One of the worst investment decisions I have ever made was to invest in Dan Fuss' former co-manager Kathleen Gaffney's bond fund EVBIX. Last year Ms. Gaffney appeared on Wealthtrack and went on and on about all manor of non-bond investments which she obviously knew nothing about, having spent a career as a bond fund manager with Dan Fuss. I put in a sell order right after the show. In my opinion bonds are a part of my portfolio to provide safe income and act as a hedge against equity losses. I will take my risk in equities where there is a decent chance of significant gains, and not in bonds.

FYI: How helpful are mutual-fund rankings from research firms such as Morningstar Inc. and S&P Capital IQ? New evidence suggests that for many investors, the answer may be “not very.”
Regards,
Ted
http://www.wsj.com/articles/why-fund-ratings-could-be-misleading-1454900921

For those wondering why the dvd distribution of LSBRX has become so paltry of late--- despite the fund holding 35% of assets in HY bonds--- I suspect this is what's at play, and is having a significant impact:

HOW DO FOREIGN CURRENCY LOSSES IMPACT FUND DISTRIBUTIONS?
During periods in which the US dollar strengthens significantly against foreign currencies, some funds that hold non-US dollar denominated bonds may realize currency losses that impact their ordinary income distributions. When a non-US dollar denominated bond is sold at a gain or loss, the sale is made up of two components: a capital gain/loss and a currency gain/loss. A recognized currency loss, in accordance with federal tax rules, decreases the amount of ordinary income the fund has available to distribute (regardless of how long the bond was held). To compensate for realized currency losses, the fund’s ordinary income must be adjusted to ensure that the fund does not distribute too much income early in its fiscal year. If currency losses are not factored into ongoing distributions, the fund risks distributing more income to
shareholders than it earned during the year. This would result in a return of capital to shareholders, effectively reducing the amount of principal that shareholders have in their accounts. Global or international funds, given their larger allocation to foreign bonds, may be especially impacted by a strengthening US dollar and therefore could experience greater fluctuations in ordinary income distributions. Currency gain/loss amounts are monitored on a regular basis for each fund.

I don't really know, but what else could it be?

Howdy PopTart,
I too have been watching the space very closely and actually added to my VERY small positions with junior silver miners just yesterday.
First of all I am still of the mind that everyone should have a wee bit of precious metals in their portfolio. By wee, I'm talking 3-10%. I consider this to be a security blanket type of investment (something for that EOTWAWKI moment). My grandkids have their bed buddies and my pm holding is my bed buddy.
More pm than this core holding is speculation. Speculation is fine and fun so long as you realize the risks. Is now a good time to speculate? What do I know? When I play with investments, speculate, if you will, I lean towards momentum investing. In this I look for trends and when they appear, gradually scale in to my target amount - as long as the trend (momentum) is with me. Let's say you think this nascent trend in the pm's is going to last, and you figure you have $10K to play. Invest $2500 and see if you make money. If you do, add another $2500 and again, see if you make money. If you do, go with the remaining $5K. If at any time it doesn't make money - do not add any more. If it loses, or starts to, have a mental stop loss of say 5-10% at which point, you start scaling out of the play. If it drops some more - exit. This momentum style investing and my penchant for this particular arena, is why I added to my junior silver miners yesterday.
Now as for investing in pms. Funds and ETFs are of two types - bullion and mining stocks. Bullion ETFs will tax your gains at the Collectible rate of 28%. My favorite fund is still TGLDX which does have a little bullion but is taxed at normal cap gain rates. Or, you can go with CEF, a closed end bullion fund that is about 55/45 gold to silver. Or you can go with mining stock funds, ETFs or individual stocks. Lastly, and this is important to many people. For you core holding in pm's, the 'hard corps' recommend holding the physical metal. Although some peeps like safe deposit boxes and such, cripes, a roll of American Gold Eagles comes in a tube 2" tall and the size of a quarter. You can hide it in the oatmeal box and it's worth ~$25,000.
All this said, at this point in time, based upon the metrics of the gold/XAU and gold/silver ratios, miners are undervalued vs. bullion and silver is undervalued vs. gold. Note that this is on the margin. The great leverage is with the junior miners but this is also nose bleed territory. My only homerun in about 40 years of investing was with Silver Wheaton that I bought around 2002-3 for under 3 that I sold in the 40's. Cha-ching!
Right now there are several geopolitical factors at play. China's economy has slowed and they have been fairly steady gold buyers both by the CB and by individuals. The threat of terrorist attacks has really spooked the traveling public and this fear translates in to bullion demand. We also have the zika virus shutting down travel to central and south American and I am far from convinced that Rio is going to be able to even have the Olympics. Oh, and did I forget the Saud family's gas war to end all gas wars? And with Iran coming online, I don't see oil much higher than today for quite a while.
Now all this stuff is what Fear and Loathing are made of (where's Hunter?).
BUT when all is said and done, the POG is dependent upon the price of the U.S. Dollar. Because gold is priced in terms of the dollar and the dollar is the world's reserve currency, they normally are indirectly proportional and this has greatly contributed in the pull back in bullion prices from it's high of ~$1900 in 2011. Recall that the great bull market ran from 2002-3 until this time and commodity bull markets normally last in the 12-15 range. This is due to the complexity of bringing additional supply online in response to higher demand and prices (e.g. you have to find it).
As for the dollar, I've said it was trash since they started QE-nth but compared to any alternative currency, it is still the cleanest pair of dirty socks in the hamper. Lately, it's been showing some weakness but due to ???? Although, I'm starting to sense a negative impact on the dollar caused by the anger of the general public directed at Washington is the support for Trump and Sanders.
Sorry to ramble on,
and so it goes,
peace,
rono

