Tough call. Had a poster here a month ago recommending oil at $58 as a sure-fire bet.
Come to research past posts, and he'd been buying at around $90 a month or so earlier (but said he had "shorted out" of that position as WTI continued falling.) Today, it's closer to $48.
Deflation is the biggest wild card here and my crystal ball on that subject is badly shattered.
Based on past cycles ... oil will recover nicely at some future time (measured in years rather than decades).
---
Caught T. Boone Pickens on CNBC this week. He's thinking oil will drop to the low-mid $40s in coming months - but than rebound to $65-$70 by year's end as the effects of domestic curtailment in production take effect and remain around that level. Recommended waiting a bit longer to buy. I've also commented before that it won't hit $40 - and am sticking with that bet. Even at lower prices, major suppliers, like Shell and Exxon, may prosper - as the stuff still needs to be moved, stored, and sold at retail. Unlike the well-head cost, those costs are relatively fixed.
---
I'm overweight this sector and so wrestle with the things that could go wrong. Among the unknowns and worrisome possibilities:
-Continued global price deflation
-Global warming (and a shift away from fossil fuels)
-Fracking (more of it and at lower cost)
-Alternative energy sources becoming more cost competitive **
-New technology to extract more energy from a gallon of fuel
-Less reliance on traditional forms of transit as drones and automated/driverless vehicles expand.(Driverless vehicles would consume less fuel for a number of reasons - especially if carrying no passengers))
-Use of lighter-weight industrial materials reducing the amount of energy used to transport them.
**Alternatives: solar, wind, hydro (especially tidal energy), geo-thermal, hydrogen (which can be extracted from water, but at great expense) and advances in nuclear which will reduce or eliminate the hazards commonly associated with it.

I not only disagree with this Josh Brown, some of what he is saying is total BS. Take a look at the chart of PTTRX right after Gross made the call. There is a marked difference away from the aggregate bond index, but following that a marked difference toward the index. What about all the correct calls Gross made for so many years?
Everyone is an "expert". They know the "one thing" that caused Gross' downfall. Assets went down from 290B to 220B, right? WTF made assets go up to 290B in first place? Gross had nothing to do with it?
Let's be honest here. Gross may not have been Puss N Boots, but no one had any trouble with him as long as PTTRX assets, if not its performance were in an upward trajectory. I would hardly call Gross an underdog, but I'm starting to think he was not the only "problem" at PIMCO. They can't say "we were already contributing to the investment decisions" AND then also blame Gross completely for his "bad call" on treasuries. This is the same as capitalizing profits and socializing losses. Not to mention, all individual investors are idiots for chasing performance, but when institutions do it after Gross's "bad call", there is no focus on it.
I'm sticking with Robert Arnott for PAUDX in the IRA. I've already reduced my PTTRX stake to 50% of what it was in the 401k. I'm putting my PGMDX stake in IRA on notice. El Erian didn't do diddly here because he was allegedly cleaning up Gross' s*** that he was tired of doing, instead of cleaning his own. Now that I learn Mihir Worah is a nuclear physicist, it might be prudent to look for manager with PhD in finance. Not to say I have anything against physicists, but I typically don't hire them to manage my money.

"iShares also plans to shut......a nuclear energy ETF (NUCL)....."
May I ask who the genius was who thought a nuclear energy ETF would be a good idea, or would be successful. Apparently the etf industry defines a successful etf as one that has at least 100 million in assets. In a nuclear energy fund?
"Pimco also will launch three new funds, including a product managed by the firm's chief investment officer Bill Gross. The fund will be called the Fundamental IndexPLUS AR Active ETF. It's based in part on an index licensed from Rob Arnott's Research Affiliates, a “smart beta” proponent."
Do you think they could come up with a name that would tell the investor more?
Like, what the heck is AR? Does it refer to Research Affiliates? Rob Arnott?
How about calling it RA instead of AR?
And what's Bill Gross doing managing an active stock fund? I know the PLUS part seeks to juice returns I believe thru investing in bonds, but Bill Gross managing stocks?
I guess wait till the prospectus comes out

Just watched this. Interesting. Talk about contrarian investing! He puts forth an intelligent case for investing in China, nuclear power, clean water in China, gold, commodities. He points out that China has an economy growing 3x faster than ours, with stocks that are way cheaper. He names his favorite China ETFs, as well as specific investments for all his themes. To invest with him the minimum is 500K, but you can easily replicate his strategy as he gave the specific investments.

