Copied and pasted from the Big Bang Investing Board.
This briefing is for the week ending December 24, 2021.
The Index Review
For the week the major equity indices finished up as Santa arrives. The Dow Jones Industrial Average gained +0.15%. the S&P 500 Stock Index rose +1.22%, the Nasdaq Composite climbed +3.12%, while the Russell 2000 Small Cap Index was up +4.14%. The three best performing major equity sectors for the week were XLY (Consumer Discretionary) +3.47%, XLK (Technology) +2.56% and XLC (Communication Services) +1.97%. The widely followed S&P 500 Index ETF SPY closed the week with a dividend yield of 1.24% and is up year to date +27.48%; and, it is off its 52 week high by -0.62%. The widely followed US Aggregate Bond ETF (AGG) was listed with a yield of 1.81% and for the week lost -0.24%. Year to date AGG has had a negative total returned of -1.75% and is off its 52 week high by -3.42%.
Global Equity Compass: For the week my three best performers in my global equity compass were GSP (Commodities) +2.69%, IEV (Europe) +1.72% and VTI (US Total Stock Market) +1.71%.
Income Compass: For the week my three best performers in my fixed income compass were CWB (Convertibles) +2.67%, PFF (Preferreds) +0.62% and HYG (Corporate High Yield) +0.52%.
Currency Compass: For the week my three best performers in my currency compass were FXA (Austialian Dollar) +0.94%, FXB (British Pound) +0.68% and FXF (Swiss Franc) +0.12%.
Old_Skeet's Soap Box ... Since I take all my mutual fund distributions in cash this has now increased the size of my cash area from about 20% to 25% due to strong year end mutual fund distributions received thus far in December. When January arrives I will review my portfolio's asset allocation mix and decide where to invest this recently received cash ... if anywhere. For now ... though ... I sit and I watch. This is mostly due to extended stock and bond market valuations and the current investment climate. One of the hardest things for me to do as a retail investor has been to just (plain old) sit and do nothing. But, I have learned, through the years, that sometimes this turns out to be one of the best things to do. My top producers (this quarter) have come from the growth & income area of my portfolio. Most likely when I start to buy it will be in the G&I area as it holds the value and the equity income parts of my portfolio. However, for now, Old_Skeet is thinking that a stock market swoon is on the horizon. I'm also thinking that a good ten percenter might not be far off. Perhaps so ... Perhaps not. But, when the swoon does come (and in time it will) I will have some extra cash to spend with a buying plan in place.
Again ... for now ... I sit, remaining invested within the confines of my asset allocation of 20/40/40 (cash/bonds/stocks) while I ponder what to do with recently received cash (if anything) which now has me cash heavy by about 5% from my neutral weighting of 20%.. An option ... Short term, I could target cash at 25% and do nothing.
Of Investment Interest
Due to most investment and news sites now requiring sign in passage to read their articles and with it getting harder to find good content that can be linked without sign in requirements the Articles of Investment Interest Area is no more. I am pondering some ideas; but, as I write I have not yet decided what the content will be. This space may become a floating feature area with something of good investment interest posted each week.
For Starters ... This week feature keys on Consuelo Mack's Wealth Track Site
Great Value Investor Bill Miller Discusses His Core Holdings Winners And Recent Promising Additions (Part 1)
https://wealthtrack.com/
Old_Skeet's Favored Reference Links
Stock Proxy S&P 500 Index ETF (SPY)
SPY Short Volume ... https://nakedshortreport.com/company/SPY
SPY Breadth Reading ... https://stockcharts.com/h-sc/ui?s=$SPXA50R&p=D&b=5&g=0&id=p25768973625
SPY Yield Chart ... https://stockcharts.com/h-sc/ui?s=!YLDSPX&p=D&b=5&g=0&id=p75520805591
SPY Price Chart (Elder Ray System) ... https://stockcharts.com/h-sc/ui?s=SPY&p=D&b=5&g=0&id=p20881173280
SPY T/A Opinion ... https://www.barchart.com/etfs-funds/quotes/SPY/opinion
Bond Proxy Aggregate Bond ETF (AGG)
AGG Short Volume ... https://nakedshortreport.com/company/AGG
AGG Yield Chart ... https://ycharts.com/companies/AGG/dividend_yield
AGG Price Chart (Elder Ray System) ... https://stockcharts.com/h-sc/ui?s=AGG&p=D&b=5&g=0&id=p07044822535
AGG T/A Opinion ... https://www.barchart.com/etfs-funds/quotes/AGG/opinion
Wishing You a Christmas Season Filled with Warm Moments and Cherished Memories.
Old_Skeet

