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So You Want To Be A Speculator
Submitted by Louis James via Casey Research,
Doug Casey's 9 Secrets for Successful Speculation
When I started working for Doug Casey almost 10 years ago, I probably knew as much about investing as the average Joe, but I now know that I knew absolutely nothing then about successful speculation.
Learning from the international speculator himself—and from his business partner, David Galland, to give credit where due—was like taking the proverbial drink from a fire hose. Fortunately, I was quite thirsty.
You see, just before Doug and David hired me in 2004, I’d had something of an epiphany. As a writer, most of what I was doing at the time was grant-proposal writing, asking wealthy philanthropists to support causes I believed in. After some years of meeting wealthy people and asking them for money, it suddenly dawned on me that they were nothing like the mean, greedy stereotypes the average American envisions.
It’s quite embarrassing, but I have to admit that I was surprised how much I liked these “rich” people—not for what they could do for me, but for what they had done with their own lives. Most of them started with nothing and created financial empires. Even the ones who were born into wealthy families took what fortune gave them and turned it into much more. And though I’m sure the sample was biased, since I was meeting libertarian millionaires, these people accumulated wealth by creating real value that benefited those they did business with. My key observation was they were all very serious about money—not obsessed with it, but conscious of using it wisely and putting it to most efficient use. I greatly admired this; it’s what I strive for myself now.
But I’m getting ahead of myself. The reason for my embarrassment is that my surprise told me something about myself; I discovered that I’d had a bad attitude about money.
This may seem like a philosophical digression, but it’s an absolutely critical point. Without realizing that I’d adopted a cultural norm without conscious choice, I was like many others who believe that it is unseemly to care too much about money. I was working on saving the world, which was reward enough for me, and wanted only enough money to provide for my family.
And at the same instant my surprise at liking my rich donors made me realize that—despite my decades of pro-market activism—I had been prejudiced against successful capitalists, I realized that people who thought the way I did never had very much money.
It seems painfully obvious in hindsight. If thinking about money and exerting yourself to earn more of it makes you pinch your nose in disgust, how can you possibly be effective at doing so?
Well, you can’t. I’m convinced that while almost nobody intends to be poor, this is why so many people are. They may want the benefits of being rich, but they actually don’t want to be rich and have a great mental aversion to thinking about money and acting in ways that will bring more of it into their lives.
So, in May of 2004, I decided to get serious about money. I liked my rich friends and admired them all greatly, but I didn’t see any of them as superhuman. There was no reason I could not have done what any of them had done, if I’d had the same willingness to do the work they did to achieve success.
Lo and behold, it was two months later that Doug and David offered me a job at Casey Research. That’s not magic, nor coincidence; if it hadn’t been Casey, I would have found someone else to learn from. The important thing is that had the offer come two months sooner, being a champion of noble causes and not a money-grubbing financier, I would have turned it down.
I’m still a champion of noble causes, but how things have changed since I enrolled in “Casey U” and got serious about learning how to put my money to work for me, instead of me having to always work for money!
Instead of asking people for donations, I’m now the one writing checks (which I believe will get much larger in the not-too-distant future). I can tell you this is much more fun.
How did I do it? I followed Doug’s advice, speculated alongside him—and took profits with him. Without getting into the details, I can say I had some winning investments early on. I went long during the crash of 2008 and used the proceeds to buy property in 2010. I took profits on the property last year and bought the same stocks I was recommending in the International Speculator last fall, close to what now appears to have been another bottom.
In the interim, I’ve gone from renting to being a homeowner. I’ve gone from being an investment virgin to being one of those expert investors you occasionally see on TV. I’ve gone from a significant negative net worth to a significant nest egg… which I am happily working on increasing.
And I want to help all our readers do the same. Not because all we here at Casey Research care about is money, but because accumulating wealth creates value, as Doug teaches us.
It’s impossible, of course, to communicate all I’ve learned over my years with Doug in a simple article like this. I’m sure I’ll write a book on it someday—perhaps after the current gold cycle passes its coming manic peak.
Still, I can boil what I’ve learned from Doug down to a few “secrets” that can help you as they have me. I urge you to think of these as a study guide, if you will, not a complete set of instructions.
