FYI: Copy & Paste 714/14: Gregory Zuckerman & Kristian Grind: WSJ:
NEWPORT BEACH, Calif.—In early June, before hundreds of employees at Pacific Investment Management Co.'s new 21-story headquarters here, Chief Executive Douglas Hodge spoke effusively about Bill Gross's enduring passion for investing.
"Forty-three years ago, he founded Pimco with a vision and a fire in his belly, and we are living that vision today," Mr. Hodge said, with the 70-year-old Mr. Gross, the firm's chief investment officer, standing beside him. "We all owe so much. Thank you."
Employees gave Mr. Gross a standing ovation. The two executives shook hands, almost hugging, according to people in attendance. It was a show of warmth at the bond giant known for its high-pressure environment and a display of unity amid a closely watched leadership transition.
Behind the scenes, however, strains persist more than six months after the abrupt January resignation of Pimco's previous CEO, Mohamed El-Erian, according to people familiar with the matter.
About three months ago, a group of Pimco senior executives became so concerned about Mr. Gross's dealings with the media that they warned him to stop making public comments they viewed as divisive, according to people familiar with the matter. Mr. Gross, the face of a firm that manages $1.97 trillion and its star investor, has threatened to quit more than once since Mr. El-Erian's March departure, including after that warning, the people say.
A key reason for the tension: Clients continue to leave Pimco and, in particular, Mr. Gross's fund. His Total Return fund, the world's largest bond fund, saw $4.5 billion of net investor outflows in June—its 14th consecutive month of defections—despite outpacing two-thirds of it rivals in the second quarter, according to fund-research firm Morningstar Inc. MORN +0.49% Over that period, investors pulled $64 billion from the now-$225 billion fund, an amount that dwarfs the total size of most mutual funds. The withdrawals came as investors, industrywide, added money to bond funds. Pimco has suffered net outflows across all its mutual funds for the past 13 months.
Six months after then-Pimco CEO Mohamed El-Erian resigned, do tensions still continue internally with co-founder Bill Gross? Gregory Zuckerman discusses on the News Hub with Sara Murray.
Mr. Gross has expressed frustration with those on Pimco's business side, according to people familiar with the situation. At a partner meeting in early June, Mr. Gross challenged Mr. Hodge, who joined Pimco in 1989, about the company's business strategy.
"There's a committee" looking into ways to improve sales and retain clients, Mr. Hodge answered, according to people in attendance.
"You should know" what steps are being taken, Mr. Gross replied sharply, these people say.
Some viewed Mr. Gross as being unduly critical of Mr. Hodge. In an interview June 30 at Pimco's headquarters with Mr. Hodge by his side, Mr. Gross said he has questioned Mr. Hodge, but that the firm has a history of encouraging spirited debate, a point echoed by other Pimco employees.
"No one here is afraid to say what's on their mind. Have we had disagreements? We've had debate for 40 years," Mr. Gross said
In a July 7 written statement, Mr. Gross said he has offered to resign "several times" over the past seven years—including when Mr. El-Erian submitted his resignation, when he tried to persuade Mr. El-Erian to stay. On Thursday, in a new statement, Mr. Gross said: "I have never considered leaving the firm" other than to allow Mr. El-Erian the sole chief-investment-officer responsibility.
In a separate, joint statement July 7, members of the executive committee said it never took up the matter of Mr. Gross leaving. The committee called Mr. Gross a "vital leader" and "an extraordinary asset for our clients." Mr. Hodge said Mr. Gross continues to be the firm's primary spokesperson and has "maintained a regular presence in the media throughout this year."
Both Messrs. Gross and Hodge said the transition to a new leadership team is going smoothly. Traders say Mr. Gross has been a calmer presence in recent weeks than at times in the past, helping boost morale. And Pimco's investment performance has improved, leading some executives to feel the firm is close to weathering the recent storm.
Mr. Gross has begun to allow others to share some responsibility, appointing six executives as deputy chief investment officers. The deputies now take turns running investment-committee meetings, held four times a week. Previously, Mr. Gross and Mr. El-Erian split that duty.
