Most Recent Articles

The Riskiest Pension Assets (and the Implications for Muni Bonds) by Robert Huebscher

State finances are in trouble, in large part due to unfunded pension liabilities. To assess the depth of those problems, one can look at what is likely the riskiest component of states' pension assets - their exposure to alternative investments and, in particular, to private equity. We assess those risks and look at the larger question of whether unfunded liabilities can trigger municipal defaults.

Most Recent Commentaries

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

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

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

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

Learning From Past Crises by Mark Mobius of Franklin Templeton

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

I Renounce Monetarism (with apologies to Mr. Lippman of Pendant Publishing) by Paul Kasriel of Northern Trust

Monetarists such as Milton Friedman hold that the M2 money supply is a leading indicator of aggregate demand. Indeed, from 1960 through 1989, the price-adjusted M2 money supply had a relatively high correlation with real aggregate demand for goods and services. As charts presented in this commentary illustrate, however, from 1990 through the second quarter of 2010 the correlation between real M2 and real final sales of domestic product deteriorated dramatically.

Bernanke Out of Bullets, But Not Bombs by Michael Pento of Euro Pacific Capital

For good or ill (mostly ill), the Fed can never run out of ammunition. Their bullets cost nothing to produce. Unfortunately, unconventional monetary tools can cause far more damage to the economy than regular policy. We must understand that the Fed can shower liquidity directly on the consumer in any amount it wants. The political pressure to do so will only increase as unemployment rises and economic growth falters. Therefore, rather than fearing phantom deflation, investors should prepare their portfolios for the real upcoming battle with intractable inflation.

The Q Ratio and Market Valuation by Doug Short of Doug Short

The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Doug Short provides mean-adjusted charts of the Q Ratio since 1900. The charts indicate that the market remains significantly overvalued by historical standards - by about 33 percent in the arithmetic-adjusted version and 44 percent in the geometric-adjusted version. Periods of over- and under-valuation, of course, can last for many years at a time.

Bullish Sea Change in a Land of Little Victories by Doug MacKay and Bill Hoover of Broadleaf Partners

The odds of slower growth rather than a double-dip went up considerably with Wednesday morning's Institute for Supply Management manufacturing index release and probably even more so for the markets as a whole. The index came out at a strong 56.3, compared to expectations of 52.9. Generally speaking a reading under 50 indicates contraction rather than expansion in the manufacturing sector. While the manufacturing sector expansion may not represent a sea change akin to what investors became accustomed to in the go-go 1990's, it is nevertheless positive.

ProVise Bullets by Ray Ferrara of ProVise Management Group

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

Why Mid-Cap? by RidgeWorth Investments

RidgeWorth Investments has published research detailing six distinct reasons why investors should consider a specific allocation to mid-caps. Specifically, it explores historical performance, evaluates current conditions that favor mid-caps as well as examines how mid-caps have performed during different points in market and economic cycles. Finally, the research looks at the incremental benefit of adding an allocation of up to 40% of mid-cap stocks to a portfolio of solely large and small cap stocks. We thank RidgeWorth Investments for their sponsorship.

The Alternative to Big Bonuses by Charlie Curnow

Do bankers deserve big bonuses? Economists will tell you that bonuses improve employee productivity by rewarding good work. But did the large performance-based payments given to Wall Street securities traders, for example, really steer them to better choices during the run-up to the recent financial crisis? What about financial advisors who base their fees on a percentage of the assets they manage? We take a critical look at Dan Ariely's latest research and the insights it provides.

An Unexpected Route to Ecstatic Clients by Dan Richards

Dan Richards was puzzled by some recent conversations with investors, until he read a column in the New York Times about how to maximize the pleasure from vacations. The column stemmed from research by behavioral psychologists on how to structure activity to generate the most impact - and led to some striking findings both for planning vacations and for structuring how clients experience their interactions with you.

Double ‘Bubble,’ Toil and Trouble by Sam Bass

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

David Blitzer on How Indices Work by Dan Richards

Many investors read about the Dow Jones or S & P 500 index being up or down 200 points but don't really understand what this means. Today's interview with David Blitzer of S & P provides an explanation of how indexes work that can be shared with clients. This is a transcript of the interview.

David Blitzer on How Indices Work – Video by Dan Richards

Many investors read about the Dow Jones or S & P 500 index being up or down 200 points but don't really understand what this means. Today's interview with David Blitzer of S & P provides an explanation of how indexes work that can be shared with clients. This is a video of the interview.

Evaluating Unconstrained Managers by Various

How can advisors evaluate an unconstrained asset manager, such as John Hussman of the Hussman Fund? In a follow-up to a recent article on research by Roger Ibbotson, we present views from several advisors on the role of returns-based style analysis and whether it can help identify whether managers such as Hussman deliver alpha.