As you read the list below, think about how you can learn more about each secret and adapt it to your own most effective use.
Secret #1: Contrarianism takes courage.
Everyone knows the essential investment formula: “Buy low, sell high,” but it is so much easier said than done, it might as well be a secret formula.
The way to really make it work is to invest in an asset or commodity that people want and need but that for reasons of market cyclicality or other temporary factors, no one else is buying. When the vast majority thinks something necessary is a bad investment, you want to be a buyer—that’s what it means to be a contrarian.
Obviously, if this were easy, everyone would do it, and there would be no such thing as a contrarian opportunity. But it is very hard for most people to think independently enough to risk hard-won cash in ways others think is mistaken or too dangerous. Hence, fortune favors the bold.
Secret #2: Success takes discipline.
It’s not just a matter of courage, of course; you can bravely follow a path right off a cliff if you’re not careful. So you have to have a game plan for risk mitigation. You have to expect market volatility and turn it to your advantage. And you’ll need an exit strategy.
The ways a successful speculator needs discipline are endless, but the most critical of all is to employ smart buying and selling tactics, so you don’t get goaded into paying too much or spooked into selling for too little.
Secret #3: Analysis over emotion.
This may seem like an obvious corollary to the above, but it’s a point well worth stressing on its own. To be a successful speculator does not require being an emotionless robot, but it does require abiding by reason at times when either fear or euphoria tempt us to veer from our game plans.
When a substantial investment in a speculative pick tanks—for no company-specific reason—the sense of gut-wrenching fear is very real. Panic often causes investors to sell at the very time they should be backing up the truck for more.
Similarly, when a stock is on a tear and friends are congratulating you on what a genius you are, the temptation to remain fully exposed—or even take on more risk in a play that is no longer undervalued—can be irresistible. But to ignore the numbers because of how you feel is extremely risky and leads to realizing unnecessary losses and letting terrific gains slip through your fingers.
Secret #4: Trust your gut.
Trusting a gut feeling sounds contradictory to the above, but it’s really not. The point is not to put feelings over logic, but to listen to what your feelings tell you—particularly about company people you meet and their words in press releases.
“People” is the first of Doug Casey’s famous Eight Ps of Resource Stock Evaluation, and if a CEO comes across like a used-car salesman, that is telling you something. If a press release omits critical numbers or seems to be gilding the lily, that, too, tells you something.
The more experience you accumulate in whatever sector you focus on, the more acute your intuitive “radar” becomes: listen to it. There’s nothing more frustrating than to take a chance on a story that looked good on paper but that your gut was warning you about, and then the investment disappoints. Kicking yourself is bad for your knees.
Secret #5: Assume Bulshytt.
As a speculator, investor, or really anyone who buys anything, you have to assume that everyone in business has an angle. Their interests may coincide with your own, but you can’t assume that.
It’s vital to keep in mind whom you are speaking with and what their interest might be. This applies to even the most honest people in mining, which is such a difficult business, no mine would ever get built if company CEOs put out a press release every time they ran into a problem.
A mine, from exploration to production to reclamation, is a nonstop flow of problems that need solving. But your brokers want to make commissions, your conference organizers want excitement, your bullion dealers want volume, etc. And, yes, your newsletter writers want to eat as well; ask yourself who pays them and whether their interests are aligned with yours or the companies they cover.
(Bulshytt is not a typo, but a reference to Neal Stephenson's brilliant novel, Anathem, which defines the term, briefly, as words, phrases, or even entire books or speeches that are misleading or empty of meaning.)
Secret #6: The trend is your friend.
No one can predict the future, but anyone who applies him- or herself diligently enough can identify trends in the world that will have predictable consequences and outcomes.
If you identify a trend that is real—or that at least has an overwhelming amount of evidence in its favor—it can serve as both compass and chart, keeping you on course regardless of market chaos, irrational investors, and the ever-present flood of bulshytt.
Knowing that you are betting on a trend that makes great sense and is backed by hard data also helps maintain your courage. Remember; prices may fluctuate, but price and value are not the same thing. If you are right about the trend, it will be your friend. Also, remember that it’s easier to be right about the direction of a trend than its timing.
Secret #7: Only speculate with money you can afford to lose.
