0.2-0.3% loss?
With SP500 off 1.3? Tech off 2.6%?
That would indeed take a lot of diversification, as aggregate bonds were only up 0.2-0.3%.
I did see that GLD (for a change) and some EMs were up also.
My only positives for day were WBMIX, SIGIX, HCP, and APA.

FYI: Copy & Paste 4/4/14: Joe Light WSJ
Regards,
Ted
There is expensive and then there is exorbitant.
Small-company stocks increasingly look like the latter.
Consider: The S&P 500 index of large-company stocks is up 176% since its low on March 9, 2009. Over the same period, the Russell 2000 index of small-company stocks is up 236%.
On some measures of value, small-cap stocks—which are often used to juice a portfolio—look pricier than they ever have been. With that in mind, investors should consider cutting their holdings of small companies and favor the least speculative parts of the market, some experts say.
"No matter how you slice the data, small caps look expensive," says Steven DeSanctis, a small-cap strategist at Bank of America Merrill Lynch
Investors expect bigger returns on small-company stocks, typically those with a market capitalization of $5 billion or less, than their larger peers. That is because small companies have uncertain earnings and revenues, making them riskier.
But historically that small-cap premium has been relatively tiny, and some researchers argue that it doesn't even exist, says William Bernstein, co-principal of investment-advisory firm Efficient Frontier Advisors in Eastford, Conn.
Mr. Bernstein says that he doesn't think small-company stocks are pricey enough to warrant making big shifts in a portfolio. But by some measures, small U.S. companies look increasingly rich.
There are lots of ways to determine if a stock is overpriced.
For small caps, Doug Ramsey, chief investment officer at investment-research and asset-management firm Leuthold Group, likes to look at the stock price divided by an average of five years of earnings, which he says historically has been the most useful in picking times to buy and sell.
By that method, the median small-company stock has a price/earnings ratio of 28.4, well above the historic median of 21.4, according to Leuthold. That also is a much steeper price tag than that of large-company stocks, which have a P/E of 21, nearly the same as they have had historically. The 34% premium for buying small caps over large caps also is well above the mere 2% median premium they have had since 1986.
Some investors prefer measuring the stock price against sales, since small companies may not have profits. By that method, such stocks look even more overpriced. At the end of February, the latest data available, the Russell 2000's price/sales ratio was about 1.6, the highest it ever has been, according to Mr. DeSanctis, whose data go back to 1979.
For long-term investors who aren't convinced small caps are overpriced and prefer not to sell outright, an option might be to rebalance their portfolios ahead of their normal timetable.
Small-cap stock prices would have to rise another 7%, assuming five-year earnings stayed constant, to reach the height of expensiveness they attained during the dot-com bubble.
But more-active investors, such as Mr. DeSanctis and Mr. Ramsey, advise that investors start scaling back their small-cap exposure sharply now.
One good reason: Toward the tail end of bull markets, large-cap stocks tend to lead small caps, Mr. Ramsey says. At more than 60 months, the current bull market already is longer than the one that ended with the financial crisis in October 2007.
Small-cap stocks make up between 7% and 10% of a typical U.S. total-stock-market mutual fund or exchange-traded fund. For their own portfolio, investors would be well-served to cut that in half to 3.5% to 5%, Mr. Ramsey says.
The balance can go to parts of the market that look cheaper. Right now, that means going abroad, Mr. Ramsey notes. The cheapest options include the Vanguard Total International Stock VXUS -0.23% ETF, which charges annual fees of 0.14%, or $14 per $10,000 invested, while the iShares Core MSCI Total International Stock IXUS -0.24% ETF, which costs 0.16%.
To the extent that an investor keeps a small slug of small caps, he should tilt toward high-quality companies with earnings and away from companies not making a profit, Mr. DeSanctis says. That means being wary of biotechnology and pharmaceutical companies, many of which aren't profitable.
And in choosing between overpriced stocks or overpriced bonds, don't forget cash. It won't give a positive return, but could come in handy once a drop in stocks inevitably arrives.
Russell 2000 Index: http://www.russell.com/indexes/americas/indexes/fact-sheet.page?ic=US2000
S&P 600 Index: http://www.spindices.com/indices/equity/sp-600
.

