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  1. Alibaba Investors: Mind the Risks

    Video Reports

    Sat, 20 Sep 2014

    Valuation on the newly minted wide-moat firm may be reasonable, but potential investors need to appreciate the key business, regulatory, and stewardship risks, says Morningstar's RJ Hottovy.

  2. 'Great Rotation' Into Stocks Runs Its Course

    Video Reports

    Sat, 20 Sep 2014

    Investors have been putting money back into bond funds as interest rates have unexpectedly dropped this year.

    federal reserve found at 0:49, 9:33

    low that people are going to turn to equities. And when the Federal Reserve started talking about removing stimulus in June of 2013, we finally saw the great rotation: Money came out of bond funds and
    go with a firm other than PIMCO. Benz: You looked at some Federal Reserve data that takes a different window into where investors are putting their dollars and found that the assets in mutual funds are at a record-high level, but savers are making some different choices. Let's talk about that data. Rawson: Mutual fund assets and household assets in mutual funds are at an all-time high in terms of the percentage of their net worth, which is encouraging. So, investors have more of their assets in mutual funds than they've ever had before. Real estate has bounced back a little bit, obviously, with the rebound in real estate prices . But what was interesting when I looked at the data is that money market funds haven't kept up with the rise in mutual fund assets. So, typically, you'd think they would go in tandem. People would hold some money in reserve in a money market fund and some money exposed to the market. However, that hasn't been the case. But what has increased is checking accounts. So, I think what's happening is that investors say, "There is no reason for me to take the money that's accumulating in my checking account, write a check to my broker, and deposit this into my money market fund, if there is no yield." With the Federal Reserve keeping interest rates so low and with money market fund regulation requiring money market funds to invest in higher-quality securities (such as
  3. Peters: Know What You Want From Dividend ETFs

    Video Reports

    Sat, 20 Sep 2014

    There can be good reasons to own dividend-focused ETFs, but investors looking for pure income may be better off in individual stocks, says Morningstar's Josh Peters.

    quality risk found at 4:53

    I want to pay less than our fair value estimates. This means quality , risk , and valuation should all be factors. I think those are good things to expect from any sort of investment product, ETF or
  4. Where Will Growth Come From?

    Video Reports

    Fri, 19 Sep 2014

    With dividend yields below long-run historical norms and the market overall looking pricey, growth in companies' intrinsic values will be key for stock investors, says Morningstar's Matt Coffina.

    stock price found at 0:45

    dividends or the dividend yield. Second, you have the change in a stock's price relative to its intrinsic value. So, if a stock is trading below what we think its intrinsic value is based on the present discounted value of its future cash flows, you would expect over time the stock price to converge upward toward that intrinsic value. On the other hand, if the stock is trading at a premium to intrinsic value, you'd expect over time the stock price to underperform intrinsic value and for the stock to decline to what a fair value would be, again, based on the future cash flows that the business is going to generate. And then the third bucket would be growth in the intrinsic value itself. So, as companies grow their earnings, raise their dividends, and realize cash flows, you would expect their intrinsic values to naturally increase over time and that provides a tailwind to returns in the stock market . Glaser: So, let's look at those three factors in today's market environment. How big of a role do you think dividends are
  5. Koesterich: This Bull Market Can Survive Higher Rates

    Video Reports

    Fri, 19 Sep 2014

    The U.S. economy and stock market should be able to absorb a measured rise in rates starting next year, but investors should expect subsequent raises to come soon after, says BlackRock's Russ Koesterich.

    federal reserve found at 0:17

    Russ Koesterich: Jeremy, thanks for inviting me here today. Glaser: Certainly the Federal Reserve has been one of the key focuses of the market recently. We heard from them today that rates are going to stay low for "a considerable time," still using that language. What's your outlook on rates? What do you think the Federal Reserve is going to do? Koesterich: There are a couple of things to consider. The Fed did keep the "considerable" language in the
  6. Carving Out a Moat in the Insurance Industry

    Video Reports

    Fri, 19 Sep 2014

    Morningstar analysts recently upgraded AIG's moat trend rating as the insurer improves its underwriting.

    segment combined ratio found at 1:01

    industry are generally based on insurers being able to either price or select insurable risk more accurately than peers. Effective underwriting shows up in a low combined ratio , which is the sum of insurance losses and underwriting expenses divided by premiums. Over the past decade, AIG's average P&C segment combined ratio was 103%. This means that for every $1 that AIG earned in premiums, they paid out and incurred $1.03 worth of insurance losses and underwriting expense. Following the financial crisis, AIG changed its strategy to focus on risk-adjusted profits. We believe that AIG's investments in its data analytics and claims-handling ability mean that, going forward, its loss ratio and combined ratio will be sustainably lower. Therefore, we forecast that AIG's combined ratio in its P&C segment will improve to the high 90s, that its returns on equity will climb, that it's currently on a
  7. Deflation? We're Not There Yet

    Video Reports

    Fri, 19 Sep 2014

    August may have seen the first monthly decline in overall prices this year, but several categories are still up on a year-over-year basis, says Morningstar's Bob Johnson.

    gasoline prices found at 6:05

    year, which was driven by an unusually strong and short-lived dip in gasoline prices . But that's going to be hard to beat this year because we haven't had as much volatility in gasoline prices this year; so, they don't have as far to fall, frankly. I think, toward the back of the year, we aren't going to get that big push from gasoline prices . Maybe we finally start to see some relief in beef prices, but I wouldn't hold my breath. Glaser: Bob, I certainly appreciate
  8. Schneider: Volatility Will Be a Primary Focus for Investors

    Video Reports

    Fri, 19 Sep 2014

    As Fed policy tightens over the short term, investors will have to actively manage interest rate exposure while looking ahead to a 'new neutral' in the next three to five years, says PIMCO's Jerome Schneider.

    interest rate found at 1:43, 4:19

    little more volatility to the market. And so, for us, thinking about interest rate exposure is one that you're going to have to actively manage over the short-term horizon--the cyclical horizon--as the U.S. economy improves, which we
    ultimately, we're going to think about ways to participate in a higher interest rate environment, and that could be looking out the yield curve in terms of roll down and potentially adding duration back in at
  9. 2 Muni Fund Picks That Sidestep Market Turbulence

    Video Reports

    Fri, 19 Sep 2014

    Fidelity Municipal Income and T. Rowe Price Tax-Free High Yield hold up well when muni markets head south.

    tax exemption found at 0:13

    are divided into short-, intermediate- and long-term categories along with the high-yield muni -bond fund category. There are also state-specific mandates, which are designed to provide tax exemption from a certain state's taxes. Performance in the municipal market is dependent on certain factors, including credit events, changes in bond yields,
  10. Kelly: Stiffer Headwinds Up Ahead

    Video Reports

    Fri, 19 Sep 2014

    Constrained labor force and productivity growth will add up to only 2% real growth for the U.S. economy over the long term, says J.P. Morgan's David Kelly.

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