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November 2017 Performance Review

December 5, 2017

Investor exuberance is becoming irrational.

It doesn't seem like what you would want to do in the face of dead-end bonds and fast rising equities globally (not to mention the increasing likelihood of corporate tax cuts), but we may have to take the portfolio's risk levels down a bit soon. Hopefully a risk reduction will be contrarian and not stupid…but the two often walk hand-in-hand.

While we don't (necessarily) think a 2000 or 2007 grade stock meltdown is in the cards, upside potential is looking smaller than downside potential. This would mean a move to lower-risk stock funds and even less credit risk on our bond side.

The Conservative portfolio gained 1.19% in November and the Aggressive portfolio gained 1.40%. Benchmark Vanguard funds for November 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 3.06%; Vanguard Total Bond Market Index Fund (VBMFX) down 0.17%; Vanguard Developed Markets Index Fund (VTMGX) up 0.85%; Vanguard Emerging Markets Stock Index (VEIEX) up 0.18%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 1.40%.

With bonds down and stocks up, up, and away our portfolios did a little better than expected for their risk level this month. The Vanguard STAR fund benchmark was also up 1.4% in November matching our Aggressive portfolio exactly, however, in down markets we're generally falling less than this total portfolio fund, mostly because of our short positions and longer-duration bond holdings.

Our lower-risk stance also resulted in our under-performing the Vanguard STAR fund so far this year. The S&P 500 is up just over 20% in 2017, while Vanguard STAR is up just over 17% — as opposed to 11.97% YTD for our Aggressive portfolio and 12.65% for our Conservative portfolio. (The fact that a balanced conservative portfolio is up over 12% YTD and we're making excuses about the poor performance is one reason this market is overheated. By now, a down market almost seems nostalgic.)

Shorting MLPs worked even with rising oil prices as ETRACS 1xMonthly Short Alerian MLP (MLPS) was up 3.2% for the month. This short fund is having a good year for an inverse fund, up around 12% even in the face of a strong economy and rising oil prices. This is a tiny fund and unpopular strategies tend to work (like shorting commodities with funds in 2008 on or buying commodities long in 2000-2002).

Value stocks did well last month with Vanguard Value (VTV) up 3.52% and Homestead Value (HOVLX) up 3.11%. Utilities and telecoms rebounded with Vanguard Utilities (VPU) up 2.89% and Vanguard Telecom Services ETF (VOX) up 2.48%. Basically everything we owned in stocks was up that wasn't short.

In bonds SPDR Barclays Intl. Treasury (BWX) was up 2.11% as the U.S. dollar turned back down. Vanguard Extended Duration Treasury (EDV) was up 1.35% while longer-term bonds outperformed shorter-term bonds. In addition, lower-risk debt did better than higher-risk debt, which is why Artisan High Income Fund (ARTFX) was down 0.45% while the bond index fell 0.17% and longer-term government bond indexes were up. Our prediction for a flat yield curve in the future is slowly coming true, especially with a Fed dying to prove their inflation fighting powers (hopefully not to the point of deflation).

In general, U.S. stocks beat foreign stocks though for the year foreign stocks have now outperformed the U.S. (this is partly due to a falling dollar).

Surprisingly both cyclical AND defensive stocks beat the S&P 500 in November — as if investors are evenly split on making bets on both a booming economy and a collapse.

With so much money going into indexing it's almost a surprise everything isn't moving in unison. But for all the indexing going on there's still plenty of betting on specific areas, just through index funds. This is why long-term under-performance of broad indexes will continue even with the savings in active management fees.

Stock Funds1mo %
Vanguard Value (VTV)3.52%
ETRACS 1xMonthly Short Alerian MLP (MLPS)3.20%
Homestead Value (HOVLX)3.11%
[Benchmark] Vanguard 500 Index (VFINX)3.06%
Vanguard Utilities (VPU)2.89%
Vanguard Telecom Services ETF (VOX)2.48%
Artisan Global Equity (ARTHX)1.66%
Vanguard Europe Pacific ETF (VEA)0.86%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.85%
iShares MSCI BRIC Index (BKF)0.41%
iShares Mortgage REIT (REM)0.40%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)0.18%
iShares MSCI Italy Capped (EWI)0.16%
Vanguard European ETF (VGK)-0.05%
Gold Short (DZZ)-0.53%
Proshares Ultrashort NASDAQ Biotech (BIS)-1.39%
Proshares Ultrashort Russel2000 (TWM)-5.76%
PowerShares DB Crude Oil Dble Short (DTO)-9.81%
Bond Funds1mo %
SPDR Barclays Intl. Treasury (BWX)2.11%
Vanguard Extended Duration Treasury (EDV)1.35%
Vanguard Long-Term Bond Index ETF (BLV)0.75%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.17%
Vanguard Mortgage-Backed Securities (VMBS)-0.18%
Artisan High Income Fund (ARTFX)-0.45%

October 2017 Performance Review

November 6, 2017

OK it's official: the market is overheating. What minor skittishness there was around the 30th anniversary of the 1987 crash evaporated faster than a Bartles & Jaymes wine cooler spilled on the hood of a VW Rabbit in the parking lot of a summer concert featuring Poison, Ratt, and Cinderella.

Our Conservative portfolio gained 0.77% in October. Our Aggressive portfolio gained 0.93%. Benchmark Vanguard funds for October 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 2.32%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.11%; Vanguard Developed Markets Index Fund (VTMGX) up 1.87%; Vanguard Emerging Markets Stock Index (VEIEX) up 2.44%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 1.38%.

When the market gets hot, we tend to lag. We're underperforming the stock market so far in 2017, as we did in 2007 before the drop in the market. Most of this current drag is from our bond allocation, but more recently we've also suffered from being in lagging fund categories like telecom.

Because stocks fell so far between 2007-2009, the market still hasn't caught up to our Aggressive portfolio for the trailing 10 years (which includes this drop) even though we've been at a significantly lower risk level than the stock index for essentially all of this time (though our risk level was quite a bit higher than today in late 2009).

