The document discusses investing in uncertain markets. It begins by outlining how asset values are determined based on cash flow and risk. It then discusses how markets are driven by fundamentals like earnings, investor sentiment, and liquidity. The document also examines market cycles, how emotions drive markets in secular and sub-cycles, and concerns around high global debt levels. It outlines bull and bear perspectives based on earnings and price-earnings ratios. Finally, the document discusses strategies for building a portfolio in uncertain times, including permanent portfolio approaches, low volatility investing, and combining ideas like setting volatility targets with simple market timing.
The document summarizes research from several studies on international investments. Some key findings include:
1) Value stocks outperformed growth stocks internationally and small stocks outperformed large stocks. Higher returns for value stocks were due to earnings reverting to the mean.
2) Stock returns in most developed countries were higher during expansive monetary periods and lower during restrictive periods, both locally and in the US.
3) Emerging markets provided diversification benefits, especially during US monetary restrictions when they added over 4.5% annually to returns.
4) Foreign real estate provided greater diversification than foreign stocks during periods of high volatility.
The document discusses five hypothetical asset allocation portfolios ranging from conservative to aggressive over nine decades from the 1930s through 2015. It provides a high-level overview of each decade and how the portfolios would have performed, with the aggressive portfolio having the highest returns but also the most volatility, while the income portfolio had lower returns but was the least volatile. It also provides economic context for each decade.
The document discusses the debasement of the riskless rate and its effects on global macroeconomics. It argues that structural issues like unsustainable government debt levels and policies like quantitative easing have distorted credit risk assessments and the traditional anchors of risk-free rates. This has undermined confidence in capital markets and led to a misallocation of capital. The document proposes that "true" AAA countries establish a global AAA fund that lends to other countries against strict conditions to help re-anchor the global credit hierarchy.
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered on November 30, 2021. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
The document discusses world stock market capitalization and performance. It notes that in 2013, the total developed world stock market capitalization was $33.2 trillion, with the US market representing a significant portion but about half of investable assets existing outside the US. It also examines the varying performance of international markets compared to the US market over the past 10 years, noting no predictable pattern of outperformance. Finally, it discusses how low correlation between some international markets like Japan and the US provides potential benefits for risk diversification.
The document summarizes "The Perfect Storm" presentation by The PFP Group Wealth Management Team. It discusses the US housing bubble and subsequent financial crisis, highlighting greed, fear, systemic risk, and opportunities emerging from the crisis. It provides an overview of The PFP Group, their services and investment strategies, which include a focus on quality stocks and bonds. Historical market perspectives are presented to advocate a long-term, disciplined approach through market volatility.
Stanford CS 007-07 (2019): Personal Finance for Engineers / InvestingAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given in November 2019. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
Stanford CS 007-07 (2018): Personal Finance for Engineers / InvestingAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given on November 6, 2018. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
The document summarizes research from several studies on international investments. Some key findings include:
1) Value stocks outperformed growth stocks internationally and small stocks outperformed large stocks. Higher returns for value stocks were due to earnings reverting to the mean.
2) Stock returns in most developed countries were higher during expansive monetary periods and lower during restrictive periods, both locally and in the US.
3) Emerging markets provided diversification benefits, especially during US monetary restrictions when they added over 4.5% annually to returns.
4) Foreign real estate provided greater diversification than foreign stocks during periods of high volatility.
The document discusses five hypothetical asset allocation portfolios ranging from conservative to aggressive over nine decades from the 1930s through 2015. It provides a high-level overview of each decade and how the portfolios would have performed, with the aggressive portfolio having the highest returns but also the most volatility, while the income portfolio had lower returns but was the least volatile. It also provides economic context for each decade.
The document discusses the debasement of the riskless rate and its effects on global macroeconomics. It argues that structural issues like unsustainable government debt levels and policies like quantitative easing have distorted credit risk assessments and the traditional anchors of risk-free rates. This has undermined confidence in capital markets and led to a misallocation of capital. The document proposes that "true" AAA countries establish a global AAA fund that lends to other countries against strict conditions to help re-anchor the global credit hierarchy.
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered on November 30, 2021. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
The document discusses world stock market capitalization and performance. It notes that in 2013, the total developed world stock market capitalization was $33.2 trillion, with the US market representing a significant portion but about half of investable assets existing outside the US. It also examines the varying performance of international markets compared to the US market over the past 10 years, noting no predictable pattern of outperformance. Finally, it discusses how low correlation between some international markets like Japan and the US provides potential benefits for risk diversification.
The document summarizes "The Perfect Storm" presentation by The PFP Group Wealth Management Team. It discusses the US housing bubble and subsequent financial crisis, highlighting greed, fear, systemic risk, and opportunities emerging from the crisis. It provides an overview of The PFP Group, their services and investment strategies, which include a focus on quality stocks and bonds. Historical market perspectives are presented to advocate a long-term, disciplined approach through market volatility.
Stanford CS 007-07 (2019): Personal Finance for Engineers / InvestingAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given in November 2019. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
Stanford CS 007-07 (2018): Personal Finance for Engineers / InvestingAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given on November 6, 2018. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
Stanford CS 007-05: Personal Finance for Engineers / Know Your WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered on November 27, 2018. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
The Asset Allocation Advisor - October 2015Eric J. Weigel
The document provides an outline and overview for research on asset allocation decisions to help investors. It discusses research goals of assessing asset class performance, views, and implications for multi-asset class portfolios. It examines prospective returns and risks of various asset classes over intermediate and long-term time horizons. Charts and analyses provide perspectives on factors like valuations, income, and sentiment that influence expected returns across equities, fixed income, real estate, commodities and cash.
Texas Enteprise Speaker Series, May 9, 2013, The University of Texas at Austin.
The Cypriot bank deposit crisis has put a modern spin on Mark Twain's "It's not the return on my money but the return OF my money that counts." The unthinkable possibilities ahead emanate from the epic gap between a government's financing needs and its ability to sell debt. This has prompted politicians to consider options that were previously considered unthinkable.
You will learn —
The magnitude of the shortfalls in government funding
The adverse effects of the monetary fixes that are already underway
The means that governments use to confiscate private wealth
The protections being devised by private citizens
The possibility of new reserve currencies and global wealth reallocation
The Texas gold depository as an example of the unthinkables that lie ahead.
The document summarizes an investment fund called the AIF Opportunity Fund that aims to capitalize on undervalued real estate assets during a period of unprecedented opportunity. The fund will be managed by experienced real estate professionals from Agricap Financial and Sterling Pacific Financial and will enable investors to collectively acquire, improve, and resell distressed real estate assets for long-term returns. Example opportunities mentioned include raw land, partially completed projects, and real estate-backed notes purchased at discounts.
The document discusses the importance of diversification in investments. It recommends diversifying investments across different asset classes and industries to reduce risk. This is done by mixing various investments into a portfolio that spreads out investments. Diversification protects investors from downturns in specific industries and allows them to benefit from positive market conditions. The document also discusses two case studies of the bankruptcy of Lehman Brothers and the global recession to illustrate the need for diversification on a global scale to avoid overexposure when crises occur.
