And the next phase is...?
As always, Josh brings a fresh perspective.
I'm not as down on the future as he seems to imply.
Would be good to get back to a more normal monetary policy, consistent earnings growth, more realistic IPOs, and attendant modesty in market expectations.
Higher wages, continued reduction in unemployment, increased capital expenditure.
All the while, interest rates remain low. Credit available.
That would not be so bad, would it?

@Tampabay Ha, hammer to nail, that's probably it, plus (I would add) an almost resolute belief that 2008-2009 never ever happened. :)
But to stay true to JohnN's post, several months ago I started to feel uncomfortable and, in step with what older wily veterans have already posted here, I did some trimming and took some gains from my stock funds. Hardest step is the first one; several weeks later, I realized that that had felt pretty good and sold a few shares here and there in stocks that had become overvalued. This brought cash to around 10%. If the 10yr T goes on down to between 2.25% and 2%, I'll be giving a trim to some fixed income, bringing cash up to circa 12.5%. Combined with cash held in mutual funds (some are rather defensively elevated right now), total cash I figure will be about 15%.

So, some links below to current ratings on long term top-tier performers. All notable. All struggling this past year...or more.
http://www.mutualfundobserver.com/fund-ratings/?symbol=TCWAX+OAKIX+UMBWX+TIGAX+SHSAX+PRHSX+VCHSX+MHNAX+UNHIX+HABDX+PTTRX+AMANX+YAFFX+BBTEX+FEVAX+FMIHX+GABEX+MPGFX+MVPFX+PIXAX+&submit=Submit
http://www.mutualfundobserver.com/fund-ratings/?symbol=CVGRX+FTQGX+MFCFX+SEQUX+PRGFX+WTEAX+AMRMX+ARDEX+AUXFX+FAIRX+BAEIX+FMIEX+IEF+PMHIX+VBLTX+ADAIX+BCMSX+ACRNX+MERDX+NBGNX+&submit=Submit
http://www.mutualfundobserver.com/fund-ratings/?symbol=RYSEX+ARTQX+DEFIX+FPPTX+PHO+FOBAX+MACSX+PVFAX+RYSEX+PRSVX+WEMMX+VVPSX+CCASX+WAAEX+WSCVX+WSTCX+UNSCX+WGRNX&submit=Submit
Broad category set.
This board especially should recognize a lot of familiar names:
Oakmark International I (OAKIX)
Waddell & Reed High-Income A (UNHIX)
PIMCO Total Return Instl (PTTRX)
AMG Yacktman Focused Service (YAFFX)
BbH Core Select N (BBTEX)
FMI Large Cap (FMIHX)
Mairs & Power Growth Inv (MPGFX)
PIMCO Fundamental IndexPLUS AR A (PIXAX)
The Cook & Bynum Fund (COBYX)
Sequoia (SEQUX)
T. Rowe Price Growth Stock (PRGFX)
American Funds American Mutual A (AMRMX)
ASTON/River Road Dividend All Cap Val N (ARDEX)
Auxier Focus Inv (AUXFX)
Fairholme (FAIRX)
iShares 7-10 Year Treasury Bond (IEF)
AQR Diversified Arbitrage I (ADAIX)
Meridian Growth Legacy (MERDX)
Neuberger Berman Genesis Inv (NBGNX)
Royce Premier Invmt (RYPRX)
Artisan Mid Cap Value Investor (ARTQX)
Delafield Fund (DEFIX)
FpA Capital (FPPTX)
Tributary Balanced Instl (FOBAX)
Matthews Asian Growth & Inc Investor (MACSX)
Royce Special Equity Invmt (RYSEX)
T. Rowe Price Small-Cap Value (PRSVX)
TETON Westwood Mighty Mites AAA (WEMMX)
Vulcan Value Partners Small Cap (VVPSX)
Wasatch Small Cap Growth (WAAEX)
Walthausen Small Cap Value (WSCVX)
Ivy Science & Technology C (WSTCX)
Wintergreen Investor (WGRNX)
SEQUX, arguably greatest mutual fund ever...no longer a Great Owl.
FAIRX, what a difference a decade makes...although, still top quintile across last two full cycles (through September anyway).
Perhaps somehow related to bond yield? IEF or TLH?
Valuations? Defensive funds not buying into current bull market?
Or, just the normal ebb and flow of investing styles across cycles?

If you are going to own actively-managed funds, it would seem to me that concentrated portfolios and investment flexibility make a lot of sense. For example, why would I pay for active management in a fund that has 200+ holdings and is essentially a closet index fund?
On the other hand, owning a mix of 5-6 'dynamic' funds, like FPA Crescent, Oakmark Equity & Income, Price Capital Appreciation, Thornburg Income Builder, BlackRock Global Allocation, etc. over the last 20 years would have provided investors with better long-term returns than the S&P 500 and much less volatility. So there is more than one way to look at this.

