Opinion

John Wasik

Five questions to get to brass tacks with your money manager

Mar 22, 2013 13:30 UTC

CHICAGO (Reuters) – When interviewing a money manager, most investors want to know investment performance. It is a natural question, but there is much more you need to know beyond absolute returns.

In lieu of focusing exclusively on annual performance, it will be more important to know about a money manager’s record on capital preservation and expenses.

Anyone can do well in a bull market and many have lucky years. But when you are looking for a money manager, you want to find out what capacities he or she has beyond that – what makes them earn the fee? Here are some questions that will help you get beyond the surface:

1. How well do you do against a standard index, not just absolute returns?

A manager’s relative performance, when judged against a specific index, is different than the absolute return, because it lets you know how he or she fared relative to a benchmark. But if you ask this question, the manger can really fudge the numbers, so you have to be sure to press for specifics.

You have to choose an index that matches the style and market capitalization strategy being employed. For instance, if the manger primarily invests in large-company U.S. stocks, you should see how the record compares – after expenses of course – against the S&P 500 Index.

When sluggish economies are good for stocks

Mar 19, 2013 15:20 UTC

CHICAGO, March 19 (Reuters) – A sluggish U.S. economy can
actually give stocks a boost.

According to a recent study from Ned Davis Research, when
the U.S. gross domestic product growth rate was 0.5 percent or
less, the S&P 500 Index rose at a rate of 10.5 percent
per year. Conversely, when the GDP rose above 6 percent, the S&P
500 lost 4.6 percent a year.

Of course, the stock market is not always a reliable
indicator of an economy. It often displays an exaggerated
reaction to most economic news from day to day.

The cost of missing rallies is huge

Mar 15, 2013 12:59 UTC

CHICAGO, March 15 (Reuters) – Will Rogers, the great cowboy
and humorist from Oklahoma, entertained America during the
darkest days of the Great Depression. His investing advice? “The
best way to make money is to buy a stock. Then, when it goes up,
sell it. If it’s not going to go up, don’t buy it.”

Today’s individual investors still seem to be playing this
fool’s game. Despite overwhelming academic evidence to the
contrary, most investors think that they can time the market.

But in reality, they are often just following herd instincts
or their own irrational impulses and getting trampled. While
being out of the market when it is tanking is no sin, not being
invested during a rally carries a steep price.

Why it is worth investing in Britain now

Mar 11, 2013 18:03 UTC

CHICAGO, March 11 (Reuters) – Despite all the evidence to
the contrary, I am bullish on John Bull. Although Britain’s
economy is struggling, it may be poised for a decent long-term
rebound, but not for the usual reasons.

The struggles are evidenced by recent news out of London
that the British Chambers of Commerce lowered their economic
growth forecast for 2013 to 0.6 percent from 1 percent. That is
below the 1.2 percent rate predicted by the Office for Budget
Responsibility, which is considered an official prediction.

I saw this stagnation in action when I visited London and
Cambridge recently, and noticed a lot of empty restaurants.
Service employees told me there was little new work at a time
when immigrants from ailing European Union countries such as
Greece, Italy and Portugal were still trickling in for the few
low-skilled jobs available. One local business owner told me the
economic climate in the city is dour.

U.S.-China manufacturing cost gap is closing

Mar 8, 2013 16:36 UTC

CHICAGO, March 8 (Reuters) – A long-term U.S. manufacturing
rebound is under way, and it will likely endure because the
United States is becoming more competitive with China and other
emerging economies.

According to a recent report by the Boston Consulting Group
titled “Made in America, Again,” the cost advantage China has
over the United States is shrinking fast. “Within five years,
rising Chinese wages, higher U.S. productivity, a weaker dollar,
and other factors will virtually close the cost gap between the
U.S. and China for many goods consumed in North America,” the
report said.

