Last Friday, I predicted the Dow would go back up from 11,934 to around 12,500

Last Friday, I predicted the Dow would go back up from 11,934 to “around 12,500 next week”. Actually that was a pretty good prediction, don’t you think? Why is this working? I was thinking, “Don’t get too close to your data. Keep an emotional detachment”. Probably that is why I can make better predictions when I am not trading big on my own account. I would be a better advisor that player, it seems.

I am selling little bit now, to take some profits. But if you sell, where do you put it? I sold $2000 FAMRX (large cap U.S. equities fund) to buy FAGIX (junk bonds). FAGIX has outperformed FAMRX over the previous ten-year period:

FAGIX YTD Performance as of 06/30/2011 4.89% 1 Year* 20.53% 3 Year* 13.26% 5 Year* 10.31% 10 Year* 10.31% Life* 10.47% NAV as of 06/30/2011 9.61 Morningstar Category High Yield Bond Overall Morningstar Rating 12 Month Low-High $8.48 - $9.95 30-Day Yield 2 as of 06/29/2011 4.88% Expense Ratio 0.76%

FAMRX YTD Performance as of 06/30/2011 4.25% 1 Year* 30.02% 3 Year* 4.94% 5 Year* 4.21% 10 Year* 2.69% Life* 4.56% NAV as of 06/30/2011 13.97 Morningstar Category Aggressive Allocation Overall Morningstar Rating 12 Month Low-High $10.85 - $14.51 Expense Ratio 0.88%

The red indicates the anomaly: bonds outperforming equities for an extended period of time. One thought is that we build our models based on historical patterns, but the patterns change. In political science, they said, ”We are always fighting the previous war.”