I’ve learned from legendary speculator Doug Casey for years—and played the occasional hand of poker with him along the way. In both settings, his instincts are uncanny. Of course, it’s really his years of experience, not any mystical instinct. But still, it’s impressive how often his decisions to hold, fold, or raise the bet turn out to be right.
I’ve yet to beat Doug playing poker. (Helpful hint for anyone inclined to try: buying him whiskey doesn’t help.) I have, however, delivered enough 5-, 10- and 20-baggers on mining stocks over the years that he often consults with me on such speculations now. Few achievements in my professional life make me prouder than this.
In poker, I’ve noticed that Doug folds a lot. This makes it hard to tell if he’s really got something or if he’s bluffing when he bets. I’ve seen him win several tournaments this way. As a basic strategy, it makes sense: don’t bet on a losing hand.
In speculation, I’ve seen Doug do the equivalent, taking a pass on many interesting investments. “You can’t kiss all the girls,” he likes to say. But there’s no bluffing when it comes to investment.
One difference that has emerged between us is that Doug’s reputation and fortune are great enough that he’s willing to take a lot more risk than I am. He really doesn’t care if many of his stock speculations don’t work out, knowing that the ones that hit the jackpot will more than make up for the losses.
Doug’s math is correct. It doesn’t matter whether your win or lose more often. What counts is that you win more money than you lose. Over time, that compounds spectacularly.
Unfortunately, I can’t afford to take as many losses as Doug can—and I doubt many readers would be patient with me if I did. So, if it’s not clear that a speculation has a good chance of delivering, I just don’t bet. I’m willing to build my fortune more slowly, carefully, and—hopefully—with fewer wipeouts as I go.
I’ve taken this to the next level in The Independent Speculator. I see the cards I have in my portfolio now as having much more than good odds of delivering. They are, I believe, some of the best speculations on the market today. And I’m excited about the new ones I’m working on.
That boils down to one lesson I apply without fail:
I will not bet with my own cash—nor encourage anyone else to do the same—unless I’m truly convinced I’m on to a great speculation.
As for the many hands I’ve folded, I have no regrets.
Even in a super-high-grade gold mine, you have to dig through a lot of dirt to get to the stuff that will make you rich.
How about you—are you in for the next round?