Stanford CS 007-09: Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
Stanford CS 007-06 (2019): Personal Finance for Engineers / DebtAdam Nash
The document provides information about different types of debt including student loans, mortgages, auto loans, and credit cards. It discusses the large amounts of debt held in each category in the US. For student loans, it notes the average debt for 2018 graduates and default rates. It also reviews strategies for paying off debt efficiently, including the debt snowball and optimal payment methods prioritizing the highest interest debt. The dangers of debt are discussed, emphasizing that bankruptcy occurs when debts cannot be paid and that credit card interest rates can exceed 20%.
Stanford CS 007-07: Personal Finance for Engineers / Good Investing is BoringAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given on November 7, 2017. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered in November 2019. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
Stanford CS 007-05 (2020): Personal Finance for Engineers / Assets & Net WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Interest rates remain low and equity index valuations are historically high. What approach should a prudent financial steward take to evaluate the financial market risks while seeking a positive return on capital? This session will explore the asset management philosophies and approaches used by several large institutional money managers to assist corporations and individuals address this issue. The discussion will be led by Mr. Birnie, Managing Partner of Piedmont Wealth Advisory and a representative from Blackrock Investments. Mr. Birnie has been a trusted advisor to SC&RA for over 15 years and has developed an expertise in risk-managed investing. Blackrock Investments is the largest money manager in the world, advising the world’s largest institutions, endowments, pensions and governments.
Speaker: Douglas Birnie, Managing Partner, Piedmont Wealth Advisory
The document compares the performance of two investment portfolios over a 15-year period from 2000 to 2015 that experienced significant market volatility and events. A portfolio consisting of 65% stocks and 35% bonds outperformed an S&P 500 portfolio, achieving an annualized return of 5.64% compared to 4.06% for the S&P 500 portfolio. The moderate portfolio also experienced less risk. By 2015, the moderate portfolio maintained a value of $375,539 after withdrawing $503,922 for income, while the S&P 500 portfolio was depleted. The document advocates for global diversification and maintaining a long-term perspective to achieve investment goals.
Roger federer (P. Slide) current global financial crisis and its implication ...Fatfat Shiying
This document discusses the global financial crisis of 2007-2008 and its implications for international financial institutions. It aims to identify the performance of IFIs, determine the causes of the crisis in the US, and examine the implications for IFIs. The causes included changes in credit availability, greed, and the housing slump. This led to failures of banks like Northern Rock and Lehman Brothers. The implications for the US included losses, declining household borrowing costs, and effects on the stock market, insurance companies, and US-China relations. Recommendations include regulating systemic risk, increasing transparency, and reforming the financial system.
The document discusses a 1986 study that found asset allocation to be more important than other factors like market timing for large pension funds' returns. It also discusses how exchange-traded funds now make asset allocation investing easier. The author advocates a value-based asset allocation approach where undervalued asset classes receive disproportionate allocations and overvalued classes are reduced over years, not days or months. Some of the best-performing endowment funds like Harvard's use this asset allocation approach.
September 13 Quarterly: Gotta' know when to hold 'em, when to fold 'emMark_Krygier
- Less Americans are investing in stocks since the 2000 tech bubble and 2008 recession, with the percentage of investors dropping from 60% to 52%.
- Investors must understand their own investment needs and timelines in order to make wise decisions about buying, holding, or selling investments during periods of price fluctuation.
- Short-term investments should be used for near-term needs while long-term investments suited for growth, like stocks and real estate, require ignoring short-term price changes.
Capital Associates - There is Always a Reason to SellMitch Katz
The document compares the performance of two investment portfolios over a 15-year period from 2000 to 2015 that included two bear markets and the Great Recession. A globally diversified portfolio with a mix of 65% stocks and 35% bonds outperformed an S&P 500 index portfolio, achieving higher returns with less risk. While both portfolios started with $500,000 and withdrew 5% annually, by 2015 the diversified portfolio still had $375,539 remaining, but the S&P 500 portfolio had run out of money. The analysis demonstrates the benefits of diversification and remaining invested during volatile markets.
Stanford CS 007-05 (2021): Personal Finance for Engineers / Assets & Net WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" taught on October 19, 2021. This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Pursuing a Better Investment Experience Brochure BrandedTheresa M. Mahoney
The Bridgeway Group is a financial services firm with offices in Pasadena and Covina, California. It offers securities and advisory services through Commonwealth Financial Network. The document includes various exhibits with disclosures related to mutual fund performance, dimensions of expected returns, benefits of diversification, and avoiding reactions to short-term market movements. It emphasizes focusing on factors within an investor's control and maintaining a long-term perspective.
The document is the October 2021 Global Financial Stability Report published by the International Monetary Fund. It discusses three main topics: navigating rising uncertainties in the global economy during the COVID-19 recovery; financial stability challenges posed by the growing crypto ecosystem; and how investment funds can help facilitate the transition to a green economy. The report analyzes risks in various sectors including corporate debt, real estate, banking, and emerging markets, and provides policy recommendations to secure a sustainable recovery and limit financial vulnerabilities.
Assistant: Assistant:
Paraplanner Paraplanner Portfolio Manager
Regulation: Regulation: Regulation:
IIROC FP Canada Portfolio Management
Fee: Fee: Fee:
Transaction based Hourly/Fixed/AUM AUM
Focus: Focus: Focus:
Products Planning Advisory
Client: Client: Client:
Mass Affluent Mass Affluent/HNW HNW
Execution Strategies
Lump Sum
- All at once
Dollar Cost Averaging
- Regular intervals over time
Value Averaging
- Buys more shares
Stanford CS 007-05: Personal Finance for Engineers / Know Your WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered on November 27, 2018. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
The Asset Allocation Advisor - October 2015Eric J. Weigel
The document provides an outline and overview for research on asset allocation decisions to help investors. It discusses research goals of assessing asset class performance, views, and implications for multi-asset class portfolios. It examines prospective returns and risks of various asset classes over intermediate and long-term time horizons. Charts and analyses provide perspectives on factors like valuations, income, and sentiment that influence expected returns across equities, fixed income, real estate, commodities and cash.
Texas Enteprise Speaker Series, May 9, 2013, The University of Texas at Austin.
The Cypriot bank deposit crisis has put a modern spin on Mark Twain's "It's not the return on my money but the return OF my money that counts." The unthinkable possibilities ahead emanate from the epic gap between a government's financing needs and its ability to sell debt. This has prompted politicians to consider options that were previously considered unthinkable.
You will learn —
The magnitude of the shortfalls in government funding
The adverse effects of the monetary fixes that are already underway
The means that governments use to confiscate private wealth
The protections being devised by private citizens
The possibility of new reserve currencies and global wealth reallocation
The Texas gold depository as an example of the unthinkables that lie ahead.
The document summarizes an investment fund called the AIF Opportunity Fund that aims to capitalize on undervalued real estate assets during a period of unprecedented opportunity. The fund will be managed by experienced real estate professionals from Agricap Financial and Sterling Pacific Financial and will enable investors to collectively acquire, improve, and resell distressed real estate assets for long-term returns. Example opportunities mentioned include raw land, partially completed projects, and real estate-backed notes purchased at discounts.
The document discusses the importance of diversification in investments. It recommends diversifying investments across different asset classes and industries to reduce risk. This is done by mixing various investments into a portfolio that spreads out investments. Diversification protects investors from downturns in specific industries and allows them to benefit from positive market conditions. The document also discusses two case studies of the bankruptcy of Lehman Brothers and the global recession to illustrate the need for diversification on a global scale to avoid overexposure when crises occur.
