Very important. I guess most should hold off buying till end of year and after capital gains distributions.

Dear friends,
The nice folks at FPA just announced a significant evolution in their five-star F P A Paramount (FPRAX). Effective September 1, it will become a global value fund. Currently it holds 75% domestic stock (mostly midcaps) and 10% cash. Longtime co-managers Eric Ende and Steven Geist will be removed from the management team. Greg Herr and Pierre Py, who became Paramount co-managers in 2011, become the two new lead managers.
Why? FP A's press release doesn't say, but two possibilities stand out.
First. F P A Paramount and F P A Perennial (FPPFX) are functionally indistinguishable. Same lead managers, for about the same amount of time. Comparable expenses, negligible turnover, domestic mid-cap focus. If you chart their performance over the past ten years, the lines are identical. And neither has drawn substantial assets: about $300 million each after 30+ years.
The apparent difference in the funds comes from Morningstar's decision to category Paramount as "world stock," despite the fact that its international exposure is minimal. The different benchmark gives Paramount an apparent edge and a higher star rating.
Second, F P A doesn't have a dedicated global fund but does have the in-house talent to produce one. By creating a clear distinction between its funds and creating a fund whose mission is easier to explain to investors, That nicely complements F P A's recent decision to remove all of their sales loads, which made their funds accessible to more investors.
Here's the red flag, with F P A itself raises: they're going to have to substantially refashion Paramount's portfolio. First, F P A's other funds currently have far higher cash levels (40-60% at last report, as opposed to 10% in Paramount). Second, even if the managers liked current prices, a substantial fraction of the 74% held in domestic stocks would be sold to create a global profile. As a result, investors are almost certain to see high realized capital gains (generally long-term, some quite possibly substantial) during the transition.
For what interest it holds,
David

Sorry Mona :-) I was being sarcastic and people are used to it. I have a lot of losses on the books. This is a way for me to book some against to offset against those losses so I don't have to carry them over for the tax year.
I've been selling funds where I have had substantial gains and not particularly enamored with, while in the case of Bridgeway I will be buying them back.

since I don't have significant gains to harvest

VintageFreak,
Please help me out with this terminology as I do not understand it. I thought the idea was to harvest a loss, not a gain.
Mona

Well, Barry's buying EMs for his clients:
"Barry Ritholtz, CEO of online quantitative research firm Fusion IQ and author of the widely read “The Big Picture" blog, recently trimmed back his clients’ exposure to U.S. equities and used the gains to buy positions in unloved markets: Europe and emerging economies."
The chart is from Barron's, and here's a note he added to the link on his site:
"Source: Barron’s. I am long emerging markets so I look for items like this. None of these issues are unknowns, and should therefore already be reflected in price."

I got the very first question wrong. I figured if the "investment" is paying INTEREST (not cap. gains) then the interest might very well be a FIXED percentage, thus $1,100.00 over 2 years at 5%. So, give me an 80%. FWIW. :)

I have been with Bridgeway through thick and thin. I put in sell orders for BRLGX, BRAGX, BRSGX and BRSVX. I'm keeping my BRBPX since I don't have significant gains to harvest. I also own BRLVX which is now institutional version of BWLIX. I'm contemplating selling it as well while i will not be able to get back in - will have to buy BWLIX.
So I plan to wait a while and start DCAing back in. Maybe I'll time this right. When vs What :-)
Good Luck to Me.

I am not sure whether GBMFX really reflects GMO projections in action, see in this respect the paper http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1701950 which concludes that "the asset composition of BF does not reflect the 7 year asset class predicted returns on the GMO web page" and also that "the gains from strategic asset allocation as exhibited by GMO are substantial, but they are not consistent" and "GMO does not use its 7 year asset class return predictions to guide the asset allocation of its Benchmark Free Asset Allocation Fund III."
Also, I believe that GBMFX history as an open mutual fund is very short. If I understand it correctly, for quite a long time it was kind of internal fund in GMO, which great flexibility and absolute tax inefficiency. You can understand it by comparing its NAV price at Yahoo, which practically did not change from 2003 to 2008, and the M* chart which shows that it gained a lot during the same time. These charts strongly disagree because of great drops in NAV in the end of each year due to the distributions. It seems to be very different now, it is rather tax efficient, its NAV slowly grows since 2009, but its overall performance is much less exciting than it was in its early years. The story may be similar to what happens when the hedge funds become regular funds, but continue using the history of their prior returns. I confess that my study of this fund was incomplete, so you may try to research it on your own.

