“The confidence data is having a muted impacted because of the spending data,” said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “That action is speaking louder than what consumers are saying.”

“Just from a very broad standpoint, there are no hard-and-fast rules that when interest rates go up that’s bad for stocks and if the dollar strengthens that’s good for stocks,” says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “You’ve always got to look behind what’s causing either the dollar strength or interest rates to rise. That’s what’s happening over the last couple of weeks—it’s all driven by renewed faith in the US economy.”

“People are recognizing the underlying strength of the U.S. economy, “said Gary Flam, portfolio manager at Bel-Air Investment Advisors. “People who were underinvested in equities after the scars of 2008 and 2009 are coming back. We are beginning to see flows into equities after 18 months.”

“There has been a preponderance of selling in the past few weeks. I think right now the market seems to be taking somewhat of a breather,” said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

“The market’s climbing a wall of worry,” said Todd Morgan, senior managing director at Bel Air Investment Advisors. “We’ve had a terrific rally here, but all great climbers must rest…I wouldn’t be surprised to see the market rest from here” through the end of the year, he added.

“The end goal of QE2 and what the Fed is trying to achieve is increase confidence in the economic situation,” says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “That gets people to spend money, whether it’s capex (capital expenditures) or by consumers on the holidays. Their goal is not to drive down rates, but to use lower rates to achieve the end goal, which is to increase confidence in the economy.”

Gary Flam, portfolio manager at Bel Air Investment Advisors, says that the backup in yields in recent days may not be a good indicator of the success or failure of QE2, noting that yields climbed shortly after the first round of quantitative easing as well. In March 2009 the 10-year yield was 2.6% to 2.7%, but between then and June, the yield rose to 3.8%, he pointed out.

“We’re digesting,” said Gary Flam, portfolio manager at Bel Air Investment Advisors. “The concerns out of Europe have died down for the time being, nothing’s being fired in any of the Koreas right now, there’s just not a lot of information to trade on. It just seems to be a quiet day in the markets.”

“The bottom line is the Fed could continue on with [quantitative easing], and that would keep rates artificially low,” said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors. “The economy’s weakness could continue. Those two factors would bode for rates to stay relatively low.

“With the perceived help that the eurozone is getting in terms of injection of money, that has given the equity markets a huge boost and the bond market is reacting appropriately,” said Kenneth Naehu, Managing Director and Head of Fixed Income at Bel Air Investment Advisors.

Gary Flam, portfolio manager at Bel Air Investment Advisors, cautioned that declines may be exaggerated considering this is a short week because of the Thanksgiving holiday on Thursday.

“This is a thin market and the moves will be exacerbated given the lack of liquidity during a holiday-shortened week,” Flam said.

The rout in municipals “was not unexpected,” said Kenneth Naehu, managing director of fixed income at Bel Air Investment Advisors LLC, which manages more than $6 billion. “It was just a matter of time,” given the large amount of new issues and higher Treasury yields, he said.

Individuals have pumped record sums into bond funds over the last two years, seeking relative safety. Now, “you’re getting a flavor of what can happen” when people find they can lose money in bonds, said Ken Naehu, head of fixed-income investing at Bel-Air Investment Advisors in L.A.

Darell Krasnoff from Bel Air Invesment Advisors speaks on TheStreet’s podcast, The Real Story, about his market outlook for 2011, client spending in a down economy, asset allocation and the California municipal bond market.

“This is just the ebb and flow of a sideways market,” says Gary Flam, portfolio manager at Bel Air Investment Advisory in Los Angeles. “Nobody seems to be giving QE2 any credit for working. It will be interesting to see if it actually does work, because nobody seems to be giving them any credit for the attempt.”

Insight on the CPI and housing starts, with Darell Krasnoff of Bel Air Investment Advisors.

