Silver Lining

Back in the day when people actually got magazines in the mail, there was an axiom that said: “When Time magazine has a bull on the cover, it is time to sell; when it has a bear on the cover, it is time to buy.”   This was an easy-to-follow contrarian indicator. If the bull or the bear are so clear that the non-financial press picks up on it, the trend must be long in the tooth.

I thought of this recently as all sorts of online news feeds are referencing the run up in silver and gold with the headline: “Is it time to buy?”

Well, of course it’s not the time to buy. It is the time to sell. Dig out grandma’s silver and turn it into cash.

I was also reminded of growing up in the 1960-70s. My father, who only used cash, collected his change in a bank on his dresser. When it got full, my job was to roll the coins for depositing in the bank after carefully extracting the pre-1964 dimes and quarters. He told me: “They will be valuable someday.”  As it happened, gold and silver both peaked in 1980. Not realizing that was the time to sell, I held and they later dropped.

I tucked those coins away until shortly after my house was burgled in 2018. Fortunately, the burglar didn’t find the coins but I decided that having them lying around wasn’t so smart. I turned twenty some dollars of face value silver coins into $600 at the local gold/silver exchange. I’d held them close to 40 years, so I’m not sure it was a great return. But, unlike some stocks I have owned, neither silver nor gold will ever go to zero.

I also read the recent HD article by Adam Grossman, which echoes many market pros, Warren Buffet included. They cite many reasons why investing in precious metals doesn’t make sense. It doesn’t have earnings; it doesn’t pay interest or dividends; it has a holding cost; etc. etc.

Everything Adam said makes perfect sense, but I have both the SLV and GLDM ETFs in my portfolio. My experience with my coins suggested that someday another peak would come.

In 2019, after both gold and silver had been in the doldrums for some time, I bought my SLV and GLDM holdings. Roughly speaking, I bought 2.5 times more GLDM than SLV. And for the next few years, they just sat there. Each year when I did my taxes I saw how much had been deducted in expenses for the metal the ETF held.

In terms of my portfolio, the two positions combined represented only a couple of percentage points. However, I expected the day would come when something would happen: inflation would spike or world events would cause some panic.  Sure enough, both things happened in the last two years.

Late last year, I started selling. I have cashed out 135% of my initial SLV investment. I’m now playing with house money and I still have 300% of my initial SLV investment sitting in my account. I have also sold some GLDM but not as much because it appears to me that silver is in much more of a bubble. I have no doubt that they will both cycle down at some point in the future…. But neither will ever go to zero and there will be other times economic or political events will send them skyward again. Perhaps that will happen in a year the stock market takes a dive.

I think part of investing is trying to identify undervalued assets and buy them in a safe and efficient manner. I would not want to try to store Kugerrands, or lose on the spread buying or selling them, but a metals ETF is very easy and efficient.

I certainly have miscalculated in the past on timing when a particular market or security was undervalued. But sometimes, with patience, it works out. In 2019, no one was talking about buying gold or silver. That was the time to buy. In 2026, if anyone can find an issue of Time, I suspect gold and silver bars will be gracing the cover. It doesn’t feel like the time to buy.