Most Popular Articles

Most Popular Commentaries

Most Popular Articles

Most Popular Commentaries

More on Related Themes

2010-09-03 Buy and Hold Still Holds by John Browne of Euro Pacific Capital

As Americans have justifiably lost faith in the stock market, the classic buy-and-hold investment strategy has fallen from favor. The problem is that retail investors are wrongly equating the performance of stocks as a class with the trajectory of American stocks in particular. Fortunately, buy-and-hold still works in many parts of the world. Meanwhile, retail investors sitting in U.S. bonds and bank accounts will ultimately pay a steep price through inflation.

2010-09-02 Learning From Past Crises by Mark Mobius of Franklin Templeton

Although it is unrealistic to assume that the structural changes implemented in some emerging markets can completely shield them from the effects of future global crises, they seem to have borne the most recent global financial crisis reasonably well. While risks have not disappeared, things look a lot better today than they did 20 years ago. The growing use of derivatives contracts is just one of the many reasons to remain cautious, but some emerging markets' strong fiscal health is cause for hope and optimism.

2010-09-02 Beggar Thy Neighbor by Niels C. Jensen, Nick Rees and Patricia Ward of Absolute Return Partners

Austerity hurts domestic economic growth, and all those countries facing harsh austerity programs over the next several years will thus realize that the only way out of the current predicament is through higher exports and/or lower imports. We cannot all export our way out of our problems, however. Somebody will have to do the imports. Lower economic activity will again lead to lower tax revenues for the public sector; it is a very unfortunate and rather vicious spiral which is also very deflationary.

2010-09-02 The Economy is in a Modern Day Depression by David A. Rosenberg of Gluskin Sheff

The economy is in a modern day depression. A depression, put simply, is a very long period of economic malaise, a series of rolling recessions and modest recoveries over a multi-year period of general economic stagnation as the excesses from the prior asset and credit bubble are completely wrung out of the system. Depressions usually are caused by a bursting of an asset bubble and a contraction in credit, whereas plain-vanilla recessions are typically caused by inflation and excessive manufacturing inventories. You tell me which description fits the bill today.

2010-09-01 A Schizophrenic Market by David Baccile of Sextant Investment Advisors

On the surface it seems the markets are experiencing a relative period of calm with equity prices about flat year-to-date and up around 10 percent versus a year ago. The credit markets have also stabilized since the second quarter when it appeared that one or more of the European countries could be forced into defaulting on their debts. However, a look beneath the surface shows some very deep and turbulent cross-currents.

2010-09-01 Land of Confusion … Bubbles and Omens Dissected by Liz Ann Sonders of Charles Schwab

Charles Schwab is sticking with its view that the recovery is square root shaped (a 'V' followed by a stall), and there's little question that we've entered the stall phase. In addition to the havoc the stall has wreaked on stock market volatility, it's taken yields on Treasury bonds to near all-time lows. This, of course, has generated a very strong upward price move in bonds (as bond prices and yields move inversely) and much talk about a 'bond bubble.' That could be the case if yields move higher, which could trigger a swift move out of bonds as an asset class.

2010-09-01 ProVise Bullets by Ray Ferrara of ProVise Management Group

Over the next 65 days it might be a bit rocky and it will therefore be important to look ahead six months from now rather than to get caught up in the moment. Investors are shunning equities for bonds, but one day not too far in the future, that trend will reverse. When it does, we could see a dramatic rise in the equity markets. ProVise also comments on Cisco's gloomy earnings report, U.S. GDP growth, falling consumer debt levels, the closing months of the campaign season and a possible real estate bubble in China.

2010-08-31 Double ‘Bubble,’ Toil and Trouble by Sam Bass (Article)

The latest economic prophecy, which has gripped investors' fears for the past three years and counting, is that a 'bubble' in US Treasury bonds is about to burst. Hyperinflation is just around the corner, the prediction goes, and US Treasury bonds, driven up in price to record levels by unprecedented policy measures, are about to crash. In this guest contribution, Sam Bass writes that advisors shouldn't follow the advice of these "seers."

2010-08-31 Risk vs. Risk by Herbert and Randall Abramson of Trapeze Asset Management

The best stock market returns occur when interest rates are relatively low and supportive of under-owned equities, with lots of cash on the sidelines to fuel a rally. Markets are currently at or inflecting up from 'floors' or buy points. Probabilities remain high that markets will rise significantly from here even if we have another temporary setback. Accordingly, Trapeze Asset Management remains fully invested (even using some leverage in margin accounts) while continuing to have no short positions, particularly with the prevailing low valuations.

2010-08-31 Boston! by Jeffrey Saut of Raymond James

While the various markets can certainly do anything, it's typically not the snake you see that bites you; and currently the media is replete with stories about the Hindenburg Omen. When so many people are asking the same 'Hindenburg Omen' question, it is typically the wrong question. Meanwhile, the equity markets have been see-sawing, buffeted by deflationary worries from the bond market. The counterpoint to those lower bond yields is copper, which has broken out to the upside in the chart, suggesting no economic double-dip.

2010-08-27 Debt Be Not Proud by Rob Arnott of Research Affiliates

The looming sovereign debt crisis may be the defining influence on capital market returns over the next 10 years. Greece recently hit a wall and had to break a lot of promises to its citizens, including retirees and prospective retirees from government employment. Greece certainly won't be the last. An exploration of the relationship between sovereign debt levels and the economic might of debtor nations reveals a scary situation, particularly for investors who cap weight their government bond market exposure.

2010-08-27 Why Another Fiscal Stimulus Won't Do by Mohammed El-Erian of PIMCO

The main debate in Washington today is whether or not to do more of the same: another fiscal stimulus and another round of quantitative easing by the Federal Reserve. This conflicts with evidence that a broader and more holistic response is needed. Policymakers must address key structural issues, including the drivers of growth and employment creation; the high risk of skill erosion and lost labor productivity; financial deleveraging in the private sector; debt overhangs; the uncertain regulatory environment; and the unacceptably high risks facing the most vulnerable segments of society.

2010-08-26 In Which Direction Will the Next Panic Come? by Chris Lightbound of GaveKal

Good 'panic indicators' may be the cheapest way to monitor fat-tail risks. One of the most reliable panic indicators is the EUR/CHF exchange rate and the daily volatility of this cross rate, especially as compared to the Spain 10-year government bond spread over German Bunds and the volatility of U.S. long bonds. As charts presented in this commentary show, there are signs that today's only crowded trade is on the sidelines. So what are the odds that either of these two concerns - another sovereign debt crisis or a U.S. double dip - will reach a tipping point and become a panic?

2010-08-26 How Low Are Bond Yields Really? by Team of Bespoke Investment Group

A growing number of investors are calling the bond market a bubble. Bespoke presents a chart showing the yield on 10-year Treasury bonds minus the year-over-year change in the CPI. Using this method, the adjusted 1.62 percent yield on the 10-year bond is still below its historical average of 2.66 percent, but nowhere near historical extremes. While one could make the argument that Treasury bonds are unattractive due to increased supply and their low yields relative to other periods in the past, it is hard to argue that their current valuation fits the criteria for a bubble.

2010-08-25 The Fed's Biggest Bubble by Michael Pento of Euro Pacific Capital

Even top-flight Wall Street analysts seem to believe that the Fed's doubling of the monetary base after the credit crunch has not had an inflationary impact on our economy. Their logic can be summed up like this: "The money the Fed created and dropped from helicopters has all been caught in the trees." In other words, the Fed is creating money, but it is just being held as excess reserves by the banking system instead of being loaned to the public.

2010-08-25 What's With Equity Valuation? by David A. Rosenberg of Gluskin Sheff

Historically, the average consensus estimate forward price-to-earnings ratio on the S&P 500 has been 15.6x. And yet, what we actually end up with on average is 19.2x. The consensus, in other words, is systematically publishing earnings forecasts that make the market look cheap. Meanwhile, the Shiller P/E, which uses the 'bird-in-the-hand' earnings, takes them in inflation-adjusted terms, and cyclically-adjusts the earnings data, currently generates a multiple of 20.6x, which is 26 percent above the historical norm.

2010-08-24 Improving on Buy and Hold: Asset Allocation using Economic Indicators by Georg Vrba, P.E. (Article)

Most long-term stock market investors follow a buy-and-hold strategy, one that makes big losses unavoidable when major downturns strike the stock market. This strategy assumes that an investor cannot know when to switch from one asset to another and that if one avoids the bad days of the market, one is also likely to miss the best days. In this guest contribution, Georg Vrba presents a way to resolve this dilemma, based on various economic indicators that provide timely buy and sell signals for the S&P 500 index.

2010-08-24 This is No Way to Run a Railroad by Michael Lewitt (Article)

In the latest edition of the HCM Market Letter, This is No Way to Run a Railroad, Michael Lewitt says the railroad known as the United States economy is chasing its own tail these days. Driven by misbegotten fiscal and monetary policies that ignore the lessons of history in favor of discredited financial and economic theories, the economy is trapped in a cycle of boom and bust. Lewitt also comments on the bond market, the European stress tests, GM, and the private equity industry.

2010-08-24 Build America Bonds Power the US States by Hildy Richelson, Ph.D. (Article)

A skeptical attitude toward new products has long served the best interests of advisors and their clients, almost without fail. However, in this guest contribution, Hildy Richelson argues that advisors should not be afraid to embrace one of the market's most prominent recent innovations: the Build America Bond (BAB).

2010-08-24 Bonds or Stocks - Who is Right? by Chris Maxey of Fortigent

Over the past several months, bond and equity markets have been on starkly divergent paths. Investors are growing increasingly concerned that perhaps the bond market knows something that the stock market is overlooking. One reason for this divergence is corporations. Emerging from one of the most severe recessions in the last century, companies are more than willing to hoard cash and favor a 'wait and see' approach before resuming expansion. Meanwhile, individual investors continue to sell equities in favor of fixed income securities.

2010-08-23 Why Quantitative Easing Is Likely to Trigger a Collapse of the U.S. Dollar by John P. Hussman of Hussman Funds

A week ago, the Federal Reserve initiated a new quantitative easing program, purchasing U.S. Treasury securities and paying for those securities by creating billions of dollars in new monetary base. Treasury bond prices surged. With the U.S. economy weakening, this second round of quantitative easing appears likely to continue. Unfortunately, the unintended side effect of this policy shift is likely to be an abrupt collapse of the foreign exchange value of the U.S. dollar.

2010-08-23 Is it Japan All Over Again? by David Rosenberg of Gluskin Sheff

Everyone has been contemplating the possibility that the U.S. could reenact Japan's Lost Decade of protracted slow growth- especially as the Treasury yield curve flattens out in sashimi-like fashion. What is interesting, however, is that things are evolving much more quickly in the United States than in Japan. Japan let its imbalances linger for longer, which is why their unemployment rate never did break above 5.6 percent, while today in the U.S. it sits at 9.7 percent.

2010-08-23 Weekly Investment Commentary by Bob Doll of BlackRock

The sharp pullback in bond yields throughout the past couple of weeks suggests that fixed income markets are discounting a return to recession conditions. In contrast, the relative resilience of the stock market suggests that equities are discounting a milder slowdown in the pace of recovery. BlackRock believes that fixed income markets are overly pessimistic, but acknowledges that it will take some time to work all of this out, meaning that stocks are likely to remain in a trading range.

2010-08-23 Markets Are Pricing in the \'New Normal\' by Charles Gave of GaveKal

Either the upcoming U.S. elections, in a repeat of 1994, will bring about a Congress able to reduce the pace of government spending, thus triggering a massive sell-off in government bonds and a significant rally in equity markets, or the expansion of the U.S. government will continue, in which case investors in U.S. government bond markets will likely thrive in a repeat of what happened in Japan over the past two decades. You can guess which outcome the biggest fixed income investment houses are rooting for.

2010-08-20 Take Your Pick: Sinking US or Soaring BRIC by John Browne of Euro Pacific Capital

If America is headed for depression, then US equity, real estate and even bond investments may become increasingly risky relative to the BRICs. Investors still holding US securities and bonds might wish to follow the example of the People’s Bank of China and begin harvesting their dollar gains. With the proceeds, investors should allocate to economies showing growth based on genuine demand and solid fundamentals.

2010-08-19 Bonds or Stocks? by Mark Oelschlager of Oak Associates

Since the market correction of 2008, investors have flocked to bonds and bond funds, and largely eschewed stocks and stock funds. Historically, however, investors have been the perfect reverse barometer, gravitating toward stocks or bonds at their peak and fleeing them at the bottom. This time should be no different, and it is therefore wise to bet that stocks will outperform bonds in the coming years. Of course there is no way to know when the current trend will reverse, but it will.

2010-08-19 Dow Dividend Yield Versus 10-Year Treasury Yield by Team of Bespoke Investment Group

There has been a lot of talk this week about how 'the great bond bubble' is about to crash and that equities look attractive compared to them. One data point that commentators have been citing is that the Dow's dividend yield is now greater than the 10-year Treasury bond yield. We've heard some say that this is the first time this has happened in decades, but in actuality, the Dow's yield got much higher than the 10-year bond yield as recently as late 2008 and early 2009. Bespoke presents a chart Dow yields minus 10-year Treasury bond yields from 1920 to the present.

2010-08-19 An Investment Strategy for a Market in Transition by Dan Fuss, Kathleen Gaffney, Matt Eagan and Elaine Stokes of Loomis Sayles

The world is entering a period of rising interest rates on a secular basis. While inflation is not a concern in the near term, the seeds of inflation are likely being planted now, even though it could take quite some time for them to overcome powerful disinflationary forces at work today. If anything, the recent events in Europe and the deceleration of global growth suggest interest rates could remain low for longer than anticipated. The economy will likely grow at a disappointingly meager pace, but it will grow nonetheless.

2010-08-19 The Bond Bubble Debate: 'One Rosie' Takes on 'Two Jeremies' by David A. Rosenberg of Gluskin Sheff

What we have on our hands is a powerful demographic appetite for yield at a time when income is under-represented on boomer balance sheets. The two most significant determinants of the trend in long-term bond yields - Fed policy and inflation - continue to flash 'green' at a time when the yield curve is still historically steep and destined to flatten. Finally, the central bank has already assured us that short-term rates will remain at rock-bottom levels for as long as the eye can see. David Rosenberg also comments on growing acceptance of frugality by retailers.

2010-08-18 Pay No Attention to the Headlines by Christian Thwaites of Sentinel Asset Management

Market valuations are attractive, especially after the recent correction to below 1,100 on the S&P. What should work is buying companies with strong and sustainable cash flows and proven management. What will not work is chasing risk, and investing in companies that dilute shareholders and operate with high leverage. Don't look for an immediate catalyst. This is a market where stealth, opportunity buying and stock picking work. If you hear the word 'momentum,' run.

2010-08-18 Bank Credit – One Month Does Not Make a Trend, But... by Paul Kasriel of Northern Trust

U.S. commercial bank total credit increased at an annualized rate of 8.3 percent in July. If this is the beginning of an upward trend in bank credit, then we can feel a lot more confident about the prospects of rising real GDP growth rates in 2011. Subsequently, if bank credit continues to grow on a sustained basis and aggregate demand growth starts to pick up in the first half of 2011, then the Fed would be expected to begin raising policy interest rates around mid-year.

2010-08-18 Dr. Keynes Killed the President by Peter Schiff of Euro Pacific Capital

Modern-day Keynesians seek to significantly increase debt levels in an effort to boost aggregate demand. In their view, only once recovery takes hold due to government spending, money printing, and borrowing does a discussion of deficits become appropriate. The U.S. has persisted under this theory for close to a century. As a consequence, Washington is now entirely dependent on the reserve currency status of the dollar and the continued hibernation of bond vigilantes. It's almost as if the federal government is daring its foreign creditors to pull the plug.

