Category Archives: Investor Psychology

A Strategy for Resource Stocks; Investing Course

A Strategy for investing in highly volatile, cyclical stocks

Once again, gold, silver and their mining stocks are selling off for whatever reason: risk-on as money floods into the stock market, rising nominal yields, 95% certainty of a (meaningless) 0.25% interest rate hike, momentum–take your excuse. The main point is to know your companies (valuation) and wait for sales like you do at the grocery store.   This week we are having a sale on some miners.

As Sprott’s Rick Rule often says, “If you are not a contrarian in the resource sector, you are a victim.  The above video is provided to show a particular investing strategy when your quality miners are selling off to prices where you estimate a margin of safety.  However, it doesn’t mean you predict THE exact bottom.  If your holding period is three-to-five years, you can occasionally pick up cheaper merchandise. Use prices to your advantage, not disadvantage.  I also wouldn’t be surprised to see the miners sell-off further because of their highly volatile nature–huge operational and asset-based leverage–when gold or silver goes up or down, both the price of their product goes up or down and the value of their reserves.  Never expect exact timing–a fool’s game.  Also, miners are impacted by the cost of their inputs, so a rising gold/oil ratio is a positive, for example.

What about the gold price in my assumptions?   I am assuming gold is money (“All else is credit”–JP Morgan) and thus I can benchmark it against world currencies. Gold has been THE strongest money relative to all other currencies for the past 20 years, 30 years, 40 years, 50 years, 100 years.  Gold is THE only money and store of value that can’t be created out of electronic bits like FIAT MONEY.  The stability of available supple is what makes gold the premier money. Of course, due to LEGAL TENDER LAWS, gold is not a currency in the U.S., except that may be changing in some states like Arizona: http://planetfreewill.com/2017/03/09/Ron-paul-testifies-support-arizona-bill-treat-gold-silver-money-remove-capital-gains-taxes/.

In fact, gold (originally silver) is the only Constitutional money allowed–http://www.heritage.org/constitution/#!/articles/1/essays/42/coinage-clause

You can get a historical overview of gold’s‘ price history below. Notice a trend?


http://www.macrotrends.net/1440/hui-to-gold-ratio Now view the miners in perspective.

P.S. Let me know if anyone wants to see a NPV case study on a miner.

Designing an analyst course

My goal is to organize a comprehensive analyst course using the best investors’ teachings and lectures. For example, Buffett, Munger, Graham, Fisher, Tweedy Browne, Walter Schloss, Klarman, and many others etc.  Why not use original sources of the best practitioners?  This is the course I wish I had twenty years ago.  It will be Buffett and Munger teaching not me.

The course would cover search, valuation, portfolio management, and you (how to improve decision-making).   There would be different modules continuing articles, case studies, videos from Columbia Business School and others. We would go from DEEP VALUE to FRANCHISE INVESTING.   Valuing assets to assessing franchises. Understanding reversion to the mean and slow reversion to the mean.  You need to understand that when a moat is breached-watch out! Note Nokia in cell phones.

I would have to make it a private web-site because of copy-right.   This would be more of like a private study place, library, and discussion area for learning.   There could be a in-person value class in some convenient location depending upon interest once folks have had a chance to go through the modules.

For example, putting ebitda into perspective might be a mini-module on a sub-set of cash-flow: http://csinvesting.org/placing-ev-and-ebitda-into-perspective-case-studies/   Now, if you scroll down to the last link, you can see that it was taken down.   With a private web-site, you would see this: http://csinvesting.org/wp-content/uploads/2012/09/placing-ebitda-into-perspective.pdf

Let me know your thoughts because this would be a huge project to complete.  What focus do YOU want?   How would YOU design and make the course.

Have a great weekend!

Recent Munger Wisdom

Recent Munger Transcript 340444245-Munger-2017-DJCO-Transcript340444245-Munger-2017-DJCO-Transcript

 

A Deep-Value Canadian Grahamite Teaches His Process

Tim McElvaine explains his simple but effective process.

2016-05_conference_transcript_McElvaine Fund An excellent tutorial on Graham-like investing. Note his simple four-pronged approach.   Read more below:

Time to Index? Got Gold?

A portfolio manager who will manage the Dogs of the Dow Portfolio.

Most institutional and individual investors will find the best way to own common stock is through an index fund that charges minimal fees. Those following this path are sure to beat the net results after fees and expenses delivered by the great majority of investment professionals. –Warren Buffett.

A minuscule 4% of funds produce market-beating after-tax results with a scant 0.6% annual margin of gain. The 96% of funds that fail to meet or beat the Vanguard 500 index Fund lose by a wealth-destroying margin of 4% per annum.  “Unless an investor has access to incredibly highly qualified professionals, they should be 100 percent indexed. That includes almost all investors and most institutional investors. –David Swensen, chief investment officer, Yale University.

“In modern markets, most institutions and almost all individuals will experience better results with index funds.” –Benjamin Graham.

Those who have knowledge, don’t predict. Thos who predict, don’t have knowledge. — Lao Tzu, 6th Century B.C.

I am reading, The Index Revolution: Why Investors Should Join It Now by Charles D. Ellis

The author presents a compelling case why most individuals should index:

  1. Indexing outperforms active investing
  2. Low Fees are an important reason to index
  3. Indexing makes it much easier to focus on your most important investment decisions
  4. Your taxes are lower when you index
  5. Indexing saves operational costs.
  6. Indexing makes most investment risks easier to live with
  7. Indexing avoids “Manager Risk”
  8. Indexing helps you avoid costly troubles with Mr. Market
  9. You have much better things to do with your time.
  10. Experts agree most investors should index

Articles proliferate such as: https://www.fool.com/investing/general/2016/04/05/the-numbers-are-in-actively-managed-mutual-funds-a.aspx and research for the past few decades has shown that Index Funds Outperform.

