FYI: A rare interview with Cornerstone Macro’s Investment Strategist, François Trahan, who has once again been named the number one ranked strategist on Wall Street by Institutional Investor magazine, as he has been for eight of the last ten years.
Regards,
Ted
http://wealthtrack.com/recent-programs/trahan-still-bullish/

The last three years SCHD beats any in the article handily, but SPY beats them all plus VYM, and PRBLX is notably above all further.

Companies and countries, even shaky ones, seem to be able to get loans (eg,. Radio Shack).

And I think that's an example of malinvestment due to tons of money flowing around. I think it's very unfortunate what has happened to Radio Shack, but I question if you didn't not have the monetary environment that you do, would Radio Shack have been gone 1-2 years ago and is throwing money at the problem simply delaying the inevitable? Easy money doesn't fix Radio Shack.
Dave and Buster's IPO'd today. I think that's tried and failed twice.
"And, HELOCs are back again."
There's a joke radio ad in the new "Grand Theft Auto" game about how people are being idiots for having any equity in their house and how they should pull that out to buy new devices that will briefly improve their life.
I say get much tighter in regards to HELOC's and have people who can advise as to the realities and risks of HELOCs. It's not, lets take out HELOCs and go on vacation and buy toys.
I suppose the idea becomes the mortgage officer and underwriters become somewhat less focused on stats and formulas and more on the people who they're dealing with. Effectively, a mortgage officer becomes more of a financial adviser and takes things into consideration rather than the idea that you enter in a bunch of numbers and it says x or y. Obviously, that's not scientific, but I do think the broad idea is if you have someone whose costs could be considerably lessened by buying, how do you make it work?
When you have someone who is the former head of the Federal Reserve not be able to refi, it really would seem more a focus on particular statistics and formulas that say X or Y versus actually looking at the person's situation.

Caught this on NBR last night. Umm ... Anybody know what Gross' track record on predicting the stock market is? I thought he was more of a bond guy.
What did he say? Equities will gain 5-7% a year going forward the next few years? Let's hope.
How does this man manage to stay in the spotlight? Maybe if we'd all stop talking about him he'd fade away like other stage legends of the past. :)
Pogo: We have met the enemy ...

Last time SPY dropped below 200 day average was November 2012 and then only for three days.
Last sustained time was late 2011, about three years ago. That one lasted about four months (August - November).
And before that...pretty much May through August 2010, which I had forgotten about.
And before that, well, no one wants to remember...November 2007 - May 2009, or 19 months.
For what it's worth...

Arnott's All Asset funds have dramatically underperformed their peers over past years. Will he make that up in the next down cycle? We shall see

@scott, are you referring to the 130/30 funds which are typically leveraged for returns?

I guess the idea is more that I would not expect a long/short fund to change - or be nimble enough - to take advantage of a 4-5% correction. A mutual fund isn't going to change in dramatic fashion because of what has happened over the last week, in other words. If this lasts months, then you may see movement and then you can look at results. It's just too short-term at this point to - I think - see major shifts in a fund's allocation.
As for the Managed Futures category, which has not done well broadly over the last few years but is something I'd not expect a moonshot from on a good year, to have a fund like Pimco's new one get double digit returns and be ahead of the category by more than 10% is certainly compelling, although the fund's prospectus language is very broad and doesn't give me a sense of the difference in this fund vs other MF funds. I will say that the Pimco fund has outperformed a large managed futures hedge fund - whether or not that continues, who knows - but I find it rather impressive.

FYI: Just because winners decline doesn't make them a bad choice.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=667868
How All the Funds Rank, Then and 10 Years Later
http://online.wsj.com/news/interactive/IFRANKING2014090820140906?ref=SB10001424052970203523204580116012154265320

Hey, a closer look at SEQUX...

Its UI is actually quite low this past year, even three years. Unfortunately, the SP500 UI is even lower. Compounding this issue is excess return. Compared to SP500, SEQUX has delivered only half the return.
During bull runs, equity volatility typically drops, and those funds that are more defensive, like SEQUX or many all-asset funds, drag, especially this past year as bond and commodity volatility is up.
But that does not mean they are "wrong," at least with regard to the way they chose to handle risk, but their ratings will invariably suffer. (Look at COBYX, for example, and the whole list above.)
Bottomline: If the market is always up, three years may not be very telling from a risk adjusted perspective.
That is something I think we are in-g on.
Thanks David. Hope all is well.

