May Report

Our May report reflects what we just saw with the May employment numbers and both are just plain awful.  Frankly we did not expect the Obama economic policies to hurt the economy so much this year, but we were wrong.  It seems even the US economy can be brought to it's knees by a run of awfully bad policies.  Our plans this year were to lay low with a low risk stock selection and make decent profits, not great profits.  We did know that a couple of our selections that were further out on the risk horizon but considered  the mix was fine adding in the safer selections, but that has not been the case.  As we move forward towards the second half of 2012 as we take our loss medicine we will adjust strategy to a highly risk avoidance stock selection. We have considered taking some assets off the table, but have decided against that for the time being.  As long as Obama is president it is now clear only fools take ANY serious risk and up to now WE have been fools.  

Our cash flow for May was good as we continue to produce good option premium income.  Both of our large loss positions produced high income from premiums for the month.  They are GG and ERF.  BCE and CTL were good trading vehicles as well for May.  Using May as a separate figure the annualized result was just over 17% gains. Margin costs were up, but not significantly and trading costs were as expected.  However factoring in the pending paper losses we are barely up for the 5 month 2012 period.  For the 5 month period we are at 1% annualized income net assuming paper losses.  I suppose with the 10 year US Treasury paying about 1.5% this morning we are nothing better except for the effort.  Unlike the US bond there is the real opportunity that our fund could finish the year in a double digit percentage gains since cash flow for us could continue to be solid. This is not a happy scenario, but being a trader we will remain positive that we can cut the losses and move forward for a profitable last 6 months of 2012. 

Again we note our fund is based on the fact that we are making money using leverage so if we did not use the leverage there would be no gains and no losses.  We still believe that prudent trading involves taking leverage and making profits where there would be none without the efforts.  Careful selection of stocks is the key.  We see no scenario where at year end we will be in the negative even with this economy so the effort remains worth it if for nothing but the experience and education.  However in the end we must admit we were wrong thinking even the US economy could withstand Obama's policies.