Just thought I'd start an open discussion for the weekend for sharing ideas/thoughts - what is anyone selling/buying, thinking about selling/buying. Ideas, etc.
I bought a little Canadian Natural Resources (CNQ), a wee bit of China Energy (CHIE), sold Salient MLP Energy and Infrastructure (SMF) and added to AQR Risk Parity (AQRNX). Thinking about Sony (SNE) and waiting for a pullback to add to DEM (Emerging Markets Income)
Comments
With the run up in equity valuations since the first part of October, with some indices gaining better than 20%, my equity allocation had grown to about 63% to 64% of the portfolio. With this, I am now in the process of trimming my equity allocation back and raising cash by a like amount. Currently, my equities are now back of 60%. From my perspective, I feel this is prudent for more than one reason. One, I feel equities are now starting to top out as they approach fair value, and, two, a change in their trend direction can occur quickly given the outcome of some current world events hanging over our heads. And, a third reason, I feel this being a presidential election year political wrangling is soon to start in Washington; and, this will no doubt from my thoughts have a negative effect equity valuations. Since no one knows for certain if and when these events will/might occur and what the effects of these events will have on equity valuations ... I have chosen to average out of my equity ballast positions thus reducing my exposure to equities at about the rate of 1 to 2 percent per week until I have reached an allocation I feel more comfortable with.
If history repeats and equities make a pull back as I anticipate ... I'll then have a good cash position to take advantage of this anticipated pull back in which I’ll do a little buying raising my equity allocation. I’ll then ride this anticipated rebounding equity trend train upwards. As equities appreciate and approach their fair value, perhaps peaking, I’ll sell some off. Then, I’ll wait for the next set up … and, then start the process over. This is one of the ways I make spiff money for my pocket.
It seems form what I have been reading in some articles and on investment boards I post on … Many investors have been selling into the recent stock market rally as I have. Perhaps, more investors plan to utilize this simple strategy than I vision. Remember, strategies work until they don’t work any longer … and, this is why it is important to keep any strategy that you may employee limited to a small part of your overall portfolio. In addition, it is most important to invest within your own tolerance for risk.
Good Luck with you own investing endeavors ... and, I wish you ... Good Investing.
Skeeter
Looking long term/over the horizon, I do believe there will be considerable inflation and I do want to be in stocks (especially some specific sectors.) That said, I just think the market feels way too complacent. Retail money may move out of fixed income into stocks, but I don't know - I think a lot of people in fixed income are in fixed income.
There was a line in David's commentary about how the long bond would do if interest rates normalize - I'd be curious if 100 average investors (people who don't do a lot of research and essentially "check boxes" on their 401k, not that I'm saying anything against it, but just saying people who don't research their investments in detail) were polled as to whether they were aware if that would be the result if interest rates normalize or not.
Essentially, if people were told this: " Tim Krochuk of GRT Capital Partners volunteers the same observation in a conversation this week. “If rates return to normal – 4 or 5% – holders of long bonds are going to lose 40 – 50%. If you thought that a 40% stock market fall led to blood in the streets, wait until you see what happens after a hit that big in retirees’ ‘safe’ portfolios.” Folks from Roger Ibbotson to Teresa Kong have, this week, shared similar concerns."
How many would go, "But I thought bonds were safe?"
So, I do want to be in equities (funds, stocks, etfs, whatever), but I do think there will be better opportunities.
Regards,
Ted
Bought some PRLAX back in January. Been a winner so far.
1. noticeably increasing my allocation to River Park Short-Term High Yield (RPHYX). The rationale is that I'm way low on "cash" in my non-retirement portfolio because I used a chunk (returning 0%) to eliminate debt (3.5%) and cover an unexpected household expense.
2. liquidating my Matthews Asian Growth & Income (MACSX) position and reallocating to Matthews Asia Strategic Income (MAINX) and Seafarer Overseas Growth & Income (SIGIX). That would be hard for me, given my happy history with MACSX but it would open two new opportunity sets and still keep me in my comfort zone (Matthews + Foster).
