Hi @JohnChisum,
GNMA has done well this year. I suggest that the most recent 3 week or so upward move, in particular; is related to monies moving into investment grade bond related areas.
A note regarding this sector, bond's; and perhaps some equity related areas is to review a chart of price actions (ticker(s) of your choice) from the period of May through Sept. of 2013. This is a reaction period after the chit-chat, err suggestion that interest rates would be moving up. We may or may not see this action again; but charting this area provides some insight into reactions of such thinking.
As things stand right now, well; what a coin toss for some. Investment money is still cheap (rates) and may become cheaper if too many folks continue to run from riskier assets and buy more I.G. bonds. The markets form of imposed QE.
The theoretcial "catch22" is, what will the auto-pilot algo machines do with the market swings and which sectors?
Take care,
Catch

Hi Guys,
“Yet, many clients continue to believe that their managers can and will outperform. (The triumph of hope over experience is clearly not confined to repetitive matrimony.) Even though no major manager has done so, the average US institutional client somehow expects its chosen group of active investment managers to outperform annually, after fees, by a cool 100 bps.”
So too do individual investors although I suspect their outperformance expectations vastly exceed the 100 basis points that institutional agencies seek.
This extended quote is from Charles Ellis’ paper “The Rise and Fall of Performance investing”. That paper was the primary reference that supported the article by Scott Burns that Ted linked earlier today. I always prefer to examine the primary source directly whenever possible. Here is a repost of the Ellis link:
http://www.cfapubs.org/doi/pdf/10.2469/faj.v70.n4.4
Ellis concluded that “ Often blinded by optimism, clients continued to see the fault as somehow theirs and so gamely continued to try to find Mr. Right Manager, presumably believing there were no valid alternatives. ………. And active managers continue to fail to outperform. Table 1 shows the grim reality of how few funds have outperformed their indices after adjusting for survivorship bias over the 15 years to year-end 2011.”
This article motivated me to explore the potential return penalties that might be coupled to our search for superior active fund managers. I used the data reported in various parts of the Ellis paper.
Roughly one-third of active managers outdo their benchmarks by about 1.0 % annually. Two-thirds of active managers underperform their benchmarks by about 1.5% annually. These asymmetric outcomes are based on a recent 10-year summary period. Cost drag is a major factor.
Therefore, simply put, the average net Excess Returns for a single actively managed mutual fund is: (1/3 X 0.010) – (2/3 X 0.015) = -0.00667 or -0.667% annually.
To illustrate the impact of this average negative Excess Return on a portfolio consider a few scenarios like 1 or 3 active fund positions on a totally active portfolio or on a portfolio with a 50/50 split between active and Index holdings.
If an all Index equity portfolio delivers an 8.00% annual reward, the 1 and 3 unit active fund components for an all actively managed portfolio will generate 7.33% and 6.00% annually on average. For the 50/50 mixed active/passive portfolio, the annual returns would be 7.67% and 7.00%, respectively. On average, such is the price for seeking positive Excess Returns from risky actively managed mutual funds.
To overcome this penalty, the investor must seek and find active managers who reliably and persistently generate positive Alpha. That’s a tough task. As Ellis highlights, such winners most often do not repeat.
In doing this analysis, another question surfaced. Picking an average active fund manager is a losing tactic. How much better does the selection screen have to be to secure a positive Excess Return? What are odds? Using the same data and the same net Excess Returns equation, it appears that the screen must eliminate almost two-thirds of all active fund managers (60% by calculation). That seems like a workable task. But again, performance persistency remains a dubious challenge.
Thank you Ted for posting the primary reference. I encourage all MFOers to read the Ellis document. It rings a bell. Active mutual fund investing is an uphill battle.
Best Regards.

This is just one method. You could set targets at which you would sweep profits. ie 10%.

As always, RTFM - read the fine manual (prospectus). Here are a couple of samples from bond funds (equity funds will clearly be trading):
Vanguard Short Term Bond Index Fund (p. 43): "A fund also may use fair-value pricing on bond market holidays when the fund is open for business (such as Columbus Day and Veterans Day)."
Everybody's "favorite" bond fund (or punching bag, as the case may be) Pimco Total Return:

The Trust is "open for business" on each day the NYSE is open for trading, which excludes the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. If the NYSE is closed due to weather or other extenuating circumstances on a day it would typically be open for business, the Trust reserves the right to treat such day as a Business Day and accept purchase and redemption orders and calculate a Fund's NAV, in accordance with applicable law. A Fund reserves the right to close if the primary trading markets of the Fund's portfolio instruments are closed and the Fund's management believes that there is not an adequate market to meet purchase, redemption or exchange requests.

