Rick Rule: Avoid these investing mistakes or you will be a ‘victim’ (Pt. 1/2)

is the gold sector underbought or overbought are people making the correct investment choices today and most importantly is gold still a safe haven asset these are the main themes we'll be discussing with none other than rick rule of spot us rick it's always a pleasure speaking with you i do enjoy a conversation so welcome back to kitco thank you for having me back and it sounds like a great topic lineup the uh uh you and i have spoken several times before i know you like to talk about the um these the great servers that you offer to viewers and subscribers to spot which is a portfolio review uh i usually talk about this at the end i'd like to bring this forward to our conversation at the start of the conversation today and sort of discuss what you've been noticing in terms of investment trends from the hundreds if not thousands of submissions you've received over the last year what trends have you been noticing in terms of what people have liked to invest in what they don't like can you comment on this thank you for the opportunity to discuss that uh i'd like to preface it by sort of causing your listeners to understand the offer uh which is that we will on a no obligations basis review uh listeners and subscribers natural resource portfolios uh to do that you simply go to a website sprott usa dot com forward slash rankings and enter the names and symbols of your natural resource portfolios please no cannabis stocks please no banks please no businesses that we don't understand i will personally rank those one to ten one being best 10 being worst and enclose a couple of stock charts that we'll talk about later in this interview uh on a no obligations basis also comment on individual issues where i think my comments might have value so framing that we've done almost 20 000 portfolio reviews since the inception of this project and i think it's fair to say that we've taught people a lot the easiest way to teach somebody a lesson is to make it relevant to them and there are very few topics more relevant to people than their own fortunes so by ranking people's portfolios of course we get their attention immediately it's worthwhile to note that my rankings are quite harsh uh one which is my top ranking is a ranking that i've awarded only nine times in 35 years i've been so much more generous with my tens which are absolute shorts um some of the lessons i've learned i think particularly when i combine the rankings with looking at the questions that people ask on the rankings form uh is that many people's goals and techniques are disconnected uh which is to say that many people's understanding of how to construct an equities portfolio is inconsistent with the goals that they express uh a second thing that i've learned is that by and large people are too speculative uh and they have too high a time preference which is to say in my experience and i can document this with the behrens gold mining stock index my favorite gold equities chart gold bull markets precious metals bull markets are of much longer duration than most people realize they're afraid if they're six months late that they are terminally late when actually gold bull markets tend to be of ten year duration and they're also of much greater dimension uh the last one 2000 to 2011 uh saw a six-fold increase in gold and more like a 12-fold increase in the gold equities the consequence of that is that taking undue portfolio risk and speculative issues and exposing yourself to company failure means that most people would be better served having 60 or 70 percent of their gold equities portfolio in very high quality gold stocks so they just capture the market move with less risk of company failure the third thing that i have found with regards to speculative portfolios is that most speculators own way too many stocks i believe that the number of shares that a person should have in their portfolio should correspond to the number of hours per month the speculator is willing to work understanding the portfolio and by work i mean read the annual reports read the proxies read the 43101s i've seen many portfolios where speculators owned 45 or 50 stocks and didn't remember on questioning why they owned them what it was that attracted uh to them what sort of internal price target one they had and what sort of time frames they had in mind uh and this is very damaging indeed if i had a fourth criticism it would be that speculators are too narrative oriented uh narrative being probably the easiest thing to assimilate emotionally uh and less willing to pay attention to technical and financial data so those would be the four conclusions that we have learned uh we have also learned however that people are very very responsible to rankings yeah okay and very responsive to our uh answers to their questions which has been in fact heartening people take um both praise uh and constructive criticism better than i would have believed i've always believed that communication is an affirmative process and if one attracts the questioner's core value too hard one loses uh the listener turns out that's not true i one of the comments on our last video uh i read through all the comments by the way but one of the comments was i would love to see an entire program with rick just talking about the mistakes that people make and you've addressed these mistakes just now the four commonly uh commonly held mistakes uh i wonder rick how somebody and a retail investor can overcome these mistakes specifically in regards to having too many stocks in their portfolio i think you and i briefly discussed this last time the issue is people don't know how to pick stocks and so they diversify as a form of safety uh is this the correct incorrect approach how should they overcome this well in fact i do believe uh that it's possible for uh amateur investors that work hard to compete with professional investors professional investors often have a quarter by quarter focus and the mining business doesn't operate on a quarterly basis the fact that an individual investor can have an 18 month time frame competing with a professional who has a 90 day time frame immediately assigns an advantage to the amateur investor and information is more broadly available now than it's ever been a kit coat to be sure but other sources too the truth is that i can get as much information online and by the way i'm a 67 year old ludite not too competent online but i can get as much information online in three hours as i used to be able to to obtain through six or seven weeks of trying to obtain printed information from say the ontario securities commission or companies uh what one really needs to do is limit one's exposure to stocks uh to uh a number concurrent with a number of hours per month that somebody is willing to work if they're willing to work 10 hours a month really work 10 hours a month then 10 stocks is plenty absolutely plenty it's important too david i think to understand that in the junior public stocks there's probably 2 000 companies that at least purport to be in the mining or minerals exploration worldwide that are public there's probably only two or three hundred that have any value whatsoever so the most important thing that you can do as a speculator looking at a stock that you don't own is find the really obvious reason not to own it so that you don't have to waste any time on it whatsoever uh if you understand that there are 300 real opportunities in a 2000 company universe the most important initial exercise that you can do is the screening exercise which throws companies away so you don't have to waste time on them people are afraid of missing opportunity when they should be afraid of accepting risk i think the uh the issue of information that you brought up is a double-edged sword yes we do have more information available