Oppenheimer senior energy analyst Fadel Gheit said the oil stocks are overpriced and are trading as if crude was going to stay at $110 per barrel.
"It really depends on what the balance of power is going to be a month from now, a year from now," Gheit said. "The Sunnis are left basically with nothing but arms because they were excluded from the government. They have no oil resources. The Kurds took their share, and the Baghdad government wants to keep their share. Maliki is not an inclusive prime minister. he's doing what Saddam Hussein did but the opposite way. He favored his own tribe over another."
An Alarmist's Worst Case?
As the second-largest and fastest-growing producer in OPEC, Iraq has been pumping 3.3 million barrels a day. OPEC's quota is 30 million barrels. So far, oil production has not been disrupted, but a northern pipeline that takes oil from Kirkuk to Turkey has been damaged by militant assaults and has been out of service since March.
"If they can hold onto Baghdad, and the south of Iraq, 3 million barrels will continue to flow and it won't be a big deal," said John Kilduff, energy analyst with Again Capital. "Any credible threat to central Baghdad or the oil fields— it's $150 just for starters."
Kilduff said any spike higher would probably fade quickly, but consumer confidence would plunge, and it would launch an energy crisis because Saudi Arabia, the global swing producer, cannot make up that much lost capacity.
Originally here.
http://seekingalpha.com/news/1803223-some-analysts-say-energy-stocks-are-getting-too-hot
More detail here.
http://www.cnbc.com/id/101763888
Other Energy News and Background.
BlackRock’s Russ Koesterich thinks energy stocks will benefit:
The recent unrest in the Middle East and the potential for higher oil prices confirms our views on two sectors: positive on energy while negative on U.S. retailers and other consumer stocks. Year-to-date, energy has been one of the best-performing sectors while consumer discretionary has trailed the broader market.
http://blogs.barrons.com/stockstowatchtoday/2014/06/16/buy-energy-sell-consumer-discretionary-as-higher-oil-prices-set-to-linger/
I have energy positions in GAGEX ,CRZAX ,CSHAX and NORW.Also two small Canadian plays CDLRF and CESDF .All are at or near Y T D or all-time highs. Blind Hog !
Energy Statistics and World View.
Oil remains the world’s leading fuel, with 33% of global energy demand, but lost market share to other fuels for the 14th consecutive year.
China surpassed the U.S. as the world’s largest net oil importer, bringing in 7 million barrels a day.
Coal consumption increased by 3% in 2013, below its yearly average of 3.9% but enough to put coal’s share of world energy consumption at 30%, its highest since 1970, BP said in its 63rd annual statistical review on Monday. The review is an industry benchmark.
http://blogs.marketwatch.com/energy-ticker/2014/06/16/renewable-energy-demand-rises-to-record-2-7-of-global-consumption/?mod=WSJBlog
For 63 years, the
BP Statistical Review of World Energy
has
provided high-quality objective and globally consistent data on
world energy markets. The review is one of the most widely
respected and authoritative publications in the field of energy
economics, used for reference by the media, academia, world
governments and energy companies. A new edition is published
every June.Highlights:
World proved natural gas reserves at end-2013 stood at 185.7 trillion cubic metres (tcm), sufficient to meet 54.8 years of global production.
Total world proved oil reserves reached 1687.9 billion barrels at the end of 2013, sufficient to meet 53.3 years of global production.
World proved coal reserves in 2013 were sufficient to meet 113 years of global production, by far the largest R/P ratio for any fossil fuel.
World coal production increased by 0.8% in 2013, well below the 3% increase in global consumption. Indonesia (+9.4%) recorded the largest production increment – the
first time since 1998 that China did not have the largest growth increment. Global consumption growth was below average but was once again the fastest among fossil
fuels. China and India accounted for 88% of global growth
World nuclear power generation increased by 0.9%, the first increase since 2010. Gains in the US, China, and Canada more than offset declines in South Korea, Ukraine,
Spain and Russia. Global hydroelectric output grew by a below-average 2.9%. Growth in China, Russia, Spain and India was partly offset by large declines in Brazil and
the Nordic countries
48 Page Review:
http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf

