I'm not going to make any comments on this board about junk bonds, but do think there are a handful of excellent writers on SA. It's like anything else when reading/browsing financial media - have a good filter.

http://www.sec.gov/Archives/edgar/data/896975/000119312514283727/d761568d497.htm
497 1 d761568d497.htm TWEEDY, BROWNE FUND INC.
TWEEDY, BROWNE FUND INC.
TWEEDY, BROWNE GLOBAL VALUE FUND II — CURRENCY UNHEDGED (the “Fund”)
Supplement dated July 29, 2014
to the Prospectus dated July 29, 2014 (the “Prospectus”)
Effective August 11, 2014 at 4:00 p.m. Eastern Time, the Fund will close to most new investors until further notice.
The Fund will remain open to existing shareholders (up to certain daily limits) as follows:
• Existing shareholders of the Fund may add to their accounts, including through reinvestment of distributions.
• Existing shareholders of other Tweedy, Browne Funds may establish an investment in the Fund.
• Financial Advisors who currently have clients invested in the Fund may open new accounts and add to such accounts where operationally feasible.
• Participants in retirement plans utilizing a Tweedy, Browne Fund as an investment option on August 11, 2014 may also designate the Fund, where operationally feasible.
• Investors may purchase the Fund through certain sponsored fee-based programs, provided that the sponsor has received permission from Tweedy, Browne that shares may continue to be offered through the program.
• Employees of Tweedy, Browne and their family members may open new accounts and add to such accounts.
• Existing separate account clients of Tweedy, Browne may open new accounts in the Fund.
The Fund reserves the right to make additional exceptions or otherwise modify the foregoing closure policy at any time and to reject any investment for any reason.
This Supplement should be retained with your Prospectus for future reference.