Hi Level5, I have held the A share class of the Thermostat Fund for more than ten years and I hold it within my fixed income sleeve since it is currently 90% fixed and 10% equity. I look at it as a risk-off (risk-on) type fund that adjust it's equity holdings based up price/earning metrics for the S&P 500 Index. So, when equities falter and fall in price it automatically loads equities and sells down bonds. Thus, it is designed to play stock market swoons without me having to do much of anything. When it's time to sit (which is hard for many retail investors to do) it plays the bond market. And, when it is time to engage and ramp up equities it plays the stock market. For me, it's a keeper and currently held within the fixed income sleeve of my portfolio.
In review of its performance I am finding that its average total return over the past five years has been better than ten percent. Not bad for a fund that often just sits in risk-off mode.

I wonder if this might be a potential strategy regarding capital tax losses and Roth conversions.
Let say I want to manage Roth conversions during market sell offs (think back to March 2020).
the-case-for-roth-conversions-in-market-downturns
Let's say I have two accounts, A T-IRA and a taxable brokerage account. They are both invested in the S&P 500 On Jan 1. 2020. Each has $10K as a starting balance. By Mar 31, 2020 they are both worth $8,037.
I take the following actions:
I convert the T-IRA to a Roth and lock in the March 31, 2020 value of $8037. On April 1, 2020 the T-IRA is now in Roth Status (conversion competed) and New Roth account continues to be invested in the S&P500. By years end the Roth value is $11,825. In April of 2021, I will owe taxes on the conversion ($8037 * my tax bracket)
In the 12% bracket I will owe $964.44
In the 22% bracket I will owe $1768.14
In the 24% bracket I will owe $1928.88
In a separate taxable account, I sell the very same investment on the same day I completed the Roth conversion and book a $1963 tax loss on that sale. On Apr 1, 2020, I re-invest back into the Total Stock Market (or appropriate wash-sale security). My $8037 by years end grows to $1287. Obviously this works perfect in hindsight. Equity markets can endure long stretches of under performance.
In April of 2021, I have a tax loss of $1963 that I can apply to my 2020 tax year or carry forward to future tax years...future Roth conversions.
tax-loss-carryforward
If I had I done nothing , both accounts would have lost and subsequently regained their losses. But by timing both a Roth conversion in the T-IRA and harvesting a tax loss in a taxable account at a pull back in the market", I have used a tax loss to "pay for" a Roth conversion.

Quicken Alert!
I am working on this week's updates and started seeing balances that did not match WITHIN Quicken! I ran a "Networth" report and the balances per account did not match what I see for each account in the "Account List" bar.
Digging deeper, I discovered that I have Schwab transactions that have been duplicated into other accounts that are not related in any way to the security and/or Schwab. Some of those accounts are "hidden" because they were taken to zero balances years ago.
In one Schwab account, I found an "Interest" transaction of $19,000+ dollars that had nothing whatsoever to do with the security in which it was found and was causing my account balance in the Networth report to be inflated; yet the Account List view ignored that transaction and thus showed the correct balance.
I literally discovered this a few hours ago. My next step is to run a report that will give me all Quicken transactions by Security/Account to find the rogue entries and then go one by one for every Schwab account to verify Cost Basis and Market Value.
I am no longer going to use the download feature until Quicken and Schwab get this fixed.
OH - and Vanguard uses the double-entry accounting method for transactions and they come into Quicken correctly matched with their DIV, ST, LT designations as single entries. No excuse for Quicken and Schwab to get this so wrong.

