What do people think of buying some GLD and/or some of the gold miners? Gold is the traditional fear trade and global equity markets have certainly been anxious for awhile now. How long will the markets puke is anyone's guess, but thus far gold seems to be a beneficiary of this year's turbulence.
I realize that my question is a broad one, I'm curious to look at gold as a long term investment or short term trade from all possible perspectives. Thanks in advance for any and all replies.
Happy Super Bowl weekend to all!
Comments
My experience with Gold and Metal Miners has not been good. There are some long trends which is good if you are on the right side of it but most of the time they land up losing money with their volatility. May be if you are a momentum trader.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2016/02/05/revenge-of-the-gold-bugs-gold-etf-notches-5-weekly-advance-biggest-since-2013/tab/print/
Having said that, OPGSX is my best performer since early September when I bought it (+19%), also my best performer this year (+13%), also my only fund to show green yesterday. This may be simply the Broken Clock Phenomenon playing out. Even perennial laggard HSGFX is up 5% YTD.
My other better performing investments lately have been PRPFX and international bonds (notably RPIBX). Like gold, these types of investments benefit when the dollar weakens or looks like it is about to. Also, fear of both bonds and equities may be driving some investors into these investments.
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Added: If someone feels gold has a future, I'd be a lot more comfortable with them looking at a fund like HSTRX, which plays around a bit in the metal, but hedges against the kind of potential 25-50% losses gold funds are known for. It's up 3.5% YTD.
Caution: I'm not an expert and probably don't know what I'm talking about.
My thought is exactly the scenario which you mention, which could prompt GLD and GDX to climb higher and likely SLV as well. But that's assuming this scenario plays out. Who knows? Thanks again for your reply!
I too have been watching the space very closely and actually added to my VERY small positions with junior silver miners just yesterday.
First of all I am still of the mind that everyone should have a wee bit of precious metals in their portfolio. By wee, I'm talking 3-10%. I consider this to be a security blanket type of investment (something for that EOTWAWKI moment). My grandkids have their bed buddies and my pm holding is my bed buddy.
More pm than this core holding is speculation. Speculation is fine and fun so long as you realize the risks. Is now a good time to speculate? What do I know? When I play with investments, speculate, if you will, I lean towards momentum investing. In this I look for trends and when they appear, gradually scale in to my target amount - as long as the trend (momentum) is with me. Let's say you think this nascent trend in the pm's is going to last, and you figure you have $10K to play. Invest $2500 and see if you make money. If you do, add another $2500 and again, see if you make money. If you do, go with the remaining $5K. If at any time it doesn't make money - do not add any more. If it loses, or starts to, have a mental stop loss of say 5-10% at which point, you start scaling out of the play. If it drops some more - exit. This momentum style investing and my penchant for this particular arena, is why I added to my junior silver miners yesterday.
Now as for investing in pms. Funds and ETFs are of two types - bullion and mining stocks. Bullion ETFs will tax your gains at the Collectible rate of 28%. My favorite fund is still TGLDX which does have a little bullion but is taxed at normal cap gain rates. Or, you can go with CEF, a closed end bullion fund that is about 55/45 gold to silver. Or you can go with mining stock funds, ETFs or individual stocks. Lastly, and this is important to many people. For you core holding in pm's, the 'hard corps' recommend holding the physical metal. Although some peeps like safe deposit boxes and such, cripes, a roll of American Gold Eagles comes in a tube 2" tall and the size of a quarter. You can hide it in the oatmeal box and it's worth ~$25,000.
All this said, at this point in time, based upon the metrics of the gold/XAU and gold/silver ratios, miners are undervalued vs. bullion and silver is undervalued vs. gold. Note that this is on the margin. The great leverage is with the junior miners but this is also nose bleed territory. My only homerun in about 40 years of investing was with Silver Wheaton that I bought around 2002-3 for under 3 that I sold in the 40's. Cha-ching!
Right now there are several geopolitical factors at play. China's economy has slowed and they have been fairly steady gold buyers both by the CB and by individuals. The threat of terrorist attacks has really spooked the traveling public and this fear translates in to bullion demand. We also have the zika virus shutting down travel to central and south American and I am far from convinced that Rio is going to be able to even have the Olympics. Oh, and did I forget the Saud family's gas war to end all gas wars? And with Iran coming online, I don't see oil much higher than today for quite a while.
Now all this stuff is what Fear and Loathing are made of (where's Hunter?).
BUT when all is said and done, the POG is dependent upon the price of the U.S. Dollar. Because gold is priced in terms of the dollar and the dollar is the world's reserve currency, they normally are indirectly proportional and this has greatly contributed in the pull back in bullion prices from it's high of ~$1900 in 2011. Recall that the great bull market ran from 2002-3 until this time and commodity bull markets normally last in the 12-15 range. This is due to the complexity of bringing additional supply online in response to higher demand and prices (e.g. you have to find it).
As for the dollar, I've said it was trash since they started QE-nth but compared to any alternative currency, it is still the cleanest pair of dirty socks in the hamper. Lately, it's been showing some weakness but due to ???? Although, I'm starting to sense a negative impact on the dollar caused by the anger of the general public directed at Washington is the support for Trump and Sanders.
Sorry to ramble on,
and so it goes,
peace,
rono
Ramble away, I'm soaking it all in. I remember your pounding the table for pm's 5 or 6 years ago, which led to my buying GLD, CEF and GDX back then. I owe you a beer or 4, thanks!
