Howdy folks,
Interesting discussion and most everything is spot on. Hank's and the others have been doing this for a long time.
Is golds still a hedge against inflation? That remains to be seen. The market is extremely manipulated not in a conspiratorial way but legally by all the central banks and countries that wish to do so. This makes it tough to play in the short run. Almost impossible.
First of all I see gold in a couple of different ways. First I see it as a core investment for all portfolios. Say in the 3-7% range, preferably in physical bullion. More that this size of a holding is speculation. This is fine as long as you know it speculation.
I try to play gold and silver in a momentum investing manner. When they start to show some momentum, you scale in and ride it until it starts to break down at which point you scale out. There is no positive momentum at this point in time.
I mentioned silver only because I do prefer to trade it and as was pointed out, the mining stocks, particularly the juniors. All I can say is that this is where the leverage is and it can truly be nose bleed stuff.
Most precious metal mutual funds contain mining stocks and zero bullion. And you want to be careful with bullion ETF's because they are taxable at the collectibles rate if held in a taxable account. Ouch!
Permanent Portfolio PFPFX is based upon a diversified portfolio that Harry Browne came up with. He felt be diversifying between select asset classes you could smooth the market cycles. WTF knows. I do own it and have for years and will continue to do so.
As for wealth diversification, the Elder Rothschild said a long time ago, that to protect your assets you should have 1/3 invested in securities, 1/3 in real estate and 1/3 in rare art. Rare art can be a lot of things but it ain't beanie babies. In my case, I sub rare coins and bullion for the latter category.
Of note with the current market in bullion, there is a major divergence between paper price and street price. This means that official paper price is viewed as bogus by the people buying and selling physical bullion and therefore there is a very large premium attached to all bullion purchases.
and so it goes,
peace and wear the damn mask,
rono

Um no, no reasonable investor rules out a stock market correction and nothing I posted suggested that.
Yes, several of those factors I posted will likely be there for years, possibly beyond my remaining number.
What's it all mean, to me at least?
(1) It seems likely those and other positive market factors will collectively act to possibly limit/reduce the number, severity and/or duration of corrections and bear markets.
(2) I will continue with stock allocations stretched to the top of my allocation range UNTIL the risk/reward of bond funds, CDs and/or MMkts significantly improves.
(3) I will continue to BTD until it stops working.
YMMV.

I was primarily suggesting that given substantial confounding factors, there's not much that can be inferred about the utilities industry from the way it behaved in the 70s. At least not without a lot of work and guesswork that I didn't provide.
One may not be able to say much even in broad terms. Giroux wrote in the last semiannual report that "utilities, in particular, have completely decoupled from Treasury and corporate bonds unlike at any time in the last 40 years."
Regarding utility funds investing in telecom and energy, most do tend to hold a healthy slug of these. The only fund I know of that hews to the traditional path is FKUQX (NTF many places), FRUAX (NTF, $100K min at TIAA, Firstrade).

@Stillers, Are you ruling out a US stock market correction? If not, what would be the reason for the next correction and when? Seems like the long list of things you mentioned are going to be there for years.

@stillers
I would add that there are way less outstanding shares/co's to purchase over the past 10-12 years..due to private co's having easier access to capital no need to go public, sure buybacks, different less capital intensive co's such as software based need less capital so no rush to go to market, etc.
So would it be wrong to say that this is an "inflationary scenario" causing the market to continusouly rise due to supply/demand....more money chasing less product....
"Transitionary"...who knows??
Baseball Fan

@waxman who said "Leveraged loans and BDC's, stay far, far away IMHO." Would you care to elaborate?

Sure, these are very volatile beasts that can be traded but are not good long term investments, in my opinion. Since 2013 BIZD (an etf that holds BDC's) has a sharpe ratio of .40 with a max DD of 44.53%. In the leveraged loan department it depends on the issue, but a popular CEF like OXLC had an over 60% drawdown over that same period. As for HNDL, like most anything else, it needs to be watched but the ETF has a good strategy in terms of stability while looking for opportunity and has done well in its short life. As someone who has traded CEFs for many years I'm looking to HNDL as more of a longer term holding to provide cash flow. Not many great options these days.

Nice stuff. Thanks @msf for the comprehensive write-up. Particularly pertinent is the role of federal & state regulation which has undergone substantial changes over the years making comparisons of different periods difficult.
My understanding of some of the dynamics in play …
- Utilities tend to borrow a lot so that rising interest rates should diminish their profitability.
- Utilities appear to be substantially exposed to the energy sectors which one would expect should help during inflationary periods as energy prices rise (countering some of the damage from rising rates).
- Utilities own a lot of infrastructure which should appreciate in value during inflationary periods.
- While the utilities indexes may be confined to more traditional utility sectors, a fund may define utilities quite broadly. How broadly is anyone’s guess. However, 5g cellular, fiber-optic and satellite based connectivity are likely within some fund managers’ purview - making their investment products more responsive to technology advances than during the 70s and 80s.
- One wonders the extent to which the advent of self-driving vehicles may become intertwined with the utility sector, as these rely on constant internet connectivity.
- Utilities might also benefit from increasing use of EVs and the need for charging stations.
- The liability issue, which msf addresses, is a real wild card. We live in a much more litigious society than 50 years ago.

