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April 6, 2010 - Vol 4, Issue 14
Dear Reader,
Help your HNW clients get the most out of a Roth Conversion. BlackRock's
upcoming webinar will help you rethink the
Roth opportunity and develop strategies for tax diversification.
_______________________________________________________________________
Liz Ann Sonders is Senior Vice President and Chief Investment
Strategist at Charles Schwab & Co. In this interview, she
discusses her positive outlook for the US economy, which she
believes has been recovering since last summer.
You and your clients often sift through competing, complicated
information in the course of making investment decisions. That's
certainly true in the municipal bond market today. Joseph
Gotelli, municipal bond portfolio manager at American Century
Investments®, urges investors to consider municipals' enduring
features. Conflicting news and views on the municipal market should
not obscure the fact that many municipal bonds remain high-quality
investments with compelling tax advantages. We thank
American Century for their sponsorship.
Dan Richards provides the latest in his very popular series of
quarterly letters for advisors to send to their clients.
This Q1 2010 article combines the attributes he considers
essential: a balanced outlook, candor, short enough for clients
to get through yet long enough to be substantial, fact-based, and
customizable to your own voice.
"The Big Short" tackles the financial meltdown as seen
by four relatively minor, but colorful players. (Minor means
running only hundreds of millions, not billions.) All of them were
voices in the wilderness, writes Michael Edesess, our
reviewer. All of them bet heavily against the subprime real estate
bubble that, for a while, fueled huge gains.
Recent research explores the return payoff of investing in
emerging markets such as Brazil, Russia, India and China, writes Dan
Richards. Contrary to popular beliefs, investing in high-growth
emerging markets has produced inferior returns to those obtained from
slower growth economies.
In response to a recent commentary by Research Affiliates, The Folly of Peer Group Analysis, a
reader offers his own research on the performance of indices against
peer groups, once impurities have been eliminated from those peer
groups. John West and Ryan Larson of Research Affiliates
provide additional analysis.
Ron Surz provides his award-winning market recap and analysis for the
first quarter of 2010. The first quarter of 2010 did not
start well, with US stocks experiencing losses in excess of 3% in
January, but then we recovered most of those losses in February,
setting the stage for 6%+ returns in March. All of the first
quarter return was earned in March.
For advisors not familiar with social media (Facebook,
Twitter, LinkedIn, Viddler, BlogTalkRadio, and YouTube), Kristen
Luke provides a 10-step plan to get started.
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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Liz Ann Sonders on the US
Economic Recovery
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"I have had the
view that we would come out this in a relatively V-shaped fashion since
last spring," says Liz Ann Sonders. "I am not just reacting to
what is obviously better news now. I anticipated that
recovery would take place when I wrote in May of 2009 that the
recession was ending. I believe we will find out that it
officially ended sometime around then - maybe in June."
Liz Ann Sonders on the US Economic Recovery
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Municipal Bond Advantages Remain
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The Build America Bond program took many newly issued bonds
out of the tax-exempt market and put them in the taxable universe.
Record demand and limited supply combined to send municipal bond yields
to 40-year lows in September. Put it all together, and 2009 was the
best year ever for municipal bond performance relative to Treasuries.
Municipal Bond Advantages Remain
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A Q1 Letter to Send Clients
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Here's an excerpt from Dan Richards' sample
letter: "We refuse to participate in that speculation - when
it comes to short-term predictions, whether about the economy or the
stock market, there's one thing we can say with virtual certainty: Most
of them will be wrong. Quite simply, no one has a consistent track
record of successfully forecasting short-term movements in the economy
and markets."
A Q1 Letter to Send Clients
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A Review of 'The Big Short' by
Michael Lewis
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This book will help nourish
the healthy debate that is going on right now about the financial
industry, its maladies and possible cures. It can do that because it is
such a great read and many people will read it, and because it is
replete with interesting, on-the-scene revelations.
A Review of 'The Big Short' by Michael Lewis
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Emerging Markets: High Growth
does not mean High Returns
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Follow-up to the Folly of Peer
Group Analysis
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In regard to Henry
Schwarzberg's analysis, John West and Ryan Larson of Research
Affiliates write, "in addition to the points you highlight with
respect to relative performance, we think most investors are unaware of
the magnitude of manager attrition (bad manager attrition) during the
market crisis of 2008. Because peer groups show average fund and
manager returns, we suspect average investor returns aren't nearly as
rosy."
Follow-up to the Folly of Peer Group Analysis
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Insights and Foresights into 2010
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Every US style
posted a positive return for the first quarter of 2010, continuing the
recovery that began in March of last year. This quarter's 5.7% market
return brings the 13-month return from March-to-March to a whopping 66%.
It would seem that we're on the right track. Smaller companies fared
best, while all three styles - value, core, growth - fared about the same
in aggregate.
Insights and Foresights into 2010
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Ten Steps to Get Started with New
Media Marketing
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New media marketing is
not a panacea. Your online presence and activity won't replace your
existing relationship-building activities and the quality work you
perform for your clients. Your approach to new media marketing must be
authentic - engaged in meaningful activities around the quality of your
work and building on your personal relationships. Tackled the right way,
a new media marketing approach will further accelerate your growth.
Ten Steps to Get Started with New Media Marketing
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Highlights from Market
Commentaries
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For three decades,
the prevailing direction for interest rates was down. This made life easy
for bond investors, since principal held up well and even grew for the
most part. The cost of these falling rates, however, was steadily lower
coupons. One of the best defenses against this reinvestment risk is to maintain
a long duration in a bond portfolio with good call protection. The good
news is that reinvestment risk appears to be waning as declining interest
rates possibly prepare to reverse, and this could create potential for
better yields.
Multisector Strategies in a Rising Rate Environment by
Dan Fuss, Kathleen Gaffney, Matt Egan and Elaine Stokes of Loomis Sayles
Credit data suggests two distinct possibilities for the future direction
of the economy. The most likely outcome is that we will see serious
credit strains in the months ahead, adding to overextended market
conditions, and creating a 'perfect storm' with a great deal of potential
risk. Alternatively, if we do not encounter fresh credit strains in the
coming months, a typical 'post-war' recovery may be on the horizon.
Regardless of what lies ahead, current conditions recommend a defensive
stance.
Possible Outcomes: A Typical Post-War Recovery, or a
Perfect Storm by John P. Hussman of Hussman Funds
The market is overvalued by more than 25 percent, but is also extremely
overbought after going 24 sessions without a decline of 1 percent or
more. Eighty-nine percent of the stocks on the S&P 500 are now
trading above their 50-day moving averages, and the Dow has advanced in
17 of the last 24 days. This suggests that the prop desks at the five
large banks are all selling securities, with leverage, to each other.
There is no sign of any other major buyer, including the Fed. This
provides reason for caution, because the banks could decide to switch
direction at any time.
Market Thoughts by David Rosenberg of Gluskin Sheff
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