Hi Guys,
A close friend asked for my thoughts on a Charlie Munger interview a few days ago. I replied. I thought you guys might be interested in my response so I’ll share. Here are my comments to my buddy without editing.
I don’t know if you addressed it in earlier MFO exchanges. The interview that I reference is at the following Link:
http://25iq.com/2013/01/16/charlie-munger-on-investment-concentration-versus-diversification/
The Charlie Munger interview is wide ranging and is terrific. It provides many opportunities for comment, both positive and negative. I love the opportunity.
Charlie Munger is Warren Buffett’s Tonto. Just as Tonto was the Lone Ranger’s faithful and trusted companion, Charlie Munger is Warren Buffett’s faithful and trusted companion.
There is both a positive and a negative aspect to that relationship. The good part is that each partner contributes and adds gravitas to the other’s investment views. The bad part for Charlie is that he will always be remembered as Tonto-like, not the senior partner. Regardless, Charlie Munger is smart and wise enough to tower tall among the investment redwoods.
Everyone touts consistency, yet many fail to satisfy this idealized behavior rule, especially in the investment world.. Buffett and Munger are no different in this regard.
I see no problem in their investment morphing history. I surely have done so, As John Maynard Keynes stated: “ When the facts change, I change my mind. What do you do, Sir?”
Buffett, in particular, has not been a paradigm of consistency throughout his legendary financial career. In his early days, he brutally cannibalized newspapers and suffered no qualms when firing staff to secure a positive cash flow. That’s just good hardnosed business.
Please read Buffett’s cumulative letters to investors. Over decades, his investment ideas and concepts certainly morphed from (a) a buying dirt cheap small stocks preference based on statistical criteria to (b) a buying large firms with a strong management team in place game plan.
Perceptions and preferences change. Buffett now advocates a hold forever business philosophy. For a time he abandoned, but again reverted to the buy cheap criterion. A while ago he jumped on the Index style bandwagon for most investors. It was not always so. But that’s what successful investors do; they accommodate a changing market environment. They learn from experience.
Sir Francis Bacon remarked in the 17th century: “By far the best proof is experience”. He also cautioned that “Half of science is putting forth the right questions.”
Ken Fisher, in his 2007 book “The Only Three Questions that Count”, is on Bacon’s wavelength in his Question One. He cautioned that what we thing we know is not really so. Fisher’s resolution to this fault is to examine the historical market using statistical correlation coefficient tools to test for suspect truisms.
Buffett and Munger represent the miniscule apex of money managers. They are much more intuitive than most. With occasional missteps, their intuition is spot-on. Most of us are not blessed with that great faculty so a more orderly, disciplined, and statistically-based approach is our default operational mode.
Munger often takes deadly aim at academia in his many writings. That’s okay, since academia has its share of faulty studies and shady participants. But I propose that these are few in number, much fewer than in many other disciplines. Unfortunately, incompetence and fraudulent practices find their way into highly prized professions like in medicine and in the law. The buyer must forever be skeptical when seeking opinions.
Charlie Munger recognizes these limitations in all his pronouncements. Note that he constantly uses terms like “almost” and “some” as his qualifiers. He never makes a ubiquitous “all inclusive” statement.
There is another side to Munger’s academic scorecard. It’s a mixed bag. Munger often acknowledges the many contributions made by the academic community when he cites the merits of limited diversification and some elements of the Efficient Market Hypothesis (EMH). Remember, it’s merely a hypothesis. Most everyone accepts the fact that, carried to an extreme, the practical guidelines discovered by academic research can turn South.
As Munger observed in the interview: “I think it is roughly right that the market is efficient, which makes it very hard to beat merely by being an intelligent investor. But I don’t think it’s totally efficient at all.” Most folks recognize that the market is not perfectly efficient.
Given the behavioral biases of all investors, and the hyper-complexity of the interwoven, interactive market parts, no investment theory or correlation is ever perfect. Even if it is attractive for some period, it is subject to future refutation, again caused by an evolving marketplace.
By the way, Gene Fama is the likely academic not identified in the article who has consistently increased his standard deviation estimate when characterizing the success story of Berkshire-Hathaway. Since he formulated the EMH, Fama himself is a 3-sigma supporter of it. Over the last year or two, Fama has softened his position on this matter just a tad – a very slight tad.
Munger is spot on-target when he cites his race track analogy. An investor need commit his money only when he perceives an edge; that’s true in both the stock world and the race track realm. Buffett noted that a batter need not swing at every pitch, especially when it's not in his comfort zone.
I knew a successful horse player who decided his favorites well before the race began. He never wagered immediately. He only placed a bet if the odds on the horse he selected increased before the closing bell; otherwise he abstained. Sometimes he spent the whole day at the track without ever committing a single dollar, but he earned his living with that discipline.
Strange bedfellows, but Charlie Munger’s investment philosophy and rules are very similar to those recommended by the previously cited Ken Fisher. To oversimplify, buy when you uncover an edge that tilts the odds, and punt to an Index-like approach if an edge can not be uncovered. Of course, this unlikely pair part company in numerous other financial areas.
The overarching presentation on EMH is a bit unfair. It presupposes an EMH goal that simply doesn’t exist. In so doing, it constructs a straw-man that is easily attacked. The false premise is that EMH is a market predictive tool. It is definitely not.
EMH only proposes universal (or almost universal) market knowledge and its price determination. It says nothing about the interpretation or use of that information for future price discovery. It does not project pricing movements as suggested in the Munger article. That claim is a mischievous straw-man.
Buffett observed that “Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees.” Munger observed that “index funds make the most sense for almost all investors. Whether they know it or not most all investors should be passive investors.” I trust the wisdom of these two investment giants.
Well, that’s my scattered comments on this excellent interview. Charlie Munger always has simple market insights that an investor can exploit. What do you think?
So ended my comments to my investment buddy.

Lecture by David Swenson to Robert Shiller's Financial Markets class where Swenson explains why he feels the 60/40 model is broken for endowments and other portfolios with an unlimited time horizon.

