Andy Busch
China, US and oil notes for CBS WBBM 780 Noon Business Hour today at 12:00CT
I’m leading of their show today at 12:05, check it out here
WBBM Notes 1/4/2016
1. China
a. Sell-off driven by weaker than expected PMI data for both official and private numbers showing 10 straight months of lower growth.
b. Circuit breaker confusion. These were installed to curb volatility but have likely generated more uncertainty and selling.
i. 7% drop triggered the breaker and caused their markets to close early.
ii. This leads investors in the lurch and unable to dump shares.
iii. The circuit breaker system creates an incentive to “sell now” and find out later if you can still sell.
c. As well, January 8th is the date when the Chinese regulators are lifting the ban on sales for listed companies major shareholders, which was imposed last summer.
d. Lastly, the US dollar against the Chinese currency broke above 6.50 for the first time since 2011.
2. Why this matters for the US markets:( might ? )
:a. The last time we had a drop of this size in the Chinese markets in August, the US markets had a large drop (10%) as well about a week later.
b. Seasonality. As January goes, so goes the rest of the year.
i. This indicator has had an 88.5% accuracy ratio since 1950.
ii. It’s only been wrong 7x.
iii. So goes the first week of January, so goes the month of January with an accuracy ratio of 86.8%
iv. Since 1950, every down January on the S&P 500 has preceded a new or extended bear market, a flat market or a 10% correction.
http://www.andrewbusch.com/2016/01/china-us-and-oil-notes-for-cbs-wbbm-780-noon-business-hour-today-at-1200ct/

I have been sitting on $500K in a money market fund for a year after firing my ineffectual financial advisor. I am 86 years old and unmarried with financially independant heirs. I would like to at least gain an amount equivalent to my RMD.
The following is my tentative selection of ETF funds that I am considering investing 25% each: VOO,VIG,PFF,VEA.
I am inviting any carefully considered suggestions or comments. Thank you and a Happy and prosperous New Year to all.

To willmatt's original question, which seems like a good discussion topic, here's ~ 2.03 inflation-adjusted cents' worth from this house.
For now, sticking with moderately significant changes made in mid-2015, which consisted of (1) reducing equity by quite a bit, concentrating it mainly in lower volatility funds with a strong tilt toward hedging foreign currency; (2) building up to about a quarter of the port in FI cef's, in munis, preferreds, and non-agency mortgages; (3) weeding out as much in hy corporates and commodity energy equity as possible; and (4) building up BBB/BB-ish muni oef's.
What are others doing?
Cheers, AJ

One area that seems duplicative is my accumulation of balanced funds. Currently, I own VWENX, JABAX and VTMFX. Two out of the three seems adequate to me. I really like VTMFX and its muni bond holdings, which I hold in a taxable account. So, its come down to a decision between VWENX and JABAX. I bought VWENX in a taxable account many years ago and its ballooned to my largest holding. I have a rather large capital gain with it, so its tough to sell without incurring the big cap gain. JABAX is held in a Roth IRA, so no tax issues with it.

FYI: Nasdaq and S&P 500 eye worst start to the year since 2001.
Regards,
Ted
http://www.marketwatch.com/story/dow-industrials-hasnt-started-the-year-this-horribly-in-84-years-2016-01-04/print
Worst Start To The Year:
https://www.bespokepremium.com/think-big-blog/worst-starts-to-the-year/

What do you think of Glenmede fund?
Speaking as someone who knows practically nothing about option investing, I can only echo what msf says. It seems to be a conservative fund that uses only covered options. FWIW, so far it has delivered about 2/3 of the S&P's returns with about 2/3 of the S&P's standard deviation.

Hi, Vert.
Not value, per se. They own equal amounts of nine ETFs, one representing each major industry. Some of the ETFs are quite growth-y, some are not. They periodically rebalance to get everyone back to an equal weight. For now, that means buying the energy ETF regularly. They own lots of shares of it which, in theory, might pay off big in an energy rebound.
Load-waived shares of SDRAX ($2,500) are widely available, but they're not going to be mistaken for a Vanguard fund (1.58% e.r.).
David

Not value per se, but my understanding is that any of these equal-weighted rebalancing schemes give you a value tilt. If you like Morningstar's classifications, they have SDRIX at 42% value and 25% growth.

