More on Related Themes
2013-05-21 Developed Europe: Regional Economic Review 1Q 2013 by Team of Thomas White International
After withdrawing into the background in late 2012, the Euro-zone sovereign debt crisis resurfaced in the first quarter with the Italian elections and Cyprus’ banking crisis. In late February, Italy’s national elections resulted in a fractured mandate, and Italians voted out the incumbent, the main architect of the country’s austerity and reforms agenda.
2013-05-21 Why the Lack of Inflation Is a Problem by Chris Maxey, Ryan Davis of Fortigent
Given the outsized role central banks are playing in today’s financial markets, inflation watching has taken on increased significance.It is widely assumed that continued easy money policies are only possible as long as price increases remain under control.At the same time, for a global economy trying to escape an extended period of weak growth and burdensome debt loads, low inflation is a double-edged sword.
2013-05-21 Capitalism and Democracy by Bill O'Grady of Confluence Investment Management
In the Italian elections, the party that showed the strongest results was the Five Star Movement, led by the comedian Beppe Grillo. Despite this strong showing, the party failed to form a government and refused to participate in any coalitions. This decision not to participate in the political process has been exhibited by other protest groups, such as Occupy Wall Street, the Israeli Tent Movement, and the Spanish “Indignant” movement.
2013-05-21 Are Equity Investors Pushing the Gas Pedal Too Hard? by Norman Boersma of Franklin Templeton Investments
Whatever previous reticence investors may have had about equities last year seems to have evaporated and, with remarkable speed, turned into fear over having missed the equity rally. Some major market averages have accelerated at a pace some say is reckless, so as we head toward the mid-point of the year, Norm Boersma, CFA, chief investment officer of Templeton Global Equity Group, takes a look at reasons investors might continue to push the gas pedalor tap the brakes.
2013-05-20 Still Bullish by Brian Wesbury, Bob Stein of First Trust Advisors
Like Rip Van Winkle, imagine you went to sleep on October 9, 2007 and didn’t wake up until yesterday. On 10/9/2007, equities were at record highs: 14,165 for the Dow Jones Industrial Average and 1,565 for the S&P 500.
2013-05-18 All Japan, All the Time by John Mauldin of Millennium Wave Advisors
This week we again focus on Japan. Their stock market has been on a tear, and their economy grew 3.5% last quarter. Is Abenomics really the answer to all their problems? Is it just a matter of turning the monetary dial a little higher and voila, there is growth? Why doesn’t everyone try that? And what would happen if they did?
2013-05-17 4 Reasons to Still Hold High Yield by Russ Koesterich of iShares Blog
With high yield spreads historically tight and prices at all-time highs, some market watchers are wondering whether it’s time to jump off the high-yield bandwagon. Russ weighs in and explains why this asset class is still worth holding.
2013-05-17 Stress Points: What High Frequency Data Tell us About Hidden Tail Risks by Vineer Bhansali, Qingxi Wang of PIMCO
Whereas rare events that occur over lower frequency, longer horizons are much harder to find (and hence much harder to derive statistics from), intraday events create a larger, more accessible data set that can be used to supplement data on tail events. Analyzing the reactions of different markets to intraday tail events can provide valuable information for investors looking for effective tail risk hedges for their portfolios.
2013-05-17 Weekly Market Highlights by Matthew Rubin of Neuberger Berman
Bank of England leaves monetary policy unchanged.
S&P 500 and DJIA post gains of 1.3% and 1.1%, respectively. U.S. inflation and housing data and euro area GDP headline this week’s economic releases.
2013-05-17 Finding Opportunity Far and Near by Frank Holmes of U.S. Global Investors
Would it surprise you to learn that a vast majority of equity valuation models state that stocks should head much higher over the next five years?
2013-05-16 Hold Your Houses: The Housing Recovery May Take Longer Than You Think To Reach Consumers by Joshua Anderson, Emmanuel S. Sharef, Grover Burthey of PIMCO
New residential construction needs to double from 2012 levels to meet long-run stable demand, and the pace of that increase is critical. Consumer credit growth is hindered by strict lending standards, continued deleveraging and limits to mortgage equity withdrawal. As a result, the balance of mortgage debt is unlikely to meaningfully increase in the next 12-18 months, delaying a return of the virtuous consumer cycle.
2013-05-16 The Dow Hits All-Time Highs, But The Truth Is It Remains Cheaply Valued by Chuck Carnevale of F.A.S.T. Graphs
The Dow Jones industrial average sits above 15,000, an all-time high. But don’t be fooled, this doesn’t mean that stocks are expensive. I understand that it seems logical to assume that
2013-05-15 And That\\\'s the Week That Was by Ron Brounes of Brounes & Associates
Fiscal Cliff. Sequester. Different names for similar budgetary issues that both basically resulted in games of Congressional “kick the can.” Now in a stroke of luck for non-compromising politicos, the budget deficit is shrinking as higher payroll taxes and paybacks from previously bailed out entities (thanks Fan) have enhanced government revenues since the beginning of the year.
2013-05-15 Speaking of a Great Week... by Blaine Rollins of 361 Capital
I left the office each day thinking that I just saw another walk off game winning home run by the S&P500. The bears were given their chance in April with the weak economic data and slightly less than exciting earnings, but they just couldn’t break it. In return, the employment data was a bit better, the global central banks came out swinging (ECB, Australia, and South Korea), then the markets broke the Yen, Bonds, and Gold, and the Bulls absolutely skinned the Bears.
2013-05-14 Nouriel Roubini: Four Reasons Investors Should be Worried by Robert Huebscher (Article)
Despite a modest recovery from the nadir of the financial crisis, the global economy still faces tail risks, according to Nouriel Roubini. Roubini’s forecast is not as gloomy as the one that earned the moniker “Doctor Doom,” when he correctly predicted the housing market collapse and the ensuing global recession. But, in a talk May 1, he identified today’s biggest danger points in Europe, the U.S., China and geopolitics which he said threaten to destabilize the global economy.
2013-05-14 Mohamed El-Erian: The Three-Speed Global Economy by Robert Huebscher (Article)
The global economy is operating at three distinct speeds, according to Mohamed El-Erian, and investors need to understand the implications of the divergent paths that key countries are following. Japan and most European countries are going backward, he said, and could continue in that direction for decades. The U.S. is “healing,” but not quickly enough to get to “escape velocity.” Certain emerging markets, meanwhile, are adapting technology and innovation and are growing rapidly.
2013-05-14 Guide to Working with Monetary Napalm by Scott Colyer of Advisors Asset Management
Napalm is a highly incendiary form of jellied fuel. It was used extensively in the Vietnam War to quickly ignite massive fires over large areas of land. In the world of financial incendiaries, the Fed’s overwhelming monetary stimulus has ignited asset prices in the United States with the force and effectiveness of napalm. Is the fire short lived? Are the gains in asset prices temporary or can they be believed? Are the housing and stock markets on fire just because of the Fed’s quantitative easing (QE) or could there be a much more fundamental reason?
2013-05-14 Housing Finally Breaks Free by Chris Maxey, Ryan Davis of Fortigent
Housing, which for so many years represented everything bad about the credit crisis, is finally beginning to have its day back in the sun. Trends in housing markets around the country are improving, to the benefit of the overall economy. It appears that trend is set to continue.
2013-05-14 Cyclical and Emerging Market Strength May Be Pointing to Better Growth by Bob Doll of Nuveen Asset Management
Last week U.S. equities advanced as the S&P 500 increased by 1.3%. We have been amazed bythe market’s ability to continue to rally in an environment in which sales growth has been anemic and earnings gains have been largely based on companies’ abilities to manage margins and utilize financial engineering.
2013-05-14 Who is Henry Singleton? by Jeffrey Saut of Raymond James
The year was 1974 and Teledyne (TDY/$77.56/Outperform), on a split-adjusted basis, was trading at about $0.05 per share. By 1986 it was changing hands around $75 per share. Unfortunately, back in 1974 I didn’t have enough money to buy more than 10 shares, having lived through the devastating bear market of 1973 1974 where the D-J Industrial Average (INDU/15118.49) lost 47% of its value.
2013-05-14 Inflation Update by Team of North Peak Asset Management
Basing investment decisions on inaccurate measurements of the inflation rate can result in investors unknowingly positioning their portfolios to lose purchasing power over time. This mis-measurement could be especially dangerous when yields are low. For example, evaluating a nominal 3% investment opportunity using an inaccurate 2% inflation rate indicates a marginally attractive 1% real return opportunity. However, if inflation is actually running at 5%, this becomes a deeply unattractive negative 2% real return investment.
2013-05-13 Tenuous Times? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
US stocks continue to make new highs, yet commodities have struggled and Treasury yields remain low, albeit up from recent near-record lows. Although not the standard playbook, we remain optimistic but acknowledge an equity pullback can occur at any time. Manufacturing data has been soft, the employment picture is mixed, and housing continues to improve. The European Central Bank (ECB) has joined the easing arty, illustrating the continued disappointments coming out of the eurozone.
2013-05-13 Americas: Regional Economic Review 1Q 2013 by Team of Thomas White International
Weaker global demand and prices for energy and commodities, as well as softer than expected domestic consumption have restricted the growth outlook for most economies in the Americas region during the first three months of the year. Fewer monthly job additions in the U.S. have dented consumer confidence, and growth for the current year is now forecast to be moderately lower than earlier expectations.
2013-05-10 A Tale of Two Markets: Equity Bulls and Bond Bears by Douglas Cote of ING Investment Management
Surging equity markets absent an accompanying rate rally is a red flag, as Treasury yields remain well below “normal”. While investors’ renewed enthusiasm for equities is warranted, they must be careful to avoid the “folly of gaming diversification”. Corporate earnings have impressed, though revenue has struggled due in part to a moribund Europe. Divergent markets mean investors should stay broadly diversified in equities and real bonds not near-cash and ever alert to the fundamentals.
2013-05-10 2013 US Financial Markets: Part 2 - The TINA Hypothesis by Clyde Kendzierski of Financial Solutions Group
Contrary to the “Bernanke Illusion” (money market funds are a zero return investment), history indicates that money market funds are likely to provide investors with returns approximating inflation over the next decade. As I pointed out in our last letter, the markets are pricing in inflation levels significantly higher than the prospective total returns of 10 year TBonds. The small additional return achieved by corporate bonds or US stocks (at current prices) is unlikely to compensate a buy and hold investor with sufficient gains to justify the interim risks.
2013-05-10 Weekly Research Briefing by Blaine Rollins of 361 Capital
This week’s focus was squarely on central bank policy decisions and the U.S. April payrolls data. Mid-week the FOMC reinforced the "Bernanke put" by stating explicitly that quantitative easing can be increased if conditions worsen.
2013-05-10 Countries Should Be Careful Not to Overstimulate Their Housing Markets by Team of Northern Trust
Countries should be careful not to overstimulate their housing markets. Credit extension is improving, but remains modest.
2013-05-09 China's Building, but Will They Come? Ghost Cities by Mark Mobius of Franklin Templeton Investments
Some of you may have heard or read about the current state of the real estate market in China, often covered in a sensationalistic way, with talk of “ghost cities” and “bubbles” ready to burst and so forth. These types of reports can cause quite a jolt in the market, which is what we saw happen, probably not coincidentally, after a popular US television newsmagazine aired a somewhat negative report in March. But as I’ve said many times before, there’s often more to a story; important parts can end up on the cutting room floor.
2013-05-09 Why Reinhart & Rogoff Still Matter by Russ Koesterich of iShares Blog
Despite Reinhart and Rogoff’s methodology mistakes, their widely cited paper’s basic conclusion still holds. Russ K warns that both policy makers and investors ignore it at their own peril.
2013-05-08 Are Recent Market Highs Merely Rhymes, or Something More? by Joe Kringdon of Pioneer Investments
As someone smarter than me once observed, history never repeats itself, but it does rhyme. Oftentimes those rhymes, like my family’s dinner bills, are simply head fakes’ curious coincidences with no residual meaning. Other times, however, they do carry meaningful implications. Consider, for example, what’s going on in the markets right now.
2013-05-08 Deflation Is OverPlease Come Out by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A blooper reel of 20th century history would likely include a feature on Japanese soldier Hiro Onoda. Posted to a small island in the Philippines during the waning days of World War II, when Onoda’s mission proved unsuccessful he was ultimately forced to flee into the woods, where he survived on a steady diet of coconuts and bananasfor almost 30 years after the end of the war.
2013-05-08 US Economy Should be \"Good Enough\" for Stocks by Russ Koesterich of BlackRock Investment Management
The April employment report confirms that the US is on a slow-but-positive course of economic growth. This environment should be conducive to further gains in equity prices. Europe, in contrast, continues to struggle and investors should approach that region with caution.
2013-05-08 6.7 Million “Missing Workers” Where Did They Go? by Gary Halbert of Halbert Wealth Management
Today we will touch several bases. We begin with last Friday’s unemployment report which was hailed by the mainstream media, but had a lot of bad news to go with the good. From there we look at the estimated 6.7 million “missing workers” in this economy and ponder if they’re permanently gone from the employment rolls.
2013-05-07 Mutual Fund Companies Need to Prepare for a Changing Environment Fund Industry Turbulence Ahead by Paul Franchi (Article)
The mutual fund industry grew explosively from the 1980s on a rare tonic of a low-inflation credit expansion powered indirectly by international trade flows. That run reached a peak in 2008 when the application of quantitative easing (QE) served to prevent industry collapse with a softer form of transition, which continues today but must end when inflation returns.
2013-05-07 Meredith Whitney – State-issued GO Muni Bonds are Safe by Ben Huebscher (Article)
Meredith Whitney has softened her tone regarding muni bonds. The analyst who famously predicted disaster for the entire market on national TV now she says that new governors have been elected and states have begun reforming. There will be problems in four key states, but she is not predicting a disaster. In fact, she said investors will be safe in general obligation bonds.
2013-05-07 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The trend is your friend (and the current trend is a “friend with benefits” for investors). After a record-setting first quarter for stocks, analysts were skeptical that the “party” would continue. And yet, the Dow Jones enjoyed a fifth straight month of gains in April, while the S&P 500 and Nasdaq one-upped the Blue Chips with six month winning streaks.
2013-05-07 Navigating Opportunities in Senior Loan and High Yield Corporate Bond ETFs by Ryan Issakainen of First Trust Advisors
In this newsletter, we will consider how senior loan and high yield corporate bond ETFs may be utilized by investors to pursue a higher level of income while seeking to mitigate the impact of rising interest rates. We’ll discuss why we believe benchmark indices are flawed investment strategies for gaining exposure to these asset classes, and we’ll highlight how First Trust utilizes active management to seek better risk-adjusted returns than passive senior loan and high yield corporate bond index ETFs.
2013-05-07 Quarterly Letter by Team of Grey Owl Capital Management
In his April 2013 commentary, PIMCO’s Bill Gross wrote, “PIMCO’s epoch1, Berkshire Hathaway’s epoch, Peter Lynch’s epoch, all occurred or have occurred within an epoch of credit expansion What if an epoch changes? What if perpetual credit expansion and its fertilization of asset prices and returns are substantially altered? What if a future epoch favors lower than index carry or continual bouts of 2008 Lehmanesque volatility ?”
2013-05-06 Aligning Market Exposure With the Expected Return/Risk Profile by John Hussman of Hussman Funds
Some risks and market conditions are more rewarding than others. My objectives for this week’s comment are very specific. First, to demonstrate using a very simple model that investment returns do indeed vary systematically with market conditions. Second, to demonstrate that overvalued, overbought, overbullish conditions have historically dominated trend-following measures when they have emerged. Third, to demonstrate the impact of accepting investment exposure in proportion to the return/risk profile that is associated with a given set of market conditions.
2013-05-06 All's Well That Ends Well by Scott Brown of Raymond James
The economic data reports were decidedly mixed last week. However, the April Employment Report exceeded expectations, which provided a good excuse for share prices to move higher. Bonds were whipsawed, encouraged by the view that the Fed was less likely to taper its asset purchases, but then hit hard by the better-than-expected payroll figures.
2013-05-06 Beyond the Headlines: Job Growth, Exports and Housing by Gregg Bienstock of Lumesis
Congress has done something for the American public. FAA, sequester, flight delays we can fix that! While I would usually take a cynical swipe at Congress (something like, “did they act because they, too, were impacted by their own stubbornness”), I’ll let well enough alone and simply pass on a heartfelt thanks. Perhaps this is the start of something. I hear they are working closely on immigration reform and an exemption for Congress and their staff from the Affordable Care Act (aka Obamacare). Ok, so two of three initiatives garnering bi-partisan support are purely self-ser
2013-05-06 Sell in May But Stick Around by Christian Thwaites of Sentinel Investments
A bit odd, perhaps, to worry about deflation as the S&P hits all time highs. But the whiff of deflation is in the air. The YOY PCE core (the one the Fed likes) came in at 1.1% which is the lowest it has ever been.
2013-05-04 The QE Sandpile by John Mauldin of Millennium Wave Advisors
Sell in May and go away? What about "risk off?" And ever more QE? Today’s letter is a quick note and a reprise of a popular letter from yesteryear (with a bit of new slant), as I am at my conference in Carlsbad.
2013-05-03 Pring Turner Approach to Business Cycle Investing by Team of AdvisorShares
Like the seasons of the year, the environment for bonds, stocks, and commodities progress in a repeatable and sequential fashion. A gardener understands it is difficult to plant in the winter because nothing grows. The same is true for the financial seasons in the business cycle, where investors can use knowledge of the sequence to create a financial market roadmap. This paper from Pring Turner Capital Group, one of our valued sub-advisors, takes you through the six-stages of the business cycle.
2013-05-03 Job Creation May Be More Robust Than Official Statistics Suggest. by Team of Northern Trust
Job creation may be more robust than official statistics suggest; U.S. employment situation; Central bank meetings
2013-05-02 “Twin Peaks” Target Achieved, What\'s Left? by Doug Ramsey of Leuthold Weeden Capital Management
Pithy sound bites aren’t our forte. So when we came up with the “Twin Peaks” idea (last decade’s S&P 500 highs of 1527 and 1565) a few months back, we hoped we’d stumbled on a market theme that might last a while. That wish was dashed on March 28th, when the S&P 500 exceeded its October 2007 peak of 1565.15.
2013-05-02 Gold Recovers Amidst Uncertainty by John Browne of Euro Pacific Capital
The selloff in gold that captured the world’s attention in mid-April has revealed some truths about how the market trades and the sentiments of many of the investors who have piled into the trade over the past few years. While the correction does highlight a higher degree of uncertainty than many of the most ardent gold advocates had anticipated, it does not represent the historic "end of an era" reversal that the many in the media have so gleefully suggested. In many ways, the market has shown a resiliency that its detractors do not understand.
2013-05-01 While the Bears Fight... by Blaine Rollins of 361 Capital
While corporate earnings outlooks and released economic data remained soft, the world moved to declare Austerity a failure and quickly assumed that the ECB could ease further at this week’s meetings. The recent collapse in commodity prices and slowdown in China does put a high card in their hand. With these new thoughts, European equities and bonds both surged on the week...
2013-05-01 Emerging Asia Pacific: Regional Economic Review by Team of Thomas White International
Major emerging Asia Pacific economies, which picked up growth momentum during the latter half of 2012, struggled to carry forward the economic pace during the initial months of 2013. China, India, and Indonesia, some of the most populous countries in the region and in the world, faced significant headwinds to growth as key engines of the economy investment, consumption, and exports came under strain.
2013-05-01 May 2013 Commentary by Team of Sadoff Investment Management
The slow growing economy will cause the Federal Reserve to stay the course with continued stimulus via low interest rates and Quantitative Easing (QE) for some time. This environment continues to be bullish for stocks.
2013-05-01 US Economy to Get a Hollywood Makeover by Gary Halbert of Halbert Wealth Management
You may have heard that the government is going to make some major changes in how our Gross Domestic Product is calculated later this year. Your first thought might be that this is no big deal. However, I will argue today that it is a very big deal, the biggest in a decade, and you need to know why. So I hope you read what follows with more than a passing interest.
2013-05-01 There Will Be Haircuts by Bill Gross of PIMCO
It has been the objective of the Fed over the past few years to make even more innovative forms of money by supporting stock and bond prices at cost on an ever ascending scale, thereby assuring holders via a “Bernanke put” that they might just as well own stocks as the cash in their purses. Gosh, a decade or so ago a house almost became a money substitute. MEW or mortgage equity withdrawal could be liquefied instantaneously based on a “never go down” housing market. You could equitize your home and go sailing off into the sunset on a new 28-foot skiff on any day but S
2013-04-30 Is the U.S. Housing Recovery Built to Last? by Milton Ezrati of Lord Abbett
The sector’s comeback will continue, but the pace will likely moderate. Here’s why.
2013-04-30 The U.S. Economy A Gain in GDP? by Marie Schofield of Columbia Management
The advance estimate of gross domestic product (GDP) released by the Bureau of Economic Analysis last Friday showed that the U.S. economy grew at an annualized rate of 2.5% in the first quarter, below expectations of an increase of 3.0%. Despite the decent first quarter advance, year-over-year gains in nominal and real GDP are largely unchanged from the prior quarter at 3.4% and 1.8%, respectively. While growth rates at this slow pace in these measures have typically heralded recessions, they appear stable but also underscore a critical problemthe failure to generate escape velocity.
2013-04-30 Letters to the Editor by Various (Article)
A number of readers responded to Robert Huebscher’s article, The New Challenges to Reinhart and Rogoff, which appeared last week.
2013-04-30 Stockman to America: Sinners, Repent! by Laurence B. Siegel (Article)
In a massive volume that melds economic history and social criticism, the former Reagan administration budget director David Stockman has documented countless ways in which America went astray over the last century. Most notably, he decried the corruption of free-market capitalism by those seeking effortless profits at the public’s expense. This is the source of his book’s title, The Great Deformation.
2013-04-30 Is May Really the Time to Go Away? by Chris Maxey, Ryan Davis of Fortigent
As investors near the witching hour of May, the oft-asked question once again comes to the foreground is it best to sell in May and walk away? This year could prove the exception to recent history, but a number of trends are beginning to take shape inside the market’s inner workings.
2013-04-30 ProVise Bullets by Ray Ferrara of ProVise Management Group
With the passage of the American Taxpayer Relief Act of 2012, a lot of people felt that things were set as it related to estate taxes. Apparently everyone believed that except the President, who has proposed several changes to estate tax law in his fiscal 2014 budget.
2013-04-29 New Highs Bring New Worries by Richard Golod of Invesco
The sustainability of the rallies in US and Japanese equities this year so far is looking uncertain amid slowing year-over-year earnings growth and mixed global economic signals. European and emerging market shares have traded lower year to date and seem likely to continue lagging in the near term. However, on balance, I remain optimistic about global equities, seeking yield opportunities and investments with an actively managed, more selective approach.
2013-04-29 Developed Asia Pacific: Regional Economic Review by Team of Thomas White International
After facing subdued economic conditions for the most part of 2012, developed Asia Pacific economies started 2013 on a cautious note. While most countries opined that downside risk to GDP growth declined substantially, challenges to growth arose from a recessionary scenario in key developed economies, especially from the European Union.
2013-04-29 Economic Slowdown Has Not Weakened Share Prices by Bob Doll of Nuveen Asset Management
U.S. equities rebounded last week as the S&P 500 increased by nearly 1.8%,1 despite continued weak economic data. We believe recent data is not yet weak enough to change forecasts. The relative stability of data and forecasts - supported by stimulative monetary policies, an improving U.S. housing market and fading political polarization in the U.S. and Europe - sends a message of reasonably low volatility and manageable downside risks.
2013-04-29 Cruel Top Line Growth by Christian Thwaites of Sentinel Investments
The current earnings season is a very mixed bag. Start with the economic background where nominal growth decelerated in 2012 from around 4.4% to 3.6%. The first quarter may be marginally higher but some of that is from a low base effect. It’s very difficult for companies to raise prices, increase share or volumes when demand is simply deficient. Sure, balance sheets are in much better shape, as evidenced by robust bond issuance, but many companies are in excess savings mode. Here are undistributed corporate profits as a percent of GDP.
2013-04-27 The Cashless Society by John Mauldin of Millennium Wave Advisors
A cashless future might be farther off than we either fear or hope. Not only is it farther away than some think, we are actually seeing an increase in the use of cash all over the world (and this is not just a US phenomenon). We will look at some interesting factoids that make for thought-provoking discussions, but when we couple them with research on the rise of the unreported economy (aka the underground economy) and the number of people who get some form of government assistance, we may find problematic consequences resulting from hidden incentives that work in unintended ways.
2013-04-26 The Return of the Asian Tigers: Guinness Atkinson Asset Management Asia Brief by Edmund Harriss, James Weir of Guinness Atkinson Asset Management
Often overlooked by international investors, South East Asia encompasses some of the world’s best performing equity markets in recent years, putting the more established emerging markets in the shade. This performance is backed by good economic results and the favourable demographics of some of these countries, with youthful populations ready to improve productivity and increase consumption. One catalyst for future growth is the Association of Southeast Asian Nations (ASEAN) free trade area, which will bring down trade barriers between the South East Asian nations.
2013-04-26 An Update on the Global Business Cycle by Investment Strategy Group of Neuberger Berman
Understanding where we are in the an important aspect of investing, as the behavior of asset classes may vary throughout that cycle. Recent data indicate that the U.S. remains in its fourth year of expansion, but payroll and retail numbers have disappointed. Outside the U.S., Europe continues to be mired in recession while China’s growth rebound recently has appeared to sputter. In this edition of Strategic Spotlight, we review what these developments mean for the global business cycle and how to position portfolios accordingly.
2013-04-26 A Funny Thing Happened on the Way to Equilibrium by Ben Inker of GMO
The bedrock of GMO’s investment philosophy is reversion to the mean. We believe that capitalism should cause the return on capital to be in line with the cost of capital, and that assets that embody similar risks should offer similar long-term returns. These beliefs, in turn, guide our assumptions that equities should trade at replacement cost, that the long-term return to equities should be approximately the same as their normalized earnings yield, and that assets without long return histories should have similar valuations and equilibrium returns as related assets with longer histories
2013-04-26 No Escape by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Global economic growth has weakened, while the US economy hasn’t reached "escape velocity." US stocks have held up relatively well. With few other attractive alternatives, domestic equities appear to be the best house in a rough neighborhood. With the Fed committed to easing, housing improving, and valuations reasonable, the trend should continue. Risks remain and diversification and some hedging strategies are recommended.
2013-04-26 Like Baseball in the Snow by Doug MacKay, Bill Hoover, Mike Czekaj of Broadleaf Partners
As has occurred in each of the last three years, the economy should continue to plug along, not as we might like it to be, but as we can reasonably expect. Growth scare or not, we suspect that the end of 2013 will show that continued progress lies ahead, but perhaps not exactly in the same pattern as it has thus far.
2013-04-25 Questioning Quantitative Easing by Scott Minerd of Guggenheim Partners
Speculation over the reduction or expansion of quantitative easing largely amounts to market noise.
2013-04-25 The End of “Expansionary Austerity?” by Scott Brown of Raymond James
A few years ago, an economic paper by Harvard professors Carmen Reinhart and Kenneth Rogoff helped fuel the push for austerity. It was met with some criticism from economists, but was widely embraced by the press and by politicians on both sides of the Atlantic. The study has now been demonstrated to have had serious flaws, but will those in power fold? Or will they double down on bad economic policy?
2013-04-25 Surf's Up! by Jeffrey Saut of Raymond James
Last month I was reminded of “Surf’s Up!” while rereading said report from my departed friend Stan Salvigsen of Comstock Partners fame. While that is the organization Stan, Michael Aronstein, and Charles Minter formed in the late 1980s, Stan’s investment career actually began in 1964 as an analyst with the Value Line Investment Survey. Subsequently, he was an equity strategist at a succession of firms, including Dreyfus, Oppenheimer, C. J. Lawrence, and Merrill Lynch.
2013-04-25 Like Air Out of An Untied Balloon... by Blaine Rollins of 361 Capital
Earnings hit the market like a ton of bricks this week. It wasn’t that the reported numbers were a disaster, but that the new data points did not change the trajectory of the current buying and selling patterns. Investors rewarded the defensive earners (bought more Coca-Cola, Johnson & Johnson, and Microsoft) and sold their shares in more cyclical stocks (Industrials, Semis, and Oil Services). Financial stocks survived the week, but few owners went home Friday feeling better about their bank names than at the start of the week.
2013-04-25 Q1 2013 Market Commentary by John Prichard of Knightsbridge Asset Management
The country now in the news is tiny Cyprus, which received a bailout for its banks from the European Union (EU), but only after agreeing to steep losses for those banks’ large depositors. Hitting up bank deposits represents a new dimension to the European debt crisis and illustrates how in a crisis, leaders can and often will resort to whatever means are necessary. When the Cypriots first requested a bailout from the EU and were told their depositors had to suffer, they balked and said that was unacceptable...
2013-04-23 Middle East/Africa: Regional Economic Review by Team of Thomas White International
According to a World Bank (WB) report, global growth in 2013 will remain sluggish as economic recovery in the developed nations is likely to be slow. Lower business and consumer confidence, government spending cuts, as well as high rates of unemployment may delay the recovery, the report says. The report has also noted that developing nations may experience slower growth due to structural and monetary policy challenges.
2013-04-23 Q1 Earnings Leave Much To Be Desired by Chris Maxey, Ryan Davis of Fortigent
Following the strongest first quarter in 15 years, it is not surprising to see equity markets faltering in April. Last week’s decline of 2.1%, however, may reflect deeper concerns about corporate fundamentals amid a mixed earnings season.
2013-04-22 Strategy for a Second Gear Economy by David Kelly of J.P. Morgan Funds
American investors could be forgiven for feeling just a little confused. One week after the stock market posted its strongest first-quarter gains since 1998, the Bureau of Labor Statistics announced the weakest monthly job growth in nine months. Real GDP growth was just 0.4% in the fourth quarter but appears to have been much stronger in the first. So is the economy getting stronger or weaker, how is the Federal Reserve likely to react to it and what, if anything, should investors do about it?
2013-04-22 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The end to another tax season; a hectic week on the earnings calendar; a number of key domestic economic releases; and ongoing developments on the global economic frontand yet, much of the country (and world for that matter) was focused on the events in Boston and the aftermath of the bombing that led to a massive manhunt and a shootout with police. Early in the week, the celebrated Boston Marathon came to an abrupt halt as terror again reigned throughout the country and nearby residents were sent into lockdown mode.
2013-04-22 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The deadly bombings in Boston last week, along with a spate of senseless killings in Newtown and Aurora, should highlight for those consumed by economics and financial market statistics the fragility of life and a sense of perspective about helping those in need at their darkest hour. How noble that on the day of the U.S. equity market’s most damaging point collapse in years, our focus was on Boston and not on our wallets or portfolios.
2013-04-22 Housing Prices Are About to Surge by Charles Lieberman of Advisors Capital Management
Housing activity has improved dramatically over the past year, but the recovery is too weak to prevent home prices from surging. We anticipate that home prices will increase at a healthy double digit rate quite soon and this price rise is likely to be sustained until new single family home construction exceeds 1 million at an annual rate for at least a six month period of time, more than 60% above the current rate of new single family construction. Read More
2013-04-22 Guess What? Growth is Back! by Brian Wesbury, Bob Stein of First Trust Advisors
The first quarter has come and gone and lots of data have been released. Still, there are pieces of data missing and these missing data points make forecasting GDP treacherous.
2013-04-22 Commodity Declines and Weak Data Startle Investors by Bob Doll of Nuveen Asset Management
U.S. equities declined last week as the S&P 500 fell by more than 2.0%, which came on the heels of a new all-time high the prior week. Led by gold, commodities experienced volatility and declined over the past two weeks. Other detractors included disappointing first quarter Chinese economic numbers and somewhat softer U.S. releases.
2013-04-20 Austerity is a Consequence, not a Punishment by John Mauldin of Millennium Wave Advisors
Austerity is a consequence, not a punishment. A country loses access to cheap borrowed money as a consequence of running up too much debt and losing the confidence of lenders that the debt can be repaid. Lenders don’t sit around in clubs and discuss how to “punish” a country by requiring austerity; they simply decide not to lend. Austerity is a result of a country’s trying to entice lenders into believing that the country will change and make an effort to restore confidence.
2013-04-19 Equity Investment Outlook by Team of Osterweis Capital Management
Every so often we write an Investment Outlook with conclusions that prove to be both accurate and worth repeating. Such is the case with our prior outlook issued in January 2013. In it we stated that “At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013. We are not blind to the challenges and uncertainties that still face us, nor do we believe that the year ahead will be devoid of volatility.
2013-04-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks moved up nicely last week despite poor economic data and a huge decline in precious metals and other commodities.
2013-04-19 F.I.R.S.T.: Bond Market Outlook by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Amid heightened political uncertainty in Europe and subdued global growth expectations, global investors owe Hiroki Kuroda a big domo arigato for his pledge to inject about $1.4 trillion into the moribund Japanese economy by the end of 2014. The newly appointed BOJ governor’s unprecedented plan to buy Japanese government bonds,
2013-04-19 Recession Watch: ECRI\'s Weekly Leading Indicator Rises by Doug Short of Advisor Perspectives (dshort.com)
Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-04-19 First Quarter Investment Commentary by Team of Litman Gregory
Looking ahead, significant uncertainty surrounds fiscal and monetary policy in terms of what policies will be adopted and their ultimate economic and financial market impacts. More broadly, still-high global debt levels pose an economic headwind. Against this backdrop, our outlook for stocks has not improved. If anything, given the sharp run-up in stock prices, we are getting closer to reducing our U.S. equity exposure further than we are to increasing it.
2013-04-19 Gold Buyers Get Physical As Coin and Jewelry Sales Surge by Frank Holmes of U.S. Global Investors
Even with the gold price dropping, why are gold coins selling at a premium? It’s Economics 101: The coin supply is limited and the demand is high. This buying trend isn’t only occurring in the U.S. In Bangkok, Thailand, for example, crowds of buyers were filling stores, eagerly waiting in multiple lines to purchase gold jewelry and coins.
2013-04-18 Reversing Quantitative Easing by Richard Bernstein of Richard Bernstein Advisors
The Fed is likely to lag the markets, as they do in most cycles. The markets will probably anticipate the Fed reversing QE. The Fed will surprise few investors. The Fed should reverse QE in a yield curve-neutral way, in our view. Steepening the curve risks perversely stimulating the economy by making carry trades and loan spreads more profitable. This cycle will probably end as do most cycles. The Fed will be behind the curve, play catch-up, tighten too much, invert the curve, and cause a recession. That end result, however, is probably quite far in the future.
2013-04-18 Fannie and Freddie Face the Future by Milton Ezrati of Lord Abbett
The mortgage finance giants are the subject of a new policy initiativewith significant implications for the U.S. housing market.
2013-04-17 U.S. GDP: After Some First-Quarter Flurry, a Slowdown? by Ken Taubes of Pioneer Investments
We had a little flush of activity in the first quarter, which we believe will lead to much better GDP potentially well over 3% than people anticipated in the beginning of the year. We look at this activity as a little bit of a catch-up, for a couple of reasons.
2013-04-17 Signs of a Correction by Scott Minerd of Guggenheim Partners
Although the long-term economic picture remains sanguine, a number of global risks and economic results point to a temporary period of consolidation in equity markets.
2013-04-17 What\'s Driving Emerging Markets? by James McDonald, Daniel Phillips, Phillip Grant of Northern Trust
Emerging market (EM) equities have historically outperformed as the global economy gained momentum, as shown in Exhibit 1. After a great catch-up rally in the second half of 2012, the stocks finished the year as global outperformers only to lose that momentum in the first quarter of 2013. What is behind the recent underperformance, and what does it say about the outlook? Our research points to a number of contributors to the recent weakness.
2013-04-16 Five Warning Signs of a Coming Market Correction by Dawn Bennett of Bennett Funds
There are no positive fundamentals driving the U.S. stock market. No one has ever gotten rich by chasing markets by buying at the top, which is how this market feels.but it seems everybody feels they can’t afford to miss being in the U.S. equity markets. People should instead be focused on the true facts of the U.S. economy and corporations and tune out the hype and happy talk from the media and Fed heads. Instead investors should focus on the real data.
2013-04-16 Gold in the Crosshairs by Peter Schiff of Euro Pacific Capital
In the opening years of the last decade, most mainstream investors sat on the sidelines while "tin hat" goldbugs rode the bull market from below $300 to just over $1,000 per ounce. But following the 2008 financial crisis, when gold held up better than stocks during the decline and made new record highs long before the Dow Jones fully recovered, Wall Street finally sat up and took notice.
2013-04-16 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, was up 1.03% for the month of March, as the high yield market continued to benefit from stable U.S. economic growth and steady asset reflation driven by the Fed and global central banks.
2013-04-16 Tax Day as Polarizing as Ever by Chris Maxey, Ryan Davis of Fortigent
Tax season is once again upon the American population, and this year, just as in years past, people are less than enthusiastic. It is estimated that the average taxpayer contributed slightly more than $11,000 dollars to federal taxes in 2012 and those figures are on the rise. As might be expected in the current backdrop, however, not everyone shares the same opinion on taxes.
2013-04-16 2013 US Financial Markets by Clyde Kendzierski of Financial Solutions Group
In the fall of 2012 the S&P 500 came close to our forecast high (S&P- 1500) Last year we suggested that not only was the S&P likely to reach 1500, but also speculated that renewed bullish sentiment could take us back to the old highs of 1565. When the S&P touched 1563 a couple weeks ago, I started getting client calls complimenting my prescient forecast.
2013-04-15 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Another dayAnother record. With last week’s poor unemployment releases suddenly a distant memory, investors looked forward (and not backward) and took the Dow Jones and S&P 500 back into record-setting territory with a four-day winning streak. By week’s end, however, some key earnings reports disappointed and analysts became more concerned about the state of the consumer (though there is clearly no consensus on that front either).
2013-04-15 Housing Is it Getting Better, A Second Look by Gregg Bienstock of Lumesis
This week we take a quick look at some of what is in the President’s budget and then focus on the housing market (the title harkens back to something we wrote a few months back). You may sense, as you read on, I’m a bit cranky this week. As you read through the housing section you’ll understand why.
2013-04-12 ECRI\'s Weekly Leading Indicator Shows a Small Improvement by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) is now at 130.1, up from 129.1 last week (revised from 129.2). The WLI annualized growth indicator (WLIg) remains unchanged at 6.2%.
2013-04-12 Housing Bubble II? by Russ Koesterich of iShares Blog
It might seem like the housing bubble just burst, but as the housing market stages a comeback, investors are asking if we’re already facing another bubble. Russ explains why home prices aren’t in a bubble but home builder stock valuations may be.
2013-04-12 Soft Patch - Part Four? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks continue to trade at all-time highs, but concerns are rising over a possible pullback and downturn in economic growth. A consolidation of gains is likely, but trying to trade around a pullback can be quite difficult. A potential tapering of Fed asset purchases continues to be discussed, but the Fed also appears nervous over the potential for a spring downturn. Cooler heads appear to be gaining traction in Washington and at least some marginal progress is being made. Economic improvement is gaining traction in Japan, raising hopes of sustainable change, while Europe continues to suffer.
2013-04-11 Telling (Taper) Time by Tony Crescenzi of PIMCO
Investors need be alert for signs of progress in the many employment indicators the Fed is watching, and listen closely to what the Fed is saying to know when bond buying will be tapered. The failure to achieve “escape velocity” is why the Fed is using its printing press to purchase $85 billion of securities monthly. These purchases will continue, the Fed says “until the outlook for the labor market has improved substantially.” The Fed has made progress toward achieving escape velocity but the progress must be sustained for the Fed to throttle back on its stimulus.
2013-04-11 Stockton is Bankrupt: Now What? by James Dearborn of Columbia Management
Although we have no exposure to Stockton, California debt, we thought it would be useful to comment on the city’s financial plight in the wake of the recent bankruptcy court ruling allowing the city to file a “plan of adjustment” or the equivalent of Chapter 11 reorganization. We, and other municipal bond participants, will be watching this process closely to see how the court treats various creditors.
2013-04-10 Economic Slowdown Halts Equity Rally by Bob Doll of Nuveen Asset Management
The latest softness in economic indicators probably means that more consolidation in the equity markets is required before we can advance beyond the recent all-time highs. During March, nearly all of the activity for the S&P 500 was within 1% of 1550. Equities may move lower due to deteriorating technical conditions and the possibility of weak first quarter earnings reports.
2013-04-10 Surprising Surge!! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
Momentum from 2012’s surprisingly strong performance continued into the first quarter of 2013 with stocks rising sharply. Our portfolios did well but lagged behind our benchmarks in the quarter. Taking a little longer view, over the trailing 12 and 36 months we mostly matched the double-digit gains of our benchmarks, which we are very pleased with since we usually underperform during strong market advances. So far this year small- & mid-capitalization, value, and domestic stocks were the market leaders, while international, growth, commodity stocks and Apple were laggards.
2013-04-10 Time to Flee Equities for Bonds...and Japan? by John Rothe of Riverbend Investment Management
Last week’s string of bad economic data may finally be the tipping point we have been waiting for. For the past few weeks, I have become more and more bearish on the US economy and stock market. Payroll tax hikes, sequestration, and slowing global growth mixed with a euphoria for a rising stock market have pushed the markets into a high risk environment.
2013-04-10 Financial Markets Review and Outlook First Quarter 2013 by Team of Managers Investment Group
Risk-based assets rallied sharply during the first quarter on the heels of a fiscal tax-cliff compromise that overhung the market in the latter half of 2012. U.S. equities posted their best quarterly returns since 1998, with both the Dow Jones Industrial Average and S&P 500 Index reaching all-time highs. While the equity market rally extended abroad, returns overseas were muted by a strengthening U.S. Dollar. Bond markets, with the exception of high-yield investments, failed togenerate anything beyond middling returns, as investors’ risk appetites started the year strong.
2013-04-10 Don't Pay Too Much for That Bordeaux - Or That Bond by Jeff Helsing of PIMCO
The financial market’s reliance on ratings agencies and benchmarks, along with regulations, can cause distortions in the value of some securities. These price distortions can create potential opportunities for some investors. Investors should consider aligning capital allocation with outcome-oriented objectives that aren’t influenced by credit ratings or benchmarks.
2013-04-09 PIMCO Cyclical Outlook for Asia: How Leadership Changes Are Shaping Asia's Outlook by Q&A with Ramin Toloui, Tomoya Masanao and Robert Mead of PIMCO
For Asia, “slow but not slowing” global growth will likely keep external demand neutral, and policy developments will therefore help shape the economic outlook. In Japan, we see a significant boost to aggregate demand coming from the concerted monetary and fiscal expansion of the new Abe government. In China, concerns about inflation, housing market excesses, and long-term financial stability are prompting policy restraint that should keep growth below 8% this year.
2013-04-09 Morning in Japan by Christian Thwaites of Sentinel Investments
There were two very important central bank meetings last week, one from the Bank of Japan the other the ECB. Bank of Japan press conferences have been soporific affairs for years with a few QE programs not leading to much and no changes to inflation targets. Deflation, a declining workforce and falling aggregate demand have been pretty much the unbroken story for the best part of two decades.
2013-04-08 The Theology of Inflation by John Mauldin of Millennium Wave Advisors
We begin this week with a simple pop quiz. Is inflation good or bad? Answer quickly. I’m sorry your answer is wrong. Or rather, we can’t know if your answer is right or wrong because we are not sure what is meant by the question. We may think we know and we may be right but we can’t be sure, because the word inflation has different meanings for different people in different places and different times. In fact, even the same people in the same place and time can’t agree on a precise definition.
2013-04-08 Taking Distortion at Face Value by John Hussman of Hussman Funds
The U.S. stock market presently reflects two unstable features. One is that extraordinary monetary policy specifically quantitative easing has created an ocean of zero-interest money that someone has to hold at each point in time, and that provokes a speculative reach for yield. The other is that extraordinary fiscal policy, coupled with household savings near record lows, have joined to elevate profit margins more than 70% above their historical norm, as the deficit of one sector has to emerge as the surplus of another.
2013-04-05 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company, Inc.
For two years or more, we’ve been discussing Europe, China, and U.S. politics as drivers for the financial markets. These drivers continue.
2013-04-05 PIMCO Cyclical Outlook for the U.S.: Back From the Brink by Josh Thimons of PIMCO
We expect the largest contributors to U.S. growth this year will be housing and related industries, increases in capital expenditures (albeit from very depressed levels), certain manufacturing sectors, such as the auto industry, and the energy sector. We see roughly 1.7 percentage points of drag on GDP coming out of Washington far less than the four to five percentage points of potential drag had there been no fiscal cliff resolution. We believe the Fed will continue with hyperactive monetary policy, which we now call “QE Infinity,” that does not have an explicit end date or progr
2013-04-05 What's Next for U.S. and European Markets? by Mike Temple of Pioneer Investments
I was asked recently to provide some color around the state of global fixed income markets as we close out the first quarter of 2013. Of course, one of the more watched situations in the global markets has been Cyprus’s banking crisis. I won’t go into too much depth on the subject here, as my colleague, Cosimo Marasciulo, has recently provided a comprehensive analysis.
2013-04-05 ECRI\'s Recession Indicators Decline from the Previous Week by Doug Short of Advisor Perspectives (dshort.com)
Today ECRI has added a new headline on the website, Employment Growth Hits New Low, based on data from today’s jobs report. Essentially ECRI is sticking to its call that a recession began in mid-2012, although the company now calls it a "mild" recession, which is quite a shift from their original stance 18 months ago: "...if you think this is a bad economy, you haven’t seen anything yet."
2013-04-05 This Week's Central Bank Meetings Revealed a Range of Behavior by Team of Northern Trust
This week’s central bank meeting revealed a range of behavior. The U.S. employment report fell well short of expectations. Does China have a property bubble?
2013-04-05 Every Gold Coin Has Two Sides by Frank Holmes of U.S. Global Investors
Just as every coin has two sides, every data point that doesn’t meet expectations usually has an upside somewhere. For instance, although the gold price has fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out this week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
2013-04-04 Sound Fundamentals but Fatigue in the Markets by Scott Minerd of Guggenheim Partners
Although economic fundamentals continue to strengthen, the run-up in asset prices that has unfolded over the past half-year appears to be at risk of a temporary set-back.
2013-04-04 Teachings from Recovered Markets by Richard Michaud of New Frontier Advisors
Domestic indices’ all-time record highs indicate that U.S. domestic equity markets have largely recovered from the 2008 Great Recession. It may have taken four years but it still seems a remarkable achievement given the Dow’s low of 6620 in March 2009. It is worth noting that prior highs were attained in an era with a poor savings rate and wide use of levered strategies. The last four years were widely characterized by a “low return” market mantra and fear of equities stoked by many doomsayers, pundits, and strategists who greeted every upturn with pessimism.
2013-04-03 First Quarter Recap by Bob Doll of Nuveen Asset Management
This past month marked the fourth anniversary of the global equity market bottom on March 9, 2009. U.S. stocks have clawed back all of the losses from the Great Recession and are near historical highs. Most other major markets are still well below their 2007 peaks, but have rebounded sharply since last June and look increasingly resilient. However, there is tremendous anxiety about the economic outlook, and many investors fear equities and other risk assets are floating on a sea of liquidity rather than solid fundamentals. We are more constructive and maintain a pro-growth investment stance.
2013-04-03 When Does The Great Recession Become the Great Rotation? by Gene Tannuzzo of Columbia Management
Given the strong flows into the bond market over the past few years, many pundits have pondered the beginning of the “Great Rotation” when bond investors begin to move money into the equity market. Investors fear that this shift could cause losses in bond funds as investors flee. Indeed since the start of the Great Recession in 2008, investors have plowed into bond funds as an alternative to equity volatility.
2013-04-03 Minor Crisis...Not Too Many Hurt by Christian Thwaites of Sentinel Investments
Cyprus proved, over the last two weeks, that markets often overlook the small stuff. Very few commentators we follow saw any of it coming and the theories that sprang up in the interim (Cyprus as vassal state to Russia, return to the Cypriot pound, imminent EU break up, twin euros in circulation, utter disaster for the economy, German intransigence and Schrecklichkeit) were absurd.
2013-04-03 Surprise! 2013 Rally Pales in Comparison to 2012 “Stealth” Rally by Douglas Cote of ING Investment Management
Despite the hoopla over first quarter market performance, it paled in comparison to the first three months of 2012. Driven in part by an extremely accommodative Fed, the U.S. economy is gaining traction, but Europe continues to flounder. After their first negative print in three years during the third quarter, S&P 500 companies returned to positive earnings growth in the fourth. A broad, globally diversified portfolio is the best way to balance the desire for wealth accumulation with an appreciation of volatility.
2013-04-03 F.I.R.S.T.: Made in the U.S.A. by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Not just the preamble for the “machine-wash-in-cold-water-and-eat-celery-only” instructions on the inside of your skinny jeans, “Made in the U.S.A.” is a brand in vogue these days as the Stars and Stripes looks to dawn a manufacturing renaissance to go with that snazzy new housing recovery everyone’s been talking about.
2013-04-02 Bernanke’s Motives Behind Quantitative Easing by Paul Franchi (Article)
We are at a turning point: away from one global monetary standard, to a yet-to-be-determined new form.
2013-04-02 A Q1 Letter to Clients: Why Warren Buffett is Bullish on Stocks by Dan Richards (Article)
Since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead. This quarter’s letter draws on Warren Buffett’s most recent letter to shareholders, and why he is bullish on the US equity market.
2013-04-02 Is the Vix Still an Adequate Measure of Risk? by Chris Maxey, Ryan Davis of Fortigent
The 30-day implied volatility index for the S&P 500 calculated by the Chicago Board of Options Exchange (CBOE), known as VIX, has long been used as an indicator of market sentiment. Commonly referred to as the “fear index,” the VIX often portends periods of stress in equity markets, as options traders price in higher volatility in the future. The shape of the VIX futures curve, in particular, has historically been used as an indicator of future volatility levels.
2013-04-02 Flying High on Borrowed Wings by Peter Schiff of Euro Pacific Capital
After selling off an astounding 56% between October of 2007 and March 2009, the S&P 500 has staged a rally for the ages, surging 120% and recovering all of its lost ground too. This stunning turnaround certainly qualifies as one of the more memorable, and unusual, stock market rallies in history. The problem is that the rally has been underwritten by the Federal Reserve’s unconventional monetary policies But for some reason, this belief has not weakened the celebration.
2013-04-02 The Crisis in Cyprus by Bill O'Grady of Confluence Investment Management
Over the weekend of March 16, Cyprus announced it was taxing deposits in order to recapitalize its banking system. The proposal, which levied a tax of 9.9% for deposits under 100k and 12.5% for amounts over that level, caused a severe political backlash. The Cypriot legislature would not approve the measure. In the days following, a banking holiday was put in place to prevent banking runs. The Troika (the EU, the IMF and ECB), who approve bailouts for the Eurozone, negotiated into late Sunday, March 24, before reaching a deal.
2013-04-01 A More Mature Bull Market by Scott Minerd of Guggenheim Partners
One of the characteristics of a more mature bull market, such as the one we are in today, is that asset prices become more susceptible to contractions due to negative news.
2013-04-01 U.S. Stock Market: Too Good to Be True? by Dawn Bennett of Bennett Funds
There is nothing worse than buying at the top of the market. Think back to the last two economic cycles. If you bought the US stock market or real estate in late 2007, you are way under on those purchases and that is after sweating it out for the last 5 years. Even with the 2009-2012 rebound, we have not seen real estate values or the Dow Index back to even. You have to ask yourself, how can this be?
2013-04-01 A Fresh Milestone by Jeffrey Saut of Raymond James
Last Thursday the S&P 500 (SPX/1569.19) notched a new all-time causing Ms. Scaggs to pen the aforementioned story in Friday’s Wall Street Journal. I was particularly interested in a sentence further down in the article that read, “The rally in stocks comes as investors warm up to stocks for the first time in years.” That prose sparked memories of an era gone by.
2013-04-01 The Arithmetic on Consumer Spending by Scott Brown of Raymond James
The 3rd estimate of 4Q12 GDP growth showed a downward revision to consumer spending growth. Less momentum heading into 1Q13, right? Guess again. Revisions to the monthly data actually showed better growth heading into the new year. Moreover, figures for January and February suggest a much stronger rate of growth in spending (and hence GDP) than was anticipated just a short time ago.
2013-03-29 ECRI Recession Indicator: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) to one decimal place is unchanged from last week. It is now at 129.7, the same as last week’s downward revision from 129.8. The WLI annualized growth indicator (WLIg) has risen fractionally to 6.6%, up from last week’s 6.3%. Those of us who regularly follow ECRI’s publicly available data and commentaries understand that there is no logical connection between ECRI’s proprietary indicators and their "pronounced, pervasive and persistent" recession call of September 2011.
2013-03-29 Learnings From the Cyprus Saga by Carl Tannenbaum of Northern Trust
There are important differences between the situation in Cyprus and the challenges other southern European nations face that should limit the transfer of financial trauma. The hope remains that the ECB’s promise to do whatever it takes to solve the sovereign debt crisis will ultimately settle markets. But access to certain types of ECB support requires reaching agreement on restructuring with the same European officials who have handled the situation in Cyprus so maladroitly.
2013-03-29 Market Resilience by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
After a stellar first quarter performance from US stock markets, which showed impressive resilience to continued headwinds, a pullback is certainly possible but we don’t suggest investors who need to add to allocations wait. In a relative world, the US stock market continues to look like an attractive place to invest, although there may also be opportunities in Japan and Europe as well. The upcoming earnings season could tell the story for the market over the next couple of months, but we continue to advocate a long-term point of view and maintaining a diversified portfolio.
2013-03-28 On the Fed, the Keystone Pipeline & the War On Jobs by Gary Halbert of Halbert Wealth Management
The Fed Open Market Committee (FOMC) met as scheduled last Tuesday and Wednesday to review monetary policy and its massive “quantitative easing” effort. The official policy statement released at the end of the meeting on Wednesday was little changed from those in previous months.
2013-03-28 Today's Good News Isn't Bad for US Stocks by Daniel Loewy of AllianceBernstein
Believe it or not, recent US housing market gains, the slight reduction in jobless rates and other signs of a revival in US economic growth are making some investors bearish about US stocks. We think their fears are misplaced.
2013-03-28 What Will Drive the Market? by Charlie Dreifus of The Royce Funds
The sequester adds to the economic headwinds caused by ending the payroll tax holiday and the boost in tax rates. However, even with the sequester, total federal government outlays will rise this fiscal year. Finally, after more than a month of daily increases for a gallon of unleaded gasoline, prices are now declining. This has been of concern as rising oil and gasoline prices were yet another headwind facing the U.S. economy. (Oil prices have also declined.)
2013-03-28 What Maslow and Rand Would Tell Investors Today by Frank Holmes of U.S. Global Investors
While gold’s performance in the short term has been counterintuitive, I plan to stick to my own advice. I simply feel safer with a small weighting in gold as insurance.
2013-03-27 Mark Hulbert: Our Kindred Spirit by Bill Smead of Smead Capital Management
Mark Hulbert and I started in the investment business in 1980. He chose to create a business out of analyzing the results and psychological implications of investment newsletter writers. At Smead Capital Management, we formed a business to analyze publicly-traded US common stocks through the prism of our eight proprietary criteria. We enjoy his unbiased third-party opinions on current circumstances and his consistently good historical perspective.
2013-03-26 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks were flat last week as investors were mesmerized by the goings on in Cypress and the European Union.
2013-03-26 Currencies in a Race to Debase by Chris Maxey, Ryan Davis of Fortigent
Since the start of the year, investors have seen rapid shifts of sentiment in currency markets. The debasement that for so long was assumed to be a purely Western phenomenon is beginning to impact countries globally, driving changes in expected returns and growth prospects.
2013-03-26 Smart People's Opinions, The Data Says and Some Looming Deadlines by Gregg Bienstock of Lumesis
Being on the road gives me a lot of time to read the views and opinions of many very smart people (Faber, Mauldin, Hussman, Hunt and Zhao this week citations below as they all are worth a read). An interesting thread runs through much of what I absorbed this week: they don’t believe the hype.
2013-03-26 The Stimulus Trap by Peter Schiff of Euro Pacific Capital
For years we have been warned by Keynesian economists to fear the so-called "liquidity trap," an economic cul-de-sac that can suck down an economy like a tar pit swallowing a mastodon. They argue that economies grow because banks lend and consumers spend. But a "liquidity trap," they argue, convinces consumers not to consume and businesses not to borrow. The resulting combination of slack demand and falling prices creates a pernicious cycle that cannot be overcome by the ordinary forces that create growth, like savings or investment.
2013-03-26 Throw the Book at Him by Jerry Wagner of Flexible Plan Investments
On February 2, Ground Hog Day, Punxsutawney Phil failed to see his shadow forecasting, and as legend has it an early spring. Yet on the first day of spring, I looked out my back window at a lake still more than half frozen with my view partially obscured by a wicked little snow flurry. So much for forecasts!
2013-03-25 The Hook by John Hussman of Hussman Funds
At the 2000 peak, Richard Russell observed "Every bull and bear market needs a hook.’ The hook in a bear market is whatever the bear serves to keep investors and traders thinking that everything is going to be all right. There is always a hook."
2013-03-25 Energy: Perilous Present, Promising Future by Milton Ezrati of Lord Abbett
For oil and gas, an era of abundant supplies and lower prices awaits. But investors will have to weather a tricky geopolitical situation before it arrives.
2013-03-25 Cyprus Reminds Us of Threats and Improving Global Economy by Bob Doll of Nuveen Asset Management
Equity averages sagged slightly last week. Strength later in the week made up for earlier weakness as the equity rally paused for the Cyprus crisis. We (and the consensus) perceive Cyprus as mainly a local problem and believe it supports our view to remain cautious with Eurozone weightings.
2013-03-25 Housing Recovery Still Young by Brian Wesbury, Bob Stein of First Trust Advisors
Into early 2012, conventional wisdom argued that the odds of a robust housing recovery were lower than the odds of New Mexico and Georgetown losing to Harvard and Florida GC.
2013-03-25 Still Bullish by Richard Golod of Invesco
Global equities (as measured by the MSCI All Country World Index) fell modestly in February amid reignited fears about the euro’s future, signs of distress in China’s economy and the looming sequester deadline in the US. Nevertheless, I believe the US, Japan and emerging markets may offer compelling opportunities, while Europe requires a more selective approach.
2013-03-22 ING Fixed Income Perspectives March 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Developed sovereigns are still broadly unattractive, but global central banks appear poised to ease. We prefer EM currencies that will continue to benefit from positive global growth and tolerate further upward pressure on the U.S.
2013-03-22 Happy Clients; Terrified Prospects by David Edwards of Heron Financial Group
Four years ago, on March 9th, 2009, US stocks collapsed to a 12 year low. A financial crisis rooted in overleveraged purchases of junk (or even fraudulent) securities claimed, in quick succession, Bear Stearns, Lehman Brother, Merrill Lynch (forced into a shotgun marriage with Bank of America) and AIG. Investors panicked, selling good securities at deep discounts to fair value.
2013-03-22 Power of Positive Screening: Pursuing Strength of Social and Financial Returns by Chat Reynders, Patrick McVeigh of Reynders, McVeigh Capital Management
Market volatility and sweeping changes to mainstream views of investing are catalyzing acceptance of tactics that combine fundamentals with a progressive outlook on social issues. Positive screening brings balanced companies to the fore of the investment landscape: this practice isolates sound equities that demonstrate strength of balance sheet, dependability of management, and a commitment to act as part of a global community focused on positive change.
2013-03-22 US Stocks: Third Time’s the Charm by Seth Masters of AllianceBernstein
At 1550, the S&P 500 has regained the peak it reached in March of 2000 (when the tech bubble burst) and again in October of 2007 (before the credit crunch hit). But we think the third time’s the charm: We think the stock market still has room to rise because equities are now more attractively valued and of higher quality than they were at previous peaks.
2013-03-22 ECRI’s "Recession" Indicators: Unchanged from Last Week by Doug Short of Advisor Perspectives (dshort.com)
The only new ECRI-related news since last Friday’s update is a CBS Moneywatch commentary, Can the stock market rise while the economy stalls? ECRI liked the commentary well enough to reprint it on the company’s website. It basically reiterates Achuthan’s point in the "Yo-Yo Years" essay that it’s possible for the market to rise during a recession, citing three such instances (of the 15 recessions) since the Roaring Twenties.
2013-03-22 The Success of Central Bank Policy Is Not Measured By The Revenue It Generates by Team of Northern Trust
The success of central bank policy is not measured by the revenue it generates. Cyprus is a small country that could cast a long shadow. The U.S. dollar’s fortune is changing
2013-03-22 In Gold We Trust by Frank Holmes of U.S. Global Investors
Poorly thought out government policies hurt the formation of capital and destroy people’s trust in paper money. Leaders may have good intentions, but some of their actions show disrespect for private property and individualism. This only reemphasizes gold as an important asset class.
2013-03-21 The Constancy of Dividends by Bill Smead of Smead Capital Management
The payout ratio on the S&P 500 Index currently hovers around 30% of the after-tax profits of companies in the indexat the low end of the last 100 years. In comparison, the capital appreciation portfolio here at Smead Capital Management has a payout ratio of 27%. This is important because most studies show that over 40% of the returns provided by common stocks come from dividends over long stretches of time. With those figures in mind, we reasoned that this is a good juncture to remind everyone about our vision of the next ten years as it pertains to dividends.
2013-03-21 Cyprus as a Pandora’s Box by Scott Minerd of Guggenheim Partners
The attempt to levy a deposit tax on Cypriot accounts has the potential to further destabilize the European Union, with contagion risk elevating for other peripheral member states.
2013-03-21 Fed Still Inching Toward Optimism by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made no changes to monetary policy today and only some small changes to the language of its statement. Once again, the Fed’s comments were slightly more optimistic about the economy than they were after the prior meeting.
2013-03-21 Global Markets’ Time Factor by Mohamed El-Erian of Project Syndicate
In recent months, the dichotomy between booming financial markets and sluggish economies (and dysfunctional politics) has loomed large. The critical element of time and who controls it could well mean the difference between an orderly global resolution of today’s ongoing financial problems and a return to serious trouble.
2013-03-20 Spending Patterns Paint Half Truth by John Browne of Euro Pacific Capital
On March 13th, the Commerce Department announced a 1.1 percent increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6 percent. This new data has led to a fresh wave of enthusiastic commentaries that the US economy is set for a strong recovery. Less examined were the underlying factors that supported the increase.
2013-03-20 The Most Important US Economic Number Now by Russ Koesterich of iShares Blog
Wondering about the outlook going forward for the US economy? Russ shares the economic number that may give you a clue.
2013-03-19 The Eurozone Crisis: Time for a Reset by Giles Conway-Gordon of Cogo Wolf Asset Management
The crisis in the Eurozone (EZ) has reached a dangerously unstable condition, politically, socially, financially and economically. Without a return to growth in the peripheral economies a disorderly outcome is becoming probable as the debtor countries approach the 100% debt-to-GDP default horizon. They will not return to growth while they share a currency with Germany. It is time for a reset.
2013-03-19 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks had a very quiet week with volumes reaching levels that one associates with holiday trading.
2013-03-19 Mila Kunis, Euphoria, and the Stock Market by John Rothe of Riverbend Investment Management
Are we in the “euphoria” stage of the market right now? This past week, as the S&P 500 nears a record level, financial news pundits were fascinated with the following headlines.
2013-03-19 Why Are Emerging Markets Struggling in 2013? by Ryan Davis of Fortigent
Despite one of the sharpest rallies in US equities in recent memory, emerging market equities have been left curiously behind in 2013. Through last Friday, the market segment was down 1.0%, compared to an S&P 500 index that was up 10.0%. This seems to violate the regime that investors have gotten used to over the past 10 years, whereby the emerging markets equity index served as a high beta proxy for the US equity market.
2013-03-18 And That’s the Week That Was by Ron Brounes of Brounes & Associates
Move over Dow Jones, here comes the S&P. What few thought possible a year ago is coming to fruition as the major indexes continue to push toward record territory. The S&P 500 is close (but no cigar) to besting its personal high set in late 2007, before this whole banking mess emerged and sent equities into a tailspin. Confident investors seemed to be overlooking the numerous concerns (budget/sequester, payroll taxes, Europe, China) so they can participate in the record run.
2013-03-18 M&A and Dividends Likely Drivers of the Market by Charlie Dreifus of The Royce Funds
The sequester adds to the economic headwinds caused by ending the payroll tax holiday and the boost in tax rates. However, even with the sequester, total federal government outlays will rise this fiscal year. Finally, after more than a month of daily increases for a gallon of unleaded gasoline, prices are now declining. This has been of concern as rising oil and gasoline prices were yet another headwind facing the U.S. economy. (Oil prices have also declined.)
2013-03-18 Finding the Sweet Spot by Mark Kiesel of PIMCO
Where is the investment “sweet spot” in today’s global financial markets? The uneven global growth outlook means there are opportunities and risks for both credit and equity investors.
2013-03-18 Don’t Forget About Emerging Market Equities by Russ Koesterich of iShares Blog
While emerging market stocks are underperforming US stocks, Russ explains why longer-term investors may want to give EM markets another look.
2013-03-15 Waiting on Weakness? by Mike Boyle of Advisors Asset Management
On Tuesday, March 5, The Dow Jones Industrial Average (DJIA) set a new record close at a level of 14,253.8 (old record of 14,164.5 was set on 10/09/07). Since then it has gone on to set four more consecutive record-closing highs. The S&P 500, at a closing level of 1556.2 on 3/11/13, is still about nine points shy of its record high of 1565.2 (also set on 10/09/07), but it is up seven days in a row and the odds of that occurring are about 1.17%.
2013-03-15 Washington May Be Ready to Take a Break From the Brink by Josh Thimons, Libby Cantrill of PIMCO
With Washington’s dysfunction not in the forefront, the economy could be more unencumbered to grow, with markets trending in a similar direction. The Fed’s proactive policies should continue to favor overweight positions in the five-year through 10-year part of the Treasury yield curve and support interest-rate-sensitive sectors of the economy most notably housing. In the longer term, however, we would advise investors to be cautious: Without meaningful long-term structural deficit reform, real growth will inevitably lag in the U.S.
2013-03-15 High Yield Market Overview by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 0.46% in February, as the high yield market finished on a positive note, after experiencing heightened volatility throughout the month.
2013-03-15 ECRI’s Recession Call: Proprietary Indicators Still Not Cooperating by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in today’s update. It is now at 129.9 versus the previous week’s 129.5 (revised upward from 129.3). The WLI annualized growth indicator (WLIg) has eased, now at 6.3, down from last week’s 6.4 (an upward revision from 6.2).
2013-03-15 Global Economic Overview by Team of Thomas White International
Global economic trends largely remained positive during February, though the stalemate after the Italian elections and the failure by policymakers to reach a deal to avoid the U.S. sequester heightened the political and policy risks. The U.S. GDP figure for the last quarter of 2012 was revised higher, showing the world’s largest economy managed to avoid a decline.
2013-03-15 Weekly Economic Commentary by Carl Tannenbaum of Northern Trust
Despite exceptionally easy monetary policy, inflation risk remains low. Record stock market levels are boosting consumer spending. U.S. capital spending is poised to be a bright spot this year.
2013-03-15 Finally!! Now What? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Surprise! We don’t know what’s going to happen in stocks over the next few weeks. But we are seeing an environment that we believe can foster further gains in the US as economic data remains generally positive, the Fed maintains its accommodative stance, and small progress is being made in the fiscal realm. Investors concerned about a pullback may want to hedge their portfolios, but maintain adequate exposure to equities.
2013-03-14 Excess Liquidity Finds a Home by Scott Minerd of Guggenheim Partners
U.S. home prices appear likely to continue to rise as the Federal Reserve injects more liquidity into the system. Given housing’s unique characteristics, this will have positive effects for consumption and growth.
2013-03-14 Newsletter by Harold Evensky of Evensky & Katz
In the latest edition of his client newsletter, Harold Evensky highlights a number of interesting bits of news, including a must-see destination for your friends, your kids and your grandkids, some advice from Warren Buffett, a tip from Albert Einstein and the latest data on hedge fund performance.
2013-03-14 Tightening the Noose: Can the SEC and Its New Chairman Be Tougher on Wall Street? by Team of Knowledge @ Wharton
Although the SEC has always been the federal government’s chief guardian of integrity in the financial markets, critics have a long list of grievances, including claims that the agency is too unsophisticated and too soft on wrongdoers. Assuming she is confirmed as the new SEC chairman, Mary Jo White will need almost superhuman skills to make the SEC more effective. Can she -- or anyone, for that matter -- accomplish this?
2013-03-13 Taking Stock in the U.S. by Team of Franklin Templeton Investments
Is it time to take stock in the U.S. market? Equities started the year strong as the U.S. economy sidestepped the worst-case fiscal cliff scenario and continued showing signs of improvement despite global economic uncertainty. In fact, the Dow Jones Industrial Average reached a record high in early March. While there are still a number of possible issues that threaten to derail the market, Grant Bowers, portfolio manager of Franklin Growth Opportunities Fund, believes economic resilience in the United States is encouraging news for stocks, and investors have taken notice.
2013-03-12 Gundlach: Investors are asking the Wrong Question by Robert Huebscher (Article)
If you're trying to assess the Federal Reserve's so-called exit strategy from quantitative easing, then you're asking the wrong question, according to Doubleline's Jeffrey Gundlach. Quantitative easing is a permanent policy tool, he said, and investors should be asking what that means for their investment strategy.
2013-03-12 Finally, a Jobs Report Worth Reading by Chris Maxey, Ryan Davis of Fortigent
Surprisingly, the February employment report showed a labor market growing at a reasonably healthy rate. Concerns that the sequester would spill into the broader economy have yet to materialize and if recent trends hold, the economy may finally be approaching a point of robust and sustainable job growth.
2013-03-12 The Plow Horse is Trotting by Brian Wesbury, Bob Stein of First Trust Advisors
In October 2012, we raised our recession odds from 10% to 25%. We saw an increase in uncertainty and fear over the election and the fiscal cliff as having the potential to cause a drop in velocity. Panics (falling velocity) are rare. As a result, our base case (75% odds) was for a 2.5% to 3% increase in real GDP for 2013. Real GDP increased just 0.1% in Q4, but now it appears the Plow Horse is starting to trot a little.
2013-03-12 We Made It. Now What? by Christian Thwaites of Sentinel Investments
What looks like a fairly settled policy in Europe is fast becoming a very dangerous situation, according to Christian Thwaites in his latest "Thought of the Week" -- "We Made It. Now What?" -- adding that the outlook for the world's second largest economic bloc is pretty week.
2013-03-12 U.S. Dominates World Markets for the Trifecta by Douglas Cote of ING Investment Management
While large-cap indices get all the headlines, mid and small caps have continued to excel. Frontier markets have picked up the slack as major emerging markets stumble. Global risks persist, though U.S. fundamentals appear solid. The move toward U.S. energy independence should soon result in a trade surplus, boosting GDP.
2013-03-12 After Last Week's US Rally: Proceed with Caution by Russ Koesterich of iShares Blog
While last week's rally was supported by better-than-expected economic data and improving investor sentiment, the magnitude of US stocks' advance is starting to cause some indicators to flash yellow. Russ explains.
2013-03-11 And That's the Week That Was by Ron Brounes of Brounes & Associates
Stocks moved to record highs (Dow Jones) early in the week and never looked back. Some favorable economic data, particularly from labor, renewed investors' confidence and others jumped on as the week progressed to participate in the friendly trend. Even with the spending cuts from sequester threatening to weaken the economy, investors focused more on the present than the future. Though naysayers scoff at the recent moves and claim the economic strength is at least partially artificially Fed induced, their voices have been silenced for now.
2013-03-08 ECRI "Recession" Update: Lakshman Achuthan Stands his Ground by Doug Short of Advisor Perspectives (dshort.com)
The big news this week is the ECRI's Chief Operating Officer and spokesman, Lakshman Achuthan, returned to the media circuit with interviews yesterday on Bloomberg, CNBC and Yahoo's Daily Ticker. In addition, ECRI has published a new commentary available to the general public.
2013-03-08 Spasmodic Stupidity: The Wile E. Coyote Congress by Cliff Draughn of Excelsia Investment Advisors
I predict the Ides of March will find us in a continued sequestration, and Congress will use the time between now and the debt ceiling deadline on March 27th to debate the merits of true tax reform as opposed to governing by crisis. In the end, though, the reform conversation will revert to governance by crisis, with another stop-gap measure to avoid government shutdown during Holy Week and Easter, which will tide us over to the elections of 2014. Do you expect any different?
2013-03-08 How to Keep Calm and Invest On by Frank Holmes of U.S. Global Investors
The market noise of today will not be going away. However, investors can gain confidence in the following wisdom of the crowd. As famous investor Benjamin Graham said, "The individual investor should act consistently as an investor and not as a speculator. Keep calm and invest on.
2013-03-07 Animal Spirits: F.I.R.S.T. by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Call it what you will a dog-eat-dog world in which you're wearing Milk-Bone underwear or an example of capitalism at its finest an M&A cycle is heating up. This activity may be signaling the rebirth of what British economist John Maynard Keynes originally referred to as "animal spirits", much to the delight of fictional corporate barbarian Gordon Gekko and his real-life analogues, who require little prompting to act on Keynes "spontaneous urge to action".
2013-03-07 Freewheeling? by Dimitri Balatsos of Tesseract Partners
Ignoring threatening clouds in the distant horizon, the financial markets are wrapped in a blanket of complacency. Consider the following. The Dow Jones Index has been flirting with the 2007 record peak. Implied stock market volatility, as measured by the VIX Index, is in the basement. Junk bond yields are at record lows, compressing spreads to within shouting distance of risk-free Treasuries. Securitization is back from the dead, while the drought in M&A activity is now getting plenty of rainfall.
2013-03-07 Capex Revival by Francis Gannon of The Royce Funds
For some time now, we have been noting the defensive nature of the investment environment, one in which fear and uncertainty continue to be the major forces driving markets. Interestingly, this trend has held true for both investors and corporations alike of late. Even after a powerful move from the low of last November, for example, investors remain fearful about cyclical or economically sensitive sectors while at the same time embracing those very sectors that benefit from easy money, are defensive by nature, and are supposedly riskless.
2013-03-07 Florida is on Fire by Lesley Deutch of John Burns Real Estate Consulting
The Florida housing market is booming. Home buyer traffic and sales are climbing rapidly throughout the state, leading to increasing home and land prices.
2013-03-06 U.S. Sequester: How Significant is it for the Global Economy? by Team of Thomas White International
Since the U.S. has been one of the brightest spots in the current global economic environment, any negative development that restricts activity in the U.S. could have a magnified impact on the economic prospects for the rest of the world.
2013-03-06 Welcome Back, Visible Risk by Rob Stein of Astor Asset Management
Risk and more accurately "visible risk" has re-entered the market, and that's a very good thing. Visible risk is what you can measure, evaluate, mitigate, manage, and hedge (at least to some degree).
2013-03-06 Why Our Best Ideas Come In The Shower and Why They Are So Hard To Remember by Gary Halbert of Halbert Wealth Management
I don't know about you, but I have had some of my best and most creative ideas while in the shower. But the shower is not the only place or activity where we tend to be more creative. Our creative juices can frequently be stimulated when doing other things as well such as driving home from work, during or after exercise, cooking, meditating, etc.
2013-03-05 What Economists can Learn from Downton Abbey by Robert Huebscher (Article)
Economists warn that the U.S. economy could be heading toward one of two catastrophes: the two-decade long stagnation that has befallen Japan, or the hyperinflation that struck Zimbabwe and the Weimar Republic. Such cautionary tales alert policymakers to the failed efforts of their predecessors. But the most relevant comparison is rarely cited – to Great Britain in the 1920s, as depicted in the highly popular PBS series Downton Abbey.
2013-03-05 Weave a Circle Round Us Thrice by Christian Thwaites of Sentinel Investments
There was plenty of news to threaten the recent market rallies but, as of writing, we're within a whisper of all time highs in US stocks and managing to have a very orderly consolidation in bonds. This is surprising because the political process has once again taken careful aim and shot itself in the foot. The sequester has become the dumb answer to difficult questions and will initiate, mostly indiscriminate, across-the-board cuts.
2013-03-05 Is Now the Time to Diversify? by Chris Maxey, Ryan Davis of Fortigent
The use of global diversification in constructing client portfolios has come under fire in recent years due to the underperformance of many risk assets. Traditionalists who stuck to their familiar S&P 500 and BarCap Aggregate Bond index blends generally outperformed their diversified peers in 2011 and 2012, as historic risk premiums failed to materialize and various alternative investment strategies faced headwinds.
2013-03-05 The Sequester: A Second Quarter Worry by Russ Koesterich of iShares Blog
Now that March 1 has come and gone, what will the sequester mean for the US economy and markets? Maybe not much in the near term, but Russ explains why the second quarter will be a different story.
2013-03-04 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
The sky is falling. The sky is falling. It's the millennium all over again. (How did those fears work out?) With politicos unable to reach any agreement on the budget (taxes), the "dumb, arbitrary" spending cuts began to take effect to the tune of $85 billion this year. (So much for a military preparedness.) Though the impact on the economy will not be felt overnight, some areas will begin to suffer sooner than others and biz/consumer confidence could become an issue in the near future.
2013-03-04 Is Congress About to Cause a Major Economic Slowdown? by John Rothe of Riverbend Investment Management
The fiscal cliff, sequestration, higher taxes, and a pending budget debate may be too much for overly optimistic investors to handle. Volatility has started to rise and the market is looking weaker:
2013-03-04 Federal Government Employment, Tax Exemption and the Drought by Gregg Bienstock of Lumesis
This week we focus very briefly on the sequester and Federal government employment and then revisit a subject that has faded but has the potential to reappear this Spring and Summer (the drought) and conclude with a quick look at housing prices. Well, as expected (how awful that this is what I've come to expect from our elected officials), the can was kicked down the road.
2013-03-04 Out On A Limb - An Investor's Guide to X-treme Monetary and Fiscal Conditions by John Hussman of Hussman Funds
Massive policy responses, directed toward ineffective ends, are scarcely better than no policy response at all. A look at the current monetary and fiscal policy environment, as well as more effective policy initiatives, and why they make sense.
2013-03-01 Front Running the Fed by John Burns of John Burns Real Estate Consulting
We are very bullish on housing, and already thinking through the impact that 3.5% mortgage rates can have if prices rise substantially due to the interest rate stimulus. The Fed has put 34% more purchasing power into the pockets of homeowners, and investors are taking advantage.
2013-03-01 The Fed's Tightening Pipe Dream by Peter Schiff of Euro Pacific Precious Metals
Testifying before the US Senate this past Tuesday, Fed Chairman Ben Bernanke made an extraordinary claim about its bloated balance sheet: "We could exit without ever selling by letting it run off." What Bernanke means here is that the Fed could simply hold its Treasuries and agency bonds until they mature, at which point the government would then be forced to pay the Fed back the principal amount. Through this process, the Fed's unprecedented and inflationary position will be gradually and placidly unwound.
2013-03-01 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)
ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance.
2013-03-01 3 Reasons Market Volatility Has Returned by Russ Koesterich of iShares Blog
In the last week, stocks have pulled back and volatility has once again spiked. Russ outlines the 3 factors that hindered the rally and explains the implications for investors.
2013-03-01 Ed Jamiesons Quick Take on U.S. Sequestration by Ed Jamieson of Franklin Templeton
Overall we are not that concerned about the sequester as it relates to the financial markets. From the research weve seen, if left in place, the sequester could provide a drag on the economy of about half a percent throughout the rest of the year. The markets themselves seem to suggest the economy can grow through sequestration.
2013-03-01 Critical Juncture? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Headwinds have reemerged and investor concern is heightened yet again. We still believe stocks can run further, but a pullback is more likely in the near-term. The sequestration is now in affect but that doesn't necessarily mean it's here to stay and more budget fights loom, particularly in advance of the potential government shutdown on March 27. Meanwhile, some members of the Fed are in favor of scaling back its quantitative easing (QE) program, rattling markets a bit.
2013-03-01 Greetings from Istanbul! by Frank Holmes of U.S. Global Investors
As I travel around Turkey, I am reminded how vital good government policies are to the health of a nation. Following a decade of fiscally responsible actions, Turkey is the picture of a growing prosperity. Perhaps Americas elected officials could take a tip from this vibrant country overseas.
2013-02-28 An Ephemeral Swoon by Scott Minerd of Guggenheim Partners
Although volatility is likely to stay relatively high going forward, the recent move in the markets to risk-off mode appears to be a temporary condition.
2013-02-28 Jeremy Siegel on Why Stocks Are -- and Will Remain -- the Best Bet by Team of Knowledge @ Wharton
Though stock market volatility continues to rattle investors' nerves, the future looks bright for equities in the U.S. and many emerging markets, according to Wharton finance professor Jeremy Siegel. That's not so for bonds, which could become money-losing investments as rising interest rates drive bond prices down. In an interview with Knowledge@Wharton, Siegel says that investors should think about reducing their bond holdings, buying more stocks and keeping just enough cash for a rainy day and other liquidity needs, since interest rates on cash are near zero.
2013-02-27 Understanding the Sequester by David Kelly, David Lebovitz of J.P. Morgan Funds
A recent survey conducted by The Hill found that only 36% of likely voters even knew what the term "sequester" meant. For the record, sequester in our current fiscal lexicon, refers to the $1.2 trillion of spending cuts spread out over the next 10 years that are set to commence on March 1, 2013. These cuts have the potential to impact both the markets and the economy. Although time still remains for a deal to be reached, it seems increasingly unlikely that this will actually occur, making it more likely that the effect of these spending cuts will be felt, at least temporarily.
2013-02-27 Potential Threats to Equity Rally by Chris Maxey, Ryan Davis of Fortigent
Equity markets started a third consecutive year in rather impressive fashion, gaining more than 6% to date. With so much optimism in the investment community, it is always worth keeping an eye open for risks possibly overlooked. By now, it is apparent that investors are increasing their exposure towards equities with arms wide open. Data from the Investment Company Institute (ICI) estimates $39 billion flowed into equity mutual funds this year through February 13. Following outflows of $153 billion in 2012, the sudden reversal has been impressive.
2013-02-27 ING Fixed Income Perspectives February 2013 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
Despite its diminutive size, February has been a whirlwind. Eat and drink too much on Fat Tuesday, be reminded of our corporeal nature on Ash Wednesday, receive a sappy Hallmark card on Thursday, and cap it all off with a memorial for a bunch of ex-presidents on Monday. Unfortunately, the next several weeks don't appear to offer any relief from this calendar whiplash.
2013-02-27 The Great Migration by Herbert Abramson, Randall Abramson of Trapeze Asset Management
We are value investors dedicated to creating portfolios for clients, whether growth (equities), income or a balanced blend of both, of undervalued securities with meaningful upside potential and a margin of safety to guard against permanent loss. For us, the bottom-up factors are the most compelling, but we are also mindful that we need to take account of the top-down macro factors. We know how the Crash of ꞌ08 and the accompanying recession created havoc for investors, including us, no matter how undervalued stocks were.
2013-02-27 Singapore A Wise Owl Among Currency Snakes by John Browne of Euro Pacific Capital
As China enters the "Year of the Snake," Singapore stands as a beacon of sound currency in a world gone mad. China's renminbi remains pegged to the US dollar, while even steadfast Switzerland has followed the US, UK, EU, and Japan into an impoverishing strategy of currency debasement. Singapore, alone, has been able to sustain genuine economic growth in the context of a strong national currency.
2013-02-26 Looking For A Reason To Sell-Off by Christian W. Thwaites of Sentinel Investments
Markets were looking for a reason to correct. Risk assets had outpaced themselves since mid November and in the first seven weeks the S&P[1] had outperformed the US Treasury 10-year note by 12% and the 30-year bond by 15%. The markets will lumber through the sequester and face the next test on the debt ceiling and first quarter results. Below the surface, the outlook is mildly optimistic. Why the qualifier? Because everything, in Europe, US and Japan, must be set in the context of the asset deflation and deleveraging going on and that will go on for some years.
2013-02-26 A Permanent Investment by Jeffrey Saut of Raymond James
The Buying Power, and Selling Pressure, indicators continue to suggest no major top is in the works. Ditto the Advance/Decline line traded to a new high before the mid-week pullback, also confirming the upside. The major averages continue to reside above their respect 50-DMAs and 200-DMAs; and, those moving averages are rising, another bullish sign. Then there is Berkshire Hathaway (BRK.A/$152,009/Not Covered), which is somewhat of a proxy for the stock market, as it traded to a new all-time last Friday.
2013-02-26 Sudden Discomfort by Scott J. Brown of Raymond James
Minutes of the January 29-30 meeting of the Federal Open Market Committee showed a growing discomfort with the Feds Large-Scale Asset Purchase program (QE3). Thats not all that surprising. Even those who strongly favor the program arent exactly happy with it. However, thats a far cry from wanting to end the program anytime soon. We should learn more this week as Fed Chairman Bernanke delivers his semiannual monetary policy testimony (Tuesday and Wednesday).
2013-02-26 2013, Losing the Bid by Bill Smead of Smead Capital Management
Many times in my 32-year career people ask me to comment on whether an established trend for a popular investment will stay intact. My answer is always the same. We don't know when the hot streak will end for the popular investment and we don't feel comfortable with popular securities. In our view, there is a dramatic difference in what you do with popular investments based on whether they areto use terms borrowed from Warren Buffett currency assets, unproductive assets, or productive assets. It has to do with the ability to sell and the liquidity you have when the popularity disappears.
2013-02-25 Fed Will Make Excuses About Inflation by Brian S. Wesbury and Robert Stein of First Trust Advisors
Inflation is tame. For now. The CPI was flat in January and is up only 1.6% from a year ago. The PPI rose a small 0.2% in January and is up just 1.4% from a year ago. And even though energy prices spiked in February, the year ago comparisons are likely to stay tame. The consensus expects the February CPI to rise 0.6% - the largest in 44 months. Nonetheless, it would still show just 1.9% inflation in the past year, which is still below the Federal Reserves target of 2%. This wont last. With the Fed loose; we expect consumer prices to rise toward 3% during 2013.
2013-02-25 Housing, Flight Delays and Another Acronym by Gregg L. Bienstock of Lumesis
This week we start with a look at housing (not what you think), touch on the sequester (how can we not now that folks finally are taking this seriously) and the America Fast Forward Bonds.
2013-02-22 Uncovering 'Diamonds in the Rough' in Today's Credit Markets by Mark Kiesel of PIMCO
There are still good opportunities for yield and total return in the credit markets, but there has been a shift in where and how investors can find them. A "diamond in the rough" is a credit that is under-covered, or not actively followed or researched by many investors. At PIMCO, we identify these opportunities through our top-down and bottom-up investment process. We've identified a number of sectors that appear poised for above-average growth.
2013-02-22 Finding What's Real in Real Estate by Team of Franklin Templeton Investments
The U.S. financial crisis in 2008-2009 left many investors with a reluctance to take investment risks, particularly those related to any of the world's wilted housing markets. However, as your local real estate agent would likely tell you, the market in one location can be vastly different than it is in another. Wilson Magee, co-manager of Franklin Global Real Estate Fund would agree that the adage "location, location, location" applies not only to individual home buyers and sellers, but to investors seeking opportunities in the commercial real estate sector, too.
2013-02-22 ECRI "Recession" Update: Proprietary Indicators Slip Again by Doug Short of Advisor Perspectives (dshort.com)
ECRI adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...
2013-02-22 January 2013 Market Commentary by Andrew Clinton of Clinton Investment Management
The municipal bond market continues to perform well in the face of significant political, financial and economic uncertainty, once again, demonstrating the importance of consistent, competitive tax-free cash flow. Municipal bonds proved to be one of the best performing asset classes during 2012.
2013-02-22 A Test of Strength for Gold by Frank Holmes of U.S. Global Investors
This week, we saw the gold bears growling louder and gaining strength, as the worlds largest gold-backed ETF, the SPDR Gold Trust, experienced its largest one-day outflows since August 2011. The Fear Trade fled the sector following the Federal Reserves meeting that revealed a growing dissension among some of its members over the central banks bond-buying program.
2013-02-22 Understanding the Sequester by David Kelly, David Lebovitz of J.P. Morgan Funds
A recent survey conducted by The Hill found that only 36% of likely voters even knew what the term sequester meant1. For the record, sequester in our current fiscal lexicon, refers to the $1.2 trillion of spending cuts spread out over the next 10 years that are set to commence on March 1, 2013. These cuts have the potential to impact both the markets and the economy. Although time still remains for a deal to be reached, it seems increasingly unlikely that this will actually occur, making it more likely that the effect of these spending cuts will be felt, at least temporarily.