2010-08-18 FOMC Warms Up the Helicopter by Nouriel Roubini of RGE Monitor

The Fed has been laying the verbal groundwork for further monetary stimulus. The August 10 announcement by the Federal Open Market Committee appears to be another signal of a gradual policy shift. On its own, the latest move is likely to have limited implications for the broader economy. More importantly, however, the decision to reinvest the repayments in Treasury bonds reflects the preference many FOMC members have expressed for an expeditious return to the Fed's traditional Treasury security-only portfolio.

2010-08-17 ProVise Bullets by Ray Ferrara of ProVise Management Group

Yields on 10-year Treasury bonds are hovering under 3 percent, which basically means that buyers anticipate inflation will only be 3 percent over the next 10 years. In spite of all the talk about deflation, however, can anyone really believe that inflation won't exceed 3 percent over the next decade given all the money the government has made available? That is why for the most part, ProVise is avoiding long-term bonds in their portfolios - remaining on the short to intermediate side of the yield curve.

2010-08-17 How Much of a Threat is Deflation? by Scott Brown of Raymond James

The Federal Open Market Committee voted to reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in long-term Treasury securities – which will keep the level of its security holdings steady over time. By itself, the Fed's decision is not a major move. Long-term interest rates were already very low. The move signals, however, that the Fed could do more if needed. Outright deflation is not likely, but it could result from a more substantial downturn in the overall economy. The Fed's latest move should prevent the economy from weakening a lot more.

2010-08-16 Treasury Yields in Perspective by Doug Short of Doug Short

Doug Short presents charts of inflation, 10-year Treasury bond yields and the federal funds rate since 1962. Last week the Fed said it will reinvest payments on mortgage assets it holds into Treasury bonds. Not surprisingly, yields fell, with the 10-Year Treasury index, for example, closing the week down 4.6 percent from its level the hour before the Fed announcement. As the charts illustrate, Treasury bond yields have occasionally led the market. How the Treasury bond market plays out over the next few months will be of critical importance to equity markets and the economy as a whole.

2010-08-16 The Fear and the Flight of the Individual Investor by Charles Lieberman of Advisors Capital Management

Individual investors have abandoned the equity market to the greatest extent in decades, pushed out by poor returns, unfathomable volatility, and disillusion with the political and economic environment. Instead, investors have turned to bonds as they prioritize safety and return-on-capital over investment returns. This search for safety will prove counterproductive, however, and investors will get hurt down the road once the economy recovers. Their flight from stocks has made the equity market the place to be for the foreseeable future, but only those with staying power will reap the benefits.

2010-08-16 Double-Dip or Single Scoop? by David A. Rosenberg of Gluskin Sheff

It is only a commentary on the human condition and the innate need to be optimistic that the vast majority of economists, analysts, strategists and market commentators still seem to be acting like ostriches with their heads in the sand, even in the face of fairly substantial evidence that GDP growth was cut at least in half in Q2 and that there is negative momentum in real retail sales being 'built' into the current quarter. If we are realistic, however, we can actually deploy strategies that will generate profitable results - certainly better than zero percent yields on cash.

2010-08-16 Investment Commentary by Bob Doll of BlackRock

The outlook for stocks will be highly dependent on the direction of the economy. Despite last week's decline in both equity prices and Treasury yields, financial markets are signaling that the worst of the deflation scare is ending and that renewed recession is unlikely. A strong current of skepticism is likely to persist for some time, and volatility levels will likely remain elevated, but as long as the economy does not retreat back into recession, stocks should be able to continue to make gains.

2010-08-13 Medicine for a New Normal by Doug MacKay and Bill Hoover of Broadleaf Partners

We could be on the cusp of a major sea change in the markets, one in which cash-rich companies - which are in far better shape than governments - begin to compete for investors through the dynamics of dividend yield. Investors who can start to capitalize on these changes now are likely to benefit as the groundswell for all things bonds begins to find a suitable and potentially even safer path towards stocks with rising dividends.

2010-08-13 Q2 Economic and Market Outlook: “Soft Patch” or “Double-Dip”? by Ken Taubes of Pioneer Investment Management

Inflation should remain well-contained for the next year or two, but a credible plan to cut budget deficits and a return to positive real interest rates will be needed to prevent the bond market from pricing in rising inflation in the medium term. In this environment, the U.S. dollar can continue to strengthen versus other major currencies, and capital markets, especially equity markets, can deliver attractive returns.

2010-08-13 No Exit - Stage Left or Right by Peter Schiff of Euro Pacific Capital

The coming doses of quantitative easing from the Federal Reserve will finally spark adverse reactions, first in the dollar and later in the bond market. When a falling dollar forces consumer prices and long-term interest rates to rise, the Fed's actions will be rendered impotent. The Open Markets Committee will have to make a horrific choice: fight inflation by tightening policy into a weakening economy, or fight recession by allowing inflation to burn out of control. It's obvious that they will choose inflation, all the while pretending that it doesn't exist.

2010-08-12 Asset Allocation: Volatility, Correlations and Returns in the New Environment by Tom and Rob Boeckh of Boeckh Investment Letter

Slow growth, high unemployment and weak inflation will keep interest rates very low in the short term. Rising government debt levels and heavy reliance on monetary ease from the Federal Reserve, however, suggest rising risks of price inflation later on, possibly much later. The current period of low long-term interest rates should thus be thought of as an extended base-building period for higher rates down the line. Investors should maintain a diversified portfolio, shifting equity exposure to defensive, non-cyclical sectors, and build positions in cash and safe sovereign debt.

2010-08-12 Bonds Have More Fun by David A. Rosenberg of Gluskin Sheff

Yields cannot go to microscopic levels, even with large-scale government debts. In the past, at the peak of bull markets in bonds, the yield curve has gotten so flat that the average spread between the long bond and the federal funds rate has been 100 basis points. It would seem that just as BB-grade sliver in the corporate bond universe was the laggard with the greatest return potential, within the Treasury curve it would seem that the long end carries with it the most compelling total return opportunity.

2010-08-11 The Fed Gives the Treasury a Gift by Brian S. Wesbury and Robert Stein of First Trust Advisors

Tuesday's announcement from the Fed means that the U.S. Treasury will pay even lower interest rates to finance its burgeoning debt levels. By holding rates steady, the Fed will become more accommodative as the year progresses. As a result, Fed policy will cause both growth and inflation to accelerate throughout 2010 and into 2011. The bond market is stuck between a rock and a hard place. Fed policy on one hand is pulling rates down, while growth and inflation will push rates up. Easy monetary policy, however, eventually results in higher interest rates down the road.

2010-08-11 Real Real Returns Study by Team of Thornburg Investment Management

This commentary features Thornburg's annual look at what investors are left with after expenses, taxes and inflation take a bite out of nominal returns. Once again, common stocks and municipal bonds are the best performers. This year's study also looks at implications for retirees, a group for whom nominal returns don't mean much, since they need to be concerned about actual spending dollars to protect against outliving their retirement income.

2010-08-10 Three Steps to Talk About Risk by Dan Richards (Article)

Among the most important things that good advisors bring is the ability to help clients make the right trade-off between risk and return ... and, as Dan Richards says, to help clients understand the critical relationship between the timeframe over which they hold investments and the volatility they experience.

2010-08-09 Corporate 'Cash' - Cheering the Asset and Ignoring the Liability by John P. Hussman of Hussman Funds

There is a lot of apparent 'cash on the sidelines' because the government and many corporations have issued enormous quantities of new debt, often with short maturities, while other corporations have purchased it. It will remain on the sidelines until the debt is retired. The government debt has been issued to finance deficit spending. At the same time, a great deal of corporate debt has been issued over the past year apparently as a pre-emptive measure against the possibility of the capital markets freezing up again.

2010-08-09 Some Salient Facts About the July Payroll Report by David A. Rosenberg of Gluskin Sheff

David Rosenberg outlines a number of reasons why last Friday' U.S. nonfarm payroll report was even weaker than we thought. He also comments on the recent 120 basis point decline on 10-year Treasury note yields, and its implications for the stock market.

2010-08-06 August Monthly Economic Update by Justin S. Anderson of Cambridge Advisors

Compared to U.S. government bonds, stocks may be a better investment if we stay in a slow-growth rather than negative-growth environment. Yields are low and the Federal Reserve is expected to keep short-term rates low for quite some time. Higher yields may be found in corporate bonds or foreign government bonds. Emerging market governments have lower debt as a percentage of their growing GDPs and may also provide higher yields to investors.

2010-08-04 No Man's Land by Mike Hurley of Incline Capital

Rallying nicely on the month of July, the U.S. markets moved back through key areas of resistance and in doing so have formed what may end up being be ‘bear traps’ on their charts. While the jury remains out on the direction of equities, however, interest rates literally across the board have broken important support levels. Among these are yields on 10-year U.S. Treasury bonds, which are now below 3 percent, and are headed lower from here. This is a trend which may well have legs, and which advisors should include in their planning for clients going forward.

2010-08-04 Back to Zero: Deflation Fears Emerge by Liz Ann Sonders of Charles Schwab

The current high correlation between stocks and bonds has only two historical precedents - periods when deflation was a reality, or when it was a fear. Low inflation is the reality today, but worries about deflation have still wreaked some havoc on markets. The latest rally may be based on a combination of waning deflation risk and the lessened likelihood of a double-dip recession.

2010-08-03 Letter to the Editor by Various (Article)

In a letter to the editor, a reader responds to Dave Loeper's article, Fake Diversification Exposed: Does Asset Allocation Work?, which appeared on July 13.

2010-08-02 Growing Federal Debt Will Cause Major Challenges in the Years Ahead by Team of Litman Gregory

A combination of sharply declining tax revenues and a surge in stimulus and bailout spending, both stemming from the financial crisis, caused the federal budget deficit to soar to almost 10 percent in 2009. Total debt to GDP ratios are climbing sharply, and could pass 90 percent by next year. The growth track of entitlement programs has led many to conclude that growing federal debt levels are unsustainable in the long term. Additionally, the Greek debt crisis could trigger increasing awareness of sovereign default risk with investors demanding higher rates for owning government debt.

2010-08-02 The Bubble In Bonds vs. Cheap Stocks by Charles Lieberman of Advisors Capital Management

It is disputed in a few corners, but more analysts and strategists view bonds as severely overvalued and stocks as symmetrically cheap. Advisors Capital Management shares this judgment and points to assorted different ways to reach this conclusion. Investors should be trying to inoculate their bonds holdings from losing value at some point and taking advantage of the upside potential in equities. The 'lost decade' in stocks could easily be followed by a lost decade in bonds, while stocks recover.

2010-08-02 What Multiples Are Telling Us Now by Milton Ezrati of Lord Abbett

The market will begin the next 18-24 months with multiples neither high nor low. Treasury and corporate bond yields, however, look low relative to the same history over which the historical multiples are calculated, seemingly leaving room for stocks to carry higher-than-average multiples. At the same time, prospects for further earnings gains seem good. Earnings have come in 25–30 percent above the easy comparisons of the past year, and as long as the economy continues to grow, which is likely, these good earnings figures should continue.

2010-07-30 Inflation in 2010 and Beyond? Practical Considerations for Institutional Asset Allocation by Michael Katz and Christopher Palazzolo of AQR Capital Management

Traditional institutional portfolios with risk characteristics similar to a 60/40 stocks/bonds allocation are not well-positioned for unexpected inflation. Stocks are not effective inflation hedges, particularly in the short and medium term. Meanwhile, traditional institutional allocations resemble a 'bet' on low inflation. A risk-based approach to strategic asset allocation, however, may generate more balanced performance across both inflationary and deflationary periods.

2010-07-28 Market Thoughts and the Long-Term Outlook for Inflation by David A. Rosenberg of Gluskin Sheff

The bull market in bonds will end reasonably close to the point in time that inflation (or deflation) bottoms. This is because the major economic factor that correlates consistently with the direction of market-determined interest rates, at least for long term Treasury Bonds, is CPI Inflation. Core inflation should recede from around 1 percent now to near 0 percent in the next 12-to-24 months, which would imply an ultimate bottom in the long bond yield of 2.5 percent and 2 percent for the 10-year T-note.

2010-07-27 America, the Odd Man Out by John Browne of Euro Pacific Capital

At long last, a good portion of mainstream economists now concede that a 'double-dip' recession is in the cards for the United States. To head off the pain, 16 top economists sent an open letter to the President urging him to 'stimulate' the economy with a massive new round of government spending. We feel this is a recipe for turning a recession into a depression.

2010-07-26 Earnings Season Masks the Slowdown in Q2 Economic Growth by David A. Rosenberg of Gluskin Sheff

Program trading, algorithms, momentum trading, technicals – all are at play. Meanwhile, the Treasury market has steadfastly refused to budge from a double-dip view, with real rates still under downward pressure, and while the breadth of the market has been decent, this rally has continued to lack volume – down a further 2 percent on Friday on the NYSE. We are also at another key technical juncture – the Dow and Nasdaq have retaken their 200-day moving averages while the S&P 500 and the Nasdaq are caught between the 50-day and 200-day m.a.'s.

2010-07-26 Earnings Bolster Investor Confidence by Chris Maxey of Fortigent

Investors found reason to cheer last week after a round of impressive earnings reports buoyed confidence. The challenge for the broader economy, however, is that companies are becoming more profitable but are unwilling to pass on those gains to their respective employees. Instead, they are stockpiling cash at the expense of employee compensation. Moving into the second half of 2010, as executives begin solidifying budgets for the next fiscal year, we could see an uptick in hiring.

2010-07-23 Portfolio Strategy by Bradley Turner of Chess Financial

With most of the globe showing signs of economic recovery, and many developed countries facing heavy debt burdens, it is hard to imagine a future that does not include higher interest rates. Since bond prices move inversely to interest rates, most fixed-income investments will face a headwind sometime in the next few years. If this outlook for bonds is correct, it's likely that stocks will deliver better overall returns over the next 3-5 year market cycle. High-quality stocks offer the best risk-adjusted returns given their reasonable valuations and attractive dividends.

2010-07-23 So What Else are the Bulls Looking at Right Now? by David A. Rosenberg of Gluskin Sheff

This is still a meat-grinder of a market. The bulls have the upper hand, but only until the next shoe drops in this modern-day depression and post-bubble credit collapse. The best we can say is that we do have a tradable rally on our hands and that we are at a critical technical juncture at the 50-day moving average on the S&P 500 - but remember, in a secular bear market, these rallies are to be rented, not owned. To be sure, 140 companies have reported so far and the news overall is good … but earnings are a coincident, not a leading indicator.

2010-07-22 California Municipal Markets - Confusion, Misconceptions and Reality by Jon Davis of HighMark Capital Management

There have been dramatic changes to the California municipal bond market over the last several years, creating new challenges for today's investor. Current state budgetary stress in California and across the U.S. may lead to a greater likelihood of possible ratings downgrades or defaults. Meanwhile, pension and entitlement obligation shortfalls will add additional pressure to future budgets. These trends have made fundamental credit analysis, valuation analysis, and a diversified portfolio vital.

2010-07-22 Failing at Resistance by Mike Hurley of Incline Capital

Technically speaking, after finding support at its 200-day moving average in February while in an uptrend, the S&P 500 is now finding resistance at that key line. This is action indicative of a down-trend, as are the 'lower highs & lower lows' which are clearly taking shape on the chart. The overseas markets are also struggling, with the most glaring example being the EAFE. In the case of the 10-yr U.S. Treasury bonds, breaking 3.2 percent moves yields out of a yearlong trading range and signals that significantly lower yields are most likely ahead.

2010-07-22 On Top of the Market Chart Series – A Temporary Pause? by Team of Managers Investment Group

This compendium provides an historical perspective of economic data compared to results from 2Q 2010, and provides comments on any developing trends. We also include a synopsis of financial markets results. The On Top of the Market Chart Book Series is designed with easy-to-read graphics to tell a story and help you visualize the changes taking place in today’s economy.

