May 29, 2017

McDonald’s Falls Short, Restraining Market’s Rally

The stock market edged higher on Monday, although disappointing McDonald’s earnings kept the Dow Jones industrial average from making any significant gains.

Banks and health shares were the day’s best performers; financial stocks advanced for the 10th time in the last 12 sessions. Bank of America led the group, while the American-listed shares of UBS rose 60 cents, or 3.22 percent, to $19.24, after the Swiss bank’s second-quarter profit exceeded forecasts.

Analysts said the market would probably trend higher in the absence of any weak economic news, but it would need strong earnings and positive forecasts to post large gains.

“Most earnings have been good, maybe not great but good, and as a consequence I think investors continue to show that equities is the asset class of choice for them right now,” said Richard Meckler, president of LibertyView Capital Management.

Weaker-than-expected results from the fast-food company McDonald’s weighed on the Dow after it said its full-year results would be “challenged” by falling sales in Europe. McDonald’s shares lost $2.69, or 2.68 percent, to $97.58.

The Dow Jones industrial average gained 1.81 points, or 0.01 percent, to 15,545.55.

The Standard Poor’s 500-stock index reached another nominal closing record high, rising 3.44 points, or 0.2 percent, to 1,695.53.

The Nasdaq composite index added 12.77 points, or 0.36 percent, to 3,600.39.

The S. P. 500 has advanced nearly 19 percent so far this year.

Nearly one-third of S. P. 500 companies are expected to report earnings this week, including Apple on Tuesday. Of the 109 companies in the S. P. 500 that have reported earnings for the quarter, 64.2 percent have exceeded analysts’ expectations, while fewer than half have topped revenue estimates.

In the bond market, interest rates were stable. The price of the Treasury’s 10-year note was unchanged at 93 21/32, while its yield remained at 2.48 percent.

Article source: http://www.nytimes.com/2013/07/23/business/daily-stock-market-activity.html?partner=rss&emc=rss

Bucks Blog: LearnVest Dips Its Toes Into Investment Advice

3:12 p.m. Updated / To add details about LearnVest

LearnVest.com, which started out in 2009 as a budgeting and money management site aimed at young women, is dipping its toes into the world of investment advice and has spiffed up its online tools to appeal to a broader audience.

LearnVest announced Tuesday that it had become a registered investment adviser, or R.I.A., which means that its certified financial planners — who give advice to the site’s users over the phone and by e-mail — can go beyond telling you to save more and pay off your credit card debt and suggest what sort of investments you should use for your retirement money.

However, while LearnVest aims to offer unbiased financial advice at a reasonable price to people who aren’t millionaires, its offering for now stops short of what many investors may truly want and need. Unlike other sites aimed at smaller investors, such as Betterment, LearnVest doesn’t offer advice about specific investments or fund families, and doesn’t actually execute trades or move money.

Rather, the site’s investment advice focuses on educating clients about asset class and allocation in general, not recommendations for specific investments, said Alexa von Tobel, the site’s founder and chief executive. For instance, planners will focus on what proportion of your portfolio should be in large company stocks, foreign stocks, bonds, real estate, cash, etc.  Ms. von Tobel said LearnVest wanted its clients to “feel empowered to select their own investments,” preferably low-cost exchange-traded funds and mutual funds, which she noted were available from a number of providers.

Although the advice may get more specific in the future as client demands evolve, she said, “For now, we’re not going to say, ‘go with this stock versus this stock.’”

In a follow-up e-mail, she said the site was “not offering implementation at this time because we’re focused on helping our clients get a solid footing in the investing space by understanding risk, portfolio allocation and how to minimize fees,” so they can successfully choose investments on their own.

Clients also are on their own in terms of re-balancing investments in retirement accounts and purchasing actual investments. A sample “Portfolio Builder” plan provided by LearnVest, which includes the investment advice component, simply contrasts a fictional client’s existing asset allocation with a recommended distribution. It also advises clients on how to vet a brokerage firm, before suggesting that they “take a look at Betterment, Vanguard, Scottrade, Charles Schwab, Fidelity and E*Trade.”

LearnVest’s basic tools — its budgeting and money-management features, where you can view all your accounts in one place — are available free. If users want to gain access to a planner, they pay according to the level of service. Previously, the highest level was $349 a year, which included development of a five-year financial plan. Now, the highest level is  the “Portfolio Builder” option at $599 a year, which includes a financial plan as well as “personalized guidance” on your investments from a certified financial planner over the phone and by e-mail. The plan includes not only an analysis of your investments, but also a review of financial aspects like estate planning and insurance analysis.

The annual fee includes an introductory diagnostic call and three subsequent calls with your adviser, along with unlimited e-mail access. You don’t get to pick your adviser, but you’ll speak with the same one each time. That flat fee is all you pay; LearnVest doesn’t charge an additional fee based on the total amount of assets under management.

A question now for LearnVest is whether the site’s financial planners can provide quality service to the volume of clients interested in their services. Ms. von Tobel says LearnVest will have 50 certified financial planners on staff by the end of the year, although she’s unsure how many of them will be full time.

