February 22, 2011 - Vol 5 Issue 8
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Bruce Berkowitz on the Exceptional Value in the Financial Sector
By Robert Huebscher
Fairholme's Bruce Berkowtiz, US stock-fund manager of the decade, discusses his large position in the financial sector and why he believes the big bets he is making do not amount to Russian roulette. He also comments on his recent nomination of former Florida Governor Charlie Crist to the board of St. Joes.
Toward an Understanding of Risk - Part 2
By Robert Huebscher
How should clients think about risk in their portfolios? Advisor Perspectives put that question to a cross-section of prominent advisors and academics. Their answers encompassed diverse opinions and underscored how crucial that question is to the investment process. In part one of this series, which appeared last week, we heard from seven practitioners in the financial planning community. This week, we hear from seven well-known academics, including two Nobel Prize winners.
Stop Wasting Time and Money on Client Communication
By Dan Richards
The world has changed in all kinds of ways. What worked in terms of client communication as recently as five years ago doesn't work nearly as well today. As a result, you need to fundamentally change how you communicate with clients.
Are You Ready to Lose Control?
By Justin Locke
We view control the same way we view pregnancy - it's an all-or-nothing condition. Either you are in control, or everything is out of control. We would all be wise to rethink this - to look at how to handle and even embrace some lack of control.
John Campbell on the Proposed Squam Lake Reforms
By Dan Richards
In this interview, John Campbell, chairman of the economics department at Harvard, discusses his research into the underlying drivers of securities prices, and the key recommendations for reforming the financial system, based on his participation in the Squam Lake Group. We provide both a transcript and a video of the interview.
Winning New Business, Growing Your Firm
By Mike Slemmer
How are advisors reaching prospects and winning new business today? What's working well for advisors as they seek to grow their businesses, and where are they finding challenges? To answer these questions, we conducted a survey in late November, 2010, aiming to learn the most common and successful business-building tactics for wealth managers, investment advisors and related professionals.
Highlights from Market Commentaries
Below are the three most widely read commentaries during the last week:
What Is In the Market and What Isn't
Inflation is priced into the market. This is not where the surprise will be and it is surprises that move markets. This is very good news for the bond market from a contrarian stand point. What isn't being discounted is the degree of fiscal austerity that is coming down the pike, and likely sooner rather than later.
What Is In the Market and What Isn't by David Rosenberg of Gluskin Sheff
At a time when bullish investor sentiment has soared to extreme levels, we can see some storm clouds coming. Yesterday's market reaction to the +0.3% MoM print in U.S. retail sales attests to the view that a whole lot of growth is being priced in. Meanwhile, the real economic data are going to be deflated by a surging deflator - U.S. import prices of food has risen at a 30% annual rate in the past three months and fuels by a whopping 60%. Looking for an asset class with possibly way too much risk priced in? Try muni bonds.
Random Thoughts by David Rosenberg of Gluskin Sheff
US and State Default Risk
The US stock market has been on a tear lately, but default risk for the country has remained stubbornly high. Granted, default risk for the US is very low compared to most countries, but it is currently near 1-year highs. Below is a chart highlighting US default risk using 5-year CDS (credit default swaps) price in Euros. While risk is nowhere near as high as it got during the financial crisis in late 2008 and early 2009, it is more than 100% higher than where it was in late 2009.
US and State Default Risk by Team of Bespoke Investment Group