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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • Barry Ritholtz: Why Markets Love Trump's Tax Cuts
    Ritholtz may be right that tax cuts are good for the stock market, but is wrong or intentionally misleading about their impact on the overall economy. It is disingenuous to call corporate tax cuts Keynesian fiscal stimulus in any traditional sense as that wasn't really what Keynes had in mind, but rather government spending on things like infrastructure to create jobs. The idea that these tax cuts will filter down throughout the economy to benefit everyone is the old trickle down lie. At best the evidence for it helping the average person in the economy is weak. Only one kind of tax cut specifically tied to creating new jobs--if you hire X people, you get Y tax cut--seems to work well. Here's an excerpt from Politifact comparing the impact of different kinds of stimulus:
    politifact.com/truth-o-meter/statements/2010/aug/12/rachel-maddow/maddow-claims-spending-more-stimulative-tax-cuts/
    As Greg Mankiw, a Harvard economics professor, explains in a summer 2010 edition of National Affairs magazine, Keynes believed that "extreme and sustained unemployment during a recession" is fundamentally the result of "a decline in overall (or aggregate) demand in the economy." The government can "help restore normalcy" by increasing demand through spending, writes Mankiw. "And because the influx of government spending drives businesses to hire and consumers to spend, its impact is multiplied."
    According to classic Keynesian theory, government spending increases have a higher "multiplier" than tax cuts, because individuals might choose to save the money from tax cuts, rather than spend it.
    Is there data to back up Keynes' -- and, by extension, Rachel Maddow's -- argument?
    Yes, but there's also data that certain types of tax cuts can have a similar impact.
    To start out, we turned to testimony by Mark Zandi before the Senate Finance Committee on April 14, 2010. Zandi is the chief economist for Moody's Economy.com and a former adviser to Republican Sen. John McCain during his 2008 presidential campaign. Page 5 of the testimony contains a table that summarizes Zandi's calculated "bang for the buck" for various fiscal stimulus programs. Spending $1 on unemployment insurance benefits, for example, increases the GDP -- the value of goods and services that the economy produces -- by $1.61 a year later, according to Zandi. (We found some counter-arguments in a previous Truth-O-Meter item checking New Hampshire Sen. Jeanne Shaheen's use of Zandi's data.) A temporary increase in food stamps has the biggest stimulative effect. For each dollar spent, GDP grows by $1.74 one year later. For spending increases as a whole, the "bang for the buck" ranges from $1.13 for the Low-Income Home Energy Assistance Program to $1.74 for food stamps.
    The former economist for the GOP presidential candidate also looked at the stimulative effect of tax cuts. Making the Bush income tax cuts permanent has a multiplier of 0.32, which means that for every dollar the government cuts in taxes, GDP grows by $0.32. Cutting the corporate tax rate also has a multiplier of $0.32. According to the chart, the most stimulative tax cut initiative would be a job tax credit, which has a multiplier of $1.30.
    So based on Zandi's research, Maddow is on solid ground. All but one of the spending programs that Zandi analyzed have a multiplier significantly higher than one. The highest multiplier for tax cuts is $1.30.
    All of that said, Ritholtz is probably right that corporate tax cuts should benefit the stock market. Corporations and wealthy stock holders are precisely who the cuts are designed to help. The fact that the cuts are working in that regard shouldn't come as a surprise. They increase corporate profits after taxes by default. Yet whether the rally from the cuts is overdone at this point is another question entirely. Valuations matter too. And conflating the stock market's performance with the health of the overall economy is a gross distortion of the truth.
  • SPY vs PONDX total returns, probably not what many would expect to view
    @JoeD posted a recent thread regarding a new offering from VanEck, LFEQ . The fund apparently uses a form of algo for a mix of SPY and some type of U.S. Treasury to establish the path of best total return. A very new and untested fund during the "nasties".
    Below is a total distributions return of SPY vs PONDX . I chose PONDX , instead of PIMIX ;as the majority of individual investors could afford to access PONDX .
