Gold - Some Thoughts about Reasons for Buying Gold - and Jesse Livermore - his approach may be applicable to many aspects of life

Here is a succinct compilations of the reasons for owning gold. It is well worth reading: Gold - The Big Picture

This essay rounds up arguments for looking at gold as a reasonable investment: 1) The dollar; 2) China; 3) declining production; 4) inflation; 5) deflation; 6) global short-term interest rates; 7) uncertainty and distrust in government; and 8) flight to safety.

Many dismiss gold and silver as relics of the past (not my wife).  If you look at the backgrounds of the sceptics, you will see a common pattern: they come from comfortable societies which have not recently experienced the ravages of war, rapacious governments, and the chaos of lawlessness.  A substantial segment of humanity has a different perspective and good reason to take measures to address insecurity of all types.  The flight to safety is the driving force for my investments in gold and its pursuit has been profitable.

The above-cite article is offered by Washington's Blog, a regularly updated commentary on American life.  I sometimes wander through the URL's on the side bar - informative ... and the authors are not shy about expressing their opinions.

So far, my speculation in gold has been profitable.  It's the usual story:

1. hanging on for greater gains when I should have been content in taking modest profits (at one point I was up 20 percent with Asanko but have seen the gain decline to about 5 percent ... I've decided to wait until the catalyst event of first production early next year) 
2. getting lucky (St Andrew Gold Fields was purchased by a neighbouring mining company and I recorded a 27 percent gain)
3. watching other bets move only slightly forward from the starting gate (no losses fortunately ... so far)

In speculating short-term, one always has to contend with a bevy of pushes and pulls:

• fear of loss, especially when declines are short and sharp
• greed: holding in the hope for greater gains
• thoughts that other "safer" types of investments hold the prospect of greater gains over the long term with less risk.

I've learned to deal with the fear of loss by betting funds that I am prepared to lose in the event that I am wrong.  With this mental outlook I can withstand dips with equanimity.  I often establish notional selling points but test them against the investment thesis which led to the purchase in the first place.  Sometimes, it's a matter of getting the timing right ... and this is largely a matter of chance as in the case of St Andrew Gold Fields. 

I've learned to deal with the "greed" factor by setting an exit price with the rationale that the cumulative impact of small gains can be appreciable even within the space of a year.  I will cast this caution aside if I sense a powerful upward trend in pricing.  I was lucky to catch this when gold and silver soared to great heights many years ago.  

I never fret about thoughts of reallocating my speculative funds to other types of investments.  Losses will not compromise the bulk of my portfolios and sometimes, the gains can be impressive indeed - that's the nature of speculation.  

Every two years, I settle back for a few days with  Reminiscences of a Stock Operator.

First published in 1923, Reminiscences is a fictionalized account of the life of the securities trader Jesse Livermore. Despite the book's age, it continues to offer insights into the art of trading and speculation. In Jack Schwagers Market Wizards, Reminiscences was quoted as a major source of stock trading learning material for experienced and new traders by many of the traders who Schwager interviewed.

It is one of the five best books I have ever read on things financial. When reading it recently, the thought occurred to me that Livermore's approach might have potential for other facets of life. I am reading it currently and will look at its application for life on the golf course .... "will I go for it and take a risk or lay up and play safe?"  And I still cannot spel "reminis ... never my strong point.