Gyroscopic Investing

From a 1-year look-back momentum standpoint, silver is now edging out gold. 8.08% vs. 7.48%. So a relative momentum trader would start swapping out their gold for silver; more easily done with ETFs, of course. Personally, I don't buy physical silver at all, except for a few souvenirs and jewelry; too bulky.

ochotona wrote:From a 1-year look-back momentum standpoint, silver is now edging out gold. 8.08% vs. 7.48%. So a relative momentum trader would start swapping out their gold for silver; more easily done with ETFs, of course. Personally, I don't buy physical silver at all, except for a few souvenirs and jewelry; too bulky.

Some gold miner in Mexico thinks silver is gonna go to $140 an ounce. That would imply gold at $10K at current ratio, well above its $5K target. Said another way, silver is going to outperform and shrink the ratio while gold will underperform. You should at least buy a bag of junk silver for SHTF purposes. Making change with gold coins is problematic.

MachineGhost wrote:Some gold miner in Mexico thinks silver is gonna go to $140 an ounce. That would imply gold at $10K at current ratio, well above its $5K target. Said another way, silver is going to outperform and shrink the ratio while gold will underperform. You should at least buy a bag of junk silver for SHTF purposes. Making change with gold coins is problematic.

I think the gold-silver ratio mean reversion play is a real thing. Buy silver know, and probably in a few years you'll have relatively more metal wealth than if you'd bought gold, with absolutely no guarantee about the absolute value of that metal.

Yeah, I'm not one of those who subscribe to the precious metals as barter instruments. For me it's purely portfolio insurance, for after the reboot. If people on the street find out you have sizable amounts of gold or silver, you'll be killed.

MachineGhost wrote:

ochotona wrote:
You should at least buy a bag of junk silver for SHTF purposes. Making change with gold coins is problematic.

Not to change the course of the thread, but I've wanted to buy a bag of junk silver for some time. So many choices. Do I buy mixed, dimes, quarters, etc?? Some dealers sell by face value, others by the troy ounce. What to do?

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InsuranceGuy wrote:I've noticed that the momentum effect of silver is slightly better as well, but it is a much worse at diversification. Because of the vast industrial uses silver is much more correlated with equities and as such is not a good out of market asset.

The slightly worse performance of gold momentum in a portfolio is vastly better in those times when equities are in the dumpster.

Does that still hold up when normalized by its own volatility?

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InsuranceGuy wrote:I know that you are big on marginal contributions of assets, but I don't measure volatility on the components of a portfolio/strategy only on the portfolio/strategy in total.

That's not the point. The point is to come up with a less volatile momentum measuring algorithm. You've already shown it is optimal to wait several months for a "top" asset to persist as thus before buying, which implies there's too much noise in the momentum signal. Try some backtesting with this kind of logic:

Rank = ROC(C,252) / StDDev(log(C/Ref(C,-1)),252);

The you'll be comparing the momentum of different assets on a uniform basis. It's like FAA without all the other junk that seems to degrade performance.

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