HOME     RESEARCH    First Quarter 2019 Research Call Replay

First Quarter 2019 Research Call Replay

Apr 18, 2019 / Investment Commentary, Asset Class Research

Listen to a replay of our first quarter 2019 Litman Gregory research team webinar. Topics covered (among others): the equity rebound, conditions in Europe, floating-rate loans, managed futures, and emerging-market bonds. The presentation slides are available at the bottom of the page under Resources.

 

Audio of the full call:
 
First Quarter Recap and Market Overview with Peter Sousa, Director of Portfolio Strategies:
 
Is the first quarter of 2019 a head fake? We know a recession is coming at some point.  I’m not believing it is in 2019 after all the latest indications, but what should we anticipate?  I have heard it’s hard to have a recession with low unemployment, but what results if employers can’t hire the workers they need?  Stagflation? Inflation?  
 
I hear a lot about how bad Europe is and would appreciate hearing if Litman Gregory is considering reducing the overweight to international developed and emerging-market stocks, at least in the balanced portfolios, to reduce volatility because being down 6% and up 8% in six months seems too volatile for a balanced portfolio.
 
With the trend toward fee compression in the industry, what plans if any do you have to adjust the average fee of your recommended portfolios? Actively managed domestic funds continue to underperform their benchmarks, and high-fee alternatives have been a drag on performance. Are you evaluating ETFs in the alternative space to further reduce the overall cost of your recommended models?
 
Any interesting initial due diligence and/or ongoing monitoring updates on the manager research side?
 
On the current industry topics of active manager performance and justifying fees from a business perspective of being a wealth manager and thinking about managing client expectations, what is the Litman Gregory thinking about talking to a new client (or a prospect) about potentially needing a 15- to 20-year time horizon to see performance results? How do you ascertain if the client will have the patience required to stay the course? Why not just use index funds, which would take two variables out of the conversation: active benchmark risk and fees?
 
Both Guggenheim’s Scott Minerd and DoubleLine’s Jeffrey Gundlach agree that the big threat to all these investments is $2.5 trillion of barely investment-grade bonds that, with a hiccup in the market, could become junk-rated and then, with the onslaught of supply, the prices would fall, yields would rise, but our floating-rate investments would be crushed. So … should we reallocate? Why not?
 
Are there any anticipated tactical allocation changes being considered in the model portfolios?
 
Does Litman Gregory have a theory on why the value premium has been negative for such an extended period? Is it just that we are being too impatient, and that a 10-year period with a negative value premium isn’t abnormal? Or could we be missing a major change in how companies should be valued? A recent article in The Economist spotlighted the problems with using the price-to-book ratio (the basis for inclusion in the Russell Value Index) as the key element in assessing a company’s value. Does Litman Gregory believe this argument has merit?
 
Any updates to share on the managed futures positioning?
 
Can you please touch on the subject of investing in emerging-market bonds? We seem to be reading more and more (industry rags not WSJ) articles about the subject.

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