May 31, 2011 - Vol 5 Issue 22
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Caution: Flawed Research on Equity-Indexed Annuities
By Robert Huebscher
When research fails to meet the basic standards of academic rigor, its conclusions should be questioned. One such case is a recent paper, Real-World Index Annuity Returns, whose conclusions you should trust at your own risk.
Doubling the Turnout at Client Events
By Dan Richards
Many advisors are puzzled and frustrated by just how hard it is to get clients to show up when they organize events for them. Achieving great turnout isn't easy, but it can be done - I recently spoke to an advisor who made a couple of simple changes to his annual event and doubled attendance as a result.
Bookstaber on the Limits of Capitalism
By Sam Parl
What can we do so that we're not fighting yesterday's war? That was the question posed by Richard Bookstaber when he spoke at the sixth annual MIT Sloan Investment Management Conference. Bookstaber, a Senior Policy advisor to the SEC and to the Financial Security Oversight Council, offered an elucidating perspective on the origins of economic crises and the proper role of regulation.
Letter to the Editor - Challenging Dave Rosenberg
By Georg Vrba
Predictions are usually made with great conviction and without a specified time frame. I review some of David Rosenberg's past predictions and show that investors would have underperformed the market had they followed his advice.
Letter to the Editor on Absolute Return, Market Neutral and Long-Short Funds
By Todd Huster
A reader responds to a market commentary, What is conservative about Absolute Return, Market Neutral or Long/Short Mutual Funds?, by Kendall Anderson of Anderson Griggs, which appeared on May 23, 2011.
Letter to the Editor on the WikiLeaks of the Economics Profession
By Guy Cumbie
A reader responds to Michael Edesess' article, The WikiLeaks of the Economics Profession, which appeared last week. That article was a review of the book, What Caused the Financial Crisis.
Hedging In an Inflationary World
By Andrew Foster
These days, given the complex web of global financial transactions in which companies are enmeshed, it is unrealistic to expect management to avoid hedging. When I invest, however, I search for companies that follow simple, consistent, and short-term hedging policies - and whose business models are strong enough to adapt to the inherent volatility and uncertainty of the marketplace.
Our Four-Year Anniversary
By Robert Huebscher
This month Advisor Perspectives marks four years of publication, and I'd like to share with you some of our accomplishments over the last year and our goals for the future.
Highlights from Market Commentaries
Below are the three most widely read commentaries during the last week:
How Quickly They Forget
Asset prices fluctuate much more than fundamentals. Rather than applying moderation and balancing greed against fear, euphoria against depression, and risk tolerance against risk aversion, investors tend to oscillate wildly between the extremes. They apply optimism when things are going well in the world (elevating prices beyond reason) and pessimism when things are going poorly (depressing prices unreasonably). If investors remembered past bubbles and busts and their causes, and learned from them, the swings would moderate. But, in short, they don't. And they may be forgetting again.
How Quickly They Forget by Howard Marks of Oaktree Capital
Bull Case Nobody Makes
We feel compelled to make a US stock market bullish case which feels as good to this writer as avoiding tech stocks did in late 1999. It is so lonely that it is divine. Andy Grove, former Intel CEO, college prof John Maynard Keynes said, "When everyone knows that something is so, it means that nobody knows nothin'." We believe the majority has put their assets into investments that will provide defeat, insecurity and failure. Out of this comes a very optimistic bull case which is available to those who have courage to look foolish in the short run and avoid today's popular asset allocation.
Bull Case Nobody Makes by Bill Smead of Smead Capital Management
What is conservative about Absolute Return, Market Neutral or Long/Short Mutual Funds?
The machine of Wall Street has convinced many individuals who believe they are prudent, conservative, investors that a mutual fund whose name or objective includes the terms Absolute Return, Market Neutral, Long/Short or hedged, will never lose your money. An individual whose fear of losing again from common stocks just can't bear sitting on cash and earning a nickel of interest every three months 1k. The desire to increase returns is just too great. Before you fall for the hype there are a few things you should know. The most important item you should remember is that there is no guarantee.
What is conservative about Absolute Return, Market Neutral or Long/Short Mutual Funds? by Kendall J. Anderson of Anderson Griggs