June Commentary

Dipsea Capital Fund LP  

 

June 2017 Commentary: 

  

The Dipsea Capital Fund returned 0.86% to clients for the month of June, its 11th consecutive, positive month.  Year to date, the fund is up 4.57% after fees and the trailing 12-month return is 7.73%.  Twenty-six weeks into 2017, the fund has been profitable Twenty-five times.  In June, the fund’s largest daily loss was -0.08%.

 

Market Review:

 

The U.S. equity markets began to emulate a different tone in June, as evidenced by a number of new crosscurrents.  While the S&P 500 index remained steady with a gain of 0.15%, we saw the more volatile technology sector, as represented by the Nasdaq 100 index, decline by -2.58%.   

 

We’re also seeing other new developments. Specifically, since the last week of June, the interest rate sensitive utility sector has corrected lower by -2.5%.  Crude oil and gold prices have moved lower, while industrial commodities have rallied. Although what this ultimately means for the stock market is open to debate, historically when volatility begins to expand in one asset class, it usually spreads to others.  We expect volatility to gradually expand this summer and our methodology welcomes that potential outcome. 

 

“History Doesn't Repeat Itself, But It Rhymes”

 

Whether Mark Twain was the first person to make that observation or not, we are strong adherents of that view.  Given most of the Dipsea team has managed client funds since the 1990's, we occasionally observe patterns that strike our synapses so profoundly, that we gasp aloud.  

 

The Federal Reserve Chairman, Janet Yellen's, recent statement that she doesn't believe we'll experience another financial crisis in our lifetime, strikes us as one such pattern.  To have the comfort to express such a confident view, seems like an example of a behavioral extreme.   (As an aside, another pattern we've witnessed is that such an extreme affirmation appears correct for a short while longer; i.e. there's no imminent event on the horizon to disprove such an assertion). 

 

We feel our experience adds value in many capacities.  Yet first and foremost we adhere to our rule-based methodology, rather than intuitive observations. This disciplined focus allows us to continue to deliver consistent, uncorrelated returns to our partners.  

 

Please accept our continued gratitude for the trust you place in us as a steward of your capital.

 

Sincerely,

 

Chris, Gregg, Eddy, Peter, Kurt and Austin.

 

 

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