>> Small caps are wildly overvalued and will likely lead the next decline. I would never advise initiating or adding to SC exposure here.
I have been reading this every six months or so for the last several years. Just graphed PENNX, FSCRX, WEMMX, and GABSX 10/9/8/7/6/5/4/3/2/1y to calm myself down.

What is going on at Third Avenue Value Fund does not inspire confidence. The old manager, Ian Lapey, is out with still no explanation or information. The new manager's start date I believe, was June 10th. Not much to go on. (Why does Jang Sung-taek keep coming to mind?)
The new manager, Chip Rewey, is new to Third Avenue. Who knows? One can only surmise, guess and assume.
My guess is simply that Ian Lapey got fired because Marty Whitman was disappointed in him or his performance, for some unknown reason or reasons. If Marty still makes these decisions, that is. Do we know?
I certainly have no criticism for anyone who decides to cut and run right now.
This is how I am handling it, and why.....
TAVFX is now on the shortest of short leashes. Currently, its YTD gain of 7.82% puts it in the 17th percentile in M*'s World Stock category, and it is in the 72nd percentile for the past 12 months. If and when the YTD percentile number becomes 51% or greater, I sell. On January 1, 2015 I switch to the 12 month percentile number.
That's the what. Here's my "why".
1. Inaction is always to be preferred over action, so it's time to just calm down and wait a little.
2. I have had this fund for many years, enjoy reading Marty's letters, and believe it offers a unique strategy that adds both safety and diversification (recent 70% peak to trough decline duly noted)
3. I learned from Janus Contrarian (JSVAX) that sometimes sudden management changes can lead to great results. The old manager the left for a bigger better deal I guess. It was disgusting at the time, but since the new manager started he has been absolutely kicking butt and taking names.
4. I asked rhetorically on M* board a while back "If I hold TAVFX until its 15-year percentile rank is below average, do you reckon I'll ever sell it?". Of course I don't know the answer to that question, and neither does anyone else. I hate to sell a fund that might end up being exactly what I am looking for in a fund -- above average over the long term.

As Mr. Berra once (allegedly) opined, "it's tough to make predictions, especially about the future."
That having been said, I think this one is safe: Artisan's not going to put their business model at risk by nibbling away at the autonomy of their investment teams. Three bits underlying observations:
1. Artisan is wildly successful
2. because it can attract and retain "category-killer" managers
3. almost all of whom join for the support and autonomy that Artisan promises.
Artisan officials report interviewing a couple dozen managers or management teams a year and hiring maybe one every two years. I've interviewed a number of those folks and the culture Artisan promises them is a powerful magnet (no more "management by marketers," no more micro-management, no more mandatory bloat).
Just a guess.
David

>>>if you liked what he was doing before, there's a good prospect you'll like version 2.0 considerably more.<<<
Where is cman when he is needed? I would sure like to know the basis of the above statement. Junk bonds have had their greatest bull market ever in both magnitude and duration dating back to mid- December 2008. So to no surprise, the junk bond market based on its three valuation metrics - percentage trading above par, yield, and spread to Treasuries - is by far the most overvalued in history. Only the spread to Treasuries is below its all time peak. I have spoken fondly of the Ivy junk bond fund (WHIYX) numerous times here in the past when Krug was at the helm and it was my favorite trading tool in Junkland. Krug is operating his new fund just like at Ivy with a mixture of junk and bank loan. Where was the praise and applause on this board when Krug was at Ivy and outperforming year after year? After all these years, I just don't understand the sudden Krug enchantment and to believe he will generate anywhere near the returns of the past in the present junk environment is ............

