Guess I didn't need to worry. Sold a lot of my DIG off today at $36 and $37 today, for about a 37% gain on those trades!
Trades:
Account 1: sold all the DIG bought at 26.07 for $36.02 (+38%). So I need to start looking at what to buy next.
Account 2: sold another 1/3 of DIG (bought at 27.20) for $37.00 (+36%). I'll probably hold onto the remaining 1/3 longer term, maybe selling off around $50.
Friday, October 31, 2008
Thursday, October 30, 2008
too busy
I wanted to sell off some DIG today, but I'm starting a new project at work and have been too busy to monitor the markets. When I was able to briefly check near the end of the day, I thought about putting in a sell order at $35 (which probably would have gotten filled), but then I got pulled away with work anyway. Tomorrow things will likely pullback, and of course I'll regret not selling once again :)
Wednesday, October 29, 2008
Today
The markets were up again today -- especially energy stocks. I wasn't able to watch the markets at all today, so in the morning I just put in a sell order for DIG at 36.00, hoping it would get hit, but it didn't quite make it. It was up to the low 35's, up over 15%, near the end of the day, and then everything dropped in the final few minutes, with the DOW and S&P actually ending up in the red.
Tomorrow, Exxon Mobile (XOM) has it's 3rd quarter earnings release. XOM makes up about 30% of DIG, so it could really have an effect on it (and all energy stocks)... which is why I wasn't sure if I still wanted to be holding lots of DIG at this point. The earnings are going to look stellar because oil was between $100 and $150 during that time period; however, everyone is expecting this and thus the price has been pushed up in advance. After the last 2 days of great gains, it could easily be sold off tomorrow. I'll just have to wait and see what happens.
Tomorrow, Exxon Mobile (XOM) has it's 3rd quarter earnings release. XOM makes up about 30% of DIG, so it could really have an effect on it (and all energy stocks)... which is why I wasn't sure if I still wanted to be holding lots of DIG at this point. The earnings are going to look stellar because oil was between $100 and $150 during that time period; however, everyone is expecting this and thus the price has been pushed up in advance. After the last 2 days of great gains, it could easily be sold off tomorrow. I'll just have to wait and see what happens.
Tuesday, October 28, 2008
Sprott Webcast
There's a new Sprott webcast from Oct.1 here.
The first 52 minutes are Eric Sprott. I love listening to him talk, especially when he gets fired up a couple of times about a few things that drive him nuts (like talk of 2-5% inflation when he says it's more like 20-25%). In the talk, of course he speaks to the incredibly poor performance of the funds, even though they completely predicted what was going to happen. He's quite convincing as usual in conveying that they are in the right positions, know what they are doing, and it's only a matter of time before they're proven right. He paints a pretty scary picture of the US financial system, and makes a convincing case for energy and gold/silver (their 2 main holdings). His opinions seem a little extreme sometimes compared to what everyone else is saying, but he's a contrarian, right? And how can you not believe this guy when he's always right... eventually. And thats just the problem -- he seems to predict things about a year or two early, and so you never know when the predictions are going to come to fruition.
The next 8 minutes are John Embry (who I love listening to as well), who makes very strong accusations about the gold market being completely manipulated by the government and banks. It will sound very conspiracy-theoristy to most people, but the evidence is quite clear. He makes bold predictions about gold going over $1000 shortly and never returning below that... ever... ever. The new gold guys at Sprott are saying gold at $2000 and silver at $40 within 4 years. It's just very hard to reconcile these views with what's been happening, but you feel the breakout in gold/silver is indeed about to occur, especially with the disparity between the lagging paper market and the current physical market that has the crazy demand and prices we're hearing about. I don't want to miss out on the ride up, so how can I not hold on?
I didn't watch the next 1.5 hours or so.
In sum, they've done a good job of convincing me to hold on to most of my Sprott holdings. I say "most" because I'm considering selling some, after what I saw today. Check this out: Today, U.S. indices up 11%, TSX up 7%, HUI/XAU (Gold stock indices) up 12%, gold & silver bullion pretty much flat. How did the Sprott funds do, you ask? They should be up at least 5%, right? Here are the results... Canadian Equity Fund: -0.1% . Energy Fund: +2.7%. Gold & Precious Metals Fund: +1.07%. What. The. Heck. How is that even possible? I'm too lazy to lookup today's performance of their individual top 10 holdings to see what happened (e.g. one stock down -20% or something). My first thought was that they must have freaked out and have gone to 30+% cash in their funds, but after listening to the webcast today it seems pretty clear they haven't changed their strategy in any way. So I don't know what happened. Today's pathetic, unexplainable performance alone makes we want to sell some to put the money to better work myself... I mean, they can't even make money in their gold & energy funds when the HUI/XAU and energy stocks go up 12%, come on. I don't want to sell too much though, thinking I can invest better than Sprott, because I'm sure I'd be proven wrong within a year.
