Decade of Daddy Mirror Fund™ Report

I must admit that I’ve let the Decade of Daddy Mirror Fund™ run on autopilot over the past five weeks (see prior report “Decade of Daddy Mirror Fund™ Bi-weekly Report” January 25-09). What once warranted a bi-weekly update now doesn’t even merit a monthly missive; too busy elsewhere to be honest.

However, I bumped into an investment advisor recently and he reminded me that I had undertaken to keep you all apprised of our friend’s (Kevin O’Leary) success, so here goes (with a heavy heart and bored soul).

Things continue to be very tough for our Mirror Fund. All we have going for us is the US$ concentration and a 1.29 dollar this am. But it still isn’t enough to keep the fund’s value above par (see launch in post “Decade of Daddy Mirror Fund” July 2-08), and we are well below the original $40 million Mendoza line. The dividends and interest payments keep flowing in, but I haven’t had time to track all of them unfortunately.

In the Mirror Fund, we’re now losing money in all of our active names, other than Goldman Sachs 2037 Subdebt (+29%).

Since the fund began we’ve locked in our profits on BMO ($775k, plus $87.5k divi), CIBC ($242k), Merrill Lynch ($799k) and Teranet ($307k plus distributions) as you’ve read in prior reports.

In the red column (original currency):

BCE (-31%), BMO (-8%), BNS (-40%), Berkshire Hathaway (-46%), Bristol Myers (-17%), CDN Oil Sands Trust (-65%), Duke Energy (-30%), Eli Lilly (-41%), JPM (-34%), Merck (-39%); MKS (-18%), Royal Bank (-26%), Spectra Energy (-45%) and Thomson Reuters (-18%).

Despite recognizing that we are overweight in the financials, the the Indicies are going down ever more (see prior post “Is the market is going lower? Of course!” March 3-09) and that CDN Oilsands Trust is a dead end this year (see prior post “BNN’s Stars and Dogs” January 26-09), I frankly haven’t felt the burning need to make a trade. And the fact that Terence Kevin O’Leary has bought so many of the same stocks for the O’Leary Global Equity Income Fund is comforting, right (see prior post “O’Leary “Global” Equity fund loads up on old Canadian favourites” February 13-09)?

Since we launched the mirror fund on Canada Day, the Dow Jones Index is down 4,619 points from the level of 11,382 — or 40.6%. Our Decade of Daddy Mirror Fund is down 10.5% during the same timeframe with a value of $36.183 million (including dividends and currency moves). With more than half of the portfolio trading in US$, the 1.29 currency has certainly masked some of our paper losses on the U.S. stocks.

The net asset value (”NAV”) of the O’Leary Global Equity Income Fund (OGE-UN:TSX; aka the Decade of Daddy Fund™) is down almost a buck since our last report (see prior post “Decade of Daddy Mirror Fund™ Bi-weekly Report” January 25-09), and now sits at $7.48, as compared to the June $12 IPO price. One can’t forget that it has paid out ~25 cents in cumulative distributions since launch.

With a $7.48 NAV, that’s a 38% decline from the launch date. As has been mentioned in the past, the decline has nicely tracked the Dow Jones over the same time period (-40.6%). The correlation between the NAV and the Dow between August 29, 2008 and yesterday’s close remains high — at 94.5%. The NAV is tracking one of the world’s best known benchmarks with almost a “mirror-like” perfection.

The fact that the OGE is down 38% had no impact on Mr. O’Leary’s ability to raise a remarkable $102 million for his new Global Income Fund. CIBC World Markets and RBC Capital Markets did a fantastic job for him (his 3rd successful fund in the past 9 months).

Let it be said yet again: Mr. O’Leary is a very talented and convincing television personality (see prior post “Kevin O’Leary is a rock star” June 30-08). The fact that our cataonic Decade of Daddy Mirror Fund has outperformed his Global Equity Fund over the past 8 months, or that he has loaded up on Canadian equities (against the very promises of the IPO prospectus) had no bearing on the appetite of retail investors for his most recent offering. All hail KO’s fundraising success!

Investors can only hope his stock-picking performance will match the success at asset gathering. Inexplicably, the nabobs at the Dead Tree Media have focused on how Don Coxe’s commodity fund is doing, but not the equally public and compelling Mr. O’Leary.

I won’t join those thinking there’s a “conflict of interest” at work in the selective media coverage. I’m sure the idea is already on the DTM’s storyboard.

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UPDATE: Our DTM friends just printed another of KO’s advertisments for his various funds on B12 in today’s business section. This instalment, called “Forget the shares, GE debt is the thing to watch” is little more than free advertising from Greenspon & Co. for retail investors to pile into the overallotment option on Mr. O’Leary’s recently launched Globe Income Opportunities Fund.

I’m surprised that no one in management at 444 Front has noticed that his last three Globe and Mail columns have subtely recommended the very type and style of investments that he was personally marketing via his Equity, Infrastructure and Income fund structures for the O’Leary Funds (formerly known as Gencap Funds, but known to us by the honourific title of The Decade of Daddy Funds™).

Perhaps they won’t be giving him the “Dox Coxe” treatment after all. Can you spell ticilpmoc?

MRM
(disclosure – this post, like all blogs, is an Opinion Piece; we own BCE, BMO, BNS, COS, MKX and GS sub debt in our household)