The Freedom Factory

Rep. Jane Harman exchanged favors for power-aided Israeli lobbyists accused of espionage, top government investigator says that bank bailouts are open to fraud, Obama tells Cabinet to cut spending by 0.02%, U.S. Treasury estimates it has lost $900 million of taxpayer money from holding $301 billion in Citigroup junk assets, Russian tariffs take toll on U.S. companies, and could the U.S. be headed for a Russian-style economic collapse circa 1998? Continue Reading

The stock market hit and then furiously bounced off a low on March 9th. Since then it has shot up about 30% nearly uninterrupted. Hope abounds that we may be emerging from one of the worst economic disasters in 20+ years. By many measures the frantic chaos of the last year appears to be subsiding, particularly when looking at the resurgence of corporate earnings, stock prices, and declining value of the CBOE Volatility Index (VIX). Yet it is at times like these when it makes most sense to buy insurance, and it just happens to be cheaper than it has been in a long time. Continue Reading

The Fund performed mainly flat this week, down 0.76%. We reallocated 85% of the portfolio over the course of the week, leaving 15% in cash to lower risk and add flexibility. Reallocation usually comes with a slight weekly loss due to illiquidity of assets, in which case they are immediately revalued from bid to ask after opening them. We temporarily lose the spread. All positions currently remain within acceptable risk parameters, with additional risk hedging applied to the most volatile assets. Continue Reading

The Fund took its largest one-week loss since inception, losing 11.44% last week. The reversal comes as the result of a “massive repositioning in the foreign-exchnage market,” in which the euro dropped 3.4% against the US dollar. To put this into perspective, 95% of weekly euro returns over the last 2.5 yrs have fallen within the 0.04% to 0.41% range. Consequently, commodities prices are dropping, particularly for oil, agricultural businesses, and for commodity-dependent economies, such as Brazil.

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The Fund lost ground this week, with a slight loss of 0.82%. This is attributed largely to reallocation of the bulk of our assets into new positions, along with renewed volatility in the financial and energy sectors. We currently hold roughly 25% of assets in cash, of which 10% is targeted for allocation this coming week. We are following an incremental reinvestment approach to offset wild asset price fluctuations over this last month. For the month of July, we are up 9.12%, and for the year we are up 23.72%.

July has been an extremely volatile month for nearly every asset class. The Fund had to employ all of its risk management techniques to minimize trading losses on certain positions, but we ended up 10.47% this week and 9.96% for the month so far. July options contracts expired today, so the Fund now sits on 100% cash, which will be incrementally allocated over the next few weeks.

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The Fund’s position strengthened slightly over the course of the week, posting a 3.9% gain. Overall, the Fund is up 12.84% since inception. July options contracts expire this coming Friday, the 18th. We currently hold two positions that are in-the-money (ITM), with several others whose prices are relatively close to short strikes. This coming week should contain a high level of volatility as contracts approach expiration, but the Fund is positioned reasonbly well to capitalize on favorable to neutral price movements. Continue Reading

June contracts expired today after a tumultuous run, with the Fund earning 8.82% for the week. Overall, the Fund is up 10% since inception in March, with a 19.3% gain since the expiration of May contracts. Those patient enough to suffer through March and early April losses have been rewarded with a 47.4% gain since our low.

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