Treasury Bills Beat Oil 30 Years On
Posted on December 22, 2015 by David Ott Acropolis Investment Management
The annualized standard deviation of monthly returns for WTI spot was 25.21 percent. To put that in perspective, it was 16.86 percent for the S&P 500 during the same period, which include the tech bubble/burst and the 2008 financial crisis.
That’s right, oil was 50 percent more volatile than stocks, but it yielded lower returns than Treasury bills over a 32 year period.

The orange line below takes the historical prices and puts them into today’s dollars ... I find it remarkable that oil was trading at the equivalent of $65 per barrel when the data first started (1983)compared to the $35 level today.

http://acrinv.com/treasury-bills-beat-oil-30-years-on/
Update 12/23/15 Oil and Energy Stocks
Posted on December 23, 2015 by David Ott
One of my favorite long-timer readers asked me today to follow up on the chart from yesterday to include the performance of energy stocks
The best quality sector data from S&P only dates back to 1989, so this data set isn't quite as long as what I showed yesterday, but the story is basically the same and I have to admit that I was surprised by how well energy stocks have done over the last 25 or so years.
In fact, despite the absolute bear market in energy stocks, which have fallen by about a third since their peak last year, they are still outperforming the S&P 500 when you look at the entire period. (1989-present0
In that same vain, when we look at this shortened period, WTI crude has kept pace with inflation, unlike the chart yesterday that showed crude failing to keep up with inflation - it just goes to show how so much data is period specific.

http://acrinv.com/oil-and-energy-stocks/

if I sold off some of these funds, to reduce their number, with one being held since to my teenage years (FKINX).
And, so it goes ...

I had that plan when I was young but go sidetracked. I wish I would have stuck with it.

Hi @Dex,
Thank you for your questions.
I am retired. Catching pension income, social security income and drawing on investment income when needed. In addition, being a former corporate credit manager, I do some consulting work form time-to-time.
To run my portfolio form a win, place, show perspective requires at least three funds per sleeve. And no, I have not given much thought to reducing the number of funds held for many reasons one being having to pay large capital gains if I sold off some of these funds, to reduce their number, with one being held since to my teenage years (FKINX).
And, so it goes ...

MANNING & NAPIER has been a wonderful financial investment house from my neck of the world (Fairport NY, an affluent suburb of Rochester) for many years. Recently they bought a majority holding in Rainier Investment Management. I wonder if closings like this will be a consolidation of similar type funds from these companies.

@ Old_Skeet - an impressive collection of funds. Do you have a benchmark that you measure your portfolio's performance against? How have you fared over the years?
I now use mostly index funds for equities, mostly actively managed funds for fixed income and only actively managed funds for my "non-traditional" alternatives (long-short, managed futures and equity market neutral). I was fortunate to have bought into some AQR alternative funds before the minimums went through the roof (at least on Fidelity, for taxable accounts).

@Mona, over the years I had enough of paying IRS on distribution even in down markets. Since vast majority of active managed funds failed to out-perform their respective indexes, getting the boring index level return is good enough for us. So on taxable accounts, we use exclusively index funds and ETFs to minimize the tax consequences. Granted that dividends will be tax according to our tax bracket, but at least I can minimize short term and long term capital gains. </blockquote
Sven,
If you are invested in Vanguard Index 500, 100% of the dividends were qualified. In Vanguard Total Stock Market Index, 95% were qualified. And for another example, if you are invested in Vanguard Mid-Cap Index, 86% were qualified.
https://personal.vanguard.com/us/insights/article/estimated-yearend-distributions-122015
Qualified dividends are taxed at 0%, 15% and 20%, the latter if you are in a 39.6% tax bracket. So unless you are making a lot of money putting you in 39.6% tax bracket, you are paying no higher tax rate on your qualified dividends than you would would pay on Long-term Capital Gains.
Mona

For the past 4 years or so I was in ARTLX, it seemed each year at distribution time that the IRS was the big winner.

@Mona, over the years I had enough of paying IRS on distribution even in down markets. Since vast majority of active managed funds failed to out-perform their respective indexes, getting the boring index level return is good enough for us. So on taxable accounts, we use exclusively index funds and ETFs to minimize the tax consequences. Granted that dividends will be tax according to our tax bracket, but at least I can minimize short term and long term capital gains.
The other thing to watch for in international funds when currency hedging is used. All the contracts will pay out as short term capital gains.

@David, Stephen Yacktman has been listed as a manager of the Yacktman Focused Fund since 2002 so part of its record must be attributed to him, for better or for worse. He seems competent and intelligent whenever I speak to him, although my reading about this family indicates that there are some significant personality differences between father and son. In the press Don Yacktman has always been painted as more reserved and less flashy than his son. But I don't know if that's true. Back in the 1990s I used to interview Don Yacktman and Jean Marie Eveillard every week for a column called Dueling Portfolios and Don Yacktman seemed pretty passionate to me. It's hard to say if some of the skill one person possesses passes from parent to child in any field. I think fundamentally the Yacktman Focused Fund's strategy is a sound one for conservative investors who know what they're getting into. That conservatism and value orientation can lead to years of underperformance in the wrong kind of market. Returns by default will be lumpy, but the underperformance one would expect should be more on the upside than the down. Oddly enough, the 1990s was another really dry period for Yacktman's style so when I was interviewing him there was a lot of pressure from shareholders for managers like him and Eveillard to load up on tech stocks. Today his style is again out of favor. I expect that to change as the bull market ends.