I try to stay away from funds that I don't understand the strategy, that include Rob Arnott's funds. Glad I stay with plain vanilla TRP Capital Appreciation and Vanguard Wellington.

@MikeM: I too have two buckets for stocks, and virtually all of my stocks are in iras, so preserving of capital is not necessarily priority one, although still important. I learned early on that setting a stop loss almost guarantees it will hit it :) My long term stock stop losses were fairly liberal (generally 15-20% down from purchase price) and once hit they went right back above and stayed above there for the most part. Some I bought back, some I let go. My other bucket , some people call spifs, are always 5% or less of portfolio and primarily are composed of 4 or 5 small or midcap stocks. There are not intended to be long term holds, but one or two I have kept for more than one year, but watch very closely. I no longer use stop losses on these either. I just watch them closely, retired.

These funds were sold as providing the flexibility to go anywhere where gains could be made. Which is fine if the manager had the ability and the skills to manuever as such. Turns out Rob Arnott is just Hussman in a corporate suit with a rigid philosophy waiting for the market to come to him.
In my baseball analogy earlier, a hitter that waits for a specific ball to send it out of the park as opposed to one who takes every ball as it comes and manufactures a hit. The team can lose while the former is waiting.

@MikeM, have tried similar experiments (with ETFs not individual stocks) none of them really worked for me. Fixed stops in amount or percentage don't work because it depends on the inherent volatility of the asset. A lower volatile asset keeps you in for too long, high volatility takes you out too quickly before it bounces back up. With individual stocks it is worse as they are more often subject to spikes based on news that can trigger these stops. So any mental stop has to be subjected to a judgment when it happens rather than be automatic and that takes time.
I believe this is why @junkster prefers low volatility assets so that you have more time without taking deep losses to make a judgment call rather than an automated decision but the idea of having an exit plan is still valid. He can correct me if I am wrong.
I do follow the Bollinger Bands (which are simply means to keep track of movements in standard deviations, nothing exotic in terms of TA) after having faced the same problem as you in holding on to a gain and seeing it subsequently disappear. If I see the price shoot past the 2 SD band on the upside, I sell. It works more often than not in preserving gains. Selling to limit a loss is much more difficult psychologically.

Buying individual, stocks to be honest, is just a recent "hobby" for me. I set aside a small bucket to play with. The first thing I learned (after mistakes) was to establish with yourself your mind set for the purchase. My mind-set had to be 1 of 2 categories, buy it and hold it, or speculating to hopefully make a profit over a short or long time. Speculating definitely requires establishing the sell point.
If you want to preserve capital as Junkster said, you must set a trailing-stop on the stock. You have to do that right after your purchase. I decided my method would be the 1% rule. Never loose more than 1% of your stock bucket on any single purchase. For example, if you decide you have $10,000 to invest (or play with in my case) in stocks and spend $2000 on a specific stock, set the trailing stop at 5% (($10,000 x 1%)/$2000) = 5%. Allow the stock to trend up (hopefully) and if it drops 5% from it's recent high - auto sell.
Are there other sell rules people use? Like I said, I'm new at this and really have had mixed results. My worst buys were before implementing the trailing stop - for sure. Still hanging on to my first buy, SLB. Darn stock increased ~20% at one point for me, then lost all that and more. But that helped me learn.

