By Ploutos:

Since the groundwork behind Modern Portfolio Theory was laid fifty years ago, it has been axiomatic that riskier portfolios should expect to be compensate with higher returns. In recent articles, I have shown that a portfolio of long tenured dividend payers in both the United States and Canada have experienced higher trailing returns with lower variability of returns than their respective broader markets.

A recent paper by Nardin L. Baker of Guggenheim Investments and Robert A. Haugen of Haugen Custom Financial Systems entitled “Low Risk Stocks Outperform within All Observable Markets of the World” attempts to refute the widely held belief that investors are compensated for holding a riskier portfolio on average over long time intervals. The study covers thirty-three countries’ equity markets from 1990-2011. Beginning with January 1990, the authors computed the volatility of total returns for each company in each country over the trailing 24 months, and then

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By Fred Piard:

As this article is a sequel, you may want to read the first episode here. Some of its comments are also of interest.

Germany has produced great things: among them nice cars and a volatile stock market. Let’s focus on the latest:

(click to enlarge)

This is a 5 year chart of the German DAX index (yellow) vs its neighbor the French CAC (blue). Not only is the DAX stronger, but it amplifies ups and downs. An ETF Proxy for the German Market is EWG, and EWQ for France.

Let’s have a look at DAX vs Nasdaq (blue) on a shorter time (1 year):

(click to enlarge)

DAX is weaker now, but an amplification phenomenon is quite obvious again. I had the idea that this amplification would also magnify seasonal effects.

Let’s replace QQQ with EWG in the “QQQ-TLT” strategy described in my latest article. The holdings of EWG are

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By Russ Koesterich:

Executive Summary

Demographics exert a significant influence on both economies and financial markets, an impact that will grow in the coming years. The graying of the developed world is hitting an inflection point and is forecast to accelerate. While we don’t necessarily envision some of the more dire predictions-an aging society does not necessarily lead to generational war-an unprecedented shift in demographics is likely to impact everything from economic growth to equity multiples.

Absent significant changes in immigration policy or retirement age, most developed countries will see slower growth in the labor force as more people retire. All else equal, slower growth in the working age population-and in some cases actual shrinkage in the work force-should translate into modestly slower economic growth.

From an investment standpoint, there are at least three implications:

1) Historically, slower growth and less demand for capital have been associated with lower real interest rates, suggesting

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By Morningstar:

By Timothy Strauts

An ongoing debate for many years has been over what is better for investors, individual bonds or bond mutual funds? The decision usually comes down to the investment’s goals. If you want complete control of your portfolio’s maturity, yield, and credit quality, then individual bonds are for you. If you want broad diversification, liquidity, and consistent portfolio characteristics, then bond funds are the answer. Target-maturity exchange-traded funds from Guggenheim seek to bridge these differences into a product that can appeal to both types of investors.

Target-maturity bond ETFs are very similar to regular bond ETFs except for a key difference. The bonds in a target-maturity fund all mature in the same year. In the maturity year, the fund will close and return all investment capital to shareholders just like an individual bond would. An investor can get the diversification and liquidity benefits of a fund and the

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By Morningstar:

By Timothy Strauts

An ongoing debate for many years has been over what is better for investors, individual bonds or bond mutual funds? The decision usually comes down to the investment’s goals. If you want complete control of your portfolio’s maturity, yield, and credit quality, then individual bonds are for you. If you want broad diversification, liquidity, and consistent portfolio characteristics, then bond funds are the answer. Target-maturity exchange-traded funds from Guggenheim seek to bridge these differences into a product that can appeal to both types of investors.

Target-maturity bond ETFs are very similar to regular bond ETFs except for a key difference. The bonds in a target-maturity fund all mature in the same year. In the maturity year, the fund will close and return all investment capital to shareholders just like an individual bond would. An investor can get the diversification and liquidity benefits of a fund and the

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By George Acs:

Barely a year ago, at the insistence of one of my kids, I joined both Facebook (FB) and Twitter. I didn’t do so out of some need to expand my social horizons, since I’m an especially anti-social type and a newly minted recluse who sits and trades all day long.

Instead, I joined in order to promote my blog and newly published book. After all, what better way to publicize when the thought of actually paying for marketing services was abhorrent?

As a recluse, the answer to the question is quite simple. No. Do not Facebook. But it’s really not that simple if you’re an investor or potential investor.

In the meantime, it’s been more than four years since I’ve had my account managed by a full service brokerage house. During about half of the 20 years that I’d spent with a single broker, including following him as he moved,

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By Doug Short:

By Adam Butler and Mike Philbrick

Modern Portfolio Theory (MPT) has been derided by practitioners, academics, and the media over the past ten years because the dominant application of the theory, Strategic Asset Allocation, has delivered poor performance and high volatility since the millennial technology crash.

Strategic Asset Allocation probably deserves the negative press it receives, but the mathematical identity described by Markowitz in his 1967 paper is axiomatic in the same way Pythagoras’ equations describe the properties of right triangles, or Schrodinger’s equations describe the positional probabilities of electrons.

The math is the math. Bear with me.

Modern Portfolio Theory requires three parameters to create optimal portfolios from two or more assets:

1. Expected returns
2. Expected volatility
3. Expected correlation

Strategic Asset Allocation applies MPT using long-term averages of these parameters to create diversified portfolios that theoretically maximize the excess returns of the portfolio per unit of volatility.

The problem with

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By Brad Thomas:Port),
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By A. I. Houriani:

Microsoft’s (MSFT) multi-market penetration business strategy has given it a place in my equity portfolio and the portfolios I manage. Microsoft has been a leading provider to the business markets, where it accumulated much of its vast wealth, but it has recently taken very strong and aggressive steps to penetrating the consumer markets.

Microsoft is no longer only the company that creates Microsoft Office and our operating systems; it has become much more than that. They’ve realized there’s an enormous consumer market, relatively untouched by them, which can vastly accelerate future growth. In response to this, we’ve seen a shift in Microsoft’s products and services; moving away from being created solely for functionality to being created for usability.

They’ve realized the absolutely enormous mobile, tablet, and e-book markets which they have begun aggressively penetrating. The new Windows 8 platform will be Microsoft’s key in performing a successful multi-market penetration which

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By Gary Townsend:

After Thursday’s close, JPMorgan (JPM) disclosed in its 2Q2012 10-Q after-tax losses of $800 million, stemming from corporate hedging operations. A slight delay in the regulatory filing had suggested that there might be a problem, which this afternoon’s market weakness may have anticipated.

The company attributed the losses to a trader in its London-based Chief Investment Office, part of its corporate segment. And while this particular trader made a lot of money for JPM, his success in recent quarters reportedly earned him the enmity of several London-based hedge funds. These took what appear to have been coordinated positions against him, resulting in fair value losses of as much as $2 billion.

Mistakes were made. JPM recently implemented a new value at risk model (VAR) that underestimated and understated the firm’s risk. The company has returned to the prior model, which it deems superior. In its conference call, the company says

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