Hello reader, welcome to the latest issue of HX Weekly!

Each week we bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

Thoughts on the Markets

The Mirror Effect in Modern Markets

This week, we read a thoughtful piece from Ben Carlson at A Wealth of Common Sense titled “Markets Are Now a Beauty Contest on Steroids.”  

We highly recommend reading the original here. 

You can also follow Ben on X here. 

Carlson’s article uses a recent surge and sharp reversal in silver to explain something much bigger about how markets operate today. His example is timely and instructive. 

Let’s start with the metal itself. 

Silver’s Sudden Surge 

Silver has always been volatile.  

Unlike gold, which primarily trades as a monetary asset, silver lives in two worlds.  

It is both a precious metal and an industrial input used in solar panels, electronics, batteries, and electrification infrastructure. That dual identity naturally creates tension in pricing. 

Recently, silver surged sharply over a short period.  

The breakout attracted attention almost immediately. Headlines pointed to constrained supply, rising industrial demand, inflation concerns, and geopolitical instability.  

The move felt urgent and powerful, as though something fundamental had shifted. 

Then, almost as quickly, the metal reversed and gave back a meaningful portion of its gains. 

What changed so quickly?  

Global mine production did not suddenly spike. Solar demand did not collapse overnight. Inflation did not disappear in a matter of days. 

What shifted was positioning. 

The Beauty Contest in Action 

John Maynard Keynes once compared markets to a newspaper beauty contest in which participants were asked not to pick the most attractive face, but rather the one they believed others would pick. Success required anticipating consensus, not identifying objective value. 

Keynes was an English economist whose ideas were so influential that there's an entire school of thought, called Keynesian economics, based on them.  

You can read all about him here. Safe to say, he knew his stuff. 

Anyhow, silver’s recent volatility is a modern version of that dynamic. 

As the breakout gained traction, investors were no longer just evaluating supply and demand.  

They were evaluating whether other investors would chase the breakout.  

Momentum traders noticed the technical pattern. Algorithms detected rising volume. ETF flows increased exposure. Social media amplified the narrative. 

The rally began feeding itself. 

Most episodes like this follow a familiar script. A catalyst emerges, triggering a breakout. Investors quickly shift from evaluating the asset itself to evaluating how others will respond to it.  

As more participants anticipate momentum, flows intensify and the narrative solidifies. Eventually, enthusiasm becomes consensus, and the field becomes crowded; even modest countervailing forces can spark a sharp reversal. 

Silver simply displayed the cycle clearly. 

Why Moves Feel Faster Today 

Markets have always had speculative elements. What feels different now is the speed. 

Zero-commission trading has removed friction. Information spreads instantly across social platforms. Passive ETFs automatically invest billions in assets.  

Systematic funds and algorithms respond to volatility and price triggers in milliseconds. 

When silver began moving, capital did not trickle into the trade. It poured in. When momentum stalled, the exit was equally swift. 

The structure of modern markets amplifies reflexivity. Price influences flows, and flows influence price. 

Silver is smaller and thinner than gold or the S&P 500, so these effects are more pronounced.  

But the same mechanics operate across equities, cryptocurrencies, and other commodities. 

Silver Is the Symptom 

This is not just a silver story. 

We have seen similar arcs in artificial intelligence stocks, meme stocks, electric vehicle names, and cryptocurrencies.  

A catalyst emerges. Investors anticipate that others will respond. Positioning builds. Narratives strengthen. The move accelerates beyond what fundamentals alone would justify. 

Then, once expectations become one-sided, even slight disappointments can unravel the trade. 

That does not mean markets are irrational. 

It means markets are reflexive. 

Participants are reacting not just to information, but also to how they believe others will react to it. 

Short-Term Psychology vs. Long-Term Math 

Here is the critical distinction. 

In the short term, markets are dominated by positioning, liquidity, and expectations. In the long term, they are dominated by earnings, cash flow, and productivity. 

