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March 2015 Performance Review

April 2, 2015

March was a pretty lousy month for stocks globally. The 2015 market is turning out to be a little topsy-turvy, with quick rebounds and drops. Our Conservative portfolio moved more or less with the markets, while our more uniquely positioned Aggressive portfolio bucked the benchmarks with a nice gain, giving us a decent spread of about 4% over the S&P 500 thus far in 2015.

The Conservative portfolio was down 0.30% in April, while the Aggressive portfolio gained 1.16%. Benchmark Vanguard funds for March 2015: Vanguard 500 Index Fund (VFINX) down 1.59%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.41%; Vanguard Developed Markets Index Fund (VTMGX) down 1.26%; Vanguard Emerging Markets Stock Index (VEIEX) down 2.08%; Vanguard Star Fund (VGSTX) ‒ a total global balanced portfolio ‒ down 0.43%.

We used the renewed drop in oil (and big upward move in our oil short) to cut back on what was becoming too dominant in our portfolio, courtesy of the roughly 240% trailing one-year return. We moved money into unhedged foreign bonds for the first time in years. This new fund will add heightened volatility compared to most bond funds, but, in general, currency volatility is not something to avoid, particularly after a good rise in the U.S. dollar.

In fact, currency "risk" is arguably the main benefit of investing globally, since most companies abroad aren't up to U.S. standards of awesome, and most non-emerging-market foreign bonds offer lower yields than here, due to perpetually sluggish economies. We could be a little early here and will increase the stake if our dollar continues up (which pushes this fund down). At least this new bond volatility (probably) won't be that correlated to the high interest-rate volatility we already have from our long duration bond funds. Keep in mind all this volatility has generally lowered the overall swings in the portfolios, as our zigs often happen when the stock market zags.

It wasn't just the double-digit return in PowerShares DB Crude Oil Dble Short (DTO) that helped us in March. Microcap stocks did well relative to the market after fairly bad performance last year — poor performance that hit most smaller-cap growth stocks relative to the market. In general, we're not impressed with Satuit Capital Micro Cap (SATMX), even though it was among our best performers this month. Shorting gold helped in March, with a 4.69% return for Gold Short (DZZ). Longer-term investment-grade bonds did well compared to the bond market.

Our biggest losers were down only slightly more than the S&P 500 but included Vanguard Telecom Services ETF (VOX) and pretty much all foreign funds, notably Wasatch Frontier Emerg Sm Count (WAFMX). Our best normal (not leveraged short products) fund performers in March included PRIMECAP Odyssey Growth (POGRX) and Artisan Global Equity (ARTHX). The former has the backwind of inflows and healthcare stocks working for it, in what is probably the late stage of a very long good run.

The biggest disappointment is Wasatch Long/Short (FMLSX), which has been yet another long/short fund that tries (and mostly fails) to reduce stock market risk by using shorts. What usually gets ʼem, besides the fees, is that the stuff these types of funds like doesn't do as well as the stuff they don't. In this case, Wasatch favors oil-related stocks, which tanked with oil, too much.

Stock Funds1mo %
PowerShares DB Crude Oil Dble Short (DTO)13.61%
Gold Short (DZZ)4.69%
Satuit Capital Micro Cap (SATMX)1.85%
Artisan Global Equity (ARTHX)-0.12%
PRIMECAP Odyssey Growth (POGRX)-0.18%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)-1.26%
[Benchmark] Vanguard 500 Index (VFINX)-1.59%
Vanguard Europe Pacific ETF (VEA)-1.65%
Vanguard MegaCap Growth (MGK)-1.84%
iShares MSCI BRIC Index (BKF)-1.99%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)-2.08%
Wasatch Long/Short (FMLSX)-2.14%
Vanguard Telecom Services ETF (VOX)-2.44%
Wasatch Frontier Emerg Sm Count (WAFMX)-2.95%
Vanguard European ETF (VGK)-2.99%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)1.45%
Vanguard Long-Term Bond Index ETF (BLV)0.66%
Vanguard Mortgage-Backed Securities (VMBS)0.49%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.41%
SPDR Barclays Intl. Treasury (BWX)n/a