Silver Tales Of Thales

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.

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