Rik Green Investor Forum Growth Portfolio down 1% in December and 17% in 2013

The growth Port-faux-lio lost 0.8% of its value in December while the S&P 500 gain 2.4%.  Gold was down 4.1% and silver was down 2.6% during the month and all the Port-faux-lios precious metals related investments lost a similar amount.  CVX saved the monthly results and was up 2.7% including dividends.  CVX is 42% of the port-faux-lios value.

Good thing that I held off rotating more CVX to precious metals last month.

Year to date the Port-faux-lio lost 17.2% while the S&P gained 30%.  CVX gained 20% including dividends.  PHYS was down 30% and the miners and silver funds were down about 40%.  A terrible year.  At least 2014 is off to a good start.

Rik Green's Investors Forum Growth Portfolio down 5% in November, 17% YTD

Rik Green's growth portfolio <Port-faux-lio> lost 4.8% in November to reach a new low.  The S&P500 gained 2.8% during the month.  CVX which is 40% of the portfolio's value was up 2% and helped offset a 5% and 9% drop in gold and silver prices, respectively.  GG which is 20% of the value dropped 12% during the month.  PSLV, PHYS, CEF, CDE, SLW and AUY all lost about the same as their underlying precious metal.  

Year to date the port-faux-lio is down 16.5% and the S&P is up 26.6%.  Gold and silver ended November at $1,253.35 and $20.00, respectively which is down 25% and 34% year to date.

Last month I was tempted to trade even more CVX for gold and silver related investments because CVX had appreciated and gold and silver were beaten down.  I decided to wait because the portfolio is running low on 'powder.'  There is not much CVX left to keep re-deploying.  Now is an even better time make this trade because CVX is a bit more valuable and the precious metals have been pummeled even further.  The beating has been so bad that I fear it may never stop.

What's the old investment adage; "buy when there is blood in the streets."  Of course in order to follow that advise one must have value to buy with.  It's not that bad yet.  My powder is precious, so I am going to wait a while longer.  If the metals take off from here I will celebrate gains on what I did do and have no regrets for not doing more.

Rik Green's Investors Forum Growth Portfolio down 1% in October, 12% YTD

Rik Green's growth portfolio <Port-faux-lio> lost 1.2% in October while the S&P500 gained 4.5%.  CVX which is 38% of the portfolio's value was down 1% and GG which is 22% of the value dropped 2% during the month.  Gold was flat and silver gained 1% and 8%.  PSLV, PHYS, CEF, CDE, and AUY all moved about the same as their underlying precious metal.  SLW was down 8% which is odd because silver was up 1%.  

Year to date the port-faux-lio is down 12.3% and the S&P 500 is up 23.2%.  Gold and silver ended October at $1,323 and $21.91, respectively which is down 21% and 28% year to date.

In mid-May and August the port-faux-lio traded some CVX shares for more gold and silver related investments.  The trade does not looks so good right now as CVX is currently about flat with its sale price, but SLW, CDE, AUY, and PHYS are down.  This is a good time to triple down, because CVX is still over $120 per share and the precious metals are beaten down.

Rik Green's Investors Forum Growth Portfolio down 5% in September

Rik Green's growth portfolio <Port-faux-lio> lost 5.5% in September while the S&P500 gained 3.0%.  CVX which is 38% of the portfolio's value was flat and GG which is 22% of the value dropped 12% during September.  Gold and silver lost 5% and 8% respectively during the month.  PSLV, PHYS, CEF, SLW, and AUY all depreciated about the same as their underlying precious metal.  CDE was down 17% and is almost as low as at the end of June which was the lowest it has been since 2009.  In July, CDE rebounded from its June low and appreciated almost 50% in one month.  CDE is a volatile stock.

Year to date the port-faux-lio is down 11.3% and the S&P 500 is up 17.9%.  Gold and silver ended September at $1,329 and $21.70, respectively which is down 21% and 29% year to date.