The first 52 minutes are Eric Sprott. I love listening to him talk, especially when he gets fired up a couple of times about a few things that drive him nuts (like talk of 2-5% inflation when he says it's more like 20-25%). In the talk, of course he speaks to the incredibly poor performance of the funds, even though they completely predicted what was going to happen. He's quite convincing as usual in conveying that they are in the right positions, know what they are doing, and it's only a matter of time before they're proven right. He paints a pretty scary picture of the US financial system, and makes a convincing case for energy and gold/silver (their 2 main holdings). His opinions seem a little extreme sometimes compared to what everyone else is saying, but he's a contrarian, right? And how can you not believe this guy when he's always right... eventually. And thats just the problem -- he seems to predict things about a year or two early, and so you never know when the predictions are going to come to fruition.
The next 8 minutes are John Embry (who I love listening to as well), who makes very strong accusations about the gold market being completely manipulated by the government and banks. It will sound very conspiracy-theoristy to most people, but the evidence is quite clear. He makes bold predictions about gold going over $1000 shortly and never returning below that... ever... ever. The new gold guys at Sprott are saying gold at $2000 and silver at $40 within 4 years. It's just very hard to reconcile these views with what's been happening, but you feel the breakout in gold/silver is indeed about to occur, especially with the disparity between the lagging paper market and the current physical market that has the crazy demand and prices we're hearing about. I don't want to miss out on the ride up, so how can I not hold on?
I didn't watch the next 1.5 hours or so.
In sum, they've done a good job of convincing me to hold on to most of my Sprott holdings. I say "most" because I'm considering selling some, after what I saw today. Check this out: Today, U.S. indices up 11%, TSX up 7%, HUI/XAU (Gold stock indices) up 12%, gold & silver bullion pretty much flat. How did the Sprott funds do, you ask? They should be up at least 5%, right? Here are the results... Canadian Equity Fund: -0.1% . Energy Fund: +2.7%. Gold & Precious Metals Fund: +1.07%. What. The. Heck. How is that even possible? I'm too lazy to lookup today's performance of their individual top 10 holdings to see what happened (e.g. one stock down -20% or something). My first thought was that they must have freaked out and have gone to 30+% cash in their funds, but after listening to the webcast today it seems pretty clear they haven't changed their strategy in any way. So I don't know what happened. Today's pathetic, unexplainable performance alone makes we want to sell some to put the money to better work myself... I mean, they can't even make money in their gold & energy funds when the HUI/XAU and energy stocks go up 12%, come on. I don't want to sell too much though, thinking I can invest better than Sprott, because I'm sure I'd be proven wrong within a year.
Trade Update - DIG
Monday was a bad day, with DIG down 10%, but today (Tuesday) the markets took off in the last 2 hours of the trading day, with the DOW having it's 2nd biggest point gain ever -- 889 points, almost 11%. DIG followed suit, although 2x the gain of course, closing up almost 22% at 30.10. I decided I would take some profits near the end of the day. Since it was skyrocketing towards the close, I just waited and waited until the final 2 minutes, before finally selling my portion at 30.27, pretty much the day's high.
If DIG continues to rise, I'll probably look to sell at least 1/2 around $36, and the remainder at $40+, if it looks like it will get that high.
Trade Status:
Sold 1/3 of the DIG I recently purchased at 27.20, sold at 30.27 (+11% gain).
Note: Still also holding the original DIG I bought in another account at 26.07.
If DIG continues to rise, I'll probably look to sell at least 1/2 around $36, and the remainder at $40+, if it looks like it will get that high.
Trade Status:
Sold 1/3 of the DIG I recently purchased at 27.20, sold at 30.27 (+11% gain).
Note: Still also holding the original DIG I bought in another account at 26.07.
Sunday, October 26, 2008
The Market Speculator
I stumbled upon a great blog by a seemingly very succesful trader here:
http://themarketspeculator.blogspot.com/
Very detailed, informative posts, updated daily.
http://themarketspeculator.blogspot.com/
Very detailed, informative posts, updated daily.
