December Performance - Up 8.5%

For December the balance increased 8.5%, after all fees and dividends received. The performance exceeded the increase in the SP 500, which increased 6.5%. By the end of the month I moved to a more conservative portfolio with almost 30% in cash. For the quarter the value of my IRA increased 13.4% relative to the 10.3% increase in the SP 500.

The largest position remains the inverse 20+ year Treasury ETF (ticker TBT) at 14%. Commodities also account for a significant portion of the portfolio, with the agricultural market basket (ticker DBA) at over 11% and palladium (ticker PALL) growing to 6%. The geographic positions each account for over 4%, with Matthews China Fund (ticker MCHFX) at 9%, Chile (ticker ECH) at just under 5%, and Hong Kong (ticker EWH) at just over 4%. For individual stocks the largest position is Citigroup (ticker C) at just over 4%. The weightings highlight an on-going belief that debt costs likely continue to rise in the U.S., benefiting banks, and commodities and inexpensive manufacturing likely outperform the market, in general.

Every position but two increased during the month, highlighting the breadth of the market rally during the month. GT Solar (ticker SOLR) bounced back after a weak November, increasing 33% up until I sold the position on December 22. American Axle and Manufacturing (ticker AXL) and MKSI Instruments (ticker MKSI) both increased almost 20%.

My positions focused on China underperformed during the month, which I believe is largely due to concerns about a rising interest rate environment. While a short-term concern, I remain confident these positions should perform well due to healthy trends in the Chinese economy and increasing pressure to allow further appreciation in the yuan relative to the dollar.

After such a strong run in December and spotty U.S. economic indicators (notably housing and unemployment causing concern), I expect somewhat of a pullback in the market in the first half of January. I plan to use this anticipated pullback to re-enter positions at more attractive prices.

		31-Dec	Dec.
Name	Ticker	% Portfolio	Chg
RF MICRO DEVICES INC	RFMD	0.0%	11.3%
KULICKE and SOFFA INDS INC	KLIC	0.0%	12.1%
HUNTSMAN CORP	HUN	0.0%	1.3%
FREEPORT MCMORAN COPPER and GOLD INC.	FCX	0.0%	15.9%
GT SOLAR INTL INC COM	SOLR	0.0%	33.3%
DUOYUAN GLOBAL WATER INC SPONS ADR	DGW	1.4%	2.1%
JEFFERIES GROUP INC NEW	JEF	2.9%	10.3%
CA INC COM	CA	1.8%	6.8%
LYONDELLBASELL INDUSTRIES N V COM CLASS A	LYB	2.6%	17.8%
CHINA GERUI ADVANCED MATERIALS	CHOP	3.5%	5.4%
PERKINELMER INC	PKI	1.9%	10.8%
AMERICAN AXLE and MFTING	AXL	0.0%	19.5%
CITIGROUP	C	4.3%	7.7%
EXCEED COMPANY	EDS	3.1%	(7.8)%
MKS INSTRUMENTS	MKSI	2.8%	20.3%
MULTI SECTOR COMMODITY TR PWR DB AGR	DBA	9.7%	11.2%
ETFS PALLADIUM TR SH BEN INT	PALL	6.0%	14.5%
PROSHARES ULTRASHRT LEH BROS 20+ YR TREAS	TBT	13.9%	6.5%
ISHARES INC MCSI CHILE INVESTABLE MKT INDEX	ECH	4.5%	3.9%
ISHARES INC MSCI HONG KONG INDEX FD	EWH	4.3%	0.2%
MATTHEWS CHINA FUND	MCHFX	9.0%	(2.1)%

November Performance - Up 1.5%

Performance Overview
In November my IRA account balance increased 1.5%, which is after all expenses and fees. The S P 500 was essentially flat. November was a wild ride as the portfolio raced up about 5% in the first half of the month before settling back.

During the month I entered a few more positions, reducing the percentage of cash in the account to about 10%. Domestic equities account for 38%, international equities 23%, commodities 15%, and inverse bond 14%. Within the equity positions, hardware is now the largest position followed by industrial materials. This weighting, coupled with the commodities positions, continues to highlight my opinion that deeper in the economy's supply chain, where I believe inflation is building, is a better place to position investments. In addition, it highlights a large weighting towards international with a large portion of revenue for domestic companies coming from overseas, specifically China and Asia. This weighting reflects my view that inflation, in the form of asset prices, likely continues to grow in this region for the foreseeable future. It also reflects my view that the yuan likely appreciates against the dollar as the Chinese government is forced to loosen the exchange rate in order to lessen inflationary pressures.

The largest drivers of growth in the account came from American Axle and Mfting (ticker: AXL), Kulicke and Soffa (ticker: KLIC), Huntsman (ticker: HUN) and ETFS Palladium (ticker: PALL). Each are positions greater than 4% and were up 11%, 11%, 12% and 8%, respectively. The reasons for the increases in AXL and KLIC, in my view, include relatively low expectations coupled with a brightening fundamental outlook. For AXL it appears as though car and truck sales have stabilized and 2011 should provide modest growth within the U.S. and international markets remain bullish. For KLIC the business is quite volatile but the U.S. economy continues to improve and the secular driver of the adoption of more copper components should drive business in 2011. For PALL the improving U.S. economy and robust growth in Asia is driving demand for Palladium.