For anyone considering recognizing more gain or doing more Roth conversions this year, I ran across a couple of quirks in the way gains may be taxed.
Suppose you have short term gains (say, $3000) and long term losses (say -$1000), so that you're net positive (+$2,000 short term). Not a common situation, but here added long term gains can get taxed at short term (ordinary income rates).
In this example, if you generate an extra $500 in long term gains, that reduces the LT loss by $500, thus increasing the net short term gains by $500: Net LT loss = $500, net gain (short term) = $3000 - $500 = $2500.
----
If your income is in the region where some but not all cap gains are taxed at 0%, then adding $1 of ordinary income can increase your taxes by 27¢, i.e. it's taxed at 27%. Kitces has an excellent piece on this; see examples 3 and 4.
https://www.kitces.com/blog/long-term-capital-gains-bump-zone-higher-marginal-tax-rate-phase-in-0-rate/
He discusses how in this situation it is preferable to generate long term gains (even if taxed at 15%) as opposed to doing Roth conversions (even if nominally taxed at 12%). Going further, if one doesn't have much in cap gains/qualified divs, ISTM that it can still make sense to convert all the way up to the next tax bracket. A small amount will get taxed at 27%, but with little in cap gains, most will get taxed "normally". But if one has lots of cap gains that would get pushed into the 27% bracket, it pays to defer converting.
This suggests a multiyear strategy for planning periodic sales of assets and Roth conversions. It can be advantageous to lump them into alternating years. One year you take two year's worth of gains (taxed at 0% or 15%). The next year you work to minimize your cap gains (so there are few gains to get taxed at 27%) and convert more retirement money. Even if those conversions push you into the 22% bracket, that's still better than having a lot of cap gains taxed at 27%.
One needs to look at how much in gains one expects to recognize (including fund distributions), how much one wants to convert, other ordinary income, to see if this lumping strategy helps.

You're correct that the management completed clawing back its fees. From the annual report:

For the year ended April 30, 2021, the Investment Manager has fully recovered all of its previously waived fees totaling $401,308. For a period not to exceed three years from the date on which a Waiver is made, the Investment Manager may recoup amounts waived or assumed, provided it is able to effect such recoupment and remain in compliance with the Expense Limitation.

Excellent reply @msf. Thanks.
The only fund of funds I ever considered buying was CTFAX (but did not buy). During my review, I called the fund and asked among other things about duplication of management fees and the rep who I spoke with said NONE. We can forgive him for a 10 bps error. I have found most reps are limited in their knowledge - may be they are over worked or may be they hold temporary jobs to invest their time! Talking to the managers / fund investment professional is the best but usually one has to be an RIA or a big investor in the fund before that access is given.
Good to know this year NICHX expenses have come under the cap - efficiencies of scale I suppose going from $550M AUM at Oct 2020 to $1.35B at Nov 2021. Nice of them not to use up the disclosed cap. (I used to work in professional services and my team never gave any part of the fee cap back to the clients!) Given the current year claw back was only 0.07% and the charged expenses were below the cap, is it reasonable to assume that all the previous waivers are now clawed back and no claw back of historic waiver would be needed in the future years? I am guessing yes, but thought I would ask in case you know the answer off hand.
More importantly, thank you for bringing to light Vanguard's clever way to charge fees (I am sure they disclosed!), considering how much chest thumping it does about fees. Thankfully, I never invest at Vanguard for their presumed low fees; high fees never stopped me from an investment, though I like to know / understand how much I am paying.

CTFAX is an example of a fund that tacks a management fee (0.10%) on top of its expenses including its acquired fund expenses (0.40%). It has put a temporary cap of 0.50% on fees excluding the acquired fund fees. When you add back the acquired fund fees of 0.40% to the capped expenses of 0.50% (including 0.10% for the second layer of management), you get to 0.90%. That's the current ER.
Absent that cap, the fees (excluding acquired fund fees) would be 0.56% and the total ER would be 0.96%.

