I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Monday Money, I write about money management.
In the past, I’ve been a reckful investor. I’ve tried too hard to make predictions, control outcomes, and optimize my choices. The result has been that I missed out on rallies, sold winning positions too early, and found myself with a smaller nest egg than I might have had, had I been more willing to choose opportunity over caution.
Sometimes I was reckless, putting myself into good, considered positions without overly worrying about how they might play out. But my natural bearishness — my memory of crashes past, my reckful calculations of the probability of drawdowns — took over and took me out when I should have stayed in.
Core to my half-reckful, half-reckless approach has beem looking to the past to figure what the future will look like, and what choices will, conditional upon that expected future, bring me where I want to go. I, unlike it seems the majority of investors, know what a crash can do to your portfolio. I was in the stock market in 2000, 2008, and 2022.
Investing, as all areas of life, requires acceptance of uncertainty and acknowledgment of the reality that the future may not look anything like the past. Investing requires a bit of recklessnes, or maybe a lot of it.
The reckless precious metals investor
Last year I established small but not insignificant position in a physical gold ETF. I also put a little bit into silver, only to sell it during when silver went down more than 10% and scared me. The gold did amazingly well. Silver, of course, recovered and moved upward, and upward, and upward.
A week ago, I decided I was ready to get in again — yes I had FOMO as silver parabolically shot to over $120 an ounce — and I made a few purchases throughout the week, one of which was almost at the peak. On Friday, silver crashed as did the rest of the precious metals market. I bought more, recklessly.
Now, the next reckless thing to do is hold on even if silver goes down more from here. The reckful thing would be to sell because my new positions are way down, and I have a rule of thumb “sell losers fast!”
I may even buy more $PSLV and $PHYS today, though I feel sorely wounded by the red numbers on my Schwab portfolio positions page.
The commodities supercycle: is it a myth?
I believe we are in a so-called commodities supercycle, a decade-plus period where real-world things take priority over the virtual cloud-based social media, search, and software systems that have dominated the last ten years of investing. As Jeff Currie said recently on Odd Lots, a commodity supercycle is just a capex supercycle, a period where businesses put money towards acquiring, upgrading, or maintaining physical, long-term assets like property, buildings, and equipment. These supercycles begin after a period when such investment lagged, as capital flowed elsewhere.
So even if precious and other metals investments struggle for a while, I trust that they will eventually start marching back upwards as demand for commodities due to expanding capex outstrips supply, lagging after so many years of disfavor.
Since commodities have been so out of favor for so long, it’s hard to imagine a world where mining and industrial stocks and metals and energy do better than the Mag 7 and their capital-light brethren SaaS companies. Thinking that such a thing won’t happen is the height of reckfulness.
The Reckless Investor
I’m not using reckless here to mean incautious, unthinking, entirely careless. I’m using it to mean the opposite of reckful — a term I derived from the Old English verb to reck which means to care, to heed, to take account of. The word reck shares a root with words like ruler, rectitude, and right: the Proto-Indo-European *reg- meaning “to move in a straight line,” or “to straighten,” or “to rule or lead.”
Note that I have a rule to sell losers quickly. But the reckless investor doesn’t follow rules, even if she keeps them in mind as possible guidance for her wayward true and unfolding self.
As much as I might like to, I can’t move in a straight line through my life. I can’t rule my life’s outcomes. In relationships, with family, at work, and in investing I have to instead respond at each moment to the unfolding, whether that’s a parabolic rise in silver or a flash crash that seemingly everyone but me saw coming. (I did know it would happen, just didn’t expect it so quickly. In retrospect, I’m glad it happened almost immediately, an immediate lesson in the volatility of silver and what I will have to do to make money investing in it).
My life’s journey will be curvy, not straight. It will include detours, and dead ends; unexpected joys and successes alongside sorrows and dissatisfaction.
Eric Fromm on insecurity
It’s impossible to feel secure given that I don’t know what’s going to happen. My favorite pundits say we’re entering a commodities supercycle. Many people say last Monday saw the top of the precious metals market for many many years. How can I feel safe when I don’t know what’s going to happen?
Erich Fromm says: you will feel insecure, there is no way around it. From his book The Sane Society [via the Philosophy Break Sunday email]:
How can a sensitive and alive person ever feel secure? Because of the very conditions of our existence, we cannot feel secure about anything. Our thoughts and insights are at best partial truths, mixed with a great deal of error, not to speak of the unnecessary misinformation about life and society to which we are exposed almost from the day of birth.
Our life and health are subject to accidents beyond our control. If we make a decision, we can never be certain of the outcome; any decision implies a risk of failure, and if it does not imply it, it has not been a decision in the true sense of the word. We can never be certain of the outcome of our best efforts. The result always depends on many factors which transcend our capacity of control.
Just as a sensitive and alive person cannot avoid being sad, he cannot avoid feeling insecure. The psychic task which a person can and must set for himself, is not to feel secure, but to be able to tolerate insecurity, without panic and undue fear.
Let me repeat that: The psychic task which a person can and must set for herself, is not to feel secure, but to be able to tolerate insecurity, without panic and undue fear.
Choosing recklessness today
Today, I’m not going to spend too much time calculating probabilities, looking for optimization, attempting to find safety in an unsafe world. I’m not going to cry over my spilt silver. In fact, I’m going to collect some more of it.
I welcome the unfolding.