Recent economic reports have presented relatively good news, but investors seem unwilling to buy in to optimism. Although recent price declines have pushed stocks into bear market territory, stocks remain a good choice vs. cash for long-term investors. In 10 years, stock earnings and valuations are likely to be higher than today.
During the recent market turbulence, corporate earnings results have continued to be strong, despite fears that slower economic growth could cause corrections. But given the unique developments in this market environment, guarded optimism seems in order because current earnings levels do not seem out of line.
The world's short-term risks are real but appear manageable. The United States, Japan, and Europe will have economic growth capped by the need to repay debt through austerity measures. Emerging market countries generally have better fiscal balances and should not face such austerity measures. And current equity valuations are only pricing in modest...
Based on third-quarter events, the probability of more vulnerable markets has risen. Minor policy mistakes may have more severe impact. Yet, with expectations so low, a "less-bad" economic report, a credible policy initiative from the Obama administration or an important move by the Europeans or Chinese could trigger a meaningful global equity rall...
Politics still seem to trump economics in the United States and Europe, although a renewed U.S. downturn seems avoidable and Greece is likely to move ahead with an orderly default. Now may be the time to consider a modest increase in equity risk positions, particularly for information technology and financials.
Zero economic activity, confidence and effective policymaking are likely to keep market volatility levels elevated as well as pressure risky asset prices in the near future. However, this uncertainty offers the opportunity for investors to rebalance their portfolios by taking advantage of attractive prices for risk assets.
The marginal utility of the Fed's tools is decreasing. And relying on that one agency to turn activity from the greatest recession on record does not seem logical. The rest of Washington needs to notice the economic malaise and work together to resolve some of the economic challenges we face.
The Internal Revenue Service records more than 1 million tax-related cases of identity theft every year, and resolving these cases can be time-consuming. This newsletter identifies typical incidents and explains how to resolve them. It also discusses how intra-family loans can help to transfer wealth.
Among the items on the list are basic tax-free gift opportunities, larger exempt gifts, tax-free transfers to credit shelters and family trusts, IRAs and retirement benefits, charitable contributions from IRAs, low interest rates related to leveraged gifting opportunities, decanting and creative planning with irrevocable trusts, and family C corpor...
Increased tax exemptions, continued availability of valuation discounts, historically low interest rates and depressed asset values have created a perfect storm for families interested in preserving their wealth. However, current opportunities may begin being eliminated as early as January 2012.
The most effective investment strategy may be to employ an approach recognizing that investment markets move in a more cyclical than linear fashion. This approach would include seeking extreme valuations, respecting the trend in the absence of extremes, and increasing the opportunity set by exploring the full-risk spectrum.
The authors have contended since late 2008 that the global deleveraging process is likely to occur in multiple stages and last until 2014 or 2015. Investors need to be aware of this cycle in allocating assets and to focus on capital preservation while resisting the temptation to be swayed by short-term volatility.
Investors often overestimate the cyclical risk involved with high-yield bonds. Buying these bonds today with a 12- to 18-month horizon makes sense. An analysis of prior cycles shows that investors with such a horizon or longer can hold on and eventually see the benefits of declining spreads and current income.
As an emerging asset class, energy-related master limited partnerships offer high and generally growing yields, an identifiable catalyst (significant build-out of the U.S. natural gas distribution infrastructure) to support continued growth, and favorable tax treatment. However, this type of MLP is quite complicated and deserves careful study.
A move from one investment manager to another comes with costs that are not easy to identify but should be considered before making the switch. A transition manager can help in assessing the issues and coordinating the logistics and the execution process.