A Basic Guide To Financial Derivatives
Interesting line: ”Most derivatives are margin-powered, meaning you may be able to enter into them putting up relatively little of your own money. This is helpful when you’re trying to spread money out across many investments to optimize returns without tying a lot up in any one place, and it can also lead to much greater returns than you could get with your cash alone.”
Just to illustrate one possible method of boosting a fund distribution (in this case by a CEF I own):
* ”The Fund may pay distributions in excess of its net investment company taxable income, and this excess would be a retum of capital distributed from the Fund's assets.” FOF Fact Sheet
Technically a “distribution” is not a ”dividend”. But taken at a glance may at first appear so.
Watch out! @Crash! Be sure to read the fine print. :)
I think it was Marty Zweig who said, “It’s treacherous out there.”

But it also used to be that a Private Client customer at Fidelity was assigned a specific rep. No more at either brokerage.

Fidelity still assigns you an individual Premier Services Advisor.
@msf did they also used to assign another kind of "specific rep" as well?

As a matter of fact, they've assigned a Private Access Account Executive, a Private Client Group Account Executive (same person, different title), a Senior Account Executive (same person), an Account Executive (same person), and a Financial Consultant (same person).
Then the musical chairs began. No title changes, but in the span of three years, three different "Financial Consultants". Then a year later, when the last one left Fidelity, I was not assigned any specific rep, whatever title you wish to give to them.

From May 1st market commentary by the Palm Valley Capital Fund (PVCMX) co-manager Eric Cinnamond.
Original blog post can be found here: https://www.palmvalleycapital.com/post/undateable
*****************************************************************************************************************************
Undateable
May 1, 2024
You can learn a lot about the financial markets by watching Seinfeld. In season 7 episode 114, Jerry and Elaine have a conversation about the lack of dating opportunities. Although they were talking about the percentage of people they consider dateable, by making some minor changes to the script, their conversation fits the current stock market perfectly.
Jerry: Elaine, what percentage of people [stocks] would you say are good looking [attractively priced]?
Elaine: 25%
Jerry: 25%? No way. It’s like 4% to 6%. It’s a 20 to 1 shot.
Elaine: You’re way off.
Jerry: Way off? Have you been to the motor vehicle bureau [screened through stocks]? It’s a leper colony down there [horrendous opportunity set].
Elaine: Basically, what you’re saying is 95% of the population [the stock market] is undateable [overvalued]?
Jerry: Undateable [overvalued]!
Elaine: Then how are all of these people getting together [why are all these people buying stocks]?
Jerry: Alcohol
As if our dating scene couldn’t get much worse, the S&P 600 soared 15% in the fourth quarter of 2023. Encouraged by the Federal Reserve’s year-end pivot, investors piled into stocks, attempting to front run the return of easy money.
At the time, we were baffled as to why the Fed was in such a rush to cut rates. For the most part, corporate earnings remained inflated. Financial conditions were already loosening, with equity valuations elevated and credit spreads tight. Home prices were also rising and remained out of reach for millions of Americans. And while the rate of inflation had declined, many of the items helping inflation moderate were plateauing, and in some cases, reversing. Further, accumulated inflation remained a serious problem, putting pressure on middle- and lower-income consumers and keeping inflation expectations elevated.
Unsurprisingly, by pivoting before the inflation battle was won, the Fed unleashed another round of asset inflation, bolstering demand and pricing power. Instead of declining back to the Fed’s 2% target, inflation bottomed and is on the rise again. To date, the Fed’s 2023 preemptive pivot is aging about as well as its “inflation is transitory” assurances in 2021.
Instead of declaring victory on inflation, we believe the Fed prematurely signaled rate cuts to head off building threats to asset prices and the economy. While there are many risks to defuse, we believe refinancing risk was, and remains, near the top of the Fed’s list of concerns. With each passing day, the amount of low-cost government and corporate debt nearing maturity grows.
Extremely low interest rates allowed the U.S. government to borrow aggressively, supporting massive fiscal deficits and artificially inflating economic growth. Corporations also benefited from elevated government spending and lower rates. Low-cost debt allowed companies to acquire, fund generous dividends, and turbocharge earnings per share (EPS) through buybacks and depressed interest expense.
As accumulated inflation continues to build, along with a seemingly endless supply of U.S. Treasuries, we believe the era of ultra-low interest rates has ended. With interest rates remaining higher for longer, a growing number of businesses are facing difficult refinancing decisions as their maturity walls approach. While some are pushing off the decision—hoping rates will decline—the market isn’t waiting and is beginning to sniff out companies that require funding over the next 1-2 years.
As we search through our opportunity set of small cap companies, many of the stocks that have performed poorly have bonds approaching maturity or have refinancing risk. For example, Cracker Barrel Old Country Store’s stock (symbol: CBRL) has fallen 45% over the past year and 61% from its 2021 high. Cracker Barrel operates restaurants that are typically located along interstate highways. We know their home-style country food well, as we hold Palm Valley’s annual founders meeting at a local Cracker Barrel (and yes, we all order from the value menu!).

