Reply to @Kenster1_GlobalValue: Good for those who took part in the move, which - when you have 60% of the float short, is not entirely unexpected. They would also be advised to consider taking profits.
However, as one who questioned why anyone in their right mind would want to own Sears on fundalarm when it was over $100 a share (and got a ton of upset responses - "OMG, it's a value stock!"), I'll continue to say that Sears is not sustainable in its current form - and buying back shares/creating short squeezes does nothing to fix Sears and K-Mart stores - two brands whose interest from consumers continues to erode. This morning from Fitch on retail:
10:45 AM ET Fitch: Sears Continues To Be Weakest Performer In Group
Dow Jones
I will gladly reconsider my opinion on Sears once Eddie Lampert actually comes up with a plan to try to restore a classic American brand rather than another round of buybacks (almost all of which was bought higher/much higher) As for taking the company private, I'm genuinely curious as to the "then what?" of that plan.
Meanwhile, other companies continue to take market share from Sears.
As for Fairholme, I continue to like the less-discussed aspects of the portfolio, such as the Asian insurers and Brookfield Asset Management, as well as to a lesser degree Leucadia. There's also the tiny investment in JZ Capital Partners.

Of the two former Thornburg people, Mr. Kinkelaar probably had more direct input on the Thornburg Income Builder fund. He was there 6 years. And Mr. Remily was there only a year. But I would say that Brian McMahon was and is the real team leader of TIBIX. Keep in mind that American Funds' Capital World Growth & Income is the "original" global dividend fund. Thornburg's success, I think, is that it is much smaller ($10B vs $66B), and has had stronger management. But it also really concentrates on the dividend, which American seems to have forgotten. I have no crystal ball with the new PIMCO offering, but it might have some attraction for investors looking for a Thornburg Income Builder type fund that cannot access Thornburg without a commission. Whether Kinkelaar and company are up to the task or not, PIMCOs huge resources should certainly be a help.

Reply to @scott: In terms of longer-term themes (esp. emerging markets), I think Jay Pelosky is worth paying attention to:
"In the global search for yield, four principal areas of opportunity stand out. First is USD denominated Emerging Market debt. While local currency EM debt became a crowded trade (currently being unwound), the same is not the case for USD debt. Investors access better sovereign balance sheets at a significant yield pick up over UST. Second, infrastructure investment is likely to grow significantly in both the OECD and EM while offering private capital a rare combination of duration and yield.
Two other opportunities include US corporate spread product, both high yield and floating rate bank loans, which have been sold off heavily and yet offer attractive yield and exposure to the US corporate sector, the most fundamentally sound segment of the market. Given the outlook for a strong dollar, weak growth and EM stagflation, spread product looks more appealing than straight equity. Finally, the long end of the UST curve remains attractive with the Fed committed to be a significant buyer of new paper thru June while the economic, political and investor backdrop remains favorable. The 30yr UST bond could retest its 2008 yield low of 2.5%."
http://www.huffingtonpost.com/jay-pelosky/post_2510_b_994172.html

At the IRS, there's a new form 8949, replacing the D-1 continuation sheet as the feed-in to the Schedule D. You have to file separate forms 8949 for covered and uncovered shares. So for some sales starting this year, the proceeds and cost basis will have to be divided between the two types of shares as well as between long and short gains. Appears you could have as many as four entries for one sale.
Looks like it's going to be a mess to keep up with for a few years, while there may be covered and uncovered shares mixed in single funds or stock holdings. It'll be complicated enough that the fund companies/brokerages are bound to make errors at least here and there on the statements that go to the IRS, which the investor will have to explain, or get the company to issue a corrected statement.
Yikes.