Columbia Thermostat Summary prospectus.
Extra management fees can be instead added surreptitiously by using an excessively costly share class of underlying funds. That's what Vanguard does with its funds of funds (e.g. STAR). Instead of utilizing Admiral or Institutional class shares, these funds purchase more expensive investor class shares of underlying funds. In fact, Vanguard eliminated the more expensive investor class shares of its index funds except for use in its funds of funds.
An expense cap usually reduces current expenses. In order to satisfy a cap, a fund's management company waives some of its fees. Later, the fund may operate more efficiently (e.g. economies of scale) or a cap may still be in place but with a higher expense limit. Either way, it can happen that actual expenses are below the stated cap. At that point, the cap appears to be moot.
But then the management is allowed to "claw back", i.e. recover, the fees that it originally waived. At least so long as the actual expenses plus the claw back don't exceed the current expense cap. Usually a claw back is limited to three years - management can only recover fees that it waived in the past three years.
Your question about how ERs work with caps is where the twist comes in. Total expenses of NICHX are 1.78% (per prospectus). Excluding the expenses that don't count toward the cap (such as acquired fund expenses) brings the ER well below 1.45%. So the management is allowed to claw back previously waived fees.
The annual report shows that the clawback for the year ending April 2021 amounted to 0.07%. That plus the prospectus' 1.78% ER (including underlying fund expenses) gets one to 1.85%.
Finally, it may be worth noting that the way NICHX handles fees of underlying funds that are affilitates is to disclose the conflict of interest rather than to adjust for double dipping. Again from the prospectus (Conflicts of Interest section):

The Fund may also invest ... in affiliated entities or accounts that may directly or indirectly benefit the Investment Manager or its affiliates, including Underlying Funds managed by affiliates of the Investment Manager.

Un-Intuitively, the fund did not lose until March 23, 2020 when both monetary and fiscal stimulus was announced. It lost about 1% TR Which it did not recover from until sometime in May 2020 - it was down for 2 months.
At inception, each manager invested between $5 and 15 million. Forms 4 are posted on the fund website. May be they started the fund to invest their own money and then must have attracted clients from their previous job where all three managers worked concurrently for a number of years. Manager bios are on the fund website - seems they have always been outsourcing managers, rather than being selectors of securities and trading them.

Regarding the 1.85% fee - there's actually a cap in place of 1.45%. But this excludes the cost of acquired funds (0.57%). That's enough to drop the remaining expenses below the cap which in turn allows the fund to claw back previously waived fees. This is why on the fact sheet that Lewis linked to the gross ER is 1.78% while the net ER is higher, at 1.85%. (Usually net is lower than gross because of fee waivers.)
Regarding stale and stable prices - this likely goes a long way in explaining where the high Sharpe ratio comes from. Sort of like looking at a Madoff portfolio. I'm not suggesting anything improper here (unlike with Madoff), just agreeing with Lewis that the pricing can be misleading. It's doubly risky here because for the acquired funds, this fund relies on the acquired funds' managers to price their own illiquid investments and suggest their NAVs. From the prospectus:

The Fund bases its NAV on valuations of its interests in Underlying Funds provided by the managers of the Underlying Funds and/or their agents. These valuations involve significant judgment by the managers of the Underlying Funds and may differ from their actual realizable value. ... The Board, the Investment Manager and the Valuation Committee may have limited ability to assess the accuracy of these valuations.

It wasn't that many years ago when a number of posters were complaining about fair market valuations, which often meant valuing foreign securities with prices stale by hours, not days or weeks. Pricing here is much more uncertain.