Hi Cman,
Thanks for your comments and your suggestion.
GBLAX is carrying to great of a foreign allocation and seems to be split about equally between domestic and foreign in the stock area. According to M* Xray, GBLAX is about 10% cash, 30% US stock, 29% foreign stock, 27% bonds, and 4% other. Whereas, I am about 20% cash, 30% US stock, 15% foreign stock, 25% bonds and 10% other.
I match up better against Franklin Balanced fund (FBLAX) although I am a little heavier in foreign stock than they are but the rest of the assets match up better with respect to its domestic stock, bonds, cash and other assets weightings although there are some differences.
As you probally know being classified a domestic balanced fund does not preclude it from holding foreign stocks as the Lipper Balanced Index is made up of the 30 largest funds in the Lipper Balanced objective and does not include multiple share classes of the funds within the index. Since, I am about two thirds domestic and one third foreign in my stock allocation I think the Lipper Balanced Index is the better choice over a global balanced type fund. A conserative or a moderate allocation fund might even be a better benchmark. LABFX seems to be much closer over GBLAX to my allocation however I am holding more cash and would therefore expect to trail it in an up trending market. It's allocation is about 3% cash, 38% US stock, 14% foreign stock, 32% bonds, and 12% other.
I still feel overall the Lipper Balanced Index is a good reference point. Many balanced funds have a walking allocation so to speak and as of my last look ABALX was holding about 72% in stocks (65% in US stocks and 7% in foreign stocks). At times, the Index has bettered me and at times I have bettered it. There are other benchmarks found in a report compiled by the WSJ that is titled Mutual Fund Yardsticks. Within this report there are two fund objectives that might fit, a Stock & Bond category and a Balanced Fund category . However, the Lipper Balaned Index seems to be the tougher Index to beat over these.
I have linked the Yardstick report for those that might wish to have a look.
http://online.wsj.com/mdc/public/page/2_3023-fundyrdstick.html?mod=topnav_2_3020
Cman, if there is another balanced fund or an index that you know of that is easily referenced and you feel might be a better benchmark please let me know. For now, I plan to stick with the Lipper Balanced Index as my benchmark; however, I am open to thoughts and suggestions.
In the past, before you came, I enjoyed reading when others would chime in and report how they were fairing and what their benchmarks were. What they were seeing and how they were positioning. In more recent times this seems to have wained. Catch 22 was good about reporting his returns but often caught flack form doing so. There was one alpha, I felt, that picked on Catch a good bit and at great lengths. I felt in a subtle way I could get a dig in towards this alpha with my performance comment. I beleive he may have barked at you when you first came. My comment was not ment to be a chest thump. Although, seems you, perhaps others, might have taken it that way.
We all have to establish ourselves and at times hold our ground. It saddens me greatly that Catch 22 does not post like he use to. Others, just moved on. And, yes ... I am still a little miffed as to how some have been treated. Still this subject alpha does a great deal to make this one of the better investment boards on the net. And, I appreciate that too plus the others that make this happen.
My late father's posture was to be sturdy like a tree and stand your ground but also be flexible enough to give to the wind.
Thanks again for your thoughts and comments. They were appreciated.
Old_Skeet

I have a lot of respect for several of the First Eagle mutual funds, especially First Eagle Global (SGENX), which has a long history of good risk adjusted returns in all markets.
This one has super high expense ratios: The Class A shares have an expense ratio of 2.69% prior to expense waivers. These expense waivers on inception of funds concern me. The issue is, when will they drop the expense waivers? So I have to count on the full 2.69% going into effect at some point.
Then there is the troubling Load........fine if that's how you pay your investment adviser. Not fine if you are a DIY investor like I believe most MFO participants are. So add 5% to the costs, or an extra 1% a year for the first 5 years, however you want to account for that 5%.
Then this type of fund (goes long and short, etc) will have increased brokerage expenses on top of it.
So a fund family with a lot going for it, but a mutual fund with lots of expenses.

I've been hearing about a rising rate environment for 5 years now. There are no easy calls. My VWLUX is up nicely this year.

