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Clark Troy
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Clark Troy has worked in the financial services world since 2000, and is currently a Financial Advisor at DWM Advisors, registered investment advisor in Durham, NC. He has completed the educational and exam requirements towards a CFP® certification. He worked for years as a management consultant... More
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  • The Shining Of Stock Pickers

    Today Francesco Guerrera of the Wall Street Journal published a piece in which he postulated that a recent drop in correlation between sectors of the S&P 500 and the overall index itself augured well for stock pickers. More simply put, if stocks' performance is less driven by the index, it should be easier to pick winners.

    Could be. But who are the pickers who'll be picking well? And how is the retail investor to pick from the pickers? Most importantly, how will the good pickers know when to stop picking and just go with the flow? And how do they cut expenses when it's better to be passive, without eviscerating their corporate culture? How will they guard against the temptation to extrapolate from their recent victories that they have been anointed by the gods of the market with outsized prescience, and therefore diminish their discipline, or have their judgment clouded? And if they do well, and bring assets into their firms or funds, how will they be able to scale their investment processes and provide succession planning to make certain that their success is sustainable?

    Guerrera really shows his hand a few paragraphs in, when he writes "Aping an index, as so-called passive investors do... will be less viable options." Why are these so-called passive investors? "Passive" is a widely accepted term denoting the strategy of using index products to capture the returns that markets offer investors while minimizing fees. There's nothing so called about it. It is in fact active investors to whom the "so-called" moniker is most aptly applied, since active funds, as they grow, find it more and more difficult to make their returns differ from indices. Hence the importance of the "active share" metric that has emerged in recent years as an analytical/marketing tool.

    Guerrera's argument that "it's a stock picker's market" is trotted out all too often, like some 7-year old mare at the Aqueduct, needed to put a warm body in gate 5. I remember when the highly esteemed Peter Bernstein made this assertion shortly before his demise in 2009. Has it been a stock-picker's market since then? Ummmm, no. In fact, so frequently does a pundit proclaim The Shining of the Stock Picker's Market that I can easily imagine writing an automated text generator to draft such articles. And its content would be scarcely more cogent, verifiable, or value-additive for investors, than the life's work of the Jack Nicholson character in the Stephen King classic: "all work and no play makes Jack a dull boy."

    Apr 15 10:27 AM | Link | Comment!
  • A Risk Facebook Might "Like" -- To Manage

    The Wall Street Journal ran a piece this morning that might be giving Mark Zuckerberg and Sheryl Sandberg a little something to lean in to. The article details ways in which ads are being served to teenager which parents, the public, and Facebook (NASDAQ:FB) itself really don't want them seeing. Ads for things like "opportunities" to enter growth industries such as nude webcam modeling being offered to teenage girls, or holsters for concealed carrying served to inner-city youths. Not good.

    Aside from the reputational concerns, this is a big operational problem for Facebook: it's difficult to control what's being shown to a billion users. I imagine they have some sort of rules-based system that tries to govern this kind of thing based on some flavor of metadata, but there are too many ways around that. Recently, for instance, Facebook has been putting ads in front of me with pictures of well-endowed ladies that say things like "French speakers! Click here to learn the shocking truth." Needless to say, I don't click, because I don't want to be in anyone's database as having shown curiosity in such stuff, lest they show me more. Who knows what they're actually selling, but I tend to doubt it has much to do with La Francophonie.

    Facebook should get out in front of this problem and launch some lean, skunkwork-like project to create some type of social rating/reporting tool for users to offer feedback on ads. Make it quick and easy to rate the appropriateness of ads, maybe just with a like/unlike function or something, and provide some sort of minor incentive (frequent clicker points to buy stuff at Amazon???) before regulators jump on this hard. We saw the impact that the Journal's reportage had on the desire of investment banks to be in metal warehousing. Facebook may be having a similar moment. It will be interesting to see how this plays out.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: FB
    Feb 28 2:26 PM | Link | Comment!
  • The Financial Hypermarket Returns? BB&T Acquires The Crump Group

    The news last Friday (2/3/12) that North Carolina-based BB&T (NYSE:BBT) would acquire Roseland, New Jersey based the Crump Group for $570 million signals a further heating of the already warm space of insurance distribution M&A. Already the nation's second largest bank-owned insurance broker, BB&T Insurance Services becomes the largest independent U.S. wholesale distributor of life insurance and a strong number two in wholesale P&C insurance after acquiring Crump.

    Bank insurance has been something of a sleepy domain in the United States, which has never seen "successful" bancassurance behemoths like ING or Fortis (whoops!) take root. All of Sanford Weill's wiles could not keep the banking and insurance components CitiBank (NYSE:C) together. Even in the shadow of Dodd-Frank and the Durbin Amendment, as banks have struggled to replace revenue streams lost to regulation, there have not been major moves to bring banking and insurance under one roof, until today. Around the banking and insurance world, it was rumored that BB&T and Wells Fargo (NYSE:WF), the bank with the largest insurance brokerage, were working to increase their ability to cross-sell banking and insurance products through their reciprocally complementary channels, which was rational but not that dramatic. Today's news changes the game.

    What's next? To compete, will Wells Fargo feel compelled to make a bid for another big life brokerage like National Financial Partners (NYSE:NFP), which rose today in line with the broader markets? Time will tell.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: BBT, WF
    Feb 07 2:26 PM | Link | Comment!
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