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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.
  • Debate Over 60/40 Allocation Continues …
    First, 60/40 is just an idea, an investor can be in 50/50 and all the way 100/0. It depends on someone's age and goals.
    PRWCX is a unique go-anywhere fund. It's not your typical 60/40. PRWCX excels in risk-adjusted performance and can be measured by the Sharpe ratio. Most investors don't have the patience to hold funds for many years. Another good idea is to use only 3-5 funds. The more you diversify, the chances are your portfolio will not beat the indexes and why Buffett said "Diversification is a protection against ignorance". Other than that, Buffett recommended the SP500, not even 5 funds.
    BTW, PRWCX beat 60/40 (SPY/PIMIX) since volatility peaked up in 2018. It had better performance, Sharpe, Sortino + close SD. see results (link).
  • Debate Over 60/40 Allocation Continues …
    It's easy to beat PRWCX on a raw return basis. VOO/VFIAX will do. The question is whether you can do it with an only moderately volatile investment.
    VOO beats BRK.A over ten years with less volatility. Thus a better Sharpe ratio (higher returns divided by lower volatility).
    PRWCX beats both of them on risk adjusted return (as measured by Sharpe ratio or Sotrino ratio).
    Comparison at Portfolio Visualizer
    By Sharpe and Sortino, QQQ is the winner.
    I like to look things up. :)
  • TCAF, an ETF Cousin of Closed Price PRWCX
    @Roy,
    If you are adding to your fixed income holdings and are concerned about inflation,
    you may want to consider TIPS. The upcoming auction on Thursday, 06/22 seems attractive.
    "The U.S. Treasury on Thursday will offer $19 billion in a reopening auction of CUSIP 91282CGW5, creating a 4-year, 10-month Treasury Inflation-Protected Security."
    "This TIPS had its originating auction on April 20, 2023, when investors got a real yield to maturity of 1.32%. Its coupon rate was set at 1.25%. CUSIP 91282CGW5 now trades on the secondary market and at the close Friday it had a real yield to maturity of 1.81% and a discounted price of $97.43 for $100 of value."
    "If the real yield holds above 1.8% through Thursday’s auction, it would be the highest auctioned real yield for a TIPS of this term since October 2008."
    Link
  • Debate Over 60/40 Allocation Continues …
    If only I had a dollar for every time someone proclaimed the death of the 60/40 portfolio!
    Link
    Both stocks and high-quality bonds experienced double-digit losses in 2022 which is very rare.
    Some historians claim 2022 was the worst-ever year for U.S. bonds.
    Link
    Bond yields have increased significantly since the start of last year
    and the Fed funds rate appears to be nearing its peak during this cycle.
    In the coming years, high-quality bonds will provide "ballast" for equities
    and generate greater returns than in the recent past.
  • Debate Over 60/40 Allocation Continues …
    It's easy to beat PRWCX on a raw return basis. VOO/VFIAX will do. The question is whether you can do it with an only moderately volatile investment.
    VOO beats BRK.A over ten years with less volatility. Thus a better Sharpe ratio (higher returns divided by lower volatility).
    PRWCX beats both of them on risk adjusted return (as measured by Sharpe ratio or Sotrino ratio).
    Comparison at Portfolio Visualizer
  • Debate Over 60/40 Allocation Continues …
    Someone on Big Bang! recently started a thread titled "How can we match or beat PRWCX?"
    .
    Looks like Berkshire has managed to beat it. I’m getting average annual returns for 10 years as follow: +11.53% for BRK.A / +11.43% for BRK.B / +10.79% for PRWCX. Double-check my numbers before buying. They’re from different sources and could be based on somewhat different time spans or criteria. Each has a unique set of risks of course. With the former you could move in and out pretty much at will (tax deferred accounts anyway), possibly skimming profits on the high end. With the latter you get much broader diversification but are limited to an extent by TRP’s prohibitions against frequent trading as well as any restrictions / fees your brokerage may impose in that regard.
  • TCAF, an ETF Cousin of Closed Price PRWCX
    I haven't opened a position in TCAF as of yet, though I had fully intended to. Doesn't mean I won't, but with us coming to within 5 years or less until retirement I find myself not wanting to add to risk assets and am considering adding to our fixed income holdings to bring our equity allocation down from its current ~57%---even though inflation is still an issue eating away at purchasing power.