A too-hot market is one where you have to explain why you are up just 8.5% and 9.3% over the last twelve months in our Conservative and Aggressive portfolios respectively as opposed to a 23.5% gain in stocks.

Much of this current excitement is with the large tech stocks in the NASDAQ index where several companies are now in the $500 billion to $1 trillion market value range. The NASDAQ index level is up a bit more than 30% over the last 12 months as opposed to the still impressive 22% gain (just over 23.5% including dividends) in the S&P 500.

As hot as these stocks are now, it's noteworthy that the NASDAQ index is up only about 35% from its early 2000s peak — while we broke that level just over a year ago. Sure, this doesn't include dividends, but for much of this time the NASDAQ's dividends were minimal because of its high stock prices.

The NASDAQ of today is a far better deal than the early 2000 NASDAQ and neither plunge 80% from these levels or gain 2% a year going forward, which is about the average annual return since 2000. This also highlights the error of investing near peak enthusiasm. We're not at peak enthusiasm, but we're at levels where future returns will be modest.

Sort of surprisingly, Vanguard Utilities (VPU) was up 4.77% while a similar lower risk yield investment Vanguard Telecom Services ETF (VOX) was down 2.2%. Telecom stocks are getting attractively priced. In other odd parings our crude oil short PowerShares DB Crude Oil Dble Short (DTO) was down 9.27% as oil continued up on global economic strength while ETRACS 1xMonthly Short Alerian MLP (MLPS) which shorts companies that move energy around the country was up 4.8%.

Europe was weak compared to emerging market stocks which held back some of our foreign holdings like Vanguard Europe Pacific ETF (VEA) and Vanguard European ETF (VGK).

Bonds were quiet in October. Higher risk bonds like in Artisan High Income Fund (ARTFX) beat the bond index again.

Stock Funds1mo %
Proshares Ultrashort NASDAQ Biotech (BIS)12.20%
ETRACS 1xMonthly Short Alerian MLP (MLPS)4.80%
Vanguard Utilities (VPU)4.77%
Artisan Global Equity (ARTHX)2.81%
Homestead Value (HOVLX)2.78%
iShares MSCI BRIC Index (BKF)2.63%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)2.44%
[Benchmark] Vanguard 500 Index (VFINX)2.32%
Gold Short (DZZ)1.99%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)1.87%
Vanguard Value (VTV)1.83%
Vanguard Europe Pacific ETF (VEA)1.77%
Vanguard European ETF (VGK)0.46%
iShares Mortgage REIT (REM)-0.79%
iShares MSCI Italy Capped (EWI)-1.28%
Proshares Ultrashort Russel2000 (TWM)-1.55%
Vanguard Telecom Services ETF (VOX)-2.20%
PowerShares DB Crude Oil Dble Short (DTO)-9.27%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)0.80%
Artisan High Income Fund (ARTFX)0.56%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.11%
Vanguard Mortgage-Backed Securities (VMBS)0.09%
Vanguard Long-Term Bond Index ETF (BLV)0.02%
SPDR Barclays Intl. Treasury (BWX)-0.76%

September 2017 Performance Review

October 7, 2017

Our win over benchmarks in August turned into a loss for September.

Stocks were hot and recent bond gains evaporated as investors moved back into risky assets. Interest rate sensitive stocks (like telecom and utilities) were down as well — 10-year treasury bond yields moved from just over 2% in early September to over 2.3% by the end of the month.

Our Conservative portfolio declined 0.07% in September. Our Aggressive portfolio fell 0.08%. Benchmark Vanguard funds for September 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 2.06%; Vanguard Total Bond Market Index Fund (VBMFX) down 0.54%; Vanguard Developed Markets Index Fund (VTMGX) up 2.40%; Vanguard Emerging Markets Stock Index (VEIEX) down 0.78%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, gained 1.67%.

Our longer-term bond funds declined in this environment, though with stock upside we didn't decline as much as the bond index. In general, having stocks and long-term bonds has had a better risk vs. return in most environments than just pure bond index — which is lower yield but less interest rate sensitive. A mixed portfolio benefits from the extra yield of longer-term bonds, the growing stock dividend yield with inflation protection, and offsetting bond gains for stock losses when the markets get scary.

Stocks are getting hot again as investor fears over Nuclear Armageddon-lite recede, even if the situation on the ground hasn't particularly improved.

Our falling dollar this year plus years of underperformance abroad has boosted foreign stocks in recent months.

The global economy seems strong and stable with a solid job market domestically.

Interest rates to seem too low to warrant easing up on stocks. This risk focus is creating opportunities in some lower-risk stock sectors like telecom and we expect to increase these allocations in coming months.

With no inflation in sight and rising rates, gold was weak, boosting our gold short Gold Short (DZZ) 6.33% and making it our top September holding.

Most of the bigger gains were foreign funds last month and most beat the S&P 500. The exception was a strong 5.33% showing in Homestead Value (HOVLX) which owns U.S. value stocks.

Losers in stocks included Vanguard Utilities (VPU) down 3.24% and Vanguard Telecom Services ETF (VOX) down 1.38% with a big 15.70% loss in PowerShares DB Crude Oil Dble Short (DTO) (oil reversed course in September). Telecom and shorting oil should work well going forward.

Our most interest rate sensitive holding, Vanguard Extended Duration Treasury (EDV) slid 4.03% while Vanguard Long-Term Bond Index ETF (BLV) fell 0.84%. High-risk bonds, which often move like stocks, pushed up Artisan High Income Fund (ARTFX) 1.2%. The dollar slide eased a bit, sending SPDR Barclays Intl. Treasury (BWX) down 1.87%.

On the political initiatives front, it is becoming increasingly likely nothing of significance will get done. The main reason is there is really no way to do anything major given our current large debt without big offsetting spending cuts or tax increases. The only real big new spending is relief of the numerous costly natural disasters. Nobody expects there to be a plan to pay for these even though there probably is more political support to do so than any other new spending. The do-nothing course means an increasing, even with a strengthening economy.

