http://www.mutualfundobserver.com/discuss/discussion/12630/thoughts-on-otter-creek-long-short-otcrx/p1
Nod to rsorden .After a month travelling out west, opened a new position in OTCRX after reading above post and a little home work.From the prospectus:(emphasis added)
'The Fund employs a “long/short” investment strategy to attempt to achieve capital appreciation and manage risk by purchasing stocks believed by the Advisor to be undervalued and selling short stocks believed by the Advisor to be overvalued. The objective of the Fund is to generate absolute risk-adjusted returns with a focus on long-term capital appreciation with below average
volatility by investing in opportunities both long
and short which are driven by intensive
fundamental analysis. Under normal market conditions, the net long exposure of the Fund (gross long exposures minus gross short exposures) is expected to range between -35% and +80% net long.
The Fund may also invest in investment grade fixed income securities, including up to 30% of theFund’s assets in corporate and convertible bonds as
well as debt issued by the U.S. Governmentand its agencies. Additionally, up to 30% of the Fund’s net assets may be invested in high yield (“junk bonds”).
High yield bonds are securities rated by a rating organization below its top four
long-term rating categories or unrated securities determined by the Advisor to be of equivalent quality.
The Fund may utilize leverage of no more than
30% of the Fund’s total assets as part of the
portfolio management process. From time to time, the Fund may invest a significant portion of
its assets in the securities of companies in the same sector of the market.
The Fund may also invest up to 10% of its net assets in derivatives including futures, options, swaps and forward foreign currency contracts. These instruments may be used to modify or hedge the Fund’s foreign currency contracts. These instruments may be used to modify or hedge the Fund’s
exposure to a particular investment market related risk, as well as to manage the volatility of theFund. "
http://www.ottercreekfunds.com/media/pdfs/Summary_Prospectus.pdf
Pretty much a go anywhere fund with the ability to leverage! With only $17+million in assets it has performed quite well Y T D .Can it execute the strategy as its assets increase?
Nice updated Fact Sheet.
http://www.ottercreekfunds.com/media/pdfs/OCL_Factsheet.pdf

Wednesday, May 7, 2014
Editor's Corner
What Happens When The Fed Stops Buying And Starts Selling?
Ron Rowland
The Fed Chair Janet Yellen testified to the Joint Economic Committee on Capitol Hill today. She revealed no surprises and generally stuck to the same script that has been in use for months. While basically optimistic on the economy, she reiterated concerns about the labor market, lack of inflation, and disappointing housing activity. She believes the lackluster first quarter GDP figures were mostly weather related and sees signs that spending and production are rebounding.
The Fed’s monthly reductions of asset purchases this year have been based on its assessment the economy was strong enough to support labor market improvements. Yellen reminded everyone that this tapering operation was still adding to the Fed’s holdings, and they in turn were helping apply downward pressure on long-term interest and mortgage rates.
Last year, the market reacted negatively to the idea of the Fed tapering its monthly purchases of Treasury and mortgage-backed securities. Tapering is one thing, but what happens when the Fed starts to reduce its balance sheet? This is seldom discussed, but today Ms. Yellen stated the Fed does in fact expect to shrink its balance sheet over time.
Outright sales of mortgage-backed securities are not planned, with the possible exception of eliminating some residual holdings. Instead, balance sheet reduction will occur by not reinvesting the proceeds the Fed receives when current holdings mature. Although the Fed intends to avoid sales of mortgage-back securities, no such assurances regarding Treasury securities were offered today.
Earlier this year, with the unemployment rate hovering around 6.7%, the Fed eliminated its 6.5% line-in-the-sand regarding when it would begin considering the reduction of monetary stimulus. The reason for this change was the belief the unemployment rate didn’t fully reflect problems within the labor market. Last Friday, the Bureau of Labor Statistics released its April employment reports, and the official unemployment rate plunged a staggering 0.4% to 6.3%.
Today, Ms. Yellen again emphasized that labor markets are still far from satisfactory. People out of work for more than six months and those only able to find part time work remain at historically high levels. The declining participation rate is also a concern, as another 988,000 people left the labor force in April. For these reasons, she believes the Fed was correct in removing the 6.5% threshold.
Markets reacted favorably to all this, giving the relatively new Fed Chief an implicit seal of approval. The Dow Jones Industrial Average climbed more than 117 points, and the 10-year Treasury yield dropped back below 2.6%.
Sectors
Energy and Utilities have been swapping places for the lead the past four weeks, and Energy came out on top today. Utilities had a setback last Friday with earnings misses and downgrades among prominent constituents. The sector is bouncing strongly today and is well on its way to reclaiming the top spot from Energy. Real Estate and Consumer Staples hold down the third and fourth spots for the fourth week in a row. Telecom jumped four places after falling the same amount the prior week. Unfortunately, the group looks like it may not be able to maintain its upward momentum, making it vulnerable to downside action. Materials and Industrials have been hanging out in the middle of the rankings for more than a month now. Technology is another sector on the verge of slipping into a negative trend. The selling in biotechnology stocks seems to have subsided for now, but the Health Care sector is still struggling to regain its footing. Earnings out of the Financials haven’t been offering much hope for the group. Consumer Discretionary continues to encounter setbacks and remains mired at the bottom of the heap.
Styles
Although three pairs of style categories swapped positions, very little has changed. Large Cap Value remains at the top but seems to be settling into a mostly sideways pattern. Mid Cap Value exchanged places with Mega Cap to recapture second place after a one-week absence. Large Cap Blend, Mid Cap Blend, and Large Cap Growth continue to hold down the middle. Mid Cap Growth and Small Cap Value comprise our second pair of categories swapping places. Mid Cap Growth came out ahead this week and even managed to generate a slightly positive momentum reading. Small Cap Blend remains in a negative trend near the bottom of the rankings. Micro Cap slipped below Small Cap Growth to take over last place. Seven weeks ago, Micro Cap was at the top, but now the tables have turned.
Global
We have been commenting for many weeks about the late March surge for Latin America. Since then, it has been digesting those gains and unable to break out of its long-term downtrend, until now. Brazil and Mexico are currently providing the strength for Latin America funds. The U.K. continues to get a currency translation boost, allowing it to climb two spots to second place. Canada strengthened its grip on third place with gains in both equity prices and the Canadian dollar. Pacific ex-Japan slipped two places to fourth as stronger groups moved ahead. The next five categories are keeping the same relative rankings and nearly identical momentum readings as last week. Europe heads up this group of five, followed by Emerging Markets, EAFE, World Equity, and the U.S. Two global categories are in the red, and this week they swapped positions with China replacing Japan at the bottom.
Note:
The charts above depict both the relative strength and absolute strength of various market sectors, styles, and geographic locations on an intermediate-term basis. Each grouping is sorted (top to bottom) by relative strength. The magnitude of the displayed RSM value is a measure of absolute strength, which is our proprietary method of measuring and reporting the intermediate-term strength as an annualized value.
--------------------------------------------------------------------------------
The Road is Long. Are You Headed in the Right Direction?
Capital Cities Asset Management
Capital Cities Asset Management, an affiliate of Invest With an Edge, provides investment planning and portfolio management with the knowledge to lead you down the right path and the discipline to ensure you don’t stray from it. For a complimentary consultation, call us at 800-767-2595 or email us at [email protected].
Explore Your Possibilities.
www.ccam.com
--------------------------------------------------------------------------------
"This 'don't worry, be happy' monetary message isn't working."
U.S. Representative Kevin Brady on May 7, 2014
--------------------------------------------------------------------------------
=== Follow Us===
--------------------------------------------------------------------------------
Recent Articles Posted at InvestWithAnEdge.com:
Lights Going Out For OFF and ONN
--------------------------------------------------------------------------------
DISCLOSURE
© 2014 AllStarInvestor.com All Rights Reserved. Protected by copyright laws of the United States and international treaties. Nothing in this e-mail should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. All Star Investor employees, its affiliates, and clients may hold positions in the recommended securities.
Distribution is encouraged. Please do not alter content.
Courtesy of: www.AllStarInvestor.com, Publisher of www.InvestWithAnEdge.com
This message was sent to Old_Skeet from:
All Star Investor | 11651 Jollyville Road, Suite 200 | Austin, Texas 78759
Email Marketing by
Update Profile | Forward To a Friend

