Money management companies report growth in 2013
By Natalie Sherman, The Baltimore Sun 10:16 a.m. EST, January 4, 2014
If you want to know something about the history of the Baltimore investment community, you might want to call James Hardesty.
The 67-year-old history buff and chairman of Hardesty Capital Management has spent his career in Baltimore, starting with a job in the mail room of Alex. Brown & Sons and later as an executive at the old Mercantile Safe Deposit & Trust Co. Both Baltimore companies eventually were acquired.
He founded his own investment firm in Baltimore in 1995. Today, it manages $800 million in assets, with a goal of reaching $1 billion within two years. To help achieve that, the firm recently hired a new president.
Hardesty recently discussed the stock market, challenges for his firm and an old classmate who is a former U.S. president.
After buying a Timonium court reporting company and a Towson spice maker, Chad Meyer is returning to his business roots — the world of high finance.
By Gary Haber, The Baltimore Business Journal Dec 3, 2013, 2:19pm EST
Several times a month I am asked where I think the stock market will be in six months or a year. The question implies that I am some sort of stock market astrologer, and that would be very scary. I just reply “I have no idea.” In the short term, I doubt that anybody has much of an idea where the stock market will go. But over the last 75 years, the market has provided an average total return of 9.4% compounded annually, comprised of 5.4% price appreciation and 4.0% dividend yield.
But the market direction question is really trying to ask is how do you time the market: when do you sell out and when do you buy in? This strategy of market timing is fraught with risk and can be very dangerous. The timing of the market requires two critical decisions: when to get out and, more importantly, when to get back in. The second decision, when to reenter the market, is really the hard part. (more…)
For the first time in my life, I am being asked when I plan to retire. It seems like only yesterday, when as a ten or twelve year old, I would sit in church on Sunday mornings thinking I would never finish my education, let alone turn sixty-five, then considered a normal retirement age. Now I am sixty-seven and advising clients on retirement planning.
Sooner or later, almost every retired client of our firm; a young sixty something or the very old; the moderately wealthy or the very rich; the big livers or thrifty old ladies, all ask the same question: “Will I run out of money in my lifetime?” I have come to the conclusion that no matter how wealthy you are, you will know you are old when you think you might run out of money. (more…)
The United States and the world suffered through a miserable quarter of political and economic disappointments. The Arab Spring turned into an Arab nightmare as Egypt’s President Morsi was ousted in a military coup, leaving the country in a state of civil unrest. Citizens of neighboring Syria, suffering through a seemingly endless civil war, were unbelievably subjected to a ruthless poison gas attack that killed fourteen hundred people, many of them children. A stunned world watched as President Obama’s threatened missile retaliation was averted at the eleventh hour by the almost fictional villain, former KGB Chief and now Russian President Vladmir Putin, who brokered a deal for peace in exchange for the destruction of Syria’s chemical weapons stockpiles. In late September, there was an Al-Qaeda-led massacre in a Kenyan shopping center. Kenya, we believed, is one of the more peaceful nations in Africa. Finally, a deranged man attacked the Naval Shipyard in Washington, resulting in twelve deaths. (more…)
‘Uncertainty fatigue’ has set in among investors
By Eileen Ambrose, The Baltimore Sun October 13, 2013
Not too long ago someone asked me what kind of an investor I was. I was tempted to make a joke of the question and answer simply, “A good one.” But then I thought of one of my old professors at Columbia Business School, Benjamin Graham, and I realized the depth of the question.
Graham lived from 1894 to 1976, wrote extensively, and was widely accepted as one of the most influential investment minds of all-time. He was credited with educating many investment luminaries including Warren Buffet, former Goldman Sachs partner Leon Cooperman, Mario Gabelli of the Gabelli Asset Management and, of course, me! (more…)
The results for the second quarter were good. We estimate that the domestic economy, supported by continued gains in housing and solid automobile sales, expanded at a rate of 1.7% in Q2 2013. The current economic expansion, which began in February 2009, is now 52 months old and approaching the average 57 month expansion in the post WWII period.
