Tag Archive for: investment commentary

Writing: More specific is better until it’s not

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Investment commentary writers often struggle to make their writing more concise. Sometimes being more precise helps.

How to do it

Here’s a before-and-after example:

BEFORE: Value stocks outperformed growth stocks in the last month of the quarter.

AFTER: Value stocks outperformed growth stocks in June.

See the difference? I find many examples like this when I compile and edit fund performance commentary for my asset management clients.

The flip side

On the other hand, commentary writers sometimes go overboard with specificity. One of my pet peeves is excessive references to the quarter under discussion.

If you name the quarter in the beginning of your paragraph, and you don’t change periods, there’s no need to repeat “the third quarter” in every sentence. The repetition is boring. It also uses up space that could be spent on meaningful discussion of the drivers of performance.

What do YOU suggest?

You’ve probably read investment commentary that could benefit from greater specificity. What are your suggestions in this area?

Key lesson for investment commentary writers from my professional organizer

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My personal possessions aren’t as neatly organized as my writing, so I’ve worked with several professional organizers. They’ve taught me a lesson that is critical for folks who write market, economic, or portfolio commentary: Put like with like.

Just as I should keep my overabundant collection of sweaters in one drawer, rather than scattered over all of my dressers, you should organize your commentary topics in a logical manner. This isn’t easy when you’re an investment professional who is under pressure to churn out commentary at a quarter-end, right when you’re busy with other quarterly tasks.

How does this translate into quarterly commentary? For example, you might separate commentary into sections on the economy, stocks, and bonds. I imagine many of you already do this. However, you can take this one step further.

Use some sort of organizing principle within each section. For example, don’t dump economic statistics in any old order. Consider dividing them into positive and negative indicators, or employment, manufacturing, and income statistics. This kind of organization makes it easier for your reader to grasp your message.

Organize your information well, and you’ll make it as easy for your readers to find your message as it would be for me to find my navy blue cardigan if I divided my sweaters into cardigans vs. pullovers and then sorted them by color.

Your mother and the “fiscal cliff”

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Talk to your mother before you use financial vocabulary in your communications. That’s one message I took away from “Guide to the Markets” presented by Andres Garcia-Amaya, a vice president with J.P. Morgan Funds, on September 29, 2012 at FPA Experience 2012 in San Antonio, Texas.

Revealing talk with mom

Garcia-Amaya recalled discussing the “fiscal cliff” with his mother. My paraphrase of his comments follows below.

G-A: Mom, what do you think about the fiscal cliff?

Mom: Oh, it’s so scary.

G-A: Mom, do you know what the fiscal cliff is?

Mom: I have no idea.

Bottom line? Don’t assume your clients and prospects are familiar with financial vocabulary. Test your communications on members of your target audience. Avoid technical terms or explain them briefly.

Market outlook: Risks create opportunities

Garcia-Amaya’s presentation focused on markets, not his mom or communications. He made the point that financial risks and bad news create opportunities for long-term investors because they depress valuations. Also, as Garcia-Amaya noted, $10 trillion is sitting on the sidelines. That’s bigger than the $9.7 trillion size of the entire U.S. mortgage market. When those funds flow back into the market, they should boost prices.

Garcia-Amaya’s current investment preferences include the following:

  • U.S. rather than non-U.S. stocks–“The U.S. is the nicest house in a crummy neighborhood.”
  • Emerging market debt–The emerging markets’ real gross domestic product (GDP) is growing and they have low net debt-to-GDP ratios.

Oct. 7 update: I thought Conrad de Aenlle’s article, “Investors Are Nearing the Edge, Too,” gave a good short explanation of the fiscal cliff: “tax increases and federal spending cuts scheduled for the end of 2012.”

Oct. 10 update: Here’s another plain English explanation. This one is from “The Today Show” with Jean Chatzky. The video clip description refers to “the ‘fiscal cliff,’ a combination of automatic tax increases and spending cuts that could devastate the U.S. economy.”

What about YOU? Do you have a brief explanation that you prefer?

Image courtesy of Sura Nualpradid / FreeDigitalPhotos.net

Reader challenge: Your favorite tool for investment commentary?

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Investment commentary is a key component of client communications for many asset managers and financial advisors. Having the right tools can make your life easier, so let’s share information about them.

