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Unsettling
Cees, it's worrying to hear you with doubts about the political landscape, with the protection of information bill and the media tribunal these are sure signs that the country has not transitioned into democracy successfully as Namibia has done. This will go far beyond the select few milking the economy for all it's worth. It's very distressing.
by H

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31 August 2010 03:39

We have met the enemy and he is us

Problems which can, if left unchecked, cause one to deviate off the path to investment success.

Over the weekend I had an opportunity to jump off the treadmill of daily living and catch up on some long-overdue reading.  A series of articles by a strategist whose readings I have enjoyed in the past has served as a great reminder to me of the importance of regularly revisiting one's investment strategy.  I was reminded of the problems and pitfalls which can, if left unchecked, cause one to deviate off the path to investment success.

Whether buying individual stocks, managing a balanced fund, saving for retirement or putting in place a strategy during retirement to ensure a sustainable level of income for the rest of one's life, it is critical to commence and implement these activities with a clearly defined rational plan (strategy).  As we have said before, those who fail to plan, plan to fail.

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29 August 2010 02:19

Opportunities in the bad news?

Those who believe that what goes down will come back up may snap up equities at bargain prices.

There's been plenty of bleak news coming out of the equity markets and the U.S. economy as a whole. Are there opportunities hidden within that bad news? Are we now in one of those "blood in the streets" scenarios that Rothschild (and many investors after him) found so appealing?

If you believe in the cyclical nature of markets, the chart below from Stifel Nicolaus may be of interest. This chart shows the 10-year rolling return of the S&P Stock Market Composite going back nearly two centuries-current performance (inside the circled area) is at low levels only seen during the Great Depression.

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29 August 2010 01:19

Active return requires active risk

It is crucial to understand how a portfolio manager allocates capital to various asset classes and stocks.

In order to justify an active investment management strategy, a portfolio manager is required to demonstrate that she can, over time, generate a return in excess of a predetermined benchmark.  The generation of this excess return, or alpha, is only possible if the portfolio is constructed to look different from the benchmark.  In general, portfolio managers utilise two methods to differentiate their portfolios from the relevant benchmark and subsequently generate excess returns.  These methods are as follows:

1. Ignore the benchmark completely

Under this method, the portfolio manager pays no attention to the composition of the benchmark when constructing the portfolio. 

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27 August 2010 03:51

Poor vs successful investment returns

It is all down to personal dynamics, writes Mark Seymour.

It's unfortunate that most clients don't enjoy the returns achieved by the average investment manager. The reason for this is because clients often switch out of an investment when short-term returns are poor and switch into an investment which is doing well over the same period, locking in their losses. Secondly, some of the most skilled managers working as a team fail to deliver successful investment returns because of the different philosophies they hold as individuals. The reason for these discrepancies is because of the dynamics that exist between the client and the investment manager and between investment managers themselves. Let's look at some of these unfortunate dynamics.

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24 August 2010 01:53

The search for yield opens up an interesting anomaly

Equity is cheap and its debt is expensive.

We at Alphen have been somewhat perplexed at the huge inflows that we have seen into bond funds over the past year (figure 1), which have driven yields down to extreme levels (figure 2). In times of heightened uncertainty as we are experiencing now, yield generating assets appear to be in high demand.

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