Woulda, coulda, shoulda. It's fun grinding someone's face in the dirt isn't it.
So really, folks waited a half hour after the news to start selling a stock that just dumped on them. Really!?
I agree. Entry and exit plans should be laid out ahead of time for any investment. There was, and still is, plenty of handwriting on the wall with respect toward deterioration in the energy sector. However news events work in both directions. Not everyone can be glued to their electronic devices throughout the day in order to react to every wire snippet. We also have no idea other than digital fog clouds about an investor or their portfolio or their positions in same or any of the reasons why they invest in what they do. For all any of us know those recently bought shares could be add-ons to legacy shares handed down from great, great grandma who lived out her golden years on the capital gains and dividends they produced. Who knows!?
Yeah, I love I told you so's.
Edited to correct some typo's, increase clarity and also to add the following. Conoco' executives made a point of coming out nationally and making repeated statements about how safe the dividend would be. Either they were lying or incredibly incompetent plus too stupid to have a grip on reality. For cripes sake the company RAISED the dividend last year. Since they didn't foresee this being a problem one might postulate that managing a company of this nature and in this environment is not their strong suit.

Heck, I can't even gains access M* ... The message I keep getting on my computer ... "Server Is Too Busy."

FYI:
Regards,
Ted
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2016-02-03/asian-stock-futures-diverge-as-dollar-selloff-sparks-oil-rebound
Reuters Slant:
http://www.reuters.com/article/us-global-markets-idUSKCN0VD024
MarketWatch Slant;
http://www.marketwatch.com/story/us-stock-futures-point-to-further-gains-as-oil-rallies-2016-02-04/print
USA Today Slant:
http://www.usatoday.com/story/money/markets/2016/02/04/stocks-dow-thursday/79807730/
IBD Slant:
http://www.investors.com/market-trend/stock-market-today/dow-outperforms-for-second-day-mattel-soars-on-deal-talk/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures:
http://finviz.com/futures.ashx

@davfor, that is an interesting and useful observation. It is necessary to understand where something like this may fit in for fund evaluation.
At a very high level, those ratios answer questions like "Is this fund going to go up and down a lot for what I can get from it that may be a problem". RARE analysis answers questions like "If I buy this fund over an index fund (or another similar fund) at any time, am I (as opposed to the fund) likely to do better than the latter".
Regarding the ratios you mentioned, a quantitative study of correlation at this point wouldn't make sense because the sample space is so small and the selected funds are already skewed towards funds that are rated high over several metrics.
But qualitatively, they do measure very different things. Those ratios along with Sharpe ratio are volatility measures that may affect your ability to achieve a certain return or the deviations they make in reaching that return that may give you ulcers. So, they are affected by market volatility. A sector index fund that faithfully follows a highly volatile sector would fare poorly in those measures.
RARE grades on the other hand measure the ability of an investor to realize an alpha or excess return over the market using a particular fund even if you are losing money because markets are headed down. It normalizes with respect to market volatility.
So, it is more related to alpha measures for a fund. It differs from alpha measures in that it is also a measure of the volatility of the alpha generation as a rolling metric. Just as volatility of price in a fund affects the probability of returns you get based on when you bought that fund (near a peak or a trough), volatility of alpha determines the probability that any individual investor will realize the alpha that is measured for the fund in discrete steps.
If the underlying market is very steady and the fund is very volatile with respect to it, it may be correlated with volatility measures. But if the fund is also steady, then it isn't correlated. A fund that generates alpha uniformly will have good RARE grades and a fund that is equally steady but loses with respect to the index say with high ER, will have poor RARE grade while the volatility measures might be the same for both.
The reason this distinction to alpha measure is important is because of timing and the incentive fund managers have to manage returns for a calendar year. If the alpha performance of a fund is streaky or lumpy as may happen with a focused fund, then the alpha you would see will be very dependent on when you bought into that fund and may be much less or negative compared to the alpha reported for that fund in some fixed time period.
Fund managers are in the asset gathering business not fund returns business, so the latter is only important as to help in that asset gathering. Because of the year to year metrics used which determine how a fund fares in rankings and comparisons, it sets up an incentive for a manager to manage the returns for a calendar year rather than manage the returns for the investors coming in and out.
The activity of fund managers trying to juice up returns towards the end of the year by increasing risk or beta exposure especially if they are trailing the index is much talked about. If you sold the fund before they did this (or have been selling regularly in retirement), you may not get anywhere close to the returns for the fund for the year.
What is not talked about much is the opposite, when fund managers get a windfall earlier in the year. Depending on that gain, it may be safer for the managers to reduce risk for rest of year and coast than risk losing that earlier gain. So if you are doing monthly buys or buy later in the year, you may not see anywhere close to the gains for the fund for the year.
RARE grades try to separate funds that have streaky or lumpy gains in narrow periods from those that steadily (not calendar year consistent as some metrics try to do) beat the market over longer periods. While it may protect you from poor timing of when you got into the fund, it also has the benefit of potentially avoiding funds that look good on paper but that may be from one or two lucky streaks and unlikely to be repeated. Funds with steady gains over longer periods may indicate better management and/or strategy.
Should complement other fund evaluation criterion.

