There's Something Worse Than Having A "Losing Position"

There's something worse than giving up at the bottom...

There's something worse than watching prices fall as you continue to add on the way down...

It's giving up "three feet from gold," when if you had just stuck it out a bit longer, things might have turned your way.

This tendency is part and parcel of human nature, and its effect is not to be underestimated. Way back in 1938, Napoleon Hill wrote about it in the classic book, Think and Grow Rich. Consider what his research uncovered. Said he:

More than five hundred of the most successful men the country has ever known, told the author (Napoleon Hill) that their greatest success came just one step beyond the point at which defeat had overtaken them. Failure is a trickster with a keen sense of irony and cunning. It takes great delight in tripping one when success is within reach.

When the precious metals make a turn to the upside that really holds, one of two things is going to happen. Either the price trades sideways for awhile, building higher highs and higher lows into a bona fide uptrend, or there will be a trident spike that shocks everyone, present company included.

Either way, we've been so conditioned to expect market failures to the upside into overhead ceilings that almost no one will believe it when things change.

They will wait for the price of silver to rise where they hope and expect it to go before they jump in (above $20, $26 or $40?). They may sell aggressively into each rise until they end up with little or no holdings. Then the mostly empty bullish train will really leave the station, with the "parade crowd" standing forlornly at the gate, wondering what went wrong.

Of course, no one can predict the future, and the price of silver might stop at say, $25. But by doing your homework and looking at the evidence – from the very accurate to the not-so-helpful – you'll be on the way toward making the right decision... for you.

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Currency Trader 4 years ago Member's comment

Personally I agree gold will continue to increase. But what's your rationale for saying so?

David H. Smith 4 years ago Author's comment

Currency Trader,

I could list a couple of dozen fundamental and technical reasons - most of which you already probably know about - for this belief. Above all else, I follow the dictum that all bull markets go through three stages, the last one being a public-mania fueled blow-off top. In my considered opinion 2011 was the end of stage 2, and that is why I lightened up in May 2011, but did not close out all of my positions. I did not (nor did anyone else who will be honest about it) expect the cyclical bear to last so long or go so deep), but as I bought/sold on the way down, never losing my belief that the third and biggest up move was still in play, as the secular bull remained alive. As we move into this last big rise over the next few years, I will be selling most of my positions in the miners and resource sector plays - into all-time highs as the public-fueled buying (on a global basis) takes the best miners into moon shots. --Please note that I am not giving financial advice here, rather I am informing your opinion so that you can choose (or not) to lead it yourself. I wish you the very best in this endeavor.

Kurt Benson 4 years ago Member's comment

Hindsight is 20/20. The problem is you can't know if something will go up or down before it does. If we did, we'd all be rich! Couldn't the price of precious metals just as easily go down?

David H. Smith 4 years ago Author's comment

Kurt Benson,

No one who is honest about the matter can (or should claim to be able to) predict the future. All we can do is take a deeply studied, considered approach, and then act (or not) based upon probabilities. These decisions will be informed by what has happened in the past, by an understanding of human nature - theirs and ours, and by looking at the convergence of certain unique factors which are now in play. Compare the 1980 gold bull market, which was a rather localized affair, with virtually NO participation by India and China. Now we have synchronized stock bear markets around the globe, massive debt at all levels, trillions in derivatives, generational sea changes socio-politically, etc. Last year China bought virtually all of the 2015 global production of gold; India bot 40% of the silver. The shift from physical holdings is moving massively from West to East. Ultimately, price discovery - based upon physical metals rather than paper substitutes, will be moving in that direction as well.

Of course I could be wrong. But I set out my plan, thought and researched deeply about it, and am now implementing it. The plan offers insurance first; (the possibility of) profit second. The best to you in whatever you decide, Kurt.