Fishing the Bottom
and Catching Gold
By Angela Koch, CEO of U.S. Money Reserve
“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.” — Benjamin Graham
Jerome Lake in Alaska, Bald Eagle Lake in Minnesota, Lake Alan Henry in Texas, Clear Lake in California, Lake Kissimmee in Florida, and Cobbosseecontee Lake in Maine — these are some of America’s favorite “secret” fishing spots.
Anglers span the country and the globe looking for the perfect moment, ideal conditions, and the very best locale to guarantee the catch of a lifetime.
In the deep and dark depths of many of these coveted fishing holes lurk largemouth and smallmouth bass, catfish, and carp. Some of the biggest and best fish are often found at the bottom of a waterway. Fishing the bottom is unique because the water is cooler and the fish are slower to respond, which can be an advantage as well as a challenge.
On the bottom of lakes, streams, rivers, and oceans are varying grades, contours, ridges, obstacles, plant life, and unexpected underwater structures. Learning how to read the bottom helps fishers bring prized fish to the top. It is a game of temperature and topography, current and clarity, and above all — timing.
In investing, fishing the bottom is a strategy that is often used to reel in the best deals to boost portfolio value. It is a way to maximize returns by seizing assets that are intrinsically underpriced. Also called value investing, “bottom fishing” is a philosophy based on opportunity, fundamentals, analysis, and above all — timing.
The concept had its genesis back in the early 20th century and is based on the theories of Columbia Business School professor and economist Benjamin Graham, who is widely considered to be the father of value investing. Graham famously said, “The intelligent investor is a realist who sells to optimists and buys from pessimists.”
Graham, along with analyst and educator David Dodd, cowrote Security Analysis, a book penned in the throes of the Great Depression, which lays out their criteria for determining what’s a bargain and what’s not. It is the one book that Warren Buffett calls his “bible,” and it has been in continuous print since 1934.
In outlining their model for exploiting undervalued market opportunities, Graham and Dodd place great weight on intrinsic value and tangible assets. According to the authors, these elements reduce the risk of loss and are the key components of a well-timed buy.
By this very definition, there is perhaps no greater bargain at the moment than gold. The precious metal’s price has dropped over $40 in the last 30 days to settle in the $1,290 range. Gold is seen as a solid buy when compared to the current run in the markets, bloated oil prices, and the inflated dollar. But few experts believe that it will remain a deal for very long.
According to Leigh Goehring, Managing Partner at Goehring & Rozencwajg, “Gold is significantly undervalued and is presented with a good buying opportunity.” Likewise, Dutch Banking giant ING makes a case for continuing to hold gold based on “physical demand, geopolitics, and inflation.” And ICBC Standard Bank analysts maintain that “gold will continue to receive support from geopolitical risks…including U.S.–China trade negotiations as well as tensions surrounding the Middle East and North Korea.”
In their iconic book, Graham and Dodd demonstrate how the best opportunities exist when the market either misunderstands or undervalues an asset. With a reputation as the world’s oldest safe haven, gold is perhaps more underrated than any asset. Despite the explosion of global debt, anemic economic growth, market bubbles and busts, and debased paper currencies, gold remains the ultimate store of wealth.
So whether you’re slow rolling, split shotting, bottom fishing, or value investing, learning how to read the bottom could bring the catch a lifetime to the top. And in the depths of market volatility, global risk, and Fed uncertainty, a rare opportunity now exists to own arguably the most influential asset in recorded history — at a really good price.
