FYI:
Regards,
Ted
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2016-02-25/u-s-futures-little-changed-after-s-p-500-posts-late-day-rebound
Reuters Slant:
http://www.reuters.com/article/us-usa-stocks-idUSKCN0VY1KX
MarketWatch Slant:
http://www.marketwatch.com/story/wall-street-attempts-to-shrug-off-weaker-oil-china-slide-2016-02-25/print
USA Today Slant:
http://www.usatoday.com/story/money/markets/2016/02/25/stocks-dow-thursday/80917152/
IBD Slant:
http://www.investors.com/market-trend/stock-market-today/stocks-end-higher-motorola-solutions-breaks-out/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures: Positive
http://finviz.com/futures.ashx

FYI: Rob Arnott says the popular strategy has become too popular.
Regards,
Ted
http://www.marketwatch.com/story/smart-beta-investing-guru-is-now-warning-of-a-crash-2016-02-25/print

A concern for us has been Romick's continued reference on the fund's long-term positive numbers, and a lack of discussion on recent (1+ year) under-performance. The downside is especially surprising considering the huge amount of cash he has hoarded in the fund. Yes, the 5-10-15 year numbers are good and they are competitive. But at least address why the high 10% loss in the last 12 months. We have not moved client dollars, but the fund is on our watch list.

FYI; It's tough to be an emerging-markets fund manager these days. And it's not looking like it will get better anytime soon, at least not before the first quarter is over. For those in doubt, examine the five biggest developing world stock funds in the U.S. by assets.
Regards,
Ted
http://www.bloomberg.com/gadfly/articles/2016-02-25/emerging-market-funds-are-having-a-quarter-to-forget
Counterpoint:
Research Affiliates joins BlackRock, Templeton in bull camp.
Pimco All Asset Fund held 35% in emerging assets as of January
Emerging-market assets are so cheap that they may be “the trade of a decade,” according to Research Affiliates LLC, a sub-adviser to Pacific Investment Management Co., one of the world’s biggest money managers
http://www.bloomberg.com/news/articles/2016-02-24/pimco-adviser-sees-the-trade-of-a-decade-in-emerging-markets

@shipwreckedandalone: Considering you still own VBINX another Moderate Allocation Fund, I think you've made a wise decision. Over the years FPCAX percentile ranking has slipped from 1-93.
15 Years: 1
10 Years: 10
5 Years: 33
3 Years: 48
1 Year: 75
YTD: 93
Regards,
Ted

Hi Professor David,
Indeed Jeremy Grantham is famous for his long-term market segment predictions.
Initially, he formulated his judgments for the upcoming decade; more recently he has shortened the timeframe to seven years. Initially, his projections seemed highly prescient; more recently his projections have proved less prescient. Like most of what happens in the marketplace, a reversion-to-the-mean iron law seems to be exercising its power.
Any prediction worth scoring must be accompanied by a well defined timeframe. Certainly, Grantham’s long-term forecasts meet that standard. A fine organization such as the statistically oriented CXO Advisory Group are well aware of that requirement.
Grantham not only made his more famous longer-term estimates, but he also made shorter-term predictions. The time scale of those predictions ranged from a single month to more than a year. CXO sorted his predictions based on their various time-spans and scored them accordingly. The 40 Grantham forecasts that CXO evaluated were done so consistent with the appropriate timeframes.
I scanned those 40 test items to confirm the timeliness of the prediction/measurement compatibility. They appear to be properly assessed on a time basis. The CXO testing excluded, and therefore did not address, Grantham’s long-term 7 year forecasts.
Dependent on what subject is being addressed, some long-term forecasts are feasible with the likelihood of reasonable accuracy; others are not. The marketplace appears to be in this latter category.
To support my contention, just review the annual checkerboard patterns that have been registered by the various investment categories and are summarized by any Periodic Table of Annual Investment Returns. Here are Links to several examples:
https://investment.prudential.com/util/common/get?file=1D065355D2CC360385257B7D00536F8A
https://www.americancentury.com/content/dam/americancentury/ipro/pdfs/flyer/Periodic_Table.pdf
These are just sample tables. The second reference even shows the drastic movements of various bond categories.
Chaos is supreme. I surely do not see any pattern. Category leaders quickly descend to the bottom of the heap. Standard deviations are huge, especially when contrasted against average annual returns. I doubt many folks have the talent and/or the luck to persistently capture this chaotic behavior in any forecasting model.
Super-forecasters do exist, but in very small numbers. Phil Tetlock’s research does establish their existence, although even within this elite group a regression tendency has been observed. Perhaps Jeremy Grantham is a member of this elite group. I hope so; I do like him, but my confidence has been eroded.
Best Wishes.

