Recap of day 32

Good evening, readers.

Our precious metals investment continues to put serious distance between itself and our S&P 500 (Vanguard 500 Index Fund) investment, gaining 2.65% on the day, to lead Vanguard by almost $4,000. In 32 calendar days, our hypothetical precious metals investment has appreciated by 10%, while our Vanguard 500 Index Fund investment has yielded 1.1%. To put this in annualized terms, our precious metals are averaging a 75.85% yearly return, while our Vanguard 500 Index Fund is averaging a 13.20% return. Granted, it's still early in the game and things can quickly change, but why in the world would anyone invest in Wall Street, when Wall Street is paying less than 20% as well as precious metals? It's sheer, blissful ignorance...

Silver continues its unstoppable flight to $50, closing the day at yet another post-1980 high, and a little over $8.00 off the all-time nominal high. Silver has gained 36.5% already this year, and is on pace to gain more than 100% by the end of the year. What else can I say? If you're not buying silver, you're simply not interested in making money.

In other news, gold closed at a new all-time record today. No surprise here... We should see $1600/oz gold before July.

The S&P 500 closed up, gaining a whopping 0.01% today. I think I can actually hear crickets chirping over at the NYSE. With swirling rumors of QE3 abounding, we have yet to see the market pick up in response. Apparently, they want to see the money first.

I believe that there's a good chance (~80%) that silver will break $100 before the end of the year. This article today from ZeroHedge seems to confirm my suspicions:

Two weeks ago the precious metals space was closely following the fate of Sumitomo's San Cristobal mine, where a long strike had paralyzed work at the world's third largest producer of silver and sixth-largest producer of zinc. While the strike was eventually resolved with concession to the domestic workers, a far more troubling report from Bolivian daily La-Razon states that Bolivia's president Evo Morales is now planning on expropriating zinc, silver and tin mines sold off by previous governments. Bloomberg reports that "Morales will announce a decree May 1 to “dismantle the privatization model,” said Nicolas Fernandez, a spokesman for state mining company Corp. Minera de Bolivia, known as Comibol. "The government is recovering all the privatized companies,” Fernandez said today in a telephone interview from La Paz. “When the decision is taken, Comibol will be ready to manage these mines.”" Among the contracts to be affected are those with Glencore International AG, Pan American Silver Corp., and most importantly, Coeur d’Alene Mines Corp., which is operator of the San Bartolome mine: the world's largest pure silver mine. Notably San Bartolome and Sumitomo's San Cristobal "account for about 83% of the nearly 1.1M tons of fine silver Bolivia produced in 2009, according to Mining Ministry data" according to The Gold Report. If indeed this news is proven true, and we will know for sure in 16 days, looks for the price of silver to spike considering about 1.33 million kilograms of silver was produced in Bolivia 2009, according to the U.S. Geological Survey: an amount which will likely fall off a cliff following the utter chaos that is unexpected nationalization.

Like clockwork, silver responded to this news, and gained almost 4% on the day. I do get a little tired of repeating the same things over and over again, but... BUY PRECIOUS METALS!

The numbers:

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Day 27

Results upon NY close of trading -- April 14, 2011:

• Gold closed at $1,475.80 per oz, up $18.40 and 1.26% from yesterday. Silver closed at $42.18 per oz, up $1.52 and 3.74% from yesterday.
• VFINX closed at $121.16 per share, up $0.01 and 0.01% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: 2.56%
• Profit for the day: $2,625.20
• Total percent return: 5.1%
• Total profit: $5,068.68

Total investment value: $104,990.46

Investment #2, Vanguard 500 Index:

• Percent return for the day: 0.01%
• Profit for the day: $8.34
• Total percent return: 1.1%
• Total profit: $1,092.54

Total investment value: $101,047.25

Advantage: Precious Metals, by $3,943.02

Days 29-31

Good evening, readers.

First, my sincere apologies for neglecting this blog over the past several days. I'm not going to make excuses, suffice it to say that I had been extremely busy with work and couldn't find the time to plug in the numbers, let alone write something useful or even remotely entertaining. With that out of the way, lets turn out attention to our hypothetical investments...

Since Friday, our precious metals have continued to beat our Vanguard 500 Index Fund investment, in spite of two significant down days in precious metals, yesterday and Monday. Our precious metals have now appreciated by more than 7% since we bought them, giving us a total return of 2.4% (remember the 5% premium we paid for them?), versus just 1.1% for our S&P 500 (Vanguard 500) investment.

As some of you may have seen before, I like creating charts in Excel to try and explain data and (ultimately) to make predictions. Therefore, I present the following two charts:

Snapshot of Vanguard 500 (S&P 500) Performance-to-Date
With Polynomial Regression Curve Indicating Expected Performance Through 4/30/2011

Snapshot of Precious Metals Performance-to-Date
With Polynomial Regression Curve Indicating Expected Performance Through 4/30/2011

This is not to say that by the end of the month our Vanguard will be at -4%, while our precious metals will be at +17%. What this says is that the best fit curve -- the R-squared value -- is fairly well-correlated to these data points. The important thing is to look at the trend, not the absolute value. The trend -- based on our totally arbitrary starting point -- for precious metals is decidedly upwards (with an ~89% correlation), while the trend for the S&P 500 is mostly downwards (with a ~75% correlation).