Hi Guys,
I really do appreciate your fine contributions that significantly enhanced the practical usefulness of my original posting. Truly independent, diverse opinions enlarge on the subject’s scope and make for better decisions, especially when presented in an honest, friendly manner. You guys did that.
Let me reiterate my respect for Jeremy Grantham and his fine organization. I definitely do not “dismiss their prognostications lightly”. That is the precise reason why I did my own meta-forecast (long-term, broadly overarching by design).
The marketplace is largely populated by smart folks whose informed actions neutralize each other with their fierce competition. Grantham and company are the elite among this smart cohort. I have had the good fortune of listening to three lectures given by Grantham, and exercised the opportunity to question him on one of those occasions. He is indeed an honest, dedicated, and ultra-smart market advisor.
But smart people do not always make smart choices or prescient decisions. Gary Belsky and Tom Gilovich’s book “Why Smart People Make Big Money Mistakes” partly provides an answer. Given the same data sets, we often interpret them differently, suffer behavioral biases, and choose opposite sides of the transaction. That’s why markets and capitalism works.
We’re all familiar with faulty assessments that lead to bad decisions. It has happened throughout history, even among the elitist segments of our population. At one point, China ruled the world with its inventions and outsized naval fleets until a single ruler disastrously decided to burn all his ocean-going ships. He isolated his country to foreigners and trade. On that one bad decision, China dropped from its number One slot as a world economic leader to almost a non-entity for centuries.
In the economics community John Maynard Keynes made and lost fortunes several times with his beauty contest approach to investing, He also said (1927) “We will not have anymore crashes in our time”. Remember Yale economist Irving Fisher’s infamous 1929 claim that “Stock prices have reached what looks like a permanently high plateau” immediately before the crash.
Scientists are also not immune to the bad decision disease. Isaac Newton lost a fortune in the South Sea bubble. By the way, he also incorrectly formulated his optics theory based on some data that later investigators discovered were fraudulently fudged to match his model. People are not perfect.
Apparently my initial posting was either not clear in some areas, or was misunderstood. Either way, it’s my fault so allow me to clarify.
Inflation was not a part of either my analysis or the GMO projections. We both completed our calculations based on real returns only, specifically excluding the need to forecast inflation dynamics. Inflation is a daunting challenge, especially highly uncertain worldwide. So we both chose to exclude the inflation dimensional complexity from our assessments. Both our analysis will fail if the world experiences some wild inflation excursions in the upcoming 7-year period.
Keep in mind that the Bogle model uses earnings growth rate on an annual basis in its formulation. There is a very tight correlation over many decades between corporate composite earnings growth rate and GDP growth rate.
As I mentioned earlier, the two dominant factors to GDP growth are population expansion and productivity gains. Given the worldwide clamor to immigrate to the US, our population will continue to expand. Given our national commitment to fundamental research and product development, I can not imagine our productivity ever going into negative territory for an extended period.
Therefore, GDP should grow over a 7 year stretch, although minor downward excursions are plausible. This means that earnings growth rate, when integrated over that same period, should also be a positive contributor.
I concur that the market is not immune to recessions. Bad stuff happens, and is likely to happen within the 7-year timeframe of the forecast. But the same history cited by MikeM also demonstrates our recovery resourcefulness. Indeed 1974-75, 2001-03, and 2008-9 were wealth eroding periods. We will surely experience similar cycles again; that’s built into the nature of a capitalistic system.
But in each instance, we recovered relatively quickly. Our marketplace has proven its resiliency. It will do so in the future. I believe that a continual 7-year downward cycle of productivity loss, or its equivalent negative corporate earnings growth rate, is highly improbable.
So I choose not to bet against our historical performance. Betting against the odds may be exciting and rewarding occasionally, but is hardly ever profitable over the long haul.
MFO provides a terrific forum to exchange divergent viewpoints, We should all benefit from these discussions if conducted in a polite, honest way. I think we did that on this thread.
Please do not extrapolate my present disagreement with the GMO US equity forecast into the future. This may prove to be a one-shot event. Note that I did not take issue with their foreign market projections. Overall, from my limited perspective, GMO is a reliable and trustworthy operation.
In this singular instance, I take exception to the GMO forecasts. I am always suspicious of anyone’s forecast, mine as well as the GMO version. The most probable returns outcome is likely to find an equilibrium between both of our estimates. Predicting is a hazardous business.
Once again, thank you all for your outstanding commentary.
Best Wishes.

Reply to @TSP_Transfer
The one thing I always look at with a fixed income CEF is how much of the distribution is return of capital.
In the case of FAM, ~13.6% of their last 3 monthly distributions consisted of return of capital and was higher before that.
UTF is even worse with their last 2 distributions being ~64.2% return of capital and increasing over time with earnings paid out dropping over the same.
Not always a deal breaker but definitely a red flag in my book.

