RBC Wealth Management
Michael D. Ruccio, AAMS
Senior Vice President -Financial Advisor
25 Hanover Road
Florham Park, NJ 07932-1407
(p) (866) 248-0096
(f) (973) 966-0309
[email protected]
michaelruccio.com
rbc investments commentary
Market Week: May 7, 2012
The Markets
The Dow hit its highest point in more than four years on Tuesday, but it was basically downhill for equities after that as investors decided to take some of their year-to-date profits off the table in advance of key European elections over the weekend. The S&P 500, Nasdaq, Russell 2000, and Global Dow all had their worst week of 2012, and the Dow's 168-point loss on Friday gave the industrials their second worst week of the year. The selling helped the 10-year Treasury yield hit its lowest level since early February as prices rose. Meanwhile, oil prices slid below $100 a barrel, while gold reversed the previous week's gains, falling almost $30 back to $1,634.
Market/Index 2011 Close Prior Week As of 5/4 Week Change YTD Change
DJIA 12217.56 13228.31 13038.27 -1.44% 6.72%
Nasdaq 2605.15 3069.20 2956.34 -3.68% 13.48%
S&P 500 1257.60 1403.36 1369.10 -2.44% 8.87%
Russell 2000 740.92 825.47 791.84 -4.07% 6.87%
Global Dow 1801.60 1946.39 1893.39 -2.72% 5.09%
Fed. Funds .25% .25% .25% 0 bps 0 bps
10-year Treasuries 1.89% 1.96% 1.91% -5 bps 2 bps
Equities data reflect price changes, not total return.
Last Week's Headlines
Unemployment fell to 8.1% in April, according to the Bureau of Labor Statistics. However, that was not necessarily good news, as the drop was largely the result of people leaving the work force. The economy created only 115,000 new jobs; that's substantially lower than the 154,000 jobs added in March or the 252,000 monthly average between December and February.
Off with his head: The frustration about Europe's finances that has previously brought down heads of state in Greece, Spain, and Italy took its toll on French President Nicolas Sarkozy. The election of François Hollande, who campaigned against the fiscal austerity and budgetary discipline measures supported by "Merkozy" (German Chancellor Angela Merkel and Sarkozy), creates uncertainty about the future of those measures.
The political parties that comprise Greece's ruling coalition suffered losses in the country's parliamentary elections, raising questions about whether a reorganized government would support the austerity program required for future bailout assistance.
Spain's gross domestic product contracted for the second quarter in a row. That officially put the financially troubled country into recession; coupled with Spain's struggle to implement austerity measures, a recession could make it more difficult for the eurozone's fourth largest economy to reduce its budget deficit and meet sovereign debt guidelines. The country also received a second piece of bad news when Standard & Poor's downgraded the credit ratings of 11 Spanish banks. Meanwhile, the European Central Bank kept its key interest rate unchanged at 1%.
The Bureau of Economic Analysis said consumer spending rose 0.3% in March and incomes grew 0.4%, helping to nudge the savings rate up slightly to 3.8% of disposable income.
The U.S. services sector grew in April, but the 53.5% reading by the Institute for Supply Management was 2.5% lower than the one in March. However, the ISM's manufacturing index was up 1.4% from March for a reading of 54.8% and a 33rd consecutive month of expansion.
U.S. construction spending rose 0.1% in March despite a 1.1% decline in spending on public construction such as state and local highways and schools. According to the Department of Commerce, private construction was up 0.7% from the previous month, roughly evenly divided between residential and nonresidential projects.
Fixed-rate mortgages have hit record lows once again, according to Freddie Mac. The 3.84% average rate for a 30-year fixed-rate mortgage was almost a percentage point lower than the 4.71% of a year ago, and 15-year mortgages were at 3.07% compared to 3.89% last year at this time.
Eye on the Week Ahead
In a week that's light on economic data, investors will attempt to gauge the impact of French and Greek elections on the eurozone's willingness and ability to enforce austerity measures and debt guidelines.
Key dates and data releases: international trade, import/export prices, U.S. Treasury budget (5/10); wholesale inflation (5/11).