at our tank fingertips but now we have almost too much information the the issue now is narrowing down what to look for in a very limited given amount of time and so you know can you can you just very very briefly point us in the right direction here well i would suggest i mean yes the answer is i can briefly but i would suggest at a later date that we delve into this extensively because this is an hour-long discussion sure what i have found with regards to junior resource talks in particular is that the most important factor is people uh there are some management teams and some individuals that have been serially successful and many more have been serial failing failures but in bull markets the investors don't seem to segregate between the born losers and the born winners and hanging out with the board winner the bourne winners is really the first thing you do in fact david looking back at my own career over 45 years focusing on my mistakes rather than other people's mistakes had i merely concentrated on the 10 or 15 management teams that i had had the best success with up to the age 35 i'm 67 now so that's what 30 something years ago uh i would have done half as much work and made twice as much money uh if i had just hung out with the ross beatties the bob quartermaines the robert friedlands lucas londines all of whom i'd done business with by the time i was 35 and not bothered with the rest of the universe i would have worked less hard and made more money so the first thing is the prior track record of success of the management teams and whether or not that success was specifically related to the task but investors must be contrarian or they will be a victim you need to buy something not when the price action is justifying the narrative but rather when everybody is either bored of something or hates something you must be forward thinking think about this if the price of the stock has doubled in six months but nothing of underlying fundamental value has changed the stock is precisely arithmetically half as attractive but the fact that it's up 100 means more people are attracted to it if you think about buying other kinds of goods like say your suit if you went to a store and saw that suit selling for twice the price that you had paid for it six months ago you'd be furious if you went to buy buy it and stop selling for half the price you would be delighted but people aren't as smart when they buy stocks is when they buy suits so it's important to buy these things when they're out of favor when they're on scale yeah the third thing i would suggest is that scale is important if you're going to take risk don't take risk for small rewards in gold equivalent terms if the target size or the target or the resource whatever the number is doesn't exceed a million gold equivalent ounces which is to say there isn't sort of a billion eight in in situ value where i don't believe that the deposit to could be produced at a hundred thousand ounces a year or more which is to say 180 million dollars in gross revenues a year or more i don't care uh there is uh as much risk in a small mind as a big mind but a small mind can never make you big money and the idea of negative async asynchrony which is to say taking big risks for small money is not attractive taking big risks for big money is somewhat more attractive so i i would say look at those things also uh adjust your time preference to the task at hand if you buy a small speculative stock because you believe that the drilling campaign that's underway will change the market's understanding of the deposit and hence increase the value of your shareholdings understand how long it will take for that drill campaign to add value let's say as an example that the company under question is drilling a deposit in northwestern bc in the golden triangle where the drilling season is short you might reasonably suspect that it will take two drilling seasons to answer the unanswered question in other words you will need to own that stock for 18 months if you have a three month time verizon owning a stock where 18 months is required to get the answer that changes the value it's your time horizon that's the problem not the company's thesis so understanding the necessary time horizon i think is very important for people too uh the one thing you were telling me offline is that uh there is now sufficient data to analyze certain trends in investor behavior could you comment on some of these trends in particular regarding uh age maybe occupation uh you know back backgrounds you know what what are some interesting trends that you've noticed that you could share well the first thing with regards to this and you'll have a laugh at my expense is that we at sprott uh we're trying to figure out for seven or eight years how we could reach younger uh and millennial investors yeah well what we did is we began to make ourselves ubiquitously available online and the young investors found us by the thousands uh so when people say when will the millennial investor be attracted to precious metals and precious metals equities the answer is not in the future uh in fact it's in the past uh thousands of millennial investors sophisticated investors by the way or at least sophisticated speculators uh have already found us so the answer to that is they're here the second thing that we're beginning to see is the presence of female investors and speculators which is something that's never happened in my career the truth is that the gold bug uh pardon the racial stereotyping but the gold bug going back 30 years all looked like me old bald fat white guys you know grumpy old white guys uh and that's all changed uh a bunch of inquiries are coming uh now from women including younger women which is probably the biggest change that i've noticed the other thing that one notices is that interest in precious metals is beginning to correspond demographically uh with data coming with regards to success by ethnicity economic success by ethnicity in north america this shouldn't surprise anybody uh cultures that have an emphasis on savings and on education tend to do better in at least the economic aspects of society and whether or not there are cultural biases in the same group in favor of precious metals or not is a different question but what we see is an incredible amount of interest in north america and internationally by the east asian diaspora by the south asian diaspora uh and by the lebanese and palestinian diaspora three uh socio-ethnic groups that tend to punch way way way above their weight in the broad economy at any rate it's interesting particularly with regards to the south asian diaspora in the united states which are really almost uh statistically insignificant except in their individual demographic um achievement relative to the broader population the extraordinary level of interest among the south asian diaspora in the united states with regards to precious metals is the one thing that really stands out i would suspect that in the united states of the responses that we have received in the last year 12 to 15 percent are from people with south asian or middle eastern ancestry where i suspect that their percentage of the general population is more like one to one and a half percent yeah so i would find that to be very interesting in terms of broad trend you

Channel: Kitco NEWS

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Keywords: gold, silver, finance, news, investing, investing news, finance news, financial news, economy, precious metals, gold price, silver price, gold price today, rick rule, gold bugs, gold investors, gold price forecast, david lin kitco, rick rule sprott, macroeconomics, millennial investors, investing advice, investing mistakes, gold investing, gold mining stocks, gold stocks, mining investing

Id: p_ABDbvTZ04

Length: 17min 57sec (1077 seconds)

Published: Mon Dec 14 2020