Physical silver held in personal possession is a cheap
option; an option being simply a choice. The best choices have a very low
downside —and infinite upside. Options and optionality are not exclusive to
financial markets.
Silver, mainly because its price is dominated by
commercial investment bank goliaths, has massive asymmetry. It’s super cheap
relative to its real supply and demand fundamentals. All it needs is a storm to
disrupt that hold. That storm is inevitable.
Nasim Taleb’s recent book, “Antifragile”, examines the
concept of optionality in his elaboration of the idea that anti fragile
options are those that benefit or grow from chaos and disorder.
From its historical ancient role as money and the basis for credit to its
modern day strategic importance and constant price suppression, physical
silver fits the bill in the great pursuit of the anti-fragile payoff.
Taleb defines the anifragile payoff as:
To get all of the advantages of wealth (the most important one being
independence and the ability to only occupy your mind with matters that
interest you) but not its side effects such as having to attend a black-tie
charity event and being forced to listen to a polite exposition of the
details of the marble rich house renovation. The worst side effect of wealth
as social associations, it forces on its victims as people with big houses to
end up socializing with other people with big houses beyond a certain level
of opulence and independence (gents tend to be less and less personable and
their conversation less and less interesting). - Nassim Taleb, “The
Antifragile Payoff”
To illustrate the classic use of optionality, Taleb invokes the ancient
story of Thales and its link to asymmetry.
The story of Thales adapted from Wikipedia:
Thales, so the story goes, because of his poverty was taunted with the
uselessness of philosophy; but from his knowledge of astronomy he had
observed while it was still winter that there was going to be a large crop of
olives. So he raised a small sum of money and paid round deposits for the
whole of the olive-presses in Miletus and Chios, which he hired at a low rent
as nobody was running him up. And when the season arrived, there was a sudden
demand for a number of presses at the same time and by letting them out on
what terms he liked, he realized a large sum of money. So proving that it is
easy for philosophers to be rich if they choose, but this was not what they
cared about. Thales then is reported to have thus displayed his wisdom but as
a matter of fact, this device of taking an opportunity to secure a monopoly
is a universal principle of business. Hence, even some states have recourse
to this plan as a method of raising revenue; when short of funds, they
introduce a monopoly of marketable goods. There was a man in Sicily who used
a sum of money deposited with him to buy up all the iron from the iron mines,
and afterwards when the dealers came from the trading-centers he was the only
seller, though he did not greatly raise the price. But all the same he made a
profit of a hundred talents on his capital of fifty. When Dionysius came to
know of it he ordered the man to take his money with him but clear out of
Syracuse on the spot, since he was inventing a means of profit detrimental to
the tyrant's own affairs. Yet really this device is the same as the discovery
of Thales, for both men alike contrived to secure themselves a
monopoly.
Silver is everyman’s little potential monopoly - securing a scarce
commodity, ethically, without the intention of controlling the price but
surviving a securing wealth in preparation for the demise of the greedy.
Physical silver will never go bankrupt. This is the heart precious metals
and it needs no dividend because there is not this ultimate risk of complete
insolvency.
Conversely, silver has a potentially infinite upside - starting with its
severe, decades long mis-pricing and ending with its ancient monetary role,
status or function against the backdrop of out of control money printing.
Thales was simply humble philosopher that people laughed at, somewhat
parallel with the everyman. Silver is just an option — one that at some point
will pay off. Thales could not predict the weather and neither can we. You
don’t need to look at the stars to see the storm coming. The signs are all
around you.
The world has gone mad — the build up of debt, corruption, misallocation
of capital, contraptions of power and no limit on spending make the financial
system exceedingly fragile, subject to destruction that cannot be fixed.
You don’t need to read the weather like Thales— the equivalent is looking
at the supply and demand data, the nature of the turnover, and price
discovery. Then all you have to do is maintain a position and hold on for the
ride. Then you take possession of your little monopoly and sell it or trade
later for a much higher price.