That last part is interesting. Given the rate of redemptions from this fund, and the fact that the "primary trading markets of the Fund's portfolio instruments are closed", it sounds like Pimco might choose not to trade tomorrow. Seems that the prospectus leaves the choice up to the fund, and you'd have to call to know for sure.

If one wants to discuss how people are adding risk by reaching for yield, that's fine - and that's basically the lead sentence in the article. But the writer seems to have an agenda, and has slanted graphs and omitted data to that end.
(Disclaimer: I am a fan of Core Plus bonds - in my view, Core is to Core Plus as S&P 500 is to Total US Equity Market. In each case, the latter provides broader and better exposure to their respective markets - US bond and US equity.)
Everyone "knows" that the US Aggregate Bond Index (tracked by AGG) is much too heavy into government securities. Even Bogle says so, and suggests the index is weighted about 70% in Treasuries and other government bonds.
So when I look at Chart 1 (correlation coefficients), what jumps out at me is not that Core Plus is (slightly) correlated with equities, but rather that a good chunk, if not all, of AGG's (slight) negative correlation with equities could be coming from its heavy slug of government bonds (which the chart shows have a much stronger negative correlation with equities).
What this suggests is that if we were to look at Core Bond funds' correlation with equities (since they rightfully tend to have much lower percentages of Treasury/government holdings than AGG) is that they would have virtually zero, or perhaps even a slight correlation with equities. To me it is telling that the writer provided a core plus bond composite, but not a core bond composite. That likely would have undercut his thesis that there's a lot of difference between core and core plus.
Take the data from that chart, and look at the R-squared values for Core Plus and Aggregate. They're about 10% - close to meaningless.
Look at Table 2. The writer implies, without justification, that because Core Plus bond funds contain some junk bonds, their volatility will be similar to junk bonds. Table 2 shows 14.5 year (curious choice) volatility (std deviation) figures US Agg, junk, and equities. But missing are core bond and core bond plus figures.
This is a suspicious omission, since Chart 1 provides data for core plus, and Chart 3 provides a graph for core bonds (using Wells Fargo Advantage Core Bond as a proxy).
I'll remedy that. Using M*'s figures for 15 years (14.5 is not a standard time range), we have

Std Dev	Sharpe
Core (MBFIX)	3.59	1.12
Core+ (WIPIX)	3.53	0.98
Agg Index	3.50	0.99
S&P 500 Indx	15.38	0.26

The naive idea that adding a modest amount of a volatile asset (junk bonds) to a portfolio will necessarily make it more volatile is wrong. The obvious (albeit contrived) counter example is to add to a portfolio an asset that is volatile and perfectly negatively correlated with the portfolio. Adding a small amount of that asset will reduce the portfolio's volatility.
What one sees here (between Core and Core Plus) is little difference. (I used WIPIX, since the writer selected to use MBFIX, so I simply used the Core Plus representative from the same family.)
I could skewer Chart 3 as misleading also, but you get the point.
If you're really concerned about Core Plus funds that are "too" aggressive, just avoid funds whose portfolios are rated low grade by M*. Lots aren't.

Stock market is open. Bond market I believe is not.
http://www.thestreet.com/stock-market-news/11771386/market-holidays-2014.html
You will be able to put in mutual fund orders but I'd guess pricing may not change for some bond funds.

Also overweight the dollar, and no blue skies for foreign stocks or currencies - Cornerstone sees these current trends lasting into the 'long term.' U.S. mega caps aren't such a good play because a large share of revenue comes from abroad, and in foreign currencies. Inflation not even remotely a problem. On yields, yeah, in the short term (~ the rest of 2014), they see the 10y T possibly falling below 2%.
He said the thing that can blow up their outlook is a reasonable recovery in China, fueled by lower interest rates & the resurgence of Chinese domestic investment.
His "one investment" was actually three - long dollar, short gold, long U.S. mid-caps.
The thing I thought was interesting is that it sounds New Neutral-ish, but very bully-bully on the U.S., especially on what many people consider to be wildly overvalued smaller-cap stocks.
No mention of EMs other than China, or of FMs, which are still doing well and largely uncorrelated with developed markets.

