Reply to @scott:
Hi Scott,
I am old enough to remember my parents saving paper to later sell, and an unmarried uncle who shared our apartment bringing bags of groceries home as partial payment for work at the Civilian Conservation Corp during the great depression. I remember the lows and highs of World War II, the oil shortage scares, the corruptions within the political, financial, and business communities, and a host of other disruptive events that threatened, in some instances, the mythical American way of life. We survived them all.
Although I do not look at the world through a rose colored prism (I’m an engineer by training and practice and always searched for failure mechanisms and pathways), I am optimistic about our resiliency in responding to complex, unexpected events that potentially could have a major impact on out Nation (like a Black Swan). History has established that our resiliency is a part of our National DNA. History matters.
It is not wise to discard history to project likely responses and baseline outcomes. Chaos Theory demonstrates that scale free events, while not entirely repeatable, do behave in patterns and generate results that are bounded. Chaos is not random. We can use history to identify likely boundaries, although there can never be absolute guarantees.
Based on our history, it is reasonable to postulate a 1 % population growth rate, a 2 % individual productivity gain, a 2 % real GDP growth rate increase, a 3 % inflation rate, and Flack taking some contrary position to challenge my postings. These long established trendlines can serve as a guide when making equity market projections.
As a zero order estimate, it is reasonable to estimate a 10 % equity portfolio annual return knowing absolutely nothing else. A 50/50 equity/bond mix should generate a 7.5 % annual return over the long term. These are ground level estimates for the totally amateur investor.
It is easy to make a first order correction to the zero order estimate by using a simplistic method that John Bogle proposed in his “Common Sense on Mutual Funds” book.
Bogle shows that returns over a timeframe like 10 years can be approximated with a three component model: (1) market dividend yield, (2) projected corporate profit growth rate, and (3) changes to the Price-to-Earnings (P/E) ratio. The first two terms are fundamentally based and rather easy to predict; the third term is speculative in nature and a devil to guesstimate.
Using the Bogle formulation allows an investor to refine his market forecasts based on current economic and market pricing conditions. Considering our current economic doldrums, our muted likely GDP growth rate, our modest P/E ratio, and the fact that we are entering the fourth year of the Presidential election cycle, I anticipate equity returns this year to be slightly below the historical know-nothing average. Note that I am using historical data sets to baseline my estimates and I adjust these to accommodate current condition assessments.
I do not understand why you find this type of forecasting so devoid of merit. Are there more sophisticated methods that might improve the prediction? Sure – all models are only approximations and never perfect. But any use of history helps to construct a baseline that, at the very least, reflects boundaries tied to past performance.
What other data sets are available to drive whatever model an investor favors? It is not reasonable to climb into a commercial jet airliner and expect to travel from New York to Los Angeles in one-half an hour. That might happen in the future, but not tomorrow, not next year, and not in 10 years. Historical data informs a performance expectation standard.
I appreciate your anxiety level and distress given the way our Nation has been gravitating. I too am not comfortable with our trajectory. But we live in a complex, interactive world that has dampening feedback loops and Small World connectivity. The speed of our communication links might actually function to alleviate our current dilemma.
We have been menaced by far greater challenges in the past and have team worked to defeat those challenges. Our DNA has not mutated. Remember what Bernard Baruch said: “There are no Bears living on Park Avenue”. Stay the course.
Best Wishes.
MJG

Howdy,
Damn, couldn't resist. Been talking about this for some 20 years.
Scott really targeted some of the drawbacks with the 'buy and die' approach to investing. And mind you, there are simply some drawbacks to what is absolutely correct about investing. Time IN the market is paramount.
Now let's qualify this. The market has returned some 10% over the long run. Ok. Fine. What is the long run? I've seen many stats going back to before the Crash of '29 and I believe them. A couple of issues are how long is the long term for you and I as investors AND does the market diverge from equilibrium and for how long?
How long are we invested for? Geez, for most of us, I'd guess 20 years on average. But use 15 or 30 if you will -- it's still a much shorter period than 75+ years. Your 'long term' investment horizon can also be truncated if you have to make any withdrawals from the investment. This could simply be due to age and personal financial plans. You save and invest and then you retire and start to draw it down. Sorry, but his changes the definition of long term. This happened to wifey with a rollover IRA invested 1/1/2000 at vanguard and very conservatively. SEPP withdrawals per IRS formula early at age 50. dot.com meltdown. Account that was supposed to last throughout retirement will run dry at age 63.5. Long term in the stock market was not sufficiently long term to recover from the market reversal on an account with withdrawals. Parallel acct at price was untouched and not only recovered, but has grown substantially while still invested conservatively.
Does this prove that long term investing - mostly static - is the best way to invest? Sure. For the vast majority of people, it's wisest. Most people don't have the time, expertise, nor savy to actively play the market. Note that I say actively play the market rather than 'time the market'. If you define time the market by anticipating what it is going to do tomorrow . . . you're either crazy, on drugs or one of a very few particularly gifted individuals. This type of market timing is sheer idiocy.
How about actively investing? Alas, most of the B&D crowd look askance at anything more than rebalancing as market timing. That's too bad and so myopic.
And that leads to the second issue and that's short term divergences in the market and its various sectors, segments, and regions from equilibrium. One sector doing great while others are down. Some of these can last for years. Geez, the gold bull market has diverged since 2001. These anomolies can be identified and played by actively investing. I call it momentum investing and don't take it to an extreme. I maintain about 75% of my portfolios invested statically. I don't mess with it and it's fairly conservative for a 63 yo. The other 25% I use to overweight trending sectors. Some are going to say that's market timing. feh. So be it. However, the difference I see is that I do not anticipate what will happen tomorrow unless it's already doing it today. If a sector has been outperforming the overall market for a few months I can slowly scale into my target investment insuring that it continues to outperform. So long as it does, I continue to increase my play. When it stops out performing and begins to retreat to the mean, I scale back out. Sure, you need to watch for changes and, but if you pick some long running trend, you can easily overweight it a bit and juice your returns. And you can do it without riding the train back down the mountain - if you pay attention and heed your stops.
And I'm ok if you want to lable me a market timer.
peace,
rono

