“Most investors and all unsuccessful investors focus on noise and ignore signal.” ~ Bob Moriarty
One of our favorite guests on Energy & Gold, Bob Moriarty, just published a practical and insightful book chronicling some of what he has learned over decades as an investor and 15 years as founder and chief editor of 321gold. “Nobody Knows Anything: Investing Basics, Learn to Ignore the Experts, the Gurus and other Fools.” is an entertaining and incredibly useful book which will help investors avoid all the most common pitfalls that have cost investor’s fortunes.
By utilizing examples from history (there are a number of history lessons in this book) and a deep understanding of human behavior Moriarty is able to show readers that investing really isn’t terribly complicated; common sense prevails and Bob Moriarty is all about common sense and cutting through the bullshit and smoke screens that litter the investing landscape. Nobody Knows Anything also offers some practical and easily implementable tips on how to manage your investments on your own with average access to information. Moriarty believes that any investor can be successful if they employ common sense and avoid the many pitfalls to which most investors fall victim.
CEO Technician: So you just published a book, and it’s about investing, or rather teaching investors about things they should not do. Tell us about your book Bob.
Bob Moriarty: I’ve been running 321gold for 15 years and I’ve managed to meet most of the people in the industry. And it’s amazing the quantity of simply bad information, it’s no mistake that people lose money because they’re listening to the wrong people. Instead of doing what makes sense they’re following the herd.
“This book will not make you rich but it may keep you from being poor.”
CEO Technician: How does one know if they are following the herd?
Bob Moriarty: There are about 40-50 gold focused websites out there and if you go to these sites you will find a lot of the same information. Website after website you will read the same information, this is what the herd is listening to. To have a successful website all you have to do is tell people what they want to hear. But if a guy is telling you what you want to hear he’s feeding your fantasies. Rather than feeding fantasies, I’m committed to telling people what they need to know.
CEO Technician: Most investors fall victim to confirmation bias; they formulate a view about a market and they proceed to search out information/opinion/news to confirm their view. From my experience confirmation bias is literally the single most toxic and pervasive cognitive bias that investors succumb to. Can you share with us an example of confirmation bias that you have observed among investors in the resource arena?
Bob Moriarty: I will give you a perfect example of confirmation bias. You and I talked in early February and I said that gold and silver had just broken out. Since the 1st of February, when it became obvious that markets were going up, shares of the precious metals miners have absolutely rocketed higher and you haven’t heard much talk about manipulation. Whereas, if the opposite had happened and stocks had crashed you would have heard everyone and their brother screaming about manipulation.
Is gold supposed to go up every single day? Are shares supposed to go up every single day? If someone is telling you that are they telling you what you need to know? The obvious answer is no, they’re not.
We’ve had several minor corrections since the 20th of January and I think we’re due for a bigger correction. I have no doubt at all that as soon as we have a correction we’re going to have people screaming about manipulation.
CEO Technician: Lets talk about the gold stocks. While gold has been trading in a range for several weeks, the gold miners have continued to make new highs. We are also entering a seasonally challenging period for the gold mining sector (summer). Where do you think we are at in the rally and should investors be looking for a correction in the near future?
Bob Moriarty: We are recording this on the 19th and a lot of shares are up 10% today. This is not what you see at the start of a move, it’s what you see at the end of a move. I’m never unhappy to see a correction. Stocks like Silvercorp Metals (SVM.TO) have gone from C$.60 in January to C$2.55 today. Minco Silver (MSV.TO) has tripled since January, Gold Standard Ventures (GSV.V) has doubled, Red Eagle (RD.V) has doubled. A lot of really good stocks have had some tremendous moves.
The point I make in the book is that when you have some really good profits take some off the table. Nobody ever went broke taking a profit. The mistake i’ve seen gold investors make time and time again is that they get these tremendous moves and they’re afraid to take any money off the table. If you were smart enough to buy Silvercorp in January at $.60-$.65 and it’s $2.55 today you’re nuts if you don’t sell some shares, you simply have to if you ever want to make a profit.
CEO Technician: I think those are some very wise words. Investors often make the mistake of seeing some big gains and then they get married to their stocks for fear of missing out on more gains, this is where greed kicks in.
Bob Moriarty: If you don’t take a profit your only other option is to take a loss. I’ve seen people who have had accounts go up 200, 300, 500% and they ended up getting forced out when the stocks went down. This happened a lot during the 2001-2008 period.
I’ll give you a great example of an unusual stock which had tremendous profit opportunity that most people wouldn’t have been smart enough to sell, Novagold (NG). NG was trading at US$.09 in early 2001. It went from .09 in 2001 to about $20 in 2007, then it dropped to .46 in 2008 and proceeded to rally to over $15/share in 2010. Now if you had taken some money of the table during the bull market periods in NG you would have made money, if you didn’t take money off the table you would have been forced out during the 90%+ declines the stock suffered.
