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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Josh Brown: When The Hedge Is Worse Than The Thing Being Hedged; Black Swans & John Hussman
    I think LB makes a good case for holding cash or high quality bonds along with equities.
    But, holding short equity positions is inherently hazardous. (Theoretically, a stock can continue to rise forever.) It boils down to the skill of the manager to effectively implement a short selling strategy - and avoid losing his shirt in the process. Not to say using short positions to hedge equity risk is a bad approach - just that John Hussman hasn't demonstrated the capacity to execute the approach effectively. And, while he somewhat vehemently denies shorting equities, Hussman's HSGFX often behaves as if (effectively) short the market.
    Alternatives like gold, foreign currencies, commodities, real estate, etc. constitute another form of hedging. Personally, I like to keep a small hold in funds which include those types of assets. I fully recognize that that dilutes my returns as compared to being invested only in equities. Much disagreement exists on the board re the subject - and I've no desire to become a spokesman for PRPFX or any other fund investing in such alternatives.
    BTW: The brains at TRP have held for several years now that we're in the midst of a cyclical bear market in commodities. They would probably say that we're in the 5th or 6th inning. While I've disagreed a bit with that bearish outlook, I suspect they're mostly correct in the call. It's relevant here only in that commodities are often viewed as an alternative investment to equities.
    Yes. Agree with LB that equity markets don't always rise. They can (and do) experience significant multi-year periods of negative performance. And I fear very much that our instant-touch media (24-hour financial reporting and internet access) have magnified the always present human herd instinct. If correct, that implies both stronger bull markets and worse bear markets ahead than have occurred historically.
    hank in Fund Discussions
  • Fidelity Announcement On Transaction Time Reduction
    This is regulatory and "should" apply to everyone at every broker. I thought mutual funds already settled faster so this wouldn't affect them, but the email I received mentions them so maybe something is changing. I don't buy without cash on hand so I don't think it matters for me but could for some people. The email I received from E*TRADE said basically the same thing as the one we both received from Fidelity:
    We're writing to make sure you know about an important upcoming change in U.S. securities markets.
    What’s changing
    The Securities and Exchange Commission (SEC), in cooperation with the financial services industry, is shortening the trade settlement period for many types of securities from three business days to two. This new rule is designed to increase efficiency and reduce risk. Products affected by the change include stocks, corporate bonds, municipal bonds, ETFs, and mutual funds, among others.
    NO ACTION IS REQUIRED FROM YOU. The shortened settlement period will take effect automatically on Tuesday, September 5, 2017.
    What this means to you
    If you sell a security, you’ll receive cash one day sooner
    If you buy a security, it will be delivered one day sooner
    If you are using margin, purchases will create a settled debit balance one day sooner and selling will decrease your settled debit balance one day sooner
    You will have one less day to execute a tax-lot swap
    LLJB in Fund Discussions
  • This Fund Invests Only In Companies That Contribute To Trump And Republicans (MAGA)
    @MSF I think members of the House and Senate would have more of an impact on the local and state level and how federal contract dollars might be directed towards campaign contributors because of their sway. Regarding the McDonnell case, the defense made specific reference to Citizens United as a rationalization for McDonnell's behavior:
    Insisting that the product would have generated jobs in Virginia, Mr. McDonnell testified that he was merely extending himself as he would have on behalf of any other constituent and that he never agreed to “put a thumb on the scales of any government decision.” His lawyers invoked the Supreme Court’s holding in the Citizens United campaign finance case that “ingratiation and access” do not constitute corruption.
    But I agree with you that the corporate influence problem precedes Citizens United, although the ruling greatly exacerbated that influence. Good link/article by the way.
    @Maurice More George Soros as the world's boogeyman? It's a tiresome trope. Yes, Soros gives to elections, but nowhere near what the conservative Koch brothers do:
    fortune.com/2017/01/29/koch-political-network-spending/
    But besides that, what makes you think I believe any major financial gifts to any politicians are acceptable? I don't. But here is a fund expressly designed to reward those companies seeking to buy influence with Republican politicians with investor dollars. There is no equivalent on the Democratic side.
