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A Cure for Precious Metals Investor Malaise

Commodities / Gold and Silver 2015 Apr 01, 2015 - 02:56 PM GMT

By: Casey_Research

Commodities

By Louis James

Markets fluctuate. Sectors cycle. Investors love and hate these facts, but we all know that if it were not so, it would be impossible to buy low and sell high.

The problem, of course, is that no one can time the market consistently. That makes it hard to know when low is low enough to make buying a likely one-way street and when it’s high enough to make selling a stroke of genius.


But this is a good thing: if it were easy, anyone could do it, everyone would try, and there’d be no profit in it. It is the very fact that it’s hard—that it takes true contrarian guts to bet against the herd and buy low, and buck the trend and sell high—that makes extraordinary profits in rational speculation possible.

Still, hard is hard, and many would-be speculators end up buying high, when “everyone” says a market sector will keep rising, and selling low, when “everyone” hates the sector precisely because it has become objectively undervalued.

And therein lies the key for maintaining one’s contrarian courage: price and value are not the same thing. When price is objectively less than value, it’s a fair bet that wherever the bottom is (just ahead or just behind), it’s close enough to count as time to buy low. When price is objectively greater than value, it’s a fair bet that wherever the top is, money in the bank today is better than evaporated, unrealized profits tomorrow.

The good news is that there’s a limit to the downside—dropping to effectively zero is gut-wrenching, but that’s the limit—while there is literally no limit to the upside. So, if one takes profits along the way, one can come out ahead, even without any stroke of genius at timing market tops.

These are the facts and logic that drive resource speculators to do what they do, to the bemusement of mainstream investors. But facts and logic are rarely as persuasive as they should be, so we thought we’d share this new video from CEO.ca, which illustrates all of the above perfectly.

This is the story of a man who turned a $20,000 speculation on junior resource stocks, some of which did drop to what he deemed to be effectively zero, into $15 million. Note that he doesn’t speak of taking profits, but one look at the car he’s driving shows that he did. This drives home the point of this article, because he admits that he completely failed to time the market, multiple times—and yet he came out ahead.

Simple words, important lessons, highly recommended. This video just might be the cure for the Bottom Time Blues.

Sometimes “investing mistakes” can turn out to be blessings in disguise. Watch these eight investment pros discuss how they invested in stocks that then plummeted up to 90%... and recovered to deliver mega-jackpots. Click here for the video.

Casey Research Archive

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