Somewhere I have an article by an academic (ugh!) that of all the indicators out there for the equity market, the best is the junk bond market. I have never been real enamored of that one as my introduction to junk bonds was in January 1991. Back then equities were coming out of a 3 month mini-bear market and *led* the junk bond market out of one its worst bear markets on record. However, in 2008, that historic bear market in junk ended in mid-December 2008 while equities didn't bottom until early March 2009. So back then junk indeed was the leader. This time around, the average junk bond open end fund and the junk bond ETF topped in late June/early July. There was much made back then about how the small time investors had panicked while the smart money swooped in and picked up the pieces. The smart money (never met them in over 45 years at this game) is not looking real smart right now as junk is getting ready to take out its recent lows. And in the chart below of one of the junk ETFs ( a really ugly chart) that low has already been taken out.
Note: My comments are meant as philosophical entertainment only. I have found my opinions and the opinions of any other talking heads are pretty worthless when it comes to accumulating wealth. No one, absolutely no one can predict or forecast with any consistent accuracy in the short run. That's why I listen only to the action of the market itself and adjust my positions accordingly. I would hate to think where I would be had I listened to my own opinions or the opinions of others over the years.
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=hyld&insttype=&freq=&show=

FYI: Emerging-market stock mutual funds are clear performance winners over the broad stock market in the past 15 years.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTg0OTcxMTg=
Enlarged Graphic: http://news.investors.com/photopopup.aspx?path=WEBlv0923_1K.gif&docId=718527&xmpSource=&width=1000&height=1152&caption=&id=718464

FYI: Small-cap core mutual funds, which invest in both growth and value stocks, have outperformed their midcap and large-cap peers in the past 15 years.
Regards,
Ted
http://license.icopyright.net/user/viewFreeUse.act?fuid=MTg0OTcxMTE=
Core Fund Over Past 15 Years Enmlarged Graphic;
http://news.investors.com/photopopup.aspx?path=WEBlv092514.gif&docId=718916&xmpSource=&width=1000&height=1152&caption=&id=718914

This is not good at all. Combined with the recent news this is not a company I would wish to invest with. That is sad because just a few years ago Pimco had the perception of being a class company.

A few highlights:
The management seems sensitive to lackluster performance of Acorn funds and treated us as adults, explaining in depth more of their approach.
A few snippets:
1. ACRNX performance seems partly joined at the hip to M&A activity. More of its holdings became takeover targets this year (repeatedly referred to as "takeout," which sent the aging audience into 10-minute revery on Peking duck) than in previous 18 months; portfolio managers very excited about that.
2. In their purchased-equity field, companies with low PE and poor earnings or negative earnings did slightly better than others over past investment year (begins midyear, maybe), but their GARP philosophy led them to purchase slightly higher up the PE and earnings ladders, generally, and not to overweight the lower end. The fund, ACRNX, still benefited from bounces at the low end. (The differences were very slight, such as 25% and 26%, not 10% and 60% -- in terms of buying low PE + neg or small earnings versus higher up the ladder.)
3. Company philosophy is to ignore macroeconomic events (at least as decision drivers).
Answers to audience Qs:
1. Where to put $10k? Ask a registered investment adviser.
2. Long bull market run: going to cash? No. Mngt does not time cash. It is up to investors to sell their own holdings and go to cash. (Per M*, ACRNX, ACINX, and CEFZX all hold zero cash.)
3. Doing what else? Harder to find great cos. with no problems. So portfolio managers are looking for companies with good business model and some problems that co. mngt might be able to turn around in short- to mid-term (within 5 years).
Cookies; wraps, with and without meat or cheese; coffee, soft drinks, iced tea. Free coffee mug.

I think most are. The trick is whether or not you have a US address. That would be the key for any future expats. A US address and a US bank account. I've had no issues with Schwab. Expat for six years now.
Edit: I should add that filing a tax return would be another factor.