2010-07-22 It's Greek to Me by Howard Marks of Oaktree Capital

The current positives for investors include moderate valuations, rising corporate earnings and the likelihood we're already in a recovery. On the other hand, consumers are still too traumatized to resume spending strongly. Conservatism, austerity and increased savings are good for individuals but bad for a stagnant overall economy. Anyone who invests today in a pro-risk fashion out of belief in the recovery must be confident he'll be agile enough to take profits before the long-term realities set in.

2010-07-21 Fixed Income Investment Outlook by Team of Osterweis Capital Management

It is unlikely that the Federal Reserve will soon reverse its easy-money policies amidst worries about the European government debt crisis, meager job growth and low inflation in the U.S. In light of all these concerning developments, Osterweis continues to take a conservative approach by focusing on securities that will experience less volatility in the current unpredictable environment. These include short duration bonds and certain 'cushion' bonds, which are longer-term, high coupon bonds that will likely be refinanced in the near term, well in advance of their maturities.

2010-07-20 Jeremy Siegel on Why Stocks are Undervalued by Dan Richards (Article)

The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. In the transcript of this interview, Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios.

2010-07-20 Jeremy Siegel on Why Stocks are Undervalued (Video) by Dan Richards (Article)

The Wharton School's Jeremy Siegel remains an outspoken proponent of stocks for the long run, as he demonstrates in this interview with Dan Richards. Siegel explains why equity investors should not be deterred by sour economic forecasts or by signals of apparent overvaluation based on Shiller P/E ratios. This is the video of our interview.

2010-07-19 Don't Take the Bait by John P. Hussman of Hussman Funds

Investors who allow Wall Street to convince them that stocks are generationally cheap at current levels are like trout - biting down on the enticing but illusory bait of operating earnings, unaware of the hook buried inside. We should be skeptical about valuation metrics built on forward operating earnings and other measures that implicitly require U.S. profit margins to sustain levels about 50 percent above their historical norms indefinitely. More sober and historically reliable measures of market valuation create a much more challenging picture.

2010-07-19 Deflation: Should the Fed be Buying Gold? Hugo Salinas-Price on the Silver Peso by Christopher Whalen of Institutional Risk Analyst

This piece features a commentary from Hugo Salinas-Price, founder of Mexican retailer Grupo Elektra, on his proposal for the introduction of a silver-backed peso. Legislation to that effect now is under serious consideration before the Mexican Congress. Salinas describes the Mexican peso as a 'derivative' of the dollar, a troubling prospect since the dollar itself is a derivative of nothing, at best a mere representation of a unit of work. Christopher Whalen also discusses the U.S. financial reform bill, and the latest Federal Open Market Committee meeting.

2010-07-19 Sovereign Risks by Charles Lieberman of Advisors Capital Management

Fitch upgraded Argentina's bonds to B (stable) from Default last week, a rather questionable decision. Argentina and a few others belong in a special class, recidivist sovereign borrowers who default on a regular basis after they've lured new lenders to provide them with fresh money. It makes little sense to upgrade Argentina and downgrade Greece because the latter country's budget cutbacks are not politically popular. It is doubtful Argentina will act responsibly any time soon.

2010-07-16 Global Government Spending Hits the Tipping Point... by Jason R. Graybill and Neil D. Klein of Carret Asset Management

A combination of spending cuts and tax increases could weigh on economic growth. This is important to bond investors over the short term, as global deleveraging will create slower global GDP growth and provide lower levels of inflation. In the longer term, governments will probably use their printing presses to inflate their way to lower debt levels while investors will demand greater returns relative to the interest rate and credit risks they assume. Thus, with an outlook towards higher rates in the years to come, Carret remains focused on short-duration, high quality portfolios.

2010-07-16 Financial Markets Review and Outlook by Team of Managers Investment Group

As volatility surged last quarter and stock prices sank, investors became very hesitant to commit new capital to long-dated assets. Despite the challenges that lie ahead for the global economy and equity markets, however, there are now opportunities for long-term investors. Growth may be scarce, and so investors may need to be very selective. The environment will reward companies with exceptional management teams, strong balance sheets, innovative products and an ability to increase revenues during challenging times.

2010-07-14 U.S. Equity Newsletter by Team of W.P. Stewart

One thing is certain - there is a lot of bad news around and many people are now forecasting a double-dip recession. 'Bad news,' however, may already be factored into prices. Global growth is still expected to be solidly positive in 2010 and 2011, albeit somewhat skewed to the emerging markets. Corporate balance sheets are very robust, productivity has never been higher and earnings growth remains strong even on somewhat reduced estimates. Equities should therefore offer significantly better returns than bonds or cash.

2010-07-13 Fake Diversification Exposed: Does Asset Allocation Work? by David B. Loeper, CIMA, CIMC (Article)

Domestic equities are down roughly 14.5% from their April 23rd high. Many advisors tout sophisticated (and very expensive) asset diversification strategies, supposedly to protect their clients against precisely these circumstances. So, with this recent decline, Dave Loeper asks whether all of those supposed diversifiers protected portfolios?

2010-07-13 Deficits Monetary and Moral by Michael Lewitt (Article)

"The word 'deficit' has come to epitomize not only our economic dilemmas but also our moral and intellectual failures to address them in an era that should be boasting of new breakthroughs in the social and physical sciences," writes Michael Lewitt in the latest installment of his HCM Market Letter, Deficits Monetary and Moral. "Instead, our ability to solve complex problems is weighed down by flawed and corrupted government processes and the lack of courage to forthrightly change them."

2010-07-13 Quarterly Commentary by Michael Golub of The Golub Group

Four main factors will help provide capital gains for blue-chip stocks over the next few years. The first is an over-inflated bond market, which will cause poor returns down the road. The second is a slow but steady return to an economy which has recovered to normal employment levels. The third is that corporations have more cash on their balance sheets than ever, and will use this cash to grow their businesses and hire new employees. The fourth is that due to cost-cutting and improved efficiency, leading corporations will show improved profitability, earnings and cash flow growth.

2010-07-13 pick up the pieces by tom brakke of the research puzzle

Tom Brakke recently started a brand new service called research puzzle pix. You can think of it as a weekday digest of items that might trigger your curiosity or tickle your (investment) fancy. This commentary contains a link to one of his first efforts for the new service, a graphic called the 'yield curve accordion.' The graph shows the migration of various points on the yield curve of U.S. Treasury bonds. As the graph illustrates, each economic stumble is met with low short rates, a steepening yield curve, and a return to risk taking.

2010-07-12 Misallocating Funds by John P. Hussman of Hussman Funds

The relative abundance of physical and educational capital has been a driver of U.S. prosperity for generations, and is the main reason why American workers earn more than their counterparts in the developing world. Neither advantage in capital, however, is intrinsic to American workers, and it will be impossible to prevent a long-term convergence of U.S. wages toward those of developing countries unless the U.S. efficiently allocates its resources to productive investment and educational quality.

2010-07-12 It's a Slow Grind by Charles Lieberman of Advisors Capital Management

Economic growth in the U.S. is only moderate, which is inadequate to bring down unemployment at a satisfactory pace, even as a double-dip recession remains highly unlikely. It's easy to recognize the problems with the economy, while overlooking the positives. But there's a critical distinction often lost between the unsatisfactory current state of economic affairs and the improving direction. Given time, economic growth should accelerate and lift the economy to a solid state of health.

2010-07-12 Recession Odds Still on the Rise by David A. Rosenberg of Gluskin Sheff

The Economic Cycle Research Institute's weekly leading index fell again last week despite the equity market bounce. The spot index fell 0.6 percent for the second week in a row, and the growth index slipped to -8.3 percent from -7.6 percent at the end of June. While this is the only indicator so far suggesting that recession odds are rising, once you get to -8.3 percent, looking at the historical record, downturns occur more often than not.

2010-07-12 Weekly Investment Commentary by Bob Doll of BlackRock

With 20/20 hindsight, it seems clear that investor expectations for the economy and earnings were too optimistic during the first four months of 2010, but overall sentiment also grew too pessimistic in the subsequent couple of months. The current low levels of Treasury yields are unsustainable. Either yields will move higher as investors become more risk tolerant or economic fundamentals will deteriorate. The former is more likely, however, and as long as our view about the economy holds, equity markets will be able to grind higher in the months ahead.

2010-07-09 Current Economic Outlook and Strategy Review by Team of Managers Investment Group

With interest rates at historically low levels, investors are wondering if, when, and how much rates will rise and how they should factor this issue into their investment thinking. Our latest ManagersInsight contains the current economic outlook and strategy review from a number of our highly regarded fixed income fund managers.

2010-07-08 Nowhere to Go But Up? by Ed Hull of Managers Investment Group

Interest rates will be rising at some point, which could result in a reallocation of assets away from fixed income. Given the uncertain economic and market environment, however, it’s difficult if not impossible to know when the Fed might make its first move, and how many moves it will make. Fixed income returns, due in large part to reinvesting flows at higher rates and yields, also have a history of stronger-than-expected returns after rising rates. Furthermore, with negligible money market rates and a steep yield curve, the cost of holding elevated levels of cash is currently high.

2010-07-08 Update: 10 Predictions for 2010 by Bob Doll of BlackRock

Over the long term, policymakers still have a difficult job to do as they work to unwind the massive amount of stimulus that had been injected into the system without causing either inflation issues or renewed deflation threats. Over the short term, the broad macro environment will continue to be buffeted by financial and economic uncertainty that will keep volatility levels elevated. That said, the odds for a double-dip recession are low. As long as a renewed economic contraction is avoided, equity prices should grind higher over time.

2010-07-08 Double-Dip Revisited by David A. Rosenberg of Gluskin Sheff

The U.S. economy is very fragile and more vulnerable to exogenous shocks than has been the case in the past. It takes time for these shocks to percolate - six months in 1995 and 12 months in 1998 - and we have yet to feel the full brunt of the European debt crisis hit home, in terms of the depressing impact of their aggregate demand on our export growth. Where the offset from government stimulus comes from next will be interesting to see. If it's not fiscal policy or the Fed, then something tells us that the bond market is going to have to work that much harder.

2010-07-06 The Ultimate Income Portfolio by Geoff Considine, Ph.D. (Article)

Conventional approaches to constructing income-oriented portfolios use either bonds or high-yield stocks. In this article, Geoff Considine explores a compelling alternative to that approach: a carefully selected model high-yield portfolio consisting primarily of low-beta, high-dividend stocks, against which the investor sells call options.

2010-07-06 And the Winner Is... by Michael Nairne (Article)

As investors rush into U.S. Treasury bonds in response to a weakening economy that may portend the onset of deflation, this begs the question whether there is a superior deflationary hedge. History can be instructive in this regard, as Michael Nairne explains in this guest contribution.

2010-07-01 Bonding with the Bond by David A. Rosenberg of Gluskin Sheff

The U.S. long bond yield is edging lower with each and every passing day, and now stands below 3.90%. It could ultimately reach 1.9%. The most important driver of bond yields is inflation expectations – more important that fiscal policies or other variables. Core inflation will head lower. As for the equity market, the news, unfortunately, is not good. The S&P 500 has broken below the key line of support for the past five months of 1,040.

2010-06-30 Asset Allocation Thoughts by Tony and Rob Boeckh of Boeckh Investment Letter

This commentary provides an asset allocation framework for investor’s portfolios that reflects our macro view, concerns about the general riskiness of the financial world and a variety of issues that go into the asset allocation process. In general, we continue to be positive on risks assets in the context of our continuing focus on wealth preservation and diversification. Probabilities favor a recovery in stock and commodity prices rather than an extended bear market.

2010-06-29 Jeff Gundlach: The US will 'Politely Default' on its Debt by Robert Huebscher (Article)

Jeff Gundlach's keynote address at last week's Morningstar conference documented the immensity of U.S. debt obligations and the lack of choices available for alleviating that burden. As he has stated in the past, he does not view inflation to be a threat in the capital markets today. He cited six options open to policy makers, but believes a seventh - some form of default - is most likely.

2010-06-29 Inflation Protection Investment Strategies by Vern Sumnicht (Article)

The value of the dollar is sure to erode, and investors will be left to grapple with the inflationary consequences. As Vern Sumnicht shows in this guest contribution, recent policies suggest steep inflation may be just around the corner. Fortunately, investors have some options to bolster their portfolios against the threat of inflation.

2010-06-29 Market Insights by Christian W. Thwaites of Sentinel Asset Management

Christian W. Thwaites takes a deeper look at some of today’s big issues. He answers the question ‘Inflation or Deflation,’ investigates the Eurozone collapse and explains the plight of the U.S. consumer. As the summer begins, Thwaites gives his outlook on the market and some simple rules to follow for a strong financial future.

2010-06-29 Breakfast With Dave by David A. Rosenberg of Gluskin Sheff

In today's issue of Breakfast With Dave, David Rosenberg comments on a continued rally in bonds that will remain the most painful trade out there given how the non-commercial accounts are positioned. He also comments on the big drag from the State and local government sector and mixed news on the American consumer. -Big drag from the State and local government sector -Mixed news on the American consumer – just take a look at the slew of conflicting articles in today’s WSJ

2010-06-25 The Big Picture by David A. Rosenberg of Gluskin Sheff

Escalating global economic imbalances have dramatically increased the vulnerability of the global recovery. The chances of a growth relapse in the second half of the year are higher than the equity market and credit market have priced in. Treasury bonds seem to be the asset class that most closely shares these cautious views. Anyone with a pro-cyclical bent has to answer for why it is that the yield at mid-point on the coupon curve is below 2 percent, a year after a whippy rally in equities and commodities and what appeared to be a sizeable policy-induced GDP jump off the bottom.

2010-06-25 Beyond the Growth Vs. Austerity Debate by Mohammed El-Erian of PIMCO

This weekend’s G-20 meeting will likely fuel, not resolve, the heated debate triggered by a combination of exploding debt and deficits in industrial countries, and the recognition that many now face a future of muted growth and high unemployment. In one corner stand the 'growth now' camp, arguing that expansion is a prerequisite to service their debt sustainably. Against them stand the 'austerity now' camp, who want budget cuts to lower risk premiums and stave off disruptive debt restructurings. The two sides are both right, and wrong.

2010-06-25 Does the Oil Leak in the Gulf of Mexico Herald a Big Discovery? by Monty Guild and Tony Danaher of Guild Investment Management

The Macondo well blowout may indicate that these Gulf of Mexico fields, located in deep water about 50 miles offshore and under another 20,000 to 35,000 of rock below the seabed, represent a massive oil discovery. The costs of exploitation will be huge (and already are), and it will probably be decades before the oil can be brought to the surface, but they may do a great deal to help the U.S. attain energy independence. Despite the ongoing tragedy of the Gulf oil spill, the reality is that these resources are likely to eventually make it to market.

2010-06-24 Ten Year Treasury Yield Hits a 52-Week Low by Team of Bespoke Investment Group

Remember back in April when the yield on the ten-year was approaching 4 percent and everyone seemed to be worried that the era of low rates was over? That didn't last long. Less than three months later, the ten-year yield is not only lower, but it's also on pace to close today at a 52-week low of 3.14 percent Since April's peak in interest rates, there has been no shortage of concerns popping up regarding Europe and the strength of the US economy.

2010-06-24 Daring to Compare Today to the 30s by David A. Rosenberg of Gluskin Sheff

Look at what we have today: No room to cut rates. No room – let alone political will – to cut taxes. And, in contrast to starting a new war, the U.S. is going to be pulling troops out of Afghanistan, which is a good thing for the troops and their families, but in terms of GDP impact it does represent fiscal withdrawal. The options to resuscitate the economy when it enters a 2002-03 style growth collapse are extremely thin, and probably lie on the Fed’s balance sheet, which means the bond-bullion barbell will likely remain a viable strategy.