Over the years I've found that these charts are very good at predicting long-term movements, but not so good at predicting short-term values. How good are they at predicting short-term movements? Why don't we re-visit this in 17 days...

Here are the numbers, delayed, but hopefully worth it:

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Day 27

Results upon NY close of trading -- April 13, 2011:

• Gold closed at $1,457.40 per oz, up $3.70 and 0.25% from yesterday. Silver closed at $40.66 per oz, up $0.55 and 1.37% from yesterday.
• VFINX closed at $121.15 per share, up $0.03 and 0.02% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: 0.84%
• Profit for the day: $851.41
• Total percent return: 2.4%
• Total profit: $2,443.48

Total investment value: $102,365.26

Investment #2, Vanguard 500 Index:

• Percent return for the day: 0.02%
• Profit for the day: $25.02
• Total percent return: 1.1%
• Total profit: $1,084.20

Total investment value: $101,038.91

Advantage: Precious Metals, by $1,326.16

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Day 26

Results upon NY close of trading -- April 12, 2011:

• Gold closed at $1,453.70 per oz, down $9.50 and -0.65% from yesterday. Silver closed at $40.11 per oz, down $0.11 and -0.27% from yesterday.
• VFINX closed at $121.12 per share, down $0.94 and -0.77% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: -0.45%
• Profit for the day: $-461.99
• Total percent return: 1.6
• Total profit: $1,592.07

Total investment value: $101,513.85

Investment #2, Vanguard 500 Index:

• Percent return for the day: -0.77%
• Profit for the day: $-783.96
• Total percent return: 1.1%
• Total profit: $1,059.18

Total investment value: $101,013.89

Advantage: Precious Metals, by $499.77

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Day 25

Results upon NY close of trading -- April 11, 2011:

• Gold closed at $1,463.20 per oz, down $11.80 and -0.80% from last week. Silver closed at $40.22 per oz, down $0.71 and -1.73% from last week.
• VFINX closed at $122.06 per share, down $0.34 and -0.28% from last week.

Investment #1, Precious Metals:

• Percent return for the day: -1.34%
• Profit for the day: $-1,332.98
• Total percent return: 2.1%
• Total profit: $2,054.06

Total investment value: $101,975.84

Investment #2, Vanguard 500 Index:

• Percent return for the day: -0.28%
• Profit for the day: $-850.68
• Total percent return: 1.8%
• Total profit: $1,843.14

Total investment value: $101,797.84

Advantage: Precious Metals, by $177.80

Day 26

Good evening, readers!

Very exciting news today in our little experiment: Our precious metals have overtaken the S&P 500, and are now winning by more than $1000! In just 25 days, our gold and silver has appreciated by more than 8.4%, while our S&P 500 investment (Vanguard 500 Index Fund) has appreciated 2.1% during this same time. Now bear in mind that our net return from precious metals is 3.4%, not 8.4%, because our hypothetical metals were bought at a 5% dealer premium, as is customary for physical delivery. Still, the fact that we bought our metals near a top in gold and when the S&P 500 was relatively weak (and thus making our Vanguard 500 investment less expensive), makes today all the more remarkable.

I'm pressed for time this evening, but tomorrow I'll post a detailed recap of the week's trading, and my preview of what we can expect next week, and sometime this weekend will be the second part of my long-awaited (and much delayed) article, Are Precious Metals Prices Headed for a Major Crash?

The numbers:

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Day 25

Results upon NY close of trading -- April 7, 2011:

• Gold closed at $1,475.00 per oz, up $15.90 and 1.09% from yesterday. Silver closed at $40.93 per oz, up $1.29 and 3.25% from yesterday.
• VFINX closed at $122.40 per share, down $0.68 and -0.55% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: 2.21%
• Profit for the day: $2,237.43
• Total percent return: 3.4%
• Total profit: $3,387.04

Total investment value: $103,308.82

Investment #2, Vanguard 500 Index:

• Percent return for the day: -0.55%
• Profit for the day: $-567.12
• Total percent return: 2.1%
• Total profit: $2,126.70

Total investment value: $102,081.40

Advantage: Precious Metals (!), by $1,227.22

Recap of day 25

Hi There Readers!

This is Mrs. Bentley. Nice to meet you! Tonight Baxter is feeling a bit under the weather so I'm filling in to bring you the exciting news in the world of  hypothetical financial investments! Since I am not versed in the jargon or science of investing, I am here to bring you the numbers, sans discussion. Tomorrow I hope Baxter will be feeling more like himself, but if not I promise to keep you updated. It sure is exciting to watch these portfolios battle against one another! Let's see who won today!

The numbers:

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Day 25

Results upon NY close of trading -- April 7, 2011:

• Gold closed at $1,458.40 per oz, down $0.70 and -0.05% from yesterday. Silver closed at $39.64 per oz, up $0.13 and 0.33% from yesterday.
• VFINX closed at $122.90 per share, down $0.18 and -0.15% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: 0.15%
• Profit for the day: $148.81
• Total percent return: 1.1%
• Total profit: $1,126.30

Total investment value: $101,048.08

Investment #2, Vanguard 500 Index:

• Percent return for the day: -0.15%
• Profit for the day: $-150.12
• Total percent return: 2.5%
• Total profit: $2,543.70

Total investment value: $102,498.40

Advantage: Vanguard 500 Index, by $1,450.52