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Written By Charles Drace, Managing Director
Latest month in review
Written July 2010
We suggest you listen to this interview on the financial and economic situation so you can be prepared, like we are, for the coming problems that could dramatically affect your future: http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/7/20_Eric_Sprott.html
June was another volatile month though from beginning to end there were not major movements. Our funds all went down slightly although much of that was due to the rising New Zealand dollar during the month.
The Performance and Income funds were both down -1.56% and the Gold & Metals fund went down -.63%. Approximately 1% of the loss was because of the rise in the NZ dollar.
Small rises in gold, silver, oil and our share market short positions contributed to our gains but these were offset by the dollar's rise and the positions we got stopped out of as share markets went down. The S&P lost 3.5% for the month, the MSCI World Index was down 2.7% while the NZ50 lost close to 3%.
The USA, UK, NZ, Japan and most of Europe are now going back into recession and their governments are doing exactly the wrong thing in raising taxes which, as was proved in 1937, just drives the economy back into recession/depression.
Those analysts who have experienced, educated long term views expect a big share and property market correction around the world in the very near future, probably set off by the banks again. A number of major banks traded in gold for cash at the end of the month as their reserves fell below legal requirements.
Our own view is that the first major correction will start around the end of July, bouncing back again in the two months leading into the November US elections [expect more stimulus spending then] with the second starting when the stimulus fails to work.
As a result we are slimming down our portfolios, moving to cash, buying more gold as the price drops in July and generally playing it safe.
If you click on each fund in the top right hand corner of the home page you'll find commentary related to each unit trust.
Past Reports
Written June 2010
May was a dreadful month for fund managers, investors and hedge funds. Except for us! May was a very good month for us with the Gold & Metals fund up 7.44%, the Income fund up 2.39% and the Performance fund basically breaking even.
The major stock indices all went down, May had the biggest single day drop in the Dow and S&P since 1940, over 2/3rds of hedge funds world wide lost money, the NZ market was down over 5%, etc. (Note that of the two hedge funds we invest in one had a great month and the other didn't trade.) would be inclined leave out references to Hedge Funds, people don't understand them and therefore fear them.
As you know, our funds tend to do the best when other funds are having trouble. We saw that in 2008 [up 'till October] when we were the best performing PIE unit trust fund manager in the country. Now when others have been struggling over the last few months we've been doing well.
One of the best drivers of our performance has been gold which has been rising in demand as more and more bad news comes out about countries mired in debt, bonds tumbling, markets trending down, currencies at risk, etc. Also our shorts helped a lot last month. Plus we've been moving to cash progressively for safety. And we got a bit of a boost from the NZ dollar falling against the rising US dollar, a welcome help after over a year of a rising NZ dollar which had a large negative effect on our funds.
Written May 2010
A good month all 'round for our three unit trusts. The Gold & Metals Unit Trust was up 1.53% for the month; Income up .27%, and Performance up 1.9%. Gold, silver and Platinum were all up for the month which was good for our bullion holdings, and many of our miners went up as well
Oil was flat for the month so didn't add any gain but all our oil positions pay good income so that helped. Even food commodities went up a bit in April having been flat or down for much of the recent past
Most markets went up in in April in spite of the troubles in Greece spilling over into the rest of Europe. The exception was the European markets which were flat. Eventually the Greek debt problem could result in them declaring bankruptcy or else the dissolution of the Euro. But that's probably well down the track. At the moment the EU in conjunction with the IMF are applying band-aids which are keeping confidence up. When it becomes apparent that loaning more money to Greece is just making the problem worse that confidence should fail.
Spain, Ireland, Iceland, Italy, and Portugal are in similar dire straights so one of the main reasons for the band-aids is to prevent a contagion across Europe which would doom the Euro and European bond markets, not to mention their share markets. We're watching this closely as we hold a few shares in Europe and but most of those are held in the Performance Unit Trust where a falling Euro is good for us because of the Jyske InvestLoan programme that comprises 50% of the Performance Unit Trust.
It's difficult to say what May will hold for us. Certainly there has been a lot of volatility in all markets with oil going down around 10% so far and all bullion plus the US dollar going up substantially. Many of our shares are down as of 17 May, all our bullion is up as well as many miners. Still two weeks to go so could go either way.
Written April 2010
Most markets continued in a sideways pattern throughout March. Share markets gained slowly over the month [albeit with much reduced volume which shows how reluctant (scared) most investors are]. Even though the Dow is only up around 5% year to date, it's still down from 2008. Gold and silver dropped quite a bit in February and March, although they have since recovered in April. Some miners did well while some did poorly so no patterns there [again improvements in miners in April]. Oil was up only slightly in March although it also jumped in April.
Thus a difficult market to make any gains in. We got hurt in our gold holdings, our short positions and our hedges and the profits and losses in most everything else balanced out each other.
The Performance Unit Trust again profited from our Jyske Bank InvestLoan programme, going up over 70% for the year. When our prospectus comes up for renewal in September, we will be looking at adding the Jyske Bank programme to the Income and Gold & Metals unit trusts, pending approval from the Public Trust.
Returns for the month of March: Income Unit Trust: -.78%, Performance UT: +1.31%, Gold & Metals UT: -3.94%.
Again the bullion banks used massive short positions to keep the price of gold and silver down, while platinum and palladium which they weren't shorting went up. Someday they'll lose out to the increasing demand for gold and silver we're seeing and then the prices will jump considerably. This has been going on for the last 9 months or more while at the same time some of the world's most successful investors have moved large portions of their funds into gold and silver, worldwide demand has increased considerably, and shortages of supply are becoming a problem [several times the US Mint stopped selling gold and silver coins because they couldn't get enough metal to meet demand].
Our house view continues to be that as the developed countries borrow more and more, making all the problems worse, and as the Mediterranean and Eastern European countries continue going broke, the bond and share markets will be forced to recognise that the problems are too big to fix with stimulus programmes. At that stage both markets will plummet and investors must hold precious metals as the best protection.
We also do not believe that the recession is over, anywhere, including New Zealand. Very weak growth figures made possible only by governments borrowing or printing money in a hopeless attempt to stimulate their economies really means that things are getting worse, not better. Remember, unemployment is still going up, bankruptcies are accelerating, as are foreclosures, and many, many shops remain vacant. Does that sound like the end of recession to you?
