Up, up, and away. You’d almost forget the economy is, at best, flat, and, at worst, is taking a pause before another plunge. (We’re in the “flat” camp incidentally.) The S&P 500 was up just shy of 10% in April, a 9.56% gain that beat the Dow’s 7.56% for the month. Small-cap stocks led the rise with a 15.46% monthly gain, while the tech-heavy Nasdaq was up a bold 12.46%. Longer-term government bonds continued to collapse off their bubble-like boom and delivered a negative 4.83% return for the month. Of course, if we get an even deeper recession the government-bond boom will likely return.
High-risk investments of all stripes had a good month, including junk bonds. Basically, if an investment had a bad 2008, it had a great April. Investors are hoping the market will do a repeat of the rise after the 2002 market lows.
Our recent move into more beaten-down fare -- like financials and Russia -- has proved timely thus far, but while we intended to hold such picks for over a year, it is likely we will be selling soon if this mini-euphoria keeps up. Our remaining inverse funds had the worst month in our history, proving once again these funds are good as a short term hedges against a collapse in the market and the most overvalued areas, but are terrible longer-term investments. Frankly, we should have sold when the getting was good but wanted the hedge against our increasingly risky portfolios. We may also consider shorting ETFs we don’t like rather than buying ETFs that short – a strategy with more long-term investing merit
Bottom line: The panic is gone from the markets, but we think the economy may have reached a permanently low plateau, to misquote the infamous economist Irving Fisher circa 1929. This is of course much better than panic and collapse.
If you want an idea how much Bill Gross has moved away from ultra safe Treasurys and into corporates, higher yield, and basically the once forlorn, look at April’s returns. Harbor Bond (HABDX) was up 1.86%, compared to a -4.83% return for long term Treasury bonds for the month, and a 0.36% return for a total bond market index. High yield (junk) bonds were up about 11.5% for the month.
Nakoma Absolute Return (NARFX) had a bad month in April with a -3.5% return – not far from this fund’s worst one-month return since we bought it, which was back in January 2008 when it had a 4.25% drop. Incidentally, the last time this fund was hit this hard was during a down month for stocks, which shows the shorts were really not working in April. Specifically, last month the fund mostly lost on shorts (best stocks will decline) in the “consumer discretionary” area, companies like Cheesecake Factory, Buffalo Wild Wings, PF Chang’s China Bistro, Ethan Allen, and the like. Many of these types of stocks rocketed up in April as fears the economy is not in fact on the road to another Depression. Nakoma remains pessimistic about the future.
Health-care stocks did not climb much in this recent move up in stocks. The Health Care Select SPDR (XLV) was down 0.12% in April. To some extent this makes sense because health-care stocks far outperformed the market on the way down (by falling less) and just seem too boring for the big comeback in higher risk stocks. But step back from the relative popularity – with a market value similar to financial stocks right now. Which area is likely to earn more money over the next 5-10 years? The financial sector, which is limping along on government loans and is still nursing a multi-trillion dollar portfolio of bad mortgages? Or the health-care sector, which benefits from an aging population and likely increases in health-care coverage with smaller offsetting hits to income from government actions resulting from the move to a greater role in health care?
Janus Global Research (JARFX) had its best month since we owned it with a 13.67% rise in April – the fund’s second very strong month in a row
Junk bonds proved to be a particularly good place to be as investor sentiment recovered. Metropolitan West High Yield (MWHYX) jumped 10.21% - the highest monthly return since we bought the fund on July 1st 2008.
The Financial Sector ETF was up 21.76% in April as the doom and gloom in banking continued to turn into bottom fishing euphoria. This fund has more than doubled since the market low in early March. While the panic selling a few weeks ago was overdone, which is why we bought this fund in the first place, by mid-May the financial sector has crawled back to being the third largest sector in the S&P 500 (right before energy, nipping at the heels of health care but well after technology stocks). This is too far, too fast. Financial stocks will perform no better than the S&P 500 from these levels.