2010-06-24 No Surprises from the Fed by Liz Ann Sonders of Charles Schwab

The Federal Open Market Committee surprised no one with its decision to keep the Fed funds target rate in a range between zero and 0.25 percent, where it's been since December 2008. The new statement marked the first time since the economic recovery began last summer that the Fed had to slightly dial back its language about the pace of the recovery. Stocks rallied immediately after the announcement, but in light of rampant intraday volatility lately, it's way too soon to judge if there will be any longer-term impact.

2010-06-23 What a Flexible Yuan Means for the Economy by Nouriel Roubini of RGE Monitor

Even if the Chinese authorities allow two-way movement of the yuan against the dollar to reduce speculation, Chinese policies could support the U.S. Treasury market, commodities and risky assets more generally - especially if other emerging market countries take a cue from China and allow only gradual depreciation. However, a sharp appreciation against the euro and dollar without other policies to support Chinese consumption could contribute to much slower global growth and higher inflation as increased Chinese production costs are transmitted to G10 consumers.

2010-06-22 China Rising by Brian S. Wesbury and Robert Stein of First Trust Advisors

China just decided it will once again let its currency - the yuan - get stronger against the U.S. dollar. Yuan appreciation will do two things. First, it will lower Chinese inflation relative to U.S. inflation. Second, it will raise the living standards of Chinese citizens. Where previously the Chinese government might have wanted the peg in order to encourage export growth, now the political calculus is starting to favor expanding the purchasing power of its workers. This is a sign of maturity for both the economy and Chinese policymakers.

2010-06-22 Inexpensive Protection Against Rising Rates by Geoff Considine, Ph.D. (Article)

As is too often the case, the biggest risks are those that we discount. The possibility of a surge in interest rates appears to be today's ignored risk, despite the warnings of many experts, including David Einhorn, Bill Gross, and Seth Klarman. We discuss an inexpensive strategy to protect your portfolios from the tail risk of rising rates.

2010-06-22 Niall Ferguson on Japan, China, and the US by Dan Richards (Article)

Harvard's Niall Ferguson is arguably today's leading economic historian. In part two of this interview, Ferguson explains why he fears the future is bleak for Japan, why China may someday be the leading global superpower, and what all this means for the US. We provide a video and a transcript.

2010-06-22 Navigating Fears of the Bond Market by James Pressler of Northern Trust

The need to keep the bond market happy while implementing often far-reaching fiscal reforms is most acute across Europe, where the outlook is for weak real GDP growth into 2011 – albeit with significant variations between countries. Conversely, the recoveries in Asia and in the Americas have effectively eliminated fears of sovereign defaults but now concerns over economic overheating will dominate. The U.S will eventually have to address its own public debt overhang, but for now is enjoying a temporary safe-haven status.

2010-06-22 The Case for Bonds by David A. Rosenberg of Gluskin Sheff

The problem with trying to assess either supply or demand in the current market environment is that everything is so confusing in the early stages of this new secular paradigm of a global credit collapse. There is no way to get it completely right. As Lacy Hunt has always maintained, it makes much more sense to assess the outlook for inflation as the primary effort in predicting Treasury rates. Maybe perhaps instead of inflation, we should really be discussing deflation, which has emerged as the primary trend, and governments have few bullets left in the chamber to deal with it.

2010-06-22 Risk Assets Regain Favor But Risk Looms on the Horizon by Chris Maxey of Fortigent

The resurgence in risk appetite continued apace this past week, allowing the S&P 500 index and the Dow Jones Industrial Average to return to positive territory for the year. By the end of the week, the S&P was up 2.4 percent and the DJIA finished up 2.3 percent. The recession of 2008-2009 seems to have left a mark on many individuals, however, especially those in the baby boomer generation who are inching ever closer to retirement. This is fueling a reallocation away from equities in favor of bonds and income-producing securities.

2010-06-21 China's Currency Shift Not a Game-Changer by David A. Rosenberg of Gluskin Sheff

The big news over the weekend was the move by China to end the yuan peg to the U.S. dollar. This delink will allow the People’s Bank of China to pursue its own independent monetary policy. In turn, this will help to ease global trade imbalances, ward off the threat of trade protectionism, alleviate domestic credit strains and inflation pressures and accelerate the Chinese shift from export-led to consumer-led growth. It also suggests that the Chinese authorities have confidence in the sustainability of the global recovery.

2010-06-17 Getting a Grip on Reality by David A. Rosenberg of Gluskin Sheff

Double-dip risks in the U.S. have risen substantially in the past two months. While the economy's 'back end' of industrial production is still performing well, this lags the cycle. The 'front end' of consumer sales and housing leads the cycle. We have already endured two soft retail sales reports in a row and now the weekly chain-store data for June is pointing to subpar activity. The housing sector is going back into the tank - there is no question about it. The recovery in consumer sentiment leaves it at levels that in the past were consistent with outright recessions.

2010-06-17 Assessing Investment-Grade Bonds by Team of Litman Gregory

Investment-grade bonds are likely to generate average returns in a 1 percent to 2 percent range in most scenarios over the next five years. That is markedly lower than any historical rolling five-year average annual return number since the mid-70s. Forward-looking scenarios project that bond yields and inflation higher than their current levels and capital losses due to rising yields will cut into income from coupon payments.

2010-06-08 Dan Fuss: What Keeps Bond Managers Up at Night by Dan Richards (Article)

Highly respected fixed-income manager Dan Fuss of Loomis Sayles recently spoke with Dan Richards about what keeps bond managers up at night. Fuss identifies the critical issues bond investors face. We provide a video and a transcript of the interview.

2010-06-08 The First Thing We Do, Let’s Kill All the Quants by Michael Lewitt (Article)

In the latest issue of the HCM Market Letter, Michael Lewitt draws the parallels between the Gulf of Mexico oil spill and financial reform - both, he says, demonstrate our inability to learn from our mistakes. Lewitt also comments on quantitative trading strategies, economic recovery and the capital markets.

2010-06-08 Bond Bubble? by David A. Rosenberg of Gluskin Sheff

The problem with trying to assess supply or demand in the current market environment is that everything is so confusing in the early stages of this new secular paradigm of a global credit collapse. Bond yields have been low for some time, and they will remain low. But don't be lulled into numerical micro-phobia. The near-30 percent slide in the Chinese stock market suggests that we have three to six more months of deflating commodity prices. And, if the trend in Japanese, German and Swiss yields are any indication, bonds in the United States and Canada have plenty of room to fall further.

2010-06-07 The European Disease by Niels C. Jensen of Absolute Return Partners

It should be blatantly clear that Greece is by no means the only country at risk of falling into the much dreaded debt trap. The United Kingdom, the United States, New Zealand, Spain, France, Portugal and Australia are all in dangerous territory and Ireland is in very deep trouble on this account. This cross-European contagion risk threatens the very existence of our banking system, and it is this risk that French and German leaders are thinking about when they say that Greece will not be allowed to go down.

2010-06-07 China's Housing Bubble, To Be or Not To Be? by Chris Maxey of Fortigent

Market forecasters are worried about the state of the Chinese real estate market, with one publication after another declaring that an asset bubble is only moments away from popping. Clearly the recovery in the Chinese real estate market is impressive, perhaps curiously so, but the dynamics of the Chinese market indicate that an asset bubble is nowhere to be found…for now. From an affordability standpoint, the price-to-income index is on the rise, but well below the levels seen in the U.S., the UK and even India.

2010-06-04 The New Economic Reality - Part II by Monty Guild and Tony Danaher of Guild Investment Management

Some investors believe that deflationary influences will lead to an immense slowdown in world economic activity, and thus thus are selling stocks, buying bonds and short-selling commodities. Others think government action to forestall the deflation will end up creating inflation, and are buying commodities, buying stocks and avoiding bonds As the two sides pull markets back and forth, volatility will continue. To deal with the volatility, Guild is holding a large percentage of client assets in cash and gold, which can rise in either an inflationary or a deflationary situation.

2010-06-03 Some Days Are Better Than Others... Just Not These Days by Liz Ann Sonders of Charles Schwab

The wall of worry is back - and that's not a bad thing. Thanks to the correction, valuation has improved, while excessively bullish sentiment is no more. Growth estimates should be pared back for the second half of this year and next year, as well. Europe's debt crisis has become a deflationary event. The Treasury yield curve presently predicts the risk of a recession this year or next, however, as near-zero. The most likely shape of the recovery continues to be a 'square root,' with a V-shaped recovery followed by a leveling out of growth.

2010-06-01 Three Ways to Improve Safe Withdrawal Rates by Geoff Considine, Ph.D. (Article)

Using Monte Carlo analysis, Geoff Considine examines three ways safe withdrawal rates can be increased beyond the baseline 4% guideline. He compares and quantifies the benefits of increasing diversification beyond equities and bonds, increasing allocations to fixed income, and employing tactical asset allocation.

2010-06-01 Equity Income Targets Utilities by Philip Sundell, CFA (Article)

Natural gas local distribution companies are appealing utility business models to conservative equity investors. They tend to have stable earnings and stronger balance sheets. Philip Sundell of American Century Investments discusses his overall outlook for utilities in this interview. We thank American Century for their sponsorship.

2010-06-01 Global Equity Markets Slip on Greek Debt Crunch by Team of Ameican Century Investments

Fears of a Greek default have heightened concerns about the financial stability of several other peripheral European countries. Spain, Ireland, Italy and Portugal, however, are not in the same situation as Greece. Italy in particular is in a separate, stronger category than the others. It is less reliant on foreign financing, with Italians owning a high percentage of their own sovereign debt. Italy also lagged in the economic boom prior to the global recession, a blessing in disguise because its banking sector is now not as over-leveraged to the housing market as banks in other countries.

2010-06-01 Margins Peak, Gold Saves Lives by David A. Rosenberg of Gluskin Sheff

There is no ‘get-out-of-jail-free’ card when it comes to the places where market prices could go during this period of pullback in investor risk appetite. The appetite for risk usually comes back because the Fed cuts rates. This time around, we may have to see more balance sheet expansion and more money printed. Gluskin still loves the bond market, but gold is a very good hedge here just in case we are wrong on the inflation call or if the markets begin to anticipate the massive reflation efforts that are still to come.

2010-05-27 Sentiment Deteriorates - But Still Not Enough by David A. Rosenberg of Gluskin Sheff

Bullish sentiment, as per the latest Investors Intelligence survey, fell again to 39.3 percent from 43.8 percent; the bear camp rose to 29.2 percent from 24.7 percent. This means bearish sentiment has risen to July 2009 levels and bullish sentiment has declined to February 2010 levels. It can be argued that at real lows, the bull camp gets to 26 percent (historical average) while the bear camp gets to 49 percent, so we may well have further to go before sending the all-clear signal out.

2010-05-26 Gold Prices, Housing, Bond Yields and the Shiller P/E Ratio by David A. Rosenberg of Gluskin Sheff

The fact that earnings have been rising while the stock market has been correcting has helped cut the degree of overvaluation in half, to a 0.5 standard deviation from 1.0 just over a month ago on a normalized Shiller P/E ratio basis. The ECRI leading economic index is foreshadowing a deceleration in real GDP growth, however, to 1.5 percent in the second half of the year from the 3.75 percent average pace since the recession technically ended in mid-2009. The S&P 500 level that would be consistent with that sort of pace would be around 850, rather than the current level of 1,074.

2010-05-25 Sovereign Default Risk — the Next Concern by Eric S. Ende of First Pacific Advisors

In this letter, first published on April 26, First Pacific argues that it was government intervention last year that stabilized the stock market and allowed credit markets to begin functioning again. Not surprisingly, however, deficit spending has led to sharp increases in the amount of outstanding government debt compared to the size of economies. Around the world we should see lower debt ratings for weaker countries, accompanied by partial defaults. Please note that events, prices and outlook may have changed since this letter was first published.

2010-05-24 Don't Mess With Aunt Minnie by John P. Hussman of Hussman Funds

In medicine, an Aunt Minnie is a particular set of symptoms that is distinctly characteristic of a specific disease, even if each of the individual symptoms might be fairly common. Last week, we observed an Aunt Minnie featuring a collapse in market internals that has historically been associated with sharply negative market implications. Historically, we can identify 19 instances in the past 50 years where the weekly data featured broadly negative internals, coupled with at least 3-to-1 negative breadth, and a leadership reversal.

2010-05-21 The First Official Correction in Equities by David Rosenberg of Gluskin Sheff

There’s no sense getting overly bearish over the latest stock market correction. For those of us with cash on hand, who had been waiting for this opportunity in a Godot-like fashion, the correction comes as good news. For the economy, it cannot be a bad thing to have oil prices come down, which helps add cash to consumer pocketbooks and protect profit margins. And of course this wonderful bond rally has acted as a source of social policy, as it has helped pull mortgage rates down to six-month lows, to 4.8 percent for the U.S. 30-year fixed rate product.

2010-05-21 Enhanced Dividend for Income by Jim O'Shaughnessy of O'Shaughnessy Asset Management

It is axiomatic in financial planning that investors searching for a steady source of income should rely heavily on bonds. The problem with bonds, however, is that if you consume the income generated by them, you only get back what you invested. And with no principal growth in the value of your portfolio, you have no way to make up for what is lost to inflation. Investors and financial advisors should therefore shift their focus to investments that could continually grow income over time, such as enhanced dividends.

2010-05-19 Currency Considerations at the U.S.-China Summit by Nouriel Roubini of RGE Monitor

The U.S.-China Strategic and Economic Dialogue will recommence in Beijing on May 24, 2010. Behind closed doors, Chinese leaders will repeat their complaints about the U.S. dollar's role as a reserve currency and their concerns about the safety of their massive $1 trillion U.S. Treasury holdings given the eroding U.S. fiscal position. Meanwhile, the U.S. will struggle to prove it has a workable long-term plan to reduce the fiscal deficit. These constraints will soften the U.S. approach to the renmibi.

2010-05-18 Spain: After the Bubble by Charlie Curnow (Article)

Today, Barajas Terminal 4 one of the most visible artifacts of the profligacy that fueled Spain's property bubble and led to the country's current financial crisis. Spain, like several other European states, has continued to spend rapidly over the past two years, even as its economy has contracted. As a result, the Spanish government's debt has skyrocketed, raising fears of a possible sovereign default.

2010-05-18 Understanding Recent Negative International Bond Returns by Team of American Century Investments

This year so far has been a challenge for U.S. investors in high-quality, unhedged international bonds, continuing a downtrend for this sector that began in December of last year. Fortunately, the long-term strategic reasons for holding international bonds remain intact, including inflation protection from a potentially weaker dollar as the U.S. budget deficit grows, and diversification benefits versus traditional domestic fixed income.

2010-05-17 Two Choices: Restructure Debts or Debase Currencies by John P. Hussman of Hussman Funds

Without a central taxing authority, the common European currency can only survive if participating countries strictly control their deficits. It should not be difficult to recognize that confidence in any currency is tied to confidence in the assets which stand behind it, and associated confidence in the restraint of fiscal and monetary authorities. The bureaucrats in both the U.S. and European central banks have chosen to betray that trust.

2010-05-17 Difficult Choices Still Facing Europe by Mohammed El-Erian of PIMCO

The beneficial impact of last weekend’s $1 trillion 'shock and awe' intervention by Europe to save Greece and safeguard the euro is fading - even more quickly than officials had feared. This is the result of two main factors. First, having analyzed the news out of Europe in depth, markets recognize that the liquidity-based approach cannot sustainably address what is at heart a solvency problem. Second, markets are concerned that short-term stability is being pursued at the cost of long-term viability.