  • Debate Over 60/40 Allocation Continues …
    My Roth IRA is mostly with T Rowe Price but I’ve gradually been moving from TRP to Fidelity funds. I’m ticked at TRP for not letting me invest in PRWCX even though I’ve invested with them for 30+ years.
    A very long time ago (more than 30+ years), there was a Winston cigarette jingle: It's not how long you make it (30+ years), it's how you make it long (building assets in T. Rowe Price).
    PRWCX is open to investors who have more than $250K invested with T. Rowe Price.
    https://www.troweprice.com/personal-investing/about/client-benefits/index.html
  • Larry Summers and the Crisis of Economic Orthodoxy
    ”If the Federal Reserve follows Summers’s advice and keeps raising interest rates until the economy hits “five years of unemployment above 5 percent,” then millions of people will suffer for absolutely no reason other than as human sacrifices to a discredited economic theory.”
    Yes. I’ve long felt that way (”Federal Reserve Wrecking Crew”). Somewhat surprisingly, the overly restrictive stance hasn’t yet thrown us into a deep recession. Summers? Uhh! / I have a lot of trouble stomaching both him and Er-Erian. Both sound like a wet rag (financially speaking) 90% the time.
    I have a hunch that a part of the inflation issue is the bundle of savings amassed by the boomers over decades of economic growth and market outperformance. In a sense. inflation may “taking back” much of what has been given over those years. Would help explain why the economy stays hot despite the efforts of the Fed to cool it. As I said, just a hunch and haven’t found anyone who agrees with me on that point.
  • Larry Summers and the Crisis of Economic Orthodoxy
    Worth reading: https://thenation.com/article/economy/summers-weber-economic-orthodoxy/
    But inflation proved the perfect issue to enable Summers to regain the spotlight. Intellectually, Summers had been deeply formed by the monetarist revolution instigated by Milton Friedman in the 1970s—which held that a key way to hold down inflation was to raise interest rates in order to increase unemployment (and thereby keep wages in check). In early 2021, Summers began sounding the alarm that the stimulus spending Biden and the Democrats had used to keep the economy afloat during Covid was going to lead to a sharp rise in inflation. When inflation did in fact rise, Summers basked in the role of the prophet vindicated.
    But Summers’s rehabilitation rested on an illusion. As Eric Levitz notes in a recent New York magazine article, all evidence suggests that while Summers was right to predict inflation, he was completely wrong about both the causes of that inflation and the best means to fight it. Speaking at the London School of Economics in June 2022, Summers said that “we need five years of unemployment above 5 percent to contain inflation—in other words, we need two years of 7.5 percent unemployment or five years of 6 percent unemployment or one year of 10 percent unemployment.” This is the standard Friedman prescription of a short, sharp shock of unemployment to defeat inflation—the same remedy followed by Paul Volcker in the late 1970s and early ’80s. Those policies, of course, led to the long-term defeat of American labor unions and the rise of Reaganite neoliberalism.
    But that scenario was not repeated under Biden. As Levitz reports, Summers’s "call for austerity was premised on the notion that only a sharp increase in unemployment could prevent a ruinous wage-price spiral. In reality, both wage and price growth have been slowing for months, even as unemployment has remained near historic lows. Summers’s failure to anticipate this outcome should lead us to reconsider just how prescient his analysis of the post-Covid economy ever was."
    The core problem, Levitz adds, is that from the beginning, [Summers’s] analysis was predicated on the idea that excessive stimulus would lead to unsustainably low unemployment and thus wage-driven inflation. There has never much reason to believe that the labor market was the primary driver of post-Covid price growth. And at this point, it’s abundantly clear that, in 2023 America, a tight labor market will not inevitably trigger a wage-price spiral.
    If the Federal Reserve follows Summers’s advice and keeps raising interest rates until the economy hits “five years of unemployment above 5 percent,” then millions of people will suffer for absolutely no reason other than as human sacrifices to a discredited economic theory.
