Outside-IN

Outside-INblog

Outside voices and views for advisers

Sep 26, 2016, 4:24 PM EST

Franklin Templeton's Michael Hasenstab: How to navigate emerging markets

By Michael Hasenstab

One question my colleagues and I are often asked is how we select which countries to invest in, as some of our best known investments — such as Ireland, Ukraine, Hungary and, most recently, Brazil — have not necessarily been obvious choices. The answer lies in a formula that we have developed and honed to help us identify countries that appear to be better off than most people appreciate, or are on a path to improvement that the market seems to be missing. Put simply, we focus on countries that we deem to be fundamentally strong but, for one reason or another, are out of favor with investors. They are otherwise robust economies suffering through temporary difficulties obscuring their underlying strengths. Our formula, which we call the Local Markets Resilience Index (LMRITM), employs a proprietary scoring system to evaluate the fundamental strength of different emerging-market countries. This index focuses on a country's... Read full post

Sep 19, 2016, 5:53 PM EST

Why traditional economic indicators failed so many this cycle

By Brett F. Ewing and S. Lance Mitchell

Many economists hold the belief that a recession is still a possibility, which has been stoked by the breakdown in traditionally reliable economic indicators. These include economist favorites like the Industrial Production Index (IPI), the Baltic Dry Index (BDIY), the Change in Labor Market Conditions Index (LMCI) and the price of copper. But are these long standing indicators really accurate? Consider that we are multi-years into the dollar's rise and still, many economy watchers seemingly can't rework their models to interpret data for the extraordinarily strong U.S. currency and the effects it's having on global interactions and prices. We believe that indicators like the BDIY and copper have been rendered completely useless by the effects of the dollar, the oversupply of product and the current en vogue switch to service based economies across the world. The two most obvious examples of this significant shift are China and Saudi ... Read full post

Sep 9, 2016, 4:11 PM EST

The value of dividends in retirement

By Jan Blakeley Holman

Over the past 87 years, dividends have accounted for over 40% of the total return for the S&P 500 Index. The importance of dividends has been an often-overlooked part of investing, but will most likely move to the forefront as baby boomers prepare for retirement and look for high and growing income-generating investments. There are generally two schools of thought on how best to structure a long-term investment portfolio. Many believe a total return approach is best. While this approach attempts to provide the growth that investors need to outpace the effects of inflation, it may also require them to sell assets at inopportune times. The second school of thought believes that it is best to build a portfolio of high-yielding income investments that generate sufficient current income to cover expenses. This approach may also fall short and leave the investor heavily exposed to sometimes lower-quality, fixed-income investments and the... Read full post

Sep 7, 2016, 2:44 PM EST

The secret history of index mutual funds

By Stephen Mihm

Forty years ago last week, Vanguard's John Bogle created the first index mutual fund, offering investors a guarantee: They would never outperform the market, but nor would they underperform it. The Index Investment Trust (now the Vanguard 500 Index Fund) simply tracked the performance of the S&P 500.Index funds are now a huge business, accounting for trillions of dollars of mutual fund money. And with good reason: Even though their returns are utterly average, their minimal fees bring big savings for investors, allowing them to outperform actively managed funds over the long term.Mr. Bogle deserves a huge amount of credit for this. But as he has acknowledged, the real story of index funds begins far earlier than Vanguard's entry into the retail market in 1976.The idea of an index fund appeared in 1960, when the University of California economist Edward Renshaw co-authored a paper, “The Case for an Unmanaged Investment Company,... Read full post

Sep 6, 2016, 4:23 PM EST

How financial advisers can write and promote a book

By Brad Johnson

Writing a book can do big things for financial professionals. Books reinforce the credibility of the author and can help establish the author as a thought leader and authority figure in the eyes of potential clients, plus it gives you an invaluable marketing and lead generation tool.Unfortunately, too many people think of writing a book as something they'll never be quite able to do. But the truth is that anybody can write a quality book. Learning to write is just like learning to do anything else: It takes time, patience, practice and the right set of tools.That's what I learned during a recent conversation I had with author and speaker Don Yaeger. During our time together, Mr. Yaeger laid out a wealth of information for new and aspiring authors. He also shared valuable book promotion strategies for existing authors. WRITER'S BLOCK: JUST A MYTH?Mr. Yaeger hasn't had writer's block a day in his life. You're probably thinking it must be ... Read full post