Stock Funds1mo %
Gold Short (DZZ)6.33%
Homestead Value (HOVLX)5.33%
ETRACS 1xMonthly Short Alerian MLP (MLPS)4.83%
iShares MSCI Italy Capped (EWI)3.53%
Vanguard European ETF (VGK)3.22%
Vanguard Value (VTV)2.98%
Vanguard Europe Pacific ETF (VEA)2.52%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)2.40%
Artisan Global Equity (ARTHX)2.24%
[Benchmark] Vanguard 500 Index (VFINX)2.06%
iShares MSCI BRIC Index (BKF)1.25%
Proshares Ultrashort NASDAQ Biotech (BIS)-0.29%
iShares Mortgage REIT (REM)-0.53%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)-0.78%
Vanguard Telecom Services ETF (VOX)-1.38%
Vanguard Utilities (VPU)-3.24%
Proshares Ultrashort Russel2000 (TWM)-11.54%
PowerShares DB Crude Oil Dble Short (DTO)-15.70%
Bond Funds1mo %
Artisan High Income Fund (ARTFX)1.20%
Vanguard Mortgage-Backed Securities (VMBS)-0.31%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.54%
Vanguard Long-Term Bond Index ETF (BLV)-0.84%
SPDR Barclays Intl. Treasury (BWX)-1.87%
Vanguard Extended Duration Treasury (EDV)-4.03%

August 2017 Performance Review

September 8, 2017

The portfolios had a good month relative to the benchmarks and Vanguard's total portfolio fund. With our gains in August we're almost neck and neck with a double-digit (for 2017) S&P 500 with significantly less downside risk. Our Conservative portfolio is up 10.54% for the year while Aggressive is up 9.49% — compared to the 11.82% return for the S&P 500.

For August, our Conservative portfolio gained 1.26%. Our Aggressive portfolio gained 1.10%. Benchmark Vanguard funds for August 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 0.29%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.85%; Vanguard Developed Markets Index Fund (VTMGX) up 0.07%; Vanguard Emerging Markets Stock Index (VEIEX) up 3.05%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 0.53%.

August was close to flat for the S&P 500 and the U.S. bond market. Most of the gains to be had were in emerging market stocks and longer-term U.S. government bonds, and we are exposed to both.

Our iShares MSCI BRIC Index (BKF) holding was up 4.41%, exceeded only by shorting oil which delivered a 13.18% return via PowerShares DB Crude Oil Dble Short (DTO). Long-term bond gains boosted Vanguard Long-Term Bond Index ETF (BLV) 2.08% and even more interest rate sensitive Vanguard Extended Duration Treasury (EDV) up 4.89%.

Utilities were strong as interest rates fell, delivering a 2.9% return to Vanguard Utilities (VPU).

Besides gains in oil shorting our losses shorting gold and biotech stocks were balanced by small gains shorting small-cap stocks and MLPs (energy limited partnerships) essentially neutralizing the drag of shorting.

European stocks were as flat as in the U.S.

Higher risk bonds were weaker leaving Artisan High Income Fund (ARTFX) down fractionally.

Fears over North Korea's nuclear advances haven't been a significant drag on stocks, which could be an indication of too much investor optimism. It's preferable to invest in a fearful market with lower valuations than one brimming with confidence.

Even south Korean stocks have been strong in recent weeks. And rightly so. As for trying to put probabilities on nuclear destruction and the resulting impact on stocks ignoring the greater issue of the impact on life as we know it, nuclear war with North Korea remains a very low probability event.

Stock Funds1mo %
PowerShares DB Crude Oil Dble Short (DTO)13.18%
iShares MSCI BRIC Index (BKF)4.41%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.05%
Vanguard Utilities (VPU)2.90%
Proshares Ultrashort Russel2000 (TWM)2.13%
iShares MSCI Italy Capped (EWI)1.78%
Artisan Global Equity (ARTHX)1.48%
iShares Mortgage REIT (REM)1.27%
ETRACS 1xMonthly Short Alerian MLP (MLPS)1.03%
[Benchmark] Vanguard 500 Index (VFINX)0.29%
Vanguard European ETF (VGK)0.07%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.07%
Homestead Value (HOVLX)0.06%
Vanguard Europe Pacific ETF (VEA)0.02%
Vanguard Telecom Services ETF (VOX)-0.23%
Vanguard Value (VTV)-0.47%
Gold Short (DZZ)-7.95%
Proshares Ultrashort NASDAQ Biotech (BIS)-9.47%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)4.89%
Vanguard Long-Term Bond Index ETF (BLV)2.08%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.85%
SPDR Barclays Intl. Treasury (BWX)0.74%
Vanguard Mortgage-Backed Securities (VMBS)0.64%
Artisan High Income Fund (ARTFX)-0.03%

June 2017 Performance Review

August 2, 2017

It was another solid month for stocks globally, with essentially everything up. The only fund category displaying red arrows was longer-term government funds, and this bond fund category, sensitive to interest rates, was down less than 1%. The strongest areas were once again abroad, as foreign markets continue to catch up after years of underperforming the U.S. market.

Even with the drag of shorting and longer-term government bonds, we had a solid month against benchmarks with the extra boost from some foreign markets. Coincidentally, our conservative portfolio had the exact same return as our Vanguard Star fund benchmark, which is riskier than our conservative model portfolio.

The Conservative portfolio gained 1.71% while our Aggressive portfolio gained 2.16%. Benchmark Vanguard funds performed as follows in July 2017: Vanguard 500 Index Fund (VFINX) up 2.04%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.37%; Vanguard Developed Markets Index Fund (VTMGX) up 2.94%; Vanguard Emerging Markets Stock Index (VEIEX) up 5.31%; and Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 1.71%.