"Wonder what the major brokerage houses that were pumping stocks are going to say now? "Ooops"."
There's a real disconnect that seems as if it's growing larger between the Buffett "long-term" view, the screeching on CNBC every five seconds about the retail investor not being in and the reality of continued retail outflows. People (the average person) continue to be much more sensitive to movement in the market, and many of those who left the market aren't coming back, despite financial media talking about it. In terms of "Ooops", that's potentially more of a short-term thing, but it's something people can point to negatively about wall street. Much of the population is looking for a reason to not be in risk, and you see it every time the market has become more volatile this year and equity fund outflows just ramp. Bond fund inflows continue and continue and continue.
I'm sure the continued volatility that will likely be seen this week will almost certainly lead to yet larger outflows from stock funds.
Lastly, before everyone irritatingly jumps in about his recent record, I do agree with this from David Rosenberg about what people are doing. "The “baby boomers” are driving the demand for income which will keep pressure on finding yield which in turn reduces buying pressure on stocks. This is why even with the current stock market rally since the 2009 lows - equity funds have seen continual outflows. The “Capital Preservation” crowd will continue to grow relative to the “Capital Appreciation” crowd." Right or wrong, you have a lot of people (especially the older crowd) who are not going to be forced - en masse - into risk.
and (from Rosenberg)
Investment Stategy - Safety and Income at a Reasonable Price
Focus on Safe Yield - Corporate bonds
Equities - Dividend growth and yield, preferred shares
Focus on companies with low debt/equity ratios and high liquid asset ratios. The balance sheet is more important than usual.
Hard assets that provide an income stream - oil and gas royalties, REITS.
Focus on sectors or companies with low fixed costs, high variable cost, high barriers to entry, high level of demand inelasticity.
Alternative assets - that are not reliant on rising equity markets and where volatility can be used to advantage.
.Precious Metals - hedge against reflationary policies aimed at defusing deflationary risks."
http://www.zerohedge.com/news/strategic-investment-conference-david-rosenberg

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..... The Big Hmmm... for we investors, eh? This weeks thoughts are prefaced with the assumption that the machines and/or those who use them for trading; reportedly, are major factors for 85% of investment markets activity. Whether you agree with this or not; the large market forces do move our investment fortunes. If we had a 4' x 8' lcd screen upon the wall that displayed the various sector groups; this is what I would see traveling the days of last week: The U.S. found strength in retail, biotech, housing, consumer staples, air trans., tele-com. and utilities, until Friday. Real estate, both U.S. and Int'l kept some strength for the week; with some utilities closing slightly positive on Friday. The biggest gains on Thursday & Friday were the inverse funds in almost every equity/commodity sector globally; followed with smaller, but positive gains in most bond sectors. Overall, it appears the largest U.S. equity sector losses were lg. and small cap value. Bonds found the largest gains in IG areas; being some corp., Treasury (including TIPS) and muni bonds, as well as surprising support for many HY types; with most EM bond areas maintaining. Recently arriving home early Sunday evening and also finding Sarkozy has lost his bid for renomination in France. Some of this outcome may be factored into markets last week; but may have other implications, come Monday.
Overall, many equity sectors globally are a little stinky; and many bonds the opposite direction. Obviously, the duration and strength of these moves will hold more short/medium term clues.
As to sector rotations below; for the past week: (Note: any given fund in any of these sectors will have varing degrees of performance based upon where the manager(s) choose to be invested.)
--- U.S. equity - 1.9% through - 5.3%, avg. = -3.2%
--- Int'l equity + .7% through - 4%, avg. = - 2.3%
--- U.S. eq. sectors + .1% through -5.4%, avg. = - 3%
--- U.S. IG bonds + .8% through +.0%, avg. = +.3%
--- HY bonds - .1% through +.8%, avg. = +.4%
The 5 best groups among the U.S. equity sectors: real estate, utilities, telecom, con. staples and air trans, although few finished the week positive; but with smaller losses. Int'l equity found China with slight positives, and Canada (commodity and U.S. exposure?) being the worst this week at about a -4%; with all other somewhere in between. There is an obvious large spread among some of the areas listed above. Now if we can only discover the forward paths.
You may consider our portfolio to be quite boring, but you may be assured that it moves and bends about each and every day; from forces beyond our control. We retail investors will find many interesting investment periods to ponder, as usual, in the coming years.
I have added a few blips related to our portfolio and market observations at the below SELLs/BUYs and Portfolio Thoughts.
SELLs/BUYs THIS PAST WEEK:

The remainder of FSAGX was sold on May 3 with the proceeds equally moved to FNMIX and FRIFX. FSAGX was purchased on 8-11-11 with the first half being sold on 3-16-2011 (- 9.8%) along with all of FFGCX, which is 1/3 each of energy, metals and agriculture companies. The remaning 50% of FSAGX was sold with a -26%. We have been in and out of this sector about 10 times since the mid-80's and are still ahead of the curve in this sector. Not unlike any fund area you choose to review, the cycles have been and remain in place; as this is the nature of the investment beast.
Portfolio Thoughts:
Our holdings had a + .22 % move this past week. Sidenote: The average return of 200 combined Fidelity retail funds across all sectors (week avg = -1.72%, YTD + 8.09%). Still plodding along. We will retain our bond holdings; but will keep a close watch in the HY area, as well as any consideration of sells in the equity funds based upon recent and Monday market actions. Final note as to our funds. LSBDX and TEGBX did not react well with Friday's close. Both of these funds had downside pressures during similar market actions in 2011, but did recover. For we retail investors; it comes down to your risk/reward tolerance in conjunction with your skills, as well as how much money we can afford to lose and still maintain one's desired life style. We surely are not all in the same boat for this area. The so-called 1% and 99% exists here, and with other retail investors, too.
The old Funds Boat is at anchor, riding in the small waves and watching the weather. 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.
I have retained the following links for those who may choose to do their own holdings comparison against the fund types noted.
The first two links to Bloomberg are for their list of balanced/flexible funds; although I don't always agree with the placement of fund styles in their categories.
Bloomberg Balanced
Bloomberg Flexible
These next two links are for conservative and moderate fund leaders YTD, per MSN.
Conservative Allocation
Moderate Allocation
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 5 funds (below) we watch for psuedo benchmarking are the following:
***Note: these week/YTD's per M*
VWINX .... + .08 week, YTD = + 4.63%
PRPFX .... - .80 week, YTD = + 4.58%
SIRRX ..... + .43 week, YTD = + 3.14%
TRRFX .... - 1.00 week, YTD = + 5.90%
VTENX ... - 1.05 week, YTD = + 5.13%
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
---Below is what M* x-ray has attempted to sort for our portfolio, as of March 9, 2012---
U.S.Stocks 10.5%
Foreign Stocks 6.8%
Bonds 78.5% ***
Other 4.2%
Not Classified 0.00%
***about 35% of the bond total are high yield category (equity related cousins)
---This % listing is kinda generic, by fund "name"; which doesn't always imply the holdings, eh?
-Investment grade bond funds 26.8%
-Diversified bond funds 20.5%
-HY/HI bond funds 23.2%
-Total bond funds 17.8%
-Foreign EM/debt bond funds 5.1%
-U.S./Int'l equity/speciality funds 6.6%
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.LW 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)
FRIFX Fidelity Real Estate Income (bond/equity mix)
FDLSX Fidelity Select Leisure
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

