Dean M. - Head Portfolio Manager

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Portfolio Recap 6-17-10
Posted by Dean M. - Head Portfolio Manager on Jun 17th, 2010 6:52pm

The LS book was down around 25bps today versus the market which closed up 13bps.  Most of the book was for sale today as the market was weak for most of the session.  A late day rally triggered by a buy program which led to pretty heavy to buy MOCs lifted the market into the green by the time 4:00pm rolled around.    There wasn't a lot of rhyme or reason to the action today... investors just decided that the weak claims number combined with the miss in the Philly Fed was reason enough to sell.

Worst performers were FXE down 0.7%, GNW down 2.6% and RDN down 3.9%.  Best performers were AAPL up 1.7%, MA up 1.6% abd VXX was down 2.8%.

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Portfolio Recap 6-16-10
Posted by Dean M. - Head Portfolio Manager on Jun 16th, 2010 7:23pm

The LS book had an up day today.  The book closed up around 10bps vs the market which closed down 6bps.  Best performers were AAPL, AGM, and GET.  AAPL was up 2.9%.  AGM was up 4.4% and GET was up 3.9%.  The worst performers were GNW, IMAX, and RDN.  GNW was down 3.8%, IMAX was down 2.9% and RDN was down 4%.

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Portfolio Recap 6-11-10
Posted by Dean M. - Head Portfolio Manager on Jun 11th, 2010 7:00pm

The LS book was up 57bps today vs the market which was up 44bps today.  The day started off weak as a result of the much lower-than-expected retail sales numbers which took the market down around 9 handles.  I took advantage of the weakness and covered my SPY short then the market basically took off from there and, for the most part, rallied throughout the day.

Best performers were XIDE, CIT and BA. XIDE was up 5.6% on a Honeywell license agreement.  CIT was up 3.6% and BA was up 2.3%.  Our worst performers were TLT which was up 1.3% and is one of our larger shorts.  TPC which was down 0.7% and has not been acting well.  GE was also a negative performer closing down 0.8%.

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Portfolio Recap 6-10-10
Posted by Dean M. - Head Portfolio Manager on Jun 10th, 2010 7:03pm

The LS book was up 1% today vs the market which was up 3%.  Unfortunately, we got a little whipsawed today as we had taken the book down by $500K late yesterday to protect P&L.  That decision probably cost us about 1%.  In other news, I was informed today that I will be running all of the portfolios at TFG.  The problem is that Jeremy wants me to let the hedging of the portfolios to be done by Mosk and Klein.  In addition, he doesn't want me to be doing any actual trading.  He wants me to give all my orders to Mosk who will execute them for me (or have one of the traders execute them for me).  Also, he doesn't want me spending my time trying to generate alpha by trading.  These things will be very difficult for me to accomplish as I am a very hands on PM and I tend to hedge dynamically, which is a must in this market, and I also like to adjust exposures and trade positions on an intra-day basis.  The thing that most frightens me is the letting go of the hedging.  I hedge very dynamically and not by offering out futures at levels.   I hedge when I think I need it and am quick to adjust when i change my mind.  So this part will be very difficult for me and will likely cause me a lot of consternation not to mention a lot of losses at first at least.  In any event, so it is said, so it will be done.

Best performers were GNW, MA, and BA.  GNW was up 7.3%, MA was up 4.9% and BA was up 3.5%.  Worst performers were SPY which cost the book 29bps, FXE which was up 1.2% and NAV which was up 6.2%.

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Portfolio Recap 6-9-10
Posted by Dean M. - Head Portfolio Manager on Jun 9th, 2010 7:21pm

The LS book ended down 16bps vs the market which ended down 59bps.  Today was a heartbreaker as the market rallied early and our book was up as much a 1% in the morning.  Those gains were short lived though as the market started to sell off after the beige book came out and basically closed at the lows.  At this point, I am getting very concerned as this selling is not normal.  The market is taking every opportunity to sell off any rally which means that there is some serious portfolio adjusting going on which could last for weeks as the current market action convinces even more PMs, namely those who have yet to adjust their portfolios, to get more defensive.  In any event, the market has a way of kicking you in the teeth then picking you up and kicking you in the teeth again and again and again so at some point you have to say enough and I am getting close to that point.