A traditional financial planner might handle between 250 and 350 clients on average, she said, although that number varies greatly depending on the clients’ wealth and the complexity of their financial situations. Since she says LearnVest’s planners operate more efficiently, she expects they will be able to handle “a good amount” over that range, although she can’t yet say just how many that might be.

LearnVest has at least 300,000 users, according to numbers the company released six months ago.

As an R.I.A., LearnVest’s planners will have a fiduciary responsibility to act in the best interests of their clients, Ms. von Tobel said. The full-time planners will be salaried and will get bonuses based on customer satisfaction, she said; neither they nor LearnVest as a company receive commissions for selling investments to clients. LearnVest said in its announcement that its planners would “remain completely unbiased, with no product recommendations throughout the client’s experience.” (Part-time planners must work at least 12 hours a week and will be paid a per-client rate, and also will be evaluated based on customer satisfaction).

Certified financial planners must undergo specific training, pass an exam and have at least three years of experience before earning the designation. In addition, Ms. von Tobel described a detailed hiring process that includes having candidates create a video explaining a financial issue and developing a complex financial plan before they are interviewed. The planners will work from locations around the country, she said.

Along with the addition of the R.I.A. designation, LearnVest has added more features to its Web site, such as the ability for a client’s financial planner to log onto a Web page while they are talking to view the client’s finances at the same time that the client is seeing it. Ms. von Tobel said clients had suggested the idea, which helps streamline interactions between the adviser and the customer. (Planners don’t have access to the information unless they are online with the client, she said.)

What do you think of LearnVest’s approach? Would you pay $599 for its level of investment advice?

Article source: http://bucks.blogs.nytimes.com/2012/09/11/learnvest-dips-its-toes-into-investment-advice/?partner=rss&emc=rss

DealBook: Warburg Stays in the Fray, but Off the Public Market

Joseph P. Landy, left, and Charles R. Kaye, co-presidents of Warburg Pincus, which has been careful not to depend too heavily on leveraged buyouts.Richard Perry/The New York TimesJoseph P. Landy, left, and Charles R. Kaye, co-presidents of Warburg, which has been careful not to depend too heavily on leveraged buyouts.

When mega-buyouts were booming several years ago, private equity firms raced to go public. Today, the stock market has punished those firms that succeeded.

Shares of the Blackstone Group, which was first out of the gate, have dropped in value by more than half since their June 2007 initial public offering. Kohlberg Kravis Roberts and Apollo Global Management, which reached the market later, have fallen more than 22 percent this year.

Agonizing over its stock price is not something that Warburg Pincus plans to do.

In an interview in the firm’s Midtown Manhattan offices this summer, Warburg’s co-presidents, Charles R. Kaye and Joseph P. Landy, insist they will stay private.

“We like being investors,” Mr. Kaye said. “We don’t necessarily want to go into the multi-asset class gathering or multi-asset class management path and be public.”

To translate: The world’s largest firms — Blackstone, K.K.R. and Apollo — are now giant, publicly traded money managers overseeing not only multibillion-dollar private equity funds, but also big hedge funds, real estate investment operations and various other businesses. By slapping their brands on an array of products, these firms have diversified their revenue, in part to please analysts and shareholders.

“They’re moving in other directions that were not part of their historical base, or where they created names for themselves,” Mr. Landy said.

Warburg plans to stick to its knitting, investing out of one giant global fund and keeping itself off the stock market. The firm is scheduled to begin raising money for a new $15 billion vehicle in the coming weeks, according to people briefed on the matter.

It is a path that Warburg has followed for four decades, before the term “private equity” even existed. And it is a model that most of the private equity industry, which manages some $2 trillion, still follows.

Yet it is largely Blackstone, K.K.R. and Apollo that define a popular vision of the modern private equity shop. The firms’ top executives have become celebrities, their donations and lavish parties appearing in the gossip pages. The main building of the New York Public Library in Midtown Manhattan is named for Stephen A. Schwarzman, the head of Blackstone. On Wednesday, Duke announced that David M. Rubenstein, a co-founder of the Carlyle Group, whose I.P.O. is expected later this year, plans to donate $13.6 million to the university’s library system.

Mr. Landy and Mr. Kaye are not exactly wallflowers. Mr. Landy serves on the national executive board of the Boy Scouts of America and Mr. Kaye is the former chairman of the Asia Society in New York.

But for Warburg, keeping its firm private is a matter of maintaining business focus. That means investing in companies in a variety of stages, from venture investments like the Canadian oil explorer Canbriam Energy to classic leveraged buyouts like the takeovers of Neiman Marcus and Bausch Lomb.

By contrast, the publicly traded private equity firms are building out new businesses to buttress their steady stream of management fees. Historically, those annual payments — typically 1 percent to 2 percent of assets — were a small portion of these firms’ earnings. Instead, they depended on lumpier performance fees, taking a share of the profits on successful deals.

Some large investors, including the nation’s biggest pension fund managers, have expressed reservations about private equity firms as public companies.

