Saturday, May 27, 2006

Price of gas per mile in 2006 = 15 cents vs. 1960's...

In the 1960's the average cost of gas per mile was 15 cents.

The cost in 2006? It's again 15 cents.

This intriguing fact comes from New York Times columnist David Leonhardt's column.


Thursday, May 25, 2006

Value investing from a Mutual Series Fund veteran, David Winters

"Think like an owner, not a renter," advised David Winters in his talk on "Value Investing" to the Boston Security Analysts Society on May 25, 2006. By that he meant that you should be a long-term investor. Today Wall Street is dominated by renters, he added.

Recently, he's mostly finding value outside the U.S. Especially in Asia, where companies:
  • have become more conservative in their capital structure
  • are often trading at a discount to asset value, and
  • are growing
Such Asian companies are attractive relative to the "cigar butts" of value, which only have "one puff" of growth left.

Winters is bucking the trend toward hedge funds. He has set up a mutual fund, the Wintergreen Fund, which has already attracted favorable press. He has, or will, set up some partnerships aimed at endowments and wealthy investors.

You can read a lengthier account of his March talk to the New York Society of Security Analysts.


Wednesday, May 24, 2006

Humor for Fed watchers: Hubbard vs. Bernanke

Economist jokes aren't a dime a dozen. Especially not jokes that touch upon the Federal Reserve.

If you follow the Fed, you should get a laugh out of the short video from Columbia Business School parodying Glenn Hubbard's disappointment at losing out to Ben Bernanke as Fed chair.

Click on "Every Breath You Take" on the Columbia Business School Follies web page.

I found this video on Kim Snider's Kimmunications blog. Kim, thank you for making me laugh!


Monday, May 15, 2006

Grady Cash's Boomer megatrends at the FPA of Massachusetts annual conference

Ten Baby Boomer megatrends were the focus of a presentation by Grady Cash at the Financial Planning Association of Massachusetts annual conference on May 12, 2006.

Some of his trends -- for example, "seniors will live longer" -- are already familiar to the financial community. I perked up when he said that the #1 financial asset of most Baby Boomers upon retirement will be their human capital. In other words, their ability to earn income after "retirement" is more valuable than their more traditional financial assets. That's something I haven't heard everywhere.

Next, Cash asked, "Who will manage the risks of human capital?" For example, the risk that an individual's health might prevent her or him from working. In his opinion, no one's doing a good job of managing these risks.

As more folks recognize the importance of their human capital, Cash foresees the growth of:
  • Post-retirement career coaching
  • Health care management
  • Anti-aging or healthy aging coaching
This will impact financial planners. Cash predicts that, as the life planning movement progresses, financial planners will move into managing health and career issues.

If you're looking for a list of Cash's 10 megatrends, you'll find them in a book that Cash aims to publish this fall.


Life insurance product trends at FPA of Massachusetts annual conference

Life insurance products tend to move from one end of the heavy-thin pendulum to the other, according to Ken Nordstrom, vice president, John Hancock, speaking at the May 12, 2006 annual conference of the Financial Planning Association of Massachusetts conference.

What do "heavy" and "thin" mean in a life insurance context? At one end of the pendulum lie heavily funded life insurance, which serves as a vehicle for asset accumulation. At the other extreme is insurance that's funded only at the level necessary to provide insurance protection.

The early 21st century has seen people despair of using insurance for asset accumulation, said Nordstrom. The emphasis has switched to protection at the thin end of the pendulum.

But don't count on the pendulum staying in one place. It could shift back to the heavy side as money rates rise and clients realize they're foregoing upside potential with their thin policies, said Nordstrom.

During the Q&A, Nordstrom commented on variable annuities. The hottest trend is offering guaranteed withdrawal benefits without annuitizing. In such a case, the investor could, for example, draw out 5% for life with step-ups every three years if the underlying portfolio rises in value.


Massachusetts public employees more vulnerable than most to Social Security's windfall elimination provision and government pension offset

The ins and outs of Social Security's windfall elimination provision and its government pension offset were the focus of a presentation by Kurt Czarnowski, regional communications director for New England, Social Security Administration, at the May 12, 2006 annual conference of the Financial Planning Association of Massachusetts.

These issues are particularly relevant to Massachusetts public employees who do not pay into Social Security. Nationwide, only 2.5% of Social Security are affected by the windfall provision or the government pension offset. For Massachusetts, the percentage rises to about 4.5%, according to Czarnowski.

There's more wiggle room in the windfall provision than the government pension offset, explained Czarnowski.

For more details, go to Windfall Elimination Provision or Government Pension Offset information on the Social Security website.


Sunday, May 14, 2006

Critic's corner: Fixed income commentary

I'm turning a critical eye on investment commentary as I prepare for my June presentation on "The Six Deadly Sins of Investment Commentary, or How to Write What Your Clients Will Read."

Here's the first sentence of a "fixed income outlook" dated April 2006: "Ben Bernanke's recent appointment to lead the Federal Reserve does not seem to have brought major changes in policy."

Does this sentence tempt you to read more?