2013-02-21 Fed Must Tune in to Changing US Economy by Joseph Carson of AllianceBernstein
With each passing month, more questions are being asked about the sluggish US economic recovery. Why has growth been subdued since the recession ended in mid-2009? What's changed in the economy? How long can loose monetary policies persist before promoting more inflation or creating a new bubble?
2013-02-21 Collateral Damage in the Currency Wars by Scott Minerd of Guggenheim Partners
Global competitive devaluation will continue to cause asset prices to rise in the near-term, but the broader implication of the policies will be increased volatility.
2013-02-20 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Tick Tick Tick. The President has plans for improving life in America. Tick Tick Tick. Republicans want to fix the middle class (and restricting taxes on the upper class may help). Tick Tick Tick. Earnings reports look good, but forecasts for the current quarter have been lowered. Tick Tick Tick. Weekly jobless claims keep falling, but major corporations are announcing layoffs. Tick Tick Tick. Sales figures show growth, but Wal-Mart and others are worried. Tick Tick Tick.
2013-02-20 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
The single biggest predictor of financial growth is not how much money we have stashed away in secret savings accounts, but how much confidence we feel about a fair return for the deployment of those dollars. In that sense, corporations and individuals alike uniformly adhere to a quid pro quo matrix. Investing must be fair; it must be reasonable; and, win or lose, it must be swathed in aspiration that makes us feel worth making the investment in the first place.
2013-02-20 Event Driven Investors Receive Their Wish by Chris Maxey, Ryan Davis of Fortigent
For several years, investors have wondered why M&A activity has been so benign.Corporate management teams cited uncertainty about the economic outlook as a primary reason for the depressed activity.With the latest round of tax increases and revenue cuts determined, companies finally appear willing to free their animal spirits and embark on the path of acquisition.
2013-02-20 Stock Market Lingers At A Precarious Place by Gary Halbert of Halbert Wealth Management
The Dow Jones Industrial Average has flirted with its all-time high of 14,198 twice in February as the Dow managed to rise above the 14,000 mark but then fell back. The S&P 500 Index is not quite as close to its all-time high, but it is within striking distance. There is widespread optimism that both indexes can break-out to new record highs, which would likely spark a new buying surge.
2013-02-19 Alan Greenspan on the Market and the Global Economy by Adam Jared Apt (Article)
During his six-decade-long career in financial services, Alan Greenspan was a central figure in seminal events that drove investment markets, from the savings-and-loan crisis to the dot-com bubble to the housing crisis. Now, nearing 87, he rarely speaks in public. But he did so last week, offering his forecasts for the U.S. and European economies.
2013-02-19 Letter to the Editor by Various (Article)
A reader responds to Gary Halbert's commentary, The Economy: Worst Five Years Since the Depression, which appeared on February 13.
2013-02-16 Seeing the Forest by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Equity markets continue to be resilient and investor confidence is elevated in various sentiment indices, suggesting a near-term pullback is possible. But there are longer-term trends developing that give us hope that the US economy's expansion and market's rally are sustainable. Federal spending cuts via the "sequestration" appear sure to happen, but there will continue to be debates about the nature and size of the cuts. Similarly, questions are increasing as to the potential unwinding of current Fed policy with regard to timing and rapidity.
2013-02-16 When It Comes to Gold, Stick to the Facts by Frank Holmes of U.S. Global Investors
During short-term gold corrections, its much more important to focus on the facts, including the fact that gold is increasingly viewed as a currency. Rather than buying real estate, lumber or diamonds, central banks around the world are buying gold. According to the World Gold Council (WGC), over 2012, central bank demand totaled 534 tons, a level we have not seen in nearly 50 years.
2013-02-15 Latest OECD Data Shows Global Economy in State of Flux by Steve Rumsey of Optimus Advisory Group
According to the OECD ("Organisation for Economic Co-operation and Development"), the US economy managed to stage a leading indicator "rally" into the most favorable northeast quadrant. The red six month lagging tail on the graph clearly shows the economic leading indicators moving from expansion to slowdown, only to move back to the expansion quadrant in late 2012.
2013-02-15 High Yield Market Overview January 2013 by Team of Nomura Asset Management
The high yield market, as measured by the Bank of America Merrill Lynch U.S. High Yield Master II Constrained Index, posted a positive total return of 1.38% in January, as the high yield market continued to rally into the new year.
2013-02-15 International Equity Commentary January 2013 by Team of Thomas White International
International equity prices sustained the uptrend in January, helped by data releases that supported the growing optimism over healthier global economic growth. Though the U.S. and U.K. economies declined unexpectedly during the fourth quarter of last year, the pace of growth improved in several Asian countries, including China, during the period.
2013-02-15 ECRI "Recession" Update: Propietary Indicators Take a Pause by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in today's update. It is now at 129.6 versus the previous week's 130.2.The WLI annualized growth indicator (WLIg) also eased, now at 8.3, down from last week's 8.9. WLIg has been in expansion territory since August 10th of last year, but is is fractionally off its interim high set last week.
2013-02-14 Is Inflation Around the Next Corner? Then What? by Pete Sorrentino of Huntington Funds
As the Federal Reserve Board reiterates its intention to keep interest rates near zero into 2015, it appears that the markets and many investors are growing complacent about inflation. Ever since the Financial Crisis of 2007-08, "headline inflation," as measured by the Consumer Price Index (CPI), has stayed low so far. Although it has threatened to break out at times, economic weakness has restrained the price growth that underlies inflation.
2013-02-14 Pacific Basin Market Overview January 2013 by Team of Nomura Asset Management
Improving expectations for global economic growth underpinned a solid start to 2013 for the Asia Pacific equity markets. In Asia, interest focused on China, as economic data showed further signs of recovery. On the other hand, the depreciating Japanese yen drew concerns that Asia's main exporters, which include Korea and Taiwan, will become relatively less competitive. The MSCI AC Asia Pacific Free Index including Japan gained 3.0% while the MSCI AC Asia Pacific ex Japan Free Index closed 2.6% higher during the month.
2013-02-14 How Not to Run a Pension by John Mauldin of Millennium Wave Advisors
For all the focus on the unfunded liabilities of Social Security and Medicare, there is another unfunded crisis brewing, and this one is in your own back yard. It's coming to you even if you live outside of the US; it just might take a little longer to get there. I wrote ten years ago that state and local pension funds might be underfunded by as much as $2 trillion. It turns out that I was being overly optimistic. New government research suggests that the figure might be as high as $3 trillion. But what if you take into account that retirees are living longer?
2013-02-14 When Politics Trump Economics by Scott Minerd of Guggenheim Partners
The U.S. economic expansion continues, but increasing attention to political risks, and currency wars, in particular, indicate a period of heightened volatility could be ahead.
2013-02-14 Pressure Points: Where Tax Reform Can Be Most Effective by Team of Knowledge @ Wharton
The deficit deal that averted the fiscal cliff crisis at the start of the year raised taxes on the wealthiest and postponed -- for two months -- government spending cuts that threatened to derail the economic recovery. But the problem remains: Spending far exceeds revenue. So what's to be done? Five Wharton faculty members offer their views.
2013-02-13 Our Job: Whether; Market's Job: When by Bill Smead of Smead Capital Management
Warren Buffett describes the stock market's purpose as being "a wonderfully efficient mechanism for transferring wealth from the impatient to the patient". We are reminded of this by a series of news reports and commentaries on subjects greatly influenced by basic economics. In today's missive, we consider what the law of supply and demand says about China, oil, and housing in the USA.
2013-02-13 Trading Secrets: And All Our Yesterdays by Tad Rivelle of TCW Asset Management
Markets work. Not because they are perfect, but because they self-correct. Inherent to their functioning is the ability for buyers and sellers, borrowers and lenders, to freely express their predilection to engage in commercial transactions as proxied by the price mechanism. This is all utterly basic. So, why are the capital markets in general, and the credit markets in particular, not to be trusted to operate without the price and quantity guidance of the Federal Reserve? I
2013-02-13 The Economy: Worst Five Years Since the Depression by Gary Halbert of Halbert Wealth Management
While the many facts and figures below are disappointing, even depressing, Americans need to know the truth about the real state of our economy and our union. Consider what follows as a rebuttal to President Obama's speech tonight. Feel free to forward this to as many people as you wish.
2013-02-12 Consumers Less Enthused to Bail Out the Economy by Chris Maxey, Ryan Davis of Fortigent
Following recent recessions, it was commonplace to rely on American consumers to bail out the economy. The reliance on the American consumer was widely understood as the best remedy for an ailing economy. We are not as fortunate this time around and our dependence on consumers is one reason for the sluggish rate of recovery since 2008.
2013-02-12 Currency Wars? What Currency Wars? by Christian Thwaites of Sentinel Investments
There's much talk of currency wars right now. We think they're way overblown. The source of the problem lies with Japan, which has made explicit a strategy to lower the yen, increase domestic demand and increase inflation. It needs to do all three. The twenty year old balance sheet recession and deflation in Japan has been a costly error in targeting inflation and not much else.
2013-02-12 Don't Just Do Something, Sit There. by Jeffrey Saut of Raymond James
"Don't Just Do Something, Sit There" is the title of a book written by Sylvia Boorstein. I was reminded of the title when I received the following email from a financial advisor at another firm last week...
2013-02-11 Shall We Dance? by John Hussman of Hussman Funds
My impression is that the worst investment outcomes have typically followed appeals to the idea that "this time is different," and "you've got to dance as long as the music is playing."
2013-02-11 Stocks: Why "Risk On" Rules by Milton Ezrati of Lord Abbett
Investors appear to believe the equity market will muddle through its many challenges.
2013-02-08 The Year in Review: 2012 by Richard Bernstein of Richard Bernstein Advisors
Politicians crave the spotlight, but it is unfortunate that investors watch the show. 2012, like 2011, was another year in which Washington theatrics scared investors. As a result, investors largely missed out on above average equity returns. Corporate profits and valuations, and not Washington, continue to be the primary drivers of equity returns. We think there are several important points to consider when reviewing 2012 performance, and when structuring portfolios for 2013.
2013-02-08 Unconventional Policies and Capital Flows by Ben Emons of PIMCO
Although quantitative easing has grabbed the headlines, a number of central banks around the world have enacted other extraordinary measures in attempts to manage their economies. The Swiss National Bank (SNB), for example, adopted an exchange rate peg versus the euro while increasing its foreign exchange reserves to almost 80% of Swiss GDP.
2013-02-08 ECRI "Recession" Update: Leading Index Growth Sets Another Interim High by Doug Short of Advisor Perspectives (dshort.com)
First a flashback for those of us who have followed ECRI's media appearances: we know that the company adamantly denied that the sharp decline of their indicators in 2010 marked the beginning of a recession. But in 2011, when their proprietary indicators were at levels higher than 2010, they made their recession call with stunning confidence bordering on arrogance...
2013-02-08 Messing with the Bull by Peter Schiff of Euro Pacific Capital
With the announcement this week of its massive $5 billion lawsuit against ratings agency Standard & Poor's, the Federal Government took a bold step to squelch any remaining independence of thought or action in the financial services industry. Given the circumstances and timing of the suit, can there be any doubt that S&P is paying the price for the August 2011 removal of its AAA rating on U.S. Treasury debt?
2013-02-08 Weekly Economic Commentary by Team of Northern Trust
Immigration reform would help the US economy at many levels. There is much going on with the US labor force participation rate. Will leadership change usher in a new era at the Bank of Japan?
2013-02-08 Out With the Dragon In With the Snake by Frank Holmes of U.S. Global Investors
Over 2013, we expect the Chinese government to continue its accommodative efforts, which should reinforce the equity rally. In addition, the new pyramid of power is focused on growth, as it seeks to improve and reform policies that will provide its residents with opportunities and social security, increase incomes and raise standards of living, which should encourage domestic consumption. Growth is set to be considerable over the next several years.
2013-02-07 Commodities: Correlating Trends with Opportunities by Mark Mobius of Franklin Templeton Investments
Commodity price inflation is both a social and an economic issue. In emerging markets in particular, food and energy costs take a deeper slice out of consumers' income, which can lead to the type of unrest that causes governments to topple. In addition to the potential impact of extreme weather on food supplies, central banks around the world are printing a flood of money, which could lead to inflated prices for other goods and services.
2013-02-07 Investing in a Low-Growth World by Jeremy Grantham of GMO
This quarter I will review any new data that has come out on the topic of likely lower GDP growth. Then I will consider any investment implications that might come with lower GDP growth: counter intuitively, we find that investment returns are likely to be more or less unchanged a little lower only if lower growth brings with it less instability, hence less risk. Finally I will take a look at the reaction to last quarter's letter, specifically about my outlook for lower GDP growth.
2013-02-07 We Have Met the Enemy, and He Is Us by Ben Inker of GMO
If modern portfolio management has a single defining urge, it is almost certainly diversification. We look for diversifying assets, strategies, and managers. A thoughtful investor can argue against almost any asset class stocks, bonds, hedge funds, private equity, commodities, you name it but arguing against diversification is like arguing against indoor plumbing. I dont want to sound like I'm calling for a return to chamber pots and outhouses, so I'm not actually going to argue against diversification.
2013-02-06 The January Barometer by Jeffrey Saut of Raymond James
It's that time of year again when the media is abuzz with that old stock market saying, "so goes the first week of the new year, so goes the month and so goes the year." With the S&P 500 (SPX/1513.17) better by 2.17% over the first five trading sessions of this year, and up 6.10% for the month of January, it is worth revisiting the January Barometer. Devised by Yale Hirsch in 1972, the January Barometer states that as the S&P 500 goes in January, so goes the year.
2013-02-06 The Job Market Data and the Fed by Scott Brown of Raymond James
Nonfarm payrolls fell by 2.8 million in January before seasonal adjustment, that is. Adjusted, payrolls advanced 157,000, about as expected. However, annual benchmark revisions showed a more rapid pace of job growth over the last two years a pace at odds with the Household Survey data. How might the Fed view the range of job market data?
2013-02-06 GDP Report Tanks - Is A Recession Looming? by Gary Halbert of Halbert Wealth Management
We will cover a lot of ground today. We begin with a new report from Goldman Sachs which argues that the US economy will remain the strongest in the world for many more years. The report rebuts claims that America is a nation in decline. Quite the contrary, say Goldman analysts who claim that there is a growing"awarenessof the key economic, institutional, human capital and geopolitical advantages the U.S. enjoys over other economies."
2013-02-05 In Uncertain Environment, Jobs Grow Tepidly by Chris Maxey, Ryan Davis of Fortigent
For the 35th consecutive month, private payrolls registered positive growth. It was hardly the robust report economists would prefer, but the labor market continues to mend. However, there are still plenty of reasons to be concerned, especially with sequestration on the horizon.
2013-02-05 2012 Equity Market Market Year in Review by Natalie Trunow of Calvert Investment Management
Equities started the year strong as global inflation remained tame, and aggressive, accommodative monetary policy by central banks around the globe helped equity markets rally hard off their lows posted in the fall of 2011. Continuously improving U.S. economic data, strong corporate earnings, and policy steps toward mitigation of the sovereign debt crisis in Europe also provided support for the equity markets worldwide.
2013-02-05 Fourth Quarter 2012 Equity Market Review by Natalie Trunow of Calvert Investment Management
With the excitement of the QE3 announcement wearing off in the fourth quarter, market participants refocused on the less-than-stellar earnings season in the U.S. and uncertainties surrounding the U.S. presidential election and impending fiscal cliff, while the negative impact of Hurricane Sandy further dampened investor sentiment. Despite a double-dip recession in the eurozone, there was some progress on the European policy front and China's economy continued to show signs of stabilizing, which helped international stocks outperform their U.S. counterparts.
2013-02-04 2013 Annual Forecast by Clyde Kendzierski of Financial Solutions Group
It's that time again. January will be over by the time you read this which means we are out of holiday excuses or "just ramping up for the new year" reasons for not getting back to work. Having said that, I'd like to offer my excuse for the Annual Forecast getting to you in February instead of the first week of the year. Hand over my heart, we started early this go-round.
2013-02-04 A Look at California, Thoughts on Employment and Why I Worry by Gregg Bienstock of Lumesis
This week we consider recent information and data regarding California, GDP and the employment picture. We also touch on why I worry about the next six months (at least). We conclude with a wrap up of the data imported into DIVER last week and coming road trips. Also, be on the lookout for a Lumesis press release and "Topic of Interest" paper later this week.
2013-02-04 Some Seasonal Blips by Christian Thwaites of Sentinel Investments
We had a week of big numbers last week of which GDP, Personal Income, Durable Goods, the Conference Board's Consumer Confidence, payrolls and the FOMC were the ones that had our attention. We went to print a little earlier this week, so missed the NFPs. But this is what came at us. First GDP. There's a spin to be told but here are the raw numbers with the center column the one that caught markets wrong-footed.
2013-02-01 Q412 Portfolio Commentary by Jay Compson of Absolute Investment Advisers
While much of the fundamental picture has played out as we expected over the past 18-24 months, the financial markets appear to be concerned solely with the existence or non-existence of macro headlines and events. There seems to be a disconnect between market movements and fundamentals which means doing real work based on intellectual honesty and logic puts you at a disadvantage. Chasing momentum and profiting from central bank market manipulation appear to be the current winning strategies.
2013-02-01 Crystallization at Davos by Scott Minerd of Guggenheim Partners
The euphoria among my fellow Davos attendees was palpable, but short and long-term risks for the world's advanced economies, including competitive currency devaluation, remain concerning.
2013-02-01 For All the Sad Words of Tongue and Pen... by Jeffrey Saut of Raymond James
"For all the sad words of tongue and pen, the saddest are these: It might have been." ... John Whittier; an influential American Quaker poet. Certainly, American poet John Greenleaf Whittier's apothegm has stood the test of time, serving as a universal lament for what "might have been." I was reminded of this maxim last week as Wall Street heard increasing laments from investors on the Street of Dreams.
2013-02-01 2 Major Threats Facing the US Economy by Russ Koesterich of iShares Blog
While markets cheered the House of Representatives' recent vote to temporarily suspend the debt ceiling, the US economy isn't out of the woods yet. Russ highlights the two major risks it still faces.
2013-02-01 ECRI "Recession" Update: Leading Index Growth Hits Another Interim High by Doug Short of Advisor Perspectives (dshort.com)
ECRI posts its proprietary indicators on one-week delayed basis to the general public, but ECRI's Lakshman Achuthan has switched focus to his company's version of the Big Four Economic Indicators I've been tracking for the past several months. See, for example, this November 29thBloomberg video that ECRI continues to feature on their website. Achuthan pinpoints July as the business cycle peak, thus putting us in at the beginning of the eighth month of a recession.
2013-02-01 2013 Economic & Capital Market Outlook by Gregory Hahn of Winthrop Capital Management
It took our country 229 years to accumulate $8 trillion in federal debt. It only took the next eight years to double it to $16 trillion. History shows that when a country accumulates debt at this rapid pace, economic growth languishes. Not surprisingly, Congress is pursuing policies that attempt to inflate the economy. Five years after the Financial Crisis, we really havent fixed much. Instead, we've issued more debt in order to pay our bills and sustain a quality of life society cannot afford long term.
2013-02-01 Dow To 14,000 and Beyond? by Frank Holmes of U.S. Global Investors
So will the Dow go beyond 14,000? Although you cant predict how hot the weather will be this summer, the clouds appear to be parting to reveal the sun today. Make sure your asset allocation positions your portfolio to shine.
2013-02-01 Weekly Economic Commentary by Team of Northern Trust
Is the world engaged in a currency war? Januarys job report had some pleasant surprises, but more progress is needed. Purchasing managers surveys suggest growth in the US, retreat for Europe
2013-02-01 Look at the Bears! Look at the Bears! by Christine Hurtsellers, Matt Toms and Mike Mata of ING Investment Management
Yes, the grumbling of bond bears is reverberating in Treasury yields, but that sound isnt the death knell of a grizzly; at this point, the closest ursine analogue is Boo-Boo Bear.
2013-01-31 China's Market Ups and Downs by Mark Mobius of Franklin Templeton Investments
China's stock market was a roller coaster in 2012, and those investors with a weak stomach for unpredictability probably found the ride unpleasant. Its true that by many measures last year's weak market performance in China's A share market was disappointing, but in a market of this size the story isn't all good or all bad, so unlike the market masses, I remain confident about China's prospects and continue to search for long-term investment opportunities in China.
2013-01-31 Q4 2012 Letter by Team of Grey Owl Capital Management
During the second half of 2012, central banks turned their massive and coordinated monetary intervention "up to eleven." This is the overwhelmingly dominant economic and market force today. Despite the long-term consequences (which are very real), we believe the central bankers commitment is steadfast. It has and will likely continue to mute both real economic and financial market volatility (at the expense of long-term growth). A deeper analysis of what has changed, our assessment of the impact, and our portfolio response follows.
2013-01-30 U.S. Debt Crisis End-Game Looms in 3-5 Years by Gary Halbert of Halbert Wealth Management
Last week, one of the most respected research groups in the world predicted that the US likely has only 3-5 years before the wheels fall off and the world is thrust into a major financial crisis, possibly even a depression. We'll talk about all of these things as we go along today. But before we go there, let's take a brief look at the economy before tomorrow's advance (first) estimate of 4Q GDP.
2013-01-29 And That's the Week That Was by Ron Brounes of Brounes & Associates
The trend is your friend...so hopefully it will continue for a little (lot) longer. With the uncertainty of the fiscal cliff on the backburner (for now), investors seem to like what they are seeing from earnings season and in the economy. They continued to take stocks higher as the S&P 500 settled above 1500 for the first time in five years and is currently riding a eight session winning streak.
2013-01-29 How Much Help from Housing? by Alan Levenson of T. Rowe Price
We expect the ongoing recovery in new housing construction from unsustainably low levels to contribute roughly percentage point to real GDP growth this year, and emphasize the risks to the upside of this forecast. Imminent employment growth in housing-related industries will provide an important channel for secondary "multiplier" effects of the housing recovery. Applying recent house price increases to the entire stock of owner-occupied housing overstates their likely wealth effect on consumer spending.
2013-01-29 What Budget Problems? by Christian Thwaites of Sentinel Investments
"Vickers falls on fear of peace." There's an apocryphal story of how on the day after D-Day, the stock of Vickers, a large defense contractor, abruptly fell. I can't find the source but it was a good story going around the City some, ahem, 30 years ago. Last week there was not a lot of price action in bonds until Friday when economic upticks replaced budgets as the main driver. We saw a one point correction in treasuries. The market is right to push budget concerns into the background for now.
2013-01-29 In Japan We Trust by Chris Maxey, Ryan Davis of Fortigent
In fewer than 60 days, one country has made a splash larger than all the others. No, we are not referring to the US, where Barack Obama was re-elected to a second term. Nor are we referring to China's recent transition of power. Instead, the country we reference is Japan. After decades of malaise, Japanese officials moved to embrace policies previously only accepted by Western officials.
2013-01-28 Global Market Commentary: Follow the Money, Again by Richard Golod of Invesco
Global equity market performance in 2012 was driven by accommodative monetary policy around the world, as well as a decline in investor fear after policymakers in Europe reduced the risk of a financial crisis. Global equity markets are likely to respond to the same stimulus this year but maybe not to the same degree. I believe the dominant factor that will drive equity prices in 2013 will likely surprise investors: inflation.
2013-01-28 A Few Things to Consider. Plus a Look at Maine and Illinois by Gregg L. Bienstock of Lumesis
This week's commentary is a slight departure from our standard format. It's been a few weeks since we mentioned the fiscal cliff, sequestration and the like. This is due to our collective saturation and the perspective of so many that the problem was solved. Well, we want to provide a reminder or two and throw a few thoughts at you to kick around. We conclude with a quick look at Maine and Illinois.
2013-01-25 Feeding the Dragon: Why China's Credit System Looks Vulnerable by Edward Chancellor, Mike Monnelly of GMO
Edward Chancellor and Mike Monnelly, members of GMO's Asset Allocation team, write to institutional clients in a new white paper about China's credit boom and outlines some worrying recent developments in its financial system. In GMO's view, "China's credit system exhibits a large number of indicators associated with acute financial fragility," including China's debt and real estate bubbles, the belief that the government is underwriting financial risk, the shadow banking system, a proliferation in credit guarantees, among others.
2013-01-25 Americas: Regional Economic Review 4Q 2012 by Team of Thomas White International
The outlook for most economies in the Americas region improved during the fourth quarter as domestic consumption growth was sustained and the anticipated revival in global demand has lifted the prospects for export growth this year. Partly helped by fiscal and monetary policy measures introduced since 2011, consumer demand has held up across most countries in the region.
2013-01-25 Opine Less, Think More by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, looks at investing from a broad perspective and goes over in detail some of the macro themes he is examining as he tries to help the reader make sense of what 2013 will bring. He discusses potential "black swans" that he has his eye on, the bounceback of American and European stock markets, the sometimes overlooked lack of a correlation between economic growth and stock market performance, what P/E ratios tell us both historically and in the present, and where valuations can go from here.
2013-01-25 Housing Is Off the Floor, But Faces Ceilings. by Team of Northern Trust
Housing is off the floor, but faces ceilings. The cost of housing could be a source of increased inflation. January's FOMC meeting should not break any new ground.
2013-01-25 Resource Investors: Why You Can Expect Sunnier Days Ahead by Frank Holmes of U.S. Global Investors
During the current commodity supercycle, there have been occasionstoo many to countwhen investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe. Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.
2013-01-25 High-Yield Wont Bubble Over by Gershon Distenfeld of AllianceBernstein
High yield may be a bit pricy these days, but we dont see a bubble building. In fact, we think the structural characteristics of bonds and the behavior of bond investors make a bubble nearly impossible.
2013-01-24 Quick Takes on the Investing Year Ahead by Sam Wardwell of Pioneer Investments
We covered a lot of market and investment topics at Pioneer's National Sales and Marketing Meeting last week. Here are some notes on a few that were popular: GDP Growth for the U.S.. Expectations for rates: Fed Funds Rate and the 10-year Treasury, EM equities favored over U.S. Equities?, Things that keep us up at night (outside of the debt ceiling, Europe, and Middle East tension.
2013-01-24 Get Your Funk Out by Jim Goff of Janus Capital Group
I manage investment professionals for a living. When an analyst gives me the positives on one hand and the negatives on the other hand, but offers no conclusion, I want to cut one of those hands off. The best analysts understand all the issues but come to well-founded views.
2013-01-24 Escape Velocity in the Economy by Scott Minerd of Guggenheim Partners
The broad improvement in U.S. economic data indicates that the economy is likely to continue to expand, supporting earnings growth and pointing to an eventual return of leveraged buy outs.
2013-01-23 Ignore the GDP Headline by Brian Wesbury, Bob Stein of First Trust Advisors
Next week, Fourth Quarter Real GDP will be released. Our forecast of 0.9% annualized growth, if correct, will encourage the pessimists to continue fretting about the economy in the year ahead. But we will ignore that dour response. Beneath the surface of the report will be evidence that the plow horse economy is picking up some steam.
2013-01-23 Economic Backdrop Supports Stocks, Credit Sectors and Munis by Russ Koesterich of BlackRock Investment Management
Thanks to solid earnings, some decent (if mixed) economic news and indications that the debt ceiling debate may be delayed slightly, stocks posted additional gains last week, continuing their strong start to 2013. For the week, the Dow Jones industrial average climbed 1.2% to 13,649, the S&P 500 index advanced 1.0% to 1,485 and the NASDAQ composite rose 0.3% to 3,134. Bonds have remained relatively steady, with the 10-year Us treasury closing the week at a yield of 1.84%, two one-hundredths lower than the previous Friday close.
2013-01-23 The Year of the American Consumer by Philip Tasho of TAMRO Capital
It was an above-average year for stock returns across the domestic market cap spectrum. Ultimately, unconventional and accommodative monetary policy trumped investor concerns over fiscal policy, the Presidential election and weakness overseas. The Federal Reserve (the Fed) entered uncharted waters when it announced open-ended quantitative easing through the ongoing purchasing of government securities. Importantly, other central banks globally waded in by mimicking the Fed in word if not deed and the global liquidity cycle continued apace.
2013-01-23 Inflated Expectations? by Kristina Hooper of Allianz Global Investors
Investors should prepare themselves for higher long-term inflation because the market may be ignoring it, a mistake that could come back to haunt. On the heels of encouraging economic data, central bankers are projecting only modest price increases for goods and services over the next 10 years. But history tells us that an inflation spike is inevitable when governments print money so aggressively. As such, investors with long-term time horizons should have substantial exposure to inflation-hedging asset classes. Now, more than ever, real returns matter.
2013-01-23 Is the European Crisis Over? by Chris Maxey, Ryan Davis of Fortigent
The European sovereign debt crisis that first erupted in 2010 and stoked almost three years of intense market volatility has all but faded from the front pages. Overshadowed by domestic policy issues and European Central Bank (ECB) President Mario Draghi's pledge to do "whatever it takes" to save the Eurozone, fears that the monetary union would crumble and unleash a maelstrom of financial distress appear to have dissipated.
2013-01-23 PIMCO's Secular Forum Preview by Mohamed El-Erian of PIMCO
It is almost time again for PIMCO's Secular Forum a critical part of the firm's investment process. This annual event, which takes place each May, brings together our investment professionals from around the world to debate and specify the key themes that we believe will affect the global economy and, consequently, our investment strategies over the next three to five years from asset allocation and relative value positioning to returns expectations and risk management.
2013-01-23 Avoid Disappointment, Aim Low by Christian Thwaites of Sentinel Investments
No, it's not a life aspiration. But it can work when it comes to investing. We had a rush of gains coming into the end of the year with the S&P up 22% over the year. But it's also one of the more relaxed markets and start we've had in years. The political agenda is still front and clear and we're in a lull until the debt ceiling arguments gain steam. The markets know this but seem comfortably complacent. They're probably right to be.
2013-01-23 It's What You Learn After You Know It All That Counts. by Jeffrey Saut of Raymond James
January is the time of year when strategists, economists, gurus, etc. all join in on the annual nonsense of predicting "What's going to happen in the markets for 2013?" For many, this ritual is an ego trip, yet as Benjamin Graham inferred forecasting where the markets will be a year from now is nothing more than rank speculation. Or as I have noted, "You might as well flip a lucky penny."
2013-01-23 Developed Asia Pacific: Regional Economic Review - 4Q 2012 by Team of Thomas White International
Developed Asia Pacific economies witnessed mixed economic fortunes during the fourth quarter of 2012. While the group's largest economy, Japan, suffered from stubborn deflation and slumping trade due to a bitter territorial dispute with China, Singapore and Hong Kong managed to fare better.
2013-01-22 2013 Investment Outlook by Jeremy Boynton of Laureate Wealth Management
I would like to focus this commentary on three trends which I believe will have a larger positive impact on the US economy going forward than the broader investment community expects.
2013-01-22 And That's The Week That Was by Ron Brounes of Brounes & Associates
Tragedy in Algeria brought another reminder about just how dangerous the world can be. Oil prices rose on the enhanced turmoil in the region as well as on news that supplies unexpectedly dropped in the recent gov report. Financials led earnings season in a mostly positive way, though several releases included reminders about the financial crisis and the greed factor of certain professionals. The favorable economic data was well received as S&P 500 index again hit a five-year high though even the optimists remain cautious as the budget negotiations yield little positive results.
2013-01-22 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
2012 was a year of mixed results on the economic front, but generally good investment returns as measured by the S&P 500 Index. Some progress was made in Europe and China, and some clarification in direction was made in the U.S. We presented our thoughts on these topics at our December 6 seminar; an archive will be available on our website.
2013-01-22 Pensions, Housing and The Inauguration by Gregg Bienstock of Lumesis
This week we look to 2011 pension data for States and Cities and zero in on funded ratios, unfunded liabilities and some of the assumptions of the underlying plans. We also touch on recent housing data that gives us some hope and offer some thoughts following inauguration day. We conclude with a reminder to take a look at the MMA/Lumesis FAQ addressing Municipal Holdings and OCC/FDIC Compliance.
2013-01-22 Equities Set to Break Out of the Bear Trap by Catherine Wood of AllianceBernstein
In the face of significant uncertainties, US and global equities rallied in 2012 and at the start of the New Year. We think there might be more to come as stocks break out of the bear trap.
2013-01-22 Invesco Fixed Income 2013 Outlook by Greg McGreevey of Invesco
While the Great Financial Crisis of 2008 is long behind us, the ensuing consequence of ongoing systemic deleveraging remains a dominant force in global financial markets. Central banks continue to respond with monetary stimulus to support regional economies and counterbalance the impact of deleveraging relative to growth and asset valuations. Such activity was especially evident in the eurozone and the US throughout the entirety of 2012.
2013-01-22 Consumer Staples: Don't Overpay for Safety by Russ Koesterich of iShares Blog
Many investors have flocked to the perceived safety of defensive sectors over the past few years, including consumer staples. But Russ gives three reasons they might want to think twice about the sector now.
2013-01-22 Keep Your Eye On The Ball - 2012 Year End Letter by Team of Sloan Wealth Management
The members of the Portfolio Management Team at Sloan Wealth Management (SWM) coach two baseball teams, two soccer teams, one T-ball team and one basketball team for our collective young children. Thus, we find ourselves stressing the basics. Learning the fundamentals of how to catch a pop-up will eliminate some of the fear of getting hit in the face. In 2012, we found many parallels to the capital markets as our portfolios posted high double digit returns in the face of fear.
2013-01-22 Year-End Investment Commentary by Team of Litman Gregory
Stocks shrugged off numerous worries to log a very good year in 2012, but can markets continue to climb? Certainly the worries remain. The most immediate has to do with the spending side of the fiscal cliff. The cliff deal made permanent the Bush tax cuts for all but high-income taxpayers but it did not address spending. So while the worst case of the cliff was avoided, the work is not nearly done. In this commentary we discuss our current assessment of the investment environment including a detailed look at what could go right, and tie it all back to our portfolio positioning.
2013-01-18 2013 International Outlook by Colin Moore of Columbia Management
We continue our outlook for 2013 with a review of select international economies and financial markets. Similar to the U.S. the road to recovery will be bumpy and we expect financial markets to continue being affected by macroeconomic uncertainties. While the overall environment remains uncertain, some of the significant headwinds in 2012, e.g. the Chinese leadership transition and a complete disintegration of the eurozone, are perhaps less concerning for markets than they were a year ago.
2013-01-18 Equity Investment Outlook January 2013 by Team of Osterweis Capital Management
Despite many headwinds and amid great uncertainty, both the U.S. economy and stock market enjoyed a rather good year in 2012. Real Gross Domestic Product ("GDP") grew around 2%, and the stock market, as measured by the S&P 500 Index, returned 16%. At the risk of sounding complacent, we believe that the fundamental trends that produced such favorable results in 2012 are still in place and should support another good year in 2013.
2013-01-18 Are Central Banks Easing Off Prematurely? by Team of Northern Trust
Are central banks easing off prematurely? Washington is girding for another budget imbroglio; Inflation is contained, for now.
2013-01-18 4 Sensational Facts About Gold Investing That You Might Not Know by Frank Holmes of U.S. Global Investors
1. Gold has been a consistent performer over the decades. 2. Gold should remain a hot commodity in 2013. 3. Gold is the least volatile commodity on the table. 4. The last four years were better than you thought.
2013-01-17 International Equity Commentary December 2012 by Team of Thomas White International
International equity prices made robust gains in December, as further improvement in economic trends across most regions lifted the outlook for 2013. Policymakers in the U.S. managed to put together an agreement at the last minute and averted the 'fiscal cliff', one of the major risks that had restricted investor sentiment during earlier months. In Europe, though economic signals remain largely weak, the further fall in bond yields of the troubled countries has helped sustain optimism about resolving the region's fiscal crisis this year.
2013-01-17 Rehab: An Update on Housing Recovery by Liz Ann Sonders of Charles Schwab
The National Association of Home Builders' Housing Market Index has staged a record-breaking run higher. Home prices have been rising and are feeding into real mortgage rates, consumer confidence, household net worth...and pushing fence-sitters off the fence. Housing's contribution to job growth could push the unemployment rate down more quickly than many believe.
2013-01-17 End of An Era: 30 Years of Double-Digit Chinese Growth by Bryce Fegley of Saturna Capital
Slumping exports, lackluster domestic consumption, and slowing urban migration contribute to lower growth expectations for China. With Chinese manufacturing capacity now saturated relative to global demand, and developed economies facing the consequences of over-indebtedness, external tailwinds to China's growth have passed.
2013-01-16 The Rise of Asia's REITs by Sherwood Zhang of Matthews Asia
Real estate investment trusts (REITs) in Asia are following in the footsteps of their U.S. counterparts as they become an increasingly important asset class attracting investors looking to gain exposure to a diversified pool of real assets and relatively high yields. In the past decade, REITs have become a growing force in the regions investment universe. This month Sherwood Zhang, CFA, takes a look at just how far Asia's REIT markets have come, and what new opportunities as well as risks may still exist.
2013-01-16 3 Reasons the Stock Market Rally Could Falter by Russ Koesterich of iShares Blog
Enjoy the US stock market rally while it lasts. Russ Koesterich has three reasons why investors should remain cautious in the near term.
2013-01-15 Gundlach’s Predictions for 2013 by Robert Huebscher (Article)
Don't expect the low volatility that characterized the capital markets in 2012 to continue. Global economic uncertainty remains, and markets are poised like a 'coiled snake' to reward or penalize investors in certain asset classes, according to Jeffrey Gundlach.
2013-01-15 Template for a Year-End Client Letter 2012 in Review: Learning from the Past, Looking to the Future by Dan Richards (Article)
Client concerns about whether you're on top of things can be reduced by sending regular overviews of what's happened in the immediate past and the outlook for the period ahead. That's why each year since 2008, I have posted templates to serve as a starting point for advisors looking to send clients an overview of the year that just ended and the outlook for the period ahead.
2013-01-15 Forecast 2013: Unsustainability and Transition by John Mauldin of Millennium Wave Advisors
As we begin a new year, we again indulge ourselves in the annual rite of forecasting the year ahead. This year I want to look out a little further than just one year in order to think about the changes that are soon going to be forced on the developed world. We are all going to have to make a very agile adaptation to a new economic environment (and it is one that I will welcome). The transition will offer both crisis and loss for those mired in the current system, which must evolve or perish, and opportunity for those who can see the necessity for change and take advantage of the evolution.
2013-01-15 Are Investors Buying into the Equity Story? by Chris Maxey, Ryan Davis of Fortigent
Last week we discussed the debate over active versus passive management. We believe active managers can add tremendous value in particular segments of the market, despite recent challenges. Outside of the active management discussion, many investors are deciding whether equities are a prudent place to allocate capital at this point in the market cycle. The first week of the year answered investors' opinions on that question loud and clear.
2013-01-15 New Year's Vantage Point: Christopher Molumphy by Christopher Molumphy of Franklin Templeton Investments
For a view on the U.S. and global fixed income market and potential opportunities therein, we turn to Christopher Molumphy, CFA, chief investment officer of Franklin Templeton Fixed Income Group.
2013-01-15 It's Not What Happens That Matters by Bill Smead of Smead Capital Management
Late in 2008 and in early 2009, a group of what we like to call "brilliant pessimists" hit the airwaves with their economic theories. The prognosticators' vision of the future was and is predicated on the history of similar situations and the mathematical realities of the huge debt overhang from the prior ten years of profligate economic behavior. They put very effective names on their visions like "new normal" and "seven lean years". They marketed their visions incredibly well to the point of shaming anyone who might disagree with their theories.
2013-01-15 Emerging Markets Equity Commentary: December 2012 by Team of Thomas White International
Emerging market equities outperformed during the month of December, helped by signs of further improvement in the economic growth outlook. Economic data released over the month were largely positive for most emerging countries, and strengthened the optimism that these markets could see a moderate improvement in growth rates during 2013.
2013-01-15 From Cliff to Ceiling! by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
When it was all said and done not much happened in the final quarter of 2012. Anxiety picked up immediately after the election as the bickering over the fiscal cliff escalated. In the end, the worst-case scenario was avoided at least for a couple of months and stocks ended about where they began the quarter.
2013-01-14 And That's the Week That Was by Ron Brounes of Brounes & Associates
Finally, a week not totally dominated by "fiscal cliff" discussions (though politicos now have their hands full with a gun control debate...what are the chances of compromise there?). Alcoa kicked off earnings season as usual and the early results lend credence to the thought that China will again be relied upon to lead any global recovery. Major banks announced major settlements as they continued to try to close the (negative) books on the financial crisis. Oil rose on Saudi production cuts.
2013-01-14 The More Things Change... by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
One crisis averted...another one on the way? Of course, but we're still positive on the US economy and stock market.
2013-01-14 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
While the S&P 500 Index posted a slightly negative fourth-quarter return, the Index's 16.0% return for all of 2012 was notable in the face of a long list of global fundamental concerns. Midcap and small cap stocks performed better during the final three months of the year, posting gains of roughly 2.0%-3.0%. The fourth quarter outperformance of smaller stocks was enough to overtake the S&P 500 for the year, but just fractionally.
2013-01-14 Population Trends, The Labor Force and a Look at the Muni Index by Gregg Bienstock of Lumesis
We start this week with a look at the DIVER Muni Index and then jump into a discussion about population trends, employment and wages. If you get no further than this opening, the short of it is that you really need to look closely at the data and where things are getting better really and where things are perceived to be better. This is especially so as some pundits suggest the higher tax rate on the wealthy will be beneficial to muni-land as more wealthy people seek to offset the increased tax burden.
2013-01-14 Crosscurrents and Contradictions: Which Way Will Municipal Bonds Go? by Tom Dalpiaz of Advisors Asset Management
The two possible scenarios outlined are quite different with very different outcomes for municipal bonds, and that is what makes any 2013 municipal bond outlooks difficult to offer with certainty. Scenario 1 will likely have a relatively benign impact on municipal bond values while the impact of Scenario 2 will be more negative. Of course, the possibilities municipal bond investors will face this year include more than just the two stark contrasts presented above.
2013-01-11 Thanks, Everybody...We'll be Right Back! by Colin Moore of Columbia Management
The Washington Comedy Club has taken a brief intermission and will be back in session shortly to resume the show. Please enjoy the facilities of this great country, free of charge, while you wait. Ignore the "Nero" character in the far corner playing the fiddle. Apparently, he isn't part of the show. Economic uncertainty emanating from fears of the U.S. fiscal cliff has been deferred but not avoided.
2013-01-11 Special Edition: The Outlook for 2013 by Team of Northern Trust
At this time of the year we typically get warm and generous wishes for the New Year and, of course, numerous questions about what our crystal ball has in store for 2013. While many economists publish their perspectives prior to January 1, we opted to wait in the hope of having a clear fiscal picture for the United States. A lot of good that did us...
2013-01-11 Invest In Equities: Your Future Self May Thank You by Frank Holmes of U.S. Global Investors
Investors have had an illusion about the stock market since the financial crisis. With the barrage of negative headlines and abhorrence toward risk, investors seemed to feel that equities would not improve going forward. This turned out to be a mistaken belief.
2013-01-10 Market Perspectives Q4 2012: Politics vs. Economics by Richard Michaud of New Frontier Advisors
The major news of the quarter was that a fiscal cliff deal passed in the final hours of the 112th Congress and was signed by President Obama. The deal averts tax increases on most Americans and prevents large indiscriminate cuts in spending in many government programs. It also averted, by nearly universal consensus among macroeconomists, tipping the American economy into recession with attendant global implications.
2013-01-10 Things Can Only Get Better by Bill Smead of Smead Capital Management
As long-duration common stock owners, we at Smead Capital Management don't put much emphasis on predicting the year-to-year movements in the stock market. We expect at least a 10 percent or greater decline during each year and a greater than 20 percent decline at least once every five years. With that caveat in place, we will throw our two cents into the debate about what the US stock market will do in 2013.
2013-01-10 Inflation Propaganda Exposed by Peter Schiff of Euro Pacific Capital
Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism.
2013-01-09 Financial Markets Review and Outlook: Fourth Quarter 2012 by Team of Managers Investment Group
As expected the fourth quarter economic landscape was dominated by the U.S. Presidential and Congressional elections and their collective impact on the fiscal cliff. After the elections were completed, markets nervously awaited the outcome of the fiscal cliff negotiations as economists generally predicted dire consequences for the U.S. economy in 2013 if a timely resolution was not reached by the end of the year.
2013-01-09 Ten Acts for Chairman Bernanke in January 2013 by Tony Crescenzi of PIMCO
Federal Reserve Chairman Ben Bernankes term ends in January 2014, and it is unclear whether he will stay on for another. We expect Bernanke will muster every means he can over the next year to help the U.S. and indeed the world emerge from a gloomy time.Here, then, are 10 items we suggest for Ben Bernankes to-do list in 2013.
2013-01-08 Letter to the Editor by Various (Article)
A reader responds to our interview, Jeremy Siegel on 'Dow 15,000,' which was published on December 18.
2013-01-08 Why China Won't Crack by Milton Ezrati of Lord Abbett
For the world's second largest economy, a hard landing scenario looks increasingly remote.
2013-01-08 Early 2013 Looks to Feature Slow Growth and Ongoing Fiscal Drama by Russ Koesterich of BlackRock Investment Management
Stock markets started 2013 off with a bang, as investors expressed relief over the down-to-the-wire agreement on the fiscal cliff that came on January 1. For the week, the Dow Jones industrial average jumped 3.8% to 13,435, the S&P 500 index rose 4.6% to 1,466 and the Nasdaq composite advanced 4.8% to 3,101. Although the deal reached last week was good news for the markets, Washington's fiscal soap opera is far from over.
Although the deal reached last week was good news for the markets, Washingtons fiscal soap opera is far from over.
2013-01-08 Another Lost Year for Active Management by Chris Maxey, Ryan Davis of Fortigent
There is no doubt that 2012 will be remembered by many investors, for reasons both good and otherwise. One group less likely to remember the good of 2012 is active managers. Across the universe of hedge funds and mutual funds, relatively few were able to outperform their comparative benchmarks. This continues a long running trend of active managers lagging their less active counterparts and raises many questions about the efficacy of active management.
2013-01-07 Fiscal Cliff: No Grand Bargain, But Enough for Now by Joanna Shatney of Schroders Investment Management
Although the best case scenario is off the table, US markets are breathing a sigh of relief that the tax cliff has been averted at least for a few more months. The final package holds enough for both the bears given that we will have to revisit the fiscal worries in the next few months and for the bulls who believe that the near-term risks have been pushed aside.
2013-01-07 Fixed Income Asset Allocation Post-Apocalypse by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
December 21, 2012 the day the Earth was prophesized to collide with a black hole of kaputness has come and gone in defiance of the Mayan calendar. The more upbeat interpretation of the 5,125-year Mayan cycle, however, is that the end date doesn't signify Armageddon but rather the beginning of a new time for positive change here on earth. So allow us to suggest an investment playbook to cash in on this silver lining. In short, the sweetness of the metaphorical fortune cookie in your hand will depend on how you allocate your fixed income assets in 2013.
2013-01-07 Restricted Room for Higher Rates by Scott Minerd of Guggenheim Partners
Interest rates should rise through 2013, however, the level to which they can increase will be limited by the Federal Reserve's ongoing attempt to stimulate activity in the housing market.
2013-01-07 Jobless Claims, a Surprising Result, Philly Fed and Ambr by Gregg Bienstock of Lumesis
This week we provide some thoughts on the recent Cliff deal and plunge into some surprising data regarding jobless claims. We conclude with a look at the Philly Feds Leading Index.
2013-01-07 White Noise? by Jeffrey Saut of Raymond James
"Investing in the financial markets necessarily involves one's ability to change perspectives over time... And there's more of the white noise than ever before."... The Contrary Investor.com. So said the Contrary Investor; and I could not agree more given my sense that the media remains "long" volatility. Indeed, every time volatility increases, so do my phone calls from the financial media as they feel "compelled to come up with rationales for daily movements in asset prices;" last week was no exception.
2013-01-07 Investments That May Keep Me Up at Night in 2013 by Charles Lieberman of Advisors Capital Management
The outlook for 2013 is quite improved compared with 2012. Domestic economic growth prospects are significantly less troublesome. The election is over. Europe has (painfully) slowly made progress in reducing its own budget problems. It is not all clear sailing, however. (It never is.) Europe remains a work in progress. All of the geopolitical risks of 2012, notably North Korea, Iran, and all of the rest of the Middle East, remain on the docket in 2013. And the battle over the U.S. budget will resume in the near future.
2013-01-07 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market has started the New Year in fine shape, relieved that President Obama's threat to raise taxes to the moon on capital gains and dividends were thwarted with the deal agreed to on New Year's Day.
2013-01-06 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to a new beginning, a new yeara new optimistic investor, a new bipartisan Congress, (well, maybe not). The more things change, the more they stay the same. While investors embraced the budget deal (that is less of a deal than a procrastination), the pragmatists realize that very little has changed other than the "fiscal can" has been kicked down the road for two months. Stocks skyrocketed; bonds plunged; politicos bickered. Welcome to 2013.
2013-01-04 In 2013, Resolve to Follow the Money by Frank Holmes of U.S. Global Investors
During these first days of January, many adopt an out with the old, in with the new, approach to shed bad habits or extra pounds. Washington opted for its same ol strategy when averting the fiscal cliff, as the addictive nature of can-kicking is a transatlantic sport, according to The Economist. The short-term fix did nothing to control the unsustainable path of entitlement spending on pensions and health care nothing to rationalize Americas hideously complex and distorted tax code... and virtually nothing to close Americas big structural budget deficit.
2013-01-03 Beyond the Fiscal Cliff by Richard Bernstein of Richard Bernstein Advisors
Politicians love the spotlight, but it is very unfortunate that investors watch the show. The drama of the so-called "fiscal cliff" has scared investors, and led them to miss a very good year in the equity market (the S&P 500's total return was 16.0% during 2012 versus the long-term annual average of 11.8%). It appears as though Washington wants to continue to dominate the headlines, which means that it may be more important than ever for investors to downplay Washington's theatrics.
2013-01-03 ProVise Bullets by Ray Ferrara of ProVise Management Group
HAPPY NEW YEAR EVERYONE!We don't know what you did on Monday night to ring in 2013, but the U.S. Senate was in session as they were attempting to avoid the so-called "fiscal cliff".At 2:07 a.m. on New Year's Day the Senate passed a bill, 89 to 8, which does a number of different things.Then late that same morning, the House also passed the bill.We are going to touch on a few of the highlights in this opening Bullet and promise to give a more detailed analysis in our mid-month Bullets.
2013-01-03 Treasury's Last Pillar Crumbles by Peter Schiff of Euro Pacific Precious Metals
With the return of Shinzo Abe and his Liberal Democratic Party to power in Japan, the market for US Treasuries may be losing its last external pillar of support. Re-elected on September 26th, Abe has quickly set a course for limitless inflation, saying Japan must "free itself from deflation and the strong yen." This is significant to the global economy as Japan is the largest foreign power left with a strong appetite for US Treasuries. If this demand falters, the Fed may be the only remaining buyer of new Treasury issuance.
2013-01-03 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).
2013-01-03 Outlook 2013: Fiscal Cliff Remains Unresolved, but Opportunities Still Exist by Russ Koesterich of BlackRock Investment Management
As we look ahead to 2013, it is impossible to make any sort of forecast without first turning our attention to the still-unresolved fiscal cliff debate. We have long said that unless we were to see significant movement on the issues of tax rates and entitlement spending, the most likely outcome would be some sort of bare-bones deal. At the time of this writing, congress and the President were still negotiating, but our analysis suggests that such a bare-bones resolution remains the most probable result, even if it does not come before the January 1 deadline.
2013-01-03 2013 Forecast: Good Economy, Challenged Markets by Douglas Cote, Karyn Cavanaugh of ING Investment Management
We enter 2013 bombarded by conflicting signals. While fundamentals have been mixed of late, longer-term themes our "tectonic shifts" like the energy revolution are gaining momentum and promising to make positive contributions sooner rather than later. And while salutary measures taken by policymakers have eased global risks and lessened fears of Armageddon, there is considerable work yet to be done.
2013-01-03 And That's the Quarter that Was by Ron Brounes of Brounes & Associates
Politics ruled the day over the past three months (and beyond) and unfortunately the trend may very well continue as the averted "fiscal cliff" was merely postponed for another two months. For now, investors are happy, but what will tomorrow bring? (That's a question for you, Prez Obama and Speaker Boehner.) Happy New Year
2013-01-03 Taking Care of Business, DC-Style, to Avert the Fiscal Cliff by Liz Ann Sonders of Charles Schwab
No "grand bargain," but Congress got a deal done at the 13th hour to avert the fiscal cliff. The next two months will bring more DC wrangling and likely market angst, but we believe the outlook has brightened for the economy and market in 2013. The "wall of worry" is alive and well.
2013-01-02 Brian McMahon on Thornburg’s Investment Income Builder Fund by Robert Huebscher (Article)
Brian McMahon is the chief executive officer and chief investment officer for Thornburg Investment Management, where he the co-portfolio manager for the $11.4 billion Thornburg Investment Income Builder Fund (TIBAX). The fund's goal is income production, and it has outperformed its benchmark, the Morningstar Moderate Target Risk, over the last ten years (10.87% versus 2.88%). In this interview, he offers his views on the economy and the markets, and how he has positioned his fund.
2013-01-02 Somewhere Over the Rainbow by John Mauldin of Millennium Wave Advisors
We are 13 years into a secular bear market in the United States. The Nasdaq is still down 40% from its high, and the Dow and S&P 500 are essentially flat. European and Japanese equities have generally fared worse. The average secular bear market in the US has been about 11 years, with the shortest to date being four years and the longest 20. Are we at the beginning of a new bull market or another seven years of famine? What sorts of returns should we expect over the coming years from US equities?
2013-01-02 Deal or No Deal? Assessing a Bare Bones Fiscal Plan by Russ Koesterich of iShares Blog
A grand bargain in fiscal cliff negotiations remains elusive, but a bare bones deal seems likely. Russ K explains what that means for the economy and investors.
2012-12-31 And That's the Week That Was by Ron Brounes of Brounes & Associates
Welcome to the end of 2012. Investors are hardly basking in the glow of a positive year for stocks. They are less than enthusiastic about the recovery in housing. They seem to be overlooking the actions of the Fed and the implications for the indefinite low rate environment. Two words remain firmly entrenched in the minds. FISCAL CLIFF. What say you (besides bickering and backstabbing)Prez O, Speaker Boehner, Senators McConnell and Reid? Time is running out and five straight down days proves that investors are growing more and more nervous. Happy New Year (I think).
2012-12-28 Readers' Golden Nuggets Focused on Gold, Resources and Overcoming Negativity by Frank Holmes of U.S. Global Investors
The past few days Ive been counting down the most popular commentaries over the past year. China, commodities and bond fund popularity were big hits; so were the Surprises in Gasoline, Oil and Resources Stock Prices. Here are the top four.
2012-12-26 Gundlach's High-Conviction Investment Idea by Robert Huebscher (Article)
Count Jeffrey Gundlach among those who expect Japan's currency to collapse because it can't service its debt. Japan's challenges may parallel those that the US faces, and Gundlach feels strongly that they have created a compelling investment opportunity.
2012-12-24 And That's the Week That Was by Ron Brounes of Brounes & Associates
Down to the homestretch. While investors generally spend the last few days of the year window-dressing and setting positions for the next, this year they face the added uncertainties of the "fiscal cliff" and the negative implications for the economy. Though the data of the week seemed positive and reflective of "solid" (too strong?) growth, the budgetary matters and inability of our "best and brightest" to work together do not bode well. So much for Plan B. Perhaps a late year holiday gift is still in order?
2012-12-21 ECRI Update: The Recession Call Is Further Undermined by Doug Short of Advisor Perspectives (dshort.com)
TheWeekly Leading Index(WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the latest public data. It is now at 127.2 versus the previous week's 127.4. However, the WLI annualized growth indicator (WLIg) rose, now at 4.6, up from last week's 3.9. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.
2012-12-21 Light at the End of the Tunnel for Gold by Frank Holmes of U.S. Global Investors
Intuition was telling me something was going on these past few days in the gold market. Our investment team was watching gold and gold stocks take a tumble for no obvious reason. It wasnt only us who felt this way: many analysts were caught off-guard. One comment from Barclays Research indicated that the week was unusually brutal with quite a few confused participants with some seemingly positive aspects of the market not having an impact.
2012-12-20 Don't Confuse Market Hiccups for Economic Heart Attacks by Matt Lloyd of Advisors Asset Management
The daily bombardment of moving toward an agreement on the fiscal cliff only to see a hesitation on the advancement is symptomatic of the tango that we have been bombarded with over the last several years. It does appear though that we are becoming a bit desensitized to the two-steps forward to two-steps back pattern we have been accustomed to in similar debt ceiling deadlines or budgetary standoffs. In looking at the markets move and comparing statements from the two parties involved, it does appear we are at least in the same ball field for negotiations.
2012-12-20 The Limits of Monetary Policy by Scott Minerd of Guggenheim Partners
With unemployment levels remaining stubbornly elevated, investors should not expect a reversal of quantitative easing by the Federal Reserve in 2013.
2012-12-19 Imagine...a Better Future by Liz Ann Sonders of Charles Schwab
After a weekend of sadness and reflection, I wanted to write something more optimistic we'll go back to the future to learn and unlearn.
2012-12-19 ING Fixed Income Perspectives December 2012 by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
While all the good little boys and Cindy Lou Whos dream of sugar plums and new iPhone 5s in blue, the adults in our modern-day Christmas story can't sleep but a wink, as visions of getting Scrooge'd by the fiscal cliff are making hearts sink. No matter if this political humbug cease or persist, down the chimneys of a recuperating housing market Ol' Saint Bernanke-olas will continue to gift $85 billion of Treasury and MBS purchases per month or more until the labor market can finally get over the hump and deliver 6.5% unemployment and inflation of 2.5% and no more.
2012-12-18 Jeremy Siegel on 'Dow 15,000' by Robert Huebscher (Article)
Jeremy Siegel was one of very few individuals to have correctly predicted the strong performance of the equity markets over the last year. The Wharton professor and author of the renowned book, Stocks for the Long Run, forecasts continued strong performance for the year ahead.
2012-12-18 Three Takeaways from the Fed by David Rosenberg (Article)
The equity market likes the prospect of more money printing and the Fed's more forceful efforts to reflate the economy, and stocks are a far better inflation hedge than bonds.
2012-12-18 Better Angels by Michael Lewitt (Article)
If all else fails, President Obama should lock the members of Congress inside the Capital about a week before Christmas, post the military at the door, hang big-screen television in each chamber, tune them to CNBC, and turn up the volume up. Faced with listening to endless repetitions of the words "rising above" or "fiscal cliff" or "kick the can down the road," our legislators will have no trouble reaching a compromise quickly.
2012-12-18 The Case for Conservative Optimism by Clark M. Blackman II (Article)
Advisors should heed the wisdom from George Washington: Troubles pass. Tomorrow will be better. This kind of optimism is the key to finding success as an investor, as a businessperson, and in life.
2012-12-18 What's Going Right? by Chris Maxey, Ryan Davis of Fortigent
Discussions of the fiscal cliff are capturing investor's attention, largely at the expense of trends pointing in the right direction. Year-end is synonymous with future prognostications, but current indicators suggest there is reason to be optimistic about the turn of the calendar this holiday season.
2012-12-18 The Fed's Giant Stride by Christian Thwaites of Sentinel Investments
FOMC: The news from this meeting was widely telegraphed (see Yellen, Evans, etc. last month) but produced some real and welcome developments. Here's the quick summary.
2012-12-17 And That's the Week That Was by Ron Brounes of Brounes & Associates
Time for some year-end window dressing (before investments fall off the fiscal cliff). With little to no progress to report on the budget, politicos continue trying to earn brownie points at home, while losing them in the press. Investors still seem to believe a deal will be reached, but with the holidays (and vacations) approaching, time is really of the essence. Retailers and manufacturers rebounded in November from superstorm Sandy, but the cliff still looms as a definite possibility.
2012-12-17 Fed Talks Louder, To Little Avail by Brian Wesbury, Bob Stein of First Trust Advisors
When someone doesn't speak your language, yet you must communicate, funny things can happen. At first, most just talk normally, hoping the message somehow gets through with a hand gesture or two. If that doesn't work, some people start talking really slowly. And if all else fails, how about saying it REALLY LOUDLY, and emphatically, to finally get our point across. That's where the Federal Reserve is today. In its own collective mind, it has a very important message to convey: that monetary policy is going to be as expansionary as necessary to get this economic recovery off the ground.
2012-12-17 I'm Dreaming of a Green Christmas by Jeffrey Saut of Raymond James
While last week, and this week, often see distortions in individual stock prices due to tax loss selling, Santa Claus tends to arrive the following week. Indeed, the last week of the year, into the first two days of January, has a pretty good track record on the upside with a rally coming about 65% of the time. As stated in previous missives, I expect the same Santa rally this year driven by a "staged in" solution to the fiscal cliff. Most readers know that I have lived in the D.C. Beltway and have a good working knowledge of how our system works.
2012-12-17 Fiscal Cliff Deadlines Draw Near by Russ Koesterich of BlackRock Investment Management
In addition to the seemingly never-ending focus on the fiscal cliff, markets turned their attention to last week's Federal reserve meeting and the corresponding announcement of the central bank's continuation of its bond-purchase program. Following a very brief rally after the announcement, however, stock prices fell and ended the week marginally lower. For the week, the Dow Jones industrial average declined 0.2% to 13,135, the S&P 500 index fell 0.3% to 1,413 and the NASDAQ composite dropped 0.2% to 2,971.
2012-12-15 Looking Back to Look Ahead by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Markets have been more focused on short-term forces; not least being Washington and the fiscal cliff negotiations. But taking a step back and gaining some longer-term perspective can help investors better weather short-term volatility. Even beyond the fiscal cliff, Washington and fiscal policy will likely remain in focus next year. Monetary policy is also front-and-center with the Fed maintaining its extremely accommodative policy and targeting specific economic conditions instead of providing calendar guidance. Europe managed to make it through the year, but challenges and risks remain.
2012-12-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
So help us understandwhere did 2012 go? While we know time really fly, it sure feels like it does when we think that 12 months have almost passed. We want to wish you and your family the happiest of holidays! Please remember the women and men serving in our Armed Forces, especially those overseas.
2012-12-15 Saving for Retirement Stage 2: The Sandwich Generation by Team of Franklin Templeton
Youve probably heard of the term sandwich generation, a time at mid-life when many individuals find themselves caring simultaneously for their children and their aging parents. Its a time when investment dollars can get squeezed out by day-to-day and unexpected expenses, a mortgage and possibly even a college savings plan. In this second of our three-part Investing for Retirement series, we take a look at some retirement savings strategies for individuals coping with these mid-life challenges as they themselves begin to look toward transitioning into retirement.
2012-12-14 2013: A Year in Global Equities by Virginie Maisonneuve of Schroders Investment Management
Global equities are very attractively valued and we are positive for their prospects in 2013 as the global economy normalises. Progress in Europe, the end of China's growth slowdown and continued momentum in the US economic recovery will support global equities. Longer-term investors must position themselves for a growth-saturated world in which sustainability and innovation will be even more important.
2012-12-14 ECRI Weekly Update: Walking the Recession Plank by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose in the latest public data to its highest level since early August of 2011. It is now at 127.7, up from a downwardly revised 126.7 in the previous week. See the WLI chart. The WLI annualized growth indicator (WLIg) also rose, now at 4.4 from last week's 3.5. WLIg has been in expansion territory since August 24th, although it is off its high at 6.0 on October 12th.
2012-12-14 No Way Out by Peter Schiff of Euro Pacific Capital
By upping the ante once again in its gamble to revive the lethargic economy through monetary action, the Federal Reserve's Open Market Committee is now compelling the rest of us to buy into a game that we may not be able to afford. At his press conference this week, Fed Chairman Bernanke explained how the easiest policy stance in Fed history has just gotten that much easier. First it gave us zero interest rates, then QEs I and II, Operation Twist, and finally "unlimited" QE3.
2012-12-14 Fiscal Friction is Taking a Toll on Confidence in Washington and Rome by Carl Tannenbaum of Northern Trust
Fiscal friction is taking a toll on confidence in Washington and Rome. What inflation rate should be used to index entitlements? Our updated US forecast assumes a budget resolution before year end.
2012-12-13 Rescuing the Bond Deer from the Bond Bear by Mike Temple of Pioneer Investments
It's the season to talk about the man who delivers presents. No, not Santa Claus, but Fed Chairman Bernanke who has been delivering the green stuff for the past four years in a helicopter, not a sleigh... My last installment introduced the Fixed Income Bond Deer the investor caught in the headlights confused about what to do. This week we contemplate the following: should "Bond Deer" be grateful for the green stuff or frightened by the possibility that it is fueling the next bond "bear" market? The answer: it depends on how long this experiment continues.
2012-12-13 Conditional: Fed Drops 2015 in Favor of 6.5% and 2.5%185 by Liz Ann Sonders of Charles Schwab
The Fed announced it's adding $45 billion in US Treasury purchases to QE3s $40 billion in MBS purchases and moving to economic versus calendar targets.
2012-12-13 The Fake Economy by Bill Mann of Motley Fool Funds
A random question for you (one that contemplates your breaking federal law, so be forewarned): Given enough time and ample resources, do you think you could create a reasonable facsimile of a $20 bill? I'd wager that given modern printing capabilities, a reasonably diligent and determined individual could create a fool-some-of-the-people copy of a $20 bill.
2012-12-13 Pacific Basin Market Overview - November 2012 by Team of Nomura Asset Management
Asian equity markets ended higher this month, although they were heavily influenced by events elsewhere. Improved economic data from Germany, coupled with expectations that Greece will receive a further round of financial support from the European Union (EU), helped to lift sentiment. Meanwhile, investors were paying close attention to the American congressional budget negotiations to avoid the looming year-end "fiscal cliff" risk to the economy, although U.S. economic data was generally positive.
2012-12-12 Does China Pass the Smell Test? by Bill Smead of Smead Capital Management
We at Smead Capital Management believe that prolonged faith in China's economy and the belief that emerging market growth will be an elixir for developed market multi-national companies is the erroneous gift that just keeps giving. If China's economy has been successfully soft landed from its boom, why is the internal Shanghai Composite index making new lows as recently as last week (November 29th, 2012)?
2012-12-12 To QE Infinity, and Beyond! by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve made two big changes today, but changes that were mostly anticipated by the markets.
2012-12-11 Tax Reform: A First Step by Clyde Kendzierski of Financial Solutions Group
I rarely use this space to rant about political issues, but the recent election made it obvious just how dysfunctional the American political process has become. The ongoing financial crisis in the US will never get fixed as long as both political parties remain focused on solutions that make the problem worse. The Democrats want to give people more money to spend, claiming this will grow the economy. The Republicans want to cut taxes, so that people have more to spend, claiming that will grow the economy
2012-12-11 Fiscal Cliff-Hanger by Scott Brown of Raymond James
The recent economic data are consistent with a moderate pace of growth in the near term. The manufacturing sector is mixed, but generally weak, reflecting a global slowdown and an inventory correction. The consumer appears to be hanging in there. The Bureau of Labor Statistics said that Hurricane Sandy did not have a significant impact on the November employment data. However, other economic indicators did reflect weather-related disruptions, which appear to have been only temporary. Meanwhile, the economy heads toward the fiscal cliff.
2012-12-11 PIMCO Cyclical Outlook: At Policy Crossroads by Saumil Parikh of PIMCO
The maturation of the global cyclical growth phase suggests we look to a handoff to more secular drivers of growth. But strong secular drivers remain elusive due to the continuation of New Normal headwinds.Policies are at important crossroads in every major economy. 2013 will be the year of policy change, with policymakers in major economies challenged to enact structural changes that spur private sector growth before government-balance-sheet-led growth is exhausted.
2012-12-10 Food, Water, Electricity & Shelter by John Petrides of Advisors Capital Management
As investors continue to grapple with near term, well documented, uncertainties surrounding the fiscal cliff and global economy, the market continues to present some interesting long term investment opportunities, particularly in our Growth strategy.
2012-12-10 13 for '13 by Richard Bernstein of Richard Bernstein Advisors
Each December we publish a list of investment themes that we feel are critical to the coming year. We continue to believe that US equities are in the midst of a major bull market that could ultimately rival 1982's bull market. It is hard to be bearish when one considers the following.
2012-12-10 Have the New Paper Clips Arrived, Enid? by Christian Thwaites of Sentinel Investments
If there's one economic stat that spans the economic/political spectrum, it's jobs. Last week's NFPs had a headline of 146,000, way above estimates, and an unemployment rate of 7.7%, the best since December 2008 and a comfortable one point below a year ago.
2012-12-10 Property Taxes Paid, More on Housing and A "Quote of the Week" by Team of Lumesis
This week we will take a look at property tax data released this week, housing-related data and the possible impact of the same. Before doing so, a reminder from last week, a brief word on the deficit reduction talks (notice we did not use the "C" word) and a quote worth considering.
2012-12-10 Is QE4 Really Coming? by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve meets this week. Analysts are supposing and predicting what the statement will say and if the Fed will change its economic projections.
2012-12-08 How Gold Miners Can Leverage the Price of Gold by Frank Holmes of U.S. Global Investors
Gazing into their crystal balls this week, Wall Street firms interpreted differing futures for gold next year. Morgan Stanley awarded gold the best commodity for 2013 while Goldman Sachs called the end of the metals hot streak. After seeing 11 consecutive years of positive performance from gold, one needs to be wary of research analysts price forecasts, as they have consistently underestimated the shifting dynamics driving the precious metal higher.
2012-12-08 Weekly Economic Commentary by Team of Northern Trust
What are the margins of monetary policy? The November job report showed only modest improvement. Japan continues to struggle, with a change of government on the horizon.
2012-12-07 ECRI Weekly Update: More Recession Flag Waving by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data. It is now at 126.8, up from an upwardly revised 126.2 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) also rose, now at 3.5 from last week's 3.4. WLIg has been in expansion territory since August 24th, althout it is off its high at 6.0 on October 12th.
2012-12-06 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Now that the election is over, and the markets are oversold, the Mideast is again volatile, and the fiscal cliff is fast approaching, most market concern rests with whos going to be the first one in the pool? Interestingly, although the stars are aligned once again to make money in the equities markets, it is still a psychological, not financial, component that governs peoples capital deployment considerations.
2012-12-06 From a Fiscal Cliff to a Fiscal Speed Bump by Scott Minerd of Guggenheim Partners
More granular analysis of the line items in the fiscal cliff tells a less harrowing story than what Congress and the media are presenting. The official projections are showing scary numbers for the fiscal cliff, but when we dig into the details we see that the real impact will likely be materially less significant. According to the Congressional Budget Office, the fiscal cliff adds up to a total increase in tax revenue of $631 billion, which is approximately 4% of GDP. Going through the report line by line tells a different story.
2012-12-06 Questions and Answers Surrounding the Fiscal Cliff by Team of Northern Trust
There is no resolution yet to the US fiscal cliff. It is probably unfair to have expected one by now; the clock is too far from midnight. But as the negotiations continue, several questions have been raised that deserve some reflection. 1. The two sides seem to be making statements that reflect stark disagreement. Are talks failing? 2. Is our fiscal path a cliff, or a slope? 3. There is a proposal to limit the deductions claimed by high income taxpayers. How would these work, and what are the consequences? 4. The cliff has been in the news for a long time. Why isnt everyone prepared for it?
2012-12-05 Market at Mercy of Fiscal Cliff Until Resolution by Liz Ann Sonders of Charles Schwab
Politics and the fiscal cliff are dominating market action and adding to the uncertainty factor.
Sentiment is better, technicals are mixed and valuation is reasonable, but until we get past the cliff, fundamentals won't matter a lot.
There are some coiled springs forming that could help offset any fiscal-cliff related contraction next year.
2012-12-05 Waiting for Signs on the Fiscal Cliff and From the Fed by Russ Koesterich of iShares Blog
Investors are stuck between a rock and a hard place: Theyre trying to plan for the end of 2012, while also looking ahead to 2013. Its being reflected in the questions Im getting from clients right now, who are worried both about the fiscal cliff and the outlook for interest rates in 2013. As we saw last week, the markets are focused on every utterance out of Washington on the fiscal cliff. For better or worse, this is unlikely to change until we have a deal. And in terms of getting to one, the truth is we did not see much progress last week.
2012-12-05 Argentinas Trials & Trubulations by Chris Maxey and Ryan Davis of Fortigent
Equity markets climbed higher for a second straight week, extending a rally that began November 16. For the week, the S&P 500 rose 0.6% and the Dow Jones Industrial Average gained 0.2%. In the post-mortem on Q3 earnings season, much has been made of the first quarter of negative earnings growth in three years. However, analysis by Morgan Stanley reveals an even more disturbing picture of corporate America: just 10 companies in the S&P 500 delivered 88% of the indexs earnings growth. Of those 10, four accounted for more than half and Apple alone made up nearly one-fifth of the indexs growth.
2012-12-05 Headline Roulette by Christian W. Thwaites of Sentinel Investments
That Fiscal Thing dominated the week. Every twitch out of Washington was greeted with over analysis by the press and us. Less so the markets. Truth is, markets are not very good at discounting political uncertainty. Sure, a tax scare here and a debt ceiling impasse there might lead to a sell-off but ultimately it's about earnings, corporate health and outlook and on those metrics, nothing last week really upset the markets in a major way. The bond market tends to get this right.
2012-12-05 Resilient Markets Mask Greater Concerns in Real Economy by Douglas Cote of ING Investment Management
Though equity markets have been calm, the real economy tells a different story.
If our leaders in Washington arent able to arrive at a compromise, January 1 will mark the beginning of the countrys first scheduled recession, though third quarter corporate earnings suggest a global slowdown is evident.
Dont be surprised to see a Christmas rally should Congress kick the fiscal can down the road and the Fed extend Operation Twist.
2012-12-04 Nate Silver's Message for Financial Advisors by Ben Huebscher and Michael Edesess (Article)
By now you are likely aware that Nate Silver of the New York Times correctly predicted the results for all 50 states (plus DC) in this year's presidential election and all but two Senate races. Silver's predictive capabilities across a range of disciplines have made him a near-deity among those whose livelihood depends on accurate forecasting - from poker players to counter-terrorism units. It's clear why: His methods work - at least in some cases. And their strengths and limitations carry important lessons for financial advisors.
2012-12-04 The Big Picture by David Rosenberg (Article)
Our crystal ball says to stick with what works in an uncertain financial and economic climate - in other words, maintain a defensive and income-oriented investment strategy.
2012-12-04 Surprising Choices in the Search for Safety Near-Certain Loss of Purchasing Power versus Short-Term by Jason Petitte, CFA (Article)
Risk, in its many guises, is unavoidable, and investors today are taking on significant amounts of credit risk, duration, and leverage to obtain high yields from many presumably safe bonds. But certain types of risk are often mispriced. By overweighting one's portfolio to those sectors that currently offer attractive risk-adjusted returns, investors will be better positioned to meet their long-term goals.
2012-12-04 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Obama meets with the nations governors and speaks before the Business Roundtable to continue drumming up support for his budget deal. (Arent most governors counted among the countrys wealthy?) Expect the bickering and blame-placing to continue until finally a small deal is reached with the majority of the work tabled for later in 2013. (How will Moodys and S&P perceive that move?) The economic calendar heats up with critical news from labor and manufacturing and retailers share insight into the holiday shopping season thus far. And Europe is never far from the radar screen.
2012-12-04 Strawberry Fields Forever? by Bill Gross of PIMCO
As John Lennon forewarned, it is getting harder to be someone, and harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will take you down and lower your expectation of future asset returns. It may not last forever but it will be with us for a long, long time.
2012-12-03 Tumbling Down the Fiscal Staircase by Scott J. Brown of Raymond James
Revisions to the 3Q12 GDP data have altered the near-term consumer spending outlook, adding to the anxiety surrounding the fiscal cliff. However, even if much of the fiscal tightening is postponed, more will be needed in the years ahead. The estimate of 3Q12 GDP growth was revised to a 2.7% annual rate, vs. 2.0% in the advance estimate. Good news, right? Well, no, just the opposite. Much of the revision was due to an increase in the estimate of inventory accumulation.
2012-12-03 Paintballs?! by Jeffrey Saut of Raymond James
Alas, if only it was that easy to paintball the rapidly approaching fiscal cliff. For those of you traveling the North Yungas Road in Bolivia and unaware of the approaching dangerous cliff, let me explain. Before beginning, however, let me preface by recalling Bill Buckleys famous lament that he would rather be governed by folks listed in the Boston phone book than Harvard professors. To be sure, there are some good politicians inside the D.C. Beltway, but not many!
2012-12-03 Housing, GDP, Lumesis Muni Index & Federal $ to the States by Gregg L. Bienstock of Lumesis
While the media is fixated on the looming cliff and having everyone and their mother opine, information about the status of our economy is of as much importance. This week we take a look at housing prices, GDP, the Coincident Index, the DIVER Muni Index and how much of each States revenue comes from the Federal Government. We keep hearing how much better the housing market is. In this regard, we routinely remind our readers that better or worse depends on from where you start. Starting pre-recession to date, only Texas, Oklahoma and the Dakotas have seen positive housing price trends.
2012-12-03 Temporary Weakness Won\'t Last by Brian S. Wesbury and Robert Stein of First Trust Advisors
Hurricane Sandy knocked out electricity all over and is now causing some flickering in the economic data. Real consumer spending fell 0.3% in October, the steepest drop since cash-for-clunkers ended in 2009, while real income slipped 0.1%. The ISM manufacturing index fell to 49.5 in November. Considering that Sandy smashed the eastern seaboard and affected roughly 25% of the US population with the brunt hitting New Jersey and New York the economic damage will be spread out. Timing helped limit the impact on October data, given that the storm struck very late in the month.
2012-12-01 The Significant Impact of U.S. Oil Production by Frank Holmes of U.S. Global Investors
The Eagle Ford shale formation lies south of our headquarters in San Antonio, Texas, giving the U.S. Global investment team a firsthand, tacit perspective on the oil and gas industrys growing natural resources phenomenon. Weve witnessed how the oil activity is boosting the local economy with solid-paying jobs, a healthy housing market and strong consumer sentiment, as oil giants such as Schlumberger and Halliburton take a bigger stake in the area.
2012-12-01 The Bank of Canada Has Barked, But Will It Bite? by Ed Devlin and Richard Clarida of PIMCO
As Canadian consumers have increased their mortgage debt and bid up housing prices, the potential for a disorderly unwinding of these imbalances rightly concerns the Bank of Canada. PIMCO believes that the banks next policy move will be to raise interest rates, but with the traditional aim of fighting inflation rather than reducing home prices and consumer debt. We expect the Bank of Canada to continue tightening mortgage credit and using moral suasion to damp the housing boom and discourage consumers from taking on more debt.
2012-12-01 The How Matters by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Market focus has clearly been on fiscal cliff negotiations. An agreement that averts the cliff would likely ignite a further near-term rally, but the ultimate solution and its components could have longer term consequences that may not be as market-friendly. US economic data has been impacted by Hurricane Sandy, but it appears modest growth is continuing; although business investment has fallen off. Housing continues to provide support and the Fed is staying the course. There are some signs of growth stabilization globally, notably in some of the emerging economies, including China.
2012-11-30 3 Reasons to Hold Off on Holiday Sales Celebrations by Russ Koesterich of iShares Blog
Is the US consumer saying goodbye to the Great Recession and hello to a heady holiday season? Initial holiday sales results may paint a rosy picture, but Russ K explains why investors shouldn't be prematurely uncorking the New Year's champagne.
2012-11-30 Where Are We in the Boom/Bust Liquidity Cycle? by Thomas Fahey of Loomis Sayles
In an often cynical world, standard financial and macroeconomic quantitative models give people the benefit of the doubt. Fundamental economic theory assumes the best of us, supposing that human beings are perfectly rational, know all the facts of a given situation, understand the risks, and optimize our behavior and portfolios accordingly. Reality, of course, is quite different.
2012-11-28 On The Economy & Capitalism vs. Socialism by Gary Halbert of Halbert Wealth Management
Today we look at a Pew Research Center survey that polled Americans for their feelings about capitalism versus socialism. The survey included all races, different ages and various income groups. I think it's safe to say, this survey will SHOCK YOU!
2012-11-28 A Turn in the Credit Cycle by Scott Minerd of Guggenheim Partners
Investors should understand the recent transition in the credit market and the implications it could have for the trajectory of asset prices over the long-term.
2012-11-27 Are Equities Still Cheap? by Chris Maxey, Ryan Davis of Fortigent
Since reaching a near-term top in mid-September, the S&P 500 Index fell more than 7%. After a 4% rally in the last five trading days, there are reasons to believe equity markets are poised to extend recent performance despite headline concerns.
2012-11-27 A Critique of Grantham and Gordon: The Prospects for Long-term Growth by Laurence B. Siegel (Article)
The vigorous global economic growth of the last two centuries is over, according to Jeremy Grantham and Robert Gordon. That prediction, if correct, has profound and worrisome implications for investors. And the short-term trend is indeed disquieting: Growth has been close to zero over the last decade in advanced countries. But the most likely outcome is that per capita GDP growth going forward will approximate its U.S. historical average of 1.8%, and it will grow faster in developing markets.
2012-11-27 Fixed Income Perspectives by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
A wise American once said "Life is hard; it's harder if you're stupid." A good example is when your pals in Washington are so busy pushing their partisan agendas that they lose sight of what could happen to the American economic Thunderbird if it goes all Thelma and Louise over the fiscal cliff. With the latest elections in the books, it remains to be seen if a Democratic president and acrimonious Republican House can put on their thinking caps to devise a way to delicately pump the brakes of fiscal restraint.
2012-11-26 Employment, Jobs and the Next Generation by Gregg Bienstock of Lumesis
Thanksgiving offers us a time to reflect on all we have to be thankful for and to share time with family and friends. There is so much to be thankful for while misfortune is evident when you check the news we live in democracy, the wealthiest country on the planet and have a resiliency that is demonstrated every time we, as a nation, are tested.
2012-11-26 Buying Treasuries and Avoiding Stocks Not the Way to Go by John Buckingham of AFAM
While we know better than to make too much out of a low-volume rally, especially during a holiday-shortened trading week, it was interesting to hear what The Wall Street Journal had to say one week ago at this time. As the publication helped ready investors for the week ahead, one story advised folks to head toward the safety of U.S. Treasury securities: "Expect safe-haven Treasurys to draw demand at the expense of stocks in the coming weeks, bucking a seasonal trend that has often favored riskier assets."
2012-11-26 And That's the Week That Was by Ron Brounes of Brounes & Associates
Investors breathed a sigh of relief (perhaps temporarily) and expressed thanks in the form of the strongest week in the market in several months (though on light volume). Domestically, housing data confirmed strength in the sector and retailers opened their doors earlier than usual with the hope that "if you open, they will come." Overseas, Europe's struggles continued, though manufacturing in China looked to be on the mend. Happy Thanksgiving and enjoy the weekend; after all, next week starts the home stretch for the end of the year...(and the fiscal cliff).
2012-11-23 Five Amazing Global Consumer Trends by Frank Holmes of U.S. Global Investors
Fifth Avenue no longer the worlds most expensive retail location. China set to be the second largest luxury market by 2017. Viva Macau is gaming capital of the world. Inexpensive Indian Aakash 2 could revolutionize tablet industry. Emerging market residents don't need a bank account to pay with their mobile wallet.
2012-11-23 ECRI Weekly Leading Index: Index Rises, Growth Diminishes by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose slightly in the latest public data (released Wednesday in advance of the Thanksgiving holiday). It is now at 125.7, up from 125.4 in the previous week. See the WLI chart in the Appendix below. The WLI annualized growth indicator (WLIg) declined to 3.8, down from last week's 4.3. WLIg has been in expansion territory for thirteen weeks, although it is now at a seven-week low, with the high at 6.0 on October 12th.
2012-11-22 Emerging Asias Rising Productivity by Robert Horrocks of Matthews Asia
Per capita GDP in China has tripled in purchasing power parity terms in the last decade yet Chinese workers still likely have their most productive years ahead of them. Asia as a whole has seen consumption increase by a third since the global financial crisis, even as the West has languished. This month, Robert Horrocks, writes about what is key to the emerging opportunities in Asia: Productivity.
2012-11-22 Economic Update by Carl Tannenbaum and Asha Bangalore of Northern Trust
A look beneath the surface reveals a housing sector still struggling with post-crisis transition. The Federal Reserve is intent on promoting a broader recovery in this area.
2012-11-21 Reflections: Primate in Distress by John Gilbert of GR-NEAM
The enthusiastic response of the capital markets to the Federal Reserve's announcement of the third quantitative easing program is, of course, just what they intended. It recalls the even more ebullient response to the ECB's Long Term Refinancing Operation announcement late last year.
2012-11-21 The Most Wonderful Time of the Year...for Stocks by Frank Holmes of U.S. Global Investors
November hasn't been living up to its reputation as one of the best months for U.S. stocks. Equity investors have been fed a cornucopia of negative news that has been difficult to digest, including the outcome of the "fiscal cliff," the front page photos of rioting in the eurozone, and the escalation of geopolitical risk in the Middle East.
2012-11-20 President Obama’s Re-Election and the Impact on the U.S. Economy by Eaton Vance Distributors, Inc. (Article)
President Obama’s re-election resolves a major element of uncertainty that has hung over the political landscape. But what kind of impact will his victory have on the economy and the markets, especially with the House still in Republican control? We posed that question to a roundtable of five investment professionals from Eaton Vance Management, Hexavest and Richard Bernstein Advisors.
2012-11-20 The Fallacies in Today’s Retirement Plan Assumptions: Putting the Hedonic Pleasure Index to Work by Bob Veres (Article)
Are you dramatically underestimating your clients' retirement lifestyle expenditures when you use Monte Carlo software? If you stop and look at a number of important assumptions hidden in the current models, you'll suddenly have a lot less confidence in the retirement plans you’re mapping out for your clients.
2012-11-20 Fix the Debt! by Team of Franklin Templeton Investments
In the "normal" course of a U.S. election, investors typically breathe a sigh of relief when the results come in, with at least one layer of market uncertainty removed. This time around, the political squabbling hasn't ended with the close of the polls on November 6. The debate about the "fiscal cliff," a combination of spending cuts and tax hikes set to go into effect on January 1, 2013, has heightened. Market volatility since the election seems to have heightened, too.
2012-11-20 Companies Grapple With Pressure from All Sides by Chris Maxey, Ryan Davis of Fortigent
As we move closer to closing the books on another earnings cycle, it is time to look back at the hits and misses for the quarter. Unfortunately, this quarter brought more misses than investors have seen in quite some time, despite a greatly reduced bar. The outlook also leaves something to be desired, with companies cutting forward guidance and analysts ratcheting down estimates for the next two quarters.
2012-11-20 Where Will the Jobs Come From? by John Mauldin of Millennium Wave Advisors
For the last year, as I travel around, it seems a main topic of conversation is "Where will my kids find jobs?" It is a topic I am all too familiar with. Where indeed? Youth unemployment in the US is 17.1%. If you are in Europe the problem is even more pronounced. The basket case that is Greece has youth unemployment of 58%, and Spain is close at 55%. Portugal is at 36% and in Italy its 35%. France is over 25%. Is this just a cyclical symptom of the credit crisis?
2012-11-20 On the Road to Zero Growth by Jeremy Grantham of GMO
In a new quarterly letter to institutional clients, GMO chief investment strategist Jeremy Grantham makes the case that, "the U.S. GDP growth rate that we have become accustomed to for over a hundred years -- in excess of 3% a year -- is not just hiding behind temporary setbacks. It is gone forever." He cautions, "investors should be wary of a Fed whose policy is prefaced on the idea that 3% growth for the U.S. is normal."
2012-11-19 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Could it be signs of progress? While Obama and key congressional leaders didn't exactly emerge form budget meeting arm-in-arm and singing kumbaya, they did report some progress (dare I say "compromise"?) regarding spending cut and tax hikes (better known as "fiscal cliff"). Investors remain fearful as prior discussions were always derailed over partisan bickering and the S&P and other ratings agencies remain on call should they need to act on US credit. Thanksgiving marks the beginning of what many retailers hope is a successful holiday shopping season.
2012-11-19 America's Fiscal Cliff Dwellers by Simon Johnson of Project Syndicate
America's looming "fiscal cliff" is actually more of a "slope," with the full effect of the tax increases and spending cuts felt only gradually. But the choice of words matters, given the hysteria that has been whipped up in recent months, primarily by people who want to decimate America's social-insurance programs.