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

Hi Dex,
I believe I fully appreciate the primary thrust of your personal questions.
Who is this MJG guy? Does he really know anything about which he writes? Is he fair and honest in his market viewpoints and analyses? Is he trustworthy?
The Internet is a terrific resource; it is a world of information within almost everyone’s grasp. But that ease of access also encourages charlatans and swindlers with their false representations. Credibility is a daunting hurdle that is difficult to jump with these brief exchanges.
On MFO, I have tried to satisfy that natural skepticism by carefully documenting my posts with applicable data, reliable references and elongated explanations. A few MFO members complain about the length of my posts.
I try very hard not to make unsupported assertions. As my earlier correction testifies, I do not always succeed. I have been posting on MFO since its inception, and for many years on its FundAlarm forerunner. I will stand on that record and its consistency.
I’m not 60 years old; I am 80. I have been investing since the mid-1950s and actually attended Columbia University while Benjamin Graham taught there. Our paths never crossed.
Our family income must only support myself and my wife of 53 years. She was a military bride. Our kids have been on their own dollar for a long time, and they are all doing quite well. Although money was very tight earlier in life, we have no financial issues or worries presently. I make no smart investment claims. Our family has been prudent savers, conservative, and lucky. Like most others, our family has shared both lucky and unlucky experiences. We lost a son to cancer.
Every generation experiences a similar set of good fortune and hard obstacles. The world will always be a dangerous place. I vividly remember many more challenging wars with greater sacrifice demands than the current conflicts. I remember double digit inflation in the 1970s and long, exasperating gasoline lines.
I don’t find the current world situation to be particularly threatening. That’s especially true if one contrasts the present miniscule nuclear threat against that which existed in the 1960s. In that decade, the USSR targeted tens of missiles against every major US city.
I too share some of your concerns about today’s political dysfunction, but that is something that I can’t control. Therefore I will adjust and survive.
Both my wife and I collect social security benefits and have separate company pensions. With just a little spending adjustments we could likely live on that income alone.
If I had one million dollars today, my portfolio would depend on my age and my risk profile. If I were 30, something like 75% of that million would be in equities and hard assets. If I were 50, about 60% of my holdings would be in equities and hard assets. Diversification works.
These are grand generalizations and need refinement based of specific preferences. Other MFO members are much better qualified at assembling detailed portfolios, so I defer to their superior talents.
I still believe that the US has a bright future. Be patient and persevere. You will win the battle; we will win the battle.
Best Wishes.

Hi JohnChisum,
I posted this previous:

1. Kill the value of the Yen.....inflating import prices on all products.
2. A new sales tax to take place in April, 2014

Their currency being killed is going to raise inflation; but that doesn't spell success in a business sense...IMO.
Also I did not look for the link; but recall from a few days ago regarding Japan and record imports of LNG mostly for power production to offset the loss of the nuclear site.
I'm not assured that their current central bank plan is going to be of any value; and hopefully our government will not look towards their plan as a continued method in this country.
Take care,
Catch

Reply to @scott: Good points. On the energy front, that's why Japan invested so much in nuclear energy. Fukushima placed a dark cloud on that. This one of things that we will not know the outcome for some years. Either this will be the beginning of good times for Japan or it will be another blip on the history timeline.

Another excellent commentary by David. While most of my holdings do not match what David has espoused on this site, I have tried to diversify my portfolio even further and I believe I have succeeded, in part due to what I have picked up here. While it is too soon to know what the ultimate result will be, the commentary does mention that even during cycles of what are called stupidity on the part of managers (and investors), as long as you have done your due diligence your picks will bear fruits.
I was very interested in the Japan commentary. I have only been to Japan twice in 2013, and will be there again in a short few months. All visits are to Tokyo. While Japan has been buffeted by the earthquake and resulting tsunami which led to the Fukushima nuclear accident, I still get the feeling that Japan is very resilient. The energy in Tokyo has never ebbed from what I could see and I would imagine that The Kansai region is also sharing the same energy. One additional story regarding Japan's defense structure; The Philippines has been at the front of the China squabble over land and ocean territories. There is no way this small country could stand up to China. The US has promised their support but the biggest news is that Japan has promised money and equipment to boost the Philippines defense forces which are very weak. This included the full backing of the Japan Defense Force if needed. I'm sure China noticed that gesture. The world is responding to China and clearly they are saying, "back off."
Once again to David, thank you for a great year and your expertise you share with the rest of us.

