The Freedom Factory

This is the fifth consecutive week of losses for the Fund, with a 5.28% decline due to continued foreign currency and commodity declines. The bulk of our losses (~ 4%) are dirctly attributable to capital loss on our long natural gas hedge, namely ITM call options for Chesapeake Energy (CHK). The remainder of losses are comprised of adverse downward movement in the utility sector and further declines in euro. On a positive note, our hedging operations on euro prevented significant loss with uncharacteristicly severe downward price movement. Current spread ratios prevent further downward loss on that insurance bet, and even open the possibility of capital gains if prices further deteriorate.

The Fund lost 2.05% this week, closing out a terrible month with a total loss of 25% for August. Despite increased precautions in our risk management approach, we suffered severe losses driven by currency markets. Unprecedented appreciation in US dollar hit us hard on multiple euro bets, and also took a toll on our commodities positions. Overall, the Fund is down 4.59% since inception. Continue Reading

Diversification is critical for long term portfolio health. We’ve all heard about the benefits of not “putting all your eggs in one basket,” but conventional wisdom needs to be updated every now and then. The modern investor has a wealth of new tools to achieve real diversification. Small retail investors are encouraged to spread their portfolios across a range of different types of stocks and bonds. Small caps, mid caps, large caps, value, growth, short and long-term Treasuries, and municipal bonds have been the staple of a diversified portfolio. Well, times have changed and so too should your notions of eggs and baskets. Continue Reading

Americans should be afraid of the long term value of the dollar. The country has massive fiscal imbalances that only look to be worsening. The social-political trajectory we are on is not likely to change, so a prudent thing to do is start transferring assets out of the country. A great way to do that is to buy foreign currencies. Exchange-traded funds (ETF’s) allow the regular investor to gain exposure to a variety of the world’s largest currencies, including Euro, British Pound, Canadian dollar, Australian dollar, Japanese Yen, Swedish Krona, Mexican Peso, and Swiss Franc.

Continue Reading