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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Trump says he’ll raise tariffs on Canadian steel and aluminum to 50%. Or Not. Or Maybe.

    https://www.thestreet.com/automotive/uaw-president-offers-straight-talk-to-workers-on-tariffs
    the labor leader said that the country's labor force has been in crisis mode since the North American Free Trade Agreement (NAFTA) was signed and that there is "no other issue "that has affected our economy and working-class people.
    "We’re in a triage situation," Fain said on the program. "Tariffs are an attempt to stop the bleeding from the hemorrhaging of jobs in America for the last 33 years.
    Maybe go back a little further to the way uncle Ronny Ray-guns killed the unions. I recall that Joe was actually SUPPORTING unions. But the Orange Kool-Aid winos have been brainwashed to think that anything to help workers is a pinko commie plot. Meanwhile, back at the ranch, Vladimir The Righteous is calling the shots. And the NATO summit today happened without any US presence. Hmmmmmm.
  • The Mounting Case Against U.S. Stocks
    Eggs are not "eggs". They come in many grades and varieties. One store that we visit each week has at least six different types of eggs, varying on size, color, and feeding/living conditions of the laying chickens. The prices range from approximately $5 to $12 per dozen. This particular store happens to be in a Northern California agricultural area which has been an egg and chicken producing center for at least 100 years, so the store has local access to many types of available eggs.
    This could not be replicated by large grocery chains, Costco or otherwise, who need huge quantities of eggs and are therefore limited as to sources able to provide that large supply. So it's no surprise that individual smaller stores might have access to small local producers, with significant price differences because of that. Perhaps the local Kroger store has access to some local producers also. Some chains allow individual stores to purchase locally, others do not.
  • Trump says he’ll raise tariffs on Canadian steel and aluminum to 50%. Or Not. Or Maybe.

