Why I Am Selling Precious Metals

This move has nothing to do with the fundamentals of gold or silver. Simply put I want to run a concentrated portfolio and my  number of holdings is getting too large. With the Federal Reserve backstopping the entire US financial system, the risk of "calamity" is lessened (in return for inflationary pressure and dollar destruction)... but this is more along the lines of, I see no reason to hold gold/silver when I have coal/fertilizer. I already know where the prices of those are a year out - whereas gold is speculative, subject to the whims of the market, and a lot of people believing in a fantasy called "2nd half recovery". So I just don't see the need anymore to hold something that is sort of replicated in other ways in the fund; yet carries more risk. I'd rather simply be more concentrated into my top holdings with this money.

People often email me "wouldn't it be better just to buy and hold, since your stock picks are solid, and they just usually go up over time?" I have to remind them, that they are focusing on the winners and not the losers. (of which I have more than my share) Kinross Gold (KGC) is a great example where trading around a core position and taking out profits when offered saved me. (one of many examples). So yes, I sometimes leave money on the table on the "big winners" but I remain consistent in approach and this approach has locked in profits (or much smaller losses) on my "losers." For example, I have a small profit in KGC despite the chart below. So I am closing my 1.1% stake in Kinross Gold (KGC) with just under a $1000 profit, selling at $19.75

Not so fortunate with my silver holding, Silver Wheaton (SLW) which despite some trading and profit taking I still exited with a $1200 loss. Considering the chart, that's a small miracle. I am selling the last of my Silver Wheaton (0.3% stake) in the $13.70s. Net net, these 2 positions essentially cancelled each other out.

Again, I want to reiterate these are not typical sales - i.e. specific to the stocks. (I actually like the KGC chart in fact) This is more of a strategy call. I am simply at the point where I want to become more concentrated and narrow the number of holdings, as it is starting to get bloated, and if I'm going to focus on commodity exposure, I am going to stick with subsectors which I have pricing visibility - so why take the tougher road, when the easier road is offered?

When the dollar is "strong" all of these sectors sell off (incorrectly) but when "weak", I know which ones will rally based on what I foresee a year out - I can't say the same for gold / silver (although I do believe the flooding of world with Western currencies will continue to help these precious metals as well).

I am looking for other things to sell as well, to continue to narrow my focus.

Disclosure: No position

Comments

[BxCap:]

Normally I like your posts, but you seem to be all over the place with your logic, and that's very understandable considering the beating these stocks just took. You would have done better to review the stocks, without the dollar being strong or weak. The SLW drop had more to do with shipping delays and volume shortfalls than the average price of silver for the quarter. The two put together resulted in a record Net Income, but failed to meet street expectations, as the company provided no guidance regarding the shipping delays and continues to expect 13-15 million ounces in 2008. This makes them like FCX, weighted on the back half of the year.

2008 May 06 10:07 AM

[GMiki1:]

Ouch for you selling two stocks that are going to make a lot of money in the fairly near future. The strength of the dollar is obviously relative. But the strength of gold and silver are not. A stronger dollar--should that last--will only be strong against other weak currencies, but gold and silver are recognized as stores of value.

I say great that you hold energy and other commodities. They will be strong. But don't sell your top PM stocks before the sector actually takes off.

I have at least 20 PM stocks. Maybe some won't make it big, though I believe in them. I do follow them all--I don't have to "focus."

I sold a lot of my best stocks, too, when I was a newer investor. Yes, I made profits on them, but I sold too soon. Don't do it, folks. If the sector is in a bull trend, hang on. SLW and KGC are highly favored stocks and will rise much, much further. Then the less favored stocks in the sector will rise. Hang in there.

2008 May 06 11:02 AM

[J_D:]

Hi; I think you have just sold two stocks at the bottom. Remember buy low sell high? I sold out positions too, 3-5 months ago at a profit. I am buying now.

2008 May 06 01:05 PM

[darkside:]

If you understood the Federal Reserve and the American banking system, and the Ponzi scheme used to finance the dollar deficits, then maybe you would reconsider your sales of KGC. The gold move has not even started yet.

2008 May 06 04:56 PM

[Dan Schmeidler:]

I would hold Gold here and not buy anymore from here on up. But I would seriously consider adding more Gold if its spot price would drop to around $800, and then more around $750 (if it ever gets there) and so on. I am certain that there will be a whole lot of other willing sellers of Gold at $800 (in the next few months). It is understandable considering how the markets expect currencies to strengthen, production to pick up and the US to come out of a recession by mid-year. Just in case it does not happen, I am adding to my Gold position. If it does happen, I would still hold on to Gold, unless the Fed Funds rate was to stay (well) above 5% or 6% for an extended period of time.

2008 May 07 03:21 AM

[Jersey:]

And then came the establishment of the Reasonable Profits Board and it spread throughout the land and nothing on Wall Street was ever the same again. The End

2008 May 07 08:24 AM

[kdwill:]

Undisciplined, inconsistent, and illogical.
LOL.

2008 May 07 11:37 AM

[ronkr:]

If this were the quality of the norm of blogs of SA, then I would take my leave of the service, free though it is. Even if Trader Mark were my best buddy, I would soon find no time to be entertained by his self centered ramblings of how his day went.

2008 May 07 02:13 PM

[User 30121:]

G Miki...I enjoy your various postings relative to the subject of gold. Enlighten me please. Do you hold physical gold as well as stocks? Your opinion on holding "physical" versus stocks. Appreciate it.

2008 May 07 08:12 PM

[GMiki1:]

User, Yes. I hold physical, but the stuff is heavy. I'm not afraid of theft, but of fire. I have some in my own hot hands, some in a vault, and some out of the country. I also hold stocks. Stocks are supposed to give one leverage. Well, that's the theory. :) I believe in the long run, they will do so.

2008 May 09 12:00 AM

[maher:]

You seem to have no sense of the gold market at all, and are mypoic in your reasoning behind your own moves.
Coal is most likely near the end of its run for now, and fertilizers' narrative has changed after anti-ethanol politics and also the huge spike on all the fertilizer stocks in the last 6-months already.

2008 May 09 02:14 AM

[TMFSinchiruna:]

He needs a gut check:

www.fool.com/investing...

:)

I wonder if that was me picking up his shares of SLW the other day... if so, thanks for the terrific bargain. :)

2008 May 14 11:33 PM

[BxCapricorn:]

Well, it's been two entire weeks already, and silver is now at the $18 mark and gold continues to climb. The market is "correcting" again, and all of the major movers have pulled back, except the metals and mines, which are up (and DRYS of course). This is another great example of how difficult it is for people to buy a bottom, even seasoned investors like Trader Mark. Instead of adding to his position, he sold off and ran to something moving upward. Now the shiny stocks are dropping, and the garbage stocks don't look so bad after all, now that they are all green in my portfolio listing.

2008 May 21 05:34 PM