Will you stay with me, will you be my love
Among the fields of barley
We'll forget the sun in his jealous sky
As we lie in fields of gold
Sting 1993
Do you remember Dr. Phil? I never watched a minute of his show, but I remember talking about him with my wife. She told me that he had a best-selling weight-loss book. I started laughing and responded honestly, “But isn’t he fat?” I’ve never understood this type of thinking. Why do people constantly follow the advice of people who have either no track record of success, or a clear track record of failure? As I recall, Dr. Phil was somehow affiliated with Oprah. You’re really going to take marriage advice from a woman who’s never been married? You’re going to listen to a stranger without kids tell you how to raise your own children? How does this make sense?
I’ve always found that the easiest way to be successful is to just do what the successful have done to get there. In whatever endeavor, finance, health, personal relationships, etc. Tweak it to suit your personality, but the rule holds. I’d love to sit down with Oprah and have a long conversation, where she could give me advice on accumulating wealth. Just not how to lose weight.
Let’s run back in time for a minute. You remember the year 2001, right? The dot.com mania was in full force. You would turn on CNBC and hear the experts tell us that this was a New Age, that traditional stock valuation formulas no longer mattered. Profit and fundamentals were out; revenue and following the trend were in. Old ladies who had never invested a penny formed investment clubs over tea to discuss how much money they were making. The financial geniuses egged them on.
The slaughter, as slaughters usually do, happened quickly. Stocks lost 98%, 99%, 100% of their value. People were wiped out. Daytraders had suicidal thoughts and had to look for work again.
The financial geniuses weren’t quiet for very long. The same people who advised the masses into bankruptcy soon had another tulip to cheerlead, the housing market. “Houses never go down in America”. “You’re an idiot if you’re not in this market”. “God ain’t makin’ no more land”. CNBC was again a really fun place. Shiny happy people, who failed miserably before, were again looked at as experts by the sheep.
You know how the game ended.
Which brings me to gold. People who have read my past blog posts know that I put 100% of my money in gold years ago. Although overall it’s been a good investment (I got in at around $880, it’s now at about $1,300) last year was horrid. It went down 28%. Never mind that it’s gone up 11 out of the last 12 years and is up again this year; that’s a tough 12th year. So what am I doing now? I’ve doubled down and then some. On the days when gold trends slightly higher I borrow between 1-2 million dollars of someone else’s money (in this case TD Ameritrade), and buy more gold. By the end of the day, and sometimes within 30 minutes, I give them their money back. If gold goes up I get a nice little hit; if it goes down I get hit.
My point of this particular post is not to discuss why I think gold is still a fantastic investment (if you’re interested just call or e-mail me), but to point out one inescapable fact. Literally every single one of the guys and gals that called either one or both of the bubbles is bullish on gold. Everyone. We’re not talking a big group here. Not many had the brains and guts to go against the majority. Likewise, there is not one analyst I know who is bearish on gold that called any of the bubbles correctly. Do your own research. It’s shocking the same idiots are still on TV.
This is not brain surgery. At the end of the day, you can follow the fools and the folly. Or you can pay attention and see how the winners play chess. I know which direction I’ll go.
Have a good night everyone,
JR
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