What to do when your investment adviser resigns – MarketWatch 04-30-13

Salient to Investors:

Mark Hulbert writes:

The Utility Forecaster, whose editor is leaving, ranks first among 108 monitored services for risk-adjusted performance over the last 10 years, second out of 70 monitored services over the last 15 years, with above-average performance in both up and down markets over the last 12 years.

Whether a strategy’s track record continues with a new editor depends on the extent to which the strategy is quantitative and algorithmic – if it is then its future success is not as dependent on who is in charge. If the strategy relies heavily on subjectivity based on experience, then continuance of its success raises significant doubts.

Read the full article at http://www.marketwatch.com/story/does-investment-experience-count-2013-04-30?link=home_carousel

Click here to receive free and immediate email alerts of the latest forecasts.

Treasuries Lag Behind Stocks as El-Erian Says Fed May Act – Bloomberg 04-29-13

Salient to Investors:

Mohamed El-Erian at Pimco said the inherent momentum of the US economy is still weak so the Fed may increase its efforts to support the economy following a meeting tomorrow by changing the narrative away from the Fed taking its foot off the accelerator.

Kei Katayama at Daiwa SB Investments is below weight Treasuries, saying the yield is too low, and people are seeking risk, and the US economy looks OK

Former Fed Governor Kevin Warsh expects the Fed to continue  aggressive easing.

Rick Rieder at BlackRock is investing in securities outside of Treasuries including high-yield bonds and mortgage-backed securities, saying to get any real income you have to take risk, and questions how to get return in an environment where yields are going to stay low.

Read the full article at http://www.bloomberg.com/news/2013-04-30/treasuries-lag-behind-stocks-as-el-erian-says-fed-may-act.html

Click here to receive free and immediate email alerts of the latest forecasts.

JEREMY GRANTHAM: We Are In A Race To Prevent The Collapse Of Civilization – Business Insider 04-29-13

Salient to Investors:

Jeremy Grantham at GMO says:

  • The global economy is reckless in its use of all resources and natural systems and is showing many of the indicators of potential failure that brought down so many civilizations.
  • Civilizations have an average lifespan of around 250 years.
  • Failing civilizations suffered from growing hubris and overconfidence: that growing signs of weakness could be ignored as pessimistic.
  • However, fertility rates have been falling in nearly every major economy. Neither Malthus nor anyone else before 1960 ever thought we would voluntarily decide to have fewer children even as we became richer – they completely missed declining fertility, a potentially very long-term and hence much more critical factor to the survival of our species.
  • All of the innovations, corporate start-ups, and risk taking work to decrease our use of depleting hydrocarbons and therefore to increase our chance of stabilizing our civilization before the cliff edge is reached.
  • China has the money and the incentive to make big moves in renewable energy development, which would potentially give them global dominance in the most important industries of the future and would relieve them of their greatest single worry: energy security.

Read the full article at http://www.businessinsider.com/jeremy-grantham-1q-2013-letter-2013-4

Click here to receive free and immediate email alerts of the latest forecasts.

Tech Stocks Are Cheapest in Seven Years – Bloomberg 04-29-13

Salient to Investors:

Tech, energy and financial stocks are the most inexpensive industries in the S&P 500 with multiples of less than 14 times earnings. US tech stocks, the second-best industry of the past decade, are at 13 times projected earnings, the lowest level versus the S&P 500 in at least 7 years.

Analysts expect earnings at the 70 companies in the S&P 500 IT Index to fall 5.5 percent in Q2 2013 as consumers and government agencies cut spending. 74 percent of 273 S&P 500 companies so far reporting have beat estimates.

In quarters when tech stocks rallied the most or second-most in the S&P 500, the US expanded 3.2 percent, versus 2.4 percent on average since 1989 and 0.8 percent on average when tech stocks trail the S&P 500.