The Public Trust is currently preparing the paperwork to open an account, for all three unit trusts, with Rick Rule's investment management company in California. Rick is considered the guru of analyst managers in the resource sector, mainly in the smaller miners, explorers and producers. For him, the resource sector comprises precious metals, industrial metals, oil and agriculture [which is exactly how we define it]. He will only manage a small portion of each fund but his expertise and long experience should enhance our returns over time. I've known about Rick for many years and have followed his writings and speeches. In early February I had the pleasure of meeting him and discussing the possibility of him managing some of our money and everything went forward from there. By the way, Rick lives on his farm north of Auckland for 2-3 months each year so he has a strong affinity for our country.
We've been content to hold most of our portfolios without significant changes as we wait for the markets to find their sense of direction again. Please see commentary under each unit trust.
Written March 2010
February was another choppy month with markets not being able to decide whether to go up or down and generally reversing one day what they did the previous one. This is a notoriously difficult market to manage money in. Hedge fund managers, who try to buy or sell trends, having been pulling their hair out this year with all this choppiness.
Gold had a significant drop from the 3rd to 5th of February which caused us to get stopped out of many mining shares so even though gold went up $20 overall in February, our gold investments were down because of the losses on the miners. We bought back into gold around the 4-5th of March as the charts started to show strength and the potential for a big movement.
We do go in and out of investments more frequently than we'd like to, but in the last year and a half the markets have been so volatile that we've had to use stops to protect the funds from even bigger monthly losses. Having said that, all our portfolios are designed as 5 year or longer investments so our strategies are longer term, and we expect them to play out well over the longer term. Still, when the world's financial markets are in turmoil, many governments are nearly broke because of their massive borrowing, cash rates are historically low, government bonds are looking to take a big hit, banks around the world are going broke and New Zealand banks are particularly vulnerable, stock markets are over-priced and most of the Western world is in recession or on the verge of going back into recession, etc. it's wise to suffer small losses rather than leave one's self open to the big losses that we've experienced recently and will experience more of in the not too distant future.
Therefore, our funds performance was poor again this month, with the exception once again of the Performance Unit Trust which only lost a negligible -.15%. The Income Unit Trust lost -2.23% and the Gold & Metals Unit Trust lost -1.78%.
Looking forward the charts are pointing to big movements in gold, US government bonds, and international shares. Charts aren't very accurate on whether these big movements will be up or down so we have to be prepared for both. My reading of the situation is that gold may go down before going up whereas US bonds and international shares may go up before they go down. Trends like these are a fund manager's best friends; it's the lack of trends we've experienced in the last half a year that we hate.
We expect more fall out from the problems in Greece, Ireland, Spain, Italy and Portugal in the not too distant future which could negatively impact on all world markets much like the Asian crisis in 97-98 so we added a few more small short positions to each portfolio.
The New Zealand dollar has also been trending sideways in a choppy pattern and this is usually a prelude to some major movement, but predicting it's direction is difficult as it is affected by so many outside influences. I do note, though that it is trading at .76 Aussie and the long term NZ/Aust currency cycles tend to top out around .74 to .76 and bottom out around .94 to .96 where it was not too long ago. If .74 to .76 becomes the top in this cycle then we'll make some good money as it slowly trends back towards .94 to .96.
Written February 2010
January was an interesting month. Turmoil began in the share markets while gold recovered some of it's December losses only to head down again from the middle of the month. Balancing that on the positive side we had some small gains from the weakening NZ dollar. Roughly speaking we lost about 1% in each fund from the market drops and gained about 2% from the currency. The exact figures for January are: Performance Unit Trust up 1.24%, Income Unit Trust up 1.35% and Gold & Metals Unit Trust up .38%.
The big news of the month was the government financial meltdown in Greece. It turned out that Greece had lied about their finances in order to join the Euro, had used the low interest rates provided by the Euro to borrow far too much and had again lied about the deficit they'd built up. When the new government told the truth, the world had to face the fact that Greece was essentially bankrupt [so is the United States and the U.K., but those facts haven't been faced yet]. This would mean big problems in the Euro area as Portugal, Ireland, Italy, Greece and Spain [they now call them the PIIGS] are all essentially bankrupt from too much borrowing. At this time, there does not seem to be any answers as to how to solve this problem.
Hence the weaknesses in world share markets and bond markets. It is surmised that one of the biggest concerns [risks] for investors in the not too distant future will be sovereign debt [government bonds] failures, especially as in the last several years governments all over the world have been borrowing more and more to try to stimulate their economies, without any positive effect except in the very short term. But obviously building up huge debts in the process.
As attendees at my seminars over the last 10 years or so will know, it's always debt that causes economic problems, recessions and depressions. The bigger the debt the bigger the resulting problem. The world has never faced debt levels like today, so everyone should batten down the hatches, ie, stop spending and start saving.
Of course, as we've been saying, the biggest debtors now are the banks so they are currently the most risky of all investments. It would be wise to spread your bank deposits around several institutions. I personally favour Kiwibank as it's government owned.
Written January 2010
If the market activity in October and November were exactly right for our long-term strategies, December was just the opposite. The NZ dollar went up 2% that, of course, knocked 2% off our December performance in all three funds. As well, gold and silver were knocked down dramatically by the bullion banks [more on that below] and that had a negative effect on all three funds, although more so for the Gold & Metals unit trust and less so for the Income Unit Trust.
The Performance Unit Trust returned -1.46% for the month; the Income Unit Trust returned -4.2%; and the Gold & Metals Unit Trust -9.29%.
In many ways it doesn't make sense to give a monthly commentary on funds with a long-term strategy. We're always going to have currency movements and manipulation of markets, and these will have, sometimes profound, effects on short-term performance. In the long run these effects are usually negligible. The important thing is to recognise what stage of long-term cycles we're in and to not bet against those cycles.
Now I mentioned the bullion banks knocking down the prices of gold and silver. This was also mentioned in the seminar we gave for investors in early December, and was the main theme affecting our December results.
To recap, the bullion banks store gold and silver for future delivery, mainly for futures contracts that, on expiration, the owners may demand the physical gold to be delivered to them. Over the years, they found that most futures contracts don't require delivery. Instead they sold for profit or loss before expiry. Therefore the bullion banks found they didn't need to buy all the gold and silver they were supposed to be storing but could still charge for 'storing' it making an even greater profit.
There are bullion banks all over the world but four of the biggest, and the ones most involved in what we're talking about here, are based in New York and owned by the big investment banks. JP Morgan Chase are the biggest and the most prominent in this trading we're talking about.
But in the last year or so with the rising price of gold and silver and the financial meltdown driving people to physical gold and silver for safety, when contracts reached expiry more and more people wanted delivery.... and the bullion banks just didn't have the gold.