In mid-May and August the port-faux-lio traded some CVX shares for more gold and silver related investments.  The trade does not looks so good right now as CVX is currently about flat with its sale price, but SLW, CDE, AUY, and PHYS are down.  This is a good time to double down, because CVX is still over $120 per share and the precious metals are beaten down.

Rik Green's Investors Forum Growth Portfolio up 1% in August

RG's growth portfolio <Port-faux-lio> gained 1.2% in August while the S&P500 lost 3.1%.  CVX lost 3.7% and GG was up 4.5%.  PHYS and PSLV were up about 6% and 20% respectively, which is slightly more than the market prices for gold and silver.  The trusts appreciation was more than the metals because their premiums to net asset value expanded during August.  SLW was up 15% during August while silver was up only 5%.  

Year to date the port-faux-lio is down 7.5% and the S&P 500 is up 14.5%.  Gold and silver ended August at $1,395 and $23.52, respectively which is down 17% and 23% year to date.

The mid-May trade of CVX for SLW and CDE is working out well.  Since then, CDE is up 15%, SLW is up 20%, and CVX is down 4%.  This trade has netted an unrealized gain of $5,716 in the port-faux-lio.

The trade on August 26th of CVX for AUY, CDE, and PHYS port-faux-lio has an unrealized loss of $1,729.  PHYS is flat and the miners are down.  AUY is down 12% and CDE is down 5% since August 26th.

CVX is now 37% of the port-faux-lio's market value down from 43% at the beginning of the year.  It pays a nice dividend of $1,00 per quarter.  The annualized dividend yield is 3.3%.  

Growth Portfolio Update: Traded More Oil for Precious Metals

This afternoon I made the following trade in the Growth Port-faux-lio:

This trade is similar to the trade that I made on May 14th which has worked out really well as of today. http://rikgreeninvestorforum.blogspot.com/2013/05/growth-portfolio-update-traded-oil-for.html  CDE and SLW are up 15% and 20% since acquired on May 14th.  CVX is down 4% since then.  The total trade gained about $5,600 which is a gain of $4,600 on CDE and SLW plus avoiding a $1,000 loss on CVX.  

Today's trade is jumping on the bandwagon.  I expect gold prices to break through $1,400 and then gap higher over the next month.  I invested in more PHYS because the trust's premium on gold to net asset value is low.  As gold prices accelerate, the premium should increase as in past rallies which will be icing on the cake.  The port-faux-lio added a small investment in gold miner, Yamana Gold (AUY) in order to get more exposure to gold prices while diversifying from GoldCorp (GG).  

Today's trade moved about 8% of the port-faux-lio's assets from CVX to precious metals.  CVX is now 37% of the total market value, down from 46%

Let's hope this bandwagon is off to the races!

Interest Rate Jump is a Crack in the Facade

The interest rate on 10 year US Treasuries is currently trading at 2.85%.  This is a jump from 2.58% just one week ago.  An increase of 27 basis points (bps) may not see like much.  But if you purchased a $100,000 10 year US Treasury bond with a yield of 2.85% instead of 2.58% you would receive about $3,400 more interest payments over the next 10 years.  http://stream.marketwatch.com/story/markets/SS-4-4/SS-4-35951/

As of July 2013 the US has $11.9 trillion of debt held by the public and $4.8T held by intra-governmental agencies, such as the Social Security Administration.  The average interest rate on the publicly held debt is 1.9%, which is about $225 billion annually.  This weeks increase in interest rates of 27 basis points would increase the interest on the national debt by about $32 billion for a full year.  The US government cannot balance its budget as it is.  Increasing interest rates make the dream of a balanced budget even more fantastical.  http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_july13.pdf

Interest rates typically serve as an early warning system for economic trouble.  Rates serve as the canary in a coal mine.  However, as I wrote in a post about a week ago the canary has been suppressed further than a NSA whistle blower.  Purchases of US debt by the US Federal Reserve Bank have kept rates low.  As of August 14 the US Federal Reserve Bank owns over $1.9T of US Treasuries.  The Fed also has $1.4T of mortgage backed securities that are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae.  And, the Fed has a few more assets it bought to help save the financial system and the economy which bring the its total assets to $3.6T.  http://www.federalreserve.gov/Releases/h41/Current/  Certainly, interest rates would have been higher if the Fed had not purchased $1.9M of Treasuries.  