FYI: Copy & Paste 7/26/14: Lawrence C. Strauss; Barron's
Tiny gain in first half follows years of annual losses for hedge funds and mutual funds in this sector.
Regards,
Ted
Many hedge funds specializing in managed futures have struggled with poor performance, to put it mildly.
After shining during the financial meltdown of 2008 -- the HFR index tracking these funds returned an impressive 18.06%, versus a 37% loss for the Standard & Poor's 500 that year -- these funds have fallen on hard times. On average, they lost 3.54% in 2011, followed by negative performances of 2.51% and 0.87% in 2012 and 2013, respectively.
As a result of this persistent underperformance, net outflows surged to nearly $6 billion in the first half of 2014, according to HFR. "Financial advisors are having a hard time persuading their clients to stay with it," says the manager of a large fund of funds.
MANAGED-FUTURES FUNDS' ASSETS total about $230 billion, or roughly 8% of the $2.8 trillion invested in hedge funds, according to HFR. The good news is that there are small signs of an improving environment for these funds, which tend to be helped by more volatility and a macro environment in which there's a lot of divergence among asset prices. The unwinding of the Federal Reserve's quantitative-easing program should help. In the first half, the average return for managed-futures funds was 0.37%. That's not great, but it's better than it has been in the recent past.
These funds rely heavily on futures contracts, usually to make calls on the direction of stocks, bonds, currencies, or commodities. Often with the help of computer algorithms, managers try to identify trends -- whether it's rising interest rates or declining gold prices. AQR Funds describes it in a recent shareholder letter as going long markets whose prices are rising and shorting those with falling prices.
For managers who can correctly identify trends ahead of the pack, so much the better when it comes to performance. Especially good scenarios are when markets are going from good to very good or from bad to worse, as was the case in 2008. Later that year, stocks and commodities tanked, while gold and Treasuries rallied. All of which led to a stellar performance that these funds haven't come close to repeating.
One of the trend-following strategy's selling points is that it's a good way to diversify a portfolio, thanks in part to low correlations to traditional assets like stocks and bonds. But with equities doing so well in recent years, many of these funds have been passed by. However, Pat Welton, co-founder of Welton Investment, which runs managed-futures strategies, points out that many of these managers don't take large positions in equities because "it's exactly what you've been hired to diversify away from." In addition, when markets flatten out -- as has been the case with interest rates, for example -- it's harder for managers to find trends and exploit them.
Yao Hua Ooi, a portfolio manager of the $6.2 billion AQR Managed Futures Strategy fund (ticker: AQMNX), points to "how far you look back to determine whether a market is trending up or down" as a key factor. In the past few years, managers who use longer time horizons -- say at least a year -- have fared better than those who use a shorter window, typically one to three months, he observes. The AQR fund's managers blend shorter and longer time horizons to gauge trends, he adds.
As if to illustrate how challenged performance has been for these funds, AQR Managed Futures Strategy has a three-year annual return of 1.2%, placing it near the top of its Morningstar category. It's a mutual fund, not a hedge fund, with an expense ratio of 1.50% -- pricey for a mutual fund but considerably cheaper than a typical hedge fund.
Welton attributes these funds' performance difficulties to the flood of liquidity by central banks around the world, more or less in unison for many years. Low interest rates have been accompanied by lower spreads, making it hard to find good trends to follow, he adds.
AN 18.73% RETURN in 2010 for the Welton Global Directional Portfolio was followed by three straight years of negative results, triggering outflows. In this year's first half, however, the fund was up 17.41%, having made money in equities, commodities, interest rates, and currencies. The portfolio also had success with so-called relative value strategies, an example of which would be going short one basket of stocks, while being long another.
Several firms have studied the dismal performance of managed futures. Ooi, of AQR, contributed to a paper on that topic. With the help of financial simulations -- these funds weren't around in, say, the 1920s -- the paper concluded that "trend-following has delivered strong positive returns and realized a low correlation to traditional asset classes each decade for more than a century." Adds Ooi: "Just like any investment strategy, it has had underperformance, but that isn't predictive that the strategy will no longer generate returns going forward."
Most of managed-futures funds, however, are in crying need of a sustained stretch of good performance -- and sooner rather than later.
M* Snapshot Of Managed Futures Fund Returns: http://news.morningstar.com/fund-category-returns/managed-futures/$FOCA$13.aspx

