MARKET NEWS / MCALVANY RECAP / MARKET NEWS

Governing the Universe

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • May 15 2023
Governing the Universe
MPM Posted on May 15, 2023

With the triumph of progressivism in America has come a confidence in humans’ ability to govern many things previously believed to be self-regulating. This includes such things as market behavior, employment, progress, shifts in technology, and so on.

Certainly most people concede that bad leadership can retard these things, but to optimize them the laissez faire approach has always been to enhance the economic “soil” with such things as infrastructure, sound currency, wise (and minimal) regulation, impartial law enforcement, and effective means for dispute settlement, and then let the market “tree” grow organically.

None of these soil amendments has ever been provided perfectly, but America’s history on the subject appears to have been better than any nation before it. The strength of America’s economy and markets has powered most of the world for the past 78 years. So what makes some people so certain they can improve on this record?

Well, this is a time of immense confidence in human ability to effect just about anything—even as our institutions shudder and groan, or possibly reverse course. And though the information programs summarized below are not political in nature, each chronicles and explains the effects of market forces in the US and throughout the world—along with efforts to control them.

That’s important because the fact that “actions have consequences” is as true in economics and finance as it is in physics and chemistry. But while scientific mechanisms and reactions are far better known than ever before, economic mechanisms and reactions are cloudier than ever—not because they are unknown, but because they can be distorted for personal gain.

If you defy proper procedure in chemistry, you can get an immediate explosion. If you do the same in economics, you can get rich in the short run because the explosion often takes a long time to occur. By the time it arrives, you can be long gone—sunning yourself on an island beach while your country goes up in flames, at least figuratively.

Some people see what’s going on before the eruption occurs. The hosts mentioned below are part of that group. They continue to convey crucial information as they and others before them have done for 50 years. Listen to what they have to say, and join many others who regularly hear and heed their insight and wisdom.

Key Takeaways:

  • The bank walk continues
  • Markets still doubt the Fed
  • A possibility for existing mortgage holders
  • Gold looks like it is gathering its strength

The McAlvany Weekly Commentary: David and Kevin again discuss both the news and the story behind the news. The current “bank walk” (as opposed to a bank run) is being caused by factors unique to our situation, but those factors are easily knowable. Discussing them in this forum both informs listeners and helps them assess the opportunity to get more interest on their own savings. The hosts also discuss the vital role of short selling in markets, and what happens when natural forces are short-circuited by disallowing the shorting of stocks. If you don’t know how short selling can hedge a portfolio or what happens when it is disallowed, be sure to listen to or read this important installment of the MWC.

Credit Bubble Bulletin: With the CPI data release showing inflation below 5% for the first time in two years and over half of banks reporting no change in their lending standards, equities are jubilant. “Equities seem to be basking in liquidity abundance and the prospect of a dovish Fed pivot. Indicative of the extraordinary monetary backdrop, money market fund assets swelled an incredible $434 billion over the past nine weeks.” Stickier inflation, higher employment, and better economic resilience have not impacted market expectations of a pivot. Doug also looks at the “X-date” fiasco over raising the debt ceiling, the Chinese bubble, and the dollar rally.

Hard Asset Insights: Morgan briefly describes fractional reserve banking and then describes how the current ebb in bank deposits offers mortgage holders a rare opportunity. “This is quite the deal for homeowners, but very problematic for the US banking system—and by extension credit and lending—and by further extension the US economy.” Consumer sentiment levels are severely depressed, jibing well with the Fed’s oft-expressed determination to continue the inflation fight. It seems that, despite optimism in the markets, consumers expect the coming recession to be neither brief nor mild.

Golden Rule Radio: Noting the week’s all-time high in the gold price, at least in the futures market, Miles and Rob discuss likely near-term developments. Miles corrects a commonly held misperception that “bad news is good for gold, and good news is bad for gold.” Instead, he states—and Rob agrees—that uncertainty is good for gold. And there is a very high level of uncertainty in the markets right now. Both hosts anticipate that such ambiguity, along with other major factors, will continue to be bullish for gold, and they discuss how that will likely play out in market behavior. They also note that in the aftermath of an all-time high for the price of gold, there was not a significant pullback in the price. That’s a very bullish development, and one that should not be overlooked.

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