Search

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

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.

Four Vanguard International Equity Index Funds to Broaden Diversification With All-Cap Exposure
FYI: Four Vanguard international equity index funds will more broadly diversify with the addition of small-cap stocks, and will follow broader FTSE all-cap benchmarks as a result.
Regards,
Ted
https://pressroom.vanguard.com/content/press_release/Four_Vanguard_Funds_to_Broaden_Diversification_6.2.15.html

Ted June 2015 in Fund Discussions
Gundlach Fund Update

The inimitable Jeffrey Gundlach will be giving a webcast update for the Total Return Bond Fund (DLTNX) next Tuesday after market close. The title of his presentation will be ... "Summer Insects."
So wear some light-colored clothing, slather on a coating of DEET, and listen in--- it could be more fun than usual. He might even splash some more cold water on our faces, like David and Ed had the temerity to do in the MFO monthly commentary (wow, was that vertigo, or just "a wobble in the hinges?"). :)

heezsafe June 2015 in Fund Discussions
David's June Commentary
A big warning sign in 1987 was the bond market. The 10 year bond yielded 7.19% at the end of February and went to 9.63% by the end of September.
In 1987, I worked for Salomon Brothers in their IT department. They layed off about 20% of the firm in the Summer of 1987 (well before the crash) because of massive losses in the bond market.

MOZART325 June 2015 in Fund Discussions
David's June Commentary
Portfolio going nowhere fast, this year. Just following the plan, and plan to ride it out, as with '08-'09. What are the odds of such a near-apocalypse again?
http://www.surfingtheapocalypse.net/forum/images/uploaded/20130415061342516be0e6cf4c7.jpg

Crash June 2015 in Fund Discussions
David Snowball's June Commentary Has Arrived
"Stock prices have risen rapidly over the past six years or so, but they were also severely depressed during and just after the financial crisis. Arguably, the Fed's actions have not led to permanent increases in stock prices, but instead have returned them to trend. To illustrate: From the end of the 2001 recession (2001:q4) through the pre-crisis business cycle peak (2007:q4), the S&P 500 stock price index grew by about 1.2 percent a quarter. If the index had grown at that same rate from the fourth quarter of 2007 on, it would have averaged about 2123 in the first quarter of this year; its actual value was 2063, a little below that. There are of course many ways to calculate the "normal" level of stock prices, but most would lead to a similar conclusion." - Ben Bernanke

Mark June 2015 in Fund Discussions
Artisan Developing World Fund Summary Prospectus
TheShadow is exactly right. This is positioned as a clone of Thornburg Developing World (THDIX), which Mr. Kaufman managed from inception until February of this year. All told, he has about 10 years of E.M. investing experience. He built THDIX into a five-star fund which has roughly tripled the return of its peers since inception and has done so with lower volatility.
In general, Artisan's new funds have performed exceptionally well (the current e.m. product, which wasn't launched in the retail market, is the exception). Artisan professes only ever to hire "category killers," then gives them both great support and great autonomy. That process has worked exceptionally well.
I'm not sure what the strategy capacity here is, but I suspect that bloat and corporate meddling might have contributed to Mr. Kaufman's relocation. The Thornburg fund went from $100 million at the end of year three to $1.2 billion a year later. If my suspicion is true (again, haven't talked with him yet), then it's likely that capacity in the new fund might be closer to $1 billion than to THDIX's current $2+ billion.
It might be that uprooting Mr. K. from Thornburg's rich analyst corps will cause him to wither but the experience of Seafarer and Grandeur Peak give us some reason to be optimistic that the transplant will take.
Regrets for any excess enthusiasm. I might have been overcompensating for the glumness perceived in my June essay.
David

David_Snowball June 2015 in Fund Discussions
David's June Commentary
Junkster, we think of trends very differently, evidently.
At the 1987 crash, Dow was up like 18% for the year --- started around 1900, by 16Oct 2250 approx; Aug high (=year high( was 2640, sure. So off its Aug highs, yes. But just look at a graph. I was looking at growth of 10k, but not a lot of difference for that.
2008: by 1 June down (only) 3-4% for the year, starting the decline. This is 10k growth, my favored way to look at things in hindsight. More slow decline to Aug 1. And if your start point is then, decline to the 28th is another 4%. And then the real drop.
(This assumes I am doing the math right.)