Similar to many consumer companies that cater to the middle class, Cracker Barrel’s traffic growth has slowed and has recently turned negative. Accumulated inflation has placed stress on discretionary spending and many of the casual dining companies we follow. Management expects industry and traffic challenges to continue. Based on analyst estimates, adjusted EPS is expected to decline from $5.47 in fiscal 2023 (ending July 31) to $4.60/share in fiscal 2024.
Even as operating results have weakened, Cracker Barrel has remained committed to its generous quarterly dividend of $1.30/share. If maintained, the $5.20/share in annual dividends will exceed this year’s expected net income. The company has also been an active buyer of its stock, purchasing $184 million over the past three fiscal years (2021-2023). Combined, dividends and buybacks have consumed $447 million in cash over the past three years versus $461 million of free cash flow.
With practically all of Cracker Barrel’s free cash flow being consumed by dividends and buybacks, debt reduction doesn’t appear to be a priority. As of January 26, 2024, debt was $452 million. Based on 2024 estimated EBITDA of $242 million, debt to EBITDA is 1.87x, or slightly above the high-end of the company’s target range of 1.3x to 1.7x.
On June 18, 2021, Cracker Barrel opportunistically issued a $300 million convertible bond with a 0.625% coupon. At the time of issuance, its stock was trading at $150.51. With a conversion price of $188, the bonds had a conversion premium of 25%. Currently, Cracker Barrel’s stock is trading near $59; therefore, the odds of the bond converting to equity before maturity are low. With a maturity of June 15, 2026, refinancing will likely become an increasingly important issue for the company and investors.

Cracker Barrel has $511 million available on its $700 million credit facility that could be used to fund its convertible bond maturity. However, the weighted average interest rate on the credit facility is currently 6.96% versus the 0.625% coupon on the convertible bond. Assuming the credit facility is used to fund its bond maturity, at current rates, Cracker Barrel’s interest expense would increase $19 million, causing a meaningful hit to earnings. For reference, earnings before interest expense and taxes (EBIT) in 2023 were $120.6 million. Like many companies with debt, Cracker Barrel’s cost of borrowing has shifted from an earnings tailwind to headwind.
We classify Cracker Barrel as a cyclical business. To consider cyclical businesses for purchase, we require a debt to normalized free cash flow ratio of 3x or less. Based on our free cash flow estimate, Cracker Barrel currently has too much financial leverage for our absolute return strategy. Nevertheless, its substantially lower market capitalization has caught our attention, and we’ll monitor its balance sheet closely for potential deleveraging catalysts, such as a cut in its dividend or sale-leasebacks of owned properties.
The small cap dating scene remains unattractive, in our opinion. However, for many consumer discretionary companies with debt, equity prices have fallen sharply, and valuations have become more attractive. That said, these aren’t dream dates! Cyclical companies with debt often come with a lot of baggage and potential drama. Before committing and getting too serious, we recommend stress testing the balance sheet and cash flow by including periods with high unemployment and tightening credit conditions. And if alcohol is needed to stomach the risk, we suggest patience and waiting for a better match. When it comes to leveraged cyclicals, there are plenty of fish in the sea!
Eric Cinnamond
[email protected]

