America today is nothing if not a factory for metaphors and aphorisms. “When sorrows come, they come not single spies, but in battalions,” quoth the Bard, and further, “uneasy lies the head that wears the crown.” Elsewhere: “be careful how you treat [nations] on your way up, as you will encounter the same [nations] on your way down.”
Perhaps the most apt word picture is the sword of Damocles—except that that famous dreamer was threatened by only one sword. America lies under many swords dangling by many threads: Military swords from China, Russia, and Iran. Monetary system swords from Brazil, Russia, India, Iran, China, South Africa (the BRIICS), and their associates. Economic swords from debt, unfunded liabilities, de-globalization, inflation, and the aftereffects of globalization. Weather disaster swords seemingly every week. A developing food shortage sword. Demographic swords from immigration and the birth dearth. The constant threat of another pandemic sword. Cultural and societal upheaval swords. An advanced Marxist/“Mussolinist” revolution sword hanging by the thread of an election—and perhaps not even that.
Some of these “sword” threats are existential. All are of immense consequence. Americans are absolutely feeling the pressure. If cortisol (the stress—“fight or flight”—hormone) were an investable asset, its bull market would make the Dow’s look like Ferdinand in the flowers.
Such uncertain times put extreme emphasis on things that are certain. Faith, family, friends, food, community, love, knowledge and wisdom, productive and protective assets, and items of enduring and widespread value all come into their own when uncertainty reigns. Such things are discussed regularly in the publications below. Gold might anchor the discussion due to the provenance of the McAlvany companies, but it ties naturally to these other things of inherently great and enduring value (discussion of which has always similarly characterized the McAlvany Financial Group). The more things of such nature come into their own, the more you’ll find them discussed and advocated in these pages.
Key Takeaways:
- Projecting strength; hiding weakness
- Markets throw a party while the Fed postures as host
- Gold and silver take a breather after a long sprint
The McAlvany Weekly Commentary: Xi Wiz – Chinese Stimulus Explodes
David and Kevin analyze China’s recent sea of liquidity as it boosted its currency to attain its fiscal goals. The country’s immediate goals were accomplished, but what at what future cost? The hosts then turn their attention to the US and its lack of manufacturing capability. If just one of the several military threats facing it were to escalate into war, the US would quickly use up its existing stores of materiel and munitions. However, it would take years to replace them. Just one Chinese shipyard, the hosts note, has greater shipbuilding capability than all American shipyards put together. Despite the fact that America’s defense budget is huge, we get far less bang for the buck than we should. The hosts also discuss labor disputes and the future of automation, along with the freedom for workers to protest working conditions and pay in various countries. Putting it all together, David concludes that, “The fourth turning is here. So civil war, world war, these are things which can’t be ruled out with historical precedent being clear and with de-globalization trends unfolding in real time.” The hosts conclude with the then-upcoming (since completed) client conference in Durango and their thankfulness for the like-minded people they talk with and serve.
Credit Bubble Bulletin: Reality Check for Bonds
Doug’s weekly summary is impacted this week by his participation in the client conference in Durango, resulting in shortened comments. He notes several data points that indicate strong economic activity in the US. This is a consequence of a phenomenon he has extensively chronicled, but which is absent from or given short shrift by most other economic commentary: “Markets, not our central bank, have the greatest impacts on financial conditions.” Now that the Fed has joined the party, “months of extraordinarily loose financial conditions (including lower market yields and record debt issuance) should now provide a tailwind to economic activity. The Fed aggressively cutting rates with financial conditions already so loose elevates overheating risks.” Doug also contrasts the Fed’s silence on immense growth in money market fund assets, repos, and the basis trade with the Bank of England’s willingness to speak on the subject. In a Financial Times article quoted by Doug, the potential for events that trigger an unwinding of $1 trillion in shorts of US government bonds is real, and could have immense and far-reaching effects.
Hard Asset Insights: Time Out for Face-to-Face Meetings
Morgan was a key participant in the annual client conference, which overlapped the time he usually devotes to the research and writing of Hard Asset Insights. As a result, HAI is greatly abbreviated this week, consisting essentially of asset price updates.
Golden Rule Radio: Gold Finishes Higher for Eighth Month Straight
Miles and Tory review charts for the week, month, and quarter in this week’s program. Gold, silver, and platinum were flat for the week, but gold’s monthly and quarterly performances are quite amazing. The hosts also note copper’s rise, perhaps confirming an earlier prediction for higher commodities. Rob joins the conversation, acknowledging that while he expected silver prices to decline and present a buying opportunity, they didn’t. He now suspects silver will not decline significantly anytime soon. Tory suspects Rob might not have been wrong but early. Both seasonal and electoral influences could play a factor in near-term prices, in light of which the hosts will focus their next program on the election and how elections have historically affected precious metal and other prices. War concerns in the Middle East and Ukraine, along with tensions in the South China Sea and weather-related disaster in the US, also affect analysis of markets here or abroad. With so many variables in play, the hosts suspect that flat precious metals prices over the past week reflect markets trying to get a read on where things are going.
