I have a precious metals "sell" recommendation this week...
I'm sure many loyal subscribers will wonder how I could dare consider doing such a thing...
Steve, don't you know the U.S. can print all the money it wants, while precious metals can't be printed?
And Steve, don't you know that printing money is the only "exit strategy" the government has to pay its promised Social Security benefits and its promised health care benefits?
C'mon Steve, don't you know that – in the long run – precious metals HAVE to outperform the dollar?
Of course... Of course... And of course. I know these things. They are plain as day.
But one thing trumps all of these things...
It's Warren Buffett's first two rules of investing.
Warren Buffett is the second-wealthiest man in America (behind Microsoft's Bill Gates). He made his billions through investing. So it goes without saying that his first two rules are worth listening to. Here they are:
Rule No. 1: Don't Lose Money.
Rule No. 2: Don't Forget Rule Number One.
I have a similar rule... Never let a small loss turn into a big one.
This week, in my True Wealth newsletter, we hit our trailing stop on shares of Silver Wheaton (NYSE: SLW, Stock Forum).
I recommended Silver Wheaton in late 2010 at $27.70 a share. It's currently trading above $30 a share – a small profit. But it's time to sell...
In mid-February, we tightened the trailing stops on True Wealth's speculative positions, including Silver Wheaton. The goal was to make sure gains didn't turn into losses. And that's the case with Silver Wheaton... We will walk away with a small gain.
We are following Buffett's rules here. We are not losing money.
Two other True Wealth precious metals plays are "at risk" of hitting their trailing stops – Royal Gold (NASDAQ: RGLD, Stock Forum) and the Gold Miners Fund (NYSE: GDX, Stock Forum).
Just like Silver Wheaton, even if these stocks close below their trailing stops and force us to sell, we will still make a small profit on them.
I wish I didn't have to sell Silver Wheaton. I love the story. The company recently announced record earnings for 2011, and it should top that record this year.
I would like to stay in the stock. But I know it's not the right thing to do... The right thing to do is to protect your capital, first and foremost. And that's what we're doing.
Silver Wheaton is now a "sell." And Royal Gold and GDX are not far behind.
I know all the arguments in favor of precious metals. I know precious metals stocks are incredibly cheap right now.
But I also know the rules of making money. And the first rule is not losing it.
We will close out of Silver Wheaton – with a profit. And we will likely return when an uptrend returns in precious metals.
Until then, abide by the greatest investor of all time's No. 1 and No. 2 rules of investing...
Don't lose money.