Two Years in the Life of a CAPS Blogger
With my two year anniversary as a CAPS blogger fast approaching, I thought this might provide a fitting moment to look back through my posts over the period to see revisit some of the highlight discussions, determine what we've learned along the way, and to begin to codify for the record where I have erred and where I have provided helpful guidance. I hope you enjoy the post, and I look forward to another two years of Foolish discussion here in the best investment blogosphere on the web. Let's begin ... at the beginning.
I became a Fool in June 2005. I wish for the life of me I could remember the article that brought me into the fold, as I would like to thank the Foolish writer that so unknowingly changed the course of my life. I quickly signed up for the Inside Value newsletter, started visiting the site more often, and by late 2006 I started building my CAPS portfolio with many of the still-active picks (SLW, KGC, AUY, etc.) that already by that time comprised the majority of my equity holdings. The core investment thesis that drove my investment decisions then remains exactly that which drives my decisions today, and indeed there is almost nothing about it that I would change from the way it appears in my CAPS profile from late 2006:
"The best offence is a good defense, and people, this is a time for defense. Commodities, alternative energy, and international!! Gold to $2,000! Silver to $20 on its way to $50!"
Long-time Fools will recognize those price targets, as they have changed very little over the years (I have raised my expectations for silver). They are reflected in one of my earliest blog posts from December 2007 (gold was around $800 per ounce, as everyone and the mother was out heralding the end of the bull market in gold):
"Gold will punch beyond $2,000 before we can even be thinking about a reversal. Silver has a great story too, as it has been manipulated downward throughout this bull market and so has perhaps an even more meteoric rise ahead as it ultimately catches up with traditional gold/silver price ratios. Silver will be at $20 before the Spring of '08, and then it's a quick trip to $50!"
I offered a more nuanced description of my outlook with my stock pitch for Freeport McMoRan written a month later:
"Gold will pass $1,000 before we know it, and after several unconvincing consolidations, it will resume its rise to $1,650 and beyond! Copper has come off its highs because analysts predict softening US industrial demand will lead the price lower. I do not subscribe to this. As the dollar plummets, the value of copper as denominated in dollars will rise just as gold will. Demand from the BRIC countries will be sufficient to keep the global copper shortage intact."
Despite having nailed the call with the first portion of my pitch, the rest of it brings me to my most eggregious error of all the calls I have ever offered here at TMF. I saw the commodities as an unstoppable freight train that would shoot straight into the stratosphere, seeming to ignore the lessons I should have learned from gold's monstrous 2006 correction that led me to sell some pm equity holdings like SSRI into weakness. Anyway, I completely failed to see the March 2008 correction coming, and even after it hit I continued to underestimate both its severity and longevity. HOWEVER, while it seemed that just about every pundit and blogger alike was abruptly declaring the end of an era with respect with the commodities bull market, I doggedly stuck to my contention that we were witnessing merely a corrective phase -- albeit it a severe and protracted one -- within a much broader multi-year secular bull market that had much further to run. In this important point, I was right on the money, and I'd rather miss on the short-term gyrations of a panic-driven marketplace any day before I'd wish to be on the wrong side of the longer-term fundamental dynamics at work. Incidentally, in failing to predict either the extent of the 2008 dollar rally or the degree of paralysis throughout the global economy, I remained in very good company. :) My bullish call for Aluminum Corporation of China from June 2008 comes to mind, and I continue to apologize to each and every Fool who have based any investment decision in part on that ill-timed analysis. I hope I made up for it with Silver Wheaton and Yamana :)
I have no problem whatsoever bringing my noteworthy mistakes to the fore. I had several horrendous calls that resulted from that same failure to appreciate the extent to which the dollar rally could be sustained in contravention of underlying fundamentals (much the way I failed this summer to predict the persistence with which the broader equity markets could be sustained in contravention of the complete absence of fundamental drivers or economic recovery).
You see the pattern, though ... I pay attention to the fundamentals ... if the markets want to stretch any movements beyond the realm of fundamental underpinnings, as long as that fundamental understanding is well honed, I am content to recognize the missed short-term call and await the return removal of a market dislocation. Looking back, it's crystal clear that the dollar rally was the most massive market dislocation event I have ever witnessed. With the Dow above 10,000, this rally is beginning to give the 2008 dollar rally a run for its money in terms of a massive market dislocation. I missed the timing with my summertime calls for a market reversal this year, but reverse it shall. My fundamental focus empowered me to maintain all of my precious metal holdings in tact -- without selling a thing! -- throughout a correction that sent my mining equities diving by as much as 80 to 90%. With gold's recent breakout, I have now regained those unrealized losses, and I believe that this result stands as a testament to the beauty of fundamentals-based investing. I know it's not for everyone, and it was scary at times, but over the long haul it sure is working for me. I have learned to reign in my expectations for timing, and indeed to deaccentuate the importance of timing within the framework of an investment strategy, as my overly eager expectations from January 2008 in anticipating PAAS at par by the end of 2009 can now be seen as grossly premature. I remain entirely confident that PAAS shares will hit par, but I no longer am willing to ascribe a definite timeframe.
If you had told me back in 2006 that gold would still be beneath $1,200 in late 2009, I'd have thought it completely impossible. While that only leaves my more bullish about the potential for an abrupt repricing event still coiled into gold like a spring, the lesson is that markets are entirely too unpredictable to permit reliable forecasting that is linked to future moments in time. I no longer care when gold hits $2,000 ... I just know that it will.
I am running out of time before I even get into linking my favorite blog posts. :) I guess this will have to become a multi-part installment. Thanks to all of you for making my first two years on the CAPS blogs such an rewarding experience, through the enjoyable as well as the frustrating moments of it all. As I've said many times before, there is no community of investors out there that I'd rather share a depression with than you Motley Fools. ;)