Comments: Overall a relative boring week in the market, which frankly I think we all cherish at this point in contrast to the tremendous volatility since Jan 1. And even more so after the nutty 4 day week last week of down 200, up 400, down 300, up 250. Not a lot of news events, or economic events - just the constant drumbeat of everything will be ok in 6 months, but I've been hearing that since August 2007. Eventually they're going to nail that call says the blind squirrel. Next week should be a lot more interesting as everyone clenches their jaws for the first 4 days, waiting to react to an inaccurate employment report next Friday... from which people can decide if there will be a recovery in 2nd half 2008 or if the world is ending. Either way, they will surely overreact, and I'll point out the utter nonsense that this number is due to Birth/Death adjustment, which I plan to do 12 times a year until people get it. [Jan 27: Monthly Jobs Report and Birth/Death Model] 80% of our jobs, by the way, are now created by the Birth/Death adjustment... sad.
As of Tuesday, I mentioned I was utterly confused by the action, specifically last week, and as they say "when in doubt, get out". Since I'm not going to 100% cash, I decided to quickly build to a 25%+ cash position and closed the week north of 27%. Until I see a clear trend, I want to be cautious and even things I like are now potential victims of hedge fund liquidations. Hence I pulled back on everything across the board. So we are again in the stage where nothing is really safe on the long side. And you can't really feel safe on the short side because that's not safe due to government interventions. So in summary - safety is gone. So I'm trying to be as 'hedged' as my self imposed rules allow and we watch day by day, week by week whom is more powerful - the government powers or the free market. Unbelievable it's come to this - I remember when stock picking was the basis of markets - but that only works on the way up I guess....
Since fundamentals are out the door in this "new era" that leaves us with technicals.... on Tuesday the S&P500 reached out to its 50 day moving average (a key support/resistance line for those who follow technical trading), and at that moment I said we're at a critical juncture [Mar 25: Back to Important Inflection Point for S&P 500]. I was open to the possibility of a move either way, up through that resistance and onward and upward to a land of Kool Aid and unicorns. Or back down. I was positioned however more towards the latter since deep in my heart of hearts my free market soul still believes ("they" haven't completely crushed my free market spirit yet).... also this was the 8th attempt at a new higher high (instead of making lower highs) since early October 2007. But within 48 hours we were confirmed.... this was the 8th failure.
Below are 2 charts - the first shows you how we looked Tuesday at the inflection point. The second shows you how we look now. We're back in no man's land of S&P 1260/1270 to 1355 or so. In a "non Plunge Protection Team aka Invisible Hand" scenario, I'd have full confidence we would be headed back to 1260/1270 and in fact break down below it as we were "supposed to" (by all rules I've learned the past decade+) a week ago Monday. In our current era I have confidence in nothing. So we'll take it day by day.
(i) Tuesday chart - bulls cheering, hopeful, happy, telling us to buy those early cycle names, commodities are dead
(ii) Friday - not so much.
As for the fund, I really did not do that much - Tuesday and more so Wednesday as it appeared a failure was likely I began building up the slew of Ultrashorts back to >20% stake. And kept raising cash and reducing risk. I've cut back on the actual commodities exposure quite a bit but of course still hold the 2nd derivatives (i.e. coal stocks, fertilizer stocks). After all I need to hold something to be considered a long biased fund... but it was a quiet week overall.
Last week was a very poor one for the fund, and this week was very good. Since neither week, in my opinion, represents reality of the fund holdings but more a reflection of large scale sector moves by hedge funds this week vs last - I am going to simply average the 2 weeks together and by that measure the fund was up for the 2 week period, with extreme volatility.
The S&P 500 lost 1.1% this week, and the Russel 2000 lost 0.9%. Rising Tide Growth Fund gained 6.0% this week, offsetting last week's 5.4% loss, to net out at 0.6% gain over the 2 week period. Again, I don't consider either last week's loss or this week's gain to be representative of the fund's holdings - simply outsized volatility caused by hedge funds racing in and out of sectors like scalded chimps (thanks Macke). I do go home this weekend in far better mood than last week since I feel like I did my virtual investors some justice this week ;)
Price of Rising Tide Growth: $11.227
Lifetime Performance to date (vs Aug 3, 2007): +12.27%
Comparable S&P 500: 1,315.22 (-10.24%)
Comparable Russell 1000: 716.15 (-10.05%)
Fund return vs S&P 500: +22.51%
Fund return vs Russell 1000: +22.32%
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
