A common trait I find among many great investors is an ability to explain things in simple terms that anyone can understand.
Along those lines is Rick Rule, President and CEO of Sprott U.S. Holdings. Who is (in my opinion) a legend in the industry. And contrary to Ben Bernanke’s belief that no one can understand or grasp the dynamics of the gold market, Rick, as he often does has put it into beautiful perspective.
If you’ve never had the chance to hear Rick speak in person or via video, it’s worth putting on your list of things to do. Because in addition to successfully guiding his clients, Rick also has an incredible knack for simplifying the complex.
In a recent interview he described his investment mindset, and how that can apply to investing in precious metals.
I’m attracted to investment questions where the answer has to begin with “when” rather than “if”.
Many people, because they don’t have conviction about the information that they’re using to make an investment decision, get terrified about the timing of being right. They tend to have trauma holding stock over a long weekend.
What I found is that if I can find a circumstance where I will certainly be right in 2 or 3 years, that’s a better bet for me than one where there’s a very strong possibility, or even a probability that I won’t be right at all.
This description certainly matches my perspective of the precious metals markets. Where rampant Federal Reserve money printing combined with banks writing undeliverable paper contracts have led to an eventual outcome that sure seems like a matter of “when.”
The facts are there, as amply detailed on the daily Miles Franklin blog. And while we don’t know exactly when the breakpoint will occur, in my opinion it is no longer a matter of “if” anymore. Similar to how we don’t know exactly when the bubbles in the stock, bond, and real estate market will collapse, but again simple arithmetic shows that it’s a matter of when rather than if.
I‘ve really learned to prefer questions where the answer begins with “when”. And you get to ask yourself those questions by confining yourself to investment areas, in commodities at least, where the selling price of the commodity is less than the total cost of production.
It’s counterintuitive that you would buy an industry at liquidation, but what happens when you buy an industry at liquidation is that at least where the commodity is essential for the future of mankind, you have one of two choices. Either the price goes up or the way we live changes dramatically.
Certainly there are a lot of challenging decisions facing investors in today’s markets. Could the stock market still go higher? Could the bond bubble be kept in check for a while longer and provide some additional upside?
Sure it’s possible.
But successfully timing and trading those markets at this point is seemingly based on a lot of “ifs”. Whereas reallocating into precious metals seems much more along the lines of an investment question where the answer begins with “when.”
April 23, 2018
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