Bookkeeping: 'Rising Tide' Performance Week 49

Submitted By Trader Mark
Week 49 performance of the mutual fund

Comments: Whew. Exhausting. The six week battle with our friend to the right continues. He

has been a beast. Wait, he *is* a beast. Well, you know what I mean. Isn't July prime hibernation season? (note to self: no.) Wasn't it just May when we were making a 2 month run off of March lows and sipping our Kool Aid and talking about how the worst was behind us and here comes the 2nd half recovery? Ok "we" were not talking about it, but "they" were. How quickly that worm has turned. Whodda thunk a week ago we'd be talking about bailouts of the two GSEs; did I mention that worm moves fast? In the end the Federal Reserve is going to be the most powerful force in the universe controlling all the strings - they were changing their entire playbook this March, were up on the Hill this week petitioning Congress for even more powers (even as they looked the other other way and missed this entire mess, and in fact many would argue created much of it), and now are potentially making new historic outreach of powers as of late today. I am almost to the point of believing some of these wacky websites out there that preach of the new world order and how it's all moving to one government. Gosh.

But I digress! This was the week of the reversal. Reversals everywhere. Huge moves down midday Monday, but a hopeful big reversal to end the day. Open Tuesday straight down, then a huge run up to close the day? Was *that* finally the reversal we were all hoping for? Uhh, no. Huge drop Wedneday. Thursday offered a little peace, and then a big swoon Friday - followed by an intraday reversal up on more dollars being dropped from the sky by the Helicopter in Chief, and then that was (almost) all erased within an hour. Cripes! And that was just the indexes, let's not even talk about the individual stocks. One of the most topsy turvy weeks I can recall - where nothing lasted for more than a few hours, and 180 degree turns were everywhere. A market in complete confusion at this historic (yet again) point... perhaps the turn from denial of what has happened to the US financial system to stages of acceptance is afoot. I don't know - it just makes one sea sick. If it's going to be like this for the next 30 years, I demand a pay raise. Keep in mind the Bear Stearns bottom was really engineering on a late Sunday night (I remember because I was hitting refresh every 30 seconds on CBSMarketwatch website) when the Federal Reserve did their "magic" (with JPM) - so be on the alert for some sort of "situation" happening this weekend... or we could be right back here getting slapped around Monday AM. Speculation of said magic might now put some sort of floor under the market. We'll see.

For the fund, we did some more buying this week and finally have (mostly) the portfolio I really like. While cognizant of further meltdown, I simply do not want to trade out of the names we own since I believe they will be the big winners of the next leg up (which I hope comes before 2013) The only names I don't like fundamentally (the small part of our barbell strategy), I am hoping will have some serious dead cat bounces (soon) since they've been down for 6 weeks straight. We've deployed all our free cash, and now we either have long or short (via ETF) positions. So to buy new things we'll need to lighten up on the short ETF exposure which I'm not ready to do at this point, aware of how that hurt us in January 2008. (even though that correction was shorter in duration, but similar in degree, than this one) This is as far as we've been allocated to the long side since the dark days of March. Which means I better turn into a pundit and start talking up this economy! Maybe I can get a guest spot on Kudlow since I'll follow the company line - Goldilocks economy baby. ;) (for a few weeks anyhow)

At this time I thought I'd share a quick look at the last 6 weeks, and how Rising Tide Growth has been doing versus the markets as a whole - I used the Russell 1000 as the measuring index since it most closely tracks to our median market capitalization. (The Dow - i.e. the safe big cap stocks - has actually been quite a bit worse over the past 6 weeks). I do want to stress "relative" stability during downtimes is a goal even if it potentially hurts short (or longer) term results. There is something to be said for having an army of investors who don't wake up each week to seeing their fund down 2-3% week after week. On that count, I am very pleased with how we've handled this correction - last week was simply unavoidable since, even with the large reductions in our commodity exposure, 15-25% down weeks in many of our names led to an underperformance versus the indexes (which we almost completely made up this week). The other 5 weeks have been solid considering the carnage surrounding us. In the month and a half correction we have endured RTG has lost 4.7% (most all in week 5) and the Russell 1000 lost 12.2%. Week by Week is seen below (week 1 on far left, week 6 on far right) I won't pop any champagne corks until we actually make a bottom because each ensuing week could provide a sharp slap to the face.

Specific to this week the S&P 500 fell 1.9%, while the Russell 1000 dropped 1.7%. Rising Tide Growth made a nice comeback from last week, gaining 1.3%. So back to our old ways of having both positive absolute and relative (to indexes) performance. We were not overly hedged this week to the short side, and in fact doing some buying on dips, so most of the gains seemed to occur as our commodity names came back to help late in the week after their complete debasement last week. 3 more weeks until our year 1 closes.

As always if interested in pledging an investment when fund is ready to launch (shooting for late 2008) please attach a comment here, or send me an email (need your state please). We have now breached >$3 million pledged - great news and thank you. I'll have an update on pledge totals next week.

Price of Rising Tide Growth: $11.663
Lifetime Performance to date (vs Aug 3, 2007): +16.63%

Comparable S&P 500: 1239.5 (-15.40%)
Comparable Russell 1000: 679.3 (-14.68%)

Fund return vs S&P 500: +32.0%
Fund return vs Russell 1000: +31.3%

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 May 2008.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates

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