The Big Picture For The Week Of January 15, 2005

Here is a question I had come in.

Have I missed the boat on Precious Metals?? It's been up big the last year and many people think this year will be better. What's your opinion? I was in an energy fund, but got out when oil dropped below $60 thinking it was heading to $50, of couse it went back over $60 and has stayed {against most peoples opinion - they claim to be experts!!}

I think I am reading someone who trades a lot and makes bets on specific outcomes. Going to zero energy (if I am reading the question correctly) is a big bet. Reducing or tweaking exposure is not so risky but zero is tough. A lot of the oil stocks I follow and own have had big moves of late.

The reader seems to care more about gold right now and wonders if he missed the move. This is a tough question. For the last few months I have made a couple of decent short term calls on gold on the RealMoney columnist conversation feature. My most recent comment was on December 15 (subscription req'd) when gold was around $503 and I thought a trading bottom had been put in.

Obviously there is more short term risk up here above $550. If you are trying to find a trade for the next few weeks I doubt it will be a lot higher in that time period. At a minimum I think gold needs to go sideways or correct before it is tradeable again.

To be clear all clients have exposure and I have no plans to get aggressive with trading gold. I view gold as an asset class that has a low correlation to US stocks. That gold is up a lot now does not change the correlation. I bought GLD last week for a couple of new accounts. I have no idea if their entry point will be good or not but it is an important asset class that has a role in all accounts I manage.

On a different note I got an email from someone with $2000 to invest, asking me about an article I wrote (free registration req'd) about Gilead Sciences (GILD) for Motley Fool on May 19, 2004. He wanted to know if he should buy Gilead. As a planning rule of thumb individual stocks are for people with enough money to diversify in a cost efficient manner. I’m sure he did not like my response but I hope he goes with a mutual fund or an ETF instead.