Any chirp from the early warning system must be closely scrutinized since it is coming from behind a thick curtain of suppression.  The Fed will continue to acquire more and more US debt in a do or die effort to keep interest rates low.  At some point the global financial system will not let the US print more and more money by buying its own debt and the scheme will fracture with a sudden snap.  No bending before breaking.  If rates continue to climb next week, it will show that the Fed has become impotent.  Fear will over take greed.  

Keep your powder dry!  When the bond market fractures it will drag equities with it.  Speculators will sell quality stocks in order to raise cash and meet margin calls.  I have cash ready to take advantage of this eventuality.  What else would I do with cash?  Loan it to the US government for 10 years at 2.58%? No way!  One of the best investments I ever made was Coca-Cola (KO).  I purchased KO for about $23/share in 2008 during the market crash and sold it 3 years later for about $33/share.  That is a gain of about 50% in less than 3 years plus about 5% dividend yield during that time.  An impressive gain on a very solid, low risk investment.  

Rik Green's Investors Forum Growth Portfolio up 8% in July

RG's growth portfolio <Port-faux-lio> gained 8.0% in July while the S&P500 gained 4.7%.  CVX was up 6.4% and GG was up 14.2%.  PHYS and PSLV were up about 7% and 1% respectively, consistent with the market prices for gold and silver.  SLW was up over 16% during July while silver was up only 1%.  With this gain, SLW recovered its losses from June when it lost dramatically more than silver.  CDE was up 1% during July.

Year to date the port-faux-lio is down 8.6% and the S&P 500 is up 18.2%.  Gold and silver are down 21% and 35% year to date, respectively.  SLW and CDE are down 6% and 3% respectively since purchased in mid-April while CVX is up 1.5%.  I am going to wait and see if gold can stay above $1,320 for several days and silver breaks above $20.00 before investing any more in the miners.  Gold's price drop below $1,300 last Friday has me worried about more loses in the near term.

Two Major Gold Miners Maintain Production Plans for 2013 Despite Drop in Gold Prices

Goldcorp (GG) and Newmont (NEM) recently reported Q2 financial results and outlook for the rest of 2013.  Surprisingly and contrary to some headlines both miners are maintaining production volume and all-in-sustaining cash cost guidance for 2013.  GG and NEM are not shutting mines or significantly cutting capital spending to generate more free cash flow.  Lower by-product (silver, copper, lead, and zinc) prices are being offset by favorable yields and mix compared to their guidance at the beginning of this year.

As a long time Goldcorp shareowner my concern was peaked by a Citibank analysis shown by Zerohedge.  http://www.zerohedge.com/news/2013-07-07/citi-no-gold-company-will-generate-free-cash-flow-current-gold-prices  The analysis implies that Goldcorp and Newmont will not generate free cash flow if gold is below about $1,600 per ounce.  There is much more to the story.

GG and NEM are forecasting an All-in Sustaining Cash Cost per gold ounce of $1,050 and $1,150 respectively for 2013.  Their forecasts assume today's commodity prices for by-products, such as silver, copper, lead, and zinc.  All-in Sustaining Cash Cost includes by-product credits and sustaining capital expenditures and excludes depreciation and expansionary and project capital.  These miners could generate free cash flow if they depleted their current reserves and did not spend on new projects.  Of course this is a poor long-term strategy, but one they could pursue if necessary until gold prices recovered.

GG and NEM have strong balance sheets and financing.  GG completed a $1.5B financing in March 2013.  So they can afford to keep investing in new projects.  Never the less, both have revised their capital spending plans.  Each are reducing their $2B+ capital plans for 2013 by only $200M.  

In Q2 each company wrote-off about $2B of value in inventory (leach pads), in the ground (reserves), and Property, Plant and Mine Developments because of the recent drop in gold prices.  NEM, for example used a long term gold price assumption of $1,400 which impaired the book value of their Property, Plant and Mine Developments by $1.5B.  Presumable, if/when the price of gold increases the companies could write up these assets and recognize a gain.  But, I doubt that accounting rules permit what goes down to go back up again in all these cases.