    LewisBraham in Fund Discussions
  • Don't Be Dazzled By Gold
    Yeah - Barron's really "got it right" in October 1998. With gold at $303, their "Wrong About Gold" article scorned investors who were (correctly) becoming bullish on the metal. So I won't put much faith in their analysis today.
    Excerpt: Wrong About Gold
    Oct. 5, 1998 - Key Commodity Indexes
    "The world's gold bugs seem to be exulting at news of the global financial crisis. And it's easy to see why. With stocks falling sharply in value, investors have started to show renewed interest in gold, that ageold hedge against hard times. But their knee-jerk reaction ignores the fact that we seem to be looking at an outbreak of deflation, not inflation. That's not to say that gold prices couldn't rise further over the next few months. Uncertainty always seems to stoke enthusiasm for the yellow metal. But the fact is that fundamental demand for gold is not increasing significantly and supplies remain plentiful."     http://www.barrons.com/articles/SB907371410794467500
    -
    Just my personal perspective ... buying gold, or the miners, is about the closest you can come to gambling within the confines of your IRA. (Only @rono knows where it's going.) I have a meager 1-2% hold in OPGSX which has done well since buying in May. Some of my diversified funds, notably PRPFX and PRAFX, have decent exposure. At some point I'll sell the p/m fund, take the money and run. Not yet --- too much uncertainty out there in the geopolitical. Last week gold was hot, picking up $30-$40 and rising to over $1320. With the turmoil in Asia, it gained another 10 bucks Monday to around $1330.
    ---
    If trouble with above link, try this Google search. Select top story "Wrong About Gold" https://www.google.com/search?ei=UK-sWevdLOSXjwSH0pawAg&q=cheryl+strauss+einhorn+commosities+corner+1998+article+on+gold+price+in+Barrons+Oftober+5+1998&oq=cheryl+strauss+einhorn+commosities+corner+1998+article+on+gold+price+in+Barrons+Oftober+5+1998&gs_l=mobile-gws-serp.12..30i10k1.30394.37695.0.38648.15.15.0.0.0.0.387.4260.0j1j7j7.15.0....0...1.1.64.mobile-gws-serp..0.15.4258.Uq4g1FlZnVE
    hank in Fund Discussions
  • Technical Analysis Tip of the Month for September, 2017
    Technical Analysis doesn't have to be complicated.
    One technique is to buy when a moving average (MA) of price crosses below the price line, and sell when the MA crosses above it. This is the technique described by Mebane Faber in his paper, "A Quantitative Approach to Tactical Asset Allocation," with the buy and sell rules on page 21: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=962461
    Another technique (with similar results) is to buy when the slope of your MA turns up, and sell when it turns down. This was described by James Rohrbach in his 2008 article, "Buy and Hold is Dead": http://www.marketwatch.com/story/the-trend-really-your-friend/print
    A technique to find a security in an uptrend is to be able to draw a straight line upward through at least 3 of its price lows, preferably using a semi-log chart. For details on drawing trend lines, see http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:trend_lines
    "The basic trendline is one of the simplest of the technical tools employed by the chartist, but is also one of the most valuable." and "Very often, the breaking of the trendline is one of the best early warnings of a change in trend." are quotations from the book, "Technical Analysis of the Financial Markets," by John J. Murphy. If you were going to read just one book on technical analysis, that would be the one I'd recommend.
    Tony in Fund Discussions
  • Edward Yardeni: S&P 500 Panic Attacks: 2009-2017
    Hi Guys,
    Dr. Ed Yardeni and his staff always do an excellent and very comprehensive job when preparing their endless array of charts. These charts always inform and help in reducing uncertainties when making a financial decision.
    I trust the charts, but I am relentlessly cautious when reviewing Yardeni's interpretation of his own research. I'll never forget Yardeni and his projections as the year 2000 was approaching. He is infamous for the overblown Yardeni Y2K negative hyperbole. Here is a Link that reviews his less than optimistic positioning on that upcoming event:
    https://www.cnet.com/news/y2k-expert-yardeni-prepared-to-admit-he-was-wrong/
    He couldn't have been more wrong, but he survived and continues to persist in his forecasting. When forecasting everyone has a mixed record, and Yardeni is certainly no exception. So as always, buyer beware!
    Best Wshes
    MJG in Fund Discussions
  • What Device Do You Use To Buy Or Sell Funds, ETF's, Stocks, Bonds, etc.?