Stanford CS 007-09: Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
Stanford CS 007-06 (2019): Personal Finance for Engineers / DebtAdam Nash
The document provides information about different types of debt including student loans, mortgages, auto loans, and credit cards. It discusses the large amounts of debt held in each category in the US. For student loans, it notes the average debt for 2018 graduates and default rates. It also reviews strategies for paying off debt efficiently, including the debt snowball and optimal payment methods prioritizing the highest interest debt. The dangers of debt are discussed, emphasizing that bankruptcy occurs when debts cannot be paid and that credit card interest rates can exceed 20%.
Stanford CS 007-07: Personal Finance for Engineers / Good Investing is BoringAdam Nash
These are the slides from the 7th session of the Stanford University class, CS 007 "Personal Finance for Engineers" given on November 7, 2017. This seminar covers compounding, types of investments, diversification, how to invest, and the four keys to good investing (all boring).
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real EstateAdam Nash
These are the slides from the 9th session of the Stanford University class, CS 007 "Personal Finance for Engineers" offered in November 2019. This seminar covers real estate and related financial decisions: buying, renting, rent vs. buy, real estate investment, rental properties & tax advantages.
Stanford CS 007-05 (2020): Personal Finance for Engineers / Assets & Net WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Interest rates remain low and equity index valuations are historically high. What approach should a prudent financial steward take to evaluate the financial market risks while seeking a positive return on capital? This session will explore the asset management philosophies and approaches used by several large institutional money managers to assist corporations and individuals address this issue. The discussion will be led by Mr. Birnie, Managing Partner of Piedmont Wealth Advisory and a representative from Blackrock Investments. Mr. Birnie has been a trusted advisor to SC&RA for over 15 years and has developed an expertise in risk-managed investing. Blackrock Investments is the largest money manager in the world, advising the world’s largest institutions, endowments, pensions and governments.
Speaker: Douglas Birnie, Managing Partner, Piedmont Wealth Advisory
The document compares the performance of two investment portfolios over a 15-year period from 2000 to 2015 that experienced significant market volatility and events. A portfolio consisting of 65% stocks and 35% bonds outperformed an S&P 500 portfolio, achieving an annualized return of 5.64% compared to 4.06% for the S&P 500 portfolio. The moderate portfolio also experienced less risk. By 2015, the moderate portfolio maintained a value of $375,539 after withdrawing $503,922 for income, while the S&P 500 portfolio was depleted. The document advocates for global diversification and maintaining a long-term perspective to achieve investment goals.
Roger federer (P. Slide) current global financial crisis and its implication ...Fatfat Shiying
This document discusses the global financial crisis of 2007-2008 and its implications for international financial institutions. It aims to identify the performance of IFIs, determine the causes of the crisis in the US, and examine the implications for IFIs. The causes included changes in credit availability, greed, and the housing slump. This led to failures of banks like Northern Rock and Lehman Brothers. The implications for the US included losses, declining household borrowing costs, and effects on the stock market, insurance companies, and US-China relations. Recommendations include regulating systemic risk, increasing transparency, and reforming the financial system.
The document discusses a 1986 study that found asset allocation to be more important than other factors like market timing for large pension funds' returns. It also discusses how exchange-traded funds now make asset allocation investing easier. The author advocates a value-based asset allocation approach where undervalued asset classes receive disproportionate allocations and overvalued classes are reduced over years, not days or months. Some of the best-performing endowment funds like Harvard's use this asset allocation approach.
September 13 Quarterly: Gotta' know when to hold 'em, when to fold 'emMark_Krygier
- Less Americans are investing in stocks since the 2000 tech bubble and 2008 recession, with the percentage of investors dropping from 60% to 52%.
- Investors must understand their own investment needs and timelines in order to make wise decisions about buying, holding, or selling investments during periods of price fluctuation.
- Short-term investments should be used for near-term needs while long-term investments suited for growth, like stocks and real estate, require ignoring short-term price changes.
Capital Associates - There is Always a Reason to SellMitch Katz
The document compares the performance of two investment portfolios over a 15-year period from 2000 to 2015 that included two bear markets and the Great Recession. A globally diversified portfolio with a mix of 65% stocks and 35% bonds outperformed an S&P 500 index portfolio, achieving higher returns with less risk. While both portfolios started with $500,000 and withdrew 5% annually, by 2015 the diversified portfolio still had $375,539 remaining, but the S&P 500 portfolio had run out of money. The analysis demonstrates the benefits of diversification and remaining invested during volatile markets.
Stanford CS 007-05 (2021): Personal Finance for Engineers / Assets & Net WorthAdam Nash
These are the slides from the 5th session of the Stanford University class, CS 007 "Personal Finance for Engineers" taught on October 19, 2021. This seminar focuses on liquidity, emergency funds, assets & liabilities, and net worth.
Pursuing a Better Investment Experience Brochure BrandedTheresa M. Mahoney
The Bridgeway Group is a financial services firm with offices in Pasadena and Covina, California. It offers securities and advisory services through Commonwealth Financial Network. The document includes various exhibits with disclosures related to mutual fund performance, dimensions of expected returns, benefits of diversification, and avoiding reactions to short-term market movements. It emphasizes focusing on factors within an investor's control and maintaining a long-term perspective.
The document is the October 2021 Global Financial Stability Report published by the International Monetary Fund. It discusses three main topics: navigating rising uncertainties in the global economy during the COVID-19 recovery; financial stability challenges posed by the growing crypto ecosystem; and how investment funds can help facilitate the transition to a green economy. The report analyzes risks in various sectors including corporate debt, real estate, banking, and emerging markets, and provides policy recommendations to secure a sustainable recovery and limit financial vulnerabilities.
Assistant: Assistant:
Paraplanner Paraplanner Portfolio Manager
Regulation: Regulation: Regulation:
IIROC FP Canada Portfolio Management
Fee: Fee: Fee:
Transaction based Hourly/Fixed/AUM AUM
Focus: Focus: Focus:
Products Planning Advisory
Client: Client: Client:
Mass Affluent Mass Affluent/HNW HNW
Execution Strategies
Lump Sum
- All at once
Dollar Cost Averaging
- Regular intervals over time
Value Averaging
- Buys more shares
Presented by Aniket Bhushan, Principal Investigator at the Canadian International Development Platform (CIDP). For more information, visit our website: www.cidpnsi.ca
This document provides information on socially responsible investing. It begins with definitions of key investment terms like stocks, bonds, mutual funds and market capitalization. It then discusses how to choose investments that align with social and environmental values through strategies like negative screening of certain industries, engaging in shareholder activism, and community investing. Research sources are provided for evaluating corporate behavior and performance from a socially conscious perspective. The goal is to educate investors on making financial choices that promote values of solidarity and responsibility.
14 hartford funds hartford balanced income fund123jumpad
The document provides information about the Hartford Balanced Income Fund, including its strategy and performance. The Fund aims to provide growth potential through a balanced mix of 55% bonds and 45% stocks. It invests primarily in dividend-paying stocks of well-known companies and investment-grade corporate bonds. The Fund has achieved returns similar to stocks but with less risk and volatility. It emphasizes stocks that pay above-average dividends or are expected to increase their dividends, as these have outperformed non-dividend payers while experiencing less volatility. The balanced approach and focus on quality dividends and bonds helps provide simpler exposure to growth assets while reducing risk.