The worst performances came from GT Solar (ticker: SOLR), MKS Instruments (ticker: MKSI), and China Gerui Adv Materials (ticker: CHOP), which were down 19%, 6% and 4% respectively. GT Solar has suffered from estimate cuts as analysts have fretted over supply growth outpacing demand, especially as government subsidies for solar likely come under pressure. I don't argue against the possible weakening of fundamentals as supply increases, however I believe the demand may prove more robust than expected and a weakening dollar should help the company. SOLR is trading under 6x the lowered consensus EPS estimate for C2011, suggesting a healthy risk/reward. MKSI is trading under 8x the consensus calendar C11EPS estimate, and thus my belief that the economy is improving should prove this valuation conservative. I do expect CHOP to begin to move upward, at the latest, when either production comes on-line mid-2011 or investors' risk appetite increases.

Proshares Ultrashort 20+ Yr Treasuries (ticker: TBT) has moved sideways during the quarter. An interesting tug-of-war is occurring in which Fed Treasury purchases, European contagion fears, and political unrest on the Korean peninsula are raising prices. Alternatively, healthy holiday demand trends thus far by U.S. consumers and rising inflationary concerns in Asia and in the U.S. are pushing prices down. I see the forces pushing the prices up and yields down as temporary in nature, and therefore I expect TBT to perform quite well during 2011.

Summary
The following is a summary of my positions and their performance during November:

Name	Ticker	% Portfolio	Chg
RF MICRO DEVICES INC	RFMD	2.1%	(3.8)%
KULICKE and SOFFA INDS INC	KLIC	4.4%	10.8%
HUNTSMAN CORP	HUN	4.8%	11.7%
FREEPORT MCMORAN COPPER and GOLD INC.	FCX	4.1%	6.9%
GT SOLAR INTL INC COM	SOLR	3.4%	(18.9)%
DUOYUAN GLOBAL WATER INC SPONS ADR	DGW	1.5%	0.0%
JEFFERIES GROUP INC NEW	JEF	2.9%	0.9%
CA INC COM	CA	1.9%	(1.3)%
LYONDELLBASELL INDUSTRIES N V COM CLASS A	LYB	2.4%	8.7%
CHINA GERUI ADVANCED MATERIALS	CHOP	3.6%	(4.3)%
PERKINELMER INC	PKI	1.9%	(0.6)%
AMERICAN AXLE and MFTING	AXL	6.6%	10.9%
MKS INSTRUMENTS	MKSI	2.5%	(5.9)%
MULTI SECTOR COMMODITY TR PWR DB AGR	DBA	9.5%	(2.1)%
ETFS PALLADIUM TR SH BEN INT	PALL	5.6%	8.1%
PROSHARES ULTRASHRT LEH BROS 20+ YR TREAS	TBT	14.3%	2.3%
ISHARES INC MCSI CHILE INVESTABLE MKT INDEX	ECH	4.7%	1.0%
ISHARES INC MSCI HONG KONG INDEX FD	EWH	4.6%	0.9%
MATTHEWS CHINA FUND	MCHFX	10.0%	0.5%

Duoyuan Global Water (ticker DGW): Beating Expectations

My ~2% position in Duoyuan Global Water (DGW $13.02) is up ~8% after reporting third quarter results that exceeded expectations. While all three segments helped drive the 35% revenue increase, the main growth driver was water reuse equipment, up 42% y/y. Most important, management expects revenue to increase 29% in constant currency for C2011, compared to the street estimate of 23%. Given my expectation of the yuan rising against the dollar, the growth should look larger for U.S. investors.

Part of what I love about this position is the high short interest, 11% of shares outstanding. These are buyers at some point. As fundamentals continue to favor bulls these shorts will eventually cover. DGW currently trades just over 8x the consensus C2011 EPS estimate, which likely goes up when the updated estimates come out tomorrow since the current consensus projects only a 7% increase next year.

October Performance - up 2.8%

Performance Overview
In October my IRA account balance increased 2.8%, which is after all expenses and fees. The SP 500 increased 3.7%. Given the substantial cash position of 62% at the beginning of the month, I am pleased with the return.

During the month I entered multiple positions, reducing the percentage of cash in the account to 21%. Domestic equities account for 27%, international equities 23%, commodities 15%, and inverse bond 14%. Within the equity positions, industrial materials is the largest position followed by hardware. This weighting, coupled with the commodities positions, highlights my opinion that deeper in the economy's supply chain, where I believe inflation is building, is a better place to position investments.