Re: "Investors Pulled ..." Sure looks like case of bad timing. Hope updraft continues for a while. Most everything's hot right now. Looks like nice follow through in Asia Thursday morning - half percent or so gains across the board early on.

five leverage ETFs delivering big gains
http://etfdb.com/2012/five-leveraged-etfs-delivering-big-gains/

Reply to @catch22: I definitely think the Greek situation will not end well - and possibly not end well for anyone involved. However, I suppose at this point I can't see as to how this should come as a surprise to any market participants. This has become what I call "Groundhog Day" finance - problems that just keep appearing and keep getting kicked down the road, despite the math telling the truth about Greece and other Euro neighbors. I fully expect new programs and interventions, etc brought together to meet any other appearances of the mathematical reality these countries are truly facing. If Greece gets X, other countries in a similar shape will want X too, as well.
If not, then, well, we'll live in interesting(er?) times, but the sun will still rise tomorrow. There's far too much of the "if this isn't done, it will be armageddon" statements being offered - I don't think things are always necessarily so black and white.
As for hedge funds, I think that may turn into a bigger battle - David Einhorn's Greenlight Capital, which does have short positions in Euro bonds - had the largest fine London's FSA has ever given out - put against it for insider trading in 2009 last week. That's not to say that Einhorn wasn't guilty (although he says he isn't), but that I think you may see various regulatory agencies trying more aggressively to turn something up on larger, more high profile hedge funds. With the tools that hedge funds have these days, larger ones have become increasingly powerful and it'll be interesting to see how far that is allowed to go.
I do think there's the possibility of a real bubble in yield, but with things the way they are, that could go on and become considerably more significant over the next few years. Some people have said MLPs are overvalued, for example, and they may very well be, but given that CDs yield an impressive 0.00000001%, then it would not surprise me to see them continue to see inflows.
I still lean towards inflation being the end result of this time period and agree with this:
"One of the reporters asked, ‘Do you worry that inflation may get out of control?’ The Chairman (Bernanke) responded, ‘We’re targeting 2% inflation.’ Of course, I don’t believe that. My belief is they are targeting something like 4% or 5%.
When they hit 4% or 5% and, in effect, (they will) spook people into spending money or getting into riskier assets. They want to stampede people into lending and spending again to get the velocity up and get the economy going. That’s the plan. It’s a game of expectations, it’s a game of psychological manipulation. One of the ways to do that is to set expectations low and then deliver a much higher inflation number.
So when the reporter asked him if inflation could get away from him, Bernanke said, ‘Yes.’ His exact words were, ‘Inflation may move away from desired levels.’ To me that was code for saying it will move away from desired levels.”"
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/1/27_Rickards__Gold_May_Super_Spike_as_We_See_the_End_of_the_Dollar.html
---
Additionally, in regards to stocks being at least a decent portion of one's holdings: I do share Marc Faber's view to some degree: "Look at the history, for example, of Germany, for the last 100 years. They had World War I. They had the hyper-inflation in World War II. The bond-holders got wiped out three times. If you owned Siemens, and you still own Siemens today, it was not a fantastic investment, but at least you still have something. You were not wiped out. I think that in equities you will be better off because you have an ownership in a company, than by being the lenders to companies, and the lenders, especially, to governments.
In a money-printing environment, it is very difficult to know what is actually cheap and what is expensive. Is the price of wheat high, or is it low? Inflation-adjusted, it is extremely low. In nominal terms, it is relatively high. I believe that, in March 2009 when the S&P was at 666, the market was actually much cheaper than is generally perceived, because of the money-printing, and I do not anticipate that we will see 666 on the S&P again, in nominal terms.
In other words, they are going to print so much money that the S&P could be at, perhaps, 2000, but in real terms, it could be down below the lows of March 6, 2009. "
As for inflation, the most odd/interesting tale is that of Kyle Bass and nickels. The hedge fund manager has bought 20 million nickels because he believes the value of the underlying metal is more than the face value and will go up when less of the underlying metal is used in the coin.
http://www.cnbc.com/id/44788851/Kyle_Bass_s_Nickel_Collection
I recently started mid-sized positions in Loews (L) and Icahn Enterprises (IEP) with a long-term view on each, and added to DGS etf and AQR Risk Parity (AQRNX)