Share your favorite tool below

What’s YOUR favorite tool for creating commentary? Please share your top choice in the comments section below.

Any kind of tool is fine. For example: writing book, commentary template, data source, investment strategist, website, data source, software, or company.

My favorite tool is mind mapping because it helps me organize the information I collect from interviews when I ghostwrite investment commentary. I use mind maps to find and organize the most important information.

I’m looking forward to learning about YOUR favorite tools.

Market commentary with wit and wisdom

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Can you recommend sources of market commentary with wit and wisdom? This request from a reader inspired me to ask my social media colleagues for suggestions.

Personally, I enjoy Off the Charts by Floyd Norris in The New York Times. If you’re a longtime reader of this blog, this may not surprise you. I’ve written several blog posts in praise of his writing skill, including “Plain English can bring your financial topic to life.”

Below you’ll find a list of other people’s suggestions. I credit the source in brackets when they gave me permission to name them. Some of the commentaries were recommended by their writers or someone working for their firm.

Still looking for more ideas? Check out the commentaries at Advisor Perspectives. To see what others like, click on the link to the most popular commentaries.

Your suggestions for witty and wise commentary

Did we miss any great sources of market commentary?

Please mention any other great market commentaries in the comments below.

Thank you very much, all of you who so generously contributed to this list.

Image courtesy of Keattikorn/ FreeDigitalPhotos.net

Poll: When can’t you replace “headwinds” in your commentary?

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Is there any time you can’t substitute “challenges” for “headwinds” in investment or economic commentary?

“Headwinds” shows up everywhere in market and economic commentary. I don’t like it because its meaning isn’t clear in the context of commentary. I prefer plainer language, such as “challenges” or “barriers.”

When I posed this question on Twitter, Justin Smith of Jonathan Smith & Co. sent a tongue-in-cheek tweet about one situation in which it’s okay to use headwinds.

 

 

 

What do YOU think about headwinds?

Headwinds has a long history of use in our industry, so I won’t be surprised if many of you vote to continue using it.

Please answer the following question in the poll in the right-hand column of my blog: What is the best substitute for “headwinds” in market or economic commentary?

Your choices include:

  • Barriers
  • Challenges
  • There is no substitute for headwinds
  • (Add your own choice)

I look forward to hearing from you!

 

 

“The Which Trials” according to “Woe is I”

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Woe Is I

If you’ve ever worried whether to use “which” or “that” you’re not alone. It took me years to figure out. However, Patricia O’Connor lays out the rules nicely in “The Which Trials” section of her book, Woe is I: The Grammarphobe’s Guide to Better English in Plain English.

Which vs. that

Here are O’Connor’s rules from page 3 of her book.

  • If you can drop the clause and not lose the point of the sentence, use which. If you can’t, use that.
  • A which clause goes inside commas. A that clause doesn’t.

Investment commentary example

I grabbed a sentence from a John Mauldin commentary to illustrate O’Connor’s rules for using which. In “A Player to Be Named Later,” he wrote, “The carrot is 1% financing for your banks, which can then buy your bonds at 4-5-6% (depending on the country).”

Which is proper in this sentence because the following sentence makes sense: “The carrot is 1% financing for your banks.” Mauldin properly places a comma before the start of the which clause.

Here’s a Mauldin sentence that properly uses that: “Will those lines look like the one that Colonel Travis drew with his sword at the Alamo, where those who crossed and joined him knew their fate?” A sentence consisting only of “Will those lines look like the one?” doesn’t make sense. Thus, that is required.

The first sentence of Mauldin’s commentary requires a judgment call about whether the second clause is essential to the meaning of the sentence. It says, “We have come to the end of yet another European Summit that was supposed to be the one to fix the problem.” The shortened version of the sentence–“We have come to the end of yet another European Summit”–works, suggesting which should replace that. However, it seems important to me that the summit failed to fix the problem. Without that phrase, the meaning of the sentence would change. Thus, it satisfies O’Connor’s stipulation that without the that clause you would “lose the point of the sentence.”

You’ll find more on these rules in “Which Versus That” by Grammar Girl Mignon Fogarty, one of my favorite online grammar resources. For a more technical explanation, see “Introduction and General Usage in Defining Clauses” on the Purdue Online Writing Lab site.

