Market Update: Raised More Cash
Posted by Frugal on May 17th, 2006
I sold my company shares at a 10% loss, a non-core (non-commodity) position, and an international bond fund to raise more cash. My cash position, excluding the cash in my 401K, is now roughly at 26% of my cash + portfolio. I have substantial cash in my 401K because I have been slightly bearish towards the market, and in my 401K account, I cannot buy commodity-related mutual funds.
Having so much cash at the sideline, I have been planning for the BIG correction in the commodity market. Since I have roughly $1 for every $3 in my core positions, my game plan is this:
- If precious metal/commodity market corrects by another 30%, to a total of 50%, I plan to put $0.7 in when my existing $3 goes to $2 (total of 50% correction roughly).
- If the market corrects by another 50% from today, I will put in my last $0.3 cash, after the $0.7 cash.
Is this the BIG one that I have been waiting for? Actually, my current opinion is that this is not the big one, but another regular drill. I think the BIG correction should coincide with US housing market and global economy slowdown. Although the stock market tends to lead by three months, I still don’t see enough slowdowns, especially on a global level.
I have taken quite a big hit to my portfolio, but I’m still holding tight. Whether this is the BIG one or not, I will deploy my cash if the market goes too pessimistic.
The general market is indeed surprising weak. Now it’s the fifth day that it is falling. Complacency is never good.
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May 17th, 2006 at 5:05 pm
I decided to go in on silver at 13.13. Have to learn one way or the other. Time to ride this out and see if those predicting a 1980 peak will be right.
May 17th, 2006 at 8:55 pm
Novice,
I don’t know what kind of timeframe you have in mind. The people who I talk to always want a quick return, which is usually not possible. As I have said in my first Market Outlook, I don’t think $750 will be broken this time around. I don’t know if there will be another up wave before the end of year. The next up wave I believe that $850 in gold will be broken. But the next up wave may come before year-end, or maybe for another 1 or 2 years. It depends on when the BIG correction comes. In any case, if you took a small position, I think it’s good. This is not the time of taking a big entry into market I believe.
$850 in gold will definitely be broken, and probably $1000 or more. But again, it all depends on timeframe. You may make a killing, or you may simply preserve your wealth. As for me, I’m most concerned about preserving my wealth. Timeframe is kind of secondary consideration to me.
Best luck.
May 18th, 2006 at 5:42 am
Bob Bronson thinks the BIG ONE is as early as Oct 06.
http://www.financialsense.com/editorials/bronson/2005/images/0630d.gif
http://www.financialsense.com/editorials/bronson/2006/0517.html
http://www.financialsense.com/editorials/bronson/2006/0517.html
As for the next gold rally, it may come sooner than we expect.
Gold has been showing remarkable resilience at the $685 support level.
I would prefer a correction back to the 50EMA price of $630 but Bob Foye suggests 20EMA as the buying-opportunity for gold.
http://www.321gold.com/editorials/hoye/hoye051006.html
Jim Sinclair’s gold commentaries are also good guides.
http://www.jsmineset.com/
His long-term gold targets are $860 and $1650.
May 18th, 2006 at 6:28 am
I think pullback to $600 to $630 will probably produce a even better rally next time. But as you said, gold is very resilent so far. Thank you very much for all the links. It is very useful for me personally.
I expect the gold bull market to go for another 5 to 10 years. Since it can’t go up all the time, I expect that after the big correction, there will be some two years or so consolidation. But judging from the global trends, the next 1 or 1.5 years should be good. I don’t see gold consolidating its move at this level either. I think it should consolidate at a higher level after it makes its really big move. The consolidation level I believe should be more than $900. So I’m still guessing that this wave down is another bigger wave down before the bigger wave up yet.