$1,888 ...... How's that for a nice round number? It's hard to believe but bullion is now only 6% away from the $2,000/oz target price that I had in mind when I started my gold mining portfolio blog back on Feb. 5, 2009. At that time bullion traded 51% lower at $914. Strangely many gold & silver mining stocks are well below their 3 year highs and the TSX global Gold Index and other professionally managed mutual funds are just now re approaching their highs achieved late last year when bullion was trading $500/oz (26%) less than today. My portfolio is up 8% from its' Nov. 2010 previous high level and up 215% from Feb. 2009. This performance can be primarily attributed to my large position in New Gold warrants.
So is it time to cash in and leave the party before the lively music stops? I would say no for the following reasons:
1) Real interest rates are sharply below reasonable levels (inflation plus 2-3%).
2) The Fed has just promised to keep rates very low for yet another 2 years.
3) European sovereign debt issues are very likely to deteriorate much further.
4) American economic recovery is painfully slow and unemployment very high.
5) U.S. political will is without direction. Debt ceiling/entitlement debates intensify.
6) Growth in developing countries appears to remain positive at reasonable levels.
7) Inflation is not evident, in fact rumors of deflation linger.
8) SPDR Gold Trust inventories are increasing quite modestly with no evidence of rampant
speculation. Inventories fell during the Feb., 2011, Soros sell off by about 100+
tonnes and were replaced a month ago only to be sold off again. Inventories remain 40-50
tonnes below previous highs.
As Fidelity's Andrew Marchese, Head of Canadian Equities and Darren Lekkerkerker, Portfolio Manager said recently, "we are bullish on select gold mining companies more so than bullion because historically, well managed companies, will outperform the base metal by a large margin. There is an upward bias for gold that we can't see that changing anytime soon".
Knowing when to get out is trickier than deciding to take on an initial position. If you can stomach the risk, I'd hold onto gold stocks for a while longer at least until some of the eight points noted above show signs of significant change.
Sunday, September 4, 2011
Friday, March 4, 2011
POLITICAL CHAOS, FINANCIAL CRISIS & CURRENCY
At my last posting in late Nov. 2010, I had realized a 197% gain in my portfolio since Feb. 5th, 2009 and as of today this stands at 156%. The last few months have been tough especially around mid-Feb. when I was scrambling to cover margin calls (my portfolio gain at that point was south of 100%). As the gold mining stocks declined sharply since the end of November, I moved out of cash and into margin... but alas I moved too soon and was caught in a dreadful margin squeeze. I had to dump another $80K of equity into my account because many of my penny-warrant holdings dropped below $2/share thereby making them unmarginable.
Now the investing public doesn't know what to make of gold assets. On the one hand they think bullion is too pricey at $1,430/oz but at the same time investors have to be impressed by gold's resilience. Try as they might, the pros could not hammer gold bullion down by more than $125/oz. That is a correction of less than 8%! They were able to hammer gold mining stocks however and they all but created a panic with several of my holdings. Yes folks, even the SPDR investors were dumping bullion with a reported decrease of over 76 tonnes from late Nov. 2010 to today in that one gold trust alone. That's a lot of bread with 32,150 troy Oz per tonne, we are only talking about $3.3 billion flowing out of SPDR!
One of these days SPDR investors will decide that they acted prematurely and heaven help them at that point. I'm sticking to my $2,000 oz prediction and I'm not doing much selling until we get there.
Now the investing public doesn't know what to make of gold assets. On the one hand they think bullion is too pricey at $1,430/oz but at the same time investors have to be impressed by gold's resilience. Try as they might, the pros could not hammer gold bullion down by more than $125/oz. That is a correction of less than 8%! They were able to hammer gold mining stocks however and they all but created a panic with several of my holdings. Yes folks, even the SPDR investors were dumping bullion with a reported decrease of over 76 tonnes from late Nov. 2010 to today in that one gold trust alone. That's a lot of bread with 32,150 troy Oz per tonne, we are only talking about $3.3 billion flowing out of SPDR!
