Very little has changed this year to date. This week's special US Senate election in Massachusetts will set the tone for major Obamist legislation up to the mid-term elections in November. The Executive branch and the Federal Reserve remain the major surprise factors, whether we like it or not.
As for investing, I have done nothing so far in January except to add back LSBDX into the IRAs for yield and gain potential. LSBDX's principals won the Bond Fund of the Year award from Morningstar for their long term returns and excellent bounce back. They became more conservative as last year progressed, and are holding a lot of Canadian T Notes and fewer junk bonds. Since I have several high yield junk closed end funds (HIO, PKO), LSBDX is a diversification along with steady Pimco Bond Fund PTTRX, my largest position in the IRAs. I am keeping Vanguard Ginnie Mae fund VFIJX, even though its yield has fallen greatly, because I need to have a certain minimum of Vanguard Funds to get the low commissions ($8) and other Vanguard benefits. So VFIJX is basically my "money market fund" in the non-taxable area
In the taxable accounts I have done nothing and still have a large amount in the tax-free money market fund. The limited partnerships (LP) I bought in December amounted to about 15% of total taxable assets. They have done very well in just a month, up 6.3% not including dividends. Much of their dividends are tax-deferred until they are sold, and I may just keep them forever. These are EPD, ETP, ETE, NS, NSH, and DMLP. DMLP is a oil and gas property and royalty owner which benefits from rising prices and from new drilling paid for by others. The rest of the LPs are pipelines, storers, and processors of gas and crude oil and products. ETP also distributes (sells) propane gas. Much of their income is fee-based rather than being tied to commodity prices.
The basic idea behind buying these LPs is that they throw off 8-9% of largely un-taxed income like high yield junk municipals did a year ago, but they don't have the same risk of default. I'll admit that I misjudged the muni market in that it has done far better than I expected. The direct Federal support for states and counties and cities has kept them solvent so far, and the new direct placement "federal" municipal bonds have allowed issuers to avoid the regular new issue market, just as with the mortgage market. With reduced issuance and increased worries about higher taxes coming, longer term municipals have flourished. After their rise back to pre-crash levels they are probably overdue for a "rest", so I am using the LPs to augment the muni money market yield.
For other taxable account choices, I have thought a lot about buying Wellesley Income fund VWINX/VWIAX, Vanguard Health Care VGHCX, or Vanguard Energy Fund VGENX. Even though the "health care" bill will hurt Medicare beneficiaries, the demographic reality is that the population is aging and will have more medical problems as they age. There are so many truly exciting therapeutic possibilities under development that more than a casual investment in health care seems warranted. VGHCX was a huge winner in the 1990's but just average in the last decade. I am waiting for a pullback to buy it.
Right now I have ~20% in gold and gold stocks, and ~30% in money market funds. The rest is largely in fairly high yield vehicles of various sorts as I have previously detailed. Thus I have plenty of cash to take advantage of opportunities that might arise. I may be adding to cash this week by unloading the Merk currency funds MERKX and MEAFX. They are unleveraged and have been OK but not great. Gold and gold stocks are a much more efficient and profitable way to hedge the dollar. To stay in my portfolios a stock or fund has to pay me a very good yield or provide excellent hedging capability and prove it.
Although I don't have many "generic" stocks, many closed end funds and open end corporate bond funds trade like stocks, so I am of course interested in the outlook for conventional or generic stocks. I think we are in a bull market, as I outlined previously, due to the sentiment breakout in late December. Also market breadth remains solid. However the relaxation and happiness (I hope it was for you!) of the holidays is over, and this is normally a time of year for a larger pullback. That's not a prediction, and we may not get one.
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