Friday, October 24, 2008
Freaky Friday
Well today was interesting. I woke up early only to find that the overseas markets had plummeted again, oil dropped from $68 to $63 after OPECs decision to cut 1.5 million barrels per day -- about the expected amount (so I guess it was buy on rumour sell on news... bah!) -- and Pre-market futures had dropped so low they hit their max limit for the day (-550 points for the DOW), and of course another load of bad news was released. People were panicking and there was speculation of the DOW opening down 1000 points and how it was going to be complete anarchy. It turned out to be not so bad, considering the oversees market performance and dismal news, and the DOW ended down only (yes, "only") 300 points.
On open, Energy stocks were down the most at about -10%, meaning DIG opened about -20% in the $23-$24 range. The markets didn't open as low as everyone expected and started rising. I was a little freaked out of course (I shouldn't have woken up early to see the news) and I had my finger on the trigger to sell. As I saw the market rising a bit, I was considering just trying to get out of DIG at a small loss around $26, especially when it finally hit that. I was nervous about the market tanking mid-day.
But then I imagined I wasn't invested in anything right now and thought about what I would be doing in that scenario. And I realized I would probably be wanting to buy DIG immediately while it was low, and I wouldn't be that nervous about it. After all, oil was down to $63 now, the markets were way down and starting to rise, and it was at the same price I had previously purchased it at when everything was higher. I realized that I quite commonly tend to freak out when I've bought something that goes up and then comes back down to the price I bought it at, even if I would be happily buying it again if I had never bought it.
So I decided to hold on. DIG rose quite a bit (thanks to Exxon Mobil doing a little better than the average energy stock) and finished -8% today at 27.56, above my average purchase price.
Gold also hit a low of around $680 and then shot up to $740, ending up in the 730's. I really think $680 is the bottom for gold. I'm hoping that with it so low and people finally being spooked enough with the continued selloff of the markets and bleak outlook, they'll finally start to flock to gold again. I don't think the rise in the US dollar will last much longer, and then gold should shoot up to the $800's.
On open, Energy stocks were down the most at about -10%, meaning DIG opened about -20% in the $23-$24 range. The markets didn't open as low as everyone expected and started rising. I was a little freaked out of course (I shouldn't have woken up early to see the news) and I had my finger on the trigger to sell. As I saw the market rising a bit, I was considering just trying to get out of DIG at a small loss around $26, especially when it finally hit that. I was nervous about the market tanking mid-day.
But then I imagined I wasn't invested in anything right now and thought about what I would be doing in that scenario. And I realized I would probably be wanting to buy DIG immediately while it was low, and I wouldn't be that nervous about it. After all, oil was down to $63 now, the markets were way down and starting to rise, and it was at the same price I had previously purchased it at when everything was higher. I realized that I quite commonly tend to freak out when I've bought something that goes up and then comes back down to the price I bought it at, even if I would be happily buying it again if I had never bought it.
So I decided to hold on. DIG rose quite a bit (thanks to Exxon Mobil doing a little better than the average energy stock) and finished -8% today at 27.56, above my average purchase price.
Gold also hit a low of around $680 and then shot up to $740, ending up in the 730's. I really think $680 is the bottom for gold. I'm hoping that with it so low and people finally being spooked enough with the continued selloff of the markets and bleak outlook, they'll finally start to flock to gold again. I don't think the rise in the US dollar will last much longer, and then gold should shoot up to the $800's.
Thursday, October 23, 2008
Trade Update - DIG
With the cash from selling SSO, I loaded up on a lot more DIG today at 27.20. Oil is sitting around $68. This is somewhat of a gamble if I'm not willing to hold long-term, because it could move way down tomorrow depending on what OPEC does tonight. But again, the potential short-term upside is huge too.
Edit: DIG shot up 10% at the end of the day, closing at 30.00, on expectations of OPEC's cut. Let's just hope this isn't "buy on rumour, sell on news".
Edit: DIG shot up 10% at the end of the day, closing at 30.00, on expectations of OPEC's cut. Let's just hope this isn't "buy on rumour, sell on news".
Wednesday, October 22, 2008
Trade Update: SSO, DIG
The market plummeted today, and energy and gold stocks got hit the worst. I got stopped out of the rest of my SSO at 29.02 today, which was right around my break-even, for an average of +7% on that trade. I never did end up placing a stop on DIG like I said I would to lock in 30% gains, and now it's only about 3% above where I bought.... oh well. Stops are great, and I really should start using them on all my trades since I can't pay attention to the markets throughout the day, and even if I could, I have a tendency to not be able to force myself to sell :)
I have no idea what's going to happen tommorrow, but I'll probably hold on to DIG even if it drops more, because I don't have too much in it, and I believe the upside potential to be huge.