Now lets journey into the real world: https://www.mackenzieinvestments.com/en/prices-performance.  I picked this fund family at random. Look at each of their funds’ long-term performance compared to their comparable benchmarks.   Not ONE outperforms. Not one.   Who in their right mind would invest?    As money managers become desperate to beat the index, they tend to mimic their benchmarks, so their amount of underperformance closes towards the index, but GUARANTEES underperformance due to fees and slippage of commissions and taxes.

Time to pack it in and index?   First, do not underestimate how difficult it is to “outsmart” the market.   I personally believe that the ONLY way–obviously–to do better is to be very different from the indexes.   You will either vastly UNDER-perform or OUTperform.  You have to be different and right.  So how to be right?  You must do things differently like use all available information in the financials (read footnotes and balance sheet), have a longer-term perspective such as five to seven years–at a minimum–three years to give reversion to the mean a chance to work or time for franchises to compound.   You have to pick your spots where you are confident that you are buying from mistaken, uneconomic sellers.   And when you do find a great opportunity (assuming that you can distinguish one) you heavily weight your position.  NOT EASY.

SETH KLARMAN

Here is what Seth Klarman recently said about current conditions (New York Times, Feb. 7th, 2017:

Most hedge funds have found themselves on the losing side of trades over the past several years, a point Mr. Klarman addressed in his letter (2016). Noting that hedge fund returns have underperformed the indexes — he mentioned that hedge funds had returned only 23 percent from 2010 to 2015, compared with 108 percent for the Standard & Poor’s index — he blamed the influx of money into the industry.

“With any asset class, when substantial new money flows in, the returns go down,” Mr. Klarman wrote. “No surprise, then, that as money poured into hedge funds, overall returns have soured.”

He continued, “To many, hedge funds have come to seem like a failed product.”

The lousy performance among hedge funds and the potential for them to go out of business or consolidate, he suggests, may become an opportunity.

Perhaps the most distinctive point he makes — at least that finance geeks will appreciate — is what he says is the irony that investors now “have gotten excited about market-hugging index funds and exchange traded funds (E.T.F.s) that mimic various market or sector indices.”

He says he sees big trouble ahead in this area — or at least the potential for investors in individual stocks to profit.

“One of the perverse effects of increased indexing and E.T.F. activity is that it will tend to ‘lock in’ today’s relative valuations between securities,” Mr. Klarman wrote.

“When money flows into an index fund or index-related E.T.F., the manager generally buys into the securities in an index in proportion to their current market capitalization (often to the capitalization of only their public float, which interestingly adds a layer of distortion, disfavoring companies with large insider, strategic, or state ownership),” he wrote. “Thus today’s high-multiple companies are likely to also be tomorrow’s, regardless of merit, with less capital in the hands of active managers to potentially correct any mispricings.”

To Mr. Klarman, “stocks outside the indices may be cast adrift, no longer attached to the valuation grid but increasingly off of it.”

“This should give long-term value investors a distinct advantage,” he wrote. “The inherent irony of the efficient market theory is that the more people believe in it and correspondingly shun active management, the more inefficient the market is likely to become.”

End.

What do YOU think?

Using Charts (NVGS)

So if charts have NO FORECASTING ability or, in my humble opinion, no investor/trader can use chart formations like rising wedges, cup and handles, head and shoulders, etc to PREDICT where the market will go IN THE FUTURE. Charts might work for Hindsight Capital, but I have yet to see any research showing the efficacy of chart reading.  Despite that vicious attack on chartists, I do use charts.   Take for example, Navigator’s Holdings (NVGS).   Let’s zero in a bit more:

Note the time period from August 2016 to December 2016.  As the price accelerated downward on larger than normal volume–note in the second week of August the plunge in price from $9.50 t0 $8.10 in one day or about 15%, OUCH!  The price decline occurred on the anouncement of second quarter earnings:

Navigator Holdings misses by $0.04, misses on revenue Aug. 8, 2016

So you have a plunging/falling knife on an “earnings miss” or worse than “expected” news.  Now look at the opposite of the trade. Since I was fundamentally bullish, who was on the other side selling?  First from the holdings, you can see that 41% of the 53 million shares outstanding is held by a private equity firm, Invesco run by Wilbur Ross–a deep value investor. Invesco bought at $9 a share back in 2012, then sold some shares at $20 a year and a half later.  Over 50% of the shares seem to be held by long-term investors.   The NVGS share price had been declining for over two years from $32 per share while it bought more ships, then LPG freight rates declined sharply and the arbitrage shrunk for some of NVGS’s products.  In short, the sudden high volume rapid decline indicated MOTIVATED sellers who were either distressed or late momentum sellers.  Some of the sellers are selling AFTER a long price decline and bad news being announed.  I consider those emotional/weak sellers. Now there is no guarantee that the news won’t worsen and the price won’t keep declining.

I feel confident saying that because NVGS’ balance sheet was not overburdened with debt. See September-2016-Update for NVGS.

