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August 2014 Performance Review

September 3, 2014

Apparently iPhone 6 expectations are enough to drive the market higher, even in the face of questionable economic growth abroad and ongoing global political problems. As long as the app economy keeps humming and interest rates remain low, investor optimism could continue. It seems the only record left to break is the old high in the NASDAQ, circa March 10th 2000. The tech-heavy benchmark finished that day at a delirious 5,048.62 — a mere 10% rise from today's level. If only Pets.com stuck around long enough to make an app with GPS tracking of your dog food order…

Of course today's NASDAQ trades at relative bargain P/E levels — the fundamentals finally caught up with the 2000s expectations (this hasn't happened in Japan, where the Nikkei is still below where it was 25 years ago, so yay America). The internet stocks finally monetized all those eyeballs with ads. We'll have to see if context sensitive advertising proves enough long-term profit growth to warrant today's more-modest-yet-still-high valuations.

The Powerfund Portfolios are still doing well compared to a mix of benchmarks and similar risk total portfolio funds, but without a higher stock allocation it is going to be tough to keep pace with a fast rising U.S. stock market. This is the trouble with late stage bull markets — you start making excuses a mere 2.8% monthly gain.

You almost couldn't lose in August — interest rates were down, which sent essentially all bonds higher.  Stocks had another strong month as well. Our Conservative portfolio gained 2.31% in August. Our Aggressive portfolio was up 2.80%. Benchmark Vanguard funds for August 2014: Vanguard 500 Index Fund (VFINX) up 3.99%; Vanguard Total Bond Market Index Fund (VBMFX) up 1.13%; Vanguard Developed Markets Index Fund (VTMGX) up 0.30%; Vanguard Emerging Markets Stock Index (VEIEX) up 3.57%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, gained 2.42%.

Our growth stock funds ruled the month again. PRIMECAP Odyssey Growth (POGRX) gained 5.89% and Vanguard MegaCap Growth (MGK) rose 4.45%. India was strong leading to iShares MSCI BRIC Index (BKF)'s nearly 4% jump in August, which beat 90% of emerging market funds. Unfortunately Wasatch Frontier Emerg Sm Count (WAFMX), another of our emerging market holdings, didn't fare so well — it was our worst performing open-end fund, essentially flat for the month.

Long term interest rates plunged anew with Vanguard Extended Duration Treasury (EDV) up near 7% — our highest single performing fund, and Vanguard Long-Term Bond Index ETF (BLV) up near 4%. Bonds less sensitive to interest rates didn't perform as well, with DoubleLine Floating Rate N (DLFRX) at the bottom of our bond fund list — up just 0.21%.

No Powerfund holding fell more than 1% last month — more testament to the hot stock and bond markets. Shorting gold came up short with Gold Short (DZZ) falling 0.46%. Telecom stocks were negative with Vanguard Telecom Services ETF (VOX) off 0.65%.

Stock Funds1mo %
PRIMECAP Odyssey Growth (POGRX)5.89%
Vanguard MegaCap Growth (MGK)4.45%
[Benchmark] Vanguard 500 Index (VFINX)3.99%
Satuit Capital Micro Cap (SATMX)3.97%
iShares MSCI BRIC Index (BKF)3.92%
American Century Utility Income (BULIX)3.90%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.57%
Artisan Global Equity (ARTHX)3.07%
PowerShares DB Crude Oil Dble Short (DTO)2.61%
Wasatch Long/Short (FMLSX)1.88%
Vanguard European ETF (VGK)0.73%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.30%
Vanguard Europe Pacific ETF (VEA)0.26%
Wasatch Frontier Emerg Sm Count (WAFMX)0.00%
Gold Short (DZZ)-0.46%
Vanguard Telecom Services ETF (VOX)-0.65%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)6.98%
Vanguard Long-Term Bond Index ETF (BLV)3.98%
[Benchmark] Vanguard Total Bond Index (VBMFX)1.13%
PIMCO Mortgage Opportunities D (PMZDX)0.48%
DoubleLine Floating Rate N (DLFRX)0.21%