    https://www.thestreet.com/automotive/uaw-president-offers-straight-talk-to-workers-on-tariffs
    the labor leader said that the country's labor force has been in crisis mode since the North American Free Trade Agreement (NAFTA) was signed and that there is "no other issue "that has affected our economy and working-class people.
    "We’re in a triage situation," Fain said on the program. "Tariffs are an attempt to stop the bleeding from the hemorrhaging of jobs in America for the last 33 years.
  • The Mounting Case Against U.S. Stocks
    @WABAC,
    The cat is out of the bag.
    Peter Navarro is on TV right now. He said "Tariffs equal to Tax cuts." If any one was waiting for it to be spelled out, now they have it.
    I haven't watched network news since Network came out. And after 25 years around marine radio traffic I stopped listening to anything but music on the radio.
    What did Navarro have to say? I'm not finding anything in print yet.
  • How reliable is the government's economic data? Under Trump, there are real concerns
    The NPR writer is apparently willfully ignorant -- or suffering from TDS -- in believing historical govt metrics are accurate.
    Inflation stats in particular have undergone a constant 'evolution' of how they are computed/reported, since at the Clinton era, and possibly before. Ditto unemployment rates. There is at least one website that has been tracking these inconsistencies for many years - www.shadowstats.com. Unfortunately, its behind a pay wall, but its commonly cited by people who have raised concerns about govt statistics, for decades now.
    The premise laid out by the NPR writer that somehow, these numbers are pure as the driven snow, until 'big bad Trump' arrived is laughable. I'm all for honest govt stats. But pretending that Trump is/will be the first to cynically manipulate data is clownish on the part of the NPR 'journalist'.
  • Ever try constructing your own “fund of funds”?
    After about 2 weeks (since February 26) the difference in performance between the etf I sold (GAA, a diversified global fund of funds with 45% equities) and the 7 CEF collection I devised is “Chump-Change”. The CEF collection has been consistently running ahead by a few dollars, but currently leads by a negligible amount. The CEF collection contains 3 equity CEFs, 3 income focused CEFs and 1 long / short CEF. I’ve traded a bit as I learned more about the potential offerings. But the basic equity / fixed income mix hasn’t changed. At this moment, both are down about 0.40% since February 26, a reflection of the emerging Trump bear market.
    Observations
    The CEF collection is much less volatile day to day.
    Obviously, fees are much higher for the CEF collection. The etf had a .37% fee.
    There is a much greater time-lag in accurate pricing for the etf. Pricing quite hard to observe accurately until day end (unless you attempt to trade it).
    As noted previously, fully exiting the etf was difficult / time consuming due to being thinly traded. Selling smaller amounts of CEFs is a breeze.
    The best time to buy CEFs was probably 2 years ago when most were trading at large discounts to NAVs. Today you need to be a lot more selective, but I think there are still some attractively priced ones if you have time to wait.
    As previously noted, CEFs respond favorably when borrowing costs (for leverage) fall. Rising rates have the opposite effect.
  • The Mounting Case Against U.S. Stocks
    It is to see negative correlation between bonds to stocks at work today. Investment grade bonds did well. Short tern junk bonds lost a bit.
    The 10 years treasury fell 10 bps.
    https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202503
    Future market for tomorrow is down again.
    https://finviz.com/futures.ashx
  • Leuthold: current small cap valuations correlation wtih 14% forward returns
    In addition to Brandes International SC (BISAX), mentioned above, BIEAX (Brandes International Value) has clocked 18.23% for 3 years and 13.78% for 5 years. Since 2023, the clone of BIEAX, BINV, has pretty much matched its performance. I'm hoping the time-worn predictions about the return of SCs and international stocks may yet bear fruit.
    FWIIW, I have committed money to Brandes, but they have yet to invite me to La Jolla for coffee. At least Disciplined Growth Investors sent me a spiffy box of candies, a welcome display of Midwestern niceness.
  • The Mounting Case Against U.S. Stocks
    A bit of perspective on valuations also from the WSJ - By Spencer Jakab, Markets A.M. newsletter.
    "Wouldn’t it be great if there were some way to quantify exuberance? At market extremes there can be. Speaking in 2002, Sun Microsystems CEO Scott McNealy was brutally honest about how dumb it was for investors to buy his company’s stock at the peak:
    Two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?
    And Sun was cheap compared with Cisco Systems, which fetched as much as 38 times sales and briefly became the world’s most valuable company. There have been many comparisons with Nvidia, which recently won and lost that crown. The AI chipmaker fetched as much as 56 times sales last year. In January it lost more market value in one day than Cisco was worth at its peak.
    McNealy’s take is forehead-slappingly obvious in hindsight, but don’t buy or sell stocks on that measure alone. Outside of semiconductors, a sector inflated by Nvidia, one of the highest sales multiples back in January could be found in out-of-favor biotechnology companies. Many have little to no revenue but lots of promise.
    At the other end of the spectrum are food retailers, which typically trade around one-third times sales. As much as people complain about grocery prices, supermarkets earn paltry profit margins.
    A company that’s very profitable like Nvidia can still look reasonable on a price-to-earnings multiple. “Look” is the key word since it’s been in business for decades and its operating margin has quadrupled recently—a hard thing to sustain, as Cisco and Sun both learned.
    Even simpler numbers might have given us pause. Two months ago Nvidia was worth as much as the entire German and French stock markets combined and twice as much as all U.S. energy stocks.
    What were we thinking?"
  • Leuthold: current small cap valuations correlation wtih 14% forward returns
    image
    In the March issue I'd mentioned the wisdom of diversifying about from domestic large growth. (Down 4.4% in the first four hours of the day, March 10 with all of the growth categories down 10+ percentage in three months.) Leuthold shared two bits of information today. First, they had decreased and are continuing to decrease their equity exposure. As of this morning (3/10), it hovers around 50% in their tactical portfolios. And (2) since the data since 1995, valuations for small caps at this level correlate with 14% annual returns over the next five years.
    Quick screen for global and US small caps, ex-growth. Year-to-date, the winners have been Cambria Global Value ETF (up 17%), Brandes ISC (up 13.8%), Oakmark ISC (up 13%), Kopernik Global All-Cap (up 12.7%) and Dimensional International SCV ETF (up 12%). The best purely domestic SC funds are Aegis Value (up 5.3% and Longleaf SC (up 3.8%).
  • Euro up vs US$; International Stocks Up
    Will add new unique Display period to MFOP and coin it: Trump 2.0. Will start November 2024. End current month or until there is a new president.
    SNL’s ”Weekend Update” on Saturday reminded everyone to set their clocks ahead - “preferably by 4 years.”
  • Euro up vs US$; International Stocks Up
    Through February (seems like years ago), a look at regional ETFs:
    3-Year Regional Index Fund Performance - US on Top
    image

    3-Month Regional Index Fund Performance - Europe on Top
    image

    Will add new unique Display period to MFOP and coin it: Trump 2.0. Will start November 2024. End current month or until there is a new president.
  • Hundreds fired at NOAA, Weather Service. Here’s what that means for Americans and economy.