Be careful of what you ask for. US economy is built to a large extent on financial illiteracy and serious lack of future planning. Trying to change that will have significant impact on the economy requiring a redesign of consumption based economy, the treatment of capital vs labor, etc.
Every one of us here who are benefitting from the capital markets and depending on it for retitement are doing so arbitraging the inefficiencies of illiteracy. Good news is that educating the masses is not an achievable goal.
In a world where financial literacy is the norm:
1. Real estate markets would collapse when people really understood leverage and effective rate of return without being hindered by emotional feeling regarding home ownership.
2. Retail economy would go into deep recession as people realized how little they can afford to spend the way they are spending now and realize how they can live with much less so they can sock away more and convert human capital to financial capital as quickly as possible to play the only game in town.
3. Favored treatment of capital over labor in taxation and policy would be reversed as masses realize how depending on human capital for retirement was futile and that everyone cannot acquire sufficient financial capital unless they earned more and not just saved more. Margins for consumptive goods would collapse as companies get a double whammy - increasing labor costs and decreasing consumption. Apple would go out of business.
4. Industries based on managing other people's money would collapse as only a few would feel the need to outsource it.
5. Retail banking as it exists would be destroyed as people deleveraged and started to live within their means and demand for loans and credit disappeared.
6. Technology sector would be decimated as venture capital would find itself over invested in companies with no exits and advertising that requires financial illiteracy to create value would no longer support companies' business models. Teens would no longer idle away their time on social media as they learnt the financial value of time. Snapchats would themselves become ephemeral as companies.
The world after getting through the above might be a better place than what we have but getting through that will be worse than living through a nuclear war for a whole generation.
But the chances of that happening are miniscule since mass financial literacy is an unachievable goal. You should be thankful for that.

Hi Guys,
I truly do not understand the reluctance of a few MFO participants to consider adding Monte Carlo methods to their financial toolbox. It is a powerful tool with unique capabilities and is specifically designed to address complex and uncertain issues. Offhand dismissal of the technique is not a sound strategy.
Monte Carlo formulations have a distinguished scientific history. Enrico Fermi used it to model atomic neutron diffusion in the 1930s. Stanley Ulam and Johnny von Neumann formalized the tool when developing nuclear fusion algorithms at Las Alamos, New Mexico in the early 1940s. The technology was given the Monte Carlo name because it was a secret World War II project.
It was slowly introduced into the financial and investment community as computers became cheaper and more accessible. Nobel Laureate Bill Sharpe made the tool available to the general public with his Financial Engines website in 1996.
Here is the Link to the website: http://corp.financialengines.com/
Take particular note of the financial institutions that use the Financial Engines toolkit. The extensive listing is literally the honor roll of the investment universe. That is a well recognized accolade for a tool that helps in the decision making process for modeling very uncertain events.
The three major mutual fund houses (Vanguard, Fidelity, t. Rowe Price) all offer a Monte Carlo simulator. Financial business entities all deploy various types of Monte Carlo programs to facilitate and to formalize their decision process. Private Monte Carlo codes are accessible to individual investors from numerous sources. The Monte Carlo simulator is ubiquitous throughout the financial industry for solid reasons. It yields guideposts for uncertain investment decisions.
I have mentioned my favorite “The Flexible Retirement Planner” in earlier postings. Here is the Link to that excellent resource:
http://www.flexibleretirementplanner.com/wp/
I also like “Moneychimp” because of its simplicity. Here is the Link to that tool:
http://moneychimp.com/articles/volatility/montecarlo.htm
If you are not comfortable with pure Monte Carlo codes, you might like a different approach offered by Firecalc. That site uses actual historical returns with structured starting dates to generate a set of equity returns. Here is the Link to that website:
http://www.firecalc.com/
I am constantly amazed at how quickly an investor can explore his retirement possibilities and pitfalls.
To illustrate, I’ll use The Flexible Retirement Planner to explore three retirement dimensions. As a baseline, I’ll postulate a portfolio with a 7.5 % average annual return with a 13 % standard deviation volatility. That’s representative of a 60/40 equity/bond portfolio mix. I’ll assume a 30 year portfolio survival requirement with an initial $40,000 annual drawdown need (these programs adjust for inflation; I selected a constant 3 % level).
First, I’ll postulate initial nest-eggs of $500,000, $750,000, and $1,000,000, all in taxable accounts. For these starting conditions, the Monte Carlo analyses projected survival likelihoods at a disastrous 2 %, an unacceptable 31 %, and a highly risky 68 % rate, respectively. That’s a significant and appalling insight. Retirement is not a good idea.
Second, how much of an improvement can I anticipate if I cutback my annual withdrawal rate to $35,000? Again, for the $500,000, $750,000, and $1,000,000, portfolios, the survival probabilities become 7 %, 50 %, and 81 %, respectively. I’m still not sanguine with these likelihoods. Still too, too risky.
These simulations suggest that I should delay retirement until I acquire a larger nest-egg. How much does a $1,250,000 portfolio enhance the odds? The survival prospects increase to an attractive 94 %. Patience will be rewarded.
Third, s few sensitivity scenarios are worth exploring. For example, what is the deterioration to the 94 % success likelihood if the portfolio only provides a 7.0 % annual return rate? The Monte Carlo code generated a respectable 91 % survival probability. That output suggests some robustness to the plan. What-If scenarios are easily examined on these Monte Carlo tools.
This entire analytical sequence took about 15 minutes to complete. The study is surely not exhaustive, but serves to illustrate the instructive power of these Monte Carlo programs.
Indiscriminately tossing the Monte Carlo codes away as not trustworthy or useful is shortsighted and misguided. These tools certainly can not predict future investment returns; nothing and nobody can. But they do provide guidance and awareness of the risks associated with numerous investment and retirement decisions. In these uncertain environments, Monte Carlo probes can be deployed to estimate the success/failure odds and to discover approaches that can enhance any troublesome odds.
Monte Carlo will do workhorse duty for you if you just give it a test ride.
Your comments are always welcomed.
Best Regards and Merry Christmas.

