Being a contrarian by nature, I am drawn into opportunities that the rest of the market dismisses as either nonsensical or passe in nature. It is not good enough that I dwell among the heathens that derive pleasure from buying small companies, ignored as they are. My pleasure comes from a deeper scale of travels into the world of restructured, hated, convoluted, distressed and misunderstood companies. Stuff that not only is passed over by the Wall Street community, but dismissed as being of plebian descent, lacking class and structure of any sort.
This character trait that has made its way into my investment philosophy also translates into more macro opinions. For example, during Q4 of 2013 I started glancing over gold names and actually found them appealing. Not because I know anything about gold mining companies, gold as commodity or the commodity markets in general. But rather due to the fact that gold is getting to the point of inflicting pain to the point where there must be an opportunity in our midst.
So I started looking at separate gold mining companies. Just looking, mind you. And actually found some candidates that seemed semi-appealing from a risk/reward standpoint.
The problem for me is that my macro calls are notoriously and consistently early. They always have been. More than 10 years go I used to pile into positions based on my macro opinions, suffering some extraordinary volatility in the portfolios I managed at the time, as a result. The opinions would turn out to be correct, but the path in getting to the point of profitability was filled with too many potholes, in hindsight.
It was actually during the 2000-2002 that I became extraordinarily bullish on gold. I remember gold was so hated at the time that Jim Cramer kicked Don Luskin off TheStreet.com just for saying that gold stocks were a good investment. That was when gold was trading for about $300 per ounce. It turned out that Don Luskin was correct and Jim Cramer is now a popular Wall Street caricature.
My mentality in the early 2000s was much different than it is now. I couldn't hold onto investments for years at a time waiting for my scenario to play out. My allocation model wasn't refined. I didn't make nearly the level of returns I should have during that gold run. It reminds me of one of my favorite market quotes:
"It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine--that is, they made no real money out of it. Men who can both be right and sit tight are uncommon." -- Jesse Livermore
After many years of experience in the markets and how I react to them, I can say that I am likely 12 months early in my opinion on gold. That means there is likely another year of either complete nothingness in terms of returns or downright negative returns that continue to punish those who believed the charlatans.
In conclusion, I'm leaving gold to itself, for the time being. I do have one quarter of one eye on it, however. That's all the attention it deserves, for now.