“About 75% of all new issues are being bought by individual investors, who are more sensitive to headlines in the news that suggest cities and states are in deep fiscal trouble, so we could see more volatility going forward,” said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

Last week, 30-year California BABs were yielding around 7.35 percent, compared with 4.25 percent for 30-year U.S. Treasurys and 5.40 percent for tax-exempt California general obligation bonds, according to Kenneth Naehu, head of fixed income at Bel Air Investment Advisors.

Walt Disney reported a profit of 45 cents a share excluding one-time items, versus 46 cents a share last year. Tim McCandless of Bel Air Investments shares his reaction on CNBC’s Closing Bell.

California missed out on a favorable environment for issuers through late summer and early autumn, said Ken Naehu, managing director for fixed income at Bel Air Investment Advisors in Los Angeles.

Now, the market is “trapped” between the expectation of government debt purchases and foreign investors selling similar assets, said Kenneth Naehu, the managing director and head of fixed income at Bel Air Investment Advisors.

“A lot of this has been baked into the market,” said Todd M. Morgan, chairman of Bel Air Investment Advisors LLC in Los Angeles, which manages $5 billion. “It be would healthy if we had a rest in the next six days, but I like the market over the next six months.”

“I think the Fed wants to be creative, and I wouldn’t be surprised if they buy assets other than just Treasuries,” said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

Financial adviser Andrew Palmer of Bel Air Investment Advisors LLC, which manages about $4.5 billion in client assets, invests about 5% of his client portfolios in distressed debt. So far this year, the strategy he employs has returned about 10% for clients; last year, it returned 35%.

“If the Fed is open-ended and says ‘we will do it for as long as it’s necessary,’ that could clearly open up [fears] that all of a sudden, if you get good economic data, the Fed will stop supporting the market, and thus keep bad news viewed as good,” said Gary Flam, portfolio manager at Bel Air Investment Advisors.

“There’s an old statement that ‘all great climbers must rest,’ ” said Todd Morgan, senior managing director at Bel Air Investment Advisors. “This market needs to digest the terrific rise it’s had over the last month and a half. This is healthy. Nothing goes straight up forever.”

“Right now, the overall market is marking time until next week,” said Gary Flam, portfolio manager at Bel Air Investment Advisors. “There’s a lot of data next week both economic as well as political that’s going to really affect the next major move in the market.”

We’re in the camp of muted, sluggish, uncomfortable growth,” said Darell Krasnoff, an adviser with Bel Air Investment Advisors LLC. “But we expect growth nonetheless.”

Anticipating that a large government purchase would push Treasury yields down, investors have been trying to front-run the government’s trade — leading to a recent surge in bonds, said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

“We had started looking (forward) to normalized bank earnings in 2012 or 2011,” said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles.

Each negative economic report issued prior that announcement increases the chances of action by the Fed, said Kenneth Naehu, head of fixed income at Bel Air Investment Advisors. “No one knows to what extent the government is implementing quantitative easing … it’s pure speculation, and expectations are already built into market rates,” Naehu said.

“You have a lot of professional investors and managers that are trailing their benchmarks. September just exacerbated that move,” says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “As we get closer to year-end, there definitely is a push by professional investors to chase rallies and then want to see pullbacks so they can get invested.”

“The prices number is probably spooking a few people” Friday, said Gary Flam, portfolio manager at Bel Air Investments. “If you start seeing more signs of inflation, that will lessen the chance of the Fed stepping up with another round of quantitative easing.”

Tax concerns aren’t enough to spur most investors to sell, said Todd M. Morgan, chairman of Bel Air Investment Advisors LLC in Los Angeles, which manages $5 billion. Morgan predicted any increase will be small and said the only people inclined to divest would be company insiders, he said.

If claims of a deal being near begin to ring false, investor confidence may falter, said Craig Brothers, a portfolio manager at Bel Air Investment Advisors in Los Angeles. “It looks like they said they had a framework just to buy themselves more time,” Brothers said. “I think there is cause to question it.”