http://individual.troweprice.com/gcFiles/pdf/trcaf.pdf
From the May 1, 2014 prospectus (excerpt) link above:
...Purchase and Sale of Fund Shares
"Subject to certain exceptions, the fund will be closed to new investors and new
accounts after the close of the New York Stock Exchange on June 30, 2014. Investors
who already hold shares of the fund after June 30, 2014, may continue to purchase
additional shares."
Here is the Summary Prospectus with a 4/29/14 filing date with the same information:
http://www.sec.gov/Archives/edgar/data/793347/000079334714000019/cafpta-may37.htm

@hank, no disagreement on definitions.
The volatility of a fund is a combination of asset class volatility and manager strategy (focused, capital protection, etc) induced volatility. Asset class volatility is managed by buying different asset classes that are not hopefully correlated.
Active funds tend to magnify (focused or concentrated funds) or diminish (capital protection or drawdown management) this volatility with manager strategy. This "multiplier" can be managed by just the allocation amount to that fund to suit your volatility tolerance because that multiplier is reasonably constant. You don't need a diversifier within the asset class for this reason paying the performance penalty.
The problem with idiosyncratic manager risk is one of failure of the strategy for some economic condition. And yes this failure can result in volatility :-) If you try to diversify away this risk by buying similar funds, then you are losing part of the reason and advantage for choosing this manager during all the time the strategy isn't failing. The more such similar funds you buy, less the advantage of using active funds over index funds.
The good news is that such failures of strategy are not common. While there are no guarantees in life, with some reasonable research, one can avoid funds that are prone to such failures rather than try to diversify that risk away and lose the edge any such fund brings over an index fund.
Am I making sense to you?

@cman:

You can see this as an extreme capital preservation strategy where the drawdown is at or close to zero under any scenario. They are definitely not for the kind of capital growth needed by the 99% to make their retirement.

So why do these managers create retail mutual funds? Because they need the money to grow the asset base and their revenues and it is easier to raise money from mutual funds especially if it becomes popular. They all look at funds like PRPFX (easiest money ever made by fund managers) and salivate and wonder why they are working so hard for just a few million.

Ha! Love it!

