Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
June 9, 2009- Vol 3, Issue 23
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While he agrees with much of what the US administration is doing to
confront the economic crisis, Simon Johnson, the former chief economist
of the International Monetary Fund, fears that present policy is not
addressing a key issue: the overwhelming influence of the finance
industry in US economic affairs. He likens this imbalance to what we
see at the core of many emerging markets crises.
The value of
a security is a function of the quality and security of its cash flows and
those of the underlying business. Nick P. Calamos, CFA, co-chief investment
officer and chief market strategist, outlines Calamos Investments' research
process for determining a company's business valuation - it is taken from
his 2003 textbook, Convertible Arbitrage: Insights and Techniques for Successful
Hedging. He details how Calamos' research uncovers the economic profits of a
company and determines the quality of the cash flows, the return on capital, and
finally, the equity's valuation. We thank them for their
sponsorship.
Nearly a half-century of global economic prosperity has ended, and
investors must gird themselves for muted returns from the capital
markets, according to Bill Gross, a Managing Director at PIMCO. Gross
shared his outlook at the Morningstar Investor Conference.
According to Black Swan author Nassim Nicholas Taleb, the U.S. economy is broken - but not beyond repair - and that repair
will not be a snap. It does not necessarily need more regulation, but
more intelligent regulation - plus the will to let entities like
Citibank and General Motors fail once they become too big and
cumbersome and act irresponsibly.
Three
of the industry's most accomplished value investors - Bruce Berkowitz of the Fairholme Fund, Tom Marsico of Marsico Capital Management and Wally Weitz of Weitz Funds - spoke at a panel discussion at the
Morningstar Investor Conference on May 28. We present some excerpts of their thoughts on key questions raised during the panel
More articles below...
The easy money has been made in the credit markets, as investors
have reaped strong year-to-date returns, topped by 17% in emerging
market debt and 30% in high yield bonds. Now the markets are in a much
riskier position, said Jeff Gundlach, Chief Investment Officer of the
TCW Group, in his quarterly update to investors that he titled "It was
Great While it Lasted."
We're all looking for ways to make the time we spend talking to clients on the phone and in meetings more productive. Recently, Dan Richards spoke to an advisor who made one small change to his routine that led
to better results from client interactions. With an investment of just
thirty seconds before each call and meeting, he has seen a meaningful
change in outcomes.
Each quarter we review changes in the Advisor Perspectives (AP) Universe, which represents $50 billion in high-net worth assets managed by RIAs. Our analysis looks at changes in asset allocation, the mutual funds and ETFs that gained or lost market share, and the performance of the most popular actively managed mutual funds.
In our letters to the Editor, a reader responds to last week's article on Jeremy Grantham.
Lastly, we highlight submissions to Advisor Market Commentaries.
We welcome guest submissions from our readers. For more information, here are our guidelines.
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Simon Johnson on Obama's Achilles Heel
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Simon Johnson thinks recovery can't succeed unless the administration
breaks the financial oligarchy that is sustaining the status quo and
preventing essential reform. Without such reform, he warns things
could get much worse.
Simon Johnson on Obama's Achilles Heel |
Anatomy of a Growth Manager: the Calamos Equity Valuation
Process
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The value of any security is a function of the underlying business' cash flows
-- including the security and quality of those flows. This paper outlines
Calamos Investments' research process for valuing a business, including how the
research team determines economic profits, cash flow quality, return on invested
capital, and ultimately the equity's valuation
Anatomy of a Growth Manager: the Calamos Equity Valuation Process
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Bill Gross and the New Normal
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Bill Gross says the "New Normal" - slow economic growth, high unemployment, and accelerating inflation - will be an inherent part of our economy for years to come. Gross
offered specific forecasts - economic growth of 1-2%, unemployment of
7-8%, and inflation kicking in over the next three to five years.
Bill Gross and the New Normal
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Nassim Nicholas Taleb's Prescription for a Black Swan-Proof Economy
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Taleb spoke at a conference in New York last week, and presented his 10 rules for a Black Swan-Proof Economy. Among those is firing the people who "got us there in the first place." He affirmed his belief that the current political and institutional leadership is not capable of rebuilding the financial system in such a way as to provide the necessary level of stability.
Nassim Nicholas Taleb's Prescription for a Black Swan-Proof Economy
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Let's Talk Stocks: Berkowitz, Marsico and Weitz
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Bruce Berkowitz, Tom Marsico, and Wally Weitz present their views on a range of topics, including valuation levels, the health care industry, and how they evaluate "capital allocator" businesses - such as Warren Buffett's Berkshire Hathaway.
Let's Talk Stocks: Berkowitz, Marsico and Weitz
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Jeff Gundlach: The Party is Over
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TCW's Chief Investment Officer, Jeff Gundlach, forecasts a "significant" downward correction in the
equity market soon. "I don't think we need to sell everything. It may
a few months before the fundamentals of debt and low economic growth
take over," he said. "The correction might be half or so of the move
that was made this year."
Jeff Gundlach: The Party is Over
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Thirty Seconds to Better Client Conversations
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With one simple step, Dan Richards shows how an advisor made his client interactions more
productive. It's a little thing - but often it's the little things that
make a big difference in the return on our time.
Thirty Seconds to Better Client Conversations
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Changes in the Advisor Perspectives Universe for Q1 of 2009
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During the first quarter of 2009, advisors shifted assets from equities into fixed income markets. One of the mutual funds gaining significant market share was the Vanguard TIPS fund. Foreign equity actively managed funds continued to outperform their benchmarks, while actively managed funds in other asset classes lagged their benchmarks.
Changes in Asset Allocation
Changes in the Most Popular Mutual Funds
Performance among the Most Popular Mutual Funds
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Letter to the Editor - Jeremy Grantham
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A reader responds to last week's article on Jeremy Grantham.
Letter to the Editor - Jeremy Grantham
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Highlights from Advisor Market Commentaries
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Paul Kasriel of Northern Trust looks at whether inflation or deflation is the greater threat over the next five yeras. He believes that the greater risk for the
global economy in general and the U.S. economy in particular is
inflation, not deflation. He arrives at this conclusion both on secular
and cyclical grounds.
Read the commentary
Charles Lieberman of Advisors Capital Management writes that interest rates surged across the entire maturity range of U.S. Treasuries last week, by an eye-popping 35 basis points on 2-year Treasury notes and a still significant 12 basis points on 10-year notes. A variety of explanations have been offered: inflation expectations are ratcheting higher, the Treasury will be auctioning off a seemingly unlimited supply of new issues to finance the ballooning deficit, or an economic recovery appears to be at hand. Only the last of these possibilities is convincing.
Read the commentary |
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