kerry - I think you're responding more to one of those "Last year I dropped 100k into Hot Mutual Fund and now it's down 10%!!!! Please tell me that this is normal so that I don't buy high and sell low!!!!" posts than to the actual concerns of the OP. She's not talking about any of your extreme options that are really straw men which avoid the question asked. Do you really think that whatever AA the OP began with is optimal for all time, and the only option is "Don't look at it"? What kind of investing advice is that?
FLVCX, although M* likes the fund, typifies the trend of mutual fund companies creating funds to satisfy niche demands, chase performance, and appear clever. The fund has some positives - low expenses, good sector bets by the manager, good fund family - but I see them as outweighed by the absurd mandate of the fund. Historical returns are fantastic, but if you believe that the manager has real skill, why would you want him to be limited to investing in leveraged companies regardless of market conditions? Why not find an equally-skilled manager who is free to reduce the risks of leveraged investing when he or she thinks prudent? Although the manager dodged the financial company disasters to which I was worried such a fund might be vulnerable (e.g. BSC, LEH), this is the kind of fund that could run into such a disaster at any time. Also it's big for a specialized fund that likes mid-cap stocks. Unless you really want risk and potential high performance, I would agree with the call to get out if you can do it with minimal costs (what's the time frame on the redemption fee?)
FAIRX is more defensible because it invests in a wider spectrum (including some decent foreign exposure and a cash holding - though you have to trust that Berkowitz will know when to put the cash to work). I'm not crazy about paying 1.00% fee for a big Berkshire Hathaway stake - have you considered getting some BRK.B shares instead? If you like Buffett's approach they're a lower cost option, and if he dies or retires you'd have an easier time getting out of your small holding than Berkowitz would have getting out of a $1 billion+ position. Otherwise I think the concept of the fund is pretty reasonable and sound.
In terms of alternate holdings to prosper in times of stagflation, I would say look for growth that isn't dependent on major trends - small companies with great ideas/execution, funds that invest in economies that are very different from the US/Europe, etc. Or you could just hope to be wrong and see a surprising return to overall growth. Try to stay out of any low-yielding income traps (e.g. long term U.S. bonds).