"The table is more evenly balanced" than when Mr. El-Erian was at the firm, Mr. Gross said in the June 30 interview. "We needed some additional chefs and cooks. It's working really well."
Making sure Pimco's new leadership structure succeeds is crucial because some investors have said they will decide whether to pull their money based on how well new management operates. "We're waiting to see how the management change plays out," said a spokesman for the Florida State Board of Administration, which has about $400 million at Pimco and is reviewing its investment with the firm.
In many ways, Pimco, a unit of German insurer Allianz SE, ALV.XE +0.81% is still dealing with the aftermath of the departure of Mr. El-Erian, who continues to serve as an adviser to Allianz.
After The Wall Street Journal reported in February that a tense relationship between Mr. Gross and Mr. El-Erian led to the latter's departure, Mr. Gross told Reuters that Mr. El-Erian was trying to "undermine him" and that he had evidence Mr. El-Erian "wrote" the Journal article—a claim the Journal dismissed as "astoundingly incorrect." A Pimco spokesman declined to comment.
On April 10, appearing on Bloomberg TV, Mr. Gross urged Mr. El-Erian to explain his resignation. "Come on, Mohamed, tell us why," Mr. Gross said in the interview.
The comments raised eyebrows within Pimco, partly because it was known that Mr. El-Erian had signed a pledge not to publicly address his departure. A group of senior executives subsequently issued a warning that Mr. Gross should avoid inflammatory public comments, according to people close to the matter.
In addition to threatening to quit, Mr. Gross told people he was considering resigning from Pimco's executive committee, which leads the firm, though he has since changed his mind, according to people familiar with the matter. In the July 7 statement, Mr. Gross said he made it clear to the executive committee that "if they ever should choose to pursue another direction for the firm, for whatever purpose, I would resign if it would be in the best interests of our clients."
Spirits have improved lately. Mr. Gross's Total Return fund, following a year of spotty performance, posted a return of 2.4% in the second quarter, thanks to a prescient bet on rising U.S. government bonds. That compares with 2.05% for its benchmark, the Barclays U.S. Aggregate bond index, according to Morningstar. It still lags behind 71% of rivals this year, though the fund's 15-year record beats 96% of peers.
"My attitude is, 'We'll show ya,' " Mr. Gross said during the interview at Pimco's headquarters, while wearing an unknotted blue tie he says was a present from Mr. El-Erian. "I'm not leaving until we show everybody that this new structure is better than the old structure."
"Don't count me out," he added.
There are signs Mr. Gross is maintaining at least some of his former approach. In mid-May, during a meeting of about 20 Pimco executives at the firm's investment committee, Mr. Gross halted Jeremie Banet, a French-born executive vice president and portfolio manager, while he was sharing his views.
Chief Executive Officer Douglas Hodge Bloomberg News
"I never understand what you're saying," Mr. Gross said, according to people in the room. "Ever."
A day after the exchange, Mr. Banet announced his resignation and said he planned to operate a food truck selling croque-monsieur sandwiches in Los Angeles. In an email, Mr. Banet said there was no connection between the meeting and his departure from Pimco. He said he has "enormous respect and admiration for Bill Gross."
In a July 10 statement, Mr. Gross said: "On that day, Jeremie was sitting at the far end of the table and I was unable to hear what he was saying. I have always respected Jeremie professionally and I like him personally."
Last month, Mr. Gross gave a keynote address at a Morningstar conference in Chicago. Donning sunglasses, he singled out media organizations in the room and said, "Repeat after me: Bill Gross is the kindest, bravest, warmest, most wonderful human being you've met in your life."
The widely circulated comments were criticized on some blogs and via social media.
Mr. Gross says that, one day later, he told hundreds of Pimco employees at a town-hall meeting in New York: "I wish I could do it over again. I wouldn't have worn the sunglasses."
"Hey, I'm not perfect," he says he told the employees.

