Mary Ann and I returned from a 2-week vacation October 6, so this report is a few days late. The break was worth it, and we are thankful for it. For the month of September, gold was up 5.7%, silver was up 12.4% and my portfolio was up 6.80%. It is up 9.06% year-to-date September 30, 2009. Comments below. Here is my portfolio as of September 30, 2009:

CASH	26.2%	(MINIMUM 30%) (All US$)
GOLD & SILVER	43.2%	(MINIMUM 30%) Gold – 14.1% (Swiss 1-oz bars 4.9%, 1-oz Kruggerands 9.2%)                          Silver – 25.3% (90% coins 18.0%, 1-oz eagles 2.2%,                                                  1000-oz bars 2.5%, SVRZF 6.4%)
MINING SHARES	17.0%	SSRI 6.7%; GDX 4.3%; SLW 2.8%; SA 1.2%; VGZ 1.2%; AUY 0.8%
NON-GOLD & SILVER PHYSICALS	13.6%	Commodity ETFs – 5.7% (RJI 1.6%; RJA 1.2%; RJN 0.6%) Oil & Gas W/I – 10.2% (Non-publicly traded investment)
PUTS & CALLS	0.0%
TOTAL	100.0%

Comments by Major Allocation

CASH: I was willing to reduce cash and my commodity ETFs in order to add to Central Fund of Canada’s new Silver Bullion Trust Fund (SVRZF) while it was selling at a discount to its Net Asset Value. As reported in Jay's Recent Transactions, in September I sold all of my DAG and DBA and purchased an additional 2.2% position in SVRZF. I expect someday my investment in SVRZF will present an outstanding arbitrage opportunity. If you are interested, be sure to read A Great Way to Increase the Safety and Potential of My Silver and Central Fund of Canada (CEF) and Arbitrage to get up to speed on this potential opportunity.

GOLD AND SILVER: I am now 43.2% in gold and silver combined, well above the 33% target allocation I suggest for beginning new portfolios. Now that gold has decisively made a new all time high near $1,050, is it time to think about selling some? Emphatically not unless I am a short term trader, which I am not. At today’s price, gold is not even half its inflation adjust 1980 high of $2,350. There will come a time for re-balancing my allocations closer to the target allocations, but it is way too early because of my conviction that gold and silver will be higher a year from now than they are today, and higher still 3 years from now. My experts are in general agreement. Since we are not short term traders or market timers, it’s too early to do any selling. We are far away from the bubble stage for this asset class (opinion).

MINING SHARES: My mining shares are doing well, but not nearly as well relative to the physical metals as they have in past precious metals bull markets. Some time in the next three years I expect them to out perform gold and silver by a factor of at least 5 to 10 times, so I would not want to be below the target allocation of 1/6 (about 17%) now. Keep in mind that this is a much higher risk category than the physical metals, so the target allocation is much lower.

NON-GOLD AND SILVER PHYSICALS: Like the mining shares, the target allocation for this asset class is 1/6 (about 17%). I am currently at 13.6%. But most of this (10.2%) is in oil and gas operating interests which do not trade publicly and hence have no verifiable market value. I have to use a formula based on the monthly distributions. In the interest of full disclosure, on December 31, 2008, the formula produced a value of 16.9% of the portfolio. On 9-30-09 its value was 10.2% of the portfolio. Thus, for year-to-date 2009, it has reduced the performance of the portfolio by almost 7%. The sharp drop in the price of oil and gas (especially natural gas) was the main cause. This is not a problem to me because in 2008 this investment made a substantial contribution to the portfolio performance, keeping 2008 from being a down year. But it does add confusion. If I did not have this investment, I would today have about 1/6 of my portfolio in Rogers’ commodity ETFs (RJA, RJI and RJN). Several of my readers have told me their portfolios are up about 20% for 2009 year-to-date, and I can believe it. In retrospect, it might have been better to leave this investment out of my portfolio, and adopt a “Model Portfolio” approach which holds only publicly traded investments, and remains “closed” in the sense that deposits and withdrawals are not made, and income and gains remain in the portfolio and are reinvested. This is something to consider for the future.
 

There are many plans in a man’s heart,
nevertheless the LORD’s counsel—that will stand.
(Pr. 19:21 NKJV)

'The silver is Mine, and the gold is Mine,' 
says the Lord of hosts. (Haggai 2:8 NKJV)
 

WORDS WE HOPE TO HEAR ONE DAY
"Well done, good and faithful servant; you were faithful over a few things,
I will make you ruler over many things.  Enter into the joy of your lord" (Mt. 25:21 NKJV)

WORDS OF WARNING
The Apostle Paul wrote, "Now godliness with contentment is great gain. We brought nothing into the world and it is certain that neither can we take anything out. So having food and clothing we will be content with that. But those who want to get rich fall into temptation and a snare and into many foolish and harmful desires, that plunge people into ruin and loss; because the love of money is a root of all kinds of evil; in their greediness some have been led away from the faith and have impaled themselves on many distresses." (1 Tim. 6:6-10 NKJV)

DISCLAIMER
The information on this page is the responsibility of Mr. E. Jay O'Keefe, but all your decisions are your own responsibility.