“So quit worrying so much about that unlikely event ( really old and broke)”
Suppose we’ll get blasted for straying OT. Appreciate the takes of everyone. @Junkster doesn’t comment often enough. As he has mentioned before, the longer we’re invested the faster the stash appreciates in nominal terms owing to compounding. . And, considering one’s ever increasing financial knowledge and skill-set, that $$ should appreciate even faster than it did in earlier years (at least on a risk-adjusted basis).
Now the other side. I was terrible managing money up until near age 50. A good job kept me afloat. (and a bad marriage nearly done me in). The “catch-up” provisions in our workplace tax-deferred plan saved my a** in hind-sight. But I will say, having at least glimpsed both conditions, it’s a thin line between “rags” and “riches”. Die rich? Die broke? They’re not really comparable - the former being much more endurable ISTM.
I’ve no answer to the dilemma. You could annuitize everything and really splurge in those luxurious later years. Just be sure that annuity has a generous inflation rider - because inflation is the big unknown - and probably the reason we over-save.

Have never owned UNIQX because I bought NICHX after UNIQX closed. NICHX is just a few years old but the Sharpe and Sortino ratios are extremely high and max DD is quite low.
The fund does buy "exotic" stuff so jockey experience is key.

The immediate consequences of switching index provider is that VIGI distributed 6.5% cap gains. Luckily, the switch did not result in VIG needing to trigger any cap gains or it had sufficient prior cap losses to soak up any cap gains triggered from the switch. VIG has net realized (and unused) cap losses as of 11/30/2021 which as a percentage of NAV amounted to 2.65%. Any ETF other than the ones that are tracking broad indices like SPY, QQQ, etc. always runs the risk of triggering cap gains because the sponsor can switch the underlying index provider (and shareholders vote in favor without recognizing the cost to them). This happened to me on another ETF 5-6 years ago. In any case, I will not be adding to VIG / VIGI anymore or for that matter buy any new Vanguard ETFs that are just a different class of their mutual funds because cap gains triggered by mutual fund redemptions can be allocated to the separate class ETFs.
Below is the M* article re the switch.
https://www.morningstar.com/articles/1040749/dissecting-vanguards-new-dividend-indexes
Note: M* quote page for VIGI has inaccurate info for December 2021 distributions. It overstates dividend (income) distribution by approx the size of the cap gain. Per share total distribution for December quarter per Vanguard is approx $5.4; whereas, M* shows $10.6

The 80+% bond allocation is well positioned for further stock decline. Majority of the bond is high quality, AAA and some in BBB. Duration is 5.5 years so it is reasonable for the rising rate in 2022.

@msf, that 22% passive seems correct now. I just used my memory that a few years ago, the split was 2/3 rd passive, 1/3 rd active. But there has been a huge expansion on the index side, including the ETFs. I don't know how VG characterizes its factor ETFs but that isn't a big amount yet.

I have a friend who owned a condo (not a co-op) in Ocean Grove - a town where the land is owned by the Ocean Grove Camp Meeting Association of the United Methodist Church.
https://www.charitynavigator.org/ein/210652120
Leases there are typically for 99 years. In the past few years there seems to have been a fair amount of commotion about the terms and rates of those leases. My friend sold before then, after being shocked, shocked, at the high NJ property taxes. No problems regarding prices or conducting transactions, though.
I dug up a couple of articles about some of the more recent leasing problems there. These seem like worst case scenarios and not something one would typically be concerned about, at least if the lease is clear and you know what to expect.
It seems that in 2016 the Camp Meeting Association tried to increase the rents for land occupied by commercial property. People organized to to sue to void the entire leasing scheme. The land owner backed down, but according to the article, at least one sale closed at reduced price because of the potential increase in the land rent. (The rent would have increased from $21 to $5K!)
https://thecoaster.net/wordpress/no-increase-planned-for-ocean-grove-land-leases/
More recently (article below is from three days ago), the Camp Meeting Association started up again with increased rents and modified terms.