Thanks, big guy.
Will's team dropped in the quarterfinals. A tight game under, well, it wasn't anymore.
Still working on the "how do I get all this done?" thing, which explains the lack of a thread on Mr. Krug and Artisan. The short version: he's going to be very happy and well-supported there; if you liked what he was doing before, there's a good prospect you'll like version 2.0 considerably more.
As to legumes, did you ever see with the Brits do with them? I'm shaken, years ago. I'll never look a bean in the eye again.
Cheers,
David

There is an article in Pension Partners that examined trends and performance in Long/Short strategies over the past several decades and concludes that L/S strategies are a thing of the past. I've wondered that myself after viewing MFLDX's performance lately. I've cut and pasted the author's conclusions. If you are interested in reading the entire article, follow the link below.
http://pensionpartners.com/blog/?p=439
Author's conclusions:
1) The alpha-generating long/short equity strategy of the 1990’s and early 2000’s appears to be a thing of the past.
2) This is likely a function of increased competition in the space and an increase in correlation and lack of differentiation among individual equity securities.
3) Over time, the long/short strategy has essentially morphed into a lower beta, long-only product that has actually delivered negative alpha in recent years and shown an inability to protect capital during market declines.
4) While widely considered an “alternative” strategy because of the short side, investors should be questioning this label as long/short funds are behaving more and more like traditional equity investments. With a rolling correlation of over .90, it is hard to argue that they are providing any “alternative” other than a lower beta version of the S&P 500.
5) The increase in correlation to the S&P 500 over the years is likely due to herding and career risk as long/short managers appear unwilling to incur the risk of not participating in an up market. The lack of volatility and historic advance over the past two years has only accentuated this issue, with the now widespread belief that the only way to perform is with higher exposure to the market.
6) While many investors appear to be happy paying 2 and 20 for lower beta exposure, this would appear to be irrational behavior considering the relative ease at which one could replicate such an exposure at a reduced cost.
7) One such replication, consisting of a 50/50 portfolio of Utilities and Staples, has widely outperformed the long/short strategy in recent years with equivalent risk and a lower correlation to the market. While not nearly as exciting as a long/short fund with a story for each individual stock in their portfolio, this would appear to be a better option for many investors if what they seek is simply lower beta.
This analysis represents average performance and some might argue that there are still many long/short funds that have generated positive alpha over the years. I would agree that this is certainly true but would question the ability of most investors to pick such funds. Also, given the poor performance of long/short equity fund of funds in recent years, it does not appear that even professional investors have been successful in separating the wheat from the chaff.
After a 200+% gain for the S&P 500 from the March 2009 low, many long/short equity managers have naturally benefited with sizable gains. Before assigning credit to these managers for any “stock-picking” prowess, I would encourage investors to compare their results with a simple ETF portfolio of Utilities and Staples (the “Utilities/Staples Test”). The results may surprise you.
Happy investing,
Mike_E

Everyone, many thanks for the wise words.
@heezsafe, you have steadied my wavering resolve. Yes, perhaps the glorious past returns wowed me and I hoped to get those, soon, but my rational reasons for buying it were not a dividend stream (I don't need that) but the opportunistic approach plus the visceral dislike for losing money. I think your approach is wise and I intend to imitate it: since I'm low on cash, I won't add more for now, but if the 10y tsy indeed goes to 2.25%, I'll add to SUBFX.
@rjb112, I have looked at FPNIX, and it seems like a fund that successfully delivers what it promises, but my hope with SUBFX is that it will not lose money even when the market moves against it, but that when it gets it right, it will have a higher upside than FPNIX. So far, as heezsafe pointed out, it has at least fulfilled the first half of its promise.
@STB65 If I understand RSIVX right, the manager does expect to be made whole at maturity, but since he goes as far out as 5 years, he may be down in a given year. I think it's a great fund, I've got a toehold in it, but since I want to be able to tap my bond funds for fresh cash in case of a stock market dip, RSIVX is probably not as good for me as SUBFX or FPNIX.

Hard to beat Bruce (BRUFX).

