Another Article on the topic:
"US producers have locked in higher prices through derivatives contracts. Noble Energy and Devon Energy have both hedged over three-quarters of their output for 2015.
Pioneer Natural Resources said it has options through 2016 covering two- thirds of its likely production. “We can produce down to $50 a barrel,” said Harold Hamm, from Continental Resources. The International Energy Agency said most of North Dakota’s vast Bakken field “remains profitable at or below $42 per barrel. The break-even price in McKenzie County, the most productive county in the state, is only $28 per barrel."
Saudis-risk-playing-with-fire-in-shale-price-showdown-as-crude-crashes

@linter: Your combination provides the following exposure: 50% HC, 22% Tech, and 13% Industrials. You may want to consider an equal mix of PRHSX and POAGX, which would be my preference. But if you want a higher octane, then you may consider a mix of PRHSX 5%, FBIOX 5% and POAGX 10%. In our portfolio, we own 10% positions in both PRHSX and POAGX.
Kevin

Makes sense to me. But also the more I look at it, the more I think that instead of 10/10 maybe the wisest thing is to go PRHSX (or similar: pjp?) 10% and POAGX 5%, especially if we are soon coming to a top or even if we aren't. Has there ever been a meaningful time period when POAGX outdid PRHSX either on the upside or lost less on the down? Heck, maybe the whole thing should go into PRHSX. Even if health corrects in a major way, I still don't see it correcting more than POAGX, right?

FYI: Look for good fundamentals, not hot streaks.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=675310

This morning I had a email response from Matthews Asia. Their explanation is a bit more thorough than previous replies other posters have noted. One question is still on my mind. They did not pay the distribution due to the tax rules on PFICs and what impact that would have on their shareholders. Would this also apply to future distributions as well? I replied back with that question in mind.
Here is their response:
Thank you for your investment in the Matthews Asia Dividend Fund and for contacting us. As you noted, there was no ordinary income distribution estimates for the Matthews Asia Dividend Fund primarily due to the tax treatment of the portfolio’s Passive Foreign Investment Companies (PFICs).
A PFIC is a non-United States company that primarily derives its income from investments. A corporation is classified as a PFIC if it passes one of two tests (with a few exceptions)—the Income Test (75% or more of the company's gross income is passive income) or the Asset Test (50% or more of the company's assets produce passive income). U.S. investors who invest in PFICs must follow unique tax regulations that differ from regular investments.
U.S. tax code requires investors under certain circumstances to deduct from the distributable income capital losses stemming from holdings in companies deemed to be PFICs. The Fund’s holdings in real estate investment trusts (REITs) are deemed PFICs. And while our inclusion of REITs in the portfolio can result in higher variability—both negatively and positively—in the income distribution, we continue to find them attractive for their significant yield premium to other equities. Please note that the Matthews Asia Dividend Fund does have income from dividends (book income) and the income is built into the value of the Fund but is not being distributed primarily because of the above tax rules. This is not an indication of a change in how the portfolio is managed. The strategy remains focused on total return while investing in companies with high dividend payouts and growth-oriented businesses.

GN'MAybe a good bet again.
Nice recent performance - intermediate government :

From Morningstar conversation Board
"How tiresome....portfolio again not updated" =
------ 85 Replys since 5/15/ 2013 ------
and yet, M* portfolio manager is still not completely
updated as of 7:30 pm est today 12/01/ 14 !!!!!!!!!!!!!!!!!! --- SLOTH----
Ralph