@cman: "For example USFIX gets its performance in its short life from overweighting short term junk bonds while having a small asset base. It has a short duration because of that allocation"
Not sure how you arrived at this. Morningstar.com says that 54.52% of their bonds have maturities over 30 years, and 11% in the 20-30 year maturities. And 16% of the bonds in the 7-10 year maturities. I only see 4.42% of their bonds as somewhat short term. My guess is that they have arrived at their 1.66 year duration by using derivatives rather than short term bonds.
I certainly agree that the opportunity cost can be large and is also a type of loss. But due to the very specific purpose for my fixed income allocation, probably the opportunity cost should not be weighted much.
One option I am seriously considering is FPNIX, because it has not had a negative calendar year return in 30 years, and they have as their stated purpose to not lose principal, and to be risk averse. But I would like at least 4 fixed income investments, with FPNIX probably being one of them. And since the purpose of my fixed income is to not lose principal, this is a top consideration. If I could find another 3-4 funds that do a great job with risk management and not losing principal, I would be set.
A great investment would be similar to the "stable value funds" that many 401ks have, which wrap fixed income investments in Guaranteed Investment Contracts, and manage to keep the NAV at $1.00 while still providing acceptable return. I'm not aware of these outside of retirement plans.
I also think that most fixed income managers hew pretty closely to a benchmark, and this limits them in managing risk and loss of principal. Bill Gross tends to use the Barclay's Aggregate Bond Index as the benchmark for his Total Return Fund, which limits his ability to keep the portfolio out of harm's way. And his unconstrained bond fund is very expensive, 1.30% plus a load for the A shares.

Since my purpose is to use fixed income as a safety net, it should err on the side of caution, and therefore be invested 'as if' rates will normalize/rise. The purpose is to protect the portfolio for when equities do poorly. So I can't risk having the fixed income portion go down when equities go down. This calls for short duration fixed income investments, as I see it.

Let me address the last sentence first. Last year (2013), the 10 year treasury rate went up from 1.78% (12/31/12) to 3.04% (12/31/13). Over that year, about 15% of intermediate bond funds did not lose money. Among these were several of the more popular funds on MFO, including D&C (DODIX), DoubleLine TR (DBLTX, though DLTNX was slightly negative), MetWest Int Term (MWIIX, MWIMX), MetWest TR (MWTIX, MWTRX), TCW TR (TGLMX, TGMNX), USAA Int Term (USIBX). (If one wants Dan Fuss/Loomis Sayles managing a basic intermediate term fund w/o a load, there's Managers Bond MGFIX, which was also positive for 2013.)
The point is that unless you expect yields to spike (exceed 4% this year or 5% next year), decently run funds will likely not lose much and can even make you a little money. Heck, the average intermediate bond fund last year lost "only" 1.4%, and with yields a percent higher this year (so the interest should boost the total return by about a percent over last year), even the typical intermediate bond fund will pretty much break even.
Sources: US Treasury (treasury yields), and Morningstar.
As to the first part of the quoted post, I've started questioning more and more seriously the value of the bond portion of a portfolio. If the purpose is a safety net - to ride out a market downturn until stocks recover - then one might set aside something like five years worth of money, and expect to draw that down to zero. That might not be enough for the market to fully recover, but I expect it should come close enough. The risk of losing a percent or so each year in a bond fund shouldn't affect the portfolio allocation significantly (thus the observations above regarding intermediate term funds). To the extent that this risk is deemed too large, a portion of that allocation can be kept in cash rather than bonds.
If the purpose is to sleep at night (i.e. it's not a question of living off investments), then I respectfully submit that restful sleep is overrated. If one doesn't need to use the investment money, that's just another way of saying that one can afford to trade short term volatility for longer term gains.