    @MJG said: ,"While what device is used to complete a trade is the specific topic under discussion, that's a detail that doesn't inspire me too much. A far more meaningful discussion would center on how a decision to trade is made and what tools are used to help make that decision. I'll focus my reply on that issue."
    @Maurice said: "For those of you who are not interested in the "how", meaning secure or unsecure access to financial services companies, may I suggest that you start and continue your "why' comments on another thread. For example, I don't know a lot about using the phone as a hotspot for security, and I find this to be informative. Others like me, may also be interested. Thank you."
    Agree. I don't understand why some try to torpedo threads that have been proceeding along nicely. If you don't like the topic under discussion stay out. As Maurice advises, start your own thread on the topic you'd like discussed.
    hank in Fund Discussions
  • What Device Do You Use To Buy Or Sell Funds, ETF's, Stocks, Bonds, etc.?
    Not sure about what's being asked here.
    These days, all devices are computers, it's just the form factor and the OS that varies. If you're not an Apple lover and are worried about Android, you can use a Windows-based cell phone. (If you don't trust Windows/Microsoft, then you won't use a Windows-based PC either.)
    Certainly there are exceptions (e.g. Amazon just stopped selling BLU phones due to continuing security concerns), but for the most part, I consider the particular OS/device immaterial with respect to security.
    I'm more concerned about back end breaches. For example, this recent exposure by Scottrade of 20K customer's info.
    Networking is a different question. I rarely do anything with financial sites while away from home - whether that is on a PC, tablet, or smart phone. When I do, I try to limit the use and select theoretically less risky networks (e.g. B&B vs. 300 room hotels). I don't even have cellphone data service. The $20 smart phone I carry has no service at all, but is good to use in Starbucks (with that $2 iced tea and free refills) to read headlines using wi-fi.
    Form factor - any "real" work is done on large-ish screens (1920x1200) with many windows open (spreadsheets, notes, brokerage pages, etc.) My laptop is semi-permanently attached to an external screen/keyboard/mouse. (Only detached for travel.)
    The one financial application for which I'll use a cellphone (networked via wi-fi) is depositing checks. The apps generally don't run on laptops, and it's easier to take a picture of a check with a cellphone than with a tablet. Though it's still easier to deposit checks in person if I happen to be passing by my broker.
    Regarding Lombard brokerage ad - Lombard was bought in 1996 by Dean Witter Discover, which branded its online brokerage Discover Brokerage Direct. In 1999 Discover ran this commercial:
    msf in Fund Discussions
  • substantiation for ongoing bull market
    I hope no one noticed that I had stated Blackstone instead of Bridgewater for Dalio's hedge fund. Have now corrected that. Sorry for the goof.
    Old Joe made an excellent point yesterday which did not escape me. And he generously repeats it here. That being that no one has exclusivity over particular topics. I'll go farther and state that when someone who seldom links stories or does so only a half-dozen times a week puts a story up on the board, I'm much more inclined to perceive their link as worthy of my time and thereby click on it. Human nature I guess. Ol Tom Paine said it well a couple hundred years a go: "It is dearness only that gives every thing its value."
    None of this is meant to take away from anyone's contributions. Just that linking interesting stories found while reading has become more of a hassle nowadays than I recall in the past.
    ---
    PS: @Ted, Ol'Joe is the best of the best here IMHO. No reason to insult him or anyone. Drive everybody away through this nonsense and what have you got left? The purpose of new posts should be to initiate/stimulate discussion. Otherwise, Google, Yahoo, Bing can churn out hundreds of financial stories daily.
    I've said my piece. I'll shut up now.
    hank in Fund Discussions
  • Once Shunned, Money Market Funds Are Proving To Be An Unlikely Haven
    Muddled writing in the article, but an interesting graphic. Short term Treasury bill debt that matures at the end of Sept. (when the debt ceiling is projected to be hit) has fallen sharply in price (yield is spiking). People are pricing in the risk of late repayment of principal.
    image
    While I'm not suggesting a total financial collapse, it wouldn't hurt to check your bank's rating (FDIC could theoretically get stressed and have no Treasury backstop). It's also interesting to ponder the possibility that prime MMFs might be safer than the government MMFs that people were funneled into for safety.
