Probably there are lots of individual factors that affect our decisions where to put our money.
I agree with Westy that we are probably in for a difficult bear market....it is amazing how many of the bear arguments of the last few years have all of a sudden started to materialize...bad mortgages making the tech bust recession even worse, bond insurance being a ridiculous joke, easy money flowing to unintended assets...makes me think that this will continue to unfold with surprises being consistent with the bear viewpoint, with derivatives eventually taking us to a place we thought would never happen. MBI, RDN, CFC, COF, LEND, NEW, the home builders, miraculously levitated for years, all of a sudden drop like a stone, as many here said they would.
In 1973 we had a similar scenario, tho not as bad, and commodities were the place of safety. Gold and gold shares went up, when the market started to fall in that january. Gold went up until the market bottomed and rallied, and then gold got hit hard . Perhaps it will be similar this time, gold goes up this year while the stock markets go down...but watch out at the market bottom, as gold will reverse for a large correction?
In looking at the gold sector, it is interesting to me that the juniors and explorers can be a great source of wealth...they can go from having no assests to having 10s of billions in assets, and the stock gains can reflect this. With the metal going up strongly, it gives you an added buffer against mistakes, as the rising metal will raise even the companies with mediocre exploration results. In this situation, it may actually be a lot easier to find successful companies than in computer or biotechnology...and the parameters related to finding metal seem to be easier to understand than the parameters that will define a winning technology.
So, I would put the money in 10% physical gold in personal possession, for safety. Then 30% in juniors with solid deposits of metal, either close to production or well funded, and in stable political areas. Then 30% in speculative juniors/explorers, with the caveat that this needs to be flexible, and adjust as new information develops, spread among half a dozen choices...keeping an eye out for new opportunities. Then the remainder in treasury bills outside of US, because, "tho shalt not bet thy whole wad", as Mr. Russell says. And no margin, because the volatility will give you a heart attack, and make you sell at the bottom, and with these small stocks, you really have enough leverage if you find some good ones. TAke delivery of shares in case the worst case scenario does actually develop..you will not have time to respond if you wait until the last minute..
Of course, a portfolio needs to constantly adjust, cant just sit with a position chosen today and hold it for years, need to watch the news, seek information, see how events unfold, and adjust accordingly. Add to winning positions with an improving story and get rid of those that fail to develop.
The small mining companies offer a great opportunity today, tho, imo, potential for much growth, with rising metal prices to bail you out of your mistakes, and many of them at very low market caps. If gold goes over 2000 as some here suggest, these stocks will offer great rewards....and protect you against either inflation or deflation.
Robin |