GG and NEM could generate cash with gold below $1,600 per ounce if necessary.  Fortunately, for them it is not necessary and they plan to continue investing in growth projects thereby doubling down their bets on rising gold prices.  GG and NEW stock prices traded up on Friday by 2.1% and 1.5% respectively, while gold was flat.

Also, note that GG and NEW do not nor do they plan to hedge revenue (e.g. gold).  During the gold price smack-down in April and May some alleged that gold miners' hedging activity was contributing to the price decline.  Not from either of these major miners.

All-in sustaining cash cost is a tricky metric.  It is not GAAP.  Many members of the World Gold Council have adopted this industry metric over the last several quarters.  Goldcorp management explained that GG's all-in sustaining cash cost will be much lower in the second half of 2013 due lower sustaining capital requirements than in Q1 and Q2.  The definition of sustaining must be a bit fuzzy.  So best to use this as a guideline and view it over time.

Kinross, Barrick, and Yamana report Q2 earning on August 1st.

http://www.thestar.com/business/2013/07/25/miners_pull_back_on_project_amid_weak_commodity_prices.html
http://business.financialpost.com/2013/07/25/goldcorp-q2-earnings-penasquito-writedown/

Rik Green's Investors Forum Growth Portfolio down 8.9% in June

RG's growth portfolio <Port-faux-lio> lost 8.9% in June and the S&P500 lost 1.5%.  CVX was down 2.7% and GG, PSLV, PHYS, and CEF were down about 14% due to the precious metals price smack downs in mid-April and at the end of June.  PSLV and PHYS were down about 11% consistent with paper gold and silver prices.  GG and CEF lost almost 15% in June.  Mining stocks were down more than bullion as you would expect given their operating leverage.  And, perhaps valuations for mining stocks were catching up to metal prices because valuations in May did not drop as fast as for the precious metals.

Year to date the port-faux-lio is down 15.3% and the S&P 500 is up 12.6%.  Gold and silver are down 26% and 35% year to date, respectively.  SLW and CDE are down 17% and 6% respectively during June and since I purchased them in mid-April.  Should I double down and buy more?  Better to wait a while and see if now really is the bottom.  Missing the bottom won't upset me as much as piling on more unrealized loses.

Rik Green's Investors Forum Growth Portfolio down 4.3% in May

Let's quantify the damage.  I have not been looking forward to this.  I have not been putting it off, honest.  We just returned from a week long vacation to the Grand Canyon, Bryce, and Zion National Parks.  It was a great trip.  No time spent thinking about commodity market manipulation and governmental internet surveillance. 

RG's growth portfolio <Port-faux-lio> lost 4.3% in May and the S&P500 gained 2.0%.  CVX was up 0.6% while GG, PSLV, PHYS, and CEF continue to suffer from the precious metals smack down.  PSLV was down 8.7% and PHYS and CEF were down about 6.5%.  GG lost only 1.6% during May.  Gold and Silver finished May down 6.0% at $1,388 and at $22.27 down 8.5%, respectively.  It seems that the precious metal mining stocks gained some valuation multiple expansion in May because GG was down only 1.6% while gold was down 6.0%.

Year to date the port-faux-lio is down 9.2% and the S&P 500 is up 14.3%.  CVX daily closing price hit an all time high of $126.43 during May.   On May 14th the port-faux-lio traded some CVX shares for CDE and SLW.  At the end of May this trade saved 1% or $275.  CDE and SLW are almost flat to the May 14th acquisition price and CVX is down about 1% since then.  

Do you own the securities in your brokerage account? The advantages of direct registration.

Do you own the securities in your stock brokerage account?  Probably not.

If you read your stock brokerage account agreement closely you know that you do not really own the stocks in your account.  Stocks are held in 'street name'.  What you own is essentially a claim for a specific number of shares in the pool of those shares administered by your broker.  The broker has title to all the shares in the pool in their 'street name'.  This facilitates trading by enabling quick transfer of stocks from one account to another at the same broker and bundling of shares for purchase and sale.

