This:
http://www.zerohedge.com/news/full-eu-summit-statement-all-its-conditional-wishy-washy-glory
This is a very, very technical chart that leads the reader through the European situation. It's a superb, in-depth look at the real, underlying details.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2012/01/Einhorn chart.jpg
Jim Rogers: "Rogers says the market euphoria brought on by the news, which saw a surge in Asian stocks, the euro and risk assets like oil, will not last.
"How many times have this happened in the last three years - they have had a meeting they have made an announcement, the market have rallied, two days later the market say wait a minute this doesn't solve the problem," he said."
http://finance.yahoo.com/news/financial-armageddon-happen-despite-eu-061542925.html

David's done a nice job explaining the fund's process in the past, but I don't recall much. Your question however is a good and logical one. Have often bought into funds I liked first & then looked for a way to fit them in. If it's a great enough fund in your view, you'll find a way. Am inclined to say there's nothing new under the sun - though the managers obviously think they've found a dandy niche. I'd say cash is cash - about as dependable as you can get in just about any financial crisis (but don't yield anything). Next in my mind would be an "ultra-short" fund heavy in investment grade stuff. The old Strong Advantage I once owned could keep up to 25% upper tier junk. While I owned it she was as true as real cash - used it like a money market to pay household bills. But these funds suffered during the panic of '08. RPHYX I'd put further down the ladder, but like the Sears Die-Hard, it may have a very long & profitable run before put to the test. Two things to consider: (1) with funds designed for safety or stability it's really important to read and understand the prospectus. Study up on the various bond ratings & which they are allowed to hold. Unlike an equity fund, you DO NOT want your manager to have a lot of latitude. (2) Figure out what it is you want your cash to do for you. Since I hold a healthy dose of junk, want the cash position about as pure as can get it - as a counter balance. Also tend to trade quite a bit, so want the cash where it will incur the least restrictions on trading and where it's easy to move back & forth into my existing equity funds. Hope this helps a little.

Howdy Claimui,
You noted: "I parked some money in RPHYX a few months ago, and now I am trying to understand how I should use this fund in the long term: as an alternative to cash, or as part of my bond allocation, or in some other way. If U have a 70/30 split between stocks and bonds, is RPHYX a suitable replacement for the "bond" portion of the portfolio? Or should I stick to a typical "core" bond fund such as VBMFX, PTTDX, DLFNX, etc."
>>>>> We don't hold this fund; but it is indeed a speciality bond fund, and would be a complementary bond fund holding for us; among our other bond funds. VBMFX and PTTDX are more broad based, while DLFNX does and will probably continue to tilt towards mortgage bonds, unless Mr. Gundlach finds problems with this area going forward.
"In the other thread about the role of fixed income in a portfolio, BobC noted that he advises clients to expect 2-4% from bonds over the next 10 years. According to Morningstar, RPHYX's 1 yr trailing performance is 3.61%, and its SEC yield is 3.65%. In this context, RPHYX's performance as a bond fund seems very respectable. It has returned (and is currently yielding) at the upper end of BobC's target range with very little change in NAV."
>>>>> I have to presume BobC's reference is an annualized, total return from a broad based bond fund holding(s). I don't know what to expect that far out into the bond/financial world and will attempt to adjust going forward, as needed.
"On the other hand, Vanguard's Total Bond Market VBMFX has returned 6.49% over the same period but with much more volatility. In isolation, I would think that if my bond target is 2-4%, and RPHYX is already returning 3.61%, then VBMFX is not worth the risk. However, I don't know how this plays out in the context of a portfolio. Maybe VBMFX is a better diversifier and thus a better choice a hedge against equity risks."
>>>>> As to risk of RPHYX versus VBMFX; one would have to consider risk in the HY bond sector in general and what affect this might have upon RPHYX and how it deals with a special area of the HY bond area. VBMFX is definitely more diverse. Another consideration is that although RPHYX has a current yield of about 3.75%, it also has an ER of 1.25% (temporary, and could be adjusted to 2.2% range); while VBMFX has a yield of about 2.75%, but an ER of .25%. Not as much yield obviously, but one is saving 1% in ER, too. Additionally, at least for me; I would continue to measure RPHYX against SPHIX. Not the same critters in function; but they are cousins. I note SPHIX, as it has a very long record of returns, is well managed and ranks 47 of 563 HY funds over the past 5 years, which of course, includes the market melt period. Since its inception, has shown RPHYX to have a slow and steady upward path when measured against swings in the traditional HY bond funds, but with about 1/2 of the total return.
"I noted in David's June commentary that he was planning to update his profile of RPHYX, so maybe this is one of the things that he could comment on. The original profile highlighted RPHYX as an alternative to money market funds but did not really discuss whether it could be a "core" bond fund in the context of a portfolio."
>>>>> For our house, for most aspects; we currently use TIPs funds for our "cash" holdings, while any of our other bond funds serve a similar purpose and could be sold for equity positions. The TIPs funds are very liquid; thus part of their usage desire. The ultimate test for RPHYX would be enough of a market scare (lasting at least 3-6 months) that also would affect the traditional HY bond sectors to find the fund's reaction to buyers and/or sellers in this area. For our purposes, we would maintain a total type bond fund for a core holding in this area.
My 2 cents worth............
Take care,
Catch

Claimui, I decided recently to put some cash into RPHYX as a money market equivalent after doing my due diligence. For those of you who may consult Yahoo charts, the price swoon on 2-24-12 is an error. I called the fund and they are contacting Yahoo to fix it. So far in its history RPHYX has been very stable price-wise, but it has yet to be tested by a 2008-type financial debacle (not that I'm wishing for one). As for my core bond holdings I lean towards the Doubleline funds, DBLTX and DBLFX, and PIMIX. At the end of the day RPHYX is still a bond fund, so I will be monitoring it as closely as I monitor any other bond fund holding.