2012-11-19 Little Dutch Boy by John Hussman of Hussman Funds
In the Mary Mapes Dodge book titled Hans Brinker, there is a fictional story within the story of a little Dutch boy who, on his way to school, notices a hole in the dyke. Having nothing else to fix the leak, he plugs the hole with his finger and stays there through the night until workers come to repair it. We are now into the fourth year of efforts to print trillions of little Dutch boys out of dollars and euros in order to stop a tide from crashing through a fundamentally damaged dyke. All of this has bought time, but no workers have arrived, and no real repairs have been done.
2012-11-19 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Fortunately, no one is compelled to invest money. They do so in a climate of tranquility, or turmoil, in an attempt to utilize their specific discipline, their risk/reward tolerances, and their expectations in order to achieve capital gains. There is no "one size fits all" system, nor is everyone suited for an all-in, win or lose, paradigm.
2012-11-19 Waiting for Godot by Charles Lieberman of Advisors Capital Management
Democratic and republican policymakers are actively negotiating over the fiscal cliff, as investors watch and wait with baited breath. They seem to be making progress, or so they suggest in their public comments. But until the situation is resolved, markets are likely to remain volatile. Other issues do seem to be moving towards resolution.
2012-11-19 On Wealth Effects of Fed Policies: Housing Is Likely The Bright Spot by Chun Wang of Leuthold Weeden Capital Management
We've mentioned before the rapidly waning effect of the Fed policies. October was a good proof of that, with the S&P 500 index down about 2% (top chart). The stock market is no doubt part of the wealth effect the Fed was trying to create, but home prices, which represent the bulk of the average person's net worth, and personal income should also be considered a big part of the wealth effect.
2012-11-17 Three Events That Sum Up the Week by Frank Holmes of U.S. Global Investors
India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounceback in demand due to improved sentiment during the festival season. The Federal Housing Administration reported that it has exhausted its reserves, possibly requiring a bailout from U.S. taxpayers for the first time ever in its nearly 80-year history. The global economic picture came into focus a little more this week with the announcement of Chinas new leadership.
2012-11-16 ProVise Bullets by Ray Ferrara of ProVise Management Group
With the elections behind us, we must now look ahead to the next six weeks of a Lame Duck Congress. Given the fact that the President was re-elected, the Republicans maintained control of the House, and the Democrats gained in the Senate, we know there will either be collaboration or chaos in Washington. The positioning has already started. The more things change, the more they stay the same.
2012-11-16 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011.
2012-11-16 ECRI Weekly Leading Index: The Slippage Continues by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined again in the numbers released today. It is now at 125.4, down from its interim high of 127.6 set five weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 4.4, down from last week's downard revision to 5.0. WLIg has been in expansion territory for twelve weeks, although it is now at a five-week low, with the revised high at 6.0 on October 12th.
2012-11-16 The REIT Stuff: How REIT Investors Have Benefited from the Real Estate Recovery by Steve Benyik of Lord Abbett
In an otherwise slow-growth economy, real estate investment trusts' (REITs) strong returns and yields have attracted considerable investment in recent years. Steve Benyik, Lord Abbett REIT analyst, provides perspective on the sector's key trends.
2012-11-16 Fed Balance Sheet Expands, Reward-Risk Clarity Fades by Alan Levenson of T. Rowe Price
While the minutes of the October 23-24 FOMC indicated a lack of consensus regarding whether to initiate a new asset purchase program to replace the Maturity Extension Program (MEP) upon its year-end conclusion, we believe that the Committee will announce at the conclusion of its December 11-12 meeting that the Fed will begin open-ended purchases of Treasury securities at a pace close to the $45 billion per month in the MEP.
2012-11-15 Pacific Basin Market Overview - October 2012 by Team of Nomura Asset Management
Equity markets derived support this month from improved U.S. economic data and an impression that China's economy might be bottoming out. In addition, the Euro Area Industrial Production numbers came in above consensus. The MSCI AC Asia Pacific Free Index including Japan declined by 0.39% while the MSCI AC Asia Pacific ex Japan Free Index gained 0.44% in October 2012.
2012-11-15 Chuck Royce Remains Optimistic After the Election by Chuck Royce of The Royce Funds
The likelihood of fiscal and tax reform in 2013 gives us faith in the long-term viability of both the U.S. economy and equities.
2012-11-15 Weekly Commentary & Outlook by Gary Halbert of Halbert Wealth Management
Obviously, I am very discouraged with the outcome of the election. The main mistake Spencer and I made (and others including Gallup, Rasmussen, Pew, Rove, Morris, etc., etc.) in our pre-election analysis was to significantly underestimate the turnout rates among Democrats. The widely-held view that Democrats were unenthused and wouldn't turn out to vote, as suggested by numerous pollsters, was simply wrong. Obama won both the popular vote and the Electoral College comfortably.
2012-11-15 Nothing Changed by Doug MacKay, Bill Hoover of Broadleaf Partners
Many events have transpired since our mid-September update, but not much has really changed. Economic growth should remain slow for as far as the eyes can see, as each region of the world struggles with its own version of the New Normal. Capitalistic animal spirits have gone the way of the modern American male and while not completely extinct, he's decidedly more metrosexual. Flannel has ceded ground to the skinny jean and ambition has given way to contentment. Save for the halls of America's top military brass, unbridled passion is simply no longer.
2012-11-14 U.S. Economic and Interest Rate Outlook - November 2012 by Carl Tannenbaum, Asha Bangalore of Northern Trust
Our updated forecast anticipates some movement on the "fiscal cliff."
2012-11-14 Helplessly Hoping...That a Market Riot Isn't Needed for Fiscal Cliff Fix by Liz Ann Sonders of Charles Schwab
A status-quo election puts the "fiscal cliff" front and center. The stock market's knee-jerk reaction was to sell; could further weakness light a fire under politicians? Good news has come from recent economic numbers, but sentiment will remain under pressure until the fiscal cliff is resolved.
2012-11-13 Voyages by Michael Lewitt (Article)
Anything short of drastic entitlement reform, serious cutbacks in defense spending, and serious tax reform that alters incentives away from speculation in favor of production will leave this country stuck on the dangerous path it is on today.
2012-11-13 The Election by Jeffrey Saut of Raymond James
As most of you know I was in Glasgow, Edinburgh, London, Zurich, and Geneva during election week seeing institutional accounts and speaking at conferences. Of course the question on all the portfolio managers' (PMs) minds was about the election, the subsequent effect on the economy and the various markets, currencies, and the Fiscal Cliff.
2012-11-13 Four More Years... by Kate Schapiro of Sentinel Investments
Americans went to the polls this past Tuesday and re-elected President Obama to four more years in office. In addition, the partisan breakdown of Congress stayed roughly the same in both the House of Representatives (Republican majority) and Senate (Democratic majority). So after nearly two years and billions of dollars spent on campaigning, debating, polling, grand-standing and mudslinging, the leadership is unchanged. A good argument for campaign finance reform if ever there was one.
2012-11-13 Sequestration - What It Means for the Municipal Bond Market by Michael Taylor of Columbia Management
If Congress fails to quickly reach an agreement on deficit reductions, automatic cuts to federal discretionary spending (sequestration) are scheduled to take effect January 2, 2013. On September 14, the U.S. Office of Management and Budget (OMB) released its report detailing how it would implement sequestration, as required by the Budget Control Act of 2011 (Act). Designed to impact defense and non-defense (domestic) program budgets equally, most agencies are subject to cuts between 7% and 11% over the next decade. The exception is Medicare which is subject to a 2% cut.
2012-11-13 Argo and Ethel: America Has Never Been a "Rose Garden" by Bill Smead of Smead Capital Management
We recently had the pleasure of seeing a movie, Argo, and a documentary on HBO, Ethel. Argo is the story of the rescue of the six Americans from the Canadian Ambassador's residence at the time of the Iranian takeover of the US Embassy in Teheran. Ethel is a documentary which tells the story of Ethel Kennedy, the wife of Senator Robert Kennedy. It was produced, directed and narrated by Ethel Kennedy's youngest daughter, Rory. I rate both of these films highly and believe they tell US investors something they need to be reminded of.
2012-11-12 After the Election, Fiscal Cliff Outcome May Surprise by Libby Cantrill, Josh Thimons of PIMCO
Our base case for a fiscal cliff resolution continues to be a lame-duck mini-deal that would reflect about 1.5% of GDP in fiscal contraction in 2013 (vs. nearly 5% without a deal). But the dynamics of polarization and partisanship that played a role in past dysfunctional negotiations may have gotten worse. On a more optimistic note, it is widely known that second-term presidents are largely interested in their legacies spearheading noteworthy, bipartisan and lasting accomplishments for the history books.
2012-11-12 Can Housing Save the U.S. Economy? by Stephen Sheehan of Columbia Management
After leading the U.S. out of the Great Recession, the manufacturing sector has recently begun to show signs of sputtering. Uncertainty surrounding the election and fiscal cliff in the U.S., decelerating growth in China and a perpetually weak Europe have led to a soft patch in the third quarter. This global hiccup has caused some U.S. companies to catch a cold, most notably those in heavy machinery, transportation, metals and mining, and general industrials.
2012-11-12 Fiscal Cliff, US Economy and Election Results - What Happens Next? by Liz Ann Sonders of Charles Schwab
Housing, manufacturing, and post-Sandy rebuilding could help offset the drag from the fast-approaching "fiscal cliff," but for now, uncertainty is front and center.
2012-11-12 Housing Recovery - A Dose of Realty Reality by Milton Ezrati of Lord Abbett
Media and the investment community have made much of recent good news on housing. Certainly, the recent upturn in sales, building, and real estate prices is welcome. But if the 1980's housing bust is any guide, popular references to strength and imminent recovery grossly overstate. That older experience suggests that health in the sector will return only slowly. Residential real estate may well have turned a corner, but major gains and price recovery will likely wait for some time.
2012-11-09 Fiscal Cliff, US Economy and Election ResultsWhat Happens Next? by Liz Ann Sonders of Charles Schwab
Even if the United States falls off the "fiscal cliff," the hit to the economy will probably be gradual. And while the fiscal cliff probably figured into the recent market pullback, it's not the only contributor. Resolution to this issue, the continuation of positive trends in housing and manufacturing, and fundamental tax reform could help give the economy a boost.
2012-11-09 Americas: Economic Review 3rd Quarter 2012 by Team of Thomas White International
Economic trends in most countries across the Americas region saw a moderate recovery during the third quarter, though the pace of growth remains subdued. Slower global demand due to the ongoing European recession and the slower expansion in Asia continues to restrict exports from the Americas. At the same time, domestic consumption growth has been relatively more robust than expected and has helped most regional economies prevent a deeper slowdown.
2012-11-09 ECRI Weekly Leading Index: Off Its Interim High by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) declined in the numbers released today. It is now at 126.2, down from its interim high of 127.6 set four weeks earlier. The WLI annualized growth indicator (WLIg) also declined, now at 5.1, down from last week's 5.9. WLIg has now spent eleven consecutive weeks in expansion territory, although it is now at a five-week low.
2012-11-09 Looking Past the Election by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
The election results are in, removing at least one area of uncertainty from the equation. For the near term, economic data in the United States may take a back seat. Growth around the world appears soft, but some pockets are more encouraging than others.
2012-11-09 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore, Victoria Marklew of Northern Trust
Hurricane Sandy will impact the pattern of upcoming data, but is not likely to have a lasting economic impact. Our updated forecast anticipates some movement on the "fiscal cliff." France may be part of Europe's problem, not a source of Europe's solutions.
2012-11-09 A Portrait of Two Presidents by Frank Holmes of U.S. Global Investors
On Friday, President Obama addressed the two topics that have been on many equity investors minds since election night: the economy and the dreaded fiscal cliff. In his speech, he delivered his familiar plan to combine spending cuts with increasing revenue by raising taxes on the wealthiest Americans. Thats how we did it in the 1990s, when Bill Clinton was president, says the president.
2012-11-08 Magic 8 Ball Knows All by Christine Hurtsellers, Matt Toms, Mike Mata of ING Investment Management
The efficacy of 1980s technology turned out to be a real bummer, huh? Flying DeLoreans and flux capacitors are the ultimate heartbreakers, but the clairvoyance promised by those iridescent black and white Magic 8 Balls is definitely a close second. Give one a few shakes today and see for yourself. "Magic 8 Ball, [SHAKE] will financial markets rally post the U.S. election?" "It is decidedly so." "Magic 8 Ball, [SHAKE] are you lying?" "Yes definitely." "Magic 8 Ball, [SHAKE] seriously?" "Reply hazy, try again."
2012-11-08 Overcoming the Brake Light Shockwave by Christian Thwaites of Sentinel Investments
Big democratic breakthroughs, say Egypt, Tunisia are halting and fall far short of the hopes they embodied. Technology is a race over mobility and brevity but hardly elicits the same wonder from years past. Governments are polarized. The US had almost no voting overlap in recent years so big ideas are on the wane. In Europe, the supra-national organizations like the EU are swift to talk and slow to act. No we're not reactionaries. We think all this is explained by the deepest drop in output in the post-war period and the slowest recovery.
2012-11-08 Developed Europe: Economic Review 3rd Quarter 2012 by Team of Thomas White International
Amid signs of a deepening economic slowdown in Developed Europe, three key events brought some cheer to the beleaguered region, raising hopes of a lasting solution to its debt crisis. In early September, the European Central Bank (ECB) announced its new Outright Monetary Transactions scheme, which is in effect a commitment by the ECB to buy unlimited quantities of sovereign bonds with up to three years in maturity, providing the bond-issuing member country agrees to a reform agenda.
2012-11-07 October 2012 Monthly Commentary by David Kelly of J.P. Morgan Funds
A light flashed on in my car this morning, telling me that it was due for service. When I take it in, the mechanics will presumably check both the engine and the brakes before deciding on exactly what it is that I need to repair, replace or adjust. For investors, after nine months of ups and downs in markets, an investment strategy checkup is in order.
2012-11-07 US Olympic Swim Team and Warren Buffett: Buy and Hold by Bill Smead of Smead Capital Management
The US swim team has their own criteria for developing young athletes. We assume in every ten-year stretch that they support the swimming efforts of 25 to 30 young athletes in hopes of finding an occasional Mark Spitz or Michael Phelps. Most of them share the characteristics we described about Michael Phelps. The US Olympic team is the most successful swim team portfolio manager in the world. What can we learn from them as portfolio managers?
2012-11-07 Forecasts & Trends by Gary Halbert of Halbert Wealth Management
Last Friday's unemployment report for October had the headline rate rising from 7.8% to 7.9%, in line with expectations. However, the pleasant surprise was that the economy created 171,000 new jobs last month, well above the pre-report consensus of 125,000 and above the average monthly increase of 157,000 jobs this year. That's the good news.
2012-11-07 October Surprise by Douglas Cote of ING Investment Management
Third quarter earnings growth for S&P 500 companies is at risk of being negative for the first time in three years. While the presidential election is important, Congress will ultimately control spending and tax legislation. Monetary stimulus alone is both inadequate and unsustainable; pro-growth taxation, spending and regulatory policy is key to our economic revival.
2012-11-06 ClearBridge Advisors - Market Commentary Q312 by Harry “Hersh” Cohen (Article)
Vibrant end demand is missing, as consumers have neither the wherewithal nor the will to spend as they did in prior periods.
2012-11-06 Asset Location: Nine Tips to Create “Tax Alpha” by Glenn Frank (Article)
With campaign season finally over, taxes are going to dominate the debate in Washington in the months ahead – however things shake out at the polls today. It's going to be confusing; it's going to be uncertain. But many of the most critical questions advisors will ask can be answered with an analytical approach to deciding where to 'house' assets – in taxable or tax-sheltered accounts.
2012-11-06 Earnings Cliff? by Mike Boyle of Advisors Asset Management
We are now about 63% (316 of the 500 S&P 500 companies have reported) of the way into the third quarter earnings season and the popular opinion seems to be that the earnings are disappointing, that this current earnings cycle has peaked and that earnings going forward will fall sharply (earnings cliff). In a nutshell, we don't believe that this is the case and will begin with the former, that the current crop of earnings reports are disappointing.
2012-11-06 Favorable Reports Post Sandy by Christian Thwaites of Sentinel Investments
The devastation of Sandy blighted the week. We were lucky in that most of our employees escaped the worst effects. We had some evacuations and plenty of lost power. But the images of devastation were overwhelming and we hope our clients and friends of the firm are safe. Perhaps, as a non-native, my perspective is warped but in the US we have an uncanny ability for industry, problem-solving, drive, inventiveness and optimism. Sometimes the very best of us comes out in these times.
2012-11-05 Americans Head to the Polls Tuesday to Decide Tight Presidential Race by Matt Rubin of Neuberger Berman
As the eastern seaboard continues to recover from the aftermath of Hurricane Sandy, estimates for the economic cost of the storm continue to climb and currently stand in the range of $30 to $50 billion. In the near-term, economic activity in the region is likely to be negatively impacted by the storm; however, the rebuilding of infrastructure, housing and businesses should boost growth in areas most impacted by Hurricane Sandy over the longer term.
2012-11-05 A New Queen Bee by Jeffrey Saut of Raymond James
By the time a queen bee is five she is old and no longer reproduces, leaving her army of honeybees torn between loyalty and survival. Since the hive cannot survive without a productive queen, the beekeeper reached into the hive with a long-gloved hand and squashes the enfeebled queen. With the entire hive as witness, all know the queen is dead. Absent the scent of their leader, the honeybees panic. Something similar to that "queen bee" sequence may be happening currently. The "old queen," at least in the private sector, was driven by exports and manufacturing.
2012-11-05 And That's the Week That Was by Ron Brounes of Brounes & Associates
Superstorm Sandy overshadowed most all newsworthy stories during the week as much of the East Coast (and beyond) suffered some ill-effects and many will be fighting to overcome challenges for many days (weeks, months) to come. The stock market closed over consecutive days to start the week and uncertainty (volatility) ensued with investors enjoying the best single day performance in a month-and-a-half, only to give up those gains a day later as many set portfolios in advance of the election. Soon the campaign will be a distant memory (but the "fiscal cliff" will become a near-reality).
2012-11-05 Commentary and Statistics by Team of ING Investment Management
U.S. equity markets were mixed during an abbreviated trading week in which Hurricane Sandy forced the longest weather-related shutdown of U.S. stock trading since 1888. While the S&P 500 eked out a small gain, the DJIA and Nasdaq closed slightly lower.
2012-11-05 Day of Reckoning by Charles Lieberman of Advisors Capital Management
Tomorrow's election is too close to call according to the polls, while Friday's jobs report was decent, blemishes notwithstanding. Super storm Sandy was and remains a severely disruptive force to the Northeast, particularly New Jersey. A few thoughts on these issues follow.
2012-11-02 World's Economies Come of Age by Mark Mobius of Franklin Templeton Investments
As we grow and age, our needs and habits often change. The same is true of economies, which grow and change along with their people. Short-term statistics that impact a country's economic growth rate, such as consumer spending, exports and the like are certainly important, but there are also long-term shifts that can have significant economic implications for the future. Changing demographics is one of them. As a long-term investor, I have to look not only at today's opportunities, but also plan for tomorrow's developments.
2012-11-02 ECRI Weekly Leading Index: Still Jogging in Place by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally in the numbers released today. It is now at 126.6, down from last week's 126.7 (revised from 126.8). Likewise, the WLI growth indicator (WLIg) slipped slightly, now at 5.9, down from last week's 6.0. WLIg has now spent ten consecutive weeks in expansion territory, although it is off its interim high of 6.1. But for the past six weeks the WLI has been jogging in place in a narrow range (126.2 to 126.7).
2012-11-02 Of Varied States: Cyclical, Storm-Tossed and Swing by Alan Levenson of T. Rowe Price
The latest readings on employment growth and household formation show a firm underpinning for moderate growth, with the household sector gathering momentum toward the emergence of positive feedback loops. Despite the immense human cost of Superstorm Sandy, the adverse impact on measured economic activity is likely to be short-lived, with a compensating rebound to emerge before quarter-end. Next week's general election results should bring clarity to the route that policy makers will take to avoid the year-end fiscal cliff.
2012-11-02 Who Will Lead America Over the Next Four Years? by Frank Holmes of U.S. Global Investors
If President Obama is reelected, it could be a negative for certain energy companies involved in natural gas fracking, says International Strategy & Investment (ISI). Conversely, a Governor Mitt Romney win could be significant for energy companies. In its Romney Portfolio ISIs rationale is that Romney and the GOP will try to do more to promote traditional forms of energy, including offshore drilling, approving the Keystone pipeline, and exploiting the nations coal resources.
2012-11-02 Blind Faith by Steven Romick of First Pacific Advisors
Although we cannot impose our will on this administration as to Mr. Bernankes continued role at the Fed, we would at least like to make our case for a Fed chairman more aware (at least publicly) of the unintended consequences of ultra easy monetary policy, and one with less hubris.
2012-11-01 Invesco Fixed Income Investment Insights: October 2012 by Darren Hughes, Scott Roberts of Invesco
High yield bond mutual funds have received $38.9 billion of inflows year-to-date through August, the second largest net inflow in the US retail bond category as measured by Lipper. Given known search activity and anecdotal evidence, we believe institutional flows into the asset class have been strong as well. Given this backdrop, we'd like to provide some insight into what's driving these flows, the likelihood of this continuing and the value in the asset class.
2012-11-01 Growth Outlook for Europe, China and the US by Mark Nash of Invesco
Growth Outlook for Europe, China and the US Mark Nash, Senior Portfolio Manager in Invesco Fixed Income, outlines the case for global "core" government bonds amid central bank actions on growth prospects in Europe, China and the US.
2012-11-01 A Value Recovery Is Long Overdue by Sharon Fay of AllianceBernstein
It's been a long, hard slog for value stocks lately. I'd say we're long overdue for a value recovery. But what would it take?
2012-11-01 Time To Vote! by Bill Gross of PIMCO
So I pulled out my magic lamp that for some reason works only every October 22nd, and rubbed until the Genie appeared in his red and white checkered cloak with a 10-inch diameter Flavor Flav clock hanging ceremoniously around his neck. Being a rather forward, although not disrespectful Genie, he immediately said, "Mr. G, instead of the yield on the 10-year Treasury, perhaps this year you should wish to know who is going to win the Presidential election?"
2012-10-31 Defying the Crowd on Chinese Stocks by Stuart Rae of AllianceBernstein
Slowing economic growth, uncertainty about government policy and disappointing returns have made equity investors wary of China. In other words, it's a perfect time to hunt for investment opportunities.
2012-10-31 Switch: Business Confidence Sinks While Consumer Confidence Lifts by Liz Ann Sonders of Charles Schwab
A wide gap has developed between sagging business confidence and improving consumer confidence...and the election and fiscal cliff appear to be the culprits.
2012-10-31 Macro View: Natural Disaster Economics by Scott Minerd of Guggenheim Partners
"Super-Storm" Sandy will distort economic activity and data over the coming months.
2012-10-30 The Yield Hunt by Michael Lewitt (Article)
The high-yield market is not in danger of imminent collapse as some have argued. As long as defaults remain relatively low, and interest rates remain invisible, investors will continue to chase yield. But a few things could cause a sharp sell-off in the near future.
2012-10-30 Nice Speech, Tough Crowd by Christian Thwaites of Sentinel Investments
Sandy is pummeling everything we know on the eastern seaboard. I hope everyone stays safe and we can ride this out without too much damage. Thankfully markets are closed. Meanwhile, here's our views on capital markets on Monday.
2012-10-30 Weekly Update: Commentary and Statistics by Team of ING Investment Management
U.S. equity markets fell back into decline during the week, as earnings reports and more specifically, forward outlooks inspired investor caution. Meanwhile, a potential "Frankenstorm" has the East Coast on edge for the coming week.
2012-10-29 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
Disgruntled investors took a look at the earnings reports and ran for the hills. With some industrial and techs issuing pessimistic reports (mainly in their outlooks), investors chose to take a hiatus. Election season is just a week-ish away and then the fiscal cliff looms in the not-so-distance future, so plenty of uncertainties and concerns remain for the time being. (And don't forget Spain.)
2012-10-29 The Quest for Certainty by John Mauldin of Millennium Wave Advisors
The last two weeks we have been looking at the problems with models. First we touched on what I called the Economic Singularity. In physics a singularity is where the mathematical models no longer work. For example, models based on the physics of relativity no longer work if one gets too close to a black hole. If we think of too much debt as a black hole of sorts, we may understand why economic models no longer work. Last week, in "The Perils of Fiscal Cliff," we looked at the use of fiscal multipliers by economists in order to argue for or against governmental economic policies.
2012-10-29 A Moderate Recovery More Of The Same by Scott Brown of Raymond James
The advance estimate of 3Q 12 GDP growth was not far from expectations. Consumer spending growth was moderately strong, while business fixed investment was a bit weak. The details suggest that some of the headwinds may be abating, although risks are tilted to the downside.
2012-10-29 Velocity, Uncertainty & the Economy by Brian Wesbury, Bob Stein of First Trust Advisors
Recently we lifted our recession odds to 25% from 10%. For some, this was worrisome. In recent weeks we've been asked, "If you guys get a little bearish on the economy, after being bullish for so long, shouldn't I get really nervous?" Our answer to this question is "no."
2012-10-29 Waiting for Treasuries to Reverse Course by Chris Maxey, Ryan Davis of Fortigent
In the years since the global financial crisis, investors have funneled money into fixed income securities. This year alone, more than $260 billion found its way into fixed income mutual funds. In an environment desperate for yield-oriented solutions, such demand is not surprising. What might be considered surprising, however, is investors' willingness to embrace such yield with extraordinary risk attached.
2012-10-29 The White Hurricane by Jeffrey Saut of Raymond James
I revisit The White Hurricane this morning because it potentially looks like another 100-year storm is heading pretty close to Manhattan. So in addition to dealing with the Benghazi scandal, Syrian atrocities, Euroquake, the "fiscal cliff," a stalled U.S. economy, softening earnings momentum, waning revenues, a dysfunctional government, the nastiest campaign I have ever seen, and who Taylor Swift should date next, Wall Street now has to contend with the potential of being flooded out.
2012-10-26 October 2012: Fixed Income Investment Outlook by Team of Osterweis Capital Management
Like last year, this summer's quarter was eventful. Investors entered the quarter with high expectations that the European Central Bank (ECB) and Federal Open Market Committee (FOMC) would provide the markets with more monetary largesse. On July 26th, Mario Draghi, President of the ECB, vowed to "do whatever it takes" to preserve the euro. Risk assets then began an anticipatory rally heading into some key events in mid-September.
2012-10-26 October 2012: Equity Investment Outlook by Team of Osterweis Capital Management
Equity and other "risk" assets rallied in the third quarter in anticipation of further monetary easing by central banks around the world. The prospect of increased liquidity from the central banks appears to have focused investor attention, at least temporarily, away from the generally softer economic data that continue to emerge from Europe and Asia.
2012-10-26 ECRI Weekly Leading Index: Running in Place by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose fractionally in the numbers released today. It is now at 126.8, up from last week's 126.6 (revised from 126.7). However, the WLI growth indicator (WLIg) slipped slightly in expansion territory, not at 6.0, down from last week's 6.1. WLIg has now spent nine consecutive weeks of in expansion territory. But essentially the WLI has been running in place for the past five weeks.
2012-10-26 Don't Fear a Normal Gold Correction by Frank Holmes of U.S. Global Investors
Dont let the short-term correction fool you into selling your gold and gold stocks. The dramatic increase in money suggests that monetary debasement will continue, and in addition to all the above drivers, these are the positive dynamics driving higher prices for gold and gold stocks.
2012-10-26 What Now? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
The market appears to be in a "wait-and-see" mode in advance of the elections, but looking beyond November 6th is important for investors. The election is only one piece of the puzzle, and certain aspects of the political landscape likely won't be much clearer after Election Day. Earnings season has been somewhat disappointing, even though there was a relatively low bar to hurdle. We see more signs that the slowdown in the United States may be ending, however, with strength in housing particularly noteworthy.
2012-10-26 Weekly Economic Commentary by Carl Tannenbaum, Asha Bangalore and James Pressler of Northern Trust
Fiscal policy is a matter of multiplication. US GDP growth accelerated in the third quarter, but remains less than ideal. Recent reports out of China reassured the markets, but underlying trends are not so promising.
2012-10-25 Cheap Debt is Good News for Stocks by Scott Minerd of Guggenheim Partners
The eventual return of leveraged buy-outs (LBOs) and an uptick in mergers and acquisitions (M&A) should give investors further reason to be bullish on stocks.
2012-10-25 Third Quarter EPS: A Harbinger for 2013? by Robert McConnaughey of Columbia Management
Prospects for this quarter's results are being very closely scrutinized. After healthy growth in Q1, Q2 results proved quite sobering, as sales decelerated and operating leverage proved hard to come by.
2012-10-25 October 2012 Newsletter by Harold Evensky of Evensky & Katz Wealth Management
Oh the joys of driving to a baseball game; sitting in endless traffic four miles from the stadium, inching past full lot after full lot, or not finding your car when it's time to go home (was it D-4 or 404 Green?). Now you can streamline your parking experience with ParkWhiz, a Chicago-based company that's recently gone national. This and other missives from Harold Evensky.
2012-10-25 Do the US Elections Matter for Investors? by Frank Caruso, Robert Brown of AllianceBernstein
Frank Caruso and Robert Brown Pundits across the political spectrum say the health of the US economy and stock market hangs in the balance of this year's presidential election. We found that when it comes to driving the stock market, politics actually takes a back seat.
2012-10-24 Policy at a Crossroads by Investment Strategy Group of Neuberger Berman
On September 13, the Federal Reserve announced a third round of quantitative easing, dubbed QE3, in the hope of providing an additional boost to the slow U.S. economic recovery. Although this latest policy action reinforces the notion that the U.S. is prepared to support its economy for as long as needed, some economists question whether the stimulus can really make a difference. In this issue of Strategic Spotlight, we consider the recent effects of loose monetary policy and whether the Fed has "reached its limit."
2012-10-23 There's New Hope for US Recovery as Early Cyclical Sectors Rebound by Joseph Carson of AllianceBernstein
Something is changing in the US economic recovery. Housing and autos are finally starting to wake up from a recession-induced slumber, and the timing couldn't be better.
2012-10-23 The Perils of the Fiscal Cliff by John Mauldin of Millennium Wave Advisors
In today's letter we'll peek over the Fiscal Cliff and see what economic models can tell us about government spending. And if we have time we'll quickly look at an interesting study that uses economics to predict the outcome of this US presidential election.
2012-10-23 A Tepid Week for Earnings by Matt Rubin of Neuberger Berman
Through the first two weeks of earnings season, corporate results have largely mirrored the releases we witnessed a quarter agoof the 118 S&P 500 companies that have reported to date, only 60% have exceeded their earnings estimates while 29% have surpassed their revenue expectations. This week, we will see financial results from 169 S&P 500 companies, representing 32% of the index market capitalization, which will be well dispersed across all 10 S&P 500 sectors.
2012-10-22 And That's the Week That Was by Ron Brounes of Brounes & Associates
Maybe a four day work week would make some sense? Well, at least, it would have been helpful this week. After a strong start in the equity markets (and a four-day winning streak), the anniversary of Black Monday brought horrid memories of past bearish times and stocks gave up all (most) of their early gains. Major techs reported poor earnings and the Nasdaq struggled more than most as weak PC demand continues to take its toll. Good news...one bad day does not a market make.
2012-10-22 The Data-Generating Process by John Hussman of Hussman Funds
For anyone who works to infer information from a broad range of evidence, one of the important aspects of the job is to think carefully about the structure of the data what is sometimes called the "data-generating process." Data doesn't just drop from the sky or out of a computer. It is generated by some process, and for any sort of data, it is critical to understand how that process works. In the financial markets, the data-generating process is often very misunderstood.
2012-10-22 An Alternate Reality by Robert Stimpson of Oak Associates
The largest positive factor affecting the environment for stock prices this year has been the recovery in the housing sector. After years of struggle, the sector appears to have turned the corner. The housing market had been showing signs of improvement for some time, but the debate as to whether the recovery was legitimate weighed on the group and added to concerns over the economy.
2012-10-22 Politics, Cliff Watching Take Priority in the Short-Term by Bob Doll of BlackRock Investment Management
The US elections are only two weeks away, and the recent polls show a very tight race. There are significant differences, both perceived and real, in the policies of the two candidates and the impact they might have on financial markets.
2012-10-22 More traction...Just Look Through the Earnings by Christian Thwaites of Sentinel Investments
Last week saw an important debate on how the US has fared in the post recession recovery. The short answer is, "not well" if measured by a return to GDP growth trends or per capita income. But the counter, as explained by Reinhart and Rogoff, is "faster than you would expect." We're in the second camp.
2012-10-19 House of Mirrors by Jeremy Boynton of Laureate Wealth Management
Did you ever try to navigate the "House of Mirrors" as a kid at your local carnival? You know the one I mean ---- where you walk through a labyrinth of mirrors designed to confuse your orientation while mocking you with various distortions of your body? If you were particularly skilled, you could use the mirror to your own advantage. What a compelling metaphor for the current state of the financial markets.
2012-10-19 Quarterly Letter by Ron Muhlenkamp of Muhlenkamp & Company
In his latest quarterly letter, Ron Muhlenkamp, president and portfolio manager of the Muhlenkamp Fund, re-examines Europe, China, and U.S. Politics as the major drivers of the markets. On September 7, 2012, Muhlenkamp published a Market Commentary, headlined "Threat of European Banking Crisis Recedes." In it, he discusses the Outright Monetary Transactions program, introduced by the European Central Bank. Mr. Muhlenkamp thinks this program makes credible the ECB's promise to do all it can to keep the Eurozone together.
2012-10-19 Muddling Down the Middle by Josh Thimons of PIMCO
PIMCO expects that the debate over the fiscal cliff will end in fiscal consolidation, but not a fiscal catastrophe. Unfortunately, while the Fed's monetary policy actions have been, by and large, successful in achieving its intermediate-term goal of increasing asset valuations, they have not been effective in influencing real economic outcomes. Our forecast for the drag on GDP from the fiscal cliff in the coming year is roughly negative 1.5%. Improvement in the housing market will only fill a small part in that hole.
2012-10-19 ECRI Weekly Leading Index: Index Slips, But Growth Rises by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index of the Economic Cycle Research Institute declined in the numbers released today. It is now at 126.7, down from last week's 127.6 (revised from 127.7). However, the WLI growth indicator rose further in expansion territory to 6.1, up from last week's 5.7. WLIg has now posted sixteen consecutive weeks of improvement and is at its highest level since May 20, 2011. The divergence between the WLI and its growth derivative is probably attributable to apparent anomaly in the BLS's weekly unemployment data over the past two weeks.
2012-10-19 Global Overview: September 2012 by Team of Thomas White International
Aggressive policy action by the U.S. Federal Reserve and the European Central Bank (ECB) helped lift investor sentiment further in September, even as economic signals from across the world continued to be jaded. The Fed has committed to buy mortgage backed securities and keep interest rates low until U.S. economic growth becomes more vigorous and the unemployment rate declines to more comfortable levels.
2012-10-19 Not by Housing Recovery Alone by Team of T. Rowe Price
Strong August-September housing starts are a clear bricks-and-mortar response to reports of rising buyer traffic, confirming a broad-based cyclical recovery in new housing construction. This trend will contribute 0.4 percentage points (pp) to real GDP growth directly through in construction activity, and perhaps another 0.2 pp indirectly through the consumer purchases of those newly employed in housing-related industries and via wealth effects related to the nascent recovery in house prices.
2012-10-19 Chinese Stocks Looking Like a Bargain by Frank Holmes of U.S. Global Investors
This appears to be a good time to be investing in China, as stocks are historically cheap. Chinese stocks are also cheap compared to emerging markets.
2012-10-19 ECB Needs to Rescue German and French Banks More than European Periphery: Global Macro View by George Bijak of GB Capital
Whenever we talk about rescuing overleveraged Europe it is always about Spain, Italy, Portugal, Ireland, and Greece the European periphery loaded with debt that they cannot possibly repay. But a closer look at the recent IMF data reveals that German and French banks need rescue more than anybody
2012-10-18 Investment Outlook 2013: "ABCD" Investing: Anything Bernanke Cannot Destroy by Cliff Draughn of Excelsia Investment Advisors
The Ben Bernanke and Mario Draghi concert gave the markets a double shot of their love in the month of September by promising to print as much money as needed to finance the debts of their respective countries. Ever since the financial fraternity party ended in 2008 and the world began deleveraging its massive credit hangover, the global markets have been hooked on the next shot of love from the central bankers.
2012-10-17 Great US Companies: Tomorrow's Foundation by Bill Smead of Smead Capital Management
Fears of a collapse in European economies and of a US recession subsided. Residential real estate appears headed for a comeback (Surprise?) in the US and nothing gives American consumers more confidence than knowing that their house is becoming more valuable.
2012-10-17 Fuzzy Math from the Continent of Peace by Christian Thwaites of Sentinel Investments
Whoops! The IMF made two announcements last week that caught our attention. But to set up the joke in all this, it's worth remembering that for decades the IMF preached austerity economics to any country that needed balance of payments assistance.
2012-10-17 Economics is Such a Drag by Fred Copper of Columbia Management
At least in Europe it is. Central bankers around the world are doing everything they can to try and pump up the global economy. Mario Draghi, President of the European Central Bank, has been incredibly aggressive and creative in trying to rectify the imbalances plaguing Europe.
2012-10-17 Emerging Europe: Third Quarter 2012 Economic Review by Team of Thomas White International
In its recent economic assessment, the European Bank for Reconstruction and Development (EBRD) said it expects growth to slow down during the year in member countries such as Russia, Poland, Hungary, and Turkey as the effects of the Euro-zone crisis spills over. The bank said many of these countries have already seen lower growth, but Russia especially is affected by falling commodity prices. Striking a similar note, the International Monetary Fund in its World Economic Outlook said emerging economies of the world are at risk should the developed economies experience a continued slowdown.
2012-10-17 Q3 Investor Letter by Team of HORAN Capital Advisors
At the beginning of the third quarter, investors following the "sell in May" strategy felt vindicated as the S&P 500 Index declined over 9.0% from May 1st to June 4th. The June 4th date turned out to be the intra-year market low and the equity rally was almost uninhibited throughout the remainder of the third quarter. We have been experiencing mixed global economic data over the past several months and in response, the Federal Reserve announced a third round of quantitative easing. While the market initially responded favorably, it ultimately declined through the end of the quarter.
2012-10-17 Rise Up: US Soft Patch Appears to be Ending by Liz Ann Sonders of Charles Schwab
By definition, inflection points are characterized by maximum weakness. Many US economic readings are again suggesting notable signs of life. Will the improvement be enough to offset the "fiscal cliff"?
2012-10-16 The New World of Credit by Michael Lewitt, Editor, The Credit Strategist (Article)
In an era in which economies are driven by the creation of fiat money by central banks, and where the base of hard money is dwarfed by the volume of outstanding debt, every form of capital is tied to credit. In 1919, William Butler Yeats famously wrote that 'the center cannot hold.' A century later, there is no center.
2012-10-16 Inflation: Washington is Blind to Main Street's Biggest Concern by Peter Schiff of Euro Pacific Capital
Journalists, politicians and economists all seem to agree that the biggest economic issue currently worrying voters is unemployment. It follows then that most believe that the deciding factor in the presidential race will be the ability of each candidate to convince the public that his policies will create jobs. It seems that everyone got this memo...except the voters.
2012-10-16 Bank of England Still Aiming at the Wrong Target by Darren Williams of AllianceBernstein
The UK is celebrating a near three-year low in consumer price inflation, but we think the Bank of England (BOE) should be more worried about the role that money and credit play in the inflation process.
2012-10-16 The ABCs of China's Share Markets by Mark Mobius of Franklin Templeton Investments
A shares, B shares, H shares. Chinese equity listings can be confusing to global investors. I'm often asked what I think about a particular share market in China, why one is outperforming others, and which to invest in. I can't tell you what to invest in, but I can give you some information which I hope will help you discern what choices make sense for you.
2012-10-15 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Global equity markets performed well in the third quarter after posting modest losses in the second quarter. The soft second quarter, which followed back-to-back double-digit quarterly gains, proved to be a pause rather than a signal that the equity bull market was ending. Though defensive sectors garnered favor in the second quarter, economically sensitive sectors have generally led performance this year, with technology, financials and consumer discretionary topping the list year to date.
2012-10-15 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
Aggressive policy responses from major central banks were dominant forces in the third quarter. The European Central Bank (ECB), Federal Reserve (Fed), Bank of Japan (BoJ) and other central banks took decisive action, prompted by the escalating European sovereign debt crisis, slowing global growth, financial market volatility, and the impending US "fiscal cliff."
2012-10-15 Seven Varieties of Deflation by A. Gary Shilling of Gary Shilling & Associates
Inflation in the U.S. has historically been a wartime phenomenon, including not only shooting wars but also the Cold War and the War on Poverty. That's when the federal government vastly overspends its income on top of a robust private economyobviously not the case today when government stimulus isn't even offsetting private sector weakness. Deflation reigns in peacetime, and I think it is again, with the end of the Iraq engagement and as the unwinding of Afghanistan expenditures further reduce military spending.
2012-10-15 Economic Singularity by John Mauldin of Millennium Wave Advisors
There is considerable disagreement throughout the world on what policies to pursue in the face of rising deficits and economies that are barely growing or at stall speed. Both sides look at the same set of realities and yet draw drastically different conclusions. Both sides marshal arguments based on rigorous mathematical models "proving" the correctness of their favorite solution, and both sides can point to counterfactuals that show the other side to be insincere or just plain wrong.
2012-10-15 And That's the Week That Was by Ron Brounes of Brounes & Associates
Though investors seemed to overlook the negative earnings projections for the third quarter, the initial releases finally brought out the sellers. While the naysayers had been drowned out by the optimism of the Fed moves, the early results and management warnings prompted investors to sell (and sell and sell) as the major equity indexes each plunged over 2% in what was considered the worst week since June. Heck even a "cheery" Joe Biden couldn't save the markets this week.
2012-10-15 Commodity Inflation Complicating Pro-Growth Policies by Ryan Davis of Fortigent
The return of commodity inflation raises several questions, primary among them being the impact it will have on emerging markets. While rising commodity prices are generally bullish for equity prices in emerging markets, it may also inhibit central bank flexibility at a time when many developing countries are experiencing decelerating economic growth. This issue was paramount in 2010, leading to underperformance in many EM stock markets. Since then, however, commodity prices have generally moved sideways, allowing those fears to subside.
2012-10-15 ProVise Bullets by Ray Ferrara of ProVise Management Group
Some recent research by InvesTech Research shows that the performance of the Dow Jones Industrial Average can indicate who will win the White House. James Stack, President of InvesTech recently released a study that showed in elections since 1900 90% of the time the Dow has correctly predicted the outcome of the election based on its returns from Labor Day until Election Day. If the Dow posts a positive return during this time period, the party in power keeps the White House and if the return is negative, they do not
2012-10-15 The New Investment World is Not Near, It's Here by Russ Koesterich of iShares Blog
The recent pace and magnitude of economic change has left many investors disoriented, to say the least. Russ K explains why this new environment is unlikely to change any time soon, which may have implications for investors' current and long-term strategies.
2012-10-12 China's Thousand Talents by Christian Halvorsen of Matthews Asia
Employment is one of many paradoxes of mainland China. The country has been adding approximately 6 million new college graduates annuallymore than any other country. Despite the fierce competition for entry-level work, China faces the additional challenge of attracting enough skilled labor in many key industries. Compounding this problem is the fact that China has for years experienced a severe brain drain, often with Chinese citizens staying abroad after completing their overseas studies.
2012-10-12 ECRI Weekly Leading Indicators: Time to Recant the Recession Call? by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) made a strong advance in the numbers released today. It is now at 127.7, up from last week's 126.2 (revised from 126.3). See the WLI chart below. The WLI growth indicator (WLIg) now marks its eighth week in expansion territory at 5.7, up from last week's 4.6. WLIg has now posted fifteenth consecutive weeks of improvement and is at its highest level since May 27, 2011.
2012-10-12 Teetering on the Edge? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
Concerns about a possible US recession remain elevated in light of the pending "fiscal cliff," resulting in some lackluster stock market action. The fiscal cliff and uncertainty around tax and regulatory policy appear to be influencing business decisions to the detriment of economic growth. While worst-case scenarios for Europe may have been taken off the table by the ECB, Spain's reluctance to ask for aid is causing consternation. And although we see continued weak growth in China, signs indicate the global slowdown may be turning around.
2012-10-12 Chinas Pyramid of Power by Frank Holmes of U.S. Global Investors
We've been able to witness Chinas incredible growth, with GDP averaging 10 percent per year and more than 500 million people moving out of poverty over the past 30 years. Now after three decades of tremendous expansion, this new generation of leaders will have to carefully maneuver the country into the next decade, towing the line between maintaining the stability created during the previous Hu-Wen administration and continuing the political and economic reform necessary to adjust to the countrys slowing growth.
2012-10-12 U.S. Economic and Interest Rate Outlook - October 2012 by By Carl Tannenbaum and Asha Bangalore of Northern Trust
Budget negotiations in the US and Europe are attempting to balance austerity, prosperity, and posterity. US exports and imports are showing the strains of sluggish conditions overseas. Our updated economic forecast reflects some "cliff" effects, but not a renewed recession.
2012-10-12 The Golub Group Commentary by Team of The Golub Group
High-quality businesses that have the ability to pay and increase their dividends are even more attractive in this low yield environment and the valuations of these businesses are cheap on an historic basis and relative basis to the alternatives.
2012-10-11 Unemployment Surprise or Conspiracy? by Marie Schofield of Columbia Management
The blogosphere is overflowing with conspiracy theories about the household survey unemployment data in this pre-election period. I do not give any credence to these stories and believe the data is the data. But it needs to be interpreted carefully as it can be complex and volatile.
2012-10-10 Beyond the Fiscal Cliff: the Dollar At Risk? by Alex Merk of Merk Funds
Looking beyond the fiscal cliff, we are afraid the greenback may be at risk no matter who wins the election. We examine the risk to the U.S. dollar in the context of the likely policies pursued under either an Obama or Romney administration.
2012-10-10 Pacific Basin Market Overview by Team of Nomura Asset Management
Regional equity markets remained largely directionless and volatile during the third quarter amid the summer trading lull. Government policy action towards the end of the quarter triggered the biggest market moves. However, the euphoria was short lived following the announcements of the European Central Bank's Outright Monetary Transactions and the Federal Reserve Board's third round of quantitative easing.
2012-10-10 And That's the Week That Was by Ron Brounes of Brounes & Associates
Don't bury Candidate Romney quite yet. The man looks to be in come-back mode and he has some experience in this area. Remember when Republicans preferred anyone but Mitt (Perry, Bachmann, Cain, Gingrich, Santorum) and yet he emerged victorious from the primary season.
2012-10-10 And That's the Quarter That Was by Ron Brounes of Brounes & Associates
The "quarter of Bernanke" left investors optimistic over the past three months despite the ongoing concerns at home and abroad (and a critical election).
2012-10-10 Third Quarter Surge Caps 12-Month Relentless Risk Rally by Douglas Cote of ING Investment Management
Despite the rally of the past year, equity markets still look cheap. Weakening manufacturing data suggest the 12-quarter streak of positive earnings growth may come to an end in the third quarter.
Housing has turned the corner, providing consumers with cause for confidence. Though fundamentals have wavered a bit, we are constructively bullish on risky assets, as "successful investing demands a choice between prudent risk control and outright risk avoidance".
2012-10-09 A Small Business Complex by Chris Maxey, Ryan Davis of Fortigent
Despite the release of the September labor report on Friday, small business owners seemed to take the biggest proportion of the spotlight last week. According to the Huffington Post, Romney and Obama mentioned the phrase "small business" a total of 29 times throughout the Presidential debate. The issues and importance placed on small business are unlikely to be as cut and dry as both candidates made them seem.
2012-10-09 Riding Into The Sunset or a Brick Wall? by Peter Schiff of Euro Pacific Precious Metals
A month ago, I presented the case for why Fed Chairman Bernanke would have strong motivation to launch another round of quantitative easing (QE) before the election. In short, it would save him his job. Now, I didn't predict with certainty that he would do so - only the few men at the FOMC knew that for sure - but it seemed likely. Shortly thereafter, Bernanke not only announced more stimulus, but promised to keep it flowing to the tune of an additional $40 billion a month until conditions improve.
2012-10-09 Expect Economic Sluggishness to Persist by Bob Doll of BlackRock Investment Management
Although the economy does seem to have improved a bit in recent months compared to where it was in the second quarter, growth levels in both the United States and around the world will likely remain subpar at least through the middle of next year. The base case for the United States appears to be the economy continuing to grow at around 2% (perhaps a notch higher) over the course of 2013. This growth level would be contingent on avoiding the full force of the fiscal cliff and would be underpinned by a recovery in housing and a pickup in capital spending levels.
2012-10-09 This Fortress built by Nature for Herself by Dennis Gibb of Sweetwater Investments
It has been some time since I have taken keyboard in hand in any attempt to inform anyone of my thoughts on the world of investing. I am taking the time to write now because we are embarked on some events that are, in my humble opinion, truly historic. As these events play out the United States may not be a fortress built by nature for herself. So hang on this could get rough and as usual it will be opinionated with a different perspective.
2012-10-09 High Yield and Equities Mind the (Equity) Gap by Hozef Arif of PIMCO
High yield bonds returned 12% through September, even as corporate defaults continued to rise, albeit gradually. While the default rate is an important market metric, it has been a lagging indicator of high yield bond total return performance. Investors should closely monitor equity markets for signals on where high yield spreads may go.
2012-10-09 Global Investment Outlook by Team of Aberdeen Asset Management
Global growth remains positive but momentum is lacking. Central bank action has eased tensions. Markets are calmer but future direction is uncertain
2012-10-08 House Prices on the Rise by Dmitri Rabin of Loomis Sayles
After four years of consecutive declines, US housing prices appear to be stabilizingand even beginning to rise. While we expect the recovery to be slow and geographically uneven, we do believe that US house prices bottomed in the first quarter of 2012 and could grow approximately 2-3% per year through 2015. In our view, these slow increases in house prices will gradually help consumers repair their balance sheets and increase demand for housing, supporting homebuilders and other housing-related industries.
2012-10-08 China: Towering Ambitions by Team of Thomas White International
The proposed Sky City will have schools, hospitals, homes, stores, and offices.
2012-10-08 The Great Debate by John Petrides of Advisors Capital Management
The first of three presidential debates kicked off last week with each candidate portraying the core fundamentals of their respective party, neither of which backed down from their beliefs. As the candidates continue to jockey for sound bites, a debate among investors continues to rage: What will happen to the market after the election?
2012-10-08 The Unemployment Surprise by John Mauldin of Millennium Wave Advisors
The unemployment number surprisingly dropped to 7.8% last Friday, and the shoot-from-the-hip crowd came out in force. To say that the jobs report was met with skepticism would be a serious understatement. The response that got the most immediate airplay was ex-GE CEO Jack Welch (who knows a few things about making a number say what you want it to say) tweeting, "Unbelievable job numbers ... these Chicago guys will do anything ... can't debate so change numbers."
2012-10-08 3Q Financial Markets Review and Outlook by Team of Managers Investment Group
The summer months were dominated by the anticipation of a Federal Reserve (the Fed) action in the form of another round of quantitative easing in response to muted economic growth and a sluggish domestic job market. Investors' expectations were met when the Fed announced their third round of quantitative easing (QE3) in September with a promise of increased purchases of agency mortgage-backed securities and an extension of the promise to keep short-term interest rates at "exceptionally low levels" until mid-2015.
2012-10-05 Economic Recovery and Debt Reduction: Faster, Please! by Chris Molumphy of Franklin Templeton Investments
It's tough to be patient in an age of instantaneous communications and instant gratification. We all want immediate answers to our questions and quick fixes to our problems. When it comes to real world tangles like the global economy, though, Chris Molumphy, CIO of Franklin Templeton Fixed Income Group, reminds us that patience, not a magic pill, is the order of the day when it comes to European and U.S. struggles to cure their economic ailments. He's realistic about these problemsbut isn't waiting to act where he does spot investment opportunities.
2012-10-05 ECRI Weekly Leading Indicators: Mixed Signals in Latest Data by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) slipped fractionally after eight consecutive weeks of growth. It is now at 126.3, down from last week's 126.6 (revised from 126.7). See the WLI chart below. However, the WLI growth indicator (WLIg) now marks its seventh week in expansion territory at 4.7, up from last week's 3.8. WLIg has now posted fourteen consecutive weeks of improvement and is at its highest level since June 3, 2011.
2012-10-05 When Do You Ignore Your Gut? by Team of Franklin Templeton Investments
Anyone who took an introductory psychology class probably remembers the classic study in which different people witnessing the same crime each report a different take on what happened. Though each presumably sane, sober person witnessed the events with his or her own two eyes, individual expectations and biases influenced how they perceived what happened. Sure, you say, but what does this have to do with investing? Well, it turns out that our individual expectations and biases influence how we view investments, too.
2012-10-05 Market Respite by Richard Michaud of New Frontier Advisors
In a period of looming macroeconomic risks and great investor uncertainty the quarter resulted in solid gains in most global equity markets. The Dow was up 4.3%, the S&P 500 5.8% and the NASDAQ 6.2% for the quarter. Year-to-date the Dow was up 10%, the S&P 14.5% and the NASDAQ 19.6%. The news internationally was encouraging though mixed with European indices up 8% for the quarter and 11.8% for the year while Pacific indices were up 2% for the quarter and 7.4% for the year.
2012-10-05 Keep up the pressure the US jobs crisis is not yet over by Mohamed El-Erian of PIMCO
The monthly US employment report has evolved steadily: once a lagging indicator of the underlying state of the economy, it is now seen more as a leading indicator of economic, political and social trends. Friday's data tell us, for once, rather good news.
2012-10-04 Market Dimensions by James Damschroder of Gravity Capital Partners
An interesting and perhaps volatile fourth quarter is upon us. We have elections and the fiscal cliff straight ahead. Markets dislike uncertainly, making asset prices potentially marginally lower.
2012-10-03 Understanding How "Debt Deleveraging" Works by Gary Halbert of Halbert Wealth Management
For many years, I have warned that our massive explosion in federal debt (up 50% just since Obama took office) would one day stifle economic growth. Obviously economic growth is currently stifled, what with the weakest post-recession recovery in decades. But the question remains as to whether our massive national debt and trillion-dollar budget deficits are the main reason for the disappointing recovery.
2012-10-03 The Fed Plays All Its Cards by Peter Schiff of Euro Pacific Capital
There never really could be much doubt that the current experiment in competitive global currency debasement would end in anything less than a total war. There was always a chance that one or more of the principal players would snap out of it, change course and save their citizenry from a never ending cycle of devaluation. But developments since September 13, when the U.S. Federal Reserve finally laid all its cards on the table and went "all in" on permanent quantitative easing, indicate that the brainwashing is widely established and will be difficult to break.
2012-10-03 Stocks Are Taking a Breather from the Rally by Bob Doll of BlackRock Investment Management
To at least some extent, the pause in the rally we have seen over the past couple of weeks can be attributed to some profit-taking on the heels of a significant multi-month uptrend (US stocks rose close to 6% in the third quarter). It is also likely, however, that investors are coming to grips with the fact that the world continues to face some serious risks and are recognizing that not all of the world's problems can be solved by central bank action.
2012-10-03 Where are the Global Winners? by Louie Nguyen of Soledad Investment Management
In today's ber-dreary and volatile global market condition, it can be difficult to imagine how the various markets around the world will eventually right themselves. It is worth noting, however, that the global market has righted itself before, from predicaments that seem just as, if not even more, dire than what we face today. Think Thailand and Korea in 1997, Mexico in 1994 and the Dot-Com Bubble in 2000. The following is the latest in our annual Global Price to Earning (P/E) analysis. It is part of our on-going effort to find compelling investments from around the world.
2012-10-03 Don't Bring Me Down: Not Swayed by Pessimism at BCA Conference by Liz Ann Sonders of Charles Schwab
We present highlights, key takeaways and perspective on the recent BCA Research Investment Conference. The eurozone crisis and China's slowdown remain risks, but are somewhat offset by optimism about US markets. Politics will remain a force underpinning uncertainty and volatility.
2012-10-03 Let the Good Times Roll by Jim Tillar, Steve Wenstrup of Tillar-Wenstrup
To summarize our current position, while we acknowledge there are many risks we feel those are already reflected in the market and stock prices will drift higher as investors begin to recognize the positive developments outlined above. Analysts remain very bearish and continue to recommend a below-average weighting to stocks. Moreover, despite strong returns from equities investors have pulled money from U.S. stock funds for 18 straight months and are largely under-allocated when compared to history.
2012-10-03 A Funny Thing Happened On The Way To Economic Armageddon by Scott Colyer of Advisors Asset Management
After the recent announcement by the U.S. Federal Reserve (Fed) that they would begin to engage in what has been deemed "QE3," there has been a lot of skepticism that such a plan could actually work. The Fed is attempting to carry out their dual mandate of price stability and full employment by engaging in a new round of asset purchasing targeted at the mortgage market.
2012-10-02 Confronting the Unemployment Crisis by Robert Huebscher (Article)
Policymakers seeking a path to economic recovery must first answer one crucial question: Is our persistently high unemployment structural or cyclical? If it's cyclical, then monetary and fiscal measures designed to boost consumer spending will restore the US to full employment in due course. But if we face a structural problem, then quick fixes won't work until we correct deeper imbalances that have left 12.5 million Americans without jobs.
2012-10-02 Pottersville by Tony Crescenzi of PIMCO
The excessive use of debt fueled by money printing was the pathway to the global debt crisis. Fed Chairman Ben Bernanke, an expert on the Great Depression, understands the ravages of debt deflation and his every action has been to prevent it from occurring. Greater care must be taken in the future to ensure that our fiat based, fractional reserve system does not run amok. This is why regulators are demanding that banks raise capital, reduce their proprietary trading activities, and shift their business models closer to a utility-style model.
2012-10-02 Are Markets Ready for a Correction? by Chris Maxey, Ryan Davis of Fortigent
Entering the final quarter of 2012, many investors may find themselves apprehensive about the outlook for markets and the broader economy. While the pace of economic disappointment appears to have slowed down and actually reversed according to the Citigroup Economic Surprise Index actual data levels continue to suggest an anemic economic state.
2012-10-02 QE and the Equity Market: Is the Fed Driving or Along For the Ride? by Patrick Lawler of PIMCO
Federal Reserve officials have said several times that among other benefits, its quantitative easing (QE) programs have helped boost U.S. equity prices. Based on our analysis, QE has not been the driving force behind rising equity prices in recent years. How does the Federal Reserve measure the success of its asset purchase programs, or quantitative easing (QE), since the 2008 financial crisis QE1, QE2, Operation Twist (OT) and QE3?
2012-10-01 More Pieces of the Puzzle by Scott Brown of Raymond James
Recent economic data have been mixed. Consumer attitude measures have improved, but manufacturing figures have softened. On balance, the numbers are consistent with more of the same: a positive, but lackluster-to-moderate pace of growth.
2012-10-01 Typical Post-QE by Christian Thwaites of Sentinel Investments
We have typical post-QE market behavior. GTs sold off, then rallied. Equities rose, then flattened. The dollar sold off then strengthened. Gold crept up. Other commodities rose, yawned and gave up most of their gains. Earlier QEs took several months for this to play out. It now all happens in quick time.
2012-09-28 The Danger of Safety by Owen Murray of Horizon Advisors
Investors have become cautious and anxious following the bear market of the past twelve years and the recent bouts of extreme volatility. We examine risks and opportunities in light of the difficult market environment in our special report The Danger of Safety."
2012-09-28 ECRI Weekly Leading Index Growth at Highest Level Since June 2011 by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the eighth consecutive week, now at 126.7, up from last week's 125.3 (revised from 124.7). See the WLI chart below. The WLI growth indicator (WLIg) now marks its sixth week in expansion territory at 3.8 (up from last week's 2.7). It has now posted thirteen consecutive weeks of improvement and is at its highest level since June 10, 2011.
2012-09-28 The Housing Market: For Real or Fakeout? by Jeffrey Dow Jones of Jones & Company
Most of you guys know that I bought a new house last summer. I spent two years looking at properties with the lovely (and patient!) Mrs. Concord, and eventually we found one that had what we each were looking for. My #1 criteria was value. Not price, but value.
2012-09-28 Schwab Market Perspective: Disrespected RallyCan It Continue? by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
US equities are trading near five-year highs but numerous measures show investors remain skeptical. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus. The enthusiasm following the Fed's announcement of more quantitative easing was short-lived, although the summer rally in stocks could be at least partially attributed to anticipation of more stimulus.
2012-09-28 Look Out Below! The Fiscal Cliff Steepens by Russ Koesterich of iShares Blog
Despite the recent happy headlines, most measures of US economic activity point to slower growth, which makes the threat of the fiscal cliff pushing the US economy into a recession even greater. Russ K explains how investors can prepare.
2012-09-27 PIMCO'S Cyclical Outlook for Asia: Structural Slowdown Shaping Near-Term Growth Dynamics by Tomoya Masanao, Robert Mead, Ramin Toloui of PIMCO
Rather than a hard landing for China, we foresee a structural downshift that could be called a "New Normal with Chinese characteristics." Australia has considerable scope for additional rate cuts and more expansionary fiscal policy to address regional weaknesses. The Japanese economy will be affected by weak economic growth in China, which will add more pressure for the Bank of Japan to respond.
2012-09-26 The Predictive Power of Dividends by Bill Smead of Smead Capital Management
In an article published by Marketwatch.com on September 21, 2012, Mark Hulbert asks the question, "Where do you think the stock market will be ten years from now?" It was as a lead into the results of a predictive model from Rob Arnott, founder of Research Affiliates. His model argues that current dividend yields go a long way to predicting ten-year forward returns. Other than a big glitch in the 1990's, it appears to have some value.
2012-09-26 Bernanke Put: Beware of Easy Money by Alex Merk of Merk Funds
Central bankers around the world may be providing a backstop to the financial markets in much the same way Greenspan did during the "Goldilocks" years, but when the short-term euphoria wears off, will the negative repercussions be even more severe?
2012-09-26 Is China Becoming Less Competitive? by Dara White of Columbia Management
Concerns about the pace of economic growth in China and the imminent change in leadership have continued to escalate. At the beginning of the year, we highlighted the potential for the rate of economic growth to slow significantly. I recently visited Asia to get a clearer perspective on the situation in China specifically, and Asia generally.
2012-09-26 Are BRICs Hitting a Growth Wall? by Mark Mobius of Franklin Templeton Investments
A global pattern of easing economic growth in the first half of 2012 has impacted the "BRIC" nations Brazil, Russia, India and China. However, I don't think the BRIC economies have hit a brick wall. While some market participants have been waiting impatiently for governments to undertake further stimulus measures, others have wondered whether something more fundamentaland less within governmental controlmight be at work.
2012-09-25 Jim Bianco – Markets Will Benefit From Disastrous Fed Policy by Robert Huebscher (Article)
The Fed's quantitative easing policy will be 'disastrous,' according to Jim Bianco, but prices for riskier assets will rise over the near term as a result. In remarks last week, Bianco, the head of the Chicago-based economic research firm that bears his name, also gave the US economy a near-failing grade of C-, and warned that inflation will be 'problematic.'
2012-09-25 Stocks Should Overcome Hurdles to Continue the Bull Market by Bob Doll of BlackRock Investment Management
Although global economic data has been relatively weak in recent years, risk asset prices have nonetheless advanced. We would attribute this trend to the fact that weak economic growth does not, by itself, limit the potential for risk assets. In our view, the liquidity-driven reflationary policies of the world's central banks have been a more important factor for asset prices than economic growth levels have been.
2012-09-24 And That\'s the Week That Was by Ron Brounes of Brounes & Associates
These days, the various central bankers keep trying to outdo themselves with new stimulus deals. This week, Bank of Japan followed the Fed leads with an expanded bond buying program. Perhaps the moves will reap dividends and the global economy will surge to higher highs in the not so distant future. (Or perhaps the "easy money" strategies will have little impact long-term and lead to periods of inflation and asset bubbles.) Apple's latest "new new" thing remains in hot demand (but can supplier keep up?).
2012-09-24 If youre a partisan Republican, skip this commentary by David Edwards of Heron Financial
In June after stocks slumped over concerns about Europe, we wrote "US stocks however, were a good value a month ago and a better value today. With the weak hands forced out by the recent 10% pullback, we are moving forward with investments in stocks." With two and half months remaining in the year, our "buying panic" forecast is starting to look prescient.
2012-09-24 Some Parting of the Clouds by Charles Lieberman of Advisors Capital Management
The ongoing rally in the equity market and corresponding rise in Treasury yields mirror the slow improvement in financial market conditions in Europe and moderate gains in domestic economic data. This still leaves more progress to be made on both fronts, but uncertainty remains elevated over the fiscal cliff, the threat of military conflict in the Middle East, the upcoming election, and tax policy.
2012-09-24 Clear Progress by Christian Thwaites of Sentinel Investments
Two weeks into a new era of ECB and Fed policy and it is a tie between the gains in equities, with the US and European broad indexes up around 2.2%. But it's the lack of follow-through and opacity of the ECB moves which are perhaps the most disconcerting and so, probably, the more short-lived. While both central banks reported easing in the form of securities purchases they had very different origins and aims.
2012-09-24 Housing Recovery Still Young by Brian Wesbury, Bob Stein of First Trust Advisors
The turnaround in the housing market is perhaps the brightest spot in an otherwise tepid economic recovery. Home sales, home building, and even home prices are all headed up. In the past twelve months, sales of existing homes are up 9% while sales of new homes are up 25%. Housing starts are up 29%. The two most prominent home price measures, Case-Shiller and FHFA, are both up at about a 7% annual rate in the past six months.
2012-09-24 Who Deserves Blame (Or Credit) For Current Tax Policy? by Ryan Davis of Fortigent
U.S. Presidential candidate Mitt Romney received sharp criticism this week for his comments regarding the "47% of people who pay no taxes." Regardless of one's political stance, Romney's comments were instructive in highlighting a very real problem. The notion that Republicans or Democrats deserve blame for the current challenges is shortsighted, however, because both parties were contributing members to the current legacy.
2012-09-22 QE Infinity: Unintended Consequences by John Mauldin of Millennium Wave
Last Monday an op-ed in the Wall Street Journal, penned by five PhDs in economics, among them a former Secretary of the Treasury and an almost-guaranteed Nobel laureate (and most of them former members of the President's Council of Economic Advisors) minced no words in excoriating the current QE policy. We will look at that op-ed in detail below. The point is that there are grave reservations about the current policy among some very serious policy makers.
2012-09-21 The Hard Road Ahead for Housing by Carl Tannenbaum of Northern Trust
The housing sector has come a long way, but has a long way to go. Mortgage underwriting standards have reverted to much more conservative norms, and housing policy is very much in a state of flux. The result: renting is on the increase, and may enjoy renewed popularity for some time.
2012-09-21 ECRI Weekly Leading Index Growth at Highest Level Since July 2011 by Doug Short of Advisor Perspectives (dshort.com)
The Weekly Leading Index (WLI) of the Economic Cycle Research Institute (ECRI) rose for the seventh consecutive week, now at 125.4, up from last week's 124.7 (revised from 124.9). See the WLI chart below. The WLI growth indicator (WLIg) now marks its fifth week in expansion territory at 2.7 (up from last week's 1.9). It has now posted twelve consecutive weeks of improvement and is at its highest level since July 29, 2011.
2012-09-20 QE n+1 What The Fed Is Really Up To by JJ Abodeely of Sitka Pacific Capital Management
As I survey the news stories and other analysis on the Feds recent announcement, most fall short of describing what the Fed is really up to. Here is a hint: it's not really about employment. It's not really about "price stability" or really about growth either.
2012-09-19 Us and Them: Household Sector Deleveraging vs. Public Sector Leveraging by Liz Ann Sonders of Charles Schwab
The eruption of the financial crisis in 2008 unleashed a household deleveraging cycle, triggering unprecedented Fed easing and now QE∞. Next up, government sector deleveraging.
2012-09-19 Bank Loans: Looking Beyond Interest Rate Expectations by John Bell, Kevin Perry of Loomis Sayles
Fixed income investors may be stymied by the current mix of interest rate projections and global macroeconomic news. Interest rates remain near historical lows, and investors continue to move between risky assets and relative safe havens like Treasurys based on the latest market headlines. We believe that bank loans can be a compelling addition to fixed income portfolios in this environment and, more importantly, over the long term.
2012-09-18 Federal Reserve Actions Help the Rally to Continue by Bob Doll of BlackRock Investment Management
The headline news last week was the US Federal Reserve's announcement of a new round of quantitative easing in which the central bank plans to purchase $40 billion of mortgage-backed securities on a monthly basis (without a predetermined end date). The Fed also pushed back the timeframe on how long it will maintain its current zerointerest-rate policy, indicating that the current level of rates should be in effect through the middle of 2015.
2012-09-18 Fed Delivers another Big Dose of QE by Scott Colyer of Advisors Asset Management
Yesterday, the Fed delivered the much anticipated dose of Quantitative Easing (QE) announcing that it would continue to buy U.S. Agency Mortgage Backed Securities (MBS) in an effort to further drive growth in the U.S. economy and decrease the ranks of the unemployed. The monthly purchase rate of $40 billion will be in addition to the already $10 billion that is being reinvested from QE 1&2 in mortgage-backed securities. This new money balance sheet expansion by the Fed accompanies additional guidance that the Fed would stay low on interest rates likely until mid-year 2015.
2012-09-18 Housing Recovery? Try Long Convalescence by Russ Koesterich of iShares Blog
The US Federal Reserve's decision to expand quantitative easing is dramatic, but we don't think it will have a significant impact on the US housing market. While the extra liquidity is supportive of risky assets in the very near-term, lower mortgage rates are not a game-changer for a consumer still struggling with little income growth and too much debt.
2012-09-17 And That's the Week That Was by Ron Brounes of Brounes & Associates
Dr. B. has spoken and investor are happy (though some Republican investors probably have mixed feelings). Though not all economists were on board with QE3, the policymakers looked at the labor market and took action. With promises of more bond-buying and low fund rates into 2015, investors went on a risk asset buying spree and stocks shot up to multi-year highs. So let the over-analysis (and political bickering) begin.
2012-09-17 Charlie Dreifus on the Global Economy and Its Impact on Stocks by Charlie Dreifus of The Royce Funds
Portfolio Manager Charlie Dreifus examines the data from Europe, China, and the U.S. and discusses how it may affect domestic stock prices.
2012-09-17 Ben Wants You To Spend Cash by John Petrides of Advisors Capital Management
This week the Federal Reserve launched its third round of monetary policy easing in as many years. Under QE3 (quantitative easing), the Fed will purchase $40 billion of mortgage backed securities on a monthly basis with the purpose of continuing to fuel the housing market. Under QE3, the Fed said it will keep its zero interest rate policy until mid-2015, with the goal of removing market assumptions of a rising rate environment. The Fed is and always will be data dependent, so all of these actions are subject to change.
2012-09-17 "QE" Stands for Quality Employment by Kristina Hooper of Allianz Global Investors
The Fed's expansive and open-ended quantitative easing program centers on building up a depleted workforce and quickening the pace of the housing recovery, but higher inflation and tight credit could play the role of spoiler. Buying mortgage-backed securities and pushing interest rates lower is designed to boost the housing sector, help loosen lending standards, stimulate corporate spending and increase foreign demand for U.S. products. This is a tall order and there are many "ifs" in this scenario, but the flexibility and breadth of QE3 increases the likelihood of its effectiveness.
2012-09-17 Was QE3 Necessary? It Depends on Who You Ask... by Ken Taubes of Pioneer Investments
Last week Chairman Bernanke and the Fed launched another aggressive stimulus program, QE3, saying that they will buy $40 billion in mortgage debt per month and continue to purchase assets in order to boost growth and reduce unemployment. He also announced that the Fed is not likely to raise rates from the current rock bottom lows until at least mid 2015, vs. 2014 as previously stated.
2012-09-17 A Fed Fueled Rally by Chris Maxey of Fortigent
The week was overshadowed by policy actions from the Federal Reserve, which led to a 2.2% gain in the Dow Jones Industrial Average and a 1.9% increase in the S&P 500 Index.
2012-09-14 Afraid of QE3? Buy Real Assets by Seth J. Masters of AllianceBernstein
We expect to see continued asset-buying announcements from central banks around the world: the ECB last month, the Fed today, the Bank of Japan imminently. The impact of these announcements, and ensuing implementations on the real economy, are likely to be ambiguous at best. However, our research suggests that real assets such as real estate and commodities will profit from asset purchases in the near term and protect from related inflationary risks in the medium term.
2012-09-14 All In by Doug MacKay and Bill Hoover of Broadleaf Partners
Dissatisfied with progress on the jobs front, the Fed went "all in" yesterday in its much anticipated, most recent policy announcement. Unlike QE1, QE2 and Operation Twist, the latest addition to the monetary smorgasbord is open-ended, meaning that it has no pre-established termination date. Policy will remain stimulative for as long as it takes to see a substantial improvement in employment. Rather than keeping rates low well into 2014, it could now be well into 2015 before they tick back up.
2012-09-14 Open-Ended Easing by Carl Tannenbaum and Asha Bangalore of Northern Trust
The Federal Open Market Committee (FOMC) took a very forceful set of steps this week, designed to stimulate what officials have called a "frustrating" job market.
Our updated forecast suggests that the growth trajectory of the US economy is positive but sufficiently sub-par for the Fed to have initiated additional monetary policy support.
There are increasing signs that China's economy is slowing more than the official readings would suggest.
2012-09-14 QE3: Ineffective Parachute for Fiscal Cliff by Russ Koesterich of iShares Blog
While the most likely scenario is that Washington reaches a compromise at the last minute, until then the uncertainty will keep the markets volatile and potentially drag down fourth quarter growth. Given recent comments out of Congress, there is also a non-trivial chance that we will, at least temporarily, go over the cliff. If that happens, QE3 will not be a particularly effective parachute.
2012-09-14 All In by Bob Rodriguez of First Pacific Advisors
2013 is a critical moment in time. If a material and timely fiscal restructuring does not take place by next September, I fear and believe that it will not occur before 2017. Unfortunately, if this were to occur, my 2009 warning of a crisis of equal or greater magnitude than the Great Recession by 2017 would be a more likely outcome. My worst fear is that fiscal gridlock continues, coupled with the policies of this activist Fed Chairman. Todays Fed actions add to my anxieties. ALL IN may be a good strategy for poker but not for this economy.
2012-09-14 Operation Screw by Peter Schiff of Euro Pacific Capital
The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won't turn off the spigots even if things noticeably improve. In other words, the dollar is screwed.
2012-09-14 All Signs Pointing to Gold by Frank Holmes of U.S. Global Investors
So, gold investors, if you havent put in your orders, consider getting them in quickly, because the bulls are buying. Credit Suisse saw 'massive inflows' into gold exchange-traded products in August after experiencing significant outflows compared to crude oil and the broader market in March, April, May and July. August shows a clear preference toward gold.
2012-09-14 Central Banks Take Center Stage by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Accommodative central banks have traditionally been good for equities and stocks have responded positively to recent action. However, each market reaction to US Fed action has been shorter in length and challenges persist. Although recent economic data has been beating relatively low expectations, it is still not meeting the Fed's hopes. We appreciate the sentiment of wanting to stimulate growth, but the Fed's power is limited. It's down the street in Washington where the real power to stimulate growth lies.
2012-09-12 Housing's 'Green Shoots' by Investment Strategy Group of Neuberger Berman
Headwinds in the housing market appear to be abating as the U.S. economy gradually heals.
2012-09-12 On Uncertain Ground by Howard Marks of Oaktree Capital
I'm going to devote this memo to the uncertainty in the world and the investment environment and then offer my take on the appropriate strategy response. This will require me to touch on a large number of topics, but I will try to dwell less than usual on each of them.
2012-09-12 Will America Be Greece in Four Years? by Gary Halbert of Halbert Wealth Management
The US national debt topped $16 trillion last week, and it was almost as if no one paid attention. At the rate we are going, the national debt will top $20 trillion just four years from now in 2016. In my August 21 E-Letter, I pointed out just how mind-boggling a trillion dollars is. Lets revisit that analogy of a trillion in terms of time.
2012-09-12 PIMCO Cyclical Outlook: Building Rickety Bridges to Uncertain Outcomes by Saumil Parikh of PIMCO
Without structural change aided by well-planned fiscal policy, we are afraid the nominal bridges of monetary policy will fail to reach their desired outcomes. The probability of a deflationary left-tail outcome emanating from the eurozone has declined substantially in the short run, yet outright economic growth in the eurozone will remain elusive in 2013.The much-publicized "fiscal cliff" is set to hit the U.S. economy on January 1, 2013, and could reduce U.S.
2012-09-12 Investing is Like Duck Hunting by Pamela Rosenau of HighTower Advisors
The discussion of additional monetary easing by the Federal Reserve has been the topic du jour in recent weeks. As a result of potential additional monetary stimulus, the US dollar has experienced a decline. Also, after a weaker than expected jobs report last week, US treasuries initially rallied given an increased expectation of Fed action. However, as pointed out by the market commentators at Sober Look, the Treasury curve has begun to steepen with the "30-year bond and other longer dated treasuries steadily selling off."
2012-09-11 Ready, Set, Fed! Weak Jobs Report Raises QE3 Odds by Russ Koesterich of iShares Blog
Russ says the US Federal Reserve Open Market Committee has more reason to consider quantitative easing at this week's meeting, after the latest payroll report suggests the US economic recovery is likely to remain weak into the end of the year.
2012-09-11 Rally Should Continue, but Look for More Volatility by Bob Doll of BlackRock Investment Management
Despite a relatively disappointing jobs market report for August, stocks rose last week as investors focused on the European Central Banks (ECB) announcement of its longawaited plan to buy bonds in the secondary market. The ECB program represents an important step in terms of lowering volatility and providing a cushion for Europes debttroubled countries to make some longer-term improvements in their fundamentals.
2012-09-11 US Stock Market Sentiment in a World of Wide Asset Allocation by Bill Smead of Smead Capital Management
Our long-time readers are aware that we are stingy when it comes to trading and big believers of keeping trading costs low at Smead Capital Management. Despite these natural inclinations, we do try to keep the pulse of sentiment in the US stock market.
2012-09-10 Better Policy, Better Recovery by Brian Wesbury, Bob Stein of First Trust Advisors
Politicians always shift the blame. So, hearing them say that "no one" could have cleaned up the so-called mess and fixed the economy in just a few years is not surprising. What else do you say when after three years of recovery the unemployment rate is still at 8.1% -- down only 1.9 points since the peak almost three years ago and real economic growth has averaged a tepid 2.2% for three years of economic recovery?
2012-09-10 Late-Stage, High-Risk by John Hussman of Hussman Funds
The market conditions we observe at present are very familiar from the standpoint of historical data, matching those that have appeared prior to the most violent market declines on record (e.g. 1973-74, 1987, 2000-2002, 2007-2009).
2012-09-10 The August Employment Report and the Fed by Scott Brown of Raymond James
The August job market report was disappointing. Nonfarm payrolls rose less than expected and previous figures were revised lower. The unemployment rate fell, but that was due to a decrease in labor force participation (dont read too much into that).
2012-09-10 As the Euro Tumbles, Spaniards Look to Gold by Peter Schiff of Euro Pacific Precious Metals
The unremitting deterioration of the eurozone's sovereign debt landscape continues to fuel uncertainties about the longevity of the euro as a strong currency. Such uncertainties are not only leading to capital flight from the EMU's periphery to the core and destabilizing markets worldwide, but they are also beginning to frighten southern European savers into seeking refuge outside their 10-year-old currency.
2012-09-10 The Case for Real Estate by Jeff Kolitch, David Baron, David Kirshenbaum of Baron Funds
We believe we are in the early stages of a multi-year real estate recovery fueled by improving cash flows, rising demand, a scarcity of new development projects, improving credit availability, and generationally low interest rates. We believe the outlook is promising for both residential and commercial real estate.
2012-09-10 When Bad Is Good by Kristina Hooper of Allianz Global Investors
Faith in the Fed is growing more devout. Despite another disappointing jobs report, stocks drifted higher Friday to close out a strong week for the major averages as investors pinned their hopes to an imminent policy move from central bankers. It is becoming more apparent every day that the U.S. economy is sputtering. While housing appears to have stabilized, jobs and manufacturing are areas of concern.
2012-09-07 Spinning Pessimism Into Opportunity by Peter Langerman, Ed Jamieson of Franklin Templeton Investments
In the markets and in life, we face bullish and bearish periods. Some days are good and some days are bad. But even on bad days, good things can and do happen, which may explain our sometimes Pollyanna-sounding persistence on the existence of a bright side even in the face of somber-sounding issues like fiscal cliffs and austerity measures.
2012-09-07 The Fed's Campaign by Peter Schiff of Euro Pacific Precious Metals
This past Friday, as Fed Chairman Ben Bernanke delivered his annual address from Jackson Hole - the State of the Dollar, if you will - I couldn't help but hear it as an incumbent's campaign speech. While Wall Street was hoping for some concrete announcement, what we got was a mushy appraisal of the Fed's handling of the financial crisis so far and a suggestion that more 'help' is on the way.
2012-09-06 September: A Rough Month for the Markets? by Gary Halbert of Halbert Wealth Management
September is often a bad month for the stock markets, historically speaking, and this year it could be especially turbulent. In addition to all the uncertainty about the weak US economy, there is uncertainty about what the Fed may do just ahead and what, if anything, will be done to address Europe's recession and debt crisis. In addition, there is the looming presidential election which no doubt will go hyperbolic this month.
2012-09-05 Profit Motive: If Earnings/Margins Are Peaking, What About Stocks? by Liz Ann Sonders of Charles Schwab
Earnings growth has peaked, but don't necessarily assume the same about margins. Present pace of earnings growth has historically been accompanied by decent market performance. Margins are increasingly driven by domestic and foreign earnings, but peaking margins have historically been accompanied by strong market performance.
2012-09-05 September Economic Update by Justin Anderson of Cambridge Advisors
August was characterized by relatively low volatility as stocks continued to grind higher and bond yields traded in a fairly narrow range. The economy saw little change as the slow growth theme continued. European officials mostly took the month off so the sovereign debt crisis fell off the radar for the month. Politics have dominated the headlines, but a close race hasn't provided an impetus for investors to make significant portfolio changes.
2012-09-04 ProVise Bullets by Ray Ferrara of ProVise Management Group
At one time during the dotcom craze, the NASDAQ closed over 5000, but, as it tumbled downward, it last crossed the 3000 mark on December 11, 2000; that is until it crossed that mark on March 13, 2012, or 11.25 years later. My, how the times have changed! The income tax was introduced in the U.S. in 1913. This means that when we file our taxes on April 15, 2013 for the year 2012, it will be the 100th year that income taxes have been paid.
2012-09-04 Civility by Jeffrey Saut of Raymond James
Webster's defines "civility" as: civilized conduct; especially: courtesy, politeness. But, there was no civility last Friday afternoon. The place, CNBC; the time 3:05 p.m.; the anchors Michelle Caruso-Cabrera and Bill Griffith; the show "Closing Bell"; the guests were myself, Bill Spiropoulos, Lee Munson, and Matt McCormick. The interview started off well enough with each interviewee responding to the anchors' questions.
2012-09-04 Housing's Slow Climb Out of the Cellar by Milton Ezrati of Lord Abbett
After being down so long, it is finally looking up for the beleaguered sector. But the recovery still faces a number of obstacles.
2012-09-04 Still No Recession in Sight by Brian Wesbury, Bob Stein of First Trust Advisors
Real GDP in the US has grown 2.3% in the past year, a mediocre rate of growth, little different than its 2.2% average since mid-2009, when the recovery officially began. It's what we call the Plow Horse economy and we expect it to continue plodding along, at least through this fall.
2012-09-04 All QE, All the Time by Chris Maxey of Fortigent
In a week of relatively light trading to wrap up the summer, equity markets trickled lower, as the Dow Jones Industrial Average lost 0.5% and the S&P 500 Index fell 0.3%. It was a mixed week of economic data in the U.S., but markets were clearly locked in on Ben Bernanke's speech in Jackson Hole, Wyoming. News on housing seems to confirm that a bottom is in place, while manufacturing data continues to move in all different directions.
2012-09-01 Schwab Market Perspective: Back to Work by Liz Ann Sonders, Brad Sorensen, Michelle Gibley of Charles Schwab
As summer winds down, we expect things to heat up as policymakers get back to work, resulting in a challenging investment environment.
2012-09-01 And That's the Week That Was by Ron Brounes of Brounes & Associates
Isaac vs. Romney vs. Bernanke. Each took their turn in the limelight this week. While the Hurricane dropped plenty of rain and brought damaging winds into Louisiana, the devastation didnt compare to Katrina. Romney humbly accepted his party's nomination, while still trying to prove to T-Partiers (and women) that he should be their guy (and he can bash his opponents with the best of them.
2012-09-01 The Consequences of Easy Monetary Policy by John Mauldin of Millennium Wave Advisors
We heard from Bernanke today with his Jackson Hole speech. Not quite the fireworks of his speech ten years ago, but it does offer us a chance to contrast his thinking with that of another Federal Reserve official who just published a paper on the Dallas Federal Reserve website. Bernanke laid out the rationalization for his policy of ever more quantitative easing. But how effective is it?
2012-08-29 International Real Estate Securities: Review and Outlook by Jon Cheigh, Rogier Quirijns, Gerios Rovers, Luke Sullivan of Cohen & Steers
We would like to share with you our review and outlook for the international real estate securities market as of July 31, 2012. The FTSE EPRA/NAREIT Developed ex-U.S. Real Estate Index had a total return of 5.2% for the month (net of dividend withholding taxes) in U.S. dollars. By comparison, U.S. REITs returned 2.0% for the month, as measured by the FTSE NAREIT Equity REIT Index. Year to date, the indexes returned 21.3% and 17.2%, respectively.
2012-08-28 Real Estate Resiliency: the REIT Model Proves its Mettle by Josh Olazabal, Amit Arora of PIMCO
REIT unsecured debt has been one of the best-performing sub-sectors in the entire investment-grade credit area. When insurance companies began to look at REIT unsecured debt, they asked for the same type of covenants associated with property-level mortgages. These requirements have coalesced into a standard REIT covenant package. We believe low default rates and relatively high recovery rates make the sector attractive over the long term particularly for buy-and-hold investors.
2012-08-28 Are Markets Nearing a Crossroads? by Chris Maxey of Fortigent
A relatively quiet, end-of-summer week resulted in modest losses for equity markets. The Dow Jones Industrial Average closed down 0.9% and the S&P 500 index lost 0.5%. There were limited amounts of economic data for the market to digest last week, but plenty of other headlines kept participants active. It was a decent week overall for economic data, as reflected by the continued recovery in the Citigroup Economic Surprise Index.
2012-08-28 Intrade.com Presidential, House and Senate Odds by Team of Bespoke Investment Group
With the GOP convention kicking off tonight, below is an updated look at where the Intrade.com "prediction market" odds currently stand for the President, House and Senate.
2012-08-28 The Gold Standard Gets Another Look by Peter Schiff of Euro Pacific Capital
As Republicans convene in Tampa to nominate Mitt Romney and hammer out their party platform, one of the planks that could attract the most attention is the Party's official position on the gold standard. As it is now being considered, the platform stops short of recommending a return to the gold standard, but does advocate a commission to consider the possibility.
2012-08-28 Whats A House Really Worth? by Carl Tannenbaum of Northern Trust
Despite the well-documented correction in real estate prices, our property taxes have been slow to react. My wife is on a singular mission to correct this asymmetry, collecting evidence from a variety of sources that suggest that our house is relatively worthless. Good thing we don't need a home equity loan.
2012-08-27 Still No QE3 by Brian Wesbury, Bob Stein of First Trust Advisors
The Federal Reserve is clearly ready to do something. In recently released minutes from the 7/31-8/1 meeting and a letter from Chairman Bernanke to Congressman Darrell Issa (R-CA), the Fed argued that its actions had helped the economy already and that the Fed was ready to do more.
2012-08-27 Inside the Feds Head by Kristina Hooper of Allianz Global Investors
Now more than ever, investors are getting a glimpse into the minds of policy makers. While economic forecasts remain foggy, recent FOMC minutes reveal why the Fed is sharpening its tools and which ones it is likely to use.
2012-08-27 U.S. Real Estate Securities: Review and Outlook by Jon Cheigh, Thomas Bohjalian of Cohen & Steers
We would like to share with you our review and outlook for the U.S. real estate securities market as of July 31, 2012. The FTSE NAREIT Equity REIT Index had a total return of 2.0% for the month, compared with a 1.4% return for the S&P 500 Index. Year to date, the indexes returned 17.2% and 11.0%, respectively.
