On Monday, November 9, 2020, Pfizer announced early results indicating a 90% effectiveness rate in its new COVID-19 vaccine. Stocks soared—not just Pfizer’s—and gold tanked, dropping $100 in a day.
Kitco’s David Lin scheduled an interview with me right away, as I had said this would happen in our previous interview. He hit this right away, saying, “You called what happened yesterday … you said, ‘When we get a vaccine announcement, we’re going to get a knee-jerk reaction in the gold market.’ And that’s exactly what happened yesterday.”
If you watch the new interview, you’ll see that my first response was to decline any nomination for prophet status.
I pointed out that it wasn’t the only possibility I’d spoken of. And I certainly didn’t predict when it would happen or how hard gold and silver would be hit.
I’m not just being modest here. I think that what I did and did not say—the projections I made and the predictions I didn’t make—highlights a very important issue for all investors.
I’ve written before about what I call The Prediction Racket. This is a sales tool used by marketers to manipulate people into making purchases they might not otherwise make.
It goes like this:
- Make a bold prediction, painting a vivid picture of the audience’s hopes and fears.
- Tell them what they already believe is true or what they want to hear.
- Persuade them that they need to pay the marketer to tell them the best way to make a fortune on their prediction.
- Offer an invented discount that makes a high price look like a bargain.
- Offer some kind of money-back guarantee for a few months (knowing it will take a year or two for the investment thesis to play out).
- Invent a phony deadline to pressure people into an impulsive purchase.
Imagine doing this and being right about the investment thesis only 25% of the time. Most customers would have terrible outcomes and wouldn’t renew. But if marketers have machines that generate thousands and thousands of sales like this, they make money anyway. (And the 25% of the time they’re right makes it possible to brag about their uncanny powers of prediction.)
That’s not how I do things.
I never slash my prices to create a fictional sense of urgency. I offer everyone the same square deal—no special discounts. Take it or leave it.
And I value my work—which transfers knowledge that can’t be “un-transferred”—so all my sales are final, with no refunds.
I don’t go for arm-twisting hype. The welcome mat is out. That’s it.
I’ve been called out on this.
One reader wrote in to accuse me of hypocrisy, saying I make predictions all the time.
My apparent prediction of the hit to monetary metals this week being a case in point.
There’s a vital difference between projecting what might happen and proclaiming what will be.
Googling for a definition of “prediction” brings up:
A prediction is what someone thinks will happen. A prediction is a forecast, but not only about the weather. Pre means “before” and diction has to do with talking. So a prediction is a statement about the future.
Fair enough, but in order to be relevant, a prediction must not only be a statement about what will be—not might, but what will be—it also has to say when it will happen.
If I say that uranium prices will rise above $60 per pound but don’t say when, it could happen 50 years from now and I could still say I was right—if any of us were still around. Of course, such a prediction would be worse than useless for anyone who got the impression that this doubling of uranium prices was imminent and invested accordingly.
But suppose I had said a few weeks ago that there would be a stock market crash before the election and that everything, including gold, would crater. That would have been a real prediction. It would have included a specific outcome (the “what”) and a very specific time frame (the “when”).
It would have been bold to do so—but it would have cost anyone who listened to me a great deal.
This does not mean that I refuse to look forward, afraid to risk being wrong.
My critic was right in a way: I look forward all the time. I’m a speculator. How could consideration of the future be anything but central to what I do?
So, if I don’t make predictions, what do I do—and what good is it to you?
I’ll tell you:
- On a daily basis, I process a flood of market, economic, political, technical, and other data, thinking about what it might mean for the future.
- I do formulate projections and write about the ones that seem most likely to me.
- If there’s more than one likely path forward, I say what I would do in each case.
- I tell paying clients what specific investment I plan to make, either now in anticipation of what I see ahead or when the time comes.
- Sometimes uncertainty calls for hedging my bets—other times it calls for placing no bets until there is clarity.
- I invest my own money based on my projections, so I have skin in the game with my clients (not just a “model” portfolio).
- I inform The Independent Speculator clients of exactly what I’ve done, providing evidence of how much I bought or sold, when, and at what price.
In short, rather than pretending I know things no mortal can know, I project the most likely scenarios and speculate accordingly.
My goal is not to be good at making bold predictions—and suave excuses.
My goal is to make money for myself and my clients.
This doesn’t require a working crystal ball, and in my experience, it pays to be very skeptical of anyone who claims to have one.
It does require a proven method, solid research, and a lot of work on a daily basis.
That’s what I offer.
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