I was in India a few years ago and while cities appear to be growing, the lack of infrastructure is apparent everywhere. Electrical power is not lacking and the socialists are in total control which limits new investments. Oil prices are hurting economy, so they need nuclear, but can't afford the subsequent rates required to finance. Imho, they need a dictator to run country for 10 years to get country on track. Everything I read on Bloomberg indicates that repeat of 1991 crisis is likely, rupee will keep crashing until elections May 2014. Hopefully, Matthews has taken this into consideration on stock picks there.

Not for short term investors - could do anything over next few years. I've dabbled before but am getting too old for this one - so don't own. (1) The new PM is hell-bent on getting inflation up to 2% a year within next couple years. He has the popular backing to basically run-over their conservative central bank - so will probably get his way. Some economists think this may be enough to rekindle the economy after 20+ years of deflation - essentially a permanent state of depression.
(2) A second "loose ball" here is the growing dispute with ancient enemy China over a group of small uninhabited islands (in a chain which includeTiawan). Recently both scrambled fighter jets to the area, but calmer heads prevailed - for the day anyhow. Interestingly, the islands offer a vantage point of China's nuclear subs departing the mainland for long missions. As such, China has a keen strategic interest in taking control. Looks like this situation may rekindle Japaneese nationalism and militarism. Now, how would a big military buildup affect Japan's economy? My guess is it would be good for it - short term anyway. Catch, if you invested in Japan it would be a far cry from your old conservative fund boat mantra. Plays on specific foreign nations or regions are inherently more risky than more diversified funds. Take care.