Reply to @MaxBialystock: The difference with Marketfield is that the fund isn't quite as strict with the "short" part of long/short and attempts to be more flexible, dialing up/down long and short exposure as it sees fit. The fund also makes sizable macro calls. It's a pretty unique fund in the long/short space.
Definitely do your own research, but if you want to consider including alternative strategies, it is worth a look.
_______________________________________________________
From a Marketwatch article on the fund:
http://www.marketwatch.com/story/flexibility-is-key-for-marketfield-fund-2011-10-25
"Michael Aronstein's Marketfield fund has one big advantage many other mutual funds don't: flexibility.
Aronstein's $764-million fund has a broad mandate, allowing it to go long and short stocks, invest across different sectors and countries, even buy and sell futures and commodities.
"It's basically a hedge fund in a mutual-fund package," Aronstein said. "We have the flexibility to go pretty much to any asset category, either long or short."
_______________________________________________________
The strategy portion of the fund's prospectus:
"To achieve the Fund's investment objective, the Adviser will allocate the Fund's
assets among investments in equity securities,fixed-income securities and other
investment companies, including exchange-traded funds ("ETFs"), in proportions
consistent with the Adviser's evaluation of their expected risks and returns.
In making these allocations, the Adviser considers various factors, including
macroeconomic conditions, corporate earnings at a macroeconomic level, anticipated
inflation and interest rates, consumer risk and its perception of the outlook of
the capital markets as a whole. A macroeconomic strategy focuses on broad trends
and is generally distinguished from a strategy that focuses on the prospects of
particular companies or issuers. The Adviser may allocate the Fund's investments
between equity and fixed-income securities at its discretion, without limitation.
The Fund's investments in fixed-income securities normally consist of investment
grade corporate bonds and debentures, mortgage-backed and asset-backed
securities, United States Treasury obligations, municipal securities,
obligations issued by the U.S. Government and its agencies or instrumentalities
and convertible securities. The Fund may also invest in zero-coupon bonds,
without limitation. In addition, the Fund may invest up to 30% of its net assets
in high-yield fixed-income securities commonly referred to as "junk bonds." The
fixed-income securities in which the Fund invests may have maturities of any
length and may have variable and floating interest rates.
The Fund's equity securities investments may include common and preferred stocks
of U.S. companies of any size. In addition, the Fund may invest up to 50% of its
net assets in equity or fixed-income options, futures contracts and convertible
securities and may invest up to 30% of its net assets in swap agreements.
Additionally, with respect to 50% of the Fund's net assets, the Fund may engage
in short sales of index-related and other equity securities to reduce its equity
exposure or to profit from an anticipated decline in the price of the securities
sold short.
The Fund may invest up to 50% of its net assets in equity securities of foreign
companies of any size, including up to 35% of its net assets in securities
issued by corporations or governments located in developing or emerging
markets. The Fund's investments in foreign securities may include, but are not
limited to, American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs"), including up to 35% of its net
assets in securities issued by corporations or governments located in developing
or emerging markets.
The Fund may borrow money from banks or other financial institutions to purchase
securities, which is commonly known as "leveraging," in an amount not to exceed
one-third of its total assets, as permitted by the Investment Company Act of
1940, as amended (the "1940 Act"), and may also engage in securities lending to
earn income.
Security selection for the Fund is driven by the Adviser's top-down analysis of
economic issues, investor sentiment and investment flows. Once the Adviser has
identified a theme that either benefits or disadvantages a specific sector or
country, it seeks to implement an investment strategy that is appropriate for
the Fund. In some cases, the Adviser utilizes a sector- or country-specific ETF
that offers exposure to a broad range of securities. In other situations, the
Adviser may select a single issue that is perceived to be particularly germane
to a specific concern or a small group of issues with characteristics that match
the goal of creating portfolio exposure to a macroeconomic theme."

http://www.sec.gov/Archives/edgar/data/89043/000091957412000036/d1255448_497.htm
The following is added as the first paragraph under "PURCHASE AND SALE OF SHARES – How to Buy Shares" in the Fund's Prospectus:
Effective January 9, 2012, the Fund will be closed to new investors seeking to purchase Fund shares indirectly through financial intermediaries and other financial services organizations. In addition, transfers of one share held by an existing shareholder to any such new investor will not be permitted. Subject to its right to reject any order to purchase Fund shares or to withdraw the offering of Fund shares at any time, the Fund will remain open to new investors seeking to purchase shares directly from the Fund through its transfer agent and to existing shareholders, including those holding Fund shares through financial intermediaries and other financial services organizations.
The following is added after the third paragraph under "PURCHASE AND SALE OF SHARES – How to Buy Shares" in the Fund's Prospectus:
Limitations or Restrictions on Purchases of Fund Shares
The Fund may impose limitations or restrictions on purchases of Fund shares periodically to protect the implementation of the Fund's investment strategy or objective. When Fund assets reach a level at which additional inflows can be invested without impairing the implementation of the Fund's investment strategy or objective, the Fund may remove an existing limitation or restriction on purchases of Fund shares.
When the Fund imposes a limitation or restriction on purchases of Fund shares or modifies a limitation or restriction, the Fund will post information concerning the limitation or restriction or modification on its website at www.sequoiafund.com. Investors may request information about any limitation or restriction by calling the Fund at 800-686-6884.
The Fund retains the right to make exceptions to any limitation or restriction on purchases of Fund shares.
The SAI provides more information about why and when the Fund may impose limitations or restrictions on purchases of Fund shares.

Reply to @AndyJ: Just a note to thank you again for mentioning the Yahoo site to set up Portfolios. I added one there... nice and quick, easy to use, with quite a bit of info not in M* options. It's too bad Yahoo does not allow for auto updating on dividends like M* does, but I'm happy with the new access.
P.S. I just saw a questionnaire asking with what people manage their portfolios... options were: my broker's site, MSN Money, Google Docs, Google Finance, FT.com, Cake Financial and Yahoo Finance. I've never heard of a couple of these so will check them out. (Interesting that the Yahoo questionnaire didn't mention M* as one of the options).

