Articles about Specific Sectors

Do Commodities Belong in Your Allocation?, 2014
For much of the last several years, poor performance from commodities has hurt investors’ portfolios, a result of depressed interest rates, low inflation and slow economic growth. Any diversification value they provided was masked by strong equity-market performance. My analysis shows that only a small allocation to commodities is justified, and advisors can obtain most of the same benefits with real-estate investment trusts (REITs) or individual Treasury inflation-protected bonds (TIPS).

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Is Gluskin's David Rosenberg Right about Utilities?, 2012
They’re not the sexiest property on the Monopoly board, but in today’s market, there’s plenty of evidence mounting that utilities are a great source of income. Gluskin Sheff’s David Rosenberg made the case for utilities in his September 6 commentary. Taking a contrarian view, Rosenberg acknowledged that utilities are universally disliked by Wall Street analysts and have performed poorly relative to other sectors this year. But utilities offer a 4.2% yield – nearly twice that of the market....they deserve a substantial...
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High Yield and Low Risk: Finding the Best Closed-End Funds, 2012

Yield-starved investors have ventured into exotic – and often risky – assets, including hedge funds, non-traded REITs and private placements. But an asset class that has been around since 1893 offers a compelling combination of low risk and high income. A carefully selected portfolio of closed-end funds (CEFs) will yield 8% with less volatility than the S&P 500.

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Why MLPs Belong in Your Portfolio, 2012
One would think that an asset class yielding 7% and carrying less volatility than do equities would be popular with investors. Yet, despite those attributes, master limited partnerships (MLPs) remain unknown or ignored by large numbers of investors. The case for MLPs is compelling, so it’s time for a deep examination of the special properties of this asset class.

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Gassed Up but No Place to Go, 2012
When a great investor points to a vastly underpriced asset, a natural first reaction is to devise the best strategy for buying it. Sometimes, however, the impediments to that strategy prove too great, something anyone will soon discover who listens to Jeremy Grantham’s assertion that “everyone who has a brain should be thinking of how to make money” long-term on natural gas.

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Understanding France’s Credit Rating Downgrade, 2012
Standard and Poor’s downgraded France’s credit rating last week from AAA to AA+. While this downgrade has gotten a lot of press coverage, there are a number of topics surrounding the downgrade that are worth noting.
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The Danger in European Stocks, 2011
European equity prices, depressed by fears of a sovereign debt crisis, are cheap to such a degree that William Bernstein, author of The Intelligent Asset Allocator, called them a true bargain. Income-oriented investors, in particular, may be tempted by 4.2% dividend yields and a market-wide P/E ratio of approximately 11. My analysis, however, contradicts Bernstein’s and shows the underlying risk those investments carry.
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Why High-Yield Bonds Make Sense Today, 2011

None other than Gluskin Sheff’s Dave Rosenberg, the widely followed analyst who was been consistently bearish in the current market cycle, said last week that high-yield (HY) bonds are “a good place to be right now.” Recent price declines have made them attractive in the short term, and their risk-adjusted returns make them attractive to longer-term strategic investors.

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Reexamining Bill Gross’ Decision to Sell Treasury Bond, 2011

Bill Gross made headlines in February by asserting that U.S. Treasury bonds were not providing enough yield to make them worth the risk and reducing his allocation to zero in the PIMCO Total Return Fund (institutional share class PTTRX). The subsequent rally forced him to admit his mistake in August, but by then his fund was trailing 90% of its peers and having its worst year since 1995. I will examine Gross’ February decision in retrospect, to illustrate its tactical and strategic costs and benefits for his shareholders.

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Volatility in Government Bonds, 2010
There was a recent story in the WSJ titled Treasury Market Gets Volatile. The article notes that a widely-followed measure of government bond volatility, the MOVE index from Merrill Lynch, has risen from 75 in August to 109 today.

The MOVE index is simply derived from options prices on bonds. The more expensive the options are, the higher the market expects volatility to be. As such, the rise in the index really does mean that the volatility of Treasury bonds has increased by 45% from August through November.
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A Better Way to Invest in Gold, 2010
When I last wrote about gold one year ago, I said that gold was sufficiently risky that an investor’s best strategy would be to purchase at-the-money call options on GLD (the gold ETF) rather than to buy GLD directly.