@Old-Joe - thanks. It kinda does but I mitigate it by using only the bluest of the blue chips or other high quality holdings that are tops in class. IOW I try not to include anything gimmicky or something that I need to be on like a hawk. So currently it's packed with the likes of ABBV, MCD, EPD, LYB, NNN, O, PEP, TGT and others. Through sheer luck I've got substantial capital gains in all of these and any financial advisor worth their salt would probably advise me to sell them but I'm not in the mood or so inclined. They do what I was hoping for and I just try to stay out of the way.

I have a 74 year-old neighbor who has stargardt disease and is losing his vision. He barely can log into his Vanguard account (will not be able to in a year or so) and can't facilitate the handful of trades his does per year online. And now Vanguard is going to penalize him for his disability?

At almost 74, this has been going through my mind in recent years also, not for failing eyesight, but more for dementia and not being able to track and tweak things, as necessary, as I do now. So far so good. My niece will have POA when I lose it, but she doesn't know anything about investing/portfolio management.
The local Schwab guy cold-called me last week, just to see how I was doing. Hadn't had contact with him in over a year, as I normally don't have any reason to.
I asked him specifically about this potential problem. He said they have people there that will do it, plus they can recommend local independent financial firms who will do it. I knew they are out there, but who to trust? But if Schwabbie recommends them, they are more than likely going to be fine.
It was a relief to hear that.

also as i ~3 decade flagship user, dropping integrated banking services was when i noticed the steep decline in vanguard :
- vanguard themselves added the burden of tens of millions of small accounts by relentless promotion of index products, lower minimums, and lower ER.
they need to cover this burden, in addition to their generous 'not-for-profit' salaries, perks, and campus expansions.
- vanguard services\tools\fees have gotten worse for all clients.
i would say the impact is more for HNW , since some of these were never free for small accounts in the first place.
so i guess it is a form of democratization of the investing experience, but not one of pride.
on a side note, peter zeihan predicts a massive decline in employment in the financial services sector for ~10 years as retirees draw down and shift to lower risk non-equity vehicles. this will not reverse until the greatest wealth inheritance transfer in history slowly begins.
so expect the worst companies to get much worse.

PIMIX outperformance was largely due to MBS acquistions in the aftermath of the Global Financial Crisis.
Messrs. Ivascyn and Murata backed up the proverbial truck. Kudos to them!
This may have been a once-in-a-generation opportunity.
PIMIX returns have generally been decent the past five calendar years but they pale compared to the past.
The fund's 5 Yr and 10 Yr trailing returns were in the top 1% of the Multisector Bond category as of 10/31/2017.
PIMIX returned 6.87% and 9.33% during these periods which exceeded the BBgBarc US Universal
benchmark's return by 4.38% and 4.85% respectively.

From Bloomy -
"Boeing raised $10 billion from a bond sale on Monday that attracted about $77 billion of orders and allowed the planemaker to ease some of its financial strains by refinancing part of its massive debt load. The outsized demand for the bonds—which Boeing attracted by initially dangling a relatively juicy yield premium to prospective investors—allowed the company to ultimately shrink that premium before it priced."

"The company sold bonds in six portions, with maturities ranging from three to 40 years ... The 40-year portion yields 2.25 percentage points more than Treasuries, said the person familiar with the offering. Initial discussions called for around 2.65 percentage points."
https://finance.yahoo.com/news/boeing-looks-sell-bonds-reporting-125719270.html

From Bloomy -
"Boeing raised $10 billion from a bond sale on Monday that attracted about $77 billion of orders and allowed the planemaker to ease some of its financial strains by refinancing part of its massive debt load. The outsized demand for the bonds—which Boeing attracted by initially dangling a relatively juicy yield premium to prospective investors—allowed the company to ultimately shrink that premium before it priced."

