Goldstar Portfolio


Striving for Optimal Growth




Disclaimer: Past returns do not guarantee future returns. The Goldstar Portfolio is an example portfolio. It is for informational purposes only and does not constitute an offer or solicitation to buy or sell any security or asset discussed herein or in any jurisdiction where such would be prohibited. Please see rest disclaimer at the bottom of this page. 




Target Allocation


Strategy


We achieve optimal growth by applying the 'Kelly Criterion' and allocating capital based on our estimated risk/reward ratio's. The higher the risk/reward ratio the more we allocate to that position.

This can be scary as the highest potential rewards are found often where there is high risk as well. Also the Kelly criterion will lead to the highest optimal returns but comes at the price of also the greatest volatility.

Generally we start buying when prices have been going down for a while and the risk/reward ratio is becoming more attractive, and we start selling only when prices have gone up parabolically and the risk/reward is becoming bad short term.

We prefer to work in several small steps instead of 1 big step. We try to offer liquidity by putting up buy and sell offers close to the market price, hoping for those offers to be filled and earning the spread, instead of executing our offers immediately, taking liquidity and having to pay the spread.

The Permanent Portfolio serves as a cash position when we cannot find enough great investments/investors.



Assets

  • Bitcoins, popular exchanges are bitstamp.netbtc-e.com and kraken.com. Popular storage/wallets are Blockchain.info their online wallets as well as the Armory Client (private key offline so that hackers can't steal them). As always invest at your own risk, rest disclaimer see bottom website.
  • NXT, a new cryptocurrency launched end 2013. Most popular exchange is bter.com and ccedk.com. Client can be downloaded via NXT.org, or you can start an online wallet at mynxt.org. The forum can be found at nxtforum.org.
  • Roland Vandamme his portfolio as published since 2000 in his payed dutch newsletter. With an average performance of 16% from 2000 until 2013 he has proven to be a top investor. His portfolio consist mostly of physical gold (65%), some physical silver (10%), some stocks & turbo's (25%) and no cash. (Update January 2014, he just bought tons of mining stocks, highly recommended!)
  • Stocks from Cyprus where the market has collapsed a staggering 98%.
  • Small cash position, EUR, if position is big then it goes into the European Permanent Portfolio.



Assets European Permanent Portfolio 

*Note, PP was removed in April 2014, liquidated for Bitcoins @ $500. 

  • 25% Stocks:
    • 20% iShares EURO STOXX 50 (Acc) - ISIN: IE00B4L5YV07
    • 5% iShares DAX ETF (DE) - ISIN: DE0005933931 (We added this because the EURO STOXX 50 does not hold enough German companies (only 30%, less then French companies with 35%) and by adding this we hold now 41% German companies in our 25% stocks and only 28% French so that the link with the German stock market is the biggest now, as it should be since it is by far the biggest economy in the Eurozone and our bonds are also only German. 
  • 25% Bonds:
    • Long term German bonds with a duration of 32 years when launched. We hold those that expire on 04.01.2037 and were launched in 2005 (ISIN: DE0001135275). They give 4% interest anually and today in 2012 they have a duration of another 25 years. If you buy new ones you want to buy more recent ones as they have a longer duration. For example in 2012 they released DE00011354812 and they expire in 2044, so they still have a duration of not 25 years but 31 years, which means they will go up more in value if interest rates drop. For a list of all long term German bonds see:  Laufzeiten und tägliche Rendite börsennotierter Emissionen
    • Why we take only bonds from Germany and not other countries is that they are the strongest government bonds in the Eurozone and that is exactly what Harry Browne wanted the 25% bonds part to hold: the strongest bonds from the region. 
    • We bought these via Maxblue, the online broker of Deutsche Bank Deutschland and transfered them to Finanzagentur Gmbh, the debt agency of Bundesrepublic Deutschland, for safekeeping. If Deutsche bank goes broke we don't have any problems as our bonds are not stored with Deutsche Bank but directly with the German Government. Finanzagentur is the same as 'TreasuryDirect' as they have in the USA.  
  • 25% Gold:
    • 15% Physical gold, Krugerrands bought via KBC Bank and Napoleons bought via Gold4ex.be
    • 10% Paper gold via Bullionvault.com because it is much more liquid than actual physical gold and we trust them and they have the cheapest rates around. This gold is stored in Switzerland. Since Bullionvault's headquarters are in the UK we do agree that from a government confiscation standpoint it is not very secure and better can be found. The new book by Craig Rowland and J.M. Lawson about the permanent portfolio as well as his podcast Gold in the Permanent Portfolio describes better more trustworthy solutions for gold than Bullionvault. 
  • 25% Cash:
    • Short term German government bonds (ISIN DE0001030070), also called 'Tagesanleihen', which is a bond of only 1 day duration, meaning you can take it out every day without any costs, same as a regular savings account, or T-Bills in USA.
    • Just like our long term German bonds, these 'Tagesanleihen' are also stored directly with Finanzagentur, the debt agency of the German Government. And in contrast to the long term bonds, these short term ones can be bought directly with Finanzagentur, so no bank transfer of short term bonds is needed. 