At-the-money GLD options have appreciated by 69% since.

I did not go as far as to advocate a pure-option strategy – that would have been a massive, bullish bet on gold; instead, my recommendation for exposure to gold was a combination of a bond ETF and GLD call options.

As I will discuss, that strategy has performed well on an absolute and risk-adjusted basis.
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Why Immediate Annuities Make Sense, 2010
As they approach retirement, baby boomers are increasingly concerned about how best to manage their portfolios during the decumulation phase of their lives. One of the challenges for advisors and investors is understanding what role annuities should play, if any.
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Will High Dividend Stocks Help You Retire Comfortably?, 2010
I came across a very highly commented article on Seeking Alpha today called With The Right Dividend Stocks, How Much Money Would You Really Need to Retire?

The Seeking Alpha article suggests that you can, in fact, draw considerably more than the 4% rule suggests if you invest in dividend stocks. The article seems to be positing that the key is to invest in stocks with high dividend growth rates and that dividend growth is the key. The problem that I have with the analysis is that it seems to be assuming that the dividend growth rates and returns on dividend stocks are, in essence, risk free.
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Using Put/Call Open Interest Ratios to Screen for High-Yield Dividend Stocks, 2010
I just ran across an article that Kapitall has on Seeking Alpha that posits an interesting and, I believe, useful way to screen for dividend paying stocks. The basic idea is to look for high-yield stocks that also have a high level of open interest in call options vs. put options.
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Strategic and Tactical Perspectives on Gold, 2009
Gold is getting a lot of attention from investors, in large part because it has outperformed all major asset classes over the past several years. There are also other, more fundamental reasons why investors are looking towards gold. The looming specter of inflation and a weaker dollar tends to motivate interest in real assets. The long-term perspective on precious metals typically focuses on the low correlation between gold and other asset classes. Indeed, when investors are selling off equities, they often pile into precious metals, as we have seen in recent years.
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Are REITs Now Undervalued?, 2009
The last couple of years have been rough for real estate, but there was a time not too long ago when it seemed that this was a ‘special’ asset class, with real estate investment trusts (REITs) providing valuable diversification benefits and consistently high returns. Do today’s low valuations represent an opportunity to buy? Can investors expect a return to low correlations for REITs with the major equity market indexes?
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Additional Dimensions of Value Investing, 2009
‘Value investing’ seems like a fairly straightforward concept, but many investors have realized that there are nuances to value investing—especially in light of large losses in some value-oriented strategies in 2008-2009. The idea seems simple: buy stocks that are relatively low-priced, as measured by dividend yield, price-to-earnings ratio, or price-to-book. There are studies going back decades that have noted that buying stocks at low P/E ratios tends to yield have average total returns than buying stocks at higher P/E ratios (see Malkiel’s A Random Walk Down Wall Street, for example). Fama and French identify ‘value’ as a statistically robust predictor of higher returns. Rob Arnott has further popularized this idea with ‘fundamental indexing.’
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Emerging Markets Performance in 2008 and Beyond, 2008
In an excellent article, Don Dion recently described a series of reasons why emerging markets have not provided investors with shelter in the current bear market. He dissects the now-dismissed notion that was popular in the early to mid-2000s that emerging markets were ‘de-coupling’ from the U.S. and thus would not be too sensitive to a meltdown in the U.S. and other developed markets. In a nice turn of phrase, he suggests that rather than being de-coupled, emerging markets have become ‘unhinged.’
See full aticle at Seeking Alpha...
Assessment of Sector Outlooks, 2008
At the start of November of 2007, I published an analysis in which I provided outlooks for a series of sector ETFs . The projections were generated using Quantext Portfolio Planner (QPP). That analysis suggested that most major asset classes were due for a substantial reversion to the mean—downwards. In particular, the worst looking asset classes were emerging markets (EEM), developed international markets (EFA), and telecom (IXP).
See full article at Seeking Alpha...

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