Silver, Financial Manias, Reversion to the Mean, and the Wisdom of Crowds

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one... Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome...

Charles MacKay, Extraordinary Popular Delusions and The Madness of Crowds, 1841

I believe in self-educating. I just finished reading a book called How Not to Invest which had some funny anecdotes about financial matters and was pretty clear about the evidence that you can't time the stock market. But many of us think we can, nonetheless.

I write about this after the events of January 30, 2026, when my silver investments peaked at $121 an ounce only to fall in a breathtaking swoop to a low of $71 an ounce later in the same day. Don’t get me wrong, I sold half my “paper” silver hoard between January 2nd and the 29th, with a large chunk at the peak, and I still hold the other half with the idea my heirs will sell it after they get a stepped-up tax basis when I die. Most of it was held in closed end precious metals funds which get favorable capital gain tax treatment rather than treated as collectables. (See symbols PSLV, CEF, and ASA). So, why did I sell half of my silver holdings? Isn’t forever the best holding period, as Warren Buffet used to say? Well, yes and no. Financial assets usually over some longer period of time will revert to the mean. Meaning no stock outperforms forever. If you hold forever, you don’t get to cash in and enjoy your winnings, and, like the fake news Zero Hedge website says, in a long enough timeline, everything goes to zero. Returns among asset classes usually even out –the theory is called reversion to the mean. And, if you hold forever, you get an average result. I am aiming for better, and thus I sell early and often, albeit keeping an eye on taxes in my sales decisions.

Now I am reading a book called The Story of Silver. Not so long ago (like a year), it seemed clear that silver was a key commodity -- used in electric cars, solar batteries, missiles, and data centers -- and was underpriced, But after busting through the historical $50 mark, silver continued its rise. Basically, the crazy price action of January 2026 was clearly a bubble of sorts. When you find yourself in such a mania, don’t be afraid to take something off the table, i.e., sell and pay the tax man. You don’t really have a gain until you realize it. The lesson of last Friday is that unrealized gains are ephemeral. And I think that is true of much of the stock market today.

While I try to show some respect for the wisdom of crowds, the simple fact is I have a contrarian personality. The crowd thought Donald Trump was suitable to be president. I hate following the crowd. I am always interested in betting against the crowd when I think it is wrong. And, sometimes, the consensus view strikes me as wrong It is those moments where I like to purchase my investments. If the stock market is quickly becoming like sports gambling, then my investment choice is either sitting it out and waiting for a better day or seeking contrary and less popular investments which I think are more likely to come into the money. While silver climbed a ladder up in January at a crazy pace, I asked myself daily how I would feel if it fell apart tomorrow. As silver continued its inexorable ride up, I would ask myself whether I could live with myself if it all was swept away in a moment. The answer was no, and that answer overcame my aversion to paying taxes. So, I sold some of it steadily over the first month of the year, and I am glad I did. Seize the day,

Silver was yesterday’s speculative investment. I not saying it won’t be tomorrow’s darling too. Soon enough, it may have a second birth. It has been around and traded for maybe 8,000+ years of human history. It is shiny. I suppose that was what attracted me in my childhood coin collecting. I remain a silver bug of sorts.

I am keeping a watch on it. Inflation likely will break out again. Trump is a soft money guy. He wants to run the economy hot for political reasons. He has burned down all of our international political and financial support. We are alone. And we are being corruptly fed into the shredder. You are bound to be trashed by him. Whatever you think of his politics, every single business judgment he has ever made has been bad. I am short Trump. I like triple inverse ETF long-term T-Biil funds and triple inverse S&P 500 funds, I own hard stuff (farmland, infrastructure, utilities, stock of companies with factories, corporation with pricing power), I once read a book called The Death of Money about Weimar Germany. It made a deep impression on me, as well as my 1970’s coming of age. As a result, I keep big money market accounts. Be fearful while others are greedy. Stop holding long-term bond funds – it is like the old saying goes, “you are stooping to pick up nickels in front of a steam roller. “

If you disagree, well time will tell. What I like about markets, just like what I like about practicing law, there are winners and losers. It is a test of wits and luck. I can say with 40 years of market watching experience, the best thing to do is follow your own star. That way, whatever happens you know it belongs to you. Don’t worship at the foot of fake gods who want 1% or-2% plus for managing your money, win or lose. You can lose your own money and keep the 2%. It adds up.