Fibonacci Financial

Posts Tagged ‘Fibonacci Financial’

While we have had  the break out of the Gold Silver ratio and of various Commodity indexes in infationary directions, we still have not seen a break out of silver.  Here is an updated point and figure chart of SLV the silver ETF.

The information regarding Commercial (insiders) and Speculator positions published in the Commitment of Trader (COT) reports on Friday still support the contention that this is a bear market rally in the precious metals also.

What Are All Those XXXX’s and OOOO’s on the Charts?

( No Dear Reader They Don’t Represent Hugs n Kisses! )

Several readers have indicated that they are not familiar with the point and figure charts that I use for illustration purposes in the blog.  John Murphy (world class technical analyst) provides an excellent overview of Point and Figure charting on his web site StockCharts.com.  If anyone is interested in why I use these “old fashioned” P and F charts drop a comment requesting additional information.

Do not get the idea that you can trade or make investment decisions from my blog entries.  These are an introduction to my services and do not constitute investment advice.

The Second Article in the Silver Phoenix series has been published.

To read it just look for the Ezine widget towards the bottom of the right hand column.

In Your Humble Partner’s Opinion Demanding “Coin Metal Silver” Is THE Most Revolutionary Act That Can Be Performed At This Time To Move The U.S.A. Back To Sound Money.

Share Your Thoughts

Gentle reader and Fibonacci Financial tourist please take a moment and step out of the cacophony of the now and listen to the words of Carl Sagan.  In these tumultuous times it is helpful to refresh our thinking in an oasis of the Suants.

EARTH: The Pale Blue Dot from Michael Marantz on Vimeo.

Thank You Michael Marantz for this marvelous presentation of Carl Sagan’s thoughts.

And another BIG thank you to Russell Stewart for sharing this with me.

Wishing Peace and Prosperity to all my readers.

Financial Fulcrum May Edition

Click to enlarge

Dear Reader I have briefly covered the La Vida LOCA (as a concept – but not all the applications yet) and would appreciate your reviewing the above checklist and let me know which item you would like me to cover in my next financial planning article.  So please drop me a comment with your requests.

It was really fun writing The Silver Phoenix Rises Again but embedded in the entertainment were some very serious, in fact revolutionary, recommendations – the take aways !

(if you haven’t read The Silver Phoenix Rises Again, please read it first)

The Primary Purpose of the article was to inspire action (your action dear reader) towards the remonetization of silver.  Remonetize silver and the remonetization of gold will follow as night follows day.  Ergo a return to sound money which is the foundation of a truly free and prosperous society.  The inimitable Harry Browne made the recommendation to always take the direct route to freedom in his classic How I Found Freedom in an Unfree World.  An example of indirect action would be to buy stock in B-Mart and plan to attend an annual shareholders meeting when you got extremely bad service.  The direct and rational action would be to walk across the street to Target.

The Political Route ? (1)

So what would be the direct route to remonetization of silver?  Join a political party and attempt to add sound money goals to the party platform (this means joining and then influencing the platform committee).  Then run for national office (House of Representatives).  IF  you win, draft legislation and stump for a consensus of rational support in congress…………………… Wrong!

The Societal Route – Individual Action (2)

The direct route would be to simply start using silver as money not just as an investment vehicle.  Currently, those of us who buy silver bullion coins or bars are using silver as a “Secondary Media of Exchange”.  To buy a candy bar or pay for services rendered we must first go to a coin shop and convert the silver (secondary media of exchange) into Money (in the US that would be Federal Reserve Notes or in colloquial terms “Dollars”).  Then we buy the candy bar or pay for services with a direct media of exchange (money) – dollars or euros or yen.  To start using silver as money (as a direct media of exchange) means to actually use it as the primary exchange item.

Actions

I am going to start paying my business partners each month with 10 ounce silver bars for up to 5% of what I owe them.  That would be paying for services with silver as money.  You could start by paying 10% of  your kids or grand childrens allowance with pre 1964 silver us coins.  This would give you the opportunity to share the history of the constitutional dollar with them.  Use it as a teaching moment to share our heritage with the next generation. (If anyone wants me to draft a short history of the constitutional silver dollar for their kids and grand children, let me know).  Be creative and share your ideas with us here.