Walkin the walk M*s top performing L/S fund in 2015-16
Update From the Jan 31 OTCRX Fact Sheet
..We continue to be focused on credit domestically and globally as the change in credit conditions is being underappreciated by investors from our perspective.
Credit market stress continues to percolate in various sectors with stress now going beyond commodities..
the decline in equity markets has made valuations slightly
more attractive; however, overall valuations in both the equity and bond markets are not compelling on an absolute basis considering the growth outlook. We
estimate the S&P 500 is trading around 15x-16x consensus 2016 earnings, this is near its historical average. Based on our conversations, it appears that in the
near term there will continue to be selling pressure in the market driven by asset liquidations among Sovereign Wealth ( funds )..
As we enter February, we have approximately 20% of the Fund in cash. We anticipate equity and bond markets will remain volatile as the market goes through a
painful digestion period driven by a less accommodative Federal Reserve, slowing global growth, tighter financial conditions, and the risk of a currency war.
Ultimately, asset prices will have to adjust to reflect a higher risk premium
Copyright © 2015 :::: Otter Creek Adviosors, LLC
http://www.ottercreekfunds.com/media/pdfs/OCL_Factsheet.pdf
OTCRX Y T D +4.09 1 YR +13.89 A U M $225 mil
JANUARY 20,2016 Webcast Combine the two links for the full presentation.About 45 minutes.
http://www.ottercreekfunds.com/media/pdfs/OCL_Call_Presentation_4Q2015.pdf
http://www.ottercreekfunds.com/media/pdfs/Q42015_CC.mp3
Or
http://www.ottercreekfunds.com/index_webcasts012016.html
Also
http://performance.morningstar.com/fund/performance-return.action?t=OTCRX&region=usa&culture=en_US
Synopsis /Outline
THE OTTER CREEK INVESTMENT PROCESS
US MACRO: THE AGE OF GOVERNMENT AUSTERITY IS OVER
Government spending is estimated to add around 40 70bps to GDP growth in 2016 according to various Street economists
US MACRO: OVERALL THE US ECONOMY HAS SLOWED
US MACRO: MIXED SIGNALS
Global trade volume growth has turned negative
One potential upside factor to growth is lower oil prices eventually boosting GDP
CENTRAL BANKS: THE POLICY CONUNDRUM
TAILRISK: EXPECT THE UNEXPECTED IN 2016
Large increases in global debt, zero bound rates, slowing growth
...we are expecting heightened levels of volatility to continue
(and they're busy boys on those days)
MARKET FUNDAMENTALS: EARNINGS GROWTH and PROFIT MARGINS
S&P 500 earnings growth excluding energy has moderated, but it is still growing
Margins gains have slowed
CHEAP DEBT & LOW RATES: REAP WHAT YOU SOW
Zero bound rates have created meaningful distortions in how capital is allocated...it started with energy production
Auto subprime financing at all time highs
THE MACRO and MARKET ENVIRONMENT: CONCLUSIONS
PORTFOLIO POSITIONING IN TODAY’S ENVIRONMENT
Long Portfolio
Short Portfolio
INVESTMENT THEMES
DRAWDOWN ANALYSIS
CONCLUSION
Seek to achieve:
•Absolute risk-adjusted returns
•
Capital preservation
in periods of dislocation
•
Low
correlation
relative to the market indices
•
Below average volatility
relative to the S&P 500 Index

FYI: DoubleLine Capital, overseen by widely followed investor Jeffrey Gundlach, said on Wednesday it posted a net inflow of $1.95 billion in January, marking the firm's 24th consecutive month of inflows.
Regards,
Ted
http://www.reuters.com/article/doubleline-gundlach-inflows-idUSL2N15I232

What I want to know is who wrote the oil hedges that have paid out billions to fracking companies keeping them alive?
The way capital market equities have been tanking (see KCE), there is something going on in the big asset management and investment banking area that is causing a panic.
The stress test for a bank is debt financing frackers with oil as collateral and then underwriting the hedges for the price of oil. When oil prices zoom upwards, they make billions but with oil going in the opposite direction, the collateral value goes down, the companies whose debt they hold begin to default on top which they have to pay out the hedges. Triple whammy.
The latter seems like just the kind of situation our investment bankers would jump into with both feet when the going is good.

