Below is a message we sent out to our newsletter subscribers (free version, not subscription) on 4 February, 2016. To receive notification of this news in a timely manner, please click on our homepage link above and sign up to our free newsletter.
4 February, 2016
To all of our Chinese subscribers, we wish you an early Happy Chinese New Year and a happy Year of the Monkey to you. However, from what we’ve been hearing, most of our subscribers, whether they are Chinese or not, are more interested not in knowing if this year will be a good financial year for those born in the Year of the Monkey, but rather in knowing if this year will finally be the Year of Gold and Silver. And by this question, we mean, “Will this year be the year gold and silver finally rise in USD?”, because last year, gold rose in almost every other global currency but the USD! In fact, as we’ve stated multiple times over the past several years, the real valuation metric for gold and silver is its weight, and ultimately everyone will understand this as the global currency wars reach their final stages. But since people tend to obsess over the wrong valuation metric – the price of gold in fiat currencies – we will address this question.
Last year, our CIO newsletter outperformed US stock markets by a wide margin of more than 8%+, and this year, we are easily outperforming US markets once again as US markets began the year with a horrible decline.
How We Provided a Positive Yield Last Year When the Gold Mining Stocks Tanked by More than -30%
Buy and hold was fatal advice last year in stock markets, and will continue to be fatal advice moving forward. In fact, the one year we did not follow our own advice and were tricked by falsified, banker-provided (JP Morgan) data in 2013, we consequently wrongly decided to buy and hold for the duration of that year. And guess what? 2013 turned out to be, by leaps and bounds, the worst performance year in our nine-year history. Not many investment newsletters focused on gold and silver assets are still around after the last 5-years of relentless Western Central Banking price suppression schemes executed against gold and silver assets. So how did we survive? Most are still not around because most had to do two things to survive during this time period which are unheard of as a matter of practice at all commercial investment firms. (1) Fund managers had to actively manage portfolios and not just buy and hold for the year. The myth that actively managed portfolios cannot beat an index is exactly that – a myth created by the commercial investment industry to trick naïve investors into always holding and never selling. Do you know why commercial investment advisors always want their clients to hold stocks and never sell? It is because they make money based upon AUM, assets under management. Consequently, the larger percentage of their portfolio that is held in cash, the less money they make. So it is much better for commercial investment managers to tell their clients to remain vested in the stock market, have their clients lose money, but take home a bigger paycheck, then it is to instruct clients to move to cash, save clients from losses, and take home a much smaller paycheck.
As an investment newsletter publisher, we don’t care if your entire portfolio is 100% cash, 100% in stocks, or 100% in physical PMs, because if it’s the right thing to do, it’s the right thing to do. Last year, we beat our benchmark XAU Philadelphia and Gold and Silver index by +37.84%. And it’s not just last year that we’ve accomplished this. Over the past nine years, we’ve beat our benchmark index by a whopping +128.10%, a feat that would have been impossible had we just bought and held PM mining stocks every year. In fact, this feat destroys the second myth of which anti-gold bankers are always falsely accusing gold advocates. Because nearly 100% of advisers that work for commercial investment advisers tell their clients to keep holding their stocks no matter if their clients should buy, hold or sell, they also falsely accuse gold advocates of practicing the same terrible guidance with their clients when it comes to gold. Obviously, if our cumulative yield over nine years beat our benchmark yield by +128.10%, this cannot possibly be true, and during the past nine years, there were plenty of times that we believed it was a terrible time to buy gold and silver. In fact, as we stated above, the only year of our nine years of operation in which we performed as poorly as our benchmark index is the one year out of nine in which we foolishly allowed ourselves to be bamboozled by falsified banker data into adopting the even more foolish banker strategy of buying and holding for the entire year in 2013.
That one year in which we embraced a standard investment industry strategy is the one year out of our nine years of performance that we admittedly made huge mistakes. However, after realizing the folly of our ways in replicating such a foolish industry-wide standard, we have never replicated that strategy since then, and never will embrace such a foolhardy strategy ever again moving forward. This adaptability that we’ve embraced is why last year, in a year when our two benchmark precious metal stocks indexes tanked by -30.10% and -32.81%, we were still able to return a positive yield of more than 5% to our Crisis Investment Opportunities newsletter members. And how will we perform if gold and silver assets finally rise this year, after five years of price declines (in USD)? Even though those in the investment industry always state that past performance is not an indication of future performance, the last two years that gold and silver assets performed very solidly in terms of USD pricing were 2009 and 2010. During those two years, despite soaring gold and silver prices, we still cumulatively outperformed our benchmark indexes by more than +33% over those two years. Thus, moving forward, we strongly believe that our margin of outperformance, even in an up year, can be just as solid as our margin of outperformance last year.
