Weekly Investment News -
Aurum Wealth Management Group
Weekly investment news from Aurum Wealth Management Group.
Every week plenty of data on national real estate is released. Watched by analysts closely are the mortgage applications and monthly changes of the Case-Shiller Home Price index. 'On fire' is the only way to describe the housing data over the past 18 months, registering double digit price gains across regions.
A picture is worth... you know how it goes. But we will just add a few bits of our observances on the graphical displays of data.
After every research shop on Wall Street put out estimates of whether a little bit of taper or a lot of taper would be announced at this week's Fed meeting, it was all for naught. Ben Bernanke & co. surprised everyone by announcing that the LSAP (Large Scale Asset Purchases) would continue as scheduled at $85 billion per month.
Large private equity firms are bringing new products to the masses.
In early August Barron's published "The Next Private-Equity Investors: Mom and Pop" and the Wall Street Journal covered the topic in May with Megafirms Talk about Challenges Catering to Retail Investors.
Cash deserves an allocation within portfolios. Last week we covered why for liquidity management reasons, but its importance extends to opportunity risk management.
We believe that cash is an important asset class within portfolios. The proper cash allocation is driven by two main factors: (1) liquidity management and (2) opportunity risk management.
June was a volatile month and a key reason was real interest rates finally going positive as shown by the 10-year TIP below. It spent the last 18 months below 0% until June 7th.
The goal of any personal investment program should be to maximize real (inflation-adjusted) returns on an after-tax basis, comparable to the necessary and requisite risk to achieve the objectives. Even though tax season is over (as our friends at Skoda Minotti are quite happy about), tax planning for investments is never over. One easy way to improve tax efficiency is with low turnover managers that generate long-term capital gains as opposed to short-term gains taxable at ordinary income rates. Another is using municipal bonds, assuming the asset class is fairly priced on an absolute basis and relative to other fixed income alternatives of similar risk. A third way to increase portfolio tax efficiency is asset location.
The end of Quantitative Easing (QE) is coming one day; the Fed put everyone on notice with four Fed officials discussing the 'taper' of open market security purchases.(i) Many people believe the money printing from the Fed went directly into the stock market and that these dollars are what is propelling the equity markets to new all-time highs. While they are somewhat right in form, they are wrong in substance. The Fed is not buying equities, but it is shrinking the supply of Treasuries and replacing them with cash. Repressing the interest rate curve is what the Fed is intentionally doing, and in so forcing the marginal investor higher than he or she would normally have to venture along the risk curve to earn satisfactory returns.
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- Watching Home Prices with Zillow
- Chart Check-up
- Less Taper Talk, Not Much Action
- Mom & Pop, "Welcome to the Club"
- The Role of Cash - Part 2