Absolute and Relative Returns by Holding Period

This chart shows the returns for the Strategic Growth model portfolio for the past quarter (13 weeks), 6 months (26 weeks), and 52 weeks ending Friday, February 27th. Over the past year, the portfolio has generated an absolute return of +38.7%, beating the market by +85.5%.

Many fund managers are proud to merely beat the market. A high performing hedge fund should be able to consistently generate positive returns over the full Bull-Bear market cycle. By aligning investment capital with the prevailing market conditions, the Strategic Growth model portfolio has consistently generated positive returns over virtually any holding period greater than 26 weeks since inception.

This chart shows that the model is generating a relatively linear rate-of-growth when measured over successively longer holding periods.

Returns for week ending 2/27/09

Model portfolio, hypothetical returns for past…
1 week: +2.5%
26 weeks: +13.8%
52 weeks: +38.7%

Value of $10,000 invested at inception in 2003: $56,821

The model remains on a SELL signal for NEXT week.

The portfolio holdings for NEXT week:

50% of funds in RWM (inverse fund)

50% of funds in Cash

Could the Market Go Lower From Here?

Sure it could.

This chart indicates that the Dow could decline another 50% from today's levels. This is not a prediction, only a possibility worth considering.

For some long-term perspective, this chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, the inflation-adjusted Dow has gained a mere 55% since its 1929 peak and gained only 10% since its 1966 peak – not that impressive considering it took many decades to achieve those gains. It is also interesting to note that based on an inflation-adjusted Dow, the current bear market actually began in 1999 only to be interrupted briefly by a multi-trillion dollar credit bubble. That bubble has burst, of course, and the Dow now trades at a level not seen since 1995.

Returns for week ending 2/20/09

Model portfolio, hypothetical returns for past…
1 week: +4.1%
26 weeks: +12.2%
52 weeks: +36.0%

Value of $10,000 invested at inception in 2003: $55,435

The model remains on a SELL signal for NEXT week.

The portfolio holdings for NEXT week:

50% of funds in RWM (inverse fund)

50% of funds in Cash

S&P 500 Earnings Collapse

The S&P has finally updated their 4Q earnings, which (predictably) have collapsed.

This is one of the most frightening charts I've seen in awhile.

Returns for week ending 2/13/09

Model portfolio, hypothetical returns for past…
1 week: +2.9%
26 weeks: +10.5%
52 weeks: +31.0%

Value of $10,000 invested at inception in 2003: $53,277

Worst 10 Years Ever

Semi-log Chart Shows Steady Rate-of-Growth

A traditional Equity Curve chart uses a linear axis. A linear axis has the effect of distorting the rate-of-change when equity is compounding over a long time period. That's why charts showing equity curves are sometimes called "mountain charts." Fund marketers love them! They are very flattering. The compounding effect makes it look like the returns are accelerating sharply, while the rate-of-change may actually be constant or even declining.

A better way to visualize the model's rate-of-change is a semi-log chart, used to visualize data that are changing with an exponential relationship as with a compounding return.

In this semi-log chart showing the equity curve, it is easy to see that the rate-of-growth for the model's equity has been fairly consistent over time.

Returns for week ending 2/6/09

Model portfolio, hypothetical returns for past…
1 week: -2.7%
26 weeks: +7.7%
52 weeks: +27.2%

Value of $10,000 invested at inception in 2003: $51,784