Leading Wealth Management Firm Selects Carol Cheng-Mayer for Investment Advisory Services and New Business Development

LOS ANGELES – September 29, 2010 – Bel Air Investment Advisors, LLC (Bel Air), a leading independent wealth management advisory firm to high net worth individuals, families, trusts and foundations, announced today the addition of Carol Cheng-Mayer as vice president to its trusted and highly regarded team of professionals. Carol will provide investment advisory services to clients, and will be responsible for business development.

The trailing 10-year return for U.S. equities through the first half of this year has been as poor only six previous times since 1835–and the latest decade was worse than any of those others. The subsequent 10-year annualized total return from those earlier low-water marks was 13.3%, notes Bel Air Investment Advisors. Based on the returns the public is now happily accepting from bonds, most folks would probably be ecstatic with half that.

“The economy will slowly, slowly get better,” said Todd M. Morgan, chairman of Bel Air Investment Advisors LLC in Los Angeles, which manages $5 billion. “Stocks are the cheapest financial assets out there. The amount of cash in individual hands is enormous, they will get back in.”

“I think people are making a mistake in how they’re trying to be defensive and only staying in high-quality munis and Treasuries,” said Krasnoff of Bel Air Investment Advisors. “They think they can hunker down and be safe, but they may get a big surprise when they see the purchasing power of their wealth declines because of dollar deterioration.”

“The market is being moved by technicals, not news flow, but right now it’s unclear whether breaking out of the range will lead to continued strength,” said Gary Flam, portfolio manager at the Los Angeles-based Bel Air Investment Advisors.

“Unless you let home prices fall to a level that will bring in more demand, you won’t find a bottom. Home prices in many markets like California are still very high and have room to fall further,” said Kenneth Naehu, managing director and head of fixed income with Bel Air Investment Advisors in Los Angeles.

“We’re getting a very strong reaction to corporate bond issuance,” said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors. “The higher yields are luring people away from Treasurys.”

“This is a market where pretty much any sort of vanilla, or high-grade paper, will be well-received,” said fixed-income portfolio manager Kenneth Naehu at Bel Air Investment Advisors in Los Angeles. “Just about all new issues will be well-received.”

“Macroeconomic data is continuing to drive equity prices,” says Tim McCandless, senior equity strategist at Bel Air Investment Advisors in Los Angeles. “As the likelihood or chance of a double-dip looks lower, equity valuations are going to be able to move higher.”

“Housing has been a big source of disappointment lately, and since the pending home sales number wasn’t bad, it has enabled yesterday’s rally to follow through,” said Gary Flam, portfolio manager of Bel Air Investment Advisors in Los Angeles.

“We’re waiting it out,” said Kenneth Naehu, a managing director at Bel Air Investment Advisors in Los Angeles. He manages almost $3 billion in municipal bonds.

The manufacturing report “gives some comfort, but that is only good until the next number,” said Darell Krasnoff, managing director at Bel Air Investment Advisors.

Andrew Palmer, managing director, was ranked in Barron’s “Top 100 Independent Financial Advisors” for 2010.

“The market is pretty strong for well-rated essential service-type issues,” said Kenneth Naehu, managing director and fixed-income portfolio manager at Bel Air Investment Advisors LLC in Los Angeles. “The simple story is that essential-service credits and well-rated bonds are going to be moved at very attractive levels for the issuer.”

“Given the concern of what’s going on in the economy and the potential for a double-dip, I’m looking for more substance to come out of the executive and legislative branches of government and not necessarily out of the Fed,” says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles.

“From a very broad perspective, we got through earnings season after the first quarter at the end of April, and the market had a sharp correction from late April to late May, and we’re right where we were at the end of May,” said Gary Flam, portfolio manager at Bel Air Investment Advisors.

“There’s this fear that a double-dip recession has either arisen or is imminent,” said Naehu. “The pessimism in the economy and desire to avoid risky assets is giving investors the perspective that the Treasury market is a safe trade for the time being.”