Best performers were DELL, CBS, and KSS.  DELL was up 0.8%.  CBS was up 2.6% and KSS was up 1.4%.  Worst performers were GOOG, IMAX, and AAPL.  GOOG was down 2.2%, IMAX was down 3.8% and AAPL was down 2.5%.

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Portfolio Recap 6-8-10
Posted by Dean M. - Head Portfolio Manager on Jun 8th, 2010 6:22pm

The book was up 13bps today.  The market was up 1.1% so we underperformed.  Stocks were definitely for sale again today, at least early on, but were better to buy in the afternoon.  I am keeping the book bullishly biased as I do believe that we are due for a rally but we are certainly running out of time before pre-announcement season begins which could throw a wrench in to the rally.

Our best performers were GNW, BA, and VXX.  GNW was up 3.1%, BA was up 1.5% and VXX was down 3.5% (we are short).  Our worst performers were SPY which cost us about 13bps. DELL which was down 1.9% and TPC which was down 1.4% were the other two weak performers in the book.

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Portfolio Recap 6-7-10
Posted by Dean M. - Head Portfolio Manager on Jun 7th, 2010 7:10pm

Another crappy day here at TFG.  The LS book was down 1.3% for the day vs the market's 1.35% drop.  We were basically long and wrong.  Not much more to say.  Our worst performers were XIDE, GNW, and GOOG.  XIDE was down 6.7%, GNW was down 4.8% and GOOG was down 2.7%.  Our best performers were SPYs, MA, and NAV.  SPY's made us around 14bps, MA was up 1.7% and NAV was down 2.4%.

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The Birth/Death Model Must Die
Posted by Dean M. - Head Portfolio Manager on Jun 5th, 2010 1:23am

The May 2010 Non-farm Payrolls number was released today and boy did it suck! Total non-farm payrolls increased by 431K but 411K came from temporary census workers so the net gain was only 20K. Since there is so much to dislike in the report, I will start with the positives. The unemployment rate fell to 9.7% from 9.9% in April and average hourly earnings rose from $22.50 in April to $22.57 in May. Now the bad news…


The Unemployment Rate


That drop in the unemployment rate was only due to a drop in the civilian labor force which fell from 154.7mln to 154.4mln which explains the entire drop in the number of unemployed people of 287K, from 15.26mln to 14.97mln people.


Re-entrants


The number of re-entrants to the civilian labor force had been pretty steady for the last few months hovering around 3.5mln since Jan 2010 until April 2010 when it jumped to 3.74mln re-entrants to the labor force which could have been read as a sign of optimism in the economy as more people thought that their chances of getting a job were good enough to start trying again. However, in May the number of re-entrants dropped by 286K people to 3.45mln which to me is a pretty clear sign that the same people that thought it was a good idea to start looking for a job in April had their hopes dashed enough for them to give up in May.


Private Sector Payrolls


Private sector job growth was only 41K vs street expectations of approximately 175K. More importantly, the 41K was a deceleration from the 218K in April and the 158K in March. There was deceleration in every category except Mining and Logging, Durable Goods, Transportation and Warehousing, and Temporary Help Services.


