David's June Commentary The current secular bull market has been referred to as the most unloved bull market in history. Maybe so. Oh, for the days of no 24-hour 'news' being blasted at us. Very little of it is news. Most is opinion and hype of the crisis du jour. I suspect that there would be much less angst right now if we were rid of this brainwashing. Are there real worries? Of course there are, but sky-high stock prices are not one of them. That WAS the case in 2000. Sky-high real estate prices and the government's push to allow virtually anyone to have a home loan are not one of them. That WAS the case in 2007. There is very little real speculation right now, and a lot of folks who were invested in 2007 are still sitting on the sidelines, either waiting for the right moment or content to hold cash, CDs, and bonds. The Fed will likely push up the Fed Funds Rate this year, but likely only by 25 bps, then wait to see how the economy and markets handle it. We are not going to see an aggressive Fed in the near term.
A correction is always a possibility in any point in time. That is easy to prepare for, both psychologically and investment-wise. A bear market is another thing, as David pointed out so well. Investors should understand how much their portfolio could lose in a true BEAR market and ask themselves if they can handle that from a life planning, time horizon point. Perhaps the most important thing for folks in the withdrawal stage is to have 3-5 years of portfolio cash flow needs in cash, CDs, or short-term bonds. Once that is done, it is usually easier to handle the downside pressures.
A geopolitical even could change things quickly, so waiting for that to happen is a fool's game. Investors should analyze their portfolio now and make adjustments according to their cash flow needs, real risk tolerance, and investment time horizon. After all, it was Louis Rukeyser, when asked what the markets were going to do, on more than one occasion said "The markets will fluck up and fluck down". So there you go.
M* 25 Funds Investors Are Dumping
Appeal of Savings Bonds Wanes in Ultralow Interest Environment
Four Vanguard International Equity Index Funds to Broaden Diversification With All-Cap Exposure
Gundlach Fund Update 
The inimitable Jeffrey Gundlach will be giving a webcast update for the Total Return Bond Fund (DLTNX) next Tuesday after market close. The title of his presentation will be ... "Summer Insects."
So wear some light-colored clothing, slather on a coating of DEET, and listen in--- it could be more fun than usual. He might even splash some more cold water on our faces, like David and Ed had the
temerity to do in the MFO monthly commentary (wow, was that vertigo, or just "a wobble in the hinges?"). :)
David's June Commentary
David Snowball's June Commentary Has Arrived "Stock prices have risen rapidly over the past six years or so, but they were also severely depressed during and just after the financial crisis. Arguably, the Fed's actions have not led to permanent increases in stock prices, but instead have returned them to trend. To illustrate: From the end of the 2001 recession (2001:q4) through the pre-crisis business cycle peak (2007:q4), the S&P 500 stock price index grew by about 1.2 percent a quarter. If the index had grown at that same rate from the fourth quarter of 2007 on, it would have averaged about 2123 in the first quarter of this year; its actual value was 2063, a little below that. There are of course many ways to calculate the "normal" level of stock prices, but most would lead to a similar conclusion." - Ben Bernanke
Artisan Developing World Fund Summary Prospectus @David_SnowballWhoa, easy does it, pardner. It is one thing to talk/write about a new fund as having outstanding prospects. It is quite another thing to suggest it is a sure thing, can't miss, definite buy, before it has a single day of performance, let alone
before it has even been constituted. Sometimes it doesn't work out. A lot of strange stuff can happen during the first night at the amusement park's Grand Opening. Chose to violate that 3 yr/
5 yr rule 'cause it just feels "right", and come in too hard and too fast, and a year later you can find yourself sitting in a pile of goo.
David's June Commentary Junkster, we think of trends very differently, evidently.
At the 1987 crash, Dow was up like 18% for the year --- started around 1900, by 16Oct 2250 approx; Aug high (=year high( was 2640, sure. So off its Aug highs, yes. But just look at a graph. I was looking at growth of 10k, but not a lot of difference for that.
2008: by 1 June down (only) 3-4% for the year, starting the decline. This is 10k growth, my favored way to look at things in hindsight. More slow decline to Aug 1. And if your start point is then, decline to the 28th is another 4%. And then the real drop.
(This assumes I am doing the math right.)
T. Rowe Closes Market-Beating Health Sciences Mutual Fund To New Money Thought this was kind of interesting: "...when T. Rowe announced the closure, that the health sciences fund grabbed $820 million in the first quarter, fully 42% of T. Rowe’s total haul in the first three months of 2015:"
T. Rowe Closes Market-Beating Health Sciences Mutual Fund To New Money
David's June Commentary >> The markets were already in established downtrends before that time.
Not so much, at least 1987 not at all. Look at SP500 and FCNTX. For 7y ago, yes, this week right now was the very week of turn. Not much of a trend prior, spring 08.
I see zero reason to think we are in for a nasty bear absent some external shock. From what I read, not in the lay or popular press but internal Goldman memoranda and thinktank economists and the like, some already cited here, the worst you can say is that things are on the pricy side, that's all. Not an original thought, but not very apocalyptic. I did like Tillinghast talking about our bad selves. But some sudden plunge soon, don't believe there is reason.
David, before the Monday crash on October 19, 1987, the Dow was already down some 17% from its August highs. Same with October 2008, entering that month the Dow was already down some 17% YTD. I would say a 17% decline is a pretty established downtrend or what am I missing here.
Yes, I was around back then. The market peaked in August, sort of meandered around until the week before the crash (which came on a Monday). The three days before the crash saw brutal losses. I don't know if you'd call that a trend or not, but people were definitely worried on Louis Ruckeyser on the Friday before the crash (there was a famous prediction that night). I lost around 40% of my money in a week. Good lesson for me.