“Pretty much across the board, companies that reported earlier said they weren’t seeing a slowdown impact their businesses, that Europe wasn’t impacting us and the U.S. seems to be growing,” said Bel Air Investment Advisors portfolio manager Gary Flam.

“Bears have the upper hand today because claims were so much worse than expected,” said Gary Flam, a portfolio manager at Bel Air Investment Advisors in Los Angeles.

“Cisco is one of the first companies that has July in their results and they were talking about seeing economic uncertainty and the slowdown affecting their business,” said Gary Flam, portfolio manager at Bel Air Investment Advisors.

Investors are looking ahead to the government’s unemployment report due on Friday, said Kenneth Naehu, head of fixed income at Bel Air Investment Advisors. Traders will be gearing up all week for its headline jobs number, which is considered one of the most important gauges of the economic recovery, he said.

Others, like Ken Naehu of Bel Air Investment Advisors, are taking the opportunity to clear out lower-quality bonds in favor of higher-quality issues. “We’re selling everything you won’t be able to sell in the near future” should the bond market suddenly turn on investors, he said.

“There aren’t many people jumping in the stock market — they’re nervous,” said Todd Morgan, senior managing director at Los Angeles-based Bel Air Investment Advisors, which has 260 clients, with minimum portfolios of $20 million. “But that’s usually the best time to buy.”

“I think [this week is] really going to be a continuation of a trend of reassurances from companies that the economy, both here in the U.S and globally, continues to grow and that we’re not heading for a double-dip,” said Gary Flam, portfolio manager at Bel Air Investment Advisors.

California’s general obligation bonds are selling briskly despite being rated just a few notches above “junk” status, said Craig Brothers, of Bel Air Investment Advisors. “There is still a lot of demand out there,” Brothers said. However, he added that he will wait to order more California debt. His Los Angeles firm oversees $2.7 billion in fixed-income assets, including $2 billion in municipal bonds.

“At the end of the day, you saw a big snapback in the market over the last week or so off the lows without much justification behind it,” said Gary Flam, portfolio manager for Bel air Investment Advisors. “But the reality is we just received more data that called the sustainability of this economic recovery into question.”

In a recent survey, 91% of wealth management advisory firm Bel Air Investment Advisors’ high net worth clients said they were concerned with wealth transfer.

“The fact that you have certainly, and not necessarily a friendly bill but a bill that you now know exactly what’s in it and what it constitutes, that certainly is being received well in today’s market,” said Gary Flam, portfolio manager of Bel Air Investment Advisors.

“When a client comes in, we have a long dialogue about their history, their sleep-well quotient, income needs, estate planning,” said Todd Morgan, senior managing director of Bel Air Investment Advisors in Century City, Calif.

“The Fed announcement yesterday gave the bias that the economy is not improving,” said Naehu. “So now we still have a flight to quality trade, and [the bond market] is of course the least scary place to invest.”

“For the most part, the vast majority of our clients give us full discretion and with that disrection comes the simple mandate: maximize the yield with minimal risk,” said Naehu, who has headed Bel Air’s bond division since leaving Bear Stearns’ West Coast municipal bond department in 1998.

Gary Flam, managing director and portfolio manager at Bel Air Investment Advisors in Los Angeles, knows customers are still skittish about stocks. But he successfully rode one kind of stock- high-dividend payers- through the downturn, and today, he’s still buying. Flam considers a dividend, a share of a company’s earnings passed along to stockholders, to be a sign of reassurance. And if a stock’s price dips, he adds, “a dividend tends to cushion the blow.”

The next 12 months will see higher prices for residential real estate, in the eyes of 87 percent of the well-heeled who were at Bel Air Investment Advisors’ Next Generation Conference in California.

“Our view is that it’s not going to be the normal reinvestment season,” Brothers said. “There are other things that are bigger.”

