@Ted,
My portfolio is of hybrid configuration ... and, on last check the S&P 500 Index was all equity. My portfolio pays out more than twice that of the S&P 500 Index in the form of interest, dividends and capital gains over the Index. To me, you are comparing apple, oranges and grapes as the same. They simply are not even though all of them are members of the fruit family.
Skeet

Hi @ bee,
I feel you know pretty much as to what I am going to write about cash being part of my portfolio’s asset allocation. To me, cash is not trash.
Years back when CD’s could be found in the four to five percent range I kept about ten percent of my portfolio in CD’s and included these in the cash sleeve of my portfolio as FDIC Insured time deposits. In addition, my FDIC Insured savings account balances were also included as time deposits.
Now that interest rates are currently very low, I still have kept these cash sums in the cash area of my portfolio but now draw on them from time-to-time to fund my special investment positions (spiffs) when I engage in them. In essence, instead for drawing interest income from these balances I now draw, most of the time, capital gains derived from the spiffs that have, for now, replaced interest income.
My asset allocation calls for a range in cash form five to twenty five percent with a neutral position being fifteen percent. Currently, it is in the twenty percent range.
Here is a brief description of my sleeve system which I organized to help better manage the investments that were held in five accounts that make my portfolio. The accounts consist of a taxable account, a self directed ira account, a 401k account, a profit sharing account and a health savings account plus two bank accounts. With this I came up with four investment areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is the income area which consists of two sleeves. … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which has more risk associated with it than the income area and it consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area, where the most risk in the portfolio is found and it consist of four sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve and a specialty sleeve. Each sleeve consists of three to six funds (in most cases) with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and the amounts held. By using the sleeve system one can get a better picture of their overall investment picture and weightings by sleeve and area. In addition, I have found it beneficial to xray each fund, each sleeve, each investment area, and the portfolio as a whole monthly. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets and wish to weight accordingly. All funds pay their distributions to the cash area of the portfolio with the exception being those in my 401k, profit sharing, and health savings accounts where reinvestment occurs. With the other accounts paying to the cash area builds the cash area of the portfolio to meet the portfolio’s monthly cash distribution needs with the residual being left for new investment opportunity. In addition, most all buy/sell trades settle from, or settle to, the cash area.
Here is how I have my asset allocation currently broken out in percent ranges, by area. My neutral targets are cash 15%, income 30%, growth & income 35%, and growth 20%. I do an Instant Xray analysis of the portfolio monthly and make asset weighting adjustments as I feel warranted based upon my assesment of the market, my risk tolerance, cash needs, etc. Currently, I am a heavy in the cash area, light in the income area and neutral in the equity area. I am thinking that once year end mutual fund capital gain distributions are paid out this will reduce the equity area and raise the cash area.
Cash Area (Weighting Range 5% to 25%)
Demand Cash Sleeve… (Cash Distribution Accrual & Future Investment Accrual)
Investment Cash Sleeve … (Savings & Time Deposits)
Income Area (Weighting Range 20% to 40%)
Fixed Income Sleeve: GIFAX, LALDX, THIFX, LBNDX, NEFZX & TSIAX
Hybrid Income Sleeve: AZNAX, CAPAX, FKINX, ISFAX, PASAX & PGBAX
Growth & Income Area (Weighting Range 25% to 45%)
Global Equity Sleeve: CWGIX, DEQAX, EADIX & PGUAX
Global Hybrid Sleeve: CAIBX, IGPAX & TIBAX
Domestic Equity Sleeve: ANCFX, CFLGX, FDSAX, INUTX, NBHAX, SPQAX & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, DDIAX, FRINX, HWIAX & LABFX
Growth Area (Weighting Range 10% to 30%)
Global Sleeve: AJVAX, ANWPX, PGROX, NEWFX, THDAX & THOAX
Large/Mid Cap Sleeve: AGTHX, BWLAX, HWAAX, IACLX, SPECX & VADAX
Small/Mid Cap Sleeve: IIVAX, PCVAX & PMDAX
Specialty Sleeve: CCMAX, LPEFX, SGGDX & TOLLX
Total number of mutual fund investment positions equal fifty one.
I wish all ... "Good Investing."
Old_Skeet

all those gains were early on. for the last little while -- ie, ever since i bought it -- it's been treading water. i tend to agree w/ BobC's last line and am keeping an itchy finger on the selling trigger.

