More on Related Themes
2013-05-20 Global Real Estate Is Hot Again, but Where Are the Best Opportunities? by Joe Rodriguez of Invesco
In this low interest rate environment, yield-hungry investors have been moving out of bonds, and many are opting for real estate investment opportunities. Combine that with a structural undersupply of institutional quality real estate in many key cities across the globe, and an attractive case for investment starts to emerge. Here’s where we see the most attractive and promising opportunities by region this year.
2013-05-18 All Japan, All the Time by John Mauldin of Millennium Wave Advisors
This week we again focus on Japan. Their stock market has been on a tear, and their economy grew 3.5% last quarter. Is Abenomics really the answer to all their problems? Is it just a matter of turning the monetary dial a little higher and voila, there is growth? Why doesn’t everyone try that? And what would happen if they did?
2013-05-17 Making the Most of Equity Allocations by Andrew Pyne, Sabrina Callin of PIMCO
We believe slowing global growth and deleveraging are likely to result in lower long-term returns for equities. Traditional approaches to building equity portfolios may not be enough for investors to meet their return goals. We have found three complementary ways investors can enhance equity return potential: fundamental indexes, index-plus strategies and high active share stock selection approaches.
2013-05-17 Stress Points: What High Frequency Data Tell us About Hidden Tail Risks by Vineer Bhansali, Qingxi Wang of PIMCO
Whereas rare events that occur over lower frequency, longer horizons are much harder to find (and hence much harder to derive statistics from), intraday events create a larger, more accessible data set that can be used to supplement data on tail events. Analyzing the reactions of different markets to intraday tail events can provide valuable information for investors looking for effective tail risk hedges for their portfolios.
2013-05-17 A Matter of Perspective by Robert Horrocks of Matthews Asia
A Hong Kong investor once told me that he considered Asia’s capital markets to be like breaking waves; their rhythms often violent, but ultimately, they make a steady progression up the shore. It has often been noted that many Asia investors play these short-term rhythms. But ultimately the tide does come in and there is room for the long-term investor.
2013-05-17 Opportunistic Investing: Making the Most of Your Cash in Today's Market by Chris Engelman of Cedar Hill Associates
With the Standard and Poor’s 500 Index rising more than 20% since last June, some people are reluctant to invest now, fearful that stocks are poised to tumble again. By focusing on their long-term investment objectives rather than short-term market fluctuations, however, investors can plan for a sound financial future. Here, Cedar Hill Managing Director Chris Engelman offers strategies for building a portfolio that helps to limit market risks and increases the likelihood of achieving your long-term goals.
2013-05-17 Weekly Market Highlights by Matthew Rubin of Neuberger Berman
Bank of England leaves monetary policy unchanged.
S&P 500 and DJIA post gains of 1.3% and 1.1%, respectively. U.S. inflation and housing data and euro area GDP headline this week’s economic releases.
2013-05-17 Finding Opportunity Far and Near by Frank Holmes of U.S. Global Investors
Would it surprise you to learn that a vast majority of equity valuation models state that stocks should head much higher over the next five years?
2013-05-16 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.
2013-05-16 Investors Living in Emerging Markets are a Bullish Bunch! by Mark Mobius of Franklin Templeton Investments
Part of my job involves putting myself out on a limb at times, and I have taken the risk of being subject to contrary (sometimes enthusiastically so) viewpoints. I’ve even been accused of being too optimistic about emerging markets, perhaps partly because my views often represent a stark contrast to dramatic news headlines. So when I took a look at the findings of Franklin Templeton Investments’ 2013 Global Investor Sentiment Survey (GISS),1 I was pleased to discover my longstanding optimism about emerging markets seems to be spreading among investors.
2013-05-16 Hold Your Houses: The Housing Recovery May Take Longer Than You Think To Reach Consumers by Joshua Anderson, Emmanuel S. Sharef, Grover Burthey of PIMCO
New residential construction needs to double from 2012 levels to meet long-run stable demand, and the pace of that increase is critical. Consumer credit growth is hindered by strict lending standards, continued deleveraging and limits to mortgage equity withdrawal. As a result, the balance of mortgage debt is unlikely to meaningfully increase in the next 12-18 months, delaying a return of the virtuous consumer cycle.
2013-05-16 The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued by Chuck Carnevale of F.A.S.T. Graphs
The Dow Jones industrial average sits above 15,000, an all-time high. But don’t be fooled, this doesn’t mean that stocks are expensive. I understand that it seems logical to assume that
2013-05-16 Everybody Wants Some: Central Banks and Bond Funds Step up Buying of Stocks by Liz Ann Sonders of Charles Schwab
The stock market has broken out of its "triple top" formation, which started in 2000, yet remains reasonably valued. Supply within the stock market has been dwindling thanks to near-record company buybacks. Demand for stocks is coming from some seemingly unlikely sources: global central banks and bond mutual funds.
2013-05-15 Things My Mother Told Me and Some She Didn't by Jerry Wagner of Flexible Plan Investments
Today the phrases I’m most likely to hear are very different. A couple of them are well worth heeding. They’re all well known on Wall Street but they never passed over my mother’s lips.
2013-05-15 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Even in the face of this year’s remarkably vibrant stock market, there remains some ugly undercurrents of how the bounty doesn’t touch everyone. In particular, I find it extremely disquieting, as an investor and as a citizen, that people might be going to bed hungry.
2013-05-15 Dissecting the Rally: What Sectors Look Attractive? by Russ Koesterich of BlackRock Investment Management
The current rally has been fueled by investors looking for relatively "safe" areas of the market. As such, the classic defensive sectors, such as utilities, consumer staples and healthcare, have been outperforming. This trend may be changing, indicating that sectors such as energy and technology are growing more attractive.
2013-05-15 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks moved higher again last week as the data continues to reflect an economy that continues to trudge along to the consternation of many.
2013-05-15 Yen Weakness: Buffett\'s \"Shot Heard Round the World\'\" by Bill Smead of Smead Capital Management
We returned recently from the Berkshire Hathaway Annual Shareholder Conference. The most exciting and profound comment to us was what Warren Buffett said about the unprecedented actions the last three years by the Federal Reserve Board. Buffett was asked about the risks of the Federal Reserve’s current plan to buy Treasuries to keep interest rates very low.
2013-05-15 How to Take Advantage of the Great (Sector) Rotation by Russ Koesterich of iShares Blog
The real Great Rotation may just be a shift to cyclical sectors from defensive ones rather than a move to bonds from stocks. Russ explains and offers 3 ways to play this rotation.
2013-05-15 Pacific Basin Market Overview by Team of Nomura Asset Management
Pacific Basin equity markets continued to rally in April, led by Japan where the central bank announced that it intends to double the monetary base and inject liquidity into the markets. The MSCI AC Asia Pacific Free Index including Japan gained 4.9% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.6% higher in April. (All performance figures are based on MSCI indices in U.S. dollar terms with dividends included unless otherwise stated.)
2013-05-15 The Great Capitulation by Pamela Rosenau of HighTower Advisors
If you were to browse the virtual bookshelves of Amazon, some of the latest titles do not seem overly optimistic about the future. In Niall Ferguson’s The Great Degeneration, he examines why civil society is in complete “free fall”. Another recent “pick me up” entitled The Great Deformation, by former Reagan budget director David Stockman, discusses the negative impacts of Washington’s political dysfunction to our democracy.
2013-05-14 Is Kyle Bass Wrong About Japan? by Robert Huebscher (Article)
It’s standard practice for short sellers to kick dirt on their targets, and Kyle Bass is doing just that by asserting that Japan’s economy is on the verge of a financial crisis. In a talk on May 3, he said that Japan’s demise is imminent. So far, though, Bass has been wrong – and he has his detractors, who are far less certain of Japan’s destiny.
2013-05-14 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 Nassim Taleb on the Anti-Fragile Portfolio and the Benefits of Taking Risks by Ben Huebscher (Article)
As we recover from the most recent financial crisis, how we can we learn from the mistakes to best prepare for the future? Nassim Taleb tackled this very question in his latest book, Antifragile: Things That Gain From Disorder, which built off his previous works and applies the lessons learned to today’s biggest challenges. Taleb examined how small doses of volatility can help systems handle larger disruptors in the future.
2013-05-14 Guide to Working with Monetary Napalm by Scott Colyer of Advisors Asset Management
Napalm is a highly incendiary form of jellied fuel. It was used extensively in the Vietnam War to quickly ignite massive fires over large areas of land. In the world of financial incendiaries, the Fed’s overwhelming monetary stimulus has ignited asset prices in the United States with the force and effectiveness of napalm. Is the fire short lived? Are the gains in asset prices temporary or can they be believed? Are the housing and stock markets on fire just because of the Fed’s quantitative easing (QE) or could there be a much more fundamental reason?
2013-05-14 Housing Finally Breaks Free by Chris Maxey, Ryan Davis of Fortigent
Housing, which for so many years represented everything bad about the credit crisis, is finally beginning to have its day back in the sun. Trends in housing markets around the country are improving, to the benefit of the overall economy. It appears that trend is set to continue.
2013-05-14 Cyclical and Emerging Market Strength May Be Pointing to Better Growth by Bob Doll of Nuveen Asset Management
Last week U.S. equities advanced as the S&P 500 increased by 1.3%. We have been amazed bythe market’s ability to continue to rally in an environment in which sales growth has been anemic and earnings gains have been largely based on companies’ abilities to manage margins and utilize financial engineering.
2013-05-14 Changing Face of High Yield by Christian Thwaites of Sentinel Investments
High yield has been on a tear. A series of fortunate events have made this one of the best asset classes in recent years. It has outperformed the S&P[1] nine out of the last thirteen years. In those that it lagged, underperformance averaged 1.9%. Outperformance averaged 9.7%. From 1985 to 2012, high yield had five down years averaging (-8.8%). The S&P had five down years averaging (-16.6%). Over the entire period, high yield underperformed the S&P by around 180bp but with about half the risk and a 0.58 correlation.
2013-05-14 Who is Henry Singleton? by Jeffrey Saut of Raymond James
The year was 1974 and Teledyne (TDY/$77.56/Outperform), on a split-adjusted basis, was trading at about $0.05 per share. By 1986 it was changing hands around $75 per share. Unfortunately, back in 1974 I didn’t have enough money to buy more than 10 shares, having lived through the devastating bear market of 1973 1974 where the D-J Industrial Average (INDU/15118.49) lost 47% of its value.
2013-05-14 Inflation Update by Team of North Peak Asset Management
Basing investment decisions on inaccurate measurements of the inflation rate can result in investors unknowingly positioning their portfolios to lose purchasing power over time. This mis-measurement could be especially dangerous when yields are low. For example, evaluating a nominal 3% investment opportunity using an inaccurate 2% inflation rate indicates a marginally attractive 1% real return opportunity. However, if inflation is actually running at 5%, this becomes a deeply unattractive negative 2% real return investment.
2013-05-13 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 Whither Interest Rates and \"Safe\" Investments? by Charles Lieberman of Advisors Capital Management
It was an interesting week for comments from notables regarding the future direction for interest rates. Bill Gross suggested yields had bottomed recently. Warren Buffett "pitied" bond investors, (but not so much he was unwilling to supply them with more bonds issued by Berkshire.) High yield bond yields declined below 5% and risk spreads continued to erode. The "Great Rotation" from bonds into stocks has not really even begun yet. Still, it only seems like a matter of time before interest rates begin to rise, severely hurting investors looking for safety.
2013-05-13 Closing Arguments: Nothing Further, Your Honor by John Hussman of Hussman Funds
Nothing further, your honor. I am resting my case.
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.
2013-05-11 Three Reasons to Buy Gold Equities Today by Frank Holmes of U.S. Global Investors
A strong stomach and a tremendous amount of patience are required for gold stock investors these days, as miners have been exhibiting their typical volatility pattern. That’s why I often say to anticipate before you participate, because gold stocks are historically twice as volatile as U.S. stocks. As of March 31, 2013, using 10-year data, the NYSE Arca Gold BUGS Index (HUI) had a rolling one-year standard deviation of nearly 35 percent. The S&P 500’s was just under 15 percent.
2013-05-10 A Tale of Two Markets: Equity Bulls and Bond Bears by Douglas Cote of ING Investment Management
Surging equity markets absent an accompanying rate rally is a red flag, as Treasury yields remain well below “normal”. While investors’ renewed enthusiasm for equities is warranted, they must be careful to avoid the “folly of gaming diversification”. Corporate earnings have impressed, though revenue has struggled due in part to a moribund Europe. Divergent markets mean investors should stay broadly diversified in equities and real bonds not near-cash and ever alert to the fundamentals.
2013-05-10 The Importance of Being Different by Franois Sicart of Tocqueville Asset Management
In his latest essay, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, writes about how superior investment managers outperform their market benchmarks -- by taking advantage of volatility, among other things -- as well as how to properly evaluate investment performance.
2013-05-10 DICK's Sporting Goods Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of DICK’s Sporting Goods Inc through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-05-10 3 Reasons to Explore the Frontier by Russ Koesterich of iShares Blog
Though frontier markets have outperformed developed and emerging markets so far this year, it’s not too late to explore the frontier. Russ offers three reasons to consider having a small strategic allocation to “pre-emerging” world equities.
2013-05-09 China's Building, but Will They Come? Ghost Cities by Mark Mobius of Franklin Templeton Investments
Some of you may have heard or read about the current state of the real estate market in China, often covered in a sensationalistic way, with talk of “ghost cities” and “bubbles” ready to burst and so forth. These types of reports can cause quite a jolt in the market, which is what we saw happen, probably not coincidentally, after a popular US television newsmagazine aired a somewhat negative report in March. But as I’ve said many times before, there’s often more to a story; important parts can end up on the cutting room floor.
2013-05-09 Equity Market Distortions Create Big Payback Potential by Joseph Paul, Kevin Simms of AllianceBernstein
Even after this year’s equities rally, market imbalances created by the financial crisis in 2008 have not disappeared. When these distortions unwind, we expect deep value stocks to rapidly recover.
2013-05-09 BlackRock Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of BlackRock Inc through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-05-09 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.
2013-05-09 The Effect of Negative Interest Rates in Europe by Zach Pandl of Columbia Management
In his press conference last week, European Central Bank (ECB) President Mario Draghi signaled that policymakers may be more open to a cut in the central bank’s deposit rate. Although Mr. Draghi acknowledged this move could have negative side effects, he added “we will be able to deal with the negative consequences we will look at this with an open mind.” Several major central banks considered negative deposit facility rates during and after the financial crisis, but so far, all have determined that the idea did not pass the cost/benefit test.
2013-05-08 Are Recent Market Highs Merely Rhymes, or Something More? by Joe Kringdon of Pioneer Investments
As someone smarter than me once observed, history never repeats itself, but it does rhyme. Oftentimes those rhymes, like my family’s dinner bills, are simply head fakes’ curious coincidences with no residual meaning. Other times, however, they do carry meaningful implications. Consider, for example, what’s going on in the markets right now.
2013-05-08 Deflation Is OverPlease Come Out by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A blooper reel of 20th century history would likely include a feature on Japanese soldier Hiro Onoda. Posted to a small island in the Philippines during the waning days of World War II, when Onoda’s mission proved unsuccessful he was ultimately forced to flee into the woods, where he survived on a steady diet of coconuts and bananasfor almost 30 years after the end of the war.
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 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs
It has been years since we have seen new highs on the Dow Jones Industrial Average and the S&P 500. Although the wait can be traumatizing, it’s nice to get proof that market prices ultimately recognize growth of business value.
2013-05-08 Is Your Investing One Dimensional? by Jerry Wagner of Flexible Plan Investments
At the National Association of Active Investment Managers (NAAIM) Uncommon Knowledge Conference in Denver last week, a reporter from Financial Planning magazine asked us, “What is active investing’?” Many confuse the phrase with the simple act of running a mutual fund populated with stock picks within the strict guidelines of a prospectus, as opposed to running an index fund, where the manager simply buys and holds the shares making up a particular stock or bond index.
2013-05-08 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 Niall Ferguson: Four Reasons Why the U.S. is Failing by Robert Huebscher (Article)
Niall Ferguson is the champion of anti-Keynesian economists. Last week, he explained why America’s pursuit of Keynesian policies is leading to disastrous consequences.
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 Deere & Co: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of Deere & Co through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-05-07 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 Why Did Gold Prices Fall So Sharply? by Paresh Upadhyaya of Pioneer Investments
April’s sharp decline in gold got people’s attention. Plunging from $1,561 to $1,347/oz on April 12 and 15, it was a staggering decline of 13.7% the biggest 2-day drop since 1983. Is anything significant going on behind the scenes? We believe this price action is not a new phenomenon for gold, but a continuation of a much bigger trend that has been in place since the third quarter of 2011.
2013-05-07 Attractive Dividends? Earnings Growth? A Way to Get Both by Team of Lord Abbett
International equities provide broader opportunities for combining appealing divided yields and earnings growth.
2013-05-06 Sell in May But Stick Around by Christian Thwaites of Sentinel Investments
A bit odd, perhaps, to worry about deflation as the S&P hits all time highs. But the whiff of deflation is in the air. The YOY PCE core (the one the Fed likes) came in at 1.1% which is the lowest it has ever been.
2013-05-04 The QE Sandpile by John Mauldin of Millennium Wave Advisors
Sell in May and go away? What about "risk off?" And ever more QE? Today’s letter is a quick note and a reprise of a popular letter from yesteryear (with a bit of new slant), as I am at my conference in Carlsbad.
2013-05-03 Oracle Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graphs on Oracle Corp shows a picture of undervaluation based upon the historical earnings growth rate of 18.5% and a current P/E of 13.7. Analysts are forecasting the earnings growth to continue at about 10%, and when you look at the forecasting graph below, the stock appears undervalued (it’s inside of the value corridor of the five orange lines - based on future growth).
2013-05-03 Asia\'s Resource Riches vs. Reform by Sharat Shroff of Matthews Asia
In recent years, the rate of acquisitions of local Asian firms by multinational companies has generally increased, particularly in China. This has happened across many industries such as industrials, medical devices and consumer staples. In many cases, if the multinational firms are not acquiring an entire company outright, they are taking a controlling stake, rather than a minority stake as a passive shareholder.
2013-05-02 Nu Skin Enterprises: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of Nu Skin Enterprises through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-05-02 Europe at a Minimum Speed by Scott Minerd of Guggenheim Partners
Market forces are correcting the growth dichotomy between the European Union’s core and periphery, thus improving the outlook for the region.
2013-05-02 Gold Recovers Amidst Uncertainty by John Browne of Euro Pacific Capital
The selloff in gold that captured the world’s attention in mid-April has revealed some truths about how the market trades and the sentiments of many of the investors who have piled into the trade over the past few years. While the correction does highlight a higher degree of uncertainty than many of the most ardent gold advocates had anticipated, it does not represent the historic "end of an era" reversal that the many in the media have so gleefully suggested. In many ways, the market has shown a resiliency that its detractors do not understand.
2013-05-02 A Case for Owning Commodities When No One Else Is by Frank Holmes of U.S. Global Investors
Sometimes following where money is being invested is a solid course of action to gain alpha; other times, a better opportunity lies in going the opposite direction, i.e., thinking contrarian.
2013-05-02 In Treasuries, the Risks Outweigh the Rewards by Russ Koesterich of BlackRock Investment Management
The 1Q GDP report was mixed, but the lack of income growth remains troubling. Oil prices are likely to remain range-bound, but that should be good enough to help energy stocks. While yields could decline further in the near-term, Treasuries look quite unappealing.
2013-05-01 The Road to Omaha: Volatility or Wealth Creation by Bill Smead of Smead Capital Management
This is the last installment in our five part series called “The Road to Omaha”. In this series of missives we have looked at the keys to the investing success of Warren Buffett leading up to the 2012 annual meeting.
2013-05-01 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 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.
2013-05-01 US Economy to Get a Hollywood Makeover by Gary Halbert of Halbert Wealth Management
You may have heard that the government is going to make some major changes in how our Gross Domestic Product is calculated later this year. Your first thought might be that this is no big deal. However, I will argue today that it is a very big deal, the biggest in a decade, and you need to know why. So I hope you read what follows with more than a passing interest.
2013-05-01 There Will Be Haircuts by Bill Gross of PIMCO
It has been the objective of the Fed over the past few years to make even more innovative forms of money by supporting stock and bond prices at cost on an ever ascending scale, thereby assuring holders via a “Bernanke put” that they might just as well own stocks as the cash in their purses. Gosh, a decade or so ago a house almost became a money substitute. MEW or mortgage equity withdrawal could be liquefied instantaneously based on a “never go down” housing market. You could equitize your home and go sailing off into the sunset on a new 28-foot skiff on any day but S
2013-05-01 Looking at Leverage Outside the Box by Team of Franklin Templeton Investments
Yield-seeking investors have been boxed in by the near-zero US rate environment, and it seems like there are few ways out. But for those willing to set aside preconceived ideas about the word “leverage,” the lesser-known leveraged loans category may be an alternative to consider in the credit space. Mark Boyadjian, senior vice president and director of our Franklin Floating Rate Debt Group, spoke to us recently about what these often-misunderstood vehicles are and what yield-seeking investors need to know before they take the plunge.
2013-04-30 The Most Underappreciated Threat to the Advisory Business by Bob Veres (Article)
Financial advisors have often heard the warning that their investment management services are going to become commoditized – so often, in fact, that you can forgive them for ceasing to pay attention. But if you don’t believe that an online algorithm can replace the sophisticated advice offered by a flesh-and-blood advisor, then check out the Wealthfront USA website.
2013-04-30 The Best Solution for Protecting Retirement Portfolios: Put and Call Options versus GLWBs by Joe Tomlinson (Article)
Retirees cannot be exposed to severe – or even modest – market losses. They need to protect their savings in a cost-effective manner. I will compare the projected outcomes for two types of strategies: options, which can reduce volatility, and products that guarantee lifetime income, such as variable annuities with guaranteed lifetime withdrawal benefits.
2013-04-30 Implementing Behavioral Portfolio Management by C. Thomas Howard, PhD (Article)
Behavioral portfolio management is based on the notion that if the advisor can redirect his or her emotions and mitigate the impact of client emotions, it is possible to build superior portfolios by harnessing market emotions. This article describes how this can be done and presents evidence of the superiority of focusing on investor behavior when constructing and managing portfolios.
2013-04-30 Is the U.S. Housing Recovery Built to Last? by Milton Ezrati of Lord Abbett
The sector’s comeback will continue, but the pace will likely moderate. Here’s why.
2013-04-30 The U.S. Economy A Gain in GDP? by Marie Schofield of Columbia Management
The advance estimate of gross domestic product (GDP) released by the Bureau of Economic Analysis last Friday showed that the U.S. economy grew at an annualized rate of 2.5% in the first quarter, below expectations of an increase of 3.0%. Despite the decent first quarter advance, year-over-year gains in nominal and real GDP are largely unchanged from the prior quarter at 3.4% and 1.8%, respectively. While growth rates at this slow pace in these measures have typically heralded recessions, they appear stable but also underscore a critical problemthe failure to generate escape velocity.
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 Is May Really the Time to Go Away? by Chris Maxey, Ryan Davis of Fortigent
As investors near the witching hour of May, the oft-asked question once again comes to the foreground is it best to sell in May and walk away? This year could prove the exception to recent history, but a number of trends are beginning to take shape inside the market’s inner workings.
2013-04-30 ProVise Bullets by Ray Ferrara of ProVise Management Group
With the passage of the American Taxpayer Relief Act of 2012, a lot of people felt that things were set as it related to estate taxes. Apparently everyone believed that except the President, who has proposed several changes to estate tax law in his fiscal 2014 budget.
2013-04-30 Beyond Gold: 4 Reasons to Think Energy by Russ Koesterich of iShares Blog
While the sell-off in gold has dominated headlines lately, another commodity oil has also experienced price declines in recent months. But despite crude’s drop, Russ is still a fan of energy stocks for four reasons.
2013-04-30 Beware of the New Systemic Risk by Ashwin Alankar, Michael DePalma of AllianceBernstein
It felt like there was nowhere to hide from the market declines last Monday, April 15, when stocks, bonds and commodities fell in unison across the world, well before the Boston bombings that day. We believe that this failure of diversification was instigated by increasingly powerful multi-asset funds, many of which use leverage, which may have become a new source of systemic risk for investors.
2013-04-29 High Yield in a Rising Rate Environment by Team of AdvisorShares
We have all witnessed a major move in Treasury rates over the last couple months, causing concern for many that we may be in the early stages of a rising interest rate environment. The traditional thought is that as interest rates rise, bond prices fall. But looking at history, the high yield market has defied this widely held notion. This paper from Peritus Asset Management examines the main reasons why high yield bonds have historically performed well during times of rising interest rates.
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 Economic Slowdown Has Not Weakened Share Prices by Bob Doll of Nuveen Asset Management
U.S. equities rebounded last week as the S&P 500 increased by nearly 1.8%,1 despite continued weak economic data. We believe recent data is not yet weak enough to change forecasts. The relative stability of data and forecasts - supported by stimulative monetary policies, an improving U.S. housing market and fading political polarization in the U.S. and Europe - sends a message of reasonably low volatility and manageable downside risks.
2013-04-29 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.
2013-04-26 Coach Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graphs on Coach Inc shows a picture of undervaluation based upon the historical earnings growth rate of 27.3% and a current P/E of 13.7.Analysts are forecasting the earnings growth to continue at about 13.5%, and when you look at the forecasting graph below, the stock appearsundervalued (it’s inside of the value corridor of the five orange lines - based on future growth).
2013-04-26 The Return of the Asian Tigers: Guinness Atkinson Asset Management Asia Brief by Edmund Harriss, James Weir of Guinness Atkinson Asset Management
Often overlooked by international investors, South East Asia encompasses some of the world’s best performing equity markets in recent years, putting the more established emerging markets in the shade. This performance is backed by good economic results and the favourable demographics of some of these countries, with youthful populations ready to improve productivity and increase consumption. One catalyst for future growth is the Association of Southeast Asian Nations (ASEAN) free trade area, which will bring down trade barriers between the South East Asian nations.
2013-04-26 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 The Race of Our Lives by Jeremy Grantham of GMO
Our global economy, reckless in its use of all resources and natural systems, shows many of the indicators of potential failure that brought down so many civilizations before ours. By sheer luck, though, ours has two features that might just save our bacon: declining fertility rates and progress in alternative energy. Our survival might well depend on doing everything we can to encourage their progress. Vested interests, though, defend the status quo effectively and the majority much prefers optimistic propaganda to uncomfortable truth and wishful thinking rather than tough action.
2013-04-26 Many Of My Dividend Growth Stocks Have Become Overvalued, What Do I Do Now? by Chuck Carnevale of F.A.S.T. Graphs
To me, there’s almost nothing better than finding a great company that I truly want to own at a fair valuation, or better yet, undervalued. In the long run, it has been my experience that this usually leads to outsized future returns, especially if you buy stocks when they are undervalued at the time. But there is quite often a side effect that can prove very disconcerting. Once an undervalued stock starts moving to the upside, momentum will often carry it above what prudent fair valuation would dictate.
2013-04-26 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 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 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 CASSHing-Out by Russ Koesterich of iShares Blog
Russ explains why he’s no longer advocating the concept of investing in certain smaller developed countries known as the CASSH countries.
2013-04-25 Murkier Prospects for Merkel by Milton Ezrati of Lord Abbett
An anxious German electorate may make it harder for the chancellor to continue her pro-cooperation approach to Europe’s fiscal crisis.
2013-04-25 Value Investing and the Philosopher's Stone by Kevin Simms, Joseph Paul of AllianceBernstein
When J.K. Rowling finished her first manuscript of Harry Potter and the Philosopher’s Stone in 1995, she submitted it to 12 publishers, who all rejected the book. In time, those publishers would regret missing the chance to back an unknown author who would later take the world by storm. Like the publishers who passed over Harry Potter, we believe that many investors today risk missing a historic opportunity to invest against the grain in attractively valued stocks across the globe.
2013-04-25 Safe Harbor Is Safe for Secure Lifetime Income Default Investments by Daniel Notto of AllianceBernstein
The new frontier in US defined contribution (DC) plans involves qualified default investment alternatives (QDIAs) with a secure lifetime income component. Will such vehicles retain their safe-harbor protections? Yes.
2013-04-25 Q1 2013 Market Commentary by John Prichard of Knightsbridge Asset Management
The country now in the news is tiny Cyprus, which received a bailout for its banks from the European Union (EU), but only after agreeing to steep losses for those banks’ large depositors. Hitting up bank deposits represents a new dimension to the European debt crisis and illustrates how in a crisis, leaders can and often will resort to whatever means are necessary. When the Cypriots first requested a bailout from the EU and were told their depositors had to suffer, they balked and said that was unacceptable...
2013-04-25 Living in Lake Wobegon by Jim Goff of Janus Capital Group
Are we normal? For many quarters, I have counseled investors that we are going through extreme market conditions and that patience was the best strategy. As the panic fades in the rear-view mirror and the road ahead looks less bumpy, I stand by the advice. But I don’t need to repeat it.
2013-04-24 The 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 Market Observations, Deflation Fears by John Rothe of Riverbend Investment Management
Last week, the S&P 500 took a quick dive down toward the 50-day moving average as investors became worried about continued poor economic data. While some investors are quick to point to the Boston Marathon attack as the reason for the decline, there was in fact a large decline in the market before the tragedy in Boston occurred.
2013-04-24 What's Behind China's Economic Slowdown? by Weili Huang of Columbia Management
China’s economy grew by 7.7% year over year (yoy) in the first quarter of 2013, against the market expectation of 8.0% yoy and a prior quarter’s 7.9% yoy. Gross domestic product (GDP) expanded 1.6% quarter on quarter (qoq), with an annualized growth rate of 6.6%, a step down from the 2.0% qoq and 8.2% annualized growth seen in 4Q 2012.
2013-04-23 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 Looking Back at Peak Oil: The Coming Crisis in Energy Supplies by Richard E Vodra, JD, CFP® (Article)
Peak Oil – the maximum sustainable rate of global oil production – happened in 2012. That’s one of the main conclusions of a new report, Fossil and Nuclear Fuels – The Supply Outlook, released in March 2013 by the Energy Watch Group. This event will have profound long-term implications for how advisors should manage clients’ portfolios, and how clients should plan their future expenses.
2013-04-23 Venerated Voices™ Q1 2013 by Advisor Perspectives (Article)
Advisor Perspectives, a leading publisher serving financial advisors and the financial advisory community, has published its Venerated Voices awards for articles published in Q1 2013.
2013-04-23 Enforcing an Office Dress Code by Beverly Flaxington (Article)
Is it too much to ask of my staff members to be dressed well when clients come into our office? I may be old school but the disregard for professionalism is annoying to me.
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 Harsh Words on Gold by Christian Thwaites of Sentinel Investments
As a graduate trainee in a London accepting house in the fall of 1981, I was given the tour and history of my new, 130 year old bank. It was one of the banks that set the daily gold price and had large bullion deposits somewhere under its location at 114 Old Broad Street. But the tour stopped at the vault door. No one went further (probably someone did but it was beyond my pay grade) and further discussion discouraged. Such was the mystery of gold.
2013-04-23 Enhancing Credit Returns in 2013 by Andreas Berndt, Ryan Blute of PIMCO
While credit achieved exceptional returns in 2012, achieving such returns in 2013 will be challenging in light of less upside potential and limited spread compression. Challenged by continued loose central bank monetary policies, alpha generation plays an increasingly significant role in seeking attractive total returns within credit portfolios.
Encouraging investors to provide managers with a variety of innovative approaches and flexibility may enhance the return potential of a European corporate bond portfolio without materially changing overall credit or interest rate risks.
2013-04-23 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!
2013-04-23 Q1 Earnings Leave Much To Be Desired by Chris Maxey, Ryan Davis of Fortigent
Following the strongest first quarter in 15 years, it is not surprising to see equity markets faltering in April. Last week’s decline of 2.1%, however, may reflect deeper concerns about corporate fundamentals amid a mixed earnings season.
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 Gold Strategy Update by John Hathaway of Tocqueville Asset Management
Gold bullion prices have been subjected to a cleverly orchestrated bear raid in our opinion. Selling of paper Comex contracts on Friday, April 12th , and Monday, April 15th, totaled 1 million contracts, exceeding global annual gold production by 12%. The attack succeeded when the technical support in the low $1500’s/oz. easily gave way and led to waves of forced selling. The volume is without precedent and has all the characteristics of a panic liquidation driven by naked short selling.
2013-04-22 Commodity Declines and Weak Data Startle Investors by Bob Doll of Nuveen Asset Management
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-19 Fast Emerging Asia by Taizo Ishida of Matthews Asia
Over the past 20 years, Asia has come a long way to evolve into an asset class in itself. China and India have famously led the way as symbols of emerging nations. But when I think about seeking growth in Asia, I am particularly drawn to the region’s smaller equity markets as attractive hunting grounds for investment opportunities. Asia continues to change at a rapid pace, and this change is not restricted to China’s ever-changing landscape, but to many other areas that may see fewer media headlines.
2013-04-19 Archer Daniels Midland Co: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
For more than a century, the people of Archer Daniels Midland Company (ADM) have transformed crops into products that serve vital needs. Today, 30,000 ADM employees around the globe convert oilseeds, corn, wheat and cocoa into products for food, animal feed, industrial and energy uses. This article will reveal the business prospects of Archer Daniels Midland Co through the lens of F.A.S.T. Graphs fundamentals analyzer software tool.
2013-04-19 Global Economic Overview - March 2013 by Team of Thomas White International
Global economic trends turned softer during the month of March as indicators from Europe showed further declines and U.S. consumer sentiment moderated on labor market uncertainties, government spending cuts, and tax increases. Continuing weakness in European demand has somewhat dulled the export outlook for emerging economies, while government policies to prevent excessive asset price inflation have led to concerns about domestic consumption growth in these countries.
2013-04-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks moved up nicely last week despite poor economic data and a huge decline in precious metals and other commodities.
2013-04-19 India\'s Gas Sector Dilemma by Siddharth Bhargava of Matthews Asia
In India, the fertilizer sector has long depended on gas as a key input. Over the last decade, several power plants that run on gas have been set up as well. Demand has grown 10% each year since 2002 while supplies, largely managed by state-owned enterprises (SOEs), have failed to keep pace. Inefficient capital allocation, lack of incentives and populist policies aimed at maintaining low prices have led the country to import 25% of its gas needs. This has further exacerbated India’s current account deficit, which now stands at 6.7% of GDP.
2013-04-19 CSX Corp Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graphs on CSX Corp shows a picture of undervaluation based upon the historical earnings growth rate of 21.2% and a current P/E of 13.5. Analysts are forecasting the earnings growth to continue at about 12.5%, and when you look at the forecasting graph below, the stock appears undervalued (it’s inside of the value corridor of the five orange lines - based on future growth).
2013-04-19 Are Gold Stocks Oversold? by Steve Land of Franklin Templeton
Gold bugs have been bugging out over a sharp decline in the price of gold, which hit a two-year low in April. Many gold-related stocks felt the sting. We think gold-related stocks could be oversold, and that there are still compelling reasons to own them.
2013-04-19 Gold Buyers Get Physical As Coin and Jewelry Sales Surge by Frank Holmes of U.S. Global Investors
Even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high. This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins.
2013-04-18 Fannie and Freddie Face the Future by Milton Ezrati of Lord Abbett
The mortgage finance giants are the subject of a new policy initiativewith significant implications for the U.S. housing market.
2013-04-17 Gold Is Crashing...And the Storm Begins by John Rothe of Riverbend Investment Management
The storm in the US stock market that I have been talking about for the past few weeks may have finally arrived. After weeks of poor economic data, we are starting to see the first crack in the current euphoria in the markets.
2013-04-17 U.S. GDP: After Some First-Quarter Flurry, a Slowdown? by Ken Taubes of Pioneer Investments
We had a little flush of activity in the first quarter, which we believe will lead to much better GDP potentially well over 3% than people anticipated in the beginning of the year. We look at this activity as a little bit of a catch-up, for a couple of reasons.
2013-04-17 Present and Emerging Risks to the Gold Trade by Amit Bhartia, Matt Seto of GMO
The notion of gold as a hedge against systemic risks is flawed. We believe that the concept of gold’s role as an insurance policy needs to be narrowed significantly.
2013-04-17 Is the Fed Eyeing an Earlier End to QE? by Zach Pandl of Columbia Management
Until September of last year, the Federal Reserve structured each of its bond buying programs in the same way: it announced a fixed amount of purchases and a specific target end date. This changed with the latest quantitative easing (QE) program launched last year. This time, instead of stating a specific dollar amount of purchases, Fed officials left the program open-ended: QE would continue as long as needed to ensure a stronger recovery in the labor market.
2013-04-17 Signs of a Correction by Scott Minerd of Guggenheim Partners
Although the long-term economic picture remains sanguine, a number of global risks and economic results point to a temporary period of consolidation in equity markets.
2013-04-16 All That Glitters Is Not Gold by Scott Colyer of Advisors Asset Management
This quote from Shakespeare’s Merchant of Venice is apropos given the nosedive in the gold markets today. In our 2013 Best Ideas piece we labeled gold a neutral as gold had not had a significant correction since 2008. Our research indicated a significant slowing of bullion purchases by gold Exchange Traded Funds (ETFs) in 2012 versus 2011. We looked for a correction and now need to contemplate whether we are in the end of the commodity bull market or merely a pause that refreshes.
2013-04-16 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, was up 1.03% for the month of March, as the high yield market continued to benefit from stable U.S. economic growth and steady asset reflation driven by the Fed and global central banks.
2013-04-16 Tax Day as Polarizing as Ever by Chris Maxey, Ryan Davis of Fortigent
Tax season is once again upon the American population, and this year, just as in years past, people are less than enthusiastic. It is estimated that the average taxpayer contributed slightly more than $11,000 dollars to federal taxes in 2012 and those figures are on the rise. As might be expected in the current backdrop, however, not everyone shares the same opinion on taxes.
2013-04-16 2013 US Financial Markets by Clyde Kendzierski of Financial Solutions Group
In the fall of 2012 the S&P 500 came close to our forecast high (S&P- 1500) Last year we suggested that not only was the S&P likely to reach 1500, but also speculated that renewed bullish sentiment could take us back to the old highs of 1565. When the S&P touched 1563 a couple weeks ago, I started getting client calls complimenting my prescient forecast.
2013-04-16 All That Glitters by Jerry Wagner of Flexible Plan Investments
Gold prices officially fell into bear market territory on Friday. With a 4% decline that day, the current drop in the price of gold from its August 22, 2011 top crossed the negative 20% mark. Today as I write this, the precious metal is down another 10% plus.
2013-04-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
There may still be people rushing to the Post Office this afternoon or evening to get tax returns in the mailbox. Of course, many others will file for an extension. The first extension is for six months and is automatic. However, when you file your extension, you have to send in the money you think you will owe and file form 4868. If you don’t file an extension, there is a 5% per month late filing fee. An underpayment could also be charged interest, and if the amount is significantly under what is owed there could be penalties as well.
2013-04-15 The (Up) Beat Goes On, Part II by Bob Doll of Nuveen Asset Management
We wrote Part I of this theme on February 11 during the first quarter rally, when the S&P 500 closed the week at 1518. This past week the S&P ended at 1589, after increasing 2.3%. Global stock prices continue to push to new highs and thus provide support for a pro-equity bias. One nuance is that the composition of the equity rally has been abnormally defensive.
2013-04-12 Asia\'s E-Commerce Evolution by Michael Oh of Matthews Asia
Korea and Japan have been trailblazers in terms of making the virtual marketplace platform, through which merchants and manufacturers of all sizes can sell goods to consumers, an e-commerce model in Asia. Unlike in the U.S. and Europe, where many retailers sell directly to customers from their own websites and handle the details of commerce themselves, most Asian e-commerce takes place on “megasites” or virtual markets.
2013-04-12 The Truth About The Impact Of Dividend Reinvesting by Chuck Carnevale of F.A.S.T. Graphs
What follows will be several examples of different kinds of dividend paying stocks offered in order to provide deeper insight into several commonly held notions. With each example, I will focus on how much return comes from dividends and how much comes from capital appreciation. I will also illustrate the precise benefits and effects of dividend reinvestment as it applies to different types of dividend paying stocks.
2013-04-12 The Bank of Japan Pulls All the Stops by Raymund Uy of Invesco
The Bank of Japan (BOJ) surprised the markets by announcing a particularly aggressive round of quantitative easing (QE) designed to rid the Japanese economy of its persistent deflation. The new policy was unexpected not only in the size of the asset purchases announced, but also in the types of securities to be purchased and their maturity.
2013-04-12 Assume a Perfect World by John Mauldin of Millennium Wave Advisors
Waiting for our forecasts to be wrong before we adopt a yet another “solution” based on a temporary fix of yet another forecast that turned out to be wrong is no way to run a railroad, unless you want your train running off a cliff. I applaud the recent attempts in DC to come to a solution on the deficits and budget, but where are the leaders who want to get real with those forecasts?
2013-04-11 The Ripple Effect of Abenomics by Scott Minerd of Guggenheim Partners
Monetary policy in Japan will continue to drive investors in that country to overseas markets, which will affect global asset prices and bond yields.
2013-04-11 Bank of Japan Surprises Market and Yen Reacts by Team of Nomura Asset Management
We recently indicated on March 14, 2013 that we believed the Yen would remain range bound near the level of PPP (purchasing power parity), which we estimated to be between 90 to 95 Yen/USD. We wrote at the time that though currency movements will be affected by various factors, the monetary policies of both Japan and the U.S. are the most important.
2013-04-11 Stockton is Bankrupt: Now What? by James Dearborn of Columbia Management
Although we have no exposure to Stockton, California debt, we thought it would be useful to comment on the city’s financial plight in the wake of the recent bankruptcy court ruling allowing the city to file a “plan of adjustment” or the equivalent of Chapter 11 reorganization. We, and other municipal bond participants, will be watching this process closely to see how the court treats various creditors.
2013-04-10 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 Pacific Basin Market Overview by Team of Nomura Asset Management
Supportive U.S. economic data drove most markets higher during the first quarter of 2013. China underperformed the region amid concerns that the economic recovery may not be as robust as previously expected, while the National People’s Congress in March failed to provide any incentives to the equity market given the absence of pro-growth policies. The MSCI AC Asia Pacific Free Index including Japan gained 5.5% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.0% higher during the quarter.
2013-04-10 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.
2013-04-10 Don't Pay Too Much for That Bordeaux - Or That Bond by Jeff Helsing of PIMCO
The financial market’s reliance on ratings agencies and benchmarks, along with regulations, can cause distortions in the value of some securities. These price distortions can create potential opportunities for some investors. Investors should consider aligning capital allocation with outcome-oriented objectives that aren’t influenced by credit ratings or benchmarks.
2013-04-10 The Clock is Ticking for Passive Management by Team of The Royce Funds
It may feel like only yesterday, but it has been four years since the equity market bottomed in March 2009. Much has changed since that timegovernment debt and the Fed’s balance sheet have exploded, bond yields have declined, and quantitative easing has become the norm.
2013-04-10 Investing for Income? “Safe” Bets Can be Surprisingly Risky. by Joe Kringdon of Pioneer Investments
The recent, seemingly terminal decline in interest rates has been difficult on many investors who have been planning their income needs for the future. Interestingly enough, a wise presenter at a meeting I attended in January* addressed this very point with a wow’ factor of quite a different nature.
2013-04-09 Four Steps to Becoming the Primary Advisor for Top Clients by Dan Richards (Article)
Recently, an advisor who had successfully persuaded an investor with many millions of dollars to open an account asked me how to turn this foothold into a larger share of this client’s assets.
2013-04-09 MLPs: Winning Streak Broken, Growth Story Intact by Sponsored Content from Legg Mason ClearBridge
by Chris Eades, Portfolio Manager (Article)
After an off year clouded by investors’ concerns about future tax policy, ClearBridge’s outlook for MLPs is again brightening. Oil and natural gas production are both ahead of estimates and the resulting infrastructure build-out is continuing.
2013-04-09 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 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
The first quarter of 2013 turned out pretty much as expected: a low volatility environment with the level of bond yields and credit spreads relatively stable. At some point, we have to be happy with earning a yield on our fixed income investments. The last several years have been a major bond bull market, particularly 2012, but with yields at low levels, there is not much room left for bond price appreciation and we should be comfortable with earning our yield and carry.
2013-04-09 The Return of the Ottomans by Bill O'Grady of Confluence Investment Management
Over the past two weeks, Turkey has taken two significant actions. First, while President Obama was visiting the region, Israeli PM Netanyahu offered Turkey an apology for the 2010 commando raid on the MV Mavi Mamara, a Turkish ship that was delivering aid to the Gaza Strip. The vessel was trying to run an Israeli blockade, which was put in place to prevent the region from receiving arms shipments. In the raid, nine people on the Turkish ship died, including eight Turks and one American. Ten Israeli commandos were wounded.
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 A Continuing Case for Dividends by Richard Skaggs of Loomis Sayles
The investment case for dividend-paying stocks is as strong as ever. Many dividend-paying stocks continue to boast yields comparable to or higher than US Treasurys, and the case for dividend growth in the years ahead remains favorable. Dividends have a long history as a significant component of total return, and investors will likely continue to press for rising payouts since corporate balance sheets are flush with cash. What should investors consider as they survey the universe of dividend-paying companies?
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 Europe Stumbles to a Cyprus Solution by Milton Ezrati of Lord Abbett
After several late-night meetings and considerable angst, the members of the eurozone have settled on something for Cyprus that looks very much like a typical bankruptcy. It is comical in a way that people worked so hard to arrive at an already widely known, well-established process. Still, this result may have value. Because Europe through these four years of crisis has strived to tailor settlements for each new challenge, it has always left people in doubt about each outcome, particularly where the pain would fall.
2013-04-08 Can Something Good Be Cheap Too? by Charles Lahr of PIMCO
Over the last eight years, the least volatile components of the MSCI World Index tended to have lower valuations, higher profit margins and higher dividend yields. This anomaly, which appears to be among the most persistent in all of equity space, is rooted in speculative human behavior such as the “lottery ticket phenomenon.”
2013-04-05 PIMCO Cyclical Outlook for the U.S.: Back From the Brink by Josh Thimons of PIMCO
We expect the largest contributors to U.S. growth this year will be housing and related industries, increases in capital expenditures (albeit from very depressed levels), certain manufacturing sectors, such as the auto industry, and the energy sector. We see roughly 1.7 percentage points of drag on GDP coming out of Washington far less than the four to five percentage points of potential drag had there been no fiscal cliff resolution. We believe the Fed will continue with hyperactive monetary policy, which we now call “QE Infinity,” that does not have an explicit end date or progr
2013-04-05 What's Next for U.S. and European Markets? by Mike Temple of Pioneer Investments
I was asked recently to provide some color around the state of global fixed income markets as we close out the first quarter of 2013. Of course, one of the more watched situations in the global markets has been Cyprus’s banking crisis. I won’t go into too much depth on the subject here, as my colleague, Cosimo Marasciulo, has recently provided a comprehensive analysis.
2013-04-05 Could Consumers Change Japan\'s Tide? by Team of Matthews Asia
This year, investor attention has focused on Japan and its macroeconomic policy with hopes that rising inflation expectations might spur businesses to invest and consumers to spend. Since Prime Minister Shinzo Abe and Japan’s ruling Liberal Democratic Party (LDP) regained power late last year and proposed more aggressive monetary policies, including an ambitious inflation target, the yen has weakened more than 20% against the U.S. dollar and more than 15% against the euro.
2013-04-05 Ask Russ: All About Emerging Markets by Russ Koesterich of iShares Blog
Russ answers more client and reader questions this time about emerging market equities and debt.
2013-04-05 Dodging Soccer Balls and Sharks in Recife, Brazil by Mark Mobius of Franklin Templeton Investments
Recife, in Brazil’s northeast Pernambuco state, is known to many as the “Venice of Brazil” given its many waterways and bridges. A welcome winter stop for our emerging markets team, the city is blessed with a tropical climate that’s as warm and sunny as its people. While the residents in this area of Brazil are often regarded as being extremely laid back given the balmy weather, we found them to be very hard workers. We found this seaside and shipping hub was not only a hotbed of tourist activity, but of potential investment opportunities as well.
2013-04-05 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.
2013-04-05 Every Gold Coin Has Two Sides by Frank Holmes of U.S. Global Investors
Just as every coin has two sides, every data point that doesn’t meet expectations usually has an upside somewhere. For instance, although the gold price has fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out this week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
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 The Road To Omaha: Valuation Matters Dearly by Bill Smead of Smead Capital Management
Valuation is the topic that will begin a month-long series we’re calling, “The Road to Omaha.” In the next five weeks as we build to the Berkshire Hathaway annual shareholder meeting, we will present a picture of Mr. Warren Buffet and his investments through the Smead Capital Management lens. There is one central fact on which Warren Buffett, efficient market theorists, and Smead Capital Management agreevaluation matters dearly.
2013-04-03 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 When Does The Great Recession Become the Great Rotation? by Gene Tannuzzo of Columbia Management
Given the strong flows into the bond market over the past few years, many pundits have pondered the beginning of the “Great Rotation” when bond investors begin to move money into the equity market. Investors fear that this shift could cause losses in bond funds as investors flee. Indeed since the start of the Great Recession in 2008, investors have plowed into bond funds as an alternative to equity volatility.
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.
2013-04-03 A Man in the Mirror by Bill Gross of PIMCO
Am I a great investor? No, not yet. To paraphrase Ernest Hemingway’s “Jake” in The Sun Also Rises, “wouldn’t it be pretty to think so?” But the thinking so and the reality are often miles apart. When looking in the mirror, the average human sees a six-plus or a seven reflection on a scale of one to ten. The big nose or weak chin is masked by brighter eyes or near picture perfect teeth. And when the public is consulted, the vocal compliments as opposed to the near silent/ whispered critiques are taken as a supermajority vote for good looks.
2013-04-03 Learning from Douglas H. Bellemore One Great Teacher and Investment Counselor by Kendall Anderson of Anderson Griggs
Sometimes, I think those of us in the investment business strive to obtain the abilities of Star Trek’s Mr. Spock. Spock, the half-human half-Vulcan, learned to ignore the human emotions buried inside his self and use logic in order to solve the problems before him. Just think, what great investors we could be if we could simply control our human nature. As a Vulcan, we could construct an investment portfolio that would produce higher returns than any human could produce.
2013-04-02 Choosing an Actively Managed Fund: What Works and What Doesn’t by Joe Tomlinson (Article)
Few topics have been studied as closely as selecting actively managed funds that will outperform the market. Advisors who use such funds need to be confident in their choices – and justify their methodology to clients. Here’s what the latest academic research says on this highly contentious issue.
2013-04-02 A Q1 Letter to Clients: Why Warren Buffett is Bullish on Stocks by Dan Richards (Article)
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. This quarter’s letter draws on Warren Buffett’s most recent letter to shareholders, and why he is bullish on the US equity market.
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 Chuck Royce on 1Q 2013: Conditions Remain Favorable for Equities by Team of The Royce Funds
In stark contrast to what we saw in 2010, 2011, and most of the first half of 2012, the market tuned out a lot of seemingly ominous political news and enjoyed a strong first quarter.
2013-04-02 ProVise Bullets by Ray Ferrara of ProVise Management Group
As we began 2013 America was looking ahead to President Obama’s second term, the passage of a tax bill that raised government revenue significantly, discovering that fourth quarter growth was virtually flat, corporate earnings that had only a few mild surprises to the upside and several to the downside, and finally, an increase in Social Security taxes of 2%. Then the sequester kicked in in early March, a band aid was used to patch the government together until the end of September, and we saw the nervousness the European markets, highlighted by Cyprus.
2013-04-02 Cypriots In The Streets by Peter Schiff of Euro Pacific Precious Metals
The news of the month comes from the large Mediterranean island of Cyprus, where Keynesian economic planning left the economy facing complete bankruptcy. The result was an unprecedented step forward in the financial collapse of the West: direct forfeiture of bank deposits. Despite official protestations to the contrary, this fallout will spread to a bank near you.
2013-04-02 Finally by Jerry Wagner of Flexible Plan Investments
With a headline like that, I could be talking about my Law School Alma Mater, the University of Michigan, making it back into the Final Four for the first time since 1993 by beating the University of Florida in the NCAA South Regional basketball Finals yesterday. Or it could be the exclamation of most Michiganders with the first sunshine-filled days this weekend since spring had sprung earlier in March (yes, the ice also finished melting on our lake this weekfinally).
2013-04-02 New Market Records, Quarterly Review, And What\'s Next by John Rothe of Riverbend Investment Management
Last week, after gyrating for the past month, the S&P 500 was finally able to close in record territory. However, investors may not be feeling the joy in their pocketbooks just yet; when inflation is factored in, it becomes clear that the US stock market is still in the extended cyclical bear cycle which started in 2000.
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 Buffet's Advice for Apple Inc. by Sean Bonner, William Bonner Jr. of Carne Capital
During a recent interview on February, 27th on CNBC Warren Buffett described a phone call he got from the late Apple CEO Steve Jobs. Mr. Buffett gave this account, "It was an interesting conversation because I hadn’t talked to him in a long time. He said, ’We’ve got all this cash. What should we do with it?’ So we went over the alternatives. It was kind of interesting." Mr. Buffett often comments in his annual letters about the options for deploying cash and he did again in this interview.
2013-04-01 Again and Again. by Scotty George of du Pasquier Asset Management
My work has always been predicated upon using quantitative modifiers to enhance portfolio value through greater efficiency of information processing and the creation of momentum-driven asset allocation models. But because so many investors quizzically suffer from a herd mentality, they find it difficult to digest common sense solutions to diffuse problems. And yet, our methodology and its consistent point of view has enabled clients to benefit without compromising investment expectations.
2013-04-01 Currency and Emerging Markets: What Can We Expect? by Giordano Lombardo of Pioneer Investments
Currency markets are making headlines again after taking a low profile amid the crises and the turmoil in financial markets of the last five years or so. I asked Greg Saichin, Head of High Yield and Emerging Markets Fixed Income Portfolio Management here at Pioneer, to provide his views about what is going on, and what he sees as the drivers of investment flows into emerging markets.
2013-04-01 The Discipline of Buy and Sell Decisions by Mark Mobius of Franklin Templeton Investments
The thought of giving up a once-treasured possession can be an emotional exercise for anyone, even if the object of affection has outlived its use. As investors, we can find it difficult to sell a once-favored holding even more difficult than the decision to purchase it. But sometimes, you just have to let go.
2013-04-01 Look Beyond the U.S. Budget Bluster by Milton Ezrati of Lord Abbett
Believe it or not, prospects for better fiscal developments out of Washington appear positive. Here’s why.
2013-04-01 Plan Sponsors and Participants Need HELP by Jon Vogler of Invesco
The Senate Committee on Health, Education, Labor & Pensions (HELP Committee) held a hearing titled “Pension Savings: Are Workers Saving Enough for Retirement?” on Jan. 31, 2013. Witnesses shared successful initiatives and highlighted areas that need improvement to help workers achieve a financially secure retirement.
2013-03-28 Emerging Markets Investment Bulletin by Team of Bedlam Asset Management
The increases in the portfolio’s net asset value continue easily to beat the hardly exacting returns from the index. The fund has gained 10.4% gross for the year to date (to 22 March), vs. a 3.0% rise for the MSCI Emerging Index. This outperformance (replicated over rolling 1- and 3-year periods) has been achieved by choosing investments irrespective of index country or sector weightings or where they are listed, so long as they derive the majority of income and profits from developing countries.
2013-03-28 2 Factors Keeping a Lid on Interest Rates by Russ Koesterich of iShares Blog
Investors have been expecting interest rates to rise, but with the yield on the 10-year Treasury bond back below 2%, Russ explains two structural factors that are slowing the rate rise.
2013-03-27 What Happened to That Export-Led Recovery? by Mike Amey of PIMCO
With nearly 50% of the UK’s total exports going to Europe, an economic area constantly flirting with its own recession, it is no surprise to see that UK trade performance has been challenged.As the US continues to re-heal, and trade becomes more geographically diversified, we should see exports start to grow once more, albeit off a modest base. The easing in sterling is undoubtedly welcome and will improve prospects for exports, but it is unlikely to be a “game changer”.
2013-03-27 RISE Survey Reveals Some Somber Retirement Realities by Team of Franklin Templeton Investments
As numbers go, 1% and 99% have gotten more than their fair share of media attention, but if you’re one of the millions who hope to retire someday, you may want to pay attention to another figure: 21%. According to the 2013 Franklin Templeton Retirement Income Strategies and Expectations (RISE) survey, that’s the percentage of retirees who have no savings to speak of. So how do you avoid falling into this statistical group? That’s the $64,000 question that’s worth much more than thatit’s the price of your future.
2013-03-27 Mark Hulbert: Our Kindred Spirit by Bill Smead of Smead Capital Management
Mark Hulbert and I started in the investment business in 1980. He chose to create a business out of analyzing the results and psychological implications of investment newsletter writers. At Smead Capital Management, we formed a business to analyze publicly-traded US common stocks through the prism of our eight proprietary criteria. We enjoy his unbiased third-party opinions on current circumstances and his consistently good historical perspective.
2013-03-26 Adapting the Yale Model for Clients by C. Thomas Howard, PhD and Lambert Bunker (Article)
The Yale University endowment fund is one of the most successful in the country, with a 10-year return besting the endowment universe average return by 300 basis points and the Wilshire 5000 return by 400 basis points. David Swensen is the architect of this program, and his guiding principles are widely used to manage large endowments. They are equally useful for client portfolios.
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 Reacting to All Time Highs by Jeff Knight of Columbia Management
The financial press has been all a-flutter, of late, with talk of new highs across U.S. stock markets. Indeed, the Dow Jones Industrial Average set a new all time closing high in March. Meanwhile, the S&P 500, as of this writing, sits less than one percent below its all time high. The surge in these well known market bellwethers in recent months feels good, and no doubt tempts investors to bask in their portfolio gains, and to ease back in their fussing over the nuances of investment strategy.
2013-03-26 Throw the Book at Him by Jerry Wagner of Flexible Plan Investments
On February 2, Ground Hog Day, Punxsutawney Phil failed to see his shadow forecasting, and as legend has it an early spring. Yet on the first day of spring, I looked out my back window at a lake still more than half frozen with my view partially obscured by a wicked little snow flurry. So much for forecasts!
2013-03-25 The Little Bank That Did. by Dan Ariely of Dan Ariely Blog
Over the last few years, I’ve had some harsh words for bankers, banks, and the culture of the industry. In truth, I could have said worse, and it would have been justified.
2013-03-25 Energy: Perilous Present, Promising Future by Milton Ezrati of Lord Abbett
For oil and gas, an era of abundant supplies and lower prices awaits. But investors will have to weather a tricky geopolitical situation before it arrives.
2013-03-25 Cyprus Reminds Us of Threats and Improving Global Economy by Bob Doll of Nuveen Asset Management
Equity averages sagged slightly last week. Strength later in the week made up for earlier weakness as the equity rally paused for the Cyprus crisis. We (and the consensus) perceive Cyprus as mainly a local problem and believe it supports our view to remain cautious with Eurozone weightings.
2013-03-25 Still Bullish by Richard Golod of Invesco
Global equities (as measured by the MSCI All Country World Index) fell modestly in February amid reignited fears about the euro’s future, signs of distress in China’s economy and the looming sequester deadline in the US. Nevertheless, I believe the US, Japan and emerging markets may offer compelling opportunities, while Europe requires a more selective approach.
2013-03-22 ING Fixed Income Perspectives March 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Developed sovereigns are still broadly unattractive, but global central banks appear poised to ease. We prefer EM currencies that will continue to benefit from positive global growth and tolerate further upward pressure on the U.S.
2013-03-22 Happy Clients; Terrified Prospects by David Edwards of Heron Financial Group
Four years ago, on March 9th, 2009, US stocks collapsed to a 12 year low. A financial crisis rooted in overleveraged purchases of junk (or even fraudulent) securities claimed, in quick succession, Bear Stearns, Lehman Brother, Merrill Lynch (forced into a shotgun marriage with Bank of America) and AIG. Investors panicked, selling good securities at deep discounts to fair value.
2013-03-22 Power of Positive Screening: Pursuing Strength of Social and Financial Returns by Chat Reynders, Patrick McVeigh of Reynders, McVeigh Capital Management
Market volatility and sweeping changes to mainstream views of investing are catalyzing acceptance of tactics that combine fundamentals with a progressive outlook on social issues. Positive screening brings balanced companies to the fore of the investment landscape: this practice isolates sound equities that demonstrate strength of balance sheet, dependability of management, and a commitment to act as part of a global community focused on positive change.
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 US Stocks: Third Time’s the Charm by Seth Masters of AllianceBernstein
At 1550, the S&P 500 has regained the peak it reached in March of 2000 (when the tech bubble burst) and again in October of 2007 (before the credit crunch hit). But we think the third time’s the charm: We think the stock market still has room to rise because equities are now more attractively valued and of higher quality than they were at previous peaks.
