Posts from the ‘Portfolio’ Category

Sep 26

Week 12 Portfolio Update: Smacked Down

I could be talking about what happened last week, or what happened to gold and silver overnight. My portfolio was doing quite well before Thursday, up since inception while the TSX and S&P were down substantially. Thursday and Friday knocked the wind out of me, and it looks like that might continue today. Mind you gold has come back from the truly panic lows it set in Asia overnight. If gold continues to fall I will be forced to lighten up on my gold stocks. In this market it is seeming more and more to me that I should just lighten up on everything to zero.

Sep 18

Week 11 Portfolio Update: Riding Ahead on Choppy Waters of European Sovereign Debt

Well we made it through another week without the world washing away. In fact the market was even up a few percent. I don’t understand how, but it was. We have a horror show all around us, with this perhaps being encapsulated most eloquently by the WSJ, of which I posted about on Tuesday.

The WSJ printed a truly frightening account of the borrowing situation in Europe. The quote is so jarring that it is worth repeating I think. As per the WSJ, from the lips of one French bank executive:

“We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore,” a bank executive for BNP Paribas, who declines to be named, told me last week. “Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.”

The S&P promptly went up 12 points.

I mean, seriously?

Of course BNP denies the rumor vehemently. So it must be just fear mongering, right? The WSJ, meanwhile, stands by their source. I don’t think its any secret that the French banks are going to be the first to have short term funding problems. This has been pointed out many times by FT, with the most recent being here. FT provided the following two graphs to bring the point home.

Both BNP Paribas and Soc Gen are high on wholesale funding (ie. they need access to markets to get the dollars to meet liabilities) and low on liquid assets (ie. they don’t have a lot of readily exchangable assets on hand to trade for dollars).

FT summed this situation up by commenting that it was “not good.”

Indeed.

Anyways, I made money this week, and it felt a bit like it might when you collect you’re last severence check and you’re not sure where the next one is going to come from. I also sold more stock to raise more cash. Every week my portolfio comes closer to approximating an underleveraged turnaround gold stock ETF. Gold stocks are the only asset class I have an ounce of comfortable holding. I keep hoping for a buyout of Arcan or for some truly unignorable news from Coastal that will send these positions to the stratosphere, but candidly I admit that the more likely scenario is that they shall go down with the good ship Europe.

What will next week bring? God only knows. Europe implosion? Europe salvation? Or more muddling misery where every rumor of an Asian knight is met with cries of relief and cheers of joy, even if its just the 5th update on the same retread story from Bloomberg. Anyways, some day something is going to give. Lets just hope that when it does, gold goes up.

Sep 11

Week 10: Back above Par

While the markets continue to shake and shudder, my 10 week old tracking portfolio put in a yeoman performance last week, bucking the trend and returning to the black. In the period since my portfolios inception (July 1st, 2011) the TSX is down 7.1% and the S&P is down 13.8%. So on a relative performance basis I am doing ok. I would like to be able to make money again some day though. Of course, that is difficult when it seems that the best place to put your money is in cash.

I made one trade last week. I bought Collosus Minerals. Its hard not to be enticed by the momentum of the gold stocks. In my actual portfolio I did more tweaking by reducing my positions a bit further in Arcan and Equal. As I have said before I will not tweak in this practice portfolio because the commissions are too high. In my actual accounts I also increased my banking hedge by adding to shorts of Bank of America and UBS.

In a related note, Don Coxe had an excellent conference call this week. He is finally beginning to see Europe as negatively as I am. He is also still a strong believer in gold. Its worth a listen.

Sep 5

A Very Important Day for Gold Stocks?

I have been working on a write-up of Argonaut Gold over the weekend. I was expecting to post that write-up today, but circumstances have arisen that make other more basic questions more pertinent (by the way, the essence of my soon-to-come post on Argonaut Gold is the stock is cheaper relative to other gold stocks than I first thought).

However, first things first:

This looks a lot like the beginning of August.

Meanwhile the price of gold is up again. It is almost at $1900/oz. One of the popular gold related articles I have seen over the weekend is about how pension funds have no exposure to gold at all. A bit of a buzz appears to be beginning.

Meanwhile, on Friday gold stocks staged a breakout.

Putting all of this together, Tuesday looks like a very important day in gold stock land.

Look, I have written before about how torn I am to own gold stocks right now. I have sold down everything else in anticipation of the European mess getting worse. In my actual account I have shorted banks to hedge the market exposure of my remaining oil stocks (I cannot short in the practice account I post to this blog so this account is more exposed than I actually am). But I have held the gold stocks. This is partially because it makes sense to me that gold will go up as the Euro disintegrates. It is partially because, thus far, gold stocks have worked. But I always hold in the back of my head the recollection of 2008 when gold stocks got hit just as hard (harder?) than the rest of the market.

So what will it be this time?

Clearly, unless things change drastically over the next few hours, North American stock markets are going to be routed on Tuesday. And since Europe is the epi-center of that rout, it is reasonable to bet that the price of gold will continue to be higher on Tuesday.

Gold stocks can only do one of two things. They can follow gold and confirm their break-out from Friday, in which case I would argue that this is only the beginning (if gold stocks do decouple from the market then I suspect this will be the confirmation to many that things are different this time and that gold stocks are an inverse correlation to the evolving euro-crisis). Or they can fall back, demonstrate it was a false breakout, and show that they will fall with the market just like in 2008. In this case they will likely end up falling hard as all the momentum buyers from last week run for the exit.

Its quite a stark set of outcomes.

And that is why I suspect tomorrow is a very important day for gold stocks.