From Junkster's linked article: "The yield on the two-year note, which rises when bond prices fall, dropped to 0.537% during today’s market action."
Folks, that's before your short term bond fund takes its cut (the ER). So, that "safe" investment's going to earn you essentially nothing. OK - Should Armageddon occur within 2 years, prices might spike higher.

Well, as usual, I just shot my mouth off without worrying too much about the actual numbers, so when I looked into it, I was happy to see that I was correct.

@dryflower, Morningstar just came out with an article on the subject.
http://news.morningstar.com/articlenet/article.aspx?id=665790
When Will Quality Bounce Back?

These funds' lackluster recent performance doesn't tell the whole story.
"Left behind the past few years have been many funds focusing on "quality" stocks, generally defined as those that are highly profitable, generate a lot of cash, and have strong balance sheets"

A few thoughts.
1. Of course, Fed dialogue and actions have an effect on my investments.
That said:
2. You have a market where people are making their choices (not saying that people here are, just sayin') increasingly based upon what the next words out of Yellen's mouth may be and I think that's the continuation of a market that is reliant to a concerning degree upon not only Fed action, but even the slightest of Fed discussion. The level of Fed speculation (the whole thing recently about whether "considerable time" would be changed or not) has gotten ridiculous. The view that bad news is good news because that means the Fed will be easier longer is dismaying for a number of reasons, a big one because it's focusing on the ultra short-term in an economy that I think desperately needs to plan a route for a sustainable long-term.
3. If you are all Asia because that's what you believe in, own it and accept the potential volatility and potential under/outperformance if something effects that region. If you are all income of various shapes and sizes because maybe you feel like its appropriate for your age or compound interest is one of the few things closest to an investment guarantee, own it. Know that Fed action will have a significant effect on your holdings, but believe that those in charge of your holdings are actively trying to prepare for the eventuality - and as some people (Heebner of CGM Focus, for example) have found out, the "inevitable eventuality" is not happening nearly as quickly as they thought it would. Have the longer term view and continue to reinvest in income holdings if you get lower levels.
Own your best ideas, whatever or whereever they may be. You don't have to own them for decades, but I do think Buffett's "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years" is a good question to help filter out things you are trying to decide whether or not to invest in.
So yes, what Yellen says and does has an effect. If you are making decisions based upon what Yellen may say next, I just think that's only going to result in unnecessary stress and problems.

I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

Great resources from the Fed, LLJB. Thanks for posting that.
The historical Fed Funds rate was very interesting. Last month is shows the Fed Funds rate was 0.09%. In June 1981 it was 19.1%. That gives plenty of information for interest rate and bond market forecasters to work on.
You're right, it would be very instructive to compare changes in the Fed Funds rate with what happened to the 10-year bond. Or just a comparison between the Fed Funds rate and the 10-year Treasury. Hmmm....maybe Charles would love to sink his teeth into that data.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I agree with you Dex. The economy would have to be doing very well for that to happen. But we are talking bonds, not stocks. Yeah, the economy doing very well would be great for stocks, and I hope that's exactly what happens. And in the scenario you mention, "2.5 years to run it up to 3.75", bonds would tank big time. Certainly the U.S. Aggregate Bond Market Index. In that scenario, junk bonds probably do OK. And corporates much better than Treasuries.
Personally, I have no forecast for interest rates, the bond market or the stock market. I'll leave the forecasting to others.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I believe, although I couldn't find the details again of what I've read, that two of the most hawkish members of the Fed, Fisher and Plosser, will rotate off as voters next year. This should make the Fed more dovish on balance. At the same time, Yellen has shown herself to be pretty dovish so far and to the extent that history provides any evidence, the Fed's chairperson usually gets what they want even though there's a committee that "votes" on whatever the Fed does. At the press conference after the meeting finished Yellen commented on the "Dot Plot" specifically and my interpretation was that she essentially said it just reflects each member's expectations about a future that hasn't happened yet and it doesn't tell you anything about how much confidence each member has in their own projections.
In terms of what happens when the Fed raises rates, in theory at least, the longer the term the less the rate should adjust. That's because what people believe about the next 10 years shouldn't have a 1:1 relationship with what happens today (although admittedly it does sometimes) and because future rates should already discount what's expected for the future.
I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

@rjb112, A lot of bond funds have been adjusting duration recently to get ready for the inevitable raise. While bond funds will go down I think it will depend on the managers. Long term funds are obviously going to get hit worse than short term. A bond fund I recently put money in has already reduced duration from less than 3 years to a average of 1.8 years. Also, will bond funds perform better than equity funds in this same climate?

