The February 28,
Market Recap and Commentary
S&P 500 Total Return for the month of February was up 3.21%.
Markets continued their rally through February, marking the best two-month start to a year in well over 20 years. It seems that progress on the China trade deal, as well as a more accommodative FED, have eased investors’ concerns for the time being. The S&P has rallied almost 20% since the lows in December in the face of weaker corporate earnings and forecasts, disappointing U.S. economic numbers, multiple European countries on the verge of or in a recession, no deal in North Korea, and no Brexit deal in place. However, it appears that these issues may be keeping the investor class from participating in this V-shaped recovery, as fund flows showed relatively modest inflows in January/February relative to their strong performance.
The S&P 500 finished February with its fifth consecutive weekly gain, finally pushing a resistant VIX under 15 for the first time since October. The extremely large one-day point swings we saw in December have faded, with the five-day average (or simple moving average, SMA) of maximum daily moves dropped from 3.67% in December to 0.66% in February. In March the S&P will celebrate the 10th anniversary of this historic bull market, making it one of the longest ever seen.
Performance and Trading Update
Horse Cove Partners Absolute Return Strategy composite was up 1.65% net of fees in February.
The S&P 500 continued its rally from December and VIX continued to fall, which is a recipe for lower premiums.
Here are the composite net returns for the Portfolio Margin accounts for the periods indicated:
Reg. T Update
Here are the composite net returns for the Reg. T accounts for the periods indicated:
HC Enhanced Yield Update
IMPORTANT TAX INFORMATION
If you have 2018 net losses on Section 1256 contracts, see IRS Form 6781, the instructions to that form and consult your tax advisor as to the availability of any carryback of such losses to prior years.
We are not in the business of offering tax advice so please consult with your tax professional.
Interactive Brokers does not mail tax forms out. Tax forms are available by logging into your account at www.interactivebrokers.com
Happy Birthday Bull Market!
The week of March 4, 2019, represents the 10-year anniversary of the start of the second-longest bull market in history. (If it runs through August 2019, it will become the longest.)
The S&P 500 bottomed at 666 10 years ago. At the end of the day on February 28, 2019, it closed at 2784.49.
Here is a look back at various benchmarks over the past 10 years:
Gold Spot $913.00 $1285.40
National Average Gas Price $2.35 $2.72
Wheat (per metric ton) $159.47 $157.20
Median Sales Price of Houses Sold in the U.S. $157,400 $317,400
30-year Fixed Mortgage Rate 7.06% 4.35%
Money Market Account yield 0.48% 0.18%
U.S. Population $279.328 million $327.436 million
U.S. National Debt $10.6 trillion $22.1 trillion
U.S. Public Debt as a percentage of GDP from just prior to the start of the financial crises in 2008 was 64.11087%. The last measure available in the 3rd Quarter of 2018 was 104.15261%.
Source: https://fred.stlouisfed.org/categories
Since the start of the last financial crisis in 2008, the U.S. has maintained an environment of very low interest rates (or “free”) money. This has had the following effects:
- It has also fueled the growth in the equity markets.
- Seen the value of housing in the U.S. more than double.
- Has allowed the Government to get away with explosive growth in debt.
Once rates “normalize” the results seem fairly obvious.
About Horse Cove Partners LLC
Profiting from the art and science of taking risk. ®
Horse Cove Partners was founded by Sam DeKinder and Kevin Ellis in January of 2013 with the commitment to help grow client’s assets with a highly disciplined investment strategy, replicated weekly, to extract absolute returns from the market by trading short volatility option spreads. The firm was launched after more than two years of trading experience with personal assets that began in December 2010. The firm is built on the strength of hedge fund trading expertise developed beginning in 2002.
Assets under management at the end of February 2019 were $108.49 million.
“We do not believe we are smarter than the market, nor can we time the market in any given week or month. As a result, we take an investment approach similar to an insurance company in that our investment strategy focuses on the probability of success and the management of risk. We believe that it is possible to realize positive returns through a disciplined focus on the risk of each trade with a weekly investment horizon, and accepting intelligent losses when risk events occur.”
We thank you for your continued support.
Sincerely,
Sam DeKinder, Kevin Ellis
Greg Brennan
Fiona Dyer
John Monahan
Michael Crissey
Don Trotter
sdekinder@horsecovepartners.com
kellis@horsecovepartners.com
gbrennan@horsecovepartners.com
fdyer@horsecovepartners.com
jmonahan@horsecovepartners.com
mcrissey@horsecovepartners.com
dtrotter@horsecovepartners.com
Horse Cove Partners LLC
1899 Powers Ferry RD SE
Suite 120
Atlanta, GA 30339
678-905-5723 main
1Net estimate on a consolidated basis of similar accounts as of 2.28.2019, which is preliminary and subject to revision. Performance estimate described herein as “YTD” are net of fees and expenses including a 2% per year management fee and 20% incentive fee and assumes investors have been invested the entire time with no withdrawals. Individual account returns may vary depending on cash flows, the time period assets are invested, and restrictions placed on the account.
This was prepared by Horse Cove Partners LLC a federally registered investment adviser under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply a certain level of skill or training. The oral and written communications of an adviser provide you with information about which you determine to hire or retain an adviser. Additional information about our firm is also available at www.adviserinfo.sec.gov. You can view the firm’s information on this website by searching by our firm name.
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Internet communications are not secure and subject to possible data corruption, either accidentally or on purpose, and may contain viruses. The content of this message should not be construed as investment advice unless explicitly stated as such in the text of this message. Further, this message should not be construed as the solicitation of an offer to purchase or an offer to sell any securities or other financial instruments, including, without limitation, interest in any private investment managed by Horse Cove Partners LLC or any of its affiliated entities.
This material has been prepared solely for informational purposes only. Strategies shown are speculative, involve a high degree of risk and are designed for sophisticated investors.
Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal and fluctuation of value. The information herein was obtained from third-party sources. Horse Cove does not guarantee the accuracy or completeness of such information provided by third parties. All information is given as of the date indicated and believed to be reliable. Performance results are estimates pending a verification. The returns are based on the Investment Manager's strategy and the compilation of actual client account trades. The Horse Cove Absolute Return and IRA Return strategies seek to extract absolute returns from the market by trading short volatility option spreads. The Enhanced Yield strategy seeks to achieve a targeted return trading only puts with a high probability of success.
The strategies reflect the deduction of advisory fees and any other expenses that a client would have paid or actually paid. The S&P 500 Index is used for comparative purposes only. The volatility of an index is materially different from that of the model portfolio. The S&P 500 refers to the Standard and Poor's 500 Index which is a capitalization-weighted index of 500 stocks. The index is designed to measure the performance of the broad domestic stock market. The VIX (CBOE volatility index) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." Investors cannot invest directly in an index. An index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Options trading entails a high level of risk. The models do not include the reinvestment of dividends and capital gains because options don't pay dividends. Please read the Characteristics and Risks of Standardized Options available from the Options Clearing Corporation website: http://www.optionsclearing.com for further details.