---The original bailout; past all of the nasties of financial institutions and associated, being their practices and morals, was likely needed to prevent full blown financial chaos, meaning and including, limited access to your electronic investment dollars, which are a series of 1's and 0's residing within a server.
Central bankers, governments all around the globe and companies.....growth, growth, growth.
Is economic growth a substitute for having a happy family and a quality life; full of gotta have it things? Some amount of wealth surely can contribute to an individuals/family opportunities to advance their position in society. The marketing folks, which include more than those at QVC, HSN, Walmart and related, are found happily at their work in many U.S. federal positions, too. The congressional folks are always marketing this or that; and this would include the current actions of the Federal Reserve; and the chairman, more so. And a U.S. president thinks they have power, eh?
So, is the pure mandate of an economy and those involved; to shape policy for, growth at any cost? Has such a model provided much benefit in reducing poverty or adding equality among population groups? While this may seem an "off-the-wall" note related to investing; many of these actions on a large enough scale or as a cumulative cluster of monies always affects people and for we here, the investing cycles. One must consider whether this grand experiment in current monetary policy may indeed, "Burn down the house" in the name of growth and a lower unemployment rate that may have entered a phase of economic cycle that is "now normal". Japan is still working on this model; although most of their debt is internally owned, unlike the U.S. The Federal Reserve and Treasury are working on this, too; and may indeed own most of whatever resembles the U.S. government credit markets, going forward.
The dog, spinning in a never-ending circle, we know; never really may catch it's tail, regardless of the size or speed of the dog. A continued "bark, bark" does not help.
Perhaps the ultimate goal of a central bank, in the developed countries; should be to determine (if this is possible) how much monetary stimulus could help a given economy during times of stress, and merely issue monies, tax free to each and every citizen who is of legal status to that country. Based upon data believed to be correct; during the past 4 years about $3.2 trillion of Fed. Reserve actions have been put in place, against a U.S. population of about 316 million. The math indicates about $10,127 per capita or a family of 4 receiving a little over $40,000 during the last 4 years. Yes, some of this money would be wasted from poor decisions; but much of it would have been spent properly and likely generating income for businesses, who in turn may have hired more folks; and all involved would have paid more in taxes at a federal, state and local level.
Alas and meanwhile; the dog chases it's tail.
Final notes, and not all inclusive; by any means, in no particular order.
--- 1995 brought NAFTA, GATT and the World Trade Organization via a lame duck congressional session.
--- Mr. Clinton.
Mr. Clinton publically declares that Glass-Steagall is no longer relevant.
--- Grant money. Check around your community/state for projects pending or in place; and review how much of the funding monies are in the form of a federal grant. Yes, work is created; and numerous projects are valid, but too many are not. When a community (a true event from about 3 years ago in MI) could not support 10 local and private art "centers", then the local economy has spoken. However, the U.S. district congress person was able to "enable" grants monies to help extend the dying entities. A news story on the same day noted that the local food bank was "empty". Money, not well spent; for the sake of the arts, in my opinion.
--- Silly spenders. Ah, congress and the government. One may not deny that there are those with the truest of hearts and intentions roaming around the streets of D.C. But, they do seem to become derailed in clear thinking, sometimes. I will only note two items. Fuel from corn and/or bio-products is one such area. The cost and benefit, from my knowledge is to the downside. Okay, a new market for corn is in place and some jobs have been created. The downside of the E85 blend is problems with use in older engines of all types (sludge formation, causing numerous problems) and take a look at a new vehicle sticker to find the mileage notation when using an E85 fuel, versus traditional unleaded fuel. Say what, it is lower MPG; can't be. Lastly, and an example that crosses many people and places over very many years and not solely directed at this person; is the "bridge to nowhere in Alaska". Come on D.C. people, why don't you all just act properly? Oh, wait there is more.............I almost forgot about the lobby folks in D.C. Talk about stimulating the economy. Well, at least in D.C., for the restaurants and hotels.
--- FASB.
Hey, let us change the rules for bad assets....cool, let's do it
--- Derivatives.
A few trillion among friends, all is well; don't worry, be happy
But, wait; there's more, the infommercial stated
--- Bernanke, May, 2007.
Mr. Bernanke, FRB speech, May, 2007
Mr. Bernanke statements, May, 2007....."But I believe that, in the long run, markets are better than regulators at allocating credit."
"All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable."
--- Fight fire, with fire ? Los Alamos, NM got lucky with a best guess method. Hoping QE's to the Nth power may be as fortunate.
May, 2000
May, 2011
--- Free market capitalism. Ah, words that are uttered by some on the great television tube and in print. There are some folks who do reside in free market capitalism. Those being the reported 30 million nomadic peoples of the planet and those who are in, or moving to the underground/barter economic systems in developed countries. The reminder of peoples are moved and stroked by sometimes perverted and corrupt monetary and political methods.
--- Low interest rate environment. We know the low interest rate environment is face slapping the many who previously relied upon the world of CD's and related money markets to generate some extra income. The side effects, not unlike the medication commercials on tv are too numerous to mention. A few areas of the negative side are: The aforementioned CD/money market downside. Pension funds and insurance companies that have to alter their plans going forward; and moving to the "riskier side" with investments (hedge funds, private equity, etc.) One side effect is that many long standing policies/insurance companies that provided long term health care plans are no longer offering such policies, either to companies for employees or to private citizens, as investment returns can no longer match the growth rate of health care. Hot money moving into whatever, many times being commodities and resulting price increases; whether the price increase should really be driven with pure and natural demand. Two side effects of this are higher prices for the consumer and perhaps lower earnings for companies who at least trail with price increases; and if they do not, their profit margins suffer.
The end results of low interest rates, may be the opposite of any implied benefit.
No, part of this is not a Mr. Bernanke bash. In theory, he fully expects this grand money experiment to have a happy ending; in order, that history may judge him in a favorable position.
And you are correct, you did not volunteer for this experiment either.
Our house wishes all well going forward with the investment pursuit.
I am finished.
Regards,
Catch

