If you're a contrarian investor--now that word like many others in the language recently, has been bastardized or balkanized, you choose the B-term of your choice--look no further than silver.
Now we're not silver bugs if such a description exists.
Hedge funds and others have been exiting of late, according to some, cutting their long positions to the lowest level since June 2019. Flash back to earlier this year when silver prices puffed up their chest as investors ran the shiny metal to $29.40.
Since then it been more about "Timber!" as the price dropped 23% and today is trading at 22.66 up 55 cents.
Part of silver's attraction is the hope that infrastructure spending would stimulate more renewable energy sources.
Silver goes into solar panels. Silver is not alone here. With growth presumably on hold for lots of reasons including fears the Fed will pull the trigger on tightening all precious metals are getting hit.
If you're contrarian that's the good thing.
If you want to own something you want to buy it when it's cheap, hold it until it's dear and then you can fill in the blanks. The spoilsports will cite value traps and such. That's a concern.
We had a friend who on his fourth divorce was asked by the judge why he filed. His reply stuck with us all this time. "Value trap, your Honor!"
So yeah, they exist. Silver doesn't pay anything while you're waiting. That's another point my friend brought up with the judge that day. With the 10-year T-note at 1.54 bonds are competition for silver. Toss in a stronger dollar. Okay. Silver is both a precious metal and an industrial commodity. Beside solar panels it gets used in jewelry and semiconductors.
But why do you really want to own it?
Silver is so far one of the worst performing assets this year. Here's another negative. Silver just went through its worst four month period since late 2014. Let's pile on the shiny stuff a bit more. It's down, let's kick it to the curb a bit more.
Silver mining companies have been sideswiped that means silver ETFs didn't get a pass either.
Energy shortages, supply chain bottlenecks and slower industrial demand ahead. This is getting serious.
Finally, never thought we'd get here, all of this is becoming front page financial news.
Scary as hell. You still with us?
If you are still a card carrying contrarian you might want to start sniffing around the silver patch.
We think it's probably a lot less smelly place than many are making it.
Try to figure what the short-term headwinds are versus the long-term tailwinds.
As contrarians we favor the long-term tailwinds.
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