Update 24 september 2012: Last month politicians have decided to shutdown Finanzagentur. As of 2013 you will still be able to open accounts but you will NOT be able to buy any new bonds anymore directly from Finanzagentur and this means NEW tagesanleihen are also cancelled as this was something exclusively released by Finanzagentur. You will however still be able to store your old tagesanleihen and bonds AND you will still be able to transfer bonds that you bought via a bank or broker, that are released before august 2012, to your Finanzagentur account, meaning that you can actually still use the account for another 10-20 years. 

To know exactly which bonds you can buy and still transfer go to Bundesbank.de website, click Service - Bundeswertpapiere - Emissionskalender des Bundes - and click on Jahresvorausschau.  This opens a pdf file with a list of recently released bonds in 2012, if there is written in the kolom 'Art' - 'Neumission', this means you cannot transfer them to Finanzagentur, but if there is written 'Aufstockung', you can still transfer them to Finzagentur the coming years. So if you want to buy more ST bonds in 2013 for instance, you can still buy DE0001137388 and DE0001137396 (that run till September 2014) and transfer them to Finanzagentur. And ofcourse all bonds realeased before 2012 can also still be transfered. So you could buy 30 year bonds in 2013 that expire in 2014, and this way have actually a short term bond every year. You could do this cheaply too we think as buying bonds via online brokers such as maxbluie is cheap, and Finanzagentur is paying interest and at expiration the whole amount without any costs, also storage has no costs, but not 100% sure of this. If you checked this please let me know in comment below or via email. 

29 comments:

  1. Welcome bitcoin people :)

    http://www.reddit.com/r/Bitcoin/comments/18ybx9/professional_investors_are_starting_to_show/

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  2. you have made the right decision re: Bitcoin.

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  3. Yes, thanks to our bitcoin investment made only 3 months ago we were able to neutralize the heavy loses in our precious metals portfolio and even end in positive territory.

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  4. Bitcoin is the future, good thinking!

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  5. follow this thread: https://bitcointalk.org/index.php?topic=68655.0

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  6. I love increasingly seeing bitcoin as a line-item in people's portfolios. Makes total sense as part of a diversified portfolio, but it's going to take some time for most money managers to realize this (the learning curve to bitcoin is indeed pretty steep).

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  7. Marc, proficiat met uw Bitcoin-speculatie :-)
    http://www.zerohedge.com/news/2013-03-20/spain-bitcoin-run-has-started

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  8. Iedereen die bitcoin koopt is gek. Dat is precies alsof je goud koopt voor world of warcraft. Het is momenteel in een hypefase en dat is erg gevaarlijk als die bubel knapt. Ik blijf er mooi af. Digitaal geld vind ik nog erger dan geld op papier want daar kan een regering nog makkelijker mee foefelen.

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  9. Hi Marc,

    how can I understand better how you invested in BITCOIN ?

    Thank you!

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    1. Investing in bitcoin requires a lot of study in understanding why they make sense and how it all works. This is something each bitcoin speculator goes through and can take many months.

      The act of buying bitcoins is very easy. Simply open an account at bitcoin-24.com and transfer euro's via bank wire to them (SEPA), I also started like that. Buying bitcoins anonymously requires a lot more study though. Storing them safely with no counterparty risk is also a challenge. But one needs to start somewhere. Please read disclaimer of my website carefully. This is NO investment advice.

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  10. Marc even serieus, je hebt nu 25% van je geld in bitcoins gestopt.
    wat als de koers weer net als in 2011 naar de 2 euro duikt ????
    ben je niet enorm aan het gokken nu??