FYI: Copy & Paste 7/26/14: Jason Zweig: WSJ;
Regards,
Ted
Even a "fiduciary" investment adviser may still be able to treat clients in ways that might surprise you.
Someone who owes you a fiduciary duty must put your benefit ahead of his own; in practice, that should mean minimizing fees, eliminating all avoidable conflicts of interest and fully disclosing any other material conflicts. Unlike brokers—who need only ensure that their recommendations are "suitable," given your needs and circumstances—investment advisers are already required by law to meet that standard.
Even so, many advisers impose "termination fees" on clients who leave the firm within a set period. It is appropriate for an adviser to recoup the cost of setting up and administering your account—and perhaps even to deter you from bolting the first time the market dips a little. But securities lawyers say that termination fees should be directly related to those costs. Otherwise such fees would seem to violate the spirit, if not the letter, of fiduciary duty.
"If for any reason you don't trust your adviser anymore, or you don't like his performance, then terminating the contract is your only real way to protect your interest," says Robert Plaze, a partner at law firm Stroock & Stroock & Lavan in Washington who formerly regulated investment advisers at the Securities and Exchange Commission. "You shouldn't be penalized for doing that."
Termination fees are fairly common. In its latest annual brochure, filed with the SEC in May, Horter Investment Management, a financial-advisory firm based in Cincinnati, says that it charges clients $200 if they exit some of the firm's strategies within 90 days. That is in addition to management fees that run up to 2.75% annually.
The firm manages approximately $700 million, according to another form filed with the SEC. Drew Horter, head of the firm, was traveling this past week and no one else was authorized to comment, said an employee.
The David J. Yvars Group, an investment-advisory firm in Valhalla, N.Y., says in its SEC brochure, filed in April, that "if an account terminates within one year of opening, a 1% termination fee will apply."
A client with $1 million would thus pay $10,000 to leave Yvars Group within the first year, in addition to the firm's management fees, which run at a 2.6% annual rate for a stock-oriented account of that size.
Yvars manages approximately $100 million, according to the brochure. David J. Yvars Sr., chief executive of the firm, didn't respond to several requests for comment.
Regulators have taken the position in the past "that some termination fees may violate an investment adviser's fiduciary duty," says David Tittsworth, president of the Investment Advisers Association, a trade group in Washington. Such fees, he says, may be unfair if they "penalize a client just for terminating an adviser or keep a client from ending a bad advisory relationship."
Other experts caution that the law in this area is ambiguous. The SEC, says Mr. Plaze, "should either enforce this or change the rules." A person familiar with the SEC's thinking says that the agency views each such situation based on the facts and circumstances.
Brian Hamburger, president of MarketCounsel, a consulting firm in Englewood, N.J., that helps investment advisers comply with financial regulations, says advisers are increasingly insisting that clients give them 30 to 90 days of advance notice of a termination.
In some cases, that might enable advisers to unwind complex or illiquid securities without hastily depressing their prices. But often, says Mr. Hamburger, it simply enables advisers to keep earning fees from clients who have already said they don't even want to work with them anymore.
So bear in mind that the word "fiduciary" isn't a guarantee that an adviser will put you first.
If an adviser's brochure says you could owe a termination fee, ask why he feels, as a fiduciary, that such a charge is in your best interest.
"Clients often make the argument that a termination fee is inconsistent with how an adviser should operate," says Barry Barbash, a partner at law firm Willkie Farr & Gallagher in New York and former head of investment-management regulation at the SEC. "They say it makes them uncomfortable, so they'd like to see it struck from the contract."
Finally, bear in mind that most advisers don't charge termination fees at all, and many will even refund a portion of your fees if you decide to leave the firm. So think twice before you hire someone who will charge you to fire him.