3. liquidating Leuthold Global (GLBLX) and moving the money into Vanguard STAR (VGSTX) or Northern Global Tactical Asset Allocation (BBALX). Since inception, Leuthold has substantially beaten Morningstar's "world allocation" peer group but has trailed both of the two alternatives. It's a little more volatile and a lot more expensive but it also has theoretically greater flexibility than either of the other two. Much of the lag occurred in the six months after launch (in the midst of the meltdown) when the other two had a structural stake in Treasury bonds. I could move the money into another core holding, FPA Crescent (FPACX), though that does increase my exposure to manager risk. Romick has been excellent for me.
Just pondering,
David
I love MLPs, I just look at a number of individual companies and think they've not only done really well, but have leaped over fundamentals because people are looking for dividends. I do have a fairly large holding in Brookfield Infrastructure Partners and am not selling that, largely because there is nothing like it and while it is an overbought MLP, it really is something that I do consider a long-term holding.
I am also considering a *small* position in TTO, which is a unique, largely private MLP fund *right now*. It trades at a continually large discount due to the fact that it is largely private equity (30% public currently, the rest private.) It can also hold real assets and started with a large power transmission project.
It is planning to eventually turn into a REIT and appears to be moving focus towards more actual, specific energy infrastructure investments. "“We intend to seek acquisitions of infrastructure assets with long lives, subject to contracts that generate stable cash flows, operated by experienced management teams,” Green said in a release." So, this would appear to be intending to become a Brookfield Infrastructure Partners-like entity down the road. This is the new sub-manager (http://www.corridortrust.com/strategy - "Corridor InfraTrust intends to manage REITs that acquire infrastructure assets. ") Additionally, the idea of an infrastructure REIT (instead of an MLP in terms of tax issues) is highly appealing.
As for MLPs, as a more standard fund, I greatly like Salient MLP Energy and Infrastructure (SMF), but I sold it largely because it had run quite a bit and given what I was seeing in terms of MLPs as a whole, taking profit seemed reasonable. If I was looking for a standard MLP fund, however, I would certainly go to that first.
CVY and HGI are also multi-asset ETFs that hold MLPs.
Also added to MACSX, Matthews Asian Gro & Inc; in three months or so, plan to revisit the new Foster fund SFGIX and consider whether to move the MACSX $ there. I already have a big chunk in MAPIX (Matthews Asia Dividend) and a smaller position in MAPTX (Matthews Pacific Tiger).
I have ~ 16% cash, and on a pullback, I'd add to Artisan Int'l Value (ARTKX), PowerShares Int'l Dividend (PID), and possibly reinvest in an EM dividend etf (probably EDIV). I've been well overweight U.S. stock, and am starting to move toward default again.
I do think the bond fears are a bit overblown - the reasoning seems to proceed from "long term Treasuries are vulnerable" (right, they are) to "therefore all bonds are suspect" (doesn't follow). I still think actively managed, diversified intermediate funds are a good investment in any climate, plus there's no guarantee there'll be a sharp break out of the malaise anytime soon. (Just IMHO.)
Good luck out there ...
Hi David,
Vanguard Star (VGSTX) is a fund I suggested that my daughter invest in when she opened her first Roth IRA. I would really like to encourage her to understand its place in an overall diversified portfolio. Have you come across any linked articles that highlight this fund?
Also, thanks for all your tireless work on this site.
Hi Ted,
Wondering what your reasons were for selling PRHSX? I own this fund as well as VGHCX.
Also, do individual bonds play a very large role in you portfolio? I recall over the years that you have been an investor who often holds individual bonds. What role do they play for you verses a bond fund and where would you suggest a small investor go to buy an individual bonds?
Thanks, it's always a privilege reading your threads.
http://online.wsj.com/article/SB10001424052970204542404577158970902886322.html