Funds/strategies like this are so outside the needs/experiences of typical retail investors as may be represented here that a discussion can only be generic as posted so far in which everybody is right but all miss the point.
There are a number of "opportunistic capital preservation" money managers like Frank Martin running boutique funds primarily for high net worth (HNW) individuals via word of mouth and networking. Some of them try to create retail funds for reasons I will cover later on. I, personally, know a manager like this, so some of the following is not necessarily what you might hear from such managers in public.
In private money management, the typical investor in such funds is a HNW individual with a few millions that may be needed in 2-3 years for some investment like real estate or a new business, money that they do not want to lose or be tied up without liquidity. They definitely do not NEED the growth from that money for their retirement but wouldn't mind if somebody opportunistically made some money on it.
You can see this as an extreme capital preservation strategy where the drawdown is at or close to zero under any scenario. They are definitely not for the kind of capital growth needed by the 99% to make their retirement.
The strategies vary using different asset classes from equities to bonds but the math is usually similar. The managers choose the allocation of capital to the opportunistic classes calculating Value At Risk so that the worst case scenario drawdown even in the short term (and hopefully the expenses as well) is balanced by guaranteed returns in the safest asset classes such as holding treasuries to maturity. In other words, they have fully "hedged" the potential downside.
The upside of the opportunistic class can vary but it is typically more like high yield or equity like returns in 5-15% range in the best case scenario. Dumb bell return asset classes like venture capital can also be used but very little of the capital can be put to work to be able to fully hedge it and picking almost guaranteed winners opportunistically is not easy.
In most cases, the asset picking ability of such managers is overrated. They have the luxury of waiting with nothing invested and growing nothing unless the asset meets the draconian investment criterion they set up for themselves. They just have to wait for a deep correction in the asset class or some other event that creates massive pricing anomalies.
The upside is usually a function more of the type of market condition (like a crash) they encounter and the frequency of such events than the asset picking.
This is very different from the funds that stay at 60-80% invested with an eye towards capital protection but cannot afford to flatline their returns waiting for opportunities.
Is a money management strategy like this relevant for typical retail investors? In theory, yes. But not for typical portfolios designed for growth overall that is of necessity. Not even to reduce volatility or adjust risk or benefit from bear markets. The reason is that there is no allocation to such funds that makes mathematical sense If you allocate a large amount, the potential opportunity costs in the flat line scenarios put your needed growth at risk. If you just put in a small amount, the opportunistic upside won't make much difference. It is relevant only for money (or a bucket) that you do not want to lose under any circumstance - down payment for a house, cash buffer beyond the emergency requirements, etc.
In practice, most retail investors either put such money in FDIC insured assets or put it in some short term bond funds and forgo the potential for opportunistic upside.
So why do these managers create retail mutual funds? Because they need the money to grow the asset base and their revenues and it is easier to raise money from mutual funds especially if it becomes popular. They all look at funds like PRPFX (easiest money ever made by fund managers) and salivate and wonder why they are working so hard for just a few million.
Raising money from a few HNW individuals has many disadvantages. It is very labor intensive and pretty much like getting political contributions. So, it is difficult to scale. It is also very lumpy as a few individuals coming in or getting out changes asset base substantially. On average, you need about $20M in AUM for every person you want to hire. Most private managers plateau out with less than $50M in AUM and always under a threat to lose chunks of it quickly from withdrawals.
So, retail and institutional funds are the next step for anybody who is tired of private money management and has built up a record they can advertise. With increased assets, they can hire people and take a much less active role in day to day management. Most go the advisor route because marketing directly to investors is expensive and difficult for specialty funds like this whose purpose is never understood enough.
The success rate in raising assets is not very high but people like Hussman give them hope. Tom Forester of Forester funds is probably the one big success story (relatively speaking in the ability to raise AUM) with an approach similar to Frank Martin early on.

Well, this is good to hear from new SA post:
"That error that they made doesn't bother me," says Buffett of Bank of America (BAC), which had to suspend its capital return plan after miscalculating capital levels. "It doesn't change my feeling about Bank of America's risk management one iota."
If we can't trust Warren Buffet, who can we trust?
(Hint: David Snowball)

@Mulder420, Scott, & Other MFO Members:
Regards,
Ted
Copy & Paste 5/3/14 Jack Hough Barron's
The Many Ways To Tap The Water Boom:
A perfect storm is brewing, water is the 21st-century oil," wrote Bank of America Merrill Lynch in a 133-page report last month. BofA calls water scarcity a "global megatrend" and says "investors need to go blue." Credit the bank's conservation efforts; it has been recycling that report for a few years now. Returns for the theme have been just OK. The S&P Global Water index has returned 12.1% on average over the past three years, beating the 9.5% return for the broad S&P Global 1200, but falling short of the 13.9% return for the U.S.-focused Standard & Poor's 500 index.
