Tactical Allocation as a Response to Uncertainty
White Paper, Thomas Shively, February 2012
One of the themes in our white paper of a year ago, “All Along the Watchtower,” was the difficulty of navigating financial markets in the current environment of heightened policy uncertainty. Both monetary and fiscal policies were pushed to extreme settings in the wake of the financial crisis—zero percent interest rates and massive quantitative easing, combined with trillion-dollar budget deficits. These policies and the uncertainty of how they will ultimately be resolved, along with landmark regulatory changes (e.g., health care and Dodd-Frank) and the uncertainty associated with their implementation or reversal, create an environment in which the economic fundamentals that normally drive financial asset values seem to hardly matter. This is not to say that issues of policy don’t normally qualify as fundamental factors—they do—but their importance today is much greater because of the extreme nature of the current policy settings.
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Dovish Tone Provides No Peace of Mind for Savers.
FOMC Meeting Implications, Thomas Luster and Bradford Godfrey, January 2012
In our last communication in December of 2011, we noted that the 2012 makeup of the Federal Open Market Committee (FOMC or the Committee), as a result of the customary annual rotation of four voting regional Federal Reserve (Fed) presidents, would likely leave it more open to further accommodative policy. In our opinion, the conclusion of the first meeting of the 2012 FOMC has, indeed, produced a decidedly dovish tone (in favor of further monetary stimulus).
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European Disunion
Investment Perspectives, Eric Stein, November 2011
We see two main problems in Europe: debt and competitiveness. When there is a debt problem — whether it’s sovereign or corporate — one can cut the debt and relieve the burden. It’s complicated, and the structure of the eurozone makes it even more complicated, but it’s doable.
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Has the Fed Killed the Case for Floating Rate Loans
White Paper, Scott Page, Craig Russ, and Christopher Remington, August 2011
Almost regardless of the economic likelihoods ahead - growth, "muddle through" or recession - the simple mathematics of this unique asset class say no. Investors should understand why. Here, we examine the numbers behind the risk/return proposition of the loan market today and the implications for investor portfolios.
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Looking at the world through inflation-colored glasses
Economic Market Insight, Thomas Shively, August 2011
What is inflation, and is it now a problem? The answer, we believe, is more nuanced than what you may hear from most economists, including those at the Federal Reserve (the Fed). Economists will offer a variety of statistical measures—the Consumer Price Index (CPI), the Producer Price Index (PPI), consumption deflators and so forth, including or excluding such items as food and energy. These measures all reflect a statistical reality, mostly focused on specific goods and services. Some of these items, especially technology products, are “quality adjusted” to account for product improvements.
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Opportunity Knocking: The long-term case for equity investing
Market Insights, Lew Piantedosi, Yana Barton and Matthew Navins, June 2011
Equity investors have experienced two severe bear markets in the past 10 years, in effect creating a "lost decade" for stocks. First, investors had to deal with the bursting of the technology bubble from 2000 to 2002 followed by a global credit storm that shook the foundation of the financial system from 2007 to 2008.
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Why This “Anti-Bond” Asset Class May Be More Compelling Than Ever
White Paper, Scott Page, Craig Russ, and Christopher Remington, February 2011
Three decades of falling interest rates were a boon for fixed-rate bonds, but today’s investors should consider the looming realities of duration and the impact of potential interest-rate risk on portfolios.
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