February 1, 2022

By David Snowball

Dear friends,

Welcome to February. It’s a month frequently associated with the color red – as in Valentine’s Day hearts, chocolate boxes, and scandalous lingerie – but investors have started the year seeing a different kind of red.

Here’s a compendium of every Vanguard index mutual fund (one share class for each) but appearances by a handful of special guests. In one month, investors had YTD returns of … Continue reading →

Thoughts on Inflation Protection

By Devesh Shah

An entire generation of investors has come of age without needing to learn how to protect portfolios and their wealth from Inflation. The mantra, three or four years ago, was “inflation is dead.” When inflation finally appeared last year, the Federal Reserve Chair declared it to be merely “transitory.” Sticky and low inflation for years has permitted the Fed to keep interest rates at historically low levels – a development which some fear has underwritten federal deficits, emboldened stock speculators, and punished savers. Increasingly, it appears that Continue reading →

Analysis Paralysis and Talking Heads

By Charles Lynn Bolin

“But I don’t want to go among mad people,” Alice remarked.

“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”

“How do you know I’m mad?” said Alice.

“You must be,” said the Cat, “or you wouldn’t have come here.”

– Alice in Wonderland, Lewis Carroll

At the time of this writing, the S&P 500 has fallen 7.8% year to date. Some respectful sources point to retail (small) investors panicking. Alice, the Mad Hatter, and I are not so sure. There are those who believe they can time the markets and are trying to jump ahead of the falling market before the rest of the crowd. Then some investors have the financial acumen to make quick, intelligent decisions. Should you sit back and ignore the volatility, buy the dip or sell the news? Continue reading →

What is Your Edge?

By Devesh Shah

Many people are heartsick after watching the stock market’s gyrations. Some of the people who are queasiest are the young investors who thought, “this is so easy!” as they booked a year’s worth of profit in a single morning, trading meme stocks or NFTs or cryptos or any of a dozen other securities they could barely explain, much less analyze. More will find their moment of reckoning as they confront Continue reading →

On Risk

By Mark Freeland

On Risk

Justice Potter Stewart’s most famous line is the one that he most regretted:

I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [“hard-core pornography”], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it, and the motion picture involved in this case is not that. Concurring Opinion, Jacobellis v. Ohio, 378 U.S. 184 @ 197 (1964)

In 1981 he lamented “having said what I said about obscenity—that’s going to be on my tombstone.”

Many investors have the same difficulty with risk that Justice Stewart had with “hard-core pornography,” they are not quite able to define it though they’re pretty sure they know it when they see it. Given that we seem to have entered a period when risk is going to be on a lot of minds, it’s important to understand what it actually is Continue reading →

Biggest Bang for your Buck

By David Snowball

Fresh from the MFO Archives! An update on a classic essay.

20 equity funds with the best capture ratios over the entire market cycle

Capture ratio is a sort of “bang for your buck” summary. It’s calculated by dividing a fund’s upside capture (a fund that typically rises 1.1% when the market rises 1% has an upside capture of 1.10) by its downside capture (a fund that typically falls 1.1% when the market falls 1% has a downside capture of 1.10). Capture ratios greater than 1.0 reflect funds that Continue reading →

21 In 21 Plus Annuity Modeling and New Taper Periods

By Charles Boccadoro

We posted month ending January 2022 performance to MFO Premium site early Thursday morning, 3 February. Pretty tough month! Nearly all funds should be included in this “incremental” drop from Refinitiv, but any omissions will be incorporated in the full monthly drop on Saturday.

We hosted our year-end review webinar on 4 January. Thank you again to all who participated! I benefit from these sessions just as much as I hope you do. It was the third consecutive year in which most domestic equity funds did Continue reading →

great horned owl

Intrepid Income Fund (ICMUX)

By David Snowball

Objective and strategy

The fund’s goal is to generate current income. In particular, they want to offer an attractively higher yield than comparable maturity US Treasury securities without taking significant default or interest rate risk.

The managers invest primarily in shorter duration corporate bonds, both investment grade, and high yield. They might also own other income-producing securities such as securitized loans and convertible securities. Generally, the majority of securities in the portfolio are part of smaller issues of less than $500 million.

Comments

For investors, there is only one risk: Continue reading →

fountain pen writing a note

Briefly Noted

By TheShadow

Hi! The Shadow here! I scan SEC filings and other sources for interesting industry developments to share with you. If you see something that you think we should share with readers in the month ahead, drop me a heads-up. If we use it, we’ll happily send an intensely stylish MFO mug to you!

Updates

Smead International Value Fund commenced operations on January 11, 2022. It’s the international version of the five-star Smead Value Fund (SMVLX), and it’s managed by Continue reading →