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Gold investors know about FOMO - but are they aware of FODO?

Commentaries & Views

I’ve decided not to wait for another meltdown to buy some of the stocks atop my shopping list. However, most are trading significantly higher than they were before the March meltdown. This has caused several readers to write in ask about the changed reward/risk ratio this implies. In other words, how to deal with the fear of missing out (FOMO).

Specifically, does paying more now than in March mean we’re caving in to FOMO?

My answer is that we would be if we were going all in on stocks in which the value proposition had not changed, but prices are racing higher. That’s not what I’m suggesting—or doing.

I’m looking to buy first stakes in the few great gold and uranium stocks I’m most keen on.

Significantly higher prices in both of those metals justify higher share prices—especially for companies that I expect to deliver added value before the next likely downturn.

That said, I admit that I’m extremely averse to paying more for stocks I liked at lower prices.

This makes me vulnerable to the opposite of FOMO: fear of drastically overpaying (FODO).

Being an often-bloodied due diligence guy, I’m painfully aware of all that can go wrong with a speculation. It’s really, really hard for me to pay a lot more for a stock this week when it was such a great deal just last week.

And when nothing else has changed, I don’t do it—that would be acting on FOMO.

But making the same decision every week leaves me short… potentially a victim of my own FODO.

So how do I get out of this dilemma?

The first thing to understand is that the two risks are not at all the same.

  • If I give in to FOMO, I risk paying way too much—possibly even top-ticking a stock—and losing a lot of money. FOMO can result in major loss of capital.

  • If I let FODO get the best of me… nothing happens. All I miss is an opportunity. I still have all the money I would have invested. Financially, FODO costs us nothing. And there’s always another opportunity.

Given this reality, I’ll choose FODO over FOMO every time.

Enough choices along these lines can make it harder to resist FOMO. I understand. It does mean missing out more often. That’s why I’ve always said that successful speculation requires self-discipline. This is just one aspect of it.

Where does that leave me today?

Well, I’ve just published a much-narrowed Post-Meltdown Shopping List in The Independent Speculator, with specific price targets.

I crossed off the ones I just can’t bring myself to pay more for and focused on the ones that I see as offering the best reward for the risk in the current context. I’ve deliberately set my entry points within the range of recent volatility.

I haven’t bought any of them yet, but that’s not FODO, that’s simply waiting for normal volatility to be my friend.

As for gold, I do expect it to go much higher. However, even without a near-term meltdown, I see significant risk of more correction if near-term news makes the paper-gold traders in New York and London think deflation is coming. I still expect silver to lag, but then deliver even better gains than gold, on a percentage basis.

This inclines me to sticking with my published entry points on my shopping list picks.

Caveat emptor,

L

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.