The Conservative Portfolio dropped -1.88% in February.
The stock death spiral continues with double-digit declines in most major indexes in February. The Dow was down 10.66%, the S&P 500 lost 10.65% (for the worst February return since 1933), and the small cap Russell 2000 fell 12.15%. Foreign stocks dropped by about the same magnitude (or rather craptitute…) The tech heavy (and bank-lite) Nasdaq was down a mere 6.68%. Bonds were near flat with the aggregate bond index down 0.38%. Not helping matters was the U.S. Government, which of late appears to be reducing confidence and adding confusion and uncertainty. Investors are starting to realize the current problem doesn’t fix easy.
Our ‘downside participation’ compared to the S&P 500 is increasing, particularly with our recent trade placed at the end of February. In February our model portfolios ranged in downside from -0.84% to -8.74%, with an average return of -5.33%. Our more aggressive portfolios should now fall from about 75%-100% of the S&P 500’s drop each month. Of course, our model portfolios are not down as much as the market’s 18.18% drop this year so far, which means we are pretty confident 2009 will be another market beating year for us.
Speaking of fund investors, they added a few billion in January, just in time to lose a good chunk of change. During the first week of March they bailed out of stock funds to the tune of $20 billion in a week (clearly not MAXadvisor subscribers…). Those are the kind of redemption numbers we like to see to get confident on stocks. Perhaps the market’s recent dramatic turnaround happened just to spite the sellers and prove the market is a can’t-win game more akin to a casino than a long-term investment strategy. We’re watching to see if this rebound brought money back in, because we’d really like to see more money leave regardless of short-term market direction. This would indicate that fund investors are throwing in the towel on investing, a distinct possibility given the market’s performance and growing bad taste for Wall Street as a business.
Nakoma Absolute Return (NARFX) again beat the market with a 1.92% drop. Still, this fund is not making money in this down market. This is acceptable so long as the fund makes money in up markets or we might as well just own a money market fund – the benchmark most long short funds never seem to beat. This fund is about the best in this often terrible fund category with a 15.10% return in 2007.
Bridgeway Balanced (BRBPX) had a great month relative to the market with a 2.34% return. Last year the fund underperformed Gateway (GATEX) by a wide margin but this year the fund is leaving GATEX in the dust.
Healthcare stocks took a dive largely on fears the new administration is going to damage profitability in the business. Specifically, when President Obama unveiled his budget in late February healthcare stocks tanked, notably insurers and drug companies. In addition, the earnings of healthcare companies don’t appear to be as ‘recession proof’ as many hoped (us included) either. As it turns out, people cut back on medical consumption – not as much as say jet skis and eating at Cheesecake Factory, but more than Wall Street anticipated. Health Care Select SPDR (XLV) was down 12.39% for the month.
Janus Global Research (JARFX) clocked in another market beating month with a 6.94% drop. One thing you have to say about his fund, it’s not a closet indexer.
The Aggressive Portfolio fell -6.55% in February.
The stock death spiral continues with double-digit declines in most major indexes in February. The Dow was down 10.66%, the S&P 500 lost 10.65% (for the worst February return since 1933), and the small cap Russell 2000 fell 12.15%. Foreign stocks dropped by about the same magnitude (or rather craptitute…) The tech heavy (and bank-lite) Nasdaq was down a mere 6.68%. Bonds were near flat with the aggregate bond index down 0.38%. Not helping matters was the U.S. Government, which of late appears to be reducing confidence and adding confusion and uncertainty. Investors are starting to realize the current problem doesn’t fix easy.
Our ‘downside participation’ compared to the S&P 500 is increasing, particularly with our recent trade placed at the end of February. In February our model portfolios ranged in downside from -0.84% to -8.74%, with an average return of -5.33%. Our more aggressive portfolios should now fall from about 75%-100% of the S&P 500’s drop each month. Of course, our model portfolios are not down as much as the market’s 18.18% drop this year so far, which means we are pretty confident 2009 will be another market beating year for us.
Speaking of fund investors, they added a few billion in January, just in time to lose a good chunk of change. During the first week of March they bailed out of stock funds to the tune of $20 billion in a week (clearly not MAXadvisor subscribers…). Those are the kind of redemption numbers we like to see to get confident on stocks. Perhaps the market’s recent dramatic turnaround happened just to spite the sellers and prove the market is a can’t-win game more akin to a casino than a long-term investment strategy. We’re watching to see if this rebound brought money back in, because we’d really like to see more money leave regardless of short-term market direction. This would indicate that fund investors are throwing in the towel on investing, a distinct possibility given the market’s performance and growing bad taste for Wall Street as a business.