One of these days SPDR investors will decide that they acted prematurely and heaven help them at that point. I'm sticking to my $2,000 oz prediction and I'm not doing much selling until we get there.
Friday, November 19, 2010
PRECIOUS METALS STRATEGY REVIEW
Current Holdings:
Cash $104K
New Gold Warrants 37,500 units ($112K)
Victoria Gold 25,000 shares ($34K)
ECU Silver Warrants 43,000 units ($28K)
Franco Nevada Warrants 3,000 units ($17K)
Petroamerica Oil Corp. Warrants 75,000 units ($14K)
Kinross Gold Warrants D 2,000 units (under $10K)
Rio Novo Gold Warrants 8,000 units
Takara Resources 7,000 shares
TOTAL PORTFOLIO MARKET VALUE (incl. cash)...$330.7K
Percentage Increase Since Inception (Feb 5, 2009): 197%
With spot gold off over 5% from its recent $1,420/oz high, and with $100K cash on hand, What is my strategy now?
I think that the market has only partially factored the QE2, currency, and debt situations so I don't see that the gold game is anywhere near its end. Since we've just come off a 35% rally (since Feb. 1st, 2010) in spot gold and related markets it should surprise no one if we see some consolidation at current prices before we see another big run up. So I plan to simply take advantage of any rotational weakness in the prices of any of my above holdings (also Agnico-Eagle Warrants in my US$ account) to increase my positions. I hope that I have enough patience to do a proper job with this strategy however I expect to be fully invested again by year-end. I plan to move into a broker margin situation should we experience a major correction (over 25%).
Cash $104K
New Gold Warrants 37,500 units ($112K)
Victoria Gold 25,000 shares ($34K)
ECU Silver Warrants 43,000 units ($28K)
Franco Nevada Warrants 3,000 units ($17K)
Petroamerica Oil Corp. Warrants 75,000 units ($14K)
Kinross Gold Warrants D 2,000 units (under $10K)
Rio Novo Gold Warrants 8,000 units
Takara Resources 7,000 shares
TOTAL PORTFOLIO MARKET VALUE (incl. cash)...$330.7K
Percentage Increase Since Inception (Feb 5, 2009): 197%
With spot gold off over 5% from its recent $1,420/oz high, and with $100K cash on hand, What is my strategy now?
I think that the market has only partially factored the QE2, currency, and debt situations so I don't see that the gold game is anywhere near its end. Since we've just come off a 35% rally (since Feb. 1st, 2010) in spot gold and related markets it should surprise no one if we see some consolidation at current prices before we see another big run up. So I plan to simply take advantage of any rotational weakness in the prices of any of my above holdings (also Agnico-Eagle Warrants in my US$ account) to increase my positions. I hope that I have enough patience to do a proper job with this strategy however I expect to be fully invested again by year-end. I plan to move into a broker margin situation should we experience a major correction (over 25%).
Wednesday, October 13, 2010
QUANTITATIVE EASING 2 (QE2)
I was treated today to a presentation and Q&A with the highly respected CIO of Signature Global Advisors, Eric Bushell, who oversees about $28B assets. Often, when I attend this type of meeting, I depart with my head full of improved articulation and definition of both preexisting thoughts and new ideas. This is a great aid for my ability to communicate with friends and clients.
For instance I have sensed for the best part of a year that Gold's value ascendancy is highly related to a declining level of confidence in the currency of developed economies to store and hold value. Today I learned that there is in fact a new world order where the G20 is replacing the G7 in terms of economic might. Today, it is estimated that 37% of global capital market value is attributable to emerging economies and that by 2030 this will climb to 60%. Yes, a new world order is here. An arrangement where the developed West is loosing control.
