Insights

Third Quarter 2003|Jim Williams| New York State Attorney General Elliot Spitzer is at it again. Good for him. You are probably aware of the latest scandal to hit the financial services industry related to after-hours trading of mutual funds (Janus, Strong, Bank of America/Nations, Bank One Group, Alliance). Why have none of the funds in your portfolio been named in any of these allegations? Is it because we had some special insight into the trading operations of the funds? No. Is it because we’re smarter than everyone else? No. Perhaps it has something to do with what we look at when we evaluate investment vehicles.

First Quarter 2003|Jim Williams| I learned a lesson last month. While I was engrossed in the news coverage of the war in Iraq, my spirits were alternatively lifted and then dashed. In the space of time between the first Tuesday, when the first strike took place, and Sunday night after several Americans had died or been captured, I went from being quite optimistic about the prospect that the war would be over in a few days, to down-in-the-depths apprehension that all of the predictions of a “quagmire” were about to come true. As I considered my own reactions to the news coverage, I started to wonder if there might be some lessons with regards to the similar onslaught of information which comes at us with respect to the financial markets.

Second Quarter 2002|Jim Williams| We are now under a constant barrage of bad news in the financial pages. The declines in stock values have been dramatic. The S&P 500 is trading at levels we last saw over 5 years ago. The internet bubble, the irrational exuberance bubble, the speculative bubble, are all being erased. This is what fills the headlines. Let me urge you to consider where the pain is really coming from.

First Quarter 2002|Jim Williams| Recall that the fundamental reason for fixed income in a diversified portfolio is to moderate the volatility of the equity component of the portfolio while maintaining a reasonable yield and a store of value. A perpetual argument exists among bond investors about the relative merits of using bond funds versus direct investments in individual bonds.

Fourth Quarter 2001|Jim Williams| With all the recent lowering of interest rates by the Federal Reserve, and with money market yields below 2% it would seem that interest rates are about as low as they can get. This is a circumstance that gives us cause to examine the role of fixed income in our portfolios. Why would anyone want to hold bonds knowing that interest rates are going to go up?

Third Quarter 2001|Jim Williams| Watching the abrupt decline in portfolio values after the terrorist attacks was disconcerting, to say the least. The horrible events themselves left many of us with a sense of loss, and a feeling that our personal security was impaired. These emotions were compounded by the reaction of the financial markets. Here's a comparative look at the market impact of several crisis events and the amount of market recovery after the end of the market reaction to the crisis