Here’s how the individual funds delivered those returns and the actions I recommend now. The sale of one fund was triggered. On August 8, this closed-end bond fund closed below the sell signal I had set for it. The fund’s portfolio didn’t merit a sale, since it is heavily invested in mortgage securities. But investors brought the price down, so we sold it from the model portfolios. We earned a return higher than 29% since adding the fund to the portfolio in late 2009. The rest of the portfolio had mixed performances during the sell off, which is what we expect from a properly diversified portfolio. We had a couple of funds decline, though not nearly as much as the stock market indexes. One of our safe income funds declined about 8% over three days ending August 8. That’s much better performance than other vehicles investing in the same asset class. I believe the decline was part of indiscriminate selling and subsequent performance seems to bear this out. The fund held steady in the market cascade of August 10. The fund’s still yielding over 6% and is better diversified globally and among industries than the alternatives. The high yield should provide some protection for the fund’s value. An asset allocation fund has a small gain for the year after losing a couple of percentage points in the downdraft. It had a small gain on August 10. For much of the last year the fund’s focused on emerging market bonds, inflation hedges, and alternatives to the dollar. At times it’s held funds that sold stocks short or otherwise bet on a market decline. We had some big winners in the portfolios. The top-performer is gold, which we own through iShares COMEX Gold Trust. As bad news increased in the U.S. and Europe, gold rose. The recent rise in gold has been parabolic. This usually is a warning sign of an approaching top, at least a short-term top. Also, regulators raised the margin requirement for gold futures effective August 12. I’ve raised the sell signal for the fund. I’m still allowing room for a normal correction, which we should expect, but want to preserve most of our gains should investor sentiment change sharply. We also won big with long-term treasury bonds. Though they’ve had had some ups and down, our fund increased almost 10% in a month, and that’s before considering distributions. It’s unusual for gold and long-term treasuries to rise at the same time. Treasuries are rising partly because they still are considered to be quality in a world of rapidly-deteriorating investments. Also, interest rates are falling in response to the weakness in the U.S. economy. Falling interest rates and a weak economy are positive for treasury bonds. We’ll hold the fund as long as interest rates don’t seem likely to rise, but I’m putting a sell signal in place in case there’s a sharp change between our visits. Other funds in the portfolio also rose. We have a safe income fund that increased modestly in value but also is paying about an 8% yield. We had another fund that rises when the stock market declines and another that’s done well because it’s invested in the Chinese currency. One of our fund managers now seems especially prescient because of a commentary published in late July. He said, “Probably the most important near-term consideration is that present market conditions are similar to those often seen during extended multi-month bull market tops, where stocks essentially trade in a 5-7% band for 6-8 months and both advances and declines are highly prone to ‘whipsaws.’” Later, he concluded, “The only way to establish equilibrium in that case is for stocks to decline by enough to turn the value-conscious sellers into buyers, which essentially requires a free-fall.” He also recently said his recession gauge suggests the U.S. and the global economies are entering a recession. Do you want to learn more about this and the other financial issues of retirement and retirement planning? Give us just 90 days, and we’ll help you build a richer, worry-free retirement…or your money back. You’ll receive the monthly advisory, Bob Carlson’s Retirement Watch, plus access to our feature-rich, members-only web site. On the members’ web site you’ll find regular updates, early access to each monthly advisory, an Archive to enhance your retirement research, Bob’s Journal, and more. For more than 20 years Bob Carlson and Retirement Watch have been helping retirees and soon-to-be retirees plan and enjoy rewarding, worry-free retirements. They can help you, too. With each monthly issue, you’ll quickly discover the answers to your most pressing questions on investing and your portfolio, avoiding little-known IRS tax traps, , making the right decisions on medical care and insurance, creating a rock-solid estate plan, choosing the best Medicare options, managing your IRA for maximum after-tax wealth, and much more. To begin creating the retirement you desire now, click here.
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