Hi Davidrmoran,
I too am not now a financial advisor client. I did use one in the early 1960s until I realized he had more incentives to churn my portfolio rather than increasing its value.
I recognize my personal experience is not universal, and the financial advisor industry can and does provide useful services for many customers. They educate and hold hands for those with weak stomachs or itchy trigger fingers. To paraphrase a Charlie Munger observation: As a money manager, he has experienced 50% drops 3 times in 50 years. The market is always 2 steps up and 1 step back. If you can't handle the 1 step back you shouldn't be in the market.
I suspect you suffered a dyslectic moment (it happens to me too) in your opening statement: “If you examine correlation history, and not just recent, global markets very often do not provide much diversification.” I remembered the data with just the opposite impact. So I checked to verify.
I used Vanguard as my primary historical data source, and updated their data summary and analysis with work I completed using Portfolio Visualizer.
Here is the Link to the Vanguard study titled “ Considerations for Investing in non-U.S. Equities”:
https://personal.vanguard.com/pdf/icriecr.pdf
The report was released in March, 2012. It concluded that although correlation coefficients have closed towards a perfect correlation of One value, diversification still mitigates individual investment class volatility and contributes towards end wealth. Vanguard concluded that a 20% to 40% foreign holding equity position had merit. Beyond the 40 % level the law of diminishing returns took hold, and in fact, acted to retard the portfolio.
Correlation coefficients are highly volatile entities. Just observe the noise like signal of the 1-year data and contrast that against the 10-year signal like data, both displayed in the Vanguard 15 page report. The data is given for many foreign Countries. It clearly demonstrates lower correlation coefficients in yesteryear with a definite tendency towards closure recently. In yesteryear, the correlations resided in the 0.4 to 0.6 range; today, those correlations are North of 0.8.
Since the Vanguard data ended a few years ago, I updated it with an analysis I made using the Portfolio Visualizer website source. Here is the Link to the Portfolio Visualizer Asset Correlation toolkit:
http://www.portfoliovisualizer.com/asset-correlations
When I said “global market diversification” I meant it in its most general sense to include all categories of asset class options. I updated the Vanguard study by examining the more recent correlation coefficients among the S&P 500 (VFINX), the total Bond market (BND), the FTSE (VEU), Emerging markets (VWO), and REITs (VNQ) as an incomplete set of primary holdings. I did mix mutual funds and ETFs since they reflect my current positions.
I had the Portfolio Visualizer compute correlation coefficients for 1, 3 and 5 years of the most recent data. Results bounced around, reflecting the unstable nature of correlations. The Bond asset retained a negative correlation against the equity holdings. The equity correlations were in the high range, very similar to the quoted Vanguard data sets with one exception. The 1-year Emerging markets correlation with the S&P 500 reverted backward to a 0.66 value.
Sorry for this detailed examination, but I felt your opening statement needed further clarification. Perhaps we are using different definitions for the short-term and the long-term. Timeframe disparities cause investment misunderstanding and need careful definition. Unfortunately, by selectively choosing timeframe, almost any position can be supported with a prudently screened data set. Statistics must always be fully scrutinized.
We agree that the article could have been more meticulously researched and more comprehensive. The cautionary “reader beware “ is warranted here.
Best Wishes.

@LLJB
You noted:
"But here's another question. I have a couple investments in start-up companies that happen to be healthcare related, medical devices. M*'s X-ray says I have 17.5% of my equity in healthcare, which I consider to be fairly overweight because healthcare is about 14% of large cap funds, a bit more for the S&P 500, only 9-12% of mid and small caps and more like 8.5% of market capitalization outside the U.S. So I'm anywhere from 20-100% overweight. But...that's without my start-ups. When I think about my exposure to healthcare, would you stick with M*'s numbers or would you add in the start-ups? I've always excluded them, because while the ultimate value of the company may be influenced by the equity markets generally and the healthcare sector more specifically, the real success or failure is almost totally dependent on whether they can successfully develop devices that are valuable in the marketplace. Essentially its an all or nothing proposition based on the skill of the inventors more than anything else."
>>>I suppose I would count money in startups as "other"; regardless of the sector.
About 6 weeks ago we purchased an IPO stock, DPLO (Diplomat Pharmacy); but this is an established company that went public, which is a whole different proposition. We do treat this holding as part of our healthcare sector percentage.
Your 17.5% in traditional healthcare would be fine by my standards at this time. But you, of course; are the one to determine this amount.
Are these startups at a venture capital stage and have not issued public stock?
Regards,
Catch

@catch22, thanks for all the explanation!! I hadn't connected with the idea that your 5% threshold is essentially one-quarter of your "floater" money, so my question about double counting is a bit irrelevant because you wouldn't take the healthcare portion of VTI, add it to a 1% position in a healthcare fund from your floater money and conclude that you've met your 5% threshold. Essentially that healthcare focused fund would need to be 5% by itself or maybe a combination of a couple healthcare funds you liked.

The question for me is when does government turn around and say, "enough is enough" and try to regulate costs that are spiraling out of control. If they crack down, then things change in a hurry.

@scott, this is an important point because with the Republicans taking over control of Congress next year there will be attacks on Obamacare. I don't believe it will be overturned and I don't think many others do either, but it will be attacked and that, I think, will create some uncertainty and potential for volatility.

The question would be what an individual considers overweight positions for their portfolio. Assuming an investor has 80% of their portfolio in equity via SPY , VTI or a large cap U.S. index fund, and that about 14% is healthcare, they would have 11.2% exposure to healthcare. They may consider this sufficient. Using the 14% healthcare exposure as an average for equity funds and an investor having 80% of their portfolio in U.S. equity; any healthcare sector exposure above 11.2% could be considered overweight by some.

