P/E’s are only “high”, “low” are “moderate” relative to where the market – and individual equities – have traded in the past. Either the range of multiples that markets have traded at in the past is meaningful, or its not…
Here, now, today, the wisdom of the market would seem to indicate that history is not relevant. But Mr. Market can be schizophrenic --- a day will come when Mr. Market will suddenly decide to concentrate on those high P/Es. But when?
Two side-bars on P/Es:
Part of the reason that the market P/E is so high is that earnings have been dropping. What is the “right” P/E for an asset with declining earnings. ---- And that decline in earnings has been despite the massively grotesque amount of Q/E, which has greatly eased the financial cost (interest burden) of companies. What happens to earnings growth when eventually rates are normalized…. (if they are, in our lifetimes)…?
Don’t trust “forward earnings”, which are guesses of operating earnings, not NET earnings. “Operating earnings”, much like EBITDA, are “earnings before the costs which management doesn’t like to count”. Making investment decisions on “forward earnings multiples” is like buying a house on your future lottery winnings…
All just one schmuck’s opinions.

ACMVX is open to new investors. From the summary prospectus:
"As of November 1, 2013, the fund is generally closed to new investors other than those who (i) invest directly with American Century (where American Century is listed as the dealer of record); (ii) invest through certain financial intermediaries selected by American Century; or (iii) otherwise qualify for an exemption under American Century’s closed fund policy."
If you don't already have an account with AC, you can open one here.

Good to know for some investors. I purchase through Fidelity and Vanguard only, so it's not available with them at the moment.

ACMVX is open to new investors. From the summary prospectus:
"As of November 1, 2013, the fund is generally closed to new investors other than those who (i) invest directly with American Century (where American Century is listed as the dealer of record); (ii) invest through certain financial intermediaries selected by American Century; or (iii) otherwise qualify for an exemption under American Century’s closed fund policy."
If you don't already have an account with AC, you can open one here.

Excellent article. Due to SEC regs, shareholder resolutions typically don't have much in the way of teeth; the resolutions being proposed these days at carbon-intensive firms are all but entirely about financial/investment risk disclosure -- disclosure of the risks, for example, that an oil or coal company takes by pumping billions more into finding new reserves that are very unlikely to ever be developed. There are already, worldwide, 4-5 times the amount of reserves that can be burned without taking the world past the 2C threshold that almost every country in the world has now agreed is the absolute limit humanity can afford.
Financial risk disclosure is the point, which is why the other companies Lewis B. cites in the article are voting for resolutions like these. Voting for them is very much an expression of fiduciary responsibility, not the reverse.

@MFO Members: "As a fiduciary, Vanguard is required to manage our funds in the best interests of shareholders and obligated to maximize returns in order to help shareholders meet their financial goals. It would be exceedingly difficult, if not impossible, to fulfill these obligations while managing portfolios that reflect the social concerns of all of our shareholders.” In the Linkster opinion Vanguard more than meets it's fiduciary responsibility to their shareholders by providing low cost passive and active funds.
Regards,
Ted