davidrmoran June 2015 in Fund Discussions
T. Rowe Closes Market-Beating Health Sciences Mutual Fund To New Money
Thought this was kind of interesting: "...when T. Rowe announced the closure, that the health sciences fund grabbed $820 million in the first quarter, fully 42% of T. Rowe’s total haul in the first three months of 2015:"

scott June 2015 in Fund Discussions
T. Rowe Closes Market-Beating Health Sciences Mutual Fund To New Money
FYI: (This is a follow-up article) (The Linkster has recommended PRHSX over the last several year. Did you follow his recommendation ?) (Up over 33% last five years.)
Investors just lost access to one of the market’s best-performing stockpickers.
Fund company T. Rowe Price (TROW) this week closed its popular Health Sciences Fund (PRHSX) to new investors, a preemptive step taken to prevent the fast-growing fund from becoming unwieldy.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2015/06/02/t-rowe-closes-health-sciences-mutual-fund-to-new-money/tab/print/
M* PRHSX Performance: http://performance.morningstar.com/fund/performance-return.action?t=PRHSX&region=usa&culture=en_US

Ted June 2015 in Fund Discussions
David's June Commentary
Thanks David for the additional comments. The talk of a broken market has been a topic for a while now. Gundlach mentioned it on the new WSW. I still felt the June commentary was far more bearish in nature than the previous installments. If anything, it should prod everyone to check their allocations and have a plan.
Now that Ted has come out from behind the Linkster curtain and proclaimed that there will be no bear market this year, we should all feel relieved. (Not)
I also remember 1987. There was a number of volatile trading days that led up to Monday. @Vert makes the point that the old WSW talked about it that Friday before. Jason Zweig was spot on in his forecast. He was more bearish than usual.
John Chism, if you hear some strange noises and happenings in your home late tonight it's the ghost of *Marty* Zweig who has come to haunt you

Junkster June 2015 in Fund Discussions
David's June Commentary
Thanks David for the additional comments. The talk of a broken market has been a topic for a while now. Gundlach mentioned it on the new WSW. I still felt the June commentary was far more bearish in nature than the previous installments. If anything, it should prod everyone to check their allocations and have a plan.
Now that Ted has come out from behind the Linkster curtain and proclaimed that there will be no bear market this year, we should all feel relieved. (Not)
I also remember 1987. There was a number of volatile trading days that led up to Monday. @Vert makes the point that the old WSW talked about it that Friday before. Martin Zweig was spot on in his forecast. He was more bearish than usual.
Edited to correct the right first name of Zweig.

JohnChisum June 2015 in Fund Discussions
David's June Commentary
>> The markets were already in established downtrends before that time.
Not so much, at least 1987 not at all. Look at SP500 and FCNTX. For 7y ago, yes, this week right now was the very week of turn. Not much of a trend prior, spring 08.
I see zero reason to think we are in for a nasty bear absent some external shock. From what I read, not in the lay or popular press but internal Goldman memoranda and thinktank economists and the like, some already cited here, the worst you can say is that things are on the pricy side, that's all. Not an original thought, but not very apocalyptic. I did like Tillinghast talking about our bad selves. But some sudden plunge soon, don't believe there is reason.

David, before the Monday crash on October 19, 1987, the Dow was already down some 17% from its August highs. Same with October 2008, entering that month the Dow was already down some 17% YTD. I would say a 17% decline is a pretty established downtrend or what am I missing here.
Yes, I was around back then. The market peaked in August, sort of meandered around until the week before the crash (which came on a Monday). The three days before the crash saw brutal losses. I don't know if you'd call that a trend or not, but people were definitely worried on Louis Ruckeyser on the Friday before the crash (there was a famous prediction that night). I lost around 40% of my money in a week. Good lesson for me.

Vert June 2015 in Fund Discussions
David's June Commentary
>> The markets were already in established downtrends before that time.
Not so much, at least 1987 not at all. Look at SP500 and FCNTX. For 7y ago, yes, this week right now was the very week of turn. Not much of a trend prior, spring 08.
I see zero reason to think we are in for a nasty bear absent some external shock. From what I read, not in the lay or popular press but internal Goldman memoranda and thinktank economists and the like, some already cited here, the worst you can say is that things are on the pricy side, that's all. Not an original thought, but not very apocalyptic. I did like Tillinghast talking about our bad selves. But some sudden plunge soon, don't believe there is reason.
David, before the Monday crash on October 19, 1987, the Dow was already down some 17% from its August highs. Same with October 2008, entering that month the Dow was already down some 17% YTD. I would say a 17% decline is a pretty established downtrend or what am I missing here.