Bulls say tech stocks tend to lead during expansions and are too cheap. Bears cite less corporate and government spending on technology as growth weakens in Europe and China. Bloomberg Industries says Obama’s proposed budget would reduce IT spending by $2.5 billion by 2015.

Walter Todd at Greenwood Capital said tech has been nothing short of terrible and says we need to see the downward revisions abate before we can get sustainable outperformance.

Peter Sorrentino at Huntington Asset Advisors expects the economy to flatline for a while and managers will sit on their budgets until the end of 2013 – there is no catalyst for ramping up production.

James Paulsen at Wells Capital Mgmt said tech stocks are a bargain and predicts a rally as companies buy back shares, despite being nervous about the large-cap tech growth stories, but expects to see much extra spending start before the end of 2013.

Bloomberg Industries and OMB say the US government will spend less on IT in the next 3 years.

The median economist expects GDP to grow 2 percent in 2013 versus 2.5 percent annualized growth in Q1 .

Economists expect Europe to fall 0.3 percent in Q2 2013 versus a 0.5 percent decline in Q1 2013.

Chris Hyzy at US Trust said capital expenditures in corporate America, corporate China, corporate Europe, are what drive the tech profits, and that has been flat.

Read the full article at http://www.bloomberg.com/news/2013-04-28/tech-stocks-cheapest-in-seven-years-as-profit-estimates-decline.html

Click here to receive free and immediate email alerts of the latest forecasts.

U.S. Stocks Rise Amid Home-Sales Data, Stimulus Optimism – Bloomberg 04-29-13

Salient to Investors:

Chad Morganlander at Stifel Nicolaus there is a positive tone to the market in part because of belief that the Fed will continue to press on the gas.

74 percent of the 273 S&P 500 companies so far reporting beat earnings estimates, 55 percent missed sales estimates.

Paul Mangus at Wells Fargo Private Bank said earnings visibility is good and sees indications that earnings momentum will pick up in future quarters.

Read the full article at http://www.bloomberg.com/news/2013-04-29/u-s-stock-index-futures-advance-before-home-sales-report.html

Click here to receive free and immediate email alerts of the latest forecasts.

Fareed Zakaria GPS – CNN 04-28-13

Salient to Investors:

Fareed Zakaria said:

  • The World Bank says that in 1981 nearly half the world’s citizens were poor, while today, less than a fifth lives in poverty – from 2 billion to 1.2 billion people. Chinese poor declined by nearly 680 million people in the last three decades, or 95 percent of the total global decline.
  • In 1981, China accounted for 43 percent of the world’s poor, South Asia for 29 percent and Sub-Saharan Africa for 11 percent.
  • By 2010, China accounted for 13 percent of the world’s poor, South Asia for 42 percent, Sub-Saharan Africa for 34 percent.
  • China has transformed the fortunes of a poor nation within a generation, while the rest of the world has made much slower progress if any.
  • In 1981, 429 million Indians lived in poverty, or 60 percent of the population. By 2012, the percentage had dropped to 33 percent but the total number is still 400 million. The Cato Institute said if Indian reforms had taken place two decades earlier, it would today have 175 million fewer poor. India’s recent drop in economic growth is alarming and will most affect the poor.
  • In sub-Saharan Africa, poverty rates slightly worsened in the 1980s and ’90s and has only recently begun to turn the corner again thanks in large part to faster economic growth.
  • In 1933, the US unemployment rate peaked at 25 percent.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript at http://transcripts.cnn.com/TRANSCRIPTS/1304/28/fzgps.01.html

Reinhart-Rogoff Rebuttal Says UMass Critics Politicized Debt – Bloomberg 04-26-13

Salient to Investors:

Carmen Reinhart and Kenneth Rogoff at Harvard acknowledged on April 17 that they had inadvertently left some data out of their calculations in “Growth in a Time of Debt”, but the error did not change their basic findings that countries with public debt in excess of 90 percent of GDP suffered measurably slower economic growth.