Is there any way for a retail investor to invest in this fund? My understanding is you can only purchase it through an financial adviser.

And here's a note on the investment process:
"Adviser’s Philosophy
Seafarer believes that disciplined active management, applied over a long-term horizon, can enhance investment performance and mitigate portfolio volatility.
Seafarer believes that structural inefficiencies exist within the financial markets of most developing countries. These inefficiencies can give rise to persistent mispricing of individual securities. Such inefficiencies may result from pronounced fluctuations in liquidity conditions, which can distort valuations; alternatively, they may arise from information asymmetries, where market participants misjudge the quality and growth prospects of a given business.
Seafarer further believes that most benchmark indices used to measure the performance of developing markets may incorporate certain shortcomings or biases. These biases mean that popular benchmarks may not fully represent the underlying economic and financial activity that they are supposed to track.
Seafarer thinks the presence of these two anomalies – mispriced individual securities, and benchmarks that incorporate biases – may provide an opportunity to enhance long-term investment performance for the benefit of shareholders.
In order to construct investment strategies, Seafarer typically follows two steps: first, Seafarer seeks to identify and invest in those companies capable of generating sustained growth, but whose prospects have not been widely appreciated by financial markets. Second, Seafarer aims to build diversified and low-turnover portfolios that emulate the characteristics of a reasonable index – one that represents underlying economic activity in global developing markets, and which avoids the biases and shortcomings that Seafarer believes are inherent to standard benchmarks in the developing world.
Seafarer believes that fundamental research on individual companies can provide the means to capitalize on persistent inefficiencies in financial markets. Seafarer constructs portfolios from the “bottom up,” meaning that it selects individual securities based on their specific merits.
Seafarer believes its process is best suited to a long-term investment horizon. Seafarer avoids chasing short-term investment themes or trying to time markets.
Seafarer’s objective is to provide investment strategies that offer sustainable growth, reasonable income, suitable diversification and dampened volatility."

There are some documents in the SEC's Edgar database that look like a draft of the prospectus. Link here:
http://www.sec.gov/Archives/edgar/data/915802/000119312511311116/d254427d485apos.htm
Looks like the fund will have Investor and Institutional fund clases with a expense ratios of 1.6% and 1.45%, respectively.
There was also more details on the strategy of the fund (posted bellow). Looks interesting...
"Principal Investment Strategies of the Fund
Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its total net assets in dividend-paying common stocks, preferred stocks, convertible securities and debt obligations of foreign companies.
The Fund may invest a significant amount of its net assets (50% to 80% under normal market conditions, measured at the time of purchase) in the securities of companies domiciled in developing countries. The Fund’s investment adviser, Seafarer Capital Partners, LLC (“Seafarer” or the “Adviser”), considers that most Central and South American, African, East and South Asian, and Eastern European nations are developing countries. Currently, these nations include, but are not limited to Brazil, Chile, China, Columbia, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, South Africa, South Korea, Sri Lanka, Taiwan, Thailand, Turkey and Vietnam.
Seafarer identifies developing countries based on its own analysis and measure of industrialization, economic growth, per capita income, and other factors; it may also consider classifications produced by the World Bank, the International Finance Corporation, the United Nations, and private financial services firms such as FTSE and MSCI.
The Fund may also invest a significant amount of its net assets (20% to 50% under normal market conditions, measured at the time of purchase) in the securities of companies domiciled in selected foreign developed nations, which in the Adviser’s opinion have significant economic and financial linkages to developing countries. Currently, these nations include Australia, Hong Kong, Ireland, Israel, Japan, New Zealand, the United Kingdom and Singapore.
The Adviser determines a company’s location based on a number of factors. A company is generally regarded by the Adviser as being located in a particular country if the company: (i) is organized under the laws of, maintains its principal place of business in, or has, as its principal trading market for the company’s securities, the particular country; (ii) derives 50% or more of its total revenue or profit from either goods or services produced or sales made in the particular country; or (iii) has more than 50% or more of its assets in the particular country.
Exposure to non-U.S. companies through the Fund’s investments in exchange-traded funds (“ETFs”), including ETFs organized under U.S. law, will be included in the Fund’s percentage of total net assets invested in non-U.S. securities.
The Fund may typically invest in convertible securities and debt obligations of any quality or duration. The Fund may generally invest in companies of any size or capitalization, including smaller companies.
The Fund attempts to offer investors a relatively stable means of participating in a portion of developing countries’ growth prospects, while providing some downside protection, in comparison to a portfolio that invests purely in the common stocks of developing countries. The strategy of owning convertible bonds and dividend-paying equities is intended to help the Fund meet its investment objective while reducing the volatility of the portfolio’s returns."

Reply to @catch22: You're right, Catch, I rarely get any financial news from the tv, so CNN was the first non-MSNBC channel I thought of.
Zack's/The Street/M*/S&P++ ratings are on the U.S. News site (example http://money.usnews.com/funds/mutual-funds/intermediate-term-bond/pimco-total-return-fund/pttax), but interesting that some fund searches directly from the Home Page don't show this added information.

