GARY SHILLING: In This Risk-On Environment, Here Are 9 Investments I Like

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Gary Shilling

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

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GARY SHILLING: In This Risk-On Environment, Here Are 9 Investments I Like (A. Gary Shilling's Insight)

In his latest monthly Insights newsletter, Gary Shilling writes that he still thinks we're in a risk on investment climate, despite red flags we're seeing in global economic growth and financial markets. "So we continue our defensive stance towards equities and suggest Treasurys as a safe haven and beneficiary of possible deflation, especially in the eurozone, as well as a weak U.S. economy," Shilling writes.

Here are the nine investments Shilling finds "attractive". 1 Treasury bonds; 2. Selected income-producing securities; 3. Small luxuries; 4. Consumer staples and foods; 5. The dollar against the euro and sterling vs. dollar; 6. Selected health-care providers and medical office buildings; 7. Low P/E stocks; 8. Productivity enhancers; 9. North American energy producers ex renewables. Meanwhile, he thinks agricultural commodities, especially sugar are unattractive. This is "due to nearly perfect growing weather and enough inventories of many crops (Our own bees are producing a record honey crop!)."

PIMCO Lags 89% Of Its Peers (Reuters)

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Bill Gross' PIMCO Total Return Fund, the world's biggest bond fund had another terrible month, lagging 89% of its peers in July, according to Morningstar data cited by Jennifer Ablan at Reuters. "According to preliminary Morningstar data on Thursday, Pimco Total Return is posting a negative 0.44 percent return, while its peer-fund category has a negative 0.23 percent return for the month as of July 30," writes Ablan. For the year the fund is up 3.25% lagging 76% of its peers.

Investors Are Descending Into The Five Circles Of Bond Hell (Business Insider)

In a low interest rate environment, fixed income investors are desperately searching for yield. Peter Tchir at Brean Capital describes the five "Circles of Bond Hell."

1. "Hope market cheapens: While this strategy has the appeal of being risk averse, it hasn't worked at all."
2. "Increase duration: This seems to be fraught with career risk at this stage."
3. "Decrease Credit Quality: "While dangerous, this remains a viable way to increase yield - assuming the central banks continue to support the markets and the economy muddles along."
4. "Give up Liquidity: "It does mean that your credit decisions have to be better than otherwise, because you likely own this in a down market."
5. "Increase Structure: "This is the next most logical step ... This is where the value is and where investors will be forced to move as it is the best option left to increase yield."

Advisors Need To Help Clients Better Understand Tax-Smart Investment Strategies (The Wall Street Journal)

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A large number of people do their own taxes but aren't aware of tax-smart investment strategies and solutions, writes Mike Miroballi, president of BMO Harris Financial Advisors in the WSJ. "Advisers should remind clients of the importance of positioning assets," he writes. "Putting your least tax-efficient investments in your tax-advantaged accounts like IRAs makes a lot of sense, especially if you don't need that income immediately."

"Advisers should also remind clients to maximize the tax benefits available through tax-deferred accounts. …Advisers should also be familiar with the state-by-state rules for tax-friendly investment vehicles like 529 education savings plans. In some states, if a client is saving for a college education, they can get a tax deduction for contributing to their in-state 529 plan."

Where Has Macro Volatility Gone (Business Insider)

"One of the main reasons for the collapse of volatility in financial markets this year is the decline in macroeconomic volatility, aka the 'Great Moderation,'" writes Ruslan Bikbov, director at US Rates Research at Merrill Lynch. "The decline in trend growth coupled with still-ample spare capacity puts economic growth on a path of narrow volatility. We don't expect volatility to return to historical norms unless macro volatility rises, which likely requires trend growth to increase as well."

macro volatility

Business Insider/Merrill Lynch

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