FYI: Shareholders are suing the backers of the $6.7 billion Sequoia Fund (SEQUX) after a hefty position in Valeant Pharmaceuticals International (VRX) delivered sharp declines in the second half of 2015.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2016/01/11/shareholders-sue-sequoia-fund-over-big-valeant-pharma-
stake/tab/print/
M* SEQUX Holdings: VRX Is #1
http://portfolios.morningstar.com/fund/holdings?t=SEQUX&region=usa&culture=en-US

FYI: Polen Growth gained 14.6% thanks to its outsize stake in Google, aka Alphabet.
Regards,
Ted
http://www.wsj.com/articles/and-the-no-1-stock-fund-of-2015-was-1452482736
M* Snapshot POLRX: http://www.morningstar.com/funds/XNAS/POLRX/quote.html

Last time I looked, it was over $30/sh...now it's @ $24.65. Is selloff due to investors moving out of equities/funds into cash...or something else? Yield is now 11%...can that hold up?

@vkt
Regarding the apparent demise of HC/biotech, it might be helpful to refer back to an October post by @Puddnhead in which he reported exiting his heavily-weighted positions and his reasons for doing so. He didn't propose it as advice, but his instincts have proven prescient.
http://www.mutualfundobserver.com/discuss/discussion/comment/69856/#Comment_69856
In a comment to that thread, I threw in some data from Josh Brown and Eddy Elfenbein, showing just how historically wild the 4-5 yr returns had been, and added a quote from Josh Brown about what he thought would likely transpire:
"Non-committal traders crowd in and then flee at the first sign that the easy money isn’t rolling in like it had been. Margined players get blown our as true investors clutch the fundamental story to their chest like a rosary. They repeat a mantra of sorts under their breath as the selling intensifies, “it’s cheap on next year’s numbers, it’s cheap on next year’s numbers.”
And so, here we are. For those who received over 25 yrs of return in less than 5, did you follow Puddnhead out the door, shouting "Is this a great country, or what?"; or, are you still clutching those beads to your chest, sipping your whiskey in the dark, wondering what oh what went wrong with the "fundamental story"?

Brazil: A politically corrupt country with an economy heavily reliant upon natural resources.
Russia: Vladimir Putin and an economy heavily reliant upon natural resources.
China: An economy managed by a clueless Communist dictatorship in the midst of imploding as the enormous bubble in the Shanghai stock market continues to correct, similar to the US dot.com implosion of 2000 to 2002:
Shanghai stock market: July 2014 - 2036
June 2015 - 5023
"5 Things To Consider In Emerging Markets" ??
Sold to you.

Energy sector is more than a falling knife. It seems to be in a price reset and so can wallow for a long time in price discovery. I believe something fundamental has changed in the trading instruments that resulted overstated demand or understated supply not just a physical demand-supply situation.
Biotech/Pharma may get to that stage once it no longer keeps producing high returns because a lot of the returns were from just money piling on to a hot sector. That creates volatility which is fine but I don't think most of the investment money coming via broad etfs and funds understand the risks in this space. Investing in clinical stage biotechs is like playing VC with startups where most of the exit upside has already been realized by the real VCs. They can simply cease to exist if clinical trials fail or FDA approval does not happen because of side effects. Bigger company pipelines are threatened because smaller startups would rather do an IPO or the acquisition costs are very high.
It doesn't mean the whole space is in trouble. Some companies will do very well but picking them is beyond the capabilities of retail investors and even some smart investors and they might not even care if too much money is pouring in. Problem with this rising/falling tide space via broad ETFs and funds is that it is subject to shocks from bad news from any company as happened with Celgene today. A very large number of companies in this space will eventually fail so there will be a sequence of bad news and the broad ETFs and funds do not provide enough diversification. Might be good if you are a momentum trader. There might not be enough gains over a longer period to show for all of the volatility.
The only thing I would trust in this kind of a market if one were to buy on dips is the S&P 500 and is likely the best one to pay off with such a move. It avoids most but not all of the sector-specific problems, currency problems, interest-rate problems, developing market problems and almost every other problem. US Economy is far from recession and all the investment money will have to go somewhere. Programmed money simply moves into such "safe" instruments to park the money other than cash.
Energy, pharma/biotechs, financials (who seem to have run out of lucrative proprietary trading ideas under increased scrutiny and don't make much in traditional banking) will be value traps for a while in my opinion even of there might be frequent violent swings up.
Obviously, I could be completely wrong about this. :)