This is a logical corollary to the above. If you bet the farm or gamble away your children’s college tuition on risky speculations—and only relatively risky investments have the potential to generate the extraordinary returns that justify speculating in the first place—it will be almost impossible to maintain your cool and discipline when you need it.
As Doug likes to say; it’s better to risk 10% of your capital shooting for 100% gains than to risk 100% of your capital shooting for 10% gains.
Secret #8: Stack the odds in your favor.
Given the risks inherent in speculating for extraordinary gains, you have to stack the odds in your favor. If you can’t, don’t play.
There are several ways to do this, including betting on People with proven track records, buying when market corrections put companies on sale way below any objective valuation, and participating in private placements. The most critical may be to either conduct the due diligence most investors are too busy to be bothered with, or find someone you can trust to do it for you.
Secret #9: You can’t kiss all the girls.
This is one of Doug’s favorite sayings, and though seemingly obvious, it’s one of the main pitfalls for unwary speculators.
When you encounter a fantastic story or a stock going vertical and it feels like it’s getting away from you, it can be very, very difficult to do all the things I mention above. I can tell you from firsthand experience, it’s agonizing to identify a good bet, arrive too late, and see the ship sail off to great fortune—without you.
But if you let that push you into paying too much for your speculative picks, you can wipe out your own gains, even if you’re betting on the right trends.
You can’t kiss all the girls, and it only leads to trouble if you try. Fortunately, the universe of possible speculations is so vast, it simply doesn’t matter if someone else beats you to any particular one; there will always be another to ask for the next dance. Bide your time, and make your move only when all of the above is on your side.
Final Point
These are the principles I live and breathe every day as a speculator. The devil, of course, is in the details, which is why I’m happy to be the editor of the Casey International Speculator, where I can cover the ins and outs of all of the above in depth.
Right now, we’re looking at an opportunity the likes of which we haven’t seen in years: thanks to the downturn in gold—which now appears to have subsided—junior gold stocks are still drastically undervalued.
My team and I recently identified a set of junior mining companies that we believe have what it takes to potentially become 10-baggers, generating 1,000%+ gains. If you don’t yet subscribe, I encourage you to try the International Speculator risk-free today and get our detailed 10-Bagger List for 2014 that tells you exactly why we think these companies will be winners. Click here to learn more about the 10-Bagger List for 2014.
Whatever you do, the above distillation of Doug’s experience and wisdom should help you in your own quest.
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"trust your gut" is wrong ... it should be "do exactly opposite of yuor gut feeling" ... and that takes courage.
fonestar wants to be a speculator.
overstatement of the year.
Fonestar and Reggie Middleton are pimping for a bank with no insurance, which gets robbed twice a week.
Good luck with that.
Oh yeah, like fonestar would waste his time pimping anything. Bitches.
Other than his glorious man-love for Satoshi.
I think this is the 1st time I've seen a bullshit sales pitch for a newsletter directly on the front page of ZH, dressed up as a guest "article."
WTF I do declare.
So your calling.... Bulshyt.
2 dollar whoring I call it
WTF -- Article says "analysis over emotion", then "trust your gut". Be a contrarian, but the trend is your friend. So 4 of these 9 investment gems contradict each other.
I trust my gut... skip this idiot's newsletter and free advice.
Well, you tried and it didn't really work out. But at least you tried so I commend you for that.
We're all speculators now, thanks to the Fed. Investor? What the fuck is that?
actually..."what's a contrarian" is the more interesting question. i've been swimming against this tide for more than a year now...and part of me says "i'm about to be swept out to sea" and part of me says "that's a tsunami heading straight for humanity. hahahahahahahahaha."
Early is the same thing as wrong.
No, late is the same thing as wrong.
+100
absolutely spot-on correct.
Have you considered Bitcoin?
Cmon people, now you all have to know he's a troll.
We're all PAINFULLY aware of that already. He picked the wrong subject at the wrong time to make his mark and now he's wandering around, lost, throwing hay-makers and searching for a handle to grab onto. Just.... just leave him alone.
The Life of A Speculator In Two Minutes..........
http://www.youtube.com/watch?v=1oZx8XD9U8s
Nope
Ive used the gut on a lot of plays and Ive dodged some bullets.
