Everything red today, no where to run even tgd funds
/Bear market
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Chart Advisor | Focus on the Price
By Gordon Scott, CMT
Wednesday, March 11, 2020
1. Volatility pricing at foreboding levels
2. Some target funds look ugly right now
3. A remote portfolio
Market Moves
Stocks fell to their lowest close of the year so far and fell by a larger amount than any other day this year (besides Monday). Today's roughly five percent drop has only been bested a handful of times in the last decade on any of the major market indexes. State Street's S&P 500 index ETF (SPY), and Invesco's Nasdaq-100 ETF (QQQ) have both hit this mark no more than five times. Perhaps that's why stocks staged a sucker's rally yesterday, since each previous time it did so was near a short-term swing low. However, this time it might be different.
That's because almost none of the previous occurrences coincided with the kind of pricing shown today in the options of the CBOE's Volatility Index (VIX). The chart below gives a visual representation of the pricing of options on the VIX. Based on the pricing, these ranges represent just over a one-standard-deviation range of probability for each given expiry. What stands out is that the pricing of all of these ranges puts them above 30 for the next six months. Option market makers are basically saying they think that the market is going to remain crazy and generally trend lower for the foreseeable future. The fact that the Dow Jones Industrial Index (DJX) slipped into bear market territory only confirmed what they fear.
There is one other possibility, and that is that these prices are simply overdone, the market correction is over, and all will soon return to normal. Seems like a slim chance. More specifically a fifteen percent chance of avoiding a bear market. At least that's the way options were priced today at the close.
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Some Target Funds Look Ugly Right Now
If you hate the idea of having to watch charts and look at stocks, you're probably not reading this right now. That simply says you aren't like most people. Most people would rather set their retirement choices up once and walk away and forget them. That's why target funds were invented. You pick a fund that matches your planned-for retirement year (or thereabouts) and simply put all your eggs in that basket. The fund will diversify for you and change that diversification over time.
The chart below shows how a comparison of two such funds (from Vanguard) and compares them with a couple bond-heavy funds. Younger individuals using such a fund and targeting retirement in 2050 probably won't want to look at their portfolio today. It has likely dropped about 15 percent in value over the past two weeks. Retirement hopefuls targeting five years out have had to endure significantly less volatility, but even these kinds of funds have dropped about ten percent recently. By comparison, funds that are 80 percent or even 100 percent composed of bonds are up for the year. That likely sounds attractive, but if you think about the way the bond prices collapsed over the past three days, such funds may have more volatility than desired in the days ahead.
That's why looking at these funds over the course of a full year can help. It's true the drop lately has been precipitous, but over the past year, the 2050 fund has only lost 3.9% and the 2025 fund is nearly unchanged. These amounts can easily be compensated for in any subsequent upward trend of the stock market./

The below article link, written late today, expresses some reasoning as to yield increases today. Nothing really defined to me; and I will monitor for other writes about this subject that may offer definitive reasoning or examples.
ARTICLE

I sold RYSEX last December after holding it since 2012. I keep a shadow portfolio at M* of everything I have bought so I can see how smart or stupid I have been.
Let's just say I don't miss it now. Maybe I will some months down the road. But I doubt it.
I bought at 19.9 per share back then. And the most recent quote -- from yesterday I suppose -- had it at 14.31. I was able to make a little money off it in December to put into bonds.
I held FPIVX once upon a time. And I kept FMIJX. I think (hope) I'll eventually end up on the upside there.

As Boris Johnson explained a week ago:
1. Containment
2. Delay (so that resources will be less stressed)
3. Research
4. Mitigate
https://www.express.co.uk/news/uk/1250211/Coronavirus-UK-plan-what-is-UK-plan-four-phases-Boris-Johnson-speech-in-full
(I was in London watching this on the BBC at the time. Compared to the US, Johnson was very clear, though like the orange one, he kept describing the government's performance as fantastic. At least the UK government wasn't sending out mixed messages.
He also described the possibility of calling up retired NHS workers to help out. And I watched the House of Lords discuss how to assist those required to stay at home, including those on public assistance.)