Knives Still Falling ??
Total Return % 1-Day 1-Week 1-Month 3-Month YTD 1-Year 3-Year 5-Year 10-Year 15-Year
XLE (Price) -2.14 -9.04 -8.44 -19.70 -9.07 -25.98 -7.22 -2.55 1.92 5.55
http://performance.morningstar.com/funds/etf/total-returns.action?t=XLE&region=usa&culture=en-US
Total Return % 1-Day 1-Week 1-Month 3-Month YTD 1-Year 3-Year 5-Year
AMLP (Price) -5.37 -14.44 0.97 -24.76 -13.69 -34.09 -8.74 -2.33
http://performance.morningstar.com/funds/etf/total-returns.action?t=AMLP&region=usa&culture=en-US
Total Return % (01/11/2016) 1-Day 1-Week 1-Month 3-Month YTD 1-Year 3-Year
ETNHX -5.14 -15.41 -15.74 -8.1 -18.68 -9.81 22.91
http://performance.morningstar.com/fund/performance-return.action?t=ETNHX&region=usa&culture=en_US
Total Return % (01/11/2016) 1-Day 1-Week 1-Month 3-Month YTD 1-Year 3-Year 5-Year 10-Year 15-Year
FBIOX -4.63 -14.16 -12.18 -8.39 -17.02 -9.53 25.27 26.93 14.19 8.33
http://performance.morningstar.com/fund/performance-return.action?t=FBIOX&region=usa&culture=en_US
Total Return % 1-Day 1-Week 1-Month 3-Month YTD 1-Year
SBIO (Price) -5.68 -15.93 -14.96 -11.29 -18.89 -3.05
http://performance.morningstar.com/funds/etf/total-returns.action?t=SBIO&region=USA&culture=en_US

Gundlach ups currency risk for first time in five years
By Michelle Abrego 11 Jan, 2016
‘As of [last Tuesday], we bought some global, mostly developed, non-dollar bonds taking some currency risk in our bond fund. For nearly five years we’ve had nearly everything dollar denominated. We think the currency risk will turn a profit,’ he said.
http://citywireselector.com/news/gundlach-ups-currency-risk-for-first-time-in-five-years/a871960?ref=citywire_global_latest_news_list

Reminder
Jeffrey Gundlach Webcast tomorrow 1/12/2016
Mr. Gundlach will be discussing the economy, the markets and his outlook for what he believes may be the best investment strategies and sector allocations 2015.
Tuesday, January 12, 2016
1:15 pm PT/4:15 pm ET/3;15 CT
Click Here to Register
https://event.webcasts.com/starthere.jsp?ei=1084870
From citywire:
‘A little more dovish on the minutes is favorable for non-dollar on the margin,’ Gundlach told Citywire Americas in New York.
And today from a Fed Member
Markets | Mon Jan 11, 2016 9:55pm EST
Fed's Kaplan: four hikes not a sure thing in 2016
Dallas | By Ann Saphir
"This is an unusual start to the year, obviously," Robert Kaplan, the Dallas Fed's new president, told reporters after a talk here.
Concern about slowing growth in China roiled world markets in August and forced the Fed to hold off raising interest rates in September. This year has started off with global markets again rocked by plunges in Chinese stock markets, a fall in the yuan and subsequent heavy intervention by the Chinese authorities to push the yuan back up.
"We went through this in August and September, we paused, we watched, we let events unfold, which is the right way to handle it, and we saw ultimately that underlying economic conditions remained intact and solvent," Kaplan said.
"There's no substitute for time in assessing economic data as it unfolds," Kaplan told reporters.
Kaplan said he is not sure there will be enough economic data before the Fed's next policy meeting in late January to justify raising rates then, but "between now and March I think there will be."
Kaplan's comments differ somewhat from those earlier in the day from Atlanta Fed President Dennis Lockhart, who said there may not be enough data even by March to make a call for raising rates.
http://www.reuters.com/article/us-usa-fed-kaplan-rates-idUSKCN0UQ06N20160112?feedType=RSS&feedName=businessNews

Thanks for sharing David.
Good stuff msf!
I actually think the folks at Whitebox did all they could to articulate their strategies. I never got the impression they wanted their investors to "Just trust us...," like the article suggests. Their conference calls and quarterly letters were straight-forward and insightful, often compelling, seemingly well intended.
Nor were their fees high. They eliminated their loaded share class. Certainly, room to do more, but still, pretty good, relatively.
Their strategies simply did not play out in the last two years, after they decided to "exit the Mr. Market bus."
As we discussed last March, they are in pretty good company.
Keep thinking maybe they were too clever for their own good, something David alluded to in his profile.
Yes, gonna need to get access to principals to better understand how it ultimately unraveled. We did try to get a phone interview for David with Mr. Redleaf, but Whitebox declined.
I'm honestly disappointing they were not more successful.

