Some Investment Changes & Palladium Example

Since my money is no longer in tax shielded accounts, I’ve changed my trade frequency dramatically. No longer day or swing trading, largely due to the painful required record keeping and taxation as ordinary income on EVERY trade – that you can skip in an IRA or 401K rollover. But now having the goal to never trade anything until it is the Long Term Gains category. Well, a bit over a year ago I threw a bunch of my house sale cash into some “just preserve value please” stocks & funds, and today I moved some of it around. The results are rather interesting.

Did Not Work:

The TIPS (Treasury Inflation Protected Fund) did not work as well as desired. Basically it was a wash. The actual funds lost about the same value as was gained in dividend payouts. I’ve sold out of those positions. They DID do their job of preserving the money, but other things did a lot better.

Worked OK I guess:

I’d tossed a chunk of the cash into Foreign Currency ETFs (Exchange Traded Funds). In particular, FXF the Swiss Franc (plus a couple of others). These gained a little. Maybe 3% or so? Again, did its job of moving out of $US and into “something else” so that IF the $US tanked, I had partial coverage. But in the long term, most currencies just don’t move far or fast and do not earn much. I’ve also exited these positions so that I can do something better with the cash.

I had a small position in some foreign stock funds that did “ok I guess”.

Worked GREAT!:

A large chunk was stuck in an S&P 500 index fund. The thesis was that ‘it is stuff’ and stuff that produces income and grows. FWIW it is very hard to beat the S&P 500 index. I’ve done it for a few years in a row, but it took a couple of hours DAILY to do so. The reason is that the S&P 500 index is basically the 500 best in the USA, and when companies “go bad” they automatically exit the top 500, and small fast growers eventually enter the bottom with growth upward intact. It is very hard to beat that inherent “management” of the index structure. So Far it has gained a lot. I’ll need to put more time into deciding where I think it is going next.

Smaller amounts were shoved into Gold, Silver, and some Gold Miners. The Gold Miners grew a little (but have big upside in price rises – after a lag). The Gold and Silver funds also did pretty nicely. I’ve held those position pending a bit more charting of alternatives.

The money we sunk into the house has already gained about 20% (as an estimate, might be more since the last time I looked).

Changes?

I’ve added a lot of an India Fund: It is in BRICS+. Not in $US. Growing very nicely. Does not have the China demographic and governance issues. Doing better than Brazil (EWZ). On track to be bigger than all the European country economies, and not subject to EU / W. Evil F. crap. I still need to do a deeper look at Brazil, Mexico and maybe even Argentina, but for now India looks like “best of the bunch” of BRICS+ & ROW.

Added a couple of “Non-US world growth” and “Non-US world dividend” funds. Also an “Emerging Markets” fund. Basically delegating the Global Search & Selection to a fund manager, while gaining a lot of diversification inside the asset class. All while moving out of $US and into non-$US “Stuff” (in this case stocks that earn and grow). Essentially combining a currency hedge against the $US along with “stock growth potential”.

Metals:

Here’s an interesting chart comparing some “precious metals”. What I find fascinating is Palladium. You can see how vehicle Catalytic Converter demand drove prices sky high for a while, but then the move toward EVs and the overall collapse of car demand tanked Palladium demand, and prices with it. The main ticker on this graph is GLD, a Gold metal fund. Palladium is the wide ranging blue line that spikes to the top in the middle then crashes to the bottom at the right. This is a 5 year weekly chart.

The two other tickets are the S&P 500 and the red / raspberry colored Platinum line that basically goes sideways while having some volatility. A typical industrial metal behaviour where longer term it doesn’t go very far but shorter term it bounces around with industrial demand.

The S&P 500 is that harder to see gold colored line that goes lower left to upper right bouncing to each side of the GLD main ticker line. Net gain over 5 years roughly the same for the two of them and with volatility often being in opposite directions (I.e. they hedge each other to an OK degree).

The Point of this graph? That commodity metals can be very volatile while going nowhere or even losing a lot of money if the underlying demand drops from technical changes. The “precious metals” are not excluded. Gold & Silver demand often driven by Money Inflation and / or Central Bank concerns.

A side note would be that the “S&P 500 Gains” in terms of gold were basically nil (other than dividends not on the chart). So is that the “true gain of the USA Companies”, just treading water but keeping up with inflation (as does gold, long term), or is it true gain and shows the Run To Safety in gold driving up gold prices? Hard to say.

So to some extent, the S&P 500 might be an inflation hedge (though it drops in recessions). Companies are a kind of “stuff” after all.

The net of all this is that I’ve got NO industrial metals in my portfolio, but I’m mostly in a (roughly balanced) set of S&P 500 index and Gold & Silver ETFs. And I’ve just added a modest amount of non-USA stock funds. I’ll find out in a year if the S&P 500 is still a winner, or if the run from the $US has made the overseas holdings more valuable. As my S&P 500 and Gold / Silver funds holdings have all passed the 1 year point, I’ll be watching them more closely for a “topping action” and if it shows up, I’m now willing to dump them for a while (IFF the chart says it is a long term down change).

Looking at the indicators on the bottom of the chart, we mostly see “Stay In!” indications. I usually use a 1 year daily chart for shorter term trades, but use the 5 year weekly chart for multi-year Bull vs Bear market calls.

Volume+ looks unremarkable. The spikes seem to indicate both top and bottom traders.

MACD is well above zero with “blue over red” indicating an ongoing strong trend. It has a bit of “blue too far above and flattening” that is seen at market trend reversals (mostly back to the Moving Averages – ‘return to the mean’) but I don’t have the Simple Moving Average lines on this chart (so it would be easier to compare the other lines). On the chart that has them, it has GLD over the stack, and the stack in normal order – so mostly saying “yeah, ride the rise a bit more”.

DMI / ADX: Blue over Black over Red, with red very low and both blue and black high. Says “rising and stay in”, though once blue crosses under black, and if red starts rising to cross it, would be saying “long term trend likely reversing”. Not there yet, but that’s what you look for.

I’d guess that gold may take a small reversal (return to mean), especially if Central Bank buying slacks off; but I’d also guess that erosion of trust in the Euro and $US AND fear of asset freezing or confiscation will continue to drive gold prices up for a while longer yet.

So, in summary:

Gold & Silver as alternatives to the $US look likely to have a bit more to run, so I’m staying in them.

Broad Equities are doing well. S&P 500 is my usual basic holding (though I use the Schwab fund mostly as there is no commission in a Schwab account). I’ve added some starter positions in “Emerging Markets” with emphasis on earnings and diversification via funds. I’ve decided to mostly add some India Funds at this point. Russia being unavailable, China “having issues”, and Brazil being a historical Political Oscillator that has not performed as well the last few years. So some broad “Emerging markets” of all sorts (via a broad fund), and some focused on India as the “Best Of The BRICS” at the moment. (There is a bit of political risk in that Modi is taking some criticism from the Globalist Mob for failure to follow their directives – a feature IMHO.)

FWIW, EPI has a nice chart, though I don’t know enough about what is in it. There are other India Funds too, or folks can directly look up the “Nifty Fifty” or its component companies:

https://www.niftyindices.com/indices/equity/broad-based-indices/NIFTY-Next-50/NIFTY-50
A fairly stable mix of 50 big and established companies in India.