    Far from vindicating Summers, inflation is yet another case where he got a big issue wrong. It joins a long list of such errors. As Binyamin Appelbaum documented in his fine book The Economists’ Hour (2015), while serving as deputy Treasury secretary in 1998, Summers took it upon himself to bully staffers who were pushing for the regulation of credit derivatives—the banking practice that led to the housing bubble and 2008 crash. Summers even called one staffer, Brooksley Born, the head of the Commodity Futures Trading Commission, into his office to scream, “I have 13 bankers in my office who tell me you’re going to cause the worst financial crisis since the end of World War II.” Ironically, it was Summers’s own failure to heed Born’s advice that caused that very crisis. In 2005, Summers derided critics of the deregulated credit default swap market as “slightly Luddites.”
  • Debate Over 60/40 Allocation Continues …
    FBALX is not far behind PRWCX and it’s open to new investors, has a low expense ratio, and has very consistent returns. I’m considering opening a position in TCAF, would prefer a fund rather than ETF for various reasons.
    My Roth IRA is mostly with T Rowe Price but I’ve gradually been moving from TRP to Fidelity funds. I’m ticked at TRP for not letting me invest in PRWCX even though I’ve invested with them for 30+ years. Their other choices for balanced and allocation funds at TRP are mediocre at best. PRWCX’s returns are meaningless for other investors who can’t own it, and it’s returns are not matched by other TRP funds.
  • Profound implications: China's birth rate
    Larry Summers, WSW. 16 June, 2023:
    In the past 6 years the number of births in China has dropped -50%. Holy Jeepers .
  • Debate Over 60/40 Allocation Continues …
    But PRWCX has been closed for years. This is why there is interest in the new ETF TCAF (see a nearby thread). It is 100% equity but is managed by Giroux (who also manages PRWCX).
    Of course, once TCAF has some record, its proper comparison would be with VFIAX /VOO, SCHB, SCHD, etc.
  • Debate Over 60/40 Allocation Continues …
    Though not a traditional 60/40 fund, returns for PRWCX are:
    YTD 10.49, 1 YR 16.16, 3 YR 10.32, 5 YR 10.56, 10 YR 10.79
    Returns for VBINX, a traditional 60/40 index fund are:
    YTD 9.81, 1 YR 12.70, 3 YR 6.12, 5 YR 6.84, 10 YR 7.77
    Compared to SP 500 fund, VFINX:
    YTD 15.71, 1 YR 22.17, 3 YR 13.80, 5 YR 11.45, 10 YR 12.46
    SD for PRWCX is 13.01 vs VBINX 12.58 vs VFINX 17.91
    With PRWCX you get just a bit south of 90% of the SP 500 return for 10 years with less volatility. For 5 years you get 92% of the SP 500 return. The people who constantly claim 60/40 is dead and useless don't invest in a moderate way and frankly don't know what they are talking about.
  • Debate Over 60/40 Allocation Continues …
    Personally, I’m very optimistic about balanced funds right now because this is the first time in years that bonds are paying healthy yields. Even with the market crash in 2022, my primary balanced fund (FBALX) has decent three and five year returns.
  • Buy Sell Why: ad infinitum.
    Hi guys,
    Some old news on some buys. Have opened positions in BOGSX and HTECX. Looking to get into smaller funds. Hoping to do better than just holding the big stuff....instead of holding only the Magnificent 7.....lol......I think there was a movie, no?
    Also opened some emerging funds. First time I've owned overseas funds in years: EACOX and CEMDX. Playing the dollar and moving things out of China.
    Have also bought CSMVX and GTCSX. First time have owned small caps since the Blond One was president.
    Also have bought VLIFX. Have owned this one before.
    As you can tell, I'm bullish with the Fed being close to done, me thinking. Mild slow down...... most of the bad I think is behind us. With a long term outlook, I felt it was time to buy. With all the gloom and bearishness around, I think a new day is dawning. The sun is rising. Things will look better in days to come.
    God bless
    the Pudd
  • Debate Over 60/40 Allocation Continues …
    Some follow on comments...
    *Nice article in Barron's by Lewis B..I'm invested in PVCMX and have recently invested in MRFOX...also noted that MAFIX, managed funds are in the article...BLNDX similar to MAFIX who knows maybe there is some magic in blending futures with Stocks?
    *Would be interesting to see number of funds who beat a 50/50 stock/bond index combo the past two years? I'm going to check if TSUMX has (I am invested in it)
    * I loaded Tbil onto the chart that Catch 22 noted...lot smoother ride without the ups/downs, no returns...makes you wonder if these experts can't figure it out did the others in LB's article just get lucky or skill involved?