FYI: (This is a folow-up article)
DoubleLine Capital, the $85 billion investment firm run by its chief executive and chief investment officer, Jeffrey Gundlach, said it opened the DoubleLine Global Bond Fund to investors on Monday.
Regards,
Ted
http://www.reuters.com/article/us-funds-doubleline-gundlach-idUSKCN0UP1K020160111
Fund Symbols:
I shares (DBLGX) and N shares (DLGBX)

FYI: Four candidates stood out from their growth counterparts.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=735547

Hedge fund vs "hedge fund". Photocopying was synonymous with xerox at one time. Who said hedge funds have to charge 20% profits and 2% fees? That is the first problem. If I invest the same way but only charge 5% profits, then my fund is not a hedge fund?
Specific issue in retrospect was these were actually "black box" funds. Now if they named them so, no one would have invested. The name suggested something unique, but it was a lie.

FYI: After a bad 2015 for emerging-markets stocks, there are potential bargains available for investors willing to take on the added risk of this volatile sector.
Regards,
Ted
http://www.wsj.com/articles/what-investors-should-consider-in-emerging-markets-1452482749

FYI: GUS SAUTER: A couple of weeks ago, I went to the barbershop. As he was cutting my hair, my barber said that he believed the stock market was rigged, he didn’t trust it, and he wouldn’t invest in stocks.
Since I spent more than 25 years encouraging people to save and invest, I was disappointed to hear this expression of distrust of investing. More disconcerting is that many people, and perhaps a majority, feel this way. The financial crisis and a number of one-off fraudulent scoundrels have provided fuel for politicians and the media to attack Wall Street and create this feeling of distrust and even anger toward Wall Street.
Regards,
Ted
http://blogs.wsj.com/experts/2016/01/11/why-investors-need-to-stop-distrusting-wall-street/tab/print/

There are both similarities and differences of faults with hedge funds and open end funds. In one sense, you're right about people tending to pile into some funds based on manager past performance.
People piled into Gundlach's funds, even though they use "exotic financial derivatives like total return swaps". (See below.) IMHO use of exotic derivatives has become more commonplace - they're not limited to hedge funds and a few offbeat mutual funds as the article suggested. Though they're still insignificant if not absent from vanilla funds.
People piled into DoubleLine, into Yacktman, and others based on the managers' long term past performance at substantially identical funds. Not on a short term (3 year) record at a fund that was substantially different. RSIVX by design holds longer term, often illiquid bonds, than RPHYX, as opposed short term bonds ("think 30-90 day maturity").
So ISTM there is a qualitative difference between piling into funds like RSIVX (unproven management for that type of fund) or TFCIX or WBMAX (both with untested strategies for open end funds), and piling into proven management and strategies in the hedge fund arena. Another example of a mismatch between strategies and open end funds - stable value funds. There were (as I recall) over a dozen open end stable value funds attempted. They couldn't handle the open end fund daily redemption requirement.
YACKX also floundered for its first couple of years. It was only in 1994, in a relatively flat market, that it began to shine. Yet people stuck with him. Quoting Yacktman: "My only real fear in 1993 was that people who put their money in during 1992 would take it out at a loss. I didn't want this to happen, because I knew my performance would come back. ... As it turned out, more money came in than went out."
With hedge funds, accredited investors have the responsibility (and supposedly the opportunity) of investigating the offering. These "sophisticated" investors don't get the same disclosures as are required of open end funds. If managers have buried past failures, it's up to the investors to discover that.
The mandated disclosures of open end funds are supposed to make it easier for the other 99%. It is their choice to accept or reject a disclosure that discloses little other than: "just trust us".
DoubleLine funds and total return swaps:
Reuters, Nov 16, 2015: RiverNorth/DoubleLine Strategic Income Fund possesses economic exposure to an aggregate of 1,103,373 shares of Common Stock [of FSC] due to certain cash-settled total return swap agreements."

ThinkAdvisor, Nov 22, 2013“It’s [DSEEX] put together using a total-return swap,” Gundlach said of the fixed-income side of the fund.
Probably other funds; this was a quick search.

