Red Flags Rise on Emerging Stocks

Wednesday, November 6th, 2013

Monday’s Wall Street Journal discussed the intermediate term future for emerging markets.  A growing number of analysts find the recent rebound in emerging markets troubling.  Developing country equities are up 16% since June.  Theeir message: Proceed at your own risk.  Based on a five year forecast, U.S. small cap stocks are still a better growth story than emerging markets.  There are currently three  issues with emerging markets.

1. The global economy has cooled and so has the global export boom that fueled developing-world growth. 

2. Stock gains in developing economies relied heavily on huge inflows of foreign money.  This has decreased and will continue to decrease as monetary policies tighten.  Few countries are ready to shift to domestic financing.

3. Rising interest rates.  Recent signs of U.S. strength could push the Fed to taper its spending in December or the first months of next year.  When domestic yields rise it will create pressures in the emerging markets.  This may be further exacerbated by a strengthening dollar.

To read the complete article from the Wall Street Journal please CLICK HERE.

As Finances Mend, Will Consumers Spend?

Wednesday, July 31st, 2013

The Fed recently released first quarter data on household finances.  Stronger balance sheets reflect improved real estate prices, rising stock prices, and continued higher rates of household saving.  Household finances still lack the strength they exhibited in the early 1990s, but they have improved enough to offer a firm basis for future consumer spending and, consequently, a durable, if still sluggish, general economic recovery. 

The level of household assets to liabilities is better today than any time since 2001.  If recent trends continue, the ratio, and what it implies about financial health, will take only one or two years more to regain the level it commanded before the American consumer yielded to the siren song of excessive debt. 

To read more on this article from Lord Abbett, please CLICK HERE.

The Talk You Didn’t Have With Your Parents Could Cost You

Monday, June 10th, 2013

If you haven’t had a conversation with your parents about handling their financial affairs after they die, this article is required reading.  Finances tend to be one of the trickiest topics because people do have traditional ideas about what you should and shouldn’t talk about.  Before you broach the topic, adult children should think about the sort of information they are seeking.  Adult children might also ask to tag along on a visit to their parents’ lawyer or financial advisor.

One common tool is a  revocable trust.  This is a tool often used to avoid probate and allow assets to immediately transfer to beneficiaries.  For the trust to work, all assets need to be retitled to the trust.  Upon death, the named trustee will go about distributing assets according to the instructions in the document.   

Everyone’s situation is different and its important to speak to an attorney or financial advisor to make this transition period as easy as possible.  To read more on this topic and one woman’s tale please CLICK HERE.

New Normal … Morphing

Monday, June 3rd, 2013

PIMCO’s investment professionals gatherd for three days to discuss the three-to-five year outlook for the global economy and markets.  Needless to say the role and actions of central banks across the globe was a recurring theme over the ”Secular Forum.”  Specifically, that in the process of buying time for economies to heal, they have inserted a disconnect between market prices and underlying economic and financial fundamentals. 

Despite their efforts, central banks are still unable to deliver sufficently robust growth and jobs to Main Street.  But they have been investors’ best friends.  If growth fails to materialize over time, reality will snatch back the returns from investors in the period ahead.  The underlying questions is how and when would improved funadmentals validate artificial prices in a globally consistent and sustainable fashion. 

To read more about PIMCO’s recent Secular Forum please CLICK HERE.