Comments: After a boring week last time around, we had a lot of excitement this week with large moves Monday, Thursday, and Friday. This bipolar action reminds me of much of the January - March action where crazy mood swings were taking us up/down 2% almost daily. As always human psychology is amazing to watch - yesterday the world was good because Costco and Walmart were accepting a whole new class of consumer (especially the latter) and that was a signal of "strength". The weekly unemployment claims report was 15K less than expected but continuing claims were at a 4 year high, but the market chose to focus on the weekly claim instead of the long term claims (typical).... anything to grasp at for signs of hope. Then today, all that hope was erased when the monthly jobs report showed a fraction of reality. Fear and greed; fear and greed - such a thin slice separating them.
We spent most of the week in heavy cash and short exposure, which served us well every day but Thursday when we got smacked across the head, with a pitcher of Kool Aid (perhaps 2 pitchers). But instead of panicking and rushing in to
buy like the lemmings that apparently run Wall Street nowadays, we just sat in our turtle position poking our head to observe but generally just sitting under the shell. That served us well Friday on the horrid reversal. Looking back it would of been preferable to punt our short exposure at 3:59 PM instead of in the morning and noon time, but the Invisible Hand has slapped me on the behind so many times, you become conditioned to see them show up at 3:30 riding on the white horse and killing your short positions. Today the rampaging bears stomped the hand; then chewed it for good measure. As for fund sectors, somehow these coal, fertilizer, and natural gas names continue their relentless move up... crude up $17 in 2 days (cripes!!) helped. Again I found it hilarious yesterday that crude up $6 was ignored, but today (along with the unemployment report) it was pointed at as a culprit for the downfall. As always "it doesn't matter until it does". I guess the new Wall Street logic is crude oil up to $130 is GREAT for the economy, but over $130 is BAD. Yep, that's what 6 years at an Ivy League gets you nowadays - super logical to me. That said, I am worried about next week because in the past commodities (the generals) were the last to fall in a general correction, so we might have that shoved down our throat next week (fair warning - if that pattern plays out next week will stink for the fund, although we have cut back commodity exposure pretty sharply... but we're overdue for a spanking)Technically, we broke out of narrow range with the action Friday - obviously to the downside. This sets us the market up for a mindset of "sell the rallies" instead of "buy the dips". A quick glance at the charts shows us with potential to head down to April 2008 lows as a first stop, and that would be the 1325-1330 area (currently 1360) so that is only 2.2% down from here (ah, we can do that in a day if we really tried). But generally one would think some pathetic attempt at 'bargain hunting' would happen first so maybe we get some bounce - if we do, I'll use that to re-establish some short exposure I let go into the abyss today. And if that level does not hold, then a retest of the "Bear Stearns bottom" would seem the natural course - perhaps we'll be talking about the "Lehman Brothers bottom" when we get there? More corporate bailouts on the way if we're lucky! Boo Yah! For those of the CNBC inclination, tune in to Kudlow tonight to hear how this is a great thing and the Goldilocks economy aka "2nd half recovery" shall commence in 3 weeks.
The indexes despite a bevy of bulls showcasing their brawn on Thursday, gave up the ghost this week - the S&P 500 lost 2.8% and the Russell 1000 was down 2.6%. Rising Tide Growth was holding up well, even through most of Friday but crumbled a bit there in the last 30 minutes Friday - still we were able to get through with only a 0.5% loss. All things considered we'll take that.
Next week I'll have our mid month update on pledges and some more formal time frame for actual launch - we are having a great month in terms of pledges (thank you). As always if interested in pledging an investment when fund is ready to launch please attach a comment here, or send me an email (need your state please).
Price of Rising Tide Growth: $12.185
Lifetime Performance to date (vs Aug 3, 2007): +21.85%
Comparable S&P 500: 1,360.7 (-7.13%)
Comparable Russell 1000: 748.3 (-6.01%)
Fund return vs S&P 500: +28.9%
Fund return vs Russell 1000: +27.9%
Last week's results here.
Since the market cap of the median stock in the Rising Tide Growth fund (median $7.1 Billion as of April 08) 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 April 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