To willmatt's original question, which seems like a good discussion topic, here's ~ 2.03 inflation-adjusted cents' worth from this house.
For now, sticking with moderately significant changes made in mid-2015, which consisted of (1) reducing equity by quite a bit, concentrating it mainly in lower volatility funds with a strong tilt toward hedging foreign currency; (2) building up to about a quarter of the port in FI cef's, in munis, preferreds, and non-agency mortgages; (3) weeding out as much in hy corporates and commodity energy equity as possible; and (4) building up BBB/BB-ish muni oef's.
What are others doing?
Cheers, AJ

@David_Snowball Love Twitter...now 151 followers :)

Hi, guys.
As part of our ongoing outreach effort, we've created a Twitter account: @MFObserver. We have 150 followers after about 24 hours. My current hope is to manage 140 characters/week. Pray for me.
Our first tweet announced the fact that RiverNorth has launched RIV, apparently the closed-end version of RNCOX. The immediate reaction (sort of interesting) was a recommendation to wait until it was selling at a discount to NAV since that's what RiverNorth themselves would be doing. I'm trying, today, to set up a face-to-face conversation with RiverNorth for the next time I'm in Chicago - around the 22nd of this month. I'll share what I learn.
David

The Capital Spectator By James Picerno | Jan 4, 2016 at 06:34 am EST
It’s official—2015 was a rotten year for the major asset classes. Other than a measly 2.5% total return in US real estate investment trusts (REITs) and fractional gains in US stocks and investment-grade bonds, the year just passed delivered black eyes to most of the broadly defined slices of the global asset pie. If you don’t mind a round of statistical abuse, let’s review the numbers.
Will the year ahead deliver something better? For the moment, Mr. Market’s ex ante clues don’t look especially encouraging. But expected returns–and risk–vary through time, which is a reminder that a robust system for risk-management and analysis will probably be especially valuable in the year to come.
http://www.capitalspectator.com/major-asset-classes-december-2015-performance-review/
@Junkster
S&P Municipal Bond High Yield Index 1 YR
LAUNCH DATE: DEC 31, 2000
246.90 2.84 %▲
S&P Municipal Bond High Yield Index 5 YR
LAUNCH DATE: DEC 31, 2000
246.90 8.06 %▲
http://us.spindices.com/indices/fixed-income/sp-municipal-bond-high-yield-index
https://www.spdrs.com/product/fund.seam?ticker=HYMB
C E F Invesco Municipal Income Opp Trust (NYSE:OIA
https://www.google.com/finance?q=NYSE:OIA&ei=tYSKVuLHMZbVjAHQvouoAw

@willmatt72 and @Old_Skeet
I agree with both of you. Yes, if you happen to choose the correct 5 funds and/or ETFs, of course that's better. But if you don't, your portfolio could take a major hit. I am fortunate because I have a place to park my cash (family business), where I can get a nice safe return. Don't know what I would do if I had to be 100% invested, or in a cash account yielding 0%.
Agree with @Old_Skeet...it's your money and you have to be able to sleep at night without constantly worrying about your portfolio. And Old Skeet, I've gotten some great ideas from your portfolio...thanks for sharing it with us!

Hmmm. Your goal in 2016 should be to own just 5!

That won't be easy ! It's a $1.2 million portfolio so I'm not sure if I want just 5 funds !

FYI: Monday marks the first day of trading in 2016, but before moving on, below is a look at the performance of various asset classes (price change, not total return) for the full year 2015 using key ETFs traded on U.S. exchanges.
Regards,
Ted
https://www.bespokepremium.com/think-big-blog/2015-asset-class-performance-indexes-sectors-bonds-commodities-countries-and-currencies/

Hmmm. Your goal in 2016 should be to own just 5!

Down 9%? That is serious damage!
One thing that seems to have tripped investors in 2015 were the so-called allocation or balanced funds. Some of them looked relatively good based on prior bull year returns simply because they used higher effective equity-correlated beta exposure (including bonds that behaved like equities) even if the overall bond/equity ratios were the same as peers. Fund managers "cheat" that way. The tide went out in 2015 exposing many of them to losses bigger than their peers.
This exposes a problem in using fund ratings or statistics for selecting funds including the metrics on this site. They don't really tell you qualitatively how they got there and two funds may have arrived at the same ranking by very different routes. One might do much worse than other when market conditions change. So how do you pick?
Perhaps, the sleeve system that I have been reading here from @Old_Skeet will reduce that execution/strategy risk even if at the expense of some returns except in bull cycles when all of them will likely eventually catch up. I don't know enough to be sure and it seems like an awful lot of funds to hold/manage.
The alternative is to understand the fund strategy and see if the assumptions of market conditions that the fund returns are based on changes but that is hard.