FYI: Copy & Paste 7/23/14: Jason Zweig: WSJ;
Regards,
Ted
include a tribute to the late Peter L. Bernstein. Few things have given me greater professional and personal pleasure than having been able to call Peter my friend.
Peter, who died five years ago at the age of 90, spent nearly six decades on Wall Street. He also worked at the Federal Reserve, taught economics at Williams College, toiled as a commercial banker, ran an investment-counseling firm, and consulted on economics and investing strategy with some of the world’s largest money managers. He was the founding editor of the Journal of Portfolio Management, which took as its mission to make investing as close to a science as the theory and the data would permit. He wrote nearly 20 books, including the twin masterpieces Capital Ideas, his history of how modern financial theory transformed investing, and Against the Gods, probably the best popular book ever written on risk.
Like most people who knew him, I regarded Peter as the philosopher-king of Wall Street, the man who had read everything, knew everyone, and had thought longer and deeper about the hardest puzzles than anyone else.
Yet the central lesson that emerged from Peter’s life and work was intellectual humility, not hubris. The more he learned, the more skeptical he became of his—or anyone’s—ability to predict the future.
Insatiably curious, Peter never stopped learning, and his favorite word when confronted with something he hadn’t yet thought of was “Wow!”
I think of him as the modern equivalent of the sages described by the great French essayist Montaigne:
“To really learned men has happened what happens to ears of wheat: They rise high and lofty, heads erect and proud, as long as they are empty; but when they are full and swollen with grain in their ripeness, they begin to grow humble and lower their horns.”
Again and again, Peter would marvel that he could “make a living by reminding people of what they know only too well already.”
In 1999, I was thrilled when Peter asked me to write a guest essay for his newsletter. (To avoid any conflict of interest, he didn’t offer, nor did I request, any compensation for writing it.) For my topic, I chose the challenge that professional money managers faced in trying to take a long-term perspective in an increasingly short-term world.
We titled it “The Velocity of Learning and the Future of Active Management.” Fifteen years later, the topic seems at least as relevant (click here to download the PDF).
In 2004, I drove up to Peter’s summer house in Brattleboro, Vt., to do a long interview. We talked for nearly four hours about everything from John F. Kennedy (Peter’s classmate in the Harvard College class of 1940) and Peter’s experiences as an intelligence officer during the London blitz in World War II to the problems of 401(k)s and the puzzle of why companies pay dividends.
Together, he and his wife, Barbara, could be as wickedly funny as classic comedy teams like Burns and Allen or Stiller and Meara. Peter mentioned during that interview that he and his lifelong friend, the economist Robert Heilbroner, had done everything together as children and teenagers. “We even lost our virginity together, at the exact same moment,” he recalled. “Not at the exact same moment, Peter,” Barbara said.
You can click here for part one of my profile of him and here for part two; the PDFs are large files that could take a while to load, but any visit with Peter is worth the wait. A fuller transcript of our long conversation is available here.
Economics And Portfolio Strategy: http://green.lunarbreeze.com/~jason146/wp-content/uploads/2014/07/PLBjz.pdf
Peter's Uncertainty Principle Part 1. http://green.lunarbreeze.com/~jason146/wp-content/uploads/2014/07/11.04PBernstein1.pdf
Peter's Uncertainty Principle Part 2. : http://green.lunarbreeze.com/~jason146/wp-content/uploads/2014/07/11.04PBernstein2.pdf

In the event of a nasty credit crunch or related that is going to cause severe, negative economic dynamics; the final over-riding circumstance for any and all monies, be they in financial institutions such as banks, credit unions or money market type funds would the overriding mandates of presidentical directives; which would include any neccessary methods to limit and/or control cash flows as determined for the overall health of institutions and others as needed.