So they needed to buy it on the open market. If they'd bought it when they should have at $600, $700, or $800 an ounce everything would have been fine. But when they needed in the second half of 2009 [and in the future] gold was selling for $900, $1000, or $1100 an ounce which meant a loss to the bullion banks of between $100 and $500 an ounce, and we're talking about millions of ounces.
Therefore, to try to reduce those losses the bullion banks needed to push the price of gold and silver down so they can buy the gold and silver they need without such great losses. To push the price down they short the gold and silver market. Over the last 6 months or so they have shorted the market to the tune of 308 million ounces of silver and 28 million ounces of gold.
You can watch this shorting in action on kitco.com [see link on our home page. Because there is so much demand now for gold and silver, buying which strengthens prices is quite strong in the hours when the New York market is not open, and sometimes when it is. But many days you'll see the price plummet during New York trading [and sometimes during Hong Kong trading] as the bullion banks place big short positions and drive the prices down.
So to December. Because of light trading around Christmas it was much easier for the bullion banks to drive the price down, which they did. Gold went from $1210 in early December to $1090 at the end of the month http://www.kitco.com/scripts/hist_charts/monthly_graphs.plx, also driving gold and silver shares down as well. Hence the losses in our funds over and above the 2% from the rising NZ dollar.
The Performance Unit Trust lost much less because we again had outstanding growth in our Jyske Bank portfolio.
Written December 2009
The commentary will be short this month because there's not much to say and it's all GOOD.
November was a month that was just made for our long term strategies: gold went up, oil went up, mining companies went up, the New Zealand dollar went down and the US dollar was neutral. So as you can imagine, all three of our unit trusts had good results for the month for the second month in a row.
The Performance Unit Trust went up 3.8% for the month and it's year-to-date return is now 18.81%. It's also .5% ahead of where it was last year, after the the 3 months of share market falls.
The Income Unit Trust also went up 3.8% though it's still down for the year and year-to-date.
The Gold & Metals Unit Trust went up 9.08% for the month responding well to the rising price of gold and silver. Rising gold and silver also took the miners up with them.
Enough said, I think!
In December gold and oil have gone down and markets have been generally weak. Although the falling New Zealand dollar continues to help us, it's unlikely that December will, at best, be anything more than neutral.
We didn't make any substantial changes to any portfolio during the month, and are unlikely to in the near future unless something significant happens. We believe the conditions going forward favour our current strategies although with the second stage of the property [mortgage] crisis and another resulting bank crisis due in the middle of 2010 we'll have to keep on our toes. We have a strategy in place to try to cope with that and will add to it as events unfold
Written November 2009
Good news this month with all three unit trusts going up. In general, our long term strategies worked, with gains in both the underlying portfolios as well as help from a weakening New Zealand dollar.
Our emphasis on commodities rather than traditional share markets has paid off yet again, especially our large positions in precious metals and oil. These were the main drivers of our performance, although the falling Kiwi dollar contributed just as much to our gains.
As I write this in mid-November gold has jumped again: $1005 on 1st Oct, $1040 on 31 Oct, to $1106 on 11 November. Oil is up slightly for the month [Nov] but it went up almost $10 a barrel in October. We also made a bit of profit on our short positions as the world's share markets weakened in October.
The Income Unit Trust went up .78% for the month, the Performance Unit Trust went up 1.51% for the month, and the Gold & Metals Unit Trust went up 1.14% for the month
More and more investors are turning to gold and other precious metals [silver and platinum have been rising in step with gold] as they become more concerned about the continuing weakness in the world's economies as well as the weakness in the US dollar. This is exactly what we've been planning for and although rising prices in any market have their downs along with their ups, we are anticipating that our strategies will play out well over the next couple of years.
Writtten October 2009
September's month-end results were very much like August's: we had decent gains in all of our portfolios in their underlying currencies but were hit by the 2.5% rise in the New Zealand dollar, which effectively took approximately 2.5% off of the Performance and Gold & Metals Unit Trusts and approximately 2% off the Income Unit Trust. Therefore we would have seen a 1% gain in the Gold & Metals UT if the NZ dollar had stayed stable, instead of the 1.45% loss for the month. The Income UT would have risen.1% instead of a 1.9% loss. And the Performance UT would have gone up almost 5.4% instead of going up only 2.92%.
The other disappointing thing was that gold and oil, which all three funds are heavily invested in, went up during the month only to go down in the last two days, thereby wiping out most of the gains. As I write this on 8 October gold has just reached an historical high and silver has rebounded dramatically as well. So has oil. Therefore we are very optimistic about our October results although, I have to say, by the middle of September we were very optimistic about September's results only to have that optimism dashed in the last few trading days of the month.
The main driver of the rising NZ dollar over the last few months has been the fall in the US dollar driving investors into commodity currencies like Australia, New Zealand and Canada. Although we've had some great returns from the Jyske Bank portion of the Performance UT during this time where we can take full advantage of the falling US dollar, for the rest of our investments we just have to wait until the NZ dollar weakens more than the US.
The whole New Zealand economy is being damaged by the high NZ dollar and there are calls from all over for the government to do something about it. The reality is there is little they can do without causing more harm than good. But the New Zealand dollar will eventually go down because the economic trouble we're in will eventually become obvious to overseas investors and they will withdraw much of their NZ investment monies to protect themselves, thus driving the NZ dollar down.
Hold on, you say. Didn't the latest GDP figures show we're coming out of recession. Yes, you could interpret them that way, and the government certainly did. But GDP is a lousy way to measure the health of an economy and the latest figures illustrate one of the weaknesses of using only GDP. GDP measures the dollar value of the goods and services sold in an economy, including government spending and government stimulus. It ignores things like unemployment, mortgagee sales, balance of [trade] payments, overseas investments, etc.
The recent GDP announcement included the fine the BNZ must pay the IRD of over $600 million for unpaid taxes resulting from the recent court judgement against them over tax evasion [The so-called Wine Box loopholes]. Take that $600 million out of the figures and GDP is still negative.
Eventually the world's investors will realise that with rising unemployment, continual redundancies, increasing mortgagee sales, rising numbers of un-tenanted offices and shops, plus difficulties exporting our goods and services because of the high NZ dollar and they will withdraw a substantial percentage of their savings. This will result in the NZ dollar dropping and all the losses we've experienced in our unit trusts through the rising NZ dollar will come back as profits to make us all happy.
