Even Europe has managed 7.5%, as measured by the FTSE Eurofirst 300 Index in dollar terms.
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.
2012-08-16 Searching for a Fiscal Ladder by David Kelly of J.P. Morgan Funds
As America begins to cool down after a long hot summer, the economy remains sluggish. Economic growth in the first half of the year is estimated to be less than 2%, reflecting continued business and consumer caution, tight lending standards and a shrinking government sector. This pace of growth, in turn, has produced a monthly average of just over 100,000 new jobs since February, leaving the unemployment rate marooned above 8%. For investors, however, the picture is not that bad.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-14 Maybe This Time is Different by Andrew Redleaf of Whitebox Advisors
This Time Is Different, the catchy title of the popular book by economists Carmen Reinhart and Kenneth Rogoff, has also become a catchphrase summing up the world-weary wisdom of our time. Reinhart and Rogoff, in recounting eight hundred years of financial follies and investment bubbles, gleefully point out that in every case experts offered plausible arguments for dispensing with traditional rules of valuation, i.e., "this time it's different."
2012-08-14 Careful With That Beehive, Eugene by Christian Thwaites of Sentinel Investments
When you move a beehive, you must move it more than three miles or not less than three feet. Anything else confuses the bees. Markets can be the same. And that's why President Draghi's comments reverberate still after two weeks. No one seems to understand what he meant.
2012-08-13 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 Begging for Trouble by John Hussman of Hussman Funds
Investors remain so addicted to the temporary high of monetary intervention that they are practically begging to be shot, mauled by dogs, and diced by a Veg-O-Matic so they can get their next fix of pain-killers.
2012-08-13 Driving with the Doors Off by Doug MacKay, Bill Hoover of Broadleaf Partners
Two months ago I bought a bulldozer-yellow Jeep Wrangler, replacing my eight year old black Audi A6. While the A6 had been a wonderful car, I was ready for something new and a Jeep fit the bill. Driving with the doors off was a lot of fun, but certainly a different feeling than I was used to experiencing. The stock market over the last two months and perhaps even last three summers has been a lot like that, different, but ultimately rewarding.
2012-08-13 Double Dip? Doubtful by Milton Ezrati of Lord Abbett
The flow of economic news is hardly encouraging. Jobs growth remains disappointing. Recent readings on consumer spending and business activity show weakness as well. If the picture of the housing market has improved a bit, it still hardly portrays strength. Talk of an imminent recessionary dip has become common, for the third time now in as many years. While some recent economic reports have been discouraging, underlying fundamentals do not point to a return to recession.
2012-08-13 Commodities to Power Emerging Markets Higher by Dawn Bennett of Bennett Funds
In Latin America, Brazil leads as a natural supplier of copper and crude oil, which it is now able to extract and export on competitive terms. Nations rich with natural resources perform well during times of global economic expansion. In particular, countries rich with industrial commodities tend to outperform those without.
2012-08-13 Stocks Look Poised for Continued Gains by Bob Doll of BlackRock Investment Management
Although investor attention seems focused on a number of well-known downside risks (including the European debt crisis, hesitant US economic growth and the pending US fiscal cliff), stocks have continued to climb higher and last week notched their fifth consecutive week of gains.
2012-08-11 And Then There Is Disaster C by John Mauldin of Millennium Wave
I have contended for some time that Europe is faced with two choices: Disaster A, which is the break-up of the eurozone, or Disaster B, which is the creation of a fiscal union, which keeps the euro more or less intact. Over the last few months I have come to realize that there is indeed a third option, which now looks increasingly possible. European leaders might do nothing more than deal with the problem immediately in front of them, moving from crisis to crisis in a slow-motion drift toward fiscal union.
2012-08-10 Schwab Sector Views: Cautiously Cautious by Brad Sorensen of Charles Schwab
We remain slightly defensive with our sector recommendations but admit that we're a bit concerned over doing so. While we certainly believe this is the appropriate positioning given the continued elevated uncertainty in the market, combined with sluggish economic data, we also acknowledge that some defensive areas appear extended and the possibility of a near-term cyclically-based rally exists.
2012-08-10 ECRI Recession Call: Weekly Leading Index Improves, Growth Index Little Changed by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly to 122.5 from last week's 122.1 (a tiny revision from the previously reported 122.2). See the WLI chart below. At one decimal place, the WLI growth indicator (WLIg) is unchanged at -1.3 as reported in Friday's public release of the data through August 3. At two decimal places, WLIg is slightly less negative at -1.28 compared to last week's -1.35.
2012-08-10 Citius, Altius, Fortius by Carl Tannenbaum of Northern Trust
Countries across the globe seek faster, higher, stronger growth. Central banks in the United States and Europe are both seeking new ways to stimulate economic activity. Recent news from the housing market has been encouraging, but the race to recovery is likely to be a marathon, not a sprint. Headwinds blowing from Europe and China will continue to present significant downside risks to U.S. economic growth.
2012-08-10 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.
2012-08-08 How Hoover Caused the Euro Crisis by Christian Thwaites of Sentinel Investments
There is a Burkean principle that many sorts of change must be regarded with skepticism. In the last few months in Europe we have seen new maxims, new ideas, new commitments, new resolves, lots of new acronyms, yet very little has changed from two years ago when Greece surfaced as the first casualty of the banking/sovereign crisis.
2012-08-08 Stock Pickers: "Somebody I Used to Know" by Bill Smead of Smead Capital Management
Art has a tendency to express culture. One of today's catchiest songs does a great job of explaining the relationship between institutional/individual investors and US common stock picking. The song captures what has happened since the summer of 1999, when Warren Buffett warned investors about forward stock market returns because of a love affair that institutional and individual investors were having with US large cap stocks.
2012-08-08 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 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week gave us quite a bit of information, but on balance the stock markets did not seem fazed one way or the other. Disappointment at a lack of policy initiative from the world's Central Bankers was offset by an employment report, which was very confusing at best, but certainly did not indicate a meltdown in the economy.
2012-08-07 The Not So Super Hero by Peter Schiff of Euro Pacific Capital
The past week provided clear lessons not just in how central bankers have a limited ability to positively influence the economy but also how they are limited in their capacity to deliver the shortsighted policy actions that investors currently crave. The developments should provide new reasons for investors and economy watchers to abandon their faith in central bankers as super heroes capable of saving the economy.
2012-08-07 Mixed Signals Color Downgrade Anniversary by Kristina Hooper of Allianz Global Investors
Two trouble spots for the economy, the job market and housing, generated some good vibes amid gloom over no action from central banks and manufacturing weakness. Unfortunately, it wasnt enough to push the stock market into positive territory for the week. But looking through a longer-term lens, stocks have been resilient since last year's debt-ceiling drama and Standard & Poors downgrade of U.S. debt.
2012-08-07 All That and Nothing To See by Christian Thwaites of Sentinel Investments
The ECB learned a tough media lesson last week. If you say, as Mr. Draghi did in a pre-Olympic euphoria, that you will do "whatever it takes to preserve the euro" then markets will take you at your word.
2012-08-06 And That's The Week That Was by Ron Brounes of Brounes & Associates
Action speaks louder than words. While the positive rhetoric coming from the mouths of center bankers brought optimism to the markets, their actions (or lack thereof) sent the indexes into a four day losing streak. Only a strong non-farm payroll release late in the week salvaged the market and a solid rebound left the major indexes in positive territory for the week (though the eternal pessimists believed the data was an aberration). Maybe Bernanke has more words of wisdom for them?
2012-08-06 From Resource Curse to Blessing by Joseph Stiglitz of Project Syndicate
New discoveries of natural resources in several African countries including Ghana, Uganda, Tanzania, and Mozambique raise an important question: Will these windfalls be a blessing that brings prosperity and hope, or a political and economic curse, as has been the case in so many countries?
2012-08-06 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 Why the Long Face? by Brian Wesbury, Bob Stein of First Trust Advisors
Back in early 2009, the University of Chicago Booth School of Business and the Northwestern University Kellogg School of Business teamed up to create the Financial Trust Index. The latest readings from July 2012 show that just 21% of Americans trust the financial system and only 15% trust the stock market. For many, this negativity is understandable.
2012-08-06 Job Outlook: Not Great, But Not Terrible by Scott Brown of Raymond James
Nonfarm payrolls rose more than expected in July, reducing fears that the economy may be headed back into recession. One shouldn't put too much weight on any one particular month, especially July. However, the figures are consistent with the broad range of data suggesting moderate growth over the near term - not especially strong, but not terribly weak either.
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 ProVise Bullets by Ray Ferrara of ProVise Management Group
One of the so-called potential benefits of a 401(k) plan is the ability of the participant to borrow money from the plan. Generally, a participant can borrow up to $50,000 from the plan and pay themselves interest. The loan must be repaid within a five year period of time.
2012-08-05 Erasers by John Hussman of Hussman Funds
Moderate losses may be a necessary feature of risk-taking, but deep losses are erasers. A typical bear market erases over half of the preceding bull market advance. It is easy to forget - particularly during late-stage bull markets - how strongly this impacts full-cycle returns.
2012-08-03 GDP Report: "Good News" - You've Got to be Kidding! by Gary Halbert of Halbert Wealth Management
We dissect last Fridays controversial 2Q GDP report, which most found disappointing but some in the mainstream media found encouraging (ie at least were not in a recession). From there, well discuss the Feds latest monetary policy meeting that ends tomorrow. The stock markets rallied strongly last week, partly on perceived good news from Europe, and partly because of renewed expectations that the GDP report would be weak enough to move the Fed to enact QE3.
2012-08-03 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 ECRI Recession Call: Weekly Leading Index Slips But Growth Index Improves by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 122.2 from last week's 122.7 (a tiny revision from the previously reported 122.8). See the WLI chart below. However, the WLI growth indicator (WLIg) improved, now at -1.3 as reported in Friday's public release of the data through July 27, an improvement over the previous week's -1.7, which was an upward revision from -2.3.
2012-08-03 The Big Four Economic Indicators: Updated Nonfarm Employment by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
2012-08-03 A Funny Thing Happened on the Way to the Recession by Martin Pring of Pring Turner Capital Group
Every day it seems the media are filled with forecasts of dyer economic times ahead based on troubles in Europe, Asia, and the Fiscal Cliff. The list goes on. Indeed the latest unemployment and GDP numbers, reflect a declining growth rate that is on the verge of going negative. Consequently, a number of commentators have used a projection of these trends to forecast an imminent recession. This is typical of crowd behavior, which has a strong tendency to extrapolate the recent past.
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.
2012-08-02 Q1 GDP Revised Upward; Q2 Growth Remains Sluggish by Team of American Century Investments
The 1.5% rise in gross domestic product (GDP) for the second quarter was in line with market expectations, while growth for 1Q was revised up slightly to 2.0%. The major U.S. equity markets fared well, with the Dow Jones Industrial Average closing above 13,000 for the first time since may. In other news, the Federal Open Market Committee (FOMC) meets this week, which could result in a third round of quantitative easing.
2012-08-01 What History Suggests About the Future of Stocks by Seth Masters of AllianceBernstein
Some experts today argue that the world has entered a New Normal condition in which stocks have permanently lost their return edge. We've heard this before. It was wrong then, and we think it's wrong now, too. In 1979, BusinessWeek published a cover story famously called The Death of Equities. now, stock market returns had lagged 10-year Treasury returns for a decade, although for somewhat different reasons.
2012-08-01 The Big Four Economic Indicators: What They're Telling Us About the Economy by Doug Short of Advisor Perspectives (dshort.com)
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method. There is, however, a general understanding that there are four big indicators that the committee weighs heavily in their cycle identification process.
2012-08-01 The Vanishing Treasury Yield by Team of Neuberger Berman
Although Treasury bonds have performed well in recent years, investors should be aware of increasing risks as yields decline. Yields for 10-year Treasury Inflation-Protected Securities have been persistently negative since the fourth quarter of 2011 and continue to trend lower, implying that investors are paying increasingly higher prices for the relative safety these investments are supposed to provide.
2012-08-01 Remarks to the NBER-Sloan Conference on the European Crisis by Mohamed El-Erian of PIMCO
We believe that this intersection between what economists and policymakers know - is a critical one to get right, and not only for a long-term investor like PIMCO. You see, unless there is a strong economic anchor, policymakers (and their political bosses) will lack the conviction and foundation needed to take difficult decisions and explain them well to citizens. So it is crucial for both sides to know what is known - and also to recognize, to the extent possible, the known unknowns.
2012-08-01 America's Constrained Choice by Mohamed El-Erian of Project Syndicate
By the time the next US presidential term starts in January 2013, the incumbent will have only limited room for maneuver on economic policy. The real choice concerns the social policies that should accompany a broadly similar set of economic measures; and, here, the differences between the candidates are highly consequential.
2012-08-01 Italy - The Next Chapter in the Eurozone Debt Crisis by Greg Hahn of Winthrop Capital Management
After recently returning from Italy and France and analyzing the economic data coming out of Italy, we have a higher conviction that Italy will be stuck in a severe recession and has an elevated probability of requiring a bailout. Our main theme, which is similar to our view of the United States, is that Italy has too much public debt and is lacking the political will to make the necessary expense cuts and stimulate its economy to successfully navigate the deleveraging that is required.
2012-07-31 Justice Roberts is Right: The Plan Won't Work by Peter Schiff of Euro Pacific Capital
Now that the Supreme Court has given its narrow blessing to the Affordable Care Act, the big question is whether it will deliver the benefits that its proponents promise. Unfortunately, as it is now constructed, the plan will backfire causing fewer healthy people to buy insurance, raise premiums for those who do, destroy employment opportunities, cripple the health insurance industry, and weaken the economy.
2012-07-31 Uncertainty Reigns Supreme by Chris Maxey, Ryan Davis of Fortigent
With the first half of the year in the rearview mirror, investors might be lulled into thinking the most active period of the year is also in the rearview. Fast forward to year-end, though, and investors may beg for a return to the sanguine days of early 2012. A range of events in the coming months will likely dictate market optimism for 2012, 2013 and possibly beyond.
2012-07-31 An ECB Rally by Christian Thwaites of Sentinel Investments
We remain dependent on European statements but what a difference a year makes. This time last year we saw softening economic data and increasingly poor news coming out of Europe. But then we had a diffident ECB president who had just finished a round of rate increases as Europe slumped. This time we have combative words from Mario Draghi to support the euro, apparently at all costs.
2012-07-30 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks bounced last week on the heels of earnings which were not so bad, and perhaps more importantly, indications that the European Central Bank was ready to take the plunge as lender of last resort.
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?
2012-07-30 Whitney, Revenue and Defaults by Team of Managers Investment Group
Shortly after Meredith Whitney's appearance on 60 Minutes, we published a Q&A with Gannett Welsh & Kotler, LLC, in which they discussed their view that Ms. Whitney's concerns were overblown. During the last 1 1/2 years, GW&K's view has proven to be correct and we have taken this opportunity to once again seek their thoughts on the financial challenges governments face today through a Q&A.
2012-07-28 Gambling in the House? by John Mauldin of Millennium Wave
The problem that gave rise to the LIBOR scandal is the lack of transparency. Why would banks want to reveal how much profit they are making? The last thing banks want is transparency. This week I offer a different take on LIBOR, one which may annoy a few readers, but which I hope provokes some thinking about how we should organize our financial world.
2012-07-27 Demographic Headwinds for Housing by Mike "Mish" Shedlock of Sitka Pacific
Boomer demographics and postponement of marriage on account of student debt and poor finances are two of the key reasons that I long-ago stated the housing recovery would be slow for a decade. Declining birthrates now show that is indeed what is happening.
2012-07-27 ECRI Recession Call: Weekly Leading Index Improves by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose to 122.8 from last week's 121.8 (a tiny revision from the previously reported 121.9). See the WLI chart below. The WLI growth indicator (WLIg) also improved, now at -1.6 as reported in Friday's public release of the data through July 20, an improvement over the previous week's -2.3.
2012-07-27 FOMC Preview: Christening QE III by Carl Tannenbaum of Northern Trust
Look for the Federal Reserve to embark on a new round of quantitative easing next week.
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.
2012-07-25 Global Bonds - Where To Now? by Nic Pifer of Columbia Management
Economic data over the past four months show a clear softening trend in global economic activity. From our perspective, the muddle-along, sluggish global growth scenario remains very much intact. Highly accommodative monetary policies by the major central banks are helping support activity and contain downside risk.
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 Low Interest Rates Are Not Enough by Mohamed El-Erian of PIMCO
Welcome to what could be called "GGIRC," the great global interest rate convergence whereby interest rates steadily converge to zero in many countries around the world, both advanced (other than the crisis European economies) and emerging (other than the persistent financial basket cases). In theory this is a good thing for a global economy. In practice, however, the situation is much more complicated and not so benign.
2012-07-25 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 Weaker Headlines by Christian Thwaites of Sentinel Investments
Well, the whole Spanish banking solution from a few weeks ago was not destined to last. Back in late June, the EU welcomed, along with the ECB, EBA and IMF that the EFSF /ESM would provide around 50bn of capital, provided the financial sector gave certain conditions and horizontal restructuring plans. And, even better, the FROB would receive the funds and ensure at the time of the capital infusion, Spain would honor its Excessive Deficits Procedures. Got that?
2012-07-24 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
I want to dispel the notion that I am an investment bear. There is nothing wrong with expressing an opinion, bullish or bearish, particularly when the consensus says its alright. Proof of one's courage, though, lies at the margins, during undetectable inflection points, before the consensus has arrived. My track record versus the benchmarks demonstrates a successful delineation between bearishness and being opportunistic.
2012-07-24 Fed Outlook: An Itchy Trigger Finger by Scott Brown of Raymond James
Fed Chairman Bernanke's monetary policy testimony to Congress was not expected to be a big deal. The economic projections of senior Fed officials were already published and the minutes of the June 19-20 policy meeting showed the Fed in a wait-and-see attitude However, most of the economic data released since the Fed policy meeting were weaker than expected. While Bernanke did not signal that policy action was imminent, the tone of his testimony was clearly concerned.
2012-07-24 Wesbury vs. Krugman by Brian Wesbury, Bob Stein of First Trust Advisors
Today, on Bloomberg with Tom Keene, Brian Wesbury was asked about Paul Krugman. Wesbury said Krugman was wrong - government spending does not boost growth, if it did there would be no poverty in the world. This was reported on BusinessInsider...BusinessInsider then reported that Krugman fired back...quoting his New York Times blog. In it, he claims it all "depends on the situation."
2012-07-24 Why We Don't Rebalance by Jason Hsu of Research Affiliates
Research makes a compelling case that investors should rebalance their portfolios, yet most investors do not do so. Why not? The answer is less about behavioral mistakes and more about the fact that rational individuals care more about other things than simply maximizing investment returns.
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 Emerging Asia Pacific: Economic Review 2nd Quarter 2012 by Team of Thomas White International
Emerging Asia, which posted strong results during the first quarter of 2012 on optimism that Europe's sovereign debt problems would be solved quickly, returned to struggling ways during the second quarter of 2012 as prospects for Europe continued to wobble throughout the period. The uncertainty about Greece's fate in the European Union and the destiny of the single market itself kept industrial firms in Europe guessing for the most part of the second quarter.
2012-07-23 Economic Review: Developed Europe Second Quarter 2012 by Team of Thomas White International
Developed Europe remained on tenterhooks for the greater part of the April-June quarter, but ended the period on a high note. At their Brussels summit on June 28-29, European leaders chalked out two crucial policies. They decided that the monetary unions permanent bailout fund or European Stability Mechanism (ESM) would be allowed to provide capital to ailing banks directly rather than through the governments of the countries in which they are located.
2012-07-23 Slow in Q2, But No Recession by Brian Wesbury, Bob Stein of First Trust Advisors
We estimate real GDP grew at only a 0.9% annual rate in Q2. The Plow Horse Economy hit a tough spot, but it hasn't hit the wall. In Q1-2011, real GDP grew at just 0.4% at an annual rate, but then accelerated again. In other words, this is not the end of the world. It's not a recession.
2012-07-23 How Can the Market Possibly Do Well? by Charles Lieberman of Advisors Capital Management
Investors remain rightfully concerned that our leaders have been unable to address major domestic and international issues. Domestic growth is sluggish, job growth is weak, unemployment remains high, the fiscal cliff looms at the end of the year and our politicians can't agree on the time of day. Moreover, none of this is likely to become clarified until after the election, if then.
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.
2012-07-22 And That's The Week That Was by Ron Brounes of Brounes & Associates
Tragedy in Colorado overshadowed earnings and economic news and even the Prez candidates could find common ground in expressing sorrow. The earnings numbers remain confusing at best (often better than downwardly revised projections); economic data depicts ongoing consumer concerns; Bernanke is attacked and attacks right back; and the markets settle not far from where they began the week. Coming up in the week ahead: New Home Sales (Wednesday), Durable Goods Orders (Thursday), GDP (Friday).
2012-07-22 Extraordinary Strains by John Hussman of Hussman Funds
A broad array of observable evidence suggests extraordinary strains in Europe, and abrupt though expected deterioration in U.S. economic activity. The Federal Reserve certainly has policy options, but those options have no material transmission mechanism to the real economy.
2012-07-20 ECRI Recession Call: Weekly Leading Index Declines by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.9 from last week's 122.9, a downward revision from 123.2. See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.3 as reported in Friday's public release of the data through July 13, an improvement over the previous week's -2.7 (a downward revision from -2.2).
2012-07-20 How Fast is Slow? China\'s Recent Slowdown in Perspective by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, examines China and its perceived economic slow down. Mr. Sicart suspects that this slowdown has several causes, each of which could be considered more or less normal in isolation, but their concurrent timing certainly has aggravated the feeling of withdrawal from the usual state of affairs.
2012-07-20 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Co.
Overall, on the negative side, European debt and banking problems, slowing Chinese growth, and U.S. fiscal challenges keep us cautious. On the positive side, dramatic shifts in energy production and use in the U.S. provide us some very interesting investment opportunities. We expect the summer and fall to remain volatile as Europe continues working through its problems and the U.S. political debate heats up in advance of the elections.
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 The Fiscal Cliff: 4 Reasons To Be Concerned by Russ Koesterich of iShares Blog
The bottom line: If were still stuck at an impasse come fall, investors should consider positioning their portfolios for a higher probability of a recession in 2013 by implementing five strategies that I outline below.
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 The Big Four Economic Indicators: What They're Telling Us about a Recession by Doug Short of Advisor Perspectives (dshort.com)
The ongoing debate about an impending recession in the US grew more conspicuous last week when ECRI's Lakshman Achuthan not only reiterated his company's recession call, but also went so far as to declare that we're already in a recession. There is, however, a general assumption that there are four big indicators that the committee weighs heavily in their cycle identification process. They are Industrial Production, Real Income, Employment, Real Retail Sales.
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 Fixed Income Investment Outlook by Team of Osterweis Capital Management
Recent escalations in the euro crisis and weaker-than-expected global economic data have led to widespread calls for further stimulus. Global leaders believe they are addressing the issue, with China and the ECB lowering interest rates and the Bank of England announcing an additional 50 billion sterling of quantitative easing. We are skeptical about the benefits of such policy action and believe that the U.S. and Europe each require different solutions to solve their fiscal issues.
2012-07-19 Developed Asia Pacific: Economic Review 2nd Quarter 2012 by Team of Thomas White International
Developed Asia Pacific economies experienced significant headwinds during the second quarter of 2012. While optimism about business conditions in the Euro-zone helped sustain export growth during the first quarter of 2012, significant challenges from the Euro-zone hampered both investor and consumer sentiment in most developed Asian economies during the second quarter.
2012-07-19 Chinas Growth Slows for Sixth Straight Quarter by Michael Sullivan of American Century Investments
Gross domestic product (GDP) growth in China, the world's second largest economy, dropped again on a year-over-year basis, from 8.1% last quarter to 7.6% for the second quarter. Growth is at its lowest level in three years. In domestic news, the major U.S. equity markets rallied last Friday and erased earlier losses to finish positive for the week.
2012-07-18 Peaks and Valleys by Carl Tannenbaum of Northern Trust
Second quarter economic activity disappointed on many fronts. The drama in Europe has taken its toll on exports, markets, and confidence. The 2012 election is starting to take shape, amid the approach of a huge fiscal "cliff" at the national and local level. The negativity and uncertainty which often surround Presidential campaigns may hinder economic and market performance. This months special focus is on the Fed's recent Survey of Consumer Finances, and what it means for our economy.
2012-07-17 Breaking Bad by Michael Lewitt (Article)
With our largest business and government institutions committing every conceivable act of legal or moral anomie, we have every right to ask who is going to protect the rest of us from those who have been entrusted with so much power and influence. The institutions that were supposed to be the lifeblood of our economy are the same institutions that inflicted the greatest harm on society. When the family has to be protected from the man who is supposed to protect the family, the family is in serious trouble.
2012-07-17 Game of Thrones by Cliff Draughn of Excelsia Investment Advisors
An economy consists of a gazillion simple transactions, all working together; and our economy used to be grounded is such factors such as supply and demand, growth, and imports and exports. But today the economy is driven by the political rhetoric of our elected officials as it relates to regulations, taxes, and anticipation of QE3. We are in global slowdown mode, and to understand how we should invest we need to better understand what deleveraging will mean over the coming couple years.
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 The Mystery of Chinese Capital Flight by Bill OGrady of Confluence Investment Management
Capital flight is defined as the rapid withdrawal of assets out of a country for political, economic or geopolitical reasons. Since late last year, there have been steady reports indicating that capital flight has been occurring in China. China restricts its capital account; inflows of foreign capital are carefully regulated and private outflows face significant restrictions. Chinese citizens can legally transfer only $50k per year out of the country.
2012-07-16 High Yield and Bank Loan Outlook - July 2012 Sector Report by Team of Guggenheim Partners
After a strong first quarter for high yield bonds and bank loans, the mixed performance of the second quarter has conjured up memories of 2011s volatility. While the lack of clarity in Europe and the looming U.S. fiscal cliff will continue to weigh on the economy, the current macro-induced price dislocations present attractive long-term opportunities for investors with patient capital.
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 And That's The Week That Was by Ron Brounes of Brounes & Associates
Now that's a nice way to end a losing streak. After six consecutive down days (and little in the way to promote optimism), investors jumped back into the equity pool feet first and the Dow surged over 200 on the final day of trading. In terms of new news, the JP Morgan earnings announcement was not as bad as expected (I guess), though investors may have been looking for any excuse to seek out bargains in the aftermath of a pretty dreary week-plus.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
A strong day last Friday salvaged the week for stocks despite continuing evidence of a global slowdown related to the sovereign debt crisis which shows no sign of improving in Europe. It was kind of a quiet week from the European leaders. There werent any concrete developments, of course, just a few confusing new twists and turns. The most important one is that Germanys highest court must now rule as to whether it is constitutional to agree to what was supposedly agreed to previously.
2012-07-16 The Surprising U.S. Consumer by Milton Ezrati of Lord Abbett
Pessimists take note: Despite lackluster jobs data, the consumer is in better shape than many think. Amid the country's diverse economic problems, it is easy to look at the dark side of everything. However much material there is on that unattractive side of the ledger, people should not lose sight of the positive developments. Especially where the American consumer is concerned, matters, if still far from universally robust, have improved markedly during the last four years.
2012-07-16 Still Drifting by Christian Thwaites of Sentinel Asset Management
We are in earnings season. This is a welcome relief from the macro and political world that has dominated markets and sentiment for several weeks. Earnings allow us to look at what companies are seeing and how they're reacting. We know they're operating in world of miserable nominal GDP growth so we will look at margins, sales, pricing power, management and cash positions. But first, why so listless and skittish?
2012-07-16 Stocks, ETFs Send Mixed Messages by John Nyaradi of Wall Street Sector Selector
Major U.S. stock indexes and ETFs send mixed messages with difficult week ending in Friday rally. U.S. stock markets had been in steady decline until Fridays unexpected rally brought the S&P 500 (NYSEARCA:SPY) into slightly positive territory for the week.
2012-07-14 The Beginning of the Endgame by John Mauldin of Millennium Wave Advisors
For the last year I have been writing that it is not clear that Europe (with the probable exception of Greece) will in fact break up. The forces that would see a strong fiscal union are quite powerful. In today's letter, I will try to bring you up to date on some insights I have had in the 18 months since Jonathan Tepper and I did the final edits on our book, The Endgame.
2012-07-13 Two Tens for a Five by Dave Baccile of Sextant Investment Advisors
Going into the Summit, very little progress was anticipated thanks to clearly crafted statements from Merkel and other northern ministers. But apparently some fast talking from Monti and other leaders, such as the new French President Francois Hollande, resulted in some new concessions by Merkel. However, additional money did not find its way "South" and the concessions, while potentially significant, do not come close to solving the debt issues facing the European Union.
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 The Pain in Spain - Is There Time for Hope and Change? by Richard Mattione of GMO
The intertwined problems of sovereign debt, European banking systems, and the euro itsself will continue to be debated despite the measures that came out of Junes meetings in Europe. Yet it is the economic and financial situation in Spain that is driving policy now. The precedents being set because of Spain are in a sense more important than discussions about the euro, for decisions about the euro can be delayed, whereas the pain in Spain is acute and the time for decisions is now.
2012-07-13 On the Hoof by Team of Bedlam Asset Management
A good month for equity markets and for the portfolio, with both enjoying significant rises of around 3.2%. These took place against increasing evidence that economic activity is beginning to slow, yet again demonstrating the lack of correlation between economic growth and equity market returns.
2012-07-13 ECRI Recession Call: Weekly Leading Index Improves Yet Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 123.2 from last week's 121.9. The WLI growth indicator (WLIg) rose fractionally, now at -2.2 as reported in Friday's public release of the data through July 6, an improvement over the previous week's -2.8 (a slight upward revision from -2.9).
2012-07-13 Muddling Through, But for How Long? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.
2012-07-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Following back-to-back double-digit quarterly gains, US stocks took a breather in the second quarter, with the S&P 500 Index declining 2.8%. It could have been worse. At the quarters low point in early June, the Index had declined 10.0% from the first-quarter close. June was a strong month for stock performance, leading to a welcome recovery from the early quarter decline. However, positive returns from the first quarter prevented the Index from becoming negative on a year-to-date basis.
2012-07-12 The View From the Fiscal Cliff by Chris Molumphy of Franklin Templeton Investments
Six months into 2012, investors whose New Years resolutions included a vow to hold strong through market dismay may be finding that the eurozone crisis and slowing global growth are testing their resolve. As we move into the second half of the year, sluggish growth and continued market uncertainty seem likely to be ongoing scenarios for the U.S., as the nation faces a fall presidential election and teeters on the edge of a precarious-sounding fiscal cliff.
2012-07-12 The Intersection of Monetary Policy and Volatility Markets by Josh Thimons of PIMCO
When the Fed exhausted the power of its traditional monetary policy tools, it turned to increasingly creative and innovative policy measures. During periods of Fed balance sheet expansion, both interest rate and equity implied volatility experienced significant declines. The opportunities presented by the intersection of monetary policy and volatility markets are often compelling, because most options market participants are not looking at the world through a policy lens.
2012-07-12 Another Employment Report Disappoints by Michael Sullivan of American Century Investments
Employers added just 80,000 jobs, falling short of expectations for the June employment report and triggering declines in the equity markets. The unemployment rate was unchanged from May (8.2%). Additionally, the U.S. manufacturing sector contracted in June for the first time since July 2009.
2012-07-11 The Ascent of South Korea by Michael Oh of Matthews Asia
One country in Asia that seems to attract less attention than it might deserve, considering its modern-day achievements, is South Korea. While index provider MSCI this year (once again) left South Korea classified as an emerging market, both FTSE and Standard & Poors have placed Korea in the developed market camp for several years now.
2012-07-11 Pocket of Strength: Employment in the Mining Industry by Frank Holmes of U.S. Global Investors
Did you know that one of the industries that has seen the best job growth in the U.S. is mining? As you can see below, from the end of December 2007 through May 2012, U.S. employment in the mining sector has increased 16 percent. This percentage change is far better than any other sector, according to data from the Bureau of Labor Statistics.
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 No Jobs Rebound in June by Ryan Davis of Fortigent
Equity markets started the third quarter in negative fashion, with a poor government jobs report sparking the decline. Following an astoundingly poor May jobs report, market participants were hopeful that June would bring about at least a normalization of labor data. Thursdays ADP employment report increased optimism that May was an anomalous reading.
2012-07-10 A Closer Look at the June Employment Data by Scott Brown of Raymond James Equity Research
Given the discrepancy in job growth between the first and second quarters, seasonal adjustment may still be an issue. However, there's concern that a high level of uncertainty in the outlook could undermine hiring in the remainder of the year.
2012-07-10 One Way Pockets by Jeffrey Saut of Raymond James Equity Research
This morning I awoke to headlines "Asia Signals Drop In Global Demand," "Euro Zone Fragmenting Faster Than EU Can Act," "European Worries Send Shares Lower," and "Investors Brace For Shaky Earnings Season." Such musings have the S&P 500 futures off about six points. Somewhat offsetting these negative quips are these headlines, "Fed Officials Favor QE3" and "Obama To Seek One-year Extension For Some Of Bush Tax Cuts;" but alas, this morning the negatives are outweighing the positives.
2012-07-10 Investors fret about Europe, but US stocks up 8.6% on the year by David Edwards of Heron Financial Group
Investors have flooded back to European and US stocks on the surprise announcement that a single Eurozone wide agency, somewhat akin to the Federal Deposit Insurance Corporation (FDIC), will be established to backstop European banks directly, rather than lending through the respective governments of troubled banks.
2012-07-10 The Real Fiscal Cliff by Peter Schiff of Euro Pacific Capital
The media is now fixated on an apparently new feature dominating the economic landscape: a "fiscal cliff" from which the United States will fall in January 2013. They see the danger arising from the simultaneous implementation of the $2 trillion in automatic spending cuts (spread over 10 years) agreed to in last year's debt ceiling vote and the expiration of the Bush era tax cuts.
2012-07-09 What if the Fed Throws a QE3 and Nobody Comes? by John P. Hussman of Hussman Funds
When we look around the globe, we find that the impact of quantitative easing is rarely much greater than the market decline that preceded it. Investors seem to be putting an enormous amount of faith in a policy that does little but help stocks recover the losses of the prior 6 month period, with scant evidence of any durable effects on the real economy.
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 Disappointing, but Not Terrible by Charles Lieberman of Advisors Capital Management
Job growth has slowed to a disappointing pace over the past three months, insufficient to bring down unemployment, but not so weak that recession is much of a threat. This mediocre performance also leaves the Fed in a quandary, neither making an obvious case to leave policy unchanged or a clear case to implement yet another form of policy accommodation.
2012-07-09 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks around the world have spent the past two weeks reacting to various announcements from government leaders and central bankers. Additionally, the economic news has certainly been found wanting both here and around the globe.
2012-07-09 Unemployment a Secular Problem by Brian S. Wesbury and Robert Stein of First Trust Advisors
Last Fridays employment report was a Rorschach test for economists. (You know, show an inkblot and find the obsession.) Its not a surprise that the response to the report was pessimistic. We heard all kinds of rhetoric, including a new one - Zombie Economy.
2012-07-07 Into the Matrix by John Mauldin of Millennium Wave Advisors
What does the current environment of earnings and valuations tell us about the prospects for the US stock markets in general over the next 3-5-7-10 years? This week we have part two of "Bull's Eye Investing Ten Years Later," which we started last week. These two letters have been co-authored with Ed Easterling of Crestmont Research. We take a look at research we did almost ten years ago as part of my book Bull's Eye Investing, updating the data and asking,"Are we there yet? When will we get to the end of the secular bear market?"
2012-07-06 Global PMI: The Trend is Your Friend by Frank Holmes of U.S. Global Investors
Manufacturing around the world weakened in June, according to the JP Morgan Global Manufacturing Purchasing Managers Index (PMI). Its reading of 48.9 was the lowest in three years and the first dip below 50 since September 2011. The current reading is also below the three-month moving average for the second month in a row. As you can see on the chart, PMI crossed below the three-month in May.