NTF funds at brokerages generally have broker-imposed short term trading fees in addition to any imposed by the fund itself, e.g. Schwab imposes a fee on NTF funds sold within 90 day of purchase.
Brokerages may impose their own min on funds (e.g. Fidelity imposes a $2500 min on funds in taxable accounts even if the fund itself has a $1000 min). Conversely, brokerages often let you into institutional funds at lower minimums, especially within IRA accounts.
Some fund families will waive brokerage commissions on house ETFs (e.g. Vanguard doesn't charge for Vanguard ETF purchases through Vanguard Brokerage, Schwab doesn't charge for Schwab ETF purchases). On the other hand, brokerages may waive commissions on outside-sponsored ETFs (e.g. Fidelity waives brokerage charges on some iShares).
Some fund families offer perks that you won't get through Fidelity or Schwab, e.g. TRP offers free premium M* accounts if you keep $100K at TRP; Vanguard offers a free financial plan if you keep over $500K in Vanguard funds directly with them.
Typically if you want to transfer an account out of a mutual fund family, the transfer is free. Brokerages typically charge $50-$100 for this service. (It's call an ACAT transfer.)
Brokerages are always tinkering with their NTF list, so funds that you purchased NTF may go off that list at a later time (so you'd need to pay to sell or even transfer out).
Brokerages are not good at providing foreign tax credit info on funds. (You may need to know the amount of foreign income your shares generated - sometimes you still need to go to the fund family to get this info, but if you invest directly with the fund that info may be on your account statement.)
Some fund families let you into closed funds if you own a sibling fund. I suspect that it would be harder to do this through a brokerage, though I haven't pressed the issue yet. (And it would certainly require human intervention which would likely incur a transaction fee, even for a fund that was NTF when purchased online.)
--------------------
All that said, if you've got a bunch of different NTF funds that you don't trade frequently, consolidating them at a brokerage makes things much easier to deal with. And the brokerages (especially Schwab) make it possible to get into some institutional (cheaper) or load funds at a lower min and without a load.

Re: "The historical database suggests that ..." Yes MJG, your figures for money markets, bonds & equities should hold water over very long periods of perhaps 100 years or more. No wonder we mere mortals have a hard time applying such potential returns to our investments. There's no easy answer. However, your recent post on "luck" ("probabilities" as I suggested) may be relevant in assessing likelihoods nearer-term. Case in point: long government bonds may well have captured much of their century-long return over the preceding 25 years and quite possibly will not enjoy a similar spectacular run again for 50 years.
Re: "Complete honesty and transparency is a rare commodity in the financial services community."
I would amend to read: "Complete honesty and transparency is a rare commodity."
Regards, hank

Reply to @AndyJ: Agree to disagree (perpetual said it well further down, too, and I'm not going to even get started on some of the specific comments in the comments section.)
As for tougher questions, that's absolutely hilarious. Financial media is never about difficult questions or there wouldn't be a CNBC (who interviews Chubby Checker for his thoughts on "Operation Twist") or Bloomberg. CNBC asking a tough question is hell freezing over. Bloomberg might actually ask a tough question accidentally here-and-there.
If CNBC started actually asking tougher questions, 1:) many people wouldn't even come on anymore and 2:) people may not like what a lot of people have to say. As is, when CNBC anchors get difficult responses, they often appear to not like what the guest has to say and look as if they're frantically trying to figure how to move on.
At least the Morningstar interviewer allowed Romick to get his thoughts out without looking all frowny because Romick wasn't being cheery and telling people everything is going to be awesome. Even worse, he wasn't telling people to buy the latest BS momo stock.
The constant BS and spin of CNBC (and Leisman in particular, who is an embarassment) is in many ways the reason why they're doing lousy. A little honesty about reality in the last 5 years would have been helpful to their audience.
The best moment was an interview with Jim Rogers a year or two ago when called CNBC (while being interviewed on CNBC) a "market PR agency." It's not incorrect.
Odd that this interview brings out all the demands for tougher questioning.