Hi Guys,
Recently, MFO member Ted referenced a 7-year forecast generated by the honorable GMO investment advisory firm. Here is the Link to the GMO graphic that captured my attention:
http://www.ritholtz.com/blog/2013/08/gmo-7-year-asset-class-real-return-forecasts/print/
Thank you Ted.
The bar chart certainly should focus your attention too. Just look at the disparity for the negative returns for both the US Large and Small Cap components, especially when contrasted against the more normative predictions for the Emerging Market sector. If you trust this forecast, you will surely consider a major asset allocation adjustment.
However, for the moment, please keep your powder dry. How accurate and reliable is the GMO forecast? That’s a particularly relevant question now given the popular excitement that usually accompanies Jeremy Grantham’s inspired releases. He is a genuinely respected expert in this arena. Here is an internal Link to a post that I contributed earlier on this matter that focuses on scoring market prognosticators:
http://www.mutualfundobserver.com/discussions-3/#/discussion/7332/time-to-look-again-at-emerging-markets-equity
The current July 2013 GMO report takes a dramatic negative position with regard to projected US equity returns. GMO forecasts that US Large Caps and Small Caps will deliver a -2.1 % and -3.5 % annual real return. respectively, in this upcoming 7-year cycle. The firm also projects a very positive outlook for the Emerging Market group.
I honestly do not know anything about the GMO methodology. Their criteria are a black box to me. I can not make any judgments about their Emerging Markets forecast since I don’t understand the mechanisms that govern its behavior or evaluations. In contrast, I do have some resources and perceptions with regard to the US marketplace. So I’ll limit my submittal to an assessment of GMO’s predictions in that area alone.
According to the CXO Advisory Group Guru scorecard, which was maintained and faithfully executed for a long time, Jeremy Grantham was correct 47.5 % of the time in 37 scored prediction instances. Not all that bad, but not great either. This is really only half the story since we don’t know the magnitudes of the gains or losses associated with each decision. However, it is a cautionary note; Grantham, is not omniscient.
Given these observations, I was motivated to do a few simple calculations. I’m sure the details of that analysis will bore you, so I’ll immediately summarize my basic conclusion: GMO is very likely wrong with respect to its US forecasts. I say “very likely” because nobody can forecast the future with precision. It’s uncertain and is best characterized in terms of probability odds.
Here’s why I disagree with the GMO projection.
Basically, GMO ignores Base-Rate considerations in their projections. The S&P 500 (Large Cap proxy) has produced 6.5 % annual real returns over its entire history. If you did no analysis whatsoever, a respectable zeroth order estimate for the upcoming 7-year stretch would be the same 6.5 % annual Base-Rate.
The GMO projection is a heroic departure from that baseline standard. Is it correct? I’ll not be dogmatic on this matter; I’ll allow my calculations to guide my likelihood decision.
My analysis exactly follows the modeling and procedures outlined in John Bogle’s “Common Sense on Mutual Funds” book. The methodology is reported in Chapter 2 of that classic tome. The analytical procedure accepts the Occam’s Razor simplicity analysis approach.
Annual Real Return is equal to Dividend Rate plus Earnings Growth Rate plus any annual speculative change in the Price-to Earnings (P/E) rate ratio. By focusing on Real Return, inflation is nicely removed from the equation.
I examined a bunch of scenarios using the WSJ’s reported current dividend rate (2.05 %) and an average of the past and forecasted P/E ratios (approximately 15). That P/E ratio is approximately in neutral territory; many experts believe that above that tipping point, markets are overvalued with downward pressures suggestive of a regression-to-the-mean likelihood, and below that threshold, the reverse is probable.
If investors have neutral feelings over market prospects ( P/E ratio remains near its current level), then over the 7-year upcoming period, earnings growth must be a -4.1 % annually to satisfy the GMO prediction. That is highly unlikely since historically earnings growth rate has been more like in the plus 3 % range. That 3 % target results from a roughly 1 % demographics growth and a 2 % productivity enhancement.
An alternate way to test the plausibility of the GMO forecast is to calculate what the change in the speculative component (the P/E ratio element) must be to satisfy the GMO real returns prediction. That balance is easily done again using the Bogle formulation.
If historically conservative earnings growth rates of 2 % and 1 % are introduced into the equation, a P/E ratio change range of -6.1 % and -5.1 % annually is required. That too is a highly unlikely outcome. It demands a consistently pessimistic cohort of market participants to make the GMO prediction work.
If the GMO forecasts prove to be in the ballpark, the accompanying P/E ratios would need to be in the 10 range. Unless attitudes and perspectives dramatically change, the US investors would never allow that to happen, at least for very long.
Based on the simple Bogle model and the historic Base-Rate market returns, I reject the GMO 7-year US equity forecasts. The probabilities of their forecast ever becoming a reality is remote. In this instance, commenting only on the US equity segment of their forecasts, I believe that GMO has missed the mark by a huge margin.
Making a few numbers and resorting to Base-Rate data are always useful tools when doing a sanity check. In this instance, the overly aggressive negative predictions for the US equity markets are exposed as very low probability events.
Given these poor likelihood odds, I’ll not act on the GMO US equity estimates. I’ll not abandon my US equity portfolio holdings, at least not based on the uninspired GMO forecasts that I consider flawed.
Regardless of my negative assessment of the current GMO forecast, I still consider that outfit a respected market analytical powerhouse. They do good work. In general, when GMO speaks we should always listen, but not always immediately accept their judgments. A little independent analysis helps to challenge outrageous,outlier predictions.
Please share your opinions on this crucial portfolio matter.
Best Regards.