Never confuse brilliance with timing. I was short oil the second half of 2008. With a Sep expiration date.
@ pragmatic: "trust your gut is wrong" - I disagree to an extent. Gut or instinct is not a feeling or emotion. Gut is accumulated experience. And it's often right as rain - if you do indeed have the experience.
Well, in that case it is still the wrong thing to say to a newb. How about, "Eventually you will be able to trust your gut"? NOT, "Oh, ignore your emotions but trust your gut even though in these early stages your gut doesn't have a clue either".
"You failed because you got too emotional."
"You failed because you didn't trust your gut."
All you do is have a noob running around in circles.
And one man and courage, make a majority.
Secret #10: Start a newsletter so you can pump and dump.
and hang out on popular blogs.
#9 Only because in Thailand, all girl is not necessary all girl.
Same in DC.
Or any sort of girl.
Gurrrrrrl maybe, but penis envy does strange things to..., critters.
blah blah blah words words words rabble rabble rabble buy junior gold miners just like I have been saying for how fucking long now....
Even before you posted, I was thinking "I wonder what Fonz would say about that," regarding his junior gold miner comment.
he may well be right but these Casey research sell side douche's have been screaming junior gold miners for years. I am conisdering saying terrible things about gold until Akak can't help himself but come on here and curse me out.
Unfortunately I have to edit this. I thought Akak exited voluntarily but it seems like he was Ko'd.
(waving to Akak)
I don't have any experience with this /sarc
But if you diss the advertisers here on ZH, your 1/2 life is days.
I'm surprised AKAK lasted as long as he did, I'm sure he's still here, just under a new avatar,
It's good to be banned/deleted time to time get some rest catch up with the real world.
If you got banned for dissing the advertisers I would have been banned 50x already.
I hate you Michael Snyder. Hate you!
i'm only here because i'm being suicided.
They're a little touchy with the gold/silver penny mining stock advertisers.
I do know that if you go on the top, most of those POST's are direct advertisements, and if you piss off the OP, they have the power to BAN/DELETE any commenter.
Akak could have pissed off just about anyone here.
They're more than a little touchy about the "Jew bashing" thing, OK? That's why they threw the penalty flag on you, Francis. I ain't saying nothin'. I'm just sayin'. That's the (nominal) reason you were put in the penalty box. Right, wrong, fair, unfair, I dunno. I'm no genius, I'm just saying that's the optics of the situation.
Great comment NoDebt and no doubt true in every regard.
Bring back Francis and AKAK!
I miss reading them
It was their time, good to see you had their backs, I think.
Warming up the ovens on Casey posts now eh...
I didn't find Akak any more or less offensive than anyone else here.
Actually, I personally found his verbage to be more of the elusive variety .. you have to read it to see what it means.
Kinda like chew on it and see what it tastes like
Ad Block Plus...what advertizers?
Best thing I ever downloaded, ironically, I just did an advertizement. Wonder if I'll be able to read it?
https://adblockplus.org/en/internet-explorer
Ok, it isn't perfect....
How to be a Rokit sientist with PT.
1. Go to the library and read lots of books about rockets.
2. Go to university and talk to the people there and enroll in courses that teach you about rockets.
3. DO YOUR HOMEWORK!
4. You will also have to do lab experiments and practical stuff too and write up reports and stuff as well as study.
5. Make sure you study and do exams and labs and pass so you can graduate as a ROCKET SCIENTIST!
6. Look for jobs as rocket scientists. If there aren't any jobs in the newspaper then you may have to look elsewhere.
7. Don't expect the bosses to come to you. You have to find them and let them know why they should hire you as a rocket scientist and not someone else. Otherwise, you may have to take on any job and save your money and start your own rocket scientist company. If you choose the latter path, then don't forget to hire a salesman and a business manager, otherwise you will be too busy looking for customers or managing the business and you won't have any time left to be a rokit sientist.
8. Keep looking until someone hires you and you become a rokit sientist!!!!
9. Now turn up to work early, work hard, work late and do all the things the boss tells you to do and you will be a rokit sientist for the REST OF YOUR LIFE!!!!! WELL DONE!!!