We should not hijack threads. Especially we shouldn't rub salt into the wounds of old bald farts in Texas who were not able to buy this fund and been rueing their fate for last 15 years

@Ted: Thanks for posting. I often get "locked out" when I try to access WSJ articles. The secret is finding the correct URL that allows access!
@kanmani: I subscribed to Hulbert's Financial Digest for many years, and followed the performance of a bunch of newsletters for a long period, including the one you are interested in.
NoLoad FundX was one of THE VERY best performers "forever". It was always on Hulbert's list of "The Best Performers" over 1 year, 3 years, 5 years, 10 years, 20 years, etc. It could do no wrong.
Then, as I posted above, the writers of the newsletter, Janet Brown 'and company', decided to carry out their strategy in a mutual fund, FUNDX....and I posted that FUNDX has lagged the S&P 500 over the past 10 years, 5 years, 3 years, 1 year!!
Success is fickle! You said you are "considering jumping into this."
You CANNOT know in advance if this newsletter is going to outperform or underperform the market. Repeat: You CANNOT know in advance........
That's the bottom line. The newsletter has enjoyed long periods of outperformance and long periods of underperformance. You might as well toss a coin........
I wouldn't bet the farm on this, unless you enjoy betting.
But the same can be said about any active mutual fund: You cannot know in advance if it will outperform or underperform the market.
What you CAN know is that a properly run index fund will come very close to the market return. Examples include VTSMX, VTI (the exchange traded counterpart), VXUS, Vanguard Total Intl Stock Index Inv VGTSX.
The WSJ article stated that "each of the three winners lagged behind the S&P 500 in more than half of the five-year periods since 1980."
So examine in advance what you would do if you went with the newsletter and invested according to it, and then went the next 5 years lagging behind the S&P 500. Most people would not have the 'faith' to continue with the newsletter and strategy. Most mere mortals would throw in the towel and find another investing methodology.
By the way, another of the 3 winning newsletters mentioned by Hulbert was the Prudent Speculator, edited by John Buckingham. He also has 2 mutual funds, VALUX and VALDX.
I see that while I have been typing, Charles has posted to this thread.
Have no idea what he said. I'm just going to hit "Post Comment" and find out afterwards.

Can you provide a link to the article? ("featured by Hulbert in today's Wall Street Journal"), or a copy and paste of the article.
I think you can learn a lot about the newsletter by studying FundX Upgrader, FUNDX.
The portfolio managers of the fund are the same people who write the newsletter in question, e.g., Janet Brown. The mutual fund carries out the strategy of the newsletter.
With FUNDX you are paying an extra 1.1% to have the newsletter writers enact their portfolio based on their newsletter. Plus you pay the individual funds' expense ratios, which you would pay anyway if you carried out the strategy on your own, by subscribing to the newsletter and not purchasing FUNDX. So Morningstar shows the expense ratio to be about 1.91%, but consider 1.1% to be the fee you pay the managers plus administration of the fund, and the rest is the expense ratios of the funds themselves.
I can share one bit of experience about the newsletter. Although I've never subscribed, years ago I came across a few issues of it. There are a lot of 'transactions', buys and sells. I think it would be relatively uncommon to have a month or two with no transactions. It is a very active portfolio of mutual funds. The strategy of the newsletter is to always be in the funds with the best momentum. When a fund in the newsletter performs poorly, they don't hang around and wait for that fund to turn around and rebound. After a certain period of time, it will be kicked out and replaced by a fund with good performance momentum.
The strategy is something to the effect of [don't quote me on this, I'm just giving you an estimate] ranking the performance of mutual funds over different time periods, such as 1 year, 9 months, 6 months, 3 months, 1 month. They have a weighting system to overweight more recent performance vs. 12 month performance.
I believe the newsletter had awesome returns [consistently beat the market] for many years quite some time ago. I also believe that the returns in more recent years has not been very good, underperforming the market.
I can tell you without a doubt that FUNDX had excellent returns on inception and for some time after that, and has had subpar returns for the past 5 and 10 years. FUNDX has underperformed the S&P 500 by 0.5% annualized for 10 years, and by 3.5% annualized for 5 years. Actually, FUNDX has underperformed the S&P 500 for the past 1, 3, 5 and 10 years, per Morningstar.
That also means the newsletter in question has also underperformed for those periods, because as I mentioned, the authors of the newsletter carry out the newsletter's strategy in this mutual fund.
Hope that helps.

