Last updated May 31, 2009

(There were no transactions during May, 2009)
 

For the month of May, my portfolio was up 12.5%. For the year-to date, on May 31, 2009, the portfolio is up 8.5%. As I mentioned last month, for the 16 months preceding this month, the portfolio was down 3.2%. Yet the month of May erased this 16-months’ loss, and increased the performance to a ten year high. This illustrates the importance of protecting against a major loss of capital, which usually takes years to recover.

Here is my portfolio as of May 31, 2009:

If you are studying the stock allocation carefully, you might ask, “Since your stock allocation is now 2.1% above your maximum limit of 15%, are you going to sell some to bring it down to the maximum?” The answer is no. The 15% maximum applies only to the total cost of my mining stocks (my investment in them). There’s no limit on the gain in market value…not yet at least. Remember the basic rule: Buy when the investment is undervalued (preferably “hated”) and hold it until it is way over valued (preferably a “bubble”). I expect our mining shares to go up several hundred percent before they become overvalued. Your next question might then be, “If you expect that, why not buy a lot more? Answer: Because my working hypothesis is that the stock market is in a secular bear market, with an estimated 5 to 10 more years to run (new lows lay ahead, possibly 3500 to 5000 on the Dow) and I do not want to risk more than 15% in stocks of any kind. Please note that if I had had 30% or 40% in stocks during 2008, I’d still be down on my portfolio instead of at a ten year high. 

Note that cash went down as a percent of total assets primarily because most everything else went up in May.

Gold was up 10.1% in May. Silver was up 25.7% in May. It made the biggest contribution to my gain for the month. My working hypothesis for physicals (commodities) is that we are in a secular bull market with 5 to 10 more years to run, thus physicals are the largest allocation in the portfolio. The second major leg up in the commodity bull may already have begun. Even if it hasn’t, the fundamentals for commodities are improving daily, while the fundamentals for most stocks are deteriorating.