Nobody Knows Anything, A Book Review

Nobody Knows Anything: Learn to Ignore the Experts, the Gurus and Other Fools is the latest book written by Bob Moriarty, a former fighter pilot and longtime proprietor of 321Gold, one of oldest and most widely followed gold websites. In the book Bob touches on his own experience both in life and in the markets to distill numerous nuggets of wisdom that can help us in our pursuit of profit in the markets. The book is particularly important for gold investors who are frequently bombarded by information that is mostly bad, outright false and otherwise irrelevant.

Bob begins the book by discussing and sharing stories from one of my personal favorite books, Extraordinary Popular Delusions and the Madness of Crowds. This book was written in 1841 and documents over centuries repeated nonsense and idiocy throughout society. Part of the book discusses economic bubbles and that is why it has become a classic for those of us who participate in the markets. Bob concludes the chapter by rightfully urging all of us to take responsibility for our own investment decisions.

Another key nugget which Bob develops both early and later in the book is the difference between signal and noise. A signal is a fact that is objective or can be objectively verified. Most sentiment indicators are signals. Examples include surveys like the bullish consensus (which Bob notes) and speculative positions in Gold or any other commodity. Bob uses the example that in April 2011 the Sprott Silver ETF was trading 25% above its net asset value.  An example of noise would be the thought that the paper gold market will vanish and Gold will trade at its true physical price. See the difference? Signals are objective.

In my opinion the book gets better in the later chapters as Bob discusses bias, agendas, claims of manipulation, reliance on gurus and when to sell.

Bob believes that Gold and other metals will become bubbles in the years ahead but he argues that the bulls will lose because they will never sell and want to keep gambling. Knowing when to sell is extremely difficult as bubbles can run out of control. In addition to urging us to remember to take profits Bob notes that selling a position in fractions makes the most sense. For example, Bob suggests selling 30% after the position doubles and another 30% if it doubles again.  In fact, this is how professionals do it. They are smart enough to know they cannot sell out at the exact top. If they have a big winner they likely will take profits periodically as gains are booked and their risk is reduced.

One thing I respect Bob for is he is quick to call out the Gold “manipulation conspiracy” crowd for their ongoing sideshow which can be put in the noise category. Bob correctly points out that all markets have been manipulated over time and if Gold and Silver were artificially suppressed as some believe then they would not have enjoyed the fantastic performance they had from 2001 to 2011. (Nevermind that the trends in real interest rates, the fundamental driver of Gold explain its ups and downs over the past 16 years).

Moreover, Bob educates us about “buzz words” and draws on his own personal experience to illustrate the nonsense with phrases such as “gold derivatives time bomb” and “commercial signal failure.” Again, this is noise and not objective information that can help us profit. Unless it is helping you make money it is noise. (As an aside if it has helped anyone make money, I welcome the chance to hear about it).

I hope precious metals newbies especially read Bob’s book and seek out sources for objective information and analysis, including Bob himself. I’ve found Bob’s market timing calls for precious metals to be quite good. After all, he started his website literally at the start of the secular bull market. There is a chance to make a lot of money in the years ahead but please educate yourself with this book and other sources of legitimate and objective, fact-based analysis. I commend Bob for his book and for being one of the voices of reason in a space that needs more of them.

Jordan Roy-Byrne, CMT