Added 8/06/16
PTIAX
Performance Trust Strategic Bond Fund
Symbol: PTIAX
No Transaction Fee No Transaction Fee 1 @ Fidelity 5000/500
1 No Transaction Fee funds are available without paying a transaction fee. No Transaction Fee funds will also be offered without a load or on a load waived basis. However, the fund may charge a short term trading fee or a redemption fee
From PTIAX
What Sets Us Apart JUNE 30, 2016
■ Flexible multisector bond fund designed to shift among a broad
range of fixed income sectors
■ Managed by a team with expertise in complex and niche fixed
income sectors, which has resulted in a distinct portfolio
■ Seeks best risk adjusted opportunities through interest rate
agnostic investment process
Ten Largest Multisector ( Bond ) Funds Holdings in Common with PTIAX
Number Percentage
1. Pimco Income 19 4.63
2. Loomis Sayles Bond 0 0.00
3. Loomis Sayles Strategic Income 0 0.00
4. Lord Abbett Bond-Debenture 0 0.00
5. Fidelity Advisor® Strategic Income 0 0.00
6. Fidelity® Strategic Income 0 0.00
7. Franklin Strategic Income 0 0.00
8. Alliance Bernstein High Income 4 1.58
9. T. Rowe Price Spectrum Income 0 0.00
10. Pioneer Strategic Income 0 0.00
Average 2.3 0.62
http://ptiafunds.com/documents/ptam-difference_ptiax_final.pdf
Bond-fund correlations increase interest-rate risk
August 4, 2016 http://www.investmentnews.com Aug 4, 2016 @ 1:32 pm
By Jeff Benjamin
Financial advisers should diversify into credit-risk strategies.
...K.C. Nelson, who manages $3 billion worth of fixed-income portfolios at Driehaus Capital Management, said bond fund investors who aren't careful could be hit hard by an interest rate hike, or just hit less hard by continued low rates.
“Investors are drawn to bonds because they're afraid of all the macro risks out there, and they also believe interest rates are not going up anytime soon, but they're making a mistake by looking in the rearview mirror at the performance of bonds,” he said.
When interest rates were at more normalized levels, diversification across the fixed-income spectrum was more straight forward, and could be accomplished through a blend of corporate, municipal, government bonds, and mortgage-backed strategies.
But with the Federal Reserve setting its overnight rate at 0.25% and the 10-year Treasury yielding just 1.5%, the bond world has essentially morphed into a singular blob of rate-risk.
Consider, for example, the various correlations to the SPDR Barclays Intermediate Term Treasury ETF (ITE).......
http://www.investmentnews.com/article/20160804/FREE/160809953?template=printart
From one of the story's links from Thornberg
Bond Correlations and Interest Rates,
Not Always a Straight Line
Josh Yafa | Director,Thornberg Client Portfolio Management
JUNE 2016
When discussing investing, a standard rule applies: bring up bond correlations if your audience needs a nap.
That axiom,however, suddenly becomes less tiresome when investors begin to worry about rising interest rates. Not surprisingly, the
thought of losing significant principal from bonds—an inexplicable combination of terms for investors accustomed to fixed
income’s ballast—tends to pique the attention of even the most seasoned and skeptical.
http://www.thornburg.com/pdf/TH3621_BondCorrelation_C.pdf
A look @ the Tax Excempt Market
https://secure.wasmerschroeder.com/UserPages/1038185.pdf
Quarterly Bond Market Overview
June 30, 2016
Wasmer, Schroeder & Company Wasmer Schroeder High Yield Muni Instl WSHYX
“ISMS” & CENTRAL BANKS
As we have pointed out in this publication on numerous occasions, multiple
secular trends are at work across the globe keeping growth low and central bankers active.
Political polarization in this country and others continues to put the burden squarely on central
banks as the ability of lawmakers to make any meaningful contribution is non-existent. Even in
the U.S., where our central bank has slowly begun the process of tightening monetary policy,
the Federal Reserve has seemingly used Brexit as an opportunity to push additional moves
further into an uncertain future. Clearly Europe and the U.K. will be in full accommodation mode
now; and Japan, the unfortunate recipient of the risk-off trade in currency markets, continues
to be in a very bad place on multiple fronts. So, higher asset prices, lower interest rates, and
continued economic malaise are likely to continue.
https://secure.wasmerschroeder.com/UserPages/1037492.pdf
Hercules Capital, Inc. :HTGC
Q2 2016 Earnings Call
Manuel Henriquez – Founder, Chairman and Chief Executive Officer
August 4, 2016 5:00 PM ET
Mark Harris – Chief Financial Officer in final Q & A
..As you know, the yield curve is flatting dramatically when you go further out.
So, I think that the short term of the curve is mispriced. We're hoping that as the market stabilized, that we'll see tightened yield spreads over the five-year rates. And once that occurs, I think that you'll definitely see us actively go out and refinance those 7% bonds you've been referring to which as I'm sure you'll realize in the event of refinancing those 7% bonds, that alone can be a 1 to 3 – sorry, $0.01 to $0.015 in quarterly earnings and prove it by resizing those bonds. But we'll make sure people understand this comment. The five-year treasury rate is acting like an Internet stock. Today alone, the five-year rate dropped nearly 4% to 1.03%. This is a five-year treasury rate. It's not supposed to be that volatile. That tells you what is going on. The 10-year rate is only 47 basis points wider than the five-year rate. That means I can borrow 10-year at 47 basis points higher plus the spread. That tells you that there's no incentive to the short-term borrowing in the capital markets right now.
http://seekingalpha.com/article/3996111-hercules-capitals-htgc-ceo-manuel-henriquez-q2-2016-results-earnings-call-transcript?part=single