With more bad news coming out of the major economies about their high debt levels, falls in property values, troubles with banks, etc, we're beginning to see the move to gold and silver for safety which should prove that our strategy of investing in precious metals should pay off handsomely. Many analysts are predicting $1500-2000 an ounce for gold in the next 12 months and while it's logical to expect a lot of volatility and some major downs on the way up, certainly something in the $1500 area is not unreasonable although no one can make accurate predictions about time frames.
Written September 2009
The month of August was virtually a flat month, and this is recognised by our performance figures, 0% for both the Performance Unit Trust and the Income Unit Trust and -3.2% for the Gold & Metals Unit Trust. Most markets went up one week and down the next, finishing the month very much where they started it. The decent gains we made in the underlying investments in all three portfolios were wiped out by the 5% rise in the New Zealand dollar over the month. Again, we don't see the NZ dollar strength as sustainable, particularly given the weak fundamentals in our economy, but it certainly could stay strong for many more months even as the government and businesses fervently hope that it will lose favour with foreign investors looking for higher interest rates and subsequently drop down to a more sustainable .50 to the US$ [now .713].
Speaking of the government, they've been able to ride out this recession with little negative feedback, but with all the small businesses closing down, the many shops and offices vacant, not to mention the rising unemployment, this won't last. I've been told that discussions are being held in the upper levels of the National Party about how and when they will tell the nation that the economy is in worse shape than they've let on.
An interesting thing has been happening in the American sharemarket. Over the last three weeks, 30-40% of the volume of trades has been in just five stocks: CitiBank, Fannie Mae, Freddie Mac, Goldman Sachs and AIG Insurance. You will recognise those names - all had to be bailed out by the US government last year, and Fannie, Freddie and AIG are all technically bankrupt. Without those five stocks going up in large volumes of trades, the US market as a whole would be down substantially. It seems impossible that private investors and mutual fund managers would be buying large volumes of bankrupt companies, so it is probably fair to say the market is being manipulated in a major way by the investment banks, hedge funds and possibly even the US government. Are they propping it up? And if so, for what reason? What happens if they stop propping it up?
We have only a minute investment in a Thai property fund, but otherwise are avoiding all property like the plague as the extreme credit problems the banks are having will continue to have a dramatically negative effect on both residential and commercial property. 84 banks have gone broke so far in the US this year and 3 or 4 are going broke each week now. In New Zealand there are doubts about the survival of the so far strongest finance companies and though the trading banks are advertising mortgage availability they appear to be only lending to the very best situations... the creme of the crop. We almost had heart attacks when we read that the NZ SuperScheme has decided to buy commercial property funds in the US because they had gone down in value and were at 'good prices'. Note: when property funds go down in value it means the property market is in trouble. Is that rocket science
As I write this on 17 September, virtually all the markets we're invested in have gone up for the month, particularly oil, gold and silver...areas where we are heavily invested. Analysts are expecting a good sized correction in the next month or so, but so many people are bullish at the moment the momentum is driving markets up well beyond reason. Earnings in most Western countries are down over 90% from last year, Price/Earnings ratios are at an all time high, everyone's bullish - all markers that point to a correction. We've been losing money on our short positions for months, but gaining on almost everything else in our portfolios. If the market corrects, we'll get stopped out of most of our investments [except our precious metals and some favoured long term holdings] but make money on our short positions.
Written August 2009
Another mixed month for our unit trusts. Through most of July the various markets have been going sideways, providing little opportunity to make any gains. For example, gold started and finished the month at $940 an ounce. We saw gains on oil, but lost more with the rising New Zealand dollar. Once again, it was the NZ dollar that contributed to our losses, though our partial hedging helped. At some stage the NZ dollar will go back into a falling cycle and all those losses will come back to us as profits.
Therefore, the Income Unit Trust and the Gold & Metal Unit Trust went backwards again in July and almost all the losses were because of the rising NZ dollar. The Performance Unit Trust went ahead again for the month as once again the Jyske Bank strategy worked well for us.
Going forward we expect markets are weakening, which should be good for our shorts. There is likely to be a strengthening in early September but many analysts are expecting major falls again in or around October.The catalyst is expected to be the US government's requirement to sell 900 billion of government bonds to finance it's enormous deficit before the end of the US government's financial year on 31 October.
This should show investors what a bad financial position the US government is in and throw doubts on any further stimulus plans, keeping in mind that all the growth [or any good news] coming out of the US has been only because of government stimuli.
We're updating our stops weekly now to lock in profits should the markets turn sour and to protect the funds from significant losses.
Written July 2009
June was a difficult month. Gold which was doing well at the end of May went down quite a bit and most commodities were weak. General share markets trended sideways which is always a difficult environment to make money in. All three funds went down accordingly. We had earlier put in a hedge against the rising New Zealand dollar - you'll recall the rising NZ dollar hurt all our portfolios earlier in the year - but the dollar fell rather than rose in June so the hedge lost money rather than made it. Note: the NZ dollar rose again in late July so the hedge is working for us now.
Essentially all markets are in limbo waiting for some more signs of economic recovery or more signs of the wheels falling off again. Economic signals are very mixed at the moment so markets aren't doing anything except go up for a day or so then down for a day or so. It's impossible to take positions with any confidence so patience is the key. We need to keep waiting until new trends develop.
There has been a lot of talk about Green Shoots in the economy, ie, signs of improvement. These are countered by the continuing bad news about falling trade, increasing debt, increasing unemployment, bankruptcies. The bad news balancing the good news so no one really knows where we're going. [In these comments I'm talking about the world situation, not just one or another country.] The Green Shoots are effectively not signs of improving economies but signs that the deterioration is slowing down. For an example, unemployment rose by over 600,000 in the U.S. in May and only 530,000 in June. So what is still a disastrous rise in unemployment is seen as being slightly LESS bad.
Our view is this is a common bear market bounce based on rising but misplaced confidence and that when people recognise that things are continuing to get worse rather than better there will be more significant market drops and a further big move to the safety of gold and silver. In July the oil price recovered a lot of it's earlier losses and food has started moving up again and that's been good for us, but the rising sharemarkets based on the false Green Shoots enthusiasm has hurt us. We're expecting the bear market to resume its downwards trajectory in the not too distant future and have positioned ours funds accordingly.
Incidentally, ABN AMRO, the multi-national Dutch bank who were 50% partners in ABN AMRO Craigs, sold their share to Royal Bank of Scotland and when the Royal Bank got in trouble over sub-prime mortgages and falling real estate values in the UK, they sold many subsidiaries to raise cash. In June the New Zealand partners of ABN AMRO Craigs bought out the Royal Bank's share of the business, so it's now wholly New Zealand owned. They're changing the name to Craigs Investment Partners from 1 August.