But not all companies fit the mold neatly, says Gary Flam, a portfolio manager at Bel Air Investment Advisors. He says Bel Air sometimes seeks hints about a company’s overseas businesses by studying which currency risks end up getting disclosed in regulatory filings. For instance, CSX Corp. (CSX), with rail network in the Eastern half of the U.S., might be far less exposed to Europe’s struggles than airlines it is often grouped with.

“The market’s just looking for an affirmation that the economy here is still growing. That’s the biggest concern,” says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “If the economy continues to grow and this is just a normal correction, the market will continue to grow. But if Europe drags down our economy, some more dour outcomes can be envisioned.”

Another bad thing for parents to do is always to solve their children’s problems. Todd M. Morgan, senior managing director at Bel Air Investment Advisors, a Los Angeles-based company that manages $5 billion, said the tendency among successful executives was to step into their children’s lives and fix things as they would in a boardroom. “Do not offer to fix or change something unless you’ve been invited to do it,” he said.

One potential investory, Los Angeles-based Bel Air Investment Advisors research manager Arun Bharath, knows that his $6 billion under management needs more exposure to emerging markets. “I’m hoping to get some ideas on how,” he says.

Kenneth Naehu, managing director and head of fixed-income at Bel Air Investment Advisors, said he expects the market’s swings to continue as long as any uncertainty remains. “One thing you should expect is volatility going forward,” said Naehu. “People have their hands on the trigger so to speak, whether they are buying or selling.”

“If you look at the Chinese market, technically it’s broken down,” Flam said. “China has slowed down. Now, their policy was to try to slow the rapid growth there, but I think a lot of people are getting spooked because the growth has slowed a little bit more than many anticipated.”

Kenneth Naehu, senior portfolio manager and fixed-income strategy head at Bel Air Investment Advisors LLC in Los Angeles, said spreads widened markedly the last time the state saw a lot of headline risk, in 2009, when lawmakers twice spent weeks arguing over budget solutions with the state facing tight liquidity.

“This is a market dominated by retail buys now,” he said. “Individual investors are very headline-sensitive. Quite frankly, individual investors often have little else to go on.”

Naehu said he tells clients that among the many financial problems facing cities and states, headline risks are the biggest cause of volatility. Headline risk also offers opportunities, he added.

“We were large buyers of California debt when spreads were wider. We haven’t been now that they’ve tightened,” Naehu said, adding that he expects spreads to widen.

“California debt is different from Greek debt,” said Kenneth Naehu, a managing director at Bel Air Investment Advisors in Los Angeles. “Our debt service is so small a part of our budget that is minuscule, and it gets a top priority. For California, restructuring debt is not possible, but for Greece it maybe the best thing.”

Others, like Gary Flam, equity portfolio manager for Bel Air Investment Advisors in Los Angeles, are also optimistic, but think the market has entered a new, more cautious place. He said he expects to see the rally continue with the Dow climbing back to roughly 12,00 from its current level around 10,400. But he thinks the “junk, high beta” market — one from which favors weaker, more volatile stocks — will give way to one that favors companies with strong balance sheets.

“The bond market reversal is showing fear in the system, but I don’t know you can definitely draw anything from it,” said Kenneth Naehu, head of fixed income at Bel Air Investment Advisors, when prices were down at the market’s open.

“It’s like somebody pressed a reset button on the market,” said Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “So we’re looking for an opportunity to add some positions and to establish new positions.”

A new study from Los Angeles-based Bel Air Investment Advisors, surveying wealthy kids and families attending a “next generation” seminar, shows that families are well aware of the the pitfalls of inherited wealth –- yet they keep on passing it down.

More than half of wealthy people are worried that their net worth will shrink, according to a new survey by Bel Air Investment Advisors.

“It was a good entry point on cash we’ve been sitting on for a long time,” Morgan said. Bel Air oversees $4.5 billion for clients, who average $17 million in investable assets.

