It is probably a contradiction, but I have long been attracted to both the cerebral and buccaneer type of investors.
My recent comments in the Cabot Explorer on the renowned strategist and author Richard Bernstein are an example of the former, and the Hunt brothers of Texas who almost cornered the silver market are in the buccaneer camp for sure.
Both are intelligent but one has an academic bent and the other more of a cunning and opportunistic style.
Richard Bernstein’s current thinking and Herbert Hunt, who passed away recently at 95, do have one thing in common and that is their appreciation of investing in commodities.
Mr. Bernstein has more of a New England conservative asset allocation approach while Mr. Hunt leans hard towards a go-for-broke Texas swagger style.
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Herbert Hunt was one of the sons of H.L. Hunt, a Texas oilman who with his brother Bunker Hunt started buying silver in the early 1970s when the price hovered around $1.50 an ounce. In 1980 it was trading around $50 they controlled more than 100 million ounces, and then it all collapsed.
The misery of fines, lawsuits, and bankruptcy followed.
The price of silver had surged in the 1970s due to high inflation and major global events such as the Iranian hostage crisis and Russia’s invasion of Afghanistan.
Mr. Bernstein currently believes cyclical stocks remain underweight in portfolios. Energy, mining, materials, and industrials such as transport, industrial real estate, steel, and shipbuilding are among the most overlooked sectors. I attended a precious metals summit this week in Washington and the mood is bullish amongst both miners and investors.
No question, commodities and precious metals are cyclical.
Recently, battered by weak property and stock markets, Chinese consumers have been buying gold hand over fist. Ditto for China’s central bank, which has been accumulating gold for 17 months straight. There is a way to go since gold only makes up 1.6% of reserves.
Gold’s bull run since 2020 has been driven by geopolitical instability, and despite two economic trends that normally push gold prices down: higher interest rates and a stronger dollar. Anticipation of lower interest rates may be priced in though it is hard to be sure about this right now.
Silver’s dual purpose as a precious metal and industrial metal will also affect demand as it causes quite a bit of external pressure on the market as silver is used in a lot of the new green technologies. Silver is known to be about twice as volatile as gold, which poses both risk and opportunity.
So, if you are buying gold, I suggest buying silver dips as well.
The best way for investors can get exposure to silver is through the Sprott Physical Silver Trust (PSLV). This fund provides direct exposure to the precious metal without the additional trouble of storing it as your money goes directly into silver bars.
In addition, shareholders can redeem their shares for physical bullion anywhere in the world (subject to certain minimum conditions).
Perhaps the best part of the Hunt family saga is how Herbert Hunt came back strong after his bankruptcy. Many in a similar situation would crawl into a bunker.
Not Mr. Hunt. Like a true Texan, he was far from finished. During the next 30 years, he rebuilt a fortune in oil and gas, and real estate. Forbes estimated his net worth to be more than $5 billion.
There is a lesson here for all of us.
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