Hi Guys,
I agree this is not a new finding.
Superior portfolio performance is a rare commodity for individual investors, for mutual funds, for investment categories, and even for the marketplace itself. At some time, usually now rather than later, the iron law of regression-to-the-mean gets enforced.
The referenced article captures that attribute. As Mark Twain observed: “History may not repeat itself, but it rhymes”. Markets change and often change in a supercharged way. Warren Buffett remarked that “The dumbest reason in the world to buy a stock is because it’s going up”. Yet many of us do exactly that.
We love winners and assume their continued winning ways. The odds against that happening are not all that high. Academic and industry studies demonstrate the regression rule time and time again.
The referenced article cautions against being “suckered”. Yet we are strongly motivated to buy last years winners. That’s a failed strategy that seasoned investors understand. Seasoned investors who populate MFO are familiar with the SPIVA scorecards and the Periodic Table studies that show how fragile persistency really is. For the newbies to the MFO site, here are Links to both a representative and recent SPIVA report and a Periodic Table:
http://www.spindices.com/documents/spiva/spiva-us-year-end-2014.pdf
https://investment.prudential.com/util/common/get?file=1D065355D2CC360385257B7D00536F8A
Indeed we are suckers for the hot hand. When searching for new investment opportunities we are often drawn like flies to honey to those stocks and those funds that occupy the top of the returns list.
What these types of scorecards show is that performance persistence is an illusion. The rotation is amazing; the table entries quickly reverse themselves.
Studies consistently demonstrate that the average active mutual fund underperforms its Index benchmark. Further, the average individual investor underperforms the mutual funds that compose his portfolio. We lose returns on several dimensions because of impatience and poor timing.
That’s the sad side of the story that victimizes the general investment public. Hopefully, MFOers are more disciplined and less momentum driven. I suspect that our portfolios contain a higher fraction of Index products, and that we hold them for longer periods. The general mutual fund data suggests that this is happening among both institutional and private investors. Good for all of us; our sucker quotient is decreasing.
EDIT: It's tough posting while watching the pro football games with a cheering group of fans.
Best Wishes.

Well, +3% is a lot better than the average investor in 2015.

The major averages are still very high compared to March '09. I'm 70+ and very conservatively positioned. Am also taking out 4-8% a year in annual distributions (varies).
Our distributions so far this year came largely from our most conservative income-oriented funds. So, relatively speaking, our small equity positions have increased a bit recently. And as part of annual rebalancing I ended up throwing a few more dollars at PRNEX which has had a horrible year. But, we're talking small amounts here. (Probably raised that fund's allocation by 1-2%. )
No - I wouldn't back up the truck and start buying at these lofty levels. Although if 25 years old again I'd probably be in invested in 1-3 good global allocation funds and out fishing or something. It's all about risk tolerance and time horizon.

Market timing does not work, period...if by "work" one means to increase total return over long periods of time. I do believe timing MAY work to prevent a catastrophic (e.g 2008) loss since one would be out of the market during the worst of a decline. That said, by the time one jumps out, he/she has already lost a considerable sum. And then the equally hard part is deciding when to get back in the market. By the time that happens the investor likely missed some and perhaps the strongest part of the recovery. A case study is Mebane Faber (one of the best if one believes in momentum/timing). His GMOM fund went to cash last year (2015) on the wings of Faber's view that his signals suggested among the most compelling case EVER for jumping out. Of course by then the fund was down a lot, and it did indeed miss the best of the recovery which began just after the switch to cash. I still hold a small position in GMOM just to see what Mr. Faber is doing, and I think his approach can work over the longer term in producing a decent risk-adjusted return. Do I think it will beat the market, no way, and probably would be better off just sticking with Wellesley!

Hi Everyone,
I use Powerfunds Portfolios to guide my investing -- Aggressive Portfolio for IRAs (we're about 15 years from retirement) and Conservative Portfolio for college funds (needed in the next 1 to 6 years). I have found them to be quite prescient about what categories will do well going forward, though sometimes a bit early in switching. Last year, the Aggressive Portfolio had a gain of 3%. (Sadly for me, I didn't do as well, with -1.7%. The recommended double oil short DTO was too volatile for me and I passed on it, but it is up 100% over the last year). In 2008, the Aggressive Portfolio was down about -16%, not too bad. The portfolios change every 12 to 18 months.
New recommendations for the portfolios came out yesterday -- check them out at the link above. Basically, in the Aggressive Portfolio, they are recommending ~ 40% in long term bonds, a switch from growth to value, new investments in utilities and Italy, and some shorts in case of a total market meltdown.
lrwilliams