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    1. Hi ?

      No, gambling is when your chances of profit are smaller then your chances of loss. It is an activity performed in casino's. It is not kind to accuse an investor of gambling, certainly not if you don't put forward rational arguments to support your case.

      I am speculating in the Variable Portfolio, that is betting your money on stuff that has a - higher - chance of winning than losing. I consider bitcoins to be still a very good speculation, as well as gold and silver. Hence why I have those assets in my Variable Portfolio.

      Bitcoins have indeed gone up a lot recently and are certainly 'overbought'. However, historically they are still not 'highly overbought' according to my calculations. The speculator in me thinks they will go considerably higher before correcting seriously so I hold on to them eventhough they now represent half of my Variable Portfolio.

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  11. Marc,
    Goed om te zien dat je eigen portfolio weer zichtbaar is.
    Alleen ik snap de cijfers van Perm. Portf. [2] van 2011 en 2012 niet. In 2012 waren alle assets positief en het totaal niet ? De keuze voor Bitcoin waren in combinatie met een VP van 50% een meesterzet. Het zal je portfolio is in de toekomst wel erg volatiel maken en dat zal meer discipline vragen dan de rustig voortkabbelende PP. Inmiddels toch maar mijn eigen VP begonnen, een soort Ivy timed PP model, niet echt gebaseerd op rationele argumenten maar op gevoel om de scherpe dips in een asset van de PP te voorkomen. Nog veel Succes.
    Gerard

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    1. Gerard, it's a real pleasure to receive your message. Very glad to see you are following our Goldstar Portfolio. Thank you so much for your compliment. :) I am also very proud that I saw the opportunity of bitcoin in time and allocated enough capital to it so it would make a difference if successful.

      It's my first year that I succeed in outperforming my grand masters Marc Faber, Harry Browne, Roland Vandamme & Hugh Hendry, and it feels great. I learned a lot and think I will prove that you can achieve high returns while at the same time having proper risk management.

      The mistake I made was invest too little in bitcoin when the risk/reward was very favorable (7% end 2012 when bitcoin was valued around $13 and coming from an immense depression) and invest too much in it when the risk/reward was outright bad (35% at the height of the bubble when bitcoin was valued at $250 and had just 20 folded in only a few months). Due to this mistake my profit was too low in the initial uptake, and my loses too high when the crash was there.

      I saw the opportunity of a tenbagger, and although I succeeded in increasing the portfolio with a very respectable 40%, I wanted to at least double the capital, which did not work out.

      Next time I'll do it better. My target exposure is now 30% to bitcoin (best speculation) and 20% to Roland Vandamme (best speculator). (They are not correlated, so if one fails, the other one can still neutralize that loss. If both fail I lose 50% of my capital which I am willing to risk as if it works out I will more then double my capital.)

      However, this time, when risk/reward is favorable I will increase this exposure with 50%, and when risk/reward is bad I will reduce this with 50%. So this gives a band for bitcoin of an exposure of 15% when it is highly overbought (instead of the target of 30%), and an exposure of 45% when it is highly oversold.

      Ofcourse it also depends on Roland Vandamme, as I also want an exposure to him, but if say gold is highly overbought this will be only 10% (instead of the target 20%) and 30% when highly oversold (hence why I have been gradually raising the exposure recently to Roland Vandamme that is clearly oversold at the expense of bitcoins which is still overbought).

      With this approach I will this time tripple my total capital (200% in 1 year!) when bitcoin tenfolds another time instead of only adding 40%. I also implemented safety measures, if bitcoin would go to zero, I won't lose everything.

      The way it works is that once bitcoins become highly oversold and I have build up an exposure up to 45%, I stop buying, even when it becomes even more cheap. That way if it goes to zero I can lose maximum 45% of my capital. I do the same for Roland Vandamme. Inversely I also will stop selling bitcoins once it is highly overbought and I have reduced my exposure to 15%. This way if a black swan would come by and tenfold bitcoins again never to go back to those valuations, I will not have sold a single bitcoin and will have profited also immensely from such event.

      It will likely become a boring year from here, but after that some serious action is in the works. Stay tuned :)

      Ps: Thank u so much for pointing out the error in my returns, it should be correct now.

