Investor Commentary July 2015-May 2016





Investor Letters

July 2015 – May 2016

350 Bon Air, Suite 230

Greenbrae, CA 94104

Telephone: (415) 925-9022

Dipsea Capital, LLC


July 0.77%


YTD 7.64%




Chris Antonio’s July 2015 Fund LP Commentary:


The U.S. broad market indexes continued their range bound nature during July in spite of many worrisome news reports in the European Union and in the mainland Chinese Equity markets.  The SP500 index rose 2% for the month and is up approx. 2.2% year to date.   Volatility, as represented by VIX, fell by 33% reflecting less concern among participants for further price declines in the indexes.


The Dipsea Capital Fund completed its launch at the beginning of July, moving all accredited assets to our new Fund structure.  We earned a return before fees of .77%. in July, and our YTD return before fees totals 7.64%.


This month we expanded our clearing affiliation to include Apex Clearing, in addition to our continued Bank of America/Merrill Lynch relationship.


Another highlight this month included our trip to New York City, where Chris Antonio took part in a panel at the Liquid Alternatives Conference. He discussed the rule-based methodologies we employ at Dipsea, together with the instruments we choose to trade, which permit us to generate uncorrelated, stable returns for our investors.




Chris Antonio













Dipsea Capital, LLC


August 0.62%


YTD 6.58%




Chris Antonio’s August 2015 Fund LP Commentary:



The calm that pervaded the US Equity markets during 2015 was abruptly interrupted in August.  Through August 31st, the S&P 500 Index fell by 6.26% and closed the month down 4.21% year to date.  Prior to August, the S&P 500 had been experiencing its tightest price range ever recorded.  We feel there is a strong probability that volatility will remain elevated throughout the fall.


For the month, the Dipsea Capital Fund LP earned .62% net return after fees for investors.  Combining the two months under our new LP structure, with the prior verified returns we earned under the LLC, we have now produced positive returns for 31 consecutive months. These positive results support two of the beliefs we hold about our Fund.


1.The strategies we employ in the US equity markets are not correlated with the broad market averages.

2.The methodologies we engage are robust because they embrace two different dimensions when viewing the market:  A directional component and a volatility overlay.


Elaborating on the second point, we only enter a position for the Fund if our directional studies and volatility analysis aligns.  Employing two filters results in our methodology being more robust. 


We continue to focus most prominently on being a conscientious steward of your capital.  Thank you for the continued opportunity to be of service.


One additional note: We have revised our historical performance to show net returns. Going forward we will only publish returns net of all fees to the investor.




Chris Antonio



Dipsea Capital, LLC


September 0.32%


YTD 6.92%



Chris Antonio’s September 2015 Fund LP Commentary:


In contrast to the US broad stock market which was down for the second consecutive month, Dipsea Capital Fund generated a positive return in September in the amount of 0.32% after fees.  The S&P 500 index fell 2.64% for the month and closed down 6.75% year to date, while the combined returns to Dipsea Fund investors for the LLC (Jan -June) and the LP (July-Sept) is 6.92%.


Moving forward we are more comfortable with the market's prospects based upon the following premises:


1.Multiple measures of investor sentiment reveal that most funds are aggressively hedged towards downside price action.  Generally, investor sentiment extremes don't work well in the direction of the crowd. 

2.Seasonality becomes favorable as late October arrives.  


3.  Interest rates remain historically low as evidenced by a recent 90-day T-Bill auction which yielded 0%!


Irrespective of our broad directional biases, we remain focused on our core methodology: trading liquid, short duration instruments in indexes and large capitalization stocks.  This orientation provides us the opportunity to earn consistent, uncorrelated returns.


Again, we appreciate the opportunity to be a thoughtful steward of your capital. Please feel free to share our story and returns with others you know who would benefit from our efforts.




Chris Antonio



Dipsea Capital, LLC


October -.02%


YTD 6.90%




Chris Antonio’s October 2015 Fund LP Commentary:


After a two-month correction, US broad market indexes had their largest percentage monthly rally in four years in October, the S&P 500 rose 8.3%. The Dipsea Capital Fund's uncorrelated strategy returned -.02% for the month.  Including October, the S&P 500 is up 1% on the year, while the combined returns to Dipsea Fund investors for the LLC (Jan -June) and the LP (July-Sept) is 6.9%. 