Passport Capital, LLC
Impala Asset Management LLC
Lyrical Asset Management LP
Sirios Capital Management, L.P.
Kynikos Associates LP (http://en.wikipedia.org/wiki/James_Chanos)
Very interesting fund, given the portions I bolded above. Very expensive fund in terms of ER, but some solid management teams.

Hi Mark.
Thank you for the precise Japanese “Nail” quote. I’m sure you realize that I was just paraphrasing this favorite Japanese saying since my original post purposely did not isolate it with quotation marks.
My primary purpose in introducing this Japanese wisdom was to differentiate that most US investors do not subscribe to the confirmatory receptivity that the “Nail” saying implies.
As a very broad generalization, the Japanese population treasures conformity and uniformity much more highly than the US population does. Again, broadly speaking, Americans encourage and expect departures from the "road most frequently traveled" when the situation demands innovative thinking and action.
Whenever I reflect on the uniformity and conformity of the Japanese cultural tendencies, I fondly recollect a now distant visit to Kobe, Japan. My wife and I were staying at a posh hotel on a hilltop that overlooked the city. Although the hotel’s modern elevators were entirely automatic, they were staffed with three well groomed, identically uniformed, attractive women who spoke perfect English.
The first was armed with a short pointer and guided us to a waiting elevator; the second assisted us into the elevator; the third punched the requested buttons. All three women were college graduates. What a waste of human resources, especially when contrasted against the utilization of human capital in some of the modern Chinese cities that we also visited.
In investing, departing from the norm offers the potential for outsized rewards; it also presents the prospects for the most spectacular failures. We get to choose the relative certainty of Index-like returns or a higher returns active target that is more risky and uncertain. In the latter instance, historical performance data suggests that our misses exceed our hits by a huge margin.
Best Wishes.

Putnam Funds
https://www.putnam.com/literature/pdf/EO183.pdf
Janus Funds
https://ww3.janus.com/SiteObjects\published/FFFFFFFFA8347B540106A689CB6E5086/6A67B6EDC7721332F91A5B876C820459/file/Janus Funds Preliminary Distribution Estimates 2014.pdf
AMG Funds (file is a PDF) (Yacktman, SouthernSun, etc...)
https://investor.amgfunds.com/income_cap_gain_distributions
Thrivent Funds
https://www.thrivent.com/mythrivent/tax_resources/mutual_fund_tax_resources_guides/capital_gains_distribution.html
Principal Funds
https://www.principalfunds.com/investor/aboutus/news/article-08312014-capital-gains-estimates.htm
or
http://www.principalfunds.com/investor/docs/tax/MM3682-23.pdf

Until I sold FAIRX a couple of days ago I had owned it for over 10 years. Over the years BB drifted from being a deep value focused manager to a swing for the fences style.

I'm sure many FAIRX shareholders sold this week. The below was posted on another message board just yesterday:
"I solved the problem. I am done with Bruce Berkowitz as of the close of business today. Sears is up about 7% right now so I hope that helps a little bit to lessen today's losses. I made very good gains over the last 7 years and cashed out of this investment vehicle from this once RESPONSIBLE money manager."
[bolding mine]

FYI: Bill Gross, founder of Pimco, and its chief investment officer for the past 40 or so years, resigned last week. Rumor has it that he was but two steps ahead of a mutinous gang, swords out, planning to make him walk the plank. Gross was too quick and before the mutineers could force him, he jumped ship -- and landed at Janus Capital. There, we surmise, he was given a slug of equity and a free hand to run a smaller, more nimble fund.
Regards,
Ted
http://www.bloombergview.com/articles/2014-10-03/bill-gross-s-investor-outlook-on-palace-coups

FYI: Weakening overseas economies, coupled with the end of QE, has helped the dollar index rise
After a weak start to 2014, the U.S. dollar has muscled its way higher this summer and the long-term gains may not be over.
Regards,
Ted
http://wealthmanagement.com/print/mutual-funds/investing-rising-dollar

I've been watching my (developed) Europe fund in particular: PRESX. I've owned it since Nov, '13. ...It was fun for a while. It's been awful stinky since .....since many months ago. Are they ever going to get the wheels back on the track over there? I've decided anyhow to hold it at the very least until I see what dividends it might pay at the end of the year. I saw something lately, noting that the fund doesn't pay cap. gains? Only dividends....?

I am a long time FAIRX investor and I sold everything today. this is looking like a replay of 2011 when BB was down over 30% in an up market. I held off selling before because of the tax hiT on my gains over the years but finally decided just to take the hit. What he is doing with a number of positions feels to me like gambling and not value investing

Something tells me this one headed to Supreme Court.