It's not as though it costs the same amount for each rung of protection - that the first 10% of protection costs $X, the next 10% of protection costs the same amount, and so on. As the risk declines, so does the cost of incremental protection. That last 5% you want in chips should come as a freebee.
Still, seek and ye shall find. ETFs with 15% and 20% downside protection:
https://preservingwealth.com/15-20-buffer-etfs-moderate-downside-protection/
More generally, here's M*'s column on buffer ETFs (including variants designed to address the need to buy on a fixed date and hold for precisely a year)
https://www.morningstar.com/etfs/going-beyond-defined-outcome-etfs
The protection is not a drag, but a cap. That is, participation rate is 100%, but only up to a given return. And as with principal protection notes, "participation" is in price only; it doesn't include divs.
Here's the generic investment return vs. reference return graph (from Blackrock).

https://www.blackrock.com/us/financial-professionals/insights/buffer-etfs

Paying $200 for a (introductory) year of M* Premium Investor. That’s $16.66 a month. You can’t buy a bottle of drinkable scotch for that. I saw a 6-pack of Sam Adam’s (Boston Lager) priced at $12.50 (+ bottle deposit) where I shop the other day. We are all suffering from “sticker shock.” Everything seems more expensive, especially if you’ve been retired a long time. I love reading financial stuff. Spend hours a week reading up on funds on M* alone. Usually it’s just to get an idea how different approaches are faring, as my core holdings hardly ever change.

To repeat what I posted earlier in this discussion:

When entire large contiguous communities are at risk because of one single loss situation (especially weather or fire related) that model simply doesn't work.
The reality is that the insurance model as we have known it is disappearing piece-by-piece, and no major financial or government entity has yet advanced a sustainable replacement model. California and Florida are your coal-mine canaries.

Following is a reproduction of the insurance-related posts from "The Week In Charts" thread.

Rbrt - April 18
From the blog:Transportation costs remain stubbornly high (+10.7% over last year), with skyrocketing auto insurance rates being a major contributing factor. The 22% increase over the last year is the biggest 1-year spike since 1976.
Insurance inflation is crazy. I need to pay attention more. Thanks.

BaluBalu - April 18
I thought 20+% auto insurance increase is absurd until I received my home insurance renewal notice with a 55% increase in premium. Never made any claims and live in an urban area. I called the insurance company to increase my deductible. For increasing the deductible by $2,500, premium decreases by $80. The insurance co.’s reasoning for increasing the premium by 55% is climate change and increase in material and labor costs. That is the same excuse they used the last two years for increasing it by more than 20% each year.
KIE, the insurance ETF has a TR of 32% over the last 3 years. Over the three year period, my home insurance premium more than doubled. How to better protect against increasing insurance premiums?

Derf - April 19
@BaluBalu ; Time to look elsewhere for insurance FWIW ! Do you have Erie in your neck of the woods ?

MikeM -April 19
@BaluBalu, I just moved my State Farm policies, 2 cars and my HO. I was with them for 10 years which really is a big mistake in the insurance game. Went to an independent broker a friend recommended who deals with several companies. Ended up saving ~$1000/year. Used some of that savings to buy a $1million umbrella policy which I've been meaning to buy for a while. Bottom line, staying faithful to an insurance company will cost you a lot of money.
Erie is a very good option. I got the best price with NYCM, which is only available in NY state I believe

Old_Joe -April 19
Thinking that there's somewhere to hide in the ongoing insurance disaster is very wishful thinking. Plain and simple: the major risk factors have increased to the point where the old models no longer work.
The basic concept of insurance is that any specific loss situation will be confined to relatively few claimants, covered by affordable premium income from the larger insured community, with room for profit left over.
When entire large contiguous communities are at risk because of one single loss situation (especially weather or fire related) that model simply doesn't work.
The reality is that the insurance model as we have known it is disappearing piece-by-piece, and no major financial or government entity has yet advanced a sustainable replacement model. California and Florida are your coal-mine canaries.