I wonder, @msf, if the success utilities had starting in the 70s might be related to the southward and southwestward movement of the US population. As you correctly point out, ignoring climate change and an unswerving faith that the Colorado river would flow forever now are shown to be false assumptions and the utilities will pay the piper. I recall being gifted a very few shares of Pinnacle West many moons ago. In my ignorance I sold them after a few years. Had I known how to set up a DRIP program, those shares would have grown a small nest egg for our kids or grandchildren. The donor of the shares simply sent a stock certificate with no instructions included, an odd gift from an uncommunicative father-in-law. His stock picking, buying a utility serving the four corners states just before their huge growth in population, is unassailable. Of course, there are other “if only” stories many of us can tell.

This name change would concern me if I held the fund (JNSTX).
The SEC says: "The Division takes the position that a 'short-term' ... bond fund should have a dollar-weighted average maturity of ... no more than 3 years."
https://www.sec.gov/divisions/investment/guidance/rule35d-1faq.htm
That doesn't apply to short duration funds. Floating rate securities are considered to have virtually zero duration, since their interest rate is generally set to match the market rate. That is, no interest rate sensitivity. But the securities themselves can have long maturities and may be illiquid.
If they have embedded options, like mortgages, they may have extension risk. To the extent that their rates don't adjust quickly or completely to market changes, they may have negative convexity - as rates go up (and bond prices fall), their prices may fall much faster than vanilla bonds with positive convexity.
What the prospectus says is that

The Fund expects to maintain an average-weighted effective maturity of three years or less under normal circumstances. ... "Effective" maturity differs from actual maturity, which may be longer. In calculating the “effective” maturity the portfolio managers will estimate the effect of expected principal payments and call provisions on securities held in the portfolio. ...[A]ll else being equal, [this] could result in more volatility than if the Fund calculated an actual maturity target.
...
Extension risk is the risk that borrowers may pay off their debt obligations more slowly in times of rising interest rates, which will lengthen the duration of the portfolio. Liquidity risk is the risk that fixed-income securities may be difficult or impossible to sell at the time that the portfolio managers would like or at the price the portfolio managers believe the security is currently worth.

https://connect.rightprospectus.com/janushenderson/TADF/47103E742/P?site=janushenderson

The ETF launched on Tuesday under SOC.
"SPC is a renter, not an owner," said CrossingBridge's Founder and Portfolio Manager, David Sherman. "In other words, we aim to capture the fixed income nature of pre-merger SPACs purchased at a discount-to-collateral value with a potential equity pop from shareholders reacting favorably to an announced deal. But we are not interested in being an equity investor post-business combination – that is a whole different ballgame."
According to CrossingBridge, SPACs offer very similar characteristics to fixed income securities, which include:
· SPACs have a liquidation date which is equivalent to a bond's maturity date.
· SPAC common stock shareholders have a full-redemption right upon a business combination, similar to a change-of-control put provision found in corporate debt indentures.
· SPACs are fully collateralized by U.S. government securities for the benefit of SPAC common stock shareholders to be released upon a redemption or liquidation. Hence, when an investor purchases SPAC common stock below its pro rata trust account value and holds the security to redemption or liquidation date, the investor will receive a positive yield, similar to a fixed income security's yield to maturity.
· SPACs may have equity upside by participating in an attractive business combination. This upside is similar to a convertible bond with the added feature that SPAC investors may redeem their common shares for their collateral value rather than continue ownership post-transaction.
SPACs are not a new asset class for Sherman; he made his first SPAC investment over 15 years ago. Given the increased popularity and capital flowing into SPACs, Sherman has significantly increased the firm's exposure to SPACs during the past few years. CrossingBridge believes the market is now large and liquid enough to effectively manage SPAC-dedicated strategies.
"Our guiding principle has been, and will continue to be, that return of capital is more important than return on capital," emphasized Sherman

Did you mean EGRNF ?
For every seller there’s a buyer. So, someone’s buying. The sharp decline alone wouldn’t deter me from investing a small percentage of assets in it if there were other compelling reasons to buy. IMHO buying and selling this one is best left to the professionals who might hedge the risk using derivatives.
Every market collapse needs a “whipping boy” whereon blame may be properly placed after the fact. Sometimes it’s unbridled speculators, sometimes unethical corporate insiders. There’s also illegal trading, over-reactive Fed tightening, lax governmental oversight, ad infinitum. Looks like EGRNF might have that ultimate fate. And what better place to disassociate ourselves from years of speculative excess than China?

I'm hoping 2 to 2.5 % after 3 years. For me 2% is better than 1 basis point for my idle cash !