Hi Guys,
With an apology to our own John Wayne, I suspect it is essential for each and everyone of us to have “True Grit”. In the investment community, passion, perseverance, and persistence are dependable characteristics for financial success. It is critical to stay the course.
University of Pennsylvania researchers are developing a wide database that purports to measure Grit from a simple 12-question test that is accessible on their website.
The initial work in this nascent field can be traced to some experiments conducted at Stanford a few decades ago. In these experiments children were seated alone at a table. The test conductor placed a sweet treat on the table and told the very young kids that they could either eat the sweetie now or wait for 15 minutes with a promised doubling of the sweeties. Upon their return, if the child had resisted the immediate attraction, he/she was indeed rewarded for his patience.
Some waited; others did not. The real test was finally completed a dozen years later when these same test subjects were interviewed with regard to their schooling success. Those who resisted the immediate satisfaction of the tempting treats as youngsters recorded far more success in their subsequent schooling accomplishments. The current studies have expanded from this simple beginning.
Here is a Link to an article by Dan Solin titled “Grit is Critical to Your Success”:
http://thebamalliance.com/blog/grit-is-critical-to-your-success-dan-solin/
Grit is not a constant. Solin provides a few tips to toughen your grit quotient. Based on our many commentary exchanges, I suspect that MFO members have an abundance of Grit. I challenge you to take the test; it requires just a few minutes of your time. Here is the Link to the quiz:
https://sasupenn.qualtrics.com/SE/?SID=SV_06f6QSOS2pZW9qR
There are no right answers here. But a high Grit score seems to be an attractive attribute that should contribute to an investor’s overarching market performance. That’s especially true given the definition of Grit as formulated by one of its key researchers, Angela Duckworth. Her powerful definition is repeated here for your convenience and inspiration. It was lifted from an interview with Forbes about a year past.
“Grit is passion and perseverance for very long-term goals. Grit is having stamina. Grit is sticking with your future, day in, day out, not just for the week, not just for the month, but for years, and working really hard to make that future a reality. Grit is living life like it’s a marathon, not a sprint.”
This definition directly applies to successful investing.
The brief test that I hope you completed has been given to all sorts of groups over a long timeframe. At West Point, the freshman class is exposed to it. It is a better predictor of future undergraduate overall performance than an IQ test.
Let us know how high on the Grit scale you measured.
I wish you all True Grit.
Best Regards.

Hi Cman and others,
I'd much rather see up days in the market. No doubt, down days are also a part of investing. I have my portfolio benchmarked against the Lipper Balanced Index. Thus far, year-to-date the Index is up 1.68% and I am up 2.25%. For the week the Index is up 0.40% and I am up 0.56% and for the day the Index was down 0.57% and I was down 0.49%. With this, I am pleased.
I wonder how those alpha types that are running a focus type portfolio are fairing? I believe one alpha in paticular preached volumes about running a concertrated portfolio.
Old_Skeet

Looking at effective duration for an actively managed multi sector bond fund is a deeply flawed fund selection strategy. There is very little correlation between reported duration and returns for such funds. To see this, check the performance of different funds between mid Apr and mid June of last year when the 10 year went up almost 1.25%. Or any period when your interest rate metric went up.

Calvert Global Water Y - CFWYX M* rates this fund 5 star.

FYI:
Regards,
Ted
http://www.marketwatch.com/story/nasdaq-leads-us-stock-drop-with-26-loss-2014-04-04/print?guid=29ADD519-401E-418A-93D7-DBB29E8C0F84
Major Indexes: http://www.cnbc.com/id/15839215

FYI:
Regards,
Ted
http://www.marketwatch.com/story/confused-about-bonds-youre-not-alone-2014-04-04/print?guid=C518555F-FBD2-4EED-896E-F678FE51D8D3

Interesting White paper that documents the benefits on how owning equal amount of Real Assets (Timber, Farmland, Property, and Energy) with a 60/40 (equity / bond) investment. Paper contends adding real assets in equal amounts to a 60/40 investment lowers the overall volatility (by as much as 50%) while also slightly increasing returns verses purely holding just a 60/40 fund. Paper also documents that real assets did not provide downside protection when markets retreated. Finally, real assets did not provide an inflation hedge over the timeframe studied (1978-2012).
Another point made was the difficulty of finding well designed real asset investments for small investors who often use vehicles like mutual funds or etfs.
From this Paper:
In this paper, we considered the performance of direct investments in three real asset classes: natural resources (namely timberland and farmland), energy infrastructure, and commercial real estate. Using publicly available data for a period starting in 1978 (for real estate) or 1996 (for infrastructure) and ending in 2012, our main result is that investing in these real asset classes would have provided significant diversification benefits relative to a traditional portfolio consisting of only public equities and government bonds, without evidence of deteriorating overall performance. While investments in natural resources had particularly low downside risk, investments in energy infrastructure and commercial real estate showed significant downside risk, comparable to a traditional portfolio of equities and bonds.
Another important caveat is that with the exception of timberland investments (and commercial real estate for 1978-1987), the real asset classes did not provide any inflation hedging benefits over our full 1978-2012 time period. Further, the diversification benefits of direct investments in natural resources were much lower in times when equity markets went down.
White paper needs to be downloaded from this link:
https://dgfi.com/White-Papers/Direct-Investments-in-Real-Assets

