A QUARTER AND A PENNY

INSIGHTS ,EXPERIENCES FROM ISSUE I VOLUME II 2010

YOUR FUND MANAGER ........ 1

 QUARTERLY FUND
PERFORMANCE ............ 3

Falcon
 KEY SIGNALS TO LOOK
NOW ............................... 4

ADDRESSING THE NEEDS OF INDIVIDUAL INVESTORS AND PLANTING

THE SEEDS FOR A SECURE FUTURE. focus
A Quarter to remember, Crowd Psychology, Predictive Mindset
and Financial Alpha

A Quarter and a Penny

Dear Investor,
difficult time for everybody- bulls,
Its often said, that- “In market the bears or pigs. 2010 is the second
Second Year is often the toughest”. year of this bull run, which started
I think, I understand. Let me in 2009 March.
explain.
And it was verily a very tough
When a full fledged bull run is in year. Since Jan 2010, 5300 proved
works, the first year is often met to be an extremely difficult level
with skepticism, doubt and this to exceed. Each time index inched
doubt fuels the rally. Because up to 5300, it was met with a
always remember for a trend to heavy bevy of sellers. Media
persist, doubt must exist. Why? initially branded them as profit
Because there must be sellers at bookers, but soon gave up on such
all levels. It’s a different thing that, a hackneyed term.
psychological strength of sellers
might be weak, but there must be The irony of the situation was,
sellers. Because if there are no, volatility was fast moving out of
sellers then the trend will not the markets. To be frank, we trend
move ahead. I think you get my followers don’t care if markets
point. rise or fall. Only there should be
Often, 9-10 months of skewering enough movement. And though
is enough for even the hardy the flee of volatility was good in
investors, and this is rapidly met one sense, because that was a
with a situation where the crowd signal retail investors were
psychology changes. And hence, getting disenchanted, yet we
around the second year, it’s a suffered.
We waited patiently, for 5300 to
break. That was July.
In August, break they did, only to
get trapped within 5370 on the
downside to 5500 on the upside.
Yes, it was a great time to be a day
trader or even a trader with holding
periods less than say a week. But
our system is not built in that way,
and as in a trendless period, we
suffered.
Somewhere, we went from a trend
following paradigm to a mild trend
anticipating setup. We increased
our position size in anticipation of
the trend. This was on the long
side. To offset such buildup, we
put ahead, short positions on
individual stocks as well.
To diversify, we took commodity
bets as well. But there was only
one, outcome. Whipsaws!
Our longs fell, our shorts rose, and
our commodity bets went haywire.
In retrospect, I believe, we made a
mistake of not going long on gold,
and I would take the entire blame
for that.
We did lose -12.4% in one month
alone, which is high from a
long/short perspective (theoretical
limit is around 10%, observed limit
was around 8%
But, I am not overtly concerned
because the entire damage took
place when we were in a biased
100% long only position (our other
short side positions were washed
out). So from that perspective it‟s
very much within limits.
Is that a consolation? No. But, that
is a statement of faith from your
fund manager, whose focus is
solely on your best financial
interests.
You might think, August was a
dreary month, but I would
differ. September, was an
excellent month, and we have
recovered almost the entire loss.
We are still down, but it‟s a
good recovery, even the most
cynical of our investors would
agree. We posted a terrific
10.54% in the month of
September, to end the quarter a
faint 4.77% down.
And these are the instances,
when having a system, and not
really listening to media folks
make it all worth it. While the
retail investors kept cashing
out(Mutual Funds are facing
record redemptions, there is
huge skepticism in air), I
sincerely believe that it is this
doubt which will help in
fuelling the rally ahead.
A recent report has come up
that, this year retail investors
have sold 7011crore worth of
monies out of their Mutual
Fund holdings in September
alone. And is it a surprise that
in a brisk month, the index
literally slung ahead by 10%
from 5500 to 6000. So, my
opinion is, we have to stick to
what we do, how we do it.
Go against the crowd behavior,
psychology, go against the
retail emotions.
As mentioned, in the T&C, we
wont be charging any fees for
this quarter.
NAV by September end is
12.36 (a 23.6% gain from
March 10)
 QUARTER PERFORMANCE

Fig 1: The shaded portion is the Fund Performance from June end to September end.

Fig 2: We were not beaten, much, we are still holding well on our own,

September had been one of
those times, when market
just moved on, without
heeding to people who
keep saying “its costly”, to
people who keep on
predicting crashes and so
on.
Market‟s job is to take
money away from many
and give it to a few. This
very paradigm we cant
understand, because its
foreign to us. Its almost
like the situation of
negative entropy. In real
life, we never see, water
flow from low lying area
to higher areas, we don‟t
see broken shards of glass
get together all by itself.
But in market it happens
all the time. Millions lose
money, only a handful take
that home. So, the logical
conclusion is do just the
opposite of what the
millions do, and you will
make money.
Falcon Pride Funds
Key signals to
look now
Crowd Psychology is going to be
the only thing which will guide you
to safety
In such pursuits, you often have to have TAILORED RISK
acute self awareness. You have to understand At Falcon Pride Funds, we take
why you are not taking a decision, and the huge focus on keeping our risk
emotions behind it. profile within control.
We want to grow your wealth, in a
Like right now, a lot of people are betting on steady way with minimum risk.
a crash, primarily because they never thought For investment opportunities,
markets can go this high. Am I cautious, yes contact
I think so. I am slowly seeing, doubt give Gaurav P.Singh at 09969596584
We would be happy to extend our
way to cautious optimism.
help
Once those bulls who are cautiously
optimistic put in their money and see things
going right, they will turn joyous. Those are
the times, I will be wary of. Actually, I am
not bothered much about “market is costly”
talks. If I am bothered, I am worried when I
hear, “market is damn cheap” talks.
So you should be. I am keeping my ears and
eyes open, if its possible to pick people who
boast of their stock picks in cocktail parties
or my friends in swimming people discussing
“call options”.
I have a hope, a belief, that these two months
of July and August were the months, where
you pay your dues. Pay your dues to achieve
higher „alpha‟, pay your dues to better
performance, pay your dues for life ahead. I
hope, with your support, I return super
normal alpha. For me, financial
compensation is important, but seeing a
satisfied smile on my clients face make it all
worth it.
Romantic- Yes. But its okay, I am in no
hurry of turning practical.
For this opportunity we thank you,
SOHAM DAS