BaluBalu - April 19
Thanks for the replies. I hope I am not ruining this thread with comments not directly related to the OP.
There is a lot of BS practiced by insurance companies' leadership. Most of us understand what risk assumption and risk diversification means.
In my small town, I have not seen a single fire in the 14 years I have been here. We have two fire stations for a 4 sq miles town and I have not seen a fire truck on the roads in years. (I see them when I drive by the fire station.) But I pay in increased premiums for the fire hazards caused by PG&E (wild fires!) and others in places with big, old trees and overhanging power lines. My neighborhood has neither of those. Evidently, I have to pay higher premiums for fires and risks in Hollywood, Napa, and other places in the country. But when you look at auto insurance and health insurance premiums, they vary by zip code. Poorer zip codes pay higher premiums for both auto insurance and health insurance - I know this because I moved around. I will not be surprised if home insurance premiums are also higher in poorer neighborhoods because my extended family members who live in richer neighborhoods with 50% more house size pay only 10% more in home insurance premium. They live only 15 miles away from me so material and labor cost differences do not explain. We can always explain away anything or build a story around any outcome if we are not interested in progress. Whose progress? you ask!
We are at the mercy of politicians and lobbyists (business leaders).
None of the above helps in figuring out how to protect ourselves from increasing premiums during my life time. (We can hope for some slow (hardly) moving social reforms but that is for another day.)
I buy insurance through a broker and I asked them yesterday and they said (after checking) I am getting the best deal in the market place. I shall call a different broker.

Old_Joe - April 19
@BaluBalu- Be sure to keep us informed of your findings- maybe a new thread devoted to the insurance situation?

BaluBalu - April 19
Good idea. May be @Observant1 / thread moderator can move our recent posts from this thread to the new thread so this thread stays clean so it is easier for others to access old Week in Charts posts.

Observant1 - 11:37AM
I created the new "Rising Auto & Home Insurance Costs" thread in Other Investing.
Requested that posts for auto and home insurance in this thread be moved to the new thread.

OK, that should get us off and running on Insurance matters.

