Last updated January 31, 2009

(Transactions since Jan. 31, 2009)

As I explained in the last update, for the year 2008 my portfolio was up .35% (about one-third of 1%). For the month of January, 2009, it was up by almost this same amount, .34%. The following will show you the portfolio as it stood on January 31, 2009. All transactions since the last report were reported here as they occurred: Jay's Recent Transactions.  I will discuss the reasoning behind these changes below.

My portfolio as of January 31, 2009:

As you can see, stocks, increased from 14.2% to 15.7% during the month. Since I did not buy or sell any stocks, this increase was all due to an increase in the market value.

Physicals fell 0.6% for the month. But notice that my Oil & Gas Interests fell 2.9%. Again, no purchases or sales were made, so the rest of my physicals were up 2.3% for the month. At their high point last year my production interests were 21% of the portfolio. They kept 2008 from being a down year. Now they are only 14% of the portfolio, and, ironically have kept the portfolio from getting off to a good start in January. Had they held their value from a month ago, the portfolio would have been up more than 3% in January. “The Lord gives, and the Lord takes away. Blessed be the Name of the Lord.”

My physical gold and silver is held in several different forms (coins, bars, ETFs, futures, a metals pool, and a bullion holding mutual fund). But I have never felt it to be important to disclose the different forms. After all, ounces of gold and silver are ounces of gold and silver no matter what form they are in, at least that’s been the case…until recently. In recent months significant differences in the price of an ounce of gold or silver have developed between the different forms in which the metals are held. This has created profit opportunities through arbitraging these differences, as explained in the essay at this link: Central Fund of Canada (CEF) and Arbitrage

Perhaps most of you will have no interest in this subject and there’s no reason you should. I find it fascinating, as well as profitable, and some of you may wish to look into it. I’m not sure at the moment how much more I will say about it. Time will tell.
    

Cash dropped from 31.3% to 30.5% during January. The only transactions I did in January were to sell all my Australian $ Trust (FXA) and about half of my Yen Trust (FXY). The non-dollar forms of cash did decline some during January, but I suspect most of the cash decline was due to spending.

  
CLOSING COMMENTS

Jim Rogers is a long term investor. I would say he is the consummate long term investor. His current working hypothesis is that a 17-20 year secular bull market in commodities began in 1999, and a secular long term bear market in stocks began at the same time. So far, his investments fit these assumptions. He bought his entire commodity index in 1999, and has yet to sell any of it (according to the last interviews I listened to a few days ago). The stocks which he has been willing to buy are fully hedged with short positions in other stocks to remove the stock market risk from his portfolio.

Try to imagine this: He buys oil at $20 in 1999, rides it all the way up to $147, then rides it all the way back down to $32. He has yet to sell any. Can you imagine yourself, or any other investor doing that? That’s why I use the phrase “consummate long term investor.” When asked about this, he said, “I don’t care whether oil is $40 or $147. I plan to sell it in 2017 at $200 or $300, or whatever it is at that time. When asked why, he says, because the fundamentals for oil (and most other commodities) are unimpaired…they are getting better every day, even as the price is falling in this deflationary crash and forced selling. He has been adding to his commodities as they fall, especially energy and agricultural products.

Rogers rarely shifts his specific strategies within the long term secular trend in which he has confidence. But when he does, I take it very seriously and spend some time thinking about it, and praying God’s guidance on what to do, if anything. Here are four statements he made in an interview less than two weeks ago:

1. “We’re certainly not out of whatever we’re in and whatever we’re in is getting worse.” 

2. "Obama has got the wrong plans and the wrong people.”

3. “I’m not buying stocks anywhere – the world is in recession, and it’s not going to get better. If politicians keep making mistakes, it’s going to last longer and longer.”

4. "If you speak Chinese, go to China. Or try farming. I’m more optimistic about agriculture than any other industry. If not farming, any thing to do with raw materials or natural resources.”

I’ve been over these a few dozen times. You might like to give them some thought. There’s not a major change in his long term strategy, but there are a couple of minor shifts in his thinking, and I plan to take action on them. First, he seems to have given up on the idea that the panic selling in October and November was the bottom. At the time, he felt there was a good probability of it being a bottom and he did some buying. I take his statement about stocks very seriously. I have no idea whether he has sold any of his stocks. I doubt it because he has them hedged. But he is not buying any more. Some day stocks will be a good buy, but apparently he thinks that day is well into the future.

Second, not only has he not given up on his commodities, he is still adding to them as they fall in price, especially agricultural and energy (and I strongly suspect gold and silver based on what I’ve heard him say a number of times since October).

I’m ready to give up my airline stocks, and switch the money into more agricultural and energy commodities. My airlines are only 2.3% of my portfolio, and they are down about the same as the commodities I’m switching into. I don’t have the luxury of an unlimited cash reserve like Rogers. So I’ll make this small switch which will reduce stocks and increase physicals. You might like to look at the charts on RJA, RJN and UNG. I suggest two year weekly charts. The first two are the vehicles Rogers uses for his own buying (they bear his name). The third is pure natural gas, which I can’t resist at a multiyear low and rock bottom support at $4.00 per mcf. If I get my head handed to me, it won’t be the first time.

I’ll give you the details on my trades shortly.  (See 4 transactions on Feb. 2, 2009)