2010-05-17 A Trillion Here, a Trillion There... by Chris Maxey of Fortigent

News was generally supportive of equity prices last week following the decision by European countries and the IMF to provide financial support to the euro area. Fears of a 'double-dip' recession are beginning to creep into popular lexicon, however, after the possibility was raised by the likes of economist Nouriel Roubini and Research Affiliates chairman Rob Arnott. Those fears appear unfounded in the near term based on the recent Philadelphia Fed survey and the current steepness of the Treasury yield curve.

2010-05-12 Has the EMU Skirted Disaster? by Nouriel Roubini of RGE Monitor

Although many operational questions remain unanswered, the €750 billion headline number for this week's euro area stabilization mechanism - in addition to the European Central Bank liquidity facilities and quantitative easing - should help fight contagion. It is now up to euro area periphery countries to fulfill the fiscal consolidation requirements. In addition, the relatively high interest rates on joint loans should serve as an incentive for euro area members to put their fiscal houses in order without recurring to the facility.

2010-05-12 Is the U.S. Too Big to Fail? by Carmen M. Reinhart and Vincent Reinhart of VoxEU

First posted November 17, 2008, this column's analysis is more relevant than ever. It asks why investors rushed to government securities, even though the U.S. was at the epicenter of the financial crisis. This column attributes the paradox to key emerging market economies' exchange practices, which require reserves most often invested in U.S. government securities. America's exorbitant privilege comes with a cost and a responsibility that U.S. policy makers should bear in mind as they address financial reform.

2010-05-11 A Historical Perspective on the Slight Depression by Robert Huebscher (Article)

Armed with textbooks and formulas, economists attack a problem by drawing lines, forming equations and trying to fit data to the real world. Niall Ferguson, a historian by training, thinks you can learn more simply by analyzing what has already happened. So what's a historian's take on the current crisis? Ferguson says it has yet to run its course.

2010-05-11 Spring Quarterly Commentary by Alan T. Beimfohr and John G. Prichard of Knightsbridge Asset Management

The stock and bond markets are currently consumed with evaluating the risks from the crisis in Greece...and at Goldman Sachs. Each crisis could cause losses for investors. The simple fact, however, is that by the time most armchair investors have been alerted to impending tragedies, the tragedies have largely already occurred. That is why being reactive is seldom a prescription for loss avoidance, and why such crises are seldom viewed by investors as opportunities for gains.

2010-05-10 Europe Fires the Bazooka by Charles Lieberman of Advisors Capital Management

Greece's risk of default has the potential to disrupt markets globally, depressing stock and most commodity markets, while pushing the safest bonds, Treasuries, to artificially high values. With Greece as a possible disruptive force to global capital markets, the Fed will be hesitant to raise rates. Moreover, restrictive fiscal policies in Greece, Spain, Portugal, Italy and the U.K. will weaken U.S. exports to Europe. While a less expansion oriented monetary policy will still be needed in the U.S., it will come later given the disruptive forces from Europe that will restrain global growth.

2010-05-10 Think U.S. Double-Dip: Again by Komal S. Sri-Kumar of TCW Asset Management

Even though the National Bureau of Economic Research, the unofficial arbiter of the start and end of U.S. recessions, has not yet decided that the most recent recession has ended, the consensus view is that the economy recovering. Positive developments notwithstanding, Komal Sri-Kumar expects signs of a renewed economic downturn to manifest themselves during coming months. The slingshot effect of monetary and fiscal stimuli has still been less than stellar given the steepness of the economic decline during 2008-2009.

2010-05-07 The Right Page of the Right Book by Team of Beacon Pointe

The beginning of 2010 saw a continuation of the 2009 rally. Most stock exchanges around the world, with the notable exception of China, posted positive returns for the quarter and added to their gains off the March 9, 2009 trough. The major indices, however, remain well below their previous highs. The post-bear rally has been fast and furious and at this time, a pause seems justified. The exact timing and nature of this pause, however, are highly uncertain.

2010-05-07 Understanding the Greek Aftershocks by Mohamed El-Erian of PIMCO

The Greek crisis has already morphed into a regional shock. It now stands on the verge of morphing into a more global phenomenon. Some countries will benefit, mainly on account of capital flows coming out of the euro area. The majority will not. And even those that do benefit should remain vigilant and responsive. Like most other countries in the world, they will also end up suffering from the consequences of lower international demand and renewed disruptions to the global banking system.

2010-05-07 Greece and Possible Contagion by Charles Lieberman of Advisors Capital Management

The equity market melted down yesterday, partly due to a trading error, but also out of fear of contagion from Greece to Spain and Portugal. Europeans will need to draw a line in the sand to prevent the possibility of contagion, or risk a broad loss of liquidity across Europe. A strong policy response, possibly including a European Union guarantee on the sovereign debt of all its members, as well as support for the European credit markets from the European Central Bank, should calm the markets. Markets will remain quite volatile until these key players take strong policy action.

2010-05-07 Is Sovereign Debt Crisis Contained to Subprime? by Peter Schiff of Euro Pacific Capital

When mortgage-backed securities started to go bad, it wasn't as if the problems emanated in subprime and subsequently 'contaminated' the rest of the market. All borrowers were infected with the same disease, but the symptoms merely expressed themselves sooner in subprime. The same is true on a national level, whereby Greece plays the part of the subprime borrower. Even though the U.S. is considered to be the highest order of 'prime' borrower, our debt-to-GDP levels are at crisis levels compared to historic precedents, and are not that much lower than those of Portugal or Spain.

2010-05-06 All Part of the Global Deleveraging Story by David A. Rosenberg of Gluskin Sheff

Greek default now seems inevitable, as does an exit from the euro zone. This is all part and parcel of the global deleveraging cycle. Entities or countries that massively overextended themselves during the boom years are going to be paying the piper, as we are now, on the opposite side of the credit cycle - the secular contraction phase. It may have started with U.S. banks and American real estate three years ago, but it is now about European banks and welfare states within the euro zone.

2010-05-05 Greek Contagion Spreads—Time for Plan B by Nouriel Roubini of RGE Monitor

The euro continued to plunge this week, and long-term government bond yields in Greece and in the periphery countries, including Italy, spiked upward again after a short rally before the recent International Monetary Fund-European Union rescue agreement. The market’s lukewarm reaction to the financing package confirms RGE’s view that a traditional financing package, extended at unsustainable interest rates, will not allay solvency fears, but rather will lead to a disorderly outcome and contagion.

2010-05-04 Lacy Hunt: Keynes was Wrong (and Ricardo was Right) by Robert Huebscher (Article)

Underpinning the Obama administration's economic policies is the work of John Maynard Keynes, the legendary British economist who called for large fiscal and monetary interventions to counter the Great Depression. On this critical issue, Keynes was wrong, says Lacy Hunt, the internationally renowned economist with Texas-based Hoisington Investment.

2010-05-04 How Much is that Investment Worth in Real Money? by Adam Jared Apt (Article)

In the latest installment of his series of articles geared to the educated layman, Adam Apt looks at the topic of the time value of money, and how discount rates can be used to determine the value of a security. He shows the practical applications of present value calculations and its limitations.

2010-05-04 Weren\'t Interest Rates Supposed to Be Rising? by Team of Bespoke Investment Group

A couple of months ago, the yield on the 10-year U.S. Treasury bond was rising towards 4 percent, and commentators everywhere were declaring an end to the 'bond market bubble,' which would send interest rates sharply higher. So what happened? Thanks to the problems in Greece and the rest of Europe, US treasuries have been a magnet for investors looking to protect their cash. At a current yield of 3.62 percent, the yield on the 10-year U.S. Treasury bond is currently trading at a two-month low, and breaking below support.

2010-05-01 The Bond Roller Coaster by Michael Nairne of Tacita Capital

The bond market has been characterized by long-term secular cycles. From 1946-1981 yields steadily rose; since 1981 they have steadily declined. The good times for bonds couldn’t last forever. Although some longer-term bond exposure is needed today as a hedge against a deflationary scenario, investors should recognize that in the next year or so the bond roller coaster is about to get underway.

2010-05-01 Resilience Resonates by Liz Ann Sonders of Charles Schwab

The stock market has absorbed numerous body blows recently, but continues to chug along—waiting for a big price correction to buy could be detrimental. Economic data remains solid, confounding some recovery skeptics and providing the Fed ample reason to slowly return to normalcy. European debt problems are growing and concerns over contagion are rising; there's no quick fix, and some politically unpopular decisions are going to have to be made.

2010-04-30 U.S. GDP, Reflecting on the Market Rally, and Unemployment by David Rosenberg of Gluskin Sheff

While many economists will undoubtedly rejoice over the strongest headline GDP results in six years, today’s Q1 2010 number actually came in a tad light relatively to expectations, not to mention the fact that it was a very mixed performance, from a sector standpoint. Real GDP expanded at a 3.2 percent annual rate versus the 3.4 percent rate that the consensus had penned in, and once again the mathematics of a renewed inventory build was responsible for half the GDP growth last quarter.

2010-04-29 Bleak Job Outlook, Consumer Reality Check and Bailouts by David Rosenberg of Gluskin Sheff

What really stands out in this recession is the permanency of job decay. The National Association of Manufacturers just announced that fewer than 30 percent of the manufacturing jobs lost in the sector will be recouped in the next six years. If this holds true for the economy as a whole, and assuming a normal cyclical upturn in the labor force participation rate, then the nationwide unemployment rate will be 15 percent in six years' time. How anyone can believe that we can squeeze inflation out of that scenario is a mystery.

2010-04-29 Greek Crisis Endangers Private Sector by Mohammed El-Erian of PIMCO

The Greek debt crisis has morphed into something that is potentially more sinister for Europe and the global economy. What started out as a public finance issue is quickly turning into a banking problem too; and what started out as a Greek issue has become a full-blown crisis for Europe. Absent some remarkable change in the next few days, things will get even more complex for the public sector. It may have no choice but to combine its own exceptional financing efforts with talks on a controversial approach that will be familiar to emerging market observers - private sector involvement.

2010-04-28 Greece, Europe and the Significance of Yesterday's Market Action by David Rosenberg of Gluskin Sheff

The Euro bounced back this morning, and the flight to higher quality German and French bonds has partly reversed course as markets swirl with speculation that the IMF will announce a stepped-up aid package. The problem, however, is that if Greece is bailed out then Portugal, Ireland, Spain and perhaps Italy may not be far behind. The inability of Greece - and others within European monetary union - to enact an independent monetary policy at a time of crisis has exposed the flaws of the union. The lack of a cohesive national government is another flaw in times of turbulence.

2010-04-27 Gary Shilling: America’s Lost Decade by Robert Huebscher (Article)

The US faces 10 years of slow growth and deflation that could rival Japan's "lost decade" - two words which Gary Shilling did not utter but which unmistakably characterize his forecast. Shilling is founder and President of the New Jersey-based economic consulting firm A. Gary Shilling & Co.

2010-04-27 The Four Horsemen of Growth: David Kelly’s Guide to Markets by Katie Southwick (Article)

With unprecedented volatility now largely behind us, J.P. Morgan's Chief Investment Strategist David Kelly believes that the economy is entering a period of recovery. To move forward, we must abandon our negative mindsets and focus on opportunities for expansion.

2010-04-26 Markets Resume Upward Momentum by Chris Maxey of Fortigent

It is clear that more and more people are becoming cautiously optimistic about the recovery unfolding around the globe, but a number of risks remain unresolved and will likely stay that way for years to come. That should provide plenty of fodder for both economic pessimists and optimists. Investors should brace for a bevy of news from every angle this week. The Federal Open Market Committee will meet on Tuesday and Wednesday to discuss the latest state of the economy. Expectations are for the fed funds target rate to remain within a range of 0 percent to 0.25 percent.

2010-04-26 The Danger of Zero Percent Interest Rates by Brian S. Wesbury and Robert Stein of First Trust Advisors

The Fed has become overly involved in financial markets and it is losing sight of its number one job - maintaining price stability. Zero percent interest rates are becoming more dangerous every day. The economy is outperforming the Fed’s forecast, creating a dilemma. Before massive snowstorms, the Fed projected that real GDP would grow 3.1 percent in 2010. First Trust's forecast for Q1 real GDP is 3.4 percent, despite record-breaking storms. And we expect Q2 real GDP growth to approach 6 percent.

2010-04-23 To Peg or Not to Peg? by Peter Schiff of Euro Pacific Capital

Just as it is always better to be rich than to be poor, it is always better to have a strong currency than a weak one. The effect of current Chinese currency policy is to make the U.S. dollar more valuable and the yuan less valuable. Whenever the Chinese government decides to end the peg, the Chinese economy will benefit as a result. While as citizens we can hope that U.S. leaders respond with the right policies to enable our economy to regain its former glory, as investors we should position ourselves to benefit from the more certain outcome.

2010-04-23 Fixed Income Investment Outlook by Team of Osterweis Capital Management

The consensus is that we are well past the crisis point and will gradually see more economic sunshine. While Osterweis generally agrees, there are a couple factors that are prompting the firm to keep a conservative posture. In particular, they are concerned with China’s large trade surplus and the prospect of rising interest rates in the U.S. While the market may remain buoyant for some time as the economy recovers, Osterweis does not believe there is much opportunity cost at this time in taking a more conservative posture and waiting for the next good buying opportunity.

2010-04-20 U.S. Equity Quarterly Newsletter by Team of W.P. Stewart

The recovery in U.S. corporate earnings underpins the equity market's current valuation and offers scope for further upward movement over the coming quarters. In many respects the continued recovery in equity prices is likely to become self-fulfilling. As confidence in equities returns, investors are likely to move more money from cash and bonds, where they have parked it over the last 18 months, into equities. This in turn will push P/E's higher, which together with better earnings should offer investors good positive returns.

2010-04-20 Months-Long Equity Rally Pauses by Bob Doll of BlackRock

Stocks have rallied in an almost uninterrupted fashion over the past couple of months, but the tenor of Friday's news adds an element of uncertainty. This backdrop, combined with various signs of excess in the markets, suggests that a period of profit-taking may be coming, perhaps sooner rather than later. In any case, however, the recovering economy, low inflation, strong corporate earnings and reasonable valuation levels should be enough to cause any sort of correction to be short-lived.

2010-04-20 Letter to the Editor – The Interest Rate Debate by Various (Article)

As a Treasury bond bear of modest conviction, advisor Martin Weil read with interest Gluskin Sheff's David Rosenberg's piece in our April 12 issue. Though providing little data to support his thesis, Rosenberg makes a solid argument for why it is inflation, not supply and demand, that drives Treasury prices and yields. In taking this position, he pits himself against, among others, Jim Grant, with whom he has been carrying on a running debate.

2010-04-20 A Short-Term Buying Opportunity for Long-Term TIPS by Michael Brennan (Article)

Fixed income investors should consider a short-term buying opportunity for Treasury Inflation Protected Securities (TIPS) with maturities of ten or more years, writes Michael Brennan in this guest contribution. The 10-year TIPS should have a total return anywhere from 30 to 40 basis points greater than the comparable nominal Treasury bond.

2010-04-19 Goldman SEC Litigation: The End of OTC?; Alan Boyce on the Duration of Fed Open Market Operations by Christopher Whalen of Institutional Risk Analyst

This piece features a comment from Alan Boyce, chief executive officer of Absalon, on the impending end of the Fed Purchasing Program. Boyce says that as FPP ends, there is the real potential for unintended consequences in domestic and foreign markets. If markets were to become unglued, the Fed may purchase more mortgages and Treasury debt. Foreign central bankers will likely snap and become sellers, however, if the Fed decides to monetize more debt. Markets would likely take it as a sign that the Fed is politically unable to exit the mortgage market, or quantitative easing.

