Archive for the ‘Thinking’ Category

Final Obvious Insights Post

Tuesday, April 15th, 2014

This will mark the final posting to the Tower Private Advisor’s Obvious Insights blog.  We are pleased and excited to inform you that the merge of Tower Private Advisors and Old National Wealth Management becomes official on April 26, 2014.  Since the merger was announced, both organizations have spent hundreds of hours preparing for this transition.  Now, as one unified team, we are prepared to serve you with the very best that both Tower Private Advisors and Old National Wealth Management have to offer.  Going forward, we will use different methods to communicate the information you need to stay current with the national and international forces that shape the investment landscape.

We would like to thank our loyal readers and express our appreciation for your interest in Obvious Insights over the years.  It has been our pleasure to give you the timely information you needed – and the occasional “observation” that may actually have been more interesting than informational.

In the months ahead you will receive similar insights and observations from both our existing investment team and some new team members from Old National Wealth Management. As an example, please click the link below for the most recent edition of the Old National Economic Outlook.

We hope you find the information just as interesting and timely as that received from Obvious Insights.

Gary D. Shearer, CFA

Economic Outlook March-April 2014_1


Weekly Recap & Outlook – 03.21.14

Friday, March 21st, 2014

Tower Private Advisors


  • Divergent equity index results
  • Chairman Yellen speaks…or mis-speaks

Capital Markets Recap

Some interesting performances below (U.S. all green for one month; Europe quite mixed, etc.). Of note is that the S&P 500 touched a new all-time high today before backing off.


Top Stories

There were several interesting stories that popped up this week, including several related to  comments in Janet Yellen’s first monetary policy meeting. First, there has been speculation that the Fed would modify its approach of trying to guide markets by referencing specific levels on specific indicators. For example, a 6.5% unemployment rate has been referenced for the past several months as one critical level. Well, the unemployment rate doesn’t tell the whole picture, as all know. So, with unemployment a hair’s breadth away from 6.5%, the Fed is going to move away from that, which Ms. Yellen made clear.

She also made clear–maybe too clear–that short-term rates would be heading upward–oh, about six months after it’s bond buying program ends. You will note below that, in March, the Fed further reduced by $10 billion its quantitative easing program of buying bonds. So, the present pace of buying is $55 billion; at the present taper rate of $10 billion per month, the Fed will be done buying bonds by September, at the latest; six months after that is–BINGO!–March 2015, which is far earlier than most have expected. The yield on the 2-year Treasury note, a proxy for monetary policy, jumped around and after Chairman Yellen’s comments, as shown below.


  • The Federal Reserve released the results of its stress test of 30 major U.S. banks. Of the 30 banks, 29 passed with flying colors. The only one that failed was Zions Bancorp. The test was about capital adequacy, and Zion came up short. Its shares are down by a bit more than 3% today.
  • A suvey of consumers in China found that almost two-thirds of them plan to withdraw funds from their bank accounts and invest the proceeds “in financial products sold on the internet.” Yikes.
  • Thanks, at least in part, to last year’s big surge by equities, the top 100 corporations have seen their pension plan funding levels jump from 73% to 89%. Another year like the last one will leave them 108% overfunded, but they probably shouldn’t plan on that.
  • Here’s an interesting development. There have been commodity funds around for a long time, and in increasing numbers as ETFs have proliferated. One problem, though, is that most have been based on futures contracts, and it just hasn’t gone well. A firm I’ve never heard of, AccuShares, has filed with the SEC to offer 12 ETFs that offer exposure to the spot prices of six commodities. ‘Coupla things… It’s typically the spot price that we’re most familiar with, as few of us care about wheat for October delivery. This will allow market participants to speculate on spot prices. Notice…12 funds, six commodities. Like the futures markets, these will represent zero-sum games. So there will be, for example, a long-oil ETF and a short-oil ETF. Basically–and I might be butchering this–if oil prices go up, the holder of the short ETF will experience a reduction in value, while the holder of the long ETF will receive a distribution. The funds’ holdings will be cash equivalents. In the past, because expiring futures contracts have to be rolled into further-out–and often higher priced–contracts there has been a natural decay in value. This could open up an entirely new arena for investors.

This Week

Most of the economic data released this week was largely in line with expectations. In housing, the NAHB Housing Market Index, and index of homebuilder sentiment, rose slightly, from 46 to 47, below expectations of 50. There is some risk that the uptrend in builder sentiment is going to taper off, as shown in the chart immediately below.


Housing Starts fell slightly (-0.2%) from an upwardly revised 909,000 (previously 880,000), while Building Permits rose by a much-larger-than-expected 7.7%–economists expected an increase of 1.6%. Existing Home Sales were exactly as expected by economists (down by (-)0.4%.) Elsewhere, inflation, as measured by the Consumer Price Index, was almost non-existent in February, with both the headline and core (i.e. excluding food and energy) numbers coming in at 0.1%, which was in line with what economists expected. That both the headline and core numbers were the same tells one that food and energy prices, on average, were unchanged in the month. On a year-over-year basis, inflation is up by just 1.1% at the core level; 1.6% at the nominal level. The Fed has plenty of disinflationary cover to continue its current monetary policy. Speaking of monetary policy, the Fed announced its plans to continue its taper program, announcing that it had purchased $55 billion of Treasury and mortgage-backed bonds, $10 billion less than in February. Given that it has been transparent about telegraphing its plans, that was exactly as economists had expected. Jobless Claims ticked up just a bit but did nothing to suggest any future direction for the series, as shown below.


Next Week

It’s a busy week for the economists next week, with quite a few economic releases due out. There are several housing-related releases, including the broadest-based measure of national home prices, the House Price Index, Case-Shiller Home Price index, New Home Sales, and Pending Home Sales. Purchasing managers indexes are due out for the Manufacturing and Service sectors. We get the third incarnation of Gross Domestic Product, Jobless Claims, and a couple of regional Federal Reserve reports.

Graig P. Stettner, CFA, CMT
Chief Investment Officer
Tower Private Advisors


June 19, 2013 Federal Reserve Open Markets Committee minutes from May meeting…

Wednesday, June 19th, 2013

In word cloud format naturally, as the real thing is dreadful…



1.14.13 speech by Philly Fed President Charles Plosser

Tuesday, January 15th, 2013

He’s one of the non-voting members (will vote in 2014), and he’s generally considered to be one of the more hawkish (i.e. less accommodative; typically worried about inflation consequences) Fed Presidents. Yet in this speech he didn’t mention “inflation,” per se, much at all, as its size relative to other terms–take “growth,” for example–is pretty small. That seems odd for a Fed hawk. (Word cloud courtesy of


Click for ginormous version

Click for ginormous version


Debt Ceiling:Fiscal Cliff tracking chart

Monday, December 24th, 2012

This chart overlays the current S&P 500 (think blue line) on top of the S&P 500 during the Debt Ceiling debacle of 2011. My thinking is that, with the same body in charge of resolving the issue as was in charge then, it makes sense that markets might follow the same path. One tenet of technical analysis is that history repeats. One tenet of Congress seems to be that it’s dysfunctional. July 31, 2011, was when Congress approved the debt ceiling increase, so I thought it was appropriate to center that with January 2, 2013, when we will be–in some form or other–past the edge of the cliff. Those dates are shown by the dashed orange line. A few days later in 2011, S&P downgraded U.S. Treasuries; that’s the vertical, dashed red line. So far, the current market path seems uncannily like 2011′s. Hopefully, the similarity ends soon. 

Click for big image