While markets were strong in the U.S. in non-sectors, really just larger cap growth, stocks did notably well with a near 3% return. Smaller cap was barely up, particularly value stocks. Abroad, the hottest market was Latin America, with funds in this category up just under 9%, followed closely by India and China funds, both up over 5%. Russia was up over 4%. This drove returns on our top returner last month, iShares MSCI BRIC Index (BKF), up 8.33%. Italy was about the strongest area in non-emerging markets, driving iShares MSCI Italy Capped (EWI) up 7.05%. We didn't even lose that much shorting small cap stocks with leverage, as Proshares Ultrashort Russel2000 (TWM) was down 1.76% because small cap stocks were lagging in July. Shorting gold, biotech, and notably oil hurt as they all went up.

In bonds, strong corporates hid our losses in longer-term government bonds in our holdings, except in Vanguard Extended Duration Treasury (EDV), which was down 0.53%. This is a 100% long-term U.S. government bond fund, and in effect the longest-term Treasury bond fund, which makes it the most sensitive to interest rates. The reason for most of the gains abroad in stocks — the falling U.S. dollar — pushed SPDR Barclays Intl. Treasury (BWX) up 2.93% for the month.

Besides investors rebalancing into underperforming assets, what is driving this global goodness in recent months is other countries looking a little better than they did last year, while we are looking a little worse. The likelihood of significant new policy initiatives to boost the economy if the Fed continues to raise rates looks slim at best, including any tax cuts. Our dollar was riding high a few months ago on continued American optimism for growth and higher interest rates compared to other major economies. Higher rates can attract money from abroad looking for safe yield. This earlier flow is reversing as our interest rates drift down slightly. The early Trump boom is gone but investors are confident in investing everywhere, and perhaps overly confident.

Stock Funds1mo %
iShares MSCI BRIC Index (BKF)8.33%
iShares MSCI Italy Capped (EWI)7.05%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)5.31%
Artisan Global Equity (ARTHX)4.13%
Vanguard Utilities (VPU)3.45%
Vanguard Telecom Services ETF (VOX)2.95%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)2.94%
Vanguard Europe Pacific ETF (VEA)2.88%
Vanguard European ETF (VGK)2.83%
iShares Mortgage REIT (REM)2.30%
[Benchmark] Vanguard 500 Index (VFINX)2.04%
Vanguard Value (VTV)1.54%
Homestead Value (HOVLX)1.45%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-0.58%
Proshares Ultrashort Russel2000 (TWM)-1.76%
Gold Short (DZZ)-4.28%
Proshares Ultrashort NASDAQ Biotech (BIS)-6.02%
PowerShares DB Crude Oil Dble Short (DTO)-16.75%
Bond Funds1mo %
SPDR Barclays Intl. Treasury (BWX)2.93%
Artisan High Income Fund (ARTFX)1.18%
Vanguard Mortgage-Backed Securities (VMBS)0.45%
Vanguard Long-Term Bond Index ETF (BLV)0.39%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.37%
Vanguard Extended Duration Treasury (EDV)-0.53%

June 2017 Performance Review

July 4, 2017

Most markets flattened out in June with very few areas rising or falling much. The strongest areas in stocks were small-cap in general and value oriented stocks of all sizes. China, Japan, and other markets in Asia where strong while Europe was weak. Yield oriented stocks were soft. Bonds in general had an uneventful June but we just saw longer-term bonds go up in price (yields down) while shorter-term bond prices fell as the yield curve flattened out.

Our Conservative portfolio gained 0.08% in June. Our Aggressive portfolio gained 0.23%. Benchmark Vanguard funds for June 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 0.61%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.03%; Vanguard Developed Markets Index Fund (VTMGX) up 0.57%; Vanguard Emerging Markets Stock Index (VEIEX) up 0.78%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 0.76%.

Technology stocks have recently started to falter, perhaps on the growing worry that things have gotten a little too euphoric in startups and tech stocks.

It's no 1999 bubble yet, but valuations of the tech leaders are getting to levels that are going to require unrealisticallly rapid growth to continue to stay in the black, and actual solid profit margins to appear someday.

The trouble is, some of these companies compete with each other aggressively, and are getting so large regulators may start thinking monopoly. Google (Alphabet) just got fined around $3B by European Union regulators.

Meanwhile hard hit areas like energy stocks may turn around as investors make a move back to the old economy so to say.

Oil's renewed drop pushed our oil short PowerShares DB Crude Oil Dble Short (DTO) up by 9.19% with our gold short Gold Short (DZZ) close by with a 4.65% return.

Of our non-shorts, only Vanguard Value (VTV) up 1.8% and iShares MSCI Italy Capped (EWI) up 1.54% were noteworthy performers, the latters performance defying a down month for European stocks in general (as seen in our holding Vanguard European ETF (VGK), which fell 0.53%).

June was a rough month for our small-cap and biotech shorts, with Proshares Ultrashort Russel2000 (TWM) down 6.7% and Proshares Ultrashort NASDAQ Biotech (BIS) dropping 16.29%.

Utilities and telecom were weak: Vanguard Utilities (VPU) fell 3.1% and Vanguard Telecom Services ETF (VOX) 2.29%. The good news here is that telecom is starting to be attractive again given recent returns and investors behavior.

Longer-term bonds were the best debt performers with Vanguard Long-Term Bond Index ETF (BLV) gaining 0.89%, even with rates creeping up on the short- to mid-range of the yield curve (where most investors are).

Our lone loser in bonds was Vanguard Mortgage-Backed Securities (VMBS), which fell 0.26%.

Stock Funds1mo %
PowerShares DB Crude Oil Dble Short (DTO)9.19%
Gold Short (DZZ)4.65%
Vanguard Value (VTV)1.80%
iShares MSCI Italy Capped (EWI)1.54%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)0.78%
ETRACS 1xMonthly Short Alerian MLP (MLPS)0.75%
iShares MSCI BRIC Index (BKF)0.68%
Vanguard Europe Pacific ETF (VEA)0.62%
[Benchmark] Vanguard 500 Index (VFINX)0.61%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.57%
Artisan Global Equity (ARTHX)0.55%
iShares Mortgage REIT (REM)0.32%
Homestead Value (HOVLX)0.28%
Vanguard European ETF (VGK)-0.53%
Vanguard Telecom Services ETF (VOX)-2.29%
Vanguard Utilities (VPU)-3.10%
Proshares Ultrashort Russel2000 (TWM)-6.69%
Proshares Ultrashort NASDAQ Biotech (BIS)-16.29%
Bond Funds1mo %
Vanguard Long-Term Bond Index ETF (BLV)0.89%
Vanguard Extended Duration Treasury (EDV)0.54%
Artisan High Income Fund (ARTFX)0.36%
SPDR Barclays Intl. Treasury (BWX)0.33%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.03%
Vanguard Mortgage-Backed Securities (VMBS)-0.26%

The Powerfund Portfolios posted solid gains in May, with both the Conservative and Aggressive portfolios beating Vanguard's main U.S. stock index and total global fund. As we're taking less risk than these funds it's harder to do this in an up market (as May was), than a down one.