Catch, IMHO that's the right way to consider it because if you take the 11.2% and decide you're underweight then you're underweight everything and you have no chance to be equal weight everything as long as the 20% is not in equity. But here's another question. I have a couple investments in start-up companies that happen to be healthcare related, medical devices. M*'s X-ray says I have 17.5% of my equity in healthcare, which I consider to be fairly overweight because healthcare is about 14% of large cap funds, a bit more for the S&P 500, only 9-12% of mid and small caps and more like 8.5% of market capitalization outside the U.S. So I'm anywhere from 20-100% overweight. But...that's without my start-ups. When I think about my exposure to healthcare, would you stick with M*'s numbers or would you add in the start-ups? I've always excluded them, because while the ultimate value of the company may be influenced by the equity markets generally and the healthcare sector more specifically, the real success or failure is almost totally dependent on whether they can successfully develop devices that are valuable in the marketplace. Essentially its an all or nothing proposition based on the skill of the inventors more than anything else.

How much does one need in healthcare? Going back to the OP's first comment, he was thinking of putting about 5% in. That would not be bad in my opinion. If one had only SP 500 Index funds and put the 5% additional in, that adds up to about 17%.+/-. Almost the same as the GDP.
If a person had 80% in a SP 500 Index fund and decided to put the other 20% into healthcare, that would come out to about 32% of the portfolio in the healthcare sector. As long as things are going smoothly then the returns on this portfolio would be pretty good. But none of us has that crystal ball and if healthcare has a bad year, that 80% in the index will not save him either. There might be some argument here if healthcare might have a bad year with everything we have discussed. Again, no crystal ball but the same thing was said of tech before 2000, and of housing before 2007-8.
So @mcmarasco should be okay with 5% along with what else he has invested.
I never believed the fictitious Gordon Gekko who stated that "Greed is good."

Hi @JohnChisum
You noted: "So anyone holding the SP500 index has a 12% exposure to healthcare already"
>>> I did some quick checks at Fido and found the following:
---Most large cap funds, including etfs and indexes are weighed about 14% towards healthcare
---mid and small caps vary from 9-12% in healthcare
---growth funds trend to be higher, with some funds holding in the 22% range for healthcare
---value funds trend more towards the 8% range
---balanced funds, both conservative and moderate, range from 14-18% healthcare exposure
The question would be what an individual considers overweight positions for their portfolio. Assuming an investor has 80% of their portfolio in equity via SPY , VTI or a large cap U.S. index fund, and that about 14% is healthcare, they would have 11.2% exposure to healthcare. They may consider this sufficient. Using the 14% healthcare exposure as an average for equity funds and an investor having 80% of their portfolio in U.S. equity; any healthcare sector exposure above 11.2% could be considered overweight by some.
For many close to or in retirement and perhaps having reduced their equity exposure to 50% or lower, the exposure to healthcare moves to 7% and less. A conservative allocation for a retired investor may have a 30/70 ratio for equity/bond style. This equity style would provide about 4.2% exposure to healthcare. Perhaps an individual in this scenario could move 10% of the bond holdings into a dedicated healthcare fund, etf, etc.
These individual "benchmarks" into a given sector should be a consideration regarding an under or overweight position.
Just a few early morning thoughts without enough coffee.....yet.
Take care,
Catch

"There is also another consideration in this as companies like GE have a healthcare component within them but they are classified differently. Toshiba is another company like that as well as Siemens. The latter two are not SP500 companies but I added them for examples. There may be others."
The problem - as you noted - they are classified differently and also, they trade like industrials rather than healthcare companies. I haven't looked at what % of GE's business is healthcare lately.
"The bigger question might be at what point does an investor have too much in healthcare?"
As noted above by Ted, healthcare makes up around 18% of GDP. Not only is that an enormous figure already, but - as noted above - it's predicted to grow faster than the economy for the next several years. With the idea that people have to buy health insurance or effectively pay a tax, certainly a tailwind for healthcare. You're seeing more in the way of organic growth with healthcare, as well, not all buyback/financial engineering a-la IBM.
The other aspect of healthcare is that there are a number of themes at work, including an aging population and unhealthy lifestyles that persist for many reasons (I mean, look at the chart of NVO.
http://finance.yahoo.com/echarts?s=NVO+Interactive#{"range":"max","scale":"linear"}
The question for me is when does government turn around and say, "enough is enough" and try to regulate costs that are spiraling out of control. If they crack down, then things change in a hurry. I just don't think that's going to happen as no actions from the government thus far would lead me to believe that they will. I mean, they're corporations, so for the last decade they're the ones who have increasingly been catered to and looked after by government in this country.
Until then, I think one has to have a good deal devoted to healthcare and preferably specifically healthcare. There is a point where it starts eating away at discretionary spending, as well - does health insurance start moving higher to the point where people skip that latte?
The question of how much do you need in healthcare - I dunno, for me, I think it's a broader focus on "needs" (which certainly includes healthcare) over "wants".