Trade Status:
SSO - stopped out of the rest at breakeven, with first half +15% = +7% average gain over 5 days.
DIG - holding on...
I have no idea what's going to happen tommorrow, but I'll probably hold on to DIG even if it drops more, because I don't have too much in it, and I believe the upside potential to be huge.
Trade Status:
SSO - stopped out of the rest at breakeven, with first half +15% = +7% average gain over 5 days.
DIG - holding on...
Tuesday, October 21, 2008
OPEC's tough decision
Two articles on OPEC's upcoming decision on Oct.24th:
http://www.nytimes.com/2008/10/22/business/worldbusiness/22oil.html?ref=worldbusiness&pagewanted=all
http://seekingalpha.com/article/100839-opec-expected-to-decide-on-production-cuts-friday?source=article_lb_themes
I'm curious what they're going to do and how much it will actually affect the oil price. I'm betting they'll announce a significant production cut and oil prices will rebound a bit to $80, unless the markets drop more this week + U.S dollar rising, which will just bring oil down. But that's just a wild guess -- no one really knows.
http://www.nytimes.com/2008/10/22/business/worldbusiness/22oil.html?ref=worldbusiness&pagewanted=all
http://seekingalpha.com/article/100839-opec-expected-to-decide-on-production-cuts-friday?source=article_lb_themes
I'm curious what they're going to do and how much it will actually affect the oil price. I'm betting they'll announce a significant production cut and oil prices will rebound a bit to $80, unless the markets drop more this week + U.S dollar rising, which will just bring oil down. But that's just a wild guess -- no one really knows.
Monday, October 20, 2008
Up-to-date
Okay, I'm finally caught up on this blog. I've given a brief overview of my investments over the last 5-10 years or so and can now finally blog "real-time".
It's Monday, and 3 days after my purchases of SSO and DIG, things are looking pretty good. DIG is up an astounding 41% and SSO is up 17%. Today I sold half of my SSO at a 15% gain. I just wanted to lock in some profits in case things take a turn for the worse tomorrow. I'll be setting a stop-loss order to make sure I at least break-even on the remaining half; but otherwise, I'll let the profits run for a bit if the rally continues.
The reason things could take a turn for the worse is because, as my brother brought to my attention, all the CDS's are being unwound this week from the Lehman bankruptcy. As my brother puts it:
The settlement for these payments is supposed to begin tomorrow, Tuesday. So who knows what will happen this week.
I would've sold some of my DIG, but I own so little that I didn't want the transaction costs taking away from my profits (since RBC still charges $29 per trade. I'm just too lazy to open up an account with a cheaper online brokerage and having everything in one place is nice). On Oct.24th, if OPEC announces only a 1 million barrel per day cut, oil could drop to $60, but if they announce a 3 million barrel per day cut, oil could go to $90. If oil continues to rise up to the meeting date, I plan to sell the day before as expectations could be too high, otherwise I'll probably hold with a stop-loss order in place to lock in at least 30% gains.
Trade Status:
SSO - bought 2008/10/16 @ $28.63, sold 1/2 on 2008/10/20 @ $33.00 (+15% return)
DIG - bought 2008/10/16 @ 26.07, still holding, currently at 36.83 (+41%)
It's Monday, and 3 days after my purchases of SSO and DIG, things are looking pretty good. DIG is up an astounding 41% and SSO is up 17%. Today I sold half of my SSO at a 15% gain. I just wanted to lock in some profits in case things take a turn for the worse tomorrow. I'll be setting a stop-loss order to make sure I at least break-even on the remaining half; but otherwise, I'll let the profits run for a bit if the rally continues.
The reason things could take a turn for the worse is because, as my brother brought to my attention, all the CDS's are being unwound this week from the Lehman bankruptcy. As my brother puts it:
All the people who sold credit default insurance on Lehman now have to pay up because Lehman defaulted. Most of the people who sold this insurance are other financial companies, so they could take a huge hit. This is how it cascades. If even one of these companies can't pay out on the insurance, then they go bankrupt, thus defaulting, thus causing all the companies that wrote insurance on them to pay, on top of what they already have to pay for Lehman, which causes others to default, etc.