I have had excellent customer service with Vanguard and my Scottrade brokerage for over twenty years so I guess it's where you are and when you interact that makes the difference,

it is not an easy call on the balance of risk and reward over long investment period. Question for most investors is getting the market return good enough?

Domestically, it's become an easy call for me. For the past 4 years or so I was in ARTLX, it seemed each year at distribution time that the IRS was the big winner. Along with other concentrated mutual funds I have owned over the years with high active share, I learned the hard way that many (most) times it does not translate into a fund that beats it's benchmark. Now, I mostly go the Index route and when I want to go to Las Vegas and play the concentrated active fund machine in my taxable account, the ER must be under 50 basis points and the turnover under 15%. Even then I limit my bets.
Mona

I have been a Vanguard customer for many years now, and have rarely had any problem with any transaction I wanted to do, or phone rep I was interacting with. Sorry you have had so much trouble; I do not think it is representative of Vanguard, however.

thanks....but as a group, these seem not worthy of a wager. Sounded like a good idea at the time though.

I think it'll be better for MF investing when more broad-based funds start taking normal positions in a few renewables companies as part of a more diversified portfolio. Not many do that now, but maybe the conventional outlook for alt energy will change with the tax credit extension and the push for more solar and wind capacity by "normal" utilities.
The solar panels, in my case at least, are a steadier, much less risky investment - essentially locking in the elec rates when they were installed for the next 30 years, with the utility raising rates almost every year.

Amen to that! Unless you want to eat, drink, sleep, and breathe the markets 24 hours a day. And I mean that literally. Over the years have seen all these investors congregate in the same funds such as the aforementioned Whitebox as well as other *crowd* favorites ala RSIVX, ARIVX, MFLDX, WAFMX, RPHYX, AQRNX, and the granddaddy of them all PRPFX. Not exactly a prescription for a wealthy retirement. I just hope it won't be the same sad story with the latest fave GPMCX.

Actually in that collection I don't think MFLDX and certainly AQRNX don't belong. One did a shareholder unfriendly thing, and one is shareholder unfriendly period.
RSIVX, I think people are bashing out of proportion. No one said it did not have any risks. People expecting RPHYX out of RSIVX without reading prospectus going to be dissapointed.
Still a believer in ARIVX. Never owned WAFMX and GPMCX
Now two funds I own and who belong are FVALX and INTLX. Luckily for me have held them forever and will continue to hold "forever". With FVALX manager didn't time the S&P 500 puts correctly or it would be breaking even. Hard to be Value Fund and time the short incorrectly. I'm in for the long haul in these two.
The one dissapointment for me has been ICMBX. Expected it to have held up much better.
Finally, got lucky with WBLSX to OTCRX switch at Vanguard. I feel for WBMAX investors.

Even Warren Buffett has bad years. BRKA is down 14% this year.

In addition to the recent Paris climate agreement, the US Congress unexpectedly agreed to extend tax credits for solar and wind for another five years. This may provide an unexpected boost to the industry, which has seen a fairly impressive growth in year over year power generation capability in the US. As the cost per kilowatt hour for both wind and solar is decreasing rapidly, and the companies in this industry are maturing, this is something that I will be looking at for 2016 as a flyer.
Anyone have funds focused in this area that I might consider?
thanks,
press

Hey little5bee, had the same trouble moving money from Schwab into Vanguard. I gave up in the middle and reversed the whole thing. The second try, several years later, went better( with cash only) went better, but the service is nothing like Schwab. Go Blue!

@larryB A few years ago, I attempted to move some money from Schwab into Vanguard. Vanguard lost my application...twice! Decided it was not worth it and would just pay the TF for Vanguard funds at Schwab.

@VF - I know you saw it coming, sorry to offend. I asked Charles because I thought he was one of the believers.
I have to wonder though if Mr. Buffett has been right all along. Just stick your money in an S&P 500 index and go live your life. If the smart people in the room with all the toys and tools can't get this stuff right who do I think I'm fooling. Some pondering I must do.

Amen to that! Unless you want to eat, drink, sleep, and breathe the markets 24 hours a day. And I mean that literally. Over the years have seen all these investors congregate in the same funds such as the aforementioned Whitebox as well as other *crowd* favorites ala RSIVX, ARIVX, MFLDX, WAFMX, RPHYX, AQRNX, and the granddaddy of them all PRPFX. Not exactly a prescription for a wealthy retirement. I just hope it won't be the same sad story with the latest fave GPMCX.

Great question by OJ. Just too many unknowns. To answer it requires answers to at least some of these basic questions:
1. Are commodities (including energy) a leading indicator of something bad coming down the road that will eventually infect all major risk assets including stocks?
2. How will the geopolitics among global producers finally play out? (This one seems to be the thrust of OJ's question.) Umm ... what would the proposed "carpet bombing" of certain areas in producing nations do to world oil supply? We're already blowing up tankers in the region without much effect on global oil prices.
3. How serious are the industrialized nations about curbing CO2 emissions?
4. How rapidly will alternative energy sources come on-stream? One example is the hydrogen fuel cell. In theory, cars could run on water.
5. How many more warm winters will the U.S. (and much of the industrialized world) experience over the coming decade?
Just a few questions few of us can get our heads around today. Yet 25 years from now the answer to OJ's question will seem perfectly obvious and we'll wonder how we missed it.

If I remember correctly, Mr Redleaf asked to be benchmarked against the best endowment performance, like Yale. Suspect by that measure, it's not done that well the past 1-2 years. Still, believe the TacOps fund is pretty young. Maybe just 4 years old.