INVESCO PRIVATE CAPITAL, INC. 21,863,874 $ 157,201,000 41.05% 53.08% 1 NaN%
PARAGON ASSOCIATES & PARAGON ASSOCIATES II JOINT VENTURE 1,050,000 $ 7,550,000 8.73% 10.85% 4 86,516 NaN%
EMANCIPATION MANAGEMENT LLC 683,422 $ 4,913,000 7.57% 6.95% 3 187,961 NaN%
HOLLOW BROOK WEALTH MANAGEMENT LLC 855,072 $ 6,148,000 3.63% 2.91% 10 489,875 NaN%

Then prices CONTINUED to decline as negative news and research reports came out reporting the known bad news of declining freight rates, over-supply of ships, economic uncertainty, etc.

Let’s set aside that on a normalized basis, I have a value for NVGS above $20, how do I know the price won’t go to $8 or $5 or $2? I don’t!   But I do have context to see if the price is “OVER” discounting the news/fundamentals.

http://seekingalpha.com/research/839737-j-mintzmyer/4912014-exclusive-research-navigator-holdings-cheap-underfollowed-deservedly is an example of several negative research reports that implied, “Yes, the stock is cheap with solid management and the company is profitable, BUT supply will increase next year.” Stay away.

Then for the next two months, September and October, the price chart showed a change in trend from rapidly down to sideways. Why was the price going sideways with negative reports and negative news constantly coming out each day?  Perhaps the chart was showing that prices had ALREADY discounted the known NEGATIVE news and extrapolating a long period of negative news.   Unless the news became much worse–despite frieght rates at 30 year lows–all you needed was slightly less bad news.

Sure enough, the announcement of earnings Nov. 4th 2016 showed that the company could still generate profits in an extremely negative operating environment. The price rallied confirming the prior discounting.  Now I could really start to add to my position.  The chart had helped me “eliminate” one side of the market–the downside.

The combination of fundamentals, the action of majority shareholders (holding firm), extreme negative news coupled with NON-DECLINING prices, gave me a signal that the market had ALREADY discounted negative news.    This is more of an art or combination of fundamentals, sentiment, and human incentives than just looking at chart patterns.

Hope that helps.

You are Hired! A Trump Playbook For Fixing Americas Economy

If you were against the New Deal and its wholesale buying of pauper votes, then you were against Christian charity.  If you were against the gross injustices and dishonesties of the Wagner Labor Act, then you were against labor.  If you were against packing the Supreme Court, then you were in favor of letting Wall Street do it.  If you are against using Dr. Quack’s cancer salve, then you are in favor of letting Uncle Julius die.  If you are against Holy Church, or Christian Science, then you are against god.  It is an old, old argument. –H.L.Mencken

The Folly of Expert Predictions

LESSON: IGNORE “EXPERT” PREDICTIONS

Bo Polny

A relatively new guy on the PM analysts scene, Bo Polny was, to my knowledge, first mentioned by Jim Sinclair (Yes, Mr. Gold of the “Gold will never go below $1500” – fame) as his chartist. He used that notoriety to open a website (2020 Gold Forecast), establish a following and charge exorbitantly for a newsletter – which I believe is now has a less-detailed, more reasonable price structure option. He is characterized as passionate, animated, can speak technical-analysis double-speak using chartist-lingo and numerology, is occasionally religious (Shemitah) and has made ambitious, dated, calls – some of which we will include that have not been resolutely judged correct or not. He’s been around less than 3-years but has some wildly poor predications. Let’s see:

May 7, 2013 – Bo Polny: Silver Extremely Vulnerable to a Break of $22 Bottom in this Polny stated that silver’s final bottom of $22 was ‘in’ but vulnerable [?!?] kind of riding the fence (it was $14.93 last I looked April 4th, 2016 – almost 3 years later – so, yeah – $22 was indeed ‘vulnerable’)

May 31, 2013 – Bo Polny: Gold Has Bottomed at $1321, to Rise into June 5th Turn Datethe following month after he stated this it went to $1190.

June 18, 2014 – Bo Polny: Gold- Up in June, Down into Summer & a Moon Shot to $2000 before Year END!Gold closed that year at around $1205.

June 27, 2014 – Bo Polny: Gold Cycle Top June 27, Next a Summer Low Buy-Of-A-Lifetime Before $2000 Gold in 2014!Actually, Gold never went above $1400 in 2014 and finished the year at $1205.

July 15, 2014 – A Final Summer Low Still Ahead as Gold’s Sabbatical Rest Comes to an End & Gold Heads to $10,000+!a continuation of his more exaggerative predictions…

August 11, 2014 – BO POLNY: A 3-Year Gold ‘BEAR’ Market Ends & a 7-Year Gold ‘BULL’ Market Beginsno, Bo…

September 9, 2014 – BO POLNY: $2000 Gold, Next Stop! 7-Year Gold Cycle Targets $5,000 & $333 Silverabsurd but it tends to peak the interests of the gold and silverbugs who immediately start mentally converting their stacks into mega-dollars imagining their new wealth and what it can buy them… silly really.

October 9, 2014 – BO POLNY: Triple Bottom a Prelude to Runaway Gold & Silver Bull Marketsnot surprisingly, nothing happened except a minor spike in the beginning of 2016 – over a year after he said it. More PM version of ‘Hopium’… which is how most of these charlatans extend their livelihood.

December 22, 2014 – BO POLNY: 2015, The Year of Devastationit wasn’t… it was another year of Bo Polny’s incorrect predictions. I think he later claimed he was a year early because of some numerology faux-pas – what-ever.

January 12, 2015 – BO POLNY: Gold and Silver, a Parabolic Rise in 2015‘Parabolic’ refers to something in the shape of a Parabola (‘U’) – analysts love this term as a fancy way of saying things will turn-around from lows back to highs. I’m sure you are aware – it didn’t transpire in his 2015 time-frame.

