My Portfolio is Perfect

**jIM_Ohio** · 03-19-2008, 06:31 AM

what kind of silver does the fund own? bullion? coins? stocks which mine silver?

**Scanner** · 03-19-2008, 06:33 AM

bullion - it's the ETF - SLV

I thought I have yammered so much about it here that you all knew I am a silver bug (and sweeps is a Vanguard cultist. . .and so-and-so is a such-such

)

**sweeps** · 03-19-2008, 06:42 AM

Lol .

**Broken Arrow** · 03-19-2008, 06:47 AM

I'm glad that you like your portfolio. No point in having one that we're not happy with, eh?

Here's a provocative and somewhat related article. While it focuses on oil, it does mention commodities as a whole....

**Scanner** · 03-19-2008, 07:11 AM

It's a good article and one reason why I locked in my ETF with a stop order -in case this whole things was a "bubble" and not real.

I agree with him on oil - it's overpriced right now. I even think it could drop lower than $85 barrel - I think $65 is reasonable.

Gold/silver are interesting. . .they are "precious metals" - they react to currency changes more than anything. Silver has industrial uses. . .so. . .if the economy ramps up as he says, then they need it as a raw material to make semi-conductors and other stuff.

It's also mined with copper. . .as copper mining falls because of the housing slump. . .then I am not sure how miners prosper.

I don't advocate holding the mining stocks. Stocks are about people and people can be worth $0 (look at Bear Stearns) in a matter of days.

Commodities can never be worth $0. Gold, oil, silver. . .it will never be worth $0.

(although oil could be "replaced" as lead energy commodity)

**sweeps** · 03-19-2008, 07:43 AM

No one's portfolio is perfect, just like no one's NCAA brackets are perfect.

**jIM_Ohio** · 03-19-2008, 07:58 AM

I have a small stake in commodities (PRPFX holds 25% gold and 5% silver (bullion and coins). This is more a cash oriented position than growth oriented.

My take is this-

While trying to grow portfolio, I want growth oriented investments. I do not consider oil, gold or silver growth.

When trying to preserve a position, having numerous uncorrellated assets really helps (meaning mix commodities with stocks with bonds with cash with other currencies).

I do have a cash position (3 months in EF, building to 6 months), but do not believe having that much cash makes sense (because it will lose to inflation). So hence I preserve my cash by keeping 3 months in cash, and investing the other 3 months moderately in an allocation designed to maintain it's value and grow it's value faster than inflation.

So I will ahve 3 months cash being preserved by using gold, silver, swiss francs etc in PRPFX, while also using the same fund to hold my "extra mortgage payments".

I might change my mind if gold returns make PRPFX bigger, but right now that fund is around .66% of my portfolio. I doubt it will ever get higher than 5%.

**Scanner** · 03-19-2008, 08:11 AM

I do not consider oil, gold or silver growth

JimOhio,

Why? Like real estate. . .they ain't making any more gold or silver.

Now oil. . .that could theorectically be "replaced" with wind, solar, nuclear, coal. Even oil though. . .you need it for plastics and fertilizer. I don't ever see it worth $0.00.

There was an interesting story somewhere where they are making algae than can synthesize oil, or maybe it's ethanol.

But gold and silver, how ever much we have in earth's crust. . .and unless the field of alchemy makes a comeback. . .that's all we are ever going to have.

The only thing I have to bet on is the population growing as far as growth.

Do you think the population will grow and we will need more corn, oil, wheat, water, copper and silver?

**sweeps** · 03-19-2008, 08:33 AM

Scanner, by definition gold and other prec. metals can't be growth assets because of what you said -- they're not making any more. There may be price swings as demand temporarily exceeds supply, but these things can't "grow" like equities can.

**jIM_Ohio** · 03-19-2008, 08:47 AM

Originally posted by Scanner View Post

I do not consider oil, gold or silver growth

JimOhio,

Why? Like real estate. . .they ain't making any more gold or silver.

Now oil. . .that could theorectically be "replaced" with wind, solar, nuclear, coal. Even oil though. . .you need it for plastics and fertilizer. I don't ever see it worth $0.00.

There was an interesting story somewhere where they are making algae than can synthesize oil, or maybe it's ethanol.

But gold and silver, how ever much we have in earth's crust. . .and unless the field of alchemy makes a comeback. . .that's all we are ever going to have.

The only thing I have to bet on is the population growing as far as growth.

Do you think the population will grow and we will need more corn, oil, wheat, water, copper and silver?

I make that "growth" comment based on past performance. Gold, long term, has not given the 9% returns of the market over a 80 year history.

But there have been shorter periods where gold ruled. 1970's, for example. But those periods are short lived.

As I stated, if stability is my objective (meaning I have 25X expenses in the bank), I would want gold/silver included because uncorrellated assets stabilze value, and that is more important because I have accumulated enough to live on.

But until I have 25X, I need growth, and based on past performance over diversification (into commodities) would slow me down, not speed me up.

**sweeps** · 03-20-2008, 06:54 AM

Scanner, silver has taken a beating.. Has your stop order been triggered?

**JBinKC** · 03-20-2008, 08:00 AM

I must admit I took some out of my base metals stocks that has weaker underlying fundamentals for the commodity like cobalt. Regarding, oil I can't see it going much lower than $80/bbl unless our country opens up the eastern outer continental shelf for drilling.

**Scanner** · 03-20-2008, 12:23 PM

Sweeps,

My stop order is 10 points away at this time. Yes, it really took a beating today - 2x that of gold. Lost about 8.5% in one day.

Average volume is about 900,000 for this - today it was 3.2 million. . .very heavily traded today. Somebody with lots of shares was dumping it.

**Scanner** · 03-20-2008, 12:33 PM

Which begs the question - if we have one more day like this and the stop order is triggered - what then?

I thought about this a lot today - I am very happy to actively manage/time 1/3rd of my portfolio rather than just "buy and hold" the whole thing.

Yes, even though I know you can't "time the market", doing this for 1/3rd of my portfolio seems right to me.

The choices are:

1. If the stop order is activated, sit on cash for awhile and earn 3% on that part of my portfolio and try to ascertain when to get back in.

2. My ETF's stop order is at a share price of 157 (closing today around 167), netting me a 16% profit in 14 months. Not bad. . .maybe I put an order in where I got in at 134 and go 10% the other way at 172, in case it turns and goes back up.

I'd love to jump ship into oil truthfully. . .(USO). . .but I think oil has a ways to fall (I agree $85/barrel is not a bad target prediction). . .I may elect for #1 and this will be my actively managed strategy. . .silver. . .cash. . .oil. . .silver. . .cash. . .oil, etc.

I dunno. . .this is just an academic discussion - it appears to be set to open higher tommorrow. The stop order may not even be activated. But who knows - after hours trading may cause more sell-off.

My Portfolio is Perfect