Last week, the Federal Reserve released its "Dot Plot", which is a plot of what each member of the FOMC thinks the Fed Funds interest rate will be. They think they will have raised interest rates 3.75% by the end of 2017. That's a lot, and it has big implications for bond funds. The big question: if they raise rates 3.75%, how much will the 10-year Treasury yield rise? Will it also go up 3.75% from where it is now, which is 2.57%? IF it does (admittedly a very big IF), we are going to see some big drops in the NAV of bond funds. Take the Total Bond Market Index Fund (VBMFX). It has a Duration of 5.7 years. For every 1% increase in the corresponding interest rates of the bonds in the fund, the NAV is expected to drop 5.7%. IF the yield on the bonds in the fund goes up 3.75% over 3 years, we could see a 3.75 x 5.7 = 21.4% drop in the price of the fund. Add in the yield to get the total return. The current SEC yield is 1.99%. With a rise in rates/bond yields, the bond fund SEC yield will rise, but since the average bond in the Total Bond Market Fund has a maturity of 7.8 years, it should take a long time to clear those bonds out of the fund for the yield to rise enough to significantly offset the NAV drop. Not a pretty scenario for the bond market.
Your comments please!
http://blogs.marketwatch.com/capitolreport/2014/09/17/dot-plot-shows-fed-will-be-quick-about-raising-rates-once-it-starts/?mod=MW_story_top_stories

Did a little shuffling/position size changes in existing positions but otherwise not doing anything. I'm finding very little of interest and only adding a little to "best ideas" - things I can see holding for 5 years or more. Just continuing to reinvest divs.

Hi Tampabay,
Sorry to learn that your situation is such that you have severely constrained options relative to active/passive fund decision-making and changes.
Unless you are an especially adroit mutual fund manager screener, the price that you are likely to pay for assembling an actively managed fund portfolio rather than an Index dominated portfolio hovers around 1% annually.
The 1% penalty is not a random number that I invented. It is a general average that I gleaned from the Monte Carlo studies reported recently by Rick Ferri. I have referenced this body of work earlier, but it is worthwhile to revisit it now. The title of the report is “The Case for Index Fund Portfolios”. Here is a Link to it:
http://www.rickferri.com/WhitePaper.pdf
The Ferri Whitepaper is based upon a series of Monte Carlo-based simulations that used real world fund data for various recent timeframes. Each Monte Carlo separate case used 5,000 random fund selections to construct a portfolio. Actively managed fund portfolio performance was measured against equivalent passively managed Index products.
The Monte Carlo analyses were completed for 3-fund, 5-fund, and 10-fund portfolios. Different timeframe data were also explored.
The actual numbers changed for each simulation, and are nicely summarized in the referenced paper. Especially meaningful performance summarizes can be found in Figure 1 and in Table 6. You should check these out. Specific numbers change as the number of funds dimension and the timeframe dimension changes.
In these various cases, Index portfolios outdistanced actively managed portfolios in 82% to 90% on the instances. In those cases when the active funds outperformed the Index portfolios, the excess positive returns where one-third to one-half the negative excess returns in the failed instances.
As a very general summary, a portfolio constructed with actively managed funds will deliver approximately 1% less return than its Index equivalent. That’s the sad news.
The good news is that the active managers do recover some of their operating costs with perhaps a mix of superior stock selection and/or effective market timing of entry/exit points. Although persistent performance is an issue, a small cohort of active managers do deliver positive excess returns (Alpha) over complete market cycles. That’s the real acid test.
I wish you success in identifying this small cohort. Low cost is one indicator even endorsed by Vanguard. Michael Mauboussin has also stated that fund managers seem to generate peak outcomes in their early 40s. Perhaps an age criteria, like centered on 43 years old, would aid the search process.
Good Luck and Best Wishes.

