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Saturday, August 31, 2013
The Market Is Falling More, And Interest Rates Are Really Starting To Shoot Higher
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ANALYST: The Bond Market Has Already Priced In Tapering, And Now The Question Is: How Much More Damage Will There Be?
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The Global Financial Markets Are Selling Off (DIA, SPY, QQQ)
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FORGET JACK BOGLE: AllianceBernstein Makes The Case For Active Portfolio Management
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AllianceBernstein's Vadim Zlotnikov Gives Us The Argument For Active Management (Business Insider)
After the financial crash there has been a loss of confidence in active management as passive investing strategies have outperformed. Vanguard's Jack Bogle has built his entire reputation on passive investing, or investing in stock market indices.
Yet there is an argument to be made for active management, according to Vadim Zlotnikov, chief market strategist at AllianceBernstein
"Active management relies on the assessment of economic value in determining pricing of securities and assets. The last four years you have seen a significant divergence between the economic value of assets and its price in the market.
"Active management is all about assuming that over long periods of time, pricing of securities and their values starts to converge. So the issue is not if it is going to work, it's when it's going to work. The time for it to work is when you have enough decline in the risk perception to at least believe that the future will exist and the future in some way, shape or form will be driven by historical rules. What has happened people have said is all these historical beliefs are no longer valid we're in a new world.
"If you start to have at least some comfort that historical economic rules are valid going forward, active management will deliver enormous returns. And you'll see that in some pick up in M&A, some pick up in LBO, because those are the long horizon economic buyers. They're not buying paper, they're obeying an underlying business and those are the guys that are willing to place capital against that arbitrage."
U.S. Target-Date Funds Saw 20% Growth In Assets Last Year (Reuters)
Assets in target date funds grew 20% in 2012, according to data from BrightScope. Target date funds are funds that pool together money from different investors that plan to retire around the same time, and in which asset allocation tends to become more conservative as this date approaches.
Target date funds had over $503 billion at the end of 2012, according to Brightscope. Recently, companies like Goldman Sachs and Oppenheimer Funds have exited the market, according to Reuters.
Here's The Chart That Predicts Recessions 'Without Fail' (Gluskin Sheff)
"If there is one metric that has worked so well over time it is household assessments of the labour market — the consumer sector tends to get it right," wrote Gluskin Sheff's David Rosenberg.
"Specifically, the University of Michigan survey component that measures consumer expectations on expected changes in unemployment rate. As the chart clearly illustrates, recessions start when this metric slips below 65 without fail. We will start to get worried then when it breaks below 75 (it is now 96) as it did in August 2007, December 200, and May 1990 — all gave us 2-4 months of preparatory time ahead of the fact."
Gluskin SheffFINRA Requests Information On How Brokerages And Their Top Representatives Are Using Social Media (WealthManagement.com)
Financial Industry Regulatory Authority (FINRA) is keeping an eye on how brokerages are using social media like Facebook, Twitter, and LinkedIn. The regulator sent letters to brokerages requesting information on how they monitor the use of scale media and if it complies with industry standards, according to WealthManagement.com.
The regulator also requested a list of the firm's "top 20 producing registered representatives (based on commissioned sales) who used social media for business purposes to interact with retail investors as defined in FINRA Rule 2210(a)(6) during the time period February 4, 2013 through May 4, 2013."
GUNDLACH: The Only Place Investors Will Make Money In The Coming Weeks Is 'The Most Hated Asset Class On The Planet' (CNBC)
While many on Wall Street expect Treasuries to continue selling-off after today's FOMC announcement. Jeff Gundlach think U.S. Treasuries are set to rally.
"No one's making any money anywhere, and I think that's because people think the conviction of central banks to continue the amount of monetary stimulus through bond purchases is less. And that's where we are right now. That's what's going to happen today again...
"I think, actually, rates are going to start falling. I think the place – the one place – that you're likely to make money in the next several weeks, maybe couple of months is actually, believe it or not, the most hated asset class on the planet: long-term U.S. government bonds.
"That's what I think is going to be the most successful investment, and what I'm really looking at to reach that conclusion is the fact that there is no inflation anywhere. There's no sign of inflation."
We'll Get One Last Unconventional Economic Indicator Before Tomorrow's Fed Announcement (FDX)
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CHART OF THE DAY: The Cost Of Sitting On Cash
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