15 Jan 2015

Portfolio Insights

We are pleased to provide a digital copy of Portfolio Insights, our quarterly newsletter.  This issue is particularly exciting because it features an entirely new look and feel for the same great content that we’ve been creating for the last dozen years. Table of Contents: Evaluating Global Stock Exposure Predicting Interest Rates Review of 2014 The Allure of Market Timing New at Acropolis Six Financial Planning Myths The US Dollar… Read More

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15 Jan 2015

How High Should Interest Rates Go?

As recently as Christmas Eve, the market believed that there was a 92.4 percent chance that the Federal Reserve would raise interest rates in 2015. The probability is based on prices for Federal Funds futures price contracts at the Chicago Board of Trade (CBOT). In the first few weeks of this year, I started hearing market chatter that the Fed may have to push off raising interest rates until 2015… Read More

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14 Jan 2015

Two Questions for Bond Investors

Last year, the Barclays Aggregate bond index (the Agg) gained 5.97 percent. Overall, our bond portfolios earned less than that – not a lot less, but less (it varies among clients, so I will be intentionally vague here). Also, while our returns were less on a relative basis, we are happy with the absolute number – mid-single digit returns are not too shabby for bond investors in the current interest… Read More

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13 Jan 2015

Mind Blowing Sector Returns

Which sector returns were better last year, healthcare stocks or utilities? There’s no question that both had great years, up 25.26 and 28.94 percent respectively, compared to 13.66 percent for the S&P 500. The question, though, asks which is better, and I think the answer depends a little on what you care about. If the answer is straight performance, then clearly, utilities won by 3.68 percentage points. The following chart… Read More

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12 Jan 2015

Finally, A Regulation You Can Opt-Out Of

In the December 2012 issue of ALM Insights, I wrote an article titled Basel III’s AFS Provision. At the time of the article, the provision detailing the effects of Accumulated Other Comprehensive Income (AOCI) on regulatory capital had been delayed due to a “wide range of views”, and the final outcome was still very much up in the air. Few in the banking industry thought that forcing banks of all… Read More

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12 Jan 2015

Labor Market Improving, More Needed

The Bureau of Labor Statistics (BLS) reported Friday that the labor market improved in December and for 2014 as a whole. In December, payrolls increased by 252,000 and over the course of the year, 2.95 million new jobs were created, the most added in a single year since 1999. The newly created jobs were one of the key elements in the falling unemployment rate, which started the year at 6.7… Read More

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9 Jan 2015

Inflation Expectations in 2015

In my judgment, the biggest stories of 2014 were falling interest rates and oil prices. I’ve written that most people expected interest rates to rise and no one expected a major drop in oil prices. The combination of those two things, plus the unexpected rise in the U.S. dollar (a big story, but not as big as the first two) means that inflation expectations have fallen dramatically in the U.S…. Read More

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8 Jan 2015

The Specter of Deflation

I almost always skip the opinion section in nearly every publication that I read. When I do read an opinion piece, it’s because it’s written by someone that isn’t affiliated with the editorial board and someone that I admire. Back in November, I read an editorial in the Wall Street Journal by John Cochrane, a respected University of Chicago professor and one of the world’s leading experts on central banks… Read More

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7 Jan 2015

As January Goes, So Goes the Year

The talking heads on CNBC have been talking a lot about how the first few days of trading this January are a lot like the first few days of last year: the polar vortex, nervousness about the economy and sharply falling stock prices. In fact, that’s all true, but I’m hard pressed to draw any implication from the similarities. First of all, we’re talking about five data points – almost nothing… Read More

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6 Jan 2015

A Great Year for Bond Investors

Bond investors were expecting a lemon going into 2014 and got lemonade instead. Institutional investors tend to look down their noses at ‘retail’ investors, but they are frequently guilty of the same problems, which in this case, was recency. In general, recency refers to applying what’s happened in the recent past into the indefinite future. For bond prognosticators, interest rates rose and bond prices fell in 2013, so it was… Read More

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