Due Diligence

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Rising Rate Pitch

Rising interest rates have been a market bogeyman for almost a decade.  During that time we’ve gotten pitched all sorts of products that claimed to protect against this.  They never seemed to do well, mostly because rates never went up!  A couple of years ago that changed.  The Federal Reserve has finally moved toward rate normalization and we’re getting the rising rate pitch all over again. Rates are still very low Interest rates here in the United States are still very low.  Raising interest rates can be a bad thing, but I’m in favor of a modest campaign of slow rate hikes to get back to more normal levels.  That is what the Federal Reserve has been doing recently.  I like that the movements have been telegraphed well in advance and that the Fed is reducing its balance sheet.  When the next recession hits, the United States will be better…

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Pick Good Funds

Pick Good Funds

The Wall Street Journal and the financial community have been abuzz about passive investing.  I wrote about settling for average and outrunning a bear via active management previously.  The newest argument for choosing active management over passive is that investors should choose ‘good’ managers, not average or bad managers. Why didn’t anyone think of that before?  Choosing a good manager sounds like common sense, but really this is an attempted rebuttal of the fact that benchmarks outperform 70-80% of actively managed funds.  Capital Group (parent company of American Funds) even published a scorecard in a sort of homage to S&P’s SPIVA report that touts the performance of ‘good’ funds.  Tim Armour, chairman of Capital Group, asks why an investor would buy Blockbuster stock in the early 2000s when they could have bought Netflix – the assumption being that a good manager would have bought Netflix while an index would have been forced…