Recap of day 19

Good evening.

I'd first like to start out by providing you with two charts on the year-to-date silver performance, along with a projection for silver performance into the new quarter.

As anyone who knows me will tell you, I'm a bit of an obsessive when it comes to Excel. I use it for nearly everything in my life that is even remotely connected to numbers, such as how much weight I'm lifting at the gym, how many miles I've ridden on my bike, how many calories am I eating, how much I weigh, and how much are my investments worth right now.

Now bear in mind that I don't tirelessly input numbers of seemingly dubious relevance just for the sake of record-keeping. No, I most certainly have a mission, and that mission is prediction. With enough data, one can make all sorts of predictions, and depending on the reliability of the data collection method, do so with a very high degree of accuracy. I guess this would mean that I'm a technical analyst in my real life, and not just in the worlds of finance and economic. I like to know, for instance, how strong might I be in 4 months, based on my current weight-lifting exercise routine. Call me crazy, but I just like to know everything I can about anything that might be highly beneficial to me at some future point. Believe it or not, raw data of a sufficient quality and reliability, when processed correctly, can yield some amazingly accurate predictions. Needless to say I'm a huge believer that too much information is nearly impossible. How can one ever make a completely educated choice without all of the data?

In the first chart, we see the direction that silver is likely to follow, based on its performance to date. How likely is it to follow this trend? Well, that's basically what the R-squared number means -- it's the coefficient of determination. The R-squared number gives you a numeric representation of the correlation of the line to the data. In simple terms, it's the probability -- assuming past performance is a good predictor of future activity -- that the line is accurate. In this case, the line and the data are 83.5% correlated. So, assuming that previous data is reliable and the trend relatively constant, it's the probability of where silver is headed in the next quarter. 

Spot Silver Prices, 1st Quarter 2001, With Linear Regression (Projection of Performance) Through 2nd Quarter

Being that I have watched silver and gold for the past several years, and I've seen a consistent trend upwards in both metals, I know that the long-term future performance of gold and silver will be excellent. However, in the short-term, no one really knows. Nevertheless, I'm going to offer this chart as a prediction, because I've made many of these charts over the years and -- generally speaking -- they're pretty damn accurate. Silver will close at a minimum of $44.50/oz by the end of May of this year. Now I saw "a minimum" because I have yet another chart for you.

Spot Silver Prices, 1st Quarter 2001, With Polynomial Regression (Projection of Performance) Through 2nd Quarter

This is a polynomial regression, which entails a slightly different equation than that for a linear regression, but that -- in this instance -- has produced a "better fit curve" than the linear regression. According to this chart, this curve is 88.1% correlated to the price of silver based on its performance so far this year.

"Wait a minute! What's this madness", I hear you say. "Are you really telling me that you think silver will be over $55.00/oz by the end of May?"

My answer to this question is a quote from the good Reverend Lovejoy, "short answer yes with an if, long answer no with a but."

I'll leave you to ponder this until next time,

Baxter

The numbers:

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Day 19
Results upon NY close of trading -- April 1, 2011:

• Gold closed at $1,428.90 per oz, down $2.90 and -0.20% from yesterday. Silver closed at $37.83 per oz, up $0.16 and 0.42% from yesterday.
• VFINX closed at $122.73 per share, up $0.61 and 0.50% from yesterday.

Investment #1, Precious Metals:

• Percent return for the day: 0.12%
• Profit for the day: $115.27
• Total percent return: -2.3%
• Total profit: $-2,252.49

Total investment value: $97,669.29

Investment #2, Vanguard 500 Index:

• Percent return for the day: 0.50%
• Profit for the day: $508.74
• Total percent return: 2.4%
• Total profit: $2,401.92

Total investment value: $102,356.62

Advantage: Vanguard 500 Index, by $4,687.53