The Aggressive Portfolio jumped 6.27% in April.
Up, up, and away. You’d almost forget the economy is, at best, flat, and, at worst, is taking a pause before another plunge. (We’re in the “flat” camp incidentally.) The S&P 500 was up just shy of 10% in April, a 9.56% gain that beat the Dow’s 7.56% for the month. Small-cap stocks led the rise with a 15.46% monthly gain, while the tech-heavy Nasdaq was up a bold 12.46%. Longer-term government bonds continued to collapse off their bubble-like boom and delivered a negative 4.83% return for the month. Of course, if we get an even deeper recession the government-bond boom will likely return.
High-risk investments of all stripes had a good month, including junk bonds. Basically, if an investment had a bad 2008, it had a great April. Investors are hoping the market will do a repeat of the rise after the 2002 market lows.
Our recent move into more beaten-down fare -- like financials and Russia -- has proved timely thus far, but while we intended to hold such picks for over a year, it is likely we will be selling soon if this mini-euphoria keeps up. Our remaining inverse funds had the worst month in our history, proving once again these funds are good as a short term hedges against a collapse in the market and the most overvalued areas, but are terrible longer-term investments. Frankly, we should have sold when the getting was good but wanted the hedge against our increasingly risky portfolios. We may also consider shorting ETFs we don’t like rather than buying ETFs that short – a strategy with more long-term investing merit
Bottom line: The panic is gone from the markets, but we think the economy may have reached a permanently low plateau, to misquote the infamous economist Irving Fisher circa 1929. This is of course much better than panic and collapse.
Nakoma Absolute Return (NARFX) had a bad month in April with a -3.5% return – not far from this fund’s worst one-month return since we bought it, which was back in January 2008 when it had a 4.25% drop. Incidentally, the last time this fund was hit this hard was during a down month for stocks, which shows the shorts were really not working in April. Specifically, last month the fund mostly lost on shorts (best stocks will decline) in the “consumer discretionary” area, companies like Cheesecake Factory, Buffalo Wild Wings, PF Chang’s China Bistro, Ethan Allen, and the like. Many of these types of stocks rocketed up in April as fears the economy is not in fact on the road to another Depression. Nakoma remains pessimistic about the future.
Health-care stocks did not climb much in this recent move up in stocks. The Health Care Select SPDR (XLV) was down 0.12% in April. To some extent this makes sense because health-care stocks far outperformed the market on the way down (by falling less) and just seem too boring for the big comeback in higher risk stocks. But step back from the relative popularity – with a market value similar to financial stocks right now. Which area is likely to earn more money over the next 5-10 years? The financial sector, which is limping along on government loans and is still nursing a multi-trillion dollar portfolio of bad mortgages? Or the health-care sector, which benefits from an aging population and likely increases in health-care coverage with smaller offsetting hits to income from government actions resulting from the move to a greater role in health care?
If you want an idea how much Bill Gross has moved away from ultra safe Treasurys and into corporates, higher yield, and basically the once forlorn, look at April’s returns. Harbor Bond (HABDX) was up 1.86%, compared to a -4.83% return for long term Treasury bonds for the month, and a 0.36% return for a total bond market index. High yield (junk) bonds were up about 11.5% for the month.
Biotech did even worse than health care in general, with a -5.68% move in April for our SPDR Biotech (XBI) ETF. The momentum has left this area.
Janus Global Research (JARFX) had its best month since we owned it with a 13.67% rise in April – the fund’s second very strong month in a row
The Financial Sector ETF was up 21.76% in April as the doom and gloom in banking continued to turn into bottom fishing euphoria. This fund has more than doubled since the market low in early March. While the panic selling a few weeks ago was overdone, which is why we bought this fund in the first place, by mid-May the financial sector has crawled back to being the third largest sector in the S&P 500 (right before energy, nipping at the heels of health care but well after technology stocks). This is too far, too fast. Financial stocks will perform no better than the S&P 500 from these levels.
