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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
  • I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
    Jason Zweig, WSJ
    THE INTELLIGENT INVESTOR
    "What the Hell, It Is Going Up Anyway"

    "My column last weekend, How a Flood of Money Swamped Cathie Wood's ARK, looked at how the billions that poured into the ARK funds might have impaired their returns.
    That's an old story, of course. Money has always chased past performance.
    Imagine a $100 million fund. It puts $5 million, or 5% of its assets, into a stock that has a total market value of $100 million. If it doubles, the fund gains 10%.
    Now say the fund has grown to $10 billion. If it puts $5 million into a stock, that’s only 0.05% of the fund’s assets. Such a teeny holding will have to go up 200-fold to contribute 10% to your return. If the manager wants to make a big bet, it takes $500 million now to put 5% of the fund into one stock -- larger than the entire market value of many smaller companies.
    You aren't the same person now as when you were a little kid. Why would you expect a fund to be?
    Yet all too many people do. No wonder they buy high and sell low: They are extrapolating an unsustainable past."
    So Cathie Woods bought into Tesla and the stock went ballistic putting ARKK on an unsustainable trajectory. So I know, lets attack her credibility, her investing acumen and methods, her personal beliefs, whatever we can think of including shorting her fund. We do that with all the fund managers when we lose our ass chasing performance don't we? It's good to be king. Wasn't ever our own personal faults or bad investing decisions. Too bad you can't close an ETF like you can a mutual fund. At least I don't think you can.
  • I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
    T. Rowe Price was the second largest holder of DKNG as of the end of September (behind Vanguard) https://www.holdingschannel.com/institutional/holders-of-dkng/
    -
    Interesting snippet on Wood’s troubles https://seekingalpha.com/news/3788991-cathie-woods-arkk-closes-at-an-18-month-low-as-all-its-holdings-end-negatively
    “Cathie Wood's troubles continue as ARKK experienced its most significant one day of capital outflows in 10-months last week, totaling $352M.”

    It wouldn't surprise me if many of the investors who recently exited ARKK got in near the top.
    Those investors would not have profited from the fund's spectacular 2017 or 2020 gains.
  • I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
    T. Rowe Price was the second largest holder of DKNG as of the end of September (behind Vanguard) https://www.holdingschannel.com/institutional/holders-of-dkng/
    -
    Interesting snippet on Wood’s troubles https://seekingalpha.com/news/3788991-cathie-woods-arkk-closes-at-an-18-month-low-as-all-its-holdings-end-negatively
    “Cathie Wood's troubles continue as ARKK experienced its most significant one day of capital outflows in 10-months last week, totaling $352M.”
  • Getting off the sidelines - when?
    For those waiting on better valuations to buy Equities, at what point would you be a serious Buyer? Do you have a specific plan in place?
    What about Bonds (yeah, what about Bonds) - are any type/class of bonds worth holding in 2022?
    Current S&P 500 PE Ratio: 25.85
    Mean: 15.96
    Median: 14.88
    If you are on the sidelines congrats. Don’t see much fear in this market just everyone wanting to buy the dips. A lot of complacency. I guess that is what the past twelve years have conditioned investors to do. Should we actually get something more than a garden variety correction ala late 2018 and February/March 2020 would use a Zweig momentum buy signal to get back in. Worked like a charm after those two brief sell offs as well as the longer bear of 2008.
    As for bonds the scary consensus is buy floating rate/bank loan funds as they are the place to be during periods of rising short term rates. Can’t argue with that ( and I have an allocation there) other than it seems a bit too pat and overwhelmingly embraced. If you get a really bad bear market in stocks/junk bonds, the floating rate/bank loan category will not protect you,
  • Proposed MMF rule changes
    You are right about the institutional nature of the rules as they are the main investors for prime funds today. Part of this retail/institutional distinction has to do with brokers converting retail clients prime fund accounts into government fund or FDIC style cash accounts, so there is just less retail money in prime funds. Part of it has to do with retail investors having little interest in prime funds now because the yields on them are virtually nil. Part of the regulators view also is that retail investors don't trade these accounts as much as institutional ones, that during the March 2020 crisis they largely stayed put while it was institutions rushing for the exits--whether that institutional rush was caused by the previous rules remains debated--but it is true that retail investors tend to have more inertia. So, ironically, the regulators are worried about retail less from a liquidity perspective. The retail investor generally is not trying to game a few basis points of NAV or yield in an arbitrage by being the first one out. The technical details you mention I came across but space is limited in these articles and the goal is to try to make complex subjects understandable.
  • A Glimpse into Barron’s Roundtable Part 1 (January 17 print edition)
    This is a fascinating and lengthy look at the markets past and present. I highly encourage folks to obtain and read the full text. While I quote a few lines from different participants, realize each had a unique point of view. And, sometimes those viewpoints diverged sharply.
