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Gold Metal Performance

Gold is set to deliver an astonishing 11th straight calendar year gain in 2011, a dramatic reversal of an equally astonishing 20-year slide that began in 1980 when the gold bubble collapsed. For 13 of the calendar years between 1981 and 2000, gold was a loser, in contrast to the S&P 500, which rose during 17 of those same 20 years. This stark comparison doesn’t do justice to the real money implications of sharply diverting ways. A thousand dollars invested into the Vanguard 500 Index Fund at the end of 1980 (even without 1980's 30%+ gain) grew to $17,524 by the end of 2000. The same investment in gold crumbled to $465.

November 2011 Performance Review

October’s sharp rebound fizzled in November, and a late month rebound wasn’t enough to push the S&P 500 back into positive territory. The market’s slight dip for the month was similar to the bond market’s slip, resulting in a down November for most investment mixes.  It doesn’t seem it but the S&P 500 is up just under 1% (with dividends) for the year. Once again, foreign stocks underperformed US stocks last month.

The Sourpuss Stock Market

As of November 14th, the S&P 500 is down a fraction, but up about 1% if you include dividends. In other words, despite the U.S. debt ceiling battles, euro debt chaos, and slow economic growth blues, investors are still beating money market funds and CDs. Granted, CDs don’t fall nearly 20% in a few weeks, look like they're going to slide another 50%, and then  recover. Such is the new market: low returns, sky-high volatility.

October 2011 Performance Review

One oddity of the new market environment is everything that is somewhat risky to very risky has been moving in near perfect sync - so wild swings tend to hit everything the same way, making well diversified portfolios appear quite risky. Longer term government bonds –which have limited long term appeal at current low rates, remain the best offset to sliding everything, almost always going up significantly when fears drive riskier global assets down.

That 70's Market

After this long plateau, inflation fears abound, oil prices remain uncomfortably high after skyrocketing a few years before. A global superpower is stuck in a war in Afghanistan, and Iraq is a war zone putting global oil supplies at risk. We have no idea where economic growth will come from, or when it will kick in. The government is a mess. Tax and regulatory uncertainty has business leaders scratching their heads. The unemployment rate, no longer stable at around 5%, seems to be heading toward 10%, and investing in precious metals or the far east appears to be the only way to make any money.

September 2011 Performance Review

This is how America’s fascination with foreign stock investing ends. It is also not far off from when we add some emerging market stock funds back into the Powerfund Portfolios. While the 10 year return for non-emerging foreign stock funds still beats the S&P 500, all the huge inflows into foreign funds were in the last five years, and for the last five years US stocks have been ahead.

Trade Talk

We’ve made trades our two model portfolios on September 20th to reflect 1) the market slide this year, and 2) increasing distaste for stock funds by investors, who are usually wrong.

September 2011 Trade Alert!

We’ve executed a trade in both the Conservative and the Aggressive Powerfund Portfolios today, September 19th 2011. The main goal is a small increase in stock fund allocation by 5% for the aggressive portfolio and 1% for the conservative portfolio because stocks, while riskier, are more attractively priced than bonds after the slide in stocks this year. More important to our methodology, fund investors are taking money out of stocks and going into bonds at elevated levels. 

August 2011 Performance Review

Another negative month. With August’s 5.45% drop, the stock market is now down four months in a row and about 10% in total since the end of April, enough to push the market into slightly negative territory for the year (talk about the old Wall Street adage ‘sell in May and go away’). But  considering we were down about 20% top to bottom from July 22nd to the lows in August, being down ‘only’ 10% feels sort of fortunate.