What do you want Rick Rule to teach about in Liberty.me U?

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What do you want Rick Rule to teach about in Liberty.me U?

  • Matt Gilliland

    Rick Rule will be returning to Liberty.me U in August (or so we’re currently planning) for a multi-session course on investing. In his session tonight, Rick asked the users to discuss what they’d like him to teach on for that course.

    Liberty.me will also be publishing a Liberty Guide on investing by Rick in August, so stay tuned!

    What do you want to learn? Kick off the discussion here!

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  • Josh K

    Can I please suggest that everyone post their questions in this thread instead of posting as an update to the group? Posting here allows everyone to “appreciate” or “like” questions which can serve as a simple voting mechanism to help Rick spend his time answering questions with the most community interest.

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    Rick Rule

    My personal thanks to everyone who attended the chat. Please let me know what I can address in upcoming discussions, that will be of benefit.

    Rick Rule

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    John Jones

    I think this discussion is a great way to organize questions for Rick’s next session and get them voted on so the best most wanted answers come out.

    Here is something I have been thinking about. We have a lot of younger investors in this group. Some are very knowledgeable and some are new to investing. I have a younger friend who falls in the latter category, but he has saved some capital and wants to learn.

    Like many new investors, he finds the whole landscape daunting and initially wanted to pick out 5 to 10 mutual funds to “diversify” himself. Was even going to let a local broker do it for him.

    I looked at what the broker was recommending. Needless to say, everything was covered in fees and at the end of it all, I showed him that he would be so “diversified” across over 800 different securities that it would be no different than buying into the Vanguard Total Market Index, which has very low management fees and no front end fees to pay a “financial advisor” (SALESMAN).

    I made a different suggestion. I asked him to open a brokerage account with a discount broker (in this case Scottrade). Many of these brokers will give a certain number of free trades with a new account or referrals. This is a great way to open an account with even a smaller amount of money and take positions in 10 or 20 securities without spending too much in commissions.

    We picked 15 different securities (mainly things I already owned and thought were good values) and he bought small amounts of each with no commissions. He quickly had a nice portfolio at a very low cost.

    This would be worthless if he did nothing else, but I am showing him how to research the companies and commodities underlying his securities. Allowing him to keep up with and assess his investments over time. I think it is a great way to get into investing where you have a chance to learn a great deal if you take an interest.

    Obviously the key is to stay actively involved with the things you own. Not buying and selling it, but understanding it and knowing exactly why you are buying or selling when you do.

    I appreciate any opinions from the group.

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      Rick Rule

      any lower cost alternative that involves the investor in the process is appropriate. The key for a younger investor is involvement and consistency. The younger investor needs to understand the power of compounding over time, and in my opinion needs to set aside 10% of pre tax income every pay period for savings and investment. That same investor needs to commit I hour per month, per account position on monitoring their investments.

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    Christopher Allen

    Traditional Portfolio Theory suggests that 5-10% of a portfolio should be held in cash depending on risk tolerance etc. At the moment, I have a cash position of ~25% of my total portfolio. As a resource investor/speculator, is this appropriate insofar as having the flexibility to capitalize on unforeseen events?

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      John Jones

      I always refer back to Charlie Munger when I am not finding value and am sitting on cash…

      “There are worse situations than drowning in cash and sitting, sitting, sitting. I remember when I wasn’t awash in cash – and I don’t want to go back.”

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    Jason Hunter

    I liked Andrew’s topic suggestion “I would like to see how he (Rick) creates a valuation for a company, based on the available info, what pitfalls he fell into starting out, what are some signs that a company is cooking the books and you can’t trust the info they give out. “.

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    Christopher Allen

    Jason, I concur.

    “I would like to see how he (Rick) creates a valuation for a company, based on the available info, what pitfalls he fell into starting out, what are some signs that a company is cooking the books and you can’t trust the info they give out.”

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    Rick Rule

    happy to do this. Would you prefer a general valuation discussion ( multi industry) or a more specific package geared to junior mining and oil and gas?

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    Christopher Allen

    A more specific package geared to junior mining and oil and gas ‘fits the bill’ for me. However, I am in no way speaking for everyone else.

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    Rick Rule

    a market consists of a variety of needs, and opinions, thanks!

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    Anonymous

    Hi Rick,

    A general value discussion would be excellent, but more specifically, the questions you ask junior mining companies to extract information that may be a push or a pitfall. As agriculture and water begin to become more and more available to the retail investor, a discussion on how to capitalize on these sectors would be greatly appreciated as well.

    Cheers!

     

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    Jason Hunter

    Personally I’d prefer to hear a valuation discussion on industries geared towards resources – mining (w/ royalty companies included), oil and gas, precious metals, base metals. It would be hard to find a better expert than Rick on these things.

