Investment Scoring & Timing
Newsletter
When Do I Sell My Silver?
Michael Kilbach
Mar 23, 2007
When do I sell my silver and
gold? Are there ways of determining when to sell ones investment?
In our opinion the two most important questions when investing
are, "when do I buy?" and "when do I sell?"
Analysis of the economy, price movements, interest rates, debt
levels, unemployment, supply and demand, public sentiment etc.
are all intended to help us determine when to buy and when to
sell an investment. In this article we briefly discuss a typical
method for determining when to sell an investment and then we
explain our way of answering this question.
Before we begin, we wish to clarify that we think many checks
and balances are crucial for answering investing questions. We
always search for confirmation of our analysis by looking at
the subject from many different angles. But is there a unique,
simple way of determining when a bull market is likely to be
coming to an end?
One common method of determining a potential maximum price in
a bull market is to look at the markets past price movements.
For example, we know that in 1980 gold had peaked out at about
$850 for one ounce. So what would be a comparable maximum price
for gold in the future? $1000? $3000? $5000? The problem with
this analysis is that the US dollar price of gold is essentially
a ratio between the metal itself and the US dollar. In this case
we are trying to guess not only how much gold will rise but also
what will happen to the measuring stick; the US dollar. This
could prove to be exceptionally difficult.
We think an easier way to determine when an investor should exit
from the Silver and Gold bull market is to determine a relative
value. In other words, we substitute the effects of the US dollar
measuring stick with other assets that can be purchased with
the value of our silver and gold investment. We would like to
know what our silver or gold is worth relative to other
investment opportunities? Why?
This is what we know:
- We know the value of our silver
when measured in US dollars. Anyone can look up a chart of silver
or gold in US dollars on the internet at anytime. But we also
know that the US dollar is constantly varying in its purchasing
power.
- We do not wish to sell our
investment and park it into cash. Our goal is to continually
grow our investment through appreciation and/or income producing
assets.
Therefore, in the future we
wish to transfer our potentially over inflated, bubble status
investments to a new market that is at its lowest valuation relative
to the one we are currently in. We compare our investments directly
to other investments in order to bypass the distortion and confusion
of the currency fluctuations.
So how does this help us? We
believe that all markets are cyclical. When one investment is
overvalued and ready to decline, we expect to find another market
that is undervalued and ready to appreciate.
For Example:
The above chart compares the
price of silver in US dollars to a number of other markets. You
will notice a black line that is the monthly price of silver
in US dollars and a blue line that represents Our Custom Score
of silver versus these other markets. When studying the chart
you will see that over the past thirty three years, silver was
at its most expensive value relative to these other markets.
Stated another way, in 1980 these other markets were at their
lowest value relative to the price of silver. While approaching
1980, it would have made sense to significantly lighten up on
your silver investments and add to other investments such as
stocks and bonds. In 1980 this relative value direct comparison
would have allowed a silver investor to sell their current investment
and purchase a larger quantity of these under valued investments.
Or, as illustrated by the blue line on the chart above, it would
have made sense to significantly lighten up on your stocks and
bonds and purchase silver and gold at the year 2000.
Our strategy is to continue
to add to our silver positions when silver is relatively undervalued
to these other assets. We then intend to lighten up on our positions
when silver is over valued relative to these other markets. We
will determine this relative value through the regular analysis
of the above chart and the custom blue line score.
Is this the only way to determine
when to exit an investment? Is the above strategy fool proof,
perfect, exact? Of course not. No trading strategy in the financial
markets is flawless and we do not claim to have a perfect system
for investing. However, at investmentscore.com we actively seek
simple solutions to complex investing problems. The above chart
is one example of our investment strategy in precious metals.
If you have enjoyed this commentary
and wish to learn more, or if you wish to learn how to view an
updated version of the above chart on a regular basis, please
visit www.investmentscore.com.
Additionally, we have outlined many reasons why we have invested
in silver on our website. Click here
for free commentary on the important question of "should
I buy silver?"
Mar 23, 2007
Michael Kilbach
email: mkilbach&investmentscore.com
website: www.investmentscore.com
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may or may not own precious metals investments at any given time.
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Score Inc. information may be deemed to be investment advice,
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It is recommended investors conduct their own due diligence on
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data is supplied by sources believed to be reliable, that the
calculations herein are made using such data, and that such calculations
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or any other person or entity, and may not be complete. From time
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prior articles and opinions we have provided. These references
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recommendation, and are likely not to be current. As markets change
continuously, previously provided information and data may no
be current and should not be relied upon.
321gold Ltd
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