When Lehman Bros. filed for bankruptcy in Sept., 2008, Chinese confidence in the then existing financial framework was destroyed and they are now aggressively advocating, and will eventually negotiate, a new framework along with a new reserve currency paradigm. We are likely to see countries like Brazil and India support this new framework since they want desperately to avoid the devastating boom and bust characteristics of our free flow of capital past.
Capital is migrating quickly to developing countries. Individuals, corporations and capital pool managers see little risk in borrowing at 1-3% interest rates and investing in developing countries where 10-20% returns are normal. This of course further exacerbates stagnating economies of the developed world and QE2 will further accelerate this flow.
QE2 (a press acronym for "quantitative easing round 2") is the label that has been placed on the expected new round of U.S. monetary stimulus designed to boost the U.S. economy. Since the Democrats are likely to loose their numerical theoretical control of the US congress, after the Nov. mid-term elections, physical (policy driven) stimulus will not likely be possible. Thus monetary policy (printing money) will be used to further help the cause. When the markets got wind of this possibility back in late July, they started to rise with commodities leading the way. Spot gold bullion has climbed to $1,375/oz from $1,162/oz, an increase thus far of over 18%!
I personally asked Eric Bushell what circumstances would gold investors need to see before they ran to cash? Without hesitation he said that if QE2 is put on hold or somehow fails to materialize, gold markets will fall back and in the longer term gold markets will decline when real interest rates turn positive. Simplicity is beautiful.
What this tells me is that this gold ride I've been on has potentially many more months to run.
Another side piece of information that puzzles me is that since August, this gold rally has not been driven by gold hoarders. SPDR bullion inventory tonnes have actually declined slightly...I can't figure that out. I've heard that Indian jewelry producers are traditionally big seasonal buyers of gold at this time of year but I would have expected gold trust investors to increase (not decrease) their holdings as the spot bullion price rose.
For instance I have sensed for the best part of a year that Gold's value ascendancy is highly related to a declining level of confidence in the currency of developed economies to store and hold value. Today I learned that there is in fact a new world order where the G20 is replacing the G7 in terms of economic might. Today, it is estimated that 37% of global capital market value is attributable to emerging economies and that by 2030 this will climb to 60%. Yes, a new world order is here. An arrangement where the developed West is loosing control.
When Lehman Bros. filed for bankruptcy in Sept., 2008, Chinese confidence in the then existing financial framework was destroyed and they are now aggressively advocating, and will eventually negotiate, a new framework along with a new reserve currency paradigm. We are likely to see countries like Brazil and India support this new framework since they want desperately to avoid the devastating boom and bust characteristics of our free flow of capital past.
Capital is migrating quickly to developing countries. Individuals, corporations and capital pool managers see little risk in borrowing at 1-3% interest rates and investing in developing countries where 10-20% returns are normal. This of course further exacerbates stagnating economies of the developed world and QE2 will further accelerate this flow.
QE2 (a press acronym for "quantitative easing round 2") is the label that has been placed on the expected new round of U.S. monetary stimulus designed to boost the U.S. economy. Since the Democrats are likely to loose their numerical theoretical control of the US congress, after the Nov. mid-term elections, physical (policy driven) stimulus will not likely be possible. Thus monetary policy (printing money) will be used to further help the cause. When the markets got wind of this possibility back in late July, they started to rise with commodities leading the way. Spot gold bullion has climbed to $1,375/oz from $1,162/oz, an increase thus far of over 18%!
I personally asked Eric Bushell what circumstances would gold investors need to see before they ran to cash? Without hesitation he said that if QE2 is put on hold or somehow fails to materialize, gold markets will fall back and in the longer term gold markets will decline when real interest rates turn positive. Simplicity is beautiful.
What this tells me is that this gold ride I've been on has potentially many more months to run.
Another side piece of information that puzzles me is that since August, this gold rally has not been driven by gold hoarders. SPDR bullion inventory tonnes have actually declined slightly...I can't figure that out. I've heard that Indian jewelry producers are traditionally big seasonal buyers of gold at this time of year but I would have expected gold trust investors to increase (not decrease) their holdings as the spot bullion price rose.
