That Was The Week That Was-2nd Week August

Smart Beta. What Is It? Beta, as you know is a measurement of risk/volatility. Lately a new buzz word has emerged that’s confusing investors- ‘Smart-Beta’.  According to the Financial Times this is also known as advanced beta, alternative beta or strategy indices.  There are numerous definitions for smart beta. One that I found I could understand is an investment style where the manager passively follows an index designed to take advantage of perceived systematic biases or inefficiencies in the market. While that reads like ‘Greenspan-speak’, the simplest explanation is a portfolio comprised of both passive and active management along with exposure to current trends or specific sectors such as timber, natural resources or agriculture. For example, a portfolio that the manager invests in the S&P 500-Index on one side, is actively managed on the other, and looks for specific trends to take advantage day-to-day  could be defined as a Smart Beta portfolio.

Utilities Have Hung In There. Expectation at the close of 2013 was that the sector would not be anything special in 2014, and investors could do better in other areas. Utilities have not only ignored the pessimistic predictions but have been a conservative bet that helped stabilize a ‘choppy’ market.

Barrons Economic Beat 8/10 :  While the stock market drifted lower the economy headed north- exceeding expectations. Everything from labor to auto sales points to continued expansion.

Markets Up Slightly Monday in Anticipation of Russia-Ukraine  Detente.  WSJ reported bank profits near record levels-second highest profit in 23 years- even as executives are complaining regulations are hurting their business. 8/12/2014.  Much of that has to do with better credit of consumer.

No Market Slump, says Morgan Stanley analysts. Markets could still expand because the economy is improving, real yields are higher, inflation is low and Fed policy accommodative. MarketWatch.com 8/12/2014

Bob Doll, CFA, Nuveen Asset Management, 8/11/2014: ‘Correction talk heats up, with Volatility Rising in Both Directions.  We do not expect a setback but a modest near-term correct could be possible. We would advice investors to ride out any volatility and consider adding to equity positions.’

Tuesday Markets Off- slightly across all indices.

Best Biggest Success Story in Europe? Poland!  According to Matthew Lynn’s London Corner the most remarkable European economic success story of the past 25 years has been Poland! It went from Solidarity in the ship building biz to joining the E.U. in 2004 and growing its economy at a 4% annual rate. Industry was privatized very early as it exited as a Soviet satellite. Taxes are kept under control with companies being taxed at one of the lowest rates in Europe. The mystery is the Warsaw Index is at 50,000 still well down from its high in 2007 of 67000. According to Lynn the Poles are building a modern developed economy and investors will surely be rewarded. MarketWatch 8/13/2014  ( Poland is considered an emerging market and there are several investments that you can investigate to take advantage of the country’s growth possibilities. Call or e-mail me.)

Markets Up Wednesday. Here’s an interesting chart to those investors that get nervous about a market correction. Richard Bernstein Advisors report that ‘Mom and Pop stink it up on a pretty steady basis and have lagged gains in every asset class with the exception of Asian emerging markets and Japanese equities, over the last 20-years.’ They have even managed to underperform cash- represented by the 3-month T-Bill.

Investors consistently bought assets that were overvalued and sold assets that were undervalued. In other words American M&P investors are the worst of the Buy High and Sell Low Folklore that so many others have talked about.

Markets Finished Up Thursday Across the Board. Questions call Paul @ 586 295 0430 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.

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