January 20, 2015 – Bo Polny – Are Precious Metals Getting Ready To Go Parabolic?there’s that ‘parabolic’ word again. In retrospect, Bo – I can answer: “Ummm… No – not ready yet”.

March 27, 2015 – Bo Polny: BREATHTAKING Crash in USD Before Summer?if ‘crash’ involves a lack of confidence – then the crash was in Bo Polny’s credibility.

May 18, 2015 – Bo Polny – It’s All Down from Here, Except Gold and SilverBo was calling for a major sell-off on the dollar and treasuries…. and being complimentary – he is, at best, premature.

June 4, 2015 – Bo Polny – Silver Short Squeeze Imminent!‘imminent’ is one of those less-fluid words that indicates immediacy – in fact Bo said in this articleIn June 2015 the shorts will run to cover as Gold and Silver spike!” – Ohh Bo…sigh

June 14, 2015 – Majestic Gold & Silver Breakout, June 2015- Bo Polny“Majestic”; possessing majesty; of lofty dignity or imposing aspect; stately; grand; not a word associated with Bo Polny.

‘June 18, 2015 – Three Digit Silver In 2016!’ – Bo Polnyof course, the year is not over but it seems less and less likely as each day goes by… the term ‘Three Digit” gets the Silverites brains congratulating themselves that they can mentally calculate that it means a minimum of $100. Bravo! Actually, at this point, the general consensus was that Bo was full of it…

August 4, 2015 – Bo Polny: $9000+ Gold & $1000 Silver if $1072 Holds!$1072 held – Bo’s prediction didn’t. 

August 13, 2015 – Bo Polny – Fasten Your Seat-Belt, Gold’s Next Cycle Targets $8000 – $10,000it must have been a slow-subscriber week for Bo… he did the equivalent of putting caffeine in the water cooler. “We love you Bo! tell us more about our millionaire status future!”

August 24, 2015 – Shemitah 2015, the Year of Jubilee and 3-Digit Silver…Putting it All Together!3-Digits again! Your Eagle coins are going to make you rich, guys and gals!

August 26, 2015 – $2000 Gold & $50 Silver this year! | Bo PolnyBo goes out on a limb… of desperation. I think the tactic backfired as he was proven VERY wrong in only a few months… tsk, tsk. Silver never even got to 1/2 his called prediction.

September 23, 2015 – Bo Polny: September 23, 2015 – THE SHIFT BEGINS! out of ‘Bo following’

October 27, 2015 – All Hell Could Break Loose in Gold/Silver Prices, $100+ Silver 2016the best predictor of future behavior is past behavior and Mr. Polny has had too many of these absurd predictions.

January 17, 2016 – What Follows Will Be The BREAKOUT OF THE CENTURY FOR SILVER! – Bo Polnyokay, Bo… we will wait and see but your call is documented. But I think even the most hardcore Silverbug has lost faith in you…

February 16, 2016 – Gold to DOUBLE in 2016 – Bo Polny or Bo’s credibility takes its final plunge, agreed? 

March 1, 2016  – Polny Sticks His Neck Out: “Gold to Double, Silver to TRIPLE in 2016!”only triple for Silver?  Bo’s really toned down from those triple-digit days – perhaps Bo doesn’t realize Silver is only $14+ change right now.

http://www.dvdbeaver.com/Gary/gold/bo_polny_failed_calls.htm

For laughs: https://www.gold2020forecast.com/

Take a look at other precious metals “analysts”

Stewart Thomson writes the Graceland Updates.

I’m not a fan of Stewart Thomson – I find him arrogant, and a wholly inaccurate PM analyst – I consider him one of the worst. Let’s allow his wayward predictions speak for themselves:

“In late 2013, I predicted the Fed would taper all the way to zero in 2014, and suggested that taper would turn the Dow into a “wet noodle”, while creating a rally in gold prices. That’s the opposite of what most analysts thought would happen in 2014, and it’s exactly what has transpired!” -Stewart Thomson Oct 2014

“Gold Set to Surge, Silver Looks Even Better! I think gold could charge beyond $1325, and on towards the $1347 and $1390 area highs. Silver, which is perhaps better referred to as “gold on steroids”, looks even better.” -Stewart Thomson August 2014

“…any gold-negative news is not likely to move the price of gold lower than $1275. The upside numbers of importance are $1325, $1347, and $1392.” -Stewart Thomson July 2014

“Gold: “Let the Good Times Roll!” During the first six months of 2014, there have been quite a number of events that are positive for the gold market, and there was a big one yesterday. Gold staged a nice breakout from a small bullish wedge pattern last night, and the entire chart has a very bullish look. Why is that? Well, the month of August can see Indian citizens buy enormous amounts of gold, as they begin preparations for the wedding season and Diwali. Expectations of those liquidity flows into gold are likely why the gold chart looks so bullish now.” -Stewart Thomson July 2014

“Gold: The Worst Is Over, What’s Next? The time to be heavily invested in the precious metals sector is not later. It’s now.” -Stewart Thomson June 2014

“While the short and intermediate trends for gold are greatly influenced by Fed policy, events in China and India are now the key drivers of gold’s primary trend…. and sends gold surging towards my target of $1432.” -Stewart Thomson July 2014

“A persuasive argument can be made that gold staged an upside breakout last night. The range of $1305 – $1326 was decisively penetrated to the upside, and gold traded as high as $1335. Monday’s close was critical, because it was not just the end of the month, but the end of the quarter. Junior gold stocks staged a spectacular ending to the first half of the year, on massive volume. The chart suggests the second half of 2014 will be even better!” -Stewart Thomson July 2014

