Insights into the world of high- and ultra-high net worth investing
November 24, 2009- Vol 3, Issue 47
A dramatic reduction in consumer
spending has doomed the US economy to slow
growth and deflation, according to Gary Shilling. America's 25-year spree of profligate spending is over, and it
will be supplanted by a decade-long
retrenchment that will ultimately bring the consumer savings
rate from 4% to double-digits, where it has not been since the mid-1980s,
Dan Fuss, the highly respected
bond manager at Loomis Sayles in Boston, says we are in the early
stages on a long-term rise in interest rates. His view was
shared by two other panelists, Carl
Kaufman of Osterwies and Margie
Patel of Evergreen. If
you accept this consensus, you must ask whether your fixed income
allocation is appropriate.
Larry Porcelli, the head of the private client group for US fund giant
BlackRock said that their research shows that 70% of Americans are willing to move their accounts if another firm
or advisor offered expertise on constructing portfolios to avoid running
out of money. Dan Richards identifies two things advisors
need to do to capitalize on this opportunity.
We speak with Brian McMahon,
CEO and CIO of Thornburg Investment Management about the Thornburg Income Builder Fund (TIBAX) and
the challenges of finding income-producing
securities in today's markets.
Financial advisors are, or at least should be, in the relationship business. So what better
way to build a relationship than to interact
with your clients and prospects outside the sphere of your business?
Kristen Luke offers her suggestions.
Record inflows into longer-term bond
funds in the last six months have provided investors purported
relief from the near-zero returns in money market funds. Do not mistake
those inflows or rising prices for an endorsement of bond funds, write Stan and Hildy Richelson in this guest
contribution. Bond funds are
inferior to individual bonds, as those who are now buying bond funds may
The term "textbook investing" suggests a perfect approach. But as
a recent visit with a class of college students reminded Mariko Gordon of Daruma Asset Management, there's
still much to be learned beyond textbooks and lecture halls. She takes a
look at five insights from the "real
world" of investing.
In a letter to the Editor, a
reader responds to Bruce Greenwald's comments and defends Warren Buffett's purchase of Burlington Northern.
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Shilling said increased consumer savings are not reflected in current
equity valuations or in the thinking of most economists. The rally
that began in March, he said, "implies that something is going to
happen in the economy - we are going to have a v-shaped recovery."
Gary Shilling's Version of the New
Fuss and the Long-Term Outlook for Interest Rates
Long term, Fuss
called credit fundamentals at the federal and municipal levels
"absolutely awful," and that is what will drive interest rates
higher. He does not think it will be possible to bring the US
deficit below 4.5% of GDP - roughly twice its historical average.
Dan Fuss and the Long-Term Outlook
for Interest Rates
into Today's Number One Client Concern
Given the magnitude of the investment entailed, the decision to go after
the retirement expert positioning shouldn't be made lightly. For those
advisors prepared to do it, however, making that commitment could be the
most important decision in driving the long-term success of your business.
Tapping into Today's Number One
Brian McMahon of Thornburg Investments
dollars of dividends paid by the S&P 500 will be down 26% from 2008 to
2009, which is the kind of cut that we have not seen in the last couple of
generations. The last time we saw this was in the 1930s, but not in
the lifetimes of any of today's investment professionals. This is a
new paradigm, and when you combine that with the low yields on
savings-oriented investments, such as money markets and Treasury bonds,
there is a big shortage of income.
Interview: Brian McMahon of
Personal with your Clients and Prospects
If you are genuinely interested in specific clients and prospects,
formalizing the process by setting goals and scheduling reminders will help
the effectiveness of your efforts. As you start thinking about your
marketing activities for next year, don't be afraid to adapt the way you
think about marketing and start getting personal!
Get Personal with your Clients and
Bonds and Not Bond Funds
You need a less diversified portfolio if you invest in individual
high-quality bonds than if you invest in bond funds. Go for quality, not quantity.
Buy Bonds and Not Bond Funds
Jedi Knight's Guide to Real-Life Investing
The plain truth is
that no matter how good the academic program, there is much about investing
in real life that no one teaches you at school. Mariko Gordon offers just a
few things that came up as she chatted with a group of would-be investors.
The Jedi Knight's Guide to Real-Life
to the Editor - Buffett and Burlington Northern
In a letter to the
Editor, a reader responds to Bruce Greenwald's comments and defends Warren
Buffett's purchase of Burlington Northern.
Letter to the Editor - Buffett and
from Advisor Market Commentaries
And I agree that, over time, the case for the dollar is not as good as I
would like. But in the meantime, we could have one very vicious dollar
rally, which would take equity markets down worldwide, along with other
risk assets. Why? Because it would be a major short squeeze.
"Where the Wild Things
Are" by John Mauldin of Millennium Wave Advisors
It is utterly simplistic to argue that the credit crisis was caused by
banks that were too big to fail. Neither AIG nor Fannie Mae or Freddie Mac
nor Merrill Lynch nor CIT were banks. Being small did not prevent the
savings and loan crisis a couple of decades ago. Being large, by itself,
did not cause the credit crisis. However, a failing large institution can
cause huge systemic problems, so the real question is how did some of our
largest financial institutions manage to fail?
"Too Big to Fail vs. Too
Political to Regulate" by Dr. Charles Lieberman of Advisors Capital
in Advisor Perspectives
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