Bookkeeping: 'Rising Tide' Performance Week 33

Week 33 performance of the mutual fund

Comments: I did not like Week 33, Sam-I-Am. I did not like it in a box, I did not like it with a fox. I did not like it in a house, I did not like it with a mouse. I did not like Green Eggs and Ham, I did not like Week 33, Sam-I-Am.

What more can I say? Thank god it was not a 5 day week, the way it went? 33 used to be my favorite numbers since that was my ACT score. No longer! I refute you, week 33. Sam-I-Am. I'll give the market credit, it pulled the same stunt on me in weeks 23 (fund lost 4.4%, trailed market by 3.5%) and 24 (fund lost 10%, trailed market by 5%) at the end of January when everything I was not in ramped, and everything I was in tanked, providing a double whammy. You can see it in my performance chart where the fund NAV (orange line) took a nose dive in mid-late January 08. So I gave up 8.5% of outperformance in those 2 weeks alone; now the market is so 'efficient' it was able to take all that away from me in 4 days. How's that for brevity - she did not take long in putting me in my place. While this was not the worst week of fund performance on an absolute basis, it was far and away the worst relative to the markets.

An easy explanation for this week's results - everything I own was pounded; I was on the wrong side of almost every trade. Simple enough. Sadly, I warned of this in last week's summary - each time I really begin to pull away from my index measures (which I try to beat by 15% a year), I promptly get nailed shortly thereafter. Like clockwork - November, January, now March. I wrote

I am now once again far exceeding my targets of beating the indexes by a yearly rate of 15%; usually when I reach this point of outperformance (in the past) the market has come in and smashed the fund the following week so I'll be vigilant about that.

Definitely frustrating on one level, but short of a wholesale change in the portfolio from what has been working 90% of the time to "the worst of breed sectors" financials, homebuilders, and retailers at exactly the correct moment - it is simply unavoidable. Shockingly, I entered the week with nice short exposure, nice cash cushion and a much decreased commodity exposure than I had say 3-4 weeks ago. Yet still these type of results. But this week was the historic type of commodity correction in terms of how quickly and how fierce it was. I keep using the word historic and unprecedented - these are simply volatile times and so much capital flows from 1 area to the next; when these hedge fund computers change direction it's 60 mph on a dime.

With that said, a lot of air was taken out of these holdings this week which is a good thing; and a lot of people who just joined the party in the past month and bought high have been burned and probably won't be returning anytime soon... also good in my book. Obviously we don't know how much further this correction will continue but with the severity and intensity we've seen; hopefully a good portion. I am not taking too much stock in the selloff here - simply put the hedge fund community has created massive imbalances everywhere they go, when they take their ball and go home, it leaves a huge vacuum (and prices go into free fall since there is little support) which affects prices in the near term - but I don't see any changes to fundamentals in coal, fertilizer, crops, etc so I am sticking to my guns with these names even if it brings more short term volatility. As I said in November 07 and January 08, these purchases in the thick of the selloffs are what generate the best returns as you go forward a month+, even if they just add to your short term misery/poor performance. If I think Mosaic is a $120 stock I should be happy to get it at $100, and thrilled at $90. So again, we will take these lumps but we knew it was coming at some point - just not all in such a compressed period, but these are the markets nowadays - time is simply compressed. Big rallies last hours, before turning into huge selloffs, before turning into large rallies.

I wish I could give you some forecast on this market but there is little to no sense on a day to day basis. Things change 180 degrees from day to day - or hourly. We appear to be nearing that resistance of S&P 1330 again and if it breaks we go to S&P 1360 but I believed that Wednesday as well, and we promptly lost 300 points on the Dow within a few hours. So we'll take it day by day in this market that continues to have no rhyme or reason.

Rising Tide Growth Fund lost 5.4% this week, losing money both in absolute terms and even more severely in relative terms (vs indexes) as the S&P500 gained 3.2% and the Ruseell 1000 gained 2.9%. Essentially, we are back to week 26 levels of outperformance and gave back (hopefully temporarily) 6 weeks of gains versus the indexes in these 4 days. But we still hold that goal of 15% yearly outperformance by the skin of our teeth. Tough to give back all those nice gains in 1 week, but this is the will of the market - we'll continue to plod forward in a very tough environment.

Price of Rising Tide Growth: $10.587
Lifetime Performance to date (vs Aug 3, 2007): +5.87%

Comparable S&P 500: 1,329.51 (-9.26%)
Comparable Russell 1000: 722.52 (-9.25%)

Fund return vs S&P 500: +15.13%
Fund return vs Russell 1000: +15.12%

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