♫Summer time, and the livin’ is easy♫—that is certainly a blast from the past. This summer is not so laid back. Several major markets seem to be struggling mightily against their secular trends. Not quite mint juleps on the veranda.
If you follow any of the McAlvany analysts mentioned below, you’ll see how much goes on beneath the surface with regard to market and economic news. As with the ocean, the waves might be calm or frothy—but most of the action goes on below.
So is all of this action and its analysis much ado about nothing or is it significant? Is it important who did what, when, and why? Or is all of that just window dressing on the major movements of history?
Well, of course it’s always been true that “inquiring minds want to know,” but beyond that it matters because all of the “window dressing” adorns a window into reality. The substance is not always clear, but it’s always there.
The reality that’s constantly stressed at the McAlvany companies is that, while man-made things can be amazing, they are not ultimate. Men can be powerful and impressive, but they die. Companies can be powerful and impressive, but they fail. Markets can be powerful and impressive, but they collapse. And so it goes.
If you’ve listened to the McAlvany Weekly Commentary for long, you know that David loves Rudyard Kipling’s poem “The Gods of the Copybook Headings.” Its title is a metaphor—not for polytheism, but for eternal principles that are not man-made. They are not swayed by human activity, rather they govern it.
David also loves Percy’s poem “Ozymandias.” It shows the ultimate fragility of even the most powerful of human endeavors.
And David helms a company that buys and sells precious metals. In a sea of man-made financial instruments, the metals are a bastion of unwavering value. They last, and when you need them, they’re there and they can help.
But unlike some precious metals companies, the McAlvany companies do not recommend the metals to the exclusion of all other investments. McAlvany Precious Metals (formerly ICA) has for decades recommended the Investment Triangle, which advises a prudent mix of growth & income, savings, and insurance. It creates a portfolio for all seasons, needing only to be tweaked occasionally to take advantage of one leg or another of the triangle given circumstances on the ground.
So understand these facts as you read the below publications each week. The bustling economic activity across the globe matters, but it’s not ultimate—or even particularly long lasting. The authors are deeply engaged in maximizing opportunities for clients—prudently taking advantage of undulating man-made investments for the sake of opportunity, while using always-valuable gold and silver for protection and legacy-creating value. It’s a strong way to go, and it’s unique in the investment world.
Key Takeaways:
- Treasury rates don’t always follow the Fed
- Bubbles must not be allowed to deflate
- Fed skips—gets ready for hop and jump
The McAlvany Weekly Commentary: Culturally, America is in a state of rapid and immense flux. Economically, the country seems to be waiting for the next shoe to fall. David and Kevin focus more on the economic side of things. Four decades of astronomical debt creation are a massive departure from the norm, and it seems that we are about to find out what kind of crop such an unprecedented sowing will produce. This week, the hosts look at the decline in bank lending and put some numbers to the damage. They also quantify personal and financial sector debt. David explains how, in the absence of immediate further tightening of the money supply by the Fed, Treasury rates could be raised by other actions. In short, even as the country and the world wait to see what the consequences of massive debt creation are, there is a great deal happening out of the sight of most average Americans. This is where you can find out what those happenings are.
Credit Bubble Bulletin: “Markets” are a big subject. If you’re going to write about them, you’d better have a massive grasp of the subtleties, intricacies, facets, and scope of the topic. Few do, which is why CBB is such a valuable resource. This week Doug chronicles the search for the elusive soft landing, developments in equities and options markets, the strange tug-of-war between market fragility and rapid-response bubble reflation by policymakers, the explosive growth in government-sponsored enterprise assets and household liquid asset growth, the Bank of Japan’s continued bucking of the widespread money-tightening trend, and much more. It’s a lot to cover, but crucial to read if you want to understand the forces at work in America’s and the world’s economies.
Hard Asset Insights: This week Morgan observes that investors are partying like it’s 1929—or 2000—or 2008. What could go wrong? Yet FOMO is turning into POMO (panic of missing out), and investors are piling into stocks like lemmings as other investments languish. In short, “this week, stocks popped, precious metals dropped, and the dollar flopped, while the yield curve further inverted…” Morgan quotes Fed officials as asserting strong support for continued money supply tightening. Not one of them is advocating interest rate cuts for the foreseeable future. Yet investors will not be denied. It seems that, for them, denial applies only to reality. David Folkerts-Landau, Deutsche Bank Chief Economist, notes, “the U.S. is heading for its first genuine policy-led boom-bust cycle in at least four decades.”
Golden Rule Radio: Tory takes the lead this week as he and Miles break down the Fed’s thinking in not raising rates this month. Inflation seems to be cooling a bit, unemployment hasn’t appreciably increased, and GDP is up a bit. All of this taken together gave the Fed the rationale it needed to keep rates where they are. Miles adds that this time of year the markets are less active, as well, which makes the Fed’s actions less impactful on those markets. Tory also points out that even now rates are below their historic average. Those who are hoping things will get back to “normal” are unsuspectingly hoping rates will be higher than they are now. The hosts then review the week’s action in precious metals and equities.
