Bookkeeping: 'Rising Tide' Performance Year 2, Week 7

Year 2, Week 7 performance of the mutual fund

Comments: It was a quiet week as the indexes finishes pretty much where they started. Yep. Trust me. Not much happened except I was forced to watch CNBC live programming every night this week - remember Lehman Brothers (LEH) going bankrupt? That was way back at the beginning part of the week. Merrill (MER) getting snapped up by Bank of America (BAC) in desperation? Yawn - zzzzz. Boring. AIG (AIG) bailout? An afterthought. That was eons ago - like Tuesday or something.

But really does it matter how we get there? (yes) All I know is the taxpayers of this country are going to be paying through the nose so we could put on a 8% rally in 1 day (+1 hour). I just am too gobsmacked (that's a term to sound worldly) to process how the past week (or weeks, or is it months, of the past year) has changed things. I also know we'll still be paying the bill, when ... just like a few years after Enron/Worldcom the "lessons" will be forgotten and the calls to lighten regulation as its "impairing U.S. capitalism" will arise again. And those who pay for government, for the corporation, by the corporation get bill after bill passed in the still of the night to loosen this rule or loosen that one. And lo and behold in 2014-2016 we'll be having this same conversation in a different part of the economy. But this era will be a hard one to ever top.

Anyhow as the market has become more and more senseless the past few months we've abandoned fundamentals to focus on technicals. This week that was thrown out the window as emotion and random news flows and rumors dominated the action. So we adapt, and the market devolves... err, evolves. I am looking back at last week's post and I wrote "The S&P 500 with a bailout induced rally...." Really it is groundhog day around here.

For the fund we actually outperformed the market by a wide shot Monday - Wednesday, since we were hedged. But that hedging came back to haunt on Thursday. This is the problem with the current market - it's about market timing and trading - not picking good stocks anymore. So it's not my cup of tea. But in that spirit of market timing after the 2nd 4%+ down day in 1 week I lifted a lot of short exposure going into the close expecting the government to do "something" (but more on the Federal Reserve side) - when the market reacted poorly to the global central banks injections of liquidity Thursday morning I reversed course and got back my short exposure and cut back my housing/financial "bet" on the long side. That blew up in our face after the CNBC announcement of a mother of all bailouts, and we had to scramble. While we cut back all our short exposure heavily we were already down within minutes 10%+ on multiple positions, and it was enough of the portfolio (remember we have a lot of cash) that the long positions were not able to make up for it. While we did buy back our Lennar and Ultra Financial very late Thursday, it helped us on Friday not Thursday. We ended up flat on a +4% day Thursday and that killed our week. It remains a dangerous market -now even for shorts. Positions can reverse on you in an instant and any market you have to watch every millisecond is not a healthy market.

The S&P 500 managed to gain 0.3% this week and the Russell 1000 gained 0.4%. Rising Tide Growth due to a 4% variance versus the market on Thursday put in 1.3% loss. All things considered, and recognizing if we had not lifted our hedges on the short side drastically late Thursday it could of been an awful Friday - I'll take that. The one main benefit this week was the lack of volatility versus the markets: Monday we were down 1%, Tuesday up 0.5%, Wednesday down 3.9%, Thursday flat, and Friday up 3.1%. Many funds I track with 1 eye of similar ilk were up or down 5-7% every day but Tuesday this week. I suppose that matters more to hedge fund investors (lack of volatility) but it does make for easier nights of sleep.

It still remains nothing more than a daytraders market at this point. We continue to struggle to find a way to make money by "investing" and not trading. That said, from where we started last August 2007 we are barely down which is saying a lot in the most violent market many Wall Street veterans of 30, 40, 50 years have ever seen. So we're surviving to fight another day.

As always if interested in pledging an investment when fund is ready to launch (shooting for early 2009) please attach a comment here, or send me an email (need your state please). We are now at roughly $4 million pledged - thank you.

*** Year 1 Results here: +10.1% vs -14.0% S&P (+24.1%)

Year 2 Metrics

Price of Rising Tide Growth: $9.874
Year 2 Performance to date (vs Aug 1, 2008): -10.33%

Comparable S&P 500: 1255.1 (-0.42%)
Comparable Russell 1000: 685.4 (-0.72%)

Fund return vs S&P 500: -9.9%
Fund return vs Russell 1000: -9.6%

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 July 2008.

Basis for indexes for year 2 is closing price August 1st, 2008.
SP500 : 1,260.3
Russell 1000 : 690.3

Please click here: fund performance for previous updates