How many lessons can you pull out of this case study?
Also, a must read on finding fanatics: https://microcapclub.com/2016/01/how-to-find-intelligent-fanatic-ceos-early/
More studies: https://www.youtube.com/watch?v=KoOEE8GI-Ko
SEARCH STRATEGY: Look off the beaten path (Joel Greenblatt)
by Ceo Technician | posted in: Bob Moriarty, Gold, Gold 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).
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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/
A LETTER TO THE US FROM JOHN CLEESE
To the citizens of the United States of America, in light of your failure to elect a competent President of the USA and thus to govern yourselves, we hereby give notice of the revocation of your independence, effective today.
Her Sovereign Majesty Queen Elizabeth II resumes monarchical duties over all states, commonwealths and other territories. Except Utah, which she does not fancy.
Your new prime minister (The Right Honourable Theresa May, MP for the 97.8% of you who have, until now, been unaware there’s a world outside your borders) will appoint a minister for America. Congress and the Senate are disbanded. A questionnaire circulated next year will determine whether any of you noticed.
To aid your transition to a British Crown Dependency, the following rules are introduced with immediate effect:
1. Look up “revocation” in the Oxford English Dictionary. Check “aluminium” in the pronunciation guide. You will be amazed at just how wrongly you pronounce it. The letter ‘U’ will be reinstated in words such as ‘favour’ and ‘neighbour’. Likewise you will learn to spell ‘doughnut’ without skipping half the letters. Generally, you should raise your vocabulary to acceptable levels. Look up “vocabulary.” Using the same twenty seven words interspersed with filler noises such as “like” and “you know” is an unacceptable and inefficient form of communication. Look up “interspersed.” There will be no more ‘bleeps’ in the Jerry Springer show. If you’re not old enough to cope with bad language then you should not have chat shows.
2. There is no such thing as “US English.” We’ll let Microsoft know on your behalf. The Microsoft spell-checker will be adjusted to take account of the reinstated letter ‘u’.
3. You should learn to distinguish English and Australian accents. It really isn’t that hard. English accents are not limited to cockney, upper-class twit or Mancunian (Daphne in Frasier). Scottish dramas such as ‘Taggart’ will no longer be broadcast with subtitles.You must learn that there is no such place as Devonshire in England. The name of the county is “Devon.” If you persist in calling it Devonshire, all American States will become “shires” e.g. Texasshire Floridashire, Louisianashire.
4. You should relearn your original national anthem, “God Save The Queen”, but only after fully carrying out task 1.
5. You should stop playing American “football.” There’s only one kind of football. What you call American “football” is not a very good game. The 2.1% of you aware there is a world outside your borders may have noticed no one else plays “American” football. You should instead play proper football. Initially, it would be best if you played with the girls. Those of you brave enough will, in time, be allowed to play rugby (which is similar to American “football”, but does not involve stopping for a rest every two seconds or wearing full kevlar body armour like nancies) You should stop playing baseball. It’s not reasonable to host event called the ‘World Series’ for a game which is not played outside of America. Instead of baseball, you will be allowed to play a girls’ game called “rounders,” which is baseball without fancy team stripe, oversized gloves, collector cards or hotdogs.
6. You will no longer be allowed to own or carry guns, or anything more dangerous in public than a vegetable peeler. Because you are not sensible enough to handle potentially dangerous items, you need a permit to carry a vegetable peeler.
7. July 4th is no longer a public holiday. November 2nd will be a new national holiday. It will be called “Indecisive Day.”
8. All American cars are hereby banned. They are crap and it is for your own good. When we show you German cars, you will understand what we mean. All road intersections will be replaced with roundabouts, and you will start driving on the left. At the same time, you will go metric without the benefit of conversion tables. Roundabouts and metrication will help you understand the British sense of humour.
9. Learn to make real chips. Those things you call French fries are not real chips. Fries aren’t French, they’re Belgian though 97.8% of you (including the guy who discovered fries while in Europe) are not aware of a country called Belgium. Potato chips are properly called “crisps.” Real chips are thick cut and fried in animal fat. The traditional accompaniment to chips is beer which should be served warm and flat.
10. The cold tasteless stuff you call beer is actually lager. Only proper British Bitter will be referred to as “beer.” Substances once known as “American Beer” will henceforth be referred to as “Near-Frozen Gnat’s Urine,” except for the product of the American Budweiser company which will be called “Weak Near-Frozen Gnat’s Urine.” This will allow true Budweiser (as manufactured for the last 1000 years in Pilsen, Czech Republic) to be sold without risk of confusion.
