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August 2016 Performance Review

September 5, 2016

August was not much of a month for bonds or stocks and was surprisingly tame given swings in global markets over the last year or so. Slightly rising interest rates pushed bond prices down, and with not much in stock market upside to overcome the drag, we had fractional losses in both portfolios.

The 'safe' higher yield stocks that recently got way too hot with investors — particularly utilities which were down about 5% last month — dived in August far beyond what the mild increase in interest rates would call for. Our holdings in Vanguard Utilities (VPU) and Vanguard Telecom Services ETF (VOX) were both down over 5% (these two funds are largely why we underperformed in August). Riskier yield had a good month as seen in our Artisan High Income Fund (ARTFX) holding, up 2.11% for the month.

Our Conservative portfolio declined 0.62%. Our Aggressive portfolio fell 0.20%. Benchmark Vanguard funds for September 2016 were as follows: Vanguard 500 Index Fund (VFINX) up 0.13%; Vanguard Total Bond Market Index Fund (VBMFX) down 0.17%; Vanguard Developed Markets Index Fund (VTMGX) up 0.51%; Vanguard Emerging Markets Stock Index (VEIEX) up 1.67%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 0.61%.

The Federal Reserve seems to again be leaning towards increasing interest rates — but the specter of rising rates didn't hit long-term bonds as much as gold. Gold Short (DZZ) was our best performer after several bad months as gold rebounded sharply. Gold almost reached $1,000 months ago — probably a key price for investor psychology, and above which gold is perceived as not being a good long-term holding, even for diversification purposes.

iShares MSCI BRIC Index iShares MSCI BRIC Index (BKF) was our winner in more traditional funds benefiting from an emerging markets rebound. iShares MSCI BRIC Index iShares MSCI BRIC Index (BKF) focuses on the so-called BRIC countries, Brazil, Russia, India, and China, once popular in the emerging market boom. This category is seeing little investor action today, and we've just seen a similar fund shut down for lack of interest. This indifference a good sign for long-term investors — categories with many fund launches are the areas to avoid. That said, there is still too much money in emerging market funds in general to get over-allocated here.

Stock Funds1mo %
Gold Short (DZZ)6.35%
Proshares Ultrashort NASDAQ Biotech (BIS)4.70%
iShares MSCI BRIC Index (BKF)4.68%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)1.67%
iShares MSCI Italy Capped (EWI)1.61%
Vanguard European ETF (VGK)1.49%
Vanguard Europe Pacific ETF (VEA)1.25%
iShares Mortgage REIT (REM)0.75%
Vanguard Value (VTV)0.55%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.51%
[Benchmark] Vanguard 500 Index (VFINX)0.13%
Homestead Value (HOVLX)-0.24%
Artisan Global Equity (ARTHX)-1.08%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-1.17%
Proshares Ultrashort Russel2000 (TWM)-3.95%
PowerShares DB Crude Oil Dble Short (DTO)-4.65%
Vanguard Utilities (VPU)-5.84%
Vanguard Telecom Services ETF (VOX)-6.34%
Artisan High Income Fund (ARTFX)2.11%
Vanguard Mortgage-Backed Securities (VMBS)-0.12%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.17%
Vanguard Long-Term Bond Index ETF (BLV)-0.61%
SPDR Barclays Intl. Treasury (BWX)-0.88%
Vanguard Extended Duration Treasury (EDV)-1.33%