Gold had its worst day yesterday since 2016, so that was a little shock to the system — mostly, I think, because the latest leaks and Tweets about the China trade dispute were relatively optimistic, with meetings scheduled for next month. It’s hard to imagine we’re going to have a “real” trade deal before the election, but certainly the President and China will both be pushing their narratives in an attempt to influence public perception… and, of course, influence the stock market, since President Trump appears to treat the Dow Jones Industrial Average like an opinion poll.
So that caused a bit of a beatdown for all the gold stocks, providing an important reminder that leverage goes both ways — mining and royalty stocks generally move up faster than gold, but they also move down faster than gold when prices decline.
And September is the worst month for stocks… so what should we do now that we’re a few days into the month? As with so many traditional calendar-gazing factoids (Santa Claus rally, “Sell in May and Go Away,” Window Dressing), we should probably just ignore it and go about the business of investing in companies that have unique, compelling or sustainable (and defensible) businesses or assets, and either turn a reasonable profit or have the potential to make a lot of profit in the future.
The goal is not to increase your edge by 0.5% over a decade because you get the seasonal timing of the market correct, the computers will always be better at that than you and will squeeze out any persistent anomalies better than any individual investor ever will… the goal is to build a portfolio of cash-flowing businesses over a long period of time and let those businesses grow and compound and become more valuable, and be opportunistic when we can in buying those companies.
Opportunistic does not mean we can tell the future, of course… it means we can establish some rational idea of what we think a company should be worth, and try to buy it when it’s available for less than that. Which is harder than it sounds, naturally, but managing our own psychology is far more difficult than trying to make rational assessments of the value of companies. Patience and inactivity are difficult, but usually rewarding.
Timing the market based on your feelings about where ...