FYI: Another financial services company has been targeted for costly proprietary investments in its 401(k) plan, leading to allegations of self-dealing at the expense of employees.
Regards,
Ted
http://www.investmentnews.com/article/20160804/FREE/160809954?template=printart

FYI: (This is a follow-up article) ( Click On Article title At Top Of Google Search)
The last big post-Lehman regulatory change is reverberating across the financial system, potentially squeezing short-term lending for businesses and local governments.
The rules haven’t taken effect yet but are already upending the $2.7 trillion money-market industry, causing nearly $500 billion to move into, out of and among these funds, which are used by investors to stash their cash and by borrowers for short-term liquidity.
Regards,
Ted
https://www.google.com/#q=A+$500+Billion+Stampede+in+Money+Markets+Even+Before+New+Rules+Hit++WSJ

Punch Bowl More than Half Full ?
Net flows into ETFs totaled $52.6B in July, according to FactSet, with just about every asset class seeing fresh money, particularly U.S. equities, which drew in $30.1B.
U.S. fixed-income saw a robust $11.6B of inflows - a possible source of concern for some analysts, noting high demand for both "risk-on" and "risk-off" assets. It wasn't just Treasurys though, as the data shows plenty of demand last month for investment-grade corporate paper, emerging-market bonds, and high-yield debt.
http://seekingalpha.com/news/3198724-etf-inflows-soar-july
Graphics from @Ted's original article from MarketWatch


http://seekingalpha.com/article/3994368-major-asset-classes-july-2016-performance-review
BEIJING (Reuters) - A raft of global risks that could adversely affect the United States remains on the horizon and requires close monitoring, Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday.
Kaplan, along with several other Fed policymakers, has urged renewed caution in trying to lift rates again...
"I am closely monitoring how slowing growth, high levels of overcapacity and high levels of debt to GDP in major economies outside the U.S. might be impacting economic conditions in the U.S.," Kaplan said at an event in Beijing.
In his second appearance within a week, Kaplan, a centrist at the U.S. central bank, repeated that he continues to back tightening monetary policy in a gradual and patient manner.
Chief among his concerns is sluggish U.S. growth exacerbated by a changing world in which economies are more globally interconnected.
"It's going to take many years and maybe decades for China to manage through overcapacity and high levels of debt to GDP," Kaplan added. "I think sudden jarring traumas ... may make that adjustment more challenging."
On Monday New York Fed President William Dudley, a permanent voter on the Fed's rate-setting committee, said that while it was "premature" to rule out a rate increase this year, negative economic shocks were more likely than positive ones.
https://www.yahoo.com/news/feds-kaplan-urges-patience-raising-rates-points-global-115047772--business.html?ref=gs
A Brief Note From G M O's Ben Inkster in their 2nd Quater Newsletter
"So what can we do to protect portfolios ..."
"a deeper analysis of what led returns to be disappointing for
the asset classes that have lagged may help investors avoid the error of abandoning decent assets just when their time may be about to come."

