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Bonds Come Back

On the surface, spending money is a great way to jump-start a weak economy. Ever since the government became such a large part of the economy (can you believe we didn't even have an income tax before 1913?) government tax and spend policy (AKA fiscal policy) has been used to "manage" economic growth.

November 2002 performance review

The conservative portfolio was up 2.6% for the month of November, but the positive action was mostly from stock funds in the portfolio, currently 50% of the total after recent increases in its equity allocation. While we felt weakness in stocks have created opportunities for risk averse investors, and we were hesitant to stay in near-zero yield cash positions, we were a bit premature in these moves.

Flight to Low Quality

If you recall from the last few issues of the Powerfund Portfolios, we talked about the panic investors felt when the Dow was in the low 7,000's, and how everyone had become severely risk averse. Much money piled into "safe" government bonds, lowering yields. Recently, as the market rallied back sharply, many of these same investors forgot all the things that made them scared in the first place - corporate scandals, a weak economy, looming war and terrorist threats, and lackluster earnings (to name just a few).

October 2002 performance review

The conservative portfolio was up just under 1% for the month of October. The positive action was mostly from the portfolio's stock funds, not the larger bond position, which was flat for the month.

Market Envy

While there has been good news on some economic fronts, the sad fact is most of the activity in the markets is primarily from two forces: 1) the alternatives to stocks are bleak 2) the nagging feeling among investors that they if they don't get in now they could miss out on some action.

November 2002 Trade Alert!

Vanguard High Yield Fund (VWEHX) with proceeds of CMHYX sale.</ul> Columbia funds, which show up in three of our model portfolios because of their high quality and low fees, where snapped up by Liberty, who has been on a fund purchasing binge for some time now. Liberty is merging some of their unbelievably crummy funds into some good Columbia funds to hide the Liberty fund's miserable performance.

September 2002 performance review

The conservative portfolio continues being our best performing portfolio, which is how you'd want a safe portfolio to do in a down market. Dragging it down are weak performance in the few stock funds in the portfolio. We are concerned about the future of bonds given that we see little room for rates to go anywhere but up from these levels.

Theory of Relativity

In the last issue of the Powerfund Portfolios we explained why treasury bonds may start being less of a sure thing, and might even surprise investors by their lousy returns as rates go back up sometime in the future (how's that for a prediction that can't go wrong?). This month we want to get back to the issue on everyone's mind: stocks. Namely, are stocks cheap, and can investors expect to make any money in them anytime soon?

August 2002 performance review

We recently shifted some of our money market allocation in this fund into the very beaten down Vanguard Utilities Income fund. The fund rallied up, then promptly fee in recent market weakness. So far October looks strong for the fund.

Gentlemen Prefer Bonds

How hot are "safe" US government bonds? They were up around 4% in August, after a big run in July amidst the market chaos. In fact, long-term government bonds, the kind the government recently decided they didn't need to issue anymore, are up over 12% this year so far. That's a lot of money to make in a safe investment.