Saturday, March 31, 2007

Portfolio March 2007

I'm not proud of my return last month. After significantly outperforming in February, the actively managed accounts only managed to gain 0.69%, while the asset allocated accounts lost 0.69%. The combined total was a $300 loss. Not a big deal, but significantly worse than the 1.15% gain in SPY and much higher gains in international indices.

The chief culprit was my stance during the mini-crash and its aftermath. I made significant changes to my AA accounts (yes, such was the strength of my convictions). You can see from the allocation table that 50% is now in bonds. While I stand by that decision, I missed the rebound in the market. That said, I still believe my decision to reduce risk exposure was a right one. We're still below the Feb 26 level when all this drama began. I believe we're in the early innings of the housing implosion saga and risk aversion will become the theme of the year.

My decision to pick up some HSGFX, Hussman's hedged equity fund, turned out to be a good one as it continued upwards in a volatile environment. I continue to hold my positions in PM and energy even adding a uranium play several days ago.

I still have some short exposure as can be seen from the table below. I also hold leap puts in XLY and XLF as disclosed earlier. The only other option position is a covered call on AAV.

If the market do decide to make new highs, obviously I'll exit my shorts/puts. I'll suffer losses but I won't let it run away like last September. I'll likely increase my international exposure first as the dividend adjusted EFA remains a very tough benchmark to beat, in terms of both absolute and risk-adjusted performance.