    Participants:
    Todd Ahlsten - Parnassus
    Rupal Bhansali - Ariel
    Scott Black - Delphi
    Abby Cohen - Columbia Univ.
    Sonal Desai - Franklin Templeton
    Henry Ellenbogen - Durable Capital
    Mario Gabelli - Gamco
    David Giroux - T. Rowe Price
    William Priest - Epoch
    Meryl Witmer - Eagle
    Quotable Quotes:
    Cohen: “Unlike in recent years past, we will see that diversification, stock selection, and risk control matter.” She terms 2022 “the revenge of the nerds”.
    Bhansali: “My (year-end) forecast implies a double-digit decline in U.S. markets (S&P 500 and Nasdaq 100) …”
    Giroux: “The asset class today with the most attractive risk/reward profile is leveraged loans. I’ve taken leveraged loans to 12% of my portfolio …”
    Giroux: “I would make a bet that the 10-year doesn’t get above 2.5% in the next year.”
    Witmer: “What has been noticeable in the past year is extreme volatility in individual stocks.”
    Witmer: “If the music stops and crypto tanks, there could be a contagion into the stock market. It could set up a good buying opportunity.”
    Black: “The NTF craze in the art market is reaching the heights of delirium.”
    Black: “I would avoid fixed income like the plague.”
    Desai: “With TIPS, you end up taking on duration risk. If there is a selloff in Treasuries, TIPS won’t deliver …”
    Priest: “There is also an existential political risk to the market around the question, ‘Does market efficiency require a democracy in order to operate optimally?’ “
    Some of the funds mentioned favorably by various panelists at different points in the interview:
    GLFOX, PAVE, EAPCX, SRLN, FRIAX, FEIFX, MPACX, CPREX (closed end)
    From Barrons - January 17, 2022
  • Hold On or Move On
    These 5 funds make up 5% of the total portfolio. They all at one point had greatly appreciated in value in the past year, but in the last 6 weeks have moved down significantly. Overall I am up in value from the initial investment, but down considerably from the high points. So the question is "Hold On or Move On?" Hold on meaning are they likely to appreciate in the next year and stay with them or Move on meaning to put the present value into allocation funds where 95% of the portfolio is invested and be happy that I did not lose any of the initial investment?
    MGGPX Morgan Stanley Global Opportunities Negative return
    BGAFX Baron Global Advantage Fund Positive return
    ARTYX Artisan Developing World Fund Negative return
    MIOPX Morgan Stanley Institutional Fund, Inc. International Opportunity Positive return
    BCSVX Brown Capital Management International Small Company Fund Positive return
  • Proposed MMF rule changes
    I think that the regulators are worried about the health of the COMMERCIAL PAPER market that companies rely on heavily. Dependence on commercial paper to fund operations is not a good thing but it is what it is. This market has lost a huge buyer as the money-market funds have mostly shifted to government paper. Only prime m-mkts funds now buy commercial paper and those are now tiny relative to government m-mkt funds.
    What is interesting is that the fund industry hated 2014/2016 m-mkt reforms, but now likes those better than the new proposed reforms (swing-pricing instead of redemptions/gates). I suppose that the Fed wants to do SOMETHING because it had to step in to provide some liquidity backstops for m-mkts in 2020, but will it be effective? Or, is it just spinning the wheel? Leave it alone, says the fund industry and its trade association ICI.
  • Proposed MMF rule changes
    Continuing on …
    It was a good article in Barron’s (By @LewisBraham) :) as Yogi mentions. The details are rather complex and I don’t understand it as well as @msf (above).
    Anyone invested in short duration corporates must have noticed something “spooky” going on starting in mid March 2020. TRUBX, which I owned than, had been conservatively administered by TRP for years. Pegged at $10.00 it rarely budged - just a penny or two on rare occasions. But after the Covid-19 lockdowns & stock market fall began, it lost at least a dime very quickly - probably a bit more than that. And, it stayed down for a number of weeks afterward. A reflection of stress at the short end of the corporate bond ladder.
    My take from a cursory reading of the Barron’s piece was that these “reforms” are mainly to reassure (institutional / corporate) investors that delaying or postponing redemptions will not “shut the gate” on them and make it harder to access their money down the road. It was this fear that led many to “rush” the funds and try to get out ahead of everyone else.
  • I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
    “Getting back on track, it's been said that you should not mix your political view with your investing approach. Very likely true but I wonder if we are entering a new era where you have to consider outside factors? Taxes going up, rates going up, more regulation, killing the energy companies required to run a large economy... “
    Sure. Consider everything when investing. I do. But no need to voice your every thought / political preferences here. It’s not the first time.
