Investment Insights: The Blog
Apr 17, 2013
If this feels like the start of a market pullback, that's because it is
In case anyone was wondering what the next market correction would look like, “This is it,” according to Paul Schatz, president of Heritage Capital LLC. Mr. Schatz, a tactical adviser and money manager, said stock market volatility over the past few days is indicative of the pullback he has been calling for and believes is necessary. “As you know, we have been looking for a short-term pullback for several weeks,” he said. “I do not believe the bull market is over and I don't think this decline will become anything serious, at least not yet.” The Dow Jones Industrial Average, which hit several record highs over the past few weeks, is now on its third consecutive day of swings of 100 points or more. The blue chip average is currently hovering around 14,580, representing a gain of more than 11% from the start of the year. Mr. Schatz said he believes the current volatility is simply a rough patch in a... Read full post
Apr 3, 2013
Stockton bankruptcy sends chilly message to muni bondholders
If municipal bond investors aren't already stressed out over the latest developments in the Stockton, Calif. bankruptcy dealing, they should be. The city of nearly 300,000 was granted Chapter 9 bankruptcy protection on Monday after a federal judge berated creditors for not wanting to compromise with the debt-laden municipality. It is not surprising that the two main insurers of Stockton's roughly $500 million worth of debt issuance would try to prevent bondholders from taking a “haircut.”For starters, the muni bonds are supposed to be senior debt obligations. Obviously, Assured Guaranty Ltd. and National Public Finance Guarantee Corp. should be expected to do everything possible to avoid being left on the hook for Stockton's financial mismanagement, even if compromise might look like the right thing to do. But what is more alarming and potentially threatening to the muni bond market is that Stockton has shown no interest in ... Read full post
Mar 29, 2013
Keeping stock market milestones in perspective
The good news is the U.S. stock market reached a new high this week, which means anyone who bought in at the top in October 2007 is finally back in positive territory. That's one sad way of looking at it.But, as Morningstar's Don Phillips sees it, anyone contributing to a 401(k) plan has been benefitting all along by dollar-cost-averaging on the way up. Props to the president of the research division at Morningstar Inc. for fleshing out the silver lining at a time when so many others are still dwelling on the lost opportunities of a market cycle. “Think about how many times the past few years have been described as the worst financial crisis of our generation, and look at where the stock market is now,” he said. “It's only been a handful of years since the darkest days of the financial crisis, which should remind us to believe that, no matter what, this too shall pass.” The stock market's powerful recent run,... Read full post
Mar 27, 2013
Housing recovery? That's old news
The latest housing market data that got everyone so excited earlier this week appears to be finally catching up to homebuilding stocks and related investments. In virtually any direction across the homebuilding landscape, property stocks have been screaming recovery for more than a year. The benchmark SPDR S&P Homebuilders exchange-traded fund (XHB) is up nearly 13% from the start of the year after gaining more than 57% in 2012. The iShares Dow Jones U.S. Home Construction ETF (ITB) has gained more than 13% this year, following a gain of more than 79% last year. This compares to a solid 10.2% gain this year by the S&P 500 Index, which gained 16% last year. At the individual company level the gains are equally impressive. Homebuilding bellwether Ryland Group Inc. (RYL) is up nearly 15% this year on the heels of a 132.4% gain last year. Toll Brothers Inc. (TOL) is up nearly 9% this year and gained more than 58% last year. And, a... Read full post
10:17 am EST
Advisers making statement by shunning formal investment statements
If you're the kind of financial adviser who doesn't take the time and effort to create specific investment policy statements for your clients you are, believe it or not, in the majority. Shocking as it might seem to most anyone even marginally connected to the broader notion of financial advice, the majority of advisers are not committing their clients to formal investment plans. “A lot of advisers are talking about the importance of advice and practice management, but not a lot of them are backing it up and doing it,” said Rod Greenshields, consulting director at Russell Investments, which uncovered this odd finding in its latest quarterly adviser survey. While advisers tend to be more diligent about creating investment policy statements for their wealthier clients, 61% of those surveyed are not doing it for all clients and many are not doing it for any of their clients. “It is much like the way everyone knows how... Read full post
Mar 11, 2013
