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XMFSinchiruna (26.96)

#1 Optimist in CAPS this Weekend... :)

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February 24, 2008 – Comments (10) | RELATED TICKERS: AEM , KGC

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.

 

10 Comments – Post Your Own

#1) On February 24, 2008 at 12:11 PM, dwot (40.33) wrote:

The more I look at the US economy, the more I can see that $1650 gold, but, I am not so sure that increase shows up in the rest of world's currencies.

Personally, being Canadian, I have not found any good economists talking about the state of the Canadian economy and the major f---ups that we are facing.  I simply don't know what is hidden, although I suspect our biggest hit is going to come from our "exemplary" and "world-model" of how to fix a pension plan.  I suspect the plan is going to blow up and I am not sure the degree of the economy it will take with it.

It is easy to find people of all nationalities looking at the US economy through a microscope picking the problems apart, and they are massive.

I think all economies are going to face problems in the day to day operations, but the cracks in the foundations of the economies differ and the US doesn't just have cracks in the foundation, it has whole buildings falling.

I think the Canadian economy is going to have serious day to day operation adjustments, but I'm not sure of the degree of stuff out there that could send the "buildings" falling.  We have a housing bubble, but we have more skin in it and far better insurance, 2.75% for mortgages with only 5% down.  I am not sure what the US was charging as it seemed variable, but a link I found said 0.78% for 5% down, so that's a huge difference.  And our mortgage insurance is all government regulated. 

There does appear to be some 0% down ads, but that is only for second home owners with good equity in their first home.  That's the only place I've seen it adverstised, so I suspect there is equity transfer, you really have to borrow 5% from your first home.

The housing bubble will clearly be a diaster for some of the BC cities, like Vancouver, but because we've had reasonable premiums for mortgage insurance, and at least some "skin" in the game I don't think our mortgage insurance will run into the same insolvency problems, or if we do, it will end up being 90 or 95c on the dollar instead of this zero on the dollar business the US is seeing in some mortgage issues.  Despite our housing bubble reaching similar levels to some of the extreme problem cities in the US, our overall equity in those bubbles is higher so we are not likely to have the same degree of negative equity.

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#2) On February 24, 2008 at 3:08 PM, abitare (35.12) wrote:

Your portfolio makes sense to me. I like to underperform, because it matches the hatred in my soul towards some companies....

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#3) On February 25, 2008 at 7:32 PM, XMFSinchiruna (26.96) wrote:

I have to admit that sometimes it's very tempting to short.  And I've never in my life seen a more obvious short opportunity than in some of the banks right now.  The rally in some bank shares in recent weeks has been laughable in its irrationality.  There is so much more bad news yet to come for the banks going forward.

 But I've come to enjoy the 'yes' charm too much to start shorting now.  :)  Just kidding... it's more because I don't trust the markets to reflect tangible value in a timely manner, especially with all the spin that flies around and the propping up of the markets by the administration and the FED, etc.

The only thing I'm sure of is that gold and silver will rise, and I'm relatively sure about energy.  Everything else is just a guessing game in my opinion.

Dwot... I think your Canadian economy will fare quite well... the presence of the precious metals miners on your markets will prevent a drastic correction in my opinion.  Going forward, we will have markets surviving in the short term on the strength of their country's respective resources, and in that department you're in great shape up there.  :)  By the way... 10% of my portfolio is in Canadian energy income trusts like PWE,PGH,PVX,ERF, and AAV.  With dividend yields of 14% or more... I believe you simply can't go wrong.  Investors looking to get in, though, should get in gradually here as they have all rebounded a ways from their recent levels after some analyst downgrades.  Still... it can't hurt to start a position here.