My thoughts:
Housing will take years (and quite likely decades, depending) to really ramp up again in general. However, prices are likely close to a bottom in many areas. There's probably another 5-10% of downside and maybe a bit more, depending on if things start turning South again. Properties in major cities (in terms of condos) are in many cases at prices they have not been at in ages - in locations that many probably thought a few years ago would never be this affordable again.
Older generations looking to downsize will create headwinds, and they will likely not find buyers for larger houses at the prices they would like. The McMansions will have to come down, because the competition will be at lower price points and more manageable houses that will be of interest to both first-timers *and* an older generation who doesn't want the big house to take care of anymore. Maybe some of the McMansions could be revamped as duplexes. The other headwind is going to be getting a mortgage. Ease of getting one swung way too far one way, now it's swinging towards much more difficulty. While that's a good thing in some ways it means less available buyers, and other issues will create less buyers, such as people who short sold their prior house.
I've seen all manner of HGTV shows from a few years ago where the young couple just starting out wants some ridiculous 3,000 square foot place. People are going to be looking for what they need - maybe not in every case, but more often. Utility, convenience. Location, location, location. People are not going to buy beyond their means to the same degree, and wind up with a house that costs that much more to maintain and results in all manner of other issues, tax and otherwise. Taxes will be an issue, although I question whether of not the rise in property taxes compared to the drop in property values (making the tax burden a larger and larger % of house value) is sustainable.
Overall, I think you maybe have another 5-10% (maybe 12-15%, tops) down (which will take a while longer), and then it's flat-to-very slight (but it'll vary heavily) *at most* price gains for a few years, and then maybe a few years after that you get low single digit gains for a few years beyond that. Gradually, over time, housing starts rising again at a more moderate pace. As of right now, you have houses in some areas that are likely below their intrinsic value and it's cheaper to buy then rent in many areas (if you can qualify for a mortgage), but that doesn't seem to matter. Those who can buy now and have a long-term time horizon (they're going to be living there, it isn't a "flip") will probably do okay. It's going to vary a lot by place. Again, I think location and convenience is going to be big - a major city condo that is in the middle of everything and going for a price that people haven't seen in ages is going to have a lot more value and interest than a generic condo in an area where one has to drive everywhere and there's a million other generic condos like it. Location, location, location. Is it near good schools, transit, etc?
The other thing I've noticed, and maybe it's just me, co-ops don't seem to be moving, maybe because people just take one look at the high HOAs (despite the fact that they cover a lot) and move on. As for HOA's, I think that may also be an issue with some condos where they may look fine on the outside, but further investigation may reveal people not paying HOA's, etc.
I definitely disagree with the people in financial media screaming (not saying Kiesel is being Cramer-like about housing at all, but some keep hyping it) about buying a house (and much like the fact that they scream about how people aren't buying stocks every five seconds) - buying a house right now for those who can is not a bad idea, but I think one has to have a very long-term view and reasonable expectations. Certain things will do okay or reasonably well over the next decade. Certain real estate will take much longer.
I'm positive on real estate, but realistic and think it'll do okay for someone who has a long-term horizon. Anyone expecting some sort of price ramp over the next few years resembling anything close to what was seen in the housing boom is going to be disappointed.
As for those who have bought in the last couple of years:
"(Reuters) - More than 1 million Americans who have taken out mortgages in the past two years now owe more on their loans than their homes are worth, and Federal Housing Administration loans that require only a tiny down payment are partly to blame.
That figure, provided to Reuters by tracking firm CoreLogic, represents about one out of 10 home loans made during that period."
http://www.cnbc.com/id/47191744
Anyone buying lumber can look at one of the Timber REITs, such as Potlatch (PCH) or Plum Creek. Potlatch is close to a 52wk low.