    People who have had no experience with a government agency or worked there and who claim there is massive fraud and abuse in Government have absolutely no idea of what they are talking about.
    The facts about the VA, for example are indisputable. It provides pretty decent medical care at a much lower price than the rest of the US Health System. I worked there for ten years. There are crazy rules, and some employees take advantage of the fixed hours etc, but sending those patients to the US private health system would cost far far more money, and there is really no room for them.
    Their medical problems with TBI, Burn Pits, PTSD and years of drug and cigarette abuse make them far far sicker than the average American. There are NO primary Care docs left anymore, so "privatizing" the VA will drive their care into numerous specialists who will charge an arm and a leg.
    I have a good friend in Western Massachusetts who says his neighbors, who are all veterans and who depend on the VA for health care are abandoning their support for Trump because while he promised during the election to support the VA he is cutting 80,000 jobs.
    These cuts are not useless clerks and "deep state" conspirators. They are cancer researchers who can't run their trials, secretaries who make appointments, doctors and social workers.
    What are the investment implications? Buy health care stocks, but not hospitals who will go broke. The Dollar and the wildly over valued US market are going down, as chaos is not good for predictions of the future.
  • Public/Private-Credit ETF PRIV with Liquidity Provider Apollo
    "I was under the impression that the SEC issues an authorization letter for trading that is transmitted to the exchange."
    Yes but as your Schwab example illustrates that letter is a separate track than the one between SEC and the issuer to clear SEC queries. I think the protocol is from the pre-internet time and probably should change but the protocol you alluded to which would be investor centric is not what the issuers would like and as such I do not expect change to the current protocol for another 4 years. We must accept that we are in a deregulation to no regulation phase.
    "I think that such a letter may have been issued in the confusion of transition at SEC and it seems to be backtracking now."
    I am not suggesting that everything is working and will work like a well oiled machine. I personally am bracing for accident rate to increase and with more severe consequences than we are used to.
    Somewhat related and as an aside, I think it will require more alertness on our part to be able to parse through what is a symptom of systemic risk and what is a symptom of routine risk (i.e., normal imperfection of a system) so we take the right risks.
    Using the public markets to monetize illiquid assets if taken to the extreme (and Americans are great at it) can result in a systemic risk.
  • Hundreds fired at NOAA, Weather Service. Here’s what that means for Americans and economy.
    Well @hondo, I hope that you don't live in Hondo, Texas. The folks there are very worried that cuts in Medicaid will close down their only local hospital, leaving them with almost no local medical care facilities. Before long you are talking about real problems for taxpayers.
    Potential Medicaid cuts could devastate America’s teetering rural health-care system
    HONDO, Tex. — Jaylee Williams needed to find somewhere to deliver her son. The 19-year-old knew little about the complicated metrics of who takes what health insurance. But relief for Williams came when they realized Medina Regional Hospital — just 15 minutes from their home — accepted Medicaid, the federal-state program that covers medical costs for lower-income Americans. Provider groups an hour away in San Antonio had refused to take the insurance.
    But the lifeline that the 25-bed critical-access hospital offered to Williams could disappear in Hondo and other communities like it. Rural hospitals across the United States fear that massive Medicaid cuts Republicans would have to consider under the current House budget proposal could decimate maternity services or shutter already struggling medical facilities in communities that overwhelmingly voted for Donald Trump.
    Nearly half of all rural hospitals nationwide operate at a deficit, with Medicaid barely keeping them afloat. Already, almost 200 rural hospitals have closed in the past two decades, according to the Cecil G. Sheps Center for Health Services Research, part of the University of North Carolina at Chapel Hill.
    Rural hospital leaders in Arkansas, Colorado, Kansas, Mississippi, Missouri and Texas who spoke to The Washington Post warned that the enormous cuts congressional Republicans are weighing could further destroy limited health-care access in rural America. Proposals to slash up to $880 billion over 10 years — which is expected to be accomplished largely by scaling back on Medicaid — would also affect those who do not rely on the program but do rely on the medical facilities that are financially dependent on the program’s reimbursements.
    Above are edited excerpts from a current report in The Washington Post.
  • Hundreds fired at NOAA, Weather Service. Here’s what that means for Americans and economy.
    NOAA's specialized workforce provides products and services that support more than a third of the nation's GDP. But in MAGA narrative, our country will be "saved" by cutting 50% of the 12,000 NOAA workers. Approx. $600M per year in Comp savings....in the scheme of things, a veritable drop in the bucket.