Morn'in Coffee, (probably not enough)
As noted in David's January commentary, and expected; there are more than enough forecasts for the 2012 markets. Before I go any further in this note; I will mention that one filter one may attempt to use for any and all verbal or written commentaries about investment market directions; is that there is and will remain a clash of equity and bond thinkers. Some are hard core to one side or the other; and both sides may profit based upon their skills, but there remain those who don't appear to choose to ever cross the road to the other side. Although many of these folks are well educated; and should have a complete understanding of both the equity and bond sectors; I attempt to find and/or filter a bias of their mind set to smooth their comments about why one should travel a particular investment sector for profit.
I note a recent, and likely a fairly common statement that the "market (equity) has no place to go, but up. Really? Says who? I wonder what these folks were writing between June of 2007 and October of 2008. 'Course, Morgan Stanley noted in the early part of 2010 that the 10 year Treasury would move to about 5.5%, if my recall is correct. Equities going up, bond prices going down. Hells bells, take your best guess, eh?
The Contrarian method has been noted over and over; being too many folks leaning to one side or the other. A coin toss may find one or the other side is correct. One can not dismiss that the big money will indeed move into what they perceive as an oversold area; if only to make a fast buck. Unfortunately, most of we individual investors need a bit longer time frame, vs one day; with which to attempt to position our portfolio for our own risk/reward factors.
What I attempt to understand may not be worth much in a short time frame (less than 6 months); but I use what time is available to find whether I may see any investment area being affected by "something". This lends more to what; at least for me, I may name as a "liberal arts" investor; trying to view various and sometimes unrelated areas in a broad spectrum, but may have the potential for cause and affect related to investments. I am comfortable with this method; although it is obvious that too much data from varying sources may cloud any given issue; but this is part of a most crucial circumstance of investing and this is doing one's best to understand who you are and how one reacts to, and takes actions from such information.
While looking around the broad spectrum of events and data..... I will note a few areas currently in view at this house.
---Employment: While it is easy to focus on those unemployed; one must also consider those still employed, eh? If 15% are unemployed and/or have stopped looking for work; do the remaining 85% have the ability or desire to continue to be consumers on a scale of past decades? How many employed at full time, minimum wage jobs will spend monies on other than the essentials of life. Full time, 2,080 hours/year at $7.25/hour is worth about $15,000 gross income per year.
---Unemployment: Reports indicate that some job areas are not being filled; as the skill set needed for some jobs, can not be readily matched. This is an ongoing social/educational/hedonistic problem and will not be fixed any time soon. Although always present in our society, there are many skilled folks who have "worked" outside of the normal workforce. I will presume this group has expanded and will continue to expand. I am not relating this to the drug trade or related; but those who do the side jobs and/or barter work in given communities. These individuals will generate and spend income into their communities, but will not be counted on tax rolls or other official data bases.
---Boomers: The massive flows of monies into investments during the past 30 years is no longer in place from this group. How well they have prepared themselves for retirement will have an impact on cash flows from investments; which will impact investors going forward. This group and their spending habits going forward will also impact our society in general; let alone the investment world in this country.
---Technology: While I read headline stories about many millions of dollars of investment into the auto industry in MI and elsewhere; the major of the monies will go towards technology and benefit only those involved with the technology. Very few "blue collar" jobs will be created; as in years past.
---Politics: U.S. politics in particular will likely remain in the cranial/rectal mode; with the exception of a most interesting period after the November, 2012 elections when the "lame duck" session of congress will be in place. I consider this period to also be a most dangerous legislative period. We will see, eh?
---War: Call them as you see them. Military intervention anywhere, in my opinion is making war. These wars will continue to draw upon monies of this country. The one bright spot, if one chooses to name it so; is that weapons exports are still a very large export of the U.S. You already know the list of hot spots that continue globally. What path is taken by this country; will impact some investment sectors, dependent upon the where and what.
---Asia: Too much to write about with this area; but China will likely continue to be picked upon for their currency policies from some in D.C. China may indeed manipulate in many areas. However, the finger pointing from some in this country will be nothing short of a deflection of fixing problems here. The big questions for those who choose to contact their faithful one's in D.C. are: Does the U.S. manipulate any internal or external monetary policies, and what would be the affect of prices upon one's budget....if China's currency were to become more valuable against the U.S. dollar. Let your D.C. person know that you expect truthful answers.
---Debt: Sure enough to go around for all, eh? Will all of the debt lead to more deleveraging by governments, financial institutions and consumers? I don't have that answer, but the question is worthy of observation going forward. Recent reports indicate that Euro banks who recently borrowed cheap money from the EuroCentralBank were expected to purchase some bonds issued by other EuroZone countries. Apparently, this has not yet happened. Their QE plan is on hold, at this time.
---Deleveraging: Consumer spending in this country was reportedly fairly strong in the holiday season. What will take place after the credit card bills arrive and due for payment will show its true face in the next quarter.
---Inflation: Inflation is still here in some areas. Social Security will place an extra 3.6% into payments beginning this month; and this is based upon the government CPI.
Well, not much noted to any extent; but my clock on the wall, states this is all, for now. If this house is lucky enough to be in the right places, at the right time with at least 50% of our portfolio, we will at least break even for 2012. The U.S. markets may be the best bet again this year. Watching the $Euro to find whether it continues downward; and its reflection upon our markets here. Mr. Bernanke likely will not allow or try to not allow much in the way of interest rate increases here; until he is fully satisfied that normal market forces, including the consumer have taken hold into a very positive GDP related mode.
What is Contrarian today? I sure don't know that this "feel" has as much meaning as it may have had 5 years ago; not unlike a steep yield curve may point to a going ecomomy. The 30 year bond bull market is reportedly upon it's death bed.....I will watch and wait. Perhaps when the bond traders and others are finished with helping Europe gets its act in order; that they will arrive in this country to help those in D.C. discover how much fun may be had with a 7% yield on our 10 year Treasury.
Surely missed something I thought I might write, but this is it.
Take care,
Catch

http://www.financial-planning.com/news/three-mutual-funds-to-watch-next-year-2676645-1.html
bond funds that cuold defy gravity again in 2012
http://www.marketwatch.com/story/bond-mutual-funds-could-defy-gravity-again-in-2012-2011-12-30
feeling nervous? try a conservative portfolio
http://www.usatoday.com/money/perfi/columnist/waggon/story/2011-12-29/investing-consider-a-conservative-fund/52275066/1

MEURX.
European fund (unlike the alternatives you listed), currently only 10% in financials (vs. the typical 16 1/2 percent). Pretty low turnover. What I've never liked about it is that it almost always hedges (though in the short term that could prove beneficial).
There are only about 27 European funds in M*'s database, once you eliminate the single country funds (Russia, UK), and the regional funds (emerging Europe, Nordic, eastern Europe). Of these, MEURX has the 7th smallest exposure to financials.
You might also look at HFEAX - it's available NTF/NL at Schwab. Even lower financial exposure (6.7%) than MEURX, a somewhat lower (but still rich) yield, expenses almost 50% higher, and it's a fund I have not looked into so I can't tell you more. Given that is has a 67% turnover, you need to check into its strategy: just because it currently doesn't own many financials doesn't mean that a year from now that will be true, with most of its portfolio replaced (unlike MEURX).
Finally, you could look at a FTSE 100 index fund. There's an iShares ETF (ISF) sold on the London exchange, so if you've got access to foreign exchanges, you might be able to purchase it that way (though it's not registered for sale to US citizens).
(Note also, VGK is not "like" VEURX, it is the same fund, just as VEUSX (Admiral shares) is also the same fund.)

