Archive for 'March 2015'

    The Fed: "Patient" Dies, Investors' Risk Appetite Lives On

    March 27, 2015 12:50 PM by Timothy Paulson

    What’s behind the surprising market reaction to the central bank’s March 18th policy statement?

    Financial markets recently were hanging on a single word from the U.S. Federal Reserve. Investors were eager to hear whether the Fed’s policy-setting arm, the Federal Open Market Committee (FOMC), would remove the word “patient”—used since December 2014 to describe the central bank’s stance toward maintaining its current zero interest-rate policy–from the statement issued at the conclusion of its two-day policy meeting on March 18, 2015. The central bank did indeed drop the word “patient” from the post-meeting communique, moving the Fed one step closer to “liftoff”—that is, the first in a potential series of interest-rate hikes.

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    Research in Action: Big Pharma on Steroids

    March 27, 2015 12:20 PM by Lavina Talukdar

    Relentless innovation and ongoing mergers and acquisitions have created significant investment opportunities in the pharmaceuticals and biotechnology sectors. 

    Prescription drugs may be a relatively small significant chunk of national healthcare expenditures each year (see Chart 1), but ongoing innovation and consolidation in the sector has had a powerful effect on valuations. 

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    Catching the IRA Wave

    March 26, 2015 5:30 PM by Brian Dobbis

    As April 15 approaches, the window is closing on the opportunities for advisors to capture both 2014 and 2015 IRA contributions.


    With only a few weeks left in the IRA season, this week’s blog contains a compendium of both IRA limits and business-building ideas. Remember: Virtually anyone with a reportable earned income is eligible to fund an IRA. Earned income is the sole requirement. Also worth repeating: through April 15, 2015, investors can still fund IRAs for 2014.

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    Research in Action:
    Riding Herd on Changing Consumer Patterns

    March 23, 2015 11:18 AM by Lord Abbett Editorial Staff

    While big corporations are struggling to retain customers, nimbler enterprises are seizing the opportunity to steal loyal consumers. Three Lord Abbett analysts assess the opportunities.

    One overarching theme in recent research discussions has been consumer spending, which has been on a healthy trajectory since the financial crisis, especially in recent quarters thanks to rising employment and declining fuel prices. (See Chart 1.) But with many consumers underemployed, cautious and/or continuing to deleverage, the outlook is a mixed bag. Rising employment and lower fuel costs may help beverage makers and innovative restaurant chains, but auto companies face considerable headwinds. 

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    2015 Taxes: What's New?

    March 19, 2015 5:30 PM by Vito Fronda

    The chore of filing taxes—never a particularly fun task—became a little more complicated with the implementation of the healthcare coverage mandate.


    Preparing a tax return can, at times, be a daunting task. For some taxpayers, it became even more complex this year because of the healthcare coverage mandate that took effect in 2014 as part of the Affordable Care Act. 

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    SMID Cap Value: Lessons Learned in 2012

    March 18, 2015 4:50 PM by Lord Abbett Editorial Staff

    Changes in the market prompted process enhancements that allowed our stock pickers to shine.

    It’s no secret that even the best-managed portfolio can hit a bad patch once in a while. In 2008, one highly acclaimed value manager lost more than 55%, lagging the market by more than 1,800 basis points and ranking in the 99th percentile of his peer group, according to Morningstar.1 The portfolio, which had beaten the S&P 500® Index 15 years in a row, was often known to hold fewer than 50 stocks. How is it possible for such an accomplished manager to miss the mark so badly? For an answer to that question, click here.

    More important, when a strategy with a strong record appears to go off the rails, should investors abandon it, or wait to see if it can get back on track?

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    Chasing Eyeballs

    March 17, 2015 10:45 AM by So Young Lee

    While media, Internet, and cable companies face a number of challenges, diversifying content platforms should drive some compelling investment opportunities in 2015.

    Just as traffic on the information superhighway has accelerated at a phenomenal pace, so have the challenges faced by media, Internet, and cable companies—but I believe diversifying content platforms should drive some compelling investment opportunities in those sectors in 2015.

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    Research in Action: Why Web 3.0 is the Product Cycle of the Decade

    March 13, 2015 1:05 PM by Eric Ghernati

    New applications combining the cloud and "Big Data" have transformed industries globally.

    Considering how much time people spend on the Internet using multiple devices—chatting, networking, shopping, banking, devouring, and sharing all kinds of content, and the like—it’s easy to see why technology sector figures prominently in various investment strategies.

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    Appreciating Company Stock

    March 12, 2015 1:38 PM by Brian Dobbis

    An often-overlooked tax break could help departing employees reduce the tax bill on company stock that has increased in value.


    Do you have clients who are planning to leave their current employer and who own company stock in their 401(k) or other qualified plan? If the stock has appreciated significantly over time, there is a little-known tax break that may be worth considering, which could significantly lower an individual’s tax bill on appreciated assets. The provision in the tax bill is called net unrealized appreciation (NUA), and it applies to individuals who own company stock and want to withdraw their retirement holdings.

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    Saving for Retirement: Be Careful Not to Over Save

    March 5, 2015 5:15 PM by Brian Dobbis

    Rules governing excess contributions make it potentially costly to overfund an IRA.


    When it comes to IRAs, you can have too much of a good thing. And that’s a bad thing.

    It’s a common error to overfund IRA accounts. "Excess contributions," as the IRS refers to them, typically occur when individuals unwittingly deposit funds that are not permitted to be made to IRA accounts. Much of the time, account owners are unaware that they ran afoul of the rules and, upon being made aware of their error, are unsure of how to correct it. Paradoxically, in order to fix the mistake, time is of the essence—but the account owner first must be aware of the error.

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    Central Banks: March Madness Ahead?

    March 4, 2015 4:08 PM by Zane Brown

    The differing policy paths of the U.S. Federal Reserve and the European Central Bank could have significant effects on fixed-income markets this month.

    We have explored divergence as a dominant theme for 2015 because investment opportunities may be driven by differences in economic growth rates, currency valuations, and monetary policies among nations. And this March may mark the inflection point for monetary policy divergence as the European Central Bank (ECB) begins quantitative easing (QE) and the U.S. Federal Reserve considers further refining the language it employs to signal its policy stance. Some observers believe the Fed will delete the word “patient” from its guidance as it prepares to normalize interest rates later this year. Policymakers had used the term in previous statements to describe the Fed’s approach to the timing of a potential interest-rate hike. 

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    Reports of a Utility "Death Spiral" Are Greatly Exaggerated

    March 3, 2015 4:20 PM by Glenn McIsaac

    Distributed solar energy has come a long way, but it is unlikely to pose a major threat to the U.S. utility industry for many years to come.

    As a research analyst, I have to take exception to a recent article in the Financial Times that suggested that the traditional utility business model is threatened by customers who generate their own power using distributed generation. The article noted that an increasing number of customers opting for distributed generation could leave fewer remaining customers to pay for the grid, resulting in higher rates and yet more defections—a potential “death spiral” for the utility industry. 

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