Investing
Good Start To 2013 As Domestic Stocks Earn 11% In First Quarter Performance
Monday, April 08, 2013 15:12

Tags: international equities | stocks | style classification | US investing

2013 stock markets started like 2012 stock markets – with a bang. U.S. stock markets kicked off 2013 with a very good 10.7% return. Also like 2012’s first quarter, foreign markets didn’t fare as well, earning only 3.5%. If we merely hold onto these gains for the remainder of the year we’ll do fine.

 

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In the following I examine the details of what has been working in global stocks, providing quick insights into market segments that have succeeded and failed.
 
U.S. Stocks
 
Smaller value stocks led the way in the quarter, earning more than 13%. By contrast, large core companies earned only 7.5% and large value earned 9.5%. Other than these extremes, style returns clustered around 12%. This has been one of those unusual periods where the “stuff in the middle” (core) has not performed in line with the “stuff on the ends.” I use Surz Style Pure® classification throughout this commentary.
 
 
 
On the sector front, health care and consumer staple stocks fared best, earning 15% and 14% respectively. By contrast, materials earned only 1%, and infotech gained only 6%.
 
 
 
Foreign Stocks
 
Looking outside the United States, foreign markets earned 3.5%, lagging both the U.S. stock market’s 10.7% return and EAFE’s 5.3% return. Japan was the big story, earning 12.8% in $U.S. The return in Japanese yen was an even more impressive 23%. The Japanese stock market soared in the quarter as the yen was weakening against the dollar. By contrast, emerging markets suffered a setback, losing 2%.
 
 
On the style front, core surprised, as it did in the United States, but core led rather than lagged.
 

For more details please visit http://www.ppca-inc.com/Commentaries/20130407-1Q13-Commentary.pdf.

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The SEC "Likes" Facebook; Agency Says Public Companies Can Make Disclosures Via Social Media, As Long As They First Disclose Which Social Sites They Will Use
Tuesday, April 02, 2013 17:00

For anyone thinking this whole social media thing wouldn’t last, the Securities and Exchange Commission today issued some surprising news: public companies can disclose material information on social media sites as long as they first publicly declare which social sites they will use.

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The SEC released the results of an investigation of the CEO of Netflix, declining to file any charges against him for disclosing material nonpublic information about Netflix on his personal Facebook page last year. The agency basically says that because social media is so new, Netflix CEO Reed Hastings did not have enough guidance to punish him. But it set the record straight on how it wants public entities to use social media to disclose material information.

 

The embrace of social media by the SEC in the publc dislcosure process represents a major event in communications, a major policy change. The government is recognizing and legitimizing the new communication medium.

 

For financial advisors the change has no immediate impact, although you may want to start following your favorite companies and mutual funds if they "favorite" a particular social medium, like Faceboook or Twitter, for making public discloures about company news. 

 

Longer term, my guess is RIAs might be able to satisfy the annual brochure disclosure requirement using social media.

 

In concluding its report on the investigation, the SEC said:

"There has been a rapid proliferation of social media channels for corporate communication since the issuance of the Commission’s 2008 Guidance. An increasing number of public companies are using social media to communicate with their shareholders and the investing public. We appreciate the value and prevalence of social media channels in contemporary market communications, and the Commission supports companies seeking new ways to communicate and engage with shareholders and the market. This Report is not aimed at inhibiting corporate communication through evolving social media channels. To the contrary, we seek to remind issuers that disclosures to persons enumerated in Regulation FD, even if made through evolving social media channels, must still be analyzed for compliance with Regulation FD. Moreover, we emphasize that the Commission’s 2008 Guidance, though largely focused on the use of web sites, is equally applicable to current and evolving social media channels of corporate communication. The 2008 Guidance explained that issuers must take steps sufficient to alert investors and the market to the channels it will use for the dissemination of material, nonpublic information. We believe that adherence to this guidance will help, with minimal burden, to assure compliance with Regulation FD and the fair and efficient operation of the market."
 

 

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Q1 2013’s Great Performance Inspires Warnings From Financial Press; Where Are The Bulls?
Monday, April 01, 2013 15:51

Perusing the consumer press after last Thursday’s close of 1Q2013, skepticism about the prospects for the market abounded.

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To be sure, it was a record-smashing quarter. “Stocks closed out the first quarter on a high note with the S&P 500 piercing through levels last seen in 2007 to end at a record high near 1,570 and the Dow logging its strongest quarter in 15 years,” CNBC reported, in the only story I could find that did not advise caution and simply reported the quarterly numbers without prognostication.


All of the other sites I read that reported on the outstanding quarterly results carried warnings of a looming correction. For example, MarketWatch’s subheadline on its coverage: “After a month of teasing investors, the S&P 500 closed at a new record high on Thursday. Time to take the money and run?”
 

The LA Times, in its coverage, similarly asked “how long might the rally last? Some market experts caution the rally may slow in the next three months, and stocks could fall 5% to 10%, they say.”
 

Even Reuters, which is relied on for reporting hard news straight, was skeptical with its headline, “Wall Street Week Ahead: Pullback possible after S&P's milestone.”
 

None of the major news outlets I found pointed out the possibility that this rally might actually be the beginning of a new secular bull market. Maybe it’s a bullish sign that sentiment is so negative in the consumer press, but none of the major new outlets suggested that the market could be on the verge of a new bull leg.

 

(Shameless plug: Economist Fritz Meyer recently made the case that stock investors could experience the benefits of earnings-multiple expansion propelling a new secular bull market, which Advisor Products explored in a story for advisor clients in newsletters and websites. Fritz Meyer’s next webinar is coming up next week and you can register for it now. )

 

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Investment Diamond Exchange Launches, Claiming To Offer A New Way To Invest In Diamonds
Wednesday, March 27, 2013 13:19

Tags: alternative investments | asset allocation | commodities | diversification | gold

For years, investing in natural diamonds was inaccessible to nearly all individual investors. The technical expertise needed as well as the historic lack of transparency in the diamond industry were all major deterrents for individuals attempting to diversify their portfolios with investment grade diamonds. But things have changed, says the Investment Diamond Exchange (IDX), which announced the launch of its unique trading platform which allows investors to buy, take physical delivery, and track real-time prices of investment grade diamonds.

 

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"For years, the diamond market was monopolized by DeBeers," says press release from IDX. "However, that all changed in 2001, when DeBeers was privatized. By 2004, the DeBeers diamond stockpile was depleted, allowing diamond prices to trade on supply and demand, just like any other commodity.”

 

 

Chris Duffield, co-founder of Investment Diamond Exchange says investors never had the ability to invest in diamonds without paying the retail mark-up, but IDx's trading platform offers price transparency and liquidity. "Our investors will be able to take physical delivery of GIA certified investment diamonds, track the value of their position, and effortlessly liquidate their diamonds whenever they desire,” Duffield says in the release.

 

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Financial Markets Haven’t Freaked Out Over Cyprus, But That Doesn’t Mean They Won't
Monday, March 18, 2013 15:30

Financial markets were stable Monday, not really panicking over reports over the weekend that international authorities will force losses on depositors in Cyprus’s banks.

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The modest declines in financial markets Monday following the Cyrpus news are a sign, says Neil Irwin in today’s Washington Post, “that global investors are betting that the losses being forced upon Cypriot bank deposits will be a one-off situation, and not form a precedent for future aid to banks in Greece, Spain, Portugal and beyond.” However, Irwin says that initial reaction may be proven very wrong, recalling an earlier chapter in Eurozone’s financial crisis that sent the bonds of Ireland, Portugal and Spain into a tailspin.
 

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