There are two alternatives: direct registration and holding paper certificates.  Unfortunately most companies stopped issuing paper certificates several years ago.  

In summary, the relative advantages of holding securities at a brokerage in street name or as direct registration are:

Ownership Model	Street Name (Brokerage)	Direct Registration (Transfer Agent)
Insurance	SIPC up to $500k	No SIPC.  No FDIC.  Investee’s discretion
Fungibility	High: ownership transferred by broker	Medium:  must instruct broker to use Direct Registration System (DRS)
Investee-Investor communication	Administered by broker	Direct
Pledging securities as collateral	Medium	High
Creating a margin account	Easy	Not available
Receiving interest and dividend payments	Broker is added step in payment chain - delays possible	No delays
Administration regulated by	SEC	SEC
Record keeping	Book entry.  No paper.	Investee's Register.  No paper.
Corporate governance	Easier for investee to go dark with fewer registered owners.	More difficult to avoid mandatory disclosures.

In my situation the decision whether to direct register shares comes down to:
- do I want to keep track of yet another account, password, etc. at the transfer agent?
- how often and easily do I need to trade this security?
- what are the chances that my broker misappropriates shares in my account?

I do not need securities in my brokerage account as collateral for margin debt.  I have little confidence in SIPC insurance. 

More background and my sources can be read at http://rikgreeninvestorforum.blogspot.com/p/precious-metals.html

At this point, I am planning to direct register about half the shares in my core holding.  

Holding securities at brokerage firms can be risky.  Ask a former MF Global account holder.  All the brokers that I use also have banking businesses.  Who knows what the assets on the banking side are invested in.  Back in 2007, one popular internet broker had significant investments in subprime mortgages, for example.  Fortunately, this broker had more ethics and discipline than MF Global.

Good Company in Underperforming the S&P Year to Date

This article by Zerohedge shows that the S&P is up 15.4% and the average hedge fund is up 5.4% YTD.

http://www.zerohedge.com/news/2013-05-22/ben-bernanke-crushes-hedge-funds-average-hedgie-underperforming-sp-65-2013

Tyler Durden's observations are, as usual very interesting.  He points out that since the market has been steadily increase in 2013 because central banks have been buying stocks directly.  The hedge funds tend to make their gains on volatility which has been tampered by the central banks buying.

One can infer that the hedge funds have been forecasting a market decline.  Their forecasts have proven wrong.  So far . . .

Anecdotally, many hedge funds were invested in Apple at the end of 2012 which has dropped from $532/share to $439/share in 2013.  The John Paulson funds have been famously invested in gold which has taken a beating so far this year.  And, Philip Falcone's Harbinger Capital's infamously lost big in telecommunications.  We hear a lot about a few famous funds regularly.  So its good to see how the entire 'we deserve 2 and 20' industry is performing.  That is hedge funds typically charge clients 2% of invested capital annually plus 20% of gains.

Shutting down fraudulent hedge funds that achieved their gains with inside information must be hurting the industry average.  Both, by removing the cheating fund from the average and scaring others straight, or at least straighter.

Growth Portfolio Update: traded oil for silver

This morning I made the following trade in the Growth Port-faux-lio:

Chevron (CVX) has done has very well over the last 6 months.  But, silver has more upside potential that big oil now.  And, if the whole market declines CVX will follow it, while precious metals should be contrarian.  As discussed in a previous post, silver seems to have more upside than gold right now.  Coeur d'Alene Mines (CDE) and Silver Wheaton (SLW) are volatile, levered plays on silver prices.  At this time, I moved only about 6% of the port-faul-lio's assets to silver mining given the risk.

Rik Green's Investors Forum Growth Portfolio down 5.1% in April

RG's growth portfolio <Port-faux-lio> lost 5.1% in April and the S&P500 gained 1.8%.  CVX was up 2.6% while GG, PSLV, PHYS, and CEF suffered from the precious metals smack-down in mid-April.  Gold and Silver finished April down 7.5% at $1,477 and at $24.33 down 14.1% respectively.  The low for gold of $1,348 and silver of $22.77 was on April 15th.  

