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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
February 10, 2009- Vol 3, Issue 6
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Economist Mark Zandi says housing will bottom in mid-2009 and unemployment will peak shortly thereafter.
Zandi, who also forecasts a modest 3% GDP contraction, is with Moody's Economy.com, has recently provided
Congressional testimony on the stimulus plan and the automaker bailout.
Understanding the dislocation in the municipal
bond market - which continues to yield more than comparable
Treasury bonds - has been an ongoing challenge for advisors. American
Century Investments' municipal team offers their answers, along with a market forecast for 2009. We
thank American Century for their sponsorship of this article.
If government intervention doesn't stabilize the housing market by
mid-year, a new round of defaults,
comparable in magnitude to the original
subprime crisis, may hit the economy, reports Eric Uhlfelder.
Dan Richards disproves
three common myths about market underperformance:
Investors
made no money in the market from the mid
60s to early 80s; it took 25
years for the market to recover
to the level reached in 1929; and
when inflation is taken into account,
investors lost money for long periods of time.
More articles below:
In last week's issue, Rob Arnott defended his claims for fundamental
indexing against criticisms
leveled by Michael Edesess. Edesess responds to those claims, again
asserting that Arnott's claims do not
stand up to scrutiny.
Adam Apt provides the third
article in his series intended for the educated layman, addressing the
question of how to think about investment
returns. What matters for the investor is the total
package, the entire portfolio. A change in one component of the package,
considered in isolation, often matters very little, unless it is indicative
of something systematic.
Each quarter we look at changes in the
most popular mutual funds within the Advisor Perspectives
universe. We identify those funds exhibiting significant gains or
losses in popularity during the fourth quarter of 2008.
Lastly, we highlight submissions to Advisor
Market Commentaries.
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Zandi forecasts a 3% peak-to-trough decline in GDP - clearly in the camp of
the optimists. He projects an additional decline in housing prices of
10% or slightly more, on top of the 25% decline since their peak in early
2006. After prices bottom mid-year, he predicted, they will level off
in 2010 and rise appreciably in 2011.
Read the article
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2009
Municipal Bond Market Outlook
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Battered by the
credit crisis and the recession-and the impact of those market-changing
events on financial market liquidity, bond insurers, local government
finances, and non-Treasury bond sectors in general- municipal bond (muni)
investors weathered severe storms last year and face further volatility
this year. But the market turbulence has also opened opportunities. This
Q&A with key members of the muni investment management and credit
research teams at American Century Investments puts 2008 in perspective and
discusses the challenges and opportunities in 2009.
Read the article
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Son
of Sub-Prime: Another Wave of Defaults
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You thought the subprime mortgage collapse was bad? Well, another
mortgage tsunami is heading our way, and it could be just as devastating as
the one that already crashed over the U.S.
economy.
Read the article
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Three
Myths of Market Underperformance
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Dan Richards provides the data to disprove three common myths about market
underperformance. He demonstrates the important of including
dividends when measuring market performance, and how the selection of the
measurement period dramatically impacts performance results - and distorts
comparisons.
Read the article
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Response
to Rob Arnott's Defense of Fundamental Indexing
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Michael Edesess asserts that the intimations of mathematical certainties
that advocates attribute to fundamental indexing are completely groundless.
All that can be claimed for it is that it is an algorithmic methodology for
the tilting of a portfolio toward a stock selection philosophy that is
attractive because it has exhibited superior returns in the past. This
places it securely in the crowded field of active management.
Read the article
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How
to Think about Investment Returns
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In this article intended for the educated layman, advisor Adam Apt explains
that returns can be slippery. They are essential as indicators of past
performance and for framing expectations for the future, but they must be
interpreted with care. In the end, what matters for your well-being is not
the return you realized, but the value of your portfolio.
Read the article
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Changes
in the Most Popular Mutual Funds
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The Advisor Perspectives Universe consists of approximately $50 billion in assets
managed by advisors on behalf of high net worth investors. We identify the
funds exhibiting significant gains or losses in popularity during the
fourth quarter of 2008.
Read the article
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Highlights
from Advisor Market Commentaries
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John Mauldin provides his thoughts on the continuing crisis, including a
very revealing look at reported and estimated earnings and the implications
for price-to-earnings ratios.
Read the commentary
John Burns' report card for the housing market and the economy is a
comprehensive review of key metrics calibrating the trajectory of the
current crisis.
Read the commentary
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Advisor
Perspectives
Box 380
Lexington, MA 02420
(781) 376-0050
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