2012-07-06 Eurozone Slowly Inching Forward by Investment Strategy Group of Neuberger Berman
The European Union (EU) summit last week in Brussels surprisingly yielded some promising outcomes. EU leaders agreed to important short-term measures that can ease the recapitalization of banks but structural issues, such as increasing banking and fiscal integration in the euro area, remain unresolved. Without longer-term measures, the volatile nature of the debt crisis, as evidenced by the Greek elections on June 17, will continue to impact confidence.
2012-07-06 Central Banks Take Steps to Stimulate Economic Growth by Asha Bangalore of Northern Trust
Following the Feds extension of Operation Twist on June 20, 2012, the European Central Bank (ECB), Peoples Bank of China (PBoC), and the Bank of England (BoE) put in place new monetary policy support today as gloomy economic data have trickled in during recent weeks.
2012-07-06 ECRI Recession Call: Weekly Leading Index Again Improves by Doug Short of Advisor Perspectives (dshort.com)
Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) again rose fractionally, now at 121.9 from last week's 121.7 (which was a slight upward revision from 121.5). See the WLI chart below. The WLI growth indicator (WLIg) rose fractionally, now at -2.9 as reported in Friday's public release of the data through June 29, an improvement over the previous week's -3.6.
2012-07-06 Market Perspectives Q2 2012: A Long Road Ahead by Richard Michaud of New Frontier Advisors
The most important economic news in the quarter occurred in the last two business days. Investors were losing patience with seemingly endless and ineffectual eurozone summitry. But the resolutions by the four major eurozone members at the end of the quarter were different. The agreements allow recapitalization of Spanish banks and purchase of Italian sovereign bonds. The proposals appear to effectively address short- and long-term problems in the eurozone economies.
2012-07-06 Mid-Year 2012 Economic Update by Team of Horizon Advisors
The questions we hear most often from our clients have to do with the Eurozone, U.S. politics, and closely related, the so-called fiscal cliff. We thought we would approach each of these in turn.
2012-07-06 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 And That's the Quarter That Was by Ron Brounes of Brounes & Associates
So much for that Random Walk Theory. During the past two years, equities started strong before running into headwinds in the second quarter and Europe (namely Greece) was perceived to be the primary culprit. As another very solid first quarter came to a close, perhaps smart investors should have been looking at charts and reading the Greek press to predict another downturn.
2012-07-05 Math, History and Psychology - Part 2 by Bill Smead of Smead Capital Management
Last week we wrote about the math of common stock investing and the effectiveness of mathematical discipline to portfolio management. This week we will focus on history and the importance of that academic discipline to us as common stock portfolio managers here at Smead Capital Management (SCM).
2012-07-05 Focus on the Fed: Interest Rates and the "Dual Mandate" by Team of American Century Investments
When creating the Federal Reserve (the Fed), Congress set out some vitally important objectives for monetary policymaximum employment and stable prices. We use this issue of Chart of the Week to provide some context around the Feds sometimes competing policy goals in its dual mandate, as well as simplify and summarize the inflation and jobs data informing Fed interest rate policy in a single graphic.
2012-07-03 A Crisis Is Not An Emergency by Christian Thwaites of Sentinel Investments
Some crises linger for years. The sterling crisis began in 1964 and, despite periodic respites, was not solved until the early 1990s. The oil crisis burned for over ten years until the political and economic stars realigned and restored order. Latin America lingered for over ten years before a breakthrough of sorts...not for everyone though, as Argentina's GDP per capita is the same as it was in 1960. A crisis is not the same as an emergency.
2012-07-03 Gleanings by Jeffrey Saut, Art Huprich, Scott Brown of Raymond James Equity Research
With this Gleanings report, we begin a monthly chart presentation and discussion, which attempts to pull together the separate disciplines of Economics, Fundamentals, Technical analysis, and Quantitative analysis.
The report contains what we think are currently some of the most important charts. We will have an overview and then highlight some of the key near-term variables that we believe could have a measurable effect on where the various markets are going.
2012-07-03 Let's Twist Again by Daniel Kurland of Corby Asset Management
Ben Bernanke must be nostalgic for his childhood. On June 19th in the summer of 1961, when Chairman Bernanke was only 8 years old, Chubby Checker released his smash hit, Lets Twist Again. Chairman Bernanke, citing decreased inflationary concerns and heightened employment weakness, announced that Operation Twist, which had been set to expire at the end of June, would be extended until the end of the year.
2012-07-02 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 Step Two - Going Backward - Election More Important Than Ever by Brian S. Wesbury and Robert Stein of First Trust Advisors
In one of the least likely outcomes in Supreme Court history, Chief Justice Roberts, who was widely considered a conservative voice on the Court, proved to be the swing vote in one of the largest expansions of US government involvement in the economy ever.
2012-06-29 ProVise Bullets by Ray Ferrara of ProVise Management Group
Much has been said and written about the expiration of the Bush tax cuts at the end of 2012. The assumption is that capital gain rates will go back to 20% and that dividends will rise to 39.6% without consideration of the Obama Care surtaxes. Since tax law would revert to what it was before the Bush tax cuts, we would revert to a special provision in the Taxpayer Relief Act of 1997 that established a preferential 18% capital gains rate.
2012-06-29 ECRI Recession Call: Weekly Leading Index Up Fractionally by Doug Short of Advisor Perspectives (dshort.com)
Click to viewThe Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.5 from last week's 121.2 (a slight downward revision from 121.3). See the chart below. However, the WLI growth indicator (WLIg) declined fractionally, now at -3.6 as reported in Friday's public release of the data through June 22, down from the previous week's -3.5.
2012-06-29 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 Meanwhile, Back at the Ranch... by Scott Brown of Raymond James Equity Research
With worries about Europe and the individual mandate of the Affordable Care Act behind us, we can go back to looking at the economy. At issue is whether recent signs of slowing were an illusion or more real. In particular, the June job market figures will be critical.
2012-06-29 And That's the Week That Was by Ron Brounes of Brounes & Associates
Hip Hip Hooray. Europe is saved (again); the equity markets are back on track (again); and investors can enjoy a much needed holiday come hump day next week. With positive news out of Europe and some favorable signs for the housing sector, investors moved back into risk assets and stocks enjoyed a nice end of the week (quarter). Supreme Court Chief Justice put his stamp on ObamaCare (and earned some enemies along the way). The second quarter could not end soon enough.
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 European Leaders Play With Fire by John Browne of Euro Pacific Capital
The world economy today stands at the doorstep of great change. A gathering crisis looms in Europe, splitting the Continent into two competing blocs. While leaders there face off against one another in a high stakes game of chicken, the rest of the world powerlessly watches the train wreck slowly unfold.
2012-06-26 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 Running on Empty by Marie Schofield of Columbia Management
In a move that was more anti-climax than comforting, the Federal Reserve (Fed) satisfied the minimum expectation of the markets and extended Operation Twist, or the MEP (Maturity Extension Program), through the end of the year thankfully taking us beyond the election period.
2012-06-25 Enter, the Blindside Recession by John P. Hussman of Hussman Funds
The joint evidence suggests that the U.S. economy has entered a recession that will eventually be marked as having started presently. In recent months, our measures of leading economic pressures have indicated the likelihood of an oncoming U.S. recession.
2012-06-25 The Fiscal Cliff -Thelma and Louise Remake Unlikely by Milton Ezrati of Lord Abbett
Unlike the cinematic outlaws, Congress will likely avoid a year-end plunge into the chasm of economic peril. The CBO report identifies eight elements of this looming fiscal drag: five automatic tax hikes and three automatic spending cuts. It estimates their total impact for fiscal 2013 at $607 billion, or some 4.0% of the countrys gross domestic product (GDP), and enough to turn positive growth negative.
2012-06-25 12 Reasons US Recession Has Arrived (Or Will Shortly) by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I am amused by the Shadow Weekly Leading Index Project, which claims the probability of recession is 31%. I think it is much higher. When the NBER, the official arbiter of recessions, finally backdates the recession, May or June of 2012
2012-06-25 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.
2012-06-25 Market Breadth Pretty Good, Save for Thursday by John Buckingham of AFAM
It would have been a nice week if it wasnt for the big plunge on Thursday as that days 250-point drop in the Dow Jones Industrial Average interrupted a solid stretch in which market breadth had been quite favorable. In fact, the other four days last week saw more advancing stocks than declining stocks, looking at the New York Composite Daily Breadth statistics from this weekends Barrons Magazine.
2012-06-25 Timid Actions, Fearful Times by Christian Thwaites of Sentinel Investments
Since 2010, investors have traveled between optimism and pessimism every three months. It's negative right now. Here's why: A very timid move by the Fed. What was glaring was the entire board revised down their expectations on the economy: i) GDP down by $500bn ii) unemployment up 500,000 and iii) lower core and PCE inflation. Not just for 2012 but next year as well. That takes complacency to a new level.
2012-06-23 Daddy's Home by John Mauldin of Millennium Wave Advisors
This week we will look at the recent action of the Fed and use that as a springboard to think about how effective Fed policy can be in an age of deleveraging. And we simply must look at Europe.
2012-06-22 Trickle Up Economics by Peter Schiff of Euro Pacific Capital
The political left wing has long tried to cast doubt on the fairness, and even the efficacy, of free market capitalism by branding it as a "trickle down" system. This epithet is meant to show how the middle and lower classes are dependent on scraps of wealth that happen to fall from the buffet table of the rich. This characterization of an unfair and inefficient system has helped them demonize policies that lower taxes (if they also extend to the wealthy) and reduce regulation on business.
2012-06-22 ECRI Recession Call: Weekly Leading Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped to 121.3 from last week's 121.8 (a slight downward revision from 121.9). See the chart below. The WLI growth indicator (WLIg) also declined, now at -3.5 as reported in Friday's public release of the data through June 15, down from the previous week's -3.0.
2012-06-22 An Ending Made For Gold by Frank Holmes of U.S. Global Investors
Hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5 to 10 percent of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system.
2012-06-20 Fed Does the Least by Brian S. Wesbury and Robert Stein of First Trust Advisors
In the past few days, news outlets have breathlessly reported that the Federal Reserve would today launch into another round of quantitative easing, probably including major purchases of mortgage backed securities. Instead, the Fed did the least that was expected, extending Operation Twist until the end of the year, but not altering the size of its balance sheet at all and not as some analysts suggested it might changing when it thinks it will start raising rates (still late 2014).
2012-06-19 Consumers Remain Perplexed by Chris Maxey and Ryan Davis of Fortigent
Consumers have long been the cog behind the American economic engine. After suffering a terrible fate in 2008, there was a long, slow build to post-recession normalcy. Consumer balance sheets are in a better place, but remain tenuous and suggest there continues to be a long distance to travel before we can once again depend on the American consumer to be the buyer of last resort.
2012-06-19 South Africa: Opportunities in the Rest of Africa Beckon by Team of Thomas White International
The signs are evident all across Africa, from Kenya in the east to Ghana in the west. South African businesses are increasingly looking at opportunities in their own backyard on the African continent with newfound enthusiasm. Though South Africa still lags the U.S. and China in total investments in the rest of Africa, in recent years, the growth in investments by the countrys companies has been the highest.
2012-06-19 The Known Unknowns by Ronald Roge of R. W. Roge & Company
On Friday, June 1, 2012 we had an all day investment strategy meeting. The purpose of this semi-annual meeting is to review our current portfolio strategy and evaluate it against the current state of the global economy...Easier said than done.
2012-06-19 Cohen & Steers U.S. Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the U.S. real estate securities market as of May 31, 2012. The FTSE NAREIT Equity REIT Index had a total return of 4.5% for the month, compared with a 6.0% return for the S&P 500 Index. Year to date, the indexes returned +8.8% and +5.2%, respectively.
2012-06-19 Cohen & Steers European Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the European real estate securities market as of May 31, 2012. For the month, the FTSE EPRA/NAREIT Developed Europe Real Estate Index had a total return of 7.5% (in U.S. dollars, net of dividend withholding taxes). By comparison, U.S. REITs had a total return of 4.5%, as measured by the FTSE NAREIT Equity REIT Index. Year to date, the indexes had total returns of +3.0% and +8.8%, respectively.
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 And That's The Week That Was by Ron Brounes of Brounes & Associates
With Fed officials preparing for next weeks policy meeting, traders and investors alike have been busy dissecting economic data and global developments as they speculate about any potential moves. While Spain and Italy saw their yields surge and Greece moved closer to Decision 2012, investors focused on the potential for European action and compromise that could put the Union back on a road to recovery (with or without Greece).
2012-06-18 A Brief Primer on the European Crisis by John P. Hussman of Hussman Funds
Europe has repeatedly been successful at addressing its recurring liquidity crises with the help of other central banks, but its still an open question whether they can durably solve the solvency crisis without more disruption and more restructuring of both government debt and troubled banks. In my view, the hope for an easy solution is misplaced, and the likelihood of recurring disruptions from Europe will remain high.
2012-06-18 Should Germany Leave the Euro? by Brian S. Wesbury and Robert Stein of First Trust Advisors
The weekend victory for the center-right keeps the Greek austerity plan alive and makes it less likely Greece will try to leave the Euro. Leaving the Euro would be an unmitigated disaster for Greece and a problem for the Eurozone, but the odds of this happening are priced into the Euro already. What isnt priced into the Euro is the exit of another country. No, not Spain, Portugal, or Italy. Were talking about the inner-most core of the Euro-zone: Germany.
2012-06-18 Cohen & Steers Large Cap Value Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the U.S. large cap value market as of May 31, 2012. For the month, the Russell 1000 Value Index had a total return of 5.9%, compared with a total return of 6.0% for the S&P 500 Index. For the year to date, the Russell 1000 Value Index had a total return of +3.5%, compared with +5.2% for theS&P 500 Index.
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 I Like These Calm Little Moments Before the Storm by Christian Thwaites of Sentinel Investments
It is the job of investment managers to look beyond the gloom. There's plenty of it. The big list last week was the slow hand clap the market gave to the Spanish bank rescue, the probable downgrade of India, one of the dead cert BRICs we all read about, and queasy economic data from the US. Now we don't just jump in and buy on all the bad news. We're not likely to retain clients that way.
2012-06-16 The Bang! Moment is Here by John Mauldin of Millennium Wave Advisors
We know that money is simply flying out of Greek banks. A number of them are clearly insolvent, yet they are meeting demands for withdrawals. Where is the cash coming from? The answer is in the form of yet another acronym from Europe, called the ELA.
2012-06-15 Booming Rental Markets by Lesley Deutch of John Burns Real Estate
The apartment market is strong. All of the large metropolitan areas in the US are seeing rent growth and declining vacancies, but location still matters. We recently completed our forecasts for 78 apartment markets across the country and we expect the following categories of markets to experience the strongest rental growth over the next five years.
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 Global Outlook Dampened Further by the European Crisis by Team of Thomas White International
Apprehensions over a worsening European fiscal crisis and concerns about slower growth in the emerging economies continued to dampen investor sentiment in May. Europes political leadership is yet to find a common ground that would accommodate the opposition to short-term austerity measures expressed in recent elections in countries such as France and Greece. There is growing expectation of a possible Greek exit from the monetary union while borrowing costs of troubled countries such as Spain have increased further, following credit rating downgrades.
2012-06-15 Every Economists Career Ends in Failure - The Irony of Hyman Minsky by John Gilbert of GR-NEAM
The economist Hyman Minsky held that capitalist economies are inherently unstable because investments are financed with debt, and the financial markets pricing of debt is volatile. Economies are prone to booms and busts as the cost of financing falls too far, or rises too much, revealing poor investment decisions. This has always been obvious to observers of business cycles, of which Minsky was one. Too many of his colleagues in economics ignore this, which we have found puzzling.
2012-06-15 ECRI Recession Call: Weekly Leading Index Up Slightly, But Growth Index Declines by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally to 121.9 from last week's 121.3 (a downward revision from 122.3). See the chart below. However, the WLI growth indicator (WLIg) slipped, now at -3.0 as reported in Friday's public release of the data through June 8, down from the previous week's -2.2 (a sizable downward revision from -0.7).
2012-06-15 Schwab Market Perspective: Time for Action by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
2012-06-15 Cohen & Steers Global Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the
global real estate securities market as of May 31, 2012. The
FTSE EPRA/NAREIT Developed Real Estate Index had a total
return of 6.4% for the month (net of dividend withholding
taxes) in U.S. dollars. Year to date, the index returned +7.9%.
2012-06-15 Cohen & Steers International Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for theinternational real estate securities market as of May 31, 2012. The FTSE EPRA/NAREIT Developed ex-U.S. Real Estate Index had a total return of 8.0% for the month (net of dividendwithholding taxes) in U.S. dollars. By comparison, U.S. REITs returned 4.5% for the month, as measured by the FTSE NAREIT Equity REIT Index. Year to date, the indexes returned +7.3% and +8.8%, respectively.
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 Patient But Vigilant Fed by Asha Bangalore of Northern Trust
Chairman Bernanke failed to offer broad hints about an imminent round of financial accommodation or an extension of Operation Twist (Maturity Extension Program) in his testimony on June 7. There were three key takeaways pertaining to the near term economic outlook from Bernanke's testimony and response to questions.
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.
2012-06-13 The by Gary D. Halbert of Halbert Wealth Management
Today we revisit the subject of the so-called fiscal cliff that our country faces at the end of this year if a Lame Duck Congress fails to pass a number of new laws by December 31. (I last wrote about this subject on March 27.) Some analysts are arguing that nothing really bad will happen if the Lame Duck Congress fails to get the job done. I disagree and I will tell you why below.
2012-06-13 U.S. Commercial Real Estate: A Technical Affair by John Murray of PIMCO
We believe attractive investment opportunities will arise in sectors of CRE that haven't yet caught the eye of technicals-driven capital. Demand for CMBS arguably comes from a lack of alternatives as opposed to any sort of inherent belief in rental fundamentals. Fickle technical factors are not the only headwinds: Deleveraging, regulatory uncertainty and weak fundamentals add further pressure.
2012-06-13 Saving the Euro by Axel Merk of Merk Funds
The management of the Eurozone debt crisis is dysfunctional. In our assessment, to save the Euro, policy makers must focus on competitiveness, common sense and communication. If policy makers strived to achieve just one of these principles, the Euro might outshine the U.S. dollar.
2012-06-13 Creative Destruction by Robert McConnaughey of Columbia Management
Creative Destruction is always at play in competitive markets of all kinds. Given the metamorphic pressures caused by todays over-levered and structurally low- growth global economy, the forces of Creative Destruction are perhaps far greater than normal. Low overall growth and historically high profit margins create a particularly potent environment in which corporations compete for their share of a potential profit pool. Revenue growth is increasingly hard to come by and cost-reduction opportunities may have been stretched to their outer limits.
2012-06-12 Kingdoms of the Blind by Michael Lewitt (Article)
Recent events offer a rare illustration of the combined effects of the failure of monetary, fiscal and regulatory policy to coordinate a meaningful response. Rising budget deficits, record low interest rates, J.P. Morgan's proprietary trading blunder and the botched Facebook IPO process speak to abject policy failures in virtually every aspect of finance. It's not even a question of not having learned our lessons; our collective policy intelligence actually appears to have diminished.
2012-06-12 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared on May 29.
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 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Each week produces a newer round in global woes, this past being highlighted by Spain and a verbal, if not political, battle over whether austerity trumps spending. We will not know how the debate concludes, but we can see its effects. Manufacturing slowed and consumer confidence went with it. The unknown consequences of a global economic paralysis is, nevertheless, having specific impact upon our markets. Most notably, the stock market is morphing into a roller coaster ride.
2012-06-12 Europe Is Near Term Driver of Market Movements by John Buckingham of AFAM
Though the dates do not coincide, as there is a lag in the Investment Company Institute data, last weeks rally in stocks was accompanied by word that for the first time in seemingly forever, mutual fund investors actually put more money into domestic equity funds than they took out, while the reverse was true for bond funds. Because it is only one week and Memorial Day was part of those ICI numbers, we hesitate to say that the tide is finally turning in terms of investor sentiment.
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 Germany's Role in Saving the European Union by Matt Lloyd of Advisors Asset Management
As the talk of supporting, realigning or destroying the European Union (EU) dominates headlines, it appears crucial to us to look at who benefits most from any of these scenarios. Most of the pressure has been on Germany, as it should since it is by far the biggest component of the EU and currently the most prosperous, though it appears so more on a relative basis.
2012-06-11 Looking Over the U.S. Fiscal Cliff by Team of Neuberger Berman
Absent congressional intervention prior to year-end, over $600 billion (about 4% of U.S. GDP) of fiscal tightening is scheduled to take effect in the United States in early 2013. Dubbed the fiscal cliff by those in the financial community, the negative impact on growth caused by expiring spending and tax provisions has the potential to derail the ongoing recovery and, according to some observers, even tip the U.S. economy back into recession.
2012-06-11 Bet Against QE3 by Brian S. Wesbury and Robert Stein of First Trust Advisors
Since the financial crisis in 2008 the Federal Reserve has done extraordinary things lowered interest rates to essentially zero, increased the size of its balance sheet by $2 trillion and announced Operation Twist. With unemployment still relatively high and real GDP growing at a 2% rate in the past year, there are many on (and off) the Fed who think more should be done. If we thought liquidity was a problem, we might agree, but its not.
2012-06-11 The Economy Cannot Live on the Fed Alone by Kristina Hooper of Allianz Global Investors
The road to economic recovery cannot be paved by monetary policy alone. It must be accompanied by greater access to credit. Rates can be kept low for years, but without looser credit standards they cannot be truly potent and stimulative. In other words, banks will need to do their part. Offering capital to a larger number of small businesses and enabling more homeowners to refinance their mortgages, or even purchase new homes, is a key ingredient that will help keep us out of a liquidity trap.
2012-06-11 China Toes a Delicate Balance by Chris Maxey and Ryan Davis of Fortigent
Markets posted their best returns of 2012 last week as investors anticipated additional policy action from global central banks. A series of events during the week heightened optimism that central banks would once again step in to support financial markets. In a Wednesday release, the European Central Bank did not cut its policy rate, but ECB President Mario Draghi said the bank was ready to act in response to the deteriorating state of the Eurozone.
2012-06-11 Investors Look Forward to More Policy Help by Bob Doll of BlackRock Investment Management
Following a significant slide the week before, stocks bounced back last week, primarily due to a growing sense that policymakers in Europe and the United States may be ready to engage in further easing measures. The increasing stress in Europe has put additional pressure on the European Central Bank (ECB) and on other policymakers to take stronger action, and, indeed, over the weekend European finance ministers announced a new plan to recapitalize the Spanish banking sector.
2012-06-11 Bertha and Casey by Christian Thwaites of Sentinel Investments
Markets braced last week for a bailout on Spain which came this weekend. Its banking sector is in wretched condition and joins other European banks at 25 year lows in share price. The official downgrades came long after the stock market had voted with its feet. European leaders had little to add to the debate. There's some talk of a twin track: some European countries pressing on to further integration, some coping with contraction and austerity on their own.
2012-06-09 A Dysfunctional Nation by John Mauldin of Millennium Wave Advisors
European leaders launched the euro project in the last century as an experiment to see whether political hope could become economic reality. What they have done is create one of the most dysfunctional economic systems in history. And the distortions inherent in that system are now playing out in an increasingly dysfunctional social order. Today we look at some rather disturbing recent events and wonder about the actual costs of that experiment. What type of "therapy" will be needed to treat the dysfunctional family that Europe has become?
2012-06-08 Monthly Investment Commentary by Team of Litman Gregory
Global stock markets dropped sharply in May amid renewed macroeconomic fears. Large-cap U.S. stocks fell 6%, while small and mid-cap stocks lost 6.6% and 6.7%, respectively. Domestic stocks are still well in positive territory for the year, with returns ranging from just over 5% for large-caps to 3.4% for small-caps. Foreign markets fell further, as questions over the stability of the eurozone dominated headlines. Both developed and emerging-markets were down 11% for the month and in negative territory year-to-date (down 3.3% and 0.4%, respectively).
2012-06-08 The Default Delusion - Inevitable....and Desirable by Jonathan Compton of Bedlam Asset Management
The many tortuous what if articles on the eurozones financial problems address the risks of collapse and contagion together with the inchoate political responses. Inevitably they conclude catastrophic consequences. There is no gain in further exaggerating this fairy tale, which is repeated to frighten voters into submission. Every scribbler had got there apart from those for whom it became a quasi-religious cult. The current cacophony of commentary remains backward looking so will again miss the key issue: default is good.
2012-06-08 More Fun in the Philippines by Kenneth Lowe of Matthews Asia
A combination of beautiful beaches, year-round sunshine, interesting historical sites and a hospitable population is generally fairly effective in forming the seeds required to capture a part of the worlds largest service sectortourism. Many Southeast Asian countries have spent the last 20 years trying to take advantage of their natural and cultural attractions to participate in the US$6.3 trillion global tourism market, with numerous success stories.
2012-06-08 Damn the Torpedoes by Peter Schiff of Euro Pacific Capital
Given what most economists now know, few would actively argue that Greece's entrance into the Eurozone back in 2001 was a good idea. Much has been written about how the fundamental misfit between Greece's economy and currency gave birth to a deeply flawed system that was destined to run off the rails.xThe same "damn the torpedoes" mentality dominates economic thinking with respect to the U.S. economy as well.
2012-06-08 And That's The Week That Was by Ron Brounes of Brounes & Associates
Add the Fed to the equation to make things a bit more interesting. With stock prices plummeting (with no end in sight), enter Dr. B. and friends with comments that led some to expect future stimulus moves (or maybe not). The European Central Bank made similar remarks, and China took it a step farther with an actual rate cut. Investors welcomed the potential moves and a bit of optimism returns (even if just for a short period). As always, the political bickering is heating up (at home and in Europe) and yet November still remains several months away.
2012-06-08 ECRI Recession Call Update: Weekly Leading Index Declines Further by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 121.6 from last week's 122.3 (a downward revision from 122.4). See the chart below. The WLI growth indicator (WLIg) also slipped, now at -2.0 as reported in Friday's public release of the data through June 1, down from the previous week's -0.7 (a downward revision from -0.6).
The ECRI numbers are extremely close to the RecessionAlert estimates, posted yesterday, which anticipated 121.9 and -1.9% for the WLI and WLIg metrics.
2012-06-07 Spain & Weak US Economy Dominate Markets by Gary D. Halbert of Halbert Wealth Management
Stock markets around the world have been pummeled in recent weeks amidst the growing reality that were in a global recession, especially in Europe. Fears that the US will also fall into recession have intensified, particularly in light of last weeks very disappointing economic reports. At the same time, the European debt crisis has once again raised its ugly head, this time with the spotlight on Spain. Spains own Prime Minister has admitted that the country is in a state of emergency, and money is gushing out of Spanish banks.
2012-06-07 May Rout Leads to June Rally by David Edwards of Heron Financial Group
We got three exogenous events in May: Greek credit crisis resumed, with Greece likely to exit the Eurozone this summer. JP Morgan Chase lost $3 billion on Credit Default Swap trading. The FaceBook FacePlant. And on June 1st, the Labor department reported a minimal gain in jobs, which has economists worried anew about the United States returning to recession.
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 Featured Video from Henderson Global Investors by Bill McQuaker (Article)
Bill McQuaker provides a market update and touches on recent changes including political developments in Europe and the slowing of job creation in the US.
2012-06-05 Letters to the Editor by Various (Article)
A number of readers respond to our article, Can Krugman Fix Our Economy?, which appeared last week.
2012-06-05 When OK is Good Enough by Team of BondWave Advisors
The US economy continues to grow, but in recent months manufacturing and employment indicators have remained positive but have been flagging. While there might not be a lot to get excited about economically here in the US, OK is better than elsewhere, like Europe. We discuss the situation in the US and Europe and provide a commentary of the US Treasury, Corporate and Municipal bond markets.
2012-06-05 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Between the problems in Europe and the disappointing news on jobs and economic growth at home, stock markets globally have taken a tumble albeit with the USA doing much better than everyone else. For some reason investors finally opened their eyes these past couple of weeks. They did not like what they saw. As we have commented endlessly here over the past six months, there never has been a recovery in our employment category, and the growth rate of the economy has never shown any inclination to rise above 2% on an annualized basis.
2012-06-05 Is America Healing Fast Enough? by Mohamed A. El-Erian of Project Syndicate
Six internal factors suggest that the United States economy is slowly healing. For some observers, these factors were deemed sufficient to form the critical mass needed to propel the economy into escape velocity. While I hoped that they might be proven right, the recent stream of weak economic data, including Mays timid net job creation of only 69,000, confirmed my doubts.
2012-06-05 Perennial May Euro Crisis Hits U.S. and Global Markets by Douglas Cote of ING Investment Management
For the third straight year, a Euro-crisis hit markets in May. Investors are fearful and looking for a plan of action. A good plan should defend against bear markets but not overreact to normal volatility. Earnings growth remains positive the U.S. is slowly but surely moving forward. Ample rewards await those who stay focused on long-term goals. For the third straight year a euro crisis hit markets in the month of May.
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 Investors Position for a Synchronized Global Slowdown by Mohamed A. El-Erian of PIMCO
The insufficient job creation, stagnant earnings and alarming long-term unemployment highlighted by Mays disheartening jobs report underscore Americas persistent unemployment crisis. The numbers also speak to a synchronized slowdown that is now taking hold of the global economy a phenomenon that is being signaled by virtually every other data release out of Europe, the U.S. and emerging countries.
2012-06-04 1-800-GET-ME-OUT?! by Jeffrey Saut of Raymond James Equity Research
The call for this week: Friday was the first day of hurricane season here in Florida, yet the storm didn't hit our beaches but rather blew onto the Street of Dreams with a 275-point "storm surge." The media attributed Friday's Flop entirely to the disappointing employment numbers, but the truth was the market was already headed down before the release of those numbers. And when the SPX's 1290 level was breached, the rout was on. And despite the break below my 1290 pivot point I can't shake the feeling that all of this is just part of the bottoming process.
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 Speeding Up the Plow Horse by Brian S. Wesbury and Robert Stein of First Trust Advisors
We call it a Plow Horse Economyit aint gonna win the Belmont, but it aint gonna keel over and die, either. And there is nothing in the latest data or market action that changes our mind; the economy is not in recession and we highly doubt it will fall into one anytime soon.
2012-06-04 Is Global Financial Reform Possible? by Paul Volcker of Project Syndicate
Nowadays there is ample evidence that financial systems, whether in Asia in the 1990s or a decade later in the United States and Europe, are vulnerable to breakdowns. The cost in interrupted growth and unemployment has been intolerably large. But, in the absence of international consensus on some key points, reform will be greatly weakened, if not aborted.
2012-06-04 Job Recap/How Big of an Impact from Europe? by Scott Brown of Raymond James Equity Research
Job growth has slowed. However, its unclear exactly why or even, despite all the hand-wringing on Friday, whether its something to worry about. A European recession would have a moderate impact on U.S. exports, but there are some positives.
There are a number of other possible explanations for the recent slowdown in (seasonally adjusted) job growth.Firms may be reluctant to hire for a number of reasons: political uncertainty, fiscal policy uncertainty, higher gasoline prices, and worries about the fallout from Europe.
2012-06-04 And That's the Week That Was by Ron Brounes of Brounes & Associates
Nothing good to report here so why even try to spin it. (Effective politicians may beg to differ.) The once promising labor picture just turned from bad to worse; manufacturing is no longer the one staple in the economy; Spain may be replacing Greece as the poster child for what ails the EU (and thats not because things are looking up in Greece). Stocks suffered their worst day of the year to end the week and the gains of the first quarter have been long forgotten. (Even the Astros stink again.)
2012-06-04 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
More importantly than not, it is vital to focus upon a bigger broader landscape when evaluating the condition of ones portfolio, than to focus upon tinier exogenous noise as those factors which indicate the probability of outperformance. Too often, and with more frequency, I have seen micro-analysis paralyze investors decision-making, rendering them incapable of reasonable response.
2012-06-04 Alternative Mutual Funds See Continued Growth by Chris Maxey and Ryan Davis of Fortigent
During an especially difficult week, global equity markets were deep in the red, as the S&P 500 Index lost 3.2% and the Dow Jones Industrial Average fell 3.3%. There was no shortage of disappointing data during the course of the past week, ranging from weakness in the ISM manufacturing survey to an underwhelming May labor market report. It was such a bad week, in fact, that Bespoke Investment Group found that 18 of the 21 economic indicators released in the U.S. fell short of expectations.
2012-06-04 Job Drought, Greece Wipe Out 2012 Gains by Kristina Hooper of Allianz Global Investors
The U.S. employment report dominated headlines and put investors on watch for further threats to the recovery. In Europe, Ireland's adoption of the fiscal pact was not enough to counter worries about the escalating banking problems in Spain. But as long as the U.S. savings rate, which currently stands at 3.4%, continues to decline, the downside risk to U.S. economic growth is limited. In addition, the substantial drop in the price of oil should also help boost the economy. We maintain the view that the United States will achieve 2% economic growth this year.
2012-06-04 Negatives Intensify, but Panic Isn't Warranted by Bob Doll of BlackRock Investment Management
For some time, we have been suggesting that the US economy had been holding up relatively well compared to the rest of the world. While we are not changing that view, last weeks data (particularly Mays employment report) provided a negative jolt and pushed stock prices down sharply. Our summary view of the US economy is that while the United States appears to have entered another slowdown phase with the data growing more disappointing in recent weeks, the case for a renewed recession still looks flimsy.
2012-06-02 ECRI Recession Call Update: Another Weekly Leading Index Decline by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 122.4 from last week's 123.0 (a slight downward revision of 123.1). The WLI growth indicator also slipped, now at -0.6 as reported in Friday's public release of the data through May 25, down from the previous week's 0.1. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.
2012-06-02 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.
2012-06-02 First Deflation, Then Inflation. But the Timing? by John Mauldin of Millennium Wave Advisors
One of the more frequent questions I am asked in meetings or after a speech is whether I think we will have inflation or deflation. My ready answer is, Yes. Then I stop, which I must admit is rather fun, as the person who asked tries to digest the answer. And while my answer is flippant, its also the truth, as I do expect both outcomes. So the follow-up question (after the obligatory chuckle from the rest of the group) is for a few more specifics. And the answer is that I expect we will first see deflation and then inflation, but the key is the timing.
2012-06-01 Are my methods unsound?...I don't see any method at all, sir. by Christian Thwaites of Sentinel Investments
This week we can add the lowest ever level of GT10, which touched 1.44%, and the 7-year note firmly below 1%. German 10-Year Bunds fell to 1.12%, brining the total return close to 20% over the last year. Over in Switzerland, it will cost you nearly 0.5% for the privilege of holding a two year bond. If negative rates are on offer, distress and fear are not far behind.
2012-06-01 Our Take on Todays Payroll Numbers by Doug MacKay of Broadleaf Partners
This mornings payroll numbers were disappointing, a fact that is being reflected in the performance of todays stock market, now down nearly 2%. Total non-farm payrolls were expected to show a gain of 150K, but increased only 69K, while the total unemployment rate edged up to 8.2% from 8.1% previously. While still in positive territory, the numbers just werent encouraging in the face of so much global uncertainty coming out of Europe and China. A client sent us a short email exclaiming Yikes and then asked us if the world was coming to an end. This was our unedited response.
2012-05-30 CBO Warns of Recession in 2013 by Gary D. Halbert of Halbert Wealth Management
The non-partisan Congressional Budget Office (CBO) has calculated the expected negative effects on the US economy if the Bush tax cuts expire at the end of this year. Their numbers just released last week are eye-opening! To give us some perspective, US Gross Domestic Product rose by 2.2% (annual rate) in the 1Q of this year.
2012-05-30 Delayed Entitlement: The Changing Economics of Retirement by Tom Streiff of PIMCO
Its a foregone conclusion that Baby Boomers retirements will be very different from the retirements of their parents. To understand how, we need to explore the impact of the most recent financial events on Baby Boomers. The conventional wisdom is that as the leading edge of Boomers converged on age 65, their associated retirements are well underway and the economic and societal effects of this demographic-driven, transfer-payment-promised contingent are just beginning. In the next three to five years we should face a rapid and unprecedented expansion of entitlement expenditures.