STREETWISE. EUROPE (IEV) has underperformed the US (IVV) for quite a while, but that may be changing, according to JPM. Be selective – AZN, DT, UBS, as there is no point going from the US to expensive European stocks – EADSY, ASML, NVO. Elsewhere, analysts are mixed on the outlooks for TSLA (the 2nd worst SP500 stock that reports on 4/23/24) and GL (the worst SP500 stock that was hit by a negative report from a short-selling firm on 4/11/24).
FUNDS. There will be opportunities in bond funds when the interest rate decline (in 2024 or 2025).
Short-Term: VCSH, JPLD, MINT
Intermediate Core-Plus: BYLD, FBND
HY: ANGL, BHYAX, CSOAX, FAGIX (18% equity)
Floating Rate: FLOT (investment-grade), BKLN (junk)
Muni: MUB
Individual corporate bonds are also attractive (from JPM, BOA, WFC, C,PNC, USB, etc)
(Consider this list by Barron’s as a sampling only. There are many more choices in each category, e.g. Treasury FRN USFR in both Short-term/Floating Rate, Fido SPHIX as pure HY, etc.)
FUNDS. They may be tempting now, but don’t overstay in the MONEY-MARKET funds. Most economists and strategists think that the Fed is done tightening, and its next move(s) will be cut(s), although there are some who think that the Fed may surprise by raising rates. Rate cuts will benefit various credits and equities and it’s best to position ahead for possible fast moves.
FUNDS. High-quality (moat), growth-value NRAAX (ER 1.06%; no-load/NTF at Fidelity and Schwab) has a concentrated portfolio with reasonable valuations (so, no NVDA, TSLA, or META). Manager HANSON uses a barbell approach for growth and value, and focuses on customer-centric companies. Fund has “sustainability” in its name, but that is considered much more than ESG.
INCOME. T-Bills ETF BOXX uses options to avoid taxable income and its AUM has grown to $2.3 billion. It uses box-spreads that allow long-term holders to pay only capital gains on sale. There are no income distributions or CG distributions (exploiting ETF’s in-kind transactions). Tax experts doubt that the strategy may withstand IRS and/or SEC scrutiny because, generally, taxes must be paid on imputed income even when not distributed. There are also doubts whether complex options strategies can work in all environments. So, +1 for creativity, 0 for true investor benefits.
Q&A/Interview. Imaru CASANOVA, VanEck. GOLD-bullion (GLD, GLDM, IAU, OUNZ, etc) has rallied on geopolitical tensions, but gold-miners have lagged (GDX, GDXJ, INIVX, etc). This gold rally isn’t being driven by retail, investment demand, or the ETFs, but by central banks (China, India, Turkey, etc). The Western investors are still on the sidelines but may be drawn in as the gold rally continues to $2,600 and beyond. Gold took off after the Russia-Ukraine war as several countries started diversifying away from dollar (due to the US dollar-diplomacy). The Fed is also near the tail end of monetary tightening. However, lately, the historical correlations among gold, rates and dollar have broken down. Gold-miners are lagging badly, but with their average production costs around $1,400, high gold prices will just flow into their bottom lines (earnings, free cash flows). Young investors seem to prefer cryptos over gold, but she thinks that overall, the gold and crypto investors are different. She suggests core gold-bullion and gold-mining holdings in 5-10% range. (VanEck has products for gold-bullion, gold-mining, Bitcoin, cryptos).
RETIREMENT. Consider ROTH CONVERSIONS ahead of the expiration in 2025 of the 2018 Tax Cuts and Jobs Act. Unless extended or replaced by Congress, higher tax brackets will go up in 2026 and beyond. A sweet spot for Conversions is between early retirement (when income may be low) and age 73 when the RMDs kick in. Also take into account the impact of Medicare IRMAA at high income levels. Benefits of Roth Conversions include tax-free withdrawals in retirement (for any purpose), reduced RMDs and less tax burden for heirs.
EXTRA. Final FIDUCIARY rules for retirement accounts will be released by the DOL soon. Currently, the fees are hidden within the wrap fees or bonuses or commissions and lead to potential conflicts. Critics (IRI, etc) say that the new rules may reduce consumer access to financial advice.
From open LINK1 LINK2
For Barron's subscribers https://www.barrons.com/magazine?mod=BOL_TOPNAV

Rough week to see the market lost over 5% in the last month. Tech stocks fell but financial and energy rose today. For now, we will hold off on stocks and focus on short term junk bonds. All my high quality bonds have been disappointing this year. Have decent cash % to sit tight for awhile.

A new complaint about naked-short-selling filed by DJT.
"Reports indicate that, as of April 3, 2024, DJT was “by far” “the most expensive U.S. stock to short,” meaning that brokers have a significant financial incentive to lend non-existent shares.2 Data made available to us indicate that just four market participants have been responsible for over 60% of the extraordinary volume of DJT shares traded: Citadel Securities, VIRTU Americas, G1 Execution Services, and Jane Street Capital."
https://www.sec.gov/ix?doc=/Archives/edgar/data/0001849635/000114036124020575/ny20026576x6_8k.htm
Basically, to short a stock, one must borrow it first. Naked-short-selling means to short a stock without borrowing it first. It has been banned in the US since the GFC - before, there were some permissible situations by broker-dealers.