Hi Art,
Sorry for your loss.
With inheritance I might suggest sitting down with an estate planner who could evaluate your goals and needs. There may be missing pieces such as, a 529 plan for educational expenses, annuities, Long term care insurance; hell, even a small life insurance policy that pays burial expenses for you or you loved ones. Many of these would either defer taxes or eliminate taxes while at the same time reduce capital risk in your portfolio.
As this experience of settling your loved one's estate "settles", maybe you have learned some things that were done well and some that you could improve on for your estate.

Hi Art,
I had the same thing to deal with a few years back. I configured the taxable account to hold a good portion of tax advantaged income producting assets and the tax deferred accounts, ira and 401k, to hold the other as much as I could. The CD ladder was held in the taxable account and there were still taxes to pay on the interest income it generated and the dividends form stocks along with some capital gains associated with profits form the sale of securities. You can somewhat reduce taxes form the type of assets you hold in the taxable account; but, at some point in time you are going to have to most likely pay the tax man. I sold some tax free munis off at a profit and had to pay taxes on the profits from the sale ... and, I had some called at a premium ... and, I still had to pay.
Have a good day ... and, I wish you the very best at sorting this out.
Skeeter

That's neat! How long do you suppose a loss "in share value relating to shifting
investor sentiment or other normal share price volatility" would have to last before it actually became a "permanent impairment of capital"? Couple of years maybe, or even longer?

http://www.firsteaglefunds.com/funds/globalincomebuilderfund.php
First Eagle Global Income Builder Fund aims to deliver a meaningful but sustainable income stream across all market environments. Through bottom-up fundamental analysis focusing on global income-producing securities, the team seeks to avoid the permanent impairment of capital by investing only where they believe an adequate discount to intrinsic value exists. While securities are considered because they generate income, they are purchased because we believe they offer a substantial margin of safety
===
Principal Investment Strategies
To achieve its objective of current income generation and
long-term growth of capital, the Global Income Builder
Fund will normally invest its assets primarily in common
stocks of U.S. and foreign companies that offer attractive
dividend yields and a range of fixed income instruments,
including high-yield, below investment grade (commonly
referred to as ‘‘junk bonds’’), investment grade and
sovereign debt, from markets in the United States and
multiple countries around the world.
Investment decisions for the Global Income Builder Fund
are made without regard to the capitalization (size) of the
companies in which it invests. The Global Income Builder
Fund may invest in any size company, including large,
medium and smaller companies. Under normal
circumstances, the Global Income Builder Fund
anticipates it will allocate a substantial amount of its total
assets to income-producing securities. That generally
means that approximately 80% or more of the Global
Income Builder Fund’s total assets will be allocated to
such investments, which may include dividend paying
equities, both high-yield (below investment grade) and
investment grade debt, sovereign bonds, and various
short-term debt instruments. The Fund may invest in
securities with any investment rating, as well as unrated
securities. The Fund may also invest (typically for hedging
purposes) in derivative instruments such as options,
futures contracts and options on futures contracts, credit
default swaps, and swaps and options on indices.
The investment philosophy and strategy of the Global
Income Builder Fund can be broadly characterized as a
‘‘value’’ approach, as it seeks a ‘‘margin of safety’’ in each
investment purchase with the goal being to avoid
permanent impairment of capital (as opposed to
temporary losses in share value relating to shifting
investor sentiment or other normal share price volatility).

I would suggest to putt tax-free income investments and low turn-over equities in your taxable account, and put your bond funds in your retirement accounts. Check the capital loss carryforwards (or gains exposure) for your equity funds. Many still have large losses that they are carrying so cap gains may not be an issue for a while.
Do you have a brokerage account for your retirement funds? If you're happy with them, keep it simple and stick with them. Many brokerages also have various fee breakpoints or premium service for meeting certain combined asset levels, so putting all the money in once place could be advantageous.
I have accounts at both Fidelity and Schwab and am very happy with both. Their websites are useful and easy to use, and their customer service is good. Scottrade has a good NTF mutual fund selection and their transaction fees for the non-ntf is reasonable, but their website isn't great.