2012-05-30 U.S. Dollar and Euro - Review and Outlook by Axel Merk of Merk Funds
The 12-month period ended March 31, 2012 (the Period) could be described as one of contrasting halves. News emanating from Europe dominated market gyrations for the majority of the Period. During the second half of the Period, the market appeared to ascribe a more optimistic assessment to the European situation and the global economy. Regarding the U.S. dollar, we consider the more dovish FOMC voting member composition to be a negative for the currency, as it will likely lead to more expansionary policies relative to global central bank counterparts
2012-05-29 Can Krugman Fix Our Economy? by Robert Huebscher (Article)
Our economy faces depression-like conditions, according to Paul Krugman, in its alarmingly high unemployment rate. It needn’t be that way, though, Krugman says – a few simple steps could quickly solve our problems.
2012-05-29 AND THATS THE WEEK THAT WAS by Ron Brounes of Brounes & Associates
When something seems too good to be true For years, investors had (im)patiently awaited the Facebook IPO and a chance to own a piece of the new new thing. Zuckerberg and Co. liked the control and were already wealthy; however, inevitably, they would be selling a piece of the
pie to would-be buyers willing to invest, despite a complete lack of understanding of its revenue model. (When has that stopped investors before?) Every new random
offering brought more anticipation about Facebooks which finally went public on May 18th.
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 Why We Lie by Dan Ariely of Predictably Irrational
We like to believe that a few bad apples spoil the virtuous bunch. But research shows that everyone cheats a littleright up to the point where they lose their sense of integrity. Not too long ago, one of my students, Peter, locked himself out of his house. After a spell, the locksmith pulled up in his truck and picked the lock in about a minute. The purpose of locks, the locksmith said, is to protect you from the 98% of mostly honest people who might be tempted to try your door if it had no lock.
2012-05-29 What is the "Fiscal Cliff"? by Andy Friedman of Washington Update
In recent months, a new phrase has entered the national lexicon, a phrase that is likely to reverberate with increasing intensity in the months ahead. That phrase is fiscal cliff. The fiscal cliff refers to the abrupt slowdown in the economy that could occur in 2013 if taxes rise and government spending falls as currently scheduled. The fiscal cliff has a number of components. Among them are: expiration of the Bush tax cuts, expiration of the payroll tax cut, new health care reform taxes, and spending cuts.
2012-05-29 Unraveling the Mess in Europe by Charles Lieberman of Advisors Capital Management
There is considerable nonsense written about the European debt crisis. Greece must balance its books, whether they remain inside the Euro or not. There are major benefits and costs to both remaining inside the Euro and to exiting. There is no silver bullet that will solve their problems easily. More broadly, banks need to be recapitalized all across Europe. This has not been done as yet, perhaps for political reasons, which only compounds the economic problems and allows them to fester. It seems like the Europeans are working towards solutions, but painfully slowly.
2012-05-29 Europe Is Near Term Driver of Market Movements by John Buckingham of AFAM
Plenty of uncertainty surrounds developments in Europe, so Ive chosen to pen this Memorial Day version of our Market Commentary on Monday afternoon rather than the usual Sunday evening. Of course, had the U.S. stock markets been open today, we might have seen a modest advance, given that the equity futures were suggesting that gains of some 40 or 50 Dow Jones Industrial Average points would be in the cards when trading resumes.
2012-05-29 The Spending versus the Austerity Debate by Jim Tillar of Tillar-Wenstrup Advisors
There is a very important debate taking place on the best way to fix our economy between those who favor more spending versus those who favor austerity. Recently the spending camp has been very vocal in promoting their theory, including recent papers by Larry Summers, Brad DeLong and Paul McCulley, Zoltan Pozsar and a new book by Paul Krugman.
What is not in dispute in the debate is that the private sector is deleveraging as an aftermath of the financial crisis, negatively impacting growth. What is in dispute is the appropriate response.
2012-05-29 Is Obama a Big Spender? by Brian Wesbury, Robert Stein, Strider Elass of First Trust Advisors
Last week, Rex Nutting, a reporter for MarketWatch, became famous when the White House used his analysis of government spending. He wrote that there has been no huge increase in spending under the current president.
We like Rex Nutting. He seems like a fair-minded analyst. But we emphatically disagree. This is not personal, heck, its not even political. Data from the Congressional Budget Office (CBO) shows President Obama has been a huge spender.
2012-05-29 Labor Market Issues Hold Down Consumer Confidence Index in May by Asha Bangalore of Northern Trust
The Conference Boards Consumer Confidence Index slipped in May to 64.8 from 68.7 in the prior month. The sub-components of the index measuring the present situation (45.9 vs. 51.2 in April) and expectations of consumers (77.6 vs. 80.4 in April) declined in May. The Case-Shiller home price index rose 0.1% in March, after a 0.2% gain in the prior month. The back-to-back monthly increase is noteworthy because one gains of this sort were seen several ago, excluding the period when the first-time home buyer program was in place.
2012-05-26 ECRI Recession Call Update: Weekly Leading Index Declines Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) dropped to 123.1 from a slight downward revision of 124.4 (see the fifth chart below). The WLI growth indicator also slipped, now at 0.1 as reported in Friday's public release of the data through May 18, down from the previous week's 0.4. The latest data release to the general public continues to command focus in the wake of Lakshman Achuthan repeated reaffirmation of ECRI's recession call in live interviews around the major business networks on May 9th.
2012-05-26 Meanwhile, Back at the Ranch by John Mauldin of Millennium Wave Advisors
We need to tear our gaze away from Europe and look around at what is happening in the rest of the world. There is about to be an eerily near-simultaneous ending to the quantitative easing by the four major central banks while global growth is slowing down. And so, while the future of Europe is up for grabs, the true danger to global markets and growth may be elsewhere.
2012-05-25 There's No Place Like America by Frank Holmes of U.S. Global Investors
Investors arent endorsing U.S. equities today. With all the positive aspects mentioned above, todays low participation in the U.S. stock market is perplexing. Here are two more reasons to invest today: 1) About 620 companies in the S&P 1500 Index are growing their revenues at more than 10 percent; and 2) 428 stocks in the index have an annualized dividend yield higher than the 10-year Treasury.
2012-05-24 Europe's Tragedy Nears the End of Act One, but the Drama Continues by Team of Knowledge @ Wharton
What a difference a year can make. When a group of European Union experts met at a workshop in Italy's Tuscan hills in the spring of 2011, the center of attention was Greece and its ever-growing sovereign debt crisis. Could it, should it, default on debt repayments? And what would happen then? The delegates wondered whether the result might be a meltdown not just of the Greek economy but of Europe as a whole.
2012-05-24 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.
2012-05-24 The Real Crash by Peter Schiff of Euro Pacific Capital
I first came to national attention back in 2008 and 2009 when the housing and credit markets imploded. I became known as the guy that other market "experts" laughed at when I warned of trouble brewing in the seemingly indestructible American economy. After the wheels ground to a halt in mid-2008, people noticed that my bookCrash Proof, originally released in early 2007, read like a detailed preview of many of the events that eventually unfolded.
2012-05-24 Sorting Out the Fiscal Cliff Issue by Asha Bangalore of Northern Trust
Under current law, the federal budget deficit in fiscal year 2013 will show a drastic decline from fiscal year 2012 as a result of scheduled increases in taxes and reductions in government spending. The Congressional Budget Office (CBO) estimates that the federal budget deficit of $1.17 trillion in fiscal 2012 will shrink to $612 billion in fiscal 2013. This sharp reduction of the federal budget deficit is referred to as the fiscal cliff in the financial media and macroeconomic discussions.
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 Case for Community Banks by Ryan Issakainen of First Trust Advisors
The most difficult decisions for investors often involve overriding the emotional residue of past mistakes, and reconsidering the merits of a stock or industry with which one has had negative experiences. This was the case for many investors following the bursting of the technology bubble in the early part of the last decade, as they avoided or severely underweighted tech stocks, and ultimately missed out on the tremendous growth experienced by the sector over the last decade.
2012-05-22 New Lows and a Dud IPO by Christian Thwaites of Sentinel Investments
We're testing all sorts of lows: 1) record low for GT10 auction last week 2) GT30 yield, same level as Dec 2008 3) European banks are at same price level as 1987...so 25 years of gains wiped out 4) euro stocks same level as March 2009, so all the gains gone 5) US safest and best place to be 6) China stocks at same level as 2006, since then the Chinese economy has doubled and 7) to cap it all we had an IPO that should never have happened. We're back in risk territory and markets don't want to extend or commit.
2012-05-22 David Rosenberg - I am not a Permabear by Robert Huebscher (Article)
While most sell-side analysts are correctly classified as permabulls, Gluskin Sheff's David Rosenberg has been branded as the opposite - a permabear. He rejects that label. He recently said he's indeed bullish - on bonds and income - and has been so for quite a while.
2012-05-22 Life-cycle Finance and the Dimensional Managed DC® Pension by Wade Pfau (Article)
Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.
2012-05-22 What History Tells Us about a Potential Greek Exit by David Schawel (Article)
Greece's future is less certain given the recent elections. Is an exit now possible or probable? What would an exit from the euro look like, and how would it be accomplished? Some historical examples give us a clue to the repercussions.
2012-05-22 Investing Through a Bumpy Ride by David Kelly of J.P. Morgan Funds
Its been a tough quarter so far. The U.S. economy is still growing, but not at a sufficient pace to excite anyone. Meanwhile, investors have had plenty to worry about including a fiscal cliff in the United States, a slowdown in China and, right now most ominously, further turmoil in Europe. Despite plenty to worry about, the realities of a U.S. economic recovery, very conservative allocations and relatively attractive valuations suggest that investors should still consider adding stocks and other risky assets to their portfolios.
2012-05-22 Were Off to See the Wizard by Bill Smead of Smead Capital Management
In October of 2010 we explained in a missive called The Wizard of Oz that investors had put too much confidence in the ability of a group of Chinese National, US-educated economists to manage the China economy. Thanks to the writing of Ambrose Evans-Pritchard in The Telegraph on May 13th of 2012, we can see just how successful the Wizard has been in perpetuating the myth that China can be the first major world economy to defy business cycles.
2012-05-22 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week saw the worst week for stocks of the year, caused by the continued fears over the impending break-up of the European Monetary Union as well as the colossal flop of the IPO of Facebook, and the burgeoning horror at the trading losses at JP Morgan. Sad to say that the fears of the past several months, as expressed in these weekly commentaries, seem to be materializing. The circus act known as Europe is back in recession, as political leadership is simply not possible given the pressures of seventeen sovereign nations.
2012-05-21 Global Shipping: Any Port in a Storm? by Sai Devabhaktuni and Gregory Kennedy of PIMCO
With the exception of LNG tankers, all three major shipping categories have been suffering from a supply glut. This, combined with higher fuel costs, has led many shipping companies into financial distress. Although banks have worked with ship owners through this down cycle, they have also pulled back from financing the industry. We believe downside risks are likely minimized in the shipping industry for new lenders and investors. Vessel values are depressed by rates that are sometimes below owners' operating costs and by an oversupplied market that suppresses secondary market values.
2012-05-21 Facebook IPO Not a Flop; Underwriters Priced it Right by John Buckingham of AFAM
he social media giant ended its first day of trading up a measly 23 cents, or 0.6% from its $38 offering price, and technical difficulties at Nasdaq delayed the opening of trading and impacted market activity throughout the day, I give kudos to the underwriters for actually pricing the deal as best they could to match the relatively limited supply to the unprecedented demand. Certainly, Facebook could eventually grow into its lofty valuation, but it is eye-opening to think the disappointing first day of trading still left the company with a $100 billion+ market capitalization.
2012-05-21 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Dell (5/22), HP (5/23) and Costco (5/24) release earnings next week, but no one seems to care much these days. The Greek crisis and ongoing EU contagion will weigh on investors as G8 leaders head to Camp David to debate fiscal responsibility. (Any opportunities to compromise, Germany?) Talks of harsh financial regs continue to heat up in the aftermath of JP Morgan. Did you guys cash-out of any Facebook (as a hedge), Mr. Dimon?
2012-05-21 Europe's Woes Flood Wall Street - But Not the Economy by Kristina Hooper of Allianz Global Investors
The rising tide of contagion has reached our shores. After months of buildup, Europes debt crisis has finally wreaked havoc on U.S. stocks, as a wave of anxiety prompted a major selloff on Wall Street. Investors fears are coming to fruition and we are once again experiencing a spring swoon. But the turmoil overseas has yet to impact the U.S. economy. In fact, the FOMC highlighted a bright spot that may have been overlooked: banks are loosening credit standards. While volatility will continue in the near-term, dividend-paying stocks may help steer portfolios until we see calmer seas.
2012-05-21 Markets Fall on Negative Europe Sentiment by Chris Maxey and Ryan Davis of Fortigent
Worries over the European sovereign debt crisis worsened this week as Greeces political instability increased concern that the country could depart the Eurozone. Greece saw a virtual run on its banks during the week, as depositors withdrew 1.2 billion in two days on fears of massive devaluation from a return to the drachma. While this represented just 0.75% of Greek deposits, it foreshadows a potentially larger crisis if a Greek Eurozone departure becomes imminent.
2012-05-21 Are We Near the End of the Correction? by Bob Doll of BlackRock Investment Management
Although US economic data was generally good last week, stocks sank sharply as investor fears over Europe's debt problems intensified. Despite the mounting crisis in the eurozone, the US economic recovery continues to look stable. While it is true that US stocks have taken a turn for the worse over the last month, other markets (particularly European stocks) have been hurt even more. In our view, markets are awaiting some sort of positive jolt (perhaps in the form of a policy response in Europe or some stronger US economic data) to break out toward the upside.
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.
2012-05-19 Dr. Frankensteins Europe by John Mauldin of Millennium Wave Advisors
We explore the options that the eurozone faces in order to stay together, and what it all means for some of the countries involved. While I have written for a very long time about the probability of Greece exiting the eurozone, the actuality is fraught with risk, not just for Europe but for the world economy. What happens in the next few months will impact us all for a very long time. Indeed, this is one of those years, as Lenin noted, when decades happen.
2012-05-18 Sublime to Ridiculous by John Gilbert of GR-NEAM
There was a time when governments were held to account for the long-term consequences of their financial habits. Those days appear to be long gone, of course, to policymakers frenzied at the political urgency of producing rising employment. But there must be a price to pay for thumbing our noses at lessons previously learned. We look here at just how far government husbandry of the financial system has strayed over time, and how important the consequences are likely to be in years to come.
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 Real Assets by Team of Cohen & Steers
Chinas economic growth is a key theme that drives our outlook for real asset categories. As the worlds dominant consumer of most commodities, China is the largest importer of iron ore, producer of steel and consumer of copper. About 65% of the worlds soybean production is imported to the region. Thus, we were encouraged by central bank easing in response to the first-quarter slowdown, as it seems to have orchestrated a soft landing. Should there be further policy actions, it could spur opportunities in a number of natural resource categories.
2012-05-18 European Real Estate Securities April 2012 Reivew & Outlook by Team of Cohen & Steers
Valuations for many listed real estate companies have reached levels that are likely too low on a relative basis. We continue to closely monitor macroeconomic developments, and remain focused on companies that we think are best positioned to shield themselves from the adverse effects of deleveraging. Specifically, we generally favor high-quality companies with strong balance sheets and relatively low cash flow multiples. We continue to like London offices and the Berlin residential market.
2012-05-18 Global Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
North America fundamentals are on a slow but positive trajectory. European economic challenges keep us focused on high-quality names. Policy easing trends likely to benefit Asia Pacific.
2012-05-18 International Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
European economic challenges keep us focused on high-quality names. Policy easing trends likely to benefit Asia Pacific.
2012-05-17 The Investing Implications of Price Creep by Russ Koesterich of iShares Blog
While double-digit inflation is extremely unlikely this year, the new core inflation figure shows that prices are slowly creeping up in the US. For investors, there are a couple of implications. 1.Recognize purchasing power erosion: Even if inflation stabilizes at current levels, over the long term 2.3% inflation would still cause prices to rise by 50%. 2. Consider equities and commodities: While uncertainty over Europe and Chinese growth are likely to keep volatility high this summer, investors should consider using near-term market weakness to add to long-term equity and commodity positions.
2012-05-16 The Bigger Picture on US Jobs by Joseph G. Carson of AllianceBernstein
Job growth slowed in March and April from a robust pace early in the year. People also appear to be leaving the labor force. Both trends suggest that the US economy may be losing momentum. However, I think preliminary employment figures dont tell the whole story and that you really need to wait for revisions to get a more accurate picture of underlying trends. In April, payroll employment rose by 115,000. That fell short of the consensus estimate of 150,000 and was the smallest jobs gain since August 2011. But initial payroll estimates are based on only a sample of business establishments.
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 ProVise Bullets by Team of ProVise Management Group
If you listened carefully to the CEOs during their earnings announcements, they were tepidly upbeat but upbeat nonetheless, as they looked forward into the remainder of the year. On a day-to-day basis the markets will be driven by the headlines and emotions. We encourage you to refrain from getting caught up in that fray. At the end of the day it will be about an economy that moves forward creating jobs and not one built on the back of debt.
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 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more – and less productive – debt are weakening our economy and creating unstable conditions.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-15 Plain Vanilla by Doug MacKay and Bill Hoover of Broadleaf Partners
In spite of the election year politics and an imposing fiscal cliff, a once in a generation shift is at work in the economy, aligning the stars uniquely in our favor. In its own return to vanilla ways, America is in the early stages of an industrial renaissance, made possible by the advent of cheap natural gas and a corporate sector that has taken its fiscal medicine. Were fitter than anyone on the planet, open to business, and ready to compete. Consumer confidence, in spite of high unemployment, is at record levels, and people are even starting to buy homes again.
2012-05-15 The world is not ending. Nor is it by Christian Thwaites of Sentinel Investments
Last week saw more dire talk on the end of the euro, the lowest ever GT10 auction, a 2.2% swing in SPX[1] and an overly dramatic reaction to hedging losses at JPM[2]. But these are not big enough to push aside the broad positives: i) Europe will cobble together some compromise...there's already broad agreement that pure austerity needs dilution and the Bundesbank even made soothing noises on inflation ii) US economic data was broadly helpful iii) market metrics remain solid and iv) the federal government is in budget surplus. Yes, no lies. Read on.
2012-05-15 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 Earnings Seasons Recap: Is Corporate Strength Fading? by Chris Maxey and Ryan Davis of Fortigent
Strength in the corporate sector since the recession ended has been well documented. In the face of general economic malaise, record profits have been achieved through aggressive cost-cutting and low financing costs. This phenomenon has been one of the major pillars propping up the markets (with the other being central bank policy). Now with Q1 earnings season all but over, it is not unreasonable to question whether that corporate strength is fading. Initial impressions of first quarter earnings season were very favorable after the first big wave of earnings releases.
2012-05-15 Policy Confusions & Inflection Points by Mohamed A. El-Erian of PIMCO
During this important annual event, PIMCO colleagues from around the world debate the major trends that will play out over the next three to five years, focusing not on what should happen, but what is likely to happen. Based on the 2012 Secular Forum discussions, we expect three themes to play out: continued policy and political confusion, overly incremental public and private sector responses and, therefore, greater potential for inflection points. In terms of regions, the status quo is no longer an option for Europe.
2012-05-15 What the Individual and Professional Investors are doing by Matt Lloyd of Advisors Asset Management
The tug of war between individual investors and investment professionals is seeing two distinct paths. According to reports from the Investment Company Institute, equity outflows of mutual funds in April were at $18 billion, the most in nearly 28 years. On the other side, according to Bloomberg, the Commodity Futures Trading Commission showed the drastic reduction of bearishness by professional speculators as net short contracts have dropped over 80% since the high set last September. The question is, Who will be right and when?
2012-05-15 Searching for Big Foot by Anwiti Bahuguna of Columbia Management
For the past few years, the sovereign bond markets have pushed peripheral European countries to reduce public debt. This has meant adopting austerity measures whereby government budgets are slashed and taxes are raised. Such measures meet investors approval. However, the immediate impact of such efforts is less economic growth which is intolerable to the people in Europe. The path to sustainable growth is complicated and requires long-term investments. We believe despite decades of research on the topic, academic efforts have not found a clear answer. Perhaps finding Big Foot will be easier.
2012-05-15 Sex, Money and Largesse: The Hidden Depression by Lance Roberts of Streettalk Live
"Sex" and "Money" are probably two of the most powerful words in the English language. First, those two words got you to look at this article. They also sell products, books and services from "How To Have Better Sex" to "How To Make More Money" ostensibly so you can have more of the former. Unfortunately, they are also the two primary causes of divorce in the country today.
2012-05-15 Month of May: Sell and Go Away, or Hang in There? by Liz Ann Sonders of Charles Schwab
We believe the stock market's correction is likely to be less severe this year relative to 2010 or 2011.
Be aware of the possible perils of following a "sell in May" trading strategy.
For now, macro concernsincluding Europe and the looming "fiscal cliff"are trumping better micro news.
2012-05-14 Dancing at the Edge of a Cliff by John P. Hussman of Hussman Funds
Our recession concerns remain intact, as do our separate concerns about extreme stock market risk. I've emphasized that our estimate of prospective market return/risk in stocks has slipped into the most negative 0.5% of historical data. Last week that estimate actually deteriorated, but I am reluctant to make comments on such a small sample, as the only more negative estimate in post-Depression history was on September 16, 2000. Even in the conditions that match the worst 2% of our return/risk estimates, the market has lost an average of 20-25% just in the following 6-month period.
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 Time to Face Reality by Charles Lieberman of Advisors Capital Management
European markets remain in turmoil, even as these governments prefer to keep their heads buried in the sand. Sooner or later, reality intrudes. Greece and Spain are in the vanguard of being forced out of their fantasy world and a second default, following closely on the first, now appears likely. Greece is small enough so its problems will impinge little on markets, if Spain can handle its bank issues sensibly. Europe's attention will soon shift towards protecting Spain.
2012-05-14 The Bull Market Has Not Yet Reached Its Highs by Bob Doll of BlackRock Investment Management
It has been the case for some time, but recent events serve as a reminder that the primary risk to the global economy and markets is the ongoing debt crisis in Europe. Confidence over policymakers' ability to deal with the crisis took a hit recently given that the election results in Greece and France signal a shift away from governments' willingness to move forward with unpopular austerity measures. The resulting political uncertainty and investor confusion has put downward pressure on stocks and other risk assets. Unfortunately, the reality is there is no quick fix for Europe's problems.
2012-05-14 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Europe is never too far away from the headlines and investors surely will be watching 1) Greece to see if its internal politicos can get along to forge a coalition and 2) France to see if its new Prez can make nice with German Chancellor Merkel. Retailers take center-stage next week as Home Depot, JC Penney, Target, Wal-Mart, and Gap all post earnings. Additionally, retail sales heads a hectic week on the economic calendar, though investors must remember that declining energy prices should help in the months to come.
2012-05-14 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Celebrations normally reserved for heroic events or political ascension have been breaking out during earnings season, as first quarter (2012) portfolio valuations accelerated and year-over-year comparisons show margin expansion. Doing what they do best, market pundits have been turning flax into gold, proclaiming that the recovery has begun. Another anecdotal elixir. One always wonders whether the chicken or the egg comes first. In this case, proclaiming it to be so precedes the actual fact.
2012-05-12 Waving the White Flag by John Mauldin of Millennium Wave Advisors
Europe has embarked on a program that will require multiple trillions of euros of freshly minted money in order to maintain the eurozone. But the alternative, European leaders agree, is even worse. Today we will look at the recent German shift in policy, why it was so predictable, and what it means. This is a Ponzi scheme that makes Madoff look like a small-time street hustler.
2012-05-11 ECRI Update: Reaffirming the Recession Call ... Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.1 as reported in todays public release of the data through May 4. This is essentially unchanged from last week. However, the underlying WLI again rose fractionally from an adjusted 124.6 to 125.4 (see the fourth chart below). The big news this week, however, is not the weekly data update but ECRI's latest reaffirmation of its recession call in a Bloomberg interview with ECRIs Lakshman Achuthan earlier this week. Ive embedded a link to the nine-minute video on the Bloomberg website.
2012-05-11 Here We Go Again....or Not? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
2012-05-11 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.
2012-05-10 I Question, Therefore I Am by Francois Sicart of Tocqueville Asset Management
Historically, the attraction of value investing has been that, by purchasing stocks whose price does not incorporate a large hope premium over intrinsic value, the downside would be muted. Conversely, the potential for the premium to increase should investors perceptions change would promise worthwhile returns even in the absence of spectacular growth by the company. These assumptions suffered a severe setback in 2007-2009, when practically all stocks were caught into the same panic-driven downward spiral. But it does not entirely negate their validity.
2012-05-10 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 International Equity: Monthly Product Commentary April 2012 by Team of Thomas White International
International equity prices remained subdued during the month of April as concerns over the European fiscal crisis continued to cloud market sentiment. Accordingly, price declines were the greatest in Europe while select markets in Asia and Latin America outperformed. As expected, the economies of both the U.K. and Spain contracted during the first quarter, and underscored the mild recession the region is facing at the moment. Bond yields of some of the troubled countries such as Spain and Italy have increased in recent weeks, and investor response to new bond issues remains lukewarm.
2012-05-10 Staying Bullish by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe we are in a new bull market, and bull markets thrive on climbing that proverbial wall of worry. Bullish sentiment is low and bearish sentiment high. Anxious retail investors, having suffered two ugly bear markets since 2000, continue to shun stocks, with money flowing out of mutual equity funds now for more than 5 consecutive years. The public is hugely underinvested. Cash on the sidelines is enormous. The fuel to ultimately power stocks higher as confidence returns.
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 Will The Bond Mania End Ugly? by Gary D. Halbert of Halbert Wealth Management
Mass migrations of the investment public from one asset class to another have often ended very badly. We can all remember the late 2000-2002 bear market in stocks when the S&P 500 plunged almost 50% and the Nasdaq over 70%. Investors had been in a mania for stocks during the late 1990s. I believe what were seeing today qualifies as a mania for Treasury bonds. Im not predicting that the current bond bubble will end the way the dot.com mania ended, but it wont take a huge increase in interest rates to put a lot of bond fund investors who came late to the party underwater.
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 Mohamed El-Erian and David McWilliams: The Key to Resolving Europe's Crisis by Robert Huebscher (Article)
Dealing with a crisis requires three things, according to Jack Welch, General Electric's former CEO. Define your reality - not as you would like it to be, but as it is. Do something about it. Then, third, acknowledge that the crisis wasn't half as difficult as you thought it was. Germany is the key player in Europe's crisis today, and it is still struggling to accurately define its reality.
2012-05-08 Jobs: Tale from Two Continents by Komal Sri-Kumar of TCW Asset Management
As in the case of Europe, the U.S. unemployment situation is likely to get worse in coming months because few moves toward meaningful structural changes in the labor market (e.g., training for the unemployed to improve skills), or fiscal shifts to aid hiring (e.g., targeted employment tax-credits) are likely to be implemented before the November presidential elections. We may have to wait for a reelected President Obama, or President Romney, to move in this direction in 2013.
2012-05-08 Why Be Scared Of A Hat by Christian Thwaites of Sentinel Investments
Markets tend to overreact and the last few weeks in France were no exception. Equities fell around 9% on the expectation of a change in government. On close look, the Hollande manifesto is modest...a change in retirement age here, a year difference to a balanced budget, a non-descript growth pledge, tax banks more, reduce immigration. Markets also have notoriously short memories: socialist (i.e. left of center) governments are good for markets. Stocks rose vigorously in the years after leftist governments took control of France in 1981, Sweden in 1998, the UK in 1997, the US in 1992.
2012-05-08 Sentiment Readies for a Tumultuous Fall by Chris Maxey and Ryan Davis of Fortigent
Market sentiment has oscillated quite rapidly in recent months on the heels of dramatic market intervention by the ECB and shifting views of global economic stability. Sentiment is likely to remain unstable in the months ahead as investors grapple with any number of events, from elections in Europe and the US to the end of recent monetary easing efforts domestically. While markets have rallied substantially over the past six months, retail investors are maintaining a somewhat neutral view on their allocations.
2012-05-08 Eurozone Election Hangover by Axel Merk of Merk Funds
The euro is recovering after a dire Monday morning; keep in mind, though, that much of Asia had a holiday and missed digesting the disappointing U.S. unemployment report; liquidity is low, as London is closed for a holiday. Medium term, however, our bigger concern is that big money, such as the Norwegian sovereign wealth fund, is taking a step back from the Eurozone. As such, the odds of more liquidity provisions from the ECB have increased. We believe the euro will underperform other European currencies; note, though, that the world, including the U.S., will remain awash in money.
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.
2012-05-07 Q1 2012 Letter by Team of Grey Owl Capital Management
The overall equity markets strong first quarter rally was narrowly focused and, from our perspective, fragile. Cutting to the chase, we think both stocks and bonds are expensive. During the quarter, we used opportunities presented by Mr. Market to trim some of our lower quality positions and to add starter positions in a few high quality businesses. We also added to our short-term, high-yield fixed income holdings, sources of return that we expect to show less volatility but results equal to or better than the broad equity market indices.
2012-05-07 Mixed Data and Patience is a Virtue by John Buckingham of AFAM
The labor report issued by the U.S. Bureau of Labor Statistics found that nonfarm payroll employment rose by 115,000 in April, and that the unemployment rate dropped to 8.1%. The improvement in the jobless rate came about only because 342,000 folks left the workforce, so there was little cause for cheer, even though the rate stood at 9.0% in April 2011 and 9.9% in April 2010. Employment increased in professional and business services, retail trade and health care, but declined in transportation and warehousing, while the private sector added 130,000 jobs and government payrolls fell by 15,000.
2012-05-07 After Austerity by Joseph E. Stiglitz of Project Syndicate
So many economies are vulnerable to natural disasters earthquakes, floods, typhoons, hurricanes, tsunamis that adding a man-made disaster is all the more tragic. The pain that Europe, especially its poor and young, is suffering as a result of its leaders willful ignorance of the lessons of the past is entirely unnecessary.
2012-05-07 Unbalanced Risk by John P. Hussman of Hussman Funds
Maybe our present concerns won't amount to as much downside as we expect. But if investors were to choose a point to test the hypothesis that this time will be different and risk will be well-rewarded, I hardly think a worse moment could be found.
2012-05-07 Toto, I have a feeling were not in Kansas anymore. by Jeffrey Saut of Raymond James Equity Research
While most people know The Wizard of Oz as one of the most popular films ever made, what is little known is that the book was based on an economic and political commentary surrounding the debate over sound money that occurred in the late 1800s. Indeed, L. Frank Baums book was penned in 1900 following unrest in the agriculture arena due to the debate between gold, silver, and the dollar standard. I revisit the dollar/gold topic this morning because I think the most important chart in the world may be in the process of breaking down. The chart in question is that of the U.S. Dollar.
2012-05-07 The Labor Market Outlook by Scott Brown of Raymond James Equity Research
The April Employment Report disappointed stock market participants. However, it really wasnt a bad report. Private-sector job growth has been moderately strong this year. The Household Survey data suggest that the economic expansion has been strong enough to absorb the growth in the working-age population, but not enough to take up much of the labor market slack that was generated during the downturn. These figures tell us nothing about where the labor market is headed. Job growth over the next six months will have important implications for investors and for the November election.
2012-05-07 Despite Uncertainty, the Bull Market Should Persevere by Bob Doll of BlackRock Investment Management
There is a great deal of uncertainty that is acting as a headwind for the markets. In the United States, perhaps the main uncertainty is over the looming fiscal and tax issues that must be dealt with before the end of the year. Additionally, the still-developing European debt crisis has the potential to derail markets, as does the possibility for worse-than-expected economic growth. In any case, while we do expect to see markets continue to churn for the near term, we also believe that stocks will eventually be able to resume their climb.
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 Back In by Mark Kiesel of PIMCO
U.S. housing may be a decent place to put money over the next several years due to improved absolute and relative valuations. U.S. housing fundamentals have improved significantly, led by lower prices, record low mortgage rates, improving inventory and delinquency trends and a gradually improving labor market, which in combination are helping homebuyer confidence and potential demand. While the outlook for U.S. housing has improved, several headwinds remain, including tight credit, potential supply from the shadow inventory and weak household formation due to a subpar economic recovery.
2012-05-04 ECRI Weekly Leading Indicator: Third Consecutive Decline by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.0 as reported in today's public release of the data through April 27. This is the third consecutive week-over-week decline since January 6th. However, the underlying WLI again rose fractionally from an adjusted 124.0 to 124.7.
2012-05-04 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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week was a seesaw affair, with the macro news being a negative, while
corporate earnings served to support stock prices. The charts above illustrate that the Dow Jones Industrial Average gained 1.4% last week as the blue chips reported pretty good earnings and outlooks. The NASDAQ Composite though fell .36%, mainly because of concerns and some confusion developing in the shares of Apple, which reports tomorrow evening.
2012-05-03 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock prices rallied here in America last week as discouraging (but predictable) economic news at home along with the worsening situation in Europe were more than offset by positive earnings from Apple, dividend increases, and buybacks from countless other corporate names. As the charts above illustrate, the Dow Jones Industrial Average gained 1.5% and the NASDAQ Composite which is heavily influenced by the price of Apple improved by 2.3% last week.
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 Renewed Eurozone Concern as Liquidity Injections Dont Solve Solvency Woes by Thomas D. Higgins of Standish Mellon Asset Management
As investors recognize that the ECB's long-term refinancing operation is doing nothing to address the regions underlying solvency problems. Resolving those problems through monetary policy is complicated by the large disparities in economic growth and inflation across the eurozones economies, rendering both loosening and tightening inappropriate for certain parts of the region. As a result, Standish remains cautious about the European economic outlook and fears that renewed uncertainty over Europes fiscal stability could lead to another bout of global financial market volatility.
2012-05-03 A Troika of Problems by Team of BondWave Advisors
The troika of the International Monetary Fund (IMF), European Union (EU), and European Central Bank (ECB) has continued to prescribe austerity. But at the end of what is now a lengthy cycle of agreements and ever-increasing austerity measures, the debt still remains significant and much of the region has either been plunged into recession or is heading that way. We discuss these ongoing problems and provide additional insight on the US Treasury, Corporate and Municipal Bond Markets.
2012-05-03 ECB Warns Easy Money No Solution by Axel Merk of Merk Funds
Austerity is the easy part, structural reform is the tough part. With regard to monetary policy, Draghi was notably light. He shed cold water on the notion of re-activating the peripheral bond purchase program. He also dampened expectations of a rate cut by emphasizing balanced inflation risks, as well as a gradual economic recovery, albeit with downside risks. He suggested the European banking sector is improving, not only visible in reduced intra-bank refinancing (repo) rates, but also apparent in an increase of the deposit base in peripheral Eurozone countries.
2012-05-03 Likely Triggers of the Next Recession by Lance Roberts of Streettalk Live
The conjecture about the next recession has raged ever since the end of the last one. Will it be in 2012 or 2013 or, if you believe the many mainstream economists' estimates, never? Historically speaking, recessions have occurred on average of about every 6-8 years regardless of monetary or fiscal policies, the strength of the economy or global peace - they occurred nonetheless. There is really no argument whether there will be a recession in our future. The only question is the timing and cause of it. The latter point is the most important. Recessions do not just happen. They need a push.
2012-05-02 Its Good To Be The King by Chris Richey of Neosho Capital
The sovereign Greek debt default will ultimately lead to a sovereign Spanish debt default, and thus we tell you why sovereign debt should not be viewed as risk-free.
2012-05-02 Digbys Umbrella and a Dinner to Remember by Christian Thwaites of Sentinel Investments
The US economy is on a painfully slow road. It is recovering. Jobs numbers are better, even though some hiring in the first quarter may have been brought forward by mild weather. Production, manufacturing and exports, all signs of regained competitiveness in the US, are showing steady improvements. And the government sector is contracting. Not on purpose mind you, but jumping off a cliff and letting inertia do the work result in the same end. Above all of this, we have a Fed using every monetary policy at their disposal to try and promote growth and employment.
