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Beginning three months ago I expanded 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 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
and the DJIA 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.
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|
V
A L U E S
Date |
Jay
PF
Index
in USD |
Gold
Price
in USD |
Oz.
of
Gold /
1 USD |
JPF/Gold |
DJIA |
Dow/Gold |
| 01-01-2000 |
100.00 |
282 |
0.003546 |
0.3546 |
11,497 |
40.7699 |
| 01-01-2009 |
352.28 |
881 |
0.001135 |
0.3999 |
8,776 |
9.9619 |
| 11-30-2009 |
412.83 |
1,177 |
0.000957 |
0.3507 |
10,345 |
8.7892 |
| 12-31-2009 |
396.85 |
1,097 |
0.000912 |
0.3618 |
10,428 |
9.5060 |
| 01-31-2010 |
379.86 |
1,080 |
0.000926 |
0.3517 |
10,067 |
9.3216 |
| |
|
P
E R F O R M A N C E
Period |
Jay
PF
% Chg
in USD |
Gold
% Chg
in USD |
USD/Gold
% Change |
JPF/Gold
% Change |
DJIA
% Chg |
Dow/Gold
% Chg |
| 01-01-2010
to 01-31-2009 (Jan 2010) |
-4.28% |
-1.55% |
-1.54% |
1.03% |
-3.46% |
-1.94% |
| 01-01-2010
to 01-31-2010 (YTD 2010) |
-4.28% |
-1.55% |
-1.54% |
-1.03% |
-3.46% |
-1.94% |
| 01-01-2000
to 01-31-2010 (121 mos.) |
279.86% |
282.98% |
-73.89% |
-0.82% |
-12.44% |
-77.14% |
| |
Notes:
(1) "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
interest 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.
(2) The Dow Jones Industrial Average (DJIA) does not include
dividends given to shareholders. These are typically reinvested,
but nowadays the dividends are usually quite small. It also does
not include the brokerage fees and capital gains taxes that
usually accompany investments in the stock market. |
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Interpretation: For the month of January 2010, my portfolio lost 4.28%. For the entire period 1-1-00 to 1-31-2010, my portfolio index increased from 100 to 379.86, a gain of 279.86%, and Gold increased from 282 to 1080, a gain of 282.98%. Thus, I have
under performed gold by .82% for the 121 months, essentially a dead heat. I am very thankful for this result, especially when I stop to realize I have equaled the performance of the world’s currently strongest secular bull market (gold) even as I have kept my portfolio diversified into several asset classes including significant cash as a hedge against an unexpected deflationary crash.
Note also that the Dow lost 12.44% in dollars during the 121-month period, but the Dow lost
77.14% for this period when denominated in Gold. On January 1, 2000, it took 40 ounces of Gold to buy the Dow. At the end of January 2010, you could buy the Dow with just 9.3 ounces of Gold.
The chart below, courtesy of JS Mineset
and updated through 12-31-2009,
shows this in picture form:
Other recent useful charts from JS
Mineset:
I made one transaction during January. It is listed under
Jay’s
Recent Transactions. Here is my portfolio as of January 31, 2010:
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| CASH |
30.6%
|
(MINIMUM
30%)
(US Treasury Bills 7.6%, HAGRF 3.9%, Bank deposits & Money Market
19.1%) |
| GOLD
& SILVER |
43.2% |
(MINIMUM
30%) Gold –
15.7% (Swiss 1-oz bars 5.4%, 1-oz Kruggerands 10.3%)
Silver – 27.6% (90% coins 18.2%, 1-oz eagles 2.4%,
1000-oz bars 2.6%, SVRZF 4.3%;
note: silver was down 3.9% in January) |
| MINING
SHARES |
15.7% |
SSRI
5.6%; GDX 4.0%; SLW 3.2%;
SA 1.0%; VGZ 1.2%;
AUY 0.8% |
| NON-GOLD
& SILVER PHYSICALS |
9.8% |
Oil & Gas W/I – 9.3% (Non-publicly traded investment) |
| PUTS
& CALLS |
0.1% |
|
| TOTAL |
100.0% |
|
 Comments
I made no changes in my major allocations in January. The only thing that changed the numbers slightly was the change in market values. Gold was down
1.5% in January. Silver was down 3.9%. My mining share portfolio dropped 13.7% for the month. These three numbers explain why my total portfolio was down 4.28% for the month, and remind us how much more volatile the mining stocks are than the metals themselves, and how much more volatile silver is than gold.
The secular bull market in gold and silver is entering its 11th year. Gold has corrected down about 12% from its all time high. Silver has corrected down about 15% from its recent high (about 25% from its all time high). This is perfectly normal and healthy behavior. Based on historical secular cycles, I expect the gold bull market has another 5 to 10 years to run, and I see no signs that we are approaching a bubble. The public at large has just begun to show some interest in gold, but nothing like the gold fever near the end of the last great bull market in the 1970s. Gold rose 24 times during that decade. In my opinion this pull back is a buying opportunity. That doesn’t mean gold and silver can’t go lower before the next leg up, but if I did not have a full allocation to them, I would be adding some here.
This applies to the mining shares as well. At their recent highs, my mining shares were about 18% of my total portfolio. Now they are 15.8%. I am prepared to ride them down however low they go before the next leg up in the gold bull. If they fall much below 15% of my portfolio, I plan to add to them in order to bring them back to a 15% minimum allocation.
Silver
Bullion Trust (SVRZF)
A few weeks ago, SVRZF was trading at a 14% premium to its net asset value (silver plus cash divided by total shares). It closed January at a 4% premium. I consider that a good buying opportunity, and if I were not fully allocated to silver, I would buy some here. As I have said previously, SVRZF is the only “paper” form of silver I would want to own. I am very comfortable owning it, and my conviction is that it may actually be safer than physical possession under certain conditions. Unless your metal is held in a bank safety deposit box, you can never be 100% certain it is theft-proof. And if it is held by your bank, there’s no guarantee that the Federal Reserve will not mandate inspection of your bank box. Having some of my silver in a segregated deposit vault in a Canadian Bank gives me a good feeling. Central Fund of Canada (which operates SVRZF) has a fifty year record of safety and integrity. I also like being able to trade my shares in the public market on a moment’s notice.
Closing
Comment
I am very impressed with the resilience gold and silver have shown during this correction, especially in light of the strong rally in the US dollar these past few weeks. Both gold and silver tend to be seasonably strong in the spring. If the US Dollar Index tops out and begins to drift lower, it could amplify the next leg up in gold and silver. This is not a time to be selling them.
The
law of Your mouth is better to me than thousands of coins of gold and silver.
(Psalm
119:72 NKJV)
Bullion
Dealers and Bullion Info | Practical
Ideas on Buying Gold and Silver
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