We've been more or less lagging benchmarks indexes since the Trump election upset so it is a little early to spike the football, but our year-to-date figures are now closing in on these hard to beat funds. Adjusting for risk we more often beat both Vanguard's U.S. stock index and total global fund, as will probably become apparent again in any meaningful stock market drop.

In May, our Conservative portfolio gained 2.03%. Our Aggressive portfolio jumped 1.92%. Benchmark Vanguard funds for May 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 1.39%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.67%; Vanguard Developed Markets Index Fund (VTMGX) up 3.41%; Vanguard Emerging Markets Stock Index (VEIEX) up 1.22%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, gained 1.86%.

While the stock market's brief sharp drop in mid-May has largely been erased in recent days, most of our upside has been from the U.S. dollar declining as the euro, and foreign stock markets, have been hot (after a long spell of underperformance for both).

In the U.S. the strongest funds in May were in large-cap growth stocks. Small-cap value funds where down nearly 3% on average. We're short small-cap but the hedge has mostly been a bust in this hot market led by riskier small-caps. In general, we would prefer shorting small-cap value as that category has been the most overpriced of late, but this is not easy to do with inverse ETFs.

Almost all foreign markets beat the S&P 500 in May, except for Latin American funds which were the sole big category loser, down about 3%. This dragged on our iShares MSCI BRIC Index (BKF) stake which posted only a 1.36% return.

Long-term investment-grade bonds were top performers as interest rates declined. We had a 3.2% gain in Vanguard Extended Duration Treasury (EDV) and a 1.9% jump in Vanguard Long-Term Bond Index ETF (BLV). The falling dollar helped boost SPDR Barclays Intl. Treasury (BWX) 1.92%. Higher-risk bonds did fine but the bigger gains where in more interest rate sensitive bonds. We're considering exiting our strong performing high yield bond fund Artisan High Income Fund (ARTFX), which was up 0.58% in May.

In sectors, financials and energy were weak — high beta stocks that have done well since Trump's election. The only real drags were Vanguard Telecom Services ETF (VOX), down 3.06%, and iShares Mortgage REIT (REM), down 1.47%. The former's poor performance was a bit of a surprise as safe and yield have been doing well. The latter's rough month was probably just a bit of a correction after big recent gains.

Other than a basically flat month shorting gold, our shorts were helping returns (it has been awhile..) with Proshares Ultrashort NASDAQ Biotech (BIS) up 7.49%, ETRACS 1xMonthly Short Alerian MLP (MLPS) up 6.38%, PowerShares DB Crude Oil Dble Short (DTO) up 5.31%, and Proshares Ultrashort Russel2000 (TWM) up 3.67%. With mostly big returns abroad — iShares MSCI Italy Capped (EWI) up 5.37%, and Vanguard European ETF (VGK) up 4.91% — AND good returns in bonds, we couldn't help but have a good May.

Stock Funds1mo %
Proshares Ultrashort NASDAQ Biotech (BIS)7.49%
ETRACS 1xMonthly Short Alerian MLP (MLPS)6.38%
iShares MSCI Italy Capped (EWI)5.37%
PowerShares DB Crude Oil Dble Short (DTO)5.31%
Vanguard European ETF (VGK)4.91%
Artisan Global Equity (ARTHX)4.04%
Vanguard Utilities (VPU)4.00%
Proshares Ultrashort Russel2000 (TWM)3.67%
Vanguard Europe Pacific ETF (VEA)3.41%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)3.41%
[Benchmark] Vanguard 500 Index (VFINX)1.39%
iShares MSCI BRIC Index (BKF)1.36%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)1.22%
Homestead Value (HOVLX)0.40%
Vanguard Value (VTV)0.06%
Gold Short (DZZ)-0.19%
iShares Mortgage REIT (REM)-1.47%
Vanguard Telecom Services ETF (VOX)-3.06%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)3.20%
SPDR Barclays Intl. Treasury (BWX)1.92%
Vanguard Long-Term Bond Index ETF (BLV)1.90%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.67%
Artisan High Income Fund (ARTFX)0.58%
Vanguard Mortgage-Backed Securities (VMBS)0.50%

April 2017 Performance Review

May 3, 2017

April was a good month for stocks and bonds across the board in April, with foreign markets performing best of all. With longer-term rates declining and foreign markets strong, our model portfolios logged a decent month — even with the drag of shorting.

Our Conservative portfolio gained 1.62%. The Aggressive portfolio rose 1.06%. Benchmark Vanguard funds for April 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 1.22%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.96%; Vanguard Developed Markets Index Fund (VTMGX) up 1.74%; Vanguard Emerging Markets Stock Index (VEIEX) up 0.32%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, gained 1.53%.

Growth stocks led the charge in the U.S. market with returns between 2 and 3% typical. Big value stocks were barely positive (as seen in our Vanguard Value (VTV) holding, which was down fractionally).

European stocks were up just over 4% as anti-EU candidate Marie La Pen was denied victory in French elections (at least for now). This also boosted the Euro and helped our foreign bond fund SPDR Barclays Intl. Treasury (BWX) with a 1.43% return.

The hottest area was Indian stocks (again), up just over 5% and the best area abroad with solid double-digit annualized three-year numbers. Close behind was Japan stocks (and not much else) as foreign stocks have been weak for much of the last few years.

