(PUB) Investing 2016

tion. Incomes are rising—slowly, but inexorably. Housing could get another shot in the arm, too. Rents are up nationwide almost 9% from a year ago, and if you live in a hot market like New York City or San Francisco, you know they’re up a whole lot more than that. With mortgage rates still low and job security strong, this is the perfect time for rent- ers to take some of their savings and become buyers, so long as they don’t overdo it. I keep wondering what it’s going to take to loosen the grip on wallets and pocketbooks, and send the U.S. consumer back to the store, or onto the Internet with credit card in hand. We’ll have to wait to see. Meantime, expect a reboot on arti- cles claiming you should “Sell in May and go away.” Yeah, yeah, I’ve heard it all before. The bottom line is that market timing doesn’t pay, and it isn’t as if the May to October period (when you’re supposed to sit in cash) is a his- torical loser. It’s not. As I like to say, time in the markets, not market timing, is how you make money. n when Barrow ran it (it has since been hamstrung by its multimanager format). So, you and I bought Selected Value in May 1999, just a couple of months after Barrow was appointed. And a year and a half later, in December 2000, I recommended the fund for investors following the Conservative Growth Model Portfolio . We’ve added and subtracted from our holdings over the years, but Barrow and his co-man- ager, Mark Giambrone, who joined Barrow as co-manager in late 2002, >

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12-Month GDPGrowth Is Less Volatile

I think the current slowdown warrants panic? Not at all. While the economy is in expansion, earnings are in recession. If the defini- tion of an economic recession is two quarters of negative growth (another way of saying two quarters of shrinking GDP), then the BEA’s reports that after- tax corporate earnings fell in the two last quarters of 2015 means we are in an earnings recession. And it’s looking as though we’ll add on a third quarter when Q1’s numbers are tallied, though by the time we see those numbers in late May, we’ll be well on our way to understanding how the second quarter has played out, and the first quarter will be long, long gone. As I’ve noted before, a big chunk of the current earnings decline is directly attributable to the energy industry. Oil prices have begun to pick themselves up off the floor from the high $20-per-barrel range in late January. But the damage has been done, and it will take some time to work today’s $40-plus prices through the system that ultimately will Growth Model Portfolios , and using the proceeds to buy S&P Mid-Cap 400 Value ETF . Based on Friday’s closing price, the sales price was $26.98 on Selected Value. The ETF was purchased at Monday’s opening price of $96.02. Why Sell? A little history is in order before I get into the nuts and bolts of this decision. First, you and I didn’t buy Selected VALUE FROM PAGE 1 >

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yield an increase in earnings per share for the oil majors. We might see that in either the second or third quarters’ earnings numbers, but recent estimates are that energy companies are going to be responsible for about 5.6 percentage points of the estimated 6.1% decline in earnings for the S&P 500 in Q1. Contrast that with the jobs picture: We’ve got solid job growth, the low- est levels of unemployment claims in over 40 years, and greater numbers of workers moving from job to job as they seek higher and higher compensa- Value upon its inception. Nope. The fund started out a loser under the guid- ance of a former Goldman Sachs port- folio manager working for Barrow Hanley. Vanguard wasn’t happy, nor was Jim Barrow, lead partner at Barrow Hanley, and so he was assigned the task of righting Selected Value’s ship. It was shortly after that, given that I knew and respected Jim Barrow, that I recommended buying the fund and put it into the Growth Model Portfolio . I’d been a fan of Windsor II for years

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The Independent Adviser for Vanguard Investors • May 2016 • 3

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