If we view this recovery in terms of employment, corporate profits, and gross domestic product growth, it is clear employment is the laggard. One possible explanation could be that our economy is becoming more productive, benefitting from investments in the information revolution, which are more widespread than previously thought. This development has lowered labor needs. Another explanation could be that corporations were surprised at the suddenness and the magnitude of the fall in the economy in 2008. The recent credit crisis was fueled by the bankruptcy of Lehman Brothers, which resulted in the bankruptcies of General Motors and Chrysler. These events pushed any number of companies to the brink of insolvency. Managements, shocked by the closing of credit markets, became very reluctant to add full-time employees, contributing to the current employment woes. The third factor potentially retarding employment levels is the uncertainty surrounding the implementation of the Affordable Care Act, which impacts 18% of the US economy. Many of the details of the program are unresolved.
It’s the Economy, Stupid — Bill Clinton, 1992
It’s the Fed, Stupid — Hardesty Capital Management, 2013
The stock market performed exceptionally well in the first quarter of 2013. In fact, the Dow Jones Industrial Average broke through its 2007 high of 14,400 on March 11 and finished the quarter with a total return of 11.9%. The S&P 500 flirted with its all-time high and closed the quarter at 1,569, just above its former peak of 1,565, and had a total return of 10.6%.
Also notable was the failure of the bond market to keep pace with the stock market, confirming our long-held fears that the bond market was vulnerable to a rise in yields, which occurred in the quarter. The 10-year Treasury yield rose from an all-time low of 1.41% in July 2012 to 2.06% on March 11, only to fall back to 1.86% by March 31. With interest rates at such low levels, even small movements resulted in extraordinary price volatility, both up and down, in bonds.
Since the S&P 500’s closing low of 683 on March 6, 2009, the index has recovered 130% to 1,569. It took the S&P over 4 years to recover to its old highs. Investors have remained fearful of equities long after the 2009 lows were established. As the chart on the next page indicates, large outflows of funds from equity mutual funds continued almost monthly until early 2013. The big gains in equity prices have been accompanied by large increases in earnings. This means that the market is paying the same (or even lower!) price per dollar of earnings. As a result, valuations remain very reasonable (see chart, back page). In addition, many retail stock brokers report strong resistance on the part of small investors to increasing exposure to equities. Perverse as this may sound, the absence of the small investor provides a large reservoir of funds for future equity investment, which in turn will support or even increase equity prices down the road. (more…)
Ignoring political drama in Washington could be the new norm
By Eileen Ambrose, The Baltimore Sun 7:30 p.m. EST, March 8, 2013
Baltimore-area money managers like what they see ahead for the U.S. economy.
By Gary Haber, The Baltimore Business Journal Jan 25, 2013, 6:00am EST
Despite an acrimonious, bordering on uncivilized, debate between the executive and legislative branches of the government, a major tax reform bill was passed and signed into law in the predawn hours of January 2nd. Regardless of when the legislation was signed, it appears our nation has avoided a journey into an economic twilight zone known as the “fiscal cliff.”
The eleventh-hour rescue appears to have temporarily avoided a crisis, but virtually no party to the legislation is satisfied with the outcome. Some would say that the can was again kicked down the road, and major issues remain. Sometime in the first quarter of 2013, perhaps as early as March 1st, additional authorizations will be necessary to increase the Federal debt limit, which created a near-crisis in August of 2011 when it was last addressed. The consequence of that crisis was the loss of the country’s AAA bond rating, and it appears this debt limit problem will be every bit as contentious as that of 18 months ago. Be assured that the hostile environment in Washington associated with economic issues will be with us for quite some time. (more…)
Over the last 30 years, there have been monumental changes to the investment advisory industry in our region. Many great, locally owned firms, like Alex Brown and Mercantile Safe Deposit & Trust, are gone. Others, such as T. Rowe Price and Legg Mason, survived and thrived. Dozens of small money management firms have been created as professionals left larger organizations over the years to start their own. As a result of these movements, the local investment advisory landscape is currently dominated by brokers, Registered Investment Advisors, and banks. RIAs seem to be growing the fastest at the moment, primarily because that business model appeals the most to both clients and practitioners.
The brokerage industry has witnessed mass defections to the RIA model as brokers have struggled with the shrinking compensation levels they have been forced to endure. Most of the compensation to brokers in the past was centered on transaction-based fees and 12b-1 fees from mutual funds. As brokerage firms reduced payouts and attempted to shift clients toward an assetbased fee, many in the industry decided to start their own practice as RIAs. Entire companies were formed to provide platforms for these disenfranchised brokers to start their businesses. (more…)
If you own stock, the fiscal cliff could be your chance to cash in.
By Gary Haber, The Baltimore Business Journal Dec 14, 2012, 6:00am EST
