FYI: Copy & Paste 5/20/14: Kelly Kearsley: WSJ
Regards,
Ted
The couple had been investing and saving for years, accumulating $4 million.
However, they had been too busy with work and travel to manage their investments according to an organized strategy, and as a result had 18 different accounts that held 150 mutual-fund positions.
They planned to retire within three years, but they couldn't decipher whether their assets would support this next life stage.
"They needed us to look at their entire portfolio, analyze it and then figure out if it was appropriate for them." says Marilyn Plum, director of portfolio management for Ballou Plum Wealth Advisors, which manages $273 million for 180 clients in Lafayette, Calif.
Ms. Plum's analysis revealed that the couple's accounts included old IRAs and 401(k)s that hadn't been monitored for decades, as well many underperforming mutual funds.
Most of the accounts were allocated primarily to stocks and far too aggressive for clients who were now more concerned with preserving their assets. Additionally, the couple had both nontaxable and taxable accounts, which meant that Ms. Plum had to pay attention to potential capital-gains taxes as she consolidated those investments.
So she crafted a plan that turned their scattered assets into a strategic portfolio, spreading the capital gains over three years to minimize taxes. "We had to develop a battle plan for moving from point A to point B," Ms. Plum says.
The first priority was to get rid of the funds that were severely underperforming. The adviser jettisoned several funds that had been high-performers years ago, but now provided lackluster returns. Ms. Plum also sold funds that were too volatile for the couple's needs.
"Portfolio management isn't set it and forget it," she says.
Next, she focused on eliminating several small holdings that had little to no impact on the couple's portfolio. The positions accounted for less 2% of the couple's investments, with most just languishing inside old 401(k)s or IRAs. Eliminating these holdings made the portfolio easier to manage and freed up cash for Ms. Plum to invest in funds that were better aligned with the couple's investment goals.
Within the first year, Ms. Plum reduced the couple's accounts from 18 to five and eliminated more than half of their 150 mutual-fund holdings. Throughout the process, the adviser worked closely with the couple's certified public accountant, who had determined that the couple needed to keep their capital-gains income under $80,000 to avoid climbing into a higher tax bracket and creating other additional taxes.
To that end, Ms. Plum timed fund sales with the couple's tax picture in mind, knowing that she must divest more of the holdings in another year or two. In the meantime, Ms. Plum is letting the dividends and earnings from those funds go to cash so that it can then be reinvested into funds that fit better with the couple's portfolio.
She also sold bond funds with no gains, or with losses, to diversify the couple's fixed-income holdings. Then, she added municipal-bond ladders to their non-retirement accounts to lower their risk and add more tax-free income.
All told, the adviser's moves generated only $36,000 in capital gains in the first year. And the couple's revised portfolio allocation is now a more appropriate 65% stocks and 35% fixed income.
Ms. Plum's work isn't done, and she'll continue refining the couple's asset mix in the two years remaining until their planned retirement. But now, they at least have a portfolio with a strategy that matches their life goals.
"Sometimes people just need help looking at the big picture," she says.