The problem is he has been saying it for like 50 years !!!
Just like I keep telling my wife one day I will grow hair. I really will one day I'm sure of it. IT is just that it when it does happen I will not find my comb.
So time will tell. One statement Faber makes I agree with though. "once in your lifetime you will be right is true of everyone". And he is just following that. One day he will be right. If we keeps saying it often enough, maybe people will only remember the last time that he said it, which will probably be worth a few billion dollars of assets under management.
It's all good.
One thing I want to know though. "Renowned Swiss Investor". Forget the Cheese. Someone tell me what he is renowned for? Always claiming the sky is falling?

@OS,
Did ING sell to Voya? LEXCX is now Voya Corporate Leaders...75 years of boring success.
Breif History of LEXCX:
youtube.com/watch?v=j85wxkl9544
And here at MFO:
mutualfundobserver.com/2011/07/ing-corporate-leaders-trust-b-lexcx/

PONDX moves monies as needed. From recall, about 1-1.5 years ago, the overwhelming major of the fund was invested in one form or another in the U.S. mortgage areas.
I fully trust the manager's and their abilities over the past severval years of our holding the cousin fund of PIMIX. This remains one of our largest bond holdings.
Derf's note above about holdings is from the "mothership" web site. No need to check M* first? Pimco's web site has a decent layout to obtain their data.

I'm relatively bullish too. For me, near the end but not quite there yet means another couple years, and probably another 200-400 points on the S&P before we get another bear. But considering how far we've come, even 400 points would stil put most of the gains in this bull in the past.
My point was that retail investors starting to pile is trditionally an indicator we're in the 7th inning or so, but not quite at the end of the game. It's when folks at cocktail parties are bragging over how much they made ever since they finally bought in last year, and spontaneously offer you some tips, that we're at the end.
That's my guess, anyway!

FYI: Its style exposure has shifted over the years, but the fund has delivered a 14% annualized gain since inception and is a good supplement to a large-cap-focused portfolio.
Regards,
Ted
http://www.morningstar.com/cover/videocenter.aspx?id=655212
M* Snapshot Of PLPSX: http://quotes.morningstar.com/fund/f?t=FLPSX&region=usa&culture=en-US

Not a stupid question at all. I had to go to their website and look at a few of their other 7-Year Forecasts. I'm almost certain it's annualized return.....not the cumulative return over 7 years. But remember, these are real returns, so add inflation to these numbers to get the nominal return. One reason I'm almost certain it's annualized return: look at the dotted red line, 6.5% historical long term US equity return. That's the annualized long term real return of US stocks. Add inflation in, and you get the typical numbers you see for the past, for very long term US stock performance, say approximately 9.5% or 10% annualized.....with the very long term inflation numbers being somewhere around 3 or 3.5 or 4%, depending on time period.
You mentioned small cap: Not pretty! And the area that people seem most cautious about, emerging markets.......interesting.

In my periodic scan of SAIs, I have now discovered Anne Gudefin owns $0 in her fund. For a manager of Mutual Series fame, to not own a single penny in the only fund she manages. This is very disheartening. I've been trying to find funds I could truly buy and hold doing my research, and then this happens.
Either I did not read SAI properly when I bought the fund which was a while back or she owned shares at one point to sucker investors in and now has sold off all her shares. Needless to say PTHDX now becomes an automatic sell for me. Not sure there is much interest in this fund. I searched for PTHDX and the only link I got was November report in which M*'s Russ Kinnel touting this fund as one of best 3 funds opened recently. That should really have given me a clue.
This sucks most intensely. I will be observing PTHDX weekly looking for good point to sell, but regardless it'll be gone by years end. I now also need to look carefully at CVLOX which I also planned to sell, but here despite Gary Black of Janus infamy, managers at least own their fund.

Sorry for stupid question. Is GMO saying TOTAL small cap return over 7 years will be -5 percent, OR year over year?

I think chances are now high for a market correction of 60%. I think next buying opportunity is 2017.
Lest anyone asks I have right to pull out stuff from my behind just like anyone else. I can point to S&P 500 returns for last 5 years and say it always pays to be fully invested in the market.
Now let me go find out what a "bear market fund is". If its HSGFX, maybe I should buy more. If it is BEARX, I need to think.

