Bookkeeping: 'Rising Tide' Performance Week 19

Week 19 performance of the mutual fund

Comments: As always the markets were paralyzed ahead of the Fed meeting. Not a creature was stirring, not even a mouse ... because if the Fed cut 25 basis points or 50 thats the difference between saving the economy or not. Yes, I write it in such a ridiculous way, because it truly is ridiculous. But that's the market for you. Well Tuesday we got the decision and the market was none too happy with it, as we got a 25 basis point Fed funds cut, with a 25 point discount cut. Markets tanks, longs cut exposure, shorts got happy. All major indexes broke key technical resistance late Tueday. Everyone was to be surprised when that evening (Tuesday) rumors were floated out of 'Fed officials' that even more initiatives were on the way. These were announced in full force 9 AM Wednesday just in time to peeve off longs and short alikes (for different reasons) - longs had cut back exposure and shorts were overextended. Well as Wednesday rolled on the market weakened all day, and after a huge morning rally broke down below the key technical levels yet again. The only thing saving the market was a suspicious buy order late in the day to get it "near" technical resistance again. The same pattern happened Thursday on a generally weak day due to inflation fears due to the PPI figure. But a 'magical' series of buying happened late in the day Thursday to push the market back again near to resistance (S&P 1490). If only....we.... could... get... above... resistance. Then Friday, CPI came out and it re-asserted what most Americans have known for 2 years (at least) - inflation is everywhere (except in government reports). Even the faulty government reports are starting to show it, no matter how hard they try to make it disappear. The market valiently tried to hold on, but weakened throughout the day, and no magical buy order was to be found late in the day as in the previous two.

For the fund, I entered the week cautious - negative on the economy but open to any movement in the market which had been drunk on the dreams of a bailout by the Fed the past few weeks. Once the decision came down Tuesday and market participants did not get what they had whined for, for weeks on ends - the babies threw a tantrum and crushed the market. Once the Fed words came out I added about 5% exposure on the Ultrashorts and another 5% once key technical levels were broken. Of course I was not happy to hear of the Fed acting like a teenager, keeping 'secrets' from us, and passing along the news that more things were in store that they didn't tell us about hours earlier. Longs originally seemed happy about the moves but then the realization that this Fed is either acting in a panicked fashion (reacting to markets) or in a terribly uncommunicative fashion (which adds risk for everyone - long and short), the longs began throwing in the towel. With a series of lower highs in the indexes I remained steadfast in the short positions and indeed despite the best efforts of "last half hour" rallies attempted out of the blue Wednesday and Thursday, I remained unconvinced... as did anyone who has been watching these markets over the years. It looked like baloney buying and it was. I also continued to cull some of the larger long positions, and kept buying at a minimum and added to more defensive areas such as healthcare. If you look at the charts of the defensive names - the Altria's (MO), the Procter & Gambles (PG), the Express Scripts (ESRX), the Coke's (KO), you see a raging bull market. Unfortunately those are recession plays, so these stocks ramping are not a good sign at all.

While I do think what the Fed is doing is (unfortunately) necessary the fact the banks have to rely on 'secret identity' auction to tap money supply instead of getting the same money that has been offered to them every day of the week through the discount window is a pretty sad statement. I do expect even more 'innovative' moves by the Fed (and Treasury department) as each week/month passes, but I am afraid the systematic issues are just too big. Until banks become less opaque and be up front about their balance sheets, they will not trust each other. That *IS* something the Fed/Treasury could force onto the system but they seem resistant. Perhaps because they know if everyone came clean it would be more scary than what we have now. If we have inflation with high growth that is 1 thing, but inflation with slow growth (or negative growth) - there is no good in that. It's very very bad.

Anyhow back to business.... the S&P 500 and Russell 1000 had terrible weeks, down 2.4% and 2.5% respectively. Readers, your future investment would of been safe sitting in Rising Tide Growth Fund as it pulled out a +0.3% return this week, outperforming the indexes by 2.7-2.8%. And as a bonus, we hit that magical $12.00 mark again (right on the dot). This puts together a nice 3 week winning streak of beating the indexes by nearly 6%. Needless to say, it was an excellent week, and my goal of beating the indexes by 15% a year is firmly on track.

Price of Rising Tide Growth: $12.000
Lifetime Performance to date (vs Aug 3, 2007): +20.00%

Comparable S&P 500: 1,468.0 (+0.20%)
Comparable Russell 1000: 799.4 (+0.40%)

Fund return vs S&P 500: +19.81%
Fund return vs Russell 1000: +19.60%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.8 Billion as of November 07) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see all fund's holdings as of mid November 2007.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates