FYI: International stock mutual funds outperformed the U.S. stock market for much of the past 10 years. But international funds fell behind in the past year amid difficulties in stimulating moribund economies in Europe and China as well as Greece's debt problems.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MjAxMjE2NzI=
Enlarged Graphic:
http://news.investors.com/photopopup.aspx?path=webLV080615.jpg&docId=765330&xmpSource=&width=1000&height=1063&caption=&id=765246

hank said
August 2 edited August 2 Flag
A few morsels from Ed:
"Some men are born mediocre, some men achieve mediocrity, and some men have mediocrity thrust upon them. - Joseph Heller"
Will this be mediocroty thrust upon us? As in;
Hi ! I'm from the government,and I'm here to help you.
The New School's Teresa Ghilarducci weighs in on mandated savings, risk aversion and avoiding fees
Aug 5, 2015 @ 10:46 am
By Bloomberg News
Retirement policy wonks don't usually get hate mail. But in 2008, Teresa Ghilarducci, an economics professor at the New School for Social Research, proposed replacing 401(k) plans and their income tax break with a mandated government savings plan for all workers. The blowback from some Tea Partyers was so intense that the school's chief of security gave her his cell phone number.
The plan called for mandatory savings of 5% of salary, with the government handling all investment decisions, guaranteeing a rate of return above inflation, and ultimately paying out the retirement money in a lifelong annuity. It's pretty radical. Conservatives hate it. She continues to advocate for it, though she won't comment on whether she has discussed it as one of the cadre of economists advising Hillary Clinton in her presidential bid.
About 15 years ago, Ms. Ghilarducci started to focus on getting to retirement in fighting shape.
“It was a pure money play,” she said. “I lost some weight and am devoted to my seven-minute workout app and weight training at the gym." It's not about vanity, she said, "but the money I hope to save if I can avoid illnesses such as diabetes and osteoporosis.”
Ms. Ghilarducci said if she didn't have access to TIAA-CREF she'd park her money in Vanguard index funds.
“It's against my religion to invest in actively managed funds,” she said. "I suspected they were fishy when I was younger, and now we have plenty of evidence that passive [investing] is better."
After doing some intensive research on long-term care insurance, she decided to pass. She cites the high premiums on the policies and new research that suggests that budget-busting extended care will be needed by fewer elderly people than previously thought.
“Pushing for Medicare to expand to cover long-term care is my best bet, and honestly, it's everyone's best bet,” she said.
Many retirement experts and myriad online tools suggest aiming for retirement income that can replace 70% to 80% of your pre-retirement income. Ms. Ghilarducci, who has based her plan on living until 92, is out to replace 100%.
http://www.investmentnews.com/article/20150805/FREE/150809967/this-retirement-expert-got-death-threats-for-her-policy-reform-ideas
WHO INVITED TERESA GHILARDUCCI TO THE TABLE?
Lunch and populism with Hillary Clinton’s least-likely adviser.
BY NANCY COOK
This article appears in the June 27, 2015 edition of National Journal Magazine as Who Invited Teresa Ghilarducci to the Table?.
Ghilarducci's big idea, then and now, is to create government-run, guaranteed retirement accounts ("GRAs," for short). Taxpayers would be required to put 5 percent of their annual income into savings, with the money managed by the Social Security Administration. They could only opt out if their employer offered a traditional pension, and they wouldn't be able to withdraw the money as readily and early as with a 401(k). The government would invest the money and guarantee a rate of return, adjusted to inflation.
To pay for the program, Ghilarducci calls for ending tax breaks for people with 401(k)s —breaks that, according to her and others' research, now go primarily toward wealthier Americans. Instead, every taxpayer would receive a $600 refundable tax credit that would go toward the 5 percent annual contribution.
Plenty of economists and policymakers—especially on the state and local levels—have proposed some version of government-run retirement accounts. But no plan has been quite so grandly liberal as Ghilarducci's, which would create a new federal program easily as massive as the one wrought by the Affordable Care Act—and do it by mandating that Americans contribute 5 percent of their earnings. "You don't like mandates? Get real," she wrote in a 2012 Times op-ed. "Just as a voluntary Social Security system would have been a disaster, a voluntary retirement account plan is a disaster."
http://www.nationaljournal.com/magazine/teresa-ghilarducci-hillary-clinton-adviser-20150626