Sep 6, 2016, 5:53 PM EST

Finra's arbitration process: Challenging the system to find the right answers

By Dale Brown

“That's the way we've always done it.” In business, this simple but dismissive mindset — if it becomes ingrained throughout an organization — can keep a company mired in the past, resistant to change and unresponsive to its customers' and employees' evolving needs. It takes a smart, disciplined organization to take an honest look at itself and its practices in order to prevent this inertia-inducing mentality from taking hold and spreading.FSI applauds Finra for doing exactly that on the subject of its dispute resolution, or arbitration and mediation, process.Over the past several years, Finra has embarked on a broad-ranging effort to improve the hallmarks of efficiency and fairness in its dispute resolution program, from revising its rules on who is eligible to serve as a public arbitrator to expanding the number of potential arbitrators provided to parties during the panel selection process.Throughout this... Read full post

Sep 2, 2016, 1:49 PM EST

Emerging markets make a comeback

By Nir Kaissar

Emerging markets are back.While the U.S. has grabbed the headlines this year with every new record high for the S&P 500, emerging-market stocks have quietly done even better. The MSCI Emerging Markets Index is up 14.8% this year through August, including dividends, while the S&P 500 is up 7.8% over the same period.That's a sharp reversal from recent years. The S&P 500 returned 6.5% annually from 2008 to 2015, while the MSCI Emerging Markets Index returned a negative 2.8% a year. That eight-year period of U.S. dominance opened a monster gap between the valuations in the U.S. and those in emerging markets — a gap so wide that the emerging markets' recent gains have barely budged it. The S&P 500 now trades at a price-to-earnings ratio of 24 (using 10-year trailing average earnings), while the MSCI Emerging Markets Index trades at a P/E ratio of 12.3.There are signs that investors are worried about U.S. valuations. As I noted in a... Read full post

Sep 1, 2016, 4:19 PM EST

Insurance that advisers will need to cover new fiduciary duties

By Daniel J. Healy

The U.S. Department of Labor recently expanded the definition of a fiduciary. The people who likely will bear the responsibilities of a fiduciary include a wide array of financial industry advisers not formerly required to take on that responsibility. Advisers who are new to this role should consider whether they have insurance coverage for new potential liabilities. Fiduciaries have certain responsibilities — such as not putting one's interests before the client's — that trigger liability separate from contract and ordinary tort liability. Specific to the DOL regulations, ERISA provides statutory means for holding fiduciaries liable. Claims alleging breach of fiduciary duty may be brought by individual clients or by pension plans, employee benefits plans, trusts or other entities. The most common lines of business insurance arguably may not be ideal for covering such liabilities. Errors and omissions coverage, business... Read full post

Sep 1, 2016, 4:16 PM EST

How social insights can supercharge investment research

By Stephanie Newby

As an investor, social-media data can be one of the most valuable cards in your deck. When used alongside financial data sets, social insights can empower investment researchers, they capture opinions that are often a precursor to consumer behavior. In this way, researchers can get a jump-start on the potential impact of consumer intentions on financial markets. Three ways investment researchers can use insights from consumer social intelligence include:● Interpolating inferences from microbehaviors to determine broader economic impact.● Identifying and analyzing trends.● As input to the buy, sell or hold decision for individual stocks. Social intelligence can help researchers identify — and quantify — minor shifts in specific topics that can have a real impact in aggregate on the economy. Take the prediction of box office takings for movies. Social-media conversations between individuals about going to... Read full post

Aug 30, 2016, 2:49 PM EST

Ways for financial advisers to face down the debt supercycle

By Roger Early

With the rapid assumption of debt by governments, businesses, and consumers worldwide, global economies are finding themselves in the midst of a debt supercycle. This period of intense and persistent increase in leverage throughout the global economy presents a number of challenges, but the primary result is sluggish global economic growth. Low economic growth presents risks for companies and governments throughout the world, and brings with it elevated credit risk. Compounding the problem, high global debt levels have weakened global economic growth to the point where, unlike in previous experiences, the credit cycle has started to drive the business cycle rather than vice versa. We know by now that the policy responses since the global financial crisis began have had mixed results, but even at their best they are little more than temporary fixes, and meaningful economic growth remains elusive in many parts of the world. Fixed-income ... Read full post

Older »