From my post on 05-21-08 01:13 PM:
âThis is one of those days (oil hitting 133, gold at 930, DOW down 450 pts in 2 days) that I could look back on, several months from now, and think, "Wow, my account was at an all time high, why didn't I liquidate everything and just sit in cash and wait for a day like today when everything is cheap?" I've had that thought before. Like the time my account went from 165k to 135k, and the time it dropped from 193k to 164K. I still do not have a real good answer to that question, but I know i won't liquidate my account.â
*****
That was a good question back then. Why the hell didnât I do it?
My liquidation value today dipped down to 168K.
What kind of an idiot lets his portfolio drop this much?
So here are the idiotâs answers:
1. Since I did not liquidate on May 21, I was kind of stuck managing this portfolio.
2. When the stuff hit the fan, several weeks ago, my choices were to sell off losers and convert paper losses into real losses. Had I done that, what would my liquidation value be today instead of 168K. Answer: probably around 172-178K, maybe. This assumes I would have kept my âlowâ risk positions, and just sold off my high risk positions.
3. The idiot still believes that this weakness in energy and commodities is a temporary correction, and not the beginning of a total collapse of the sectors. If the idiot did not have that confidence to hold, his stance would be beyond idiotic, right into lunacy.
4. All independent analysts I read point to a declining general market, probably world-wide, and possibly a âgenerationalâ disaster of epic proportions.
*******
So if I had sold off my losers as they occurred, I donât believe I would have been very much better off then right now. I still donât know where the bottom is. I still have the possibility that the correction will end and level out, and if this happens I will be in a position to minimize my losses to a much less degree.
This is only early August and I have nothing expiring before October, so I am under little time pressure. Most analysts think the correction in oil and precious metals will be over by end of august. I donât really when I will actually surrender, but I probably am getting very close to start some scaling back, if I donât see a leveling out soon.
************
by Frank Holmes, CEO, U.S. Global Investors | August 4, 2008
Print - Quote:
Are we at the end of the commodity bull market or does this battered sector offer an attractive buying opportunity?
Thatâs the question on the minds of everyone trying to navigate one of the most complex and volatile markets weâve seen in years. The continuing economic slowdown (particularly at home and in other G-7 countries), combined with more than a year of bleak news from the financial sector, has left investors dazed and desperate.
The liquidity crisis has forced leveraged investors and companies to unload assets across the board to comply with new accounting rules like FAS 157 and FAS 140, and this has created a domino effect as investors panic. An estimated $15 billion was pulled out of U.S. stock funds in July, about four times more than in June. For the first seven months of 2008, those outflows totaled $52.4 billion, an all-time high.
July was also a very tough month for commodities and commodity stocks. The S&P Natural Resources Index fell off 15 percent, the worst monthly sell-off in the sector since August 1998, when the Russian currency crisis triggered the implosion of the hedge fund Long-Term Capital Management. Prices for the underlying commodities also suffered in July, with the Jefferies/CRB Index down 10.1 percent. This was just short of the worst monthly performance for this index since 1970.
The fundamentals for gold have not changed, and with negative real interest rates in the U.S., this is a good time to maintain exposure to gold investments. As you can clearly see from the chart below, July and August generally mark a low time for gold before prices climb with the arrival of the fall buying season, which is another reason to consider gold now.
The world is different from a decade ago. Back then, the world was experiencing a global currency crisis that started in Asia in 1997 and peaked in 1998 with Russia defaulting on its sovereign debt. This was the final blow that doomed Long-Term Capital Management.
China and other emerging economies have massive U.S. dollar surpluses, and these countries are committed to infrastructure spending. This week Chinaâs government announced that it will focus more on sustainable growth than worry about inflation. This is significant.
Last monthâs tumble for resources can be traced back to the latest troubles in the financial sector that started more than a year ago with the subprime mortgage collapse and were accelerated by the new accounting rules in late 2007. The intermarket relationship of assets get bundled together with a liquidity event, and the icing on the cake was the March 2008 collapse of the auction-rate securities market, which basically froze $300 billion in retail investor cash. This issue has yet to be resolved, and lawsuits are flying everywhere.
The market is now seeking liquidity in response to the recent moves by Merrill Lynch and others to sell mortgage-related assets at huge losses and the persistent rumors that more Bear Stearns-like failures are yet to come.
The regulatory actions in July to stop shorting of 19 financial stocks, including Merrill Lynch, was well-timed. These stocks have rallied 50 percent off their lows, and more importantly for Merrill, it was able to refinance its losses. Had the SEC not stepped in, packs of illegal short-sellers could have crushed Merrillâs stock, just as they did Bear Stearns.
While energy and resources felt the impact of Julyâs turmoil, itâs important to keep in mind that this performance did not reflect the sectorâs solid fundamentals. Historically, oil dips in July before rallying from August through October, as illustrated in the seasonal chart below. "
end quote
********
This is a decent summary of the kind of stuff I think is true.