11. The UK will harmonise petrol prices (or “Gasoline,” as you will be permitted to keep calling it) for those of the former USA, adopting UK petrol prices (roughly $6/US gallon, get used to it).
12. Learn to resolve personal issues without guns, lawyers or therapists. That you need many lawyers and therapists shows you’re not adult enough to be independent. If you’re not adult enough to sort things out without suing someone or speaking to a therapist, you’re not grown up enough to handle a gun.
13. Please tell us who killed JFK. It’s been driving us crazy.
14. Tax collectors from Her Majesty’s Government will be with you shortly to ensure the acquisition of all revenues due (backdated to 1776).
Thank you for your co-operation.
* John Cleese [Basil Fawlty, Fawlty Towers, Sir Lancelot of Camelot (Monty Python & The Quest for the Holy Grail), Torquay, Devon, England]
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What is Risk? A Great Post on Risk
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?
VALUATION
Buffett say there are ONLY two things you need to know as an investor
Then place those two skills in an investing philosophy/framework. See below.
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Improve the YOU: http://reasonio.teachable.com/courses/enrolled a free course on Epictetus and Stoic Philosophy–needed for what is coming!
http://millionaire-investor.com/program.html A value investing training program in Singapore.
Posted in Valuation Techniques, YOU
Tagged Investment principles, valuation, Vitaliy Katsenelson
Test yourself…………….
Each of four cards on a table has a letter on one side and a number on the other, but you can only see what is on the side facing up. What you see are two letters and two numbers:
A 4 D 7
Suppose the rule governing these cards is that if a card has a vowel on one side, it has an even number on the other side. Which two cards would you turn over to find out whether the rule is true? Take no more than twenty seconds.
Now go to the real world: Can you name at least two psychological/analytical errors that you see in this clip.
https://youtu.be/Cxjdj5_5yNM Take no more than 4.5 minutes–length of the clip. The investment bankers each have MBAs, CFAs, Accountng degrees etc. They are SMART!
Total time for test 5 minutes.
2016_templeton Hand-out to go with the above talk in 2016. A good discussion of the psychological strength needed to apply value investing principles.
Posted in Free Courses, Investing Gurus, YOU
Tagged psychological strength, Templeton, test
Nobody wants to be the bearer of bad news. Nobody wants to crush people’s dreams. But in the world of investing, cold, hard facts, not dreams, are what make you money. And the fact of the matter is, historically speaking, buying gold is the worst possible investment you can make.
I am very sensitive to the fact that what I just said has probably caused some readers to go apoplectic, and for that I apologize. I know that I will never convince the gold bugs, inflation hawks or doomsday preppers of this thesis, nor my own personal position that gold will eventually be worthless. But for the rest of you, let me lay out the case to avoid gold as an investment.
The Numbers Don’t Lie
In his seminal book “Stocks for the Long Run,” renowned economics professor Jeremy Siegel looked at the long-term performance of various asset classes in terms of purchasing power — their monetary wealth adjusted for the effect of inflation.
With a $1 investment each in stocks, bonds, T-bills and gold, beginning in 1802 and ending in 2006, Siegel calculated what those assets would then be worth.
Stocks were the big winners, growing the initial dollar investment into $755,163. Bonds and T-bills trailed dramatically, returning only $1,083 and $301 respectively. But the big surprise was in how badly gold fared during that time, only growing to $1.95.
An Inefficient Investment Vehicle
In addition to its miserable historical performance, gold also has many other failings as an investment, not least of which are the cumbersome and inefficient options available to own it and the prevalence of less than reputable salespeople in the precious metals space.
Owning physical gold in the form of bullion has many drawbacks. Wide bid and ask prices on physical gold ensure that the moment you purchase it you are already underwater on your investment. In addition, shipping costs for the heavy metal will further add to your cost basis.
Once you get your gold, you then have to decide how to store it. Keeping it at home exposes it to the risk of theft, fire or natural disaster. Taking it to the bank requires the rental of a safe deposit box, the cost of which will eat into your profit as well.
Firms will store your physical gold on site, but they charge for the service, and the idea of having your yellow treasure held by someone somewhere else, commingled with that of others, is not very appealing.
Ultimately, gold is a legacy investment vehicle from a time before mass communications, ease of global travel, and the internet. It no longer is the default store of value that it once was, and financial and technological advances have made it an investment best suited for collectors and hobbyists, but certainly not for serious investors.