 We found October a challenging month for our strategy.  Our orientation is to generate consistent returns regardless of market, month in and month out.  Providing our investors a flat return is a disappointment.  That said, we preserved capital in excellent fashion through late summer, and aspire to generate steady returns through year end. 


 For the balance of the year we expect the market to return to a sideways trading range.  Statistically, despite the positive seasonality through year end, sentiment studies tell us that investors are no longer so aggressively hedged and we expect a standoff between the bulls and the bears. 


 As always, our broad directional orientation takes a back seat to our rule-based methodology.  We continue to adhere to our core methodology: trading liquid, short duration instruments in indexes and large capitalization stocks.  This focus provides us the opportunity to earn consistent, uncorrelated returns.


 Our mission remains to be a thoughtful steward of your capital. We appreciate the opportunity to be of service.




Chris Antonio




Dipsea Capital, LLC


November 0.36%


YTD 7.28%



Chris Antonio's November 2015 Fund LP Commentary:



The US broad market indexes ended the month of November 2015 little changed, with the S&P 500 index gaining .05% for the month.  Dipsea Capital Fund's uncorrelated strategy returned .36% for the month after fees. Including November, the S&P 500 is up 1.04% on the year, while the combined returns to Dipsea Fund investors for the LLC (Jan -June) and the LP (July-Nov) is 7.28%.


In November we generated steady returns with 15 out of 20 trading days being profitable.  In spite of our consistency, we assumed a very conservative stature.  Many of our rule-based metrics were not communicating signals offering advantageous risk reward setups.  Our experience has reinforced to us that when the markets offer fewer setups, we are respectful of that reality, and work to be patient while waiting for good risk reward scenarios to put money to work.  It is imperative to not give up hard earned returns in environments where we are not finding many good risk reward setups.  We consider ourselves first and foremost Stewards of Capital. 


For December, many cross currents are before the market- cascading commodity prices, a very strong dollar and signs of a slowing economy.  Despite these issues, historically low interest rates have sustained the equity markets.  It’s certainly a tug of war.  We continue to aspire to manage our capital for steady absolute returns regardless of market direction.  Statistically, despite the positive seasonality through year end, our work presently supports a sideways, yet volatile market.


The Dipsea Team appreciates the opportunity to be of service.




Chris Antonio








Dipsea Capital, LLC


December .06%


YTD 7.35%



Chris Antonio’s December 2015 Fund LP Commentary:


The past 30 days were an unusually volatile period for stocks.  Statistically, the S&P 500 saw its third most volatile December since 1928.  The index ended the month with a loss of (1.75%) and finished the year with a loss of (0.70%).


The Dipsea Capital Fund returned 0.06% for the month of December, and generated a total annual return to Dipsea Fund investors of 7.35%.  This annual return comprises the returns from the LLC from Jan-June, and the LP from July through the end of 2015.


There is no shortage of marketplace concerns: slowing world economies, arguably expensive equity valuations, and very few investment alternatives which might provide any modest yield with rates so low.  We remain especially mindful of the potential for unintended consequences after seven years of very low interest rates. 


In spite of the difficult landscape, we remain confident in the efficacy and the consistency of our approach.  Our strategy provides consistent, uncorrelated returns.  As always, our goal is to conserve principal and deploy capital more opportunistically during this high volatility environment.  The Fund’s returns will continue to compound strongly as long as risk is tightly managed.  Again, our mission is first and foremost to be a conscientious steward of our and our investor’s capital. 


It’s been a busy six months since we have transitioned to our new fund structure.  We are very excited to be joined by my former colleague, Gregg Siepman who has assumed the role of CEO of Dipsea Capital. Gregg and I worked together years ago for Paine Webber on the Pacific Stock Exchange and he later embarked on a successful career as CEO of a European trading firm.  Happily, for all of us, he and his family have returned to California.  Gregg has the expertise to take us to the next level so I may focus my efforts on managing the portfolio. 


