Q3 2012 Letter from the President | Part 2

This week we will be presenting excerpts from the latest President’s Letter by Roger Hewins. If you missed it, catch up with yesterday’s post on risk and volatility in the market.

So what’s the good news?

Well, markets remain cheap. Latest numbers show the ratio of expected earnings for the next year to stock prices – called the “forward looking p/e ratio” – to be quite low around the world:



Europe, Australia, Far East (EAFE)


Emerging markets


Source:  J.P. Morgan Asset Management

Earnings are still pretty good, and with rising earnings and more or less stable prices, stocks are cheap based on traditional measures. Of course, if our fears are realized and big troubles hurt these companies and their earnings, they could get cheaper still. That is risk. But from where we are today, anything short of some serious setbacks could mean very good things for the investor.

What about Stockton?

Well, the good news is that excellent bond managers, such as the team at Vanguard, managed to avoid holding any of the bonds from Stockton or the other two California entities which filed for bankruptcy. If anyone naively believed they could buy their own bonds and do without professional credit analysis, let this be a lesson to them. Buying bonds from a broker and having no credit analysis is like picking up quarters on the freeway. It might work for a while, but…

More potential good news – perhaps these entities will effectively address their problems now. They have an opportunity to completely restructure their financial obligations, and we can only hope they get it right this time. Lots of pain, but we knew that was coming all along, like watching a slow motion train wreck. Fingers crossed.

Stay tuned for tomorrow’s post, “Meanwhile, in the rest of the world…” 

Hewins Financial Advisors, LLC d/b/a Wipfli Hewins Investment Advisors, LLC (“Hewins”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. Hewins is a proud affiliate of Wipfli LLP. Information pertaining to Hewins’ advisory operations, services and fees is set forth in Hewins’ current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at www.adviserinfo.sec.gov. The views expressed by the author are the author’s alone and do not necessarily represent the views of Hewins or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Hewins, and Hewins does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Hewins of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional. Hewins does not provide tax, accounting or legal services.
Roger Hewins
Roger Hewins


Roger Hewins is the President of Hewins Financial Advisors. Roger has more than 30 years of experience in investment management, helping bring the sophisticated financial advice typically reserved for large institutional clients to everyday investors, from high-net-worth individuals and families to small businesses and retirement plans.

No Comments Yet

Comments are closed

Q3 2012 Letter from the President | Part 2

time to read: 1 min