After my longest vacation in decades, I am somewhat at a loss for words. We saw many old friends, talked and listened for hours, experienced much good music and art, and ate too well and too much: in short a successful vacation! The earlier time this summer in Hawaii was more truly "R & R" time: rest and recuperation. This was fun for all the senses.
I've grown tired of lugging a laptop computer around and took only my "nano-computer", a T-Mobile Dash (HTC) which runs the Windows Mobile 6 OS. This very slim machine runs internet, messaging, and email off either TMobile's GPRS "EDGE" network or any nearby wi-fi output. T Mobile has greatly extended their capability since I bought my first Sidekick unit over three years ago, both geographically and in network speed. I tested the network speed several times through http://performance.toast.net/ and got a rough average of 160 Kbps or about double the effective speed of a 56 Kbps dial-up service. This is about like ISDN was years ago, and is quite acceptable. It worked well enough to keep track of the basics once or twice a day. After all a vacation is for "taking leave of" and I didn't want to be an "inter-nut" and spoil the fun for myself and others.
Before I tell you how my portfolios did, let me tell you what they consisted of with all of them under my management consolidated. The "pie" does not include personal checking accounts, stored gold, collector items, personal real estate (home) and other family and personal possessions. It includes only investible and invested funds. 49% was/is in "cash" in the form of Vanguard's Prime money market fund @ 5.13%. The rest is approximately equally divided amongst nine funds: BEARX, DODBX, FAIRX, HSGFX, PRWCX, SGENX, VWINX, VWEHX, and "MIX". The last one is a collection of much smaller pieces of funds and ETF's including energy, mining, real estate, and "emerging markets" exposures. VWEHX is Vanguard's "high yield" municipal bond fund, but a very conservative one.
DODBX, FAIRX, PRWCX, SGENX, AND VWINX are all considered by me to be "balanced funds" with either a traditional stock/bond/convertible mix or who are primarily stock investors but who almost always keep >20% in cash for buying value after pullbacks. They (in total) are estimated by me to be holding about 70% in stocks and 30% in bonds or cash at this time.
BEARX is both a long/short fund emphasizing the short, but is also a gold fund. HSGFX is a mid cap long fund with 100% short hedging via Russell 2000 and SP500 futures or options. "MIX" is the inflation kicker or spice to improve inflation protection but not enough to torpedo the plan. That plan is volatility reduction which is important to me now partly since I am retired and live off our funds and because I felt increasingly that the markets were due for a larger drawdown.
Now for the comparisons: from the peak of the stock markets on about July 18 (and using daily closes only) the Dow 30 was -5.89% to its lowest close to date and the SP500 was -6.58% to its lowest close. The long US Treasury bond was up about 2.5% over the same period and the US Dollar Index and gold were virtually unchanged over that same period.
Drum roll please........ the low volatility fund described here was down 1.17% over the same period to its lowest daily closing. Thus it had less than 1/5 the drawdown percentage of the SP500. As of Friday's close, the SP500 fund at Vanguard is up 3.56% on the year, and my low volatility fund is up 3.16%. Clearly there is an opportunity cost to a low volatility program, but the much lower "ulcer index" is worth it to me at my age and given the current technical situation of the market.
I haven't done all my work on the markets since I got back a few days ago, so I don't want to say too much. But I think that based on historical considerations the market will probably remain under pressure this summer. How it responds to this currently grossly oversold condition in the next week or ten days will tell the tale. Several very different but reputable intermediate term predictors are turning positive right now. They both turned negative just before I went away in mid July.
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