Income Unit Trust
The Income Unit Trust dropped 1.46% in June as a result of falling gold and other commodities [mainly caused by the rising U.S.dollar] and rising to sideways traditional share markets. Though we're still getting good income streams in this fund, the capital values of most investments suffered as oil, gold and food went down.
There has been recent rises in oil, gold and food in late July although probably too late to have a positive effect on the portfolio. Still, we don't manage portfolios on a day to day basis because no one can predict what will happen in the short term. Instead, our strategies are based on longer term trends and we're confident that the long term trends of rising precious metals, rising oil and food, and falling world share markets will reassert themselves in the not too distant future. In the meantime the key is patience as any short term attempts to play the markets are likely to backfire.
Incidentally, ABN AMRO, the multi-national Dutch bank who were 50% partners in ABN AMRO Craigs, sold their share to Royal Bank of Scotland and when the Royal Bank got in trouble over sub-prime mortgages and falling real estate values in the UK, they sold many subsidiaries to raise cash. In June the New Zealand partners of ABN AMRO Craigs bought out the Royal Bank's share of the business, so it's now wholly New Zealand owned. They're changing the name to Craigs Investment Partners from 1 August.
Performance Unit Trust
The Performance Unit Trust retraced the gains of May, losing 6.5%, to end up almost exactly where it was at the end of April. Falling gold and silver, commodities and oil and the NZ dollar were the main culprits; sideways markets hurt our shorts and left us with no place to invest where there was any profit potential.
In the Jyske Bank InvestLoan part of the Performance Unit Trust had borrowings in Euros for most of June which is neutral to the portfolio as the investments are denominated in Euros. In late June we switched the borrowings to 75% US dollars which has been good for us so far in July as the US dollar weakened. And even though we have a good income stream from most of the securities in this portfolio, losses in commodities and oil and gold hurt the capital value of many securities.
For the ABN AMRO Craigs part of the portfolio, it's the same story.... falling gold, oil and other commodities. Incidentally, ABN AMRO, the multi-national Dutch bank who were 50% partners in ABN AMRO Craigs, sold their share to Royal Bank of Scotland and when the Royal Bank got in trouble over sub-prime mortgages and falling real estate values in the UK, they sold many subsidiaries to raise cash. In June the New Zealand partners of ABN AMRO Craigs bought out the Royal Bank's share of the business, so it's now wholly New Zealand owned. They're changing the name to Craigs Investment Partners from 1 August.
There has been recent rises in oil, gold and food in late July although probably too late to have a positive effect on the portfolio. Still, we don't manage portfolios on a day to day basis because no one can predict what will happen in the short term. Instead, our strategies are based on longer term trends and we're confident that the long term trends of rising precious metals, rising oil and food, and falling world share markets will reassert themselves in the not too distant future. In the meantime the key is patience as any short term attempts to play the markets are likely to backfire.
Gold & Metals Unit Trust
Gold and silver dropped in June, which is probably all we need to say about this fund. We did get some good gains in some of the smaller gold mining companies but not enough to offset the falls in gold itself so the end result was a loss of of 7.7%. Gold and silver bullion, which we own through a variety [listed in New York and Sydney] of Exchange Traded Funds, which in turn hold the physical metals in bank vaults, are the two investments that we don't run stops on so we're fully exposed to the rises and falls. We do this as these holdings are very long term [at least another 10 years] and it's impossible to out-guess the market by short term trading.
Gold and silver recovered in July but many analysts predict another fall before the next leg up. The chartists say that once gold breaks $1050 an ounce [it's been in the lower to mid $900 range for most of the last two months] then the next leg will go up to somewhere between $1250 and $2000. As 50% of the portfolio holds physical gold and silver we're ideally positioned to take advantage of the next leg up. Incidentally, most analysts are suggesting that silver will rise even faster than gold in the next leg, so we've got one third of our physical holdings in silver at the moment.
The Gold & Metals Unit Trust is mostly invested through ABN AMRO Craigs. ABN AMRO, the multi-national Dutch bank who were 50% partners in ABN AMRO Craigs, sold their share to Royal Bank of Scotland and when the Royal Bank got in trouble over sub-prime mortgages and falling real estate values in the UK, they sold many subsidiaries to raise cash. In June the New Zealand partners of ABN AMRO Craigs bought out the Royal Bank's share of the business, so it's now wholly New Zealand owned. They're changing the name to Craigs Investment Partners from 1 August.
Gold, silver and to a lessor degree oil, have been responding to the movements in the US dollar for most of this year. As the news re the dollar waxes and wanes between positive and negative on almost a daily basis while traders look for some sense of a direction, the precious metals have responded accordingly. Therefore every time the US dollar goes up gold goes down and vice-versa.
Written 20 June 2009
The Performance Unit Trust went up 6.1% net for the month of May; the Income Unit Trust went down 2.81% net for the month; the Gold & Metals Unit Trust went down 3.17% for the month.
Markets had no sense of direction in May. We had a few things going for us and a few going against us. The main losses occurred courtesy of the rise of the New Zealand dollar. It's gone up more than 20% in the last couple of months and that has hurt us as we're 90% invested offshore. In the long run we believe the NZ dollar will resume it's downward path but it's been strong lately, as have other commodity currencies, because of the weakness in the US dollar.
In late May we contracted Pure Capital to run a futures trading account for us to protect us against further rises in the NZ dollar, but since then the dollar has mainly moved sideways.
Gold went up over 10% in May but the dollar's rise wiped that out. We also had some good results from some gold miners, but again not enough to counteract the dollar's rise.
The Income and Gold and Metals Unit Trusts went up in Euro terms but ended down a couple of percent in NZ dollar terms.
The Performance Unit Trust had a second consecutive month of good returns achieving 6.1% for the month, mainly due to borrowing in US dollars while investing in Euros, Canadian and Australian currency based securities.
Commodities have been volatile, especially industrial metals, while foods have been strengthening. Share markets are not showing any sense of direction but have generally been weaker during May after their good showings in March and April.
We feel that markets are in limbo for awhile, awaiting either good or bad news from the US and European economies. Our view is that there is another property led banking crisis around the corner so bad news is more likely.
Written 20 May 2009
April was a good month for Socrates funds. The Suckers Rally of March and early April lost steam and enthusiasm and as you know, our strategy is hurt by Suckers Rallies. Therefore the poor performance of March switched to good performance as the rally died out.