Perhaps this is the difference between a fund selection approach vs a portfolio allocation approach. So, I will try to explain this a bit more in general detail because I think this is important for the correct use of the site tools.
First, I wasn't recommending HYD here which belongs to a relatively high volatility category. The fund itself just follows the category as an index fund. Particularly good for momentum players as the most liquid ETF in the category. As an index fund it follows the category unlike managed funds which might provide drawdown protection at the expense of upside like TSSAX for example in this category.
The premise of the calculations and ratings on this site favors the latter over the former to give better "numbers". But better risk adjusted numbers don't necessarily provide for a better total return at the end of an investment period. The longer the time period for investment, the greater the difference between the two where capital protection extracts its cost over the protection in bear markets in that category. This is why I prefer index funds over any highly rated funds here (as long as one is available) in long time horizons, with a glide slope to risk managed funds as the horizon gets shorter.
The point is that these numbers in the dashboard are good for comparing two funds that are otherwise similar in the same category but not to make absolute statements as to whether a fund should be used in a portfolio or not on its own which depends on the portfolio allocation strategy. It should never be used to decide between funds in two different categories ignoring the portfolio allocation strategy because one has a better risk group or return group ratings. It is a bit like treadwear numbers on a tire.
The case for the category of SHYD (and therefore this index in it) is in allocations where the volatility of HYD is too much to accommodate. Munis have been problematic in portfolios because the regular munis are priced for maximum tax benefits and so not great unless one can benefit fully from it at the highest tax brackets.
The high yield category has been an exception where the credit quality based returns lessen that tax-treatment spread. This is evident in things like HYD or TSSAX where the total returns were of interest even if one didn't get the full tax benefits.
The problem is that such HY munis have been too volatile for conservative portfolios and even some moderate portfolios. Same problem with HY corporate bonds as well.
The case for funds like RPHYX or STHBX is to tame that volatility by taking away the interest rate sensitivity especially given where we are in the rate cycle and some capital protection with active management. But the result is relatively anemic returns even if they come out good in risk-adjusted returns.
I see the category of S/T HY munis as bridging that gap and a good diversifier (not a replacement) for the short term bond buckets in conservative portfolios which typically have short term corporates and treasuries or active risk managed short term HY corporates whose total returns have been rather restrained.
Hence, the suggestion to take a look at this fund/category. It may or may not fit your portfolio allocation strategy, if you have one!
Hopefully, the long-winded explanation will encourage people to think a bit more about their portfolio allocation and fund selection relative to that than plugging it blindly into a dashboard and seeing what color pops up. :-)
Otherwise, it will be as bad as selecting based on M* ratings!