This is the nature of the discount-rate-driven gains for asset classes such as equities, bonds, and real
estate. Beyond the discount rate change, it is still true that US equities have done surprisingly well,
emerging equities surprisingly badly, and so on. But even if those “surprises” are permanent (and
our guess is that for the most part they are not) the fact that the valuation of US equities has risen
guarantees that the future returns to US equities from here will be lower than they would have been
otherwise, and the same is true for all of the long-duration assets whose discount rates have fallen
over the period.
The most shocking hole that will be blown through people’s portfolios is if discount rates rise again
fairly quickly. Even if the circumstance is one in which the global economy is doing well, the impact
of a 1.5% increase in the discount rate on equities from here is a fall of over 30%, which would
almost certainly be enough to swamp the earnings impact of the decent growth. For bonds, of course,
there would be no possible counter to the discount rate effect. For a portfolio that is fully invested in
long-duration assets (i.e., consists of a combination of stocks, bonds, real estate, and private equity),
the possible performance implication is on the order of the falls experienced in the financial crisis –
perhaps a 20-33% fall depending on the weightings – despite the fact that the global economy was doing just fine.
So what can we do to protect portfolios against this possibility? One answer would be to hold cash, which, as a zero-duration asset, would be a beneficiary of rising discount rates. The trouble with cash, of course, is that if the discount rates do not rise, it is doomed to deliver little or nothing. What
we would ideally like is to hold a short-duration risk asset – one where if nothing changes we are getting paid a decent return but where a rising discount rate will not destroy multiple years’ worth of
returns. We believe alternatives fit the bill pretty well. If things hold together, we should expect to
make money from activities such as merger arbitrage or exploiting carry trades or global macro. If the
world does surprisingly well and causes investors to raise their expectations for discount rates, these
strategies should be largely unaffected and could still make money. If we head into a severe recession
or financial crisis, they will presumably lose money, as we saw in 2008, but that is no different from
other risk assets. To be clear, I’m not arguing that the returns to alternatives are likely to be a lot
higher than we have seen since 2009-10. Alternatives have been mildly disappointing since 2009, doing almost 1% worse than one might have expected. The more sobering truth is that the 4.2% return they have achieved since then simply looks pretty good given the other choices on offer, and
their lack of vulnerability to rising discount rates is a comfort in a world where almost everything in
a traditional portfolio is acutely vulnerable to discount rate rises should they happen.
Today does not look like a great opportunity to reach for risk, despite the temptation in the face of unprecedentedly unattractive yields on government debt.....
The charm of alternatives today is that we believe they should perform similarly in either the
temporary or permanent shift scenario, and there are almost no other assets with expected returns
above cash for which that is the case. The problem with alternatives is that they are more complicated
to manage than traditional assets, generally have higher fees associated with them, and require more
oversight. Normally, those problems are enough to make them less appealing than traditional risk
assets such as equities and credit. Today, however, they seem well worth the extra effort. Their
generally disappointing performance over recent years, rather than a sign to dump them once and for
all, should probably be recognized as a signal of their potential utility in the market environment we face in the coming years.
There is no panacea for the low returns implied by asset valuations today. Anyone suggesting
differently is either fooling themselves or trying to fool you. But piling into the assets that have been the biggest help to portfolios over the past several years, as tempting as it may be, is probably an even worse idea than it usually is. And a deeper analysis of what led returns to be disappointing for
the asset classes that have lagged may help investors avoid the error of abandoning decent assets just when their time may be about to come.
https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=30
A Q R funds
http://quicktake.morningstar.com/fundfamily/aqr-funds/0C000021ZL/fund-list.aspx
Arbitrage funds
http://quicktake.morningstar.com/fundfamily/arbitrage-fund/0C00001YYL/snapshot.aspx
Long-Short Equity: Total Returns
http://news.morningstar.com/fund-category-returns/long-short-equity/$FOCA$LO.aspx
Multialternative: Total Returns
http://news.morningstar.com/fund-category-returns/multialternative/$FOCA$GY.aspx

Well-said. Which also underscores the reason for the vast majority of retail investors should IGNORE the whatever-way-the-wind-is-blowing nature of the financial media puditocracy and get their investing analysis from more responsible organizations and sources. Like, oh, I don't know .... MFO, among other places. ;)

Perhaps there are two types of investors, those who want to get rich and those who want to stay rich? Gundlach, with a net worth of $1.4 billion, is certainly in the latter camp. He can achieve his personal goal by staying high and dry, others cannot. I get the impression from Ed that a number of the other folks in the "stay rich" camp (Mr. Soros and Dr. Druckenmiller among them) have reached a similar conclusion; in consequence, they're more exposed to gold and/or gold miners than to other asset classes.
The common adage is "being early is the same as being wrong." Perhaps they're more comfortable taking the risk of being that kind of wrong rather than the other kind?
Just pondering,
David

Why do I keep thinking the more a money manager appears on TV (or in the media) as an financial talking head the less useful and/or "correct" their analysis, estimates, calls, or prognostications are?