    That mattress is beginning to look better and better :-)
    FWIW, ratings of some of the better known online banks (see depositaccounts.com)
    Ally Bank: A+, 1.15% savings
    Amex Bank: A, 1.15% HY savings
    Barclays: A, 1.15% savings
    Discover Bank: A, 1.15% savings
    Goldman Sachs: A+, 1.20% savings
    Synchrony Bank: A, 1.20% HY savings
    msf in Fund Discussions
  • substantiation for ongoing bull market
    Thanks.
    I came across a few good articles re: Ray Dalio's recent cautionary remarks to investors while reading last evening. He's the head of Bridgewater, a large hedge fund. Dalio feels we're probably in a 1937 type political environment (sharply divided) and sees substantial risks to markets.
    As a result, Bridgewater has pulled back on risk. Not all would agree. However, Dalio does make an interesting case that financial markets cannot be completely isolated from political/social factors. The two to him are intertwined - especially today.
    End point - I didn't post any of the stories for fear Ted had already linked them somewhere else. For the most part, I prefer to read newspapers directly rather than to sort through 100+ posts
    hank in Fund Discussions
  • WSJ Says: Investors Pulling Back From Gundlach's Biggest Fund

    Related item:
    http://www.mutualfundobserver.com/discuss/discussion/34807/will-jeffrey-gundlach-s-trump-like-approach-on-twitter-work-in-financial-services#latest
    rforno in Fund Discussions
  • Better Than Expected, Barely Good Enough: Profits And Stocks

    "The seasonal trend is for stocks to go soft during the summer ... especially, August."
    Just off-the-cuff (without further research) I'd tend to agree. Some of the worst stock market sell-offs seem to have occurred in late summer or early fall. The '29 crash, the '07-'09 debacle, and a one-day drop of more than 20% in '87. However, unlike some, I would never risk being substantially underweight equities or largely absent from the markets out of some kind of observance of this historical pattern. To me there's just too big a risk of making an incorrect call and missing out on big gains.
    Isn't investing interesting?
    I'd agree Ol'Skeet. I consider that's a good reason to follow the postings at MFO and indulge in other
    financial print/electronic media. As you well know, however, there are some (well ... 1 in particular here) who profess to find the ebb and flow of markets of little no interest and who are content to "peek" at their investments only once or twice a year. Different strokes for different folks.
    hank in Fund Discussions
  • Will Jeffrey Gundlach's Trump-Like Approach On Twitter Work In Financial Services?
    FYI: (This is a follow-up article) (Click On Article Title At Top Of Google Search)
    Jeffrey Gundlach's new aggressive Tweeting style has sparked a discussion as to whether it makes sense in the financial services industry.
    Regards,
    Ted
    https://www.google.com/search?source=hp&q=Will+Jeffrey+Gundlach's+Trump-like+approach+on+Twitter+work+in+financial+services?&oq=Will+Jeffrey+Gundlach's+Trump-like+approach+on+Twitter+work+in+financial+services?&gs_l=psy-ab.3...3490.3490.0.63960.3.2.0.0.0.0.79.142.2.2.0....0...1.2.64.psy-ab..1.1.79.6..35i39k1.lSaHTE5d3Aw
    Ted Ted in Fund Discussions
  • Your Mutual Fund Manager Just Doesn’t Matter Much Anymore
    FYI: Sometime back in the 1990s my financial adviser and I were discussing an investment in the Fidelity Contrafund, a high-performing mutual fund helmed then — and still — by the legendary Will Danoff.
    I can’t recall exactly, but I expressed some misgivings about the fund’s fees.
    “You’re buying Will Danoff,” my financial adviser said.
    Regards,
    Ted
    https://www.washingtonpost.com/business/economy/your-mutual-fund-manager-just-doesnt-matter-much-anymore/2017/08/07/f3cda63a-7b9e-11e7-83c7-5bd5460f0d7e_story.html?utm_term=.b837b61e5d38
    Ted Ted in Fund Discussions
  • Preferred Shares: High-Yielding But Pricey
    FYI: (Click On Article Title At Top Of Google Search)
    What’s not to love about preferred shares? These securities, which have characteristics of both bonds and stocks, pay yields of around 6%—more than the average junk bond—and are typically issued by large, well-capitalized, investment-grade-rated financial institutions. Payouts are usually taxed as qualified dividend income, allowing investors to keep more of what they earn.