SDGs and the Future of Development Finance: Go Big, or Go HomeQueena Li
The document discusses financing development to achieve the UN Sustainable Development Goals (SDGs). It notes that the SDGs require development finance to "go big" by scaling up from billions to trillions. It distinguishes between "scale investors" like pension funds that need market structures to invest large amounts, and "catalytic investors" like governments and philanthropists that can take more risks. Canada can help by building on existing blended finance initiatives and reforming its development finance institution to take more risks and offer a broader range of instruments as a catalyst.
This document discusses two phenomena that began in the mid-to-late 1990s: 1) A decline in the quality and appreciation of music, attributed to changes in the music industry and technology. 2) A rise in assets under management for alternative asset managers, but a decline in performance. It then discusses trends among investors, including lower fees for managers, more direct investments, growing interest in niche strategies, and decreasing patience with underperforming or largest firms. The document concludes with an update on the author's firm, Alpine, and their focus on unique opportunities and content.
Wealth Building with Savings, Investing & Windfallsmilfamln
This document provides information about building wealth through savings, investments, and handling windfalls. It begins with defining what wealth means, then discusses strategies that wealthy people commonly use like living below their means and paying themselves first. Tips for building wealth include having clear investment objectives, diversifying investments through asset allocation, and taking advantage of tax-advantaged investment practices. Strategies for investing include dollar cost averaging, rebalancing portfolios, and investing for the long term. The document also defines what a windfall is and provides guidance on handling unexpected large sums of money.
The document discusses short interest in small cap stocks and provides evidence that stocks with higher short interest tend to underperform over time. It analyzes performance of Russell 2000 stocks grouped by short interest deciles, finding that deciles with higher short interest showed poorer cumulative returns from 2011-2015. Recently, there was an anomalous period where heavily shorted energy stocks with crushing debt loads surged as oil prices rebounded, providing a rare example of when holding heavily shorted names worked out. However, the document concludes that while possible, it is generally unlikely for investors to outperform by targeting stocks with high short interest.
Exploring New Opportunities and Diversification Strategies in Alternative Investments - Presentation delivered by Cynthia G. Koury, Partner and Senior Vice President, CM Wealth Advisors at the marcus evans Private Wealth Management Summit Fall 2014 in Las Vegas.
The last decade has been a challenge for many investors, especially those investing for the long term and retirement. Given declines in global stock markets, many investors have seen little to no real growth in their portfolios over this period. This Wealth Guide explains why investors’ portfolios may underperform in both bear and bull markets and incur substantial costs in the process. It also details the impact this chronic underperformance can have on achieving long-term financial goals.
For more free wealth management guides on portfolio performance and for expert consultation, visit SolidRockWealth.com.
This article highlights 15 top-performing mutual funds over the past 5 years. It begins by discussing the difficult market environment for funds since 2005, with the average annual return just 2% compared to inflation. However, some funds delivered much better returns. The top-performing fund highlighted is the Yacktman fund, which returned 40% over 5 years compared to just 4,000% for a market index fund. The article then examines the BlackRock Global Allocation fund in more detail as the top global fund. It achieved an average annual return of 7.7% over 15 years by taking advantage of market downturns to buy stocks and bonds at lower prices. The fund aims to limit risk by diversifying across
The Nicola Wealth Strategic Outlook, hosted by President David Sung, featured presentations by John Nicola, Chairman & CEO, and Rob Edel, Chief Investment Officer, Bijal Patel, CFO and Head of Private Capital, and Mark Hannah, Managing Director, Nicola Wealth Real Estate. Our speakers each weighed in on the issues influencing today’s investing environment and how they impact their respective asset classes.
Global Investment Returns Yearbook 2013Credit Suisse
Published: 1/2013
It is now over five years since the beginning of the global financial crisis and there is a sense that, following interruptions from the Eurozone crisis and, more recently, the fiscal cliff debate in the USA, the world economy is finally moving towards a meaningful recovery. In this context, the Credit Suisse Global Investment Returns Yearbook 2013 examines how stocks and bonds might perform in a world that is witnessing a resurgence in investor risk appetite and might soon see a rise in inflation expectations. With their analysis of data spanning 113 years of history across 25 countries, Elroy Dimson, Paul Marsh and Mike Staunton from the London Business School provide important research that helps guide investors as to what they might expect from market behavior in coming years.
With the improving business cycle in mind, Andrew Garthwaite and his team analyze whether inflation is good for equities. Drawing on the Yearbook dataset, they assess what type of inflation we may see in the future, and what equity sectors, industries and regions offer the best inflation exposure.
- Download the Global Investment Returns Yearbook 2013 (PDF): http://bit.ly/1pbjE7U
- Order the print version of the Global Investment Returns Yearbook 2013 http://bit.ly/1dvaRfh
Visit the Credit Suisse Research Institute website: http://bit.ly/18Cxa0p
Socially Responsible Investing - SoJust Skillshare August 2013Robbie Samuels
This document provides an overview of socially responsible investing. It defines key terms like mutual funds, market capitalization, and asset allocation. It discusses strategies for conscious investing like excluding certain industries, supporting environmental and social issues, and shareholder activism. The document recommends diversifying investments according to goals and risk tolerance. It lists resources for researching companies' financials and social performance. The overall message is that investors have an obligation to understand how their decisions impact society and can align investments with personal values.
This document discusses various investment strategies including asset allocation, market timing, and buy and hold approaches. It notes that diversification works well until major market downturns, when most asset classes tend to decline together. The document then discusses how options strategies can be used to generate income, hedge risk, diversify a portfolio, and lock in profits. It provides examples of how put options, covered calls, and selling cash-secured puts work. The document concludes by outlining the two-basket approach used by SMARToption - Basket I invests in equities hedged with long-term put options, while Basket II independently generates income by selling short-term puts and calls. Historical performance data is presented showing how SMART
Wealth advisors LLC pursues a better investment experience for its clients by embracing principles of prudent diversification and avoiding behaviors that often undermine returns, such as market timing, chasing past performance, and overreacting to short-term market movements. The firm recommends low-cost, globally diversified portfolios and advises clients to focus on what they can control - their investment plan, taxes, and expenses - rather than trying to outguess unpredictable markets. By following these disciplined strategies, the firm aims to help clients achieve superior long-term returns.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
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2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
The Universal Account Number (UAN) by EPFO centralizes multiple PF accounts, simplifying management for Indian employees. It streamlines PF transfers, withdrawals, and KYC updates, providing transparency and reducing employer dependency. Despite challenges like digital literacy and internet access, UAN is vital for financial empowerment and efficient provident fund management in today's digital age.
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
Improving the quality and accessibility of job postings is one way to reduce employment barriers for neurodivergent people.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
5. At the highest level, we value assets with this formula:
Cash Flow / Risk = Asset Value
Less Risk = Higher Asset Value
Central Banks’ objective:
Reduce perceived risk in order to push up asset values
which makes consumers feel more free to spend
which drives up economic growth.