I see the confusion - terminology. What you call the "retail class" is a fund with two classes, a retail class and an institutional class. The latter (PRAMX) has the same $1M min as the institutional fund's single share class.
The retail fund (including its institutional class) has indeed been around for several years. I always thought of it as a narrow niche product and was somewhat surprised it hung around so long. I believe $100M is large enough for a fund to be viable, albeit not extremely profitable for the management company.
T.Rowe Price was (still is, for now) practically alone in offering an African-focused fund. (M* shows 15 misc. region funds; the only other fund focused on Africa is the $2M CAFRX fund.)
The Templeton fund TFMAX is (was?) a broader fund, with around 2/5 in each of Africa/Middle East and Asian EM countries; the remaining holdings are in Latin America.
Here's a 2015 M* column that suggests a few alternatives:
https://www.morningstar.com/articles/719486/frontier-markets-havent-been-immune

Morningstar today ran an analysis of which funds have the best downside capture ratio during the current panic, which they date as 2/19 - 3/9/2020.
Slightly surprising:
Best: Matthews Asia Growth & Income (MACSX), 69.5%
2. First Eagle Overseas (SGOVX), 70.7%
3. Matthews India (MINDX), 71.4%
4. FPA International Value (FPIVX), 71.6%
5. Matthews Asia Dividend (MAPIX), 74.1%
One almost would have suspected that being at the heart of the storm - i.e., Asia - would have sunk the Matthews folks. Nope.
Best US equity funds?
Royce Special Equity (RYSEX), 63.5%
Yacktman Focused (YAFFX), 69.7%
Yacktman (YACKX), 71.6%
First Eagle US Value (FEVAX), 77.0%
FMI Common Stock (FMMIX), 77.4%
Royce. Hmmm. A lot of cash in the portfolio and an averse to leveraged (i.e., debt ridden) companies helps. The others keep cropped up on our "best of" screens.
As ever,
David

Hi, Kaspa. You might be interested in the story of Akre in our "manager changes" article this month. It feels rather like a Mairs & Power-ish management transition (which is to say, seamless and nearly invisible) has been underway.
Hi, david. I may have pointed out at the time that Mr. Miller's "streak" was an illusion engendered, in part, by luck and year-end window-dressing. If, instead of measuring 1/1 - 12/31, you picked 12/1 - 11/30 ... or virtually any other month-end, the streak vanished. Mr. Akre's outperformance seems rather more consistent, in the sense that pretty much any time I check in, his trailing numbers are top-tier. That might be because his discipline is a bit more ... disciplined? mechanical? than Mr. Miller's. I don't have any metric to capture that suspicion, though the fact that his downside capture ratio is in the 60s seems reassuring.
For what that's worth,
David

To clarify - these are two different funds. The fund being liquidated is "Institutional Africa & Middle East Fund". The fund you own, which has two share classes (investor and institutional) is "Africa & Middle East Fund".
The former (TRIAX) has $33.6M AUM. Your fund has $101.4M AUM, divided between PRAMX and TRAMX (your shares). PRAMX (the institutional class shares of your fund) are not being liquidated. That is, unless you run across a new SEC filing for this fund.
(Figures are from T. Rowe Price pages, not M*)