Coin Metal

Now this is a small but vital first step.  Unfortunately, most of the physical silver out there can’t be used as coins in everyday transactions.  99.9% pure sounds great BUT it is not durable enough to be used as money.  So we need someone to start minting “coin metal” silver coins.  Coin metal silver coins would be 90% silver and 10% copper.  Each silver coin would have 1 full ounce of pure silver and .11 ounces of copper.  The coin would weigh 1.11 troy ounces and would be very durable and usable for many years in everyday transactions.  I am currently working on that project unless someone beats me to it – hint hint (I am a money manager and personal financial coach not a mint master).

Anyone interested in these “Coin Metal” silver coins please share your email address and I will keep you posted.

Silver is THE doorway to sound money – just open it and walk down the yellow brick road. 

Let freedom ring with the sound of silver in every ones pockets.

YOU HAVE THE POWER TO CHANGE HISTORY – USE IT – INFECT TWO OTHER PEOPLE WITH THE SILVER VIRUS BY SPREADING THE MONEY AROUND.

Rocky Mountain Illumi Naughty Dictionary definitions:

1 Political Science – The art of acquiring with a gun through governmental action what you can’t acquire on a voluntary basis through dialogue and a hand shake.  Always a win/lose situation.

2 Volitional Science – The art of acquiring what you want through dialogue and a hand shake.  It is always a win/win outcome.

Flash – The Gold Silver ratio Broke Down ! The Scales Tip Towards the Inflation Camp.

Vide !

Given this Breach in the Gold Silver ratio, I will be looking closely at the COT (Commitment Of Traders) report this weekend and next (unfortunately the info is for trading only through tuesday).

Frankly dear reader I am skeptical.  Let’s look at the Silver ETF SLV action.

A price Break Out in SLV that prints an X at $14.50 would force this ole poker player to exchange some of his greenbacks for silver bars.  One of Jesse Livermore’s rules was never be afraid to buy strength.  Not every poker hand is a winner but you learn to play every hand unemotionally.  Remember its not about the hand its about the game.  That is where good money management (proper asset allocation, stops, Optimal F, etc…) comes into play.  If you don’t have good money management rules – before the game ends YOU WILL LOSE.  If you make money along the way without employing good money management, you were lucky and luck runs out.

As Paul Harvey always says – Stay Tuned For News.

The Inflation vs Deflation debate rages all over the Web – So who is right ?

Last years deflationary collapse was revealed by a break out of a 2 year consolidation of the Gold/Silver ratio.  After burning itself out temporarily and yielding to the current mini bail out bubble the Gold/Silver ratio has once again entered a consolidation formation.  The breakout should indicate which tide will overwhelm the markets over the next 9 to 18 months.  My guess is that you will not find this insight anywhere else on the web.

Vide !

How does this work?  Silver was demonetized a century or so ago and now a large part of its demand comes from the industrial/jewelry sector (although the monetary demand is growing again).  Therefore it is more sensitive to a deflationary collapse.  Although the central banks and governments of the world have worked tirelessly to demonetize gold, it still is part of the monetary base of most central banks.  In spite of blatant manipulation by central banks and governments it still is less sensitive to deflation.  If the Bernanke/Obama bail out/stimulus printing presses overwhelm the collapse of toxic debt and we head into another inflationary/hyper-inflationary period, gold and silver will both break out to new highs but silver will run faster.  As the price of silver outpaces gold on a relative basis, the Gold/Silver ratio will decline.

Why should you care dear reader?

The next tide of either Inflation or Deflation will have a massive impact on your investments and wealth.  Knowing which one will dominate should dramatically alter the composition of your investments and impact your financial decisions.

The Gold/Silver ratio is one of the key indicators that I watch.

We don’t have to guess or predict the outcome of the Deflation / Inflation tug-of-war.  We just have to be alert to what the markets are telling us and reallocate our portfolios accordingly.

You saw it here first.  So, Stay Tuned ! ! !