I doubt it. If you're informed enough to recognize Ben's name, you know that pundits didn't predict big changes from him, nor has he made such changes.

"So what?" might be your reaction if you don't know who Ben is.

When you're competing for your readers' very limited time, remember they may only give you one sentence to pique their interest.

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Saturday, May 13, 2006

How do institutional investment firms use the Internet?

Institutional investment firms are much more open to using the Internet to seek new business than to provide client service.

That's the point of an interesting post on the kasina blog.


What's a "savings account on a disk"?

"How many of you have savings accounts?" asked Jacqueline Metsma of TrueNorth in Pittsfield, Mass.

Among a small group of junior high school students, was a girl who replied, "I have a savings account on a disk."

On a disk? What did she mean?

Jackie cracked the riddle. The girl had a certificate of deposit -- a CD.

I heard this story from Jackie at the annual conference of the Financial Planning Association of Massachusetts yesterday.


Thursday, May 11, 2006

Biggest challenge for NYSE's Marshall Carter

Marshall N. Carter, Chairman, NYSE Group, Inc., addressed the Boston Security Analysts Society (BSAS) on Thursday, May 11. He discussed the changes brought on by the merger of the New York Stock Exchange with Archipelago and the impact of increasingly electronic and global stock trading.

During the Q&A, I asked Carter what's his greatest challenge going forward.

His reply? What happens if revenues from the NYSE's three sources -- listings, trading and market data -- really takes off? The NYSE's customers could complain that those revenues are "coming out of their hides." There are issues of how the NYSE, as a nonprofit organization recently turned into a for-profit organization, can maintain the public's trust.

In his presentation, Carter alluded to his recent testimony before a House Financial Services subcommittee. He's got some interesting stats about the declining number of IPOs listed in the U.S.

In case you're not familiar with Carter's background, here's what his blurb said, "Prior to serving as a director of NYSE, Mr. Carter lectured on leadership and management at the Sloan School of Management at M.I.T. and Harvard’s Kennedy School of Government. At Harvard, from 2001 to 2005, he was a Fellow at the Center for Public Leadership and the Center for Business and Government. From 1992-2001 Mr. Carter was chairman and CEO of the State Street Bank and Trust Co., and its holding company, State Street Corporation.

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Tuesday, May 09, 2006

Are large caps making comeback? Business Week blogger takes on Wall Street Journal reporter

Are large cap stocks making a comeback? That's what an article in the May 8 issue of The Wall Street Journal said.

Aaron Pressman of Business Week disagreed in his May 8 blog post.

Who do you think is correct?


Monday, May 08, 2006

"THE PERFECT MARK How a Massachusetts psychotherapist fell for a Nigerian e-mail scam" by Mitchell Zuckoff

I thought that by now everyone had heard about the Nigerian e-mail scam.

Back in the days when e-mail wasn't so common, I used to receive Nigerian scam letters via snail mail because, as a regular contributor to
Foreign Trade, my address was published in the magazine.

Mitchell Zuckoff tells a cautionary tale in
The New Yorker.


"The Middle Ground: Mid-cap stocks find themselves in an unusual place--the spotlight--after a strong showing in 2005" by Susan B Weiner, CFA

It's hard out here for mid-caps. Despite their strong performance in 2005--when the fund category gained 9.28%, compared with 5.97% for large caps and 6.09% for small, according to Morningstar--there's no denying that mid-cap stocks have yet to command as much respect from advisers and investors as their small- and large-cap peers. "Mid-cap equities represent approximately 20% of the total value of the U.S. stock market but account for less than 15% of assets in U.S. equity mutual funds," says Chris Bowen, a portfolio manager for the Wasatch Heritage Growth Fund. "

Click here to read the rest of my article in Financial Planning magazine.


Monday, May 01, 2006

Good definition of "secular" in Waters magazine interview with Pimco

Can you define the investment meaning of "secular"?

How about "a three-to-five-year trend that is independent of business cycles"?

Read below for a fuller explanation by Mark Kiesel, executive vice president and generalist portfolio manager with Pimco. This is excerpted from a Q&A that appeared in Waters magazine.

Waters: What do you mean by secular?

Kiesel: Secular is more of a three-to-five-year trend that is independent of business cycles. With business cycles, you tend to have recessions, growth spurts and monetary policy, which counteract the business cycle. A secular trend is a longer-term approach. An example is the industrialization of emerging markets, the globalization of the work force and aging of the population. These are secular trends that have significant implications for interest rates, inflation and economic growth. We hopefully do a good job of anticipating these big-picture changes in interest rates, credit trends, volatility, sector rotation and so forth.

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Morningstar: "Some of the best tools on the web"

Imitation is still the highest form of flattery. So, if you're a marketer, don't hesitate to get inspiration from your competitors.

"Some of the best tools on the web," a recent Morningstar article points to some interesting tools on mutual fund websites.

The performance attribution statistics at Fidelity provide nice comparisons of specific Fidelity funds vs. their benchmarks. See the example of the Fidelity Small Cap Retirement Fund.