2010-04-19 Let the Tightening Begin... by Jason R. Graybill and Neil D. Klein of Carret Asset Management

Chairman Bernanke has started to turn the Federal Reserve's liquidity spigot off, and will continue this process through the remainder of this year and into next. It will be a slow process, as the Fed remains concerned about the fragility of the economic recovery. With unemployment at elevated levels, foreclosures a topic of daily conversation and with banks still stingy about extending credit, the Fed seems focused on letting this economy gain its footing versus worrying about the potential risk of inflation.

2010-04-14 Where is Inflation Going? by David A. Rosenberg of Gluskin Sheff

Inflation is going down. Fully 87 percent of the time, for five decades, U.S. core inflation has been lower the year after a recession ended, while core inflation has been down 75 percent of the time two years after a recession ended. This is because, even as the economy moves off the bottom, the output gap lingers and exerts downward pressure on inflation. In addition, nominal GDP growth rates have been in the 3-4 percent range in U.S. and Canada over the past five to 10 years. This has big implications for assumed returns in pension funds as the population ages.

2010-04-14 Quarterly Review and Outlook by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management

Massive government spending is unsustainable, and will not lead to economic growth. Recent research says that the multiplier for federal government spending is less than one (each dollar spent results in less than one dollar of growth), whereas the multiplier from tax reductions is greater than one. Other economic research suggests that in an extremely overleveraged economy, monetary policy does not work. With excessive levels of debt and contractionary monetary and fiscal policies in place, inflation will continue to moderate, thereby driving long term treasury yields lower.

2010-04-14 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles

The U.S. bond market is unlikely to offer investors the yield or capital appreciation opportunities they need to meet their investment objectives in 2010. Instead, investors will need to expand their investment universe. Investments in non-U.S., high-quality governments and supranationals could offer capital preservation, while emerging-markets debt and corporate debt might present performance prospects. In the non-dollar securities arena, investors could take advantage of securities offering capital preservation as well as performance.

2010-04-13 What Correlates With Bond Yields: The Core and the CPI Are All That Matter by David Rosenberg of Gluskin Sheff

Monetary policy is the strongest single predictor of bond yields, with an 88 percent correlation. Inflation and inflation expectations, meanwhile, drive Fed policy, and core inflation commands a 75 percent historical relationship with bond yields. Slack in the economy drives inflation expectations, and we currently have tremendous spare capacity in goods, labor and housing. Rosenberg also comments on the tenuous prospects for a big recovery, despite hopeful signals from equity markets.

2010-04-13 Yield Opportunities Still Exist in Bonds by American Century Investments (Article)

The current economic and market environment presents intriguing challenges for income-seeking, risk-averse investors. One effect of the Federal Reserve's policy of holding short-term interest rates at historically low levels is to force cautious, safety-oriented investors out of cash-equivalent investments. In this article, David MacEwen, chief investment officer for fixed income, discusses a number of opportunities that may provide additional yield for clients within a risk-managed, fixed-income framework. We thank American Century Investments for their sponsorship.

2010-04-13 Shameless by Michael Lewitt (Article)

The fiscal train wreck in the United States has not been set back on the tracks, and the global imbalances that led to the financial crisis have not gone away. Quite to the contrary, writes Michael Lewittin Shameless, the latest edition of his HCM newsletter. In fact, if progress isn't made with respect to these issues, and if intelligent financial reform is not enacted, future instability is guaranteed.

2010-04-12 Extend and Pretend by John P. Hussman of Hussman Funds

A year ago, the Financial Accounting Standards Board suspended rule 157, which had previously required banks to mark their assets to market value when preparing balance sheet reports. The basic argument was that fair values were not appropriate because there was 'no market' for troubled assets, which was false even at the time. This 'extend and pretend' policy has created a gap between the reported value of assets and the value they would have on the basis of reasonable cash flows over the course of their maturity.

2010-04-12 Setting the Record Straight on the Bond Debate by David Rosenberg of Gluskin Sheff

Bond bears argue that the U.S. government has never before raised so much debt to finance the bloated fiscal deficit and roll over existing obligations. With credit contracting, rents deflating, the broad money supply measures now declining and unit labor costs dropping at a record rate, however, it hardly seems plausible that inflation is a risk at any time on the near- or intermediate-term forecasting horizon. Rosenberg also comments on currency, equity, commodity and corporate bond valuations, as well as money and credit contractions.

2010-04-12 Sizing Up a Saw-Toothed Portrait of Potential Sustainability by Team of American Century Investments

A number of key leading indicators - including recent stock market performance, the expanding manufacturing sector, and the steep upward slope of the Treasury yield curve - point toward continued recovery. In addition, the unemployment rate, while still high, does not appear to be moving higher, and has in fact come down from its recent 10.1 percent high reached last October. History suggests that after an unemployment peak is attained, significant improvement follows soon afterward; there hasn't been a historical tendency for the unemployment rate to 'plateau' at levels near its peaks.

2010-04-09 Interest Rates are Creeping Up by Asha Bangalore of Northern Trust

The Fed is on hold in the near term, with nearly all its emergency programs either closed or expired. The effective federal funds rate has moved up in recent weeks, to an average of 16 bps in March, as have yields on other Treasury securities. The upward trend of Treasury market yields places the Fed is a tight spot, because the objective of easy monetary policy is defeated if Treasury market yields continue to move up and raise the cost of credit. Northern Trust's best bet is that interest rates will decline somewhat in the weeks ahead as bearish economic news comes out.

2010-04-09 Portfolio Strategy by Bradley Turner of Chess Financial

Three first principles of preserving and growing capital deserve our attention at this juncture in financial markets: Never own too much of any one investment, keep only those investments that offer the prospect of a reasonable return, and accept that financial markets will behave in a way that confounds the majority of people. These first principles speak to the importance of portfolio diversification, maintaining reasonable expectations and avoiding the latest fads. Turner also discusses prospects in the bond, stock, commodity and commercial real estate markets.

2010-04-07 When the Facts Change by Niels C. Jensen of Absolute Return Partners

An echo bubble is upon us. Echo bubbles are the children of primary asset bubbles, and emerge when monetary authorities respond to the bursting of a primary asset bubble by slashing policy rates. Extraordinarily low interest rates are currently encouraging another bout of excessive risk taking. If policymakers raised rates now, however, they would almost certainly kill the fledgling recovery. The pressure is therefore on monetary authorities to keep rates low and feed the new bubble. Investors should steer toward assets that benefit from high volatility.

2010-04-06 Guess Hu's Coming to Dinner at the White House - Much Ado About Very Little? by Asha Bangalore of Northern Trust

Chinese President Hu Jintao will attend a summit in Washington, D.C. on April 12-13. His plans have set off speculation that the Chinese government is prepared to let the yuan appreciate versus the U.S. dollar. Some in Congress want to brand China as a currency manipulator and impose protectionist penalties against the country. Chinese central bank balance sheets from last year, however, do not suggest that China engaged in extraordinary foreign exchange intervention. Bangalore also comments on impending reflation, and the expiration of the home buyer tax credit.

2010-04-06 Municipal Bond Advantages Remain by American Century Investments (Article)

You and your clients often sift through competing, complicated information in the course of making investment decisions. That's certainly true in the municipal bond market today. Joseph Gotelli, municipal bond portfolio manager at American Century Investments®, urges investors to consider municipals' enduring features. Conflicting news and views on the municipal market should not obscure the fact that many municipal bonds remain high-quality investments with compelling tax advantages. We thank American Century for their sponsorship.

2010-04-05 Houston, We Have Ignition by Charles Lieberman of Advisors Capital Management

The final and most important missing link in the economic recovery is now falling into place. Job growth has resumed. While we should not jump to strong conclusions based on a single economic report, the underlying trends and supporting data all reinforce the same inference that the economy is back on a growth track. The economic recovery trajectory is likely to further improve in the coming months as job growth feeds into household income and confidence in order to support more spending. This month we have ignition. Next month, we may have liftoff.

2010-04-05 Labor Market Turnaround by Bob Doll of BlackRock

The March payrolls report likely signaled the start of a long-awaited rebound in the employment picture, which should benefit the broader economy. As fiscal and monetary stimulus begins to fade over the coming months, the economy is going to require some self-sustaining mechanisms to kick in, and growing employment levels would certainly be beneficial. Over the course of the next year, we expect the economy to successfully shift from a recovery to an expansion. Investors should continue overweighting equities and credit-related fixed income assets and underweighting cash and Treasury bonds.

2010-04-01 First Quarter Economic Review by Thomas H. Luster of Eaton Vance Investment Managers

2010 is off to a strong start, building on the accelerating recovery that began in 2009. In the fourth quarter of 2009, GDP posted a healthy 6 percent growth rate, driven by strong government outlays, increased business activity - mainly, rebuilding very low inventory levels - and a nascent recovery in consumer spending.

2010-04-01 Market Insight by Duncan W. Richardson of Eaton Vance Investment Managers

A year ago today, changes in the financial markets were nearly overwhelming for investors. At the close of last year's first quarter even the most sanguine of observers couldn't help but worry that the worst might not be over yet. Investor fear was reflected in the March 2009 asset allocation survey by the American Association of Individual Investors showing record low 41 percent allocations to equities and record high 45 percent allocations to cash.

2010-04-01 Market Insight by Payson S. Swaffield of Eaton Vance Investment Managers

Evidence mounts that the U.S. economy is moving away from the depths of the Great Recession. The U.S. economy expanded at a 5.6 percent annual rate in the fourth quarter of 2009, and corporate profits surged. While unemployment stands at 9.7 percent, there are indications that the jobs picture may be improving, and inflation has remained in check. The U.S. stock market has responded favorably to the current environment, with the Standard & Poor’s 500 Index climbing more than 5 percent since calendar year-end.

2010-04-01 The U.S. Bond Market is Losing Steam by Monty Guild and Tony Danaher of Guild Investment Management

Smart investors will buy stocks on dips, sell their long term bonds denominated in the euro and the U.S. dollar, and shift into shorter maturity bonds or into stocks that can grow. Investors should consider selling all long term bonds of any type. Guild and Danaher favor foreign stocks in Singapore, Thailand, Indonesia, and Malaysia. They also favor export-driven companies in developed countries, and commodity producers globally, especially oil companies that are increasing their production. Gold is in a trading range, and should be bought for below $1090 per ounce.

2010-03-31 Yield Curve Back Near Highs by Team of Bespoke Investment Group

With long-term interest rates rising and short-term interest rates contained, the rising yield curve is once again starting to receive attention. The Fed defines the yield curve as the difference in basis points between the yield on 10-year and 3-month U.S. Treasury bonds. High values in the yield curve are positive for the economy, while an inverted yield curve is a harbinger of weakness. The curve is currently at the high end of its historical range, and has made multiple attempts to break through the 380 bps level in the current period.

2010-03-31 March Madness Trickles Into Housing Markets by Chris Maxey of Fortigent

As much as we would like to assume that a 30 percent peak-to-trough decline in home prices returned housing prices to fair value, that may not be the case. Housing markets are proving that an endless supply of liquidity can only mask underlying weakness for so long. Without jobs, no amount of principal forgiveness or interest rate reduction will allow homeowners to suddenly begin paying their mortgages again. Fortigent also comments on the IMF's plan to back Greece's debt, the new Federal Reserve public relations tour and the week ahead.

2010-03-31 ProVise Management Group by Ray Ferrara of ProVise Management Group

While many investors feared that health care reform would hurt the market, the Dow Jones Industrial Average jumped 44 points just after the bill passed, and is now approaching 11,000. Some Wall Street experts predict the bill will boost demand for prescription drugs and medical care, offsetting the tens of billions that health care firms will pay to subsidize the plan. Provise also comments on the impact of the census, corporate budgeting for 2011, the weakness of the Tampa Bay economy, the rising savings rate, increasing Treasury bond yields, IRS audits and college basketball betting.

2010-03-30 Stocks May Have Gotten Ahead of Themselves by Bob Doll of BlackRock

The current environment is one of a broadening global economic recovery marked by improving corporate earnings, low interest rates, increasing business and consumer confidence, and a labor market that should soon turn positive. Markets have turned increasingly bullish on the chances for economic growth. Stocks may have gotten ahead of themselves in the short term, however, as some technical indicators now look stretched. Nevertheless, an ample amount of cash remains on the sidelines and the macro backdrop suggests that the long-term path of least resistance for stocks continues to be up.

2010-03-30 Multisector Strategies in a Rising Rate Environment by Dan Fuss, Kathleen Gaffney, Matt Egan and Elaine Stokes of Loomis Sayles

For three decades, the prevailing direction for interest rates was down. This made life easy for bond investors, since principal held up well and even grew for the most part. The cost of these falling rates, however, was steadily lower coupons. One of the best defenses against this reinvestment risk is to maintain a long duration in a bond portfolio with good call protection. The good news is that reinvestment risk appears to be waning as declining interest rates possibly prepare to reverse, and this could create potential for better yields.

2010-03-29 Possible Outcomes: A Typical Post-War Recovery, or a Perfect Storm by John P. Hussman of Hussman Funds

Credit data suggests two distinct possibilities for the future direction of the economy. The most likely outcome is that we will see serious credit strains in the months ahead, adding to overextended market conditions, and creating a 'perfect storm' with a great deal of potential risk. Alternatively, if we do not encounter fresh credit strains in the coming months, a typical 'post-war' recovery may be on the horizon. Regardless of what lies ahead, current conditions recommend a defensive stance.

2010-03-29 Weekly Commentary and Outlook by Tom McIntyre of McIntyre, Freedman and Flynn

The stock market shrugged off the passage of Obamacare and moved higher last week based on the resolution of the debt crises in Dubai and Greece, as well as definite signs that corporate profits remain strong. Both the Dow Jones Industrial Average and the NASDAQ Composite gained around 1 percent, even as Treasury yields started to move higher. This week's employment report should see gains of 200,000 jobs or more. While the impact will be overstated, job creation this large could change perceptions.

2010-03-29 Central Banks in 2010 - The Cacophonous Sound of Exit Music by Asha Bangalore of Northern Trust

Recent developments suggest that the uncertainty of the past three years has left central banks skittish. Otherwise strong economies have been slow to normalize rates and central banks that are following inflation targets have been more willing to risk breaches than growth. The remainder of the year will be characterized by differing exit strategies and their intended and unintended consequences. As central banks around the world begin tightening before the Fed and the ECB, there will be further implications for global capital flows and exchange rates.

2010-03-26 Global Market Management by Monty Guild and Tony Danaher of Guild Investment Management

Investors should focus on exporting companies, food-related companies, raw materials producers, iron ore, oil, coal, technology, and on stocks of other countries, especially countries that can export to fast-growing areas such as India, China and Southeast Asia. Even U.S. financial stocks are enjoying a rally as uncertainty ends. Japanese, European and U.S. stocks that produce products for domestic consumption offer poor prospects. Gold is in a trading range, and investors may want to acquire gold shares as it approaches the bottom of that range.

2010-03-25 Market Thoughts and Shiller Valuations by David Rosenberg of Gluskin Sheff

With a stronger U.S. dollar, rising bond yields, lower commodity prices, slower growth and the stock market flirting with post-crisis highs, the stars are aligning for something big to happen. Bond yields are rising temporarily, and this will very likely prove to be a good buying opportunity. In the near term, however, higher yield activity may well persist and the question is how the equity market is going to handle this backup in market rates. In addition, the latest Shiller data shows that the S&P 500 is overvalued by at least 30 percent, benchmarked against historical norms.

2010-03-24 No Greece in the American Machine by Nouriel Roubini of RGE Monitor

Sovereign debt risk recently graduated from an emerging economy hitch to an advanced economy problem. The Greek debt crisis occupies center stage of the political and economic debate, and Greece's problems could soon spread to Portugal, Spain, Italy and Ireland. Comparisons between these countries and troubled U.S. states are in vogue. Implicit and explicit backstopping from the federal government, however, should prevent state and municipal debt crises from reaching levels faced by European governments.

