Sunday, September 30, 2007

Portfolio August and September

I was too busy to post a portfolio summary last month so I will discuss both August and September’s performance here. As usual, the return was dominated by that of the resource/commodity sector. Both energy and precious metals were under pressure in August which resulted in a dour down month while the major indexes managed to recover from the subprime induced swoon and posted positive results. However, all has been forgotten by the end of September when energy/metals notched up huge gains and my portfolio posted the highest percentage and net dollar gains for as long as I have been tracking them.

For the month of September, the actively managed accounts gained 11.69% to bring the YTD figure to 14.17%, while the asset allocated accounts gained 5.27% to bring the YTD figure to 6.05%. Total YTD gain now stands at 8.61%. It is still below the 9+% increase in VTI and SPY but with precious metals having finally emerged from their 15 months correction (IMO), I have reason to believe that I’ll be able to beat these benchmarks this year.

As written elsewhere, I believe a recession is likely. I’ll put the time at around now and first quarter of 2008. However, there may be reasons to believe that the stock market will not see a severe contraction as global growth is unlikely to be derailed. That is not to say that there may not be any initial jitters in foreign markets (and I’ll stand ready to take advantage), it’s just that I don’t expect a depression like so many bears on the internet. One arbitrage play I’m considering is between money center and regional banks, specifically, long BAC (Bank of America) and short RKH (regional banks HOLDRs) or KRE (regional banking ETF). The idea is that the Fed is the regional banks are likely to see profits suffer as this housing mess unfolds and lending standards tighten; on the other hand, the Fed has come out saying they will draw “a ring of defense” around the money center banks.

Changes in reporting portfolio performance
Starting next month I’ll no longer report the actual size of my portfolio although I will continue to report the percentage change which will be computed exactly the same way. I’m not sure how helpful the dollar figures are in the first place. The portfolio reported here represents a significant portion, but not all, of our net worth. Since this blog is anonymous, I felt quite comfortable in showing the exact numbers initially. However, it has become an impediment to sharing this site with family, friends and certain other people. Hence the decision.