Q3 Investment Committee Briefing

blog_investment_committeeThis is the first in a two-part blog of our Quarterly Investment Committee Briefing.
So far this year, one of the big stories in global markets was the surprise Brexit vote in the third week of June. Conventional wisdom was that this event was a harbinger of future economic weakness and lower markets. Markets fell a bit on the news; however, as so often happens with conventional wisdom, it was quickly cast aside. By the start of Q3, the S&P 500 had almost recovered to its 2016 high levels. In the weeks that followed, the S&P 500 and several other major stock indexes crept higher… until August 15 when they broke through to an all-time record high level. Continue reading

Is the Potential for Tax-Exempt Yield Really Worth the Risk?

This article will be featured in the summer edition of our 360 Insights Quarterly Client Newsletter.
In a recent period of low stock market returns, low interest rates and low economic growth, investors have faced the temptation of trying to find the elusive outperforming investment. Who wouldn’t want to speed into the investment performance fast lane while others are stuck in traffic? Recently, promised outperformance has come from hedge funds, limited partnerships and high-yield bonds. Yet, as history proves again and again, great expected returns also mean taking on great risk. This year, the latest exemplar of this was the municipal bond market.
Would you buy a bond backed simply by the good faith of an entity that was drowning in debt and had poor growth prospects? What if the debt to GDP ratio rose above 70% as revenue dried up and borrowing cost rose?1 And what if this entity did not have the option of defaulting on its debt? Yes, the investment we’re discussing is Puerto Rico Municipal Bonds. Continue reading

Three Investment Income Strategies

Blog_PP_MarchThis blog is from the March issue of Portfolio Perspectives.
With interest rates at all-time lows in the U.S. and negative in other parts of the world, investors are desperately searching for ways to create sustainable income from their investment portfolios. Below are three strategies that can potentially be used for creating income. Continue reading

Window Dressing

Source: “Corporate Bond Market Transaction Costs and Transparency,” Edwards, Harris, Piwowar. The Journal of Finance, Volume 62, Issue 3, June 2007.
Are you using individual bonds to differentiate your portfolio offering for affluent investors? Many advisors do, often citing liability matching and taxes as the main justifications for such a strategy. Although, I don’t argue there may be cases where individual bonds make sense for a client, I believe it is important to consider the tradeoffs of using individual bonds vs. a bond mutual fund before making that decision. Below I’ve summarized the key points to consider when deciding between an individual bond and bond mutual fund strategy.
Continue reading

Oops! Here We Go Again

When will investors (and many financial advisors) learn the potential perils of chasing returns?
Take a look at the chart below showing flows into bond funds from 2009 through 2012. Billions of dollars poured in, year after year.
Equity and Bond Flows 2004 – 2013
Meanwhile, despite five-in-a-row positive years for U.S. equity markets, investors fled stocks until the bond market turned sour in 2013, with a 15.1% decline in 30-Year U.S. Treasuries.
Continue reading