How safe are the big mutual fund houses

[pscot]

like Vanguard and Fidelity? Obviously, if you have money in one of Fidelities sector funds, Defense/Aerospace for instance, if that sector melts down you're going to take a hit. But suppose you have 100K in Vanguard's Intermediate Treasury fund. Is that as safe as actually owning 10 year Treasuries? Say we're looking at a 10 year bear market in equities. That may sound extreme, but it's what happened after 1929. Is Vanguard a safe place to ride out such an economic hurricane?

[mnhtnbb]

1. VFITX Chart since 1996

at this link http://finance.yahoo.com/q?s=VFITX

click on max for charts

[HereSince1628]

2. The big houses are not nimble. When they move, they can move the market

and actually hurt themselves. It's been over a year that the trouble in financials has been obvious and the big houses are still trying with varying success to reduce their exposure.

The aircraft cycle should be in a mode to replace planes, but airlines are cancelling orders as solvency is much more pressing at this time. Consequently, Boeing's suffering is probably not yet at bottom. Unlike housing builders, Boeing doesn't build a lot of planes on speculation.

If oil can go to $200 a barrel there is still some room to make out in gold since oil and gold move together.

[aspergris]

4. spreading gold and oil

for about 2 weeks. Long gold, and short oil

the spread was -25. Is now -13. 12 pts profit so far.

Spreading them is a nice way to lower risk

[pscot]

5. How does one short oil

Do you use a normal broker? Puts on oil producers or a direct play in the commodity? Must be an adrenalin rush, like swimming in the shark tank.

[aspergris]

6. What I did was

Short an equal notional value of USO (for oil short) and went long GLD (gold)

since the share price is very different, I want to be equally exposed, so I use a multiplier.

Iow, GLD is now @ 94.82 and USO @ 109.10, so I buy equal DOLLAR amounts of the two. Iow, short X dollars (not shares) of USO and long X dollars of GLD

So, on today for instance, GLD is down 1.38% but oil is down about 3% so the spread still makes money

here's a chart I just posted of the spread. Note this chart assumes equal SHARE amounts (not dollar amounts), but it's almost the same since the share price is so close.

Regardless, the trend is there.



There are a # of ways to short Oil. You can short USO. or short Oil futures (not recommended for retail investors) (QMQ8), or buy puts on gold futures, or USO.

Another nice way to go short oil, although not mathematically as precise as USO for a PURE spread is DUG

Going long DUG = going short oil but also has oil stock exposure. It's a nice way . Also note you can't short STOCKS in IRA's but you can use "reverse" ETF's like DUG or short futures or buy puts

DUG is up 4.6% right now.

[aspergris]

7. darnit link didn't work... try this

(((_)))

[aspergris]

8. one. more . time

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[pscot]

9. Graphic still not there, but I get the picture

I did very well with Vanguard's energy ETF. I'm on the sidelines right now, but will probably get back in at some point. I've been with Vanguard for years, and I trust them, but I still wonder how they'll do in a long, secular bear market like that of the 1930's.

[aspergris]

3. Vanguard - from a long term Vanguard investor

Money market funds are stellar.

Unlike many fund families (let alone hedge funds that were WIPED out), they do NOT chase yield.

Personally, if you are looking for a "safe place", their money markets are excellent. Personally, I prefer to buy distressed stocks that get sold off in a bear market, and play oil and gold.

This is a bear market. With emotion and panic comes HUGE opportunity.

Today was a 9% scalp in banks for instance. That is a HUGE move in the banks index.

But vanguard is known for two things: 1) low cost 2) indexing

They rule the former, and practically invented the latter

I've used vanguard funds for 20 years

No complaints

of course, do your own DD. This is not an offer to sell. usual disclaimers apply

[Common Sense Party]

10. Are you asking if your money that you invest is tied up in the institution itself?

No, your money is invested in separate trusts, not to be commingled with Vanguard's corporate assets or Fidelity's corporate assets.

Even if Fidelity as a fund company goes down the crapper, the funds should, theoretically, be separate from that.

If you're asking if a bond fund is as "safe" as a Treasury, the answer would have to be, no, not really. A bond fund is not guaranteed. Bond funds can fluctuate with interest rates.

I'm not sure what your question was, so I'm not sure if I have come close to answering it.

[pscot]

11. I'm not concerned here

with the normal price moves of a bond fund based on interest rate fluctuations. I'm talking about the safety of an investment in one of Vanguard's treasury bond funds in the, admittedly unlikely, event that Vanguard failed.