2012-05-02 A New Wave of Foreclosures Could Challenge the Housing Market by Team of American Century Investments
The most recent data on the U.S. housing market suggests we may have reached a bottom. However, most experts anticipate the housing market will be hit by a large new wave of foreclosures that will substantially affect the current supply-demand balance for the remainder of this year and possibly into 2013. As a result, we may be looking at one more phase of price declinesparticularly in local markets where the housing bubble grew largest before it burstbefore we truly find the bottom to our five year housing crisis.
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 Trading For Now, No Breakout Yet by Christian Thwaites of Sentinel Investments
Markets seem to be taking the broader economic news in their stride. The FOMC confirmed its policy, so no new buying but also no unwind on the balance sheet. The demand for safe assets remains very high and that leads us straight to MBS where we maintain a very over-weight position. Equities are drifting higher, which we like as we increased the position some weeks ago. It helps that positive surprises outnumber negative surprises by 3:1 so far this earnings season. The market tends to overreact to news which suggests there's lack of conviction. But at least there's no over-valuation.
2012-05-01 Is Now The Time To Brace For Another Volatile Summer? by Chris Maxey of Fortigent
In the latest week, the Federal Open Market Committee reiterated its stance that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. While rates will remain low for now, the Fed will need to fend off other challenges in the months ahead, ones that could send investors racing for the beach sooner than normal. The biggest challenge for the Fed and the economy in the coming months is in the form of Operation Twist. The hope was that such actions would drive down interest rates and encourage borrowing of all forms.
2012-05-01 A Wake-up Call on the Economy by Milton Ezrati of Lord Abbett
Economic statistics seem at times to have their own ebb and flow, sometimes overstating and sometimes understating the underlying fundamentals. Sadly, these often meaningless data variations can create false feelings about economic possibilitiesenthusiasm, when the statistical flow leans toward the strong side, or despair, when it leans on the soft side. Investors, in particular, succumb to such swings in attitude, but, to a lesser extent, so do businesspeople. So, it was with a string of insupportably good numbers late in 2011 and earlier this year.
2012-05-01 Germanys Neighborhood Watch by Mohamed A. El-Erian of Project Syndicate
Ultimately, there can be no strong Germany without a stable eurozone; no stable eurozone without a strong Germany; and no global economic stability without both. Germans might not like their choices, but refusing the responsibility of leadership is one option that Germany does not have.
2012-04-30 The Economy and the Presidency by Martin Feldstein of Project Syndicate
If history is a reliable guide, the outcome of the US presidential election will depend significantly on the economys performance between now and November 6, and on Americans perception of their economic future under the two candidates. While other issues may well influence voters, economic conditions favor Mitt Romney.
2012-04-30 Dissecting the US Q1 GDP by Monty Agarwal of MA Capital Management
4 years after facing a massive recession, the unemployment rate is still stuck above 8% and the economic growth is starting to slow. Many of my colleagues in the hedge fund circles are calling for a return to negative growth or recession in the US by the end of 2012. This does not bode well for the retail investor, who after missing the Q1 rally has decided to jump back into the markets only to see the rally dissipate.
2012-04-30 Here We Go Again by Brian S. Wesbury and Robert Stein of First Trust Advisors
We are not saying the negative data is meaningless. Its not. But some of the reaction is, once again, overdone. Debating the worry-warts has become a full-time job and we cant prove them wrong until the future becomes the present. So, lets look back to last year when we said in a few months we will be looking back at recent reports as just statistical noise. Sounded good then, so lets not mess with success. The more things change, the more they stay the same.
2012-04-30 Euro Risks Continue but Support for Risk Assets Is by Bob Doll of BlackRock Investment Management
At this point last year, two of the major downside risks were the possibility of the European debt crisis spiraling out of control and the inability of the United States to get its fiscal house in order. Today, while these remain two factors that have investors concerned and while there are some similarities between the situations one year ago and today, there are also some important differences. The US fiscal policy is murky. The tax and fiscal policies that are set to expire at the end of 2012 are clouded in uncertainty and it is impossible to view them outside the 2012 elections.
2012-04-28 A Gold Standard? by John Mauldin of Millennium Wave Advisors
Here is a speech by Jim Grant to the New York Federal Reserve. The always erudite Grant takes us back in time to the very beginnings of the Federal Reserve, to show us how far we have strayed from the original intent. Grant argued for a return to the gold standard in the very halls of fiat money! It seems the New York Fed is asking some of its critics to come and speak.
2012-04-27 Managed Futures and Macro: Q1 2012 Market Commentary by Jon Sundt of Altegris Investments
With Eurozone concerns receding and the macroeconomic picture showing strength, the market outlook at the end of Q1 is notably brighter than at the end of last year. Reduced correlations, lower volatility and the prospect of less government intervention have led some players to hope for a return to a new old period in which fundamentals drive the markets. If that theme does indeed prove to be sustainable, we expect that: a) more managed futures managers, would profit from stronger trends; and b) more circumspect global macro managers may take advantage of increasingly bullish positioning.
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 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.
2012-04-27 ECRI Weekly Leading Indicator: The Growth Index Slips Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 0.6 as reported in today's public release of the data through April 20. This is the second consecutive week-over-week decline since January 6th. However, the underlying WLI rose fractionally from an adjusted 123.8 to 124.1.
2012-04-26 The Global Fiscal & Monetary Policy Shift Moves Markets by George Bijak of GB Capital
The powerful macro forces that drive global economy and move stock markets have changed direction post the peak of the Global Financial Crisis. Governments are tightening their Fiscal Policies and Central Banks are expending their Balance Sheets (also known as quantitative easing or money printing) as part of globally synchronized deleveraging process.
The two opposing forces pull the global economy in different directions. The fiscal cuts are slowing economic growth but are counter-balanced by a stimulative nature of the Central Banks easing.
2012-04-26 One Step Closer: Fed Keeps Rates Low But Gets More Hawkish by Liz Ann Sonders of Charles Schwab
The Federal Reserve's Open Market Committee (FOMC) made no change to short-term interest rates, but provided no hints that a third round of quantitative easing (QE3) was in the offing. As usual, the committee repeated its comment about keeping the Fed's balance sheet under review and being willing to act "as appropriate," while also confirming its pledge to keep rates "exceptionally low" through 2014. For the third consecutive meeting, there was one dissenterRichmond Federal Reserve Bank President Jeffrey Lackerwho believes the first increase in rates will be necessary in 2013.
2012-04-26 The Bernanke-Krugman Smackdown by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Bernanke is trying like a madman to get banks to increase lending but Bernanke and Krugman both do not understand economic reality. Banks cannot lend because they are still capital impaired, hiding losses yet to come, and holding assets that are marked-to-fantasy instead of marked-to-market. Consumers are busted and holding interest rates at 0% when prices of food and gasoline are soaring exacerbates the problem. There are few credit-worthy businesses that want to borrow in this environment. The businesses that do want to borrow are not credit-worthy and banks would be foolish to lend to them.
2012-04-25 Developed Europe: Economic Review 1st Quarter 2012 by Team of Thomas White International
The first quarter of 2012 witnessed several comforting developments in Europe. Greece fulfilled the pre-condition for securing its second bailout by convincing its private creditors to accept a 53.5 percent write-off on its debt. The deal eased concerns about a disorderly default by Greece on its sovereign debt. Following up on the liquidity-infusing program it introduced late last year, the ECB carried out another round of its Long-Term Refinancing Operation (LTRO), this time handing out to about 800 banks a total of 529.5 billion in 3-year loans at a very low interest rate of 1 percent.
2012-04-25 Impatience Will Lead To Our Demise by Lance Roberts of Streettalk Live
What is both disturbing and disappointing is the lack of foresight exhibited by the media and political leaders of not only Europe but the U.S. as well. It should not be a surprise to anyone that the austerity regimen, agreed to last month as a long term solution to Europe's sovereign debt crisis, is going to cause economic growth to slow. We have been very vocal about this point. Austerity measures cannot be imposed when an economy is saddled by rising debt costs and high unemployment. It will reduce economic output and therefore requires a strongly growing economy to offset the drag.
2012-04-25 Is The Economic Recovery Stalling? by Gary D. Halbert of Halbert Wealth Management
The US economic recovery is facing some stiff headwinds. Those include high gasoline prices, the recession and higher interest rates in Europe and the recent disappointing unemployment numbers in the US, just to name a few. The apparent slowdown in the recovery recently is in part due to the unusually warm winter, which served to pull economic activity forward in January and February, thus making March and April so far look softer. Some in the mainstream media concluded that we dont have a problem with the economy. Maybe so, but the recovery has had an uneasy feeling about it recently.
2012-04-25 The Dividend Tax Debate: Soaking the Rich or Raining on the Recovery? by Peter Lefkin of Allianz Global Investors
Taxes, one of the few certainties in life, have been the source of a lot of uncertainty this election year. President Obamas proposed budget, if enacted, would raise the tax rate on corporate dividends for upper-income individuals to 39.6% from 15%. His administration projects that it would raise over $200 billion over the next decade. Critics say it would prompt companies to cut dividends and horde cash, which could have a debilitating effect on the economy. It could also hurt aging retirement savers, who receive 75% of dividend payouts. Get the latest on the politics behind the policy.
2012-04-24 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)
Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.
2012-04-24 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 Chinas Growing Pains by Milton Ezrati of Lord Abbett
Among all the fears discussed in the financial community these days, worries over Chinas expansion loom large. The government in Beijing has revised down its growth expectations to 78% a year from the former breakneck pace of 1012%. Private groups, such as the American Chamber of Commerce in China, have made similar downward adjustments in their expectations. Though there is good reason to anticipate a slowdown in the pace of Chinese growth, it would be a mistake to exaggerate the risks, and especially to do so by drawing easy parallels to Americas real estate debacle.
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 Blowin in the Wind by Scott Brown of Raymond James Equity Research
Recent economic data have been mixed, but generally consistent with moderate economic growth. The recovery continues, but has failed to gather much steam and remains relatively fragile. Were on our way, but weve a long way to go. Over the last year, the economy has faced a number of headwinds, capping the pace of improvement. Those headwinds appear to be lessening to some extent although there are uncertainties, particularly as one looks to 2013.
2012-04-23 Americas: Economic Review First Quarter 2012 by Team of Thomas White International
Optimism over economic prospects increased across the Americas regions during the first quarter of the year, as economic data showed sustained improvement and global risks eased somewhat. Despite costlier fuel, consumer spending climbed in most countries across the region, especially in the U.S. The European fiscal crisis now appears less worrisome when compared to last year, while the slowdown in Asia has turned out to be milder than expected earlier. Commodity prices have recovered after the correction during the second half of last year, on an improved outlook in global demand.
2012-04-23 Run, Don't Walk by John P. Hussman of Hussman Funds
One way to gauge your speculative exposure is to ask the simple question - what portion of your portfolio do you expect (or even hope) to sell before the next major market downturn ensues? Almost by definition, that portion of your portfolio is speculative in the sense that you do not intend to carry it through the full market cycle, and instead expect to sell it to someone else at a better price before the cycle completes. With respect to those speculative holdings, and when to part with them, my own view is straightforward. Run, don't walk.
2012-04-21 A Little Bull's Eye Investing by John Mauldin of Millennium Wave Advisors
Bull's Eye Investing was the book that really helped establish this letter. It dealt with a host of investing ideas, secular market cycles, value investing, alternative investing, and more. I have taken that material, updated it, and written a new book, part of the Little Book series done by Wiley, called The Little Book of Bull's Eye Investing Finding Value, Generating Absolute Returns, and Controlling Risk in Turbulent Markets. I have waited to announce this one until it is off the presses and being shipped. Here is the introduction and part of the first chapter of the book.
2012-04-20 Currency Wars: Gambling With Other Peoples Money by Axel Merk of Merk Funds
If running out of your own money wasnt bad enough, policy makers are increasingly spending other peoples money to bail their country out. At the upcoming G-20 meeting, finance ministers from around the world will contemplate an increase to the resources of the International Monetary Fund (IMF). At stake for politicians is whether they can continue to do what they know best to play politics. In contrast, at stake for investors may be whether currencies will retain their function as a store of value.
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 Monthly Investment Commentary by Team of Litman Gregory
Stocks and other risk assets surged in the first quarter, continuing the strong run that began in the fourth quarter of last year. In each of the past two quarters, domestic stocks gained about 12%, marking one the strongest runs over the October-March span going back to the 1920s. Developed foreign stocks increased nearly 12% in the quarter, emerging-markets stocks gained 14, small-cap U.S. stocks were up 12%, high-yield bonds rose 5%, and emerging-markets local-currency bonds added 8%.
2012-04-20 Whats Ahead for the Fed? by Team of Neuberger Berman
Although growth could slow from here, we do not believe economic conditions will deteriorate enough to provoke further accommodative measures from the Fed. The Fed may be on hold for the time being, but we also believe that Bernanke is acutely aware of the potential consequences of reversing monetary policy too quickly. As a result, interest rates may stay lower for longer. In this type of yield-constrained environment, we continue to favor segments like high yield fixed income and emerging market debt, which both offer attractive sources of income and upside potential.
2012-04-20 Release Oil from the SPR? Better to Take the Long View by Greg E. Sharenow and Mihir P. Worah of PIMCO
A temporary release aimed at influencing short-term prices could actually send an unintended bullish signal to the market that long-term spare capacity in OPEC producers is insufficient to meet supply losses. After the release of oil from the SPR in 2011 prices initially fell by 7%, but quickly rebounded as the market priced in the challenge of redelivering the oil to the SPR in the future. With few options, governments have limited ability to influence oil prices and so should focus instead on policies that impact the medium to long term.
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 Fixed Income Investment Outlook April 2012 by Team of Osterweis Capital Management
The Feds easy money policy will likely not reverse in the near term, but may do so before 2014, if economic growth strengthens meaningfully; some inflation is also acceptable to the alternative deflation. We are seeing some economic strength in the U.S., which is translating into higher equity prices (and hopefully higher capital gains). We are still generally avoiding exposure to interest rate risk found in Treasuries and investment grade bonds. We believe the easy money has been made there and we are not currently being compensated for the risk of rising interest rates.
2012-04-20 ECRI Weekly Leading Indicator: The Growth Index Slip by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) is now at 1.2 as reported in today's public release of the data through April 13. This is the first week-over-week decline since January 6th, over three months ago. The underlying WLI contracted more dramatically from an adjusted 125.9 to 123.9 (see the fourth chart below). This is the largest decline, in percentage terms, since August 19th of last year.
2012-04-20 Car Sales, Gasoline and Demographics by Mike "Mish" Shedlock of Sitka Pacific Capital Management
The Great Recession is over, yet gasoline sales have not rebounded. Is this an indication another recession is on the horizon? That the recession never ended? Something else?
2012-04-20 Preferred Securities First Quarter 2012 Review and Outlook by Team of Cohen & Steers
Preferred securities continue to offer a compelling total return proposition. Treasury yields are at or near historic lows, and the Federal Reserve appears committed to holding interest rates steady for the foreseeable future. At the same time, with preferred yields near 7%, the yield spread between preferred securities and Treasuries remains far wider than its long-term average, and few other investments offer as much income.
2012-04-20 U.S. Real Estate Securities Review and Outlook, First Quarter 2012 by Team of Cohen & Steers
We have a very favorable view of specific office markets, including life sciences, technology and media, as well as New York offices broadly. We also continue to like prime retail and self storage owners, which are seeing very strong fundamentals. In contrast, we remain cautious toward health care properties and secondary retail. We have also reduced our allocation to apartment REITs on the margin following their strong run in 2011.
2012-04-20 Closed End Funds First Quarter 2012 Review and Outlook by Team of Cohen & Steers
. With borrowing rates likely to remain low for an extended period, we believe the yield advantage of leveraged closed-end funds will continue to draw investor interest. As a result, we see potential for the broad closed-end fund market to trade at even narrower discounts or even premiums to NAV. In addition, the recent success of new issues should allow the closed-end fund IPO window to remain open in 2012. At the present pace, we do not believe new supply will pressure pricing in the secondary market or impede discount narrowing.
2012-04-19 Current Conditions Cater to Our Rigorous Muni Investment Process by Team of American Century Investments
The last four years have been a remarkable period in municipal bond (muni) market history. The 2008 Financial Crisis and the Great Recession transformed the high-grade U.S. muni market and how people invest in it. What was once a relatively homogenous bond sector in terms of its credit quality and ratings became much more heterogeneous. Under these conditions, we believe experienced professional credit research and portfolio management are now crucial to investment success. This article outlines our muni investment processes.
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 Forget about Spring, it Feels Like Summer by Philip Tasho of TAMRO Capital
Stocks sizzled in the first three months of 2012, delivering the best first quarter return since 1998, as measured by the S&P 500. Last month we suggested that perhaps we have seen this movie before; a strong first quarter in the markets followed by a sharp correction as fundamentals weakened. Is it different this time? We are optimistic the economic expansion will follow through. Why? We see consumers slowly waking up from their four-year slumber. Looking at retail sales growth, consumer spending has improved, while U.S. unemployment has receded to 8.2% as of March.
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 European Debt Crisis Never Went Away by Gary D. Halbert of Halbert Wealth Management
US stocks are having a big day today, with the Dow up just over 200 points. But there are problems lurking in Europe that could be quite negative for global equities over the next several weeks. There are fears that Spain and perhaps Italy will need more bailout loans in the weeks just ahead. Thats our topic for today. In December and January the ECB took the unprecedented step of loaning apprx. 1 trillion euros to European money center banks in an effort to buy some time for the banks to recapitalize. The loans had three year maturities, and the interest rate was an incredibly low 1%.
2012-04-18 Quirky Tales and Waves of Change by Doug MacKay and Bill Hoover of Broadleaf Partners
While almost all commodities (ag, chemicals, and energy) have tended to move up and down together in price, oil has always beat to a different drummer, likely as a function of the ebb and flow of geopolitical concerns and the physical location of most known reserves. I would guess, however, if natural gas is in such abundance domestically, it could very well be the case around the globe. The prospect for $200 oil might be as remote as NASDAQ 5000.
2012-04-18 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.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 The Unemployment Rate: A Coincident Recession Indicator by Georg Vrba, P.E. and Dwaine van Vuuren (Article)
For what is considered to be a lagging indicator of the economy, the unemployment rate provides surprisingly good signals for the beginnings and ends of recessions. We have developed a model that uses unemployment figures to produce these signals and to determine the probability of when a recession may start.
2012-04-17 Is China Serious about Currency Reform? by Milton Ezrati of Lord Abbett
Chinas central bank governor, Zhou Xiaochuan, made comments that drew less attention than they deserve. First, he suggested that market forces would play a bigger role in setting the value of Chinas currency, the yuan. He also mused that the yuan should rise further against the dollar and on foreign exchange markets generally. An announcement by the People's Bank of China relating to increased flexibility in the trading band of the currency would appear to confirm Zhou's intent. There is room for two responses to this new Chinese positioning, one cynical and the other much more positive.
2012-04-17 Question for the ECB: What Now? by Fred Copper of Columbia Management
The ECB tipped its hand last week in terms of which direction it is likely to go. Board member Benoit Coeure indicated the ECB could step in and buy Spanish bonds. It is unlikely to be a sustainable solution. It wouldnt be surprising to see renewed stresses emanating from the peripheral sovereign debt markets. There is a limit to how much the ECB is going to be able to do in this situation. Ultimately, the real burden is going to have to be borne by politicians through substantial fiscal adjustments.
2012-04-17 Earnings on a Hot Plate by Chris Maxey of Fortigent
While the economy has displayed fits and starts of entering a sustained recovery over the past several years, there has been no doubt about the ability of companies to reshape their balance sheets and refocus their businesses. In the midst of first quarter earnings season, there are some concerns that the corporate hot streak will come to an abrupt end, but the reduction in earnings expectations since late last year appears to be favoring another positive earnings season.
2012-04-17 Mind the Gap by Liam Molloy and Bethany Carlson of Galway Investment Strategy
There is almost always a gap between price and value. Over the next few years price volatility is likely to be the source of the gap as sentiment waffles from overly exuberant to downright pessimistic. In the era of the 24-hour news cycle, high frequency trading, and an ever shortening investor attention span, prices move fast. Markets are emotional creatures and have a tendency to boom and bust. There have been occasions when underlying changes of value have gone unrecognized for sustained periods, and the gap was not primarily a function of price volatility.
2012-04-17 10 More Years of Low Returns by Lance Roberts of Streettalk Live
Ten more years of low returns in the stock market. If you are one of the millions of baby boomers headed into retirement-start saving more and spending less because the stock market won't bail you out. I will explain why this is the likely future ahead for investors. In this weekends newsletter I wrote that "If you put all of your money into cash today and dont look at the market for another decade you will be better off..."I realize that this statement is equivalent to heresy where Wall Street is concerned but there is one reason behind my apparent madness - the power of reversion.
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 After the Speed Bump... by Robert Stein of Astor Asset Management
Slow down: Speed bump. After that, accelerate with care. Thats the essence of our near-term economic outlook. Although a tapping of the brakes is likely, there is virtually no danger of going off the road. The economic engine, having finally gained some sustainable momentum, will probably keep moving at a slow and steady pace, with a general upward trend overall for the rest of the year.
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 Kasriels Parting Thoughts Recent Federal Budgetary Trends: Facts, Not Opinions by Paul Kasriel and Asha Bangalore of Northern Trust
The federal budget deficit reached its widest gap on a 12-month moving total basis in February 2010 at $1.478 trillion. Although remaining at astronomical levels, the budget deficit has been trending lower and stood at $1.246 trillion in March 2012. The year-over-year growth in the 12-month moving total of federal outlays peaked at 19.7% in July 2009. In March 2012, the year-over-year change in the 12-month moving total of federal outlays was minus 1.1%. The median growth in the year-over-year moving total of federal outlays from December 1955 through March 2012 is 6.6%.
2012-04-16 What the Return of Market Volatility Tells Us by Mohamed A. El-Erian of PIMCO
Signals of a challenging outlook are much louder in European bond markets. Last week, yields on peripheral government securities went from flashing orange to again flashing red, with Spanish risk spreads near or at record levels. All this speaks to the unsettling situation of markets that remain highly dependent on policymakers who, themselves, are stuck in the muddled middle: unable to deliver sustainable outcomes or to exit from their market interventions. This is the unfortunate reality of an "unusually uncertain" outlook, blunt policy tools, and a rather dysfunctional political context.
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.
2012-04-14 The War for Spain by John Mauldin of Millennium Wave Advisors
The inflection point that I thought the ECB had pushed down the road for at least a year with their recent 1 trillion LTRO is now rushing toward us much faster than Draghi had in mind when he launched his massive funding operation. So, we must pay attention to what Spain has done this week which, to my surprise, seems to have escaped the attention of the major media. It may be considered a tipping point when the crisis is analyzed by some future historian. And then we'll get back to some additional details on the US employment situation, starting with a few rather shocking data points.
2012-04-13 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 Developed Asia Pacific: Economic Review 1st Quarter 2012 by Team of Thomas White International
Developed Asia Pacific economies showed more promise in the first three months of 2012 compared to the gloomy scenario witnessed during the last quarter of 2011. A marked upturn in the U.S. economy along with receding fears about the debt crisis in Europe gave a fillip to export-based economies in Asia such as Japan and Singapore. Whats more, inflation in most of the developed Asia Pacific economies became less of a concern during the first two months of 2012, with Singapore, Hong Kong and New Zealand all reporting subdued inflation.
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 Groundhog Year by Rick Lear of Sloan Wealth Management
This week the titles were again of debt crisis in Europe. But Europe was not the only recurring item. Many other aspects seemed strikingly familiarlike they just happened last year.and the year before. This year, The EM guys still like Emerging Markets, the folks taking TARP money are still on the front page of paper, the guys selling proprietary products still have charts to support their products, trouble in Middle East, North Koreans may have nuclear weapons, the bond guys still like bonds, the stock guys still like stocks, perm-a-bears still gloomy and Washington still a mess.
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.
2012-04-13 Wheres the Beef for Gold Equities? by Frank Holmes of U.S. Global Investors
If you plan on shopping for bargains in the gold miner department, youre going to fight a crowd. Numerous global investors have been pounding the table for gold stocks, including Marc Faber who said gold shares have become extremely oversold and could rebound in the next few days and Global Portfolio Strategist Don Coxe, who reiterated that gold equities are undervalued compared to the precious metal. A big buyer has been the miners themselves. Mergers and acquisitions in the mining sector have been at an all-time high over the past two years. Theyve been willing to pay a premium too.
2012-04-13 The Next Error by John Gilbert of GR-NEAM
The escalating frenzy for yield may in fact prolong the trying process of deleveraging by tacitly supporting bad investment decisions, and underpricing of risk. The relentless destruction of private capital in real terms is policymakers' answer to reducing leverage in nominal terms. If central banks err in the direction of ease, as the Fed will signal if it ignores the Taylor Rule for a time, poor long-term investments are likely to do well for a transitory period. The eventual reckoning can be suppressed, but only for a time.
2012-04-13 Recent Federal Budgetary Trends: Facts, Not Opinions by Paul Kasriel of Northern Trust
The federal budget deficit reached its widest gap on a 12-month moving total basis in February 2010 at $1.478 trillion. Although remaining at astronomical levels, the budget deficit has been trending lower and stood at $1.246 trillion in March 2012.
2012-04-12 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Co.
The rally in stock prices which began in the fourth quarter of 2011 carried into the first quarter of 2012. Some called it a relief rally. We believe one trigger for the rally was the announcement of the Long-Term Refinancing Operation (LTRO) program enacted by the ECB which allowed European banks to rollover debt obligations for up to three years. We believe this bought them some time, probably measured in months. This alone does not solve the problems of Europe, but its better than prior programs which bought them a few days or a few weeks; (they kicked the can further down the road).
2012-04-12 Jobs Data a Reminder of the Slow, Fitful US Recovery by Russ Koesterich of iShares Blog
While last Fridays disappointing monthly jobs report doesnt herald the end of the US recovery, its a reminder of the recoverys fragility and that improvement in the US economy will most likely continue to be slow and characterized by fits and starts. When you view the jobs data in a context of longer than one month, there is evidence that the US labor market has improved since last year. However, its improving from a very low base at an agonizingly slow pace. There is also some evidence that the labor market has structural problems that may prove to be a drag on growth for some time.
2012-04-12 Evolution, Impact and Limitations of Unusual Central Bank Policy Activism by Mohamed A. El-Erian of PIMCO
I will speak in a central bank and to central bankers about the role of their institutions particularly the Federal Reserve and the European Central Bank in todays highly complex, perplexing and historically unusual policymaking environment. I will go further and try to link actions to motivations. And, when it comes to implications, I will attempt to put forward questions and hypotheses that, I believe, are critical for the future of the U.S. and global economies but for which I, like others, have only partial answers.
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.
2012-04-12 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
Central banks around the world sent a rush of liquidity into the global financial system, and this coordinated effort helped stem the risk of a major European credit crunch that was brewing at the close of 2011. In our view, the liquidity provision has improved the macroeconomic outlook and buys some much needed time for sovereigns, banks and other indebted private sector agents to try to get their balance sheets in order. Risk assets have generally responded very well to easy money policies over the last two quarters, while negative real interest rates have piqued the global thirst for yield.
2012-04-11 Small Businesses Less Optimistic in March by Asha Bangalore of Northern Trust
The Small Business Optimism Index of the National Federation of Independent Business fell in March to 92.5 from 94.3 in the prior month. The March decline is the first after six monthly gains since September 2011. Although the percentage of respondents indicating that poor sales is problematic has held steady for two straight months, it has failed to show an improvement in March. The index tracking plans of firms to increase employment declined to zero from 4.0 in the prior month, the poorest showing since October 2008, which was during the global financial turbulence.
2012-04-10 Paul Kasriel's Parting Thoughts on the Economy by Robert Huebscher (Article)
Paul Kasriel, the chief economist at Northern Trust, will retire at the end of this month. In this interview, he explains why he is optimistic about the prospects for the US economy and why supposed headwinds - from the price of oil to the housing market - pose much less of a threat than most people believe.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-10 Jobs 'Stunner' Not Much of a Surprise by Kristina Hooper of Allianz Global Investors
The number of new jobs created last month was downright disappointing, but maybe it should not have come as such a surprise. Job growth and improvements in the unemployment rate had been moving at a faster clip than modest economic expansion could support, a phenomenon that seemed to defy history and economic theory. Okun's Law suggests that the job market will be depressed for some time because GDP growth has been less than robust. The pullback we are seeing is not cause for alarm, however. The economy is growing and jobs are being created, but there will be fits and starts along the way.
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.
2012-04-10 Which Stocks Win on Main Streets Comeback? by Bill Smead of Smead Capital Management
We are very excited about the next three to five years because we believe it is likely that Main Street will start to compete with Wall Street for capital and economic growth will accelerate. Unemployment rates would fall in that scenario and pent-up demand for goods and services could come out of the woodwork among average American households. What we mean by saying this is that capital will begin being demanded for business activities. As capital gets demanded for business activities ranging from housing to business expansion, the cost of capital will rise and bond prices would fall.
2012-04-09 And That's The "QUARTER" That Was... by Ron Brounes of Brounes & Associates
Europe hopes the latest (bailout and reg) moves will help it get its act together. (Good luck with that.) China applies the brakes. Labor looks strong, but can it continue? The Fed debates the need for more stimulus (without any consensus). Facebook moves closer to IPO (and investors beg to participate). The world lectures Iran and finally takes harsh measures (stand by to help Saudi). Investors hope to keep the mo going for another quarter, while being tempted to take profits along the way. Can we finally start focusing on Obama vs. Romney?
2012-04-09 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Investors return to work after much-deserved R&R and face a equity market at a crossroads. Was the pullback this week a temporary blip or was it the start of a longer-term trend representing the true fundamentals of the economy and the corporate climate? Futures predict that Mondays opening may be weak due to labor data. The dreaded I word highlights the weekly data as higher energy prices may have taken a toll on the key inflation gauges. Still experts like Bernanke do not see many price pressures on the long-term horizon and any rise in crude and gasoline due to Iran may be short-lived.
2012-04-09 Is the Fed Promoting Recovery or Merely Desperation? by John P. Hussman of Hussman Funds
What we've observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. All of this reflects not health, but despair, and explains why real disposable income has grown by only 0.3% over the past year.
2012-04-09 Pigs and Panics! by Jeffrey Saut of Raymond James Equity Research
As stated, this is a key week for the equity markets and we continue to wait and see how the equity markets resolve themselves on a short-term basis, a trading stance we have been in for weeks. Meanwhile, for investors, I met with a portfolio manager last week whose investment style I think is suited for the current stock market climate. The investment style of Troy Shaver, PM of Dividend Asset Capital, sub-advisor to Goldman Sachs Rising Dividend Growth Fund (GSRAX/$15.05), is to invest in companies that increase their dividends by 10% per year on average for 10 years in a row.
2012-04-09 Still, Plenty Good by Charles Lieberman of Advisors Capital Management
March payroll employment was disappointing, although economic gains cannot be expected to move in a smooth ascending growth curve. Economic trends remain solid. There is little reason to expect monetary policy to change, although the latest figures reinforce the Fed's concern that job growth is insufficient to reduce unemployment as much and as quickly as they would prefer. So, there's every reason to expect policy to remain highly accommodative. A few months ago, this employment report would have been taken as good news. That it is now disappointing is a good measure of how far we've come.
2012-04-09 The Global Debt Crisis by Gregory Hahn of Winthrop Capital Management
A major part of our investment thesis is that the developed countries in the world have too much debt relative to the size and historical growth rates of their economy. However, the costs of continued borrowing have risen as the amount of debt has increased. Furthermore, the economies of these developed countries are growing too slowly for revenues to offset the burden of increased expenditures. We expect that these countries will have significant difficulty reducing their debt burdens through continued stimulus initiatives as they attempt to inflate their economies.
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.
2012-04-09 Policy, Numbers and Markets. Still good. by Christian Thwaites of Sentinel Investments
Commentary continues to use pre-2008 data as a baseline, whether for economic data, household behavior or corporate prosperity. This is a mistake. We remain in a liquidity trap. This happens 1) when asset prices fall 2) the private sector delevers 3) credit demand becomes inelastic, i.e. immune to price 4) savings increase 5) income balances between the private, corporate, net export and government sectors distort and vi) the reluctant leakages destroy aggregate demand. Throw in higher credit standards and necessary re-regulation and you can see why austerity economics is the final bullet.
2012-04-09 An Update on U.S. Manufacturing by Team of Neuberger Berman
On April 2, the Institute for Supply Management reported that the ISM Manufacturing Index had increased to 53.4 in March from 52.4 in February, slightly ahead of consensus forecasts. Although this often-watched indicator has flirted with contraction territory (below 50) at different points throughout the economic recovery, it has now expanded for 32 consecutive months since August 2009 and continues to point to strengthening economic growth. Here, we discuss our expectations for the manufacturing sector and its potential impact on financial markets.
2012-04-07 It's All About Jobs by John Mauldin of Millennium Wave Advisors
Friday's employment numbers were decidedly soft, but the unemployment rate went down anyway, and that is about the best you can say. And this being a holiday weekend, it provides us an opportunity to look deep into the employment numbers, while we put off thinking about Spain for at least a week. And who knew that being an unmarried Asian-American in the US was a risk for unemployment? Plus a few other interesting items will make for an interesting letter.
2012-04-06 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.
2012-04-06 On Starting Out by Andrew Foster of Seafarer Capital
Judging from the headlines, it would seem an inauspicious time to start a company. The national rate of unemployment is high; the economy might have recovered from crisis, but growth is tepid, and confidence is low; myriad regulations and taxes supposedly stifle entrepreneurship; and our nation is deeply indebted. Many argue the country lacks the capacityand perhaps the willto invest properly in its own future. Whatever the case, it would not seem a particularly hospitable climate in which to launch a venture.
2012-04-05 Our National Debt Is Scarier Than You Think by Gary D. Halbert of Halbert Wealth Management
The US national debt stands at just over $15.6 trillion as compared to the $15.1 trillion gross domestic product in 2011. This means that our national debt is now 103.3% of GDP, a feat which has not happened in the Post-WWII era. To put $15.6 trillion into perspective, this means that every man, woman and child in America owes just over $50,000 toward the national debt. If we use an estimated budget deficit of $1.1 trillion for 2012, the national debt will have grown by just over $5 trillion in the last four years.
2012-04-05 A Centerless Euro Cannot Hold by Kenneth Rogoff of Project Syndicate
Europe may never be an optimum currency area by any standard. But, without further profound political and economic integration which may end up excluding some current eurozone members the euro may not make it even to the end of this decade.
2012-04-05 Calm After the Storm by Richard Michaud of New Frontier Advisors
The Fed has announced that it stands ready to promote economic growth with all the tools at its disposal. The Fed policy of low interest rates and cheap credit may still be needed to help the job market heal for some time to come. However, the inevitability of a rise in interest rates at a foreseeable point may encourage investors to avoid fixed income securities. The financial reality is that markets clear and prices depend on buyers as well as sellers. Time horizons and global forces are always considerations. The importance of diversification is always prudent for long-term investors.
2012-04-04 What Shall We Do with All Our New Natural Gas? by Team of American Century Investments
Youre probably aware of the revolution taking place in natural gas technology and supply. Horizontal drilling along with hydraulic fracturing has created the ability to capture huge quantities of natural gas trapped within large shale formations across the U.S. And so the United States is faced with an energy policy challenge and question not related to dealing with scarcity but instead what to do with this sudden windfall of new domestic energy. How we address this question will have important economic consequences for our various industries, employment and our economy overall.
2012-04-04 Kasriel's Parting Thoughts - Has the Fed Boosted the Stock Market? by Paul Kasriel of Northern Trust
The Feds actions have benefited the stock market as well as aggregate demand for goods and services in the U.S. economy. Would you have preferred that the Fed sit idle as it did in the early 1930s, with likely similar results for the stock market and the economy in recent years as occurred at that time? The Fed has simply provided some of the credit to the economy that the private MFI system would have had it not been crippled with loan losses. And even with the Feds additional credit creation, total MFI credit growth has fallen short of the long-run normal credit creation of private MFIs.