Plenty More Lined Up. With Better Ideas ?
Steve Cohen and the Infinite Monkey Theorem
By Michael P Regan a Bloomberg Gadfly columnist covering equities and financial services. Jul 27, 2016 2:05 PM CDT
.. this theory came to mind while reading a Wall Street Journal article about how Steve Cohen is investing in a hedge fund run by investment firm Quantopian, which provides money to amateur quants who come up with profitable computerized trading strategies. These aren't exactly monkeys, of course; they're obviously much smarter. (The article mentions mechanical engineers and nuclear scientists.) But the idea is similar: Give enough people the right tools, and eventually you'll get Shakespeare. Or in this case, something even better: market-beating trading algorithms.
Some 85,000 quant wannabes reportedly have signed up from 180 countries and created more than 400,000 algorithms trading U.S. stocks on the platform, and 10 have been selected to trade a few thousand dollars.
.. It may be tempting to roll your eyes and dismiss the initiative as some sort of gimmick. That would be a mistake that ignores how much technology has democratized all manner of business models that previously had high barriers to entry
And if you wanted to be the manager of a quant fund? Well, now it sounds as if Cohen and his crew are interested in knocking down those barriers to entry that stood in the way for a long time -- namely access to millions, or hundreds of millions of dollars, in capital. This will most likely inspire even more to storm the gates than the 85,000 that have already done so. Perhaps the only surprising part of this development is that it took this long to happen.
http://www.bloomberg.com/gadfly/articles/2016-07-27/steve-cohen-and-the-infinite-monkey-hedge-fund-managers

Hi Catch22,
Like most evolutionary movements much depends on timeframe and where you look. Women have successfully penetrated many professions. One industry that has escaped Gloria Steinem however has been the financial sectors, especially mutual fund management.
There is a huge, huge gap between what fund managers say and what they do. That gap is not possible in other professions such as among doctors and engineers. It is not a hard assignment to find statistics that demonstrate the bias that still exists in the mutual fund manager sector. Here is a Link to a recent Morningstar study that makes the case:
http://corporate.morningstar.com/US/documents/ResearchPapers/Fund-Managers-by-Gender.pdf
The stats tell the story without resorting to lie detectors. The Old Boys Club appears to be intact and working against females and clients in this financial arena. Note that I included clients as suffering damage. Studies show that women are terrific investors, are conservative, and introduce a diversity of perspectives in formulating investment decisions.
I too recognize that in some professions, the truth, the whole truth, and nothing but the truth is notable by its frequent absence. Politics anyone?
In my working career, I had the good fortune to hire and also to work for some very talented women.
Best Wshes.

I strive to maintain at least a five percent weighting in the minority sectors (materials, real estate, communication services and utilities) and at least a nine percent weighting in the majority sectors (consumer cyclical, financial services, energy, industrials, technology, consumer defensive & healthcare) within my portfolio. Since, I am at about a nine percent weighting in energy and energy now accounts for about a seven percent weighting in the S&P 500 Index this puts me at about a +2% overweight in the sector as compared to the Index and in a neutral position within my portfolio according to my allocation weightings. This leaves me with about seventeen percent that can be move around and overweight accordingly as to how I wish to allocate sector weighting within my portfolio.

Hi Guys,
Nowadays, it's all about freedom of choice. In the USA women are free to enter whatever occupation appeals to them on an individual basis. Education is not a limiting factor. More females do post-high school than men.
Women choose not to work as bricklayers (the construction industry) or as firefighters as a general rule. That's their choice. Occupational participation rates are dynamic and are in a constant change mode. There are now more women bartenders than men.
More power to females. They have earned it. They are patient, they are persistent, and they multitask better than their male counterparts. They learned that skill managing households and children.
I love them all. They will do well as more and more of them invade the financial money management world. Good for them and good for us.
Best Regards.