We continue to believe in further meltdowns in the financial markets in the long term, a trend that was temporarily interrupted by the short lived enthusiasm of the Obama stimulus rally.
Though gold producers have been rising lately, gold itself is still trading in a band of $870 - $930 an ounce It dropped in April from the top to near the bottom of that range so the Gold & Metals fund lost 1.5% for the month.
Our Performance unit trust had a good month, most of our positions contributing well, to jump 7.3% for April. Rising oil was a help here as well as food commodities and miners.
Our Income unit trust has a good month as well with a 1.38% gain. We would love to have a gain like that every month with this fund. Our emphasis on income producing investments paid off.
Written 29 April 2009
Whew !!! What a tumultuous six months. Biggest share market drops since the early 1930's; biggest corporate bond drops; biggest residential real estate drops; biggest commodity market drops; substantial interest rate drops; biggest banking and investment company drops since the 30's, highest volatility since the 30's. And no country in the world escaped the carnage.
Our Income Unit Trust and Gold & Metals Unit Trust came through all right, particularly compared to most other fund managers, with only small losses, but our more aggressively managed Performance Unit Trust took a big hit. Our only consolation is that we lost a smaller percentage than Warren Buffet did. On the positive side almost all our investors in the Performance Unit Trust also had investments in the Income and/or Gold & Metals Unit Trusts so their combined results weren't that bad. More commentary on each unit trust's specific page.
For the month of March, the sharemarkets in most of the world reacted positively to Obama's stimulus plan. We didn't buy into that euphoria as it only makes the end problem worse. You can't fix a problem created by too much credit, too much debt, too much borrowing and lax monetary policy with more credit, debt, borrowing and laxer monetary policy. As a result, all our funds which are positioned for more strife in financial markets went backwards as the market went up. It would have been nice if we could have timed the rise and taken advantage of it, but that's nearly impossible to do.
The current plunge in commercial property in the US and other countries will put renewed pressure on banks and I expect to hear of a lot more of them getting in trouble soon. This should lead to another round of the crash and thus be good for gold, our short market strategies, and our high income paying bonds and oil shares.
Going forward, the news isn't good. The US is probably officially in depression, although it usually takes 6 -12 months for the government to admit it. Because they've been buying over 50% of all the world's exports most other countries have had recession forced upon them by the US troubles; although to be fair, the UK, Eastern Europe, Japan and even New Zealand compounded their problems by having too much debt in their own economies.
Commodities, historically, tend to be the only markets that rise during these depressing times which is why all three of our unit trusts are geared towards commodities. On the plus side China, India, Brazil, Canada and, to a degree, Australia have not gone into government debt so there's a lot of money to make, sell and buy resources in those countries, and good investment opportunities as a result. We haven't invested back into China or India yet as we expect the next big fall in the US will affect them as well, but some good opportunities should present themselves if we're patient. We are heavily invested in Canada and less so in Australia, with a smattering in Brazil, and of course very heavily in gold and are moving steadily into more oil.
For our funds, we're very happy with the future prospects of gold and other commodities and believe we will continue to out-perform most fund managers because of this strategy. We were the top performing fund manager in all three categories for 9 out of 12 months in 2008.
Written 19 March 2009
February was another month of extreme volatility in the markets and nothing but gold escaped it. Therefore our Gold & Metals Unit Trust had a small rise for the month while both the Income and Performance Unit Trusts went backwards a bit. Having said that, everything is changing in March as I write this. Share markets around the world have gone up for 5 out of 6 days, gold dropped then recovered, and the US Federal Reserve is buying $1 trillion in bonds and mortgage backed securities to try to boost the market. This has boosted confidence across the world's markets but also shows desperation on the part of the US government, so this rally is not likely to last for long.
We've seen a recent resurgence in interest in commodities as emerging markets like China adjust to the recession. This is good for us because of our focus on commodities, especially gold and oil. We've reduced our short positions in the US market except financials and commercial real estate, and our switching into more commodity investments, mainly at the moment gold, oil and food. We haven't yet seen enough strength in industrial commodities/metals but are watching with interest.
With the US Fed releasing another trillion into the US economy, the US dollar has dropped considerably. This is good for all commodities and especially good for gold and oil. It's too soon to see if this trend will last for long but if so, you will recall that a falling dollar/rising commodities environment is where we got our great performances last year. Fingers crossed!!!
Written 18 February 2009
Our best month ever [so far], in all three funds [touch wood]. Always a pleasure to write such words, especially after the pain we suffered in September and October. The Performance Unit Trust was up 17.16% for the month, the Gold & Metals Unit Trust up 17.65% for the month, and the Income Unit Trust was up 11.35% for the month.
The main themes adding to these returns were the continued strength in the gold and silver markets as more investors moved to them for safety in the fact on continuing economic problems, or should I say the continued slide into world depression. In particular, gold and silver mining companies have had a great couple of months. We've also been able to find some very high dividend corporate bond funds.
And the third helper was our short positions in the US sharemarket. As you probably know the US sharemarket had it's worst January since records were kept, and we profited from that.
Going forward, we're getting back into oil and gas royalty trusts as well as dipping our toes into food based commodities. We're still avoiding base metals commodities.
We're in the process of contracting Pure Capital, a Wellington based hedge fund, to run a risk protection, return enhancement programme for all three unit trusts. Their programme, which is custom designed for our investment themes and strategies, is designed to reduce the risk inherent in each of our strategies when things are running against us and to enhance the gain from each of our themes when things are running in our favour.
Written 19 January 2009
All three unit trusts went down in December reversing the gains from November and then some. Most of our investments went up except the short positions in the US market where we took some big losses. We've maintained those short positions as there is a very real chance the US market will fall substantially soon. It showed all the signs of falling in mid-December then rallied at the end of the month. As I write this in mid-January the market is falling again, as it has been since 6 Jan., and about half of our short losses have been regained.
Gold was up in December, which helped all three funds. In fact, almost everything we've got in our portfolios went up but we're more than offset by the losses in the short positions.
The New Zealand dollar rose in December, which hurt all three funds but as I write this in mid-January the NZ dollar has erased all it's gains and looks to be heading down. With the vast majority of our funds invested offshore a rising NZ dollar hurts us and a falling one helps us, so the losses it caused us in December are turning into profits in January.
As the economic and financial situation in the US gets worse by the day with dramatic increase in unemployment and bankruptcies, and these problems continue to spread around the world, another major share market crash in the not too distant future cannot be ruled out and we think it important to keep our shorts in place not only for protection but for good profit potential. We just have to be patient and ride out the current volatility until the market decides which direction it is going to go.