    As far as the federal debt goes … both sides share the responsibility. One side likes to cut taxes - especially for people who don’t need it. Another side likes government funded infrastructure and social programs. Both pushed for those stimulus checks. The goal was to get as much money into circulation as possible before the economy froze up due to the pandemic. It’s hard to second guess those emergency measures or to recall the extent to which the economy shut down.
    Remember which direction your investments were heading in March 2020 before relief measures from the Fed and the Treasury were announced?
  • Smead International Value Fund (SVXLX) Launched 1/11/22
    The Smead Value Fund has performed very well in the Large Value category.
    It will interesting to see if Smead Capital can produce similar results in the International Value category.
    When Smead Capital was headquartered in Seattle, Bill Smead was a regular guest on a local PBS business/finance program (2008 - 2011?).
    Mr. Smead was very articulate and his investment philosophy resonated with me.
    However, I could not get past Smead Value Fund's high expense ratio so I didn't invest in it.
    In retrospect, perhaps I should have taken the plunge?
  • Proposed MMF rule changes
    @LewisBraham has a piece in Barron's on this. My summary (advance preview):
    "FUNDS. Post-Financial-Crisis reforms are not working for some MONEY-MARKET FUNDS. GOVERNMENT money-market funds are doing fine (AUM grew to $4.1 trillion). But PRIME money-market funds have shrunk to $831 billion. These invest in commercial paper and CDs, can have redemption fees and/or gates and/or floating NAVs (institutional prime). When issues developed in 2020, these prime money market funds were reluctant to use their available tools and the FED had to step in with some liquidity backstops. So, now, the SEC has proposed new rules that will ditch redemption fees and gates in favor of SWING-PRICING (a form of floating NAV related to redemption level). The fund industry is opposing these new rules (Fido, Federated Hermes, Blackstone, BNY/Mellon, etc)."
    https://www.barrons.com/articles/money-market-funds-sec-regulations-51642183815?mod=hp_DAY_9
  • I'm Not Sure Wood at ARK ETF Knows What "Soul Searching" Really Is
    @Baseball-Fan, First year of pandemic was under Trump and the second year was under Biden. What was the federal budget deficit in the first year and second year. You can pick the deficit by calendar month to come up with the calendar year deficit. Let us talk facts and keep political commentary and hyperbole out. Hyperbole is needed only if trying to market something people do not need.
    I did not receive any of the stimulus checks and was happy to see BBB not pass in the form it was being pushed. Unemployed since Feb 2020 and did not receive unemployment checks or any form of assistance either.
  • Hold On or Move On
    @msf yes you raise some excellent points. I went through that same analysis that you describe above and evaluated both funds 2 years ago. Long term they both have similar track records. But MFAPX gets there with much less volatility. MIOPX actually held up quite well in the March 2020 selloff -- only dropping about 15% in comparison to 19% for its category. But things really turned south for MIOPX and other funds with large emerging markets exposure when China cracked down on its technology industry last year. I think you can trace its underperformance starting then. I might return to MFAPX at some point but am looking for more of a large cap blend. I find selecting an international fund to be quite difficult because they have underperformed the U.S. for so long. This year to date foreign value is doing quite well with funds like Dodge and Cox International up over 6% YTD but I wonder if this is a short term thing. Their long term track record is pretty poor. Again international is real conundrum.
    @carew388 It's funny you mention MSFBX because that one has come up on my screens too. I really like that funds defensive posture with about 30% in consumer staples. Unfortunately it also has a 20% allocation to tech so if tech continues to get hit as I believe will happen -- you won't be safe in the fund. YAFFX is intriguing with a great long term track record -- also more of a global fund. It is one fund I'm looking at also. I think this is going to be a difficult year to make money though.
  • Hold On or Move On
    This will be a bit painful to do but I will be selling most of my position in MIOPX. I really like the manager -- Kristian Heugh. But there is too much downside risk in his portfolio.
    If you like the manager and want to dial down the risk a bit, you could consider MFAPX. The difference between the MS summaries is that MIOPX includes emerging companies, while MFAPX is primarily focused on established companies.
    Morgan Stanley MIOPX page
    Morgan Stanley MFAPX page
    Obviously they have a lot of overlap, but their figures are significantly different.
    Portfolio Visualizer comparison
    Close performance over 3, 5, 10 years (through year end 2021). A notable distinction is that from 2Q2020 on, MIOPX rose and fell faster. For example, YTD (2022), MIOPX dropped 9.23% and MFAPX dropped 2.83%. PV shows other significant differences (better figures are MAFPX):
    std dev: 16.58% vs. 12.99%
    max drawdown: 26.18% vs. 17.26%
    Sharpe ratio: 0.77 vs. 1.00
    Sortino ratio: 1.27 vs 1.71
    As one might expect with its higher volatility MIOPX had a much better best year (55.06% vs. 44.18%) and a much worse worst year (down 12.36% vs down 5.48%).
