Last updated February 28, 2009

(Transactions since Jan. 31, 2009)

My portfolio fell 3.3% in February. Since it was up about one-third of 1% in January, I am down almost exactly 3% year-to-date in 2009. The following will show you the portfolio as it stood on February 28, 2009. All transactions since the last report were reported here as they occurred: Jay's Recent Transactions

My portfolio as of February 28, 2009:

In a recent interview we learned that Jim Rogers had ceased buying any stocks anywhere. Just three days ago he reported that he had sold all of his stocks except a portion of his Chinese stocks. He didn’t say what portion. Then he added that he had been recently selling US stocks short. His logic is that the rally which usually follows a panic selling climax such as we had in November never occurred, and his assumption now is that the bottom has not been seen in the US stock market. He added that he expects the recession to get much worse and last much longer. That’s really all I needed to hear. I sold my energy stock ETF (XLE) and my airline stocks. Normally, I would hold no stocks in today’s financial atmosphere, but I am making the mining shares an exception because of my strong conviction about their potential over the next 5 years as gold and silver enter the final phase of their secular bull market. Rogers has never mentioned mining shares, but several of my other experts are holding them now.

As explained previously, Rogers has predicted chaos ahead in the currency markets. I infer from his interviews that he is still holding most of his US dollars. I have converted all of my foreign currencies back to dollars, with the exception of Chinese currency, which is pegged to the dollar. I may convert it to dollars but haven’t decided.

Note that I have segregated physical commodity ETFs (agriculture and energy). The reason is that these are funded by commodity futures contracts on the actual commodities. That adds some measure of additional risk. Some are ETNs which are actual notes (liabilities) of the issuing firms, adding further potential risk. For these reasons, I am putting strict limits of 5% on each of these two categories. That does not mean that I will reduce them if they exceed the 5% limit (either due to adding to my investment or due to market value increase). I expect them to rise to a multiple of their current values, and I hope to sell them when they become a bubble near the end of the secular commodity bull market. What it means is that when they reach 5%, I will not add any new money to them. Similarly, you will note that my gold and silver have exceeded my 30% allocation. In my opinion, they are nowhere near the bubble stage, and since they are the safest form of cash on earth (opinion), I am happy and thankful to see them rise to a much higher percent of the portfolio.

  
CLOSING THOUGHT

I’ve been studying and thinking about the chart we discussed a few days ago, 200 Years - Dow/Gold Ratio.  In the discussion, Ted asked me if I thought we could see the ratio reach 2:1 or 1:1. My answer was, yes, it has happened before. He asked how I thought they might adjust to reach a 1:1 ratio, and I answered that I could visualize the Dow at 3,800, and I could visualize gold at 3,800.

The very next day I was reading Richard Russell’s Dow Theory Letter for February 27, 2009, and he said this on page 3, “Back in the year 2000, one share of the Dow would buy 44 ounces of gold. As the Dow declined and as gold rose, the ratio between the two headed lower. Currently the ratio is down to 7.71, meaning that one share of the Dow will buy only 7.71 ounces of gold. At previous extremes, the Dow would buy close to only one ounce of gold. Whether we’ll ever see a ratio close to 1 again, I don’t know. Subscribers often press me to guess at where prices will be when the ratio hits its low on this trip. If I had to guess, I’d venture $3,500 gold and the Dow at 3,500. Your guess is probably as good as mine.”

This current secular stock bear is now 10 years old. It could have another 5 to 10 years to run. It might take several years to liquidate the huge crowd of investors in stocks, especially when you consider the IRAs, 401-Ks, pension funds, hedge funds and foreigners who have bought stocks. No one knows the future, and we could have a strong rally in stocks at any moment, but I am very comfortable with a very low stock allocation, and I feel that gold has the potential for a major move up during the remainder of this cycle.