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YTD Portfolio Results & Market Commentary

|Includes: AUY, Central Fund of Canada (CEF), CHK, CSCO, EWS, GSK, PAAS

THE ENLIGHTENED-AMERICAN PORTFOLIO SPREADSHEET

  • Enlightened-American Portfolio: +7.2% through August 1st, 2011 (my actual IRR, including cash balance)
  • DJIA: +4.8%
  • Nasdaq: +3.5%
  • S&P 500: +2.3%
  • DJ Wilshire 5000: +2.2%
  • Russell 2000 (smallcap): +1.2%
I must admit some pleasure at walking away from the portfolio for a month only to return to YTD results showing us outperforming all the major indices we follow. Once again, this proves the old value investing maxim that most of the time, the best move is to do nothing.

Of course, it was entertaining to return to watch the political kabuki known as the debt ceiling crisis. One look at the markets was all it took to confirm just how toothless this "crisis" was  -- 10 year Treasury yields actually tightened last Friday below 2.8%, hardly a sign of weakening confidence in US debt even as political pundits went into hyperbolic overdrive about a deal. US stock markets' reaction today, with the Dow finishing slightly down despite news of the deal, only reinforces that politicians have been toying with Main Street's emotions even as all sides made sure to clue Wall Street in on what was truly at stake in these negotiations, which was ultimately nothing.

I have long asserted that smart investors know the only ideology to adhere to is pragmatic flexibility. There may be a time to raise taxes, there may be a time to cut spending but in the face of an economy on the brink of a double-dip recession, that time probably is not now.

In any case, our investments do not hinge on politicians or the Fed getting political and economic policies right (a losing proposition if ever there was one).  The portfolio's outperformance since the last update owes in large part to big gold positions -- CEF, AUY and MFN, though the latter is offset by an in-the-money call due to exercise this month. Good showings by EWS, GSK, CSCO (which we doubled down on in June) and CHK preferred D shares all bolstered YTD results while the S&P 500 lost a few basis points of return since mid-June.

But that is all in the past and the important task at hand is how to position for the future. My answer is always the same: continue looking for good opportunities at cheap prices and let the big picture take care of itself. As always, YMMV.