Image Source: Pixabay
 

Today, I’m heading over to the ol’ Johns Hopkins University.

I will say this: telling them you’re an alumnus doesn’t get you in the door any faster than the other patients.

Just being in more pain does. You know, the way it should be.

I’m getting some images on my back, plus a few other fun things designed to keep me away from surgery.

And given that Baltimore Ravens Quarterback Lamar Jackson also hurt his back and is set for a back MRI today, I’m really hoping it’s not at the same facility.

That feels like tempting fate in a way I don’t need right now.

So, I’m sitting here, waiting. It’s going to be a while. And when you’re stuck in a waiting room with nothing to do, your brain does what it always does. It wanders.

Mine wandered straight to silver.

Because while I’m sitting here not moving, silver very much is. It’s now pushing toward $70 an ounce. And when you line up the reasons, it’s not hard to see why.

1. Global supply shortages.

2. Ongoing stimulus from Japan.

3. The Fed is doing its little semantic shuffle with “reserve management.”

4. And the strong likelihood of more stimulus out of China, because that’s what China does when things slow down.

This could get out of hand fairly quickly.

Silver doesn’t move in a calm, orderly fashion. When it starts to go, it tends to go all at once, which makes people uncomfortable.

That move raises the next question I can’t get out of my head.

If this leg is already underway, where does the next wave of capital go?

As I’ve explained in recent weeks, different allocations have acted as reservoirs of capital over the last decade.

I’m talking about places where money could park itself, compound, and leverage without anyone asking too many hard questions. We already talked about how Bitcoin acts as that liquidity pressure valve… and that’s definitely in the cards.

But the biggest and most obvious one was the MAG 7, FAANG, and similar tech names. That’s where the crowd lived.

There were reasons for that.

These companies were incredibly capital efficient. They benefited from massive passive investment flows as ETFs multiplied. They became pristine collateral for leveraged funds looking to squeeze out a little extra return while momentum stayed intact. This is why Warren Buffett’s Alphabet (GOOGL) investment made sense.

But… those same names also unwind very fast when leverage leaves. And they explode higher when central banks and policymakers accommodate.

We’ve seen both sides of that trade in 2025 multiple times.

What else?

Over the last 18 months, we’ve watched another reservoir fill, this time in the metals. The timing wasn’t accidental. Things really started to cook when we talked about the persistent monetary inflation expansion we expected over a 36-month window starting in March 2024. That was the basis for the Hedge of Tomorrow report.

The real ignition point came when the gold-to-silver ratio hit 100.

Since then, after this massive rally, that ratio has contracted to roughly 60-to-1.

Eric Sprott, who is probably the clearest long-term voice in gold and silver right now, thinks the ratio could ultimately contract much further as global mining activity improves. Something closer to 15-to-1.

If he’s even remotely right, silver still has a lot of room to move.

So here’s where we are.

The MAG 7 reservoir looks pretty full, given valuations and the constant bubble talk.

Gold and silver have already exploded to the upside, with no shortage of people trying to talk silver back down off its cliff, even as the fundamental case remains intact.

So again, the question matters.

What other reservoir can fill?

That’s where I have to bring in my conversations with Tim Melvin and the idea that keeps circling back.

Value. Quality. Momentum
 

What’s still genuinely confusing to me is how many companies are sitting right in front of us, trading below tangible book value, and being treated like they don’t exist.

Hundreds of community and regional banks.

Dozens of upstream oil and gas producers are under book value.

Plenty of companies are selling below book value while still showing strong capital efficiency metrics. Countless more with low EV/EBIT and EV/EBITDA numbers. Many more funds are trading under their net asset value.

Large funds aren’t going to touch small-cap value or some of these ignored opportunities.

They simply have too much money to deploy.

But that doesn’t mean these companies are bad businesses. It means the plumbing of modern markets makes them inconvenient.

A big firm can’t allocate 10% of a $1 billion fund to a $550 million company without becoming a 20% owner overnight.

That comes with disclosures, filings, and a level of attention they don’t want.

So they avoid it.

That avoidance creates distortions.

Markets don’t price truth… they price capital flows.

When flows are constrained by fund size, index construction, liquidity rules, and passive vehicles, mispricings can persist far longer than most people expect.

This is where discipline matters.

It’s not about optimism or narratives.

It’s about discipline. Sometimes… stupid discipline.

Benjamin Graham understood this long before any of us were around. He bored people with arithmetic for a reason.

He rambled about book value, tangible assets, and a margin of safety.

His idea was that you don’t need a heroic future if you don’t overpay in the present.

The Piotroski F-score is just that idea dragged into the modern world.

Joseph Piotroski asked nine simple yes-or-no questions that ask whether a company is actually improving or quietly decaying.

The focus centers on what matters: Profitability, leverage., cash flow, and operating efficiency.

There are no forecasts or macro guesses.

It’s just evidence on a balance sheet...

What’s striking right now is how many companies trading below book aren’t broken.

They’re just ignored.

Community banks with capital ratios that regulators would envy.

Energy producers are throwing off real free cash flow while being priced as if oil is permanently cheap.

Industrials with order books that would have been celebrated five years ago are now dismissed because they don’t fit the current narrative.

These aren’t widow-and-orphan stocks.

They’re adult supervision stocks.

Momentum still matters, but not the kind driven by leverage and ETF flows.

The quieter kind… It starts with bases forming, and relative strength turning up. These indicators matter… because once they head up… they can break through key technicals and shoot into the stratosphere… as Skywest (SKYW) did from $17 a share in early 2023 to more than $135 earlier this year.

That’s because the price action or these names follows balance-sheet repair, not marketing budgets.

Large funds can’t play here… because of the math.

And that’s how reservoirs form.

First, it was big tech. Then it was metals.

Now, capital feels hesitant, looking for places where value hasn’t already been strip-mined and labeled a bubble on financial television.

It won’t be one thing. It never is.

It will be a rotation into balance sheets that don’t require miracles.

It will turn into companies priced for failure that don’t actually fail.

Into names where the downside is arithmetic and the upside is normalization…

And like sitting in a waiting room, it requires patience, not adrenaline.

You don’t rush the scan… You just wait for the image to come into focus.

Next week, I’ll be sharing our list of tradeable stocks that meet the metrics in the Capital Wave Report to accompany my outlook for the year ahead...

We’ll actively monitor them in 2026 and take action when the momentum indicators align… To a more active year ahead…

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