Maria’s Note: Our offices are closed for Labor Day. So instead of Tom’s usual updates from the road, we’re passing along one of our favorite Postcards classics. It’s an essay every gold investor – old… new… or on the fence – should read closely…
“Two interesting things happened to me today,” someone wrote on Twitter recently.
“Got a haircut. Barber told me to buy gold. Said the Fed is printing too much money.
“Got a tire fixed. Owner of the shop told me to buy silver. Said the Fed is printing too much.”
He didn’t say it, but the implication he’s making is that everyone – even barbers and mechanics – have already bought gold and silver. When there’s no one left to buy, the price must fall…
And with that, I’m starting to feel a growing impulse from my lizard brain.
“Take your profits,” it whispers. But I’m not listening to it this time. Let me explain…
The First Time I Found Gold
I found gold in 2002.
I was 26 years old. I was working at Citigroup, which was, at the time, the largest bank in the world.
The world was in turmoil. The bubble in technology stocks had popped two years before… the World Trade Center had just been attacked… energy giant Enron had gone bankrupt… and the U.S. was preparing for war in Iraq…
It was an anxious time.
Meanwhile, I’d found Bill Bonner’s daily e-newsletter. I’d tumbled down a rabbit hole, reading about hard money, Austrian economics, dollar debasement, and gold.
I found a whole community of people talking about unconventional investment ideas… and making dire predictions about the future of American finance…
Gold had been in a bear market for 22 years at that point, and it was trading at its lowest price in 26 years.
If there was ever an unpopular, ignored investment that no one was paying attention to, it was gold in 2002.
And yet, Bill was recommending selling stocks and buying gold. He called it the “Trade of the Decade”…
How I Missed the Trade of the Decade… Or Most of It
I was utterly convinced by Bill’s (and others’) arguments about getting out of stocks and buying gold. Gold seemed like it had to rise. And I felt like even if I was wrong, I probably wouldn’t lose much money.
So, I took all my money and bought gold. First, I bought a portfolio of gold stocks. Then, I opened a trading account and bought highly leveraged gold derivatives.
And finally, I was so excited about the idea, I approached my friends and family and asked them to give me money so I could buy gold for them, too. I ended up with 11 investors.
Over the next nine years, gold rose from $300 an ounce to $1,900 an ounce… a move of over 500%.
Unfortunately, our little gold pool didn’t go along for the ride. When the market started making new multi-year highs, I heard the same whispers I’m hearing now…
“Gold is going to correct,” said the voices. “You’ll lose the profits you’ve made. Better cash out now while you can still show a gain.”
I lost my nerve. I sold everything and returned everyone’s money.
Then, I watched in horror for the next six years as gold continued rising… while I sat on the sidelines and missed out on hundreds of thousands of dollars in profit for me and my investors.
Not Making the Same Mistake This Time
One of my all-time favorite books on speculation is the biography of Jesse Livermore. (It’s called Reminiscences of a Stock Operator by Edwin Lefèvre.)
Jesse Livermore was basically a fearless gambler who had a knack for making (and then losing) huge fortunes in the stock market. His biography documents his approach to speculation.
One piece of advice he repeatedly emphasizes in his anecdotes is “sit still when you’re right.”
“It never was my thinking that made the big money for me,” he says. “It was always my sitting. Got that? My sitting tight!”
“Men who can both be right and sit tight are uncommon,” he goes on. “I found it’s one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money.”
With my first foray into gold, I made the classic amateur mistake of not “sitting tight.”
I let my lizard brain – and the seduction of a possible correction (which never came) – talk me out of my position…
I can already feel the same seduction nagging me today.
But this time, I’m going to ignore the whispers. I know they’re trying to make me do the wrong thing.
I’m sitting tight this time.
– Tom Dyson
P.S. As easy as it sounds, sitting tight is one of the hardest things for an investor to do. That’s why, this time, I’m not leaving things up to my lizard brain… Instead, I designed a strategy to help me time my move in and out of gold. And in 2018, I went nearly “all in” on it, with $1 million of my own money.
What I love most about this strategy is it takes the guesswork – and the emotion – out of investing… so I can follow Jesse Livermore’s advice to “sit still.” To learn how you can put this strategy to work for you today, watch this.
A dear reader shares their experience with labor and wages as a U.S. Merchant Marine… while others praise Tom for his Postcards…
Reader comment: I enjoy reading your Postcards, especially your family adventures. I was curious about your comments about rising wages. I work in the maritime industry. I’ve been doing that for about 50 years now and have managed to work myself up to the highest level (master mariner). I have seen our wages and benefits go nowhere but DOWN since the 1970s, when I started.
We have lost over half our crew (so we all have to do at least twice as much work). We have lost our “free” healthcare through the U.S. Public Health Hospital Service (which was created specifically for the U.S. Merchant Marine) when Reagan shut us out of it.
We have had the Standards of Training, Certification, and Watchkeeping, a huge load of expensive “training,” forced on us so we have lost a lot of our earned vacation time. This has cost us many tens of thousands of dollars just to keep our ability to go to work (our licenses/certificates).
Since the latest oil price crash in 2014-15, our wages have been cut in half (or more). I was laid off in late 2015 and have been struggling to find any work I can in this field (who wants to throw away 40 years of experience and a VERY hard-earned license? If we don’t have over 150 days of sea time in the last five years, we lose our license). I don’t see any evidence of our wages increasing. It would take a LOT to get us back to where we were in 1970, when you take into account EVERYTHING that we’ve lost over the years.
Reader comment: Thank you for freely educating common folks, like me, on big-money pictures. I find your articles both entertaining and enlightening.
Reader comment: Love the Postcards and your viewpoint on the current state of the world. I think you have been right-on with respect to what is going on for some time now.
Tom’s note: As always, thanks for your kind messages. We read every note you send us. Please keep writing us at [email protected], and I’ll do my best to answer your questions in a future Friday mailbag edition.