Howdy,
Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.
For those who don't know; I ramble away about this and that, at least once each week.
NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.
While looking around.....Well, Mr. Patient has more of a smile, so far; this month, this year. Mr. Patient is one of those little characters whom we've seen portrayed as the pro or con perspective resting upon either shoulder, voicing opinions and thoughts. Mr. Twitchy could be named for the other shoulder character. Mr. T is relaxed most of the time, or at least keeps his thoughts to himself. Mr. P and Mr. T generally do offer a balance, related to most things; and in particular, investing and investments. Mr. P is the one with patience, Mr. T. is less patient; but is also the most curious and is the explorer, and therefore discovers more and new items of interest. Mr. P is indeed the named and actual pilot of the investment boat, using the charts and information placed before him. He is generally content with the tried and true safe passage ways upon the investment waters. But, it is Mr. T who offers up thoughts and suggestions about new passage ways and ports of call. As patient as Mr. P may be, he realizes that the ports and safe harbors he is most familiar with and has enjoyed in the past, can change. Mr. T is the one who keeps track of the reports from the other investment pilots as to their perspective of changes in the familiar ports of call; and who also offer up alternative ports of call; to which, the Funds Boat has yet to visit. Mr. T will investigate these reports and offer a navigational passage, to a new port of call. The boat may not stop or stay at a new port; but will at least take a closer look and make some notes for future reference.
Mr. P is a decent boat pilot; and Mr. T is a decent navigator. Both realize that their travels upon the waters of investments are best served and safer when both of their skill sets are combined; as neither could perform both positions as well, on their own. They continue to attempt to find the best passages and ports of call, going forward.
You may find a slight pressure of weight upon each shoulder top from time to time. The pro's and con's friends you have; debating this or that. One may name the "con", as is sometimes referred; the devil's advocate. Although this naming has its own reference to many; it should not be taken as a negative aspect; but as the balancing argument as to setting an investment plan.....the "why should I" or "the convince me".
I have noted a few things below, in the Buy/Sell/Portfolio section.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
This 1st link to Bloomberg is for their list of balanced funds; although I don't always agree with the placement of fund styles in their categories.
http://www.bloomberg.com/apps/data?Sector=888&pid=invest_mutualfunds&ListBy=YTD&Term=1
These next two links are for conservative and moderate fund leaders YTD, per MSN.
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Symbol=$HF&Category=CA
http://moneycentral.msn.com/investor/partsub/funds/topfundresults.asp?Category=MA&Type=&symbol=$HF
Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.
We live and invest in interesting times, eh?
Hey, I probably forgot something; and hopefully the words make some sense.
Comments and questions always welcomed.
Good fortune to you, yours and the investments.
Take care,
Catch
SELLs/BUYs THIS PAST WEEK:
NONE
A reflection upon the links above; we attempt to establish a "benchmark" for our portfolio to help us "see" how our funds are performing. Aside from viewing many funds within the balanced/flexible funds rankings (the above links), a quick and dirty group of 4 funds we watch for benchmarking are the following:
***Note: these YTD's per M*
VWINX ....YTD = + 1.6%
PRPFX ....YTD = + 5.8%
SIRRX .....YTD = + .8%
HSTRX ....YTD = + 1.1%
None of these 4 are twins to our holdings, but we do watch these as a type of rough guage.
Portfolio Thoughts:
Our holdings had a + 1.45 % move this past week. Related to the Mr. P and Mr. T above. Patience has won out so far this year, as is related in particular to LSBDX. This fund's performance in 2011 was a bit on the rocky side; and Mr. Twitchy offered choices for change and to split this fund 4 ways in 2012, forget 2011 and move on into other investments with the proceeds of the sale. LSBDX has performed very well in 2012, to date. The investment positions taken by the managers in 2011 were apparently not incorrect; but as with many other investment areas, continued to be hammered to the downside with the continued unknowns from Europe in particular. Mr. Patient will continue to watch the situations surrounding us; and is assured that Mr. Twitchy will be in place, too; looking at as much as possible, using his curiousity, to perhaps discover something that has been overlooked. To the high praise of MFO and the members, it is very difficult to find a topic to note here that has not been placed into the discussion boards. Excellence, as usual.
---Below is what M* x-ray has attempted to sort for our portfolio---
U.S.Stocks 11%
Foreign Stocks 11.14%
Bonds 70.83% ***
Other 7.03%
Not Classified 0.00%
***about 35% of the bonds are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"
-Investment grade bond funds 26.8%
-Diversified bond funds 19.8%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 4.3%
-U.S./Int'l equity/speciality funds 8.1%
This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
APOIX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
TEGBX Templeton Global (load waived)
LSBDX Loomis Sayles
---Speciality Funds (sectors or mixed allocation)
FCVSX Fidelity Convertible Securities (bond/equity mix)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FFGCX Fidelity Global Commodity
FDLSX Fidelity Select Leisure
FSAGX Fidelity Select Precious Metals
RNCOX RiverNorth Core Opportunity (bond/equity)
---Equity-Domestic/Foreign
FDVLX Fidelity Value
FSLVX Fidelity Lg. Cap Value
FLPSX Fidelity Low Price Stock
MACSX Matthews Asia Growth-Income

