- Technical: Our Man bit the bullet and re-entered the Technical positions (in DDM, QLD and SSO) during the month. The false sell signal ended up meaning that with the exit and re-entry, Our Man missed out on part of the gains available in the technical book though on the positive side, he’s not expecting another sell signal for a bit even if there’s higher volatility in the markets.
- International: As mentioned in his recent post, Our Man added a position in Argentina given his expected/anticipated changes there. Unfortunately, the ETF (ARGT) doesn’t really offer the exposure that OM is after, so he’s chosen to create it through some individual stocks (PAM, PZE and BMA).
The portfolio ended the month -1.09%, which left it at +4.9% YTD, both of which proved disappointing.
The main negative drivers were the Equities (-208bps) and International (-110bps) books. The International book’s loss was driven by the position in Greece, where political uncertainty continued to ramp up leading to renewed fears of an exit (Grexit) from the Euro. The losses in the Equity book were more broadly spread, driven by the positions in India (-85bps combined, RDY and TTM), EOX (-29bps, as Energy continued to suffer) and the Internet names (-69bps, as VIPS saw profit-taking and TWTR fell during the month). There were small losses in the Absolute/Bond Funds (-1bp), Puts/Hedges (-2bps), Technical (-12bps) and Energy Efficiency (-4bps) books.
These losses offset some strong performances from elsewhere in the book, with the US Dollar being a key driver of both the Currencies book (+102bps) and the China Thesis (+125bps). The strength of the dollar against the Yen and especially the Euro drove the currencies book, and its strength against the Australian Dollar coupled with the continued strong performance fo the Chinese A-Share market drove the China thesis book. Our Man’s belief that we’re in a substantially different tone to the US Dollar than we’ve seen in many years, was largely rewarded last year (the Currencies book and the China Thesis book contributed well over 100% of the portfolio’s return) and the tasks for 2016 will be better ensuring that the rest of the book is more constructive and managing the inevitable pullbaks in the US Dollar.
Portfolio (as at 12/31 - all delta and leverage adjusted, as appropriate)
24.0% - Technical Book (DDM, QLD and SSO)
16.8% - Equities (EOX, RDY, TBPH, THRX, TTM, TWTR & VIPS)
10.2% - International/Country (GREK, GVAL, and Argentinian names)
4.2% - Bond/Absolute Return Funds (DLTNX
0.1% - Energy Efficiency (AXPW, and XIDE)
-0.0% - Hedges/Put Options (premium of under 2bps premium in EWJ and EWZ puts)
-14.5% - China-Related Thesis (CROC – Short Australian Dollar, partially offset by CAF – Long Chinese A-Shares)
-58.2% - Currencies (EUO – Short Euro, YCS – Short Japanese Yen)
12.4% - Cash
Disclaimer: For added clarity, Our Man is invested in all of the securities mentioned. He also holds some cash and a few other securities (of negligible value). You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you.