2013-03-22 Deep Value Diving in the Eurozone by Katrina Dudley of Franklin Templeton Investments
Greece’s tale of financial woe may well go down as a modern Greek tragedy, with people in power falling prey to a tragic flaw which brings about their catastrophic reversal of fortune. It’s all quite dramatic and dire, but if the real life Greek financial system stays true to the classical formula, the conclusion means recognition of that tragic flaw and potential course correction. For those hardy and/or contrarian souls who suspect opportunity may be sprouting from Greece’s great mess, this would be good news.
2013-03-22 Insights on India: Land of Paradoxes by Chetan Sehgal of Franklin Templeton Investments
Technology has made it easy for our emerging markets team to stay in contact from nearly every corner of the globe, but electronic communications can’t replace human interaction through a face-to-face exchange of ideas. Twice a year, our 50+ analysts gather together in a single location to share opinions on companies, discuss global events, and conduct a peer review and evaluation. I’ve invited my colleague, Chetan Sehgal, to pen his thoughts on India and why we chose it as the location for our most recent gathering.
2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors
Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.
2013-03-21 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.
2013-03-20 Is The Government Lying To Us About Inflation? Yes! by Gary Halbert of Halbert Wealth Management
On Friday, the Labor Department reported that the Consumer Price Index (CPI) jumped an unexpected 0.7% in February. This was above pre-report estimates and was the highest monthly reading since 2009. We should be very concerned, right? Let’s take a closer look.
2013-03-20 Playing with Fire in Cyprus by Fred Copper of Columbia Management
Early Saturday morning, after 10 hours of negotiations, it was announced that Euro Area (EA) finance ministers had agreed upon a bailout package for the government and banking system of Cyprus. The total financing needs of Cyprus are 17 billion euros ($22 billion), which equates to approximately 100% of Cypriot gross domestic product (GDP), making this by far the largest bailout relative to the size of the economy yet in the EA.
2013-03-20 Global Real Estate StocksTime to Get Out? by Eric Franco of AllianceBernstein
Real estate stocks have now rebounded from the crash during the global financial crisis. But we think valuations are still reasonable, especially as property fundamentals continue to improve in key markets.
2013-03-20 The Most Important US Economic Number Now by Russ Koesterich of iShares Blog
Wondering about the outlook going forward for the US economy? Russ shares the economic number that may give you a clue.
2013-03-20 Investors Need to Pivot by William Benz of PIMCO
Fixed income investors need to think differently in the current environment. Investors may want to consider pivoting to strategies that are less focused on traditional benchmarks and more oriented to generating income and providing greater flexibility to hedge against rising rates, widening credit spreads or higher inflation.
2013-03-19 Paul Matlack from Delaware Investments on the Direction of the Bond Market by Robert Huebscher (Article)
Paul Matlack is senior vice president, senior portfolio manager and fixed income strategist for Delaware Investments. His firm oversees $145 billion in fixed-income strategies, and in this interview Matlack discusses his outlook for the economy and the bond market, and how advisors should be positioning client portfolios.
2013-03-19 The Outlook for Equities by Howard Marks of Oaktree Capital Management
It doesn’t take much to get me started on a memo. In this case one sentence was enough, in an article from the February 4 online edition of Pensions & Investments, as described by FierceFinance on February 28: “The long-term equity risk premium is typically between 4.5% and 5%.”
2013-03-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks had a very quiet week with volumes reaching levels that one associates with holiday trading.
2013-03-19 Mila Kunis, Euphoria, and the Stock Market by John Rothe of Riverbend Investment Management
Are we in the “euphoria” stage of the market right now? This past week, as the S&P 500 nears a record level, financial news pundits were fascinated with the following headlines.
2013-03-19 A Tired Equity Market Crawls Higher by Bob Doll of Nuveen Asset Management
U.S. equities rose again last week as the S&P 500 increased 0.66%, with an overall gain for the year of 9.96%.1 The remarkable resilience of the U.S. economy against fiscal cliff headwinds has boosted equity investor sentiment. The U.S. macroeconomic outperformance has also helped U.S. equities outperform global counterparts. Investor preference toward the U.S. has largely been confirmed by rising flows into U.S. equities.
2013-03-19 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:
2013-03-19 The Dow Marches On by Gene Peroni of Advisors Asset Management
The stock market has demonstrated tireless resiliency in the face of challenging headline news and geopolitical events since its bottom in March 2009. Now, some four years later, the burden of some of these once gripping issues has been lifted.
2013-03-18 Finding the Sweet Spot by Mark Kiesel of PIMCO
Where is the investment “sweet spot” in today’s global financial markets? The uneven global growth outlook means there are opportunities and risks for both credit and equity investors.
2013-03-18 Outlook for the Yen by Team of Nomura Asset Management
For several quarters ahead, we estimate that the Yen will remain range bound near the level of PPP (purchasing power parity), which is estimated to be between 90 to 95 Yen/USD. Though currency movements will be affected by various factors, we think the monetary policies of both Japan and the U.S. are the most important.
2013-03-18 Currencies: A 1970s Flashback? by Milton Ezrati of Lord Abbett
Four decades ago, a currency war and significant Fed easing were followed by a bout of high inflation. Now investors are worried that history could repeat itself.
2013-03-15 Emerging Markets Equity Commentary by Team of Thomas White International
Emerging market equities saw a moderate correction in February, broadly similar to the rest of the world. Prices reacted negatively to renewed concerns of a worsening European fiscal crisis as the results of the recent Italian elections turned out to be inconclusive.
2013-03-15 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 What’s Next, Mr. Finance Minister? by Sudarshan Murthy of Matthews Asia
Every February, India’s federal government releases its annual budget to outline revenues and spending plans. In the years following India’s independence in 1947, when government-owned enterprises dominated the economy, the budget was of utmost importance to market watchers. With the country’s economic liberalization in the early 1990s, the significance of this annual budget process diminished somewhat. However it is still meaningful, and this year’s budget exceeded US$300 billion in expenditures.
2013-03-15 Reducing the Risk from Adding Stock Exposure by Seth Masters of AllianceBernstein
Adding other sources of diversification could significantly reduce the risk from increasing stock exposure, our research suggests.
2013-03-15 Washington May Be Ready to Take a Break From the Brink by Josh Thimons, Libby Cantrill of PIMCO
With Washington’s dysfunction not in the forefront, the economy could be more unencumbered to grow, with markets trending in a similar direction. The Fed’s proactive policies should continue to favor overweight positions in the five-year through 10-year part of the Treasury yield curve and support interest-rate-sensitive sectors of the economy most notably housing. In the longer term, however, we would advise investors to be cautious: Without meaningful long-term structural deficit reform, real growth will inevitably lag in the U.S.
2013-03-15 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 0.46% in February, as the high yield market finished on a positive note, after experiencing heightened volatility throughout the month.
2013-03-15 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 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 Newsletter by Harold Evensky of Evensky & Katz
In the latest edition of his client newsletter, Harold Evensky highlights a number of interesting bits of news, including a must-see destination for your friends, your kids and your grandkids, some advice from Warren Buffett, a tip from Albert Einstein and the latest data on hedge fund performance.
2013-03-14 3 Reasons It's Not Too Late to Consider Emerging Market Bonds by Russ Koesterich of iShares Blog
After the recent rally in emerging market bonds, is it too late to allocate to this asset class? Not for long-term investors, says Russ and he offers 3 reasons why.
2013-03-13 What's Your Advantage? by Bill Smead of Smead Capital Management
In the March 9, 2013 issue of Barron’s, writer Jonathon Laing wrote an excellent piece about Howard Marks. This article provides the base from which we can discuss the main components of investment portfolio composition. These components are information, analysis of information, and decisions made from information and analysis. In doing so, we will bring to light why we believe today’s best opportunity is in long-duration common stock investing.
2013-03-13 Who Cares if There's a High-Yield Bond Bubble? by Gary Halbert of Halbert Wealth Management
High-yield bonds, or "junk bonds" as they are widely known, have received a lot of attention in recent months. Is there a high-yield bond bubble? Certainly a ton of new money has gone into high-yield bond funds over the last few years. Millions of Americans who would have never considered high-yield bonds have bought in due to near zero returns on traditional savings vehicles.
2013-03-13 Argentina on Sale by John Mauldin of Millennium Wave Advisors
(From Cafayate, Argentina) There are some who worry whether the path that Argentina has taken to monetary ruin on multiple occasions (and that it seems intent on taking again) is one that the US may also find itself on. That worry has crossed my mind a few times, I must confess. Today we will look at Argentina more in depth. From a monetary perspective, it deserves attention. And once again there will be opportunity.
2013-03-13 Feared Copper "Flood" More Likely a Trickle by Jon Ruff of AllianceBernstein
Investors have turned bearish on commodities, particularly in the case of copper, where recent talk of a looming surge in new supply has sparked fears of a price rout. We’re skeptical about the copper supply-glut story and don’t think what’s happening in copper is a "canary in the coal mine" for the rest of the metals markets.
2013-03-13 Coping With Age by Zach Pandl of Columbia Management
Many things in life get better with age, but many others do not. Unfortunately for central banks, the effects of unconventional monetary policy probably fall in the latter category. Unlike traditional monetary policyin which the central bank only sets short-term interest ratesthe impact of unconventional policies likely decays over time. This means that it is not enough for the Federal Reserve to keep its current policies in placeit actually has to take additional action to maintain the same impact on interest rates and the economy.
2013-03-13 Taking Stock in the U.S. by Team of Franklin Templeton Investments
Is it time to take stock in the U.S. market? Equities started the year strong as the U.S. economy sidestepped the worst-case fiscal cliff scenario and continued showing signs of improvement despite global economic uncertainty. In fact, the Dow Jones Industrial Average reached a record high in early March. While there are still a number of possible issues that threaten to derail the market, Grant Bowers, portfolio manager of Franklin Growth Opportunities Fund, believes economic resilience in the United States is encouraging news for stocks, and investors have taken notice.
2013-03-13 Yield Opportunity in a Low Yield Environment by Troy Johnson of Westcore Funds Denver Investments
The Fed’s aggressive monetary policy teamed with its inability to jump-start the anemic economic growth pattern has challenged investors’ quest for yield entering 2013. We offer investors the following for consideration as they seek yield in this environment.
2013-03-12 Client Communication beyond the Newsletter by Beverly Flaxington (Article)
You have written about the importance of communicating with clients in a variety of ways. What are some examples of things that work best, other than the standard newsletter?
2013-03-12 Letters to the Editor by Various (Article)
Two readers respond to Joe Tomlinson's article, Can Advisors Add Value Through Fund Selection?, which appeared on February 26, and a reader responds to Wade Pfau's article, Breaking Free from the Safe Withdrawal Rate Paradigm: Extending the Efficient Frontier for Retirement Income, which appeared last week.
2013-03-12 Bill Ackman on What Makes a Great Investment by John Heins (Article)
In addition to commenting on his high-profile current investments, Pershing Square Capital's Bill Ackman in a recent interview with Value Investor Insight describes the general company traits he looks for in both active and passive investments, why a high public profile is an important element of his strategy, whether his thesis on J.C. Penney has evolved, what lessons he's learned from a few prominent mistakes, and why his short conviction on Herbalife is as high as ever.
2013-03-12 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 Pacific Basin Market Overview February 2013 by Team of Nomura Asset Management
Monthly returns for February 2013 were somewhat mixed, but the Pacific Basin regional markets generally ended in positive territory this month. Outside of Asia, political instability in Italy and concerns that the Federal Reserve might begin to scale back its monetary stimulus in the U.S. led to weaker investor sentiment. Economic data from China was weak, largely due to the effect of the Chinese New Year.
2013-03-12 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 U.S. Dominates World Markets for the Trifecta by Douglas Cote of ING Investment Management
While large-cap indices get all the headlines, mid and small caps have continued to excel. Frontier markets have picked up the slack as major emerging markets stumble. Global risks persist, though U.S. fundamentals appear solid. The move toward U.S. energy independence should soon result in a trade surplus, boosting GDP.
2013-03-12 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.
2013-03-12 After Last Week's US Rally: Proceed with Caution by Russ Koesterich of iShares Blog
While last week's rally was supported by better-than-expected economic data and improving investor sentiment, the magnitude of US stocks' advance is starting to cause some indicators to flash yellow. Russ explains.
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 Italy: Welcome to the Bungle by Milton Ezrati of Lord Abbett
Results of the recent election increase the likelihood of a eurozone breakupand disruptions to financial markets.
2013-03-11 Who's Selling And Who's Buying As The Dow Trades In Record Territory? by John Rothe of Riverbend Investment Management
Last week turned out to be another positive week for investors, as the S&P 500 finished the week up 2.2 percent. However, as my regular readers know, I consider the current market risk high, and have been building a case these past few weeks that we will soon be entering a bear market.
2013-03-11 Forecasting Bond Returns in the New Normal by Saumil Parikh of PIMCO
PIMCO has a detailed framework for deriving a forecast for secular bond returns based on our most current expectations of policy rates and the inflation-adjusted (or real) bond risk premium.
We start by defining the expected secular real policy rate as the expected average rate of the fed funds rate after adjusting for inflation over the next 10 years.
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 Ride Over Bump in Gas Prices with These Investment Themes by Frank Holmes of U.S. Global Investors
U.S. oil independence is picking up steam. In December, the country lost its position as the world's largest importer of oil, with shale production climbing faster than expected. Net imports fell below 6 million barrels per day, domestic production increased more than 1 million barrels per day and demand declined by about 700,000 barrels per day.
2013-03-08 Our Five Year Forecast by Kendall Anderson of Anderson Griggs
We believe that predicting short term swings in the market is an exercise in humility. Longer-term market predictions can have some value, but they should be based on a form of valuation methodology of the underlying securities which make up the market of choice, and a consideration of the current mood of the market participants should also be included.
2013-03-08 How Cash Could Point to More Upside for U.S. Stocks by Adam Peck of Heartland Advisors
Investors remain concerned about dwindling bond yields but still aren't rushing headlong into stocks, notwithstanding their recent market highs. We thought it might be interesting to take a look at the difference between the cash earnings yield of U.S. stocks (as represented by the MSCI U.S. Stock Index) and the yield being paid by intermediate-term investment grade corporate bonds. In looking at historical data, cash earnings yield can be a good proxy for free cash flows and an indicator of a company's financial strength.
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.
2013-03-07 Guanxi, Mianzi, and Business: The Impact of Culture on Corporate Governance in China by David Smith of Aberdeen Asset Management
There are two key cultural and sociological issues of particular importance when evaluating Chinese companies: guanxi (relationships and networks) and mianzi (face). When analyzing the potential of a Chinese company, it's important to understand how guanzi and mianzi affect transactions, board composition and deliberations, and shareholder engagement, among other issues.
2013-03-07 Animal Spirits: F.I.R.S.T. by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Call it what you will a dog-eat-dog world in which you're wearing Milk-Bone underwear or an example of capitalism at its finest an M&A cycle is heating up. This activity may be signaling the rebirth of what British economist John Maynard Keynes originally referred to as "animal spirits", much to the delight of fictional corporate barbarian Gordon Gekko and his real-life analogues, who require little prompting to act on Keynes "spontaneous urge to action".
2013-03-07 Freewheeling? by Dimitri Balatsos of Tesseract Partners
Ignoring threatening clouds in the distant horizon, the financial markets are wrapped in a blanket of complacency. Consider the following. The Dow Jones Index has been flirting with the 2007 record peak. Implied stock market volatility, as measured by the VIX Index, is in the basement. Junk bond yields are at record lows, compressing spreads to within shouting distance of risk-free Treasuries. Securitization is back from the dead, while the drought in M&A activity is now getting plenty of rainfall.
2013-03-07 New Highs by Team of Janus Capital Group
The Dow Jones Industrial Average closed at a new record high the first week of March, breaking its previous closing high reached in October of 2007. The new record is symbolic more than anything else, but it still has some positive implications for equity markets.
2013-03-07 A New Chapter for Turkey? by Frank Holmes of U.S. Global Investors
In 2012, Turkey was the best performer among the emerging markets we track on our Periodic Table showing a decade of returns. All developing countries rose last year, but stocks in Turkey climbed an astounding 56 percent.
2013-03-07 Three Dimensions of Discipline by Team of Franklin Templeton Investments
As New Year's resolutions fade into guilty memories, it's a bitter reminder that maintaining discipline, in life and investing, is just plain hard. Despite best intentions, bear markets can tempt investors to sell everything, while bull markets can whip people into a buying frenzy, both courses of action that rarely end happily.
2013-03-07 How Much Risk Does Adding Stocks Pose? by Seth Masters of AllianceBernstein
Investors have good reasons for their recent net increase in stock fund purchasesand good reasons to remain anxious, in our view. While market volatility has returned to normal, memories of the wild market swings of the past five years loom large. Here's what we think about the risk of increasing stock exposure now.
2013-03-07 After the Dow Record Close: What Comes Next? by Russ Koesterich of iShares Blog
After Tuesday's record setting Dow Industrials close, are US stocks still cheap? Can the market move higher? Russ answers these questions and more.
2013-03-06 Lessons Learned by Jerry Wagner of Flexible Plan Investments
The need for taking precautions, preparing for emergencies, having "just-in-case" options, was a much discussed topic...right after the 2000 and 2008 market crashes. Not so much anymore.
2013-03-06 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 Smooth Returns by Bill Smead of Smead Capital Management
Harry Markopolos was working for a hedge fund of funds and attempting to put a portfolio together that would "smooth" long-term returns. In the process of marketing what his company was doing, he ran into a client who already had a money manager doing that for him. The money manager the client used was Bernie Madoff. When Markopolous looked at the long-term track record of Madoff's client, he instantly knew that it was mathematically impossible to have a return that high with as little year-to-year variance in the return. We at Smead Capital Management would like to ask a few questions.
2013-03-06 Combining the Best of Passive and Active Investing by Patrick O'Shaughnessy of O'Shaughnessy Asset Management
Should investors pay higher fees to active managers in an attempt to beat the market? Or should they instead buy cheap passive index funds or exchange-traded funds (ETFs) thereby surrendering to the compelling long-term evidence that successful money managers are few and far between and very difficult to identify. It is an important and ongoing debate because the choice between the passive or active approach to investing can have a huge impact on long-term results.
2013-03-06 Pain Aversion by Pamela Rosenau of HighTower Advisors
As the equity market continues to rally, the consensus among investors has called for a 3-5% pullback. Unfortunately for the market bears, "the pain trade remains higher right now." There are many who claim that equities are "overbought" or that stocks are "too extended." As market strategist Barry Ritholtz stated, "We find it hard to believe that after hiding under a rock for nearly five years, that a few months of equity inflows means investors have gone from petrified to exuberant. That process in our opinion is a longer arc, not a singular event."
2013-03-06 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.
2013-03-06 An Infinite Amount of Money by John Mauldin of Millennium Wave Advisors
The three major blocs of the developed world are careening toward a debt-fueled denouement that will play out over years rather than in a single moment. And contrary to some opinion, there is no certain ending. There are multiple paths still available to Europe and especially the US, though admittedly none of them are bright and carefree.
2013-03-05 You’re The Cream of the Crop: Key Findings from the 2012 Advisor Perspectives Reader Survey by Jeff Briskin (Article)
Experienced. Results oriented. Focused on serving the needs of individuals and families. Confident in your abilities. Eager to expand your knowledge. If this sounds like you, you're not alone. These are the traits that stand out among Advisor Perspectives readers, based on the findings of our 2012 Reader Survey.
2013-03-05 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 Absolute Return Letter: Expect the Unexpected by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
With real interest rates being negative in many countries we expect low returns on both equities and bonds going forward. Many investors have responded to that by allocating more and more of their assets to passive strategies such as ETFs. We believe it is the wrong approach for this type of environment.
2013-03-05 Currencies: The Winds of War by Milton Ezrati of Lord Abbett
In this conflict, the collateral damage could include asset bubbles and accelerating inflation.
2013-03-04 Living in the Past: Investors Finally Putting Away the Rear-View Mirror? by Liz Ann Sonders of Charles Schwab
With a very strong January in the books for stocks, and hefty inflows into stock mutual funds, are we finally seeing the investor class become believers?
2013-03-04 Is Congress About to Cause a Major Economic Slowdown? by John Rothe of Riverbend Investment Management
The fiscal cliff, sequestration, higher taxes, and a pending budget debate may be too much for overly optimistic investors to handle. Volatility has started to rise and the market is looking weaker:
2013-03-04 Forecasting Bond Returns in the New Normal by Saumil Parikh of PIMCO
PIMCO has a detailed framework for deriving a forecast for secular bond returns based on our most current expectations of policy rates and the inflation-adjusted (or real) bond risk premium. We start by defining the expected secular real policy rate as the expected average rate of the fed funds rate after adjusting for inflation over the next 10 years.
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 Wait for Your Pitch in Today's Market by John West of Research Affiliates
Great hitting in baseball depends in part on waiting for the right pitch. In today's market, most asset classescoming off their impressive 2012 recordare "high and outside" the valuations necessary for future big league returns. Patience is the name of the game today.
2013-03-01 Health Is Wealth: Health Care Spending As An Emerging Market Growth Engine by Amit Bhartia, Alvaro Pascual of GMO
Amit Bhartia and Alvaro Pascual, members of GMO's Emerging Markets Equity team, write to institutional clients in a new white paper about the correlation in emerging markets between public healthcare spending and domestic consumption.
2013-03-01 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 Seeking a Fixed Income Fix by Team of Franklin Templeton Investments
While governments worldwide continue to struggle with debt and budget issues, for the most part, corporations have turned lemons into lemonade and have become lean and mean. While not without risk, corporate credit actually looks to be in fairly good shape, according to Eric Takaha who, as senior vice president and portfolio manager of Franklin Strategic Income Fund spends a good deal of time analyzing the space.
2013-03-01 Is It Time to Get Back into Stocksor Too Late? by Seth Masters of AllianceBernstein
After five years of fleeing stocks for the perceived safety of bonds, US mutual fund investors became net buyers of stock funds in January. While some see the return of the retail investor as a negative indicator for stocks, we say, "Better late than never."
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.
2013-02-28 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 Jeremy Siegel on Why Stocks Are -- and Will Remain -- the Best Bet by Team of Knowledge @ Wharton
Though stock market volatility continues to rattle investors' nerves, the future looks bright for equities in the U.S. and many emerging markets, according to Wharton finance professor Jeremy Siegel. That's not so for bonds, which could become money-losing investments as rising interest rates drive bond prices down. In an interview with Knowledge@Wharton, Siegel says that investors should think about reducing their bond holdings, buying more stocks and keeping just enough cash for a rainy day and other liquidity needs, since interest rates on cash are near zero.
2013-02-27 Potential Threats to Equity Rally by Chris Maxey, Ryan Davis of Fortigent
Equity markets started a third consecutive year in rather impressive fashion, gaining more than 6% to date. With so much optimism in the investment community, it is always worth keeping an eye open for risks possibly overlooked. By now, it is apparent that investors are increasing their exposure towards equities with arms wide open. Data from the Investment Company Institute (ICI) estimates $39 billion flowed into equity mutual funds this year through February 13. Following outflows of $153 billion in 2012, the sudden reversal has been impressive.
2013-02-27 Is This Market "For the Birds"? by Jerry Wagner of Flexible Plan Investments
Last week, the stock market hit one of those gusts of headwind that seemed to stop the 2013 rally in its tracks and push it backward. When that happens, as it is again today, it is like watching the gull traverse just a few feet in front of us on the beach. What happens in the short run can be progress or retreat.
2013-02-27 The Rising US Dollar - What It Means To The Economy And To Investors by John Rothe of Riverbend Investment Management
Earlier this week, we saw a spike in the US dollar. After months of being stuck in a sideways trading pattern, the US dollar is starting to aggressively move upward. Global investors are starting to allocate to dollars. While the US has its own problems, the dollar is still the strongest currency in the world and is viewed by many as a safe haven.
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 Love, Money or Disappointment: What Will Asian Credit Investors Find in Their Red Envelopes? by Robert Mead, Raja Mukherji of PIMCO
Our cyclical economic outlook for Asia in 2013 is unusually dependent on breakthroughs in structural policies. Although we continue to favor select opportunities in key sectors, in general Asian credit spreads are trading historically tight. Bottom-up research is critical, along with careful top-down views on shifting economic conditions, and investors need adequate compensation for taking credit risk. Some sectors and companies can grow significantly faster than their respective economies.
2013-02-27 Ignore the Noise. Equities Offer Income Potential. by Joe Kringdon of Pioneer Investments
Common prospectus disclosure reads, "past performance is no guarantee of future results." Yet, this crowd of naysayers seems to be projecting the paranoia associated with the "lost decade(s)" onto the current environment and beyond. They are preparing for the future by fighting the last few wars all over again. Their sentiments and actions (or inactions) are emblematic of an American looking the wrong way for traffic on a London street. Given wrongfully configured context, these people are looking in the wrong direction for the wrong things. I continue to be positive on the equity markets.
2013-02-26 Can Advisors Add Value Through Fund Selection? by Joe Tomlinson (Article)
Low-cost index funds will beat the average actively managed fund after expenses. But can advisors identify superior active funds to overcome this disadvantage? Advisors who believe they can choose those funds will be challenged by the results of two studies from the defined-contribution industry.
2013-02-26 Howard Marks’ Warnings and How to Protect your Portfolio by Geoff Considine (Article)
Howard Marks, founder and chairman of Oaktree Capital Management, wrote in a recent memo that the biggest danger to investors is their willingness to buy risky assets that are likely to provide low returns. Market conditions may not fully reflect current risk; option prices, for example, are very low. Some firms – notably PIMCO – recommend investors buy put options to protect their portfolios. I propose an alternative strategy that will be resilient to the potential shocks of increased volatility and higher interest rates, without incurring the cost of options.
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 Horse Feathers by Michael Kayes of Willingdon Wealth Management
While wisdom and experience are certainly very important to long-term investment success, I do believe it is also necessary to begin each day with an open mind. Flushing the senses, so to speak, allows new information to be processed through an unbiased filter. In short, markets change, and investment thinking must be adaptable.
2013-02-26 A Permanent Investment by Jeffrey Saut of Raymond James
The Buying Power, and Selling Pressure, indicators continue to suggest no major top is in the works. Ditto the Advance/Decline line traded to a new high before the mid-week pullback, also confirming the upside. The major averages continue to reside above their respect 50-DMAs and 200-DMAs; and, those moving averages are rising, another bullish sign. Then there is Berkshire Hathaway (BRK.A/$152,009/Not Covered), which is somewhat of a proxy for the stock market, as it traded to a new all-time last Friday.
2013-02-26 The Postman May Not Ring at All by Paul DiGiacomo of Columbia Management
United States Postal Service is technically insolvent. Last year, the agency exhausted its borrowing capacity and failed to pay $11 billion into its retiree health plan. This year, it will not make a $6 billion contribution. While the current cash balance of $2 billion is sufficient for 10 days of operation, management forecasts a $100 million deficit by October. When payments to employees and suppliers end, so too will the mail.
2013-02-26 2013, Losing the Bid by Bill Smead of Smead Capital Management
Many times in my 32-year career people ask me to comment on whether an established trend for a popular investment will stay intact. My answer is always the same. We don't know when the hot streak will end for the popular investment and we don't feel comfortable with popular securities. In our view, there is a dramatic difference in what you do with popular investments based on whether they areto use terms borrowed from Warren Buffett currency assets, unproductive assets, or productive assets. It has to do with the ability to sell and the liquidity you have when the popularity disappears.
2013-02-25 Fiscal Policy: The Same Old Drag by Milton Ezrati of Lord Abbett
Among the many fears shared by investors, concerns over fiscal drag have recently risen. Though no one yet can know the specifics of Washington's coming compromises, these will no doubt impose the anticipated tax hikes or spending cuts, and these will indeed hold back the pace of economic growth. Still, it would be a mistake to anticipate too much of a shock. The country, after all, has suffered fiscal drag for some years now. Even with failure in Washington, a moderation in cutbacks at the state and local level should allow government overall to offer the economy a measure of relief.
2013-02-25 Dodging the bullets by Team of Bedlam Asset Management
Although the year is barely a month old there are already signs that the long-awaited rotation out of the perceived safety of bonds and into inflation-proofed equities may have begun. Given the dismally low yields on offer it seems likely that, at the very least, it is the beginning of the end of the bond market bubble. Some of the biggest bubbles in the bond market, and thus most at risk from a sell-off, are in high yield and emerging market debt.
2013-02-25 Tupperware Brands Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2013-02-22 Emerging Markets Outlook: Will Emerging Markets Continue Their Run in 2013? by Scott Klimo of Saturna Capital
A number of times we have been asked whether emerging markets will continue their run in 2013. Our response typically begins with the following clarification: "Emerging markets" may be a handy way to refer to the countries that constitute a generally recognized asset class, but this group is far from monolithic. Widely differing levels of development, economic drivers, opportunities to invest, and returns exist under the emerging markets umbrella. For this reason it's not entirely correct to imply that "emerging markets" had a run in 2012.
2013-02-22 Uncovering 'Diamonds in the Rough' in Today's Credit Markets by Mark Kiesel of PIMCO
There are still good opportunities for yield and total return in the credit markets, but there has been a shift in where and how investors can find them. A "diamond in the rough" is a credit that is under-covered, or not actively followed or researched by many investors. At PIMCO, we identify these opportunities through our top-down and bottom-up investment process. We've identified a number of sectors that appear poised for above-average growth.
2013-02-22 Frontier Markets: Today's Models of Fiscal Prudence by Paul Herber of Forward Management
Say you are evaluating the markets of two countries in a search for investment growth opportunities. One country's sovereign debt is 120% of its gross domestic product (GDP), while the other has outstanding sovereign debt that represents only 11% of its GDP. Saddled with sovereign debt, the first country faces painful fiscal austerity measures, inflationary ones, or bothany of which will no doubt stifle economic growth.
2013-02-22 Finding What's Real in Real Estate by Team of Franklin Templeton Investments
The U.S. financial crisis in 2008-2009 left many investors with a reluctance to take investment risks, particularly those related to any of the world's wilted housing markets. However, as your local real estate agent would likely tell you, the market in one location can be vastly different than it is in another. Wilson Magee, co-manager of Franklin Global Real Estate Fund would agree that the adage "location, location, location" applies not only to individual home buyers and sellers, but to investors seeking opportunities in the commercial real estate sector, too.
2013-02-22 State of the Union and Retirement by Jon Vogler of Invesco
Retirement programs drew a few mentions in President Barack Obama's State of the Union address on Feb. 12, including these two about Medicare reform...
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 The 4 New Defensive Strategies by Russ Koesterich of iShares Blog
Waiting for a market correction? Wondering how to potentially protect your gains? Forget merely opting for traditional defensive sectors. Instead, consider Russ' four suggestions.
2013-02-21 General Dynamics Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of General Dynamics Corp through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-02-21 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?
2013-02-21 Tapping China's Growth via Dividends by Yu Zhang of Matthews Asia
When the long-term historical performance of global equity markets is considered, investors can see that the contribution of dividends to total return is significant. In this regard, China has been no exception. Between 1999 and 2012, 46% of the total return of the MSCI China Index was derived from dividends received and reinvested. This month, Yu Zhang, CFA, explores the ways in which a dividend-investing approach can be an effective investment strategy in China.
2013-02-21 Collateral Damage in the Currency Wars by Scott Minerd of Guggenheim Partners
Global competitive devaluation will continue to cause asset prices to rise in the near-term, but the broader implication of the policies will be increased volatility.
2013-02-20 Event Driven Investors Receive Their Wish by Chris Maxey, Ryan Davis of Fortigent
For several years, investors have wondered why M&A activity has been so benign.Corporate management teams cited uncertainty about the economic outlook as a primary reason for the depressed activity.With the latest round of tax increases and revenue cuts determined, companies finally appear willing to free their animal spirits and embark on the path of acquisition.
2013-02-20 Taxes: Living Off the VAT of the Land? by Milton Ezrati of Lord Abbett
The country has renewed its conversation about the way it should tax itself, whether to rely on income taxes or replace them with sales taxes. This latest buzz springs from plans by several Republican governors to reduce or eliminate their state income taxes. It has extended to talk about change at the federal level, including speculation about the introduction of a value-added tax (VAT) in addition to existing federal income taxes. Similar proposals surfaced in the 1990s and earlier in this century.
2013-02-20 The 2030 Most Likely Best Case Scenario by Bill O'Grady Kaisa Stucke of Confluence Investment Management
Two weeks ago 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 these expected trends. Last time, we presented the most likely worst case scenario. This week, we will explore the most likely best case scenario.
2013-02-20 Nervous Investors Approaching a Trap? by Jerry Wagner of Flexible Plan Investments
With the S&P 500 reaching new post-crash highs, it is interesting, to say the least, that most individual investors are not bullish on stocks. Rather, as the market has moved relentlessly higher this year, individual investors have turned more and more bearish.
2013-02-20 Two New Country Views for a Two-Speed Global Economy by Russ Koesterich of iShares Blog
The global economy is stuck in a two-speed regime: Developed markets like Europe, Japan and the United States are stalling, while China is re-accelerating. Russ explains what this divergent growth landscape means for his country outlooks.
2013-02-19 Alan Greenspan on the Market and the Global Economy by Adam Jared Apt (Article)
During his six-decade-long career in financial services, Alan Greenspan was a central figure in seminal events that drove investment markets, from the savings-and-loan crisis to the dot-com bubble to the housing crisis. Now, nearing 87, he rarely speaks in public. But he did so last week, offering his forecasts for the U.S. and European economies.
2013-02-19 The Three Minutes that Cost a Million-Dollar Prospect by Dan Richards (Article)
Small investments of time often pay big dividends. That message was agonizingly clear to an advisor who wasted several minutes having a coffee at a Starbucks, when he should have been preparing for the prospect he was about to meet.
2013-02-19 Kyle Bass on Inflation and How to Protect Against It by Mark Quam (Article)
Kyle Bass, the founder of Hayman Capital, foresaw the collapse of the sub-prime mortgage bond market in 2008 and the foreign sovereign debt crisis in Greece. Bass' latest warning is about looming Inflation – and he advises how to protect against it.
2013-02-19 Expanding the Toolkit for Monitoring Your Equity Managers by Markus Aakko, Andrew Pyne of PIMCO
Investors may want to consider active share when assessing whether and how their active equity managers add value beyond a passive benchmark. The methods for monitoring investment managers are well established. But given the importance of getting portfolio allocation right in a low-growth, low-return world, it's worth examining new ways to assess risk and value added. While tracking error has been held as a key measure for active risk, it may include elements that reflect market conditions rather than managers' actual decisions on risk.
2013-02-19 A Technical Look At The Current Market by John Rothe of Riverbend Investment Management
The S&P 500 Index has been rising consistently this year, leading many to wonder if this is the start of a new long-term bull market. Volatility has been low and market commentary from the financial media continues to be positive. Everything looks great right? Unfortunately, when we dig deeper into the underlying components of the market, we are actually in a high risk environment that may potentially harm investors who are too bullish.
2013-02-19 Jesse Livermore by Jeffrey Saut of Raymond James
"There were times when my plans went wrong and my stocks did not run true to form, but did the opposite of what they should have done if they had kept regard for precedent." So said Jesse Livermore, as chronicled in the brilliant book Reminiscence of a Stock Operator by Edwin Lefever; and, stock market historians will recall that Jesse Livermore is still considered one of the most colorful market speculators of all time.
2013-02-16 Seeing the Forest by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Equity markets continue to be resilient and investor confidence is elevated in various sentiment indices, suggesting a near-term pullback is possible. But there are longer-term trends developing that give us hope that the US economy's expansion and market's rally are sustainable. Federal spending cuts via the "sequestration" appear sure to happen, but there will continue to be debates about the nature and size of the cuts. Similarly, questions are increasing as to the potential unwinding of current Fed policy with regard to timing and rapidity.
2013-02-16 How To Remain Solvent Longer Than The Market Is Irrational by Team of F.A.S.T. Graphs
I believe it is extremely important that investors focus on the value of what they own more than they do on the day-to-day machinations of price volatility. However, I also believe, and even recognize, that very few investors are capable of ignoring volatile stock price movements. When the price of a stock that they own is rising or falling, especially when the swings are large and/or violent, it is very difficult for people to maintain a steady head and hand. Instead, emotions take over reason which often cause otherwise rational investors to make irrational decisions.
2013-02-15 High Yield Market Overview January 2013 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 1.38% in January, as the high yield market continued to rally into the new year.
2013-02-15 International Equity Commentary January 2013 by Team of Thomas White International
International equity prices sustained the uptrend in January, helped by data releases that supported the growing optimism over healthier global economic growth. Though the U.S. and U.K. economies declined unexpectedly during the fourth quarter of last year, the pace of growth improved in several Asian countries, including China, during the period.
2013-02-15 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 Thailand: Land of the Smiles by Mark Mobius of Franklin Templeton Investments
China and India may be Asia's largest economies, but they aren't the only countries with growth potential on the continent. Southeast Asian countries can also offer compelling investment opportunities. Thailand, known as the land of the smiles because of the expression its natural beauty and friendly people inspire, is a country where we believe the economic prospects could give investors reasons to smile too.
2013-02-15 In Defense of Commodity Futures by Seth Masters, Jon Ruff of AllianceBernstein
Several prominent pension funds have slashed their commodity futures investments for delivering poor returns with higher volatility than usual, while failing to diversify equity exposures as expected, The Wall Street Journal recently reported. If inflation rises, they may regret it.
2013-02-14 Is Inflation Around the Next Corner? Then What? by Pete Sorrentino of Huntington Funds
As the Federal Reserve Board reiterates its intention to keep interest rates near zero into 2015, it appears that the markets and many investors are growing complacent about inflation. Ever since the Financial Crisis of 2007-08, "headline inflation," as measured by the Consumer Price Index (CPI), has stayed low so far. Although it has threatened to break out at times, economic weakness has restrained the price growth that underlies inflation.
2013-02-14 Pacific Basin Market Overview January 2013 by Team of Nomura Asset Management
Improving expectations for global economic growth underpinned a solid start to 2013 for the Asia Pacific equity markets. In Asia, interest focused on China, as economic data showed further signs of recovery. On the other hand, the depreciating Japanese yen drew concerns that Asia's main exporters, which include Korea and Taiwan, will become relatively less competitive. The MSCI AC Asia Pacific Free Index including Japan gained 3.0% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.6% higher during the month.
2013-02-14 How Not to Run a Pension by John Mauldin of Millennium Wave Advisors
For all the focus on the unfunded liabilities of Social Security and Medicare, there is another unfunded crisis brewing, and this one is in your own back yard. It's coming to you even if you live outside of the US; it just might take a little longer to get there. I wrote ten years ago that state and local pension funds might be underfunded by as much as $2 trillion. It turns out that I was being overly optimistic. New government research suggests that the figure might be as high as $3 trillion. But what if you take into account that retirees are living longer?
2013-02-14 When Politics Trump Economics by Scott Minerd of Guggenheim Partners
The U.S. economic expansion continues, but increasing attention to political risks, and currency wars, in particular, indicate a period of heightened volatility could be ahead.
2013-02-14 Pressure Points: Where Tax Reform Can Be Most Effective by Team of Knowledge @ Wharton
The deficit deal that averted the fiscal cliff crisis at the start of the year raised taxes on the wealthiest and postponed -- for two months -- government spending cuts that threatened to derail the economic recovery. But the problem remains: Spending far exceeds revenue. So what's to be done? Five Wharton faculty members offer their views.
2013-02-14 Understanding Derivative Overlays, in All Their Forms by Markus Aakko, Rene Martel of PIMCO
Passively managed overlays are typically based on a simple formula, while active approaches involve more complex algorithms or decision-making. Overlay examples include portable alpha, LDI, currency, completion, rebalancing, and tactical asset allocation overlays -- as well as tail-risk hedging and hedge fund replication. Potential benefits include the ability to effectively manage cash, reduce costs and risk exposure, simplify manager transitions and express tactical views.
2013-02-14 Emerging Markets Consolidate After Last Year's Gains by Team of Thomas White International
After the strong relative performance towards the end of last year, emerging market equities settled with moderate gains during the month of January as global investor sentiment remained optimistic. Global economic data continue to be mostly positive, sustaining the trend from the second half of last year.
2013-02-13 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 The Next Step to Increasing DC Plan Participation by Seth Masters of AllianceBernstein
Defined contribution (DC) plans can deliver benefits only if workers choose to participate. Unfortunately, about one in every five eligible US employees chooses not to, according to research from Aon Hewitt. So it's encouraging that 77% of DC plan sponsors stress the importance of increasing participation in their plans, according to a recent survey we conducted. Automatic enrollment has helped lift participation in many DC plans. But how can plans take the next step toward 100% participation?
2013-02-13 January Retail Sales: Why Stocks May Be Vulnerable by Russ Koesterich of iShares Blog
When the Commerce Department releases the headline January retail sales number on Wednesday, economists expect to see a big drop from December. Russ explains why the number could come in even lower and the implications for investors.
2013-02-13 It's Time To Take Advantage Of Rising Energy Prices by John Rothe of Riverbend Investment Management
Oil prices have been on the rise again as we enter a period of the year that is historically strong for the energy sector. While markets continue to be a bit overbought, investors should not yet panic at rising oil prices. Since last summer, oil prices and the market have been closely correlated. What had been viewed by consumers as a "tax" in the past, is now viewed as a sign of increasing demand for gas due to economic expansion.
2013-02-12 The Best Tool You’ve Never Heard Of by Bob Veres (Article)
What's the most useful tool for your advisory practice that you've probably never heard about? I nominate an online service that fills in the blanks in your client asset management system.
2013-02-12 Consumers Less Enthused to Bail Out the Economy by Chris Maxey, Ryan Davis of Fortigent
Following recent recessions, it was commonplace to rely on American consumers to bail out the economy. The reliance on the American consumer was widely understood as the best remedy for an ailing economy. We are not as fortunate this time around and our dependence on consumers is one reason for the sluggish rate of recovery since 2008.
2013-02-12 Looking Forward 2013: Fixed Income Outlook by Team of Managers Investment Group
On January 8, 2013 Managers Investment Group (MIG) hosted a webinar "Looking Forward 2013: Fixed Income Market Outlook." The discussion included insightful analysis of the 2012/2013 fixed income markets and Q&A sessions with renowned panelists Nancy Angell of GW&K Investment Management (subadvisor to our suite of GW&K Funds), Dan Fuss of Loomis Sayles (subadvisor to the Managers Bond Fund), and Tony Crescenzi of PIMCO (subadvisor to the Managers PIMCO Bond Fund).
2013-02-12 Macroeconomic Risk? That's So 2012 by Tom West of Columbia Management
Fourth quarter earnings are modestly beating expectations, albeit by less than the amount expectations were lowered during the quarter. And while every sector and industry is different, the market seemed to give companies (even with their cautious outlook for 2013) the benefit of the doubt they can manage through a tough demand environment. This may be based on a general belief that the risk of extreme events is dropping.
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.
2013-02-12 High Yield Opportunity in a Crowded Space? by Mike Temple of Pioneer Investments
We have seen something interesting unfold over the last month in the markets signs of what we believe are the beginning of a Treasury breakout. Yields are starting to push through levels that have been fairly stable and steady over the last year. Our observation would be that we are starting to see a more secular move out of U.S. Treasuries and other high quality fixed income assets.
2013-02-12 Is Love in the Air? by Jerry Wagner of Flexible Plan Investments
This week includes Valentine's Day, the day millions worldwide exchange cards, letters, candy, flowers and other gifts with the center of their affection. Surely there must be a study of Valentine's Day. But search as I might, I could not find a single study of the influence of this fabled day on our financial markets. I did find one in Australia that dared to show that the chances for an up or down day in their stock market were, what else, 50-50. Could it truly be that we had finally found a seasonal event that was dare I say it random?
2013-02-11 Distracting Dividends by John Petrides of Advisors Capital Management
With interest rates at historic lows, bonds have become a difficult place to find income (although paradoxically, in 2012, asset flows into bond mutual funds have outpaced that of stock mutual funds yet again), so investors have looked to other assets for yield, most notably high dividend paying stocks. Stocks continue to be attractively valued relative to fixed income and cash. In addition, high dividend paying stocks offer investors the ability to grow the income to help offset inflation, whereas in bonds, the income is fixed.
2013-02-11 Brazil: Infrastructure Push Creating New Opportunities Across Sectors by Team of Thomas White International
Both corporates and the federal government have started investing heavily on overhauling Brazil's infrastructure.
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 Stocks: Why "Risk On" Rules by Milton Ezrati of Lord Abbett
Investors appear to believe the equity market will muddle through its many challenges.
2013-02-11 And That's the Week That Was by Ron Brounes of Brounes & Associates
With folks in the Northeast finally returning to normalcy following Superstorm Sandy's impact in October, a "potentially historic" blizzard threatened the region with predicted disruptions to businesses, schools, travel, etc. Though New England is expected to catch the brunt of the damage, forecasters are calling for up to 20 inches of snow in New York City. For now, NYSE Euronext does not anticipate anything but "business as usual" at the NY Stock Exchange as contingency plans are well in place.
2013-02-11 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Earnings continued to roll in which combined with higher dividends in many cases continued to support stock prices.
2013-02-08 Unconventional Policies and Capital Flows by Ben Emons of PIMCO
Although quantitative easing has grabbed the headlines, a number of central banks around the world have enacted other extraordinary measures in attempts to manage their economies. The Swiss National Bank (SNB), for example, adopted an exchange rate peg versus the euro while increasing its foreign exchange reserves to almost 80% of Swiss GDP.
2013-02-08 Golden State Gets Upgrade by Frank Holmes of U.S. Global Investors
The turbulent clouds that settled upon California's bond market are beginning to dissipate, as the state's general obligation debt was recently upgraded to 'A' by Standards & Poor's. It has been almost a year since the rating agency has had a sunny outlook on the Sunshine State, but a series of improving economic data and better fiscal position have been turning things around.
2013-02-08 Overcoming 3 Bad Investing Behaviors by Russ Koesterich of iShares Blog
Do you avoid the stock market? Shun diversification? Trade inefficiently? Russ and guest blogger Nelli Oster an investment strategist on Russ' team examine three common bad behaviors among investors and provide tips for potentially mitigating their impact.
2013-02-08 Out With the Dragon In With the Snake by Frank Holmes of U.S. Global Investors
Over 2013, we expect the Chinese government to continue its accommodative efforts, which should reinforce the equity rally. In addition, the new pyramid of power is focused on growth, as it seeks to improve and reform policies that will provide its residents with opportunities and social security, increase incomes and raise standards of living, which should encourage domestic consumption. Growth is set to be considerable over the next several years.
2013-02-07 Commodities: Correlating Trends with Opportunities by Mark Mobius of Franklin Templeton Investments
Commodity price inflation is both a social and an economic issue. In emerging markets in particular, food and energy costs take a deeper slice out of consumers' income, which can lead to the type of unrest that causes governments to topple. In addition to the potential impact of extreme weather on food supplies, central banks around the world are printing a flood of money, which could lead to inflated prices for other goods and services.
2013-02-07 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 Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2013-02-07 We Have Met the Enemy, and He Is Us by Ben Inker of GMO
If modern portfolio management has a single defining urge, it is almost certainly diversification. We look for diversifying assets, strategies, and managers. A thoughtful investor can argue against almost any asset class stocks, bonds, hedge funds, private equity, commodities, you name it but arguing against diversification is like arguing against indoor plumbing. I dont want to sound like I'm calling for a return to chamber pots and outhouses, so I'm not actually going to argue against diversification.
2013-02-06 Focus on Fixed Income by Steve Van Order of Calvert Investment Management
Last week Administration officials, including the President, clearly ruled out using extraordinary legal measures to avoid defaulting on Treasurys financial obligations in the absence of a debt ceiling hike by Congress. The two legal measures most discussed, going back to the summer 2011, were invoking the 14th Amendment and minting a trillion dollar platinum coin. The coin idea was dismissed as Fed officials commented that the central bank would not honor the coin as a deposit, and the amendment idea has been shelved a number of times.
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 Four Steps to Get in Front of Million-dollar Prospects by Dan Richards (Article)
Most advisors tell me that once you're face-to-face with a prospect, you have an excellent chance of signing them up. It's not the slam dunk that it might have been 15 or 20 years ago, but good odds nevertheless. The big challenge is getting that face-to-face meeting.
2013-02-05 Australia in the Asian Century by Team of Thomas White International
Early in 2011, The Economist magazine ran a cover story titled 'The Next Golden State.' The title, incidentally, referred to Australia. Today, Australias citizens enjoy some of the highest standards of living anywhere in the world. With a real income of $62,000 per person in 2012, the country ranked 13th worldwide. Five of the ten best livable cities in the world are in Australia. But, for all its advantages, the country's contribution to the world economy in absolute terms is small. It accounted for just over 1 percent of world GDP in 2011.
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 Are We There Yet? by Jerry Wagner of Flexible Plan Investments
Last week we talked about the numerous commentators urging investors to buy the dips. We pointed out that many of them (unlike many of the Flexible Plan strategies) were under invested during the stock market rally that began last November and thus were simply trying to finally get on the market band wagon.
2013-02-05 Currency War or Something Altogether Different? by Niels Jensen, Nick Rees,Tricia Ward of Absolute Return Partners
"Who is afraid of currency wars?" asks Gavyn Davies in the FT. I have known Gavyn for 25 years and have to confess that he is way out of my league intellectually. He is one of the smartest people I have ever met and, thankfully, also one of the humblest. He rarely gets things wrong so, when I occasionally disagree with him, it always makes me slightly uneasy.
2013-02-05 Ditto by Howard Marks of Oaktree Capital Management
Anyone who reads my memos of the last 23 years will see I return often to a few topics. This is due to the frequency with which themes tend to recur in the investment world. Humans often fail to learn. They forget the lessons of history, repeat patterns of behavior and make the same mistakes. As a result, certain themes arise over and over. Mark Twain had it right: "History doesn't repeat itself, but it does rhyme." The details of the events may vary greatly from occurrence to occurrence, but the themes giving rise to the events tend not to change.
2013-02-04 Our Outlook: Very Bullish for the Stock Market by Team of Sadoff Investment Management
The combined readings of these breakouts, volume strength, significant pivots by a long list of financial stocks and improving commodity prices evidence major trend improvements. Restated, the underpinnings for both the economy and stock market evidence significant strengthening ahead.
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 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 Some Seasonal Blips by Christian Thwaites of Sentinel Investments
We had a week of big numbers last week of which GDP, Personal Income, Durable Goods, the Conference Board's Consumer Confidence, payrolls and the FOMC were the ones that had our attention. We went to print a little earlier this week, so missed the NFPs. But this is what came at us. First GDP. There's a spin to be told but here are the raw numbers with the center column the one that caught markets wrong-footed.
2013-02-01 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 The Myth of the Nest Egg by Seth Masters of AllianceBernstein
For decades we've focused on the nest-egg notion as the goal for retirement saving, benchmarking our progress in relation to that lump sum. But it has no context other than probably being the single biggest "paycheck" most of us will ever see. That lump sum may sound great to me, but what does it mean for my spending over 20 or even 30 years without a paycheck?
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 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 China's Market Ups and Downs by Mark Mobius of Franklin Templeton Investments
China's stock market was a roller coaster in 2012, and those investors with a weak stomach for unpredictability probably found the ride unpleasant. Its true that by many measures last year's weak market performance in China's A share market was disappointing, but in a market of this size the story isn't all good or all bad, so unlike the market masses, I remain confident about China's prospects and continue to search for long-term investment opportunities in China.
2013-01-31 Closed-End Fund Review: Fourth Quarter 2012 by Jeff Margolin of First Trust Advisors
Following a year (2011) when the average closed-end fund was up a respectable 5.37% on a share price total return basis, closed-end funds posted even better performance in 2012, with the average fund up 14.00% (according to Morningstar) on a share price total return basis. The strong performance was broad and deep with many categories posting double-digit total returns. There were many factors which contributed to the strong results posted in 2012 and while I have written and spoken about them before, I want to reiterate them here.
2013-01-31 Credit Supernova! by Bill Gross of PIMCO
They say that time is money. What they don't say is that money may be running out of time. There may be a natural evolution to our fractionally reserved credit system which characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a "big freeze" trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence.
2013-01-31 Fiscal Cliff: Making Decisions in Crisis Part II by Brian Singer of William Blair
Having set a framework using strategic decision theory to interpret the choices of US politicians in response to their incentives around the "fiscal cliff," we now similarly turn our attention to the incentives (or disincentives) around the choices facing investors. While the general rise of uncertainty around changes to the rules of a game slow down the decision making process of investors, we consider the implications of a shifting tax burden on longer run equity valuations.
2013-01-31 Making Sense of Low Volatility Investing by Feifei Li of Research Affiliates
Why do low volatility stocks outperform riskier ones over time? Dr. Feifei Li, our Head of Research and my long-time collaborator, has focused on understanding the theoretical foundation underpinning the low volatility anomaly and documenting the strategy's risk-return characteristics in developed and emerging markets. In this issue of Simply Stated, our newsletter focusing on investor education, she summarizes the literature on the low volatility effect as well as provides additional insights from her own research based on an expanded global data set.
2013-01-31 Q4 2012 Letter by Team of Grey Owl Capital Management
During the second half of 2012, central banks turned their massive and coordinated monetary intervention "up to eleven." This is the overwhelmingly dominant economic and market force today. Despite the long-term consequences (which are very real), we believe the central bankers commitment is steadfast. It has and will likely continue to mute both real economic and financial market volatility (at the expense of long-term growth). A deeper analysis of what has changed, our assessment of the impact, and our portfolio response follows.
2013-01-31 Hasenstab: Little Value in U.S. Treasuries Right Now by Team of Franklin Templeton Investments
The financial markets may have let out a collective sigh of relief on January 1 when U.S. politicians managed to avoid falling off the fiscal cliff, but the fact is the fundamental issue plaguing the U.S. still hasn't been addressed mounting debt. As a result, Dr. Michael Hasenstab, co-director of the International Bond Department and portfolio manager for the Templeton Global Bond Fund, says he doesn't see much value in U.S. Treasuries right now. He does see it elsewhere in the world, though, including Ireland and select emerging markets where fiscal houses appear in much better order.
2013-01-31 Signs of a Solid 2013 for Stocks by Milton Ezrati of Lord Abbett
Yield spreads versus bonds indicate that stock valuations have considerable upside.
2013-01-30 Taking a Dip? by Jerry Wagner of Flexible Plan Investments
In the cold Midwest in January, the only talk of dips tends to be at Super Bowl parties or during the annual Polar Bear Club celebrations when a few hardy, scantily clad individuals jump into the frigid winter waters. Of course, in the summer those dips are much more inviting, following which a double "dipped" cone from the ice cream parlor has plenty to recommend it. But tune in to any financial news program or pick up your favorite financial read and you'll see that dips are all the rage. In this case, the reference is to "buying on dips."
2013-01-30 Fiscal Cliff: Making Decisions in Crisis Part I by Brian Singer of William Blair
Having lost touch with mainstream America, neither the Republican nor the Democratic Party enjoys much governing ability. Second, politicians struggle to function as leaders, regardless of competence, as a result of party disengagement. Third, left to their own devices, politicians will respond to their individual incentives. Bringing these observations together, neither party platform nor leadership vision will provide as much guiding force as the incentives of each politician, sometimes individually and other times in coalition.
2013-01-30 U.S. Debt Crisis End-Game Looms in 3-5 Years by Gary Halbert of Halbert Wealth Management
Last week, one of the most respected research groups in the world predicted that the US likely has only 3-5 years before the wheels fall off and the world is thrust into a major financial crisis, possibly even a depression. We'll talk about all of these things as we go along today. But before we go there, let's take a brief look at the economy before tomorrow's advance (first) estimate of 4Q GDP.
2013-01-29 Predicting Asset Class Returns: Recommendations for Financial Planners by Joe Tomlinson (Article)
Developing reasonable estimates for stock and bond returns requires more than just historical data or the assumptions provided in financial software packages. Inappropriate assumptions can doom retirees to outliving their savings or forgoing a life style they could otherwise afford. There are better ways to forecast, and in this article I'll suggest a few of them.
2013-01-29 How to Hire the Best People by Beverly Flaxington (Article)
Numbers rule. Investments, financial plans and future goals can be assessed quantitatively. But the fundamental component of an advisor's practice is the people. Having the right people on your team to work with your clients and support your efforts is crucial to your long-term success, which is why I created a structured process for hiring the best employees.
2013-01-29 Letter to the Investment Committee by Emilio Vargas (Article)
The following is a thousand words on investing that will irritate most every investment professional. Most forms of active portfolio management incur fees, transaction costs and taxes. Whole industries exist due to these costs, and their proponents will argue that they are adding value. In aggregate they cannot; they are all costs. That I am proposing an investment that could take food from the mouths of the children of an army of accountants, brokers and investment professionals will, no doubt, cause them to find flaws in what follows.
2013-01-29 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 The Term Premium: Past and Present by Zach Pandl of Columbia Management
Of the many possible explanations for the historically low level of government bond yields, near-zero central bank policy rates should be at the top of the list. However, government bond yields also appear low for reasons beyond central bank policy rates. In particular, todays low rate environment also reflects a depressed "term premium," or the compensation investors receive for taking duration risk.
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.
2013-01-29 In Japan We Trust by Chris Maxey, Ryan Davis of Fortigent
In fewer than 60 days, one country has made a splash larger than all the others. No, we are not referring to the US, where Barack Obama was re-elected to a second term. Nor are we referring to China's recent transition of power. Instead, the country we reference is Japan. After decades of malaise, Japanese officials moved to embrace policies previously only accepted by Western officials.
2013-01-28 Economic Insights: Signs of a Solid 2013 for Stocks by Milton Ezrati of Lord Abbett
Yield spreads versus bonds indicate that stock valuations have considerable upside. Earlier in this recovery, when earnings were growing very strongly, consensus concerns about equities cited the danger of an earnings slowdown. Those expressing this concern pointed out, that such a slowdown would occur inevitably as the recovery matured, especially with economic growth proceeding at such a subpar rate. What seems to have escaped notice is that the slowdown already occurred in 2012 and that the stock market offered good returns despite it.
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.
2013-01-25 Feeding the Dragon: Why China's Credit System Looks Vulnerable by Edward Chancellor, Mike Monnelly of GMO
Edward Chancellor and Mike Monnelly, members of GMO's Asset Allocation team, write to institutional clients in a new white paper about China's credit boom and outlines some worrying recent developments in its financial system. In GMO's view, "China's credit system exhibits a large number of indicators associated with acute financial fragility," including China's debt and real estate bubbles, the belief that the government is underwriting financial risk, the shadow banking system, a proliferation in credit guarantees, among others.
2013-01-25 Americas: Regional Economic Review 4Q 2012 by Team of Thomas White International
The outlook for most economies in the Americas region improved during the fourth quarter as domestic consumption growth was sustained and the anticipated revival in global demand has lifted the prospects for export growth this year. Partly helped by fiscal and monetary policy measures introduced since 2011, consumer demand has held up across most countries in the region.
2013-01-25 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 Cliff Dwellers by Stephen Taddie of Stellar Capital Management
In the ensuing days and weeks there will be plenty of opinions about what passed and what will continue to be negotiated in the drama known as the fiscal cliff. The spectacle of across-aisle dealings makes for a well rated "Reality" show (Fiscal Riff?), but poor ratings for both effectiveness and efficiency in governance. With US-centric issues in the forefront, the focus has been taken off the ongoing Euro Zone talks, which continue to plod along.
2013-01-25 Truth vs. IgnoranceThe Impactful Investment Manager of Tomorrow by Katy Sherrerd of Research Affiliates
Ignorance in investing can have devastating consequences for individual portfolios and personal wealth. Too often, capital market participants have little knowledge of how markets work, how to make investment decisions, or how to manage their portfolios. This month's Fundamentals explains how investment managers can add value for their clients through insight and education combined with the quest for alpha.
2013-01-25 Opine Less, Think More by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at investing from a broad perspective and goes over in detail some of the macro themes he is examining as he tries to help the reader make sense of what 2013 will bring. He discusses potential "black swans" that he has his eye on, the bounceback of American and European stock markets, the sometimes overlooked lack of a correlation between economic growth and stock market performance, what P/E ratios tell us both historically and in the present, and where valuations can go from here.
2013-01-25 Prisoner of the Bureaucracy by John Mauldin of Millennium Wave Advisors
I wrote some time ago that Greece had a choice between Disaster A: staying in the euro; and Disaster B: leaving the euro. I have recently come back from four days in Greece, meeting with lots of people at all levels of society, and will share with you in this letter my analysis of their choices and the results. I'll also have a few things to say about what the developments in Greece might mean for the rest of Europe and the developed world.
2013-01-24 Searching for Growth in a Low-Growth World by Austin Graff of PIMCO
We believe corporate profit growth will fall short of sell-side consensus estimates. But companies with inflation-linked revenues and supply side advantages to drive revenue growth, and those with ample cost levers to improve margins, are positioned for sustained earnings growth in the New Normal.