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    2. Gerard, you mention you also started a Variable Portfolio using the Ivy method applied to a Permanent Portfolio. How does this work?

      Agreed that the Goldstar Portfolio, due to allocating 50% in a Variable Portfolio and on top of that speculating in the most volatile asset known to mankind: bitcoins, the Goldstar Portfolio has become much more volatile.

      This comes at a price as when the portfolio goes up a lot like the start of the year (up to 80% return in a few months) it consumes all your energy, and when it crashed (down to only 10% profit, losing almost half of the portfolio it's capital in only a few days) I cried. It's been a serious rollercoaster, but mostly due to the mistakes I made. I think with the strategy described above volatility should go down a lot while profit should go up as well. But still it will be much more risky and much more volatile indeed than an exclusive Permanent Portfolio. Speculating, even when successful, comes definitely with a price.

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    3. Marc,

      Which parameters do you use to calaculate the Risk/reward ratio ?

      I'm an investor not a speculator. However a VP is nice thing to experiment. Regarding the PP allocation there is most of the time one asset which goes seriously down in a year. Gold this year. No problem, because there is most of the time a asset which goes up. Stocks this year. The quest is "can we avoid the falling asset ? " And so i stumble on the Ivy timed model which seems to work alright. But I don't believe in technical analyse and I did'n't like the asset mix of the Ivy model. On technical analyse; i found it a lot of buzz, but there is "normal" pattern on assets; they climb slowly for a long period which end with a rather sharp decline. The Ivy model makes use of that pattern. So now I try out the IVY indicator, just a simple 200 days moving average to buy or sell the PP assets (a bit tweaked because I added a real estate index). I started on april first with all assets allocated except Gold, which worked out fine with a plus of 4 % against the PP of -1 %. But that is short term, the question is; will the indicator warns on time ? and the costs of moving in and out the assets.

      Gerard

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    4. Hi Gerard,

      I use several parameters to estimate risk/reward ratio. Risk/reward ratio is always an estimation ofcourse as you can certainly discuss what the upward potential is of something, and what the downward move can be worst case.

      I start with fundamental analyses. What's the potential over the next 2-3 years? For gold, if we get a final rally in this already 13 year long bull cycle, I estimate it can fivefold like it did at the end of the 70's. If we have started a long term bear market it can lose -50% over the next 2-3 years, like it did at the start of the 80's.

      For bitcoins, it can fiftyfold over the next 2-3 years if it continues it's rise of adoption, like it did in the past 2-3 years, or it can completely fail due to whatever reason and lose -100% of it's value. (I saw on your website that you also have a table specifying potential profit and potential loss for each asset: http://www.verstandig-beleggen.nl/index.php?paginaid=5)


      Then I also use the 200 day moving average price to judge whether the asset is relatively cheap or relatively expensive right now. If bitcoin price is above 200 day moving average I consider it relatively overbought/expensive, if it's highly above 200 day moving average I consider it highly overbought/very expensive. Same for gold. These simple 'current price' versus '200 day moving average price' indicators say right now that bitcoins are overbought/expensive, and gold is highly oversold/ relative to average price of last 200 days, very cheap.

      Fundamental analyses shows that bitcoins are overall a better bet, with higher risk/reward ratio than gold, hence why I have a target of 30% bitcoins/20% Roland Vandamme. But right now since bitcoins are overbought/relatively expensive and gold highly oversold/ relatively very cheap my target exposure is 30% Roland Vandamme and only 20% bitcoins as the risk/reward is better right now for Gold/Roland Vandamme, than for bitcoins.

      Ofcourse it's not because the risk/reward is good or excellent that the bet/investment/speculation will work out, it can still completely fail, but then still it was a bet worth taking and I made the right decision to take it.


      Interesting approach you are taking with your Variable Portfolio, trying to avoid the asset in the pp that will more likely drop. I could not find any info about 'normal' pattern of assets when looking for IVY method. I agree that asset in a bull market start by climbing slowly but this does change in a rapid increase before falling sharply. Also it works in swings, with higher highs, and higher lows, where the final swing is the biggest before going in a long term bear market where you have many swings also but this time with lower highs, and lower lows.