Junkster June 2015 in Fund Discussions
David's June Commentary
I just want to thank @Ted for making it clear where the US Stock Market is headed for the rest of the year! And @Junkster for suggesting its probably wise to be positioned so that a big downturn can be welcomed as a buying opportunity. I sit here in neutral with 50% in Stocks and 15 to 20% in "near cash" investments thinking we are probably more than 1/2 way done with the current bull market in US Stocks....but wondering where the money will go if it exits quickly. I think @Old_Joe commented recently about the lack of appealing alternative investments in a post when he wrote about his current allocation mix. Perhaps as long as the herd continues to feel entitled to a "good return" from "somewhere" the US stock market will continue to climb....at least until it doesn't!

davfor June 2015 in Fund Discussions
David's June Commentary
@MFO Members: Trees don't grow to the sky, and at some point the market will reverse course, but it won't be this year. The S&P 500 will finish higher in 2015, about 13% higher. than it closed in 2014.
Regards,
Ted

Ted June 2015 in Fund Discussions
David's June Commentary
David, thank you for your additional comments. I know I don’t know either. I know a lot less than you, which is why I value your monthly commentary. And I often don’t know what I don’t know (2008 proved that a lot of us didn’t have a clue).
A few positive thoughts:
If there is a meltdown in the bond market, your liquidity problem would probably disappear quickly. Low prices bring out buyers. If bonds declined to the point where their payouts equaled say 10%, a lot of that cash sitting in short term treasuries would shift to the long end. There is a lot of wealth in this country that can solve liquidity problems. We saw that during the real estate crash. Pundits thought that the real estate market wouldn’t recover for decades because of all of the unsold inventory, foreclosures, tight credit, etc. But a funny thing happened: thousands of investors started buying those homes with all cash deals. Anyone who tried to buy a foreclosed home on the cheap was confronted with aggressive overbids.
Another worry that we hear often on cable channels is that stocks are going up only because of stock buybacks--financial engineering that is supposedly unhealthy. But the other side of that equation, as you know, is that the corporations that buy their own shares have less shares outstanding, and so we shareholders own a larger percentage of the business. [If they paid out the money in dividends, many shareholders would simply reinvest the dividends, so the result is basically the same.] And many of these companies still have a ton of cash.
Yeah, I’m worried. But then all that worrying seems to feed the next rally.
I have enough cash to pay my expenses for probably ten years. So if I have to suffer through another crash, I’ve got the resources to pay my bills and increase my fund holdings. And I feel fairly comfortable that my conservative funds, many great owl funds, will do a fairly good job of minimizing the fall [though I still remember how a few of my former funds, like Longleaf Partners, failed miserably the last time we went over the edge, and I felt like I wanted to vomit.]

Lawlar June 2015 in Fund Discussions
David's June Commentary
>> The markets were already in established downtrends before that time.
Not so much, at least 1987 not at all. Look at SP500 and FCNTX. For 7y ago, yes, this week right now was the very week of turn. Not much of a trend prior, spring 08.
I see zero reason to think we are in for a nasty bear absent some external shock. From what I read, not in the lay or popular press but internal Goldman memoranda and thinktank economists and the like, some already cited here, the worst you can say is that things are on the pricy side, that's all. Not an original thought, but not very apocalyptic. I did like Tillinghast talking about our bad selves. But some sudden plunge soon, don't believe there is reason.

davidrmoran June 2015 in Fund Discussions
David Snowball's June Commentary Has Arrived
With apologies to OJ, Jerry and the others, Ted was the first to note that David's June Commentary was posted. I'm afraid my initial tongue-in-cheek remark may have been inappropriate or misinterpreted. It was intended to induce others to read this excellent commentary.
I'm a bit surprised at the seeming surprise David's cautionary market outlook seems to have generated. Regular readers of his monthly commentaries know that he has long voiced skepticism (I think well founded) ) about the durability of the bull market and valuations in general. If you also read Ed Studzinski's regular comments, he makes David look like a lotus eating optimist. (As most here know, Ed co-managed the Oakmark Equity and Income Fund for many years, turning out impressive results.)
I don't think MFO participants have been completely "in the dark" on the valuation issue or to the fact that stock markets can and sometimes do drop precipitously (25+% overnight) or flounder for incredibly long periods, as measured in years or decades. That's the risk you take for being in equities. If you read JohnChism's thread about "Bullish or Bearish" you'll find some of the same concerns David has recently raised - though certainly not as thoroughly explored or eloquently stated as only David can do.
To refresh readers' memories, I've clipped a few morsels from some of David's Commentaries dating back to November, 2013. Please read the commentaries in full, as they are easily retrievable on the MFO website. Apologies to David if, in pulling these out of context, I altered the meaning, omitted pertinent context, or changed the emphasis of any. There was no intent to do so.
Regards
-
November 1, 2013: "... a market that tacks on 29% in a year makes it easy to think of investing as fun and funny again. Now if only that popular sentiment could be reconciled with the fact that a bunch of very disciplined, very successful managers are quietly selling down their stocks and building their cash reserves again."
December 1, 2013: "Small investors and great institutions alike are partaking in one of the market’s perennial ceremonies: placing your investments atop an ever-taller pile of dried kindling and split logs. All of the folks who hated stocks when they were cheap are desperate to buy them now that they’re expensive...We have one word for you: Don’t."
January 1, 2014: If you’re looking for a shortcut to finding absolute value investors today, it’s a safe bet you’ll find them atop the “%age portfolio (invested in) cash” list ...They are, in short, the guys you’re now railing against"
February 1, 2014: "It makes you wonder how ready we are for the inevitable sharp correction that many are predicting and few are expecting."
March 1, 2014: "It’s not a question of whether it’s coming. It’s just a question of whether you’ve been preparing intelligently."
April 1, 2014: "Some (money managers) ... are calling the alarm; others stoically endure that leaden feeling in the pit of their stomachs that comes from knowing they’ve seen this show before and it never ends well."
June 1, 2014: ... all of this risk-chasing means that it’s Time to Worry About Stock Market Bubbles."
September 1, 2014: "Somewhere in the background, Putin threatens war, the market threatens a swoon, horrible diseases spread, politicians debate who among them is the most dysfunctional ..."
February 1, 2015: "The good folks at Leuthold foresee a market decline of 30%, likely some time in 2015 or 2016 and likely sooner rather than later. Professor Studzinski suspects that they’re starry-eyed optimists."
April 1, 2015: "(Sooner) ... Or later. That is, the stock market is going to crash. I don’t really know when. Okay, fine: I haven’t got an earthly clue. Then again, neither does anyone else."
May 1, 2015: "For investors too summer holds promise, for days away and for markets unhinged. Perhaps thinking a bit ahead while the hinges remain intact might be a prudent course ..."

