October 25, 2011 - Vol 5 Issue 43
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Miccolis, Bengen and Evensky on the New Challenges in Portfolio Construction
By Michael Skocpol
Conventional wisdom about the best way to construct a portfolio has been discredited, according to three industry thought leaders - Jerry Miccolis, Bill Bengen and Harold Evensky. Each has distinct visions of the ways in which advisors should build portfolios in the wake of the financial crisis of 2008, but all three agree that traditional methods must be scrutinized.
How Advisors are Billing on Held Away Accounts
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A Jeopardy Champion and our Economic Future
By Robert Huebscher
Several years ago, a group of IBM scientists watched the television quiz show Jeopardy at a local bar and decided that they could develop the technology to beat a human contestant. They succeeded, and the system they built, Watson, is situated at the leading edge of a wave of breakthroughs in artificial intelligence that will lower health care costs and accelerate economic growth.
The Questions You Should Ask about PIMCO's Total Return Fund
By Martin Weil
When a manager's performance slips, the inevitable question is why. Was this a simple misjudgment on the direction of the markets or an incorrect selection of securities in the portfolio? On the other hand, is the slip indicative of a more serious process failure? When the manager in question is Bill Gross, the answers to these questions become crucial to money managers and investors across the country.
On Market Timing and Whiskey
By J.J. Abodeely
Noah S. 'Soggy' Sweat, Jr. a Mississippi legislator, gave a famous speech addressing the controversial subject of prohibition. The consummate politician, Soggy tried to appeal to advocates on both sides of the issue, illustrating a lesson that advisors today will surely appreciate: In order to get at the substance of a contentious issue, sometimes you have reframe the question.
How a Trivial Oversight Created a Big Problem
By Dan Richards
Over 25 years working with advisors, I've learned that while you need to get the big things right, small issues are often much more important than they appear on the surface. Last week I met with a 25-year industry veteran who told me about a big price he paid for a seemingly minor oversight.
Residential Housing: The Problem and the Solution
By Robert Huebscher
If arresting the decline in residential housing prices is a precondition to a broader economic recovery, then the prospects of a double-dip recessions are more likely. Over the next year home prices will decline 5% to 7%, according to Laurie Goodman. She identified two key policy initiatives that would break what she termed an ongoing 'death spiral' in the housing market.
Our Most Read Article from Last Week:
Gundlach: Markets Aren't Cheap Enough Yet
By Robert Huebscher
Prices for risky assets are straddling the extremes of two potential outcomes. A 'hurricane' may hit, in the form of a blow-up in Europe or a move to put the US federal government on an austerity program, driving prices lower. Or world economies will plod along, in which case optimistic pricing makes sense. But prices should be 'truly cheap' against those parallel problems, according to Jeffrey Gundlach, and that is not yet the case.
Highlights from Market Commentaries
Below are the three most widely read commentaries during the last week:
Europe: Just Getting Warmed Up
At present, the S&P 500 is again just 10% below the high it set before the recent market downturn began. In my view, the likelihood is very thin that the economy will avoid a recession, that Greece will avoid default, or that Europe will deal seamlessly with the financial strains of a banking system that is more than twice as leveraged as the U.S. banking system was before the 2008-2009 crisis.
Tags: Equities US Europe Sovereign Debt
Europe: Just Getting Warmed Up by John P. Hussman of Hussman Funds
America at Stall Speed?
Judging from the skittishness of both markets and consensus expectations, the United States economic prospects are confusing. One day, the country is on the brink of a double-dip recession; the next, it is on the verge of a turbo-charged recovery, powered by resilient consumers and US multinationals starting to deploy, at long last, their massive cash reserves. In the process, markets take investors on a wild rollercoaster ride, with the European crisis (riddled with even more confusion and volatility) serving to aggravate their queasiness.
Tags: US Europe
America at Stall Speed? by Mohamed A. El-Erian of Project Syndicate
Three Strategists Speak Out & Rare Apology From PIMCO
Quality in bond land is expensive and promises little return for a fair amount of risk. The Fed is punishing Treasury investors with historically-low yields. We believe the only way to generate a return in these markets is by price appreciation because these notes have very little in the way of coupon income. This lack means that they will trade more like zero coupon bonds when, and if, the Fed ever removes the buying pressure on that market. History has shown us that the market will move before the Fed does. Our discipline has thus far beaten our benchmark.
Tags: Treasury Bonds US
Three Strategists Speak Out & Rare Apology From PIMCO by Scott Colyer of Advisors Asset Management
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