Bought an 18 month non-callable CD this week at Schwab, to replace one that matured last week. The CD pays 5% interest, and is from an A rated bank. The 18 month CD fits well into a CD ladder I have in place. As a retired person, I am very comfortable buying CDs, which pay at least 5%, from banks with a strong financial rating.

https://www.sec.gov/Archives/edgar/data/1295908/000158064224002124/dcm-innova_497.htm
497 1 dcm-innova_497.htm 497
DCM/INNOVA HIGH EQUITY INCOME INNOVATION FUND
A Series of Centaur Mutual Funds Trust
Supplement dated April 11, 2024, to the Summary Prospectus, Statutory Prospectus and
Statement of Additional Information, each dated February 28, 2024
Effective immediately, the DCM/INNOVA High Equity Income Innovation Fund (the “Fund”), a series of Centaur Mutual Funds Trust (the “Trust”), has terminated the public offering of its shares and will discontinue its operations effective May 24, 2024. Shares of the Fund are no longer available for purchase and, at the close of business on May 24, 2024, all outstanding shares of the Fund will be redeemed at net asset value (the “Transaction”).
The Board of Trustees of the Trust (the “Board”), at the recommendation of the Fund’s investment advisor, DCM Advisors, LLC (the “Adviser”), determined and approved by Written Consent of the Board on April 10, 2024 (the “Written Consent”), to discontinue the Fund’s operations based on, among other factors, the Advisor’s belief that it would be in the best interests of the Fund and its shareholders to discontinue the Fund’s operations. Through the date of the Transaction, the Advisor will continue to waive investment advisory fees and reimburse expenses of the Fund, if necessary, in order to maintain the Fund at its current expense limit, as specified in the Fund’s Prospectus.
Through the Written Consent, the Board directed that: (i) all of the Fund’s portfolio securities be liquidated in an orderly manner not later than May 24, 2024; and (ii) all outstanding shareholder accounts on May 24, 2024, be closed and the proceeds of each account be sent to the shareholder’s address of record or to such other address as directed by the shareholder, including special instructions that may be needed for Individual Retirement Accounts (“IRAs”) and qualified pension and profit sharing accounts. As a result of the Transaction, the Fund’s portfolio holdings will be reduced to cash or cash equivalent securities. Accordingly, going forward, shareholders should not expect the Fund to achieve its stated investment objectives. Any capital gains will be distributed as soon as practicable to shareholders and reinvested in additional Fund shares, unless you have requested payment in cash.
Shareholders may continue to freely redeem their shares on each business day prior to the Transaction. Procedures for redeeming your account, including reinvested distributions, are contained in the section “Redeeming Your Shares” in the Fund’s Prospectus. Any shareholders that have not redeemed their shares of the Fund prior to May 24, 2024, will have their shares automatically redeemed as of that date, with proceeds being sent to the address of record. If your Fund shares were purchased through a broker-dealer or other financial intermediary and are held in a brokerage or other investment account, redemption proceeds may be forwarded by the Fund directly to the broker-dealer or other financial intermediary for deposit into your brokerage or other investment account.
The Transaction will be considered for tax purposes a sale of Fund shares by shareholders, and shareholders should consult with their own tax advisors to ensure its proper treatment on their income tax returns.
IMPORTANT INFORMATION FOR RETIREMENT PLAN INVESTORS
Shareholders invested through an IRA or other tax-deferred account should consult the rules regarding the reinvestment of these assets. In order to avoid a potential tax issue, shareholders generally have 60 days from the date that proceeds are received to re-invest or “rollover” the proceeds in another IRA or qualified retirement account; otherwise the proceeds may be required to be included in the shareholder’s taxable income for the current tax year.
If you have any questions regarding the Fund, please call 1-888-484-5766.
Investors Should Retain this Supplement for Future Reference