By the way, I wish Mauldin hadn’t capitalized “Summit.” But that’s a whole other issue, which I’ve explored in “Do you use ‘pride capitals’?”

Woe is I is a fun read

I recommend O’Connor’s Woe is I as a fun read. Plus, you may learn something from it. I know I did. I’m glad I learned about it from a post on the Copyediting Facebook page.

Quarterly investment letters–Tell me “What makes them great?”

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Quarterly investment letters are central to many asset managers’ communications with their clients. That’s why I’m asking your help in defining what makes them great.

Please answer my six-question survey (NOTE: I’ve removed the link to this expired survey]. I’ll report on the results in a future blog post.

You inspired me. Thanks!

Investment professionals care intensely about these letters, as I learned when I asked members of  my LinkedIn Groups the following question:

The responses to this “one word” question inspired this survey. I feel fortunate to belong to this community. Thank you!

If a “nobody” wrote Jeremy Grantham’s quarterly letter…

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Jeremy Grantham of GMO is a thinker whose words command attention. Financial professionals will read his quarterly investment letters regardless of how well they’re written. But if an unknown strategist delivered the same content, she or he would not benefit from the same indulgence. In fact, few people might have advanced beyond the initial paragraph about his busy schedule. This realization prompted me to think about how I’d rewrite “The Shortest Quarterly Letter Ever,” Grantham’s December 2011 missive.

Headings: An easy fix for bullet point overload

The first two pages of Grantham’s four-page letter consists almost solely of bullet points. It isn’t easy for the human brain to process more than three to six bullet points.

If Grantham didn’t have time to do more than write bullet points, he could have asked a colleague to group his bullet points by topic under a heading. For example, he has a number of bullet points addressing the position of the U.S., which could have been grouped under headings such as

  • Challenges faced by the U.S. and the rest of the developed world
  • America’s competitive weaknesses vs. other countries
  • American social weaknesses

My headings may not be perfect, but they offer more direction to the reader who skims the letter. Right now, the only headings seen by the reader are not informative: “Notes to Myself” and “Recommendations.” Based on these headings, I’d zoom right to “Recommendations,” missing the views that underlie Grantham’s recommendations.

Bold type: Another easy aid to reading

Bold type is another way to help readers distinguish what’s more important.

For example, the following is a sentence I might have bolded in Grantham’s letter:

When one of these old fashioned but typical declines occurs, professional investors, conditioned by our more recent ephemeral bear markets, will have a permanent built-in expectation of an imminent recovery that will not come.

However, this sentence is currently buried in a 15-line paragraph. However, I do like that the paragraph starts with a bolded phrase: “No Market for Young Men.” This phrase helps readers grasp the point that Grantham gradually builds toward in his paragraph. The graph that follows is also helpful.

Massive overhaul

If I had my druthers, I’d rewrite this piece into paragraphs. The piece would start with an introductory overview. It would use headings, and possibly subheadings.

Here’s my quick, bullet-pointed introduction to Grantham’s content, with an emphasis on his strongest point.

S&P Headed for a L-O-N-G Correction

The U.S. stock market could be headed for a 14-year correction, if historical averages for corrections following bubbles hold true. Other negatives for the U.S. include

  • Demographics that also plague the rest of the developed world
  • Inadequate savings
  • The weaknesses in our infrastructure, education, and government
  • Social issues, such as greater income inequality

In light of these and other factors, I recommend

  • Avoiding low quality U.S. stocks
  • Tilting toward safety
  • Avoiding duration risk
  • Moving slowly into resources in the ground

If you’re not a “Grantham”

If you write investment commentary–and you’re not a strategist of Grantham’s stature–please keep my suggestions in mind as you draft your quarterly market commentary.

You’ll find links to more investment commentary tips in “Resources for quarterly investment commentary writers.”

Feb. 8, 2018 update: I removed the broken link to Grantham’s commentary, which is no longer available online.

Tweets from Jack Malvey’s Boston Security Analysts Society talk

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BNY Mellon’s Jack Malvey spoke about the Search for Global Relative Value During the Great Transition Age, 2009-2025, to the Boston Security Analysts Society yesterday.

I tweeted some of the bits that interested me the most. I was especially interested to learn that he holds no bonds in his personal portfolio.


If YOU attended the session, I’m interested to learn your thoughts about it.