Generally speaking, if the gains from a fund (any kind of fund) are tax-free, you'd want those funds in your taxable account, as this of course avoids paying tax on those gains.
It's been years since I've had a brokerage account, although at the moment I am looking at Schwab with respect to that. All of my dealings for many years have been directly with fund families themselves, so I can't be of much help on a brokerage house, but I'm sure you'll hear from lots of others on that issue.

Reply to @Ted:
Hi Ted,
Congratulation on your short term winners. I too have similar holdings (PRHSX, PRMDX & USNQX). I also own a fund similar to Catch's in USAGX.
My strategy (not to speak for Catch or anyone else) is to take some winning and reposition them into other under performing long term holdings I own. Right now that happens to be USAGX and some others in my portfolio. I will admit that this is a bit of a "falling knife" reinvestment strategy.
Being a long term owner USAGX (over ten years), I took your chart out a little farther back in time to point out that I was a buyer of your funds/ETFs when they under performed and a periodic seller of USAGX (FSAGX) as it out performed.
5 year Comparison:
http://finance.yahoo.com/echarts?s=FSAGX+Interactive#symbol=fsagx;range=5y;compare=ijh+qqq+prhsx;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;
I calculate "out performance" based on my buy point to when I have achieved a 10% gain. This triggers a 10% sale and a realization of my winnings. If this out performance continue I take profits for each 5% gain thereafter. I try to reallocated these gains elsewhere. For me, elsewhere has been: USAGX, VDE, TGBAX, WAEMX, and PRPFX most recently. I try to keep track of my gains and losses...the ebb and flow...sometimes, the sky rocketing and the sky diving...of my funds. My hope is that my active reallocation will help balance these dynamics out and in the end improves my overall long term gains.
I will also say that when interest rates rise I will reconsider my commodities and gold holdings but for now I maintain exposure in these areas...somewhere between 5-10%.
Over the years I have learned a lot the from you and others here at MFO (and Fund Alarm)...I hope we can continue to share, learn, and grow from each other.

Hi Flack, Skeeter here …
Thanks for the update. You have me wondering … Why you decided to close the short position and go net long and not to more neutral position? Remember the market peaking process ... I feel it is close if not here.
As you know I am somewhat defensive at the moment while I await an anticipated pull back occurring sometime this summer or early fall (May through October). Currently, I am with a moderate equity allocation based upon my tolerance for risk at 50% equity. A conservative allocation for me would be in the 40% range and an aggressive allocation for me would be in a 60% range … so, being in the 50% range in equities I rate this as moderate. If I were to sell down much further, I would have to start reductions in a taxable account and with this I would have to deal with the payment of taxes on realized long term capital gains (no losses to carry forward) and, I would also lose a good stream of dividend income, which is currently favorably taxed at the moment.
Speaking of income, I just opened my April brokerage statement and from it’s review in comparison to the year ago statement my income is up better than 25% including short term investment activity. As you may recall in years past about 15% of my portfolio was in cash with 5% being in demand deposits and about 10% being in time deposits. I am now at about 25% cash with most of it in demand with little left in the CD ladder.
So how is my income up over the same period from a year ago? A good part of it comes from making the cash part of the portfolio more productive by buying special equity ballast positions; and, then selling them off when a set goal was obtained. Thanks Flack, for your help with the technical analysis lessons you provided on the board a few years back. However, I am now utilizing one of the virtues important for every investor that is … patience.
My portfolio’s asset allocation is one that provides me with great flexibility for varying market conditions as I am currently sitting on 25% cash, 25% income and 50% equity. Most everything I own is in some shape, form or fashion is kicking off an income stream with the exception being cash (little income here). Most that read my post know that some of it will be deployed for an anticipated return opportunity when the right set up appears in the equity market (S&P 500 Index or S&P 1500 Index). Even if I sit tight through the rest of the year with my cash and do nothing more with it I have more than doubled what I would have made off interest at the old CD ladder annual rate of about five percent. That’s right … thus far this year alone I am up better than ten percent form my special cash allocated investment profits.
I wish you well with your recent net long position … Please know I am also net long in my equities. We will see how the summer goes as I am looking for a five percent perhaps even a ten percent pullback … something bad happens … an even greater pull back ... perhaps twenty percent or more. This is why I am holding a larger cash position than normal. As Catch 22 says, we are living in interesting times.
My best to all,
Skeeter
PS. I am now on an early extended vacation as I work off some of my accrued benefit time over the coming months before I retire. I will still be on the board from time-to-time but not as often. If you ping me and I don’t respond it is because I am out of pocket ... and, no where close to a computer.