The settlement for these payments is supposed to begin tomorrow, Tuesday. So who knows what will happen this week.
I would've sold some of my DIG, but I own so little that I didn't want the transaction costs taking away from my profits (since RBC still charges $29 per trade. I'm just too lazy to open up an account with a cheaper online brokerage and having everything in one place is nice). On Oct.24th, if OPEC announces only a 1 million barrel per day cut, oil could drop to $60, but if they announce a 3 million barrel per day cut, oil could go to $90. If oil continues to rise up to the meeting date, I plan to sell the day before as expectations could be too high, otherwise I'll probably hold with a stop-loss order in place to lock in at least 30% gains.
Trade Status:
SSO - bought 2008/10/16 @ $28.63, sold 1/2 on 2008/10/20 @ $33.00 (+15% return)
DIG - bought 2008/10/16 @ 26.07, still holding, currently at 36.83 (+41%)
Jumping in
So it's Thursday, October 16th and I've been itching to get into something. The markets have double-bottomed and all signs point to a temporary rally. Yes, Sprott still thinks we're just in the 4th inning and is still extremely bearish on the general markets long term, and bullish on gold and energy.
I don't want to borrow more money to invest, and I don't want to sell any of my Sprott gold and energy as I believe it's at the bottom. So what do I do? Well, lo and behold I happen to have some cash in my investment accounts that I was unaware of. I thought I was fully invested and never check my account details since I know exactly what I hold and roughly what is happening with it. But this last Thursday, I happened to look more closely and noticed the cash sitting there. It wasn't much money to trade with, but it was a start.
Since my brother believed in a market rally and was buying SSO (and call options on it), I bought into this 2x leveraged ETF too. I agreed it looked like a temporary market bottom.
Also, that day oil had dropped to $70 (from a high of almost $150 3 months ago). Energy stocks had come down so much and were sitting incredibly low this whole week -- about 60% off their highs! It seemed almost too obvious:
I don't want to borrow more money to invest, and I don't want to sell any of my Sprott gold and energy as I believe it's at the bottom. So what do I do? Well, lo and behold I happen to have some cash in my investment accounts that I was unaware of. I thought I was fully invested and never check my account details since I know exactly what I hold and roughly what is happening with it. But this last Thursday, I happened to look more closely and noticed the cash sitting there. It wasn't much money to trade with, but it was a start.
Since my brother believed in a market rally and was buying SSO (and call options on it), I bought into this 2x leveraged ETF too. I agreed it looked like a temporary market bottom.
Also, that day oil had dropped to $70 (from a high of almost $150 3 months ago). Energy stocks had come down so much and were sitting incredibly low this whole week -- about 60% off their highs! It seemed almost too obvious:
- Most oil predictions are around $80-90 for 2008, with Sprott and Merryl Lynch and others still predicting $150-ish oil in 2009-2010. Oil could go to $50 short-term due to lower demand, but that could not last long with the depleting oil reserves and continued increase in world-wide energy needs due to China and other emerging economies.
- OPEC moved their emergency November meeting up to Oct.24th as they are panicked about the crash in the oil price. They are predicted to slash production by $1-$3 million barrels per day to stabilize/increase the price. The market doesn't seem to be reacting to this yet.
- There are many energy companies that will be profitable even at $50-70 oil, and they seem way oversold right now.
I figured there was a potential for big gains here, but I didn't have much money to invest, so I looked for a leveraged ETF and found the Ultra Oil&Gas ProShares (DIG), which I bought on Thursday as well. The only thing I didn't like about this ETF is that Exxon Mobil makes up about 30% of the index; I don't like indexes that have such a large percentage in one stock.
Eggs: meet Basket
So where was I... Sprott Canadian Equity Fund (SCEF) was making me incredible returns from 2003-2007. I had also diversified into their Precious Metals/Gold fund and Energy fund, which really wasn't diversifying because SCEF had basically had become equivalent to half of their Precious Metals fund and half of their Energy fund. In fact, I believe SCEF now has to be classified as a precious metals fund due to the amount of gold bullion and precious metals content.
Anyway, in late 2006 I was continually reading articles from Sprott and other trusted sources predicting the upcoming U.S. housing market crash, possible financial meltdown, and almost guaranteed U.S. recession (all of which came true). Sprott and others were going on and on about how gold and silver were the only safe havens, and how gold, then at $600, would soon skyrocket over $1000. I decided it was time to take another plunge to hopefully protect myself and make a killing in the process. So in early 2007, I borrowed a whole shwack of money again and invested it all in the Precious Metals fund.
