DAILY UPDATE: Wall Street’s Hell Week & National Dentist’s Day

By Staff Reporters



National Dentist’s Day falls on March 6th every year. It was established as a way to show appreciation and thanks for dentists. It’s also a way to bring awareness to dentistry so that people will know more about how to care for their teeth. It also encourages people who may have avoided going to the dentist to come in for a checkup.

MORE: https://nationaldentistsday.com/


“WALL STREET Hell Week: Features several potential landmines for the stock market. One of them is the jobs report on Friday. Employment numbers have been on the rise, and continued strength in the labor market could lead to more interest rate hikes. Another key event this week: FOMC Chair Jerome Powell’s testimony on Capitol Hill. He’s expected to field questions on the trajectory of inflation and the looming debt-ceiling crisis.



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How to Review Style-Based Stock Portfolio Performance Evaluations

Stock or Manager Relevance Comparisons and Philosophy

By Dr. David Edward Marcinko MBA, CMP™


One relatively recent performance evaluation approach that was developed to help improve the relevance of comparisons is the separation of stock universes and managers by style. This classification method attempts to distinguish between stocks or manager philosophies based upon general financial characteristics of the investments.

The Managers

In very general terms, a manager is often a growth manager if the investment approach that the manager uses focuses on stocks showing growth and momentum in its earnings and price.

A value manager is generally considered to be a manager that attempts to identify under-valued securities based upon fundamental analysis of the company.  A stock may be considered either “growth” or “value” based on a given set of valuation measures such as price-to-earnings, price-to-book value, and dividend yield.

The Style

The goal of style-based performance comparisons is to take some of the biases of the market environment out of the comparison, since a portfolio’s returns will ideally be evaluated versus a universe of alternatives that represent similar investment characteristics facing the same basic market environment.  Thus, if the environment is one in which investors in stocks with strong past earnings and price momentum have generally performed better than those using fundamental analysis to find under-valued stocks, comparing the growth/momentum portfolio to a growth index or universe should help eliminate the bias.

Style-based universes can help the medical professional better understand the basic environment captured over a given performance time period.

However, there are significant limitations with the various approaches to constructing style-based stock and manager universes that should be understood if they are to be used in direct performance comparisons.  Taking style-based stock universes separately from style-based manager universe, one of the most significant issues regarding the categorization of stocks by “growth” and “value” styles is the lack of agreement in the specification of what a growth stock is versus a value stock.  With some universes divided by price-to-book value, others by price-to-earnings and/or dividend yields and some by combinations of similar variables, stocks are often classified very differently by two different stock universes.  Further, stocks move across a broad spectrum as their price and fundamentals change, resulting in stocks constantly moving between growth and value categories for any given universe.  If there is ambiguity in the rating of a given stock, then the difficulty is only compounded when we attempt to boil what may be complex investment processes of an investment manager or mutual fund portfolio manager to a simple classification of growth or value.  A beaten down cyclical stock that no self-respecting growth/momentum manager would purchase may be classified as “growth” because it has a high price-to-earnings ratio (i.e., from low earnings) or a high price-to-book value (i.e., from asset write-offs).  Value managers are not the only ones to own low valuation stocks that have improving earnings.


The second problem with style categorization is that managers are often misclassified or they purposefully “game” the categorization of their own process in order to appear more competitive.  As an example, if a manager that typically looks for relatively strong earnings/price momentum is lagging in a period when “growth” managers are outperforming, the rank of the manager can be improved simply by claiming a “value” approach.  Morningstar’s “style box” classification of mutual funds by size and style of the current portfolio highlight this problem for any given fund by showing how their portfolio has changed its classification annually.

Current Events

The stock market has been booming lately. Up almost 100% since March 2009, after being down almost 50%. And so, perhaps this is a good time to re-evaluate the performance of your investment portfolio[s].


However, this leads to an interesting question for the medical professional or his/her advisor: If a manager is still using the same basic investment philosophy and disciplines, but their “style” category has changed according to the ratings service, should you fire them?  If the answer is “yes”, then the burden of monitoring and the cost of manager turnover are an inevitable part of narrow style based performance comparisons.

But, if the answer is “no,” then it is easy to see the difficulty of fitting every management approach into a simple style box.  The more reasonable alternative is to use style-based stock and manager universes as a tool for understanding the environment, rather than an absolute performance benchmark.


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PODCAST: Health Insurance “Medical Policy” Explained


By Eric Bricker MD




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Understanding Active Asset Allocation

The Two Types of Active Allocation

[By Jeffrey S. Coons; PhD, CFA]

[By Christopher J. Cummings; CFA, CFP™]

ACASometimes, physician investors feel that the markets either overreact or under react to a given piece of news – related to a specific security – and are generally willing to commit their time and resources to find mispriced securities.  

For example, a young physician with a long time horizon may feel that the financial markets are too focused on the near-term following a decline in a pharmaceutical company’s stock from a disappointing FDA report.  Or, the recent banking industry debacle is a good sector wide example of abrupt depression. 

And so, if active asset allocation makes sense based upon the limitations of passive asset allocation in managing risk over even long periods of time, how do physician investors – and their advisors – make active asset allocation decisions?   

The Approaches 

There are two distinct active asset allocation approaches used to build an investment portfolio.   They are the top-down method and the bottom-up method, and they differ based on how important economic and industry variables are to the decision-making process relative to individual security variables.  

Top-Down Approach

Advocates of the top-down approach generally begin their investment process by formulating an outlook for the domestic economy, and in certain circumstances the outlook is constructed for the global economy.  This may be a direct result of a quantitative model using various market and economic data as input to reach a conclusion regarding the best asset mix on a tactical basis, or it may be a more subjective process resulting from a qualitative assessment of the market and economic outlook.

In developing an economic overview for qualitative top-down asset allocation decisions, the medical professional and/or his advisors typically consider factors such as monetary policy, fiscal policy, trade relations, and inflation. Clearly, macroeconomic factors such as those listed above are likely to have a significant impact on the performance of a wide range of investment alternatives.

After a thorough analysis of the overall economy has been completed, top-down investors will either buy broad baskets of stocks representing an asset class or perform an analysis of industries that they believe will benefit from the economic overview that has been developed. 

Factors that may influence the attractiveness of particular industries include regulatory environment, supply and demand of resources, taxes, and import/export quotas. 

The top-down approach generally views the best company in a weak industry as being unlikely to provide satisfactory returns.  

The final step in the top-down process involves analyzing individual companies in industries that are expected to benefit from the forecasted economic environment.  


Bottom-Up Approach

In contrast, investors employing a bottom-up approach will focus their attention on identifying securities that are priced below the investor’s estimate of their value.

Physicians and investors using the bottom-up approach to asset allocation and portfolio construction will only purchase securities deemed attractive according to their basic pricing and security selection criteria, thus adjusting the overall mix of investments by the limit of securities considered attractive at current valuations.

A truly bottom-up approach will consider economic and industry factors as clearly secondary in identifying investment opportunities. Investors using this approach will focus solely on company analysis.   However, they must recognize that investment decisions cannot be made in a vacuum.  Macroeconomic factors, as well as industry characteristics and traits are likely to be key elements in identifying attractive investment opportunities even on a security-by-security basis.

The key to bottom-up asset allocation and portfolio management is to realize that the decision variables driving the basic mix of assets in the portfolio are more related to the availability of attractive individual investments than to a general top-down market or economic overview.

Are you an active or passive investor?

If an active investor; what type are you?


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