The portfolio gained 3.2% for the month of September, bringing our year to date return to 0.8%.* The S&P gained 8.8% over the month. Of course it is disappointing to underperform our benchmark so drastically, however that will be the occasional result of holding a low volatility portfolio. We question the validity of this rally. While the economic data has improved slightly, the economy is still in grave difficulty. There have been rumors and intimations that the US will embark on a new stimulus spending and a program of quantitative easing. Previous rounds of such stimulus have done nothing to improve employment rates, and we fear that each time the government takes over a larger portion of the economy it dooms us to a longer period of sub-optimal growth. How that can be positive for equities is beyond us. Even more amazingly, 10-year Treasury rates ended the month nearly unchanged! We have been wrong about the direction of rates for a very long time now, but this just seems absurd.
* 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.
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