    What criteria are important? I’m guessing things like strong balance sheet, strong management team… and what metrics should we use in judgement: price to cash flow? price to book? price to ounces of production? price to ounces in the ground?

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      Adem Tumerkan

      I believe Ben Grahams chapter in Security Analysis about homogeneous and heterogeneous companies is great for really understanding the key difference in investing in commodity based companies relative to the rest of the sectors.

      I use a quantitative analysis on what the company knows it has (balance sheet, grades, reserves, royalties, etc) then use pure speculative qualitative analysis on what will be the means to the end of my thesis of the company (is management competent? Will the prices of the underlying commodity go up? If yes, why? What is the competitive edge relative to other companies that will be producing the exact same ounce that my company will? etc).

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    Adem Tumerkan

    Rick,

    I had emailed you personally after your video as I had not caught the two newsletters you had recommended and I had a couple minor questions to ask. But since you are partaking in this discussion I shall ask here:

    Do you enjoy Casey Research International Speculator and Energy report or is it to expensive relative to the other newsletters ($749.99)?

     

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    Christopher Allen

    Rick, who is your favourite entrepreneur in Uranium right now?

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    Rick Rule

    Ron Hochstein, of Denison, part of the Lundin group of companies, and managers of Uranium Participation Corp.

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    Craig Brown

    Hi Rick,

    After investing in my future ability to generate an income (graduate studies), I place most of the surplus capital from my paycheck in a tax-efficient, highly diversified basket of low-cost index funds, industry-specific ETFs, and precious metals. I was recently comforted by the fact that even Laurence Kotlicoff (the Boston University economist who repeatedly draws public attention to the devastating magnitude of our nation’s “fiscal gap” – on the order of $220 trillion) still recommends buying and holding index funds for the long-term.

    It seemed evident that you do not believe the efficient market hypothesis holds much weight in real-world trading. You argue that one must invest not only money, but also considerable time and effort, researching company fundamentals and searching for differences between the price and value of individual stocks. I am curious how your beliefs on the efficient market hypothesis formed, changed over the course of your career, and most importantly, how they affect your current investment (and speculation) strategies?

    Thank you for putting together an informative presentation, looking forward to the rest of the series!

    Best,
    Craig

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      Rick Rule

      Thanks for your kind words. My point was imply that each individual is his or her own best money manager. People spend more time researching what movies to watch than what

      companies or funds to own!

      As to the efficient market hypothesis, I’ll paraphrase Benjamin Graham ” In the near term, the market is a voting machine, in the long term, it is a weighing machine”. I have made my money exploiting the delta between how people “vote” and what companies are worth. I’m certain you hold most voters in the same regard as I

      I own some passive ETF’s, in sectors that I like, but don’t have the time to do my own work in. As the fees compress around constrained index ETF’s, I’ll probably shift more assets there.

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    Garvin Tran

    Dear Mr. Rule,

    A Great Video. Could you go into more details, how to value stocks of junior resource companies at their different stages.   From Concept phase, successful discovery, feasibility until development of a producing asset. How would you factor the risk component in the valuation at each phase?

    Thanks

    GT

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    Rick Rule

    I’m getting the valuation messages, thanks all. Get ready for some BORING presentations, valuation is a tough slog!

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      Christopher Allen

      BORING = Profit

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      Rick Rule

      very true, the harder we work, the luckier we get!

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    Sean Ridlon

    Wait, Rick! Could you do a bit on new investors ($100-$50k) and best strategies? For the people starting out saving the 10% gross advised by yourself and others- would the savings be better situated as:

    1) Physical metals

    2) cash

    3) precious metals ETFs

    4) mining juniors based on valuation

    5) majors based on valuation

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      Rick Rule

      I think resource and precious metals should comprise between 20-35% of a non professional, generalist portfolio. Depending on ones age, income, other assets, etc., the speculative portions of a portfolio should be between 10-50% of total portfolios.

      Broad based passive resource portfolios can be constructed simply by buying ” Petroleum and Resources” (PEO) a closed end fund on the NYSE, traded at a discount to NAV, and our new Sprott Gold Miners ETF, a qualitative ETF. While self serving, our Sprott Physicals Trusts offer a tax advantaged way for investors to hold the suite ( gold, silver and PGM) of precious metals.

      The juniors are suitable to investors who are prepared to accept risk, and invest time and effort, as well as money.

       

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    Sean Ridlon

    Rick, thanks for the reply. I appreciate the recommendations.

     

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    Josh Wells

    I would be very interested in using Ivanhoe Mines as an example for going through the valuation process. It is now selling for significantly less than it’s price at IPO. Screaming bargain now?

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