The Babson Capital Staff Letter -4th Quarter 2009       (PDF)
January 13, 2010

Markets Rebound But Headwinds Remain. 2009 was a year of turnaround for the fixed income markets. The asset classes that fell the most in 2008 performed the best in 2009; high yield bonds and loans led the pack with returns above 50% for the year and commercial mortgage backed securities and asset backed securities returned over 20% actually beating the S&P 500 by a few percentage points. The year ended well with the fourth quarter exhibiting decent performance, though the second quarter was the star.

The Babson Capital Staff Letter - 3rd Quarter 2009       (PDF)
October 09, 2009

The rally in equities and credit markets continued in the U.S. in the third quarter. Key markers for the quarter include positive earnings surprises, a successful cash-for-clunkers program, the 1,000-mark breakthrough in the S&P 500, and Federal Reserve Chairman Bernanke’s thoughts that the recession is over. The U.S. financial system seems to have stabilized for now, and inflation seems to be under control despite record-low interest rates. Does this mean that we are out of the woods? Is “up” the only way for the markets to go? To be able to answer these questions, we need to briefly revisit the cause of the downturn in 2007.

The Babson Capital Staff Letter - 2nd Quarter 2009       (PDF)
July 30, 2009

The corporate credit markets saw the best quarterly returns in history this past quarter, followed by a slight pull back near the quarter’s end. Investors also pulled back, reminding themselves of the true state of the fundamentals of the economy despite the much-talked-about “green shoots.”

The Babson Capital Staff Letter - 1st Quarter 2009       (PDF)
March 31, 2009

With the year that will be remembered as that of the Credit Crunch behind us, the first quarter of 2009 emerged with much change and hence hope for the markets. It was a quarter of aggressive government policy. March was the key month when policy makers either announced stimulus plans or appeared publicly almost on a daily basis over a period of two weeks that marked the turn of the equity markets. Key policy announcements included the Federal Reserve’s program to buy over $1 trillion in various treasury and agencies bonds, the launching of the TALF (Term Asset-Backed Securities Loan Facility) and the Treasury’s announcement of the public/private plan to buy toxic assets.

A Retrospective on Five Essential Truths       (PDF)
April 14, 2006

Over the years, the Babson Staff Letter has provided readers with a window into the expertise and core values of our investment staff, offering common sense and straight-forward perspectives available in few other places. The Babson Staff Letter has been a tangible expression of the practical philosophy and "do-your-homework" approach to investing that this firm has long practiced. As capital markets and investment management progressed, from investing in stocks for dividends to investing for growth, and from investing for individuals to investing to address the complex needs of institutions, Babson Capital has changed. So too has the Babson Staff Letter.

Avoiding Investment Short Cuts and Bias Traps       (PDF)
November 05, 2005

"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people full of doubts." — Bertrand Russell. Just why people make mistakes when choosing between courses of action has been the life work of Harvard Business School Professor Max Bazerman. Relevant to Staff Letter readers, he even includes a chapter on errors investors are prone to make. In this Staff Letter we examine a few of the theories Dr. Bazerman highlights.

The New York Stock Exchange – Part II       (PDF)
August 12, 2005, Benjamin  F. Sylvester 

On the occasion of the New York Stock Exchange's decision to merge with Archipelago, an electronic-trading market rival, we decided to look at the NYSE itself to see how its changes reflect the evolution of the U.S. capital markets. In part 1 of this Staff Letter (June 10), we looked at the NYSE's early roots and development up through the Crash and Great Depression. Here we continue the tale up to the present day.

Co-Investing: A Strategy For Sharing Real Estate Risk and Returns       (PDF)
July 08, 2005, Jeffrey  J. Williams 

In the last ten years another kind of real estate transaction called co-investment, where real estate mortgages are shared privately among two or more portfolio lenders, such as insurance companies and pension funds, has accounted for as much as $35 billion in transaction value. Although this level is small relative to the nearly $650 billion in commercial mortgage-backed securities (CMBS) issued over the same time, it is still meaningful and is having a steadily increasing influence on the real estate lending marketplace. This Staff Letter focuses on the unique characteristics of co-investing: who participates in these deals, what these investors end up owning and where, and how co-investment transactions are structured.

The New York Stock Exchange: Evolution Through Revolution — Part One       (PDF)
June 10, 2005, Benjamin  F. Sylvester 

The venerable New York Stock Exchange (NYSE) and its celebrated trading floors are in for some significant change. For starters, this quintessential symbol of capitalism will soon likely merge with a former rival electronic-trading market and in the process become publicly traded like the very stocks swapped through the Exchange's storied open-outcry auctions.

Bubble Trouble: Is America's Housing Market Set to Crash?       (PDF)
February 11, 2005

With home prices continuing their steady and, to some, logic-defying ascent in the face of rising interest rates, many are asking if we are in a housing bubble. For insight on this important question - home equity represents the largest asset for most Americans - we turned to Marc Louargand of Cornerstone Real Estate Advisers LLC, a real estate management and advisory firm, also owned by our parent MassMutual.

Beyond the Bard — The Investment Attraction of Bank Loans       (PDF)
October 08, 2004, Thomas  M. Finke 

Just a few minutes after the curtain rises on Hamlet, Polonius, one of Shakespeare's most memorable minor characters, takes center stage and delivers a speech to his son, Laertes, chock full of all sorts of parental advice, including one of the Bard's most quoted lines: "To thine own self be true." Tucked away a few lines earlier is another nugget of wisdom: Neither a borrower nor a lender be, For loan oft loses both itself and friend, And borrowing dulls the edge of husbandry.

Structured Credit Products: Finding New Ways to Spread Risk and Capture Return       (PDF)
September 25, 2004

Most Americans have either a direct or indirect investment in real estate. At one end of the real estate market are first-time homebuyers John and Jane Consumer. What is likely to be their most significant investment could not be more financially compelling with interest rates at 50-year lows.

Winning The Investment Marathon       (PDF)
September 10, 2004

Investors who do well in stocks differ from each other in many ways (but they do share a number of common characteristics.) Generally, these are not attributes that one has to be born with - so everyone can emulate, to a substantial degree if they try hard enough, the way the Warren Buffetts and Peter Lynches operate.

What's Wrong With Investment Performance?       (PDF)
August 27, 2004

At the time of our recent name change, we took a look in these pages at the broader history of the company ("What's In A Name" - July 9, 2004) and in particular, the legacy of David L. Babson, firm founder and president for 38 years.

Some ABCs Of Structured Commercial Real Estate Financing       (PDF)
July 25, 2003, Robert  F. Little 

Most Americans have either a direct or indirect investment in real estate. At one end of the real estate market are first-time homebuyers John and Jane Consumer. What is likely to be their most significant investment could not be more financially compelling with interest rates at 50-year lows.

Commercial Real Estate - Finally Entering the Public Financing Arena       (PDF)
May 16, 2003, Thomas Zatko 

The key to real estate, and to some extent investing as well, may be location, location, location. But until recently, the investing public couldn't even find one whole segment of the real estate sector - commercial properties.

Risk- By Any Other Name       (PDF)
April 18, 2003, Michael  F. Farrell 

Risk is a scary word - especially to investors today given the past few years' stock market performance and geo-political/economic developments. However, there are many ways of looking at risk, and investors are missing something by now focusing only on the most negative aspects of this concept.

Reaching for Return (And Risk) In Corporate Bonds       (PDF)
February 21, 2003, William  H. Jefferis 

Everybody loves bonds. After three years of pain in equities, nervous investors are leaving stocks, flocking instead to fixed income securities for their relative safety and generous cash yields.