● ANTs: Using Alternative and Non-Traditional Investments to Allocate Your Assets in an Uncertain World
By Dr. Bob Froehlich
Excerpt via publisher, John Wiley
There is clearly overwhelming evidence that a large percentage of a portfolio’s performance is determined by the percentage of money that an investor places in stocks, bonds, and alternative and non-traditional assets. Then to a much lesser extent, the performance of a portfolio is affected by the individual’s investment selection within those asset classes. The purpose of this book is to help you decide how much of that important 90 percent portion of your portfolio should be allocated to alternative and nontraditional asset classes.
When most individual investors thought of asset allocation, they simply thought of the big three: stocks, bonds, and cash. The reason was that most individual investors really only had these choices available to them. Not so anymore. Individual investors now have the opportunity to invest just like the big institutional investors by having exposure to alternative and non-traditional asset classes as well.
Analyzing The United States Government… As A Business
If the federal government was a corporation–a very big corporation–how would it stack up? Mary Meeker takes a stab at an answer. Befitting the size of her target, the analysis is hefty in its own right, weighing in at 266 pages. “This report looks at the federal government as if it were a business, with the goal of informing the debate about our nation’s financial situation and outlook,” writes Meeker, a partner at KPCB and former financial analyst at Morgan Stanley, in the newly released “USA Inc.” The report examines the government’s income statement and balance sheet and concludes: “By the standards of any public corporation, USA Inc.’s financials are discouraging.” If you need additional details, this PDF file won’t disappoint. If you prefer a bound copy of the dark details, you can find it here
Q4 GDP Revised Down As Oil Threat Bubbles
Last year’s fourth-quarter rise in GDP wasn’t as strong as initially estimate, the U.S. Bureau of Economic Analysis reports. That’s discouraging for all the usual reasons, along with the fact that the economy needs all the momentum it can muster if there’s an oil-shock coming, courtesy of the turmoil in the Mideast.
Strategic Briefing | 2.25.2011 | Oil & The Economic Outlook
Rising Oil Prices Pose New Threat to U.S. Economy
New York Times/Feb 24
In the last week, oil prices have risen more than 10 percent and even breached $100 a barrel. A sustained $10 increase in oil prices would shave about two-tenths of a percentage point off economic growth, according to Dean Maki, chief United States economist at Barclays Capital. The Federal Reserve had forecast last week that the United States economy would grow by 3.4 to 3.9 percent in 2011, up from 2.9 percent last year.
Calibrating the Macro Effects of Higher Oil Prices: Results from the MA Model
Macroadvisers/Feb 24
Assuming no change in long-term inflation expectations, no monetary policy response, and no financial-market spillovers, the partial effects of the rise in oil prices can be estimated by scaling up or down the following simulation result generated from our model. An increase in oil prices of $10/bbl for one year starting in the first quarter of 2011 would:
•Reduce GDP growth by about 0.3 percentage point over the first half of the year and by 0.2 percentage point over the entire year.
•Headline PCE inflation would be about 0.1 percentage point higher over the year, and the unemployment rate about 0.1 percentage point higher.
Mixed Messages In January Durable Goods Report
January may have been harsh on the labor market and other sectors of the economy, but there’s no sign of a winter chill in today’s durable goods report for last month. New orders for manufactured durable goods surged 2.7% on a seasonally adjusted basis in January, the highest monthly gain since last September. But the robust advance in the top-line number for new orders comes with some messy details.
Jobless Claims Fall As Oil Prices Rise
Today’s weekly update on new jobless claims offers a fresh reason for hope, but the crowd isn’t likely to take the bait. The back and forth in this series in recent months has given rise to false hopes several times in the last few months that job growth is poised for better days. Is it different this time? Last week’s tally of new filings for unemployment benefits dipped to 391,000 on a seasonally adjusted basis, the Labor Department reports. That’s the lowest since the summer of 2008. But just when things are starting to perk up (maybe) for the labor market, it’s all a moot point suddenly, thanks to the upheaval in Libya and the resulting spike in oil prices.
Rebalancing & Fundamental Indexing
The original “fundamental indexing” ETF—RAFI US 1000 ETF (PRF)—recently celebrated its fifth birthday, and there was reason to celebrate. The fund, which was launched in December 2005, posted a tidy premium in its first five years vs. its competitors: the likes of the S&P 500 and Russell 1000. Fundamental indexing, as practiced by Rob Arnott’s benchmarking designs at Research Affiliates, seems to be working.
Inflation Expectations & Rising Oil Prices
The political upheaval in Libya has pushed oil prices to a 28-month high. Whenever crude runs skyward, fears of higher inflation usually follow, and this time is no different.
Strategic Briefing | 2.22.2011 | Libya: Oil & Political Crisis
Oil Rises to Highest Since 2008 as Libya Unrest Stokes Concern
Bloomberg/Feb 21
Oil surged to the highest price in more than two years in London as violence escalated in Libya, stoking concern supplies will be disrupted as turmoil spreads through the Middle East and North Africa… “Libya is producing 1.5 million to 1.6 million barrels a day, so any unrest is concerning,” Andrey Kryuchenkov, an analyst at VTB Capital, said by phone from London. “Until things settle there, prices are underpinned.”
Crude Near 28-Month Highs On Libyan Supply Cuts
Dow Jones Newswires/Feb 22
“Libya is the first major oil exporter to be engulfed by the crisis…it has probably doubled the additional risk premium in oil prices” to around $10/barrel, according to consultancy Capital Economics.
Global Warming & Asset Allocation
If you think climate change is a real and present danger, your asset allocation should reflect that outlook, according to a new study from Mercer, the consulting firm. That’s sure to be a controversial recommendation in some quarters. Anything related to climate change tends to stir debate of one kind or another, and so reviewing the topic as it relates to investing promises no less. Ready or not, it’s time to take a hard look at the implications of climate change for designing and managing portfolios, Mercer explains in “Climate Change Scenarios—Implications For Strategic Asset Allocation”