Challenging the Paradigms of Investing
by Frank Holmes
by Frank Holmes: Gold:
The World’s Friend for 5,000 Years
It was an exciting and educational week. I was in Vancouver at
the Agora Financial Investment Symposium speaking to hundreds of
investors who are eager to learn how to grow and protect their wealth.
This years theme, Innovate or Die, fit well with
my presentation, as the conference challenged attendees to adapt
their investment strategies just as empires and enterprises adjust
to changing circumstances.
When I wasnt behind the podium, I sat with the audience,
soaking up new ideas from speakers, including Gloom Boom & Doom
Editor Marc Faber, historian Niall Ferguson and Editor of Outstanding
Investments Byron King, who surprised me and challenged my current
way of thinking.
Back at the office, our analysts and portfolio managers continue
their daily meetings as always to discuss and digest the mountains
of research that cross our desks each day. We question what we read,
analyze statistics and hypothesize on what we see happening across
the global economy. As much as emotions and biases take a role in
investing, our goal is to make decisions not based on groupthink
that discourages creativity, but founded on a collective wisdom
that encourages critical evaluation of the economy and markets.
Global investors constantly need to be watchful of individual biases,
impaired thinking and emotional reactions that can have an adverse
effect on a portfolio. Thats why we created this weekly Investor
Alert which thousands of readers have come to rely on. One of our
values at U.S. Global Investors is to always be curious to learn
and improve, and the Investor Alert was borne from a belief that
shareholders want to understand the very subtle nuances of biases
My presentation attempted to address a few cognitive dissonances
I see in the markets these days and I was pleased to have several
attendees approach me afterward, remarking how they thought differently
after seeing the slides. See
previous presentations and be surprised.
As much as Id love to share all of the visuals here, in the
interest of space, I selected only a few that I believe challenge
the paradigms of investing.
1. For all the hype over recent tech initial public offerings,
did you know that investors have lost more money in Groupon and
Facebook than the entire assets in all of the gold funds? With
the endless coverage leading up to Groupon and Facebooks IPO,
the stocks appeared to be positioned to the public as a mainstream
investment. However, I believe people were unaware of the risks
involved when they purchased shares.
As you can see below, since its price peak on November 4 through
July 26, Groupon has lost $15 billion in market capitalization.
Facebook has lost even more in dollar value in a shorter amount
of time: From its intraday high on May 18 through July 26, the market
cap of the company has dropped $34 billion. These losses pale in
comparison to all the money invested in gold funds in the U.S. combined.
the rest of the article
Frank Holmes is chief
executive officer and chief investment officer of U.S. Global Investors
Inc. The company is a registered investment adviser that manages
approximately $4.8 billion in 13 no-load mutual funds and for other
advisory clients. A Toronto native, he bought a controlling interest
in U.S. Global Investors in 1989, after an accomplished career in
Canada’s capital markets. His specialized knowledge gives him expertise
in resource-based industries and money management.
© 2012 321