Portfolio Managers Are Asking Themselves One Question After Recent Trading

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The One Question Portfolio Managers Are Asking Themselves After Recent Trading (Dow Theory Forecasts)

From Richard Moroney: "If a mere one-half percentage point increase in bond yields can have so much impact — halting the broad stock market’s advance and triggering considerable tumult in high-yield stocks and aggressive bonds — what’s going to happen when yields return to more normalized levels?

That is what a lot of portfolio managers are asking themselves after the last few weeks of trading, which have seen a rotation out of defensive dividend payers morph into a broader decline. Shares of companies highly sensitive to interest rates, including homebuilders and real estate investment trusts, have been hit especially hard. But most stocks have moved lower since May 22, when the advance-decline line for S&P 1500 stocks peaked."

One Wall Street Ritual Hasn't Changed In Decades (ConvergEx Group)

Wall Street has changed a lot in the last few decades writes Nick Colas,  chief market strategist at ConvergEx Group, but "one ritual" has stayed the same. After meeting with sector analysts and strategists early in the day, salespeople get on the phone with clients about the firm's investment viewpoint. 

"The reality is somewhat sloppier.  Analysts give their perspectives, yes, on the investment merits of the public companies under their coverage.  But the most likely question from the sales staff is either “Why isn’t everything you just said already in the stock?” or “What are the 24 words I can say on the off chance I actually get a client on the phone?”  And every salesperson serves accounts with a wide variety of investment perspectives.  What the guy covering hedge funds needs from an analyst call is very different from the gal covering long-only mutual funds.

"As a result, the same analyst morning call gets transmitted in very different ways.  It might start as an upbeat reiteration of a “Buy” recommendation with some color about the current quarter that the analyst believes will be a penny below consensus.  The hedgie salesman will call every account saying “My guy/gal says that this company is going to miss.  Short the stock.”   The mutual fund saleswoman will go out with “Gotta buy this name if/when it pukes on the quarter.”  Old school Wall Street salespeople call this a “New York sell, Boston buy” call."

The State Of The Four Official Recession Indicators (Advisor Perspectives)

NBER Business Cycle Dating Committee looks closely at four indicators industrial production, real personal income, nonfarm employment, and real retail sales. Doug Short of Advisor Perspectives pulls each of the indicators into separate charts to see the decline in each indicator since 2006.

Advisor Perspectives

Small Advisory Firm Needs To Hire More People To Manage Client's Powerball Winnings (Investment News)

Madden Advisory Services, the investment advisor that calls Gloria Mackenzie a client, is a four-person firm with about $203 million in assets. Investment News reports that it could see its assets under management double since McKenzie won the $590 million Powerball Lottery. She was left with $270 million after taxes. Harry Madden who founded Madden Advisory said that they would be hiring more staff and space to meet the Powerball winner's needs.

Investing In International Bond Funds Could Be A 'Double-Edged Sword' (The Wall Street Journal)

The Vanguard Group has forayed into global bond funds, and this could prompt mainstream investors to venture into global debt as well. But advisors are telling the Wall Street Journal that this could be a "double-edged sword."

While overseas debt might be more attractive for investors chasing yield, Greg Peterson, research director at Ballentine Partners told the WSJ that they will also have to take on a lot more risk. This is because of differences in law, current account balances, volatility in Forex markets that could all impact foreign bond funds. While some think the extra yield makes up for the risks, others think investors should be cautious, especially if central banks start reducing their quantitative easing programs.

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