Tuesday, April 25, 2006

"Fund companies based overseas are quietly opening their doors to US "

U.S. investors are discovering socially responsible funds offered by non-U.S. firms.

That's the scoop according to
"How to invest in foreign firms that do good: Fund companies based overseas are quietly opening their doors to US investors seeking ethical companies," an article by G. Jeffrey MacDonald in the Christian Science Monitor.

Folks are actually investing in European funds that aren't registered in the U.S. It isn't very convenient, as MacDonald points out. But a very determined investor can succeed.

On the other hand, there's the U.S.-registered Domini European Social Equity Fund. It's less than a year old, but Domini has a good name in the U.S. Speaking of Domini, if you're in Boston, you might want to hear her speak at the Boston Security Analysts Society in May.

Another option: wait for the U.S.-registered SRI fund that Prince Albert of Monaco will launch in September, according to this article.


Monday, April 24, 2006

"Options for enhancing returns" by Bud Haslett of Write Capital Management

One of the most exciting moments of his life was when the Chicago Board Options Exchange introduced its S&P 500 BuyWrite Index (BXM) on April 11, 2002.

That was according to Bud Haslett of Write Capital Management, when he addressed the Boston Security Analysts Society on "Options for Enhancing Returns" on April 24, 2006.

A covered call strategy using the BXM would have produced returns similar to the S&P 500 with one-third less risk (as measured by standard deviation) over the period June 1, 1988 to December 30, 2005, said Haslett. Of course, this is a good time to remember that "past performance is not a guarantee of future returns."

Haslett emphasized that there are pros and cons to every investment strategy using options. Even a so-called "no-cash collar," where you'd receive $1 for writing a call and pay $1 for a put isn't without costs, he said. In that case you're sacrificing upside return potential on the stock.

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Monday, April 17, 2006

CFA candidate uses blog for job hunting

Here's an interesting example of a CFA candidate using a blog for job hunting.


Wednesday, April 12, 2006

"Rethinking Risk Tolerance" by Michael Kitces

Do you think that your client's risk tolerance is the only thing you need to know about your client's relationship with risk?

Think again, says Michael Kitces in "Rethinking Risk Tolerance," Financial Planning (March 2006). There's a big difference between your client's risk tolerance and his or her risk capacity. Act carefully when tolerance and capacity point you in opposite directions.

Kitches advises combining a risk tolerance questionnaire with a maximum-decline approach.


Tuesday, April 04, 2006

Advice for your quarterly commentary: Don't wait for index returns to be published

Are you tired of holding your quarterly investment commentary or client letter until those darned official index returns are published?

Jump the gun! Write and send your letter before the official numbers are published, if timeliness is a big concern for you.
For an example of this, visit www.BrintonEaton.com and click on the first quarter 2006 entry under "Our News Room>Quarterly Overviews."

Pay attention to Brinton Eaton's footnote. It says "
In the interest of timeliness and ease of understanding, we have replaced the detailed table of 22 market benchmark indexes with a narrative overview. (The benchmark index providers had begun making their data available later than in the past, and this was causing us to delay release of your quarterly package. If you would like any of this detailed data, please give us a call, and we will provide it to you as soon as it becomes available.) "

The index numbers you pull off a computer the day after quarter-end are often subject to revision. They may even be revised after they're declared "official." If you put them in your investment commentary, they'll hold you hostage.

When I worked full-time producing investment commentary and other publications for a large investment management firm, we drafted our commentary before quarter-end. If nothing dramatic happened at the end of the quarter, we could beat the rest of the world in publishing our commentary. That was especially true if we didn't use any specific index returns.

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Monday, April 03, 2006

Ed Haldeman: Putnam is not up for sale

What are your thoughts about the assertion that you're cleaning up Putnam for sale to another asset management company?

That's the question I asked Ed Haldeman of Putnam Investments during the Q&A portion of his presentation today to the Boston Security Analysts Society.

We're cleaning up Putnam for us, replied Haldeman, adding that the firm has worked hard to broaden employees' ownership of the firm. Stock is given to employees at a 30% discount to the appraised value.

"I wish every employee at Putnam could own stock," said Haldeman. But the restrictions of private equity prevent that. Putnam is 15%-owned by employees, the remainder is owned by Marsh & McLennan (MMC).

Haldeman said that:
  • MMC is a very satisfied owner
  • The relationship of Putnam and its management with MMC is very positive
  • There is geographic separation between Putnam in Boston and MMC senior management in New York City
However, Haldeman also said, "My responsibility is to make sure Putnam is strong irrespective of ownership." He added that Putnam is in a strong financial position with a strong management team.

The main points of Haldeman's formal presentation focused on how the firm has managed change during his roughly two years on the job. That included:
  1. Create a vision or mission: "What we do is take care of other people's money" instead of "we sell mutual funds"
  2. Create a culture
  3. Create an agenda: "Manage money for clients in a way that's consistent, dependable and superior"
  4. Spend time outside my office
  5. Get a few quick wins

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Saturday, April 01, 2006

New York Times picks up Bridgewater Associates "repricing of American assets" theme

Yesterday I wrote about the "repricing of American assets" theme as reported in The Wall Street Journal. Today the same theme popped up in The New York Times, but displaying different data. Both articles quote Bob Prince of Bridgewater Associates.

"China and U.S. Are World's Growth Engines and Its Market Laggards," blares the headline on Floyd Norris' "Off the Charts" column.

This article examines global stock market performance since Sept. 30, 2002. "Searching stock markets around the world, there appear to be only four that have performed worse -- when measured in dollars -- than the American market over that period. They are the markets in Botswana, Malaysia, Slovenia and China, with the latter being the only market to show a decline."

Why two growth engines like China and the U.S. lagged?

According to Norris, China has lagged because of its poor investor protection and strong Chinese companies listing on exchanges outside China.

As for the U.S., our trade deficit reflects the fact that companies overseas have benefited from our economic growth.

Here's what Bridgewater's Prince thinks, according to Norris. "Bob Prince of Bridgewater Associates, a money management firm, argues that a repricing of American assets is needed to continue drawing in foreign capital. He notes that the difference between American interest rates and those in Europe and Asia has been growing for more than a year."

"If that continues, it will mean that American companies have to pay more for capital — either equity or debt — than overseas competitors. That will make it more difficult for them to compete. Mr. Prince argues the trend will continue until American growth slows enough — or the dollar falls enough — to begin to cut the trade deficit and thus reduce the American need for investment from overseas."

Norris ends his article with the conclusion that worldwide stock market strength means that "even lagging areas of the world are going to start growing."