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Archive for the ‘US Perspectives’ Category

Balancing Perception, Reality, Equities and Fixed Income

April 17, 2012 Comments off

Never underestimate the power of perception to influence people’s fiscal behavior. Perception is such a significant influence, in fact, that economic tea-leaf readers have developed a myriad of surveys and indicators to monitor individuals’ perceptions of the investing environment because perceptions can—and do—move markets. When sentiment is negative, investors tend to shift out of assets they perceive as “risky” and into assets they perceive as “safe.”  Ed Perks, Senior VP and director of Core/Hybrid Portfolio Management for Franklin Equity Group, , is well aware of the role perception plays in the markets and even took note of it in a previous post to these pages: see “Perception vs. Reality.” Here he picks up the thread with his strategy for determining a strategic mix between equities and fixed income when market perceptions change, and what he sees as the fundamental reality today. His thoughts, in brief:

  • We’ve seen a gradual decline in market volatility levels in the first quarter and, at the same time, an increase in risk-tolerance among investors.
  • Despite market turbulence, corporate profits have remained strong.
  • We think rewarding shareholders, achieving dividend growth, and engaging in share buy-backs should be a big part of the corporate story in 2012.
  • Dividend-paying common stocks offer an interesting opportunity amid the reality of today’s yield-scarce environment. Read more…

Drilling Into Fuel Prices

April 3, 2012 Comments off

Gasoline, deodorant, dishwashing, liquid, eye glasses, crayons….What does this list of seemingly random items have in common? They are all made from refined crude oil.1 So even if you don’t feel pain at the gas pump, you probably rely on more products made with or from crude oil than you’d think. And of course even non-oil based products are generally shipped via fuel-consuming transport vehicles, so you’re bound to feel the pinch in the form of fuel surcharges or price hikes sooner or later.

But Beyond Bulls & Bears has never taken a fatalistic view. If volatility can present buying opportunities, surely there’s a possible silver lining to headline-making oil price heights. And so we turn to Fred Fromm, portfolio manager for Franklin Equity Group specializing in natural resources, and part of the team that analyzes the gold and precious metals market, aka the guy with the inside scoop on all things oil, gold, and even those other less-talked-about commodities.

Fromm in brief: 

  • U.S. demand for gasoline is actually down, but demand outside the U.S. is strong.
  • Geopolitical issues, namely in Iran and Syria, are being factored into oil pricing, but major disruptions may not occur.
  • If China’s growth rate could continue indefinitely, its too-strong growth would likely strain commodity supply.
  • Supply-demand balance looks tight enough to support gold, but demand can fall quickly and should be closely watched.
  • Fromm opts for geographic diversification to avoid the risk of having too many investments in a country with a high degree of political risk.

Read more…

Diversification at the Core

March 22, 2012 Comments off

Pinning down the origin of the saying, “don’t put all your eggs in one basket” is surprisingly difficult. Some say it’s an ancient Chinese proverb. Some attribute it to American author Mark Twain, or Spanish writer Miguel de Cervantes. It’s a simple saying, one you might expect to find cross-stitched onto a pillow, but don’t let its ubiquity fool you: there’s wisdom in those words.

The late Sir John Templeton was certainly a champion of diversifying one’s “basket” of investments. And so is Tucker Scott, portfolio manager for Templeton Global Equity Group. Diversification is at the core of his investment strategy. A summary of his recent remarks: 

Tucker Scott

  • We try to find stocks that we believe are undervalued, then build a portfolio that’s well-diversified by industry and by country
  • We try to limit position sizes in an attempt to help limit potential stock-specific risk
  • We don’t look to an index as a guide to desired weightings; we rely primarily on internal research
  • The primary area where we’ve been purchasing stocks in Europe is the financial sector
  • The core European countries appear to be in a healthy state; we think the European “project” should continue Read more…

Survival of the Lipp-est

February 6, 2012 Comments off
Bill Lippman

Bill Lippman

Every now and again we get the opportunity for a more a personal chat with one of the portfolio managers here. The opportunity recently arose again, this time with Bill Lippman: a Bronx native, tennis fanatic, and, by the way, CIO for the US Value, Franklin Equity Group. With 60-odd years in the business the always charismatic Mr. Lippman certainly can share some memorable stories.  Read on…

On How He Got Into Asset Management
As a young man out of college, I was running a sales organization. It had nothing to do with the financial services industry, although I did graduate with an MBA that focused on finance. These were tough times back then, and one of our best salesman made an incredible commission that year – this was amazing – $30,000. Can you imagine such a huge amount!

He quit that year, and I called him back in and I said: “I’m just curious. You made $30,000 here this year, which was outstanding. Everyone else made $15,000 if they were lucky. Where are you going?” He said, “I’m going to work for a mutual fund organization.” I said, “You really think you’re going to make more money there than here?” He said, “Yes!”

Read more…

Déjà Vu All Over Again

January 25, 2012 Comments off
Grant Bowers

Grant Bowers

We’re not even a month in, but it looks like the global economy, Europe and earnings may be the big attention getters in 2012. The equity markets have been off to what could be called a mild rally during the first half of January, but they’re still reacting to eurozone worries like a baby with a jack-in-the-box; they know something big is coming, but they’re not sure when, and when it does, they jump. It’s a fair enough reaction.  Last year’s rough and tumble volatility wasn’t exactly a cake walk.

That wild ride doesn’t appear to be over, though, as hopeful outlooks for smooth sailing were noticeably absent from the slate of 2012 market predictions. But if you can’t wrap yourself up in a warm blanket of false promises, at least you can pull up a chair to the grown-ups’ table and take a practical survey of the landscape.  Doing just that, Franklin growth manager Grant Bowers suggests heading into 2012 with realistic expectations:

Read more…

Perception vs. Reality

January 24, 2012 Comments off
Ed Perks

Ed Perks

For many U.S. investors, the new year doesn’t appear all that new. Home prices in the U.S. remain anemic, job growth feels inadequate and the market is about as turbulent as ever. But there’s a flip side to every coin and there’s often potential opportunity hidden in what looks like just plain old trouble.

Ed Perks, senior VP and director of Core/Hybrid Portfolio Management for the Franklin Equity Group and regular contributor to these pages, ruminates on what he sees as a continuing theme of disconnection between perception and reality and how it will shape the investment landscape in the year ahead:

Read more…

Welcome to Election Season

January 17, 2012 Comments off

Forget the Kentucky Derby with its mint juleps and heartstring-tugging back stories.  If you’re looking for a truly dramatic horserace, look no further than this year’s run-up to the U.S. presidential election as we count down to November. 

For Americans it means choosing a leader to guide the country for the next four years.  But what does it all mean to investors?  Once you get past the mudslinging and the emotional policy pleas, how can you expect all of this political theater to impact the markets?

Read more…