Saturday, September 18, 2010
WHERE WAS JEFF FOR THE PAST YEAR?
On Sept 1, 2009 I fell off a ladder fracturing most of my ribs, puncturing my right lung and breaking my back...I was hospitalized for 6 weeks. Interestingly I didn't loose interest in Gold during my recovery and with the help of my wife, Jackie, managed to execute a number of trades during late Sept. and Oct. 2009. I ended 2009 with my portfolio worth about $160K.
Unfortunately I forgot how to post to this blog and wasn't able to figure it out until today, Sept. 18, 2010.
Unfortunately I forgot how to post to this blog and wasn't able to figure it out until today, Sept. 18, 2010.
Gold is Good
Since August 26th I have eliminated a $35K margin position by selling $100K worth of precious metals related stock investments into a gold bouillon rally that started late July, 2010, with gold @ $1,160/oz & my portfolio @ $180K. Today, September 17, 2010, Bullion is at $1,278 (up 10.2%) while my portfolio is worth $247K.
My portfolio, by the grace of God, is up 122% since Feb. 5th, 2009 for which I am grateful, but I cannot claim any great prowess since the Dynamic Precious Metals Fund is up 130% over the same interval. In other words I would have been 8% richer had I simply entrusted my capital to this professional management team .... but then, I would not have had nearly as much fun!
My major holdings are Cash: $63K, New Gold Warrants ($67.6K MV), Victoria Gold ($36K), Franco Nevada Warrants 20.1K, Agnico-Eagle Warrants $23K and ECU Silver Wts. $14.6K. New Gold and Victoria look especially promising as longer term holds.
This summer I've taken new exploratory positions in Petroamerica Oil corp. Warrants and Takara Resources inc.
If this rally continues, I plan to sell Franco Nevada and smaller portions of my other holdings, increasing cash to perhaps $100K.
My portfolio, by the grace of God, is up 122% since Feb. 5th, 2009 for which I am grateful, but I cannot claim any great prowess since the Dynamic Precious Metals Fund is up 130% over the same interval. In other words I would have been 8% richer had I simply entrusted my capital to this professional management team .... but then, I would not have had nearly as much fun!
My major holdings are Cash: $63K, New Gold Warrants ($67.6K MV), Victoria Gold ($36K), Franco Nevada Warrants 20.1K, Agnico-Eagle Warrants $23K and ECU Silver Wts. $14.6K. New Gold and Victoria look especially promising as longer term holds.
This summer I've taken new exploratory positions in Petroamerica Oil corp. Warrants and Takara Resources inc.
If this rally continues, I plan to sell Franco Nevada and smaller portions of my other holdings, increasing cash to perhaps $100K.
Thursday, June 25, 2009
Gold now Hot! Hot! Hot!
Since my last post I've invested the $20.5K cash on hand at that time plus another $21.5K of new margin. Reacquired my Coeur D'Alene and Franco Nevada Wts. holdings at a 20+% discount and added to my Aurizon Gold position.
I also made a dumb, mistaken sale of my New Gold Wts. at $.35 (I wanted to sell my US Gold Wts.) I reacquired 15,000 (50% of my position) New Gold Wts. @ $.37 and will probably have to pay more for the other half. Meanwhile I'm still trying to sell my 30,000 US Gold Wts.
I'm looking to buy Pacific Rubialis Energy Wts. (PRE.WT-T) but fear I have missed the boat.
I also made a dumb, mistaken sale of my New Gold Wts. at $.35 (I wanted to sell my US Gold Wts.) I reacquired 15,000 (50% of my position) New Gold Wts. @ $.37 and will probably have to pay more for the other half. Meanwhile I'm still trying to sell my 30,000 US Gold Wts.
I'm looking to buy Pacific Rubialis Energy Wts. (PRE.WT-T) but fear I have missed the boat.
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