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David Rosenberg has been bearish on bonds since last April. As U.S. treasuries, emerging market bonds investment-grade corporate bonds, and muni bonds delivered negative returns in 2013, junk bonds delivered a 7% total return, he writes. But the investor crowd has suddenly lost interest in bonds considering U.S. high-yield mutual funds and ETFs had $US4.4 billion of net outflows in 2013, the largest redemption since 2005. “After all, at these yield levels, if you’re going to invest in risk assets, and there is risk in corporate bonds albeit a different sort of risk than there is in hard assets or equities you may as well dip some toes into the stock market pool,” writes Rosenberg.
“While it is late in the game, the game is still not over necessarily and we could have been saying the same thing this time last year. What is incredible is that while most of the fixed-income universe failed to generate income in 2013, the asset class that continued to deliver the income even as bond yields rose were the dividend-paying arena of the equity market. And it was more about the dividend growth than it was about the yield. Just check out, for example, what the Dogs of the Dow strategy did last year (the 10 highest-yielding components of the DJIA) — a 30% advance which actually outperformed the rest of the blue-chips by over 400 basis points!”
Hedge Funds Had A Record Year In 2013 (Eurekahedge)
Globally, hedge funds saw their assets under management increase to an all-time high of $US2.01 trillion in 2013, according to Eurekahedge. Hedge funds’ AUM grew by $US228.8 billion in 2013, the fastest annual growth on record since 2007. Funds that were focused on Asia Pacific had the best returns and were up 15.3% in 2013. And a breakdown shows that those with Japan and Greater China focus had the best regional results at 25.7% and 19.3% respectively. Meanwhile the distressed debt hedge fund strategy delivered the strongest performance with 16.8% returns in 2013.
Last year the Financial Industry Regulatory Authority (FINRA), launched the High Risk Broker (HRB) program was created to identify brokers with “a pattern of complaints or disclosures for sales practice abuses and could harm investors as well as the reputation of the securities industry and financial markets.” FINRA said in its 2014 Regulatory and Examination Priorities letter that it would expand its HRB program this year and “create a dedicated enforcement team to prosecute such cases.”
FINRA will review the due diligence of firms that hire these brokers. It is also concerned about the risks they bring to a new firm. “Using sophisticated analytics — known as the Broker Migration Model — FINRA identifies and monitors both brokers who move from a firm that has been expelled or otherwise has a serious disciplinary history to another FINRA-regulated firm, and the firms that hire such individuals. FINRA uses the model’s risk scoring, among other means, to prioritise surveillance and to conduct focused or accelerated examinations and enforcement efforts.”
Bob Doll’s 10 Predictions For 2014 Include A 10% Correction In The Stock Market (Nuveen Asset Management)
Nuveen Asset Management’s Bob Doll expects stocks to fall 10% in 2014 before they end in the green. But here are his 10 predictions for 2014, published verbatim: 1. The U.S. economy grows 3% as housing starts surpass one million and private employment hits an all-time high. 2. 10-year Treasury yields move toward 3.5% as the Federal Reserve completes tapering and holds short-term rate near zero. 3. U.S. equities record another good year despite enduring a 10% correction. 4. Cyclical stocks outperform defensive stocks. 5. Dividends, stock buy-backs, capex, and M&A all increase at a double-digit rate. 6. The U.S. dollar appreciates as U.S. energy and manufacturing trends continue to improve. 7. Gold falls for the second year and commodity prices languish. 8. Municipal bonds, led by high yield, outperform taxable bond counterparts. 9. Active managers outperform index funds. 10 .Republicans increase their lead in the House but fall short of capturing the Senate.
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