Getting More Fully Invested

Remember that cash I kept on the sidelines when I bought some mutual funds a few weeks ago? Well, I was able to put some of it to work last week then the market followed Lehman into the toilet mid-week. I bought more of both JARFX and MINDX. At this point I am fairly fully invested (at least until I sell my house). I just think cash and bond yields are too low given the completely obvious presence of inflation if you have filled up your car or gone to the grocery store lately. I would rather own almost entirely stocks at this point in time. I also believe that the U.S. market has at least begun to discount the recession we are about to experience. Stocks usually start to bounce before the economic data does. The election of Barrack Obama will probably not be well recieved by the market (I think he is likely to win) and could set us up for another more leg down in fall. Nonetheless, I think he will surround himself with smart people and will avoid being a "tax and spend" liberal, but ought to rather be a "tax and balance the budget" liberal. Furthermore, I think the fed funds rate at 2% ought to stimulate the economy by early 2009. Overall, while it may not be a straight line up, with a long-term view I think now is a good time to own stocks as they are one of the few ways to fight off inflation's devastating effects on your wealth.

Making Some Bets

Well, I decided to make some bets today. I am putting new capital to work in several mutual funds including: RRPIX, MINDX, EUROX, and JARFX.

This will leave my current allocation of funds not invested at my employer as follows:
FNMIX - 3.9%
MAKOX - 11.4%
MINDX - 12.2%
EUROX - 12.2%
RRPIX - 19.6%
JARFX - 20.3%
CASH - 20.4%

The rational for the new buys is as follows:

RRPIX -- this is a 125% inverse of the 30 yr. treasury bond fund. I think inflation will tick up here over the next year or so to between 4-6% and expectations that the fed will raise rates will increase. People will sell 30 yr. treasuries as a result.

MINDX -- I like India long-term. The 20% sell-off this year represents a good opportunity to start investing in that view.

EUROX -- I also like Eastern Europe long-term. Russia still cheap given the move in oil. This fund has big bets in Russia for now. I hope the managers will allocate to other Eastern European countries as Russia gets more expensive.

JARFX -- I like this divesified international fund. Driven by a team of stock pickers, this fund keeps sector weightings that match the index. It has consistently generated alpha since its launch in 2005.

CASH -- I am keeping plenty of ammo in case there is another flight to quality (as I think there likely will be) so I can add to all of these purchases.

In case you are wondering why I buy mutual funds and not individual securities (since I pick equities professionally for a living) the reason is simple: The trading restrictions at many investment firms are very stringent (including mine). If I have a good individual idea I am obligated to put it in my fund for investors. Because I don't pull the trigger on any of the individual mutual fund holdings (the fund's manager does), I am allowed to trade the funds freely under our compliance policy. I do generally eat a fair amount of my own cooking (i.e. allocate the majority of my liquid capital to the fund I work at) because I think it aligns my incentives with our investors'.