2013-01-24 Breaking Away by Jerry Wagner of Flexible Plan Investments
With the college and the NBA seasons now in full stride, these breakaways are on full display every day of the week and most hours of the day throughout television land. Not to be outdone, the stock market staged its only breakaway last week as it broke out above its post-correction high and scored a new market-rally highpoint. As the chart illustrates, this has been a hard fought victory. The market made the just-broken highs back in September. Since then, uncertainty sustained by an election and impending fiscal cliff had formed a nearly impenetrable defense.
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 Tail Risk Hedging: It Pays to Be Countercyclical by Vineer Bhansali of PIMCO
The cost of hedging in absolute terms is back to pre-crisis lows. Quiet markets, low volatility and a lack of visible risks on the horizon can lead to complacence and increasingly dangerous, leveraged positions. Many credit markets have been direct beneficiaries of the belief in seemingly lower tail risks in equity markets, and could also end up suffering if there is a re-emergence of widespread fear of, and upward repricing of, these tails. Investors should consider taking this opportunity to reload their hedges as soon as they can.
2013-01-24 Emerging Asia Pacific: Regional Economic Review 4Q 2012 by Team of Thomas White International
Emerging Asia Pacific economies showed strong signals of a rebound in economic activity amidst generally rising exports and stabilizing inflation. While some major economies like China, which had cut interest rates throughout 2012 to stimulate the economy, saw a mild resurgence in inflation, many countries like South Korea, Taiwan, Malaysia and Philippines saw inflation stabilize significantly during the quarter. Still, India, the region's second largest economy, continued to be troubled by rising prices despite high interest rates.
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 High Yield Market Overview December 2012 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 1.59% in December, as the high yield market rallied on the perceived benefits of a fiscal compromise in the U.S.
2013-01-23 Economic Backdrop Supports Stocks, Credit Sectors and Munis by Russ Koesterich of BlackRock Investment Management
Thanks to solid earnings, some decent (if mixed) economic news and indications that the debt ceiling debate may be delayed slightly, stocks posted additional gains last week, continuing their strong start to 2013. For the week, the Dow Jones industrial average climbed 1.2% to 13,649, the S&P 500 index advanced 1.0% to 1,485 and the NASDAQ composite rose 0.3% to 3,134. Bonds have remained relatively steady, with the 10-year Us treasury closing the week at a yield of 1.84%, two one-hundredths lower than the previous Friday close.
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 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 Norfolk Southern Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
Norfolk Southern Corp (NSC) is one of the nation's premier transportation companies. Its Norfolk Southern Railway subsidiary operates approximately 20,000 route miles in 22 states and the District of Columbia, serves every major container port in the eastern United States, and provides efficient connections to other rail carriers.
2013-01-23 Gun Control & How To Play Upcoming Debt Battles by Gary Halbert of Halbert Wealth Management
Ever since the tragedy on December 14 at Sandy Hook Elementary School in Newtown, Connecticut occurred when Adam Lanza senselessly murdered 26 people (20 children and six staff) and then himself there has been a growing cry from millions of Americans for some kind of new gun controls. And the current occupant of the White House is all too happy to oblige. Last week, the president unveiled the most sweeping new gun control laws since the so-called Brady Bill was passed in 1993, requiring background checks on firearm purchasers in the US. Obama's proposals go much further as I will discuss.
2013-01-23 Avoid Disappointment, Aim Low by Christian Thwaites of Sentinel Investments
No, it's not a life aspiration. But it can work when it comes to investing. We had a rush of gains coming into the end of the year with the S&P up 22% over the year. But it's also one of the more relaxed markets and start we've had in years. The political agenda is still front and clear and we're in a lull until the debt ceiling arguments gain steam. The markets know this but seem comfortably complacent. They're probably right to be.
2013-01-22 Wally Weitz on Value Investing in the Post-Crisis Era by Robert Huebscher (Article)
As the president and founder of Weitz Funds, Wally Weitz has spent nearly three decades putting his instinct for opportunity to work for shareholders. Influenced by the value-investing model of Benjamin Graham and Warren Buffett, Wally manages the Partners III Opportunity Fund (WPOPX), which has had an annual return of 10.85%, versus 6.23% for the S&P 500. In this interview, he discusses his investment methodology and how it has evolved since the financial crisis.
2013-01-22 Venerated Voices by Ranks Economic and Market Commentaries Most Read by Financial Advisors (Article)
Here are the winners of our 2012 Venerated Voices awards: the top commentaries, authors and firms for the past year, based on readership.
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 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 Latin America: Europe's Pillar of Strength by Team of Thomas White International
European firms are shaking off pressure at home through various business transactions in Latin America.
2013-01-22 Keep Your Eye On The Ball - 2012 Year End Letter by Team of Sloan Wealth Management
The members of the Portfolio Management Team at Sloan Wealth Management (SWM) coach two baseball teams, two soccer teams, one T-ball team and one basketball team for our collective young children. Thus, we find ourselves stressing the basics. Learning the fundamentals of how to catch a pop-up will eliminate some of the fear of getting hit in the face. In 2012, we found many parallels to the capital markets as our portfolios posted high double digit returns in the face of fear.
2013-01-22 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week saw the markets continue to trade off of concerns over Apple, and just what might happen in Washington DC concerning the debt limit negotiations. Earnings season will hit high gear this week.
2013-01-22 Fossil Inc Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
Fossil Inc. (FOSL) is a global design, marketing and distribution company that specializes in consumer fashion accessories. The Company's principal offerings include an extensive line of men's and women's fashion watches and jewelry sold under proprietary and licensed brands, handbags, small leather goods, belts, sunglasses, soft accessories, shoes and clothing.
2013-01-18 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 The Allure of Panda Coins by Teresa Kong of Matthews Asia
While I waited in another long line in San Francisco International Airport recently, I struck up a conversation with the gentleman behind me. It turned out we were both returning from research trips in China. But rather than being an investor of securities as I am, this fellow traveler was an investor in Chinese coins, specifically, panda coins.
2013-01-18 Equity Investment Outlook January 2013 by Team of Osterweis Capital Management
Despite many headwinds and amid great uncertainty, both the U.S. economy and stock market enjoyed a rather good year in 2012. Real Gross Domestic Product ("GDP") grew around 2%, and the stock market, as measured by the S&P 500 Index, returned 16%. At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013.
2013-01-18 4 Sensational Facts About Gold Investing That You Might Not Know by Frank Holmes of U.S. Global Investors
1. Gold has been a consistent performer over the decades. 2. Gold should remain a hot commodity in 2013. 3. Gold is the least volatile commodity on the table. 4. The last four years were better than you thought.
2013-01-18 VF Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of VF Corp through the lens of FAST Graphs fundamentals analyzer software tool. Therefore, it is offered as the first step before a more comprehensive research effort. Our objective is to provide companies that have excellent historical records and appear reasonably priced based on past, present and future data and expectations.
2013-01-18 Taking Stock of the Greek Issue by Giordano Lombardo of Pioneer Investment Management
Euro zone officials have shown a lot of flexibility in dealing with Greeces efforts. As the crisis extended to other countries, EMU politicians have put the integrity of the euro area above all and are unlikely to give up on their efforts should further difficulties arise. A Greek exit from the euro area does not seem to be an option any longer, but Greece must continue its efforts to return its public finances to a sustainable path.
2013-01-17 International Equity Commentary December 2012 by Team of Thomas White International
International equity prices made robust gains in December, as further improvement in economic trends across most regions lifted the outlook for 2013. Policymakers in the U.S. managed to put together an agreement at the last minute and averted the 'fiscal cliff', one of the major risks that had restricted investor sentiment during earlier months. In Europe, though economic signals remain largely weak, the further fall in bond yields of the troubled countries has helped sustain optimism about resolving the region's fiscal crisis this year.
2013-01-17 Signs of a Rotation by Scott Minerd of Guggenheim Partners
As yields continue to dwindle and risks in the fixed income market come into clearer focus, investors have begun to regard equities as a compelling alternative to bonds.
2013-01-17 Investing in Africa: Misconceptions and Realities by Mark Mobius of Franklin Templeton Investments
It's easy to fall prey to misconceptions and generalizations about places we've never been: to assume everyone in the United States drives big cars, all the French love croissants and all Canadians play hockey. There are many misconceptions about investing in developing markets, and Africa certainly has its fair share, but it's dangerous to make sweeping generalizations.
2013-01-17 End of An Era: 30 Years of Double-Digit Chinese Growth by Bryce Fegley of Saturna Capital
Slumping exports, lackluster domestic consumption, and slowing urban migration contribute to lower growth expectations for China. With Chinese manufacturing capacity now saturated relative to global demand, and developed economies facing the consequences of over-indebtedness, external tailwinds to China's growth have passed.
2013-01-16 The Rise of Asia's REITs by Sherwood Zhang of Matthews Asia
Real estate investment trusts (REITs) in Asia are following in the footsteps of their U.S. counterparts as they become an increasingly important asset class attracting investors looking to gain exposure to a diversified pool of real assets and relatively high yields. In the past decade, REITs have become a growing force in the regions investment universe. This month Sherwood Zhang, CFA, takes a look at just how far Asia's REIT markets have come, and what new opportunities as well as risks may still exist.
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 3 Reasons the Stock Market Rally Could Falter by Russ Koesterich of iShares Blog
Enjoy the US stock market rally while it lasts. Russ Koesterich has three reasons why investors should remain cautious in the near term.
2013-01-16 Tax-Deferral Becomes More Urgent As Congress Seeks Fiscal Solutions by Mitchell Caplan of Jefferson National
Many Americans began the New Year relieved that the "fiscal cliff" had been averted, if only temporarily. But there is no escaping their biggest fearthat an increase in their federal tax bill is inevitable. Congress continues to hammer out the final details, but one thing is certain: anyone drawing a salary or receiving other income will be hit with more taxes. And the higher their income, the bigger the bite.
2013-01-15 Gundlach’s Predictions for 2013 by Robert Huebscher (Article)
Don't expect the low volatility that characterized the capital markets in 2012 to continue. Global economic uncertainty remains, and markets are poised like a 'coiled snake' to reward or penalize investors in certain asset classes, according to Jeffrey Gundlach.
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 The Markets and the Cult of Now by Joseph Paul of AllianceBernstein
Crisis-battered investors continue to favor the relative certainty of current income over the "maybe" of future capital appreciation. If you ask me, however, this hyperfixation on Now is creating some provocative opportunities in Later.
2013-01-15 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 New Ice by Jerry Wagner of Flexible Plan Investments
Last week, the immediate snap-back reversal we were expecting lasted 3 days and then the rebound to new short-term highs that we also spoke about occurred as well. While it is always difficult in the very short term to tell if we are back on track, to me it looks like we remain pointing higher, expecting some short-term dips along the way.
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.
2013-01-15 What's Behind the Buyback Binge? by Milton Ezrati of Lord Abbett
The pace of stock repurchases says much about equity valuationsand companies' expectations for economic growth.
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 On the Road in India by Mark Mobius of Franklin Templeton Investments
India appears to be on its way to becoming a major market for motor vehicles. Annual car and truck sales currently in India are roughly one third of the 15 million units produced in the U.S., but the pace of growth has been high. The total population of registered motor vehicles in India numbered more than 100 million in 2008- 2009, with consumer vehicles (passenger cars, motorcycles and scooters) accounting for about 4/5 of the total.
2013-01-11 New Year's Vantage Point: Norm Boersma by Norman Boersma of Franklin Templeton Investments
As we ring in a new year, it's a good time to gain some perspective on where we've been, and where we might be headed. Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at the current headwinds facing the global equity markets, from fiscal imbalances to growth challengesand how market uncertainty can result in market mispricings.
2013-01-11 2 Reasons to Stick With Emerging Markets by Russ Koesterich of iShares Blog
Think emerging markets equities have run their course? Not so fast despite recent strong performance, Russ explains why there's room for further EM gains in 2013.
2013-01-11 How the Platinum Coin Could Work (or Backfire) by Mohamed El-Erian of PIMCO
The unusual move of minting a large platinum coin might shock politicians into cleaning up the fiscal mess. But the rest of the world may see it as inflationary.
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 Gold Strategy Investor Letter, Q4 2012 by John Hathaway of Tocqueville Asset Management
John Hathaway, manager of the Tocqueville Gold Fund (TGLDX), examines in his latest quarterly letter the macro factors affecting the price of gold and gold mining stocks. While such stocks have traded at a discount relative to historic norms, Hathaway remains bullish on gold and gold related equities, believing both could see new highs in 2013.
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 Things Can Only Get Better by Bill Smead of Smead Capital Management
As long-duration common stock owners, we at Smead Capital Management don't put much emphasis on predicting the year-to-year movements in the stock market. We expect at least a 10 percent or greater decline during each year and a greater than 20 percent decline at least once every five years. With that caveat in place, we will throw our two cents into the debate about what the US stock market will do in 2013.
2013-01-10 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.
2013-01-10 A New Years Vantage Point: Michael Hasenstab by Michael Hasenstab of Franklin Templeton Investments
As we ring in a new year, it's a good time to gain some perspective on where we've been, and where we might be headed. In the first few weeks of January, Beyond Bulls & Bears will be featuring a series of investment commentaries from select Franklin Templeton investment management teams. These professionals provide their insights on the market ups and downs of 2012, and the potential challenges and opportunities that may lie ahead from their respective vantage points. Today we hear from Michael Hasenstab, portfolio manager and co-director of the International Bond Department.
2013-01-09 Political Small Ball and Its Impact On Municipal Bonds by Tom Dalpiaz of Advisors Asset Management
In politics, making a grand bargain might be compared to the big inning where big things are accomplished in a big way. Given the serious issues we currently face regarding government spending, deficits, and the need for entitlement and tax code reform, it is not surprising many investors and the public generally have been feeling the need for a big inning or grand bargain from our political players.
2013-01-09 Stock Market Rocket by Jerry Wagner of Flexible Plan Investments
I know that if you spent any time during the holidays around children eight or older, you probably saw some pretty amazing electronic toys, communication, and entertainment devices. But 50-some years ago one of the best toys in the world was...a rubber band. Today the snap of the rubber band holds a different meaning to me. It symbolizes what I believe has been happening in our stock market.
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 3 Key Dates to Watch After the Fiscal Cliff Deal by Russ Koesterich of iShares Blog
After last week's partial deal, Russ explains when investors should expect more market volatility and another round of late-night drama from Washington.
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 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 Why China Won't Crack by Milton Ezrati of Lord Abbett
For the world's second largest economy, a hard landing scenario looks increasingly remote.
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 Fixed Income Asset Allocation Post-Apocalypse by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
December 21, 2012 the day the Earth was prophesized to collide with a black hole of kaputness has come and gone in defiance of the Mayan calendar. The more upbeat interpretation of the 5,125-year Mayan cycle, however, is that the end date doesn't signify Armageddon but rather the beginning of a new time for positive change here on earth. So allow us to suggest an investment playbook to cash in on this silver lining. In short, the sweetness of the metaphorical fortune cookie in your hand will depend on how you allocate your fixed income assets in 2013.
2013-01-07 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 Germany and Eastern Europe: Lessons in Free Trade by Team of Thomas White International
Economies in east and central Europe are attracting huge foreign investments into the automobile sector.
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.
2013-01-03 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 Another Look at Small-Cap Myths by Francis Gannon of The Royce Funds
A few years ago we wrote about several small-cap myths. As we begin the New Year, we thought it might be helpful to revisit some of the more prominent misconceptions about our chosen asset class and to examine how they have factored into recent performance.
2013-01-03 Outlook 2013: Fiscal Cliff Remains Unresolved, but Opportunities Still Exist by Russ Koesterich of BlackRock Investment Management
As we look ahead to 2013, it is impossible to make any sort of forecast without first turning our attention to the still-unresolved fiscal cliff debate. We have long said that unless we were to see significant movement on the issues of tax rates and entitlement spending, the most likely outcome would be some sort of bare-bones deal. At the time of this writing, congress and the President were still negotiating, but our analysis suggests that such a bare-bones resolution remains the most probable result, even if it does not come before the January 1 deadline.
2013-01-03 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 The Deal is Done Observations on the Cliff, the Ceiling and Your Investments by Sam Wardwell of Pioneer Investments
I've been saying that December 31 was a media deadline, not a real deadline for a fiscal cliff resolution, since Congress could act retroactively.
2013-01-03 Taking Care of Business, DC-Style, to Avert the Fiscal Cliff by Liz Ann Sonders of Charles Schwab
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
2013-01-03 5 Investment Ideas for a Post-Fiscal Cliff Deal World by Russ Koesterich of iShares Blog
As discussed in previous posts, Congress kicked off the New Year with a bare bones deal to avert (or at least delay) the fiscal cliff. Though markets responded positively to the news Wednesday morning, the euphoria isn't likely to last.
2013-01-02 Getting the Most from Your Investment Committee by Bob Veres (Article)
Investment committees are a little bit like fingerprints: they come in all shapes and sizes, and no two are exactly alike in form or function. So advisory firms that have investment committees – or are considering creating one – can learn a lot from one another. My research has identified some best practices for this flexible management tool, by comparing notes among advisors on how they are managing their IC teams.
2013-01-02 Brian McMahon on Thornburg’s Investment Income Builder Fund by Robert Huebscher (Article)
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he the co-portfolio manager for the $11.4 billion Thornburg Investment Income Builder Fund (TIBAX). The fund's goal is income production, and it has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last ten years (10.87% versus 2.88%). In this interview, he offers his views on the economy and the markets, and how he has positioned his fund.
2013-01-02 Somewhere Over the Rainbow by John Mauldin of Millennium Wave Advisors
We are 13 years into a secular bear market in the United States. The Nasdaq is still down 40% from its high, and the Dow and S&P 500 are essentially flat. European and Japanese equities have generally fared worse. The average secular bear market in the US has been about 11 years, with the shortest to date being four years and the longest 20. Are we at the beginning of a new bull market or another seven years of famine? What sorts of returns should we expect over the coming years from US equities?
2013-01-02 How Much Hedge Fund Exposure Makes Sense? by Daniel Eagan of AllianceBernstein
Our research suggests that a well-diversified allocation to hedge funds might improve portfolio returns, but their greatest benefit is the risk reduction that comes from their low correlation to stocks. Here's why.
2013-01-02 Where Munis and Government Budgets Meet by Rafael Costas of Franklin Templeton Investments
In the realm of municipal bonds, if you had been focusing on the bankruptcy filings or threats facing a few California cities that dominated the news headlines earlier this year, you couldn't have been blamed for concluding that the sector was a minefield. But then, as year-end approached, the state and local government story became more upbeat, and investors were flocking to the municipal market. Rafael Costas, co-director of the Franklin Municipal Bond Department, has ridden this kind of headline carousel before and he's used to seeing these types of stories cycle through.
2013-01-02 Emerging Markets Outlook by Armando Armenta of Invesco
There are a number of factors effecting the flows into emerging market economies. I'd like to review several of them in the medium term outlook and let you know why I doubt they will recede soon.
2012-12-28 Capitol "Cliffhanger": Thriller or Chiller? by Milton Ezrati of Lord Abbett
Whatever the outcome of the last-minute jockeying in Washington, meaningful fiscal reform remains unlikely.
2012-12-28 Don\'t Wait for the Robins: Investment Strategy for 2013 by Pamela Rosenau of HighTower Advisors
Warren Buffet once remarked, "If you wait for the robins, spring will be over." "Uncertainty" has been an overarching issue since the financial crisis of 2008 and one of the principal reasons that investors have remained on the sidelines away from the equity markets. As it has been a part of the investment lexicon, "uncertainty" will always exist in some capacity. In 2012, investors began by focusing on European issues, then the U.S. election, and now the fiscal cliff. In fact, when there is little uncertainty and investors appear unafraid, one should be more concerned.
2012-12-28 Readers' Golden Nuggets Focused on Gold, Resources and Overcoming Negativity by Frank Holmes of U.S. Global Investors
The past few days Ive been counting down the most popular commentaries over the past year. China, commodities and bond fund popularity were big hits; so were the Surprises in Gasoline, Oil and Resources Stock Prices. Here are the top four.
2012-12-27 The Best Investment-Related Quotes by Glenn Frank (Article)
I've compiled a list of my favorite investment-related quotes. They come from a range of sources – including many outside the world of finance. I hope that they provide wisdom and inspiration for the year ahead.
2012-12-27 Saving for Retirement Stage 3: Making Retirement Funds Last as Long as You Do by Team of Franklin Templeton Investments
So you're finally ready to retire. You've worked hard. You've planned. You've saved. You're ready to toss the business section and flip to the travel pages. You hope the investment decisions you've made have positioned you to meet your future needs. You may be retired, but your money has to keep working, and luck, as they say, tends to favor the prepared. In this third installment of our "Saving for Retirement" series, we take a look at some considerations and strategies for those fortunate folks beginning or living in retirement.
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 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."
2012-12-24 Skip the Surtax: A Tax-Saving Strategy for CRTs by Daniel Eagan, Steve Schilling, Tara Thompson Popernik of AllianceBernstein
A special provision buried deep in a recent set of proposed US Treasury regulations opens the door for charitable remainder trusts (CRTs) to protect gains from being subject to next year's 3.8% Medicare surtax. Here's how CRTs can reduce their beneficiaries' tax burden.
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 "Frack and Slack" Put U.S. Trade in the Black? by Milton Ezrati of Lord Abbett
Could it be that the U.S. trade balance is headed into the black? At first blush, the prospect looks dubious. This country's trade deficit has drifted deeper into the red for so many decades now that few can even conceive of lasting improvement. Even so, that is what seems to be in prospect.
2012-12-21 The Barbarous Relic Expresses an Opinion by John Gilbert of GR-NEAM
Gold has a long and varied history in economics and finance. Otherwise sensible people lose rationality and logic when conversation turns to the subject, with some rising to passionate romance, and others to apoplexy. It elicits neither for us, which allows us an attempt at a reasoned view. That is more important today than usual, because there is a message in gold's price behavior, and it is not an encouraging one. That message is that not only are rates of return low at the moment, but they may remain there for some time.
2012-12-21 How to Screen for Wonderfully Boring Stocks by Bill Smead of Smead Capital Management
In a December 7, 2012 piece for Barrons.com, Mark Hulbert shared the research from a study called "Low Risk Stocks Outperform within All Observable Markets of the World." The study, written by Nardin Baker and Robert Haugen, convincingly made the argument that boring stocks are wonderful for superior compounded returns regardless of which country you measure.
2012-12-21 Lights, Camera and Action in China by Winnie Phua of Matthews Asia
More than a decade ago, China reached a turning point in its film industry with the co-production of its first internationally acclaimed movie hit, "Crouching Tiger, Hidden Dragon." The film, directed by Academy Award winning Taiwanese American director Ang Lee, raked in more than US$213 million globally, and became the highest grossing foreign language film in U.S. history. Pretty good for a movie made in China on a US$17 million budget.
2012-12-21 The Japanese Economy: The Result of the Lower House Election by Team of Nomura Asset Management
The Liberal Democratic Party (LDP) reclaimed power in a landslide victory. Together with coalition partner, the New Komeito Party, the LDP secured 325 seats giving it two-thirds of the total seats, which allows them to pass legislation by using the supermajority position in the lower house. This will enable them to overrule the upper house where no party currently holds an overall majority, otherwise requiring the LDP to consult with opposing parties. In addition, on an individual case by case basis, the LDP would be able to seek cooperation from the third party Japan Restoration Party.
2012-12-20 Hedge Funds: Identifying Alpha and Mitigating Risk by Daniel Eagan of AllianceBernstein
Hedge funds have historically generated higher returns than stocks with less volatility, but they also pose several significant risks that volatility alone doesn't capture, our research suggests. That makes careful due diligence and diversification of managers crucial.
2012-12-20 Rolling Tail Hedges: The Dynamic Tradeoff between Cost and Potency by Vineer Bhansali of PIMCO
In our hypothetical illustration, rebalancing tail risk hedges more frequently than once a year offers some benefit under all volatility curves (ignoring transaction costs) but the benefits are greatest when the volatility curve is flat or steep. Some of the benefits of rebalancing can quickly disappear if the transactions costs are large. Two key points for investors to consider: Hedging has to be a systematic, repeated, asset allocation decision to obtain best long-term benefits, and the hedge program has to be active and consider pricing levels so efficient rebalancing can be implemented.
2012-12-20 Japan: Abundant Opportunities Despite Debt-Induced Deleveraging Cycle by David Nadel, Dilip Badlani of The Royce Funds
Over the last two decades, Japan has suffered under the malaise of deflationary deleveraging after its stunning growth between the 1960s through the end of the 1980s. In 1991, economists were predicting that Japan would overtake the U.S. as the world's largest economy by 2010. Instead, Japan's GDP has stayed largely stagnant over this time period as the country has been trapped in a debt-induced deleveraging cycle.
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.
2012-12-20 Can China Double National Income by 2020? by Daisuke Nomoto of Columbia Management
Xi Jinping, China's newly elected president, was the featured speaker at the recent National Congress. However, I felt the most interesting point to come out of the event was outgoing President Hu Jintao's announcement of a plan to double Chinas national income by 2020. This plan is reminiscent of a similar program launched in Japan in the 1960s, spearheaded by Prime Minister Ikeda, where the goal was also a doubling of national income. The two programs have a number of parallels despite the multi-decade time gap between them.
2012-12-20 Italy: The Impending Elections by Giordano Lombardo of Pioneer Investments
As Italy's technocratic party prepares to exit , I asked Cosimo Marasciulo, Pioneer's Head of European Government Bonds and Foreign Exchange, for his thoughts on pending elections in 2013 and how they might affect investors. I'll share a few of those thoughts with you here.
2012-12-19 Accenture: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of Accenture (ACN) through the lens of FAST Graphs fundamentals analyzer software tool.
2012-12-19 Energen Corp: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of Energen Corp (EGN) through the lens of FAST Graphs fundamentals analyzer software tool.
2012-12-19 2013: A Year in Multi-Asset Investing by Johanna Kyrklund of Schroders Investment Management
Extreme political risk is reduced but the cyclical environment remains challenging. Safe havens are expensive and we are increasingly incentivized to take on more risk. Equity valuations are attractive. Our core emphasis remains on quality although there is tactical opportunity
in pockets of extreme value.
2012-12-19 ING Fixed Income Perspectives December 2012 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
While all the good little boys and Cindy Lou Whos dream of sugar plums and new iPhone 5s in blue, the adults in our modern-day Christmas story can't sleep but a wink, as visions of getting Scrooge'd by the fiscal cliff are making hearts sink. No matter if this political humbug cease or persist, down the chimneys of a recuperating housing market Ol' Saint Bernanke-olas will continue to gift $85 billion of Treasury and MBS purchases per month or more until the labor market can finally get over the hump and deliver 6.5% unemployment and inflation of 2.5% and no more.
2012-12-19 The Consumer Catalyst in Asia's Emerging Markets by Andrew Sleeman of Franklin Templeton Investments
There may be no better evidence of the economic power of the consumer than the spending frenzy that occurs this time of yearthe sparkling lights, the must-have gifts and gadgets, the indulgent meals. Whether online, brick and mortar, big box or mom-and-pop, retailers count on the year-end consumer boom.
2012-12-18 Better Angels by Michael Lewitt (Article)
If all else fails, President Obama should lock the members of Congress inside the Capital about a week before Christmas, post the military at the door, hang big-screen television in each chamber, tune them to CNBC, and turn up the volume up. Faced with listening to endless repetitions of the words "rising above" or "fiscal cliff" or "kick the can down the road," our legislators will have no trouble reaching a compromise quickly.
2012-12-18 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 Energy Face-Off: North American Energy Independence vs. Canada's Export Plans by John Devir of PIMCO
President Obama's November 2011 postponement of a decision on whether to permit an oil pipeline from Canada's oil sands to the U.S. Gulf Coast caused a barrage of protests and negative press in Canada. Canada's new focus on building capacity to sell to Asia-Pacific could hinder U.S. ambitions of energy independence from overseas oil, since the U.S. imports roughly 30% of its crude oil from Canada. We see investor opportunities in rail transportation and pipeline systems that possess excess capacity.
2012-12-18 Central Bank Insurance by John Mauldin of Millennium Wave Advisors
Possibly, the question I am asked the most is, "What do you think about gold?" While I have written brief bits about the yellow metal, I cannot remember the last time I devoted a full e-letter to the subject of gold. Longtime readers know that I am a steady buyer of gold, but to my mind that is different from being bullish on gold. In this week's letter we will look at some recent research on gold and try to separate some of the myths surrounding gold from the rationale as to why you might want to own some of the "barbarous relic," as Keynes called it.
2012-12-18 Cliff Diving by Jerry Wagner of Flexible Plan Investments
A "fiscal" cliff potentially to be caused not by the confluence of divers, swirling ocean and towering cliffs, but by a huge impending tax increase and self-imposed unspecified cuts that must be made automatically at year end to essential defense and social welfare programs, all to deal with a tidal wave of government spending, resulting in a nation drowning in debt.
2012-12-17 The Market's Next Appointment: Health Care by Milton Ezrati of Lord Abbett
Even if a "fiscal cliff" resolution is achieved, investors will receive another dose of uncertainty courtesy of the Affordable Care Act.
2012-12-17 Fiscal Cliff Deadlines Draw Near by Russ Koesterich of BlackRock Investment Management
In addition to the seemingly never-ending focus on the fiscal cliff, markets turned their attention to last week's Federal reserve meeting and the corresponding announcement of the central bank's continuation of its bond-purchase program. Following a very brief rally after the announcement, however, stock prices fell and ended the week marginally lower. For the week, the Dow Jones industrial average declined 0.2% to 13,135, the S&P 500 index fell 0.3% to 1,413 and the NASDAQ composite dropped 0.2% to 2,971.
2012-12-17 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market has gone into a trance as we approach the end of the year. The uncertainty around fiscal policy, along with concerns over Apple and the economy at large have caused institutions to wait for the dust to clear.
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 Saving for Retirement Stage 2: The Sandwich Generation by Team of Franklin Templeton
Youve probably heard of the term sandwich generation, a time at mid-life when many individuals find themselves caring simultaneously for their children and their aging parents. Its a time when investment dollars can get squeezed out by day-to-day and unexpected expenses, a mortgage and possibly even a college savings plan. In this second of our three-part Investing for Retirement series, we take a look at some retirement savings strategies for individuals coping with these mid-life challenges as they themselves begin to look toward transitioning into retirement.
2012-12-14 2013: A Year in Global Equities by Virginie Maisonneuve of Schroders Investment Management
Global equities are very attractively valued and we are positive for their prospects in 2013 as the global economy normalises. Progress in Europe, the end of China's growth slowdown and continued momentum in the US economic recovery will support global equities. Longer-term investors must position themselves for a growth-saturated world in which sustainability and innovation will be even more important.
2012-12-14 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."
2012-12-13 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 Can The U.S. Afford Its National Credit Card? by Garritt Conover and Orhan Imer of Columbia Management
With U.S. national debt at all time highs and major Federal programs expiring within weeks, it is no surprise that the focus of investors following the election has quickly shifted back to the upcoming fiscal cliff. Fears of an insolvent government or a U.S. debt crisis have sparked heated debates regarding ways of tackling the budget deficit but just how imminent a threat does it pose?
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 Hedge Funds: Separating Fact from Hype by Daniel Eagan of AllianceBernstein
It's easy to understand the allure of hedge funds and the fear they inspire. After conducting rigorous research aimed at separating fact from hype, we have concluded that hedge funds historically have had an attractive risk/return profile.
2012-12-13 Will China's New Leaders Rise to Reform? by Mark Mobius of Franklin Templeton Investments
While the uncertainty wrought by the election process in democratic countries may be largely absent in China, the country's gradual transition to new leadership and the likely new course for the country over the next decade still raises questions. In March 2013, the National People's Congress, China's parliament and highest state body, intends to formally usher in China's leadership, and some members of the "old guard" are retiring. Will China's new leaders continue to reform the economy, moving it toward a domestic consumption model, and still be able to maintain enviable growth rates?
2012-12-13 The Fake Economy by Bill Mann of Motley Fool Funds
A random question for you (one that contemplates your breaking federal law, so be forewarned): Given enough time and ample resources, do you think you could create a reasonable facsimile of a $20 bill? I'd wager that given modern printing capabilities, a reasonably diligent and determined individual could create a fool-some-of-the-people copy of a $20 bill.
2012-12-13 3 Potential Scenarios for 2013 by Russ Koesterich of iShares Blog
Despite getting lucky in 2012, many of the major risks that economies and markets faced this year remain. With the current environment in mind, Russ K shares his 3 potential scenarios for 2013 along with potential investment strategies for each.
2012-12-13 Pacific Basin Market Overview - November 2012 by Team of Nomura Asset Management
Asian equity markets ended higher this month, although they were heavily influenced by events elsewhere. Improved economic data from Germany, coupled with expectations that Greece will receive a further round of financial support from the European Union (EU), helped to lift sentiment. Meanwhile, investors were paying close attention to the American congressional budget negotiations to avoid the looming year-end "fiscal cliff" risk to the economy, although U.S. economic data was generally positive.
2012-12-12 The Fiscal Cliff Doesn't Arrive on December 31 by Sam Wardwell of Pioneer Investments
The news media is breathlessly counting down the days until the arrival of the fiscal cliff on December 31. It may make for good television (tune in tomorrow) but it's not good economics...or good political analysis. Here's why.
2012-12-12 Mish Shedlock Exposed by Peter Schiff of Euro Pacific Capital
In January 2009, just as the "Peter Schiff was Right" YouTube video that catalogued my previously derided predictions about a coming financial collapse was racking up views and attracting mainstream attention, a blogger and investment advisor named Mike Shedlock (aka "Mish") saw an opportunity to make an unethical grab at my current and prospective clients by breaking the nascent wave.
2012-12-12 Nu Skin Enterprises: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article will reveal the business prospects of Nu Skin Enterprises (NUS) through the lens of FAST Graphs fundamentals analyzer software tool.
2012-12-11 Shared Sacrifice by David Rosenberg (Article)
Now that everyone is focused like a laser beam on Fiscal Armageddon, it may be more appropriate to look at what is happening on Main Street rather than Washington. Looking ahead, it is going to be more about the economy, and taking it a step further, at times like these, it is important to understand where the real economic power resides, and this is with the people.
2012-12-11 Fine Wine - Why it's for More than Just Drinking by Mark E. Ricardo, JD, LLM, AAMS (Article)
For many investors, an ideal asset class would combine superior long-term absolute and risk-adjusted returns with a hedge against inflation and stock market volatility. There's a way to get all of that, in an asset class you might never have thought of until now: fine wine. Investment-grade wine deserves careful consideration, particularly now that - unlike other collectibles, such as art and rare books - it can be traded on a regulated exchange.
2012-12-11 Letters to the Editor by Various (Article)
Readers respond to a series of articles that appeared over the last several weeks.
2012-12-11 High-Yield Bank Loans: Look Before You Leap by Ashish Shah, Gershon Distenfeld, Ivan Rudolph-Shabinsky of AllianceBernstein
High-yield bank loans are a hot topic again in capital markets, with features touted as ideal for today's environment. But we think it makes sense to take a closer look at what bank loans really areand aren't. In our opinion, there are a few holes in the case for piling into high-yield loans.
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 Up, Then Down by Jerry Wagner of Flexible Plan Investments
Five losses in a row for my Detroit Lions, and every one a heartbreakerin most of the games they led by at least ten points at one time. Getting ahead but still losing is a pattern that is not restricted to sports, but is also encountered in investing. It's surprising that conventional stock market investing has not seemingly developed any effective ways to counter it. Yet with profits in most of our strategies so far this year, it's important to seek to do so.
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.
2012-12-10 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 Russia's WTO Entry a Big Boost to World Economy by Team of Thomas White International
The WTO's 156th entrant is the world's ninth largest economy and Europe's biggest.
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.
2012-12-08 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.
2012-12-07 Saving for Retirement: Stage 1 by Team of Franklin Templeton
Most of us have certain expectations about our retirement. We may daydream of the golden years as a time to explore exotic locales, perfect a golf swing, or just relax. The reality is often quite different, particularly for those whove done more daydreaming than planning, or who have suffered setbacks to their portfolios in 2008-2009 and feel a sense of paralysis. Knowing where to begin can be confusing, and as with most things, overcoming inertia to take that first step certainly isnt easy.
2012-12-07 Archer Daniels Midland Co: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-07 Ball Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-07 Dillards Inc: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-07 Hormel Foods Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-06 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 Regal-Beloit Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-06 United Technologies Corp: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-06 Questions and Answers Surrounding the Fiscal Cliff by Team of Northern Trust
There is no resolution yet to the US fiscal cliff. It is probably unfair to have expected one by now; the clock is too far from midnight. But as the negotiations continue, several questions have been raised that deserve some reflection. 1. The two sides seem to be making statements that reflect stark disagreement. Are talks failing? 2. Is our fiscal path a cliff, or a slope? 3. There is a proposal to limit the deductions claimed by high income taxpayers. How would these work, and what are the consequences? 4. The cliff has been in the news for a long time. Why isnt everyone prepared for it?
2012-12-06 Tango Time by Colin Moore of Columbia Management
Investors should be prepared for a sizable tax hike in excess of $1 trillion. The Republican position on taxes is untenable. I can find little evidence that a tax yield of approximately 18%/19% harms the economy. I am in the camp of lower tax rates and fewer deductions especially for incomes above $500,000. However spending is at a level not seen since World War 2. I am supportive of the deferral assuming the cuts are specifically identified and the deferral period is explicit. However the ratio of cuts to tax increases needs to be approximately 2 to 1.
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 Nordstrom Inc: Fundamental Stock Research Analysis by F.A.S.T. Graphs of F.A.S.T. Graphs
This report presented essential fundamentals at a glance illustrating the past and present valuation based on earnings achievements as reported. Future forecasts for earnings growth are based on the consensus of leading analysts. Although with just a quick glance you can know a lot about the company, its imperative that the reader conducts their own due diligence in order to validate whether the consensus estimates seem reasonable or not.
2012-12-05 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.
2012-12-05 Resilient Markets Mask Greater Concerns in Real Economy by Douglas Cote of ING Investment Management
Though equity markets have been calm, the real economy tells a different story.
If our leaders in Washington arent able to arrive at a compromise, January 1 will mark the beginning of the countrys first scheduled recession, though third quarter corporate earnings suggest a global slowdown is evident.
Dont be surprised to see a Christmas rally should Congress kick the fiscal can down the road and the Fed extend Operation Twist.
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
2012-12-04 How to Turn Acquaintances into Clients by Dan Richards (Article)
The transition from a casual social conversation to a business-related one is tricky, requiring us to do it in a way that's not intrusive and doesn't make the person uncomfortable. Here's an approach that worked for one advisor.
2012-12-04 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 Don't Let Sleeping Utilities Lie by Pamela Rosenau of HighTower Advisors
As the market continues to digest the unrelenting daily news flow relating to the fiscal cliff, some investors are trying to anticipate who the big winners and losers will be as we head into 2013. Although some may worry about uncertain economic consequences, Ned Davis Research notes that history reveals that in periods of market decline between 1970 and 2000, dividend paying stocks have outperformed their stingy counterparts by 1.5% per month.
2012-12-04 Economics 101: Little Return without Risk by Bill Smead of Smead Capital Management
A tremendous amount of energy and effort has been expended in the US on behalf of wealthy investors to secure returns while reducing risk. Like any useful endeavor, it started out as a wise thing and reached its stride in the late 1990s as a way to deal with a massive asset misallocation. As Warren Buffett always says, What the wise man does at the beginning, the fool does at the end. It appears to us that the efforts to eliminate risk in the US capital markets have reached the foolish point.
2012-12-04 Strawberry Fields Forever? by Bill Gross of PIMCO
As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will take you down and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.
2012-12-04 Intrinsic Value from Ben Graham to Anderson Griggs With an example; Emerson Electric (EMR) by Kendall J. Anderson of Anderson Griggs
Ben Graham may not have been the first to use the term intrinsic value as a form of analysis for stocks and bonds. But, through his teachings and the successful application of this approach by his many students and practitioners (including Warren Buffett, John Templeton, Seth Klarman, Mason Hawkins, Howard Marks and yours truly) he is given the credit. Understanding the concept of intrinsic value is necessary for an intelligent investor. Without understanding intrinsic value, its offspring, margin of safety, has no meaning.
2012-12-03 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.
2012-12-03 CVS Caremark Corp: Fundamental Stock Research Analysis by FAST Graphs of FAST Graphs
This article is going to look at CVS Caremark Corp (CVS) through the lens of FAST Graphs - fundamentals analyzer software tool. The 12-year historical chart on CVS Caremark Corp shows that the company is undervalued. The prudent investor seeking growth and a rising income stream might want to look more in-depth at CVS Caremark Corp for possible addition to his own portfolio.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-12-01 The Bank of Canada Has Barked, But Will It Bite? by Ed Devlin and Richard Clarida of PIMCO
As Canadian consumers have increased their mortgage debt and bid up housing prices, the potential for a disorderly unwinding of these imbalances rightly concerns the Bank of Canada. PIMCO believes that the banks next policy move will be to raise interest rates, but with the traditional aim of fighting inflation rather than reducing home prices and consumer debt. We expect the Bank of Canada to continue tightening mortgage credit and using moral suasion to damp the housing boom and discourage consumers from taking on more debt.
2012-12-01 The How Matters by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Market focus has clearly been on fiscal cliff negotiations. An agreement that averts the cliff would likely ignite a further near-term rally, but the ultimate solution and its components could have longer term consequences that may not be as market-friendly. US economic data has been impacted by Hurricane Sandy, but it appears modest growth is continuing; although business investment has fallen off. Housing continues to provide support and the Fed is staying the course. There are some signs of growth stabilization globally, notably in some of the emerging economies, including China.
2012-11-30 Active Management: Don't Drop the Pilot by Patrick Rudden of AllianceBernstein
For years, we've advised clients to hold diversified portfolios with balanced allocations to stocks, bonds and other assets. Lately, it's been a hard sell, especially after years of underperformance by active equity managers. But the tide may be turning.
2012-11-30 Fiscal Cliff Countdown: Templeton Perspectives by Team of Franklin Templeton Investments
The U.S. "fiscal cliff" clock is ticking loudly, and so far U.S. politicians havent been able to cooperatively silence it. A sweeping roster of automatic spending cuts and tax hikes remain set to go into effect at year-end with what could be detrimental economic consequences.
2012-11-30 A Municipal Bond Cliffhanger by Guy Davidson of AllianceBernstein
Municipal bonds are popular because the interest they pay is exempt from federal taxation. But in its search for solutions to the fiscal cliff, the US federal government is looking under every rock for more revenue sources. This could put muni bonds' tax-exempt status at risk.
2012-11-30 ProVise Bullets by Ray Ferrara of ProVise Management Group
Last year the post office lost almost $15 billion. You would think that postal rates would be going up, and they are. Effective January 27, 2013, the price of a first class stamp will increase to 46 while a postcard will increase to 33. Both are a one penny increase. Does the post office really think this will make a difference? We hope you have a lot of those "forever" stamps.
2012-11-30 3 Reasons to Hold Off on Holiday Sales Celebrations by Russ Koesterich of iShares Blog
Is the US consumer saying goodbye to the Great Recession and hello to a heady holiday season? Initial holiday sales results may paint a rosy picture, but Russ K explains why investors shouldn't be prematurely uncorking the New Year's champagne.
2012-11-29 The 13th Labour of Hercules: Capital Preservation in the Age of Financial Repression by James Montier of GMO
James Montier, a member of GMO's asset allocation team, writes to institutional clients in a new white paper on the prospects for preserving and growing capital in a world of slowing growth. Defining financial repression loosely "as a policy that results in consistent negative real interest rates," Mr. Montier poses the question "how does a value investor respond to this? It certainly appears as if the assets one would normally associate with capital preservation are expensive. So can and/or should you substitute other assets such as equities into the role of safe-haven value store?"
2012-11-29 Small-Caps Pack Big Punch in Emerging Markets by Frank Holmes of U.S. Global Investors
In October, the International Monetary Fund painted a gloomier picture for global investors, as it projected slower growth due to slumping world trade and uncertainty in the West. Despite the forecast, big gains can still be unlocked in the faster-growing emerging markets. We believe the smaller stocks are holding the key.
2012-11-29 Are E&Fs Jeopardizing Their Missions? by Seth Masters of AllianceBernstein
Many US endowments and foundations (E&Fs) still plan to spend 5% of their assets each year, despite unusually low expected returns. We think few understand how likely it is that this will limit their ability to fulfill their missions in perpetuity.
2012-11-29 "Bond Deer" in the Headlights by Mike Temple of Pioneer Investments
An insightful client exclaimed to me last week, after I had enumerated the many risks facing bond market investors that he felt like a deer in the headlights. "Bear" with me for a paragraph or two while I elaborate. . .
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 Better Fundamentals & Attractive Valuations - Why Now is a Good Time to Increase EME Exposure by Michael Zinkand of Managers Investment Group
U.S. equity markets have continued to rise during 2012. As of September 30, 2012, the S&P 500 Index was up 16.4%, with some segments of the U.S. market surpassing their 2007 highs. Emerging market equities have also produced decent returns and benefited from increased investor interest. Through September 30, 2012, however, the MSCI Emerging Markets Index has returned only 11.1% in U.S. Dollars year-to-date, compared with 16.4% for the S&P 500. This may be somewhat surprising since "riskier assets", like small-cap equities and emerging market equities, often lead when stock markets rise.
2012-11-27 Are Equities Still Cheap? by Chris Maxey, Ryan Davis of Fortigent
Since reaching a near-term top in mid-September, the S&P 500 Index fell more than 7%. After a 4% rally in the last five trading days, there are reasons to believe equity markets are poised to extend recent performance despite headline concerns.
2012-11-27 Beta The One Trick Unicorn by Liam Molloy, Bethany Carlson of Galway Investment Strategy
For a long time investors have been told the only free lunch is diversification. In a hurry to buy into the mythical free lunch investors jumped in without asking enough questions, like what is diversification. Instead everyone hurried to fill buckets and cover the style boxes with about as much thought as someone filling out a March Madness office bracket.
2012-11-27 Fixed Income Perspectives by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A wise American once said "Life is hard; it's harder if you're stupid." A good example is when your pals in Washington are so busy pushing their partisan agendas that they lose sight of what could happen to the American economic Thunderbird if it goes all Thelma and Louise over the fiscal cliff. With the latest elections in the books, it remains to be seen if a Democratic president and acrimonious Republican House can put on their thinking caps to devise a way to delicately pump the brakes of fiscal restraint.
2012-11-27 Fiscal Perdition by Marie Schofield of Columbia Management
Fiscal consolidations are underway across the developed world, and many require large adjustments. At a minimum, countries need to bring their primary budgets into balance in an effort to stabilize growing debt-to-gross domestic product (GDP) ratios. Many are looking at trimming deficits totaling 5% of GDP or more. This will require both spending cuts and tax increases which often work counter to stabilizing debt ratios, as this can brake GDP growth and undermine both the fiscal position and the political fortitude for action.
2012-11-27 Seasonal Rallies and Fiscal Cliffs by Jerry Wagner of Flexible Plan Investments
Black Fridaythat term used to be reserved for days that major crashes began in the stock market. Fortunately, we saw anything but last week as stocks soared to their best week in months. The market followed through once again on the pre- and post-Thanksgiving positive seasonality pattern that we reported on last week.
2012-11-26 Stuck in the Muddle with You by Milton Ezrati of Lord Abbett
Raising Keynes hasn't worked. What will finally lift the fog of uncertainty that bedevils the economy?
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 To Invest or Not To Invest? That is NOT the Question! by Matt Scales of Columbia Management
The question that many investors continue to ask is, "Should I be buying stocks now or not?" This is the question investors trying to time the market ask themselves every day. If they choose not to be in the market, they may idle in cash as their neutral position until they figure out when to get back in. However timing the market is a very difficult game, even for the most accomplished investors.
2012-11-22 Emerging Asias Rising Productivity by Robert Horrocks of Matthews Asia
Per capita GDP in China has tripled in purchasing power parity terms in the last decade yet Chinese workers still likely have their most productive years ahead of them. Asia as a whole has seen consumption increase by a third since the global financial crisis, even as the West has languished. This month, Robert Horrocks, writes about what is key to the emerging opportunities in Asia: Productivity.
2012-11-21 The Most Wonderful Time of the Year...for Stocks by Frank Holmes of U.S. Global Investors
November hasn't been living up to its reputation as one of the best months for U.S. stocks. Equity investors have been fed a cornucopia of negative news that has been difficult to digest, including the outcome of the "fiscal cliff," the front page photos of rioting in the eurozone, and the escalation of geopolitical risk in the Middle East.
2012-11-20 Kyle Bass on the Next Big Crisis by Robert Huebscher (Article)
If economics could be studied in a laboratory, scientists might concoct something like the circumstances now unfolding in Japan – and policymakers should be paying close attention. According to Kyle Bass, Japan's currency – and its bond market – are about to collapse under the weight of the country's unsustainable fiscal deficit.
2012-11-20 President Obama’s Re-Election and the Impact on the U.S. Economy by Eaton Vance Distributors, Inc. (Article)
President Obama’s re-election resolves a major element of uncertainty that has hung over the political landscape. But what kind of impact will his victory have on the economy and the markets, especially with the House still in Republican control? We posed that question to a roundtable of five investment professionals from Eaton Vance Management, Hexavest and Richard Bernstein Advisors.
2012-11-20 Are Inflation-Adjusted Annuities Right for Clients? The Product and Its Prospects by Joe Tomlinson (Article)
Many economists and retirement experts favor inflation-adjusted SPIAs, but advisors and the investing public have never shared their enthusiasm. Detractors contend that the product is fundamentally flawed and will never gain broad acceptance. My own view is more optimistic, but significant obstacles will, nonetheless, continue to impede wider adoption.
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 Emerging Markets Equity -- Monthly Product Commentary: October 2012 by Team of Thomas White International
Economic data from major emerging markets suggested a moderate reversal from the weak trends of recent months.
2012-11-20 Favoring France: The Newest Bright Spot in Europe by Russ Koesterich of iShares Blog
Europe may be stabilizing, but it's not out of the woods yet. One bright spot on the continent? France. Russ explains why he would now overweight the country's equities.
2012-11-20 When is the Turkey Supposed to Arrive? by Jerry Wagner of Flexible Plan Investments
This Thanksgiving week historically has not been a turkey in the markets. Since 1950, stocks have advanced the day before and after the holiday 76% of the time. Yet, this year the turkey in the financial markets seems to have arrived early. Stocks as measured by the S&P 500 Index have fallen 5.1% since the Tuesday Election Day close.
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 4 Reasons Not to Taiwan On by Russ Koesterich of iShares Blog
Russ K shares four reasons hes downgrading his view of Taiwan from overweight to neutral and shares potential single country solutions he prefers instead.
2012-11-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks continued their post-election selloff. The usual concerns about future tax increases and retrenchment by both consumers and business weighed heavily upon investor sentiment.
2012-11-19 The Seeds of Higher Market Volatility Were Sown by Mike Temple of Pioneer Investments
A paradigm shift in financial markets has taken place since 2008 into a more volatile investment environment that will demand different ways of managing risk. In an ironic twist of intention, today's higher volatility is the consequence of attempts by central banks to engineer a less volatile economic environment.
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.
2012-11-16 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 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 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011.
2012-11-16 Fed Balance Sheet Expands, Reward-Risk Clarity Fades by Alan Levenson of T. Rowe Price
While the minutes of the October 23-24 FOMC indicated a lack of consensus regarding whether to initiate a new asset purchase program to replace the Maturity Extension Program (MEP) upon its year-end conclusion, we believe that the Committee will announce at the conclusion of its December 11-12 meeting that the Fed will begin open-ended purchases of Treasury securities at a pace close to the $45 billion per month in the MEP.
2012-11-15 Russia and China's Neighborly Interests by Mark Mobius of Franklin Templeton Investments
Whether our neighbors are as close as the airplane seat next to us or across a national border, most would probably agree that while we may not see eye to eye, peaceful cooperation makes more sense than tense relations. China and Russia share some 4,000 miles of common border, and their neighborly relationship has certainly had some ups and downs. But it's clear to me that the opportunities for cooperation between these two nations have enormous potential mutual benefits, particularly in the trade of natural resources.
2012-11-15 New Leaders, Same Steady Hand on the Chinese Economic Tiller by Anthony Chan of AllianceBernstein
The media spotlight is on China's new president, Xi Jinping. But investors should be watching Li Keqiang, the new premier. It's Mr Li who will be responsible for combating the country's slowing economic growth and, with it, potentially the fate of the world's economy.
2012-11-15 November 2012 Market Commentary by Andrew Clinton of Clinton Investment Management
In light of the approaching fiscal cliff and likely changes to the US tax code, we continue to believe that municipal bonds offer some of the most attractive risk- adjusted return potential available in the market today.
2012-11-15 Pacific Basin Market Overview - October 2012 by Team of Nomura Asset Management
Equity markets derived support this month from improved U.S. economic data and an impression that China's economy might be bottoming out. In addition, the Euro Area Industrial Production numbers came in above consensus. The MSCI AC Asia Pacific Free Index including Japan declined by 0.39% while the MSCI AC Asia Pacific ex Japan Free Index gained 0.44% in October 2012.
2012-11-15 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 The Fiscal Cliff Comes Into Focus by Zach Pandl of Columbia Management
Investors and economists have been debating the fiscal cliff for more than a year. When budget negotiations fell apart in July 2011, the White House and congressional leaders delegated responsibility for finding additional federal savings to a bipartisan "super committee". However, this group could not bridge the differences between the two parties either, and so the nation's fiscal policy was set to the fallback option: automatically begin cutting spending and allow tax rates to set higher at the start of 2013.
2012-11-13 The Downside to Socially Responsible Investing by Robert Huebscher (Article)
Who wouldn't want a cleaner environment or a more just society? We can all agree these are worthy goals. But it's an established fact that pursuing them through one's investing is costly; environmental-, social- and governance-based investing (ESG) does fine on a gross basis, but loses money net of fees. Now, a recently published paper argues that that ESG is basically a waste of time.
2012-11-13 Harvard's #1 Strategy Guru on the Key Decision for Your Business by Dan Richards (Article)
Competition has brought many once-dominant names to the brink of survival - General Motors, Kodak, Sears and Xerox. Michael Porter, Harvard's top expert on strategy, explains why advisors ignoring the important lesson here do so at their peril.
2012-11-13 Voyages by Michael Lewitt (Article)
Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.
2012-11-13 The New Dynamics of Referral Generation by Beverly Flaxington (Article)
Discussion of financial advice among acquaintances has gone totally off the grid. It has become an almost universally taboo subject. People are loath to broach any conversation about personal finances. What are your thoughts?
2012-11-13 The Real Job Creators by Justin Locke (Article)
The election is behind us, but a politically charged phrase that took a starring role in the campaign lingers on: "job creators." Now that cooler heads are returning, it's time to get past the politics and acknowledge the facts: Capital, by itself, does not create jobs. Jobs are created by salespeople.
2012-11-13 Quarterly Letter by Team of Grey Owl Capital Management
The multiple hurricanes of fiscal deficits and monetary malfeasance are headed our way. Unfortunately, financial market models that seek to assess the magnitude, direction, and timing of economic tempests are far less precise than those of our scientific brethren. So, we prepare for the worst, but we dont immediately evacuate. There are still plenty of opportunities for solid investment returns and we will describe two new investments in the pages that follow. Yet, the risks are real, as we have discussed frequently in these letters, so our overall portfolio structure remains conservative.
2012-11-13 China's Transition Occurring at a Critical Time by Chris Maxey, Ryan Davis of Fortigent
While the presidential election in the U.S. was on the forefront of most investors' minds, current events in China could be equally important to the global economy. China is going through a political transition at the same time as it seeks to re-balance its economy. Whether those efforts will be successful remains a great unknown.
2012-11-13 Four More Years... by Kate Schapiro of Sentinel Investments
Americans went to the polls this past Tuesday and re-elected President Obama to four more years in office. In addition, the partisan breakdown of Congress stayed roughly the same in both the House of Representatives (Republican majority) and Senate (Democratic majority). So after nearly two years and billions of dollars spent on campaigning, debating, polling, grand-standing and mudslinging, the leadership is unchanged. A good argument for campaign finance reform if ever there was one.
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.
2012-11-12 After the Election, Fiscal Cliff Outcome May Surprise by Libby Cantrill, Josh Thimons of PIMCO
Our base case for a fiscal cliff resolution continues to be a lame-duck mini-deal that would reflect about 1.5% of GDP in fiscal contraction in 2013 (vs. nearly 5% without a deal). But the dynamics of polarization and partisanship that played a role in past dysfunctional negotiations may have gotten worse. On a more optimistic note, it is widely known that second-term presidents are largely interested in their legacies spearheading noteworthy, bipartisan and lasting accomplishments for the history books.
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.
2012-11-12 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The election results were no sooner determined when stocks started selling off. Hard to believe it is coincidence, but it is also hard to believe the markets were caught off guard either.
2012-11-12 Housing Recovery - A Dose of Realty Reality by Milton Ezrati of Lord Abbett
Media and the investment community have made much of recent good news on housing. Certainly, the recent upturn in sales, building, and real estate prices is welcome. But if the 1980's housing bust is any guide, popular references to strength and imminent recovery grossly overstate. That older experience suggests that health in the sector will return only slowly. Residential real estate may well have turned a corner, but major gains and price recovery will likely wait for some time.
2012-11-09 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 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 Roots of Economic Karma by Vivek Tanneeru of Matthews Asia
I'm a strong believer that bad governance (yes, bad) is a natural part of the process of socio-political empowerment, and one that is actually necessary at times in order for some democracies, such as India, to achieve faster economic growth. Typically, during times of great socio-political transformation economic governance takes a backseat as newly empowered segments of society view redistribution of power and patronage as the first order of business. Their attention turns to good economic governance only after they feel fully assimilated. Allow me to explain.
2012-11-09 Looking Past the Election by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
The election results are in, removing at least one area of uncertainty from the equation. For the near term, economic data in the United States may take a back seat. Growth around the world appears soft, but some pockets are more encouraging than others.
2012-11-09 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 Will China Ditch Mao To Save The Party? by James Gruber of Asia Confidential
Maintaining the status quo isn't an option. It'd jeopardize the future of the Communist Party itself. But the party has a habit of reinventing itself and I am cautiously optimistic that it'll do so again. You're likely to see China move more and more towards a Singaporean-style economic and political model.
2012-11-08 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 Alternative Thoughts - All That Volatility For Nothing? by Lawrence Epstein, Josh Rowe of Orinda Asset Management
In 2011, the S&P 500 had one of the smallest price changes in its history, but investors experienced significant daily volatility. Stock investors experienced an extraordinarily tumultuous 2011 marked by the collapse of governments, standoffs over raising the national debt ceiling, and an escalation of the sovereign credit crisis in Europe. Markets rose and fell several percentage points in minutes on the barest of rumors from Washington and Brussels and frequent surprises in economic data around the globe.
2012-11-08 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 Japanese Carmakers Can Surmount Backlash from China Dispute by Takeo Aso, Atsushi Horikawa of AllianceBernstein
The territorial dispute between China and Japan is clouding the outlook for Japanese automakers. But we think that bilateral business pragmatism will eventually trump the current political tensions.
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 October 2012 Monthly Commentary by David Kelly of J.P. Morgan Funds
A light flashed on in my car this morning, telling me that it was due for service. When I take it in, the mechanics will presumably check both the engine and the brakes before deciding on exactly what it is that I need to repair, replace or adjust. For investors, after nine months of ups and downs in markets, an investment strategy checkup is in order.
2012-11-07 US Olympic Swim Team and Warren Buffett: Buy and Hold by Bill Smead of Smead Capital Management
The US swim team has their own criteria for developing young athletes. We assume in every ten-year stretch that they support the swimming efforts of 25 to 30 young athletes in hopes of finding an occasional Mark Spitz or Michael Phelps. Most of them share the characteristics we described about Michael Phelps. The US Olympic team is the most successful swim team portfolio manager in the world. What can we learn from them as portfolio managers?
2012-11-07 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 Asset Location: Nine Tips to Create “Tax Alpha” by Glenn Frank (Article)
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead – however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets – in taxable or tax-sheltered accounts.
2012-11-06 Earnings Cliff? by Mike Boyle of Advisors Asset Management
We are now about 63% (316 of the 500 S&P 500 companies have reported) of the way into the third quarter earnings season and the popular opinion seems to be that the earnings are disappointing, that this current earnings cycle has peaked and that earnings going forward will fall sharply (earnings cliff). In a nutshell, we don't believe that this is the case and will begin with the former, that the current crop of earnings reports are disappointing.
