Hougan: 7 Takeaways From Our Global Macro

June 22, 2015


Takeaway No. 3: Richard Bernstein Is Probably Right: High Yield Munis Are An Amazing Deal

Like Mark Yusko, Richard Bernstein of Richard Bernstein Advisors is also a great investor AND a great speaker. His talk was wide-ranging and incisive, but the insight that stood out to me was this (I’ll paraphrase the commentary since I didn’t record the session):


“When we go looking for income, we love high-yield munis. High-yield munis are cheaper than the bonds of Iraq or the bonds of Lebanon. That’s absurd. There isn’t even a government in Lebanon, but people are willing to loan it money cheaper than they would the high-yield U.S. muni market.”


Investors are falling all over themselves to buy emerging market debt, and overlooking a big opportunity right in their back yard. The muni space is full of headline risk, but the actual default rates are low, particularly when the economy is doing well. A fund like the Market Vectors High Yield Muni ETF (HYD | C-59) is yielding 5.51 percent tax-free.


Takeaway No. 4: The Smart Money Loves Spain

The opening panel of the day brought together three sharp minds—Susanne Alexandor of Cougar Global, Neil Azous of Rareview Macro and Jay Pelosky of J2Z Advisory—for a discussion of where to invest. While there were positive feelings about Japan and a united distrust of both China and the U.S., the group got most excited about Spain and Italy.

In fact, the iShares MSCI Spain Capped ETF (EWP | A-95) probably got more mentions than any other fund during the day. People are certain Spain’s economy is about to take off, and shares are cheap—the price/book ratio is just 1.44. Spain could be the new hot investment in the second half of 2015.


Takeaway No. 5: Oil Is … Confused

As mentioned, there were a few consensus picks at the conference—pro Spain and Japan, anti-China and the U.S.—but there was no consensus on oil. For every investor who said it was heading to $80, there was another saying it will go to $30.


Takeaway No. 6: SPLV Doesn’t Own Utilities Anymore

The team from PowerShares and Standard and Poor’s had a nice presentation on their low volatility fund, the S&P 500 Low Volatility ETF (SPLV | A-63). The fund, which owns the 100 lowest-volatility stocks in the market, was historically criticized for loading up on utilities stocks. But as the presenters pointed out, in the last rebalance, the position in utilities fell to 2.74 percent. Financials now dominate the portfolio, with a 36 percent weight.


That says something scary to me about the market.


Takeaway No. 7: Social Media Is A Big Deal (And Josh Brown Is Awesome)

Josh Brown closed the conference with a speech on the importance of social media to advisors. Josh—better known perhaps as The Reformed Broker—is one of the most talented bloggers on the market, and provides the best Twitter-focused commentary about the economy there is.

My colleague Olly Ludwig covered Josh’s speech, but what captured me was his passionate message: To succeed on social media, be authentic. Too many people approach social media just as a marketing mechanism, and that’s doomed to failure. You have to use it to connect authentically, and the marketing will follow from there.

At the time of this writing, the author held no positions in the securities mentioned. Contact Matt Hougan at [email protected].


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