Municipal Bond Risk

While municipals generally carry lower yields due to their tax benefits, beware that they are more risky than comparable Treasury securities. Municipals can default since, unlike the federal government, they do not have the ability to print money. The most recent (and largest ever) city to declare bankruptcy is Stockton, CA. See the article here, Fox News.

Mutual Fund Oversight

Like corporations, mutual funds have board of directors. However, they often exhibit much less oversight and control. Thus, there is debate whether they actually provide any value or simply serve as figureheads. See article here, Smart Money.

Actively Managed ETFs

ETFs were originally designed as alternatives to index funds, but ones that could be actively traded like stocks -- meaning continuous trading and the ability to short and margin. As ETFs have developed, however, they are now moving into active (as opposed) to passive management. This may increase costs, but it provides another avenue for potential investors. See the article here, Index Universe.

Reputational Capital

Ratings agencies are supposed to provide an independent view on a firm's (or country's) financial outlook. However, their involvement in the subprime crisis (i.e., their AAA rating on defunct MBS securities) revealed that the rating agencies are often more reactive than proactive. Thus, they seem to have lost much of their respect and influence. See article here, Breakout.

It Pays to Be Young

The model is changing, as wealth management firms may need to increasingly hire younger advisors. See article here, Reuters.

Step on the Gas

With the economy hitting a "speed bump," market participants increasingly believe the Fed will "step on the gas" to get it going again. Similar thoughts seem to exist in regards to potential action by the Chinese central bank. As a result, markets around the world were up. See the articles here (xinhuanet) and here (MarketWatch).

Is Diversification Dead?

Diversification (primarily based on asset correlation) is a key component of Modern Portfolio Theory (MPT). However, the recent financial crisis illustrated an increase in correlation across asset categories. Thus, many debate whether diversification still helps. Even with increasing correlations, diversification still provides benefit (possibly just not as much). However, the more relevant issue is that increasing correlation across the typical asset categories suggests that diversification is now more critical across "non-typical" categories -- such as commodities, hedge funds, and private equity funds. See the article here, Journal of Financial Planning.

"Dumb Money" Pushing Treasuries

Demand for Treasury bonds pushes prices up and yields lower. Given that Treasury yields are at all-time lows, the implication is that demand for these securities has increased. Many attribute this to buying by the Fed, but this demand is really being driven by retail investors. For contrarian investors, this would be an indicator to sell Treasuries, as retail investors are often referred to as "dumb money." See the article here, CNBC.

Health or Money?

When asked whether they would have health or money, most people would probably choose money. However, a recent study shows that investors actually trust their investment advisors more than their doctors. So, does this imply they care more about their money than their health?????? See the article here, Investment News.

Leading or Lagging

Economists and investors often look to the index of leading indicators to predict the economic future. One measure included in this index is unemployment. However, some debate whether this is more of a lagging indicator since high unemployment hinders spending. In either case, recent news related to initial jobless claims has been positive. See the article here, Reuters.

The ECB Is NOT the Fed

Although both the ECB and Federal Reserve are central banks, they are much different in their approach to managing their respective economies. The Fed's mandate includes both promoting growth and controlling inflation, while the ECB is really only designed to mitigate inflation. Thus, the ECB is not equipped to act in a speedy fashion as the Fed did in response to our financial crisis. (See the article here, Wall Street Journal.)

Alternative Investments for the Masses

Historically, hedge funds and private equity funds have only been available to qualified (i.e., rich) investors. However, new ETFs offer the opportunity for smaller investors to join the party. Check out the new AlphaClone ETF, which will be offered on the International Securities Exchange.