Hi MrRuffles,
I do not have a rigid formulaic set of rules, but I do deploy a generic set that serve as guidelines to reduce the selection field to manageable proportions.
Here is my candidate set, not necessarily in order of importance and it is not necessary that all need to be satisfied. Flexibility and gut feelings are important contributors to the final judgment. Here are my golden 11 rules:
1. A mutual fund that fits nicely into the more important asset allocation plan. Check the Morningstar fund asset distribution.
2. Low costs, like below the category average by at least 25%.
3. Low turnover rate, like 50% annually or less. I want a decisive management that is committed to its decisions.
4. Positive Excess Returns above appropriate benchmark for various, but not necessarily all, longer-term timeframes. That means mostly positive Alphas and Information Ratios above zero after examining different timeframes.
5. An understandable investment selection policy that offers the potential for market outperformance. Something unique that warrants the extra costs.
6. Seasoned and stable fund managers with quantifiable track records.
7. Trustworthy fund firm with deep pockets to hire superior fund managers and research teams.
8. Gut feeling that this fund will deliver the goods over time.
9. A commitment to stay the course with the selected fund to allow a proper test period, like maybe at least 3 years unless circumstances drastically change.
10. A default option to hire an Index fund if nothing satisfactorily surfaces.
11. The fund should have a near zero cash position. I’ll do my own cash management.
12. I’m sure I forgot something. Others will add to this incomplete list. No great discoveries in my golden 11.
Please keep in mind that I’m a very senior investor in the Required Minimum Withdrawal phase of my investment life. On average, I probably adjust my portfolio about twice a year. I’ve never been a very active trader. I am slowly moving my portfolio towards a higher percentage of Index products primarily motivated by cost considerations.
Each of us have different goals, timeframes, and portfolio ambitions. What I do might not mesh in any way with your investment and financial profiles whatsoever. When investing, nothing is ever cast in stone.
I wish you the very best success in your mutual fund decisions. But remember that in the long scheme of happenings, it is really a small matter. Your asset allocation decision has far more influence on your investment success.
Best Regards.

Here's a list of internet funds from 2001. Very familiar names from the dot com era. Was M* wrong to pan this subcategory en masse, given that the vast majority of these funds are no longer with us?
If M* was going to pick one, should they have picked a fund with unproven management (all newbies), or followed the manager (Ryan Jacobs) who built that fund's record (a la Gundlach, but also Winters)?
Hindsight is wonderful. Since the M* "dissing" was in the 1999-2005 era, wouldn't it be more relevant to look at the fund's performance in, say, the decade of the 2000s? (So that we can see whether it would have been worthwhile avoiding the fund prospectively.)
VF suggested using VFINX for comparison. I'm okay with that (of course, since that stacks the deck :-) ) Using the same M* charts, we can get what $10K would be worth at the end of that decade. For WWWFX, it was $6527. VFINX lost only 1/3 as much, winding up with $9,045.
I'm in complete agreement that M* tends to fawn over some funds and managers; PIMCO/Gross is indeed a fine example of that. There, you can look at M*'s comments vs. performance over the next 1-3 years and see the disconnect.

VF you are so right on this. M* has a bad habit of either dissing some very good funds or simply ignoring them. The latter is just fine by me, since it means those funds fly under the radar and do not amass large asset bases. They also will diss all funds of a fund company they don't like. For instance, they currently hate a large, midwest-based company, and rarely have anything good to say about any of that company's funds, despite the fact that several are quite good. For years they billed and cooed with PIMCO and had Mr. Gross at virtually every M* conference (along with the other same managers every year). Unfortunately, M* is the only game in town for detailed research.

Just curious if you are referring to American Century funds, Bob.

VF you are so right on this. M* has a bad habit of either dissing some very good funds or simply ignoring them. The latter is just fine by me, since it means those funds fly under the radar and do not amass large asset bases. They also will diss all funds of a fund company they don't like. For instance, they currently hate a large, midwest-based company, and rarely have anything good to say about any of that company's funds, despite the fact that several are quite good. For years they billed and cooed with PIMCO and had Mr. Gross at virtually every M* conference (along with the other same managers every year). Unfortunately, M* is the only game in town for detailed research.