FYI: dDoomsayers, the guys who believe that every breakthrough is one step closer to a turning point.
As a result, a raft of prognosticators has come out in the last few weeks saying to expect everything from a mild downturn (buying opportunity) to a reason to protect profits and move to cash to a looming decade of financial pain and misery.
It’s enough to get investors thinking about buying a bear-market fund
Regards,
Ted
http://www.marketwatch.com/story/think-twice-before-you-invest-in-a-bear-market-fund-2014-07-14/print?guid=AD8EC752-0B54-11E4-B65E-00212803FAD6
The Average Bear Market fund Returns YTD-One Year-Three Years Five Years:
YTD: -(9.77) %
1. -(26.02)%
3. -(23.72)%
5. -(28.30)%
M* Bear Market Fund Returns;
http://news.morningstar.com/fund-category-returns/bear-market/$FOCA$BM.aspx

FYI: When most of us imagine retirement, our minds wander to what we’ll get to do then that we don’t have enough time for now. If we’re lucky, we can push the uncertainty of our investment.
Regards,
Ted
http://www.nytimes.com/2014/07/12/your-money/saving-for-a-bucket-list-thats-likely-to-evolve.html?ref=your-money&_r=0

So, looks like OAKMX recovers (surpasses previous peak) maybe 3 years sooner than laggard WQCEX, as seen below in M* chart:

MaxDD or Maximum Draw Draw is to me only half of the story.
Markets move up and down. Typically the more aggressive the fund the more likely it is to have a higher MaxDD. I get that. What I find "knocks me out of a fund" in a down market is the funds inability to bounce back.
When managers employ strategies that reduce the timeframe after a MaxDD (employing cash, being defensive then aggressive, etc.) they can shorten the duration a fund stays in the MaxDD phase. To me, the phase ends when the fund returns to a previous level of growth. As an investor, a fund that employees strategies to shorten the duration it stays in MaxDD stands a chance of having the investor "hold on for the ride" and not bail on the fund at the very worse time.
I have owned some "dead cat funds" over the years (Vanguard US Growth comes to mind) and I have had to bite the bullet and sell after years and years of underperformance after it initially bottomed. I appreciate managers who understand that investors need a reason to hang on when funds are phasing back to growth, but as I age I don't bounce back as quick from a fall. In my opinion, the shorter the phase the better...my funds need to be a little sprier and I.
Anyway, I would love your candidate for a fund that despite it's MaxDD it maneuvers the rough waters quickly even as markets cycles and market valuations changed. What's your shortest Duration MaxDD fund?
Here's two aggressive growth funds POAGX (MC/ LC) and BUFOX (Micro Cap) that have very different "return to growth phase durations:

FYI: Cope & Paste 7/11/14: Kristian Grind: WSJ:
Choices Including Nontraded Real-Estate Investment Trusts and 'Liquid Alternative' Funds Have Numerous Risks
Regards,
Ted
Mutual funds that try to emulate hedge funds. Exchange-traded funds that use borrowed money to jack up their bets. Real-estate investment trusts that are hard to unload. Structured notes that look like conventional debt but can be far more risky, and "go anywhere" bond funds that are prone to trade safety for yield.
All these investments have at least one thing in common: They have seen their popularity soar recently as investors seek protection from perceived market dangers—or as fund companies market them heavily. They also are hard to understand, lack transparency, are expensive and don't have proven performance records.
In interviews, financial advisers, analysts and industry experts frequently said these investment types should be treated with extra caution by investors.
"Anything that is complicated is not something that the typical investor should buy," says Samuel Lee, an analyst at Chicago-based investment-research firm Morningstar MORN +0.44% who specializes in ETFs. "There are more opportunities for sophisticated players to take advantage of you."
To be sure, these investments can perform well and could have a place in a portfolio—albeit a small one—as long as they are used correctly. There are plenty of other risky investments marketed to individuals that aren't named here—foreign-exchange trading or options trading, for example.
Investors should ask several questions before they plunk down their money, says Robert Hockett, president and wealth manager at Atlanta-based Cambridge Wealth Counsel, which oversees $260 million in assets: Is it clear what the investment does? Does it come with high fees? Can you sell it easily? And does it have a proven record?
Here is what you need to know about the five investments—and some safer alternatives.
Liquid-Alternative Funds
"Liquid alternative" mutual funds typically employ hedge-fund-like strategies but don't come with the same restrictions. There isn't a high investment minimum, for example, and the funds aren't as difficult to exit as traditional hedge funds.
The category encompasses several different subsets, including so-called long-short funds—equity funds that hold long positions in some stocks while betting against others, and managed-futures funds, which bet on futures contracts. Other funds use leverage, or borrowed money, to ramp up their bets.
Liquid-alternative funds have skyrocketed in popularity, with investors pouring $40 billion into them in 2013, up from $14 billion the previous year, according to Morningstar. This year through June, they have taken in $14.6 billion.
Fund companies say they offer investors a chance to diversify their portfolio and capture at least some of the upside of stock returns in good markets while offering protection in down markets.
But skeptics say the strategies often are too complicated for the average investor to understand, and many are too new to have a proven track record. They also come with high fees: an average of 1.9% of total assets, or $190 per a $10,000 investment, compared with 1.2% for a typical actively managed stock mutual fund and 0.6% for a stock index fund, according to Morningstar.
"They have some ugly baggage and warts they carry," says Mark Balasa of Balasa Dinverno Foltz in Itasca, Ill., a wealth-management firm with $2.8 billion in assets under management. "Advisers are challenged to understand what they do, let alone investors."
Christopher Van Slyke, founder of WorthPointe, a wealth adviser in Austin, Texas, with $325 million of assets under management, says most of the funds he has seen pitched by investment firms don't have more than a six-month track record. He likens them to a "black box" because of their complex investment strategies.
Try instead: If you want some shelter from the risk of a bad decline in stocks, you could always keep more of your money in cash instead. It is safer and a lot cheaper.
Nontraded Real-Estate Investment Trusts
Nontraded real-estate investment trusts are similar to their public counterparts, which trade like stocks and allow investors to invest in an array of commercial properties.
Lately, nontraded REITs have been going gangbusters: In 2013, they raised $19.6 billion, up from $10.3 billion in 2012, according to Robert A. Stanger & Co., a Shrewsbury, N.J.-based investment bank that tracks the industry. Through June of this year, nontraded REITs have raised $8.8 billion.
Investors are attracted to them because of their high dividends—generally as much as 7% on invested capital versus 3% to 4% for publicly traded REITs, according to Green Street Advisors, a research firm in Newport Beach, Calif.
But nontraded REITs can be hard for investors to unload during a real-estate downturn, advisers say. The investments have become a concern of the Financial Industry Regulatory Authority, the industry's self-regulator. Because they are generally illiquid, their performance and value are difficult to understand and the cost is high, the agency has warned.
Disclosure is murkier than with publicly traded REITs. While nontraded REITs report their holdings quarterly, investors don't initially know more than the general asset class they are investing in when they buy in—what is known as a "blind pool."
What's more, say experts, because the REIT isn't trading publicly, it is hard to gauge its value until a liquidity event occurs, such as when the REIT is sold, merged or publicly listed, although the REITs typically use appraisals to report the share value after the offering closes.
Fees also are high, as much as 11% in initial sales charges to pay the retail broker, the dealer and the back-end costs of putting the REIT together, according to Stanger.
Nontraded REITs have a mixed track record. Of seven deals that were merged or sold in 2013, four are worth more now than the initial issuing price of the shares, according to Stanger. A $10 share in the Chambers Street REIT, for example, would now be worth $8.04, while a $10 investment in the Cole REIT would be worth $13.56.
Try instead: Publicly traded REITs aren't nearly as risky and are far more transparent, and they can be a good diversifier in a portfolio, experts say. A mutual fund that holds a basket of commercial real-estate companies also can provide exposure to the market and is liquid, says Dave Homan of Willow Creek Wealth Management in Sebastopol, Calif.
The $24 billion Vanguard REIT ETF, VNQ +0.01% for example, whose holdings include property developers and REITs, has returned an average of 10.5% over the past three years as of July 10, according to Morningstar. The ETF has an annual expense ratio of 0.1%, or $10 per $10,000 invested.
Graphic; http://online.wsj.com/news/interactive/INVESTOR0711?ref=SB10001424052702304642804580015090303169012

