Same theme not quite the alarm .
Macro View
Complacency in Uncharted Waters The next challenge for central bankers is changing monetary policy when the economy has come to depend on it.
May 03, 2016 Global CIO Commentary by Scott Minerd
...Another market area that is clearly not behaving according to the central banks’ script is foreign exchange. Japan’s current laundry list of woes is topped by the strengthening yen, which is a major headwind for its moribund economy. The Bank of Japan is due to convene later this month, and may decide that the best course of action is to intervene directly to drive down the value of its currency. Such direct intervention basically will entail selling yen and buying U.S. dollars, and typically those dollars go to buy U.S. Treasurys. Europe is probably not far behind: It has tepid growth, a strengthening currency, and more potential downside to their policy rates. This means there is a high likelihood of a fairly good bid on Treasurys in the coming weeks that could be sufficient to push the 10-year U.S. Treasury note lower.
My message to central bankers is the following: Although the waters at the present time might seem calm, they are still uncharted and there are risks beneath the surface. QE and negative interest rates, once thought to be extraordinary measures, have become the new monetary policy orthodoxy in the largest developed economies. The data on the long-run effects are limited, but real-time experience with these policies offers a few lessons.
...we learned from Japan that ever larger doses of unconventional monetary policy may be required in the absence of growth-enhancing structural reforms. Moreover, it is incredibly difficult to reverse these policies from an economy that has come to depend on them. Second, in Europe we are learning that such policies offer limited benefits unless paired with a coordinated fiscal plan. Finally, we have learned here at home that trying to “normalize” policy, even in a gradual manner, can strain financial markets.
https://guggenheimpartners.com/perspectives/macroview/complacency-in-uncharted-waters
Also
Markets and life since 2006.
10 Stats About the Last 10 Years
May 02, 2016 By Nicholas Colas who is is Chief Market Strategist for Convergex.
Summary: The headline today that Goldman Sachs’ stock has gone nowhere for a decade got us thinking about general market performance over the last 10 years. The key contours are straightforward: subpar price returns (a 4.9% compounded annual growth rate for the S&P 500) with increased volatility (a VIX that is 25% more volatile than average). From there, things get funky.
Think back over the last 10 years - how different was your life in April 2006? While you may think your daily existence is largely the same (maybe the kids are older or you’re married now, but that about it…), consider what was actually different about your life in the spring of 2006:
No iPhone. Steve Jobs unveiled the first iPhone in January 2007, and it didn’t ship until June of that year.
No Facebook (unless you were in college at the time). Facebook only opened to the general population in September 2006.
No Twitter. The full version of the product launched in July 2006.
No Instagram. The picture sharing site only launched in 2010.
No Kim Kardashian. “Keeping up With The Kardashians” debuted in October 2007.
No Uber. The company received its seed funding in 2009.
No iPad. Apple started taking pre-orders on the first-gen product in March 2010.
It feels like April 2006 demarcates the last days of some Dark Age, or at least a simpler time without the manifold distractions of today. And while you might opt for a world without the Kardashians, imagine it without your smartphone, Facebook/social media, and an iPad to entertain the kids (or yourself). It’s ok – don’t panic. You have them now.
The journey from April 2006 to April 2016 in financial markets has, of course, been a wild ride. But just as it is hard to remember what daily life was like a decade ago, it is also easy to forget some of the important waypoints that capital markets took from there to here.
Here are 10 data points about the last 10 years we hope you will find useful:
http://www.convergex.com/the-share/10-stats-about-the-last-10-years

Hi, Ben.
Not sure about the 2-3 year holding pattern thing. They crushed the competition 3 years ago and crushed them 2 years ago then trailed for the first 3 quarters of 2015 then outperformed in the 4th quarter. They're trailing this year. Over the whole period from Jan. 2015 to now, they trail their peers by 5% cumulative.
Innovators, to them, do stuff like high levels of employee training and product refinement (think of it as "continual internal upgrades"). But they also look for businesses that won't flame-out which means many quarters of cash-flow growth. Tesla, cool as they are, posted losses of $0.54 share with a share price of $225. They also lose $30,000 on every high-end car they sell. That's not a profile these guys would get within a mile of.
David

If we're including multi-billion funds, one I like is American Century Mid Cap Value, ACMVX. (Before anyone writes that this is closed, look again. It is only closed when purchasing through a third party, e.g. Schwab.)
I ran a search for small funds in the small cap value space, and ran across LSV Small Cap Value (LVAQX). In some senses, similar to TDVFX (tiny AUM, tiny cap). Not quite deep value though. Even lower turnover (15%). And fine performance so far (three years old - see original share class LSVQX).
This seems like a quant fund with training wheels. It keeps its sectors within 5% of its benchmark - I'm guessing that this could explain the low turnover, since quant funds are often whipsawed.