http://online.wsj.com/article/SB10001424052970203363504577187293030118950.html?ru=yahoo&mod=yahoo_hs
"St. Joe Co., one of largest landowners in Florida, signaled that it is scaling back development plans again, an indication that its efforts to turn the state's Northern Gulf Coast into a cluster of luxury second-home communities have been a flop.
On Friday, the company indicated in a Securities and Exchange Commission filing that it has adopted a "new real-estate investment strategy" that will see it reduce capital expenditures at its master planned communities. The firm said it also expects to sell undeveloped parcels in bulk at discounted prices.
The company expects to report a charge of between $325 million and $375 million for the fourth quarter of 2011, when earnings are released next month. That would amount to about one-fifth of the company's market capitalization and about half of the total real-estate assets on the company's balance sheet, which totaled $759.6 million at the end of September........"
Quite a bit more at the link above.

to your last point, hank... many more than 3 "broke the buck" in 2008, but those owned by banks or any other deep pocketed (and not so deep pocketed) parents, received capital infusions to keep their NAV @$1.00.

http://markets.chron.com/chron/news/read?GUID=20493702
DoubleLine Launches DoubleLine Opportunistic Credit Fund
LOS ANGELES, Jan. 27, 2012 /PRNewswire/ -- The DoubleLine Opportunistic Credit Fund (the "Fund") has completed an initial public offering of common shares and has listed on the New York Stock Exchange, Fund adviser DoubleLine Capital LP ("DoubleLine") announced today. Organized as a non-diversified, closed-end management investment company, the Fund trades under the symbol DBL.
The Fund raised approximately $326.5 million in proceeds (before deduction of the sales load and offering expenses and exclusive of the underwriters' overallotment) in the initial public offering of 13,060,000 common shares at $25 per share. The Fund has granted the underwriters an option to purchase additional common shares at the public offering price less the sales load within 45 days of the date of prospectus, solely to cover overallotments, if any. Assuming full exercise of the underwriters' overallotment option, which may or may not occur, overall sales totaled approximately $375.25 million.
{...}
The Fund does not intend to employ investment leverage initially. Subject to DoubleLine's determination that the then-current market conditions are favorable, the Fund intends, at a future date, to add leverage to its portfolio by using reverse repurchase agreements, dollar roll transactions or similar transactions, and/or borrowings, such as through loans or lines of credit from banks or other credit facilities. The Fund will, however, limit its use of leverage from reverse repurchase agreements, dollar roll transactions or similar transactions, and/or borrowings, such that the assets attributable to the use of such leverage will not exceed 33 1/3% of the Fund's total assets (including the amounts of leverage obtained through the use of such instruments).

