The portfolio gained 2% for the month of February, bringin our year to date return to -4.4%.* It was helped by some recovery in the equity markets, though we began cutting our levered long position.
* 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.
29 Mar 2010
Small-C January 2010 Letter
The portfolio lost 6.4% for the month of January.* This was due to an levered long in S&P equity.
* 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.
* 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.
Small-C December Letter and 2009 Review
The portfolio gained 2.1% for the month of December, bringing our year-to-date return to 15.6%.*
* 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.
* 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
Small-C November 2009 Letter
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.
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.
17 Nov 2009
Small-C October 2009 Letter
The portfolio returned 1.6% for the month of October, bringing our year-to-date return to 18.0%.*
* 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.
* 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.
Small-C September 2009 Letter
The portfolio returned 4.9% for the month of September, bringing our year-to-date return to 16.4%.*
* 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.
16 Sept 2009
Small-C July & August 2009 Letter
The portfolio lost 0.1% for the month of July, bringing our year-to date return to 16.1%. The portfolio lost 4.7% for the month of August, bringing our year-to date return to 11.5%.* We are disappointed to hand in two losing months in a row, especially one of the magnitude of our August loss. It is perhaps overly simplistic to note that our shorts outperformed our longs - though fundamentally that's what happened. The market rose, while China didn't. Corporate bond spreads tightened, but yields fell as well. Gold didn't do much of anything, while neither did oil.
In July, we took the step of adding two single-share relative value trades to the portfolio. You may remember we swore off single stocks some time mid last year, and that in the early months of 2009 we had great confidence that this year’s returns would come from asset allocation. As the market felt to be in a recovery mode, with shares bounding upward and bid/asks narrowing in many sectors, we thought it was a good time to get into relative value. Certainly we had been surprised by the rapid recovery in equity prices, but couldn’t we at least capture some profits from laggards in the rally? We invested in two stocks, which appeared quite reasonably valued and potentially able to benefit from continued stock market strength. On that trade, we have experienced our fastest loss rate of any position so far this year. We are considering increasing the size of our trade.
We are sad to report we have lost our confidence in the “science” of economics. Until recently, we had an unwavering faith in a classical, Adam Smith-type economic model. Then suddenly the penny dropped. To be considered valid, a scientific theory must not only have explanatory power, but also predictive power. Our classical model of economics appears to have great explanatory power, but outside the most facile cases is useless for predicting future effects. What do we do now? Become complete economic nihilists? We're trying to get through Keynes as a bit of self-help, but he's not quite the entertainer Smith was.
* 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.
In July, we took the step of adding two single-share relative value trades to the portfolio. You may remember we swore off single stocks some time mid last year, and that in the early months of 2009 we had great confidence that this year’s returns would come from asset allocation. As the market felt to be in a recovery mode, with shares bounding upward and bid/asks narrowing in many sectors, we thought it was a good time to get into relative value. Certainly we had been surprised by the rapid recovery in equity prices, but couldn’t we at least capture some profits from laggards in the rally? We invested in two stocks, which appeared quite reasonably valued and potentially able to benefit from continued stock market strength. On that trade, we have experienced our fastest loss rate of any position so far this year. We are considering increasing the size of our trade.
We are sad to report we have lost our confidence in the “science” of economics. Until recently, we had an unwavering faith in a classical, Adam Smith-type economic model. Then suddenly the penny dropped. To be considered valid, a scientific theory must not only have explanatory power, but also predictive power. Our classical model of economics appears to have great explanatory power, but outside the most facile cases is useless for predicting future effects. What do we do now? Become complete economic nihilists? We're trying to get through Keynes as a bit of self-help, but he's not quite the entertainer Smith was.
* 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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