To me this looks like ASMIY provides/manufactures the equipment used by ASML in it's photolithography systems. Double-check to be sure.
From M* ASMIY - ASM International NV ADR
Company Profile
Based in the Netherlands, ASM International supplies semiconductor manufacturing equipment. ASM's front-end equipment, such as atomic layer deposition and epitaxial tools, is used in the preparation of silicon wafers and fabrication of semiconductor layers. ASM's 25%-owned subsidiary, ASM Pacific Technology, manufactures back-end tools used to assemble and package semiconductors into their final form.
Contact
Versterkerstraat 8, Almere, 1322 AP, Netherlands
T +31 881008810
[email protected]
www.asm.com
M* ASML - ASML Holding NV ADR
Company Profile
Founded in 1984 and based in the Netherlands, ASML is a leading manufacturer of photolithography systems used in the manufacturing of semiconductors. Photolithography is the process in which a light source is used to expose circuit patterns from a photomask onto a semiconductor wafer. ASML's products are used at every major semiconductor manufacturer, including Intel, Samsung, and Taiwan Semiconductor Manufacturing.
Contact
De Run 6501, Veldhoven, 5504 DR, Netherlands
T +31 402683000
www.asml.com

After reading a current article in The Economist, I'm thinking of investing a relatively small amount directly in a company called ASML. In the US it is carried on NASDAQ as ASML Holding N.V., with the trading symbol "ASML".
Info from Wickipedia: ASML Holding N.V. is a Dutch company and currently the largest supplier in the world of photolithography systems for the semiconductor industry. The company manufactures machines for the production of integrated circuits.
Over the years I've occasionally owned ADR (American Depositary Receipt) shares, but this is the first time that I've encountered what seems to me (likely incorrectly) to be an alternative listing on the OTC market. That OTC listing symbol is "ASMIY".
The share price for ASML is more than twice that of ASMIY, and the P/E ratio for ASML is roughly 44 vs 19 for ASMIY. The WSJ indicates that ASMIY is a competitor for ASML, and other information that I find does indicate that ASMIY is indeed in the same business. The problem is that I can't seem to easily find a side-by-side comparison between the two listings, and I have no idea if those two symbols are somehow representing two different companies, or (somehow) two different aspects of the same company.
Thanks for any help on this one!

Corporate money market accounts used to be more common, but many shut down a few years ago. GE Interest Plus was one such account.
Dominion Energy is a holding company rated BBB and these unsecured notes are junior to all notes and other liabilities of its subsidiaries. I'm not suggesting that this account cannot serve a useful purpose; just be aware of the risks.
Here's an old WSJ article (2004) on this type of account:
Corporate Money Funds Offer An Alternative Savings Method
https://www.wsj.com/articles/SB107464416174007045

The reason you might want one is simple: the rate of return can run as high as 2.6%, compared with returns of less than 1% on most similar saving vehicles. ...
These products are well-liked by companies because they help them diversify their lender base ...
Like all things in investing, increased reward is always burdened by an increase in risk -- and corporate money-market accounts aren't any different. On the surface, they're like any other savings account: You can withdraw money whenever you choose, write checks and -- in some cases -- even pay bills online.
But with a corporate money-market account, your savings go toward funding bonds issued by the company -- and therein lies the risk. By taking this route, you're essentially investing in that company's corporate debt. That means you have to be entirely comfortable with one company's ability to pay its bills ...
The best way to determine the risk of a corporate money-market account is to review the company's corporate-debt rating. Corporate-debt ratings describe companies' creditworthiness and are provided by ratings companies such as Standard & Poor's, Moody's Corp. and Fitch Ratings.

DERI Prospectus:
https://www.sec.gov/Archives/edgar/data/715957/000119312519094557/d929220d424b5.htm
Dominion Energy credit ratings:
https://investors.dominionenergy.com/fixed-income/dominion-energy/default.aspx

Wife and I own many D&C funds. They obviously have a value tilt, and tend to stay fully invested. I don't expect a smooth ride from them, but I do expect them to act as true fiduciaries. I like the fact that they don't do marketing and have a team culture.
I wouldn't go 100% in on D&C, but I'm comfortable with them representing 20% of my holdings.

