FINANCIAL ADVISOR INSIGHTS: Advisors Are Getting Flooded With Questions About Gun Stocks

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Advisors Are Getting Flooded With Questions About Gun Stocks In Aftermath Of Newtown Shooting (The Wall Street Journal)

Gun stocks like Smith & Wesson’s and outdoor goods retailers like Cabela’s that also sell guns, got crushed in the immediate aftermath of the Sandy Hook massacre. Amid the outcry and the Obama administration’s plan to change gun policies, advisors expect clients will want to sell gun stocks but that it might be difficult to clear portfolios. Others however warn that this uproar about guns will die down in six months.

The Four Big Investment Themes Of 2012 (The Reformed Broker)

Investment advisor Joshua Brown says there were four major themes for investors this year. The first was the Apple obsession, but the stock’s recent downward trajectory has left investors in unfamiliar terrain. The second and the biggest winning trade was in homebuilder stocks. The third big theme was investors piling into bond funds.  And the fourth big theme was the inflows out of active funds, and into passive funds like Vanguard.

Wall Street’s Biggest Geniuses Reveal Their Favorite Charts Of 2012 (Business Insider)

As we wrap up 2012, Business Insider’s Matthew Boesler reached out to some of our favorite analysts, economists and traders to get their favorite charts of 2012. Of the 70 charts he curated Boesler said John Stolzfus and Matthew Naidorf’s gold chart was his favorite. Here is their explanation:

“Uncertainty, financial crisis, currency debasement, accommodative monetary policies, and central bank additions to gold reserves undoubtedly wheaten investors’ appetite for the ‘safe haven’ and ‘storehouse of value’ attributes of the metal. We believe, however, that ultimately it was the accessibility and liquidity provided by the ETF structure that facilitated the momentum and scope of gold’s performance. Our chart illustrates the rise of gold eight years before and eight years after the launch of SPDR Gold Shares (GLD).”

gold chart

If You’re Investing In Alcohol, Long Bourbon, Short Beer (Citi)

Per capita beer consumption has been falling and bourbon sales have surged in comparison, according to Citi’s Vivien Azer. Meanwhile, spirits also give alcohol drinkers more “buzz for their buck”.

“While we like the pockets of growth that remain in the U.S. beer category, overall we continue to believe that the U.S. spirits segment offers a more attractive return profile for investors, given the less impressive trends that we expect to continue to see for the U.S. beer category, generally. As such, our favorite name within our alcoholic beverage coverage remains Brown-Forman, where we have an $80 target price, which represents 28% ETR from current levels.”

A Baker’s Dozen – 13 Investment Themes for 2013 (Credit Suisse)

Credit Suisse analysts expect 2013, to be “disappointingly similar to 2012” but identify 13 investment themes for next year. These include healthcare reform, U.S. housing, shale revolution, and, automation.

In housing, homebuilders and building product companies will benefit from the improvement in home sales and prices. Among banks Wells Fargo will likely be the biggest beneficiary, and, mortgage REITs and insurers will also be key winners. The biggest risks to housing are  “elimination of the mortgage interest deduction and/or significantly higher FHA down payment requirements”.

Here’s How Index Funds Can Save Your Retirement (Marketwatch)

Paul Merriman, founder of Merriman LLC writes that moving money out of individual stocks and active funds, into index (passive) funds can help people retire earlier. 

Index funds add money to savings and help avoid stupid decisions. Merriman highlights ten ways in which index funds can help savings, these include reducing turnover since they rarely replace stocks and bonds, saving on taxes, and reduced risk through diversification. 

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Read more from source:“Business Insider”

WAIT: Did The Fed Just Tighten?

screw

“Did The Fed Just Tighten?”

This is the hot new question more and more people are asking.

The reason people are asking that is this: Last week, the Fed announced that it was getting rid of its guidance that it would hold rates low until 2015, and that it would instead aim for low rates until unemployment was around 6.5% or inflation expectations were around 2.5%.

The growing chatter is that we could start seeing these thresholds before 2015, particularly if the economy gets out of the liquidity trap, and returns to trend or above-trend growth, as today’s GDP report suggests is beginning to happen.

That specific question ‘Did the Fed just tighten?’ is asked by BofA/ML’s Chief Investment Strategist Michael Hartnett, in his new note on “Contrarian thoughts” for the year 2012.

He notes:

We find the change in the Fed’s “exit strategy” from its zero interest rate policy from late-2015 to an economic threshold of unemployment below 6.5% (and manageable inflation) to be very interesting. In our view, this brings into question the expectation that high liquidity is here to stay, and is perhaps a reason why gold prices have struggled this year. Also, since the Fed meeting last week, bond fund inflows have reversed. In just four days we’ve seen $2.5bn of outflows, which is on course to be the first weekly outflow in 30 weeks, and the largest outflow in 70 weeks.

This notion also helps explain some of the ongoing weakness in gold.