DON LANSING (DONL@STEDWARDS.EDU) 5
6. WHAT DRIVES MARKET PRICES?
• Fundamentals Economic Cycle; Corporate Earnings (S&P 500
at $100/share in earnings)
• Investor Sentiment Enthusiasm drives P/E ratios for stocks;
Yield spreads for bonds
• Liquidity Availability of capital; money flow; Fed policy can
influence this (HAS influenced this!)
DON LANSING (DONL@STEDWARDS.EDU) 6
7. WHAT DRIVES MARKET PRICES?
• Fundamentals Economic Cycle; Corporate Earnings (S&P 500
at $100/share in earnings)
• Investor Sentiment Enthusiasm drives P/E ratios for stocks;
Yield spreads for bonds
• Liquidity Availability of capital; money flow; Fed policy can
influence this (HAS influenced this!)
DON LANSING (DONL@STEDWARDS.EDU) 7
9. Part 2: Emotions Drive Markets
DON LANSING (DONL@STEDWARDS.EDU) 9
10. MARKET CYCLES
• Most stocks follow the market
• Markets move in broad cycles driven by a combination of
fundamentals and sentiment
• SECULAR cycles last 15-20 years, typically
• Sub-cycles last 2-3 years, typically
• Secular cycles peak when investor sentiment (good or bad) reaches
a “fever pitch” pushing prices well beyond norms.
• Sub-cycles change more on events/fundamentals – e.g. perceived
economic expansion/recession
DON LANSING (DONL@STEDWARDS.EDU) 10
11. SECULAR MARKET CYCLES
• Secular bull cycle – i.e. 1982-2000 for stocks
• Investment rarely loses money
• Pricing reaches very high levels
• P/E ratios for stocks are a good general barometer
• Secular bear cycle – i.e. 2000-today for stocks
• Investment struggles to deliver real return
• P/E ratios gradually slope downward to under 10
DON LANSING (DONL@STEDWARDS.EDU) 11
18. Part 3: The Fundamentals
DON LANSING (DONL@STEDWARDS.EDU) 18
19. MARKET CYCLES – CAUSES OF INVESTOR ANGST
• Global finance and economics becoming increasingly
intertwined
• Increased systematic risk notion of “contagion”
• Domestic cycle influenced by global cycle, but still distinct
• Europe in recession
• China Slowdown falling commodity demand weakness in
Brazil, Australia, Russia, other Emerging Markets
• These areas have been in a clear bear market
• Are they truly turning the corner?
• U.S. growth sluggish but best of neighborhood
DON LANSING (DONL@STEDWARDS.EDU) 19
21. THE IMPACT OF GLOBAL DEBT
• Living in Reinhart/Rogoff World:
• Research by Reinhart/Rogoff widely sited for concerns about U.S.
debt
• Studied financial situation of 44 countries over two centuries
• Found that debt to GDP >90% was a tipping point
• Led to reduction in growth of -1% for years on end (20+ years)
• Why? High debt limits government’s ability to invest
• Resources go to pay down/support debt
• Interest rates spike as markets demand more compensation
DON LANSING (DONL@STEDWARDS.EDU) 21
22. THE IMPACT OF GLOBAL DEBT
• Is the U.S. different?
• Yes – for now.
• Almost unlimited ability to borrow, and very cheaply!
• Current interest cost is at the same level as 1991
• Dollar as Reserve currency and related Treasury bond market
provide important “buffer” – size of markets without peer
• Debt has been transferred from private to public – lowers net
interest expense in the “system”
• Debt cycle is following a “typical” path of previous bubbles –
reason for optimism
DON LANSING (DONL@STEDWARDS.EDU) 22
28. Corporate Earnings x PE Ratio = Market Prices
BULLS:
•PE Ratios are cheap, especially with interest rates so low.
•The worst has passed and the future is brighter than the past.
BEARS:
•The global economy is buried under the weight of debt
•Deleveraging (reducing the debt) cycle will keep earnings and investor
sentiment down
•Eurozone workouts and China slowdown are big known risks.
•U.S. budget issues and related debt are a big potential risk.
DON LANSING (DONL@STEDWARDS.EDU) 28
29. Corporate Earnings x PE Ratio = Market Prices
BULLS:
•PE Ratios are cheap, especially with interest rates so low.
•The worst has passed and the future is brighter than the past.
BEARS:
•The global economy is buried under the weight of debt
•Deleveraging (reducing the debt) cycle will keep earnings and investor
sentiment down
•Eurozone workouts and China slowdown are big known risks.
•U.S. budget issues and related debt are a big potential risk.
DON LANSING (DONL@STEDWARDS.EDU) 29
31. BUILDING AN INVESTMENT STRATEGY
• Objectives
• Long-term (retirement) vs Short-term (project)
• Personality Profile
• Knowledge
• Maintenance
• Stomach (Ability to Handle Volatility)
DON LANSING (DONL@STEDWARDS.EDU) 31
32. DISCUSSION OF RISK
• What is risk? A result that is different than expected –
investors focus on worse than expected.
• Volatility is the enemy of successful investing (though it also
creates opportunities)
• Deviation is dangerous because it pushes emotional buttons in
individual investors makes them anxious, induces fear, …
• Deviation from account peak – what we call “drawdown” – is a key
focus
• Investors emotionally “own” an asset value
• Thus, the goal is to minimize drawdown and hold on to the bulk of
gains offered
32
34. 2-3 Years Up;
1-2 years Down
DON LANSING (DONL@STEDWARDS.EDU) 34
35. DEALING WITH UNCERTAINTY:
PERMANENT PORTFOLIO
• Established in 1982, in an era of stagnant economic growth and
rampant inflation, Permanent Portfolio seeks to provide a sound
structure and disciplined approach to asset allocation. The Fund
was born in an environment where investors didn't know where to
turn. Regardless of what an investor did, they were losing money.
Harry Browne, one of the founders of the fund stated, "It's easy to
think you know what the future holds, but the future
invariably contradicts our expectations. Over and over again
we are proven wrong when we bet too much on our
expectations. Uncertainty is a fact of life." No one can
accurately predict the future.
DON LANSING (DONL@STEDWARDS.EDU) 35
36. DEALING WITH UNCERTAINTY:
PERMANENT PORTFOLIO
• Solution: Invest in 4 uncorrelated asset classes
• Precious metals, cash, stocks, U.S. Treasury bonds
• Fund (PRPFX) got off to a bad start, losing over -10% in
its second year
• Has since lost money only 3 times in almost 30 years
• Expanded charter to include non-U.S. stocks and real
estate
DON LANSING (DONL@STEDWARDS.EDU) 36
39. DEALING WITH UNCERTAINTY:
LOW VOLATILITY INVESTING
• Another reaction to secular bear market ending in 1982
• Study shows that buying and holding low-volatility stocks
= market return with 2/3 the volatility.