FYI: Copy & Paste 7/12/14: Sarah Max: WSJ
Regards,
Ted
Just 900 fund managers out of nearly 8,000 funds have more than $1 million invested in their own portfolios. What does that mean for you?
Active mutual fund managers talk up the importance of insider ownership for the stocks they buy. It's a vote of confidence, they say, when CEOs put their own net worth on the line.
It stands to reason, then, that mutual fund investors would ask the same of their managers. "It's a positive indicator when managers invest in their own funds," says Stan Mavromates, Americas chief investment officer at Mercer. "It shows real conviction in the stocks and bonds that they're picking."
Since 2005, the Securities and Exchange Commission has required annual disclosure of manager ownership in a fund's statement of additional information. The numbers are given in ranges, from $1 to $10,000 on the low end, to more than $1 million at the top, and they're easy to pull up using Morningstar's FundSpy tool.
The results are shocking. Of the 7,700 funds tracked by Morningstar, nearly half are run by managers who don't have a single penny in their own funds. There are valid reasons to give some managers a pass -- managers of target-date funds or single-state muni bond funds, for example. It's also reasonable for managers of sector funds or niche strategies to have somewhat smaller stakes.
Zero ownership, however, should give investors pause, says Russel Kinnel, Morningstar's director of mutual fund research. And that's what some 35% of U.S. stock funds have, according to Morningstar data. "I can't imagine having 35% of my portfolio invested in companies whose CEOs don't own any stock in their company," says Chris Davis, head of the employee-owned Davis Advisors. All five stock Davis funds have more than $1 million of manager money invested.
WHILE A GOOD DEAL OF RESEARCH has been devoted to the relationship between stock performance and insider ownership, little has been done on the relationship between ownership and performance in the fund world. "We're just starting to test the predictive power of management," says Kinnel. In a 2008 analysis, he found that managers of funds recommended by Morningstar had, on average, $354,000 invested in their own funds. The average stake for managers of funds panned by Morningstar: $52,000.
Fund companies, for their part, don't require managers to own their own funds, but most encourage it. Fidelity says that more than two-thirds of actively managed public funds are run by managers with at least $1 million invested in those portfolios. At Janus, managers are prohibited from owning individual stocks, and incentive pay -- roughly a third of total compensation -- goes straight into the funds they run, to be vested over four years. Managers have the option of reallocating to other funds, but most stay put. "I've never sold a share of the funds I've managed," says Jonathan Coleman, who has more than $1 million in the Janus Triton (JANIX) and Janus Venture funds (JAVTX).
High levels of ownership are particularly common -- and especially important -- at boutique firms, which often offer more "high conviction" funds. The more a manager touts his stock-picking, the more of his money should be in the fund. All but two of the 14 funds at Artisan Funds, for instance, are run by managers who have at least a million bucks in their portfolios. "Everyone here has the feeling that it is their business," says Dan O'Keefe, co-manager of Artisan International Value (ARTKX) and Artisan Global Value (ARTGX).
All told, just 910 funds have at least one manager with a seven-figure stake -- shameful, especially for large-company fund managers. Says Kinnel: "A million dollars isn't that big a hurdle for most managers."

FYI: Contrarian money manager Steven Leuthold called it quits from the tightly regulated mutual fund business a couple of years ago
Regards,
Ted
http://wealthtrack.com/recent-programs/steven-leuthold-the-contrarians-contrarian/

Hi Bee. You know as well as anyone that, as goes gold and treasuries goes PRPFX. It's positive history over the past 10-15 years is due to positive trends in those categories. I believe those days are gone, so I sold this fund about 2 years ago. Could be a good short term hold to park money, but there are better conservative vehicles for longer term investors, IMHO.

Since you are thinking about capital preservation, and maybe PRPFX has a bright short-term future (as you suggest), sure, and maybe even longterm, I nonetheless suggest that you graph its last year against GLRBX, PONDX, and, oh, AOM. Looks okay, not great, but quite okay. Then do the same for two years.

@rjb112.
Yes sir. Meb fan I am.

How then do you think investors should use the Shiller P/E in their investing decisions?

Every now and then, I fear Mr. Faber does sound a little like a Cape Crusader. But I think I most align with his preference to find the intersection of value and momentum.
Aloca AA comes to mind this past year. BAC last couple years.
If I jump-in on low valuation only, even if I really like the company, I'll have it on a short leash. There is just so much unknown. Always.
But once the stock gets some altitude, thanks to momentum (be it due to earnings or group think), I'll try to use 200 day or 10 mo SMA. If it dips below that, I'll look to exit.
If momentum turns a 1 bagger to a 2 bagger to a...10 bagger. I will try to stay with it regardless of valuation and use only momentum to determine whether to remain or exit.
So, I guess the short answer is: I seem to be most comfortable entering a position when it has both value and momentum, but once established, momentum is the driver.
That's what seems to be working for me these days. FWIW.
Hope all is well.
c