Shorting stocks and gold meant losses in April but oil slipped, sending PowerShares DB Crude Oil Dble Short (DTO) up 7.42% for the month.

Longer-term government bonds led the bond markets in April even outperforming high-yield bond funds. Over the last year higher-risk debt has done better with high-yield bond funds up just over 10% while long-term government bonds are still down slightly over this period.

In general, safer debt (including muni bonds) are more attractively priced than high-yield debt now. Reach for yield has pushed bond prices up, and we're benefiting with Artisan High Income Fund (ARTFX) — up 1.37% in April — and iShares Mortgage REIT iShares Mortgage REIT (REM), which delivered a 3.6% return. iShares Mortgage REIT iShares Mortgage REIT (REM)'s big month means it's up 14.16% YTD and 32.77% in the last year.

Stock Funds1mo %
PowerShares DB Crude Oil Dble Short (DTO)7.42%
Vanguard European ETF (VGK)3.90%
iShares Mortgage REIT (REM)3.60%
Artisan Global Equity (ARTHX)2.85%
iShares MSCI Italy Capped (EWI)2.76%
Vanguard Europe Pacific ETF (VEA)2.21%
Vanguard Telecom Services ETF (VOX)2.19%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)1.74%
iShares MSCI BRIC Index (BKF)1.46%
[Benchmark] Vanguard 500 Index (VFINX)1.22%
Vanguard Utilities (VPU)0.67%
Homestead Value (HOVLX)0.48%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)0.32%
Vanguard Value (VTV)-0.03%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-0.52%
Gold Short (DZZ)-2.56%
Proshares Ultrashort Russel2000 (TWM)-2.64%
Proshares Ultrashort NASDAQ Biotech (BIS)-3.06%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)1.84%
Vanguard Long-Term Bond Index ETF (BLV)1.58%
SPDR Barclays Intl. Treasury (BWX)1.43%
Artisan High Income Fund (ARTFX)1.37%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.96%
Vanguard Mortgage-Backed Securities (VMBS)0.56%

March 2017 Performance Review

April 4, 2017

The rally in stocks fizzled in March and bonds didn't offer much help as rates drifted up slightly. Foreign stocks performed better as the valuation gap — after years of underperformance to the U.S. stock market — may be attracting more money.

Our Conservative portfolio gained 0.69% in March. The Aggressive portfolio rose 0.85%. Benchmark Vanguard funds for March 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 0.10%; Vanguard Total Bond Market Index Fund (VBMFX) down 0.06%; Vanguard Developed Markets Index Fund (VTMGX) up 3.00%; Vanguard Emerging Markets Stock Index (VEIEX) up 2.25%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 0.85%.

We beat the benchmarks this month (finally…) largely on the strength of foreign stock funds, and fair performance from our shorts (including a 10% gain in PowerShares DB Crude Oil Dble Short (DTO)). At the top of the traditional fund heap was iShares MSCI Italy Capped (EWI), up 8.84% for the month and leading the already strong European markets (Vanguard European ETF (VGK) also performed well, up 4.43%)).

Emerging markets were hot with iShares MSCI BRIC Index (BKF) up 2.57%, largely on the work of Indian stocks.

Mortgage REITs also sizzled, with the Conservative portfolio's iShares Mortgage REIT (REM) up 2.88%. In general we're seeing risky yield-reach again by investors.

Our only notable bad performers from March: Vanguard Telecom Services ETF (VOX), down 2.11% — and now quite attractive again given recent lagging. Value stocks in general were weak with Homestead Value (HOVLX) down 0.72% and Vanguard Value (VTV) down 0.92%. We had mild declines in longer-term bond funds like Vanguard Long-Term Bond Index ETF (BLV), down 0.70%, and Vanguard Extended Duration Treasury (EDV) down 0.97% — though longer-term bonds are not attractively priced after the big gain in U.S. stocks over the last year.

Large-cap growth was the strongest U.S. category with a roughly 1% return, but we're not directly exposed here now.

Foreign stocks aren't really that cheap when you factor in the likely slower earnings growth than the U.S. market in larger markets and the heighted risk in emerging markets, but with our currency expensive after a multi-year rise large gains can be made investing abroad in unhedged funds solely on our currency weakening. Bottom line: you are now getting more diversification benefit from owning foreign assets than probably anytime in the last 10 years.

Non-emerging market foreign stock fund categories generally have higher ratings on our proprietary category rating system because the returns have been relatively weak and money flows have been less positive recently. Ideally we'd see huge outflows from foreign stock funds, which we'd buy into. But there may just be too many investors today who diversify to any and evertying, in contrast to the sort of 1990s style performance chasing we used to witness. Emerging market stock funds have done well and have beaten U.S. markets this year but are still seriously underperforming from levels hit in early 2011 — actually going in a different direction completely through much of this time. Right now, emerging market stocks are not that attractive given the recent gains, and interest by investors we'll likely focus more on larger foreign economies.

Stock Funds1mo %
PowerShares DB Crude Oil Dble Short (DTO)10.00%
iShares MSCI Italy Capped (EWI)8.84%
Vanguard European ETF (VGK)4.43%
Vanguard Europe Pacific ETF (VEA)3.06%
ETRACS 1xMonthly Short Alerian MLP (MLPS)3.06%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)3.00%
iShares Mortgage REIT (REM)2.88%
iShares MSCI BRIC Index (BKF)2.57%
Artisan Global Equity (ARTHX)2.49%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)2.25%
Proshares Ultrashort NASDAQ Biotech (BIS)1.42%
Gold Short (DZZ)1.04%
[Benchmark] Vanguard 500 Index (VFINX)0.10%
Vanguard Utilities (VPU)-0.05%
Proshares Ultrashort Russel2000 (TWM)-0.62%
Homestead Value (HOVLX)-0.72%
Vanguard Value (VTV)-0.92%
Vanguard Telecom Services ETF (VOX)-2.11%
Bond Funds1mo %
SPDR Barclays Intl. Treasury (BWX)0.76%
Artisan High Income Fund (ARTFX)0.18%
Vanguard Mortgage-Backed Securities (VMBS)0.10%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.06%
Vanguard Long-Term Bond Index ETF (BLV)-0.70%
Vanguard Extended Duration Treasury (EDV)-0.97%

February 2017 Performance Review

March 3, 2017

Maybe it is the buzzy Snap IPO, maybe the daily stock market record highs, but we seem to be getting closer to that ole' irrational exuberance again.