best bet for 2012
http://www.onwallstreet.com/ows_issues/2011_12/best-bets-for-2012-2676014-1.html?ET=onwallstreet:e5236:2131761a:&st=email&utm_source=editorial&utm_medium=email&utm_campaign=OWS_Daily__122711
yes you guessed it - EM, energy, tech could be major players
rbc wealth financial weekly commentary
Market Week: December 27, 2011
The Markets
In-the-black Friday: Buoyed by good economic data and congressional reconciliation over extension of the payroll tax cut, the Standard & Poor's 500 headed into the Christmas weekend with a gift for investors--its return to positive territory for the year. That left only four trading days in 2011 for the Nasdaq and Russell 2000 to try to catch up as the Dow continued to dominate 2011. The Nasdaq was only 1.3% away from breaking even for the year, but the Russell 2000 was still almost 5% from doing the same. And despite a relatively benign week, the Global Dow would need to gain more than twice as much in four days as it did during the entire first quarter to have a positive year.
Market/Index 2010 Close Prior Week As of 12/23 Week Change YTD Change
DJIA 11577.51 11866.39 12294.00 3.60% 6.19%
Nasdaq 2652.87 2555.33 2618.64 2.48% -1.29%
S&P 500 1257.64 1219.66 1265.33 3.74% .61%
Russell 2000 783.65 722.05 747.98 3.59% -4.55%
Global Dow 2087.44 1751.60 1803.20 2.95% -13.62%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 3.30% 1.86% 2.03% 17 bps 127 bps
Last Week's Headlines
Housing starts shot up 9.3% in November, driven largely by construction of multifamily units, while building permits (an indicator of future construction) were up 5.7%. The Commerce Department said that housing starts were up 24.3% compared to last November.
The U.S. economy grew more slowly during the third quarter than previously estimated by the Commerce Department. The final 1.8% growth rate represented a downward revision from the 2.5% and 2% of the first two estimates, but was still higher than Q2's 1.3%. Corporate profits rose at a slower pace than in Q2; they were up $32.5 billion compared to $61.2 billion in the second quarter, while after-tax profits were up $41.6 billion.
New home sales rose 1.6% in November; that's 9.8% ahead of the same time last year, according to the Commerce Department. Meanwhile, the National Association of Realtors® said home resales were up 4%, which put them 12.2% above last November.
There were reassuring signs out of Europe as a successful auction of short-term Spanish sovereign debt cut the yield on three- and six-month bills by more than half. Also, the European Central Bank allowed 523 European banks to borrow a total of €489 billion in three-year loans to refinance debt.
The Bureau of Labor Statistics said 43 states had lower unemployment rates in November, while three states (Wisconsin, Minnesota, and Colorado) saw unemployment rise and four others remained the same. The West continued to have the highest regional unemployment rate (9.9%) while the Northeast had the lowest (7.9%).
American incomes were up 0.1% in November, according to the Commerce Department. However, the extra money promptly went out the door, as consumer spending also was up 0.1%.
The Federal Reserve Board proposed new regulations designed to help prevent a repeat of the 2008 financial crisis. The rules, which would apply to banks with more than $50 billion in assets and other systemically important financial companies, would require annual stress tests, prevent the largest banks from investing more than 10% of their capital in another systemically important bank, limit debt-to-equity ratios and credit exposure to a single company, and increase capital requirements in some cases.
The Supreme Court set a three-day session March 26-28 to hear arguments in the 26-state legal challenge to the Patient Protection and Affordable Care Act (the health-care reform legislation passed in 2010).
The Conference Board's index of leading economic indicators was up 0.5% in November. Seven of the index's ten indicators showed improvement, led by interest rate spreads and housing permits.
Durable goods orders were up 3.8% in November. However, the Commerce Department said if orders for defense and transportation-related equipment such as aircraft parts are excluded, orders actually fell 1.2%.
Congress gave taxpayers at least a temporary reprieve from higher taxes by approving a two-month extension of a payroll tax cut that had been scheduled to expire January 1.
Eye on the Week Ahead
The holiday-shortened week is the last opportunity for institutional investors to window-dress their portfolios before leaving a tumultuous year behind.
Key dates and data releases: home prices, consumer confidence (12/27); pending home sales (12/29).

Wolfgang,
You may want to get a copy of this book. I know Doug from another forum and he has put together a most execellent book for Military folks who are retiring:
http://www.amazon.com/Military-Financial-Independence-Retirement-ebook/dp/B005AU15EU
You can even order it through this site, and MFO will receive credit for your purchase.

Hi Maurice and Anna,
Mr. Bond here, "Catch said jokingly." Well, this is currently the "house of bonds".
I do recall a similar question in the late summer; and I noted, not yet; if my recall is correct.
We still hold direct TIPS funds, and more are within our numerous bond funds, too
One would discover than many of the investment grade bond funds this year may tip their hat to the TIPS holdings for the YTD returns.
Personally, I don't find too much real happy in the equity area as has been related to the ongoing problems discussed here on a regular basis.
Anna's point is probably the best consideration. If you took your profits only off of the table from VIPIX; where to put the monies.
Your portfolio mix will have to be your guide, based upon your preference. If VIPIX is 20% of your portfolio, then other considerations would be in place, eh?
The most recent TIPS auctions were well subscribed (plenty of buyers). I don't recall which duration, but one series of auctions resulted in a -.87% yield.
Not unlike many other IG bond areas this year.......when folks what them, the yields continue lower and the prices higher. I have no regard at this time how low the yields go; 'cause the money is in the price increases....at least at this time.
Could any of this run in all types of bonds start to go the other way? We know that day may come............but, how far away may that day be? 6 months; 1, 2, 3 years.
Any kind of magic may evolve to help the financial healing; but until there is clearer sign of that; our house will remain in the "bond box".
So, this house will hold tips until the area appears to sour and there is a better place for the money; at least in the eyes of this house.
If the linker here is working again, you may check these periodically and/or also using Falcon's Eye at this site. There are different maturity periods:
STPZ
LTPZ
TIP
Regards,
Catch