April 2009 Performance Commentary
The Conservative Portfolio jumped 4.52% in April.
Up, up, and away. You’d almost forget the economy is, at best, flat, and, at worst, is taking a pause before another plunge. (We’re in the “flat” camp incidentally.) The S&P 500 was up just shy of 10% in April, a 9.56% gain that beat the Dow’s 7.56% for the month. Small-cap stocks led the rise with a 15.46% monthly gain, while the tech-heavy Nasdaq was up a bold 12.46%. Longer-term government bonds continued to collapse off their bubble-like boom and delivered a negative 4.83% return for the month. Of course, if we get an even deeper recession the government-bond boom will likely return.
High-risk investments of all stripes had a good month, including junk bonds. Basically, if an investment had a bad 2008, it had a great April. Investors are hoping the market will do a repeat of the rise after the 2002 market lows.
Our recent move into more beaten-down fare -- like financials and Russia -- has proved timely thus far, but while we intended to hold such picks for over a year, it is likely we will be selling soon if this mini-euphoria keeps up. Our remaining inverse funds had the worst month in our history, proving once again these funds are good as a short term hedges against a collapse in the market and the most overvalued areas, but are terrible longer-term investments. Frankly, we should have sold when the getting was good but wanted the hedge against our increasingly risky portfolios. We may also consider shorting ETFs we don’t like rather than buying ETFs that short – a strategy with more long-term investing merit
Bottom line: The panic is gone from the markets, but we think the economy may have reached a permanently low plateau, to misquote the infamous economist Irving Fisher circa 1929. This is of course much better than panic and collapse.
If you want an idea how much Bill Gross has moved away from ultra safe Treasurys and into corporates, higher yield, and basically the once forlorn, look at April’s returns. Harbor Bond (HABDX) was up 1.86%, compared to a -4.83% return for long term Treasury bonds for the month, and a 0.36% return for a total bond market index. High yield (junk) bonds were up about 11.5% for the month.
Nakoma Absolute Return (NARFX) had a bad month in April with a -3.5% return – not far from this fund’s worst one-month return since we bought it, which was back in January 2008 when it had a 4.25% drop. Incidentally, the last time this fund was hit this hard was during a down month for stocks, which shows the shorts were really not working in April. Specifically, last month the fund mostly lost on shorts (best stocks will decline) in the “consumer discretionary” area, companies like Cheesecake Factory, Buffalo Wild Wings, PF Chang’s China Bistro, Ethan Allen, and the like. Many of these types of stocks rocketed up in April as fears the economy is not in fact on the road to another Depression. Nakoma remains pessimistic about the future.
Health-care stocks did not climb much in this recent move up in stocks. The Health Care Select SPDR (XLV) was down 0.12% in April. To some extent this makes sense because health-care stocks far outperformed the market on the way down (by falling less) and just seem too boring for the big comeback in higher risk stocks. But step back from the relative popularity – with a market value similar to financial stocks right now. Which area is likely to earn more money over the next 5-10 years? The financial sector, which is limping along on government loans and is still nursing a multi-trillion dollar portfolio of bad mortgages? Or the health-care sector, which benefits from an aging population and likely increases in health-care coverage with smaller offsetting hits to income from government actions resulting from the move to a greater role in health care?
Janus Global Research (JARFX) had its best month since we owned it with a 13.67% rise in April – the fund’s second very strong month in a row
Junk bonds proved to be a particularly good place to be as investor sentiment recovered. Metropolitan West High Yield (MWHYX) jumped 10.21% - the highest monthly return since we bought the fund on July 1st 2008.
The Financial Sector ETF was up 21.76% in April as the doom and gloom in banking continued to turn into bottom fishing euphoria. This fund has more than doubled since the market low in early March. While the panic selling a few weeks ago was overdone, which is why we bought this fund in the first place, by mid-May the financial sector has crawled back to being the third largest sector in the S&P 500 (right before energy, nipping at the heels of health care but well after technology stocks). This is too far, too fast. Financial stocks will perform no better than the S&P 500 from these levels.