Andrew Foster dropped a note in my mailbox this afternoon to inform me that the 4th Qtr Portfolio review for SFGIX has been posted. As most know, Mr. Foster worked in Asia for some time before his days at Mathews and reacts (and doesn't react) to Asian events in uncharacteristic ways. Always worth a glance, IMO, even if one isn't prepared to have him work with your money just yet.
http://www.seafarerfunds.com/fund/portfolio-review
His current stance on Asia--- and on emerging market stocks in general--- has taken a turn, and I think it's worth a smoke in the pipe:

February 2016 – In his latest portfolio review, Andrew Foster discusses a shift in the Fund’s composition, away from the Asian region, and toward larger stocks at the expense of smaller ones. Next, he speculates as to the cause behind the collapse in China’s capital markets. While he does not offer a definitive explanation, he does suggest that circumstances may be serious enough to warrant attention from investors.

heezafe,
Thanks for the information.
It sounds like you know a bit about the Matthews Funds as well a Seafarer Overseas Growth and Income.
If my research is correct and current, MAPIX is about 30% Japan and 35% China/Hong Kong, MACSX is about 36% China/Hong Kong and 6% Japan, and the last I looked SFGIX was about 17% China/Hong Kong and 3% Japan, with a total of 52% in Asia, so it is more diverse in the Asia space than MACSX or MAPIX. Also, SFGIX had a 13% position in Emerging Europe, 21% in Latin America, and 5% in South Africa.
Currently I own MACSX (seems to be the least risky of the three) in a retirement account and I am trying to figure out if owning SFGIX and or MAPIX gives me added diversification, or I just would be collecting funds.
Any thoughts would be appreciated.
Mona

http://www.sec.gov/Archives/edgar/data/1418191/000141304216000337/walthscvsupp.htm
497 1 walthscvsupp.htm
WALTHAUSEN SMALL CAP VALUE FUND
TICKER WSCVX
February 24, 2016
SUPPLEMENT TO PROSPECTUSES DATED JUNE 1, 2015
The Board of Trustees of Walthausen Funds (the “Trust”) has approved the re-opening of the Walthausen Small Cap Value Fund (the “Fund”), a series of the Trust, to new investors and new accounts effective on or about March 1, 2016. In connection with this action, the following changes are hereby made to the Fund’s Prospectus:
The sentence “The Fund is closed to new investors. See “Investing in the Fund” on page 8 for additional details.” is deleted on page 4 and page 8 of the prospectus.
The section under the heading “Investing in the Fund” is deleted on page 8 of the prospectus and replaced with the following:
You may purchase shares directly through the Fund’s transfer agent or through a brokerage firm or other financial institution that has agreed to sell the Fund’s shares. If you are investing directly in the Fund for the first time, you will need to establish an account by completing a Shareholder Account Application (To establish an IRA, complete an IRA Application). To request an application, call toll-free 1-888-925-8428.
************
Please retain this supplement with your Prospectus for future reference. You may obtain more information about the Fund at www.walthausenfunds.com or by calling toll-free 1-888-925-8428.

Interesting argument. There's always overvalued areas. However, for natural resource producers it's hard to make that claim. Gas is overpriced at $1.25 (excluding tax)?
Tech is nearly impossible to value anyway. If you're building 8-track decks you're overvalued. If your aeorspace division is about to receive a big contract from NASA to supply the space station or ferry payloads to the moon, you might be undervalued.
Central banks and lawmakers will do what they will do. But it would be rare indeed for a paper currency to maintain or increase in purchasing power over extended periods. This begs David's question a bit I suppose. But, even nominal gains in equities are preferable to little or no gain in cash.

