For The Duration...

I'm continuing to batten down the hatches as in 2007-2008. I could be wrong and I really hope I am, but I'm trying to reduce chances of a big drawdown in net assets.

Along the lines of reducing average duration of bond holdings in both tax-deferred and taxable accounts, today I exchanged PIMCO's wonderful Income Fund (PIMIX) for PTTRX. The income is considerably cut, but Bill Gross is cutting duration everywhere too.

Borrowing one of Gross's methods, especially in the Unconstrained (discretionary) Bond Fund (PFIUX), I added some "negative" duration by buying the triple net short long treasury bond fund TMV. Small amount, but with triple leverage and with its long negative duration it's more powerful than cash for cutting duration.

I will hold the Vanguard Ginnie Mae (VFIJX), Short term corporate (VFSUX), and conservative Corporate High Yield (VWEAX), as well as dear old Wellesley Income (VWIAX). The first two have quite short durations, and the last two are well managed and keep me well within the Vanguard Admiral category for services, costs, and commissions.

Given the rebounds today in gold and silver, I sold all the precious metals stock funds (SIL, GDX, GDXJ) due to increasing moves probably to tax and nationalize mines all over the world. A gold bird in the hand is worth two in the bush, literally. So I added to both physical gold and Central Fund of Canada (CEF) with approximately 50% each in gold and silver bullion. I am keeping AGQ, triple long silver, for the time being. It's up 48% in a month!

On any big run up in the closed-end funds I will exit them all and go into things like FXF and others of its family. Again here too I am taking a cut in income to protect capital.

Recommended reading is John Hussman's weekly "sermon" of economic wisdom from this Monday. http://www.hussmanfunds.com/ It's his genius to make the extremely complicated very understandable. He explains why the FED's attempt to get out of quantitative easing (QE) will be quite hazardous for major inflation and market risks even with tiny increases in interest rates.

Despite my fervent hope for a set and forget portfolio, the times we live in dictate otherwise. Nor have I found someone who is extremely expert over time and who will take on my accounts in a caring fashion.

We do what we have to do to preserve our financial freedom.