Comments: Whew. Exhausting. The six week battle with our friend to the right continues. He
has been a beast. Wait, he *is* a beast. Well, you know what I mean. Isn't July prime hibernation season? (note to self: no.) Wasn't it just May when we were making a 2 month run off of March lows and sipping our Kool Aid and talking about how the worst was behind us and here comes the 2nd half recovery? Ok "we" were not talking about it, but "they" were. How quickly that worm has turned. Whodda thunk a week ago we'd be talking about bailouts of the two GSEs; did I mention that worm moves fast? In the end the Federal Reserve is going to be the most powerful force in the universe controlling all the strings - they were changing their entire playbook this March, were up on the Hill this week petitioning Congress for even more powers (even as they looked the other other way and missed this entire mess, and in fact many would argue created much of it), and now are potentially making new historic outreach of powers as of late today. I am almost to the point of believing some of these wacky websites out there that preach of the new world order and how it's all moving to one government. Gosh.But I digress! This was the week of the reversal. Reversals everywhere. Huge moves down midday Monday, but a hopeful big reversal to end the day. Open Tuesday straight down, then a huge run up to close the day? Was *that* finally the reversal we were all hoping for? Uhh, no. Huge drop Wedneday. Thursday offered a little peace, and then a big swoon Friday - followed by an intraday reversal up on more dollars being dropped from the sky by the Helicopter in Chief, and then that was (almost) all erased within an hour. Cripes! And that was just the indexes, let's not even talk about the individual stocks. One of the most topsy turvy weeks I can recall - where nothing lasted for more than a few hours, and 180 degree turns were everywhere. A market in complete confusion at this historic (yet again) point... perhaps the turn from denial of what has happened to the US financial system to stages of acceptance is afoot. I don't know - it just makes one sea sick. If it's going to be like this for the next 30 years, I demand a pay raise. Keep in mind the Bear Stearns bottom was really engineering on a late Sunday night (I remember because I was hitting refresh every 30 seconds on CBSMarketwatch website) when the Federal Reserve did their "magic" (with JPM) - so be on the alert for some sort of "situation" happening this weekend... or we could be right back here getting slapped around Monday AM. Speculation of said magic might now put some sort of floor under the market. We'll see.
For the fund, we did some more buying this week and finally have (mostly) the portfolio I really like. While cognizant of further meltdown, I simply do not want to trade out of the names we own since I believe they will be the big winners of the next leg up (which I hope comes before 2013) The only names I don't like fundamentally (the small part of our barbell strategy), I am hoping will have some serious dead cat bounces (soon) since they've been down for 6 weeks straight. We've deployed all our free cash, and now we either have long or short (via ETF) positions. So to buy new things we'll need to lighten up on the short ETF exposure which I'm not ready to do at this point, aware of how that hurt us in January 2008. (even though that correction was shorter in duration, but similar in degree, than this one) This is as far as we've been allocated to the long side since the dark days of March. Which means I better turn into a pundit and start talking up this economy! Maybe I can get a guest spot on Kudlow since I'll follow the company line - Goldilocks economy baby. ;) (for a few weeks anyhow)
At this time I thought I'd share a quick look at the last 6 weeks, and how Rising Tide Growth has been doing versus the markets as a whole - I used the Russell 1000 as the measuring index since it most closely tracks to our median market capitalization. (The Dow - i.e. the safe big cap stocks - has actually been quite a bit worse over the past 6 weeks). I do want to stress "relative" stability during downtimes is a goal even if it potentially hurts short (or longer) term results. There is something to be said for having an army of investors who don't wake up each week to seeing their fund down 2-3% week after week. On that count, I am very pleased with how we've handled this correction - last week was simply unavoidable since, even with the large reductions in our commodity exposure, 15-25% down weeks in many of our names led to an underperformance versus the indexes (which we almost completely made up this week). The other 5 weeks have been solid considering the carnage surrounding us. In the month and a half correction we have endured RTG has lost 4.7% (most all in week 5) and the Russell 1000 lost 12.2%. Week by Week is seen below (week 1 on far left, week 6 on far right) I won't pop any champagne corks until we actually make a bottom because each ensuing week could provide a sharp slap to the face.
Specific to this week the S&P 500 fell 1.9%, while the Russell 1000 dropped 1.7%. Rising Tide Growth made a nice comeback from last week, gaining 1.3%. So back to our old ways of having both positive absolute and relative (to indexes) performance. We were not overly hedged this week to the short side, and in fact doing some buying on dips, so most of the gains seemed to occur as our commodity names came back to help late in the week after their complete debasement last week. 3 more weeks until our year 1 closes.
As always if interested in pledging an investment when fund is ready to launch (shooting for late 2008) please attach a comment here, or send me an email (need your state please). We have now breached >$3 million pledged - great news and thank you. I'll have an update on pledge totals next week.
Price of Rising Tide Growth: $11.663
Lifetime Performance to date (vs Aug 3, 2007): +16.63%
Comparable S&P 500: 1239.5 (-15.40%)
Comparable Russell 1000: 679.3 (-14.68%)
Fund return vs S&P 500: +32.0%
Fund return vs Russell 1000: +31.3%
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 May 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
10 comments:
Great results for not being able to short! Do you plan on having any short positions once the fund is opened up?
the first of many?
Office of Thrift Supervision shuts down IndyMac - July 11, 2008
http://news.yahoo.com/s/ap/20080712/ap_on_bi_ge/indymac_17
more kool aid please
from the article
"This institution failed today due to a liquidity crisis," OTS Director John Reich said.