Howdy @heezsafe,
You noted: "Some here are referring to "cash equivalents" with words such as "TIPS, and related bonds [?]" and "low duration bond funds." Fascinating!! Please, describe for me, what could you possibly have used as your detour point to take you down this perditious road of reasoning, to this happy place of delusion?"
Okay, so in theory; down the road to investing hell............
The first week of February found me standing in front of the Mutual Fund Roadhouse Cafe. Bingo! Sell our small cap holdings was the thought. Sure enough the holdings were sold. But the money was not going to be parked in a traditional money market fund to which we have access; as the E.R. and yield of such areas is already negative and worse when factoring inflation. So our "cash" moves to investment grade bonds, be they gov't. or corp.
Eventually, these monies were moved to PRHSX, FSPHX and later to GPROX.
Our cash parking (since 2009) is not cash as in MM funds; and likely won't be for many years, if then.
There may already be enough "cash" among the managed holdings; so I won't add more to the pile.
Okay, past my pillow time for today.
Take care,
Catch

@MFO Members: Sounds like a broken record, but I've been telling MFO Board Members to buy healthcare, especially biotech, for over three years.
Regards,
Ted

I added to PRHSX just yesterday and have been trying to be overweight healthcare for the last 3 or 4 years. @jerry, I think you're right, everyone already knows about aging baby boomers, but the rest of the developed world is getting old too. I also believe there will be huge opportunities in China especially if the middle class continues to grow and healthcare becomes more important to people. If it were only for the US/Europe/Japan I would probably let the chips fall where they do with my funds and not pay as much particular attention to being overweight.

I have not flown American Airlines in years.
I used to fly TWA a lot.
Then, lived on Delta for years. Still like Delta. Good airline. Good people.
But, Virgin America has become my favorite airline.

Raw figure (with DODIX included) = 23.5%, slightly above normal. That's a bit deceptive, since it doesn't include cash held by managers of allocation type funds. Without doing a M* X-Ray, I'll guess the true cash component at about 30%, a bit higher if you include the short term bonds those funds hold.
Of course this discussion only makes sense in context. (conservative old **** many years into retirement.)

sir - you have a good % imho. Previously the j.bogle also has 20% bonds although he is > 80 years old.... great minds think alike

should be good for 5-10 years. after that too well known to be investible (all will know about ageing baby boomers?

What is your opinion on WBMAX - Whitebox Tactical Opportunities fund ?
I bought last year as WBMRX but TDA moved me to WBMAX after Whitebox eliminated WBMRX share class.
There is no movement in the fund since I brought, and I am at 2% loss as of today. Usually, I keep the funds for long.
For example, held VHGEX for 10 years, VDGIX for 8 years, etc.
I brought this fund as an alternative for bonds and use it as a hedge fund.
I know Scott has a very good opinion about Whitebox folks. What do you guys think about it?
Are there any better alternatives in this space (tactical/hedge or whatever you call this category) ?
Thanks,
Mrc

I would be cautious about owning core bond funds when we are in a period of rising interest rates. Flat-to-lower rates are ideal for core bonds, ... Then again, the definition of what a core bond fund is. VBMFX, for example, has not lived through a period of rising rates. It has been stellar in the past, but none of us knows what will happen.

Bob, I think you might be a bit too literal here. While John (and jerry) referred to "core bond", they (or at least John) were speaking in terms of their portfolio (i.e. their "main" or "anchor" holding), and not literally in terms of the type of fund ("core bond fund").
ACCNX is a core plus fund - it can hold junk bonds and vary the portfolio attributes considerably. According to M*, it went big into junk this year, now sporting an average credit rating of BB. Further, nearly half its bonds are securitized (generally MBS) vs. a quarter for its typical peer, placing it about midway between DLTNX and VBMFX.
While I'm not necessarily advocating ACCNX (don't know enough about it), I do think that core plus funds (with the right managers) can serve one well even in this environment.

Duration is one way to measure potential risk, with this fund having a probability of losing 5.6% of its value for every 1% increase in interest rates.

This brings us to another point, and one which makes me less sanguine about funds that tilt toward MBSs.
A duration of 5.6 years means that if interest rates go up by a basis point, then the portfolio may expect to lose 5.6 basis points. But the next basis point in rate change will (usually) bring a lesser shift in NAV. That's because the price/yield curve is concave up (like a y=1/x curve) - equivalently, that it has positive convexity, or its second derivative is positive. So the further you go out on the curve (the higher rates go), the shallower the slope, and the less the price changes for each additional basis point of interest.
But MBSs are different. They can even have negative convexity, meaning that the higher rates go, the faster the NAV changes. MBSs tend to be good in a slowly changing interest rate environment (as we seem to have now), but can misbehave when rates change quickly.
Just another reason why choice of managers is important, and why even core plus bond funds have a lot flexibility that they can use to good advantage or to hang themselves.

Duration was one of the factors I went into ASDVX. It's a new fund but American Century brought in Marge Karner who is not as well known as Gundlach or Fuss but nonetheless has experience. She heads a team of four other managers. Currently the duration is 1.9 years. There is another fund with the same concept, ASIEX and that one has a duration of 4 years.
I do like these unconstrained bond funds but as with most questions, you will get differing answers. It depends on the funds themselves. This is new territory we are heading into so who knows what will happen.
Thanks @jerry and @BobC for your responses.

@willmatt72, I wondered about that myself as I saw the charts of these two side by side. It looked like YAFFX took just as big of a hit as the other too but it would be hard to determine their holdings at that time period.

The periodic moment to cash of YAFFX is why I have bought and held it for years :)