Tactical investing news, views and resources for financial advisors
In Friday’s On My Radar, Steve links to a great interview of David Swensen, Yale’s CIO, by former Goldman co-chairman and former Treasury Secretary, Robert Rubin.
Take a few minutes and watch the interview. It’s worth it. Add Swensen to the list of famed investors predicting low single-digit forward returns. He shares some sage advice on portfolio management and diversification.
Click the photo for the full interview.
Naturally, because there’s a presidential election this year, every news cycle is very noisy. It’s critical, however, that we maintain our focus on monitoring and assessing important financial news and managing potential risk. Such is the case regarding the financial condition of Deutsche Bank (DB). DB is one of the largest financial institutions on the planet. And, right now, it may be one of today’s great systemic risks. Think Bear Stearns, Lehman Brothers…
Due to super-sized leverage (like gigantic beer steins at Oktoberfest) and significant counterparty risk, a stumble at DB will ripple through the world’s financial system and would cause great harm. Read more in this week’s On My Radar.
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As we head into summer this weekend we are ready to relax but we always have a keen eye on the markets. We have a tradition at CMG of consistently producing intelligence for clients, advisors and the investing public no matter what the season.
You can find CMG intelligence here at Advisor Central twice a week. Steve Blumenthal produces a weekly outlook called On My Radar every Friday, and Trade Signals on Wednesday. Sign up for Advisor Central updates here and on the main CMG Capital Management Group site for On My Radar and Trade Signals.
Michael Hee
Managing Director, Investment Research
CMG
What is risk?
At its most basic level, risk can be defined as the extent to which actual investment performance may deviate from expectations. Defining and establishing appropriate expectations is a critical aspect of a financial advisor’s business.
Prior to joining CMG Capital Management Group, while working as a consulting Actuary; I made a living by putting a price tag on risk. Insurance companies need to be reasonably convinced that the premiums they charge their clients will be sufficient to cover future claims, administrative and operating expenses, and provide profit while constantly maintaining a competitive premium level in order to attract and retain clients. This is a complicated endeavor which involves more than a bit of science as well as art. Having a sound understanding of risk is critical to being able to quantify it.
Here at CMG, we often spend time discussing risk with financial advisors to help them appropriately allocate their clients’ portfolios. Often what appears to be a well diversified portfolio from an asset allocation perspective turns out not to be well diversified from a risk perspective.