    Just a looking backwards view of returns that may surprise you. (April 2, 2007- Jan. 29, 2018) Place the cursor on the graphic line of choice for total return number and date. The cursor may be positioned anywhere onto the graphic.
    http://stockcharts.com/freecharts/perf.php?SPY,PONDX&p=6&O=011000
    Enjoy your remainder, pillow time here.
    Catch
  • FMC Strategic Value Fund liquidation

    But there's no rational basis to make a decision! How can a fund which holds equities maintain a constant price?
    Unless it's gone to all cash.
    In which case they should tell me.
    It really seems strange to distribute cap gains right before a liquidation.
    I think they did tell you. The prospectus supplement contains the usual boilerplate for liquidations:
    In anticipation of the liquidation of the Fund, the Adviser may manage the Fund in a manner intended to facilitate its orderly liquidation, such as by holding cash or making investments in other highly liquid assets. As a result, during this time, all or a portion of the Fund may not be invested in a manner consistent with its stated investment strategies, which may prevent the Fund from achieving its investment objective.
    They said they'd go to cash. That cap gains distribution is what one might expect right after they sold off virtually all their securities.
    I think I've seen funds in rare cases say that they're reducing the management fees because they're really only managing cash leading up to the fund closure. But most funds seem to just chug along, collecting their fees for a virtual MMF. That strikes me as a good reason to get out sooner rather than later.
  • LFEQ - gimmicky ETF (with the possibility of downside protection)
    Kind of interesting idea, anyway. Van Eck offers this product (LFEQ) which supposedly uses a proprietary model to determine the best allocation split between 2 investments: 1) an S&P 500 ETF and 2) US Treasuries. That's it. Just 2 investments. The ER is .59%.
    Supposedly the model gives daily trades signals on whether to allocate 20%, 40%, 60%, 80% or 100% to equities. Which begs the question....if stocks go into a tailspin, will their model get out of equities in time?
    This ETF has total Net Assets of only $9.8M. If only such products worked as intended/advertised. I find they rarely do.
  • Trump Stock Rally Second Only To FDR
    oh, please
    http://www.macrotrends.net/2481/stock-market-performance-by-president
    and wait, wasn't FDR the worst sort of libtard socialist??
    I look forward to their followup.
  • FMC Strategic Value Fund liquidation
    @MFO Members: Way to go, very consistent, 100 percentile YTD-15 Years.
    Regards,
    Ted
  • FMC Strategic Value Fund liquidation
    As previously noted on this board, FMSVX is being liquidated next month.
    I invested some money in this small cap value fund some years ago, probably because I read some positive comments here. It has been run by First Manhattan Co and I don't think it even had a ticker symbol for awhile. I was enchanted by the idea that this New York investment firm was running a small fund for its clients and whomever else wanted to join in.
    Surely they knew what they were doing and things would go well.
    They did for a little while.
    I plead guilty to not paying attention to how it has done lately: but it's only up 1.74% for the last year, - 2.65% for the last three years and +3.16% for the past five years. I would have thought those numbers impossible in the booming market we've seen.
    The fund made a large cap gains distribution in December, is making another one now (payable Feb 6, who knows how much??) and is maintaining a CONSTANT SHARE PRICE of $20.
    I called today to see how the liquidation process works. I could cash in now (at 20), or wait until the mid-February final demise. One factor in the final distribution amount is the cost of carrying out the execution.
    But there's no rational basis to make a decision! How can a fund which holds equities maintain a constant price?
    Unless it's gone to all cash.
    In which case they should tell me.
    It really seems strange to distribute cap gains right before a liquidation.
    Lesson to be learned -- PAY ATTENTION to your holdings.
    I'll not buy anything again which is so far under the radar that information is hard to find.
    At least I think I made a little profit on it.
    David
  • Barry Ritholtz: Why Markets Love Trump's Tax Cuts
    FYI:Here we go again.
    It has barely been a month since the Tax Cuts and Jobs Act of 2017 passed. Despite a volley of criticism over the bill, Mr. Market has voted with his feet. The U.S. equity rally since then has been substantial -- so much so that many market observers seem fixated on negative issues such as valuation, the speed of the run-up, and why a bad ending is inevitable.