Hi Sir
Maybe down 4-5% today at end close...we probably stay volatile like this until few more weeks until they have good data from covid19. so far 31 deaths past few weeks [much less prevalence then flu but much more lethal I suppose.]
Don't really know if it will down another 20-30s% until we are done
There are no safe place to go presently maybe except CDs/Cash. US-T yield is so low right now not a good place to buy
I was very surprised at Mama's fidelity port 55s% bonds 45% stocks down only 2% year total return

Not to the subject, and @davidrmoran is more aware of this; but Harvard is closing it's doors as of March 15. All students to vacate as they would at the end of term. Pack it up and leave, no exceptions.
So, the "smoke them if you've got them" doesn't mean much right now from an investment perspective, eh?

From a long ago song lyric: "Nowhere to run to, nowhere to hide."
All of the below government bill through bond types are down in pricing.
Our 72% bond/28% equity portfolio has no support from any area as of 12:30 EST.
Has this happened before in modern times??? Where the correlation between UST issues and equity markets have little meaning to one another.

ADD: Is the U.S. Treasury playing in the background to support yields???
--- SHY = (1-3 yr bills)
--- IEI = (3-7 yr notes)
--- IEF = (7-10 yr notes)
--- TLT = (20+ Yr UST Bond
--- EDV = (Vanguard extended duration gov't)
--- ZROZ = (UST., AAA, long duration zero coupon bonds)
If these circumstances remain through the week, don't look for many smiling faces in the investment world, as; not much will provide a positive return.
Be well; take care of you and yours,
Catch

https://www.sec.gov/Archives/edgar/data/852254/000174177320000504/c497.htm
497 1 c497.htm IAM STICKER
T. Rowe Price Institutional Africa & Middle East Fund
Supplement to Prospectus and Summary Prospectus Dated March 1, 2020
At a Board meeting held on March 9, 2020, the fund’s Board of Directors approved the closure and liquidation of the fund. The closure and liquidation are expected to occur on May 8, 2020 (“Liquidation Date”). Prior to the Liquidation Date, the assets of the fund will be liquidated at the discretion of the fund’s portfolio management and the fund will cease to pursue its investment objective. In anticipation of the closure and liquidation, effective April 27, 2020, the fund will be closed to new investors or existing shareholders to purchase Fund shares. At any time prior to the termination, we welcome you to exchange your shares of the fund for the same class of shares of another T. Rowe Price fund. After the fund is closed and liquidated, the fund will no longer be offered to shareholders for purchase.
The date of this supplement is March 11, 2020.
E171-041 3/11/20

Interesting report Mr. Snowball, thank you for pulling that data.
David - not sure I agree with you re the comparison to Bill Miller/Akre
While you can make the argument that many of AKREX portfolio holdings are way overvalued, they are well run, relevant, established, good cash flow, leaders in there market segment, high ROIC holdings.
I do like that you have a "grey beard veteran" in Mr Akre at the helm along with younger talented associates.
I recall that many of Mr Miller's portfolio holdings were "moon shot" type of holdings and he had somewhat eclectic, outside of the box approach to investing (just my recollection)
Over time, I'll take my chances with Akre's process/investing approach (did like that they increased their cash holdings in Q4/19')
Best,
Baseball Fan

D&C have good funds but many of them are riskier and it shows at market stress such as 2008 and many times when stocks go down at least 10%. This is why when volatility increases, such as the last 3 years, their funds lag.
I have never owned their funds because I found better choices.
DODBX-->I used to own PRWCX. In the last 3-5 years, DODBX ranks in its category at 90 and 50. 90 means it's in the bottom 10%. JABAX is much better too.
DODIX-->is probably their best fund but I still owned PIMIX for several years, I know, it's not the same category. DODIX is really Multi sector light and why yesterday it lost -1% while most core plus did better.
DODGX--->SP500(VFIAX/VFINX) has better performance for 5-10-15 years. This is PorVis(link) for 15 years that shows that SP500 had better performance, SD, Sortino.
DODFX has a negative performance for 3-5 years and ranks in its category at 77,78 which is pretty bad. Very easy to find better funds such as AFCNX.
D&C funds have low expenses which is nice but only one part of the puzzle.