      The difficulty is to recognize which swing is the last in a long term bull market. As getting out before you will miss most of the gains but failing to get out on that one will produce huge loses. For gold this is my biggest question. Did we see the final rally in 2011? Or is the big final one yet to come? I estimate chances only 50% that it is still to come, but if it does, it will likely fivefold from here (or drop first another 25%/50% and then tenfold). But it the last swing was in 2011 then more drops will come but the tenfolding not in decades, and current prices will be considered high in 2-3 years time.

      You have made a great bet on 1st of april that gold would fall! Very nice. I didn't see that coming. What's your opinion on gold? Do you think the bull market is over or a final mania is more likely?

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    5. Marc,

      Interesting that we use the 200 day moving average reverse. Simply put; If the price is above you sell (plus reward indicator) and I buy. Weird
      Why you use the long SMA ? I follow the trend, so in my case it seems logical. In your case I'm not sure of a 5, 50 or 200 days makes more sense.

      about Gold, I realy don't know. Financial markets are mad. I expect Gold to fall as long as Goverments will stimulate. But they will stop in a moment in time. Then Stocks will fall, inflation & Gold will go up. So not this year, maybe next year

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    6. Marc,
      Prettig dat je je portfolio update. Blijkbaar zit je nu in 50 % cash.
      Ik ben benieuwd naar nieuwe speculatieve plannen ?
      Gerard

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    7. Hi Gerard! :)

      Thank you for still following my work :)

      Thank you also for pointing out an error. I messed up my sheet, now it should be correct. Still invested highly in Bitcoin and Nxt!

      How does your portfolio look these days? Congrats on your prediction about gold last year. It indeed ended on a really bad note!

      Have trippled my position into Roland Vandamme this year. How do you think gold and mining stocks will do for 2014?

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    8. Marc,

      Pity, I was curieus about new speculations.
      I only looks every quarter of a year. But I guess about 4% up.
      The future is difficult to predict from here:
      1) 50% prob.; world economy will accelarate in growth, so equities (2014), inflation (2015), Gold (2016).
      2) 30% prob.Like Japan: stagnation, maybe deflation; Bonds
      3) 20% prob.back to recession: Gold & Cash. (sounds like PPis a good choice).
      Mining stock are not my specialty. The relation between Gold & mining stock is vey weak. As investments they are too volatile and I didn't speculate. I have Billiton.
      Good Luck

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  12. Hi Marc,

    Nice work your portfolio.

    How do you invest in Cyprus as a Belgian?
    I thought there were capital controls?

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    1. This portfolio is fake. You can't buy Cyprus stocks as a non Cyprus resident. So you are right, because you can't get money in or out of Cyprus.

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    2. There are perfectly legal ways to buy shares listed on the Cyprus Stock Exchange despite the capital controls. I will share more detail once I have bought my full position.

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  13. Marc,
    I have updated my performance. Nice year until now.
    I'm pleased with the PP performance
    I''m very pleased with my new dividend portfolio
    I'm not pleased with my Ivy timed model HB based strategy. I will see till end of the year, if it makes any progress, otherwise I abandon the idea of techical analysis.

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    1. Hi Gerard,

      +5% after 3 months is nice start indeed! :)

      How large is your dividend portfolio in your total portfolio?

      The stock market has had a strong recovery since 2009. Marc Faber estimates chance for a serious correction high and I agree. What convinces you to raise your allocation to (dividend) stocks at this point?


      I am at -20% YTD. Will this become my worst year ever? Or my best year ever? Still confident in the latter.

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    2. I just started the dividend portfolio, so about 3 %. It's purpose is to generate an income in due time beside the core PP portfolio for preserving wealth. And yes the stockmarket will fall one day, but I will build up the dividend portfolio in the next 5-10 years, so it doesn't matter. If it fails, price's will be cheap.
      You can afford some losses. 2013 was extremly profitable for you.You have accepted extrem volatility. we will see.

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Disclaimer

This website is for informational purposes only and does not constitute an offer or solicitation to buy or sell any security discussed herein or in any jurisdiction where such would be prohibited. The author of this website, Marc De Mesel, as well as the commentators, together the authors, are expressing their own opinion on various subjects including those relating to economics, finance and investing. The authors are not registered financial advisors, brokers or securities dealers and do not take responsibility for the decisions you take with your money. All investments contain elements of risk. You should understand what these risks are before buying any investment. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary, and does not constitute investment advice. The authors will not accept liability for any loss or damage, including without limitation to any losses which may arise directly or indirectly from use of or reliance on such information.