Silver’s long-term supply and industrial demand trends did not materially change during its recent surge and reversal. What changed was sentiment and positioning. 

Over decades, the assets that generate durable cash flows and rising earnings tend to outperform. That principle has not changed. 

What has changed is how quickly short-term perception can distort price around that long-term trajectory. 

The beauty contest can dominate headlines and price action for weeks or even months. Eventually, however, financial reality reasserts itself. 

Our View 

Here at HX Research, we respect liquidity cycles and sentiment shifts.  

Ignoring positioning in today’s market would be naive. Silver’s recent volatility is a vivid reminder of how reflexive markets can become. 

At the same time, we anchor our decisions to operational momentum. We focus on companies growing revenue, expanding earnings, strengthening balance sheets, and building durable competitive advantages. 

The beauty contest may determine short-term winners. 

But math determines long-term outcomes. 

Silver’s wild ride is not evidence that markets are broken. It is evidence that markets are highly interconnected, hyper-aware systems reacting to themselves in real time. 

Understanding that reality does not eliminate volatility. 

It provides perspective. 

And in a market that often feels like a hall of mirrors, perspective is an edge. 

A year ago today we published a note sharing our views about the eventual outcome of the Trump TARIFF threats.

This was several months BEFORE "Liberation Day" and we think our views were pretty spot on. We hold these same views today. Enjoy the note!

HX Daily Redux

A Trump “Trade War” Truth for You

The media has Trump’s “trade war” all wrong.

One of the most perplexing aspects of this new administration and the media’s response to it is how surprised they are when Trump does what he said he was going to do.

This past weekend saw a tremendous amount of news around the threat of tariffs on our largest trading partners — Canada, Mexico, and China.

I purposely worded that as “the threat of” because over and over, Trump has acted in a very predictable fashion.

He comes out firing with statements about massive changes he is going to make politically or economically.

Predictably, his political opponents, the media (aren’t they the same?) and members of his own party’s establishment quickly respond by predicting an oncoming apocalypse if he does what he just said he would do.

Every time, however, he then uses the “threat” of his big changes to exact some sort of value in exchange for toning them down.

I will not judge the real value of what he gains in this situation, because I’m not sure he even cares very much — he just gets SOMETHING.

Then everyone who protested is left scratching their heads when it turns out we don’t have a disaster after all… and may even be better off than before.

This was happening in his first administration. And now that he knows a lot more about politics and doesn’t need to worry about reelection, it’s happening in this administration times ten.

His actions this past week have me thinking about his method and its impact on the markets.

I keep asking myself one question…

The Question the Media Won’t Touch

What if Trump wins? Let me explain what I mean by “win.”

What if he repeatedly goes out with big, blustery threats of action and repeatedly puts our country in a better spot — both politically and economically?

The consensus strongly argues that this won’t work and that he will irreparably damage the existing world system. I don’t think that is a bad thing.

This brings us back to my earlier point about trade and tariffs.

There is an overwhelming consensus amongst the “smart” money that free trade is mutually beneficial. Disrupting it would cause an economic catastrophe.

I have a LOT of problems with this idea.

First, what is “free trade”?

If everything were allowed to move across borders with no tariffs, subsidies, or restrictions whatsoever, then that would be true free trade.

The reality, though, is much different than this academic model. In the real world, countries put up substantial barriers.

Second, some would claim that even if trade is less than “free,” the United States still benefits and our consumers get lower prices.

The system has worked pretty well for us so far, right? Just look at how well the U.S. has done economically compared to its peers.

This argument makes more sense, but I would ask, “How do we know?”

That is, how do we know that tactical tariff threats to extract an even better deal for us won’t work better?

That is not a strategy we have pursued actively in almost a century. We certainly have never pursued it in the modern world.

There is another popular Wall Street saying that says, “If you owe the bank $100, you have a problem. If you owe the bank $100 million, they have a problem.”

The idea is that an outsized liability is as much a problem for the borrower as the lender.

This sums up our trade imbalances with these three large partners.