In a note out yesterday, Deutsche Bank’s Joe LaVorgna talked about the same thing:

As a result, if the pace of economic growth improves over the next year, the unemployment rate decline may accelerate from what has been a relatively linear drop to this point in the cycle. This is a risk to our forecast. In the following chart, we show the behavior of the unemployment rate versus a fitted time trend. The close cluster of data points around the time trend shows the relatively linear drop in the rate; in other words, the rate has declined at a relatively constant rate. If this pattern continues, we should get to a 6.5% unemployment rate by Q3 2014. However, if the economy grows in excess of 2.5% in the latter portion of next year, compared to roughly 2% at present, the unemployment rate is likely to fall a bit more quickly, possibly getting to 6.5% in early 2014.

The fact of the matter is that people are really talking about an exit right now, or at least a possibility, in a way that hasn’t been discussed for awhile. Arguably that fact represents a very modest tightening at the margins.

For more on the Fed’s big announcement, see here >

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Read more from source:“Business Insider”

DAVID ROSENBERG: Here Are 10 Near-Certainties In A Sea Of Uncertainty

David Rosenberg

Europe’s debt crisis continues, the U.S. fiscal situation is up in the air and Japan has entered a technical recession, creating a “sea of uncertainty”.

In an environment with low returns, slow economic growth, and political uncertainty, Gluskin Sheff’s David Rosenberg writes that SIRP – safety and income at a reasonable prices – continues to be his primary investment strategy. 

Despite all the ambiguity, however, some things are almost certain. Here are ten-near certainties that Rosenberg says to invest around [presented verbatim]:

  1. We remain in a classic post bubble ‘fat-tailed’ distribution curve, where the range of possible outcomes is much wider than in past recovery phases. This will remain the case in 2013, and until such time as all the major global debt imbalances have been fully resolved.
  2. Near-6% U.S. output gap; 3%+ global gap. The world is still awash with excess capacity across labour and product markets. As such, disinflation themes will keep trumping inflation themes. This puts preservation not just of capital, but of cash flows, front and centre in terms of core investment strategies.
  3. Fed likely to keep rates near 0% through 2018 (according to our analysis): Interest rate volatility minimized; long-short credit strategies should remain core to any bond strategy.
  4. $1.7 trillion in cash on U.S. corporate balance sheets: Even though yields have plunged in the past year, corporate bonds remain a solid investment given prospective low default risks, especially given still-wide spreads relative to the government sector.
  5. Fed to replace Operation Twist with outright bond buying: Treasury yields to head even lower, making dividend yield and ‘bond proxies’ in the equity market that much more alluring.
  6. Real interest rates to remain negative: This is a very powerful positive thrust for the precious metals complex, and should help establish a firmer floor under the stock market given the implications for “discounted” earnings growth (i.e. a lower cost of capital).
  7. Stephen Harper around until April 2015 (at the least), Barack Obama around until January 2017: Along with diverging monetary policies, the stark political divide is bullish for the Canadian dollar.
  8. Geopolitical tensions — Middle East, China’s political transition, Greek default risks, U.S. fiscal issues, high and rising youth unemployment rates in Europe and Japan-China rift: Exposure to raw materials is a good hedge against these recurring flare-ups.
  9. U.S. energy self-sufficiency: Still a forecast, but this has positive implications for the manufacturing renaissance story.
  10. Malthusian population dynamics: That two billion more people to feed in the next 35 years means we need 70% more food; an agrarian revolution is in its infancy stages.

SEE ALSO: Deutsche Bank: 13 Outlier Events For 2013

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Read more from source:“Business Insider”

David Rosenberg Presents 10 Things In The Economy That Are ‘Nearly-Certain’

David Rosenberg

Europe’s debt crisis continues, the U.S. fiscal situation is up in the air and Japan has entered a technical recession, creating a “sea of uncertainty”.

In an environment with low returns, slow economic growth, and political uncertainty, Gluskin Sheff’s David Rosenberg writes that SIRP – safety and income at a reasonable prices – continues to be his primary investment strategy. 

Despite all the ambiguity, however, some things are almost certain. Here are ten-near certainties that Rosenberg says to invest around [presented verbatim]:

  1. We remain in a classic post bubble ‘fat-tailed’ distribution curve, where the range of possible outcomes is much wider than in past recovery phases. This will remain the case in 2013, and until such time as all the major global debt imbalances have been fully resolved.
  2. Near-6% U.S. output gap; 3%+ global gap. The world is still awash with excess capacity across labour and product markets. As such, disinflation themes will keep trumping inflation themes. This puts preservation not just of capital, but of cash flows, front and centre in terms of core investment strategies.
  3. Fed likely to keep rates near 0% through 2018 (according to our analysis): Interest rate volatility minimized; long-short credit strategies should remain core to any bond strategy.
  4. $1.7 trillion in cash on U.S. corporate balance sheets: Even though yields have plunged in the past year, corporate bonds remain a solid investment given prospective low default risks, especially given still-wide spreads relative to the government sector.
  5. Fed to replace Operation Twist with outright bond buying: Treasury yields to head even lower, making dividend yield and ‘bond proxies’ in the equity market that much more alluring.
  6. Real interest rates to remain negative: This is a very powerful positive thrust for the precious metals complex, and should help establish a firmer floor under the stock market given the implications for “discounted” earnings growth (i.e. a lower cost of capital).
  7. Stephen Harper around until April 2015 (at the least), Barack Obama around until January 2017: Along with diverging monetary policies, the stark political divide is bullish for the Canadian dollar.
  8. Geopolitical tensions — Middle East, China’s political transition, Greek default risks, U.S. fiscal issues, high and rising youth unemployment rates in Europe and Japan-China rift: Exposure to raw materials is a good hedge against these recurring flare-ups.
  9. U.S. energy self-sufficiency: Still a forecast, but this has positive implications for the manufacturing renaissance story.
  10. Malthusian population dynamics: That two billion more people to feed in the next 35 years means we need 70% more food; an agrarian revolution is in its infancy stages.