@MFO Members: Let's see now, here is this turkey's track record, enough said !!!
Regards,
Ted
YTD: 76 Percentile
1Yr. 90 "
3Yr. 85 "
5Yr. 98 "
10 Yr. 66 "
15 Yr. 89 "

from our May commentary on the merger, for what interest it holds:
Putnam Voyager Fund (PVOYX) is merging into Putnam Growth Opportunities (POGAX) on July 15, 2016. Voyager’s performance was rightly described as “dismal” by Morningstar. Voyager’s manager was replaced in February by Growth Opportunities', after a string of bad bets: in the past six years, he mixed one brilliant year with two dismal ones and three pretty bad ones. He was appointed in late 2008 just before the market blasted off, rewarding all things risky. As soon as that phase passed, Voyager sank in the mud. To their credit, Voyager’s investors stayed with the fund and assets, still north of $3 billion, have only recently begun to slip. The new combined fund’s manager is no Peter Lynch, but he’s earning his keep.
David

Sometimes you can do a distribution in kind from your IRA to your taxable account and bootstrap an institutional share account that way. (Occasionally the fund company will require you to pony up enough to meet the high minimum or it will convert the shares to retail shares.)
If you do a distribution this way, you can even avoid IRA tax consequences by replacing the shares removed with their cash value within 60 days (i.e. a 60 day IRA rollover).
I've posted before that I think the question of whether there's a 12b-1 fee is a red herring.
Retail funds are going to collect money from the fund one way or another to pay for servicing the account. A fund uses this money to pay a third party brokerage to do the selling and generate account statements, or to do these tasks itself if selling direct.
It may or may not break the cost out as a separate line item, but either way, that's a reason why the retail funds cost more. The TRP fund has no 12b-1 fee, but included in "other expenses" are "administrative fees" of up to 0.15%:

The funds may make payments to retirement plan recordkeepers, broker-dealers, and other financial intermediaries (at a rate of up to 0.15% of average daily net assets per year) for transfer agency, recordkeeping, and other administrative services that they provide on behalf of the funds. These administrative services may include services such as maintaining account records for each customer; transmitting net purchase and redemption orders; delivering shareholder confirmations, statements, and tax forms; and providing support to respond to customers’ questions regarding their accounts.

See Prospectus.

FYI: Putnam Investment Management will merge its long-time flagship stock mutual fund out of existence this summer, according to a filing with regulators.
Assets in the $3.3 billion Putnam Voyager Fund (PVOYX) will be absorbed by the $609 million Putnam Growth Opportunities Fund (POGAX) in the middle of July. Robert Brookby, portfolio manager of Growth Opportunities Fund since 2009 and Voyager since February, will run the unified fund, the filing says. Brookby took over for Nick Thakore, who left the firm. He had run Voyager since 2008. From the filing.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2016/05/04/putnam-voyager-fund-will-be-merged-out-of-existence/tab/print/

Is it not the % of assets that count not the amount? If I sold 25k of stocks that would be a big decision . If Bill Gates did that it might be almost meaningless regarding his market view.

Many of the top small cap value funds are closed to new investors, and this is an ongoing good news/bad news. Nuveen FSCCX and Wisdom Tree DES are both open and have among the best 3 and 5-year records. Mid cap value is also pretty bare, but Wells Fargo SMCDX has a good track record. ETFs offer more options in PEY, DVY, DON, all of which have out-performed the S&P 400. But, as David says, it depends on what is important to you. Diamond Hill has a great small cap fund, but it is closed.
We use Vanguard Index VIMAX as a core hold, with UMBMX as a concentrated add-on. It has out-performed both midcap blend and value over the last 10 years, mostly it has less downside loss.
For small cap we use SWSSX or VTMSX as a core, with IYSIX in our more aggressive accounts.

"But has acted like a story stock"?
Uhhh ... top 3% of all global funds for the past three, five and ten years. It trailed its peers in 2015 by 1.3% and YTD by 3.5%. Their argument is that they favor firms that generate lots of free cash flow, which they take to be a sign of a sustainable business that can finance its own growth without recourse to borrowing. The market lately has emphatically favored "get big quick" story stocks. The four FANG stocks accounted for all of the S&P 500's gains last year but if you look at Netflix (the "N"), they're trading for $110/share and reporting $0.04 earnings/share. Facebook ("F") reported $0.18/share last year against a share price of $115. They do own Alphabet/Google but not Amazon.
So if "story stocks" are bad and they refuse to own the story stocks, despite their current price momentum, wouldn't that be a good thing?
Puzzled, as is so often the case,
David

FYI: When the going gets rough, the 1 percent start selling.
That’s the finding of a new paper that says people with the highest income bailed from stocks disproportionately on the worst days of the financial crisis. The share of selling by the biggest earners rose “sharply” in days following spikes in volatility, according to data on millions of sales reported to the government in 2008 and 2009.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-05-03/super-rich-were-first-to-bail-when-lehman-collapse-ripped-stocks