We made a lot of clients happy for a number of years when we owned MFLDX from late 2007 through 2013. While we are no longer in this fund, I think we learned a few lessons. 1) Independence is crucial. When Marketfield was bought by Mainstay, it was a boutique fund with strong performance record. Mainstay made it their marquee fund, and assets ballooned from $4B to almost $16B in less than a year. No management team with a unique strategy, no matter how smart and talented, can handle this inflow. 2) Our observation is that the team let their risk parameters widen to accomodate the massive flow of cash. That resulted in a 12% loss in 2014, something from which they have not recovered. 3) No longer a boutique fund used by RIAs, hot cash fled the fund, even faster than it went in, with assets dropping to only $3B now. Once the run starts, it feeds on itself. Do not try to stand in the doorway. Interesting to note that the best record in the Equity Long-Short sector belongs to Schwab Hedged Equity SWHEX, that also happens to have one of the smallest asset bases. I am not suggesting folks buy this fund, but if I did own it, I would watch fund flows very carefully. Another strong performer is Gateway GTEYX, which has been around a very long time and now has by far the largest asset base. It has remained independent, though it is part of the Natixis group (Oakmark, Loomis, Vaughn Nelson, et al), and just keeps plugging along. Nothing fancy and has by far the lowest expenses of the group.
As for Hussman, it just boggles the mind to think that HSGFX has lost money in going on 6 of the last 8 years. Shareholders have fled, but there are still some who have stayed (maybe Hussman and his relatives?).

HI David,
I was reading your August commentary and was interested in your strategy about thinning out the ranks relative to the number of holdings in your portfolio. I believe you indicated that you have started the process. I was curious about one conundrum that I'm sure you've encountered: selling funds that have built up capital gains. If you are like me and have held funds for several years, chances are that you have a considerable amount of capital appreciation sitting in those funds. Selling those funds would trigger capital gains taxes (mostly long-term). Do you have a particular strategy regarding these funds? For example, are you choosing to sell certain ones this year and others in subsequent years based on the amount of capital gains or some other strategy? I'm trying to whittle down the number of funds that I own, but find myself looking at funds that have considerable capital gains waiting to be taxed.
Excellent job on the commentary as always !
Will

The total stock market funds are generally tax efficient.ETFs are often tax efficient Vanguard has tax managed funds. I like Tax manged capital appreciation . Owned it 20 years with NO capital gain distributions It invests in roughly the largest 10000 growth stocks (so no Exxon for example

Hi @Sven
I'm puzzled with this other statement in Mr. Studzinski's commentary:
" most people investing in a balanced (or equity fund for that matter) investment, do not have a sufficiently long time horizon, ten years perhaps being the minimum commitment."
My "presumption", per the above; would have to center to the possibility of only those close to or in retirement would use a balanced fund (conservative or moderate). Perhaps an explanation will arrive.
IMO, there remains many folks who should be invested in some fashion but are still afraid of the "nasty Wall St. thing". Balanced funds allow these folks to have market exposure with perhaps limited portfolio destruction, eh?
Take care,
Catch

Is it really the year 2105? Did we really jump 90 years overnight? :)

Thanks for the keen eyes!
That's my fault. I've fixed the title, but can't change the link, now. *sigh*

Whenever I see posts or articles discusing returns from the opening of a fund or stock to the present time which show outstanding returns I have to smile. Sure, there are some that have held the same investnents for decades, but the vast portion belong to the church of whats working now and get out when the market falls and get back in much higher than when they sold. It is very difficult to hang on to an investment when it has years of underperformance. I am guilty of it too. Having sold GLD after I saw it drop 20% from my costbasis. I did not see the silver lining of holding it anymore. I have also sold stocks in favor of others, but I generally hold on to my funds unless I exchange out for one I like better, but its seldom. I will not be rebuying any gold in the future, even recently sold some gold coins and sets I inherited. Cash or st bonds even at these anemic interest rates will at least hold its value as long as inflation is low.

