STI Hedge Fund and the big selloff.

Several times in the past week I have been asked how are my investments doing?  I am down approximately 11.7% overall on the valuation of the stocks either long or in options held in the hedge fund as of Tuesday close. . Cash flow for the year is around 10% net, so I am down less than 2% overall. Most stocks are holding up well so that in itself validates my selection process, which requires almost all selections to meet certain criteria.  I can not say I am happy at this past week's action since it could limit my options going forward and most importantly could cut down on opportunities to produce cash flow.  My hedge fund is cash flow based. For the record I have one stock green on my screen, SO, good ole SO, which on my very first posting I said was the safest stock on the planet. Got one right.

 

I am pleased and proud that the structure of the hedge fund has held up just as I planned for so many years of trial and error building an approach to be prepared for a moment like this one, when a big sell off happens. I have taken some time to model scenarios going forward and find that the scenarios I envisioned for large market corrections such as this one work out with a continued positive cash flow, however currently a smaller cash flow. This is not to say that they WILL work out right. The pride here comes from the fact I only know of one hedge fund not down big for the year, and that one bet big on a downturn and won.  If the downturn had not occurred then they would be down as well.  I believe I include one element that so far saved my fund from drastic losses and makes my model scenarios going forward work right. A hedge fund is a highly leveraged approach that allows one to make outsized gains in most markets, it also can produce outsized losses if the market is down big. And no I am not about to come right out and say what that element is or any other of the unique approaches I take to derivative investing. If you had worked for over three decades to get something you know works and make you money would you give it away. I expect not. 

 

Anyway only time will tell here. You will notice in my monthly reporting if it works by noticing if I continue to report positive results each month. Positive results that are above what you can get in any other investment currently. Since I am doing 16% plus going into August that is way above anything you can find elsewhere.  You can also note the December report and see if I have had to take losses in carry forward items too. The final point here is that the model requires that the US economy comes back to normal sometime down the road. Under the current leadership that frankly is in doubt, so there still could be a fly in the ointment. Running my own personal hedge fun is still exciting to me even when it is scary like the current environment.  I can assure you of that if you ask my wife about being around the house with me this week. On the other hand she did not seem to mind too much when we went to the new car dealership last week.

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