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#4) On February 26, 2008 at 5:25 AM, StockSpreadsheet (72.55) wrote:

If the U.S. economy goes into/deeper into a recession, that could still be bad for the Canadian economy.  Last I checked, between 2/3 and 3/4 of Canadian exports go to the U.S., with about an equal range of their imports coming from the U.S..  Therefore, a slowdown in the U.S. could seriously affect the Canadian economy.  Sure, they have some things that they could potentially divert to other nations, (timber, machinery, etc.), but a lot of it is tied to the U.S. without much of an option to sending the products other places.  (For example, a lot of the oilsands oil is sent to the U.S. through pipelines that go directly to the U.S. and I don't believe the pipelines connect to Vancouver, so the oil could not be exported to China as there is no way to get it to a port.  Also, a lot of parts for the Big Three U.S. automakers are made or assembled in the Canada.  U.S. cars are not an export item, as they tend to be bigger and less fuel efficient than cars in other major markets, (Japan, Europe, etc.).  That limits Canadian options if the U.S. sells fewer cars domestically.

I still like a lot of Canadian stocks, and think there are some good values out there.  I'm just saying that Canada could be affected fairly strongly by a U.S. recession, so they are not as insulated from our slowdown as maybe a Germany or Japan might be, as a lot of their exports go by ships already, so it is a lot easier to get that ship rerouted to a non-U.S. port if they want to sell their items to China or India.

Good luck with your investing.  May all your picks be winners.

Craig 

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#5) On February 26, 2008 at 9:59 AM, TDRH (99.49) wrote:

Congratulations.  Never say never, it is early in the game, those with long term holdings will compound over time and dominate.

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#6) On February 26, 2008 at 11:21 AM, XMFSinchiruna (26.96) wrote:

Thanks TDRH... I'll keep plugging away with my precious metals.  :)  But truly it's not a competition... to me the whole point is to share ideas so that more of us can reap rewards.  Nothing would make me happier than for all 45,000+ CAPS players to be outperforming the market and be seperated in score by tiny margins.  :)  For their own fiscal safety, I really feel every investor needs some serious precious metals exposure to see them through this market upheaval.

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#7) On February 26, 2008 at 6:40 PM, ATWDLimited (< 20) wrote:

Go metals go, I am in asimilar positon to you, but more weighted in energy than metals, so it would be more like 33% materials/metals 60% energy, and 10% other stuff like techs/drugs.

Nice job so far, but it seems I have surpassed you as the highest rated yes man in the CAPS world so the title of no underpreforming stocks optomist now belongs to me a mere 16 year old investor.

Getting into caps about this september, I had this account, but I never bough any thing, on Jan 22 right in the middle of the carnage i bought up all the things I could not think of and have just crushed the market because of it. Ncie article btw.

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#8) On February 26, 2008 at 7:41 PM, ATWDLimited (< 20) wrote:

Here is the link to the new #1 optimist, in only 1 month have reached spot #59 out of 45,000.

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#9) On February 26, 2008 at 7:44 PM, ATWDLimited (< 20) wrote:

Here is the link to the new #1 optimist, in only 1 month have reached spot #59 out of 45,000.

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#10) On February 27, 2008 at 9:51 AM, XMFSinchiruna (26.96) wrote:

16 and investing this well....?  You're going to be a very wealthy man.  :)  Congratulations ATWD, I've been watching your rise up the top ten of the yes list, and checked out your portfolio a while back.  It seems both of us are on to something that is working, and hopefully more investors will see our portfolios and start weighting those precious metals and energy in their portfolios with gusto.  I don't mind at all losing the number 1 spot... as long as the person passing me is invested in metals and energy.  :)  As I said before... good luck to us all.

P.S.  Did anyone see silver today?  Up another .50 to over $19.20!  I started buying under $10, but I know a lot of people who bought at $4 and are just rolling in gains.  Silver's going to $50 on its way to $100 and beyond.  Gold is going to punch through $1,000 any day now on its way to $1,650, then $2,000 and beyond.  None of these trajectories will be straight lines, as spot prices will consolidate and correct at various levels along the way, but the point is... while some people presume that they can't go any higher... the fundamental weakness of the dollar and the inflationary practices out there preclude any other possibility.... gold and silver are safety.

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