@catch22, and others;
I previously commented that the healthcare component comprised 12% of the S&P500 index. That is confirmed here, http://www.bespokeinvest.com/thinkbig/2013/3/11/historical-sp-500-sector-weightings.html although the data is two years old. I don't think there has been that much of a change.
As for returns, the healthcare sector within the index has returned 25% YTD. This from the Yardeni research. http://www.yardeni.com/pub/PEACOCKPERF.pdf
So anyone holding the SP500 index has a 12% exposure to healthcare already. The missing part of that is biotech. There might be a bit of that in the index but I think it is mostly comprised of big pharma etc. Is it still a good idea to throw an additional 5% of the portfolio into healthcare exclusively? I think so and with that you get the biotech components which are the big returners this year and I think for the future. As I have said before, I like "future stocks". There is also another consideration in this as companies like GE have a healthcare component within them but they are classified differently. Toshiba is another company like that as well as Siemens. The latter two are not SP500 companies but I added them for examples. There may be others.
Edit: Look at Fig.10 of the Yardeni link that breaks down the healthcare sector further into subsections and biotech is the leader at 35% return YTD. The others are not chopped liver either.
The bigger question might be at what point does an investor have too much in healthcare?

Hi @LLJB
You noted: "I have a question for you related to your points here and in another post about not investing less than 5% in "whatever" because it takes that to make any difference in your portfolio. I agree with you but I also realize it can depend on how you define your "whatevers". For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count? And if not, how do you decide which "whatever" things get allocated to?"
>>>What I posted in another thread: Our house remains U.S. centric in the equity area, gathering whatever international exposure from the fund holdings. The only direct exception being, GPROX; at this time.
A serious consideration going forward is to maintain VTI / ITOT or similar holding for 40% U.S. equity exposure and PIMIX (our largest bond holding) for bond exposure, also at 40%.
The remaining 20% would be allocated to "other", as determined by market observations. Currently, this would be the healthcare sector. Any of these holdings would be subject to change, not unlike June of 2008, as previously noted. None of the 20% floater money would hold less than 5% in any one area; as too little forward appreciation could likely be the result. This could mean, however; that more than one fund could result in a given market sector.....i.e.; energy; to provide the 5%.
Regarding the 5% consideration for the "whatever" money.
The 5% minimum I personally use is for investments I consider favorable for my risk/reward tolerance; and that present what appears to have a decent capital appreciation potential.
This is relative to what I noted above; with maintaining 40% in each for VTI and PIMIX. Healthcare holdings are about 14% of VTI. This would meet my needs, if I wanted at least 5% in healthcare (14% of 40% of the total portfolio).
Obviously, 40% each to VTI and PIMIX indicates a major part of a preference for an overall portfolio, and is U.S. centered with the exception of non-U.S. companies within VTI, or more so, the earnings of U.S. companies generated outside of the country. So, one could weakly argue some foreign exposure.
Now, what to do with the other 20%? Cash at this house has been some form of bond holding. If we want to buy something else, we always have to sell some of a bond fund for the transaction (at least as of today :) ).
This is the part that generally has the consideration for the 5% to make any difference; for the investment to be worthwhile to the overall portfolio. Usually the 5% is purchased at one time. Although, I think it is fine to average into a holding, too. But, I if averaged into a particular holding; it would likely be within a one month time frame.
Today, with 80% of a portfolio in the above two holdings; this would be the mix for the remaining 20% if split 4 ways: GPROX (although now closed), FRIFX (conservative, decent performing real estate), GASFX (utiliy/energy) and FSPHX. Or the whole 20% into FRIFX , GASFX or FSPHX.
This is obviously a lot of fiddling around with a portfolio. With enough choices, one may also consider 20% into 5 balanced/conservative allocation/moderate allocation funds or etfs to spread manager risk. I note this as one balanced fund with a very nice return record for several years is in the tank this year....... VILLX is running a negative return YTD. Lots of folks with this fund who are not happy. We do not hold this fund, thankfully.
>>>You also noted: "For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count?"
PRHSX is a sector fund and that is the only way I view such a holding. It is a special consideration; separate from a LC, MC, SC, growth or value equity. Such a fund could be a combination with tight restrictions from managers; such as a small cap healthcare fund, but it is still a dedicated sector.
>>>Also noted: " but when you think about your 5% threshold, do you double count?"
I will presume you mean overlap within holdings to form the 5% threshold. Yes.
I write singular here; but the portfolio is a household portfolio. At one time we both had several 401k/403b from investment vendor changes over the years. Early in 2009 we wanted a high percentage exposure to the HY bond area. We had about 45% of our portfolio invested in this area at one time, split among several investment houses within the retirement accounts. The same would apply to 1% from here and another 2% from somewhere else to meet the 5%.
I have not checked, but I suspect many broadbased equity funds have fairly high percentages of healthcare holdings. Depending upon your funds, you may have a fairly high overall percentage of healthcare.
In theory for some, is that diversification helps ease the pain when the markets are "mad". One could suppose finding 20 investment areas and givng 5% to each. I'm not convinced this method is of value.
I probably missed something with this long write; which was not intended to be this chatty.
Like me know about clarity; as it is too late at night for me, today.
Regards,
Catch

