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 July
20, 2010 - Vol 4, Issue 29
Dear Reader,
The latest book from Martin Leibowitz, one of the
most respected thinkers in the investment industry, attempts to
justify the endowment model of investing. As Michael
Edesess writes in this review, Leibowitz's defense is highly
problematic, and that should concern any advisor utilizing a
Yale-like strategy.
Northern Trust's chief economist, Paul Kasriel,
forecasts that interest rates will remain low for the remainder of
2010. Investors are looking for guidance on how they
should best position their cash and fixed income portfolios to take
this environment into consideration, and should consider the tradeoff
between liquidity and yield. We thank Northern Trust for
their sponsorship.
The
Wharton School's Jeremy Siegel remains an outspoken proponent of
stocks for the long run, as he demonstrates in this interview
with Dan Richards. Siegel explains why equity investors
should not be deterred by sour economic forecasts or by signals of
apparent overvaluation based on Shiller P/E ratios. We also
provide a video of the interview.
After a brief review of known shortcomings of common fund
evaluation methodologies, Mike Ervolini introduces a new approach
based upon analytics that his firm has developed. Rather than
relying on non-predictive metrics such as past performance, his
approach looks at investment processes in relation to deeper
skills that managers possess regarding buying, selling, and position-sizing.
While the unique aspects of Build America Bonds (BABs) and
recent Treasury Department actions are meaningful, the risks to
investors have been over-emphasized. BABs remain an attractive
vehicle for investors and issuers, and the market for them is
likely to grow.
A recent conversation between Dan Ricahrds and an advisor
drove home how easy it is to cross wires when communicating with
existing and prospective clients. That miscommunication
almost cost the advisor a million-dollar account.
Kristen Luke provides the next two installments of her series on low-budget
marketing for startup RIA firms. She discusses how to create
your marketing collateral and how to establish yourself as an expert
in your market niche.
In a letter to the editor, a reader responds to several
recent articles which have addressed the fiduciary standard for
advisors.
Lastly, we highlight submissions to 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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Martin Leibowitz' Failed Defense
of the Endowment Model
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Considerations for Investing in
a Low Interest-Rate Environment
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Remember when you couldn't get your clients to think about
a cash allocation in their investment portfolio? Since the market
decline of 2008, skittish clients want to be assured they have
sufficient downside protection. Finding liquidity and
income in these turbulent markets can be challenging for advisors.
Considerations for Investing in a Low Interest-Rate
Environment
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Jeremy Siegel on Why Stocks are
Undervalued
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Beyond The Stars: Improving
Active Fund Selection Based On Manager Skill
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The Opportunity in Build America
Bonds
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The overwhelming amount of issuance since these bonds'
inception points directly at the success of this program in achieving
the goals intended by its creation: promoting economic and employment
growth while improving municipal issuers' access to the credit markets.
The Opportunity in Build America Bonds
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Lessons from a $1 Million
Misunderstanding
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Parts 4 and 5 of a Marketing
Guide for RIAs
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Letter to the Editor
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A reader responds to several recent articles which have
addressed the fiduciary standard for advisors.
Letter to the Editor
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Highlights from Market
Commentaries
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Doug Short provides charts of the S&P Composite since 1929 adjusted
for real price and real total return. As the charts show, for the past 21
months, the secular bear market that began in 2000 has substantially
underperformed the equivalent timeframe during the Great Depression.
Total Return or Total Disappointment? by Doug Short
of Doug Short
This letter contains a special feature by George Magnus, senior economic
advisor at UBS Investment Bank, on the coming negative change in global
demographics. The world population is aging rapidly and the proportion of
retired to working people is rising sharply. While these are slow-moving
forces compared to, say, banking crises, they are powerful and inexorable
trends that cannot be 'fixed.' Rather, we, and governments, must adjust
to them, and investors must pay attention to their complex investment
implications.
Demographics, Destiny and Equity Markets by George
Magnus of Boeckh Investment Letter
The relative abundance of physical and educational capital has been a
driver of U.S. prosperity for generations, and is the main reason why
American workers earn more than their counterparts in the developing
world. Neither advantage in capital, however, is intrinsic to American
workers, and it will be impossible to prevent a long-term convergence of
U.S. wages toward those of developing countries unless the U.S.
efficiently allocates its resources to productive investment and
educational quality.
Misallocating Funds by John P. Hussman of Hussman
Funds
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