http://fpafunds.com/docs/media/2013-07-31-vii-with-db-and-rr-with-disclosures-v2.pdf?sfvrsn=2

FPA Capital’s Robert Rodriguez and Dennis Bryan describe how the market’s “gaming mentality” can create opportunity, what inexpensive sectors have not piqued their interest, how they play technology without having to pick product winners and losers, and why the see unrecognized value in DeVry, Rowan, Foot Locker and Western Digital.

Two year high for 10 year Teasury (Seeking Alpha)
10-year Treasury yield wants 3% • 1:24 PM
It's thin trading conditions, but the 10-year Treasury yield jumps 9 bps all of a sudden to 2.86%, touching a new 2-plus-year high. This despite weaker-than-expected consumer and housing data this morning.
TLT -0.8%, TBT +1.7%.
The move is taking a toll on stocks, where the S&P (SPY -0.4%) has slipped more than half a percent off the session high.
The mortgage REITs (REM -1.7%), (MORT -1.5%), (MORL -3.5%) quickly react to the downside. Leading are: Armour (ARR -2.9%), CYS (CYS -4.2%), Javelin (JMI -3.5%), Hatteras (HTS -2.3%), (MFA -2.6%), Annaly (NLY -1.9%), American Capital (AGNC -1.8%), Dynex (DX -1.4%).

Buffett Acolyte Zhao Returns to China Stocks

Zhao Danyang, the Chinese investor who won a charity lunch with billionaire Warren Buffett in 2008, led his hedge funds to post returns three times more than their Asian peers this year by shifting assets back to Chinese stocks.
Zhao’s Hong Kong-based Pureheart Capital Asia Ltd. has more than 80 percent of its $217 million in Chinese stocks traded in Hong Kong, Singapore, the U.S. and at home from 50 percent at the start of 2013, said Jerrie Huang, its business development manager. The $162 million Pure Heart Value Investment Fund returned 24 percent this year through July, Huang said. The Eurekahedge Asian Hedge Fund Index rose 8 percent in the first seven months.
Pureheart is returning to Chinese stocks after six years of corrections cut their valuation close to historical lows, Huang said. It decided in January 2008 to liquidate all five funds that specialized in yuan shares, with combined assets of about $200 million, because it could no longer find any attractive investment opportunities, it said in statements then.
“There is no doubt that the China stock market is still in a bear market,” Pureheart said in a July newsletter to investors, adding it marks a “good time for optimists” like itself. “The falling share prices will provide a very good opportunity for us to buy the carefully selected shares at a bargain.”

I did hold off on selling certain international funds I wanted to harvest gains from. Keeping a close eye. As I have been "fixing" my portfolio, I have paid less attention to my international exposure. I have some work to do.

I have looked at CEFs from time to time but they are complex and many use leverage to juice their returns or return your own capital to you disguised as a dividend. I recommend researching CEFs at M* before you invest.

