Poll: instincts and investing?
RedTiger
Posts: 5,608 ✭
How good are your instincts? Are your instincts often spot on, getting in near the lows, sellling near the highs? Or the opposite, a wrong-way indicator, with the popular buy-high, sell low crowd mentality. How accurate is your self-view? Many believe they are near one extreme or the other, but if they actually go back and look at their buys and sells and future price action, the first glance self-assessment is way off. So it might be useful to take a moment before answering, because like the investing instinct, the self-assessment instinct is often skewed to one-side.
Obviously this is the precious metals forum, so the question most directly applies to buys and sells of gold and silver and related metals, but instincts extend far and wide. I recently wrote about the famous Wall Street story in 1929, when Joseph Kennedy had the prescience to sell all his stocks because a young shoe shine boy, gave HIM stock tips, instead of asking him for tips. The 1929-era "shoe shine boy" is the cliche version of the last bull in, making a rapid price decline almost inevitable. Others on the forum, have mentioned a friend or a relative who has that knack for getting in at the top. Whether it was dot-com stocks in early 2000, or real estate a few years later, there are those that seem to have an uncanny knack for getting interested and getting in at the worst possible time. I second question would be about "wrong way" friends or relatives and what they are currently interested in.
Obviously this is the precious metals forum, so the question most directly applies to buys and sells of gold and silver and related metals, but instincts extend far and wide. I recently wrote about the famous Wall Street story in 1929, when Joseph Kennedy had the prescience to sell all his stocks because a young shoe shine boy, gave HIM stock tips, instead of asking him for tips. The 1929-era "shoe shine boy" is the cliche version of the last bull in, making a rapid price decline almost inevitable. Others on the forum, have mentioned a friend or a relative who has that knack for getting in at the top. Whether it was dot-com stocks in early 2000, or real estate a few years later, there are those that seem to have an uncanny knack for getting interested and getting in at the worst possible time. I second question would be about "wrong way" friends or relatives and what they are currently interested in.
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I feel you make your luck by doing your homework, being patient and having self control, rather than just buying to be buying or selling because you "think" you should. jmho
<< <i>I don't think there really are investing "instincts" so much as luck.
I feel you make your luck by doing your homework, being patient and having self control, rather than just buying to be buying or selling because you "think" you should. jmho >>
And that's the difference between analysis and instinct. Sometimes I wonder, though, how much it really makes a difference. As a group, most hedge fund managers can't consistently outperform the market. It's like Nassim Taleb says, if you have enough people flipping coins someone will come up with heads every time, but that doesn't mean they have any particular coin flipping skill.
This applies to PM's and other investments.
Stacking has taught me to "just stack" though, and that has carried over to other investments, including the stock of solid companies and reasonable mutual funds. Actually I think I learned this "just stack" mentality from collecting coins, and picked up the phrase from many of you here. Buy what I like and put them away. Sell when I don't like what I own, or when they no longer fit in the long horizon.
Did I recently buy some Silver and Gold right before this week's major hit? Yeah, I bought a roll of ASE's
When I look through my stock and mutual fund portfolios, I see much of the same. Almost all have a long-term acquisition string, with prices that show the swings over the last decade, but look pretty good overall.
I'm sure if I traded in and out more often, I could be better off ... of course I could be worse too.
“We are only their care-takers,” he posed, “if we take good care of them, then centuries from now they may still be here … ”
Todd - BHNC #242
Short term instincts - not bad.
Stocks - pretty good.
Precious Metals - very good.
I've made some mistakes when I wasn't paying close attention. I don't try to call every market turn, only when I see big changes in the investment landscape.
I should have bought Chrysler when Iaccoca took over, and Walmart when one of my customers mentioned it to me in 1987. I should have gone into Intel sooner, and Microsoft early on instead of never. I did well with Pixar though, and very well with ST Microelectronics, Sprint PCS and Williams Communications.
But I've always done well with silver and gold.
I knew it would happen.
other choice. He put a $200K addition on to his then $400K home. Thought it would only continue to go up as more people flooded into the area for homes. The house has now fallen
back a long ways in total value. He called me up in mid-May looking to get into gold and silver. I told him I expected things to correct deep into July or mid-August and to wait until the next bloody correction came along. This way he could be sure in buying near a bottom. Well June went buy and then metals took off by July 5th and never looked back. Here it was August and they were still climbing. He felt like he was missing the boat. I still highly recommended he not chase the metals up. So he ended up buying in at gold $1800 and silver around $41. It all looked ok until September rolled into town. This was money that had been sitting around earning almost nothing in a savings/CD account for the past several years.
While I may have looked stupid telling him a final dump would come by August, it did eventually come, even if about 2-4 weeks late.
Funny that at first my gut told me his interest in gold was a possible topping sign. But then I convinced myself he was just one of the "early birds" of the masses that finally "got it." If one looks at all the forum activity on various sites, the same old warning signs were there. Old buzzards who had seen these topping signs were being chastised by the "nouvea" bulls that they were barbarous relics who couldn't see straight anymore and that gold was headed to $2000+, silver back to $50. The old buzzards were invariably right all along.
roadrunner
<< <i>I don't think there really are investing "instincts" so much as luck. >>
Some folks don't believe in luck. I believe there is a mix of luck, instinct or talent, plus analysis and work. For isolated decisions, luck might play a large role. When a person is making lots of decisions, random luck tends to even out and become less of a factor. When there is a large data set, natural talents plus good analysis tends to mean more than luck. Whatever the reasons, I observe that some folks definitely have a better "gut" when it comes to money. They might have been accumulating gold in 1999 when the crowd was hot to trot on dot com stocks. Some are the opposite, when their gut is telling them something, it tends to be the wrong thing. There are plenty here that joke about it, saying "I just bought (or sold), the market is sure to go opposite." I also observe a handful on the forum, that seem to have a knack for being ahead of the crowd, making what may seem like lucky decisions. If they make enough of them, time after time, market after market, I would tend to credit skill much more than luck.
I believe some folks have a natural talent for investing. Their instincts, might consist of being a good judge of people and character, accurately reading the mood of the investment crowds, or being able to quickly look at a balance sheet or financial data and make a good decision. Others are the opposite, poor judges of managers, almost always late when following crowds, always tending to focus on inconsequential spurious data when making decisions based on numerical data, and almost always on the wrong side of the markets, no matter where they put their money.
/edit to add: as for the Random walkers, the efficient market theory folks, and the coin flipping analogy, that has some value. Probably more so for professionals, because professionals tend to be skewed by "dumb money." The crowd likes to invest in what is hot, and that tends to skew who gets hired and still has a job managing investment money. On an individual basis, I observe those with sound financial instincts, and those that are the opposite. Those with good instincts never ever buy heavily during bubble markets, never fall for the obvious financial scams. Those with poor instincts, tend to fall for the latest and greatest financial products or promoted gimmicks, and seem to have a knack for doing so time after time.