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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
December 29, 2009- Vol
3, Issue 52
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This is our last issue for
2009. We want to wish all our
readers a happy holiday season and a happy new year. We
look forward to serving you in 2010.
Jeremy
Siegel is a professor at
the Wharton School of the University of Pennsylvania and the author of Stocks for the Long Run. In our
interview, Siegel says fair value for the
S&P 500 is at least 1,300 and the economy is poised for rapid recovery - without the need
for additional stimulus packages.
Bob Veres is the editor and
publisher of Inside Information,
a publication focused on practice management and related issues for the
financial planning profession. He just introduced a new monthly service, Client Articles, which will
contain articles (and cartoons) that can be sent to clients, for
example as part of your quarterly newsletters. He provides two sample letters.
We closely monitor which articles
draw the most readership. This allows us to fine-tune our content to
the preferences of our audience. Reflecting on those articles that
were most popular over the last year, however, we believe other articles
also deserved your attention. We
provide the "Top 10" articles you didn't read - but should have.
What's the best way to say thank you when you get a new client as a
result of a referral from someone with whom you already
work? Dan Richards says
sending the typical thank you gift is a mistake, and offers some advice for
gifts that will make a lasting impact.
More
articles below ...
The
mainstream financial services industry, the media and academia - virtually
everyone - has overestimated the value of
diversification in risk management. The recent crisis has
shown that investors need more than simple diversification to protect them
from both the known and the unknown risk that they will eventually
encounter. In this guest contribution, Roger Schreiner, says that when it comes to risk management,
diversification simply is not enough.
We
have two letters to the Editor.
A reader responds to our article last week, The Next Black Swan? Underfunded
Public Pensions, and provides additional
data showing the depth of the pension crisis. Another
reader comments on our recent articles on the predictive power of Morningstar's ratings.
Lastly, we highlight submissions to Advisor
Market Commentaries.
We welcome guest submissions from our
readers. For more information, here are our guidelines.
If you are experiencing problems
opening or navigating through our newsletters, we can send you a text-only
version. Please send an email to feedback@advisorperspectives.com requesting the "text-only" version.
If you have received this newsletter
in error, or you do not wish to receive future newsletters, please reply to this email with the word
"unsubscribe" in the subject line.
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"I think that earnings growth next year will be stronger than
anticipated and will break the all-time high for the S&P, which was in the
second quarter of 2007, when earnings for the trailing 12 months were in
the low 90s," says Siegel. "In 2011 or 2012 we will break
that amount. With $90 in earnings and a 15 P/E ratio, you get 1,350
for the S&P."
Jeremy Siegel on the Undervaluation
in US Equities
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End-of-Year Letter Templates
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Industry
consultant and editor Bob Veres provides two sample end-of-year letters as
part of a new service he is introducing.
End-of-Year Letter Templates
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The Top 10 Articles You Didn't Read (But Should Have)
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Here is our list of the Top 10 articles that did not make the "most
popular" list based on readership, but we believe are worthy of your
attention.
The Top 10 Articles You Didn't Read
(But Should Have)
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The Best Way to Thank Clients for Referrals
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Every advisor does something to say thank you when this happens - a bottle of
wine, chocolates, gift baskets, flowers, sporting tickets, a charitable
contribution and gift certificates for dinner, to name just a few
methods. While they will undoubtedly be appreciated, the difficulty
with all of these is that they are unlikely to truly stand out in the
client's mind. Part of the reason is that gifts such as these run the risk
of coming across as impersonal.
The Best Way to Thank Clients for
Referrals
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Diversification is Not Enough
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Mutual fund managers are right about one thing: Risk management is handled at
the portfolio level, not the fund level. It is the responsibility of
the investor and their advisor to select when to expose themselves to risk
and how much of their portfolio to shield from it.
Diversification is Not Enough
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Letter to the Editor - Pension Liabilities
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A
reader provides data illustrating the depth of the crisis in public pension
funds.
Letter to the Editor - Pension
Liabilities
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Letter to the Editor - Morningstar Ratings
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A reader comments on the recent articles on the predictive power of
Morningstar's ratings.
Letter to the Editor - Morningstar
Ratings
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Highlights from Advisor Market Commentaries
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The global economic recovery underway will likely be very much
de-synchronized, borne of heterogeneous initial conditions on display prior
to the recession, with a full range of possible outcomes. In the developed
world, we had double bubbles in property and credit creation. Much of the
developing world, in contrast, had already gone through its "baptism
by fire" a decade ago and actually had incredibly sound balance sheets
in the public and private sector as a starting point. In addition to these
differing initial conditions, there is still uncertainty over three major
issues, which in turn creates a range of possible outcomes in our forecast.
Depending on how these issues progress, we're looking at multiple potential
resolutions of the inherent tension in the overall system. There will
likely be some bipolar market outcomes.
"Paul McCulley Discusses
PIMCO's Cyclical 2010 Outlook" by Paul McCulley of PIMCO
Larry Katz, director of research at Merriman, plots the declines and (so
far) partial recoveries of five diversified portfolios that Merriman
describes in their literature plus the Standard & Poor's 500 Index. In
each case, we wanted to see what happened after the high point, the beginning of October 2007, through the end of November
2009, giving us a 26-month market snapshot.
"The Bumpy Road to
Recovery" by Paul Merriman of Merriman
We are ushering in 2010 on a note of guarded hope, unlike the dawn of 2009
when great apprehension about the global economy was the predominant theme.
Three broad aspects stand out as the curtain closes on 2009. First,
recession is now a matter of history. Second, massive financial sector
blowups are mostly behind us, but smaller yet significant tempests cannot
be ruled out. Third, an arduous economic recovery is nearly certain.
Against this backdrop, we think the world economy will move ahead with
mixed economic momentum but mostly tilted toward a positive economic growth
trajectory. We begin with predictions of economic growth, inflation, and
unemployment, then take a look at fiscal challenges, currency issues and
potential asset valuation problems in selected countries.
"Staggered Return to Global Growth" by Paul
Kasriel of Northern Trust
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Advisor
Perspectives
Box 380
Lexington, MA
02420
(781) 376-0050
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