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   Strategies & Market TrendsPrecious Metals mutual funds (gold, silver, PGMs)


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To: Larry S. who wrote (946)11/20/2005 9:04:55 AM
From: Larry S.
   of 972
 
Dan & Wade et al,

I see that I have missed two weeks so I will post the past two week's as well as this week's GMI ratio bit today. However, it is most interesting that with gold at a several-year high, this week's Barron's carried an interview with JOHN HATHAWAY the Tocqueville Gold Fund manager. Of course, he is very bullish long term and sees major interest coming into the market when the price breaks $500.00/oz. He sees this happening during the next few months. Abelson also had some bullish words concerning gold in his "Up and Down Wall Street" column this week. So that they covered both sides of the debate, the Economic Beat Column this week was written by Carl B. Weinberg, the economist at High Frequency Electronics and he is very bullish on the dollar and obviously not bullish on gold. The Commodities Corner is devoted to Copper and discusses the Chinese Trader that is in trouble with a large short position. The general thrust of the story is bullish - supplies are low and demand continues to hold (it won't drop unless we have a global recession, in which case the dollar is likely to fall hard. In any event, when Barron's starts publishing bullish stories on gold, it is time to look for a pull back.

The GMI/POG ratio:

On 11/03, the Barron's GMI was 773.23 up significantly from the previous week's 745.40. With the POG down but only slightly at 460.50 (11/04), the ratio was up at 1.68.

On 11/10, the Barron's GMI was 779.80 up from the prior week's 773.23. With the POG also up at 466.75 (11/11), the ratio was down slightly at 1.67.

On 11/17, the Barron's GMI was 833.72 up significantly from the prior week's 779.80. With the POG also up at 485.85 (11/18), the ratio was up at 1.72.

I observed in my a previous post that I can't access the website with the data on the meaning of the ratio. It may have been shut down. If we can't access it, it is not clear to me that continuing to post the ratio is worth while. I can't seem to find the time to put the data into a spread sheet; so that we could build our own model. In any event, I will continue to post the ratio bit for a few more weeks. However, I recall (I think) that a higher ratio must be achieved before the probability of a major decline becomes substantial.

The ratio a year ago was 1.58, almost as high as today.

Larry

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To: Larry S. who wrote (948)11/29/2005 9:15:30 AM
From: Larry S.
   of 972
 
Dan & Wade et al,

What a difference a week makes, I didn't find any mention of PMs in this week's Barron's. I had mentioned last week that, when Barron's starts publishing bullish stories on gold, it is time to look for a pull back. It shows what little I know as the POG spiked above $502.00 last night. It has pulled back this AM and many experts expect a consolidation here before rising further; so maybe I wasn't far off.

Lease rates are showing an interesting pattern. The 1-month rate is higher than the 1-year rate. This inversion has been apparent for a few weeks. I don't know what it means but it is different condition than I've noticed in the past 10 years.

The GMI/POG ratio:

On 11/24, the Barron's GMI was 833.31 down very slightly from the prior week's 833.72. With the POG also up at 487.60(11/25), the ratio was down slightly at 1.71.

I observed in my a previous post that I can't access the website with the data on the meaning of the ratio. It may have been shut down. If we can't access it, it is not clear to me that continuing to post the ratio is worth while. I can't seem to find the time to put the data into a spread sheet; so that we could build our own model. In any event, I will continue to post the ratio bit for a few more weeks. However, I recall (I think) that a higher ratio must be achieved before the probability of a major decline becomes substantial.

The ratio a year ago was 1.58, almost as high as today.

Larry

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To: Larry S. who wrote (949)12/26/2005 5:26:11 PM
From: Larry S.
   of 972
 
Dan & Wade et al,

It benn a month since I posted the Barron's GMI bit but I have the data, so I will post the missing bits below. As indicated, the POG has had a wild ride the past few weeks but is back about where is was a month ago. If Barron's is the contrary indicator it has been in the past, it should pull back further as this Christmas week edition contains a very bullish story by one of the Barron's staff. It includes the following quotes;

""Most people on Wall Street have a very strong opinion on gold, but very few people know what they're talking about," says Trey Reik, who runs Clapboard Hill Partners, a long/short equity fund that focuses on mining shares. "The fact is, you don't know [the reasons for the spike] until after the peak and you see how it unwinds."

Certainly, eager speculators have played a role in the big run-up. "Investors have been scrambling to find anything they can bid up in price," says Peter Perkins, a global investment strategist at BCA Research.

The level of speculation has led some, including Reik, to predict a price pullback, perhaps to $480 an ounce, before the longer-term bull market plays out. But James Turk, founder of GoldMoney.com, a well-regarded Internet site for buying and selling gold, expects prices to top $850 an ounce next year. He's worth listening to: In the fall of 2004, Turk correctly forecast that gold would break $500 in 2005.

Turk sees the move above $500 as "an international buy signal" that confirms for investors that "this move is for real." He notes that gold has been rising against all of the major currencies, something that hasn't occurred since the 1970s, the start of the last major bull market in gold. He points out that in current dollars, gold's all-time high of $850 an ounce, reached in 1980, would be $2,200."

Lease rates continue at very low levels and the rates for different lease durations are almost the same. As I indicated a month ago, I don't know what it means but it is different condition than I've noticed in the past 10 years.