The following is an Associated Press news release quoted from the Washington Post.
(It is the second article down on the page.)
New SEC rules for money-market funds
"Regulators voted by a narrow margin to end a longtime staple of the investment industry — the fixed $1 share price for ­money-market mutual funds — at least for some money funds used by big investors.
The idea is to minimize the risk of a mass withdrawal from the funds during a financial panic.
The Securities and Exchange Commission also is letting all money funds block withdrawals when their assets fall below certain levels or impose fees for withdrawals.
The rules were adopted Wednesday by a 3-to-2 vote, culminating several years of regulatory haggling and false starts. They were opposed by one Democratic and one Republican commissioner.
The floating-price requirement applies only to prime institutional funds, which are considered riskier. They represent about a third of money-market funds, according to the SEC.
A run on a money-market fund during the financial crisis showed how risky the funds could be. The Lehman Brothers collapse in fall 2008 triggered the failure of the Reserve Primary Fund, one of the biggest money-market funds, which held Lehman debt. The Reserve Primary Fund lost so much money that it “broke the buck,” as its value fell to 97 cents a share."
— Associated Press

FYI: One area of the financial markets that we constantly monitor for signs of confirmation or divergence in the trend for equities are spreads between interest rates on high yield debt and comparable treasuries. High yield debt is far out on the risk spectrum of fixed income, so it tends to have a closer correlation to equities. Therefore, when stocks are rising, we typically see spreads on high yield debt tighten as investors have a bigger risk appetite. Conversely, when equities decline you see spreads on high yield debt normally widen as investors demand more in the way of yield to compensate for the added risk.
Regards,
Ted
http://www.bespokeinvest.com/thinkbig/2014/7/23/high-yield-spreads-widen-should-you-be-worried.html?printerFriendly=true

Meanwhile, I am subscribing to a newsletter (Chartist) for 10% of the total investment just to gain access to another datapoint.

Note that there is the Chartist Mutual Fund newsletter and the regular Chartist newsletter, which is an individual stock newsletter. The editor/author, Dan Sullivan, is a market timer.
Some on MFO have spoken very highly of James Stack, who publishes the InvesTech newsletter and apparently has a good performance record. I believe his newsletter is on the Hulbert Financial Digest Honor Roll.
If you want to get an objective third party audit of the performance records of many newsletters, the Hulbert Financial Digest does that. I believe you can also order an in-depth analysis of an individual newsletter from Hulbert.

A lot of dire forecasts for junk bonds in the various links of Ted original link above. Here's some more negative comments, these coming from Michael Aneiro's column in this week's Barron's. Mr. Aneiro has been a regular Cassandra on junk bonds for well over a year now. You know the broken clock analogy, so maybe Mr. Aneiro's time has finally arrived.
>>>Among current pockets of risk, as I've warned in this column before, is the corporate bond market. Not only are corporates rich, but they can also be harder to sell than they were just a few years ago. Since the financial crisis, banks have cut their corporate-bond holdings to keep pace with regulations. Inventory is down by 40% to 75%, according to various estimates, and if there's ever a rush to sell, fewer willing buyers could mean steeper losses, affecting bonds, mutual funds, and ETFs alike.
"THERE'S NO QUESTION that liquidity has decreased," says Gershon Distenfeld, director of high yield at AlianceBernstein, who says increased capital requirements have curtailed risk appetite among banks and dealers and made it more costly to maintain bond inventories. He adds that Bear Stearns, Lehman Brothers, and Merrill Lynch used to represent more than a third of U.S. high-yield trading volume, and none of them exist as a stand-alone entity today.
Fixed-income trading at banks "is evaporating," says James Swanson, chief investment strategist at MFS Investment Management. He sees corporate bonds, particularly high yield, as increasingly perilous for investors. "Are those markets, given how low yields are, compensating you for the risk of illiquidity?"
Corporate bonds are often pulled in two directions: When equity prices fell amid last week's turmoil, riskier corporates slid, too, but the losses were tempered by gains in underlying Treasury bonds. That pattern can hold up for short periods but will be challenged during more protracted downturns, especially if nobody really wants to buy.<<<

"How I became A Financial Predator and Spent My Summer Vacation."