So now I pretty much had everything in gold and energy. While all my eggs were pretty much in one basket, I couldn't see anything else worthwhile to invest in; diversification wasn't an option. But I also didn't want to sit on the sidelines in cash. And I was somewhat correct as it turns out, there weren't really any good investments the last year (as far as "long" positions go).
I was unprepared for what happened next. Gold did move according to plan: in one year the price of gold went from $600 to $900 (and at one point over $1000). However, gold stocks went down about 10%. I couldn't believe it. But that was just the tip of the iceberg. They gradually went down more, and then the whole recent subprime/financial crisis hit. So I thought, "good, my gold stocks will pay off now". But as the financial stocks started plummeting, eventually the whole market and world markets crashed 20-40% at the beginning of October. The gold stocks that I thought would save me came down even harder, and energy stocks even worse than gold. I thought I was prepared for this, thought I was protected. Looking back, I feel pretty stupid for underestimating what a market crash can do. SCEF is down about 40% YTD, and the precious metals fund is down about 50% YTD. I've lost a lot of eggs -- on paper.
Now, I don't blame Sprott at all. Their overall call was correct. In fact, Eric Sprott has always been so bearish that he's never recommended anyone investing in his long-only mutual funds! Seriously! Even though his mutual funds had performed better than his hedge funds to date, he always recommended the hedge funds, which could hold short positions, which he felt was needed to add protection in this secular bear market (and lo and behold I believe the hedge funds are anywhere from only -10% to break-even YTD). I knew that Sprott was short on all the financial stocks. If I truly believed what they were saying, I should've had some short positions. I didn't want to get into shorting or buying put options though, so never gave it a second thought. If I would have done my research though, I would have discovered that there are great inverse ETF products out there -- leveraged ones too (e.g. SKF or SDS), which basically allow you to short various indices without actually shorting. I already had plenty gold; I shouldn't have bought more. I just didn't see the other angle that I could attack from. Oh well, lesson learned, and now I know about all these great ETFs out there.
I still trust my holdings in Sprott -- they've had big losses before and have recovered. They know what they're doing, and their responses in conference calls to the recent horrible performance have been very re-assuring and encouraging. I do believe gold is poised to skyrocket again and that gold stocks shouldn't go much lower, so there's no point in selling now near a bottom.
With the markets having dropped so much and everything getting so crazy volatile (record one-day gains and losses in the DOW being broken every week), I felt there was a lot of opportunity out there that I didn't want to miss out on. Mutual funds are not nimble enough to be able to fully participate in some of the short-term opportunities. So the itch to begin some stock trading set in...
Anyway, in late 2006 I was continually reading articles from Sprott and other trusted sources predicting the upcoming U.S. housing market crash, possible financial meltdown, and almost guaranteed U.S. recession (all of which came true). Sprott and others were going on and on about how gold and silver were the only safe havens, and how gold, then at $600, would soon skyrocket over $1000. I decided it was time to take another plunge to hopefully protect myself and make a killing in the process. So in early 2007, I borrowed a whole shwack of money again and invested it all in the Precious Metals fund.
So now I pretty much had everything in gold and energy. While all my eggs were pretty much in one basket, I couldn't see anything else worthwhile to invest in; diversification wasn't an option. But I also didn't want to sit on the sidelines in cash. And I was somewhat correct as it turns out, there weren't really any good investments the last year (as far as "long" positions go).
I was unprepared for what happened next. Gold did move according to plan: in one year the price of gold went from $600 to $900 (and at one point over $1000). However, gold stocks went down about 10%. I couldn't believe it. But that was just the tip of the iceberg. They gradually went down more, and then the whole recent subprime/financial crisis hit. So I thought, "good, my gold stocks will pay off now". But as the financial stocks started plummeting, eventually the whole market and world markets crashed 20-40% at the beginning of October. The gold stocks that I thought would save me came down even harder, and energy stocks even worse than gold. I thought I was prepared for this, thought I was protected. Looking back, I feel pretty stupid for underestimating what a market crash can do. SCEF is down about 40% YTD, and the precious metals fund is down about 50% YTD. I've lost a lot of eggs -- on paper.