The GMI/POG ratio:

On 12/01, the Barron's GMI was 848.19 up from the prior week's 833.31. With the POG also up(breaking 500) at 502.55(12/02), the ratio was down slightly at 1.69.

On 12/08, the Barron's GMI was 876.16 up from the prior week's 848.19. With the POG up significantly at 525.50(12/09), the ratio was down at 1.47.

On 12/15, the Barron's GMI was 845.58 down from the prior week's 876.16. With the POG down significantly at 507.50(12/16), the ratio was up at 1.67.

On 12/22, the Barron's GMI was 863,74 up from the prior week's 845.58. With the POG down at 505.00 (12/23), the ratio was up at 1.71.

As I have observed in my recent posts, I can't access the website with the data on the meaning of the ratio. It may have been shut down. If we can't access it, it is not clear to me that continuing to post the ratio is worth while. I can't seem to find the time to put the data into a spread sheet; so that we could build our own model. In any event, I will continue to post the ratio bit for a few more weeks. However, I recall (I think) that a higher ratio must be achieved before the probability of a major decline becomes substantial; it is clear that the ratio is on the high side of the mean.

The ratio a year ago was 1.50; the GMI was nealy 200 lower.

Larry

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To: Larry S. who wrote (950)12/26/2005 10:55:12 PM
From: Wade
   of 972
 
Larry and Dan,

Sorry for lagging of my responses.

I have reduce my PMPIX holding significantly due to its unable to keeping up 150% XAU leverage and exposure to hedged stocks. I added USERX to the line up. This fund has been lagging due to several poor stock selections. But, I like its new line up right now. I'll keep on watching its performance and will move away from it if it doesn't perform well.

I feel the same way that POG will move higher because it has becoming an international currency when all paper currencies are printing in record speed and quantities.

GMI/POG ratio can be replaced with XAU/POG for research. I used it very often:

smcurl.com

Good luck for 06.

Wade

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From: Wade12/29/2005 6:56:05 PM
   of 972
 
The key to make good money from the mutual funds is to look for those can beat both XAU and HUI indexes. Otherwise, there is no point to pay those mangers to look after our money. <G>

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From: Wade1/28/2006 7:52:07 PM
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smcurl.com

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To: Wade who wrote (952)2/7/2006 7:46:57 PM
From: unrealistic_thoughts
   of 972
 
The key is to beat ^XAU and ^HUI indexes with your mutual fund.

Oh, like my (large, > 15%) gold holdings in tinyurl.com Vanguard Precious Metals Fund VGPMX, with the 0.48% total expense ratio ?? Sorry, I could not resist a big grin when I read that comment from Wade.

What do you guys think of the explanation on the Prudent Bear Website - the presentation, "Why Gold?" at prudentbear.com ?? I have done pretty well in the past 4 years from finding the smelliest assets (gold, vanguard pacific stock index fund), holding my nose, and investing. My timing has been stomach-turning - usually there is an immediate 20% drop in the investment value, but I am happy with the 40% and 200% returns since those initial investments have been done.

I don't think you can buy an asset until you know when to sell. The Dow:GoldPrice ratio, which is historically 10x, suggests a selling price of $1100 per ounce. If we are looking for a bottom in the gold price, a price of either $2000/ounce (or a dow of 5000) is possible. I don't really care which one it is as long as I have a substantial fraction of my assets invested in gold or gold mining shares at that point.

If you look around the world, you see countries such as Japan and China printing up horrendous amounts of cash to try to stimulate their economies, and now the USA is doing it too with its deficits, and you've gotta realize that at some point the central bankers will not be able to sterilize all these outrageous amounts of cash, and they will leak into asset prices or cause a debt-deflation. Then, you need to get really pissed off at how these central banks are playing you for a chump unless you invest in a non-inflatable asset. Then hold your nose, and invest in gold, and sleep at night, soundly.

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To: unrealistic_thoughts who wrote (954)2/7/2006 8:09:32 PM
From: Wade
   of 972
 
VGPMX has lots of base metals which gave it a good lead before gold took off. Since July 05. This fund has been lagging comparing to the pure PM funds. The expense ratio doesn't have strong correlation with the performance. I don't mind to pay more for the best funds. <G>

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To: Wade who wrote (955)2/8/2006 5:23:29 AM
From: unrealistic_thoughts
   of 972
 
If you read John Bogle's books (Bogle founded Vanguard), there is research indicating that GROSS returns are NEGATIVELY correlated with expense ratios. In other words, funds typically charge high fees because (a) they are incompetent and inefficient - and need the money to stay alive, or (b) because they are greedy and want to steal your money. Both reasons have very negative connotations for your long-term overall returns.

How do can I x-ray a mutual fund like VGPMX to figure out what percent of it is base metals and what percent is diamonds and what is gold ?? I guess i could sit down with a spreadsheet and a half a galloon of beer and the prospectus - is there a faster way ??

- Don

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To: unrealistic_thoughts who wrote (956)2/8/2006 7:57:08 AM
From: Wade
   of 972
 
There are quick ways to find what you need at Yahoo:

Metals:
finance.yahoo.com

Performance:

finance.yahoo.com

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