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Two Reasons Investors Aren’t Freaking Out About Ukraine (iShares Blog)
Ukraine related market concerns didn’t last too long but that doesn’t mean the events there don’t matter to markets, writes BlackRock’s Russ Koesterich. There are two reasons that markets shirked off tensions in Ukraine.
1. “Significant liquidity from the Federal Reserve (Fed), along with the Bank of Japan, has suppressed market volatility in much of the developed world.” Koesterich points out that volatility has been low since 2012.
2. Since the financial crisis, most volatility has been tied to economic policy in Europe and the U.S. as compared to geopolitics.
Koesterich thinks it would take a “significant escalation in violence,” or a clear impact on markets for investors to start panicking about Ukraine. “However, with the Fed set to continue tapering, volatility may revert back to a more normal range,” writes Koesterich. “For a sign of when this may happen: watch the bond guys.”
It is often argued that as baby boomers retire stock prices will be pushed down. But Vanguard points to five reasons these concerns are overblown.
1. Baby boomers aren’t going to retire at the same time. “The baby boomer generation spans nearly 20 years, so any stock sales should be gradual.”
2. “Boomers’ share of stock market is similar to prior generations. No equity downturn has been linked to historical retirement transitions.”
3. “Boomers’ wealth is highly concentrated. Close to 90% of equities are concentrated among the richest 10% of the generation. Wealthier investors won’t need to sell for short-term needs.”
4. More foreign investors have stepped into the U.S. stock market. Any selling pressure by boomers is likely to be dampened by the growing base of global investors.”
5. “There is no significant relationship between proportion of U.S. retirees and stock returns.”
The SEC has charged Michael A. Horowitz, Moshe Marc Cohen, an advisory firm, and others in a “variable annuities scheme to profit from the imminent deaths of terminally ill patients in nursing homes and hospice care,” according to a press release. A variable annuity, is an insurance contract in which the insurance company makes periodic payments and which also has a death benefit. It is also tax-deferred.
The SEC alleges that Horowitz found a way to exploit these benefits. The regulator alleges that Horowitz recruited others to obtain information about terminally ill patients in southern California and Chicago and “sold variable annuities contracts with death benefit and bonus credit features to wealthy investors,” expecting that these patients would die soon. “He designated the patients as annuitants whose death would trigger a benefit payout. Horowitz marketed these annuities as opportunities for investors to reap short-term investment gains. When the annuitants died, the investors collected death benefit payouts,” according to the press release.
The SEC is still pursuing charges against Horowitz and Cohen but received $US4.5 million in settlements from others involved. Darla Mercado at Investment News put the scam at $US80 million.
Hedge Fund Clients Offer A Huge Opportunity For Advisors (The Wall Street Journal)
Spence Whitman, managing director at Stephens Inc’s Charoltte branch lists top portfolio manager and founders at hedge funds among his clients. Whitman thinks there’s a tremendous opportunity for advisors with such clients. 80% of their net worth is typically invested in the hedge fund and its the remainder that advisors target.
“We think we can add value on short-term municipal bonds, precious metals, and other asset classes that they don’t use on a daily basis,” he writes in a new WSJ column. “With this money they are looking for some kind of absolute return without a lot of risk. We want to be able to hit the button and get the money back in three days. We don’t purchase real estate or alternative investments, just the most liquid of securities.” Whitman does warn though that these clients have certain restrictions imposed on them by their funds.
New York State Comptroller Thomas DiNapoli’s latest report showed that securities industry workers in New York City earned $US27 billion in bonuses in 2013. That was more than the $US16 billion, the total earnings of all the full-time minimum wage workers in the U.S. combined. The securities industry had 165,200 workers in New York city, which compares to the 1.08 million full-time minimum wage workers in all of America last year.
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