FINANCIAL ADVISOR INSIGHTS: The Old Relationship Between Market Value And Corporate Cash Flow Is Forever Broken

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

‘The Cult Of Now Is Having A Profound Effect On Financial Markets’ (Advisor Perspectives)

Joseph Paul at Alliance Bernstein says “crisis-battered investors continue to favour the relative certainty of current income over the “maybe” of future capital appreciation”. Investors that want cash now are looking at real estate investment trusts (REITs) and stocks. 

“Investors are assigning a substantially lower value to the cash flows of common stocks because they don’t trust that managements will deploy this cash wisely.” Instead they find more value in REITs for instance because they are expected to distribute their earnings to shareholders, even though  companies have used cash productively. 

“To believe that current conditions will become the status quo is to believe that the historical relationship between market values and corporate cash flows is forever broken. By our reading, the opportunity cost of distrust is pretty steep. The time will come when investors will no longer see the point in paying it.” 

The Debt Ceiling Could Be Good For Fund Investors (The Wall Street Journal)

The debt ceiling debate and its impact on stocks could actually be good for fund investors, according to RiverFront Investment Group’s Michael Jones. In the event that a deal doesn’t materialise he expects stocks to correct eight – 10 per cent. 

“In that event, instead of cutting exposures to stock funds, Mr. Jones says his team is likely to raise allocations to exchange-traded funds focused on more risky assets. “This isn’t like the last debt ceiling debate in the summer of 2011 when stocks wound up falling around 20%,” he observes. “During that period, the European debt crisis was reaching a crescendo.

With less heightened tensions overseas, both in emerging markets and Europe, Mr. Jones views a market dip this time around as a good time to take a closer look at international stock funds. In particular, he favours ETFs for developing economies such as Indonesia, South Korea and Taiwan.”

Ian Bremmer Explains His Top Risk For 2013 (Reuters)

Ian Bremmer thinks political instability in emerging markets especially China, will one of the biggest market risks in 2013. 

Speaking at a Thomson Reuters Newsmaker event Bremmer said: “I think that emerging markets in general, the level of political instability, is underpriced for 2013. …The level of uncertainty around investing in China is many magnitudes greater than it is in the United States, but no one ever says they’re on the sidelines because of uncertainty in China.”

22 Insights From The Most Successful Investors In History (Business Insider)

As we are halfway through January and experts everywhere are telling investors where to put their money, Business Insider highlighted insights from some of the greatest investors of all time. 

One of our favourites is from Warren Buffett. “Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy only when others are fearful.”

30 Big Stocks That Are Way Below Wall Street’s Price Targets (Bespoke Investment Group)


Bespoke Investment Group

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