FREE
WEEKLY REPORT
16/05/2014
Here is the article from a free weekly newsletter I subscribe to. It is cut and paste from the email. A nice review of some things happening in the nuclear energy field if you may be interested in the Global X Uranium (URA | C-93) mentioned in Ted's post.Sorry about the length of the text.Lengthy (as in time) would also apply to some of the ideas being explored in the future of nuclear energy
A U M: $217M
Expense Ratio: 0.69 percent
The Future of Nuclear – SMRs?
Nuclear power is not an industry that experiences huge growth rates, and it is infinitely more difficult for investors to find a hidden gem in nuclear energy than it is in oil and gas. There just aren’t any mom and pop nuclear shops out there. Nevertheless, it is a global industry that does around $140 billion in annual business and thus it is important to get a status check on what is going on in the nuclear world from time to time.
A Renaissance Delayed
The “nuclear renaissance” was supposed to have kicked into high gear by now, as many predicted only a few short years ago. But the industry has hit a standstill in the western world, as a confluence of events conspired to kill off the renaissance before it got started.
First was the financial crisis, which depressed demand for electricity worldwide, and despite the economic recovery, power demand will not reach the trajectories that executives had previously anticipated. Then came the fracking revolution, which caused natural gas prices to plummet as a glut of new fuel came online. Utilities suddenly found it much cheaper to go with gas over nuclear power.
Meanwhile, the collapse of the cap-and-trade bill in 2009 in the U.S. Congress doomed carbon pricing for at least half a decade, perhaps longer. As a carbon-free fuel, the nuclear industry would have benefited enormously from restrictions or costs put on fossil fuels. Climate hawks are still trying to gain back the momentum they had in the months and years prior to 2009.
The nail in the coffin for the nuclear industry came on March 11, 2011 in the form of a massive tsunami. The meltdown of three of the six nuclear reactors at Fukushima Daiichi scared off any interest in nuclear power on the behalf of many governments across the globe.
A Nuclear Future
Still nuclear power has a lot going for it. It can provide truly massive baseload power. It has a tiny footprint in terms of land use with a power density of 338 megawatts per square meter. A Bloomberg article earlier this week noted that it would take 772 square miles of wind turbines to account for the equivalent amount of power coming out of just two reactors at Indian Point in Westchester County, New York.
Nuclear power will also not suffer from severe price fluctuations that natural gas power plants have to deal with. And over the long-term, which may be one of its biggest strengths, nuclear power does not produce greenhouse gas emissions. As more and more governments move to place limits on carbon pollution, nuclear will be there to pick up the slack.
But that doesn’t mean that utilities will simply build the massive gigawatt style nuclear plants of yore. Nuclear reactors of that size can cost over $8 billion a piece and take nearly a decade to complete. Utilities – and their shareholders and financiers – can’t and won’t wait that long to see a return. Moreover, demand for electricity in many countries is simply not growing that fast to justify such an outlay.
Scale Down to Scale Up
So, nuclear will need to be much more nimble.
That means new reactor designs, specifically smaller and cheaper ones. Small modular reactors (SMRs) offer an interesting model for 21st century nuclear power. They offer several advantages over conventional large reactors. First, they can be added incrementally in doses of 50 or 100 megawatts, which could match up well to electricity demand that is growing slowly.
SMRs can be theoretically manufactured as if on assembly line, instead of on an ad-hoc, case-by-case basis at its final site. This could significantly reduce costs on a per-megawatt basis. They would also require significantly less money upfront, reducing risk, and thus, the cost of capital.
SMRs also offer potential benefits in terms of safety and security. They can be constructed underground, reducing their vulnerability to terrorist attacks or extreme weather events. Finally, SMRs could be constructed in remote areas that don’t have connections to commercial power lines – offering off-grid, decentralized power.
That is the idea anyway. But there are very big obstacles standing in the way. First, many critics doubt the hype. Without a single SMR constructed to date, much of the supposed advantages remain theoretical. Second, SMRs face the same problems as conventional nuclear power – cheap natural gas and flat demand.
But the huge potential of SMRs has caught the attention of policymakers at the highest levels. Under the Obama administration, the Department of Energy decided to offer $452 million in grants to the private sector – on the condition that recipients offer up an equivalent amount of money – in an effort to get a viable SMR design licensed and up and running by 2022. The Nuclear Regulatory Commission (NRC), which has setup its regulations based on large light-water reactor designs and is notoriously resistant to change, is working with DOE and the nuclear industry to kick start the design licensing process.
And progress has been disappointing, despite strong support from the Obama administration. The first recipient of DOE grant money, mPower, a division of Babcock & Wilcox (NYSE: BWC), is not doing too well. B&W and DOE spent a combined $400 million on mPower, but B&W decided to shelve the plans and lay off workers. B&W sees a weak power market for the foreseeable future, and doesn’t believe SMRs justify the risk.
The second recipient of DOE grant money was NuScale Power, a small company based in Portland, OR, and a subsidiary of Fluor Corporation (NYSE: FLR). NuScale is working on a 45-megawatt reactor that would eliminate a lot of the complicated engineering that goes into a large conventional reactor. As electricity demand rises, up to 11 additional SMRs could be added to a single site, totaling 540 megawatts of nuclear capacity, according to the company’s vision. NuScale hopes to submit a design to the NRC in 2015 for approval by 2018, putting on track for full commercialization within a decade.
All of this is not to say that big nuclear power plants are dead. China is in the midst of a massive buildout of nuclear power, and has plans to reach 58 gigawatts of installed capacity by 2020, quadrupling the size of its current fleet. Then, in the following ten years, China plans on tripling again to 150 gigawatts.
Such monumental plans for nuclear power have some companies in a great position to profit. In particular, Westinghouse remains a huge player in the global nuclear market. Westinghouse, a division of Toshiba (TYO: 6502), is the owner of the only generation III+ reactor design that is certified by the NRC, one that is the favorite for many new Chinese projects. There are currently four AP1000’s under construction in China, as well as two additional units that received a green light from Chinese regulators in February. The AP1000 is also the design of choice for the first nuclear reactors under construction in the United States in three decades.
Nevertheless, in the U.S., SMRs are more likely to win out over the long-run. “The future as we look at it for new nuclear, a decade-plus out, would be on efficient modular reactor designs,” said Christopher Crane, CEO of Exelon Corporation. Exelon (NYSE: EXC) just recently acquired Pepco, a utility that serves the mid-Atlantic region of the eastern seaboard. The combined company will be the largest utility in the U.S. in terms of customers served. But Exelon is also the largest holder of nuclear power plants in the country, and as of 2010, it generated 93 percent of its electricity from nuclear. If the executive of the largest nuclear power owner in the U.S. is looking at SMRs, investors should take note.
Indeed, despite the hiccups with mPower, there is still strong bipartisan support for nuclear power in the halls of Congress. Just look at the political firestorm that resulted from the Solyndra debacle compared to the non-news that was B&W’s decision to scale back its SMR plans. The White House’s FY1 budget proposal included a 30 percent increase in DOE’s SMR program. Strong political support for any energy source is hard to come by, and for nuclear power in general, and SMRs in particular, political support will be key in the years to come.
But it is no guarantee they will succeed. Investors should keep their eyes on this space because nuclear power is at a crossroads.
Source;http://oilprice.com/Alternative-Energy/Nuclear-Power/The-Future-of-Nuclear-SMRs.html