    According to M*, the best fit index for MIOPX is US Convertible Bonds!
    http://performance.morningstar.com/fund/ratings-risk.action?t=MIOPX
    From inception through 2016 MIOPX tracked FISCX pretty closely. (MIOPX even returned less over this period). Then it became more volatile and returned more. But it wasn't until 2020 that it took off like a rocket. And then fell like a stone. In that same period, MFAPX also rose with MIOPX, but not as quickly and with much gentler spikes.
  • Hold On or Move On
    This will be a bit painful to do but I will be selling most of my position in MIOPX. I really like the manager -- Kristian Heugh. But there is too much downside risk in his portfolio. One fund that I have added is CDC which Lynn Bolin has written about here. It is a low volatility defensive fund with heavy weightings in financials, consumer staples, and utilities. Held up very well in March 2020 and has a very nice long term record.
  • Small-caps at all?
    @JohnGaltIII I bought WAMCX back in May of 2020 and it has been an excellent fund for me. Unfortunately as you've seen with interest rates rising funds like this with high PE multiples are susceptible to a great deal of risk. The fund was down 8-9% for the year earlier this week. I feel that in the current environment this fund and others in the small cap growth space will perform poorly. I have gone ahead and taken profits and plan to allocate to more defensive positions.
  • More mess at Vanguard
    @msf said, “ I tend not to deal much with financial institutions in their role as fund shops. To the extent that I do, my interactions are typically limited to accessing reports/prospectuses, perhaps a little info about the holdings/management, and important to me, capital gains and dividend estimates. Also muni income breakdown by state.”
    Rather than starting a new thread - a related personal question, if I may. I have just one fund outside my IRAs, PRIHX. Having transferred that from TRP to Fido last year “in kind”, I’m curious which will provide tax information? Will a statement come from TRP? Fido? Or both? Thanks.
    To the broader issue here, I’m of the opinion that the deterioration of service at businesses and institutions is commonplace - driven by cost constraints and profit motives. As consumers we want the lowest prices. As shareholders we want the greatest profitability. Those sometimes clash or lead to ruin of service we once found reliable. I sometimes find my self shouting angrily at Walgreen’s “robo assistant” when calling in or checking on prescriptions. But it’s a lot easier to move your prescriptions elsewhere than to transfer all your retirement money.
  • More mess at Vanguard
    I'll say it again: I find Vanguard to be the most ridiculously difficult firm to deal with of all fund shops my wife and I use.
    I tend not to deal much with financial institutions in their role as fund shops. To the extent that I do, my interactions are typically limited to accessing reports/prospectuses, perhaps a little info about the holdings/management, and important to me, capital gains and dividend estimates. Also muni income breakdown by state.
    Cap gains/div estimates: IMHO Vanguard has been superb here. It provided an initial set of estimates along with a release date for an update. Its final estimates included estimates for divs.
    Contrast that with many other fund shops, e.g. Morgan Stanley, which at best provided a single estimate in October (based on Sept 30th figures) and no estimate of divs.
    https://www.morganstanley.com/im/publication/forms/tax/2021-estimated-year-end-distributions.pdf
    Finding reports/prospectuses/fund info on Vanguard's site is not as streamlined as it could be (there doesn't seem to be a page aggregating all funds). Still, from the personal investor home page one can enter the name or ticker of a fund to go directly to the fund page. That page has a link to prospectuses and reports, and pretty clear information one can tab through for full holdings, management, etc.
    Contrast that with Schwab. When I type Schwab 1000 into the search box on its home page it brings me to 3,338 search results. Maybe there's a fund page in there somewhere, but I can't tell.
    Instead, one can use the accounts & products drop down (-> investment products-> mutual funds) to get to a generic MF page. The drop down on that page, "Find Mutual Funds" has an "Investor Information" selection. That gets one to a page listing Schwab funds, with links to the fund pages and additional links to their reports, holdings, etc.
    "https://www.schwab.com/mutual-funds/find-mutual-funds/investor-information
    As a brokerage, Vanguard has recently made it harder to find third party funds. I haven't found any direct way to get to the 3rd party fund page since the website revamp. One can enter another company's fund name or ticker into the home page search box to go to that particular fund. From there one finds a link to "Other companies' funds & ETFs".
    That brings you to the old 3rd party page: https://investor.vanguard.com/other-funds/
    Still, that's better than brokerages like Merrill or T. Rowe Price, where there doesn't seem to be any way to find out from them what third party funds they offer without opening a brokerage account.
    What I've found to be the worst part of dealing with Vanguard is its phone service. Routinely 40 minutes on hold. But no worse than T. Rowe Price in that regard. (I was recently on the phone continually with both in trying to get a simple IRA transfer between the two straightend up.)
    Vanguard is not the easiest fund shop to work with. But IMHO it's also far from the worst. (I think TIAA is in a league of its own, but that's a whole 'nuther story.)