Hi Guys,
To quote President Bill Clinton. “I feel your pain.”
I was moved to write this post by Igno’ s palpable distress over the unseemly misbehavior of financial agents of various stripes. For the most part, he sees this huge cohort populated by unscrupulous highwaymen and undisciplined charlatans. Here is his posting on the matter:
http://www.mutualfundobserver.com/discussions-3/#/discussion/3376/exactly.
Igno draws some approximately accurate pictures, but he paints with too broad a brush. He condemns an entire industry because of some popular misunderstandings within that community, because of a few miscreants, and because of common everyday advertising puffery.
Bad stuff happens. Even as victims of these unhealthy practices, we should try to forgive bad advice if it is honestly offered. Admittedly, it is sometimes difficult to ferret-out the innocent advisor from the guilty or the incompetent one. But we do have resources to do so.
The flood of information accessible on the Internet to both professional and amateur investors alike makes this task doable. Our connectivity to these sources is unparalleled. However, since many of them are unverified, the reliability of each candidate source must be challenged by skeptical scrutiny. Aiding our task is the daily (for the day trader, the minute-by-minute) pricing of the global marketplace. It has never been simpler to keep score by comparing the hired-hand’s performance against a good benchmark.
Many members of the MFO family can help in this task and freely volunteer to do so.
Let me now address the specific issues that troubled Igno. He was angered by the tortured statement "Studies have shown that over the long-term it is not your individual investments that determine your investment results, but your investment allocation." In this instance, that quote was lifted from the SeekingAlpha website. The quote purportedly comes from the 1986 research paper “Determinants of Portfolio Performance” by Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower. That paper is almost universally misunderstood and misquoted. The SeekingAlpha article just continued that legendary misrepresentation.
The Brinson paper focused on the monthly variability of institutional portfolio returns, not on their absolute returns. The paper reported that 93.6 % of the VARIABILITY in the returns could be coupled (correlated) to asset allocation. Other studies have made similar conclusions, although the specific percentage is not quite as high as the original Brinson finding. Some academics and industry researchers have contested the methodology in the original study.
William Jahnke is an often referenced critic. Here is a Link to his “The Asset Allocation Hoax” article:
http://www.norcal-ai.org/dwnld/2008-AssetAllocationHoax-Jahnke.pdf
The debate continues in detail, but the accumulated evidence is overwhelming. Asset allocation does directly influence absolute expected returns, and when properly deployed can control return variability. The Brinson research definitely did not conclude that it is highly likely that Warren Buffett and Jim Cramer would generate similar outcomes if they managed your portfolio. They would not.
Profits are a requisite target when assembling any venture. One of the guiding principles of any economic model is that there are no free lunches. In some way, you must always pay to play.
In a lottery, the charge is usually about 50 % pot retention for the lottery organizers. On a racetrack, the track operators withhold about 15 % of each race kiddy, about half for the State and about half for themselves. As John Bogle often says: the croupier must be paid.
The good news is that the marketplace is not a zero-sum game. Unlike the lottery, or the racetrack, or Las Vegas, all of which extract their fees so that the gamble payoff matrix reverts to a less than zero-sum game, the financial marketplaces have historically delivered positive outcomes even after fees have been extorted.
For any investment, it is very important to have a general sense of the potential payout matrix. Realistic expectations are mandatory when making asset allocation decisions. The key is to get some premium over annual inflation rates.
The historical database suggests that Money Market funds will generate about 0.5 % annually above inflation. Short term government bonds generate about a 0.75 % premium. Moving up the scale, longer term government bonds offer about a 3 % advantage, whereas high quality corporate bonds typically sweeten the payout by 4 % over inflation to accommodate increased risk. Large cap equities typically provide a 5 to 6 % premium, and small cap equities advance the expectations to perhaps 9 %. Historically, gold has merely traced inflation rates. Recognize that these are approximate values meant to illustrate an escalading returns scale as a function of risk.
Given the Gold recent ascendancy, this last historical statement demonstrates just how distorted annual returns can become, dependent on political, economic, and public sector sentiment factors. These distortions can persist for an extended period, but eventually there is a regression to the mean. Patience is a critical component when implementing any investment strategy. Overall, market return base rates must be recognized and acknowledged during portfolio construction.
All businesses are designed to be money machines. Las Vegas casinos are not in business to give away money. All aspects of their various branch operations are distinct profit centers. The same is true in the financial world. Financial consultants are no exception.
It is the clients duty to measure the contributions of their hired consultants against their costs. Cost/benefit analysis is an economic way of life. If a hired consultant disappoints relative to his promises, and/or misrepresents his performance record, fire the bastard. You are always free to choose.
I certainly agree that it is sometimes difficult to separate the wheat from the chaff. However, that too is your duty as the ultimate decision maker.
You must be particularly alert when doing the separation. I’m not certain, but it is likely that Oscar Wilde once remarked that some of us have a compulsion to complete the separation process fairly, and then inexplicably toss away the wheat.
I’m not sure of that last attribution, but this one definitely came from Oscar Wilde: “The salesman knows nothing of what he is selling save that he is charging a great deal too much for it.”
All literature and talking points originating from the vested-interest party must be interpreted skeptically. That’s a universal given. The source and the source’s motivates must always be assessed. I am currently rereading Edward Bernay’s frightening book, “Propaganda”.
Bernay is associated with being an early proponent for influencing public opinion using statistical analysis and psychological tools. He is credited with changing America’s breakfast habits to a ham and eggs society. His 1928 book is considered a classic, and supposedly served as a template for Joseph Goebbels Nazi propaganda agenda. The opening paragraph in the book is appalling in its scope and frankness. Here it is:
“THE conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.”
Complete honesty and transparency is a rare commodity in the financial services community. Each entity is a slave to its own incentives. But if that entity understands the art of long term strategy, those incentives must reflect customer considerations. An informed customer knows how to keep score, and the servicing agency knows that he knows. To remain a viable business in the long haul, that agency must incorporate a client’s wealth wellbeing in their business model; otherwise it is doomed. So, there are some excellent money managers and financial organizations.
I suspect, with a few outstanding exceptions (like Bernie Madoff), most mutual fund operations do faithfully attempt to properly align the client’s portfolio with their goals. Unfortunately, given political, economic, and market uncertainties coupled to the vicissitudes of unreliable public sentiment that is all too prone to be stampeded by Bernays-like propaganda, these firms frequently fail to satisfy those goals.
Indeed, at times, I too share Igno’s pain and hurt. But that experience is an inherent part of investing. Skill matters, but luck happens.
Your comments are welcomed.
Best Regards.

