Beginning this month I am expanding the performance information. I believe you will find it much more useful and practical. Each month you will see the performance for that month, the performance for the year-to date, and the performance for the entire period from January 1, 2000 to date. For simplicity, I have assigned a value of 100 to my portfolio (PF) on 1-1-00, hence the title Jay’s PF Index. Later dates show what $100 invested in my portfolio has grown to. In addition, for comparison purposes, you will see my portfolio compared to gold for all of these periods of time. I believe these additional performance figures will add valuable perspective to our investment analysis. Here are the performance figures in the new format.

Gold Price Oz. of Gold JPF/Gold Date Jay PF Index in USD Per 1 USD Ratio 01-01-2000 100 282 0.003546 0.3546 01-01-2009 352 881 0.001135 0.3999 09-30-2009 384 1,009 0.000991 0.3807 10-31-2009 380 1,045 0.000957 0.3637     Jay PF % Change Gold % Change USD/Gold JPF/Gold Period in USD in USD % Change % Change 10-01-2009 to 10-31-2009 (Oct. 2009) -1.06% 3.57% -3.44% -4.47% 01-01-2009 to 10-31-2009 (YTD 2009) 7.90% 18.62% -15.69% -9.04% 01-01-2000 to 10-31-2009 (1 decade) 280.10% 270.57% -73.01% 2.57%

Interpretation: For the entire period 1-1-00 to 10-31-09, my portfolio increased from 100 to 380.1, a gain of 280.1%. Gold increased from 282 to 1045, a gain of 270.57%. The USD relative gold decreased by 73.01%. And my portfolio relative to gold increased by 2.57%. Note: "USD/Gold % Change" is simply the reciprocal of the gold price in dollars. You cannot precisely compare the dollar with gold without adjusting for interest. The dollar earns interest. Gold does not. With interests rates near zero, this seems insignificant, but over time it is not. Interest rates must eventually rise. On the other hand, GATA and other experts on gold claim that the price of gold has been artificially manipulated downwards for many years by concentrated short selling on the futures markets. Some experts also believe that a significant percentage of physical gold supposedly held by futures exchanges does not exist. Furthermore, central bankers regularly talk down gold. After all, it competes with their fiat currencies and threatens their job security.

CASH	26.2%	(MINIMUM 30%) (All US$)
GOLD & SILVER	43.9%	(MINIMUM 30%) Gold – 14.8% (Swiss 1-oz bars 4.9%, 1-oz Kruggerands 9.2%)                          Silver – 29.1% (90% coins 18.0%, 1-oz eagles 2.2%,                                                  1000-oz bars 2.5%, SVRZF 6.4%;                                                  note: silver was down 1.92% in October)
MINING SHARES	15.8%	SSRI 6.0%; GDX 4.1%; SLW 2.8%; SA 0.8%; VGZ 1.3%; AUY 0.8%
NON-GOLD & SILVER PHYSICALS	13.6%	Commodity ETFs – 5.7% (RJI 1.9%; RJA 1.3%; RJN 0.7%) Oil & Gas W/I – 10.2% (Non-publicly traded investment)
PUTS & CALLS	0.0%
TOTAL	100.0%

Comments

My portfolio changed very little in October, and I am very content to sit with my current allocations for the foreseeable future. I explained in detail last month why I am comfortable with a high allocation in gold and silver, and a few percentage points below my cash target allocation of 30%.

“DON’T JUST DO SOMETHING, SIT THERE!” My observation over fifty years of investing is that the average investor makes far too many trades and holds far too many different investments. He feels that he must do something. He watches the news and events occurring in the world and feels he must respond to them. At times he may get in step with the short term ups and downs, and his confidence that he has found the secret rises. But it rarely lasts. He almost always misses out on the really big and profitable moves in the asset class destined to become the next bubble in the world.

By contrast, the great majority of investors with long superior track records (including the several I follow closely) spend most of their time just sitting and watching. They are concentrated in the one or two asset classes which are gathering a crowd and on the way to becoming the next bubble (rather than having little bits of many different things). They have a good cash reserve ready for any new opportunity, and have no debt. They do not attempt to trade short term. They are single-mindedly determined to sell when their primary asset class(s) becomes a bubble and the crowd is buying hand over fist. They are willing to hold through the intermediate corrections which occur before the bubble reaches its peak. Jim Rogers is the consummate illustration of this strategy, having called a new secular bull market in commodities in 1999. He has held all his commodities since then and added during the huge 2008 correction.

I began accumulating commodities in 2000, especially gold and silver. About two years ago, I became convinced that gold and silver would become the next bubble. This had never occurred to me before. Now, my experts are beginning to use this same language, and my conviction is growing. My conviction is not based primarily on a belief in the intrinsic value of the precious metals, although I do believe they are undervalued. My conviction is most strongly based on the belief that this is the asset class which will gather the next crowd of investors, and drive the prices to the bubble stage.

Try to grasp the full impact and significance of this next statement. At current market values, gold and silver are less than 2% of all marketable world assets. Could this figure be wrong? Of course; I had to rely on studies which I have seen. But it can’t be too far off. Imagine what would happen if every investor decided to put 1% more of his retirement funds into gold or silver. What if every mutual fund decided to add 1% or 2% gold to their fund? I watched this happen in the 1970s, and gold went up 24 times in 10 years.

Could I be wrong? Absolutely! Always remember that, and take it into account in your own decision on how to allocate your portfolio. For a long time I have suggested 33% for your gold and silver allocation. Just a week ago, Richard Russell suggested this exact same figure. And I do not know when or how fast the crowd will build up. But my conviction has never been stronger that gold and silver will be the next bubble.

For more on this, watch for the upcoming article entitled Why Gold has been the “World Reserve Currency” for Thousands of Years. It should be out shortly.
 

Wait for the LORD;
Be of good courage, and He shall strengthen your heart;
Wait, I say on the LORD! 
(Psalm 27:14 NKJV)

I wait for the LORD, my soul waits,
And in His word I do hope.
(Psalm 130:5 NKJV)

The end of a thing is better than its beginning;
The patient in spirit is better than the proud in spirit.
(Ecclesiastes 7:8 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.