Investment Strategies

Technological advancement and behavior shifts are fueling increased volatility in the capital markets, changing the way many advisors – and clients – view risk. Last year a pension fund manager told Yahoo! Finance that he’d never seen anything like the wild swings we saw last year in the market in his three decades in the business.

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Jeffrey Barefoot, 60, a registered investment advisor in Perrysburg, Ohio, made a decision eight years ago to forego conventional asset allocation. He shifted his client portfolios predominantly to hard assets after he noticed long-term trends favoring gold.

In the process of converting to a precious metals strategy, the veteran CPA and attorney has developed a unique financial planning niche. While, he admits it’s not for everyone, he knows exactly what type of client he wants at Barefoot Wealth Management.

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Gary Shilling wrote The Age of Deleveraging in 2007 and the famed economist and investment guru says we’re not out of the woods yet. This year will see continued pain as governments and individuals pay down debt. Shilling forecasts a moderate global recession in 2012 as consumers cut back on spending, sending business growth lower. He predicts no more than 2% annual growth this year, and continued problems in the housing sector and Eurozone, as well as a Chinese economic slowdown.

From John Mauldin’s e-newsletter:  Read More

Jeffrey Dow Jones, a contributor over at the Seeking Alpha blog, makes an interesting data discovery about the relative uselessness of standard P/E ratios in determining “value” and forecasting future profitability of stock investments. The P/E ratio as a measure of value has long been held to be a core tenet of “investing for the long-run.”  Read More

Because dealing with people’s money is, by nature, an “angst-ridden” occupation, Wade Chessman, CFP®, decided well before 2008 that he would not let anxiety get the upper hand.

“Years ago, I decided to take a more tactical approach to clients’ investments,” said the President of Chessman Wealth Strategies in Dallas. “I find it more stressful to do nothing than to do something.”

In his opinion, “You can’t time the market, but you can adapt to it (because) the downside is not being able to be there when opportunity arises.”  Read More

Last year I wrote about the big disagreement regarding the style classification of fallen financials. Indexes that use Price/Book as the classification variable, like Russell and S&P, view these stocks as value while my classification scheme sees these same stocks as growth because I use Price/Earnings. I defended my position by noting that the book values of these fallen financials are overstated because they have not been fully adjusted for bad debts.

A lot has happened in the past year, including movement toward agreement. Surz Style Pure classifications agreed with Russell and S&P prior to the 2008 meltdown, but have not agreed for the past 3 years as you can see in the following performance report. We disagree primarily because of financials.  Read More

“Everything should be made as simple as possible, but not simpler.” –Albert Einstein

The world’s awash in definitions of risk, but one of the most meaningful and practical is identifying risk as the possibility of falling short of investment objectives.

Recognizing what could go wrong and designing a plan to avoid critical failure is at the heart of goals-based investing, a popular and sensible approach to money management. A simplified risk management strategy for target date funds (TDFs) begins with the identification of objectives. The decisive question: What do you want TDFs to achieve?  Read More

Your classification has mattered a lot in the past 3 yearsFinancial stocks have been hit hard by the current economic crisis, causing most index providers to categorize them as deep value. This is because most providers use Price/Book as the style differentiator. As prices declined book values have not because underwater mortgages remain on the books near their origination value. Book values of distressed banks are grossly overstated. Consequently Price/Book ratios are grossly understated.

By contrast, earnings have fallen even faster than the prices of these companies, so a Price/Earnings classification places these financials well into the growth camp. In other words, style classifications have become debatable. Are financials now cheap (value) or speculative (growth)? What do you think? Here’s a clue: The president of Bank of America recently declared that he runs a growth company.  Read More

When you want something you have never had you will have to do something you have never done. – Anonymous

Introduction

Despite the continuing global financial crisis, the uprisings in the Middle East and the Japanese disaster, global stock markets delivered very good results in the first quarter of 2011. These upheavals test the mettle of investment managers, so you need the proper perspective to evaluate investment performance. The question, “Is performance good?” requires an answer to yet another question: “Relative to what?” As usual, some styles, sectors and countries performed better than others in this first quarter. Have your managers seized upon the better segments and/or selected exceptional securities? Where have they succeeded and failed?  Read More