MARKET NEWS / MCALVANY RECAP / MARKET NEWS

Good Things Matter Even More in Bad Times

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Jun 12 2023
Good Things Matter Even More in Bad Times
MPM Posted on June 12, 2023

Investing in a time of immense cultural and political change is like trying to rope a cow during an earthquake. (This is a theoretical analogy. The writer is no cowboy, even when the earth is not moving.) It’s hard enough when the cow, your horse, and your lariat are moving, when the earth moves too, the degree of difficulty ratchets up by an order of magnitude.

Environmental, social, and governance scores edge out business competence for investment decisions. Diversity, equity, and inclusion concerns trump competence in hiring decisions. Social elements at every level push aside traditional measures of functional excellence. Is an exceptionally run company a good investment if it has an insufficient number of a certain kind of politically advantaged people in its ranks?

People have fled to America for centuries to escape societies in which who you are is more important than what you can do. Such immigrants’ heirs are now back in the soup. A meritocracy has always been the bugaboo of those who come up short on merit. And without a society that highly values competency, and that schools and trains for it, skill and knowledge quickly fade into the recesses of society.

But there’s an interesting thing about competent people. They associate. They congregate. They know each other and they rely on each other. They say true things. They do things well. They attempt important projects. In short, they form a cohort of capability. If you want to know who does things well in one profession, ask someone who does things well in another profession.

We mention this here because this is the standard the McAlvany companies have long dedicated themselves to. Listen to the McAlvany Weekly Commentary and you will hear interviews of critical thinkers from many walks of life. You will hear summaries and recommendations of exceptional books you won’t hear mentioned anywhere else. You’ll hear precepts that are time tested by tens of thousands of people. And you’ll hear it all put together in a clear and comprehensive way.

In the Credit Bubble Bulletin, you’ll see analysis by someone who has examined bubble finance for decades, in detail, at length, and from angles you would never have considered without reading Doug’s work. The work is simply amazing in quality, quantity, and depth. Bubbles dominate our economy and all our markets. They create and destroy millions of fortunes. Yet few people give them the study they deserve. Doug does.

Morgan’s Hard Asset Insights provides deep and broad analysis of important markets. He examines key data, surveys, periodicals, classic economic works by seminal thinkers, and other inputs to collate and describe the elements of complex economies and markets. He is unashamed to stand on the shoulders of giants to provide the high-level view that is so valuable—even as he provides key observations from those with boots on the ground. Forest and trees—they both matter.

Miles and his fellow hosts Tory, Rob, and Robert are brokers with decades of experience in the markets they analyze and describe. They have helped thousands of clients achieve greater safety and stability in their portfolios over the years. When they talk about markets, trends, history, and human nature, they know whereof they speak. They work every day in the milieu they describe in their program. You’ll find no ungrounded theory here, nor any cursory treatment of important developments.

Make mcalvany.com Reality Central for your topical listening, reading, and studying efforts. It’s a strong connection to truth-based things, theories, and thinking for those who still value such priceless commodities.

Key Takeaways:

  • Fed: Inflation is not the enemy
  • Debt changes homes, but doesn’t leave the neighborhood
  • Hope is not a good investment strategy
  • The summer doldrums set the stage for action later in the year

The McAlvany Weekly Commentary: David and Kevin focus some of their analysis on the Fed’s fight against inflation—portraying it more accurately as a fight against too much inflation. Inflation is pretty much the raison d’être for a central bank and fiat currency because you can’t inflate a gold-backed currency at will. From the Fed’s perspective, the inflation we have now is just too much of a good thing. After all, the Fed’s goal is two percent inflation of the currency per year—which means the Fed steals only two percent of your purchasing power per year. The organization is not greedy, after all. But since we’ve had inflation below two percent for several years, is the Fed now content to balance the scales by letting inflation run hot for a while? The hosts also discuss profit vs. preservation for the investor. Which should take precedence? And they discuss the most recent developments in the market, and compare them to analogous events in history.

Credit Bubble Bulletin: America’s love affair with debt continues, but with changes. Borrowing numbers from the most common sources are lower across the board than they have been. Contrast that with government-sponsored enterprise-related lending: “The bottom line is that GSE growth has been nothing short of phenomenal. GSE assets surged $1.248 TN, or 15%, over five quarters, and $2.410 TN, or 33.8%, since the start of the pandemic (13 quarters).” Much of that has come from Federal Home Loan Bank loans. “With its AAA rating and attractive liquidity profile (especially during crisis periods!), GSE obligations are the perfect asset for money market funds. Moreover, with flows gravitating to the perceived safety of money funds during risk averse market backdrops, the money market fund complex becomes a powerful mechanism for system Credit and liquidity expansion.” There is much more to this analysis. Click on the link to read further.

Hard Asset Insights: Morgan notes increasing optimism this week in equities markets, to the point that even Barron’s is starting to get on board. Is this yet another episode of the “Barron’s curse”? The possibility is real. The facts, unfortunately, do not justify the euphoria. “Sentiment and technicals have gotten over-bullish… This is a classic set-up for financial tempests and hard landings, not blue skies and bliss. In fact, just this week, the World Bank offered updated global growth projections forecasting a significant second half 2023 slowdown that will send global economic growth to low levels matching the 2008 great financial crisis. In the words of the World Bank’s chief economist, ‘the world economy is in a precarious position.’ ” For more on the large and expanding gap between sentiment and reality, be sure to read this week’s HAI.

Golden Rule Radio: Tory and Miles note that the summer slow-down in the markets is in full swing, which puts the recent mild pullback in gold in perspective. Both hosts note that if the price declines a bit further they will be buying gold for both themselves and clients who dollar-cost average their purchases. The gold/silver ratio is steady, meaning that silver has generally tracked with gold through its recent moves. Miles notes that silver is “way too cheap,” which will change as silver swaps leadership roles with gold. Moving to equities, Miles compares US with European and Chinese markets, giving his thoughts on what the short-term future is likely to hold. Tory notes that the next FOMC meeting outcome regarding rate hikes will certainly affect equity prices, as investors have been expecting a pivot to easier money from the Fed. And Miles passes on a nugget of investing advice regarding when to buy an asset you have assessed as well worth buying.

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