For Full Article Click WayBack
Even money says this post attracts the GOLD IS DOOMED advertisement on the page
Editor: Too bad gold isn’t an investment but just money.
http://tocqueville.com/insights/gold-strategy-investor-letter-3Q16
Misconceptions about gold S&D
It is the emotional nonprofessional investor who sends the price of a stock up or down in sharp, sporadic and more or less short-lived spurts. The professional investor has no choice but to sit by quietly while the mob has its day, until the enthusiasm or the panic of the speculators and nonprofessionals have been spent.” –J. Paul Getty
Can You Explain This?
Starting on page 4, this money manager explains his firms consistent underperformance. Do you agree or disagree? Why? A lesson for investors.
wedgewood_view_3rd_quarter_2016_client_letter (Start on page 4)
wedgewood-partners-2nd-quarter-2016-client-letter-brexit-the-vote-heard-round-the-world
wedgewood-partners-1st-quarter-2016-client-letter
wedgewood-view-4th-quarter-2015-back-to-our-regularly-scheduled-stock-market
PASSIVE INVESTING
There’s no such thing as “passive investing.” As Ben Graham defined it in his magnum opus, Security Analysis, “An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” Because passive strategies entail zero analysis of either of these qualifications they are, by definition, speculative. And those adopting them are speculators, not investors.
Like “jumbo shrimp,” “virtual reality,” “old news,” or “living dead,” the term “passive investing” is thus an oxymoron.
My point here is not to shame everyone who has embraced passive in recent years. There are plenty of good reasons to go passive, namely to dramatically lower your costs. My point is that if you want to call yourself an “investor” you need to do a little bit more thinking about the prices and fundamentals of risk assets than just buy at any price and hope. I think Jesse Livermore said it best in Reminiscences of a Stock Operator:
The average American is from Missouri everywhere and at all times except when he goes to the brokers’ offices and looks at the tape, whether it is stocks or commodities. The one game of all games that really requires study before making a play is the one he goes into without his usual highly intelligent preliminary and precautionary doubts. He will risk half his fortune in the stock market with less reflection than he devotes to the selection of a medium-priced automobile.
Embracing passive investing is exactly this sort of ‘cover your eyes and buy’ sort of attitude. Would you embrace the very same price-insensitive approach in buying a car? A house? Your groceries? Your clothes? Of course not. We are all very price-sensitive when it comes to these things. So why should investing be any different?
http://www.thefelderreport.com
Value Managers Discussing Performance With Customers
Read all four parts of this study of shady pump and dump schemes in the Pink Sheet World. (Must Read) https://theintercept.com/2016/09/22/the-money-is-gone/
See the lows put in Jan. 11th in both the HUI Goldbugs index and Freeport McM (FCX). Only six days after the publishing of this article.
Five years ago, the FTSE 350 Mining index reached a post-financial crisis peak at just over 28,000. It currently sits at 7,134, down 75% at an 11-year low, and share prices remain vulnerable.Global commodities markets remain massively oversupplied and Chinese demand is waning, but there will come a point at which mining shares are a ‘buy’ again. (You always want to buy commodities and/or commodity stocks at the point of MAXIMUM PESSIMISM or when supply is greatest and demand lowest!).
Investec Securities has built a “Mining Clock”, which brilliantly illustrates the mining cycle, including when to buy and when to sell. It’s a real “cut-out-and-keep” for every investor.
Investec writes:
“Please see the updated Mining Clock below where we indicate that it appears still too early to be buying the mining sector. This is despite five straight years of underperformance from mining equities globally, in every sector, save Australian listed gold equities which outperformed the ASX in 2014 and 2015.” (Where is the article that told you WHEN, exactly, to buy?). Rearview investing doesn’t work.
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The above article proves once again that no one can time a sector–except when (like in this article) there is no hope for a rebound.
http://prostedywagacje.blogspot.co.uk/2016/08/how-to-play-this-bull-market-in-gold-in.html
Last time I sold a few of my miners back in July
http://csinvesting.org/2016/07/08/time-to-sell-some-miners-but-not-much/
And now over the next few days and weeks, a time to rebuy at the margin. But if you are in a bull market Sentry__Com_BullishGold_MacLean___E then sitting tight is what you must do. At most, I think we are in six to seven on the mining clock. So far, the public is not yet participating except perhaps in the last month.
WHAT do YOU think?
HAVE A GOOD WEEKEND!
P.S.: http://donmillereducation.com/journal/ Work on yourself!
Posted in Investor Psychology, Risk Management, Search Strategies, Valuation Techniques, YOU
Tagged Cyclical Stocks, the mining clock