2012-11-06 The Absolute Return Letter: The Era of Kakistocracy by Neils Jensen of Absolute Return Partners
We are now five years into a crisis that just doesn't want to go away. Paraphrasing Charles Gave of GaveKal who wrote a supremely succinct paper on this topic only last week, policy makers continue to tamper with interest rates, foreign exchange rates and asset prices in general. They continue to permit deposit-taking banks to operate like casinos. They issue new debt to pay for expenditures when we are already drowning in debt. They just don't seem to get it. Albert Einstein once defined insanity as doing the same experiment over and over again, expecting a different result.
2012-11-06 Same Old Samba for Brazil by Milton Ezrati of Lord Abbett
The old saw for the last 80-plus years puts Brazil perpetually on the verge of becoming the next economic powerhouse, but never quite making it. It is easy to see the potential. The nation is large; rich in natural resources and arable land; has a sizable, active population; and has well-developed trade relations in the Americas, with Europe, and with Africa. Brazil has failed to realize its potential less for economic reasons than because of misguided government policies.
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 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 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.
2012-11-02 World's Economies Come of Age by Mark Mobius of Franklin Templeton Investments
As we grow and age, our needs and habits often change. The same is true of economies, which grow and change along with their people. Short-term statistics that impact a country's economic growth rate, such as consumer spending, exports and the like are certainly important, but there are also long-term shifts that can have significant economic implications for the future. Changing demographics is one of them. As a long-term investor, I have to look not only at today's opportunities, but also plan for tomorrow's developments.
2012-11-02 China's Thirst for Oil by Hardy Zhu of Matthews Asia
The demand for oil and gas in China has grown with the country's rapid economic development of recent years. While the nation's major domestic oil fields continue to produce crude oil, China is increasingly looking beyond its borders for its energy needs. I recently visited western China and Kazakhstan, home to one of the world's biggest oil reserves (and the world's largest landlocked country), to research this industry.
2012-11-02 Hiking the Fiscal Cliff by Denise Ferguson of Columbia Management
Consider the geology of the current fiscal cliff. It evolved from the confluence of challenging policy decisions built on constantly shifting layers of political sediment. It is the unprecedented stress among these colliding tensions which makes forecasting footing so slippery and challenging this year. Below are the key tectonic guideposts to understand how the interlocking tiers of political stratification could play out during the upcoming lame duck session.
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 Blind Faith by Steven Romick of First Pacific Advisors
Although we cannot impose our will on this administration as to Mr. Bernankes continued role at the Fed, we would at least like to make our case for a Fed chairman more aware (at least publicly) of the unintended consequences of ultra easy monetary policy, and one with less hubris.
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 US Stocks Facing a Bumpy Ride by Russ Koesterich of iShares Blog
The US stock exchanges are slated to reopen for trading on Wednesday, after Hurricane Sandy prompted the longest weather-related closure of the New York Stock Exchange since 1888. What can investors expect when trading resumes? Russ K explains.
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 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 Building Portfolios that Beat their Benchmark: Measuring Nanometers with a Yardstick by Bob Veres (Article)
Using tools he co-developed with the Nobel-prize winning economist Bill Sharpe, one advisor has found that he can reliably outperform an appropriate benchmark. His work proves it is possible to build a portfolio knowledgably. You just need the right tools to get the job done.
2012-10-30 The 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 Finding Hidden Revenue with Existing Clients by Dan Richards (Article)
Investor skepticism and an uncertain economy are challenging advisors to maintain revenue growth and practice profitability. That's why I was intrigued by an advisor who's used a simple strategy to achieve substantial growth in assets from existing clients, even though she already managed most of their money.
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.
2012-10-30 The Path Toward America's Energy Independence by Jonathan Mogil of Columbia Management
U.S. energy independence has become a front and center issue during the current presidential campaign. This should be no surprise as reducing our country's dependence on foreign energy sources has been discussed in every election since Richard Nixon introduced his "Project Independence" initiative, in the wake of the OPEC oil embargo and the resulting oil crisis.
2012-10-30 Bond Market Primer by Kendall Anderson of Anderson Griggs
For years, our tag line "Common Sense Portfolio Management for Intelligent Investors" has served us well. There are times, though, that "Common Sense" can steer us in the wrong direction. Take driving. When a teenager sits behind the wheel of a car for their very first attempt at driving they know, from years of watching Mom and Dad drive, that when they want the car to go to the right, they turn the steering wheel to the right. Even someone who has never driven an automobile knows this. It is common sense.
2012-10-29 5 Ways for Incumbent Advisors to Get -- And Keep -- Their Clients' Vote of Confidence by Rob Isbitts of Sungarden Investment Research
Obama and Romney are asking for four years to deliver results -- ask your clients for three. First, a brief disclaimer: Nothing in this article is intended to be politically motivated. OK, with that out of the way, let's talk about a most critical issue in our industry that is easily forgotten in today's madcap, have-it-now, sensationalized world: investment evaluation horizon.
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.
2012-10-26 The China Debate by Robert Horrocks of Matthews Asia
It seems to me that pretty much the only thing you can get Democrats and Republicans to agree on these days is that China is bada job-destroying exporter of cheap goods. And indeed, at the most recent two presidential debates, both candidates spoke of the trade deficit with China and described China as a rule-breaker, including the way it has managed its currency. They phrased their views as if trade were a competition between nations and that exports are obviously superior to imports. U.S. manufacturers might agree but consumers may demur.
2012-10-26 Of Irish and Fiscal Cliffs by Team of Franklin Templeton Investments
Dr. Michael Hasenstab, Templeton Global Bond Fund portfolio manager and co-director of Franklin Templeton Fixed Income Group's International Bond Department, doesn't prescribe legislative answers, but he can relate the fiscal challenges the U.S. faces to the experiences of a country with its own dramatic cliffs: Ireland.
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 What Now? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
The market appears to be in a "wait-and-see" mode in advance of the elections, but looking beyond November 6th is important for investors. The election is only one piece of the puzzle, and certain aspects of the political landscape likely won't be much clearer after Election Day. Earnings season has been somewhat disappointing, even though there was a relatively low bar to hurdle. We see more signs that the slowdown in the United States may be ending, however, with strength in housing particularly noteworthy.
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 Third Quarter EPS: A Harbinger for 2013? by Robert McConnaughey 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.
2012-10-25 In or Out? The Case for - and Against - the Stock Market by Team of Knowledge @ Wharton
Given ongoing volatility in the stock market, it's no surprise that investors are increasingly bearish on the market's prospects, beset by a lack of confidence in its institutional underpinnings and a general pessimism about the direction of the economy. But is that distrust misplaced? Wharton experts are mixed about the future fortunes of the stock market, with some saying that investors are withdrawing at the worst possible time and others noting that many people had entrusted too much of their retirement savings to the fate of equity markets.
2012-10-25 October 2012 Newsletter by Harold Evensky of Evensky & Katz Wealth Management
Oh the joys of driving to a baseball game; sitting in endless traffic four miles from the stadium, inching past full lot after full lot, or not finding your car when it's time to go home (was it D-4 or 404 Green?). Now you can streamline your parking experience with ParkWhiz, a Chicago-based company that's recently gone national. This and other missives from Harold Evensky.
2012-10-25 Renminbi on the International Stage by Mark Mobius of Franklin Templeton Investments
For more than a decade, China's currency, the Renminbi (RMB), had been on a path of appreciation, but some weakness this year generated renewed talk about whether the currency is fairly valued against global currencies. As global equity investors, we are constantly faced with currency changes. This is an important factor when considering our investments, because currency movements impact companies' earnings and operations.
2012-10-25 Venerated Voices 2012 Q3 by Advisor Perspectives (Article)
We published our quarterly update for the Venerated Voices awards. Rankings were issued in three categories: The Top 25 Venerated Voices by Firm, The Top 25 Venerated Voices by Advisor and The Top 10 Venerated Voices by Commentary.
2012-10-24 It's Where You Start by Pamela Rosenau of HighTower Advisors
There is no shortage of cash on the sidelines. Although some investors have been sitting on a pile of cash for quite some time, there are a few catalysts on the horizon that may motivate some of that cash into the stock market.
2012-10-24 Based on Real Math The S&P 500 Is Fairly Valued by Chuck Carnevale of F.A.S.T. Graphs
As investors, we do not believe in forecasting stock markets or stock prices on individual stocks. Instead, we approach investing as the process of calculating intrinsic value based on fundamentals. To us, the most important fundamental to be considered when evaluating the True Worth of a market or a common stock is earnings. Therefore, it's important that the reader understands that this article is offered as a mathematical calculation of what the S&P 500 is actually worth based on earnings.
2012-10-24 Voluntary Exile by Bill Smead of Smead Capital Management
We at Smead Capital Management (SCM) believe that institutional and individual investors have moved their asset allocation away from large cap US stocks. Institutions are in exile in private equity, hedge funds and all things commodity and BRIC-trade related.
2012-10-23 How to Change the Regulatory Debate - Before it's Too Late by Bob Veres (Article)
After almost a decade of lobbying, arguing, and posturing, the long fight on Capitol Hill over who will regulate RIAs and how to define 'fiduciary' is approaching a close. Within the next six months, there will no longer be any real excuse to put off a decision, and new players, both in Congress and at the SEC, will be eager to start fresh.
2012-10-23 October Surprises by Jerry Wagner of Flexible Plan Investments
Ever since President Lyndon Johnson announced on October 30, 1968 that he was halting the bombing of North Vietnam and intensifying talks with the Viet Cong, there has been fear or hope for an October Surprise in Presidential election years. Back then, it was believed the intention was to help Johnson's Vice President, Hubert Humphrey, win the Presidency. And it almost did, as Humphrey quickly moved up in the polls, although losing six days later by a narrow 0.7% of the popular vote.
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 A Tepid Week for Earnings by Matt Rubin of Neuberger Berman
Through the first two weeks of earnings season, corporate results have largely mirrored the releases we witnessed a quarter agoof the 118 S&P 500 companies that have reported to date, only 60% have exceeded their earnings estimates while 29% have surpassed their revenue expectations. This week, we will see financial results from 169 S&P 500 companies, representing 32% of the index market capitalization, which will be well dispersed across all 10 S&P 500 sectors.
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 Cracker Barrel: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
This article is going to examine the home-style country restaurant Cracker Barrel (CBRL) through the lens of FAST Graphs - fundamentals analyzer software tool, which shows us a picture of a company that is currently in value. The prudent growth and dividend investor may want to do their own due diligence into this fine company for possible addition to their own portfolio.
2012-10-22 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 Politics, Cliff Watching Take Priority in the Short-Term by Bob Doll of BlackRock Investment Management
The US elections are only two weeks away, and the recent polls show a very tight race. There are significant differences, both perceived and real, in the policies of the two candidates and the impact they might have on financial markets.
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 3 Investment Strategies for the New World by Russ Koesterich of iShares Blog
No doubt about it the investment climate has changed, and it's unlikely to change back anytime soon. Russ K gives 3 possible solutions for investors seeking to adjust to the new investment world.
2012-10-19 House of Mirrors by Jeremy Boynton of Laureate Wealth Management
Did you ever try to navigate the "House of Mirrors" as a kid at your local carnival? You know the one I mean ---- where you walk through a labyrinth of mirrors designed to confuse your orientation while mocking you with various distortions of your body? If you were particularly skilled, you could use the mirror to your own advantage. What a compelling metaphor for the current state of the financial markets.
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 Getting Trampled by the Herd by Team of Franklin Templeton Investments
Many people are programmed to assume the consensus view is the correct one. They see a particular movie based on a number of positive reviews, buy a particular phone because people have camped out in front of a store to get it, or change their hairstyle based on the latest fad. It's extremely hard to go against the crowd, even if you can't afford that fancy new phone, or that new hairstyle isn't actually so attractive on you. It may be easy to laugh off falling prey to a gadget trend or a hairstyle, but what happens when it's your investments that have been trampled by following the herd?
2012-10-19 Cyclical and Turnaround Stocks: There Is A Lot Of Value In This Market: Part 5 by Chuck Carnevale of F.A.S.T. Graphs
This article represents the final installment in our "There Is A Lot of Value In This Market" series. In some ways, this article represents prima fascia evidence supporting some of our main hypotheses. First of all, this article will clearly support the notion that not all common stock are the same, and therefore, they should all not be painted with the same broad brush stroke (generalities or opinions).
2012-10-19 Blurring Lines: Positioning for Developed and Emerging Market Realignments by David Fisher, Julie Salsbery of PIMCO
The demographic, financial and political lines separating developed and emerging countries are increasingly blurred, and we believe bond investors will need to adapt. Not only do investors need to take a more holistic approach to analyzing and investing in sovereign debt, they also need to reconsider their strategic thinking regarding benchmarks and their tactical approach to seeking returns. PIMCO Global Advantage Strategy utilizes a GDP-weighted benchmark and capitalizes on PIMCO's global resources to create a portfolio designed to reflect the evolving international opportunity set.
2012-10-19 Educating India by Siddharth Bhargava of Matthews Asia
India has long been a country where entrepreneurs have stepped in to fill gaps in the market, and their role in primary education has been no different. Over the last decade, an estimated 300,000 low-cost private schools have sprung up across India. And as counterintuitive as it seems, many poor parents are willing to pay for their children's schooling to avoid the country's free education system.
2012-10-19 Beyond Borders: Currency Considerations for Investing by Russ Koesterich of iShares Blog
As more international assets are finding their way into investment portfolios, it's important for investors to recognize the effect that currency exposure may have on their portfolios.
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.
2012-10-18 Tax Cliff Enhances Potential Benefit of Roth IRA Conversion by Daniel Eagan of AllianceBernstein
With US federal tax rates poised for a potential hike next year, now is a good time to consider converting retirement assets to a Roth IRA. Conversions are now available to all investors, with no income ceiling in place.
2012-10-18 As Global Growth Falters, Consider Emerging Markets by Russ Koesterich of iShares Blog
Global growth this year is forecast to lag that of both 2011 and 2010, and the outlook for 2013 isn't much better. These sobering forecasts are bolstering Russ K's view that investors should consider being overweight emerging market stocks.
2012-10-18 Quest Diagnostics, Inc: Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
In this article we are going to examine Quest Diagnostics Inc (DGX) through the lens of FAST Graphs - fundamentals analyzer software tool. Quest Diagnostics, Inc. is the world's leading provider of diagnostic testing, information and services. FAST Graphs shows us a picture of a company that is current undervalued.
2012-10-18 Macro View: Europe's Glacial Move To Federalization by Scott Minerd of Guggenheim Partners
Uncertainty continues to weigh on European markets but the continent is still drifting toward federalization. Recent trends and political developments are constructive for an eventual return to growth for the region.
2012-10-18 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 Emerging Europe: Third Quarter 2012 Economic Review by Team of Thomas White International
In its recent economic assessment, the European Bank for Reconstruction and Development (EBRD) said it expects growth to slow down during the year in member countries such as Russia, Poland, Hungary, and Turkey as the effects of the Euro-zone crisis spills over. The bank said many of these countries have already seen lower growth, but Russia especially is affected by falling commodity prices. Striking a similar note, the International Monetary Fund in its World Economic Outlook said emerging economies of the world are at risk should the developed economies experience a continued slowdown.
2012-10-16 Stiglitz vs. Bremmer: What’s Next for the Global Economy? by Ben Huebscher (Article)
On October 3rd, the same night Barack Obama and Mitt Romney were clashing in their first debate, two equally polarized men met in New York City's Kaufmann Concert Hall to discuss the future of economics, both here and abroad.
2012-10-16 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 Uncertainty Reigns by Jerry Wagner of Flexible Plan Investments
Since I last wrote this column we have had a couple of election year debates that have settled one issue: the race for the White House is not settled. Going into the debates, many commentators were declaring the race over. The appearance that the re-election of Barack Obama was a fait accompli gave the financial markets a sense of certainty with regard to one of the biggest question marks that had been overhanging the markets all year. If there is one certainty to trading the financial markets it is that investors hate uncertainty. It invariably leads to lower stock prices.
2012-10-16 The ABCs of China's Share Markets by Mark Mobius of Franklin Templeton Investments
A shares, B shares, H shares. Chinese equity listings can be confusing to global investors. I'm often asked what I think about a particular share market in China, why one is outperforming others, and which to invest in. I can't tell you what to invest in, but I can give you some information which I hope will help you discern what choices make sense for you.
2012-10-15 Should We Bail Out (of) Europe? by Joni Clark of Loring Ward
The troubling headlines from Europe just keep on coming, and the seemingly-never-ending string of economic summits has failed so far to develop a comprehensive solution. This has led some investors to wonder if they should reduce their exposure to investments in the eurozone.
2012-10-15 Brazil: Infrastructure Push Creating Business Opportunities by Team of Thomas White International
With only 14 percent of Brazil's roads paved, motorways in the country are more suited to horse carts than vehicles. Those doing business in Brazil will be familiar with the "Brazil Cost." It's a disparaging pointer to the extra expenses investors inevitably incur in the country due to its befuddling bureaucracy, high taxes, and most of all, creaking infrastructure.
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 Passed Pawns by John Hussman of Hussman Funds
I've long been fascinated by the parallels between Chess and finance. Years ago, I asked Tsagaan Battsetseg, a highly ranked world chess champion, what runs through her mind most frequently during matches. She answered with two questions "What is the opportunity?" and "What is threatened?" At present, I remain convinced that the key opportunity lies in closing down exposure to risk.
2012-10-15 QE3Back to the Future by Milton Ezrati of Lord Abbett
The broad scope and open-ended nature of the Federal Reserve's third round of quantitative easing raises questions about what exactly Fed chairman Ben Bernanke has in mind. Some insight, remarkably, emerges from a speech he gave in November 2002 to the National Economists Club in Washington, D.C., when he was simply a Fed board member. Taking his cue then from fears of a Japanese-style deflation, he laid out a path for monetary stimulus in an extreme situation, outlining nontraditional policy tools that have since become common.
2012-10-15 Third Quarter Earnings in Focus by Matt Rubin of Neuberger Berman
Heart of earnings season begins this week. Given potential dividend tax increase at yearend, many are watching for one-time dividend payouts. Second U.S. presidential debate scheduled for Tuesday.
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 Blue-Chip Dividend Aristocrats - There is a Lot of Value in this Market: Part 4 by Team of F.A.S.T. Graphs
This is the fourth in a series of articles designed to counter a pervasive attitude that common stocks are expensive today. Furthermore, we would agree with those that contend that we have been in a stealth bull market for the last 18 months or more. However, would also contend that stocks were so cheap prior to this stealth bull-run that even though they have risen, there are still many stocks that remain fairly priced and even many that are undervalued. Blue-chip Dividend Aristocrats represent one of the best examples of our thesis.
2012-10-12 The Fiscal Cliff and Your Portfolio by Travis Fairchild, Patrick O'Shaughnessy of O'Shaughnessy Asset Management
Whether or not we find ourselves staring over the fiscal cliff come January 1 is still very much in question, but investors are understandably concerned with what the resultant tax increases may mean for their portfolio values and dividend income. If Congress is unable to reach a compromise between now and January 2013, President Bush's 2003 tax cuts will expire and tax rates on income, dividends, and capital gains will increase by significant margins.
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 Should We Bail Out (of) Europe? by Joni Clark of Loring Ward
Though the eurozone has its share of ongoing challenges and uncertainty, this doesn't mean investors should exit Europe entirely.
2012-10-12 Long/Short Investing: Bon Apptit by Geoffrey Johnson of PIMCO
Long/short equity is a distinct investment approach that seeks to reduce downside risk while still capturing much of the equity markets upside potential. By removing the long-only constraint, long/short managers have an expanded opportunity set with the potential to generate returns and mitigate risk from both long and short investment ideas. Long/short equity strategies have a lower long-term volatility and risk profile than the market as a whole and have captured a good percentage of price movement in up markets and a smaller percentage in down markets.
2012-10-11 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 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 When Averting Loss Can Lead to Averting Gains by Team of Franklin Templeton Investments
Think about something you'd really hate to lose, something of value to you such as a treasured possession. Now imagine you're told that if you lay that object on the line in a bet, you have a good shot at doubling its value, but there's also a possibility you'll lose it. How low would the chance of loss have to be before you'd be willing to take the risk? Maybe 10 percent? Less than that? The answer may lie in a behavioral economic theory called "loss aversion."
2012-10-11 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 Beyond the Fiscal Cliff: the Dollar At Risk? by Alex Merk of Merk Funds
Looking beyond the fiscal cliff, we are afraid the greenback may be at risk no matter who wins the election. We examine the risk to the U.S. dollar in the context of the likely policies pursued under either an Obama or Romney administration.
2012-10-10 Munis and Tax Reform: Tempest in a Teapot or Taxmageddon? by Team of Neuberger Berman
We've heard increased dialogue recently about the future of the tax exemption for municipal bond income. While it has long been commonly thought that taxing municipal bond income would result in higher borrowing costs to governments potentially impairing their ability to operate the current political landscape, upcoming election and looming "fiscal cliff" have opened for debate the prospect of changes to longstanding provisions of the U.S. tax code.
2012-10-10 Will South Africas Struggles Overshadow its Potential? by Mark Mobius of Franklin Templeton Investments
Africa is a continent many investors bypass, but from my perspective as a long-term investor, I think that's a mistake. South Africa has faced some struggles recently, but I think they can be overcome, and a brighter future could be ahead there for its people. South Africa is the largest economy in Africa, and is the only country on the continent where I think the "frontier" market label doesn't apply. Some have added an "S" to the end of the "BRIC" acronym to include South Africa in the grouping of emerging market economies of Brazil, Russia, India and China.
2012-10-10 Pacific Basin Market Overview by Team of Nomura Asset Management
Regional equity markets remained largely directionless and volatile during the third quarter amid the summer trading lull. Government policy action towards the end of the quarter triggered the biggest market moves. However, the euphoria was short lived following the announcements of the European Central Bank's Outright Monetary Transactions and the Federal Reserve Board's third round of quantitative easing.
2012-10-10 Third Quarter Surge Caps 12-Month Relentless Risk Rally by Douglas Cote of ING Investment Management
Despite the rally of the past year, equity markets still look cheap. Weakening manufacturing data suggest the 12-quarter streak of positive earnings growth may come to an end in the third quarter.
Housing has turned the corner, providing consumers with cause for confidence. Though fundamentals have wavered a bit, we are constructively bullish on risky assets, as "successful investing demands a choice between prudent risk control and outright risk avoidance".
2012-10-10 Potential Picks for a Yield-Starved Portfolio by Russ Koesterich of iShares Blog
Yield-hungry investors today are faced with a stark choice: accept lower yield or more risk. Russ K explains why given those options, investment grade bonds may be one of the better bargains.
2012-10-10 Gold Strategy Investor Letter, Q3 2012 by John Hathaway of Tocqueville Asset Management
John Hathaway, manager of the Tocqueville Gold Fund (TGLDX), examines in his latest quarterly letter how "Gold and precious metals stocks rallied sharply in the third quarter." He believes the catalyst for this move was the "resumption of quantitative easing by the Fed and ECB in late August." Mr. Hathaway goes on to say that "The rally suggests that the lengthy correction which began in August of 2011 has been completed, setting the stage for a powerful new leg in the bull market for precious metals and related mining shares."
2012-10-09 Dividend Income: Music to Our Ears by ClearBridge Advisors (Article)
The hunger for income among investors is helping put dividends in the spotlight, say Hersh Cohen and Mike Clarfeld of ClearBridge.
2012-10-09 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 How to Manage an Overextended Team by Beverly Flaxington (Article)
I work for a large financial firm. I am continually frustrated by the fact that we generate lots of good ideas and talk about what we need to do, but rarely get things done. Many things stay open-ended, or up for discussion. I am part of the problem because I am so busy, as is my team. How can I be more of a doer and less of a talker?
2012-10-09 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 Letter to the Editor by Various (Article)
A reader responds to Rob Arnott's commentary, The Glidepath Illusion, which was published on September 25.
2012-10-09 A Small Business Complex by Chris Maxey, Ryan Davis of Fortigent
Despite the release of the September labor report on Friday, small business owners seemed to take the biggest proportion of the spotlight last week. According to the Huffington Post, Romney and Obama mentioned the phrase "small business" a total of 29 times throughout the Presidential debate. The issues and importance placed on small business are unlikely to be as cut and dry as both candidates made them seem.
2012-10-09 A Case Study of a Fiduciary Breakdown by Robert Rafter, Matt Sommer of Janus Capital Group
A recent case offers several lessons for Plan Sponsors and Service Providers. One of the most critical issues in the case was the failure of the company to follow its own Investment Policy Statement. This case illustrates the need for plans to create a proper process for Fiduciary Risk Management - emphasizing the Investment Policy Statement as the foundation for a prudent process.
2012-10-09 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.
2012-10-08 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 How an Obama Win Would Impact the Market by Joanna Shatney of Schroders
As the battle for the US presidency continues, Joanna Shatney, Head of US Large Cap Equities at Schroders, discusses the impact on the market if Obama wins or loses the election.
2012-10-05 Economic Recovery and Debt Reduction: Faster, Please! by Chris Molumphy of Franklin Templeton Investments
It's tough to be patient in an age of instantaneous communications and instant gratification. We all want immediate answers to our questions and quick fixes to our problems. When it comes to real world tangles like the global economy, though, Chris Molumphy, CIO of Franklin Templeton Fixed Income Group, reminds us that patience, not a magic pill, is the order of the day when it comes to European and U.S. struggles to cure their economic ailments. He's realistic about these problemsbut isn't waiting to act where he does spot investment opportunities.
2012-10-05 High-Yield Buys: There Is a Lot of Value In This Market: Part 3 by Chuck Carnevale of F.A.S.T. Graphs
In this part 3, we turn our attention to the highest yielding stocks that are constituents on the S&P 500. However, we submit that there are essentially two primary reasons that explain why these stocks offer such high yields.
2012-10-05 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 Harmony and Turmoil by Sherwood Zhang of Matthews Asia
Since Japan's recent purchase of the disputed Diaoyu/Senkaku Islands a few weeks ago, anti-Japan protests erupted in various Chinese cities, with some turning violent and targeting Japanese shops, cars and factories.
2012-10-05 Union Pacific Corp:Fundamental Stock Research Analysis by Team of F.A.S.T. Graphs
With this article we are going to examine Union Pacific Corp (UNP) through the lens of FAST Graphs - fundamentals analyzer software tool. Union Pacific Corp is a company that is currently in value. With analysts from Capital IQ forecasting earnings growth to continue at about 15.2%, this may be an opportune time for the prudent dividend and growth investor to look into this fine company further for possible addition to their portfolio.
2012-10-04 Thrown in Over Their Heads: Understanding 401(k) Participant Risk Tolerance vs. Risk Capacity by Stacy Schaus, Ying Gao of PIMCO
Our analysis suggests as investors in target-date strategies near retirement they become more attuned to market swings. We believe 401(k) plans cannot succeed if participants jump out of markets at the bottom and possibly miss a rebound. Plans need to have tolerable downside risk, so participants can ride the market waves. The way to manage target-date assets, in our view, is to focus first on the risk capacity of participants relative to meeting an income goal. We ask, how much of one's final income will need to be replaced in retirement?
2012-10-04 Priming the Liquidity Pump by Mark Mobius of Franklin Templeton Investments
The global economy is often like a line of dominos. One piece tumbles, causing others to fall too. This year, weak economic growth and heavy debt burdens in many developed markets had a domino effect on emerging economies, and many investors lost confidence in both. In response, central banks have taken actions to boost economic growth and prime the liquidity pump.
2012-10-04 Collective Action Clauses: No Panacea for Sovereign Debt Restructurings by Ben Emons of PIMCO
Beginning next year, collective action clauses (CACs) will become mandatory for sovereign bonds issued by European countries under U.K. law. CACs, which allow a supermajority of bondholders to agree to changes in bond payment terms, became popular following Argentina's default in 2001 and even more so after the financial crisis of 2008. On balance, the introduction of CACs in European government bond markets in 2013 is positive for investors.
2012-10-04 Overtime, Then (not so) Sudden Death by Jerome Schneider of PIMCO
The FDIC's unlimited insurance coverage on demand deposits is set to expire on December 31. While the expiration by itself might not be a game changer, it adds to the uncertainty that looms over liquidity strategies as global interest rates continue to be squeezed. We believe that actively managed short-term strategies that dynamically adjust to market conditions are viable solutions, with more attractive risk and return characteristics than money markets.
2012-10-04 When Career Risk Reigns by Neils Jensen of Absolute Return Partners
In this month's Absolute Return Letter we pick up the baton from last month. How does the current crisis actually affect financial markets? How do you overcome the low returns? What can you do to protect the downside risk in a high correlation environment? We argue that career concerns often lead to irrational decisions by professional money managers and that this provides opportunities for those who can afford to deviate from the norm.
2012-10-04 Nothing's Perfect by Jerry Wagner of Flexible Plan Investments
On September 21, the Apple iPhone 5 made its debut simultaneously on four continents. Its first weekend saw over five million in sales! And the current inventory was sold out within a week a perfect product introduction. Wellnot quite. Soon articles like iPhone 5′s Biggest Problems started showing up, talking about scratching, chipped exteriors, lens flares and others. Then there were complaints about its faulty Maps application that even drew a rare corporate apology last week. It just proves the point of this weeks Hotline: Nothings Perfect.
2012-10-04 Market Dimensions by James Damschroder of Gravity Capital Partners
An interesting and perhaps volatile fourth quarter is upon us. We have elections and the fiscal cliff straight ahead. Markets dislike uncertainly, making asset prices potentially marginally lower.
2012-10-03 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 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 Monthly Letter to Our Clients and Friends by Kendall Anderson of Anderson Griggs
Warren Buffett, Ben Graham's most famous student has said, "[Ben Graham] also taught me to see a stock not as something with a ticker symbol that wiggles around but to think about it as part of a business. Dont get elated because something had gone up or depressed because it went down. If I knew the facts, and it went down, I bought more of it". Although these two forces of investment beliefs are in constant battle, there is one common belief; Both believe that any attempt to "time the market" is not an intelligent approach to investment management.
2012-10-03 Stocks Are Taking a Breather from the Rally by Bob Doll of BlackRock Investment Management
To at least some extent, the pause in the rally we have seen over the past couple of weeks can be attributed to some profit-taking on the heels of a significant multi-month uptrend (US stocks rose close to 6% in the third quarter). It is also likely, however, that investors are coming to grips with the fact that the world continues to face some serious risks and are recognizing that not all of the world's problems can be solved by central bank action.
2012-10-03 Where are the Global Winners? by Louie Nguyen of Soledad Investment Management
In today's ber-dreary and volatile global market condition, it can be difficult to imagine how the various markets around the world will eventually right themselves. It is worth noting, however, that the global market has righted itself before, from predicaments that seem just as, if not even more, dire than what we face today. Think Thailand and Korea in 1997, Mexico in 1994 and the Dot-Com Bubble in 2000. The following is the latest in our annual Global Price to Earning (P/E) analysis. It is part of our on-going effort to find compelling investments from around the world.
2012-10-03 Has Unconventional Policy Helped Lower the Yield Curve? by Zach Pandl of Columbia Management
With the funds rate stuck at zero for nearly four years, the Federal Reserve (Fed) has used a variety of unconventional policy tools in an effort to push longer-term interest rates lower. We think these actions affect markets in a variety of ways, and also that some of their effects may overlap.
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 Understanding Portfolio Variances vs. the Market by Joni Clark of Loring Ward
Some investors with a keen eye on the markets have asked why their diversified portfolios did not perform in line with the more widely covered industry benchmarks, such as the S&P 500 Index. If your investment portfolio is broadly diversified in the global equity markets with an emphasis on small and value stocks, performance results will likely vary from equity-tracked benchmarks.
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.
2012-10-02 Damages by Bill Gross of PIMCO
How could the U.S. not be the first destination of global capital in search of safe (although historically low) prospective returns? Studies by the CBO, IMF and BIS (when averaged) suggest that we need to cut spending or raise taxes by 11% of GDP and rather quickly over the next five to 10 years. Unless we begin to close this gap, then the inevitable result will be that our debt/GDP ratio will continue to rise, the Fed would print money to pay for the deficiency, inflation would follow, and the dollar would inevitably decline.
2012-10-02 The 2010, 2011, 2012 Corrections Were P/E Multiple Related; Earnings Were Sound by George Bijak of GB Capital
We had nasty stock market corrections in the middle of 2010, 2011 and 2012 caused by political uncertainty about Europe's debt. In times of market declines it is good to remind ourselves the difference between a correction and a bear market.
2012-10-02 The Risk in Safety by Greg Nejmeh of HS Management Partners
The "risk on/risk off" sound bite is routinely applied by financial commentators when attempting to explain inexplicable market fluctuations. As the pendulum oscillates between greed (risk on) and fear (risk off), the fulcrum the pivot point where the scale rests in perfect balance can best be characterized as safety. It is from that state of equilibrium that the market begins each trading day...
2012-10-02 QE and the Equity Market: Is the Fed Driving or Along For the Ride? by Patrick Lawler of PIMCO
Federal Reserve officials have said several times that among other benefits, its quantitative easing (QE) programs have helped boost U.S. equity prices. Based on our analysis, QE has not been the driving force behind rising equity prices in recent years. How does the Federal Reserve measure the success of its asset purchase programs, or quantitative easing (QE), since the 2008 financial crisis QE1, QE2, Operation Twist (OT) and QE3?
2012-10-01 Chile: Lithium Adds More Energy to Export Growth by Team of Thomas White International
The world's largest producer and exporter of lithium has added another lucrative segment to its commodity fortunes.
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 Quantitative EasingBernanke Sizes Up the Risks by Milton Ezrati of Lord Abbett
Bernanke acknowledged four potential pitfalls in policywith a fifth lurking in the shadows.
2012-10-01 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.
2012-10-01 Dont Be Fooled By September's Market Rally by Russ Koesterich of iShares Blog
September has historically been the worst month of the year, but this time around it did not play to script. The surprising rally distracted complacent investors from signs of increasing volatility. Russ K explains.
2012-09-29 Uncertainty and Risk in the Suicide Pool by John Mauldin of Millennium Wave
Investors in the stock market, especially professionals, are obsessed with risk, your humble analyst included. We try to measure risk in any number of ways, looking for an edge to improve our returns. Not only do we try to determine probable outcomes, we also look for the 'fat tail' events, those things that can happen which are low in probability but will have a large impact on our returns.
2012-09-28 Falling Off the Fiscal Cliff? by Libby Cantrill, Josh Thimons of PIMCO
When we look at how the fiscal debate is likely to play out, rather than how it should play out, our base case is the fiscal cliff will likely be resolved in a short-term deal before the end of the year, making what was a cliff more like fiscal black diamond still dangerous, but not likely to land the economy in a body cast.
2012-09-28 The Danger of Safety by Owen Murray of Horizon Advisors
Investors have become cautious and anxious following the bear market of the past twelve years and the recent bouts of extreme volatility. We examine risks and opportunities in light of the difficult market environment in our special report The Danger of Safety."
2012-09-28 Gold Glitters by John Browne of Euro Pacific Capital
Just a few weeks ago, Mario Draghi, President of the European Central Bank, announced that he would do anything required to bailout the weakest members of the Eurozone and in so doing prevent the euro currency from dissolution. Two weeks ago, as signs of recession increased, Fed Chairman Bernanke announced he would do anything required to stimulate the U.S. economy, real estate, and the financial markets. But the biggest winners thus far that may have resulted from these newly communicated intentions are not the euro or the broad stock markets but rather gold and gold-related investments.
2012-09-28 Growth Stocks: There is a Lot of Value in this Market Part 2 by Chuck Carnevale of F.A.S.T. Graphs
In part one of this series we introduced the notion that in all markets whether bear or bull, there will always exist individual stocks that are fairly valued, overvalued or undervalued. In this same vein we argued that it's a market of stocks, not a stock market. To put this into context, we are simply suggesting that the discerning investor can always find bargains if they are willing to look and do their homework. However, we should also add that bargains can come from many different types of equities.
2012-09-28 Alternative Thoughts: Macro Investing - What is macro investing and investing in a macro strategy? by Lawrence Epstein, Josh Rowe of Orinda Asset Management
Macro investing has long been the focus of investors in search of non-correlated investment strategies. Orinda Asset Management believes that macro strategies have the potential to produce positive absolute returns across market cycles. In addition, the strategy has historically exhibited low correlation to traditional equity and fixed income indices, and has provided effective diversification benefits when incorporated as part of a long-term investment plan.
2012-09-28 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 No Free Lunch? The Real Impact of Lower Rates in Brazil by Maria (Masha) Gordon, Richard Flax of PIMCO
The Brazilian government wants to keep interest rates low but also guard against inflation; so the authorities have moved down a path of "macro-prudential" measures, with a broad range of implications for equity investors. In reality, as the cost of capital in Brazil falls, the returns and cash flows from regulated businesses are coming under pressure. In this environment, we find that consumer businesses are the most appealing, especially if growth accelerates.
2012-09-27 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 How Can Balanced Investors Mitigate Their Equity Risk? by Daniel Loewy of AllianceBernstein
Over the past three decades, bonds have provided balanced investors with the best of both worlds. As 10-year Treasury yields fell from a high of 13.7% in 1980 to less than 2% today, bonds provided both strong returns and a great cushion in times when equities were weak. Bonds are still important, but investors shouldn't expect more of the same.
2012-09-27 Dividend Yield vs. Dividend Growth by Ashvin Viswanathan of O'Shaughnessy Asset Management
Investor demand for high-yielding companies has grown even stronger because of the perception that these companies are more defensive and recent news that the Federal Open Market Committee (FOMC) has extended its forecast of low rates until 2015. We believe buying a portfolio of high-quality, global, market-leading companies with superior valuations and high dividend yields provides investors with an excellent opportunity to consistently beat the market, while providing high income relative to fixed income securities in the current environment.
2012-09-26 The Predictive Power of Dividends by Bill Smead of Smead Capital Management
In an article published by Marketwatch.com on September 21, 2012, Mark Hulbert asks the question, "Where do you think the stock market will be ten years from now?" It was as a lead into the results of a predictive model from Rob Arnott, founder of Research Affiliates. His model argues that current dividend yields go a long way to predicting ten-year forward returns. Other than a big glitch in the 1990's, it appears to have some value.
2012-09-26 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.
2012-09-26 Will Solar Ever Reach "Grid Parity"? by Catherine Wood of AllianceBernstein
The coming of grid parity keeps receding into the distance like a desert mirage. Over the last six years, executives at solar energy firms and their consultants have projected repeatedly that solar energy will reach grid paritybecome cost competitive with other power sourcesin three to five yearsonly to push its expected time of arrival further into the future. My colleague Brett Winton explains why.
2012-09-26 Are BRICs Hitting a Growth Wall? by Mark Mobius of Franklin Templeton Investments
A global pattern of easing economic growth in the first half of 2012 has impacted the "BRIC" nations Brazil, Russia, India and China. However, I don't think the BRIC economies have hit a brick wall. While some market participants have been waiting impatiently for governments to undertake further stimulus measures, others have wondered whether something more fundamentaland less within governmental controlmight be at work.
2012-09-25 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 Value Investing in a Macro-Driven Environment by Robert Huebscher (Article)
The GoodHaven Fund (GOODX) is managed by Larry Pitkowsky and Keith Trauner. For most of the previous decade, Larry and Keith held research, portfolio management, and executive positions with the Fairholme Fund. I spoke with them last week.
2012-09-25 How to Build a Portfolio by Adams Jared Apt (Article)
This is the first of a set of three articles intended for the educated layman, in which I will combine the core ideas presented in my preceding articles into a comprehensive description of how to put together a portfolio. In this one, I'll explain what is often called Modern Portfolio Theory.
2012-09-25 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.
2012-09-25 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Chief Justice John Marshall, in 1819, once described policymakers' great influence, remarking, "The power to tax involves the power to destroy." With rising fiscal deficits and a desperate need to raise revenue, many nations have come up with various tax solutions to raise billions of dollars. One hotly contested idea in the U.S. and Europe lately, and once advocated by John Maynard Keynes during the Great Depression, is a financial transactions tax imposing a cost on buys and sells of stocks or bonds.
2012-09-25 The Beginning of Fall Blues by Jerry Wagner of Flexible Plan Investments
I only have time for a short note today. It's probably a reflection of the shorter days that fall ushers in or maybe the increased pace of business that the end of summer vacations seems to ignite. Speaking of seasons, the market weakness we saw last week is just what our Political Seasonality Index has been suggesting that the stock market might have in store for us in this period.
2012-09-25 The Glidepath Illusion by Rob Arnott of Research Affiliates
Young adults should buy stocks; mature adults should favor bonds. Or so we're taught. In this month's Fundamentals, Rob Arnott takes a serious look at Glidepath strategies used within target-date funds and comes up with some surprising findings.
2012-09-25 The Future Of Money Market Funds by Gregory Hahn of Winthrop Capital Management
The Financial Crisis of 2008 has left its mark on the capital markets and the economy, and money market mutual funds are one of those areas that were affected. One of the pieces of unfinished business following the financial crisis is improved regulation of money market mutual funds.
2012-09-24 Eating the Future by John Hussman of Hussman Funds
Every security on Earth works like this. The higher the price you pay for a given set of expected future cash flows, the lower your prospective future rate of return. Higher prices essentially take from future prospective returns and add to past returns. Conversely, lower prices take from past returns and add to future prospective returns.
2012-09-24 If youre a partisan Republican, skip this commentary by David Edwards of Heron Financial
In June after stocks slumped over concerns about Europe, we wrote "US stocks however, were a good value a month ago and a better value today. With the weak hands forced out by the recent 10% pullback, we are moving forward with investments in stocks." With two and half months remaining in the year, our "buying panic" forecast is starting to look prescient.
2012-09-24 Trade Winds Shifting in America's Favor by Milton Ezrati of Lord Abbett
The improvement in the U.S. trade balance can be traced to the dollar's relative weakness and increasing domestic energy production.
2012-09-24 Some Parting of the Clouds by Charles Lieberman of Advisors Capital Management
The ongoing rally in the equity market and corresponding rise in Treasury yields mirror the slow improvement in financial market conditions in Europe and moderate gains in domestic economic data. This still leaves more progress to be made on both fronts, but uncertainty remains elevated over the fiscal cliff, the threat of military conflict in the Middle East, the upcoming election, and tax policy.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market was flat on low volume last week. In other words little of consequence happened. Oil prices fell back somewhat after rumors that a release from the Strategic Petroleum Reserve were floated by our government in an attempt to influence the market of yet another asset class. One wonders where the stock market, interest rates and the price of commodities would be if the government both at home and elsewhere was not manipulating prices to the extent they do.
2012-09-24 ECB Throws Euro a Life Preserver by Philippe Brugere-Trelat of Franklin Templeton Investments
A few short months ago, the euro appeared to be in critical condition. The crushing weight of debt, particularly in Southern Europe, seemed to be sucking the life out of the European Union. Now that the European Central Bank has announced that it stands ready to provide some life support to the euro, the contagion fears seem to have ebbed, and one might even say predictions of its death were perhaps greatly exaggerated.
2012-09-24 Energen Corp: Stock Research Analysis by Team of F.A.S.T. Graphs
With this article we are going to examine Energen Corp (EGN) through the lens of FAST Graphs - fundamentals analyzer software tool, which shows us a picture of a company that is currently in value. The prudent investor might want to do their due diligence on this company as a possible addition to their portfolio.
2012-09-24 Who Deserves Blame (Or Credit) For Current Tax Policy? by Ryan Davis of Fortigent
U.S. Presidential candidate Mitt Romney received sharp criticism this week for his comments regarding the "47% of people who pay no taxes." Regardless of one's political stance, Romney's comments were instructive in highlighting a very real problem. The notion that Republicans or Democrats deserve blame for the current challenges is shortsighted, however, because both parties were contributing members to the current legacy.
2012-09-21 Growth for the Long Run by Jonathan Coleman, Brian Demain, Nick Thompson of Janus Capital Group
"I skate to where the puck is going, not where its been." Wayne Gretzky. Many investors would love to be as successful as The Great One when it comes to their portfolios. Yet investors are often heavily influenced by the past, losing sight of where they need to be going. This seems to be especially true today: mistrust of equities is running high after a decade of disappointing returns and excessive volatility.
2012-09-21 There is a Lot of Value in this Market: Part 1 by Chuck Carnevale of F.A.S.T. Graphs
Whenever there is a rise in stock values as we have experienced over the past year or so, it seems to be human nature to automatically assume that valuations have become too high. However, although it is possible that this is true, it is not necessarily so. A lot has to do with where valuations were before the run-up occurred. For example, if valuations were extremely low, then even after a rise, they can continue to be low or perhaps only have risen to becoming fairly valued.
2012-09-21 Short-term Gratification and Long-term Return by Franois Sicart of Tocqueville Asset Management
Over time, I have tried to learn from my investment experiences. As a result, my style has become influenced less by greed and fear and more by patience and realism. Here are a few of the lessons I have learned and passed along.
2012-09-21 Testing Indonesia's Coal Boom by Xin Jiang of Matthews Asia
On a recent trip to Indonesia, small talk with my taxi driver led to an interesting proposal: an offer to buy a coal mining license. I wasn't in the market for one but it just goes to show how much Indonesia's coal mining industry has grown in recent years. The country's rapid and significant development in this area has been due partly to privatization efforts, but more so to a sharp uptick in demand from countries like China. Nearly 80% of the output from Indonesian mining firms is exported, with China as the largest individual importer.
2012-09-21 Managing Risk In Your Retirement Portfolio by J Michael Martin of Financial Advantage Inc
Traditional pensions are gradually disappearing from American culture. More and more of us will depend on our own investments to cover some or all of our living expenses during our "golden years." Prospective retirees' goals are pretty straightforward: to enjoy a satisfying retirement and to provide a meaningful inheritance for their families.
2012-09-21 The Volatility Risk Premium by Graham Rennison, Niels Pedersen of PIMCO
Amid elevated global macroeconomic uncertainty and market turbulence, investors are searching for ways to diversify portfolios with non-traditional asset classes. Volatility risk premium strategies aim to capture a return premium over time as compensation for the risk of losses during sudden increases in market volatility. We believe investors seeking to diversify their equity risk exposures should consider adding volatility risk premium strategies to their portfolios, albeit with appropriate diversification across major option markets, active risk management and prudent scaling.
2012-09-21 The Ramifications of a Robin Hood Tax by Frank Holmes of U.S. Global Investors
Could a transaction tax have unintended consequence for American banks? While the jury is still out on that answer, Hungarys example is a reminder to policymakers to comprehensively consider the rewards of collecting a Robin Hood tax along with the risks. Profits and bank credit growth rates across Hungary plummeted due to the hefty bank levies imposed.
2012-09-21 About That Swiss Neutrality by Russ Koesterich of iShares Blog
Swiss stocks still merit a positive long-term outlook but on a short term basis, Russ is changing his allocation to underweight from neutral.
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 Fed to Debase Dollar? by Alex Merk of Merk Funds
Is the Fed's goal to debase the U.S. dollar? The Federal Reserve's announcement of a third round of quantitative easing (QE3) might have been the worst kept secret, yet the dollar plunged upon the announcement. Is Bernanke intentionally debasing the dollar?
2012-09-19 Us and Them: Household Sector Deleveraging vs. Public Sector Leveraging by Liz Ann Sonders of Charles Schwab
The eruption of the financial crisis in 2008 unleashed a household deleveraging cycle, triggering unprecedented Fed easing and now QE∞. Next up, government sector deleveraging.
2012-09-19 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell, Kevin Perry of Loomis Sayles
Fixed income investors may be stymied by the current mix of interest rate projections and global macroeconomic news. Interest rates remain near historical lows, and investors continue to move between risky assets and relative safe havens like Treasurys based on the latest market headlines. We believe that bank loans can be a compelling addition to fixed income portfolios in this environment and, more importantly, over the long term.
2012-09-19 Power Struggles and Progress in Romania by Mark Mobius of Franklin Templeton Investments
Bordering the Black Sea in Southeastern Europe, Romania offers visitors a variety of beautiful and dramatic landscapes concentrated in a relatively small land area, including modern cities and medieval villages, sweeping mountain vistas, broad plains and sandy beaches. Romania may also be one of the more attractive investment destinations in emerging Europe today, but its political environment has been characterized by some power struggles as dramatic as its scenic views.
2012-09-19 Technology Dividends: Oxymoron No More by Ryan Issakainen of First Trust Advisors
In recent years, equity income ETFs have gained in popularity, as investors seeking growth and income have poured billions of dollars into these strategies. While each of these ETFs takes slightly different approach for selecting and weighting stocks, there is one common characteristic shared by all: an underweight position in the technology sector relative to broad equity benchmarks. While this allocation may seem intuitive to some, we believe it's time to include technology stocks in equity income strategies.
2012-09-19 Farmland: The New Gold? by Randy Bateman of Huntington National Bank
Yes, it's just 'dirt', but life on this planet wouldn't exist as it does today unless it didn't comprise a third of the world's surface. Unfortunately much of that 'dirt' is in areas too wet, dry, rocky, salty, devoid of nutrients, or covered by snow for agricultural production. With only 14 percent of the world's landmass considered fertile, and that shrinking at a significant pace, there's a realization that increased farm production is essential to satisfy the increasing demand for food products.
2012-09-18 The Question that Prevents Client Defections by Dan Richards (Article)
Unless you take action, even the best advisors are going to lose more clients than you'd like. Fortunately, you can ask your clients a simple question that will counteract the dynamics causing those defections.
2012-09-18 The Trend is Your Friend by Keith C. Goddard, CFA (Article)
John Hussman's recent market commentary, The Trend is Your Fickle Friend, highlighted the limitations of trend-following investment strategies that rely on moving-average crossover rules as a primary filter. But an extensive study conducted by our firm demonstrated that a simple moving-average crossover system outperforms buy-and-hold, while reducing drawdown risk and volatility.
2012-09-18 Your Clients' Toughest Retirement Decision by Wade Pfau (Article)
Want to trigger an impassioned debate? Ask a group of advisors about the choice between systematic withdrawal plans and single-premium immediate annuities. Fee-only advisors are loath to cede control of client assets to an insurance company that might someday default, while annuity advocates fire back that only their strategies provide a lifetime income guarantee.
2012-09-18 Recognize the Relative Advantages of Natural Resource Equities vs. Commodities by RS Investments (Article)
This RS Investments research brief examines how shifts in commodity fundamentals presents the case for employing natural resource equities as a means to benefit from favorable long-term secular trends, while achieving superior risk-adjusted returns, similar diversification benefits, and more reliable inflation protection relative to commodities.
2012-09-18 Letters to the Editor by Various (Article)
Several readers respond to our article, Can Our Retirement System be Fixed?, which appeared last week. A reader responds to Bill Gross' commentary, The Lending Lindy, which appeared on September 5, and a reader responds to David Schawel's article, Three Bond Funds for Rising or Falling Rates, which appeared last week.
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 $4 Gas Could Put Brakes on Growth by Milton Ezrati of Lord Abbett
Reaction to the recent climb in gasoline prices appears surprisingly muted, but a sustained rise could result in a significant drag on U.S. growth.
2012-09-18 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Last week the stock market got all it wanted from the Central Banks of Europe and here at home. The money presses have been put on full power. The result was a continuation of the stock market rally along with commodities while bonds suffered a setback as investors swapped out.
2012-09-18 Federal Reserve Actions Help the Rally to Continue by Bob Doll of BlackRock Investment Management
The headline news last week was the US Federal Reserve's announcement of a new round of quantitative easing in which the central bank plans to purchase $40 billion of mortgage-backed securities on a monthly basis (without a predetermined end date). The Fed also pushed back the timeframe on how long it will maintain its current zerointerest-rate policy, indicating that the current level of rates should be in effect through the middle of 2015.
2012-09-18 Buckle Inc: Stock Research Analysis by Team of F.A.S.T. Graphs
This article is going to analyze Buckle Inc (BKE) through the lens of FAST Graphs. Buckle announced at its quarterly meeting of the Board of Directors, held on September 17, 2012, the Board authorized a $0.20 per share quarterly dividend to be paid to shareholders of record at the close of business on October 15, 2012, with a payment date of October 26, 2012.
2012-09-18 Complex Structures for Investing in China by Hardy Zhu of Matthews Asia
China's Variable Interest Entities (VIEs) have long allowed foreign investors to be able to partake in the growth of some industries in China, such as education and the Internet, restricted to foreigners. VIEs have come under increasing scrutiny. But are they inherently more risky? This month Hardy Zhu takes a look.
2012-09-18 Housing Recovery? Try Long Convalescence by Russ Koesterich of iShares Blog
The US Federal Reserve's decision to expand quantitative easing is dramatic, but we don't think it will have a significant impact on the US housing market. While the extra liquidity is supportive of risky assets in the very near-term, lower mortgage rates are not a game-changer for a consumer still struggling with little income growth and too much debt.
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 Emerging Markets Equity Monthly Product Commentary: August 2012 by Team of Thomas White International
Emerging market equities saw a marginal price correction during the month of August, as concerns about growth moderation in these economies persisted. The economic downturn in Europe, one of the largest markets for export-oriented emerging market countries, continues to force policy makers in emerging economies to come up with programs to support domestic growth. However, renewed optimism over aggressive policy action to stem the fiscal crisis in Europe helped the emerging markets in.
2012-09-17 Global Overview: August 2012 by Team of Thomas White International
Signs of emerging political consensus in Europe over supporting further action by the European Central Bank (ECB) and a closer banking union helped sustain investor sentiment during the month of August. Germany and select other countries that were skeptical of open ended policy measures by the ECB now appear to be scaling down their opposition.
2012-09-17 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.
2012-09-17 A Fed Fueled Rally by Chris Maxey of Fortigent
The week was overshadowed by policy actions from the Federal Reserve, which led to a 2.2% gain in the Dow Jones Industrial Average and a 1.9% increase in the S&P 500 Index.
2012-09-17 Main Street Policy...Seriously? by Jason Doiron of Sentinel Investments
In case you did not catch the press conference last week, Ben Bernanke believes that his latest round of quantitative easing will benefit Main Street. Seriously? The notion that Main Street will benefit from the Fed purchasing an additional $40 billion per month of agency-backed MBS is preposterous to us.
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 The Cure for Baldness by Neel Kashkari of PIMCO
Rarely does one find market commentators offering moderate, balanced investment advice these days. More likely one will find extreme headlines designed to capture maximum attention.
We believe it is worthwhile to take time to craft an investment strategy that can withstand a range of market outcomes.
In a lower-return world, we look to buy companies that are attractively priced and that can grow faster than the market as a whole, and we actively manage downside risks.
2012-09-14 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 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 Australias Second-largest Export It Isnt Coal by Adam Bowe of PIMCO
With growth in China now moderating, and the price of commodities and Australias terms of trade now declining, many investors are questioning how the Australian dollar has managed to remain well-supported. The explanation lies mainly in the changing structure of the funding of the current account deficit. Going forward this will likely have important implications for monetary policy in Australia if the decline in national income growth is not offset by a similar decline in the Australian dollar.
2012-09-14 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 You're an Idiot. Statistically. by Bill Mann of Motley Fool
Statistically, the SEC found that American investors - regardless of age, race, or gender - lack basic financial literacy, and that they generally do not understand even the most elementary financial concepts such as compound interest and inflation.
2012-09-13 Finding Seeds of Growth by Serena Perin Vinton of Franklin Templeton Investments
Like the seed waiting to emerge beneath an icy winter blanket, there are equity growth opportunities sprouting that perhaps aren't obvious on the surface. When the global economic landscape seems rocky and unfertile, you might think opportunities in growth-oriented stocks would be stunted. Serena Perin Vinton, co-manager for Franklin Growth Fund, knows where to dig for those growth opportunities though, and sometimes it's in unusual places. One area she points to is U.S. manufacturing, which she believes could be set to stage a comeback.
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 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.
2012-09-12 Is Europe Fixed? Not Even Close! by Fred Copper of Columbia Management
Euro Area (EA) equities have rallied 16% since European Central Bank (ECB) President Mario Draghi made his now famous July 26 pronouncement that "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." Does this mean the EA is fixed? Not even close.
2012-09-12 Investing is Like Duck Hunting by Pamela Rosenau of HighTower Advisors
The discussion of additional monetary easing by the Federal Reserve has been the topic du jour in recent weeks. As a result of potential additional monetary stimulus, the US dollar has experienced a decline. Also, after a weaker than expected jobs report last week, US treasuries initially rallied given an increased expectation of Fed action. However, as pointed out by the market commentators at Sober Look, the Treasury curve has begun to steepen with the "30-year bond and other longer dated treasuries steadily selling off."
2012-09-11 Can Our Retirement System be Fixed? by Robert Huebscher (Article)
Google 'Teresa Ghilarducci' and you'll find countless references to her as the most dangerous woman in America. That dubious distinction stems from her 2008 book, When I'm Sixty-Four, in which she advocated replacing voluntary 401(k) plans with government-mandated savings accounts. Ghilarducci was attempting to address a problem that thus far has eluded solution, so it's important to consider her arguments, which have drawn praise from some quarters, too.
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 The Winds of Market Change by Mark Mobius, Michael Hasenstab of Franklin Templeton Investments
As we cross the mid-way point of the year, you might say the equity and fixed income markets have been a lot like the recent weather in much of the world: uncertain, and tending toward extremes. The perception of a stormy economic climate has driven some equity valuations to extremely low levels, particularly in Europe, and investors have been pouring into fixed income despite extremely low yields.
2012-09-11 Rally Should Continue, but Look for More Volatility by Bob Doll of BlackRock Investment Management
Despite a relatively disappointing jobs market report for August, stocks rose last week as investors focused on the European Central Banks (ECB) announcement of its longawaited plan to buy bonds in the secondary market. The ECB program represents an important step in terms of lowering volatility and providing a cushion for Europes debttroubled countries to make some longer-term improvements in their fundamentals.
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 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 Russia: Riding on the Fast Lane by Team of Thomas White International
The fall in oil and natural gas prices has prompted the Russian government to turn its attention to the country's hitherto ignored manufacturing sector.
2012-09-10 Will Greece Set Sail from the Euro? by Milton Ezrati of Lord Abbett
Despite a chorus of voices calling for Athens to exit the currency union, the potential consequences would likely be unpalatable for the rest of Europe.
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 Back to School: Summer Vacation Ends for Central Bankers by Andrew Boczek of Sentinel Investments
The heady days of "Maestro" Alan Greenspan may be long gone. Nonetheless, most of us still take for granted that similarly wise men and women, aloof from the pressures of politics and short term market fluctuations, have the capacity to set the proper price of our most precious commodity: time. Or said another way, to set an effective interest rate policy that encourages either savings or spending, today or in the future, to help manage long term economic stability.
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 Spinning Pessimism Into Opportunity by Peter Langerman, Ed Jamieson of Franklin Templeton Investments
In the markets and in life, we face bullish and bearish periods. Some days are good and some days are bad. But even on bad days, good things can and do happen, which may explain our sometimes Pollyanna-sounding persistence on the existence of a bright side even in the face of somber-sounding issues like fiscal cliffs and austerity measures.
2012-09-07 Euro: Looks Like a Duck, Quacks Like a Duck by Alex Merk of Merk Funds
If it looks like a duck, quacks like a duck, it just might be a duck. We are talking about the euro: it now looks like a currency, acts like a currency, it might as well be yet another currency.
2012-09-07 Eating Las Vegas' Lunch by Satya Patel of Matthews Asia
Since opening its casino industry to international companies in 2002, Macau has become a global gaming center. In 2011, Macaua special administrative region of Chinabrought in US$33.5 billion in gaming revenue, more than five times that of the Las Vegas Strip. Gaming operators have gladly built multibillion dollar facilities in Macau because each new casino seems to attract increasing mass market and VIP gamblers.
2012-09-07 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 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Pessimism about the next administration's impact on the emerging markets is held in check by the likely convergence of US and Chinese economic interests. More than ever, Ms. Smith needs Ms. Wong. To borrow a recent Financial Times headline, "Obama should pray that China overtakes the US."
To us, Indonesia and Malaysia look pretty promising by this standard. Other stories include a look at timber and an update on Bahrain's economy.
2012-09-06 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.
2012-09-05 The Lending Lindy by Bill Gross of PIMCO
Our entire finance-based monetary system led by banks but typified by insurance companies, investment management firms and hedge funds as well is based on an acceptable level of carry and the expectation of earning it. In a New Normal economy where lenders dance to the Blue Danube instead of the Lindy, how should we move our own feet? Carefully, I suppose, and with recognition that historic returns are just that historic.
2012-09-04 The Ultimate Income Strategy - Higher Yield and Lower Volatility by Geoff Considine (Article)
Investors, especially those in the de-accumulation phase of their retirement, count on high income and low volatility. Achieving the best possible tradeoff between yield and risk is a major challenge for advisors. Over the last two years, I've shown how to construct a low-risk portfolio - the ultimate income portfolio (UIP) - that yields over 9.0%. Let's look back at how those portfolios performed and the components of this year's UIP.
