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)%