Bookkeeping: 'Rising Tide' Performance Week 26

Week 26 performance of the mutual fund

Comments: I laid out most of my thoughts in today's post 'Is is Time to Adjust Strategy?' so I'll keep it relatively short this week. It feels like a world away from 11 days ago when emergency 75 basis point cuts pulled the world back from the cliff it was about to jump off. That was not even a fortnight ago, yet it seems like eons. This is the complexion of a bear market *IF* we are in one. Maximum frustration. Suck you in. Spit you out.

From what I have been reading on other sites of people I have been reading for years - I sense a lot of frustration. There is no rhyme or reason day to day and "market rumors" seen to change mood or thoughts by the hour. Not even by the day; by the hour. Each day seems like its own year, totally unrelated to the past. Impossible market to game in the near term right now. Further, a lot of frustration with which stocks are going up. Now if this plays out as a true bear market move, the market will continue higher - drawing in more people from the sidelines who were cautious and not willing to believe in this rebound. As they jump in, they drive up prices, drawing in more buyers. And more. And then once we're all in - we have the next major selloff... just as those doubters had thrown in the towel and joined the bull case.

Myself, I am going to try to remain patient. I hate underperforming on any single week, but it's just not reasonable to beat indexes week in and week out. But that does not make me not want to grit teeth. Rising Tide Growth Fund made money this week, but it was probably the most unhappy I've been with a gain in a long time. +1.33% in a week should never be frowned upon (that annualizes to >65% annual) but I have major performance envy this week as the indexes flew off the handle with the S&P 500 up 4.9% and the Russell 1000 was up 5.1%. Just a huge week for the indexes.

For the fund, I own nothing the market wants right now. I don't even know how I eeked out a gain as very little I own has anyone interested, and I have a hefty Ultrashort exposure facing the sectors the market is driving up massively this week.... financials, real estate, and small caps. Considering how I am exposed there, I am happy to have not lost money this week. Again, this feels very similar to mid August when the first discount cuts came out of Big Ben. People of relative intellect were pointing to the greater problems in both the real economy and the financial institutions but it was like talking to a wailing 4 year old toddler screaming at the top of their lungs with their hands over their ears - the market ramped up week after week for nearly 2 months. So we'll see how much farther we have to go here; this move off last Wednesday's intraday lows has been extreme. For the move to continue breadth needs to spread to other sectors. Quite frankly the problem with this market the past year has been narrow breadth - it is a situation of rotational leadership - I was fortunate to own the leaders of last year, so while the rest of the market stalled (or free falled) these names did very well, providing great out performance. Now the tables are turned; I'm the one on the outside looking in on the happy family gathered around the warm fireplace clinking wine glasses full of retail stocks, homebuilders, and financials. Brrr... it's cold out here.

The question is how real he move is and for how long it can continue in the face of the economic news coming out daily. Unknoweable. The whole gig is based on unshakeable faith in the Fed and the federal government - the same entities spit on 2 weeks ago for their incompetence. :) How quickly the worm turns. What we have established is any notion of free market capitalism died in the past 3 months. This at least allows me to smirk in day to day life when people tell me about how America is the bedrock of free markets [because that's what their textbook said in 9th grade social studies]. (hey I need to find a silver lining somewhere)

Technically, the S&P 500 is still in a longer term downtrend, but obviously bouncing very strongly within the downtrend. We went so far below the 200 day moving average (literally historic even considering the huge selloffs earlier this decade), that we are just making up a lot of lost ground. The S&P now sits at 1395; we could conceivably still retract all the way up to 1450 or so and still be in a series of lower highs. 1450 is 3.5% higher from here. But if we keep moving straight up (again historic, atypical but what hasn't been the past half year?) - and break through these levels, then I need to concede bearishness - and move to ignore all economic news and turn into Kool Aid toting bull who believes Fed cuts fix everything, as I was forced to in September and October 2007.

As I like to say. Bad news? Doesn't matter. Until it does. Right now it doesn't matter. And when it matters again, people will overdo it once more on the downside. Human nature. One extreme or the other. The reasonable middle ground has no place with human beings torn between fear and greed on a literal hourly basis (of late).

This week ends my 2nd quarter - I will do a more in depth write up of this quarter in a separate entry but it was one heck of a quarter - two separate months of vicious corrections of 10% (or more) in November and January. The fund ended quarter 1 @ $11.925 NAV and ended quarter 2 @ $11.01 or a 7.7% loss for the quarter. Essentially a wasted 90 days as that matched the indexes; but up to the 2nd week of January things were looking far rosier. Much good work was wasted in the past 3.5 weeks. And now the fund is back below the goal of beating the indexes by 15% each year.

Price of Rising Tide Growth: $11.009
Lifetime Performance to date (vs Aug 3, 2007): +10.09%

Comparable S&P 500: 1,395.4 (-4.76%)
Comparable Russell 1000: 761.1 (-4.40%)

Fund return vs S&P 500: +14.85%
Fund return vs Russell 1000: +14.49%

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 January 2008.

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