from seekingalpha.com:
The Asset Allocation Lie starts like this, "Studies have shown that over the long-term it is not your individual investments that determine your investment results, but your investment allocation." Now let's step back and think on this for a second. Warren Buffet is generally considered the greatest investor ever. In one sentence, every Financial Advisor has just belittled and indeed, insulted his life work. They have not only insulted his investment decisions and results of the past six decades, but also his lifelong desire to teach the public at large about how to invest appropriately. This insult continues on to his shareholders who invested in his company on the belief that they might reap excess investment rewards in the future. Every Hedge Fund Manager, every Portfolio Manager, that has utilized proper stock selection, like Mr. Buffet, as their investment strategy and has achieved success with that investment strategy is being insulted. Every one of their investors, who invested with them in the belief that they could utilize proper stock selection as an investment strategy, is also being insulted. And there is one final person who is also insulted by this entirely false concept, and that is: everyone else, literally. Every individual investor who has not invested with or even heard of Warren Buffet is being insulted by almost every financial firm and advisor in the industry since these strategies, enacted by the successful investment managers, are not being presented as options to the public at large. This is the Lie.
Then there is the Deception. The Deception uses the Lie to get you, the unknowing individual, to trust the Financial Advisor (or more accurately described, the Salesperson) and utilize their services as well as their firm. Because as long as you don't know about the other, more effective investment strategies of elite investment managers, you'll turn your money over to idiots. The idiots are active investment managers who are incapable of beating relevant benchmarks over a reasonably significant period of time.
Finally, there is the Steal. The firm and the advisor charge what seems to be a "low fee" in relation to historical returns, but is in fact a very high fee for the actual services they perform for the client. This "low fee" grows over time as you save and invest more capital and have some positive investment returns. As the "low fee" grows, the compensation to the firm and advisor grows while they continue to do effectively nothing. This is the second part of the joke in action, "But if you steal a little bit of money, from a large segment of people over an extended period of time, you get rich." Who gets rich? Not the client, but the firm and the advisor.

http://www.zerohedge.com/news/was-blackrocks-permabull-bob-doll-fired-stealing-financial-models
http://www.reuters.com/article/2012/06/21/us-blackrock-quantmodeldisclosure-idUSBRE85K1JA20120621
"For the past one, three, five and 10 years, the three funds have underperformed their benchmarks, according to Lipper."

Reply to @catch22: The author, who is a financial advisor, merely points out the risk associates with bond funds or bond ETFs with respect to raising interest rate. One can lost value in their principal (decline bond prices) while maintain the yield in interest rate hike. So avoid long duration bonds and use short/intermediate term duration bond funds instead.
The author suggests buying individual bond and hold to their maturity date, the principal will be paid in full along with the coupon yield regardless of interest rate. Also create a bond ladder to ensure income stream. However, this will require bond selection skills and large $$ for diversification. These the exact reasons individual investors use mutual funds/EFT to gain broad bond exposure, and professional actively management.

Q&A with Andrew Foster in Investing Daily
http://www.investingdaily.com/15227/emerging-market-stocks-the-bric-is-just-the-beginning
Ben: What countries are most attractive right now?
Andrew Foster: Vietnam is well positioned. Some investors are concerned that its growth model isn't very healthy, since the state sector is not particularly well managed and creates distortions in the economy. But the private sector is vibrant and growing quite rapidly.
China and some of the other more developed emerging markets in Asia have been shifting their manufacturing bases to lower-cost economies. Vietnam stands to gain much of that business. Meanwhile, on the domestic front, Vietnam continues to make sound regulatory changes, even if those changes haven't always pleased the market. For example, some investors are worried about heavy-handed regulations on Vietnam's banking sector, but those concerns are misplaced. The regulators are acting in quite a benign way to promote medium- to long-term growth by forcing some consolidation among the banks and clamping down on certain speculative activities.
There's also a lot to be excited about in Malaysia. Some interesting economies and sub-industries have begun to spring up there. For example, Malaysia has a growing medical equipment sector, and a number of burgeoning financial services industries. With regard to the latter, Malaysia has a leading global position in Islamic finance, predominantly serving Southeast Asia. These are intriguing niches where Malaysia has managed to secure a foothold and become quite competitive. On the other hand, the economy as a whole does have a fair bit of export sensitivity, and that could be problematic during a global downturn.
South Korea is another market that offers opportunity. Samsung Electronics (Korea: 005930, OTC: SSNLF) and Hyundai Motor (Korea: 005380, OTC: HYMTF) have become strong enough to practically dominate their industries. South Korea also has some very competitive and well-managed companies that are incredibly cash generative, but have yet to see their valuations rise to reflect their underlying fundamentals. Those stories are lost behind the excitement over the country's export competitiveness.
There's been a bifurcation in the market's opinion about whether to favor companies that produce impressive top-line growth, but whose cash flows are not nearly as strong, or companies that produce strong cash flows, but have more moderate growth. That's created a situation where investors interested in South Korea can still find defensive, undervalued names with attractive yields.
Thailand deserves attention too. We're reasonably positive about Thailand's political outlook, as well as the country's recovery after last year's floods. The economy seems to be picking up momentum after a difficult 2011, and we've been excited to see many Thai companies that had suffered serious setbacks regain lost ground. There's reason to be optimistic about Thailand in that context.
Mexico also has a robust economy. It does have linkages to Europe, and there has been concern about the narcotics wars there. Despite those issues, the economy has been surprisingly stable and productive. And there are Mexican companies that offer attractive dividend yields and have healthy, unlevered balance sheets.

Howdy msf,
Well.......yes, I was just kinda mess'in around with outloud thinking placed into words here.
As you noted, the bonds I mentioned still could move much higher in yield and we too; do not play in this area of trading.
My fantasy thinking with these particular bonds and their yields (of which, our house places close attention) is that, my best guess is that if either of the yields become much higher........well, there is going to be much more stress in financial systems and I still don't know what the various entities in Europe can do to fix the situation.
The scary part of this for these two countries and the affects spread over the entire Euro financial system, is that I can't imagine how any country being deep into the "do-do" of monetary affairs can afford to pay these yields.
Not unlike one who has a high credit card balance and finds the notation about the minimum monthly amount required and what the payback period and amount will be if one only makes the minimum payment.
Still a pretty nasty situation.
Take care,
Catch

Not to sound like a broken record about poor financial journalism, but he lost me when he said that low turnover helps keep the expense ratio down. Turnover affects brokerage costs and also has market impact (i.e. moving market prices upward as you buy, and downward as you sell). But neither effect is included in the expense ratio. Rather, they're hidden performance costs, which is one reason why one needs to look at turnover in addition to looking at expense ratios.
The writer makes it sound like this fund has higher than average market cap for a small cap fund, because it will let winners ride. The opposite is the case. The fund does not have to "conform" (read: buy) stocks with market caps within the Russell 2000 range, but rather stocks with market caps within the Russell 2000 range or below. Read the prospectus (Principal Investment Strategies section). That's why over 1/3 of the fund is in microcaps, and only 1/6 is in midcaps, and why this fund can serve as a good entry into microcaps for someone who does not want to hold a separate microcap fund.

Reply to @Derf: Hi Derf. No idea if the financial sector is a buy now. Just adding to Scott's point that financials looked like a bargain or a good value play back in '09-'10. But those who jumped in early got beat-up pretty good. Berkowitz is the poster child for that move.
Have a good weekend and happy fathers day to you.

Reply to @scott:
"There is great value in Europe and there is going to be greater value in Europe, but the banks aren't it."
I agree with you. If we parallel what's going on in Europe and how they will recover to the US recovery, every US sector has recovered and then some except financial. If you graph all the sector ETF's starting from the start of 2008 to the present, the only sector that has not come back is financial, still down about -35%. Compare that to sectors like consumer discretionary and consumer staples, up ~ 50% and 40% respectively since start of '08. If Europe's recovery is similar to the US recovery, sectors other than financial offer much better opportunities then the financial 'value trap' (as you said). As seen in the US, the European financial sector could take many years to reach a positive slope to recovery. -just my 2cents.

1. How do you compare your value investing style at FPA versus Harris/Oakmark and Brandes since you also spent time working at those other 2 places?
2. Since you worked as an Analyst at Harris/Oakmark and the Oakmark International/Global funds have been gobbling up Japanese stocks for over a year now --- why have you taken a different path and stayed completely away from Japanese stocks?
3. What was your investment case/thesis for Brambles, G4S and Legrand? And why do you think the market has mispriced their stock?
4. Tell us about Turkey? Are there no companies there that appeal to you considering that they are based in Europe but do not face the financial/economic troubles of Western Europe? Would you say that Turkey interests you but in an indirect way? For example - you are invested in Diago and last year they purchased Mey Icki Distillery for $2.1B in cash and is Turkey's biggest spirits company, which holds an 80 percent share of the country's top-selling spirit categories. I guess you see that as a positive and an indirect way for you to invest in Turkey and take advantage of the health of that country versus most of Europe?
6. What typically creates opportunities for you to buy?
7. How do you create your list of potential buys?
8. Do you visit a lot of companies and is that face to face meetings important to you from a research/evaluation perspective?
9. What were your most important investing influences early on?
10. How do dividends play a role in your evaluation/consideration of a company?
11. What are your thoughts on Nokia stock which has been battered I believe over 80%. Is their stock not cheap enough and you believe this is a value trap? Balance sheet looks poor? Too much future uncertainties and competition in the mobile handset market?
12. Do you like investing in small foreign subsidiares of large multinational companies that trade separately from the parent company?
13. As a follow-up question to my earlier mention of Diageo (which you are invested in) - what do you think about their Balance Sheet? Meaning do you think the 7 Billion Euros of debt (last I heard) is a fairly safe amount of leverage for Diageo and is a non-issue?
14. What would be your investment thesis not to invest in Spain's Telefonica?