David Winters was on CNBC today about this. I have never looked at his funds and don't follow KO to know what they may have done or not.
My first impression is that Winters is a lousy communicator even if he has a valid point, not that fund managers need to be. Combine that with media airheads, there is just smoke and dust.
From what I understood his main gripe was that KO had orchestrated a large flow of money from the company to the management. His inability to explain it clearly makes him irrelevant in this fight. From what I understand, the actions of KO, if he is correct isn't very different from the practices at most large corporations even if that seems wrong to a bystander.
If a company has a lot of cash, it can do two things with it. Either invest it in the company to grow the company top line or return it to shareholders via stock buy backs or increased dividends. The latter is what Carl Icahn is trying to do with Apple.
The modern American Management doesn't see a company this way because the shareholders have benefitted from the huge generational inflow of money into equities leading to multiple expansions. They see it more like a Limited Partnership where the top management directly benefits from the company finances while the shareholders bet amongst themselves as a derivative and realize their gains from each other. The recent moves by companies to create non voting share classes goes further in this direction.
So, from the management perspective, they play all kinds of financial games to get the top 5% in the company to take as much as possible for themselves.
The common compensation practice is to tie the compensation to share price. Conceptually, this is wrong in many ways since it incentivizes the management to prop up the share price which may be uncorrelated with the health of the company.
Two easy ways to do this is to do share buybacks or increase bottom line by cutting costs (mostly from reducing labor costs with layoffs and outsourcing). Neither of these necessarily imply the company is growing but both increase the share price and consequently the variable compensation of top management.
American Airlines management a few years ago while on the verge of bankruptcy, was an eggregious example of this. They negotiated a wage decrease with its unions under threat of bankruptcy and set up a compensation scheme to reward themselves if the share price went up. Typically these schemes are top heavy because an average employee gets very little as result of that and their wages make more sense than the individual gain from options.
The airline realized net revenue from this cost cutting and the top management got bonuses that totaled almost the entire net revenue. The per employee distribution of this bonus gave them a few cents on the dollar of the wage cut they had agreed to.
In the case of Coca-Cola, the argument from Winters seems to be that if the company had just done a cash buy back, the shareholders would have benefitted. But KO set up a compensation scheme that rewarded the top 5% handsomely based on share price. This compensation was in stock grants. On paper, this looks great. After all, the management is being rewarded for improving shareholder value.
The problem is how this happens. The stock grants and options dilute existing shareholder value and hurts both. If a company has a lot of cash, it can buy back enough so that the share price increase offsets the dilution and increases it just enough to trigger the bonuses to top management.
So what has happened is that you have transferred a chunk of cash from the company to top management and used more cash to prop up the share price. Instead, if they had used all that cash to just do a buyback, all the gains would have been realized by shareholders. It is a zero sum game in this financial engineering which has very little to do with growing the company. The too management is taking no risks with stock bonuses because they are the ones who decide to use cash to prop up the share price and they know exactly how much.
American corporate management at its finest. But it is not people like Winters that is going to change this.

FYI:
Regards,
Ted
http://news.investors.com/print/investing-mutual-funds/040214-695709-vanguard-founder-john-bogle-speaks-out.aspx

Bruce Fund
Mannkind Cv 5.75% Portfolio Weight % 5.42
http://portfolios.morningstar.com/fund/holdings?t=BRUFX&region=usa&culture=en-US
I hold BRUFX as a core holding.Late to the party ,but I recently opened a small position in ETNHX for a pure BioTech play. Holds smaller companies than FBTCX and more readily available.

Not many managers claim to be selling protection. But, a nice straw-man for a reporter with time on his hands one supposes.
Hussman will sell you some. But it's costly. His flagship HSGFX is still negative over 1, 3, 5, and 10 year periods.
Can't help offering here that one can't have it all. If we're gonna dump funds after a year or so's under-performance and take our $$ elsewhere, than we're laying ourselves (and our managers too) a nice trap for when things suddenly turn and go south.