“We don’t really have a problem with private equity funds going into new businesses,” said Donald Pierce, the interim chief investment officer of the San Bernardino County Employees’ Retirement Association, a $6 billion fund. “But the real question is whether moving away from their core focus will affect their returns.”

Though its roots stretch back to the venerable E.M. Warburg Company, Warburg Pincus dates to 1966, when Lionel I. Pincus and John Vogelstein created a partnership aimed at investing in a variety of companies. Today it manages more than $30 billion with offices in nine cities including Shanghai and São Paulo, Brazil.

The firm has only one main investment fund at any given time, unlike competitors who raise specific funds for, say, mezzanine debt or Asian real estate. During the financial crisis, the firm, along with other private equity shops, saw an opportunity in the battered banking sector. It committed $579 million from its fund to large minority stakes across four banks: Webster Financial, Sterling Financial, National Penn and Banco Indusval of Brazil.

By investing from one pool of money, Warburg executives say they are trying to avoid having to invest for investing’s sake — buying a tech company simply because they are sitting on money in a technology-focused fund that needs to be deployed. Warburg also has less of a central focus on leveraged buyouts, the classic private equity transaction in which a firm borrows large amounts of money to take companies private.

“We’ve always had this broad mandate so that when the L.B.O. world falls off a cliff, we don’t need to do L.B.O.’s,” Mr. Landy said, referring to leveraged buyouts. “This whole diversified strategy at the core of what we do allows us the kind of flexibility that many of these firms are trying to get today.”

Executives say that strategy has helped the firm realize some of its biggest hits. This year, Warburg and Blackstone held an I.P.O. for Kosmos Energy, an oil producer focused on fields in West Africa. Beginning in 2004, Warburg led three financing rounds for the company, totaling about $1 billion.

Kosmos’s May I.P.O., in which its owners sold a 10 percent stake, raised more than $594 million. Warburg’s 42 percent stake alone is now worth $1.9 billion on paper.

But the firm has had its misses as well. None has been more prominent than its $815 million investment in MBIA, a publicly traded mortgage bond insurer, made as the housing bubble was rapidly deflating in late 2007.

At the time, Warburg executives felt that they could catch the proverbial falling knife, investing in a troubled company at the moment that its problems were coming to a head, and riding the recovery to a tidy profit. But MBIA’s woes, rooted in its insuring subprime mortgage investments, only worsened as the financial crisis deepened.

“We fully vetted the thesis, but I wish the returns would have been better,” David Coulter, one of Warburg’s lead partners on the MBIA deal, said, adding that Warburg still hopes to eke out a small profit from the investment.

A crucial reason the largest buyout firms have gone public is to address problems with succession. By issuing public stock, the firms’ founders can more easily cash out their holdings, allowing them to step aside for new leaders.

Blackstone, Carlyle and K.K.R. are all run by executives in their 60s and have not announced clear succession plans.

Warburg has already transitioned to a younger generation. In 2000, Mr. Pincus and Mr. Vogelstein handed off the firm’s leadership to Mr. Kaye and Mr. Landy.

With Mr. Kaye now only 47 and Mr. Landy just 50, the two plan to stick around for at least a little while longer.

Article source: http://feeds.nytimes.com/click.phdo?i=47880e03ff9c5f2eb34c7fbf3114b13e

Bucks: How Rising Stock Prices Can Fool You

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog and on his personal Web site, BehaviorGap.com.

Missed in the heated debate last week over my post about gold was a narrow but crucial point: As the market value of an asset class increases, so does the risk.

While this may not apply to specific, individual stocks in all cases, it certainly applies to the market as a whole. I know this might appear obvious, but we don’t always act as if it is.

Think about this for a minute: Was the SP 500 more risky on March 6, 2009, when it was under 700, or is it more risky today, with the index over 1,300?

Now I realize, for example, that small-cap stocks are more risky than large-cap stocks. But when you consider small-cap stocks as an asset class individually, as the market value goes up, the risk of investing in that particular asset class increases.

The same thing applies to commodities, like gold. You’d be hard-pressed to convince a rational person that gold at $1,500 per ounce is less risky than gold at $500 per ounce.

It’s also fair to say that if we measure risk based on how we feel, almost all of us felt like the market was far more risky in early 2009 than we do today. As prices go up, the news seems better, people start to feel more comfortable and we equate that feeling of comfort with less risk. But that makes no sense when we think about it rationally, which is why investing based on our initial gut feelings can be so dangerous.

No one wanted to touch stocks in early 2009. There was no appetite for initial public offerings. Now money is flowing back into the equity markets and we’re all clamoring for shares of LinkedIn. And this, after a historic 100 percent plus rise in stock prices in a little over two years!

Please don’t misunderstand me. I’m not saying that the stock market is going to crash. I’m not saying that social media stocks represent a bubble (though others are suggesting it). I am trying to point out that as the market value of an asset increases, so the does the risk, and that it makes sense to at least think about that as you make important decisions about what you’re going to do with your life savings.

Article source: http://feeds.nytimes.com/click.phdo?i=3b8d21c13a49478791e5864a1f03d9a0