Reply to @Zolta:
Hi Zolta,
Thanks for the kind words. I try to inform.
With regard to your specific question, I have no special market insights or uncommon market wisdom. I struggle like everyone else to secure market rewards plus just a little sugar in terms of excess returns. Sometimes I succeed; sometimes I fail to achieve this modest goal. I too have no access to insider-quality information.
I do not own a silver bullet; I suspect very few people of moderate wealth do. There are no secrets buried among us.
I compliment you on your portfolio construction methods. From my perspective, they are rock solid. I use similar techniques myself and have little to offer that might improve on your systematic approach. It is disciplined. That is more than half the battle.
Although our approaches share several similarities, I am genuinely humbled by the breath and scope of your dedication to portfolio management. My efforts pale by comparison. I no longer have the patience to monitor a hundred or so alternative fund options. That task overwhelms me.
From the mid-1950s through the early-1980s, I constantly screened and updated about 150 individual stock candidates to assemble an equity portfolio of roughly 30 positions. The 30-holdings target reflected my interpretation of portfolio diversification as envisioned from Harry Markowitz’s Portfolio Selection studies.
That was an arduous time-consuming task that I abandoned in the early-1980s in favor of a mutual fund dominated program. I have never regretted that decision; today, I do not own any individual stocks whatsoever. Investment decision-making is much easier now.
My current guidelines in fund selection are likely very similar to your rules. Here are a few (probably incomplete) criteria that I follow. In general, I apply a top-down technique and hire fund managers to supply the bottom-up details of the selection process.
I too measure past performance over a range of timeframes as a selection discriminator, the longer the better. I verify manager tenure with that specific fund. Cost containment is a paramount consideration; costs matter greatly, especially when intermediate-term returns are likely to be muted. A small fund size is better to foster agility. The fund family should be large enough to support a sizable and stable cadre of researchers. Also, it must be flexible enough in its policies to permit freedom of fund manager actions, especially to encourage a go-anywhere attitude. I am patient and allow my chosen funds years to test their mettle except under extraordinary circumstances.
I also use a 200-day market moving average to aid in adjusting my overarching portfolio asset allocation. Momentum persists, at least in the short-term (1 year or less by my standards). When making rare portfolio adjustments, I do so incrementally since uncertainty is always a residual restriction regardless of the confidence assigned to any indicator signal. False signals are traps for all traders.
I employ calendar study findings when making my infrequent trades. CXO Advisory Group provides excellent access to a number of such statistical studies that range from suggesting the most rewarding trading days for any given month to the benefits of considering the Presidential 4-year cycle when doing longer range planning. Please visit their site to explore calendar phenomena at:
http://www.cxoadvisory.com/calendar-effects/
Since I have a large, globally diversified portfolio, I also incorporate some broad economic indicators when making minor adjustments to my portfolio on an annual-like basis. The two most fundamental drivers to an established economy are population demographics and productivity growth. For the US, the current historical averages for those two influential factors are 1 % and 2 % per year, respectively. If the US exceeds those expectations, GDP growth rate and corporate profits will respond accordingly. The correlations are reliably positive and statistically tight.
I also loosely watch the Federal Reserve monetary policy trends and biases. I firmly believe in Milton Friedman’s famous statement that “Inflation is always and everywhere a monetary phenomenon.”
Finally I too am skeptical of both financial professionals and amateurs alike. We all are victims of overconfidence, and are more often wrong then right. When the investing public is all in, perhaps it is time to be at least partially out of the market. Public and professional sentiment is definitely a contrarian’s signal.
I make no claims to be more market-wiser than any other investor. I have suffered my fair share of bad investments. I hope I have learned from these experiences. Believe it or not, my bigger hope is that you avoid the missteps that I made and manage to sidestep a few negative outcomes.
I know you will not fail to do better since you are more fully prepared then I was way back in the distant past.
Unfortunately, I must wish you luck since, after over 5 decades of investing experience, my most compelling finding is that skill is a necessary, but not a sufficient, factor to guarantee successful investing. To some extent, we all must be somewhat lucky in this uncertain world.
I do wish you good luck and successful investing.