    * Such a dichotomy going on right now...Biden spouting how economy is great, but tax receipts way down even though he increased corp tax, seat of the pants view, folks traveling bigly, airports full, restaurants are full, some companies still hiring, some letting folks go, maybe rolling recession, car dealers still charging list plus for new cars...strange, no? Makes you think the markets could go up another 20% and just as easy go down 20% plus...
  • Debate Over 60/40 Allocation Continues …
    The 3 noted with 1 year chart.
    Side note: Although a totally funky 1 year for a broad U.S. bond fund, a current real return for a total U.S. equity index and and total U.S. bond fund, each with about 3,000 + holdings; and these two within a 529 account at a 50/50 have a combined total 1 year return of 11.1%. So, not getting the big equity bump from the averaging down of the bond fund, which has a 1 year return of +.36%; but bonds have tempered equity draw downs since 2006. I expect the bond portion to perform better going forward. For 15 years, this 50/50 has provided a decent tax sheltered return.
  • Debate Over 60/40 Allocation Continues …
    Investors keen to keep an eye on their own investment portfolio can still rely on the basic wisdom of a 60/40 weighting to equities and bonds despite the recent souring of sentiment towards it, industry participants say. BlackRock warned at the end of April that, despite the recent rebound for this classic investment approach, investors should now buy a wider range of assets, but its biggest rival provider of exchange traded funds insists the traditional portfolio still has good long-term prospects.
    “Research from Vanguard dating back to 1977 shows last year was a historical anomaly for the 60/40 portfolio in that it was the only year in which both equities and bonds sank in value — delivering double-digit losses.In every other year, either both were in positive territory or gains in one offset losses in another. Roger Aliaga-Diaz, Vanguard’s chief economist for the Americas and head of portfolio construction, maintains that knee-jerk responses to market upsets are unwise. He points out that over the 10 years to the end of December a classic 60/40 portfolio would have delivered an annualised return of 6 per cent. Over the past four years that figure would still have been 5.9 per cent and the Vanguard Capital Markets Model projection for the next 10 years as of the end of December was for returns of 6.1 per cent.”

    Above excerpted from The Financial Times - June 17, 2023
    https://www-ft-com.ezp.lib.cam.ac.uk/content/8b6221f8-daa4-4cd9-8c76-58c8e0f7fff0
    (May require subscription to access)
    I checked the recent performance of three funds sometimes viewed as “safer” alternatives to a traditional 60/40 mix. (I’ve owned each of these in the past.) Returns going back to 3 years aren’t encouraging:
    TMSRX 3-year annualized +1.22% / YTD +1.49%
    BAMBX 3-year annualized +0.42% / YTD -0.31%
    CCOR 3-year annualized +0.91% / YTD -10.51%
    (Numbers from M*)
    Three years could be viewed as ”short-term”, but we live in a world where many view it as ”longer-term” - for better or worse. Did not check for 60/40 balanced funds. Would not expect near-term results to be much better. Balanced funds pretty much got “clocked” in 2022. More questions than answers here for conservative investors designing a portfolio with both growth potential and a risk profile they can cope with.
  • Gold
    If you want to try and understand gold / gold miners I might suggest subscribing to Bill Fleckenstein’s “Market Rap.” That’s something he knows a lot about and frequently addresses in commentary or in answer to questions submitted by readers (see “Ask Fleck” link). Just take care not to drink his bearish Kool-Aid re the stock market.
    I’m “agnostic” as far as metal / miners go. Beyond my understanding. Recently exited a long time exposure to the miners (1 mutual fund and 1 stock). Risk mitigation move tied to an age-related portfolio revamp - not a market call. Continue to hold a “smidgen” in GLTR, an ETF with derivative exposure to gold, silver, platinum and palladium. It’s a tiny allocation viewed as a possible hedge against equity volatility. Also own one CEF focused on gold and natural resources.
    Back to Bill - My sense, having followed him a number of years now, is that while he very much likes the physical precious metals, he has felt for a long time that the miners are grossly undervalued / under-priced in relation to the metals. Not all miners are equal however. Depends on the quality of the mines / gold fields they own. That’s not always easy to discern (in the same way that seemingly profitable oil discoveries can end up being unprofitable). Like I said, best to get it directly from him.