@expatsp: "But given how aggressive my asset allocation is right now, it's really important that my bond funds not lose money in a downturn. I don't need the upside from that part of my portfolio"
You might want to take a look at FPA New Income FPNIX.
It has an expressed mandate to not lose money.
I don't believe it has any lost money in a single calendar year for 30 years.

@rjb112.
Great Owl Fund.
The designation is given to funds that achieve top quintile performance in their categories based on Martin Ratio in all evaluation periods 3 years and older.
Here is link to definitions: http://www.mutualfundobserver.com/2013/06/ratings-system-definitions/
And here's link to all GOs, as of 1Q14. We will update for 2Q early next month...
http://www.mutualfundobserver.com/search-tools/great-owls/

Checked with Yahoo finance. PRWCX appears to be the winner over the last (10 yrs.) It beat BUFBX by 12.75 % !! Will it's performance continue over the next 10 years? Your guess is as good as anybody.
Have a good weekend & lets move on.., Derf

Seriously.
You're not seeing any of this?

If you're doing well, you're definitely doing well.
Do I think there's another 2008 tomorrow? No, but you see some overbuilding in things like hotels. There were a whole lot of hotel projects in major cities in 2007,too and many of them never happened.
You also had instances of hotels refinancing/taking on additional debt at the peak who got into issues in the years after when cash inflows could not service the debt. It's remarkable how many hotel projects there are in some major cities at this point. It's not people taking advantage after the bust, it's years later and you're seeing the rush. Maybe it's not Blackstone buying Hilton at the top, but feels a little like that.
Feels like the hotel industry is one big "Whocouldaknown?" Was there one hotel REIT that didn't drop (wholly or completely) the dividend in 2008?
This is a lovely chart:
http://finance.yahoo.com/echarts?s=BEE+Interactive#symbol=BEE;range=my
(nearly $25 in mid-2007 and dropped to less than a buck by early 2009. Has it come back? Absolutely, but still less than half the highs.)
"Go clean.
Go green."
Until the next downturn. No one has any long-term vision. Green does well with oil where it is. Oil drops, people forget about it.
"Everybody owns an i-something."
I wouldn't necessarily say that's a good thing. "Chicken in every pot, Iphone in every hand?"
"Innovations in health."
Any that are going to bring soaring costs down?
" even HELOCs."
Oh, good. Because there's evidence that people used those sensibly before.
Or, if you will, a gif response about HELOCs coming back:

"Refurbished bridges."
Maybe where you're living. I'd say the country as a whole wasted a huge opportunity during this period to focus on infrastructure.
"Packed stadiums"
http://msn.foxsports.com/mlb/story/attendance-down-not-just-at-miami-marlins-games-060513
http://abcnews.go.com/Business/story?id=87981
Concert ticket prices rise, sales fall.
"Construction of new homes."
Yet, first time buyers aren't there and what's primarily selling seems to be the higher end homes (Again, if you're doing well, you're doing very well.).
Stats on % change by price
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/06/Schizo housing recovery May.jpg
Also, interesting that years ago people were scrambling to convert rentals into condos for sale at the top. Now, you have the reverse: people scrambling to convert condos into rentals. Story on CNBC the other day about a Florida situation where investors bought up the majority of a condo property, to the point where they could force a buyout of the remaining owners, many of whom bought at the top and would now be accepting less than half. You have rents soaring, because so many people can't buy for various reasons.
Again, I'm not saying another 2008 is around the corner. I'm simply saying, there's the feeling that when things do turn, it'll just be history repeating itself. Easy money boom, easy money bust and, to some degree, back at square one. It's not about creating anything sustainable, it's all about consumption. It's the easiest monetary policy in history and I'm not looking forward to when things eventually turn. I have the feeling that when the next crisis happens, it will be evident that few people learned anything from the last one.