So, as many are asking today, will 2016 finally be the year gold and silver prices finally rise significantly? Honestly, it’s too early to tell. All the pieces in place from a fundamental perspective were in place last year in 2015 for last year to finally be “that year”, and it did not manifest. At maalamalama, as you are likely aware by now if you’ve been following us for years, we don’t make such price predictions. Why? Predicting precise gold and silver price behavior only has one possible outcome – to make the price predictor look foolish. Just look how foolish Harry Dent appears after predicting a $700 price close for gold in 2014, in which gold closed at $1206, and then reappearing in 2015 to state that his 2014 gold price prediction was not wrong, but just his timing, to reiterate his firm belief that gold would close 2015 at $700. Well guess what? In 2015, gold closed at $1,060, meaning that for two consecutive years, Dent’s predictions missed the mark by an astonishing 72% and 51%. If one is off the mark by 5% or 10%, then this wouldn’t be so bad, but miss the mark by 72% and 51%, and you should lose all credibility in the prediction game. Furthermore, by now, many people have realized that the big names that boldly make such predictions often do so only to benefit themselves. Often there are ulterior motives driving such predictions that only become apparent after people act on these public figure’s predictions. For example, just recently, famous billionaire oil investor T.Boone Pickens very publicly predicted that oil prices would double from their recent low of $26 to $52 a barrel later this year. And how committed was he with his prediction? He was so committed to this prediction, that as soon as oil moved higher on his prediction, he sold all of his oil holdings just 4 days later after making this bold prediction.
Consequently, instead of trying to predict exactly where gold and silver prices will end up at the close of every year, or what price oil will close at by year-end, both of which are impossible feats to accomplish, we let the market trends dictate our decisions. Last year, gold and silver trended lower for most of the year so we remained in cash and on the sidelines when it came to investing in precious metal stocks for most of the year, except for two brief periods last year when we believed gold and silver stocks would rise, and we were able to buy and close out our positions with decent overall gains both times. And what about the time in-between? Well, last year we shorted US stock markets three times and earned cumulative profits all three times as well. Back when we used to tweet with regularity, before twitter asked me to confirm my phone number and other personal information every time I logged in during my business travels and I became fed up with their invasion of privacy, here are three examples of tweets we sent out in the second half of 2015 that all served as prescient warnings that came true.
This year if US stock markets appear that they will trend higher for most of the year and gold and silver prices in USD will rise most of the year, then guess what? We will be long most of the year in gold and silver stocks and short most of the year in the US stock market. And what if a repeat of last year happens? Then we will apply the same strategies from last year that earned us a positive yield. We don’t think that will be the case as US stock markets appear to eventually fall to a much greater extent than it has already fallen ytd, and gold and silver appear primed for sustained rises higher this year. However, if this situation doesn’t manifest, we have learned to react and adapt to market trends rather than trying to force feed clients a strategy that does not work. And as it was last year, that will be the key to success this year. Adapt and bend to market trends instead of adopting a singular strategy from which you will not veer. Buy and hold is dead, and has long been dead as an intelligent strategy. Don’t die this year by refusing to adapt and by clinging to a buy and hold mentality. So far, this strategy is serving us well again this year. As of yesterday, our CIO newsletter was sitting on +4.96% gains ytd while the US stock market continued to fall another -4.83% over the same time period.
So will gold and silver make bold moves higher this year? Beware today, but long-term, we think they will. More importantly, even if they don’t, we can employ strategies that will maximize our chances of yielding positive gains. For more information, please visit us at maalamalama.com. And if you are a believer in investing in truly beaten down value plays, then there are no better value plays in today’s market then junior gold and silver mining stocks. Please click here to read about the various types of available Platinum Memberships that focus on such opportunities that paid off at an even higher clip for our Platinum Members last year. I believe that this year will be the year for valuation plays, and there are no better valuation plays in the world than beaten-down PM mining stocks. But as I stated above, even if I am wrong, and it takes a little longer for valuation plays to pay off, as long as one is adaptable and flexible, it is still possible to reap positive yields by changing strategies with changing market trends as long as one does not become so enamored with one’s strategies that one is unwilling to change them when they are not working.