The opportunity may indeed be more compelling than recent returns suggest. Water infrastructure is crumbling in the U.S., but municipalities have delayed spending to help balance their budgets. That has created enormous pent-up demand for pipes, pumps, and wastewater-treatment gear, and water main breaks are now occurring more frequently from San Francisco to Milwaukee to Springfield, Mass. In emerging markets, growing middle classes are consuming more water-intensive goods like meat, and clamoring for things Americans take for granted, like the ability to draw a clean glass of tap water.
The problem with theme investing, however, is that some key factors that drive stock returns have nothing to do with the themes. Chief among these is valuation; the price an investor pays is easily as important to long-term returns as what he buys. The S&P Global Water index recently traded at 23 times trailing earnings, versus 18 times for the S&P 500. Investors with a thirst for water exposure must be careful not to pay too much. Promising names include Rexnord (ticker: RXN), HD Supply Holdings (HDS), American Water Works (AWK), and two others belo
Our blue planet holds plenty of water, but only 2.5% of it is fresh. The amount of fresh water has fallen 35% since 1970, as ground aquifers have been drawn down and wetlands have deteriorated. Meanwhile, demand for water-intensive agriculture and energy is soaring. Overall water demand is on pace to overshoot supply by 40% by 2030. Water scarcity will damp long-term economic growth unless governments spend more to recycle wastewater, turn salt water into fresh, and build smarter plumbing. BofA therefore expects companies that meet these needs to deliver outsize growth for many years.
BUT INVESTORS MUST PAY attention to other factors, too. For example, now is a good time for stock buyers to turn their attention from pumps to plumbing, says Matt Sheldon, manager of the Calvert Global Water fund (CFWAX), which has returned 12.9% a year over the past three years, ranking among the top 2% of natural-resources funds, according to Morningstar. A boom in hydraulic fracturing of oil and gas reserves over the past decade sent demand for pumps soaring, and provided outsize returns for companies like Flowserve (FLS). Its stock price has multiplied 10 times over the past 10 years. But growth there has slowed and shares look fully priced. Flowserve is expected to increase its revenue by less than 4% this year, and its shares go for 19 times this year's earnings forecast.
Meanwhile, a rebound in the U.S. housing market should drive improving results for companies that sell plumbing systems to builders and municipalities. Sheldon likes Rexnord, which makes valves, floodgates, backflow preventers, and other water products. Its revenues are expected to increase by 7% this fiscal year, which runs through March 2015. Its shares go for 16 times earnings.
HD Supply, an 8% revenue-grower, sells a broad line of building and maintenance supplies, and is seeing particularly brisk growth from its waterworks division. The company, a former unit of Home Depot, went public and swung to a full-year profit last year. Shares go for 20 times this year's earnings forecast, but earnings are still ramping up quickly from a low base. The price/earnings ratio drops to 13 based on next year's forecast and to less than 10 based on 2016. Last August we wrote that shares were poised for 20% upside over the coming year (Aug. 12, "The Home Depot of Commercial Construction"). They're up 11% since then, on par with the S&P 500.
Utilities offer another way into water. American Water Works is the largest investor-owned water and wastewater utility in the U.S., with customers in 40 states. For utilities, aging water infrastructure represents not only a future cost, but a future profit. That's because regulators allow them to invest in infrastructure at handsome returns on equity, and in many states, if realized returns fall behind projected ones, utilities can top them up with customer surcharges. American Water Works is expected to increase its revenue by 7% this year, and shares sell for 19 times this year's earnings estimate. Janney Capital Markets cites the stock as a favorite utility in part because of the potential for stable and rising income. Shares yield 2.7% and management links its payout to earnings, which Janney predicts will grow 7% to 10% a year over the long term.
China represents a top opportunity for water investments in emerging markets, says BofA. In China, all those coal-fired power plants account for 20% of total water consumption, and that figure could rise to 40% over the next decade. Beijing Enterprises Holdings (392.Hong Kong) has a hand in water treatment and sewage, along with toll roads, beer, and gas pipelines. Its shares go for 18 times this year's earnings forecast. That looks inexpensive compared with its projected revenue growth of 16% this year and 21% next year.
EMERGING MARKETS STOCKS aren't the only way to invest in emerging markets, says Andreas Fruschki, manager of the AllianzGI Global Water fund, which ranks among the top 6% of natural resources funds for three-year performance, according to Morningstar. Fruschki's fund has only a 10% stake in companies based in the emerging markets; he prefers to invest in those markets through global companies that sell there. Danaher (DHR) was recently the fund's top holding. It's an acquisition-driven company that focuses on niche markets, and has a hand in water analysis and treatment, test equipment for electronics and medical research, and more. Revenue is expected to grow 5% this year. Danaher shares go for nearly 20 times this year's earnings forecast, but earnings understate the amount of cash the company generates because of charges related to past deals. Shares go for less than 17 times this year's projected free-cash flow.