Great call, Scott, when GILD was below 100. I own THQ also. If you are looking for froth, FBIO (formerly CNDO) and NVAX are Jim McCamant's picks from a while ago that I still have. No dividends, of course.

Thanks! :)
Gilead ultimately didn't make sense to me from a valuation standpoint - basically the valuation had priced in a lot of bad news and basically ignored the pipeline, not to mention management's track record. While it's been frustrating it's finally taken off in the last month.
Additionally, in terms of health care, I think it's just the place to be. As I've said previously, I like to focus on "needs over wants" and healthcare is really a core of that. I think lifestyles unfortunately aren't going to change and as a result, the obesity situation (and all of the conditions that come along with that) are only going to continue to be a large theme. There's also demographics and a number of other tailwinds. I definitely own a lot of healthcare, but I sleep well at night, given that. I said in another thread, I do worry about healthcare costs (which will probably be something like 20% of GDP within 4-5 years) becoming unsustainable, but what are we going to do about it? Probably nothing, given the government's inability to really make progress in just about any important area. So, healthcare spending will continue to crowd out other things.
You also have had a great deal of innovation in biotech in recent years. While I do think some of the binary (has one medicine, does it work yes/no) biotech stocks are expensive, a lot of the larger companies are not.
I've also talked about other companies lately, including CVS (which, given the Target deal, will quickly add another 1660+ locations without having to build them) and Abbott (nutritional products, considerable exposure to EM.) I still like Celgene, which has a ton of collaborations with other various companies.

Celgene is risky and a tad volatile, but I like their considerable focus on collaborations and hopefully they can meet their longer-term projections:
"For adjusted earnings, Celgene raised 2015 guidance to the range of $4.60 to $4.75 per share, although that's below current consensus of $4.84 per share.
In his presentation, Hugin said Celgene expects to meet or exceed previous 2017 guidance, although the company is not raising that forecast at this time. The company still expected net product sales in the $13-14 billion range and adjusted earnings per share of $7.50.
New on Monday morning was financial guidance for 2020. Celgene expects net product sales to reach $20 billion and adjusted earnings per share of $12.50. Both forecasts top current consensus estimates, although the accurancy of estimates five years into the future is always a bit murky."
http://www.thestreet.com/story/13007744/1/celgene-has-2020-vision-for-long-term-growth-but-plays-safe-for-2017.html
Shire, Roche (although I hate the European one div a year instead of quarterly), Abbvie, Teva, Amgen, McKesson, Pfizer and Illumina are other things I've considered, although Illumina would be a tiny, "find it fascinating, just want to have some exposure to it" longer-term play.
In 2012, BOA/ML said: "The fight against obesity will be a major investment trend for the next 25-50 years, a report by Bank of America/Merrill Lynch said on Tuesday, listing 50 companies in areas from healthcare and pharmaceuticals to food and sports that could benefit."
If that's really the case, that's pretty dismaying. I'd like to hope we can be able to change en masse before 25+ years.
As for THQ, I own THQ and HQL. I'll be happy to collect the monthly dividend from THQ which has generally traded with around a 5-6% discount. The company announced a buyback program not that long ago. Not sure where they are with that, but with THQ where it is....

FYI: Janus Capital Group Inc. said on Tuesday it launched a total return fund that invests across global stock and bond markets, developed in part by Nobel Prize winner Myron Scholes whom the firm hired 11 months ago.
Regards,
Ted
http://www.reuters.com/article/2015/06/23/funds-janus-idUSL1N0Z90LD20150623
Janus Website JAGDX: https://www.janus.com/retail/funds/janus-adaptive-global-allocation-fund

As I understand it, THQ is a different fund from HQL. The former pays a monthly distribution and invests in healthcare issues that produce income as well as capital appeciation. HQL is an equity fund that may invest a portion of its assets in more speculative issues, including unlisted companies. CEF investors like to buy when a fund's discount appears to be greater than normal in hopes of capturing the upside when the discount reverts to the mean. I own both THQ and HQL.