Thanks Hank, not because I don't respect him, but I rarely have read any of David's monthly commentaries. So are you saying he is a persistent prophet of pessimism???
I sure would have hated to have missed 2014 as that year pretty much sealed my retirement.

Junkster June 2015 in Fund Discussions
David's June Commentary
October 19, 1987 and October 2008 did not come out of the blue. The markets were already in established downtrends before that time. David you give far too much credence to "the smartest of the smart money people" In almost fifty years in the game have never found such a creature, except for maybe Uncle Warren. And even he has never had a clue as to market direction. I knew one guy who wrote a book about ........... and suddenly found himself managing tens of millions of dollars. And he was definitely not smart money. It's the dumb money that believes there is smart money out there that knows a thing or two where the markets are headed! Simply look at the so-called "smart" money hedge fund managers and their performance since 2008. Personally I would love to see the persistent prophets of pessimism get it right now. The best money is always made coming out of bear markets. Another nasty bear would thrill me no end.

Junkster June 2015 in Fund Discussions
David's June Commentary
Hi Old Joe,
For ease of scoring your survey, I’ll give a single word answer, and I’ll explain later: Nothing. I plan no immediate action.
My “just stand there, do nothing” approach is grounded in several dimensions.
For decades, both studies and practical experience have demonstrated that “Forecasters can’t forecast”. The marketplace should be tightly coupled to the economy. Yet even eminent economists constantly can’t get it right. In late 1929, Irving Fischer predicted that stocks had reached a high “permanent plateau”. He, along with John Maynard Keynes, lost a fortune in the marketplace. Fischer was destroyed, Keynes recovered later. Economist’s dismal forecasting record matches ours. It’s not pretty.
As Keynes remarked: “Investing is an activity of forecasting the yield over the life of the asset; speculation is the activity of forecasting the psychology of the market”. These are both error prone assignments. T. Rowe Price noted that “No one can see ahead three years, let alone five or ten”. I pass on the forecasting job.
Our esteemed MFO principals did not really make a forecast. A proper forecast requires a defined timescale and a magnitude estimate. Our team leaders merely hinted that the warning flags are flying high. Given the length of the current Bull market these flags have been raised for a long time now. As cycle time increases and as prices escalate, downturn risk must also increase.
I have no idea if we are in ninth inning of the present Bull or in the seventh inning. But I suspect we are somewhere in the late innings. That’s merely my opinion, and surely not a fact. The fact that institutional professionals are heavily on the side of at least a short-term continuation of the Bull market is somewhat worrisome.
Lastly, I am a very senior long-term investor. I react slowly and in incremental steps. Before the release of the MFO June report, I planned to not make a portfolio adjustment until mid-December. Both my wife and I will execute our Required Minimum Distributions at that time. The June Commentary did not inspire me to alter that plan. Certainly other exogenous events could do so. Mostly because of age, our plan is to reduce equity positions in favor of more income secure holdings. That’s obviously not for everyone.
Old Joe, your post has successfully solicited superior replies. Thank you, and thank everyone for their excellent participation.
Best Wishes.

MJG June 2015 in Fund Discussions