2012-04-04 Fed - Actions Speak Louder Than Words by Axel Merk of Merk Funds
The Fed has a credibility problem: having assured investors that rates will remain low for an extended period, it may only take one or two FOMC members to turn more optimistic about the economic outlook to cause the markets to more aggressively price-in tighter monetary policy. Conversely, Bernanke has made it clear that he is most concerned about a recovery in the housing market and that low interest rates throughout the yield curve are desirable. Operation Twist is specifically aimed to achieve that, lowering long-term rates and flattening the yield curve.
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.
2012-04-04 Time Heals All Wounds by Robert Stimpson of Oak Associates
The US stock market enjoyed a strong first quarter of 2012. Fueled by better economic data and a calming of fears over Europe, the stock market surged higher. For the first quarter, the S&P 500 rose 12.6%. Oak Associates accounts did much better, gaining on average more than 17%. The strongest performing sectors of the market were financials, technology, and consumer discretionary. These three groups are the most cyclical and their strong performance bodes well for a broader economic recovery through 2012.
2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)
When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.
2012-04-03 Good Quarter. More to Come. by Christian Thwaites of Sentinel Investments
Good week ending an even better quarter. We like this rally because i) large cap stocks were in line with small and mid, that means less speculative juice and more reality investing ii) GTs came unglued fast but iii) Baa spreads came in thanks to low net issuance and high demand, again crushing the crowding out theorists but, no matter, iv) Europe came back from the brink and fewer daily catastrophe headlines and v) the Fed gave plenty of information to not expect a policy reversal. This is solid stuff and markets feel better than this time in 2010 and 2011 when we saw spring sell offs.
2012-04-03 Have We Reached the End of the Rally? by Bob Doll of BlackRock Investment Management
Our overall view about the markets is that improvements in the global economic outlook, continued easy financial conditions and slowly improving investor risk appetites are all reasons that stock prices should continue to crawl higher. Markets have, however, paused somewhat in their rally over the last several weeks. This can be attributed to the fact that prices had risen so far so quickly and that markets were overdue for a period of consolidation or correction, but it is also important to emphasize that we will need to see further evidence of economic improvement for gains to continue.
2012-04-03 Five Undervalued Dividend Paying Retailers by Chuck Carnevale of F.A.S.T. Graphs
We believe the retail sector is currently a mixed bag where some of the best names are currently too pricey to buy. Retailers such as Costco (COST), Ross Stores (ROST) and T.J. Maxx (TJX) have seen their share prices skyrocket over the last year or so. On the other hand, not all leading retailers have followed suit even when their operating results have been comparable. We have identified five well-known and even leading retailers that offer attractive valuation, good dividend yields and the opportunity for double-digit total returns over the next five years.
2012-04-03 Disappointing Ending to a Great Quarter, No Reason to Alter our Bullish Stance by John Buckingham of AFAM
Though we were reminded the last couple of weeks that equity prices dont simply go straight up and we know that a 3% to 5% pullback is overdue, we remain optimistic about the long-term prospects for our broadly diversified portfolios of undervalued stocks. Our rationale remains unchanged. Economic data has been improving (Q4 GDP Growth came in at 3.0%, while Gross Domestic Income increased 4.4%). Valuations are generally not rich, especially considering the incredibly low interest rate environment and the strength of corporate balance sheets.
2012-04-03 Risk On by Jim Tillar, Steve Wenstrup and Tim Roesch of Tillar-Wenstrup Advisors
Overall both risk and return seem muted until something in the current environment changes. As long as yields on assets like bonds and cash remain low, it is hard for stock markets to collapse. But those yields are so low because central banks are frightened about the economic outlook which makes it very hard for a bull run to be sustained. While there has been improvement is some areas of the economy some are struggling to grow beyond previous levels.
2012-04-03 Christine Lagarde: Emerging Market Nations Will Get More Power in the IMF by Team of Knowledge @ Wharton
Christine Lagarde, managing director of the IMF, sees no alternative to the strict austerity policies being imposed on many peripheral European countries, says the double dip recessions in Italy and Ireland just announced come as no surprise, and notes that IMF reforms will shift 6% of current quotas to dynamic emerging and developing countries. Lagarde's comments came in an exclusive interview with Knowledge@Wharton and media partner ParisTech Review late last week, as BRIC countries demanded more voting power in return for the larger financial contributions being requested by the IMF.
2012-04-03 Have Investors Moved Past Europe? by Chris Maxey of Fortigent
At the end of 2011, the Long-Term Refinancing Operation brought a modicum of stability to financial markets in Europe.When coupled with the orderly default of Greece, the situation in Europe is seemingly on a road to more pleasant ground. Just as soon as investors place Europe in their periphery, however, problems once again begin bubbling to the surface.In recent weeks, the spotlight has turned to Spain, where unemployment is near 24% and the government is expected to run a 5.9% budget deficit for 2012.
2012-04-02 It's All Data (Jobs) Dependent by Charles Lieberman of Advisors Capital Management
The performance of the economy has improved quite substantially over the past several months, with very significant implications for policy and politics. A healthier labor market is sufficient to insure a healthier economy, which supports the rally in the stock market, the decline in bond prices, and the rise of President Obama in the polls. Numerous issues will affect the political polls in the coming months, but the outlook for the economy remains one of continued improvement.
2012-04-02 Shrugging Off Bad News! by Jeffrey Saut of Raymond James Equity Research
March came in like a bear, but went out like a bull, capping the best first quarter since 1998. For the quarter the SPX gained 11.99% for its 10th best start of the year ever. For me it was almost like dj vu as I recalled the best first quarter of my lifetime, which was 1975s surge of 21.59%. Why dj vu? Well, it is because I began writing strategy In November of 1974 with the line, I believe now is the time to accumulate stocks. At the time the Dow was trading below 600, having fallen from its March high of 891 for a 34% decline.
2012-04-02 Better News On Consumer Spending, But ... by Scott Brown of Raymond James Equity Research
The monthly report on personal income and spending rarely gets much interest from the financial markets. However, the spending figures are a direct part of the governments GDP calculation. The latest numbers (through February) paint a much brighter picture than they did a month ago. While the outlook has improved from a month ago, its not enough for most Fed policymakers. It will take much more substantial economic growth to undo fully the recessions damage to the labor market. QE3 is still seen as unlikely, but its not off the table completely.
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.
2012-04-02 The Manufacturing Renaissance by Kristina Hooper of Allianz Global Investors
While unemployment remains elevated, the U.S. manufacturing sector has quietly staged a dramatic turnaround, one that could be a pillar of support for the economic recovery. Jobs shipped overseas decades ago are now returning home. Productivity has grown significantly thanks to advances in technology and favorable exchange rates with Americas trading partners. The cost of labor per output in the United States has decreased. Manufacturing in this country may never return to its golden years, but it is certainly experiencing a rebirth of sorts.
2012-04-02 Too Little to Lock In by John P. Hussman of Hussman Funds
At present, investors have no reasonable incentive at all to "lock in" the prospective returns implied by current prices of stocks or long-term bonds.
2012-03-31 All Spain All the Time by John Mauldin of Millennium Wave Advisors
The events of the last 24 hours compel me to once again look "across the pond" at the problems that not only plague Europe but will be a drag on world growth as well, as Europe goes through its continued painful adjustment as a consequence of trying to adopt a single currency. Since Spain is going to be on the front page for some time, it will be useful to look at some of the problems it is facing, to put it all into context. And what I heard while in Europe in private meetings is troubling.
2012-03-30 Stocks, Bonds, and the Efficacy of Global Dividends by Ehren Stanhope, CFA of O'Shaughnessey Asset management
First, we look at the prospects for the two assets classes that comprise a majority of investors portfolios: stocks and bonds. Second, we review one of the most tried-and-true investment strategies that has been a part of the investment lexicon since the beginning of the modern investment era: dividends. But we do so with a caveat global dividends. Finally, we review the results of two strategies back to 1977 to demonstrate the applicability of our approach. We think you will find the results both eye opening and compelling.
2012-03-30 ProVise Bullets by Team of ProVise Management Group
It seems all investors have dividends on their brains these days. Apparently this is also true of corporate boards. Even Apple, which during the second Steve Jobs era did not pay a dividend, decided to use some of its $97 billion of cash for a stock buy-back and for a dividend. Based on a $600 share price, the yield would be approximately 1.8% when it begins paying its $2.65 quarterly per share dividend. The first payment will begin July 1st. The dividend amounts to about $9 billion per year, which is the second largest dividend payment, behind AT&Ts $14 billion.
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.
2012-03-29 China's Gravity-defying Economy: How Hard Will It Fall? by Team of Knowledge @ Wharton
As China's high-octane economy shifts into lower gear, virtually everyone agrees that the double-digit, super-charged boom years are drawing to a close. Speculation over the possibility of a so-called "hard landing" for the country flourishes with each boom and bust cycle, only to die down as China's growth revs up again. This time, however, both external and internal factors -- including global conditions, domestic politics and financial trends -- are reinforcing the downturn. Many experts warn that without some painful reforms, there will be worse trouble to come.
2012-03-29 To QE or Not to QE by Tony Crescenzi of PIMCO
If the Fed does nothing, asset prices could fall, threatening Americas fragile economic recovery. But if the Fed decides to battle the forces of deleveraging, it could commit a classic error by acting during a turning point and thereby doing too much. During Operation Twist, the Fed will absorb the equivalent of all of the issuance of U.S. Treasury securities maturing beyond seven years. When Operation Twist ends, global investors will be left to shoulder the burden.
2012-03-28 Are You Going to the Doctor Less? by Harlan Sonderling of Columbia Management
Throughout 2011, the healthcare sector saw another year of reduced medical consumption, measured by doctor visits, hospitalizations, elective surgeries and more use of generic pharmaceuticals over branded products. This led to better earnings for managed care companies (payers) and lower earnings for hospitals and device companies (providers). So far, 2012 looks to be similar, but investors are watching carefully indicators like gross domestic product and employment growth and procedure and pharmaceutical volumes for signs of an uptick in utilization (unit consumption) and trend (price).
2012-03-27 GMO: Two Questions We Can't Answer by Robert Huebscher (Article)
Its reputation was built on stellar returns achieved with long-term bets on undervalued asset classes. Current market conditions, however, pose two unanswerable questions for GMO – leaving the firm with an uncertain strategy for its equities and fixed-income allocations.
2012-03-27 Our Current Perspective on the Global Economic Outlook by American Century Investments (Article)
As we proceed through the first quarter of 2012, the U.S. economy continues to drift— not in recession, but far from the level of growth and dynamism we would like to have. Meanwhile, global economic growth has slowed as the world anticipates a solution to the European sovereign debt crisis. In short, we are in a period of uncertainty, not only about how key events will unfold, but about the timing associated with their future progress and resolution.
2012-03-27 One Year Into the Arab Spring by James A. Pressler of Northern Trust
The last three months marked the first anniversary of events considered unthinkable before 2010. The past year saw the outbreak of protests throughout Tunisia, Egypt, Bahrain and beyond; an outbreak of democracy not imported from the industrialized powers but home-grown. And as each dictatorship fell, onlookers checked off another successful transformation from the Arab Spring. Such waves of change felt as unstoppable as they were inevitable, and a feeling emerged that it was only a matter of time before the Middle East/North Africa (MENA) region stepped into the third era of Arab awakening.
2012-03-27 The Economic Backstop: The Consumer by Matt Lloyd of Advisors Asset Management
As we near the summer, if you listen close you might hear the anticipation of yet another macro shock to stall out the equity market gains. Over the last couple of years, the risk of a domestic double-dip recession, natural disasters, public political debates and European sovereign debt crises have all had the effect of stalling out positive momentum gained in the first quarter. Through April of last year, the S&P 500 showed a total return of 9.05%. However, by the end of September it was at negative 8.67% including dividends and thus rebounded to show total return of 2.11% by year end.
2012-03-27 Buy Commodities, Sell Brands by Bill Smead of Smead Capital Management
Warren Buffett was quoted the other day saying, We like companies which buy a commodity and sell a brand. We thought it would be very helpful to unpack his thought and put it into the context of today. We believe these current circumstances are framed by the historical over-pricing of commodities, the coming economic contraction of China, the successful cleansing of the income statements of US households and the inevitable rebound in housing in the US. We will look at the makeup of our portfolio companies which buy a commodity and sell a brand to consider their upside in this environment.
2012-03-26 Monthly Investment Commentary by Team of Litman Gregory
We recently spoke with portfolio managers from two fund management teamsChris Davis and Ken Feinberg of Clipper and Selected American Shares, and Pat English of FMIwho have historically exhibited different views toward banks and financial services firms. In addition to providing insight on current risks and opportunities in the financial sector, the interview touches on a number of topical subjects including the Federal Reserve, the European debt situation, and the housing market.
2012-03-26 Heard the One About a "Fiscal Cliff"? by Brian S. Wesbury and Robert Stein of First Trust Advisors
For three years the market has suffered from a severe case of economic hypochondria. Headline after headline proclaimed that this time, for sure, the recession would return. All of these have come and goneand yet the recovery is three years old. Now, some doomsayers are pointing ahead to a fiscal cliff in 2013. Bottom line: expect to hear more about the fiscal cliff for the next several months. Then, when it doesnt cause a recession, youll never hear about it again.
2012-03-26 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks were subdued last week, as concerns about the growth prospects of the economy overtook the recent trend in the media to portray everything as being on the upswing. As the charts above illustrate, the Dow Jones Industrial Average fell by 1.2% while the NASDAQ Composite held forth with a marginal gain for the week.
2012-03-26 Postcards from the Edge: Central Banking in the Age of Policy Extremes by David Kelly, David M. Lebovitz and Brandon D. Odenath of J.P. Morgan Funds
Major developed world central banks have taken extraordinary action over the last few years, leaving us in uncharted territory, close to the edge with little experience or history to rely on. The move to todays extremes was forced by the impotence of conventional monetary policy tools, as well as the breadth and depth of the crisis-causing issues. Uncertainty about the probabilities and range of possible outcomes resulting from current extremes has, and will, impact both capital markets and decision making in the real economy.
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 A Random Walk Through the Data Minefields by John Mauldin of Millennium Wave Advisors
We are once again to a point in Europe where there are no good choices, only very bad ones. But this time it is with a country that actually makes a difference. (No slight intended to Greece, but you are just small.) Spain has no good way to cut its deficit without things getting worse. But Europe must be willing to then fund Spanish debt, even if "only" through more LTRO actions by the ECB.
2012-03-23 Preferred Securities - February 2012 Review and Outlook by Team of Cohen & Steers
We are encouraged by the trajectory of U.S. economic data and credit trends, as well as positive developments in Europe that have somewhat brightened the outlook for risk assets. However, we are closely monitoring various macro risks that could weigh on the global economic recovery, including a recession in Europe, high oil prices and slowing growth in China. Our portfolio remains more heavily weighted towards domestic issuers and is somewhat conservative relative to credit. That said, we continue to add to certain European issues and other higher-beta securities.
2012-03-23 International Real Estate Securities- Investment Review & Outlook - February 2012 by Team of Cohen & Steers
International real estate securities added to their year-to-date gains in February, although the pace of the rally moderated. Most markets in Europe and Asia Pacific continued to benefit from the retreat of macro risk concerns. Europes difficult grapple with its fiscal crises has made for a negative macroeconomic backdrop, and we expect a moderate recession as a base-case scenario for the region. Given this environment, we seek to invest in companies that are best able to shield themselves from the most adverse effects of slowing economies and a general deleveraging.
2012-03-23 U.S. Real Estate Securities - February 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data showing measured improvement, including solid employment gains, as well as positive developments in Europe that have somewhat brightened the outlook for risk assets globally. With funding costs likely to remain low and demand showing signs of strengthening, we believe U.S. real estate fundamentals will continue to gradually improve in 2012, supported by a scarcity of new supply in most markets.
2012-03-23 Europe Investment Review & Outlook February 2012 by Team of Cohen & Steers
Europes difficult grapple with its fiscal crises has made for a negative macroeconomic backdrop, and we expect a moderate recession as a base-case scenario for the region. The recent LTRO facilities have prevented a severe credit crunch and collapse of the EU banking system. However, we take the view that this three-year program merely buys time to sort out the overleveraged balance sheets of most EU banks; it does not solve the long-term solvency crisis facing Greece and possibly Portugal.
2012-03-23 Global Real Estate Securities Investment Review and Outlook February 2012 by Team of Cohen & Steers
Global real estate securities added to their year-to-date gains in February, although the pace of the rally moderated. Most markets in Europe and Asia Pacific continued to benefit from the retreat of macro risk concerns. U.S. REITs, which advanced in 2011 while other regions struggled, had a modest decline.
2012-03-23 Regressing to the Mean Asset Values Returning to Low Correlations by Robert Stein of Astor Asset Management
Asset values are finally marching, once again, to the beat of their own drummers. This is a welcome change of tune. Among the many investing challenges of the past few yearsbeyond the aftermath of a near-meltdown of the financial system and a global economy that went into a deep recessionwas the high degree of correlation among different assets. Assets moved in tandem, whether in lockstep or with inverse moves, based largely on risk on/risk off investment decisions. Concerned about Europe? Sell stocks, buy bonds. Think the EU ministers will reach a deal? Buy stocks, sell bonds.
2012-03-23 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.
2012-03-23 The Republican Budget Proposal: Reading the Tea Leaves by Russ Koesterich of iShares Blog
While budget plans from Republicans and Democrats are generally at odds, the differences between the parties current proposals are particularly stark and provide evidence for Russ forecast for the global market this year: Two quarters of sun, followed by a chance of severe thunderstorms in the fourth quarter.
2012-03-23 Where is the Unemployment Rate Headed? by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I have a pretty cool interactive map below that will let you graph the unemployment rates based on parameters that you can choose. First let's take a look at the current unemployment rate and a discussion of the parameters that define it.
2012-03-22 The American Recovery by Mohamed A. El-Erian of Project Syndicate
The US has gone through an arduous period of intervention and rehabilitation since the global financial crisis in 2008 sent it to the economic equivalent of the emergency room. The question now is whether the US economy is ready not just to walk, but also to run and sprint.
2012-03-22 Explaining the Stir over Recent Fed-Speak by Team of American Century Investments
The official statement from the Federal Reserves March 13 interest rate policy committee meeting was relatively ho-hum (no significant changes from Januarys statement), but other recent Fed communications have raised more of a stir. In particular, we explain what fiscal cliff and sterilized QE mean, and help put them into context. Its all part of a mixed, uncertain economic outlook in which slower mid-year growth, like last year, cant be ruled out, but higher inflation by next year is also a possibility.
2012-03-21 Trade Rains on the Jobs Parade by Peter Schiff of Euro Pacific Capital
Back in the late 1980s, when annual trade and budget deficits were but a small fraction of today's levels, the markets were rightly concerned about America's ability to sustain its twin deficits. This anxiety helped lead to the stock market crash of 1987. More recently, large and persistent trade deficits were a significant factor in building the imbalances that caused the U.S. economy to implode in 2008. But in recent years, most Americans have lost their concern with gaping trade deficits. I believe it will soon come back with a vengeance.
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 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-20 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 A Turning Point by Christian Thwaites of Sentinel Investments
Bottom Line: Bonds are now outside of the recent range, especially in the 30-year. We could see another 10bp retrace to 3.50%. Equities have had a good run but still have reasonable valuations. New money goes to IG bonds. Spreads are approaching their long-term mean but demand from natural buyers is high.
2012-03-20 An Actively Passive Debate by Chris Maxey of Fortigent
The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.
2012-03-20 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.
2012-03-19 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 Did You See The 10-Year? by John Petrides of Advisors Capital Management
This week the US 10 year Treasury note spiked from 2% yield on Monday to 2.4% by the end of Wednesday. Around the office we were marveling at this move. Given the recent volatility in the equity market, that might not seem like much to stock investors, but to those in the fixed income world thats quite a change. The sudden spike in Treasuries has several implications: 1. Those investors who rushed into U.S. Treasuries over the past four months out of fear and panic (presumably not in hopes of achieving income) in search of safety, actually have an unrealized loss in their position!
2012-03-19 Stocks: More Room to Run by Bob Doll of BlackRock Investment Management
While it is important to remain cognizant of the risks facing the markets, our overall view toward stocks remains constructive. Since the current rally began last autumn, we have seen some market pullbacks, but they have been brief and shallow, likely because many investors remain underweight equities and have been using pullbacks to buy on price dips. Now that bond prices are falling, we believe investors as a whole will finally begin to move out of Treasuries and into stocks. As such, as long as the macro fundamentals remain reasonably good, we believe equities should grind higher from here.
2012-03-17 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors
We will look at why employment is so critical. How are jobs created and what policies can be adopted to help foster more jobs? Should the US try and keep jobs that are going overseas, or develop whole new industries? Who exactly is the competition globally for jobs?
2012-03-16 Far From Normal by Team of Dana Investment Advisors
Economists say that if we can sustain the current rate of job creation, we will need two more years to get the unemployment rate under 7%. Ben Bernanke at the Fed is still concerned that the job market is far from normal. As a result, you can expect the Fed to make no changes in their accommodative stance of near zero interest rates. Their goal is to control inflation while seeking lower unemployment.
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 The Real Debate: Preservation of Capital vs. Preservation of Purchasing Power by Chris Clark of The Royce Funds
Investments in high-quality companies that have embedded pricing power and high returns on their invested capital look to us to be some of the best investments to protect and grow purchasing power, and we believe they need much broader representation in investors' asset allocation. We think that the period of exclusively focusing on the preservation of capital has passed and that now is the time to be focused on the preservation of future purchasing power.
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 ProVise Bullets by Team of ProVise Management Group
Lets take a few moments to talk about GDP, the economy in general, and investor psychology. the GDP figures for the fourth quarter were revised from 2.8% to 3%. This marks the tenth consecutive quarter of growth, and given everything we know at this point its likely that the first quarter of 2012 will also reflect growth. In other words, we will have 11 consecutive quarters of growth. Fortunately the concept of a double dip recession has faded. Make no mistakethere will be another recession at some time in the future, but it will clearly not be a double dip recession.
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 Two Important Steps for the Economy by Greg Hahn of Winthrop Capital Management
The FOMC released a statement which showed a more positive tone from prior meetings. However, it is clear the Fed will continue to maintain a highly accommodative stance as they see downside risks to economic growth continuing to outweigh the upside risks to inflation. The Feds economic assessment differed from the last several meetings, in two important ways. First, the FOMC acknowledged recent improvements in the labor markets and forecast continued improvement in the jobs market with declines in the unemployment rate. The Second Step toward Progress is a Healthier U.S. Banking System
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 Stress Tests No Sweat by Peter Schiff of Euro Pacific Capital
The Federal Reserve ran another "stress test" on major financial institutions and has determined that 15 of the 19 tested are safe, even in the most extreme circumstances: an unemployment rate of 13%, a 50% decline in stock prices, and a further 21% decline in housing prices. The problem is that the most important factor that will determine these banks' long-term viability was purposefully overlooked - interest rates.
2012-03-15 Why Our Recession Call Stands by Lakshman Achuthan and Anirvan Banerji of ECRI
Many have questioned why, in the face of improving economic data, ECRI has maintained its recession call. The straight answer is that the objective economic indicators we monitor, including those we make public, give us no other choice.
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.
2012-03-15 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market continued to meander last week as concerns over Greece have now been replaced by a growing consensus that growth in the United States is slowing.
For the week the stock market was mixed as indicated by the above charts.
The Dow Jones Industrial Average declined slightly
while the NASDAQ Composite gained slightly on the week.
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 No QE3 Yippee! by Liz Ann Sonders of Charles Schwab
The Fed made no major changes to its policy statement and announced a continuation of Operation Twist, but did not hint at or announce further quantitative easing.
The Fed's assessment of the economy did improve somewhat.
Richmond Fed President Lacker's dissent and Dallas Fed President Fisher's pronouncements ring true.
2012-03-13 Employment Outlook Weather and Gasoline by Scott Brown of Raymond James Equity Research
Nonfarm payrolls rose more than expected in February, with an upward revision to figures for December and January. The job market figures have been strong. However, an unusually mild winter has certainly had an impact. Its difficult to isolate the effect of mild weather. The labor market is definitely improving, but recent figures may be somewhat exaggerated. Mild winter weather may pull forward some seasonal gains that would have otherwise occurred in March and April. In addition, higher gasoline prices threaten to dampen the pace of improvement in the near term.
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.
2012-03-13 Will he? Won't he? by Christian Thwaites of Sentinel Investments
Will oil prices hurt the economy? No Recent good news on the economy has come with warnings of possible demand destruction from higher oil. First, lets stress that QE does not cause higher oil prices. There are too many iterations between increasing bank reserves and the trading firepower needed to drive spot oil prices sharply higher. And while we have seen an increase since September, we're no higher than a year ago. During that time economic prospects dimmed then brightened MENA troubles flared, receded and then grew, and Asian demand steadily rose. But there are reasons to be sanguine.
2012-03-13 Economic Update by Mark Oelschlager of Oak Associates
As one might expect after a near-doubling of the market in three years, investor sentiment, by many measures, is much more positive these days. These psychology indicators had reached worrisome levels (too much optimism often augurs below-average stock returns) a few weeks ago but have since come in a bit, which is healthy. The recent bullishness is hard to square though with the general anxiety individuals still have toward stocks. While some are returning to the market, many are still spooked by the volatility of recent years.
2012-03-13 Another Country in Europe to Avoid by Russ Koesterich of iShares Blog
Russ recently advocated that investors avoid Spain and Italy, markets that are cheap for a reason. Now, hes adding the United Kingdom to the list of European markets to consider underweighting -- a country that has its own issues separate from those of the euro zone.
2012-03-13 Checking In With the Municipal Market by Team of Neuberger Berman
In 2011, many investors appeared concerned about the potential for widespread defaults in the U.S. municipal bond marketsomething that failed to materialize. Now, we check in with the municipal markets and find that the outlook is greatly improved; however, in the wake of recent robust performance, it may also be a good time to exert some caution.
2012-03-13 The Strategic Times: What is the Yield Curve Saying and Should We be Listening? by Matt Lloyd of Advisors Asset Management
Many prognosticators continue to discount the shape of the yield curve and what bits of wisdom one might see in its steepness or flatness. Though not a perfect indicator from the past, it does represent some interesting expectations from institutional investors that should not go unaddressed. Though these numbers may not appear meaningful to the average investor, the institutional investor sees this as highly significant as it pertains to investor appetite, economic impacts and hedging of interest rate swaps and currency expectations.
2012-03-12 Do I Feel Lucky? by John P. Hussman of Hussman Funds
It seems to me that before entirely disregarding evidence that is as rare as it is ominous, you have to ask yourself one question. Do I feel lucky?
2012-03-12 An Overweight to Stocks Is Still Warranted by Bob Doll of BlackRock Investment Management
We believe the macro environment remains equity-friendly and we would argue that it still makes sense to retain overweight positions in stocks. The economic expansion should continue, inflation remains muted and central banks around the world are hyper-focused on maintaining easy monetary policy. Add to this backdrop the fact that stock valuations remain attractive, and the case for sticking with stocks gains strength.
2012-03-12 The Bears' Five Stages of Grief by Brian S. Wesbury and Robert Stein of First Trust Advisors
The economic bears have had it rough the past few years. They keep bashing the economy, but it keeps recovering. Watching them fight through the five stages of grief is educational. First there was denial, then anger (some are still in this stage), now its bargaining.
2012-03-12 Are the Jobless a Coiled Spring? by Kristina Hooper of Allianz Global Investors
Putting pink-slipped workers back on the job could provide a big boost to the U.S. economy. But while the recent steady job growth we have seen has fueled optimism that the pace of the recovery is quickening, market watchers may be ignoring a red flag. There is still a high percentage of unemployed people who have been out of the work force for 27 weeks or more. Yet repressed spending for such a prolonged period could be a coiled spring that could deploy with some force as they return to the work force. Why unemployment may be a short-term hurdle and a long-term catalyst for the economy.
2012-03-10 There Will Be Contagion by John Mauldin of Millennium Wave Advisors
The headlines are about Greece, but the real story is not Greece but who is next. European leaders were right to be worried only a short while ago about contagion effects of a Greek default to the entire Euro system, which of course they now say doesn't exist. This week we look at Europe, and sort through the ever more fascinating implications of the news in today's headlines.
2012-03-09 Economic Update - March 2012 by Team of Cambridge Advisors
We continue to deal with the added risk to the global economic system caused by the high degree of debt that exists throughout the developed world. A spirit of cooperation in Europe helped to put those concerns on the back burner in February. Solutions for Greece have been announced however, these are not permanent solutions and the problems go much further than Greece. We expect more turbulence from sovereign debt problems to reemerge in coming months.
2012-03-09 ECRI's Weekly Leading Index Improves (Slightly) Yet Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -2.6 in today's public release of the data through March 9th. This is the eighth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, increasing from an adjusted 124.1 to 124.3 (see the third chart below). Here again is a recent media appearance by Lakshman Achuthan, the Co-founder of ECRI, defending ECRI's recession call on with CNNMoney.
2012-03-09 The Road to Hades Is Paved with Partisan Politics by Gregory Yencharis of Neuberger Berman
Over the last year, we have become more guarded on GARVEE bonds based on changing dynamics in the municipal market that have been driven largely by fiscal pressure and dysfunctional Washington politics. In this piece, we discuss why our views have changed and the assumptions we use in our proprietary stress test model that help the Neuberger Berman Municipal Research Team avoid potentially problematic bonds.
2012-03-09 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 Of Tulips and Treasuries. Treasuries Securities Entering Bubble Zone. by Scott Colyer of Advisors Asset Management
U.S. Treasury securities could take their place alongside other bubble assets like tulip bulbs did in the 1630s. There are signs of a secular change afoot in the U.S. Treasury market as rates set historic lows. The U.S. Treasury market is indeed a crowded market as Euro-singed capital is being tucked behind the ultimate safety of the U.S. obligations. Add to that the Feds own record setting buying binge in these securities and you have an asset that may have well crossed the line of what its long-term value could possibly be.
2012-03-08 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 And Thats The Week That Was by Ron Brounes of Brounes & Associates
New week; same old story. EU ministers continue debating the Greek bailout package which should (hopefully) come to resolution next week. Unemployment highlights a busy economic calendar as investors look to see how the solid weekly jobless claims releases translate into the key labor rate and nonfarm payroll data. Bring on Super Tuesday, right Mitt?
2012-03-08 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks continued to mark time last week as concerns increased over slowing global growth and rising international tensions as evidenced by the price of oil. All in all though, the combination of low interest rates, high profit growth and rising dividends all combine to support stock prices and continue to make
the stock market virtually the only investment game in town. As the charts above illustrate, the Dow Jones Industrial Average was flat last week, while the NASDAQ Composite (aided by Apple) moved fractionally higher.
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.
2012-03-07 The Truth Behind High Gasoline Prices by Gary D. Halbert of Halbert Wealth Management
While the latest report on 4Q GDP came in a bit better than expected, most economists agree that growth in 2012 will not be as good as the 4Q of last year. Following that, we look at some remarks from Fed Chairman Ben Bernanke in his recent Senate testimony. While he defended quantitative easing, it doesnt sound like the Fed is going to do QE3 anytime soon.
2012-03-06 More Mixed by Scott Brown of Raymond James Equity Research
The economic data reports have become more mixed. Growth is rarely even across time and industries, but the stock market often has a hard time with conflicting evidence. For Mr. Market, the economy has to be either booming or falling apart completely. Mild winter weather has clearly been a factor in the last few months, but unusual weather often merely shifts growth from one quarter to another. Last year, the economic gears were starting to catch, but gasoline rose from around $3 per gallon at the beginning of the year to $4 per gallon in early May. Are we in for a repeat?
2012-03-06 Street Smarts by Jeffrey Saut of Raymond James Equity Research
While I remain cautious (not bearish) there are still things to do. For example, I continue to like the strategy of looking at companies whose share price has collapsed for a one-off event. Recall, this was the case with Acme Packet (APKT/$30.26/Strong Buy) back in January, where in our analysts view the stock swoon had taken a lot of the price risk out of the equation. A similar sequence occurred last week with Vocus (VOCS/$13.52/Strong Buy), where our fundamental analyst maintains his positive view.
2012-03-06 Fed Takes 'Goldilocks' Approach to Tepid Economy by Kristina Hooper of Allianz Global Investors
Ben Bernanke's not-too-hot, but not-too-cold outlook spells low rates through 2014, but there's no QE3 in sight. He cautioned that while the unemployment rate has decreased faster than the Fed anticipated over the last year, the job market remains far from normal. Despite a more optimistic consumer outlook, investors have largely stayed on the sidelines. This is where the Fed's Goldilocks approach to monetary policy should prove beneficial.This level of certainty highlights certain truths that will help investors make better decisions. Investors will be punished for being savers.
2012-03-06 Continued Struggle Between Borrowing and Lending by Chris Maxey of Fortigent
Nonfarm payrolls and the unemployment rate headline the weeks economic data. Consensus expects another 200K+ gain in payrolls and no change in the unemployment rate. Other major economic data of note includes the ISM Non-Manufacturing index and the US trade balance. Abroad, there are important releases on tap including Q4 EU GDP and EU retail sales. Both the ECB and Bank of England meet this week, but neither is expected to adjust their key interest rates. Other central banks meeting include Russia, Australia, Brazil, Poland, New Zealand, Indonesia, South Korea, Canada, Peru, and Malaysia.
2012-03-06 Big Headlines...Not Much Action by Christian Thwaites of Sentinel Investments
Bottom Line: Volume: There's still no major conviction in the rally. Too many cautious investors out there keeping a wary eye on their gains. Russell 2000: has broken down recently; the mega caps have overshadowed it. Employment: Still the most sensitive number. Anything above 150,000 is fine but confidence will be shaken if it's much below. AAPL: The most over-owned stock in the market and accounted for about 20% of February gains. The Fed is sticking to its script: and with the growth numbers, this means that GT10s are likely to remain exactly where they are today.
2012-03-06 Fiscal Fantasies by Marie Schofield of Columbia Management
The Congressional Budget Office (CBO) just released updated budget and economic projections for the next 10 years in its monster annual report. The report looks a touch closer to reality in the very near-term, marking down expected growth rates for the economy. Real gross domestic product (GDP) growth of 2% is forecast this year (down from the original estimate of 2.7%), and only 1.1% in 2013 (down from 1.5%). Both these estimates are below those of the Federal Reserve by a third. Much rosier projections are assumed thereafter with no interruption via recession.
2012-03-05 Warning: A New Who's Who of Awful Times to Invest by John P. Hussman of Hussman Funds
Last week, the estimated return/risk profile of the S&P 500 fell to the worst 2.5% of all observations in history on our measures. This is not a runaway bull market. Rather, it is a market that again stands near the highs of an extended but volatile trading range. Importantly, the market is again characterized by an extreme set of conditions that we've previously associated with a Who's Who of Awful Times to Invest.
2012-03-05 Sound Fundamentals, Scary Geopolitics by Charles Lieberman of Advisors Capital Management
Data revisions indicate that household income grew more strongly than reported earlier, so consumers are far better able to sustain growth in spending, particularly as job gains are also increasing. Housing is recovering too, adding a new source of demand to the economy. Thus, the economic underpinnings to growth appear distinctly healthier. At the same time, the threat of conflict in the Middle East has pushed up oil prices, which eats into disposable household income. An actual conflict would chill discretionary spending, at least temporarily.
2012-03-05 Investors Are Skeptical, and Pace of Gains Slows by Bob Doll of BlackRock Investment Management
Even with the S&P setting new post-crisis highs, we don't think stocks are ahead of themselves. While we may not be pricing in a recession like we did last October, markets are in the same place as last April but earnings are up nearly 15%. The October market bottom also seemed to have technical characteristics of an important low. While there remain plenty of problems, including rising oil prices and profit margins at very high levels, we recommend overweighting equities. For investors that are underweight equities, we recommend continuing to dollar-cost-average to increase exposure.