Momentum seems to have switched in favor of GDX for the moment. Thanks also for your comments on momentum investing. Don't think I'll do so, but the temptation is there. I don't have the time during the day to watch the ticker, plus I have a wife and 2 kids to think about. I've enjoyed everyone's input though!
Thanks for the reassurance.
Unrelated thought - As someone noted a while back, the contents here live-on forever in cyberspace. So that someone with no experience googling "gold" a year from now may well access our humble thoughts. Might explain the elementary, rudimentary, and simplistic nature of my ramblings.
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PS: Great stuff from rono. My direct exposure is in the 2-3% area. Will let it run higher if it wants. With a few other funds, like PRPFX, it's actually a bit higher anyway.
But this is just me and if that is your thing then by all means go for it. For gold and silver devotees it is like a religion. And I learned to never debate/denigrate anyone's religious/political beliefs. Professor Jeremy Siegel pretty much laid it out for gold in the 1998 edition of his book. Adjusting for inflation he compared the total returns for stocks, bonds, bills, and gold from 1802 to 1997. He used the London spot price for gold. $1 in stocks returned $558,945 vs. $803 for bonds, $275 for bills and $0.84 for gold.
Edit: Hank and Ron and regarding a topic I posted about the other day. I can guarantee you that you two guys have a pension. Those of us like me that don't can't be "playing" around in the precious metals and funds like PRPFX - a five year loser. I don't mean that in a ornery manner either. It's just a fact that we pensionless folks look at the trading/investing landscape through entirely different lenses.
I'll watch gld & gdx for a few days. I kinda doubt that I'll put money into either of these etf's however.
Speaking as one of the bigger fools in the room I don't believe rono would anymore trade his entire portfolio in and out of junk/muni bond OEF's than Junkster would a portfolio of PM's. Circle of competence: rono knows PM's; Junkster knows bonds. I have no doubt that both can successfully trade their chosen vehicles like nobody's business. However, I don't see either pounding the table for their way of doing business but rather expressing opinions on what they know and understand. As in all matters, weigh the options for yourself mindful of the risks and rewards in view of your overall endpoint.
PRPFX (which I've never owned) has it's ups and downs like any investment. It's glory environment is during market calamities, recessions/depressions and so on. It pretty much lags during times of market advances as we've seen the last 5 years but kills it when we're falling into the eternal abyss. Again, treat it accordingly if you choose to invest. All things in moderation for most of us.
Yes - And most of us here are probably overweight equities today for that very reason.
But here's what makes some of us age 70+ and retired shudder when contemplating where to invest. It's an excerpt from a purportedly independent study of PRPFX - the fund many love to hate.
(Excerpt): ... Turn the clock back a bit and revisit a time when the sky was falling and “Mr. Market” seemed to have it in for all of us regardless of where you tried to put your money. That was in 2008. ... (Let's) refresh you on the performance of certain asset classes/indexes that year:
S&P 500 -37.00%
Mid Cap -41.46%
Small Cap -33.79%
MSCI EAFE (International) -43.06%
Emerging Markets -53.18%
(Continued) ... If you had any Bond exposure in your portfolio that’s probably all that you had to celebrate as they at least turned in a positive +5.24%. Most people realistically didn’t have enough Bond exposure but flocked to them in 2009. They were rewarded with another positive year with +5.93%. The problem with that, however, is that the areas they just cut bait on (stocks) returned the following:
S&P 500 +26.46%
Mid Cap +40.48%
Small Cap +27.17%
MSCI EAFE (International) +32.45%
Emerging Markets +79.02%
Source: http://www.myportfolioguide.com/blog/168-independent-review-of-the-permanent-portfolio-fund-prpfx-.html
Article doesn't give stats for junk bonds, but my recollection is they lived up to their name in 2008. By contrast, PRPFX lost a bit over 8% that year.
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How many small investors had the stomach to sit out 2008 passively watching their life savings depreciate by 40% or more? More unlikely still, how many who yanked their $$ out in panic after suffering big losses realized on March 9, 2009 that the bear had ended and it was now time to reinvest?
So Junkster ... That large outperformance of equities since the 70s is only as good as an individual's ability to hold on to those investments through thick and thin. I realize you are a experienced and adapt trader within your specialty. However, the research, work, education and temperament required to execute your approach doesn't fit many of us.
All of the above is why I keep a foothold in PRPFX. Won't make you nearly as much $$ as equities will long term. But it's a fund that allows some of us to sleep a little better. (And yes - you can replicate the fund's mostly static investments on your own for a lower ER if you want to.) At near 10% of my holdings I like it and recently converted to a Roth.
Loved Rono's reference to the teddy bear. I never had one as a kid, but occasionally took a bottle of Johnny Walker Red to bed in my younger years. Probably served a similar purpose.
Mark is spot on. Goes back to Peter Lynch - play what you know. Everybody has some area of knowledge superior to most and if played . . . I've collected coins for some 60 years so I should know pm's. I've watched Mark play MLPs for years and tried, but I have NEVER been able to figure them out. Indeed, over the years, most of my investment losses have been from playing somewhere I had no business being.
That said, when you play within your circle of competence, as Mark put it, you are able to bear greater risks with a larger percentage of your portfolio.
As for investing differently because I have a pension is really beside the point of financing a retirement.
I've always thought of retirement as a footstool with one or more legs. Social security is a leg, as is a DB pension, and a 401(k), an IRA, savings, home equity, rental income, other streams of income, a child who is a physician with a granny flat, etc. Each of these represents a leg under your stool. The game is to get as many legs and make each of them as strong as you can.
and so it goes,
peace,
rono
Granny flat? I had to look that one up! My neighborhood has a couple of granny flats.