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September
7, 2010 - Vol 4, Issue 36
What are reporters looking for online? How can you make sure
they find you? And what do social media-savvy financial
advisors know about engaging the media? Get the answers
to these questions and more from an expert panel at the
"Engage the Media Using Social Media" webinar on
September 15th at 4pm (ET). Register here.
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Dear Reader,
DoubeLine's Jeffrey Gundlach recently reduced his position
from "overweight" to "small underweight" in
Treasury bonds, and cited "divergent behavior across the yield
curve." In this interview, he discusses that behavior and the
rationale behind his move, as well as his thoughts on other asset
classes, including equities and gold.
The recent financial crisis and fear of continued
under-performance has driven many investors to passive fixed income
strategies. Help clients understand the interest rate
sensitivity and potential for lower yields that could results from
investing in passive fixed income strategies. We thank
Janus for their sponsorship.
The
SEC is now considering reforming how 12b-1 fees are currently
charged, how they would be set in the future, and how they will be
disclosed to fund purchasers. In this guest contribution,
Michael Edesess offers an alternative, radical proposal, should
the SEC's reforms not be adopted.
More articles below...
We all have them... clients whose emotions gyrate with markets,
second guess decisions, and create grief and frustration for their
advisors. In the perfect world, you'd part company with all
of these clients. Dan Richards offers an alternative
approach.
Bob Veres presents the latest release from his new service,
which provides advisors with sample letters that they can share
with their clients. In this edition, he looks at human
psychology and the three factors of fear to understand why
markets may now appear scarier to investors.
Mistakes happen - often. Eliminating them is impossible.
The real question is: How do you manage the inevitability of
making them? In this guest contribution, Justin Locke
shares a few lessons he learned while playing the bass in a
professional orchestra.
One of the most remarkable discoveries in modern finance is the ability
to improve the expected return of a portfolio while simultaneously
reducing its risk. In this guest contribution, which advisors can
share with clients, Michael Nairne explains that the proverbial
"free lunch" does exist, its exploitation requires a
focus not only on the returns and volatility of the assets in the
portfolio but on the degree of covariance between those assets.
Lastly, we highlight the most popular 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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 Jeffrey Gundlach on Bonds,
Stocks and Gold
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"That's a classic divergence where part of the yield
curve, the one that is controlled by the Fed, goes down to a new low,
but other parts of the market don't corroborate that type of activity,"
says Jeffrey Gundlach. "The orthodox low in yields will
ultimately prove to have come in late 2008."
Jeffrey Gundlach on Bonds, Stocks and Gold
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Why Active Fixed Income
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The recent financial crisis and fear of continued
underperformance has driven many investors to passive fixed income
strategies. Help clients understand the interest rate sensitivity
and potential for lower yields that could results from investing in
passive fixed income strategies.
Why Active Fixed Income
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A Modest Alternative to the
SEC's Proposed 12b-1 Solution
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Perhaps the best way to combat industry pressure to
maintain the status quo is to offer a yet more radical proposal. Fund
companies, distributors and advisors should all agree that clients must
read a Surgeon General-like warning - slapped on the client agreement
in giant, boldface letters, as on a cigarette pack - prior to their
purchase of a fund that carries a 12b-1 fee.
A Modest Alternative to the SEC's Proposed 12b-1
Solution
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Responding to Clients who Drive
You Crazy
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Sometimes difficult clients bring substantial assets, on
other occasions they're connected to other clients that you value ...
and when you have bills to pay, it's unrealistic to tell every client
who you occasionally find tough to deal with to take their business
elsewhere. So if you're stuck with those difficult clients, what
can you do to make the situation more palatable?
Responding to Clients who Drive You Crazy
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The Three Factors of Fear
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Suddenly, in the past few weeks, the markets have looked
a lot scarier to a lot of nonprofessional investors in the U.S.
market. Why? The answer probably has something to do with
human psychology.
The Three Factors of Fear
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Mistake Management, Symphony
Style
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"Contrary to the myth of perfection that surrounds
major symphony orchestras, even fabulous players make mistakes all the
time," writes Justin Locke. "Furthermore, in that
environment, you cannot conceal a mistake. Everyone hears it, and
everyone knows who did it."
Mistake Management, Symphony Style
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The Free Lunch Illustrated
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Unfortunately, the typical investor, eschewing
diversification in favor of the latest hot manager or the
recommendations of a market prophet, often misses out on the free
lunch. That is unfortunate because, in retrospect, one can clearly
discern the tremendous value that diversification offers.
The Free Lunch Illustrated
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Highlights from Market
Commentaries
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Below are the three
most widely read market commentaries during the past week:
At present valuations, exposure to market and credit risk is not likely
to be well-compensated over the long-term, and may be associated with
substantial losses in the intermediate term. Recent advances may simply
be the product of a fragile post-crisis bounce, similar to those
following other historical credit crises in the U.S. and abroad. The
quarters immediately ahead present the greatest risk of fresh credit
strains and concentrated economic risk.
Hussman Funds 2010 Annual Report by John P. Hussman
of Hussman Funds
As the developed world stumbles from crisis to crisis, many developing
countries seem poised to continue taking a greater share of the world's
wealth. This trend, however, is not an automatic signal to invest. China,
India and Brazil, the most sought-after developing markets, now demand
double-digit multiples, and have higher inflation and monetary growth
than developed markets. These factors suggest that the margin of safety
is significantly smaller in developing markets than in developed markets.
Views on Developing Markets by Team of First Eagle
Funds
The economy is in a modern day depression. A depression, put simply, is a
very long period of economic malaise, a series of rolling recessions and
modest recoveries over a multi-year period of general economic stagnation
as the excesses from the prior asset and credit bubble are completely
wrung out of the system. Depressions usually are caused by a bursting of
an asset bubble and a contraction in credit, whereas plain-vanilla
recessions are typically caused by inflation and excessive manufacturing
inventories. You tell me which description fits the bill today.
The Economy is in a Modern Day Depression by David A.
Rosenberg of Gluskin Sheff
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