U.S. stocks where the clear winners again in February, but risky global assets, from emerging markets to junkier debt, posted good numbers as well.

Our Conservative portfolio gained 1.60% in February and the Aggressive portfolio gained 1.12%. Benchmark Vanguard funds for February 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 3.96%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.66%; Vanguard Developed Markets Index Fund (VTMGX) up 0.99%; Vanguard Emerging Markets Stock Index (VEIEX) up 3.28%; Vanguard Star Fund Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 2.11%.

The portfolios hung in there versus the benchmarks thanks to exposure to said emerging markets and junk debt. Shorts and our foreign bonds were the main drag, as were foreign non-emerging market stocks, which barely budged. We're just not taking enough stock risk in general to keep up with high-stock-allocation balanced portfolios like Vanguard Star Fund Vanguard Star Fund (VGSTX) have which is about 60% stocks, mostly U.S. It's worth noting that in down markets we don't fall as much as VGSTX either and have outperformed it with our aggressive portfolio since early 2002.

Hot areas for the month include emerging market stocks from India, China, and Latin American which is why iShares MSCI BRIC Index (BKF) was up 3.51% — just short of the U.S. Index. Other winners were iShares Mortgage REIT (REM) up 5.68% as investors flocked to riskier yield and a surprise 4.95% jump in Vanguard Utilities ETF (VTU) as utilites rebounded sharply without a major drop in interest rates.

For now, the mentality of investors is stocks will win and bonds will lose. The economy is still improving and fears of a pending recession have vanished. Upbeat inflation and employment data supports the rising stock picture, as well as the rising rate story.

The economy has finally become strong enough for the Federal Reserve to speed up the rate increases (and maybe kill all the fun in the process). This fear of rising rates has been around for quite some time now, but recently the fear has morphed into angst over rising inflation from of economic activity rather than Federal Reserve mischief.

It's possible stocks will continue to rise while bond prices decline and yields go up. We had near 1% dividend yields on stocks in early 2000 during the epic bubble, and over 5% yields on bonds when investors didn't care for bonds. Today the stock market yields about 2% while 10-year government bonds yield just shy of 2.5%. Heck, stocks could double and bonds fall by half. Or stocks could crash like they did they last time famed economist Robert Schiller's valuation measures were as high as today.

Sure, either a big rise or '29 style crash are unlikely, even if either happened it would likely end as badly as it did in 2000 when treasury bonds basically outperformed stocks for the next 15 years. It's more likely stocks will get a little more inflated but rates will stay near current levels.

Stock Funds1mo %
iShares Mortgage REIT (REM)5.68%
Vanguard Utilities (VPU)4.95%
Homestead Value (HOVLX)4.75%
[Benchmark] Vanguard 500 Index (VFINX)3.96%
Vanguard Value (VTV)3.58%
iShares MSCI BRIC Index (BKF)3.51%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)3.28%
Vanguard Europe Pacific ETF (VEA)1.06%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)0.99%
Artisan Global Equity (ARTHX)0.74%
Vanguard European ETF (VGK)0.59%
iShares MSCI Italy Capped (EWI)-0.38%
PowerShares DB Crude Oil Dble Short (DTO)-1.29%
Vanguard Telecom Services ETF (VOX)-2.77%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-3.69%
Proshares Ultrashort Russel2000 (TWM)-4.25%
Gold Short (DZZ)-6.20%
Proshares Ultrashort NASDAQ Biotech (BIS)-12.73%
Bond Funds1mo %
Vanguard Extended Duration Treasury (EDV)1.95%
Vanguard Long-Term Bond Index ETF (BLV)1.80%
Artisan High Income Fund (ARTFX)1.29%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.66%
Vanguard Mortgage-Backed Securities (VMBS)0.48%
SPDR Barclays Intl. Treasury (BWX)0.30%

January 2017 Performance Review

February 4, 2017

The interest rate increase that accelerated when President Trump won in November ended in December.

Rate-sensitive investments across the board have performed well in recent weeks, pushing our Conservative portfolio up more than our Aggressive portfolio in January.

Stocks remained strong, though the overall investor shift from bonds to stocks has slowed.

Upside in stocks (and downside in bonds) could be limited without actual tax-and-spend policy taking shape and with no signs of rising inflation.

The Federal reserve just took a break on rate increases because economic growth and inflation just aren't there yet to warrant much higher short term rates.

Our Conservative portfolio gained 1.11%. Our Aggressive portfolio advanced 0.69%. Benchmark Vanguard funds for January 2017 were as follows: Vanguard 500 Index Fund (VFINX) up 1.88%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.29%; Vanguard Developed Markets Index Fund (VTMGX) up 3.66%; Vanguard Emerging Markets Stock Index (VEIEX) up 4.94%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 2.11%.

Our strongest area was in emerging markets with iShares MSCI BRIC Index (BKF) up 7.31%, well above broader emerging market index returns.

Europe was strong but Italy took a breather after a hot streak. iShares MSCI Italy Capped (EWI) was down 1.94% in January — our only negative returning stock or bond fund last month that wasn't shorting.

Speaking of, PowerShares DB Crude Oil Dble Short (DTO) was the lone area of shorting success in January.

Junk bonds led the bond market again with Artisan High Income Fund (ARTFX) up 1.64% but recently hit foreign bonds rebounded with SPDR Barclays Intl. Treasury (BWX) up 1.46% as the U.S. dollar's rise may have also reached a limit. The rebound in junk bonds has now been significant and is increasing downside risk if the economy appears to weaken. As investment grade yields are higher than a few months ago the spread in yields between higher-risk and lower-risk debt isn't as appealing.