I was a commodities broker in 1984 and I looked at the records of hundreds of people who had been investors in 1978, 1979 and 1980. People had taken a $50,000 account in 1978 and watched it climb to nearly $1,000,000 in 1980 and without exception every single person had lost everything they had because they wouldn’t sell.
When silver hit near $50/ounce in April 2011 people should have been looking to take a profit but the perma-bulls were running around screaming about how silver was going to hit $100/ounce or $500/ounce. All these silver bulls lost money and that’s totally insane because these are markets, they go up and they go down.
“…without exception every single person had lost everything they had because they wouldn’t sell.”
CEO Technician: You’ve been around for a while and this is not your first bull market. What does this market feel like to you? We’ve seen a ~90% rally in the GDX since the January low, does this feel like 2001 to you or another market period?
Bob Moriarty: It feels like 1976 to 1979, the move from the January low to now is the biggest move I have seen in such a short time span. I have always said that the move we saw in gold from $1900+ to $1050 was not the beginning of a bear market, it was a correction in a bull market. I think the bull market has resumed, I don’t see it hitting new lows and I think we are going to have a bull market that’s going to make the Nasdaq in 1999 and 2000 look tame by comparison.
CEO Technician: Now that we’ve seen many stocks more than double, has the easy money been made?
Bob Moriarty: The really easy money has been made, you’re probably not going to see many stocks like Silvercorp rise 300%+ in 7 weeks. However, there are still lots of really good companies out there with great projects that will move forward to production.
CEO Technician: What have you been seeing and hearing in the resource space? Are you palpably seeing more optimism, more traffic to 321gold?
Bob Moriarty: There is definitely more optimism out there. Investors are putting money back into stocks again. We had a correction and I think the correction is over.
CEO Technician: Can you give us more of a taste of what’s in your new book?
Bob Moriarty: The book delves into a wide variety of investing topics. Let me give you a sample. The book talks about contrarian investing, which is one of the surest ways to make money. If you understand what the herd is doing and you do the opposite you will always make money.
I also talk about deviation from the mean and regression. All things deviate from the mean and they regress to the mean. For example, the ratio of gold to silver reach 84 to 1 a few weeks ago and it has now dropped to 72.
I also talk about reliance on gurus. I am not a believer in gurus. People who run around and act like they are gurus, every one of them is a fraud.
I talk about when to sell, basically when you buy a stock you need to have a plan as to when you are going to sell it.
I talk about “the next big thing”. There’s always a next big thing and right now it’s lithium. You can be sure that lithium will go into a bubble when too much money floods into the market and then it will crash.
I talk about manipulation. We just heard that Deutsche Bank admitted that they manipulated gold and silver. I find that funny because anyone who really understands financial markets understands that all financial markets are manipulated. We know that interest rates are manipulated, we know that commodities markets are manipulated, and there’s a real good chance that stock markets are manipulated. The mere fact a market is manipulated is neither a buy signal nor a sell signal. It’s like saying the sun rises in the east, and while it’s true it’s meaningless.
And last but not least, the four magic words that when you hear them you know a bubble is about to blow up. “This time is different”.
In writing this book i’m not trying to show how smart I am. I’m trying to show how the average investor with average access to information can make intelligent investment decisions if they just use common sense.
CEO Technician: The book is a must read and I especially like what you said about knowing when to sell. I’ve learned after more than a dozen years as a market participant that investors spend much too much time focusing on when to buy. Having a plan on when to sell and knowing when to sell is much more important than any decision to buy.
I want to ask you one final question about something you mentioned. Lithium, which has quite frankly been the sector story of 2016. Where do you think we are at in the lithium investment cycle and what do you think of lithium as an investment story?
Bob Moriarty: Lithium is a good investment. But you need to remember investment cycles, for example what happened with the Nasdaq, with uranium, with silver, etc. All of these things went into a bubble, the problem with lithium is the entire space is probably only about a $1 billion space and there’s probably been about $5 billion poured into it. Anybody who has gotten into the lithium space and has a 10-bagger it’s time to take some money off the table and wait for the next big thing. You don’t want to get caught in the last big thing.
We finished reading Nobody Knows Anything today and we are smarter investors for having read it. Nobody Knows Anything articulates a lot of common sense investment secrets that take most investors a lifetime to learn; $9 and a few hours of reading is a tiny investment to grasp this level of wisdom. We want to thank Bob for his time and for sharing a tremendous amount of wisdom in a concise and thought provoking interview.
DISCLAIMER: The work included in this article is based on SEDAR filings, current events, interviews, and corporate press releases. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The views expressed in this publication and on the EnergyandGold website do not necessarily reflect the views of Energy and Gold Publishing LTD, publisher of EnergyandGold.com. This publication is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions. Junior resource companies can easily lose 100% of their value so read company profiles on www.SEDAR.com for important risk disclosures. It’s your money and your responsibility.