#1 Optimist in CAPS this Weekend... :)
CAPS is the most ingenious investor's tool out there. Where else can you track the relative performance of your investment ideas in real time against an enormous community of more than 45,000 fellow members? As long as your rank is rising, you know you're on to something that's working, and if you're falling back in the pack, chances are you're also losing money in real life and your portfolio needs some tweaking.
When I first posted my portfolio to CAPS in November of 2006, I was looking for courage. You see, I had built a real-life portfolio that was more than 50% weighted in precious metals, with another 25% in energy and most of the remainder in international equities and ETFs. After the enormous correction in the prices of silver and gold in June of 2006, I was determined not to feel that type of pain again, but I also remained convinced that the precious metals and commodity boom was still quite far from its peak. Watching my CAPS ranking rise gave me added courage to remain long precious metals through some additional corrections, and hindsight has shown each time that this was the right move for me.
As a slow and steady rise in my CAPS ranking was mirrored by exciting real-life gains, and as my continued due dilligence into the macro economic drivers behind the commodities boom painted an ever-clearer picture, I increased my precious metals weighting until today greater than 60% of my holdings are in the metals complex. While every investment professional I spkoe with told me this was foolhardy... that "conventional wisdom" dictated a maximum gold weighting of 5-10%... or that commodities were far too volatile to invest in over the long haul. Well, they're right about the volatility. PM investments are not for the faint of heart. But for someone like me who saw every single macroeconomic indicator pointing towards a free-falling US Dollar, out-of-control inflation from the fiscal policies of the federeal government and the FED, etc... I saw precious metals as the only way to preserve capital through the economic upheaval that was presaged by the news every day. When the Dow began tanking in earnest last month, and the U.S. recession became a more obvious threat, it was that final confirmation for me that I'm invested exactly as I would wish to be invested during such a period.
I'm sure I'm not the only CAPS member who gets excited from time to time to watch the rankings. But a couple of months ago happened to pay attention to one of my "lucky charms" for the first time. It was the "yes" charm, which indicates a member who has been in CAPS for 3+ months and has never made an underperform call. I was excited to see that even though my ranking was a few hundred back from the top, that I was in the top 10 of the yes list. Since I never short equities in real life, nor do I engage in puts or calls or any such instruments, I never would have thought to list an underperform pick. I never thought strategically about playing CAPS as a game... it has always just been a representation of my real-life portfolio, though far from a direct match. That said, if I had been playing strategically, you can bet I would have shorted every major bank and brokerage institution back in August, and my overall ranking would be higher than it is today.
Well today I feel like I've reached the top of CAPS for me personally, since I will never choose an underperform call. Those who choose underperform surely have greater leverage to a given investment thesis, and thus can achieve greater ranking results with a thesis that is solid. So I'll probably never be the top fool, but I'm okay with that. And I probably won't remain the top 'yes' man for long... since there are a ton of great players out there and I've seen the portfolios of some of the others on the yes list... but at least I'll know I was number 1 for a weekend once in 2008. More importantly, this suggests to me that being long gold, silver, energy, and international equities is the best arrangement of long positions at present... and since my conviction of where this is all going has only grown stronger... I intend to remain invested this way right through $1,650 gold and $50 silver and beyond.