A Critical View of My Portfolio

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 |  Includes: ERO, EU, FXE, GDX, GDXJ, GG, GLD, IAU, OIL, PBA, SGOL, SLV, STO, SVM, UDN, USO, UUP
by: Old Trader

As we approach the end of the year, the thought crossed my mind that it was about time to take a break, and take a dispassionate, critical view of my portfolio. I’m not a particular adherent to any sort of mechanical rebalancing, but I can definitely see the wisdom in taking a periodic look just to get one’s bearings, figuratively speaking.

I think that it's important for an investor or trader to have both a goal, as well as a considered plan for achieving it (aside from making a “ton of money”). Having said that, I can also see how circumstances can, over a period of time, place an investor in a spot they didn’t necessarily intend to go.

My thoughts on taking a figurative step back were sparked by my exposure to PMs. I’m not a long time gold bug, but have come to see, and accept the wisdom of having 5-10% of a portfolio devoted to that particular asset class. Silver, in particular, (as well as the miners) has been on a tear, as of late, so my attention had been focused on that particular portion of my portfolio.

Doing some quick number crunching showed me that my exposure (via miners) is currently at 18.08%. Certainly not wildly out of whack, but I wouldn't be looking to add additional exposure. The “good news” about the over-weighting of the sector is that it’s the result of gains, particularly with the case of silver. Assuming that PMs continue to show strength, I’m thinking that should the percentage rise to 20% or so, I’d take some profits off of the table and pare the allocation back to 10%/-15%.

Getting back to the concept of taking periodic looks at a portfolio, I think that a part of the evaluation process should include making certain that any premises made in the initial construction are still valid. Granted, it's not too likely that “big picture” stuff is going to change dramatically in a few months' time, as a rule, but if one had started a portfolio several years ago, or more, that may not be the case.

In fashioning my portfolio, a couple of the premises behind my allocations were: being bearish on the dollar, and being bullish on energy. Regarding the first point, I was more inclined to get more foreign exposure, either via foreign stocks, or ownership of US-based multinational firms. A couple of years back, I was more constructive on the Euro, but that’s obviously a case of a premise no longer being valid.

Regarding my bullish stance on oil, that premise seems to be still holding up. An additional benefit of the oil/gas exposure relates back to the weak dollar premise. In fact, between the PMs, at 18.08%, and an additional 10.69% in oil companies, 28.77% of my portfolio is hard asset related. In keeping with my desire to minimize US exposure, both of my miners (GG, SVM) are Canadian firms (and SVM has properties in China), and two of my oil companies (PVX, and Pace Oil & Gas, which was spun out of PVX) are also Canadian, with a third (NYSE:STO) being Norwegian.

Obviously, I’m not done with my evaluation, yet. But even this admittedly cursory look has shown me holes that I feel need filling, to wit, no LatAm exposure and damn little Asian exposure.

Disclosure: Long GG, SVM, PVX, STO, MDOEF-PK