Reply to @kevindow:
The Bard said it best: What's in a name? That which we call a rose by any other name would smell as sweet.
"One could not have purchased FEHIX on 11/19/2007." Literally true, as a fund by that name (ticker) did not exist on that date. What's in a name? In 2007, you could not have purchased a company with the ticker "L", yet that company (Loews - LTR) did exist, and now trades under that symbol. Tickers change. The company didn't.
Perhaps your point is that the legal entity did not exist in 2007, because the "new" company was created last month. That's the way reorganizations work. When a company wants to operate under Delaware laws, it forms a shell company in Delaware, that shell company acquires the real company, and then the real company dissolves. Nothing else need change. (I am rather familiar with this process, as I worked with our company lawyers in reorganizing our company as a Delaware corp last year.) Shareholder of the old company get shares of the new company , but no one can buy shares of the new company until this transaction completes.
I gave you the example of Oppenheimer funds that are reorganizing as Delaware corps. Same management company, same fund family, same owners (shareholders). But you cannot buy shares in those Delaware-based funds (yet - the reorg has not completed).
You assert as a "fact" that M* should have noted when one legal entity terminated and another began. That's an "opinion", and one that you have yet to substantiate. Same management, same objective, same way of running the portfolio. Just a different legal entity.
Compare and contrast:
a)Oppenheimer funds (same family, same management, same objective, same ticker, but you could not buy the new investment company (fund) prior to reorganization)
b)Wells Fargo Advantage Ultra Short Term Income Fund (STADX) -was Strong Ultra Short Term Income Fund until Wells Fargo acquired Strong in 2004-5 (different family, same manager to this day(!) - Thomas Price - as with Strong (but different management company), same objective, same ticker, but you could not buy the new investment company(fund) prior to reorganization)
c) Wells Fargo Advantage Capital Growth Fund (SLGIX), formerly Strong Endeavor (SENDX) (different family, same manager to this day(!) - Thomas Pence - as with Strong (but with a different management company), same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization).
d) Perkins Mid Cap Value (JMCVX), was Berger Mid Cap Value (BEMVX) until Janus acquired Berger funds in 2003 (different family, same manager from the Berger inception to this day(!) - Thomas Perkins (with the same management company Berger used, same objective, different ticker, but you could not buy the new investment company (fund) prior to reorganization). Here's an extra twist - when Janus acquired the Berger funds, it also acquired a minority stake in the management company; it has since taken over a majority (80%) of Perkins, Wolf, McDonnell and Co, and renamed the company.
It appears that your opinion is that for each of these funds (and many more), the funds began anew when they were acquired. So all the violations of the Strong funds were washed clean when they were reorganized - they're not the same funds, often with changed tickers, so not the same track record and not the same shady history.

@kevindow -- the inception date of the fund has nothing to do with the fact when one could purchase the fund. many funds start with the firm's seed capital and first build a performance record before opening to the outside investors. of course, some 'star' managers, such as gross or gundlach, would be the exception to the rule.

I AM 47 YEARS OLD AND HERE ARE MY AMERITRADE SEP IRA ACCOUNT:
ARIVX-Aston River Road Independence-SV-9%
DLTNX-Doubleline Total Return-IT/BF-5%
FPACX-FPA Cresent Fund-M-20%
GNVRX-Geneva Advisors All Cap-LG-15%
RYBHX-Rydex S & P Midcap 400 Fund-MG-9%
SEQUX-Sequoia Fund-LB-13%
WPOPX-Weitz Partners III Opp.-LB-10%
YAFFX-Yacktman Focus-LV-19%
IN MY FIDELITY SEP IRA ACCOUNT:
BMPEX-Beck, Mack & Oliver Partners Fund-LB-12%
FAIRX-Fairholme-LV-18%
IVWIX-IVA Worldwide-WA-14%
JATTX-Janus Triton Fund-SG-6%
MFCFX -Marisco Flexible Capital-LG-18%
PRPFX-Permanent Portfolio-CA-8%
PYVLX-Payson Value-LV-16%
UMBMX-Scout Mid Cap-MB-8%

(it's been in a 30 year bull cycle but interest rates can't go down from here and since prices move inversely to yield . . .)
I suspect all fixed-income investments have become a risky asset.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Worried minds think alike. Adhering to the quaint old guideline of stocks/bonds mix according to age would be 40/60 but feel more comfortable with 35/65 or even 30/70.
But dislike bond exposure at this juncture point for the reasons above. A rather sticky wicket allocating a majority of assets to a credit market that offers a negative real return
on most anything that addresses the interest rate risk (shorter term higher credit qualities.) I/we restructured the entire fixed income side over a year ago, in hindsight over a year early. Fidelity holdings are floating rate, short term muni, New Markets.
Also RPHYX, RNSIX which I was introduced to here and much thanks for that. The remainder of long-only bond funds were rolled over into a couple multi-asset strategies launched by Loomis Sayles and Doubleline employing complex long-short derivative strategies across currency, commodity, stock and bond markets. Apparently too complex. The Loomis Sayles fund
managed (...) to get wrong-footed whipsawed daily with a steadily dwindling NAV in both up and down markets plus no yield (MARYX, don't go there.) Bye-bye, rolled into RNSIX which continues on quite a roll in up, down or sideways markets, don't ask me how, now 20% of assets, its three separately managed subportfolios are a comfort factor for an outsized position. I'm aware of the overconfidence/hubris factor that afflicts fund managers who consistently find everything breaking their way until not, see Bill Miller,
Ken Heebner and the alphabeta bet, confusing one for the other, alpha and beta. The Doubleline Multi-Asset (DMLIX) continues to break even after a year, no more nor less with scant yield, basically a hedge fund for the 99% mom/pop retail investor with the same dismal performance as the pricier high net worth 1% varieties, commiseration knows no class.
The accumulation phase ended with retirement nearly a decade ago, capital preservation is the goal. Long term wind-at-back bond fund complacency will end with surpise and shock in the sort of interest rate rise exceeding all forecast guesstimations by hundreds of basis points the likes of which bankrupted Orange County in the mid-'Nineties. Amnesia is not a strategy. Seared both sides like a Texas-style steak by the '08 market crash the pain avoidance shift has been to the next burner to heat up. I'm not a shorter but it has its appeal regarding fixed income at present despite being dead wrong for over a year.
In a much higher interest rate environment laddering Bulletshares etfs hold vast appeal
for a buy-and-forget capital preservation minded individual with far better things to do (think beachwalk) than pay attention to financial markets having become a wall to wall mess, bumper to bumper, stem to stern, in my version because complexity favors the sinister.