This guy sounds like someone who writes about bonds, not funds. He's separated out the capital (price) appreciation (from $9.68 to $9.93) from the interest return. Look at the phrasing: it's "yielding 3.86% and sitting on a nice year-to-date [price] gain of 2.5%"
But even that is wrong. The 3.86% yield he quotes is the SEC yield that incorporates part of the price change - the portion due to market premium/discount amortization over time, but not the portion due to interest rate changes. The 2.5% price gain is a gross figure and so includes all sources of change. Thus, the amortization is being counted twice.
If he's going to separate price movement from interest payments, he should use something like trailing 30 day rate, or M*'s trailing twelve month rate, which is 3.93%.
As to the substance - junk has an equity aspect to it (if the market is improving and companies are more likely to succeed, the risk of junk defaults decreases, and so the value of junk bonds, like that of their underlying companies, goes up). So whether rising interest rates hit junk hard or not seems to depend on part on whether the market views the increase as a positive sign (companies are strong and improving), or as an impediment (companies cannot grow as easily with higher borrowing costs).

>>>High-Yield Bond Funds: Don’t make the mistake of focusing on interest rates and missing a potentially bigger problem for bond fund prices — credit risk. High-yield bond funds are providing great yields for investors in a low-yield environment and have also held up on the price side thus far in 2015. For example, one of the best high-yield bond funds, Fidelity Capital & Income (FAGIX[5]), is yielding 3.86% and sitting on a nice year-to-date gain of 2.5%. But when things turn south and the flight to safety hits the bond market, investors need to be prepared for stock-like declines. In 2008, in the midst of the last big downturn, FAGIX was hit with a 30% drop.<<<<
I could show you articles that say the exact opposite about high yield bond funds. Namely, that they hold up well when the Fed raises rates. As for his example of FAGIX, who is this guy??? The article is dated June 19 but the YTD return is 5.22%, a big % distance above the measly 2.5% mentioned.

FYI: Active fund managers are skilled and, on average, have used their skill to generate about $3.2 million per year. Large cross-sectional differences in skill persist for as long as ten years. Investors recognize this skill and reward it by investing more capital in funds managed by better managers. These funds earn higher aggregate fees, and a strong positive correlation exists between current compensation and future performance.
Regards,
Ted
http://blog.alphaarchitect.com/2015/06/19/surprise-some-active-managers-are-skilled/

Hi MJG,
Thanks for the compliment and the inquiry.
The person that I learned the most from regarding special investment strategies was my late father. I have commented on some of these in prior post. A few I most often use are noted below.
One that has been a family favorite, for a good number years, is a seasonal strategy often referred to as “Sell in May and Stay Away to St. Leger’s Day. Seems to work more times than not. Naturally, I don’t sell out of the markets; but, I do reduce my allocation to equities during the summer months and then scale back upwards towards fall, through the winter months and usually through spring. If things began to fall apart I exit the special position(s).
Another one is to make sure I have a good weighting towards oversold sectors. I strive to maintain at least a five percent weighting in minor sectors of materials, real estate, communication services and utilities. And, in the major sectors of consumer cyclical, financial services, energy, industrials, technology, consumer defensive and healthcare, I strive to maintain at least a nine percent weighting in these (even if they are out of favor). In doing the math this adds up to 83%. This leaves 17% that can be move to sectors where opportunity is perceived to knock. I start with an asset compass to track the assets that I have chosen to follow and invest in. In addition, I use some simple technical analysis indicators such as money flow, relative strength, MACD, slow stochastic and simple moving averages (50 & 200) plus the price action itself along with P/E Ratios and a couple of other things.
Nothing really fancy to write about just some old fashion down home research and deployment of capital when deemed warranted. Think back to my writings as to how I use to bet the dogs many years ago. It was a simple system that worked more times than not. That was to bet three dogs in each race to win, place or show and especially if they were running in lanes two through seven. Often times the dog running in lane one gets pinched into the rail. After doing statistical analysis on which lanes win more often than the others and betting strong dogs when running in them … Well it develops into a clever system type approach.
And, last but not least I feel my investment sleeve system that I have written about in the past has been most beneficial along with selecting quality funds to invest in that have a history of good performance has also played a part to this success.
This is probably not the response you were seeking … but, it is what it is. And, that is a good number of times it comes down to nothing more than “A Scientific Wild Ass Guess.”
Respectfully,
Old_Skeet