“Gold Stock ETFs: Outrageously Bullish! If I’m correct, the “bare minimum” arithmetic target is: $2663. I think my target price is absolutely justified by the global fundamental and geopolitical price drivers.” -Stewart Thomson June 2014

“Technically, all sectors of the gold market look bullish. Regardless of whether a daily chart, weekly chart, or a monthly chart is used, all technical lights are green. The weekly charts suggest that investors who are waiting for gold to bottom in July are at risk of missing an enormous rally that appears to already be underway.” -Stewart Thomson June 2014

“I’ve outlined a rough scenario for summer rally enthusiasts on the daily silver chart below. I’ve suggested silver could move up to about $22. Much higher prices are possible.” -Stewart Thomson June 2014

“Gold now seems to be forming an inverse head and shoulders bottom pattern, and that’s good news for bullish investors.” -Stewart Thomson April 2014

“Indian National Election is the Most Bullish Event for Gold in Past 100 Years!” -Stewart Thomson April 2014

“Gold market technicians should be open to the possibility that in the bigger picture, this rally has only just started.
Many of PM investors are likely to sell on a rally back to the $1500 area, to cut the huge losses they sustained in 2013.” -Stewart Thomson February 2014

More Negative News; Hunter S. Thomson

Negative gold articles are piling up:https://mishtalk.com/2016/12/27/financial-times-barrons-tout-death-of-gold/

but note the sentiment extremems: http://www.acting-man.com/?p=48247

Hunter S. Thompson’s Letter on Finding Your Purpose and Living a Meaningful Life

Hunter S Thompson

In April of 1958, Hunter S. Thompson was 22 years old when he wrote this letter to his friend Hume Logan in response to a request for life advice.

Thompson’s letter, found in Letters of Note, offers some of the most thoughtful and profound advice I’ve ever come across.

April 22, 1958
57 Perry Street
New York City

Dear Hume,

You ask advice: ah, what a very human and very dangerous thing to do! For to give advice to a man who asks what to do with his life implies something very close to egomania. To presume to point a man to the right and ultimate goal— to point with a trembling finger in the RIGHT direction is something only a fool would take upon himself.

I am not a fool, but I respect your sincerity in asking my advice. I ask you though, in listening to what I say, to remember that all advice can only be a product of the man who gives it. What is truth to one may be disaster to another. I do not see life through your eyes, nor you through mine. If I were to attempt to give you specific advice, it would be too much like the blind leading the blind.

“To be, or not to be: that is the question: Whether ’tis nobler in the mind to suffer the slings and arrows of outrageous fortune, or to take arms against a sea of troubles … ” (Shakespeare)

And indeed, that IS the question: whether to float with the tide, or to swim for a goal. It is a choice we must all make consciously or unconsciously at one time in our lives. So few people understand this! Think of any decision you’ve ever made which had a bearing on your future: I may be wrong, but I don’t see how it could have been anything but a choice however indirect— between the two things I’ve mentioned: the floating or the swimming.

But why not float if you have no goal? That is another question. It is unquestionably better to enjoy the floating than to swim in uncertainty. So how does a man find a goal? Not a castle in the stars, but a real and tangible thing. How can a man be sure he’s not after the “big rock candy mountain,” the enticing sugar-candy goal that has little taste and no substance?

The answer— and, in a sense, the tragedy of life— is that we seek to understand the goal and not the man. We set up a goal which demands of us certain things: and we do these things. We adjust to the demands of a concept which CANNOT be valid. When you were young, let us say that you wanted to be a fireman. I feel reasonably safe in saying that you no longer want to be a fireman. Why? Because your perspective has changed. It’s not the fireman who has changed, but you. Every man is the sum total of his reactions to experience. As your experiences differ and multiply, you become a different man, and hence your perspective changes. This goes on and on. Every reaction is a learning process; every significant experience alters your perspective.

So it would seem foolish, would it not, to adjust our lives to the demands of a goal we see from a different angle every day? How could we ever hope to accomplish anything other than galloping neurosis?

The answer, then, must not deal with goals at all, or not with tangible goals, anyway. It would take reams of paper to develop this subject to fulfillment. God only knows how many books have been written on “the meaning of man” and that sort of thing, and god only knows how many people have pondered the subject. (I use the term “god only knows” purely as an expression.) There’s very little sense in my trying to give it up to you in the proverbial nutshell, because I’m the first to admit my absolute lack of qualifications for reducing the meaning of life to one or two paragraphs.

I’m going to steer clear of the word “existentialism,” but you might keep it in mind as a key of sorts. You might also try something called Being and Nothingness by Jean-Paul Sartre, and another little thing called Existentialism: From Dostoyevsky to Sartre. These are merely suggestions. If you’re genuinely satisfied with what you are and what you’re doing, then give those books a wide berth. (Let sleeping dogs lie.) But back to the answer. As I said, to put our faith in tangible goals would seem to be, at best, unwise. So we do not strive to be firemen, we do not strive to be bankers, nor policemen, nor doctors. WE STRIVE TO BE OURSELVES.

But don’t misunderstand me. I don’t mean that we can’t BE firemen, bankers, or doctors— but that we must make the goal conform to the individual, rather than make the individual conform to the goal. In every man, heredity and environment have combined to produce a creature of certain abilities and desires— including a deeply ingrained need to function in such a way that his life will be MEANINGFUL. A man has to BE something; he has to matter.