http://www.sec.gov/Archives/edgar/data/826732/000119312511347036/d269846d497.htm
Calamos Growth and Income Fund and Calamos Global Growth and Income Fund
Effective on the close of business January 20, 2012 (the “Closing Date”), Calamos Growth and Income Fund and Calamos Global Growth and Income Fund (each a “Fund”) is closed to new investors. Current investors in each Fund as of the Closing Date may continue to invest in their respective Fund, as well as reinvest any dividends or capital gains distributions. However, once an account is closed, additional investments in a Fund will not be accepted.
Each Fund has limited sales of its shares because Calamos Advisors, the Fund’s adviser, believes continued sales, without restriction, may adversely affect the Fund’s ability to achieve its investment objective. Sales of Fund shares to new investors will generally be discontinued as of close of business on the Closing Date, and financial intermediaries may not open new accounts with each Fund or add new investors to existing omnibus accounts after that time. You may be required to demonstrate eligibility to purchase shares of a Fund before your investment is accepted. If you are a current Fund shareholder and close an existing Fund account, you will not be able to make subsequent investments in the Fund. Each Fund may resume unrestricted sales of its shares at some future date, but neither Fund presently has an intention to do so.
Additional purchases of shares of each Fund will be permitted in the following instances:
(i) Acceptance of reinvestment of dividends and capital gain distributions on Fund shares.
(ii) Existing shareholders that have a position in the Fund may continue to add additional shares to their existing accounts.
(iii) Existing shareholders that have a position in each Fund may exchange shares of other funds in the Calamos Family of Funds for shares of each Fund.
(iv) Discretionary investment advisers may continue to invest in each Fund through an existing account at a financial institution and/or intermediary on behalf of clients who are current Fund shareholders.
(v) With Fund approval, all or a portion of the shares held in a closed Fund account may be reallocated to a different form of ownership.
(vi) In the case of certain mergers or reorganizations, retirement plans may be able to add the closed Funds as an investment option and sponsors of certain wrap programs with existing accounts in a Fund would be able to continue to invest in the Fund on behalf of new customers.
(vii) New and additional investments made through platform-level asset allocation models within mutual fund wrap and fee-based programs.
(viii) Direct clients of Calamos Advisors, or any affiliate, may open new accounts in each Fund.
(ix) Existing and new participants in employer-sponsored retirement plans, including employees of Calamos Advisors LLC, each Fund’s investment adviser, and any of its affiliates, and qualified defined contribution retirement plans, such as a 401(k) plan, profit sharing plan, 403(b) plan or 457 plan, that offer the closed Funds as an investment option as of the Closing Date may direct contributions to the Fund through their plan, regardless of whether the participant invested in the Fund prior to its closing.
(x) Upon prior approval, employees of Calamos Advisors and its affiliates may open new accounts in the closed Funds; Trustees of the Calamos Funds and directors of Calamos Asset Management, Inc. may also open new accounts in the closed Funds.
MFSPT3 12/11
--------------------------------------------------------------------------------
Each Fund reserves the right to modify the extent to which sales of shares are limited and may, in its sole discretion, permit purchases of shares where, in the judgment of management, such purchases do not have a detrimental effect on the portfolio management of the Fund or its Shareholders. Notwithstanding the forgoing, each Fund continues to reserve the right to reject any order for the purchase of shares in whole or in part for any reason, and to suspend the sale of shares to the public in response to conditions in the securities markets or otherwise.
Please retain this supplement for future reference.
2

First, clarification - the article (another Chuck Jaffe entertainment piece) is a criticism of Alliance Bernstein target date funds (as being poor choices within the target date universe). It's not a criticism (or even a critique) of target date funds in general.
As usual, he is selective in his quotes. Where it suits his purpose to quote M*, he does so. But when he wants to denigrate A-B for including more than stocks and bonds in their funds, he eschews M*. Because that would undercut his criticism:
"'The mainstream approach is a little bit of TIPS, a little commodity exposure and some real estate,' [Morningstar senior mutual fund analyst] Charlson says."
From: Anti-Inflation Tactics Vary in Target Funds by the Editors of Dow Jones Newswires.
Next - as to target date funds in general. I agree with Mike that for most people these are good options. Though it may seem counterintuitive, a problem is that these funds are underutilized. The idea of these funds is that they allocate your portfolio for you. If they only represent a small portion of your portfolio, then they're just messing with the allocation that you're managing on your own, and making it harder for you to get the allocation you want.
It's like saying: right now, I want a 60/40 mix, but I've got 25% of my portfolio in a target date fund that's 70/30. What do I need to do with the other 75% of my portfolio to get my target mix? Next year, I'll want to keep that 60/40, but the target fund will have slipped to 65/35. How do I need to rebalance my portfolio? And so on. What's the point? If you like the glide path of the target fund, use it; if not, then it's only getting in your way.
As to the usefulness of these glide paths - here's an interesting study from the Journal of Financial Planning, Asset Allocation for Retirement: Simple Heuristics and Target-Date Funds. They studied different products and examined their theoretical performance over rolling 40 year periods. They found that (as John suggested) a 100% equity approach until about 10 years to retirement works best, but is not without risks. That the target date funds do a pretty good job as well, but are not that much better than the 120-age heuristic. That you need to keep people's behavior in mind (e.g. they cite a study showing that many people, faced with n funds to choose from in a plan, simply allocate 1/n to each of them, even if most of the funds are all, say, large cap domestic stock).
I've skimmed it; haven't read it through carefully yet. Much more interesting grist than Jaffe (who nevertheless has his entertainment value).

