Howestreet.com - the source for market opinions

ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

May 21, 2020 | Which is More Dangerous to Your Wealth: FOMO or FODO?

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of the Independent Speculator. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. Although frequently mistaken for one, Mr. Tiggre is not a professional geologist. However, his long tutelage under world-class geologists, writers, and investors resulted in an exceptional track record. The average of the yearly gains published for the flagship Casey publication, the International Speculator, was 18.5% per year during Tiggre’s time with the publication. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them

I’ve decided not to wait for another meltdown to buy some of the stocks atop my shopping list. However, most are trading significantly higher than they were before the March meltdown. This has caused several readers to write in ask about the changed reward/risk ratio this implies. In other words, how to deal with the fear of missing out (FOMO).

Specifically, does paying more now than in March mean we’re caving in to FOMO?

My answer is that we would be if we were going all in on stocks in which the value proposition had not changed, but prices are racing higher. That’s not what I’m suggesting—or doing.

I’m looking to buy first stakes in the few great gold and uranium stocks I’m most keen on.

Significantly higher prices in both of those metals justify higher share prices—especially for companies that I expect to deliver added value before the next likely downturn.

That said, I admit that I’m extremely averse to paying more for stocks I liked at lower prices.

This makes me vulnerable to the opposite of FOMO: fear of drastically overpaying (FODO).

Being an often-bloodied due diligence guy, I’m painfully aware of all that can go wrong with a speculation. It’s really, really hard for me to pay a lot more for a stock this week when it was such a great deal just last week.

And when nothing else has changed, I don’t do it—that would be acting on FOMO.

But making the same decision every week leaves me short… potentially a victim of my own FODO.

So how do I get out of this dilemma?
The first thing to understand is that the two risks are not at all the same.

  • If I give in to FOMO, I risk paying way too much—possibly even top-ticking a stock—and losing a lot of money. FOMO can result in major loss of capital.
  • If I let FODO get the best of me… nothing happens. All I miss is an opportunity. I still have all the money I would have invested. Financially, FODO costs us nothing. And there’s always another opportunity.

Given this reality, I’ll choose FODO over FOMO every time.

Enough choices along these lines can make it harder to resist FOMO. I understand. It does mean missing out more often. That’s why I’ve always said that successful speculation requires self-discipline. This is just one aspect of it.

Where does that leave me today?

Well, I’ve just published a much-narrowed Post-Meltdown Shopping List in The Independent Speculator, with specific price targets.

I crossed off the ones I just can’t bring myself to pay more for and focused on the ones that I see as offering the best reward for the risk in the current context. I’ve deliberately set my entry points within the range of recent volatility.

I haven’t bought any of them yet, but that’s not FODO, that’s simply waiting for normal volatility to be my friend.

On that subject, I should add that I’ve now found confirmation that Kazatomprom is no longer selling into the spot uranium market. They may even have to buy on the spot market to fulfil all their contractual obligations. Assuming the CEO isn’t flat-out lying, this is extremely bullish for uranium this year.

As for gold, yes, I do expect it to go much higher. However, even without a near-term meltdown, I see significant risk of more correction if near-term news makes the paper-gold traders in New York and London think deflation is coming. I still expect silver to lag, but then deliver even better gains than gold, on a percentage basis.

This inclines me to sticking with my published entry points on my shopping list picks.
Caveat emptor,

 

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the HoweStreet.com Weekly Recap.

May 21st, 2020

Posted In: Louis James

Post a Comment:

Your email address will not be published.

All Comments are moderated before appearing on the site

*
*

This site uses Akismet to reduce spam. Learn how your comment data is processed.