Friday, March 2, 2012

Keeping My Emotions in Check

I am extremely bullish on silver. My research tells me that 2012 is going to be a good year for the white metal, not that it matters but my gut tells me the same(never invest because your gut tells you). We are investing in silver and I personally believe that it is going to be one of the best investments not only in the next 5 years but might be the best investment opportunity in my lifetime. Only time will tell, and it will be fun to look back and see this statement, because overall that is a pretty bold statement for someone in their 30's, and hopefully I will have a long life ahead of me.

We started looking into silver in 2008 when the price pulled back strongly to around 8-10 dollars. I watched it for six months regularly as it climbed up to $16. While I was watching the price I was doing research on the fundamentals of it. I was was also looking into the best way to purchase and store it. We finally pulled the trigger at the end of 2009 at around the spot price of $18, at this point I felt confident that it was worth putting some money into.

Over the last couple of years with investing in the PM market, I have done my due diligence and spent many countless hours studying and double checking the fundamentals to make sure that I/we had made the right decision.  All you hear is that silver is volatile and its for speculators(which it is), but you never hear the fundamentals. During this time not only have I confirmed that I have made the right decision, but that I believe in it more than when I initially looked into it.

During the last two years, we have been dollar cost averaging and not trying to time the market, just regular accumulations of the metal each month, no matter the price. I believe I have a done really good job keeping my emotions in check with not worrying about the price but focus on purchasing it not matter the price and knowing that in the next few years trying to save 2-5 dollars per oz isn't going to matter.

We are now sitting in a good spot with our investment now and have our core position. I believe with the market swings, that I can start to play this investment a bit different. I believe that we can stop buying every month and save some cash for when the price swings to the downside. Then we can pick up some more at cheaper prices...or buy the dips. We still want to purchase more, I would love to purchase all the way up to around $50. I will re-asset once the price hit that mark.

Last year we saw a run up in silver from around $28 to $48 dollar over the summer and then back to finish around $28 at the end of the year. We purchased at $28 and also at $48, which overall, doesn't matter, because we also purchased at $18 and other prices during the last two years.

So far this year, the price started at around $28 and so far it's around $36 around 30%, and honestly its hard to watch the price going up and not think that you have missed the boat.  I follow some blogs that follow the metal hourly and daily, most of the people on these blogs are as bullish, if not more bullish than myself. It is funny to read the comments about the price movements. You can  start to see this timing the market mentality and I am surely guilty of it (reason of this post).


Before I could finish this post, Wed, around 10am Silver dropped from around 37.50 to under 34 which is over 7% drop. This was exactly what I was talking about, silver had been on a tear since the beginning of the year(up 30%). The 2011 ending for silver, everyone seemed defeated and some even seemed bearish on the overall trend(including me). Now the night before(Tuesday) everyone on these blogs thought they had missed the boat and that silver was going to the moon without pulling back and taking a breather. I remember telling myself that I just need to relax and let the price come back down.

Anyways, I just need to remain level headed and keep my emotions in check. We have our core position and I think that we will be well rewarded come one, two, three, etc..years down the road. A lot can change during this time and I will be watching very closely and seeing if the fundamentals change or if it is time to move our money into something that is more undervalued than silver.

I have seen how the market trade on greed and fear, and experienced it first hand.

Here is a great presentation from David Morgan on silver:

Sunday, January 1, 2012

2011 Year End Update - 2012 Here We Come

Another blessed year comes to a close and despite the rocky road, we are still gaining...slowly.

2011 brought a lot of hills and valleys and especially with the portfolio. I believe this is due to the insurance/investments in the precious metals.

Even though Gold is solid and remained in the 11year uptrend finishing up 10%, silver on the other hand started the year at $30.67oz and ran up to $48.70, only to finish down around 1% at $28.18. With that, we saw the net worth move  upwards fairly fast and downwardly fast.

One place I feel like we might have mismanaged was more in cash and less in stocks/brokerage account.

Lets break it down:

Cash & Savings: Looking back on this year, I have to say that I probably mismanaged this area a bit. I really wanted to to get to 50K in cash. The reason for this is that we are still trying to get our core position for our in PMs. Our goal in 2012 is to get 50k sitting in cash in this bucket.

Stocks/Brokerage: 2011 saw a payoff to some selling of a few of our stocks. Eldorado Gold Corp(EGO) $269.67 +53%,  Fronteer Gold(FRG) $517.38 +64%, Avalon Rare Metals(AVL) $886.82 +189%,  Quicksilver(ZQK) $20.73 +42%  Stocks sold for a loss - Proshares Ultra Silver(AGQ)  -$55.54 -19% Ultrashort S&P500 Proshares(SDS) -$139.46 -34%.