Per their 2013 annual letter, Martin Capital Management has returned 5.3% annualized net of fees from 2000-2013 vs 3.6% for the S&P 500.
From 2003-2013, they lagged the S&P in every single calendar year, except 2008.
To quote from the commentary: "There are some investors for whom this strategy is a very good fit"
My question is who are these "some investors"?

FYI: Copy & Paste 5/1/14: Tommy Stabbington & Chiara Albanese WSJ
Regards,
Ted
Franklin Templeton Investments fund manager Michael Hasenstab has raised the stakes in his wager on Ukrainian bonds, but investors in some of his funds have folded their cards.
Investors are pulling cash from a Templeton fund with a relatively high concentration in Ukraine bonds and from his flagship Global Bond Fund, which also has invested in the Eastern European country's debt.
Mr. Hasenstab is known for his bold, contrarian bets on out-of-favor government bonds. He snapped up Irish bonds during the dark days of the euro-zone crisis and rode them to sterling returns. A few years ago, he similarly took a gamble on Hungary that paid off.
Michael Hasenstab said about Ukraine that he is 'encouraged by the long-term potential.' Patrick McMullan
Ukraine is proving to be a rougher ride. Its bonds have swung wildly during the political crisis over Crimea and the eastern part of Ukraine and are now broadly weaker for the year. Templeton has bought about $7 billion of Ukrainian debt, according to data provider Ipreo, about one-quarter of the country's international bonds. Mr. Hasenstab added to his holdings in the second half of last year and early this year, according to company filings.
The Emerging Market Bond Fund, which has $6.2 billion in assets, had 10.6% of its portfolio in Ukrainian bonds as of the end of March. It has seen outflows of $1.26 billion in the first three months of the year, according to data provider Morningstar. Mr. Hasenstab added to these holdings in March as the political crisis intensified, according to company filings. The Emerging Market Bond Fund has the highest Ukraine exposure among Franklin Templeton's funds
A version of the Global Bond Fund marketed to European investors, with assets of $39 billion and a 3% allocation to Ukraine, has seen outflows of $4.93 billion, according to the company. Outflows in the $71 billion U.S. version of the Global Bond Fund, with a 4.5% allocation, have been $570 million, according to Morningstar. Overall, U.S. and European funds investing in emerging-market debt saw outflows of just under 4%, the Morningstar data show.
In the first quarter, the Emerging Market Bond Fund lost 0.4%, while the Global Bond Fund gained 0.7%, according to Franklin Templeton.
One investor, who pulled cash out of the Emerging Market Bond Fund this year, said: "When you buy Franklin Templeton you know what you get in terms of high volatility. We reduced exposure to the firm earlier in the year to cut volatility in our portfolio."
Two investors in the Emerging Market Bond Fund said individual investors, who tend to be more skittish than institutional clients, were behind a large part of the outflows.
A Franklin Templeton spokeswoman said the fund is a "very niche strategy out [of] the range of global bond strategies managed by Michael Hasenstab, which accounts for $185 billion under management." She declined to comment further.
On a conference call with analysts Wednesday, Franklin Templeton Chief Executive Greg Johnson said much of the outflow from European funds can be attributed to investors allocating more of their money to stock and hybrid funds instead of bonds as Europe recovers from recession.
Mr. Hasenstab couldn't be reached to comment, and the spokeswoman declined to make him available.
Franklin Templeton has been reassuring investors over its holdings of Ukraine's bonds as the crisis escalates, according to a person familiar with the firm's business.
On Thursday, Russian President Vladimir Putin called on Ukraine to withdraw military forces from the southeast of the country, a move that would effectively cede control to the pro-Russian forces that have taken over about a dozen cities in the border area and are pushing for a referendum on its status.
Ukrainian government debt has endured a bumpy ride this year. A dollar-denominated bond maturing in 2023 yielded 9.14% at the end of 2013, according to Tradeweb. The yield climbed to as high as 11.5% in February, before falling back below 9%. As the crisis rumbles on, Ukraine bonds have fallen out of favor once more, and the yield on Thursday stood at 10.5%. Bond yields rise as prices fall. In comparison, a 10-year German bond yielded 1.47% on Thursday, according to Tradeweb.
Mr. Hasenstab himself has been on a charm offensive. Last month, he visited Kiev. In a video filmed in the Ukrainian capital and posted on the firm's website, Mr. Hasenstab strolled the streets and sung Ukraine's praises.
"We are very encouraged by the long-term potential," he said in the video. "It's a country that despite some of the short-term fiscal issues has very little indebtedness, close to 40% debt to [gross domestic product], which is a very manageable amount."
Some investors said they have some concerns the Ukraine bet could turn sour but are willing to keep the faith with Mr. Hasenstab given his excellent track record. His Global Bond Fund has returned 52.5% over the past five years, according to Franklin Templeton. In comparison, the JPMorgan Global Government Bond Index has returned 21.5%, according to J.P. Morgan.
"I think Ukraine is more of a marketing issue for [Franklin Templeton] than an investment issue," said one investor who held on to substantial holdings in Mr. Hasenstab's funds during the first quarter of 2014.
"Hasenstab would probably rather manage the fund rather than go on a tour to calm people down. But I think the worst is behind them, and I wouldn't have a problem investing with them in the future because of this."
s

