Permanent Portfolio Analysis for week ending 2/2/07
For information regarding the history and approach used for the Permanent Portfolio Analysis please refer to my initial post at: http://www.safehaven.com/showarticle.cfm?id=6793.
Gold (Currently Bullish):
Gold is currently in the "Shed" region and got close to "Sell" last Thursday. I'm not buying right now. I am bullish on gold so I always buy when the price gets close to the 180-day Moving Average and I back up the truck and load it when the "Accum" trigger is hit, now at -.37. If you are building your portfolio, you might want to wait for the next dip. If you are in sell-mode the past few days would have been a-good-a-time-as-any to sell a few coins to get you through the month. If you are balancing your Permanent Portfolio to get gold to 25% selling now is OK. Put the proceeds into the Long Bond or into whatever class you are short.
I buy the physical metal and bury it. I also buy "Paper Gold" in stocks and funds that are highly correlated to the price of gold (e.g. ASA, GLD, TGLDX, etc.). When I get ready to sell the first thing that goes will be the paper. I'll hold the physical metal until the end.
Note to kids: DO NOT SELL THE GOLD! And make sure you get those two gold crowns out of my mouth before they cremate me. In case you forget, keep the ashes as they may pay for final expenses Don't let the undertaker steal them.
Bonds (Currently Neutral):
Bonds didn't do much last week and are hugging the 180-day MA. I am neutral on Bonds so I always buy when the "Accum" trigger is hit and the price is below the Median, now at -.56 and 10.25 respectively. If you are just starting to build your portfolio, now is an OK time to accumulate the long-bonds but there may be some downside remaining.
When I'm buying I either buy the actual 30-year bond or TLT.
Stocks (Currently Bearish):
The S&P500 was building all week long and is a few cents away from "Shed". I am bearish on Stocks so I always buy when the "Accum" trigger is hit and the price is below the Median, now at -.89 and 17.66 respectively. It looks like I'm going to be waiting a while... I know this graph looks bullish but if you are just starting to build your portfolio I would wait to see what happens next week...next month...maybe next year. Be patient and wait for the correction. Remember, you can hold as much as 35% of your portfolio in cash and still be compliant with the strategy (I'm close to that now myself). If you're selling, watch the S&P500 and if it goes up next week shed a few shares to balance your portfolio.
I'm currently speculating on the energy and defense sectors as it seems we're going to be in this war for a while. Heck, you can't do anything about it so you might as well try to make some money.
The Permanent Portfolio Fund:
The Permanent Portfolio Fund is trading in the Sell region and almost hit Strong Sell last Thursday. What is this telling us? I'm just your "Average Bob" but it seems that we're in a situation where almost everything is getting a little pricy. Something is going to give and it seems that the classes with the most to give are stocks and gold. I'm comfortable with the gold so let's wait and see how the deteriorating housing market affects stocks.
A long-term chart of PRPFX is shown below. I've included the current buy/sell triggers on the graph for perspective though these triggers may not apply as well to the past:
If you look at this graph and understand that the Permanent Portfolio approach instructs you to invest 25% in gold, stocks, bonds and cash, you will see that since mid-2001 the whole mess has traded above the 180-day MA with almost no general buying opportunities. Again, something has got to give...Be patient and vigilant.
I am not doing anything right now except accumulating short-term T-Bills, documenting the locations of my buried gold and waiting for Gold, Stocks and Bonds to become a little more reasonable. However, if you are just starting out now to build your Permanent Investment Portfolio, long-term bonds would be a good place to start.
Also, I should like to mention that I'm not a licensed investment specialist, I'm a Geographer with a specialty in Climatology and Geographic Information Systems, so any investment actions you take based on my advice you take at your own risk. Furthermore, Man does not cause global warming so you now know where I stand on that issue.
Freezing my butt off tonight in Huntsville, Alabama,