Thanks for the notes @hank
Per the "(on balanced funds) "... I am increasingly concerned that the three usual asset classes of equities, fixed income, and cash, will not necessarily work in a complementary manner to reduce risk."
Many economies and policies still doing the fight from years ago. Central banks are doing what they feel is needed, but; yes the markets are perverted by many factors.
Not sure about the "risk" part; but the "return" thought is reflected through this year, at this point in time.
Not more than 2 years ago, one could find a balance to an equity portfolio portion if it went south for awhile; as support could usually be found from investment grade bonds and related.
Not the case this year, eh?
Hey, I gotta get outside for work before the evening storms arrive.
Take care,
Catch

Is it really the year 2105? Did we really jump 90 years overnight? :)

I am confident gold will hit 5k an oz though I do not expect to be alive when that happens. Hopefully I will be around for gold at 2k which may happen within 8-10 years. This is NOT a prediction. I am actually planning to buy gold at $1050 and then average down bu not up from that level.Reason for 1050 is the large number who will buy at 1000.

The math:
You could have purchased gold for around $150 an ounce during the 1975-1977 period (after which the price rose sharply). Today's price is close to $1100. Over a 40 year period (1975-present) that equates to around a 5% annually compounded return.*
Historical gold prices http://www.nma.org/pdf/gold/his_gold_prices.pdf
It would have been better to purchase gold prior to 1975 when the price (artificially set) remained around $35 an ounce for many years. Unfortunately, U.S. law prohibited private citizens from owning gold except in smaller quantities in the form of jewelry.
The Gold Reserve Act (1934) https://en.m.wikipedia.org/wiki/Gold_Reserve_Act
---
*(interest compounded yearly - added at the end of each year)
Year Year Interest Total Interest Balance
1 $7.50 $7.50 $157.50
2 $7.88 $15.38 $165.38
3 $8.27 $23.64 $173.64
4 $8.68 $32.33 $182.33
5 $9.12 $41.44 $191.44
6 $9.57 $51.01 $201.01
7 $10.05 $61.07 $211.07
8 $10.55 $71.62 $221.62
9 $11.08 $82.70 $232.70
10 $11.63 $94.33 $244.33
11 $12.22 $106.55 $256.55
12 $12.83 $119.38 $269.38
13 $13.47 $132.85 $282.85
14 $14.14 $146.99 $296.99
15 $14.85 $161.84 $311.84
16 $15.59 $177.43 $327.43
17 $16.37 $193.80 $343.80
18 $17.19 $210.99 $360.99
19 $18.05 $229.04 $379.04
20 $18.95 $247.99 $397.99
21 $19.90 $267.89 $417.89
22 $20.89 $288.79 $438.79
23 $21.94 $310.73 $460.73
24 $23.04 $333.76 $483.76
25 $24.19 $357.95 $507.95
26 $25.40 $383.35 $533.35
27 $26.67 $410.02 $560.02
28 $28.00 $438.02 $588.02
29 $29.40 $467.42 $617.42
30 $30.87 $498.29 $648.29
31 $32.41 $530.71 $680.71
32 $34.04 $564.74 $714.74
33 $35.74 $600.48 $750.48
34 $37.52 $638.00 $788.00
35 $39.40 $677.40 $827.40
36 $41.37 $718.77 $868.77
37 $43.44 $762.21 $912.21
38 $45.61 $807.82 $957.82
39 $47.89 $855.71 $1,005.71
40 $50.29 $906.00 $1,056.00
Standard CalculationBase amount: $150.00
Interest Rate: 5%
Effective Annual Rate: 5%
Calculation period: 40 years
From "The Calculator Site" http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

HomeFed issued $150 million in senior notes that mature in three years, with a coupon of 6.50%. The company chose not to pay for a rating. The money was used to buy a 1,400 acre property known as Otay Ranch, which according to Sherman was “contiguous to property HomeFed already owned.
That would be a tad over $107,000 / acre. It must be a Wall St. property !!!! ??? (California)5300 acre development.
Derf