I started there (Vanguard) and I will hold their BEST till the end, with about 50% of all my money, and NO I don't hold Index funds, but I used to.......... graduated?

Hi JoJo,
Cresci did a very fine job at HLMRX, so JOSAX looks good to me. I would likely target JOSMX (ER 1.24 vs. 1.49 for JOSAX), which is apparently available in Fidelity retirement accounts for a $500 minimum + TF according to a test trade I just made. Another fund to consider, which has a value bias, is BISMX, and this fund is available at Scottrade for a $2500 minimum in both types of account with a TF.
Kevin

Hi @catch22, I agree!! I have PRHSX in an account at E*TRADE where its NTF. I was just trying to offer some thoughts related to the idea that the fund was showing as closed.
I have a question for you related to your points here and in another post about not investing less than 5% in "whatever" because it takes that to make any difference in your portfolio. I agree with you but I also realize it can depend on how you define your "whatevers". For instance, my position in PRHSX is 1% of my portfolio but I could count it as healthcare or I could count it as large cap growth or both. Either way it doesn't make or break the 5% rule in this case, but when you think about your 5% threshold, do you double count? And if not, how do you decide which "whatever" things get allocated to? Thanks for your thoughts!

Howdy @LLJB
While PRHSX does appear to "allow" a buy internally at Fido, personally; I don't find a need to purchase ($50 fee) this fund versus FSPHX.
My 2 cents.
Take care,
Catch

I would have thought that was implicit in the discussion of low volatility funds. Dividend paying stocks tend to have lower volatility because of their moderately assured income stream - the same stream that makes them susceptible to interest rate risk, as discussed in the article.
Here are a couple of WSJ articles on this point:
http://www.google.com/search?q=high+hopes+for+'low+volatility'+funds
"Many low-volatility stocks pay high dividends. .. 'The PowerShares fund should capture the low-volatility effect better, [] but the flip side to that is that you're taking on more sector risk.' That's because the PowerShares fund tracks an index composed of the least volatile stocks in the S&P 500, and becomes heavily weighted toward sectors like utilities (recently around 25% of the index, compared with about 3% for the S&P 500)."
http://www.google.com/search?q=beware+'low+volatility'+ETFs (okay, technically this one's from Barron's)
"A BETTER BET: dividend-growth stocks. They're steady hands, with more attractive valuations and less interest-rate sensitivity. ... VIG ... SCHD"

@mcmarasco: Here's what Nellie Huany at Kiplinger had to say about health care funds back in September.
A revolution is under way in health care, and it’s not too late to cash in. Scientific advances are changing the way drugs are developed and creating a torrent of new treatments. By making insurance available to millions who previously couldn’t buy it, Obamacare is fueling demand for health care products and services. And, oh, by the way, we’re not getting any younger.
Put it all together, and this colossal sector is likely to keep growing faster than the overall economy. Health care spending in the U.S.—some $3 trillion a year—accounts for 18% of gross domestic product. The government predicts that the figure will rise by an average of 5.8% annually over the next eight years, slightly faster than the growth of the overall economy. That’s reason enough to make a long-term commitment to health stocks, but it’s not the only one. Three trends are dramatically changing the health care system, creating plenty of opportunities for investors.
Regards,
Ted