10. Don't expect to do all exciting rocket sientist things on day one. Remember, you still have to start at the bottom and work your way up. Just because you studied hard and got a piece of paper, doesn't mean you actually know anything. Go to the back of the queue. You have to wait for all the old-timers to get famous or retire before you can do any exciting, innovative stuff. Do as you're told for at least the first five years. After that you should have a few graduates of your own that you can boss around.
So there you go, NOW YOU KNOW EVERYTHING THERE IS TO KNOW ABOUT HOW TO BE A ROKIT SIENTIST!!!!!!!!!!!!!!
Of course, it isn't easy. You can't do it all at once. This is not a "Become-a-rokit-sientist-quick" scheme. It is a "Become-a-rokit-sientist-slow" scheme becoz that is what works. And do your homework and have discipline and blah blah blah and if you fail then it is becoz you were a lazy git who didn't obey my instructions or didn't try hard enuff blah blah blah send me $6000 and I will give you the advanced course ...
<----- How to be a ROKIT SIENTIST
<----- How to be a Speculator
What was more helpful?
<------- They were both crap
<------- At least the one about rocket scientists had sarcasm / entertainment value.
This sectret to being a speculator above :- Secret #1: Contrarianism takes courage.
Mean while you get all these so call market gurus claiming the bonds will crash and the market will crash too using their 1929 analogies. See the truth to that here => http://bit.ly/1eiJ8N7
Bears using those 1929 analogs like above link, would have had their asses handed to them.
Inflationists are long stocks dumbass
Blah bla blah....over the past 3 years all that has mattered is #6. Every idiot with a PC and a margin account has made money on the trend alone. Meanwhile, following all the other "steps" has cost people fortunes being short.
I was talking to someone about that today. First off let me say that I do not blame ZH for any financial decisions I have made that did not work out, nor should anyone else. Ultimately you own your decisions. With that said we were discussing how many people have went bust by making a correlation between ZH content and the market and investing accordingly. Our over/under guess was somewhere around 25k.
why not go to a casino and put it all on red, at least the odds are 50/50. That's better than any speculating, and you can double your money in less than 10 minutes
You do know the odds are not 50/50. There is a least one green 0 and sometimes a green 0 and a green 00 on the wheel, making the odds less than 50/50.
But I agree, the odds are better than speculating in the market. Win or lose, it's less painful and less time consuming, plus you get free drinks and get to hopefully scope out some hot babes.
yes it was more of a metaphor than a statistical analysis but we both get the gist......why bother in a rigged casino when the real casino gives better odds. Statistically isn't it all about the odds anyway?
Many casinos list the last 10-20 spins on a roulette table. It's a no brainer to only bet after you see the last 5-6 spins have the same color. Try it to see if the game is fixed. If it's not fixed bet the farm and you'll be rich, if you lose your money you'll understand the fed, life and why you're a peon.
I got the hard lesson in Freeport on red-black. The odds are ~50/50 each time. With the market, not so much.
Yup. Me, I prefer the ponies. Although the house rakes a heck of a lot off, even on straight bets, I get to pit my wits against others on a more level playing field ( no leverage, HFT, algos, manipulation, etc.), weed out the garbage, and at least have a shot a picking up some dough.
People are lazy, and expect just to throw their money in and come out rich without doing the slightest bit of research or work. If it wasn't ZH, their bad decisions would just be based on a reaction to some other source of information. Imagine how much capital has been pissed away on Cramer-based decisions.
Fools and their money...
Are soon parted ...
I agree with you on the point people are lazy, but the empath in me has to scream out here. People <I think> do the best they can, based on the knowledge they have / are able to obtain. Arguably or not, the media absolutely distorts the facts and in so doing, changes the odds.
JMHO
Yea, I've been beaten black, blue and fucking bloody from mining stocks for 3 fucking years. I still obviously believe in them, but FUCK! I haven't dared open a quarterly statement in over a year...
what's been mined is your sphincter.
Hey Sarge!
Now that is funny .. step AWAY from the statement
*_*
ps ... I feel your pain
Use your gut. If you get it wrong then you must have trusted your emotions instead of cold, hard analysis. You didn't do your homework.
The trend is your friend. Until it is your fault for not being a contrarian.
Do fundamental analysis. Don't forget to read all the associated footnotes or else you could miss vital information and won't get the full picture. Except all the numbers are made up these days so your fundamental analysis won't mean jack shit.