"The Federal Reserve on Wednesday telegraphed it could hike rates six to seven times by the end of 2024, illustrating the central bank’s optimism that the COVID-19 recovery will progress well enough for the Fed to tighten its easy money policies in a few years.
The policy-setting Federal Open Market Committee still held interest rates at near-zero in its updated statement, but said it had advanced talks on paring back its asset purchase program.
Since the depths of the pandemic, the Fed has been absorbing about $120 billion a month in U.S. Treasuries and agency mortgage-backed securities. But Fed officials have said in recent weeks that by the end of the year, the economy will likely make the “substantial further progress” needed for the central bank to begin slowing the pace of those purchases."
https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-september-2021-141145429.html
Can't wait earn a nifty 1.5% on my savings after another 3 years, while inflation eats my breakfast, lunch and dinner for me.

On the surface it makes sense if your goal is to position your more aggressive holdings so that they become subject to RMD later rather than earlier. Of course, there are plenty of unknowns here, including how well you and your DW (dear wife) are able to coordinate your planning (ie “stay on the same page”) - and to continue doing so through what might prove to be widely varying market conditions.
As you’ve explained it, this would garner a few additional (non-RMD) years on the “aggressive” side of the overall portfolio. Of course, a conversion of your own more aggressive holdings to a Roth would also be a way to protect them from RMD and would reduce overall the size of the Traditional IRA so that the RMD would be less in ensuing years.
There is a counter point however. With assets not subject to taxation (in particular the Roth) you own the asset 100%. On the contrary, if the asset is subject to taxation than the government is in effect part owner. Under certain conditions, you might deem it more prudent to take on more risk inside the part of the portfolio that’s subject to taxation - effectively allowing the government share a portion of that risk.

DW is five years younger and five years from her first RMD. We are buy and hold types and have an oversized Bucket 1. The thought of having to sell for RMD funding makes me cringe. It occurred to me that adjusting my DW’s assets for more growth investments and mine for more income makes sense as opposed to matching allocations. Am I crazy? Thanks in advance for your thoughts.

The venerable Art Cashin introduced me years ago to the concept of "an orderly sell-off."
That's what Monday's action looked like to me so I added to AAPL, AMZN and MSFT just prior to the close.
Ah, at least one other person saw it the same way and offered an interesting metric...
https://www.yahoo.com/finance/news/stocks-fall-options-traders-show-185553962.html
And OBTW, Monday's drop was not a stand alone event. It came on the heels of a coupla DOWN weeks and was highlighted by the S&P blowing through its 50-day MA. So yeah, of course as a LT investor I added on Monday.

I own it. Re-opened around 2008/2009 then it closed some years later. One of the few EM value style funds available besides Pzena, T Rowe and a couple of others.

Follow up to my previous post -
Fixed interest rate on Series EE bonds currently being issued is 0.10%. I would not bother with them, even though they are guaranteed to double in value in 20 yrs because one is locked in for 20 yrs or earn practically nothing if withdrawn sooner, including a one year lock up. It is scary to think the Govt economic projections lead them to the current pricing @ 0.10%. From TreasuryDirect -
"How does Treasury decide on the interest rate?
We determine the fixed interest rate for EE bonds by taking market yields and adjusting them to account for the value of components unique to savings bonds, including options that permit early redemption (redemption after the first 12 months) and tax deferral.
We do this twice a year: May 1 and November 1. The new fixed rate of interest then applies to all EE bonds bought in the following six months."
P.S.: An IBond with a principal of $10K purchased on May 1, 2004 has a current balance of $17.3K, after 17 years. That is, a 73% accrued interest (or increase balance) in 17 years.

Schwab Raises Fees for Buying Fidelity and Vanguard Funds
“After years of fee wars with other brokers, Charles Schwab is pushing back. Starting on Nov. 1, the cost for retail investors to buy Vanguard, Fidelity, and Dodge & Cox funds at the broker will rise from $49.95 to $74.95—a 50% increase. Similarly, at TD Ameritrade, which Schwab acquired in October 2020, prices for the same fund families will rise from $49.99 to $74.95 on Oct. 1.
“Schwab's stated reason for this shift is covering its record-keeping and other administrative costs. ‘The majority of mutual fund families pay Schwab/TD Ameritrade for necessary and important shareholder servicing expenses, but some do not,’ says Alison Wertheim, a representative for Schwab (ticker: SCHW), in an email. ‘We are applying this different amount on retail mutual fund purchases only for funds from which we do not receive shareholder servicing compensation in order to offset the expense we incur in providing shareholder servicing.’ But is it a coincidence that Schwab is raising prices on two fund families with brokerage divisions that are its biggest competitors and the source of the fee wars?”
Excellent article. Delves into the history of the fee price wars, some of the causes and motivational factors and makes some inferences about where things may be heading.
From: Barron’s - September 20, 2021
LINK (May require subscription to access complete article)

As an aside, I believe “bank loans” are ST, floating rate (secured?) loans given to companies that couldn’t float a regular bond/loan…NOT loans taken out by banks. Less interest rate risk, but more credit risk (which seems ok at this point in economic cycle)

*snip*
In his previous interviews he mentioned that bank loans (or floating rate bonds) are attractive because of their high yield (3%) and short duration (1-2 years). Even though bank loans are rated junk, they are safer because they are high in capital structure in case of the banks defaulting on the loans. Also he mentioned that utilities are attractive and stable while offer 3-4% yield.