Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
While looking around..... I know you know, those little
steel balls in the handheld games where one tilts and moves the flat base around to drop the balls into holes, or pass through a maze or some other quest. You may have one of these stashed away in a drawer at home. Well, I envison such a game from time to time and presume my game board and the holes represent investment choices. There are 20 holes in the base board representing the investment sector choices; but there are only 10 steel balls. Hey, I can do this with enough time, practice and experience. Cool, I got the balls into the holes of choice. Whoops, who bumped my board? Ah, that's it. While I slept, someone else was messing around with my game board. As you may assume by now; after placing the steel balls into the investment sector holes of my choice; I find during one practice event with the board, the sensation of other hands also attempting to move the board. Now this hole alignment thing is hard enough; let alone another set of hands trying to override my moves. I'm sure your understand my connective note about this board game and the others who are also playing with our game; even while we sleep. Keep your thinking caps in place, be patient and continue to assess your own risk and reward behaviors. There always will be others who are messing around with your game.
#72 There also exists rules 69 and 70. These, of course; are the simple, quick and dirt methods using head math to rough guage investment return rates; although these may be used for other caluclations, too. I know some here question why I would bother with such a note about the rule of 72. I will note that there have been more than enough adults whom I have encountered over the years who have never heard of the rule; so I will assume this may apply here, too; and that I/we have no way of knowing how many first time and young investors may be reading through the posts here at MFO. The number 72 has many of the easy factor numbers from multiplication that most folks learn in the 4th grade. So, one conjures that their portfolio is able to return about 6%/year with proper management. How long before one may be close to doubling their monies, from a set value? Divide 72 by 6 (annual % return); and one finds about 12 years are required to double the worth of the original investment dollars. Now, if one is really good with money; and gathers returns of 35%/year; the money will double in worth in just about 2 years. Okay, enough for this.
Sideways, with a twist. This is what our current portfolio could be named. A little bit of this and a little bit of that, with a yield average of about 4.7%; awaiting to find if there is more than sideways markets in our near future, and where and what may be the sectors.
Well, just some out loud thinking and writing.
I have noted a few things below, in the Buy/Sell/Portfolio section.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
This 1st link to Bloomberg is for their list of balanced funds; although I don't always agree with the placement of fund styles in their categories.
http://www.bloomberg.com/apps/data?Sector=888&pid=invest_mutualfunds&ListBy=YTD&Term=1These next two links are for conservative and moderate fund leaders YTD, per MSN.
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Symbol=$HF&Category=CAhttp://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Category=MA&Type=&symbol=$HFSuch are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs/BUYs THIS PAST WEEK:
NONEA reflection upon the links above; we attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 4 funds we watch for benchmarking are the following:
***Note: these YTD's per M*
VWINX ....YTD = + 3.3% + .4 week
PRPFX ....YTD = + 6.6% - 1.3 week
SIRRX .....YTD = + 1.5% + .3 week
HSTRX ....YTD = + .81% + .2 week
None of these 4 are twins to our holdings, but we do watch these as a type of rough guage.
Portfolio Thoughts:Our holdings had a
+ .34 % move this past week.
A M* returns list I really like. Click the link just below.http://news.morningstar.com/index/indexReturn.html?msection=IdxReturnsMany equity markets were just kinda hanging around this week; with the exception of the U.S. small/mid cap area, which received a slight haircut. Treasury yields still indicate a bit of an edge for some investors; or at the very least a parking spot for some extra cash. Yields in most Treasury durations ended the week in the down range, with prices reflected upward. The old Funds Boat is at anchor, riding in the small waves; watching the weather and keeping the existing cargo. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
---Below is what M* x-ray has attempted to sort for our portfolio---
U.S.Stocks 11%
Foreign Stocks 11.14%
Bonds 70.83% ***
Other 7.03%
Not Classified 0.00%
***about 35% of the bond total are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"
-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1% This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FCVSX Fidelity Convertible Securities (bond/equity mix)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)
---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income
Comments
http://www.bloomberg.com/news/2012-02-09/buffett-says-bonds-are-among-most-dangerous-assets-on-low-rates-inflation.html
As Mr. Buffet has a very different ability for deals, versus the other 99.3% of investors, including the largest hedge funds and many investment banks, it is difficult to associate what is prudent for an individual investor vs Mr. Buffet.
How many folks got a call from the Fed/Treasury looking for some help in the dark days in the fall of 2008? I recall a recent story by "x" (don't recall the name); but the story was one of those written about how one may invest and prosper like Mr. Buffet. Portions of the story were well positioned as to where and what to invest in; but the fact remains that Bershire will have deals and/or propositons for assistance and/or investments that will never find there way to the common investor.
His viewpoint will not and can be the same.
A few thoughts from this regular person of the investment world:
>>>> It appears the Berkshire holdings are about 1/3 in a mix of bonds. I will assume this is a ready cash holding; to be dumped when something else that is equity related is a better use of the money. This part is not unlike our cash holdings being of the bond type, versus plain cash.
>>>>> The Forbes article notes the word "currency" several times. I have not read the shareholder report; but my outside take on this, is that Mr. B. does see currency risk, as in the continued devaluation of the dollar and/or inflation; the lose of purchasing power which may be best trumped by holding equities. I can not and will not argue against this. This is part of our rational for some of our equity holdings. While our bond holdings are a larger percent of the total, the sectors are very diverse; although still subject to "hits"; not unlike the equity markets.