If we are in a period of rising interest rates, I would be cautious with bond holdings in terms of duration, maturity, quality. At some point, there may be an opportunity to lock in 3, 4, 5% in CDs and short-term bonds. That's a ways off, for sure. But that would be a way to reduce potential volatility. We have clients that came to us with old single-premium fixed annuities that have minimum-interest guarantee of 5%. We told them to hang on to these. They were purchased in the 1990s when 5% seemed impossibly low. Just goes to show us.

Fortunately OSTFX had the smarts to dump Valeant, unlike Sequoia and some others (Vanguard was also very late to dump, BTW). Perhaps the most important thing to keep in mind is that Osterweis started as a firm that managed money for ultra-high net worth families. Capital preservation was and is a high priority. The funds came along as an offshoot of the private money management, sort of a "what can you do for out grandkids" response. As a result, OSTFX has never been flashy, never been a style-box fund (it is most definitely not a midcap blend fund, another M* mistake), and strives to provide good returns over the long haul. Everyone of us has owned at least one fund that stumbles once in a while. Prior to last year's crappy number, you have a 10-year average return of that is very close to the S&P 500 with less risk. We are willing to give the team a little slack here. There has been very little turnover on the team, with Berler and Kovriga there since 2006. Are there concerns? Yes, there are always concerns with actively-managed funds.
If OSTIX is compared to the Non-Traditional Bond category (which is where we believe it should be), it is a bracket buster. Are there concerns? Yes, but the YTD number is not because the team decided to take dumb pills. Like OSTFX, we are giving them some slack, but nothing suggests there is any flaw. Which reminds me again that I seldom read M* analyst commentary for a good reason.

Overpricing can be as small as 0.5%, so this comment alone does not cause me to worry. He did get it right in early March, 2009, when he said "the train is leaving the station." Too bad his management company's funds have not done particularly well and certainly do not reflect his outlook over the years. I am sure they have constraints that inhibit them from overweighting asset classes very much.

"Grantham's observation that stocks have been overpriced about 80% of the time over the past 25 years. " 25 years is a long time to wait for mean reversion. Maybe he needs to adjust his estimates of fair value.

@Shostakovich OSTFX had a huge position in Valeant Pharma before analyst Andrew Left's take-down of it last Fall. I think OSTVX also had a significant chunk in it, too. They dumped it right away, before things got worse (as they have), but considerable damage had already been done.
http://www.benzinga.com/analyst-ratings/analyst-color/16/02/6508179/valeant-gets-closer-to-lefts-50-target-after-new-account?curator=thereformedbroker&utm_source=thereformedbroker
Combine that with the HY bond exposure in the fixed income sleeve, and a presence in MLPs, and you pretty much have your under-performance explained.

Hi, OJ!
Uhhh, I would imagine that investors rather like investing in a market that has an airbag. That might be quite enough to keep them home.
As to valuations, perhaps they're not all that comparable? See, for instance, http://www.starcapital.de/research/stockmarketvaluation. To the extent there's convergence, perhaps the fact that markets are global leads to broadly similar valuations? Perhaps the fact that 2500 foreign stocks trade on US markets as ADRs has a similar effect?
Just pondering,
David

David's post suggests that Grantham's estimate- "...US stocks are overpriced by 50-60% right now", is based on the Fed's actions coupled with the pursuit of short-term selfish interests on the part of management.
Question: If the suggested overvaluations are confined to US equities, then wouldn't value investors have turned en masse to an alternative and presumably more accurately priced market, Europe, for instance?
Granted, the EU central bankshave more or less paralleled the Fed with respect to trying to stabilize the markets since 2008 or so, but surely not prior to that? And is Grantham suggesting that short-sighted management is also responsible for elevated valuations of major European stocks also? That's surely a whole lot of world-wide short sightedness.
How do we explain the near equivalency in value/pricing for European stocks "since the days of Alan Greenspan"? Surely Greenspan's influence didn't significantly drive the European markets, yet their price/value ratios were and are comparable to ours.