Hi OJ,
This may be a bit of a tangent note about the "what is competitive".
I must note that I do not have fact or data evidence to support anything.
Greece and/or other Euro countries have certain skill and engineering sets. I recall that Spain does piece work for Boeing, and Italy has a decent industrial base. France has been building autos for years; let alone nuclear units and safe high speed trains.
Obviously, the list is probably very long if one were to dig into a formal study.
However, as the $Euro is the common money of that region (countries/states); not unlike the $U.S. here (states), I will make an observation, that to me; has some linkage.
For Europe and the auto industry. Germany, France, Spain and Italy all have unions for various auto industry functions. I don't know (no facts), but will presume the wage scales are the highest in Germany; and add the blends of benefits, the total work cost/wage package suits the prevailing wage of a given country.
The same now applies to the U.S. U.A.W. union jobs in some states for the auto industry and not in other states. The exodus of auto manufacturing started many years ago with some U.S. work moving into southern states. European auto companies also made the same moves. Michigan and other union auto manufacturing states did not obtain this new work. So, the work; although not all union as perhaps in Europe did seek a wage scale deemed suitable by a company.
A big hmmmmm....eh?
The cost of labor is the easiest to measure.
A final nail in the shift of the cost of labor, at least in North America; was the passage of NAFTA, then GATT and tie into this the formation of the WTO. The time frames of these massive global trade acts began the end of the end of manufacturing as it had been known in this country for 100 years.
Relative to auto production; many component and final build centers went to Mexico. Throw in the technology and cheap labor from other countries and wham-o.
And don't ask about WTO, cause it is all a secret court system.
These battles exist today in MI, as well as in this country; let alone the Euro areas, too. I will presume the existing infrastructure that was available could have suited an auto company moving to MI, but I must consider the cost of labor was the biggest part of the equation to not locate in this state.
Technology places another final nail into the cost of a product, too.
The U.A.W. finally came around to a two tier wage scale, and I suspect this saved some work in MI.
Lastly, a few weeks ago I noted that I may purchase a Chrysler or Dodge mini-van built not too far away, in Canada. The name plate and world headquarters is located away and outside of Detroit, the company is owned by Fiat of Italy and many components for final assembly may come from 20 different other companies around the globe.
This is about as competitive as it becomes, eh?
I suppose the true measure is always going to be to the bottom line of a given company; and the workers are to some of the money counters, just a needed and measured piece of the total money pie.
I don't know that I really said much related to your original post; as I am a bit on the sleepy side of life tonight. Perhaps a few pieces were worthy.
Away to the pillow I must be.
Take care,
Catch

Hi Catch,
I have some comments that I will make and in making them perhaps it will provide some insight into my thinking and my practice that will provide some answers to the questions you raise without a direct response to any of them.
First, I believe every investor needs to establish their tolerance for risk along with setting some goals they wish to achieve through investing. Their portfolio needs to be tailored along these lines. For me, I am willing to invest in assets of the moderate risk type that offer income generation stream and also provide for the opportunity of some capital appreciation over time knowing in some periods there may be some negative appreciation along the way (decline in price).
Second, I believe what one pays for securities has a great deal of bearing in making money. Indeed price is important. I follow the practice I learned from my late father. When equities are towards their 52 week low most likely they have become over sold from fear and good buying opportunities can be found. Dad had a strong will and would not buy unless he felt he was receiving good value and his portfolio was built over time … not over just over a few years. He would not chase an up trending market. If he had not already positioned for an anticipated rebound he sat it out. To him, this was investing spreading his activity out over years. In trading there is the desire and rush to get rich quickly. I read about too many folks trying to trade their way to success. I do not know of any of my friends that have found success through day trading. And, one of them was a very smart person, a nuclear engineer by profession that felt he was bigger than the market through way of his intelligence. Lost most of his 401k money and with that committed suicide. So, the bottom line, don’t over pay for what you buy and buy it with some conviction. I invest mostly for total return … Investments that offer some capital appreciation and pay dividends. An important feature I like to see in a company is that it has a history of raising these dividends to their investors as they grow profit. This is not to say that I don’t have some fixed income as I do and I believe there is a place for it in every portfolio.
Third, I believe a good investor can recognize a market top. A simplified way to do this is once equities are approaching their 52 week highs perhaps they have become over bought from investor enthusiasm. I have observed many of my family members only buy when they feel equities are on a good upward roll and become mystified when they discover they have over paid now that the market has begun its decent. Actually, I use to use my aunt as a sell indicator. When she started to buy, I started to sell because she usually committed her money after equities had had a good strong run and from my thoughts they had become overbought.
Forth, I believe all investors should keep some dry powder, cash, to seize upon opportunity.
Fifth, I believe one should not invest one’s cash reserves held for emergency. They should be held away from your portfolio and not comingled with other cash assets within it. Once you have built an emergency fund … and, only then, should one consider investing. After all, investing entails certain risk. It offers the opportunity for gain as well as the opportunity for loss. And, most of all, I believe one should govern and invest accordingly and within their abilities.
This is how we do it in this house hold. And, in stating the above, I am not saying this is by any means the right way for all.
I wish all … whatever your investing style and skill might be … “Good Investing.”
Skeeter