    Regards,
    Ted
    https://www.bloomberg.com/view/articles/2018-01-29/why-markets-love-trump-s-tax-cuts
  • What to watch from health care earnings
    I am not familiar with the writer of this article; but she may add value to your thoughts in the healthcare sector.
    https://www.healthaffairs.org/do/10.1377/hblog20180126.137502/full/
  • Pimco D Shares to convert to A Shares
    Interesting that ponAx is *no load* at vanguard!
    Nothing special about load-waived A shares. Already offered by Blackrock (e.g. bAedx), Franklin Templeton (e.g. tcwAx), Nuveen (e.g. npsAx), JPMorgan Chase (e.g. olvAx), Columbia (e.g. rebAx), and on and on. Pimco is well behind the curve.

    PiMco Income isn’t available as an annuity at Fidelity (although total return is available).

    Fidelity's not the only game in town. Look around, you can find it.
    An HSA option is severely limited to how much you can put in per year.
    If you're talking about small investors, they're constrained by what they have to invest. If the HSA contribution significantly limits how much money they can put it, then they're not so small investors (and could afford I shares).
    So even with those additional options, its severely limits the small investor from getting into the fund as it wouldn’t be highly available in the fund supermarket at most brokers.
    What's the issue here? Your list of four options communicated the idea that small investors would either have to become big investors (add lots of money to buy I shares) or pay a load to gain access to Pimco funds. But they can already buy Pimco A shares without a fee or load.
    Now you seem to be agreeing that they can, but that you don't want to walk across the street (metaphorically speaking) to buy the shares. What do you say about the many other funds that aren't open for new accounts everywhere, such as VWENX, ACMVX, BRUFX?
    There's an old joke: A poor, devout man prays each week to win the lottery, and each week doesn't win. He finally asks the Lord why he hasn't won. The response: "meet me half way; buy a ticket!"
  • Trump Stock Rally Second Only To FDR
    FYI: In stark contrast to the dire predictions from some pundits and prognosticators, the equity markets have continued to soar since Donald J. Trump moved into the White House.
    In addition to a record-setting period for stocks, the Dow Jones Industrial Average since Mr. Trump officially took office on Inauguration Day has produced the second-best 12-month performance since Franklin D. Roosevelt’s first year in 1933.
    Source: FactSet and CNBC.
    Regards,
    Ted
    http://www.investmentnews.com/gallery/20180123/FREE/123009999/PH
    1. Franklin D. Roosevelt (D)
    2. Donald J. Trump (R)
    3. Harry S. Truman (D)
    4. Barack H. Obama (D)
    5. Lyndon B. Johnson (D)
    6. George H.W. Bush (R)
    7. William J. Clinton (D)
    8. John F. Kennedy (D)
    9. Gerald R. Ford (R)
    10. Dwight D. Eisenhower (R)
    11. George W. Bush (R)
    12. Ronald W. Reagan (R)
    13. Richard M. Nixon (R)
    14. James E. Carter (D)
  • What to watch from health care earnings
    Thanks @catch22,
    Yes, it will be interesting to see how health care earnings are reported. About 10% of my equity money rides in health care with no spiffs in place. The health care hound has been on the move of late and with this I'm looking for some good reporting.
    Thanks again for making post of this.
    Skeet
  • $1M-VG, 2017 = Only $25.5K Income & Div.s
    msf, I never heard of the annuity loophole before. Here is another article that explains I think a bit clearer.
    https://www.personalcapital.com/blog/retirement-planning/can-withdraw-401k-ira-penalty-free/
  • $1M-VG, 2017 = Only $25.5K Income & Div.s
    If one separates from service in the year one turns 55 (even if before one's birthday), then one can tap employer-plan (government Thrift Savings Plan) without penalty.
    Pretty much all tax sheltered plans (IRAs, 401(k)s, etc.) can be tapped without penalty so long as one takes "substantially equal periodic payments" until the later of age 59.5 or five years. Section 72(t) payments.