FYI: Gene Neavin, co-manager of the top-rated $753 million Federated High Yield Trust, divides junk bonds into two categories: the 10 percent of the market issued by metals, mining and energy companies, and the 90 percent from everyone else.
While the first group faces serious problems, the second is in surprisingly good shape, according to Neavin, whose fund has the best five-year performance among its peers. His view contrasts with bleaker forecasts from the likes of DoubleLine Capital’s Jeffrey Gundlach.
Regards,
Ted
http://www.bloomberg.com/news/articles/2016-02-02/why-the-best-junk-fund-manager-since-11-is-betting-on-a-rebound

Interesting note from M* commenter, bchalmers:

Quoting Kevin Carter of Big Tree Capital - what to do with broad emerging market ETFS?
Carter: Avoid them. I have come to the conclusion that the largest emerging market ETFs (EEM & VWO) have significant structural flaws and are not optimal ways to get exposure to emerging markets.
That conclusion is only being strengthened by the collapse of oil and natural resource prices. The biggest problem with these ETFs is the large allocation to state-owned enterprises, which account for about 30% of EEM and VWO.
These are massive, legacy, government-owned Chinese banks, Brazilian oil companies, etc., that are inefficient, conflicted and frequently corrupt. Just look at Petrobras in Brazil. If you read the newspaper, you know that the country is reeling, as dozens of Brazil’s government officials and business leaders stand accused of looting billions of dollars from Petrobras through a string of kickbacks and bribes.
The other big problem is that VWO does not own companies like Alibaba and Baidu, because these companies list in the U.S. and are thus not included in the FTSE Emerging Markets index.
It seems crazy that these companies choose to list on the most transparent markets with the highest listing standards, but get “punished” from an index perspective for that decision.
Of the 48 companies in EMQQ, only two are included in VWO. Just think about that. Petrobras is in VWO in multiple places (local listing, ADR, preferred), while Alibaba and Baidu aren’t.

At least the junk munis continue to just roll along with PYMDX the leader of the pack.

I keep looking over my shoulder on the junk munis, but right, nothing negative's happening yet - but we're getting close to that time of year for munis. I'd hate to give back very much of the gains - thinking about de-risking, like selling some NHMAX.

Hi @DavidV.
Thanks for posting the Seeking Alpha article. Below are some of my own recent observations and thinking.
I, myself, have been wondering what triggered the January sell off in the markets ... and, came to the conclusion that it had a lot to do with electronic program trading. It seems, there were some big money accounts that sold assets, as I have read, perhaps even some sovereign wealth funds to raise money to support domestic programs. No doubt, selling pressure in the capital markets was generated; and, I believe, program trading keyed on this selling pressure resulting in a good sizeable downdraft. Perhaps some might even say a selling stampede resulted.
From my own research, year-over-year earnings in the S&P 500 Index have been in decline for most of 2015 and had been trending downward until about September in which I noticed that they began to improve. From the reference source I use to follow earnings, earnings are currently projected to rise and to continue upward through much or 2016. With this, it seems to me, technical market trading patterns took over fundamental based market research and trading.
Within my own portfolio I have a good number of hybrid mutual funds (sixteen of forty seven funds) that invest in a combination of cash, bonds, stocks and other assets. In my recent month end study (January Ending Instant Xray Report), I detected that there was some good movement from stocks to bonds in these hybrid funds, as a whole, enough to the point that it raised my portfolio's overall allocation to bonds by 2%. Due to the delay in reporting mutual fund trading activity some of my hybrid mutual fund managers must of have had a feeling there was going to be a possible stock market sell off coming and began to move to bonds sometime back in late 2015 or because they felt stocks were overbought.
It will be interesting, to continue to follow this asset movement in my hybrid funds and see if this movement to bonds continues or if the hybrid fund managers change course and begin to now load equities perhaps following a fundamental path since earnings seem to be now improving and stock market prices have recently declined perhaps now to the point of becoming oversold.
I am wondering if anyone else, that closely follows their portfolio’s asset makeup, might have also noticed this?
I wish all ... "Good Investing."
Old_Skeet