• Calls into question fundamental tenet of investing
research
• One is compensated more for taking more risk
• Recent: S&P creates a low-volatility index SPLV
DON LANSING (DONL@STEDWARDS.EDU) 39
42. DEALING WITH UNCERTAINTY:
SETTING VOLATILITY TARGETS
• Rather than focus on return, focus on measuring and
adjusting portfolio based on market volatility
• Set target volatility – example 15%
• Divided Volatility Target by S&P Volatility
• Result sets % allocated to equities
• As market volatility increases, equity allocation decreases
• Ex: 15% / 20% = ¾ = 75% equity allocation
DON LANSING (DONL@STEDWARDS.EDU) 42
45. DEALING WITH UNCERTAINTY:
PORTFOLIO CONSTRUCTION – COMBINING IDEAS
• Carry a low-volatility core portfolio
• Can be low-volatility stocks and/or bonds
• Bonds can be adjusted for risk target – e.g. HY
• “Allow” allocation to higher performance/volatility pieces
when applicable
• When market trending up – own higher-beta pieces
• Market volatility increases – cut high-beta positions
DON LANSING (DONL@STEDWARDS.EDU) 45
48. Avoid the
bad times.
Keep vol low.
DON LANSING (DONL@STEDWARDS.EDU) 48
49. Part 5: Managing your Strategy
DON LANSING (DONL@STEDWARDS.EDU) 49
50. DOWN/UPSHIFTING A PORTFOLIO
• We can take half-steps in making our portfolio more or less risky
in small steps
• Reduce our risk by adding more yield
• Move from stock index position to
1. High yield stock ETF (DVY/SDY or HDV)
Decreasing Risk
2. Preferred stock ETF (PFF/PGX/PGF)
• Note: mostly financial companies
1. Hybrid yield ETF (PCEF/INKM)
2. High yield bonds (HYG/JNK, VWEHX)
3. Corporate bonds (LQD)
DON LANSING (DONL@STEDWARDS.EDU) 50
51. MANAGING INCOME PORTFOLIOS
• Relative versus Absolute Risk
• Importance of Duration
• +1% move in interest rates = -D% move in bond price
• Managing spreads instead of rates
• Spread = Difference between rate of bond & Treasury rate
• Higher the spread, the more compensation being demanded
• Lower spreads = nearer to end of cycle
DON LANSING (DONL@STEDWARDS.EDU) 51
55. Becoming a successful investor is largely
about learning what triggers emotions that
bring harm to your portfolio; then
developing/embracing a strategy that avoids
the negative triggers.
DON LANSING (DONL@STEDWARDS.EDU) 55
As this is my first presentation to this group, I’m going to wander through a series of slides and topics that provide an overview of how I have come to look at investing. We will begin with a handful of high-level descriptive formulas and work our way down to specific strategies that reflect these rather uncertain times.
For much of this rally from 2009 we have felt like we were having to navigate a veritable quicksand of underlying forces. 2012 brought a rather normal year in retrospect. There was a general positive trend, a typical -10% correction, and, in the end, a successful double-digit return. Despite the markets rather benign year, the myriad fears and concerns out in the world have kept mutual fund and hedge fund managers on the sidelines, leading them to underperform their benchmarks (such as the S&P 500) by the most since 1937. Only 10% of mutual fund managers have beaten their benchmarks over a two-year span – a testimony to how difficult the market environment has been.
So we’re all struggling against the current here. Here’s how one hedge fund manager put it last year.
Let’s begin by looking at some starting points.
We value assets with this formula. Cash flows which come from dividends, expected capital appreciation, corporate earnings, all the money generation goodness in the numerator. We discount that goodness with risk. The market reflects risk everyday through interest rates, in broad strokes, pushing that number up or down as the individual riskiness of the asset dictates. The wonder of finance is that I will raise and lower that risk using different assumptions than you will. It’s the intersection of all those varying assumptions and viewpoints that makes a market. This formula is very important these days because central banks are proactively trying to drive risk down in an effort to pump up asset values. In simple terms, that is all the central banks of the world are trying to do. If they can convince investors that market risk is reduced, money flows into riskier assets, investors make more money, take more chances, and stimulate more growth.
This is a slightly different way to think about markets but with just a reworking of the same idea. Markets are the intersection of these three inputs. We usually expect that fundamentals: corporate earnings, economic growth, etc. are the primary force behind the market. That’s true to a degree, but it’s limited. Liquidity is just the amount of money flowing into or available to stocks. This is where the monetary policy of the Federal Reserve plays a role, which has certainly been nominally trying to prop up stocks. The real money gets made when investor sentiment turns upward and people get excited about stocks. That’s what we really want, and what the Fed has been trying to influence. Excitement causes P/E ratios to expand and the compounding effect of investors paying more per dollar of corporate earnings at the same time that earnings are growing pushes stocks sharply higher.
With corporate earnings at record levels, certainly the fundamental part of the equation is doing its part. The Fed has been supplying the liquidity piece in their effort to juice sentiment by reducing interest rates and perceived risk. These two things should be driving investor sentiment and stocks well higher. And by some measures, notably the VIX volatility measure, investors would seem to be rather content. However, as stocks have been rallying over the past 3.5 years, investors have been pulling money OUT of stocks and pouring that money INTO bonds, despite record low bond yields. Thus, investor sentiment is a far cry from where it could be. And that’s the missing piece of the rally puzzle at this point and the piece that really kicks the market into a higher gear. I’d note that one of the reasons investment folks are pretty excited about this month is a surge of money INTO equity funds for the first time in quite awhile. We don’t know if that’s a new trend. If it is, this rally will have some legs.
There are any number of reasons why investor sentiment remains in the dumps. I’d argue that regardless of what’s going on in the world today, this decline in sentiment is simply a normal course of events; a reaction to an overly enthusiastic bull market period that culminated in the internet and tech stock bubble of the late 1990s. Sentiment went too high then, and it’s likely to overshoot on the downside going forward.
When we look back over decades of stock market history, we find that this slack attitude toward stocks is nothing new. Investors go through these regular cycles of bullishness and bearishness. .These long, secular cycles last for a good while – 15-20 years, typically. During a bullish cycle, a buy and hold strategy wins the day as stocks rarely suffer any notable yearly loss – though they certainly have bad days and months. However, during the bearish secular cycle, markets really swim upstream, struggling to hold on to gains.
The defining characteristic of these secular cycles is investor sentiment; again, emotion is the key component of investing. The fever pitch of the late 1990s marked the latter stage of the most recent secular bull market. We have been living since early 2000 through a secular bear market. Markets will have a few good years, followed by some heart-breaking declines. The net effect is rather little progress. The investor sentiment can be fairly easily seen in what’s called a PE 10 ratio. The PE 10 ratio divides stock prices by a 10-year rolling average of earnings. This smooths out earnings over the regular economic cycle, leaving us with a clearer view of investor behavior/sentiment. This ratio has consistently found its way under 10 at the end of these long secular bear periods. Today, we sit at around 20, roughly half of the ratio at its all-time high in the late 1990s, and about twice where we need to get to in achieving a bottom that coincides with history.
The reason why understanding these secular market cycles is important is that the market acts so differently. in these two environments. During a secular bull market, we cannot go wrong sticking with stocks. 96% of the time we are having decent years with most of those winning years being solidly double-digit. Thus, buy and hold is a decent strategy through secular bull periods. In secular bear markets, however, markets gyrate a whole lot more, sometimes dealing us quite negative returns, other times, quite good returns. The watchword during these times is flexibility and paying attention.
Investors have had a tough time during this rally because of the persistence of sharp declines in the market. This chart is really telling for the secular bull/bear concept. The bars show the annual return of the broad stock market. The dots below show the maximum drop or drawdown in that year. Throughout the 1980s and 1990s secular bull market, the declines experienced during the year were typical 10% or less corrections. There were only a couple of exceptions, both of which felt like major crashes given how benign markets were acting. We enter a secular bear market in 2000 and see what happens – the market becomes a whole lot more volatile, with declines routinely greater than 10%. This choppiness destroys investor confidence and pushing money to the sidelines.