2012-09-04 Lessons from the Weight-Loss Industry: The Keys to Growing your Practice by Dan Richards (Article)
Why do most attempts at dieting result in failure? According to Weight Watchers - whose program has outperformed its competition over many years - it's because of a lack of a good methodology or the right combination of discipline and incentives. The same is true of successful client prospecting, as a recent conversation with an advisor illustrated.
2012-09-04 ProVise Bullets by Ray Ferrara of ProVise Management Group
At one time during the dotcom craze, the NASDAQ closed over 5000, but, as it tumbled downward, it last crossed the 3000 mark on December 11, 2000; that is until it crossed that mark on March 13, 2012, or 11.25 years later. My, how the times have changed! The income tax was introduced in the U.S. in 1913. This means that when we file our taxes on April 15, 2013 for the year 2012, it will be the 100th year that income taxes have been paid.
2012-09-04 Challenges in Todays Municipal Market by Douglas Peebles of AllianceBernstein
Most fixed-income investments carry two key risks: interest-rate risk and credit risk. Both affect a bond's value in the market. But before the 2008 financial crisis, interest-rate risk was the primary concern of many investors and investment managerscredit risk was much less of a consideration. My colleague Michael Brooks explains why.
2012-09-04 Risks in the Search for Yield by Charles Lieberman of Advisors Capital Management
Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.
2012-09-04 Housing's Slow Climb Out of the Cellar by Milton Ezrati of Lord Abbett
After being down so long, it is finally looking up for the beleaguered sector. But the recovery still faces a number of obstacles.
2012-09-04 Postcard from India: Taking Frugal Engineering to the World by Team of Thomas White International
The first 25 ton truck that rolled out of Daimler's new Indian manufacturing plant in June this year was similar in most respects to other trucks the company sells across the globe. Even on a closer look, the only major difference seemed to be the name and logo on the front grill. The iconic Mercedes three pointed star logo had been replaced by a new round logo and brand name, BharatBenz.
2012-09-04 An Upgrade of UK Equities by Russ Koesterich of iShares Blog
With UK economic growth showing signs of stabilization, the downside of investing in the region now appears more balanced versus the potential benefits. Russ believes it's time to upgrade equities from the United Kingdom to a neutral status.
2012-09-04 Risk Mitigation by Bill Smead of Smead Capital Management
How did the job of an asset allocator move from seeking out undervalued asset classes and securities to one of seeking to mitigate risk? Is risk mitigation a worthy goal or even possible without abandoning real return goals? When and why did wealth creation become wealth management? What opportunities exist today for those who seek wealth creation through intelligent risk taking?
2012-09-04 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 The Latest ETF Eye-Opener by Frank Holmes of U.S. Global Investors
A few years ago, we discussed the flow of money rushing into ETFs without careful analysis by investors about the unknown risks. Institutional Investor recently highlighted another downside to these investments: ETFs' use of hypothetical, back-tested performance. To attract assets, some index providers have unique indexes based on various performance characteristics, weighting methodologies and valuation metrics.
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.
2012-08-31 Risks in the Search for Yield by Charles Lieberman of Advisors Capital Management
Interest rates are so extraordinarily low that investors have pushed up prices (and pushed down yields) of all the traditional investments used for income, so they have even forced into more esoteric or risky investments. This search for yield has created significant risks that may not be well appreciated. This Commentary discusses these risks.
2012-08-31 Rethinking How We Invest by Matt Scales of Columbia Management
Building portfolios to meet individual objectives is or should be a customized exercise, so this article should not be considered advice for any individual. Instead, it is an alternative philosophy to how investors have traditionally approached building portfolios. For the vast majority of us, we allocate our capital to asset classes with the highest expected returns.
2012-08-31 Prepare Now for the Looming Fiscal Cliff by Russ Koesterich of iShares Blog
The general election season is finally upon us, and investors should begin shifting their focus from theoretical discussions about the impending fiscal cliff of potential tax hikes and spending cuts to more concrete action plans of what to do about it.
2012-08-31 While Everyone Worried About Europe by Robert Horrocks of Matthews Asia
We all do it. We all refer to Asia as an export-driven economy. It's one of those seemingly useful bits of shorthand. Unfortunately, I believe it has come to do more harm than good. Along with "emerging economies," I would like to banish the phrase to the ranks of outlawed jargon.
2012-08-30 Opportunity Cost: Emotions by Matt Lloyd of Advisors Asset Management
Emotions may be keeping your clients in cash, putting their long-term goals at risk. Taking a snapshot of headlines and it is not hard to discern where investors' predispositions lay.
2012-08-30 The Calm Before the Storm? by Jerry Wagner of Flexible Plan Investments
I know these are the dog days of summer, a time that Jack London captured perfectly in the quote here. Nothing much is happening in the financial world as summer draws to a close. There was little news from Europe. The last of earnings reporting season is behind us, and while the results were the worst since the rally began in March of 2009, they were not terrible.
2012-08-30 The ESM: Saviour, Super SIV or End of the Road? by Andrew Bosomworth of PIMCO
So long as the fundamental issues about the future of the eurozone remain unsolved, the extra supply of ESM bonds will likely drive up the borrowing costs of its weaker stakeholders. Without a cap on or exit clause from additional capital calls, the ESM could lead northern eurozone countries down a difficult and unsustainable path.
2012-08-30 Dividends: The Next Bubble? by Ed Perks, Don Taylor of Franklin Templeton
Dividend-paying stocks have received a good deal of attention this yearand for good reason. Ed Perks, senior vice president and director of the Core Hybrid Portfolio Management Group at Franklin Templeton, and Don Taylor, senior vice president and portfolio manager for Franklin Equity Group, suspect it's these fearful prognostications that are overinflated, not the asset class. As they see it, the dividend-paying stock universe is expanding, and deserves investor attention.
2012-08-30 Fixed Income Investing - the Dangers of Complacency by Bill Woodruff of Bandon Capital Management
The paper points out the US has been in a declining interest rate environment for 30 years, producing a tailwind for fixed income investors but one with little room left for further decline. At these interest rate levels - the yield on the 10 year US Treasury recently hit an all-time month end low of 1.49% - fixed income investors face unique risks which are predominantly unfamiliar.
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 The Russian Evolution by Mark Mobius of Franklin Templeton
It might be tempting to say "everything old is new again" in Russia, given the return of Vladimir Putin to the presidency after a four-year hiatus, an interesting development in the country's political evolution. I think Russia has also evolved a great deal as an investment destination in the past two decades and holds great potential, although there is still more work to be done to open the markets and instill investor confidence.
2012-08-28 Who’s Fooling Whom? by Michael Lewitt (Article)
Equity markets are exhibiting a remarkable degree of complacency. The VIX is currently at extremely low levels and it can maintain those levels for a long period of time. The worse things get in terms of the economic data, the higher the market goes on hopes of central bank stimulus. At this rate, the Dow will peak just as the world is coming to an end!
2012-08-28 Real Estate Resiliency: the REIT Model Proves its Mettle by Josh Olazabal, Amit Arora of PIMCO
REIT unsecured debt has been one of the best-performing sub-sectors in the entire investment-grade credit area. When insurance companies began to look at REIT unsecured debt, they asked for the same type of covenants associated with property-level mortgages. These requirements have coalesced into a standard REIT covenant package. We believe low default rates and relatively high recovery rates make the sector attractive over the long term particularly for buy-and-hold investors.
2012-08-28 Taking Rational, not Rationalized, Risks by Wylie Tollette of Franklin Templeton Investments
Like beauty, "risk" is often in the eye of the beholder. What might seem "risky" to one person (such as traveling to an exotic destination) might be an exciting adventure for someone else. Wylie Tollette, Senior Vice President and Director of Performance Analysis and Investment Risk at Franklin Templeton Investments, travels around the world, working with portfolio managers to focus on a different kind of risk.
2012-08-28 General Mills Inc: Stock Research Analysis by Team of F.A.S.T. Graphs
General Mills Inc (GIS) is a high quality blue-chip dividend growth stock with a consistent long-term record of earnings growth averaging approximately 8% per annum.
2012-08-28 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.
2012-08-28 Policymakers Hold the Key to Confidence by Bob Doll of BlackRock Investment Management
The Dow Jones Industrial Average fell 0.9% to 13,158, the S&P 500 Index slid 0.5% to 1,411 and the Nasdaq Composite lost 0.2% to close the week at 3,070. As August draws toward a close, US equities have hit four-year highs, corporate bond yields touched multi-year lows and many risk assets can look back on a pretty good summer. But despite plenty of investment and central bank activity, we continue to see a shortage of economic and financial market confidence.
2012-08-28 Behavior Modification by Kendall Anderson of Anderson Griggs
The last few years have caused a number of us to modify our financial behavior. It is hard to believe that the financial crisis is over five years old. According to S&P Case-Shiller, the good times ended in June of 2006 when home prices peaked. By April of 2007 the big subprime mortgage lender New Century Financial Corporation filed for bankruptcy.
2012-08-27 The Trend is Your Fickle Friend by John Hussman of Hussman Funds
Typically, the best that can be achieved with popular moving-average crossover systems is a moderate reduction in drawdown risk, but zero or negative incremental long-term return versus a buy-and-hold.
2012-08-27 Municipal Finance - Some Positive Signs by Milton Ezrati of Lord Abbett
State and local government finances remain precarious. The degree of trouble varies from place to place, of course, but generally it will take decades for states and cities to put their finances in anything like good order. It is, in fact, a good bet that no middle-aged person today will live to see such an event.
2012-08-27 Copeland White Paper I: Dividends and Tax Rates by David McGonigle of Copeland Capital Management
As it stands today, barring a political compromise, the highest tax rate payable on dividends will jump from 15.0% to 43.4% for the 2013 tax year. That sets up two important questions for investors in dividend-oriented strategies.
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 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 Is a Japan-Style "Lost Decade" Ahead for the US? by Sharon Fay of AllianceBernstein
The laborious pace of the US recovery has inevitably fostered comparisons with Japan. But we find several reasons why a protracted slump like Japan's is unlikely, as my colleague Gerry Paul argues. After five years of tepid growth, investors can be forgiven for wondering if the US is headed for a decades-long slump like Japan's.
2012-08-24 A Case for Long-Term Equity Investing by Ric Dillon, Chris Welch, Chris Bingaman of Diamond Hill Investments
The past five years have been difficult for equity market investors and especially for active money managers. Despite recent results, we believe that the next five years will be advantageous for equity investors and for our intrinsic value focused investment philosophy and process.
2012-08-23 The Emerging Story in Europe by Mark Mobius of Franklin Templeton
There's a unique and often overlooked story coming out of some of Europe's emerging markets that interests me more. While much of developed Europe is still struggling to get its fiscal house in order, much of emerging Europe already has. Some of the emerging markets in Europe deserve to be a greater part of the European story, and in my view, can offer compelling investment opportunities at attractive valuations.
2012-08-23 '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 Reading the Right Tea Leaves to Gauge Market Volatility by Daniel Morillo of iShares Blog
Market volatility has come to be associated with short-term events, like the Lehman Brothers bankruptcy or the downgrade of US debt. But Daniel Morillo explains why investors should keep an eye on broad macroeconomic prospects and not the latest breaking news headline to gauge where market volatility is headed for the longer term.
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 Dividends Provide A Return Bonus by Team of F.A.S.T. Graphs
With all things being equal, dividend paying common stocks provide their shareholders a return bonus, or what some might like to call a kicker, over an equivalent common stock that pays no dividend. Many investors do not see it this way, as they tend to think of the dividend providing them their return. However, the stock market capitalizes earnings whether a company pays a dividend or not.
2012-08-22 An Investor-Driven Recovery by Erik Franks of John Burns Real Estate Consulting
Investors are buying homes at a more rapid pace than ever before, and this time their investments actually make sense. Most are buying homes below replacement costs, or at prices that allow for a reasonable rental return.
2012-08-22 5 Counterintuitive Reasons Why the Investment Vehicle of the the Decade is ... Stocks by Rob Isbitts of Sungarden Investment Research
These days there are more varieties and combinations of investments than selections on a Starbucks menu -- but that's not necessarily a good thing. Now, you can invest in emerging markets, dividend-paying stocks, bonds from Africa and commodities that only farmers and professional speculators used to traffic in. Heck, clients can even tell an advisor they would like a double-long, midcap equity ETF.
2012-08-22 The Bullish Case for Energy Stocks by Russ Koesterich of iShares Blog
Lower crude oil inventories and less spare capacity among OPEC oil producers are just two of many reasons why I continue to be bullish on energy and energy stocks over the long term.
As I've been writing about for months, oil supply remains tight by historical standards. Among the reasons I gave in a post early this summer, I expect crude prices to rebound in the long term...
2012-08-22 Relative Value by Bill Smead of Smead Capital Management
Everyone wants to wait for the perfect time to buy into the stock market or into any major investment market. They want to enter at historically cheap prices or at "absolute values". We at Smead Capital Management believe that these people are kidding themselves and everybody else. At the time of historical lows and "absolute value" those same folks are too mortified to pull the trigger and always come up with the reason that "it's different this time". Inertia rules the day.
2012-08-22 R-E-S-P-E-C-T by Jerry Wagner of Flexible Plan Investments
With 18 Grammys, the Queen of Soul, Detroiter Aretha Franklin has certainly earned the respect of millions over a fifty-year career in show business. Conversely, despite six advancing weeks in a row, the latest bull rally just can't get any of that R-E-S-P-E-C-T.
2012-08-21 The Profession's Faulty Assumptions: A Top Ten List by Bob Veres (Article)
In the financial planning profession, we make a lot of assumptions about the world in order to run spreadsheet models, retirement projections and sufficiency analyses, and generally determine how much a client should save and invest for the future. But many of the industry-standard inputs into our models are (how can I say this delicately?) garbage. Here are my top ten garbage inputs, with an explanation of how we might possibly improve on them.
2012-08-21 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 Is Now the Time to Take Stock in Europe? by Norm Boersma of Franklin Templeton
Being a value manager in the equity space this year hasn't been an easy job. When investors are focused on capital preservation and risk is said to be "off" the table, the value proposition can certainly require some conviction. Templeton Equity Group CIO Norm Boersma knows that when certain sectors are out of favor, that's often when the best opportunities surface. To position for a time when risk is back "on," he is embracing the low market valuations present in Europe and elsewhere.
2012-08-21 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.
2012-08-20 QE3: Tackling the Big Questions by Milton Ezrati of Lord Abbett
Will the Fed launch another round of quantitative easing? If so, when? Here are the factors that could influence the central bank's decision.
2012-08-20 Europe's Unstable Hammock by Mohamed El-Erian of PIMCO
This summer I have been asked a lot about Europe -- not so much by economists but by others concerned that the lingering crisis there would make their daily economic life even more challenging. In responding to these questions, I have often struggled to summarize in a few sentences the causes of Europe's existential crisis, let alone what is likely to occur next (including elements of a solution) -- that is until I tried to use a hammock.
2012-08-20 Weekly 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.
2012-08-20 Eaton Corp: Stock Research Analysis by Team of F.A.S.T. Graphs
We believe Eaton Corp (ETN) currently represents an above-average dividend yield opportunity. The company can be purchased at a discount to its earnings justified fair value, and offers a dividend yield of over 3.3% (light blue highlighting). We recommend doing your own due diligence, but Eaton Corp looks like a classic buy low today to sell later at a higher value with a nice yield to sweeten the pot.
2012-08-17 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 Groundhog Day: Will Septembers Sell-off Repeat? by Russ Koesterich of iShares Blog
Investors might feel they are trapped in their own version of Groundhog Day this year as Russ K expects September, which has historically been the worst month of the year for capital markets, to once again fall victim to its well-documented negative seasonal bias.
2012-08-17 How Change Happens by John Mauldin of Millennium Wave
This is an encore appearance of the letter that is clearly the most popular one I have ever written, updated with a few thoughts from recent times (it was also part of a chapter in Endgame). Numerous reviewers have stated that this one letter should be read every year. As you read, or reread, Ill be enjoying a week off.
2012-08-16 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 The Chinese Hangover: As Infrastructure Spending Drops, So Does Demand for Chinese Steel by Raja Mukherji of PIMCO
The Chinese steel industry today shows many signs of serious economic difficulties brought about by the unprecedented size and speed of industry expansion. However, as the country's focus shifts away from public investments and toward tax cuts, it will be difficult for China to absorb this overabundance of domestically produced steel. Ripple effects of this oversupply may include softening iron ore prices, a possible drop in the Australian dollar, and potentially weaker global steel prices.
2012-08-15 Going for Gold: Lessons from London by Colin Moore of Columbia Management
Fiercely competitive professional athletes were able to join together for a common purpose of achieving gold for the U.S. Small teenagers were prepared to sacrifice family life to win gold for the U.S. If only our politicians could find a way to set aside traditional rivalries and find a team plan to reduce our debt and spur higher levels of growth on a equitable basis. Unfortunately, the opposite is occurring.
2012-08-15 "Curiosity" - Return of American Exceptionalism by Gary Halbert of Halbert Wealth Management
The IRS regularly issues something called Individual Tax Identification Numbers to people living in the US, but who are not eligible for a Social Security number. These illegal aliens working in the US received $6.8 billion in tax refunds last year by filing. A number of IRS employees recognized that this is/was tax fraud. We could end $2.5 billion in government waste like paying almost three times that much in tax refunds to illegal aliens to pay for invaluable missions like Curiosity.
2012-08-15 Preparing Portfolios for Inflation by Ronit Walny, Kevin Winters of PIMCO
Although disinflation has seemed the more likely scenario in recent years, PIMCO expects inflation to accelerate from recent levels over the next three to five years, but double-digit rates are unlikely. An understanding of the constituents of the Consumer Price Index can help us design portfolios that seek to better defend against inflation. The core building blocks of such portfolios are commodities, Real Estate Investment Trusts and Treasury Inflation-Protected Securities.
2012-08-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
There are bears out there who are extremely disappointed that the U.S. has not entered another recession over the past three plus years. Certainly, the 18 months of downturn in the markets that began in October of 2007 and culminated in March 2009 gave them a lot to cheer about. But, since then, they have looked everywhere possible to come up with bad news.
2012-08-14 How Safe are Annuities? by Joe Tomlinson (Article)
For many advisors, the possibility that insurance companies will run into financial difficulties makes recommending annuities a nonstarter. But annuities are the best way to mitigate longevity risk, which may pose a greater danger, and advisors can take steps to help protect clients from insurers' financial problems.
2012-08-14 An Imperfect Storm by Janus (Article)
Changing regulations have drained liquidity from the corporate bond markets, as growth in bond ETFs is distorting a shrinking market. These converging forces are likely to result in a more volatile environment, but we see opportunity for managers able to understand the fundamental risk and reward.
2012-08-14 How One Advisor Adds Three Clients a Month by Dan Richards (Article)
I've had several emails in response to last week's article on how investors are using LinkedIn to help select advisors. Indeed, one advisor told me of a systematic approach that is consistently yielding new business. Let's look at how this advisor is capitalizing on his online presence to attract an average of three new clients per month.
2012-08-14 Blind Faith by Michael Lewitt (Article)
Central banks are facing political and practical obstacles that will render it very difficult for them to deliver anything more than anodyne words and actions as summer moves into the always dangerous August holiday season. IPhones should be kept on alert at the beach through Labor Day.
2012-08-14 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.
2012-08-14 Oil: Does Supply and Demand Matter? by Bill Smead of Smead Capital Management
We believe the long-term demand for oil will be greatly influenced by where the world gets its best future growth. As the chart below shows, the US has cut by 50% the amount of energy which is required to generate each dollar of Real Gross Domestic Product (GDP).
2012-08-14 India: Good Growth, Bad Growth by Sunil Asnani of Matthews Asia
It goes without saying that areas of growth attract investors. But in a blind chase for growth, it is easy to forget that only growth accompanied by economic profits creates value. This month Sunil Asnani takes a look at some of the once-celebrated, top-down investment ideas that did not live up to expectations, comparing them to some less exciting ideas that actually did deliver.
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 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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The rally in stocks which no one seems to believe in continued again last week. With Europe on vacation or celebrating the Olympic Games the macro background remained quiet and allowed stock prices to advance even as investor pessimism continues to grow.
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 Ross Stores Inc: Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graph on Ross Stores Inc shows a picture of overvaluation based upon the historical earnings growth rate of 19.6% (orange circle) and a current PE of 21.3 (red circle). Another interesting note is that Ross' price follows its Historical PE of 15 rather than following its Operating Earnings Growth Rate of 19.6%.
2012-08-10 Global Telecom Stocks Lose Luster by Russ Koesterich of iShares Blog
As their prices have increased in recent months, global telecommunication stocks have started to lose some of their luster. Russ K explains why factors such as valuation and profitability have prompted him to change his view of the sector.
2012-08-10 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.
2012-08-09 Food Inflation in Context by Team of American Century Investments
The news is full of reports about huge increases in prices for corn, wheat, and soybeans, as a result of a simultaneous, severe drought in many of the world's food-producing regions. Despite the dramatic headlines, the reality for U.S. consumers is that the food inflation they experience is likely to be much more tame. Indeed, the USDA projects a 2-3% increase in prices for fruits and veggies next year, with beef prices expected to rise a bit faster than that.
2012-08-09 Big Lots Inc: Stock Research Analysis by Team of F.A.S.T. Graphs
As a special request of a reader, we are reviewing Big Lots Inc. (BIG) through the lens of FAST Graph with this article. In an instant, the Earnings and Price Correlated graph on Big Lots tells a story of a cyclical company with a rather erratic operating history. We believe this is important information for prospective investors to know.
2012-08-09 Is Dodd-Frank the Death of Preferreds? by Mariela Jobson of iShares Blog
Investors wonder whether new regulations will impact the supply of preferred stocks, but iShares Portfolio Manager Mariela Jobson explains what the changes really mean for the future of preferreds.
2012-08-09 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
India's massive power failure was a gift to both investment bankers and asset managers. There will likely be a surge in infrastructure-related financing and investment activity directed at South Asia. We also look at sovereign wealth fund transparency; the UAE funds rank comparatively well. Our allocation guidelines for North Africa focus on Morocco, where we believe we will see sustained gains for both portfolio and direct investors once the European situation stabilizes.
2012-08-09 Pacific Basin Market Overview - July 2012 by Team of Nomura Asset Management Co.
Most equity markets in the Pacific Basin region recovered somewhat in July after a weak second quarter on expectations of further monetary easing and measures by the European Central Bank to forestall a Euro currency crisis. However, when we examine the sector results, it is hard to conclude that the recovery was accompanied by an improvement in sentiment.
2012-08-08 How Hoover Caused the Euro Crisis by Christian Thwaites of Sentinel Investments
There is a Burkean principle that many sorts of change must be regarded with skepticism. In the last few months in Europe we have seen new maxims, new ideas, new commitments, new resolves, lots of new acronyms, yet very little has changed from two years ago when Greece surfaced as the first casualty of the banking/sovereign crisis.
2012-08-08 Cash Flow is King by Pamela Rosenau of HighTower Advisors
In today's yield starved environment, investors continue to seek secure sources of income with the potential for growth. Energy infrastructure master limited partnerships (MLPs) have become increasingly attractive not only for their above average current yield, but for their low risk profile and ability to generate predictable cash flows backed by, in many instances, long-term tariff based contracts.
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 ECB Policy: Over-Promise and Under-Deliver, Investor Behavior: Over-Anticipate and Over-React by Colin Moore of Columbia Management
Last week was a good example. Investors anticipated a major announcement from Mario Draghi, President of the ECB on Thursday because of remarks he had made the previous week at a conference in London. When he did not announce any immediate monetary policy changes following the regular meeting of the ECB, the markets demonstrated considerable volatility, declining on Thursday and rising on Friday.
2012-08-07 Why Hedge Funds Destroy Investor Wealth by Michael Edesess (Article)
If all the money that's ever been invested in hedge funds had been put in Treasury bills instead, the results would have been twice as good. So claims Simon Lack - a former JPMorgan executive whose job was once to help steer billions into hedge funds - in his recent book, The Hedge Fund Mirage: The Illusion of Big Money and Why It's Too Good to Be True. You'd think hedge fund advocates would immediately pounce on this and refute it; but it's irrefutable.
2012-08-07 The Game-Changer for Attracting Affluent Clients by Dan Richards (Article)
Until now I've been a skeptic on the value of social media for attracting affluent clients. You can use Facebook and Twitter to connect with investors in their 20's and 30's - but not the older, more prosperous clients advisors target. But last week, three separate conversations changed my mind on this.
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 Investing in Central Utility Stocks - Do Todays Valuations Make Sense? Part 3 by Team of F.A.S.T. Graphs
This is the third in my series on investing in utility stocks based on the sector's current valuation levels. The series was initially inspired by concerns that utility stocks may be overvalued because they had recently performed very well. When the series first started with Part 1, utility ETFs were showing the best one-year performance of any sector. By the second installment Part 2, the utility sector had fallen into second place (Utility Sector Performance July 31, 2012).
2012-08-07 A Second Wave of Capital Flight Reaches Eurozone Core by Thomas Kressin of PIMCO
During the first phase of the euro crisis, private capital flowed out of the "peripheral" countries to the core of the eurozone, but this shift had no adverse impact on the euro. Now, investors are taking their capital out of the eurozone altogether. The euro threatens to fall further, possibly leading to serious concerns about a devaluation spiral.
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 Family Dollar Stores Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graph on Family Dollar Stores (FDO) shows a picture of overvaluation based upon the historical earnings growth rate of 15.2%. Analysts are expecting the earnings growth to continue at about 15%, and when you look at the forecasting graph the stock appears overvalued, (it's at the top of the value corridor of the five orange lines - based on future growth).
2012-08-06 Japan's Tax Hike Could Prove Costly by Milton Ezrati of Lord Abbett
Japan has been here before, and the outcome was far from pleasant. Yet it seems the wheels are in motion. The country will double its national sales tax, from 5% to 10%. Justified as a way to help the country deal with its precarious fiscal situation, the move has raised serious concerns. This kind of a tax hike, applied for much the same reason, has been widely blamed for the country's destructive late-1990s' recession.
2012-08-06 Note to Bond King: Check Your Math by Seth Masters of AllianceBernstein
The Wall Street Journal published an article on August 1 headlined: "Bill Gross: Equities are Dead." In fairness to Gross, what he actually wrote in his August "Investment Outlook" was, "the cult of equities is dying." We agree with most of Gross's argumentbut not with his unsupported forecast of extremely low stock returns. Let's take a look at Gross's claims...
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.
2012-08-06 TJX Companies Inc Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graph on TJX Companies shows a slight picture of overvaluation based upon the historical earnings growth rate of 18.6% (orange circle) and a current PE of 20.4 (blue circle). Analysts are forecasting the earnings growth to continue at about 12%, and when you look at the forecasting graph below, the stock appears overvalued, (it' outside of the value corridor of the five orange lines - based on future growth).
2012-08-05 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.
2012-08-03 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 How to Avoid the Bursting of the Bond Market Bubble by Gary Halbert of Halbert Wealth Management
This letter is the first in a series that I hope you will take very seriously. U.S. interest rates are at record lows. Meanwhile, Obama and Congress are sky-rocketing the national debt. We all know this cant go on much longer.
2012-08-03 Family Dollar Stores - Stock Research Analysis by Team of F.A.S.T. Graphs
A quick glance at the historical earnings and price correlated FAST Graphs on Family Dollar Stores (FDO) shows a picture of overvaluation based upon the historical earnings growth rate of 15.2%. Analysts are expecting the earnings growth to continue at about 15%, and when you look at the forecasting graph the stock appears overvalued, (it's at the top of the value corridor of the five orange lines - based on future growth).
2012-08-03 Time to Row, or Sail? by John Mauldin of Millennium Wave Advisors
Earnings are a topic of great debate. At any given time, you can hear someone on TV talking about how "cheap" the market is, while the person on the next channel goes on about how expensive the market is. Today we look at the cycle of earnings, rather than a specific point in time. Let me give you a little preview. In terms of time, this earnings cycle is already longer than average, and in terms of magnitude it is projected to go to all-time highs.
2012-08-02 Two Inflection Points by Andrew Redleaf of Whitebox Advisors
I'm generally happiest, professionally, when I have at least one strong investment conviction. Currently I have two. I want to be long large-cap equities and short small-cap equities. And I want to be long cheap options on natural gas, mostly by owning E&P (exploration and production) firms that have become attractively cheap with the collapse of gas prices.
2012-08-02 Mythbusting: How Elections Affect Markets by Russ Koesterich of iShares Blog
Elections do matter for the markets, but not necessarily for the reasons that investors tend to believe. Ahead of the next presidential election, Russ debunks some common myths surrounding markets and elections.
2012-08-02 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 Welcome to Dystopia! by Jeremy Grantham of GMO
In a new quarterly letter to GMO's institutional clients today, chief investment strategist Jeremy Grantham warns: "We are five years into a severe global food crisis" that in the long term "will threaten global stability and global growth." An accompanying investment commentary by GMO head of asset allocation Ben Inker focuses on risks of eurozone equities, which he describes as "somewhere between fair value and mildly cheap" but not worthy yet of "a table-pounding endorsement."
2012-08-01 Whither Global Stocks? Be Sure to Track This Data by Russ Koesterich of iShares Blog
Sometimes, either weak economic numbers or strong economic numbers can point to a surge in US and global equities. This could be one of those weeks. Russ has his eye on two important economic reports that are being released this week, and he explains why weak data may be positive for global equities.
2012-08-01 Municipal Bonds: Putting Things in Perspective by Sheila Amoroso, Rafael Costas, John Wiley of Franklin Templeton Investments
It's easy to jump to conclusions based on shocking headlines and dire predictions. If that's all you read, you'd probably be walking around with a stiff neck from looking up, waiting for the sky to fall. Beneath the sensational headlines often lies a more mundane story. This could be the case with the current bout of muni-bond default mania, which harkens back to the muni-market panic in December 2010.
2012-08-01 Real Estate Portfolio Construction for Individual Investors by Casey Frazier of Versus Capital Management
Commercial real estate is an asset class that includes many different strategies and approaches. Investors segment real estate investments into a few categories. This segmentation is done by several key factors including income profile, leverage, operational risk and potential returns. The most important segmentation is core versus non-core, or properties with stable income versus properties that have unstable or no income.
2012-08-01 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 China's Growing Pains by Mark Mobius of Franklin Templeton Investments
Many feel that China is the engine for the world economy and that if it slows down, we may be doomed to a recession or even a depression. Yes, China's growth is decelerating from the double-digits of recent years; various forecasters are predicting a possible GDP growth range of 7-8% this year. However, I think it's important to emphasize that would still represent an impressive pace, and remember that China isn't the world economy's only locomotive.
2012-07-31 Beyond the Ultimate Death Cross by Georg Vrba, P.E. (Article)
Last week, I showed why the 'ultimate death cross' is not a bearish signal. But the methodology behind that signal - what's known as a 'golden-cross trigger' - can indeed offer a reliable guide to investors. And one can do even better with a simple improvement to the trigger that I have devised.
2012-07-31 Venerated Voices by Venerated Voices (Article)
We published our quarterly update for the Venerated Voices awards. Rankings were issued in three categories: The Top 25 Venerated Voices by Firm, The Top 25 Venerated Voices by Advisor and The Top 10 Venerated Voices by Commentary.
2012-07-31 Cult Figures by William Gross of PIMCO
The long-term history of inflation adjusted returns from stocks shows a persistent but recently fading 6.6% real return since 1912. The legitimate question that market analysts, government forecasters and pension consultants should answer is how that return can be duplicated in the future. Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades.
2012-07-31 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.
2012-07-31 Gold at ECB: Accident or Strategy? by Axel Merk of Merk Funds
When the euro was launched, the European Central Bank (ECB) held approximately 15% of its assets in gold. That ratio has remained reasonably stable, giving rise to a variety of chatter, including suggestions that it may displace the U.S. dollar. We pursue the question on whether the ECB's gold holdings are an accident or strategy.
2012-07-30 No Such Thing as Risk? by John Hussman of Hussman Funds
In the face of present enthusiasm over central bank interventions, one almost wonders why nations across the world and throughout recorded history have ever had to deal with economic recessions or fluctuations in the financial markets.
2012-07-30 What Next for Spain? by Myles Bradshaw of PIMCO
As part of its bank recapitalization program, Spain has ceded fiscal sovereignty, and this is a positive step toward resolving the euro debt crisis. We believe its eurozone partners should now make good on their summit agreement to use European Financial Stability Fund and European Stability Mechanism instruments in a flexible and efficient manner.
2012-07-30 The Euro's Survival Requires German Engineering by Milton Ezrati of Lord Abbett
As Europe's paymaster, Berlin faces a tricky task: promoting austerity among economically stressed peripheral nations but not too much. In Europe's seemingly endless debt negotiations, Berlin would seem to hold all the cards. It is, after all, Europe's largest economy, its most powerful, and its most financially sound. But in reality, Berlins options are highly constrained and require a remarkably delicate policy balance.
2012-07-30 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 Austerity: Damned If You Do, Damned If You Don't! by Fred Copper of Columbia Management
This glib depiction could be applied to most of the developed world. Much of the world's attention is on the debt imbalances within Europe, but too narrow a focus will miss the fact that aggregate debt levels for the region as a whole are still disturbingly high. The same is certainly true of Japan, and to a lesser extent the U.S.
2012-07-30 The Central Bank by John Petrides of Advisors Capital Management
Global markets responded favorably last week to comments from Mario Draghi, President of the European Central Bank, saying that he would do whatever it takes to save the euro (this reminded me of Fed Chairman Bernanke's comments in February 2009, when the Fed started its asset purchase program, and markets responded favorably soon after). Although the world awaits more details as to what Mr. Draghi's comments entail, equity markets rallied, and the yields on Spanish and Italian bonds came in.
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 Equity Implications for a Modest-Return World by Andrew Pyne of PIMCO
With equities likely to see modest returns over the secular horizon, we believe that capturing alpha will be critical for investors seeking to meet target portfolio returns. Equity valuations appear reasonable, but volatility is likely to remain elevated amid slowing global economic growth and macroeconomic risks. As macro events drive markets, the probability of fundamental mispricing increases, providing opportunity for active managers to add value.
2012-07-27 Challenging the Paradigms of Investing by Frank Holmes of U.S. Global Investors
Global investors constantly need to be watchful of individual biases, impaired thinking and emotional reactions that can have an adverse effect on a portfolio. One of our values at U.S. Global Investors is to always be curious to learn and improve, and the Investor Alert was borne from a belief that shareholders want to understand the very subtle nuances of biases and misconceptions. I have selected a few that I believe challenge the paradigms of investing.
2012-07-27 Bringing it Back Home by Philip Tasho of TAMRO Capital
Our financial system has been cleaned up and recapitalized; consumers have paid down debt and seem to be looking to buy houses again. A large part of the improvement in the domestic economy is centered on the housing revival. It is not rapid - again, its a slow recovery - but at least we seem to be moving forward.
2012-07-27 Buffalo Wild Wings Inc - Stock Research Analysis Is It Too Saucy? by FAST Graphs Team of FAST Graphs, Inc.
A quick glance at the historical earnings and price correlated FAST Graphs on Buffalo Wild Wings (BWLD) shows a picture of slight undervaluation. However, since analysts are expecting the earnings growth to somewhat slow down, when you look at the forecasting graph the stock appears modestly overvalued - its just within the value corridor of the five orange lines - based on future growth.
2012-07-27 Treading Water by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
2012-07-26 Days of Reckoning - The Potential Impact of the 2012 Elections on the Markets by Russ Koesterich of iShares Blog
Elections can, and often do, matter for markets, but not necessarily for the reasons investors tend to emphasize. For example, there is little historical evidence that markets perform better or worse depending on which party occupies the White House. There is also no concrete evidence that markets do better under divided government, a myth that seems to have taken hold thanks to the bull market of the 1990s.
2012-07-26 Wage Inflation in China: Implications for Inflation and Global Investing by Team of American Century Investments
The transformation of China's economy since the late-1970s when the country opened up to foreign investment and began to take steps to participate fully in the global economy has been nothing short of remarkable. The Asian giant has undergone a dramatic transformation from a comparatively small, underdeveloped, rural economy to a dynamic, urban, manufacturing-based economy that is now the second largest in the world.
2012-07-25 An Attractive Destination for Holidays, and IPOs by Mark Mobius of Franklin Templeton
Many Western investors would likely have little trouble naming this years biggest initial public offering in the U.S., but they probably dont know that two of the top three global IPOs so far this year have been in an island nation probably better known as a holiday destination than an investment one. That country is Malaysia, where an interesting story has been unfolding in the IPO market.
2012-07-25 US Utilities: Don't Overpay for Yield by Russ Koesterich of iShares Blog
As short-term interest rates remain at or close to zero, investors starved for income should be wary of overpaying for yield, particularly when it comes to US utilities. In the search for yield, Russ believes investors have pushed US utilities prices too high. His advice: Don't overpay for yield.
2012-07-25 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 If You Own Utility Stocks, Consider Selling The Overvalued Ones - Part 1 by Team of F.A.S.T. Graphs
Recently, I've come across several discussions by dividend growth investors as to whether the utility sector is overvalued or not today. Therefore, I decided to look into the sectors relative valuation as a whole to see what I could find. The only way to efficiently conduct this kind of research is to rely on a broad statistical array utilizing traditional valuation metrics. However, before I report my findings there are some caveats and clarifications that I feel are very appropriate.
2012-07-25 After the Downgrade: German Stocks or Bonds? by Russ Koesterich of iShares Blog
Amid rising uncertainty surrounding Europe, Moody's earlier this week lowered its outlook for Germany. Now, given the likelihood that Europe will continue to be a source of economic risk and investor angst, many investors are wondering whether they should stick with German assets. Should investors stick with German assets? Russ says the answer is yes on German stocks but no on the country's bonds.
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 Optimal Strategies for Secular Market Cycles by Michael Kitces (Article)
With alternative investments and active management strategies growing ever more popular, an advisor recently told me, 'It's just a fad and will end with heartache as all investment fads do. I've watched it play out over and over during my 30-year career.' But I am not persuaded. The secular market cycle today is different from the bear market 30 years ago, and not all market cycles favor the same investment strategies.
2012-07-24 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 The Upside of Low Interest Rates for Pension Plans: Issuing Debt to Fund Pension Liabilities by Jared Gross, Seth Ruthen of PIMCO
Issuing debt allows a sponsor to de-risk without waiting for market events or cash contributions to reach the level of funding that triggers a shift in asset allocation. There are a number of ways in which a sponsor may benefit from replacing inefficient debt (in the form of a pension deficit) with the tax and accounting advantages of marketable debt.
2012-07-24 Markets Likely to Continue Moving Unevenly by Bob Doll of BlackRock Investment Management
Notwithstanding a pullback on Friday, stocks managed to post gains last week despite a generally negative tone to the economic data. In some ways, the recent trend of relatively weak data has actually been beneficial for stocks in that it has been boosting hopes for additional policy stimulus around the world. For the week, the Dow Jones Industrial Average climbed 0.4% to 12,822, the S&P 500 Index advanced 0.4% to 1,362 and the Nasdaq Composite climbed 0.6% to 2,925.
2012-07-24 Investment Review & Outlook by Team of Cohen & Steers
The headlines in Europe were dominated by political uncertainty and prospects for a prolonged recession, amid signs of deteriorating economic conditions around the globe. The U.S. economy decelerated, as the positive effects of the mild winter wore off and both hiring and spending slowed. Treasury yields fell to all-time lows and oil prices plummeted roughly 30% from their February peak.
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.
2012-07-23 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 China's Economy - A Great Wall of Worry? by Milton Ezrati of Lord Abbett
The population of China bears seems to keep growing. This already large colony of doomsayers can point to any number of legitimate troubles facing China today, and they glibly do so, from slowing exports growth to an aging population, from real estate excesses to a moribund consumer sector. Bears think China is in for a "hard landing," but their pessimism is overdone. Here's why.
2012-07-23 Investing off the Beaten Track in an Uncertain Global Economy by Dan Ivascyn of PIMCO
The global economy remains in a multiyear period of global deleveraging; it will be an uncertain and, at times, volatile process. The substantial uncertainty and volatility affecting interrelationships across different markets are providing relative-value opportunities. Alternative strategies can be enticing, but the decision to use them needs to be fully informed and weighed against all the options.
2012-07-23 Spain's Molasses Jeopardizing Eurozone? by Axel Merk of Merk Funds
Spanish 10-year government bond yields are trading near 7.5% as Spain's central government is expected to bail out its regions and in return may ask for a bailout itself. Guarantees don't make a system safer, quite the opposite: everything is safe until the guarantor itself is deemed unsafe.
2012-07-23 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock prices recouped their early week losses, as earnings reports were not as bad as feared. Fridays session, and again today though, have seen investors reminded that Europe is a broken economic zone which cannot be repaired using
the current European Monetary Union framework.
2012-07-22 How 5 Seriously Overworked Buzzwords Can Come Between You and Your Client by Rob Isbitts of Sungarden Investment Research
In my experience, several investing buzzwords have done more harm than good for investors. While they are important concepts, they have been so commoditized by the financial planning industry that their true meaning has been misinterpreted. All the while, Wall Street firms have reaped the benefits by mass-customizing portfolio management. What started as a concerted effort to help investors has been reduced to a marketing pitch and investors keep falling for it.
2012-07-21 The Lion in the Grass by John Mauldin of Millennium Wave
Today we'll explore a few things we can see and then try to foresee a few things that are not so obvious. This is a condensation of a speech I gave earlier this afternoon in Singapore for OCBC Bank, called "The Lion in the Grass." The simple premise is that it is not the lions we can see that are the problem; but rather, in trying to avoid them, it is often the lions hidden in the grass that we stumble upon that become the unwelcome surprise.
2012-07-20 July 2012 Newsletter by Harold Evensky of Evensky & Katz
FRANK SINATRA FAN?
Mena chided me for starting my last NewsLetter on a negative note so I thought Id repent this time and start with something more positive. Even if youre not a Sinatra fan, this lovely and moving piece of music by Andre Rieu," a renowned Dutch violinist, conductor and composer, and his orchestra is a tribute to Frank Sinatra with My Way on his Stradivarius violin at Radio City Music Hall New York.
2012-07-20 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 No Armageddon, but Consequences by Michael Hasenstab of Franklin Templeton
In a time of severe stress and crisis, its easy to come to the conclusion that Armageddon is upon us. Those who believe the European Union is going to split up and Chinas growth will come to a screeching halt are probably building bunkers and sharpening their survival skills right about now. Hasenstab isnt in panic mode. In fact, hes optimistic the eurozone will survive, and that no, China wont move back into the feudal age.
2012-07-20 America's Competitive Spirit by Frank Holmes of U.S. Global Investors
We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.
2012-07-19 Quarterly Review and Outlook by Hoisington and Hunt of Hoisington Investment Management
Long-term Treasury bond yields are an excellent barometer of economic activity. If business conditions are better than normal and improving, exerting upward pressure on inflation, long-term interest rates will be high and rising. In contrary situations, long yields are likely to be low and falling.
2012-07-19 Equity Investment Outlook by Team of Osterweis Capital Management
In the politically correct atmosphere that permeates many of our college campuses, the euro-centric view of world history is regarded as hopelessly anachronistic, small-minded and possibly even racist. In the last year, they have become hopelessly euro-centric, rising or falling in concert with the news coming from the eurozone. A few years ago the markets focused on growth in emerging markets. Today, they focus on problems in the developed world.
2012-07-19 Europe Risk Preparedness by William De Leon of PIMCO
PIMCO's risk management process is dynamic and flexible, allowing us to evolve to understand, quantify and manage risks in broad scope and at the portfolio level. We are particularly focused on preparation for multiple potential scenarios, from a one-country redenomination to a full break-up of the eurozone into 17 separate currencies.
2012-07-19 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 Active vs. Passive Approaches in Fixed Income Portfolios More Than Meets the Eye by Michael Zinkand of Managers Investment Group
While investors have long debated the merits of active versus passive equity investing, considerably less time has been spent on arguing the benefits of actively managed fixed income portfolios. This paper outlines the shortcomings of passive fixed income benchmarks, the challenges of index replication, and the numerous benefits of active management.
2012-07-18 How to Look Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors
Among investors these days, a fellow commodity bull is about as rare as finding a positive story in the media, especially when you look at the results of metals and natural resources during the first half of 2012. Only four commodities on our periodic table pulled off a positive return. Wheat grew the most, rising 13 percent, followed by single-digit rises from corn, gold and copper.
2012-07-18 Readers Questions Answered by Mark Mobius of Franklin Templeton Investments
People who follow me know that one of my favorite things to do to really get to know a city is to walk or cycle the streets and interact with the locals. The great questions you readers submit are kind of like a digital version of that experience, providing me with invaluable perspectives and ideas from around the world. Thank you! Please read on for my answers to a few of your recent questions.
2012-07-18 Taking Short Cuts to Higher Returns with AQRs Capital Antti Ilmanen by Kendall Anderson of Anderson Griggs
On November 2-3 of 2011 the CFA Institute and CFA France sponsored the Fourth Annual European Investment Conference in Paris, France. Antti Ilmanen, Ph.D. was one of the presenters. The title of his Presentation was Understanding Expected Returns. This months letter is based on this presentation as it appeared in the June 2012 publication CFA Institute Conference Proceedings Quarterly.
2012-07-18 The LIBOR Mess: How Did It Happen - and What Lies Ahead? by Team of Knowledge @ Wharton
When regulators in the United Kingdom and United States announced a settlement with Barclays bank over its manipulation of LIBOR, the benchmark interest rate used around the world, there were plenty of reasons for jaws to drop. First and foremost was the whopping fine of $450 million, reflecting the seriousness of the case, along with analysts' predictions that LIBOR rates could influence interest rates on between $350 trillion and $800 trillion in loans and investments.
2012-07-17 How to Forecast Future Stock Returns: Part 3 by Chuck Carnevale of F.A.S.T. Graphs
A lot of what Part 1 & Part 2 attempted to convey is the logical and common sense nature of valuation in regards to sensible stock investing. Once you have determined that fair valuation, plus or minus, exists, then the prudent investor should look to future earnings growth as the likely source of future long-term returns. By applying the same principles that we presented and discussed in Parts 1 & 2, we can calculate within a reasonable range of predictability what our future returns might be.
2012-07-17 Should You Wait to Buy a SPIA? by Joe Tomlinson (Article)
Advisors may be reluctant to recommend single-premium immediate annuities (SPIAs) with interest rates currently so low. It may be better to wait for rates to rise, which will bring more attractive SPIA pricing. But that leaves the question about how long we will wait for better pricing. In this article, I'll show how the decision to delay can turn out well or poorly, depending on the timing and size of rate increases.
2012-07-17 Can you Beat SPIAs with Long-Term Bonds? by Michael Edesess (Article)
While single-premium income annuities (SPIAs) guarantee a specific income as long as the purchaser lives, their rates of return generally compare unfavorably with long-term bonds over normal life expectancies. This makes SPIAs look like the inferior investment, notwithstanding their value as longevity insurance. But considering the low level of interest rates and the potential for future volatility, SPIAs are still a good choice for many retirees.
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 Letters to the Editor by Various (Article)
Two readers respond to Bob Veres' article, Why Are Advisory Fees Lower Than They Have To Be?, which appeared last week, and a reader responds to Larry Siegel's article, Benchmarking Your Retirement Portfolio With a Risk-Free Strategy, which also appeared last week.
2012-07-17 Gundlach – Avoid Riskier Assets by Robert Huebscher (Article)
Since early this year, Jeffrey Gundlach has warned investors to avoid exposure to riskier assets – among them, equities, non-dollar-denominated securities and sovereign debt. Still reluctant to move to a more aggressive position, Gundlach said on Thursday that 'substantial opportunities await,' but they may be as much as a year away.
2012-07-17 ProVise Bullets by Ray Ferrara of ProVise Management Group
President Obamas Affordable Care Act was deemed constitutional by the Supreme Court. This means that unless something happens between now and the end of the year, on January 1st, taxes will go up for certain taxpayers: A 3.8% Medicare contribution tax for single taxpayers making more than $200,000, and married couples filing jointly making more than $250,000. Interest, dividends, rents, and capital gains on these groups will see an additional 0.9% Medicare tax applied to income.
2012-07-17 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before. If this is indeed another rerun, we should expect central bank and other policy responses to help limit the fallout. As we see it, hesitancy and solvency traps are the main obstacles to recovery.
2012-07-17 Global Slowdown: Preparing for a Recession by Russ Koesterich of iShares Blog
While Russ believes that the most likely scenario for the global economy in 2012 is continued slow growth, he explains what's behind the recent global slowdown and what investors may want to consider doing if it grows worse.
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.
2012-07-17 U.S. Equities - So Far So Volatile by Robert McConnaughey of Columbia Management
The premise of our 2012 equity market outlook was very modest economic growth in an overall environment fraught with risks, predominantly brought on by the dangerously high debt loads facing the developed world. Within that environment, we have advocated a two-pronged focus.
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 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?
2012-07-14 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 Mid-year Market Review by Rob Isbitts of Sungarden Investment Research
After one of the most trying years for investors in 2011, the first half of 2012 had a similar feel. The split-personality of optimism about a slow but visible recovery in the U.S. and weekly do-or-die drama in Europe produced the type of half-year that, frankly, we expected. Specificially, a continued pattern of news-driven, unsustainable moves in both directions landed much of the U.S. stock market in a tight price range.
2012-07-13 Worried about Higher Taxes? Take Action by Frank Holmes of U.S. Global Investors
About 1.25 million Americans would pay more in taxes next year if President Barack Obamas latest plan is approved. The White House wants to allow taxes to rise for households making more than $250,000 by boosting the top marginal tax rates to 36 and 39.6 percent (currently, its 33 and 35 percent). In an environment where government policy favors higher taxes, investments that lower a tax bill can look attractive.
2012-07-13 Bond Investing - Its the Short Side, Stupid by Gary D. Halbert of Halbert Wealth Management
As you are probably aware, I am an avowed political junkie but this article isnt about politics. Instead, I want to borrow a phrase from the 1992 presidential election as an analogy to highlight what I believe bond investors should be concentrating on right now - the short side.
2012-07-13 End Game: What Happens to Residential Mortgage-Backed Securities if There's a Eurozone Exit by Rod Dubitsky of PIMCO
An exit would substantially affect euro-denominated RMBS mortgage collateral. Currency redenomination and devaluation would likely wipe out the entire available credit enhancement for most deals. Losses of redenominated loans could overwhelm credit support, even for well-performing deals.
2012-07-13 Looking Past Negativity to See Opportunity by Frank Holmes of U.S. Global Investors
Tremendous population growth, changes in government policies, development of new technologies, urbanization trends work the same way. Its what Jeremy Grantham called the great paradigm shift and they have equally dramatic effects on how we invest in commodities, change opportunities and adjust for risk. Smart investors look past the rampant negativity in the media to see these patterns and anomalies to determine where the opportunities and threats lie.
2012-07-12 Pretzel Logic by James Moore of PIMCO
The primary pension-related change in the legislation is to give temporary funding relief by altering the discount rate used for liability valuation and represents the third such change in the past decade. The estimated revenue impact from lower minimum required contributions seems optimistic to us, and misses some fairly obvious costs. Congress essentially extended a welfare transfer from the Haves to the Have Nots.
2012-07-12 4 Reasons to Like China by Russ Koesterich of iShares Blog
The Chinese central bank last week announced its second surprise rate cut within a month. The action from the central bank was an acknowledgement that the worlds second largest economy is slowing. Despite Chinas economic slowdown, Russ continues to hold an overweight view of Chinese equities for four reasons.
2012-07-12 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 China Fueling Auto Sales by Mark Mobius of Franklin Templeton
The picture postcard image many western travelers may have of Chinas city streets is one besieged with bicycles and empty of cars, but China is no longer pedaling its way into the futureits firmly in the drivers seat as autos rapidly replace human-powered transit. Motor vehicle sales have been booming in China, a reflection of the growing middle class. In 2009, car sales in China exceeded those in the United States, and in 2011, China led world auto production at 18.4 million units.
2012-07-11 Gold to Outshine Dollar? by Axel Merk of Merk Funds
As the price of gold has gone up fivefold over the past 10 years, why would one buy it at todays prices? For the same reason an investor would buy any other asset: if one believed it would be a good investment now, that is if one believed it may appreciate in value and add portfolio diversification benefits. A key reason to hold gold today might be to prepare for the crisis tomorrow.
2012-07-10 Why Are Advisory Fees Lower Than They Have To Be? by Bob Veres (Article)
How much should you charge for your services? Is there any way to objectively calculate a fair price? Doctors, lawyers and accountants all charge relatively similar prices for their services. Why does the financial planning profession have fees that are all over the map?
2012-07-10 Benchmarking Your Retirement Portfolio With a Risk-Free Strategy by Laurence B. Siegel (Article)
Making the savings from 35 or 40 years of work pay for a retirement of the same length is a real challenge. At a zero real rate of return, you would have to save half of your income to enjoy a retirement that long without taking a cut in your living standard. There is, of course, a better way - judicious use of TIPS and annuities. A riskless strategy using those asset classes can safeguard one's retirement assets and can serve as a benchmark against which riskier portfolios can be measured.
2012-07-10 Swimming with Black Swans: The Volatile Decade Ahead by Russ Koesterich of iShares Blog
So long smooth sailing. Russ Koesterich explains why he expects the rest of this decade to be characterized by more market volatility and why seemingly out-of-the-ordinary Black Swan events could become more frequent.
2012-07-10 Is Higher Inflation on the Horizon? by Orhan Imer of Columbia Management
For nearly two decades inflation in the U.S. has been fairly contained except for a few periods of moderate acceleration around peak levels of economic activity. More recently, headline inflation as measured by the year-over-year change in the CPI-U (Consumer Price Index for Urban Consumers) declined from 3.9% in September 2011 to 1.7% in May 2012 driven primarily by the slowdown in the U.S. economy and the sharp drop in energy and commodity prices.
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 Investing and the Euro Crisis by David Kelly of J.P. Morgan Funds
In the summer of 2012, the Euro Zone crisis continues to dominate financial markets as it has done over each of the past two summers. While the solution to the problem remains relatively straightforward, it requires a level of economic understanding, political courage and communication among policymakers that has been absent thus far. Without this, the crisis is likely to lurch forward with only a very slow and painful resolution.
2012-07-09 The 4 Biggest Investment Performance Myths - and How They Can Torpedo Advisor-Client Trust by Robert Isbitts of Sungarden Investment Research
In 26 years in the investment industry, I have seen investor and advisor behavior from many different angles: as an advisor, portfolio manager, strategist, author and proprietor. Two things have been quite consistent during that quarter-century: 1) That clients and advisors both care deeply about investment performance and 2) that investment performance is rarely evaluated with proper perspective.
2012-07-09 Economic Insights: U.S. Exports: A Lower Gear, but Still Cruising by Milton Ezrati of Lord Abbett
The growth of exports at times has added as much as two percentage points to the overall pace of the economys expansion and is a major reason why American manufacturing has staged a comeback in recent years - a renaissance some have called it. But of late, with the dollar rising against both the euro and the yen, and with growth overseas slowing or, in Europes case, falling, questions have arisen about the sustainability of U.S. export strength.
2012-07-09 Level Best by Richard Clarida of PIMCO
Craving instant information gratification, many of us spend much time trying to forecast and analyze short-term changes in economic data. Looking at the trends in the levels of economic data over a period of five to seven years provides refreshing insight and perspective on the economy that are often distorted by the daily data noise. Specifically, trends in the Consumer Price Index, the U.S. Dollar Index and real GDP reveal important insights about the economy, markets and policy.
2012-07-09 2Q Financial Markets Review and Outlook by Team of Managers Investment Group
Debt and growth issues dominated the headlines again causing a muted version of the risk off trade to return to prominence. Greece was the main culprit due to elevated debt levels, rising yields, social unrest and two elections. To the delight of many, disaster appears to have been avoided as the pro-austerity party won. Greece has a long road ahead, but this was a positive step forward to begin efforts to decrease debt levels and spur growth.
2012-07-09 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.
2012-07-07 Into the Matrix by John Mauldin of Millennium Wave Advisors
What does the current environment of earnings and valuations tell us about the prospects for the US stock markets in general over the next 3-5-7-10 years? This week we have part two of "Bull's Eye Investing Ten Years Later," which we started last week. These two letters have been co-authored with Ed Easterling of Crestmont Research. We take a look at research we did almost ten years ago as part of my book Bull's Eye Investing, updating the data and asking,"Are we there yet? When will we get to the end of the secular bear market?"
2012-07-06 Market Perspectives Q2 2012: A Long Road Ahead by Richard Michaud of New Frontier Advisors
The most important economic news in the quarter occurred in the last two business days. Investors were losing patience with seemingly endless and ineffectual eurozone summitry. But the resolutions by the four major eurozone members at the end of the quarter were different. The agreements allow recapitalization of Spanish banks and purchase of Italian sovereign bonds. The proposals appear to effectively address short- and long-term problems in the eurozone economies.
2012-07-05 Looking for Bubbles by Niels Jensen, Nick Rees, Tricia Ward, Thomas Wittenborg of Absolute Return Partners
This month's Absolute Return Letter picks up on the question we left hanging in the air back in May - is Asia a potential re-run of Europe? Although policy rates appear to be dangerously low, and thus encouraging further borrowing, Asia has come a long way since 1997 and there is no immediate risk of a financial meltdown. Australian property prices and commodity prices - in particular crude oil prices - are more likely 'credit event' candidates in our opinion.
2012-07-05 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Investors focused on emerging markets may be well positioned to benefit from a "barbell" strategy, favoring sukuk and Southeast Asian equities. While in Afghanistan, were more inclined to tilt toward optimism than despair in the wake of military right-sizing. Both India and some Middle East countries are set to be active there. We offer other comments on high dividend yields in GCC stock markets and emerging trends in Ghanas timber industry.
2012-07-05 How to Know What Rate of Return to Expect from your Stocks: Part 2 by Chuck Carnevale of F.A.S.T. Graphs
In this Part 2, we will focus on how to utilize current valuation in conjunction with earnings growth rates in order to come up with a reasonable expectation of the future total returns a stock can be expected to provide. The point is that neither can be looked at in isolation. In other words, the price you pay to buy the growth that the company ultimately delivers, will determine not only how much money you make (the percentage return on investment), but how much risk you took to make it.
2012-07-05 Math, History and Psychology - Part 2 by Bill Smead of Smead Capital Management
Last week we wrote about the math of common stock investing and the effectiveness of mathematical discipline to portfolio management. This week we will focus on history and the importance of that academic discipline to us as common stock portfolio managers here at Smead Capital Management (SCM).
2012-07-05 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 Bond Funds: You Get What You Don't Pay For by Michael Edesess (Article)
Innumerable studies have shown that it's well-nigh impossible to beat the averages consistently investing in equity funds. But what about bonds? Bonds, after all, have more structure - perhaps there are ways an expert fund manager could exploit that structure and gain an edge over other investors. Is it possible to predict how well a bond fund will perform relative to other funds?
2012-07-03 The Value of Planning by Bob Veres (Article)
How much do you charge for your services? When you look hard at the value you provide, the answer may be: 'not enough.'
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 10 Predictions for 2012: Mid-Year Update by Bob Doll of BlackRock Investment Management
At the midway point of 2012, it seems an opportune time to review the predictions we made at the beginning of the year. Although much could change, at this point it appears that the majority of our predictions are on track.
2012-07-03 European Summit - Something for Bulls and Bears by Fred Copper of Columbia Management
The European summit outcome was fascinating; it had something for everyone, both bulls and bears. The net result was a positive surprise with at least one major concession by Germany. In concurrent news, three of the four semifinalists in the Euro 2012 soccer tournament were PIGS (Portugal, Italy, Greece and Spain) and the other was Germany. Spain won the competition on Sunday, symbolic of the PIGS power within Europe it isnt all about Germany.
2012-07-03 2Q 2012: Why I Still Believe in the Long-Term Viability of Stocks by Chuck Royce of The Royce Funds
Royce's President and Co-CIO talks about recent volatility, correlation, and why he still has confidence in stocks...How long do you think the market will be caught in this volatile, range-bound pattern? I think it's impossible to say with any certainty, though obviously we'd all like it to be over soon. There's vast turmoil going on in Europe, which is having an effect on the equity markets, and that is a large part of this range-bound phenomenon that has characterized the markets.
2012-07-03 What's In A Name? by Bill Gross of PIMCO
Not only banks and insurance companies but sovereign nations as well cannot all be counted on to guarantee a return of principal, let alone a return on investment. An authentic debt crisis which the world is now experiencing can only be ultimately cured in two ways: 1) default on it, or 2) print more money in order to inflate it away. There are very few clean dirty shirts in this world. Timing in investment markets is critical and at the moment the U.S. is considered to be the cleanest.
2012-07-03 The Next Frontier by Mark Mobius of Franklin Templeton
In a recent interview, I was asked whether I was becoming a frontiersman in my quest for the next big investment opportunity. Its true that many of my recent investment adventures have taken place in frontier markets the smaller, less-developed cousins of the emerging markets.