The Birth/Death Model Adjustments


Finally, the Birth Death adjustment to private sector payrolls was 215K in May. This is the BLS's way of factoring in the impact of new and closed businesses which are unable, in most instances, to be included in the actual BLS survey. The problem with this number is the fact that it is not a surveyed number, it is an estimated number based on a very complex set of assumptions and calculations. The BIG problem with this number to me is the simple fact that it has provided a positive adjustment to the annual payrolls number in every year since it was first put into service in April of 1999. How is this possible? I mean really, how is this possible? In the year from April 2001 to March 2002, the Net Birth/Death Adjustments to the monthly payrolls number was positive for every month except for one; including the months of Oct, Nov and Dec 2001 which were very difficult months for the US economy. Fast forwarding to 2008, the Net Birth/Death Adjustment was positive for every month except for January 2008. The same thing happened in 2009. How is that possible when the US economy was going through its greatest economic challenge in 80 years! Suffice it to say, I do not believe in the integrity of the Birth/Death Model which can only lead me to the conclusion that the private sector payroll growth in May 2010 was something less, and possibly significantly less, than the reported number of 41K new jobs. This would mean that the deceleration could have been even greater. It could also mean that we had net job loss in the private sector in May 2010, which would not be a good sign for the US economy. (The table below displays the annual total of the monthly preliminary estimates of the Net Birth/Death Adjustments.)


































































Year

Net Birth/Death Adjustment



# of Months with Positive Adjustment



2009



882



11 out of 12



2008



904



11 out of 12



2007



1130



11 out of 12



2006



964



10 out of 12



2005



865



10 out of 12



2004



836



10 out of 12



2003 (Apr-Dec)



695



8 out of 9



2002 (Apr-Mar03)



289



8 out of 12



2001 (Apr-Mar02)



196



11 out of 12



2000 (Apr-Mar01)



39



10 out of 12



1999 (Apr-Mar00)



30



10 out of 12




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Portfolio Recap 6-4-10
Posted by Dean M. - Head Portfolio Manager on Jun 5th, 2010 12:26am

I'm getting pretty tired of this crazy market volatility.  It makes it very difficult for me to do my job which is to put together a portfolio of good long and short ideas and generate alpha from those ideas.  In this crazy market, any alpha gets washed away in a tsunami of fear-driven beta.  Fear of a double dip driven selloff or fear of missing a massive recovery rally... whatever the reason, its fear that it making it difficult to stay will solid stock ideas, long or short.  How do I manage in a market like this?  Well, over the years, I have typically run my portfolios pretty hedged up and I have done so with my portfolio here at TFG up until a little over a week ago when I decided to "go commando" as both our Chief Market Strategist and our Head Technical Trader were both calling for a turnaround in the market.  The strategy worked until today when the May payrolls number came out and pretty much sucked!  Prior to the payrolls number I was on board with the rally thesis as everything seemed to be lining up: Mosk's technicals, Klein's tick, cheap market valuation, oversold conditions and cheap stocks.  Well today, I must reassess my bullishness because of the payroll number.  Yes, it was really that bad.  Please see my other blog where I discuss why I feel the payrolls number was so horrible.

I closed the book at around 32% net long as I was covering SPYs as the market sold off.  Let's hope we have a relief rally on Monday.  The book closed down around 1.9% today in what was its worst day since inception vs the market's negative 3.4% showing on the day.  Our worst performers were GNW (down 6.1%), BA (down 4.8%) and TPC (down 6.4%).  Our best performers were SPY (made the book 25bps), FXE (down 1.6%), and BBVA (down 10%).

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Portfolio Recap 6-3-10
Posted by Dean M. - Head Portfolio Manager on Jun 3rd, 2010 7:41pm

Up day again in the book today.  The portfolio was up 65bps today vs the market which was up 41bps.  XIDE was a huge contributor to the positive P&L in the book today having crushed the estimates.  The stock was up nearly 27% at the close and as much as 32% in the regular session.  Ahhhhh... sweet vindication.  Regarding the rest of the book, things went swimmingly today as the book was down only 9bps at its worst and up as much as 88bps at its best; even when the market was down over 5 handles.  We closed the book at 39% net long and 66% gross exposure.

Our top three performers were XIDE, GOOG, and DELL.  XIDE closed up 26.7% on a very positive earnings release.  GOOG closed up 2.5%.  DELL closed up 4.9% on strength in tech and a statement by Micheal Dell that he had considered taking Dell private.

Our worst performers were TPC, WLT, and MTSN.  TPC was down 2.4% on continued weakness from yesterday.  WLT was down 3.5% on continued weakness in commodity names on concerns over global growth and a slowdown in China.  MTSN was down 1.7%.

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