Stock Funds1mo %
iShares MSCI BRIC Index (BKF)7.31%
PowerShares DB Crude Oil Dble Short (DTO)6.79%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)4.94%
Vanguard Europe Pacific ETF (VEA)3.67%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)3.66%
Artisan Global Equity (ARTHX)3.09%
Vanguard European ETF (VGK)2.96%
[Benchmark] Vanguard 500 Index (VFINX)1.88%
iShares Mortgage REIT (REM)1.36%
Vanguard Utilities (VPU)1.17%
Homestead Value (HOVLX)0.55%
Vanguard Value (VTV)0.49%
Vanguard Telecom Services ETF (VOX)0.38%
Proshares Ultrashort Russel2000 (TWM)-0.89%
iShares MSCI Italy Capped (EWI)-1.94%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-4.37%
Proshares Ultrashort NASDAQ Biotech (BIS)-10.20%
Gold Short (DZZ)-10.58%
Bond Funds1mo %
Artisan High Income Fund (ARTFX)1.64%
SPDR Barclays Intl. Treasury (BWX)1.46%
Vanguard Extended Duration Treasury (EDV)1.25%
Vanguard Long-Term Bond Index ETF (BLV)0.56%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.29%
Vanguard Mortgage-Backed Securities (VMBS)0.17%

December 2016 Performance Review

January 4, 2017

The Powerfund Portfolios started 2016 well and ended 2016 well, but the underperformance during the interest rate increase was a post-election drag on our bond and foreign funds which lowered both portfolios' annual return numbers. Too little in stocks in general and U.S. stocks in particular and too much shorting led to so-so 2016 returns of 3.9% and 3.82% respectively in the C­onservative and Aggressive portfolios.

In December our Conservative portfolio gained 0.98% and the Aggressive portfolio jumped 1.81%. Benchmark Vanguard funds for December 2016 were as follows: Vanguard 500 Index Fund (VFINX) up 1.96%; Vanguard Total Bond Market Index Fund (VBMFX) up 0.26%; Vanguard Developed Markets Index Fund (VTMGX) up 2.49%; Vanguard Emerging Markets Stock Index (VEIEX) down 0.16%; Vanguard Star Fund (VGSTX), a total global balanced portfolio, up 0.90%.

For the year the Vanguard S&P 500 gained 11.81% while the Vanguard Total Bond portfolio rose 2.51%, so a 50/50 U.S. portfolio should have been up just over 7%. Unfortunately we were under 50% stocks and our short positions, while a relatively small part of the overall portfolio allocations, experienced big losses. Outside of our short fund we actually did well by and large, even though we were too heavy in some interest-rate-sensitive stock funds.

All that said, the Powerfund Portfolios experienced very low volatility and downside compared to just about any benchmark in 2016. Our benchmark fund-of-funds, Vanguard STAR, fell 3.74% in January 2016 when the S&P 500 dropped almost 5%, while our Aggressive was down only 0.46% for the month.

Our Aggressive's month-by-month performance in 2016 was only down more than 1% in a single month: November. In the post election market mayhem the Aggressive portfolio fell by a whopping 2.76%. We were positioned well for U.S. stock weakness and economic turmoil, not growing domestic optimism.

In December we had some nice rebounds in Vanguard Telecom Services ETF (VOX) up 7.43% and iShares MSCI Italy Capped (EWI) up 12.33%, as rate sensitive stocks did well and shorting gold and biotech's worked after a rough year.

December was one of our best months of picks relative to benchmarks. The main dogs were shorting oil and small cap stocks, though iShares MSCI BRIC Index (BKF) was down 2.29% even though Russian stocks have been strong all year, China has been a slight drag. Artisan High Income Fund Artisan High Income Fund (ARTFX) rose 1.45% as investors continued to favor riskier debt over less economically sensitive but more rate-sensitive debt.

Our stock funds were, on average, in the top half of their category for 2016 with most in the top third or higher. The only real dog from a pure relative fund performance was Artisan Global Equity (ARTHX) in the bottom 10%. This fund has never been in the bottom half since launch in 2010, but the portfolio mix was too defensive to do well in this market.

On the bond side other than Artisan High Income Fund Artisan High Income Fund (ARTFX) our relative performance was more average.

Bottom line, it wasn't a year to short or be lean on U.S. stocks. Of course, neither was 1999. I'm not impressed with our 2016 returns but those looking for a low downside found it. Those looking for more risk and reward would have been better off in almost any mix of our stock funds, skipping the bonds and shorts. We've never matched a hot stock market but our strong relative performance during declines have always made up for it.

Stock Funds1mo %
iShares MSCI Italy Capped (EWI)12.33%
Vanguard Telecom Services ETF (VOX)7.43%
Proshares Ultrashort NASDAQ Biotech (BIS)5.52%
Vanguard European ETF (VGK)4.92%
Vanguard Utilities (VPU)4.79%
Gold Short (DZZ)4.02%
Vanguard Value (VTV)2.73%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)2.49%
Vanguard Europe Pacific ETF (VEA)2.45%
Homestead Value (HOVLX)2.02%
[Benchmark] Vanguard 500 Index (VFINX)1.96%
iShares Mortgage REIT (REM)0.66%
Artisan Global Equity (ARTHX)0.32%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)-0.16%
iShares MSCI BRIC Index (BKF)-2.29%
ETRACS 1xMonthly Short Alerian MLP (MLPS)-3.59%
Proshares Ultrashort Russel2000 (TWM)-6.17%
PowerShares DB Crude Oil Dble Short (DTO)-12.47%
Stock Funds1mo %
Artisan High Income Fund (ARTFX)1.45%
Vanguard Long-Term Bond Index ETF (BLV)0.80%
[Benchmark] Vanguard Total Bond Index (VBMFX)0.26%
Vanguard Mortgage-Backed Securities (VMBS)-0.10%
SPDR Barclays Intl. Treasury (BWX)-0.27%
Vanguard Extended Duration Treasury (EDV)-0.36%