2012-08-27 And That's the Week That Was by Ron Brounes of Brounes & Associates
When Ben Bernanke talks...investors listen, Republican moans, Romney belittles, and markets react. For now, the jury is still out about any upcoming stimulus move as the policymakers appear far from consensus. Housing continued its rebounding ways, though manufacturing again raised concerns. Europe still appears to be in disarray as Greece takes direction (and a scolding) from its stronger brethren. Stocks ended their nice winning streak, though closed the week on a high note.
2012-08-27 FPA Crescent: Steve Romick's Semi-Annual Report by Steven Romick of FPA Fund
FPA Crescent Fund has released its Semi-Annual report on the state of the fund and its investments. The piece also delves into portfolio manager Steve Romick's market outlook and thoughts regarding the fund's positioning moving forward.
2012-08-24 Is a Japan-Style "Lost Decade" Ahead for the US? by Sharon Fay of AllianceBernstein
The laborious pace of the US recovery has inevitably fostered comparisons with Japan. But we find several reasons why a protracted slump like Japan's is unlikely, as my colleague Gerry Paul argues. After five years of tepid growth, investors can be forgiven for wondering if the US is headed for a decades-long slump like Japan's.
2012-08-24 Russ Ks Guide to Economic Indicators (Infographic) by Russ Koesterich of iShares Blog
Pundits like to throw around a lot of numbers when trying to predict the direction of the US economy. The most popular economic indicators, however, aren't necessarily the best. Russ K explains why the economic indicators you hear most often are overrated and identifies which indicators you should use instead.
2012-08-24 Emerging Markets Real Estate Securities: Review & Outlook by Jason Yablon of Cohen & Steers
We would like to share with you our review and outlook for emerging markets real estate securities as of July 31, 2012. For the month, the FTSE EPRA/NAREIT Emerging Real Estate Index had a total return of 2.2% in U.S. dollars (net of dividend withholding taxes), compared with 3.6% for the FTSE EPRA/NAREIT Developed Real Estate Index (net), a broad measure of the global real estate securities market. Year to date, the indexes returned 19.0% and 18.9%, respectively.
2012-08-24 Gold: First Mover Advantage by Frank Holmes of U.S. Global Investors
This week, gold bugs were rewarded with the long-awaited positive momentum in the yellow metal, and on Friday, bullion rose to about $1,670. After falling below the 200-day moving average, gold had been stuck in quicksand for several months. With the jumps in the price this week, bullion swiftly rose above this critically important long-term moving average.
2012-08-23 Setting Up for Jackson Hole by Carl Tannenbaum of Northern Trust
I was once favored with an invitation to the Federal Reserve's annual retreat in Jackson Hole, Wyoming. It was an amazing experience; the participant list was a Who's Who of global economic policy makers. I called my mother to brag, but all she wanted to talk about was the mischief that she and my father had gotten into while honeymooning in the area some fifty years earlier. Too much information.
2012-08-23 Global Real Estate Securities: Review and Outlook by Jon Cheigh, Chip McKinley of Cohen & Steers
We would like to share with you our review and outlook for the global real estate securities market as of July 31, 2012. The FTSE EPRA/NAREIT Developed Real Estate Index had a total return of 3.6% for the month (net of dividend withholding taxes) in U.S. dollars. Year to date, the index returned 18.9%.
2012-08-22 What Will it Take for the Rally to Continue? by Bob Doll of BlackRock Investment Management
One of the factors underlying the upturn in stock prices over the past couple of months has been a modestly improving trend in US economic data. Last week, retail sales advanced 0.8%, well ahead of expectations. This was the first increase in four months, which suggests that while households remain generally cautious, spending levels are beginning to tick higher.
2012-08-22 Relative Value by Bill Smead of Smead Capital Management
Everyone wants to wait for the perfect time to buy into the stock market or into any major investment market. They want to enter at historically cheap prices or at "absolute values". We at Smead Capital Management believe that these people are kidding themselves and everybody else. At the time of historical lows and "absolute value" those same folks are too mortified to pull the trigger and always come up with the reason that "it's different this time". Inertia rules the day.
2012-08-22 R-E-S-P-E-C-T by Jerry Wagner of Flexible Plan Investments
With 18 Grammys, the Queen of Soul, Detroiter Aretha Franklin has certainly earned the respect of millions over a fifty-year career in show business. Conversely, despite six advancing weeks in a row, the latest bull rally just can't get any of that R-E-S-P-E-C-T.
2012-08-21 Hype and Reality in the Muni Bond Market by Hildy Richelson (Article)
Meredith Whitney's prediction last year of billions of dollars in municipal bond defaults stirred investors' fears. Earlier this summer, bankruptcies in three California cities reignited them, and last week a Federal Reserve study revealed that muni bonds have defaulted at a higher rate than previously reported. But no crisis has befallen the municipal bond market, and it is highly unlikely that one ever will.
2012-08-21 Anniversary Weaks by Christian Thwaites of Sentinel Investments
A couple of anniversaries last week: five years since the start of the credit crunch and one year since the US downgrade. The ramifications of both are still evident daily, of course. We're still living the consequences. So this is as good a time as any to take stock.
2012-08-21 Inflation Subdued, But Will It Last? by Chris Maxey of Fortigent
As the economy continues to grind along at a sub-optimal rate of growth, many pundits are calling for additional quantitative easing measures from the Federal Reserve. Recent inflation data keeps the door open for further easing, but pockets of higher prices exist, keeping the Fed at bay.
2012-08-21 Young Americans: The Death of Equities May be Exaggerated by Liz Ann Sonders of Charles Schwab
PIMCO founder Bill Gross believes the "cult of equity is dying" let me take the other side. Mutual-fund flows suggest that we may have lost a generation of investors. However, demographics suggest there may be another generation that could be the stock market's savior.
2012-08-20 And That's the Week That Was by Ron Brounes of Brounes & Associates
Once upon a time, Facebook and Groupon were prospective Wall Street darlings. Now both they are pushing all-time lows with analysts questioning their overall revenue models. For now, they are in the minority, as some decent earnings numbers and economic data brought back the "bulls" (at least those who arent on vacation) and sent the major indexes higher (again). Europe still has plenty of issues; the jury is still out on the Fed's next moves; and the campaign season is heating up.
2012-08-20 The Basis For Fear by Charles Lieberman of Advisors Capital Management
Last week, I wrote about how stocks are cheap historically and also with respect to other asset classes, such as bonds. This week, I want to focus on the reasons for this. Stocks are not cheap by accident. Investor concerns over Europe, renewed recession in the U.S., the fiscal cliff and the huge budget deficits provide ample reason for caution. However, not all of these concerns are well placed and some of the issues can be resolved favorably.
2012-08-17 Fiscal Cliffhanger by Brian Horrigan of Loomis Sayles
In the famous 1955 movie Rebel Without a Cause, troubled high school student Jim Stark (played by James Dean) winds up playing a game of chicken with his classmates. The US economy is at risk of driving, so to speak, over a "fiscal cliff" starting January 1, 2013, an event that threatens to wreck the economy. There are fewer than five months to avoid going over this cliff.
2012-08-17 Press Play by Liam Molloy, Bethany Carlson of Galway Investment Strategy
The Treasury has doled out approximately $10.5 billion on excess bank reserves over the last four years. The emergency Fed policy of paying 25 basis points on excess reserves was enacted on October 6, 2008 to incentivize banks to hold them in the midst of the financial crisis. It worked. But the policy also introduced another headwind to velocity of money.
2012-08-17 Love Trade Cools as Central Banks Gold Demand Heats Up by Frank Holmes of U.S. Global Investors
Although the Love Trade (purchasing gold for coins or jewelry) is on ice for now, a relatively new gold buyer has been warming up to gold. Central bank purchases hit a record high since the official sector became gold buyers three years ago. If this trend continues over the remainder of 2012, central banks will be entering a new territory of gold buying that has not been seen since the early 1960s and since the end of the Bretton Woods System in 1971.
2012-08-17 How Change Happens by John Mauldin of Millennium Wave
This is an encore appearance of the letter that is clearly the most popular one I have ever written, updated with a few thoughts from recent times (it was also part of a chapter in Endgame). Numerous reviewers have stated that this one letter should be read every year. As you read, or reread, Ill be enjoying a week off.
2012-08-16 Markets Holding Up Despite Volatility by Ken Taubes of Pioneer Investments
Despite a steady stream of negative headlines and high volatility, markets are holding up pretty well. The broadest measure of the stock market, the S&P 500 Index, is up nearly 13% year-todate through today, August 13, 2012. The NASDAQ is up almost 17%. High yield bonds are up almost 9.7% while investment grade corporate bonds have gained over 7%. Even Europe has managed 7.5%, as measured by the FTSE Eurofirst 300 Index in dollar terms.
2012-08-16 The Chinese Hangover: As Infrastructure Spending Drops, So Does Demand for Chinese Steel by Raja Mukherji of PIMCO
The Chinese steel industry today shows many signs of serious economic difficulties brought about by the unprecedented size and speed of industry expansion. However, as the country's focus shifts away from public investments and toward tax cuts, it will be difficult for China to absorb this overabundance of domestically produced steel. Ripple effects of this oversupply may include softening iron ore prices, a possible drop in the Australian dollar, and potentially weaker global steel prices.
2012-08-16 Monthly Investment Bulletin by Team of Bedlam Asset Management
A good month: a gross increase of 3.13%, over twice the index at .49%. Opinion polls the morning after the opening ceremony for the London Olympic Games estimated that 2.5% of the television audience (or 30m viewers) actually believed that the Queen and James Bond parachuted into the Olympic arena. Even if true (the poll was tiny and perhaps respondents had a better sense of irony), such gullibility is understandable on live TV. But naivety in financial markets is unforgivable.
2012-08-16 Searching for a Fiscal Ladder by David Kelly of J.P. Morgan Funds
As America begins to cool down after a long hot summer, the economy remains sluggish. Economic growth in the first half of the year is estimated to be less than 2%, reflecting continued business and consumer caution, tight lending standards and a shrinking government sector. This pace of growth, in turn, has produced a monthly average of just over 100,000 new jobs since February, leaving the unemployment rate marooned above 8%. For investors, however, the picture is not that bad.
2012-08-15 Understanding Ego Depletion by Dan Ariely of Dan Ariely Blog
From your own experience, are you more likely to finish half a pizza by yourself on a) Friday night after a long work week or b) Sunday evening after a restful weekend? The answer that most people will give, of course, is "a". And in case you hadn't noticed, it's on stressful days that many of us give in to temptation and choose unhealthy options. The connection between exhaustion and the consumption of junk food is not just a figment of your imagination.
2012-08-14 Maybe This Time is Different by Andrew Redleaf of Whitebox Advisors
This Time Is Different, the catchy title of the popular book by economists Carmen Reinhart and Kenneth Rogoff, has also become a catchphrase summing up the world-weary wisdom of our time. Reinhart and Rogoff, in recounting eight hundred years of financial follies and investment bubbles, gleefully point out that in every case experts offered plausible arguments for dispensing with traditional rules of valuation, i.e., "this time it's different."
2012-08-14 China Growth Threatened by the West by Chris Maxey, Ryan Davis of Fortigent
As we head further into the second half of 2012, it is clear that policy from central banks in the US, Europe, and China will drive markets and the global economy. Monetary policy in the US is becoming less impactful, while central bankers in Europe appear unwilling to tackle the enormity of their collective problem. It could be China that provides a sparkplug for second half global growth...
2012-08-14 Oil: Does Supply and Demand Matter? by Bill Smead of Smead Capital Management
We believe the long-term demand for oil will be greatly influenced by where the world gets its best future growth. As the chart below shows, the US has cut by 50% the amount of energy which is required to generate each dollar of Real Gross Domestic Product (GDP).
2012-08-13 Driving with the Doors Off by Doug MacKay, Bill Hoover of Broadleaf Partners
Two months ago I bought a bulldozer-yellow Jeep Wrangler, replacing my eight year old black Audi A6. While the A6 had been a wonderful car, I was ready for something new and a Jeep fit the bill. Driving with the doors off was a lot of fun, but certainly a different feeling than I was used to experiencing. The stock market over the last two months and perhaps even last three summers has been a lot like that, different, but ultimately rewarding.
2012-08-13 Double Dip? Doubtful by Milton Ezrati of Lord Abbett
The flow of economic news is hardly encouraging. Jobs growth remains disappointing. Recent readings on consumer spending and business activity show weakness as well. If the picture of the housing market has improved a bit, it still hardly portrays strength. Talk of an imminent recessionary dip has become common, for the third time now in as many years. While some recent economic reports have been discouraging, underlying fundamentals do not point to a return to recession.
2012-08-13 Invest with the Best?! by Jeffrey Saut of Raymond James
I have been a "fan" of the astute Claude Rosenberg ever since hearing him speak. Some will remember him as the author of Investing with the Best, which deals with the daunting task of selecting an investment manager. Given the plethora of investment managers, picking a manager is difficult. That's why many individuals' selection process consists of nothing more than looking at a portfolio manager's track record for the past few years. We think such a simplistic approach is a mistake.
2012-08-13 Commodities to Power Emerging Markets Higher by Dawn Bennett of Bennett Funds
In Latin America, Brazil leads as a natural supplier of copper and crude oil, which it is now able to extract and export on competitive terms. Nations rich with natural resources perform well during times of global economic expansion. In particular, countries rich with industrial commodities tend to outperform those without.
2012-08-13 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The rally in stocks which no one seems to believe in continued again last week. With Europe on vacation or celebrating the Olympic Games the macro background remained quiet and allowed stock prices to advance even as investor pessimism continues to grow.
2012-08-13 Stocks Look Poised for Continued Gains by Bob Doll of BlackRock Investment Management
Although investor attention seems focused on a number of well-known downside risks (including the European debt crisis, hesitant US economic growth and the pending US fiscal cliff), stocks have continued to climb higher and last week notched their fifth consecutive week of gains.
2012-08-10 Schwab Sector Views: Cautiously Cautious by Brad Sorensen of Charles Schwab
We remain slightly defensive with our sector recommendations but admit that we're a bit concerned over doing so. While we certainly believe this is the appropriate positioning given the continued elevated uncertainty in the market, combined with sluggish economic data, we also acknowledge that some defensive areas appear extended and the possibility of a near-term cyclically-based rally exists.
2012-08-10 2012 2Q Economic - Capital Market Summary by Greg Hahn of Winthrop Capital Management
The single biggest driver for the economy and investment returns is the deleveraging process which we are currently struggling through. Arguably, we have successfully transferred debt from the financial sector to the U.S. government through the Fed's QE programs. As we move through the long process of reducing debt, economic growth inevitably moderates as resources are applied to debt reduction rather than fixed investment and consumption within the economy. As a result, expected returns on financial assets are lower.
2012-08-10 Citius, Altius, Fortius by Carl Tannenbaum of Northern Trust
Countries across the globe seek faster, higher, stronger growth. Central banks in the United States and Europe are both seeking new ways to stimulate economic activity. Recent news from the housing market has been encouraging, but the race to recovery is likely to be a marathon, not a sprint. Headwinds blowing from Europe and China will continue to present significant downside risks to U.S. economic growth.
2012-08-09 Market Surge is Amplified by Low ExpectationsAs Expected by Matt Lloyd of Advisors Asset Management
European fears have subsided a bit as the European Central Bank's (ECB) president continued to offer words of support for a more comprehensive solutionthough he appeared to dampen the statements with concessions about the ECB's ultimate subservient role to the governments.
2012-08-08 How Hoover Caused the Euro Crisis by Christian Thwaites of Sentinel Investments
There is a Burkean principle that many sorts of change must be regarded with skepticism. In the last few months in Europe we have seen new maxims, new ideas, new commitments, new resolves, lots of new acronyms, yet very little has changed from two years ago when Greece surfaced as the first casualty of the banking/sovereign crisis.
2012-08-08 Stock Pickers: "Somebody I Used to Know" by Bill Smead of Smead Capital Management
Art has a tendency to express culture. One of today's catchiest songs does a great job of explaining the relationship between institutional/individual investors and US common stock picking. The song captures what has happened since the summer of 1999, when Warren Buffett warned investors about forward stock market returns because of a love affair that institutional and individual investors were having with US large cap stocks.
2012-08-08 Monthly Product Commentary: International Equity - July 2012 by Team of Thomas White International
International equities made modest gains during the month of July on repeated assurances from European policymakers that they will explore all possible steps to prevent a collapse of the monetary union and arrest further economic decline. Developed markets in Europe's Nordic region and the Asia Pacific, excluding Japan, as well as select emerging markets in Asia ended with healthy gains for the month.
2012-08-07 Robert Shiller on the Social Benefits of Finance by Laurence B. Siegel (Article)
It's a bad sign for the finance industry that one of its leading minds - the distinguished Yale economist Robert Shiller - has felt compelled to write a book in order to defend the idea that finance itself is a constructive pursuit, worthwhile to modern society. Have things really gotten that bad?
2012-08-07 Obama Remains Strong on Intrade; GOP Strong in Congress by Team of Bespoke Investment Group
Four months from today, citizens across the country will hit the ballot boxes to cast their votes in this year's Presidential election. Over at prediction market website, Intrade.com, President Obama continues to hold a near 20-point lead over Mitt Romney in his re-election bid. Obama's odds of winning currently stand at 58.4%, while Romney's odds are below 40 at 39.7%.
2012-08-07 Lose The Swimmies! by Dan Morris of Morris Capital Advisors
As the end of June and the July 4th holiday approached much of our nation was gripped in an oppressive heat wave. Most people sought some respite from the weather at the pool, the lake, or the beach. For us, it was the pool, and it was crowded, with adults wishing for some quiet space, teenagers splashing and creating a commotion, and the young ones in their swimmies. I even saw one youngster, with a overprotective parent or nanny, using a flotation ring and swimmies.
2012-08-07 Mixed Signals Color Downgrade Anniversary by Kristina Hooper of Allianz Global Investors
Two trouble spots for the economy, the job market and housing, generated some good vibes amid gloom over no action from central banks and manufacturing weakness. Unfortunately, it wasnt enough to push the stock market into positive territory for the week. But looking through a longer-term lens, stocks have been resilient since last year's debt-ceiling drama and Standard & Poors downgrade of U.S. debt.
2012-08-07 All That and Nothing To See by Christian Thwaites of Sentinel Investments
The ECB learned a tough media lesson last week. If you say, as Mr. Draghi did in a pre-Olympic euphoria, that you will do "whatever it takes to preserve the euro" then markets will take you at your word.
2012-08-07 A Plane on the Tarmac by David Kelly of JP Morgan Funds
A few weeks ago, I was sitting in a plane on the tarmac at La Guardia. We had pulled away from the gate, but the pilot had just come over in the intercom to let us know that we were number 35 in line for takeoff. Since we were going nowhere fast, I took out my laptop and tried to think of an analogy to describe the current state of the American economy. Then I realized that I was sitting in one.
2012-08-06 Diamonds in the Rough by Mark Kiesel of PIMCO
The demand for most high-quality, income-producing assets continues to exceed supply due to a weaker growth outlook and aggressive policy action by global central banks. Yet we are still finding numerous opportunities globally through our bottom-up research that targets areas around the world where fundamentals are supportive and the outlook remains constructive.
2012-08-06 Why the Long Face? by Brian Wesbury, Bob Stein of First Trust Advisors
Back in early 2009, the University of Chicago Booth School of Business and the Northwestern University Kellogg School of Business teamed up to create the Financial Trust Index. The latest readings from July 2012 show that just 21% of Americans trust the financial system and only 15% trust the stock market. For many, this negativity is understandable.
2012-08-03 Is Buy-and-Hold Dead? by Richard Bernstein of Richard Bernstein Advisors
If one searches in Google for Does buy-and-hold work?, more than 191 million results will appear.If one searches for Is buy-and-hold dead?, more than 81 million results will appear.However, if one searches for Successful buy-and-hold strategies, only about 9 million results will appear.Its pretty clear that the investing world believes that buy-and-hold strategies are basically dead and gone.
2012-08-03 GDP Report: "Good News" - You've Got to be Kidding! by Gary Halbert of Halbert Wealth Management
We dissect last Fridays controversial 2Q GDP report, which most found disappointing but some in the mainstream media found encouraging (ie at least were not in a recession). From there, well discuss the Feds latest monetary policy meeting that ends tomorrow. The stock markets rallied strongly last week, partly on perceived good news from Europe, and partly because of renewed expectations that the GDP report would be weak enough to move the Fed to enact QE3.
2012-08-03 2nd Quarter Small Cap Newsletter by Team of 1492 Capital Management
The stock market posted a strong start for the year but quickly surrendered most of its gains as the macro environment (European debt concerns and China’s slowing economy) caused near-panic selling pressure until the last week of the quarter.
2012-08-03 A Funny Thing Happened on the Way to the Recession by Martin Pring of Pring Turner Capital Group
Every day it seems the media are filled with forecasts of dyer economic times ahead based on troubles in Europe, Asia, and the Fiscal Cliff. The list goes on. Indeed the latest unemployment and GDP numbers, reflect a declining growth rate that is on the verge of going negative. Consequently, a number of commentators have used a projection of these trends to forecast an imminent recession. This is typical of crowd behavior, which has a strong tendency to extrapolate the recent past.
2012-08-03 The Race for Resources by Frank Holmes of U.S. Global Investors
The world watched in awe as American swimmer Michael Phelps became the most decorated Olympian of all time. It's inspiring to see the incredible results of his tremendous sacrifice and commitment. Investing in global markets requires the same sort of stamina, especially at times like this week, when the month's reading on the manufacturing industry was not encouraging. The J.P. Morgan Global Manufacturing PMI of 48.4 for July was the lowest since June 2009.
2012-08-02 Two Inflection Points by Andrew Redleaf of Whitebox Advisors
I'm generally happiest, professionally, when I have at least one strong investment conviction. Currently I have two. I want to be long large-cap equities and short small-cap equities. And I want to be long cheap options on natural gas, mostly by owning E&P (exploration and production) firms that have become attractively cheap with the collapse of gas prices.
2012-08-01 America's Other 30% by Stephen Roach of Project Syndicate
Consumption typically accounts for 70% of America's GDP. But the 70% is barely growing, and is unlikely to revive strongly at any point in the foreseeable future, which puts an enormous burden on the other 30% of the US economy to generate any sort of recovery.
2012-08-01 Housing: Good Vibrations by Liz Ann Sonders of Charles Schwab
It's time for an update to January's report on housing, and the news continues to get better. Household formations are key. Household formations are moving higher but housing completions aren't keeping pace. Real mortgage rates plunge into negative territory. Key housing market index indicates continued sales (and pricing) recovery.
2012-08-01 China's Growing Pains by Mark Mobius of Franklin Templeton Investments
Many feel that China is the engine for the world economy and that if it slows down, we may be doomed to a recession or even a depression. Yes, China's growth is decelerating from the double-digits of recent years; various forecasters are predicting a possible GDP growth range of 7-8% this year. However, I think it's important to emphasize that would still represent an impressive pace, and remember that China isn't the world economy's only locomotive.
2012-07-31 Uncertainty Reigns Supreme by Chris Maxey, Ryan Davis of Fortigent
With the first half of the year in the rearview mirror, investors might be lulled into thinking the most active period of the year is also in the rearview. Fast forward to year-end, though, and investors may beg for a return to the sanguine days of early 2012. A range of events in the coming months will likely dictate market optimism for 2012, 2013 and possibly beyond.
2012-07-31 An ECB Rally by Christian Thwaites of Sentinel Investments
We remain dependent on European statements but what a difference a year makes. This time last year we saw softening economic data and increasingly poor news coming out of Europe. But then we had a diffident ECB president who had just finished a round of rate increases as Europe slumped. This time we have combative words from Mario Draghi to support the euro, apparently at all costs.
2012-07-30 Sharp Decline in Earnings and Revenue Estimates by Mike "Mish" Shedlock of Sitka Pacific
For the first time in three years, US Quarterly Earnings are Poised to Drop. "Third-quarter earnings of Standard & Poor's 500 companies are now expected to fall 0.1 percent from a year ago, a sharp revision from the July 1 forecast of 3.1 percent growth, Thomson Reuters data showed on Thursday. That would be the first decline in earnings since the third quarter of 2009, the data showed."
2012-07-30 Right Down the Middle by Michael Kayes of Willingdon Wealth Management
A tenuous moment occurs in our household every time we get down to the last piece of dessert. My kids fight over it, and I'm right there with them. When I was a kid, my mom had the perfect solution to this age old dilemma. She would allow the first child to cut the dessert and the other to choose which half they wanted. The interconnectedness between the process and the final outcome ensured fairness. A truly cooperative attitude like this seems nowhere to be found in our world today.
2012-07-30 Whitney, Revenue and Defaults by Team of Managers Investment Group
Shortly after Meredith Whitney's appearance on 60 Minutes, we published a Q&A with Gannett Welsh & Kotler, LLC, in which they discussed their view that Ms. Whitney's concerns were overblown. During the last 1 1/2 years, GW&K's view has proven to be correct and we have taken this opportunity to once again seek their thoughts on the financial challenges governments face today through a Q&A.
2012-07-30 Heads, I Win, Tails, You Lose by Brian Wesbury, Robert Stein of First Trust Advisors
Up, down, sideways...it's all bad, all the time. Take oil, for example. Between September 2011 and March 2012, oil prices rose about 20%. This generated all kinds of "sky-is-falling" stories about consumers having less money to spend. But, recently, as oil prices headed south in May and June, do you think the negativity went away? Not! The Pouting Pundits of Pessimism said falling oil was a bad sign, signaling weak global demand. It's all bad, all the time. The glass is always half empty.
2012-07-30 The Central Bank by John Petrides of Advisors Capital Management
Global markets responded favorably last week to comments from Mario Draghi, President of the European Central Bank, saying that he would do whatever it takes to save the euro (this reminded me of Fed Chairman Bernanke's comments in February 2009, when the Fed started its asset purchase program, and markets responded favorably soon after). Although the world awaits more details as to what Mr. Draghi's comments entail, equity markets rallied, and the yields on Spanish and Italian bonds came in.
2012-07-30 Looking Past Weak Data; Awaiting Policy Responses by Bob Doll of BlackRock Investment Management
Although last week featured some lackluster economic and earnings news, investors continued to focus their attention on the growing possibility of additional monetary policy action, particularly from Europe. For the week, the Dow Jones Industrial Average climbed 2.0% to 13,075, the S&P 500 Index advanced 1.7% to 1,385 and the Nasdaq Composite rose 1.1% to 2,958.
2012-07-30 The Longest Yard by Tony Crescenzi, Ben Emons, Andrew Bosomworth, Isaac Meng of PIMCO
As the global slowdown progresses, we can expect central banks to deploy more policy tools without limits to stem the pace of deleveraging. In Europe, quantitative easing using ESM bonds could prove to be another bridge that buys politicians more time, but does not solve the root problem. We expect real economic growth in China to be muted. While some stabilization is possible later this year, it is hard to foresee a sustained recovery.
2012-07-27 Demographic Headwinds for Housing by Mike "Mish" Shedlock of Sitka Pacific
Boomer demographics and postponement of marriage on account of student debt and poor finances are two of the key reasons that I long-ago stated the housing recovery would be slow for a decade. Declining birthrates now show that is indeed what is happening.
2012-07-27 Challenging the Paradigms of Investing by Frank Holmes of U.S. Global Investors
Global investors constantly need to be watchful of individual biases, impaired thinking and emotional reactions that can have an adverse effect on a portfolio. One of our values at U.S. Global Investors is to always be curious to learn and improve, and the Investor Alert was borne from a belief that shareholders want to understand the very subtle nuances of biases and misconceptions. I have selected a few that I believe challenge the paradigms of investing.
2012-07-27 FOMC Preview: Christening QE III by Carl Tannenbaum of Northern Trust
Look for the Federal Reserve to embark on a new round of quantitative easing next week.
2012-07-27 Bringing it Back Home by Philip Tasho of TAMRO Capital
Our financial system has been cleaned up and recapitalized; consumers have paid down debt and seem to be looking to buy houses again. A large part of the improvement in the domestic economy is centered on the housing revival. It is not rapid - again, its a slow recovery - but at least we seem to be moving forward.
2012-07-27 Treading Water by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Stocks seem to be biding time until the action heats back up as summer winds down, but market-moving events can happen at any time. The US economy continues to slow and Bernanke had a relatively dour outlook before Congress. But it appears things would have to get worse before another round of easing is initiated; the effectiveness of which we continue to question. Yields in Spain and Italy indicate action may be needed sooner rather than later, but we did get positive remarks by the ECB, which led to market rallies and a big drop in yields, providing a measure of hope.
2012-07-26 On Top of the Market: Sustained Fear and Uncertainty Offer an Attractive Entry Point by Team of Managers Investment Group
Now updated through 2Q. This compendium provides an historical perspective of economic data compared to today's results, and provides comments on any developing trends. We also include a synopsis of financial markets results. The OTOTM Chart Book is designed with easy-to-read graphics to tell a story and help you visualize the changes taking place in today's economy.
2012-07-25 A Couple Questions by Dan Ariely of Dan Ariely Blog
Excuses. Justifications. Rationalizations. Stories. Stretching the truth. So many ways to whitewash the lies we tell ourselves and others. Here are a few questions that might remind you of your own dalliances with dishonesty.
2012-07-25 Top Line Growth Stalling Amid Global Weakness by Chris Maxey, Ryan Davis of Fortigent
At this juncture, positive catalysts seem few and far between. According to FactSet, 18 of 22 companies have already guided lower for the third quarter. Analysts are also ratcheting down forecasts quickly, with flat earnings growth expected in Q3. While growth is expected to pick back up in the fourth quarter, analysts have not cut those estimates aggressively yet. If the economic picture does not improve in the next few months, expect a pattern of downgrades to follow suit.
2012-07-25 Economic Review: Americas - 2Q 2012 by Team of Thomas White International
Among the developed economies in the region, growth forecasts for both the U.S. and Canada have been revised lower. Though the U.S. outlook has weakened, the Mexican economy has so far remained unaffected, as manufactured goods from the country remain competitive in export markets. Brazil is yet to see a recovery even after a series of monetary and fiscal measures taken since the second half of last year to support the economy.
2012-07-25 Low Interest Rates Are Not Enough by Mohamed El-Erian of PIMCO
Welcome to what could be called "GGIRC," the great global interest rate convergence whereby interest rates steadily converge to zero in many countries around the world, both advanced (other than the crisis European economies) and emerging (other than the persistent financial basket cases). In theory this is a good thing for a global economy. In practice, however, the situation is much more complicated and not so benign.
2012-07-24 Weaker Headlines by Christian Thwaites of Sentinel Investments
Well, the whole Spanish banking solution from a few weeks ago was not destined to last. Back in late June, the EU welcomed, along with the ECB, EBA and IMF that the EFSF /ESM would provide around 50bn of capital, provided the financial sector gave certain conditions and horizontal restructuring plans. And, even better, the FROB would receive the funds and ensure at the time of the capital infusion, Spain would honor its Excessive Deficits Procedures. Got that?
2012-07-24 Markets Likely to Continue Moving Unevenly by Bob Doll of BlackRock Investment Management
Notwithstanding a pullback on Friday, stocks managed to post gains last week despite a generally negative tone to the economic data. In some ways, the recent trend of relatively weak data has actually been beneficial for stocks in that it has been boosting hopes for additional policy stimulus around the world. For the week, the Dow Jones Industrial Average climbed 0.4% to 12,822, the S&P 500 Index advanced 0.4% to 1,362 and the Nasdaq Composite climbed 0.6% to 2,925.
2012-07-24 Litman Gregory Mid-Year Commentary by Team of Litman Gregory
High debt levels in developed countries create headwinds that are likely to hamper global economic growth in the years ahead. Europe's debt woes raise the risk of a damaging financial crisis, and global stock markets reflected these concerns in the second quarter. Why are we discussing this now? It is partly a reflection on having reached a quarter of a century in business and thinking about how we have conducted our business.
2012-07-23 Emerging Asia Pacific: Economic Review 2nd Quarter 2012 by Team of Thomas White International
Emerging Asia, which posted strong results during the first quarter of 2012 on optimism that Europe's sovereign debt problems would be solved quickly, returned to struggling ways during the second quarter of 2012 as prospects for Europe continued to wobble throughout the period. The uncertainty about Greece's fate in the European Union and the destiny of the single market itself kept industrial firms in Europe guessing for the most part of the second quarter.
2012-07-23 Economic Review: Developed Europe Second Quarter 2012 by Team of Thomas White International
Developed Europe remained on tenterhooks for the greater part of the April-June quarter, but ended the period on a high note. At their Brussels summit on June 28-29, European leaders chalked out two crucial policies. They decided that the monetary unions permanent bailout fund or European Stability Mechanism (ESM) would be allowed to provide capital to ailing banks directly rather than through the governments of the countries in which they are located.
2012-07-23 Europe Flares As Summer Heat Continues by John Nyaradi of Wall Street Sector Selector
Summer heat covers the nation as Europe's debt crisis flares again. Last weeks economic reports brought spots of sunshine to the housing market with the NAHB Home Builder Index rising, along with a strong June Housing Starts report.Equity markets were rallying most of the week in response to relatively positive earnings reports and hopes for more easing by Dr. Bernanke and the Federal Reserve.
2012-07-23 Slow in Q2, But No Recession by Brian Wesbury, Bob Stein of First Trust Advisors
We estimate real GDP grew at only a 0.9% annual rate in Q2. The Plow Horse Economy hit a tough spot, but it hasn't hit the wall. In Q1-2011, real GDP grew at just 0.4% at an annual rate, but then accelerated again. In other words, this is not the end of the world. It's not a recession.
2012-07-23 China's Economy - A Great Wall of Worry? by Milton Ezrati of Lord Abbett
The population of China bears seems to keep growing. This already large colony of doomsayers can point to any number of legitimate troubles facing China today, and they glibly do so, from slowing exports growth to an aging population, from real estate excesses to a moribund consumer sector. Bears think China is in for a "hard landing," but their pessimism is overdone. Here's why.
2012-07-23 Investing off the Beaten Track in an Uncertain Global Economy by Dan Ivascyn of PIMCO
The global economy remains in a multiyear period of global deleveraging; it will be an uncertain and, at times, volatile process. The substantial uncertainty and volatility affecting interrelationships across different markets are providing relative-value opportunities. Alternative strategies can be enticing, but the decision to use them needs to be fully informed and weighed against all the options.
2012-07-23 Bubbles without Markets by Robert Shiller of Project Syndicate
A speculative bubble is a social epidemic whose contagion is mediated by price movements. The speculative bubbles in the housing, equity, and commodity markets that preceded and accompanied the current global financial crisis are also its ultimate cause. But, before we conclude that we should rein in the markets, we need to consider the alternative.
2012-07-23 Spain's Molasses Jeopardizing Eurozone? by Axel Merk of Merk Funds
Spanish 10-year government bond yields are trading near 7.5% as Spain's central government is expected to bail out its regions and in return may ask for a bailout itself. Guarantees don't make a system safer, quite the opposite: everything is safe until the guarantor itself is deemed unsafe.
2012-07-23 Housing, Profits Shine Amid Rain in Spain by Kristina Hooper of Allianz Global Investors
Despite continued crisis in Europes periphery pressuring stocks, a rebound in housing, surprisingly strong profits and a spike in M&A activity may point to a healthier U.S. economy. And institutional equity managers are more optimistic on the stock market. However, with employment still showing weakness and the euro-zone crisis remaining a critical concern, one has to wonder why these institutional investors are becoming more bullish. Heres some insight into why they may be keeping the faith.
2012-07-22 And That's The Week That Was by Ron Brounes of Brounes & Associates
Tragedy in Colorado overshadowed earnings and economic news and even the Prez candidates could find common ground in expressing sorrow. The earnings numbers remain confusing at best (often better than downwardly revised projections); economic data depicts ongoing consumer concerns; Bernanke is attacked and attacks right back; and the markets settle not far from where they began the week. Coming up in the week ahead: New Home Sales (Wednesday), Durable Goods Orders (Thursday), GDP (Friday).
2012-07-21 The Lion in the Grass by John Mauldin of Millennium Wave
Today we'll explore a few things we can see and then try to foresee a few things that are not so obvious. This is a condensation of a speech I gave earlier this afternoon in Singapore for OCBC Bank, called "The Lion in the Grass." The simple premise is that it is not the lions we can see that are the problem; but rather, in trying to avoid them, it is often the lions hidden in the grass that we stumble upon that become the unwelcome surprise.
2012-07-20 American Pie in the Sky by Nouriel Roubini of Project Syndicate
For the last three years, the consensus has been that the US economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging implies that the recovery will remain, at best, below-trend for many years to come.
2012-07-20 What's Behind the Risk-On/Risk-Off US Economy? by Joseph Carson of Alliance Bernstein
The US economic recovery is progressing in fits and starts. Short-lived risk-on periods, when companies and consumers invest more, seem to constantly give way to risk-off periods, with anxiety and fear restraining economic activity. I think the choppy growth trends may have been triggered by a big change to business behavior since the financial crisis of 2008.
2012-07-20 Long Journey, Map Provided by John Gilbert of GR-NEAM
It is almost four years since the Lehman bankruptcy. In the periods of economic contraction that were typical of the postwar period, the clouds would be parting by now. Income growth would have resumed and necessary balance sheet repair would be more or less complete. By any standard, the current episode is a balance sheet recession of historic proportion. Previous downturns were initiated by central bank rate increases, which occurred this time as well.
2012-07-20 How Fast is Slow? China\'s Recent Slowdown in Perspective by Francois Sicart of Tocqueville Asset Management
In his latest piece, Francois Sicart, Founder and Chairman of Tocqueville Asset Management, examines China and its perceived economic slow down. Mr. Sicart suspects that this slowdown has several causes, each of which could be considered more or less normal in isolation, but their concurrent timing certainly has aggravated the feeling of withdrawal from the usual state of affairs.
2012-07-20 America's Competitive Spirit by Frank Holmes of U.S. Global Investors
We believe there are many great American companies to invest in. We like those that are growing their top line revenues and paying robust dividends. Currently 47 percent of the S&P 500 stocks pay a dividend yielding more than a 10-year Treasury, demonstrating the resiliency and strength of American enterprises.
2012-07-19 Quarterly Review and Outlook by Hoisington and Hunt of Hoisington Investment Management
Long-term Treasury bond yields are an excellent barometer of economic activity. If business conditions are better than normal and improving, exerting upward pressure on inflation, long-term interest rates will be high and rising. In contrary situations, long yields are likely to be low and falling.
2012-07-19 Equity Investment Outlook by Team of Osterweis Capital Management
In the politically correct atmosphere that permeates many of our college campuses, the euro-centric view of world history is regarded as hopelessly anachronistic, small-minded and possibly even racist. In the last year, they have become hopelessly euro-centric, rising or falling in concert with the news coming from the eurozone. A few years ago the markets focused on growth in emerging markets. Today, they focus on problems in the developed world.
2012-07-19 Developed Asia Pacific: Economic Review 2nd Quarter 2012 by Team of Thomas White International
Developed Asia Pacific economies experienced significant headwinds during the second quarter of 2012. While optimism about business conditions in the Euro-zone helped sustain export growth during the first quarter of 2012, significant challenges from the Euro-zone hampered both investor and consumer sentiment in most developed Asian economies during the second quarter.
2012-07-19 Chinas Growth Slows for Sixth Straight Quarter by Michael Sullivan of American Century Investments
Gross domestic product (GDP) growth in China, the world's second largest economy, dropped again on a year-over-year basis, from 8.1% last quarter to 7.6% for the second quarter. Growth is at its lowest level in three years. In domestic news, the major U.S. equity markets rallied last Friday and erased earlier losses to finish positive for the week.
2012-07-18 GOP VP Poll Results - Thumbs Up for Rubio, Thumbs Down for Pawlenty/Portman by Team of Bespoke Investment Group
Yesterday we ran two polls regarding Mitt Romney's VP pick to get a gauge on the topic from the investment community. In the first poll, we asked, "Who will Mitt Romney pick as his VP running mate?" As shown below, Marco Rubio got the highest percentage of votes at 28%, followed by Rob Portman at 18%, Tim Pawlenty at 15% and Condi Rice at 12%.Next we asked, "Who should Mitt Romney pick as his VP running mate if he wants to win?"
2012-07-17 Gundlach – Avoid Riskier Assets by Robert Huebscher (Article)
Since early this year, Jeffrey Gundlach has warned investors to avoid exposure to riskier assets – among them, equities, non-dollar-denominated securities and sovereign debt. Still reluctant to move to a more aggressive position, Gundlach said on Thursday that 'substantial opportunities await,' but they may be as much as a year away.
2012-07-17 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before. If this is indeed another rerun, we should expect central bank and other policy responses to help limit the fallout. As we see it, hesitancy and solvency traps are the main obstacles to recovery.
2012-07-17 Game of Thrones by Cliff Draughn of Excelsia Investment Advisors
An economy consists of a gazillion simple transactions, all working together; and our economy used to be grounded is such factors such as supply and demand, growth, and imports and exports. But today the economy is driven by the political rhetoric of our elected officials as it relates to regulations, taxes, and anticipation of QE3. We are in global slowdown mode, and to understand how we should invest we need to better understand what deleveraging will mean over the coming couple years.
2012-07-17 Global Slowdown: Preparing for a Recession by Russ Koesterich of iShares Blog
While Russ believes that the most likely scenario for the global economy in 2012 is continued slow growth, he explains what's behind the recent global slowdown and what investors may want to consider doing if it grows worse.
2012-07-17 Bull Market Has Been Buffeted, but Remains Intact by Bob Doll of BlackRock Investment Management
During a relatively modest week in terms of trading activity, stocks managed to stage a rally on Friday that helped erase the declines of the previous four days. The stock market gains over the past month can be largely attributed to the perception that policymakers in Europe have been making some progress combatting the ongoing debt crisis. There is a sense of uncertainty over the state of the US economy, and that uncertainty is making investors, companies and consumers wary about the future.
2012-07-17 Impact of ETF Growth on Active Managers by Dmitriy Katsnelson, Ryan Davis of Fortigent
A paradigm shift away from active management has been in place for more than a decade. Active mutual funds held more than 19 times the amount of assets than passive strategies before the SPDR SPY ETF was launched in 1993. As seen below, they have gradually lost market share to passive vehicles, particularly in US Equities.
2012-07-17 Is a U.S. Recession Looming? by Scott Colyer of Advisors Asset Management
There are many indicators that we look for that tends to define cyclical market bottoms and give us signs of an upturn. Recent investor lack of volume and record high cash balances can also point to a change toward higher market valuations. Every day I hear about the relative cheap valuations of U.S. equities. We know that valuations can stay depressed for years, even decades. Why would we be thinking that a potential melt-up might be about ready to happen?
2012-07-16 And That's The Week That Was by Ron Brounes of Brounes & Associates
Now that's a nice way to end a losing streak. After six consecutive down days (and little in the way to promote optimism), investors jumped back into the equity pool feet first and the Dow surged over 200 on the final day of trading. In terms of new news, the JP Morgan earnings announcement was not as bad as expected (I guess), though investors may have been looking for any excuse to seek out bargains in the aftermath of a pretty dreary week-plus.
2012-07-16 Pacific Basin Market Overview by Team of Nomura Asset Management
Europe's sovereign debt crisis continued to hound the global equity markets throughout the second quarter, while economic data from the U.S. was also lackluster. Despite a late recovery, the Japanese equity market fell during the April-June quarter, owing to instability in the European financial system, economic distress in Europe, the U.S. and China, and the yens appreciation.
2012-07-16 Stocks, ETFs Send Mixed Messages by John Nyaradi of Wall Street Sector Selector
Major U.S. stock indexes and ETFs send mixed messages with difficult week ending in Friday rally. U.S. stock markets had been in steady decline until Fridays unexpected rally brought the S&P 500 (NYSEARCA:SPY) into slightly positive territory for the week.
2012-07-14 The Beginning of the Endgame by John Mauldin of Millennium Wave Advisors
For the last year I have been writing that it is not clear that Europe (with the probable exception of Greece) will in fact break up. The forces that would see a strong fiscal union are quite powerful. In today's letter, I will try to bring you up to date on some insights I have had in the 18 months since Jonathan Tepper and I did the final edits on our book, The Endgame.
2012-07-13 Worried about Higher Taxes? Take Action by Frank Holmes of U.S. Global Investors
About 1.25 million Americans would pay more in taxes next year if President Barack Obamas latest plan is approved. The White House wants to allow taxes to rise for households making more than $250,000 by boosting the top marginal tax rates to 36 and 39.6 percent (currently, its 33 and 35 percent). In an environment where government policy favors higher taxes, investments that lower a tax bill can look attractive.
2012-07-13 End Game: What Happens to Residential Mortgage-Backed Securities if There's a Eurozone Exit by Rod Dubitsky of PIMCO
An exit would substantially affect euro-denominated RMBS mortgage collateral. Currency redenomination and devaluation would likely wipe out the entire available credit enhancement for most deals. Losses of redenominated loans could overwhelm credit support, even for well-performing deals.
2012-07-13 Muddling Through, But for How Long? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Equity markets rebounded from their lows, but the move has been less than enthusiastic and convincing. Earnings season is upon us and corporate commentary and outlooks may take the focus away from the macro world, at least for a time. Muddling through is what's occurring in the US economy. But how long before a break is made, both in the economy and the markets? Any progress made at the most recent EU Summit appears to have been short-lived and any credible long-term solutions remain elusive. Additionally, Chinese growth continues to slow and concerns over a "hard landing" are growing.
2012-07-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Following back-to-back double-digit quarterly gains, US stocks took a breather in the second quarter, with the S&P 500 Index declining 2.8%. It could have been worse. At the quarters low point in early June, the Index had declined 10.0% from the first-quarter close. June was a strong month for stock performance, leading to a welcome recovery from the early quarter decline. However, positive returns from the first quarter prevented the Index from becoming negative on a year-to-date basis.
2012-07-12 The View From the Fiscal Cliff by Chris Molumphy of Franklin Templeton Investments
Six months into 2012, investors whose New Years resolutions included a vow to hold strong through market dismay may be finding that the eurozone crisis and slowing global growth are testing their resolve. As we move into the second half of the year, sluggish growth and continued market uncertainty seem likely to be ongoing scenarios for the U.S., as the nation faces a fall presidential election and teeters on the edge of a precarious-sounding fiscal cliff.
2012-07-11 Gold to Outshine Dollar? by Axel Merk of Merk Funds
As the price of gold has gone up fivefold over the past 10 years, why would one buy it at todays prices? For the same reason an investor would buy any other asset: if one believed it would be a good investment now, that is if one believed it may appreciate in value and add portfolio diversification benefits. A key reason to hold gold today might be to prepare for the crisis tomorrow.
2012-07-11 Green Consumption: Its Not All Positive by Dan Ariely of Predictably Irrational
There was a time when farmers markets, eco products, recycling, and renewable energy were squarely in the tree huggers domain. Then, somewhere along the line, green went mainstream, turning environmental awareness into a socially desirable trait and a mark of morality.
2012-07-10 Recession is Not Imminent by Dwaine van Vuuren (Article)
Perma-bears are bombarding us with alarm bells, sounding the doom of the US economy. We find ourselves in yet another 'summer slowdown scare,' for the third year running. In 2010 and 2011, the purported slowdowns turned out to be soft landings. Investors who ran to the sidelines stared in disbelief as the stock market roared ahead, leaving them behind. We are likely in the same position now.
2012-07-10 One Way Pockets by Jeffrey Saut of Raymond James Equity Research
This morning I awoke to headlines "Asia Signals Drop In Global Demand," "Euro Zone Fragmenting Faster Than EU Can Act," "European Worries Send Shares Lower," and "Investors Brace For Shaky Earnings Season." Such musings have the S&P 500 futures off about six points. Somewhat offsetting these negative quips are these headlines, "Fed Officials Favor QE3" and "Obama To Seek One-year Extension For Some Of Bush Tax Cuts;" but alas, this morning the negatives are outweighing the positives.
2012-07-10 Is Higher Inflation on the Horizon? by Orhan Imer of Columbia Management
For nearly two decades inflation in the U.S. has been fairly contained except for a few periods of moderate acceleration around peak levels of economic activity. More recently, headline inflation as measured by the year-over-year change in the CPI-U (Consumer Price Index for Urban Consumers) declined from 3.9% in September 2011 to 1.7% in May 2012 driven primarily by the slowdown in the U.S. economy and the sharp drop in energy and commodity prices.
2012-07-10 Investors fret about Europe, but US stocks up 8.6% on the year by David Edwards of Heron Financial Group
Investors have flooded back to European and US stocks on the surprise announcement that a single Eurozone wide agency, somewhat akin to the Federal Deposit Insurance Corporation (FDIC), will be established to backstop European banks directly, rather than lending through the respective governments of troubled banks.
2012-07-09 Disappointing, but Not Terrible by Charles Lieberman of Advisors Capital Management
Job growth has slowed to a disappointing pace over the past three months, insufficient to bring down unemployment, but not so weak that recession is much of a threat. This mediocre performance also leaves the Fed in a quandary, neither making an obvious case to leave policy unchanged or a clear case to implement yet another form of policy accommodation.
2012-07-09 Unemployment a Secular Problem by Brian S. Wesbury and Robert Stein of First Trust Advisors
Last Fridays employment report was a Rorschach test for economists. (You know, show an inkblot and find the obsession.) Its not a surprise that the response to the report was pessimistic. We heard all kinds of rhetoric, including a new one - Zombie Economy.
2012-07-07 Into the Matrix by John Mauldin of Millennium Wave Advisors
What does the current environment of earnings and valuations tell us about the prospects for the US stock markets in general over the next 3-5-7-10 years? This week we have part two of "Bull's Eye Investing Ten Years Later," which we started last week. These two letters have been co-authored with Ed Easterling of Crestmont Research. We take a look at research we did almost ten years ago as part of my book Bull's Eye Investing, updating the data and asking,"Are we there yet? When will we get to the end of the secular bear market?"
2012-07-06 Business Investment Dwarfs Housing by Brian S. Wesbury of First Trust Advisors
Since 2008, the market punditry has focused on housing, housing and housing. Business news channels have housing experts who report on every housing number as if it were the golden key to all economic activity. People say we cant have a recovery without housing. Conventional wisdom has an obsession with housing.
2012-07-06 Mid-Year 2012 Economic Update by Team of Horizon Advisors
The questions we hear most often from our clients have to do with the Eurozone, U.S. politics, and closely related, the so-called fiscal cliff. We thought we would approach each of these in turn.
2012-07-06 Are You Limited by Linear Thinking? by Frank Holmes of U.S. Global Investors
Dont be limited by linear thinking in your portfolio. As an alternative to low yielding Treasury bonds, consider resources stocks that pay dividends. Weve found that most materials, utilities and energy stocks in the S&P 500 Index pay a dividend higher than the 10-year Treasury: Materials and utilities companies yield an average of 2.3 percent and 4.1 percent, respectively, while energy stocks pay an average yield of 2.2 percent. Nonlinear thinkers have historically benefited from the inclusion of natural resources as part of a balanced portfolio.
2012-07-05 And That's the Quarter That Was by Ron Brounes of Brounes & Associates
So much for that Random Walk Theory. During the past two years, equities started strong before running into headwinds in the second quarter and Europe (namely Greece) was perceived to be the primary culprit. As another very solid first quarter came to a close, perhaps smart investors should have been looking at charts and reading the Greek press to predict another downturn.
2012-07-05 Math, History and Psychology - Part 2 by Bill Smead of Smead Capital Management
Last week we wrote about the math of common stock investing and the effectiveness of mathematical discipline to portfolio management. This week we will focus on history and the importance of that academic discipline to us as common stock portfolio managers here at Smead Capital Management (SCM).
2012-07-03 10 Predictions for 2012: Mid-Year Update by Bob Doll of BlackRock Investment Management
At the midway point of 2012, it seems an opportune time to review the predictions we made at the beginning of the year. Although much could change, at this point it appears that the majority of our predictions are on track.
2012-07-03 Gleanings by Jeffrey Saut, Art Huprich, Scott Brown of Raymond James Equity Research
With this Gleanings report, we begin a monthly chart presentation and discussion, which attempts to pull together the separate disciplines of Economics, Fundamentals, Technical analysis, and Quantitative analysis.
The report contains what we think are currently some of the most important charts. We will have an overview and then highlight some of the key near-term variables that we believe could have a measurable effect on where the various markets are going.
2012-07-03 Jump: Market Rallies Sharply on EU Summit News by Liz Ann Sonders of Charles Schwab
Friday's sharp rally on better European news is followed by weaker economic news this week, keeping debate alive about what the market's priced in. When markets expect nothing and get something it can be a recipe for a rally. Investors of every ilk have de-risked, unleashing a scramble last Friday. The US economy is at stall speed, but still looks better than much of the world.
2012-07-03 Let's Twist Again by Daniel Kurland of Corby Asset Management
Ben Bernanke must be nostalgic for his childhood. On June 19th in the summer of 1961, when Chairman Bernanke was only 8 years old, Chubby Checker released his smash hit, Lets Twist Again. Chairman Bernanke, citing decreased inflationary concerns and heightened employment weakness, announced that Operation Twist, which had been set to expire at the end of June, would be extended until the end of the year.
2012-07-02 Anatomy of a Bear by John P. Hussman of Hussman Funds
The unusually bad outcomes of similar historical precedents help to convey why we retain such a durable sense of doom, even after last weeks scorching risk on advance. A moderate continuation of constructive market action would likely be sufficient to move us to soften our presently hard defense by retreating from a staggered strike option hedge. At present, conditions remain aligned with those that have preceded some of the most negative consequences in market history.
2012-07-02 U.S. Economic Outlook: Potential for Growth, Vulnerability to Policy Mistakes by Saumil Parikh of PIMCO
There are very early signs of improvement in the housing market. Another plus is the shift in U.S. energy supply from imported oil to domestic oil and natural gas. The U.S. economy still faces significant headwinds from over-indebtedness, large imbalances, growing inequality and policy incrementalism. In our view, investors need to consider the implications of rising forward tax rates and that price inflation will play a greater role in generating nominal GDP growth than in the past.
2012-07-02 Has Housing Stabilized? by Ryan Davis of Fortigent
In the past two weeks, several important indicators have illustrated a market that, while not quite in a state of recovery, appears to be stabilizing. This sentiment was echoed in the latest Beige Book released by the Federal Reserve, which reported, several Districts noted consistent indications of recovery in the single-family housing market, although the recovery was characterized as fragile.
2012-07-02 The Virtue of Necessity by Jeffrey Saut of Raymond James Equity Research
The call for this week: In my opinion, last week the Commodity Index bottomed and the Dollar Index topped. If so, recession fears should abate in the months ahead. Moreover, if a recession was really on the horizon "junk" bond yields would be rising on worries of increased defaults and that is not happening with the iShare High Yield Fund (HYG/$91.29) attempting to make a new reaction high (i.e., lower yields).
2012-06-30 Bull's Eye Investing (Almost) Ten Years Later by John Mauldin of Millennium Wave Advisors
The current valuation of the stock market is relatively high, but it is not overvalued, considering today's conditions. Low inflation-rate conditions should be accompanied by relatively high P/Es. But if deflation or high inflation (or both) are likely upcoming, the market is very expensive. On the other hand, if the inflation rate happens to remain near price stability, then this secular bear could remain active a while longer but how likely is that?
2012-06-29 A Strategy to Navigate the Housing Cycle by John Burns of John Burns Real Estate
The memories of 2007 through 2011 are clouding too many people's vision. There are plenty of legacy problems from the housing boom that have yet to clear, and plenty of risk to the downside, but the demand, supply and affordability measures are in place to help us put the housing downturn behind us and move forward. We are leaving stage one of the recovery and moving into stage two. Don't miss the ride.
2012-06-29 Step Two - Going Backward - Election More Important Than Ever by Brian S. Wesbury and Robert Stein of First Trust Advisors
In one of the least likely outcomes in Supreme Court history, Chief Justice Roberts, who was widely considered a conservative voice on the Court, proved to be the swing vote in one of the largest expansions of US government involvement in the economy ever.
2012-06-29 Legal Gimmickry Rescues Obama by Peter Schiff of Euro Pacific Capital
Despite the celebrations among Democrats, yesterday a majority of Supreme Court justices ruled that the Constitution does not allow the government to force Americans to buy health insurance. However in providing the swing vote to uphold the Affordable Care Act (aka Obamacare) Chief Justice John Roberts broke with the four other justices who shared that view by declaring that the methods chosen to get individuals to buy insurance were not penalties but taxes.
2012-06-29 Fat Tails by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have moved modestly higher and may now be in a relatively large trading range. US economic growth remains sluggish and is drifting dangerously close to stall speed. Policymakers in Europe appeared to make some progress in the most recent summit, but much is left to be done and time is running out. Meanwhile, global growth is slowing and central banks are attempting to stem the decline.
2012-06-29 Meanwhile, Back at the Ranch... by Scott Brown of Raymond James Equity Research
With worries about Europe and the individual mandate of the Affordable Care Act behind us, we can go back to looking at the economy. At issue is whether recent signs of slowing were an illusion or more real. In particular, the June job market figures will be critical.
2012-06-29 And That's the Week That Was by Ron Brounes of Brounes & Associates
Hip Hip Hooray. Europe is saved (again); the equity markets are back on track (again); and investors can enjoy a much needed holiday come hump day next week. With positive news out of Europe and some favorable signs for the housing sector, investors moved back into risk assets and stocks enjoyed a nice end of the week (quarter). Supreme Court Chief Justice put his stamp on ObamaCare (and earned some enemies along the way). The second quarter could not end soon enough.
2012-06-29 Unmasking the Asian Giant by Frank Holmes of U.S. Global Investors
China is far from perfect: While actors can perfect their lines and use masks to captivate an audience, smart investors know better to use a wealth of information across numerous sources to guide investment decisions. Weigh the evidence and judge for yourself. As my friend, Investment Strategist Keith Fitz-Gerald recently said in an interview, A powerful China is coming, and we have two choices. Either we're at the table, or we're on the menu. To him this means, Good news from China is good news for the U.S.; bad news from the Chinese economy is bad news here.
2012-06-27 The Great American Mirage by Stephen Roach of Project Syndicate
In September 1998, during the depths of the Asian financial crisis, the US Federal Reserves then-chairman, Alan Greenspan, had a simple message: the US is not an oasis of prosperity in an otherwise struggling world. Greenspans point is even closer to the mark today than it was back then.
2012-06-26 A Top Analyst: North America Heading to Energy Independence by Robert Huebscher (Article)
Ed Morse, a managing director of Citigroup Global Markets, said last week that by the end of this decade the US and Canada will have a surplus of oil, leaving it with 'no room for imports.' But the longer-term picture is far less certain, as extraction moves from conventional wells to newer sources, such as deepwater fields and shale-based oil.
2012-06-26 Running on Empty by Marie Schofield of Columbia Management
In a move that was more anti-climax than comforting, the Federal Reserve (Fed) satisfied the minimum expectation of the markets and extended Operation Twist, or the MEP (Maturity Extension Program), through the end of the year thankfully taking us beyond the election period.
2012-06-26 Math, History and Psychology by Bill Smead of Smead Capital Management
In my 32 years in the investment business, success in common stock investing seems to come down to math, history and psychology. At Smead Capital Management (SCM), we have built our investment discipline and our eight proprietary criteria around these academic subjects. With the stock markets gyrating wildly the last few weeks, we thought it would be helpful to see where we are today in each of these disciplines. We will start this week with our view on the math section.
2012-06-25 And That's the Week That Was by Ron Brounes of Brounes & Associates
Ahthe doldrums of summer. Sure Greece just completed crucial elections that could have dramatic impact on the euro-zone and the global economy; AND Spain just saw its interest rates rise above the key seven percent level into traditional bailout territory; AND JP Morgan, of failed hedging fame, just received a major ratings downgrade by Moodys Investors Services; AND Facebook disappointed the investment world with its disastrous IPO, a comedy of errors for most everyone involved
2012-06-25 Enter, the Blindside Recession by John P. Hussman of Hussman Funds
The joint evidence suggests that the U.S. economy has entered a recession that will eventually be marked as having started presently. In recent months, our measures of leading economic pressures have indicated the likelihood of an oncoming U.S. recession.
2012-06-25 Volcker Does Not Rule by Jeffrey Bronchick of Cove Street Capital
There are many reasons an interested observer can conjure as to why the US economy remains in a petulant quagmire, and some of them are actually not political in nature. Our mini-treatise today is on our particular favorite: the inanity of financial services regulation and the whipping boy of the month, Jamie Dimon of JP Morgan.
2012-06-25 The Rating Agencies Are Lost At Sea by Charles Lieberman of Advisors Capital Management
Moodys bank downgrade is such a breathtaking demonstration of incompetence that it undermines the entire rating agency concept. If the banks deserve downgrading now after domestic banks increased their capital base dramatically over the past few years, declines in loan defaults, and recovery in profits, one can only wonder why these very same banks were not rated junk a few years ago before these improvements occurred?
2012-06-25 The Second Step: Supreme Court by Brian S. Wesbury and Robert Stein of First Trust Advisors
Step Two of our Four Steps to Recovery will happen sometime this week. The wait for the Supreme Court to issue its decision on whether President Obamas health care reform law is constitutional is almost over.
2012-06-25 Let's Twist Again by Kristina Hooper of Allianz Global Investors
It looks like the Fed is finally facing up to the facts. The U.S. economic recovery has stalled and policymakers have realized that they need to step in. Despite a favorable election outcome in Greece, a renewed commitment to austerity and staying in the euro zone, the Fed has lowered its outlook for growth and extended Operation Twist.
2012-06-25 Markets Vacillate Between Weaker Data and Hopes for Policy by Bob Doll of BlackRock Investment Management
Last week was a modestly negative one for stocks as investors continued to focus on a trend of weakening economic data. Additionally, many were disappointed by what was perceived to be a less-than-robust response from the Federal Reserve following its policy meeting last week.
2012-06-25 Jilted Investors Unsure Where to Turn by Chris Maxey and Ryan Davis of Fortigent
Institutional and individual investors are at an uncertain juncture, waiting to see what the next shoe to drop is. With an important series of events occurring soon, such as the US Presidential election this fall and the fiscal cliff facing the US at years end, investors may need to wait to get more clarity on the market outlook.
2012-06-25 Timid Actions, Fearful Times by Christian Thwaites of Sentinel Investments
Since 2010, investors have traveled between optimism and pessimism every three months. It's negative right now. Here's why: A very timid move by the Fed. What was glaring was the entire board revised down their expectations on the economy: i) GDP down by $500bn ii) unemployment up 500,000 and iii) lower core and PCE inflation. Not just for 2012 but next year as well. That takes complacency to a new level.
2012-06-25 Government Mortgage Policies Will Determine the Speed of the Recovery by Lisa Marquis Jackson of John Burns Real Estate
Our current view on housing is that the market has bottomed and the slow recovery is underway. But now the question we are often asked is, "What does that recovery look like?" Even in a down market, the mortgage industry remains a multi-trillion dollar business and our takeaway is that a full-fledged housing recovery won't completely take hold until housing finance begins to rebuild itself.
2012-06-22 Dont Expect A Double Dip This Year by Russ Koesterich of iShares Blog
Renewed fears of a US double dip are making the rounds. While Russ gives four reasons why the United States is not likely to tip back into recession this year, he has a word of caution about a risk looming over 2013.
2012-06-22 An Ending Made For Gold by Frank Holmes of U.S. Global Investors
Hold tight to your convictions, gold investors. Review your allocation to gold and gold stocks to make sure it remains around 5 to 10 percent of your portfolio. That way the precious metal can act as a shock absorber to help protect from any unexpected bumps in the financial system.
2012-06-21 Cohen & Steers Closed-End Fund Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the closed-end fund market as of May 31, 2012. For the month, the total return of the Morningstar U.S. All Taxable ex-Foreign Equity Closed-End Fund Index was 4.4 percent based on market-price and 4.6 percent on a net-asset-value (NAV) basis. Year to date, the index had a market-price total return of 5.1 percent and a NAV return of 2.6 percent.
2012-06-20 Growth Versus Austerity: A U.S. Dollar Perspective by Axel Merk of Merk Funds
Austerity versus Growth? Which economic model is sustainable? If it werent for those pesky bond vigilantes, it may be only politics. Lets not get too excited that either path will work. Lets look at the implications for investors with a focus on the U.S. dollar.
2012-06-19 Will Policy Response Follow Policy Rumor? by Bob Doll of BlackRock Investment Management
The past two weeks have been better for stocks, with the major indices up in consecutive weeks for the first time in more than a month. Europe remains stuck in a cruel cycle of recession, a banking system in need of life support, frozen policymakers, too much debt and a downward confidence spiral. In the United States, economic growth slowed this spring (likely due to poor weather and the earlier spike in gasoline prices), but remains intact.
2012-06-19 Consumers Remain Perplexed by Chris Maxey and Ryan Davis of Fortigent
Consumers have long been the cog behind the American economic engine. After suffering a terrible fate in 2008, there was a long, slow build to post-recession normalcy. Consumer balance sheets are in a better place, but remain tenuous and suggest there continues to be a long distance to travel before we can once again depend on the American consumer to be the buyer of last resort.
2012-06-19 Down and Out in Wenzhou by Bill Smead of Smead Capital Management
Much like in the US in 2006, the Chinese government officials and the worldwide media need to believe that what is going on in Wenzhou is not the first domino in a series of dominos which fall over the next two years. The Chinese economy and its miracle of the last 30 years were originally driven by the competitive advantage of cheap labor.
2012-06-19 Achilles Last Stand: Greeks Vote in Favor of Euro by Liz Ann Sonders of Charles Schwab
The June 17 Greek elections favored the pro-bailout party and allow for a likely coalition to be formed probably the least-tumultuous outcome. However, kicking the can further down the road doesn't solve the eurozone's structural problems, nor does it stem contagion. Next on investors' radar is this week's Federal Reserve meeting, where additional easing is expected.
2012-06-19 Is China Running Out of Steam? by Matthew Rubin, Ing-Chea Ang, Justin Gaines of Neuberger Berman
The Chinese growth story is especially impressive. At a time when many economies have struggled, China has continued to expand rapidly, helped by its dominant position in manufacturing, growing middle class and, after the 2008 credit crisis, its successful injections of capital and stimulus to ward off recession. Nevertheless, recent data have suggested that the Chinese expansion is now slowing more quickly than most investors expected.
2012-06-19 Shocking Fed Survey on Consumer Finances by Gary D. Halbert of Halbert Wealth Management
Today we focus on a new Fed study which found that Americans net worth plunged almost 39% in the period from 2007 to 2010. That period included the so-called Great Recession, a financial crisis and a severe bear market in stocks. There are lots of interesting statistics to look at in this new Fed study.
2012-06-18 And That's The Week That Was by Ron Brounes of Brounes & Associates
With Fed officials preparing for next weeks policy meeting, traders and investors alike have been busy dissecting economic data and global developments as they speculate about any potential moves. While Spain and Italy saw their yields surge and Greece moved closer to Decision 2012, investors focused on the potential for European action and compromise that could put the Union back on a road to recovery (with or without Greece).
2012-06-18 A Brief Primer on the European Crisis by John P. Hussman of Hussman Funds
Europe has repeatedly been successful at addressing its recurring liquidity crises with the help of other central banks, but its still an open question whether they can durably solve the solvency crisis without more disruption and more restructuring of both government debt and troubled banks. In my view, the hope for an easy solution is misplaced, and the likelihood of recurring disruptions from Europe will remain high.
2012-06-18 Mood by Jeffrey Saut of Raymond James Equity Research
M-O-O-D: That is the important word right here. And, what a difference a few weeks makes for last week the markets seemed to switch from the glass being half-empty to half-full leaving Mr. Market in a more forgiving mood. Importantly, market mood frequently sets the near-term trend. If the mood is positive, all things are possible; if it is negative, little is.
2012-06-18 Cohen & Steers Large Cap Value Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the U.S. large cap value market as of May 31, 2012. For the month, the Russell 1000 Value Index had a total return of 5.9%, compared with a total return of 6.0% for the S&P 500 Index. For the year to date, the Russell 1000 Value Index had a total return of +3.5%, compared with +5.2% for theS&P 500 Index.
2012-06-18 I Like These Calm Little Moments Before the Storm by Christian Thwaites of Sentinel Investments
It is the job of investment managers to look beyond the gloom. There's plenty of it. The big list last week was the slow hand clap the market gave to the Spanish bank rescue, the probable downgrade of India, one of the dead cert BRICs we all read about, and queasy economic data from the US. Now we don't just jump in and buy on all the bad news. We're not likely to retain clients that way.
2012-06-15 Every Economists Career Ends in Failure - The Irony of Hyman Minsky by John Gilbert of GR-NEAM
The economist Hyman Minsky held that capitalist economies are inherently unstable because investments are financed with debt, and the financial markets pricing of debt is volatile. Economies are prone to booms and busts as the cost of financing falls too far, or rises too much, revealing poor investment decisions. This has always been obvious to observers of business cycles, of which Minsky was one. Too many of his colleagues in economics ignore this, which we have found puzzling.
2012-06-15 Schwab Market Perspective: Time for Action by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
With escalated uncertainty, sitting back can be an easy choice, but we believe investors and policymakers alike need to take action. Equities bounced off of what appeared to be oversold conditions but although the US economy appears to be holding its own, a renewed sustainable uptrend may be hard to come by until some substantive policy actions are taken around the globe. The time for decisive action in the eurozone appears to be quickly approaching as short-term solutions are no longer satiating the market.
2012-06-15 Obstacles to a Lasting Recovery: The Liquidity, Hesitancy & Solvency Traps by Thomas Fahey of Loomis Sayles
Those familiar symptoms are back again to start the summer: risk aversion; falling equity prices; rising volatility; record-low German and US government bond yields; wider credit spreads; a European country getting picked on; and a stronger US dollar. We have seen this bad movie twice before, during the summers of 2010 and 2011. If this is indeed another rerun, we should expect central bank and other official policy responses to help limit the fallout. As we see it, hesitancy and solvency trapsnot a liquidity trapare the main obstacles to a lasting economic recovery.
2012-06-15 Cohen & Steers Global Real Estate Securities Strategy by Team of Cohen & Steers
We would like to share with you our review and outlook for the
global real estate securities market as of May 31, 2012. The
FTSE EPRA/NAREIT Developed Real Estate Index had a total
return of 6.4% for the month (net of dividend withholding
taxes) in U.S. dollars. Year to date, the index returned +7.9%.
2012-06-14 Out of Order by Peter Schiff of Euro Pacific Capital
I was invited to testify about the Federal Housing Administration's (FHA) policy in the apartment lending market. Although this was a fairly narrow issue, I told the congressmen the same thing I did last year when I was invited by a different subcommittee to testify about job creation: government programs don't solve problems, they just create new ones. While I thank the Committee for inviting me, I believe the congressmen may have gotten more than they bargained for.
2012-06-14 The US Economy Sitting on the Threshold of a New Golden Age: Part Two by Chuck Carnevale of F.A.S.T. Graphs
In part one of this multipart series on the US economy I offered the following basic opinion: The majority of the positive aspects underpinning the US economy are being mostly ignored by mainstream media in favor of the smaller, but more titillating, negative aspects. Consequently, I believe that many Americans, and since this is an investing blog, many investors, are holding a much more negative view of the strength of the American economy than is warranted. I offer massive outflows from equity funds into Treasury bonds as evidence supporting my thesis.
2012-06-14 A Year in the Life of a City Bike. by Dan Ariely of Predictably Irrational
At one point the people who run Hudson Urban Bikes, a bike rental company in the West Village, wondered what would happen to a bike if it was left chained to a post in the city for one year, and they took a picture of it each day to document its progress. The bicycle began its experimental journey equipped with all necessary equipment plus a basket, water bottle, splashguard and a few other goodies.
2012-06-14 Patient But Vigilant Fed by Asha Bangalore of Northern Trust
Chairman Bernanke failed to offer broad hints about an imminent round of financial accommodation or an extension of Operation Twist (Maturity Extension Program) in his testimony on June 7. There were three key takeaways pertaining to the near term economic outlook from Bernanke's testimony and response to questions.
2012-06-14 Chart of the Week: Growth Dichotomys Diminished Influence by Team of American Century Investments
Despite weaker-than-expected U.S. employment data for May (released June 1) and other signs of slow economic growth, the Fixed Income Macro Strategy Team at American Century Investments does not believe the U.S. economy is headed toward another recession (though the marginal possibility of recession has increased). Rather, the team believes the economy remains on a sub-par recovery/slow (1-3%) growth path, with headwinds.
2012-06-13 The by Gary D. Halbert of Halbert Wealth Management
Today we revisit the subject of the so-called fiscal cliff that our country faces at the end of this year if a Lame Duck Congress fails to pass a number of new laws by December 31. (I last wrote about this subject on March 27.) Some analysts are arguing that nothing really bad will happen if the Lame Duck Congress fails to get the job done. I disagree and I will tell you why below.
2012-06-13 U.S. Commercial Real Estate: A Technical Affair by John Murray of PIMCO
We believe attractive investment opportunities will arise in sectors of CRE that haven't yet caught the eye of technicals-driven capital. Demand for CMBS arguably comes from a lack of alternatives as opposed to any sort of inherent belief in rental fundamentals. Fickle technical factors are not the only headwinds: Deleveraging, regulatory uncertainty and weak fundamentals add further pressure.
2012-06-12 Odds for Greece and the Health Care Law by Team of Bespoke Investment Group
Below is an updated look at Intrade.com contracts for two of the biggest news stories going on this month -- the Supreme Court's health care law decision and the euro crisis. The first chart below shows the Intrade.com odds for the individual mandate of the health care law to be ruled unconstitutional by the end of 2012. This is essentially a bet that the mandate gets overturned when the Supreme Court announces its decision on the case later this month.
2012-06-12 Modern Day Fairy Tale of 3 Economic Wizards (Except It's True) by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Once upon a time (today), in a land not so far away (USA), there lived a trio of economic wizards (economists), whose names shall remain anonymous (Paul Krugman, Greg Mankiw, Ben Bernanke). A fourth wizard, Murry Rothbard, is no longer among the living but resides in the netherworld. The above wizards seldom agree with each other because they come from competing schools of wizardry. (1) Keynesian School of Fiscal Voodoo and Witchcraft (2) Monetarist School of Monetary Voodoo and Witchcraft (3) Austrian School of Sound Money, Sound Economic Principles and Common Sense.
2012-06-11 The Heart of the Matter by John P. Hussman of Hussman Funds
The ongoing debate about the economy continues along largely partisan lines, with conservatives arguing that taxes just aren't low enough, and the economy should be freed of regulations, while liberals argue that the economy needs larger government programs and grand stimulus initiatives. Lost in this debate is any recognition of the problem that lies at the heart of the matter: a warped financial system, both in the U.S. and globally, that directs scarce capital to speculative and unproductive uses, and refuses to restructure debt once that debt has gone bad.
2012-06-11 China Toes a Delicate Balance by Chris Maxey and Ryan Davis of Fortigent
Markets posted their best returns of 2012 last week as investors anticipated additional policy action from global central banks. A series of events during the week heightened optimism that central banks would once again step in to support financial markets. In a Wednesday release, the European Central Bank did not cut its policy rate, but ECB President Mario Draghi said the bank was ready to act in response to the deteriorating state of the Eurozone.
2012-06-11 Investors Look Forward to More Policy Help by Bob Doll of BlackRock Investment Management
Following a significant slide the week before, stocks bounced back last week, primarily due to a growing sense that policymakers in Europe and the United States may be ready to engage in further easing measures. The increasing stress in Europe has put additional pressure on the European Central Bank (ECB) and on other policymakers to take stronger action, and, indeed, over the weekend European finance ministers announced a new plan to recapitalize the Spanish banking sector.
2012-06-11 Bertha and Casey by Christian Thwaites of Sentinel Investments
Markets braced last week for a bailout on Spain which came this weekend. Its banking sector is in wretched condition and joins other European banks at 25 year lows in share price. The official downgrades came long after the stock market had voted with its feet. European leaders had little to add to the debate. There's some talk of a twin track: some European countries pressing on to further integration, some coping with contraction and austerity on their own.
2012-06-08 The Accidental Empire by George Soros of Project Syndicate
Germany is likely to do what is necessary to preserve the euro but nothing more resulting in a German-dominated eurozone in which the divergence between creditor and debtor countries continues to widen. The EU would then become a German empire with a permanently depressed peripheral hinterland in need of constant transfer payments.
2012-06-08 Waiting for Clarity and Action in the Euro Zone by Neil Dwane, Stefan Hofrichter of Allianz Global Investors
Poor economic data and the collapse of a Spanish bank have kept the pressure on Europe and the financial markets, but we believe Greece will stay in the euro and the European Union. U.S. investors should know that Germany is pro-Europe and recognizes the need for growth, not just fiscal austerity. It is also important to point out that ECB policy has been supportive, but they do not want to do the job of the government. U.S. investors should look to high-quality dividend-paying stocks in this uncertain environment...
2012-06-08 The US Economy Sitting On The Threshold Of A New Golden Age: Part One by Chuck Carnevale of F.A.S.T. Graphs
In the past, Ive written numerous articles positing a long-term optimistic outlook for both our economy and the attractive future growth prospects of our great American businesses. Even though I hate to forecast the market in general, I have even presented evidence indicating that the general market as represented by the S&P 500 is currently reasonably priced and even slightly undervalued. My most recent contribution can be found here.
2012-06-08 And That's The Week That Was by Ron Brounes of Brounes & Associates
Add the Fed to the equation to make things a bit more interesting. With stock prices plummeting (with no end in sight), enter Dr. B. and friends with comments that led some to expect future stimulus moves (or maybe not). The European Central Bank made similar remarks, and China took it a step farther with an actual rate cut. Investors welcomed the potential moves and a bit of optimism returns (even if just for a short period). As always, the political bickering is heating up (at home and in Europe) and yet November still remains several months away.
2012-06-07 Spain & Weak US Economy Dominate Markets by Gary D. Halbert of Halbert Wealth Management
Stock markets around the world have been pummeled in recent weeks amidst the growing reality that were in a global recession, especially in Europe. Fears that the US will also fall into recession have intensified, particularly in light of last weeks very disappointing economic reports. At the same time, the European debt crisis has once again raised its ugly head, this time with the spotlight on Spain. Spains own Prime Minister has admitted that the country is in a state of emergency, and money is gushing out of Spanish banks.
2012-06-07 May Rout Leads to June Rally by David Edwards of Heron Financial Group
We got three exogenous events in May: Greek credit crisis resumed, with Greece likely to exit the Eurozone this summer. JP Morgan Chase lost $3 billion on Credit Default Swap trading. The FaceBook FacePlant. And on June 1st, the Labor department reported a minimal gain in jobs, which has economists worried anew about the United States returning to recession.
2012-06-06 Our House: Is the United States the Best House in a Bad Neighborhood? by Liz Ann Sonders of Charles Schwab
I won't try to put lipstick on the pig that was last Friday's May jobs report, but I will try a little lip gloss. Somewhat lost in the mire of the dire reaction to the report were several other more-positive readings on the economy. That's testament to the likelihood that there are many more drivers to today's malaise than just jobs growth, or lack thereof. It seems clear we're in the midst of the third consecutive mid-year economic slowdown, driven by similar forces, most dominantly the eurozone debt crisis.
2012-06-05 Featured Video from Henderson Global Investors by Bill McQuaker (Article)
Bill McQuaker provides a market update and touches on recent changes including political developments in Europe and the slowing of job creation in the US.
2012-06-05 When OK is Good Enough by Team of BondWave Advisors
The US economy continues to grow, but in recent months manufacturing and employment indicators have remained positive but have been flagging. While there might not be a lot to get excited about economically here in the US, OK is better than elsewhere, like Europe. We discuss the situation in the US and Europe and provide a commentary of the US Treasury, Corporate and Municipal bond markets.
2012-06-05 Rational Despair and Analogous Situations by Bill Smead of Smead Capital Management
Randall Forsyth of Barrons wrote a piece on May 31st, 2012 called, Irrational Exuberances Flip Side Seen in Low Bond Yields. It reminded me of the following and wise joke. A younger person asks an older person, How do you succeed in business? The older person says, Good Decisions. The younger person says, How do you make good decisions? The older person answers, Through experience. The younger person asks, How do you get experience? The older person answers, Bad decisions.
2012-06-04 After Disappointing Jobs Data, Now What? by Russ Koesterich of iShares Blog
Stocks tumbled Friday after particularly disappointing May jobs data. Russ provides his take on what the report means for the US economy and stocks going forward. First, the implications for the economy: As jobs numbers tend to lag broader economic activity, the report doesnt in itself suggest that the United States is slipping back into recession. In addition, its worth calling out that according to the new data, the United States created only 69,000 net new jobs in May, less than half of what economists were expecting and the slowest rate of net new job creation in a year.
2012-06-04 It's All Relative by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Equities have pulled back and are flirting with correction (-10%) territory. We believed this was a needed process, and remain modestly optimistic that economic data will rebound and the market will eventually resume its move higher over the next several months. The Federal Reserve has made clear that it stands ready to act should the US economy deteriorate, or the European debt crisis escalate, but we remain skeptical. The more important issue in our view is how the coming "fiscal cliff" is addressed.
2012-06-04 More Muddling Along by Charles Lieberman of Advisors Capital Management
It appears that economic growth has slowed a bit once again, although a relapse into recession seems fairly unlikely. Consumer spending, business investment and a recovery in housing should support growth at a moderate pace. Europe remains a dark cloud hanging over better prospects. Budget deficits at the sovereign level and bank capital needs at the corporate level must be resolved before markets can breathe easily. So volatility in our markets is likely to continue. Since we can exert very little control over Europe, policymakers here must remain focused on maintaining growth domestically.
2012-06-04 Why Smaller Banks Are Attractive by Richard Bernstein of Richard Bernstein Advisors
We continue to prefer smaller, US domestic banks to larger, multinational banks. A backdrop of anemic yet improving US employment and stabilizing housing markets will likely benefit domestic lenders, but the continued deflation of the global credit bubble could continue to hurt the growth prospects for global financial institutions. Although the vast majority of the risks related to the deflation of the US credit bubble seem well-known, investors still appear to be underestimating the risks of credit deflation in Europe and in the Emerging Markets.
2012-06-04 4 Reasons Europe is a Major Risk for US Stocks by Russ Koesterich of iShares Blog
Some investors have argued that events in Europe are having a disproportionate impact on US stocks. Their logic: the US is in the midst of a recovery, albeit a fairly anemic one, that is unlikely to be derailed by Europes travails. Its true that the US economy is doing much better than Europes, and especially southern Europes. But from my perspective, the trajectory of the US economy and the US stock market are very much tied to eurozone events. Here are four reasons why US investors should not underestimate the potential impact of events in Europe.
2012-06-04 Job Recap/How Big of an Impact from Europe? by Scott Brown of Raymond James Equity Research
Job growth has slowed. However, its unclear exactly why or even, despite all the hand-wringing on Friday, whether its something to worry about. A European recession would have a moderate impact on U.S. exports, but there are some positives.
There are a number of other possible explanations for the recent slowdown in (seasonally adjusted) job growth.Firms may be reluctant to hire for a number of reasons: political uncertainty, fiscal policy uncertainty, higher gasoline prices, and worries about the fallout from Europe.
2012-06-04 And That's the Week That Was by Ron Brounes of Brounes & Associates
Nothing good to report here so why even try to spin it. (Effective politicians may beg to differ.) The once promising labor picture just turned from bad to worse; manufacturing is no longer the one staple in the economy; Spain may be replacing Greece as the poster child for what ails the EU (and thats not because things are looking up in Greece). Stocks suffered their worst day of the year to end the week and the gains of the first quarter have been long forgotten. (Even the Astros stink again.)
2012-06-04 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
More importantly than not, it is vital to focus upon a bigger broader landscape when evaluating the condition of ones portfolio, than to focus upon tinier exogenous noise as those factors which indicate the probability of outperformance. Too often, and with more frequency, I have seen micro-analysis paralyze investors decision-making, rendering them incapable of reasonable response.
2012-06-04 Negatives Intensify, but Panic Isn't Warranted by Bob Doll of BlackRock Investment Management
For some time, we have been suggesting that the US economy had been holding up relatively well compared to the rest of the world. While we are not changing that view, last weeks data (particularly Mays employment report) provided a negative jolt and pushed stock prices down sharply. Our summary view of the US economy is that while the United States appears to have entered another slowdown phase with the data growing more disappointing in recent weeks, the case for a renewed recession still looks flimsy.
2012-06-02 Will the ECB and Fed Follow Where China Leads? by Frank Holmes of U.S. Global Investors
Every month, policymakers track purchasing managers indices (PMI) around the world as they consider fiscal and monetary actions. To us, a PMI is a measure of health of companies around the world, because it includes output, new orders, employment and prices across manufacturing, construction, retail and service sectors. Historically, weve seen Chinas PMI number leading the year-over-year change in exports by three to four months, so when the PMI has increased, a few months later, Chinese exports have historically risen, and vice versa.
2012-06-02 First Deflation, Then Inflation. But the Timing? by John Mauldin of Millennium Wave Advisors
One of the more frequent questions I am asked in meetings or after a speech is whether I think we will have inflation or deflation. My ready answer is, Yes. Then I stop, which I must admit is rather fun, as the person who asked tries to digest the answer. And while my answer is flippant, its also the truth, as I do expect both outcomes. So the follow-up question (after the obligatory chuckle from the rest of the group) is for a few more specifics. And the answer is that I expect we will first see deflation and then inflation, but the key is the timing.
2012-06-01 Obama Odds to Win Decline, But Mitt Doesn't Rally by Team of Bespoke Investment Group
2012-05-30 CBO Warns of Recession in 2013 by Gary D. Halbert of Halbert Wealth Management
The non-partisan Congressional Budget Office (CBO) has calculated the expected negative effects on the US economy if the Bush tax cuts expire at the end of this year. Their numbers just released last week are eye-opening! To give us some perspective, US Gross Domestic Product rose by 2.2% (annual rate) in the 1Q of this year.
2012-05-30 Beyond Short-Term Risks, Stocks Are Growing More Attractive by Bob Doll of BlackRock Investment Management
Given our view that the European debt crisis should remain reasonably well contained and our belief that the US recovery remains on track, our outlook for risk assets continues to be a positive one. The combination of the rising equity risk premium, falling stock prices, improving corporate arnings and lower Treasury yields means that stocks have become quite cheap relative to bonds. Assuming that the world is not headed for a renewed deflationary spiral, there is little doubt in our view that stocks are poised to provide superior long-term returns over bonds given their current levels.
2012-05-30 Gannett: Where Buffett Meets Zillow by Bill Smead of Smead Capital Management
You will be surprised to hear that I am somewhat addicted to keeping track of the value of the home we have in the Seattle area and the one in Scottsdale, Arizona. It seems that Zillow uses comparisons to recent sales as the primary vehicle to come up with their Zestimates. We believe at Smead Capital Management (SCM) that comps are a useful tool in valuing common stocks. They are even more useful if the transactions are recent and spectacularly useful if the comps come from a savvy buyer. We would like to run our version of a Zillow estimate on Gannett (GCI).
2012-05-29 Can Krugman Fix Our Economy? by Robert Huebscher (Article)
Our economy faces depression-like conditions, according to Paul Krugman, in its alarmingly high unemployment rate. It needn’t be that way, though, Krugman says – a few simple steps could quickly solve our problems.
2012-05-29 AND THATS THE WEEK THAT WAS by Ron Brounes of Brounes & Associates
When something seems too good to be true For years, investors had (im)patiently awaited the Facebook IPO and a chance to own a piece of the new new thing. Zuckerberg and Co. liked the control and were already wealthy; however, inevitably, they would be selling a piece of the
pie to would-be buyers willing to invest, despite a complete lack of understanding of its revenue model. (When has that stopped investors before?) Every new random
offering brought more anticipation about Facebooks which finally went public on May 18th.
2012-05-29 Being There by Jeffrey Saut of Raymond James Equity Research
The call for this week: I am out of the country seeing institutional accounts, so these may be the only strategy comments for the week. In my absence the stock market will likely resolve its near-term directionality because the "selling stampede" is now 18 sessions long and such stampedes tend not to last for more than 17 to 25 sessions. Despite the decline, by my work there has been no Dow Theory "sell signal," although there are some Wall Street wags who are using very short-term pivot points and believe otherwise.
2012-05-29 Unraveling the Mess in Europe by Charles Lieberman of Advisors Capital Management
There is considerable nonsense written about the European debt crisis. Greece must balance its books, whether they remain inside the Euro or not. There are major benefits and costs to both remaining inside the Euro and to exiting. There is no silver bullet that will solve their problems easily. More broadly, banks need to be recapitalized all across Europe. This has not been done as yet, perhaps for political reasons, which only compounds the economic problems and allows them to fester. It seems like the Europeans are working towards solutions, but painfully slowly.