Howdy,
I've been very busy and will remain so through the weekend, so a short blip. I have a bit of time this Friday morning to place a few thoughts regarding our portfolio and the markets in general.
Yesterday, Thursday, June 7 found a little time to hear Mr. Larry Fink (CEO, Blackrock). I would have preferred to listen in on the whole two hour period, as well as Mr. Bernanke's testimony.
A few notes from what I was able to gather, and please correct me or add to, if I am mistaken.
1. Mr. Fink is an equity person based upon yesterday's, as well as previous public comments. I would like to view his asset allocations. More or less, when Mr. Fink was asked about could (pointing at the individual/retail investor) one expect investors be to be drawn back into the equity investing sector; as over the past 12 years, the returns in this area have not been stellar. He replied that he hoped so, and that the longer term equity return records were more favorable.
>>>>> I will maintain that while longer term data for equity or any other areas may hold some clues about a rosy past in the U.S.; the past is the past, and not the world of today.
2. My only take from Mr. Bernanke's testimony from yesterday, is that I suspect he would like to place a most simple line of words to these congressional committees; stand up and leave the room......"no further questions and have a nice day." He would provide a simple statement to the congressional folks, that at this point in time, the Fed and Treasury have nothing left to alter this economic condition and that if you folks can not come to an agreement to a functional plan that has nothing to do with politics and your getting re-elected, that I will advise for yourselves, your children and your grandchildren to obtain the best financial planner that you are able to afford; because the water is getting deeper and colder, and I don't think you'll make it to the shoreline in enough time, when your boat has overturned.
3. So what? The big traders were looking for the big punch of more QE something or other. They also seemed to be happy that China's central bank reduced their rate .25%, the Bank of England kept their rate in place and blah, blah. Talking heads also explained the recent equity rally, in some part; to better data. Ya, okay. Last week and last month were all poopie for various data and now somehow there is better/positive data. Ah, where is that; please?
China's CB rate change was not for a good reason; nor was B of E holdings its rate. The reasons remain as they have been for some time now; growth and other related prospects remain a bit edgy. I do believe there are and will remain any number of cheerleaders, from the big traders to the central bankers who will continue to attempt to reassure the masses that things are improving. Moving along sideways in some areas does exist; but I have not yet unrolled the banners of "equity joy".
While global equities had a few days of rally based upon something; at the same time French 10 year and German 2 year gov't. issues set new record low yields. Hmmmmm......... Also, last week; and I can't recall the names, a major insurance company that issues insurance in the shipping industry announced that it will no longer (July 1) issue insurance against goods moving by ship to Greece. Another well known, large company (again can't recall the name) also noted that when their received payments cleared in Greece, the money was moved overnight into British banks.
Obviously, everyone has to be their own judge as to conditions that may affect their portfolios. When we find a sustained period (1-3 months) of rising yields on high quality global, government debt; other signs of a true global recovery should also be in place. Our house would prefer a much happier global environment; but do not find this, at this time. Reality bites, is still in place.
If our house is wrong in our current assessment and/or we miss the shift; we will get our bond wings clipped somewhat; and those who hold the proper equity sectors will run past us on the road to profits.
'Course, and sadly; we all have to deal with the slow motion train wreck that is the greatly divided congress who remain in the total selfish mode of operation. I suspect their are a few who really try to work for a better plan, too.
Lastly, Europe is 2-3 years behind the fix/unwind/debt problems or whatever one chooses to guage; versus the U.S. Europe has to deal with a central bank and related that can not currently properly provide the same functions as our Fed. and Treasury; and this is compounded by all of the political ramifications, too.
From a previous Funds Boat statement:
The below is on the radar; and is not totally inclusive, as other trinkets of news and data must be watched and attempt to draw some conclusions to either support or negate any given investment area.
--- continuing to monitor the broad based insdustrial commodity sectors...energy, copper and related
--- the $US broad basket value, and in particular against the Euro and Aussie dollar (EU zone and China/Asia uncertainties).
--- yield/price directions of U.S. treasury's, German bunds, U.K. gilts and Japanese bonds.
--- what we are watching to help understand the money flows: SHY, IEF, TLT, TIP, STPZ, LTPZ, LQD, EMB, HYG, IWM & VWO; all of which offer insights reflected from the big traders as to the quality/risk, or lack of quality/risk; in various bond sectors. These areas may also reflect towards directions of various equity sectors; as if some bond types get the cold shoulder, so will some equity areas, regardless of perceived quality or value.
Take care,
Catch

