May 17, 2011 - Vol 5 Issue 20
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Dylan Grice on Japan's Coming Hyperinflation
By Robert Huebscher
The Japanese scenario haunts US policy makers, who recall that country's two-decade miasma of lethargic growth and escalating fiscal deficits with apprehension. What scares them most, perhaps, is the potential endgame Japan now faces: an insolvent government crippled by uncontrollable inflation. While Japan's current situation closely parallels the experience of other countries that went on to confront hyperinflation, according to Dylan Grice, we shouldn't expect a crisis in the near term.
Webinar: How Advisors are Using Technology Today
Sponsored Content by ByAllAccounts
This webinar will present the key findings from a recent technology survey of more than 500 advisors. We will review how technology has allowed firms to scale, what applications and newer technologies - such as iPads - are begin used, and the criteria you should use when evaluating technology. We'll also reveal the critical pitfalls to avoid when investing in a new technology.
Pippa Malmgren on Inflation and its Geopolitical Impact
By Robert Huebscher
The Cold War may have been over for a quarter century, but the inflation-driven challenges that characterized that historical era are heating back up. Today, global volatility is back, according to Pippa Malmgren, who says that commodity-driven inflation will lead to political instability in emerging markets.
Four Steps to a Top-Performing Team
By Dan Richards
Over the past 25 years, I've observed many high-performing teams and spent a lot of time talking to advisors and their support staff about the keys to their success. Here are four observations about what it takes to have a well-functioning team.
The Smooth Illusion
By Michael Lewitt
In retrospect, the Federal Reserve's interminable zero-interest policy and its quantitative easing programs are likely to be seen not only as ineffective but damaging to the prospects for sustainable long-term economic growth. A number of asset classes are beginning to exhibit bubble-like behavior, something that would be far less likely to occur were interest rates normalized.
Your Top Priority Should Be Your Top Priority
By Justin Locke
How do you determine your top priority? Too often, leaders get bogged down by routine, and they fail to meaningfully answer that question.
Improving on Buy and Hold: An Initial Sell Signal
By George Vrba, P.E.
I have updated the model described in my article, Improving on Buy and Hold: Asset Allocation using Economic Indicators. The ECRI U.S. Weekly Leading Index and its annualized growth rate published on May 13, 2011, together with the most recent values of the other indicators, have been incorporated in my model. A basic sell signal was generated last week.
Letter to the Editor
A reader responds to our article, Howard Marks on the Human Side of Investing, which appeared last week.
Last Week's Top-Read Article:Howard Marks on the Human Side of
By Robert Huebscher
Howard Marks is widely regarded for his thought-provoking essays on the discipline and process of value investing. He is the chairman and co-founder of California-based Oaktree Capital, and he delivered the keynote address at the Value Investing Congress in Pasadena last week.
Highlights from Market Commentaries
Below are the three most widely read commentaries during the last week:
Time To Be Serious (and probably too early) Once Again
Lighten up on risk-taking now and don't wait for October 1. But, if you listen to my advice, be prepared to be early! A word on being too early in investing: if you are a value manager, you buy cheap assets. If you are very "experienced," a euphemism for having suffered many setbacks, you try hard to reserve your big bets for when assets are very cheap. But even then, unless you are incredibly lucky, you will run into extraordinarily cheap, even bizarrely cheap, assets from time to time, and when that happens you will have owned them for quite a while already and will be dripping in red ink.
Time To Be Serious (and probably too early) Once Again by Jeremy Grantham of GMO
One of the ways investors can think about prospective return and risk is from the standpoint of the Capital Market Line, which lays out a menu of investment possibilities at various levels of return and risk. In theory, investors like to believe that this menu is always a nice, positively sloped line, where greater risk is associated with greater prospective return. And somehow, regardless of where market valuations are, investors often seem to believe that 10% is 'about right' for the prospective return on stocks. As it happens, valuations exert an enormous effect on the prospective returns
Tags: Equities US
The Menu by John P. Hussman of Hussman Funds
Estimating Future Returns: New Update
At Butler|Philbrick, we believe in crunching the numbers ourselves to discover where meaningful relationships exist. We apply statistical models to improve our chances of success. Traditional Advisors assume that the best estimate of future market returns in all market environments is the simple long-term average return on stocks: about 6.5% per year after inflation. We hypothesized that it is possible to construct a statistical model using long-term market data which will allow us to make much more accurate predictions about long-term returns. It turns out that we were right.
Tags: US Inflation
Estimating Future Returns: New Update by Adam Butler and Mike Philbrick of Doug Short