2012-05-29 Europe Is Near Term Driver of Market Movements by John Buckingham of AFAM
Plenty of uncertainty surrounds developments in Europe, so Ive chosen to pen this Memorial Day version of our Market Commentary on Monday afternoon rather than the usual Sunday evening. Of course, had the U.S. stock markets been open today, we might have seen a modest advance, given that the equity futures were suggesting that gains of some 40 or 50 Dow Jones Industrial Average points would be in the cards when trading resumes.
2012-05-29 Amid Uncertainty, What is an Investor to Do? by Chris Maxey and Ryan Davis of Fortigent
Markets rebounded last week after a two-week slide. The S&P 500 and Dow Jones Industrial Average rose 1.7% and 0.7%, respectively, in a choppy trading period. Discussion of a potential Greek exit from the Eurozone rattled investors, while economic data in the US was modestly positive.
2012-05-26 Meanwhile, Back at the Ranch by John Mauldin of Millennium Wave Advisors
We need to tear our gaze away from Europe and look around at what is happening in the rest of the world. There is about to be an eerily near-simultaneous ending to the quantitative easing by the four major central banks while global growth is slowing down. And so, while the future of Europe is up for grabs, the true danger to global markets and growth may be elsewhere.
2012-05-25 Loss Capacity Drives 401(k) Investment Default Evaluation by Stacy Schaus and Ying Gao of PIMCO
Based on our research, we believe retirement plan participants capacity for loss may be much lower than many investment default options accept as tolerable.
Regardless of asset allocation structure, an investment default option should maximize the likelihood that each plan participant will meet his or her retirement income needs.
One of the keys to meeting a set income replacement goal is to understand how much plan participants can afford to lose at every age as they approach retirement.
2012-05-25 Convertibles Market Review and Outlook by Ellen Gold and Ramez Nashed of Invesco
2012 will continue to be a good year for convertible bonds. New issuance will remain on its current path and increase as companies take advantage of low interest rates to raise capital to fund stock buybacks and mergers and acquisitions activity. Avoiding issue-specific underperformers still remains the key to performing well. This will prove to be even more important than picking the issue specific winners, given the asymmetric risks that are present in the market.
2012-05-24 The Real Crash by Peter Schiff of Euro Pacific Capital
I first came to national attention back in 2008 and 2009 when the housing and credit markets imploded. I became known as the guy that other market "experts" laughed at when I warned of trouble brewing in the seemingly indestructible American economy. After the wheels ground to a halt in mid-2008, people noticed that my bookCrash Proof, originally released in early 2007, read like a detailed preview of many of the events that eventually unfolded.
2012-05-23 Market Gut Check Time, Again by Mike Boyle of Advisors Asset Management
Our research of the last 50 years shows 3% pullbacks occur on average four times a year. So, clearly pullbacks are commonplace during a normal bull market; however, every time they occur they still set investor emotions on edge and test their resolve. At times like this we like to try and decipher what drove the selloff and try to resolve if we think it is just a normal correction or the beginning of a longer trend down and possibly the start of a new bear market.
2012-05-23 Greece Poised to Default & Exit the Euro by Gary D. Halbert of Halbert Wealth Management
Weve all heard horror stories about the global financial crisis that could unfold if tiny Greece defaults on its debts later this year. There are genuine fears that if Greece defaults, that leaves the door open to similar defaults by Portugal, Ireland and possibly even Spain. Some fear, in this nightmare scenario, that even Italy could default (although I doubt it). Will the ECB pony up even more taxpayer money for Greece this time around? Most agree that this will be decided largely by Germany.
2012-05-23 Global Investment Outlook by Mike Turner of Aberdeen Asset Management
Investors continue to focus on the global macroeconomic backdrop, which is still relatively positive despite slightly disappointing data recently. There are signs that some of the imbalances within the Eurozone are starting to ease as competitiveness is improving in some of the peripheral countries and this is beginning to be reflected in trade figures. Looking further ahead, we feel that global consumption should be supported by falling headline inflation.
2012-05-22 The Case for Community Banks by Ryan Issakainen of First Trust Advisors
The most difficult decisions for investors often involve overriding the emotional residue of past mistakes, and reconsidering the merits of a stock or industry with which one has had negative experiences. This was the case for many investors following the bursting of the technology bubble in the early part of the last decade, as they avoided or severely underweighted tech stocks, and ultimately missed out on the tremendous growth experienced by the sector over the last decade.
2012-05-22 New Lows and a Dud IPO by Christian Thwaites of Sentinel Investments
We're testing all sorts of lows: 1) record low for GT10 auction last week 2) GT30 yield, same level as Dec 2008 3) European banks are at same price level as 1987...so 25 years of gains wiped out 4) euro stocks same level as March 2009, so all the gains gone 5) US safest and best place to be 6) China stocks at same level as 2006, since then the Chinese economy has doubled and 7) to cap it all we had an IPO that should never have happened. We're back in risk territory and markets don't want to extend or commit.
2012-05-22 David Rosenberg - I am not a Permabear by Robert Huebscher (Article)
While most sell-side analysts are correctly classified as permabulls, Gluskin Sheff's David Rosenberg has been branded as the opposite - a permabear. He rejects that label. He recently said he's indeed bullish - on bonds and income - and has been so for quite a while.
2012-05-22 What History Tells Us about a Potential Greek Exit by David Schawel (Article)
Greece's future is less certain given the recent elections. Is an exit now possible or probable? What would an exit from the euro look like, and how would it be accomplished? Some historical examples give us a clue to the repercussions.
2012-05-22 Investing Through a Bumpy Ride by David Kelly of J.P. Morgan Funds
Its been a tough quarter so far. The U.S. economy is still growing, but not at a sufficient pace to excite anyone. Meanwhile, investors have had plenty to worry about including a fiscal cliff in the United States, a slowdown in China and, right now most ominously, further turmoil in Europe. Despite plenty to worry about, the realities of a U.S. economic recovery, very conservative allocations and relatively attractive valuations suggest that investors should still consider adding stocks and other risky assets to their portfolios.
2012-05-22 The Achilles Heel of the US Economy by Russ Koesterich of iShares Blog
The Achilles Heel of the US economy may just be that entitlement programs havent kept pace with US demographics, a fact that has long-term implications for investors.
According to a recent annual government report on entitlement programs, the Social Security trust fund is likely to run out of money in 2033, three years earlier than previously projected. Meanwhile, both Social Security and Medicare arent sustainable in the long term without structural changes.
2012-05-22 Return to Normalcy: The False Argument of "Austerity" vs. Growth by Team of Institutional Risk Analyst
To rescue Europe, to reinvigorate the United States, and to set the global economy on a sustainable path toward expansion, the current debate offers a so-called "choice": either slash government spending or spend your way to growth. In Europe, German Chancellor Angela Merkel is one of the most prominent proponents of fiscal restraint -- in part because Germany is picking up the tab for the continent's debt crisis. And in the United States, economist and New York Times columnist Paul Krugman is the fullest-throated supporter of more government spending.
2012-05-22 Were Off to See the Wizard by Bill Smead of Smead Capital Management
In October of 2010 we explained in a missive called The Wizard of Oz that investors had put too much confidence in the ability of a group of Chinese National, US-educated economists to manage the China economy. Thanks to the writing of Ambrose Evans-Pritchard in The Telegraph on May 13th of 2012, we can see just how successful the Wizard has been in perpetuating the myth that China can be the first major world economy to defy business cycles.
2012-05-22 The Harsh Realities of Bond Math by Mark Oelschlager of Oak Associates
Shortly after I graduated from college my father sat me down and tried to teach me about bonds. He proceeded to explain that prices and yields. He tried to explain the difference between a bonds yield and its coupon as well as the effect that time to maturity has on the sensitivity of a bonds price to changes in interest rates. It all sounded so complex, and there were intertwining effects. This, combined with its counter-intuitive nature, made the concept of bond pricing difficult to grasp in a short lesson.
2012-05-21 Facebook IPO Not a Flop; Underwriters Priced it Right by John Buckingham of AFAM
he social media giant ended its first day of trading up a measly 23 cents, or 0.6% from its $38 offering price, and technical difficulties at Nasdaq delayed the opening of trading and impacted market activity throughout the day, I give kudos to the underwriters for actually pricing the deal as best they could to match the relatively limited supply to the unprecedented demand. Certainly, Facebook could eventually grow into its lofty valuation, but it is eye-opening to think the disappointing first day of trading still left the company with a $100 billion+ market capitalization.
2012-05-21 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Dell (5/22), HP (5/23) and Costco (5/24) release earnings next week, but no one seems to care much these days. The Greek crisis and ongoing EU contagion will weigh on investors as G8 leaders head to Camp David to debate fiscal responsibility. (Any opportunities to compromise, Germany?) Talks of harsh financial regs continue to heat up in the aftermath of JP Morgan. Did you guys cash-out of any Facebook (as a hedge), Mr. Dimon?
2012-05-21 A Worthy Scapegoat by Charles Lieberman of Advisors Capital Management
The $2 billion trading loss reported by J.P. Morgan Chase has unleashed a torrent of comments suggesting an even greater need to impose Dodd-Frank, that bank trading operations need to be reined in, that banks managers are badly overpaid and suffer from hubris that gets them into trouble, that our largest banks are too big to fail and too big to manage, and that regulators need to do a better job of keeping banks from taking too much risk with depositor money.
2012-05-21 The Plow Horse Rolls On by Brian S. Wesbury of First Trust Advisors
Turn on the television, pick up the newspaper, search the Internet and you will find story after story about Greece, JP Morgan, austerity, the labor force, student loans, California, the G-8, or the Facebook IPO. Just about every bit of the coverage is negative.
And yet, amid all this, our plow horse economy keeps moving forward through the stumps and rocks and mud. Its certainly not Ill Have Another, who, with one more win, can take the Triple Crown a measure of strength, courage and greatness. But it aint headed for the glue factory either.
2012-05-21 Markets Fall on Negative Europe Sentiment by Chris Maxey and Ryan Davis of Fortigent
Worries over the European sovereign debt crisis worsened this week as Greeces political instability increased concern that the country could depart the Eurozone. Greece saw a virtual run on its banks during the week, as depositors withdrew 1.2 billion in two days on fears of massive devaluation from a return to the drachma. While this represented just 0.75% of Greek deposits, it foreshadows a potentially larger crisis if a Greek Eurozone departure becomes imminent.
2012-05-18 Rental Housing Boom Set to Explode by John Burns of John Burns Real Estate
Rental households comprise 34% of the housing stock, and are growing at the incredible rate of 1.6 million per year, while owned households are actually declining in number. This is an incredible surge in demand. In our summary of the U.S. housing market only 20% of renters live in large buildings and the remaining 80% of renters live in alternative types of housing. Approximately 55% of new renters are renting single-family homes, while 45% are renting apartments. The single-family rental business, which is already larger than the institutional quality apartment business, is booming.
2012-05-18 S&P 500 vs. Obama Re-Election Odds by Team of Bespoke Investment Group
Last year when the market tanked, Obama's odds tanked as well. Then they picked back up again nicely as the market rallied during the first quarter of this year. Since the start of the second quarter, however, the President's odds of winning have started to tick lower once again, just as the market has dropped. Continued market weakness would surely hurt the President's re-election chances, which makes us think he'll do as much as he can (which may not be enough) to keep things from falling apart before November.
2012-05-18 Gold: The World's Friend for 5,000 Years by Frank Holmes of U.S. Global Investors
Investors have defriended gold recently in favor of the dollar, as Greek and French voters rejected austerity measures. Greeks have been responding to their escalating debt issues for a while by steadily pulling money from overnight deposits. I often say, money goes where it is best treated, and these deposits will need to find a safe haven.
2012-05-18 U.S. Real Estate Securities Review & Outlook for April 2012 by Team of Cohen & Steers
We have a generally favorable view of key office markets, including life sciences, technology and media, as well as NY offices broadly. We have decreased our allocation to apartments based on valuations and the prospects for more direct and indirect (housing rentals) competition. We continue to favor prime retail owners, while staying cautious toward health care properties, suburban offices and secondary retail.
2012-05-18 Emerging Markets Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
In a global economy characterized by moderating inflation and tepid growth in developed markets, we believe emerging markets real estate securities offer attractive upside potential on a risk-adjusted basis. Policymakers in emerging economies have indicated increasing comfort with accommodative monetary policies, while domestic demand remains robust, creating a positive operating environment for both landlords and developers. On a relative value basis, we are finding more opportunities in residential developers, as we believe share prices remain depressed following their poor 2011 returns.
2012-05-18 Global Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
North America fundamentals are on a slow but positive trajectory. European economic challenges keep us focused on high-quality names. Policy easing trends likely to benefit Asia Pacific.
2012-05-18 International Real Estate Securities April 2012 Review and Outlook by Team of Cohen & Steers
European economic challenges keep us focused on high-quality names. Policy easing trends likely to benefit Asia Pacific.
2012-05-17 Our Fixed Income Insights on Yield Traps by Team of American Century Investments
From a fixed income perspective, we explain why aggressive yield-enhancing strategiesresulting from this extended period of historically low U.S. interest rates and yieldscan threaten the potentially valuable long-term portfolio benefits from holding fixed income positions. In particular, chasing yieldand stumbling into yield trapscan derail the important volatility reduction and diversification benefits offered by carefully selected and well-managed fixed income holdings.
2012-05-17 You should worry about EM inflation. Not US inflation. by Richard Bernstein of Richard Bernstein Advisors
Investors seem overly concerned about US inflation. Both market-derived expectations and actual rates of US inflation remain very subdued, yet we are consistently asked about inflation and whether our investment strategies are adequately structured for high US inflation. Across the board, these data do not support structuring investment strategies for the US inflation that investors, oddly enough, feel is inevitable. The data do, however, suggest that investors recent rush into emerging market debt is much riskier than they anticipate.
2012-05-16 The Bigger Picture on US Jobs by Joseph G. Carson of AllianceBernstein
Job growth slowed in March and April from a robust pace early in the year. People also appear to be leaving the labor force. Both trends suggest that the US economy may be losing momentum. However, I think preliminary employment figures dont tell the whole story and that you really need to wait for revisions to get a more accurate picture of underlying trends. In April, payroll employment rose by 115,000. That fell short of the consensus estimate of 150,000 and was the smallest jobs gain since August 2011. But initial payroll estimates are based on only a sample of business establishments.
2012-05-16 ProVise Bullets by Team of ProVise Management Group
If you listened carefully to the CEOs during their earnings announcements, they were tepidly upbeat but upbeat nonetheless, as they looked forward into the remainder of the year. On a day-to-day basis the markets will be driven by the headlines and emotions. We encourage you to refrain from getting caught up in that fray. At the end of the day it will be about an economy that moves forward creating jobs and not one built on the back of debt.
2012-05-15 Lacy Hunt on Debt, Austerity and Recovery by Robert Huebscher (Article)
Global economies are experiencing unsustainable debt disequilibrium, according to Lacy Hunt. Economic textbooks preach that equilibrium, rather than transition, should be the predominant condition. But our attempts to reduce our indebtedness by taking on more – and less productive – debt are weakening our economy and creating unstable conditions.
2012-05-15 Austerity Its All In The Timing by Scott Brown of Raymond James Equity Research
One problem with designing fiscal stimulus is determining how rapidly to move back toward fiscal balance. The U.S. economy has already faced some degree of austerity. According to the National Income and Product Accounts, government consumption and investment subtracted 0.6 percentage point from GDP growth over the last six quarters, where in normal times, it would have added about 0.3 percentage point (consistent with population growth). Real GDP averaged 1.8% growth over the last six quarters. It would have been nearly a full percentage point higher if not for the contraction in government.
2012-05-15 Ponzi's Children by Michael Lewitt (Article)
Europe, whose economic condition is nothing less than terminal, is about to receive what physicians refer to as a 'zetz' of morphine in the form of M. Hollande. A 'zetz' is the final dose that doctors give to dying patients to hasten their passage to the afterlife. In Europe's case, however, the medicine is not going to be painless, and its administration is not based on mercy but on resentment and stupidity.
2012-05-15 Earnings Seasons Recap: Is Corporate Strength Fading? by Chris Maxey and Ryan Davis of Fortigent
Strength in the corporate sector since the recession ended has been well documented. In the face of general economic malaise, record profits have been achieved through aggressive cost-cutting and low financing costs. This phenomenon has been one of the major pillars propping up the markets (with the other being central bank policy). Now with Q1 earnings season all but over, it is not unreasonable to question whether that corporate strength is fading. Initial impressions of first quarter earnings season were very favorable after the first big wave of earnings releases.
2012-05-15 Month of May: Sell and Go Away, or Hang in There? by Liz Ann Sonders of Charles Schwab
We believe the stock market's correction is likely to be less severe this year relative to 2010 or 2011.
Be aware of the possible perils of following a "sell in May" trading strategy.
For now, macro concernsincluding Europe and the looming "fiscal cliff"are trumping better micro news.
2012-05-14 Dancing at the Edge of a Cliff by John P. Hussman of Hussman Funds
Our recession concerns remain intact, as do our separate concerns about extreme stock market risk. I've emphasized that our estimate of prospective market return/risk in stocks has slipped into the most negative 0.5% of historical data. Last week that estimate actually deteriorated, but I am reluctant to make comments on such a small sample, as the only more negative estimate in post-Depression history was on September 16, 2000. Even in the conditions that match the worst 2% of our return/risk estimates, the market has lost an average of 20-25% just in the following 6-month period.
2012-05-14 Brazil: Compelling Opportunities for the Long Term by Brigitte Posch of PIMCO
Although economic growth has moderated somewhat in recent years, Brazils growth story remains compelling.
Underpinned by favorable GDP growth, Brazilian bank fundamentals are solid; banks are closely regulated and well-capitalized.
PIMCO believes several key corporate sectors oil, gas, utilities, infrastructure and major banks will dominate the outlook for Brazil over a secular horizon thanks to stronger pricing power and improved profitability.
2012-05-14 Time to Face Reality by Charles Lieberman of Advisors Capital Management
European markets remain in turmoil, even as these governments prefer to keep their heads buried in the sand. Sooner or later, reality intrudes. Greece and Spain are in the vanguard of being forced out of their fantasy world and a second default, following closely on the first, now appears likely. Greece is small enough so its problems will impinge little on markets, if Spain can handle its bank issues sensibly. Europe's attention will soon shift towards protecting Spain.
2012-05-14 The Bull Market Has Not Yet Reached Its Highs by Bob Doll of BlackRock Investment Management
It has been the case for some time, but recent events serve as a reminder that the primary risk to the global economy and markets is the ongoing debt crisis in Europe. Confidence over policymakers' ability to deal with the crisis took a hit recently given that the election results in Greece and France signal a shift away from governments' willingness to move forward with unpopular austerity measures. The resulting political uncertainty and investor confusion has put downward pressure on stocks and other risk assets. Unfortunately, the reality is there is no quick fix for Europe's problems.
2012-05-14 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Europe is never too far away from the headlines and investors surely will be watching 1) Greece to see if its internal politicos can get along to forge a coalition and 2) France to see if its new Prez can make nice with German Chancellor Merkel. Retailers take center-stage next week as Home Depot, JC Penney, Target, Wal-Mart, and Gap all post earnings. Additionally, retail sales heads a hectic week on the economic calendar, though investors must remember that declining energy prices should help in the months to come.
2012-05-11 Here We Go Again....or Not? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Softer economic data has prompted concerns that the market may be headed for a summer swoonsimilar to the previous two years. We believe the backdrop is decidedly different (and better) this time around but investor and business confidence will continue to be important. Some appear to be hoping for weaker data in order to spur the Fed to enact QE3. We believe the bar is much higher and that the Fed should look to return to a more normal monetary stance. Complicating the overall picture and the Feds job is the coming "fiscal cliff" out of Washington at the end of this year.
2012-05-11 Looking to China to Fire Up its Economy by Frank Holmes of U.S. Global Investors
Following on the heels of renewed concern over Europes debt situation, China released its monthly economic data. Fixed asset investment, industrial production and retail sales all rose in April, yet growth was not as strong as analysts anticipated. Weak is the word to describe Chinas April figures, says CLSAs Andy Rothman in his Sinology Report. But China wants the ability to manage a stable decline to promote medium-to-long-term structural reforms as well as avoid a hard landing, says CEBM.
2012-05-11 The US: Stuck in the Slow Lane How Long? by Russ Koesterich of iShares Blog
A slow growth world does not necessarily mean the death of equities or the absence of opportunities. It does, however, suggest that investors need to have realistic expectations for the US economy, and for most of the developed world. Slower growth, lower interest rates and lower multiples are arguably consequences of higher public debt. And this may be an issue were still contending with in two decades time.
2012-05-10 First Quarter Stepping Stone or Stumbling Block? by Team of Managers Investment Group
Popular headlines from last year took the sidelines and investors re-embraced risk. European government bond yields declined in response to long-term refinancing operations (LTRO). The much anticipated Greek default finally occurred in March and the firewall around Greece appeared to hold for now. The focus returned to the U.S. as the economic picture at home showed continued subtle improvement. Lower unemployment claims helped bolster equity prices. Several other major indicators pointed to a strengthening U.S. recovery. Market volatility fell to the lowest point since 2007.
2012-05-10 I Question, Therefore I Am by Francois Sicart of Tocqueville Asset Management
Historically, the attraction of value investing has been that, by purchasing stocks whose price does not incorporate a large hope premium over intrinsic value, the downside would be muted. Conversely, the potential for the premium to increase should investors perceptions change would promise worthwhile returns even in the absence of spectacular growth by the company. These assumptions suffered a severe setback in 2007-2009, when practically all stocks were caught into the same panic-driven downward spiral. But it does not entirely negate their validity.
2012-05-10 Q112 Portfolio Commentary for the Absolute Strategies Fund by Jay Compson of Absolute Investment Advisers
It is no secret the structural problems and crises throughout the global economy stem from excess debt. This letter attempts to explain why we think the global economy is in this situation, why the process for creating the problems continues to this day, why financial markets are not out of the woods. We are extremely optimistic about the future investing climate, but only after we get through the final stage of the credit bubble. In our view, the root of the problem stems from the willingness of a broad swath of investors and money managers to bid up asset prices to extreme levels.
2012-05-10 Staying Bullish by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe we are in a new bull market, and bull markets thrive on climbing that proverbial wall of worry. Bullish sentiment is low and bearish sentiment high. Anxious retail investors, having suffered two ugly bear markets since 2000, continue to shun stocks, with money flowing out of mutual equity funds now for more than 5 consecutive years. The public is hugely underinvested. Cash on the sidelines is enormous. The fuel to ultimately power stocks higher as confidence returns.
2012-05-09 It's All About the Fraud: Madoff, MF Global & Antonin Scalia by Team of Institutional Risk Analyst
In this issue, we return to the Lehman Brothers, Madoff and MF Global bankruptcies to talk about how the largest banks have wired US bankruptcy laws to their own advantage. Specifically, the 2005 changes to the bankruptcy code, combined with the traditional American caution regarding pre-judgement restraint on the parties surrounding a bankruptcy, has provided American banks with a free pass to facilitate fraud with no accountability. But first, Ally Financial has received the blessing of the US Treasury to file a bankruptcy for the ResCap real estate unit. This is a profoundly bad idea.
2012-05-08 Richard Bernstein: US Assets will Outperform over the Next Decade by Robert Huebscher (Article)
Prior to founding the firm that now bears his name, Richard Bernstein was the chief investment strategist at Merrill Lynch & Co. In this interview, he discusses why he expects US assets - both equities and fixed income - to be the outperformers among global markets over the next decade.
2012-05-08 Why Be Scared Of A Hat by Christian Thwaites of Sentinel Investments
Markets tend to overreact and the last few weeks in France were no exception. Equities fell around 9% on the expectation of a change in government. On close look, the Hollande manifesto is modest...a change in retirement age here, a year difference to a balanced budget, a non-descript growth pledge, tax banks more, reduce immigration. Markets also have notoriously short memories: socialist (i.e. left of center) governments are good for markets. Stocks rose vigorously in the years after leftist governments took control of France in 1981, Sweden in 1998, the UK in 1997, the US in 1992.
2012-05-08 Sentiment Readies for a Tumultuous Fall by Chris Maxey and Ryan Davis of Fortigent
Market sentiment has oscillated quite rapidly in recent months on the heels of dramatic market intervention by the ECB and shifting views of global economic stability. Sentiment is likely to remain unstable in the months ahead as investors grapple with any number of events, from elections in Europe and the US to the end of recent monetary easing efforts domestically. While markets have rallied substantially over the past six months, retail investors are maintaining a somewhat neutral view on their allocations.
2012-05-08 Dont Fight the Last War Lessons from the Battlefields of Risk Management by Niels C. Jensen of Absolute Return Partners
Investors often behave as if they operate in a world of logic and certainty even when that is not the case. For that reason, history is littered with investors who have failed miserably. In this month's Absolute Return Letter we look at many of the pitfalls facing risk managers and we take a stab at where the next big crisis is going to surface. Our conclusion may surprise a few readers.
2012-05-08 A New Economic Era: The Usual Rules No Longer Apply by Dawn Bennett of Bennett Group Financial Services
Against this backdrop of economic woes in the U.S. and Europe, business activity in Asia and Latin America is on the rise. The developing economies and emerging markets are where we see the better metrics, not in the US, Europe or Japan. One needs to look at the BRIC countries connection to commodities growth, and understand how they are getting on top of inflation. We believe China will lead the emerging markets in 2012. They will lean towards easing so their consumers will not be hurt by the less than healthy European export business as well as the weaknesses in the exports to the U.S.
2012-05-07 Q1 2012 Letter by Team of Grey Owl Capital Management
The overall equity markets strong first quarter rally was narrowly focused and, from our perspective, fragile. Cutting to the chase, we think both stocks and bonds are expensive. During the quarter, we used opportunities presented by Mr. Market to trim some of our lower quality positions and to add starter positions in a few high quality businesses. We also added to our short-term, high-yield fixed income holdings, sources of return that we expect to show less volatility but results equal to or better than the broad equity market indices.
2012-05-07 Mixed Data and Patience is a Virtue by John Buckingham of AFAM
The labor report issued by the U.S. Bureau of Labor Statistics found that nonfarm payroll employment rose by 115,000 in April, and that the unemployment rate dropped to 8.1%. The improvement in the jobless rate came about only because 342,000 folks left the workforce, so there was little cause for cheer, even though the rate stood at 9.0% in April 2011 and 9.9% in April 2010. Employment increased in professional and business services, retail trade and health care, but declined in transportation and warehousing, while the private sector added 130,000 jobs and government payrolls fell by 15,000.
2012-05-07 After Austerity by Joseph E. Stiglitz of Project Syndicate
So many economies are vulnerable to natural disasters earthquakes, floods, typhoons, hurricanes, tsunamis that adding a man-made disaster is all the more tragic. The pain that Europe, especially its poor and young, is suffering as a result of its leaders willful ignorance of the lessons of the past is entirely unnecessary.
2012-05-07 Unbalanced Risk by John P. Hussman of Hussman Funds
Maybe our present concerns won't amount to as much downside as we expect. But if investors were to choose a point to test the hypothesis that this time will be different and risk will be well-rewarded, I hardly think a worse moment could be found.
2012-05-07 The Labor Market Outlook by Scott Brown of Raymond James Equity Research
The April Employment Report disappointed stock market participants. However, it really wasnt a bad report. Private-sector job growth has been moderately strong this year. The Household Survey data suggest that the economic expansion has been strong enough to absorb the growth in the working-age population, but not enough to take up much of the labor market slack that was generated during the downturn. These figures tell us nothing about where the labor market is headed. Job growth over the next six months will have important implications for investors and for the November election.
2012-05-07 Despite Uncertainty, the Bull Market Should Persevere by Bob Doll of BlackRock Investment Management
There is a great deal of uncertainty that is acting as a headwind for the markets. In the United States, perhaps the main uncertainty is over the looming fiscal and tax issues that must be dealt with before the end of the year. Additionally, the still-developing European debt crisis has the potential to derail markets, as does the possibility for worse-than-expected economic growth. In any case, while we do expect to see markets continue to churn for the near term, we also believe that stocks will eventually be able to resume their climb.
2012-05-05 A Graphic Presentation by John Mauldin of Millennium Wave Advisors
The job market is still in a deep hole. At April's rate of job gains, it would take well over three years to return to December 2007's employment level, without adjusting for population growth; at the average rate of the last six months, it would take about two years. Earnings are weak, and the strongest sectors aren't those of which economic miracles are spun. QE3 looks like more of a possibility than it did a few days ago.
2012-05-04 Bullish on America by Andrew J. Redleaf of Whitebox Advisors
Todays crisis has nothing to do with the shadow banking system or any other sort of shadow. Todays crisis is all out in the bright sunshine and remarkably straightforward. The supposed danger is that some major economic power (i.e., not Greece) will become unable to access credit markets. Spanish or Italian or French bonds will decline so steeply as to imperil the banks that own them or appear to do so, causing a run on global financial institutions as severe as 2008s.
2012-05-04 Housing in One Graphic by John Burns of John Burns Real Estate
The following graphic summarizes the U.S. housing market. The red boxes are a small percentage of the total, yet are receiving all the media and political attention. Americans make astute financial decisions, at least in the short-term (debt will hurt us in the long-term). We will bailout very few homeowners. We will increase construction by building in the ever-increasing number of areas that need homes and builders can make a profit. We will figure out how to make portfolio investments in the massive single-family rental market. We will buy homes if it makes financial sense for us to do so.
2012-05-04 Back In by Mark Kiesel of PIMCO
U.S. housing may be a decent place to put money over the next several years due to improved absolute and relative valuations. U.S. housing fundamentals have improved significantly, led by lower prices, record low mortgage rates, improving inventory and delinquency trends and a gradually improving labor market, which in combination are helping homebuyer confidence and potential demand. While the outlook for U.S. housing has improved, several headwinds remain, including tight credit, potential supply from the shadow inventory and weak household formation due to a subpar economic recovery.
2012-05-04 Do Emerging Markets Win, Place or Show in Your Portfolio? by Frank Holmes of U.S. Global Investors
The recovery in U.S. stocks is significant and helps restore confidence in equities. Were pleased to see markets improving, especially following a rough finish in 2011. Yet there lingers a persistent negativity toward emerging markets growth and commodities that prevents many investors from jockeying their portfolios into a position for growth. Rather, they remain spectators on the sidelines, with equity fund outflows continuing.
2012-05-03 A Troika of Problems by Team of BondWave Advisors
The troika of the International Monetary Fund (IMF), European Union (EU), and European Central Bank (ECB) has continued to prescribe austerity. But at the end of what is now a lengthy cycle of agreements and ever-increasing austerity measures, the debt still remains significant and much of the region has either been plunged into recession or is heading that way. We discuss these ongoing problems and provide additional insight on the US Treasury, Corporate and Municipal Bond Markets.
2012-05-02 Chinas Landing Pattern by Mark Mobius of Franklin Templeton
Our main investment themes in general have been focused on consumers and commodities. It is our belief that Chinese consumers are likely to continue gaining clout, and Chinese macroeconomic policy has increasingly been moving from an export-based model to one fueled by domestic demand. We also expect that demand for hard and soft commodities should remain strong as China and many other emerging markets industrialize, gain wealth and increase spending on infrastructure, which tends to tilt the balance between supply and demand in favor of producers.
2012-05-02 Investments vs. Outvestments by Andrew J. Redleaf of Whitebox Advisors
This is a great time to invest. But you have to make sure you really are investing and not accidentally outvesting. The market is currently sorting credit into about four big categories. Three of those categories are priced roughly in reference to Treasuries (outvestments). Those are the categories in which we are not interested. The first category, obviously, is Treasuries themselves. Next, short-term paper of super-blue-chip firms. Third, bonds that are just on the border of being investments. Finally, all domestic bonds whose prices are detached from Treasuries.
2012-05-02 Its Good To Be The King by Chris Richey of Neosho Capital
The sovereign Greek debt default will ultimately lead to a sovereign Spanish debt default, and thus we tell you why sovereign debt should not be viewed as risk-free.
2012-05-02 One Up on Wall Street by Bill Smead of Smead Capital Management
Peter Lynch went to the mall with his wife back in the days when he ran Fidelity Magellan. The purpose was to see what stores were getting good traffic and creating a buzz. Peter felt this was an advantage the average individual investor had over the professionals on Wall Street. We like to buy companies in the Warren Buffett-Charlie Munger tradition. We like to buy most during periods of pessimism ala John Templeton. We use our proprietary eight criteria for selecting. Finally, we get excited when the current evidence hints that we are onto something, getting good traffic and creating a buzz.
2012-05-02 Digbys Umbrella and a Dinner to Remember by Christian Thwaites of Sentinel Investments
The US economy is on a painfully slow road. It is recovering. Jobs numbers are better, even though some hiring in the first quarter may have been brought forward by mild weather. Production, manufacturing and exports, all signs of regained competitiveness in the US, are showing steady improvements. And the government sector is contracting. Not on purpose mind you, but jumping off a cliff and letting inertia do the work result in the same end. Above all of this, we have a Fed using every monetary policy at their disposal to try and promote growth and employment.
2012-05-02 A New Wave of Foreclosures Could Challenge the Housing Market by Team of American Century Investments
The most recent data on the U.S. housing market suggests we may have reached a bottom. However, most experts anticipate the housing market will be hit by a large new wave of foreclosures that will substantially affect the current supply-demand balance for the remainder of this year and possibly into 2013. As a result, we may be looking at one more phase of price declinesparticularly in local markets where the housing bubble grew largest before it burstbefore we truly find the bottom to our five year housing crisis.
2012-05-01 Another Story of Too Much Debt: Investing During Unsustainable Economic Conditions by Brian McAuley (Article)
US-based investors cannot ignore the macro environment, and therefore must consider the consequences of our increasing indebtedness and its impact on capital markets. We can gain valuable insights into our fiscal problems from the housing bubble and the European sovereign debt crisis - lessons which every value investor should heed.
2012-05-01 Don't End the Fed, Mend the Fed by Paul Kasriel of Northern Trust
Congressman Ron Paul has written a book entitled End the Fed. I have to admit that I have not read his book. But I have read many of Congressman Pauls excellent (in my opinion) essays on monetary theory and policy. Congressman Paul likely argues in End the Fed that the Fed and other central banks have created monetary "mischief" in the past and are likely to continue to do so in the future. Because of this monetary mischief, I assume that Congressman Paul would like to replace the Fed and other central banks with some form of a gold standard. I share Congressman Pauls sentiments.
2012-05-01 Is Now The Time To Brace For Another Volatile Summer? by Chris Maxey of Fortigent
In the latest week, the Federal Open Market Committee reiterated its stance that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014. While rates will remain low for now, the Fed will need to fend off other challenges in the months ahead, ones that could send investors racing for the beach sooner than normal. The biggest challenge for the Fed and the economy in the coming months is in the form of Operation Twist. The hope was that such actions would drive down interest rates and encourage borrowing of all forms.
2012-05-01 A Wake-up Call on the Economy by Milton Ezrati of Lord Abbett
Economic statistics seem at times to have their own ebb and flow, sometimes overstating and sometimes understating the underlying fundamentals. Sadly, these often meaningless data variations can create false feelings about economic possibilitiesenthusiasm, when the statistical flow leans toward the strong side, or despair, when it leans on the soft side. Investors, in particular, succumb to such swings in attitude, but, to a lesser extent, so do businesspeople. So, it was with a string of insupportably good numbers late in 2011 and earlier this year.
2012-04-30 Housing Recovery Now Underway by Charles Lieberman of Advisors Capital Management
Many focused on the slower than expected pace of growth in first quarter GDP, but the stronger rise in housing activity merited little more than passing mention. However, housing construction is gathering steam, as inventories are now severely depressed and demographic trends require a resumption in new construction. Autos were another significant contributor to growth. We expect both sectors to continue as key sources of demand in the ongoing expansion.
2012-04-30 Dissecting the US Q1 GDP by Monty Agarwal of MA Capital Management
4 years after facing a massive recession, the unemployment rate is still stuck above 8% and the economic growth is starting to slow. Many of my colleagues in the hedge fund circles are calling for a return to negative growth or recession in the US by the end of 2012. This does not bode well for the retail investor, who after missing the Q1 rally has decided to jump back into the markets only to see the rally dissipate.
2012-04-30 Here We Go Again by Brian S. Wesbury and Robert Stein of First Trust Advisors
We are not saying the negative data is meaningless. Its not. But some of the reaction is, once again, overdone. Debating the worry-warts has become a full-time job and we cant prove them wrong until the future becomes the present. So, lets look back to last year when we said in a few months we will be looking back at recent reports as just statistical noise. Sounded good then, so lets not mess with success. The more things change, the more they stay the same.
2012-04-30 Euro Risks Continue but Support for Risk Assets Is by Bob Doll of BlackRock Investment Management
At this point last year, two of the major downside risks were the possibility of the European debt crisis spiraling out of control and the inability of the United States to get its fiscal house in order. Today, while these remain two factors that have investors concerned and while there are some similarities between the situations one year ago and today, there are also some important differences. The US fiscal policy is murky. The tax and fiscal policies that are set to expire at the end of 2012 are clouded in uncertainty and it is impossible to view them outside the 2012 elections.
2012-04-27 Managed Futures and Macro: Q1 2012 Market Commentary by Jon Sundt of Altegris Investments
With Eurozone concerns receding and the macroeconomic picture showing strength, the market outlook at the end of Q1 is notably brighter than at the end of last year. Reduced correlations, lower volatility and the prospect of less government intervention have led some players to hope for a return to a new old period in which fundamentals drive the markets. If that theme does indeed prove to be sustainable, we expect that: a) more managed futures managers, would profit from stronger trends; and b) more circumspect global macro managers may take advantage of increasingly bullish positioning.
2012-04-27 Happy (Third) Anniversary: Now What? by Jon Quigley of Advanced Investment Partners
During the trading day on March 6th, 2009, the S&P 500 Index hit its intraday bottom of 666.79. In the ensuing three years the Index has advanced over 100%. Along the way, weve witnessed the collapse of some of the older and more hallowed names in the financial industry buh-bye Lehman Brothers, so long Merrill), endured the most severe recession in at least 25 years, suffered through incredible spates of market volatility, and gathered a few gray hairs (or lost some hair) along the way.
2012-04-27 Roller Coaster Returns by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite an earnings season that has been much better than expected so far, investors appear to be again focusing on more macro concerns. Europe and China are dominant concerns but US growth sustainability is also being questioned. We remain optimistic on the ultimate direction of the stock market. The Fed meeting provided no changes but did show a slightly more hawkish tilt in their economic forecasts. Meanwhile, the US government continues to play a dangerous game of chicken as election season is already in high gear and the so-called "fiscal cliff" looms.
2012-04-27 Sell in May and Go Away? Not this Year by Frank Holmes of U.S. Global Investors
One catchy investing maxim thats popular this time of year is sell in May and go away, the notion that investors should cash in their investments and take the summer off. We believe its a much better market this year. After following a similar trajectory as the previous year from October to the beginning of March, improving economic data pushed the S&P 500 over 3 percent higher in March 2012 after trending sideways during the same time period last year.
2012-04-27 Bond Market Reflections Spring 2012 by Bruce A. Weininger of Kovitz Investment Group
Faced with the prospect of loaning money out for eight years knowing that our best case return over that time was 2%, we decided that, for a while anyway, wed rather hold onto to cash in hopes that pricing will become more rational over the coming weeks or months.
2012-04-26 One Step Closer: Fed Keeps Rates Low But Gets More Hawkish by Liz Ann Sonders of Charles Schwab
The Federal Reserve's Open Market Committee (FOMC) made no change to short-term interest rates, but provided no hints that a third round of quantitative easing (QE3) was in the offing. As usual, the committee repeated its comment about keeping the Fed's balance sheet under review and being willing to act "as appropriate," while also confirming its pledge to keep rates "exceptionally low" through 2014. For the third consecutive meeting, there was one dissenterRichmond Federal Reserve Bank President Jeffrey Lackerwho believes the first increase in rates will be necessary in 2013.
2012-04-26 The Bernanke-Krugman Smackdown by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Bernanke is trying like a madman to get banks to increase lending but Bernanke and Krugman both do not understand economic reality. Banks cannot lend because they are still capital impaired, hiding losses yet to come, and holding assets that are marked-to-fantasy instead of marked-to-market. Consumers are busted and holding interest rates at 0% when prices of food and gasoline are soaring exacerbates the problem. There are few credit-worthy businesses that want to borrow in this environment. The businesses that do want to borrow are not credit-worthy and banks would be foolish to lend to them.
2012-04-25 Is The Economic Recovery Stalling? by Gary D. Halbert of Halbert Wealth Management
The US economic recovery is facing some stiff headwinds. Those include high gasoline prices, the recession and higher interest rates in Europe and the recent disappointing unemployment numbers in the US, just to name a few. The apparent slowdown in the recovery recently is in part due to the unusually warm winter, which served to pull economic activity forward in January and February, thus making March and April so far look softer. Some in the mainstream media concluded that we dont have a problem with the economy. Maybe so, but the recovery has had an uneasy feeling about it recently.
2012-04-24 Bruce Greenwald on Structural Imbalances in the Economy by Eric Uhlfelder (Article)
Bruce Greenwald likes to say that he is constituted to disagree with everybody about everything, and he was true to his word at the recent Hyman P. Minksy Conference in New York. Taking immediate exception with the virtually unanimous characterization of the economic crisis as a balance-sheet recession, Greenwald, a professor of finance at Columbia University, argued that, far from being unusual, balance-sheet recessions can in fact be found at the heart of almost all business cycles.
2012-04-24 In the Long Run with Dividend-Paying Stocks by Meggan Walsh and Clint Harris of Invesco
A healthy level of skepticism and the conviction to go against consensus when it is supported by sound fundamental research is a strong combination for successful investing. We have little exposure to energy, an area investors favor. Financials is one of our largest weightings, an area thats out of favor. We prefer dividend sustainability and growth while investors are currently focused on high yielders alone. Its important to remember that history has shown that dividend-paying stocks are part of an enduring, fundamental approach to value investing and not a thematic allocation.
2012-04-24 Is 2012 the Year for Hedge Funds? by Chris Maxey of Fortigent
Prior to the financial crisis, hedge funds were largely viewed as alpha generating, high return seeking, portfolio diversifiers. In 2008, that model came under attack from multiple angles fraud, illiquidity, and poor returns being the primary culprit. Ever since that time, the value proposition of hedge funds and alternative investments remains in question, causing some to wonder if this is a make or break year for the space. There is reason to think the environment for hedge funds and active managers is improving.
2012-04-24 Chinas Growing Pains by Milton Ezrati of Lord Abbett
Among all the fears discussed in the financial community these days, worries over Chinas expansion loom large. The government in Beijing has revised down its growth expectations to 78% a year from the former breakneck pace of 1012%. Private groups, such as the American Chamber of Commerce in China, have made similar downward adjustments in their expectations. Though there is good reason to anticipate a slowdown in the pace of Chinese growth, it would be a mistake to exaggerate the risks, and especially to do so by drawing easy parallels to Americas real estate debacle.
2012-04-24 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Dr. Bernanke and friends get together again to set monetary policy and will discuss oil and gas prices and the effect on inflation as well the newfound labor slowdown. Still, no one expects any additional stimulus moves at this time and the policymakers should reiterate their intent to keep the funds rate at near-zero percent well into 2014. The future of Europe remains atop the headlines as France holds crucial national elections and the IMF convenes for its semi-annual soiree.
2012-04-23 Emerging Asia Pacific: Economic Review 1st Quarter 2012 by Team of Thomas White International
Emerging Asia Pacific economies, which reported dismal economic numbers during the fourth quarter of 2011, recovered some lost ground during the first quarter of 2012. Export-led growth in many Asian countries, which had come under pressure during the last months of 2011, witnessed slight improvements in 2012 thanks to receding fears about a sovereign debt crisis in the EU and a stronger-than-expected recovery in the U.S. China, the regions largest economy, however, signaled that it will accept a slightly lower growth rate of around 7.5 percent over the coming years.
2012-04-23 Middle East/Africa First Quarter 2012 Economic Review by Team of Thomas White International
While the Middle East and Africa (MEA) region continues to weigh the impact of the tumultuous Arab Spring uprisings, the area is facing against another challenge yet again. In addition to the existing domestic instability, a strained external environment (the Euro debt crisis) is proving to be a major threat to the regions trade, tourism, remittances and other exports receipts. According to the World Banks Global Economic Prospects report, the economic recovery seen in Morocco, Jordan and Tunisia in late 2011 is likely to stall in 2012.
2012-04-23 Blowin in the Wind by Scott Brown of Raymond James Equity Research
Recent economic data have been mixed, but generally consistent with moderate economic growth. The recovery continues, but has failed to gather much steam and remains relatively fragile. Were on our way, but weve a long way to go. Over the last year, the economy has faced a number of headwinds, capping the pace of improvement. Those headwinds appear to be lessening to some extent although there are uncertainties, particularly as one looks to 2013.
2012-04-23 Dow Direction Dictates by Jeffrey Saut of Raymond James Equity Research
This week we will see more major companies reporting earnings. From our research universe, stocks that are favorably rated by our fundamental analysts and appear positive on our proprietary algorithms are: Brinker ; Baidu; Pultegroup; and Caterpillar. For the past few weeks I have wrongly suggested that my sense is the S&P 500 (SPX/1378.53) will remain mired in the 1385 1425 consolidation zone. Subsequently, the SPX dropped below that envisioned zone, yet has rallied back into the 1375 1385 zone, which has now become an overhead resistance level.
2012-04-23 Americas: Economic Review First Quarter 2012 by Team of Thomas White International
Optimism over economic prospects increased across the Americas regions during the first quarter of the year, as economic data showed sustained improvement and global risks eased somewhat. Despite costlier fuel, consumer spending climbed in most countries across the region, especially in the U.S. The European fiscal crisis now appears less worrisome when compared to last year, while the slowdown in Asia has turned out to be milder than expected earlier. Commodity prices have recovered after the correction during the second half of last year, on an improved outlook in global demand.
2012-04-23 A Seesaw of Surprises by Kristina Hooper of Allianz Global Investors
It was a week full of surprisesboth good and bad. Corporate profits in the United States have come in stronger than expected. U.S. consumers are spending more money than anticipated. But continued housing weakness, higher-than-expected jobless claims and deeper disruptions in Europes debt crisis have raised some eyebrows. Adding to uncertainty are the events in the Netherlandsone of only a few AAA-rated lenders in Europeas its government rejected a fiscal austerity plan and now is in jeopardy of collapsing. Here is how to put such a mixed bag in perspective.
2012-04-23 Global Policy Remains a Critical Catalyst by Bob Doll of BlackRock Investment Management
The economic backdrop continues to be mixed, but the overall trend continues to be one in which the US economy appears to be growing slowly. One interesting pattern that has emerged is that the US household sector has been picking up at the same time that the industrial side has been weakening. While an improving household sector is critical to ensuring long-term growth, there are some caveats to this trend. First, households have been dipping into their savings to boost spending, which is clearly not sustainable. Additionally, some of the growth may have been "borrowed" from summer quarter.
2012-04-23 The Plow Horse Economy by Brian S. Wesbury and Robert Stein of First Trust Advisors
Like a plow horse, the US economy just puts one hoof after the other. It aint gonna win any races, but it aint gonna keel over and die either. After slogging through the mud last year, and slowing down to just 1.2% annualized growth in the first three quarters of 2011, things have improved. In the fourth quarter last year, real GDP grew a solid, work-horse-like, 3%. We expect that continued in the first quarter of 2012. If anything, other indicators suggest real GDP growth might be even stronger. Nonfarm payrolls rose 635,000 in Q1, the largest gain since 2006.
2012-04-20 Currency Wars: Gambling With Other Peoples Money by Axel Merk of Merk Funds
If running out of your own money wasnt bad enough, policy makers are increasingly spending other peoples money to bail their country out. At the upcoming G-20 meeting, finance ministers from around the world will contemplate an increase to the resources of the International Monetary Fund (IMF). At stake for politicians is whether they can continue to do what they know best to play politics. In contrast, at stake for investors may be whether currencies will retain their function as a store of value.
2012-04-20 Small Cap Outlook 1Q12 by 1492 Investment Team of 1492 Capital Management
While weve seen the markets advance nicely, we think the market could gain more than 25% this year as the U.S. economy continues to move ahead and the rest of the world is in stimulus mode. Most importantly, there are still plenty of bears calling for recession, despite an ongoing barrage of better economic statistics. No doubt the remainder of the year will give the stock market plenty to ponder like the U.S. Presidential election, ongoing European debt crisis fallout and concerns about Chinas economic growth. Read on to understand why were so bullish on the U.S. stock market.
2012-04-20 Monthly Investment Commentary by Team of Litman Gregory
Stocks and other risk assets surged in the first quarter, continuing the strong run that began in the fourth quarter of last year. In each of the past two quarters, domestic stocks gained about 12%, marking one the strongest runs over the October-March span going back to the 1920s. Developed foreign stocks increased nearly 12% in the quarter, emerging-markets stocks gained 14, small-cap U.S. stocks were up 12%, high-yield bonds rose 5%, and emerging-markets local-currency bonds added 8%.
2012-04-20 Equity Investment Outlook April 2012 by Team of Osterweis Capital Management
We think stocks are reasonably priced on an absolute basis and extremely attractive relative to bonds. Bonds have performed well over the past three decades, but with interest rates at record lows, there is not much room for bonds to continue outpacing stocks on a total return basis. Meanwhile, companies are steadily increasing dividends. Even Apple recently instituted a dividend. For some time, investors have been lowering their exposure to U.S. equities. We believe this trend should reverse, especially once interest rates start to rise and bond market returns turn negative.
2012-04-20 Fixed Income Investment Outlook April 2012 by Team of Osterweis Capital Management
The Feds easy money policy will likely not reverse in the near term, but may do so before 2014, if economic growth strengthens meaningfully; some inflation is also acceptable to the alternative deflation. We are seeing some economic strength in the U.S., which is translating into higher equity prices (and hopefully higher capital gains). We are still generally avoiding exposure to interest rate risk found in Treasuries and investment grade bonds. We believe the easy money has been made there and we are not currently being compensated for the risk of rising interest rates.
2012-04-20 Weighing the Evidence of Oil and Gold Stocks by Frank Holmes of U.S. Global Investors
We believe in thinking contrarian and keeping a close eye on historical trends to discover inflection points, as stocks tend to eventually revert to their means. For example, in March 2009, we noted significant changes signaling the market had hit rock bottom; following that time through the end of the first quarter, the S&P 500 Index rose more than 100 percent. Todays extreme divergence in oil and gold stocks and their underlying commodities presents a rare opportunity: what these stocks need now are investors to take advantage of it.
2012-04-20 Preferred Securities First Quarter 2012 Review and Outlook by Team of Cohen & Steers
Preferred securities continue to offer a compelling total return proposition. Treasury yields are at or near historic lows, and the Federal Reserve appears committed to holding interest rates steady for the foreseeable future. At the same time, with preferred yields near 7%, the yield spread between preferred securities and Treasuries remains far wider than its long-term average, and few other investments offer as much income.
2012-04-20 Emerging Markets Real Estate Securities Investment Review & Outlook First Quarter 2012 by Team of Cohen & Steers
A general moderation in inflation pressures is giving emerging market authorities more liberty to pursue policy stimulus, auguring well for domestic growth. We believe this will create opportunities for residential developers in various markets and we have increased our allocation to these companies.
2012-04-20 U.S. Real Estate Securities Review and Outlook, First Quarter 2012 by Team of Cohen & Steers
We have a very favorable view of specific office markets, including life sciences, technology and media, as well as New York offices broadly. We also continue to like prime retail and self storage owners, which are seeing very strong fundamentals. In contrast, we remain cautious toward health care properties and secondary retail. We have also reduced our allocation to apartment REITs on the margin following their strong run in 2011.
2012-04-20 Closed End Funds First Quarter 2012 Review and Outlook by Team of Cohen & Steers
. With borrowing rates likely to remain low for an extended period, we believe the yield advantage of leveraged closed-end funds will continue to draw investor interest. As a result, we see potential for the broad closed-end fund market to trade at even narrower discounts or even premiums to NAV. In addition, the recent success of new issues should allow the closed-end fund IPO window to remain open in 2012. At the present pace, we do not believe new supply will pressure pricing in the secondary market or impede discount narrowing.
2012-04-20 U.S. Large Cap Value Investment Commentary as of March 31, 2012 by Team of Cohen & Steers
Valuations are still attractive, in our view, if somewhat less so than at the beginning of the year, and volatility has subsided. We expect to see an increase in dividend payers; Apple has opened the door for other technology companies, a sector that has had a relatively low proportion of dividend-paying companies. We are also seeing solid dividend increases among industrials companies.
2012-04-19 Current Conditions Cater to Our Rigorous Muni Investment Process by Team of American Century Investments
The last four years have been a remarkable period in municipal bond (muni) market history. The 2008 Financial Crisis and the Great Recession transformed the high-grade U.S. muni market and how people invest in it. What was once a relatively homogenous bond sector in terms of its credit quality and ratings became much more heterogeneous. Under these conditions, we believe experienced professional credit research and portfolio management are now crucial to investment success. This article outlines our muni investment processes.
2012-04-19 Huge Dilemma: Do You Protect Your Job or Your Clients' Money? by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I feel like a broken record. Jeremy Grantham, John Hussman, and Lance Roberts of Streettalk Live surely feel the same way. I have been preaching the "low returns for a decade" concept for quite some time. It is very tough preaching caution, when caution is routinely tossed to the winds. Yet history has proven time and time again, that such times are precisely when caution is warranted, even though timing the precise moment is simply impossible.
2012-04-19 What to Do With the Daily Data Divulge? by Matt Lloyd of Advisors Asset Management
Simply ignoring the immense amount of data would be foolhardy and we must use more corroborating data and scrutinizing the data among trends and the volatile monthly data. This has given rise to the more artistic aspect of viewing the markets than how we may have in the past. This is why ones prediction for the markets may differ completely from another while looking at the exact same data. As such, the importance of the rationale for why one may feel a certain way about the markets is as important as the actual conclusion.
2012-04-19 Price and Waistline Stability Prove Elusive as Inflation Creeps Up by Scott Colyer of Advisors Asset Management
The long-time trends are firmly in support of consistent price inflation during the history of the US. Inflation is a natural inclination for people, businesses, politicians and central banks. Given the Feds ultra-easy monetary policy aimed at creating inflation, we will eventually see it. Higher inflation requires investors to rethink where they invest. Cash and fixed income do little to cope with inflation and actually can be losers if held at times of higher than normal inflation rates. We think investors should take advantage of current bargains in real estate and equity asset prices.
2012-04-18 Stock Picking in a World of Profit Margin Mean Reversion by Bill Smead of Smead Capital Management
We feel investors should avoid capital intensive companies which are tied to commodities or emerging markets. As interest rates rise and capital becomes dear, those who eat capital lose and those with strong balance sheets and who generate high and consistent free cash flow, should win. As Buffet, Grantham, Hutchinson and Stein pointed out, someone loses in the reversion to the mean of profit margins when compared to GDP. Lastly, dont be fooled by those who are bearish on the stock market because of their belief in profit margin reversion.
2012-04-17 Muppet Capers by Michael Lewitt (Article)
Investors enjoyed strong stock market and credit market gains during the first quarter of the year, but storm clouds may be forming on the horizon. Corporate profits have likely peaked. Stocks may be the best house in a bad neighborhood, but houses in that neighborhood appear to be fully priced for now. There are also some troubling signs in the bond markets, particularly the long end.
2012-04-17 Earnings on a Hot Plate by Chris Maxey of Fortigent
While the economy has displayed fits and starts of entering a sustained recovery over the past several years, there has been no doubt about the ability of companies to reshape their balance sheets and refocus their businesses. In the midst of first quarter earnings season, there are some concerns that the corporate hot streak will come to an abrupt end, but the reduction in earnings expectations since late last year appears to be favoring another positive earnings season.
2012-04-17 Asia-Pacific Portfolio Committee on PIMCOs Cyclical Outlook by Robert Mead, Tomoya Masanao and Ramin Toloui of PIMCO
We do not expect to see aggressively expansionary policy to combat the incremental economic slowdown in China. We believe that most countries in emerging Asia will continue to put their currency appreciation on hold, as inflation is expected to remain subdued over the cyclical horizon.
We are concerned about the sustainability of Japans economic growth beyond 2012, as the governments reconstruction spending will fade in 2013. Relatively speaking, Australia is indeed a beneficiary of higher commodity prices as a result of the strong demand for coal, iron ore and liquid natural gas.
2012-04-17 Mind the Gap by Liam Molloy and Bethany Carlson of Galway Investment Strategy
There is almost always a gap between price and value. Over the next few years price volatility is likely to be the source of the gap as sentiment waffles from overly exuberant to downright pessimistic. In the era of the 24-hour news cycle, high frequency trading, and an ever shortening investor attention span, prices move fast. Markets are emotional creatures and have a tendency to boom and bust. There have been occasions when underlying changes of value have gone unrecognized for sustained periods, and the gap was not primarily a function of price volatility.
2012-04-17 Quarterly Review and Outlook First Quarter 2012 by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management
From both economic theory and historical experience the answer is clear; austerity is the solution to too much debt. McKinsey Global Institute examined 32 cases where extreme leverage caused financial crises since the 1930s. In 24, or 75% of these cases austerity was required, which McKinsey defines as a multi-year and sustained increase in the saving rate. Public and/or private borrowers took on too much debt because they lived beyond their means, or they consumed more than they earned. Thus, to reverse the problem spending had to be held below income, increasing the saving rate.
2012-04-16 Market Drawdown Presents Buying Opportunities by Bob Doll of BlackRock Investment Management
Given the relative differences between the economy in 2011 and what it looks like today, we believe the US economy will be more resilient than it was last year. We would also look to corporate earnings as a source of strength. Although we are forecasting that the pace of earnings growth will be slower this year than it has been in the recent past, so far the data has shown that corporate earnings have been doing just fine. Expectations for the first quarter have been set relatively low, but so far over 80% of the companies that have reported have surpassed expectations, which is a good sign.
2012-04-14 The War for Spain by John Mauldin of Millennium Wave Advisors
The inflection point that I thought the ECB had pushed down the road for at least a year with their recent 1 trillion LTRO is now rushing toward us much faster than Draghi had in mind when he launched his massive funding operation. So, we must pay attention to what Spain has done this week which, to my surprise, seems to have escaped the attention of the major media. It may be considered a tipping point when the crisis is analyzed by some future historian. And then we'll get back to some additional details on the US employment situation, starting with a few rather shocking data points.
2012-04-13 Pacific Basin Market Overview - March 2012 by Team of Nomura Asset Management
Our outlook for global economic growth remains reasonably optimistic. The U.S. in particular has exhibited some surprisingly buoyant conditions driven by improvements in the job market and stronger consumption. Europe for now appears to have disproved the more pessimistic forecasts, whilst Japan will benefit from reconstruction activity. Our sector allocation strategy remains biased towards growth. We hold overweight positions in the Industrials, Consumer Cyclical, and to a lesser extent, Technology, while we remain underweight in the Telecommunications and Utilities sectors.
2012-04-13 Developed Asia Pacific: Economic Review 1st Quarter 2012 by Team of Thomas White International
Developed Asia Pacific economies showed more promise in the first three months of 2012 compared to the gloomy scenario witnessed during the last quarter of 2011. A marked upturn in the U.S. economy along with receding fears about the debt crisis in Europe gave a fillip to export-based economies in Asia such as Japan and Singapore. Whats more, inflation in most of the developed Asia Pacific economies became less of a concern during the first two months of 2012, with Singapore, Hong Kong and New Zealand all reporting subdued inflation.
2012-04-13 Dutch Disease Lite in Australias Economy by Robert Mead of PIMCO
Australia is probably more likely to feel the effects of an extended structural change in the economy as resources continue to be reallocated, rather than the effects of a full-fledged, but transitory, case of Dutch disease. China is Australias largest trading partner, and Chinas historical focus on infrastructure building has amplified the divergence in Australias two-speed economy. We believe Australias strong initial conditions should help ensure that Commonwealth Government Bonds remain one of the worlds cleanest dirty shirts for risk-averse investors.
2012-04-13 Schwab Market Perspective: Concern or Correction? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data has softened a bit lately but still indicates growth in the US. After a long stretch of relative calm in the markets, we've seen the markets pull back, possibly fulfilling the correction that was overdue. We believe the longer-term trend is higher but near-term risks continue to be elevated and earnings season could bring more volatility. The minutes from the most recent meeting of the Fed seemed to solidify that another round of quantitative easing (QE3) is not in the offing. Although the stock and bond markets initially reacted negatively, we are heartened by the rhetoric.
2012-04-13 How Rising Rates Will Affect Stocks by Russ Koesterich of iShares Blog
While recent market weakness, and the accompanying bond market rally, has tempered fears of an imminent bond market meltdown, many equity investors are still concerned about the potential impact of rising rates on US and global stocks. This year, I expect long-term rates to rise modestly as they appear too low. Assuming the US economy continues to stabilize over the course of the year, the yield on the 10-year Treasury will likely rise to around the 3% level, . However, this probable grind higher is not a major threat to US and global stocks this year for two reasons.
2012-04-13 Wheres the Beef for Gold Equities? by Frank Holmes of U.S. Global Investors
If you plan on shopping for bargains in the gold miner department, youre going to fight a crowd. Numerous global investors have been pounding the table for gold stocks, including Marc Faber who said gold shares have become extremely oversold and could rebound in the next few days and Global Portfolio Strategist Don Coxe, who reiterated that gold equities are undervalued compared to the precious metal. A big buyer has been the miners themselves. Mergers and acquisitions in the mining sector have been at an all-time high over the past two years. Theyve been willing to pay a premium too.
2012-04-13 The Next Error by John Gilbert of GR-NEAM
The escalating frenzy for yield may in fact prolong the trying process of deleveraging by tacitly supporting bad investment decisions, and underpricing of risk. The relentless destruction of private capital in real terms is policymakers' answer to reducing leverage in nominal terms. If central banks err in the direction of ease, as the Fed will signal if it ignores the Taylor Rule for a time, poor long-term investments are likely to do well for a transitory period. The eventual reckoning can be suppressed, but only for a time.
2012-04-12 Jobs Data a Reminder of the Slow, Fitful US Recovery by Russ Koesterich of iShares Blog
While last Fridays disappointing monthly jobs report doesnt herald the end of the US recovery, its a reminder of the recoverys fragility and that improvement in the US economy will most likely continue to be slow and characterized by fits and starts. When you view the jobs data in a context of longer than one month, there is evidence that the US labor market has improved since last year. However, its improving from a very low base at an agonizingly slow pace. There is also some evidence that the labor market has structural problems that may prove to be a drag on growth for some time.
2012-04-12 Evolution, Impact and Limitations of Unusual Central Bank Policy Activism by Mohamed A. El-Erian of PIMCO
I will speak in a central bank and to central bankers about the role of their institutions particularly the Federal Reserve and the European Central Bank in todays highly complex, perplexing and historically unusual policymaking environment. I will go further and try to link actions to motivations. And, when it comes to implications, I will attempt to put forward questions and hypotheses that, I believe, are critical for the future of the U.S. and global economies but for which I, like others, have only partial answers.
2012-04-12 Global Investment Outlook - March 2012 by Team of Aberdeen Asset Management
Global economic growth sustains its momentum for now. Fiscal policy remains a global focus. Further monetary policy accommodation should support markets. Recent positive momentum within the U.S. economy is driving the global economic recovery, overwhelming the negative sentiment emanating from peripheral Europe. Real incomes, boosted by employment growth and easing inflation, are showing signs of turning positive in the U.S., feeding through to the broader economy.
2012-04-12 Equity Market Review & Outlook by Richard Skaggs of Loomis Sayles
Looking out to year-end, Congress and the White House will be required to act on a long list of expiring tax measures and a debt ceiling increase is necessary as well. As we saw in 2011, compromise is very difficult to achieve and the elections introduce another level of uncertainty. However, the markets current attractive valuation builds in some of these risks. Beyond our shores, there is always the possibility of disappointment in Chinas growth trajectory, and further serious challenges with weaker members of the euro zone should be anticipated.
2012-04-12 Bond Market Review & Outlook by Thomas Fahey of Loomis Sayles
Central banks around the world sent a rush of liquidity into the global financial system, and this coordinated effort helped stem the risk of a major European credit crunch that was brewing at the close of 2011. In our view, the liquidity provision has improved the macroeconomic outlook and buys some much needed time for sovereigns, banks and other indebted private sector agents to try to get their balance sheets in order. Risk assets have generally responded very well to easy money policies over the last two quarters, while negative real interest rates have piqued the global thirst for yield.
2012-04-11 Will Baby Boomers Wreck the Market? (The Sequel) by Gary D. Halbert of Halbert Wealth Management
The basic premise behind the idea that Baby Boomers might lay waste to the stock market makes sense intuitively. The idea is that as Boomers retire, they will shift assets away from stocks to less risky alternatives such as bonds, annuities, CDs, etc. and begin living on the interest. All of this selling activity, the story goes, will put downward pressure on stock prices and lead to a major selloff.
2012-04-10 Allocating to Real Assets: Why Diversification Matters by Cohen & Steers (Article)
One way to extend the long-term purchasing power of a traditional stock and bond portfolio is through an allocation to real assets. But individually, categories like commodities, natural resource equities and REITs can be volatile. Cohen & Steers meets the challenge with a focus on broad asset-class diversification.
2012-04-10 Paul Kasriel's Parting Thoughts on the Economy by Robert Huebscher (Article)
Paul Kasriel, the chief economist at Northern Trust, will retire at the end of this month. In this interview, he explains why he is optimistic about the prospects for the US economy and why supposed headwinds - from the price of oil to the housing market - pose much less of a threat than most people believe.
2012-04-10 Super Macro - A Fundamental Timing Model by Theodore Wong (Article)
Rather than endure losses in bear markets - as passive investors must - I have shown that a simple trend-following model dramatically improves results, most recently in an Advisor Perspectives article last month. Now it's time to extend my approach by showing how this methodology can be applied to fundamental indicators to further improve performance.
2012-04-10 Which Stocks Win on Main Streets Comeback? by Bill Smead of Smead Capital Management
We are very excited about the next three to five years because we believe it is likely that Main Street will start to compete with Wall Street for capital and economic growth will accelerate. Unemployment rates would fall in that scenario and pent-up demand for goods and services could come out of the woodwork among average American households. What we mean by saying this is that capital will begin being demanded for business activities. As capital gets demanded for business activities ranging from housing to business expansion, the cost of capital will rise and bond prices would fall.
2012-04-09 And That's The "QUARTER" That Was... by Ron Brounes of Brounes & Associates
Europe hopes the latest (bailout and reg) moves will help it get its act together. (Good luck with that.) China applies the brakes. Labor looks strong, but can it continue? The Fed debates the need for more stimulus (without any consensus). Facebook moves closer to IPO (and investors beg to participate). The world lectures Iran and finally takes harsh measures (stand by to help Saudi). Investors hope to keep the mo going for another quarter, while being tempted to take profits along the way. Can we finally start focusing on Obama vs. Romney?
2012-04-09 Is the Fed Promoting Recovery or Merely Desperation? by John P. Hussman of Hussman Funds
What we've observed in the employment figures is not recovery, but desperation. Having starved savers of interest income, and having repeatedly subjected investors to Fed-induced financial bubbles that create volatility without durable returns, the Fed has successfully provoked job growth of the obligatory, low-wage variety. Over the past year, the majority of this growth has been in the 55-and-over cohort, while growth has turned down among other workers. All of this reflects not health, but despair, and explains why real disposable income has grown by only 0.3% over the past year.
2012-04-09 Strong Fundamentals Drive Best First Quarter Since 1998 by Douglas Cote of ING Investment Management
The best first quarter since 1998 was marked by strong fundamentals and reduced volatility and global risk.Could it be that the vicious cycle of the past few years has been broken? Could we have entered into the type of virtuous cycle in which positive data beget more positive data, as has marked prior sustained bull markets? Sell in May and go away and other bear strategies that have worked in prior years will likely be ineffective this year, driven in large part by strong fundamentals and global risks that have been excessively discounted.
2012-04-06 Managing Expectations: Why Gold Should Thrive by Frank Holmes of U.S. Global Investors
Its been a challenging week for gold investors. As I often say, investing, like life, is about managing expectations. Over the past 11 years during golds spectacular bull run, investors should remember that price action can go both ways. What helps is to look at the historical rise and fall of gold. For example, looking at the past decade of one-day 5 percent drops in gold, you can see that this event is pretty rare. In 2006, gold dropped more than 5 percent in a day only two times. In 2008, there were three such events. Another one occurred at the end of this February.
2012-04-06 A Generational Shift in the Making by Rick Palacios of John Burns Real Estate
The housing market is carving out a bottom and renters are slowly starting to purchase homes again. The percentage of apartment REIT renters moving out to purchase a home rose last quarter.
2012-04-06 A Headwind for the US Economy: Tax Uncertainty by Russ Koesterich of iShares Blog
If 2013 tax hikes seem set to hit on schedule, I would be more bearish on the US economy and US equities. In such a scenario, the US economy would likely face $500 billion to $600 billion in fiscal drag a significant damper on economic growth and consumption from higher taxes. And lingering uncertainty over taxes into 2013 would also be a negative for the US economy because of the potential harm it could cause to US confidence and business spending.
2012-04-04 Kasriel's Parting Thoughts - Has the Fed Boosted the Stock Market? by Paul Kasriel of Northern Trust
The Feds actions have benefited the stock market as well as aggregate demand for goods and services in the U.S. economy. Would you have preferred that the Fed sit idle as it did in the early 1930s, with likely similar results for the stock market and the economy in recent years as occurred at that time? The Fed has simply provided some of the credit to the economy that the private MFI system would have had it not been crippled with loan losses. And even with the Feds additional credit creation, total MFI credit growth has fallen short of the long-run normal credit creation of private MFIs.
2012-04-04 Fed - Actions Speak Louder Than Words by Axel Merk of Merk Funds
The Fed has a credibility problem: having assured investors that rates will remain low for an extended period, it may only take one or two FOMC members to turn more optimistic about the economic outlook to cause the markets to more aggressively price-in tighter monetary policy. Conversely, Bernanke has made it clear that he is most concerned about a recovery in the housing market and that low interest rates throughout the yield curve are desirable. Operation Twist is specifically aimed to achieve that, lowering long-term rates and flattening the yield curve.
2012-04-04 Economic Update by Richard Hoey of Dreyfus
We believe that a full-scale global recession is unlikely, assuming that there is no major oil price spike from a disruption of the flow of Middle East oil. We believe that a key cause of global economic expansion will be the easy monetary policy prevailing in many regions and countries worldwide. We expect a global growth recession in 2012, with declining economic activity in Southern Europe, an economic stall or temporary declines in the U.K. and much of Northern Europe, a moderate slowdown in emerging markets and a U.S. expansion at a near-trend pace in 2012, somewhat faster than last year.
2012-04-04 Time Heals All Wounds by Robert Stimpson of Oak Associates
The US stock market enjoyed a strong first quarter of 2012. Fueled by better economic data and a calming of fears over Europe, the stock market surged higher. For the first quarter, the S&P 500 rose 12.6%. Oak Associates accounts did much better, gaining on average more than 17%. The strongest performing sectors of the market were financials, technology, and consumer discretionary. These three groups are the most cyclical and their strong performance bodes well for a broader economic recovery through 2012.
2012-04-03 The Easy Money Saloon by Michael Lewitt (Article)
When two of the world's soundest central banks (Israel and Switzerland) start investing their reserves in stocks (the Bank of Israel is run by the highly respected Stanley Fischer for God's sake!), one has to wonder what the world is coming to. Apparently the global saloon is expanding its boundaries. No doubt we will soon hear the ECB is merging with the London Stock Exchange.
2012-04-03 Good Quarter. More to Come. by Christian Thwaites of Sentinel Investments
Good week ending an even better quarter. We like this rally because i) large cap stocks were in line with small and mid, that means less speculative juice and more reality investing ii) GTs came unglued fast but iii) Baa spreads came in thanks to low net issuance and high demand, again crushing the crowding out theorists but, no matter, iv) Europe came back from the brink and fewer daily catastrophe headlines and v) the Fed gave plenty of information to not expect a policy reversal. This is solid stuff and markets feel better than this time in 2010 and 2011 when we saw spring sell offs.
2012-04-03 Have We Reached the End of the Rally? by Bob Doll of BlackRock Investment Management
Our overall view about the markets is that improvements in the global economic outlook, continued easy financial conditions and slowly improving investor risk appetites are all reasons that stock prices should continue to crawl higher. Markets have, however, paused somewhat in their rally over the last several weeks. This can be attributed to the fact that prices had risen so far so quickly and that markets were overdue for a period of consolidation or correction, but it is also important to emphasize that we will need to see further evidence of economic improvement for gains to continue.
2012-04-03 The Long and Winding Road, Part 2 Closer to the end than the beginning by Ron Sloan and Clint Harris of Invesco
Three years ago, we published an article outlining our long-term view that a generation of economic tailwinds had become headwinds leading to a period of volatile, trendless markets that would create opportunities for disciplined investors. Were certainly closer to the end of this journey than the beginning, but we believe were facing an important transition period for earnings and valuations that will create a narrower opportunity set than the one we saw three years ago when the current cycle began. Today, companies are faced with a two-part dilemma.
2012-04-03 Time to Pay the Piper by Frank Holmes of U.S. Global Investors
One way investors can offset higher tax rates is through municipal bonds. In general, interest generated from municipal bonds is exempt from all federal income taxes and some state and local taxes (depending on your state). While municipal bonds carry a greater amount of risk than Treasury bonds, tax advantages and higher yields make them extremely attractive to Treasuries on a relative basis. The yield on government debt is currently in the doldrums just above 3 percent while the yield on the Bond Buyer 40 Index of munis is above 4 percent.
2012-04-03 Risk On by Jim Tillar, Steve Wenstrup and Tim Roesch of Tillar-Wenstrup Advisors
Overall both risk and return seem muted until something in the current environment changes. As long as yields on assets like bonds and cash remain low, it is hard for stock markets to collapse. But those yields are so low because central banks are frightened about the economic outlook which makes it very hard for a bull run to be sustained. While there has been improvement is some areas of the economy some are struggling to grow beyond previous levels.
2012-04-03 Christine Lagarde: Emerging Market Nations Will Get More Power in the IMF by Team of Knowledge @ Wharton
Christine Lagarde, managing director of the IMF, sees no alternative to the strict austerity policies being imposed on many peripheral European countries, says the double dip recessions in Italy and Ireland just announced come as no surprise, and notes that IMF reforms will shift 6% of current quotas to dynamic emerging and developing countries. Lagarde's comments came in an exclusive interview with Knowledge@Wharton and media partner ParisTech Review late last week, as BRIC countries demanded more voting power in return for the larger financial contributions being requested by the IMF.
2012-04-03 Have Investors Moved Past Europe? by Chris Maxey of Fortigent
At the end of 2011, the Long-Term Refinancing Operation brought a modicum of stability to financial markets in Europe.When coupled with the orderly default of Greece, the situation in Europe is seemingly on a road to more pleasant ground. Just as soon as investors place Europe in their periphery, however, problems once again begin bubbling to the surface.In recent weeks, the spotlight has turned to Spain, where unemployment is near 24% and the government is expected to run a 5.9% budget deficit for 2012.
2012-04-02 It's All Data (Jobs) Dependent by Charles Lieberman of Advisors Capital Management
The performance of the economy has improved quite substantially over the past several months, with very significant implications for policy and politics. A healthier labor market is sufficient to insure a healthier economy, which supports the rally in the stock market, the decline in bond prices, and the rise of President Obama in the polls. Numerous issues will affect the political polls in the coming months, but the outlook for the economy remains one of continued improvement.
2012-04-02 Better News On Consumer Spending, But ... by Scott Brown of Raymond James Equity Research
The monthly report on personal income and spending rarely gets much interest from the financial markets. However, the spending figures are a direct part of the governments GDP calculation. The latest numbers (through February) paint a much brighter picture than they did a month ago. While the outlook has improved from a month ago, its not enough for most Fed policymakers. It will take much more substantial economic growth to undo fully the recessions damage to the labor market. QE3 is still seen as unlikely, but its not off the table completely.
2012-04-02 2012 Invesco Fixed Income and Asset Class Outlook by Greg McGreevey of Invesco
Given the increased need for yield in developed economies, driven by an aging demographic base and low interest rate environment, we expect parts of the high yield, bank loans, corporate credit and distressed debt to post solid performance over the near-term. As we look across the global landscape, the US has seen a notable reduction in debt at financial institutions and among consumers. Leverage at the government level remains high and there is no credible plan to reduce such debt going forward.
2012-03-31 All Spain All the Time by John Mauldin of Millennium Wave Advisors
The events of the last 24 hours compel me to once again look "across the pond" at the problems that not only plague Europe but will be a drag on world growth as well, as Europe goes through its continued painful adjustment as a consequence of trying to adopt a single currency. Since Spain is going to be on the front page for some time, it will be useful to look at some of the problems it is facing, to put it all into context. And what I heard while in Europe in private meetings is troubling.
2012-03-30 Kasriels Parting Thoughts Mary Matlins Economics by Paul Kasriel of Northern Trust
There is a controversy about whether one should use real GDP or real GDI to evaluate the performance of the U.S. economy. Real GDP is obtained by adding up spending across the economy and real GDI is computed by adding up income earned. Conceptually, GDP and GDI are identical but the source data for each is different and they yield different numbers. The GDI measure is gaining attention; Jeremy Nalewaik of the Fed has pointed out the National Bureau of Economic Research uses monthly indicators, GDI and GDP to determine official dates of business cycle peaks and troughs.
2012-03-30 China's Family Planning by Elizabeth Dong of Matthews Asia
Family planning in China has become a complex topic of debate as the country feels increasing pressure due to its growing elderly population. Chinas current one-child policy, introduced in 1979, allows some exemptions, including those for ethnic minorities, rural farming families and parents who themselves are single children. But the social and economic costs of implementing the one-child policy have risen, and many are calling for change.
2012-03-30 Shifting Winds-Turbulence Ahead? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Treasury yields have moved somewhat higher, while stocks have largely continued to rise. Recent correlations appear to be breaking down, which could lead to increased volatility but we remain relatively confident in equities. Perception as to the next moves by the Fed appeared to be shifting, but Bernanke reiterated their easy monetary stance. Uncertainty is rising and the Feds goal of increased clarity through more transparent communication is under scrutiny. Liquidity concerns in Europe have eased but economic risks remain, while Spain and Italy face deal with their ongoing debt crises.
2012-03-30 Does China Hold the Winning Ticket? by Frank Holmes of U.S. Global Investors
Some bears may think the odds of China being the winner among emerging markets in 2012 are also remote. Over the past few years, Chinese stocks have lagged compared to its emerging market peers. However, the Periodic Table of Emerging Markets perfectly illustrates: last years loser can be this years winner. Historically, every emerging country has experienced wide price fluctuations from year to year. Over time, though, each country tends to revert to the mean.
2012-03-29 China's Gravity-defying Economy: How Hard Will It Fall? by Team of Knowledge @ Wharton
As China's high-octane economy shifts into lower gear, virtually everyone agrees that the double-digit, super-charged boom years are drawing to a close. Speculation over the possibility of a so-called "hard landing" for the country flourishes with each boom and bust cycle, only to die down as China's growth revs up again. This time, however, both external and internal factors -- including global conditions, domestic politics and financial trends -- are reinforcing the downturn. Many experts warn that without some painful reforms, there will be worse trouble to come.
2012-03-29 Intrade.com Odds for the Affordable Care Act's Individual Mandate by Team of Bespoke Investment Group
The Supreme Court debate on the constitutionality of the Affordable Care Act ended today. The debate over the past three days has caused plenty of drama in DC, as everyone tries to decipher what the nine Justices will ultimately decide. At least over at the prediction market website, Intrade.com, the odds are showing that the individual mandate may be in trouble. As shown below, the odds on the Intrade contract for the individual mandate to be ruled unconstitutional (by the end of 2012) spiked from 35% before the debate started up to 65% as of this afternoon.
2012-03-28 Revisiting the Liquidity Cycle with the Minsky Model by Thomas Fahey of Loomis Sayles
Once an extreme event occurs, standard models offer limited insight as to how the ensuing crisis could play out and how it should be managed, which is why policy responses can seem disjointed. The latest policy responses to the European crisis have been no exception. To understand and respond to a crisis like the one in Europe, perhaps we need to consider some new models that include the human factor. Economic historian Charles Kindleberger can offer some insight
2012-03-28 The End of the 30-year Bond Bull Market? by Team of Knowledge @ Wharton
Is the great 30-year bull market in bonds coming to an end? Yes, perhaps -- or maybe not: It depends on whom you ask and how flexible your timing is. While many people think of bonds as conservative holdings, they have produced stellar returns for decades, thanks to the taming of inflation and other factors. But some experts say economic recovery could now reverse the process by driving interest rates higher, causing bond prices to fall.
2012-03-27 Our Current Perspective on the Global Economic Outlook by American Century Investments (Article)
As we proceed through the first quarter of 2012, the U.S. economy continues to drift— not in recession, but far from the level of growth and dynamism we would like to have. Meanwhile, global economic growth has slowed as the world anticipates a solution to the European sovereign debt crisis. In short, we are in a period of uncertainty, not only about how key events will unfold, but about the timing associated with their future progress and resolution.
2012-03-27 Housing Boom? Not Yet by Russ Koesterich of iShares Blog
Despite some recent signs the US housing market may be stabilizing, Russ explains why he doesnt expect a strong housing rebound in the near term and doesnt advocate aggressively leveraging to housing-related investments.
2012-03-27 Home Prices Have Been Rising for 3 Months, but Nobody has Been Telling You by Wayne Yamano of John Burns Real Estate
Over the last 3 months, prices are up in 90 of the 97 markets we analyzed. The average price increase over the last 3 months is 1.1%, or a 4.5% annual rate. This is big news, so why isn't anyone else reporting it? It is because most price indexes are at least 3 months behind what's happening with home prices right now. The Burns Home Value Index (BHVI) gives you a 3-month competitive advantage. We developed the BHVI to answer the question, "What is happening to home prices today?" The answer is, "Home prices are rising!"
2012-03-27 Buy Commodities, Sell Brands by Bill Smead of Smead Capital Management
Warren Buffett was quoted the other day saying, We like companies which buy a commodity and sell a brand. We thought it would be very helpful to unpack his thought and put it into the context of today. We believe these current circumstances are framed by the historical over-pricing of commodities, the coming economic contraction of China, the successful cleansing of the income statements of US households and the inevitable rebound in housing in the US. We will look at the makeup of our portfolio companies which buy a commodity and sell a brand to consider their upside in this environment.
2012-03-27 Uncovering Equity Yield Traps by Team of American Century Investments
As the low interest rate environment persists, uncertainties continue even as new marketplace concerns begin to emerge. This observation is especially applicable to investors that are desperate for current income opportunities. In their search for equity investments, many will opt to screen for opportunities using current yield as the main filtering criterion. In situations such as this, those in hot pursuit of rich rates find themselves at risk of falling prey to nasty yield traps. Although yield traps exist in the fixed-income space, this piece focuses on yield traps involving equities.
2012-03-26 Monthly Investment Commentary by Team of Litman Gregory
We recently spoke with portfolio managers from two fund management teamsChris Davis and Ken Feinberg of Clipper and Selected American Shares, and Pat English of FMIwho have historically exhibited different views toward banks and financial services firms. In addition to providing insight on current risks and opportunities in the financial sector, the interview touches on a number of topical subjects including the Federal Reserve, the European debt situation, and the housing market.
2012-03-26 A Tale of Two Tech Sectors by Kristina Hooper of Allianz Global Investors
March is a fitting time to talk about tech because it is the month when investors witnessed the infamous noise heard round the world: the bursting of the dot-com bubble 12 years ago. And while their ears might still be ringing from the blast, when it comes to tech stocks, a little perspective goes a long way. In 1999, irrationally bullish sentiment drove tech valuations to lofty heights with little regard for actual profits. Today, the tech sector is among the most attractive and fundamentally sound areas of the economy.
2012-03-26 Overcoming Objections to Equities by Bob Doll of BlackRock Investment Management
So what are some of the improved economic conditions that have been pushing yields higher? We have devoted quite a bit of space in recent weeks to discussing the improvements in the labor market, and while jobs growth is certainly among the most important economic indicators, there are other factors that have been showing signs of improvement as well. Debt deleveraging remains a source of concern, but we have been seeing progress on that front. Individuals have been paying down their debt over the past few years and household debt levels have been falling noticeably.
2012-03-26 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Europe takes a well-deserved back seat to the global headlines as all eyes shift to China to see how the country deals with its recent economic slowdown. Consumer activity is on the hot seat domestically as a key confidence gauge is released and analysts closely dissect personal income and spending data in light of the sudden pickup in the labor market. The markets continue to test key levels as investors weigh the low yields in fixed income against the current risk in equities. Hows that speaking tour treating you, Dr. B.? Any Ron Paul sightings?
2012-03-23 Whats Next for Equities? by Matthew Rubin and Justin Gaines of Neuberger Berman
In 2011, the S&P 500 finished essentially flat on a price-return basis. That return, however, would not have been achieved without a 15% gain over the last three months of the year. Equities have since picked up where they left off and, year-to-date, most major indices are up by double digits. Front-of-mind for investors is whether this momentum can be maintained. We offer the bear and bull cases as well as our thoughts on what may lie ahead.
2012-03-23 A Random Walk Through the Data Minefields by John Mauldin of Millennium Wave Advisors
We are once again to a point in Europe where there are no good choices, only very bad ones. But this time it is with a country that actually makes a difference. (No slight intended to Greece, but you are just small.) Spain has no good way to cut its deficit without things getting worse. But Europe must be willing to then fund Spanish debt, even if "only" through more LTRO actions by the ECB.
2012-03-23 U.S. Real Estate Securities - February 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data showing measured improvement, including solid employment gains, as well as positive developments in Europe that have somewhat brightened the outlook for risk assets globally. With funding costs likely to remain low and demand showing signs of strengthening, we believe U.S. real estate fundamentals will continue to gradually improve in 2012, supported by a scarcity of new supply in most markets.
2012-03-23 Emerging Markets Real Estate Securities - Investment Review & Outlook February 2012 by Team of Cohen & Steers
As emerging economies work through the late stages of a mid-cycle slowdown, policy markets are attempting to engineer soft landings as inflation pressures continue to moderate. Given the potential for better domestic growth in such an environment, we expect to take advantage of buying opportunities among residential developers. Our favored markets include Brazil, based on its natural resources, growing consumption trends and shareholder-friendly business environment. We particularly like the retail market, which continues to exhibit strong fundamentals.
2012-03-23 Global Real Estate Securities Investment Review and Outlook February 2012 by Team of Cohen & Steers
Global real estate securities added to their year-to-date gains in February, although the pace of the rally moderated. Most markets in Europe and Asia Pacific continued to benefit from the retreat of macro risk concerns. U.S. REITs, which advanced in 2011 while other regions struggled, had a modest decline.
2012-03-23 Large Cap Value Strategy February 2012 Review & Outlook by Team of Cohen & Steers
Our near-term outlook for the U.S. economy and markets is increasingly favorable, as several of our long-term concerns appear to be easing. Economic indicators are strengthening, the danger of a eurozone collapse has receded and earnings reports for 2011 have been good. Valuations remain attractive, if somewhat less so than a few months ago, and investors are poised to put their considerable cash balances back to work. Cyclical names and sectors are most likely to lead the rally over the next few months.
2012-03-23 Gold and China: Where the Bulls and Bears Square Off by Frank Holmes of U.S. Global Investors
To paraphrase the great Steve Martin, todays investors are very passionate people and passionate people tend to overreact at times. An overreaction is exactly whats happened in gold and global markets in recent weeks. While market bulls have been sniffing out data points to support their case, market bears have continued to take a glass-half-empty approach. Gold and China are two areas that have been caught in the bear trap this week, but we believe the gold and China bulls still have room to run.
2012-03-23 The Republican Budget Proposal: Reading the Tea Leaves by Russ Koesterich of iShares Blog
While budget plans from Republicans and Democrats are generally at odds, the differences between the parties current proposals are particularly stark and provide evidence for Russ forecast for the global market this year: Two quarters of sun, followed by a chance of severe thunderstorms in the fourth quarter.
2012-03-23 Where is the Unemployment Rate Headed? by Mike "Mish" Shedlock of Sitka Pacific Capital Management
I have a pretty cool interactive map below that will let you graph the unemployment rates based on parameters that you can choose. First let's take a look at the current unemployment rate and a discussion of the parameters that define it.