Can someone in-the-know give us more details on this fund? Yahoo lists an inception date of Aug 11, 2000 for this fund, but gives no dividends or capital gains, which is suspicious. Touchstone's site lists A,C,Y, and Inst shares, but not Z. I wonder if this was an Old Mutual fund that they acquired/merged?

Just as a reminder.
Four profiles, three of them updates. I'm going to try to update all of the old profiles in rotation, as well as add some new funds. My recent flu goofed the plan slightly (Osterweis and Huber got moved to June), but I've done a pretty thorough rereading of Amana Developing World, Artisan Global Value, and LKCM Balanced. We've also added (at your request!) FMI International.
A new "best of" column, featuring financial news aggregators. Junior identified two good human-curated sites. Many of your know, and work with, Abnormal Returns. David Sherman of Cohanzick, adviser to the RiverPark Short-Term High Yield fund, recommended Counterparties.com. It's a new site from Reuters and does good work.
Beyond that, a story about an old friend (remember the Technology Value Fund, titan of the 90s) that's morphed into a new form (publicly-traded venture capital fund, but with the same team). Through mid-April, they made either 3% or 175%, depending on when you got out. Also a small rant about the lackadaisical response by fund companies to dwindling public interest and a cheerful discovery: RiverNorth is partnering with Manning & Napier to launch an intriguing hybrid.
For what interest it holds,
David

Hey rono & OJ,
I have held GASFX which seem to be somewhat a NG play. It has enjoyed recent gains as the price of NG has slid. GASFX is a combination of energy and utility companies that provides a dividend of 2.41%. This dividend has help lower the funds volitality while at the same time has a concentration of stocks in the fund...the top ten holdings make up almost 50% of the fund. Cheniere Energy is out performing 110% YTD while most of its other holdings have not broken out to any significant levels.
I wonder if the Export side of this industry (LNG) might be a good way to take advantage of the pricing advantage we have verses the rest of the world.
The Coming Utility Surge:
http://online.wsj.com/article/SB20001424052702303863404577283650908288014.html?ru=yahoo?mod=yahoo_itp
Here's a short video on the GASFX fund:
"We are the Saudi Arabia of NG"
http://www.thestreet.com/_yahoo/video/11230037/gas-utility-index-fund-piping-hot.html?cm_ven=YAHOOV&cm_cat=FREE&cm_ite=NA&s=1

Howdy folks,
Natural gas is starting to move and it's time to start scaling in . . . time to make a few bucks. Nat gas has been a $4-5 item for ever but in recent months got down just under $2. It's not bounced back and is around $2.38 as I write.
How best to play this commodity and get the most leverage is the nut question.
If you want to make a momentum play, it's relatively easy. Decide that a small percentage of your portfolio will be 'play money'. For ease of instruction, I'll use $10,000 as your mad money. When you see a divergence in a particular sector, segment, region, whatever, watch to see if it continue to diverge for the norm. If it does and looks interesting, make an initial play of 25% of your intended investment or, in this case, $2500. Now watch it and see what it does. If it loses, use a 10-20% stop loss. If it stays flat, keep watching it. If it gains, add another $2500. And watch it. If it continues to go up, add the rest. Now, use that same mental stop loss of 10-20% as a signal to start scaling out when the price breaks and the trend ends.
Enough of school.
How do you kids think we should play natural gas?
peace,
rono

