July 26, 2011 - Vol 5 Issue 30
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Comfort is Rarely Rewarded; Maverick Risk and False Benchmarks
By J.J. Abodeely, CFA, CAIA
Conventional investment strategies, while affording the investor at least a temporary degree of comfort, are destined to produce mediocre results. Only by distancing themselves from the ordinary approach - as Jeremy Grantham and Seth Klarman have - can asset managers achieve superior performance and truly fulfill their fiduciary duties by acting as proper stewards of their clients' capital.
Are you charging enough for held away accounts?
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Wondering if you are charging enough for held away accounts? Watch this video to find out: how much advisors are billing, how to bill (where to take the fee from) and how to communicate the benefits of providing a holistic view of all your clients' accounts.
Investing with a View of Significant Inflation
By Bob Kargenian
Almost all the analysis we read has concluded that, with the Fed seemingly printing money out of nowhere, the inevitable consequence must be significantly higher inflation. We're not convinced, but we have identified which strategies are likely to best protect clients if inflation accelerates.
Ten Minutes to Much More Effective Client Meetings
By Dan Richards
Given the importance of client reviews, advisors should always be alert for ways to make them more effective. Recently, I spoke to an advisor who made a simple change to meeting agendas and saw a significant improvement as a result.
Income Opportunities in Municipal Bonds and Stocks
By Robert Huebscher
In this interview, Brian McMahon and Chris Ryon of Thornburg Investment Management assess the opportunities for income-oriented investors, particularly in the municipal bond market. They answer questions such as when a separate account is better than a fund, and why a barbell is inferior to a laddered portfolio.
Jeremy Siegel - Why I Changed my Mind about Index Funds
By Dan Richards
Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania, discusses what caused him to reject capitalization-weighted market indexes and what he chose instead. A video of this interview is also available.
Letters to the Editor
A reader responds to our article, Gundlach: A Debt Ceiling Impasse Could Drive Rates Lower, which appeared last week. Another reader responds to Don Moir's letter to the editor, which was in response to Doug Short's commentary, A Short History of Dividend Stocks, which appeared on July 5.
Our Most Read Article from Last Week
Failing to raise the debt ceiling would be a 'huge financial calamity,' according to Federal Reserve Chairman Ben Bernanke and the general consensus view. But that opinion is 'exactly wrong,' at least as far as the Treasury market is concerned, DoubleLine's Jeffrey Gundlach said in a conference call with investors last Tuesday.
Highlights from Market Commentaries
Below are the three most widely read commentaries during the last week:
Debt and Delusion
The problem that much of the world faces today is that investors are overreacting to debt-to-GDP ratios and demanding fiscal-austerity programs too soon. They are asking governments to cut expenditure while their economies are still vulnerable. Households are running scared, so they cut expenditures as well, and businesses are being dissuaded from borrowing to finance capital expenditures. The lesson is simple: We should worry less about debt ratios and thresholds, and more about our inability to see these indicators for the artificial and often irrelevant constructs that they are.
Tags: Monetary Policy Sovereign Debt
Debt and Delusion by Robert J. Shiller of Project Syndicate
Secular Outlook: Implications for Investors
As the economy undergoes important realignments, investors will need to rethink their traditional approaches to managing their portfolios. As the lines between interest rate and credit risk become blurred, finding sources of safe spread becomes even more critical. More, not less, discretion is warranted when navigating volatile global markets, avoid sectors affected by financial repression and hedge against inflation and/or adverse tail events. We believe investors need to look at risk factors rather than traditional asset classes when making asset allocation decisions.
Secular Outlook: Implications for Investors by Bill Benz of PIMCO
Dabbling with Support
The market continues to have the look of a broad topping process, in which it's very common to see it's confined to a trading range of about 5-7% for 6-8 months. Near-term, tests of widely-recognized "support" are often met by a bout of short-covering, similar to what we observed two weeks ago. Given the moderate improvement in market internals produced by that rally, a retest of those lows that isn't overly hostile to market internals might provide some latitude for market exposure. Suffice it to say that constructive opportunities are likely to be limited, but not impossible to achieve.
Dabbling with Support by John P. Hussman of Hussman Funds