2012-03-03 Unintended Consequence by John Mauldin of Millennium Wave Advisors
This week we wonder about the consequences of the European Central Bank (ECB) issuing over 1 trillion in short-term loans to try and postpone a banking credit crisis and lower sovereign debt costs for certain peripheral countries in Europe. What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely? That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.
2012-03-02 Will the Bond Bubble Burst This Year? by Gary D. Halbert of Halbert Wealth Management
I dont know who first uttered this classic line The trend is your friend (until its not) but it is timeless. It seems especially appropriate today in light of the massive shift weve seen from stocks to bonds since the financial crisis and bear market of 2008-early 2009. Millions of investors have moved from stocks to bonds and consider themselves safe. Today, there are more people invested in US bonds (of all types) than ever before.
2012-03-02 Fed Done: So Is Gold by Brian S. Wesbury of First Trust Advisors
The bottom line is that even though Bernanke wants to make the case for QE3, he cant.In fact, better news on the economy has cut the Fed off from doing more massive easing projects.In the end, we believe the Fed has finally run out of justification for its excessively easy monetary policy.As the quarters ahead unfold, the prospects of more ease will continue to wane.This is good news for stocks which do not do well with accelerating inflation but, it is bad news for gold.Gold is done.and so is the Fed.
2012-03-02 ECRI Continues to Defend its Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.0 in today's public release of the data through February 24th. This is the seventh consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 19th of last year. The underlying WLI also improved, incresing from an adjusted 123.1 to 124.2 (see the third chart below).
2012-03-02 TARGET2: A Channel for Europe's Capital Flight by Andrew Bosomworth of PIMCO
The Eurosystem's TARGET2 transaction system introduces elements of fiscal union via the back door. The large TARGET 2 positions developing among national central banks in the eurozone reflect capital flight from the periphery to the core and de facto introduce transfer and burden sharing elements of a common fiscal policy. Monetary policy ends up substituting for fiscal policy without going through the same democratic channels that governments' expenditure and taxation decisions entail. Taxpayers in the eurozone are contingently liable for losses incurred by monetary policy operations.
2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors
We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.
2012-03-01 ProVise Bullets by Team of ProVise Management Group
When helping people with retirement and cash flow planning, we often have some detailed conversations concerning the costs of health care. Some retirees have a misconception that somehow, because of Medicare, things are free. Anyone who is a part of Medicare knows that is simply not the case. Not only do you pay premiums for Parts B and D, but there are some significant co-payments and deductibles attributable to Medicare, as well. Health care costs are estimated to be over $325,000 over the course of retirement for a 65 year old couple.
2012-03-01 Waiting for Eighty by Doug MacKay and Bill Hoover of Broadleaf Partners
A significant shift in investor psychology is underway after many years of prolonged and painful drought. Just as a stronger economy engenders hope about the future, it also has the benefit of smothering the noxious fumes of political division. The biggest risk to the economy right now may be rising gas prices. At the same time when gas prices were at similar levels last year, mortgage rates were higher, consumer confidence was much lower, and employment trends were moving in the wrong direction. Can the United States reassert its leadership in the global economy? We believe it is and it can.
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 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 Woody Brock on Healthcare Reform and Trade Relations with China by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In the second part of this two-part interview, he discusses his recently published book, American Gridlock, and focuses on how to fix two of our nation's most pressing problems: the crisis in health care - made worse by ObamaCare - and our trade relations with China.
2012-02-28 Globalization: Its Saboteurs and Its Chicken Littles by Michael Edesess (Article)
The word 'globalization' provokes both excitement and fear. The excitement has sold millions of Tom Friedman books and turned a drab annual business conference, the World Economic Forum, into one of the hottest events of the year. It is front-and-center in recent tensions between the U.S. and China, and makes the European Union's economic crisis a concern for the whole world. Should we fear or embrace globalization?
2012-02-28 ARRA, Three Years On by Scott Brown of Raymond James Equity Research
The American Recovery and Reinvestment Act of 2009 was signed into law on February 17, 2009. Did it help? Yes, but estimates of the impact vary. Before Barack Obama took office, he selected Christina Romer to be the chair of the Council of Economic Advisors. Romer, a professor of economics at the University of California, Berkeley and an expert on the Great Depression, is exactly the sort of person youd want advice from in combating a severe recession. Its long been rumored that Romer had requested a significantly larger stimulus package than the roughly $800 billion in ARRA.
2012-02-28 The Big Picture Through a Small-Cap Lens by Kristina Hooper of Allianz Global Investors
Things are looking up for investors as a recovery in the job market and a rosier consumer outlook have helped fuel optimism. But spiking oil prices could spoil the party in the short run. A look at small-cap stocks may offer perspective. The rally, Oct. 4 - Feb. 23, has seen the Russell 2000 jump 37%, well ahead of both the Russell Mid-Cap and the Russell 1000 indices. The small-cap rally may be headed for a hiccup, however, one foreshadowed by last weeks slight decline in the Russell 2000. Still many portfolios can benefit from a long-term allocation to small-cap and even micro-cap stocks.
2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Earning season plods along with consumer-driven companies like Walt Disney and Coca Cola highlighting the calendar. Investors get a break on the economic front as the mad rush of releases slows, allowing them time to digest this weeks data, particular the news from the labor front. (Surely consumers should be more confident after the favorable developments?)
2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
A few retailers (Abercrombie & Fitch, Nordstrom) take center stage in earnings season as investors get another glimpse into the recent holiday activity. Likewise retail sales highlights the economic calendar and offers some follow-through from the season. Fed minutes depict the mindset of the policymakers. And, of course, there will be news from Greece.
2012-02-27 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Historically, its difficult to have economic expansion without job growth, fiscal expansion, and consumer confidence. And yet, despite low interest rates, and a leveling-off of unemployment, we find ourselves in the middle of an economic recession. Of course, phrases like recession, expansion, and depression do not represent points in time, but, rather, periods during which these phenomena occur. So to suggest that we might be in any one of these economic cycles also implies that we must define the time line, the trends direction and magnitude, and our place within it.
2012-02-27 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Spread amongst positive innuendo about the Eurozone austerity discussions and strength in the global oil markets, was consternation about contentious earnings reports and a build up in selling pressure upon equities whose values are bumping up against relative strength resistance points. The state of the financial markets is net-neutral. The most important characteristic of the markets today is the aging of intermediate recovery trends and the high number of equities that amble along laterally. Any entry into long term probabilities would be done today at high risk.
2012-02-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market paused last week in its 2012 rally over concerns about what might happen in Greece. As the charts above illustrate, both the Dow Jones Industrial Average and the NASDAQ Composite fell fractionally for the week, but certainly showed underlying strength given the urge of many to take short-term gains.
2012-02-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks moved higher last week in anticipation of a deal over Greek sovereign debt, as well as evidence the economy is not falling into a double-dip recession. As the charts above illustrate, the Dow Jones Industrial Average gained over one percent, while the NASDAQ Composite moved higher by 1.65% led by Apple, Inc.
2012-02-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Despite the agreement to bail out Greece again, the financial markets concluded a very quiet week. Prices were virtually unchanged (see the charts below) as the underlying economic data continued to show a mixed outlook.
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.
2012-02-27 No Inflation and Plenty of Money by Christian Thwaites of Sentinel Investments
We are still fighting: worldwide fiscal drag (aka the dogma of expansionary austerity) with accommodative money polices. The PBOC joined in with some RRR cuts, although these do not mean much in the Chinese loan-quota system. And the BOJ took steps to weaken the yen. CBs are in control. Government fiscal policies remain ineffectual. Bottom Line: US government bonds remain in a tight band of 190-210. The New Issue Market is strong with low end investment grade names trading at less than 314 over GT10s. We continue to like US equities.
2012-02-27 South Africa: Resource Nationalism Gaining Political Currency by Team of Thomas White International
Increasing government control over natural resources is not a new trend. Governments in most emerging countries, including established democracies such as India and Brazil, directly or indirectly control most of their mineral resources. But in the case of South Africa, the consequences of such decisions can reverberate far and wide. The country has one of the worlds biggest reserves of natural resources, currently valued at $2.5 trillion.
2012-02-27 Equity Gains Likely to Continue, But at a Slower Pace by Bob Doll of BlackRock Investment Management
It was a relatively subdued week in terms of economic data, with the highlight perhaps being the weekly initial unemployment claims, which were unchanged (a stronger-than-expected result). This data helps confirm that improvements in the labor market have been gaining traction. This Friday we will see the February employment report and most economists are calling for a new jobs number of 200,000 or higher with a flat or perhaps slightly lower unemployment rate.
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 Real Estate Securities - January 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data showing measured improvement, including steady employment gains. With funding costs remaining low and demand showing signs of strengthening, we believe U.S. real estate fundamentals will continue to gradually improve in 2012. Importantly, new supply remains scarce in most sectors, due in large part to banks continued reluctance to finance speculative development projects.
2012-02-24 International Real Estate Securities - January 2012 Review & Outlook by Team of Cohen & Steers
International real estate securities rallied along with stocks broadly in January amid an easing of macro risk concerns. Positive developments in Europe significantly reduced the risk of a liquidity crisis, while data from China suggested the country was successfully navigating a soft landing to its economy. Meanwhile, the U.S. economy continued to show evidence of modest yet self-sustaining growth.
2012-02-24 Large Cap Value Strategy - January 2012 Review & Outlook by Team of Cohen & Steers
January was a quiet but strong month for equities. Investors moved away from defensive sectors and into somewhat riskier names as sentiment about the global economic outlook improved. There was no bad news from Europe. Indeed, global markets expressed relief that Europes banks now have access to additional liquidity through the Long-Term Refinancing Operations program (LTRO) announced in December. The U.S. economy continued to show self-sustaining growth that, while modest, allayed fears of recession.
2012-02-24 Convertibles Market 2011 Review and 2012 Outlook by Ellen Gold and Ramez Nashed of Invesco
U.S. GDP growth slowed in 2011 as the European financial crisis, U.S. legislative gridlock, the persistently weak housing market, and sustained elevated unemployment weighed on consumer confidence and consumer spending. These factors are expected to persist and, while we are cautiously optimistic that they should improve throughout 2012, this is by no means certain and the path could be turbulent. Given this potentially volatile economic backdrop, the convertible bond sector may be considered a risk controlled avenue to gaining exposure to the equity market.
2012-02-24 Global Commentary: Investors Want to Gains to Continue by Bill McQuaker of Henderson Global Investors
Although the start of the year has been encouraging, significant risks remain, especially from Europe, specifically Greece as it seeks to secure the next tranche of its bailout funding. The improvement in economic data, particularly from the US, however, provides some grounds for optimism, particularly as equities, despite their recent rally, appear inexpensive. Investors will be looking to see whether the global market momentum can be maintained: January last year began on a similar positive note, only to give way to weakness later in the year as structural economic problems resurfaced.
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.
2012-02-24 ECRI Defends its Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.5 in today's public release of the data through February 10th. This is the sixth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. However, the underlying WLI decreased fractionally from an adjusted 123.4 to 123.2 (see the third chart below). This is the second week of slippage in the underlying index.
2012-02-23 Uncertainty and Change Dominate Markets by Daniel C. Chung of Fred Alger & Company
US companies are doing an admirable job in difficult times. Uncertainty is not an acceptable management strategy, so businesses are continuing to move for-ward and seek opportunities to grow, even as Washington dithers. Despite our many concerns about the state of US policy-making, we remain confident in the fundamental strength of our economic system and the vitality and creativity of corporate American its people and in its structure
2012-02-23 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 Tick, Tock Goes the Inflation Clock by Chris Maxey of Fortigent
Despite this short-term good news, the cloud hanging over Europe promises to remain for some time. As expected, the first glimpses of fourth quarter GDP reveal a region under severe economic pressure. Growth in the European Union contracted 0.3%, the first such decline since the recession. Most member countries saw their economies shrink, including Germany (-0.2%), Italy (-0.7%), and Spain (-0.3%). On the bright side, France actually surprised consensus with a 0.2% expansion.
2012-02-22 Where Things Stand by Scott Brown of Raymond James Equity Research
The economy continues to operate far below its potential, which means that an extended period of above-trend growth is needed to mop up current slack. Real GDP growth has long trended about 3% per year. This trend is not the same a potential output. In fact, potential output should be below this trend partly due to the aging of the population. However, those arguing that the housing sector has either permanently reduced potential output or overstated potential output prior to the housing correction are off base. We have a lot of ground to make up, especially in the job market.
2012-02-22 Abbondanza! by Jeffrey Saut of Raymond James Equity Research
Despite overbought conditions, a Dow Theory upside non-confirmation, the end of the buying stampede on January 26th, a stock market that has used up most of its internal energy in the short-term, a massive downside reversal from Wall Streets premier stock last Wednesday (AAPL/$502.12), saber rattling in the Hormuz Strait, a ~21% rise in the price of gasoline since mid-December, et all the stock market has trudged higher. Manifestly, the SPX has now gone 35 trading sessions in 2012 without suffering a 1% down day.
2012-02-22 Buyer Beware When it Comes to US Retailers by Russ Koesterich of iShares Blog
While the US labor market has improved recently, it has yet to lead to any real acceleration in US consumption. In fact, last week, US retail sales came in below expectations for a second month in a row, and US consumption growth has held relatively steady at a 2% annualized rate for the past 10 quarters. There are four reasons why consumption is still so far below trend despite the improving labor market. 1. Keeping the improvement in context: The job market is actually improving from a very low base. 2. A Smaller Work Force. 3. Decelerating Wages and 4. Household Debt.
2012-02-21 Woody Brock on Solving America's Fiscal Problems by Robert Huebscher (Article)
Dr. Horace 'Woody' Brock is the founder Strategic Economic Decisions, an economic research and consulting service. In this interview, he discusses his recently published book, American Gridlock, and how America can grow its economy through 'good' deficit spending.
2012-02-21 David Rosenberg: "Searching for Certainty in a Sea of Uncertainty" by Katie Southwick (Article)
David Rosenberg is known for his bearish outlook, and he has not yet seen anything in recent economic news that persuades him to change his tune. Contrary to prevailing "bullish complacency" and the widespread belief that central banking systems "have the answers to the ongoing global debt deleveraging cycle," in the United States Rosenberg sees monumental deficits, flat growth, an underlying trend of deflation, and current fiscal policies that will limit future flexibility. In other words, trouble remains on the horizon.
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 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 Stocks Rising, But Still Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors
The rise in equities so far this year is not just a sugar high. The Fed has done nothing new, while Keynesian pump-priming is on the wane. Federal spending peaked at 25.3% of GDP back in 2009. Its still way too high, but has fallen to 23.7%. Meanwhile, despite shenanigans like the temporary payroll tax cut, federal revenue has risen from 15.1% of GDP to 15.4% in the past year. Spending is down and taxes are up. Fiscal policy is contractionary. Yes, the Fed is loose and is holding interest rates down. But even if we assume normal interest rates and stable profits , stocks are very cheap.
2012-02-21 U.S. Real Estate Securities - January 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data including steady employment gains. With funding costs likely to remain low and demand showing signs of strengthening, U.S. real estate fundamentals will continue to gradually improve. New supply remains scarce in most sectors, due in large part to banks continued reluctance to finance speculative development projects.The positive trajectory, however, is not without potential dangers. Economic growth remains at risk to global macro concerns, and our global investment team continues to closely monitor developments in Europe and China.
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.
2012-02-18 Payroll Tax Cut Deal: The Good News and the Bad News by Russ Koesterich of iShares Blog
The good news is that extensions of the payroll tax holiday and unemployment benefits will remove a near-term risk for the US and global economies. But the bad news is that significant economic risks remain.
2012-02-18 A Surer Footing by David Kelly of J.P. Morgan Funds
While the footing appears surer, the economic and market outlook remains very foggy suggesting that it is best to stick to the middle of the path and cautiously put one foot in front of the other.
2012-02-18 Danger: Caution Ahead by Bob Rodriguez of First Pacific Advisors
I know many of you would like more actionable ideas but principal protection is uppermost in my mind. Patience is required now. Many investors underestimate the potential risks and disruptiveness from high global financial leverage. We are in phase 2 of a continuing and expanding economic and financial market instability. Flexibility, high liquidity, and concentrated asset deployment, when appropriate, will be key elements in attaining superior investment performance. The era of being fully invested and adjusting portfolio weights relative to an index has been over for more than a decade.
2012-02-18 The Cancer of Debt and Deficits by John Mauldin of Millennium Wave Advisors
We will explore some options to actually resolve the deficit and debt crisis. Cutting spending or raising taxes have consequences, but not all cuts and not all taxes are the same. For those who have been wanting more specific solutions from me, I am going to address the issues surrounding taxation and offer my thoughts as to what we should do.
2012-02-17 Something Old, Something New, Something Borrowed and Something 2 by Richard Clarida of PIMCO
Given the Feds targets for both inflation and long-run normal employment, the new framework suggests continued lower bound rates, forward guidance and potentially additional QE. The Fed explicitly extended the length of time that it expects interest rates to remain exceptionally low and kept the door open to adjusting at a future meeting the size and composition of its balance sheet. The Fed reached unanimous agreement on a published numerical inflation target of 2% that, in its judgment, best satisfies its mandate to achieve price stability.
2012-02-17 ECRI's Controversial Recession Call: Fifth Consecutive Improvement in the Growth Index by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.7 in today's public release of the data through February 10th. This is the fifth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. The underlying WLI decreased fractionally from an adjusted 123.6 to 123.5
2012-02-16 ProVise Bullets by Team of ProVise Management Group
There was much to cheer about in the January jobs number, with unemployment dropping to 8.2% and 243,000 jobs being created; almost 90,000 more than was originally projected. On top of that, the government revised the November and December numbers, adding another 60,000 jobs to those two months, bringing the total number of people employed during 2011 to around 1.82 million. But, among all the good news that both sides of the political arena jumped all over, there remain some unpleasant facts.
2012-02-16 Profit Margin Squeeze: New Update by Doug Short of Advisor Perspectives (dshort.com)
The accompanying charts offer clues for evaluating the risk of profit margin squeeze in the current economy. One is the ratio of crude to finished goods in the Producer Price Index. The other is an indicator constructed from two data series in the Philadelphia Fed's Business Outlook Survey through yesterday's release. It is the spread between the Philly Fed's prices paid (input costs) and received (prices charged) data.
2012-02-16 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Historically, its difficult to have economic expansion without job growth, fiscal expansion, and consumer confidence. And yet, despite low interest rates, and a leveling-off of unemployment, we find ourselves in the middle of an economic recession. Of course, phrases like recession, expansion, and depression do not represent points in time, but, rather, periods during which these phenomena occur. So to suggest that we might be in any one of these economic cycles also implies that we must define the time line, the trends direction and magnitude, and our place within it.
2012-02-16 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Last weeks performance was distracting. Spread amongst positive innuendo about the Eurozone austerity discussions and strength in the global oil markets, was consternation about contentious earnings reports and a build up in selling pressure upon equities whose values are bumping up against relative strength resistance points. The state of the financial markets is net-neutral.The most important characteristic of the markets today is the aging of intermediate recovery trends and the high number of equities that amble along laterally. Entry into long term probabilities would be high risk.
2012-02-15 Stay Frosty by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The Roubiniesque blues felt globally due to a lack of confidence is not isolated to just the marginally attached and does have merit. As the economy restructured manufacturing workers in the 1980s only had a 65% reemployment rate. We feel the past few years have marked another restructuring in US the economy. Again it will likely mean unemployment will remain high as many workers may not make the transition. This time around the reemployment rate for housing related jobs and financial services will likely remain very subdued.
2012-02-15 Winning Streak Ends On the Last Day of the 6th Week, the Markets Rest, Still Relatively Positive by John Buckingham of AFAM
Hard to complain about Fridays relatively modest pullback as we knew the equity market five-week winning streak would eventually have to come to an end and the ever so slight gains for each of the previous four days of the week meant that the performance for the full week was not so bad. While the markets were long overdue for a breather, the main catalyst for Fridays drop was concern that this weekends austerity vote in Greece would not go as planned, setting the stage for a default of the countrys debt next month.
2012-02-15 From Argentina to Athens? by Mohamed A. El-Erian of PIMCO
There are way too many discomforting similarities between what has been happening in Greece recently and Argentinas 2001 path to economic and financial turmoil.
Unless Greek and European officials reflect on key lessons from Argentina's experience back then, the parallels could also end up including a financial meltdown, a deep output collapse, and social and political turmoil.
Greece need not and should not - continue to follow Argentinas example of eleven years ago.
2012-02-14 The System will Hold Together... by Jeffrey Saut of Raymond James Equity Research
The implications are that things are likely going to get a little less fun for investors for a while with the major averages transitioning from a steep price rise to more of a sideways to downward pricing structure. This does not mean you cant make money. On the upside, my algorithms show that our fundamental analysts Strong Buy ratings on 7.6%-yielding CenturyLink (CTL/$38.02) and non-yielding Whiting Petroleum (WLL/$50.89) are setting up for a potential upside breakout. Meanwhile, our analysts Underperform rating on ViaSat (VSAT/$45.22)is being confirmed by my algorithms to the downside.
2012-02-14 Hey, Big Spender? by Paul Kasriel of Northern Trust
Some political movement ought to unfurl the Mission Accomplished banner with regard to reining in federal government spending. As shown in the chart below, in the 12 months ended January 2012, the cumulative total of federal outlays-defense, non-defense, entitlements, interest on the debt-increased only 1.5% vs. the 12 months ended January 2011. The median growth in 12-month cumulative total federal outlays from January 1954 through January 2012 is 6.6%. Starting with the 12 months ended March 2010, this measure of growth in federal outlays has been below the long-run median.
2012-02-14 What a Difference 3 Years Make by Kristina Hooper of Allianz Global Investors
Three years removed from the Styxian depths of the financial crisis, investors are now in much better shape. Back in 1980, when Ronald Reagan was running for president, he struck a chord with the voting populace by asking the seminal question, Are you better off now than you were four years ago? Much of the electorate ran through a mental checklist and decided that they were worse off. As a result, voters pulled the proverbial ripcord, ousted the incumbent and Reagan was elected our 40th president. Investors should be asking themselves a similar question today.
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 The 'Risk On' Trade Remains the Right Call by Bob Doll of Blackrock Investment Management
The risk on trade is the right one in the long term given that the worlds major economies are healing and that debt problems are slowly improving. These processes will not occur in a straight line and we will see setbacks along the way. The rise in risk asset prices, however, has been in a more-or-less straight line, with US stocks rising close to 25% over the past four months. As a result, at some point we will almost certainly see at least a pause in the upward move as markets experience some sort of consolidation or corrective action.
2012-02-12 Hot Potato by John P. Hussman of Hussman Funds
A hot potato has been repeatedly passed from speculatively overvalued, overbought, overbullish market conditions driven by massive central bank interventions, to credit strains and emerging economic weakness nearly the instant those interventions are even temporarily suspended. The same speculators who have historically accompanied major and intermediate market peaks have emerged, followed by the emergence of credit strains, economic pressures, and a flight to safe-havens. The market is in an extended game of hot potato which will be resolved by the eventual removal of both conditions.
2012-02-11 The Answer We Dont Want to Know by John Mauldin of Millennium Wave Advisors
This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable.
2012-02-11 The Student Loan Debt Bomb by Mike "Mish" Shedlock of Sitka Pacific Capital Management
It's interesting to watch some of the terms bandied about in headline news. For example, the LA Times headline reads "S&P says student loan debt could be next financial bubble". Next? Could Be? What with the word "next"? Also what's with the words "could be"? Without a doubt student loans are in a bubble and have been for many years. Another way to describe the situation is "Debt Bomb".
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 ECRI's Puzzling Recession Call: The Growth Index Contraction Eases Yet Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -4.3 in its latest reading, data through February 3rd. The latest public data point is a reduced contraction from last week's -5.3 (a slight downward revision from the previously reported -5.2). This is the highest level (i.e., least negative) since August 26th of last year. The underlying WLI increased fractionally from an adjusted 123.0 to 123.3.
2012-02-10 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.
2012-02-10 Theres Value in Russias Future by Frank Holmes of U.S. Global Investors
Increasingly, Russian companies have begun paying dividends, with some companies paying as much as a 10% annual dividend. As interest rates around the world will remain low or even negative for years to come, dividends offer investors the opportunity to earn income with the potential of appreciation. Although political risks remain, we believe Russia continues to be a hotbed of opportunity for emerging market investors.
2012-02-09 Our Budget Deficit and the Coming Elections by Team of American Century Investments
One week ago, the CBO released its latest federal budget and economic outlook for the U.S. In the associated report, they explain that their ten year baseline budget projection is not a forecast of future events. Instead, it is provided as a policy benchmark that reflects what will occur to the federal budget and deficits if the existing taxation and spending laws are kept intact without additional legislative actions. Of course, we are now within nine months of a major election where a key issue will be what changes are needed to address our present fiscal woes.
2012-02-09 Syria, Assad and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)
Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.
2012-02-09 Bernanke on the Unemployment Rate and Labor Weakness by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I nearly always disagree with Bernanke on monetary and fiscal policy. Specifically, the Fed ought not have a monetary policy for the simple reason the Fed should not exist. Indeed, the Bernanke Fed and the Greenspan Fed have both proven beyond a shadow of a doubt they do not know what they are doing, where the economy is headed, or anything else of relevance in setting monetary policy. However, on rare occasions, Bernanke can say a few snippets that seem to make complete sense. For example, Bernanke Says 8.3% Unemployment Understates Labor Weakness.
2012-02-09 Private Equity: Fact, Fiction and What Lies in Between by Team of Knowledge @ Wharton
What good is private equity, anyway? Critics say these investment pools make money the wrong way -- buying "target companies," slashing jobs, piling on debt and selling the remnants, which by then are doomed to fail. Defenders say PE is a strong creator of jobs and value, and a vital source of outsized returns for pension funds, university endowments and other investment pools that serve ordinary people. Who's right?
2012-02-08 A Spark That Lit the Economy by Frank Holmes of U.S. Global Investors
Fridays employment data was the latest of a series of data showing marked improvement in the U.S. economy. ISI counted 18 straight weeks of stronger U.S. data including better vehicle sales, same store sales, homebuilding and manufacturing. Also, U.S. money supply is growing at a robust 10 percent year-over-year, greasing the wheels for Americas economic engine, which showed 3.7 percent growth in nominal GDP in the fourth quarter.
2012-02-07 The January Jobs Report by Scott Brown of Raymond James Equity Research
Make no mistake. The labor market is improving and theres hope for strong job growth this spring. Moreover, average weekly hours have been trending higher, consistent with an expected increase in new hiring in the months ahead. However, not to harsh your mellow, the January employment data were not as rosy as the headline figures would seem to suggest. These data should not change the picture for the Fed. We still have a lot of ground to make up in the labor 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 Despite Naysayers, The Recovery Is Real by Brian S. Wesbury and Robert Stein of Euro Pacific Capital
The US economy is far from perfect. Economic growth has been positive, but mediocre over the past year and a half. The unemployment rate, at 8.3%, is still elevated, higher than it ever was from 1984 through 2008. When it comes to bashing government policies, from either party, we do not take a back seat to anyone. What we cant do, because it makes no sense, is allow our dislike of current government policy to influence our view of the actual economic data. There really is a recovery underway. If it quacks like a duckit must be a duck.
2012-02-07 Inflection Point: The Start of a New Cycle in Real Estate? by Joel Beam, Ian Goltra, and Michael McGowan of Forward Management
Commercial real estate markets appear to be entering an extended cycle of recovery. The recovery is expected to play out unevenly across U.S. and international markets, with the first wave focused on knowledge-based, gateway cities and technology corridors. Commercial real estate is currently inexpensive by historical standards. Unlike residential markets, commercial real estate markets appear healthy, with rising liquidity and transaction levels.
Institutional and private-equity funds are ratcheting up their real estate commitments, seeking 6.5%-8% returns in line with historical averages.
2012-02-07 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 Fed Policies Pay Off by Christian W. Thwaites of Sentinel Investments
The forces of disillusion have glowed recently. We have had unsubtle debates on the Fed debasing money, the ECB providing unwarranted support and threats that the economy was going to lurch into a double dip (a reasonable but narrow view) or accelerate into hyperinflation (yes, really). So this was a week of unequivocal good news.
2012-02-07 Corporate Earnings Hit a Rough Patch by Chris Maxey of Fortigent
The week started slow, however, with a mixed personal income and outlays report from the Bureau of Economic Analysis. While consumer spending was flat in December, incomes grew 0.5% above expectations and the biggest gain since March. The lack of spending growth is concerning, but somewhat expected given stagnating wage growth. Spending to this point has largely been financed through savings, making Decembers income boost a much welcome improvement for consumers.
2012-02-07 If Current Bank Credit Trends Continue, Bet Against the Feds Interest Rate Forecast by Paul Kasriel of Northern Trust
A majority of FOMC members expect that the interest rate on federal funds, an interest rate controlled by the Fed, will not be increasing until late in 2014. If the current trend in the behavior of bank credit continues in 2012 and into 2013, I believe that the FOMC will be lifting its federal funds rate target early in the second half of 2013. Again, if the current growth trend in bank credit continues, a failure on the part of the FOMC to raise its federal funds rate target and shrink its balance sheet will sow the seeds of a rate of consumer inflation above the FOMCs 2% annualized target.
2012-02-07 Order and Progress on the Rise in Brazil by Mark Mobius of Franklin Templeton
My worldwide pursuit of good investing bargains takes me to some magnificent countries. In my view, Brazil is certainly among the most beautiful and economically vibrant in the western hemisphere. Its Portuguese-speaking multiracial population of almost 200 million1 represents a growing and upwardly mobile consumer market. Brazil is the fifth most populated country in the world and is chock-full of natural resources and rich farmland. Appropriately, the countrys name comes from the wood that grows along the coast, which was greatly valued by the European textile industry.
2012-02-06 Notes on Risk Management - Warts and All by John P. Hussman of Hussman Funds
Presently, there seems to be an unusually wide gap between hindsight and foresight, both in the financial markets and in the economy. In both cases, forward-looking evidence suggests weak outcomes, but recent trends encourage optimism and risk-taking. Rather than sugar-coat these uncertainties and minimize the messy divergences in the data, I think the best approach is to review the evidence, warts and all, including economic risks, market conditions, and the strengths and limitations of our own investment approach.
2012-02-06 Wary Investors Give US Stocks Another Go by John Browne of Euro Pacific Capital
Recently, the stock market has been roaring, with the S&P500 up a stunning 22% from October 3, 2011, which was the low of last year. In fact, the first month of 2012 has been one of the best Januaries on record for US stocks. On top of that, last Fridays jobs report seems to provide further evidence that we're turning a corner. However, there are many reasons to question the bestowal of bona-fide bull status on this market. It's hard to miss the artificial props in place to push up prices. Both the supply and demand sides of the equation are standing on shaky foundations.
2012-02-06 Apparent Decoupling of U.S. and European Economies Underway by Matt Rubin of Neuberger Berman
U.S. showing continued improvement in economic indicators, while IMF predicts Europe contraction. Improvement in economy and favorable fourth quarter earnings helped S&P 500 to its best January since 1997. Given situation in Washington and Europe, investors unlikely to experience a smooth ride.
2012-02-06 Markets Continue Their Winning Ways by Bob Doll of BlackRock Investment Management
Notwithstanding the strong performance of the last month, we believe markets are still pricing in a more negative economic backdrop than what we are predicting. Investor confidence remains low and many are still sitting on large amounts of cash. It is important to remember that stock prices have not completely recovered from the significant drawdown that occurred in the summer of 2011, suggesting that markets have further room to run.
We are not expecting to see uninterrupted smooth sailing from here, but we do believe that the trends for stocks are pointing in the right direction.
2012-02-06 Time to Get in the Game by Kristina Hooper of Allianz Global Investors
Recent data on job growth, unemployment and manufacturing activity offer compelling reasons for investors to get off the sidelines. Private job growth continued with a gain of 257,000 jobs, signaling a very constructive trend weve seen for a number of months. Public sector job shrinkage also continued and should be a welcome sign given the need to reduce government debt. The unemployment rate fell to 8.3% in January. Arguably, investors should be willing to take on more risk when they feel their employment is more secure. And the feeling of greater job security might soon be on the horizon.
2012-02-04 Who Took My Easy Button? by John Mauldin of Millennium Wave Advisors
There is no way enough money can be found to fund our entitlement programs, given the current system, even under the best of assumptions. Things must change. Either we will make the difficult choices or those changes will be forced by the market. The longer we put off the difficult choices, the more painful the consequences. This week we begin a series on the choices facing the US. We need to understand the consequences of the choices we make. Cut spending, say some. Tax the rich, say others. Cut out waste and corruption is always a popular choice. Do all of the above, intone others.
2012-02-03 Sentinel's Top 10 Predictions For 2012 by Christian W. Thwaites of Sentinel Investments
i) the US is emerging stronger from this recovery than any other major economy ii) Europes woes are temporarily eased and iii) China is past the worst of its inflation scares. If that sounds muted, it is. The damage done to the economies through irresponsible lending and uncontrolled asset price inflation (the US) or unencumbered vendor financing and overvalued exchange rates (EU) was immense. Both meant huge banking messes. And households are the only ones who clean up banking messes. In time. Slowly. And thats where the world stands.
2012-02-03 The U.S. Economy Marches On To An Unsteady Beat by Team of BondWave Advisors
Despite the misgivings by the Fed about the recovery, and with much of Europe teetering on recession, domestic economic data continues to suggest moderate expansion in both output and employment. We discuss this situation along with the positive performance of the Treasury, Corporate and Municipal bond markets.
2012-02-03 American Creativity by Doug MacKay and Bill Hoover of Broadleaf Partners
We remain bullish on the stock market. In an environment of low or non-existent bond yields, stocks may not only represent a compelling alternative source of income, but likely have a far better risk reward profile when it comes to upside return potential. After more than a decade of being the cellar dweller of annual asset class returns, domestic common stocks may finally be due for some positive mean reversion. This doesnt mean were headed back to an era of multi-year, double digit returns but, that given a choice among alternatives, stocks should prove to be the best game in town.
2012-02-03 The Unlikely Bull Market by Niels C. Jensen of Absolute Return Partners
Europe is going from crisis to crisis at the same time as stock markets climb higher. Meanwhile, investors are left confused. The key to understanding the apparent disconnect between stock market behavior and economic fundamentals is the aggressive policy being pursued by the ECB which has eased credit conditions in the crisis-stricken European banking industry. With more QE from the ECB in the pipeline, we expect equity prices to benefit.
2012-02-03 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 ECRI Recession Call: Growth Index Contraction Eases Again by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) posted -5.2 in its latest reading, data through January 27. The latest public data point is a reduced contraction from last week's -6.6 (a slight downward revision from -6.5). This is the highest level (i.e., least negative) since late August. The underlying WLI increased fractionally from an adjusted 122.7 to 123.2 (see the third chart below).
2012-02-03 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.
2012-02-03 Still Losing the War on Unemployment by Mohamed A. El-Erian of PIMCO
The first Friday of every month, you will find me among those eagerly waiting for the release of the latest government data on jobs. Such eagerness, however, should not be confused with joyfulness. While the numbers have markedly improved over the past year, too much of the commentary has been overly partial and, sometimes, dangerously misleading a situation that is likely to grow worse in the run-up to the November elections.
2012-02-03 Drudge, Tyler Durden and Economic Ignorance by Brian S. Wesbury of First Trust Advisors
There is a group of influential people (meaning that they get lots of hits on their blogs or websites) who may be articulate and have an ax to grind, but at the same time know little about economics, mathematics and data. A classic example is the Drudge Report link today to a headline and blog post by Tyler Durden that says, Record, 1.2 million people fall out of labor force in one month
2012-02-03 Some Facts About the 'Falling' Unemployment Rate by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Given the complete distortions of reality with respect to not counting people who allegedly dropped out of the work force, it is easy to misrepresent the headline numbers. Digging under the surface, the drop in the unemployment rate is nothing but a statistical mirage.
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).