This is a most interesting study.
I found review of the chart most interesting as my asset allocation range for stocks is a low of 40% to a high of 60%. From the chart, the 40/60 mix returned 8.8% with a worst drawdown of 25% while the 60/40 mix returned 9.9% with a worst drawdown of 38%. Since, 2009 the 40/60 mix has returned an average of 7.4% per year while the 60/40 mix returned 10.0% ... and, Old_Skeet's asset allocation ranged for the most part somewhere in between these two mixes; but, with moving in and out of some special equity positions (spiffs) averaged 15.7% for the same time frame. And, folks that is a lot of added alpha being generated from using those spiffs. From my recollection, I believe there were a few times that my asset allocation did work its way, from capital appreciation, on my equities upwards to around 65% before being trimmed back.
In troubling market times my portfolio's asset allocation would allow for a mix of cash (30%), bonds (30%) stocks(40%). Currently, I am at about cash 20%, bonds 20%, stocks 50% and other 10% as reflected in my most recent portfolio's Instant Xray review.
As Flo states in those Progressive Insurance commercials ... "Feeling Kinda Good" ... and, "lucky" after this brief study.
Now off to the beach ... and, hoping you have a pleasant summer weekend.
Old_Skeet

I have been eyeing multi-asset income funds for near cash investing. They invest in preferred stocks and dividend payers, REITs, fixed income and cash equivalents. I don't expect big gains but hopefully better than the money markets are giving out. There is some added risk but with MM funds you are losing purchasing power also.
I will add that six months ago I moved some of my portfolio into such a fund as I am right at the retirement age.

Hi John,
What types of funds are you looking at? Just curious if you could give a few examples. Thanks,
Will

@Ron: CIM is guaranteed for six months 7%+, and the potential for some capital appreciation. I just bought some.

Ted, I will consider for partial position, I wouldn't have found this fund on my own, thanks.

FYI: Diamond Hill Capital Management has closed its long/short equity fund to new investors. The $4.3bn Diamond Hill Long-Short Fund (DIAMX) launched in 2000 and was closed to new investors on June 12.
Regards,
Ted
Ted
http://www.fundaction.com/news/diamond-hill-closes-alts-fund-to-new-investors/
M* Snapshot DIAMX: http://www.morningstar.com/funds/XNAS/DIAMX/quote.html
Lipper Snapshot DIAMX: http://www.marketwatch.com/investing/Fund/DIAMX?countrycode=US
DIAMX Is Unranked In The (L/S E) Fund Category By U. S. News & World Report:
http://money.usnews.com/funds/mutual-funds/long-short-equity/diamond-hill-long-short-fund/diamx

I have been eyeing multi-asset income funds for near cash investing. They invest in preferred stocks and dividend payers, REITs, fixed income and cash equivalents. I don't expect big gains but hopefully better than the money markets are giving out. There is some added risk but with MM funds you are losing purchasing power also.
I will add that six months ago I moved some of my portfolio into such a fund as I am right at the retirement age.

@Ron: CIM is guaranteed for six months 7%+, and the potential for some capital appreciation. I just bought some.

I believe the Yacktman funds are still good funds but there have been a couple changes from the pre-great recession days to now. The first I think is that the son now runs the fund, not the father. The other is assets under management. The 2 very similar funds now have over 21 billion. I don't know for sure, but I'm guessing it was less than a third of that back in 2007-8.
I like the idea of a good value stock picker willing to go to cash in the large cap space. I owned YAFFX for years. But when I moved my 401k to and ira last year I went with a smaller fund with similar style, SEEDX. Haven't bothered to compare the 2 but I like smaller, focused funds with capital preservation as it's main goal. SEEDX to me was a smaller version of Yacktman.
edit to add: and of course a third change is it is not owned by the Yacktmans anymore.

