12
Feb
2014
The Market is Over Valued. Now What?
The same fine reader that asked about buy-side versus sell-side research asked another useful question about market valuation metrics. Let this be a signal to all readers that I demonstrate my appreciation for questions with answers! The question refers to an article by Mark Hulbert from CBS Market Watch that looks at six different valuation measures that all come to the same conclusion – that the market is overvalued. First… Read More
6
Feb
2014
Bonds & Bond Ratings
At the end of October, I wrote that investors could earn a tax-free nine percent yield on their fixed income portfolio buy purchasing bonds issued by Puerto Rico. In the article, I said that ‘markets caught on before the bond ratings agencies’ since prices had fallen dramatically while Moody’s had just cut their rating from Aa3 to A2, which is still five rungs above investment grade. A little more than… Read More
5
Feb
2014
Who am I to Judge?
At the beginning of a client relationship, we ask new clients whether or not there are any constraints that we need to be bound by in managing the investment assets. Ninety-nine times out of a hundred, there’s nothing to worry about other than assets with a low cost basis and, therefore, a lot of potential capital gains taxes. In addition to any tax considerations, we want to know whether an… Read More
30
Jan
2014
Fed Tapers as Bernanke Departs
Stock markets fell and bonds rose sharply yesterday as the Federal Reserve continued to pull back on their quantitative easing program and tensions about emerging markets ramped up. The yield on the 10-year Treasury dropped eight basis points to 2.69 percent, falling all the way from 3.0 percent at the start of the year. Even though January isn’t even over, the Barclays US Aggregate bond index has regained almost three-quarters… Read More
28
Jan
2014
Client Goals Trump Everything
Markets were lower yesterday across the board, but the feeling in the air, so to speak, was more calm, as evidenced by the four percent drop in the CBOE Volatility index. Granted, it was a four percent drop following a 40 percent increase last week, but the direction was right. Bonds fell, as measured by the 10-year US Treasury bond, as bond investors pulled away from the ‘flight-to-quality’ trade and… Read More
27
Jan
2014
Emerging Markets Tail Wags Dog
Concerns about a slowdown in China’s economy appears to be the ‘go-to’ rationale for the selloff, although there hasn’t been any new data since the Purchasing Index Managers (PMI) report that we discussed on Friday. A secondary, but possibly more plausible explanation is that investors are looking at the weakness in Emerging Markets currencies and are concerned about the end of the Federal Reserve’s quantitative easing program. We noted the… Read More
27
Jan
2014
Time to Exit Emerging Markets?
Emerging markets (EM) had a tough time last year, down about five percent while US markets rose by basically one-third. Given that the losses are extending into 2014, it’s natural to wonder whether we should remain invested in EM. The short answer is that we certainly don’t intend to withdraw or reduce our position there, and, in fact, we are actually considering increasing our allocation slightly. Acropolis has held EM… Read More
21
Jan
2014
Acropolis vs Harvard Endowment
I didn’t apply to Harvard because I was certain that they would not admit me. My grades were fine and scores were so-so, but at that time they were accepting only nine or ten percent of applications and I knew that the other kids had top grades and scores AND were fluent in four languages, captain of multiple teams and fought poverty on the side. Or, worse yet, their parents… Read More
17
Jan
2014
How We Use Past Performance
Yesterday’s insight about the Morningstar Manager of the Year generated a lot of interest and feedback from readers. Thank you! I appreciate your replies and make it a point to respond to all of them. While we’re on the subject, I also want to thank you for completing the satisfaction survey that we sent 10 days ago. I am pleased to report that when you were asked whether you would… Read More
16
Jan
2014
Morningstar’s Manager of the Year
Markets were higher today on upbeat earnings and manufacturing data. The S&P 500 closed at an all time high and is now up 0.07 percent for the year! Who knew such a little return could be so exciting. Much of the excitement about earnings came from Bank of America (BAC), which posted its highest annual profit since the financial crisis. Back in 2007, when BAC had a market capitalization of… Read More