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Real Assets Adviser

May 1, 2015: Vol. 2, Number 5

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  • Financial Life: If Joe Duran is correct and the wealth advisory business is destined for enormous change, why is he smiling?

    It is one of the things business executives fear most — disruptive change to their industry. It can reduce a business model to obsolescence, steal market share and evaporate profits.

    Think of the bankrupting of Kodak after the advent of digital photography, the decimation of the music industry after MP3s and music-sharing applications came along, or how Microsoft was marginalized when the company moved too slowly into the new frontier of cloud computing.

    The wealth advisory business has already seen its share of disruptions, and Joe Duran points to more disruptions to come. The founder and CEO of United Capital sees “massive” changes yet to come, including the widespread use of robo-advisers and the emergence of a cottage industry filled with boutique financial advice practices, triggering a major compression in the pricing for investment-only services.

  • The One-Stop Solution: Mutual funds offer investors a bundle of real assets, but indices to measure performance are lacking

    Toward the end of March, U.S. crude (oil) reserves jumped by 8.2 million barrels in one week, reaching the highest levels in about 80 years. As could be expected, this unusual economic occurrence affected energy valuations, which were already weakened by oversupply, and the price of U.S. light crude oil flowed below $50 a barrel — a good deal if you are a consumer; not such great news if you are a real asset investor.

  • The Intelligent Edifice: New technologies promise to boost the built environment

    Think about your office building’s intelligence quotient. It is no Einstein. Do not feel badly; most buildings are well to the left of the bell-shaped intelligence curve.

    The commercial structures we inhabit started as little more than a protective shell, separating us from the elements. Concrete block construction gave us strong edifices of limited height and flexibility. Then they started breathing as we incorporated heating and cooling systems to enhance our comfort. When the steel girder came along, our buildings turned from crustaceans into vertebrates and are now capable of reaching far into the sky and withstanding shocks as violent as earthquakes.


  • Retail Real Estate Still in Fashion: But a low cap-rate environment suggests it might not be in vogue for long

    So some of your well-heeled clients are inquiring about the attractive returns various U.S. retail real estate investment vehicles have been generating the past few years. They keep hearing that investors targeting regional malls, smaller centers and freestanding properties are managing to defy the nation’s relatively anemic economic recovery, as well as the continuing onslaught of e-commerce in certain categories.

  • Oil City Is Losing Its Viscosity: Crude could blacken the outlook for Houston and other energy-dependent metros

    Houston has got a problem.

    The red-hot Texas city has been running its economic engine on high-viscosity oil for years, to great effect. It might be difficult for some of us to believe that economies still run on something this primeval as oil. But oil is the culture in Houston; it is a matter of civic pride. Oil is to Houston what champagne is to France. And it’s a darn good living at $110 a barrel. Houston honky-tonks have been belting out songs of happiness and prosperity for some time now.

  • Here Come the Millennials: They are using their digital expertise to change how they shop, invest and finance their future

    The leading edge of the millennial generation (those born between 1982–2004 or 1980–2000, depending on the source) is now entering its prime spending, household formation and employment years. This 90 million-strong cohort is the largest and most diverse in U.S. history. The group currently controls about $2 trillion in liquid assets, according to Wealthfront. By the end of the decade, that number will grow to $7 trillion. From there, it will grow exponentially as millennials enter their prime earning years while receiving a massive wealth transfer from their boomer parents. The economy will be feeling the impact of millennial choices for decades to come.


  • The Red-Hot Hotel Business: With property values escalating and lots of projects in the construction pipeline, is it time to check out?

    Karen Johnson has been keeping tabs on the hospitality and hotel business for more than 30 years. Her pedigree as a hospitality industry consultant includes stints with organizations such as Horwath Landauer/Landauer Associates, Jones Lang LaSalle, Marriott and PKF Consulting. Now, as principal of Pinnacle Advisory Group, we asked her to assess the current state of the hotel sector.

  • A Losing Battle: The numerology of a death foretold.

    Coal is still the fossil fuel that is used to generate 40 percent of the world’s electricity. It is also the dirtiest of all fossil fuels. Coal plants churn-out toxins such as mercury, which retards brain development in youngsters, and sulfur and nitrous oxides, which damage lung tissue.  Health experts estimate that coal emissions kill 800,000 people a year, most of them poor. Numbers like that and the following statistics bode very poorly for the coal industry’s future.

  • Crude Geography: How the U.S. energy market is breaking from the price constraints of the global oil market

    Peter Zeihan, author of the book The Accidental Superpower, on the future of U.S. and global oil prices. The following are some excerpts from his appearance on the TV program Global Public Square.


  • Separating Real Estate from Financial Stocks: An idea whose time has come

    Stock exchange–listed Real Estate Investment Trusts (REITs) as well as other listed real estate companies have long been included in the Financials Sector of the stock market as classified by the Global Industry Classification Standard (GICS). Now, S&P Dow Jones Indices and MSCI, the co-developers of GICS, have agreed the time has come for this to change — and with good reason. Real estate is about to be recognized as a major part of the U.S. economy and capital markets, as well as a distinct and much more visible investment opportunity for all to see.