In the meantime, gold and gold mining shares have shown reasonable strength and we're steadily increasing our exposure to large and small mining companies.
We're currently signing the paperwork to appoint Pure Capital manage about 8% of each portfolio. Their proprietary system is designed to complement a fund manager’s portfolio by limiting losses when markets go down and increasing returns when markets go up. We anticipate this will decrease the volatility of our portfolios significantly while increasing returns.
Written 21 December 2008
November was a good month for us, nothing much else to say.
The Income Unit Trust went up .9%, The Performance Unit Trust went up 3.6% and the Gold and Metal Unit Trust went up 4.1%
November was still a volatile month, but less so than September or October.
We made a bit of money on our Shorts and were helped a lot by the increase in gold. Oil hasn’t moved up yet, so we’re still on the sidelines there.
We still expecting major problems with the US dollar, US share markets. And the US bond market. The Us Government has now promised $8 trillion in handouts to banks and various companies, and when they start issuing the bonds to pay for that (soon) the US dollar will tank, the bond market likely collapse and the investors will desert the ship.
Putting $8 trillion in circulation will also cause a lot of inflation, which will be good for gold and silver.
Written 21 November 2008
What a couple of dramatic months. World share markets lost over $25 trillion dollars. Yes, trillion!
We got stopped out of half our positions. As well we lost money on our US dollar sensitive investments – the US dollar loan, oil and gold – all of which went down as the dollar way up.
The US govt borrowed $2 trillion to prop up banks and this will have a very negative effect in time on the US dollar, and a positive effect on our funds if we are patient.
Our short positions actually lost us money as each time the US govt announced another bailout, markets went up dramatically for the day and we got stopped out with a 15-20% loss. This happened several times.
Looking forward the US dollar must drop at some stage and gold and oil and the other commodities, most now in short supply, should go up in response.
When the time comes for gold, metals and oil to recover we will be able to buy at rock bottom prices and high dividend yields.
Written 17 October 2008
We're still the top performing fund manager in the Growth category [our Performance Unit Trust] but we've been knocked off our top perch in the Conservative arena [Income Unit Trust]. However, we got hammered in September across all three unit trusts as banks and hedge funds sold everything they could get their burned hands on to shore up their capital bases with cash. That means even gold was sold; two major banks sold enormous amounts of silver in September as well.
In spite of the turmoil in the United States, and the growing realisation that the U.S. is leading the world into recession, banks and fund managers are putting all their cash in the US dollar for safety. We believe this is stupid as the breakdown in the US economy and US banking/investment system means the US dollar must crash before long. As one of our major strategies is to make money from a falling US dollar, the rising dollars has hurt us a lot, particularly in commodity investments. The Kiwi dollar has risen against the Euro and the Aussie $$ and this has hurt us as well. When the US and Kiwi dollars start downhill again, our portfolios should bounce bank a lot.
In the meantime, many of the dividend paying shares we hold which were paying 10% of more in dividends are now, with their share prices having halved, paying close to 20% in dividends. Mining shares are lower than they were when we started Socrates. Both present some great buying opportunities when the dust settles.
We're in one of the periodic corrections in the commodities market; next round up should be significant. All reasons why we look with optimism on the investment prospects for our funds in the coming year, even while planning on a world-wide recession an further, bigger falls in traditional stock markets - markets which we are happy to continuing shorting for profit.
Written September 2008
We're still the top performing PIE fund manager in New Zealand. And we're still in positive territory for the year in all three funds. Very few fund managers can say that. However, the last two months have been very difficult and all three funds lost money. We've experienced these kinds of drops before and will again. We're riding them out confident of our current strategy in the long run. These Bear Market bounces are common, but often look nasty at the time.
The Europeans and Japanese met with the American government and decided that if the US dollar didn't show some strength that the Japanese and Europeans would start buying the dollar to drive it up. Their exports were suffering from the low dollar/high Euro. Word of the meeting was 'leaked' to the media so investors and hedge funds started buying the dollar, driving it up more than 15% in a few weeks. As gold and oil are both inversely correlated to the US dollar, both started to go down. This meant that hedge funds had to sell off their long positions in both commodities, escalating the falls. So three of our major themes got hit: falling US dollar, rising gold and rising oil. As well, the Kiwi dollar recovered a few percent, which hit our other major theme.
The other major event was the US government's deal to take over Fannie Mae and Freddie Mac. This sent a signal around the world that the US govt. would save the day, or at least save the investment world. As a result, share markets went up which was bad for our strategy. However, no rational person would expect this to last as the kinds of problems they're trying to deal with in the US are just to big to have any outcome other than meltdown.
As gold and oil dropped, mining companies and oil explorers fell and we got stopped out of a lot of positions. As a consequence all our funds have a lot of cash, and it's our intention to keep a lot of cash until the cycles reverse into our favour again. As I write this there is some strength coming into the gold market and some small weakness creeping into the US dollar, so the reversal may not be that far away.
We're confident of a reversal and the re-emergence of our investment themes as the US financial situation just keeps getting worse and worse with more government bailouts which the US government does not have the money to afford to pay for. They keep borrowing the money, but with the US weaknesses becoming scarier their ability to borrow may be limited soon. When that happens, expect the bottom to fall out of the US dollar and financial instruments and gold and oil to skyrocket.
Written 14 August 2008
One should never brag about exceptional performance, as we did after our June results, without expecting to eat humble pie after the next results. All our trends were happily working for us in May, June and early July until the middle of July when the US Federal Reserve Bank said they would support the two big failing mortgage giants, Fannie Mae and Freddie Mac. This caused a misplaced faith that the banks would survive the credit crunch. Another reason for this faith is the US government has traded $1.6 trillion of the bank's toxic mortgage bonds and CDOs for real money - ie, US government bonds - during the last year. Continued government support is keeping the banking and investment industries alive although, as you all know, making the overall situation worse and setting up the system for an even bigger fall. I pity all the children and grandchildren who will have to pay back the trillions of dollars spent by the Bush administration to prop up their friends and family in the oil, investment, pharmaceutical and securities industries.
As a result, the US dollar surged higher, driving oil and gold down. As our investment themes called for a falling dollar and rising oil and gold, we took a hit.
In early August we moved to reduce our exposure to oil and gold, and the US dollar loan in the Performance Unit Trust, so as to limit further losses as these corrections play themselves out.