    JD wrote: "$600M per year in Comp savings......in the scheme of things, a veritable drop in the bucket."
    To paraphrase an old Senator of many years ago, $600M here -- $600M there and before long you are talking about real money.
  • Gimme Credit - latest memo from Howard Marks
    In a sense that tactic of buying when others are fearful has worked for me as well. Dumpster fires and bathwater floods are great places to look for hidden gems rather than racing up the roads to the current sparkles in the eyes of the masses.
    I am no where near the abilities of Buffett, Marks or a host of others but my best returns have come from selections made during those times.

    +1
    I’ve spent hours listening to Howard Marks drone on about his philosophy of buying low and waiting (often for years) for those distressed assets to recover. A favorite of mine. I’d be much richer if I’d followed his advice and not let go of some bargain priced stocks, bonds or funds too early. It’s a tough act to follow. Requires the Biblical patience of Job. (I’m the dummy who let go of DKNG a couple years ago at around $12.50 after a two-year dalliance with the struggling stock.)
    Marks’ earned his reputation buying distressed debt (lower tier junk bonds), including debt of companies in bankruptcy. So the comments in the linked piece are with reference to that asset class. To his way of thinking this kind of dumpster-diving entails less risk than buying many other market-priced assets. But it only works if you are confident enough in your picks that you can hold for the long run. My point earlier: If you are a more diversified investor, don’t think buying some BB and lower credits is going to smooth out your ride or prove an easy path. Understand the risk you’re adding to your portfolio.
  • the March issue is live!
    I've always been rather taken by The Fate of the Titans, the once unassailable funds that slip and then slip from public view. When I started writing about funds (Brill's Mutual Funds Interactive! Once named by Barron's as one of the two best fund sites on the web, with the other being some impudent startup firm in Chicago), the Technology Value Fund has the surest thing to sure money that you could find. Two tech insiders, the now-departed Ken Kam and Kevin Landis, knew the tech industry in a way that mere professional investors couldn't. 60% a year for six years, with Ken reportedly getting nervous about the magnitude of the bubble and cashing out in '99. (Smart guy.) Six funds that would have called ARK or Royce to mind: every available flavor of the same thing. Then the inevitable: crash, bounce, crash. Bold decision to renounce the '40 Act and bring their genius to private equity. Bounce, crash, crash, crash. Never a word of doubt from Kevin who know has a fund valued at $0.06/share whose holdings are so illiquid that the fund can't be ... well, liquidated.
    I tried to be a bit blunt on climate change and infrastructure, and a bit helpful on The Great Rotation thing. The warning about the new magic wand - private equity exposure - might fall somewhere in-between.
    I might ask Chip to make an edit or two to better explain Goodhaven and the ETF in The Great Rotation.
    Lynn did his predictably excellent work, data-rich and thoughtful, on bond funds that are not vanilla and bond ladders built without buying bonds, per se. Shadow highlights the death of MACSX (literally, the insiders called the fund Max). I have a bad feeling about Matthews ("new executive leadership" is rarely a good sign) and some ongoing anxiety about Grandeur Peak (where the lead manager of their best performing fund suddenly left, with Mr Blake stepping in until Mr Gardiner's mid-summer return). When I talked with the folks at GP, the take was "easy-peasy, nothing to see, we got this covered." And yet, assets are down by half during Mr. G's sabbatical and the complex has gone from almost all four- and five-star funds to almost all two star ones. It might be worth noticing.
  • Private-Equity Wants a Piece of Your 401(k)
    this has been some time in the making, as institutions have self-capped allocation for a few years now. marketing is no longer restricted to hnw clients.
    lobbyists not needed, and will be faster\cheaper by giving trump & cronies their cut directly.
  • Market Concerns - are you hedging your portfolio, or is it business as usual?
    I was sitting at 33% equity when all the fun started a few days ago. With a few very small changes in my CEF collection (Out with the old. In with the new) equity exposure has crept up a bit to around 38%. Still too early IMHO to start loading up the wagon. :)
    Markets like this can last years. Though I’m not expecting that.