Well Charles just found one of them. I've been a fan of and correspondent with Meb Faber for years!
I like Andrew Smithers books Valuing Wall Street and Wall Street Revalued. His latest containing solutions to the constant bubble blowing is only fair.
Ed Easterling's work at Crestmont Research is outstanding.
If I were to subscribe to a newsletter you can't beat Jim Stack of InvestTech. Tremendous track record of compounding gains. Was too sanguine in 2007 though. (Most were). My belief is that most don't look enough at market history to realize what bear markets from overvalued conditions do to portfolios. Stack knows his numbers but doesn't like the timing game. He will get defensive though and was.
Hussman is a tremendous market historian. A good economist also. I suspect his personal bear market ends in a bit and he regains some of his lustre.
You are right. The alternatives to stocks are slim. In 2007-2009 I was hiding out in jumbo CDs from American Express Bank at close to 5.5%. That ship has sailed.
Good luck with your reading and investigations! Read both sides. A man has to decide for himself.

www.onwallstreet.com/news/investment_insights/fund-manager-profile-bob-zenouzi-delaware-dividend-income-fund-2689043-1.html?zkPrintable=truec
Total Return Approach to Dividend Stocks
by: Joseph Lisanti
Advisors face this problem every day: Fixed-income rates are low, but aging clients need to generate income. “People are looking for yield,” says Bob Zenouzi, lead manager of the Delaware Dividend Income Fund.
Despite the name of his fund, Zenouzi prefers to offer his investors total return these days. He believes that it is the best way to approach the mismatch between current yields and investors’ income needs.
Zenouzi contends that many traditional income bastions — including utilities, master limited partnerships, mortgage REITs and health care REITs — have become “bond surrogates” and are therefore too pricey in today’s market. “When you look at the highest quintile dividend yield, the P/Es of those companies are trading at a 20% premium to the S&P 500 P/E; and historically they traded at a 20% discount,” he says.
“We own some, but we’re just really underweight,” he explains. “So we’ve lowered the yield in our fund — which, frankly, hasn’t been too popular with many advisors and investors, but we think it’s the right thing to do.”
Instead of focusing on the juiciest yields, Zenouzi’s team buys issues that it believes are likely to increase dividend payments. “To me the risk isn’t so much in buying good equities with competitive dividend yields that can grow; the risk is chasing the highest yields,” Zenouzi says. He sees danger in overvalued, high-yielding equities as interest rates inevitably rise. “When they get to these expensive levels, they become much more correlated to the 10-year Treasury,” he explains.
The fund’s 30-day SEC yield was recently 1.92%, though the 12-month trailing yield was slightly higher at 2.25%. Competitors who stuck to higher-yielding stocks underperformed last year, Zenouzi says. His fund delivered a total return of 19.7% in 2013, vs. 16.48% for the moderate allocation category, according to Morningstar.
As is often the case, Morningstar compares Delaware Dividend Income in multiple categories. Against the Morningstar moderate target risk category, the fund does even better. Moderate target risk funds returned 14.31% last year on average, so Zenouzi’s portfolio outpaced them by more than five percentage points.
This year through March 31, DDIAX ranks 13th out of 920 funds in the moderate target risk category, according to Morningstar; over five years it ranks third among 666 funds in the category. Morningstar awards the load-waived version of the fund, available through advisors, an overall ranking of four stars out of five, observing that it delivers above-average returns but also carries above-average risk.
The research firm measures the fund’s beta at 0.65 vs. the Russell 1000 Value total return index, which Morningstar calls the “best fit” benchmark.
One reason for the lower volatility is that Delaware Dividend Income isn’t limited to common stocks. Although the fund may have up to 45% of assets in junk bonds, the entire bond portion of the portfolio was recently a little more than 18% of the fund, and fixed-income investments are concentrated in high-yield debt and convertible securities.
Zenouzi notes that these securities provide a little extra safety because they sit higher in a corporation’s capital structure than common stocks. The fund may also buy investment-grade bonds, but it doesn’t currently hold these issues because, Zenouzi says, they are more interest-rate sensitive.
REAL ESTATE HOLDINGS
Zenouzi, who helped create Delaware Dividend Income in 1996 and who has been lead manager since 2006, heads a team of 35 managers and analysts who work on the fund. He monitors the overall asset allocation and makes the final decision on it. Because he also serves as chief investment officer and lead manager for Delaware’s real estate securities and income solutions group, he is deeply involved in managing the realty sleeve of the portfolio, recently about 8.5% of holdings.
Currently, Zenouzi favors mall, apartment and shopping center REITs. But not all real estate can pass muster. One factor he considers is average lease length. “We want shorter-duration leases within the REIT,” he says, noting that a shorter lock-in of rents primes the properties better for economic growth. Recent REIT holdings included Simon Property Group, General Growth Properties and AvalonBay Communities.
The fund has underweighted financials, especially banks. “Given Dodd-Frank and Basel III and capital ratio rules, they are less levered and they’ll have less earnings growth going forward,” Zenouzi says. “We think that, over time, they’re going to act more like utilities.”
Although DDIAX can invest up to 30% of its assets in stocks and bonds outside the United States, the vast majority of its holdings are U.S.-based. Emerging market issues are almost invisible in the current asset lineup. Zenouzi explains that, about four years ago, the fund’s managers concluded that slowing growth in China would cause emerging market investments to fall out of favor. “I contend that the U.S. will continue to outperform the emerging markets for the next couple of years,” he says.
For a fund that values dividend growth, Delaware Dividend Income appears to have fairly rapid portfolio turnover at roughly 50% annually. But initial appearances can be deceptive. Most of the turnover is in the high-yield bond sleeve, Zenouzi says. In large-cap value equities, which constitute about 45% of assets, the managers have very low turnover of about 8% annually.
“They haven’t put a new name in the fund in probably a year and a half,” Zenouzi explains.
EQUITY APPROACH
In addition to real estate, the fund also favors energy, health care and communications services stocks. Among the fund’s recent top equity holdings are Halliburton (HAL), first bought in 2012, Merck (MRK), first purchased in 2009, and Verizon Communications (VZ), held since 2005.
The fund’s top 10 stock positions account for 14.5% of assets. The weighted average market cap of DDIAX’s holdings is $66.6 billion.
In evaluating the large-cap value stocks that make up the largest portion of Delaware Dividend Income’s equity holdings, Zenouzi’s team considers price-to-earnings, price-to-sales, price-to-cash-flow and price-to-book ratios. Those metrics are compared with both the sector the company is in and the universe of stocks available. “Valuation should always be the primary factor for investors, because that’s how you protect your downside,” Zenouzi says. “That’s your margin of safety.”
Current conditions are far from ideal for managing an income portfolio: The Fed is tapering asset purchases, yields remain low and unemployment is still stubbornly high.
“It is challenging,” admits Zenouzi, who contends that his team’s policy of steering clear of equities with the richest yields will continue to be the best course for now. He believes that the Fed’s tapering will create some “yield opportunities” down the road, but for now investors seeking higher yields will face headwinds.
Zenouzi worries that some older baby boomers may still believe that they will be able to sell their stocks, buy bonds and just clip their coupons. “You can’t do that anymore,” he says. “You can’t live on yield alone. You need to grow your capital or you will run out of money.”
Joseph Lisanti, a Financial Planning contributing writer in New York, is a former editor-in-chief of Standard & Poor’s weekly investment advisory newsletter, The Outlook.

I think this should be a come-to-Jesus moment for those who've taken the F-F model as the gospel truth. Fama and French admit that their original three-factor model was not motivated by theory. They chose value and size because they worked better than other characteristics in back-tests. Grounded in the efficient-market hypothesis, they came up with risk-based stories for these patterns. Small-cap stocks provided excess returns because they're more vulnerable to the business cycle. Value stocks did so because they were distressed.
...
Fama and French add to the puzzle by finding that the value premium can be explained away as a combination of profitability and investment intensity. An efficient-market theorist would argue that profitable firms and firms with low capital intensity must therefore be riskier in unique ways in order to have commanded return premiums.
Accordingly, Warren Buffett, who famously favors profitable firms with low capital requirements, must then have exploited the special kinds of risks these firms have. And someone who invested in firms with low profitability and huge ongoing investments must have earned lower returns because of such stocks' lower risks. This story defies common sense. I think Buffett's explanation for his success is better: Investors are not perfectly rational and tend to undervalue wonderful firms. By the gold standard of science--the ability to predict patterns in data yet unseen--Buffett's framework passes with flying colors, even if it was never published in a prestigious academic journal.

Boom goes the cman dynamite.

