FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
How Advisors Can Spot A Fraud (The Wall Street Journal)
It is important for advisors to know the warning signs of fraud in a company and not just rely on auditors when considering an investment, writes Brian Fox of Tennessee-based Capital Confirmation in a Wall Street Journal column. These signs include 1. The use of a post office box for a mailing address. Some will try and cover this up by using a P.O. box at UPS or FedEx. 2. A constant gross margin for a company at a time when the gross margins of rival companies is shifting. Fox also says advisors should also check numbers with a third party and should at the end of the day “do their own homework.”
Driver In Paul Walker Crash Was Merrill Lynch Advisor (Investment News)
Over the weekend actor Paul Walker died in a car crash. The driver of the car, Roger W. Rodas, who also died in the crash was a “nearly-two-decade Bank of America Corp. employee who had become one of Merrill Lynch’s most successful brokers in Southern California,” reports Trevor Hunnicutt of Investment News. Rodas and Walker had in fact met at a race track in California, and WealthManagement.com reports that Walker officially became his client in 2007. “[Mr. Rodas] achieved quite a bit,” William Halldin, a Bank of American spokesman told Investment News. “We’re deeply saddened by this news.”
The endowment investment returns of Harvard, Brown, Cornell, Stanford and Yale under-performed the 60% stocks/40% bonds portfolio model, according to a report from Charles A. Skorina & Co. Columbia topped that list of 12 university endowments with a five-year 6.8% annualized return, compared with Harvard’s 1.7% annualized return.
“One common trait among the various endowments is their use of so-called alternative investments like hedge and private equity funds, real estate and more,” writes CNBC’s Lawrence Delevingne. “Those can diversify and help juice returns, but they can come at a high cost in terms of fees paid to third party managers. In short, they don’t always improve returns.”
In period of crisis cross-asset correlations rise and this limits a money managers ability to diversify portfolios. But “2013 has been a year marked by a fall in correlation between asset classes, countries, factors and stocks,” write Nomura’s Sarah McCarthy, Rupal Agarwal and Inigo Fraser Jenkins. “That is a natural response as the nadir of the crisis recedes further into the past and normality returns to markets that can respond to their own ‘fundamentals’ rather than one common risk-on-risk-off dynamic. That means that asset markets can start to diverge.”
ROBERT SHILLER: ‘I Am Most Worried About The Boom In The US Stock Market’ (Reuters/Der Spiegel)
Nobel Prize winner Robert Shiller says stock exchanges of various countries are at high levels. “I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets,” Shiller told Der Spiegel. “That could end badly.”
“I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable,” he added.
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