After spending many years in Wall Street, and after making and losing millions of dollars, I want to tell you this: It was never my thinking that made the big money for me. It always was my sitting. Men who can both be right and sit tight are uncommon.
– Legendary Speculator Jesse Livermore, from the classic 1923 book Reminiscences of a Stock Operator
If you saw a serious flaw in Tiger Woods’ putting technique, would you tell him? If you seriously thought you could help Derek Jeter hit an inside fastball better, would you tell him?
I did exactly that, in my world…
Rick Rule is a Tiger Woods or Derek Jeter when it comes to natural resources investing. He’s worked incredibly hard at it… for decades. He knows natural resource investing and analyzing company balance sheets as well as anyone on the planet.
These attributes have made him an extremely wealthy man.
[ad#Google Adsense]But I saw a flaw in his swing… Rick was happy hitting singles, when he could have been hitting many more home runs. In short, he was right about his investment ideas, but he was leaving too much money on the table.
So one day, I told him about it… I said:
Rick, I love that you manage to consistently discover and buy investments at 40 cents on the dollar or better and sell them at 80 cents on the dollar, based on what you see as their intrinsic value… But you’re leaving too much money on the table…
Instead of just doubling your money, you could sometimes pick off 10 times your money. You’ve done all the homework, and you should reap the full rewards of your efforts. So don’t cut yourself short.
Buy in at your usual big discount, and bank all your profits once you’re up 100% by selling half. And then, to capture the full rewards of the 10-bagger, let it run… You can then use a trailing stop to get out of the other half of your position.
I surprised myself by saying this to Rick. But the thing about the greats like Rick is, they still want to get better.
He agreed with me, right there on the spot. Rick saw the logic immediately – the potential reward versus the risk. He’s been letting his winners ride and he’s been using trailing stops (when possible) ever since.
Can you change your ways like Rick? Can you shift gears, sit tight, and let a winner ride? Right now, you need to…
Now is the ultimate test… Now is the time for you to be right AND sit tight.
Don’t sell your winners now for a quick profit. Now, more than ever, don’t accept a single when you can hit a home run.
Why do I say “now, more than ever?” I explained the situation in True Wealth three months ago, in an issue called “A Potential Bull Market in Everything.”
In that issue, I said everything could go up… a lot. I began that True Wealth issue by saying:
I know it feels scary out there right now. But… conditions are ripe for some crazy upward moves in all kinds of assets – stocks, real estate, commodities – you name it.
That call was right. Just about everything has gone up. Why all the excitement in asset prices in the last few months? I explained that three months ago in True Wealth, as well…
Unemployment is extremely high. And inflation is not a problem. As long as this situation persists, the Fed will keep interest rates near zero for a very long time.
This will create asset bubbles. Bernanke won’t care… They’ll just be the collateral damage of his efforts to fix the U.S. economy.
The story hasn’t changed. Unemployment is still high. And inflation (by the Fed’s math) is not a problem. (Far from it.)
Prices have gone up in just about everything in the last three months. These gains are simply the “collateral damage” of the Fed’s effort to fix the economy. Since the fix hasn’t worked yet, the Collateral Damage Trade is still on.
Assets aren’t as cheap as they were a few months ago. But it’s possible they could go straight up, beyond any sensible value. For investments, the story hasn’t changed… It’s only gotten better. Stay “all in.” Sit tight. Don’t cut and run.
Me? I’ll just stick to what I do, which is find you safe ways to grow your wealth. And right now, I think the safest way to grow your wealth is to stick with your winners.
Good investing,
— Steve Sjuggerud
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