All of us at Dipsea Capital appreciate the opportunity to be your trusted steward of capital and look forward to a great 2016!


Respectfully Submitted,


Chris Antonio





Dipsea Capital, LLC


January -1.09%


YTD -1.09%




Chris Antonio’s January 2016 Fund LP Commentary: 


The price volatility of December continued into the first month of 2016.  The S&P 500 Index of U.S. stocks experienced its worst start to the year in history, ending January with a percentage loss of 5.1%.  The Dipsea Capital Fund experienced a rare down month with a negative return of 1.09%.


As we shared in December, there are a multitude of concerns facing investors at the moment.  Besides slowing global growth, there is now heightened concern to the health of certain large European banks.  Further adding to our cautious view is how the markets are punishing seemingly constructive news with lower prices.  Even the companies reporting positive earnings and revenue numbers immediately forfeit their temporary price gains.  How markets react to news is an important aspect of our behavior methodology, and they’re currently not telling a positive story.


On the opposite side of the coin, many sentiment gauges are now conveying a high level of pessimism.  Sentiment is frequently a powerful contrary indicator.  That noted, there are times when sentiment is aligned with strong fundamental trends. Currently, we’re more open to the fundamentals trumping sentiment.


In spite of the difficult landscape for most investors, we remain confident of the efficacy and the consistency of our approach.  Reiterating my thoughts from last month, the key during higher volatility regimes is to conserve principal, and deploy capital more opportunistically. 


Thank you for the continued opportunity to be a trusted steward of your capital. 




Chris Antonio




Dipsea Capital, LLC


February .13%


YTD -.96%




Chris Antonio’s February 2016 Fund LP Commentary: 


The S&P 500 Index of U.S. stocks experienced a modest, though third consecutive loss in February in the amount of .41%.  The Dipsea Capital Fund generated a positive return for the month of .13% percent after fees.  Year-to-date, the Dipsea Capital Fund is down .96% versus the broad market index loss of 5.51%.


There is some controversy as to whether Mark Twain first coined the phrase, “History doesn't repeat itself, but it does rhyme”.  Certainly, the repetition of the broad patterns we have witnessed during the past 30 years in the markets continue to hold true, especially when it comes to human behavior.  Participants tend to become too negative at the lows and broadly complacent at the highs.  As we finished February, as represented by the latest Commitments of Traders data, small traders in the futures of US stock market indexes had pushed their negative bets to an all-time high.  Generally, these smaller participants, when leaning hard in one direction, tend to be wrong.  We’ll see if history repeats itself in this instance.

On the other hand, we are witnessing over the past six months especially, a tangible change from the past in the markets.  Specifically, we’re observing a more fragile marketplace.  The markets are moving from quiescent to volatile, (and often back again), with unprecedented urgency.  There are many forces contributing to this change.  Suffice to say, it’s a mutation that’s quite real in the markets, and one we expect to continue.  It’s also a change we’re actively looking to address with subtle adjustments to our methodology. 

It remains a privilege to work on your behalf.  Thank you for the continued opportunity to be a trusted steward of your capital. 




Chris Antonio 







Dipsea Capital, LLC


March .08%


YTD -.88%


 Chris Antonio’s March 2016 Fund LP Commentary:


The S&P 500 Index of U.S. stocks experienced a strong rebound in March, recouping its losses from January and February, gaining 6.6% on the month. The Dipsea Capital Fund generated a slight gain for the month of .08% after fees.  Year-to-date, the Dipsea Capital Fund is down .88% versus the broad market index gain of .77%.


As highlighted in last month’s letter, the market is continuing its tendency of the past 9 months to accelerate from quiescence to alarm, and back again, in short order.  We believe this manic behavior is in fact rational, and is likely to continue.  The markets are supported by a subsidized, low-interest rate regime which contributes to low volatility.  Yet stocks are plagued with a historically expensive valuation and an environment with fewer players (think banks), to provide liquidity during typical periods of stress.  The result is the type of price movement we witnessed in January/March, similar to last year’s August swoon and October rally.