As I see it then, the formula runs something like this: a man must choose a path which will let his ABILITIES function at maximum efficiency toward the gratification of his DESIRES. In doing this, he is fulfilling a need (giving himself identity by functioning in a set pattern toward a set goal), he avoids frustrating his potential (choosing a path which puts no limit on his self-development), and he avoids the terror of seeing his goal wilt or lose its charm as he draws closer to it (rather than bending himself to meet the demands of that which he seeks, he has bent his goal to conform to his own abilities and desires).

In short, he has not dedicated his life to reaching a pre-defined goal, but he has rather chosen a way of life he KNOWS he will enjoy. The goal is absolutely secondary: it is the functioning toward the goal which is important. And it seems almost ridiculous to say that a man MUST function in a pattern of his own choosing; for to let another man define your own goals is to give up one of the most meaningful aspects of life— the definitive act of will which makes a man an individual.

Let’s assume that you think you have a choice of eight paths to follow (all pre-defined paths, of course). And let’s assume that you can’t see any real purpose in any of the eight. THEN— and here is the essence of all I’ve said— you MUST FIND A NINTH PATH.

Naturally, it isn’t as easy as it sounds. You’ve lived a relatively narrow life, a vertical rather than a horizontal existence. So it isn’t any too difficult to understand why you seem to feel the way you do. But a man who procrastinates in his CHOOSING will inevitably have his choice made for him by circumstance.

So if you now number yourself among the disenchanted, then you have no choice but to accept things as they are, or to seriously seek something else. But beware of looking for goals: look for a way of life. Decide how you want to live and then see what you can do to make a living WITHIN that way of life. But you say, “I don’t know where to look; I don’t know what to look for.”

And there’s the crux. Is it worth giving up what I have to look for something better? I don’t know— is it? Who can make that decision but you? But even by DECIDING TO LOOK, you go a long way toward making the choice.

If I don’t call this to a halt, I’m going to find myself writing a book. I hope it’s not as confusing as it looks at first glance. Keep in mind, of course, that this is MY WAY of looking at things. I happen to think that it’s pretty generally applicable, but you may not. Each of us has to create our own credo— this merely happens to be mine.

If any part of it doesn’t seem to make sense, by all means call it to my attention. I’m not trying to send you out “on the road” in search of Valhalla, but merely pointing out that it is not necessary to accept the choices handed down to you by life as you know it. There is more to it than that— no one HAS to do something he doesn’t want to do for the rest of his life. But then again, if that’s what you wind up doing, by all means convince yourself that you HAD to do it. You’ll have lots of company.

And that’s it for now. Until I hear from you again, I remain,

your friend,
Hunter

Read more: https://www.farnamstreetblog.com/

Once you have found your purpose you MUST read this:

2016-Year-In-Review-PeakProsperity

For those who like to follow  Pabrai–from a recent missive:

While there are no guarantees, our portfolio (Pabrai Funds) is trading at one of the widest discounts to underlying intrinsic value. It is probably a good time to join. I enjoyed my recent chat with Barron’s Magazine:

http://www.barrons.com/articles/why-mohnish-pabrai-likes-gm-fiat-and-southwest-air

You might also enjoy viewing a talk I recently gave to the students at Peking University: https://www.youtube.com/watch?v=Jo1XgDJCkh4

Personally, I think he is way over-rated as an investor-YOU can do better following YOUR own method.

“In a state where corruption abounds, laws must be very numerous.” ~Tacitus

Thinking about Prices

stock-tip

http://energyandgold.com/2016/11/14/moriarty-there-is-more-opportunity-today-than-there-has-ever-been-in-history/

 

Moriarty: There is More Opportunity Today Than There Has Ever Been in History

by Ceo Technician |  posted in: Bob MoriartyGoldGold Stocks |  0

Given the surprising US election outcome and the tumultuous market environment we wanted to connect with 321gold founder & editor Bob Moriarty for his latest thoughts on geopolitics and of course, markets. Bob obliged and this is an interview that you definitely don’t want to miss!

CEO Technician: Does the election result have any impact on gold and markets?

Bob Moriarty: I’m not sure it has any impact. Everyone wants to connect news with price movement and it just doesn’t work that way. We’ve been taught since we were two years old “the stock market went up today for reason xyz,” the financial news media needs news but the market goes up and down for many reasons and there is not a direct correlation between news and price movement.

I think Donald Trump is a fool but he’s not nearly as big of a criminal as Hillary Clinton. For whatever reason Trump’s surprise win sent precious metals tumbling and I see this as the real opportunity to load up and get aboard the train before it leaves the station.  I will be buying silver on Monday.

CEO Technician: Russia is getting even more serious in Syria by moving their sole aircraft carrier to the region in order to assist in bombing “terrorist” groups. With Turkey moving land forces inside Syria and the usual cast of characters remaining very much involved in the power struggle inside the country and in Iraq next door, the situation doesn’t look like it could be much more dangerous. What’s next in Syria?

Bob Moriarty: Hillary Clinton got us involved in Syria. Syria is a completely different situation from Iraq although the two are often confused. Israel came out with a proposal in 1996 called “The Clean Break From The Peace Process,” it’s on Google. In this proposal Israel says it needs to destroy Syria and that’s exactly what they’re doing. It’s a plan that’s been in place for 20 years. The US is in Syria because of Israel but if you step back for a minute and ask yourself “what interest does the US have in Syria and why do we care who runs Syria?” the answer would be “we have no interest in Syria.” We are destroying the Middle East and the 65 million or so refugees from the Middle East are going to destroy Europe and the EU.

CEO Technician: The refugee situation in Europe is out of hand and Europe faces a terror threat from within its own borders of an unprecedented scale.

