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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
December 16, 2008- Vol 2, Issue 51
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We have a number of noteworthy articles from guest contributors and an editorial
advocating our recommendation for the auto industry.
Robert Pardes examines the TARP program and
shows how its original mission, to help institutions cleanse their balance sheets of toxic assets,
can be accomplished. Other changes to the program can help stem foreclosures and stimulate demand for housing.
Dave Loeper, CEO of Financeware, asks whether all that "diversification" various financial
product marketers and asset allocation academics have been pitching for
years has succeeded. His evidence, over the past year, is that a less diversified portfolio outperformed its more
diversified counterparts.
Hawaii-based advisor John Robinson responds to calls by former FPA
President Dan Moisand to make the CFP designation mandatory for financial
planning practitioners. Robinson comes to the defense of "faux planners,"
and explains why the CFP designation
should not be required.
We offer a response to one of the papers we featured last week
that won awards from the Financial Planning Association and Janus.
Jim Shambo, author of the paper "The Hedonic Pleasure IndexTM,"
responds to a reader's assertion concerning recently-released information
from the Bureau of Labor and Statistics (BLS). Shambo says the BLS data does not invalidate his results,
because it does not explain individual
consumption patterns in the manner required by financial planners.
Bad decisions when times were fat spell a rough road ahead for those who
hold their savings in Russian currency. Author and fund manager
Vitaliy Katsenelson says the Russian
economy is a disaster and the ruble will be devalued.
Our editorial, The Mother of all Moral Hazards, argues
that bankruptcy is the best option for GM
and Chrysler. The Bush and Obama administrations should
announce a coordinated plan to provide debtor in possession (DIP) financing
and ensure an orderly and well-funded transition that will ultimately put
the automakers on a solid foundation for the future.
Lastly, we highlight some recent Advisor Market Commentaries, including the
red flags that were raised
during the due diligence review
of Madoff Securities by the
hedge fund consulting firm Aksia, LLC.
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TARP: A Flawed Acronym, Not a Flawed Mission
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The TARP program
has focused on injecting capital directly into institutions to stimulate
lending, but this goal is not being met. Without abandoning the
original goal of cleansing troubled financial institutions' balance sheets,
TARP funds can and should be used in a far more expedient and transparent
way, and the program should incorporate new goals like stemming
foreclosures and stimulating economic activity.
Read the article
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Diversification
- When More is Less
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Dave Loeper shows
that a simple and low cost portfolio, constructed from ETFs, would be down
21% for the year, about half of that of a more diversified portfolio.
In addition, his low cost portfolio has less risk than an all-equity
portfolio.
Read the article
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In
Defense of "Faux Planners"
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Former FPA President Dan Moisand has expressed his opinion that RIA representatives
who practice financial planning but do not hold the CFP designation are
"faux planners," and has stated his desire to push for
legislation that would make the use of the term "financial
planner" the exclusive domain of CFP certificants. John
Robinson, a Hawaii-based advisor, provides the counter-arguments to these
claims.
Read the article
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Letter
to the Editor - The Hedonic Pleasure Index™
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Jim Shambo, author of one of the two papers that won awards from the
Financial Planning Association and Janus, responds to a reader's
question. He says it is the planning profession's responsibility to
reflect clients' "real world" when simulating their needs, as he
aims to create a transition from an "average price index" to an
"individualized consumption index."
Read the article
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The
Disaster Formerly Known as the USSR
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Russian economic
growth in this decade was completely driven by rising commodity prices,
mainly of oil and gas. As the global economy goes into recession and
commodity prices either decline or remain at today's levels, Russia
will relive the horrible 1990s when it defaulted on its debt and suffered
from a severe inflation. Think of Russia
as a very large oil and gas producing company that is run for the most part
by a government that makes General Motors' and Ford's management and
autoworkers' unions look like progressive thinkers.
Read the Article
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Editorial:
The Mother of All Moral Hazards
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An attempt to rescue the auto industry, such as the $14 billion package
which failed in Congress last week, wold have created the Mother of All
Moral Hazards, with no incentive for stakeholders to make any concessions
until all the money was spent. A far more prudent option is to
facilitate an orderly and well-funded transition to bankruptcy, so that the
structural problems that afflict the industry can be solved with a
long-term perspective.
Read the Article
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Highlights
from Advisor Market Commentaries
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We highlight recent submissions to Advisor Market
Commentaries:
One of the firms that warned its clients of the dangers of investing with
Bernie Madoff is the hedge fund consultant Aksia, LLC. Aksia has allowed
us to publish their letter to clients, which outlines the red flags raised
during their due diligence of Madoff Securities. To this list we add
that investors were not allowed to speak directly to Madoff, according to
published reports, which was apparently also the case with Marc Dreier,
whose firm also collapsed this weekend.
Read the Commentary
Nouriel Roubini of the RGE Monitor examines the full spectrum of world
economies as he assesses whether aggressive fiscal and monetary policies
can avert global stag-deflation.
Read the Commentary
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