Mark Twain wrote in 1907, “There are three kinds of lies: lies, damned lies, and statistics.” The differences in opinion about soft or hard landings center on how trends are measured, data accuracy, revisions, seasonal adjustments, and which data to follow. I provide Chart #3 of what I am monitoring over the next six months as the story about soft or hard landings unfolds. Continue reading →
This is my annual assessment of the funds that I own and whether it makes sense to hold them with my annual outlook, as described in this month’s companion article. My outlook is “Risk Off” because of economic uncertainty, plus bonds are now paying an attractive yield. The funds assessed in this article exclude bond funds, individual stock, and American Century Advantis All Equity Markets (AVGE). As interest rates rose and stocks and bonds fell, I gradually sold my most volatile funds and bought short-term ladders of certificates of deposit and Treasuries to lock in higher yields. With interest rates higher, I now ask myself, would I rather own my remaining funds in my intermediate buckets or make four or five percent in safer investments? That is the question.
I use the “Bucket Approach” and have Fidelity Wealth Management manage my longer-term portfolios, which collectively resemble Continue reading →
My last article on Seeking Alpha suggested that value, international, small caps, and emerging markets would outperform over the coming years. David Snowball wrote “The Investor’s Guide to 2023: Three Opportunities to Move Toward” last month along the same lines and offers his insight into these asset classes along with some excellent funds. I follow the Bucket Approach, where some Buckets have similarities to Dr. Snowball’s “Terrified Investor,” “Exhausted Investor,” or “Enterprising Investor.” A Reader on Seeking Alpha asked my opinion about Continue reading →
(And by implication, frowns on celebrity endorsements)
Happy New Year! I wish everyone a prosperous 2023. It is that time of year again when investment companies, analysts, and pundits create outlooks for the coming year. The quote attributed to Dwight D. Eisenhower that “Plans are useless, but planning is indispensable,” is applicable as there are risks to the outlook, which is the first section in this article. The second section is my outlook and strategy for 2023. The final section is the outlook from the Federal Reserve, The Conference Board, and Vanguard. Links to other outlooks are included in the Appendix.
Thanks to the notice by David Snowball, I have become a premium subscriber to The Independent Vanguard Adviser. I use the Continue reading →
I hope that Readers enjoyed their Thanksgiving as much as I did and wish everyone a safe and happy holiday season and a prosperous new year.
I expect this Santa Claus Rally will give way to a New Year’s hangover as investors start to anticipate a recession more than they fear inflation. On November 10th, the Consumer Price Index for all Urban Consumers was released to show the inflation rate increased by 7.76% from a year ago and 0.44% from the previous month which is still a high annual rate of 5.3%. The minutes of the November Federal Open Market Committee Meeting provide insights: Continue reading →
2023 Sleeping Bears in Waiting
We are in a classic late stage of the business cycle with the Federal Reserve raising rates to reduce demand in order to control inflation. What is different this time is that the inflation is likely to be higher for longer because it is a global issue resulting from a combination of factors, including COVID-related supply chain disruptions and related stimulus, an extended period of low-interest rates and easy monetary policy, and the Russian invasion of Ukraine that, in addition to being a tragic loss of lives, also disrupted supply chains. I look at the base case of the Federal Reserve raising the Fed Funds (FF) target rate in November and December and holding the rate relatively constant next year. The next six to nine months are key to determining Continue reading →
Source: PublicDomainPictures.net
A reader on the Mutual Fund Observer Discussion Board asked “how do you feel about putting monies into funds that have a somewhat ‘black box’ dynamic to them…yes, they explain their positions but sometimes I wonder, how safe of an investment are some of these funds?”
For those not familiar with black box investing, Investopedia explains: “a black box is a device, system, or object which produces useful Continue reading →
Since retiring two months ago, I purchased the actively managed Fidelity New Millennium ETF (FMIL) for diversification. It is one of four actively managed equity ETFs offered by Fidelity that has more than $50M in assets. My introduction to FMIL came from an article by Tezcan Gecgil, “3 Fidelity ETFs To Diversify Your Portfolio In August,” at Investing.com, in which she highlighted that FMIL has done relatively well year-to-date. I then read “ETF of the Week: Fidelity New Millennium ETF (FMIL)” by Aaron Neuwirth from VettaFi, formerly known as ETF Database, which summarizes a podcast by ETF Trends CEO Tom Lydon in “ETF of the Week” with Chuck Jaffe Continue reading →
Medieval world maps were speculative documents, incorporating what the cartographer knew to be true, but that often left a lot of blank space on the map. The places where the mapmaker could offer only uncertain guidance were marked with the Latin legend “Hic sunt dracones.” That is, “here be dragons.”
