Recent portfolio changes are working out well. I cut way back on stocks over the past few months, almost to 5%. I cut out "paper gold" entirely a week to ten days ago. And I loaded up on long US Treasury's via Vanguard's ETF EDV and WHOSX, both of which feature Treasury strips whose average duration is over a year longer (26.6 years) than their average maturity or payback dates (25.2 years). This also means that if interest rates fall 1% at the 30 year bond level, the bonds in EDV will theoretically rise 27%. Thursday and Friday last week and today had very good rises for the long bonds.
I "think" that gold may have completed a correction from May, so I have added back somewhat in ASA and IAU. I plan to refrain from buying the Canadian "closed-end" gold funds. Fundamentally gold may still be under pressure so I am watching it closely. I'll write more about ASA and IAU later. I am not adding back in generic stocks since my feeling is bearish on both technicals and fundamentals.
I have identified another hedge fund type mutual fund from PIMCO which is a long/short stock fund. It is set up like quite a few PIMCO theme funds with a basic stock sector idea overlying a bond-like base. My first experience with this approach was their Commodity fund PCRDX/PCRIX back in 2003-7. The new one (to me) is PFATX which can be bought for $25,000 in many brokerage accounts. Smaller minimum versions of the fund are available for a higher annual fee. This fund is long the RAFI stock indexes which are indexed according to value measurements, and it is short the SP500 which is, of course, capitalization weighted. PFATX is up an annualized 10.61% since it started up in February 2008! It was even up today. So I have an initial portion of PFATX in the account I keep for "hedge mutuals" which includes HSGFX and TFSMX. There will, of course, be periods when the big cap bloated stocks will outperform value, but over time value will win out, and especially in a bear market. PFATX has so far outperformed (10.61% annualized) versus HSGFX (-0.42% annualized) and TFSMX (+3.51% annualized). They all have the same goals and all have merit. I like the PIMCO fund because they have depth in house and are definitely not one man bands. I also have a smaller portion in PAUIX and a much larger position in Bill Gross's flagship PTTRX which is hard to beat for returns with low volatility.
I will need to scale back on the higher volatility funds for August due to vacation time. I did buy one of the very small and light (1.6 lbs!) Sony notebooks to take on vacation, but I hate to be running to look at a trading screen at times like that.
**July 28, 2010 Addendum: Nearly as soon as I published this it was obvious that bonds were reversing down, and that my analysis was premature at best. So I cut out all but a modest positon in EDV as I outlined below in a comment dated July 25. I do not edit posts after publication, but prefer to comment on the posts and any changes under comments. I still do believe that bonds will rise, but I am approaching it in a less concentrated fashion. More later.
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