Fibonacci Financial Portfolio Prism vs  Life-Cycle Investing

Life-Cycle Investing is a primary model for asset allocation in most financial planning performed in the U.S.A.  It is aptly described in a Social Security Policy Brief titled “Portfolio Theory, Life-Cycle Investing and Retirement Income”. The Policy Brief says “The life-cycle funds described here create portfolios that are heavily concentrated in stocks at the beginning of the work life and gradually shift holdings to bonds as retirement nears“.

The following table from the SS Policy Brief demonstrates this shift away from stocks as one ages:

This rigid/mechanical model relieves the Financial Planner of the burden of making market allocation decisions other than the fine tuning of these bench marks based on the clients special needs, goals, experience and expectations.  This model implies that intelligent decisions about asset allocation based on the markets is impossible.  Most Americans have bought into the Life-Cycle Investment  model as demonstrated by the next table which also comes from the same  SS Policy Brief.  Are you caught in the Life-Cycle Investment trap?  A first hint would be that your 401K is down 40-60%.

This table illustrates actual investor preferences as revealed in a study performed by Bodie and Crane (1997).

Remember – 90% of Portfolio Returns come from Asset Allocation decisions !

Therefore, if we get our allocations wrong it has tremendous impact on our wealth and retirement options.  Each quadrant (Cash, Lending, Investing, Tangibles/Intangibles) has its own seasons, cycles and dynamics.  Yes sometimes these cycles are correlated but sometimes they are not.

I will not explore the fallacies behind the stock portion of this model until a latter article.  But one chart will provide sufficient information to bring the “Bond” (aka Lending quadrant in FF Model) portion of the Life-Cycle Investment model into serious question. Vide !

Click to Enlarge

The above chart of 10 Year Treasury Bonds shows that there have historically been long periods of rising interest rates and long periods of declining interest rates.  Why should we care?  When interest rates rise the value of Bonds fall – ergo – you loose money!  When interest rates decline Bonds values go up!  As shown in the chart, interest rates have been declining for more than 25 years and as one would expect this was a period of rising bond values.  BUT interest rates are very low now.  Given past history, we are likely to see a 25 to 30 year period of rising interest rates begin in the near future – ergo – 30 years of losing money in bonds (except for a very few speculators).  These rising interest rates will devastate bond portfolios!  So, does it make sense to move older clients into this rising interest rate Bond Bear market trap? NO!, NO!, NO!

The Dynamic Fibonacci Financial “Portfolio Prism” Debut!

Without going into a complete explanation of the Fibonacci Financial portfolio development process, let me introduce the Portfolio Prism a dynamic approach to asset allocation.

The first step in the FF Portfolio decision process is to maintain an Asset Allocation Map of the market.  The result of our current assessment of the markets is displayed on the M.D.D. (Market Decision Dashboard).  The current recommended position in Bonds can be found in the “Lending Quadrant”.  Currently long term bonds are not under accumulation but are rather being liquidated in anticipation of a potential 30 year bear market in bonds.  But for illustration purposes, let pretend that Bonds are anticipated to be entering a 25 year bull market and will be under accumulation.  The next step in the FF Portfolio decision process would be to gather information about a client and to develop a client profile.  The final step would be to develop a portfolio based on the market profile and the client profile.  If bonds are deemed appropriate, regardless of the client’s life-cycle position, either conservative or more aggressive bond investment vehicles would be chosen.

The M.D.D. ( Market Decision Dashboard) in full display looks like:

(Caution the following view of the M.D.D. is for demo purposes only)

As a reminder, the underlined items in each quadrant will indicate that additional history, fundamental, technical and investing information is available when you click on the item and drill down.

So dear reader, should the aging Baby Boomers mechanically shift their decimated stock portfolios into bonds as recommended by a dominant portion of the financial planning community based on the static Life-Cycle Investment model ?

What do YOU think?  Please comment.

Feedback on the new Portfolio Prism would be greatly appreciated.

A Mango Thanks to Russell Stewart for sharing this Fibonacci with us

Art and Investing DO go together

Buen Provecho mi lectores!

Beware

The current Bail Out Bubble Rally will probably end in the Jaws of the BEAR !

So Dear Readers, Stay alert when the Dow breaches the 9000 level.