Howdy,

Again, a thank you to all who post the links and also start and participate in the many fine commentaries woven into the message threads.

For those who don’t know; I ramble away about this and that, at least once each week.

NOTE: For those who visit MFO, this portfolio is designed for retirement, capital preservation and to stay ahead of inflation creep; if and when it returns. This is not a buy and hold portfolio, and is subject to change on any given day; based upon perceptions of market directions. All assets in this portfolio are in tax-sheltered accounts; and any fund distributions are reinvested in the funds. Gains or losses are computed from actual account values.

While looking around. Apparently, this house in reality, is running a market neutral fund. I jabbered enough about my market perspective and the challenges in the PRE funds boat note on the 30th; this section, this week will be about the what to do now aspect of our portfolio; if indeed any actions are required. A first note that M* indicates that the portfolio has an overall yield of 4.27%. This write generally reflects thoughts with our bond holdings, being the biggest chuck of our money; but must be countered with the actions of the equity holdings and forward directions, and in particular, our high yield/income bond funds with their more related linkage to actions of the equity cousins. A non-scientific look at HY bonds vs equity actions since August 1, shows that for every 1% decline in a broad U.S. equity index, one would find about a 1/3% price decline in the HY area. This changed this past Friday, Sept 30; when HY price declines just about matched the decline of pricing in the broad equity area; and finally pushed our HY funds to mostly negatives for YTD. ‘Course this action has caused yields to increase to higher and tempting levels; but at the cost of lost NAV. A few considerations of cause and effect in the next 6-12 months; as I still feel that the complex nature of fixes for the U.S. and Europe will remain entangled by and with political and legal (in the case of Europe) problems with the likely overhang of whether any fixes or decisions are credible and/or proper to the point of being real fixes:

1. The last quarter of the year for the fund managers is here and now. Some equity fund mgrs are in the rock and hard place zone, somewhat locked in place by the prospectus. Some bond funds are also similarly stuck. So, as usual; one must decide the who, what and where of matching a fund type to what one feels may be the market actions of the next 6-12 months. This is where the flex (in and out of a sector, without having to wait until the end of the trading day) of using an etf fund is of value; and no less, the ability via prospectus and finely tuned manager(s) decisions for a traditional mutual fund.

2. Pension funds: These folks will always maintain a core bond postion of some flavor or another. Based upon their internal forecasts for forward equity actions; and their need to generate cash flow, I anticipate accelerated bond yield chasing, i.e.; reworking and re-allocation of their bond sectors. This may bode well for support in the HY and other bond sectors.

3. Mutual funds: The same thinking applies to some bond funds. The late to the party crowd are moving more monies to U.S. bond issues. Pimco, TCW and others. I suppose they have become believers to the serious problems. I sure don’t know how Mr. Gross and co. missed this move, being Pimco gave birth to the new normal.

4. The continued strength of the U.S. dollar; albeit, perhaps only for the next 6-12 months does indeed affect values of funds. If and when this does flip downward again, one’s dollar will buy more of whatever that is not denominated in $US; if you catch the near top, before the down move.

So, what to do? Monday will tell this house more; but we may sell down some percentage (25%) of HY) and move the monies to a more flexible bond fund to allow for the decisions of management among what type of bonds to hold. We have no reason to whine about our HY/HI holdings, as these have been held since May/June of 2009 and have paid us well. ‘Course this has not worked very well with having Pimco manage our holdings in PTTRX; and sadly, this is the only bond fund available in one retirement plan. So, we are stuck with this for now. Perhaps strange to some, is why we would hold FSAGX in such an economic environment. Our house will place this holding in line with the need to have insurance on the house and cars. The money is there for some protection that may never be needed; but may be foolish to not have. As to our current equity holdings, well; a real head scratcher with these, as our percentage is not very large, but continued down moves of these will still nickel and dime our losses. Fido Select Auto, Fido commodity holdings and CAMAX are the only real big dogs, YTD. Auto is in play as to some of the companies held that support select areas (Auto Zone/related) as many folks are going to fix and not buy good used or new vehicles. We are also betting on earnings of auto companies with sales in the asian markets. Fido commodities fund is a tough one, too. We still feel that the equity holdings here are being beat up with the rest of the equity markets, but not for any real and proper reason. Yes, some of the holdings are related to real demands in some sectors. copper, etc.; which have real uses in growing economies; but there is a real base of use and need for the energy and agriculture sectors of this fund.

