At times like these, EVERYONE gets a spanking in the markets, no matter how smart or talented. You cannot be an investor in the public markets, own fantastic businesses for the long-term, watch as their value go NUTS and not expect a mean reversion, a reversal, a resumption of NORMALCY, at some point.

Buyers overpay in certain instances when they get euphoric, and they underpay – or worse, LIQUIDATE without regard to fundamentals, when they undergo moments of HORRIFYING FEAR.

Just as you were willing to sit and watch as your assets got priced for perfection (and then some), be willing to experience the opposite.

Remember, your CHIEF GOAL is to own businesses that compound over your lifetime, and to own as MUCH of them as possible, assuming that you pay fair prices for them, since that will make you WEALTHIER. Bottom line is that owning the S&P 500 over a 30-yr period multiplies every $50,000 risked into $380,612, statistically.

Obviously, this isn’t the case with CYCLICAL stocks – commodities, biotech, cannabis, blockchain and other boom-and-bust industries – which don’t compound as SURELY or as FAST as traditional dominators. With cyclical stocks, you want to buy on PESSIMISM and sell on OPTIMISM.

This is what we’ve been doing with gold stocks for the past 3-4 years. There have been short spurts of optimism, but overall, we’re still in the depressed valuations part of the cycle – we are ACCUMULATING.

Higher prices are likely to come next, since the Toronto Venture Exchange is down 83% since 2007; the carnage will stop and U-TURN soon!

What I believe is happening is that central banks have reached the ENDGAME in terms of their ability to raise interest rates EVER AGAIN. That means that credit will not contract, financial conditions will not tighten and easy-money is not going away, under this current dollar system.

Therefore, stocks will continue to remain expensive, in general, and gold has a real chance to do SOMETHING SPECIAL, starting now and into the next 4-5 years.

LIMIT ORDERS: THE ART OF STAYING DISCIPLINED!

When trading small-cap stocks, which are defined as any companies under a $500M market cap – many of which belong to the natural resources industry – it’s important to have CLEAR BOUNDARIES that you set for yourself on how much to pay.

For one, see what the major shareholders have paid for their shares, by looking at the recent private placements. That will show you what the big-wigs, the institutional money and the millionaire accredited investors are valuing the company for.

I love doing that, since it shows me at which price point the CEO has been able to negotiate with very sophisticated investors to risk their money.

Secondly, in any brokerage account, there’s a way to buy shares for a certain limit price. That way, if a specific stock POPS or GAPS higher, you can avoid the temptation to chase it, by setting a software restriction. I ONLY buy in that way, personally. Recently, I’ve bought shares in a company that I WAITED 41 months to reach the P/E ratio that I was willing to purchase it for.

Thirdly, I never invest more than 3% of my portfolio in any small-cap company and I don’t lose more than 50% of that, EVER. Instead, I set a stop-loss, so that if a trade goes south, I lose 1.5% of my portfolio (3% * 0.5). On the flip side, if it goes well, my goal is to exit after it triples or more. The risk is 1.5% of the portfolio, while the upside is 6% – that’s a risk/reward ratio of 4:1.

Lastly, I am adding two stocks to our watch list: Citigroup (C) has revolutionized its business model and could potentially double in the next 3-4 years, SIGNIFICANTLY outperforming the general indices. The second company that I’m currently looking into and which could deliver higher-than-normal returns is UGI Corporation (UGI). While typically a boring utility stock, it suffered from a rough quarter and shares came down by 20%, which is rare for it. The comeback could be a great rebound trade.

This Sunday, I’m going to publish highly controversial analysis with SERIOUSLY important data, so stay tuned.

KEEP CRUSHING IT IN 2020!