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Just want to drop you a heartfelt thank you note. Your articles have help to reshape my portfolio in the last several years. Following your advice, I have reduced risk/exposure in oversea and growth funds and increased defensive funds including value, consumer staples and utilities. Late last year I added commodity-related funds (including those you mentioned in February 2022 MFO Commentary) and they have done very well against the surging commodity prices.
Another question, is US entering a late business cycle and what indicators would you be watching for? I would like to reduce the equity exposure to below 50%, but I am concern about core bonds with the rate hike this year. Please advise. Thank you.
Hi Sven,
Sorry for the late response. Thank you for the kind words. Yes, the US economy is entering the late stage of the business cycle. I am also at 50% equities, and invested as you describe. I track about 30 main indicators most available at the St. Federal Reserve including financial risk, yield curve, orders, labor, recession, among others.
You will like my next article on MFO. It is about inflation and where the economy is going. It discussed several potential funds. I have reduced allocations to COTZX/CTFAX because if is volatile. It is great Flexible Portfolio fund, but is mostly bonds and is going down. What do you do with safe money. I researched this.
Cash is good, but will not keep up with inflation. Bonds are going down as interest rates go up. Short term rates are going up, but with the yield curve flattening, what about intermediate bonds. My gut feel is that intermediate bonds yields will also go up. For safer money, I like real return funds like FSRRX and PIRMX/PZRMX. For safe money, I like short term inflation protected bonds such as VTIP/VTAPX and STIP.
A risker selection is TBX which shorts intermediate bonds. I may put a little in it. Another selection might be DBA which is an agriculture commodity fund.
I was reading your post on the link "Best ETF or Mutual Funds for severe inflationary cycle?" and being that I too am interested in opening a position in VCDMX, I had two questions:
1. I think that I picked up from M* that it has a negative SEC yield of 1.91%. If this is the case, does a negative yield concern you?
2. Also from M* I think it shows a significant percentage of Treasury/Agency bonds. If I am reading this correctly, with rising rates is this a concern to you?
I might be having a problem understanding this fund and its components but I know that I am looking for an alternative fund to hedge against inflation.
thank you for your December response to me. It's been of great help. I'm still researching and sitting on about 18% cash reserves that I'm holding off allocating until I'm done. I do not have access to EFT in my account, and don't have the resources to meet 1 mil minimums, but know how to read a prospectus and find the Z and R6 classes I can invest in.
I just want to say thank you for your time and post. It is much appreciated and helps a lot. Your kindness is respectable. Regards, Michael
It is probably a good thing to have some cash with the market volatility today. I am conservative at the moment. This past week's wild ride is probably a sign of more to come. I am watching for opportunities now.
Regards,
Lynn