    Here's the TSP description of both options and more (annuitization):
    http://www.wifle.org/newsletters/december2007/accessingTSPwithnopenalty.pdf
  • Pimco D Shares to convert to A Shares
    So the small investors can:
    1) put up the money for I class shares
    2) go through an advisor
    3) buy the loaded A shares (for the new investors, not the converted D share investors ).
    4) buy the etf BOND which is a more tax efficient structure than the mutual fund.
    5) Pony up $3K to buy the A shares NTF, e.g. PONAX:
    https://investor.vanguard.com/mutual-funds/profile/overview/N061?FundIntExt=EXT
    6) Buy A or I shares NTF with no/low min through an HSA, e.g. The HSA Authority (available funds)
    7) Buy an annuity clone (Pimco Variable Insurance Trust) fund, with no min, e.g. through Fidelity Personal Retirement Annuity
  • Illinois Ponders Pension-Fund Moonshot: A $107 Billion Bond Sale
    @mfs,
    From memory your research is believed, by me, to be good. The three North Carolina Muni funds I held were FXNCX (Franklin) ... ETNCX (Eaton Vance) ... and, you guessed it OPNCX (Oppenheimer).
    And, yes I let all three of them go because of their Puerto Rico positions plus three other national muni funds as well. My advisor saved me a good bit of grief as the nationals (I held) were also loaded with Puerto Rico bonds as well.
    Moving on ... tax free Illinois bonds have no interest to me at all "whatsoever." From my perspective they are an investment hazard just as Puerto Rico became to be. Linked below is an article that supports this thinking.
    http://www.chicagotribune.com/business/columnists/ct-illinois-chicago-municipal-bonds-junk-0611-biz-20170609-story.html
  • Illinois Ponders Pension-Fund Moonshot: A $107 Billion Bond Sale
    I don't think you appreciate the nature of FPRTX. This was a fund that was double tax free in all 50 states. At the risk of sounding repetitive, the only way to accomplish this is to invest exclusively in munis issued by territories. This must load up on Puerto Rico - since it must own only territories, and pragmatically most of those bonds are from PR.
    That's very different from a single state fund, that's allowed, in fact expected, to have the vast majority of its bonds tax-exempt in just one state. This doesn't preclude these funds from bulking up on territory bonds, but it doesn't require them to, unlike FPRTX.
    As it turns out, in the past decade, FXCNX never exceeded 20% in territory bonds, generally peaking around 18% between 2010 and 2012. In 2015 it had dropped down to 5% or so. Contrast that with the 2015 holdings of the Oppenheimer Rochester funds in the link I provided (some 30%+, all nine over 18%).
    To put these numbers in perspective, I spot checked other NC long muni funds in 2012 (links are to SEC filings):
    FXCNX (2/2012): 18.3%
    EVNCX (2/2012) 16.2%
    MSNCX (3/2012) 9.6% (if I added right)
    FLNCX (5/2012) 1.25% (my arithmetic, again)
    OPNCX (3/2012) 40.6%
    From the Oppenheimer Annual Report: "Securities of the Commonwealth of Puerto Rico, which are exempt from federal, state and local income taxes, represented 40.6% of the Fund’s net assets as of March 30, 2012, and contributed favorably to the Fund’s total return this reporting period."
    Sure, Franklin is at the high end of the "normal" range for territory holdings, along with Eaton Vance. But Oppenheimer Rochester is in a class of its own - in the risks it takes, and in how it flaunts this (at least in good times). Many people do not seem to recognize the outsized risks this family takes.
  • $1M-VG, 2017 = Only $25.5K Income & Div.s
    May need to look at private corporate bonds 5%-10% of portfolio. for instance Pick large companies like Verizon sprint macys bbb- or higher rate. Typically yield 5.5%ir higher. Vanguard got many Corp bonds
  • $1M-VG, 2017 = Only $25.5K Income & Div.s
    @Thurston_Howell_IV, if you are in your early 50's, aren't you going to have to pay a 10% penalty on top of taxes from the IRA/401K? Or am I misunderstanding where you are taking money from. Also, if you are working within the tax deferred accounts, why are you making dividend and income a priority and not just total return? Doesn't matter where the return comes from when you withdraw from tax deferred.