2012-01-31 Lacy Hunt on the Roadblock to Recovery by Robert Huebscher (Article)
'The fundamental key to prosperity is not governmental financial transactions, or even private sector financial transactions,' according to Lacy Hunt, the widely respected economist at Hoisington Investment Management, with whom we spoke last week. 'The key to prosperity is the hard work and creativity of our individuals in businesses.'
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 The Fed: Dual Targets Or Dueling Targets? by Scott Brown of Raymond James Equity Research
The Fed has adopted an inflation target, as many other central banks have done long ago. However, the Fed retained its dual mandate, with a soft employment target. How will the two goals be achieved and what happens when they conflict? The Fed says is will use a balanced approach. The Fed lengthened the period for which it expects to keep short-term interest rates at exceptionally low levels. However, the five Fed governors and 12 district bank presidents have differing opinions on when the Fed should start raising short-term interest rates and what the rate target will be at the end of 2014.
2012-01-31 America's Economic Engine Still Healing by Chris Maxey of Fortigent
A thin week of economic data and renewed focus on the European sovereign debt crisis may have prompted profit taking by some investors. Arguably, the biggest development last week was the Federal Open Market Committees (FOMC) press release on Wednesday. For the first time, the central banks decision makers released forecasts for the federal funds rate and the timing for the first rate increase. In that release, the FOMC unexpectedly announced that it expected to hold rates near zero until at least late 2014. This far exceeded previously stated expectations of a mid-2013 rate hike.
2012-01-31 Fed Forecasts Depend on Data by Brian S. Wesbury and Robert Stein of First Trust Advisors
Last summer, the Fed promised to hold rates down through mid-2013. Headlines from last week suggest that the Fed now thinks 2014. But, how committed is the Fed to this strategy? What will it take to change course? Some analysts argue that this is an ironclad commitment and there will be no course changes. We believe this is a misreading of the Feds intentions. There are 19 potential economic views that are important at the Federal Reserve 7 are on the Board of Governors and 12 are Presidents of regional banks. There is more disagreement at the Fed than meets the eye.
2012-01-31 Junior Resources Companies Set to Outperform? by Frank Holmes of U.S. Global Investors
In volatile markets, small stocks typically lag larger companies as investors flee what they perceive to be risk. However, this love affair with large-caps is generally short lived as investors return to the beaten-up small caps when the turmoil subsides. Historically, small-caps have outperformed their larger counterparts. In 2011, junior miners were shunned, but Global Resources Fund co-portfolio managers Evan Smith and Brian Hicks pointed out to me this week that were beginning to see signs of small-cap strength.
2012-01-31 When Two Percent is Good by Christian W. Thwaites of Sentinel Investments
FOMC marked new ground by placing a date on any change in the fed funds rate out to 2014, a full year beyond the date put out last year. This is exactly the playbook described by the Fed Chairman nearly ten years ago. He is shaping interest conditions as obviously as he can. He would prefer a policy of conditionality, say to unemployment or inflation (the case for nominal GDP is probably too radical for now) but, if nothing, he is a pragmatist and knows he would not carry all the board with him. So the next best thing is a fixed period.
2012-01-31 Do Unresolved 2011 Economic Ailments Portend a Similar 2012? by Team of Managers Investment Group
Now updated through 4Q. This compendium provides an historical perspective of economic data compared to today's results, and provides comments on any developing trends. We also include a synopsis of financial markets results. The OTOTM Chart Book is designed with easy-to-read graphics to tell a story and help you visualize the changes taking place in today's economy.
2012-01-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
All eyes will be on the Fed as investors hope to take the newfound insight from its meeting and translate that into profitable trading opportunities (is that the intent of the new strategy?). The ever-changing mindset of the consumer is again on display as McDonalds (1/24), Starbucks (1/26), and Procter & Gamble (1/27) headline the earnings season. Looking at the economic data, analysts get their first look at 4th quarter GDP and gain greater insight on the impact of those Thai floods and the success of the holiday season. And then theres Europeis Greece really back in the headlines?
2012-01-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As January goes, so goes the market for the year. Can we keep these gains for two more days? A few key bellwethers post earningsExxon Mobil looks to set new records; Amazon shows the effects of the holiday season; and UPS provides new signs about the strength of the overall economy. Labor and manufacturing highlight a very busy week on the economic calendar as investors hope to see continued positive trends from the ISM (manu), nonfarm payroll, and the unemployment rate. And, of course, Europe is never too far from the weekly headlines. (The more things change) Go Giants (a week early).
2012-01-30 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The New Years rally continued last week. Solid earnings reports, for the most part, along with the belief that the Federal Reserve Board will offer up some policy changes this week served to support stock prices across the board. As the charts above illustrate the Dow Jones Industrial Average gained 2.4% and the NASDAQ Composite jumped 2.8% last week to extend their early year gains.
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 Warning: Goat Rodeo by John P. Hussman of Hussman Funds
We're observing an "exhaustion" syndrome that has typically been followed by market losses on the order of 25% over the following 6-7 month period (not a typo). Worse, this is coupled with evidence from leading economic measures that continue to be associated with a very high risk of oncoming recession in the U.S. - despite a modest firming in various lagging and coincident economic indicators, at still-tepid levels. Compound this with unresolved credit strains and an effectively insolvent banking system in Europe, and we face a likely outcome aptly described as a Goat Rodeo.
2012-01-30 TIPS for Financial Repression by Mihir Worah of PIMCO
Treasury Inflation-Protected Securities got a boost last week after the Fed extended the period of time it is likely to maintain unusually easy monetary policy and moved toward adopting a formal inflation target of 2% for the Personal Consumption Expenditure Index. Bernanke said that the central bank was likely to allow deviations from this target if employment was not where the Fed thinks it should be. We think financial repression is likely to persist and real interest rates are likely to be lower than recent history would suggest for the foreseeable future.
2012-01-30 Don't Fight The Fed, Part Three by Charles Lieberman of Advisors Capital Management
Growth is improving slowly, but insufficiently to satisfy the Fed. So Fed officials are reviewing new initiatives to promote growth, including buying mortgages in the market. The Fed's latest press release suggests that policy may remain unchanged for even longer than suggested earlier. But the Fed's willingness to remain so staunchly committed to growth remains "data dependent", as any significant increase in GDP growth could cause the Fed to backtrack. At the end of the day, the Fed is committed to an outcome, not to the calendar. And right now, it is committed to growth.
2012-01-30 Modest Economic and Jobs Growth Should Continue in the Months Ahead by Bob Doll of BlackRock Investment Management
From a technical perspective, the market backdrop continues to be a strong one. All of the major indices are trading at above their 200-day moving averages and the advance/decline lines are trending quite strong. Additionally, mutual fund flows are starting to move in a positive direction for stocks with some evidence suggesting that investors are starting to get back into the markets (although the amount of cash on the sidelines remains high). Although economic and market data is looking better than it did months ago, it is important to remember that significant downside risks remain.
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.
2012-01-28 The Transparency Trap by John Mauldin of Millennium Wave Advisors
We look at the shift in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, theres even a tidbit on Greece. Unemployment will be higher than we are comfortable with; it is just a product of the current environment and simple math. The US economy is in a Muddle Through range of around 2%. If not for a potential shock coming from a serious European crisis and real recession, the US should not slip into outright recession this year.
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 Waist Deep in the Big Muddy by Peter Schiff of Euro Pacific Capital
As long as interest rates remain far below the rate of inflation, the U.S. economy will fail to equitably restructure itself for a lasting recovery. As a secondary effect, U.S. savers will likely continue to suffer from a lack of yield and a weakening currency. In the end, the collapse of the U.S. economy will be that much more spectacular due to the great lengths we have gone to postpone it.
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.
2012-01-26 Journey to the Center of the (Fed's) Mind by Liz Ann Sonders of Charles Schwab
The Federal Reserve opted to keep short-term interest rates on the floor and extended the period of time during which rates are likely to remain near zero.
Newly published forecasts show slightly better growth, a bit less inflation and a lower unemployment rate.
Fed Chairman Ben Bernanke got hit with a lot of questions about the risks of extending zero-rate policy for 2 more years.
2012-01-26 Is There Value in U.S. Equities? by Team of Emerald Asset Advisors
The importance of asset allocation and timing was again evident last year. After rallying earlier in the year, stocks took investors on a gut-wrenching ride over the summer before rallying again in the fall. And for all of the twists and turns, in the end the S&P 500 essentially ended the year where it began. But that's history. What do we expect looking ahead? As we examine today's investment landscape, we believe opportunities can be found in U.S. stocks, particularly large-cap stocks. There are several trends in place that support our view.
2012-01-26 Fed Language Goes Dovish, But Policy Unchanged by Brian S. Wesbury and Robert Stein of First Trust Advisors
Investors should take note that at his press conference today Chairman Bernanke made it clear that if the Feds economic forecast proves either too optimistic or too pessimistic, that it would change its forecast and alter its policy expectations for the funds rate as well. The importance of this statement cannot be underestimated. We anticipate faster economic growth, lower unemployment, and higher inflation than the Fed projects over the next few years. As result, we believe the Fed will start raising interest rates well before late 2014.
2012-01-25 Significant Growth Potential for Indonesia's Middle Class by Frank Holmes of U.S. Global Investors
Indonesias workforce is growing 7,000 people stronger each day, adding an estimated 21 million people to its workforce by over the next decade. This is second only to India. This growth has given birth to a burgeoning middle class willing to spend money on durable goods such as clothing, personal-care items, home appliances and electronics. Currently, domestic consumption accounts for two-thirds of Indonesias GDP. Weve already seen double-digit growth in sales for televisions, cars, computers and laptops over the past few years. More importantly, this trend is just getting started.
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 U.S. Real Estate Securities Investment Commentary - December 2011 by Team of Cohen & Steers
We expect GDP growth of between 1% and 2% in 2012, with modest but steady gains in employment. This should support continued gradual improvement in real estate fundamentals, given low new supply in most sectors. In this environment, we seek to identity markets with above-average employment (and income) trends. And in an election year that should present opportunities and risks, we will monitor how the results might affect employment in the financial and health care industries, and the Washington, D.C. market generally.
2012-01-24 Beyond Reinhart and Rogoff by Robert Huebscher (Article)
My article two weeks ago, The Misreading of Reinhart and Rogoff, elicited a number of challenges, both from those who argued that excessive debt imperils our economic growth and from those who claimed that my proposed solution was unworkable. Among those challengers was Lacy Hunt, who raised several valid concerns. I will explain why I disagree with Hunt and others, and why the dollar's position as the reserve currency increases our borrowing capacity. But our ability to borrow cannot be a license to spend unwisely, and I will conclude by expanding on the policy choices the US must pursue.
2012-01-24 Dale Mortensen on Addressing Unemployment by Dan Richards (Article)
Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the transcript.
2012-01-24 Everybodys Unhappy!? by Jeffrey Saut of Raymond James Equity Research
On January 3 I stated that session felt like an emotional peak and that January 10 felt like the price peak. Subsequently I wrote, The only question in my mind is if the markets are going to have a pullback into the 1230 1240 support zone, or go sideways to correct their overbought condition and allow the internal energy to be rebuilt. So far, it has been a sideways consolidation until last weeks upside breakout causing one old Wall Street wag to exclaim, Breakout or fake-out?! On a short-term basis I think it is a fake-out believing a trading top is due this week ...
2012-01-24 Risk Off, Risk On...? by Chris Maxey of Fortigent
Since the start of 2012, global risk markets have all but ignored the overhang of pessimism that frustrated the markets in 2011. For the most part, equity indices already surpassed their gains for all of last year. While such gains may ultimately prove sustainable, there remains a modicum of uncertainty that could rear its head quite suddenly, and quite viciously. In the meantime, an assessment of the investment landscape shows investors may have a legitimate reason for bullishness in the short term.
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.
2012-01-24 Africa: Opportunities and Challenges in a Growing Economy by Team of The Royce Funds
As the South African economy continues to mature and other, even less developed, economies begin to thrive, we will keep our attention focused on company fundamentals, corporate governance, and what we think are attractively undervalued businesses with the potential to grow in the global economy. As the bulk of Africa's economies are frontier markets, still progressing toward the status of developing economies, the continent as a whole represents long-term opportunities that will require patience and diligence. Its resources and demographics are likely to make it well worth the wait.
2012-01-23 Dodging a Bullet, from a Machine Gun by John P. Hussman of Hussman Funds
The interpretation best supported by the data is that recession risk remains very high based on the leading evidence and the typical outcomes that have resulted, but that the rate of deterioration has eased significantly, and it is simply unclear whether this is a temporary pause or a reversal. Rather than overstating the case one way or another, we remain strongly concerned about recession risk, but recognize the recent stabilization and the potential for a low-level continuation of that.
2012-01-23 Smart Strategies Looked Stupid in 2011 by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The US has a confidence crisis, not a growth crisis. Jobs are being created. Consumers spending rose 6.9%. Corporate profits went up 16%. Financial leverage is low, operational leverage is high. Even with the rise in government debt, public debt service is at its lowest since the mid 80s. And all this during the year we survived a major nuclear crisis in Japan, the first-ever Treasury downgrade, revolutions in North Africa and the Middle East, several hundred thousand government layoffs, gridlock in Washington, and the effective bankruptcy of Greece.
2012-01-23 Debt and Deleveraging: A Five-Pronged Solution by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Citing the latest report on "Debt and Deleveraging" by the McKinsey Global Institute, Ambrose Evans-Pritchard proclaims a light at the end of the tunnel and that America overcomes the debt crisis as Britain sinks deeper into the swamp. However, there is a big difference between alleged "light at the end of the tunnel" and "America Overcomes Debt Crisis" as Pritchard claims. US consumers may be one-third of the way through, but US debt-to-GDP ratios are low only because unsustainable government spending has taken up the slack.
2012-01-23 Who's Afraid of the Big Bad Sovereign Debt Wolf? by Monty Guild and Tony Danaher of Guild Investment Management
Last Friday, the sovereign debt of nine European nations was downgraded by S&P. Now, there are only four European nations whose sovereign bonds carry the highest AAA rating: Finland, Germany, Luxemburg and the Netherlands. Since the sovereign debt refinancing and potential default problem still goes unsolved, we foresee the markets having to keep digesting more waves of bad news. Yet the fear created by such news is diminishingnot because of a shortage of negative news headlinesbut because European banks are more protected by the many lifelines that central banks keep throwing them.
2012-01-23 Focus Shifts from Fear to Fundamentals by Kristina Hooper of Allianz Global Investors
Kristina Hooper, head of portfolio strategies, highlights last week's rally in stocks as a launching point for investors to overcome anxiety and regain focus on valuations, corporate earnings and improving macroeconomic conditions.
2012-01-23 Animate and Repress by Christian W. Thwaites of Sentinel Investments
Europe is in a state of suspended animation, neither moving nor acting on policy. After weeks of spurious deadlines, the markets settled into quiet acceptance that Greece is a hopeless case but that, for now, imminent collapse is not in the cards. Some of the best performing bond markets this week have been the worst of the worst...Ireland, Italy and Greece long bonds are up over 5%. It's not all good. Greek CDS have virtually ceased to exist and notional amounts on the peripherals have shrunk. No one wants to stand behind a restructuring, posing as PSI haircut, masquerading as default.
2012-01-23 Rally Not Built on Complacency by Brian S. Wesbury and Robert Stein of First Trust Advisors
No matter how we make our argument, and no matter how consistently the economy grows, the doubt and fear and disbelief just wont go away. We noticed this recently, when conventional wisdom started to say that investors were being complacent these days. In other words, when the equity markets go down, investors are living in reality and accepting that the economy and financial markets just arent in great shape. But when the equity markets go up, they are being schizophrenic, overly optimistic, and now some are saying complacent.
2012-01-23 Willful Optimism in the Face of Pessimism by Robert Horrocks of Matthews Asia
The U.S. has an unemployment problem, Europe is insolvent and Chinas banking system and property developers face the prospect of rising bad loans. The only thing that appears to be sustainable in investors minds is depression. Indeed, this has led to ongoing pessimismand perhaps too much of it. This month Robert Horrocks, PhD, takes a dissenting view on all the negativism as central banks in Europe, the U.S. and Asia appear to be shifting to more accommodative stances as inflationary pressures subside.
2012-01-23 Stocks Advance Despite Softening Earnings Data by Bob Doll of BlackRock Investment Management
The recent bounce in stocks and in other risk assets can be attributed to a combination of some improved US economic data, a lack of significant new negatives in the euro debt crisis and further evidence of a soft economic landing in China. For the rally to continue, we believe at least two developments need to occur. The first is that we need to see policymakers in the euro area continue to stabilize conditions. The second is that we need to see global economic data continue to improve enough to support corporate earnings growth.
2012-01-20 U.S. Domestic Stocks Time for a Close-Up by Philip Tasho of TAMRO Capital
For 2012 we believe U.S. stocks should provide investors good to average returns for the year. Large cap stocks should have an edge over small and midcap stocks due to superior valuation and improving fundamentals. The domestic economy will likely register continued subpar economic growth and global markets should also remain subdued due to credit issues in Europe and softness in export markets. As this is an election year, we believe there will continue to be volatility in the U.S. market. We hope to take advantage of near-term downward volatility.
2012-01-20 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Co.
2011 was another year of economic crosscurrents and mixed results. We began the year with some confidence that the U.S. was gradually on the mend and that Europe was beginning to deal with its problems. This actually worked out through mid year (June/July). In August it became apparent that not much was being accomplished by the leadership in Europe or the U.S., and both world and U.S. markets got hit hard. Our focus was on large, U.S.-based companies, but we still were down for the calendar year. Going forward, we believe large, U.S.-based companies remain the place to be.
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 On Mexicos Homes by Kate Jaquet of Seafarer Capital
Mexicos macroeconomic backdrop has been surprisingly benign for more than a decade now. The country has experienced stable growth, low unemployment, low levels of government debt and it has managed inflation relatively well, as evidenced in the table nearby. The country also enjoys very capable policy management, a burgeoning middle class, stable mortgage markets, strong housing demand and a wide field of homebuilders to cater to that demand. No one knows whether or when the violence in Mexico might end, but behind the headlines, the housing market gives hope that a stable future lies ahead.
2012-01-20 The Deleveraging Myth Part 2: Behind Consumer Deleveraging by Russ Koesterich of iShares Blog
The rise in transfer payments can, and probably should, continue in the near term as wage growth is still anemic. However, if previous credit bubbles are any guide, it will take a long time for the labor market to rebound, meaning the consumer is likely to remain dependent on help from the government in the long term. While this will allow consumer deleveraging to continue, it comes at the expense of more government debt and a net effect of more US non-financial debt.
2012-01-19 Mission Impossible: Why Chinas Soft Landing Will Look like the One We had in the US in 2007-2009 by Bill Smead of Smead Capital Management
Last week the Federal Reserve Board released the minutes of its meetings in 2006. There were discussions of the current economy, numerous credit tightening moves and a consistent belief in the idea that the US and its policy makers could engineer a soft landing from our real estate bubble. The landing that we had from our real estate bubble was the hardest landing since the Great Depression. Now we believe all the pieces are in place for a hard landing in the China real estate markets.
2012-01-19 Repairing the Global Plumbing by Mohamed A. El-Erian of Project Syndicate
More than three years after the global financial crisis, the world still has a nasty plumbing problem: credit pipes remain clogged, and only central banks are working to clear them. Fortunately, it is not too late to build broader pipes that compliment and replace the damaged infrastructure.
2012-01-19 Developed Europe: Economic Review Fourth Quarter 2011 by Team of Thomas White International
Germany: Unemployment fell to historically low levels. Exports grew in November, while businesses and consumers remained optimistic. U.K.: The services and construction sectors stayed buoyant. GDP grew 0.6 percent in the third quarter of 2011 France: The unemployment rate rose suddenly in the July after being in a downtrend for several quarters. Italy: The new government introduced the countrys third austerity package in 2011. Spain: Tax hikes and spending cuts were announced by a new conservative government.
2012-01-18 A Little Cold Water Thrown on the Recovery by John Buckingham of AFAM
The economic data out last week was hardly terrible, but the positive momentum seen in the past couple of months was slowed as the Commerce Department reported that higher prices for imported oil and a 7% drop in exports to Europe caused the U.S. trade deficit to expand sharply in November.
2012-01-18 Chinese Dragon To Unshackle Renminbi? by Axel Merk of Merk Funds
Chinese consumer spending is likely to have been under-reported for some time; we dont think a housing bust in China will stifle consumer spending as much as some fear. Importantly, Chinese consumer spending may rise like an avalanche in years to come. China is right to prepare its economy for this rise, amongst others, by unshackling the renminbi. A currency serves as a natural valve for domestic policies, helping to tame inflationary pressures. Currencies of the more developed Asian neighbors may also benefit in the process.
2012-01-18 Americas Economic Review: Fourth Quarter 2011 by Team of Thomas White International
As the year 2011 ended, the clouds of pessimism about the economy lightened across the Americas region, as key data trends suggested that earlier fears of a steep downturn were unfounded. Financial markets stabilized as investors turned more optimistic about the outlook for 2012. Concerns over external risks, particularly about the European fiscal crisis, also calmed down as hope was renewed that enduring political solutions will be found for the fiscal challenges facing the developed countries.
2012-01-18 The Bigger the Base, the Higher the Space by Pamela Rosenau of Hightower Advisors
Overall, people around the globe are underinvested or invested in the wrong asset classes. As data point continue to strengthen, coupled with the fact that income (and sustainability of income) are becoming a scarce commodity, a significant rally in the equity markets could ensue. As some technical analysts may suggest, the bigger the base, the higher the space. As U.S. blue chip stocks have lagged for more than ten years, they have built a base that has prepared these stocks for liftoff.
2012-01-18 Rock Bottom: Housing May Have Already Hit It by Liz Ann Sonders of Charles Schwab
A comprehensive (read: long) and chart-filled update on housing suggests the bottom may largely be in. Pricing may have more downside and real mortgage rates need to decline further, but most other metrics are flashing green. New themes: housing becoming "local" again, and for now, renting is trumping buying.
2012-01-17 A Nobel Laureate’s View on the US A Debt Problem, but an Unemployment Crisis by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the transcript of the interview.
2012-01-17 A Nobel Laureate’s View on the US - A Debt Problem, but an Unemployment Crisis - Video by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the video of the interview.
2012-01-17 Letters to the Editor - the Misreading of Reinhart and Rogoff by Various (Article)
Many readers responded to Robert Huebscher's article, The Misreading of Reinhart and Rogoff, which appeared last week.
2012-01-17 ProVise Bullets by Team of ProVise Management Group
The season for predictions is behind us and we thought it might be fun to come up with a few predictions that go out on a limb, both positively and negatively. Here are five semi-wild, but possible predictions for 2012. 1: Jobs, especially manufacturing jobs, return to America. 2: Switching from the economy to politics, the Republicans will hold a majority in the House, although they will lose some seats. 3: Turning to the world, the euro survives in spite of its being badmouthed over the past several months, and it strengthens late in the year. ...
2012-01-17 Good News or Cheap Stock Prices, but Not Both by Charles Lieberman of Advisors Capital Management
Investors often fail to appreciate that they can have either good news or cheap stock prices, but not both. It is good news that provides confidence and elevates stock prices to high valuations. Bad news undermines confidence and depresses stock prices. This maxim, first expressed by Joe Rosenberg, Chief Investment Officer for Loews Corp., and repeated in Barron's, applies most appropriately to prevailing stock valuations and implies an exceptional buying opportunity for those who can take a longer term investment perspective.
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 A Society Moving Toward The Brink? by Chris Maxey of Fortigent
With economic growth stagnating, global indebtedness remaining stubbornly high, and unemployment refusing to budge, pressure on governments and ordinary citizens is mounting. Financial crises are notoriously difficult to recover from, but the longer-term sociological problems created by such severe declines in output pose a major headwind to the economy in 2012 and beyond.
2012-01-17 Double-Digit Market Returns in 2012? by Bob Doll of BlackRock Investment Management
Skeptics would suggest that the solid start to 2012 is little more than a typical "January effect" in which stocks tend to rise at the beginning of the year, but we think there is more to it than that. In part, we believe the upward moves of the last two weeks can be attributed to the fact that many investors (including active fund managers) came into the year underexposed to risk assets following a disappointing 2011, and who are at this point beginning to put their cash to work.
2012-01-17 An Unhappy New Year in Europe by Milton Ezrati of Lord Abbett
Though the most intense pressure from Europes financial crisis will likely abate in the coming year, its lagged effects seem poised to put the continent into recession. Even if in the next few months the governments of the EU and the leadership of the ECB act with more resolve than they did last year, any favorable economic effect will take time to develop, leaving Europes economies to suffer in the interim. The most optimistic forecasts on Europe expect negligible growth. More pessimistic forecasters look for a 23% drop in the continents real GDP.
2012-01-17 Fixed Income Investment Outlook by Carl Kaufman and Simon Lee of Osterweis Capital Management
An incongruity developed during the 2nd half of 2011. As Treasuries continued their rally that began after the S&s, US equity markets also rose from their August lows. Normally, a rally in Treasuries implies that investors are in a risk off mode, fear of economic weakness causes investors to seek safe havens, like US Treasuries. Conversely, a rally in equities is perceived as a risk on mode, meaning that the sky is clearing and it is safe to invest again. With the Q4 rally in both the risk on and the risk off markets, the question arises: What is causing this anomaly?
2012-01-14 The End of Europe? by John Mauldin of Millennium Wave Advisors
The peripheral countries have no choices that allow them to grow and prosper without first suffering (for perhaps a long time) some very real economic pain. Leaving the eurozone has severe consequences; but the economic pain of leaving would go away sooner and allow for quicker adjustments, than if they stayed. However, the initial pain would be worse than the slow pain they'd suffer by staying in the euro. Their choice is, simply, which pain do they want or maybe, which pain do they think they want? Because whatever they choose, they are not going to like it.
2012-01-13 Quarterly Review and Outlook, Fourth Quarter 2011 by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management
As the U.S. economy enters 2012, the gross government debt to GDP ratio stands near 100%. Nominal GDP in the fourth quarter was an estimated $15.3 trillion, approximately equal to debt outstanding by the federal government. In an exhaustive historical study of high debt level economies around the world, it was demonstrated that when a countrys gross government debt rises above 90% of GDP, the median growth rates fall by one percent, and average growth falls considerably more. This study sheds considerable light on recent developments in the US.
2012-01-13 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 Spin City by Team of Dana Investment Advisors
The December jobs report was recently released and politicians are falling all over themselves to spin interpretations. It pays to look at these numbers in an objective way. As Mark Twain once said, Get your facts first, and then you can distort them as much as you please. So here goes. The private economy created 212,000 net new jobs in December and the unemployment rate dropped to 8.5%. Most industry sectors added jobs, even construction added 17,000 jobs. The government lost 12,000 jobs, but that is good news as it indicates that government is paring back to better control their budgets.
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 Quarterly Review Fourth Quarter, 2011 by Mark Oelschlager of Oak Associates
After a dismal third quarter, when concern over the economy and debt ceiling drove stock prices lower, equities came roaring back in Q4 on improving economic data. Signs of a strengthening economy are numerous, and include consumer confidence, retail sales, pending house sales, lending activity, and employment. Corporate profitability, the untold story of recent years, continues to be outstanding. As fourth quarter earnings results filter in over the next few weeks, we expect the trend to remain in place.
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 A Look Back (2011) and Forward (2012) by Team of American Century Investments
The major US equity markets ended 2011 not far from where they began in terms of their index values. Now that the New Year has arrived, the question is where these markets might be headed in 2012. Three important considerations behind this question are: 1. How key macro-factorse.g. the EU debt crisisare or arent addressed 2. Can U.S. corporations continue to deliver the earnings growth they have for the past three years 3. What are the prospects for US consumers and householdsan increasingly important consideration as the global recovery slowed in the fourth quarter of last year.
2012-01-12 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.
2012-01-12 The Perils of 2012 by Joseph E. Stiglitz of Project Syndicate
The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the Wests misguided policies, which, driven by ideology and vested interests, almost seem to reflect a commitment not to grow. As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions.
2012-01-11 And That's The Week That Was by Ron Brounes of Brounes & Associates
After a meaningless breakeven year, the S&P 500 looks to better its performance in 2012.A recent CNNMoney survey speculates the benchmark index will gain 7% in the current year.While the economic data has been positive as of late, all eyes shift to corporate earnings and Alcoa kicks off the season in the coming days. Retail sales highlight the economic calendar and investors get a better feel for the true results of the holidays.While sales looked strong throughout, mass discounting undoubtedly cut into profits and some retailers are now rethinking the success of the markdown strategy.
2012-01-11 Emerging Asia Pacific: Economic Review 4th Quarter 2011 by Team of Thomas White International
Emerging Asia Pacifics economic expansion slowed considerably beginning in October 2011. In many economies, export growth along with investments grew at their slowest pace since the summer of 2009. Although the Purchasing Managers Index improved across key economies in November the index was still under the 50 mark, which generally means a contraction in manufacturing activity. Almost all the countries in emerging Asia Pacific posted slower third quarter expansion over the year-ago period.
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 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
As junctures go, the post-holiday euphoria might be short-lived. Despite a sprinkling of good numbers, the headwinds are too great when considering a secular change from bear to bull. I would be careful about being drawn into a sucker rally. As I wrote in my current Quarterly, markets today are much more synchronized in their direction. While we wait, impatiently, for the Eurozone to get its act together, other regional bourses are held hostage. Growth becomes relative to how the other guy is doing, not absolute in its own right.
2012-01-11 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Happy New Year to everyone and it was for stock investors. The stock market, at least here in the United States, ended on a positive note last year and has started on a positive note this year. As the charts above illustrate, the New Year saw a first week gain of over one percent for the Dow Jones Industrial Average. while the NASDAQ Composite jumped 2.65% in the first four trading days of 2012.
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 Labor Data: Healthy Gains by Marie Schofield of Columbia Management
The labor market continues to heal slowly and looks sustainable, although the December strength is likely overstated and there will be some payback in January. The drag from the global dynamic has yet to make any mark.
2012-01-10 Bad Medicine, Bad Policies by Christian Thwaites of Sentinel Investments
We can see the results of sensible monetary policy and not so sensible fiscal policy: slow recovery of manufacturing and service jobs, decline in all government jobs and gradually lower participation rates. Expect these trends to continue. We find 30-year bonds with a near 20 duration very tradable. The YTD price swing is already over 4% and with a 3.0% yield; we must be careful that price changes not wipe our coupon returns. Stocks offer attractive entry points but we look at individual companies, balance sheets and management more than the overall asset class.
2012-01-10 The Dollars Lucky Streak by Peter Schiff of Euro Pacific Capital
All self-perpetuating virtuous cycles are vulnerable to a sudden break in the positive feedback loop. When reality rears its ugly head, and the spell breaks, the reverses can be vicious. It happened with dot com stocks, it happened with real estate, and I believe it will happen with the dollar and Treasuries. Even if Europe does not resolve its problems, the day of reckoning will still eventually arrive. The unfortunate truth is that the longer it takes, the worse it will be, as we will have that much more debt to reckon with.
2012-01-09 Leading Indicators and the Risk of a Blindside Recession by John P. Hussman of Hussman Funds
The balance of leading evidence continues to indicate a very high likelihood of an oncoming recession. We respect the various marginal improvements in the data in recent months, which do take the probability to less than 100%, but that is a far cry from suggesting that recession risk is anywhere close to being "off the table." Recession is not a certainty, but it remains the most probable outcome at present.
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 Structurally High Unemployment for a Decade by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Since 2008 I have been stating the US would have "Structurally High Unemployment for a Decade". Indeed, based on historical trends in labor force growth, the expected unemployment rate for the number of jobs created during the recovery would be well north of 11%. Yet, the unemployment rate is currently an artificially "low" 8.5% (not that 8.5% is anything to brag about). To show how difficult it will be to bring that rate down, let's take a look at job growth (or losses), for the last three decades (numbers in thousands).
2012-01-09 Employment Disappointment by Milton Ezrati of Lord Abbett
Employment gains of late have taken the edge off peoples worst recessionary fears, but they nonetheless remain fundamentally inadequatefar short of historical norms and the very human needs of the now-huge army of unemployed. In the coming year, continued economic growth should improve the situation, but only marginally. Employment will increase only slowly. By the end of 2012, still more than 8% of the work force likely will remain unemployed.
2012-01-09 Lots of Bulls, Few Bears by John Buckingham of AFAM
The market goes down and investors become bearish, the market goes up and they become bullish. Seems like folks will one day wise up as buying stocks on sale should make shoppers more excited than waiting to pick them up after theyve advanced, but this is evidently not the time to break the spell. While we do worry that the rally, albeit modest, in stocks heading into Q4 earnings reporting season, which kicks off this week, could succumb to a little selling (buy the rumor, sell the news), we remain upbeat in our view for the equity markets in 2012.
2012-01-09 Will Housing Follow Job Growth? by Kristina Hooper of Allianz Global Investors
An improving job market and increased manufacturing activity suggest a stronger economy, but the housing sector remains weak. However, low interest rates, less debt and more affordable homes could turn housing into a positive catalyst.
2012-01-09 Nonsense Arguments About Jobs by Brian S. Wesbury and Robert Stein of First Trust Advisors
The better the employment reports get, the more ridiculous the assertions from those who deny the improvement. Fridays report, was the best since the recovery started. Private payrolls rose 212,000, while the number of hours per worker and earnings per hour went up as well. As a result, total workers earnings are more than keeping pace with inflation. Even the unemployment rate went down again and is now at 8.5%, almost a full point below where it was a year ago. Our observation is that most of these arguments against optimism are driven by politics and border on the ridiculous.
2012-01-09 Muddling Through in 2012 by Bob Doll of BlackRock Investment Management
The world continues to operate in a post-creditbust environment in which significant amounts of deleveraging still need to occur. The momentum in the United States is pointing in the right direction, but we do expect to see ongoing back-and-forth in the tone of economic data. Conditions will not continue to improve at the same pace we have seen over the last couple of months, nor will they deteriorate to the point that a double-dip recession becomes likely. Instead, we expect the economy to chart a middle course and grow somewhere between 2% and 2.5% for the year.
2012-01-09 Steady As She Goes Into Early 2012 by Scott Brown of Raymond James Equity Research
Much like the situation last year, the economy appears to be poised for improvement. Again, there are still some headwinds and a number of downside risks to the growth outlook and much will depend on developments in Europe and in the oil market over the next few months. Theres still some prospect for further accommodation from the Federal Reserve we may see another round of asset purchases announced later this month.
2012-01-09 The January Barometer by Jeffrey Saut of Raymond James Equity Research
Its amazing that equity markets have rallied in light of the strong U.S. dollar. That action suggests that stocks are not ready for the pullback I have been expecting following last Tuesdays upside blow off. Still, while the Dow Industrials and Dow Transports have tagged new reaction highs, the SPX and NDX have not. Such divergences always leave me cautious, especially since we are past the seasonally sweet spot for stocks. At some point we are going to get a profit-taking event, whether it is from last Tuesdays intraday high or the 1300-1320 overhead resistance zone remains to be seen.
2012-01-09 Corporate Profits Hit a Wall, But Stocks a Buy? by Chris Maxey of Fortigent
Equity markets finished their first week of the New Year with positive gains, with the S&P 500 and Dow Jones Industrial Average rising 1.6% and 1.2%, respectively. Those gains, and more, occurred in the first 30 minutes of trading on Tuesday, the first trading day of 2012. From there, markets traded choppily through the remainder of the week, as lingering problems in Europe dampened risk appetites. Investors returning from holiday break received more positive news regarding the US economy, particularly within manufacturing and employment.
2012-01-09 Middle East/Africa Fourth Quarter 2011 Economic Review by Team of Thomas White International
Weakening global activity and further political uncertainty are the foremost risks that are likely to affect the Middle East and Africa (MEA) regions performance. The IMF report notes that oil exporting nations of the MEA region have benefited from continued high energy prices and are slated to finish off 2011 clocking in a GDP growth of 5% before easing to 4% in 2012. However, these countries do face a downside risk in the likelihood of fiscal and debt challenges in the developed nations that could adversely impact global activity and international oil prices.