http://news.morningstar.com/articlenet/article.aspx?id=607835
* Vanguard Explorer Gains a 7th Subadvisor
* Departing T. Rowe Price New Era Manager to Remain With Firm After All
* Edward Jones to Launch Affiliated Mutual Fund
* FPA Perennial Gains Comanager
* MFS Drafts Low-Volatility Fund
* BlackRock to Rename Dividend Fund
* Portfolio Manager Shifts on Goldman International Funds
* Nuveen to Liquidate 2 Small Tradewinds Funds
* Manning & Napier Readies Launch of Emerging Fund

http://www.sec.gov/Archives/edgar/data/1444822/000119312513336644/d581730d497.htm
497 1 d581730d497.htm AQR MULTI-STRATEGY ALTERNATIVE FUND
AQR FUNDS
Supplement dated August 15, 2013 (“Supplement”)
to the Class I and N Prospectus, dated May 1, 2013 (“Prospectus”),
of the AQR Multi-Strategy Alternative Fund (the “Fund”)
This Supplement updates certain information contained in the Prospectus. You may obtain copies of the Fund’s Prospectus and Statement of Additional Information free of charge, upon request, by calling (866) 290-2688, or by writing to AQR Funds, P.O. Box 2248, Denver, CO 80201-2248. The following disclosure is hereby added to the section titled “Closed Fund Policies” on page 168 of the Prospectus. Please review this important information carefully.
AQR Multi-Strategy Alternative Fund
Effective at the close of business September 30, 2013 (the “Closing Date”), the AQR Multi-Strategy Alternative Fund (the “Fund”) will be closed to new investors, subject to certain exceptions. Existing shareholders of the Fund will be permitted to make additional investments in the Fund and reinvest dividends and capital gains after the Closing Date in any account that held shares of the Fund as of the Closing Date.
Notwithstanding the closing of the Fund, you may open a new account in the Fund (including through an exchange from another AQR Fund) and thereafter reinvest dividends and capital gains in the Fund if you meet the Fund’s eligibility requirements and are:
• A current shareholder of the Fund as of the Closing Date—either (a) in your own name or jointly with another or as trustee for another, or (b) as beneficial owner of shares held in another name opening a (i) new individual account or IRA account in your own name, (ii) trust account, (iii) joint account with another party or (iv) account on behalf of an immediate family member;
• A qualified defined contribution retirement plan that offers the Fund as an investment option as of the Closing Date purchasing shares on behalf of new and existing participants;
• An investor opening a new account at a financial institution and/or financial intermediary firm that (i) has clients currently invested in the Fund and (ii) has been pre-approved by the Adviser to purchase the Fund on behalf of certain of its clients. Investors should contact the firm through which they invest to determine whether new accounts are permitted; or
• A participant in a tax-exempt retirement plan of the Adviser and its affiliates and rollover accounts from those plans, as well as employees of the Adviser and its affiliates, trustees and officers of the Trust and members of their immediate families.
Except as otherwise noted, once an account is closed, additional investments or exchanges from other AQR Funds will not be accepted unless you are one of the investors listed above. Investors may be required to demonstrate eligibility to purchase shares of the Fund before an investment is accepted.
The Fund reserves the right to (i) make additional exceptions that, in its judgment, do not adversely affect the Adviser’s ability to manage the Fund, (ii) reject any investment, including those pursuant to exceptions detailed above, that it believes will adversely affect the Adviser’s ability to manage the Fund, and (iii) close and re-open the Fund to new or existing shareholders at any time.
PLEASE RETAIN

I had problems with this too. Someone can correct me if I'm wrong, but this is basically one of those times where M*'s peer groupings create confusion. M* recently moved FPNIX to the "Nontraditional Bond/Flexible Income" grouping, after FPNIX stated it's appreciation goal to be CPI + 1%. Its now compared with funds like LSBRX and PUBDX, which had been on fire over the past five years.
But FPNIX is super conservative and has been less concerned with total return than with capital preservation. From FPA's policy statement fpafunds.com/docs/fpa-new-income-fund-information/2011-03-the-fpa-absolute-fixed-income-policy-statement.pdf?sfvrsn=2:

The FPA Absolute Fixed Income Strategy (including FPA New Income, Inc.) is one of the longest standing fixed income strategies in the USA. We have a defined investment philosophy and process and have executed against it for almost twenty eight years. At various times during this period, both aggressiveness and caution have been demonstrated in the selection of longer term and credit sensitive investments. Only when we felt that we were being more than adequately compensated for the potential risk of loss did we become aggressive.
For the past eight years, our investment strategy has been one of caution since we believed that risk of loss was too great and thus, we focused on capital preservation first, income generation second and capital appreciation last.

M* says as much in their Fund Analysis as well. FPNIX is down to around 1.4 yrs avg. duration, and by rule can't hold more than 25% junk bonds. Basically they're a fish out of water when being compared to other Multisector/Non-trad funds. A closer comparison might be either Short Term funds like JASBX or SCLDX, or some grouping of conservative funds that fall outside of traditional definitions like PYGSX or RPHYX.

I sold my WAEMX as I indicated before, but added lil to SFGIX. I plan on selling CEMVX and CIVVX and buy CIOVX by end of the month especially if they do well, because it will good time for me to harvest some gains. So I'm actually reducing my EM exposure.