June started out a little rocky but recovered somewhat as the month progressed. The S&P500 was up just .14% while the Dow was essentially flat (down .05%). Tech was a touch weaker, with the Nasdaq off .31% in June. ...read the rest of this article»

Bonds took another dive in April – a move that appears to be continuing into May. Long term U.S. government treasury bonds – the most interest sensitive bonds – fell nearly 2% in April, after a 3% drop in March. Bonds are down just over 5% for the year, and now have a three year average return below 3% (or only slightly above what you would have received in a good money market fund over the same period). ...read the rest of this article»

Bonds took a dive in March. The roughly 3.5% hit to long-term treasury bonds was the worst hit to bonds since April 2004. The Federal Reserve’s rate-increasing campaign to fight inflation (inflation they may have created) finally caught up with longer-term bonds. ...read the rest of this article»

Bonds took a dive in March. The roughly 3.5% hit to long-term treasury bonds was the worst hit to bonds since April 2004. The Federal Reserve’s rate-increasing campaign to fight inflation (inflation they may have created) finally caught up with longer-term bonds.

Stocks had a good month, with the S&P500 up 1.24%. More speculative stocks outperformed the big caps that dominate the S&P500 and the Dow – a reversal of recent months. The Nasdaq was up 2.56% while the small-cap Russell 2000 Index was up 4.85% – taking small-cap stocks to all time highs, a fairly stretched valuation compared to larger-cap stocks.

Our Conservative portfolio was up 0.22%. With a rough month for bonds, we’re glad to see a positive return. 

The real action came from our new stake in Vanguard Telecom VIPER (VOX), which is also in our Hotsheet for 2006. The ETF (exchange traded fund) was up 4.78% for the month, and up near 15% for the first three months of the year. Investors are becoming wise to the relatively low valuations and high dividends of out-of-favor (at least compared to the rest of the market) telecom stocks. On the one hand, rising interest rates are a threat to any investment bought for yield – who needs a 2% dividend when you can get, say, 6% in government bonds? However, if inflation fears drive interest rates higher, telecom giants are decent inflation picks because the companies have mountains of debt, and debtors generally like inflation. It’s worth noting the American Century Utility fund, which we sold at the end of February, was down 1.51% in March.

SSgA International Growth (SINGX) was no slouch, up 3.5% for the month riding the continuing strength in international stock markets. Too bad we only had 5% in this fund and 5% in the telecom fund. But then, it is a conservative portfolio. International markets keep attracting so much new money that we’re getting quite negative. We’ve had this fund less than a year and it’s up 28% already.

Bill Gross has been moving into longer-term bonds, apparently confident the economy is on the brink of slipping, which will lead to lower interest rates. The Harbor Bond fund (HABDX) was down 1.1% for the month – slightly worse than the 0.98% hit to the total bond market, meaning Gross is likely taking some duration risk here (owning longer maturity bonds than the benchmark).

Short-term bonds were largely flat, with yield making up for the slight decline in prices. Vanguard Short Term Investment Grade (VFSTX) was up just 0.07% in March.

High-yield (junk) bonds were strong compared to investment-grade bonds. Apparently investors are becoming more confident in corporate America’s ability to pay back debt – given that corporate profit margins are at multi-decade highs, it’s not a half bad assumption. Furthermore, if inflation kicks up, companies with lots of debt may benefit; their existing debt load will become easier to payoff as their revenues inflate with everything else. Vanguard High Yield Corporate (VWEHX) was essentially flat for the month. 

Healthcare stocks slipped – HealthCare Select SPDR (XLV) fell 1.23%, reversing previous strength compared to the broader market.

Bonds took a dive in March. The roughly 3.5% hit to long-term treasury bonds was the worst hit to bonds since April 2004. The Federal Reserve’s rate-increasing campaign to fight inflation (inflation they may have created) finally caught up with longer-term bonds.

Stocks had a good month, with the S&P500 up 1.24%. More speculative stocks outperformed the big caps that dominate the S&P500 and the Dow – a reversal of recent months. The Nasdaq was up 2.56% while the small-cap Russell 2000 Index was up 4.85% – taking small-cap stocks to all time highs, a fairly stretched valuation compared to larger-cap stocks.

Our Aggressive Growth portfolio was up 1.59%. The strong stock funds made up for the weakness in bonds. 

The real action came from our new stake in Vanguard Telecom VIPER (VOX), which is also in our Hotsheet for 2006. The ETF (exchange traded fund) was up 4.78% for the month, and up near 15% for the first three months of the year. Investors are becoming wise to the relatively low valuations and high dividends of out-of-favor (at least compared to the rest of the market) telecom stocks. On the one hand, rising interest rates are a threat to any investment bought for yield – who needs a 2% dividend when you can get, say, 6% in government bonds? However, if inflation fears drive interest rates higher, telecom giants are decent inflation picks because the companies have mountains of debt, and debtors generally like inflation.

If international markets keep attracting so much new money, we’re going to have to cut our stakes further. T. Rowe Price Japan was up 4.16% for the month, Artisan International Small Cap (ARTJX) was up 5.15%.

Short-term bonds were largely flat, with yield making up for the slight decline in prices. Vanguard Short Term Investment Grade (VFSTX) was up just 0.07% in March.

Healthcare stocks slipped – HealthCare Select SPDR (XLV) fell 1.23%, reversing previous strength compared to the broader market.

Bill Gross has been moving into longer-term bonds, apparently confident the economy is on the brink of slipping, which will lead to lower interest rates. The Harbor Bond fund (HABDX) was down 1.1% for the month – slightly worse than the 0.98% hit to the total bond market, meaning Gross is likely taking some duration risk here (owning longer maturity bonds than the benchmark).

Interest rates were down in February, helping bond fund returns. Longer term bonds gained 0.77% for the month, while Vanguard Total Bond Index (which owns all types of investment grade U.S. bonds) rose 0.37%. ...read the rest of this article»

The Conservative portfolio put in a decent 4.14% showing in '05 – about half of 2004’s 9.35% return, but then the stock market returned more than twice as much in 2004 as well.  ...read the rest of this article»

Stocks rocketed, but bonds were merely ho-hum in November. The Conservative portfolio rose 0.82% for the month. The S&P500 rose 3.78% while the Lehman Brothers Aggregate Bond Index rose just 0.44%. Smaller-cap stocks were hot, and tech hotter still – areas safe portfolios are light on. ...read the rest of this article»

The Conservative portfolio fell 1.25% in October as both bonds and stocks were weak. The S&P500 dropped 1.67% while the Lehman Brothers Long Term Treasury Index fell 1.88%. Smaller-cap stocks fared worse, with the Russell 2000 index of smaller stocks down 3.1%. ...read the rest of this article»

The Conservative portfolio was essentially flat in September, up just 0.08%. Bonds and stocks flipped once again – bonds fell while stocks went up. ...read the rest of this article»

Junk bonds were the weakest part of the bond market, possibly because investors are starting to fear the solvency of corporate America once again, in light of the financial troubles hitting the airline industry. Some more leveraged companies – beyond just airlines – could have trouble eating the higher costs of energy for long periods of time. ...read the rest of this article»