2012-01-07 2012: A Year of Choices by John Mauldin of Millennium Wave Advisors
2012 will the year that the consequences of the choices made by the developed world will begin to manifest themselves in the economic realm. We are in the closing chapters of the current Debt Supercycle, with different countries strewn out along the path, and all headed for a destination that will force major decisions if politically painful actions are not taken. Some countries (e.g., Greece) have a choice between the dire and the disastrous. The option for merely difficult choices was long ago, and there is no going back to where you started without a different but equally painful outcome.
2012-01-06 And Thats The Year/Quarter That Was... by Ron Brounes of Brounes & Associates
Global geopolitical events continue to impact all investments markets. Just when Europe seemed to be taking positive steps to move passed crisis mode, along come Spain, Italy, and Hungary to remind investors that the road to recovery will be paved with many bumps along the way. A nuclear Iran presents huge concerns and additional sanctions could cause new crude supply challenges that may prompt inflation to resurface. The recent favorable labor releases woke the consumer from hibernation in time for the holidays, but will the enthusiasm last once the season ends?
2012-01-06 What Happened in 2011Whats up for 2012? by Peter Schiff of Euro Pacific Capital
This all lends itself to a volatile, but nearly flat trend for stocks and bonds in 2012. Fundamentals dont yet support a run-up, but easy money may put a floor underneath assets over the short run. Unless the situation were to change, we believe aggressive dips in stock markets represent buying opportunities. We tend to think bonds will underperform equities in 2012, given their dramatic outperforming in 2011.
2012-01-06 All The Emperors Are Naked by Brian S. Wesbury of First Trust Advisors
Governments seem unwilling to deal with issues that are relatively straight-forward. Its not hard to understand. Spending needs to be paid for by taxes, but taxes undermine the incentives to produce and invest and push business to other countries. Eventually government spends so much that the economy cannot support it (no matter how much tax rates rise) and bond buyers go on strike. Many European countries have reached that point.
2012-01-06 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 Flight 2012, Cleared to Hold? by Mike Boyle of Advisors Asset Management
Commercial air travel can be pretty frustrating these days, but nothing compares to the call from the cockpit as you approach your destination that the flight is entering holding. Immediately many questions enter travelers minds including: Why? How long? Where will we land? Given the S&P 500 essentially experienced a holding pattern in 2011, many investors must be asking themselves similar questions right now. Specifically the S&P lost .04 points last year as it began 2011 at 1257.64 and ended the year at 1257.60.
2012-01-05 True Reflections on 2011 and 2012 by Liz Ann Sonders of Charles Schwab
The Dow Jones Industrial Average (DJIA) managed a gain for the year in 2011, but very few investors were cheering.
With inflation settling down, the upward boost to real gross domestic product (GDP) is likely being underestimated.
Although the eurozone crisis may keep volatility elevated short-term, 2012 is looking like a better year.
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.
2012-01-05 New Year, Old Worries by Team of BondWave Advisors
2011 was a volatile year where the old guard of the global economy was plagued by weak economies, bloated debt levels, tight credit, and action against normally stellar credit ratings. Europe dominated the headlines, both in December and 2011 overall, and continues to struggle. We discuss these issues and provide additional insight into the US Treasury, Corporate and Municipal Bond Markets.
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 What to Watch for in Early 2012 by Russ Koesterich of iShares Blog
As 2012 gets underway, investors should pay close attention to two particular unresolved economic issues: High Italian bond yields and the ongoing drama of the payroll tax holiday. These two pieces of unfinished business are likely to dominate headlines and influence markets during the first few months of this year. They both also could send the global economy back into a recession if theyre not solved adequately. What needs to happen for these issues to be resolved? Heres a quick look at some signs investors should watch for.
2012-01-04 Towards the Paranormal by Bill Gross of PIMCO
The New Normal, previously believed to be bell-shaped and thin-tailed in its depiction of growth probability and financial market outcomes, appears to be morphing into a world of fat-tailed, almost bimodal outcomes.
A new duality credit and zero-bound interest rate risk, characterizes the financial markets of 2012, offering the fat left-tailed possibility of unforeseen policy delevering or the fat right-tailed possibility of central bank inflationary expansion. Until the outcome becomes clear, investors should consider ways to hedge their bets.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2012-01-03 The Triumph of Optimism by Scott Minerd of Guggenheim
Over the course of history there is a certain triumph of optimism. Betting against the column of progress of human history and the innovation of mankind has always proven to be a losing proposition. In the short run, there are times to become cautious, as the past five years have exemplified. Broad-based economic expansion and its attendant outsize investment returns follow contraction and panic just as the day follows the night. As dark as the current environment may seem, the sun will come up tomorrow. When it does, I believe it will shine favorably on the optimists of today.
2012-01-03 Good Defense, Slow Progress a Win for 2011 by Kristina Hooper of Allianz Global Investors
The stock market finished flat for the year, but an absence of loss in the face of a wave of negative news coupled with improving economic conditions are cause for optimism in 2012. While the stock market took us on a wild ride to nowhere, investors are better off than they were a year ago.
2012-01-03 The Year of the Dragon by Jeffrey Saut of Raymond James Equity Research
Since the day after Thanksgiving I have stuck with the strategy that the Santa Claus rally had begun. On November 25th the SPX was changing hands around 1158. We are now 100 points higher. Consequently, I would not chase the dragon right here since I anticipate that an upside blow off is due ...
2012-01-03 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As January goes, so goes the market for the year. While most investors look beyond such hype, many surely will be pulling for a strong start to the new year. Despite summit after summit, emergency call after emergency call, bailout after bailout, stimulus after stimulus, the European debacle appears no closer to resolution (and is maybe getting worst). Italy is hurting; Hungary could be next; Germany and France are calling the shots. Iran presents a new threat to the oil markets as a blockage at the Strait of Hormuz threatens real damage to the energy supply/demand picture.
2012-01-03 Dale Mortensen on Addressing Unemployment - Video by Dan Richards (Article)
Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the video.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock markets here in the USA and Europe are ending the year on a positive note. The concerns of the European sovereign debt issue have been put aside for now as the European Central Bank is essentially embarking on a quantitative easing policy. The Dow Jones Industrial Average gained 3.6% last week and is positive for the year while the NASDAQ Composite jumped by 2.5% and is more or less break even for the year with a few trading days left in 2011.
2011-12-30 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Leave it to global austerity to bring confidence in markets to a grinding halt. Our global credit crisis allows for very little wiggle room in addressing both a moral and economic bankruptcy that has now engulfed the worlds financial markets for four years specifically, and nearly two decades, generally. In recent weeks, efforts to create multinational solutions worldwide, and bipartisan solutions domestically, have erased some doubt that the problem of overspending will be addressed, but only quenched an immediate taste for something positive to occur.
2011-12-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
The so-called Santa Clause rally implies favorable activity over a seven daysthe final five trading days of one year and the first two of the next. (So the pressure is on if these markets are going to break even in 2011.) With volume already on the light side (and vacations and gift exchanges taking center stage during the next week), expect trading activity to get even weaker heading into the new year. Sometimes market moves become exaggerated on low volume as fewer buyers/sellers are working to smooth out the gyrations so dont panic if 100+ point swings on the Dow remain the norm.
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.
2011-12-29 2012 Offers Few Reasons for Optimism by John Browne of Euro Pacific Capital
In 2011, politicians of the U.S. and EU set their economies on a rendezvous with economic and financial disaster. If one assumes as I do that no leader on either side of the Atlantic has the courage to face the music, then there can be little reason for optimism in 2012.
2011-12-28 Was the 2011 Economy a Miracle? by Brian S. Wesbury and Robert Stein of First Trust Advisors
Government spending may be falling as a share of GDP, but it is still very high. This limits job creation and holds back real GDP growth from its potential. Excessive regulation does the same.And while an easy Fed boosts growth, it also creates inflation, which will become more of a problem in the years ahead.
Netting all this out, the scale is still tilted toward growth.New US technologies and the productivity that they create are so powerful that they are overwhelming the drag from bad government policies.Compared to forecasts of recession, its a miracle.Look for another one in 2012.
2011-12-27 Vitaliy Katsenelson on Krugman’s Missed Call by Robert Huebscher (Article)
Vitaliy Katsenelson is the chief investment officer at Investment Management Associates, a Denver-based money management firm, and the author of two highly acclaimed books on value investing. In this interview, he identifies what Paul Krugman failed to see with regard to China, discusses the prospects for the European and domestic economies, and explains why Microsoft is a grossly undervalued stock.
2011-12-23 Outlook 2012: Living In Interesting Times by Victoria Marklew, Asha G. Bangalore, James A. Pressler, and Ieisha Montgomery of Northern Trust
Setting aside the debate over the appropriateness of various policy directives, this Outlook considers which countries or regions are vulnerable as we head into 2012. Not surprisingly we start off with Europe, then go through the U.S., industrialized Asia, and Latin America, finishing with a brief discussion of the political powder keg that is the Middle East.
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 U.S. Real Estate Securities - November 2011 by Team of Cohen & Steers
Europe appears headed for recession, which would have at least some negative effect on the U.S. economy. However, that is a scenario we have incorporated into our models, and we continue to expect slow but steady domestic growth with gradually improving fundamentals for U.S. commercial real estate. Our estimates of net asset value are largely conservative. While transactional information has been relatively light, it has provided confirmation to our numbers. We believe acquisition activity could pick up as 2012 progresses, especially as REITs ability to raise capital remains in force.
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 Preferred Securities Investment Commentary by Team of Cohen & Steers
With interest rates likely to remain near historical lows for an extended period, we believe the high income potential of preferred securities (which currently offer nearly twice the income of corporate bonds) will continue to attract investors. Not only is high income in high demand, but it also provides a meaningful buffer to the total return profile of the asset class in this volatile environment.
2011-12-21 Hot Potato by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Lupin Rahman and Rob Mead of PIMCO
The world is playing a game of hot potato with European financial assets, and the European Central Bank is a reluctant player. Together, Europes fiscal and monetary authorities can likely avert a systemic accident, but they must act quickly and courageously. Differentiation among emerging market monetary policies is increasing. And in Australia, the central bank will likely need to ease further in 2012. If every central bank enacts similar monetary policy tools, those tools compete for the same targets (financial and inflation stability), thereby potentially eroding their effectiveness.
2011-12-20 Expectations Creep by Jamie Cornehlsen (Article)
Today's generation of college students have it easier, at least in one respect, than any of their predecessors. Over the years, college professors had made it easier for students to get good grades, a phenomenon known more commonly referred to as 'grade inflation.' The reasons for this erosion of expectations continue to be debated, but there is ample data showing that the trend toward more generous grading is real. Today, a similar phenomenon plagues economic expectations.
2011-12-20 Some Questions For 2012 And Beyond by Scott Brown of Raymond James Equity Research
The U.S. economy is expected to advance at a moderate rate in 2012, but Europe presents a key downside risk to the outlook. That aside, there are longer-term uncertainties about potential growth over the next several years. Next year will be an election year and income inequality could be an issue. Like any good horror movie, the European crisis has carried an ongoing feeling of dread. The potential for a catastrophic collapse is palpable. For the U.S., a meltdown would hit exports, but the bigger fear is possible financial market disruptions.
2011-12-20 By The Side Of The Road by Jeffrey Saut of Raymond James Equity Research
For months I have stated, While I guess we could talk ourselves into a recession, like the aforementioned hot dog folks, most of the finger-to-wallet ratios I monitor are not pointing towards a recession. To be sure, railcar loadings (especially intermodal) have been pretty strong for the past few months. State tax receipts are up year-over-year. East Coast port traffic, both inbound and outbound, remains perky. And, one of the best walk around indicators, namely foot traffic at the casual dining restaurants because it is the most discretionary of all consumer purchases, is still positive.
2011-12-20 Economy Happy to Close Out a Forgettable 2011 by Chris Maxey of Fortigent
There are several economic indicators on tap for next week, highlighted by the third and final estimate for Q3 real GDP.No change is expected from Novembers estimate of 2.0%. Other items of note include housing starts, existing home sales, new home sales, personal spending, and the durable goods report. As mentioned previously, Wednesdays existing home sales report from the NAR will provide clarity on the size of the agencys five-year revision to home sales. This is a potentially significant event, depending on the size of the adjustment.
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 When "Positive Surprises" Are Surprisingly Meaningless by John P. Hussman of Hussman Funds
How much importance should we put on the fact that economic data has delivered positive surprises in recent weeks? Don't all these surprises significantly short-circuit the risk of probable recession? As economist John Williams observes, "starting in October, a divergence developed: Whereas year-to-year change in BLS estimated payroll earnings continued at a more-or-less constant, positive level, tax receipts fell quite markedly. Where the Treasury numbers reflect full reporting, the BLS data are sampled..modeled and..revised...the BLS has overstated average earnings..in recent months."
2011-12-19 AA Is the New AAA by Charles Lieberman of Advisors Capital Management
The U.S. was downgraded to AA some months ago. France, as expected, was downgraded to AA this weekend. China is AA. Europe's six remaining AAA countries are under review and will likely also be downgraded to AA shortly. It hardly matters. AA is the new AAA. The markets understood well before the rating agencies that European sovereigns were mismanaging their finances and rendered their judgment that these budget deficits need to be reduced. Europe must do so before its credit problems spread. Progress is being made, albeit painfully slowly.
2011-12-19 Americas Best Companies are Cheap - So Merry Christmas and a Prosperous New Year! by Chuck Carnevale of F.A.S.T. Graphs
Investors have been fleeing US equities at unprecedented levels. Yet, I believe there is compelling evidence that suggests that this may be the best opportunity to invest in high-quality U.S. common stocks that we have seen in many years. The list of 100 stocks presented in this article represents only a sampling of the many companies that are selling at valuations which are lower than their fundamentals justify. The only logical reason that I can come up with for this, is extreme pessimism.
2011-12-19 Somali Sense of Humor by Christian Thwaites of Sentinel Investments
The fifth review on the Greek financing package makes grim reading: 1) bank deposit outflows equivalent to 15% of GDP 2) privatization sales proceeds revised down to less than 3% of GDP 3) GDP to fall more in 2011 than estimated and again next year, bringing the cumulative shrinkage to 15% but 4) debt to remain at over 140% for most of the next decade, assuming a 4% paid rate not the 34% market rate and 5) labor productivity deteriorating. In another sign of euro dysfunction, the Bundesbank refused to participate in a general IMF trust for the eurozone.
2011-12-19 The Three Rs of Investing by Marc Seidner of PIMCO
The inability to achieve sustainable levels of economic growth raises the risk of recession in many developed world economies. Under financial repression, market interest rates are kept very low for a very long time period with the hope of stimulating investment, but repression also starves savers to the benefit of borrowers. Increasing risk with an uncertain distribution of possible outcomes should lead to caution regarding traditional models and asset allocation practices.
2011-12-19 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Time is running out for that Santa Claus rally and the less-than-favorable tones coming from the worlds key politicos (wont call them leaders) are giving investors little reason to remain positive. Still, the recovering labor market and (hopefully) strong holiday season offer some incentive to buy (if only they can overlook the never-ending EU problems). Investors dissect an array of data before heading out for the holidays and possibly not returning until 2012. Some late-year window dressing could help bring one final surge to the markets (or not).
2011-12-16 Loose Monetary Policy Paves Way for Growth by Scott Migliori of Allianz Global Investors
Continued volatility in early 2012, but an increasingly accommodative monetary policy globally could jumpstart growthparticularly among export-driven companiesin the second half of the year. Energy and health care sectors stand out as likely outperformers.
2011-12-16 ProVise Bullets by Team of ProVise Management Group
The third quarter of 2011 produced negative returns for just about every asset class in every country in the world. Although the markets have rebounded over the past two and a half months, the net worth of each American household fell, on average, by 4% during those 90 days. This was the largest drop since the fourth quarter of 2008 which marked the beginning of the Great Recession. While the bankruptcy of Lehman Brothers was the so-called catalyst for the decline in 2008, the decline from July 1st to September 30th this year was largely based on the fears of a default by the US government.
2011-12-16 Whats Driving Markets These Days? Not Economic Data by Russ Koesterich of iShares Blog
Despite generally better-than-expected economic data and a good earnings season, stocks remain stuck in the same trading range theyve been in since the summer. The reason: Political developments continue to trump economic ones. For much of the year investors, including myself, have been surprised and mystified at how political events have unfolded in the United States and Europe. Policy decisions have become harder to predict and are being motivated by domestic political considerations. And increasingly, they are driving how markets perform.
2011-12-16 A Bad Year for Common Sense by Gerald Hwang of Matthews Asia
The phrase common sense can be a paradoxical concept in investment conversations. Seemingly imbued with a perverse, reverse meritocracy, the catchphrase appeals to investors as an intellectual leveler. It suggests, Let us think things through logically. Not only does this sound good, but what could be more egalitarian and humble? But when investment managers consider something to be common sense, be wary. We take a look at how common sense failed bond investors this year.
2011-12-16 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.
2011-12-16 Striking Portfolio Balance with Gold Stocks by Frank Holmes of U.S. Global Investors
Back on August 22, I wrote that gold was due for a correction and that it would be a non-event to see a 10 percent drop in gold. I wrote, This would actually be a healthy development for markets by shaking out the short-term speculators. This mornings gold price of $1,590 is about 15 percent from the high, which is a little greater than predicted, but a non-event just the same. I believe the long-term story remains on solid ground.
2011-12-15 The European Overhang and Odds of a Meltdown by Russ Koesterich of iShares Blog
Earlier this week, I noted that very elevated Italian and Spanish bond yields remaina short-term risk for both the European and global economies.Several other major European-related risks also continue to threaten markets.1)In the short-term, a key risk remains European banks. While bank funding needs have been addressed by European leaders, capital adequacy still is an issue. 2)A broader risk remains in the form of the interplay between economic policy and domestic politics. In efforts to solve Europes debt problems, domestic political considerations have too often trumped economics.
2011-12-14 Dollar Soars Following FOMC No Hint of QE3; Looking Ahead, What's Next? by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I have read countless articles recently regarding the inevitability of QE3. I have disagreed for four reasons:1.Price of oil near $100 give Fed little choice 2.Rising price of food gives Fed little choice 3.Stock market has risen on hype of European bailout giving Fed little reason 4.Falling unemployment rate (even though it's totally bogus) gives Fed little reason 5.Why should the Fed react when hot air from Europe gave a huge lift to the markets? I would have been surprised if the Fed tossed a QE3 bone under those circumstances. And it didn't.
2011-12-14 Fed Ends 2011 with a Whimper by Liz Ann Sonders of Charles Schwab
There were no surprises out of the Fed meeting today, with short-term interest rates remaining pegged at zero. There was one dissenting FOMC member who wished for additional policy accommodation. Much of the Fed's near-term focus remains on the eurozone debt crisis.
2011-12-14 Clinton Investment Management 3Q2011 Market Commentary by Andrew Clinton of Clinton Investment Management
As we look toward year-end, we endeavor to seek out the best means for adding meaningful value to our client portfolios. We expect municipal bond new issue supply to dissipate as we approach the New Year. As it does, we expect technical conditions to improve materially. We also believe that the roughly $20 billion in anticipated January reinvestment will pull demand for municipal bonds forward into December. We have extended our client durations modestly in an effort to capitalize on what we believe could be a period of solid outperformance for the municipal bond market.
2011-12-14 The Credit Research Case for Using Muni Funds by Team of American Century Investments
We believe muni market credit quality remains generally high despite continuing changes and challenges, including the demise of the bond insurance industry (which has created a more heterogeneous muni market) and the slow economic recovery, which has put continued pressures on municipal budgets. However, we believe these challenges have made experienced, professional credit analysis more important than ever. One way for investors and advisors to access expert, experienced credit analysis is through the use of established muni mutual funds that have been through multiple market cycles.
2011-12-13 Fed Policy Outlook Changes On The Way? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee will meet on Tuesday to set monetary policy. The Fed is widely expected to leave short-term interest rates unchanged and the wording of the economic assessment should be largely the same as in the previous statement. However, we could see another round of asset purchases or some changes to the Feds communications. The inflation outlook is moderate. It doesnt look like well see substantially higher inflation in 2012, but (barring a large negative shock to growth) were unlikely to see a threat of deflation.
2011-12-13 Self Sustaining by Jeffrey Saut of Raymond James Equity Research
Last week the ECBs interest rate cut took center stage, but that cut should be viewed within the context of the 40 world wide interest rate cuts that preceded it. Clearly, there is a global easing cycle underway; and, we think you will see more such news this week when the FOMC announces it policy statement Tuesday. Stocks will continue to grind irregularly higher driven by portfolio managers trying to play catch-up, the upside seasonal bias, low valuations, still depressed sentiment readings, and the knowledge that we have now entered the best performing six months of the year for stocks.
2011-12-13 What Happens If A Rising Tide Sinks Some Ships? by Chris Maxey of Fortigent
A multi-day summit in Brussels by European policymakers yielded an expected fiscal union between euro member countries. However, a key refusal by Britain undermined the credibility of the pact. Without unanimous agreement, the original European Union treaty cannot be altered, so a new intergovernmental agreement was created. Some question whether such an arrangement has the teeth to enforce budgetary discipline.
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 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Retail sales highlights a rather hectic week on the economic calendar as investors get another good reading about consumer activity and the holiday shopping season. Bear in mind, Thanksgiving will be included in this data. PPI and CPI are expected to reveal few concerns on the inflation picture, something the Fed continues to closely monitor as it makes decisions moving forward. And, of course, the eyes of the world remain firmly on Europe these days as Great Britain looks to prove its worth, while France and Germany continue to make policy decisions without much concern about anyone else.
2011-12-12 2011: The Year in Two Headlines by David Edwards of Heron Financial Group
The volatility of US stocks prices which was average from August 2010 through July 2011 suddenly jumped to levels last seen around the 9/11 attacks.The bottom line is that, in the face of one amorphous gelatinous macro event after the other, the US stock market has managed to trade on either side of unchanged all year long.Meanwhile, another quarter of record earnings are on tap starting the first week of January, inflation remains contained, interest rates remain low, and valuations are compressed.Macro concerns are the lid, earnings are the flame at what point does the pot bubble over?
2011-12-12 One Step at a Time by Charles Lieberman of Advisors Capital Management
Rising profits and cheap valuations make stocks very attractive, but concerns over Europe will offset these solid domestic fundamentals, particularly when developments increase the risk of widespread credit defaults. So, volatility should remain high, as investors respond these events. Stock prices will move higher, but it will remain a roller coaster ride. As Europe resolves its finances, risks of a meltdown should fade and volatility should decline, clearing the way for stocks prices to move meaningfully higher.
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.
2011-12-12 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Markets continue to be whipsawed by headlines out of Europe which much of the time are confusing and contradictory. Overall, however, the stock market here in the United States continues to outperform other global markets, and as evidenced by the
charts below showed gains for the week. Last week saw the Dow Jones Industrial Average gain 1.4% while the NASDAQ Composite moved higher by three quarters of a percent.
2011-12-12 Teutoburg Forest Remembered by Christian Thwaites of Sentinel Investments
The European Council agreed to some startling actions to stem the crisis: 1) all fiscal deficits not to exceed 0.5% of GDP 2) excessive deficit rules to come into effect when they breach 3% of GDP 3) the Commission to sign off on national budgets and 4) enforce sanctions if debt exceeds 60% of GDP with 5) fiscal integration to follow and 6) EFSF and ESM capital to remain at around 500bn with another 200bn committed to the IMF. The markets' reactions were generally favorable but I doubt any of this will hold.
2011-12-12 Obama's 8%: Sounds Right by Brian S. Wesbury and Robert Stein of First Trust Advisors
Given his advisers track record, you would think President Obama would be very cautious when making predictions about the unemployment rate. As we all now know, even though the stimulus bill was fully implemented, the jobless rate kept heading north, peaking at 10.1% in October 2009 and never once falling even remotely close to 8%. Nevertheless, President Obama is doing it again and predicting unemployment will be 8% around Election Day. This time, we think hes right.
2011-12-10 A Player to Be Named Later by John Mauldin of Millennium Wave Advisors
There are two main points to be taken away from this week's European summit. First, the Germans really took control. This has been coming for a long time, and it's not like we haven't discussed it in these letters. Second, Britain either opted out or was shown the door, depending on your point of view. That is the real game-changer, long-term, for more than the obvious reasons.
2011-12-09 Markets Rolling Look For More Of The Same by Monty Guild and Tony Danaher of Guild Investment Management
During the last two weeks, global markets have moved their way to higher ground and indications point to a healthier finish than expected to an otherwise sickly 2011. We see several developments supporting a continued equity market rally. They have to do with measures taken in China, Europe, and by central bankers around the globe. The Canadian and Singapore dollars are well-managed currencies in countries with conservative banking systems. They are good candidates for continued long- term appreciation versus the Euro and U.S. dollar.
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 Skyrocketing Student Loan Debt Will Delay Homeownership by Rick Palacios of John Burns Real Estate
Student loan debt now totals $865 bn, which is greater than all credit card debt and other types of household debt except for mortgages! College graduates have debt averaging $25,000. Even more troubling is the rise in debts associated with for-profit college and trade schools, whose revenues come primarily from debt available through Federal government programs. The debt load is so high, and the job outlook so bleak, that student loan default rates have almost doubled. With the economy little improved since 2009 (two-year lag on data), default rates are bound to rise further.
2011-12-09 Building Wisdom with Our Boots on the Ground by Frank Holmes of U.S. Global Investors
Analysts at U.S. Global Investors scrutinize research reports and study Bloomberg data to help our investment team gain first-mover advantage. Today, I asked research analyst and Shanghai-native Xian Liang to share how he combines analyses from third-party reports with boots-on-the-ground observations to find the best opportunities Asian markets have to offer.
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 Will a Eurozone Recession Put a Damper on the World's Fragile Economic Recovery? by Team of Knowledge @ Wharton
If large parts of Europe fall into a recession, as many experts are predicting, it is likely to have negative, although varied, effects on economies around the world, including those -- like the United States -- that are struggling to recover from the global financial crisis. As European leaders hammer out yet another package of solutions this week, Wharton faculty weigh in on the impact of a eurozone recession, as well as the pros and cons of the recovery measures that are up for debate.
2011-12-08 Significant Growth Potential for Indonesias Middle Class by Frank Holmes of U.S. Global Investors
Indonesias workforce is growing 7,000 people stronger each day. This is second only to India as Asias fastest growing workforce. CLSA says this growth has given birth to a burgeoning middle class willing to spend money on durable goods such as clothing, personal-care items, home appliances and electronics. Currently, domestic consumption accounts for two-thirds of Indonesias GDP. Weve already seen double-digit growth in sales for televisions, cars, computers and laptops over the past few years. Indonesia appears well positioned for future growth.
2011-12-08 Global Economy and Market Summary Third Quarter 2011 by Stephen Hammers of Compass EMP Funds
The world economy has continued to slow during the last few months. The next several quarters are likely to be weak for three reasons. First, fiscal policy will continue to be restrictive as plans to trim excessive federal budget deficits continue to unfold. Second, private sector demand looks gloomy because households will continue to deleverage from high debt levels while unemployment remains a problem. Third, the uncertain future of the Euro-zone debt situation remains a major setback to future economic growth.
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.
2011-12-06 The Unspoken Truth about Hedge Funds by Michael Edesess (Article)
The popularity of the endowment model among advisors has been driven by the belief that hedge funds have produced positive risk-adjusted returns. But the basis for that notion has been statistics gleaned from hedge fund databases, and new research shows returns from those databases are even more upwardly biased than previously thought; the supposed alpha never really existed.
2011-12-06 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The past few weeks have seen a rollercoaster ride for stocks. Despair over the European sovereign debt crisis has been replaced, for now, with optimism that the authorities there have finally decided to act. Both the Dow Jones Industrial Average and the NASDAQ Composite had stellar weeks. Both indices gained more than 7 percent for the week. Of course, this just reclaimed the losses from the previous couple of weeks, but the averages are once again positive for the year and given the level of pessimism and uncertainty supports our notion of just how undervalued this stock market is.
2011-12-06 Storm Clouds Across the Globe by Komal Sri-Kumar of TCW Asset Management
Major world equity markets had their best weekly performance in three years, boosted by economic numbers from the US, and by hopes that European leaders may find a solution to the debt crisis. U.S. manufacturing showed signs of regaining momentum, with both new orders and exports coming on strong. At weeks end, jobs numbers for November indicated that the open unemployment rate had dropped from 9.0% to 8.6%. Healthy sales on Black Friday (November 25), the traditional beginning of the holiday shopping season, also cheered investors during the following week.
2011-12-06 What Are Investors Up To? by Chris Maxey of Fortigent
With markets ebbing and flowing and making it virtually impossible to differentiate up from down, it has become all the more difficult to determine what qualifies as an attractive investment. While equity markets rallied into the end of November, volatility remains well above its long-term average, causing most investors to question their equity allocations. It should come as no surprise, then, that individual investors are anything but confident in the latest rally. Macroeconomic headlines and excessive volatility are dampening even the most hardened investors faith in financial markets.
2011-12-06 Markets Cheer Economic and Policy Progress by Bob Doll of BlackRock Investment Management
Although last week's news was positive it is too early to declare any sort of victory and it is important to remember that the market gains that occurred last week did not match the losses of the previous two weeks. However, it does appear that conditions are continuing to improve. The coordinated rate action and continued easy availability of money should ease some of the world's debt burdens. On the economic front, we are expecting GDP growth in the US to increase to at least 3% in the fourth quarter, which should provide further evidence that the macro backdrop is getting better.
2011-12-06 Adding Some Holiday Gloss to a Not-So-Super Month by Team of BondWave Advisors
November began with a European shakeup that did little to bolster the confidence of investors. Fear raged as Greece and Italy threatened to roll back efforts made by the ECB and IMF. In the US, all eyes were on the supercommittee, which was tasked with reducing the deficit over the next 10 years. BondWave Advisors discuss the US economic indicators that brought a coat of gloss to the pessimism and provide additional insight into the US Treasury, Corporate and Municipal Bond Markets.
2011-12-06 Evaluating Optimum Currency Areas: The U.S. versus Europe by Ben Emons of PIMCO
While economic integration has progressed materially since the inception of the EMU, the U.S. scores much higher in terms of labor productivity, labor mobility and wage flexibility. Research shows that wage rigidity-defined as wage freezes or cuts as a fraction of total workers-is much lower in the U.S. than the eurozone. Eliminating these rigidities is crucial for the eurozones growth as an optimum currency area. Albeit painful, the intensity of the debt crisis in Europe may force a quicker progress of reform implementation, which could be a competitive advantage for the EMU in the future.
2011-12-06 Decade-Long European Recession Coming Up by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Reflections on the Un-Level Playing Field. What could possibly be more un-level than guaranteeing banks and bondholders will never take losses? When there are more losses, and there will be, the only way to guarantee banks do not take them, is to have someone else take them, namely taxpayers. If Sarkozy gets his wish, taxpayers, not bondholders will pay the price. The same holds true for Ireland, Spain, Belgium, and Italy. The only true way to level the playing field is to make banks and bondholders who take foolish risks to pay the price for their foolish actions.
2011-12-06 Treasury Inflation Protected Securities: Whats Next? by Vishal Khanduja of Columbia Management
TIPS have performed relatively well in 2011. Over the next 12 months we expect TIPS to outperform equivalent maturity U.S. Treasuries, However, given the current historic low level of real interest rates, we believe that absolute returns for the asset class will be only slightly positive. Our view is based on three factors: U.S. economic and policy outlook, recent trends in the components of consumer inflation and current valuations versus our base case assumptions.
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.
2011-12-05 And That's The Week That Was by Ron Brounes of Brounes & Associates
One week does not make a trend, especially since politicos across the globe have been more than capable of messing up a good thing in the past. Black Friday came and went, but hopefully the holiday spirit remains and shoppers still frequent the malls. The grand plan in Europe surely could ease the recurring tensions of the past few years, but grand plans have had a way of fizzling in the past. Dont put it past Congress to rain on the market parade. Do all investors celebrate the Santa Clause rally, regardless of religious affiliation?
2011-12-05 Have We Avoided A Recession? by John P. Hussman of Hussman Funds
Recent U.S. economic reports have improved modestly from the clearly negative momentum that we saw in late-summer. Unfortunately, the underlying recessionary pressures we observe are largely unchanged. When we take the present set of economic evidence in its entirety, we see very little evidence of a meaningful reduction in recession risks. Indeed, the evidence from the rest of the world, both developed and developing, reinforce the expectation that the global economy is approaching a fresh contraction.
2011-12-05 Solid Improvement by Charles Lieberman of Advisors Capital Management
The latest employment report showed significant improvement. Job growth is still not strong enough, but the gains are sufficient for the expansion to continue without faltering, as long as the financial crisis in Europe is addressed. And finally, it appears that the Europeans are closer to resolving their debt issues.
2011-12-05 Engines of Doctrine by Christian Thwaites of Sentinel Investments
European leaders have a tough time stringing together a coherent sentence but the words go roughly like this: 1) drive down deficits 2) pummel inflation 3) encourage companies to invest more and 4) households to spend more and, thus, fingers crossed, 5) create employment. The problem with this is that output gaps drive down aggregate demand and prices. And no business executive will invest while demand is leaking. And so will not increase employment. This standard trap is exacerbated when there is no central bank that can do what central banks do.
2011-12-05 Year of the Living Dead Stock Market by Kristina Hooper of Allianz Global Investors
Stocks have been acting like a pack of zombies this year: wandering around aimlessly, frightening off everyone, but not really getting anywhere. However, recent data suggest an awakening.
2011-12-05 Economy Improving, Stocks Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors
Remember the big fat zero jobs reports back in August? The US was supposedly teetering on the brink of another recession, or maybe depression. Democrats wanted more government spending stimulus. Republicans said President Obama was the equivalent of a zero. With all this negative sentiment, the Dow fell 250 points that day. But something happened on the way to the bank. One month later, that big fat zero was revised up to a +57,000, the next month it was revised up again to +104,000. All that recession talk in early September was highly misleading.
2011-12-05 The Shortest Quarterly Letter Ever by Jeremy Grantham of GMO
Sadly, I feel increasingly vindicated by my seven lean years forecast of 2 years ago. The U.S., and to some extent the world, will not easily recover from the current level of debt overhang, the loss of perceived asset values, and the gross financial incompetence on a scale hitherto undreamed of. Separate from the seven lean years syndrome, the U.S. and the developed world have permanently slowed in their GDP growth. This is mostly the result of slowing population growth, an aging profile, and an overcommitment to the old, which leaves inadequate resources for growth.
2011-12-05 Treading Water by Scott Brown of Raymond James Equity Research
The good news is that the economy does not appear to be contracting. The bad news is that its still not growing fast enough to make up much of the ground lost during the downturn. The unemployment rate fell to 8.6% in November, from 9.0% in October and 9.8% a year ago. However, more than half of that drop was due to a decrease in labor force participation. The data suggest an economy that is growing just enough to absorb the growth in the working-age population.
2011-12-03 December Monthly Economic Update by Justin Anderson of Cambridge Advisors
While the improving domestic economic picture seems to be pointing to continued slow growth, the markets are focused on Europe as they continue the tumultuous process of finding a resolution to their debt crisis. Until a long-term solution is found, we will likely continue to experience above average market volatility. In this environment we continue to favor a diversified mix of asset classes with an emphasis on yield.
2011-12-03 Falling Unemployment Rate is 'Statistical Mirage' by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Those who think the economy is improving based on the falling unemployment rate are looking at a statistical mirage based on an extremely atypical and prolonged drop in the labor force.
2011-12-03 Schwab Market Perspective: Short-term PainLong-term Gain? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Markets have been under pressure as the crisis in Europe has recently intensified, providing the impetus for more aggressive action and an eventual resolution, including this week's coordinated central bank actions. Economic data in the United States continues to be largely better than expected. The supercommittee failed to come to a deficit reduction agreement. While markets expressed initial disappointment, their failure may end up being beneficial as it forces spending restraint. As the euro crisis has deepened, some steps have been taken but mostly address liquidity, not solvency.
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 o