It may be even easier to explain (or, my mind may just work in strange ways).
Say you purchase a bond with the intent of holding it to maturity. (This is the only assumption I will make about you - it doesn't matter whether you are a long term holder. The hold to maturity assumption is necessary, else one cannot say that the original bond is "immune" to interest rate risk.)
Interest rates rise. Your intent has not changed; you intend to hold a bond that matures on a specific date. You can sell your bond at a loss, and purchase another one to replace the bond you owned. No change of grade or maturity date.
You'll get a higher yield on the replacement bond, that will exactly make up for the loss. How could it be otherwise? You could have purchased your own bond back at market price you just sold it for.
Tax treatment is another matter. When you sell the bond at a loss, you'll have a capital loss. But the higher interest that you earn on the replacement bond will be taxed as ordinary income. If you purchased your own bond back (at a discount), the "appreciation" back to par from the discounted price would be considered ordinary income by the IRS. Whether you buy back your own bond or a different replacement bond, from a tax perspective swapping bonds looks like a losing tactic.
(Note that even if you're talking about muni bonds, the "phantom interest" due to the "appreciation" of the bond due to market discount is considered taxable income.)
Edit: if you purchase your own bond back, you have a wash sale, the maturity price will be the same as the purchase price (assuming your original purchase was at par), and you'll just have received the same interest payments you would have gotten had you not sold and repurchased your bond. In short, swapping a bond for itself winds up having no net tax effect. But swapping a bond for an equivalent one does, for the worse.

India @ Eight Month Low/China Valuation Fueled Higher
The 30-share gauge, Sensex...closed at an 8-month low of 26,425.30 -- a level not seen since October 17, 2014 .Similarly, the 50-share Nifty has stumbled by 476.05 points or 5.63 per cent in the past three weeks
Concerns that the US Fed will increase rates as early as September on better-than -expected jobs data, drought fears and RBI's cautious stance on economic recovery continued to hit the sentiments.
Foreign investors turned cautious in anticipation of a inclusion of Chinese A shares in the MSCI Emerging Markets Index, which could see them move to Chinese markets, traders said Such an inclusion would have resulted in a sharp increase in China's weightage in the index, coming at an expense of other emerging markets including India.
http://profit.ndtv.com/news/market/article-sensex-ends-week-with-loss-of-343-points-771318
Against grain ,I took profits here MCSMX and added here MINDX
China’s Stock Market Value Tops $10 Trillion for First Time
by Richard Frost Updated on June 14, 2015 — 5:15 AM CDT Bloomberg
Companies with a primary listing in China are valued at $10.05 trillion, an increase of $6.7 trillion in 12 months, according to data compiled by Bloomberg. The gain alone is more than the $5 trillion size of Japan’s entire stock market. The U.S. is the biggest globally, at almost $25 trillion.
No other stock market has grown as much in dollar terms over a 12-month period, as Chinese individuals piled into the nation’s equities using borrowed funds to bet gains will continue. Valuations are now the highest in five years
http://www.bloomberg.com/news/articles/2015-06-14/china-s-stock-market-value-exceeds-10-trillion-for-first-time
China's stock market value tops $10T
Jun 14 2015, 10:20 ET | By: Yoel Minkoff, SA News Editor
http://seekingalpha.com/news/2578975-chinas-stock-market-value-tops-10t?uprof=46

I am confused by this statement in the linked report:
"There is a common misperception that holding a bond to maturity makes your portfolio immune to interest rate risk. The reality is, when rates rise, the total expected return from a bond is identical, regardless of whether the bond is held to maturity or sold at a loss and replaced with a bond that pays a higher coupon."
Seems to me that holding a bond to maturity does make your portfolio immune to interest rate risk. You will get the bond coupon and your principal back regardless of interest rate changes assuming the issuer does not default.

The author is referring to the total return of the bond.
And implicit in the discussion is that the investor is going to be a long term owner of bonds. What the author said does not hold true if someone buys bonds today, interest rates rise tomorrow, and they sell their bonds at a loss of principal and the proceeds go into some other investment.
"The reality is, when rates rise, the total expected return from a bond is identical, regardless of whether the bond is held to maturity or sold at a loss and replaced with a bond that pays a higher coupon"
Scenario A: The bond is held to maturity, so there is no loss of principal. However, there is a "loss"......the person is getting less semi-annual interest than he would get from selling his bonds at a loss and buying the current bonds. He gets more semi-annual interest from the higher coupon current bonds. The trade-off: he took a loss of principal on the bonds he owned.
Scenario B: He sells his bonds at a capital loss, and immediately purchases the current higher coupon bonds. His loss of capital will eventually be made up for by the extra interest he is earning, since he now owns bonds with higher coupons.
Again, this only works for the long term owner of bonds, not the person who sells at a loss and puts the proceeds elsewhere.
The concept that the author presents works the same for individual bonds and bond funds......again, for the long term owner of bonds.....not for the person timing the bond market........not for the person who is changing his asset allocation % of bonds vs. stocks after rates change.