Reply to @MJG: i agree, judging from my own experience and that of others, that wisdom, if it comes at all, comes with age.
40 yo demand is quite arbitrary however. While I understand your assumptions, not everyone's career path and experience is identical. Having lived through the latest recession and a huge credit contraction could affect the younger manager's judgment more than the older one's similar length experience in the 90s. Also, some people never learn. John Meriwhether's Long-Term Capital had all the right models and assumptions for the relatively safe arb strategies. He was right in the end, and his trades made money, but AFTER the fund was bailed out as his leveraged positions were considered systemic risk. He then open another fund -- totally identical to LTCM, but 2-3 times leveraged instead of 8-10. He treated his LTCM experience as a 100 year flood and didn't believe in the repeat. And then 2008 happened. So overconfidence is a problem that might not go away with age. Also, as was (or wasn't) mentioned before, luck, investment culture, discipline in taking either gains or losses, corporate set up and support etc. etc.-- contribute to the manager's success. In terms of women being calmer investors, i witnessed a PM so calm that her financial hedge fund rode many of her favorite longs all the way to zero. You could argue that a male PM would have cut his losses at some point or gone short.

Hi Catch22,
Ok, let me state this another way.
Because of the higher yield found in the Federated fund, FMUAX, will have a higher payout to your pocket while USBLX will have the higher total return of the two with greater capital appreciation but with less money paid to your pocket over the referenced time frame of one, three and five years. It is true, at some point in time, with USBLX's ability to grow it's principal faster, it's payout while lower will evenutally catch up to that of FMUAX's payout, and even pass it, most likely at some time in the future. But, over the given time frame referenced FMUAX's payout in the form of yield, income generation, will be higher.
Form where I come from ... Yield is defined as the income that is generated from an investment; and, a higher yielding investment will pay out more income than a lower yielding one.
Perhaps this made the mud more clear ... perhaps not.
Have a good evening ...
Skeeter

"The so called gifted are created, not born. Practice has the potential (not the certainty) to make perfect. That’s a healthy lesson. ..... In Ericsson’s concluding section, he writes: 'We found no rigorous reproducible evidence that innate abilities, excepting height and body size, prevent healthy individuals from attaining expert levels of performance.' " -
MJG, Surely you don't mean to say any healthy child given the right parenting and education can attain equally "gifted" levels of accomplishment? All my 60+ years of life experience tell me that is not the case. I'll submit that stand-outs in their fields like Einstein, Hawking, Picasso, Bach or Mozart owe at least part of their high achievement to innate inborn traits - not to diminish the important role parents & education play.
As for selecting a fund manager - I suppose age, sex, & other human factors might conceivably affect attitudes or abilities in some manner. However, I believe by far the most important ingredient here is the investment "culture" within the firm through which said investment manager emerges. If invested in T Rowe Price's Capital Appreciation fund, I can be pretty certain of having a highly competent individual at the helm and that he or she will pretty much operate according to the charter they are given. In this case, I won't worry whether it be male or female or whether the person be 35 or 65 years of age. Sure, the company can change (we need to remain vigilant) and they can screw up just like any of us. However, I'll trust them and their processes (over my own abilities to screen a manager) until they provide reason not to. Just my 2 cents.

Hey There Skeeter,
You noted: "If money in your pocket is important, one might wish to look at how much the fund also puts in your pocket along with its total return."
Okay, you got me go'in down the road of confusion with this.
Total return is total return, yes? Be it from yield and/or capital appreciation or the combination.
Example: Two equity/income funds have a blend of equity and income holdings, with each having different yields at any given time, over a period of time.
It is possible that both funds could have near identical "total returns" over a period of time. But this doesn't indicate that one fund is better than the other from looking at just the yield.
Regards,
Catch