Year to date the port-faux-lio is down 5.2% and the S&P 500 is up 12.0%.  CVX hit an all time high of $122.01 at the end of April.   You may remember that I was consider shifting from oil to precious metals last month partly because oil hit a high of $121 on March 22nd.  Fortunately, I did not pull the trigger.  The smack-down of precious metal prices in mid-April has created a better entry point.  

I remain confident that precious metals are the best place to protect wealth.  Gold and silver prices will go up just as fast as they went down in mid-April.  The question is when.  While I wait for a clear sign, CVX and oil are a good place to park my money.  It pays a nice dividend and should continue to appreciate as central banks continue purchasing equities.

Rik Green's Investors Forum Growth Portfolio up 1.8% in March

Rik Green's growth portfolio <Port-faux-lio> gained 1.8% in March and the S&P500 was up 3.5%.  CVX was up 2.1% and GG gained 3.7%.  The precious metals funds were almost flat: gold gained and silver lost a little.

Year to date the growth portfolio is flat while the S&P is up 10%.  Interestingly CVX is up 10% YTD along with the S&P.  The Fed's easy money is inflating stock prices and many other asset classes.  Recent easing Japanese Yen policy and loss of confidence in the Euro has also driven appreciation in US dollar denominated assets.  

So why are precious metals the exception and not appreciating?  The market prices for gold and silver are actively being manipulated down by JP Morgan among others with support from the US Fed.  JP Morgan has a large short position in gold and silver.  Check out Eric Sprott, Harvey Organ, and Jim Rickards for more about precious metals market manipulation.

I am currently wrestling with 3 major issues related to the investments in this portfolio:

1) Should I start selling CVX?  The growth port-faux-lio is heavily weighted in CVX.  CVX market value has been tracking the entire market.  Money may becomes less easy which would drag down equity, and specifically CVX prices.  

2) How much longer can the manipulators suppress gold and silver prices?  Gold and silver market values have not changes much in the last 1.5 years.  I can hang on for several more years.  But if they can get away with it for 10 more years, I might throw in the towel and search for better returns in real estate.

3) Why are gold mining companies and specifically GG not valued higher?  GG's current share price is only 16 times 2012 net earnings.  GG has a much higher P/E than the entire precious metals mining industry because its growth prospects are much better.  Is the entire industry under valued?

Rik Green's Investors Forum Growth Portfolio down 3.9% in February

Rik Green's growth portfolio <Port-faux-lio> lost 3.9% in February and the S&P500 was up 1.1%.  CVX was up 1.7% and continues to outpaced the S&P500.  The precious metals funds were down about 8% and GG was down 7.8% in February.

Year to date the growth portfolio is down 1.8% while the S&P is up 6.2%.  This volatility is tough to stomach!  Deep breath.  Anyone investing in precious metals must be prepared to weather some storms.  But it still hurts to think that an investment in the S&P index would have out performed my carefully selected investments.  We're only in the first inning.

From an earlier post you can see that I believe the recent decline in metal prices to be a buying opportunity.
http://rikgreeninvestorforum.blogspot.com/2013/02/gold-prices-down-another-2-make-for.html

Rik Green's growth portfolio up 2.2% in January

Rik Green's growth portfolio <Port-faux-lio> gained 2.2% in January and the S&P500 was up 4.8%.  CVX outpaced the S&P500 and was up 6%.  The precious metals funds were up 2% offset by a 4% decline in GG.  The gold mining sector continues to suffer from throwing good money after gold that costs more than $1,600/ounce to get out of the ground.    Market valuations for strong gold mining companies are going to take off once the market sorts out the herd.  CVX ended January at $115.15 per share close to its high last September of $118.53.  At $115 per share the dividend yield on CVX is just over 2.3%, which makes it attractive if you can lever up 99 to 1 with zero interest money.  More on that later.