Mutual Fund Comparison
Tickers (limit 5):
Compare: Returns Risk Fees Holdings
Symbol Fund Name 1 Wk 13 Wk YTD 1 Yr 3 Yr (Annualized) 5 Yr (Annualized) 10 Yr (Ann)
FPACX FPA Crescent -0.06% 2.45% 2.76% 11.52% 10.31% 13.46% 9.02%
PRWCX T P Cap App -0.41% 2.50% 4.05% 13.60% 12.10% 15.70% 9.42%
YACKX Yacktman -0.12% 4.31% 2.72% 10.18% 12.55% 18.41% 10.83%
BERIX Berwyn Inc -0.28% 2.55% 3.28% 11.00% 8.71% 11.94% 8.36%
DVY iShares:Sel Div ETF -1.02% 4.68% 4.27% 13.66% 14.65% 19.91% 7.25%
The chart above shows some funds that I have recently screened. I find this tool very useful because the annualized returns show built in income and gains distributions. What is frustrating to me is that there is an arbitrary limit of 5.
Does anyone have a site where the ticker entry is unlimited?
prinx

Good article. The next generation needs to understand that risk adjusted returns on labor are no longer sufficient to ensure financial freedom in the US except in very few niche verticals. They either need to find those verticals for a career or find a line of work early that will help them build up capital quickly (just saving on any job isn't enough) so they can leverage time and much more favorable return on capital to provide them the freedom to do what makes them happy for much of their adult life. Not sure, it is easy to make them understand this though.

The demand for Treasuries from outside primarily comes from central banks or sovereign funds holding dollar reserves. Much of this is in treasuries than actual dollar currency as people often assume. Assets at this level aren't looking for yield, just safety or preserving value over inflation in the best case. Holding them with (small) negative returns for this purpose is not uncommon. Since these bonds are often held to maturity, price fluctuations or marking to market is not a big issue for these buyers.
One can use the change in flows from this type of yield-insensitive demand to increase total returns as bond managers try to do. They are not buying Treasuries for the yield (unless we are talking about real returns in the 4%+ range).
This is important to know because the demand from funds exist only as long as there is a movement in prices and expectation of further price gains. Once, this flow induced movement stops, demand drops and people head for the exit.
It is a cyclic phenomena.
This discussion reminds me of the opposite euphoria at the beginning of the year when @Ted was making the case for the other side and I expect he will be doing so again sometime in the future. :-)
Rather than take positions on bonds and equities like baseball fans choosing their teams and dissing the others, being diversified and staying so through these cycles is the best bet regardless of sentiment. Or one can be an active momentum trader to exploit these cycles without being jingoistic on either.