A couple of pictures show these secular market cycles over time. The lines at the bottom show the PE 10 ratio and how it trends up or down to drive the expansion or contraction of stock prices. You can see that we’ve come down a good bit since the peak. Recent stock price action has pushed the ratio back upward, however.
This is Fidelity’s view of same chart, simply showing the periods of flattish returns followed by extended periods of very good returns. Fidelity argues that we are quite near the end of this secular period, so they are trying to get people to hang in there for better times ahead.
Here’s a more detailed look at their view. They are believing that we’ve seen most of the major swings and are in for an extended period of choppy markets as seen on the right side of this chart. This chart shows the average trajectory of bearish market cycles, looking at many countries over multiple decades. They are considering the 2008 market crash as the beginning of this downward sub-cycle. Note that they think we could have as much as 3-4 more years of choppy sideways markets with a nearly 40% trading range. That’s plenty wide to make and lose lots of money!
Another way to examine how far we have left to go in this secular bear market is to look at the average PE ratio contraction. This chart just shows the % change /decline in PE ratios as they contract through a bearish cycle. Compared to the average of past cycles, our current secular bear market is generally tracking the path downward. We are marching pretty close to the average here. However, I’d point out that the starting point of the current secular bear market, in terms of PE ratio, was far higher than normal. Will that mean we fall further than average? The bottom line is that investor sentiment is a serious drag on stock values these days and that is unlikely to markedly improve anytime soon.
So we do not expect a big upward swing in PE ratios to take place during this bearish sentiment phase. Let’s shift gears a little bit and take a look at some of the things causing all that investor angst right now. The big one has been an all-too-fresh memory of 2008. Investors still see contagion everywhere they look. The current rally has been, in large part, a relief rally on the view that the contagion has been lessened or eliminated. If contagion and finance are not as bad as we thought, that leaves us with the underlying economics. Europe’s recession may be modest in depth. China appears to be coming OUT of their shift downward., which could bring recovery to emerging markets ending an 18-month cyclical bear market period for those markets. U.S. growth, while sub-par, is still better than other large “developed” economies.
Here’s a quick look at global growth trends and projections. We see that U.S. growth, while not exciting, is the best among the large developed economies. The “emerging” economies, have seen growth declining. They’ve been injecting lots of stimulus in the hopes of returning to an upward slope . JP Morgan, at least, expects them to succeed. If so, this bodes well for emerging market stocks.
Keeping a lid on growth in the “mature” economies has been a period of global deleveraging. At the highest level, we have a global debt problem that is unwinding. The effects of this elevated debt were captured most notably in a book by professors Reinhart and Rogoff. They looked at the experience of many countries over a long period of time. In general, they found that once the debt exceeds 90% of the nation’s GDP, economic growth really suffers – underperforming by 1%, on average, for many years as government investment is diminished and bond investors become concerned. The western world is wrestling with this problem right now. The U.S. sits with debt in excess of 70% of GDP in debt, still somewhat away from the tipping point here, but uncomfortably close. A good chunk of Europe along with Japan are all beyond this 90% number, which limits their ability to expand in turn limiting global economic growth. With Europe largely acting as one, Germany must send money to Southern Europe to cope with the debt thus limiting one of the world’s top 3 economies.
While some people like to equate the U.S. with Greece or Argentina of the laste 1990s, there are enormous differences that lessen the immediate impacts when compared with those scenarios. The U.S , as the global standard currency, has unique advantages other countries do not. Lack of understanding these advantages leads to erroneous assumptions about the timing of negative events – such as debt-induced higher interest rates, etc. This misunderstanding of the facts of global finance has been one of the primary causes of poor investment performance, it seems to me. Thus, global debt and the resulting deleveraging cycle are a serious hurdle to global economic growth, and one that should pervade for awhile to come. Still, the U.S. is a long way from a crisis brought on by this, if only because the alternatives/competitors are in even worse shape.
The corporate earnings piece of our fundamental input has been very good – with the S&P 500 generating over $100 in per share earnings this year. Corporate earnings are at record highs. But growth is slowing as global economies face myriad headwinds. The margin gains driving early growth in earnings have all been used up leaving revenue gains as the only source of earnings growth. Thus, 2013 looks like a sluggish year for earnings gains.
This slide shows how a bubble in private debt leads to a bubble in public/gov’t debt. The private deleveraging process has obvious implications for private economic investment. The gov’t tries to cover the slack, thus building public debt. Which is in turn worked off as the economy heals, tax revenues rise, and the need for gov’t support diminishes. We are following this path and are in between the light and dark blue phases.
This is what the surge in private debt looked like building up to the financial crisis. You can see how government debt (green line) picked up the slack from the falling private debt (from households and financial companies).
The federal debt is still very high, of course. The chart on the right puts federal spending and income in the context of GDP. Thus, as GDP plunged in 2008, spending as a % spiked upward. We see the gaping deficit caused by a decade of shrinking revenue while spending spiked. As the economy has recovered, spending as a % has been decreasing. With the recent changes in tax policy and further recovery in the economy, we should see further reductions in this income-spending gap. The deficit that fuels the debt has been shrinking and is expected to drop to 4% of GDP over the next couple of years.
I brought this slide forward from last fall as we now know some of the results and can check them against these projections. This slide from PIMCO provides detail of the fairly common assumption among investment folks that the election impact will be minimal on the overall magnitude of the budget actions. We know now that the tax impact was quite similar to what PIMCO at least expected. The spending changes are still yet to come.
Stepping back from all of this we have no shortage of uncertainty. That is keeping our PE ratio/sentiment piece of the equation relatively low despite the Fed’s efforts to make stocks more attractive.. Going forward, the global economy continues to work through a series of big issues. One of the challenges we have as investors is deciphering how much of this is already priced into stocks. None of these issues is new or unknown to the broad investment public.
This month at least investors appear to have diminished their concerns about the bottom two items, feeling that the “tail risk” as we call it has decreased substantially. Chinese economic data has been improving. The fear of a U.S. fiscal cliff has gone away. And markets already embraced the notion that contagion risk from Europe and the possible breakup of the Euro had become a non-issue. I’d say some of those worries still exist – Europe certainly is not out of the woods yet - and will return to the forefront at some point.
When we build an investment strategy we have a short list of questions to ask ourself. It’s really important to understand yourself and be honest about what you can handle with investments. Use this to guide what strategy works best for you. If we can master the emotional part of investing, we have a much greater chance of success. For most people, the emotions are triggered by market and stock volatility. If we can reduce this volatility, we in turn reduce the likelihood of our having an emotional reaction that leads to a poor investment decision. We’re going to survey in the next few slides some investment strategies built around reducing volatility. .
We talk about volatility as equaling risk because it’s that volatility that creates our mental view of gains and losses and drives us to actions and reactions.