Bob Moriarty: If you’re in a village in Syria and someone comes in and bombs the shit out of you, then you do 1 of 3 things: You die, you leave, or you fight back. If there’s another option please let me know. When you leave you’re angry. Syria is a 7-dimensional chess match and there’s no good guys. The refugees are angry, by creating refugees we are creating terrorists. The key to solving the terrorist threat is to stop creating refugees.

A lot of people act like this refugee crisis isn’t going to come to the United States, of course it’s going to come to the United States. We need to stop bombing countries and creating refugees.

CEO Technician: I was at the New Orleans Investment Conference a couple of weeks ago and there were a couple of themes that stood out to me and I’m interested to hear your thoughts. Big discoveries are becoming extremely rare and the biggest investment profits come from big discoveries. Another theme of the conference is the idea that yields have bottomed and we are now in a rising rate environment.

Bob Moriarty: That’s correct. The last big discovery I can think of is Fruta Del Norte down in Ecuador and that was about 10 million ounce (20-30 million ounces over the long term). There are some big deposits of lower grade but those require several billion dollars to move into production.

Here’s what used to happen, the majors had big exploration teams and did a lot work themselves while partnering with high quality juniors. Suddenly 200-300 juniors skyrocketed to 1,500-2,000 juniors due to the evolution of the internet and the rapid access to information. It is more important than ever to distinguish high quality well run juniors from the rest of the crowd. I believe this is the best time ever to be a junior mining investor but you must do your research and pick the companies with top tier management teams. There is more opportunity today than there has ever been in history.

Yields have bottomed but you must remember that the Fed follows the market, not the other way around. Interest rates are increasing but with the entire world awash in debt and an extremely unstable financial system it will be an increase in interest rates that blows the whole thing up.

CEO Technician: What do you think about gold in a rising interest rate environment? I posted a chart last week on CEO.CA showing that over the last 40+ years gold has more often than not been positively correlated to interest rates. It’s only been in the very recent history (since the Global Financial Crisis) that we have witnessed a negative correlation between rates and gold.

Bob Moriarty: I’ll tell you something that few have the guts to say. Gold is expensive relative to other commodities (such as oil, pigs, platinum, etc.) because gold is the #1 real asset. The real interest rate environment is what matters to gold, if inflation is 4% and interest rates are 3% that’s a very positive environment for gold. Gold can do well in a rising rate environment but it’s the real rate of interest that matters.

CEO Technician: Any thoughts on lithium, cobalt, and renewable energy revolution?

Bob Moriarty: The key to lithium is how soon they can get it into production. Lithium is actually a very common element but we are having a revolution in energy storage. By 2025 solar power will be comparable in cost to coal and that’s going to create an absolute revolution, fortunes will be made between now and then. Cobalt is much less covered than lithium, if you can find real cobalt companies with legitimate projects I think you will do very well. There are way too many lithium companies and many of them will go away.

CEO Technician: We’ve seen the sharpest move lower in precious metals and mining shares in more than 3 years since Trump won last Tuesday night. Where are we at and is it time to buy?

Bob Moriarty: Trump didn’t win the election, Clinton lost it. There is a difference. If Clinton had read Nobody Knows Anything, she would have known to not trust the “Experts” and “Gurus” and the other fools. Trump has never worn a uniform or held a public office. He will either be the best president in US history or the worst. Flip a quarter and find out. This is the bottom and the buying opportunity in gold and gold shares, right now. I am buying silver this morning (Monday 11/14).

There is a time to buy, a time to sell and a time to do nothing. Now buying miners.   Note the extreme swings in sentiment

gold-stocks-bullish-sentiment-nov-14th-2016

Lookin’ cheap: http://ericcinnamond.com/look-away-im-hideous/

Michael Lewis: Pointless Skeptics (Derivatives, 2007), Management Fee

trump-vs-clinton

In 2007, Michael Lewis laughed off concerns about derivatives and excessive leverage

I enjoyed Michael Lewis’ recent Daily Show interview about his new book, The Big Short. Lewis summarized the crisis nicely and mocked the ignorance of most of the banking world, saying they hid the risk so well they fooled even themselves.

But Lewis faltered when he said almost no one saw the financial crisis coming. Lewis said “A very small handful of investors, I mean, ten to twelve, made a giant bet against [subprime mortgages]” and virtually everyone else on Wall Street was “dumb money”:

“They [financial institutions] figured out there’s an awful lot of money to be made lending money to people who shouldn’t be lent money. And when you do that, you create lots of risk. And the only way you get that risk out [of your firm] and get other people to take it is to disguise it. So they got really good at disguising the risk, and they got so good they disguised it from themselves, they fooled themselves.

Lewis apparently fooled himself too because, in January 2007, Bloomberg reporter Michael Lewis wrote an entire article — titled “Davos Is for Wimps, Ninnies, Pointless Skeptics” — complaining about all the foolish worry at Davos over excessive risk-taking and derivatives contracts:

It’s become almost obligatory for the world’s most important economic people, at the beginning of each year, to travel joylessly to the base of a Swiss ski slope and worry…. Davos is where people with no talent for risk-taking gather to imagine what actual risk-takers might do. Davos Man needs to sit in judgment; Davos Man needs to brood. So great is this need that he will brood about virtually anything, no matter how little he knows about it.