Overall, what we sold this year, we were up $1209.46 a gain of +59%.

Here are the gains/losses based of percentages this year. Currently down 8% for 2011, I try and keep a level head and not get to excited or depressed on prices, investing in commodities/energy you see wild swings in the market. We saw our uranium stock drop 50% after the Japan earthquake this year.

The list of stocks we currently own: (AAU)(AG) (AUY)(FSM)(LYSCF)(MRO)(PAAS)(SSRI)(SLW)(SVM)(EXC)(PWE)(PHYS)(DNN)(ZQK)(XOM)(CVX)(RGLD).

*As you can see we are heavy in commodities in my brokerage account. This is all based on my thought that over the next decade the best investments are going to actually be in hard assets and assets in the ground. My Roth/IRA/401k are in pretty common index funds and mutual funds so I figure I can go more risky with brokerage. I believe these will out perform equities in the next decade and if nothing else I feel more comfortable with my portfolio being diverse. I am bearish on the US Dollar and US Economy, I believe that 16 trillion dollar deficits are not going bode well for the USA.

Precious Metals: (Spot : Gold - $1531.00 / Silver - $28.18) (Gold/Silver Ratio: 54.32)(Dollar cost - 29.94)  Precious Metals took a huge dive going into the end of the year. Gold was still up 10% and Silver down 1%. We remained dollar cost averaging in the whole year. Every 2-4 weeks we would purchase regardless of the price. The dollar cost averaging has allowed us not to try and time the market but just purchase as we get paid. The downside to this is that we purchased at the very top at $49. Even though we have made purchases when it was under $30 as well.

As it stands right now, we have a core position, and will be making purchases on dips and occasional times just to pick up some here and there. We are about half way to where I think we should be and this will increase with our overall net worth and the economics of the world/US.

...we are currently investing mostly in silver which I plan to sell and purchase gold when the silver to gold ratio is 30/1 then 20/1 the finally 10/1 if it makes it that far which I do believe it will at least reach 16/1(its historic ratio). I plan on always owning silver and gold bullion to pass along to my kids/grandchildren. We own silver as an investment and we hold gold as an insurance policy on our investments. We currently prefer to keep a percentage of our wealth in PMs instead of federal reserve paper(dollar bills).

Retirement 401k: This will jump up an bit more as I haven't been counting my wife's retirement this year. I believe it should be around an extra 5k.

Retirement IRA's: This category didn't have a great year and we actually were negative...I have been sitting in cash in some of this and the emerging markets and total stock market funds along with the precious metals funds didn't seem to perform particularly well this past year. I am currently looking to use some of the cash on the sideline go to work in their dividend paying funds. Current funds we are in: (VDIGX, VWELX, VGSTX, VEIEX, VGPMX)

Real Estate: The plan remains to keep our money that we were going to put down as a down payment in the bank or investments. We will try and hedge our payments with trying to pay off the home in 10-15 yrs depending on what comes our way. This might change along the way depending on kids, economy, jobs and so forth.

Debts and Liabilities -
Credit Cards: We currently do not hold debt in this category and prey that we never have to. 

Car Loan:  First vehicle is paid off, it is currently 5 years old and is going to be the family car going forward since it is a SUV. After long debates and figuring out what is best for our family, we decided to purchase a new Prius. Our reasoning being that was that the second car was getting old and needed more and more service, but yet it still had good trade in value. Also with a kid on the way, a two door just wasn't going to cut in any longer. We travel to family and to the beach a lot and we just were not going to have the room to pull it off any longer. We decided on a gas efficient car since we travel to family and I travel to work everyday. We also believe that gas is not going be cheap(relatively) ever again.

Home Mortgage: Mostly paying interest on our home at the moment, so not much of a dent here.

Hard to believe 2011 came and went as fast has it has and that we are still doing such a great job with our finances. Even a small 6K jump in our net worth, which is a bit deceiving, since we went 22k into the vehicle debt. I feel like we are on the right path and we just need to keep doing what we are doing.

Headed into 2012, we now have a kid on the way now and the stakes are starting to get a bit more serious and real. We have decided to go back onto a budget and try and live off my salary only. Hopefully we can pull it off and save a lot over the next five months before the kid arrives.

We are starting to raise as much cash a possible and hopefully we will have close to a year worth of savings(salary) saved for when the kiddo comes. Well, guess this is it for 2011, welcome 2012!