Based on studies of individual investors, most of us can identify with not one, but both of these individuals. We buy high, after hearing news reports, friend testimonials, et al. telling us of great riches being made, riches that we are missing out on. It feels “safe” to invest during these times. We dive in headlong not realizing the bulk of the market gain has passed. The market inevitably rolls over, heads sharply downward, and starts to feel dangerous. We eventually get tired of seeing our balance falling month after month and throw in the towel just before or after the bottom. The market comes roaring back upward without us in it. If we can overcome these emotional reactions to the market, primarily through building a portfolio that minimizes the volatility, we have a better chance of succeeding.
So, imagine how those guys would fare in this sort of environment. This is the last secular bear period from the mid-1960s through 1981, A nightmare for investors. A market that wrings out their emotions with the volatility. And back then, almost no tools were available for individual investors to protect their portfolios, and you’re running almost every trade through an expensive broker. There’s not much you can do. As a reaction to that, some folks tried to figure out different ways to invest.
Harry Browne was one of those people. The secular bear market had clearly left scars on him as you can see from his quote in bold. So, he created the Permanent Portfolio – an uncorrelated group of assets that will lessen the volatility and generate decent returns.
This is what Harry did. He got off to a bad start and his timing was poor also. For in 1982 a new secular BULL market got underway and all the volatility and lack of return Harry was trying to protect against went away. Markets got better. And his new fund was built for the bear market, not the bull.
Looking over the past 20 years, however, we see that despite falling way behind during the 1990s bull market, the Permanent Portfolio was immune to the 2000-2002 market crash and suffered relatively little in the 2008 financial crisis. Now, over this 20-year period, the fund has rewarded those who stuck with it. It’s made good on its low-volatility design while delivering solid returns.
In the shorter-term, since the 2009 rally began, the fund has continued to do well, though it’s been flat for the past year.
Also coming out of the 1960s and 70s secular bear market was a study showing that investing in lower volatility stocks actually rewarded investors far more than academic theory would suggest. Academic theory argues that investors should be compensated for taking on greater risk. If taking less risk still delivers equal returns, however, what does that mean? It means it’s a good investment!
The S&P Low Volatility Index underperforms during strong secular bull periods, and it’s not immune to the market forces that caused the 2008 financial crisis crash. Still, for stock investors, this index offers a smoother ride and will approach market performance much of the time.
The index is regularly rebalanced to the sectors that are exhibiting the least amount of volatility. Utilities routinely comprise about 20% of the index. However, we can see that financials became a heavy part of the index only to be whittled down as volatility in that sector increased. Currently, healthcare and consumer staples, along with utilities account for the bulk of the index allocation.
Recent variations on this pursuit of low volatility have been to manage volatility and risk as the primary objective. Another approach to managing volatility which is a bit more sophisticated is to set a volatility target and let the allocation to equities float as volatility in the market rises and falls. If market volatility rises above a deviation of 15%, then you automatically reduce your equity exposure. You can measure this ratio daily-weekly or monthly as you like. And of course, there’s an ETF for that – this one offered by Direxion Funds.
Here’s a pictorial view of how this might work, reducing your equity exposure as market volatility increases.
Finally, returning to our simple approach from last year. I spoke then of simple timing mechanisms to give your portfolio a “tactical” approach, minimizing your exposure to market downsides which allows you to build more wealth over time. This chart shows how that works – going to cash when timing indicators, such as a simple moving average approach, tell you to exit the market.
We can expand on this simple timing approach by combining some of the ideas we’ve covered. We can essentially buy and hold a low-volatility “core” portfolio using some of the possibilities we’ve covered here – stocks and/or bonds. When the market is healthy, in an upswing, with low volatility, we press the pedal down a bit by adding some higher performance positions. As volatility increases and/or our timing indicators flash red, we reduce these higher performance positions. You see that this approach is ALL about reading the market. There really isn’t any stock analysis required. It’s a rather low-maintenance investment approach which can be accomplished by just following a few indicators – e.g. market volatility, simple price movement, moving averages, etc.
Here’s a more visual view of one of the ways we approach this. We have a low-volatility fund for investing in global bonds (PIGLX) along with a high-yield bond fund (VWEHX) as our core positions. You can see these positions generally march upward with the only real pause being the 2008 financial crisis. And we saw before that there were any number of indicators which could help us avoid most of that. We then manage the Emerging Market and Nasdaq 100 positions using our more short-term timing indicators. We have to be more diligent with these positions because they can drop so quickly and sharply – inflicting serious damage on our portfolio; the type of damage we are doing everything to prevent!
Here’s the performance of such a portfolio. You could also buy and hold more defensive market sectors such as healthcare and consumer staples, or a low-volatility ETF – anything that has a volatility profile that’s substantially less than the market. We focus on the Nasdaq 100 and emerging markets as our high-performance sectors. You can also incorporate energy and other more cyclical sectors – really anything that has a good amount of performance to offer and which you can fairly easily time.
And some metrics associated with this approach. We receive less of the return when the market is going up, which we expect, but endure far less drawdown when the market is falling. The net effect is far better returns with half the volatility and a fraction of the drawdowns.
More incremental ways to modify your portfolio during uncertain times – downshifting in steps. There are any number of ways to do this. The list shown here is just one way to reduce risk incrementally.
Though we’ve spent much of today talking about stock market trends and investing, I wanted to say at least a few words about income investing. These days, the Fed has increasingly been trying to push investors to view stocks and similar higher risk investments – e.g. MLPs, utilities, dividend stocks – as a better place to put money than regular bonds. The Fed has made us actively consider the relative risk of being more aggressive . For example, by purchasing high-yield bonds instead of triple-AAA corporate bonds, by purchasing municipal bonds instead of U.S. Treasury bonds. They have tried to decrease the absolute risk of those investments by making money so cheap for corporations and municipalities that the risk of default goes way down. We’ve seen that in the high yield bond area where defaults are almost non-existent, well below historical averages, because the interest payments are so much lower than typical and the market so hungry for refinancing their debt. But as rates start to tick upward, and they must at some point, managing duration becomes the key. Basically, duration is just a quick way to see what our price risk is with the bonds. If the duration is 10, then our bond/bond portfolio/fund will drop by -10% in price for every +1% increase in yield. Yields go from 3% to 4%, we lose -10% in price. If the duration is only 2, then we only lose -2% for that same move in yields. It’s important to pay attention to that when buying bond ETFs, or whatever fixed income instrument you’re buying. Also, you want to understand that spreads tell the tale of risk in the market. If the spreads are at historic lows, as they were in the summer of 2007, it means investors are underpricing risk relative to history.
I think most people would put us in the lower left corner – low inflation that is likely to rise going forward. This has traditionally been a positive period for equities as well as commodities. Bonds should return to providing little more than their coupon.
Shifting back to the big picture of where the market is. I’ll leave you with an optimistic slide from Fidelity. Here, Fidelity outlines some of the positive potential drivers of a higher stock market in the future. Both Fidelity and JP Morgan have been rather bullish this year in spite of all the noise and angst surrounding us. It’s been a good call.
This graphic returns us to our thesis that emotions and our ability to build a strategy that fits well with our emotional makeup is the key to long-term investment success. I find this graphic to be so true. There’s this chasing our tail aspect to the left side of the graphic – the one that depicts the individual investor who’s always seeking the hot trade.
From my experience working with everyone from students who are new to investing to clients of all backgrounds and approaches to very successful investors, this is the key. Find out your investor “personality” and get a strategy that fits.