Dear Partners & Prospective Readers.
Over the past seven days—and especially across the last five trading sessions—markets have delivered one of the clearest demonstrations of why discipline matters more than conviction. What unfolded in silver, alongside stress across other leveraged markets, was not random. It was a textbook example of how price, leverage, and investor behavior interact during periods of structural strain.
This is the type of environment where systems protect capital and emotion erodes it.
Silver’s recent price action has been historic in both magnitude and volatility. After an extended advance, the metal experienced violent reversals and a sharp collapse that caught many participants off guard. While unsettling, this behavior is not unprecedented. History provides important context.
In 1974, during a period of rising inflation and weakening confidence in monetary policy, silver rallied sharply from roughly $2.50–$3.00 per ounce to over $6.00, before retracing nearly 40–50% in a matter of months as volatility surged and leverage was reduced. That episode reflected markets struggling to price monetary uncertainty in real time.
The more dramatic comparison occurred during 1979–1980. In mid-1979, silver traded near $6 per ounce. Over the following months, fueled by inflation fears, speculative participation, and expanding leverage, silver surged to nearly $50 per ounce by January 1980. What followed was equally violent. As exchanges raised margin requirements repeatedly and liquidity tightened, silver collapsed by more than 60% in a matter of weeks.
The lesson from both periods is not simply that silver is volatile. The lesson is that when silver enters these types of phases, the market is stress-testing confidence in the monetary system, and leverage in the paper market becomes the accelerant.
It is important for readers to understand that there are two distinct markets for silver. The physical market consists of actual silver bars, coins, and industrial supply used in manufacturing. This market is constrained by mining output, inventory, and delivery, and tends to move more slowly. The paper market consists of futures contracts, options, and ETFs. This market is highly liquid and heavily leveraged, allowing participants to control large exposure with relatively small amounts of capital. Most of the extreme volatility we have seen has occurred in the paper market, not because physical silver disappeared overnight, but because leveraged positions were forced to adjust rapidly.
Retail participation played a critical role in this dynamic. In the days leading into silver’s decline, retail investors poured record amounts of capital into silver ETFs such as SLV and SIL. Some of the largest single-day retail inflows on record occurred just before margin requirements were raised and price began to break down. Historically, peak retail participation tends to arrive late in a trend, not early. By the time enthusiasm becomes widespread, leverage is often elevated and risk controls begin to tighten.
This brings us to margin requirements, which are often misunderstood.
In plain English, margin is the amount of money a trader must put up to control a futures position. Because futures are leveraged instruments, traders do not pay the full value of the contract upfront. When markets are calm, margin requirements are lower. When markets become volatile, exchanges raise margin requirements to protect the system.
When margin requirements increase, traders must either add more cash to maintain their positions or reduce exposure. In crowded, leveraged markets, this can trigger forced selling. Importantly, margin hikes are not opinions about where price should go. They are risk controls. Their effect, however, can accelerate declines even when the long-term story has not changed.
Over the past six weeks, exchanges raised margin requirements on silver and related metals multiple times. This forced leverage out of the system and amplified the downside move. The same mechanism played a role in 1974 and again in 1980.
This is precisely where systematic trend following demonstrates its value.
The Nehemiah Fund did not buy silver because it was “cheap,” nor did it hold the position because of a story. The Fund entered silver near $54 on a buy signal as price confirmed a sustained upward trend. The position was scaled as price moved higher and structure remained intact.
As silver advanced through $70, $75, and even $80 per ounce, the Fund did not take profits based on how high the price felt. There were no discretionary decisions and no subjective targets. Instead, the position was managed using a rules-based trailing stop. As long as price structure remained intact, the position stayed on. When structure broke, the system exited automatically and without hesitation at an average price near $88.
This was not an emotional decision. It was the outcome of a disciplined, objective process.
Most retail investors are conditioned to buy what feels cheap and sell what feels expensive. Trend-following systems operate in the opposite way. They buy strength, not weakness. They add exposure as trends persist and exit when trends fail—regardless of opinion, excitement, or fear. This approach is uncomfortable by design, and it is precisely why it works during periods of extreme volatility.
The same discipline applied across other markets, particularly cryptocurrencies.
Five weeks ago, on December 3rd, we discussed the increasing technical risk in crypto markets based on structure, specifically the emergence of a death cross, where shorter-term price trends (50-day EMA) cross below longer-term trends (200-day EMA). Historically, this condition has often preceded extended weakness in highly leveraged, speculative markets. Because of that signal, the Nehemiah Fund had already exited all cryptocurrency exposure well before the recent carnage unfolded. As further weakness developed, the Fund was not reacting—it was already positioned defensively based on price.
This distinction is critical. The Fund does not buy assets simply because they have fallen or appear “cheap.” It waits for price to confirm a new trend and then participates. When structure breaks, exposure is removed. No debate. No hope. No subjectivity.
Perhaps the most important takeaway from this period is what the Fund is not doing. Out of the 15 global futures markets the Nehemiah Fund actively monitors, only one market—soybeans—is currently in a confirmed long position. The only other market showing potential near-term viability is crude oil, and even there, price has not yet met full confirmation criteria. The remaining markets have broken down structurally. Rather than forcing trades, the system is largely out of the market, preserving capital and waiting for structure to re-emerge.
Capital preservation is not inactivity. It is a decision.
Periods like this—where silver exhibits 1970s-style volatility, retail participation peaks late, margin requirements rise repeatedly, and leveraged markets unwind—are not environments where conviction or prediction are rewarded. They are environments where process is rewarded.
The Nehemiah Fund is designed as a globally diversified, systematic futures strategy. We are not market strategists or economists. We do not predict outcomes. We observe price, manage risk, and execute consistently. History has shown—again and again—that during periods of excess and stress, markets test discipline. Systems exist because human behavior tends to fail precisely when volatility rises.
Did You Know?
On this day in 1935, the U.S. Congress passed the Banking Act of 1935, which significantly expanded the powers of the Federal Reserve and reshaped modern monetary policy. Major structural shifts in markets often follow changes in financial architecture—and markets tend to reflect those changes in price long before they appear in headlines.
Warm regards,
The Nehemiah Fund Team