Hi Bhopali. Be very careful in thinking anyone on a discussion board or anyone marketing an investment news letter is a guru. We are all here to offer opinions and listen to the ideas of others. Not to say there are not a lot of smart people on this board to help you form your own style - there are. But take in ideas to form your own style, which I kind of think you already have.
With that, my opinion would be to DCA the new money into a diversified portfolio based on your age and risk tolerance. This bull is long in the tooth, so putting all the $ to work now could be a mistake.
If you have an urge to follow a news letter, set aside maybe 10% of the money for that purpose. It might be fun to play the game, but don't risk a lot of money on a stranger.
If it is a substantial windfall, it might not be a bad idea to talk with a 'fee only' financial advisor. They should give you more of the detail catch22 referred to (important considerations). It could be just for a one-time assessment and plan outline with no further obligations. I actually found that this type of assessment and financial advice is offered free through some of the big investment houses like Schwab and Fidelity. I'm in the process of rolling over my 401k to an IRA at Charles Schwab. I went to my local branch to speak with an advisor there. I was very happy and impressed at the personalized retirement and investment overview I received - for free.
Bhopali, just my 2 cents with a grain of salt. Congratulations on your windfall and good luck on your plans.

FYI Morningstar Inc. said it will pay $61 million to settle an intellectual property lawsuit filed by a Chicago-based developer of financial software, according to a Securities and Exchange Commission filing.:
Regards,
Ted
http://www.chicagotribune.com/business/breaking/chi-morningstar-settlement-intellectual-property-20140717,0,4765214,print.story

Editor's Corner
Between Balance Sheet Growth and Reduction
Ron Rowland
Fed Chair Janet Yellen conducted her twice-annual testimony on monetary policy to the Senate and House yesterday and today. Her prepared speech contained little new and tended to emphasize previous Fed statements. “Too many Americans remain unemployed, inflation remains below our longer-run objective, and not all of the necessary financial reform initiatives have been completed,” Ms. Yellen reiterated to the Senate Banking Committee.
The Fed recently announced its timetable of ending additions to its balance sheet by October, but little has been revealed about what happens after that. Today, she told the House Financial Services Committee that the Fed intends to reduce the size of its balance sheet eventually. When lawmakers pressed her on this subject, she stated the Fed would be in a position to provide guidance by the end of the year. In other words, they are still working on it.
With asset purchases almost complete and balance sheet reductions still on the drawing board, the attention is turning to when the Fed will start raising interest rates. Yellen believes that time is far in the future because the 6.1% unemployment rate is not telling the whole employment story and inflation is under control. One indicator she is keeping an eye on is wage increases, and so far, there has not been any pressure on employers to raise wages.
There appears to be some dissention within the Fed regarding interest rates. Some members think the time may be ripe to begin raising rates and are voicing their concerns. According to Kansas City Fed President Esther George, “Today’s economy, with a strengthening labor market and rising inflation is ready for a more normal rate environment. Waiting too long may allow certain risks to build, that if realized, could harm economic activity.”
Corporate taxes are becoming front-page news as more and more companies reincorporate overseas through inversions in order to receive more favorable tax treatment. An inversion is defined as “a transaction through which the corporate structure of a U.S.-based multinational group is altered so that a new foreign corporation, typically located in a low- or no-tax country, replaces the existing U.S. parent corporation as the parent of the corporate group.” The Obama administration is encouraging congress to take immediate action to pass legislation aimed at curtailing this activity. In an interview today, Treasury Secretary Jack Lew stated his preference that any such legislation be retroactive to prevent a last minute rush by corporations.
Investor Heat Map - 7/16/14
Sectors
Technology climbed another rung of the ladder to displace Energy at the top of the sector rankings. The stability of large cap stocks over the past week, coupled with an upside earnings surprise from Intel (INTC), helped Technology grab the lead. Energy didn’t drop far and is now in second place. Real Estate performed well and climbed two spots to third, pushing Health Care down to fourth in the process. Telecom weathered the recent market storm well and rose to fifth from eighth. There is now a three-way tie for sixth place as Materials, Financials, and Consumer Staples crowd together. Materials weakened enough to fall two spots and join the other two sectors despite a good earnings report from Alcoa (AA). The recent rise of Consumer Discretionary was partially unwound this week as it fell back three spots to ninth. A strong performance from the transportation industry helped Industrials move out of last place, while continued weakness for Utilities pushed it to the bottom.
Styles
The style rankings are now reflecting a full defensive mode pattern. Category strength is currently aligned by market capitalization, with the largest stocks on top. Within each capitalization strata, Value is the strongest and Growth the weakest. This is defined as a defensive pattern because during times of market uncertainty or weakness, investors favor the blue-chip large capitalization stocks over the more speculative small company equities. Additionally, stocks exhibiting Value characteristics are considered safer than those tilted toward Growth. The only two relative ranking changes from last week were the rise of Mega Cap from sixth to first and the fall of Mid Cap Value from first to fifth. Micro Cap remains at the bottom for a second week, and today it sports a negative momentum reading.
Global
Sometimes a category will jump in the rankings, and sometimes it may surge. Latin America went from ninth to first over the past week – easily qualifying as a surge. The region’s recent success is almost entirely due to improvements in Brazil, as Colombia and Argentina lost ground while Mexico and Chile lagged. China held its second place spot and today reported that its second quarter GDP grew by 7.5% from a year ago. Canada, in first place for the past two weeks, fell to a third place tie with Emerging Markets. Japan slipped two spots to fifth, and the U.S. eased down to sixth. World Equity, Pacific ex-Japan, and the U.K. were all pushed down a peg due to the rapid ascension of Latin America. EAFE and Europe bring up the rear, and Europe flipped over to a negative momentum reading.

