MARKET NEWS / MCALVANY RECAP

A Very Rich Heritage

MARKET NEWS / MCALVANY RECAP
McAlvany Recap • Oct 31 2022
A Very Rich Heritage
MPM Posted on October 31, 2022

It may have occurred to you that despite the highest price inflation rate in 40 years, Americans continue to eat out, engage in recreational activities, and generally live life as they have previously. Sure, there has been some belt tightening, some activities and purchases have been foregone, and store shelves often look forebodingly bare, but there is a remarkable level of activity still going on in the land of the formerly free.

It’s all a testament to the strength of free markets—not that we necessarily have such markets now, but that we have a history of them. In spite of steadily eroding fiat currency values, distorted markets, increasing taxes and regulations, and the very mixed effects of globalism, America still has a level of affluence that is the envy of most of the world.

Granted, that is changing fast. But its existence is a tribute to what we have had, courtesy of our founding fathers and those who have carried the founders’ vision through decades of centrist, socialist, and crony capitalist distortions. There are many in America who still know what it is to have honest money, honest work, honest business, honest relationships, and even relatively honest government. We at the McAlvany companies reach out to such people—and those who seek to join them—every week. We do so through our publications and podcasts, and person-to-person via the phone, meetings, or conferences.

Such people are the lifeblood of our nation first, and our company as well. If you are one of them, we invite you to join us in our efforts to improve the fiscal health of our clients and support the way of life bequeathed us by our forebears. Begin, if you like, with one or more of the information sources below.

Key Takeaways:

  • Britain is in turmoil, with both the government and central bank in a bad place
  • Fed tight money policy is creating difficulty throughout Europe and elsewhere
  • Equities continue to struggle The McAlvany Weekly Commentary: For years now, some of the most simultaneously safe and successful individual investors have simply invested in FAANG (Facebook, Apple, Amazon, Netflix, and Google) stocks. So dedicated to this strategy are they that they buy on every dip, as some have even continued to do this year. As Bill King might say, “How’s that working out for you?” Those stocks are down as much as 67%. In contrast, the money managers at McAlvany Wealth Management are nearly 60% in cash—the highest level to date—with direct equity exposure down to 20%.

Dynamics this year have turned people’s goal from obtaining a good return on their capital to the return of their capital. This reversal has been so significant that even Ray Dalio has reversed his “cash is trash” mantra and begun moving to cash. With the dollar recently up as high as 114, that’s a smart move. Credit Bubble Bulletin: “After a decade of becoming fully embedded in market perceptions, prices and structures, as well as within governmental planning and budgets, business strategies, economic structure and the like – how do central bankers these days signal that ‘whatever it takes’ has run its course? Can it be done without unleashing instability virtually everywhere?” That seems to be the question du jour—the answer to which is almost incomprehensibly consequential.

Bank credit default swaps and government bond prices are high and rising. Collateralized loan obligation prices have tumbled well below intrinsic value. Britain’s new government and its central bank are in dire straits. It’s a jungle out there, and getting wilder by the minute. Be sure to read CBB each week for the latest developments in the US and throughout the world. Hard Assets Insights: Ever the student of economic theory as well as keen analyst of markets and human behavior, Morgan this week brings Ludwig von Mises’ analysis of credit expansion to bear on our current economic situation. It’s sobering news. Mises’ economic theory never attained respectability in the halls of academia or government. Its sole merit is that it is accurate. In that light, his assertion that the only choice regarding “the final collapse of a boom brought about by credit expansion” is whether it happens now or later, depending on whether the central bank continues expanding credit or not, is not good news. Be sure to read HAI for some advice to investors facing this situation. Golden Rule Radio: Miles and Rob discuss policy effects across the pond—from the effects of US monetary tightening on Britain and the Continent to the eventual effects of energy crisis in Europe on the US. They also touch on the state of affairs in the US encapsulated so eloquently in Tulsi Gabbard’s departure statement as she quit the Democratic Party. In short, looking at a world economy in chaos and crisis, the hosts ask listeners to consider stabilizing their personal economy with money that doesn’t fluctuate in intrinsic value. If institutions are too hidebound to do so, it’s a very good thing that individuals can.

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