Stick to the basic principles of sound investing - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 22 January 2014
Stick to the basic principles of sound investing A  A  A

Baltimore, Maryland

Sell the tech stocks. Buy the gold miners.

This simple formula is our moneymaking advice for this year.

Not that we have any new insight into technology...nor any way of knowing what is ahead for gold or the companies that dig it out of the ground. Not at all. Our advice is based on ignorance, not knowledge. Not knowing what is ahead, we revert to an old rule: Buy low. Sell high.

What's high? Open any newspaper to its financial pages and you will have your answer. Amazon. LinkedIn. Twitter. Zillow. Nest. Facebook. Google. Choose almost any internet-related company and you will find a good short-sale candidate. Amazon traded at a P/E over 1,000 the last time we looked. LinkedIn was around 800. As for most of the internet companies there is no need to look. You will find plenty of P but no E to divide into it. Most of these companies do not make money; they lose it. Will they survive the year without crashing?

We don't know, but beware a bear market. When the market turns south the companies that led it up will lead it down. Those that rose the highest will sink the lowest. And take a look at a chart of the S&P. You will see what appears to be a 'double top.' Does this mean the entire market - with the techs leading the way - is ready to take a dive? Maybe.

Last year, companies that mined the worldwide web soared... but those that got their hands dirty slumped badly. Gold went down about stocks were cut in half.

Send in your Questions for Ajit...

As you know, Ajit Dayal (Founder, Equitymaster) is going to be the keynote speaker at The Equitymaster Conference 2014 - Beyond Uncertainty.

So here's your chance to send in your questions for Ajit!

Just click here and post questions you would like Ajit to answer in the conference. We will collate and send it out to him.

Now, we can't guarantee that all of these will be answered, but knowing Ajit, am sure he'll try to answer as many as he can...

Don't delay and send in your Questions for Ajit Right Away....

As might have been expected, this produced an anticipation of further losses. Almost every account published at the end of the year told us that gold was destined to go down further.

"Little hope of glitter for gold in 2014," said the Financial Times on December 28th.

"Rebound unlikely..." continued the report.

"Gold bulls lose faith in metals reputation as a store of value," opined Gregory Meyer on January 4.

"Very, very few analysts are bullish gold..." said Michael McGlone, US director of at ETF holdings.

"The deck is pretty much stacked against gold next year," added Michael Klapwijk, at Precious Metals Insights in Hong Kong. He predicted an average price of $1,170 for 2014. Then, the metal traded at $1,200. Now, it trades around the $1,240 mark.

So far this year gold has defied the pundits. So have the mining stocks. After putting in 'double bottoms' last year, both gold and gold miners seem to be moving up.

If anyone knows what 2014 will bring he does not work here at the Diary. Instead, we - poor, ignorant humans - must stick to the basic principles of sound investing. When something is very expensive, we sell it. When it is very cheap, we buy it. That is all ye know in life and all ye need to know.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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1 Responses to "Stick to the basic principles of sound investing"


Jan 26, 2014

The publics are ready for cheating on their eagerness to earn more and risk more. In present days on can earn approximately Rs.500 to Rs.1000 per day on an investment of Rs.1 Lakh but not willing spend even one paise from it. Greedy makes fool one all the time. In the present generation, all willing to cheat and eat. But we must notvcare for money safety with decent returns.

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