Hi Ted, I'm very aggressive right now: about 85% equities, 10% bonds, 5% cash. No health care funds. I expect I'm about 30 years from retirement and I did manage during the last market crash to hold tight and add when things looked bleak -- that's how my asset allocation ended up as it is, I moved from bonds and cash into stocks in '08-'09 and have so far only dialed that back only slightly. (Before I sound like a genius, I didn't have that much bonds and cash then either, so the shift was only about 10% of my portfolio, but boy, that 10% made all the difference.)
But given how aggressive my asset allocation is right now, it's really important that my bond funds not lose money in a downturn. I don't need the upside from that part of my portfolio. Which perhaps means I have just answered my question...

FYI: Copy & Paste 6/25/14: Gail Marks Jarvis: Chicago Tribune
Regards,
Ted
Pricey stocks, bonds have experts guessing too
You are agonizing over where to invest your money, you aren't alone.
The pros are there with you — nervous about stocks and bonds as clear opportunities become fuzzy in both. As the best and brightest fund managers talked at Morningstar's three-day conference in Chicago last week, they repeatedly expressed reservations.
They see Treasury bonds vulnerable to the inevitable climb of interest rates, and corporate and high-yield bonds paying so little interest that there isn't enough insulation to protect investors if the economy suddenly weakens or if investors get cold feet. After the unrelenting climb of stocks since 2009, the pros see a stock market so pricey that stocks appear vulnerable to any bad news for the economy or companies.
But the difference between you and professionals who run mutual funds is that fund managers are hired to do something with clients' money, no matter what. While sitting on cash rather than stocks or bonds might provide security in an iffy environment, cash earns no interest thanks to a Federal Reserve policy designed to get people to choose riskier options. Even though many pros say they are flummoxed by a market in which everything from stocks and bonds to currencies and commodities have all become pricey because of the trillions of dollars worth of stimulus poured into the markets by the Federal Reserve and counterparts in Europe and Japan, fund managers are doing what they think they must: deploying money where they can make a case for satisfactory results even though they expect high prices to hold back future gains.
They are emboldened by the fact that prices are high — but not outrageously high.
After all, even though pros have worried about bonds and pricey stocks for months, the Standard & Poor's 500 stock market index has managed to bestow gains of 5.5 percent this year while bonds haven't incurred the losses that pros thought were a sure thing earlier this year. There hasn't even been a correction (a short-term downturn of 10 percent in the stock market) for 32 months. Such a long stretch without a sizable dip in the markets has happened only four other times, according to Gluskin Sheff economist David Rosenberg.
Still, bond fund managers Mark Egan, of Scout Investments, and Bill Eigen, of JPMorgan Asset Management, told a Morningstar audience of financial advisers that they are so concerned about the lack of opportunity in bonds that they have parked about 60 percent of their clients' money temporarily in cash. Pimco's Mohit Mittal has about 28 percent of his portfolio in cash.
Cash will hold back bond fund gains if bonds continue to do well. But Eigen figures interest rates will eventually rise, investors will panic and try to bail out of bonds so quickly that bonds will suffer sharp losses. Then he plans to buy bargains.
Fund managers typically avoid holding more than 5 percent cash because waiting for deals can take longer than expected, and investors get impatient when their mutual funds are earning less than other more daring funds.
Considering the high prices of stocks, some fund managers who specialize in stocks also are holding substantially more cash than usual. Even those scouring the world for investments are having difficulty finding stocks cheap enough to buy.
While some have suggested buying cheaper stocks in European markets, Ben Inker, director of asset allocation for GMO, is cautious about Europe.
"You can find some cheap companies, but all of them have hair on them," he told the Morningstar audience of over 1,000 financial advisers. "Some places that aren't even cheap have hair on them."
Since money managers must find something to buy, Treasury bonds that mature in five to seven years "are not a wonderful place to be, but are OK," he said.
Meanwhile, Dennis Stattman, who heads BlackRock's asset allocation team, said stocks of large Japanese companies that sell to the world are significantly cheaper than U.S. companies. He's trimmed some exposure to U.S. stocks because they've become so pricey and added Japanese companies.
While some investors have been interested in European financial companies that appear cheap, Stattman said "in many cases they are overlevered and in possession of bad assets."
European stocks have climbed significantly simply because the "European Central Bank took off the table the fear of banks failing." But "governments have promised too much and taxed too little."
Meanwhile, Michael Hasenstab, chief investment officer for Franklin Templeton global bonds, says two of his favorite markets for bonds have been Poland and Hungary, and he's comforted that the continuation of stimulus from the U.S. Federal Reserve and counterparts in Europe, Japan and China will power many emerging markets.