To be clear, these were not stupid or credulous guys. They were just guys who knew the world was a dangerous place, and the uncharted regions were Continue reading →
I am now in my fourth week of retirement. This article is the third of a three-part series describing my experiences as I retire. It builds upon “Certainty of Death and Taxes,” where I describe how taxes, social security, and Medicare may impact retirement financial plans. The topics covered in this article are:
“Things as certain as death and taxes can be more firmly believed” was written by Daniel Defoe in “The Political History of the Devil” in 1726. Benjamin Franklin wrote, “In this world, nothing can be said to be certain, except death and taxes” in 1789. Few subjects I have written about elicit such a passionate response as “Roth Conversion” and “Deferring Social Security Benefits.” This article is the first of a three-part series describing Continue reading →
By the time this article is published in Mutual Fund Observer, I will have been retired for one day as I near my 67th birthday. I spent 25 hours this past month listening to audiobooks about the psychology of retirement and an equal amount of time searching the internet for ideas generated from these books. I concluded that I should ease into retirement and plan on what to do for the next 365 days, sometimes called the Retirement Honeymoon Phase. This article is the second of a three-part series describing my experiences as I retire. Continue reading →
The Federal Reserve is raising rates to slow the economy, reduce inflation, and reduce bond purchases (Quantitative Tightening). The International Monetary Fund and World Bank are lowering forecasts of global growth, and the Russian invasion of Ukraine is further disrupting supply chains and raising geopolitical tensions. I am at my neutral allocation of 50% to stocks but have shifted away from the most volatile funds and toward more defensive funds that do well during the late stage of the business cycle and higher inflation. This article describes Continue reading →
I have expressed my intention to retire in the next few months with the specter of stagflation looming. I have studied the 1960s to 1970s stagflation period since I lived through these times and know that they are secular. Federal Reserve Chairman Jerome Powell recently described the potential for inflation to last for an extended period of time:
…the risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously as I have described. (Powell Says ‘Inflation Is Much Too High’ And The Fed Will Take ‘Necessary Steps’ To Address,” CNBC, 3/21/2022) Continue reading →
Risk is defined as “the possibility of loss or injury” by the Merriam-Webster Dictionary and volatility as “a tendency to change quickly and unpredictably.”
Risk refers to the possibility of loss, which is outcome focused. Volatility refers to a quick, unpredictable change, which isn’t centered on the outcome. To be a good investor, a person must be able to differentiate between these. Volatility acts as noise, while risk is worth paying attention to.
– The Difference Between Risk And Volatility, Investopedia, Judy Hulsey
I continue to expect a regime change from mid-cycle to late-cycle later this year and look for opportunities to reduce exposure to riskier assets from my current 55%. Fourth-quarter nominal gross domestic product is up 11.8% compared to a year ago with the consumer price index up 7.5% for a real (inflation-adjusted) gross domestic product of 5.6%. Inflation, valuations, geopolitical risks, and volatility are Continue reading →
“But I don’t want to go among mad people,” Alice remarked.
“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”
“How do you know I’m mad?” said Alice.
“You must be,” said the Cat, “or you wouldn’t have come here.”
– Alice in Wonderland, Lewis Carroll
At the time of this writing, the S&P 500 has fallen 7.8% year to date. Some respectful sources point to retail (small) investors panicking. Alice, the Mad Hatter, and I are not so sure. There are those who believe they can time the markets and are trying to jump ahead of the falling market before the rest of the crowd. Then some investors have the financial acumen to make quick, intelligent decisions. Should you sit back and ignore the volatility, buy the dip or sell the news? Continue reading →
The Mutual Fund Observer writes for the benefit of intellectually curious, serious investors— managers, advisers, and individuals—who need to go beyond marketing fluff, beyond computer-generated recommendations, and beyond Morningstar’s coverage universe.
The quote above had a big impact on me in July 2019 when I was first introduced to Mutual Fund Observer, and I became its most enthusiastic fan. I began contributing to the monthly newsletter shortly thereafter. I appreciate the efforts that have gone into creating and maintaining MFO by Professor Continue reading →
I love reading the monthly discussions from Mr. Bolin. He is providing very useful information month after month. They’re always so insightful and analytical, yet it can be difficult to construct a portfolio because each month brings some new funds and different analyses. It would be very useful if he would have some specific portfolios and update recommended changes when he thinks it’s necessary. This month’s catastrophe portfolio is compelling, and one I may invest in for the long term. As a retiree of many years, it’s just what I want.
– MFO Discussion Board by golub1
I share a personal traditional IRA at Fidelity that I have constructed following Fidelity’s business cycle approach heavily influenced by the risk management philosophy from Mutual Fund Observer. Each investor’s needs are different, and this portfolio is Continue reading →
I divide my investing strategy into the low cost, buy and hold philosophy following that of Vanguard, and its founder, John Bogle, along with Charles Ellis, and the more active business cycle approach of Fidelity, Benjamin Graham, Howard Marks, and Ed Easterling, with a touch of trend following from Gregory L. Morris using a risk-managed approach of Mutual Fund Observer, the bucket approach of Morningstar, and the tax strategy that I learned late in life. Whew! This article Continue reading →
This article takes a closer look at Fidelity Advisor Multi-Asset Income (FMSDX/FAYZX), Fidelity Strategic Real Return (FSRRX), and Fidelity Advisor Strategic Income (FADMX/FSIAX) which I have identified in previous articles as funds with high risk-adjusted-performance. They are managed by Adam Kramer, Ford O’Neil, and a strong team of co-managers.
This article continues the theme from the long-term trends identified in Retrospection Is a Hard Metric to Match. Recently Lance Roberts wrote Deficit Deniers & 40-Years of Economic Erosion covering the same 40 year period but emphasizes Continue reading →