A study by Bradford DeLong at University of California and Lawrence Summers concluded that stimulus could generate so much growth that it would pay for itself.

Paul Krugman has continued to be one of the most vocal critics of fiscal cuts.

Read the full article at http://www.bloomberg.com/news/2013-04-26/reinhart-rogoff-dispute-umass-criticism-of-debt-study-findings.html

Click here to receive free and immediate email alerts of the latest forecasts.

Americans Spend Less on Finance as Doubt Lingers: EcoPulse – Bloomberg 04-26-13

Salient to Investors:

Americans are allocating a smaller share of their spending to investment-related fees since the recession, a sign they are still wary of returning to financial markets.

Stuart Hoffman at PNC Financial Services said people are shying away from stocks since the recession and have not really re-engaged in equities again.

Komal Sri-Kumar at Sri-Kumar Global Strategies said Americans are not budgeting as much for investment activities, suggesting many have not recouped losses from the stock market’s rout and illustrates consumer enthusiasm does not exist right now, particularly for stocks. Sri-Kumar said consumer reluctance to spend on financial services is essentially a time bomb for the future because it cannot just be institutional investors in the equity market.

ICI reports outflows from US-based stock mutual funds of $1.4 billion in February and have been negative for 36 out of 44 months since the recession ended.

Charles Rotblut at AAII says there’s an underlying sense of bearishness and frustration as people are nervous of another recession emanating from the European debt crisis.

Greg McBride at Bankrate says near record-low interest rates have not been enough to push would-be investors back into the stock market, while 76 percent say they are not more inclined to invest because of low rates offered for savings accounts and CDs, unchanged from a year ago despite lower interest rates and higher stocks.

Robert Dye at Comerica Bank said investment-related spending appears to be stabilizing from the artificially high level reached in the market boom that preceded the recession, when the speculative environment in 2006 and 2007 encouraged activities like day trading. Dye said investment spending has not fallen below its 23-year average, showing people are not stuffing money in the mattress.

Health-care expenditures accounted for 16.3 percent of total personal consumption in February, up 2 percent from the 10-year pre-recession average.

Read the full article at http://www.bloomberg.com/news/2013-04-26/americans-spend-less-on-finance-as-suspicion-lingers-ecopulse.html

Click here to receive free and immediate email alerts of the latest forecasts.

Most U.S. Stocks Fall Amid GDP Report, Corporate Earnings – Bloomberg 04-26-13

Salient to Investors:

Terry Sandven likes the risk reward for equities but says it’s a ride the highs, buy the dips market.

Frederic Dickson at D.A. Davidson said investors are tiptoeing in to figure out if it’s too hot or too cold.

The majority of economists expect the Fed will lower its benchmark rate to 0.5 percent from 0.75 percent on May 2.

74 percent of 270 S&P 500 Index companies so far reporting have beaten estimates, and analyst are turning more bullish on corporate earnings, expecting Index earnings gained 1.1 percent in Q1 2013.

George Soros disclosed a stake in JC Penney.

Read the full article at http://www.bloomberg.com/news/2013-04-26/u-s-stock-futures-drop-as-investors-await-gdp-report.html

Click here to receive free and immediate email alerts of the latest forecasts.

Treasuries Gain as U.S. Economic Growth Is Slower Than Forecast – Bloomberg 04-26-13

Salient to Investors:

Douglas Swanson at JPMorgan Chase said Fed tapering is not going to happen too early, and on recent data, that’s a lot less likely to happen in 2013. Swanson said Bernanke has been consistent and more aggressive than the market anticipates.

Dan Greenhaus at BTIG said investors are not convinced there’s any reason to meaningfully sell off Treasuries as growth remains less than desirable.

Read the full article at http://www.bloomberg.com/news/2013-04-26/treasuries-little-changed-before-gdp-data-after-volatility-drops.html

Click here to receive free and immediate email alerts of the latest forecasts.