How Dipsea is responding to this New Normal:


First, we maintain our focus on conservation of capital.  We can plateau, but we aren’t accepting of giving back previously hard fought returns.  Second, we continue to work diligently to make modest adjustments to our rule-based methodology which ultimately rekindles our consistent, uncorrelated returns.  The markets mutate, we adapt.  We believe our persistent research efforts during this period will be recognized during the 2nd quarter.


Earnings season will soon be upon us.  The first quarter will mark the 3rd consecutive decline in quarterly earnings for the S&P 500 component companies.  If revenue is down, it will mark the 5th straight quarter that revenues have fallen year over year.  We admit to not knowing if these numbers are already priced into the market. We’ll observe with interest how the markets respond.  Fortunately, because of the short duration of the products we trade, we don’t need to know.  We’ll simply respond to the pricing inefficiencies which our rule-based methodology highlights, and we’ll operate accordingly.


It is our privilege to work diligently and mindfully on your behalf.  Thank you for the continued opportunity to be a trusted steward of your capital. 




Chris Antonio 


Dipsea Capital, LLC


April 0.47%



YTD -0.42%



Chris Antonio’s April 2016 Fund LP Commentary:


The S&P 500 Index of U.S. stocks continued its March rally through most of April before surrendering the bulk of its advance and finishing up .27% for the month.  The Dipsea Capital Fund generated a net gain of .47% after fees for April.  Year-to-date, the Dipsea Capital Fund is down 0.42% versus the broad market index gain of 1.04%.  The more volatile Nasdaq 100 index is down 5.48% year-to-date.


There are many compelling arguments for the market’s future course.  On the bull side, sentiment remains bearish by many measures, often a contrarian indicator when at extremes.  Crude oil has made a substantial rebound from its February lows, which provides substantial support to the banks.  Lastly, implied volatility is indicating little concern among participants at present. 


On the other side of the coin, the fundamental underpinnings of the equity market, revenue, and earnings, continue to disappoint. S&P 500 earnings will likely drop for the 6th quarter in a row, among the longest streaks since 1871, the seasonally-weak "worst six months" are about to hit, and tech stocks, typically an important indicator of market health, continue to diverge badly from the S&P 500. 


We don’t currently possess a strong bias about market direction, although we always remain vigilant about working to detect the market’s subtle clues.  Happily, we feel good about our ability to consistently generate positive returns regardless of market direction or changes in volatility.  


We remain appreciative of the opportunity to be trusted steward of your capital.



Chris Antonio 







Dipsea Capital, LLC



May 0.39%



YTD -0.03%



Chris Antonio's May 2016 Fund LP Commentary:


The S&P 500 Index of U.S. stocks had its 3rd consecutive positive month, gaining 1.53%.   The Dipsea Capital Fund generated a net gain of .39% after fees for May.  Year-to-date, the Dipsea Capital Fund is down 0.03% versus the broad market index gain of 2.59%.  


Similar to the political landscape, there are some very divergent arguments to the future course of the market.  On the positive side, the market remains in a low volatility mode with modest, though steady price appreciation.  Typically, these “grinding” price trends do not end until prices accelerate in the direction of the current trend.  And although seasonally the market is prone to weakness May through October, and the price of the S&P 500 index is now 2 standard deviations above its medium-term 50-day average, we still don’t have sufficient evidence to bet on lower prices….yet.  In addition, at the end of May, certain sentiment surveys showed extremely high pessimism among participants.  This phenomenon generally serves as a contrary indicator and argues for higher prices until more participants become bullish.


On the bear side, the market is expensive on a price to earnings and price to sales basis.  Value isn’t present at these prices, except in relation to currently historical interest rates.  


We remain mindful of the terrain, and continue to mine for inefficiencies whether the market continues higher or ultimately corrects in price.  In addition, as we remain committed to our rules and methodology, we continue to devote significant resources to test and analyze market characteristics and keep our returns robust.  We remain very optimistic about our ability to grow our returns back to our historical average.


We continue to enjoy the process of working towards greater excellence in our work; all the while remaining appreciative of the confidence you place in us to be a trusted steward of your capital.




Chris Antonio





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