I thought this would be a more clear cut and easier write, that this house was just going to sell this or that; and move the monies to such and such fund(s). A weekend of pondering this has not brought forth a more clear vision.:):) I sure as heck hope I/we have not just added to the confusion of the markets. I suppose that this house can not whine too much for our YTD performance; but, with what we are invested in, the ride down has been much slower for the past 2 months; but this portfolio also takes much more time to recover to higher YTD levels.

Such are the numerous battles with investments attempting to capture a decent return and minimize the risk.

We live and invest in interesting times, eh?

Hey, I probably forgot something; and hopefully the words make some sense.

Comments and questions always welcomed.

Good fortune to you, yours and the investments.

Take care,

Catch

SELLs/BUYs THIS PAST WEEK:

NONE

Portfolio Thoughts:

Our holdings had a -.89 % move this past week. And yes, we are satisfied with our risk adjusted returns YTD. If the portfolio can pull a +10 to 12% for the year; you will not hear any whining from this house. (This sentence was from an April write; and I/we suppose a +5% for the year may now look good, too !) Our portfolio is at — 4.7 % from the high point in mid-July.

The old Funds Boat may make 5% or 25% this year. I expect some rough waters, changing winds and opposing currents; causing the most serious attention being given to a firm hand upon the rudder control. (April report text)

The immediate below % of holdings are only determined by a fund name, NO M* profile this week

CASH = 8.3%

Mixed bond funds = 81.8%

Equity funds = 9.9%

-Investment grade bond funds 18.6%

-Diversified bond funds 18.5%

-HY/HI bond funds 25.8%

-Total bond funds 14.6%

-Foreign EM/debt bond funds 4.3%

-U.S./Int’l equity/speciality funds 9.9%

This is our current list: (NOTE: I have added a speciality grouping below for a few of fund types)

ALSO, this week indicates yield/YTD data after the fund name

—High Yield/High Income Bond funds

FAGIX Fid Capital & Income (6.4%/-6.5%)

SPHIX Fid High Income (6.9%/-2.8%)

FHIIX Fed High Income (8%/-1.2%)

DIHYX TransAmerica HY (8.6%/-1%)

DHOAX Delaware HY (front load waived) (6.7%/-4.9%)

—Total Bond funds

FTBFX Fid Total (3.3%/+5.5%)

PTTRX Pimco Total (3.3%/+1.9%)

—Investment Grade Bonds

APOIX Amer. Cent. TIPS Bond (2.4%/+7.7%)

DGCIX Delaware Corp. Bd (5.2%/+4.8%)

FBNDX Fid Invest Grade (2.8%/+6.6%)

FINPX Fidelity TIPS Bond (.8%/+10.2%)

OPBYX Oppenheimer Core Bond (4.9%/6.2%)

—Global/Diversified Bonds

FSICX Fid Strategic Income (4.5%/+1.7%)

FNMIX Fid New Markets (5.2%/+2.4%)

DPFFX Delaware Diversified (4.4%/+4.2%)

TEGBX Templeton Global (load waived) (5.3%/-3.9%)

LSBDX Loomis Sayles (5.7%/+1.2%)

—Speciality Funds (sectors or mixed allocation)

FCVSX Fidelity Convertible Securities (bond/equity mix) (3.7%/-12.4%)

FRIFX Fidelity Real Estate Income (bond/equity mix) (5.3%/-1.2%)

FSAVX Fidelity Select Auto (0%/-32%)

FFGCX Fidelity Global Commodity (1.2%/-24%)