While I agree performance is only one piece of the puzzle, it's not reasonable to compare a value shop like D&C (DODFX) to a growth shop like AC (AFCNX). Growth has been a major tailwind for folks like American Century, WCM, etc.

Morn'in @Old_Skeet

In tabulating my portfolio's asset allocation yesterday evening I noticed that my income funds were down while my equity funds were up. What's this saying?

My view: As I noted in a previous post.
While equity had an up day (March 10), most investment grade bonds took a break. While most U.S. gov't. issues are "holding", corporate bonds are not and had another substantial down day on Monday. I see this as investors not having to sell bonds for whatever reason, but a continued rotation away from corporate bonds; and also a rotation into longer duration. These bond types have more potential to be impacted to the negative as corporate earnings are likely to continue downward in the current COVID-19 market.
Overall, I also expect equity-income funds to continue to struggle IF corporation earnings remain negatively impacted. A double whammy of falling equity prices and a downgrade of their quasi investment grade bonds. Plain vanilla active managed bond funds are being whipsawed, too; from a very active bond market, where corporate bonds are being whacked and if there is not a big enough percentage of AAA gov't. bonds in a fund, the corp. bond side is impacting this funds to the negative.
The below list is from March 7, but the LQD has continued to move downward from this date. From March 4, last Wednesday; through yesterday, Tuesday, March 10; the general range for corporate "investment grade" bonds is: -3 through -4%. Whatever quality of IG corp. bonds that are held within any particular fund you hold, will be reflected. Digging into the quality of bond holdings within any of your funds will help identify why some are behaving in a particular fashion. Example: Ford Motor Co. has a large holding of BBB rated bonds in their debt issuance. This credit quality is borderline and may be downgraded as needed by S&P or Moody's, based upon forward prospects for the company's profitability.
--- A quick look at S&P's bond rating guide:
"AAA" and "AA" (high credit quality) and "A" and "BBB" (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ("BB," "B," "CCC," etc.) are considered low credit quality, and are commonly referred to as "junk bonds."
Week / YTD
--- MINT = -.02%/+.5% (Pimco Enhanced short maturity)
--- SHY = +.7%/+2.2% (1-3 yr bills)
--- IEI = +1.6%/+5.4% (3-7 yr notes)
--- IEF = +2.8%/+9.5% (7-10 yr notes)
--- TLT = +7.5%/+23.5% (20+ Yr UST Bond
--- EDV = +10%/+31.4% (Vanguard extended duration gov't)
--- ZROZ = +10.6%/+35% (UST., AAA, long duration zero coupon bonds)
***Other:
--- LQD = +1.85%/+5.5% (corp. bonds)
--- TIP =+2.1%/+5.2% (UST., inflation bonds, mixed duration)
--- LTPZ = +7.1%/+17.9% (UST, long duration TIPs bonds)
Enough from me, and hopefully not too clunky from a fast write.
Take care,
Catch

In tabulating my portfolio's asset allocation yesterday evening I noticed that my income funds were down while my equity funds were up. What's this saying? For me, it means some investors are having to sell bonds to cover their margin calls and/or perhaps some investors are now starting to move money back into stocks and leave bonds. For this past week I have favored equity income over fixed income and did a little equity buying reducing cash by 1% and raising my equities by 1%. This puts me back to my neutral equity allocation of 40%. This now leaves me somewhere close to 19% cash, 41% income and 40% equity within my asset allocation. In addition, my portfolio generates a good bit of income with an annual distribution yield of about 5%. This gives me the flexability to invest this income generation as I feel warranted (or take it to my pocket if needed).
FWIW: I have been a buyer of equities at the 8%, 13% and 19% decline marks. My next buy step is targeted to take place, should the 500 Index move into bear market territory, somewhere between a decline of -20% to -25%. In addition, when the equity markets turn upwards I'll most likely buy during the upswing.