2012-03-22 The American Recovery by Mohamed A. El-Erian of Project Syndicate
The US has gone through an arduous period of intervention and rehabilitation since the global financial crisis in 2008 sent it to the economic equivalent of the emergency room. The question now is whether the US economy is ready not just to walk, but also to run and sprint.
2012-03-22 Brazil Retail Sector Riding the Wave of Middle Class Growth by Team of Thomas White International
Even in the late 1990s, Brazil was just like any other emerging economy, characterized by extremes of wealth and abject poverty with no social class dividing the bridge between. A decade and more down the line, the effervescence in the middle cannot be missed. Yes, the great Brazilian middle class defined as those who earn between $690 and $2,970 a month has arrived and is here to stay. If Brazil has made a name in the global retail sector, it had better thank these late comers, empowered with good purchasing power and access to credit.
2012-03-22 Explaining the Stir over Recent Fed-Speak by Team of American Century Investments
The official statement from the Federal Reserves March 13 interest rate policy committee meeting was relatively ho-hum (no significant changes from Januarys statement), but other recent Fed communications have raised more of a stir. In particular, we explain what fiscal cliff and sterilized QE mean, and help put them into context. Its all part of a mixed, uncertain economic outlook in which slower mid-year growth, like last year, cant be ruled out, but higher inflation by next year is also a possibility.
2012-03-21 US Treasuries: This is the End? by Russ Koesterich of iShares Blog
Last week, the US Treasury market suffered its worst losing streak since 2006. This rapid rise in yields has prompted investors to wonder whether the 30 year rally in bonds is finally coming to an end, and if so how high will rates rise? The answer may surprise you.
2012-03-21 Trade Rains on the Jobs Parade by Peter Schiff of Euro Pacific Capital
Back in the late 1980s, when annual trade and budget deficits were but a small fraction of today's levels, the markets were rightly concerned about America's ability to sustain its twin deficits. This anxiety helped lead to the stock market crash of 1987. More recently, large and persistent trade deficits were a significant factor in building the imbalances that caused the U.S. economy to implode in 2008. But in recent years, most Americans have lost their concern with gaping trade deficits. I believe it will soon come back with a vengeance.
2012-03-20 Bob Rodriguez on the Dangers in Today's Markets by Robert Huebscher (Article)
Bob Rodriguez is the managing partner and chief executive officer of Los Angeles-based First Pacific Advisors. In this interview, he discusses how the challenges faced by the US economy will impact the capital markets.
2012-03-20 The Wages of Denial by Michael Lewitt (Article)
Europe is insolvent, and hopelessly so. Her procurer - the European Central Bank (ECB) - can front her some money for a while, but in the end she is either going to have to repay him or suffer a very rough consequence. In the meantime, however, she can continue to entertain her customers, in this case those willing to extend her credit in one form or another. Sooner rather than later, however, these creditors are going to grow tired of her tricks and turn their attention otherwise. At that point, she will be left to deal with the ECB because nobody else will have her.
2012-03-20 Is There a Bubble in Treasuries? by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Both Sides of the Case; Explaining the 2011 Treasury Rally (It's Not What You Think); Where to From Here? People have been calling a bubble in treasuries for at least a decade. The shocking result, especially to hyperinflationists, has been a stair-step decline in yields for 30 years. That's quite a long time.
2012-03-20 Game On by Scott Brown of Raymond James Equity Research
Nothing in the recent economic data suggests that the Fed is any closer to raising short-term interest rates. However, the figures also imply that further Fed asset purchases are less likely. While the Fed did not surprise last week, the bond market had factored in some chance that the Fed would eventually undertake QE3. In the short term, the recent pop in bond yields may simply be a case of be on the bus or be under it. However, bond yields seem unlikely to rise sharply from here, at least for now.
2012-03-20 A Turning Point by Christian Thwaites of Sentinel Investments
Bottom Line: Bonds are now outside of the recent range, especially in the 30-year. We could see another 10bp retrace to 3.50%. Equities have had a good run but still have reasonable valuations. New money goes to IG bonds. Spreads are approaching their long-term mean but demand from natural buyers is high.
2012-03-20 An Actively Passive Debate by Chris Maxey of Fortigent
The debate surrounding active versus passive investment management continues to attract a growing share of investor interest. After several years of underperformance, active managers are finally outperforming their benchmarks YTD, but it may be too late. Investors, frustrated with the underperformance and higher fees, are piling en masse into exchange-traded funds (ETFs) and other low cost solutions. The time for an all-passive solution may not be right now, but active managers are undoubtedly concerned about what the future may hold.
2012-03-19 Did You See The 10-Year? by John Petrides of Advisors Capital Management
This week the US 10 year Treasury note spiked from 2% yield on Monday to 2.4% by the end of Wednesday. Around the office we were marveling at this move. Given the recent volatility in the equity market, that might not seem like much to stock investors, but to those in the fixed income world thats quite a change. The sudden spike in Treasuries has several implications: 1. Those investors who rushed into U.S. Treasuries over the past four months out of fear and panic (presumably not in hopes of achieving income) in search of safety, actually have an unrealized loss in their position!
2012-03-19 Stocks: More Room to Run by Bob Doll of BlackRock Investment Management
While it is important to remain cognizant of the risks facing the markets, our overall view toward stocks remains constructive. Since the current rally began last autumn, we have seen some market pullbacks, but they have been brief and shallow, likely because many investors remain underweight equities and have been using pullbacks to buy on price dips. Now that bond prices are falling, we believe investors as a whole will finally begin to move out of Treasuries and into stocks. As such, as long as the macro fundamentals remain reasonably good, we believe equities should grind higher from here.
2012-03-16 The Real Debate: Preservation of Capital vs. Preservation of Purchasing Power by Chris Clark of The Royce Funds
Investments in high-quality companies that have embedded pricing power and high returns on their invested capital look to us to be some of the best investments to protect and grow purchasing power, and we believe they need much broader representation in investors' asset allocation. We think that the period of exclusively focusing on the preservation of capital has passed and that now is the time to be focused on the preservation of future purchasing power.
2012-03-16 February Leaps to a Multi-Decade Market Open by Doug Cote of ING Investment Management
The markets YTD success has been fueled by a dramatic reduction in global risk and upbeat economic data. The fence to contain the euro crisis has been definitively established. Oil prices are a concern, but the real economy has the wind in its sails. Though equity fund outflows continue, its never too late for investors to do the right thing.
2012-03-16 The Heart of March Madness by Frank Holmes of U.S. Global Investors
Everyone agrees that its unethical to put the firms interest ahead of its clients. More importantly, a self-serving financial attitude is a breach of fiduciary duties. It may be possible that Goldman Sachs has moral issues, but not all financial firms are morally bankrupt. Nor are thousands of executives and professionals employed in the industrymoms, dads, uncles, aunts, daughters, sonswho are hard-working and acting in the best interest of their customers.
2012-03-15 Investment Management with a Conscience by Douglas Hodge of PIMCO
Earlier this year the Financial Times ran a series of editorials under the title Capitalism in Crisis. Contributors ranged from Bill Clinton and Alan Greenspan to FT editors Martin Wolf and John Kay. There was also a submission with the byline, Occupy London. While I am admittedly unable to add much to their collective wisdom, I think a sound analysis of capitalism requires an understanding of the role of the investment management industry within the financial services ecosystem."
2012-03-15 Market Update: A Real Recovery, or a False Start? by Team of Knowledge @ Wharton
The Dow has hit its highest level in years, loan rates are at record lows and the U.S. economy appears to be gaining momentum. Even the housing market is starting to look inviting. But is this a real recovery -- or a false start like last year's? Wharton's Jeremy Siegel and Scott Richard think the economy is showing signs of a true rebound, and predict that stocks should do well in the next 12 months. But bonds, they warn, are in dangerous waters, and economic growth will be in jeopardy if oil prices keep rising and the European credit crisis worsens. (Video with transcript)
2012-03-15 Stress Tests No Sweat by Peter Schiff of Euro Pacific Capital
The Federal Reserve ran another "stress test" on major financial institutions and has determined that 15 of the 19 tested are safe, even in the most extreme circumstances: an unemployment rate of 13%, a 50% decline in stock prices, and a further 21% decline in housing prices. The problem is that the most important factor that will determine these banks' long-term viability was purposefully overlooked - interest rates.
2012-03-15 Everyone Hates Stocks ...and That's Why You Shouldn't by Bill Mann of Motley Fool
I dont tend to put currency into market moves, particularly short-term ones. But it has to be said that the tenor of the news regarding economies worldwide has been unambiguously bad. Why in the world would stocks go up in the face of such misery? Havent people heard about whats going on in Greece? Of course they have -- its why so many rushed out of risk assets last October and November. But while the caterwauling has done its job in spooking people, the underlying facts belie the news cycle: the American economy is booming.
2012-03-14 Chart of the Week: The Worlds Infrastructure Plans by Frank Holmes of U.S. Global Investors
Demand for access to basic needs, an emerging middle class and a never-ending use of global resourcesthese are the primary drivers of major infrastructure projects over the next several years. The infrastructure plans taking place across emerging markets emulate a 1950s America. As these governments help their residents pursue the American Dream of better homes, health care and quality of life, I believe the companies with a strong footprint in these growing markets stand to benefit.
2012-03-14 No QE3 Yippee! by Liz Ann Sonders of Charles Schwab
The Fed made no major changes to its policy statement and announced a continuation of Operation Twist, but did not hint at or announce further quantitative easing.
The Fed's assessment of the economy did improve somewhat.
Richmond Fed President Lacker's dissent and Dallas Fed President Fisher's pronouncements ring true.
2012-03-13 The Gutenberg Economy by Michael Lewitt (Article)
As commentators near and far speculate on what 2012 will bring to the global economy and markets, there is little question that one factor will be decisive: the central banks' printing presses. Both the Federal Reserve and the European Central Bank (ECB) will keep printing dollars and euros around the clock until their presses run out of ink.
2012-03-13 Employment Outlook Weather and Gasoline by Scott Brown of Raymond James Equity Research
Nonfarm payrolls rose more than expected in February, with an upward revision to figures for December and January. The job market figures have been strong. However, an unusually mild winter has certainly had an impact. Its difficult to isolate the effect of mild weather. The labor market is definitely improving, but recent figures may be somewhat exaggerated. Mild winter weather may pull forward some seasonal gains that would have otherwise occurred in March and April. In addition, higher gasoline prices threaten to dampen the pace of improvement in the near term.
2012-03-13 The Ambergris Factor! by Jeffrey Saut of Raymond James Equity Research
I had a meeting with two PMs from Switzerland that had 10 questions they wanted answered. 1. Would you buy cyclical stocks or defensive stocks? I would buy cyclicals because I dont believe we are going to see another recession in the U.S. for the near future. 2. 2011 was a risk on/risk off year, so is it a top down or bottom up strategy for 2012? Last year you only had to get two things right. You had to raise cash in March/April and put it back to work during the bottoming sequence of August October. One always needs to employ a bottom up strategy combined with a top down view.
2012-03-13 Will he? Won't he? by Christian Thwaites of Sentinel Investments
Will oil prices hurt the economy? No Recent good news on the economy has come with warnings of possible demand destruction from higher oil. First, lets stress that QE does not cause higher oil prices. There are too many iterations between increasing bank reserves and the trading firepower needed to drive spot oil prices sharply higher. And while we have seen an increase since September, we're no higher than a year ago. During that time economic prospects dimmed then brightened MENA troubles flared, receded and then grew, and Asian demand steadily rose. But there are reasons to be sanguine.
2012-03-13 Economic Update by Mark Oelschlager of Oak Associates
As one might expect after a near-doubling of the market in three years, investor sentiment, by many measures, is much more positive these days. These psychology indicators had reached worrisome levels (too much optimism often augurs below-average stock returns) a few weeks ago but have since come in a bit, which is healthy. The recent bullishness is hard to square though with the general anxiety individuals still have toward stocks. While some are returning to the market, many are still spooked by the volatility of recent years.
2012-03-13 Home Prices and Inflation, Part 1 by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Various charts show home prices are now back to levels last seen in September-October 2002. I posted such a chart constructed from the LPS Home Price Index (HPI) in LPS Home Price Index Shows U.S. Home Prices Accelerated Decline.
2012-03-09 Economic Update - March 2012 by Team of Cambridge Advisors
We continue to deal with the added risk to the global economic system caused by the high degree of debt that exists throughout the developed world. A spirit of cooperation in Europe helped to put those concerns on the back burner in February. Solutions for Greece have been announced however, these are not permanent solutions and the problems go much further than Greece. We expect more turbulence from sovereign debt problems to reemerge in coming months.
2012-03-09 Why Equities Are Attractive Today by Matthew OConnor of Hartland & Co.
Is today the right time to invest in equities? Equity investors have experienced a roller-coaster ride. As a result, many investors have run as far as they can from equities, pulling out roughly $135 billion from U.S. stock mutual funds last year. Even with the S&P 500 Index off to its best start in 25 years and inching closer to its 2008 high*, investors continue to withdraw money from U.S. stock mutual funds. So, where are we? Is it the right time to invest in equities? Due to a combination of reasons, we believe equities do look particularly attractive today and for the long term.
2012-03-09 Appreciating China to its Fullest by Frank Holmes of U.S. Global Investors
While most analysts dont expect another moon shot rise in China's GDP this year, a 7.5 percent growth rate still exceeds most emerging economies and all developed nations. Advanced economy growth is expected to be meager, slowing from 1.6 percent to 1.3 percent in 2012, according to The Conference Board. For long-term investors learning to appreciate the finer points of the country, we believe China is somewhat like fine wine; it only gets better with age.
2012-03-08 Of Tulips and Treasuries. Treasuries Securities Entering Bubble Zone. by Scott Colyer of Advisors Asset Management
U.S. Treasury securities could take their place alongside other bubble assets like tulip bulbs did in the 1630s. There are signs of a secular change afoot in the U.S. Treasury market as rates set historic lows. The U.S. Treasury market is indeed a crowded market as Euro-singed capital is being tucked behind the ultimate safety of the U.S. obligations. Add to that the Feds own record setting buying binge in these securities and you have an asset that may have well crossed the line of what its long-term value could possibly be.
2012-03-08 Global Forecast Update: Growth Upgraded, But Problems Remain by Azad Zangana and Keith Wade of Schroder Investment Management
We have upgraded our forecasts for global growth in response to better data and a further easing of policy. In particular, the success of the European Central Banks (ECB) long term liquidity operations and surprising resilience of Germany mean that we expect the recession in Europe to be shallower than before. However, it is still a weak picture. We do not see US activity taking off as the de-leveraging process has further to run. Much of the recent improvement in growth reflects an inventory cycle as the factors which held the economy back last year fade and go into reverse.
2012-03-08 And Thats The Week That Was by Ron Brounes of Brounes & Associates
New week; same old story. EU ministers continue debating the Greek bailout package which should (hopefully) come to resolution next week. Unemployment highlights a busy economic calendar as investors look to see how the solid weekly jobless claims releases translate into the key labor rate and nonfarm payroll data. Bring on Super Tuesday, right Mitt?
2012-03-07 Winning the War in Europe by Scott Minerd of Guggenheim
Given my view on the global liquidity glut, it probably will come as no surprise that I remain bullish on U.S. investments, including equities, high yield bonds, bank loans and other risk assets, as well as art and collectibles. I believe the United States has entered a period of self-sustaining economic expansion, driven primarily by the aggressive monetary policy of the Fed, which is now being reinforced by the ECB. U.S. growth is necessary to reduce domestic unemployment and to provide support to the struggling economies in Europe and Asia.
2012-03-07 The Truth Behind High Gasoline Prices by Gary D. Halbert of Halbert Wealth Management
While the latest report on 4Q GDP came in a bit better than expected, most economists agree that growth in 2012 will not be as good as the 4Q of last year. Following that, we look at some remarks from Fed Chairman Ben Bernanke in his recent Senate testimony. While he defended quantitative easing, it doesnt sound like the Fed is going to do QE3 anytime soon.
2012-03-06 More Mixed by Scott Brown of Raymond James Equity Research
The economic data reports have become more mixed. Growth is rarely even across time and industries, but the stock market often has a hard time with conflicting evidence. For Mr. Market, the economy has to be either booming or falling apart completely. Mild winter weather has clearly been a factor in the last few months, but unusual weather often merely shifts growth from one quarter to another. Last year, the economic gears were starting to catch, but gasoline rose from around $3 per gallon at the beginning of the year to $4 per gallon in early May. Are we in for a repeat?
2012-03-06 U.S. Covered Bonds: Reassessing Credit Risk and Relative Valuations by Marco van Akkeren and Ben Emons of PIMCO
We believe nominal spread analysis is insufficient, since investors must now consider recovery and default risk under various economic conditions.
Our factor-based approach provides a means to quantify default probabilities across a range of outcomes instead of analyst-defined ad hoc assumptions.
We also investigate historical CDS spreads as a means to quantify default risk relative to national home price appreciation.
The potential for an emerging U.S. issuer market, combined with ongoing foreign issuance, leads us to believe the U.S. covered bond market has viability.
2012-03-06 The Recovery of the US Economy Continues by John Buckingham of AFAM
The Dow Jones Industrial Average closed above 13,000 on Tuesday for the first time since May 2008. While there is no significance to the number from where we sit, The LA Times devoted front-page real estate in Wednesdays paper to the accomplishment and The WSJ ran a story titled, Dow, on A Tear, Leaps to 13000. One might think that the media coverage would perhaps provide a little prodding to get back into the market for those sitting on the sidelines, but the 3% pullback on the week in the Russell 2000 small-cap stock index suggests instead that many saw it as a reason to reduce risk.
2012-03-06 Continued Struggle Between Borrowing and Lending by Chris Maxey of Fortigent
Nonfarm payrolls and the unemployment rate headline the weeks economic data. Consensus expects another 200K+ gain in payrolls and no change in the unemployment rate. Other major economic data of note includes the ISM Non-Manufacturing index and the US trade balance. Abroad, there are important releases on tap including Q4 EU GDP and EU retail sales. Both the ECB and Bank of England meet this week, but neither is expected to adjust their key interest rates. Other central banks meeting include Russia, Australia, Brazil, Poland, New Zealand, Indonesia, South Korea, Canada, Peru, and Malaysia.
2012-03-05 Dipping a Toe Back Into the Market by Team of Franklin Templeton
After the rollercoaster that was 2011, trying to explain why now seems like a good time to venture back in still sounds a little crazy. But for those who are looking for some perspective, youve come to the right place. Read on for why Ed Jamieson, president/CIO of Franklin Equity Group, Peter Langerman, president/CEO of Mutual Series, Gary Motyl, president/CIO of Templeton Global Equity Group, and Mark Mobius, executive chairman of Templeton Emerging Markets Group, all think it might be time for investors to consider taking the plunge.
2012-03-05 Warning: A New Who's Who of Awful Times to Invest by John P. Hussman of Hussman Funds
Last week, the estimated return/risk profile of the S&P 500 fell to the worst 2.5% of all observations in history on our measures. This is not a runaway bull market. Rather, it is a market that again stands near the highs of an extended but volatile trading range. Importantly, the market is again characterized by an extreme set of conditions that we've previously associated with a Who's Who of Awful Times to Invest.
2012-03-05 Sound Fundamentals, Scary Geopolitics by Charles Lieberman of Advisors Capital Management
Data revisions indicate that household income grew more strongly than reported earlier, so consumers are far better able to sustain growth in spending, particularly as job gains are also increasing. Housing is recovering too, adding a new source of demand to the economy. Thus, the economic underpinnings to growth appear distinctly healthier. At the same time, the threat of conflict in the Middle East has pushed up oil prices, which eats into disposable household income. An actual conflict would chill discretionary spending, at least temporarily.
2012-03-05 The Disingenuous ECRI Recession Call by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Late last month in "ECRI Sticks with Recession Call on CNBC; More than a Bit of an Exaggeration by Achuthan to Make His Call?" I questioned the ECRI's use of coincident indicators to make a claim regarding recession....
In spite of all the above, I happen to like the ECRI recession call. Yes, I am biased, but it is hard to find anyone who is not....
To go out on a limb, I think GDP in 2012 is going to hugely surprise on the downside, and 1st Quarter GDP may be as low as zero to .5%. A negative number (or more likely a revised negative number) would not shock me in the least.
2012-03-02 Will the Bond Bubble Burst This Year? by Gary D. Halbert of Halbert Wealth Management
I dont know who first uttered this classic line The trend is your friend (until its not) but it is timeless. It seems especially appropriate today in light of the massive shift weve seen from stocks to bonds since the financial crisis and bear market of 2008-early 2009. Millions of investors have moved from stocks to bonds and consider themselves safe. Today, there are more people invested in US bonds (of all types) than ever before.
2012-03-02 Fed Done: So Is Gold by Brian S. Wesbury of First Trust Advisors
The bottom line is that even though Bernanke wants to make the case for QE3, he cant.In fact, better news on the economy has cut the Fed off from doing more massive easing projects.In the end, we believe the Fed has finally run out of justification for its excessively easy monetary policy.As the quarters ahead unfold, the prospects of more ease will continue to wane.This is good news for stocks which do not do well with accelerating inflation but, it is bad news for gold.Gold is done.and so is the Fed.
2012-03-02 The Protein Bomb by Niels C. Jensen of Absolute Return Partners
Population will grow from 7-8.3 billion people over the next decade. Meanwhile, arable land across the world will shrink and living standards will continue to rise, with the OECD projecting 3 billion new middle class consumers over the next 20 years. Many of these people will change their diets in favor of more animal protein. Livestock is quite inefficient in terms of converting grain to energy, so the pressure on farmers to deliver more will be immense. We conclude that agriculture should be represented in every long-term portfolio, but farm land has already risen a lot in value.
2012-03-02 Will Oil Continue Heading Higher? by Frank Holmes of U.S. Global Investors
We expect there to be corrections in the price of oil throughout 2012, just like the ups and downs commodities experience from year to year. While the world is hungry for energy, theres no free lunch on the Periodic Table of Commodities, and historically, from year to year, commodities fluctuate. Crude oil, for example, has seen its share of ups and downs: In 2008, oil lost 53 percent; in 2009, it increased a substantial 78 percent. While oil may remain elevated, use these higher prices to your advantage by owning natural resources companies that benefit from higher prices.
2012-03-01 2012: A year in US bonds by David Harris of Schroder Investment Management
There are two new factors that came to the forefront in late 2011 and which are set to influence investments throughout 2012. Indeed, it appears the collective bond market had a series of epiphanies in Q3 that should frame investment activity for some time to come, and these factors are by no means isolated to the US. The first factor is the broad recognition that debt expansion will not be the large driver of economic growth as it has been for the past several decades. The second factor is that political policy pronouncements will often trump economic and credit fundamentals.
2012-02-29 Dirt Economics: Demographics Matter! by Shane Shepherd of Research Affiliates
Generations ago, people had large families, ensuring an adequate supply of labor to work the farm and provide a comfortable retirement. Now, families are small and we face a mountain of debt and soaring deficits. This months Fundamentals examines the implications for the economy and investors portfolios.
2012-02-29 Life During War Time by Rick Lear of Sloan Wealth Management
This week, with European financial crisis almost in our rear view mirror, it is the price of oil that is leading the economic worry race. This worry race has seen more lead changes than the Republican Primary. Worrying about the economy is our new Cold War. We believe, that like the Cold War, this too shall pass.
2012-02-29 2012: A Year in the Global Economy by Azad Zangana and Keith Wade of Schroder Investment Management
Global growth is set to slow further in 2012 largely as a result of the euro crisis. On the positive side, two factors should support activity in 2012. The first is a fall in inflation, which will support household real incomes leading to stronger consumer spending. The second is the strength of the corporate sector; companies have stockpiled cash and built up profits. However, Europe is entering a serious recession and will weigh on growth elsewhere. Euro policymakers should redouble their efforts to find a solution to the eurozone crisis.
2012-02-28 Globalization: Its Saboteurs and Its Chicken Littles by Michael Edesess (Article)
The word 'globalization' provokes both excitement and fear. The excitement has sold millions of Tom Friedman books and turned a drab annual business conference, the World Economic Forum, into one of the hottest events of the year. It is front-and-center in recent tensions between the U.S. and China, and makes the European Union's economic crisis a concern for the whole world. Should we fear or embrace globalization?
2012-02-28 The Big Picture Through a Small-Cap Lens by Kristina Hooper of Allianz Global Investors
Things are looking up for investors as a recovery in the job market and a rosier consumer outlook have helped fuel optimism. But spiking oil prices could spoil the party in the short run. A look at small-cap stocks may offer perspective. The rally, Oct. 4 - Feb. 23, has seen the Russell 2000 jump 37%, well ahead of both the Russell Mid-Cap and the Russell 1000 indices. The small-cap rally may be headed for a hiccup, however, one foreshadowed by last weeks slight decline in the Russell 2000. Still many portfolios can benefit from a long-term allocation to small-cap and even micro-cap stocks.
2012-02-28 Oil Prices, Mixed Data Slow Market Gains by Chris Maxey and Ryan Davis of Fortigent
The continued march higher in oil prices is filtering its way down to consumers in a less-than-favorable way. By the end of the week, the average price for a regular gallon of gas was $3.65, 30 cents higher than the price one year ago. Consumers are all too familiar with the taxing effect of higher gas prices, particularly given the extreme run up early last year. Interestingly, the number of Google searches for gas prices recently overtook those for Greece, suggesting that the domestic economic situation is trumping consumers concern about an overseas shock.
2012-02-28 The Bottom Line #9 - Land of the Rising Debt-to-GDP Ratio by Paul Azeff and Kory Bobrow of Euro Pacific Capital
The way we see it, Japan has no choice but to sell more bonds to foreigners. They cant cut their debt service costs because they would then essentially be in default, and would lose access to the capital markets; they cant reduce their retirement costs, because even if they tried, the retirees would have no choice but to make up the shortfall by selling more bonds. In technical financial market terms, we call this a Catch-22.
2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
A few retailers (Abercrombie & Fitch, Nordstrom) take center stage in earnings season as investors get another glimpse into the recent holiday activity. Likewise retail sales highlights the economic calendar and offers some follow-through from the season. Fed minutes depict the mindset of the policymakers. And, of course, there will be news from Greece.
2012-02-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Europe will continue to make headlines as Greece took strides this week to achieving its bailout, but still must appease its European trading partners and the International Monetary Fund. The domestic economic calendar heats up as news from manufacturing and consumer-related releases highlight the data of the week as the month of February comes to a close (a day later than usual). The Federal Reserve publishes its Beige Book and investors can again start speculating about any future stimulus moves and the continued dissension among the policymakers.
2012-02-27 Weekly Market Commentary by Ron Brounes of Brounes & Associates
The spectre of Dow 13,000 haunted the market last week. In the midst of a political debate, a moral dilemma, and a global debt conflagration, nothing could be less significant than a numerical integer whose relevance is highly overrated. As numbers crunchers go, there are integers and there are integers. More to the point is the location of the integer and the trend within which it is contained. For example, if Dow 13,000 represents the end of a cycle, a destination, then its significance is diminished as opposed to a breakout on the way to somewhere else.
2012-02-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The stock market paused last week in its 2012 rally over concerns about what might happen in Greece. As the charts above illustrate, both the Dow Jones Industrial Average and the NASDAQ Composite fell fractionally for the week, but certainly showed underlying strength given the urge of many to take short-term gains.
2012-02-27 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Stocks moved higher last week in anticipation of a deal over Greek sovereign debt, as well as evidence the economy is not falling into a double-dip recession. As the charts above illustrate, the Dow Jones Industrial Average gained over one percent, while the NASDAQ Composite moved higher by 1.65% led by Apple, Inc.
2012-02-27 Oil Prices vs Energy Stocks by Team of Bespoke Investment Group
Earlier this week we highlighted the growing divergence between the Dow Jones Industrial Average and the Dow Transports. While it is a negative divergence on a technical basis, given the breakout in the price of oil in recent days, it is understandable that the Transports would be underperforming. While Transports are big consumers of oil and see a negative impact from higher energy prices, energy producers who sell the energy should see a positive impact, and that is what we have been seeing...to a degree.
2012-02-27 Brute Force and Two Serious Problems by Christian Thwaites of Sentinel Investments
The brute force of liquidity driven markets is waning. Earnings season draws in and there were enough negative surprises, about 30% of reporting companies, to take the edge off the rally. As of writing, we're up over 6% YTD on SPX [1] but with little decisive break out in the last three weeks. Why? Well, the culprits are: Greece: Greece has been punching well above its weight as a pain for some time. China: After a pretty awful 2011, when stocks fell 20% and remain at about half the 2007 peak, inflation, housing and net exports remain a problem.
2012-02-27 Equity Gains Likely to Continue, But at a Slower Pace by Bob Doll of BlackRock Investment Management
It was a relatively subdued week in terms of economic data, with the highlight perhaps being the weekly initial unemployment claims, which were unchanged (a stronger-than-expected result). This data helps confirm that improvements in the labor market have been gaining traction. This Friday we will see the February employment report and most economists are calling for a new jobs number of 200,000 or higher with a flat or perhaps slightly lower unemployment rate.
2012-02-25 The Emotions of Fear and Apathy Create Good Buying Opportunities by Frank Holmes of U.S. Global Investors
One of the reasons money has found its way back to the market is that low interest rates and a bubble in bonds have upped the attractiveness of equities relative to other asset classes. In fact, many large-cap equities come with a higher yield. This means that investors can wait for the growth, while receiving the income. Overall, it looks like the markets dark clouds are lifting and we could be in for a period of sunny skies in the months ahead.
2012-02-25 Tax That Other Guy by John Mauldin of Millennium Wave Advisors
Last week's letter on taxes drew more response than any letter I have written in years. Questions that were raised simply beg for an answer, and some of the replies were very thoughtful, well-written suggestions for alternatives. This week I am going to do something I can't ever remember doing, and that is to use the entire letter to involve and respond to my readers.
2012-02-24 Global Real Estate Securities - January 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data showing measured improvement, including steady employment gains. With funding costs remaining low and demand showing signs of strengthening, we believe U.S. real estate fundamentals will continue to gradually improve in 2012. Importantly, new supply remains scarce in most sectors, due in large part to banks continued reluctance to finance speculative development projects.
2012-02-24 Convertibles Market 2011 Review and 2012 Outlook by Ellen Gold and Ramez Nashed of Invesco
U.S. GDP growth slowed in 2011 as the European financial crisis, U.S. legislative gridlock, the persistently weak housing market, and sustained elevated unemployment weighed on consumer confidence and consumer spending. These factors are expected to persist and, while we are cautiously optimistic that they should improve throughout 2012, this is by no means certain and the path could be turbulent. Given this potentially volatile economic backdrop, the convertible bond sector may be considered a risk controlled avenue to gaining exposure to the equity market.
2012-02-24 Schwab Market Perspective: Two Steps Forward... by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
US stocks and economic data appear to be moving at least two steps forward for every step back, which we believe leads to a strengthening trend for bothalthough there are inevitable bumps along the way. We believe the agreement in Washington to extend the payroll tax through 2012 may be the last substantial economic-related agreement before the election, but there are major issues looming. The Fed continues to believe another round of easing may be appropriate, which we think could be dangerous and that they should be looking to move in the other direction.
2012-02-24 Investment Advice from Your Uncle Polonius by Jeremy Grantham of GMO
Believe in history. In investing Santayana is right: history repeats and repeats, and forget it at your peril. All bubbles break, all investment frenzies pass away. You absolutely must ignore the vested interests of the industry and the inevitable cheerleaders who will assure you that this time its a new high plateau or a permanently higher level of productivity. The market is gloriously inefficient and wanders far from fair price but eventually, after breaking your heart and your patience, it will go back to fair value. Your task is to survive until that happens. Heres how.
2012-02-23 Uncertainty and Change Dominate Markets by Daniel C. Chung of Fred Alger & Company
US companies are doing an admirable job in difficult times. Uncertainty is not an acceptable management strategy, so businesses are continuing to move for-ward and seek opportunities to grow, even as Washington dithers. Despite our many concerns about the state of US policy-making, we remain confident in the fundamental strength of our economic system and the vitality and creativity of corporate American its people and in its structure
2012-02-23 Emerging Markets: A 2012 Outlook by Ingrid Baker of Invesco
Emerging markets, once an asset class favored primarily by the dedicated global investor, came of age during the past decade. The Asian Crisis of the late 1990s, Russia
2012-02-23 PIMCO by Ed Devlin of PIMCO
Given the bimodal nature of the expected distribution of outcomes, it is important for investors to remain nimble so they can respond to high frequency data and global public policy developments.
We expect the Bank of Canada to remain in wait-and-see mode until it is clear which way the economy is tipping.
In our base case scenario, we estimate Canadian bond market returns in the range of 2%-4%, and if we tip into a virtuous cycle of economic recovery, we anticipate the possibility of negative absolute returns.
2012-02-22 Tick, Tock Goes the Inflation Clock by Chris Maxey of Fortigent
Despite this short-term good news, the cloud hanging over Europe promises to remain for some time. As expected, the first glimpses of fourth quarter GDP reveal a region under severe economic pressure. Growth in the European Union contracted 0.3%, the first such decline since the recession. Most member countries saw their economies shrink, including Germany (-0.2%), Italy (-0.7%), and Spain (-0.3%). On the bright side, France actually surprised consensus with a 0.2% expansion.
2012-02-22 Where Things Stand by Scott Brown of Raymond James Equity Research
The economy continues to operate far below its potential, which means that an extended period of above-trend growth is needed to mop up current slack. Real GDP growth has long trended about 3% per year. This trend is not the same a potential output. In fact, potential output should be below this trend partly due to the aging of the population. However, those arguing that the housing sector has either permanently reduced potential output or overstated potential output prior to the housing correction are off base. We have a lot of ground to make up, especially in the job market.
2012-02-21 David Rosenberg: "Searching for Certainty in a Sea of Uncertainty" by Katie Southwick (Article)
David Rosenberg is known for his bearish outlook, and he has not yet seen anything in recent economic news that persuades him to change his tune. Contrary to prevailing "bullish complacency" and the widespread belief that central banking systems "have the answers to the ongoing global debt deleveraging cycle," in the United States Rosenberg sees monumental deficits, flat growth, an underlying trend of deflation, and current fiscal policies that will limit future flexibility. In other words, trouble remains on the horizon.
2012-02-21 Gundlach: The Two Questions that Matter Most by Robert Huebscher (Article)
Two questions stand out amid the complexity of the current economic and market environment, according to Jeffrey Gundlach, both of which relate to critical elements of fiscal and monetary policy and should guide portfolio construction for investors.
2012-02-21 The Macroeconomic Backdrop Continues to Improve by Bob Doll of BlackRock Investment Management
Looking ahead, we believe the backdrop for risk assets remains a solid one. The global economy is hardly experiencing boom conditions and remains subject to the hangover effects of the financial crisis, but improvements have been real and sustainable. Interest rates around the world are low. This backdrop, combined with at-least reasonable valuations, should help equities to continue to outperform. On a near-term basis, the improvements we have seen in recent months do appear to have been absorbed by the markets, which explains the recent nearly uninterrupted move higher in stock prices.
2012-02-21 Economic Insights: Housing Reality Check by Milton Ezrati of Lord Abbett
Good news on residential real estate has prompted a kind of enthusiasm about the sector's prospects. It is good to see closure on the legal matters surrounding foreclosures and some improvement in sales and construction activity. These signs do suggest that the worst on housing has very likely passed. But too much enthusiasm is misplaced. Much will prevent housing from acting as an economic growth engine for years to come. The economy will grow, and the urgency surrounding home values and mortgages will gradually lift, but the sector at best can offer the economy little more than neutrality.
2012-02-21 Good News Cant Keep a Lid on Investor Fear by Kristina Hooper of Allianz Global Investors
The outlook for the stock market keeps getting brighter, but investors are still letting fear cloud their judgment. In the United States, the jobs picture a rather bleak scenario less than a year ago has improved substantially. The euro-zone debt crisis has also improved. We havent seen any real contagion from Greece, as evidenced by sovereign debt yields. And despite prominent investors such as Warren Buffett and Jeremy Grantham favoring stocks over bonds, a lot more money flowed into bond funds in January. This disconnect reveals a continued tug-of-war between fear and fundamentals.
2012-02-21 Stocks Rising, But Still Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors
The rise in equities so far this year is not just a sugar high. The Fed has done nothing new, while Keynesian pump-priming is on the wane. Federal spending peaked at 25.3% of GDP back in 2009. Its still way too high, but has fallen to 23.7%. Meanwhile, despite shenanigans like the temporary payroll tax cut, federal revenue has risen from 15.1% of GDP to 15.4% in the past year. Spending is down and taxes are up. Fiscal policy is contractionary. Yes, the Fed is loose and is holding interest rates down. But even if we assume normal interest rates and stable profits , stocks are very cheap.
2012-02-21 U.S. Real Estate Securities - January 2012 Review & Outlook by Team of Cohen & Steers
We are encouraged by the recent trend of U.S. economic data including steady employment gains. With funding costs likely to remain low and demand showing signs of strengthening, U.S. real estate fundamentals will continue to gradually improve. New supply remains scarce in most sectors, due in large part to banks continued reluctance to finance speculative development projects.The positive trajectory, however, is not without potential dangers. Economic growth remains at risk to global macro concerns, and our global investment team continues to closely monitor developments in Europe and China.
2012-02-18 The Enduring Popularity of Gold by Frank Holmes of U.S. Global Investors
For thousands of years, pharaohs, explorers, rulers and investors have been attracted to gold, as the precious metal has been a vital tool in building and protecting wealth. While gold naysayers focus on the day-to-day fluctuations in price, I believe gold equities and bullion will continue to enjoy maximum popularity, as the Oracle of Omaha puts it, for years to come. The allure of goldwhether it is from Fear or Lovecannot be underestimated.
2012-02-18 Danger: Caution Ahead by Bob Rodriguez of First Pacific Advisors
I know many of you would like more actionable ideas but principal protection is uppermost in my mind. Patience is required now. Many investors underestimate the potential risks and disruptiveness from high global financial leverage. We are in phase 2 of a continuing and expanding economic and financial market instability. Flexibility, high liquidity, and concentrated asset deployment, when appropriate, will be key elements in attaining superior investment performance. The era of being fully invested and adjusting portfolio weights relative to an index has been over for more than a decade.
2012-02-17 Economic Insights: Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Europe seemingly creates new financial and economic concerns daily, while in the United States, fiscal questions and election uncertainties trouble the outlook. Still more dangerous issues surround the military and diplomatic maneuvering in the Persian Gulf. And these are just a sample of the sources of investment concern. But even as all this prompts people to hide in cash and the usual safe havens, such as U.S. Treasury bonds, these investment choices pay such poor yields that presumed safety comes at tremendous cost. Investors, then, must consider riskier investments.
2012-02-16 American Housing: Falling Prices, But Rising Value by John Gilbert of GR-NEAM
American house prices are approaching a bottom.In certain cases, they are already there. For the better part of the last years we have watched the improving economics of rental cash flow with interest, as monthly rents have risen rapidly while purchase prices have languished. The Fed issued a paper in early January reviewing conditions in the U.S. housing market for the purpose of imploring Congress to make structural changes that would remove barriers to a more rapid recovery.For the Feds pump priming to work, the pump must be capable of functioning properly, they said essentially.
2012-02-16 Mega Caps: Where the Profits Are by Russ Koesterich of iShares Blog
Despite mega caps recent outperformance, the stocks remain cheap on both a relative and absolute basis. Heres more evidence to add to the case for mega caps. The current discount on mega-cap stocks is particularly hard to justify given that these large companies continue to be extremely profitable despite todays tepid economic environment. In fact, the return on equity (ROE) for the S&P 100 index is slightly below 29%, the highest level since 2000 and well above the long-term average of 23%.
2012-02-15 When Capital Shrugged by David Baccile of Sextant Investment Advisors
if I were given a time horizon of 10 years or more and had only two options, own 100% bonds or 100% stocks, I would choose stocks. But we are not limited to those two choices. The current fragility of the global economic and financial environments will surely create opportunities for investors to shift funds between asset classes in a way that should substantially improve their risk-adjusted rates of return over the next ~10 years. With equities, individual stock selection also provides investors with real possibilities to earn an acceptable rate of return now.
2012-02-15 Stay Frosty by Liam Molloy and Bethany Carlson of Galway Investment Strategy
The Roubiniesque blues felt globally due to a lack of confidence is not isolated to just the marginally attached and does have merit. As the economy restructured manufacturing workers in the 1980s only had a 65% reemployment rate. We feel the past few years have marked another restructuring in US the economy. Again it will likely mean unemployment will remain high as many workers may not make the transition. This time around the reemployment rate for housing related jobs and financial services will likely remain very subdued.
2012-02-15 Double Recovery? by Neil Hennessy of Hennessy Funds
The past three years have certainly had their low points, but they have also seen a number of amazing high points, and I believe those highs have been adding up to a true recovery in the financial markets. Since the market lows of March 2009 the markets have rallied back, with the Dow Jones Industrial Average returning over 110% (through February 6th). I am not an analyst or an economist, I am an economic realist. Using common sense as my guide I continue to see signs of recovery.
2012-02-14 A Dejected Asset Class Finds Its Way in 2012 by Chris Maxey of Fortigent
Investor interest is acutely focused on the developed world, specifically Europe and the US. All the while, developing countries continue to be better positioned fiscally, with lower debt and better long-term growth prospects. Despite the outlook, stock markets in emerging markets are largely at the mercy of their counterparts in Europe and the US, suffering in lockstep as opposed to embracing the decoupling phase that was supposed to have begun in 2007. According to the IMF, emerging and developing economies grew 6.2% in 2011, compared to a 1.6% growth rate in advanced economies.
2012-02-14 What a Difference 3 Years Make by Kristina Hooper of Allianz Global Investors
Three years removed from the Styxian depths of the financial crisis, investors are now in much better shape. Back in 1980, when Ronald Reagan was running for president, he struck a chord with the voting populace by asking the seminal question, Are you better off now than you were four years ago? Much of the electorate ran through a mental checklist and decided that they were worse off. As a result, voters pulled the proverbial ripcord, ousted the incumbent and Reagan was elected our 40th president. Investors should be asking themselves a similar question today.
2012-02-14 Supply, Demand, and Valentines Day by Dan Ariely of Predictably Irrational
Want to know how to ensure your wife or girlfriends satisfaction with her Valentines Day present? Over breakfast, casually mention that recent census data shows women outnumber men in your area, and that men are apparently a scarce commodity. Why would this matter? Well, according to a recent study, perceived gender ratio affects economic behavior in both men and women. So for those of you who are single and looking to find a match, heres a little help from the US Census Bureau. Ladies, youll want to try your luck in the blue areas; guys, your best bet is in the red.
2012-02-13 Be Confident in the Recovery by Brian S. Wesbury and Robert Stein of First Trust Advisors
Two prominent measures of consumer confidence dropped unexpectedly in recent weeks. This provided plenty of fodder to those who still think the US economy is teetering on the brink of a long awaited double-dip. But when it comes to the consumer confidence data, the only thing were confident about is that confidence doesnt matter. Not one bit.
2012-02-13 The 'Risk On' Trade Remains the Right Call by Bob Doll of Blackrock Investment Management
The risk on trade is the right one in the long term given that the worlds major economies are healing and that debt problems are slowly improving. These processes will not occur in a straight line and we will see setbacks along the way. The rise in risk asset prices, however, has been in a more-or-less straight line, with US stocks rising close to 25% over the past four months. As a result, at some point we will almost certainly see at least a pause in the upward move as markets experience some sort of consolidation or corrective action.
2012-02-13 Around the World of Investing Opportunity by Milton Ezrati of Lord Abbett
Among those choices, credit-sensitive fixed-income instruments would seem to offer superior returns with reasonable security. Opportunities also present themselves in the equity markets. In the developed markets, North America seems to offer the best risk/reward balance. Though stock valuations are better in Europe and Japan, the former still needs to deal with its debt crisis and the likelihood of recession, while the latter faces the very fundamental matter of severely aging demographics as well as the immediate adverse impact of an expensive currency.
2012-02-11 The Answer We Dont Want to Know by John Mauldin of Millennium Wave Advisors
This election is ultimately about dealing (or not dealing) with the deficit, and putting the country on a path to a sustainable budget deficit, one that is less than the growth rate of the country. As I have argued elsewhere, and will argue in future letters, that is the paramount issue. Not dealing with the deficit runs the very real risk of the bond market treating us just as it is treating Italy and any other country that gets to the point where its debt is unsustainable.
2012-02-10 Inflation Outlook 2012: Benign, But Watch the Tails by Mihir P. Worah and Nicholas J. Johnson of PIMCO
Headline inflation, as measured by the Consumer Price Index (CPI) in the U.S., ran at 3.0% in 2011, up from 1.5% for 2010.
Our base case is for inflation to moderate this year, heading to slightly below 2%. Longer term our bias is toward higher inflation, and we feel any deflationary episode is likely to be short-lived.
Faced with this possibility of higher inflation, many investors may need to examine their allocations to assets associated with real return potential, including Treasury Inflation-Protected Securities (TIPS), real estate, commodities and equities.
2012-02-10 Bikes to Beemers and Bimmers by Satya Patel of Matthews Asia
A shift to redividing the pie in favor of the masses could further fuel Chinas domestic consumption and contribute to its rising middle class. Changes that enable Chinas bicycle owners to trade up, swapping their bikes for motorbikes and then motorbikes for luxury cars would likely help temper unrest and foster greater growth in Chinas economy.
2012-02-10 Missed Opportunities? by Liz Ann Sonders, Brad Sorensen and Michelle Gibley of Charles Schwab
Investors eased back into stocks to start the year. This is the start of a sustainable trend, but equities rarely go up in a straight line and near-term caution may be warranted. Another deadline is approaching for Congress and the President to make a deal. Something will get done, but any hopes for substantial action remain dim. Markets appear to be more comfortable with the European debt crisis and the risks associated with it. Central banks around the world are easing, which could help support international stocks in the coming months.
2012-02-10 Theres Value in Russias Future by Frank Holmes of U.S. Global Investors
Increasingly, Russian companies have begun paying dividends, with some companies paying as much as a 10% annual dividend. As interest rates around the world will remain low or even negative for years to come, dividends offer investors the opportunity to earn income with the potential of appreciation. Although political risks remain, we believe Russia continues to be a hotbed of opportunity for emerging market investors.
2012-02-09 Innovation Suggests Vibrant Future for Tech Sector Innovation Innovation by Walter Price of Allianz Global Investors
We are relatively positive on technology in 2012 for a variety of reasons. In mid-2011, large-cap tech companies valuations began to stabilizemany at record lows. A number of tech companies have also built stable businesses since the early-2000 tech decline, and more have started paying dividends. Moreover, tech companies generally do well in slow-growth periods because they offer cost savings, and particularly innovative companies can get very good traction in this environment. Indeed, Facebook's IPO is likely to usher in a new era of online advertising.
2012-02-09 Syria, Assad and the Arab Spring by Doug Short of Advisor Perspectives (dshort.com)
Last October I posted a commentary, Libya, Ghaddafi and the Arab Spring, shortly after Ghaddafi's death at the hands of the Libyan National Liberation Army. It was the third major Arab regime to be overthrown in 2011. Since that time Ali Abdullah Saleh has resigned the presidency of Yemen, which remains in a state of turmoil. And the media spotlight is currently on the escalating conflict in Syria.
2012-02-09 Q411 Portfolio Commentary by Jay Compson of Absolute Investment Advisers
We continue to stress that investors remain patient. Given that we are likely in the 1% of money managers that look beyond the next 30 days, it is inevitable that the markets will move counter to our positioning. This is to be expected and is consistent with the Fund's historical performance.We continue to remain disciplined and receive counsel from the investing bible: Graham and Dodd's Security Analysis. For those few true value investors left, it's worth noting that nowhere is the phrase "margin of safety" defined by quantitative easing, government stimulus, or bank bailouts.
2012-02-07 Despite Naysayers, The Recovery Is Real by Brian S. Wesbury and Robert Stein of Euro Pacific Capital
The US economy is far from perfect. Economic growth has been positive, but mediocre over the past year and a half. The unemployment rate, at 8.3%, is still elevated, higher than it ever was from 1984 through 2008. When it comes to bashing government policies, from either party, we do not take a back seat to anyone. What we cant do, because it makes no sense, is allow our dislike of current government policy to influence our view of the actual economic data. There really is a recovery underway. If it quacks like a duckit must be a duck.
2012-02-07 Inflection Point: The Start of a New Cycle in Real Estate? by Joel Beam, Ian Goltra, and Michael McGowan of Forward Management
Commercial real estate markets appear to be entering an extended cycle of recovery. The recovery is expected to play out unevenly across U.S. and international markets, with the first wave focused on knowledge-based, gateway cities and technology corridors. Commercial real estate is currently inexpensive by historical standards. Unlike residential markets, commercial real estate markets appear healthy, with rising liquidity and transaction levels.
Institutional and private-equity funds are ratcheting up their real estate commitments, seeking 6.5%-8% returns in line with historical averages.
2012-02-07 Corporate Earnings Hit a Rough Patch by Chris Maxey of Fortigent
The week started slow, however, with a mixed personal income and outlays report from the Bureau of Economic Analysis. While consumer spending was flat in December, incomes grew 0.5% above expectations and the biggest gain since March. The lack of spending growth is concerning, but somewhat expected given stagnating wage growth. Spending to this point has largely been financed through savings, making Decembers income boost a much welcome improvement for consumers.
2012-02-06 Obama Re-Election Odds Versus the Stock Market by Team of Bespoke Investment Group
Obama's odds to win re-election onIntrade.comhave been steadily rising since hitting their lows in the mid-40s last September. Last week alone, the odds rose from 54% to 56.6%. We've overlaid the historical Intrade.com odds for Obama to win re-election on a chart of the S&P 500 going back to 2010. As shown, the lows in Obama's re-election odds came at the exact same time that the stock market made its low last year. Rest assured that the Obama team is watching the stock market just as closely as any poll out there as the 2012 election looms.
2012-02-06 The Coulds Are Parting by Charles Lieberman of Advisors Capital Management
It is fast becoming hard to dispute that an increasingly solid economic expansion is underway and that hiring is accelerating. The healthier economy has dispelled fears of recession and the stock market has been advancing at a strong clip, almost 16%, since the interim low at the end of November. With slow progress being made in Europe to contain the debt crisis, there should be fewer depressants holding back stocks and, with valuations still low, despite this sharp recent rally, there is still plenty of upside for long term investors.
2012-02-06 Markets Continue Their Winning Ways by Bob Doll of BlackRock Investment Management
Notwithstanding the strong performance of the last month, we believe markets are still pricing in a more negative economic backdrop than what we are predicting. Investor confidence remains low and many are still sitting on large amounts of cash. It is important to remember that stock prices have not completely recovered from the significant drawdown that occurred in the summer of 2011, suggesting that markets have further room to run.
We are not expecting to see uninterrupted smooth sailing from here, but we do believe that the trends for stocks are pointing in the right direction.
2012-02-04 Who Took My Easy Button? by John Mauldin of Millennium Wave Advisors
There is no way enough money can be found to fund our entitlement programs, given the current system, even under the best of assumptions. Things must change. Either we will make the difficult choices or those changes will be forced by the market. The longer we put off the difficult choices, the more painful the consequences. This week we begin a series on the choices facing the US. We need to understand the consequences of the choices we make. Cut spending, say some. Tax the rich, say others. Cut out waste and corruption is always a popular choice. Do all of the above, intone others.
2012-02-03 Sentinel's Top 10 Predictions For 2012 by Christian W. Thwaites of Sentinel Investments
i) the US is emerging stronger from this recovery than any other major economy ii) Europes woes are temporarily eased and iii) China is past the worst of its inflation scares. If that sounds muted, it is. The damage done to the economies through irresponsible lending and uncontrolled asset price inflation (the US) or unencumbered vendor financing and overvalued exchange rates (EU) was immense. Both meant huge banking messes. And households are the only ones who clean up banking messes. In time. Slowly. And thats where the world stands.
2012-02-03 The U.S. Economy Marches On To An Unsteady Beat by Team of BondWave Advisors
Despite the misgivings by the Fed about the recovery, and with much of Europe teetering on recession, domestic economic data continues to suggest moderate expansion in both output and employment. We discuss this situation along with the positive performance of the Treasury, Corporate and Municipal bond markets.
2012-02-03 Thunderstorm First, Then Rising Pressure by John Gilbert of GR-NEAM
The developed world is riskier than it was, and should be valued accordingly. That is a dour conclusion, but avoiding it does not mean that one can outrun it. Perceptions of what makes risky assets attractively valued need to be adjusted for the context. Valuation levels that were attractive when the world was less indebted are attractive only at lower levels since valuations have not yet anticipated eventual inflation. Those that will do the best are those that benefit from inflation and the negative real interest rates that result, since ultimately that is the choice governments will make
2012-02-03 American Creativity by Doug MacKay and Bill Hoover of Broadleaf Partners
We remain bullish on the stock market. In an environment of low or non-existent bond yields, stocks may not only represent a compelling alternative source of income, but likely have a far better risk reward profile when it comes to upside return potential. After more than a decade of being the cellar dweller of annual asset class returns, domestic common stocks may finally be due for some positive mean reversion. This doesnt mean were headed back to an era of multi-year, double digit returns but, that given a choice among alternatives, stocks should prove to be the best game in town.
2012-02-03 The Unlikely Bull Market by Niels C. Jensen of Absolute Return Partners
Europe is going from crisis to crisis at the same time as stock markets climb higher. Meanwhile, investors are left confused. The key to understanding the apparent disconnect between stock market behavior and economic fundamentals is the aggressive policy being pursued by the ECB which has eased credit conditions in the crisis-stricken European banking industry. With more QE from the ECB in the pipeline, we expect equity prices to benefit.
2012-02-03 Still Losing the War on Unemployment by Mohamed A. El-Erian of PIMCO
The first Friday of every month, you will find me among those eagerly waiting for the release of the latest government data on jobs. Such eagerness, however, should not be confused with joyfulness. While the numbers have markedly improved over the past year, too much of the commentary has been overly partial and, sometimes, dangerously misleading a situation that is likely to grow worse in the run-up to the November elections.
2012-02-03 Drudge, Tyler Durden and Economic Ignorance by Brian S. Wesbury of First Trust Advisors
There is a group of influential people (meaning that they get lots of hits on their blogs or websites) who may be articulate and have an ax to grind, but at the same time know little about economics, mathematics and data. A classic example is the Drudge Report link today to a headline and blog post by Tyler Durden that says, Record, 1.2 million people fall out of labor force in one month
2012-02-02 Knowledge is the Antidote to Fear by Team of Sloan Wealth Management
We feel investors should focus on the high probability that this could be a rewarding decade. The volatility of the market can often mask the improving fundamentals. Now two years into the decade, we are pleased that the SWM Moderate Risk Composite is up 14%. This election year will create endless entertainment, needed discussion on the future of our great nation and finally clarity for corporations and individuals. This clarity should allow corporations to loosen their purse strings and continue to fuel growth.
2012-02-02 Royce Looks Back at 2011, a Year of Correlation, Capitulation, and Consternation by Team of The Royce Funds
Twenty-eleven saw disasters both natural and human. There were threats of European default, failures of political leadership, worries over recession, and the ever-present specter of staggering debt. All of these events contributed to one of the wildest years for stocks in recent memory. It seems likely that 2011 will be remembered not for the severity of its losses, which weren't nearly as bad as one might think, but for its daily drama of extreme volatility.
2012-02-02 2011: The US Year by Richard Bernstein of Richard Bernstein Advisors
The market generally proves the consensus wrong, and 2011 certainly adhered to that historical precedent because the consensus "must owns" at the beginning of 2011 generally underperformed during the year. What is somewhat startling to us, however, is that conviction has yet to be shaken. The consensus continues to favor commodities, emerging markets, and "any-bond-but-treasuries".
2012-02-01 Year-End Commentary by Steven Romick of First Pacific Advisors
We find investing especially challenging todaynot that its ever been easy. We feel like we are forced to bet on policy, and how does one do that? Particularly when we believe we are betting that too many of the wrong people will make the right decisions. We feel a little like explorers, blazing new trails, learning about the new world weve come upon, charting a different path with new information, all while trying to avoid being scalped. We continue to seek the best path, even if its new, to both protect your capital (first) and to provide a return on it (second).
2012-02-01 Investment Management in the Age of Austerity by Douglas Hodge of PIMCO
The broader financial industry is in a state of contraction, and the primary drivers of investment management revenue have become less reliable.
Higher volatility and lower returns have fundamentally changed the relationship between investors and the managers to whom they entrust their wealth. We are all being held to a higher standard.
We believe those investment management firms that can adapt and absorb these profound changes will come out ahead and will be best prepared to deliver value to their clients.
2012-01-31 Bob Doll Believes the Recent Equities Rally Could Continue by BlackRock (Article)
Conditions have improved compared to last quarter, with the US economy showing signs of acceleration and European policymakers moving further along the path of progress. With the bearish tone receding, investors should consider moving into "risk" assets and out of "safe" assets, especially on pullbacks.
2012-01-31 Barry Eichengreen on the End of the Dollar - Video by Dan Richards (Article)
Barry Eichengreen is a professor of economics and political science at the University of California, Berkeley and a former senior advisor to the International Monetary Fund. In this interview, he discusses the future of the dollar as the reserve currency and the role of the IMF in the Eurozone crisis. This is the video of the interview.
2012-01-31 America's Economic Engine Still Healing by Chris Maxey of Fortigent
A thin week of economic data and renewed focus on the European sovereign debt crisis may have prompted profit taking by some investors. Arguably, the biggest development last week was the Federal Open Market Committees (FOMC) press release on Wednesday. For the first time, the central banks decision makers released forecasts for the federal funds rate and the timing for the first rate increase. In that release, the FOMC unexpectedly announced that it expected to hold rates near zero until at least late 2014. This far exceeded previously stated expectations of a mid-2013 rate hike.
2012-01-31 Fed Forecasts Depend on Data by Brian S. Wesbury and Robert Stein of First Trust Advisors
Last summer, the Fed promised to hold rates down through mid-2013. Headlines from last week suggest that the Fed now thinks 2014. But, how committed is the Fed to this strategy? What will it take to change course? Some analysts argue that this is an ironclad commitment and there will be no course changes. We believe this is a misreading of the Feds intentions. There are 19 potential economic views that are important at the Federal Reserve 7 are on the Board of Governors and 12 are Presidents of regional banks. There is more disagreement at the Fed than meets the eye.
2012-01-31 Do Unresolved 2011 Economic Ailments Portend a Similar 2012? by Team of Managers Investment Group
Now updated through 4Q. This compendium provides an historical perspective of economic data compared to today's results, and provides comments on any developing trends. We also include a synopsis of financial markets results. The OTOTM Chart Book is designed with easy-to-read graphics to tell a story and help you visualize the changes taking place in today's economy.
2012-01-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
All eyes will be on the Fed as investors hope to take the newfound insight from its meeting and translate that into profitable trading opportunities (is that the intent of the new strategy?). The ever-changing mindset of the consumer is again on display as McDonalds (1/24), Starbucks (1/26), and Procter & Gamble (1/27) headline the earnings season. Looking at the economic data, analysts get their first look at 4th quarter GDP and gain greater insight on the impact of those Thai floods and the success of the holiday season. And then theres Europeis Greece really back in the headlines?
2012-01-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As January goes, so goes the market for the year. Can we keep these gains for two more days? A few key bellwethers post earningsExxon Mobil looks to set new records; Amazon shows the effects of the holiday season; and UPS provides new signs about the strength of the overall economy. Labor and manufacturing highlight a very busy week on the economic calendar as investors hope to see continued positive trends from the ISM (manu), nonfarm payroll, and the unemployment rate. And, of course, Europe is never too far from the weekly headlines. (The more things change) Go Giants (a week early).
2012-01-30 Warning: Goat Rodeo by John P. Hussman of Hussman Funds
We're observing an "exhaustion" syndrome that has typically been followed by market losses on the order of 25% over the following 6-7 month period (not a typo). Worse, this is coupled with evidence from leading economic measures that continue to be associated with a very high risk of oncoming recession in the U.S. - despite a modest firming in various lagging and coincident economic indicators, at still-tepid levels. Compound this with unresolved credit strains and an effectively insolvent banking system in Europe, and we face a likely outcome aptly described as a Goat Rodeo.
2012-01-30 Weekly Market Commentary by Scotty George of du Pasquier Asset Management
Time is a luxury many investors seem not willing to indulge. A stop/start economy, seemingly moving valuations laterally, has them on the edge of their seat, hoping that something exciting happens to their net worth. Ominously, however, the recently completed holiday season comes replete with its own set of hangovers. Some economists now worry that households took on too much debt, and might cause spending in the ensuing months to contract. More foreboding is that banks and brokerages are reporting that some cash for our holiday expenditures was withdrawn from retirement fund accounts.
2012-01-30 Tide Turns for Structured Credit by Joshua Anderson and Carrie Peterson of PIMCO
Many investors remain skeptical, but the market environment for structured products has changed markedly since the financial crisis of 2008.
Current pricing now reflects a more realistic view of the underlying fundamentals, including weakness in the global economy and U.S. housing market.
We believe now is the time to consider entering the structured credit market.
2012-01-30 Don't Fight The Fed, Part Three by Charles Lieberman of Advisors Capital Management
Growth is improving slowly, but insufficiently to satisfy the Fed. So Fed officials are reviewing new initiatives to promote growth, including buying mortgages in the market. The Fed's latest press release suggests that policy may remain unchanged for even longer than suggested earlier. But the Fed's willingness to remain so staunchly committed to growth remains "data dependent", as any significant increase in GDP growth could cause the Fed to backtrack. At the end of the day, the Fed is committed to an outcome, not to the calendar. And right now, it is committed to growth.
2012-01-28 The Transparency Trap by John Mauldin of Millennium Wave Advisors
We look at the shift in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, theres even a tidbit on Greece. Unemployment will be higher than we are comfortable with; it is just a product of the current environment and simple math. The US economy is in a Muddle Through range of around 2%. If not for a potential shock coming from a serious European crisis and real recession, the US should not slip into outright recession this year.
2012-01-27 Global Real Estate Securities Investment Commentary - Full Year 2011 by Team of Cohen & Steers
Our macro outlook has turned more positive given the global shift toward monetary easing as well as U.S. economic data confirming steadily improving growth. However, we expect the fiscal crisis plaguing Europe to remain an overhang, as the region is likely heading into recession, making a long-term resolution increasingly difficult. Despite these challenges, we believe fundamentals for global real estate securities will continue to improve broadly, with the lack of new supply coupling with growing demand and effective expense reduction to generate meaningful cash flow growth.
2012-01-27 International Real Estate Investment Commentary - Full Year 2011 by Team of Cohen & Steers
We remain materially underweight Europe and Japan, and overweight Asia Pacific (ex-Japan). We have selective allocations to well-established companies in emerging markets whose business models are positioned to benefit from secular growth in consumer spending among emerging middle classes. We are overweight high-quality retail and offices in major city centers globally, where tenant demand has been more resilient and supply more constrained. Finally, we have allocations in property sectors and geographies where stronger cyclical recovery is emerging as a driver of outsized cash flow growth.
2012-01-27 LCV Web Commentary - December 2011 by Team of Cohen & Steers
We continue to believe that the crisis in Europe is far from over; that the improving U.S. economic data, while encouraging, signal something well short of a robust recovery; and consequently, that the first half of 2012 remains highly uncertain. For these reasons, we still expect (1) more intervention by politicians and central bankers, (2) continued historically low interest rates in the US, (3) modestly positive U.S. economic data, (4) high but slowing growth in China and emerging markets, (5) short-term measures to address Europes long-term debt crisis.. and others.
2012-01-27 Waist Deep in the Big Muddy by Peter Schiff of Euro Pacific Capital
As long as interest rates remain far below the rate of inflation, the U.S. economy will fail to equitably restructure itself for a lasting recovery. As a secondary effect, U.S. savers will likely continue to suffer from a lack of yield and a weakening currency. In the end, the collapse of the U.S. economy will be that much more spectacular due to the great lengths we have gone to postpone it.
2012-01-27 Slow Road to 'Normal?' by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Market volatility has fallen and tight correlations have loosened, indicating to us some calming of fears and increased attention on more traditional economic and earnings-related news. This is a good sign for stocks in the foreseeable future. The Fed unveiled its new communication strategy after its most recent meeting, reiterating that interest rates will likely remain extremely low for some time. The European picture is brightening slightly and there may be a glimmer of hope for stock market investors. After a soft patch, global growth may be turning around.
2012-01-27 Heart of China Bull Beats Strong by Frank Holmes of U.S. Global Investors
With rising incomes and increasing urbanization, we believe China is pursuing the American Dream, and the government has shown great determination to build the necessary infrastructure along with a robust urban labor market. On a purchasing power parity basis, Chinas share of world GDP has risen significantly, from around 3 percent in 1985 to a current world share of nearly 16 percent.
2012-01-26 Journey to the Center of the (Fed's) Mind by Liz Ann Sonders of Charles Schwab
The Federal Reserve opted to keep short-term interest rates on the floor and extended the period of time during which rates are likely to remain near zero.
Newly published forecasts show slightly better growth, a bit less inflation and a lower unemployment rate.
Fed Chairman Ben Bernanke got hit with a lot of questions about the risks of extending zero-rate policy for 2 more years.
2012-01-26 Is There Value in U.S. Equities? by Team of Emerald Asset Advisors
The importance of asset allocation and timing was again evident last year. After rallying earlier in the year, stocks took investors on a gut-wrenching ride over the summer before rallying again in the fall. And for all of the twists and turns, in the end the S&P 500 essentially ended the year where it began. But that's history. What do we expect looking ahead? As we examine today's investment landscape, we believe opportunities can be found in U.S. stocks, particularly large-cap stocks. There are several trends in place that support our view.
2012-01-25 Rise of the Dragon by Mark Mobius of Franklin Templeton
With the debt situation in Europe continuing to further unravel and dim economic prospects in the U.S., many have come to believe that the star of the dragon descendants has the potential to rise even further in the coming years. Chinas GDP growth is expected to moderate to around 8.2% in 2012, which is high compared to developed economies. In this highly connected world, China is unlikely to be immune to the global slowdown, but I believe the Chinese government will utilize their substantial reserves and banking system to stimulate the domestic economy, as they did in 2009.
2012-01-25 Emerging Markets Real Estate Investment Commentary Full Year 2011 by Team of Cohen & Steers
Over the long term, we believe emerging market real estate securities are well positioned to benefit from secular trends such as expanding urban centers and the rise of the consumer class. In the near term, however, we expect volatility to continue as markets grapple with uncertainty about Europe and further deceleration in economic growth. In this challenging market environment, we continue to favor commercial landlords over developers.
2012-01-24 Michael Lewis on the True Depth of the Crisis in Europe by Larry Siegel (Article)
Michael Lewis is a financial writer and author, most recently of Boomerang: Travels in the New Third World, in which he reported on the European debt crisis from several of the affected countries. In this interview, he discusses a range of topics, including the future of Wall Street and the challenges of great financial writing.
2012-01-24 Beyond Reinhart and Rogoff by Robert Huebscher (Article)
My article two weeks ago, The Misreading of Reinhart and Rogoff, elicited a number of challenges, both from those who argued that excessive debt imperils our economic growth and from those who claimed that my proposed solution was unworkable. Among those challengers was Lacy Hunt, who raised several valid concerns. I will explain why I disagree with Hunt and others, and why the dollar's position as the reserve currency increases our borrowing capacity. But our ability to borrow cannot be a license to spend unwisely, and I will conclude by expanding on the policy choices the US must pursue.
2012-01-24 Dale Mortensen on Addressing Unemployment by Dan Richards (Article)
Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the transcript.
2012-01-24 New Tools to Help Clients with Retirement Decisions by Joe Tomlinson (Article)
Our clients face a range of financial planning issues, and the arrival of retirement typically involves making numerous decisions. Here is a set of tools that provide useful information to professionals who work with clients on the verge of retirement - especially financial advisors, accountants and lawyers.
2012-01-24 The Libertarian and the Lobbyists by Simon Johnson of Project Syndicate
Among the Republican candidates still vying to challenge Barack Obama in Novembers US presidential election, Ron Paul stands out for arguing consistently that government is the problem, not the answer, with regard to banking. But the real problem with financial regulation, a new study shows, is lobbying.
2012-01-24 Risk Off, Risk On...? by Chris Maxey of Fortigent
Since the start of 2012, global risk markets have all but ignored the overhang of pessimism that frustrated the markets in 2011. For the most part, equity indices already surpassed their gains for all of last year. While such gains may ultimately prove sustainable, there remains a modicum of uncertainty that could rear its head quite suddenly, and quite viciously. In the meantime, an assessment of the investment landscape shows investors may have a legitimate reason for bullishness in the short term.
2012-01-24 The Plain Facts by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe that, while Europe will suffer a recession in 2012 on its painful path to recovery, with or without Greece, the U.S. and Canada will likely see accelerating growth this year, as will China, India and Latin America. In fact, global growth should be above 3%, supported by record high total household wealth in the world, which has doubled since 2000. China and India provide half of the worlds economic growth. And manufacturing in India and China grew in December and should continue to do so from renewed government stimulation.
2012-01-23 The Path of Least Resistance Is Up by Charles Lieberman of Advisors Capital Management
There is so much skepticism with respect to stocks that most everyone who might be scared out of the market has already exited. Investors fear a credit meltdown in Europe following a Greek default. They also fear a weakening domestic economy. As a result, stock prices are depressed, despite solid earnings growth and a healthy corporate sector. If investor's fears are not fulfilled, stocks should move higher.
2012-01-23 Debt and Deleveraging: A Five-Pronged Solution by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Citing the latest report on "Debt and Deleveraging" by the McKinsey Global Institute, Ambrose Evans-Pritchard proclaims a light at the end of the tunnel and that America overcomes the debt crisis as Britain sinks deeper into the swamp. However, there is a big difference between alleged "light at the end of the tunnel" and "America Overcomes Debt Crisis" as Pritchard claims. US consumers may be one-third of the way through, but US debt-to-GDP ratios are low only because unsustainable government spending has taken up the slack.
2012-01-23 Obama and The Market: The First Three Years by Team of Bespoke Investment Group
While his critics argue that Obama is one of the most anti-business Presidents in US history, a look at the equity market's performance since Obama was inaugurated shows a different picture. The chart below shows the performance of the DJIA during the first three years of each US President since 1900. As of last Friday, the DJIA has now risen 60% under President Obama, making him one of only five Presidents to see the Dow gain 50% or more in their first three years in office! After last Friday's rally, Obama moved narrowly ahead of Clinton.
2012-01-23 Focus Shifts from Fear to Fundamentals by Kristina Hooper of Allianz Global Investors
Kristina Hooper, head of portfolio strategies, highlights last week's rally in stocks as a launching point for investors to overcome anxiety and regain focus on valuations, corporate earnings and improving macroeconomic conditions.
2012-01-23 Animate and Repress by Christian W. Thwaites of Sentinel Investments
Europe is in a state of suspended animation, neither moving nor acting on policy. After weeks of spurious deadlines, the markets settled into quiet acceptance that Greece is a hopeless case but that, for now, imminent collapse is not in the cards. Some of the best performing bond markets this week have been the worst of the worst...Ireland, Italy and Greece long bonds are up over 5%. It's not all good. Greek CDS have virtually ceased to exist and notional amounts on the peripherals have shrunk. No one wants to stand behind a restructuring, posing as PSI haircut, masquerading as default.
2012-01-23 Rally Not Built on Complacency by Brian S. Wesbury and Robert Stein of First Trust Advisors
No matter how we make our argument, and no matter how consistently the economy grows, the doubt and fear and disbelief just wont go away. We noticed this recently, when conventional wisdom started to say that investors were being complacent these days. In other words, when the equity markets go down, investors are living in reality and accepting that the economy and financial markets just arent in great shape. But when the equity markets go up, they are being schizophrenic, overly optimistic, and now some are saying complacent.
2012-01-20 The Great Urban Migration of China by Frank Holmes of U.S. Global Investors
If China follows this path, another 30 percent of the population is expected to move to the cities by the year 2030 less than 20 years from now, says BCA. This movement means there will be more than a half-billion city dwellers in the next 20 years or about 200 million new urban households. I believe this urbanization trend just hit the pivotal moment that dramatically shifts certain buying patterns into a higher gear, driving an enormous demand for housing, consumer staples and durable goods.
2012-01-20 Equity Investment Outlook by John Osterweis and Matt Berler of Osterweis Capital Management
We believe that 2011 was an aberration in terms of stock market correlations and that gradually stocks will once again perform based more on their individual results and outlooks and less on the markets en masse risk on, risk off vacillations. Despite our near-term caution, which reflects a very uncertain economic and political climate, we are increasingly convinced that equities are poised for solid longer-term returns. Over the past ten years, stocks generally underperformed bonds. This is highly unusual. Stocks are now reasonably priced and profits are expected to expand.
2012-01-20 On Mexicos Homes by Kate Jaquet of Seafarer Capital
Mexicos macroeconomic backdrop has been surprisingly benign for more than a decade now. The country has experienced stable growth, low unemployment, low levels of government debt and it has managed inflation relatively well, as evidenced in the table nearby. The country also enjoys very capable policy management, a burgeoning middle class, stable mortgage markets, strong housing demand and a wide field of homebuilders to cater to that demand. No one knows whether or when the violence in Mexico might end, but behind the headlines, the housing market gives hope that a stable future lies ahead.
2012-01-20 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
The first full week of trading in the New Year was uneventful but positive as the market awaits corporate earnings and next weeks Federal Reserve Board Meeting. As the charts above illustrate, the Dow Jones Industrial Average extended its gains for the year by an additional half of one percent last week, while the NASDAQ Composite jumped nearly 1.4% on excitement in many of the technology shares.
2012-01-20 And That's The Week That Was by Ron Brounes of Brounes & Associates
So will Frances borrowing costs start tumbling now that the S&P has cut its rating below AAA? Illogically, thats what happened in the US. Now that the news is finally out in the open, investors can go back to monitoring Greece as it hopes to finally make a debt restructuring deal with private creditors. What say you, Germany? Earnings season moves forward and the banks look to reverse the pessimism initiated from JP Morgans disappointing report. Intel pushes some of the earnings attention over to the tech world and GE provides profit news from one of the nations key economic bellwethers.
2012-01-20 The Deleveraging Myth Part 2: Behind Consumer Deleveraging by Russ Koesterich of iShares Blog
The rise in transfer payments can, and probably should, continue in the near term as wage growth is still anemic. However, if previous credit bubbles are any guide, it will take a long time for the labor market to rebound, meaning the consumer is likely to remain dependent on help from the government in the long term. While this will allow consumer deleveraging to continue, it comes at the expense of more government debt and a net effect of more US non-financial debt.
2012-01-20 It May Take a Dragon to Breathe Fire into Markets by Frank Holmes of U.S. Global Investors
Ive found many people are particularly energized about predicting a hard landing for Chinas economy, but I believe the country is no sinking ship. China isnt fast-approaching an iceberg in the dark of the night like the Titanic. Beijing has long been anticipating the ice chunks and subtly adjusting the rudder around inflation without steering the economic ship too far off course.
2012-01-20 And That's The Week That Was by Ron Brounes of Brounes & Associates
So will Frances borrowing costs start tumbling now that the S&P has cut its rating below AAA? Illogically, thats what happened in the US. Now that the news is finally out in the open, investors can go back to monitoring Greece as it hopes to finally make a debt restructuring deal with private creditors. What say you, Germany? Earnings season moves forward and the banks look to reverse the pessimism initiated from JP Morgans disappointing report. Intel pushes some of the earnings attention over to the tech world and GE provides profit news from one of the nations key economic bellwethers.
2012-01-19 Inflation: Wheres the Beef? by Team of American Century Investments
With inflation seemingly in check, we reevaluate the near- and longer-term inflation environment, and discuss implications for investor portfolios. It is easy to understand why this topic intrigues so many. Depending on your perspective, inflation can be said to be rising fairly rapidly from low levels seen just a few years ago; or it could be said to be quite restrained, given the calls in recent years for runaway inflation as a result of unprecedented U.S. monetary and fiscal policies and a number of pronounced global economic imbalances.
2012-01-19 Asia-Pacific Portfolio Managers Discuss PIMCOs Cyclical Outlook by Robert Mead, Isaac Meng and Raja Mukherji of PIMCO
We expect emerging Asia growth below the market consensus due to its less aggressive policy responses compared to 2008-2009.
The Asia-Pacific region is less affected than others by eurozone turmoil but contagion is still a risk through direct trade and the regional production chains that characterize Asias export-oriented economies.
In this environment, we favor Australian government bonds for their high credit quality, low-beta currencies such as the Chinese yuan, corporate issuers that have delevered, covered bonds and mortgage-backed securities.
2012-01-19 Mission Impossible: Why Chinas Soft Landing Will Look like the One We had in the US in 2007-2009 by Bill Smead of Smead Capital Management
Last week the Federal Reserve Board released the minutes of its meetings in 2006. There were discussions of the current economy, numerous credit tightening moves and a consistent belief in the idea that the US and its policy makers could engineer a soft landing from our real estate bubble. The landing that we had from our real estate bubble was the hardest landing since the Great Depression. Now we believe all the pieces are in place for a hard landing in the China real estate markets.
2012-01-19 Developed Europe: Economic Review Fourth Quarter 2011 by Team of Thomas White International
Germany: Unemployment fell to historically low levels. Exports grew in November, while businesses and consumers remained optimistic. U.K.: The services and construction sectors stayed buoyant. GDP grew 0.6 percent in the third quarter of 2011 France: The unemployment rate rose suddenly in the July after being in a downtrend for several quarters. Italy: The new government introduced the countrys third austerity package in 2011. Spain: Tax hikes and spending cuts were announced by a new conservative government.
2012-01-18 A Little Cold Water Thrown on the Recovery by John Buckingham of AFAM
The economic data out last week was hardly terrible, but the positive momentum seen in the past couple of months was slowed as the Commerce Department reported that higher prices for imported oil and a 7% drop in exports to Europe caused the U.S. trade deficit to expand sharply in November.
2012-01-18 Chinese Dragon To Unshackle Renminbi? by Axel Merk of Merk Funds
Chinese consumer spending is likely to have been under-reported for some time; we dont think a housing bust in China will stifle consumer spending as much as some fear. Importantly, Chinese consumer spending may rise like an avalanche in years to come. China is right to prepare its economy for this rise, amongst others, by unshackling the renminbi. A currency serves as a natural valve for domestic policies, helping to tame inflationary pressures. Currencies of the more developed Asian neighbors may also benefit in the process.
2012-01-18 Americas Economic Review: Fourth Quarter 2011 by Team of Thomas White International
As the year 2011 ended, the clouds of pessimism about the economy lightened across the Americas region, as key data trends suggested that earlier fears of a steep downturn were unfounded. Financial markets stabilized as investors turned more optimistic about the outlook for 2012. Concerns over external risks, particularly about the European fiscal crisis, also calmed down as hope was renewed that enduring political solutions will be found for the fiscal challenges facing the developed countries.
2012-01-18 The Bigger the Base, the Higher the Space by Pamela Rosenau of Hightower Advisors
Overall, people around the globe are underinvested or invested in the wrong asset classes. As data point continue to strengthen, coupled with the fact that income (and sustainability of income) are becoming a scarce commodity, a significant rally in the equity markets could ensue. As some technical analysts may suggest, the bigger the base, the higher the space. As U.S. blue chip stocks have lagged for more than ten years, they have built a base that has prepared these stocks for liftoff.
2012-01-18 Rock Bottom: Housing May Have Already Hit It by Liz Ann Sonders of Charles Schwab
A comprehensive (read: long) and chart-filled update on housing suggests the bottom may largely be in. Pricing may have more downside and real mortgage rates need to decline further, but most other metrics are flashing green. New themes: housing becoming "local" again, and for now, renting is trumping buying.
2012-01-17 Martin Wolf on the Eurozone and Beyond by Robert Huebscher (Article)
Martin Wolf is widely considered to be one of the world's most influential writers on economics. Since joining the Financial Times in 1987, where he is chief economics commentator, he has received numerous awards for excellence in financial journalism. In this interview, he discusses the Eurozone crisis and prospects for global economic growth.
2012-01-17 GMO: Something's Fishy in China by Robert Huebscher (Article)
A wide gulf separates the two most prominent views regarding China's future. Faced with slowing economic growth, one side says its leaders will deftly navigate a soft landing, while the other claims it will face an implosion similar to those that befell Japan 20 years ago and the US in 2008. Count GMO, a firm that has built its reputation on its ability to identify a bubble about to pop, in the latter camp.
2012-01-17 A Nobel Laureate’s View on the US A Debt Problem, but an Unemployment Crisis by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the transcript of the interview.
2012-01-17 A Nobel Laureate’s View on the US - A Debt Problem, but an Unemployment Crisis - Video by Dan Richards (Article)
Peter Diamond is a professor emeritus at MIT and the winner of the 2010 Nobel Prize in Economics for his work on unemployment and labor market policy. In this interview, he discusses the degree to which US unemployment is a structural problem and whether it can be reduced through fiscal stimulus. This is the video of the interview.
2012-01-17 The Great Deleveraging Myth by Russ Koesterich of iShares Blog
Theres been talk in the blogosphere lately aboutwhether or not developed economies are deleveraging, i.e. winding down their debt. Some recent posts, under headlines such as The Age Of Consumer Deleveraging Is Over and Deleveraging is So 2011, have argued that at least in the United States, consumer deleveraging appears to be a thing of the past. My take, however, is that in many sectors of the US economy, deleveraging hasnt happened at all. In fact, the notion that the United States is deleveraging is mostly a myth.
2012-01-17 Fed Policy Outlook More Communication Is Good by Scott Brown of Raymond James Equity Research
The Federal Open Market meets next week to set monetary policy. Its widely expected that short-term interest rates will remain unchanged and that (for the time being) there wont be another round of asset purchases (QE3). The Fed will begin publishing the range of senior Fed officials projections of the appropriate federal funds rate target (for the fourth quarter of this year and the next few years). There are more benefits than risks in making these projections public.
2012-01-17 A Society Moving Toward The Brink? by Chris Maxey of Fortigent
With economic growth stagnating, global indebtedness remaining stubbornly high, and unemployment refusing to budge, pressure on governments and ordinary citizens is mounting. Financial crises are notoriously difficult to recover from, but the longer-term sociological problems created by such severe declines in output pose a major headwind to the economy in 2012 and beyond.
2012-01-17 The Impact of the Falling Dollar by Jonathan A. Shapiro of Kovitz Investment Group
Regarding the progress of the businesses we own, a useful metric we track is the Price-to-Value ratio. Conceptually, this statistic measures the current price of a portfolio company to its intrinsic value, conservatively estimated through our multiple valuation techniques. For example, Wal*Marts current P-to-V Ratio is 80%, determined by taking its roughly $60 stock price divided by our current fair business value estimate of $75. This implies, based on what we know today, Wal*Mart is roughly 20% undervalued, providing approximately 25% upside from current levels (not including dividends).
2012-01-17 On the Fed, Stocks, the Election & More on the 1% by Gary D. Halbert of Halbert Wealth Management
We look at the Feds latest Beige Book report that came out last week, which showed that the economy improved in all 12 Fed Districts. We also ponder the question of whether the Fed is ramping up to do a QE3. Next, with everyone wondering if were facing another roller coaster ride in the stock market this year, I will bring you some interesting facts about what stocks have historically done in presidential election years. Finally, I dug a little deeper over the last week to find some fascinating information on the so-called Top 1% of wealthiest Americans.
2012-01-13 Quarterly Review and Outlook, Fourth Quarter 2011 by Van R. Hoisington and Lacy H. Hunt of Hoisington Investment Management
As the U.S. economy enters 2012, the gross government debt to GDP ratio stands near 100%. Nominal GDP in the fourth quarter was an estimated $15.3 trillion, approximately equal to debt outstanding by the federal government. In an exhaustive historical study of high debt level economies around the world, it was demonstrated that when a countrys gross government debt rises above 90% of GDP, the median growth rates fall by one percent, and average growth falls considerably more. This study sheds considerable light on recent developments in the US.
2012-01-13 Spin City by Team of Dana Investment Advisors
The December jobs report was recently released and politicians are falling all over themselves to spin interpretations. It pays to look at these numbers in an objective way. As Mark Twain once said, Get your facts first, and then you can distort them as much as you please. So here goes. The private economy created 212,000 net new jobs in December and the unemployment rate dropped to 8.5%. Most industry sectors added jobs, even construction added 17,000 jobs. The government lost 12,000 jobs, but that is good news as it indicates that government is paring back to better control their budgets.
2012-01-13 Demographic Headwinds: The Decline of Peak Spenders by Doug Short of Advisor Perspectives (dshort.com)
"S&P 500 to Fall 30-50% in 2012." Dent's grim forecast is primarily based on the demographics of the peak spending years, an age cohort he refers to in the interview as 46-50. Economists and market analysts often think of retiring boomers as the primary drag on the economy with their the transition from the accumulation to the decumulation phase of their life-cycle. But if we understand of the crucial role of consumption for our economic health, a significant decline in the number of peak spenders is a demographic headwind that will challenge us for years to come.
2012-01-13 Fed Plays PR Games by John Browne of Euro Pacific Capital
The world was taken by surprise recently by the Fed's announcement that it would publish some of its economic forecasting that forms the basis for its strategy. The Fed claims that the move will vastly increase so-called transparency, which has become a buzz word for honesty and virtue. However, the new policies do nothing to remove the cloak of secrecy that conceals still many of its most significant activities. This myth will do little to lure investors back into the markets but as an unintended consequence will reveal just how profoundly the markets are currently guided from the top.
2012-01-13 What the Next Decade Holds for Commodities by Frank Holmes of U.S. Global Investors
What will happen over the next 10 years? I believe the supercycle of growth across emerging markets will continue with rising urbanization and income rates. This bodes well for commodities, especially copper, coal, oil and gold, and well continue to focus on companies that will benefit the most from these much-needed resources.
2012-01-13 Investing in 2012: Same Issues, More Extreme Valuations by David Kelly of J.P. Morgan Funds
When all was said and done, 2011 turned out to be the metaphorical equivalent of a roller coaster ride.There were quiet positives: The addition of 1.6 million jobs with the unemployment rate falling from 9.4% to 8.5%, a gradual improvement in light vehicle sales, the demise of Bin Laden and gathering economic momentum as the year drew to a close. There were scary negatives: soaring oil prices in reaction to the Arab Spring the human and economic toll of the Japanese tsunami the inability of Europe to deal with its complicated debt issue and the inability of Washington to deal with simpler one.
2012-01-13 Time to Climb? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
The US economy continues to expand and has recently picked up momentum. Investors have been focused on European and US debt problems, but that may set up an environment for stocks to move higher. Many challenges await Congress. We're not optimistic that much progress will be made, but the rhetoric will almost certainly heat up as late-year elections loom. Recent policy decisions in Europe provide some hope but the region's banks continue to struggle and are pulling back on lending, which likely impedes growth. In China, policymakers attempt to keep growth from dipping below healthy levels.
2012-01-12 A Look Back (2011) and Forward (2012) by Team of American Century Investments
The major US equity markets ended 2011 not far from where they began in terms of their index values. Now that the New Year has arrived, the question is where these markets might be headed in 2012. Three important considerations behind this question are: 1. How key macro-factorse.g. the EU debt crisisare or arent addressed 2. Can U.S. corporations continue to deliver the earnings growth they have for the past three years 3. What are the prospects for US consumers and householdsan increasingly important consideration as the global recovery slowed in the fourth quarter of last year.
2012-01-12 Global Investment Outlook by Team of Aberdeen Asset Management
Policy makers globally face the challenge of supporting growth while managing debt levels, and still remaining aware of inflation. The Eurozone crisis is a further complication, and has the potential to make matters more difficult. That being said, there is still growth in the world economy, though perhaps more disparate than in previous cycles. Given the inter-connected nature of countries in the globalized world, there are few areas truly insulated from turmoil. However, there are safer-havens where clearer policy frameworks and the ability to enact solutions more robustly are helpful.
2012-01-12 The Straits of America by Nouriel Roubini of Project Syndicate
Macroeconomic indicators for the US have been better than expected for the last few months. But, despite the favorable data, US economic growth will remain weak and below trend throughout 2012.
2012-01-11 And That's The Week That Was by Ron Brounes of Brounes & Associates
After a meaningless breakeven year, the S&P 500 looks to better its performance in 2012.A recent CNNMoney survey speculates the benchmark index will gain 7% in the current year.While the economic data has been positive as of late, all eyes shift to corporate earnings and Alcoa kicks off the season in the coming days. Retail sales highlight the economic calendar and investors get a better feel for the true results of the holidays.While sales looked strong throughout, mass discounting undoubtedly cut into profits and some retailers are now rethinking the success of the markdown strategy.