Now, I don't blame Sprott at all. Their overall call was correct. In fact, Eric Sprott has always been so bearish that he's never recommended anyone investing in his long-only mutual funds! Seriously! Even though his mutual funds had performed better than his hedge funds to date, he always recommended the hedge funds, which could hold short positions, which he felt was needed to add protection in this secular bear market (and lo and behold I believe the hedge funds are anywhere from only -10% to break-even YTD). I knew that Sprott was short on all the financial stocks. If I truly believed what they were saying, I should've had some short positions. I didn't want to get into shorting or buying put options though, so never gave it a second thought. If I would have done my research though, I would have discovered that there are great inverse ETF products out there -- leveraged ones too (e.g. SKF or SDS), which basically allow you to short various indices without actually shorting. I already had plenty gold; I shouldn't have bought more. I just didn't see the other angle that I could attack from. Oh well, lesson learned, and now I know about all these great ETFs out there.
I still trust my holdings in Sprott -- they've had big losses before and have recovered. They know what they're doing, and their responses in conference calls to the recent horrible performance have been very re-assuring and encouraging. I do believe gold is poised to skyrocket again and that gold stocks shouldn't go much lower, so there's no point in selling now near a bottom.
With the markets having dropped so much and everything getting so crazy volatile (record one-day gains and losses in the DOW being broken every week), I felt there was a lot of opportunity out there that I didn't want to miss out on. Mutual funds are not nimble enough to be able to fully participate in some of the short-term opportunities. So the itch to begin some stock trading set in...
Sunday, October 19, 2008
Starting with Sprott
What if I told you there was a fund out there that had a 25+ year average of making over 25% per year, and did it quite consistently (no wild 300% gains one year, -80% another, etc.) Some people get lucky for a few years, but this is a 25 year-history! Forget that it's hard to find any results that go back even close to that far, this track record was as good as or better than Warren Buffet's. This was not luck.
This nearly impossible feat is what Eric Sprott managed to accomplish in his private managed accounts at Sprott Asset Management. Click HERE for an archived PDF of this performance history. The graph on that page speaks for itself. This is what I had stumbled upon in 2002, and as I began reading articles by this man and seeing what he had done, I knew that this is where I had to put my money. I loved his insight and philosophy to investing. He and his team had (and have continued to) accurately predict what the markets were going to do and where money should be invested; they proved this with their brilliant articles and their stunning results.
Oh, one small snag though that I forgot to mention: you had to be a multi-millionaire to have a managed account. Luckily, Sprott had decided to open up a public mutual fund back in late '98, called the Sprott Canadian Equity Fund which was supposed to follow the same trading style as in his managed accounts, primarily investing in small-cap Canadian stocks. The mutual fund was already averaging over 30% per year for the 5 years it had been open. It made huge gains both during the dot-com boom AND through the bust. Unfortunately, even this mutual fund required a $25,000 minimum investment at the time (later dropped to $5000), an amount that I did not have.
I finally decided to take the plunge at the beginning of 2003, opening a line of credit and borrowing a bunch of money to allow me to make the investment. And I'm glad I did. From 2003-2007, the fund enjoyed the following yearly gains: 30%, 38%, 13%, 40%, and 14%. This is equivalent to about 26% per yr, which is what I had expected. hmmm... maybe I should write a post about the phrase "past performance is not indicative of future returns"...
Anyway, there is too much I could write about Sprott, so I'm not even going to start :) All I can say is you should read every single Markets At A Glance article on their site. And peruse the rest of their site at http://www.sprott.com/.
This nearly impossible feat is what Eric Sprott managed to accomplish in his private managed accounts at Sprott Asset Management. Click HERE for an archived PDF of this performance history. The graph on that page speaks for itself. This is what I had stumbled upon in 2002, and as I began reading articles by this man and seeing what he had done, I knew that this is where I had to put my money. I loved his insight and philosophy to investing. He and his team had (and have continued to) accurately predict what the markets were going to do and where money should be invested; they proved this with their brilliant articles and their stunning results.
Oh, one small snag though that I forgot to mention: you had to be a multi-millionaire to have a managed account. Luckily, Sprott had decided to open up a public mutual fund back in late '98, called the Sprott Canadian Equity Fund which was supposed to follow the same trading style as in his managed accounts, primarily investing in small-cap Canadian stocks. The mutual fund was already averaging over 30% per year for the 5 years it had been open. It made huge gains both during the dot-com boom AND through the bust. Unfortunately, even this mutual fund required a $25,000 minimum investment at the time (later dropped to $5000), an amount that I did not have.
