Category Archives: Mutual Fund Commentary

Managing Risk During Inflation

By Charles Lynn Bolin

I have expressed my intention to retire in the next few months with the specter of stagflation looming. I have studied the 1960s to 1970s stagflation period since I lived through these times and know that they are secular. Federal Reserve Chairman Jerome Powell recently described the potential for inflation to last for an extended period of time:

…the risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher, which underscores the need for the Committee to move expeditiously as I have described. (Powell Says ‘Inflation Is Much Too High’ And The Fed Will Take ‘Necessary Steps’ To Address,” CNBC, 3/21/2022) Continue reading →

Briefly Noted . . .

By TheShadow

DoubleLine Capital, Jeffrey Gundlach’s $137bn asset management firm, has received approval from the Securities and Exchange Commission (SEC) to launch two active non-transparent ETFs.

The company initially filed for the strategies – the DoubleLine Opportunistic Bond ETF and the DoubleLine Shiller CAPE US Equities ETF – in October 2021. The funds have expense ratios of 0.5% and 0.65%, respectively.

The funds will not disclose assets Continue reading →

Overcoming Drawdowns

By Devesh Shah

My “Thoughts on Inflation Protection” essay, which appeared in MFO’s February 2022 issue, focused primarily on the role of different major asset classes in providing an inflation buffer for your portfolio. The article was focused in particular on the performance of funds and ETFs with substantial exposure to TIPS (Treasury Inflation-Protected Securities) and similar products. I highlighted the promise of short-duration TIPS funds.

In passing, I also noted the long-term potential role of domestic stocks and Equity REITS in protecting against inflation, while mentioning their two main drawbacks. One, they do not Continue reading →

Managing Risk During Normalization and Rising Rates

By Charles Lynn Bolin

Risk is defined as “the possibility of loss or injury” by the Merriam-Webster Dictionary and volatility as “a tendency to change quickly and unpredictably.”

Risk refers to the possibility of loss, which is outcome focused. Volatility refers to a quick, unpredictable change, which isn’t centered on the outcome. To be a good investor, a person must be able to differentiate between these. Volatility acts as noise, while risk is worth paying attention to.

– The Difference Between Risk And Volatility, Investopedia, Judy Hulsey

I continue to expect a regime change from mid-cycle to late-cycle later this year and look for opportunities to reduce exposure to riskier assets from my current 55%. Fourth-quarter nominal gross domestic product is up 11.8% compared to a year ago with the consumer price index up 7.5% for a real (inflation-adjusted) gross domestic product of 5.6%. Inflation, valuations, geopolitical risks, and volatility are Continue reading →

Death, taxes and childbirth

By Mark Freeland

As we head into March, it will soon be spring. A young man’s fancy lightly turns to love, while young and not so young investors’ thoughts turn more solemnly to taxes. This seems like an appropriate time to look at one corner of taxation – curiosities of ordinary income dividends distributed by funds.

I’ve been told that some people find taxes numbingly dull and perplexing. Who could imagine? Just to help you target your attention, Continue reading →

February 1, 2022

By David Snowball

Dear friends,

Welcome to February. It’s a month frequently associated with the color red – as in Valentine’s Day hearts, chocolate boxes, and scandalous lingerie – but investors have started the year seeing a different kind of red.

Here’s a compendium of every Vanguard index mutual fund (one share class for each) but appearances by a handful of special guests. In one month, investors had YTD returns of … Continue reading →

Thoughts on Inflation Protection

By Devesh Shah

An entire generation of investors has come of age without needing to learn how to protect portfolios and their wealth from Inflation. The mantra, three or four years ago, was “inflation is dead.” When inflation finally appeared last year, the Federal Reserve Chair declared it to be merely “transitory.” Sticky and low inflation for years has permitted the Fed to keep interest rates at historically low levels – a development which some fear has underwritten federal deficits, emboldened stock speculators, and punished savers. Increasingly, it appears that Continue reading →

Analysis Paralysis and Talking Heads

By Charles Lynn Bolin

“But I don’t want to go among mad people,” Alice remarked.

“Oh, you can’t help that,” said the Cat: “we’re all mad here. I’m mad. You’re mad.”

“How do you know I’m mad?” said Alice.

“You must be,” said the Cat, “or you wouldn’t have come here.”

– Alice in Wonderland, Lewis Carroll

At the time of this writing, the S&P 500 has fallen 7.8% year to date. Some respectful sources point to retail (small) investors panicking. Alice, the Mad Hatter, and I are not so sure. There are those who believe they can time the markets and are trying to jump ahead of the falling market before the rest of the crowd. Then some investors have the financial acumen to make quick, intelligent decisions. Should you sit back and ignore the volatility, buy the dip or sell the news? Continue reading →