Hi Guys,
I’m a little amazed by how often referenced articles and posts interact with one another.
Just today, this article on Marc Faber and the 10 Laws of Wealth piece have that interconnected character. Here is the internal Link to the 10 laws article:
http://www.mutualfundobserver.com/discuss/discussion/28733/these-10-laws-of-wealth-can-help-you-hold-on-to-investment-gains
There really are no unexpected recommendations in this listing. Rule 4, “Forecasting is for weathermen”, is relevant for the Faber reference. Forecasters do hazardous duty and are challenged to score a 50% accuracy. Actually, weathermen have a much better record than financial wizards. Faber falls into that lower success ratio cohort. Here is the CXO Advisory Group Guru grade ratings:
https://www.cxoadvisory.com/gurus/
Based on a large number of predictions over an extended timeframe, Faber’s record is rather unimpressive. He scored at the 45% correct level. CXO asked the following: “Marc Faber: Nabob of Negativism?” My answer is a firm yes to that question.
Faber seems to always recommend a rather large portfolio asset allocation to Gold holdings, sometimes as high as 25%.
If that allocation is scraped from the fixed income portion of the portfolio (equities sort of held constant), overall portfolio returns should not suffer too much, and the portfolio’s standard deviation should be greatly reduced.
I loosely checked the numbers over several timeframes with Gold ranging from the 10% to the 25% portfolio weightings to verify my speculation. The few numbers I made confirmed my perspective. Please note that I do not do Gold in my portfolio.
Best Regards.

Drone investing
Target-date funds are a great financial innovation with the potential to help millions of investors. But if you do set your investments that way, you shouldn’t ever really forget them.
Investors on autopilot may never learn the basic financial concepts for themselves, just as self-driving cars may lull us into a dangerous complacency.
If something goes wrong — and in 2008, not only did funds fall in value more than some investors expected but some were found to be impermissibly overweighting their equity holdings, in violation of their prospectus — we may suffer more damage than if we had never relied upon them. That sounds something like when a car’s autopilot fails and passengers are hurt in accidents they might easily have avoided with a little attention to the road.

Everyone needs to make the decision themselves whether these investment vehicles are appropriate for them. As convenient as they are, we rebalance our portfolio several times annually and autopilot is not for us.

FYI: Ameriprise Financial is telling clients to sell OppenheimerFunds municipal bond funds with big holdings of Puerto Rican debt, adding to the chorus of critics of the funds' holdings.
Regards,
Ted
http://www.investmentnews.com/article/20160721/FREE/160729978?template=printart

"I suspect Ms. Yellen and associated folks just shake their heads on some days."
@Catch22- For sure. Ms. Yellin strikes me as one who is pretty resilient and one who keeps her eyes open. I'd be very surprised if she was proceeding with "head up and locked", as the old aviation saying goes. Frankly, very glad to have someone of her caliber at the controls.
I agree with your list of potential factors which may likely impact financial modes going forward. That's one hell of a lot of chickens looking for a place to roost:
---technology
---central bank policy(s)
---demographics (baby boomers and the young with low education and low paying jobs)
---jobs/wage growth (being jobs of consequence, monetary)
---ongoing affects upon personal budgets since the market melt
---societal unrest
---pension funds, life insurance companies (many underfunded and scratching for returns.
I suspect that future historians will regard the first quarter of the 21st century as a significant inflection point in the course of world history, as was much of the nineteenth century.
Take care- OJ

@Ted Actually, the byline could have been better, and it was almost accidental that my half-addled brain didn't move on by. Thanks for playing clean-up and finishing off the post "right and proper," as I'd intended to do (lately, my glass being only "half-full").
p.s. And may I say that you have been pretty darn sharp lately in finding most of the nuggets in the pile of largely useless goo the financial MSM has been spewing out for several months now. You may consider that a pat on the back for a labor of love well-done! I had no idea hula hoop usage could elevate one's game so noticeably, in the short-term. :)