Part 2:
That put commodity investors in a strong position, and many rushed to take advantage. Investors had less than $1.8 billion in mutual funds and ETFs that focus on commodities at the end of 2003, but that amount had swelled to more than $182 billion at the peak in August 2011, according to Chicago-based investment-research firm Morningstar.
Now, the situation is different. China's economy is growing more slowly, and ramped-up production of many materials is helping to keep a lid on prices. While many commodity markets are rising, some are falling.
For example, coffee has shot up 94% this year through Thursday, due to a drought in top exporter Brazil, while a virus that has killed millions of pigs has pushed the price of lean-hog futures up 48%. But copper—widely used in appliances, homes and elsewhere—is down 8.2% due to concerns about Chinese growth, while lumber has lost 9.5%.
"When China was growing at 13%, it was almost a no-brainer because China consumes 40% of global commodities," says Shelley Goldberg, an independent commodity strategist who advises institutional clients on investing in sustainable resources. "Today, it's not such a simple story."
Yet there are signs that at least some ordinary investors still hope to ride a hot market.
Between August 2011 and the end of last year—a period when commodity prices were in a funk—investors pulled more than $23.3 billion out of commodity mutual funds and ETFs, according to Morningstar. After pulling out more money in January, investors put $400 million back into the funds in February and March, as commodity markets rebounded.
A Proliferation of Funds
Investors considering following suit have an often-bewildering array of funds to choose from, most of which have relatively short track records by which to judge performance.
The funds fall into two broad categories—those that invest in a wide variety of raw materials across the various commodity subsectors, such as energy, agriculture and precious metals, and those that focus more narrowly on a single sector or even a single material, such as gold, copper or corn.
Broad-based funds are the better choice for an investor who wants general commodity exposure and lacks expertise or conviction about what will happen to prices for a particular type of material.
The broad funds typically track an index of materials, though some follow their index more closely than others.
For example, the iPath Dow Jones-UBS Commodity Index Total Return exchange-traded note closely tracks the Dow Jones-UBS Commodity Index. The fund charges 0.75% in annual fees, or $75 for every $10,000 invested, according to Morningstar.
The largest commodity mutual fund by assets, the $14.1 billion Pimco CommodityRealReturn Strategy Fund, also follows the index to a great degree, but fund managers have some leeway to tweak exposure by, for example, increasing or decreasing holdings of a specific commodity relative to the index or buying futures contracts that won't come due until months later, if they think prices for a certain material are more likely to rise further down the road. The fund charges annual fees of 1.19%.
The funds also have different ways of handling a quirk of the commodities markets. When commodity contracts mature each month, fund managers typically buy the next month's contracts to replace them.
But if prices for the new contracts are higher—a phenomenon known as "contango"—the additional cost can significantly erode the fund's returns. Contango can occur when, for example, there is sufficient supply in the near-term but either a shortage of supply or a surge in demand looms.
Plain-vanilla commodity index funds often don't try to mitigate that risk, which also can work in an investor's favor if the new monthly contracts are less expensive, which is known as "backwardation."
Other funds, such as the PowerShares DB Commodity Index Tracking Fund ETF—the largest broad-based commodity ETF by assets, at $5.7 billion as of Thursday—pick monthly contracts that will come due months down the line in some cases, to limit the damage from contango or maximize the benefit of backwardation. The fund charges 0.85% in annual fees.
Commodity funds can carry other risks that might catch investors off-guard. Purchasing a commodity futures contract typically only requires that an investor or a fund put up a small percentage of the contract's face value, so funds have to decide what to do with the remainder of their assets.
The Pimco fund, for example, has less than a quarter of the fund's capital tied up in commodity contracts, and it tries to give returns a boost by investing most of the remainder in Treasury inflation-protected securities and other Treasurys.
Morningstar noted last August that the fund's declines for the year to that point were largely because bond prices fell as investors began to anticipate a reduction in the Federal Reserve's efforts to stimulate the economy by buying bonds. The fund is up 11% year to date.
Funds that focus on a single type of commodity tend to be smaller. One exception: popular funds backed by gold or other precious metals, which often have lower fees because the cost of actually storing the materials is relatively low.
For investors with strong views on the future prices of particular commodities, there is an array of funds available that track, for example, corn, natural gas or crude oil. But the funds can be risky and sometimes carry high fees.
Hard and Smart
Experts say there are smart ways to hold hard assets, including understanding what purpose they are meant to serve and finding low-cost ways to achieve that aim.
"When we're constructing a portfolio for high-net-worth clients, one of the objectives is to protect real spending and quality of life," says Jeffrey Heisler, investment strategist at TwinFocus Capital Partners, a Boston firm with about $2 billion under management.
"People are natural consumers of food and energy," he says. "Commodities hedge out and diversify and balance that risk we all naturally hold."
The firm's clients collectively held about $3.4 million in a broad basket of commodities through the PowerShares fund as of Thursday, and another $23.3 million in SPDR Gold Trust, an ETF backed by gold bullion. The SPDR fund is the largest retail commodity fund of any kind, with $32.9 billion in assets, and charges 0.40% in annual fees.
Some investors prefer a similar fund also backed by bullion, iShares Gold Trust, which charges 0.25% in annual fees. Individual shares also cost less, because a single share represents 1/100th of an ounce of gold, rather than 1/10th of an ounce for the SPDR fund. The iShares fund has $6.8 billion in assets.
Perhaps most important, investors need to have realistic expectations. Throughout history, commodities markets have gone through periods of boom and bust, and investors who were fortunate enough to hold commodities during the run-up last decade saw what a boom looks like.
But investors also risk a bet going bust. Researchers have found that spot prices for raw materials are flat over time, once inflation is accounted for. In other words, they offer no positive return in the long run.
"An ounce of gold bought a good men's suit or a toga 2,000 years ago, and it buys a good men's suit today as well," says William Bernstein, author of "The Investor's Manifesto" and a co-principal of portfolio manager Efficient Frontier Advisors, based in Eastford, Conn.
"The relative value hasn't changed
.
WSJ In-Depth

@bee: A managed payout fund could add to the discussion. Example:
Vanguard Managed Payout Fund (VPGDX)
Product summary/Fund facts:
"The Managed Payout Fund is intended to supplement an investor’s retirement income by paying a monthly distribution that is based on an annual distribution rate of 4%. The Managed Payout Fund invests in a number of Vanguard funds, providing exposure to a broad range of asset classes and investments.
The fund’s strategic objective is to try to make monthly payouts that, over time, keep pace with inflation. The fund seeks to balance its payout level with its potential for future capital growth. If the fund’s investment returns are low, the fund may distribute capital as part of its payout, which could lead to a decline in monthly payment amounts and in the value of fund shares over time."