Nakoma Absolute Return (NARFX) again beat the market with a 1.92% drop. Still, this fund is not making money in this down market. This is acceptable so long as the fund makes money in up markets or we might as well just own a money market fund – the benchmark most long short funds never seem to beat. This fund is about the best in this often terrible fund category with a 15.10% return in 2007.
Bridgeway Blue-Chip 35 (BRLIX ) had a better return relative to the market in February than January’s dismal showing, with an 8.2% drop for the month.
Healthcare stocks took a dive largely on fears the new administration is going to damage profitability in the business. Specifically, when President Obama unveiled his budget in late February healthcare stocks tanked, notably insurers and drug companies. In addition, the earnings of healthcare companies don’t appear to be as ‘recession proof’ as many hoped (us included) either. As it turns out, people cut back on medical consumption – not as much as say jet skis and eating at Cheesecake Factory, but more than Wall Street anticipated. Health Care Select SPDR (XLV) was down 12.39% for the month.
Biotech stocks have been about the best part of the stock market for most of the 50% drop in stocks. SPDR S&P Biotech (XBI) delivered some bad performance with a 12.30% drop in February, taking the one year return to negative 12.95% and the since added return (we bought in late 2006) return down to -7.49%. This of course is far better than the stock market in general.
Janus Global Research (JARFX) clocked in another market beating month with a 6.94% drop. One thing you have to say about his fund, it’s not a closet indexer.
In our last month’s portfolio commentary we said we’d be cutting back on hot PowerShares DB Commodity Double Short ETN (DEE), and we sold it completely at the end of February after an 11.55% one month return. Double inverse ETFs and ETNs are a tricky game, but this one really worked out for us. We bought the fund at the end of June in 2008 near the top of the commodity bubble. With this sale, we booked a 389% return in less than a year, enough to take up some of the pain in all the stock fund declines. We’ve had some quick triple-digit returns in funds in our model portfolios before (206% return in SSgA Emerging Markets SSEMX and 194% in Artisan International Small Cap ARTJX) but nothing this high or this fast.
We noted we were going to sell Western Asset Managed High Income Fund (MHY) soon because of the rising market price relative to underlying fund value. We sold at the end of February, but unfortunately the fund’s negative 16% return for the month removed all of our profits leaving us with a -3.11% return since added. Considering we bought the fund at the end of October 2008, relative to the stock market and even other junk bond funds this is return wasn’t bad – though not the double-digit positive return we were showing last month.
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The Conservative Portfolio dropped -1.88% in February.
The stock death spiral continues with double-digit declines in most major indexes in February. The Dow was down 10.66%, the S&P 500 lost 10.65% (for the worst February return since 1933), and the small cap Russell 2000 fell 12.15%. Foreign stocks dropped by about the same magnitude (or rather craptitute…) The tech heavy (and bank-lite) Nasdaq was down a mere 6.68%. Bonds were near flat with the aggregate bond index down 0.38%. Not helping matters was the U.S. Government, which of late appears to be reducing confidence and adding confusion and uncertainty. Investors are starting to realize the current problem doesn’t fix easy.
Our ‘downside participation’ compared to the S&P 500 is increasing, particularly with our recent trade placed at the end of February. In February our model portfolios ranged in downside from -0.84% to -8.74%, with an average return of -5.33%. Our more aggressive portfolios should now fall from about 75%-100% of the S&P 500’s drop each month. Of course, our model portfolios are not down as much as the market’s 18.18% drop this year so far, which means we are pretty confident 2009 will be another market beating year for us.
Speaking of fund investors, they added a few billion in January, just in time to lose a good chunk of change. During the first week of March they bailed out of stock funds to the tune of $20 billion in a week (clearly not MAXadvisor subscribers…). Those are the kind of redemption numbers we like to see to get confident on stocks. Perhaps the market’s recent dramatic turnaround happened just to spite the sellers and prove the market is a can’t-win game more akin to a casino than a long-term investment strategy. We’re watching to see if this rebound brought money back in, because we’d really like to see more money leave regardless of short-term market direction. This would indicate that fund investors are throwing in the towel on investing, a distinct possibility given the market’s performance and growing bad taste for Wall Street as a business.
Nakoma Absolute Return (NARFX) again beat the market with a 1.92% drop. Still, this fund is not making money in this down market. This is acceptable so long as the fund makes money in up markets or we might as well just own a money market fund – the benchmark most long short funds never seem to beat. This fund is about the best in this often terrible fund category with a 15.10% return in 2007.
Bridgeway Balanced (BRBPX) had a great month relative to the market with a 2.34% return. Last year the fund underperformed Gateway (GATEX) by a wide margin but this year the fund is leaving GATEX in the dust.