Hi Guys,
The persistence of market excess returns is so rare that it seems to be an illusion.
We constantly search for and mostly fail to discover the Holy Grail of investing. Sure, the law of large numbers sort of guarantees that a small percentage of individual stock pickers and mutual fund managers will generate excess returns relative to a carefully selected benchmark for a year or two. Statistics work to accomplish that outcome. But a major issue is top performance persistence over a longer measurement cycle. On that matter, it appears that the market experts and investment gurus consistently fall short of target goals.
The evidence in that regard is overwhelming. In a recent Wall Street Journal equity analyst survey of institutional entities, awards were granted to superior individual analysts. However, on average, the qualifying cohort as a group statistically underperformed appropriate Indices.
Decades ago, University of California professors reported that individual investors (most likely from the roles of Charles Schwab California clients) underperformed representative benchmarks when they published their findings in “Trading is Hazardous to Your Wealth” and “Boys will be Boys”. The authors of both studies are Brad Barber and Terrance Odean.
Year after year, the market research firm Dalbar annually reports in their Quantitative Analysis of Investor Behavior document that mutual fund investors poorly time the market; they underperform market rewards by a huge percentage. These ambitious traders sell funds that subsequently outperform their replacements. Successful timing is a treacherous business that eludes most investors.
More recently, Morningstar reinforces that same poor timing observation with their own analysis that reveals that individual investors are often late when buying top-ranked fund performers. That finding motivated Morningstar to add their Metals rating system (supposedly forward looking) to their Star rankings (admittedly a rearview mirror analysis). Time will test if the newer Metal ratings enhance the value of the Morningstar service.
At the guru level, CXO Advisory Group has collected accuracy prediction records for scores of famous market gurus over an extended timeframe. Once again, the value-added by these experts is highly questionable. Their accuracy typically ranges from just under 70 % to just over 20 %, with a cohort average that struggles to reach 50 %. That dubious record is no better than a fair coin toss.
A specific illustration of the limitations of self-proclaimed experts to even project market direction trends is provided by a recent CXO study. The study examined the market wisdom of financial newsletters monitored by Mark Hulbert. Hulbert has long reported that a vast majority of these newsletter gurus do not achieve Index-like returns.
Hulbert also likes to address market direction by a formulation that he calls his Hulbert Stock Newsletter Sentiment Index (HSNSI). He considers the HSNSI a contrarian’s signal. The composite newsletter judgments are interpreted as characteristically wrong. Here is the Link to the CXO statistical assessment of HSNSI:
http://www.cxoadvisory.com/3265/sentiment-indicators/mark-hulbert/#more-3265
Anecdotally, I just returned from the Las Vegas MoneyShow conference. The selling of financial services and eloquent computer programs services are major components of that meeting. Access to computer programs that give the user a trading advantage with instantaneous data updates and sophisticated technical analyses tools supposedly award that investor with the edge that he needs for success in this field.
However, an economist at these sessions warned that the promises most likely exceed that which is delivered or deliverable. He cautioned to keep our hands away from our wallets. That was probably the best advice offered at the conference.
Hedge Fund structures have sold their services since the 1940s. According to common wisdom, Hedge Fund management is populated with the smartest, the inventive, and the most resourceful folks in the financial universe. Even under this purportedly superior management, the Hedge Fund survival rate is dismal.
The Federal Reserve has studied their hazard rate (their probability of failure). The Fed findings do not inspire confidence in the shrewdness of these Hedge fund managers. Their frequency of failure is high and their time to failure is short. Even these megastars of the investment world are victims to market vagaries and fail to successfully navigate it. Risky ventures generate high casualty rates.
Standard and Poor’s studies demonstrate the same expert shortcomings. S&P measures expert performance with their Standard & Poor's Indices Versus Active (SPIVA) studies and their Persistence Scorecard studies. They just released their mid-year Persistence Scorecard. Current results are generally inline with earlier findings. Here is the Link to that work:
http://www.spindices.com/assets/files/spiva/sp-persistence-scorecard-june-2012.pdf
Enjoy this latest edition of the Persistence Scorecard. By delving just a little into the weeds of the S&P Persistence scorecard you will identify some fund categories that travel more persistent roads then others. The nuggets are waiting to be discovered with some digging.
At the broadest echelon of interpretation, the S&P Persistence scorecard constantly challenges the industry assertion that skill outcomes dominate over pure luck.
Once again, the current scorecard statistically shows that performance persistence over 3 and 5 year periods do not even match those expected from a normally distributed Bell curve by random chance alone. That’s sad. Why? Most likely these skillful and well trained fund managers can not overcome the drag of trading and management costs. As John Bogle never tires of reiterating, costs matter greatly. Luck is never a lady.
I use two S&P reports (the SPIVA and the Persistence scorecards) to annually shift my portfolio incrementally. I like to contrast the present reports with the last few releases to see if any trends are being established or abandoned. It’s a dynamic world within the competing active and passive mutual fund management options.
The many references that I cited tell a consistent and disappointing story.
A formidable array of market experts, practicing professionals, and fortunetelling gurus fail to capture the economic winds beyond the accuracy level that a simple coin-toss can do. If these insiders really made truly independent judgments, from “The Wisdom of the Crowd” studies, one would anticipate a better outcome.
That does not occur because the total of expressed opinions are not independent assessments, but rather a produce of group-think. The experts invariably exchange their views before formulating their recommendations, thus diminishing the value of their forecasts by compromising its independence.
Whenever statistical data are used for explanatory purposes, non-mathematically inclined folks are often skeptical. The doubters tend to accept the premise that “the data were sufficiently tortured to secure a confession”. That does happen. To address that reservation, I specifically included a host of findings from studies conducted by a diverse set of financial institutions and professionals. It makes the posting much longer, but I hope more convincing.
On a personal level, numerous superstars often demonstrate their own market madness. John Maynard Keynes was the most influential economist of the 20th century and a successful market trader. Keynes became rich several times. Still, he did not foresee the Great Crash in the late 1920s and was nearly bankrupted by it.
Lord Keynes recovered and died a wealthy and renown economist. He wrongly said in 1926: “We will not have any more crashes in our time”. Even Worldly Philosophers of the first rank make investment missteps. There are many such personal stories of failure, redemption, and even failure again in some instances. Keynes equated the stock market to a casino or a game of chance, completely unpredictable.
The obvious bottom-line conclusion is that experts are just as prone to decision-making debacles and forecasting errors as the private investor is. The absence of persistent superior outcomes from these wide ranging surveys of money managers pervasively proves, that from a statistical perspective, luck trumps skill when making investment decisions. And luck fads quickly. Skilled financial managers are a myth except in very rare exceptional cases.
What to do? Be more self-reliant and trust yourself. It’s okay to seek and listen to the chorus of financial professionals. At bottom, that helps to establish a baseline. In the end however, you must make the final decisions. Most assuredly you are not the smartest or the best informed person in the room. But just as assuredly, you are the smartest and the best informed concerning your private circumstances, your goals, your current portfolio, your health, your risk aversion status, and your comfort zone.
So be your own decision maker and do not blindly accept the gospels preached by the assembly of false wizards. The record clearly does not support their exaggerated claims to fame.
But life and the marketplace goes on. Sadly, in my personal search for market guidance, from an early U2 song (in their Joshua Tree album): “ I still haven’t found what I’m looking for”. Perhaps it doesn’t exist, but I continue the march.
I encourage you to do the same. Stay the course; always run the race through the finish line in full stride.
Best Regards.