SEE ALSO: Deutsche Bank: 13 Outlier Events For 2013

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Read more from source:“Business Insider”

Every Investment Fad And Theme, From 1996 To 2012

Another year in the books and I’ve updated my Investing Fads and Themes by Year guide accordingly.  It begins with 1996 because that was my first summer working on The Street and my earliest exposure to the market.

So what was 2012 about?

Well, there four major themes this year for investors.

First and foremost, there was Apple Obsession. During most days throughout the year it was the primary topic of discussion on every website and all over television.  Apple’s market cap swelled above $620 billion this summer, making it the most valuable company of all time this summer (eclipsing the honor once held by Microsoft in 1999).  It has since seen about $150 billion or so lopped off that market cap thanks to two consecutive quarters of missed earnings, a f***ed up map app and encroaching competition from Samsung. But this sell-off from 700 per share down to 500 has only made the stock more talked about, not less, as shareholders who’ve been accustomed to a one-way trip higher are now on very unfamiliar ground.

Also, the single biggest winning trade this year was in the homebuilders and home remodeling stocks.  Housing starts began lifting off and never stopped. In the meantime, every foreclosure that’s been bought from a bank has needed thousands in repair and other aesthetic work done. Can’t rent a home out otherwise, especially one that’s been tenant-less for a long time.  Homebuilding stocks like Toll, Lennar and Pulte Homes led the markets all year – the XHB index ETF is up a whopping 55% year-to-date!  In addition, home improvement plays like Home Depot and Lowes also had a fantastic year, up 60% and 40% respectively.

The Chase for Yield went absolutely bonkers this year, investors poured money into bond funds at a startling rate.  Bond mutual funds have taken in $242 billion this year (through early december), while bond ETFs have had inflows of over $50 billion – that’s on top of the $45 billion haul for fixed income ETFs in 2011. With lackluster yields in treasurys of any maturity, this year investors went for corporates and high yields, REITs and even emerging markets debt. The flows in were endless, each week brought fresh cash into the space.  So long as rates are expected to stay low, this trend looks as though it wants to barrel right on through into 2013.

Finally, can we talk about the Index versus Active debate for a moment? Because like Kate Upton, the Vanguard Group was very clearly one of this year’s biggest winners. An old idea that originated with Jack Bogle’s Vanguard back in 1976 enjoyed a major resurgence as the hyper-correlation of the risk-on, risk-off era saw investors fire their active managers and go straight for index funds with their cash.  Vanguard’s low-cost, plain vanilla mutual and exchange-traded funds took in more than $130 billion in new money this year! Slow to have gotten into ETFs, Vanguard has been able to play serious catch-up thanks to internal expense ratios on products that wholesalers at rival companies refer to as “not-for-profit.” The index king is now the number three ETF manager by assets at $236 billion, nipping at State Street’s heels as we speak. it should be noted that investors have plowed into passive funds even as they’ve yanked an unholy sum of cash from the world of active management.

So those were the big stories of the year that investors and traders bought into. Below is my updated guide to the Investing Fads and Themes by Year, 1996 – 2012.  Enjoy!

Investment Fads By Year

SEE ALSO: America’s Biggest Companies Tell Us Where The World Is Headed

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Read more from source:“Business Insider”

Bank of England offers glum outlook for 2013

Busses pass the Bank of England in the city of LondonLONDON (Reuters) – The economy is likely to remain stagnant in the near term but inflation will probably exceed 2 percent in the next year and also faces further risks from higher food prices, Bank of England policymakers said on Wednesday. After its December 5-6 meeting, the BoE's Monetary Policy Committee decided to keep its main interest rate at a record-low 0.5 percent and its bond purchases at 375 billion pounds as expected, with stubborn inflation trumping worries about a sluggish economy. …

Read more from source:“Yahoo”

Bank of England offers glum outlook for 2013 – minutes

Busses pass the Bank of England in the city of LondonLONDON (Reuters) – Britain's economy is likely to remain stagnant in the near term but inflation will probably exceed 2 percent in the next year and also faces further risks from higher food prices, Bank of England policymakers said on Wednesday. After its December 5-6 meeting, the BoE's Monetary Policy Committee decided to keep its main interest rate at a record-low 0.5 percent and its bond purchases at 375 billion pounds as expected, with stubborn inflation trumping worries about a sluggish economy. …

Read more from source:“Yahoo”