The Camp Meeting Association has begun to issue new leases for commercial properties here that come with higher rent and reminders that its owners need to refrain from selling anything that would be considered incompatible with Christian values. ...
The Camp Meeting historically ... and transferred the leases to new owners when the properties were sold. But it has begun to review and issue new leases for properties that aren't single-family homes when they change hands, offering terms that can include higher rent, fewer years and restrictions on activities it finds antithetical. ...
The morals clause, she said, opens the door to interpretation.

https://www.app.com/story/news/local/neptune-wall/ocean-grove/2021/12/15/ocean-grove-camp-meeting-association-raises-rents-businesses/8718660002/
Yankee Stadium (the original) was owned by the Knights of Columbus and the land was owned by Rice University. (The Yankees leased the stadium.) This complicated matters in the 70s when Yankee Stadium was renovated.
https://www.nytimes.com/1972/08/11/archives/city-acquires-the-title-to-yankee-stadium.html

My parents lived on a lake in the north Georgia mountains that was owned by Georgia Power Co. The power company owned most of the land bordering the lake and leased lots to homeowners for 100 years. That arrangement apparently hasn’t hurt residents because the cost of homes has skyrocketed over the years. My parents originally bought their home in the 1960s for about $14,000. My mom sold the house in the 1980s for about $350,000 and the same house is probably worth $1 million plus now.

I bought a property in a very unique community that has 45 years left on a 100 year land lease. The property is part of a Co-op (think Condo) but our association doesn't own the land. We pay a hefty land lease fee on top of our normal HOA expenses.
It's my first year as an owner and I am questioning the logic of our board members regarding insurance premiums. None of these properties are bank owned... everyone is cash. Insurance premium increased 25% this year over last year's costs. To add insult to injury, the association needed a bridge loan to avoid payment penalties from the insurer. That loan charges 4.61% interest.
We are in year 55 of a 100 year lease which means that in 45 year the value of the condo goes to zero (for shareholders...remember I own a share of a Co-Op) and the land lease owner takes possession of all of our "property".
I understand the importance and need for basic insurance coverage (liability being one), but I would like find alternative ways to manage the risk of an aging property and its diminishing value due to the this land lease dynamic.
Anyone have any thoughts on this very unique real estate dynamic that I now call home (well at least until I am 107)?

"Ckucking" back in. GGSOX -6.7 % for 3months from 12/16
+19.2 for 5 years " "
GPROX -6% For 3 months as of 12/16
+18.4 for 5 years
Looking to buy more on the dip after distributions

I have several of GP Funds. While some of the best stock ideas are being shared among the GP fund managers, each fund manager has the final decision in purchasing/selling a stock. Also, each fund has different mandates from the others. For example, the Global Micro Cap Fund is not the same as the Global Reach Fund, but some of the Global Micro Cap stock suggestions have been utilized in the Global Reach Fund, but not all of them. Similarly, Global Micro Fund may have some picks that are shared with the International Opportunities/Global Opportunities Funds, but not all of Global Micro Cap stock ideas are utilized.
For example, compare USNQX and NASDX. While both are based on the Nasdaq 100 benchmark, why aren't both funds performing the same (fund expenses are slightly different from each other)? Currently, USNQX has a lower expense ratio (.44%) than NASDX's expense ratio (.50%) but NASDX has a better YTD return than USNQX (from Google Finance). Years ago, NASDX performed better than USNQX. Then for several years, USNQX performed better. For the last year or two, NASDX has performed better than USNQX. Same can be said for S&P 500 funds (fund expenses are slightly different) as to why aren't they performing more in synch while utilizing the same benchmark
Second, Wasatch and GP have similar tendencies in closing their funds to keep them nimble. Since the GP managers learned Wasatch's management practices, they are probably being used similarly in GP's practices. I would hate to miss out on a fund that is closed for 5-10 years waiting for it to re-open.
Disclosure: I own the Global Micro Cap (in taxable and non-taxable accounts) and Contrarian funds, Global & International Opportunities funds, Emerging Opportunities, and Global & International Stalwarts. Thinking about a position in the US Stalwarts Fund.