Insights into the world of high- and ultra-high net worth investing
September 29, 2009- Vol 3, Issue 39
There are good reasons for investors
to maintain a long-term strategic
allocation to gold, which has clear, positive portfolio benefits
(due to low correlation to other asset classes). That said, gold is in an historic run-up in value
and has been generating unsustainably
high returns. Because of its high price and rising
volatility, Geoff Considine argues there
is significant tactical risk in gold.
Investors should expect extremely low
inflation - just slightly above zero - for the indefinite
future, according to Connie Everson, the
Managing Director and co-founder of the Capital Markets Outlook Group, a
Boston-based economic consulting firm that serves institutional
investors throughout the world. Everson delivered her remarks to an
audience of financial analysts in Boston last Thursday.
Dan Richards' recent article, A
Wakeup Call for Advisors: Turmoil at the Top of the Market,
drew by far the largest response of any his articles in the last year and a
half. Focusing on a number of recent articles on affluent investors leaving existing advisors,
the article laid out five strategies to respond to this trend. Of
course, laying out the strategies is the easy part - it's acting on them
that's tough - and Dan offers suggestions
for advisors looking for a way to prioritize their action plan.
Equity indexes, like those offered by Russell and S&P are
the investment-world equivalent of sausages - chopped up pieces of meat in
tightly wrapped packages. Most shoppers buy sausages based on brand
name, as do investors when they choose their benchmarks. In this
guest contribution, Ron
Surz dissects these index sausages and explains the
real differences in their ingredients.
More articles below...
Why do some expect that social
networking should produce
results in a matter of a couple of months? It is
still networking and should be handled in the same manner. As Kristen Luke explains, merely advertising your business may
work if you are a restaurant or hotel, but it doesn't work in a relationship-oriented business like financial
as Dickens contrasted the fortunes and
misfortunes in England and France in his classic novel, A Tale of Two Cities, today the divergence is painfully apparent in those who plan
to accumulate wealth for their retirement and those who seek excess returns
in their portfolios. In this guest contribution, advisor
Brian Murphy tells the tale of two clients - one who aggressively sought
alpha and the other who passively built retirement wealth.
Jeff Mortimer is
Senior Vice President and Chief
Investment Officer-Charles Schwab Investment Management, Inc.
(CSIM). Mortimer has overall responsibility for approximately $240 billion in Schwab Funds and
managed accounts. We spoke with Mortimer two weeks ago about the
economy and why he believes the market
has already priced in the bad news trumpeted by the media.
In our letters to the Editor,
a reader responds to our article last week, The Financial Market Solution to
Carbon Emissions, and another to our article two weeks ago, Mohammed El-Erian: We Have Not
Reached Escape Velocity.
Lastly, we highlight submissions to Advisor Market Commentaries.
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How do we rationalize the positive returns from simply holding a physical
commodity such as gold? For many investors, gold provides protection
against the contingency of rampant inflation. As such, one might
argue that the long-term returns for holders of gold are rational because
the financial system rewards those who provide access to this ultimate form
of reserve currency. But even if this is the case, there must be some
rational way to value gold-it cannot be a great investment at any price.
Strategic and Tactical Perspectives
Case Against Inflation
investors, it's taken as a given that government spending will lead us to
inflation," Connie Everson said. Stagnant flows in the credit
markets and sluggish economic activity, however, lead others to assume that
we are instead facing deflation - or at least an extended period of low
interest rates. According to Everson, excess capacity in the economy
will dominate, driving low inflation
The Case Against Inflation
Intention into Action
As you think about your response to Dan Richards' earlier article, consider
going back to the five strategies that were outlined. As you think about
them, consider whether you'd give any of them a top priority of 10 - and if
the answer is yes, that's the idea you should focus on going forward.
Turning Intention into Action
Testing Investment Style Sausages
It matters a lot
which factors are used to define stock style classifications. Different
approaches not only assign stocks to different styles, but they result in
financial characteristics and performance behaviors that are materially
different. It's important to know the ingredients of your style sausages,
and not just select them based on brand name.
Taste Testing Investment Style
Networking is Still Networking
How do you make social networking sites like LinkedIn, Facebook and Twitter
work for you? The answer is to treat them like you would any other
networking opportunity. Kristen Luke offers some tips for networking
in the word of social media.
Social Networking is Still
While we may now be exiting the "age of foolishness," surely it
will one day return and some new form of madness will overtake Wall Street
and perhaps the rest of the world. Regardless, Brian Murphy's clients
will be "okay" nearly 90% of the time-based on fact, not
fiction. Not because we beat the market, not because we found
the best money manager, and clearly not because we over-weighted energy,
alternative investments or any other Wall Street nonsense.
A Tale of Two Investors
Jeff Mortimer, CIO of Charles Schwab Investment Management
"The path of
economic growth may have been steep in the past and maybe it will slow to
around 2%. So perhaps you should look to incorporate faster growing
asset classes like emerging markets into your asset allocation. It
doesn't overly concern me that consumer slows down and spends less. The
market has already discounted that."
Interview: Jeff Mortimer, CIO of
Charles Schwab Investment Management
In our letters to
the Editor, a reader responds to our article last week, The Financial
Market Solution to Carbon Emissions, and another to our article two weeks
ago, Mohammed El-Erian: We Have Not Reached Escape Velocity.
Letters to the Editor
from Advisor Market Commentaries
Bond yields can be pushed lower for a longer period than is ever foreseen
at the outset of a bubble collapse. Either prolonged weak economic
conditions or a miscalculation by central bankers or governments could be
the trigger. In the 1930's, for example, yields on government and
corporate bonds drifted gradually lower after the initial economic recovery
in 1933 as consumer prices dipped in the mid-1930's and dropped sharply in
"Lower Than You Think" -
by Michael Nairne of Tacita Capital
Let's jump forward to next September. We will need at least 1.5 million
jobs to take into account growth in the population. Plus another half
million jobs that we are likely to lose before we start to grow again. What
is the likelihood of average job growth of 160,000 a month? Anyone want to
take the "overs" bet?
Welcome to the New Normal by John
Mauldin of Millennium Wave Advisors
in Advisor Perspectives
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