They say all news gets priced into the stock market. Proponents of the Efficient Market Theory believe that there is “perfect information” in the stock market. Any information or insight that is available is there for all to see therefore negating any possible edge in beating the market. All that being said, no matter how clear your crystal ball is, nobody expected the shocking news we received on Friday.
Bill Gross, the co-founder of Pacific Investment Management (PIMCO) in Newport Beach, quit and packed his bags to join Janus Capital this past Friday. Gross has long been known as the “King of Bonds” and considered to be the nation’s most prominent bond investor. Until last year he was responsible for managing the largest mutual fund in the world – the PIMCO Total Return Bond Fund (PTTRX). That title now goes to the Vanguard Total Stock Market Index but PTTRX is still the world’s largest bond mutual fund. So…what happened here and was the writing on the wall?
As alluded to above PTTRX, and PIMCO in general, has been suffering for quite some time. PIMCO isn’t the only bond fund manager who has struggled with outflows but the sheer volume has opened some eyes. From May to August of 2014 PIMCO has had over $70 billion in assets liquidated and withdrawn. Over the past 72 hours (only 1 trading day including the weekend) the firm has already seen $10 billion bolt for the door! Continue reading →
If you were asked to list two or three of the largest Registered Investment Advisory (RIA) firms in the country which ones would come to mind first? You’d definitely hear many of the names associated with Wall Street and the investment industry. Names like: Merrill Lynch, Charles Schwab, Fidelity and Wells Fargo – while these are certainly large firms none of them are RIA’s. We’ve written on several occasions what an RIA is and how they are driven by their fiduciary responsibility to their clients. A simple online search of RIA’s will show that the largest firm is nearly 40% larger than any its closest competitor. It specializes in assisting individuals in managing their company retirement accounts and has become a behemoth in the investment industry. Financial Engines, Inc. has risen out of relative obscurity and is quickly becoming a household name.
Financial Engines is based out of Sunnyvale, CA, is publicly traded under the ticker symbol FNGN, and currently manages over $90 billion in assets! To put this in perspective the second largest RIA firm is Fisher Investments with assets under management of just over $50 billion. Fisher Investments is a marketing machine and if you have a portfolio over $500,000 in value, you’ve most likely received one of their post card mailings or solicitation emails.
Financial Engines, on the other hand, is a relatively young company and is the creation of some of the brightest minds in the industry that made their mark in the late 1990’s. The founders of the firm are Nobel Prize winning economist William Sharpe, Stanford Law Professor Joseph Grundfest, Attorney Craig Johnson and Jeff Maggioncalda. While the firm went through some minor growing pains, they have certainly found their target market – working with individuals and managing the investments in their company retirement plans. Continue reading →
With interest rates at rock bottom levels many investors have gravitated to dividend yielding stocks over the last several years. Money markets, certificates of deposit and bonds simply are not delivering the rates that investors are looking for or have come to expect. It has left investors looking for other options to generate the income that they are counting on but what are the long-term ramifications? Are investors chasing yields with the risk of digging themselves into a deeper hole? What should investors look for and how can they manage their portfolios effectively?
It doesn’t take much effort to find a laundry list of stocks with very attractive yields. In fact if you simply run a screener on Google it will return a list of nearly 100 stocks that offer a yield of 10% or more! With the stock market continuing its upward trend investors have been moving to these stocks chasing the yields with little attention being paid to the underlying stock and the associated risks.
Before we jump into specific companies and industries let’s make sure we are all on the same page and understand what dividends are. Continue reading →
The expression of “the writing is on the wall” could not be more appropriate as we inch closer to wrapping up 2014. We work and interact with countless people in the financial services industry ranging from those who manage billions in the most sophisticated manners available, all the way to a retired blue collar worker who wants straight forward investor education and service on how to invest.
What each of these two parties have in common is that they don’t trust tomorrow and all of the warnings about a frothy and dangerous investing environment are as documented as they’ve perhaps ever been. Continue reading →