The Freedom Factory

Sen. Rockefeller proposes bill that would give government sweeping powers to control, monitor, and regulate the Internet, ACLU demands public schools stop blocking gay web sites on public computers, Rep. Jane Harman calls incriminating NSA wiretap “abuse of power,” National Service legislation signed into law that will cost $6 billion over 5 years by hiring “paid volunteers,” government will need to issue $2.4 trillion in new Treasury securities in 2009 to meet budget shortfalls and bailout program requirements, and U.S. to give another $5.5 billion to automakers… 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

Funny things have been going on in markets for some time now. Stocks, corporate bonds, commodities, and currencies were decimated in 2008, with the volatility threatening to persist into the New Year. There’s talk of deflation, inflation, stagflation, defaults, bankruptcies, layoffs, unemployment, and the best word of the year: de-leveraging. Wait, is that even a word?

The only thing we know is that we don’t really know what’s happening or where it’ll take us. The more confused people become the more gold they buy. In fact, from peak to trough gold (GLD) has risen 52% over the last 52 weeks. With this kind of bull run, it makes sense to lodge a small bet in the other direction. Continue Reading

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

Natural gas has been absolutely destroyed since early July, falling nearly 60% from its high. There are certainly good reasons for the decline – US dollar appreciation, bursting of a commodities bubble, and realization that world supply and demand are not in as critical a situation as doomsayers had earlier proclaimed. Volatility is a scary thing, but it is the bread and butter of the savvy option investor. There are several ways to play natural gas that can more than pay for your winter heating bills. Continue Reading

The Fund had its two worst weeks since inception with the close of August contracts. We lost 12.87% last week, which followed a 11.44% loss the previous week. The good thing about trading one month duration contracts is that the pain is over. All bad assets have expired and are no longer on our books. VPAG is now fully invested in September contracts, with all positions well within acceptable risk parameters. Expect a slight dip this week followed by gains through expiration on 9/19. Continue Reading

The Fund closed out the week with a 2.57% gain,  bringing July performance up to 11.98%. Overall, the Fund is up 27% since inception in March. Higher than normal volatility across all asset classes made for a tough month, but the Fund pulled out well ahead of our benchmark. Our portfolio is currently 85% invested with a 15% cash reserve. All positions remain well within acceptable risk parameters, leaving the porftfolio in a strong position going into August options expiration on the 15th.    

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.

Continue Reading