So, I'm thinking I have this interesting idea for an article. I kick it around for a few days; try to find an angle on it. For the heck of it, I check the Webs to see if anyone's done anything like it for a while, and wouldn't you know it, TV-Radio-Internet's favorite investment guru (with respect to Suze), Clark Howard just did an article on --my-- topic about two weeks ago! Well, it’s not the same. It’s similar and he’s got a salient point or two. Don Stott of Colorado Gold fame also just wrote something on the topic. Folks must be reading my mind. We’ll discuss both in a moment. On with it...!
I've been in these precious metals markets for over 30 years now. That seems like a long time, until I hear from guys like Dick who started out trading silver futures on an outdoor pay phone in the winter of 1971, or Jim Sinclair or Richard Russell who have been doing this I think even before gold and silver were invented. I made my first silver purchase in early '81. I was in high school then, so it wasn't a large purchase. Nonetheless, it had been a long damned time before I broke even on that investment -- I'm still waiting if we're going to factor in inflation. It was a long bear to bear until things started to heat up in the mid/late 90s. Networked computing was revolutionizing information access and that included the information we could access regarding our precious, precious metals. A silver or gold bug such as myself was thrilled because I could connect with others, get real-time quotes instantly and could read articles and analysis about the markets, even on the job when I was supposed to be working. There were only a couple of sites back then, so there was an element of anticipation. Not so today.
The communication process is defined simply by messages sent and received. Reception is not always so simple, however, because noise becomes a factor. That noise can be literal, audible noise that we hear, or it can be our incessant internal monologue that all of us must endure - or enjoy. The state of our current precious metals information network could be described as a noisy situation. When I look over the sites, and there are so many of them (mine included), and there is so much information, and so much analysis, and so many forecasts and most of it is free free free! A couple of questions come to mind: First off, is anyone making money off of these precious metals markets? Second, is anyone making any money who is paying for investment advice in these metals markets?
I'm going to talk about my own challenging journey through these metal's markets at another time; hopefully in the same place. Today, I want to discuss the paid adviser (advisor is an alternate spelling, FYI). Now, don't get me wrong. I don't have anything against paid advisers. Some of my best friends are precious metals advisers. My son even wants to grow up to be one. At one time or another, I've subscribed to most of the majors: Russell, Rosen, Hamilton, Ackerman (2x), Casey, Nichols, Ski, Uncle Harry, Adens, Dines, Thomson... You name it, I probably subscribed. I've seen plenty graduate from the forums into paid gigs, as well, and most of them had some serious talent. In fact, everyone I ever subscribed to did an excellent job. The thing is -- I never made any money from them. I joined several of them while they were in the throes of their “greatest-call-ever-that-didn’t-pan-out,” but there always seemed to be something with the timing or something wrong... or was it... something else?
I'll say it again, that I never made any money paying for investment advice. When I wasn't paying for it, I was continually scanning the metals websites looking for clues, or hints, or subtle innuendo about the next price move that perhaps even the writer did not realize they were communicating. The thing I realized in hindsight was that I wasn't actually looking for investment advice (paid or not), I was merely looking for someone to affirm my own belief of where the next move would head. If I was short, I believed price would go down. If I was long, I believed price would go up. So my investment strategy (loosely named), was not to follow what I saw in the charts or in the fundamentals or in what I was paying someone to tell me; my strategy was to follow not what I believed would happen, but what I wanted to happen. And if I ran across an article by someone who disagreed with my desire, my want, I simply ignored it. Even when I was paying for the advice! I would fade the call if it didn’t fit my desire. Of course, this is not an investment strategy. I know it now, and I even knew it then, but there was something inside me that had be a cowboy; had to do it my way, even if my choices turned out to be wrong. Even if those choices lost me money. And when I was wrong and lost money, of course I was miserable. Oh... those were some troubling years. Getting back to the point, if this scenario sounds familiar, and I would imagine that it might because, as a contrarian, I know that the majority of investors are wrong and I would also imagine that this desire to "do it my way" is fairly common among the independent, freedom-loving gold and silver crowd. Add to the mix this brutal last two years, and I wonder if anyone who didn't buy-and-hold in the early '00s is making any money? And I'll ask again, is anyone who is currently paying for advice making any money?
There are a few newsletter writers who are infamous for their calls. In fact, they're wrong so often and so consistently, that they're accused on the forums of being paid shills who are aiding and abetting the manipulation of the metals (if you believe in that sort of thing). How are these guys making money in this market, aside from the money they make from their subscribers? Clark Howard says this: “Paying people to guide you is money well spent, not money spent poorly. If you are at a roadblock or you don't know where to start, hire a fee-only financial planner and pay them for guidance." He is comparing fee-only planners with advisers/brokers who work on commission. Well, that's a no-brainer. The bottom line is that no one, no one is going to look after your money like you will. Not sure if Mr. Howard has dealt with PM newsletter writers or subscription services like these. He doesn't address that in his article, so I'm addressing it here. Don Stott is less sanguine to the thought of paying for professional advice. He says, “Nuts to them all.” Judging from my track record with them, you’d think that I’d say the same thing, but I don’t because, of course, no one forced me to pay these people. I signed up with them because it seemed like they had a pretty good system going and they could save me some legwork.
Please pardon the obviousness, but I propose that to be a successful investor - in the metals or not - you have to find the strategy that fits your nature and that can be a pretty darned long (and expensive) search. If you haven't found your strategy, you're not going to find it by paying someone else, so save your money. I think that’s the bottom line to this discussion. If you don’t know how to invest, learn how. If you pay someone to teach you, listen to them. Before you pay them, though, do some self-exploration. Really look at yourself and ask yourself not what you think will happen with the market, but what you want to happen in the market. Learn some money management techniques. Stay away from dubious investment vehicles. If this is just too much, then just keep stacking your physical and wait for Jim Sinclair’s rhino horn(s). You can make money that way and still be a cowboy.
In the next article, I'm going to go further into the "noise" of these markets and talk about how I found peace there. Thanks so much for reading.
Joe Silverheels Paulson is a husband, father, teacher, veteran (who worked at the NSA but didn’t spy on you), and an avid precious metals investor for over 30 years. His websites on Silver and Gold are designed to guide and instruct newer precious metals investors. You can be one of his first followers @BuySellSilver
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