9, 2010 - Vol 4 Issue 45
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New Strategies in Alternative
By Robert Huebscher
Alternative investments, broadly speaking, and hedge
funds, more specifically, have performed as intended over the last 20
years, modestly increasing returns and significantly reducing risk
when added to a traditional stock-bond portfolio.
Selecting the appropriate vehicle is the challenge, and that task has
been made easier by the introduction of new exchange-traded strategies.
How Modern is Your Portfolio
After 58 Years,
is there Another Way to Conquer the Efficient Frontier?
the past, active or "tactical" investment management referred
to jumping in and out of stocks and bonds - market timing. With the
introduction of sophisticated funds that help the masses harness the
power of institutional managers and alternative asset classes and
strategies, today, tactical management may help to renovate your
portfolios - and help you retain and attract assets.
Waiting for Superman: The
Fate of Teachers' Unions
By Charlie Curnow
In 'Waiting for Superman,' the new documentary film
about the shortcomings of American public education, director Davis
Guggenheim argues that, in order to compete with rival school systems
in Asia and Europe, the U.S. must rein in its teachers unions and
embrace the free market principles of private schools and privately
managed charter schools. Is this a fair assessment?
A Reading List for 2010
Vitaliy Katsenelson of Investment Management Associates
Updated for 2010 and in time for the holidays, here is
the latest installment of my recommended books. I originally wrote
this list in 2008 and again last year. I intend to keep adding to and
revising it every year. It contains seven sections: Selling,
Think Like an Investor, Behavioral Investing, Economics, Stock Market
History, Risk and Books for the Soul. The first three sections
are presented below and the remaining four will be presented next
Recently, an advisor emailed me asking for suggestions
on how to deal with clients who sold some or all of their portfolio
near the 2008 lows. More specifically, he wanted to know if
it's worthwhile educating these clients on where they would be had
they not sold out.
Michael Lewitt of the HCM Market Letter
Keynesian policies are inflicting untold damage on the
U.S. and global economies today. Keynes did not have to be
misread. The reason that the current recovery is below par is
that the economy is experiencing a massive paradox of thrift.
We doubt that reducing already low rates is going to stimulate much
of anything other than more frustration on the part of savers. Sooner
or later, everything being earned on the upside of this
liquidity-induced rally will be given back in spades - the only
question is when.
Michael Nairne of Tacita Capital Management
The crux of the difference between the 'cheap' and
'overvalued' market valuation views lies in the selection of earnings
numbers, of which there are two basic sets. The broadest traditional
measure is 'as reported' earnings which includes all charges except
the cumulative impact of accounting changes, discontinued operations
and extraordinary items. Is the market cheap by the appropriate
Finding Your Alternatives
Beverly D. Flaxington of The Collaborative
In everyday life, you know that the first idea you think
of to meet a need,
or address a problem, may not always the best one. But
when it comes to
running a firm, far too many advisors never go through a
brainstorming process to determine which option may be
the best one for
The Most Neglected Marketing
Often, advisors lack a strategy for following up with a
prospect if he or she is not immediately interested in hiring your
firm. As the authors of a recent book state,
"81% of sales that close, close on or after the fifth
contact." It is imperative
that you integrate a follow-up strategy in your marketing plan.
Hope has transformed into fear - not about making money
but about the prospect of another bubble. The recent statements and
actions of the Federal Reserve Bank may be laying the groundwork for
the third massive asset mispricing in ten years.
Highlights from Market
Below are the three most widely read commentaries during
the last week:
Voted. What's Next For the Economy?
the two chambers of Congress split between Democrats and Republicans,
the conventional wisdom likely to be repeated over the next few weeks
is that political gridlock is good for the economy. While often true,
that is not the case today. Democrats and Republicans must meet in
the middle to implement policies to deal with debt overhangs and
We've Voted. What's Next For the Economy? by Mohammed
A. El-Erian of PIMCO
From a Lost Decade
the past decade has a lesson for investors, that lesson should have
two components. The first is that valuations matter. Although
valuations often have little impact on short-term returns over periods
of less than a few years, they are undoubtedly the single best
predictor of long-term market returns. Moreover, high valuations are
ultimately followed by far deeper periodic losses than emerge from
low valuations. Put simply, greater risk does not imply greater
reward if the risks that investors take are overvalued and
Lessons From a Lost Decade by John P. Hussman of
Stock Market Cheap?
dropping to 13.4 in March 2009, the S&P 500 price-to-earnings
ratio using trailing earnings averaged over 10 years has rebounded to
21.4. The historic average is 16.35, suggesting that the stock market
is expensive. Secular declines have ranged in length from over 19
years to as few as three. The current decline is now in its 10th
year. Doug Short provides charts of the P/E10 ratio since 1871.
Is the Stock Market Cheap? by Doug Short of Doug