Healthcare stocks took a dive largely on fears the new administration is going to damage profitability in the business. Specifically, when President Obama unveiled his budget in late February healthcare stocks tanked, notably insurers and drug companies. In addition, the earnings of healthcare companies don’t appear to be as ‘recession proof’ as many hoped (us included) either. As it turns out, people cut back on medical consumption – not as much as say jet skis and eating at Cheesecake Factory, but more than Wall Street anticipated. Health Care Select SPDR (XLV) was down 12.39% for the month.
Janus Global Research (JARFX) clocked in another market beating month with a 6.94% drop. One thing you have to say about his fund, it’s not a closet indexer.
The Aggressive Portfolio fell -6.55% in February.
The stock death spiral continues with double-digit declines in most major indexes in February. The Dow was down 10.66%, the S&P 500 lost 10.65% (for the worst February return since 1933), and the small cap Russell 2000 fell 12.15%. Foreign stocks dropped by about the same magnitude (or rather craptitute…) The tech heavy (and bank-lite) Nasdaq was down a mere 6.68%. Bonds were near flat with the aggregate bond index down 0.38%. Not helping matters was the U.S. Government, which of late appears to be reducing confidence and adding confusion and uncertainty. Investors are starting to realize the current problem doesn’t fix easy.
Our ‘downside participation’ compared to the S&P 500 is increasing, particularly with our recent trade placed at the end of February. In February our model portfolios ranged in downside from -0.84% to -8.74%, with an average return of -5.33%. Our more aggressive portfolios should now fall from about 75%-100% of the S&P 500’s drop each month. Of course, our model portfolios are not down as much as the market’s 18.18% drop this year so far, which means we are pretty confident 2009 will be another market beating year for us.
Speaking of fund investors, they added a few billion in January, just in time to lose a good chunk of change. During the first week of March they bailed out of stock funds to the tune of $20 billion in a week (clearly not MAXadvisor subscribers…). Those are the kind of redemption numbers we like to see to get confident on stocks. Perhaps the market’s recent dramatic turnaround happened just to spite the sellers and prove the market is a can’t-win game more akin to a casino than a long-term investment strategy. We’re watching to see if this rebound brought money back in, because we’d really like to see more money leave regardless of short-term market direction. This would indicate that fund investors are throwing in the towel on investing, a distinct possibility given the market’s performance and growing bad taste for Wall Street as a business.
Nakoma Absolute Return (NARFX) again beat the market with a 1.92% drop. Still, this fund is not making money in this down market. This is acceptable so long as the fund makes money in up markets or we might as well just own a money market fund – the benchmark most long short funds never seem to beat. This fund is about the best in this often terrible fund category with a 15.10% return in 2007.
Bridgeway Blue-Chip 35 (BRLIX ) had a better return relative to the market in February than January’s dismal showing, with an 8.2% drop for the month.
Healthcare stocks took a dive largely on fears the new administration is going to damage profitability in the business. Specifically, when President Obama unveiled his budget in late February healthcare stocks tanked, notably insurers and drug companies. In addition, the earnings of healthcare companies don’t appear to be as ‘recession proof’ as many hoped (us included) either. As it turns out, people cut back on medical consumption – not as much as say jet skis and eating at Cheesecake Factory, but more than Wall Street anticipated. Health Care Select SPDR (XLV) was down 12.39% for the month.
Biotech stocks have been about the best part of the stock market for most of the 50% drop in stocks. SPDR S&P Biotech (XBI) delivered some bad performance with a 12.30% drop in February, taking the one year return to negative 12.95% and the since added return (we bought in late 2006) return down to -7.49%. This of course is far better than the stock market in general.
Janus Global Research (JARFX) clocked in another market beating month with a 6.94% drop. One thing you have to say about his fund, it’s not a closet indexer.
In our last month’s portfolio commentary we said we’d be cutting back on hot PowerShares DB Commodity Double Short ETN (DEE), and we sold it completely at the end of February after an 11.55% one month return. Double inverse ETFs and ETNs are a tricky game, but this one really worked out for us. We bought the fund at the end of June in 2008 near the top of the commodity bubble. With this sale, we booked a 389% return in less than a year, enough to take up some of the pain in all the stock fund declines. We’ve had some quick triple-digit returns in funds in our model portfolios before (206% return in SSgA Emerging Markets SSEMX and 194% in Artisan International Small Cap ARTJX) but nothing this high or this fast.
We noted we were going to sell Western Asset Managed High Income Fund (MHY) soon because of the rising market price relative to underlying fund value. We sold at the end of February, but unfortunately the fund’s negative 16% return for the month removed all of our profits leaving us with a -3.11% return since added. Considering we bought the fund at the end of October 2008, relative to the stock market and even other junk bond funds this is return wasn’t bad – though not the double-digit positive return we were showing last month.