I think it's a little early to buy this downdraft. If the other majors follow suit and pull back (say a ten percent decline in large caps) then small caps will probally double that at twenty percent or so. However, they will most likely lead in a rebound rally. The small/mid cap sleeve of my portfolio is down less than five percent from its high water mark with positive gains year-to-date as I write; and, my portfolio as a whole is down from its high water mark by just a little over one percent. I might buy a little IIVAX when I feel a bottom has been reached and in watching the technicals that I follow I don't feel we are there yet.
On the calendar ... May just arrived and we still have the hot summer to transverse before fall arrives when stocks usually stage a fall rally that usually continues through the winter months on and into May. So by my thinking and by the calendar, it's time for a break! Anyway, I am going to wait in my belief that better valuations might be had.
Old_Skeet

In theory, yes. Retail investors can do a lot of things that big funds cannot - be nimble, for example. I have been doing this in my play money portfolio so the following is from hands-on experience and consequent scar marks than any science or theory.
Hedges can help reduce market exposure without triggering tax consequences in non tax-deferred portfolios or face redemption constraints in mutual funds. Down markets can be exploited for gains.
But there are serious limitations.
Hedging more than $100k-$200k is not easy because of the size of lots involved in hedging whether it is options or short instruments. Wrong bets can hurt IF you are betting enough to make a difference on the up side or hedging enough to protect large amounts.
It requires much more active participation than one may expect to do. If you have a trading platform that allows you to program in conditional buy/sell orders more complex than stop limits, you can be a bit more hands off. Otherwise, the entry or exit points can happen anytime and you need to be monitoring them. It doesn't require you to trade daily necessarily, but might require you to monitor very frequently (if you have any significant positions).
There are no guarantees that any particular hedges or inverse bets will work. Whether you use fundamentals or technicals, there will always be false starts and positions that don't work. You are aiming for net gains.
Because of the volatility, there will be no opportunities most of the time unless you want to become a day trader. It requires patient waiting for the right entry points to occur. Most money is made in a period when the market in that asser class heads up or down without much volatility for a long enough period and you have the right bets in that direction (like the use of leveraged long funds last year).
When you have a position, you have to be OK with significant drawdowns in that position if you are effectively hedging a bigger position. The overall volatility can be lower from long/short positions but the volatility of each position can be high. Pulling the trigger early from loss aversion in each such position won't make you money nor will it hedge effectively.
This is one strategy that is best left to people that do this for a living. Many of those don't do well either. Requires a lot of research or data analysis and sound strategy.
Not recommended except for play money or to generate small alphas if you have the time and inclination. It is fun when it works. :-)

Howdy @heezsafe,
A blip I noted this past February; that I noted previous at FundAlarm, prior to MFO. The Goldman forecast was interesting (link near bottom of linked page).
>>>Jeez, did I write this??? .....who just day's ago claimed to be batting 100% on interest rate predictions, need to ask me that?
Ah, the problem with getting older and the brain function.....my political aspirations are finished.
However, I will say that I was confident about interest rate movements.
As to risk/reward and the big trump at this point of life at this house is capital preservation to let the monies live and compound another day forward.
Lastly, not directly related to any and all flavors of bonds; is that we have never been fussy about, from where the profits arrive.
Thanks for the reply.
Take care of you and yours,
Catch

@heezsafe
I'm glad to hear you suggest it (and congratulations on your good calls!) but I'll probably just sit tight for now. I want to hold on to my cash (which ain't much) in case something more dramatic happens in either the stock or bond market.
At least SUBFX hasn't lost much so far on a wrong bet, it's just not going up; since their managers say in the current environment they want to preserve capital and wait for better opportunities, I guess that's not bad. And anyway I look to my bond funds for safety, not excitement.

@hank, as long as we are overthinking these headlines what if the subject of going bust is the rally rather than the bond? :-)
I get that you are fearful of the current levels and valuations and like most people have an aversion to loss influencing your decisions. But you really cannot time the market with a finger in the wind.
Three good options: Have a diversified portfolio that also includes beaten down or not so lofty sectors at a level of beta exposure that you are comfortable with, rebalance and stay put, outsource the downside protection to active managers that have demonstrated that capability, or learn technical analysis in some depth to do meaningful momentum/trend allocation with mental or actual stop loss limits.
If you don't have shortfall risk of your capital in your time period then what you are saying regarding some risk-off decision makes sense as a plan for the future but not as a way to time the market.