2012-07-03 Of Mice and Men by Michael Shamosh of Corby Asset Management
We have all spent our share of time at amusement parks. We always marvel at the degree of engineering required to subject the human body to stresses not present in our ordinary day. Those screams mean something. Investing is often described as similar to riding a roller coaster, where the rapid ups and downs can subject ones emotional framework to feelings of exhilaration, fear, and pain. We liken it to a ride called the Wild Mouse, one you might have spent some time on in your youth.
2012-07-03 Let's Twist Again by Daniel Kurland of Corby Asset Management
Ben Bernanke must be nostalgic for his childhood. On June 19th in the summer of 1961, when Chairman Bernanke was only 8 years old, Chubby Checker released his smash hit, Lets Twist Again. Chairman Bernanke, citing decreased inflationary concerns and heightened employment weakness, announced that Operation Twist, which had been set to expire at the end of June, would be extended until the end of the year.
2012-07-02 Nightmare on Wall Street: This Secular Bear Has Only Just Begun by Ed Easterling of Crestmont Research
Secular bull markets are great parties. Investors arrive from secular bears really wanting to take the edge off. As the bull proceeds, above-average returns become intoxicating. By the time it is over, the past decade or two has delivered bountiful returns. In contrast, secular bears seem like hangovers. They are awakenings that strip away the intoxication, leaving a sobering need for an understanding of what has happened.
2012-07-02 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks were mixed last week as the news from Europe remains difficult, while here at home the Fed told us things were not going well but decided to do very little about it (maybe because they cannot).
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.
2012-07-02 Economic Insights: U.S. Exports - A Lower Gear, but Still Cruising by Milton Ezrati of Lord Abbett
Amid a rising dollar and sluggish global economies, exports should continue to bolster U.S. growth, although the pace will slow. Exports have remained one of the few consistent bright spots in this otherwise subpar economic recovery. The growth of exports at times has added as much as two percentage points to the overall pace of the economys expansion and is a major reason why American manufacturing has staged a comeback in recent yearsa renaissance some have called it.
2012-07-02 Has Housing Stabilized? by Ryan Davis of Fortigent
In the past two weeks, several important indicators have illustrated a market that, while not quite in a state of recovery, appears to be stabilizing. This sentiment was echoed in the latest Beige Book released by the Federal Reserve, which reported, several Districts noted consistent indications of recovery in the single-family housing market, although the recovery was characterized as fragile.
2012-06-30 Bull's Eye Investing (Almost) Ten Years Later by John Mauldin of Millennium Wave Advisors
The current valuation of the stock market is relatively high, but it is not overvalued, considering today's conditions. Low inflation-rate conditions should be accompanied by relatively high P/Es. But if deflation or high inflation (or both) are likely upcoming, the market is very expensive. On the other hand, if the inflation rate happens to remain near price stability, then this secular bear could remain active a while longer but how likely is that?
2012-06-29 A Strategy to Navigate the Housing Cycle by John Burns of John Burns Real Estate
The memories of 2007 through 2011 are clouding too many people's vision. There are plenty of legacy problems from the housing boom that have yet to clear, and plenty of risk to the downside, but the demand, supply and affordability measures are in place to help us put the housing downturn behind us and move forward. We are leaving stage one of the recovery and moving into stage two. Don't miss the ride.
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 How to Know What Rate of Return to Expect from your Stocks: Part 1 by Team of F.A.S.T. Graphs
We believe there are two critical attributes that the prudent investor should consider before investing in a company (stock). Furthermore, these same two attributes can be used to calculate a reasonable expectation of the future return the stock is capable of generating on their behalf. These two attributes are valuation and the rate of change of earnings growth.
2012-06-29 U.S. Inflation Update: More Long-Term Threat than Near-Term by Team of American Century Investments
During the week of June 11-15, the U.S. governments Bureau of Labor Statistics (BLS) reported declines in May prices received by U.S. producers for their goods, as well as lower May prices paid by U.S. consumers. These May declines in the BLSs Producer Price Index (PPI) and Consumer Price Index (CPI) were largely the result of declining energy prices, particularly those for gasoline.
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 The Coming Oil Supply Gap by Russ Koesterich of iShares Blog
Prices at the gas pump are falling and slow global growth is expected to keep oil prices down in the near term. But Russ has a handy new chart showing why he expects crude prices to rebound in the longer term: global oil demand is likely to greatly outstrip supply by 2030.
2012-06-28 Focusing on Capital Preservation: Stable Value and Possible Alternatives by Brett Gorman, Henry Kao, Stacy Schaus of PIMCO
Stable value, which combines an actively managed fixed income portfolio with a contract to help assure principal and income, offers capital preservation potential and historically higher risk-adjusted returns than money market and low duration strategies.
2012-06-28 The Counterrevolution in Egypt by Bill OGrady of Confluence Investment Management
In this report we will begin with a geopolitical history of Egypt, concentrating on the unique geography that has historically shaped its governance. We will discuss the role of the military in Egyptian political life, focusing on its self-perception and its goals. We will also detail the role of the MB as an organized political group in the country. Following this analysis, we will offer our forecast for Egypt and its potential effects on the region.
2012-06-27 The Rocky Road Ahead This Year by Russ Koesterich of iShares Blog
Back in February Russ warned that an eerie quiet had settled over the market and investors should prepare for an increase in volatility. Well, four months later that eerie quiet has lifted, and Russ outlines three reasons he expects the second half of this year to be much more volatile than the first.
2012-06-27 Reconnaissance: Strategy Notes by Douglas Clark Johnson of Codexa Capital
Without external support for Egypt, there are few choices for reconfiguring national output. The country is an oil importer; its agricultural industry fragmented and inefficient; private wealth is suspicious. We also look at the growth implications of the fiasco at the G-20 meeting. In Pakistan, foreign names could rally behind exceptional investment-return potential once an election is called and a new government is in place.
2012-06-27 United States of Europe has Arrived! by Axel Merk of Merk Funds
A fiscal union, a banking union, a United States of Europe has arrived! Dont believe it? Just like many newborns, this one has its shares of wrinkles, but what you see is what you get. We discuss a tough love approach to move forward in Europe, as well as implications for currencies.
2012-06-27 Long-Term Investing in a Short-Term World by Mark Mobius of Franklin Templeton
In this electronic age, news and rumors can spread like wildfire across the globe, heightening market volatility as markets react in real time. It can be difficult for investors to see the forest for the trees as they try to dodge the downdrafts immediately in front of them, sometimes making hasty missteps.
2012-06-26 A Top Analyst: North America Heading to Energy Independence by Robert Huebscher (Article)
Ed Morse, a managing director of Citigroup Global Markets, said last week that by the end of this decade the US and Canada will have a surplus of oil, leaving it with 'no room for imports.' But the longer-term picture is far less certain, as extraction moves from conventional wells to newer sources, such as deepwater fields and shale-based oil.
2012-06-26 Ensuring That Clients Feel Valued by Dan Richards (Article)
Ask advisors whether they value their clients - especially top clients - and care about their future success, and you'll get a funny look wondering what you've been smoking. The answer is so obvious that the question isn't worth asking. But ask clients the corresponding question and the response is often quite different.
2012-06-26 Where in the World is Risk Today by Russ Koesterich of iShares Blog
With the sovereign debt crisis centered in the developed world, the traditional notion that all developed markets are less risky for investors than all emerging markets doesnt hold up anymore. Today, while developed markets certainly top the list of the least risky countries and vice versa for emerging markets, some developed markets are now just as risky as emerging markets. At the same time, some emerging countries are now just as safe as their developed market counterparts.
2012-06-26 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 Perspective; or where you stand is a function of where you sit! by Jeffrey Saut of Raymond James Equity Research
Perspective is the capacity to view things in their true relations or relative importance. And last Thursday the stock markets perspective changed abruptly. The day started out well enough with an opening 20-point pop to the upside, but from there the Dow Dive commenced. The causa proxima for the dive was more softening economic reports from China and Germany followed by a lame Philly Fed report, which saw that index accelerate its swoon from Mays -5.8 reading to -16.6.
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 Emerging Markets Converge With the Developed World by Michael Gomez, Lupin Rahman of PIMCO
We expect to see growth moderating in emerging economies over the secular horizon, but still outpace growth rates in Europe and the U.S. Emerging economies entered this period of global uncertainty with relatively clean balance sheets, reasonably high degrees of policy flexibility, and substantial dry powder in the form of international currency reserves. Emerging markets are likely to be affected by the considerable growth headwinds and uncertainty emanating from the developed world.
2012-06-25 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 Markets Vacillate Between Weaker Data and Hopes for Policy by Bob Doll of BlackRock Investment Management
Last week was a modestly negative one for stocks as investors continued to focus on a trend of weakening economic data. Additionally, many were disappointed by what was perceived to be a less-than-robust response from the Federal Reserve following its policy meeting last week.
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 Dont Expect A Double Dip This Year by Russ Koesterich of iShares Blog
Renewed fears of a US double dip are making the rounds. While Russ gives four reasons why the United States is not likely to tip back into recession this year, he has a word of caution about a risk looming over 2013.
2012-06-21 H.B. Fuller Co - Can you Stick with Them? by Team of F.A.S.T. Graphs
Founded in 1887, H.B. Fuller Co (FUL) is a world leader in adhesives and specialty chemicals. H.B. Fuller has generated an above-average growth rate, although results have been somewhat cyclical since 1998. The current consensus estimate shows that leading analysts believe earnings are expected to accelerate over the next five years. Prospective shareholders may want to review this company.
2012-06-21 What Makes Investors Buy High, Sell Low? by Team of American Century Investments
Conventional investment wisdom says: Buy when the price is low, wait for the investment to increase in value, and sell it at the top to realize gains. It seems like a straightforward strategy. So why dont investors follow it?
2012-06-21 50 Potential Investment Opportunities to Participate in the New Golden Age: Part Three by Chuck Carnevale of F.A.S.T. Graphs
In parts one and two of this three-part series I presented a case that focused on the long-term potential for a bright future of economic strength and growth. Moreover, I pointed out that I felt that the best of what our economic future holds goes mostly ignored, in favor of a focus on our problems. Therefore, I concluded that there exists a general pessimistic view of our future that I believe is wrong.
2012-06-20 Not-So-Indian Summer: 5 Reasons to Underweight India by Russ Koesterich of iShares Blog
Russ elaborates on his underweight view of India with a BlackRock Investment Institute list of five things wrong with the Indian economy, and shares how investors can be positioning portfolios as a result.
2012-06-20 Is AutoZone A Little Out Of The Zone? by Team of F.A.S.T. Graphs
A good growth company is always a nice addition to a portfolio, but you have to watch to make sure you are not paying too much. The old saying is: You make your money on the buy side. Looking at AutoZone (AZO) at a glance, we see that it normally trades (Normal Historical PE the blue line) at or below its historical operating earnings growth rate (the orange line). Therefore, it appears that AutoZone may be trading at a slight premium to its historical valuation.
2012-06-20 Growth Versus Austerity: A U.S. Dollar Perspective by Axel Merk of Merk Funds
Austerity versus Growth? Which economic model is sustainable? If it werent for those pesky bond vigilantes, it may be only politics. Lets not get too excited that either path will work. Lets look at the implications for investors with a focus on the U.S. dollar.
2012-06-20 The World Needs Another Greek Hero by Joseph Giulitto of Trust Company of America
Hesiod wrote a few years ago- A spirit of competition, of good conflict that tends to reduce the problems of scarcity. (Hesiod was in favor of the rule of law and the dispensation of justice to provide stability and order within society. He spoke out against corrupt methods of wealth acquisition and denounced robbery.700BC) A very telling tale with eerie significance to current events.
2012-06-19 Retirement Floors and Implications for Evensky's Cash-Reserve Strategy by Wade Pfau (Article)
Does sensible retirement planning call for funding basic needs with less volatile assets and investing more aggressively for aspirational goals? Or, with client goals clearly defined and prioritized, does sensible planning call for a total returns approach? Multiple schools of thought have emerged, but there is not yet any consensus about what constitutes a proper retirement income floor. These lingering unresolved disagreements reinforce the benefits of Harold Evensky’s and Deena Katz’ popular strategy.
2012-06-19 Will Policy Response Follow Policy Rumor? by Bob Doll of BlackRock Investment Management
The past two weeks have been better for stocks, with the major indices up in consecutive weeks for the first time in more than a month. Europe remains stuck in a cruel cycle of recession, a banking system in need of life support, frozen policymakers, too much debt and a downward confidence spiral. In the United States, economic growth slowed this spring (likely due to poor weather and the earlier spike in gasoline prices), but remains intact.
2012-06-19 The R Word in Emerging Markets by Mark Mobius of Franklin Templeton
No matter what decision we face in our lives, there is always some type of risk involved. But when you take a few risks, the experience can often be quite rewarding. When it comes to investing, some risks are present no matter what market youre in. Its also true that there are risks that are especially important to consider when it comes to the emerging markets.
2012-06-19 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 After the Greek Vote, Now What? by Russ Koesterich of iShares Blog
The relief rally Monday following Sundays Greek election was short lived. To be sure, the outcome of Sundays election is near-term good news for investors. A government led by the pro-bailout New Democracy is likely to follow more of the austerity program and to try, at least for now, to keep Greece in the euro. That said, there are two main reasons why markets arent continuing to celebrate the Greek vote.
2012-06-19 A Busy Weekend in Europe by Fred Copper of Columbia Management
The headline story is the election in Greece. The initial market reaction to the vote result was positive, with the Euro and Asian markets up strongly. Apparently, the market is realizing that though a disorderly Greek exit scenario has been taken off the table, at least temporarily, by the majority given to pro-bailout parties, we are really just back to where we were before, between the rock of an economy in free-fall and the hard place of an unsupportable and expanding mountain of debt.
2012-06-19 Down and Out in Wenzhou by Bill Smead of Smead Capital Management
Much like in the US in 2006, the Chinese government officials and the worldwide media need to believe that what is going on in Wenzhou is not the first domino in a series of dominos which fall over the next two years. The Chinese economy and its miracle of the last 30 years were originally driven by the competitive advantage of cheap labor.
2012-06-19 Is China Running Out of Steam? by Matthew Rubin, Ing-Chea Ang, Justin Gaines of Neuberger Berman
The Chinese growth story is especially impressive. At a time when many economies have struggled, China has continued to expand rapidly, helped by its dominant position in manufacturing, growing middle class and, after the 2008 credit crisis, its successful injections of capital and stimulus to ward off recession. Nevertheless, recent data have suggested that the Chinese expansion is now slowing more quickly than most investors expected.
2012-06-19 U.S. High Yield: A Closer Look at Junk Spreads by Hozef Arif of PIMCO
Investors are cautious about high yield bonds which have become more volatile following strong performance and inflows earlier this year. We believe the cyclical bottom in default rates is behind us, and based on a tightening in lending standards compared to last year, we expect a gradual increase toward the mean in default rates and credit losses in 2012.
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 Shocking Fed Survey on Consumer Finances by Gary D. Halbert of Halbert Wealth Management
Today we focus on a new Fed study which found that Americans net worth plunged almost 39% in the period from 2007 to 2010. That period included the so-called Great Recession, a financial crisis and a severe bear market in stocks. There are lots of interesting statistics to look at in this new Fed study.
2012-06-18 Mood by Jeffrey Saut of Raymond James Equity Research
M-O-O-D: That is the important word right here. And, what a difference a few weeks makes for last week the markets seemed to switch from the glass being half-empty to half-full leaving Mr. Market in a more forgiving mood. Importantly, market mood frequently sets the near-term trend. If the mood is positive, all things are possible; if it is negative, little is.
2012-06-18 Health Care - Will the Supremes Keep Us Hangin On? by Milton Ezrati of Lord Abbett
As of this writing, the Supreme Court has yet to announce its decision on Obamacare. It has not even announced when it will reveal its decision. Still, if much about the Courts conclusion remains a mystery, two things about it are fairly clear: 1) the Court will almost surely hand down something complex, and 2) whatever it decides, uncertainty will continue to plague business and investment decision making.
2012-06-18 Cohen & Steers Preferred Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the preferred securities market as of May 31, 2012. For the month, the BofA Merrill Lynch Fixed Rate Preferred Index had a total return of 0.3% and the BofA Merrill Lynch Capital Securities Index returned 0.7%. Year to date, the indexes had total returns of +6.9% and +7.7%, respectively.
2012-06-18 Japanese Equity The Impact of Global Instability by Team of Nomura Asset Management
Mainly owing to fears of a potential Euro break up, the decline in the global stock markets in April 2012 continued through May as well. On June 4th, the Japanese equity market (TOPIX) sank to its lowest level in 29 years, declining even further below the bottom set in the aftermath of the Lehman shock in Japanese yen (JPY) terms. However, in U.S. dollar (USD) terms, the level of the Japan equity market is still above its post Lehman low recorded in March 2009.
2012-06-18 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock markets continued their cautious advance last week as hopes for a victory by the New Democracy party in Greece strengthened throughout the week. At the same time the cross currents of elections in France and Egypt kept the trading rather quiet.
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 Its Not Just Dinah In The Kitchen Anymore At Williams-Sonoma! by Team of F.A.S.T. Graphs
Founded in 1956, Williams-Sonoma (WSM) is not just a quality kitchen store, but a specialty leading home furnishing retail store. Williams-Sonoma has historically grown earnings at a compounded rate of 12.9% since 1998, resulting in a 3.4 billion dollar market cap. Williams-Sonomas earnings per share have risen from $0.51 per share in 1998, with a drop in 2008 to $0.22 per share, to a current forecast earnings per share of approximately $2.49 for fiscal 2012. The current dividend yield is 2.6% and the dividend has increased each year for the past 7 years.
2012-06-15 Is the World on Sale? by Peter Langerman, Christian Correa of Franklin Templeton
Like a swift kick to the gut, the eurozone crisis knocked the wind out of the stock market in May. While most investors duck and run, others see market stumbles as opportunities to pick up potential long-term values. For these contrarians, they see the world on sale. Peter Langerman, Chairman, President and CEO of Mutual Series and co-manager of Mutual Shares and Mutual Global Discovery funds, and Christian Correa, Director of Research for Mutual Series and co-manager of Mutual Beacon and Mutual Recovery funds, are in the latter group.
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 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011. If this is indeed another rerun, we should expect central bank and other official policy responses to help limit the fallout. As we see it, hesitancy and solvency trapsnot a liquidity trapare the main obstacles to a lasting economic recovery.
2012-06-14 The Pitfalls of Protectionism by Mark Mobius of Franklin Templeton
Free, fair and open trade is essential to fostering a thriving global economy. In the past, when economic conditions have deteriorated, weve seen governments in developed and emerging economies alike engage in protectionist policies. With growth in many countries slowing this year (tied in part to the crisis in the Eurozone), Im concerned that protectionism could be on rise. In the end, I believe these policies dont really protect anyone.
2012-06-14 The US Economy Sitting on the Threshold of a New Golden Age: Part Two by Chuck Carnevale of F.A.S.T. Graphs
In part one of this multipart series on the US economy I offered the following basic opinion: The majority of the positive aspects underpinning the US economy are being mostly ignored by mainstream media in favor of the smaller, but more titillating, negative aspects. Consequently, I believe that many Americans, and since this is an investing blog, many investors, are holding a much more negative view of the strength of the American economy than is warranted. I offer massive outflows from equity funds into Treasury bonds as evidence supporting my thesis.
2012-06-14 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 Europe - Will the Greek Election Shift German Direction? by Milton Ezrati of Lord Abbett
As the Europeans meet and speak and summit, it becomes ever clearer just how intense and complex matters have become. Greece will determine, later this month, whether it will stay in the eurozone or perhaps even the European Union (EU). In or out, Europe and Greece will have to cope with the aftermath of the decision. Even as Greek questions remain open, an even broader drama has grown around recent proposals for the union to issue eurozone bonds that would draw on the generalized credit of all members in common.
2012-06-13 Can Nu Skin Keep The Wrinkles Out Of Earnings? by Team of F.A.S.T. Graphs
Founded in 1984, Nu Skin Enterprises (NUS) is a distributor in clean personal care products. Nu Skin has historically grown earnings at a compounded rate of 6.1% since 1998, resulting in a 2.71 billion dollar market cap. The companys earnings per share have risen from $1.49 per share in 1998, to current forecast earnings per share of approximately $3.06 for fiscal 2012. The company started paying a dividend about 11 years ago and has raised their dividend every year.
2012-06-13 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 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.
2012-06-13 The Tip of the Iceberg For Dividend Stocks by Team of Columbia Management
Post-crisis equity investors seek to lower portfolio volatility. Dividend stocks have provided higher returns with less risk compared with non-dividend payers. Baby boomers are retiring now with much smaller nest eggs than they had anticipated. They need reliable sources of income and growth. Cash-rich companies are in a position to pay and potentially grow dividends, while dividend payout ratios are historically low. Active managers leverage in-depth research to uncover promising opportunities among companies likely to initiate or raise dividends.
2012-06-12 Investing for Retirement: SPIAs, TIPS, Stocks and the 4% Rule by Joe Tomlinson (Article)
Relying only on stocks and bonds to fund a decumulation strategy may no longer be feasible, given today's low interest rate environment and the prospect of muted returns from the equities market. Investors should instead consider using single-premium immediate annuities (SPIAs) to fund at least a portion of retirement needs.
2012-06-12 Why Oil Prices Can Move Higher by Russ Koesterich of iShares Blog
With oil prices down roughly 25% from their 2012 peak, many investors are asking about the future direction of crude.
In my opinion, while fears of a hard landing in China and overall weakness in global growth are likely to keep prices down in the near term, crude should rebound in the longer term for three reasons.
2012-06-12 Asia's Role in Global Economic and Portfolio Rebalancing by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
We expect that the reallocation of global investor portfolios toward more balanced allocations to emerging market bonds the Great Migration to support Asia in the coming years. To pivot to a growth model that emphasizes domestic demand, China must alter government policy on taxes, profits of state-owned enterprises as well as make other structural changes. Japans growth will continue to be challenged by secular dynamics, and by the countrys inability to respond to them.
2012-06-12 Pacific Basin Market Overview - May 2012 by Team of Nomura Asset Management
Depressed market sentiment, high volatility, and low trading volume together resulted in another difficult month for the Pacific Basin regions equity markets. Following a great start to the year, Asian markets gave most of these gains back during May, as worries about the health of the Spanish banking system stoked deeper concerns about the progress of the eurozone debt crisis, with Greek elections looming on June 17th as well. U.S. data continued to disappoint, raising fears that the economic recovery could be stalling.
2012-06-12 Bemis Co Inc - Attractive Value, Yield and Growth by Team of F.A.S.T. Graphs
Bemis Co Inc (BMS) has achieved a moderate record of long-term earnings growth in a semi-cyclical fashion. However, even though earnings growth had faltered slightly during our last two recessions, the company remained highly profitable. We believe the company appears reasonably valued at its current quotation. This article looks at Bemis Co Inc, a Dividend Champion, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures.
2012-06-11 The Heart of the Matter by John P. Hussman of Hussman Funds
The ongoing debate about the economy continues along largely partisan lines, with conservatives arguing that taxes just aren't low enough, and the economy should be freed of regulations, while liberals argue that the economy needs larger government programs and grand stimulus initiatives. Lost in this debate is any recognition of the problem that lies at the heart of the matter: a warped financial system, both in the U.S. and globally, that directs scarce capital to speculative and unproductive uses, and refuses to restructure debt once that debt has gone bad.
2012-06-11 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stock markets rebounded last week on the perception (which turned into reality over the weekend) that Europe would find some sleight of hand method of rescuing the Spanish banking system.The reality this morning is that Spains sovereign debt (which this bailout money will be added to) is trading down and its credit default swaps are trading higher. This is not a very good sign for the bailout at this point. On top of that, now Ireland and Greece (which votes again this weekend) want similar and more lenient terms to their previously negotiated bailouts. Thus, Europe remains a total quagmire.
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 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 China Eases the Way by Frank Holmes of U.S. Global Investors
Following negative data last week, investors were clearly concerned about global growth and anxiously anticipated government actions. While Europe and the U.S. disappointed investors, China surprised on the upside by cutting interest rates. The market reacted positively, as the S&P 500 Index increased 3.7 percent. Its clear the governments tone in China shifted this week with the rate cuts. The government appeared to be comfortable with slower growth, but that position seemed to change as the country took steps to avert a hard landing and cut interest rates to stabilize the economy.
2012-06-09 A Dysfunctional Nation by John Mauldin of Millennium Wave Advisors
European leaders launched the euro project in the last century as an experiment to see whether political hope could become economic reality. What they have done is create one of the most dysfunctional economic systems in history. And the distortions inherent in that system are now playing out in an increasingly dysfunctional social order. Today we look at some rather disturbing recent events and wonder about the actual costs of that experiment. What type of "therapy" will be needed to treat the dysfunctional family that Europe has become?
2012-06-08 The Purveyors of Notgeld by Tony Crescenzi of PIMCO
It is through this emergency money and repressively low interest rates that the worlds central banks create conditions that compel investors to seek out value in real assets and move outward along the risk spectrum. Investors should focus on assets that are likely to benefit from central bank policies designed to reflate deflated economies: commodities, land, equipment and software, for example. In equities, this means favoring entities in the developing world over those of the developed world in particular those reliably expected to pay a dividend.
2012-06-08 Five Tech Stocks with the Added Benefit of Dividends by Team of F.A.S.T. Graphs
Here are five technology-oriented companies that are currently trading at a price earnings ratio that implies that the stocks are attractively valued. Each of these five companies currently offers a dividend yield that is above-average as represented by the S&P 500.
2012-06-08 The US Economy Sitting On The Threshold Of A New Golden Age: Part One by Chuck Carnevale of F.A.S.T. Graphs
In the past, Ive written numerous articles positing a long-term optimistic outlook for both our economy and the attractive future growth prospects of our great American businesses. Even though I hate to forecast the market in general, I have even presented evidence indicating that the general market as represented by the S&P 500 is currently reasonably priced and even slightly undervalued. My most recent contribution can be found here.
2012-06-07 The Specter of Default: How Safe Are U.S. Treasuries? by Team of Knowledge @ Wharton
Just how solid are U.S. Treasury bonds, long considered a "riskless" investment? Is a default possible? Desirable? Unthinkable? And what are the options for reducing the annual government deficits that cause the country's debt to grow? Those and other questions were the subject of a recent Wharton conference titled, "Is U.S. Government Debt Different?" The conference was set up in the wake of last summer's debt-ceiling showdown in Washington, which highlighted the risk of a default on government bonds.
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.
2012-06-07 The Absolute Return Letter - First Mover Advantage by Niels C. Jensen of Absolute Investment Advisers
Contrary to conventional wisdom, the eurozone crisis has always been a banking crisis. It only morphed into a sovereign crisis because of political incompetence. Given the rather stubborn approach of the German government to its beleaguered eurozone partners, the crisis is rapidly moving towards some sort of crescendo. It is only a question of time before one of the Southern European countries come to realise that they might be better off outside the eurozone, particularly if they are the first mover.
2012-06-07 Remarks to the 12th Annual International Seminar on Policy Challenges for the Financial Sector by Mohamed A. El-Erian of PIMCO
Let me start with what I will refrain from doing specifically, I will not pre-empt the detailed discussions that you may have on such topical issues as regulatory principles, SIFIs, market infrastructure, stress testing and, of course, the rapidly changing nature of sovereign risk in advanced countries. Instead, I will try to touch on three more general topics that, in addition to your critical detailed analysis, I believe are important in assessing the potential impact of regulatory reform in terms of the past, present and future.
2012-06-07 Real Challenges in Brazil by Mark Mobius of Franklin Templeton
Brazil, the B in the emerging markets entities known as the BRIC countries (Brazil, Russia, India, China), has entered what I think can fairly be described as a rough patch of sluggish growth. Since my last update on Brazil, the country has experienced heightened economic challenges that threaten its competitive position to slip. In 2011, Brazils growth eased to 2.7% after having reached 7.5% in 2010.1 The Eurozone crisis and the impact of a stronger Real on the competitiveness of Brazilian industry are partially to blame for this growth slowdown.
2012-06-07 Diversify to Take the Edge off Swings in Investor Sentiment by Team of American Century Investments
The investor sentiment cycle presented here is an excellent investor education tool. In a single snapshot, it captures both the cyclical nature of financial markets and the subjective, emotional response many investors have to those market movements. After all, saving and investing are relevant to the extent that they help us achieve profoundly important personal goals, such as funding retirement, a childs education, or a bequest to future generations. Under those circumstances, it is easy to understand why market swings would elicit an emotional response from investors.
2012-06-06 Economic Insights: Japan - Glimmers Amid the Gloom by Milton Ezrati of Lord Abbett
Japan still looks troubled. To be sure, the economy recorded a surprisingly strong 4.1% annualized real gross domestic product (GDP) growth in the first quarter. Much of that growth, though, was due to government spending. Otherwise, the flow of news still points to the same tepid growth that has troubled Japan for more than 20 years now. Four of the last six quarters have shown real declines, including last years fourth quarter. This once-powerful exporter faces a deficit on its balance of international payments, while spring data releases show industrial production in decline.
2012-06-06 Liquidity Lessons: The Critical Importance of Budgeting for Overlay Strategies by Markus Aakko, Jared Gross of PIMCO
One approach is to tier liquidity into current and contingent tiers, where some assets are kept in more liquid form and others are kept in higher-yielding investments. Quantifying how much of the immediate category is needed is a relatively straightforward risk-management exercise involving estimating the potential mark-to-market change in value of the overlay. Our view is that locating the liquidity pool internally has a number of potential advantages over an external model.
2012-06-06 Energize The Growth Component Of Your Portfolio With Chicago Bridge & Iron Co by Team of F.A.S.T. Graphs
Chicago Bridge & Iron Co (CBI) potentially offers high growth at a very reasonable price. Although the company does exhibit the occasional bout of cyclicality, long-term earnings growth has averaged over 16% per annum. Consequently, long-term buy and hold shareholders have earned returns that have exceeded the market by a large margin. Some of the best advances are achieved coming out of weak periods as earnings explode off of cyclical lows.
2012-06-06 Merk Commentary: ECB Meeting - No Horse Trading, No Additional Money Printing (for now) by Axel Merk of Merk Funds
Draghi stuck to his guns in today's press conference of the European Central Bank (ECB). Keeping the main refinancing rate unchanged, he discarded various proposals on how the ECB could bail out peripheral governments.
2012-06-05 On Their 30th Anniversary - Get Your Dividend Portfolio Rolling with Norfolk Southern Corp. by Team of F.A.S.T. Graphs
Like most railroads, concerns regarding the coal industry have driven Norfolk Southern Corp.s share price to one of its lowest levels since 1998. Nevertheless, strength in other areas of their business seems to support continued confidence in long-term earnings growth. Therefore, current weakness in the share price may represent an excellent long-term opportunity.
2012-06-05 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 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.
2012-06-05 Reynolds American Inc. - Reasonably Priced with a High Yield by Team of F.A.S.T. Graphs
Even though Reynolds American Inc. (RAI) has risen substantially off of its lows in 2009, the company looks reasonably valued at todays quotations. Therefore, the dividend growth investor looking for above-average dividend yield with moderate growth might want to look closer. The company claims to be transforming the tobacco industry, and maybe it can transform your income portfolio as well.
2012-06-04 After Disappointing Jobs Data, Now What? by Russ Koesterich of iShares Blog
Stocks tumbled Friday after particularly disappointing May jobs data. Russ provides his take on what the report means for the US economy and stocks going forward. First, the implications for the economy: As jobs numbers tend to lag broader economic activity, the report doesnt in itself suggest that the United States is slipping back into recession. In addition, its worth calling out that according to the new data, the United States created only 69,000 net new jobs in May, less than half of what economists were expecting and the slowest rate of net new job creation in a year.
2012-06-04 My Best Investment Advice - Watch Your Fellow Investors And Do The Opposite by Chuck Carnevale of F.A.S.T. Graphs
In my opinion, the recent selloff in stocks defies commonsense and logic, but in truth and fact it usually does. In other words, its not uncommon to see investors selling at precisely the time they should be buying and vice versa. Moreover, when investor pessimism is at a high, like it is today, stocks become cheap causing people to panic and sell. Now when I review the data, I get optimistic and immediately began to suspect that all this pessimism is creating a great long-term opportunity for investors with a more optimistic view of the future.
2012-06-04 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 Opportunities in Credit Higher Quality High-Yield Bonds by Team of Columbia Management
One of the more compelling opportunities across todays fixed-income landscape is within the higher quality segment of the high-yield market bonds rated BB and B. Strong underlying fundamentals driven by a wave of refinancing and solid operating performance have greatly diminished credit risk among these issuers, as demonstrated by exceptionally low current and expected default rates. Despite this, spreads, or yield premiums relative to Treasuries, are generally higher than long-term averages.
2012-06-04 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 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.
2012-06-01 Asset Allocation: Does Macro Matter? Part II by Sebastien Page of PIMCO
We see the conventional, valuation-based approach to asset allocation as akin to looking in the rearview mirror, which may lead to suboptimal investment outcomes when important macroeconomic shifts take place. We believe an econometric framework to assess the impact of shocks to GDP growth and inflation provides the missing link between macroeconomic forecasts and portfolio performance. Investors should constantly complement, review and revise qualitative and quantitative macroeconomic analyses with judgment, experience and a view on current events.
2012-06-01 Hasenstab on a Possible Grexit by Michael Hasenstab of Franklin Templeton
The Greek debt drama looks to be entering its final act. On June 17, Greek citizens will cast their votes to either elect a pro-austerity government that would keep the economically eviscerated country in the eurozone, or leave the union and go it alone. Dr. Michael Hasenstab expects either option is going to be painful for Greece, so the big question in his mind is whether the world is prepared for either outcome. A summary of some of Dr. Hasenstabs thoughts on what Greeces next move may mean for investors.
2012-06-01 Civil Disobedience Hong Kong Style by Robert Horrocks of Matthews Asia
Walking around Hong Kong a couple of weeks ago, I was struck by the citys own version of the Occupy Wall Street movement.
Directly underneath the HSBC tower, in the center of Hong Kongs vibrant financial district, is a small paved area, a portion of which is home to Hong Kongs anti-capitalist, anti-Wall Street movement. In the skyscraper above, thousands of banking and financial employees toil away daily, not overly disturbed by the protesters directly beneath their feet. Why? Because the civil disobedience below is just sowell, civil.
2012-06-01 Are my methods unsound?...I don't see any method at all, sir. by Christian Thwaites of Sentinel Investments
This week we can add the lowest ever level of GT10, which touched 1.44%, and the 7-year note firmly below 1%. German 10-Year Bunds fell to 1.12%, brining the total return close to 20% over the last year. Over in Switzerland, it will cost you nearly 0.5% for the privilege of holding a two year bond. If negative rates are on offer, distress and fear are not far behind.
2012-05-31 The Global Industrial Sector: Have Profit Margins Peaked? by John Longhurst of PIMCO
Factors driving profit margin expansion in the industrial sector include globalization, EM capital expenditures, a focus on profitability and global labour arbitrage.
Potential headwinds include a slowdown in global growth drivers, rising labour rates and global deleveraging.
We believe profit margins are most at risk in product areas where EM companies are benefiting from state capitalism and seek to take local advantages global.
2012-05-31 The Eurozone Crisis: 4 Developments to Watch by Russ Koesterich of iShares Blog
With the future of Greece and the eurozone still so uncertain, many investors are asking how they might predict what the most likely outcome is.
While I dont have a crystal ball, in addition to paying attention to eight pivotal eurozone events happening from now until July, Im also watching for four critical developments in the run-up to the second Greece election on June 17. Heres my watch list.
2012-05-31 The Sense and Sensibility of Global Investors by Mark Mobius of Franklin Templeton
The worlds financial markets are like a spiders web; inter-linked and highly connected, strong and flexible, but sometimes fragile, too. The global financial markets have gone through rapid change in the last ten years. Large, emerging economies such as China and India have increased their contribution to global GDP and become true global powers1, causing individuals perceptions of the global economy to shift, as well. Perception has the tendency to impact market reality, which is why I was intrigued to see the results of our 2012 Global Investor Sentiment Survey.
2012-05-31 Wall Street Food Chain by Bill Gross of PIMCO
Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of such previously sacrosanct debt represent a potential breaking point in our now 40-year-old global monetary system. Bond investors should favor quality and clean dirty shirt sovereigns (U.S., Mexico and Brazil), for example, as well as emphasize intermediate maturities that gradually shorten over the next few years.
2012-05-31 Institutionalizing Courage by Robert Arnott of Research Affiliates
Most investors measure wealth in terms of the value of their portfolio. We believe it is better to measure wealth in terms of the portfolios ability to support sustainable spending. This months Fundamentals explores why this approach requires courage.
2012-05-31 Charting the Benefits of a Diversified Approach by Team of American Century Investments
Weve written quite a bit about diversification recently. Rather than tell you about the potential benefits of a diversified approach, we thought wed use this initial issue of Chart of the Week to show you how a diversified portfolio can potentially smooth out performance and improve cumulative returns over time.
2012-05-30 The Eurozone Crisis: 8 Key Events to Watch by Russ Koesterich of iShares Blog
Be prepared for another volatile summer. From now until July, there are a number of pivotal events from votes to meetings that could help dictate Greece and the eurozones future, and will most certainly drive market sentiment. But because the outcome of many of these events is so hard to predict, I expect markets will remain especially volatile in the days leading up to these key dates. Among the 8 pivotal moments highlighted, key events include a May 31 Irish referendum on the Stability Treaty, and the June 17 Greek elections, among others.
2012-05-30 McGraw-Hill It Provides A Lot of Information, So Let The Pictures Do The Talking! by Team of F.A.S.T. Graphs
McGraw-Hill Companies (MHP) looks like a good addition for the dividend growth investor. The market has historically applied a premium valuation to this company. Its historically above-average earnings growth had pushed the company to trade at premium, until recently.At its current valuation, McGraw-Hill sits at a fair valuation.Therefore, we believe today's price represents a sound valuation given McGraw-Hills quality and consistency.
2012-05-30 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 Economic Insights: Tax ReformFact or Fantasy? by Milton Ezrati of Lord Abbett
Despite the Washington divide, the prospects for tax reform are stronger than you might think. The budget debate in Washington goes on, highly partisan and seemingly with little prospect for compromise, much less progress. Even after Novembers election, probabilities suggest that neither party nor group of budget partisans will gain enough power to move fiscal matters in a concerted direction. Still, for all the prospect of impasse, tax reform remains a possibility.
2012-05-30 Navigating the Equity Market by Pamela Rosenau of HighTower Advisors
Between now and the Greek election on June 17th, I expect we will see a consistent negative bias in the equity market. According to Citigroup global equity strategist Tobias Levkovich, sentiment has shifted rapidly from complacency in March to panic in the latest readings of their Panic/Euphoria Model. He adds that these readings are a contrary indicator, in addition to valuation metrics, arguing statistically that we may see market gains over the next two or three quarters.
2012-05-29 What Does a Dividend Tax Hike Mean for Dividend-paying Stocks? by Steve Chun (Article)
The Bush tax cuts are due to expire at the end of this year, but owners of dividend-paying
stocks need not be afraid. Historically, changes in tax regimes have had little
effect on the value of the aggregate stock market. Historical data show that even
vulnerable asset sub-classes - high-yield stocks, for example - have not lost value
long-term as a result of similar tax increases.
2012-05-29 The Reality of the Situation by John P. Hussman of Hussman Funds
If one steps back from the trees to observe the forest, the reality of the situation is that Europe is already largely in recession, the global economy is slipping quickly toward the same outcome, and in my view, the U.S. is also entering a recession that will ultimately be dated as beginning in May or June of 2012 (i.e. now). The economic headwinds already in place are likely to make any meaningful budget progress virtually impossible in the Eurozone, and without meaningful budget progress, the likelihood of continued bailouts to peripheral European states is slim.
2012-05-29 Hopes, Dreams and College Savings Solutions by Roger Michaud of Franklin Templeton
Its one of those universal truths that from the day their babies are born parents are filled with hopes, dreams and fears for their children. Those hopes and dreams typically include a successful career which often starts with a college education. The thought of a college education can lead to one of parents biggest fearsnot being able to foot the bill. Given the rising cost of college, financing a four-year degree for one or more children can be a daunting prospect for parents juggling day-to-day living expenses while trying to save for other investment goals like their own retirement too.
2012-05-29 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 Canada: Untangling Pipeline Projects to Realize Energy Export Potential by Team of Thomas White International
Oil production in Canada is set to increase to 6 million barrels a day by the end of this decade, but the country lacks pipeline infrastructure to facilitate exports. For a country richly endowed in natural resources, and with growing energy production, Canada has been facing a perplexing problem in recent years. While its producers are supplying oil and gas to U.S. refineries at prices below the international market, Canadian refineries on the east coast are paying higher international prices for the oil they import.
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 Saber Rattling by Colin Moore of Columbia Management
Tension between Iran and its Gulf Co-Operation Council (GCC) neighbors continues to rise. The GCC was formed in 1981 by the Sunni controlled states to bolster security after the 1979 revolution in Iran and the subsequent war with Iraq. Tension between Shiite Iran and Sunni Saudi Arabia escalated last year after Saudi troops entered Bahrain to quell protests. The members of the GCC held talks to discuss closer political, economic and military union.
2012-05-25 Caterpillars Earnings Look Like And Act Like A Caterpillar; Moving Slowly But Steady by Team of F.A.S.T. Graphs
This article looks at Caterpillar Inc, a Dividend Contender, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures. In order to provide you the opportunity to research this company deeper and faster we are providing a link to a live, fully functioning earnings and price correlated set of graphs.
2012-05-25 Searching for European Solutions, and Dividends by Team of Franklin Templeton
As the European debt crisis rages on, people in the eurozone are voicing their opinions about austerity measures, bailouts and such, not just on the streets, but also at the polls. As the winds of political change swirl, the future of the eurozone seems to hang in the balance. Tucker Scott, portfolio manager of Templeton Foreign Fund, and a vocal fan of a thorough vetting process, says hes focusing on long-term outlooks, not just todays headlines. And, hes finding select European stocks with dividend-growth potentialin some cases even better opportunities than in the U.S.
2012-05-25 Loss Capacity Drives 401(k) Investment Default Evaluation by Stacy Schaus and Ying Gao of PIMCO
Based on our research, we believe retirement plan participants capacity for loss may be much lower than many investment default options accept as tolerable.
Regardless of asset allocation structure, an investment default option should maximize the likelihood that each plan participant will meet his or her retirement income needs.
One of the keys to meeting a set income replacement goal is to understand how much plan participants can afford to lose at every age as they approach retirement.
2012-05-25 General Mills: Food for Thought! by Team of F.A.S.T. Graphs
General Mills has an impressive dividend yield for the income investor. Its estimated earnings growth is on the mark at about 7.2% and would make a nice contribution to an income portfolio. This article looks at General Mills Inc (GIS), a Dividend Challenger, through the lens of the F.A.S.T. Graphs Fundamentals Analyzer Software Tool. Since a picture is worth a thousand words, the reader will be provided the essential fundamentals at a glance expressed vividly in pictures.
2012-05-25 India's Demographic Dividends by Sunil Asnani of Matthews Asia
Fortunately, Indias vast population of 1.21 billion, considered a time bomb not long ago, is increasingly being viewed as a positive. While its population has grown by roughly 18% over the past decade, the percentage of its children has actually fallen during this same period.looking to base manufacturing operations in other countries.India would do well to realize that this period of demographic shift is not merely a stroke of luck, but a window of opportunity. For growth to be sustainable requires some reforms in the way people live and work.
2012-05-25 Supply Your Portfolio With Healthy Growth From Medical Suppliers by Team of F.A.S.T. Graphs
With baby boomers being one of the biggest population bubbles, medical suppliers can be a healthy addition to a portfolio. Here are five medical supply companies that are trading below their normal historical PE ratios and inline or slightly below their estimated growth rates. Consequently, they represent an opportunity for above-average growth and yield.
2012-05-25 Sysco - Building A Case For A Return To Growth by Team of F.A.S.T. Graphs
Sysco Corp is an extremely high quality powerful franchise that is positioning itself for long-term future growth. Currently, the company controls about 17 % of the $225 billion North American food service distribution market. Since this industry is currently experiencing stress, it seems only logical that Sysco is best positioned among its peers to survive and prosper. On the other hand, many of its smaller local and regional competitors may not.
2012-05-25 Going Defensive With Dividend Funds by Russ Koesterich of iShares Blog
With markets likely to remain volatile in the near term, investors should consider dividend paying stock funds as a defensive play.
2012-05-24 Blue-Chip Dividend Growth Stocks Todays Strong Option For Retirement Portfolios - Part 1 by Chuck Carnevale of F.A.S.T. Graphs
There is a confluence of factors that are painting a very odd picture of current investor behavior. Common sense and a careful analysis of the market dynamics between equities and bonds today would indicate that investors should be acting in the exact opposite manner than they are. Interest rates are hovering at a 100-year low, which creates two problems for investors. First, there is not enough return from bonds to fund a retirees income needs or to fight inflation. Second, investing in bonds with interest rates so low makes it riskier to own bonds today than it has been in over a century.
2012-05-24 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 Jumping Into The Abyss: A Bull Case for Gold Mining Stocks by JJ Abodeely of Sitka Pacific Capital Management
Gold mining stocks, as measured by the AMEX Gold Bugs Index (HUI), are down nearly 40% from their August 2011 high. Representative ETFs such as GDX and GDXJ as down similar amounts, if not more. Mining company stock prices look to be falling into the abyss.
While buying mining stocks here could certainly look foolish in the near-term, NOT accumulating positions, or selling them for that matter, is likely to be the bigger mistake over the long term.
2012-05-24 Repair Your Dividend Portfolios With Genuine Parts by Team of F.A.S.T. Graphs
Genuine Parts Co (GPC) has over 80 years of distribution expertise in replacement parts for automotives and industrial parts, as well as office and electrical materials. It appears to be a company poised for continued earnings and dividend growth. The company is a Dividend Champion with 25 years of raising its dividend. The strong dividend yield should attract a conservative investor looking for income and steady growth.
2012-05-24 Measuring Active Management: The Basics of Active Share and Tracking Error by Team of American Century Investments
Every investor needs to understand the basics of portfolio management. In a broad sense, portfolio management can be divided into actively managed and passively managed categories. Although we describe both approaches at the outset, we fasten our attention on active portfolio management in this piece. Specifically, we focus on the Active Share and Tracking Error approaches to measuring active management in equities. The goal is to further develop an appreciation for the multi-faceted complexion of active portfolio management.
2012-05-23 Is Quantitative Easing the Silver Bullet to Economic Recovery? by Joseph Giulitto of Trust Company of America
I saw this quote recently while researching another topic. I found it to be appropriate to capture the challenge that professional money managers have in finding investments appropriate for the current domestic economic and geopolitical environment. The rules (that apply to what makes an investment good or bad) that have been established over the previous 40 years of investing are no longer relevant, and those investments that typically would struggle during a massive global recession have been successful in achieving a rising valuation.
2012-05-23 The Three-Part Case for Commodities by Russ Koesterich of iShares Blog
With both gold and broader commodity indices down significantly month to date, many investors are asking if they should lower or even remove their commodity exposure. I believe the answer is no.
First, its useful to put the recent weakness in perspective. Both gold and a broad basket of commodities are down roughly 10% over the past three months. While the losses represent a significant correction, they are in line with the performance of equity markets over the same time period. Even more importantly, here are three reasons for maintaining a strategic exposure to commodities.
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 Niall Ferguson - The West's Six Killer Apps by Robert Huebscher (Article)
For five centuries, the West dominated Eastern economies. But, beginning with the fall of the Berlin Wall in 1989, the East has now caught up, according to Niall Ferguson. It did so by downloading six "killer apps."
2012-05-22 Life-cycle Finance and the Dimensional Managed DC® Pension by Wade Pfau (Article)
Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.
2012-05-22 Finding Alpha with Active Managers by Jay Feeney of Robeco Investment Management
Many investors are convinced that alpha has disappeared from U.S. equity markets and prefer to use passive investment tools such as exchange traded funds (ETFs) to broadly gain exposure to these markets. The problem with this approach is that it gives up any chance of outperformance
and forces an investor to settle for benchmark returns minus fees. It also ignores the fact that alpha potential does exist. Although many active managers have not done a good job in capturing alpha, there are many who have outperformed over time, producing very sizeable excess returns.
2012-05-22 The Achilles Heel of the US Economy by Russ Koesterich of iShares Blog
The Achilles Heel of the US economy may just be that entitlement programs havent kept pace with US demographics, a fact that has long-term implications for investors.
According to a recent annual government report on entitlement programs, the Social Security trust fund is likely to run out of money in 2033, three years earlier than previously projected. Meanwhile, both Social Security and Medicare arent sustainable in the long term without structural changes.
2012-05-22 Return to Normalcy: The False Argument of "Austerity" vs. Growth by Team of Institutional Risk Analyst
To rescue Europe, to reinvigorate the United States, and to set the global economy on a sustainable path toward expansion, the current debate offers a so-called "choice": either slash government spending or spend your way to growth. In Europe, German Chancellor Angela Merkel is one of the most prominent proponents of fiscal restraint -- in part because Germany is picking up the tab for the continent's debt crisis. And in the United States, economist and New York Times columnist Paul Krugman is the fullest-throated supporter of more government spending.
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.
2012-05-22 The Harsh Realities of Bond Math by Mark Oelschlager of Oak Associates
Shortly after I graduated from college my father sat me down and tried to teach me about bonds. He proceeded to explain that prices and yields. He tried to explain the difference between a bonds yield and its coupon as well as the effect that time to maturity has on the sensitivity of a bonds price to changes in interest rates. It all sounded so complex, and there were intertwining effects. This, combined with its counter-intuitive nature, made the concept of bond pricing difficult to grasp in a short lesson.
2012-05-22 Goodbye Planet Rates, Hello Planet Quantity: Credit Markets in a Zero Rate World by Luke Spajic of PIMCO
There is a sense that developed market economies are somehow undergoing a reversed metamorphosis reverting from butterfly back to caterpillar where growth is crawling as opposed to flying. The fear of credit destruction, perhaps triggered by deflationary scares, becomes a bigger obsession for central banks. The culture of credit risk-taking changes as rates go lower and approach zero with a perennial risk of the economy tipping into deflation.
2012-05-21 Liquidation Syndrome by John P. Hussman of Hussman Funds
Presently, the market remains richly valued on normalized earnings, and is coming off of a speculative peak with an abrupt and persistent initial decline. All of this reflects what might be called a "liquidation syndrome" that is selective for awful drops that began in 1969, 1972, 1987, 2000, 2007, and the more moderate but still steep losses in 1998, 2010, and 2011.
2012-05-21 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 A Worthy Scapegoat by Charles Lieberman of Advisors Capital Management
The $2 billion trading loss reported by J.P. Morgan Chase has unleashed a torrent of comments suggesting an even greater need to impose Dodd-Frank, that bank trading operations need to be reined in, that banks managers are badly overpaid and suffer from hubris that gets them into trouble, that our largest banks are too big to fail and too big to manage, and that regulators need to do a better job of keeping banks from taking too much risk with depositor money.
2012-05-21 Gilead Sciences Inc Strong Growth At An Unreasonably Low Price by Team of F.A.S.T. Graphs
Gilead Sciences Inc (GILD) is an innovative healthcare company with a strong record of historical earnings growth and expectations for above-average growth into the future. Nevertheless, Mr. Market seems unwilling to recognize the past and future earnings power of this niche pharmaceutical growth stock. Consequently, the company trades at a single digit PE ratio that we believe significantly undervalues both the companys past and future potential. Therefore, investors seeking high growth at a reasonable level of risk might want to look further into this undervalued growth opportunity.
2012-05-21 I Should Have?! by Jeffrey Saut of Raymond James Equity Research
The brilliant Lee Cooperman, captain of hedge fund Omega Advisors, quoted Joe Rosenberg on CNBC last week, You can have cheap equity prices, or you can have good news, but you cant have both! Clearly, we currently have bad news, which in my opinion has resulted in cheap equity prices. Playing to that quote, my father always told me, Good things tend to happen to cheap stocks. As stated, the real question is, If we get a rally from this oversold condition is it the start of a new up leg, or is it just a compression rally that will be brief followed by still lower prices?
2012-05-21 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 Rental Housing Boom Set to Explode by John Burns of John Burns Real Estate
Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned households are actually declining in number. This is an incredible surge in demand. In our summary of the U.S. housing market only 20% of renters live in large buildings and the remaining 80% of renters live in alternative types of housing. Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental business, which is already larger than the institutional quality apartment business, is booming.
2012-05-18 Blue-Chip Dividend Growth Stocks Todays Strong Option For Retirement Portfolios - Part 1 by Chuck Carnevale of F.A.S.T. Graphs
There are many pundits and prognosticators that never weary of attempting to convince investors on how risky it is to invest in equities, even high-quality dividend blue-chip paying equities. Invariably, they will always point to volatility as the evidence supporting their thesis that stocks are too risky of an investment for retirees. I believe this is a great travesty that is prominently promogulated upon an unwary investing public. The inevitable interruptions in the business cycle have conditioned people into believing that stocks are riskier than they really are, at least in my opinion.
2012-05-18 Postcard from Southeast Asia by Lydia So of Matthews Asia
A recent research trip I took to Thailand and Indonesia was a welcome break from watching gloomy macroeconomic data flash across my office computer terminals. Being on the ground, and literally on the streets, in Bangkok, Jakarta and several smaller Indonesian towns offered a reality check on the economic potential of Southeast Asian countries. This is not to say that these countries dont face challenges at their respective stages of economic developments. But speaking face to face with management teams offered me a fuller perspective.
2012-05-18 The Pros and Cons of Preferreds by Russ Koesterich of iShares Blog
Given the universal hunt for yield, many investors are asking me what I think of preferred stocks. I believe that this asset class certainly has a place in yield oriented portfolios, but I wouldnt overweight preferred equity funds at this time and would instead remain neutral. Why? While preferred funds are certainly providing a healthy, relatively high yield in a low yield environment, the extra yield comes with a lot of volatility. urrently, preferred funds are offering a yield similar to that of a high yield bond fund, but preferred funds are also offering about 50% more volatility.
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.
2012-05-17 Avoiding a Cold Shower in the Cash Markets by Jerome M. Schneider of PIMCO
A concern for investors would be to vigilantly monitor the global marketplace for any changes in the liquidity markets, reviewing aspects and conditions in both the unsecured and secured markets. The second source is the capital market participants themselves. Reduced or reallocated dealer balance sheets have led to wider bid-offer spreads in the marketplace. The final evolutionary condition to monitor is the regulatory environment in the U.S. The SEC and the Fed have recently become critics of the current structure of 2a-7 money market funds.
2012-05-17 Our Fixed Income Insights on Yield Traps by Team of American Century Investments
From a fixed income perspective, we explain why aggressive yield-enhancing strategiesresulting from this extended period of historically low U.S. interest rates and yieldscan threaten the potentially valuable long-term portfolio benefits from holding fixed income positions. In particular, chasing yieldand stumbling into yield trapscan derail the important volatility reduction and diversification benefits offered by carefully selected and well-managed fixed income holdings.
2012-05-17 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.
2012-05-17 You should worry about EM inflation. Not US inflation. by Richard Bernstein of Richard Bernstein Advisors
Investors seem overly concerned about US inflation. Both market-derived expectations and actual rates of US inflation remain very subdued, yet we are consistently asked about inflation and whether our investment strategies are adequately structured for high US inflation. Across the board, these data do not support structuring investment strategies for the US inflation that investors, oddly enough, feel is inevitable. The data do, however, suggest that investors recent rush into emerging market debt is much riskier than they anticipate.
2012-05-17 Restoring Trust by Kendall J. Anderson of Anderson Griggs
Conflicts always exist between clients and managers. Requiring full disclosure is a step in the right direction towards minimizing these conflicts. Rules alone will not be enough to restore trust between you and those of us who considered themselves professional advisers. My suggestion is that all advisers live their life, both professional and personal under an older rule than the current body of laws. That rule is Do unto others as you would have them do unto you.
2012-05-17 Greece Must Exit by Nouriel Roubini of Project Syndicate
The Greek euro tragedy is reaching its final act: it is clear that either this year or next, Greece is highly likely to default on its debt and exit the eurozone.Like a doomed marriage, it is better to have rules for the inevitable breakup that make separation less costly to both sides.
2012-05-17 Five Conservative Utilities From The Wild And Wooly West by Team of F.A.S.T. Graphs
Utility stocks have historically been known as conservative investments with above-average dividend yields. Therefore, investors seeking income from equities within a reasonable level of risk may find opportunities within the utility sector. However, the reader should note that the dividend records from utility stocks can be somewhat spotty and therefore, moderately unpredictable. Consequently investors seeking a growing dividend income stream may want to look elsewhere in spite of the above-average yield these companies offer.
2012-05-17 Rules of the Game Have Changed for Euro High-Yield Investors by Douglas J. Peebles of AllianceBernstein
Although we think financials will be a potential driver of volatility of high-yield returns in the coming year, were not suggesting that investors should shun the sector altogether. Its true that, in some cases, the expected returns may be outweighed by both systemic and idiosyncratic risks. For example, we might have a negative outlook on both a financial institution and the country in which it is domiciled. But in many cases, levels of country and idiosyncratic risk may be acceptable.
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 A Taylor-ed View of Dividends by Team of Franklin Templeton
The baby boomer generation, people born in the U.S. from 1946 19601, numbers some 78 million and is now moving into retirement. Taylor challenges this group in particular to think differently about their investments given the current economic climate. We are currently in a low-growth, very low interest rate environment and I really dont think thats going to change too much anytime soon. Dividends and dividend yield in the equity market matter a lot more than they did before..."
2012-05-16 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 The Vision Thing II by Bill Smead of Smead Capital Management
In May of 2010 we wrote about how important it was for the companies which meet our eight criteria to have a strong vision and clear agenda for their business. We believe that every five to ten years those who manage money need to "cast a vision" of where they want to take investors and then backtrack from there to put a portfolio together to best take advantage of the vision cast. We believe there are three main roadblocks to the casting of a vision for the execution of a portfolio plan. In the absence of more attractive titles, we will call these roadblocks fog, bog and smog.
2012-05-16 Will a Grexit Come to Pass? by Russ Koesterich of iShares Blog
The Greek election provided further evidence that despite all of the accords, firewalls, and bailout funds, Europes economic future remains on a precipice. In a reflection of deepening economic malaise in Greece, the majority of the May 6th vote went to far left and right parties, few of which ran on a platform of fiscal austerity or loyalty to Europe. While the election certainly raised the odds of Greece eventually leaving the euro, its too soon to conclude that a Greek exit is imminent. Greeces fate now hinges on the results of a second election, expected to occur as early as mid-June.
2012-05-16 Germany Faces Political Isolation by John Browne of Euro Pacific Capital
One month ago it appeared that Germany held the whip hand in its titanic struggle against those seeking to cure all economic ills with the snake oil of currency debasement. Now, it appears that the ground beneath its feet is being swept away in a flood of popular unrest and political exploitation. The recent elections in Europe, which highlight both the strong grass roots revolt against Germanic demands in Greece and France show that the cause of sound money and fiscal prudence to be a lonely and difficult endeavor.
2012-05-16 Africa: Investing in the Cradle of Civilization, Part 3: Ghanas Golden Opportunties by Mark Mobius of Franklin Templeton
This year could prove an interesting one for Africas west coastal country, Ghana. Presidential and parliamentary elections are slated to be held by year-end, the results of which are almost sure to impact the shape of the countrys future. President John Atta Mills has stated in the press that he will take all necessary constitutional steps to ensure the conduct of free, fair and transparent elections. Im encouraged by the economys 14% growth in 2011 (thats faster than China!), and would be pleased to see evidence of more positive momentum.
2012-05-16 Keep Your Portfolio Rolling Along With Canadian National Railway by Team of F.A.S.T. Graphs
We believe at its current quotation CNI offers dividend growth investors an above-average total return at below levels of risk. Although the company only offers a market average dividend rate, we would expect its dividend to grow commensurate with its above-average expected earnings growth. We consider this a high quality dividend growth stock that is ideally suited for the long-term buy and hold conservative investor. As always, we recommend you conduct your own thorough due diligence.
2012-05-16 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 Quarterly Review: 1st Quarter 2012 by Robert L. Worthington of Hatteras Funds
Overall economic conditions are slowly improving in certain developed markets like the U.S. This could result in decent and probably better than expected earnings results for Q1 2012, which of course are announced throughout the early-mid part of the coming quarter. Risks are still prevalent and meaningful in regards to the European debt crisis and may continue to mute economic activity for this part of the world. Finally, while evidence suggests that the major developing economies of China, India and Brazil are slowing, risk of hard landings in these countries is small.