Not giving up my Active managers for index funds, sorry I can't afford it

Tampabay,
I have a good friend with the same problem. She bought a few good actively managed funds in mid 2009. However, the funds have underperformed their benchmarks for the past few years, but because of the unrealized capital gains, she too can't afford to sell.
In retrospect, she would have been better off with a total stock market index fund and concentrated on her tennis game.
Mona

Hi Guys,
Active mutual fund management is certainly not dead, and will never die.
Why? Active managers are experiencing some tough years, investors are abandoning them in droves, and academic/industry research paints a dismal picture. The simple answer is human hubris. Nobody readily accepts average performance; almost all of us reside in Lake Wobegon. Or at least we want to believe that’s true.
Outcomes are the sum of skill and luck components. That’s not my model. Michael Mauboussin advocates this model and writes extensively about it. He uses numerous sports analyses to illustrate his findings. His overarching conclusion is that overall skill levels are increasing to a point where performance differences are small. That means that outcomes are more dependent upon luck factors since skill neutralizes itself.
Mauboussin uses ballplayer and superstar Ted Williams as a prime example. Williams was the last player to hit 400 for an entire season. He believes that record will stand forever because the skill normal distribution has become very spike-like in character; its standard deviation has decreased substantially over the past decades.
Whereas, in Williams’ playing days a plus 4-sigma performance was needed to reach a 400 batting average level, with today’s crunched higher skills, an unlikely 6-sigma performance is required to achieve that lofty 400 hitting zone.
Similarly, the professional investors today would likely outperform those from yesteryear. Now professionals are better trained, better informed, have huge staffs, and super computers. All professionals benefit from these pluses about equally, and any resultant perceived advantage tends to cancel each other out.
Seeking Alpha is a more challenging task given the competency of the players. It’s a tough game, but animal spirits keep many players in it. “Average” is just not the American way. Note that today 70% of the trading is done by professionals. Where does that place us individual investors within the skill-luck spectrum tradeoff in a relative sense? We know more, but so do these pros.
I mention Mauboussin because he has written many books that touch on this subject. His “The Success Equation” is devoted to this topic. I have not read it. But I have read a lengthy report that Mauboussin composed that formed the basis for his book. The title of the article is “Untangling Skill and Luck”. Here is a Link to that work:
http://vserver1.cscs.lsa.umich.edu/~spage/ONLINECOURSE/R15SkillandLuck.pdf
It’s a very nicely written report. It contains many investment lessons that could benefit you guys. I recommend you download and absorb it.
Best Regards.

@rjb112: "The Fed just revealed yesterday that the Fed Funds rate, currently 0% to 0.25%, is expected by the Fed to be at 3.75% at the end of 2017. If the corresponding rates of the bonds that the DoubleLine Long Duration Bond Fund will invest in also increase 3.75%, the NAV of the fund would be expected to drop close to 37.5%."
why do you think that the overnight fed rate has anything to do with the long term interest rates?
in terms of timing of the launch, it is curious. however, if he thinks that the long rates are to go up in the short term due to the improving economy and exit of the large buyer (the fed), and then will stabilize for many years at around 4.5%, then he might get a good entry point during the next 6-8 months as the fed purchases subside and the first overnight rate hikes get implemented. also, the rising equity markets caused many previously underfunded pension schemes to get close to the fully funded status. most of them went to their respective boards and investment committees to ask for the 'de-risking' mandate. as more of them get this approved, there will be a huge demand for the long-term treasuries and IG corporates. so, may be, just may be, he has a vision and perspective that some on the retail side simply lack?