I don't want to put in orders unless I know they will be executed 10/13.

Hi John,
Thanks for posting this Seeking Alpha article. It is well written and the comments on the strategies discussed I found to be of good reading. My thoughts are that there is a good possibility of a 250 point drop in valuation for the S&P 500 Index from its recent high of 2020 but there is no certainity to this happening. This would put it in a downdraft spin by my defination. My thoughts are that I'll buy at every 50 point drop from the 2020 mark with a sum equal to about one percent of the cash held within my portfolio. Should the Index reach my targeted 1770 range then this will leave me with about 10% cash plus whatever my mutual funds hold and leave me at about a 15% cash level in the near term. Under my plan, I will have bought at 1970, 1920, 1870, 1820, and 1770 ranges which when averaged will average to a buy-in at the 1895 range. With the large year end cash distributions that I expect from my mutual funds to make then my cash levels could be restored pretty close to their current 20% level with no action on my part even after considering my most recent buys.
I like to average-in, in a market decline and average-out in a market bull run. Should the market decline to the 1770's as it might then once it has bottomed and turned then I'll start averaging-out, by about one percent of equity valuation, at every 25 point climb from the 1900 level until a full cash position has been obtained. This is what I did once the Index reached the 1600 level a while back.
I am by no means saying the market will perform to my thinking and others should goven by their own thinking and not mine. I am writting this only for information puropses as to how I manage my portfolio with respect to both bullish and bearish stock market movement.
Hopefully, 3rd quarter corporate earnings will be good and a fall stock market rally will be coming in the near term. As the article states the upcoming week will provide some insight as to how the 4th quarter might be looking.
I wish all ... "Good Investing."
Old_Skeet

Looking for that lucky quarter we get out and flip on occasions like this. It's here somewhere ... In the meantime, I'll do some nibbling at around 16,000 on the Dow (of course that's but one measure). But I wouldn't deploy cash aggressively at that level.
As always ... your commitment to equities depends very much on time horizon, needs, and other factors.

Down.
http://www.businessinsider.com/dallas-hospital-employee-tests-positive-for-ebola-2014-10

This week might tell the story, technically.
http://m.seekingalpha.com/article/2555415-stocks-the-most-important-week-in-6-years?source=feed_all_articles

FYI: Charles Ellis hammered the latest nail in the coffin of professional money management. His article, “The Rise and Fall of Performance Investing” appeared in the summer issue of The Journal of Portfolio Management. It declares the era of performance money management over. Done. Finished.
Regards,
Ted
http://assetbuilder.com/scott_burns/the_performance_management_lottery_ticket
The Rise And Fall Of Performance Investing: Charles Ellis:
http://www.cfapubs.org/doi/pdf/10.2469/faj.v70.n4.4

You're right about seeing the rate of return. And seeing a fund that is number one in performance, etc....these are very strong motivators

Suggest moving all 0-response / 0-discussion posts (meaning no or 1 response after 1 day or some such threshold) to an Inactive / Low-Activity folder, leaving all else as is maybe.
You can set criteria and nomenclature differently of course.
There also could be a Concluded / Nearly Concluded folder for those lively but no activity for 2 days. -- ?
Just housekeeping and basic forum hygiene, to shorten the looong list now that the site is even more of a success than prior.

I looked up ACCNX which I own.
AAA. 45.88%
AA. 8.81%
A. 9.65%
BBB. 19.88%
BB. 8.38%
B. 4.10%
CCC. 1.28%
CC. 0.32%
C and below. 1.69%
Per the prospectus; at least 65% in investment grade. Up to 35% in high yield and or emerging market debt. No more than 10% in non-dollar debt.
I'm sure every fund will interpret the Plus differently. Some may be hinging on unconstrained.

By the way, Kathleen Gaffney's firm is going to launch IIRC 18 "ETMFs", exchange traded mutual funds. I believe these will be active mutual funds, traded on an exchange....really just active ETFs. We will probably have an active ETF managed by Kathleen Gaffney in there. I think one way or another, active ETFs are going to gain traction and be significant investment vehicles.

Thanks also Mike_E for that info. My guess is that they were buying stocks to boost returns but the recent selling has hurt them. That is a big question @rjb112, how do you fit this into your asset allocation? It is almost a income/growth fund.