Ah, Michael? How much did you know about derivatives or bank leverage ratios in 2007? You sat in judgment of many of the world’s top financial experts and mocked them for their ignorance when, it turns out, they were right and you were wrong. Look at the insiders whose worry you mocked:

“The system is becoming very complex. The risk of some crisis happening is rising,” says Nouriel Roubini, chairman of Roubini Global Economics. “The world isn’t pricing risk appropriately,” says Steven Rattner, co-founder of Quadrangle Group. “Excessive borrowing and risk-taking,” intones Juergen Stark, chief economist for the European Central Bank.

“The last time we talked,” says William Rhodes, senior vice chairman of Citicorp Inc. (in case you didn’t hear him the first time), “I mentioned we’re going to get some adjustments some time in the future. So this is a time to be prudent.”

..So why do these people waste so much of their breath and, presumably, thought, with their elaborate expressions of concern? Even if these global financial elites knew something useful that you and I don’t — that, say, 50 hedge funds were about to go under and drag with them half the world’s biggest banks along with a third of the Third World — they would be unlikely to do anything about it.

Lewis especially mocked Davos’ concerns about explosive growth in (completely unregulated) derivative contracts:

Derivatives seem to be this year’s case in point. Davos had hardly been up and groaning about the dangers of being alive before Bloomberg News reported what appears to be the general Davosian view: “The surging demand for derivatives is making financial markets more vulnerable to any slowdown in the global economy.”

The piece came with supporting quotes from European Central Bank President Jean-Claude Trichet, Bank of China Vice President Zhu Min and the deputy chief of India’s planning commission, Montek Singh Ahluwalia — but not a worrisome fact in sight. None of them seemed to understand that when you create a derivative you don’t add to the sum total of risk in the financial world; you merely create a means for redistributing that risk. They have no evidence that financial risk is being redistributed in ways we should all worry about. They’re just — worried.

But the most striking thing about the growing derivatives markets is the stability that has come with them.

Now, I realize we all make mistakes. Most of us occasionally make really, really big mistakes. Perhaps we even publicly ridicule everyone else for making a serious mistake when, in fact, they’re right and we’re wrong.

But, if we make a huge mistake, laugh at others for being wiser and more prudent, and later write about how stupid “everyone” was for making the mistake we made, that’s intellectually dishonest. Lewis complained very publicly that the world’s financial experts were idiots for worrying about leverage and derivatives… then he turned around several years later and pretended only a handful of brilliant investors saw the crisis coming while everyone else was blind to the dangers. Which Michael Lewis should we believe?

Lewis should express humility and contrition for so falsely slamming those concerned about leverage and derivatives. His opinion matters, especially when he is writing for Bloomberg. And he should stop pretending that only a handful of people saw the crisis coming because he himself told us otherwise just a few years ago.

Posted by James on Thursday, March 18, 2010

The Greats Struggle

Who can tell me why? q316-longleaf-partners-funds-shareholder-letter and fundcommentary-q3-2016-final   What should your management fee be to solve their underperformance problems?

An Excellent Discussion of Cyclical Resource Investing

Precious-Metals-Summit-Conferences

and an excellent interview of Tom Kaplan: The Historian-an-interview-with-thomas-kaplan/ and ng_ar_2015

i-did-nothing-mark-mckinney-final (A cyclical investor)

Metals investor Kaplan raises $200 million for acquisition fund

By Svea Herbst-Bayliss | NEW YORK

Prominent metals investor Thomas Kaplan raised $200 million, more than expected, from investors eager to join him in making acquisitions in an industry starved for cash.

Kaplan’s Electrum Group LLC raised the money in Electrum Special Acquisition Corp, according to a prospectus filed with the U.S. Securities and Exchange Commission on Tuesday.

Electrum had expected to raise $150 million, it said in the prospectus. The “blank check company” expects to use the money to buy a company or assets with a focus on gold and other precious metals.

Details about the money raised were revealed on Thursday.

Kaplan, an Oxford-educated historian turned metals expert with a long track record of success, is betting that he and his team can spot an unloved company to buy and help it flourish again as demand in the sector improves.

“We are building up a war chest, given what we think is a unique buying opportunity in the metals and mining industry,” said Electrum Chief Executive Officer Eric Vincent. He would not describe what the target might be.

http://www.reuters.com/article/us-funds-kaplan-spac-idUSKBN0OR21O20150611p

Kaplan previously made big bets on NovaGold Resources Inc and Gabriel Resources, earning money as the price of gold climbed some years ago but suffering when it later dropped.

In 2007, Kaplan sold Leor Exploration & Production LLC, owner of natural-gas wells in Texas, for about $2.6 billion.

Last year Electrum started Electrum Strategic Opportunities, a private equity fund whose clients include the Municipal Employees’ Retirement System of Michigan.

(Additional reporting by Josephine Mason in New York; Editing by Lisa Von Ahn)

STUDENT CONTEST


The Santangel’s Investor Forum invites eligible students to apply for a free ticket to attend the 2016 Forum, to be held in New York City on November 3, 2016.
The Leonard Family has endowed a table at the upcoming conference to enable a select number of talented students to attend the annual invitation-only event.
The contest was very beneficial for last year’s winners, including one who met his current employer through the event. We were excited recently to receive the following feedback about this 2015 Forum Winner:
“[He] started working here a couple months ago and he’s been terrific so far, and I just wanted to give you a big thanks for the connection. He has a bright future.”
All enrolled undergraduate and graduate students are eligible. Interested candidates should apply by emailing their resume and a current investment idea write-up to Steven Friedman (sfriedman@santangels.com).  The idea can be for any type of security or asset class, but the write-up must be limited to 300 words. Preference will be given to unique and original ideas. Please submit ideas by October 15, 2016.
Please feel free to pass this along to anyone who may have an interest.