Traditional Equal Weighting May Not Be as Diversified as You Think

Traditional Equal Weighting May Not Be as Diversified as You Think

The core belief that we have held at PowerShares since we were founded back in 2002, and continue to hold today, is that funds tracking market-capitalization-weighted indexes may not represent the optimal investment strategy.  Why? If one believes (as we do) that markets aren’t perfectly efficient and security mispricing can and does exist, market-capitalization-weighted indices will, by definition, have overweighted those securities that through time proved to be overvalued and similarly will have underweighted those securities that proved to be undervalued — thus creating a relative drag on investment performance.  Of course the quest for active managers is to accurately identify which camp each security falls into at a given point in time (overvalued versus undervalued) and position portfolios to capitalize on the reversion to the mean. 

Read More

Contrarian View: A More Balanced Approach to Rate Risk in 2015

Contrarian View: A More Balanced Approach to Rate Risk in 2015

The threat of higher interest rates is dominating many 2015 outlooks for investors and professional forecasters alike. Consensus expectations call for the Federal Reserve (Fed) to begin tightening in the second half of the year, with market rates to rise in concert and bond prices to fall. But the changing composition of voting members on the Federal Open Market Committee (FOMC) is a looming variable that I believe will likely impact the pace and severity of Fed action.

Read More

Anti-Austerity Syriza Party Wins Greek Election. Will Its Tone Moderate?

Anti-Austerity Syriza Party Wins Greek Election. Will Its Tone Moderate?

The radical leftist Syriza Party was a clear winner in the Jan. 25 Greek elections. The party fell just two seats short of an absolute majority, resulting in a much bigger victory than expected. Alexis Tsipras, leader of Syriza, has wasted no time in forming a coalition government with the Independent Greeks – a small right-wing party with only one policy in common with Syriza: rejection of the Troika agreement (a financing agreement with the European Commission, the European Central Bank (ECB) and the International Monetary Fund) and austerity.

Read More

10 Takeaways From 10 days in China

10 Takeaways From 10 days in China

Toward the end of 2014, we spent 10 days meeting with economists, industry consultants and foreign and domestic companies in Shanghai, Beijing, Hong Kong and Macau to evaluate investment opportunities. Our visit resulted in a deeper understanding of potentially powerful current and emerging trends.

Read More

Oil Roils: Disconnect Between Price and Economics

Oil Roils: Disconnect Between Price and Economics

This oil price cycle has been unique and dramatic, even for me — a 20-year survivor of previous cyclical gyrations. Forecasters, commentators and investors alike want to know what’s coming next in the cycle — how low will prices go? No one knows the answers, of course, but here’s what we can observe.

Read More

ECB’s QE Program Surprises to the Upside

ECB’s QE Program Surprises to the Upside

The European Central Bank (ECB) said Thursday that it will provide greater stimulus to the eurozone in a determined effort to boost growth and inflation in the region. The ECB announced plans to embark on quantitative easing (QE), meaning it will purchase bonds outright in an effort to inject greater liquidity into the financial system in hopes of generating increased private sector credit and demand. Many are calling the move a “landmark” decision since it marks the first time the ECB will undertake QE along the lines of similar programs in the United States, the UK and Japan.

Read More