    There’s one problem, however: They are getting expensive....
    Regards,
    Ted
    https://www.google.com/search?source=hp&q=Preferred+Shares:+High-Yielding+but+Pricey&oq=Preferred+Shares:+High-Yielding+but+Pricey&gs_l=psy-ab.3...4505.4505.0.6550.3.2.0.0.0.0.82.160.2.2.0....0...1..64.psy-ab..1.1.82.6..35i39k1.R5jU2DtHUO8
    Ted Ted in Fund Discussions
  • Be Careful What You Blog, And When
    This certainly wasn't a great PR move, but aside from that, could be viewed as a positive.
    It's pretty common to see one fund in a family buying the same securities as another one is selling. Aside from the immediate benefit of reducing trading costs (by trading internally), it can also be taken as a sign that the managers are not all moving in lock step, suffering from group think and a single pool of analysts.
    That seems preferable to watching implosions from massive overlap, such as one of BobC's bugaboos, Janus.
    msf in Fund Discussions
  • GMO White Paper: The S&P 500: Just Say No
    @BobC. Not so sure. I lost half my portfolio in dot com bust. I lost 22-23% in Financial Crisis. Only because I sold.
    It is true I also didn't enjoy the gains after 2008 that one would have done simply buying and holding. However, I'm not sure I am worse for it. I'm more objective now because I was more "active". Sometimes that's better than deer caught in headlights.
    I need to read the whole GMO paper. I'm not going to say anything about people's ability to predict. However I do manage my allocations systematically. I was a 100% invested until last week in my retirement accounts, now I'm not. One doesn't have to make 100% on/off moves, but for me taking some money off the table and trying to deploy it somewhere else or gradually putting it back in does make sense.
    Also, sometimes I keep a list of things I "want" (not "need") and if I take gains, I will go buy something. After all, that's why we invest.
    Best.
    VintageFreak VintageFreak in Fund Discussions
  • Has anyone looked at PSYPX or SEMRX?
    A little bit more about that 2015-2016 dip. From M*'s article "Your Bond Fund Could Be Riskier Than It Looks" (linked to by Ted)
    "the trailing five-year period through July 31, 2017, includes only one stressful period for high-yield corporates: June 2015 through February 2016. That was mainly confined to energy and metals and mining firms. ... What if, instead of rebounding in February 2016, oil prices had continued to plunge, or just settled at a much lower floor, pushing more high-yield bond issuers into financial distress? Was this scenario more or less likely than what actually occurred? Risk isn't just what happened (volatility); it's what could have happened but didn't."
    From the video, it sounds like this fund had been investing in low rated bonds and got burned in the only time during its lifetime that this section of the market hiccuped. At least as of Jan 31, the fund was still over 50% in BBB or lower-rated bonds. (Jan 31, 2017 annual report). This was after moving the fund into higher quality bonds (per annual report).
    Are they managing credit risk well? Are the high returns so far (despite the volatility) due to skill or simply holding mostly junk and near junk?
    msf in Fund Discussions
  • Massachusetts Probing Trading By Financial Services (Brokerage) Firms
    This just sounds like payment for order flow, hardly a secret, not illegal (though it must be disclosed) and, forgive me, (almost) everyone does it.
    Here's a sample disclosure from Schwab (generally payments "average less than $.0009 per share"):
    http://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/material_aspects.html
    Also from Schwab is their advisory disclosure, that purports to explain how they reconcile best execution with payment for order flow:
    Schwab may receive remuneration such as liquidity or order flow rebates from a market or firm to which orders are routed, but at all times is committed to best execution.
    Schwab considers a number of factors ...
    [and]
    Schwab may receive remuneration such as liquidity or order flow rebates from a market or firm to which orders are routed, but its trading practices are designed to achieve best execution.
    I'm not condoning the practice, just wondering whether there's anything new here or whether this is grandstanding. (What, a politician burnishing his credentials?) The Boston Herald article says that "Galvin said he suspects the practice is standard in the financial industry." If he only "suspects" a practice that's out in the open, where has he been?
    msf in Fund Discussions