The first of the M* articles linked to in the elevator talk item was a "Fund Spy - Medalist Edition" column. While I haven't got a clue why M* gives analyst ratings ("medals") for some funds as opposed to others, the immediate answer to why GTSOX wasn't mentioned in this column is that it isn't a "medalist".
But more importantly, both articles discuss funds that use collar strategies (that "collar" or constrain both upside and downside). The difference among the funds in the articles seems to be in how they adjust the parameters (e.g. how far out of the money the options are).
In contrast, it looks like GTSOX just writes covered call and "covered" put options. "The Portfolio is called 'Secured Options' because the call and put options it writes will be covered by [what the portfolio owns]". That's from the prospectus.
That strategy generates income, but doesn't provide the same direct protection as do protective puts. SDRAX buys puts to protect against bear markets, and (with parameters adjusted differently) Gateway seems to use them to protect against market corrections.

Yes, you do deserve the best possible.
PRBLX, FLPSX, and GLRBX down a half-percent or a bit more, Yackts down >5%, FREAX and FRIFX up 2-3%, FOSFX up 8+% (recently replacing OAKIX, down almost 4%), and DSENX, the majority of my nut, up >4%, as was PDI, though somehow I have missed the latter. The nervous retiree has not yet aggregated these results.
k, edited to add that Fido Fullview shows -2% for the year. Gah. I guess part of that was withdrawal to live on. Almost 1% of it was totally speculative fool bets I made in oil and pharma. Greed, man.

Happy New Year everyone!
Been a while since I posted these basic performance plots of SPY and AGG.
A look back at SPY shows lots of volatility and it just eked a small gain ...

Ditto for AGG ...

Both are just under their 200 day averages.
Personally, my last trade was on January 15 picking up more BAC. I held tight all year, even in August. Acting more like a buy-and-hold investor. Hopefully, I did not disappoint Flack and Junkster.
It was a pretty lame year for my portfolio, off 9% ...
Equities, largest to smallest: BAC down 5%, AIG up 12%, OAK down 4%, HCP down 8%, and AA down a massive 37%.
Weighted, my equities took my portfolio down about 6%.
The rest of the pain came from my funds.
Funds, largest to smallest: FAAFX down 15% (it sadly remains my Great Pumpkin fund), DODGX down 5%, SIGIX down 4% (about 12% better than its peers), and DODBX down 3%.
Hoping you and yours (and me and mine) a more prosperous 2016!
c

Hi, Vert.
Not value, per se. They own equal amounts of nine ETFs, one representing each major industry. Some of the ETFs are quite growth-y, some are not. They periodically rebalance to get everyone back to an equal weight. For now, that means buying the energy ETF regularly. They own lots of shares of it which, in theory, might pay off big in an energy rebound.
Load-waived shares of SDRAX ($2,500) are widely available, but they're not going to be mistaken for a Vanguard fund (1.58% e.r.).
David

The elevator discussion in David's Jan. commentary caught my attention. If I understand it correctly, the strategy of SDRIX is to stay fully invested at all times in a generally large cap value manner while hedging against a bear market using puts that only come into the money when the market is down 10%. Unlike most long-short strategies, it's not hedging against individual securities nor is it trying to time moves in and out of the market (as does Hussman, I believe?). So the fund can have good success either in a big up year or in a big down year. Its worst case scenario seems to be a year with the market down 9% (so the hedge isn't quite triggered) while the market is led by growth stocks (so the value tilt causes under-performance). This year, a flat market led overwhelmingly by a couple of big growth stocks, SDRIX was down less than 5%, so I'm guessing that down 15% really would be a rock-bottom scenario for it. It's a nice thought that your fund would do okay in a roaring bull market while thriving in a devastating bear.
FWIW, this is the first vehicle I've seen that pretty much implements the investing ideas that Mark Spitznagel puts forth in his very interesting book, The Dao of Capital. The main difference so far as I can recall is that Spitznagel suggests a breakpoint of 20% or 30% for your hedge instead of 10%, I presume because of cost.
Any comments?

Last year: -8.4%
5-year average: -8.33%
http://funds.us.reuters.com/US/funds/overview.asp?symbol=HSGFX.O