âThis is one of those days (oil hitting 133, gold at 930, DOW down 450 pts in 2 days) that I could look back on, several months from now, and think, "Wow, my account was at an all time high, why didn't I liquidate everything and just sit in cash and wait for a day like today when everything is cheap?" I've had that thought before. Like the time my account went from 165k to 135k, and the time it dropped from 193k to 164K. I still do not have a real good answer to that question, but I know i won't liquidate my account.â
*****
That was a good question back then. Why the hell didnât I do it?
My liquidation value today dipped down to 168K.
What kind of an idiot lets his portfolio drop this much?
So here are the idiotâs answers:
1. Since I did not liquidate on May 21, I was kind of stuck managing this portfolio.
2. When the stuff hit the fan, several weeks ago, my choices were to sell off losers and convert paper losses into real losses. Had I done that, what would my liquidation value be today instead of 168K. Answer: probably around 172-178K, maybe. This assumes I would have kept my âlowâ risk positions, and just sold off my high risk positions.
3. The idiot still believes that this weakness in energy and commodities is a temporary correction, and not the beginning of a total collapse of the sectors. If the idiot did not have that confidence to hold, his stance would be beyond idiotic, right into lunacy.
4. All independent analysts I read point to a declining general market, probably world-wide, and possibly a âgenerationalâ disaster of epic proportions.
*******
So if I had sold off my losers as they occurred, I donât believe I would have been very much better off then right now. I still donât know where the bottom is. I still have the possibility that the correction will end and level out, and if this happens I will be in a position to minimize my losses to a much less degree.
This is only early August and I have nothing expiring before October, so I am under little time pressure. Most analysts think the correction in oil and precious metals will be over by end of august. I donât really when I will actually surrender, but I probably am getting very close to start some scaling back, if I donât see a leveling out soon.
************
by Frank Holmes, CEO, U.S. Global Investors | August 4, 2008
Print - Quote:
Are we at the end of the commodity bull market or does this battered sector offer an attractive buying opportunity?
Thatâs the question on the minds of everyone trying to navigate one of the most complex and volatile markets weâve seen in years. The continuing economic slowdown (particularly at home and in other G-7 countries), combined with more than a year of bleak news from the financial sector, has left investors dazed and desperate.
The liquidity crisis has forced leveraged investors and companies to unload assets across the board to comply with new accounting rules like FAS 157 and FAS 140, and this has created a domino effect as investors panic. An estimated $15 billion was pulled out of U.S. stock funds in July, about four times more than in June. For the first seven months of 2008, those outflows totaled $52.4 billion, an all-time high.
July was also a very tough month for commodities and commodity stocks. The S&P Natural Resources Index fell off 15 percent, the worst monthly sell-off in the sector since August 1998, when the Russian currency crisis triggered the implosion of the hedge fund Long-Term Capital Management. Prices for the underlying commodities also suffered in July, with the Jefferies/CRB Index down 10.1 percent. This was just short of the worst monthly performance for this index since 1970.
The fundamentals for gold have not changed, and with negative real interest rates in the U.S., this is a good time to maintain exposure to gold investments. As you can clearly see from the chart below, July and August generally mark a low time for gold before prices climb with the arrival of the fall buying season, which is another reason to consider gold now.
The world is different from a decade ago. Back then, the world was experiencing a global currency crisis that started in Asia in 1997 and peaked in 1998 with Russia defaulting on its sovereign debt. This was the final blow that doomed Long-Term Capital Management.
China and other emerging economies have massive U.S. dollar surpluses, and these countries are committed to infrastructure spending. This week Chinaâs government announced that it will focus more on sustainable growth than worry about inflation. This is significant.
Last monthâs tumble for resources can be traced back to the latest troubles in the financial sector that started more than a year ago with the subprime mortgage collapse and were accelerated by the new accounting rules in late 2007. The intermarket relationship of assets get bundled together with a liquidity event, and the icing on the cake was the March 2008 collapse of the auction-rate securities market, which basically froze $300 billion in retail investor cash. This issue has yet to be resolved, and lawsuits are flying everywhere.
The market is now seeking liquidity in response to the recent moves by Merrill Lynch and others to sell mortgage-related assets at huge losses and the persistent rumors that more Bear Stearns-like failures are yet to come.
The regulatory actions in July to stop shorting of 19 financial stocks, including Merrill Lynch, was well-timed. These stocks have rallied 50 percent off their lows, and more importantly for Merrill, it was able to refinance its losses. Had the SEC not stepped in, packs of illegal short-sellers could have crushed Merrillâs stock, just as they did Bear Stearns.
While energy and resources felt the impact of Julyâs turmoil, itâs important to keep in mind that this performance did not reflect the sectorâs solid fundamentals. Historically, oil dips in July before rallying from August through October, as illustrated in the seasonal chart below. "
end quote
********
This is a decent summary of the kind of stuff I think is true.