Too bad MJG isn't here to read Munger's comments re academic financial types. Pretty funny.

FYI: The intriguing argument by Research Affiliates founder Robert Arnott is that conventional retirement investing gets things precisely backwards.
As Mike Foster of Financial News this week aptly sums it up, Arnott argues investors should own more stocks the older they grow, not fewer, which also means those approaching retirement should cut back their participation in the bond market. He finds that 40-year periods since 1871 generally show his approach yields a superior result — more on those findings in a moment.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2014/07/16/retirement-investing-are-you-doing-it-all-wrong/tab/print/

Actually he seemed relatively bullish with his comments.
"Birinyi expects the S&P 500 to keep advancing as bears capitulate and pick up stocks.
Durable, Sustainable
“This is a durable and sustainable bull market,” he said in a July 9 phone interview from Westport, Connecticut. “It’s going to surprise us because I still don’t think we’ve got to a point where water is boiling yet.”
Birinyi, one of the first analysts to advise clients to buy when stocks were bottoming after the 2008 financial crisis, predicts the S&P 500 will rise to 2,100 (SPX) by December."

FYI: dDoomsayers, the guys who believe that every breakthrough is one step closer to a turning point.
As a result, a raft of prognosticators has come out in the last few weeks saying to expect everything from a mild downturn (buying opportunity) to a reason to protect profits and move to cash to a looming decade of financial pain and misery.
It’s enough to get investors thinking about buying a bear-market fund
Regards,
Ted
http://www.marketwatch.com/story/think-twice-before-you-invest-in-a-bear-market-fund-2014-07-14/print?guid=AD8EC752-0B54-11E4-B65E-00212803FAD6
The Average Bear Market fund Returns YTD-One Year-Three Years Five Years:
YTD: -(9.77) %
1. -(26.02)%
3. -(23.72)%
5. -(28.30)%
M* Bear Market Fund Returns;
http://news.morningstar.com/fund-category-returns/bear-market/$FOCA$BM.aspx