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September 2008



View from the Bottom: Tales of a ~0.05 Rated Player

September 28, 2008 – Comments (34) | RELATED TICKERS: CEF , GLD , SLV

Let me first apologize for my absence from CAPS for the past couple of months, especially to Madcowmonkey, TastyLunch, StockSpreadsheet, GreenMycon, TMFSinchiruna, and many on whose blogs I have posted and who have posted on mine. There are two reasons for my AWOL. 1) Work and life are crazy busy right now, and 2) During this crushing gold and commodities correction, it was extremely painful to watch the market and my score. So I didn't for awhile. Sort of a defense mechanism, which is really the ultimate point of this post. Because throughout this correction and huge drop in my score, I did not close any picks in CAPS and I certainly did not sell in real life. Whether this is smart or not is debateable. But I wanted to discuss some of my convictions and use my score and other evidence / commentary out there to highlight what I believe is the market trend.

First, the Ugly.

My score reached -3300 at its lowest point (so far) down from just shy of +1000. ... yikes. My rating was bouncing around 0.05-0.10 for awhile and at one point I was in the bottom 100 players out of >61000 .... double yikes. Humbling, yes. Frightening, yes .... and no. Which leads me to,

Second, Was I / Am I Scared.

Well I would be a liar if I said no outright. I mean I have real money at stake, and watching your portfolio take >5% haircuts on a daily basis isn't exactly pleasant. But if I was really scared of the movement of my portfolio, I would have sold. And I didn't. I firmly believe that the commodity bull is not over and the gold/silver bull is definitely not over. Right or wrong that is what I think, and I refuse to be shaken out of my positions. I will go into why I don't think I am wrong in a moment. But I believe that the gold bull run still has much farther to go up and the USD has much farther to fall down. And so instead of watching my portfolio get hammered every day, I would check it only occasionally. I have been adding to my gold and silver positions, especially on the last two large pullbacks recently. But I have been trying very hard not to get caught up in the day-to-day flailings of the gold market during this correction phase, mostly to keep myself from going insane :)

Third, Are Gold and Commodities finally done Correcting?

The short answer is, I believe yes. Now that doesn't mean very much. I am not a very good trader. If I was, I would have held a little more cash in reserve and bought more on the pullbacks. As it happened, I bought into the peak with a large chunk of my cash. So my timing could be WAY better. So has this recent upleg signaled the end of the correction in gold? I think so. But of course it could correct more. But I think due to recent events, the bottom of the correction has been put in, and I would like to offer some commentary and thoughts as to why. Ultimately, I think gold in large part, and commodities in general really have a place in your portfolio and I think that now is the time to add to positions or open initial ones if you have not done so already.

Evidence piece number one: my score. Holy cow. Just look at my score. It is a vast wasteland diving to the depths of the Fool scoreboard. And my porfolio is weighted primarily as Gold/Silver, Commodities, and Alternative Energy. During this last correction for pretty much all of these sectors, my score has tanked. But recently it is signalling a potential change in direction. See below.

binv  [more]

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