Friday, October 17, 2008

Bookkeeping: 'Rising Tide' Performance Year 2, Week 11

Year 2, Week 11 performance of the mutual fund

Comments: Yet another crazy week in a series of crazy weeks. The volatility this week was simply numbing. I guess it was an upgrade from the past few weeks when the only direction was down. I was shocked to see a stat scroll on the bottom of the CNBC screen on Oct 14th - the Dow and S&P 500 were only up 1 day (this Monday) for the month of October as of that point. That is staggering. Well we made it two days this week. But 2 days of upside every month is not really going to cut it for the longs....

I broke out the intraday volatility this week - it is sickening. Keep in mind there was a period for about 1.5 years in 2005-2006 that the S&P 500 never fell or gained more than 2%. Now that was also abnormal but whatever "this" is, is just wrong. Until some sort of calmness returns to the market is is hard to believe we'll attract any real investors. This monster has just become a home for traders whose time frames is measured in minutes or hours. Today was the "calmest" day at only a 7.2% intraday swing....

Monday Low 913, High 1007: 10.3% swing
Tuesday Low 972, High 1044: 7.4% swing
Wednesday Low 904, High 995: 10.0% swing
Thursday Low 866, High 948: 9.5% swing
Friday Low 918, High 985: 7.2% swing

Sometimes a picture (video) speaks better than words. Below is a video akin to my reaction everytime I spent more than 3 minutes staring at the market this week.

Don't laugh - I, and many others, have been sleeping like this baby the past few weeks. You know - waking up every 3 hours and crying. ;) If I never have to see another CNBC Asia anchor again, it will be too soon.

Not much to say fundamentally, or technically - all these historical constructs we've used for years are out the window at this point. It is like flying blind. A bull might construe yesterday's low as a double bottom formation. A bear might say "hedge fund redemptions begin anew next week!" I can't argue with either, and they might not be mutually exclusive. We are oversold by any historical standard by multiple deviations but have been so for a while now. But we've never gone through a systematic delevering like this either - so there is only so much you can learn from the past. Since individual stocks are fluctuating so rapidly and by purchasing something at the wrong time, you can be down 20% within a few hours I've been mostly hanging out in the indexes. Since we are SO oversold, I do not want to press bets on the short side so I cut back - so a lot of our week end cash position is "future short" exposure that I don't want to put back on unless we begin to break down again or rally significantly. So it is temporarily in cash. At *some point* we have a bear market rally that lasts more than 1 day, or 5 hours. But until fundamentals of individual companies matter again, it's hard to really devote too much to any 1 position or take an "investment stake" over a "trading stake".

After the worst week in history, the S&P 500 & Russell 1000 really only made back 25% of last week's losses; the former was up 4.6% and the latter up 4.4%. Rising Tide Growth was able to gain 4.3% despite having 20-35% cash most of the week, along with some short exposure along the way. So we were able to keep up with the market to the upside despite protecting a large chunk of our capital and reducing volatility versus the indexes each day. Mostly this was due to some well timed trades - we still long for the day when we can invest and not look at the market for a few hours. Someday.

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

Year 2 Metrics

Price of Rising Tide Growth: $8.788
Year 2 Performance to date (vs Aug 1, 2008): -20.19%

Comparable S&P 500: 940.6 (-25.37%)
Comparable Russell 1000: 507.8 (-26.44%)

Fund return vs S&P 500: +5.2%
Fund return vs Russell 1000: +6.2%

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

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