2012-01-11 Emerging Asia Pacific: Economic Review 4th Quarter 2011 by Team of Thomas White International
Emerging Asia Pacifics economic expansion slowed considerably beginning in October 2011. In many economies, export growth along with investments grew at their slowest pace since the summer of 2009. Although the Purchasing Managers Index improved across key economies in November the index was still under the 50 mark, which generally means a contraction in manufacturing activity. Almost all the countries in emerging Asia Pacific posted slower third quarter expansion over the year-ago period.
2012-01-11 Developed Asia Pacific: Economic Review by Team of Thomas White International
Developed Asia Pacific economies faced economic headwinds for the greater part of the fourth quarter of 2011 beginning in October. Major export-oriented economies such as Japan, Hong Kong, and Singapore witnessed slowing export growth as consumer confidence in key markets such as the U.S. and the EU remained weak. Although China boosted exports from Developed Asia Pacific economies, overall exports to emerging economies across the world came under pressure. Furthermore, the resilience of the labor market was also tested by the slowing export and domestic markets.
2012-01-10 The Misreading of Reinhart and Rogoff by Robert Huebscher (Article)
If the cry for deficit reduction rests on an intellectual framework, it would be the work of Reinhart and Rogoff, whose book, This Time is Different, has been hailed for its historical study of financial crises. A key finding - that growth slows once the ratio of debt-to-GDP exceeds 90% - has been widely cited by those calling for decreased government spending. But those calling for deficit reduction have largely ignored a number of caveats that Reinhart and Rogoff gave with respect to their 90% threshold, and as a result many warn that the US faces a Greek-like sovereign-debt crisis.
2012-01-10 Gundlach on the Key Risk for Bond Investors by Robert Huebscher (Article)
Watch out if you own a bond fund that underperformed its benchmark by 2% or more last year, as most did. Rather than put their careers at risk by suffering a second year of poor performance, those fund managers will turn to indexation, according to DoubleLine’s Jeffrey Gundlach. And since the Barclay’s Aggregate Index holds nearly 35% of its assets in Treasury bonds with near-zero yields, its investors will endure poor returns.
2012-01-10 Intrade Recession Odds Plummet by Team of Bespoke Investment Group
The stock market has stabilized over the past few weeks here in the US. This has coincided with a belief that things might not be as bad as expected here in the US on the economic front. One way to highlight sentiment towards the US economy is through Intrade's contract for whether or not the US will go into a recession in 2012. As shown below, the odds have plummeted recently down to just 25.1%, which is the lowest level seen since mid-2011 before Europe really went haywire.
2012-01-09 Investment Perspective Fourth Quarter 2011 by Team of Cambridge Advisors
The concerns over Europes debt problems continued and contributed to volatility in stock prices and bond prices. Although the markets have responded favorably to the partial solutions that have emerged, the issues are not entirely resolved. In this environment where the outlook can and does change quickly based on unfolding worldwide events, volatility is likely to persist. We continue to believe diversification across asset classes is the prudent strategy in this environment. Bonds provide stability, but stock exposure is needed for long-term growth.
2012-01-09 Structurally High Unemployment for a Decade by Mike "Mish" Shedlock of Sitka Pacific Capital Management
Since 2008 I have been stating the US would have "Structurally High Unemployment for a Decade". Indeed, based on historical trends in labor force growth, the expected unemployment rate for the number of jobs created during the recovery would be well north of 11%. Yet, the unemployment rate is currently an artificially "low" 8.5% (not that 8.5% is anything to brag about). To show how difficult it will be to bring that rate down, let's take a look at job growth (or losses), for the last three decades (numbers in thousands).
2012-01-09 One More Step Forward by Charles Lieberman of Advisors Capital Management
Markets remain priced for economic weakness, with some possibility of a financial market meltdown, despite improving conditions. Stock prices remain very low compared to bond prices, while government bond prices remain very high compared to corporate bond prices. Both comparisons speak to a high degree of caution on the part of investors. The economy is not playing along, however. Barring an unexpected adverse shock out of Europe, which remains the market's primary concern, the economy and the equity market would likely gather momentum over 2012.
2012-01-09 Employment Disappointment by Milton Ezrati of Lord Abbett
Employment gains of late have taken the edge off peoples worst recessionary fears, but they nonetheless remain fundamentally inadequatefar short of historical norms and the very human needs of the now-huge army of unemployed. In the coming year, continued economic growth should improve the situation, but only marginally. Employment will increase only slowly. By the end of 2012, still more than 8% of the work force likely will remain unemployed.
2012-01-09 Will Housing Follow Job Growth? by Kristina Hooper of Allianz Global Investors
An improving job market and increased manufacturing activity suggest a stronger economy, but the housing sector remains weak. However, low interest rates, less debt and more affordable homes could turn housing into a positive catalyst.
2012-01-09 Muddling Through in 2012 by Bob Doll of BlackRock Investment Management
The world continues to operate in a post-creditbust environment in which significant amounts of deleveraging still need to occur. The momentum in the United States is pointing in the right direction, but we do expect to see ongoing back-and-forth in the tone of economic data. Conditions will not continue to improve at the same pace we have seen over the last couple of months, nor will they deteriorate to the point that a double-dip recession becomes likely. Instead, we expect the economy to chart a middle course and grow somewhere between 2% and 2.5% for the year.
2012-01-09 Stock Volatility: Not What You Might Think by Charles Lahr of PIMCO
Contrary to finance theory, lower risk appears to produce the potential for higher returns over the long term.
Volatility tends to amplify stock returns so higher risk generally leads to higher returns in a positive market and greater losses in a negative market.
Over the long run, lower volatility stocks can lead to higher returns because avoiding the downside can have powerful effects on compounding.
Higher volatility stocks tend to fit the definition of speculative, while low volatility stocks can offer the potential for preservation of principal and a satisfactory risk-adjusted return.
2012-01-09 Steady As She Goes Into Early 2012 by Scott Brown of Raymond James Equity Research
Much like the situation last year, the economy appears to be poised for improvement. Again, there are still some headwinds and a number of downside risks to the growth outlook and much will depend on developments in Europe and in the oil market over the next few months. Theres still some prospect for further accommodation from the Federal Reserve we may see another round of asset purchases announced later this month.
2012-01-09 Corporate Profits Hit a Wall, But Stocks a Buy? by Chris Maxey of Fortigent
Equity markets finished their first week of the New Year with positive gains, with the S&P 500 and Dow Jones Industrial Average rising 1.6% and 1.2%, respectively. Those gains, and more, occurred in the first 30 minutes of trading on Tuesday, the first trading day of 2012. From there, markets traded choppily through the remainder of the week, as lingering problems in Europe dampened risk appetites. Investors returning from holiday break received more positive news regarding the US economy, particularly within manufacturing and employment.
2012-01-06 Capturing Domestic Demand in Emerging Markets Neither Small Caps Nor Multinationals Are a Good Proxy by Arjun Divecha of GMO
As domestic demand play gains momentum, we hear increasingly that the best way to capture this theme is to buy small cap emerging stocks. We believe, however, that this is a mistake and that focusing on companies that specifically serve domestic demand is a more effective way to exploit the opportunity. Besides, why buy a proxy when you can buy the real thing?
2012-01-06 And Thats The Year/Quarter That Was... by Ron Brounes of Brounes & Associates
Global geopolitical events continue to impact all investments markets. Just when Europe seemed to be taking positive steps to move passed crisis mode, along come Spain, Italy, and Hungary to remind investors that the road to recovery will be paved with many bumps along the way. A nuclear Iran presents huge concerns and additional sanctions could cause new crude supply challenges that may prompt inflation to resurface. The recent favorable labor releases woke the consumer from hibernation in time for the holidays, but will the enthusiasm last once the season ends?
2012-01-06 Have Winds Shifted to Provide Relief to Investors? by Frank Holmes of U.S. Global Investors
We believe the winds are shifting to bring needed relief to global investors. Weve seen improving economic data from the U.S. lately, and this positive news from the worlds largest economy, along with an improving Chinathe worlds most populated countryoffsets the negativity in Europe.
2012-01-05 Flight 2012, Cleared to Hold? by Mike Boyle of Advisors Asset Management
Commercial air travel can be pretty frustrating these days, but nothing compares to the call from the cockpit as you approach your destination that the flight is entering holding. Immediately many questions enter travelers minds including: Why? How long? Where will we land? Given the S&P 500 essentially experienced a holding pattern in 2011, many investors must be asking themselves similar questions right now. Specifically the S&P lost .04 points last year as it began 2011 at 1257.64 and ended the year at 1257.60.
2012-01-05 True Reflections on 2011 and 2012 by Liz Ann Sonders of Charles Schwab
The Dow Jones Industrial Average (DJIA) managed a gain for the year in 2011, but very few investors were cheering.
With inflation settling down, the upward boost to real gross domestic product (GDP) is likely being underestimated.
Although the eurozone crisis may keep volatility elevated short-term, 2012 is looking like a better year.
2012-01-05 Finding Real Value in Real Estate Investing: REITs by Team of Managers Investment Group
REITs are not an asset class that investors typically consider for their portfolios. Yet REITs offer many benefits that make them attractive. In this paper, we explore what REITs are, the many advantages they bring, and why you should consider them for your portfolio.
2012-01-05 2012 Market and Economic Commentary and Outlook by Multiple of Various
This is a compilation of economic and market forecasts from managers at 14 individual mutual fund companies.
2012-01-05 New Year, Old Worries by Team of BondWave Advisors
2011 was a volatile year where the old guard of the global economy was plagued by weak economies, bloated debt levels, tight credit, and action against normally stellar credit ratings. Europe dominated the headlines, both in December and 2011 overall, and continues to struggle. We discuss these issues and provide additional insight into the US Treasury, Corporate and Municipal Bond Markets.
2012-01-04 ProVise Bullets by Team of ProVise Management Group
The year 2012 is upon us and looms large for a number of different reasons. Within the next few days, the first of the Presidential primaries will begin and by early November we will know who our next President is and who controls Congress, along with many State Houses. Some astrologists believe this is the Age of Aquarius and according to the Mayan calendar, December 21st will be the end of time, or as some prefer to think of it (ourselves included) the beginning of a new age. Maybe the astrologists and Mayans have something going.
2012-01-04 What to Watch for in Early 2012 by Russ Koesterich of iShares Blog
As 2012 gets underway, investors should pay close attention to two particular unresolved economic issues: High Italian bond yields and the ongoing drama of the payroll tax holiday. These two pieces of unfinished business are likely to dominate headlines and influence markets during the first few months of this year. They both also could send the global economy back into a recession if theyre not solved adequately. What needs to happen for these issues to be resolved? Heres a quick look at some signs investors should watch for.
2012-01-04 Defending Our Optimism by John Burns of John Burns Real Estate
Since our client webinar last January, we have been defending our realism, which was viewed as optimism by most of our clients, whether they are builders, developers, product manufacturers, private equity investors or public markets investors. We called for home prices to fall slightly, a tough three years selling homes, and a construction recovery that is exactly the time for patient money (5-10 year money) to invest wisely. Most money is not that patient, so the challenge for each of our clients continues to be when to increase their investments.
2012-01-03 Ghosts of Christmas Past by Michael Lewitt (Article)
While Europe desperately needs the liquidity that the latest bailout scheme provides, nobody should mistake liquidity for solvency and think for a moment that the crisis is over. Much more work is needed to heal the wounds that European policy makers and business leaders have inflicted on their societies since the European Union was formed.
2012-01-03 US Recession - An Opposing View by Dwaine van Vuuren (Article)
A large number of reputable analysts and companies are forecasting a new U.S recession on the immediate horizon. Attracting the most attention is ECRI, which made a public recession call on September 30th and several television reaffirmations since. But an examination of a broader range of other composite economic indicators shows that sole reliance on ECRI's forecast would be misplaced.
2012-01-03 The Triumph of Optimism by Scott Minerd of Guggenheim
Over the course of history there is a certain triumph of optimism. Betting against the column of progress of human history and the innovation of mankind has always proven to be a losing proposition. In the short run, there are times to become cautious, as the past five years have exemplified. Broad-based economic expansion and its attendant outsize investment returns follow contraction and panic just as the day follows the night. As dark as the current environment may seem, the sun will come up tomorrow. When it does, I believe it will shine favorably on the optimists of today.
2012-01-03 Good Defense, Slow Progress a Win for 2011 by Kristina Hooper of Allianz Global Investors
The stock market finished flat for the year, but an absence of loss in the face of a wave of negative news coupled with improving economic conditions are cause for optimism in 2012. While the stock market took us on a wild ride to nowhere, investors are better off than they were a year ago.
2012-01-03 Thoughts About 2012 by Charles Lieberman of Advisors Capital Management
Major issues cloud the outlook for 2012. Fiscal policy remains in limbo, while the country revs up the presidential campaign. Finances in Europe remain a work in progress, yet the risk of a globally troublesome misstep remains. There is also no shortage of geopolitical risks around the world, including Iran, the entire Middle East, and a new regime in North Korea. Domestically, the economy is gathering some upward momentum. But will the economy be permitted to build on these trends, or will some external factors undermine the recovery? The answer is unclear, which is why market is so cheap.
2012-01-03 The Year of the Dragon by Jeffrey Saut of Raymond James Equity Research
Since the day after Thanksgiving I have stuck with the strategy that the Santa Claus rally had begun. On November 25th the SPX was changing hands around 1158. We are now 100 points higher. Consequently, I would not chase the dragon right here since I anticipate that an upside blow off is due ...
2012-01-03 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As January goes, so goes the market for the year. While most investors look beyond such hype, many surely will be pulling for a strong start to the new year. Despite summit after summit, emergency call after emergency call, bailout after bailout, stimulus after stimulus, the European debacle appears no closer to resolution (and is maybe getting worst). Italy is hurting; Hungary could be next; Germany and France are calling the shots. Iran presents a new threat to the oil markets as a blockage at the Strait of Hormuz threatens real damage to the energy supply/demand picture.
2012-01-03 Dale Mortensen on Addressing Unemployment - Video by Dan Richards (Article)
Dale Mortensen is an economist, a professor at Northwestern University and a co-winner of the 2010 Nobel Prize in Economics. In this interview, he discusses the unemployment situation in the US. This is the video.
2011-12-31 Remarkable Resilience by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Despite a remarkable series of crises, the stock market was roughly flat on the year. Earnings increasing, inflation decreasing, and economic data improving, the environment for a renewed upward move may be in place to start 2012. There seems to be little hope from DC for any relief in the near term, but 2012 brings an election cycle that will likely have a major impact on the future of the US. A near-term implosion in Europe seems to have been avoided but real solutions remain absent and the risks for a greater economic pullback are growing, which would likely have global implications.
2011-12-30 And Thats The Week That Was by Ron Brounes of Brounes & Associates
The so-called Santa Clause rally implies favorable activity over a seven daysthe final five trading days of one year and the first two of the next. (So the pressure is on if these markets are going to break even in 2011.) With volume already on the light side (and vacations and gift exchanges taking center stage during the next week), expect trading activity to get even weaker heading into the new year. Sometimes market moves become exaggerated on low volume as fewer buyers/sellers are working to smooth out the gyrations so dont panic if 100+ point swings on the Dow remain the norm.
2011-12-30 Beyond Beasts and Bossa Nova:The Brazilian Boom by Team of Guild Investment Management
What does all this mean for those who wish to invest in Brazil? It means that when it is time to buy Brazil and the time isnt here yet you will want to consider banks and credit card companies as a way to capture the wave of consumer cash since many consumers go abroad to buy personal and pricey consumer goods. To take advantage of rising internal Brazilian spending you will probably want to consider autos, housing, and big ticket durables that will not fit into the luggage of shoppers returning from spending trips abroad.
2011-12-30 2012: A Look Ahead by Bob Doll of BlackRock Investment Management
2012 is likely to feature a slow-growth world that includes a recession in Europe. The US faces headwinds, but manages to achieve growth of between 2% and 2.5%. China and India slow somewhat, but, along with the US, make up two-thirds of global GDP growth. The big risk remains that of a financial breakdown in Europe, which would tip the developed world into recession. Inflation should also continue to move lower. Should the muddle-through environment come to pass, we believe earnings and some improvement in confidence would allow equity markets to move higher, with US stocks leading the way.
2011-12-30 Case for Sustained $100 Oil by Frank Holmes of U.S. Global Investors
China, along with other emerging markets, and the European Central Bank are in the early stages of a global easing cycle, primarily by cutting interest rates to spur growth. Also, the Federal Reserve should remain stimulative. These government actions set the stage for sustained, or perhaps higher, demand for oil. Geopolitical threats remain on the horizon, and could also be a positive catalyst for oil.
2011-12-29 What Can We Expect in 2012? by Frank Holmes of U.S. Global Investors
As we prepare to bid farewell to 2011 and welcome 2012, its undoubtedly important for investors to start the new year off with as much knowledge about the markets as possible. I saw a great visual over the holiday weekend that captured the effects of the financial crisis. The sky-high leverage ratios of Morgan Stanley, Bear Stearns, Lehman Brothers and Goldman Sachs caused part of the economic weakness, but Nomura points to the policy mistake which forced Lehman Brothers to declare bankruptcy as the reason GDP plunged so significantly.
2011-12-27 The Ten Most-Read Articles in 2011 by Robert Huebscher (Article)
As is our custom, we conclude the year by reflecting on the 10 most-read articles over the past 12 months.
2011-12-27 Bear Trap by Jeffrey Saut of Raymond James Equity Research
StockCharts.com defines a bear trap as a situation that occurs when stock prices break below a significant level and generate a sell signal, but then reverse course and negate the sell signal. While that's the formal definition, I have often referred to bear traps as undercut lows. The biggest one in recent history occurred on October 4, 2011. I revisit the undercut low thesis today because it appears that is precisely what happened last Monday afternoon when the S&P 500 (SPX/1265.35) knifed through its previous reaction low of 1209.47.
2011-12-23 Twenty Years of Investing in Asia by Paul Matthews and Mark Headley of Matthews Asia
This month Asia Insight speaks with Paul Matthews and Mark Headley to get their thoughts on 20 years of investing in Asia. Why were you so convinced of Asias growth prospects at a time when few others were? Paul: As a young businessman trying to build an asset management firm focused on Asia ex Japan, the challenge for me was that Japan was 95% of the investment universe and also a majority of the market for asset gathering. While based in Hong Kong, I was given the task of looking for ways to build the business and so I was attracted to the markets that were open and growing.
2011-12-23 Outlook 2012: Living In Interesting Times by Victoria Marklew, Asha G. Bangalore, James A. Pressler, and Ieisha Montgomery of Northern Trust
Setting aside the debate over the appropriateness of various policy directives, this Outlook considers which countries or regions are vulnerable as we head into 2012. Not surprisingly we start off with Europe, then go through the U.S., industrialized Asia, and Latin America, finishing with a brief discussion of the political powder keg that is the Middle East.
2011-12-23 Banking Reform: Hopefully Britannia Creates A Wave by Monty Guild and Tony Danaher of Guild Investment Management
The British government has set in motion this week a future overhaul in the way that individual banks do business. British banks will be required to separate their basic lending and deposit operations from investment activities involving trading and speculation on behalf of clients and the banks themselves. This should mean that the deposits of retail customers will be shielded and protected from bank investment and trading ventures.
2011-12-23 European Investment Commentary by Team of Cohen & Steers
Our global macro view has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, we expect Europe to struggle in the intermediate term as austerity measures introduced by a variety of governments continue to hinder growth.
2011-12-23 Global Real Estate Investment Commentary by Team of Cohen & Steers
Our macro outlook has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, Europe is likely to remain an overhang, as the region appears to be heading into recession, making a resolution to its debt crisis considerably more difficult.
2011-12-23 International Real Estate Investment Commentary by Team of Cohen & Steers
Our macro outlook has turned more positive given the recent shift toward monetary easing in Asia Pacific and emerging markets, as well as U.S. economic data confirming slow but positive growth. However, Europe is likely to remain an overhang, as the region appears to be heading into recession, making a resolution to its debt crisis considerably more difficult.
2011-12-20 Gundlach on the Key Threat to Global Economies by Robert Huebscher (Article)
If class warfare is to be the dominant theme in next year’s presidential campaign, it will revive the premise of Ernest Hemingway's 1937 novel, To Have and Have Not, which he wrote in the midst of the second downturn of the Great Depression. That was also the title Jeffrey Gundlach gave his conference call with investors last week, during which he warned that wealth inequality will threaten European and domestic economies. Last week also saw Morningstar pass over Gundlach as a candidate for its fixed-income manager of the year award, so we’ll look at whether that decision made sense.
2011-12-20 Dennis Gartman Explains His Call on Gold by Robert Huebscher (Article)
Dennis Gartman has been publishing his daily commentary, The Gartman Letter, since 1987. He's been in the news lately because of a call he made last week on the price of gold. In this interview, he discusses the reasons behind that forecast.
2011-12-20 Expectations Creep by Jamie Cornehlsen (Article)
Today's generation of college students have it easier, at least in one respect, than any of their predecessors. Over the years, college professors had made it easier for students to get good grades, a phenomenon known more commonly referred to as 'grade inflation.' The reasons for this erosion of expectations continue to be debated, but there is ample data showing that the trend toward more generous grading is real. Today, a similar phenomenon plagues economic expectations.
2011-12-20 Economy Happy to Close Out a Forgettable 2011 by Chris Maxey of Fortigent
There are several economic indicators on tap for next week, highlighted by the third and final estimate for Q3 real GDP.No change is expected from Novembers estimate of 2.0%. Other items of note include housing starts, existing home sales, new home sales, personal spending, and the durable goods report. As mentioned previously, Wednesdays existing home sales report from the NAR will provide clarity on the size of the agencys five-year revision to home sales. This is a potentially significant event, depending on the size of the adjustment.
2011-12-20 A Look Back at 2011 by Bob Doll of BlackRock Investment Management
Although 2011 started off on a relatively strong note for the global economy and markets, the past year was dominated by fears that contagion from the European debt crisis would derail the recovery. Overall global economic growth struggled as most areas of the world experienced growth slowdowns (the notable exception being the U.S.) Emerging markets were also faced with some mounting inflation pressures, which presented a challenge for policymakers. Although there have been some signs of progress regarding the debt crisis, uncertainty levels remain high going into 2012.
2011-12-20 Austerity and the Modern Banker by Simon Johnson of Project Syndicate
Santa Claus came early this year for four former executives of Washington Mutual (WaMu), a large US bank that failed in fall 2008. The Federal Deposit Insurance Corporation (FDIC) had brought a lawsuit against the four, actions that included taking huge financial risks while knowing that the real estate market was in a bubble. The FDIC sought to recover $900 million, but the executives have just settled for $64 million, almost all of which will be paid by their insurers; their out-of-pockets costs are estimated at just $400,000.
2011-12-20 The Three Scrooges by Team of Dana Investment Advisors
Lawmakers are lining up to play Ebenezer Scrooge in the seasons production of A Christmas Carol. The backdrop for this years production is energy and the key players trying for the lead role are the EPA (Environmental Protection Agency), the Department of Energy, and Congress. They are each doing their best to stifle energy development thereby keeping gas prices high and curtailing job growth.
2011-12-19 AA Is the New AAA by Charles Lieberman of Advisors Capital Management
The U.S. was downgraded to AA some months ago. France, as expected, was downgraded to AA this weekend. China is AA. Europe's six remaining AAA countries are under review and will likely also be downgraded to AA shortly. It hardly matters. AA is the new AAA. The markets understood well before the rating agencies that European sovereigns were mismanaging their finances and rendered their judgment that these budget deficits need to be reduced. Europe must do so before its credit problems spread. Progress is being made, albeit painfully slowly.
2011-12-19 Americas Best Companies are Cheap - So Merry Christmas and a Prosperous New Year! by Chuck Carnevale of F.A.S.T. Graphs
Investors have been fleeing US equities at unprecedented levels. Yet, I believe there is compelling evidence that suggests that this may be the best opportunity to invest in high-quality U.S. common stocks that we have seen in many years. The list of 100 stocks presented in this article represents only a sampling of the many companies that are selling at valuations which are lower than their fundamentals justify. The only logical reason that I can come up with for this, is extreme pessimism.
2011-12-19 Somali Sense of Humor by Christian Thwaites of Sentinel Investments
The fifth review on the Greek financing package makes grim reading: 1) bank deposit outflows equivalent to 15% of GDP 2) privatization sales proceeds revised down to less than 3% of GDP 3) GDP to fall more in 2011 than estimated and again next year, bringing the cumulative shrinkage to 15% but 4) debt to remain at over 140% for most of the next decade, assuming a 4% paid rate not the 34% market rate and 5) labor productivity deteriorating. In another sign of euro dysfunction, the Bundesbank refused to participate in a general IMF trust for the eurozone.
2011-12-19 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Time is running out for that Santa Claus rally and the less-than-favorable tones coming from the worlds key politicos (wont call them leaders) are giving investors little reason to remain positive. Still, the recovering labor market and (hopefully) strong holiday season offer some incentive to buy (if only they can overlook the never-ending EU problems). Investors dissect an array of data before heading out for the holidays and possibly not returning until 2012. Some late-year window dressing could help bring one final surge to the markets (or not).
2011-12-17 The Center Cannot Hold by John Mauldin of Millennium Wave Advisors
We'll leave aside the politics of the payroll tax extension and look at the economic implications, and then go on to examine the deficit in the US. That will give rise to some thoughts about Europe and what would have to happen for a country to leave the euro. We'll finally close with some thoughts and graphs about the more controversial part of the tax cut extension, the Keystone XL Pipeline. Just how radical is it to build such a pipeline in the US? And what are the implications for the deficit?
2011-12-16 Reasons for Moving Have Shifted Dramatically by Chris Porter of John Burns Real Estate
People buy homes for many different reasons, and the mix of reasons has shifted lately. Family-related reasons, such as marriage or divorce, is an increasing percentage, while the desire for homeownership is a decreasing percentage of home buyers. This supports our forecast for 62% homeownership. With the general view that prices and mortgage rates are more likely to get better than worse, many buyers are staying on the sidelines. When they can say, "We should have bought 6 months ago," we expect the pent-up demand to begin to unleash.
2011-12-16 'Tis the Season I Doubt You Will Remember by Jeffrey Bronchick of Cove Street Capital
While deep value investors tend to perform well over reasonable time frames, adjusting reported performance for risk poses a substantial problem. Deep value portfolios contain lower-quality, fundamentally riskier assets. Returns ought to be higher to compensate for greater underlying risk. Under conditions of severe economic distress, higher risk levels in value portfolios lead to disastrous investment results.
2011-12-16 Early Santa Arrival? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Stocks have continued their seesaw pattern around developments in the European debt crisis. The major indices remain in the wide range we've been in for the last two years. Factors are setting up for a potential break above that range in the coming year. Expectations about progress in Washington are extremely low and near-term the biggest issues are the proposed extensions of the payroll tax cut and unemployment insurance. The increasing populist rhetoric is not helpful and any chance of major debt-reducing legislation occurring before the 2012 election seems remote.
2011-12-16 Striking Portfolio Balance with Gold Stocks by Frank Holmes of U.S. Global Investors
Back on August 22, I wrote that gold was due for a correction and that it would be a non-event to see a 10 percent drop in gold. I wrote, This would actually be a healthy development for markets by shaking out the short-term speculators. This mornings gold price of $1,590 is about 15 percent from the high, which is a little greater than predicted, but a non-event just the same. I believe the long-term story remains on solid ground.
2011-12-14 Fed Ends 2011 with a Whimper by Liz Ann Sonders of Charles Schwab
There were no surprises out of the Fed meeting today, with short-term interest rates remaining pegged at zero. There was one dissenting FOMC member who wished for additional policy accommodation. Much of the Fed's near-term focus remains on the eurozone debt crisis.
2011-12-14 Idaho Municipal Bonds: The Gem State Shines by Phelps McIlvaine and Shannon Skinner of Saturna Capital
Here we examine the health of Idaho and its municipal bonds in the context of the U.S. market as a whole, in order to separate the facts from the hype. What we find is that Idahos staunch fiscal conservatism is serving its economy well in trying times, and that for Idaho resident investors, the tax-exempt returns from high-quality Idaho bond issues offer a relatively low-volatility way to take advantage of a bright spot in the muni market.
2011-12-14 Clinton Investment Management 3Q2011 Market Commentary by Andrew Clinton of Clinton Investment Management
As we look toward year-end, we endeavor to seek out the best means for adding meaningful value to our client portfolios. We expect municipal bond new issue supply to dissipate as we approach the New Year. As it does, we expect technical conditions to improve materially. We also believe that the roughly $20 billion in anticipated January reinvestment will pull demand for municipal bonds forward into December. We have extended our client durations modestly in an effort to capitalize on what we believe could be a period of solid outperformance for the municipal bond market.
2011-12-14 The Credit Research Case for Using Muni Funds by Team of American Century Investments
We believe muni market credit quality remains generally high despite continuing changes and challenges, including the demise of the bond insurance industry (which has created a more heterogeneous muni market) and the slow economic recovery, which has put continued pressures on municipal budgets. However, we believe these challenges have made experienced, professional credit analysis more important than ever. One way for investors and advisors to access expert, experienced credit analysis is through the use of established muni mutual funds that have been through multiple market cycles.
2011-12-13 Fed Policy Outlook Changes On The Way? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee will meet on Tuesday to set monetary policy. The Fed is widely expected to leave short-term interest rates unchanged and the wording of the economic assessment should be largely the same as in the previous statement. However, we could see another round of asset purchases or some changes to the Feds communications. The inflation outlook is moderate. It doesnt look like well see substantially higher inflation in 2012, but (barring a large negative shock to growth) were unlikely to see a threat of deflation.
2011-12-13 What Happens If A Rising Tide Sinks Some Ships? by Chris Maxey of Fortigent
A multi-day summit in Brussels by European policymakers yielded an expected fiscal union between euro member countries. However, a key refusal by Britain undermined the credibility of the pact. Without unanimous agreement, the original European Union treaty cannot be altered, so a new intergovernmental agreement was created. Some question whether such an arrangement has the teeth to enforce budgetary discipline.
2011-12-12 Teutoburg Forest Remembered by Christian Thwaites of Sentinel Investments
The European Council agreed to some startling actions to stem the crisis: 1) all fiscal deficits not to exceed 0.5% of GDP 2) excessive deficit rules to come into effect when they breach 3% of GDP 3) the Commission to sign off on national budgets and 4) enforce sanctions if debt exceeds 60% of GDP with 5) fiscal integration to follow and 6) EFSF and ESM capital to remain at around 500bn with another 200bn committed to the IMF. The markets' reactions were generally favorable but I doubt any of this will hold.
2011-12-12 Progress in Europe Lifts Sentiment by Bob Doll of BlackRock Investment Management
Market action last week centered on the European summit that took place on Thursday and Friday. While no one is suggesting that the debt crisis will go away any time soon, the framework agreement that was reached has at least reduced some of the anxiety and appears to have eased the gridlock in European financial markets. While these moves will do little to ease the near-term debt issues affecting many European countries, they are important. In our view, last week's summit may well represent the first tangible positive developments since the crisis began.
2011-12-12 Obama's 8%: Sounds Right by Brian S. Wesbury and Robert Stein of First Trust Advisors
Given his advisers track record, you would think President Obama would be very cautious when making predictions about the unemployment rate. As we all now know, even though the stimulus bill was fully implemented, the jobless rate kept heading north, peaking at 10.1% in October 2009 and never once falling even remotely close to 8%. Nevertheless, President Obama is doing it again and predicting unemployment will be 8% around Election Day. This time, we think hes right.
2011-12-09 Markets Rolling Look For More Of The Same by Monty Guild and Tony Danaher of Guild Investment Management
During the last two weeks, global markets have moved their way to higher ground and indications point to a healthier finish than expected to an otherwise sickly 2011. We see several developments supporting a continued equity market rally. They have to do with measures taken in China, Europe, and by central bankers around the globe. The Canadian and Singapore dollars are well-managed currencies in countries with conservative banking systems. They are good candidates for continued long- term appreciation versus the Euro and U.S. dollar.
2011-12-09 2012: Politics Versus Fundamentals by Richard Bernstein of Richard Bernstein Advisors
Assessing the prospects for a coming twelve-month period is always a challenge. We rely on our broad arsenal of fundamental barometers for profits, sentiment, momentum, and our cyclical indicators to help us identify whether markets are correctly aligned relative to their economic and profits cycles.
2011-12-09 Skyrocketing Student Loan Debt Will Delay Homeownership by Rick Palacios of John Burns Real Estate
Student loan debt now totals $865 bn, which is greater than all credit card debt and other types of household debt except for mortgages! College graduates have debt averaging $25,000. Even more troubling is the rise in debts associated with for-profit college and trade schools, whose revenues come primarily from debt available through Federal government programs. The debt load is so high, and the job outlook so bleak, that student loan default rates have almost doubled. With the economy little improved since 2009 (two-year lag on data), default rates are bound to rise further.
2011-12-09 Obama Gets Real by Peter Schiff of Euro Pacific Capital
History has proven time-and-again that capitalism works and socialism does not. Taking money from the rich and redistributing it to the poor does not grow the economy. On the contrary, it reduces the incentives of both parties. It lowers savings, destroys capital, limits economic growth, and lowers living standards. Maybe Obama should take his eyes off the teleprompter long enough to read some American history. In fact, he could start by reading the Constitution that he swore an oath to uphold.
2011-12-09 Building Wisdom with Our Boots on the Ground by Frank Holmes of U.S. Global Investors
Analysts at U.S. Global Investors scrutinize research reports and study Bloomberg data to help our investment team gain first-mover advantage. Today, I asked research analyst and Shanghai-native Xian Liang to share how he combines analyses from third-party reports with boots-on-the-ground observations to find the best opportunities Asian markets have to offer.
2011-12-09 You Can't Print More Gold by Frank Holmes of U.S. Global Investors
As central banks print money and increase supply, currencies become devalued. Whereas in the recent past, one currency may be reduced in value compared with other currencies, this time there is global competitive devaluation as excess liquidity is put into the system. Historically, this excess liquidity has made its way to riskier assets, i.e. stocks and commodities. Gold is generally a benefactor of this flight to riskier assets as many investors see it as a store of value. This chart illustrates the interconnectivity of gold and global money supply growth.
2011-12-08 Some Perspective on Recent Stock Market Volatility by Team of American Century Investments
Both October and November exhibited substantial price volatility. For the full month of October, the index was up 10.9% on a total return basisthe best October performance for the S&P 500 in nearly 20 years. In contrast, for November the index was down -7.5% through Friday the 25th before a substantial rally the last three trading days of the month. Well take a closer look at the volatility of the S&P 500 from a historical perspective to provide some insights about market volatility its history, trends and causes.
2011-12-08 Global Economy and Market Summary Third Quarter 2011 by Stephen Hammers of Compass EMP Funds
The world economy has continued to slow during the last few months. The next several quarters are likely to be weak for three reasons. First, fiscal policy will continue to be restrictive as plans to trim excessive federal budget deficits continue to unfold. Second, private sector demand looks gloomy because households will continue to deleverage from high debt levels while unemployment remains a problem. Third, the uncertain future of the Euro-zone debt situation remains a major setback to future economic growth.
2011-12-07 The Fed: Is QE3 Coming in January? by Gary D. Halbert of Halbert Wealth Management
For most of this year, rumors have continually swirled that the Fed was about to embark on yet a third round of Quantitative Easing. The rumors suggested, that the Fed would announce another $600 billion in asset purchases, primarily of long-dated Treasury bonds. While many of us argue that the first two rounds of QE have had little positive effect, the Obama administration and many others are urging the Fed to do more. The argument is that Europe is heading into a recession, and this cant help but weaken the US economy just ahead.
2011-12-07 Waiting for All In by Mark R. Kiesel of PIMCO
Without a more forceful and coordinated policy response, Europe now faces an increasing risk of a hard landing. In this uncertain environment, volatility will likely remain high, liquidity poor, risk premiums wide and the global economy fragile as financial and credit conditions tighten. Easier monetary policy as well as the potential for more balance sheet support from a larger consortium of global central banks is now needed over our cyclical horizon. If these actions are coordinated and timely, investors and risk takers would be more likely to move off the sidelines.
2011-12-06 What Are Investors Up To? by Chris Maxey of Fortigent
With markets ebbing and flowing and making it virtually impossible to differentiate up from down, it has become all the more difficult to determine what qualifies as an attractive investment. While equity markets rallied into the end of November, volatility remains well above its long-term average, causing most investors to question their equity allocations. It should come as no surprise, then, that individual investors are anything but confident in the latest rally. Macroeconomic headlines and excessive volatility are dampening even the most hardened investors faith in financial markets.
2011-12-06 Adding Some Holiday Gloss to a Not-So-Super Month by Team of BondWave Advisors
November began with a European shakeup that did little to bolster the confidence of investors. Fear raged as Greece and Italy threatened to roll back efforts made by the ECB and IMF. In the US, all eyes were on the supercommittee, which was tasked with reducing the deficit over the next 10 years. BondWave Advisors discuss the US economic indicators that brought a coat of gloss to the pessimism and provide additional insight into the US Treasury, Corporate and Municipal Bond Markets.
2011-12-06 Life Finds a Way by Neel Kashkari of PIMCO
Even the most sophisticated risk management models can't protect against scenarios we've never even contemplated. In this New Normal economic environment of slow economic growth, high volatility and enormous macro risks we don't believe ignoring major downside risks is prudent for equity investors.
We believe investors are best served by employing a combination of three strategies to actively manage downside risk in equity portfolios to hedge against the risks they can see, and equally importantly, the risks they can't see.
2011-12-06 Treasury Inflation Protected Securities: Whats Next? by Vishal Khanduja of Columbia Management
TIPS have performed relatively well in 2011. Over the next 12 months we expect TIPS to outperform equivalent maturity U.S. Treasuries, However, given the current historic low level of real interest rates, we believe that absolute returns for the asset class will be only slightly positive. Our view is based on three factors: U.S. economic and policy outlook, recent trends in the components of consumer inflation and current valuations versus our base case assumptions.
2011-12-05 Engines of Doctrine by Christian Thwaites of Sentinel Investments
European leaders have a tough time stringing together a coherent sentence but the words go roughly like this: 1) drive down deficits 2) pummel inflation 3) encourage companies to invest more and 4) households to spend more and, thus, fingers crossed, 5) create employment. The problem with this is that output gaps drive down aggregate demand and prices. And no business executive will invest while demand is leaking. And so will not increase employment. This standard trap is exacerbated when there is no central bank that can do what central banks do.
2011-12-05 Economy Improving, Stocks Cheap by Brian S. Wesbury and Robert Stein of First Trust Advisors
Remember the big fat zero jobs reports back in August? The US was supposedly teetering on the brink of another recession, or maybe depression. Democrats wanted more government spending stimulus. Republicans said President Obama was the equivalent of a zero. With all this negative sentiment, the Dow fell 250 points that day. But something happened on the way to the bank. One month later, that big fat zero was revised up to a +57,000, the next month it was revised up again to +104,000. All that recession talk in early September was highly misleading.
2011-12-03 December Monthly Economic Update by Justin Anderson of Cambridge Advisors
While the improving domestic economic picture seems to be pointing to continued slow growth, the markets are focused on Europe as they continue the tumultuous process of finding a resolution to their debt crisis. Until a long-term solution is found, we will likely continue to experience above average market volatility. In this environment we continue to favor a diversified mix of asset classes with an emphasis on yield.
2011-12-03 Schwab Market Perspective: Short-term PainLong-term Gain? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Markets have been under pressure as the crisis in Europe has recently intensified, providing the impetus for more aggressive action and an eventual resolution, including this week's coordinated central bank actions. Economic data in the United States continues to be largely better than expected. The supercommittee failed to come to a deficit reduction agreement. While markets expressed initial disappointment, their failure may end up being beneficial as it forces spending restraint. As the euro crisis has deepened, some steps have been taken but mostly address liquidity, not solvency.
2011-12-03 Time to Bring Out the Howitzers by John Mauldin of Millennium Wave Advisors
It is now common to use the term bazooka when referring the actions of governments and central banks as they try to avert a credit crisis. And this week we saw a coordinated effort by central banks to use their bazookas to head off another 2008-style credit disaster. The market reacted as if the crisis is now over and we can get on to the next bull run. Yet, we will see that it wasn't enough. Something more along the lines of a howitzer is needed (keeping with our WW2-era military arsenal theme). And of course I need to briefly comment on today's employment numbers.
2011-12-02 The Cost of (Super Committee) Failure by Russ Koesterich of iShares Blog
With the failure of the Congressional super committee, the US economy is now poised to experience a significant slowdown in 2013. Russ explains that given that in 2013 the US economy will very likely still be struggling with the impact of consumer deleveraging and a moribund labor market, the resultant fiscal drag would increase the probability that the United States could tip back into a recession.
2011-12-02 Are Stars Aligned for a Year-End Rally? by Frank Holmes of U.S. Global Investors
Correlations will decrease along with volatility as we get more clarity on the eurozone crisis and see signs of stability in the global economy. Volatility fell this week, with the CBOE Volatility Index (VIX) declining 20 percent. This could be related to the news that November U.S unemployment unexpectedly dropped to 8.6 percent, U.S. auto sales in November were the strongest in more than two years, and preliminary data on holiday retail sales appears to be strong. According to Bloomberg News, Black Friday sales hit a record high this year, with consumers spending $11.4 billion.
2011-12-01 Contrarian Perspective to Market Sentiment Fear by Matt Lloyd of Advisors Asset Management
We have long taken the contrarian perspective to the fear that dominates market sentiments. Overnight we have now seen the recognition that Europe is unable to fully solve this on their own and needed mediation in the form of a Federal Reserve lowering of the overnight swap rates to release the pressure cooker on European liquidity. Though we have witnessed many interventions this year, this one is pronounced in what it says in a very subtle manner.if you could ever call an intervention like this as subtle.
2011-12-01 On Money and Confidence by Andrew Foster of Seafarer Capital
At this moment, the worlds central banks have undertaken what appear to be coordinated efforts at relief, easing liquidity by boosting money supply. This is a welcome move, as liquidity has been strained. My concern is that while this monetary stimulus is necessary, it is not sufficient to achieve financial stability. Unless confidence is restored specifically, by repairing balance sheet solvency growth will remain tepid, and markets range-bound.
2011-11-30 Guide to Save the Euro by Axel Merk of Merk Funds
Can the euro be saved? Is it possible to stem the flight of money from the periphery into the core? With a botched German auction in mind, investors are now wondering whether its possible to prevent a flight out of all things euro? We examine the dual challenges of fiscal sustainability and bank solvency in this analysis, with the not-so-modest title Guide to Save the Euro.
2011-11-30 Residential Housing Hangover by Team of Neuberger Berman
The housing crisis has left a lasting mark on the U.S. economy. Six years after the market peak in 2005, home prices continue to falter in some areas of the country, volumes remain low, and many investors and potential homebuyers remain wary of the residential marketplace. In this edition of Strategic Spotlight, we examine recent data from the U.S. housing market to consider how they may figure into overall growth expectations going forward.
2011-11-29 Jeremy Siegel on Why Stocks are 'Extremely Attractive' by Robert Huebscher (Article)
Jeremy Siegel is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania. His book, Stocks for the Long Run, now in its fourth edition, is widely recognized as one of the best books on investing. We spoke to him last week about equity valuations and the prospects for the economy.
2011-11-29 Sometimes We Lose Perspective by Scott A. MacKillop (Article)
It's been a rough ride lately for investors. Looking back over the course of my lifetime, however, what has been particularly exceptional is not recent market swings - these come and go - but rather the return one would have earned if they had been continuously invested in the stock market over the past 60-plus years.
2011-11-29 Is 2012 Destined to be a Repeat OF 2008 for Banks? by Chris Maxey of Fortigent
Mounting concerns in Europe and the failure of Congress supercommittee weighed on investor sentiment during the holiday-shortened week. As expected, the congressional supercommittee failed to negotiate a $1.2 trillion deficit reduction by Wednesdays deadline. The move triggers automatic cuts to the federal budget starting as early as this year. Near-term effects are mostly in the form of program non-renewals for example, the expiration of 99-week unemployment benefits, the payroll tax cut, and other Recovery Act stimulus.
2011-11-29 Homeownership To Fall 8% by Wayne Yamano of John Burns Real Estate
We have done a lot of quantitative and qualitative research on the future of homeownership, and concluded that homeownership is likely to fall eight percentage points, from 70%* in 2005 to 62% in 2015. The American Dream of Homeownership is still alive and well, as confirmed by several surveys, including ours. However, we are going to return to requiring future homeowners to save and to take on debt that they can afford to repay. This will be a shock to some, but we all know it is the right thing to do.
2011-11-29 Deja Vu? Eurozone Crisis Today vs. 2008 Subprime Crisis by Liz Ann Sonders of Charles Schwab
News flow on the eurozone debt crisis is speedy, and the latest news of a fiscal pact brings cheers by stock investors for now.
There are many similarities between the 2011 and 2008 crisesbut even more differences.
The end of the "Debt Supercycle" has ushered in a period of heightened risk and shortened economic/market cycles.
2011-11-28 And That's The Week That Was by Ron Brounes of Brounes & Associates
While traders, investors, and politicos prepare for their Thanksgiving travel plans, the week should be anything but dull. HP highlights the earnings reports as shareholders try to figure out the future of its PC biz. The Fed releases minutes from the last policy meeting so economists can view the dissension in its midst in determining if and when Bernanke and Co. will act again. GDP headlines the economic releases and some analysts expect a slight downward revision to the initial 2.5% reported expansion rate in the third quarter.
2011-11-28 And That's The Week That Was by Ron Brounes of Brounes & Associates
Black Friday results take center stage as retailers report sales data and analysts extrapolate what one days business means for the season. A rebound in consumer activity could bring new confidence to the markets. A positive showing from manufacturing and labor would also help sentiment. Then again, any newfound confidence may be overshadowed by the super-committee. Any sane politicos left? What say you, Newt, for your 15 minutes in the limelight?
2011-11-28 Another Asian Wake-Up Call by Stephen S. Roach of Project Syndicate
For the second time in three years, global economic recovery is at risk, with the crisis in 2008, triggered by subprime crisis made in America, now followed by Europe's sovereign-debt crisis. The alarm bells should be ringing loud and clear across Asia an export-led region that cannot afford to ignore repeated shocks to its two largest sources of external demand.
2011-11-28 Multiple Focal Points by Charles Lieberman of Advisors Capital Management
Europe remains the markets focus, but the domestic economy also merits attention, particularly with another payroll report due on Friday. The data have come in consistently better than expected, including Black Friday sales, despite the distractions of Europe and the inability of the Super-Committee to reach a budget deal. Left to its own devices, it seems entirely possible that the economic expansion would slowly gather momentum. Unfortunately, it seems like a sure bet that the market will remain highly sensitive to developments in these other arenas.
2011-11-26 Beyond the Supercommittee by Team of Charles Schwab
After months of negotiations, the Joint Select Committee on Deficit Reduction announced that it could not reach agreement, stating: "we have come to the conclusion today that it will not be possible to make any bipartisan agreement available to the public before the committee's deadline" The supercommittee had a deadline of November 23 to make recommendations to trim at least $1.2 trillion from the budget deficit. What's beyond the supercommittee? Schwab answers the key questions. Such as, why did the supercommittee fail? and are US Treasuries still a safe-haven investment? among others.
2011-11-25 Changing the Rules in the Middle of the Game by John Mauldin of Millennium Wave Advisors
Angela Merkel is leading the call for a rule change, a rewiring of the basic treaty that binds the EU. But is it both too much and too late? The market action suggests that time is indeed running out, and so well look at the likely consequences. Then I glance over the other way and take notice of news out of China that may be of import.
2011-11-23 Giving Thanks by Michael Dana of Dana Investment Advisors
It has been a tumultuous decade starting with 9/11, the wars in Iraq and Afghanistan, natural disasters (hurricanes, earthquakes, floods, tornados and fires), the financial crisis starting in 2008, and upheavals in the Middle East and the continuing financial problems in Europe. All these events have combined to cause worldwide recession and slow economic growth particularly in Europe and the US. With the mortgage meltdown and the continuing high unemployment rate, you would think that there is little to be thankful for this holiday season, but you may not be seeing the forest for the trees.
2011-11-22 Krugman versus Summers – Will the US mirror Japan? by Robert Huebscher (Article)
Larry Summers and Paul Krugman may share ideological leanings, but they disagree sharply about our economic prospects. Both agree that political gridlock is responsible for the failure to grow our economy, but is that impasse is so severe that the US is destined to endure the slow growth, high unemployment and deflation that has plagued Japan for the last two decades? It depends who you ask.
2011-11-22 Crafting a Country Call by Russ Koesterich of iShares Blog
For nearly a year, Russ has made weekly investment calls about markets across the globe. Heres a quick look at the macroeconomic approach behind his country views and a summary of where his calls now stand. Generally underweight in countries where prevailing macroeconomic conditions cannot explain high or expensive valuations, and he is typically overweight in countries where prevailing macroeconomic conditions cannot explain low or inexpensive valuations.
2011-11-22 The Domestic Economy Keeps Fighting for Growth by Chris Maxey of Fortigent
It is a shortened week due to the Thanksgiving holiday in the US, but that does not mean investors should tune out. The market will turn its sights on the governments super committee, which is looking less than super. The committee looks like it will not meet its target deadline of November 23, which will likely have negative implications for financial markets. The committee was supposed to find spending cuts that would reduce the deficit by $1.2 trillion over the next decade.
2011-11-22 A Failure to Act by Russ Koesterich of iShares Blog
The bipartisan Congressional super committee announced on Monday that it would not be able toreach a deficit-reduction dealin time for its deadline this week. The committees failure will not unleash a near-term economic catastrophe, but it does have four important implications for the US economy: 1. Lower Investor Confidence 2. A Stalled Economy in 2012 3. Fiscal Drag in 2013 and 4. Another Potential Downgrade.
2011-11-22 Debt Story by Scott Brown of Raymond James Equity Research
Loan growth plays a key role in economic expansion. Simply put: no loan growth, no economic growth. However, theres a downside. Debt doesnt matter until it does. Debt has played a key part in the economic downturn and in the gradual recovery. Europes sovereign debt crisis has continued to escalate, with no easy way out. In the U.S., the government has borrowed more, but the markets have not punished it for doing so. Theres no sign that that is going to change anytime soon.
2011-11-22 Common Sense is Uncommon: Our Hidden Economic Resilience by Pamela Rosenau of Hightower Advisors
If one thing has become clear these days, macro factors increasingly determine the valuations at the micro level. Although the valuation of individual stocks used to determine the value of the market as a whole, stock selection is now subordinate to asset allocation. Even Bill Miller, the ultimate bottom-up investor, is going to lose his job after thirty years at the helm of Legg Mason Value Trust. Investors need to begin to focus on the positive signals that the market is sending us - better economic data will be a boon for the U.S. stock market.
2011-11-22 Whether the U.K. is in the Euro or Not, We Are All in This Together by Mike Amey of PIMCO
Can the U.K. economy withstand a further sharp deterioration in the European debt crisis? The prospect of European recession, coupled with the U.K.'s program of tight fiscal policy, points to a challenging economic outlook for the U.K. A weak eurozone means weak export prospects at a time when the U.K. is trying to rebalance its economy towards greater exports. The U.K. economy has made great strides in stabilizing its banking system, but it is not yet in a position where it can withstand a systemic European crisis involving multiple defaults.
2011-11-21 No Direction Home by Christian Thwaites of Sentinel Investments
The conceit of Ancient Rome: In Imperial Rome, roads out of the city marked only the distance from the city, not to anywhere. All that counted was how far or near you were from it. The ECB adopts a similar centricity: all that matters is to keep prices stable. Nothing else. Which is why euro bonds continue to retreat with Italy and Spain hitting the 7% club for their 10-year paper. Unemployment can remain at 10% for three years. Growth can slow to 0.2%. But while inflation stays above the 2% target, all bets are off to ease the pain.
2011-11-21 No Direction Home by Christian Thwaites of Sentinel Investments
The conceit of Ancient Rome: In Imperial Rome, roads out of the city marked only the distance from the city, not to anywhere. All that counted was how far or near you were from it. The ECB adopts a similar centricity: all that matters is to keep prices stable. Nothing else. Which is why euro bonds continue to retreat with Italy and Spain hitting the 7% club for their 10-year paper. Unemployment can remain at 10% for three years. Growth can slow to 0.2%. But while inflation stays above the 2% target, all bets are off to ease the pain.
2011-11-18 Behavioral Finance (Why Watching CNBC Wont Make You Rich) by David Edwards of Heron Financial Group
The current confluence of strong and rising earnings, low stock price valuations and exceptionally low interest rates presents one of the best stock buying opportunities in 50 years. Most Americans will not take advantage of that opportunity because most invest with their hearts, not with their heads, and right now their hearts are filled with fear! To help our clients invest with their heads, we present this commentary on behavioral finance.
2011-11-17 The Holiday Spending Outlook Reflects Continued Consumer Caution About the Economy by Team of American Century Investments
Santa may not be especially generous, but at least hes planning on adding a little extra compared to last year. That outlook is according to the National Retail Federation. And while this forecast is not one to get retailers especially excited about the season, it is the second best outlook for growth in spending in the past five years. The major challenge for retailers will be that, while spending is forecast to increase slightly, consumers will be price-conscious and bargain-drivenmeaning that generating profit growth off any sales increases will be a difficult challenge.
2011-11-17 European Respite Allows Fundamental Scrutiny of Economy by Matt Lloyd of Advisors Asset Management
An interesting week of economic data has allowed the slight respite from the European soap opera to push a more fundamental scrutiny of the economy. The two-day heavy release reveals quite a few of positive surprises, even if they are slight. In Q1 we grew at 0.4%, the Q2 at 1.3% and the non-revised number for the Q3 is at 2.5%. This growth is in light of the acceleration of the European situation that started in July and should have impacted the domestic GDP growth rate. However, we saw just the opposite due to the relative strength of the Euro compared to the U.S. dollar.
2011-11-17 A Risk Lurking in Octobers Retail Sales by Russ Koesterich of iShares Blog
October retail sales are the latest sign that the US economy is likely to avoid another recession and is experiencing what Im calling The Great Idle. But a look behind the retail numbers also reveals a major risk facing the US economy. With unemployment still high and wages growing so slowly that hourly workers are losing purchasing power at the fastest rate in 20 years, you may be wondering where consumers are getting the money to buy new cars or the latest iPhone. It turns out that surprisingly brisk retail spending is being supported by lower savings and by help from the government.
2011-11-17 Its All Very Taxing by Howard Marks of Oaktree Capital
But what is the fair share? How is it to be determined, and by whom? When Senator Reid says, its time for millionaires and billionaires to pay their fair share, he implies they havent been doing so thus far. How does he know? Whats the standard? If theres an objective standard for ones fair share, why does it only seem to be those from the left side of the political spectrum who say its not being paid? And if there isnt an objective standard, how can the fair share be determined? The truth is, fairness is almost entirely in the eye of the beholder.
2011-11-16 It Ain't Over Till It's OverAnd Thats Not Happening Soon by Team of Guild Investment Management
Dont expect the current crisis of budgetary deficits and spending restraints to stop any time soon. Instead, think in these realistic terms: the era of fiscal restraint and spending limits has come, and will be with us for ten to twenty more years. It is obvious to veteran observers that Europe and America are facing hard choices that will result in slow growth and increased suffering for the people. And for that we have our incompetent legislators past and present to thank. They have misused their mandates, grossly exceeded their budgets, and are loath to correct wayward behaviors.
2011-11-15 Michael Aronstein on Today's Key Macro Trends by Robert Huebscher (Article)
Michael Aronstein is the president and chief executive officer of Marketfield Asset Management. Since its inception in 2008, his fund has returned 31% while the S&P has been down 15%. I spoke with him about the key macroeconomic and strategic issues facing investors today.
2011-11-15 It's All Greek to Me by Michael Lewitt (Article)
As one who has written that there is little chance of a long-term solution to Europe's problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump.
2011-11-15 Gump Pong by Doug MacKay and Bill Hoover of Broadleaf Partners
The behavior of the stock market of late has been a lot like Forrest Gump practicing ping pong-blazingly fast and completely mesmerizing. After zoning out, I had to ask myself, did that really happen? I've experienced many ups and downs in the stock market over the last twenty-five years, but rarely have I ever seen so many high speed, directional changes compressed into such a narrow period of time. By my count, the S&P 500 experienced four round trip volleys of ten percent or more since early August, before moving to higher ground in late October-all on lighter than normal volumes.
2011-11-15 In a World Dependent on Crude, is Natural Gas the Savior? by Chris Maxey of Fortigent
It will be a busy week in the US with reports on inflation, retail sales, industrial production and housing starts. Inflationary pressure is likely to show further signs of easing in October, particularly as food costs continue to stabilize. Retail sales were quite strong in September, but gains for October are expected to be more muted. Earnings season is winding down, with quarterly reports expected from UniCredit, Dell, Home Depot, Walmart, Target, Vivendi, Dollar Tree and Gap. The only major central bank to meet this week is the Bank of Japan, which is unlikely to change rates.
2011-11-15 Every Picture Tells a Story: Market Charts Looking Good by Liz Ann Sonders of Charles Schwab
With so much focus on the macro, I thought an update on the micro would be welcome.
Several measures of sentiment, valuation and technical conditions show the market to be in pretty good shape.
Macro headwinds persist, but the expectations bar has arguably been set low enough to be easily hurdled.
2011-11-14 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
News from Europe continued to roil markets on a daily basis, but when all was said and done there were new governments in Greece and Italy (same governments just different leaders), and the stock market advanced on the week as economic data and earnings continued to impress investors. As the charts above illustrate the Dow Jones Industrial Average gained 1.4% while the NASDAQ Composite was flat as concerns over Apple held back that average.
2011-11-14 Improving Recovery Prospects by Charles Lieberman of Advisors Capital Management
Europe is moving slowly towards resolving its financial issues, but the performance of the domestic economy is looking significantly better. A domestically originated recession is looking ever more unlikely. Europe may take a while to resolve its financial and budget issues, but the adverse effect of a recession in Europe, even a severe one, on our domestic economy should be negligible. So while tremors from Europes financial turmoil may disrupt our market temporarily, they are unlikely to derail our expansion. This suggests that the equity market should continue its recent recovery.
2011-11-14 Don't Fret the Foreign Stuff by Brian S. Wesbury and Robert Stein of First Trust Advisors
Guess what? Japans real GDP grew at a 6% annual rate in the third quarter, a sharp snapback from the downturn following that awful earthquake and tsunami. Much of the rebound was auto-related, as manufacturers overcame problems with electricity and the supply-chain. While the swings in Japan are more dramatic, US economic data shows the same pattern. Real GDP accelerated in the US to a 2.5% annual growth rate in Q3. If we exclude the large drag from an inventory slowdown, real final sales grew 3.6%.
2011-11-14 Pacific Basin Market Overview October 2011 by Team of Nomura Asset Management
The Japanese equity market ended the month of October almost unchanged. Concerns about Europes sovereign debt crisis and a slowdown in the global economy initially sent the index sliding to a new year-to-date low at the outset. Subsequently, the Japanese stock market rebounded along with a steady retreat from the excessive investor pessimism surrounding overseas economic conditions. Positive U.S. economic indicators, including unexpectedly strong employment figures, housing data and solid GDP growth, boosted market confidence.
2011-11-14 Italian Job Redux by Jeffrey Saut of Raymond James Equity Research
On Wednesday, Enel, the major Italian oil company, said, Its time to tell the truth to Italians. Number 1: The party is over. The party referenced is the welfare state that has careened so many Mediterranean countries down the entitlement road. Recently, driven by the sovereign debt markets, reality has arrived at the crossroads along with the realization that the welfare-state needs major austerity reforms. Ignoring lessons our union leaders steered us down the same road as Ohio voted to reverse a law designed to curb the bargaining power of unions representing public employees.
2011-11-14 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Retailers continue to showcase their prior quarters as Home Depot, Wal-Mart, Staples, Gap, and Ann Taylor take turns reporting profits. Additionally, October retail sales give investors one final look at the picture before the mad rush of Black Friday. The inflation data is also reported though the latest push upward in crude will not be reflected quite yet. Europe continues to be the talk of the town and all eyes will remain on Greece and Italy as the world watches the transitions of power in those two struggling economies.
2011-11-11 Down with the Eurozone by Nouriel Roubini of Project Syndicate
The eurozone crisis seems to be reaching its climax, with Greece on the verge of default and an inglorious exit from the monetary union, and now Italy on the verge of losing market access. But the eurozone's problems are much deeper. They are structural, and they severely affect at least four other economies: Ireland, Portugal, Cyprus, and Spain. With Italy too big to fail, too big to save, the endgame for the eurozone has begun. Sequential, coercive restructurings of debt will come first, and then exits from the monetary union that will eventually lead to disintegration.
2011-11-10 Tipping into Recession? Not Yet by Russ Koesterich of iShares Blog
If you think this is a bad economy, you havent seen anything yet. Thats what the Economic Cycle Research Institute said on Monday when it warned investors that the US economy is tipping into a recession. But heres why Russ does not agree. As ECRI recently pointed out, recessions can begin in periods of positive GDP growth. Im closely watching a big uncertainty looming over the global economy-whether Europe will be able to resolve its crisis. If Greece does end up defaulting on its debt in a disorderly fashion, then the US economy could end up very well tipping into a recession.
2011-11-08 Checking the Boxes by Research Team of GaveKal
We have argued recently that the current rally is largely dependent on US economic performance, since Europe's crisis is not going to be solved anytime soon. On that basis, Friday's reports of mixed and lacklustre data for US employment may not seem overly confidence-boosting. The household survey showed the unemployment rate unexpectedly ticked down from 9.1% to a six-month low of 9.0% in October; but the establishment survey disappointed, showing total nonfarm payrolls grew +80K last month Beyond these headline figures, however, we found the report supportive of our major current themes.
2011-11-08 Perfect Storm: Eight Reasons to be Bullish on the US Dollar by Mike "Mish" Shedlock of Sitka Pacific Capital Management
One of my much appreciated contacts is Steen Jakobsen, chief economist for Saxo Bank in Copenhagen, Denmark. Today he passed on an "internal note" that he gave permission to share. Steen Writes..."One of my main themes over the last quarter has been a "relative outperformance" of the US economy relative to consensus. This has materialized and our call was almost entirely driven by Consumer Metric data which over the last three years has outperformed any other relevant predictor. This is now slowing down slightly, but still elevated..."
2011-11-07 Better in the U.S.; Worse in Europe by Charles Lieberman of Advisors Capital Management
Economic data show that the domestic economy has regained its footing after a weak performance early this year, even as political considerations in Europe delay resolution of its credit crisis. This is particularly frustrating because the basis for addressing the crisis is widely shared and agreed upon. Growth prospects have improved sharply over the span of just a few weeks. Economic growth forecasts were being downgraded at a rapid pace a month ago and forecasts of recession had become common. Instead, Q3 growth exceeded Q1 and Q2 combined and another solid advance in Q4 now seems likely.
2011-11-07 Fragile China by Milton Ezrati of Lord Abbett
There is a certain irony in this situation: Washington seems ready to start a trade war with China, while investors, for other reasons, worry over a crackup in this critical economy and crucial engine of global growth. And there is reason to worry about China. Inflationary pressures have grown, threatening to undermine that economys competitive edge, slow or stop the pace of economic growth, and jeopardize asset values. Chinas anti-inflation policies independently threaten economic growth prospects and also asset prices.
2011-11-07 Risks Remain High, But May Be Receding by Bob Doll of BlackRock Investment Management
We do not think the Fed is quite ready yet to enact QE3, but should we see some sort of combination of further chaos in Europe, inflation levels receding further and economic growth deteriorating, the likelihood would grow. On the economic front, last week saw the release of the October payrolls report. Gains were slightly weaker than expected (up 80,000), but the data also showed that gains in August and September were revised up sharply and that unemployment fell very slightly, from 9.1% to 9.0%.
2011-11-05 Welcome to the Great Idle by Russ Koesterich of iShares Blog
First, there was the Great Depression. Then, there was the Great Recession. Now, the US economy is stuck idling along in neutral, temporarily unable to move beyond sluggish growth, high unemployment and a general lack of confidence.
2011-11-05 The Political Season Heats Up by Monty Guild and Tony Danaher of Guild Investment Management
U.S. presidential elections are a year away, while France and many other countries will be staging elections within the next twelve months. We can expect continued volatility as politicians around the globe say things to benefit their re-election chances which can have a negative impact on stock prices globally over the short run. This has made and will continue to make the tried and true method of buying and holding specific stocks for the long term a difficult road to travel anywhere in the world.
2011-11-04 Buyer's Remorse by Hardy Zhu of Matthews Asia
Autumn has traditionally been a strong season for housing sales in China, and September and October are usually dubbed the golden and silver months. But press reports this year have called September copper and October iron in light of sagging sales figures. Sales dropped 49% over last year in the 14 major cities it tracks. Transaction volume in many major cities retreated even further. Due to weak sales and tighter loan quotas from banks, many developers have lowered prices in attempts to expedite sales. In Shanghai, prices for some units have declined 20% to 40%.
2011-11-03 Households Continue to Reduce Debt and Embrace Frugality by Team of American Century Investments
Many things are different about the current economic recovery compared with past. One of the most important differences is the lack of any meaningful resurgence in consumer spending. Households continue to reduce their debt levels, which can be good for our long-term economic outlook. But in the near term, deleveraging means consumers cannot play the same role they have of driving strong economic growth by a surge in spending that satisfies their deferred consumption during the downturn. Well take a look at how households and consumers are faring in their efforts to reduce debt.
2011-11-03 Dressing Up a Default for Halloween by Team of BondWave Advisors
Politicians in Europe spent October trying to juggle three balls: 1) avoiding an unavoidable Greek default, 2) keeping a Greek default from cascading into Italy and Spain, and 3) shoring up the European banks before a Greek default. BondWave Advisors discuss the details of the Greek situation in our November Fixed Income Report and provide additional insight into the US Treasury, Corporate and Municipal Bond Markets.
2011-11-03 Fed Fights for Relevance by Brad Sorensen of Charles Schwab
The Federal Reserve made no changes to their current course of action, but continue to leave the door open for additional measures.
The statement noted stronger economic activity in the third quarter and increased household spending but continued weakness in employment and housing.
Increasingly, it appears that the Fed is being pushed to the background, frustrating their attempts to get the economy moving and reduce the unemployment rate.
2011-11-02 Born in the USA: A Look at What Could Go Right by Liz Ann Sonders of Charles Schwab
The expectations bar has probably been set low enough to be easily hurdled as the big market rally may be indicating.
Not only is recession risk fading in the near term, a very positive longer-term story is emerging, even though very few are in tune (yet).
Investors have gotten used to digesting worst-case scenarios maybe it's time to ask what could go right.
2011-11-02 Could America Turn Out Worse than Japan? by Mohamed A. El-Erian of PIMCO
There was a time when America looked down on Japan for the latters inability to deal with its economic problems. No more. Like Japan, America is now realizing how difficult a post bubble economy can be. The fear is that it will also find out that that it lacks some of Japans attributes needed to cope with long years of economic stagnation. The US has no time to waste to build on the important, albeit small progress that has been made in recent weeks. If it does not, there is a risk that the countrys economic fate could end up being even worse than what Japan has experienced.
2011-11-02 Cain vs. Romney by Team of Bespoke Investment Group
Herman Cain has definitely surged inthe polls, and he has taken the lead in many of them. As shown below,however,people are still putting their money on Romney to win the GOP nomination for President. Over atIntrade.com, the contract for Romney to win the GOP nomination puts the odds at 69.5%, while the contract for Cain puts his odds at only 6.3%. At its peak, Cain's Intrade odds to win were just over 10%, and they havepulled backover the past few weeks. Romney's odds to win keep on creeping higher.
2011-11-02 Debarred from Certainty by Christian Thwaites of Sentinel Investments
The innocent pre-2008 are days gone. Expect volatility. Markets distrust most of the news and theres little conviction in any one direction. Vanilla investors are on the sidelines. Day to day trading is mostly position covering and range bound investing. Thats fine with us. The more algos and high frequency trading noise, the easier to spot fundamental anomalies. The challenge is to keep fluid between seemingly different but highly correlated markets.
2011-11-01 A Better Way to do Financial Planning by Robert Huebscher (Article)
Simplicity is dangerous when it comes to financial planning. Easy-to-use tools that project your retirement savings based on minimal inputs such as your income and savings rate amount to a “bait-and-switch,” according to Larry Kotlikoff, a Boston University professor of economics. To properly prepare for retirement, one should focus on maintaining a constant standard of living throughout their life – what economists call consumption smoothing.
2011-11-01 Just When You Thought Europe was Rescued, New Skeletons Emerge by Chris Maxey of Fortigent
Economic data in the US will receive plenty of attention this week. On Tuesday, the ISM Manufacturing Survey is released, with economists anticipating continued expansion in the manufacturing sector. Wednesdays ADP private payroll employment report will offer a taste of what is to come in Fridays nonfarm payroll employment report for October. Consensus expectations are for job growth of slightly less than 100,000 and an unemployment rate of 9.1%.
2011-11-01 Separate Tables by Christian Thwaites of Sentinel Investments
About two thirds of companies have beaten expectations and growth is around 16%. If the market holds at 1280 pixel-time level, we will have seen a 17% retracement of the 22% summer correction. Equities look well supported but NFLX, AMZN and GMCR [1] show how fragile is confidence. The ever-reliable Fed surveys from Richmond, Chicago and Kansas all showed improvements with very little sign of price increases. Bottom Line: Some worry that the sell off in bonds may be too rapid but we're comfortable with domestic stocks and, increasingly, international.
2011-11-01 Follow the Cycle by Richard Bernstein of Richard Bernstein Advisors
It remains a mystery to us as to why investors believe each cycle is different from other cycles. The title of a very popular book right now is "This Time is Different" Some cycles are stronger and some are weaker, and some cycles last longer than others. However the investment implications at different points in the cycle remain remarkably consistent. With the exception of bubbles, we have yet to come across a truly 'different' investment cycle. Most important, the typical rotations within the global financial markets are following their normal pattern even during the current cycle.
2011-10-31 And That's The Week That Was by Ron Brounes of Brounes & Associates
Europe apparently has solved all of its financial challenges While Greek protests continue daily, the EU leaders held a contentious summit that teetered between storming out with nothing and completing a breakthrough deal. In the end, the group agreed to significantly write-down Greeces sovereign debt held by private investors, recapitalize the banking system, and expand the bailout fund. The ministers hope that China and Japan will embrace the new deal and even throw a few bucks their way as an investment in the global economy, but nothing definitive has been determined at this time.
2011-10-31 Not Quite Out of the Woods, Yet by Charles Lieberman of Advisors Capital Management
Progress was made as Europe outlined how it would defuse its credit problems and domestic growth was resoundingly non-recessionary. Critics pointed out the flaws and they are correct that more progress is needed. Europe's banks must now raise capital and the market must become more comfortable that financial support will be provided to sovereign borrowers while they make progress towards reducing their deficits. Domestically, more job growth is needed to provide the income gains needed to finance spending gains. All of the weaknesses in the economy would be addressed if job growth improved.
2011-10-31 What's Going Right? by Brian S. Wesbury and Robert Stein of First Trust Advisors
Everyone knows housing is still weak. And, everyone knows jobs are growing, but not fast enough to seriously lower the unemployment rate (9.1%). Everyone also knows real GDP has expanded for nine consecutive quarters, at an average annual rate of 2.5%. No one is satisfied with this; but it is a recovery, not a recession. So, how can real GDP grow when housing and employment are so weak? Well, it turns out that the strongest part of the economy has been business investment. Equipment and software investment has grown five times faster than GDP-12.9% over the past nine quarters.
2011-10-31 Rally Continues on Positive News from Europe by Bob Doll of BlackRock Investment Management
Investor sentiment has certainly improved over the past several weeks, and while it is much too early to declare victory over the European debt crisis, last weeks deal is certainly a positive step. The easing of the risks associated with Europes issues, along with a brighter outlook for the US economy than was the case a couple of months ago does create a more solid footing for risk assets. Given the sharp advance markets have seen over the past month, we may be in for a period in which markets need to "digest" these gains, but the longer-term outlook for stocks does appear to be improving.
2011-10-29 Missing the Forest for the Trees? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Earnings season was good and economic data in the US has improved. Robust growth is unlikely in the near future, but the economy is improving. Investors appear to be unconvinced that the picture may be brightening. Inflation continues to run higher than we'd like to see but sustainable price gains are unlikely. The Fed continues to be extremely accommodating. Italy has the potential to be a much bigger problem than Greece. A tentative agreement has been reached for Europe, but hopes for a true long-term solution remain thin. China is likely to suffer no worse than a soft landing.
2011-10-28 U.S. Corporate Third Quarter Profits Looking GoodSo Far by Monty Guild and Tony Danaher of Guild Investment Management
The events of the past few days have proved our case that more QE will be coming. In Europe, they will not let their banking system fail and will provide the necessary liquidity to backstop their banks. They can either nationalize banks or recapitalize the banking system with new capital from several countries. The bottom line is that liquidity will be added and central banks balance sheets will expand. Growing use of QE is bullish in the short to intermediate term for stocks in the U.S. and emerging markets, and it is bullish for gold, oil, wheat, and the currencies we have recommended.
2011-10-27 Outlining the U.S. Economys Growth Dichotomy by Team of American Century Investments
David MacEwen describes the growth dichotomy that has developed during the recovery from the Great Recession, and how its restricted the recovery, softened consumer sentiment, influenced the fixed income teams macroeconomic outlook, and shaped some of the teams sector outlooks. One of the key characteristics of the subpar, slow-growth recovery we have experienced since the Great Recession has been the clear divide between the recovery rates of the business and consumer sectors. Businesses have bounced back faster and stronger than the U.S. consumer who buys their goods and services.
2011-10-27 FPA Crescent Fund Q3 2011 by Steven Romick of First Pacific Advisors
An unresolved European sovereign and financial dilemma, in concert with a U.S. economy thats been a disappointment compared to the once-rosy projections of most economists, caused global markets to retreat in the third quarter. Crescent declined as well, but it fell 30% less than the U.S. market for the quarter and 40% less in the year-to-date period. The U.S. markets actually fared quite favorably and Crescent more favorably still when viewed in context of the global financial upheaval.
2011-10-27 Asia-Pacific Portfolio Committee Discusses Cyclical Outlook for Globe and Region by Robert Mead, Tomoya Masanao and Isaac Meng of PIMCO
China will likely focus more on rebalancing of the investment-focused domestic economy this time, rather than on reflating of the economy to engineer higher growth as it has done in 2008 to 2009.
Japans fiscal policy will need to be expansionary to facilitate reconstruction efforts.
We believe Australian government bonds have the potential to outperform U.S. Treasuries on a local currency basis, particularly in a left-tail global economic scenario.
2011-10-27 Eyes on the Prize by Richard Clarida of PIMCO
Before Nobel laureates Tom Sargent and Chris Sims developed their methods, economists and policymakers had no rigorous way to incorporate expectations into their statistical models.
There is a limit to forward guidances effectiveness, which is why the Fed has pursued other policy options since hitting the zero lower bound.
An uncanny correlation exists between the Feds preferred measure of the publics long-term inflation expectations and the timing or initial announcement of a quantitative easing or twist program.
2011-10-26 72% Say US Headed in the Wrong Direction by Gary D. Halbert of Halbert Wealth Management
We begin with some new Associated Press polls released. Lead among them is the poll which found that 72% of Americans now believe that the US is headed in the wrong direction. Then summarize the latest economic reports, most disappointing, but there were a few bright spots. Finally, I will address a political issue that is just beginning to make the rounds in the media. That the Republican presidential hopefuls are gravitating to a flat tax and jobs growth agenda that could stand up very well against President Obamas tax-and-spend, punish- success policies in the 2012 election.
2011-10-25 Residential Housing: The Problem and the Solution by Robert Huebscher (Article)
If arresting the decline in residential housing prices is a precondition to a broader economic recovery, then the prospects of a double-dip recessions are more likely. Over the next year home prices will decline 5% to 7%, according to Laurie Goodman. She identified two key policy initiatives that would break what she termed an ongoing 'death spiral' in the housing market.
2011-10-25 Fed Outlook More Asset Purchases? by Scott Brown of Raymond James Equity Research
The Federal Open Market Committee, the Feds policymaking arm, will meet on November 2-3. Clearly, there are some differences of opinion among senior Fed officials regarding the appropriate path for monetary policy. However, the dissenters (those wanting to do less) are a small minority. The FOMC will come together with a somewhat less troublesome near-term economic outlook (no recession in the near term), but there are more concerns about growth in 2012.
2011-10-25 Economy Continues to Surprise, But Inflation Offers a Scare by Chris Maxey of Fortigent
Equity markets continued fighting higher, with the Dow Jones Industrial Average gaining 1.4% and the S&P 500 Index increasing by 1.1% last week. Optimism from both Europe nearing an agreement on its debt problems, as well as positive earnings reports, pushed equity markets higher throughout the week. Since the start of earnings season, slightly more than 300 companies reported quarterly earnings figures. Out of those that reported, 63.7% beat consensus earnings estimates. That is a moderate improvement from the past two quarters, but somewhat below the 65% average since March 2009.
2011-10-25 Housing: A Time to Buy by David Kelly and David Lebovitz of J.P. Morgan Funds
With the debt crisis in Europe still unresolved and economic growth in the U.S. sluggish, the capital markets continue to exhibit elevated volatility. However, this does not mean that no investment opportunities exist. Although the U.S. housing market remains extremely depressed, we believe that given current valuations and demographic dynamics, now may be the time to consider an investment in housing. Few financial manias in history have had as devastating an economic impact as the American real estate bubble of the 2000s.
2011-10-24 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Earnings season rolls along as Citigroup, Wells Fargo, and Bank of America hope to send some positive messages from banking (that JP Morgan was unable to dodont hold your breath). IBM and Intel give investors a glimpse into the world of tech. A hectic week on the economic calendar leaves investor hoping to see a continuation of the rebound in manufacturing (from the post-Japan earthquake doldrums) and good news on the inflation front. The Fed Beige book grants another look into the data debated by the policymakers as investors speculate about future stimuli.
2011-10-24 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Big oil takes center stage in earnings as Exxon-Mobil and Chevron make a run at record profits. Amazon.com gives an early glimpse into the holiday season. Euro-zone leaders try to make progress on the rescue plan and France and Germany have sworn that the matter will be rectified by mid-week (or at least a course of action will have been set). The initial release of third quarter GDP highlights the economic releases. Somehow 9.1% growth rate (like Chinas) is not likely to be in the cards.
2011-10-24 Looking A Bit Healthier by Charles Lieberman of Advisors Capital Management
Important uncertainties remain, but our domestic economys performance appears to be improving. Third quarter GDP, which will be reported this week, is expected to be the strongest of the year, suggesting that growth held up despite battles over the budget that scared investors and induced a downgrade by S&P. Nonetheless, job growth remains anemic and Europe is still working to contain its sovereign debt crisis and the damage it could inflict on its banks. So, more progress is necessary to restore confidence and enable growth to pick up to more desirable levels.
2011-10-24 Beige Book Should Leave Investors Less Blue by Kristina Hooper of Allianz Global Investors
The Feds Beige Book, which provides a more holistic view of the economy than any individual data point, confirmed what weve seen in recent economic reports: the U.S. economy grew slightly in September and the first week of October. Also positive were the latest industrial production numbers: U.S. industrial production increased for the third straight month helped by rising demand for autos, planes and electronics. This offers further evidence of a disconnect between sentiment and dataone that could spell opportunity.
2011-10-21 Emerging Markets Real Estate by Global Real Estate Team of Cohen & Steers
Emerging market real estate stocks were hit hard in the risk-averse environment that defined the third quarter. The asset class underperformed its developed-market counterpart, which also had a double-digit decline amid slowing global growth and concerns regarding Europes unresolved sovereign debt crisis. Slowing global growth is taking some pressure off emerging markets in terms of inflation containment. A trend of policy easing appears to be underway. This could result in improved performance for recently problematic sectors. We have been incrementally adding to such sectors.
2011-10-21 Global Equity OutlookFourth Quarter 2011 by Team of American Century Investments
In this edition of Weekly Market Update, presents the teams outlook for global equity markets, based on the latest research and discussions with companies from industries and countries across the economy and the globe. The team focuses on individual security selection, building portfolios from the bottom up, rather than making top-down judgments about the economy. In their view, economic trends matter to the extent that they relate to corporate earnings power. As a result, the outlook focuses on corporate earnings and other areas they deem important to successful global equity investing.
2011-10-21 Debt is Addictive, and Requires a Painful Rehab by Rick Palacios of John Burns Real Estate
The charts below tell the story. The typical U.S. consumer has become addicted to debt, and the banker/dealer continues to supply more debt drugs in the form of credit cards as well as low interest rate loans for homes, cars, televisions, and even cell phones (cheap phones in exchange for multiyear contracts). Business owners and governments are just as addicted. Why wait for what you want when you can get your fix right away by signing on the dotted line?
2011-10-21 How to Succeed at Auctions by Herbert Abramson and Randall Abramson of Trapeze Asset Management
We believe weve suffered more from the illiquidity and greater volatility of many of our smaller cap holdings, but thats where we are finding the best values with the greatest potential. When the markets recover, that same illiquidity should boost performance on the way up. Maybe sooner than is believed.
2011-10-21 Do Bullish Investors Have an Ace in the Hole? by Frank Holmes of U.S. Global Investors
You may not be able to count cards at the blackjack table, but counting historical trends of the stock market and discovering inflection points are not only legal strategies, they are essential to successful investing. One card worth counting is the Purchasing Managers Index (PMI), which measures the manufacturing strength of any given country. A rising PMI indicates a growing economy and is considered a leading indicator.
2011-10-20 U.S. Real Estate Securities by Global Real Estate Team of Cohen & Steers
We would like to share with you our review and outlook for the U.S. real estate securities market as of September 30, 2011. The FTSE NAREIT Equity REIT Index had a total return of 14.7% for the quarter, compared with a 13.9% return for the S&P 500 Index. Year to date, the indexes had total returns of 6.0% and 8.7%, respectively. From a sector perspective, we believe apartment REITs will continue to benefit from positive market fundamentals despite a weak job market. We remain underweight in office REITs, but continue to see attractive opportunities in urban markets.
2011-10-20 Global Real Estate by Global Real Estate Team of Cohen & Steers
We would like to share with you our review and outlook for the global real estate securities market as of September 30, 2011. The FTSE EPRA/NAREIT Developed Real Estate Index had a total return of 17.4% for the quarter (net of dividend withholding taxes) in U.S. dollars, and 12.7% for the year to date. Global real estate securities fell sharply in the third quarter, along with equities broadly, as risk factors escalated. All major regions had double-digit declines amid slowing growth in the U.S. and China and intensified concerns regarding Europes sovereign debt problem.
2011-10-19 Equity Investment Outlook by Team of Osterweis Capital Management
During the third quarter, the stock market plunged as investors hopes for a sustained U.S. economic recovery dissipated and fears of a world-wide economic slowdown and possible U.S. double-dip recession increased. The U.S. faces several major structural headwinds including a moribund housing sector, high unemployment, bank credit restraint, and a growing and worrisome federal debt. Underlying these and other problems is the depressing effect of the end of the debt super cycle.
2011-10-19 Thinking Long-Term by Kendall J. Anderson of Anderson Griggs
We will never be able to remove all the news that influences our investment decisions, nor should we. What we can do is recognize that rapid trading and market timing may work in the short-term, but has reduced individual returns over the long-term. We can recognize that markets regress to the mean over long periods of time, but that may be much longer than you have or want. Our approach is an attempt to reconcile the two. We are fully aware that at times, stock and bond prices exceed value and at other times they are well below value.
2011-10-19 Middle East/Africa: Economic Review September 2011 by Team of Thomas White International
The MENA region continues to grapple with instability in the aftermath of the Arab Spring uprisings. The draining of public finances, elevated levels of inflation and high rates of unemployment seem to paint an unfavorable picture for the region in the short term. According to the IMF World Economic Outlook report, inflation in the region is expected to average around 7 percent in 2011 and 10 percent in 2012. In addition, the report noted the adverse impact of weaker growth in the United States and Europe on commodity prices, foreign investments and economic activity.
2011-10-19 Developed Asia Pacific: Economic Review September 2011 by Team of Thomas White International
Developed Asia Pacific nations continued to face headwinds to growth in September. With factory output across the world slowing down to a trickle, major developed Asia Pacific economies ranging from Japan to New Zealand started witnessing pressure on their economic output. As exports still act as the backbone for many of Asias developed countries, a global decline in manufacturing is causing concerns. A slowdown in the U.S. and Europe also cast a shadow on the economic prospects for Asian nations.
2011-10-19 Americas: Economic Review September 2011 by Team of Thomas White International
Financial markets faced significant volatility as the global economic outlook weakened and concerns about the European crisis worsened. Markets in the Americas region were also affected by the erosion in investor confidence, though the developed markets in the region fared relatively better. Latin American currencies saw steep falls against the U.S. dollar, as the weaker economic outlook is expected to force the central banks to cut interest rates in the future, potentially reducing the relative attractiveness of these markets to global investors.
2011-10-19 America at Stall Speed? by Mohamed A. El-Erian of Project Syndicate
Judging from the skittishness of both markets and consensus expectations, the United States economic prospects are confusing. One day, the country is on the brink of a double-dip recession; the next, it is on the verge of a turbo-charged recovery, powered by resilient consumers and US multinationals starting to deploy, at long last, their massive cash reserves. In the process, markets take investors on a wild rollercoaster ride, with the European crisis (riddled with even more confusion and volatility) serving to aggravate their queasiness.
2011-10-18 Bob Doll: Why the US is Positioned Strongly by BlackRock (Article)
Investor unease has risen dramatically over the past quarter in the face of growing concerns about the world's economic and financial health. The focal point has been the intensifying debt crisis in Europe. The issues facing Europe are highly complex, but essentially are underscored by a single question: Is Europe facing a solvency crisis or a liquidity crisis?
2011-10-18 Letter to the Editor by Various (Article)
A reader responds to Laurence Siegel's article, A Critical Look at Obama's Economic Team, which appeared last week.
2011-10-18 Economic Data Receives Another Dose of Positive News by Chris Maxey of Fortigent
Not only was key economic data, such as retail sales, better than expected, but also the start of earnings season brought about a number of positive corporate earnings surprises.An important caveat is that analysts earnings estimates were routinely cut over the past several weeks, leading to a lowered bar and higher likelihood of upside surprise.Regardless, markets appear pleased by the news, at least for the time being. Over the latest week, each of the major indicators, excluding consumer sentiment, came in above consensus.
2011-10-18 Volatility Rears its Ugly Head by Jeremy Blackman of Hester Capital Management
The major debate in the financial markets today revolves around whether or not the U.S. is going to experience a double-dip recession. We do not expect a recession, but if that does happen it should be a shallow one. We remain cautiously optimistic that the politicians in the US and Europe will eventually do the right thing as the consequences of not acting in a prudent and responsible manner are not pretty. We anticipate that markets will continue to be volatile until Europe finds resolution for its problems and until politicians across the globe learn to compromise across party lines.
2011-10-17 9 of the Second 10 Best Performing Dow Stocks are Fairly Valued by Chuck Carnevale of F.A.S.T. Graphs
We have continued to see a lot of good companies producing good shareholder returns. However, as we have gone deeper down the list, we have begun to see more examples of cyclical companies and companies that have not had as stellar a record of operating performance. Therefore, it stands to reason that these less successful businesses have also produced lower shareholder returns. We believe its important for prospective investors to realize how different specific companies can perform regardless of the general state of the market.
2011-10-15 Can 'It' Happen Here? by John Mauldin of Millennium Wave Advisors
The beginning of the end of the Weimar Republic was some 89 years ago this week. There is a stream of opinion that the US is headed for the same type of end. How else can it be, given that we owe some $75-80 trillion dollars in the coming years, over 5 times current GDP and growing every year? Remember the good old days of about 5-6 years ago (if memory serves me correctly) when it was only $50 trillion? With a nod to Bernankes helicopter speech, where he detailed how the Fed could prevent deflation, I ask the opposite question, Can it (hyperinflation) really happen here?
2011-10-14 The Bottom Line #6 by Paul Azeff and Kory Bobrow of Euro Pacific Capital
What we can learn from the past is that in the current environment, being nimble, buying at major fear-induced selloffs and, even more importantly, selling into strength, is a strategy that will outperform the buy-and-hold crowd. For nimble traders, volatility represents opportunity. Having someone by your side to help calm the fear and quell the exuberance helps the returns a lot. Its when you have volatility like weve seen of late, or after the Great Depression, or experienced in the Japanese market over the last 20+years, when you really need a good execution strategy to stay profitable.
