Letter 2008 12 30 - part 3
We Made Two Mistakes
We underestimated, full stop.
(i) The rapidity of the debt laden monetary edifice’s systemic unwinding, and
(ii) The force with which a wastrel currency such as the US$ can rise due to debt deleverage.
Another interesting point to make is, while gold is up its minimum and obligatory 5%, large gold mining shares in aggregate have fallen 30%, and many smaller gold mining shares have fallen more than 80%, even though the cost of extracting gold (mainly oil) has fallen 50%. In other words, it was not enough that one be invested in gold, but that the gold must be in physical/certificate form, and not be in gold mines.
We did not lose in 2008 because
(i) We were low in shares,
(ii) Were not leveraged,
(iii) Had relatively high cash, even US$ cash, and
(iv) Had some short positions that wagered for a falling market.
Let us count our blessings so that we can better prey, and pray that we may count them again next year.
Where We Now Are
Item Amount (2008.12.30) Notes
Cash 19.8%
- CAD - 8.3%
- CHF - 1.6%
- HKD - 5.5%
- RMB - 0.1%
- SGD - 0.4%
- USD - 3.6%
Gold, platinum and silver 27.8% 34% physical, 66% certificates
Bonds 0%
Equities 20.2%
- Gold/silver mining - 7.7% Mostly GDX, and some PAAS
- Energy - 3.6%
- Other - 8.9% Specials, SRS, TBT, TAN
Real estate 32.2% Yielding @ 4.5+% on cost
Liabilities 0%
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