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A decade of gaining 18% a year – some ‘relic’

So far, it looks like my line-in-the-sand price of $1,320 has held but I will feel better when gold tops $1,400 again.  It also looks like the turn-around day was today, the OPTIONS EXPIRY DAY on Comex.  Congratulations to the crooks with special kudos to the traders at JPMorgan, who pulled it off once again. It’s easy when the CFTC turns a blind eye to what is going on.

I just finished a short recap of the markets from December 31, 2010 through today.  Here are the highlights:  Gold is down 4.8%, Silver is down 9.97%, platinum is up 2.4%, palladium is up 2.9%, the HUI is down 8.7%, the XAU is down 8.8%, the dollar is down 1.8%, the euro is up 2.7% and the Dow is up 2.7%.

The obvious conclusion is that the mining shares, as usual, fell around twice as much as gold and silver, and silver fell twice as much as gold.  This all happened while the dollar was also falling, which is surprising since gold usually moves inversely to the dollar. Since we know that the demand for physical gold and silver is very strong, this is nothing more than a regular Cabal “raid” on gold, silver and the mining shares.  Judging by the numbers, to date, the engineered “correction” was a nuisance, but rather minor – unless you are loaded up on mining shares, especially silver mining shares.

My portfolio of mining shares took a BIG hit this time around and a good friend of mine saw his portfolio (125 assorted silver exploration stocks) drop by over $1.5 million.  But – I recovered 1/6th of the loss today and as soon as gold is back to $1,400 and silver is back to $30, I will be in the black again.  You may ask “why hold throughout the drop and lose all that money?”  A good question, and one I ask myself all the time.  My answer is that I am in it for the long-haul, meaning at least another four to six years, and I don’t want to have to pay a huge tax bill which will leave me with only 85% of my sale proceeds to re-invest, and then, when I re-enter the market again have to wait a full year to get long-term capital gains treatment on my investment.

Now if I really thought that the bull market was in danger of a major collapse, say down to $1,000 an ounce, which would take silver down to below $20, an absolute slaughter to the mining shares, I would probably sell my shares.  Note, I said sell my shares, not my physicals.  They are my legacy to Andy and Betsy, my two wonderful children and for my five beautiful grandchildren.  They are also there for Susan and me, should it ever be necessary – or if I decide to “spend my kid’s inheritance.”  My intentions are to spend down my portfolio of mining shares, NOT my physicals.  It works for me and it keeps me out of dollars, which is exactly what Sir Richard Russell recommends.  In the King ‘World News interview at the end of today’s blog, Russell says, So it’s the dollar, the dollar, the dollar, that I’m directing my subscribers’ attention to. If the dollar collapses, every investment you own will be adversely affected — your home, your stocks, your insurance policies, your bonds, your 401K — everything that is denominated in dollars.

The Russell advice — swap your dollars for physical gold or CEF, GLD, or SGOL. In other words, do as China and Russia and many other nations are now doing — get out of your dollar assets.”

This has been my plan for the last five years and it has served me well.  Whereas the dollar and all dollar-denominated investments by definition have lost up to 10% per year to inflation for a decade, gold is UP 18% a year for the last decade.  Gold has outperformed the Dow EVERY YEAR SINCE 2004, and I’m not talking about a cumulative number, but every year.  I find there is SAFETY in storing wealth in gold and silver and there is RISK in holding onto dollars and dollar denominated investments.  Most people disagree with me.  That’s O.K., I have thick skin.  Sadly, I am certain that I will be right and those who choose to be dollar rich will, one day, ask themselves how they could have been so clueless.  I measure my wealth in ounces of gold (and silver).  This is one time when I wouldn’t mind gaining a lot of weight.

Dave Kranzler wrote the following on the dollar – in harmony with my own views. Dave is friends with our Chicago broker, Harold Rosen.  He is also a daily contributor to the LeMetropole Café.  He always has great things to say –

A Warning On The Dollar From il Padrino…

“If the dollar collapses, every investment you own will be adversely affected — your home, your stocks, your insurance policies, your bonds, your 401K — everything that is denominated in dollars.” LINK

I’ve been watching the dollar all day today (well, I do every day) and so far it has bounced 3 times at the 78 level since this afternoon. This could get ugly for anyone who does not have a significant portion of their wealth in precious metals…

Sprott Asset Management’s chief investment strategist, John Embry writes in the latest issue of Investor’s Digest of Canada that the current “manufactured” correction in gold will give buyers their lowest prices for 2011. Embry’s commentary is headlined “A Decade of Gaining 18% a Year — Some ‘Relic.”  If you can find the time, download the PDF of Embry’s latest essay. This is a great read!  The link is:


Remember, I will be on vacation until Monday, February 7.  No daily blogs until I get back.  Believe me, it will be as hard on me NOT writing them as it will be for some of  you who can’t wait to read them every day.  Feeling guilty, today’s blog is one-third longer than usual – all good stuff and I hope you find to time to soak it all up.

Tune in again in 11 day.

Best of everything,

David Schectman

Miles Franklin