So do technical analysis instead. Except the charts won't mean anything either as the game is rigged.
Ring up the NSA and see if you can buy a tap on Jamie's cell phone. That should work. Don't forget to pay off the right people, otherwise when you get too rich they'll come around and repossess your Bugatti Veyron (and all your other stuff).
# 10 END THE FED
No shit! +1000
It's going to be painful, but it's better now to lose a finger than later amputate the arm, shoulder and the head.
i see no reason why we have to choose?
let's lose the finger, the arm, the shoulder, and the head.
in fact, let's chop the entire body up into bits and toss it into a vat of hydrochloric acid to get rid of the remains.
it's not murder, it's an act of self-defense.
the tree of liberty must be refreshed by the blood of tyrants and patriots!
Speculation is a fancy word for gambling, which is why god invented arbitrage.
If you are too lazy to do your home work, keep your hands in your pockets, and watch the blinking lights.
Unearned money and wealth is everywhere today. Look out.
Unearned fiat and paper promises, for sure.
Real money, not so much.
The world has been mad since sentience occured, it's just recently that the volume has been turned up to 11.
Louis James ....
Louie Louie! OHHH Louis Louie .... YA YA YA YA
Ooops, sorry got lost in the music and gave away my age LOL
What a bunch of trifling crap this is. It's super easy to be a speculator from '04 to present and especially if one were able to leach onto Doug Casey.
These days ... not so much!
Toot your own horn much, Louis?
Ahmm... who was the target audience for the author... an Indiana based Investment club ?
87% of the ZH readership is from Indiana. Only 76% of them are members of Investment Clubs though.
Jesus, I thought it was Edgar Casey.
My Bad.
dumbStruck's successful speculating tips:
1- Have reliable sources of inside information, ie be in politics or banking.
2- Invest with other people's money.
3- Cheat,lie,steal from/to friends,neighbors,relatives,tax payers,investors et al
4- Have politians, regulators, media et al in your back pocket.
5- Have so much money you create your own fiscal weather patterns wherever you go.
6- Have lots of friends, croanies in high places.
7- Bang the open/close, talk your own book...
I'm sure there are more excuses for getting richer faster but don't want to think of them, maybe others can pitch in where I've given up.
3b - create a Fondi (foundation)
8. Pay the exchange for early data, write a Hft program,co-locate it, and front run everyone on the planet.
Thanks Doug Casey....
i'm gonna buy me an Argentinian brick house near a golf course and sip wine everynight...just like you said.....
And when the dark comes i'm gonna bolt the doors cause when people get hungry those bandits never like it when them gringos take all the good stuff......
But don't worry Doug....you will be ok.....because you'll be in the USA smoking a cigar and talking to that hot bitch from Kitco and telling her 'What is Money Is'.......
Speculation is dead, just buy spoos, all they do is go up.
Seriously, look at a monthly chart and when you cut out the piddly liquidation break noise it is just a straight line up at a 60 degree angle for years.
You can mess around with different ratios of long ES NQ TF YM if you wanna get fancy or maybe throw in a few bonds and gold if you really wanna play it safe but unless you are a member of an exchange buying individual stocks is not a great use of capital. the best and easiest use of capital with the most bang for your buck is just straight long futures, preferably bought on a dip so you take minimal heat.
Theoretically XYZ penny stock dejour can out perform or maybe you wanna try and ride Facebook up to 100 this year but they can go down potentially, unless you are congress or some other person trading on insider info again best bet is the indexes as it is literally illegal for them to ever go down substantially and with the lesser leverage on just straight long stock the percent gain of the underlying may be greater but from a return on risk if not also return on capital perspective will likely be worse futures probably win again.
PS- as I post this the ES is down a tick, now is your chance to jump on em, next stop the moon!!
Edit: aww you missed it, they are now green again; you could have been somebody.
ETA on next downtick: 100 hours or so.
Think like a thief to see them.
Act like a thief and join them.
JD.
This is the same Doug Casey who promoted a (his) newsletter which advised (pre-2008) that Gold and mining stocks were the way to get through the impending financial crisis ?
Is Doug the antichrist? I've seen signs.