Hi, ep1.
A lot depends on what you're looking for, beyond "small and midcap." Some folks like deep value, some seek low-vol, absolute value or concentrated portfolio. I ran a quick screen through MFO Premium for SC/MC value sorted by highest Sharpe ratio over the full market cycle. Here's the shortlist:
Intrepid Endurance (formerly Intrepid Small Cap, ICMAX) - absolute value which means huge cash holdings until compelling valuations appear. Up 4% YTD despite 67% cash which implies that equity portion was up 12%. Lost 18% in the 2007-09 crash. In a similar vein but without full-cycle performance is Aston/River Road Independent Value (ARIVX) - the former manager of ICMAX is at 85% cash and has still gained 8.5% YTD which implies about a 60% gain in the equity portfolio. Most folks have been pretty caustic about the funds because the managers have been steadily harvesting gains and building cash since about 2011 which means they've missed the current party.
Victory Sycamore Established Value (VETAX) - $4 billion mid-cap fund with a value bias. Nominally has a load though those are often avoidable. Fully invested, consistently top decile performer. Lost 43% in the market crash, substantially less than the index.
Wells Fargo Special Mid Cap Value (WFPAX) - $3.5 billion mid-cap fund with a value bias, same story on the load. Launched in 1998 but the current team has been onboard about seven years, top 5% performer. Down 44% in the crash.
Hennessy Cornerstone Mid Cap 30 (HFMDX) - no-load with about a billion. Substantially more volatile than the two funds above, somewhat higher returns, very low turnover.
Queens Road SCV (QRSVX) - about $135 million, lots of insider ownership, tends toward small blend, top 20% over time. About 20% cash at the moment and up about 5% YTD. Dropped 42% in the crash versus 53% for a comparable index fund.
Intrepid Disciplined Value (ICMCX) - the all-cap value version of Intrepid Endurance. It's about half cash, half stocks now. 4.5% YTD. Lost 37% in the crash. It's a true all-cap value so it's hard to benchmark - most value indexes are mostly large cap and most mid-cap value indexes are mostly midcap. Eyeballing several, I'd say that a comparable passive product might have lost 50-55% compared to this fund's 37%.
One possibility with a bit more risk might be Adirondack Small Cap (ADKSX) which dropped an index-like 52% in the crash but rebounded so sharply that it's now leading its peers by 2.7% annually over the full cycle.
If you're a true believer in the research, you really need to look at Towle Deep Value (TDVFX) which has about the cheapest and smallest-cap portfolio around. Shorter record - just under five years - but very solid returns, vast insider ownership, no marketing, healthy internal culture. Microcap deep value is not, to be clear, a place for the faint of heart.
Just some teasers,
David

Note that 10% of Buffett's money invested bonds would generate enough income to live on while letting the equity portion accumulate. Would investing 10% of your wealth in bonds plus other sources of income (pension,etc.) generate enough income for you to live on? Does this strategy apply to you?

Don't forget that the S&P 500 has a dividend yield of over 2%......
Need to include that in the income, along with the income from the bonds
Cheers

According to M*, PRVIX return for Q1 2016 was 3.19%, right on the nose.
http://performance.morningstar.com/fund/performance-return.action?t=PRVIX&region=usa&culture=en_US
Likewise, RPTIX for Q1 2016 was -0.38%, again matching what your 401k said.
http://performance.morningstar.com/fund/performance-return.action?t=RPTIX&region=usa&culture=en_US
As a sanity check, I went to TRP's site to get the T. Rowe Price Report for Spring 2016. It shows the retail class of Small Cap Value (PRSVX) returned 3.17% in the quarter, just two basis points behind PRVIX.

FYI: Matthews Asia has announced the renaming of the Matthews Asia Science and Technology Fund (Investor Class: MATFX; Institutional Class: MITEX) to the Matthews Asia Innovators Fund.
Regards,
Ted
http://www.businesswire.com/news/home/20160503005302/en

Last Quarter 401-k traded in retail for institutional shares. I ran the institutional shares, prvix, adjusted close & came out + 5.31% gain for the Qter.. 401-k shows gain of 3.19 %. The other change took place in rptix. Adjusted close shows +1.37 % while 401-k shows -.38 % for the Qter.. Was this due to selling one day at close & buying the next day at close.
Did I take one in the shorts or what. Seems to me MF would do the exchange same day to keep the customer happy !
Thoughts requested,
Derf

Vanguard's 1-3 year short-term government bond fund VGSH has lower expenses than SHY (.10 vs .15) and can be bought, along with VOO, in a Vanguard brokerage account for no commission.

FYI: Simply allocate 90 percent of your money to the Vanguard S&P 500 ETF (VOO) and 10 percent to the iShares 1-3 Year Treasury Bond ETF (SHY).
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-05-02/put-buffett-s-advice-into-action-with-these-two-etfs

Valeant is not 'a sewer': Bill Ackman
Bill Ackman, Pershing Square Capital CEO and portfolio manager, discusses the changes happening at Valeant Pharmaceuticals, and his decision to invest in the company's business model, after Berkshire Hathaway Vice Chairman Charlie Munger commented the company has become a sewer.
http://video.cnbc.com/gallery/?video=3000514305

mcmarasco: "If there any any other investment vehicles worth considering, please let me know!! Yes, PFF 5.5% yield month-in-month-out, year after year, with little downside risk.
Regards,
Ted