This is our largest single holding. MDW has had it for 4+ years.
I think straightforward is what they were going for. Stuff that is inherently bad. Tobacco and liquor aren't inherently bad as they can be fine in moderation. Financials aren't all bad. Some people are swindlers and some aren't. I'd say that it's the really bad ones (Madoff) that give the rest of them a bad name. Weapons aren't inherently evil. But in the hands of evil, they certainly are. They are usually good in the hands of policemen. I'm not sure what's bad about nuclear power. I think you are right when you said straightforward.

"Ave Maria." Hail Mary. Let's put aside the long-shot football reference..... About this fund family's flagship fund, The Ave Maria Catholic Values Fund: "The Fund practices morally responsible investing. This process is designed to avoid investments in companies believed to offer products or services or engage in practices that are contrary to core values and teachings of the Roman Catholic Church. The Catholic Advisory Board sets the criteria for screening out companies based on religious principles. In making this determination, the Catholic Advisory Board’s members are guided by the magisterium of the Roman Catholic Church and actively seek the advice and counsel of Catholic clergy. This process would, in general, avoid two major categories of companies: first, those involved in the practice of abortion, and second, companies whose policies are judged to be anti-family, such as companies that distribute pornographic material or whose policies undermine the Sacrament of Marriage."
At least all of this is straightforward, albeit selective. Roman Catholic values, though? Weapons, tobacco, liquor, nuclear, financials that are doing their best to rape the lot of us? Un-green fossil fuels? These are OK? Have these guys read any of the bishops' official statements lately? At least the founders had good intentions, I suppose. And what constitutes a threat to the sacrament of Marriage? (final phrase, above.)......... I looked at AVEDX, though. Its performance looks to be very good indeed. But you can't invest according to that statement above (which I suppose applies only to their flagship fund) and think that you can keep your hands clean.

Hi John and others,
Quote From your link:
interestng article for fix income minded investors
http://advisorperspectives.com/commentaries/pimco_92111.php
"...we place a lot of emphasis on downside hedging. Investors certainly want to participate in market upside, but, in our view, avoiding losses may have greater impact over the long term. Our belief is that no matter how strategies may perform in strong markets, if they do a terrible job during down markets, investors lose."
My Question:
What are some of these downside hedging strategies we all want to be aware of? I have to agree that losses have greater impact over the long term so how do you participate in the upside while hedging the downside?
Here is what I try to use as strategies:
I try to take profits (10-20% gains) from my temporary "alpha" investments and place these profits into a Total Return, Income or core Investments (PTTDX, TGMNX, USAIX, PFPFX). Most recently I took profits (20% gain) from a Precious Metal & Mining fund (USAGX) and established a position with these profits in USAIX (an Income fund)
I try to take profits (10-20% gains) from my "alpha" investments and place these profits into other out of favor Alpha Investments. Here, I reference other sector investments and its position in the business cycle. There are always out of favor sectors. Some can stay out of favor for a very long time so this reinvestment can feel like drag on a portfolio but if you bought it at an out of favor price with profits you have minimized the downside risk as well as diversified your portfolio. Patience is required to reward you with this investment over the longer term.
Here, I try to educate myself and then make some educated guesses as to what is a good value...out of favor. This could be a fund strategy or EFT strategy that is out of favor. FAIRX comes to mind as a fund (2 segments Banking & Real Estate) and PKN (nuclear power) comes to mind as a EFT. Right now FAIRX can be purchased at a 32% discount to its recent price. It may have some more downside but may be rewarded handsomely over the long term. Nuclear power can be invested in through PKN which is down 33% since the Japanese disaster. It also will be out of favor for the short term but may also be a big energy source for China and other countries.
What are you downside strategies?
bee