2010-03-24 Rocking-Horse Winner by Bill Gross of PIMCO

Prudent lending must be directed not only towards sovereigns that can escape a debt trap, but ones that can do so with a minimum of reflationary consequences and currency devaluation. A unit of quality credit spread will do better than a unit of duration. Rates face a future bear market if global reflation is successful as central banks eventually normalize quantitative easing policies and 0 percent yields. Spreads in appropriate sovereign and corporate credits are a better bet as long as global contagion is contained. If not, a rush to the safety of Treasury bills lies ahead.

2010-03-24 The Economy, Interest Rates and Fixed Income Markets: What to Expect in 2010 by Curtis Arledge and Eric Pelliciaro of BlackRock

This commentary features an interview with BlackRock chief investment officer of fixed income Curtis Arledge and Eric Pellicaro, head of global rates investments for BlackRock fundamental fixed income. Arledge and Pellicaro predict that the Federal Reserve will keep the federal funds rate in the 0 to 0.25 percent range until at least the first half of 2011, particularly if economic activity slows down as the year progresses. When the central bank does start raising rates, it will do so gradually, and it will clearly telegraph its intentions in advance of formal rate announcements.

2010-03-23 Fixed Income Short Duration Bonds by American Century Investments (Article)

The fixed-income team at American Century Investments doesn't foresee sudden surges in inflation or interest rates in the immediate future, but they are on the horizon. "Near-term inflation concerns remain low due to lingering weak economic fundamentals," says David MacEwen, chief investment officer for fixed income. "However, looking long-term, the unprecedented levels of fiscal and monetary stimulus used to fight the recession will eventually result in higher inflation." (This is sponsored content.)

2010-03-22 Sex Sells... And So Does Fear by Charles Lieberman of Advisors Capital Management

Household confidence remains low, despite evidence that the economy has been growing for three quarters. Negative interpretations of data are given too much credibility and attention, and investors continue to pour money into bonds while avoiding stocks. Markets, however, tend to move ahead of perceptions. Just as the stock market began to recover in March 2009 before the economic recovery was evident, the market will now continue to recover in anticipation of the resumption of job growth and a self-sustaining expansion. Confidence surveys will follow suit.

2010-03-22 Inflation Benign For Now by Chris Maxey of Fortigent

Equity markets posted gains last week on news that inflation was muted and that the Federal Reserve would continue holding down interest rates at low levels for an extended period. The core consumer price and producer price indices rose just 0.1 percent in February, and the Fed's target federal funds rate remained between 0 and 0.25 percent. Leading economic indicators, however, have taken a weaker turn in recent weeks. Negative contributions from a shorter manufacturing workweek and falling stock prices were the biggest detractors.

2010-03-19 Paul Krugman Versus Reality by Peter Schiff of Euro Pacific Capital

Paul Krugman is right about one thing - China's currency peg is destabilizing the world economy and it must end. If China reversed its role in the U.S. Treasury market, however, China would emerge as the long-term winner. The value of the Chinese currency would rise sharply, causing prices to tumble in China. Americans, meanwhile, would lose the ability to buy cheap goods overseas. The U.S. must formulate a plan that weans the country off its dependence on Chinese Treasury bond purchases without forcing change too quickly.

2010-03-18 Dollar: Beleaguered No More? by Komal S. Sri-Kumar of TCW Asset Management

After weakening for most of the past decade, the dollar has appreciated significantly against the euro and the pound sterling, the two major European currencies, over the past three months. This is due more to the weakness of European currencies than to the strength of the dollar. Fears of stagnation in Europe, uncertainties over upcoming U.K. elections, and concerns that Portuguese and Spanish debt sovereign may come under attack by hedge funds have all dragged on European currencies. Compared to this turbulence, the U.S. economy seems like a safe haven.

2010-03-16 The Trifecta - Okun's Law and Unemployment - Is the Law of Supply & Demand Obsolete? by Kendall J. Anderson of Anderson Griggs

Okun's law explains the relationship between unemployment and real output, and calculates the gap between real GDP and potential GDP. Based on current GDP growth forecasts, the law predicts a one-half percentage point decline in unemployment this year and a full-point decline in 2011. Despite very positive returns, however, investors continue to allocate to bonds instead of stocks. The laws of supply and demand tell us that this is unwise.

2010-03-16 Implications of the Current Shiller P/E Ratio by Keith C. Goddard, CFA and Channing S. Smith, CFA (Article)

In this guest contribution, Keith Goddard and Channing Smith expand on ideas presented in a previous article, Return Distributions and the Shiller P/E Ratio. They study the historical behavior of U.S. stocks during three-year holding periods that began at with valuations comparable to recent market conditions, as measured by the Shiller P/E ratio.

2010-03-11 What the PBoC Cannot Do with Its Reserves by Michael Pettis of Michael Pettis

What the People's Bank of China does to the value of China's currency and how it invests its reserves matter a lot to China and the world, but not always in the way China and the world think. To get it right, we need to keep in mind the functioning of the balance of payments, the PBoC and other balance sheets, and the way the two are interrelated.

2010-03-11 Headlines Fail to Derail Munis by Team of BlackRock

Municipal bonds of all maturities enjoyed positive returns in February, outpacing their U.S. Treasury counterparts. Money market rates remain low, however, encouraging investors to move further out on the municipal curve to capture yield. While state and local governments continue to face fiscal challenges and worries over bond defaults, Moody's released an updated default rate study that continues to point to the relative safety of municipals.

2010-03-10 Will the Bond Vigilantes Ride Again? by Milton Ezrati of Lord Abbett

Projected deficits will remain too large for too long to avoid raising serious concerns about inflation, the dollar's value and the economy's fundamental growth potential. When investors return to these questions, chances are that the bond vigilantes who made pricing so tumultuous in the early 1990s will come back. Those vigilantes were unwilling to tolerate any red ink in federal finances during the Clinton administration. If President Obama wants to prevent bond vigilantism, he must end the current policy uncertainty and present a credible, balanced plan to control the future flow of debt.

2010-03-03 Recommended Bond Allocation by Team of Bespoke Investment Group

Have analysts become more conservative, or will the recommended bond weighting continue to fall as the market goes up? Wall Street strategists currently recommend a 30.5 percent weighting in bonds. Before the run-up in treasury bonds during the financial crisis, the recommended bond weighting ranged between 15 and 20 percent. As bond prices rallied, strategists increased their recommended weighting. Bond prices peaked in December 2008, however, and have been drifting lower since the onset of the current bull market in stocks.

2010-03-02 Economic Warfare: China and the United States by Michael Schussele of Michael J. Schussele, CPA

The China Dream, a new book by senior Chinese army officer Liu Mingfu, argues that China will become the world's number one economic power within the next five years, and that this change will be a harbinger for economic warfare between China and the United States that could escalate into military conflict within the next 10 to 20 years. While the U.S. needs China to buy treasury bonds, there is controversy over whether Japan has displaced China as the largest holder of U.S. debt.

2010-03-01 Lessons from the 'Naughties' by Robert D. Arnott of Research Affiliates

Sizeable real returns will be difficult in this decade, as they were in the last. Almost all asset classes are priced richly relative to historical norms. We can tilt the odds back in our favor, however, by tactically altering our portfolio risk based on measures as simple as yields and yield spreads. The surest path to success marries tactical asset allocation with a more efficient beta, such as the Fundamental Index methodology, and a full toolkit of alternative markets.

2010-02-25 How to Whip Inflation Now (or Whenever It Arrives) by Rob Isbitts of Emerald Asset Advisors

Inflation is coming, but it is hard to predict just when. When it does come, the inflationary era will be several years in length. A flexible investment toolbox that includes the ability to use the short side of the market and employ alternative styles will be essential.

2010-02-25 The Institutional Advantage When Buying and Selling Bonds by Josh Gonze of Thornburg Investment Management

Retail investors are at a disadvantage compared to institutional sellers such as mutual funds when selling bonds. An individual must call his broker and request a quote. This quote contains a mark-up for the trade desk and a sales credit for the broker, and may be a low-ball number to begin with. By contrast, an institutional investor enjoys economies of scale, has the expertise to judge the true value of bonds and has numerous methods for completing a sale.

2010-02-25 The Global Bond Market: Opportunity or Opportunity Cost by David W. Rolley of Loomis Sayles

The U.S. bond market is unlikely to offer investors enough yield or capital appreciation opportunities in 2010. Investors should instead expand their investments to include global bonds. High-quality governments and supranationals could offer capital preservation, while emerging market debt and corporate debt may present performance prospects. Non-dollar securities could offer both capital preservation and performance.

2010-02-25 structured myopia by Tom Brakke of the research puzzle

Structured myopia, the institutionalized focus on a narrow range of sectors, makes no sense for the individual investor or the biggest firm, but it is everywhere. Equity investors rarely pay attention to fixed income markets. Developments in fixed income bond and credit markets often presage changes in equity markets, however, as the recent financial crisis showed.

2010-02-24 Leading Indicators Reflect Positive Trends by Ken Taubes of Pioneer Investment Management

GDP growth forecasts of 3 percent to 4 percent could mean gains in credit and equity markets. Higher growth could lead to quicker tightening by the Fed, however, which could depress bond prices, as well as increase discount rates for equity markets. Corporate credit and equity markets should provide strong opportunities in 2010. While inflation is not a threat in the near term, investors should consider incorporating inflation hedges such as bank loans or multi-sector inflation products as tensions grow between fiscal deficits and monetary policy.

2010-02-23 Fixed Income Investment: What's the Index Doing for You? by Jason Brady of Thornburg Investment Management

The Barclay's Capital Aggregate Bond Index is comprised of thousands of securities picked not due to their size or relevance, but to their presence in the market. It is reconstituted monthly and consists of reasonably large bond issues denominated in U.S. dollars, with 75 percent of its issues backed by the government. Its combination of high negative convexivity, low yield, and long duration, however, makes it an imperfect model for investors seeking fixed income exposure.

2010-02-23 Interest Rates, Inflation and the PIMCO Total Return Fund by Robert Huebscher (Article)

The current generation of financial advisors has never experienced rising interest rates, but that will change, based on the forecasts we collected in our survey last week. We review our survey results and look at the implications for the largest bond portfolio, the PIMCO Total Return fund.

2010-02-22 Getting Back to Normal by Charles Liberman of Advisors Capital

The Federal Reserve's hike of the discount rate was a message that economic and financial conditions are returning to normal, and that interest rates must follow suit. Real rate hikes will not occur for another few quarters, and policy should remain accommodative for a long time. Economic growth should continue to build, and the outlook for stocks remains very positive. Bond yields should also rise gradually over time.

2010-02-20 G7 Weekly Economic Perspectives by Christopher Probyn and Geoffrey Somes of State Street Global Advisors

U.S. housing starts rose 2.8 percent in January, and industrial production jumped 0.9 percent to its highest level since December 2008. Investor risk appetites revived, boosting commodities and sending equities higher for the second week in a row, while government bonds eased.

2010-02-18 Just When We Thought They Were Out... by Chris Maxey of Fortigent

Equity markets were still oversold based on a number of momentum and sentiment measures last week as buyers pushed the both the S&P 500 and the Dow Jones Industrial Average indexes to volatile 0.9 percent gains. Headlines this week should center on Greece\'s bid for explicit financial support from other Eurozone members, as well as a slew of new economic data.

2010-02-18 The Ultimate Buy-and-Hold Strategy: 2010 update by Paul Merriman of Merriman

An investor's choice of assets if far more important than the times he decides to buy or sell those assets. In a nutshell, the ultimate buy-and-hold strategy is this: Use no-load funds to create a sophisticated asset allocation model with worldwide equity di-versification by adding value stocks, small company stocks and real estate funds to a traditional large-cap growth stock portfolio.

2010-02-17 Grecian Formula by Rob Isbitts of Emerald Asset Advisors

The market rally in the last 10 months of 2009 should have taken two or three years to unfold. The pace of advance thus has to slow, and this slowdown may manifest itself with temporarily lower stock prices. Furthermore, slowly increasing interest rates may suggest fears of inflation.

2010-02-16 Outlook Report: 2010 Searching for the Afterparty by Robert N. Stein of Astor Asset Management

Markets will grow in 2010, but foreign and domestic gains will be harder to find than they were a year ago. The market's panic and robust recovery suggest a return to growth rates closer to historical norms, with some areas outperforming others. Sectors that performed best during the recession may be the highest performers during the recovery.

2010-02-13 Fear Takes the Wheel by Peter Schiff of Euro Pacific Capital

Peter Schiff of Euro Pacific Capital says in his economic commentary that the recent strength of the stock market may be more attributable to fears of inflation than an improving economy. Growing U.S. debt levels threaten to swamp to dollar, and are leading investors away from dollars and treasury bonds.

2010-02-11 Fixed Income Investment Outlook January 2010 by Team of Osterweis Capital Management

Osterweis Capital Management says in its fixed income investment outlook that increased investor appetite for risk drove up prices of high-yield bonds, equities and other financial assets in 2009. Investors may want to avoid Treasury bonds and other underweight longer-dated assets in order to avoid the impact of a possible interest rate hike.

2010-02-11 Chairman Bernanke on Fed's Exit Strategy/ Trade Gap Widens in December by Asha Bangalore of Northern Trust

Asha Bangalore discusses the “exit strategy” from quantitative easing, and notes that the interest rate on reserves could soon replace the federal funds rate as the Federal Reserve's main policy tool. The large volume of reserves in the current banking system and the resulting loss of activity and liquidity in the federal funds market have made the federal funds rate less reliable as an indicator. The Q4 trade deficit data are also discussed.

2010-02-09 China’s Quest for a Shortcut to Greatness by Vitaliy Katsenelson (Article)

The Chinese economy must be getting out of control, because the Chinese government is doing the unthinkable: It is desperately trying to put the brakes on its economy. Author and fund manager Vitaliy Katsenelson looks back at how China got into this trouble and looks forward to China's prospects.

2010-02-08 Are the Markets Oversold? by Chris Maxey of Fortigent

Fortigent senior analyst Chris Maxley says equity markets are quickly approaching oversold territory. The S&P 500 lost a mere 0.7 percent last week despite heightened market volatility. Sovereign credit issues continue to loom over markets, and improved earnings are still not inspiring traders.

2010-02-04 Market Review & Outlook by Roge of R. W. Roge

R.W.Roge is a NY-based advisor and fund manager. They call for a "slow and bumpy" recovery, and expect interest rates to rise. They are investing in the shorter end of the yield curve, TIPS, and high-quality dividend paying stocks.

2010-02-04 Breakfast with Dave by Rosenberg of Gluskin Sheff

Rosenberg's bearish thesis is based on his belief that the "great policy reflation experiment is over." He notes that China, India, Canada and most of Europe are tightening budgets. The 2009 stimulus "cushioned the blow;" 2010 and beyond look much different. He recommends a conservative asset allocation.

2010-02-02 Bonds for the Long Run by Bronchick of Reed Conner Birdwell

RCB is a classic value-based investor. They note that the 2009 rally has left them with fewer buying alternatives. However, they state, "equities as an asset class will outperform investment grade bonds of almost any stripe over the intermediate and longer term using January 2010 as our starting point…” They believe equities are valued “to do okay,” since 2009 and 2010 earnings do not represent a “normalized” environment. “Moving forward, the real fun in 2010 will be how investors react to the possibility of higher interest rates driven by a stronger than expected economy.”

2010-02-01 Fed Up? The Effects of a Rate Rise by Ezrati of Lord Abbett

Milton Ezrati examines the history of Fed Funds rate hikes and the response of the bond markets. He concludes, based on the evidence of the 2004-2007 experience, that bond investors should not be fearful of rate increases.