@cman, yes I realized that right after I posted it upon re-reading your original comment. My apologies.
My experience(s) in this arena has undeniably been enhanced by dare I say computerization of research, data gathering and transaction convenience for sure. I have instant access to tools never before available as well as sometimes absurd levels of insight and information. What once required phone calls to traders/brokers, days of waiting for snail mail deliveries an so on can now be handled in a matter of seconds or minutes from any comfortable or uncomfortable outpost in the world. Life is good in that respect.
However, I will also say that it took a great deal of learning, practice, confidence and maybe most importantly investable wealth accumulation in order for me to take the steps toward individual management. I simply did not have the capital starting out that would have enabled me to build a portfolio of individual holdings at a reasonable cost. There is simply no getting around that. Where trading costs were once based on the number of shares traded one can now flip shares on a whim practically free. That's got to help the bottom line.
So I guess I did need mutual funds initially for diversification and to provide all the necessary background research on companies and other investment instruments. I don't feel quite the same level of need or level of reliance today. I don't kid myself by thinking that I've tamed all of the investment risks out there or that I'm even near the level of professionals who do this day in and day out but I do believe that I am much more aware of them and possibly even accepting of them than I was when I first began investing.

Note in the article's pie chart which asset allocation from conservative to aggressive had the best returns over time.
Regards,
Ted

Thanks for the article Ted.
Here's an approach I would like others to comment on if you would be so kind.
For simplicity, I propose using Retirement Dated Mutual Funds to help a retiree properly allocate their overall retirement distribution needs during 30 or more years of retirement. Retirement Dated Mutual Funds have a built in mechanism that, over time, allows them to follow an "allocation glide path" from aggressive growth to conservative allocation at a specific date in the future. This eliminates the need for an individual investor to "manage" their retirment portfolio. Allocation decision are built into the overall protfolio by virtue of fund selection. in addition cost as low to resonable dpending on the fund selected.
I propose that these Retirement Dated Funds be thought of as Distribution Dated Funds. The date would coincide with the start date of a 5 year distribution period during retirement. As each five years period end another Distribution Dated Fund would be gliding into position to help fund distributions for the next five years of retirement.
If a retiree were able to determine what periodic distributions they would need (adjusted for inflation and in addition to their retirement income pension, SSI, annuities) and (over each five year period of time in retirement) they could then work backwards and determine initial funding levels using historical performance data as a guide.
So, for example, if one were to retire in 2015 at age 65 their retirement distribution portfolio might look something like this:
Retirement (Distribution) Dated Funds
2015 - Will provide distributions from age 65-70
2020 - Will provide distributions from age 70-75
2025 - Will provide distributions from age 75-80
2030 - Will provide distributions from age 80-85
2035 - Will provide distributions from age 85-90
2040 - Will provide distributions from age 90-95

Note in the article's pie chart which asset allocation from conservative to aggressive had the best returns over time.

Do you seriously need a chart to realize that? :-)
The "over time" is a problem when one is dealing with probabilistic end of life estimations. The returns are a function of start and end points as much as what happens in between and can make or break a retirement.
In the middle of bull markets everyone in the media preaches getting aggressive and being there right until the end. In bear markets, everyone preaches capital protection and reducing volatility.
I think this is where managed funds with an eye on capital protection can help. Rather than just deciding percentage beta exposure with age, keeping the allocation fixed and increasing assets in downside protection strategy funds as one ages. Starting with just index funds in the beginning when you don't need a life vest or friction on returns from active management. Moving to all managed funds towards the end that have a good record of balancing performance with downside protection. Interpolate smoothly between them.
Someone ought to do a target dated fund with this type of strategy. It is not that difficult to do on your own either.

TMSFX's ER is 1.78 and has a short (inception 2011) long / short history. $53 M AUM.
"The investment seeks capital appreciation. The fund invests primarily (at least 80% of its net assets) in stocks of companies engaged in the health care sector using a long/short growth strategy in seeking to capture alpha, reduce volatility, and preserve capital in declining markets. "
Charted against PRHSX provides an interesting performance comparison over the last 16 months.
How would an investor use TMSFX to hedge PRHSX (or any other Health Care fund) from volatility or downside risk?

@Scout: Does it make sense based on yield and expense? I do live in California.
Fund Notes:
Expense Ratio: 0.57%
7-Day Yield:
As of 04/24/2014 0.01%
The fund invests principally in high-quality, California tax-exempt securities with maturities of 397 days or less.
----------------------
It makes no sense based on yield. The yield is 0.01%. Consider that zero yield. You get nothing. Doesn't matter that it's tax exempt: you're not being paid anything
If you want "a place to park money for liquidity", you also can't go with a bond fund, because even short term bonds do not give you the stated purpose.
The best bet for your stated purpose is online FDIC Insured banks that pay a decent yield. Ally Bank is one of the best choices for this. It currently pays 0.87% yield on a savings deposit account, no minimums, no fees. When you subtract out the California taxes you will pay on that 0.87% yield, you will be WAY ahead of anything else that I am aware of that gives you a "place to park money for liquidity". There are several other online FDIC insured banks that have yields from 0.85% to 0.95% at this time. You can find a list of them on bankrate.com and several other websites. Some others are American Express Bank, Barclay's, GE Capital, CIT, etc.
Why not just choose the highest yielding one, which I believe is about 0.95% at this time? That's an option, but some banks offer higher rates temporarily to attract money, then later lower the rates. Ally Bank has a long history of offering high rates and they don't do this as a short term teaser.
You can set up a "link" between your brokerage account and an online bank and transfer money back and forth without fees, very quickly and simply.
If anyone has found a better option for the stated purpose, I would like to know about it.