I finally decided to take the plunge at the beginning of 2003, opening a line of credit and borrowing a bunch of money to allow me to make the investment. And I'm glad I did. From 2003-2007, the fund enjoyed the following yearly gains: 30%, 38%, 13%, 40%, and 14%. This is equivalent to about 26% per yr, which is what I had expected. hmmm... maybe I should write a post about the phrase "past performance is not indicative of future returns"...
Anyway, there is too much I could write about Sprott, so I'm not even going to start :) All I can say is you should read every single Markets At A Glance article on their site. And peruse the rest of their site at http://www.sprott.com/.
The early beginnings
I thought I should start off with a quick overview of my investing history...
I've always been a math/computer-geek guy, always have loved numbers and formulae and problem solving. I don't remember when I first got interested in the stock market, but I don't know what took so long. I don't think it was until around 1999 when my brother started telling me about all the money he was making (on paper) in cool tech stocks he was buying. Ah yes, the dot com bubble. I eventually opened an account in 2000, right when the bubble was bursting. Of course, after most stocks dropping 50% off their highs, it seemed like a perfect time to buy: how could they go any lower?! Long story short, we all know tech stocks ended up dropping about 90%, and yes, I held on for the ride down and lost most of my money.
Luckily I didn't have too much money at the time so I didn't really lose that much in hindsight, but it felt like a lot at the time. After that I just noodled around very little in stocks. I still always read financial news every day, read about stocks, was addicted to looking at charts, imagined what I'd invest in each day, but I was a little too scared to buy much.
I started thinking I wanted some good long-term investments, and in looking around, I was quite disappointed in the long-term performance of all mutual funds. I began a quest to find the best investment possible, the absolute best that was out there. I wasn't going to settle for some bland generic fund that averaged 5-7% per year. I figured there had to be something/someone out there that could consistently make huge returns long term. I searched and searched, weeding through shady products and scams, more boring funds, getting more and more depressed, until one day, I stumbled across the secret treasure chest that met and exceeded my wildest expectations -- it was almost too good to be true. It was *exactly* what I was looking for... and its name was Sprott. (to be continued)
I've always been a math/computer-geek guy, always have loved numbers and formulae and problem solving. I don't remember when I first got interested in the stock market, but I don't know what took so long. I don't think it was until around 1999 when my brother started telling me about all the money he was making (on paper) in cool tech stocks he was buying. Ah yes, the dot com bubble. I eventually opened an account in 2000, right when the bubble was bursting. Of course, after most stocks dropping 50% off their highs, it seemed like a perfect time to buy: how could they go any lower?! Long story short, we all know tech stocks ended up dropping about 90%, and yes, I held on for the ride down and lost most of my money.
Luckily I didn't have too much money at the time so I didn't really lose that much in hindsight, but it felt like a lot at the time. After that I just noodled around very little in stocks. I still always read financial news every day, read about stocks, was addicted to looking at charts, imagined what I'd invest in each day, but I was a little too scared to buy much.
I started thinking I wanted some good long-term investments, and in looking around, I was quite disappointed in the long-term performance of all mutual funds. I began a quest to find the best investment possible, the absolute best that was out there. I wasn't going to settle for some bland generic fund that averaged 5-7% per year. I figured there had to be something/someone out there that could consistently make huge returns long term. I searched and searched, weeding through shady products and scams, more boring funds, getting more and more depressed, until one day, I stumbled across the secret treasure chest that met and exceeded my wildest expectations -- it was almost too good to be true. It was *exactly* what I was looking for... and its name was Sprott. (to be continued)
First Post
I started this blog in order to:
(a) convince my brother to start up a similar investment blog, since he always has a million things to say about the market, options trades he's making, etc., which he always just emails me instead of posting somewhere.
(b) have a place to keep notes on what I'm thinking any given day, what I'm investing in, what trades I'm making, what my predictions are. Something that will be fun to look back on, and maybe something that will help me learn from my mistakes.
This isn't meant to be a public investment advice blog. I intend this to be more of just a personal investment diary for me and any family or friends who may be interested.
(a) convince my brother to start up a similar investment blog, since he always has a million things to say about the market, options trades he's making, etc., which he always just emails me instead of posting somewhere.
(b) have a place to keep notes on what I'm thinking any given day, what I'm investing in, what trades I'm making, what my predictions are. Something that will be fun to look back on, and maybe something that will help me learn from my mistakes.
This isn't meant to be a public investment advice blog. I intend this to be more of just a personal investment diary for me and any family or friends who may be interested.
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