That means jobs that were once outsourced to the People’s
Republic and elsewhere may be coming back to America. Coleman
Co, for instance, is bringing manufacturing of its plastic
coolers back to Wichita, Kansas, from China. Ford Motor Co
is repatriating some 2,000 jobs. Increased productivity through
automation combined with competitive wages is moving many U.S.
companies to “in-source” production. Here are some other key
factors in this trend:

As tech sector goes for an upgrade, it is time to invest

Mar 1, 2013 17:23 UTC

CHICAGO, March 1 (Reuters) – Despite the drama concerning
U.S. agencies potentially dimming lights due to the sequester
saga, global companies are brightening the scenario for
technology purchasing. That could spark a turnaround in the
sluggish sector.

Telecommunication services and information technology are
laggards in the U.S. stock market’s current bull rally, up only
3.6 percent and 2 percent year-to-date, respectively, through
Feb. 22. That compares with a 6.6 percent rise for the broader
S&P 500 Index.

This contrasts with consumer staples and discretionary
items, which are up more than 9 percent and 5.8 percent,
respectively, according to S&P. This reflects widespread
optimism that consumer spending will return.

Nine reasons to smile about the stock market

Feb 25, 2013 21:18 UTC

CHICAGO, Feb 25 (Reuters) – Over the past few months, it has
been much easier to make a case that widespread financial
anxiety is easing, although trying to quantify the upsurge can
be like trying to catch a frog. As soon as you grab for it, it
jumps.

At the beginning of last year, investors were grouchy about
nearly everything and kept putting money into bond funds, while
the stock market slipped. Then numerous economic indicators
started pointing north and sour global financial news became
less prevalent, and the tide turned as money started flowing out
of bonds and into stocks.

As financial anxiety eases, investors feel they can take
more risk and worry less about the worst-case scenario. This is
good news for the overall economic picture in the United States.

Avoid the herd mentality on growth vs. value stocks

Feb 22, 2013 14:17 UTC

CHICAGO, Feb 22 (Reuters) – In the mercurial world of stock
market trends, predicting whether the market is favoring growth
or value styles is an either/or situation.

Sometimes growth stocks, which tend to produce consistently
higher earnings, dominate. Then they fall out of favor, as value
stocks, bought at bargain prices relative to their potential
market value, take the limelight.

The nature of the beast in the growth vs. value tug of war
is that when big money managers conclude that growth stocks may
be getting overpriced then it is time to look for bargains.
Since institutions tend to move in a herd, a switch en masse
happens almost simultaneously and billions flow into
bargain-priced stocks over a period of months. Sometimes the
buying lasts for years.

Rooting out risk in your bond portfolio

Feb 19, 2013 17:33 UTC

CHICAGO (Reuters) – When U.S. Federal Reserve governors start talking about “overheating episodes in credit markets,” as did Jeremy Stein in a February 7 speech in St. Louis, it is time to prick up your ears.

Stein warned that in an attempt to “reach for yield,” investors have been taking on ever-greater risks in vehicles like high-yield corporate “junk” bonds, insurance products and real estate investment trusts. And that means that even though most of the drama in recent weeks has been focused on a bullish stock market – the S&P 500 Index is up nearly 7 percent year-to-date through February 15 – you need to pay even closer attention to bonds.

Of course, yield-hungry bond investors are taking risks because they have been frustrated since 2008, when the Federal Reserve slashed interest rates to practically nothing. The Fed is expected to keep rates low through 2014.

Obama gives green energy funds a jump-start

Feb 15, 2013 16:06 UTC

CHICAGO, Feb 15 (Reuters) – In the wake of yet another
monster storm in the Northeastern U.S., we are once again
reminded of the need to address climate change, which is like a
Grendel that keeps coming out of its cave to ravage us with
increasingly violent weather.

The President outlined new initiatives on climate change in
the State of the Union address on Tuesday. If they gain traction
in Washington, it will give a boost to stocks and
exchange-traded funds that invest in alternative energy and
global warming solutions.

“If Congress won’t act soon to protect future generations, I
will,” President Obama said. “I will direct my Cabinet to come
up with executive actions we can take, now and in the future, to
reduce pollution, prepare our communities for the consequences
of climate change, and speed the transition to more sustainable
sources of energy,”

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