FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
The Single Biggest Opportunity In U.S. Investing Right Now (Advisor Perspectives)
Michael Porter, a professor at Harvard Business School tells John Heins, editor of Value Investor Insight, that energy in the U.S. is a secular trend that investors should pay attention to. “In the U.S. economy, the single biggest opportunity that will have ripple effects across many industries is the new energy situation,” he said. “This is certainly not a secret and has already had significant impact on oil and gas producing regions and on the railroads and pipelines that transport all the new production.”
“The next-order effects, which are just beginning, will be on industries where oil and gas are important feedstocks or inputs, such as in chemicals and plastics where U.S. production now has a competitive advantage where it has had a disadvantage. Further down the line, other energy-intensive industries and companies will benefit.”
Jeff Kleintop Reveals His Best Investment Idea For The Next Decade (Business Insider)
When asked for his top investment idea for the next decade, Jeff Kleintop, chief market strategist at LPL Financial, told Business Insider that he would pick the S&P 500. “I hate to be unimaginative here, but 10 years is a long time to hold a very specific investment. Sure the energy renaissance has a long time horizon, but what will it look like in 3 years much less 10? Who can say? I’d say the S&P 500. I have a chart below that is my favourite chart of all time. I created it over a decade ago and it hasn’t failed me yet. It simply shows the trailing PE and the next 10 years price return for the S&P 500. …Anyway, right now it shows the S&P 500 will generate about an 8% price return on average over the next 10 years. Add a 2% dividend and you get 10%. A 10% annualized total return is not a bad deal compared to bonds, commodities, or cash for the next 10 years. I’ll take it.”
How Advisors Can Help Wealthy Clients That Have Just Sold Their Business (The Wall Street Journal)
Greg Curtis, chairman of Pittsburgh-based Greycourt, writes that his firm manages assets of clients with a net worth between $US30 million to a few billion dollars. Often these clients have earned that wealth by building a business and selling it in boom times. Often they think that after they’ve sold a company, the should invest immediately but that’s often a mistake.
“There’s a chance that with the market this high, there could be a correction, or an event that’s even worse,” Curtis writes in a Wall Street Journal column. “For families who have just recently sold a business, I like to suggest that they wait one market cycle to invest. Encourage clients to be patient, and remind them to look forward a few generations. Their grandchildren are never going to criticise them from entering the market a few months later than they did. But, more than likely, they’re going to be upset if the client lost their inheritance because they rushed to invest it.”
Merrill Lynch’s Global Wealth and Investment Management division saw a 35% year-over-year rise in Q4 profits to $US777 million. Revenue was up 7% to $US4.5 billion, “driven by higher non-interest income related to long-term AUM flows and higher market levels.” Asset management fees were up 15% on the year to $US1.8 billion. Client balances were up 10% to a record $US2.37 trillion, driven by higher market levels and net inflows.
After stocks had a great run up in 2013 there have been growing concerns about stock market bubble. Marc Faber author of “The Gloom Boom And Doom Report,” told Bloomberg TV that we are “in a gigantic financial asset bubble, but it is interesting that despite of all the money printing bond yields won’t go down.”
“They bottomed out on July 25, 2012 at 1.43% on the 10-years. We went to over 3.0%. We’re now at 2.85% or something thereabout. But we’re up substantially. Now, this hasn’t had an impact on stocks yet. In fact, it pushed money into the stock market out of the bond market. But if the 10-years goes to say 3.5% to 4.0%, then the 30-year goes to close to 5.0%, the mortgage rates go to 6.0%. That will hit the economy very hard.
“[The bubble] could burst before. It could burst any day. I think we are very stretched. Sentiment figures are very, very bullish. Everybody’s bullish. The reality is they’re very bullish because they think the economy will accelerate on the upside. But my view is very different. The global economy is slowing down, because the global economy’s largely emerging economies nowadays, and there’s no growth in exports in emerging economies, there’s no growth, in the local economies. So, I feel that the valuations are high, the corporate profits have been boosted largely because of the falling interest rates.”
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