December Commodity Commentary and Performance

What a month! December was one of our most opportune months and topped off a very good year for the Diversified Program. Auspice has now been profitable in 9 of the last 12 months. While the global indices also had a good month, Auspice managed to outperform almost all on the month, and many on the year. For example, the S&P was up 6.5% in December and 12.80% in 2010. The TSX didn't fare as well but was up 3.7% in December and 10.9% for the year. The GSCI commodity index made up the bulk of its 2010 performance in December finishing off the year with a 9.0% return. On a 3 year annualized return basis, most equity indices remain negative (S&P -5%, TSX -1.7%) while Auspice continues to outperform at 14.4%.

Key Points regarding our Positions

Energies: As in November, the Energy market made some small gains. From a trend perspective, 3 of the 4 (less natural gas) components are now showing up-trend potential including Gasoline, Heating Oil and Crude Oil. In addition to the Gasoline position taken last month, we took a new position in Heating Oil. A new Crude position was also taken at the beginning of January. We remain short natural gas.While we would describe the trends as preliminary which are notoriously challenging to trade, we will continue to carefully monitor this sector as we believe opportunities are likely forthcoming in this sector. To that end, we are launching an institutional Energy program in early 2011. Please contact Auspice for more information.

Metals: The Metals sector was again the star of the month (and the year) and we remain long Copper, Gold, and Palladium. This sector remains in a solid up-trend. At the beginning of December we reduced the risk and resized positions (took some profits).

Grains: Grains also had a fantastic month. We remain long Soybeans and Corn and added a long Wheat position as well. 

Soft Commodities: Softs had a decent month. We remain long Coffee and Orange Juice, both have been profitable. We re-entered the Cotton market after exiting very profitably in November. The current position is small given the volatility in that market. Lastly, the short entered in Lumber last month was covered. This market was a challenge to trade given the lack of trend in 2010.

Currencies: The currency sector was also profitable in December. We took new positions in Swiss Franc (Long) and Yen. We remain flat in US Dollar index, Euro and British Pounds. We remain long solid up-trends in the "commodity currencies", Aussie and Canadian Dollars. Interest Rates: Interest Rates were the only down sector in December despite being the second most profitable on the year. We exited the remaining long 10 and 30 years. Both were profitable long term trades which returned approximately 4 times risk taken. We re-entered a long position in the Eurodollars in the short end of the curve late in the month.

Equities: Equities produced the third highest gain in December as the global markets rallied. We remain long the majority of the sector with the exception of Japan's Nikkei which we are currently flat. This sector remains risky and volatile.