The portfolio lost 4.5% for the month of November, bringing our year-to-date return to 13.5%.* We are sorry to hand in such a disappointing setback, one which destroys months of steady performance and is close to the maximum total monthly loss we feel we can accept.
What happened? Mainly, the S&P gained 6.2% over the month, while we are short about half of our portfolio gross value. Our various equity longs, including China, generally underperformed the index. Gold had a pretty good month, trading up 12.8%, though we missed out on a part of that after closing our position. At a point where people seem to believe that gold can not possibly decline, we felt uncomfortable holding it any longer. Gold doesn't generate income, after all. Take an ounce of it, put it in a safe, come back ten years later and you still have an ounce of gold. Our bond portfolio didn't do much over the month, making a slight gain. Oil stayed flat as well.
Is it time to reevaluate our equity short? Yes - actually it is. The January barometer hasn't worked (so far) this year. Work we have recently seen indicates it is a good idea to be long into year end and through January, so we will be heading back to a long-equity stance. We still think our short rates position / long inflation position makes a lot of sense.
* We report the percentage gain or loss during a month in an additive sense for ease of comparison, however the year-to-date returns are reported as a chained series. As the total return become greater, and as inflows have an effect on the portfolio, the two will diverge. Adding up the monthly returns for the year may not give the precise total return.
15 Dec 2009
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