Energy News
Russia/Ukraine,Turkey,Mexico
http://us2.campaign-archive2.com/?u=ed58b19f2b88e4a743b950765&id=46c686b5b9&e=41e04eb3d1
Can Mexico avoid the 'nationalist pull" of its past?
"For foreign oil giants such as Chevron Corp. (CVX), Exxon Mobil Corp. (XOM) and Royal Dutch Shell Plc (RDSA), it means they’ll get access to untapped oil reserves that Pemex says could total 113 billion barrels, including 26.6 billion in the deep waters of the Gulf of Mexico. At current prices, the reserves are worth $11 trillion. The government says foreign investment together with the revamping of Pemex’s aging infrastructure will drive up production to 4 million barrels a day by 2025 from 2.47 million at the end of March."
http://www.bloomberg.com/news/2014-05-13/mexico-oil-opening-may-release-gusher-for-foreigners.html
"The commercial side of solar has lagged in the past couple of years. The residential solar market grew 60% between 2012 and 2013, whereas the non-residential sector grew 4% in the same period."
http://blogs.marketwatch.com/energy-ticker/2014/05/13/obama-initiative-to-boost-commercial-solar/?mod=WSJBlog
More Keystone....
http://www.bloomberg.com/news/2014-05-13/transcanada-ceo-says-keystone-changing-u-s-canada-ties.html
Another "under study"!
U.S. Studies Lifting Ban on Crude Oil Exports
"According to the Energy Information Administration, total U.S. crude oil production was up 15% last year at 7.4 million barrels per day. Domestic output is forecasted to hit 8.5 million bbl/d in 2014. The Paris-based International Energy Agency believes the U.S. will rank as the world's largest oil producer by 2020."
http://www.foxbusiness.com/industries/2014/05/13/us-studies-lifting-ban-on-crude-oil-exports/

Roger Ibbotson wrote an annual investing classic, that all the pros would read. Per M*, below:
"He has written numerous books and articles including Stocks, Bonds, Bills, and Inflation with Rex Sinquefield (updated annually) which serves as a standard reference for information on capital market returns."

Same old indexology propaganda with flawed metrics. Amusing in this case that the article itself points out the criticisms of the metric as if the "fairness" by doing so gives it validity to make the usual indexology argument. The metric including the M* investor returns are fundamentally flawed as I have pointed out several times before
mutualfundobserver.com/discuss/discussion/comment/38066/#Comment_38066
They have no information on why funds flowed in or out and just use net flows/assets for computation. Garbage in, garbage out. That sets up the kind of false result exemplified in the above linked post.
It is more interesting to look at why this kind of evangelization persists. After all, we know anecdotally people do all kinds of dumb things, right?
As an analogy, we also know that some people "sin" according to the tenets of any religion. But that is quite different from proclaiming everybody is a sinner (or most are).
These things persist for precisely the same reason "sin" and "repentence" is so necessary for organized religions (as opposed to spiritualism or personal faith). It is the means of influence over and control of the masses. Organized religion preys on the fears and insecurities of the average person by defining "sin" and its "consequences".
The idea is to make people feel bad/insecure about themselves and then offer a path of "repentance" that will save them if they follow the religion. This is a very powerful mind control tool. In addition, by casting the society at large as sinners, it makes people feel good about themselves. After all, they are not as bad as the masses, right?
Indexology uses the same trick. Convince people that they are "sinning" in their investing, make them feel they cannot win this way, point to the other "sinners", imply that most people are sinners and perhaps they are too and then offer up the indexing as the repentence.
You can easily spot indexologists as easily as you can spot Jehovah's witnesses. The message always has the "people are dumb in their investing, if you think you are better, perhaps you are just overconfident or ignorant, here is how I found my salvation" and this is repeated over and over again with liberal use of logical fallacies to make the same point.
Index funds have all kinds of great uses and can be used wisely as part of a portfolio. Just as active funds can be. Trading by emotion is bad but this doesn't mean all trading is bad or that all trading is necessarily via emotion (see the sinner imperative and false logic above). Without trading, we would have no price discovery and no markets. Traders make a lot of money over dumb investors. But the latter include indexologists too!
Smart investors are those that reject these forms of religious control, get to know themselves (unfortunately the Dunning-Kruger effect might be a problem here but that seems to be more of a problem for the Indexology witnesses than for an average investor who is more insecure than confident), get to critically analyze and think about information, and leverage their specific advantages (analytical ability or available capital or risk tolerance or lack of liquidity constraints or whatever) to maximize the returns for themselves.
Dumb investors are those that fall for the religious rhetoric. :-)