2010-02-01 Breakfast With Dave by Rosenberg of Gluskin Sheff

Rosenberg provides an update to his bearish outlook. He says credit flows remain constrained, amid new bank failures last week. The spending freeze announced by the Obama administration will provide what amounts to a “rounding error” of improvement in the context of the unemployment situation. Investors should consider a defensive allocation – similar to what would have worked in 2008 but did not work in 2009.

2010-01-30 This Time is Different by Mauldin of Millennium Wave Advisors

Mauldin begins with an analysis of the reported Q4 GDP numbers, saying that it is not indicative of underlying growth in the economy. He then comments on the Reinhart-Rogoff book "This Time is Different," focusing on the point that governments can survive debt-fueled growth until confidence in them evaporates. He is discusses Greece's fiscal problems.

2010-01-29 Q409 Portfolio Commentary & Updated Fact Sheet by Compson of Absolute Investment Advisers

“Beyond just our economic, fiscal, and underemployment problems, we are likely to see a reversal of three decades of tailwinds that will turn into large headwinds: deleveraging, higher taxes, re-regu

2010-01-29 Geronimo! by Browne of Euro Pacific Capital

Browne offers a bearish forecast for US equity and bond markets based on five factors: the steepness of the recent rally, uncertainty regarding interest rates, a poor outlook for the economy and uneas

2010-01-28 Monthly Investment Commentary by Team of Litman Gregory

When the dust settled on one of the most eventful and upended years in memory, investors had generous gains in stocks and certain segments of the bond market to salve the wounds of a disastrous 2008 a

2010-01-28 This is Not Supposed to Happen by Rosenberg of Gluskin Sheff

Rosenberg comments on the State of the Union Address, yesterday’s FOMC statement, the latest Investors Intelligence poll and the continuing flows of money into the bond markets. Most importantly, he

2010-01-26 Bill Miller Commentary by Miller of Legg Mason

Bill Miller says, “In our view, one thing the data support and the evidence warrants is the belief that the current consensus for economic growth for 2010 is too low, and that it’s likely expectations

2010-01-26 Tell Me I'm Wrong by Marks of Oaktree Capital

Howard Marks says “the rally in financial markets worldwide has outpaced the fundamentals,” and he does not believe we are “in the midst of a strong recovery.” He expects the economy to “sputter alon

2010-01-26 2010 Outlook / Macro Overview by Keegan of Ridgeworth

“In summary, global asset markets have transitioned from fear at the beginning of 2009 to an environment where government support and intervention have led to complacency and greed. While these powerf

2010-01-22 Give Bernanke a Break by Nairne of Tacita Capital

In a recent speech, Bernanke pointed out that it was low real long-term rates (i.e. nominal rates less inflation) determined in the bond market that were a major contributor to the housing bubble, not

2010-01-22 Thoughts on the End Game by Mauldin of Millennium Wave Advisors

"As for financial markets, we have come full circle to the concept of financial fragility in economies with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubbl

2010-01-21 Breakfast with Dave: Market Musings and Data Deciphering by Rosenberg of Gluskin Sheff

In my view, three years after the detonation in residential real estate, it is still all about housing. And it will be interesting to see how the markets handle (i) a near-term renewed decline in the

2010-01-20 Geithner's Debt Nightmare by Maxey of Fortigent

The problem for the Treasury moving forward is twofold. For one, interest rates have nowhere to go but up. At the end of 2009, the average interest rate on all outstanding US debt stood at 3.3%, a f

2010-01-20 A Strong Dollar Call by Patten of Symmetry Capital

We're taking a more bullish stance on the USD and related assets such as Treasuries… Markets are making the same case today, with the dollar up, and stocks and commodities down. Pundits are attribu

2010-01-19 Inflation Myth and Reality by Hussman of Hussman Funds

It is in this context that we should consider inflation risks over the coming decade. At present, inflation risks are hardly considered to be problematic by Wall Street. From the standpoint of the nex

2010-01-19 Steve Leuthold: The Market will Rally This Year by Robert Huebscher (Article)

Steve Leuthold is chairman of the $4.5 billion Leuthold Group and one of the most widely-followed market analysts. In his keynote presentation at last week's Fortigent conference, he offered an upbeat forecast for the first half of 2010.

2010-01-05 Risk Management through Costless Collars by Geoff Considine (Article)

Nassim Taleb and Zvi Bodie are among those who advocate a wealth management strategy that includes options. Despite their evangelism, though, options are rarely a part of retirement portfolios. The costless collar, a straightforward options strategy, gives investors the upside of an asset class (such as equities) while absolutely limiting the downside risk.

2010-01-05 Perspectives on 2009 and Beyond by Ron Surz (Article)

We are again privileged to provide Ron Surz' award-winning market commentary. Surz examines global performance in Q4, 2009 and the prior decade.

2009-12-29 End-of-Year Letter Templates by Bob Veres (Article)

Bob Veres is the editor and publisher of Inside Information, a publication focused on practice management and related issues for the financial planning profession. He just introduced a new monthly service, Client Articles, which will contain articles (and cartoons) that can be sent to clients, for example as part of your quarterly newsletters. He provides two sample letters.

2009-12-29 Letter to the Editor – Pension Liabilities by Various (Article)

In this first letter to the Editor, a reader responds to our article last week, The Next Black Swan? Underfunded Public Pensions, and provides additional data showing the depth of the pension crisis.

2009-12-15 A Template for a Year-end Letter by Dan Richards (Article)

Many advisors have told Dan Richards they receive a positive response from the quarterly review letters they've sent over the past year based on the templates he has provided. Here's a template that can be a starting point for a year-end review letter.

2009-11-24 Gary Shilling's Version of the New Normal by Robert Huebscher (Article)

A dramatic reduction in consumer spending has doomed the US economy to slow growth and deflation, according to Gary Shilling. America's 25-year spree of profligate spending is over, and it will be supplanted by a decade-long retrenchment that will ultimately bring the consumer savings rate from 4% to double-digits, where it has not been since the mid-1980s, he said.

2009-11-24 Dan Fuss and the Long-Term Outlook for Interest Rates by Robert Huebscher (Article)

Dan Fuss, the highly respected bond manager at Loomis Sayles in Boston, says we are in the early stages on a long-term rise in interest rates. His view was shared by two other panelists, Carl Kaufman of Osterwies and Margie Patel of Evergreen. If you accept this consensus, you must ask whether your fixed income allocation is appropriate.

2009-11-24 Interview: Brian McMahon of Thornburg Investments by Robert Huebscher (Article)

We speak with Brian McMahon, CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and the challenges of finding income-producing securities in today's markets.

2009-11-24 Buy Bonds and Not Bond Funds by Hildy and Stan Richelson (Article)

Record inflows into longer-term bond funds in the last six months have provided investors purported relief from the near-zero returns in money market funds. Do not mistake those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest contribution. Bond funds are inferior to individual bonds, as those who are now buying bond funds may soon discover.

2009-11-17 Federal Taxes & Municipal Bonds Historical & Current Perspective by Munder Capital Management (Article)

With income tax increases seemingly around the corner given the budget deficit and a potentially very expensive federal health care plan, the spotlight has returned to municipal bonds and the power of tax-free income. Municipal portfolio managers at the Munder Funds identify the attractiveness of municipal bonds based on projected budget deficits, current spreads over treasuries, and macroeconomic trends. We thank them for their sponsorship.

2009-11-03 Absolutely … Maybe by Robert Huebscher (Article)

Since Putnam introduced its absolute return funds earlier this year, over 4,200 advisors and $650 million in assets have flocked to the new financial products. Putnam's four funds seek to beat inflation by 100, 300, 500 and 700 basis points, and their performance over their first nine months (3.1%, 6.4%, 8.4% and 12.2%, respectively) was encouraging for their investors. Impressive as those results may be, the question is whether they are sustainable.

2009-10-27 Stay the Course or Plot Another? by Ted A. Ponko, CFA (Article)

Is it reasonable for investors' objectives to change along with major fluctuations in their wealth? In these instances, sticking with the current portfolio may not be the best option - even for long-term investors. In this guest contribution, Ted Ponko of Klein Decisions argues advisors need a reliable way to determine when to stay the course and when to plot another.

2009-09-15 The 'Cash For Clunkers' Economy by Michael Lewitt (Article)

We are once again privileged to offer the latest edition of the HCM Market Letter, edited by Michael Lewitt, titled The 'Cash for Clunkers' Economy. Lewitt examines the drivers behind the current market rally, the health of the banking system and the housing industry, the the future for derivatives regulation. If you enjoy this newsletter, we encourage you to subscribe directly though the link provided with our article.

2009-09-01 Shiller P/E's and Predicting Returns by Joseph A. Tomlinson, FSA, CFP (Article)

It becomes clearer every day that the stock market does not follow a random walk and that there may be some predictability in long-term returns. But there's little agreement on how best to make such predictions. In this guest contribution, advisor Joe Tomlinson takes a look at using price/earnings ratios to predict future stock market performance.

2009-08-25 Should Investors Hold More Equities Near Retirement? by Ron Surz (Article)

A just-published paper argues that investors should hold more equities as they near retirement, contrary to conventional wisdom and to the glide paths employed by the target date fund industry. Ron Surz examines this research, and argues that the authors of the paper failed to properly consider the risks inherent in such a strategy.

2009-08-18 Actively Managed TIPS? by Robert Huebscher (Article)

When PIMCO talks, the market listens. But we mustn't forget that the bulk of PIMCO's revenue comes from actively managing bond portfolios so, when they claim that alpha can be earned by actively managing TIPS, a healthy dose of scrutiny is warranted. Our article shows why that scrutiny is justified.

2009-08-18 A Crash Course in Investing Six Lessons from the Market Meltdown by Dougal Williams, CFA (Article)

The market decline from October 2007 to early March 2009 was the worst since the late 1930's. Stocks dropped 60%, investor uncertainty skyrocketed, and trust and confidence were shattered. The age-old rules for personal investing are now being questioned: Is Buy-and-Hold dead? Has Asset Allocation outlived its usefulness? Does Diversification still work? In this guest contribution, Dougal Williams provides answers to these questions that can serve as a guide for long-term investment success.

2009-08-18 Turbulence Can Improve Portfolio Diversification by Susan B. Weiner, CFA (Article)

Classic diversification has failed, Mark Kritzman says, because traditional, independent measures of volatility and correlation don't provide enough information to indicate which portfolios will deliver the lower risk or higher returns that, at least theoretically, should come with investing in imperfectly correlated asset classes. Kritzman offers the concept of turbulence as an alternative way to approach diversification, and provides his latest research on the subject.

2009-08-04 Uncovering the Mayhem in 2008 in the TIPS Market by Robert Huebscher (Article)

In an interview two weeks ago, Yale Endowment manager David Swensen singled out TIPS as the best way to protect against inflationary and deflationary scenarios. We review a comprehensive study of the history of the inflation-indexed bond market, including an explanation for the extreme volatility in TIPS last year.

2009-07-07 Gary Shilling: Recovery is a Year Away by Robert Huebscher (Article)

Among economists, Gary Shilling owns one of the most prescient forecasting records, having accurately predicted the credit crisis and the performance of key asset classes over the last several years. Now, he says, the chances that the current wave of "green shoots" will be the finale to the recession are "pretty low."e

2009-06-30 Letters to the Editor: The Road to Zimbabwe by Various (Article)

In the second set of our letters to the Editor, we publish responses to to our article, The Road to Zimbabwe.

2009-06-23 The Road to Zimbabwe by Robert Huebscher (Article)

John Williams of Shadow Government Statistics is best known for exposing inaccuracies and biases in government reporting of data - most notably the understatement of the CPI index. Williams says the US economy is on the brink of hyperinflation which will render the dollar worthless, as happened recently to Zimbabwe's local currency.

2009-06-16 High-Yield Bonds A Potential Opportunity for the Risk Tolerant by Northern Trust Investments (Article)

High-yield bonds have recently offered investors historically high spreads relative to Treasury and investment-grade corporate bonds, presenting attractive current income potential in today's low-rate environment. The current recessionary environment also poses a heightened risk of default, underscoring the importance of security selection and intensive analysis of underlying fundamentals. We thank Northern Trust Investments for this contribution and their sponsorship.

2009-06-16 Moving Average: Holy Grail or Fairy Tale - Part 1 by Theodore Wang (Article)

Buying and holding a diversified portfolio works well during good times, but falls short when supposedly uncorrelated asset classes drop in unison in bear markets. Are there alternative investment strategies that work for all seasons? Ted Wong evaluates strategies using moving averages to determine their effectiveness.

2009-06-09 Simon Johnson on Obama’s Achilles Heel by Eric Uhlfelder (Article)

While he agrees with much of what the US administration is doing to confront the economic crisis, Simon Johnson, the former chief economist of the International Monetary Fund, fears that present policy is not addressing a key issue: the overwhelming influence of the finance industry in US economic affairs. He likens this imbalance to what we see at the core of many emerging markets crises.

2009-06-02 John Bogle and the Lantern on the Stern by Robert Huebscher (Article)

In his remarks at the Morningstar conference last week, Vanguard founder and index fund pioneer John Bogle criticized many aspects of the mutual fund industry. Bogle, who turned 80 this year, is primed to fight his next battle - reducing investor reliance on past returns - which he likens to a lantern on the stern of a ship.

2009-05-26 Dan Fuss and the Eisenhower Recession Redux by Robert Huebscher (Article)

Those of us old enough to remember Studebakers and the military-industrial complex will recall the Eisenhower Recession, which began in 1957, lasted eight months and was followed by the 10 month "Rolling Adjustment" recession beginning in 1961. The W-shaped path of the US economy during this period is the correct analogy to today's crisis, according to Loomis Sayles and Company's Dan Fuss.

2009-05-26 Taking Tax Advantage of Municipal Bonds by Northern Trust Investments (Article)

Whether or not tax rates change, municipal bonds clearly offer an attractive alternative to Treasuries and taxable bonds. This piece from Northern Trust Investments explains how the comparatively low volatility, historically high credit ratings - and above all the tax advantage - make municipal bonds an alternative worth considering for risk-adverse investors. We thank them for their sponsorship.

2009-05-26 TIPS – When a Discount is Really a Premium by Robert Huebscher (Article)

We answer a question posed by a number of readers in response to our article last week, Opportunities and Risks in TIPS, and show that TIPS purchased at a discount offer superior performance relative to those purchased at a premium, given deflationary assumptions.

2009-05-26 The Big Issues Facing the Hedge Fund Industry by Robert Huebscher (Article)

Last week, the Argyle Executive Forum hosted its 2009 Hedge Fund Leadership Forum in New York. This event attracted more than 200 leaders from the hedge fund industry, with a series of panel discussions centered on the key issues managers now face. Although the sessions were "off the record," we have summarized the key themes from the discussions.

2009-05-05 Defending Against Inflation: A New Look across Asset Classes by Robert Huebscher (Article)

In the long-term performance race against inflation, stocks are the hands-down winner, outpacing inflation 9.7% to 3.0% since 1926. But that history is characterized predominantly by modest inflation, with one big exception - the 1970s, when double-digit inflation contributed to a bear market. We look at new research showing the effectiveness of different asset classes as inflation hedges, and Zvi Bodie explains the implications for retirement portfolios.

2009-05-05 Letter to the Editor – A Safer Four Percent Withdrawal Rule by Various (Article)

Hawaii-based advisor John Robinson is the author of several articles on safe withdrawal rates, and he reviews our recent article, A Safer Four Percent Withdrawal Rule. We respond to Robinson's critique.

2009-04-28 Gary Shilling – Economic Forecast and Current Market Opportunities by Robert Huebscher (Article)

Gary Shilling is well-known for his forecasting record, having correctly predicted major economic events over the past several decades. Beginning in 2002, he warned his clients that the housing market "has taken on self-feeding, bubble dimensions that will sooner or later collapse," and continued to sound this warning through 2007, when his predictions came true. Dr. Shilling shares with us his current forecast for the economy and the market.