Monday, October 24, 2005

Look smarter to your clients, prospect or boss

Would you look smarter to your clients, prospects or boss if you could easily track news stories about them? The free Google Alerts service provides “email updates of the latest relevant Google results (web, news, etc.) based on your choice of query or topic,” as Google puts it. For information on how to sign up, go to


Sunday, October 23, 2005

Newsletters that help you communicate better

For those of you who value effective written communications, I'd like to recommend two free e-newsletters:
  1. Ann Wylie’s Revving Up Readership. You can sign up without seeing a sample ( or I’d be glad to forward an entertaining back issue to you. I usually get an idea – and a chuckle – out of this newsletter.
  2. Michael Katz’s E-Newsletter on E-Newsletters. You can access an archive of back issues (


Friday, October 14, 2005

U.S. households not overleveraged, says economist Maury Harris

Maury Harris, chief U.S. economist and managing director, UBS Investment Research, staked out positions on five controversial topics as part of his October 14 presentation to the Boston Security Analysts Society. According to one of his slides:
  1. Households are not yet dangerously overleveraged.
  2. The low personal savings rate should not rebound sharply.
  3. Historically high U.S. reliance on foreign financing currently is not necessarily dangerous.
  4. Each US$10 sustained rise in crude oil prices subtracts only around 0.2% per year from real GDP growth in each of the following two years.
  5. National average home prices are unlikely to decline despite some regional weakness.
Because I have a mortgage broker as a client, I was particularly interested in Maury's positions related to real estate. It's true, he said, that debt repayment and financial obligation ratios are near record highs. However, over time, U.S. households have become more prosperous, so they have a greater ability to pay their debts. As a result, mortgage delinquency rates have not trended up.

As for house prices, they're high when compared with income. However, low interest rates have made them affordable. He believes that housing prices aren't overvalued because:
  1. It has taken time for the tax change affecting primary residences to filter into prices.
  2. The more liquid real estate becomes, the more valuable it becomes.
  3. The American public doesn't expect as much out of financial assets as they used to, so they're putting more money into real estate rather than stocks and bonds.


Monday, October 10, 2005

Small cap rally still has more life, says Lisanti

The small cap stock rally is NOT over, according to the presentation made by Mary Lisanti, president and portfolio manager, AH Lisanti Capital Growth LLC, at the Northeast NAPFA conference on October 8, 2005.

Small caps' outperformance cycles tend to be very, very long and driven by earnings growth, said Lisanti. She estimates that the current cycle will last 10 years, so it's only about halfway completed.

Other positive factors cited by Lisanti include:

o Small caps' return on capital is rising.

o The economy is slowing, but slowing will be uneven, so some small cap companies -- especially small cap growth companies -- will prosper.

o Small caps outperform during periods of inflation because they have pricing power. Also, their cost structures are better than those of large caps. Unlike larger companies, they are less international and have fewer embedded costs and less debt.

o Small cap growth has done much worse than large cap growth, so reversion to mean should help small cap growth even more.

To learn more about Lisanti, go to


Investment-related comments from September 2005

September 21, 2005

What a coincidence! Yesterday I heard Michael Santoli, senior editor and "The Trader" columnist for Barron's say that hedge funds' emphasis on short-term trading and long-short investing is forcing equity research departments to change their focus.

This morning, I found this headline in my email from Citigroup: "The Global Investigator -- Short Circuit: Initiating Our Least Preferred Stocks Portfolio, Global Equity Strategist: Ajay Kapur."

Here's Kapur's rationale for starting this portfolio. "Long-only fund managers are … constrained to utilize on 30%-40% of their stock selection abilities. Why? Most stocks in a cap-weighted index comprise such small weights that list opportunity exists to meaningfully underweight them. As 120% long, 20% short portfolio, i.e., a modest level of short-selling and a 100% market exposure, captures 85% of the benefits of a full market neutral portfolio." By the way, the typos in the quote above are not mine. I think the first "on" should be "only" and "As" should be "A." Also, some word is missing from his third sentence.

Santoli, who spoke to the Boston Security Analysts Society (BSAS), also opined, "I think long-short will be durable."

To learn about future BSAS events, go to

September 14, 2005

"Tips from a Guy with Scars," was one of the topics covered by Charley Ellis at the Sept. 13 meeting of the Boston Security Analysts Society.

He offered the following advice to members of investment committees overseeing investments for foundations, endowments, municipalities and other organizations.

· "Control the agenda at manager meetings." Don't let it turn into a manager sales meeting instead of an investment review meeting.

· Insist on receiving "all materials ahead of time."

· "Outsiders" can help.

· "Skip GNP and investment details - Focus on key decisions."

· Annual policy review with alumni.

· "Strong staff = pure gold."

· "Keep readable minutes and use them." Too few investment committees develop an institutional memory for why they made decisions.

· "Select committee members with great care."

· "Consider capable multi-line managers."

Ellis is the author of Investment Policy, an investment classic, and the founder of Greenwich Associates (