2011-10-14 Will the Micro Matter? by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Q3 earnings season is in full swing and it will be modestly positive after numerous reductions of expectations due largely to economic concerns. The US will avoid a dip into recession and, for now, the data seems to support that view. The yield curve has flattened since the announcement of Operation Twist but mortgage applications have yet to jump and companies continue to cite concern over governmental policies for their continued caution. The EU debt crisis has had some positive movement, providing some hope to the market, but concern is growing over the state of the Chinese economy.
2011-10-13 Our Fixed Income Macro OutlookFourth Quarter 2011 by Team of American Century Investments
Our economic outlook has become a bit more defensive and cautious, compared with earlier this year. After improvement last year, economic conditions have slowed. In particular, the financial sector has come under renewed pressure from the European sovereign debt crisis and continued housing market stagnation. It remains to be seen if this slowing is transitory or more significant. Both the consumer and business sectors have experienced slowing. But a subpar recovery with headwinds remains our projected most-likely scenario, not a recession.
2011-10-13 The Great Deleveraging: Will Consumer Spending Ever Recover? by Team of Knowledge @ Wharton
U.S. households are a critical contributor to economic health. But the financial downturn of recent years has hit consumers hard, and they are more hesitant than ever to spend, borrow or seek access to credit. Although a more debt-conscious outlook has positive implications for the individual, experts say the widespread deleveraging is making it difficult for the business sector and the economy as a whole to get back on its feet.
2011-10-13 The Instability of Inequality by Nouriel Roubini of Project Syndicate
This year has witnessed a global wave of social and political turmoil and instability, with masses of people pouring into the real and virtual streets. While these have no unified theme, they express in different ways the serious concerns of the worlds working and middle classes about their prospects in the face of the growing concentration of power among economic, financial, and political elites. Any economic model that does not properly address inequality will eventually face a crisis of legitimacy.
2011-10-12 Employment and Unemployment by Mike "Mish" Shedlock of Sitka Pacific Capital Management
The irony is that the better the economy the more people will be tempted to come back into the labor force and the more upward pressure on the participation rate and unemployment rate as well. Therefore, we cannot assume that 158,000 jobs per month will necessarily take the unemployment rate to 7% by 2017. Should the economy slip back into recession, and I think it already has, either employers shed more jobs, corporate earnings plunge, or both. I suggest both. On that basis, earnings growth is not sustainable and stocks are certainly not cheap.
2011-10-12 Repeating the Future by Neel Kashkari of PIMCO
For long-term investors, meaning those prepared to stay invested for three, five and even 10 years, who can endure volatility, we believe equities can offer attractive returns.
In an extended period of slow economic growth and deleveraging, interest rates are likely to remain low. Actual income generation from investments is important.
Hopefully society can institutionalize the lessons from this crisis so that future generations dont repeat it: Individuals, corporations and countries should only borrow to fund long-term investment, not current consumption.
2011-10-12 Investing in an Environment of Extremes by David Kelly of J.P. Morgan Funds
The volatility of the last few months along with very negative headlines have caused a stream of assets to leave equity funds and move into cash and high-quality fixed income assets. However, this has left assets at extreme valuations. Indeed, by the end of the Q3, U.S. stocks were selling at lower prices than at the end of any quarter in 21 years. 10-year Treasury yields were running below the core year-over-year inflation rate for the first time in 31 years. Long-term investors may want to be somewhat over-weight in equities and under-weight in fixed income relative to a normal portfolio.
2011-10-11 A Q3 Client Letter Drawing on Buffett’s Optimism 'The U.S. is coming back now' - and why three inves by Dan Richards (Article)
Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles. This quarter's letter provides clients with perspective on the recent market turmoil.
2011-10-11 Undercut Low? by Jeffrey Saut of Raymond James Equity Research
What do you mean by an undercut low? was a question I received in numerous emails after last Tuesdays verbal strategy comments. Well, for the past few months I have been talking about the similarities to the declines, and subsequent bottoming sequences, of October 1978 and October 1979. I know that the environments are very deferent but, I am referencing just the pricing action of the D-J Industrials. As often stated, those aforementioned declines were just as severe/quick, as what we experienced from the 7/27 intraday high of 12751.43 into the selling climax lows of August 8th and 9th.
2011-10-10 Talking Points for the "Occupy Wall Street" Protesters by John P. Hussman of Hussman Funds
The proper way to address the present economic imbalances is pursue policies that encourage the restructuring of bad debt, the allocation of public funds and private savings to productive investment and new research, the accumulation of education and labor skills ("human capital") to allow workers to capture a greater share of their own productivity, and the continuation of social safety nets to ease the economic adjustments that are necessary in a deleveraging economy. In my view this requires a number of steps which not everyone will like.
2011-10-10 Positive Signs Exist, but Europe and Policy Are Unclear by Bob Doll of BlackRock Investment Management
It is difficult to assess value in the current environment. If the European debt crisis were to suddenly disappear, stocks would appear very cheap, but of course the uncertainty over the debt crisis remains the critical wildcard. From a technical perspective, over the past couple of weeks the S&P 500 tested the 1,100 low it reached in August and while that level was briefly pierced from a price perspective, stocks rebounded quickly which perhaps makes the 1,100 level a stronger floor. This is not to say that that level will not be tested again, but we do believe it is a good sign.
2011-10-10 Recession Certainty - Oh, Never Mind by Charles Lieberman of Advisors Capital Management
Fears of a recession have been rampant, but the conditions that precede recession have been absent and recent data provides strong evidence that the expansion is continuing. While turmoil in Europe was expected to weaken consumer and investment spending, neither has retrenched. Rather, the economy remains on a slow growth path, with the pace of growth in the second half likely to exceed the pace of the first half of the year.
2011-10-08 An Irish Haircut by John Mauldin of Millennium Wave Advisors
But here is the issue for Europe. The amount of money needed for Ireland is going to be a lot more than they now think, or at least are willing to admit. When Eurozone politicians worry about 'contagion,' or one country wanting the debt relief that another country gets, it is a very real worry. And rightfully so, as voters in Portugal or Spain or (gasp) Italy who are burdened by debt that is seemingly intractable will also want relief. It is not just an Irish condition, it is a human trait.
2011-10-07 Fiddling While the Euro Burns by John Browne of Euro Pacific Capital
Last week, eurozone finance ministers postponed, the most difficult decisions on the Greek debt crisis. The assembled powers could have forced an orderly Greek default or they could have taken steps to push Greece out of the union. Instead, they simply bought time until the next major rollover of Greek debt-which comes due in November. Much of the prevarication can be attributed to political disagreement in Germany, where some see the current crisis not only as a means to further European unification, but also as an opportunity to extend German influence throughout the continent.
2011-10-07 Point of Maximum Pessimism? by Niels C. Jensen of Absolute Return Partners
The current level of pessimism is quite overwhelming, in particular in Europe where the eurozone crisis has taken its toll on investor confidence. This has led to valuation levels we haven't seen since the dark days of 1981-82, just before we embarked on the 1982-2000 bull market - the biggest of all time. It is our view that investors will be amply rewarded if they begin to buy European equities at current levels, although it is a strategy that shall require both a solid stomach and some patience.
2011-10-07 Third Quarter 2011 Market Commentary: This is Not 2008 by Robert Stimpson of Oak Associates
The discussion on how to contain the sovereign debt crisis torments the market, which would prefer a decisive solution administered by a powerful and determined financial authority. While stringing the situation along is painful in the near-term, it may actually allow other struggling countries in Europe time to right their budget problems and enact measured reform before bailout funds are required to force them to act. Regardless, an end to the debate will come and financial markets will recover. We intend to benefit from it.
2011-10-06 Worry and Volatility Continue in September by Team of BondWave Advisors
September was a continuation of the fear and anxiety that plagued August. Worries about a global slowdown and the fiscal situation in Europe drove a volatile month. Fears of a double-dip recession have been growing as economic data has moderated. These fears were stoked after the September FOMC meeting when the Fed downgraded the state of the economy by announcing a new plan intended to stimulate growth. The IMF also adjusted its global outlook down, revising its estimate for global growth in 2011 and 2012 to 4% from 4.3% Estimates for the US were revised from 2.5% to 1.5%.
2011-10-05 And That's The Week That Was by Ron Brounes of Brounes & Associates
While investors are still trying to figure out just what is going on in Europe, they must change their news feeds to follow events closer to home.The economic calendar will be quite hectic and investors have recently shown a propensity to over-react to each big release. Manufacturing and labor highlight the weeks data. Investors want to see a rebound in sector activity since the factory slowdown after the Japan earthquake; optimistic analysts hope the jobless claims report was not an aberration and the unemployment rate could fall below 9%. Any chance the third quarter was just a bad dream?
2011-10-05 Million Dollar Question: Dollar and Recession Risk Up Together by Liz Ann Sonders of Charles Schwab
Recession fears have mounted, but the picture is still mixed and it's not yet conclusive.
The US dollar is winning the "least ugly" currency contest, but isn't helping stocks or commodities.
Short-term, a stronger dollar is a negative for riskier assets but not necessarily longer-term, if history's a guide.
2011-10-04 Jeffrey Gundlach: Preparing for the Coming Crisis by Katie Southwick (Article)
Speaking at a luncheon in New York last week, Jeffrey Gundlach, the founder and chief investment officer of DoubleLine Capital, gave investors advice on how to survive pending crises at home and abroad. After outlining the current state of U.S. debt and tax policy, Gundlach advised against European investments, favoring the U.S. dollar and owning U.S. government bonds as a hedge against credit.
2011-10-04 The Energy Expert You Shouldn’t Trust by Richard Vodra (Article)
Daniel Yergin, a self-described 'leading energy expert,' has written The Quest: Energy, Security, and the Remaking of the Modern World, designed to provide information that policy-makers can rely upon in shaping energy policy for the decades ahead. This could be a dangerous reliance, for Yergin is an advocate for the fossil fuel community, not an honest broker of information.
2011-10-04 To Cure the Economy by Joseph E. Stiglitz of Project Syndicate
As the economic slump that began in 2007 persists, the question on everyones minds is obvious: Why? The prescription for what ails the global economy follows directly from the diagnosis: strong government expenditures, aimed at facilitating restructuring, promoting energy conservation, and reducing inequality, and a reform of the global financial system that creates an alternative to the buildup of reserves. Eventually, the worlds leaders and the voters who elect them will come to recognize this. But how much pain will we have to bear in the meantime?
2011-10-04 Is Recession a Certainty in the U.S.? by Scott Colyer of Advisors Asset Management
There is certainly much greater economic risk out there than there was just a month or two ago. My sense is that any recession that the United States may experience would be associated with a slowing of U.S. GDP because of a fall of in Europe, and potentially China. I believe that China would act quickly to reverse their tightening bias to spur growth. Calling recessions is a dangerous game. We all try to make logical sense of markets and try to forecast the future. All I know is that folks that have done well decade over decade, like Buffet, are buying and not selling.
2011-10-04 Markets Warned of Impending Recession by Chris Maxey of Fortigent
In the latest week, economic data was mixed, but news on consumer income and spending raised concerns over the health of the all-important consumer sector. Even worse, a growing number of economists are highlighting the possibility of recession. One organization, the ECRI, went as far as declaring that recession was unavoidable and warned, theres nothing policy makers can do to head it off. Such dire forecasts do nothing to bolster economic or market confidence. The ECRI has accurately predicted prior recessions, including the most recent one in 2008.
2011-10-03 Six Pac(k)in' by Bill Gross of PIMCO
Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor.
There is only a New Normal economy at best and a global recession at worst to look forward to in future years.
If global policymakers could focus on structural as opposed to cyclical financial solutions, New Normal growth as opposed to recession might be possible.
2011-10-03 Prospects for Employment and Recession by Charles Lieberman of Advisors Capital Management
Concern is high that the U.S. economy may be close to or entering recession, yet the fundamentals lend little support to such a projection. There has been no decline in jobs, while corporate health is very strong. So the recession concerns appear to be driven more by the decline in stock prices than by economic developments. There can be no recession without job losses, although the data still report job gains. Fridays employment report will shed light if anything has changed.
2011-10-03 Markets Continue to Look for Clarity by Bob Doll of BlackRock Investment Management
The global financial stresses that have been contributing to market volatility have shown no signs of easing. Financial markets have been signaling that economic growth levels are too weak to support the current financial structure. Corporate bond spreads in most markets have been widening and euro-area bank bond spreads are close to their 2008 crisis levels. These signals suggest that economic growth needs to improve sharply (which is not likely to happen any time soon) or that further policy action is needed to ease the strain.
2011-09-30 Are You Properly Positioned for the Return of the Economic Vitality of America by Chuck Carnevale of F.A.S.T. Graphs
It has been my observation over my last four decades of studying the stock market that investors have a penchant for projecting into the future what is currently happening. In other words, when the market is behaving badly, they tend to believe it is going to continue to behave badly far into the future. And as I reflect on this, it occurs to me that every bull market has ended with a bear market, and conversely, every bear market has ended with a bull market. The most important attribute to remember about free-markets is that they self adjust. Most know this as the law of supply and demand.
2011-09-30 Schwab Market Perspective: Perception vs. Reality by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Economic data continues to reveal sluggish activity, and markets have been increasingly trading in a risk-on, risk-off mode. The Fed continues to try to stimulate greater economic growth, most recently with the announcement of operation twist. We have serious doubts this will engender any broad upturn. We continue to look toward Washington to move beyond short-term rhetoric and provide some serious long-term plans that allow businesses to have more confidence in the future. European policymakers continue to delay any real action, increasing the risks of an escalation of the debt crisis.
2011-09-30 Extreme Divergence Between Coal Rocks and Stocks Unwarranted by Frank Holmes of U.S. Global Investors
Coal was relatively flat for the quarter, but whats interesting is that coal companies were severely discounted. Over the last two years, coal stocks and the commodity have closely tracked each other, until this summer, when worries about a global slowdown caused coal stocks to fall off a cliff, not once, but twice, in August and again in early September. This extreme divergence between coal companies and the commodity seems unwarranted when the long-term drivers of coal remain supportive.
2011-09-30 ProVise Bullets by Ray Ferrara of ProVise Management Group
As the Congressional Committee of 12 meets to figure out what to do about spending and taxes, we thought you might find the following of interest: Again, some people think it would be a good idea to distribute purchasing power by taking more millions of citizens off the federal income tax rolls entirely. While everybody wants relief from high taxes, there are at least two things wrong with this proposal.
2011-09-29 Grease (Greece) is the Word by Bill Smead of Smead Capital Management
You might think that the countries in Europe like Portugal, Ireland, Greece and Spain are the source of the current consternation in the US stock market. We believe that Europe is peripheral to the core issue. American investors have spent the last ten years falling in love with the BRIC trade and feeding an infatuation with the global synchronized economy and the emerging consensus surrounding global stocks/bonds. In our opinion, it is time to go back to conventionality and leave the BRIC trade before its time is gone and investors put their capital back in motion.
2011-09-28 Fed Extends Maturities by Kathy A. Jones and Rob Williams of Charles Schwab
Fed Notes-The TwistObservations and takeaways on the Fed's two day meeting this week.
Bank Bondsplus Extraordinary Calls on Trust Preferred SecuritiesWe elaborate on factors affecting the banking sector.
Obama Bill Questions Exemption on Muni bondsOur view on one piece of the job proposal presented by the Obama administration.
Liquidity- Ignore at Your PerilWe highlight some reasons why liquidity, especially in volatile markets, is an important investment factor.
2011-09-28 On Flexibility, and Why the World Needs More of It by Andrew Foster of Seafarer Capital
I hold no illusions about the gravity of the current sovereign crisis. The intractable nature of such large debts has sapped confidence. Most of Europe is saddled with unsustainable obligations, and a decade of fiscal profligacy has put the U.S. on a trajectory to match Europes worst. The West must put its fiscal house in order. All that stated, I want to be clear about what I view as our central problem today: the world is not growing fast enough. The challenge we face is, first and foremost, one of growth, and not necessarily one of debt.
2011-09-27 When Greece Defaults by Keith Goddard (Article)
The Greek default is indeed inevitable, but there remain two possible ways the world may learn about it, and financial markets will react very differently depending on which of these two processes for default occurs.
2011-09-27 Markets Struggle to Reconcile Macro and Micro by Chris Maxey of Fortigent
It was a difficult week from a number of standpoints, not the least of which was the growing number of downside risks that rose to the surface. A broad number of financial markets broke down this week, including copper, the Hang Seng and precious metals. Struggles in those markets came from any multitude of reasons, including the acknowledgement of slower growth ahead from the International Monetary Fund and the US Federal Reserve.
2011-09-27 Darkest Before the Dawn by Bill Smead of Smead Capital Management
Even though we are not traders or short-term oriented, we would like to throw out a few opinions which cause us to be very positive about the stock market over the next one to two years. While market participants look to the US government and the Fed for answers, US Households are doing remarkable and historical work of getting their finances in order. Insiders have been as aggressive in their purchases of their own companys stock as they were in early in 2009.We believe many of our stocks have held up quite well in this environment, but some of them look especially attractive at this point.
2011-09-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As finance ministers gather to put Humpty Dumpty together again, Prez O hopes more concrete measures are taken; the contagion is already occurring as other economies are suffering from the global crisis of confidence. Domestically, investors get more manufacturing news that will hopefully show a bounce-back from the Japan disaster-related downturn. Consumer-related data could indicate whether retailers have any hope for the future holiday season. Politicos are sure to bicker; Fed watchers continue to question; and investors remain uncertain. So what else is new?
2011-09-27 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As finance ministers gather to put Humpty Dumpty together again, Prez O hopes more concrete measures are taken; the contagion is already occurring as other economies are suffering from the global crisis of confidence. Domestically, investors get more manufacturing news that will hopefully show a bounce-back from the Japan disaster-related downturn. Consumer-related data could indicate whether retailers have any hope for the future holiday season. Politicos are sure to bicker; Fed watchers continue to question; and investors remain uncertain. So what else is new?
2011-09-26 Reflections and Outrage by Bob Rodriguez of First Pacific Advisors
Here is address given at the 2009 Morningstar conference which has just as much relevance now as it did then. Last years performance was a terrible one for the market averages as well as for mutual fund active portfolio managers. It did not matter the style, asset class or geographic region. We managers did not deliver the goods and we must explain why. In letters to shareholder will this failure be chalked up to bad luck, an inability to identify a changing governmental environment or to some other excuse? We owe them more than simple platitudes, if we expect to regain their confidence.
2011-09-26 Twist And Pout by Scott Brown of Raymond James Equity Research
As expected, the FOMC opted for Operation Twist, and will sell short-term Treasuries out of its portfolio and buy longer-term Treasuries. However, the size of the Feds operation was larger than anticipated and more out-the-curve, sending yields on long-term Treasuries tumbling sharply. In addition, to further aid the housing market, the FOMC voted to recycle is maturing mortgage-backed securities and agency debt back into mortgage-backed securities. So whats not to like? By themselves, the Feds latest moves arent going to lead to strong GDP growth anytime soon, but they should help.
2011-09-26 Economic Recovery Starts with Bank of America by Team of Institutional Risk Analyst
In this issue we provide a "how to" roadmap for the restructuring of Bank of America (BAC), this in response to a number of yowls of protest, spurts of indignation and outright do-not-knows. For those who've not done so, please read "A not so fictional FSOC memo for Bank of America" where we introduced the home audience to the concept of a parent-only view of BAC and other bank holding companies ("BHCs"). The restructuring of BAC creates a huge positive for credit creation in the US housing sector, the necessary condition for an economic recovery.
2011-09-26 Market Outlook Hinges on Europe by Bob Doll of BlackRock Investment Management
We expect the economy will muddle through in the coming year and we would place decent odds that economic growth will improve from the 1% level it experienced in the first half of 2011. This view is predicated on the assumptionand it is a big onethat there is no major additional fallout from the European debt crisis.
2011-09-24 Catastrophic Success by John Mauldin of Millennium Wave Advisors
Rick Perry touched the third rail of Social Security and called it a Ponzi scheme, which of course immediately made him the leading candidate in the shoot the messenger category. Behind the rhetoric, I look at some actual numbers. Not the unfunded liabilities, thats too easy. Lets look at what a heartless, uncompassionate man President Roosevelt was when he started Social Security. And of course, we must start off with the results of the FOMC meeting, which has me feeling not at all amused. What are they thinking? Apparently, they are seeing the results from another, alternative universe.
2011-09-23 Invesco Fixed Income Quarterly Outlook by Team of Invesco
While economic growth has been rather stagnant and the statement cites significant downside risks to the economic outlook, the Feds preferred core inflation measures, consumer inflation apart from the food and energy categories, have trended upward since the onset of QE2, the central banks second round of large scale asset purchases that swelled its balance sheet to more than $2.8 trillion. At the onset of QE2, core inflation measured year-over-year was low and trending lower, and deflation represented a realistic potential outcome.
2011-09-23 Turkey Gets an Upgrade by Frank Holmes of U.S. Global Investors
The IMF offered a sober assessment of the global economy this week when it released the September 2011 update of its World Economic Outlook. The IMF stated the global economy is in a dangerous new phase, citing two main downside risks: The possibility the crisis in the eurozone will be too much for the regions policymakers to handle, and soft economic activity in the U.S. is due to a weak housing market, deteriorating financial conditions and a political impasse regarding fiscal consolidation. Accordingly, the IMF cut its projections for global growth to 4 percent through 2012.
2011-09-23 Extreme Moves Leave Markets in Rare Territory by Frank Holmes of U.S. Global Investors
Many investors have used gold and other commodities as a haven from recent volatility, buoying prices while equities sunk, but even those investments werent immune to the wave of selling. The U.S. dollar, in contrast, was up 2.2 percent. Much of the dollars rally came after the Fed announced the creatively named Operation Twist. The Fed will sell $400 billion of short-term securities and buy an equal amount of long-term debt. The goal is to push down long-term interest rates, which would spur economic activity.
2011-09-22 Talking Our Way to Recession! by David Edwards of Heron Financial Group
The Europeans do not yet have a political structure for engineering a rescue, and that will be the over-hang in Europe. They will figure it out - eventually. The risk remains whether Italy, Spain, Portugal, Ireland will require equivalent rescues. The largest unknown risk is: of all the banks and hedge funds that sold Credit Default Swaps on Greek bonds, do any have enough capital to pay off their exposure. Remember that the US Treasury directed $62 billion to AIG to cover CDS exposure at that firm in 2009. We doubt that the European central banks are prepared to do the same.
2011-09-22 Jobless Claims, Leading Indicators Could Show US Economy is Not Contracting by Russ Koesterich of iShares Blog
Of all the economic reports coming out this week, Im most closely watching for the latest US weekly jobless claim numbers and the new leading indicators data, due out Thursday. Both will give further confirmation on the near-term state of the economy. As Ive mentioned before, I expect that the US economy is most likely going to experience an anemic expansion, rather than another recession. Recent economic reports have so far confirmed my view. I believe the new data this week will similarly show that the while the US economic recovery has stalled, the economy is not contracting.
2011-09-22 Twist and Shout: The Fed, as Expected, Announced "Operation Twist" by Liz Ann Sonders of Charles Schwab
The Federal Reserve announced "Operation Twist," which was largely expected.
The goal is to further reduce borrowing costs and push money via lending out into the real economy.
Whether it will work is the big question because high interest rates are not the economy's problem.
Ultimately, confidence has to improve before we're likely to enjoy any reasonable pace of economic growth. Whether this move by the Fed starts the confidence-healing process remains to be seen. But we suggest you keep your expectations relatively low.
2011-09-21 Pondering 2H 2011 Bank Earnings by Team of Institutional Risk Analyst
This week, we do a short rant on the 2H 2011 outlook for financials and ask whether further deflation does not mean a mixed road ahead for some banks. To review, let's look at the Bank Stress Index for the past several years in the box below. You can look up the rating for your bank on our retail web site, www.irabankratings.com. The major factors affecting bank performance are largely economic as always, but the market value of the liquid, large-cap financials will be buffeted by the macro see-saw between the US and EU. We just hope that our BSI is not rising again by the close of 2011.
2011-09-21 Muni Veterans Discuss Economy, Downgrades and Silver Lining by Joseph Deane and Julie Callahan of PIMCO
Many municipal balance sheets are in reasonably good shape and default rates remain a small fraction of the overall market.
The downgrade of Americas AAA rating to AA+ had a knock on effect on municipal bonds. However, we believe of greater consequence to bond issuers, and to the market, is the outcome of federal budget negotiations.
We feel essential service revenue bonds tend to have more consistent revenue streams and lower (or no) pension and medical liabilities than general obligation issues.
2011-09-20 The Irrational Optimist by Michael Lewitt (Article)
'Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft,' writes Matt Ridley. These words hit the proverbial nail on the head. The misallocation of capital in today's economy is a severe threat to future prosperity and perhaps survival itself.
2011-09-20 Renting REO to Stabilize Housing by John Burns of John Burns Real Estate
After extensive research, we believe that selling REO homes (homes that are owned by the lender after foreclosure) to investors makes the most economic sense for the banks, Fannie Mae, Freddie Mac, HUD, and the American taxpayers. Current regulatory and political pressures that prohibit or discourage these institutions from adopting this sound economic decision should be relaxed. Selling REO to investment groups who will professionally manage the homes, can help stabilize home prices, improve REO asset recoveries and prevent rents from rising too quickly.
2011-09-20 With the Economy Weak, the Fed Steps Up to the Plate by Chris Maxey of Fortigent
With the Fed potentially considering new easing measures this week, economists paid particular attention to last weeks inflation reports, looking for any clue that the Feds current programs are feeding higher inflation. Thus far, the Fed is in the clear, but there is budding inflationary pressure under the surface that is raising cause for concern. In August, the Consumer Price Index rose 0.4%, led by higher food and energy prices. That follows an equally strong increase of 0.5% in July. Consumer prices received a slight reprieve earlier in the summer, but that softness is dissipating.
2011-09-20 Deja Vu? by Jeffrey Saut of Raymond James Equity Research
Over the past 41 years I have observed a few comparisons that have had fairly good correlations to what was occurring at the time and have used them to help allay panic among investors at inappropriate times. Most recently, I have suggested the panic lows of August 4th and 8th showed such extreme panic-selling readings that participants had to go back to May 13, 1940, when the Germany Army broke through the Maginot Line and invaded France, to find similar panic levels. That observation was consistent with the analogue I have been using for two months.
2011-09-19 Preparing for a Greek Default by John P. Hussman of Hussman Funds
The yield on 1-year Greek government debt ended last week at 110%, down slightly from a mid-week peak of 130%. Even with the pullback, the Greek yield structure continues to imply default with certainty. All the markets are really quibbling about here is the recovery rate. That figure was still hovering near 50% as of Friday, but was a bit higher than we saw a few days earlier. A bailout today does not avert default, but at best defers it to a later date, and squanders funds that could otherwise be used to stabilize the European banking system once that inevitable default occurs.
2011-09-19 The H1:2011 Economy may have been Stronger than we Thought by Brian Horrigan of Loomis Sayles
A key sector is the nonfinancial corporate sector. It excludes government, noncorporate small businesses, farmers, nonprofits, owner-occupied housing, and banks and insurance companies. Real output in the nonfinancial corporate sector surged a hot 4.5% in Q1 and a red-hot 7.5% in Q2. The weakness in the economy is predominantly in housing, banks, government, and small business. Overall, nonfinancial corporations have been doing well. Output in that sector has matched the prior peak of Q4:2007. Hows the economy doing? It depends on whom you ask. Dont count it as a lost cause just yet.
2011-09-19 No Recession, No Panic by Brian S. Wesbury and Robert Stein of First Trust Advisors
Online markets (at Intrade) put the odds of a recession in the next year at 40%. The consensus of economists (in a Wall Street Journal poll) has the odds of recession at one in three. These elevated fears are hitting consumer confidence, creating political pressures and causing volatility in financial markets. We think the actual odds of a recession are much lower than the consensus thinks. We place them at 20%, barely above the 15% that history tells us exists in any year.
2011-09-19 Uncertainty Remains, but so too Does Opportunity by Bob Doll of BlackRock Investment Management
In contrast to Europe, the United States economy remains in reasonably good health. The United States does, of course, have its own sovereign debt issues to deal with and the future state of the federal deficit is an obvious source of concern. The difference between the United States and Europe is that the United States has the ability to solve its own fiscal problems, even if coming to an agreement about how to do so is a significant challenge. Given this backdrop, its hardly surprising that US stocks have been outperforming on a relative basis over the past couple of months.
2011-09-17 Twist and Shout? by John Mauldin of Millennium Wave Advisors
What in the wide, wild world of monetary policy is the Fed doing, giving essentially unlimited funds to European banks? What are they seeing that we do not? And is this a precursor to even more monetary easing at this next weeks extraordinary FOMC meeting, expanded to a two-day session by Bernanke? Can we say 'Operation Twist?' Or maybe 'Twist and Shout?'
2011-09-16 ProVise Bullets by Team of ProVise Management Group
In our opinion, Congress and the President need to do two things. The first is to develop a long-term, permanent solution to the Tax Code and to remove regulations that are, at best, postponing the decisions of employers to hire, and in some cases, driving jobs overseas. Heres what we would do if we were leaders in Congress: we would identify each and every one of the parts of the package where there is common agreement and pass them as quickly as we possibly could.
2011-09-16 Libya: Reconfiguring National Wealth by Douglas Clark Johnson of Codexa Capital
In Libya, economic redevelopment, understanding tribalism, and economic diversification may be more relevant to a cross section of global commercial interests, than ongoing dissection of oil production, however important that sector may be to funding reconstruction efforts.
2011-09-16 An Analysis of the Obama Jobs Plan by Mark Zandi of Moodys Economy.Com
In the current political environment, it is less than likely that most of the presidents plan will pass Congress. Our current baseline outlook assumes that the payroll tax holiday for employees is extended for only one more year. There is a fighting chance that broader payroll tax cuts for employees and employers could become law, but the odds arent high enough at this time to change our baseline assumptions.
2011-09-16 And Thats The Week That Was by Ron Brounes of Brounes & Associates
Housing numbers highlight the data of the week so dont expect much positive news on the economic front. The Fed holds its policy meeting and the jury is still out over how the debate will unfold. Some investors seem to want stimulus for stimulus sake. The Fed could extend maturities on its government portfolio; it could reduce the interest paid to banks for holding excess cash in reserves. Such measures could prove more symbolic than anything. On the other hand, some Fed watchers warn of unforeseen consequences and believe it is time to let capitalism rule the day.
2011-09-16 King of the Mountian by Team of Research Affiliates
Despite the market turmoil of the past two years, U.S. equity valuations continue to resist gravity. In this issue of Fundamentals, we look at the potential consequences of understated inflation and too-low real interest rates, combined with an accommodative Fed policy. What does that mean for the stock market?
2011-09-15 Addressing Our Chronically High Unemployment Rate by Team of American Century Investments
Anyone who listened to President Obamas speech to Congress last Thursday should have come away with one overriding theme: His goal for the remainder of his first term in office is jobs creation. But the stubborn persistence of extremely high unemployment since the Great Recession officially ended over two years agoalong with the massive stimulus spending and record low interest rates that accompanied efforts to revive the economysuggest the challenge were facing in lowering unemployment is unlike any weve faced in past recessionary recoveries since World War II.
2011-09-15 More of the Same by Bob Rodriguez of First Pacific Advisors
What would it take for me to shift to a more optimistic longer term outlook? First, there should be a discussion and then implementation of real and substantive congressional budgetary reforms that have a standing in law. Without this change, a future congress can overturn any of the expenditure cuts that are voted on today but are not implemented until much later. With a congressional approval rating of 13%, the American public should demand nothing less because the Congress cannot be trusted. Both parties are equally responsible for the fiscal mess the nation faces.
2011-09-14 Obamas Jobs Speech, The Economy & The Fed by Gary D. Halbert of Halbert Wealth Management
Once again this week, there is a lot of news to cover. We begin with my thoughts on President Obamas latest jobs speech in which he asked for yet another almost $450 billion in stimulus which he said is paid for. That all depends on Congress passing a litany of new tax increases that Obama announced yesterday. Following that discussion, we will look at the latest economic reports, including the dreadful August unemployment report. Next, we will move on to the latest news from the Fed and what the FOMC may be up to at its upcoming monetary policy meeting on September 20-21.
2011-09-14 Asian Bonds Fund Manager Interview: A Misunderstood Opportunity by Team of Aberdeen Asset Management
Global investors remain under-invested to Asian bonds. Exposure is often made through global debt benchmarks; however, these benchmarks typically have low allocations to Asia, may not be particularly active, have allocations to less creditworthy countries and possess limited local currency exposure. Many investment opportunities in the Asian region have been overlooked. Asia provides a diverse set of markets and a broad set of country issuers across the credit spectrum, offering what we believe are good opportunities for investors to enhance portfolio yields.
2011-09-13 The Risks of Exchange-Traded Products by Dennis Gibb (Article)
Every major financial crisis has been foretold by timely but ultimately ignored warnings. At the end of mania, the rush to secure more fees, investment performance and status trumps common sense. In the last few months, the drumbeats of warnings from financial journals and regulators about exchange-traded funds have been sounding. Few seem to be listening.
2011-09-13 Extraordinary Measures Needed by Scott Brown of Raymond James Equity Research
While Fed officials appear to be divided the hawks are a minority. More monetary stimulus is coming but its unclear whether this will include another round of asset purchases or a lengthening of maturities in the Feds asset holdings. Looking at Europe, its difficult to quantify the probability of a banking crisis, the exit of one or more countries from the monetary union, or a complete breakup. The political environment is difficult in a different sort of way than in the U.S. Fiscal and monetary policy efforts in the U.S. may not lead to a strong recovery anytime soon, but at least we try.
2011-09-13 Fear and loathing at Bank of New York Mellon by Team of Institutional Risk Analyst
In our last issue, we presented the case for the insolvency of the parent of Bank of America Corp, even though the subsidiary banks remain profitable and well-capitalized. This week, we ponder the situation at Bank of New York Mellon, where like BAC the operational performance of the depositories does not tell the whole story. Despite the high profile thrashing meted out to BAC and BK both by the NY AG in the Countrywide put-back settlement, markets may not fully appreciate just how deep is the rising kimchee swirling around BK.
2011-09-12 Whats Missing From Obamas Plan by Russ Koesterich of iShares Blog
In a speech last Thursday evening, President Obama outlined his American Jobs Act, a $447 billion package of tax cuts and government spending he hopes will help stimulate the slowing economy. It calls for reduced payroll taxes, extended unemployment benefits and increased spending on infrastructure to help put people back to work. Without passage, I believe the US will suffer significant fiscal drag in 2012 and the economy will face more headwinds. However, while the proposal could spur some growth, it does nothing to fix the longer-term fiscal problems facing the country.
2011-09-12 The American Consumer: Down, but Not Out by Milton Ezrati of Lord Abbett
Those who had succumbed to double-dip recessionary fears got a shock with the July report on household incomes and outlays. It showed continued, albeit moderate, income growth of 0.3% for the month, but a striking 0.8% jump in outlays. Though far from conclusive, this spending jump, among other indicators, offers considerable evidence that the economic softness that was supposed to be a prelude to recession was more likely an interruption from which the economy will now likely move ahead, however slowly.
2011-09-10 China Fears Much Ado About Nothing by Frank Holmes of U.S. Global Investors
There are many questions surrounding the global market but the Chinese economy remains headed toward the moon. The country, of course, remains vulnerable to external forces but we believe the economys strong momentum will be enough to carry the country through, should volatile times persist.
2011-09-10 The Money Pit by Michael Dana of Dana Investment Advisors
Zero net non-farm jobs were created in August. Likewise, QE1 and QE2 have not boosted economic growth and we certainly do not need a QE3. The Fed has nothing left, and it is not their job to stimulate the economy. Policy decisions coming from Washington will be instrumental in determining our economic recovery. Intentionally or not, Fed policies are propping up our stock market. With the daily bombardment of bad news around the globe you would think equity prices would be in a free-fall. However, corporate earnings are relatively strong and we are still the safest haven for investor money.
2011-09-09 Should We Cheer The FHFA Lawsuit? by John Downs of Euro Pacific Capital
Last Friday the Federal Housing Finance Agency (FHFA) lawsuits were filed against seventeen banks and financial institutions for $200 billion in subprime loan losses. The victims of the alleged fraud? Fannie Mae and Freddie Mac, and therefore the taxpayers. The suits claim that Fannie and Freddie, then two of the largest investment bodies in the world, had been ruthlessly hoodwinked by bankers into buying low-quality, and potentially fraudulent, mortgage-backed securities. In exchange for fees and commissions, big banks and loan companies stuck the taxpayers with a mountain of bad debt.
2011-09-08 Congressional Budget Office Updates Its Economic and Fiscal Forecast by Team of American Century Investments
Two weeks ago, the non-partisan Congressional Budget Office (CBO) released an update to their Budget and Economic Outlook that forecasts U.S. fiscal and macroeconomic trends over a ten year period (2012 to 2021). This update creates a baseline for negotiations by the Joint Select Committee on Deficit Reductionthat committee of six Democrats and six Republicans from Congress created by The Budget Control Act of August 2011 which resulted from the contentious debt ceiling negotiations in July. In this Weekly Market Update, well review what this baseline
2011-09-08 If Some Dare Call It Treason, Was Milton Friedman a Traitor? by Paul Kasriel of Northern Trust
The principal factor accounting for the current exceptionally weak economic recovery is not unusually high uncertainty, too burdensome regulation and taxation, excessive federal government spending and/or debt or a major structural change in the economy, but rather inadequate depository institution credit creation. The reason depository institutions are not creating normal amounts of credit is that they suffered enormous losses after the residential real estate bubble burst and they remain concerned about current and/or future capital adequacy.
2011-09-08 The Transfer Payment Paradox by Russ Koesterich of iShares Blog
You dont have to be a fan of profligate government spending to recognize the enormous paradox the United States faces in getting its economic and fiscal houses in order. The US economy is driven largely by consumptionroughly 70% of GDP comes from personal consumption. A large and growing percentage of that consumption is dependent on federal transfer paymentsdirect government payments to individuals. Yet as the US tries to get its deficit under control, these payments could be cut. That in turn could have a significant impact on disposable income and economic growth.
2011-09-08 Can You Hear Me Now? by Jeffrey Saut of Raymond James Equity Research
In last weeks verbal strategy comments I cautioned to not pay up for stocks since the NYSE McClellan Oscillator was about as short-term overbought as it ever gets. Additionally, I stated that if this is a replay of the October 1978/1979 bottoming sequence we will have opportunities over the coming weeks to buy select stocks at lower prices. Given the European news over the weekend, and yesterdays Euroland equity markets meltdown, it should come as no surprise that the S&P 500 preopening futures are sharply lower this morning.
2011-09-08 Developed Asia Pacific: Economic Review August 2011 by Team of Thomas White International
Developed Asia Pacific countries faced increasing headwinds to economic growth during August. Lukewarm growth figures in developed Western economies such as the U.S. and the European Union are troubling the growth prospects of many export-oriented markets such as Singapore, Japan and Hong Kong. Despite some support from emerging markets, export orders for Singapore and Hong Kong have slowed down substantially. In Japan the current account surplus slid, while the Singapore government revised its export growth figures down for the rest of the year.
2011-09-08 The Changing Landscape of Global Investing by Mohamed A. El-Erian of PIMCO
National and global realignments are fundamentally and durably changing the global investment landscape.
Investors face the challenge of recalibrating some of the traditional parameters that are key to managing risk and delivering returns.
There are also implications for investment management firms which are yet to be sufficiently reflected in the thinking and actions of the industry as a whole.
2011-09-08 Middle East/Africa: Economic Review August 2011 by Team of Thomas White International
According to the IMF, global economic prospects have taken a downturn in the wake of a weaker U.S. economic recovery, uncertainty surrounding the Euro-zones fiscal stability and relentless turmoil in the Middle East and North Africa (MENA) region. In recent weeks, the MENA region has been in the spotlight yet again, with the Libyan revolt against Muammar Gaddafis 42-year long dictatorship gaining momentum. The IMF has been keeping a close watch on developments in the strife-ridden country and is yet to determine the uprisings impact on the Libyan economy.
2011-09-08 Developed Europe: Economic Review August 2011 by Team of Thomas White International
Last month, major economies such as Germany and France as well as the European Central Bank (ECB) took steps to allay fears about a debt contagion in Developed Europe. Still, investor sentiment remained weak in the region, echoing worldwide concerns over the state of the American economy and the loss of momentum in the global economic recovery. Amid worries that the European Financial Stability Facility (EFSF) may not have adequate funding to bail out Italy and Spain, if the need arises, the ECB stepped in to buy the sovereign debts of the two countries for the first time.
2011-09-07 More Readers Questions Answered by Mark Mobius of Franklin Templeton
We have begun to see signs that the overheated Chinese economy may moderate in the not-too-distant future. We believe that inflation in China could reach a peak in the near future as a result of the Chinese governments decision in July to increase pork supply by releasing a portion of their strategic pork reserves. By releasing more pork supply into the market, the government hopes to combat rising pork prices. That move, combined with an easing growth rate, could subsequently lead to the end of the central banks current tightening monetary policy cycle in the near term.
2011-09-06 Byron Wien Reflects on His List of Surprises by Laurence B. Siegel (Article)
Byron Wien is a senior managing director and vice chairman of Blackstone Advisory Partners, the largest alternative investment firm in the world with $140 billion under management. Each year, for the last 26 years, he has published a list of 10 'surprises' investors should expect in the capital markets and the economy. In this interview, he reflects on his list for 2011 and what see sees ahead.
2011-09-06 Double-Dip Scorecard by Milton Ezrati of Lord Abbett
Three issues have dragged the market around of late: 1) Europes sovereign debt crisis, 2) Washingtons budget debate, and 3) fears that the American economy will fall into a second recessionary dip. This Economic Insights takes up the third of these pressing issues, offering a kind of scorecard on double-dip likelihoods by peering behind the latest, admittedly weak, economic data to assess causes and likelihoods. The conclusion admits to the possibility of a second recessionary dip, but nonetheless settles on the probability that growth will continueslow to be sure, but growth nonetheless.
2011-09-06 Economic Recovery Poised to Improve by Bob Doll of BlackRock Investment Management
The U.S. will avoid a deep slump, but it remains an open question as to whether growth is modestly positive or if the US flirts with a recession. In any case, however, we do not expect to see a period of economic weakness that is anything like what we saw in 2007 and 2008. Unlike then, the US financial system is much better capitalized, the housing market is no longer overvalued and there is some demand in the cyclical parts of the economy. Additionally, we would point out that temporary factors are at least somewhat responsible.
2011-09-06 Want Jobs? Have Faith by Brian S. Wesbury and Robert Stein of First Trust Advisors
The private sector created 17,000 new payroll jobs in August and the government lost 17,000. The net was zero. Nadazipzilchnothing. Some would say that this is a perfect metaphor for the economya big fat zero. The stock market is getting drilled, politicians are frothing at the mouth, the Fed is having longer meetings, and investors are scared. So, whats going on? First, let us say that we have been overly optimistic. We expected better growth in jobs and the economy. We have been wrong, but we still dont expect another recession.
2011-09-04 Its All About the Jobs and Gold by John Mauldin of Millennium Wave Advisors
If somehow a Republican appeared in the White House tomorrow, there is no magic he (or she!) could bring with him/her to fix the unemployment problem. There are just some things the private sector will have to do for itself, and the sooner the government stops getting in the way, the sooner will get things fixed. But it will take a long time, no mater what. For the record, I think you should own about 5% of your net worth in gold, as insurance, not as an investment.
2011-09-02 The Land of Free Lunches by Team of Broadleaf Partners
Weve recently concluded that the innovation cycle will become paramount to wealth creation in an environment of slow growth and when credit is relatively scarce. The economy and financial markets are fluid and dynamic. While scarce today, banks will eventually start lending again, changing the dynamics of a muted economic cycle. And while innovation is always an investable theme, in an environment where growth is scarce, such scarcity can also lead to situations where select groups of stocks become wildly overvalued as was the case for the Nifty Fifty in the 1970s and technology years ago.
2011-09-02 The Great Bank Robbery by Nassim Nicholas Taleb and Mark Spitznagel of Project Syndicate
For the US economy and other developed economies the elephant in the room is the amount paid to bankers over the last five years. Investors, and the rest of us, would be better off if these funds flowed to productive companies, perhaps with an amount equivalent to what would be transferred to bonuses directed to well-managed charities.
2011-09-01 Food, Clothing, Shelter; Shelter Part Still Not Good by Sean Hanlon of Hanlon Investment Management
In March, I shared with you a chart of the S&P 500 Index plotted against the NAHB/Wells Fargo Housing Market Index (HMI) and identified how these indices display a level of correlation. I pointed out that housing tends to lead stocks; in some instances as much as two years, and in others perhaps a couple months or quarters. The point of that Commentary, is that movements in the S&P500 Index are typically forecast by a precursory movement in the HMI. Where was the HMI forecast for a rise in the S&P500 index that started in 2009? There was none! Housing was and continues to show a flat-line.
2011-09-01 Q&A with Litman Gregory Research by Team of Litman Gregory
We regularly use a Q&A format to address questions from readers about our investment views and current strategy. This format permits us to address a range of different topics and allows readers to focus on areas that are of interest to them. This Q&A piece was worked on jointly by members of our research team and tackles questions received during the past several weeks. We have grouped the questions into broad categories for convenience. The main topics include the Fairholme Fund, Investment-Grade Bonds, Floating Rate Loans, Municipal Bonds, International Bonds, China and Commodity Futures.
2011-09-01 Q2 2011 Bank Ratings; FSOC Memo on Bank America by Team of Institutional Risk Analyst
We present our view on Bank of America (BAC Q2 2011 Bank Stress Rating: B) from the perspective of a fictional analyst named Herbert Gold working at the Fed. He has been asked to write the briefing for the Financial Stability Oversight Council, the vehicle created by the Dodd-Frank confidence in bureaucracy legislation to liquidate insolvent financial firms. But before we delve into a fanciful exposition on the importance of a parent-only analysis of a bank holding company, let's check on developments at IRA and the new Q2 2011 bank stress index (BSI) ratings for the US banking industry.
2011-09-01 The Blessing of Hitting the Skids First by Bill Smead of Smead Capital Management
We believe that the first country to hit bottom, the first to confess its mistakes the way Frank Blake and Howard Schultz did for their companies, and the first to cleanse the banks, corporations and households will lead to lasting prosperity long before any other country in the world does. We also believe that the investment rewards of US non-cyclical large cap common stock investing has rarely looked more attractive because of the willingness of investors to underestimate the benefit of hitting the skids before everyone else does.
2011-08-31 Be-Ratings Wars. by Jonathan Leidy of Portico Wealth Advisors
S&Ps US downgrade was an unmistakable watershed event, causing everyone from the President to the proletariat to take a long, hard look at the lackluster numbers that have typified the US economy for months. Perhaps equally noteworthy during the tumult, however, was the sheer quantity of contradictions, ironies, and paradoxes that arose throughout the downgrade process. They sprung from all sides, ranging from the subtle to the downright staggering, and yielded a portrait of a country desperate for direction. What follows is a chronicle of these incongruities.
2011-08-31 1/2 Full: Not Throwing in Towel on Recession Probability by Liz Ann Sonders of Charles Schwab
Double-dip recession chatter is highly elevated, but I think we'll scrape by without one. Leading indexes are giving conflicting signals. Recession or not, growth will be weighed down by debt and lack of confidence. Let me state right up front that even though I'm not in the recession camp, risks that there will be one have risen markedly. A good deal of that risk relates to the breakdown in confidence triggered by the debt ceiling-related political antics, the subsequent downgrade of US debt by Standard & Poor's, the ongoing debt crisis in the eurozone and a highly volatile stock market.
2011-08-31 Policy Conundrums by Scott Brown of Raymond James Equity Research
In a week or so, President Obama will announce proposals to boost job growth and shore up the housing sector. These efforts, even if they could make it through Congress, would help somewhat, but wouldnt boost economic growth substantially. Bernankes Jackson Hole speech showed that the Fed chairman remains optimistic about the long-term prospects for the economy. Current difficulties are unlikely to affect the long-term growth potential, but he stressed that is if our country takes the necessary steps to secure that outcome.
2011-08-30 Austerity is not Enough by Andrew Balls of PIMCO
Before the Jackson Hole meetings over the weekend, it was no surprise that all eyes were on central banks. They have demonstrated in recent years that they can act swiftly and decisively when they choose to. While eurozone governments have failed to maintain a united front to deal with a sovereign debt crisis, and American politicians have concocted their own budget crisis, central bankers have retained the moral and operational high ground. Yet, given the problems of growth in the U.S., and of growth, solvency and the coherence of the eurozone, there is a limit to what central banks can do.
2011-08-30 Scenarios for a Stock Market Bottom by Keith C. Goddard, CFA (Article)
A probability-based forecast for the U.S. stock market between now and 2013 can be constructed using historical relationships between stock prices, earnings and dividends. This yields a matrix of possible outcomes for the S&P 500 Index over the next two years.
2011-08-30 Asking the right and wrong questions by Dan Ariely of Predictably Irrational
From a behavioral economics point of view, the field of financial advice is quite strange and not very useful. For the most part, professional financial services rely on clients answers to two questions: How much of your current salary will you need in retirement? What is your risk attitude on a seven-point scale?
From my perspective, these are remarkably useless questions but first, lets think about the advisors business model. An advisor will optimize your portfolio based on the answers to these two questions. Not to be offensive, but I think that a simple algorithm can do this.
2011-08-29 A Reprieve from Misguided Recklessness by John P. Hussman of Hussman Funds
Over the past three years, Wall Street and the banking system have enjoyed enormous fiscal and monetary concessions on the self-serving assertion that the global financial system will "implode" if anyone who made a bad loan might actually experience a loss. Because reversing this mantra is so difficult, policy makers are likely to continue fitful efforts to "rescue" this debt for the sake of bondholders. The justification for those policies will therefore have to be coupled with rhetoric that institutions holding these securities are too "systemically important" to suffer losses.
2011-08-29 And That's The Week That Was by Ron Brounes of Brounes & Associates
One positive week does not constitute a trend (wishful thinking). The economic calendar is quite hectic next week with key news from manufacturing and labor. Though recent results have been lackluster at best, many analysts have predicted a rebound in the months to come. Hopefully, some favorable signs of such strength will present themselves as early as next week (starting with decent nonfarm additions and a reduction in the jobless rate). If not, maybe Bernanke can come to the rescue again. QE3 anyone?
2011-08-29 Markets Recover Some Ground As Uncertainty Remains High by Bob Doll of BlackRock Investment Management
In some ways, whether or not the economy does sink into recession is a technical point. If we do see a double-dip recession, any such contraction should be mild. If the economy avoids a recession, growth will still be weak. From an earnings perspective, any decline that comes about in earnings growth due to economic weakness should also be smaller than the average contraction that occurs during a typical recession. Looking ahead, our forecast is that earnings growth flattens out while GDP remains very low.
2011-08-26 The US Financial Sector in an Environment of Turbulence by Team of Loomis Sayles
US financial companies have spent the past three years trying to improve their balance sheets. We saw this trend reflected in company reports of asset quality improvements, increasing capital and strengthening liquidity. Heightened anxiety about the European debt crisis, a potential slowdown in the global economic recovery and the US credit downgrade appears to have overshadowed financial company fundamentals. Fundamental improvements by financial companies have fortified the sector, leaving it substantially stronger than in 2008. Currently, we think financials are well positioned.
2011-08-26 Confidence Counts by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Most of the normally historically-telling leading indicators continue to point to the US avoiding a recession. However, risks are clearly heightened as continued erosion of confidence could push perception into reality. The Fed continues to be divided on whether to attempt further monetary stimulus. We question if any efforts will have the desired impact. The Obama Administration and Congress continue to scramble to be seen as doing something to help, but also have limited policy options. European policymakers seem oblivious to the erosion of confidence.
2011-08-26 Valuation Gap Makes Gold Miners Attractive But All Miners Arent Created Equal by Frank Holmes of U.S. Global Investors
Goldwatchers were reminded golds volatility works in both directions this week, with prices falling more than $100 an ounce in just one day. We forecasted the selloff last week, explaining a 10 percent correction would be a non-event. Once again the CME Group hiked the exchanges margin requirements for gold investment to shake out overleveraged speculation. This is a positive for long-term investors.
2011-08-25 One Number Says it All by Stephen S. Roach of Project Syndicate
The average annualized growth of US consumer spending over the past 14 quarters-calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011 is 0.2%. Never before in the post-WWII era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US-and in the global economy. The US economy-as well as the global economy-cannot get back on its feet without the American consumer. Its time to look beyond ideology-on the left and right-and frame the policy debate with that consideration in mind.
2011-08-25 The Fork in the Road by Lance Paddock of Thompson Creek Wealth Advisors
On a fundamental basis the US stock market is still overvalued. As discussed in our last View from the Bluff profit margins are already likely to begin retrenching. If the economy gets worse that will likely accelerate along with a slowing of sales. Narrower segments of the US market are now near fair value, especially the highest quality parts of the market. Overseas markets are another story. International and developing markets are looking reasonable on the whole. Not cheap, but around fair value. Some individual markets (such as Japan and parts of Europe) are actually looking cheap.
2011-08-23 Strategies for a Rising Rate Environment by Jayant Kumar of Fisher Francis Trees & Watts (Article)
Shortening the duration of a fixed-income portfolio is often considered the default option, but it is not the only way to hedge against a potential rise in interest rates. This article provides investors with a framework to analyze and implement a range of fixed-income strategies, and highlights various investment considerations that should carefully be taken into account.
2011-08-23 Germany's Stumble Threatens Appetite for Peripheral Support by Ryan Davis of Fortigent
Equity markets faced mostly negative economic data last week for both the US and abroad, putting a quick end to the market rebound that began the previous week. In Europe, Germanys GDP slowed markedly. The regions most powerful economy expanded by just 0.1% in Q2, the slowest since early 2009 and down considerably from 1.3% in the first quarter. It was also far lower than an expected 0.5%. This in turn weighed on Eurozone growth, which expanded just 0.2%. Slower growth than the tepid levels already anticipated puts further pressure on the deficit-plagued region.
2011-08-23 And Thats The Week That Was by Ron Brounes of Brounes & Associates
As another successful earnings season winds down, investors have all but forgotten the solid second quarter showings and are focusing on the sudden economic downturn. So much for the nice results and strong outlooks from energy, health care, retail, and certain techs. Investors are choosing instead to trade based on the political bickering, the seemingly never-ending European woes, and the short-term negative effects of Japan. Many corporations across various sectors remain cash-rich and are weighing their options as they pursue new opportunities: acquisitions, dividends, share buyback.
2011-08-22 Outlook: Cautiously Optimistic For Economy & Markets by Bob Doll of BlackRock Investment Management
Despite the overall negative tone among investors, not all of the news has been bad in recent weeks. Data regarding July pointed to the beginnings of a stronger economic second half of 2011, including better payroll figures, industrial production, unemployment claims and retail sales. Additionally the Index of Leading Economic Indicators actually rose in July and was ahead of expectations. However, it is important to remember that August is when all of the stresses in the credit markets and equities spiked, so it is very possible that this may negatively impact Augusts economic statistics.
2011-08-20 The Recession of 2011? by John Mauldin of Millennium Wave Advisors
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash. Well know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.
2011-08-19 Is Business Choking on Red Tape? by Frank Holmes of U.S. Global Investors
About a year ago, I wrote about The Shocking Cost of Regulation and the unintended consequences new rules can have on our business system without proper cost-benefit analysis being done. A year later, its clear the swarm of red tape is choking companies and impeding growth.
2011-08-19 The Silver Lining for Markets and the U.S. Economy by Frank Holmes of U.S. Global Investors
There is a silver lining: Despite all the negative news out there, the global economy will continue to grow. In fact, the U.S. economy has had several positive developments recently. The four-week average for unemployment claims dropped to 402,000 during the week ending August 13. There is still a large chunk of America unable to find a job, but that group has shrunk 13 percent since August 2010 and is about 40 percent of peak 2009 levels.
2011-08-19 Back to the Future: Median Home Prices Mirror Years Past by Gregory Tsujimoto of John Burns Real Estate
Prepare to take a trip back in time as you use the interactive map below to view the last time median home prices matched current median prices. Youll find some markets and regions are mirroring 2006 - when MySpace was the top website in the social networking realm. In other markets, you may have a flashback to 1997, standing in line to see the movie Titanic.
2011-08-18 What stage of deleveraging are we in? by Team of Litman Gregory
The Litman Gregory research team has been assessing how long it will take for the U.S. economy to deleverage and when we can expect earnings to revert to the old trend line, which has been adjusted downward slightly after the great recession. The bottom line is that we think deleveraging started in late 2008 and that it will probably take roughly 10 years to complete the process. What this means is that going forward we will roll earnings forward at a slightly higher rate than we have in the past and, as a result, our fair-value point for the S&P will also increase at a slightly higher rate.
2011-08-18 Where the Debt Crisis Could Spread by Russ Koesterich of iShares Blog
Investors are facing an unprecedented situation. Virtually all the major advanced economies the US, Japan and Europe have simultaneously undergone a significant fiscal deterioration, thanks to the after-effects of the financial crisis and worsening demographics. In addition, investors are wrestling with the implications of the recent US downgrade by S&P, as well as a slowing economy. Markets are rattled and many are wondering: what is the new riskless asset? A new index called the BlackRock Sovereign Risk Index provides just such a framework.
2011-08-17 Our Take on the Current Market Tumult by Jon Quigley of Advanced Investment Partners
A headline sums up the markets action: its a sell first, ask questions later market as investors experience flashbacks to the 2007/2008 markets. Investors/markets dont like uncertainty and theyre getting political, economic and sovereign uncertainty in abundance. With the austerity discussions that are dominating US and Europe, there are increasing concerns about a double-dip recession even though positive economic signs are out there earnings, revenues, and a slightly better than expected jobs report.
2011-08-16 Gundlach - 'The Cusp of a Global Banking Panic' by Robert Huebscher (Article)
Don't interpret last week's volatility as merely a reaction to S&P's downgrade of US Treasury debt, according to Doubleline founder and chief investment officer Jeffrey Gundlach. Investors are actually fearful of a global banking crisis, he said, because many countries face a perilous choice - defaulting on their sovereign debt or inflating their way out of trouble.
2011-08-16 Is Gold in a Bubble? by Art Patten of Symmetry Capital Management
Back in 2010, we wrote that we viewed gold as overpriced, but were unwilling to lie down in front of what appeared to be an early-or mid-stage bubble. Good thing we didnt, as spot gold is up about 40% since. It might be time to revisit the trade though. In May of this year, Michael Darda of MKM Partners observed that the commodities rally was getting a bit long in the tooth when compared to earlier bubbles like U.S. housing and the Nasdaq. In late July of this year, Doug Short provided an eye-catching overlay of the recent gold price run-up on the bubble and bear markets seen in recent years.
2011-08-16 A Closer Look at Fixed Income: Assessing the effects of the downgrade on specific sectors by Karen Dunn Kelley of Invesco
Fixed income markets are dynamic and complex, and each fixed income asset class is unique in its level of exposure to the U.S. sovereign rating downgrade by S&P. So, while Ive taken a high-level view of the downgrades effects so far, at this point, I think it would be helpful to drill a little deeper into these various asset classes. This piece will assess how these asset classes have been affected by the downgrade that lowered long-term U.S. ratings from AAA to AA+ and subsequent downgrades on other U.S. bonds, and provide their outlook on what investors can look for next.
2011-08-16 Money Manager Pride Goeth Before Destruction by Bill Smead of Smead Capital Management
All great money managers reach a point in their career where adulation and self confidence detracts from their better judgment. This interruption in judgment usually coincides with the discipline in use becoming the most popular discipline in the marketplace or the investing style being overdue for a three to five-year correction. Studies of the equity managers with the best long term records show that the best underperform the S&P 500 Index 35% of the time. The pride associated with multi-decade success and an army of folks enjoying your work is probably the most dangerous thing.
2011-08-15 Developed Asia Pacific: Economic Review July 2011 by Team of Thomas White International
Reconstruction spending in some key countries in the region, like Japan and New Zealand, also played a key role in improving labor markets. In Australia, however, labor markets turned sour as job losses inched up during the quarter. Inflationary pressures have become acute in Singapore and Hong Kong mainly due to labor shortage and a relentless rise in property prices. Economies that depend on China for their export industries are worried about a weakening in the Chinese economy in the quarters ahead.
2011-08-15 Americas: Economic Review July 2011 by Team of Thomas White International
Second quarter economic growth was weaker than expected in the U.S.. Canada is also expected to report slower second quarter growth, but may regain some of the lost pace by the second half. Slower growth in the U.S. will likely have a restrictive effect on economic activity in Latin America, especially in Mexico and Colombia, which have relatively deeper economic ties with the U.S. For the resource exporters in the region, the expected decline in global demand growth for commodities and industrial material is likely to be a dampener.
2011-08-15 Middle East/Africa: Economic Review July 2011 by Team of Thomas White International
Inflation has been the highest in the MENA regions due to capacity constraints and food prices. While rising costs of food and oil have increased inflationary pressures in South Africa, Israels inflation rate has breached the target range set by its central bank. In addition, South Africa is witnessing strained consumer demand, while growing economic disparity despite lower unemployment rates has triggered social unrest in Israel. Jordan is also battling pricing pressures and is looking to bridge its wide funding gap by raising capital with the issuance of its first Islamic debt instrument.
2011-08-15 Return to Recession.or Recovery? by Liz Ann Sonders of Charles Schwab
Soft economic data has caused talk of a return to recession to grow, leading to a return to the risk-off trade and a spike in volatility. We believe these fears and the market reaction are overdone and indicators still point to growth, but risks are high. The chorus calling for a new quantitative easing (QE3) program from the Fed has grown. We believe it's unlikely at this point. The European debt crisis continues to damage investor confidence as policymakers appear to be consistently behind the curve. Meanwhile, the economic slowdown could ultimately help emerging markets.
2011-08-12 Warren Buffett Said Ignore Political and Economic Forecasts by Julie Carnevale of F.A.S.T. Graphs
This article is about casting a light of reason on the longer-term perspective, in contrast to what is typically an emotionally charged attitude about short-term volatility. It is human nature to judge the performance of our portfolios based on their closing stock price for any given day, week, month, or even quarter. The point we're trying to make here is that it is not the most important factor, unless you were actually planning to sell on the day you measure it. Otherwise, the intrinsic value derived from the operating results that you generate is more important than price volatility.
2011-08-12 Robert Rubin, Bank America and the fate of the dollar by Team of Institutional Risk Analyst
This week in The Institutional Risk Analyst, we take a look at the latest week of inaction and indecision on the part of the leaders of the G-20 nations. Never has doing absolutely nothing taken so much time and garnered so much market and media attention. If the nothing doing dance by Barack Obama, Nicholas Sarkozy and Angela Merkel reaches a much higher frequency, life as we know if is definitely going to change big time. And that change may include altering the international role of the dollar, a change regarding which neither Congress nor the American people have been consulted.
2011-08-12 Another Look at China's Property Market and Financial System by Robert J. Horrocks of Matthews Asia
There continues to be much debate over whether Chinas growth is balanced and sustainable, and many observers will demand you side with one camp or the other: extremely bullish or bearish. This month, Chief Investment Officer Robert Horrocks, PhD, takes a more nuanced view in examining the drivers behind Chinas real estate market and evolving financial system.
2011-08-12 Implications of United States Downgrade for Tax-Exempt Market by Chad Farrington of Columbia Management
If negotiations stall or fail to meet intended goals, forced budgetary cuts could have greater impacts on certain credits in the market than under a more thoughtful plan. We continue to believe that broad generalizations of implications in the tax-exempt market are misguided and fundamental credit analysis of each security is crucial. Our credit analysts will continue assessing the credit strength of securities on an individual basis, which has always incorporated the reliance on federal government transfers.
2011-08-12 Policy Dithering Will Further Fuel the Crisis by Mohamed A. El-Erian of PIMCO
The world economy is now in the grips of a damaging feedback loop involving deteriorating fundamentals, lagging policy responses and destabilised financial markets. If policymakers do not act boldly, and do so in a globally-coordinated fashion, the world risks tipping into a prolonged recession with worrisome institutional, political and social consequences.
2011-08-12 The Fix is In by Peter Schiff of Euro Pacific Capital
Until interest rates are allowed to rise to appropriate levels, more resources will be misallocated, additional jobs will be lost, government spending and deficits will continue to grow, the dollar will keep falling, consumer prices will keep rising, and the government will keep blaming our problems on external factors beyond its control. As the old adage goes, 'insanity is doing the same thing over and over again and expecting different results.'
2011-08-12 Making Sense of the Markets by Team of Neuberger Berman
It is one thing to theorize about markets. It is quite another to invest. With that sentiment in mind, we offer a sampling of views from some of our portfolio managers across our firm who each independently form their own conclusions as to what to make of the market and how to position portfolios according to their respective investment disciplines.
2011-08-12 After the Downgrade - Evaluating S&Ps decision and possible opportunities for investors by Karen Dunn Kelley of Invesco
I want to highlight a few points that we believe give some much-needed context to this unprecedented situation. And I want to share some thoughts from my colleagues around Invesco, who are carefully monitoring both the risks and the opportunities presented by this downgrade.
2011-08-12 Buy, Sell or Hold? Relax and Don't Panic by Frank Holmes of U.S. Global Investors
There was more blood in the streets Monday as the world continued to digest S&Ps downgrade of US debt, the two-week market selloff, and the likelihood the US economy could possibly slide back into recession. These concerns, combined with continued political/economic struggles in the eurozone from socialist policies, have created a potent concoction of fear across global markets and sent volatility skyrocketing Monday to its highest level since the May 2010 Flash Crash. While many investors are running for the exits, others have chosen to ride the wave of volatility or buy depressed shares.
2011-08-11 US Treasury Downgrade by Brian Horrigan of Loomis Sayles
Given the nature of how the political system is handling the fiscal situation and the views of the rating agencies, I could make a strong case that there will be no downgrade by Moodys or Fitch before December 2011. But Treasurys are likely to remain on a negative outlook. I dont think that S&P will issue another downgrade this year. If Congress fails to follow through on recommendations from the Super Committee, we could get a downgrade from Moodys or Fitch. Congress has a strong incentive to implement the recommendations from them in order to help avoid automatic spending cuts.
2011-08-11 Market Flash: "Everybody Stay Calm" by Jason B. Leach of Cravens Brothers Wealth Advisors
In the wake of this debt crisis sell-off, our political leaders need to come up with long-term structural ideas not only for budget cuts and tax reform, but for jobs, housing, education, infrastructure, real Wall Street reform, and a comprehensive energy policy. Our nation is at the point of maximum pain and the time has come for big, structural solutions, not temporary fixes. Washington must be wrested from the rule of the banking oligarchs and all manner of lobbyists during this process or we will be digging out of the holes we have put ourselves in for much longer than we would like.
2011-08-10 Despite Recent Darkness, Long-Term Picture Brighter for Equities by Bob Doll of BlackRock Investment Management
A review of some of the data provides valuable perspective on the recent extreme market volatility. The recent weeks correction has taken US equities down about 18% from their April high. About 11% of that decline has come in the past three days. In comparison, when equity markets began to price in a double-dip recession last summer, US stocks fell 17%, a decline of virtually identical magnitude. Following sharp reversals of this sort, we have in the past seen the market quickly recover 33% to 50% or more of its losses.
2011-08-10 Danger: Children at Play by Jeremy Grantham of GMO
I am not an expert in euro finance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro. So why didnt the bosses attempt to fi x it early on when it would have been so much easier? Today these problems have become much tougher, but still the decisions are only half made and the cans get kicked and kicked again.
2011-08-10 A Crisis of Confidence, but No Time to Panic by Larry Maddox of Horizon Advisors
The economy is in much better condition than it was in 2008 and 2009. While we may have a slowly growing economy, we have successfully emerged from a very deep recession. GDP and corporate earnings have both exceeded peak levels set before the recession began. Both corporate and individual balance sheets have improved dramatically and the overall leverage in the financial system has been greatly reduced. In addition, the slow recovery is due in large part to lingering weakness in employment and housing, making further sizable declines in these vital areas of the economy far less likely.
2011-08-10 Unprecedented Fed to the Rescue by Mohamed A. El-Erian of PIMCO
After Mondays gut wrenching 635 point fall, the Dow Jones index surged an impressive 430 points on Tuesday. In the process, investors experienced a wild 640 point intra-day roller coaster! Gold prices set another record while Treasury yields fell sharply, with the 2-year closing at an eye popping 0.2% and the 5-year at an equally stunning 1.0 percent. Tuesdays combination of unusual, if not unprecedented, market moves had a lot to do with the Fed. Once again, the institution came to the rescue of an equity market under severe pressure, and did so in a bold manner.
2011-08-10 Update on Global Economic Uncertainty by Team of Nomura Asset Management
Investors can afford to be less nervous in a market that has already declined significantly. Rather, we would recommend that investors should recognize the ability of these companies to generate earnings as well as their ability to sustain their dividends payments. Governments of all major developed and emerging countries have to deal with deteriorating economic forecasts, so until investor psychology calms down, patience may be needed. We will continue to monitor the changing investment environment and identify stocks that offer worthwhile investment opportunities.
2011-08-10 Rumours by Jeffrey Saut of Raymond James Equity Research
When asked how he made his money, Mr. Rogers answered, I sell euphoria and buy panic. Currently, gold and Treasuries are gapping on the upside; and, stocks are gapping on the downside. The implication, though I believe gold is in a secular bull market, suggests positions should be sold in metals and the freed-up cash should be used to buy sound stocks with decent dividend yields. The weeks ahead will determine if this is the correct strategy. All said, IMO it is too late to panic. The time raise cash, was months ago. Now it is time to selectively redeploy that cash into select equities.
2011-08-09 New Insights on the Role of Alternative Investments in High-Net-Worth Portfolios by Scott Welch, CIMA (Article)
Trends and developments over the past five years allow greater access to alternative strategies and dictate a different conversation with investors about the purpose and trade-offs of such strategies, as well as appropriate ways to incorporate them into well-diversified portfolios.
2011-08-09 Letters to the Editor by Various (Article)
A reader responds to Robert Huebscher's article, The Winning Endgame, which appeared last week, and another reader responds to Scott Smith's guest contribution, Hitting a Moving Target: Matching Portfolio Risk to Client Expectations, which also appeared last week.
2011-08-09 Focus on the Economy by Brian S. Wesbury and Robert Stein of First Trust Advisors
Investors remain on edge and stocks are down about 2% around the world today. Combine last weeks sell-off, the debt ceiling debate, financial instability in Europe, the recent soft patch, and a downgrade by S&P and this fear is understandable. Short-sellers and pessimists are in their glory. And for the umpteenth time, Nouriel Roubini said that a double-dip recession is on its way. We understand the uncertainty. What we dont get is why it's so hard for economists to look at economic data. There was a soft patch but, it is not getting worse. In fact, data has been improving.
2011-08-09 US Debt: Moody?s AAA / S&P AA+ by Brian S. Wesbury and Robert Stein of First Trust Advisors
If this move by S&P helps the US get more serious about cutting spending, then it will have been a very positive development. If it influences the political environment by pushing the US to a more conservative set of fiscal values it will be even more positive than that. There is a titanic battle of economic and political philosophy taking place in the US today. S&P wants to be a player in this battle, but in the end it will have a relatively minor role.
2011-08-09 S&P Downgrade and Municipal Market Insights by Tom Dalpiaz of Advisors Asset Management
Here is some perspective from Municipal Separately Managed Accounts (SMA) Land about the S&P downgrade and the municipal bond market: Moodys and Fitch have retained their AAA ratings on U.S. Government debt. This action by S&P was not entirely a surprise and was foreshadowed to a large degree. The rating agencies had negative trends on U.S. Government debt for a few months and S&P, in a mid-July report, laid out in three scenarios the actions they might take depending on how the debt ceiling increase was handled by Congress.
2011-08-09 The Other Shoe Drops: Munis Tied To Government Get Downgraded by Joseph Deane, Julie P. Callahan and Joseph A. Narens of PIMCO
We believe the implications from the downgrade as well as the overall environment make a good case for muni investors to prefer essential-service revenue bonds over General Obligation (GO) securities.
This is not the first time that we have seen the muni market face potential ratings downgrades.
The muni market has become a market where credit analysis is increasingly important.
2011-08-08 Recession Warning, and the Proper Policy Response by John P. Hussman of Hussman Funds
As of Friday the S&P 500 was below its level of November 2010, when the Fed initiated its second round of quantitative easing. Aside from a brief bump in demand that kicked the recession can down the road a bit, the U.S. economy is not much better off. Meanwhile, countless individuals in developing countries have been injured by predictable commodity hoarding and global price instability. The Fed has leveraged its balance sheet by over 55-to-1. As policy makers look to address the abrupt deterioration in U.S. , we should ask ourselves: Do we really long for more of the Fed's recklessness?
2011-08-08 Everyone Forgot the Basic Laws of Economic by Richard Bernstein of Richard Bernstein Advisors
The consensus over the past month of so was that Washington would come to a last minute debt limit resolution and the equity markets would rally once the cloud of uncertainty regarding the US's finances was removed. Washington did come to its last minute resolution, but the markets have sold off. What happened?
2011-08-05 Portfolio Commentary Q211 by Jay Compson of Absolute Investment Advisors
The Fund's overall positioning and exposures have changed very little over the past few months as our managers continue to see almost all asset classes priced to deliver unsatisfactory long term returns. There is no real change in overall thoughts from our previous commentary except to add that many of the issues and risks we have discussed are starting to become more significant and weakening fundamentals are finally becoming more apparent to investors. Ironically, the things that have created short term rallies of late are largely noise and are less positive than they were 3-6 months ago.
2011-08-05 Are We Heading Back to Recession? by Russ Koesterich of iShares Blog
With the inventory build no longer driving the economy, growth is now reflecting real end-user demand. Unfortunately there isnt much of it. Personal consumption is by far the largest component of the economy, accounting for roughly 70% of economic activity. As everyone is well aware, the consumer has been on strike for much of the past three years. Consumers can spend from income, accumulated wealth or borrowing. For much of the previous decade, consumers were able to compensate for the lack of real income gains. Unfortunately, those factors cannot be relied on today.
2011-08-05 Markets Enter Correction Territory as Economic Concerns Set In by Bob Doll of BlackRock Investment Management
Two weeks ago, we did not think that stocks were expensive. Now, with markets lower by
10%, stocks are pricing in a more negative scenario than we expect. To us, this suggests
that the present market could represent an opportunity to accelerate moves out of cash
and Treasuries and into risk assets.
2011-08-05 The Center of Gravity Shifts Slowly by Andrew Schiff of Euro Pacific Capital
To an extent not fully appreciated by the investing public, financial markets are influenced by human emotion just as much as they are by economic data, corporate earnings, and dividend yields. Of all human motivations, fear is perhaps the most powerful. When people get scared, the fight or flight instinct forces us to take action. Simple dangers prompt simple responses. If we unexpectedly encounter a bear on our driveway, we immediately run into the house and call animal control. But its harder to know what to do when financial danger stalks the stock market.
2011-08-05 Advisor Alert - Placing This Week's Selloff Into Context by Frank Holmes of U.S. Global Investors
The major market indices were lower this week. The Dow Jones Industrial Average lost 5.75 percent. The S&P 500 Stock Index decreased 7.19 percent, while the Nasdaq Composite fell 8.13 percent.
Barra Growth outperformed Barra Value as Barra Value finished 7.53 percent lower while Barra Growth decreased 6.88 percent. The Russell 2000 closed the week with a loss of 10.34 percent.
The Hang Seng Composite Index finished lower by 6.80 percent, Taiwan fell 9.15 percent, and the KOSPI declined 8.88 percent.
The 10-year Treasury bond yield closed 24 basis points lower at 2.56 percent.
2011-08-04 Weekly Commentary & Outlook by Tom McIntyre of McIntyre, Freedman & Flynn
Concern over the debt ceiling debate had the stock market down each and every day last week despite stellar earnings reports. The Dow Jones Industrial Average fell by 4.2% while the NASDAQ Composite dropped 3.58% last week as Washington dithered. Today is a new week, and with the erstwhile deal announced last night, the stock market should enjoy a very sharp snap back. Fears about the financial system not being able to function normally should dissipate despite some worry that the deal will not be approved in the House of Representatives.
2011-08-04 The Five Horsemen of the Economic Malaise by Craig Hester of Hester Capital Management
The unwinding of the economic malaise will take years, and it will be a painful - but necessary-process. There is much fear and anxiety reflected in the financial markets. Many of the world economies are in a state of disequilibrium, with too much debt, facing high unemployment and sluggish growth. Policy options are limited, and politicians lack the courage to act. But out of such times come opportunities. We live in a world of instant news and an acute short-term focus. One of the keys to investment prosperity is to manage money with a long-term perspective while balancing risk and return.
2011-08-03 Disappearing Act: GDP Loses Steam by Liz Ann Sonders of Charles Schwab
Although the debt deal remains top-of-mind, the latest GDP report's weakness didn't ease the angst.
The economy is now operating at "stall speed" and is at a crucial inflection point.
There's not much good news other than corporate profits, which have boomed.
2011-08-03 Training Wreck Waiting to Happen by Bill Smead of Smead Capital Management
Someday soon, as the charade of uninterrupted GDP growth catches up with the Totalitarian Communist Government, we believe the entire Chinese banking system will have to be recapitalized to the tune of over $1.5 trillion. At that point, there wont be enough money to lend for new projects to even maintain existing GDP. In our opinion, there will be an economic contraction in China lasting three to four years. Whether China is to become a truly great economy will be determined by what they do in the aftermath of the coming economic train wreck.
2011-08-03 A Deal Nears, but the Economy Remains Unstable by Chris Maxey of Fortigent
With fears of an impasse over the debt ceiling, equity markets faced a difficult week. Fortunately, leaders announced on Sunday evening that they reached a deal in principal to raise the debt ceiling. Many pundits have reiterated in recent weeks that a deal would be reached prior to the August 2 deadline, but markets and investors grew nervous over the past week. However, politicians stayed true to form. They assured the American people that, despite headlines from the past several months, Republicans and Democrats came together in the interest of their constituents to strike the best deal.
2011-08-02 The Second Great Contraction by Kenneth Rogoff of Project Syndicate
Why is everyone still referring to the recent financial crisis as the Great Recession? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the United States and other countries, leading to bad forecasts and bad policy. The phrase Great Recession creates the impression that the economy is following the contours of a typical recession, only more severe. That is why, throughout this downturn, forecasters and analysts who have tried to make analogies to past post-war US recessions have gotten it so wrong.
2011-08-02 Is the US a "BBB" credit? David Woolley on the MERS land title chain fiasco by Team of Institutional Risk Analyst
In this issue of The Institutional Risk Analyst, we feature a summary of a paper by David E. Woolley, a California Licensed Land Surveyor and Certified Fraud Examiner, who is a principal of Harbinger Analytics Group in Tustin, CA. Thanks to David and Lisa Herzog, who edited the study and performed research, for summarizing the paper. But first a rant on the furious inaction of the past week.
2011-08-01 America Will Avoid Default But There's A Lot More to Do by Mohamed A. El-Erian of PIMCO
Politicians are taking an important step this weekend to remove the threat of a debt default and to focus more credibly on problems facing the economy. We should thank them for that. But we should also remind them that their work is far from done. Washington should waste no time in redoubling efforts to remove the multiple policy uncertainties and structural impediments that stand in the way of restoring America on the path of high growth and plentiful job creation. Anything short of that will imply further economic and social deterioration, and a greater erosion of America's global standing.
2011-08-01 Debt Crisis Averted, Now Back To Reality by John Petrides of Advisors Capital Management
Late Sunday night the US Senate reached a deal to effectively cut $2.4 Trillion from the US budget in a two stage process: about $1 trillion agreed upon now over a ten year period, and $1.5 trillion more to be decided by a special committee of lawmakers by November. This removes fear of a US default and helps stabilize confidence throughout the global financial system. Aside from congressional procedures, the deal appears done. We will see how the credit ratings agencies will react to the proposal. Now investor focus will shift from DC incompetence back to the macro and micro economy.
2011-08-01 FW: F.A.S.T. Graphs video blog on 3M Co. (MMM) and Emerson Electric Co. (EMR) by Chuck Carnevale of F.A.S.T. Graphs
At the special request of readers of our recent blog post titled Six High-profile Industrials with Staggering Three-year Performance? (Part 1) we have prepared a short video blog looking at 3M Corp. and Emerson Electric through the lens of our F.A.S.T. Graphs research tool. Click this link to view the video: youtu.be/EJrIx9sxhQ4
2011-08-01 And That's The Week That Was by Ron Brounes of Brounes & Associates
A month ago, the DC deficit/debt debate was amusing political theater. Partisan hacks earned brownie points with loyal constituents, while preparing for next years election. Two weeks ago, the theater turned into a game of chicken as Main Street and Wall Street watched with interest to see which party would blink first. Today, theater and chicken are no longer amusing. A complete and utter inability to compromise and a win-at-all-costs attitude have brought government and economy to the brink of disaster. Are there any grown-ups left in Washington?
2011-08-01 Why Global Debt Dramas Recur by Mohamed A. El-Erian of PIMCO
Neither Europe nor America can sustain the sort of economic recovery that would make a meaningful dent in their debt dynamics. As a result, different governments are opting for different approaches, including harsh austerity, financial repression and, in one case, a potential debt restructuring.
De-levering pressures will be with us for years, and governments will mix and match from the menu of options. Accordingly, periodic debt dramas will recur. And we all need to understand the dynamics and the likely choices governments will make going forward.
2011-08-01 Markets Will Look Past Debt Issues, But Not Yet by Bob Doll of BlackRock Investment Management
Over the past several months, stocks have been in a fairly narrow trading range, with strong earnings pushing prices higher and macro risks and the growth slowdown acting as counterweights. Once the debt and deficit pictures become more clear and once investors are able to price in the effects of the final deals, markets may be able to again focus on fundamentals. From an economic perspective, the US economy remains vulnerable, which is not a comfortable backdrop for risk assets, but we continue to believe that the probability of recession remains low and that economic data should improve.
2011-07-30 The 2011 Gold Season is Just around the Corner by Frank Holmes of U.S. Global Investors
September has traditionally been the beginning of the gift-giving season for gold. This is the time of year when gold jewelers are the busiest. The Muslim holy month of Ramadan begins in August and concludes with generous gift-giving in early September. Then its Diwali, known as the festival of lights in India, Christmas in the U.S., and Chinese New Year. The key to this seasonal strength over the past few years has been demand from China and India.
2011-07-30 Shifting Focus by Liz Ann Sonders, Brad Sorensen, and Michelle Gibley of Charles Schwab
Some economic indicators are starting to perk up while corporate earnings have been strong as we wind down reporting season. Stocks will move higher in the coming months once confidence is restored. Whatever the near-term outcome of the debt debate, the US still has deficit issues to deal with and hard choices must be made to ensure economic stability for years to come. Europe finally arrived at their debt deal, but it likely falls short of what will eventually be needed. Meanwhile, China is key to emerging market performance and continues to deal with inflationary concerns.
2011-07-30 Could a U.S. Debt Downgrade Trigger a Financial Crisis? by Neel Kashkari of PIMCO
A downgrade of U.S. credit could spark a new financial crisis. Would the impact be as great as when Lehman Bros. failed? Treasurys have been defined for decades as the risk-free financial instrument; faith in them is far stronger than it was in debt of Lehman. U.S. Treasuries are a $14 trillion market. Lehman had approximately $600 billion of liabilities before it failed, less than 5% of the size of the Treasury market. These factors suggest that a U.S. downgrade has the potential to be as bad, or perhaps worse, than the Lehman shock.
2011-07-30 Visualizing GDP: The Consumer Is Key... and at the Razor's Edge by Doug Short of Doug Short
Over this time frame, we see that the personal consumption expenditures component has shown the most consistent correlation with real GDP itself. When PCE has been positive, GDP has been positive, and vice versa. As the Q2 GDP component analysis clearly illustrates, personal consumption expenditures, at 0.07 of the real GDP 1.29, is at the razor's edge of positive territory.
2011-07-29 Gold Faces Short-Term Price Trap by John Browne of Euro Pacific Capital
Gold appears set on a very strong upward path. However, in the short term, if global recessionary forces re-emerge and/or investors become euphoric over the US dodging a debt default, gold could face a significant price correction. If governments inflate wildly in a futile attempt to avert a pending depression, leading to stagflation, then gold should rebound in priceMy forecast should not be construed as an appeal for investors to sell their gold and try to time their way back into the market. Rather I would suggest that there may be some discounted buying opportunities in the coming months.
2011-07-28 Akre Focus Fund Quarterly Letter by Chuck Akre of Akre Capital Management
We believe that businesses and consumers in the United States are gradually healing, but it is clear the economy remains hobbled by the housing hangover and excessive debts public and private. Perhaps even greater troubles are brewing abroad. Serious fragilities in the European and Chinese banking and monetary systems are coming to light. Every major economy of the world including our own is facing down the uncomfortable prospect of austerity. Nearly everywhere, the ability of monetary authorities to maintain a stable value of paper currency is in question.
2011-07-28 The 'how' undermines the 'what' of the debt ceiling debate by Mohamed A. El-Erian of PIMCO
I am confident that Washington will find a way to compromise on a mini-deal, rather than a grand bargain, that raises the debt ceiling and avoids a debt default. They may even manage to evade a downgrade of the nations vaunted AAA credit rating, though this is more uncertain. But fiscal solvency is not merely a function of deficits and debt. It is also highly sensitive to economic growth: The lower an economys growth rate, the higher a budget deficit is likely to be, the larger the debt accumulation, and the greater the need for yet another round of fiscal austerity to safeguard solvency.
2011-07-28 WSJ Economists' GDP Forecasts: Weak Q2 But a Stronger 2nd Half by Doug Short of Advisor Perspectives (dshort.com)
Every month the Wall Street Journal surveys a few dozen economists to get their opinions on a variety of hot topics. The survey also asks for forecasts on a regular set of economic indicators: 10-Year Yields, Fed Funds Rate, GDP, CPI, Unemployment Rate, Housing Starts, Crude oil, Payrolls, Home Prices. I've made a little snapshot to help us understand what these mainstream professional eoconomists are forecasting for quarterly GDP for the rest of the year. The markers are arranged from low to high for each quarter so we get a clear idea of the distribution of responses.
2011-07-28 It's About Payment, Not Price! by Wayne Yamano of John Burns Real Estate
For those consumers who are waiting to buy a home, are you aware that you could be "priced out" of the market by rising mortgage rates and tighter underwriting, even if home prices fall? Potential home buyers are focused on the wrong metric. They are overly focused on home price because of the tremendous correction that has occurred and the focus on home prices in the media. What consumers and the media are ignoring is the monthly payment, which is absolutely fantastic right now and highly unlikely to get much better. Everyone is just assuming that they will stay low forever.
2011-07-27 Profit expectations in the square root recovery by Robert McConnaughey of Columbia Management
They always say that in the media, if it bleeds, it leads. Crisis and tragedy is gripping stuff, and there has been plenty to report in the financial press in recent years. Perhaps under-reported and less-celebrated has been the truly remarkable recovery of profits at American businesses in the wake of the Great Recession. Reacting to the pain of the downturn, corporate America did a remarkable job of tightening its cost belt. As a result, the rather modest recovery in economic growth has driven huge profit gains, as margins have leapt back to historical peaks.
2011-07-27 Are We Headed For A Second Recession? by Caroline Corbett & Lance Roberts of Streettalk Live of Advisor Perspectives (dshort.com)
Is a second recession in so short of a time in the offing? It certainly seems that way. The hope for a continued recovery has grown dim lately as many of the economic indexes are moving towards contractionary territory. In the words of David Rosenberg, chief economist at Gluskin Sheff, "one small shock" could send us into a second recession. With the recent release of the Chicago Fed National Activity Index, our proprietary economic index is just one small step away from crossing the 35 mark which has always been a pre-cursor to recession.
2011-07-27 Washington Had a Spending Problem by Paul Kasriel of Northern Trust
Although Washington does not seem to have a current spending problem, what about a spending problem going forward? Specifically, if the programs specified in President Obamas February 2011 budget proposal were implemented, how would growth in federal total outlays in an eight-year Obama presidential tenure compare with growth in federal total outlays of other presidents tenures? To answer this question, I have relied on projections of total federal outlays by the Congressional Budget Office (CBO), the nonpartisan scorekeeper of all things fiscal.
2011-07-26 Investing with a View of Significant Inflation by Bob Kargenian (Article)
Almost all the analysis we read has concluded that, with the Fed seemingly printing