OTW #63: The biggest flaw in retail investors' strategy, Hard asset bull market, & more.
Important financial stories to check out over the weekend
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1. The biggest flaw in retail investors’ strategy.
The key difference between the average investor and the best fund managers in the world can be summarized under one topic: portfolio management.
That insight is according to investor and entrepreneur George Gammon who joined the Stansberry Investor Hour podcast last week.
Most retail investors, I would argue, spend 99% of their time trying to figure out what to buy or what not to buy. And they spend 1% of their time on the portfolio management, the money management, or the risk management. And from what I can tell, the pros do the exact opposite.
Gammon explained that the best hedge-fund managers start with a macro view and then look at the fundamentals and the narrative later. He also noted that these experts spend most of their time deciding how to position themselves and how to use “asymmetrical” trades to reap big profits. Gammon likens this to counting cards in blackjack: players bet big when the odds are in their favor but reduce their bet size when they don’t have an edge.
An asymmetrical trade is a trade where the potential gains substantially outweigh the potential losses. If you can risk $10 to make $100, that’s an asymmetrical trade. Investors look for these opportunities because they offer the chance to make massive profits with relatively limited risk.
Antagonist’s take
I take this same approach with our Antagonist portfolios. When I select a trade, I start with the macro and then move to the fundamentals and narrative. (You can read the full process here).
Also, as Gammon noted in his interview, portfolio management is far more important than the positions themselves. How you allocate your money and how you manage risk have a much greater impact on your results.
Asymmetrical trades are also critical. Many professional traders have win rates less than 50% yet still achieve superb profits. How? Through asymmetrical trades.
With this strategy, just one or two big winners will wipe out multiple losers. Of course, this assumes that you’re also disciplined enough to cut your losing trades and let your winners ride. Unfortunately, most retail investors do the opposite because they get emotionally tied to their positions.
Antagonist premium members receive asymmetrical trade ideas with our short-term Challenge Portfolio. I share basic options and other strategies to supercharge the gains that we achieve in our long-term Blend Portfolio.
To learn more about these portfolios and how you can profit from them, check out the Portfolios section of the Antagonist home page.
When you’re ready to upgrade to a premium membership, start with a free trial. At less than $17 per month, just one winning trade could pay for your membership for an entire year (depending on the size of your portfolio). Discounts are available for students, educators, groups, and referrals.
2. Hard asset bull market.
Crescat Capital published its latest research letter, and it’s packed with insights and charts that will help you determine if you need to adjust your portfolio allocations.
Here are some key highlights:
End of Financial Globalization: Escalating geopolitical tensions and the unraveling of trade partnerships suggest we’re moving toward a financially deglobalized era. This change, along with high debt levels, is leading to aggressive infrastructure spending and potential inflationary pressures.
Debt and Fiscal Spending: Developed economies are facing an unprecedented surge in debt due to higher interest rates and the need for ongoing extreme fiscal spending. Unlike the 1940s, when the U.S. monetary system was anchored to gold, today’s fiscal and monetary environment is the most undisciplined in history.
Resurgence of Gold: As central banks struggle with sovereign debt and asset valuation imbalances, gold is re-emerging as a key asset for central bank reserves, moving away from U.S. Treasuries.
Commodity Prices and Mining Industry: Despite the construction boom, capital expenditure in natural resource industries remains historically low. This supply-demand imbalance will likely drive commodity prices significantly higher. Mining companies are also currently undervalued, which offers a compelling investment opportunity.
Antagonist’s take
I’ve been tracking these shifts and trends for over a year, which has led to several recommendations in our Blend Portfolio. The returns have been excellent so far, and I expect that to continue. Here are just a few examples of our top holdings:
74% return in 11 months with a copper mining company
65% return in 9 months with a commodity
50% return in 12 months with a small-cap coal company
44% return in 12 months with a small-cap oil company
33% return in 3 months with a gold mining company
To see the full details of each of these positions, as well as all our other holdings, start a free premium membership trial today. Cancel any time.
Last thing...
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Thank you for reading, and have a great weekend!
Jason Milton
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