COMMENTARY - RADY ASSET MANAGEMENT FIRM

Portfolio                    Contrarian Long/Short Fund  S&P 500  RAM Outperformance    
Q4 2010                                     8.82%                          10.73%                                                                         
2010                                         -2.51%                          15.03%                                        
Cumulative Since Inception*     4.86%                          -4.79%           9.65%                    

8 September 2010

As goes Housing, so goes the Economy

We are not normally proponents of governmental interference in markets, but in February 2009 – during the worst moments of the recession – we advocated a 4% mortgage plan as the lowest frictional cost way to put money in the hands of households while helping the banks move ‘toxic’ assets off their balance sheets[1][2].

22 October 2009

The Rady Contrarian Long/Short and Rady Opportunistic mutual funds are now open to all investors. These funds offer access to hedge fund portfolio management, without any of the typical partnership restrictions. The Long/Short strategy has been managed since 2007 and is focused on long term risk management, using a contrarian investment approach. The portfolio management team has in excess of 45 years of industry experience. The team also manages the value oriented Long‐Only Rady Opportunistic Value Fund. The portfolio manager has overseen Long‐Only portfolios since 1995. This strategies performance can be viewed in PSN database and is managed in a substantially similar format to the Rady Opportunistic Value Mutual Fund. Both the long‐short Contrarian (RADIX, RADYX, RADCX) and long‐only Opportunistic (ROVIX, ROVYX, and ROVCX) are open to new investors.

February 2010

Dear Partner,
We are pleased with our 2009 performance. The Contrarian Long Short portfolio returned 14.61%.

Description                                  2009                   2008
Contrarian Long/Short, LP            14.61%             -12.85%
Standard and Poor's 500 Index     26.47%             -37.00%

While it hasn’t been surprising to us; the first six months of 2009 have been extremely volatile. The good news is that this volatility continues to create extraordinary opportunity. During the first quarter we witnessed the DJIA drop to the mid 6000’s along with a decrease of 24% for the S&P 500 driven by legitimate concerns we could be headed into an economic depression.

Banks are faced with a no win situation with the federal government and investors. The regulators are using a doomsday scenario to stress test the banks balance sheets when doomsday has already occurred. It’s kind of like calling the fire department after the building has been burnt to the ground.

We are becoming increasingly concerned that the fed is running out of ammunition and rates will continue to move up in the face of an aggressive government debt buyback program to push borrowing costs and mortgage rates down.

The CDS market for US Treasuries is relatively new because treasuries were considered "risk-free" prior to our current financial crisis. As you can see from the chart below, CDS prices are up more than 10X in the last 8 months. This price movement represents a clear message from the CDS market: over the last 8 months the risk of our government defaulting on its debt obligations has increased 10X.