Nobody Knows Anything: A Book Review
When I first started to invest in the stock market over 15 years ago, I did everything I could to be the best investor I could be. I watched CNBC daily, read Barron’s and countless other mainstream paraphernalia…….and promptly lost over 50% of my capital in 2 years.
I happened upon Bob Moriarty’s excellent 321gold.com website shortly thereafter, while in the process of discovering the precious metal miner sector. There were many posts about gold and alternative investment philosophies which began to change my way of thinking about investing.
The 321gold website was also responsible for introducing me to a fascinating book titled “Memoirs of Extraordinary Popular Delusions and the Madness of Crowds” by Charles Mackay. Although written over 175 years ago, this book is still incredibly relevant today.
In Bob’s latest book “Nobody Knows Anything”, the first chapter is dedicated entirely to the brilliance of “EPD” (Bob had to use the initials of “Extraordinary Popular Delusions” for further reference to avoid “spending the rest of my time typing”). EPD is a fascinating read about the idiocy of crowd behavior throughout history up until the early 19th century.
The following chapter naturally drifts towards the necessity of “contrarian thinking” being beneficial, if one wants to become a successful investor. After the reader has learned about the “madness of crowds” throughout history, he/she is informed of the crowd becoming rational one by one as the idiocy subsides, to be a contrarian while all others are firmly entrenched on one side of the boat which is being capsized by irrational behavior.
One of my favorite chapters in the book is about “Bias and Agendas”. Since gold and its role in the financial system has been linked throughout recent history, there have been many self-proclaimed “Gurus” which Bob does a wonderful job of disclaiming. He sums up the chapter quite nicely by stating: “Gurus don’t care if you make money. They care if they make money. If you lose money it’s because you made poor decisions. Make better decisions. One of the best you can make is to ignore all gurus”. Classic!
Bob also has a very poignant chapter on recognizing “when to sell”. This is one of the most important things to learn if you wish to become a successful investor. I share the same views as the author in believing the precious metal miner sector will eventually become a huge bubble. Bob informs the reader of how to recognize the signs of a topping process in the sector, which will be of paramount importance to investors if/when this does indeed take place.
The bottom line for me in synopsizing this book is how simple investing can be if you just use basic common sense and simple logic. As investors, we tend to over-think our investments while not paying attention to the simple fundamental details, as opposed to the “noise” derived from them. This book does a wonderful job of reminding us we need to tune out the noise and try to keep our investment strategies as simple as possible if we wish to be successful investors.
If only Bob had written this book over 15 years ago, he could have saved me a great deal of time and money!
David Erfle founder of www.juniorminerjunky.com, is a 52 year old self-taught mining sector investor. He stumbled upon the mining sector in 2003 as he was looking to invest into a growing sector of the market. After researching the gains made from the 2001 bottom in the tiny gold and silver sector he became fascinated with this niche market. So much so that in 2005 he decided to sell his home and invest the entire proceeds from the sale into junior mining companies. When his account had tripled by September, 2007, he decided to quit his job as the Telecommunications Equipment Buyer at UCLA and make investing in this sector his full time job. He personally survived two bear markets, witnessed incredible sector changes and had to alter his investment philosophy numerous times in order to adapt to changing market conditions.