By way of a backhanded compliment, they have simplified their website a bit. (I'd not seen one more complex than theirs.)
Before, if you had the usual type of accounts (e.g. 403(b), or anything else using the TIAA-CREF annuity structure), and you also had "external" accounts (e.g. a taxable brokerage account), these showed up in different places on their website, and you had to navigate through them differently. Now, all the statements are in one place. An improvement, albeit a small one.
But the company structure is just as complicated as always. Still with the three share classes that charge IRAs the most. Still with a bank that's somewhat off to the side. Still without statements online for aftertax annuities. It took me 4-5 clicks and scrolling down each of the pages to get to the aftertax annuity performance (worse than before, at least because of all the scrolling required).
Still can't find any info about what funds they offer NTF (via their brokerage). There's just one link to Nuveen funds (which they own). It's not under the drop down menu (What We Offer), but at the very bottom of the page (as you scroll down for miles), where you see it under "For Financial Advisors". So you can get these NTF at other brokers but not at TIAA (formerly TIAA-CREF)?
Lipstick on a pig is too kind (and I do think TIAA-CREF is excellent for some purposes)

>> Grantham's observation that stocks have been overpriced about 80% of the time over the past 25 years.
May it continue.

Hi Dex, Hi BobC
Thanks for your commentary. Perhaps from this dialectic exchange a useful synergy will emerge. That often happens.
I take no issue with the general rules that you both advocate. I too use them. But they are motherhood and apple pie. If your mother and father did not lecture them as a practical gospel before teenage, your parents were delinquent. That advice is accepted wisdom; it just does not go far enough for retirement planning purposes.
Those guidelines simply do not yield a yardstick to measure retirement planning progress against, and do not help in a final retirement decision. Some metrics are needed. A Monte Carlo approach is a perfect tool given the uncertain nature of future portfolio performance. Monte Carlo methods were specifically developed during World War II to address uncertainty, especially when a boatload of data are accessible.
Napoleon said: “Nothing is more difficult, and therefore more precious, than to be able to decide”. Information gathering, data interpretation, hypotheses testing, and flexibility to adjust are essential elements in any ongoing retirement planning process.
Without numbers and expectation estimates, a potential retiree is lost at sea. Without credible estimates any retirement consultant is similarly lost at sea, and is not providing a full service. Convenient, easy to use, and fast Monte Carlo simulations fill many of the gaps, at least in a probabilistic sense. That’s as good as it gets.
For example, use the PortfolioVisualizer Monte Carlo tool. In a few minutes it runs 1000 random cases for the input parameters. Those input parameters are easily changed to explore what-if scenarios. Those what-if scenarios test the robustness of any assumptions. Time span is changed with a single input.
Output includes a likely median end wealth portfolio value, a portfolio survivable probability, and the 25 and 75 percentile portfolio value likelihoods. All this is good stuff and informs both the sagacity of the ongoing savings process and any final retirement date decision. These outputs can be updated over time, and yield retirement guidance. And it’s all free for the doing.
Note that the Monte Carlo simulators that I recommend do not operate in a vacuum. They are just one tool in a retirement planning toolkit. Adopting that tool does NOT preemptively require discarding all the other elements discussed in these exchanges. These are not mutually exclusive planning devices. They should be used in tandem.
Monte Carlo simulators have become a more or less standard tool in financial planning circles. An early version was developed by Nobel Laureate Bill Sharpe. He still runs that service as part of his Financial Engines website. Like all tools, the everyday American wisdom is to “use it or lose it”. I’m at a loss to construct an alternate way to generate any meaningful projections for the survivability of any retirement war-kiddy.
Your suggestions are welcomed and encouraged.
Best Wishes.

FYI: Financial planning and everything associated with it can be stressful and complicated, even off-putting. For a financial services brand like TIAA—which just dropped the "CREF" from TIAA-CREF—that can present a marketing challenge.
Regards,
Ted
http://www.adweek.com/news/advertising-branding/why-financial-services-company-shortened-its-name-and-changed-its-logo-169807
Mutual Fund Wire.Com Slant:
CREF-Less:
http://www.mfwire.com/common/artprint2007.asp?storyID=53520&wireid=2
TIAA Website:
https://www.tiaa.org/public/index.html
M*: TIAA Fund Family:
http://quicktake.morningstar.com/fundfamily/tiaa-cref-asset-management/0C00001YVW/fund-list.aspx