Charles I think those -50% one day losses we saw yesterday on Fannie and Freddie could just as easily be +50% and much more one day gains if the courts change their mind and rule in favor of shareholders. The stock prices on those seem to be 100% tied to court and government decisions about Fannie and Freddie. The stocks could really go thru the roof if the decision is made to return the companies to shareholders and allowed to funnel their profits to them.
I think both companies have already repaid the government what was borrowed, have they not? I think Bruce has a very strong argument, and having Ackman on your side always helps.
I just wouldn't be able to handle the volatility and uncertainty of FAIRX. FAIRX is like a hedge fund now. Certainly better to pay 1% versus 2%/20%

Getting in DFA funds (with an advisor and paying fee) is one thing. Getting out of DFA funds (getting rid of advisor and moving on) is something else. You will never hear Swedroe or other pro-DFA talking heads talk about the difficulty (and tax consequences) of getting out.

@varmint: Can you elaborate? Don't know what you are referring to.
What's the difficulty in getting out of the funds and dropping the advisor?
What special tax consequences are you referring to, other than those you would have if you sold a Vanguard index fund and had to pay capital gains taxes on the previously unrealized/newly realized gains?
I've never worked with an advisor, but you should be able to end the relationship, stop paying fees, and get your money back. Hopefully you have the account at a brokerage like Fidelity, Schwab or TD Ameritrade, which I understand are popular for advisor accounts.

Yes, of course the junk open end munis. Surprised there hasn't been a bigger bandwagon for junk munis here. Probably a good thing though. I've been harping on junk munis since January and so as not to come across as a zealot, won't mention them again. Funny thing about zealots. Whatever they endlessly preach about - be it a particular fund or asset class such as gold/ silver or whatever - it eventually comes back to bite them. They then seem to fade away or worse, become a zealot about something else. The worse kind of zealots are those who don't let go, even after the object of their affection vaporizes their capital.
Definition of Zealot - A person who has very strong feelings about something and wants other people to have those same feelings.

What about the typical, plain vanilla bond funds that pay income dividends monthly, like the Vanguard Total Bond Market Index Fund, etc.
Does the share price drop by an amount equivalent to the income distribution [not considering market activity for the day], as is the case when stock funds distribute dividends and/or capital gains?

Thanks for the explanation and clarification. Much appreciated.

if the fixed income fund's objective is current income -- then you pretty much covered ALL fixed income funds. trust me i know... i read (if not write) these for a living. for the equity fund, an investment objective would be capital appreciation. just like large cap equity could be anything in the world, so could be unconstrained bond funds or any other fixed income vehicles. DBL is a mortgage fund -- that's doubleline's primary expertise. its discount is less than that of DSL because.... wait for it... it IPO'd earlier -- in the go-go pre-2013 fed taper tantrum. so it had physically more time to develop better pricing. this is very similar to PDI (an ivascyn mortgage fund) vs PCI. the latter is more diversified (currently also with ivascyn) and IPO'd AFTER PDI, i.e. less time to develop decent pricing.
for full disclosure, i own a decent chunk of PDI, smaller one of DSL, and a tiny bit (picked up in the latest swoon) of PCI.
The only funds that should be similar to identical are those that not only managed by the same PMs, but have identical names, such as Pimco Income, Pimco Income I, Pimco Income II, etc.
Hope this clears your confusion.

if the fixed income fund's objective is current income -- then you pretty much covered ALL fixed income funds. trust me i know... i read (if not write) these for a living. for the equity fund, an investment objective would be capital appreciation. just like large cap equity could be anything in the world, so could be unconstrained bond funds or any other fixed income vehicles. DBL is a mortgage fund -- that's doubleline's primary expertise. its discount is less than that of DSL because.... wait for it... it IPO'd earlier -- in the go-go pre-2013 fed taper tantrum. so it had physically more time to develop better pricing. this is very similar to PDI (an ivascyn mortgage fund) vs PCI. the latter is more diversified (currently also with ivascyn) and IPO'd AFTER PDI, i.e. less time to develop decent pricing.
for full disclosure, i own a decent chunk of PDI, smaller one of DSL, and a tiny bit (picked up in the latest swoon) of PCI.
The only funds that should be similar to identical are those that not only managed by the same PMs, but have identical names, such as Pimco Income, Pimco Income I, Pimco Income II, etc.
Hope this clears your confusion.

Kris Jenner started his hedge fund Rocks Spring capital last October, so far his fund is doing better than TR health care fund and most other health care related funds.

I think the trend will last for awhile due to ageing baby boomers.Since the market will anticipate that event, 2020 might be a time to reduce allocation rather than say 2026 which is the year peak births turn around 75.