Nearly Two Out of Three High Net Worth Inheritors Are “Very
Concerned” About Growing Wealth, According to Survey Conducted at Bel Air’s Next Generation Conference

LOS ANGELES – May 5, 2010 – Bel Air Investment Advisors LLC (www.belair-llc.com), a leading independent wealth management advisory firm to high net-worth individuals, families, trusts and foundations, released today key findings from a survey conducted at a Next Generation wealth conference.

These are the results of a wealth survey done by Bel Air Investment Advisors LLC, which polled 80 of its very high net worth clients at a conference in Indian Wells.

Gary Flam, portfolio manager of Bel Air Investment Advisors, said fears are ramping up that the euro-zone debt crisis might grow bigger and have broader economic implications than originally thought. Worries of a contagion effect are on the rise. “Greece is seen as the tipping of the first domino, to be followed by Portugal and Spain,” he said.

News of a bailout for Greece may be pushing Treasury prices down Monday, but a one-day slip is not enough to indicate investors are completely convinced the bailout will work, said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors. “The market is not sold on that there’s a solution for Greece. Until we see a significant rally in Greek bonds, it’s hard to believe the market will have any conviction that Greece has turned the corner,” he said

“It’s what we’ve seen over the last few weeks. There’s this underlying strength in the market,” said Flam. “But I think the second takeaway, given the news out of Greece, is these things are in the headline and are being discounted.”

“If you’re hoping for a pullback to get in at lower levels, then you’re doing exactly that, you’re hoping,” says Gary Glam, portfolio manager at Bel Air Investment Advisors in Los Angeles. “When you invest based on hope it usually doesn’t go well.”

Until then, Treasurys will likely remain in a narrow range, said Kenneth, Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

“Though he’s keeping a watchful eye on slowing momentum in the market, Gary Flam, portfolio manager at Bel Air Investment Advisors, said today’s retail sales figures buoyed stock moves higher despite early session headwinds ranging from Greece’s debt hardships to downbeat jobs data.”

“‘[Same-store sales] were strong across the board. There was some concern that some of this might have been priced in, but they came in even stronger than most were expecting, which is why you’re seeing the strong pick-up,’ he said. ‘The market continues to have tremendous resilience.’”

“‘People seem to be getting a little more faith that you will see economic activity continue in the second half and not fall off a cliff…But the problem for the market may be that the gains will get harder to come by.’”

“‘People seem to be getting a little more faith that you will see economic activity continue in the second half and not fall off a cliff…But the problem for the market may be that the gains will get harder to come by.’”

“‘We think 2010 is going to be about being more opportunistic about positions—not just buying things when they’re down but also selling stocks when they’re richly valued…It’s going to be more about moderating our positions to make sure we have more attractive risk ratios going forward in all our positions.’”

“‘Municipal markets, where not-for-profit hospitals borrow for construction and technology, were unfazed by headlines that declared the health reform law historic in reach…’”

“Gary Flam, portfolio manager at Bel Air Investment Advisors, said to look for traders to ratchet down their exposure as the week goes on.”

Institutional investors are keeping an eye on California’s fiscal woes, but do not doubt its commitment to paying bondholders, a top priority backed by state law, said Ken Naehu, head of fixed-income at Bel Air Investment Advisors in Los Angeles.

“They care more about the state’s ability to make debt-service payments, which is extremely strong,” Naehu said.

Treasury prices may have been little changed by the auction, but fell on the long end because of major stock market gains, said Ken Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

A year ago, “we could have talked blue in the face about the once-in-a-lifetime opportunities” in stocks, but clients “wouldn’t even pick up the phone,” says Gary Flam, equities portfolio manager at Bel Air Investment Advisors in Los Angeles. Now, he says clients “are more open to it, they’re proactively contacting us asking if it’s time to get in.”

Treausry markets are looking a bit lackluster as they have been all week, said Ken Naeuhu, managing director and head of fixed income at Bel Air Investment Advisors. Trading volume is low and looks to remain that way until any major economic news hits headlines, he said.