2012-05-16 The Facebook IPO: A Note to Mark Zuckerberg; or, With Friends Like Morgan Stanley, Who Needs Enemi by Dan Ariely of Predictably Irrational
I just received this letter from a friend in the banking industry. Dear Mark, Theres been a lot of ballyhoo recently about your IPO and your choice of investment bankers. Indeed, a war was fought by the banks to win your deal of the decade. As reported in the press, the competition was so intense banks slashed their fees in order to win your business. Facebook is only paying a 1% commission for its IPO rather than the 3% typically charged by the banks. Congratulations, Mr. Zuckerberg! On the surface it appears your pals in investment banking have given you a quite a deal!Or have they?
2012-05-15 Dividends: A Timeless Component of Equity Return by Loomis Sayles & Company, L.P. (Article)
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors' minds. But dividends have a long history as a significant component of total return, and today's buzz is just the most recent chapter.
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 A Growing Attraction to Municipal Bonds by Team of Hennion & Walsh Asset Management
For income oriented investors, bonds can provide for a dependable and consistent stream of income, and principal protection when held to maturity. Bonds, whether they are Municipal, Government or Corporate bonds, can also provide for compounded growth opportunities when the income received from the bonds is reinvested. Additionally, for growth-oriented investors, fixed income securities can provide investors with downside protection and diversification within a growth portfolio especially in a highly volatile market where additional, measured, short-term flights to quality are likely.
2012-05-15 Inflation Fighters by Russ Koesterich of iShares Blog
Whether you agree with Russ that inflation isnt a short-term concern, or you fear the worst in the near future, preparing a portfolio for inflation is on many investors minds. Russ weighs in on how different asset classes measure up against inflation. TIPS provide an effective inflation hedge and having a benchmark allocation to this asset class is prudent, the many investors clamoring into TIPS are currently contributing to, and accepting, an average negative real yield across the entire TIPS curve. In addition, TIPS will not perform well if real yields rise along with rising interest rates.
2012-05-15 McDonald's Back In Value, Above Average Growth And Yield by Team of F.A.S.T. Graphs
McDonald's represents an excellent choice for the prudent dividend growth investor seeking both capital appreciation, and above-average current yield and the opportunity to grow both in the future. With its recent pull-back, McDonald's is priced at the upper end of our valuation corridor. Therefore, although the company is not cheap, we do consider it a sound long-term investment at these levels. Furthermore, we would suggest that if the stock continued to drop from these levels, the prudent investor could use the lower price as an opportunity to average down their cost basis.
2012-05-15 The world is not ending. Nor is it by Christian Thwaites of Sentinel Investments
Last week saw more dire talk on the end of the euro, the lowest ever GT10 auction, a 2.2% swing in SPX[1] and an overly dramatic reaction to hedging losses at JPM[2]. But these are not big enough to push aside the broad positives: i) Europe will cobble together some compromise...there's already broad agreement that pure austerity needs dilution and the Bundesbank even made soothing noises on inflation ii) US economic data was broadly helpful iii) market metrics remain solid and iv) the federal government is in budget surplus. Yes, no lies. Read on.
2012-05-15 Cummins Inc: Gear Up Your Dividend Portfolio For Strong Growth With A Dividend Kicker by Team of F.A.S.T. Graphs
The recent pull-back in Cummins' stock price has created an excellent opportunity for prudent investors seeking growth and income an opportunity to achieve above-average long-term results. The company has little debt on their balance sheet, the potential for strong growth and a recent history of increasing their dividend consistent with their earnings growth. A quick glance at their historical earnings and price correlated graph show that anytime the company could be purchased at a PE ratio below 14, like it is today, represents an excellent long-term buying opportunity.
2012-05-15 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 Equity Investing: From Style Box to Global Unconstrained by Andrew Pyne of PIMCO
PIMCO sees greater potential benefit to global portfolios in strategies that are unconstrained by a benchmark, and with managers who think about absolute return at least as much as they think about relative return. We believe the style box approach resulted in too great a focus on returns relative to a very narrow index and led investors to have too short of an investment time horizon in which to evaluate their managers, and that the cycles of style performance and the narrow benchmarks in the style box world encourages manager turnover and undermines long-term portfolio return potential.
2012-05-15 Policy Confusions & Inflection Points by Mohamed A. El-Erian of PIMCO
During this important annual event, PIMCO colleagues from around the world debate the major trends that will play out over the next three to five years, focusing not on what should happen, but what is likely to happen. Based on the 2012 Secular Forum discussions, we expect three themes to play out: continued policy and political confusion, overly incremental public and private sector responses and, therefore, greater potential for inflection points. In terms of regions, the status quo is no longer an option for Europe.
2012-05-15 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 Economic Insights: Consumer SpendingBack in the Black by Milton Ezrati of Lord Abbett
Since late 2011, measures of consumption show acceleration in virtually all categories. In one sense, this is good news for the economy, as it will push the pace of overall growth and, ultimately, prompt more hiring, which in itself will reinforce spending growth. But this new trend raises longer-term concerns. More liberal consumer spending can only take the economy so far. Because heightened levels of consumption will limit households abilities to make needed improvements in their finances, any effort to boost outlays too far too fast would only threaten pinched finances at a later date.
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 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks have endured a rough couple of weeks as it has finally become obvious to everyone that the socalled recovery in the US has been a mirage while the difficulties in Europe have never been addressed. The latter problem is due to the flawed structure of the European Monetary Union, while our problem has to do with an incorrect mixture of policy choices from Washington and in many of our larger states such as California and Illinois. Last week saw a decline of 1.7% for the Dow Jones and .76% for the NASDAQ Composite. These declines were very modest compared to the carnage in Europe and Asia.
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 Charting Crude by Matt Lloyd of Advisors Asset Management
Crude and gasoline have been in the press a great deal recently. Headlines touting the potential recession being exacerbated by high prices of crude and gasoline have also been met with statements about the need to regulate the speculators who are the ones to blame. We have mentioned our view on this several times over the last few weeks. Last week we mentioned a chart pattern corresponding with a negative backdrop that could push crude down in the short run. Consider the move in the Crude over the last five days.
2012-05-10 Diversification 301: Tailored Solutions for Your Portfolio by Team of American Century Investments
We continue our discussion of diversification and its application to investor portfolios. We explain how there is no single universal diversified portfolio suited to all investors and occasions. Instead, diversification is a highly customizable framework that can and should be uniquely tailored to suit each individual investors goals and risk tolerances. Earlier articles in the series discussed the basic benefits and rationale for diversification and a discussion of alternative investments that can be used to diversify a traditional balanced portfolio of stocks and bonds.
2012-05-10 Speed Up Your Portfolio Performance With Comcast by Team of F.A.S.T. Graphs
Comcast has been a very consistent growth stock since 2004. However, as we previously stated, overvaluation kept shareholders from earning the returns that Comcasts excellent operating achievements deserved. However, valuation became aligned with earnings in late 2008, and the company instituted a dividend in calendar year 2008. Today the combination of above-average past and expected future growth with an above market and potentially growing yield, position the company for attractive future returns.
2012-05-10 Five Consumer Staples For A Hearty Portfolio With Yield by Team of F.A.S.T. Graphs
The old adage that people got to eat apply to the five consumer staple companies covered in this report. From the farm to the table these companies provide sustenance to a hungry world. Therefore, we believe that conservative investors that are craving the opportunity for growth and income might want to look closer at these five consumer staples. Each appears to be reasonably priced, and the group provides various combinations of growth and yield.
2012-05-10 Sell in May: Volatility Isnt Going Away by Russ Koesterich of iShares Blog
According to the old adage Sell in May and go away, investors are supposed to cash out their stock market positions in May and then take the traditionally poorer performing summer months off. Its no wonder, then, that many investors are asking if its time to sell, a question all the more pertinent after last weeks losses. In my opinion, the answer is a qualified yes. I believe that investors should consider lightening up on certain positions and getting more defensive. But my belief is not based on the month of the year, but rather on current market volatility.
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 Benchmarking Tail Risk Management by Vineer Bhansali of PIMCO
While tail risk hedging is a critically important area of modern portfolio management practice, the relative newness of the area means standard frameworks for benchmarking such portfolios have not developed. In fact, weve found that once the framework for proper tail hedge construction is defined based on key guidelines (including exposures, attachment, cost, and basis risk), the task of creating a proper index becomes relatively straightforward. To compensate for insufficient real-time performance measurement, tail hedges need to be evaluated on the basis of scenario analysis.
2012-05-10 The Easy Money Has Been Made by Rich Rosen of Columbia Management
As investment professionals, we chafe whenever we hear that expression. Why? Because in this business, there is no such thing as easy money. All our investment decisions are the end result of a great deal of research. Rarely are our greatest expectations realized, but neither are our greatest fears. In either case, it is never easy. Having said that, we feel confident in forecasting that an investment in natural gas (once it bottoms this spring/early summer) will perform substantially better going forward than it has for the last several years and with less risk.
2012-05-10 Emerging Markets Equity: Monthly Product Commentary April 2012 by Team of Thomas White International
Emerging market equity prices were subdued for the second successive month in April as renewed concerns over the European fiscal crisis dulled the outlook for exports from some of the leading emerging economies. The moderate correction in energy and other commodity prices also dampened the optimism over economic growth in some of the leading resource exporting countries. Among the major emerging markets, Brazil declined the most followed by India and Taiwan. Most emerging markets in Europe also underperformed during the month.
2012-05-10 Is The U.S. Going Greek? by Joseph Giulitto of Trust Company of America
Debt as a percentage of GDP is the standard barometer in which most the worlds economies judge the health of a countrys economy. How much you produce vs. how much you owe. The US as of 12/30/2011 had a total debt of $15.69 trillion. That takes into consideration both publicly-held debt and intergovernmental holdings. Currently, total debt as a percentage of the production of the United States is a staggering 100.4%. Clearly there is no precedent for this kind of fiscal malfeasance. Or is there?
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 It's All About the Fraud: Madoff, MF Global & Antonin Scalia by Team of Institutional Risk Analyst
In this issue, we return to the Lehman Brothers, Madoff and MF Global bankruptcies to talk about how the largest banks have wired US bankruptcy laws to their own advantage. Specifically, the 2005 changes to the bankruptcy code, combined with the traditional American caution regarding pre-judgement restraint on the parties surrounding a bankruptcy, has provided American banks with a free pass to facilitate fraud with no accountability. But first, Ally Financial has received the blessing of the US Treasury to file a bankruptcy for the ResCap real estate unit. This is a profoundly bad idea.
2012-05-09 Economic Update by Team of Cambridge Advisors
More money has flowed out of stock funds and into bond funds consistently over the past three years even though stock returns have outpaced bond returns and forward looking bond fund returns are expected to be low and possibly negative. This movement reflects investor aversion to the inherent risk in stocks. Bond investments tend to provide some stability to a portfolio when stock prices decline.
2012-05-09 The Bond Market\'s Changing Face by Tom Seay of Heartland & Co.
Many investors think of the bond market as a sleepy backwater of the investable universe. But since interest rates peaked in the early 80s, financial innovation in the bond market has spawned countless new investment vehicles (junk bonds, zero-coupon bonds, collateralized debt obligations and other derivative products), democratized lending (think subprime borrowers and emerging countries) and brought Central Bankers our of dark paneled, smoke-filled rooms into the media spotlight (think Fed Chairman Ben Bernanke on 60 Minutes). All this has occurred during a 30-year bull market in bonds.
2012-05-09 Going Global Can Pay Dividends by Brad Kinkelaar, Cliff Remily and Raji Manasseh of PIMCO
In todays low yield environment, many investors now include dividend-oriented equities in their portfolios in an effort to reach their income goals.
U.S. investors with home market bias risk severely limiting their income potential because in the U.S., dividend payout ratios are on the decline, taxes are potentially on the rise, and valuations in sectors that typically offer attractive dividends are near historical highs.
In our view, global equities can provide more attractive dividend income opportunities and offer potential for additional benefits, including diversification
2012-05-08 Annuities versus Systematic Withdrawals: Understanding Tax Effects by Joe Tomlinson (Article)
Given the complexity of most annuities, analysis of them typically only considers pre-tax results. But taxes matter. As we will see, tax impacts vary by the specific type of annuity you're considering, and will make the difference between annuities being cost effective or a drain on cash flow.
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 Why the Best Conductors Sent Us Home Early by Justin Locke (Article)
As a professional speaker, I focus on leadership and management. But I have a major handicap to overcome: the conventional wisdom that a core goal of leadership is to motivate greater effort.
2012-05-08 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 Baidu Inc: High Priced or Valued to Buy? by Team of F.A.S.T. Graphs
Baidu Inc is most commonly referred to as the Chinese version of Google. On the one hand, the stock is cheap relative to expected growth. While on the other hand, its current valuation is more than twice the average company. Therefore, we believe that although the company appears attractively valued based on earnings growth, it should be recognized that it is only appropriate for the aggressive investor seeking maximum capital appreciation. Furthermore, there are additional risks that the discerning investor should consider before investing in Baidu Inc.
2012-05-08 Use Snail Mail to Place Your FedEx Order by Team of F.A.S.T. Graphs
After suffering from shrinking earnings during the great recession, FedEx (FDX) appears on track to once again deliver the goods profitably. However, the market seems to have already recognized the current opportunity and pushed valuation to the outer limits of fair value. Therefore, FedEx may be an investment that requires patience. Aggressive investors could take a position here, but more conservative investors may want to wait for a more attractive entry point.
2012-05-08 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 When Quality Pays: A Fundamental Approach to Pursuing Lower Risk and Higher Returns by Chuck M. Lahr of PIMCO
Determining which fundamentals may lead to higher returns would give equity investors a useful tool for constructing portfolios.
Quality can be defined for equities by analyzing fundamental factors, such as operating margin, leverage (debt to equity ratio) and dividend yield.
The factors that define quality tend to lead to lower risk in individual equities.
As these fundamental factors in part lead to lower volatility, they may also lead to higher returns to the extent the stocks participate in the low volatility anomaly.
2012-05-08 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.
2012-05-07 Economic Insights: Earnings GrowthIs It Enough? by Milton Ezrati of Lord Abbett
After two-plus years of exceeding expectations, earnings this year seem poised to reflect the plodding nature of this economic recovery. In 2010 and 2011, even as the real economy managed only a paltry 2.4% average annual rate of expansion, the earnings of S&P 500 companies soared, rising more than 47% in 2010 and almost 20% in 2011. This year, the slow fundamentals will surely assert themselves. There is nothing ominous in the pattern. It is, after all, well-established historically that earnings should come into line with slower-growing revenues in this, the third year of economic recovery.
2012-05-07 Q1 2012 Letter by Team of Grey Owl Capital Management
The overall equity markets strong first quarter rally was narrowly focused and, from our perspective, fragile. Cutting to the chase, we think both stocks and bonds are expensive. During the quarter, we used opportunities presented by Mr. Market to trim some of our lower quality positions and to add starter positions in a few high quality businesses. We also added to our short-term, high-yield fixed income holdings, sources of return that we expect to show less volatility but results equal to or better than the broad equity market indices.
2012-05-07 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 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.
2012-05-05 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.
2012-05-05 Has Tech Reached Its Top? by Russ Koesterich of iShares Blog
Since last fall, technology companies have been helping pull the broader market higher. The S&P 500 technology sector, of which Apple Inc. makes up a significant part, has gained roughly 20% year to date and is up approximately 37% from last summers low. Its no surprise, then, that many investors are wondering if the momentum will last. In my opinion, while the technology sector still looks compelling over the longer term, it may be time for some investors to pare back their positions in the sector.
2012-05-04 Southern Co: A Solid Dividend Choice Worth Waiting For by Team of F.A.S.T. Graphs
We believe that Southern Company represents an extremely high-quality option for the investors seeking a high level of current income with an opportunity to grow moderately. However, we believe the current valuation is a little extended. Although Southern Co's current stock price is currently within our corridor of value, it is at the high end. Therefore, we would be more comfortable in recommending Southern Company if the PE ratio were a couple of points lower. On the other hand, Southern Company is an extremely high-quality and stable utility that may be worth waiting for.
2012-05-04 Five Healthy Dividend Growth Stocks to Cure What Ails Your Portfolio by Team of F.A.S.T. Graphs
These 5 above-average growing opportunities in the healthcare sector provide dividend growth investors potential alternatives to the traditional large-cap pharmaceuticals. This is a high quality group of healthcare companies that possess above-average growth potential plus an above-average dividend yield that is expected to grow at above-average future rates. Consequently, we believe these candidates offer the total package. Each of these nontraditional healthcare opportunities are attractively valued, provide an attractive dividend, and the opportunity for above-average total return.
2012-05-04 Housing in One Graphic by John Burns of John Burns Real Estate
The following graphic summarizes the U.S. housing market. The red boxes are a small percentage of the total, yet are receiving all the media and political attention. Americans make astute financial decisions, at least in the short-term (debt will hurt us in the long-term). We will bailout very few homeowners. We will increase construction by building in the ever-increasing number of areas that need homes and builders can make a profit. We will figure out how to make portfolio investments in the massive single-family rental market. We will buy homes if it makes financial sense for us to do so.
2012-05-04 Apple is a WantGlobal Resources are Needs by Frank Holmes of U.S. Global Investors
Investors seem to be overlooking the fact that Apples products are wants, not needs. Millions of consumers want an iPad and many want a computer, yet, every single person in the world needs global resources. We need companies to grow our food; we need oil, natural gas and coal to fuel our cities. And so do the other 7 billion people on the planet. To outperform the S&P 500 over the long term, we believe investors should overweight their portfolio to the global products and services that people need, not want.
2012-05-04 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.
2012-05-03 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 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 Rethinking Best Practices for Bank Investment Portfolios by Sabrina Callin and Justin Ayre of PIMCO
The turmoil in capital markets and changes in the regulatory environment have sparked changes in bank investment portfolios and caused many banks to reevaluate portfolio management practices. Banks without the resources to develop new processes may be forced to limit their investment opportunity set, possibly limiting earnings and diversification potential in the securities portfolio. The investment portfolio may represent an opportunity to improve bank revenues and risk-adjusted performance by expanding into investments with improved return and diversification potential.
2012-05-03 6 Reasons Why a Soft Landing in China Matters by Russ Koesterich of iShares Blog
World markets and financial media seem to react to every new data point about Chinas economy, whether its manufacturing reports or gross domestic product numbers. This market sensitivity isnt very surprising given how important China has become for the global economy. But it also means that it will be hard for the global recovery to continue without a soft landing in China.
2012-05-03 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.
2012-05-02 Newsflash: The Dividend Aristocrats Found The Lost Decade by Chuck Carnevale of F.A.S.T. Graphs
Volatility can only hurt you if you react to it. And you should not react to it unless there is a real fundamental deterioration with the fundamentals of the businesses you own. If fundamentals are strong and price falls, then buy more if you can, or hold if you cant buy more. The very best companies can remain profitable even during our most severe economic challenges. Consequently, when you can find these companies on sale, regardless of what caused it, I believe you should consider optimistically investing in them. It sure beats taking losses that you dont need to absorb.
2012-05-02 Inflation Anxiety is Spooking Investors by Matt Tucker of iShares Blog
Investors are spooked. They are so spooked that they are buying an asset that currently has a negative yield. What is the culprit causing so much concern? Curiously, its inflation. Investors appear to be so concerned about inflation that they are seeking protection against it without much regard to the cost of that protection. This phenomenon is playing out in the market for Treasury Inflation Protection Securities, or TIPS. In the last few auctions, the demand for TIPS by investors has been oversubscribed by almost 3X.
2012-05-02 Investments vs. Outvestments by Andrew J. Redleaf of Whitebox Advisors
This is a great time to invest. But you have to make sure you really are investing and not accidentally outvesting. The market is currently sorting credit into about four big categories. Three of those categories are priced roughly in reference to Treasuries (outvestments). Those are the categories in which we are not interested. The first category, obviously, is Treasuries themselves. Next, short-term paper of super-blue-chip firms. Third, bonds that are just on the border of being investments. Finally, all domestic bonds whose prices are detached from Treasuries.
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 How to Respond to the Bachus-McCarthy Bill by Bob Veres (Article)
I recommend that everybody contact your elected representatives and tell them that the proposed Bachus-McCarthy legislation would be detrimental to the small businesses in their district or state. Below is a sample letter for you to send to your elected representatives, and a press release for you to send to your local paper and press contacts.
2012-05-01 The Asymmetric Value of Delaying Social Security Benefits by Michael Kitces (Article)
Despite a compelling body of research arguing that most retirees would benefit by delaying the onset of Social Security payments, the majority who are eligible still elect to begin receiving them as early as possible. But delaying Social Security benefits is one of the best triple-hedges available to any retiree - simultaneously protecting against poor returns, high inflation, and longevity.
2012-05-01 Congress Needs to Stop a Dividend Tax Hike by Richard McMahon (Article)
Bad news is lurking right around the corner for investors, businesses and the nation's economy. Unless Congress acts before the end of the year, dividend income will be taxed at individual tax rates instead of at the same rate as long-term capital gains.
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 The Income Hunt: Opportunities Abroad by Russ Koesterich of iShares Blog
When it comes to fixed income portfolios, investors are often too reliant on domestic debt issues. However, as Russ explains, today there are a number of reasons why US investors should consider looking outside their own country particularly toward emerging markets for their fixed income needs.
2012-05-01 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 Wind Shear Avoidance: Why There Is Value in Momentum by Vineer Bhansali of PIMCO
Explicit tail hedges that look expensive in a normal world may indeed turn out to be cheap if the unimodal morphs into the bimodal.
When faced with bimodal outcomes, momentum as a risk factor becomes potent, and cost-efficient exposure to momentum becomes critical to proper portfolio construction.
In this world of low, pegged interest rates, an investor who is going to take risk needs other means to make the portfolio more inured to unforeseen shocks and market storms. Investors should look at effective alternative beta strategies, such as momentum, that can be implemented efficiently.
2012-05-01 Tuesday Never Comes by Bill Gross of PIMCO
The current acceleration of credit via central bank policies will likely produce a positive rate of real economic growth this year for most developed countries, but the structural distortions brought about by zero bound interest rates will limit that growth and induce serious risks in future years. Gradually higher rates of inflation should be the result of QE policies and zero bound yields. Focus on securities with shorter durations bonds with maturities in the 5-year range and stocks paying dividends that offer 3%4% yields. Real assets/commodities should occupy an increasing percentage.
2012-05-01 Does Quality Matter? by Jeremy Javidi of Columbia Management
Most investors take comfort in investing in high quality companies. There are several attributes that define quality including strong balance sheets and cash flows. Having a strong balance sheet allows a company to redeploy capital towards growth opportunities rather than debt reductions. We believe that these attributes persist in the market over the market cycle and are virtuous in the pursuit of higher returns. However, recently we asked, where has quality gone? Often an initial snap back in the market after a bear market favors companies with weaker balance sheets.
2012-04-30 Truth or Consequences? by Jeffrey Saut of Raymond James Equity Research
When youre wrong you say youre wrong; at least thats what the pros do. Clearly, I have been somewhat wrong by being conservative, but not by much because the INDU is actually 70 points lower than at the April 2, 2012 intraday high. Given the aforementioned litany of cautionary indicators, my sense remains the S&P 500 (1403.36) will spend some more time below 1425 while the short-term overbought condition is alleviated and the stock markets internal energy is rebuilt. Fridays market action only reinforced that belief with the indices gapping higher and then closing well below those highs.
2012-04-30 ProVise Bullets by Team of ProVise Management Group
What part of leadership are our elected officials in Washington not getting? Last month the Supreme Court heard the case regarding the Affordable Care Act and a ruling is likely to happen sometime in late June. Regardless of how the Supreme Court rules, healthcare reform is a topic which is here to stay. First of all it is estimated that by 2020 healthcare will account for one in every nine jobs in the U.S., adding 4.2 million jobs during this decade. As the Baby Boomers move into retirement there will be a need for an ever-increasing number of physicians, nurses, home health aides, etc.
2012-04-30 Japans Quest to Replace Nuclear Energy with Natural Gas by Team of Thomas White International
During last summer when Japan was facing a severe decline in electricity generation, consumers readily answered to the governments call to reduce consumption. However, Japanese policymakers have quickly and correctly realized that such noble responses from a strongly patriotic people are not the answer to the energy challenges facing the county. Now, the new long-term energy roadmap being drawn up in Tokyo will go a long way to help Japan lighten the gloom that engulfed the country when those giant waves came ashore last year.
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 TIPS for Value Investors: Whos Afraid of Negative Yields? by Jeremie Banet and Mihir Worah of PIMCO
Why wasnt the recent TIPS auction a blockbuster among Main Street investors? We believe they were frightened away by the -1.08% real yield.
We would argue that the negative real yields that are explicit in TIPS also represent the implicit discount rate for ALL financial assets in the U.S.
Moving away from TIPS into nominal yield is a bet on inflation being less than 2% for the next five years and less than 2.25% for the next 10 years a pretty bold bet!
2012-04-27 Yes, They Do: Low Interest Rates Do Make Stocks Cheap by Chuck Carnevale of F.A.S.T. Graphs
Im inspired to write this article because I am so frustrated by the plethora of all the so-called expert market prognosticators that continuously bombard the public with negative forecasts. I consider this to be both erroneous and irrational. When the markets are doing well, we are immediately inundated with articles talking about how the market has surely topped and a big drop is imminent. The real truth of the matter is that nobody really knows. Not the Fed, nor any of the so-called experts. Pessimism is pervasive, but optimism is, in fact, more accurate and rational in my opinion.
2012-04-27 What are ETF and Mutual Fund flows telling us? by Kevin Mahn of Hennion & Walsh Asset Management
On the ETF front, while we did see some positive net flows into bond-oriented ETFs (notably High Yield Bonds), we also observed significant funds flowing into domestic and international emerging market equity products. In terms of outflows, or redemptions in this case, funds were flowing out of a wide variety of Morningstar categories, albeit only slightly on the bond-oriented front. I believe that the divergence in fund flow information for the first quarter of 2012 may primarily be related to the types of investors who generally invest in the products.
2012-04-27 Roller Coaster Returns by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
2012-04-27 Bond Market Reflections Spring 2012 by Bruce A. Weininger of Kovitz Investment Group
Faced with the prospect of loaning money out for eight years knowing that our best case return over that time was 2%, we decided that, for a while anyway, wed rather hold onto to cash in hopes that pricing will become more rational over the coming weeks or months.
2012-04-26 Dividends: A Timeless Component of Equity Return by Richard Skaggs of Loomis Sayles
With interest rates at historic lows and many dividend-paying stocks boasting yields comparable to or higher than US Treasurys, it is no wonder that dividends have recently been at the forefront of many investors minds. But dividends have a long history as a significant component of total return, and todays buzz is just the most recent chapter. Stripping away the noise, what should investors consider as they survey the universe of dividend paying companies? We believe dividend payments are poised to grow in 2012, likely faster than earningsper-share growth.
2012-04-26 Why Eurozone Woes are Creating Headwinds for Global Firms by Team of Knowledge @ Wharton
Europe is in crisis -- and that has major implications for multinational firms with significant operations in the region. In fact, while much is written about the race by corporations to penetrate emerging markets like China and Brazil, the reality is that the investment by multinationals in Europe dwarfs the assets they have in those fast-growing economies. And the sovereign debt crisis in Europe, along with weak economic growth, is sparking changes in how these firms operate -- altering everything from manufacturing strategies to marketing to financial maneuvers.
2012-04-26 The Newlyweds Dilemma by John West of Research Affiliates
Before marriage, men and women enjoy a lot more free time. Married life represents a huge shift in their habits and schedules. Similarly, a new world of lower expected returns signals a major break from mainstream investment approaches. This months Fundamentals examines how investors can position their portfolios for the future.
2012-04-26 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 Shareholder Letter and Commentaries by Robert Horrocks of Matthews Asia
How the markets behave in the near future, including the size and duration of any pullback, is unknowable. However, we remain confident in the long-term growth and prosperity of Asia. Therefore, our approach, in the midst of what are admittedly absorbing macro discussions, has been to focus on finding good businesses, rather than try to speculate on events. As much as we all like to discuss the big issues of the day, the real excitement and challenge comes in discovering businesses whose future prospects are underappreciated by the average view of the investment community.
2012-04-26 Looking Forward to New Leadership in the Market by Pamela Rosenau of HighTower Advisors
Winston Churchill once stated, The farther back you can look, the farther forward you are likely to see. When I look at the broader equity market, there are two areas that I find particularly attractive large integrated energy companies and large pharmaceuticals. Just twelve years ago, some of the large integrated energy companies had price-to-earnings ratios near 25x. Since that time, their earnings multiples have contracted to roughly 10x, yet some have grown their earnings per share by an impressive 250 percent over the same time period.
2012-04-25 Readers Questions Answered Part IX by Mark Mobius of Franklin Templeton
I agree with your outlook on the emerging economies. My concern is the Eurozone, where there is political and currency instability. There is talk that one or more countries may leave the Eurozone. This could be a shock to the financial world, affecting currencies, and banks with exposure may tumble. How would you assess this risk? I believe the Europeans are on the right track and are addressing the fiscal issues facing not only Greece, but other countries in the Eurozone. Ultimately, these are issues impacting all developed countries, includng the U.S. and Japan.
2012-04-25 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.
2012-04-25 Avoiding Equity Market Exposure by Team of American Century Investments
The year 2012 finds the search still on for income and capital appreciation with acceptably low volatility. Many investors remain leery of stocks and are also interested in opportunities that possess low correlation to equity markets. In addition, the low interest rate environment presents difficulties for those trying to achieve total return goals by relying on fixed income investments. Given these issues, some may wish to learn more about the techniques utilized by many equity market-neutral (EMN) strategies.
2012-04-24 65+5+Dividends: The case for quality dividend stocks in the first five years of retirement by Legg Mason ClearBridge Advisors (Article)
Retirees are living longer than ever before, and for many, outliving their money is a real concern. A good reason to consider quality large-cap dividend stocks in the early years of retirement - which have historically offered higher returns than fixed income with lower volatility than equities overall.
2012-04-24 Why a 60/40 Portfolio isn’t Diversified by Alex Shahidi (Article)
Maintaining a balanced portfolio is critical, especially when predictions of growth and inflation vary as widely as they do today. Investors are always better off spreading risk than aggressively betting on one economic outcome, and that's especially true when the range of possible economic outcomes is so wide.
2012-04-24 The Number One Priority for Advisors by Dan Richards (Article)
What's the single most critical need for advisors to succeed? There are lots of candidates – investment knowledge, communication skills, the ability to sell, and attracting and motivating a strong team.
2012-04-24 Letter to the Editor - Jeremy Grantham by Various (Article)
A reader responds to Jeremy Grantham's commentary, My Sister's Pension Assets and Agency Problems, which appeared on April 19.
2012-04-24 SteelPath MLP Alpha Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds
Though the MLP sector provided positive returns this quarter, the sectors performance lagged that of the broader markets. The MLP sector, as measured by the Alerian MLP Index, produced a total return of 1.97% for the quarter versus the 12.59% total return of the S&P 500 Index. The broader market rally appeared to have been sparked by some encouraging domestic economic data and seeming improvement in the Eurozone. Given that the industries represented by the S&P 500 Index often have greater exposure to general economic trends than MLPs, this broader market outperformance is not surprising.
2012-04-24 SteelPath MLP Income Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds
Looking forward, we expect to see varied performance across MLP sub-sectors. We believe headwinds remain for propane, natural gas storage and coal, and growth opportunities are likely limited for interstate natural gas pipelines. However, growth opportunities related to growing domestic natural gas liquids and crude oil production are varied and substantial in our opinion. We continue to expect robust acquisition activity within the sector as traditional owners of midstream assets continue to rationalize their asset portfolios.
2012-04-24 SteelPath MLP Select 40 Fund Quarterly Commentary by Gabriel Hammond and Stuart Cartner of SteelPath MLP Mutual Funds
Sector performance for the quarter was characterized by a continued appreciation for partnerships exposed to oil and NGL rich shale plays and the corresponding growth opportunities. Additionally, both sectors and names that were neglected last year received attention during the quarter while investors took profits in investments that had outperformed over the past several months.
2012-04-24 Fixed Income Commentary First Quarter 2012 by John E. Villela, David W. Seeley and Barbara J. McKenna of Longfellow Investment Management
The ever‐changing regulatory environment must be watched closely. The new, onerous capital requirements directed at the broker‐dealer community will make it more costly for broker‐dealers to hold inventory on their balance sheets. This will affect the cost of liquidity by making transactions more expensive in the marketplace. In addition, potential changes to money market regulations, which could include allowing the net asset value to float, could force a number of market participants to seek alternative fixed income solutions such as cash or short duration strategies.
2012-04-24 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.
2012-04-24 A Risky Business by Russ Koesterich of iShares Blog
In todays low yield environment, fixed income investors face a stark choice: accept lower income or take on additional risk to generate incremental yield. In assessing these two options, investors must start with their own tolerance for risk and investment objectives. For those willing to take on additional risk, I continue to advocate reducing duration risk, for which investors are not being adequately compensated, and modestly increasing exposure to spread products. I currently see opportunities in Investment Grade US Corporate Debt and Emerging Market Bonds.
2012-04-24 Sell in May and go away? by Beth Vanney of Columbia Management
Sell in May and go away is a popular Wall Street adage referring to the belief that returns from October through April tend to be higher than returns from May through September. We thought it a timely topic to investigate paying particular attention to the election year cycle. Sell in May and go away? Not based on this analysis. The returns for October-April may be higher in general, but the absolute level of returns from May-September is still good, and slightly higher in an election year.
2012-04-23 Emerging Asia Pacific: Economic Review 1st Quarter 2012 by Team of Thomas White International
Emerging Asia Pacific economies, which reported dismal economic numbers during the fourth quarter of 2011, recovered some lost ground during the first quarter of 2012. Export-led growth in many Asian countries, which had come under pressure during the last months of 2011, witnessed slight improvements in 2012 thanks to receding fears about a sovereign debt crisis in the EU and a stronger-than-expected recovery in the U.S. China, the regions largest economy, however, signaled that it will accept a slightly lower growth rate of around 7.5 percent over the coming years.
2012-04-23 Middle East/Africa First Quarter 2012 Economic Review by Team of Thomas White International
While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the regions trade, tourism, remittances and other exports receipts. According to the World Banks Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.
2012-04-23 Spring 2012 Quarterly Commentary by Jonathan A. Shapiro of Kovitz Investment Group
Theres an old adage about a six-foot tall man who drowned crossing a stream that was five feet deep on average. We believe the lesson here is well worth heeding. In investing, its not enough to survive on average. Investment survival depends not on how well one performs during periods of market euphoria, but how well you navigate through the rocky episodes. One of the byproducts and, indeed, one of the most important aspects of investing scared is that it obliges us to make sure the downside risk of our portfolios is limited in bad times.
2012-04-23 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 Decoding Duration to Better Understand Your Portfolio by William G. De Leon and Ravi K. Mattu of PIMCO
Duration is often used as a shorthand way to communicate the interest rate risk of a fixed income portfolio. We frequently encounter duration quotations presented as though no subtleties exist. These quotations average duration exposures across maturities and across currencies, implicitly assuming that yields across maturities and currencies are equally volatile and perfectly correlated. We approach the task of understanding interest rate risk with a more complete view of the risk dynamics driving interest rate sensitivity.
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 Maybe Diversification Is Not All It's Cracked Up To Be by Chuck Carnevale of F.A.S.T. Graphs
As I began digging into the many faces of diversification, I quickly learned that it is a much more complex concept than at first meets the eye. I feel I learned that there is no one-size-fits-all or even a set of universally applicable rules or principles. To a great extent, diversification turns out to be a very personal issue. How much or how little depends more on your goals and objectives, the knowledge and experience you possess, the time you can allocate to your investment portfolio, and of course, your tolerance for risk. Some of us need a great deal of diversification.
2012-04-20 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 How European Politics Could Impact Markets by Mohamed A. El-Erian of PIMCO
Fed up with how all the economic, financial and policy news out of Europe have been contributing to equity market volatility? Well, not only will this continue but, now, we must also get ready for something new over the next few weeks: the impact of elections. In addition to their consequential national impact, the series of forthcoming elections involve cross-border implications that influence prospects for regional policy coordination and, therefore, the nature and speed of the solutions for Europes debt crisis.
2012-04-20 Weighing the Evidence of Oil and Gold Stocks by Frank Holmes of U.S. Global Investors
We believe in thinking contrarian and keeping a close eye on historical trends to discover inflection points, as stocks tend to eventually revert to their means. For example, in March 2009, we noted significant changes signaling the market had hit rock bottom; following that time through the end of the first quarter, the S&P 500 Index rose more than 100 percent. Todays extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.
2012-04-20 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.
2012-04-19 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.
2012-04-19 Price and Waistline Stability Prove Elusive as Inflation Creeps Up by Scott Colyer of Advisors Asset Management
The long-time trends are firmly in support of consistent price inflation during the history of the US. Inflation is a natural inclination for people, businesses, politicians and central banks. Given the Feds ultra-easy monetary policy aimed at creating inflation, we will eventually see it. Higher inflation requires investors to rethink where they invest. Cash and fixed income do little to cope with inflation and actually can be losers if held at times of higher than normal inflation rates. We think investors should take advantage of current bargains in real estate and equity asset prices.
2012-04-18 Stock Picking in a World of Profit Margin Mean Reversion by Bill Smead of Smead Capital Management
We feel investors should avoid capital intensive companies which are tied to commodities or emerging markets. As interest rates rise and capital becomes dear, those who eat capital lose and those with strong balance sheets and who generate high and consistent free cash flow, should win. As Buffet, Grantham, Hutchinson and Stein pointed out, someone loses in the reversion to the mean of profit margins when compared to GDP. Lastly, dont be fooled by those who are bearish on the stock market because of their belief in profit margin reversion.
2012-04-18 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 Balancing Perception, Reality, Equities and Fixed Income by Team of Franklin Templeton
Never underestimate the power of perception to influence peoples fiscal behavior. Perception is such a significant influence, in fact, that economic tea-leaf readers have developed a myriad of surveys and indicators to monitor individuals perceptions of the investing environment because perceptions canand domove markets. When sentiment is negative, investors tend to shift out of assets they perceive as risky and into assets they perceive as safe. Ed Perks, portfolio manager of Franklin Balanced Fund and Franklin Income Fund, is well aware of the role perception plays in the markets.
2012-04-18 Ride the Wave of Crude? by Brad Sorensen of Charles Schwab
Crude-oil prices have moved steadily higher over the past several months, but the move may not be sustainable.
Geopolitical tensions are unpredictable, but the response in demand to rising prices has become more rapid, and we see other downside risks.
Investing directly in the energy sector may not be the best way to try to benefit from rising oil prices, given new investing options, along with companies' various costs and sources of revenue.
2012-04-17 The Real Reason to Worry about Oil by Robert Huebscher (Article)
Few question the prevailing wisdom that tensions with Iran have caused the recent rise in oil prices. But another possibility exists - and it's a much greater long-term threat to economic growth.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 Letters to the Editor by Various (Article)
We have several letters from readers, including one in response to Lisa Keung's article on myths about women and investing and one in response to a recent commentary by Dan Ariely.
2012-04-17 Investor Question: Gold or Gold Miners? by Russ Koesterich of iShares Blog
The Fed may be the best friend gold investors ever had. The most important factor for gold is actually not inflation or the dollar, but rather the level of real interest rates. In fact, the relationship between gold and real rates is so critical that since 1990, the level of real rates explains roughly 60% of the annual performance of gold. Gold generally does best in an environment in which real rates are low to negative as this means no opportunity cost to holding gold. Since 2003 when gold began its long-term outperformance we have been in just such an environment.
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 Asia-Pacific Portfolio Committee on PIMCOs Cyclical Outlook by Robert Mead, Tomoya Masanao and Ramin Toloui of PIMCO
We do not expect to see aggressively expansionary policy to combat the incremental economic slowdown in China. We believe that most countries in emerging Asia will continue to put their currency appreciation on hold, as inflation is expected to remain subdued over the cyclical horizon.
We are concerned about the sustainability of Japans economic growth beyond 2012, as the governments reconstruction spending will fade in 2013. Relatively speaking, Australia is indeed a beneficiary of higher commodity prices as a result of the strong demand for coal, iron ore and liquid natural gas.
2012-04-17 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.
2012-04-16 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 Hold In There...Still Good News by Christian Thwaites of Sentinel Investments
First quarter markets flirted with euphoria. Jobs numbers were good, the Fed kept its head and confirmed a stable policy, Europe was quieted through the LTRO feedstock and corporate earnings looked good with the bank stress tests and a California fruit company powering ahead. But, understandably, and as with any attention disorder patient, markets need caring support. The catalyst for the recent drops was surprisingly benign: Spain and Italy are finding it tough to implement austerity, the Fed is not promising QE and earnings are going to be spotty. Still we haven't changed our outlook.
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 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 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.
2012-04-12 Diversification 201: Implications of Diversification for Investor Behavior by Team of American Century Investments
Here we look at diversification as a tool to address many classic failings identified by the science of behavioral finance. Earlier we explained the rationale behind diversification and how it can be used for structuring a portfolio to help manage risk and maximize risk-adjusted performance. We also provided an Intro to Alternatives meant to highlight the types of strategies that can be used to diversify a traditional portfolio. In future months well address such topics as diversification in a post-Financial Crisis world, and what types of diversification strategies make the most sense.
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 Newtonian Profits by Neel Kashkari of PIMCO
Today many equity investors are asking whether corporate profit margins can stay strong. Stock prices today are anchored on strong profits, hence investors intense focus on the sustainability of those profits. If they fall, stock prices are likely to follow. No doubt individual companies and sectors will face margin pressure. But for the equity market as a whole, our central scenario is for corporate margins to remain strong in the near future. We are buying individual companies we like based on our analysis of their own fundamentals in the context of the economic environment they are in.
2012-04-12 Benjamin Graham's The Intelligent Investor: Chapter Eight by Kendall J. Anderson of Anderson Griggs
There are only five pages dedicated to bonds in Chapter Eight. But, these five pages had such major influence on my early years as an advisor. And once again, it is those pages that are sending me a reminder as to why I should not buy bonds today. Given the current interest rates, I would strongly suggest any and all bond investors read these pages. I can assure you that Mr. Buffett has.
2012-04-12 Volatility Is Not Risk by Chuck Carnevale of F.A.S.T. Graphs
Rogers blog dealt with his feelings about a recurring theme in Barrons over the weekend referencing peoples complacency for risk. The first part of his writing dealt with the risks associated with the utilization of puts. On this subject, Roger and I are in agreement. However, the second part of his blog talked about what he felt was the great risk of using dividend paying equities as an alternative investment choice. The following analysis utilizing the F.A.S.T. Graphs earnings and price correlated research tool illuminates the important parts that I feel Roger left out.
2012-04-11 Cullen/Frost Bankers Inc.: A Financial Institution Investors Can Bank On by Team of F.A.S.T. Graphs
We believe Cullen/Frost Bankers Inc. represents an excellent opportunity for investors seeking a well-managed financial with an above-average dividend yield and excellent track record based on conservative and prudent business practices. The fact that this financial has strung together 18 years of dividend increases through the financial services industrys most difficult times is a testament to the quality and management of this banking institution. Therefore, investors seeking an attractive and growing dividend yield might want to consider a position in Cullen/Frost Bankers Inc.
2012-04-11 Carlisle Companies Inc.: Accelerated Earnings Potential and a Growing Dividend by Team of F.A.S.T. Graphs
Carlisle Companies Inc. appears to be poised for accelerated earnings and dividend growth. Even though this company offers a below-market current yield, it is a Dividend Champion with 25 years of raising their dividend. On the other hand, the accelerated expected earnings growth should lead to a rapidly increasing future growth yield that could reward shareholders that are more concerned with future income than current. Investors seeking above-average capital appreciation, coupled with a dividend that could grow at above market rates might want to look deeper into Carlisle Companies Inc.
2012-04-11 Will Baby Boomers Wreck the Market? (The Sequel) by Gary D. Halbert of Halbert Wealth Management
The basic premise behind the idea that Baby Boomers might lay waste to the stock market makes sense intuitively. The idea is that as Boomers retire, they will shift assets away from stocks to less risky alternatives such as bonds, annuities, CDs, etc. and begin living on the interest. All of this selling activity, the story goes, will put downward pressure on stock prices and lead to a major selloff.
2012-04-11 A Balancing Act by Mark Mobius of Franklin Templeton
The balancing act between inflation and growth that economies often face is perhaps even more pronounced in the emerging markets world: stimulate growth too much, and inflation could flare, but stamp out inflation too hard, and growth could freeze. The fire of inflation seems to have moderated and some central banks have taken actions to stimulate growth. I believe the fundamentals in many emerging markets look supportive of these actionsas long as it doesnt tip out of balance. Inflation is a big challenge, and I believe it will probably be a very important consideration going forward.
2012-04-11 Municipal Bonds: What a Difference a Year Makes by Team of Franklin Templeton
Nows an exciting time for investors to consider this asset class, which is on firmer footing today. In brief: We believe the fear and dire predictions about municipal bonds last year were largely unfounded and misguided. We think the municipal bond market is now trading on strong fundamentals. Fiscal constraints remain in the marketplace; we need to be disciplined and responsible in our investing. In our opinion, its nonsensical to compare the U.S. municipal marketplace to sovereign-debt countries. We are staying more defensive; we think its the most prudent course of action.
2012-04-11 Time to Exit Emerging Markets? by Russ Koesterich of iShares Blog
Is it time to sell emerging market equities? Thats what many investors are wondering given that emerging market stocks are up significantly since fall lows and have modestly outperformed developed markets year to date. Despite emerging markets strong recent performance, I believe there are two major reasons why investors should still consider overweighting select countries relative to their weight in the MSCI ACWI benchmark. Cheap Valuations and Falling Inflation.
2012-04-10 Flexible Strategies for Longevity Protection: Comparing Two Products by Joe Tomlinson (Article)
Products that guarantee income for life can be useful for retirement planning, but many clients also want flexibility and control over their investments. Two products that can meet these objectives are variable annuities with guaranteed lifetime withdrawal benefits (VA/GLWBs) and deferred income annuities (DIAs).
2012-04-10 The Importance of Being Earnest by Neil Eigen and Richard Rosen of Columbia Management
If the buy low/sell high investing maxim is self-evident, why dont more investors do it? In 2007, corporate pension funds had close to 70% of their assets in stocks, yet at the bottom, bonds and cash accounted for more than half of the mix. As an investor, how can you avoid being part of the buy high/sell low crowd? Fundamentals are more important than themes. Some people can time the markets, but that probably doesnt apply. We prefer a simple, get rich slow strategy, which may be possible if you maintain a disciplined investment approach in concert with a reasonable set of expectations.
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 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 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 The Fed Shifts Gears by Milton Ezrati of Lord Abbett
The Federal Reserve, while continuing to hint at future quantitative easing (QE), seems at last to have also felt a need to address the longer-term inflationary risks of such policies. Accordingly, Fed chairman Ben Bernanke unveiled a new approach to quantitative easing, what he calls "sterilized QE." It, he claims, would both support markets (and the economy) and at the same time guard against any longer-term inflationary consequences. Though there is good reason to harbor skepticism about the technique he has outlined, this recent change in tone does offer encouragement.
2012-04-09 Investment Grade Bonds Still Attractive by Tom Murphy of Columbia Management
We continue to find investment grade corporate bonds attractive. Even after a strong start to the year, corporate bond spreads are anywhere from 20-90 basis points above their 20 year averages. This historical absolute valuation advantage is also buoyed by attractive relative valuations versus Treasuries spreads as a percentage of overall yield are currently from 1.8 to 2.4 standard deviations above their 20 year averages. Aggregate corporate credit metrics are also basically as good as they have been any time over that 20 year period, and companies maintain tremendous financial flexibility.
2012-04-07 It's All About Jobs by John Mauldin of Millennium Wave Advisors
Friday's employment numbers were decidedly soft, but the unemployment rate went down anyway, and that is about the best you can say. And this being a holiday weekend, it provides us an opportunity to look deep into the employment numbers, while we put off thinking about Spain for at least a week. And who knew that being an unmarried Asian-American in the US was a risk for unemployment? Plus a few other interesting items will make for an interesting letter.
2012-04-06 If You Think All Utility Stocks Are The Same - Think Again by Chuck Carnevale of F.A.S.T. Graphs
Utility stocks, especially regulated utility stocks share certain characteristics that differentiate them from the typical dividend growth stock. On the plus side, utilities are thought of as predictable stocks with low volatility characteristics. Utility stocks also tend to provide a higher current yield than many dividend growth stocks. On the other hand, all of this consistency comes at a sacrifice of growth. Since the typical utility has a significant portion of their businesses regulated, their ability to grow earnings and dividends is restricted.
2012-04-05 NewsLetter - April 2012 by Harold Evensky of Evensky & Katz
Although we continue to believe in the tenets of Modern Portfolio Theory, the concept is Buy-and-Manage not Buy-and-Forget. As a consequence, we made numerous adjustments to our strategic allocations over the years. And, consistent with our buy-and-manage philosophy, for the last few years weve been studying investment markets and have come to believe that long-term future returns are likely to be even lower then we estimated in 2002, market risk will be higher and the benefits from diversification less (i.e., correlations will be higher).
2012-04-05 CACI - Growth at a Ridiculously Low Price by Chuck Carnevale of F.A.S.T. Graphs
We believe that CACI it is extremely high-quality Defense Company with a niche that is currently being unfairly discounted by Mr. Market. The company possesses a predictable and consistent opportunity for continued double-digit earnings growth that is significantly in excess of the average company. Nevertheless, it can currently be purchased at a significant discount to the average company. This company pays no dividends; it is purely an opportunity for growth that can currently be purchased at a significant discount to its True Worth.
2012-04-05 Shifting Focus: Behind Country Valuations Today by Russ Koesterich of iShares Blog
As the European financial crisis raged last fall, investors were closely monitoring metrics like credit default swaps and yields on Italian bonds to determine where to place their country bets.
But 2012 has brought some stability to the eurozone and with it weve noticed a shift in the types of indicators that investors should be tracking when it comes to determining country valuations metrics that show economic growth.
2012-04-05 Global Equities: Building a Research Mosaic for the Information Age by John Longhurst of PIMCO
As a result of increasing correlations across the globe, identifying the best global franchise opportunities at attractive valuations is becoming increasingly important. We believe that taking a broader global perspective and comparing a companys valuation and growth outlook versus their global competitors is just as germane as looking at them relative to their country or region. Identifying Chinese and non-Chinese companies that will gain and lose in this process is a critical long-term challenge when constructing a global portfolio and not an easy one.
2012-04-04 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 Drilling Into Fuel Prices by Team of Franklin Templeton
Gasoline, deodorant, dishwashing, liquid, eye glasses, crayons.What does this list of seemingly random items have in common? They are all made from refined crude oil.1 So even if you dont feel pain at the gas pump, you probably rely on more products made with or from crude oil than youd think. And of course even non-oil based products are generally shipped via fuel-consuming transport vehicles, so youre bound to feel the pinch in the form of fuel surcharges or price hikes sooner or later.
2012-04-03 Fewer, Richer, Greener: Why Jeremy Grantham is (Partly) Wrong by Laurence B. Siegel (Article)
Is the human experience getting better or worse? This is a big question investors are rarely asked to confront, yet its answer has profound consequences for market returns.
2012-04-03 Senior Loans Attractively Priced Relative to High Yield by OppenheimerFunds, Inc. (Article)
By restoring confidence in the global financial system, the European Central Bank's Long Term Refinancing Operation has allowed global bond investors to participate in attractive opportunities around the world.
2012-04-03 A Q1 Letter to Clients: Bernanke, Buffett and Siegel on the Prospects Ahead by Dan Richards (Article)
Here is a template for a letter to serve as a starting point for advisors looking to send clients a summary of what's happened in the past 90 days and the outlook for the period ahead.
2012-04-03 The 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 Overcoming Financial Repression with High Yield Bonds by Peter Ehret of Invesco
In this current low-interest rate environment, we see value in the high yield market, especially as the asset class has proven to provide relative attractive returns not only when compared to treasuries and investment grade corporate bonds but also when compared to the typical inflation-hedging asset classes such as equities. Furthermore we feel the strong fundamentals in the asset class additionally bolster the positive story for high yield bonds. In summary, we believe that allocating a portion of ones investment portfolio into high yield bonds may help investors.
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 The Long and Winding Road, Part 2 Closer to the end than the beginning by Ron Sloan and Clint Harris of Invesco
Three years ago, we published an article outlining our long-term view that a generation of economic tailwinds had become headwinds leading to a period of volatile, trendless markets that would create opportunities for disciplined investors. Were certainly closer to the end of this journey than the beginning, but we believe were facing an important transition period for earnings and valuations that will create a narrower opportunity set than the one we saw three years ago when the current cycle began. Today, companies are faced with a two-part dilemma.
2012-04-03 Time to Pay the Piper by Frank Holmes of U.S. Global Investors
One way investors can offset higher tax rates is through municipal bonds. In general, interest generated from municipal bonds is exempt from all federal income taxes and some state and local taxes (depending on your state). While municipal bonds carry a greater amount of risk than Treasury bonds, tax advantages and higher yields make them extremely attractive to Treasuries on a relative basis. The yield on government debt is currently in the doldrums just above 3 percent while the yield on the Bond Buyer 40 Index of munis is above 4 percent.
2012-04-03 The Value of Sentiment Polls by Bill Smead of Smead Capital Management
In our opinion, those who are very bearish about the US stock market need a substantial price increase to trigger historically extreme newsletter writer sentiment. Those who are optimistic should prefer a temporary correction or sideways movement to reinforce fear on the part of the crowd. This would cause the bullish and bearish readings to gravitate to toward each other and remove the risk of having some temporary hell to pay for those of us who seek to practice long-duration common stock investing.
2012-04-03 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 1Q 2012: Why The Rally Can Last by Chuck Royce of The Royce Funds
We're seeing one of those rare occasions when one of our predictions for the market as a whole worked out almost exactly the way we thought it would. For a while now, we have been noting the disjunct between the very negative and alarmist headlines and the more optimistic view our own analyses and contacts with managements were revealing. It seemed to us as early as last September that the economy was in better shape than the conventional wisdom was suggesting.
2012-04-02 The Outlook for the U.S. Dollar by Nic Pifer of Columbia Management
On a trade-weighted basis, the U.S. dollar was largely unchanged in the first quarter of 2012. We expect a broadly similar story in both the near- and medium-term, with the balance of structural and cyclical weakness across the major economies providing little clear direction for the U.S. currency. For sure, movements of 5% or more in the trade-weighted dollar are always possible, reflecting short-term swings in investor sentiment and the normal volatility of currency markets. But we do not expect sudden moves in either direction to be sustained.
2012-04-02 When Will Corporate Cash Flow? by Milton Ezrati of Lord Abbett
One of the great constants in this otherwise inconstant environment is the strength of corporate finances. Financial excesses and the need to de-leverage concern governments and households, not the corporate sector, which actually came out of the 200809 financial crisis and recession with its finances in good order, and has only strengthened them since. The question now is how and when companies will deploy these impressive financial resourceswhether on capital spending, hiring, or, especially, on the mergers and acquisitions (M&A) that typically proceed from strong corporate finances.
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 Singapore Gateway to Southeast Asia by Mark Mobius of Franklin Templeton
Viewing the region from the now 20-year old seat of our Singapore office, what we see in Southeast Asia is a generally favorable combination of rising per-capita incomes and a relatively young population, a recipe with the potential to fuel the appetite for a wide variety of consumer goods. The challenges Southeast Asian markets face must not be easily dismissed, but overall I am optimistic about the regions long-term growth potential.
2012-03-29 Should you be Concerned About the U.S. Government Debt? by Jason Hsu of Research Affiliates
Should investors be concerned about the size of the U.S. government debt? Does it matter who owns the debt? This months Fundamentals, authored by Research Affiliates CIO Jason Hsu, examines the implications for future consumption and investors portfolios.
2012-03-29 1Q2012 Japan Commentary by Patricia Higase of Rising Funds Capital Management
As the Japanese equity markets enter the last week of the first quarter, the TOPIX has gained approximately 19.8% year to date. Translating this into U.S dollars, investors gain approximately 12% in returns year to date. The primary change moving the Japanese equity market has been the yen weakening approximately 8% from the end of 2011. General global stabilization and risk aversion abating have also contributed towards the markets recent moves.
2012-03-29 Asset Allocation Committee Outlook by Team of Neuberger Berman
The resurgence of risk appetite witnessed in late 2011 has continued, with most major equity indices up in double digits for the year-to-date. In contrast, fixed income indices have posted very modest and, in some cases, negative returns in the first quarter. Much has been accomplished in the U.S. and globally that has contributed to the now six-month-old equity rally. However, concerns remain. Given this picture, the Asset Allocation Committee's core view remains steadyunderweight bonds, overweight equities.
2012-03-29 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.
2012-03-29 Stocks: Still a Bargain by Russ Koesterich of iShares Blog
With global stocks up approximately 25% from their fall low and many market watchers endorsing equities in recent weeks, its hardly surprising that investors are wondering if stocks are still a good bargain. While some measures of sentiment notably abnormally low volatility levels could be interpreted as flashing yellow caution signs, valuations and fundamentals still favor global stocks over the long term. Currently, equities look reasonably priced. Developed market equities are trading at around 14.5x trailing earnings, while large emerging markets are trading at roughly 12x earnings.
2012-03-28 Our First Five Years by Gregory Nejmeh of HS Management Partners
As business owners, and as a long only investment manager, optimism is in our DNA. That said, we consider ourselves to be optimistic realists: optimists grounded in reality, and aware that we have to persevere through the inevitable difficult times while believing in and planning for the better days that lie ahead. In that regard, the axiom that the more things change, the more things stay the same has applicability in the investment business. The collective experiences weve had served us well during the turbulent markets we faced in 2007/8/9.
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).
2012-03-28 How to Access the EM Consumer? Think Small by Russ Koesterich of iShares Blog
Investors who are looking to gain exposure to emerging market domestic consumption may want to consider the small cap segment of emerging markets. I expect emerging markets to outperform based on low relative valuations, falling inflation and stronger growth. Longer term, emerging market stocks are likely to benefit from falling volatility and rising developed market volatility. However, if youre specifically trying to capture, and profit from, the secular rise of emerging market middle class consumers, its worth considering that small cap stocks provide a more targeted exposure.
2012-03-28 Challenges and Change in Brazil by Team of Franklin Templeton
Brazils economy is grappling with some interesting challenges right now, such as shifts in monetary policy to cope with a possible economic slowdown and preparing to host two major events on the international stagethe 2014 FIFA World Cup Brazil and the Olympics in 2016. Marco Freire, Franklin Templetons CIO, Brazil Fixed Income for the Local Asset Management team based in Sao Paulo, isnt sharing any locals-only secrets about either event, but hes happy to share his insights on how Brazil is approaching these challenges, and to clear up some common misconceptions about Brazils markets.
2012-03-28 The End of the 30-year Bond Bull Market? by Team of Knowledge @ Wharton
Is the great 30-year bull market in bonds coming to an end? Yes, perhaps -- or maybe not: It depends on whom you ask and how flexible your timing is. While many people think of bonds as conservative holdings, they have produced stellar returns for decades, thanks to the taming of inflation and other factors. But some experts say economic recovery could now reverse the process by driving interest rates higher, causing bond prices to fall.
2012-03-27 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 Questions of Character by Michael Lewitt (Article)
As a long-time investor in leveraged companies, the character of management has long informed my decisions of where to direct capital. There is no margin of safety when you invest in a company managed by dishonest or reckless managers, or a management team that has a history of placing its own interests before those of its shareholders or creditors. The same is true of choosing an investment manager.
2012-03-27 Letter to the Editor – Jeremy Grantham by Various (Article)
A reader responds to Michael Edesess' article, Jeremy Grantham: This Time is Different, which appeared last week.
2012-03-27 Housing Boom? Not Yet by Russ Koesterich of iShares Blog
Despite some recent signs the US housing market may be stabilizing, Russ explains why he doesnt expect a strong housing rebound in the near term and doesnt advocate aggressively leveraging to housing-related investments.
2012-03-27 The demise of risk-on / risk-off and the emergence of heteroscedasticity by Jason Doiron of Sentinel Investments
I estimate that I inadvertently watch 12 hours of financial news programming per day. Too much television? perhaps, but for a portfolio manager it has become an occupational necessity. One of the greatest benefits to watching this much television is that I can recite verbatim every commercial that plays on CNBC with no clue which company is sponsoring the ad - pig on a skateboard anyone? The other benefit is that I am provided with a front row seat to a rogues gallery of pundits who describe the complexities of the financial markets through sound bites.
2012-03-27 The Great Escape: Delivering in a Delevering World by Bill Gross of PIMCO
When interest rates cannot be lowered further or risk spreads significantly compressed, the momentum begins to shift, gradually yields moving mildly higher and spreads stabilizing or moving slightly wider. In such a mildly reflating world, unless you want to earn an inflation-adjusted return of minus 2%-3% as offered by Treasury bills, then you must take risk in some form. We favor high quality, shorter duration and inflation-protected bonds; dividend paying stocks with a preference for developing over developed markets; and inflation-sensitive, supply-constrained commodity products.