>>>>> One item I did not find in the Forbes story is Mr. Buffet's remark about missing the correction in the real estate markets. He admits to missing what was taking place. I think he is still missing what is taking place. I name this as a "seperate reality"; of which, all of us have problems in defining, dependent upon who and what we are, as well as our circumstances in life. Our house does not want to lose 10% of our portfolio value, although we are more well positioned than the vast majority of the common folk, of whom we are part of; but someone with a $10 million portfolio would still be able to survive with a 10% loss of net worth. This is part of the disconnect that exists in what is or is not real; in the real world of the citizens of the country. Our house shops and observes with all of the common folk. I listen to their comments at the gas station or the $ stores. I sure as heck wonder how a young or old couple, even if they are fortunate enough to each have a minimum wage job may make ends meet. Their gross income is about $32K/year. The net income after taxes does not go far.
A recent comment from a highly paid sports figure, who seems to nominally be a real down to earth person; noted how surprised he was to find out how much a package of disposal diapers cost for a newborn child. He also noted that this continues on for some time......yup, about 3 years, give or take.
>>>>> I will also note regarding Bershire and its insurance company(s) holdings; and there exposure to the bond world. I will suspect that Mr. Buffet is also concerned with the long term ability of some insurance companies to maintain into the future a payout model that has some basis in the ability to make payouts based upon investments in various bonds. If he is worried about bonds, he is worried about the insurance companies, too. NOTE: I have no clue as to the type or number of insurance companies within Berkshire.
As to bonds and bubbles; well, there are bubbles everywhere, I do believe. I am skeptic of many areas of the equity markets, too. As to equities, I will have to agree with some; that one perhaps should favor the large global companies that will likely survive better in our topsy-turvey world. As I have noted before, bonds are the cash of the world; and in some cases, weak cash. I wrote in Funds Boat sometime last year about Treasury's, at the time; as being "just" the best turd pile at the time. This is still the case. But, there are too many bonds being issued by central banks and others (private equity, too). I find nothing much has changed that caused the melt in 2008; as to risk in any sector. The EuroZone, in my opinion; is still playing with fire with all of the machinations of moving money around in the four pockets of the financial pants being worn. The scary exception is that they have come to the Monopoly board game carrying Monopoly money to add to the game that was not part of the original amount of money that was originally intended to be used based upon the rules of the game. The value of "Park Place" or "Boardwalk" have become perverted and distorted.
Mr. Buffet is not wrong to consider that bonds or at least some bonds are to be considered a "head scratching" investment and to take consideration when buying and/or holding them. However, I think this same thought should be broadly applied to many investment sectors. We are all investing in the full faith and credit mode that nothing bad is going to happen again. Let us hope.
Lastly, I recall; in the fall/winter of 2008 viewing some of the share prices for some very large companies and thinking that the prices were the same and lower than the cost of a value meal at McD's. Some were the same price as were the items on the $ menu at McD's. Sadly, I had very little time to do more than maintain our very conservative portfolio at the time; as my father passed away a few days before the Lehman Bros. melt and I indeed was in a "separate reality" mode for several months after.
Really lastly...........if the overall bond markets take a hit for whatever reason; those who are not paying attention, and who may have had their butts whacked with the equity melt 3 years ago, and now get a bond butt kick besides........well, forget about that segment of investor coming back into the market place; period.
Also, I read the story Sunday night; which Ted has posted this morning with a link. A must read in my opinion........the Arnott post.
Well, I have blabbed enough; and likely without saying much.
ADDED: 11:30am, book; The Fourth Turning....this is the Amazon link also available as Kindle format. A short overview is at this page link, too...scroll down a bit.
http://www.amazon.com/dp/0767900464/?tag=googhydr-20&hvadid=5783380377&hvpos=1t1&hvexid=&hvnetw=g&hvrand=871014614985566275&hvpone=12.23&hvptwo=&hvqmt=b&ref=pd_sl_16xh9g2k89_b
Take care of yourselves up there; and remain safe moving all of the snow.
Catch
About 80 percent of its $10.8 billion in non-U.S. government-related debt are from those nations, according to the Feb. 25 annual report. A year ago Omaha, Nebraska-based Berkshire said in a filing that it had $11.9 billion of foreign government debt without identifying the countries."
and:
"Buffett, Berkshire’s chairman and chief executive officer, said last year in the company’s annual letter to shareholders that its strategy is to keep cash “largely in U.S. Treasury bills and avoid other short-term securities yielding a few more basis points.”
Berkshire’s fixed-maturity portfolio had $2.9 billion of Treasuries and other U.S. government debt as of Dec. 31, and the company had $37.3 billion of cash, according to a filing."
http://www.bloomberg.com/news/2012-02-27/buffett-favors-germany-u-k-canada-sovereign-bond-holdings-outside-u-s-.html
Personally, I continue to believe that, for most people, it is an excellent choice to be diversified across asset classes, such as the Risk Parity strategy. Anyone can, of course, emphasize this or that, but my view is that no one should be all bonds, all stocks, all gold, all any one thing or strategy (I don't think anyone should have a portfolio entirely focused on yield, etc)
Hoping all is well with you and yours.
Hey, you wrote it better than I. Thank you for your input.
A related note to one of our holdings, of which; I would not normally hold, at least by this vendor; but is one of a limited choice in one current account is OPBYX. This bond fund is generally a corporate and mortgage securities related mix.
An area that is doing okay for the past year and holding its own right now.
This holding could be on the chopping block; when things become funny will interest rates or some other unforseen event that would damage these sectors.
Although the investment markets "waves" are not too big on the surface; there still remains strong and changing currents just below the surface, in my opinion.
Thank you and take care of you and yours,
Catch/Mark