There is no logical argument here, there are only assertions.
"These things persist for precisely the same reason that 'sin' and 'repentance' is so necessary for organized religions (as opposed to spiritualism or personal faith)." That is an assertion, not a logical argument. No empirical evidence is suggested. You put scare quotes around sin and repentance so what exactly you mean by them here is unknown. You continue, "It is the means of influence over and control of the masses." That is another assertion, not a logical argument. "Organized religion preys on the fears and insecurities of the average person by defining 'sin' and its 'consequences'. That is another assertion. It is not a logical argument. Its empirical meaning is uncertain given that there are many organized religions but no one "Organized religion", and if you mean all organized religions are one in this again the scare quotes around sin and consequences make it unclear what you are talking about. Again no attempt is made to define anything.
"The idea is to make people feel bad/insecure about themselves and then off a path of 'repentance' that will save them if they follow the religion." Another assertion, not a logical argument. No attempt at any empirical proof. Scare quotes around repentance making it unclear what is meant by that. No attempt to define it. "This is a very powerful mind control tool." A stronger form of the previous assertion. It's not a logical argument, no empirical proof given or suggested beyond your assertion. "In addition, by casting the society at large as sinners, it makes people feel good about themselves." Another assertion. Not a logical argument, no empirical evidence given. "After all, they are not as bad as the masses, right?" I don't know, are they?
Lest I be accused of taking out of context:

Now who am I to object to a good anti-clerical rant like this (or is it an anti-religious rant in general which you try to weasel out of by way of the occasional disingenuous qualification)?

Obviously, someone whose use of logic is limited to asking the equivalent of "are you trying to weasel out of the charge of beating your wife?" :-)
It is called begging the question.

However, the above leaves me confused:
In the second sentence you say, "This is a very powerful mind control tool." The first sentence says, "The idea is to make people feel bad/insecure about themselves..." The third sentence says, "...it makes people feel good about themselves." I'm wondering, is it a good mind control tool because it makes people feel bad/insecure about themselves or is it a good mind control tool because it accomplishes the opposite by making people feel good about themselves?

Since the subject of those statements refer to different aspects of the control, I can see how a superficial reading can be confusing. Perhaps an analogy to the beauty products industry which uses the same mind control can avoid those automatic comprehension blockers to realize what was actually said than what selective quoting can obscure.
Exploiting your insecurities by putting up unrealistic beauty image

examples to make you feel bad about yourself is the first step in this mind control. The offering of a solution that is guaranteed to improve your image significantly and so makes you feel better about yourself is the next step. Keeping you hooked on using it by reinforcing that you are better off than most in your situation now (obviously not those earlier examples and hiding that you are doing the same to everyone else relatively) and so making you feel better as long as you are using it is what sustains it.

It seems that no matter what it does it manages to be a good mind control tool. On second thought, perhaps this is a good analogy on the misuse of logic by index fanatics and their ilk.

Putting up a straw argument to knock down and begging the question are the misuse of logic in evidence here.

FYI, this comment is provided by someone who is not a member of any organized religion. I do, however, see possible alternate explanations for the idea that all men are sinners to the one given by cman. The attempt at an accurate description of reality comes to mind.