The Aggressive Portfolio jumped 6.27% in April.
Up, up, and away. You’d almost forget the economy is, at best, flat, and, at worst, is taking a pause before another plunge. (We’re in the “flat” camp incidentally.) The S&P 500 was up just shy of 10% in April, a 9.56% gain that beat the Dow’s 7.56% for the month. Small-cap stocks led the rise with a 15.46% monthly gain, while the tech-heavy Nasdaq was up a bold 12.46%. Longer-term government bonds continued to collapse off their bubble-like boom and delivered a negative 4.83% return for the month. Of course, if we get an even deeper recession the government-bond boom will likely return.
High-risk investments of all stripes had a good month, including junk bonds. Basically, if an investment had a bad 2008, it had a great April. Investors are hoping the market will do a repeat of the rise after the 2002 market lows.
Our recent move into more beaten-down fare -- like financials and Russia -- has proved timely thus far, but while we intended to hold such picks for over a year, it is likely we will be selling soon if this mini-euphoria keeps up. Our remaining inverse funds had the worst month in our history, proving once again these funds are good as a short term hedges against a collapse in the market and the most overvalued areas, but are terrible longer-term investments. Frankly, we should have sold when the getting was good but wanted the hedge against our increasingly risky portfolios. We may also consider shorting ETFs we don’t like rather than buying ETFs that short – a strategy with more long-term investing merit
Bottom line: The panic is gone from the markets, but we think the economy may have reached a permanently low plateau, to misquote the infamous economist Irving Fisher circa 1929. This is of course much better than panic and collapse.
Nakoma Absolute Return (NARFX) had a bad month in April with a -3.5% return – not far from this fund’s worst one-month return since we bought it, which was back in January 2008 when it had a 4.25% drop. Incidentally, the last time this fund was hit this hard was during a down month for stocks, which shows the shorts were really not working in April. Specifically, last month the fund mostly lost on shorts (best stocks will decline) in the “consumer discretionary” area, companies like Cheesecake Factory, Buffalo Wild Wings, PF Chang’s China Bistro, Ethan Allen, and the like. Many of these types of stocks rocketed up in April as fears the economy is not in fact on the road to another Depression. Nakoma remains pessimistic about the future.
Health-care stocks did not climb much in this recent move up in stocks. The Health Care Select SPDR (XLV) was down 0.12% in April. To some extent this makes sense because health-care stocks far outperformed the market on the way down (by falling less) and just seem too boring for the big comeback in higher risk stocks. But step back from the relative popularity – with a market value similar to financial stocks right now. Which area is likely to earn more money over the next 5-10 years? The financial sector, which is limping along on government loans and is still nursing a multi-trillion dollar portfolio of bad mortgages? Or the health-care sector, which benefits from an aging population and likely increases in health-care coverage with smaller offsetting hits to income from government actions resulting from the move to a greater role in health care?
If you want an idea how much Bill Gross has moved away from ultra safe Treasurys and into corporates, higher yield, and basically the once forlorn, look at April’s returns. Harbor Bond (HABDX) was up 1.86%, compared to a -4.83% return for long term Treasury bonds for the month, and a 0.36% return for a total bond market index. High yield (junk) bonds were up about 11.5% for the month.
Biotech did even worse than health care in general, with a -5.68% move in April for our SPDR Biotech (XBI) ETF. The momentum has left this area.
Janus Global Research (JARFX) had its best month since we owned it with a 13.67% rise in April – the fund’s second very strong month in a row
The Financial Sector ETF was up 21.76% in April as the doom and gloom in banking continued to turn into bottom fishing euphoria. This fund has more than doubled since the market low in early March. While the panic selling a few weeks ago was overdone, which is why we bought this fund in the first place, by mid-May the financial sector has crawled back to being the third largest sector in the S&P 500 (right before energy, nipping at the heels of health care but well after technology stocks). This is too far, too fast. Financial stocks will perform no better than the S&P 500 from these levels.