The lender's failure came the same day that financial markets plunged when investors tried to gauge whether the government would have to save mortgage giants Fannie Mae and Freddie Mac.
The banking regulator said it closed IndyMac after customers began a run on the lender following the June 26 release of a letter by Sen. Charles Schumer, D-N.Y., urging several bank regulatory agencies that they take steps to prevent IndyMac's collapse.
In the 11 days that followed the letter's release, depositors took out more than $1.3 billion, regulators said.
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wonder if the good senator was short :)
TM
This article in WSJ tells how our good senators are looking after the good of the country. Unbelievable that these people are willing to let elite rich destroy the whole system.http://online.wsj.com/article/SB121573640282644435.html
Dick Durbin and the Chicago Boys.
KB
Mark,
Congrats on your results. This market is like the old New York New York song...
If you can make it here you can make it anywhere
------------------------------
The current market has to be one of the most interesting ones in history. On the one hand we have these tremendous bull markets that are tied to globalization and the shift of money, industry, and power from the West to the East (and South America)... on the other hand we have the deepest deflationary crisis since the great depression that extends globally because the credit packages were spread throughout the world... and then just for a twist we have tremendous inflation in food and energy...
Most people are losing their *ss but the more I learn the more opportunity I see...
BTW I was wondering if you have a bit of time to respond to an email. I talked a few minutes with the head of the board of directors of a Chinese Co. today when I had a few minutes... he was just freaking out about the stock... talking about the fact that the company was doing so well and that bear raids and naked shorts were just ravaging the best companies... very very interesting... not just for this company but for many others...
And you'll likely be doing this or having somebody do this as a fund manager... when the stock is getting crushed and even the top dogs can't understand why and are panicking it's time to listen...
BD,
I can be short - I just can't be short individual names. I believe the 2nd best return in the fund has been SKF - Ultrashort Financial. Of course we have nailed many restaurants, retailers, casinos, and the like that have fallen 60-70%+ in the fall that would of been great to hold on the short side or at least own puts. It would of really goosed our returns even more.
To your question - we will have it written in the prospectus the ability to short. Trying to figure out the mechanics is leading to some complication - money needs to be segregated to the side for this, so we'll have to see how easy it is. With a small asset base I don't want to have to "reserve" $x that I cannot use and must sit waiting for a short decision, especially with a market that changes directions every 2 hours. But the ability will be there, it's just a matter of the application.
hrs,
yes the first of many - expect a few hundred go be gone by this time next year. A few regionals too i.e. National City looks like one going to hog heaven
kb, I wish every person would read articles like that. It is truly something that should make every American angry. In the beginning these were truly supposed to be representatives (of the people). They are now simply representatives of themselves, and their corporate backers... and talk a good game on TV to the "peons" (us). Much like our energy policy, our lack of financial regulation it will have to take a crumbling of epic proportion for things to change. That is unfortunately the American way - the sheep (voters) are not educating themselves on what is truly going on out there. Ignorance is bliss for those in power. We'll be one small voice fighting that, and hopefully as we grow more people read, and talk to their neighbors and educate them. I believe there are a few other websites doing the same. Oh yeh, we'll try to make money along the way too ;)
Roses,
Yes there is always opportunity. Most money managers are so American centric and stuck in 1960s-1990s thinking they are missing a lot. Thats why most good mutual fund managers are hedge fund managers in short order.
As for your other comment, much like the loss of the uptick rule I wonder why the naked short situation is never addressed. I can only guess hedge funds truly have the SEC in the back pocket. There is literally a list out there saying these are the stocks being affected by this and people act like there is no way to track down who is doing the naked shorting. I am all for SHORTING (legitimate) but the ability to short without real shares is criminal but our SEC does not care it seems.
But in a general sense I don't like to hear managment complain about the stock price. Do something about it - i.e. great performance. I'd urge you to google Overstock CEO Patrik Byrne for an example of when a company focuses so much on the shorts and a crusade against them and misses the whole point of executing within his own company. He is the poster child for these complaints.
TM
I couldn't tell from your blog, are you in favor or against the uptick rule or the removal of it.
The periodic bear raids on the momentum stocks- MOS, POT, coal stocks, etc. like we saw last week may be attributed to the downtick rule because these fall in waterfall style. If that is true then the downtick rule would help the disciplined investor by giving him/her chances to get in on good stocks at artificially depressed prices. You mentioned how we saw like 5 panic sell offs/bear raids of the "good shortage stocks" in the last year (which were golden buying opportunities), well that same period is also when the uptick rule was eliminated. Perhaps the two are correlated?
I think its ridiculous. If you have enough pool of capital you can sit on the bid and pound a weak sister down all day. Then cover at 3:30 PM and come back the next day and repeat. It's foolish and I never have seen an explanation of "why" it was necessary to change it.
Why should those stocks you mention go down only due to a trick devised by SEC after it being the other way for decades?
And what does it do for small and mid cap companies who don't have big cash war chests to buy their own stock and defend themselves? There are 1000s of those small caps who a hedge fund could sit on day after day after day and pound away at it, pick a 6 minute period here, pick a 8 minute period there. And you can make a mighty mint in thinly traded stocks.
Perhaps Goldman is sitting on the bid pounding away at TSL for the rest of the year so they cannot get the cash they need without a serious equity offering that may dilute upwards of 20%.
seriously I wouldn't rule this out. TSL is so thinly traded, they can destroy all remaining longs and steal their shares and then when conditions improve and TSL starts beating numbers in 2009, they hold most of TSL shares (except investinghobo's because those have a $80 sell limit ;) ) and can upgrade. Although I doubt the big Goldman would mess with TSL a quite small cap stock.
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