Hi Catch, As I recalled you are invested in Utah 529 plan, right? If there is only 6 years of investment time left, your current 80/20 equity/bond allocation is too aggressive in my opinion. At this point the emphasis should shift toward capital preservation, but other may choose different paths.
What you proposed is similar with 50% allocated to bond/cash equivalent as the age-based "growth" portfilio. Given the low interest rate environment, short term bond index and FDIC insurance saving are not attractive options. I would pick longer duration bonds such as Vanguard Total Bond Market Index. Several years before withdrawal starts you will need to change your equity/bond/cash allocation again.
http://www.uesp.org/Investment-Info/Age-Based-Investment-Options.aspx

Reply to @Old_Joe:
Looking at the data, you'll see that groceries in general have risen pretty quickly, but that eating out has risen only modestly (I've seen reports about how the Dardens and such are racing to the bottom in prices due to the economy). Put it altogether and you get a combined monthly increase of 0.2%, and an increase for 2011 of 4.7%.
Food at home rose 6% in the past year, including rises of 7.9% for meat, poultry, fish and eggs, and 8.1% for dairy products. But if you have a sweet tooth, that stuff only went up 3.8%.
People tend to be more sensitive to losses and less sensitive to gains, which is why they notice small losses more than significant gains, and likewise why they notice the prices that are going up but not so much what has declined or not gone up much. That makes the averages appear worse than they actually are.