The largest drivers of growth in the account came from Huntsman (ticker: HUN), ETF Palladium (ticker: PALL) and RF Micro Devices (ticker: RFMD), up 19.8%, 14.4% and 12.8%, respectively. The reason for the increases, in my view, include a weaker dollar driving commodity prices, ability of Huntsman to hold onto price increases amongst strengthening demand, and improving execution by RF Micro Devices' management coupled with strong secular demand in wireless.

The worst performances came from Duoyuan (ticker: DGW), VIX (ticker: VXX), and Teradyne (ticker: TER). I sold both VXX and TER for losses of 18.3% and 5.4% during the month. Volatility was relatively mute during most of the month and the VXX constantly bleeds value, placing a ticking clock on my position. For TER the December guidance was much lower than I had expected so I decided to move to the sidelines until the stock has settled. DGW was down 9.3% from when I bought it. At this point I plan to hold on to it but will be watching future losses closely.

Poor execution happened on the second purchase of American Axle Mfting (ticker: AXL) as I bought on the open at $10.10 only to see the stock fall to $9.22 at the end of the day. The company announced the September quarter that beat estimates and raising full year revenue growth. I missed that the full year growth combined with results of the third quarter implied a management's guidance for the mid-point of December revenue was below the street consensus. After re-evaluating the position and listening to the conference call, I believe the fundamental trends remain quite healthy and believe the take-away from the sell-off is the market's unwillingness to overlook marginal issues around this stock. It also may suggest that the market remains skeptical about the economic outlook next year. 

Summary
The following is a summary of my positions and their performance during October and relative to their cost.

		29-Oct		Change		Cost/	Sale/
Name	Ticker	% Portfolio		October		30-Sep	29-Oct
HUNTSMAN CORP	HUN	4.6%		19.8%		$11.56	$13.85
GT SOLAR INTL INC COM	SOLR	4.1%		(1.7)%		$8.37	$8.23
FREEPORT MCMORAN COPPER	FCX	3.9%		(5.0)%		$99.84	$94.80
AMERICAN AXLE MFTING HOLDING	AXL	3.8%		(6.5)%		$9.87	$9.22
JEFFERIES GROUP INC NEW	JEF	2.9%		5.5%		$22.69	$23.93
LYONDELLBASELL INDUSTRIES	LYB	2.2%		(4.1)%		$28.00	$26.86
RF MICRO DEVICES INC	RFMD	2.1%		12.8%		$6.46	$7.29
KULICKE & SOFFA INDS INC	KLIC	2.1%		5.4%		$5.90	$6.22
PERKINELMER INC	PKI	1.9%		1.9%		$23.02	$23.45
CA INC COM	CA	1.9%		1.1%		$22.94	$23.20
DUOYUAN GLOBAL WATER INC	DGW	1.6%		(9.3)%		$13.79	$12.51
MULTI SECTOR COMMODITY	DBA	9.8%		8.1%		$27.48	$29.70
ETFS PALLADIUM TR SH BEN INT	PALL	5.3%		14.4%		$56.38	$64.48
ULTRASHRT LEH BROS 20+ YR TRE	TBT	14.1%		8.8%		$31.25	$33.99
MATTHEWS CHINA FUND	MCHFX	10.2%		2.2%		$29.37	$30.02
ISHARES INC MCSI CHILE	ECH	4.7%		2.6%		$73.91	$75.84
ISHARES INC MSCI HONG KONG	EWH	4.7%		(0.6)%		$18.85	$18.73
TERADYNE INC	TER	Sold 10/28		(5.4)%		$11.64	$11.01
Barclays Bank 500 VIX	VXX	Sold 10/13		(18.3)%		$17.29	$14.13

Duoyuan Global Water Inc. (Ticker: DGW)

Bought a 2% position in Duoyuan Global Water, ticker DGW, at $13.79.

This purchase is primarily a value play with strong support against the stock moving lower due to both its balance sheet and cash flow trends. Yet, the company should benefit from healthy secular growth trends within the water industry and a rising yuan.

Reasons for buying:
(1) $209 million of net cash on balance sheet, relative to a market cap of about $340 million.
(2) Guided sequential revenue growth in 3Q of 10%, or almost 30% y/y, in constant currency.
(3) Consistently CFO and FCF positive, reporting $18.6 million of FCF in 2009 (~13% unlevered FCF yield).
(4) Management appears active in pulling in new technologies to address China's water issues, improving competitiveness of the company within China.
(5) Benefit from a rise in the Yuan relative to the dollars for reporting purposes.
(6) Company positioned in the attractive clean water niche in China.


Duoyuan Global Water Inc. is a China-based domestic water treatment equipment supplier. Duoyuan's product offerings address several steps in the water treatment process, such as filtration, water softening, water-sediment separation, aeration, disinfection and reverse osmosis. Duoyuan offers a comprehensive set of complementary products across three product categories: water conservation, including circulating water treatment; water purification; and water reuse treatment, including wastewater treatment. The Company has a local distribution network, which provides proximity to end-user customers and responsiveness to local market demand.