I’ve just posted my third closed trade for the public to see: Pretium Resources (PVG). This wasn’t a big win for me. After disappointing results from the company, I was just happy to get all of my money back.
Fortunately, I did bag a big win right out of the gate in 2018. There was another sideways trade as well, resulting in an average gain of about 20% and a 16.4% ROI. You can see all my closed trades on my track record page.
Why tell you this?
Well, it’s instructive for several reasons…
First, note that Pretium was a high-profile speculation for me. It’s the one stock in my portfolio I disclosed to the general public. Back in my Casey Research days, I said numerous times that I thought Pretium was a great speculation, and that if I were free to own the stock, I would buy shares. So when I became an independent speculator, it was the first stock I bought. I am well known for having defended the company—not once, but twice—when it was attacked by dishonest short sellers.
And now I’m out.
I have several reasons for this, but it boils down to the company struggling to deliver consistent output at its flagship Brucejack gold mine. The details aren’t important to my point today.
Whether or not I made the right call doesn’t even matter.
The key point is that when results disappointed, I did not let pride, hope, or fear of negative publicity stop me from selling.
You see, so many investors become cheerleaders for the stocks they own that it blinds them to the negatives that always appear. It’s one thing to acknowledge the bad with the good and defend a company that has more positives than negatives to its story. It’s quite another to refuse to see important negatives and stay in a bad trade until it destroys one’s capital.
The great danger here is what psychologists call “confirmation bias.”
This is more insidious than just the simple tendency people have to believe what they wish were true. Because we know what we know, and think what we think, we tend to seek out evidence that supports our ideas. We turn a blind eye or discount data that contradict what we want to believe. We come up with unlikely explanations and interpretations for why bad news isn’t as bad as it really is. Sometimes we just don’t remember the bad news at all—it slips our minds, while the good news stays fresh and clear.
I see confirmation bias so often when I interact with investors, I now take it as a given.
I’m not bashing anyone in particular. I’m saying this is human nature. We’re all vulnerable to confirmation bias. And it’s a leading cause of portfolio meltdown, so we must all be on our guard.
I’m not saying I’m immune to this weakness, by the way. I’ve lost money staying in bad trades too long before. I’m sure I will again.
My pledge to subscribers is not that I’ll never lose, but that I’ll be as brutally honest as I can with them and myself about all my trades.
I won’t go down with a ship because I refuse to see a gaping hole in its hull.
Further, my due diligence never ends: I keep on looking for holes in the story after I’ve bought in.
I welcome criticism and contrary views. A report that says the same things I already know about a stock I own does me no good at all. One that attacks my basis for speculation gives me the opportunity to learn something new. It may even save me from disaster if I’m wrong. If my thesis survives, I’ll be that much more confident.
In this context, I want to invite you to participate in my next live streaming session: The Three Yellow Metals.
I’m going to start with brief remarks on the speculations I get asked about the most—the three yellow metals. But then we’ll go into a Q&A session, to which I hope participants will bring any and all data, ideas, and views that differ from my own. Shoot me down if you can, and we’ll all be better off for it.
Unlike many so-called webinars, this session really will be live, and participants will be able to comment and ask questions in real time. My idea isn’t to broadcast my ideas to a passive audience, but to interact and address whatever it is they need the most.
Whether your interest is primarily energy minerals, precious metals, nuclear power, oil and gas—or even mainstream investments—I want to hear from you. I want to offer you what guidance I can, where I can.
And I’ll be straight if I can’t address any issues brought up—which would be great for me, as it would show me opportunities for valuable research.
The goal is to help investors and speculators as much as I can—while gathering critical information that will help me as well.
Be warned, however: this means I won’t just tell you what I think you want to hear. I’ll give you my best insights and judgment, based on my years of experience—whether you like it or not.
This way, you can help me avoid any confirmation bias I may have, and I’ll help you avoid any you may have. As with all my business endeavors, I’m only interested if I can make it a win-win for us both.
Best of all, this live session is completely FREE.
You can participate, ask questions, and sign up to be kept posted all on this page:
Thursday, February 28, 12:12pm, EST, 2019