Reply to @scott: I can't seem to include the entire reply in one, so part two:
That's not even taking into account what I believe are other issues with agriculture (less agricultural land available vs continually rising populations, etc.) I also believe in strategic/productive infrastructure to some degree. As I've noted in other threads, I'd like to see PPP (Public Private Partnership) investments as a bigger asset class in the US in a manner similar to the direct infrastructure investments available in other countries (see John Laing Infrastructure on the London Market which I think pays something on the order of 6%, and Brookfield Infrastructure in the US has a little of this - that pays 5.5% or so.)
"I said that demand for JGB’s appears to be unlimited, i.e., on the part of the Japanese public that buys 95% of them and which see these bonds as being THE quintessential investment vehicle."
First, I hate calling anything investment-wise a "quintessential" vehicle; that could last for years and change within a month. Again, I dislike coasting on a perception of safety (both from the standpoint of an investor and the actions of the entity itself), especially in this day and age.
I think it's an interesting study regarding the willingness of the Japanese to invest in their country; in a way, it's an impressive example of nationalistic pride. On the other hand, does it make Japan overly reliant upon a buyer that, through changes in demographics or any number of other issues, will not always be there to the necessary degree? I don't know, but I'll continue to say that both the situation does not appear sustainable and that it could go on longer than I could imagine but that doesn't make it right or sustainable or worth consideration as an investment. In terms of them offering a gold coin, I believe any added benefits to bond holders should not be tangible. Offering gifts sets a precedent.
"I’m not aware that any members of Congress, the Executive or the Federal Reserve have ever argued that government spending should be unlimited! Clearly, that would unleash rampant inflation and violate the legal objectives I mentioned. No one, as far as I know, argues that because the government CAN spend without restraint, it SHOULD."
There's degrees of lack of restraint - and again, I think you've seen a steady slide into spending with an increasing lack of accountability or focus in recent years. It's not spending without any restraint whatsoever, but it's a matter of spending with less and less in the way of checks and balances and diminishing results in terms of the nation's overall progress. I realize that this is entirely debatable, but it's the way that I see it: I continue to see the country spending money without a great deal of progress for the nation as a whole, and little in the way of tangible improvements.
"I’m not sure why you’re focusing on this. Isn’t this simply a fact? "
I suppose it's stating that without any statement of the potential consequence. Stating that the government "could spend any amount of money that it wants" without any sense of the consequences of that is concerning. In theory, it could, but the consequences could very well be a disaster. I think there's the concern regarding confidence in currency from a number of board members (which and in terms of M1, does this chart not at all seem concerning?
http://research.stlouisfed.org/fred2/series/M1
Again, unsustainable situations can go on longer than anyone can possibility believe (the market can be irrational longer than you can stay solvent, yadda yadda yadda), but while a logically unsustainable situation that continues to pile on further can go on for longer than anyone can believe, eventually it corrects and it tends to correct suddenly and rapidly and in a manner that isn't orderly. Confidence in a currency or other financial asset or institution can happen very suddenly and to deny the history - and not to learn those lessons - is unfortunate, and those incidents are going to play out again; it's very clearly evident to me that much of what caused 2008 really wasn't learned from or fixed, largely because rather than a gradual rehab (which isn't illogical after the worst financial crisis in decades), we wanted to reboot to a few years prior as fast as possible. The former would have lead to a more sustainable result, the latter was more popular and comfortable. Even governments can't continually avoid their problems by spending money - if they could, I tend to think history would be rather different.
"As you point out, the Fed must look at the relevant fundamentals when carrying out monetary policy."
I believe there's a lack of trust in the ability of the Fed to do that and/or whose interest they are acting in.
"Don't we need an objective criterion for judging what constitutes appropriate expansion? "
Okay. Whose criterion would you like to use?
"Effectively, we bond and cash holders are all being taxed in order to subsidize the big lenders and keep them afloat. As much as that outcome makes me mad."
You say it makes you mad, but your philosophies - in my opinion - are also in a way encouraging it to continue.
Maurice said: " . . . by keeping interest rates below where the markets would price them, they are already breaking promises to owners of Treasuries in terms of yield."
I don't know if there's any promises, but it's an unfortunate reality and really, only adds to problems with a portion of the population that is seeing higher expenses (especially medical.)
"(Fundamentals matter, both for fiscal and monetary policy.)"
In theory. In reality, I tend to think that it's increasingly less of a primary concern - or least the fundamentals of the broader economy are at least much less of a concern.
"Maurice said: For you and Washington to say that the US can expand the currency without regard to fundamentals (the result of inflation or even hyperinflation), is without precedent in the history of currency."
You may not have said that, but I think that's what some people are taking from some of your statements, which (again, my opinion) seem to take a very pro-spending, pro-aggressive monetary policy stance. Again, saying something like this: "The US government can spend any amount of money that it wants, in reality" while true in theory without a discussion of the realities that that could bring leads one to believe that you are favor of that reality, at least *to some degree*. Again, while maybe not true, that's how it comes off (to me, and maybe to others.)
"Considering how low interest rates are on US bonds, I guess I'm just amazed at how amazingly strong confidence is in the US dollar. "
Money slushing around has to go somewhere. I've said previously that the currency markets seem like a futile game of musical chairs; there's no long-term safe haven and while the dollar is currently less the focus of attention due to European issues, that could change next week.
You have a large portion of the population that has taken money out of stock mutual funds and run to what they believe is the safer harbor of fixed income funds. You have foreign fixed income markets that do not appear large enough to withstand demand (there was a great story about emerging market bond demand versus the size of the market earlier this year, and how that lead to trouble when the asset class started to sell off; I wish I could find that.) In present day, people run to the liquidity and size of the US treasury market. How much of this is confidence and how much of it is repetitive response to trouble? How much of this is any number of behind-the-scenes reasonings that none of us are aware of (including Rickards' theory that banks are now captive buyers, which, admittedly is just a theory, but an interesting one) or attempted financial repression? How much of it is an older generation not pleased with the economy and not willing to take the risks in retirement and moving - for better or worse - to fixed income rather than stocks? There's so many elements and varied reasoning.
I think there's a lot to more to it than, "well, there's still demand so everything must be okay." Additionally, that belief - if it ain't broke in outside appearance, don't fix it - is concerning on a number of levels. Coasting on what remains of faith in our economy and resting on the idea of "well, what else is there?" is a dangerous concept and heck, there probably won't be another option for a while, but rather than coast on the status quo, I'd rather see us be more of an example and set forth a sustainable path rather than push others to start seeking alternatives - which isn't going to happen overnight, but it is clearly the longer-term goal of some nations. If that becomes the desired end result, it isn't going to be announced in advance. I'm sure that some will dismiss the idea that there are attempts by some nations to seek alternatives (which again, goes on the idea that if the current status seems okay, why would anyone change?), and that would be to choose to ignore the evidence to the contrary, which is fine.
"The only way the US could ever default would be if Congress voted to stop honoring US bonds."
That would make for some interesting foreign relations.
Additionally, it's early, so there may be an incomplete thought or two here. I'll read over it again later.

