Opportunity Knocks – Emerging Markets
It was just a few years back when we would ask mutual fund representatives who visited our office what investments other advisors were utilizing in their clients’ portfolios. The answer that came back time and again was “most advisors have 40%-50% of their clients’ money in international funds with half that being in emerging markets […]
ARE INVESTORS TOO COMPLACENT?
Complacency, whether in the stock market, your job, your life, etc., is never a good thing. With the geopolitical news – Ukraine, Isis, European slowdown (Italy is in recession) – making headlines, it begs the question: Are investors too complacent about risk? One way to determine if investors are complacent is to look at […]
CORPORATE BORROWING – PART 2…..
In our last market update, we discussed corporate debt and company stock buybacks. We see this topic as a bigger story than what has been reported so we thought we would again address the issue and give an example using a well- known company that has been doing this for the last few years. […]
Company Buybacks – Party like its 1999 (or 2007?)
Because of historically low interest rates, companies are selling bonds (borrowing money) and buying back shares. This is a good thing for the market, but is it just a short-term sugar high? Let’s look at some figures. For the twelve months ending March 31, 2014, companies increased the amount of company shares they purchased by […]
Unintended Consequences – No liquidity in bond markets
As a direct result of the financial crisis of 2008, the Frank/Dodd Wall Street Reform Act was passed to try and reduce the risk of banks’ failing during a financial crisis. One of the unintended consequences of the Act was that it has reduced liquidity in the bond market. How? Before Frank/Dodd, banks were active […]
European Central Bank negative interest rates – the battle to devalue the Euro
Mario Draghi, the head of the European Central Bank (“ECB”) has been vocal over the past few months about the need to devalue the Euro. His first step in pursuing this objective was to cut the bank deposit rate to -.10%, which he says will also help to fight off deflation. However, there are other […]
Risk is important, but risk with expected returns is meaningful
When a fund manager recently visited and touted their emerging market bond fund as a good investment, we couldn’t believe what we were hearing. The fund was 17% invested in Nigerian bonds, 9% in Russian bonds and 7% in Venezuelan bonds. For that much risk, the fund had a yield of only 5.5%. In our […]
WHY ARE INTEREST RATES FALLING?
If the economy is so rosy, as the Federal Reserve has insinuated with tapering and talk of higher inflation (PPI is up 0.6% in April and 2.1% over the past year), why would interest rates be falling? Under normal circumstances, falling interest rates imply the economy is not as robust as it seems. However, this […]
MANAGED FUTURES: OPPORTUNITY AND DIVERSIFICATION
What are Managed Futures? Let’s break this down a bit and start with a futures contract. A futures contract is an agreement to buy or sell a set amount of a particular asset at a predetermined price and date. The futures market is comprised of agriculture assets (sugar, corn, etc.), energy assets (natural gas, oil, […]
RISK AND OPPORTUNITY
The Federal Reserve, along with central banks around the globe, has been easing for over 5 years. After that long of a time period, market distortions will occur. What do we mean? From 2003-2006, the Federal Reserve left interest rates lower than they should have been and this distorted the real estate market. We remember […]