Muni-bond holders in purgatory as Detroit teeters on the brink
Detroit's financial mismanagement has devolved into an ugly political morass, but the latest move by Michigan Gov. Rick Snyder is seen as a ray of hope for municipal bond investors. Regardless of where you stand on the politics involved in a city drowning in debt and unable to pay its bills, the governor's plan to install a temporary emergency manager to try to fix the mess is good news to those with real skin in the game. “For bondholders, this stabilizes the situation and also averts the possibility of an immediate bankruptcy filing,” said Eric Friedland, head of municipal credit research at Schroder Investment Research. Muni bond investors have a singular focus, and tend to look beyond the fact that Detroit's mayor can't get along with the city council, and that Michigan's largest city has had multiple opportunities to address its spending and debt load, and that Democrats are viciously attacking the Republican... Read full post
Mar 4, 2013
Sequester fiascos would be good news for muni bonds
The municipal bond market, having ridden some rough seas recently, could be poised to benefit if and when something negative comes out of the dreaded sequester spending cuts. Even though the much-hyped $85 billion reduction in the pace of federal spending between now and October has amounted to a big yawn for the financial markets, it still adds up to a smaller federal subsidy for some programs and departments. “The good news is very few muni bonds are heavily dependent on a federal subsidy,” said Daniel Toboja, vice president of municipal bond trading at Ziegler Capital Markets. As Mr. Toboja sees it, much of the $4 trillion muni bond market could be poised for “a slight pop” if some of the worst sequester-linked fears start coming to fruition. “If there's talk of a possible recession and a stalling of economic growth, munis are where investors will start putting money,” he added. Finally, some good ... Read full post
Feb 27, 2013
Beating the benchmark is so 2012
The S&P 500 Index is a wonderful benchmark of broad stock market activity, but does that mean we have to measure our investment performance against that, or any, universal benchmark? This is the kind of attitude shift that Brinker Capital Inc. has been pushing to the financial advice community with a certain degree of measured success. According to the results of Brinker's January survey of financial advisers, 79% say they are now using their clients' personal goals as measures of investment success. “This is a major shift in thinking,” said Brinker president John Coyne. Brinker, which manages more than $13 billion on managed account platforms, has even hired a behavioral finance specialist to help educate financial advisers. “One of the things we found is that people don't think about wealth in absolute terms, they think of wealth in relative terms,” said Daniel Crosby, an independent behavioral finance... Read full post
Feb 12, 2013
The ultimate — and strangest — alternative investment gets a big boost
As alternative investments go, it doesn't get much more out there than VR Holdings Inc. (VRHD), which is essentially a shell corporation with a 17-year-old lawsuit as its primary asset. However, depending on your tolerance for mind-numbingly slow legal proceedings and appetite for arcane court battles, the patient investor could find some real upside in what amounts to an investment in a $3.4 billion lawsuit. That's the basic premise pitched so enthusiastically by lead plaintiff Morton Lapides, who helped engineer the tactic of providing aging plaintiffs some liquidity by packaging the lawsuit inside a publicly-traded company. The stock, which was listed in 2009, has maintained a near constant price of 51 cents per share on almost no trading activity. Of course, the potential in a best-case-scenario legal resolution would make the 460 million outstanding shares worth about $6 each after legal fees and expenses, representing a tidy gain ... Read full post
Jan 25, 2013
More bad news for savers where unemployment is high
In the category of more proof that life is not fair, it turns out that bank deposit interest rates are closely tied to state-level unemployment rates. While yields on deposits are low and trending lower all over the country, depositors in states where unemployment is lower have been enjoying higher interest on their savings. In Nebraska, which has the nation's lowest unemployment rate of just 3.7%, bank depositors are earning an average annual percentage yield of 0.45%. That might not sound like much, because it's not, but it might sound good to a resident of Ohio, where the unemployment rate is 6.7% and the deposit yield is 0.24%. In Michigan, which leads the nation with an 8.9% unemployment rate, bank depositors are getting a mere 0.27% yield on their money. The rate is down from 0.38% a year ago. Dan Geller, executive vice president at Market Rate Insights, said the link between deposit rates and unemployment rates is part of the... Read full post
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