I'll continue to believe that governments should not *start* offering "thank you"s to bond buyers, whether it be out of desperation or otherwise or whatever one would like to believe about the state of the government's finances.
"But it's precisely because of that belief that I think we should not promote those who preach the quasi-religious doctrine that there is one, and only one, such safe harbor: gold."
Those who seem continually dismiss anything and everything related to gold as some sort of "wild conspiracy theory" and who stand on the opposite side of the fence seem awfully fanatical about their own beliefs in regards to monetary policy - so much so that I don't know why anyone should be worried, because from the sounds of it, these beliefs seem like foolproof solutions and our government is exceptional at effectively spending money in a manner that's productive and not at all waste or malinvestment or funneled to cronies or special interests. So, spend away. Extremely loose monetary policy for as far as the eye can see will not only get everything going again, but apparently has no negative consequences whatsoever (and has always, ALWAYS ended well in the past - right?)
I've discussed my philosophies regarding inflation and the belief that hard assets (not only gold, but also more importantly basic needs/strategic assets - energy, agriculture, even infrastructure) will do well over the coming 5-10 years.
I'm displeased with the views of some in regards to loose monetary policy and spending, but that's fine - that's their view and we can just keep passing the bill to future generations and kicking the can. Don't be surprised if the end result is still a decrease in the standard of living in this country.
A path that would appear unsustainable can go on for longer than anyone could possibly imagine, but continuing down an unsustainable path doesn't make it okay or acceptable - it often only makes the end result that much worse. As long as the situation proceeds along status quo in appearance, nothing is changed with a look towards long-term improvement and sustainability - if it doesn't appear broke now, why fix it?
Then it hits the wall and everyone hollers, "No one could have ever seen it coming!" (although the IMF/Japan articles are interesting reading - another: http://www.theaustralian.com.au/business/economics/japans-debt-a-rising-concern-imf-report-warns/story-e6frg926-1226205392344) The lack of much concern about fiscal sustainability is what I find disturbing, as is the encouragement by some to move yet further away from fiscal responsibility.
I don't claim to know how long Japan's financial status can continue to go on at these levels, but I can know that I don't want to participate and/or time investing in an undesirable and unsustainable situation.
There's also the matter of faith in the asset, and there's no way to know how long confidence/faith in a particular asset will last - but if faith/confidence is ever lost, the effects can be rapid and and sudden. It could go on for 10 years, 5 years, 1 year, another month - but so what? Does the fact that the asset class continues to hold up make their financial situation somehow acceptable or any more sustainable over a longer term if it continues on the current path? The fact that there are buyers of JGBs does not make for a convincing/fundamental/etc argument to me that they are an asset to be invested in for the short or long-term or that Japan's finances are okay in the slightest.
"I fully agree with you that it's prudent to take the approach that "there are no safe harbors" for investors in the coming years."
I'm not sure that's the case (I tend to think that your views would lead you to believe that some assets are unquestionably safe harbors), but okay.
From the other thread: "The US government can spend any amount of money that it wants, in reality."
What a fun reality - why not just spend as much as we desire? I'll take a new high speed rail system across the country, why not throw in a new electric grid (and as I've said previously, investments in infrastructure should have happened years ago; now we've spent a fortune and still have substandard infrastructure in many areas of the country), new White House - heck, solve the housing problem by buying everyone houses.
It'll be like playing Sim City with unlimited money.
I forgot that we can simply spend ourselves into prosperity (what did Biden say again? "If we don't spend money, we're going to go bankrupt" - actually, that is what he said, and there are two sides - those who cheer that statement and those who are nauseated by it - I'll go with the latter.) Why be fiscally responsible ever when we can spend any amount of money we want? If we spend and spend, who's to say when to stop and who's to say we can get off that path? When does the saving for the next "bad period" occur? (Never.)
There's the whole "old fashioned" notion of saving during good times in an attempt to be able to get through bad times. We've spent in good times and we've spent in bad times. There's this wonderful concept that apparently there's never any consequence for that because we can just spend more money and extend and pretend.
How about forcing seniors and those who rely on fixed income to take risks and having them look at CDs from their local bank and having them find that a 6month CD isn't even listed in promotional materials because the interest rate is so small. There's no guarantees? Sure, there's definitely no guarantees on what yield they'll get, and there's also no guarantees that you're going to - time and time again - drive them into risk assets, either - and they won't be spending as much because their fixed income income has dried up to a trickle.
I'm not going to go any deeper into the discussion because I've - not to sound harsh (or any harsher, at least) - gotten a little tired of discussions on how inflation that is worse than distributed figures and loose monetary policy for as far as the eye can see are apparently a "good thing" and that if we don't continue down that path, we will have a "super depression". (and others have covered with greater detail a lot of the same ground as my views in the other thread about the dollar.)
There are significant structural flaws with this economy, and what has been done is largely blowing air into a tire with a hole in it without patching the hole first.

http://www.bloomberg.com/video/82279410/
Dec. 6 (Bloomberg) -- Dan Fuss, vice chairman at Loomis Sayles & Co., talks about the performance of fixed income and financial markets. Fuss also discusses Standard & Poor's decision to place the credit ratings of 15 euro nations on a negative outlook. He speaks with Lisa Murphy on Bloomberg Television's "Street Smart."