House foreclosures in the US have hit historic highs and a new round of mortgage losses are coming as low interest rate mortgages are reset in 2009. We expect that this will knock the stuffing out of the financials as even the incredible largesse of the US government will not be enough to keep banks afloat - at least 10 major banks have already fallen over and another 90 are expected to fail within a year.
This will result in the dollar dropping and oil and gold rising in response. And our long term investment themes coming back into their own.
Written 30 June 2008
June! What a month! Some of the biggest drops in the share markets around the world and all three of our funds have had their best month ever.
Our performance Unit Trust returned 7.96% for the month and a whopping 25.97% for the last twelve months.
Our Income Unit Trust returned 5.85% for the month and a marvelous 12.82% for the last 12 months.
Our gold and Metals Unit Trust returned 5.31% for the month and a patiently waited for 17.22% for the last 12 months.
All the long term strategies we put in place in 2006 worked for us in June except for the emerging markets. It’s also apparent that were the only PIE Fund Manager in New Zealand using these winning strategies.
**Your friends can download the investment statement and application form from our website**
To recap, strategies include: wide international diversification, falling US share market, falling US and NZ dollars, rising commodities-especially oil, precious metals and food, and shorts on vulnerable areas like US financial's and US consumers.
We have warned that the US sub-prime crisis that started in July 2007 was only the tip of the iceberg, and that has proven to be the case with more bank problems, notably Fanny Mae and Freddie Mac who between them hold over $5 trillion in US mortgage (1/2 of the US’s total mortgages). Their debts are over $7 trillion – at a time when the US housing market is dropping at its greatest rate since the Depression.
American Banks are borrowing as much from the US government each month as the war in Iraq has cost each year.
Written 31 May 2008
May was a good month for Socrates funds with all funds going up for the month. The Income Unit Trust rose 1.43% for the month, the Performance Unit Trust rose 7.2% for the month, and the Gold & Metals Unit Trust rose 2.8% for the month. This recovery from the losses in April when the gold and precious metals prices went down means our 12 month returns again, for the 7th month running, make us the best performing NZ PIE unit trusts in all three categories.
Twelve month returns for the Performance fund were exceptional on 12.05% when almost all our competitors returned negative results and the average of our 44 competitors was -4.43%.
Gold and precious metals are still running in a sideways trough which started after their correction in mid-March. We expect they'll continue going sideways until the US dollar starts declining again which will probably happen in the next couple of months. At the moment the US govt honchos are trying to talk the US dollar up but with the economy weakening so quickly their efforts will be wasted. A falling dollar is good for both precious metals and oil, but also for our Performance Unit Trust which has a falling US dollar strategy through Jyske Bank.
Probably the two main reasons for our good performances in May were the rising price of oil and the falling New Zealand dollar. As you may recall, we were committed to strategies of rising oil and falling dollar right from the beginning. It's only recently that these themes have begun playing out in our favour and we expect a lot more potential in both areas. Oil is quite likely to get to the $200 barrel area within the next 12 months and the NZ dollar will probably fall another 20-30%. As all three portfolios benefit from a falling dollar, now is a good time to add to your investments to take advantage of this potential.
The Income Unit Trust and, more so, the Performance Unit Trust have good exposure to oil so again, even though there may be some short term corrections in the oil market, now is a good time to add to positions to capitalise on future oil price rises and to try to offset the costs of filling your petrol tank.
Written 30 April 2008
Sorry for the delay in this commentary. We've been updating the website, as you can see, but there's been a lot of hassle and to-ing and fro-ing to get it running properly.
Anyway, the good news is that we're still the top performing PIE unit trust manager in all three categories. However, in April the continuing weakness in the prices of gold, silver and platinum impacted on all three unit trusts, so the Income and Gold & Metals funds went down a bit. The Performance fund continued going up as our positions in oil, food and emerging markets more than offset the fall in the prices of the precious metals. Of course, there are no oil, food or emerging markets positions in the G&M unit trust, and those positions are much smaller in the Income unit trust than in the Performance unit trust as they tend to be on the riskier end of the spectrum.
Precious metals tend to move sideways in rather volatile channels for sometimes as long as a year before reclaiming the upward trend. We have no way of knowing how long this current sideways trend will continue, but at some stage the upwards momentum will resume and we'll continue to be well placed to profit from it.
The other big news is the price of oil continuing to go up. In our six-monthly report of last October we said analysts expected to see $100 a barrel oil by the end of the year. Now they're saying $200 a barrel by the end of 2008. We've been invested in oil since we started the Socrates funds and all our oil positions have been benefiting from the recent price rises.
The next thing to impact on the values of all three funds will be the drop in the New Zealand dollar. We've been expecting weakness in the dollar for some time as currencies always fall when countries run big trade deficits, as we do. However, our currency has been held up by the high interest rates. The confidence reports over the last few months show an enormous drop in consumer confidence - in fact the biggest drop of any country in the world. It seems that the majority of consumers expect New Zealand to go into a recession this year, which we've been predicting for a long time now. When the economy weakens the Reserve Bank must lower interest rates. The market is now expecting lower rates so the NZ dollar has dropped by 4 cents against the Australian dollar, and also dropped a bit against the US dollar and the Euro. We expect further drops in the NZ dollar and have positioned all 3 portfolios accordingly. Hopefully we'll get enough drop to affect this next's months unit prices.
Written 31 March 2008
Another good news/bad news month. Bad news first - gold dropped from $1030 oz. in the middle of March to $920 oz. by the end of March. Silver, platinum, and other metals went down as well. Also, the stock markets in the U.S. went up, so we not only lost money on our metal positions but also on our short positions.
The good news is that our returns had been so good in December and February that we still finished the financial year in great shape. In all three categories, our unit trusts were the top performers in New Zealand by a very wide margin [compared to PIE unit trusts as reported by Morningstar in the Press].
The 12 month return for the Income Unit Trust was 6.3% after fees and tax. Our nearest competitor was less than 3% and the average for conservative trusts was -.43%**. The 12 month return for the Performance Unit Trust was 7.75% net. Our nearest competitor [out of 40 funds] was just over 0%. The average of the 40 funds was -6.11%**. The 12 month return for the Gold & Metals Unit Trust was 8.1% net. There are no competitors, as it would appear we remain the only fund manager in New Zealand to have recognised that gold and metals are in a bull market.
** Did you note the negative sign in front of these two?
In April all our portfolios have increased in value and so far - touch wood- have regained the losses in March. Most markets have been tracking sideways for the last few weeks looking for a new sense of direction. Time will tell which direction they will take but with all the credit problems still to come in the U.S., UK, and here in NZ, a downward direction is more likely, which we be good for our funds.