They buy a lot more from us than we do them, and it makes up a much bigger part of their economy. This is a strength for them but also a weakness.

Here is a post from X with the data.

In the wake of the tariff threat with Canada and Mexico, many pointed out that exports to the United States made up 20% and 35% respectively of their economic output. The corresponding number for the United States was around 1.5%.

They are much more vulnerable than we are economically and there are real imbalances. Imbalance politically and economically that we are valid to ask to be addressed.

That brings us back to my question — what happens if Trump wins?

He goes out and threatens tariffs and other actions against our largest trading and economic partners and extracts benefits for our economy.

I think the stock market goes higher — potentially a LOT higher.

Not only will we reap the benefits of the value extracted, but we also remove the “risk” of the apocalypse that is being fed to us all by the media and the “smart” money.

I don’t know that this will be the outcome. But we are about to find out in the coming months.

Market Wizard’s Wisdom

The Economy, The Stock Market and The Gipper

As we enter into a long weekend into the President’s Day holiday, we thought we would share some of the clever wisdom of one of our most beloved recent presidents – Ronald Reagan. 

Ronald Wilson Reagan was born on February 6, 1911, in Tampico, Illinois to Jack Reagan and Nelle Clyde Wilson. Raised in a religious family in the Chicago area, Reagan attended Eureka College where he was a so-so student but active in cheerleading and campus politics. 

After graduating, he began his career as a sport broadcaster and that eventually led him to a screen test and a seven-year contract with major motion picture studio Warner Brothers. 

Over 30 years he starred in numerous film and tv productions and was most well known for his iconic role as George “The Gipper” Gipp in the film “Knute Rockne, All American” (1940). 

Originally registered as a Democrat, Reagan eventually supported the 1952 presidential campaign of Dwight D. Eisenhower and Richard Nixon in 1960. This led to his candidacy for the California governorship on political stances of individual freedom and opposition to big government. 

Here served as governor of California from 1967 to 1975 and emerged as a Presidential candidate due to his vocal criticisms of President Jimmy Carter. He unexpectedly lost the Republican Iowa caucus to George H.W. Bush but soon after secured the nomination. 

He trounced President Carter and then went on to win reelection in 1984 serving two full terms as President. 

Reagan is known for many of his policies and events during his Presidency, but he is most well known for his opposition to communism as well as the robust economy and stock market during his terms. 

Reagan closed his presidency at the age of 78 as (at the time) the oldest president at the end of term. Reagan retired to California and passed away from complications as a result of Alzheimer’s at the age of 92 on June 5, 2004. 

Like all presidents, Reagan had (and has) his share of vocal critics. Overall, though, he remains well regarded by the public and especially for overseeing a period of tremendous growth of the US economy. 

Here are some of his clever insights on the economy, stock market, and life from over the years. 

Enjoy! 

This is a clever summary of his opposition to big government. While some would argue that government brings more benefits than costs, it is hard to argue with his logic here. 

He said this 40 years ago and we have seen an unrelenting confirmation of his views over the last four decades. 

This quote builds on his opposition to big government and adds in the idea of individuals being responsible for progress. 

Again, we can argue that government can also play a positive role, but it is hard to argue that through history individuals have been responsible for the great advances of mankind. 

Another prediction that has proven to be much more correct than we ever could have imagined. 

What is most interesting about his quotes is although they obviously express a particular political viewpoint, it would be very hard NOW for either side to argue with him! 

Given the childishness of our current President and the senility of our previous President, it is beyond refreshing to see true wit out of a President! 

This is one of my favorite quotes of all-time. As the son of an immigrant whose family was attacked and imprisoned, it is very much top of mind for me that the freedom we take for granted everyday can be fleeting. 

It is important that we remember this even as it feels like it will never go away. 

It is another popular quote, but “Freedom isn’t free” and it is all of our duty to defend it. 

We hope that you’ve enjoyed this week’s issue of HX Weekly…

Do you have any thoughts, questions, or feedback? Tell us more in the comment section or at [email protected].