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)%

Sold Positions in Conservative Shift

Sold all of the following positions (performance from purchase):

AXL @ $12.95 (+ 34%)
FCX @ $116.49 (+ 17%)
HUN @ $15.79 (+ 36%)
KLIC @ $7.46 (+ 24%)
RFMD @ $7.81 (+ 21%)
SOLR @ $8.92 (+11%)

Each of these stocks are relatively high beta and have performed well. Given the recent strength of the market I am looking to shift to a more conservative portfolio into the beginning of next year and re-evaluate some weightings.

I continue to have significant exposure to commodities, inverse treasuries, and China. For now, I expect to leave these positions in place. I may establish a position in a volatility-related ETF since the VIX is near a record low. I believe the market may be positioned for a brief reversal since companies are taking hard hits, like Nike ticker NKE, after reporting strong results.

Note: Nike's stock has dropped because of "only" 11% growth in future orders, in my view. Exceed Company, ticker EDS, reported a 25% increase in 2011 wholesale orders.

RF Micro Devices (Ticker: RFMD) Pops

RF Micro Devices, ticker RFMD, is up 7% today and has established a new 52-week high. While Next Inning Technology released an updated report on the company, to which I do not have a subscription, my best guess as to what is driving it higher is something management may announce tomorrow morning in conjunction with their presentation at the Barclays Capital Global Technology Conference.

I plan to let the ~2% ride through tomorrow morning. RFMD is now up over 13% from when I bought it on October 11. Since it is a smaller position and the stock is trading just over 10x the consensus C11 EPS estimate, I don't expect to take any profits unless the announcement changes the end game for the company.

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%

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

RF Micro Devices (Ticker: RFMD)

RF Micro Devices (Ticker RFMD), a 2% holding, reported September financial results after the close yesterday. The company beat top and bottom line, and provided guidance for the December quarter above street expectations.

The key comment in the conference call, in my opinion, was said by the CEO:
"In fiscal 2011, we continue to anticipate annual revenue growth supporting record operating income and double-digit growth in earnings per share. In fiscal 2012, which begins in April, we forecast sequential growth will accelerate, driving expanding margins and continued improvement in earnings and cash flow."

Translation - Improving ROIC (the primary driver of stock performance, in my view) + Growth.

Reasons for likely improving ROIC:
(1) Focusing on areas of leadership and RF components and compound semiconductors.
(2) Fundamentally altered the capital intensity of the business through IP, intellectual property, and technology leadership. Can now drive significantly higher revenue with less capital investment. (Capacity utilization is roughly 75%)
(3) Improved execution

The drivers of the accelerating growth include:
(1) Strength of new product launches
(2) Customer diversification efforts (Nokia down to ~39% of revenue)
(3) Long-term secular growth trends in our end markets

Bottom Line - This outlook should set-up the stock for a sustained run because the stock is trading under 10x the consensus estimate for C2011 non-GAPP EPS.


Transcript from call.

Everyone should do their own research on an investment idea before buying/ selling.

RF Micro Devices (Ticker: RFMD)

Bought a 2% position in RF Micro Devices, ticker RFMD, at $6.46.

Reason for Buying: Attractive segment with healthy secular tailwinds of increasing wireless usage, U.S. company with 85% of sales outside the country (benefits from weakening dollar), increasing market share in Asia, accelerating revenue growth, healthy ROIC of 13% last quarter (likely strengthens going forward), EPS recovering with growing trend of upside surprises, conservative FY12 (FYE March) EPS growth rate of just over 10%, P/E of under 10x on F12 EPS estimate.

RF Micro Devices designs and manufactures high-performance radio frequency (RF) components and compound semiconductors technologies. The company’s products enable worldwide mobility, provide enhanced connectivity and support advanced functionality in the cellular handset, wireless infrastructure, wireless local area network (WLAN or WiFi), cable television (CATV)/broadband and aerospace and defense markets.

Largest customer is Nokia, representing 44% in the June quarter. RFMD has been losing market share within Nokia, which has been widely talked about in the industry and market during 2010 and likely one of the main reasons the stock performed poorly until recently.

Large majority of revenue, as determined by "bill to" address, is outside the U.S., approximately 85% in F10. The company has been gaining market share in Asia as management has actively worked to diversify its customer base and replace Nokia's business. Revenue increased 29% last quarter, highlighting success in this strategy. China represented 37% of F10 revenue, followed by 14% in India. The majority of international sales are denominated in U.S. dollars, which become more price competitive when the dollar weakens.

Recent announcements of expansions to product lines. Completed restructuring in 2009 to improve operating efficiency. Repurchased 2012 convertible debt in July to reduce outstanding debt balance by $90 million, lowering interest expense and potential dilution should stock rise above $8, the initial conversion price.

Company has exceeded the EPS estimate for the last four quarters by $0.01 to $0.05. EPS estimate for F11 (FYE March) is $0.60 from Factset and $0.64 for FirstCall, and for F12 is $0.67 for Factset. P/E for F12 is therefore under 10x with potential upside to earning.