invest w/ an edge commentary
Wednesday, January 18, 2012
Editor's CornerInvestor Heat Map - 1/18/12
Got Drachma?
Ron Rowland
U.S. stock benchmarks built on the January rally, with the S&P 500 closing above 1300 today for the first time in almost six months. Gains have been broad-based the last few days with most sectors participating and the laggards having only minimal losses.
A casual observer might think the bullish behavior is connected with earnings season. If so, it is partly because analysts created lower expectations since last quarter. In October, Wall Street expected 15% earnings growth this quarter. Now the consensus is only 7%. We are still early in the cycle though, making further generalizations difficult at this point.
Just before the long weekend, S&P downgraded its sovereign debt rating for nine European countries. This was followed Monday by a cut for their erstwhile savior, the European Financial Stability Facility. The downgrades appear to have had much the same impact as similar action did for the U.S. last August. Rather than higher borrowing costs, at least some of the affected governments were able to sell debt at even lower interest rates. The main thing this tells us is that no one cares what S&P thinks any more.
One place in Europe where rates aren’t falling is Greece. Negotiations with lenders are underway, but bond traders seem to think a default is imminent. Germany and other neighbors are not near as frantic about the possibility as they were a few months ago - which suggests their plans for an orderly dissolution of the Euro currency are probably complete. Get ready for a return of the Greek Drachma.
The world’s preferred safe haven is still the U.S. for now. Ten-year Treasury yields here are holding below 2% and show no hints of moving much higher. Economic data was generally good since last week. December retail sales ticked up since last year with notable strength in automobiles. Consumer sentiment improved, as did an index of homebuilder confidence. We are dubious the current strength can continue much longer, but for now we won’t fight the tape.
Sectors
The Industrials sector held on to the first-place position it seized last week and gathered even more bullish momentum. Materials is not far behind, though, after jumping from #5 to #2 since our last report. Financials fell to third place as resistance near the October peak proved formidable. Health Care picked up a little steam but still slipped back to the fourth-place position. The week’s worst-performing sector was Energy. Lower crude oil prices are no doubt a factor, but energy-related equities actually began sliding a few days earlier. We will see in the next few days whether crude’s move back over $100 helps the oil stocks. Utilities - which not long ago had a firm grip on the top sector position - is now almost in last place, just one rung off the bottom of the list. For now, at least, Telecom is still the lowest-ranked sector.
Styles
Equity Style categories remain packed into a tight range with little dispersion from top to bottom. This allows odd phenomena, such as the Large-Cap Sandwich. Large Value is in first place and Large Growth is on the bottom. We also have a strange pair near the middle of the pack with Mega Caps and Micro Caps right next to each other. Mega Cap is probably being held back by a large Energy allocation. Value is still ahead of Growth at all cap levels.
Global
This week’s Global picture should please anyone who likes symmetry. The number and magnitude of positive categories is nearly a mirror image of the negative ones. The U.S. is still on top, but China is moving up quickly. In fact, China had the best weekly performance of all 32 equity categories we track. Latin America and Emerging Markets moved up to third and fourth places, respectively, after both turned in above-average performances. Canada held steady near the middle of the pack. The U.K. slipped from #2 last week all the way to #7 now. This was partly due to a weakening pound, but the emerging-market surge was a bigger factor. Pacific ex-Japan gained some relative strength but is still in a bearish trend. Japan slid further down the ranks while Europe continued to hold a death grip on the bottom rung of the ladder.

Hi Sven,
USAA offers three national munis USSTX (Short Duration...yielding 2.62%), USATX (Intermediate Duration...yielding 4.14%), and USTEX (Long Duration...yielding 4.56%). The other dynamic with any kind of bond fund is the fund price. It can appreciate in downward moving interest rate environments and depreciate in upward moving interest rate environments.
Over the past year all three funds have enjoyed price appreciation as well as yield. This is, in part, due to the major hit munis took in 2010. I usually don't use Yahoo Finance chart tool because it reflects only price changes in a fund. Morningstar charts incorporate both price and dividends (capital gains) and therefore is a better comparison chart tool.
In the case of comparing bond fund prices I like to track these three funds together using Yahoo finance. Since yield is predetermined (see above), price is what an investor can adjust their allocations to. I like to allocate more of my muni money to the longer duration bond (USTEX) when prices are appreciating and move back to the shorter term muni (USSTX) when the trend reverses.
Charting these three funds together can give you this information because the longer term duration will reverse (cross over the intermediate fund first and then cross over the shorter term bond), sometimes very quickly . To me this is trend following strategy I use for bonds...lengthen my duration at times...shorten duration at time.
Here's the yahoo chart for these three funds. Remember this is only a price chart not the actual value chart (price + dividend). Change the time frame and move the scroll bar to observe the the crossovers. The price trend for muni has been really strong lately...the 1m,3m and 1 yr performance has been outstanding. The 2 YR and 5 YR paint a different story.
http://finance.yahoo.com/echarts?s=USTEX+Interactive#chart10:symbol=ustex;range=1y;compare=usstx+usatx;indicator=dividend+volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined

Reply to @Mark:
Hi Mark. Yes, I agree. That is my recollection too. But I thought he used '08 and '09 as his guide to down and up years. Maybe not exclusively, but those 2 years were major inputs on his view of manager reaction and performance... to my recollection. So hence, looking at any performance data, 3 year, 5 year or even 10 would have been vastly skewed to '08/'09 results in 2010. So I guess to me performance was the same thing.
That said, I miss Fundmentals posts. Can't say I always agreed with him, but he always made me think. I'd say he may have had the biggest impact on how I swayed my portfolio towards managers whose main criteria is to preserve capital - loose less. Funds like YAFFX, ARIVX, FPACX, MACSX, HSRTX.
And to paraphrase Jimmy Durante; THANKS FUNDMENTALS,
WHERE EVER YOU ARE.