When I compared the decline and recovery of my high yield bond funds at Fido to my stock funds, Contrafund and Low priced Stock, from 2007-9, the declines were less and the recovery a year sooner. Perhaps this reflects Fido's bond expertise (supposedly good) or the size of the stock funds, but I also do think "that time it was different."
OTOH, I'm not sure where one is supposed to go. My children's Roth IRA contributions from March remain in cash, waiting for the anticipated correction, and I hope they aren't checking the accounts. While I "know" timing in general fails, I think there will be a better entry point in the next 6 months, and the money will be in an index global stock fund.
While I am more willing to let new Fido 403b $ sit in cash for now, I also put a toehold in ARTFX in my IRA at TDA. Just wish I could add more $ there.
Depends on one's time horizon. At five years, I'm not selling high yield.

@Charles Thanks, Chauncey G. For a rosier outlook, maybe I should be using whatever you're using; is it expensive? :)
Come to think of it, the smoke tree sapling I've been pampering for 5 years finally took off this Spring. Maybe I'm mismeasuring the potential of the green shoots.

>> 35 years is a long enough time to start to be statistically significant
'start to be' --- now there's a stats assertion you don't read every day.
Speaking of timespans, GPGOX and BRSIX do look interesting, and outperform WEMMX recently (only recently).
Apologies if I misinferred.

I do love theoretical argument, especially by academics, but hey, I have an idea instead:
Go to M* 10k growth and chart VFINX, GABEX, GABSX, and WEMMX for 5-6-7-8-9-10y, and then max to 1998.
Report what you see then and tell how it fits in with all these theories. (I chose the last three cuz it's the same guy and team, of course.)

I'm sorry if I wasn't clear. My post was meant to be an anti-academic/theory one, or at least anti-bad-academics. I do love me some Robert Shiller. Paul Merriman and MJG are convinced by the Fama-French arguments. I am skeptical and tried to present the other side of that story.
Comparing the 10-15 year returns of certain active funds with that of the S&P is a bit apples to oranges. I'm with you that active management provides downside protection and the possibility of better returns. But the question was "does SCV provide better returns?"
Over the last 15 years, the answer has been yes. But look back to valuation levels in 1999. The nature of market-cap weighting meant the S&P was full of overvalued tech stocks waiting to crash, while small value stocks languished. Savvy, patient managers were able to provide great returns when that bubble broke. But those conditions do not exist today. As an example, look at the returns of $10,000.00 for VFINX ($136,691.30 or 19.05%) vs. NAESX ($48,688.57 or 11.13%) over the previous 15 years, 6/26/1984 - 6/26/1999. Incidentally, the Tech and Japan Bubbles are my arguments #1 and #2 against market-cap indices.
That's why I gave 35 year returns of four distinct equity areas. 1979 was chosen for three reasons: First, 35 years is a long enough time to start to be statistically significant; second, 35 years is a fair approximation of the horizon of a retirement savings plan; Third, the evidence that small-cap stocks outperform was taken from the Rolf Banz 1979 paper using data from 1936-1975.
Over the past 35 years, the returns were:
VFINX = 11.66%
NAESX = 11.37%
M*'s LCV tracker = 11.21%
M*'s SCV tracker - 11.98%
Banz's paper was subject to later revision when people realized he hadn't accounted for survivorship bias. But that didn't stop Fama and French from harping on about the size premium, and how you get compensated for increased risk. And now they've gone back and admitted they just kind of made that up, but, hey, here's a whole new model!