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February 2015 Performance Review

March 2, 2015

What the interest rate gods giveth in January, they taketh away in February. The S&P rebounded to new highs, and we're even breaking through NASDAQ 5,000 again—just like we did in March, 2000! The reality of fabulous tech earnings growth finally caught up with NASDAQ prices of 15 years ago. Imagine how much worse things could have been had we not seen these earnings materialize in technology—it would be sort of like Japan: 25 years after a bubble in prices and still decades away from earnings to match.

With rates creeping back up in February, bonds slid, with the longer-term, investment-grade bonds that we own slipping the most (but still boasting some of the best one-year returns in bond or stock markets). Interest rate sensitive investments, notably utility and real estate stocks, performed poorly compared to the stock market as a whole. While our gold short ETF Gold Short (DZZ) helped, it wasn't enough to make up for losses in bonds and our oil short PowerShares DB Crude Oil Dble Short (DTO)—the latter which fell sharply and then rebounded somewhat after a spectacular rise.

Our Conservative portfolio was up 0.36%. Our Aggressive portfolio gained 1.57%. Benchmark Vanguard funds for February 2015 were as follows: Vanguard 500 Index Fund (VFINX) up 5.74%; Vanguard Total Bond Market Index Fund (VBMFX) down 1.08%; Vanguard Developed Markets Index Fund (VTMGX) up 5.94%; Vanguard Emerging Markets Stock Index (VEIEX) up 3.53%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 3.47%. The strongest areas in the market were growth stocks in general and stocks in Japan in particular: growth and Japan equities posted monthly returns in the 5% to 6% range on average. Europe did well after a lousy year, while Latin America did poorly, probably due to ongoing weakness in commodity markets and related issues. The best side of the bond market was in higher credit risk bonds, especially junk bonds, where funds were up over 2% even as the bond market in general slid. We benefited somewhat from this with DoubleLine Floating Rate N (DLFRX), a floating rate fund with significant credit risk that gained 1.17% in February and had been an otherwise lackluster performer since purchase.

On the stock side of the portfolios, most of our holdings did well except for American Century Utility Income (BULIX), which is interest rate sensitive. Wasatch Frontier Emerg Sm Count (WAFMX) was weak relative to emerging market stock funds in general.

Stock Funds1mo %
Gold Short (DZZ)11.78%
Vanguard Telecom Services ETF (VOX)6.62%
Vanguard MegaCap Growth (MGK)6.27%
Vanguard Europe Pacific ETF (VEA)6.16%
Vanguard European ETF (VGK)6.09%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)5.94%
PRIMECAP Odyssey Growth (POGRX)5.79%
[Benchmark] Vanguard 500 Index (VFINX)5.73%
iShares MSCI BRIC Index (BKF)5.71%
Satuit Capital Micro Cap (SATMX)5.53%
Artisan Global Equity (ARTHX)5.05%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.53%
Wasatch Long/Short (FMLSX)2.89%
Wasatch Frontier Emerg Sm Count (WAFMX)0.66%
American Century Utility Income (BULIX)-2.88%
PowerShares DB Crude Oil Dble Short (DTO)-3.60%
Bond Funds1mo %
DoubleLine Floating Rate N (DLFRX)1.17%
Vanguard Mortgage-Backed Securities (VMBS)-0.33%
[Benchmark] Vanguard Total Bond Index (VBMFX)-1.08%
Vanguard Long-Term Bond Index ETF (BLV)-4.16%
Vanguard Extended Duration Treasury (EDV)-9.12%