Insights into the world of high- and ultra-high net worth investing
August 25, 2009- Vol 3, Issue 34
Paul Bolster and Emery Trahan,
professors of finance at Northeastern University, were curious about the Mad Money phenomenon, and applied the full force of their analytical powers to a study
of Jim Cramer's advice. They published their analysis
earlier this year, and it reveals answers to key questions - such as
whether Cramer's picks move the market or whether
Cramer can legitimately call himself a skillful stock picker.
While many - perhaps most - advisors use client
appreciation programs as part of their marketing efforts, Mo
Young has embraced this idea and made it his sole marketing focus. Young's practice is based in Youngstown, Ohio - which has the distinction of losing population more
rapidly than any other city in the US - yet Young has added
several hundred new clients over the last four years with his strategy.
Larry Katz, Director of Research at Merriman, Inc., responds to Geoff Considine's article two weeks ago, What
the New Normal Means for Asset Allocation. He has multiple objections concerning much of Considine's
logic, and would not recommend his alternative portfolio to
Only a few months ago, economist's doomsday scenarios caused
widespread concerns that we were about to revisit the Great
Depression. That consensus view on
the economy has shifted remarkably quickly, with a much more
positive outlook for the immediate period ahead. Dan Richards cites two recent articles
making a persuasive case for optimism.
The last thing you may want to read is another article about China - how many ink cartridges have been exhausted writing about
its phenomenal growth numbers in the past decade? - but what Vitaliy Katsenelson has to say may
surprise you: China's economy is hardly as vibrant as
everyone thinks it is.
paper argues that investors should hold
more equities as they near retirement, contrary to conventional
wisdom and to the glide paths employed by the target date fund
industry. Ron Surz
examines this research, and argues that the authors of the paper failed to properly consider the risks inherent in
such a strategy.
In our letters to the Editor, a reader responds to Dougal Williams' article last week, A
Crash Course in Investing: Six Lessons from the Market Meltdown, and other readers respond to our
article on Actively Managed TIPS and
to an Advisor Market Commentary on healthcare
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From July 2005 to the end of 2007, Jim Cramer's advice would have produced
a cumulative return of 31.75%, or an annualized return of 12.09%, versus a
cumulative 18.72% or 7.35% annualized for the S&P 500.
Subtracting an assumed transaction cost of 1%, which may or may not be
reasonable but should reflect the cost of trading what in many cases are
small-capitalization stocks, would have reduced Cramer's cumulative return
to 22.42%, still well ahead of the S&P 500, but slightly behind the
Russell 1000 Growth and Value indices, and nearly matching the Russell 2000
Growth index. Does this mean Cramer generated alpha?
Jim Cramer Exposed: Does He Generate
a Practice in America's Fastest Dying City
advisor uses client appreciation events as part of their marketing
strategy, but none has embraced the idea like Mo Young, and Young's success
is remarkable. Young gets as many as 65 unsolicited introductions per
year from his program, and he converts about 75% of those into
clients. His client retention rate is exceptionally high, with less
than 1% annual turnover, even during last year's bear market.
Building a Practice in America's
Fastest Dying City
New Normal and Asset Allocation: Merriman's Response
Larry Katz of Merriman says Geoff Considine's suggested portfolio has a
large-cap tilt instead of our small-cap tilt. He makes several questionable
bets and in so doing he arrives at a portfolio that is riskier than it
needs to be.
The New Normal and Asset Allocation:
With a lessening
of near term worries, the focus of concern for many investors is now
shifting to prospects for mid- and long-term growth. Two recent cover
stories in the Economist and Business Week provide ammunition to reassure
clients thrown off balance by some of the alarmist rhetoric about depressed
economic growth for the foreseeable future.
The Case for Optimism
today is where Japan
was in the late '80s, except with the greater political instability that
comes with a semi-controlled economy and the lack of a social safety net.
(In a country like China,
jobless, hungry people don't write angry letters; they riot.)
Beating a Dead Dragon
Investors Hold More Equities Near Retirement?
Our intuition tells us that retirees can't afford taking additional risk as
they near retirement, but traditional risk measures argue otherwise. We
need an alternative risk measure that captures the importance of protecting
account balances near retirement, because retirees have limited
opportunities to make up losses by working longer.
Should Investors Hold More Equities
to the Editor
In our letters to
the Editor, a reader responds to Dougal Williams' article last week, A
Crash Course in Investing: Six Lessons from the Market Meltdown, and other
readers respond to our article on Actively Managed TIPS and to an Advisor
Market Commentary on healthcare policy.
Letters to the Editor
from Advisor Market Commentaries
We hear a lot of concern that the Fed's
mushroomed balance sheet over the past two years is setting the
stage for a 1970s' style inflation here.
So long as we have a fiat (a.k.a. Chrysler?) monetary standard, the threat of hyperinflation always lurks. But
is the stage currently being set for such an eventuality? I do not think
If Inflation Is a Monetary
Phenomenon, Is U.S. Hyperinflation a Clear and Present Danger? by Paul Kasriel of Northern Trust
A number of economic and financial
variables have exhibited signs of improvement recently even if
macro indicators are still mixed. The pace of economic deterioration has
slowed significantly, and after four quarters of severe contraction in
economic activity, RGE Monitor now
forecasts that the U.S. will display positive real GDP
growth in the second half of 2009.
U.S. Economic Outlook Update: Stop
Asking When the Recession Will End by Nouriel
Roubini of the RGE Monitor
As I have repeatedly said, the world is
awash in excess capacity. We simply built too much productive
capacity to be utilized in the New Normal. One way of dealing with too much
capacity is to simply close the plants. That is what is happening in the
paper and memory-chip industries. Other industries are engaging in mergers
to reduce or "rationalize" capacity. While that process is a good
thing, it does mean that unemployment
rises or stays higher longer.
The Statistical Recovery, Part Three
by John Mauldin of Millennium
in Advisor Perspectives
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