2012-03-27 Bernanke's Problem with the Gold Standard by Axel Merk of Merk Funds
In his new lecture series, Federal Reserve (Fed) Chairman Ben Bernanke is going out of his way to discuss the "problems with the gold standard." To a central banker, the gold standard may be considered "competition," as their power would likely be greatly diminished if the U.S. were on a gold standard. The Fed, Bernanke argues, is the answer to the problems of the gold standard. We respectfully disagree. We disagree because the Fed ought to look at a different problem.
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.
2012-03-27 Uncovering Equity Yield Traps by Team of American Century Investments
As the low interest rate environment persists, uncertainties continue even as new marketplace concerns begin to emerge. This observation is especially applicable to investors that are desperate for current income opportunities. In their search for equity investments, many will opt to screen for opportunities using current yield as the main filtering criterion. In situations such as this, those in hot pursuit of rich rates find themselves at risk of falling prey to nasty yield traps. Although yield traps exist in the fixed-income space, this piece focuses on yield traps involving equities.
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 Are We Approaching a Second Banking Crisis? by Matt Lloyd of Advisors Asset Management
So, even though we saw healthy growth and returns to investors over this time requiring patience during the credit crunch of 2008 when returns were negative the market has built up a large base of holders to offset the lack of primary dealers holding net positions. It still brings to bear whether these positions have been measured for duration risk in case of higher rates as we have discussed many times before; however, demand for yield and risk aversion has at least tempered the loss of primary dealers utilizing capital.
2012-03-26 Economic Insights: Fear, Bank Lending, and Fed Frustrations by Milton Ezrati of Lord Abbett
The Fed recently released the results of its latest survey of senior bank officers. Like the economy, the bankers' attitudes were mixed. Things have improved over the past year. Bankers on balance have shown a greater willingness to extend credit. But still, they remain very cautious. Understandable after the losses of 200809, this lingering reluctance to lend offers yet another explanation as to why this economy's recovery has proceeded so slowly to date, and will likely continue to do so for some time to come. Still, there are tentative signs that the environment is easing.
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.
2012-03-23 Emerging Markets Real Estate Securities - Investment Review & Outlook February 2012 by Team of Cohen & Steers
As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures continue to moderate. Given the potential for better domestic growth in such an environment, we expect to take advantage of buying opportunities among residential developers. Our favored markets include Brazil, based on its natural resources, growing consumption trends and shareholder-friendly business environment. We particularly like the retail market, which continues to exhibit strong fundamentals.
2012-03-23 Diversification at the Core by Team of Franklin Templeton
The late Sir John Templeton was certainly a champion of diversifying ones basket of investments. And so is Tucker Scott, portfolio manager for Templeton Global Equity Group and manager of Templeton Foreign Fund. Diversification is at the core of his investment strategy. A summary of his recent remarks: We try to find stocks that we believe are undervalued, then build a portfolio thats well-diversified by industry and by country. We try to limit position sizes in an attempt to help limit potential stock-specific risk.
2012-03-23 Global Listed Infrastructure - February 2012 Review & Outlook by Team of Cohen & Steers
We have a positive near-term outlook for infrastructure securities based on improving U.S. economic data and stabilizing credit conditions in Europe. But our optimism remains tempered by rising sovereign debt levels in Europe and the United States and a likely protracted period of economic hardship in the European periphery. Emerging markets are likely to be somewhat stronger, in our view, driven by better structural demand and monetary easing. For this reason, we have increased our investments in Brazil, China and Mexico.
2012-03-23 Is There Still Income in Fixed Income Today? by Joni Clark of Loring Ward
The extraordinary performance of fixed income investments in the past few years resulted from a combination of slow economic growth, low inflation and aggressive intervention by the Federal Reserve. These unusual factors are unlikely to be repeated over the next 30 years, and these unexpected returns simply cannot reoccur.
2012-03-22 The Case for Chinese Stocks by Russ Koesterich of iShares Blog
Chinas recent lowering of its growth target made some investors nervous that the country may be in for a period of sluggish growth. Russ, however, believes that a hard landing can be avoided, and he continues to advocate overweighting Chinese equities for three reasons.
2012-03-22 Why Gold Can Go the Distance by Frank Holmes of U.S. Global Investors
Golds been knocked down lately, but several enduring factors have conditioned the yellow metal for an inevitable comeback. Since the beginning of 2012, gold has trailed its precious metals peers, gaining only about 6 percent compared to double-digit returns for silver and platinum. At the end of February, gold was especially hard hit, following Ben Bernankes announcement that there would be no additional quantitative easing and the European Central Bank offering additional LTRO loans to banks.
2012-03-22 Regulated Energy: Rise and Shine by Josh Olazabal, John Devir and Jennifer Seo of PIMCO
Regulated energy companies natural gas pipes, gas utilities and electric utilities have generally been seen as the sleepy cousins of more exciting energy subsectors like exploration and production, or coal extraction and production. But we have witnessed a number of events and regulatory developments in recent years that we believe are re-energizing the regulated energy subsector, more clearly distinguishing it from other members of the energy sector family and providing the potential for an abundance of opportunity for astute investors.
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 Falling Treasuries: A Currency Perspective by Axel Merk of Merk Funds
What are the implications for the U.S. dollar and investors portfolios if bond prices continue to fall, as they have of late? Within that context, should investors care whether the U.S. retains its status as a reserve currency? Should it effect the way investors think about their own cash reserves?
2012-03-21 Money Market Fund Reforms The Debate by Guy Holbrook of Columbia Management
When looking back over the last few years at the money market sector it clearly has been a tumultuous period for an industry that had traditionally been viewed as stable and secure, all while providing daily liquidity for shareholders. It became evident, however, when the Reserve Primary Fund Broke the Buck in 2008 that safeguards needed to be enacted in order to protect both shareholders and the industry. There are currently three main schools of thought being debated when it comes to potential additional reforms ahead for the Money Market industry.
2012-03-21 Why Convertible Bonds Should Be Part of Your Asset Allocation by Gary D. Halbert of Halbert Wealth Management
Im going to let you hear from Greg Miller about convertible bonds. Not only will Greg tell you how they work, but also why they can be an important diversification technique in your portfolio even now when other types of bonds are falling out of favor. I believe that many of you will want to have convertible bonds in your portfolio before long. The interest rate increases weve seen over the last couple of weeks may be a sign that the long bull market in traditional bonds is rolling over to the downside. Convertible bonds offer opportunity even during periods of rising interest rates!
2012-03-20 Jeremy Grantham: This Time is Different by Michael Edesess (Article)
Jeremy Grantham is a paradox. A man who has said many times, 'This time it's different are the four most dangerous words in the English language,' is now saying - loud and clear - this time it really is different.
2012-03-20 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 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 Economic Insights: Bernanke's Drama Strikes a Chord by Milton Ezrati of Lord Abbett
The chairman has shown clearly that all policyboth fiscal and monetaryfaces quite a balancing act. The Fed, which has already done a great deal to support financial markets and the economic recovery, has reason already to worry over longer-term inflationary pressures. But it cannot remedy matters if the federal government fails to do its job of fiscal reform while protecting the economic recovery. Bernanke has made it clear that there are no easy answers, because all the pieces of the puzzleeconomic growth, inflation, monetary policy, and fiscal policydepend on each other.
2012-03-20 An Actively Passive Debate by Chris Maxey of Fortigent
The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.
2012-03-20 Apple Does Not Need its Cash to Grow as Much as its Shareholders Need it to Spend by Chuck Carnevale of F.A.S.T. Graphs
The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.
2012-03-20 Transmission Channels by Neel Kashkari of PIMCO
We believe the European debt crisis will likely flare up again, and equity investors should consider positioning portfolios to be more resilient against such a shock. A disorderly Greek default, if it occurs, would likely shock the eurozone and the globe via at least four transmission channels: the European banking system, European sovereign debt markets, corporate financing markets and regional trade. The shock of a massive Greek default would likely swing investor sentiment strongly toward risk off, putting pressure on equity markets globally.
2012-03-20 Has Anybody Seen My Old Friend Doomsday? by Bill Smead of Smead Capital Management
Commodities have never been more popular or seen wider participation in my 32 years in the investment markets. The idea that more people existing is justification for higher commodity prices has constantly been refuted over the last 100 years. For example, we feel that if more people means perpetually rising commodity prices, they would have gone up all the time. In our opinion, China's hard landing is already happening. When China's debacle is obvious to everyone, commodities and stocks related to them will be the lepers of the investment world.
2012-03-19 The Search for Yield in a Low-Rate Environment by Team of Franklin Templeton
There are always opportunities to capture yieldif you are willing to shoulder the price of the associated risk. In their words: We look at the return profile for a company historically, and we project that out three to five years. A low-interest rate environment generally benefits heavy borrowers, whose cost of borrowing will be kept low. We believe investors tired of little return may move out on the risk spectrum in search of more potential return. Dividends can indicate a company cares about its shareholders. Dividends look like theyre here to stay.
2012-03-19 Readers Questions Answered Part IX by Mark Mobius of Franklin Templeton
It doesnt make sense for any of the countries in the Eurozone to leave the Euro. Moving into another currency does not solve any problems. Thats why Im baffled when people say a particular country should leave the Eurozone. As I see it, the choice to exit a currency is not made by the government, its a choice made by the people. The good news is that the Europeans, in addition to providing more liquidity, are striving to get to the core of the problem by trying to impose fiscal discipline. For this reason, I think the outcome should be positive in the long term.
2012-03-19 Western Medicine by Neel Kashkari of PIMCO
Liquidity is buying time for European countries, but their economies are growing too slowly to support their debt loads. Just as there is no reason to assume U.S. household debt levels will continue to climb, there is also no reason to assume companies that benefitted from that debt-fueled spending will grow at historical rates. Until we see sustainable, real economic growth in America, we believe equity investors should carefully scrutinize the assumptions underlying consumer discretionary stocks and consider global companies that are selling into higher growth markets.
2012-03-19 Andrew Balls Discusses PIMCO's European Cyclical Outlook by Andrew Balls of PIMCO
The ECBs intervention has helped the European system undergo a slower and more orderly deleveraging process but it does not deal with the twin underlying problems of too little growth and too much debt in the countries at the center of the crisis. The eurozone faces a daunting set of challenges, including technical and economic challenges but highest on the list are politics and coordination. Greeces potential exit from the eurozone remains a significant risk and one that could lead to contagion across the eurozone as investors reassess the potential currency risk.
2012-03-17 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 The Truth About Earnings and How They Drive Stock Values and Shareholder Returns by Chuck Carnevale of F.A.S.T. Graphs
I wanted to clearly establish the importance of a comprehensive fundamental analysis before an investment decision is made. However, determining fair value from the perspective of the right market price to pay to buy a stock is a function of applying the appropriate PE ratio to reported earnings, and the recognition that, long-term rates of return are going to be a function of the companys earnings. Finally, my objective was to provide, conclusive and undeniable evidence that this theory actually works under real-world conditions. Fair market value is clearly a function of earnings.
2012-03-16 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 Peroni Report February: On The Edge of Something Big? by Gene Peroni of Advisors Asset Management
The Wall Street adage, Never sell a dull market short, might be particularly applicable at this juncture. The volatility index has been in a steady downtrend since last October and is now trading at an eight month low. Reviewing the charts of the 30 DJIA components reveals surprisingly similar horizontal compressed trends since January. Referring to on-balance volume characteristics, however, these flat-line patterns may be masking significant accumulation trends that could unleash considerable upside price pressure by the second quarter.
2012-03-16 Taking Rising Dividends to the Bank(s)! by Scott Colyer of Advisors Asset Management
Yesterday, the Fed was moved to release the latest round of stress test results for the largest 19 banks in the US one day early. Midday, JP Morgan announced a significant dividend increase which gave the appearance of jumping the gun so the Fed chose to make all of the results public late yesterday. The news caused prices of most U.S. banks to rise as the tests confirmed the continued progress being made towards strengthening their businesses. We believe that this is simply the beginning of a renaissance of the U.S. banks and their ability to grow earnings and dividends in the next few years.
2012-03-15 Diversification 101 by Rich Weiss of American Century Investments
In this edition of Weekly Market Update, Rich Weiss, discusses diversification-the rationale, the benefits, and ways to apply this approach. This is the first in a series of monthly write-ups on the topic with future pieces devoted to topics such as the state of diversification in a post-financial crisis world; portfolio rebalancing; and when and what types of diversification strategies make the most sense, among other topics. Outfitted with this information, investors can make better investment choices, improving portfolio diversification and risk-adjusted performance now and into the future.
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 You Can No Longer Say Corporates Without EM by Brigitte Posch and Ignacio Sosa of PIMCO
In our view, the risk profile for EM corporates has improved thanks to stronger sovereign balance sheets and economic growth prospects compared with developed markets. While EM corporates generally have not garnered as much attention as sovereigns, PIMCO expects that significantly more assets will be managed against an EM corporate bond index this year. The road ahead for risk assets may be bumpy. But PIMCO believes the case for focused EM corporate bond investing remains compelling based on improved credit fundamentals, a solid macro backdrop, and potentially attractive yields.
2012-03-15 Investment Management with a Conscience by Douglas Hodge of PIMCO
Earlier this year the Financial Times ran a series of editorials under the title Capitalism in Crisis. Contributors ranged from Bill Clinton and Alan Greenspan to FT editors Martin Wolf and John Kay. There was also a submission with the byline, Occupy London. While I am admittedly unable to add much to their collective wisdom, I think a sound analysis of capitalism requires an understanding of the role of the investment management industry within the financial services ecosystem."
2012-03-15 Where to Look for Dividends? Try Outside the US by Russ Koesterich of iShares Blog
With the dividend corner of the US equity market now crowded and expensive, Russ gives three reasons why investors might want to consider looking abroad for dividend income. More Reasonable Valuations: Outside of the US, dividend paying stocks still appear cheap and are trading at a significant discount to the broader equity market. More Attractive Yields: Non-US dividend companies are offering more enticing yields. Outperformance in a Slow Growth Environment: high dividend paying stocks tend to outperform during periods of slow growth like the one were experiencing this year.
2012-03-15 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 Par for the Investing Course by Team of Franklin Templeton
Theres a certain Hollywood mystique around the quest for The Next Great Investment. The un-glamorous truth, of course, is that unearthing hidden opportunities actually takes equal parts elbow grease and know-how. Par Rostom, is that roll-up-the-sleeves kind of guy. Hes not looking to invest in companies just because they are household names with splashy advertising campaigns. The companies are the ones he feels are best in their particular niche, but that youve probably never heard of. Surprisingly, hes finding some of them in the eurozone, a place the crowd is largely avoiding today.
2012-03-14 Why U.S. Investors Should Look Beyond Dividend Yield by Patrick O'Shaughnessey of O'Shaughnessey Asset management
Many investors are fed up with yields on fixed income securities and are in search of higher yield. As a result, U.S. stocks with high yields have become very popular with individual and professional investorsbut we believe that investors are looking at the wrong kind of yield. Though dividend yield works very well internationally, investors in U.S. stocks should instead focus on shareholder yield, a factor we have long advocated that has provided considerably stronger returns for U.S. stocks for more than 80 years.
2012-03-14 Pacific Basin Market Overview - February 2012 by Team of Nomura Asset Management
We still have a broadly positive view of the outlook for the Asia Pacific equity markets. The European Central Banks efforts to provide long-term liquidity support have alleviated the default risk among the peripheral Euro-zone countries. It also appears that the Federal Reserves easy money policy is beginning to have a positive impact on the U.S. economy. Given this optimism, we believe that equities in the region will continue to rally, particularly in the oversold cyclical sectors such as Industrials, Technology and Consumer Durables.
2012-03-13 Concentrated Equity Triple Play Higher Returns, Lower Risk, Lower Correlations by C. Thomas Howard, Ph.D. (Article)
Concentrating a portfolio on a few choice assets dramatically increases an investor's chance of superior performance. Nonetheless, most advisors and investors shun portfolio concentration as unacceptably risky. To a great extent, this is driven by the myth that adequate diversification is impossible unless one holds many stocks - a myth I will debunk.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
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 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 China and the Rising Cost of Oil by Matt Lloyd of Advisors Asset Management
While the markets and economy continue its path upward with each trepid step more anxious than the previous, the anxiety about future crude prices has now hit the political circuit. However, one base analysis that has seemed to slip memory is the correlation of Chinas growth and its growing demand of oil and the price of oil itself. What makes this important is the recent dichotomy that we are seeing in the underlying economic growth of China and the price of crude oil.
2012-03-12 EuropeAll Talk, Little Action by Milton Ezrati of Lord Abbett
Europes heads of state have done a lot of summiting and deal- making of late. Greece has voted for still more austerity. But on balance, the results have, again, disappointed. Though Europes monetary authorities have staved off Greek default, the more significant help for Europes sovereign debt troubles has come from the European Central Bank (ECB), which, at last, has begun to provide markets much needed liquidity. Otherwise, Europes leaders, though they have managed something, seem incapable of thinking broadly enough even to begin grappling with the continents underlying problems.
2012-03-12 The King is Back by Liam Molloy and Bethany Carlson of Galway Investment Strategy
On Mar 1, Lazlo Birinyi called for the S&P500 to hit 1700 in 2012 (an increase of 35%). The 24% rise in the S&P500 between Oct 4 and Feb 29 has prompted many to review their outlook for the year. Their euphoric revisions are propelled by some tailwinds: lean company financials with high operating leverage; emerging markets consumer demand; improving jobs reports; low interest rates, and high cash balances. Many of these factors contributed to Galways relatively positive outlook. However, one lesson we have learned over the years is to start getting nervous when everyone agrees with you.
2012-03-12 Unlocking Concentration Risk by Nick Reilly, Mark Bennett, and David Templeton of HORAN Capital Advisors
We contend the best time to seek portfolio protection is when its cheapest. This would be comparative to purchasing life insurance when premiums are least expensive. Similarly, one should evaluate stock concentration risk when markets are positive and sentiment is good. The intent of this report is to outline the challenges associated with concentrated holdings and to introduce potential solutions to help reduce the risks associated with such holdings.
2012-03-12 To Hell and Back In by Charles Lieberman of Advisors Capital Management
This past week saw the three year anniversary of the market low on March 9, 2009. The most crucial lesson that investors should have learned is that good investments recover, no matter how dramatically the market may decline, no matter how volatile it may be at times, and they should approach investing with a long-term plan in mind. Many investors were shaken out of the market over the past few years now have account values that are well behind where they would be if they had simply held on for the vicious ride.
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.
2012-03-12 In Japan, Eventually is Getting Closer by Robert McConnaughey of Columbia Management
On the anniversary of the devastating tsunami and earthquake in northeastern Japan we wish to express our sympathy and support for the people of Japan. With the rightful attention on the anniversary of this tragedy and on the Greece/European debt/growth challenges, it is easy to forget about the massive structural challenges faced by Japan. Japans total debt load surpasses even the U.S. in absolute terms and is second (and a close second) only to Zimbabwe in terms of debt to gross domestic product (GDP) at over 200%.
2012-03-12 Iran, Oil Prices, and the Economic Recovery by Milton Ezrati of Lord Abbett
With the situation highly unstable the hope is that the powers involved can reach a resolution without resorting to military action or even a standoff that prompts insurers to close down shipping. Should such a resolution develop, crude oil and gasoline prices would certainly drop from today's highs. Though they would not likely recapture the lows of late last year. Even if today's level of tension were to hold up current prices indefinitely, it would cause little further harm than it already has. But until some resolution is reached, risks for much higher prices remain significant.
2012-03-09 Investors In Common Stocks Must Get Valuation Right; Heres How by Chuck Carnevale of F.A.S.T. Graphs
Investors should be careful and willing to always run the numbers out to their logical conclusions. But, it all starts with knowing what you are buying (investing in) in the first place. True investors, like Peter Lynch, and many of the other renowned investing greats such as Phil Fischer, Warren Buffett, etc., all invest as owners in businesses with a focus on the strength of the business behind the stocks they buy. Therefore, these investor greats are always buying the earnings power of the respective businesses they are investing in, relative to their goals and objectives.
2012-03-09 Earning Real Income With Real Estate by Team of Emerald Asset Advisors
The oldest mantra about investing in real estate holds that the key to success is location, location, location. While there is always the chance that real estate investments will produce capital gains (or losses), we believe a better reason to consider real estate investments is for income, income, income. That's especially true in today's ultra low rate environment. While the words "real estate" conjure images of the woeful state of the residential real estate market, the commercial real estate market is in much better fundamental shape.
2012-03-09 Long-Short Funds Lead Greenwich Indices in February by Clint Binkley of Greenwich Alternative Investments
Hedge funds turned in another month of gains across all major strategies, notes Clint Binkley, Senior Vice President. Results from Long-Short Equity funds show that managers are increasing net exposures as they become more confident about economic conditions. Although some managers continue to expect a market correction, most believe it will be mild as institutional investors are still waiting for opportunities to add to their positions.
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 Remarks at the Launch of USAIDs Policy on Gender Equality and Women Empowerment by Mohamed A. El-Erian of PIMCO
Many of us have a responsibility, indeed an obligation, to do whatever we can to ensure that both conscious and unconscious biases are better identified and minimized. This is a multi-year, multi-faceted effort. As illustrated by the USAID policy, it involves research, education, advocacy and action; as well as measurement, accountability and mid-course corrections. For all these reasons, we admire the important work being done on gender equality and the empowerment of women. We strongly endorse the importance of greater and equal opportunities.
2012-03-09 Appreciating China to its Fullest by Frank Holmes of U.S. Global Investors
While most analysts dont expect another moon shot rise in China's GDP this year, a 7.5 percent growth rate still exceeds most emerging economies and all developed nations. Advanced economy growth is expected to be meager, slowing from 1.6 percent to 1.3 percent in 2012, according to The Conference Board. For long-term investors learning to appreciate the finer points of the country, we believe China is somewhat like fine wine; it only gets better with age.
2012-03-08 Oil and Gasoline Prices Rise Again: How High and How Long? by Team of American Century Investments
One year ago, we wrote on the recent up-tick in crude oil and gasoline prices which was caused by turmoil and revolution in the Middle East. A year later, were experiencing a similar rise in crude and gasoline prices. Last week, the average national cost for a gallon of unleaded regular gasoline was approximately $3.75 per gallon. One contributing factor has been the increase in tensions between Western countries (and Israel) with Iran over its continuing work to produce nuclear fuel which could be used in atomic weapons.
2012-03-08 Picking Stocks, Stock-by-Stock by Team of Franklin Templeton
Katrina Dudley, co-manager for Mutual European Fund, is a savvy stock shopper with both patience and resources. Here is a taste of her stock-picking approach as inspired by Mutual Series guiding principle: buy a dollars worth of assets at a discount. 1. Macro considerations are important, but they dont change our stock-by-stock selection process 2. Volatility is here to stay, but it can create opportunity 3. Were looking at the company-level impact of macro influences like eurozone austerity 4. Many European companies are readjusting their cost base, becoming more competitive.
2012-03-08 Putting Colombia on the Global Investment Map by Mark Mobius of Franklin Templeton
Colombias real GDP is projected to grow by between 5% and 6% by end 2011, and inflation to end 2011 at less than 4%. The primary caveat: lack of infrastructure remains one of the main challenges for the country; past guerrilla conflicts made large parts of the country inaccessible, a hurdle the country has not quite yet overcome. However, as security has improved, the central government has gained more access to the countryside, enabling it to make some progress on infrastructure improvements.
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 If Israel Bombs Iran How Could Stocks & Stock Markets React? by Paul Dietrich of Foxhall Capital Management
The probable results of Israel bombing Irans nuclear sites would be oil and gold prices skyrocketing, the stock market could drop precipitously and Iran would almost certainly retaliate by sending missiles raining down on Israel, close the Straits of Hormuz and even attack oil tankers or U.S. naval vessels, as they have threatened to do. Americans could also see a spike in terrorism directed against Americans and American interests overseas and here at home.
2012-03-08 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 Q&A with Russ Koesterich: What Obamas Budget Proposal Means for Dividend Investing by Russ Koesterich of iShares Blog
President Obamas 2013 budget proposal includes a significant hike in the dividend tax rate. Russ explains how likely this proposal is to pass and what it would mean for the dividend paying stocks investors who have embraced in their quest for yield.
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 New Tools to Manage Longevity Risk by Joe Tomlinson (Article)
If you could guarantee yourself an inflation-protected stream of income for the rest of your life, would you take it? For many retirees, the answer is yes, and that is rightfully sparking new interest in deferred-income annuities (DIAs). By combining a DIA with a TIPS ladder or more aggressive equity-centric investments, retirees can obtain inflation-protected lifetime income. But they will face important tradeoffs, as I will explain.
2012-03-06 Why Invest? - Part 2 by Adam Jared Apt (Article)
Risk tolerance is a quality inherent in an individual or an institution. Whether quantified or not, risk tolerance is the amount of return the investor requires as compensation for the extra risk that comes with investing. It's a concept that is essential for making investment decisions, yet it is elusive and maddeningly difficult to specify. Even so, many investment advisors like to give the public the impression that they're proficient at determining it.
2012-03-06 U.S. Covered Bonds: Reassessing Credit Risk and Relative Valuations by Marco van Akkeren and Ben Emons of PIMCO
We believe nominal spread analysis is insufficient, since investors must now consider recovery and default risk under various economic conditions.
Our factor-based approach provides a means to quantify default probabilities across a range of outcomes instead of analyst-defined ad hoc assumptions.
We also investigate historical CDS spreads as a means to quantify default risk relative to national home price appreciation.
The potential for an emerging U.S. issuer market, combined with ongoing foreign issuance, leads us to believe the U.S. covered bond market has viability.
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 Reviving a Chinese Bull by Pamela Rosenau of HighTower Advisors
Changes in the direction of the reserve requirement ratio (RRR) for Chinese banks, or the minimum reserves a commercial bank must hold according to central bank regulations, have a major impact on the Chinese stock market. The RRR in China had steadily climbed from eight percent in mid-2006 to its peak of 21.5% in mid-2011. The decision in November 2011 by the Peoples Bank of China to cut the ratio by 50 basis points, which was subsequently followed by another cut just last month, appears to be the beginning of a long directional move downward in the RRR as the bank continues to ease.
2012-03-06 Why Buy the Cow? by Peter Schiff of Euro Pacific Capital
The communist revolutions in the 20th century sought to nationalize the wealth generated by privately held industries back to the exploited workers on whose backs the profits were supposedly derived. America has made the rejection of this idea and its support of free market principles the centerpiece of its economic narrative. However, as a result of our current and proposed tax policies towards corporate shareholders, our government collects a portion of industrial output that would inspire envy in even the most rabid Bolshevik.
2012-03-06 Economic Insights: The Presidents BudgetD.O.A., but Interesting Nonetheless by Milton Ezrati of Lord Abbett
Republicans promptly condemned Obama's fiscal 2013 budget. Since Republicans control the House, there is little chance that this budget, will pass into law before November. But if this proposed budget is DOA leaving little reason for investors to adjust their portfolios for it, the document can instruct on what it ultimately will take to address this nations deficit and debt problems. Two matters in particular become clear: 1) overall spending control demands entitlements reform and 2) tax hikes on the wealthy, whatever they mean to fairness, cannot fully answer the deficit question.
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.
2012-03-06 Defining Risk: Warren Buffetts Three Kinds of Investments by Bill Smead of Smead Capital Management
In his 2011 letter, Warren Buffett explained the purpose behind investing, the real definition of risk, and the three types of investments which congregate the marketplace. We believe Mr. Buffett struck at the core of the problem that most investors are having. They are defining risk primarily by what happens in the next twelve months, while the Oracle of Omaha is thinking in five to ten-year time frames, at a minimum. These short time frames are combined with eyes locked on the rearview mirror, inhibiting investors from participating in wealth creation as we look out into the future.
2012-03-05 Choosing the Right REIT Can Benefit Diversification by Team of American Century Investments
The quest for consistently high risk-adjusted return is an arduous, never-ending journey. This outline introduces the basics of Real Estate Investment Trusts (REITs). That REITs can serve as a useful portfolio diversifier can easily be made apparent. The next issue becomes which type of REIT? The emphasis of this write-up is on identifying the different types of REITs. Outfitted with this information, investors can make better REIT choices, aiding portfolio diversification now and into the future.
2012-03-05 Beyond Risk-on/Risk-off: Paying Heed to Peripheral Cues in Portfolio Construction by Vineer Bhansali of PIMCO
The availability of high-frequency information, technological advances in electronic trading and the dominance of government and regulatory policy factors made the world since the crisis of 2008 a risk-on/risk-off environment. In January 2012, S&P 500 implied correlations began to fall. It appears that stocks are beginning to take a bit more of their individuality back so that other assets dont move in lock step. Investors may benefit from a focus on policymakers, relative value opportunities, hedging potential left tail events, and diversification.
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 Is Popularity Ruining Indexing? by Bill Smead of Smead Capital Management
Scarcity creates value in economics. In our view, what is scarce today is an equity manager doing long-term/long duration equity analysis and institutions/individual investors willing to employ them. Since 33% of the stock market is indexed and most of the other 67% works in very short analytic time frames, we believe the market must be as inefficient as it has ever been. Time is the ally of the long-duration common stock investor and we believe more so now, because indexing is getting too popular and investing in short durations is at epidemic levels.
2012-03-03 Unintended Consequence by John Mauldin of Millennium Wave Advisors
This week we wonder about the consequences of the European Central Bank (ECB) issuing over 1 trillion in short-term loans to try and postpone a banking credit crisis and lower sovereign debt costs for certain peripheral countries in Europe. What if, instead of holding the European Monetary Union (EMU or Eurozone) together, that actually makes a breakup more likely? That would certainly fall under the rubric of unintended consequences, and be worth our time to contemplate in this week's letter.
2012-03-02 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 The Protein Bomb by Niels C. Jensen of Absolute Return Partners
Population will grow from 7-8.3 billion people over the next decade. Meanwhile, arable land across the world will shrink and living standards will continue to rise, with the OECD projecting 3 billion new middle class consumers over the next 20 years. Many of these people will change their diets in favor of more animal protein. Livestock is quite inefficient in terms of converting grain to energy, so the pressure on farmers to deliver more will be immense. We conclude that agriculture should be represented in every long-term portfolio, but farm land has already risen a lot in value.
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 Positioning Your Portfolio When You Dont Have All the Answers by Josh Thimons of PIMCO
Faced with difficult questions like the European debt crisis, portfolio managers have two possible courses of action: feign omniscience and seek to position portfolios for one outcome, or admit to not knowing the answer and seek to position portfolios to prosper in the most likely scenarios and hold ground in the least.
We believe the latter is the better course because two extreme outcomes appear increasingly likely for almost all asset classes, which increases the risk involved in choosing the wrong answer.
2012-03-02 President Obamas 2013 Fiscal Budget Proposal: What is the Impact on Not-For-Profit Hospital Bonds? by Tony Wong and Mary Jane Minier of Invesco
On February 13, 2012, President Obama released his proposal for the countrys 2013 fiscal budget. The $3.8 trillion plan, as proposed, calls for $360 billion in cuts to Medicare and Medicaid over a 10-year period. Under the budget proposal, hospitals and other medical providers will see lower Medicare and Medicaid reimbursement levels. According to Moodys Investor Services, the proposed cuts would pose an unprecedented threat to the not-for-profit hospital industry given that on average Medicare makes up 43% of gross revenues and Medicaid accounts for 12%.
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 2012: A year in US bonds by David Harris of Schroder Investment Management
There are two new factors that came to the forefront in late 2011 and which are set to influence investments throughout 2012. Indeed, it appears the collective bond market had a series of epiphanies in Q3 that should frame investment activity for some time to come, and these factors are by no means isolated to the US. The first factor is the broad recognition that debt expansion will not be the large driver of economic growth as it has been for the past several decades. The second factor is that political policy pronouncements will often trump economic and credit fundamentals.
2012-03-01 Cures for the Apathetic Investor by Frank Holmes of U.S. Global Investors
A lack of faith and trust has driven investors to the sidelines and halted the flow of capital in the U.S. According to the Investment Company Institute, investors pulled more than $130 billion from equity mutual funds during 2011. This is a common reaction in the cycle of market emotions where investors generally move from a fear of losing money, to becoming apathetic about the markets, to feeling confident about investments, and finally, to irrational exuberance. Right now, many investors appear to be stuck in an apathy sandpit.
2012-03-01 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 Dirt Economics: Demographics Matter! by Shane Shepherd of Research Affiliates
Generations ago, people had large families, ensuring an adequate supply of labor to work the farm and provide a comfortable retirement. Now, families are small and we face a mountain of debt and soaring deficits. This months Fundamentals examines the implications for the economy and investors portfolios.
2012-02-29 The Difference Between Knowing and Doing by Stephen Dodson of Bretton Fund
Theres a significant disconnect between what investors say is the right approach and how they invest in reality. Many funds claim to be long-term, but the average holding period for the average stock mutual fund is only 10 months. Part of the reason for this dissonance is the incentive for fund managers to invest a particular way to attract institutions, who often want low variances to market movements, not necessarily maximum returns. The desire to collect assets can cause a divergence of interests between fund shareholders and fund managers.
2012-02-28 The Outlook for Oil by Russ Koesterich of iShares Blog
Are we headed for another oil shock, and, if so, what are the investment implications? Russ tackles these questions, explaining what could cause an oil spike, why he believes crude prices are likely to stay elevated in the near term and what this means for his view of global energy companies.
2012-02-28 The Problem with Target-Date Fund Glide Paths by James A. Colon, CFA (Article)
The attack on target-date funds (TDFs) continues to gain steam, and for good reason. Virtually all TDFs offer a mechanical approach to glide-path management, unnecessarily exposing investors to risk - most noticeably when they are on the verge of retirement. A superior approach would keep the long- and short-term volatility of an investor's portfolio within appropriate ranges by actively managing the glide path.
2012-02-28 Fun, Fun, Fun by Jeffrey Saut of Raymond James Equity Research
There have now been 37 trading sessions in 2012 and so far the S&P 500 has yet to experience a 1% Downside Day. This 37-session skein has occurred 11 other times in the past 84 years and has on every occasion except one seen the equity markets higher by the end of the year. Still, the rise since the buying stampede ended, which stopped on January 26, 2012 at Dow 12841.95, has felt unnatural to me. Surprisingly, the Industrials reside only 141 points above their intraday high of January 26th, causing one market maven to exclaim, no wonder I feel like were in the Trading Twilight Zone.
2012-02-28 Oil Prices, Mixed Data Slow Market Gains by Chris Maxey and Ryan Davis of Fortigent
The continued march higher in oil prices is filtering its way down to consumers in a less-than-favorable way. By the end of the week, the average price for a regular gallon of gas was $3.65, 30 cents higher than the price one year ago. Consumers are all too familiar with the taxing effect of higher gas prices, particularly given the extreme run up early last year. Interestingly, the number of Google searches for gas prices recently overtook those for Greece, suggesting that the domestic economic situation is trumping consumers concern about an overseas shock.
2012-02-28 Credit Counts: The New Municipal Bond Market by Joe Deane, Julie Callahan & David McMahon of PIMCO
Today, the primary emphasis in security selection must be placed upon creditworthiness and the relative value of credit spreads. When the spread on a bond more than compensates an investor for its underlying risks, the bond becomes an attractive candidate, PIMCO believes. Investors with the resources and process in place to conduct proprietary credit research may have a strong competitive advantage.
2012-02-28 De-Fence by Bill Gross of PIMCO
Over the past 30 years, an offensively minded Federal Reserve and their global counterparts were printing money, lowering yields and bringing forward a false sense of monetary wealth.
Successful investing in a deleveraging, low interest rate environment will require defensive in addition to offensive skills.
The PIMCO defensive strategy playbook: Recognize zero bound limits and systemic debt risk in global financial markets. Accept financial repression but avoid its impact when and where possible. Emphasize income we believe to be relatively reliable/safe; seek consistent alpha.
2012-02-28 Black: Swans and Crude by Liz Ann Sonders of Charles Schwab
Economic/financial "black swans" are generally more dire than geopolitical ones.
The Middle East is today's hotbed for potential geopolitical crises.
Oil is taking the brunt of the pressure, but it's not necessarily the death knell for stocks or the economic recovery.
2012-02-28 Dividends: Proposed New Tax Rates by Robert McConnaughey of Columbia Management
We are in a very attractive period for dividend paying equities. With yields from higher credit quality bonds at historical lows, an investing public hungry for income has to consider an increased allocation to equity income. The backdrop is positive for them to do so with healthy cash flows and historically low payout ratios creating a solid foundation for reliable and growing dividend yields. Given the strong outperformance of the highest current yielders in 2011, we continue to advocate seeking out companies with the ability to grow their dividends sustainably in the future.
2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Earning season plods along with consumer-driven companies like Walt Disney and Coca Cola highlighting the calendar. Investors get a break on the economic front as the mad rush of releases slows, allowing them time to digest this weeks data, particular the news from the labor front. (Surely consumers should be more confident after the favorable developments?)
2012-02-27 Weekly 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 Brute Force and Two Serious Problems by Christian Thwaites of Sentinel Investments
The brute force of liquidity driven markets is waning. Earnings season draws in and there were enough negative surprises, about 30% of reporting companies, to take the edge off the rally. As of writing, we're up over 6% YTD on SPX [1] but with little decisive break out in the last three weeks. Why? Well, the culprits are: Greece: Greece has been punching well above its weight as a pain for some time. China: After a pretty awful 2011, when stocks fell 20% and remain at about half the 2007 peak, inflation, housing and net exports remain a problem.
2012-02-27 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 Are Individuals Going Back into Stocks? by Charles Lieberman of Advisors Capital Management
The strong rally in equities in the early part of 2012 raises the question as to whether households will stop buying bonds and will resume buying stocks. I think the answer is no, which I also believe is unfortunate. While the equity market rally has no doubt captured the attention of households, I doubt those who have exited the stock market will venture back into this perceived risky arena until they get badly hurt owning bonds. Thats coming, but it hasnt happened yet.
2012-02-27 In Dividends We Trust Payout Ratios Low By Historical Standards by John Buckingham of AFAM
Dividends, dividend and more dividends. It would seem that everywhere we look these days, we find investment professionals singing the praises of dividends. And why not, given that interest rates continue to rest (and I do mean rest) at microscopic levels, while the yields on most of the major equity market averages exceed that of the 10-year U.S. Treasury. More importantly, perhaps, there is plenty of room for payouts to increase going forward given that the percentage of annual earnings distributed to shareholders for S&P 500 companies stood at a record low level of 30% in 2011.
2012-02-27 Economic Insights: The Presidents BudgetD.O.A., but Interesting Nonetheless by Milton Ezrati of Lord Abbett
President Barack Obama has released his fiscal 2013 budget. Republicans promptly condemned it as irresponsible and merely a campaign document. Since Republicans control the House of Representatives, there is little chance that this budget, or anything like it, will pass into law before the November elections. But if this proposed budget is dead on arrivalleaving little reason for investors to adjust their portfolios for itstill the document can instruct, especially on what it ultimately will take to address this nations deficit and debt problems.
2012-02-25 Tax That Other Guy by John Mauldin of Millennium Wave Advisors
Last week's letter on taxes drew more response than any letter I have written in years. Questions that were raised simply beg for an answer, and some of the replies were very thoughtful, well-written suggestions for alternatives. This week I am going to do something I can't ever remember doing, and that is to use the entire letter to involve and respond to my readers.
2012-02-24 Global Listed Infrastructure - January 2012 Review & Outlook by Team of Cohen & Steers
We have a positive near-term outlook for infrastructure securities based on improving U.S. economic data and stabilizing credit conditions in Europe. But there are still headwinds. The road to Europes recovery is unlikely to be smooth; and in the United States, state and local government debt may dampen growth. Emerging markets are likely to be somewhat stronger, in our view, driven by better structural demand. For this reason, we have increased our investments in Brazil, China and Mexico.
2012-02-24 The Outlook for the Overvalued Euro by Russ Koesterich of iShares Blog
Now that a second Greek bailout deal has been reached, investors are asking whether Greece will remain in the euro bloc and how the euro will likely perform going forward. Russ answers these questions, explaining why the euro currently appears overvalued and how a weaker currency could be good for Germany.
2012-02-24 Greek Crisis: This Too Shall Pass by Team of Franklin Templeton
Jerry Palmieri, Vice President and Sr. Portfolio Manager for Franklin Equity Group, doesnt worry too much about whether the Greek drama dominating daily headlines will turn into global market tragedy. A veteran of Franklin Templeton since 1965, hes survived to tell the tale after more than four decades of market ups and downs. His wizened view summarized: Market ups and downs are to be expected. U.S. market, economy will survive the Greek debt crisis. Things will work out. Market timing not the ticket to long-term investing success.
2012-02-24 Investment Advice from Your Uncle Polonius by Jeremy Grantham of GMO
Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time its a new high plateau or a permanently higher level of productivity. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience, it will go back to fair value. Your task is to survive until that happens. Heres how.
2012-02-24 ECRI Defends its Recession Call by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) growth indicator of the Economic Cycle Research Institute (ECRI) came in at -3.5 in today's public release of the data through February 10th. This is the sixth consecutive week of improvement (less negative) data for the Growth Index and the highest level (i.e., least negative) since August 26th of last year. However, the underlying WLI decreased fractionally from an adjusted 123.4 to 123.2 (see the third chart below). This is the second week of slippage in the underlying index.
2012-02-23 Muni Outlook Q&A with Portfolio Manager Alan Kruss by Team of American Century Investments
Municipal bonds (munis) are back in the bond market spotlight, but for different reasons than a year ago (when widespread defaults were projected, and muni funds experienced heavy outflows). Muni performance has rebounded strongly since then, which has triggered follow-up questions about the muni market outlook. We posed them to Alan Kruss, Vice President and Municipal Portfolio Manager at American Century Investments.
2012-02-23 Uncertainty and Change Dominate Markets by Daniel C. Chung of Fred Alger & Company
US companies are doing an admirable job in difficult times. Uncertainty is not an acceptable management strategy, so businesses are continuing to move for-ward and seek opportunities to grow, even as Washington dithers. Despite our many concerns about the state of US policy-making, we remain confident in the fundamental strength of our economic system and the vitality and creativity of corporate American its people and in its structure
2012-02-23 Emerging Markets: A 2012 Outlook by Ingrid Baker of Invesco
Emerging markets, once an asset class favored primarily by the dedicated global investor, came of age during the past decade. The Asian Crisis of the late 1990s, Russia
2012-02-23 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 Emerging Markets Real Estate Securities by Team of Cohen & Steers
We believe that recent developments within emerging real estate markets are consistent with our macro view. As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures moderate. Given the potential for better domestic growth, we expect to take advantage of buying opportunities among residential developers (e.g., in Brazil), and have selectively been moving in that direction.
2012-02-22 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 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.
2012-02-22 Greece Anxiety to the Rising Cost of Crude Oil by Matt Lloyd of Advisors Asset Management
With the ever so slowly resolution for Greece becoming a reality, most markets are turning their anxiety to the rising price of crude. The international energy markets have been shaken by the realization that Iran and its 2.5% of the worlds oil production may soon cause another economic shock. Though this concerns Europe more than the other continents, it surely puts a strain on everybody needing oil to help sustain the positive growth in the global economy. As such, we have seen a steady and sharp rise in gasoline prices.
2012-02-22 Media Headlines Will Lead You To Ruin by Lance Roberts of Streettalk Live
Two weeks ago Barron's ran the cover page of "Dow 15,000". Over the weekend Alan Abelson ran a column titled "Everyone In The Pool". Today, CNBC leads with "Dow 13,000 May Finally Lure Investors Back Into Stocks". Unfortunately, for most investors, the CNBC headline is probably right. Investors, on the whole, have a tendency to do exactly the opposite of what they should do when it comes to investing: "Buy High and Sell Low." The reality is that the emotions of greed and fear do more to cause investors to lose money in the market than being robbed at the point of a gun.
2012-02-22 Rethinking Risk: Pension Plans Should Adjust to Global Realities by Jeff Helsing of PIMCO
Many governments are carrying higher levels of debt, which can increase both economic and asset volatility as well as default risk.
The resulting incremental increase in default risk suggests pension portfolios may have less duration than implied by traditional measures.
Pension plans with high levels of equity exposure should consider increasing durations and credit exposure.
Investment guidelines may need to be adjusted so they dont measure credit risk simply by the World Banks definition of emerging markets.
2012-02-22 Our Five Year S&P 1500 and Sector Forecast by Kendall J. Anderson of Anderson Griggs
Emotions are and will continue to be the drivers of short-term demand for stocks and bonds. At the individual stock level, we believe we can isolate certain human traits which drive this demand. However, at the broader market levels, we believe that the method to judge emotions is more intuitive than quantitative. In other words, it pays to be somewhat of a contrarian and to try not to become a member of the Buy High/Sell Low Club. History of markets can be a helpful guide to understanding the emotions that have driven previous investor buying decisions after major market declines.
2012-02-21 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 A Simple Email to Save a Client by Dan Richards (Article)
A recent conversation got me thinking. Losing a client is a painful experience -even more so when you realize that something as simple as an email could have avoided that outcome.
2012-02-21 Economic Insights: Housing Reality Check by Milton Ezrati of Lord Abbett
Good news on residential real estate has prompted a kind of enthusiasm about the sector's prospects. It is good to see closure on the legal matters surrounding foreclosures and some improvement in sales and construction activity. These signs do suggest that the worst on housing has very likely passed. But too much enthusiasm is misplaced. Much will prevent housing from acting as an economic growth engine for years to come. The economy will grow, and the urgency surrounding home values and mortgages will gradually lift, but the sector at best can offer the economy little more than neutrality.
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.
2012-02-18 The Enduring Popularity of Gold by Frank Holmes of U.S. Global Investors
For thousands of years, pharaohs, explorers, rulers and investors have been attracted to gold, as the precious metal has been a vital tool in building and protecting wealth. While gold naysayers focus on the day-to-day fluctuations in price, I believe gold equities and bullion will continue to enjoy maximum popularity, as the Oracle of Omaha puts it, for years to come. The allure of goldwhether it is from Fear or Lovecannot be underestimated.
2012-02-18 Payroll Tax Cut Deal: The Good News and the Bad News by Russ Koesterich of iShares Blog
The good news is that extensions of the payroll tax holiday and unemployment benefits will remove a near-term risk for the US and global economies. But the bad news is that significant economic risks remain.
2012-02-18 The Cancer of Debt and Deficits by John Mauldin of Millennium Wave Advisors
We will explore some options to actually resolve the deficit and debt crisis. Cutting spending or raising taxes have consequences, but not all cuts and not all taxes are the same. For those who have been wanting more specific solutions from me, I am going to address the issues surrounding taxation and offer my thoughts as to what we should do.
2012-02-17 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 Oracle Is Too Cheap To Ignore Any Longer by Chuck Carnevale of F.A.S.T. Graphs
We believe that Oracle Corp. is just one of many technology titans that we believe the market is mispricing. Furthermore, we believe part of that stems from the general pessimism that has created the so-called flight to safety get out of equities. Pessimism thrives on uncertainty; and one of the main attributes of technology is uncertainty. We believe that investors seeking maximum capital appreciation at reasonable levels of risk might do well to take a hard look at not only Oracle, but the technology sector in general.
2012-02-17 Assessing Performance Records A Case Study by Howard Marks of Oaktree Capital
What are the non-negotiable requirements for accurately assessing investment performance? Id say: a record spanning a significant number of years, a period that includes both good years, and a benchmark or peer universe that makes for a relevant comparison. The other day, at an event for alumni and other constituents of the University of Pennsylvania, president Amy Gutmann reviewed the performance of the university during the financial crisis. Thinking about it afterward, I realized that I should share with you the story of Penns endowment and its lessons.
2012-02-17 Economic Insights: Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Europe seemingly creates new financial and economic concerns daily, while in the United States, fiscal questions and election uncertainties trouble the outlook. Still more dangerous issues surround the military and diplomatic maneuvering in the Persian Gulf. And these are just a sample of the sources of investment concern. But even as all this prompts people to hide in cash and the usual safe havens, such as U.S. Treasury bonds, these investment choices pay such poor yields that presumed safety comes at tremendous cost. Investors, then, must consider riskier investments.
2012-02-16 Weekly Market Update: Introduction to Alternative Investments by Team of American Century Investments
Alternative investments (or alts as they are commonly known) have exploded in popularity in recent years. What began as specialty investment strategies utilized by only the most sophisticated institutional investorssuch as pension plans and university endowmentsare now readily available to retail investors through a number of mutual funds and exchange-traded funds. Here we try to explain alts appeal in broad terms, discussing how these strategies are used and what role alts may play in an individual investors portfolio.
2012-02-16 Hasenstab Sticks to His Guns by Team of Franklin Templeton
Michael Hasenstab, Portfolio Manager of the Templeton Global Bond Fund, doesnt scare so easily. As he reiterated recently, he actually sees times of market panic as opportunities to make investments where he sees long-term value. The key thoughts he shared: The challenge during periods of volatility is that, although investors can take a short-term hit, this volatility can create opportunity. Fears Europe will sink Asia appear overblown. China not likely to see a hard landing. The Eurozone drama continues to unfold.
2012-02-16 Currency Funds - Special Case International Bond Funds by Axel Merk and Kieran Osborne of Merk Funds
Investors may want to reduce their exposure to interest and credit risk in their international fixed income investments. One way to accomplish this may be to invest in international fixed income funds that have a commitment to the short end of the yield curve and to high credit quality securities. Currency funds may be considered special cases of international bond funds, as many typically invest in international fixed income securities of short duration to gain currency exposure. As such, currency funds tend to focus on currency risk while seeking to mitigate interest and credit risk.
2012-02-15 When Capital Shrugged by David Baccile of Sextant Investment Advisors
if I were given a time horizon of 10 years or more and had only two options, own 100% bonds or 100% stocks, I would choose stocks. But we are not limited to those two choices. The current fragility of the global economic and financial environments will surely create opportunities for investors to shift funds between asset classes in a way that should substantially improve their risk-adjusted rates of return over the next ~10 years. With equities, individual stock selection also provides investors with real possibilities to earn an acceptable rate of return now.
2012-02-15 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 Not in My Lifetime by Bill Smead of Smead Capital Management
The weak dollar and international economic fears have sparked multi-year bull markets in gold, oil and most major commodities. This has forced asset allocators at the largest institutions, consulting firms, registered advisory firms and financial advisor networks to over-emphasize all aspects of the capital eaters and the longer-term Treasury bonds which compete for these dollars. In effect, the Federal Reserve Board caused the last of the unbelievers to give up in early February because it does not appear that rates will rise in our lifetime.
2012-02-14 ‘The Greatest Anomaly in Finance' by Geoff Considine (Article)
If I told you that there is an easy-to-exploit market anomaly that has enabled investors to consistently and substantially outperform the market with less risk for more than four decades, your first instinct might be to roll your eyes. After all, the unending quest to improve returns while lowering risk has yielded countless methods with initial promise that subsequently collapse under further scrutiny.
2012-02-14 The Safety-first, Goals-based Approach to Financial Planning by Wade Pfau (Article)
Little of what is taught in traditional investment textbooks is of value in personal financial planning. Risk is not standard deviation; it is the probability and consequences of not meeting one's goals. That real-world perspective animates a new book by Zvi Bodie and Rachelle Taqqu that implores advisors and their clients to lock in the funding of their essential expenses before worrying about their discretionary goals.
2012-02-14 Letters to the Editor by Various (Article)
A reader responds to Larry Siegel's article, Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns, and another reader responds to Joe Tomlinson's article, An Innovative Solution to Retirement Income, both of which appeared last week.
2012-02-14 Savers Are Not A Special Class by Christian Thwaites of Sentinel Investments
The self-reinforcing struggles between risk appetite and liquidity continued this week. Since the FOMC meeting, LTRO kicking in, easier policies from the ECB and a run of good economic numbers, we're in rally territory for equities here and abroad. The good news is that this has not come at the expense of other asset classes...so gold, bonds, US$, commodities are all holding up well. The liquidity push cannot have come at a better time. Private sectors are still building precautionary savings and public deficits are closing...
2012-02-14 Peroni Report February: On The Edge of Something Big? by Gene Peroni of Advisors Asset Management
One of the bullish features of this market is that there is a good balance in performance among the leading industry sectors. For instance, agriculture had been a leading sector following the markets lows after the financial debacle. But, stocks in the sector generally consolidated through much of last year. I believe that the consolidation was completed in the fourth quarter and that agriculture can reclaim its longer-term leadership. Numerous stocks in the sector have exhibited good relative strength recently and several stocks have begun to breakaway from downward or neutral trends.
2012-02-14 A Dejected Asset Class Finds Its Way in 2012 by Chris Maxey of Fortigent
Investor interest is acutely focused on the developed world, specifically Europe and the US. All the while, developing countries continue to be better positioned fiscally, with lower debt and better long-term growth prospects. Despite the outlook, stock markets in emerging markets are largely at the mercy of their counterparts in Europe and the US, suffering in lockstep as opposed to embracing the decoupling phase that was supposed to have begun in 2007. According to the IMF, emerging and developing economies grew 6.2% in 2011, compared to a 1.6% growth rate in advanced economies.
2012-02-14 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 Bill Gross vs. Warren Buffett and Larry Fink by Charles Lieberman of Advisors Capital Management
While bonds seem frightfully overvalued, stocks are cheap because investors are so hell bent for safety. Investors continue to shift capital out of stock funds and into bond funds virtually every month. This behavior suggests that they are fixated on the zero risk of default and fail to appreciate how they will be hurt by the loss of buying power.
2012-02-13 Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Among those choices, credit-sensitive fixed-income instruments would seem to offer superior returns with reasonable security. Opportunities also present themselves in the equity markets. In the developed markets, North America seems to offer the best risk/reward balance. Though stock valuations are better in Europe and Japan, the former still needs to deal with its debt crisis and the likelihood of recession, while the latter faces the very fundamental matter of severely aging demographics as well as the immediate adverse impact of an expensive currency.
2012-02-11 The Answer We Dont Want to Know by John Mauldin of Millennium Wave Advisors
This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable.
2012-02-10 Western Medicine by Neel Kashkari of PIMCO
Liquidity is buying time for European countries, but their economies are growing too slowly to support their debt loads. In the U.S., household debt is declining, but remains high. There is also no reason to assume companies that benefitted from that debt-fueled spending will grow at historical rates. Until we see sustainable, real economic growth in America, we believe equity investors should carefully scrutinize the assumptions underlying consumer discretionary stocks and consider global companies that are selling into higher growth markets.
2012-02-10 Indices Show Hedge Funds Off to Strong Start in January by Clint Binkley of Greenwich Alternative Investments
"US equities rallied significantly to begin 2012 and Long-Short managers are the best performers thus far. Hedge funds focused on Market Neutral strategies were also surprisingly strong as both Arbitrage and Event-Driven managers posted their best results in months. Despite investors being drawn into risk-on sectors of the market, most funds remain cautious with the economic situation in Europe still unresolved, notes Clint Binkley, Senior Vice President.
2012-02-10 Inflation Outlook 2012: Benign, But Watch the Tails by Mihir P. Worah and Nicholas J. Johnson of PIMCO
Headline inflation, as measured by the Consumer Price Index (CPI) in the U.S., ran at 3.0% in 2011, up from 1.5% for 2010.
Our base case is for inflation to moderate this year, heading to slightly below 2%. Longer term our bias is toward higher inflation, and we feel any deflationary episode is likely to be short-lived.
Faced with this possibility of higher inflation, many investors may need to examine their allocations to assets associated with real return potential, including Treasury Inflation-Protected Securities (TIPS), real estate, commodities and equities.
2012-02-10 Nike (NKE): Just Do It - Sell by Chuck Carnevale of F.A.S.T. Graphs
A close examination of the earnings and price correlated graphs, coupled with the historic valuations that the market has applied to Nike shares, it becomes clear and obvious that Nike shares are overpriced today. Even with its high expected future earnings growth, the headwind of such overvaluation seems likely to make it extremely difficult to achieve any acceptable long-term rate of return. On the other hand, its also obvious that the market has decided to price Nike at todays rich valuation, and therefore, its at least possible that it can continue to do so.
2012-02-10 A Stock for its Dividends - Revisited by Jesper Madsen of Matthews Asia
Since investors often turn to Asia looking for growth, they may overlook that the region offers a well-diversified universe of dividend-paying companies in terms of sectors and countries. This month Jesper Madsen revisits the notion that the Asia Pacific region should play an essential role for investors seeking yield and growth in income.
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 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?
2012-02-09 Q411 Portfolio Commentary by Jay Compson of Absolute Investment Advisers
We continue to stress that investors remain patient. Given that we are likely in the 1% of money managers that look beyond the next 30 days, it is inevitable that the markets will move counter to our positioning. This is to be expected and is consistent with the Fund's historical performance.We continue to remain disciplined and receive counsel from the investing bible: Graham and Dodd's Security Analysis. For those few true value investors left, it's worth noting that nowhere is the phrase "margin of safety" defined by quantitative easing, government stimulus, or bank bailouts.
2012-02-08 What the Bond Market Knows That You Dont by Matt Tucker of iShares Blog
On the back of improving US economic data, equities have rallied off of autumn lows, and yet US Treasury yields have continued to surf bottom with the 10-year note trading below 2% for the first time on record. Why havent interest rates recovered in support of improving data? Do US Treasury investors know something that equity investors dont? The answer may lie across the pond in Europe. The European crisis intensified significantly in the fall, causing equity markets (and most risky assets for that matter) to sell off and US Treasury rates to fall, despite the August downgrade.
2012-02-07 Jeremy Siegel, Rob Arnott and Other Experts Forecast Equity Returns by Laurence B. Siegel (Article)
A forecast of the equity risk premium (ERP) tells you how much to save, how to allocate assets between equities and fixed income, and how much you can consume. Given its great importance, the CFA Institute recently convened a group of top-level academics and practitioners to forecast future ERPs - and to reflect on similar predictions they had made a decade ago.
2012-02-07 A Conversation that Tripled Referrals by Dan Richards (Article)
Last fall, a veteran advisor contacted his retired clients with the suggestion that they meet to discuss one simple goal - to lay out detailed monthly cash flow forecasts matching funds coming in with cash going out. Not only did this exercise benefit those clients, he was able to leverage his efforts to triple his referrals.
2012-02-07 Market Dimensions by James Damschroder of Gravity Capital Partners
We estimate there is a 15% to an upwards of 31% opportunity for some reasonable re-inflation to normal valuation to be had in emerging equity securities. It wouldnt be too aggressive to even call 60%. That would bring us to an implied P/E of only 15. I dont know if itll take six months or several years to accomplish this, but this was the logic I used in getting back into the international markets quickly after having correctly anticipating the start of the sovereign debt crisis. In retrospect, we came back a little early; but I believe this move will be very fruitful in the long run.
2012-02-07 Inflection Point: The Start of a New Cycle in Real Estate? by Joel Beam, Ian Goltra, and Michael McGowan of Forward Management
Commercial real estate markets appear to be entering an extended cycle of recovery. The recovery is expected to play out unevenly across U.S. and international markets, with the first wave focused on knowledge-based, gateway cities and technology corridors. Commercial real estate is currently inexpensive by historical standards. Unlike residential markets, commercial real estate markets appear healthy, with rising liquidity and transaction levels.
Institutional and private-equity funds are ratcheting up their real estate commitments, seeking 6.5%-8% returns in line with historical averages.
2012-02-07 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 Global Overview: January 2012 by Team of Thomas White International
Concerns over a significant global downturn have faded further as economic data trends from the last days of 2011 and the early days of the current year remain healthy. Global manufacturing activity expanded again in January, helped by output growth in the U.S., China, Japan, India, and Australia. Manufacturing output also improved in the Euro-zone, helped by continued gains in Germany. U.S. labor market conditions advanced again in January, raising hopes for increased consumer demand that will also help export growth in other economies such as China.
2012-02-07 Where to Find Value in Emerging Asia by Russ Koesterich of iShares Blog
Im updating my views on some of the emerging market countries in Asia. While Im upgrading Chinese equities from neutral to overweight, Im downgrading South Korean and Indian stocks from neutral to underweight. Starting with China and South Korea the two countries are both highly exposed to global growth, but China currently appears to be the better positioned and is likely to hold up much better. To be sure, South Korean equities are also cheap compared to other emerging markets. Im downgrading India in response to the countrys recent surge in valuations and persistently high inflation.
2012-02-07 A Tribute to Dr. Irwin Jacobs and Qualcomm by Kendall J. Anderson of Anderson Griggs
Any business cannot survive without more cash coming into the business than is being spent. For many new companies, especially technology companies, when the cash ran out they would just close the doors. Not for Dr. Jacobs and his fellow owners. When the cash ran out, they chose a different route to stay afloat, one that was contrary to accepted business practices and possibly the most important contribution any company has made in the development of the wireless industry. Their solution was to license all of their patents as a portfolio in return for a royalty payment.
2012-02-07 Order and Progress on the Rise