Whether you are a member or not is irrelevant to the soundness of an argument unless you routinely use that to discredit opposing arguments in which case I understand why you prefer to state it explicitly. However, claiming to have alternatives, suggesting that such alternatives are the reality without actually stating the alternative explanation can be construed as a "weaseling out" argument. :-)

This is tedious for me more than anyone else who goes through it. There was no question, only assertions, so there were no questions for me to beg. Changing the assertions to speculative beauty products does, indeed, change nothing, I agree about that. I'm pointing out that these are all assertions, not logical nor empirical arguments. I don't consider that a Straw Man. I never even hinted that my not being a member of any organized religion was any proof of the validity of what I was saying, the idea of mentioning it was to show that this was no special pleading on my part. Finally, the doctrine of Original Sin is the orthodox opinion of Christianity (I didn't say it was the universal opinion), it must be held by a billion people or so, and I can hardly believe that anyone would deny that there are alternative explanations as to why these things (sin and repentance) are said to exist.

RGHVX

Don't know anything about this fund other than the current snapshot I can see on M*.
From performance, it seems to work like a competent low volatility mid cap value fund - what XMLV should be but isn't. That seems to be consistent with their stated objective. They have delivered on that in their brief existence as a retail fund, so that is a good thing. How they might deal with a 2001 or a 2008/9 as a retail fund is unknown, of course.
I have no reason to believe that they will not deliver on that objective at the current low asset base where it is easier and cheaper to hedge. Will that strategy scale up if and when their asset base grows? I have no information to say one way or another.
Looking at the last snapshot portfolio, they are extremely good at stock picking or extremely good at end of quarter window dressing or both. :-)
I would consider a fund like this in the portfolio allocation for midcaps in a managed fund bucket to fit a volatility profile rather than to fill an alternative strategy bucket. For me, the latter funds need to be somewhat uncorrelated with the relevant index in some noticeable ways than just managing volatility or providing capital/downside protection.

Same old indexology propaganda with flawed metrics. Amusing in this case that the article itself points out the criticisms of the metric as if the "fairness" by doing so gives it validity to make the usual indexology argument. The metric including the M* investor returns are fundamentally flawed as I have pointed out several times before
mutualfundobserver.com/discuss/discussion/comment/38066/#Comment_38066
They have no information on why funds flowed in or out and just use net flows/assets for computation. Garbage in, garbage out. That sets up the kind of false result exemplified in the above linked post.
It is more interesting to look at why this kind of evangelization persists. After all, we know anecdotally people do all kinds of dumb things, right?
As an analogy, we also know that some people "sin" according to the tenets of any religion. But that is quite different from proclaiming everybody is a sinner (or most are).
These things persist for precisely the same reason "sin" and "repentence" is so necessary for organized religions (as opposed to spiritualism or personal faith). It is the means of influence over and control of the masses. Organized religion preys on the fears and insecurities of the average person by defining "sin" and its "consequences".
The idea is to make people feel bad/insecure about themselves and then offer a path of "repentance" that will save them if they follow the religion. This is a very powerful mind control tool. In addition, by casting the society at large as sinners, it makes people feel good about themselves. After all, they are not as bad as the masses, right?
Indexology uses the same trick. Convince people that they are "sinning" in their investing, make them feel they cannot win this way, point to the other "sinners", imply that most people are sinners and perhaps they are too and then offer up the indexing as the repentence.
You can easily spot indexologists as easily as you can spot Jehovah's witnesses. The message always has the "people are dumb in their investing, if you think you are better, perhaps you are just overconfident or ignorant, here is how I found my salvation" and this is repeated over and over again with liberal use of logical fallacies to make the same point.
Index funds have all kinds of great uses and can be used wisely as part of a portfolio. Just as active funds can be. Trading by emotion is bad but this doesn't mean all trading is bad or that all trading is necessarily via emotion (see the sinner imperative and false logic above). Without trading, we would have no price discovery and no markets. Traders make a lot of money over dumb investors. But the latter include indexologists too!
Smart investors are those that reject these forms of religious control, get to know themselves (unfortunately the Dunning-Kruger effect might be a problem here but that seems to be more of a problem for the Indexology witnesses than for an average investor who is more insecure than confident), get to critically analyze and think about information, and leverage their specific advantages (analytical ability or available capital or risk tolerance or lack of liquidity constraints or whatever) to maximize the returns for themselves.
Dumb investors are those that fall for the religious rhetoric. :-)

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.
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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?