Original post can be found here: https://marshfieldfunds.com/commentary/
******************************************************************************************************************************
Marshfield Concentrated Opportunity Fund (MRFOX)
Market Commentary For March 2024
[Commentary Fox]
The market surged this quarter and, somewhat uncharacteristically for such a breathless sprint (especially one fueled principally by tech), our stocks outpaced it. While we have confidence in our companies and their shares’ ability to outperform the S&P 500 over time, we could never have predicted the strong performance we saw this quarter. Nor, frankly, could we have foreseen the market’s robust upswing in a world so beset with uncertainties. Ultimately, the timing of such bursts of performance is both impossible to anticipate or even to understand. When it happens for us, though, we give thanks to the rigors of our process and discipline that keep us on the straight and narrow no matter how the market chooses to behave.
Therefore, while ever obedient to the higher power of our philosophy, we remain unrepentant agnostics when it comes to the future trajectory of the stock market in general and individual names in particular. The fact that the S & P 500 is weighted according to the market cap of its constituent companies only serves to reinforce that resolve, especially while “as goes Nvidia so goes the index” is now apparently the rule of the day. This is nothing particularly new; investors worshipping at the altar of the reigning FOMO darlings have always had outsized influence over the direction of the market—at least in the short-to-medium term. But as we’ve seen time and again, many a false god has been praised to the heavens only to have its feet of clay revealed in due time.
That does not mean, though, that we are without religion when it comes to embracing the information the market can and does provide us. Indeed, the faith we place in the market’s efficiency in aggregating individual views as to what a company’s stock is worth each day is valuable treasure; while stock prices are not always correct in how they reflect underlying value, they are unassailably right in describing how investors view those stocks each day. It’s our job to use that information by, as appropriate, buying, selling, or holding. So long as a stock’s price is, over time, tethered—even loosely—to its true value, our ability to wait for the right moment to engage in advantageous trades turns out to be our greatest blessing. Who cares what the market might be about to do—race higher, skid lower, coast—so long as we have a sound read of intrinsic value against which we can measure, on any given day, whether our chosen stock is priced too low, too high, or more or less right on the nose?
Given the above-mentioned market surge, we found little to buy and more to sell. Early in the quarter, before Capital One’s acquisition attempt was announced, we continued to add to our position in Discover Financial. Subsequent to that announcement, we sold our entire position in that stock. Once an acquisition is announced, the price of the stock is essentially set by arbitrageurs, who, frankly, understand the odds of the deal closing better than we could. During the quarter we also sold our position in in Goldman Sachs. A succinct version of our theory in owning Goldman goes as follows: they have large pool of capital and we believed they could allocate that capital intelligently enough to earn a decent return. Unfortunately, many of the allocation decisions they made were subpar and we saw no reason to believe that the quality of their decisions would improve in the future. We also finished trimming our position in Arch Capital, solely due to price appreciation.
The broad market today seems to be hosting a tent revival of sorts, with tech stocks as the talismanic centerpiece. But this too offers us an opportunity: instead of bemoaning the exorbitant price of stocks, we rejoice in our ability, as just noted, to sell those holdings that are hitting highs we believe are unlikely to be sustained or surpassed, at least in the medium term. Markets like this, whether held aloft by hope, euphoria, or (ir)rational exuberance, do tend to return to earth at some point. If opportunity is knocking today, we’ll answer the door with a smile. What we won’t do is join the pilgrimage to the top of the cliff. But by this point, we assume we’re preaching to the choir.

OP (Fred):
I am a soon-to-be early retiree. (Had planned to retire in Aug 2020, but COVID arrived, and my employer sent me home to work from my sofa -- so I decided to hang around a few years more, not out of financial necessity, but by choice...)
I mention this only because most of my lifetime investment contributions have been made. My primary concern is not maximizing return. Rather its to preserve and protect principal and the purchasing value thereof.. I've 'made it'. I don't wish to 'lose it'.
I discovered QDSNX at the end of last year -- on these message boards. I discovered REMIX (BLDNX), in the same time period. Based on their volatility/performance/risk-management philosophies, I opened positions in both funds very early in 2024, and have added to them periodically. QDSNX in particular seems to be positioned to benefit (modestly) during hard "down days" in the market.
Excepting my company plan -- which has the typical, plain-vanilla, unhedged, indexed type limited choices, QDSNX and REMIX are the 2nd and 3rd largest , non-cash positions in each of my accounts. The largest position is BAMBX -- another fund classified as 'alternative', but which I view as a tremendous bond fund substitute.
When the next recession/bear market hits, I will likely re-deploy more capital to more conventional / unhedged ETFs/funds, at lower prices. Until that happens, given the stretched valuations and exuberant market sentiment, I'm very content to rely on risk-managed funds to eke out returns.