Dipsea Capital Fund LP
July 2017 Commentary:
The Dipsea Capital Fund returned .42% to clients for the month of June, its 12th consecutive, positive month. Year to date, the fund is up 5.01% after fees and the trailing 12-month return is 8.27%. Thirty weeks into 2017, the fund has been profitable twenty-eight of the weeks. In July, the fund’s largest daily loss was a -0.07%.
Most markets continued their upward trajectory in July with the Dow Jones Industrials, the S&P and the Nasdaq 100 all making new, all-time highs. Yes, there were anomalies as always: the Dow Jones Industrial Average gained 570 points on the month, 310 of those points can be attributed to only one stock, Boeing Company. Also, the Dow Jones Transportation Average, an index many follow to gauge economic activity, fell 4% in July, while the broad index of smaller stocks, the Russell 2000, rose a paltry 0.3%.
Overall, it was a historically quiet month with regard to volatility. The VIX index, which many consider a gauge of fear in the market, briefly dropped to its lowest reading on record. Even before that drop it had steadily fallen to lows not seen in two decades.
Another sign of complacency is supported by the chart below, courtesy of the excellent site, Sentimentrader.com.
As a rough measure of investor sentiment, this indicator looks at the total assets invested in equity mutual funds and ETFs, and compares it to the total assets invested in the safety of money market funds. The higher the ratio, the more comfortable investors have become holding stocks; the lower the ratio, the more uncertainty there is in the market.
We always adhere to our rule based methodology and aspire to generate positive returns regardless of market direction or the specific volatility environment. That said, as veterans of three decades in the business, we believe the environment can change quickly, especially when many valuation and sentiment extremes are present.
As partners and fellow investors in Dipsea Capital LP, please accept our continued appreciation for the trust you place in us as a steward of your capital.
Chris, Gregg, Eddy, Peter, Kurt and Austin.