Thesis for Continuation of Those and Other Current Trends
By Tom Stevenson4:44PM BST 01 Aug 2015
Tom Stevenson is an investment director at Fidelity Worldwide Investment. The views expressed are his own. He tweets at @tomstevenson63.
Excerpts from http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html
Commodities rout brings global winners and losers
The sell-off in commodities is terrible news for emerging market countries which depend on high resource prices
The commodity slump is important because, unlike the Greek debt negotiations and Shanghai’s bursting equity bubble, its impact is felt throughout the global economy. Greece is a rounding error in worldwide terms while the Chinese stock market remains largely sealed off from the rest of the world. Last month’s slide in oil, industrial metals and agriculture speaks to a broader concern – that the long slow recovery from the financial crisis is far from secure.
Although the past month has seen an acceleration of the slide in commodity prices, it is actually part of a secular shift that may have barely begun. Commodities boomed for a decade from 2001. It is unrealistic to expect the correction to be over in just four years. This is good for some countries, sectors and asset classes and catastrophic for others. No wonder Janet Yellen is leaving her options open.
Companies are belatedly acknowledging that they face a prolonged downturn in prices and they are finally facing up to the consequences.
That’s bad news for commodity producers and companies dependent on investment in the sector. It’s also terrible news for emerging market countries whose economies and current accounts depend on high resource prices. Between the mid-1970s and the mid-1990s, inflation-adjusted earnings for basic resources, industrials, chemicals, oil services and machinery companies went nowhere. It is hard to see why this pattern should not be repeated.
But for the commodity consuming parts of the economy, a slide in the cost of resources is just another tail-wind to add to falling unemployment, rising wages and persistently low inflation. This is why the US stock market trades at a premium to the rest of the world and why resource-hungry Japan continues to look so interesting.
For many companies and individuals, reduced input prices and lower transport and heating costs are a positive that will keep a lid on inflation and give the central banks on both sides of the Atlantic pause for thought. It’s not too late to get on the right side of this trade.
http://www.telegraph.co.uk/finance/economics/11778011/Commodities-rout-brings-global-winners-and-losers.html

"M* don't like. It will never admit it, while it keeps currying favor with other managers whose funds never "recovered" (sic)."
M* didn't like this fund when it covered it (aside from one later report, it stopped covering the fund in the mid 2000s, just like its "spinoff" and probably its other peers).
This fund has recovered its losses from its 2000 peak, but M* never praised this fund. Rather, M* continues to praise other funds (not necessarily its peers) that didn't recover from the bust at the turn of the millennium.
"Investors who listened to M* would have generally fared badly."
The vast majority of this fund's peers have vanished. M* continually panned the group of funds as a whole, so generally one would have done well by heeding M*'s advice.
But this fund fared moderately well, so one would have done better holding on and ignoring M* for this specific fund.
"10K at inception, VFINX : 41K, FUND : 137 K"
See graph for growth of $10K. VF set chart at "maximum", and moused over to get the final (current) values of VFINX and this fund as of the posting date.
"M* would start dissing the fund at end of 2000"
M* started coverage in 1999, and never wrote a positive report (though some were nuanced). The mid 2000 report said that one could do better by purchasing a peer fund.
The late 2000 report (apparently the one VF is using as the first "dissing") said that the fund was positioning itself somewhat defensively (not a bad idea for late 2000), while acknowledging that the fund still lost as much as its average peer. Being defensively positioned, it should have fared better.
"At this time [late 2001] M* is all over this fund."
The late 2001 report said that the fund had blown away its peers by virtue of its defensive positioning (losing a lot less), but if the market turned up, that could reverse. M* advised avoiding the fund - it was no longer focused on its objective (hard to fit into a portfolio), heavily concentrated (high risk), and had recently changed management (favorable short term performance may not be meaningful).
"Last 5 Years, VFINX marginally higher than fund
Last 3 Years, VFINX marginally lower than fund"
Over the past five years, this unnamed fund has slightly underperformed the S&P 500; over the last three, it has done a smidge better than the S&P 500. (Didn't I just write this before?)

Since we're cherry picking data, holding PRPFX since 2000 would have yielded 7.7% CAGR vs 4.3% for SPY. Better sharpe, half the volatility and draw down as well.
Holding GLD since its inception has a slightly better return than SPY with roughly the same draw down and volatility.
So it can and does diversify, IMO.

clacy, but it wasn't until PRPFX had such a great run that it became a board favorite. It's five year annualized return isn't anything to crow about either. I would wager most here succumbed to all the incessant articulate ramblings about the fund in the past five years. Just go back to 2011 in the MFO board archives on PRPFX.