MARKET NEWS / MCALVANY RECAP

Honesty Is the Most Productive Policy

MARKET NEWS / MCALVANY RECAP
McAlvany Recap • Jul 01 2024
Honesty Is the Most Productive Policy
MPM Posted on July 1, 2024

A few weeks ago we discussed in this space the value of excellent productive work. No nation can enjoy a high standard of living on a widespread basis without it.

America used to have an excellent work ethic. Its products were the envy of the world. They were durable, functional, and aesthetically pleasing. When you called a worker to fix something in the house that had broken, they did so quickly, efficiently, and at reasonable cost. This author is old enough to remember those days. They were far from perfect, but they were real. Now, the goal is to put in as little work with as little quality as possible.

One of the ways people minimize their work and maximize their pay is through organizing. Cartels, unions, guilds, associations, and other organizations are all ways people collectively withhold work and demand greater remuneration for the work they do. This of course funnels much greater rewards into their pockets—for a time. The problem is that organized persons gain their advantage by disadvantaging unorganized persons. There’s no such thing as a free lunch. Someone has to pay for it.

Socialism and communism are ultimate forms of this behavior, in which broad segments of society decide to organize and strike back at those who have organized against them. These systems’ adherents fail to realize that the rich didn’t get rich by being stupid. While many wealthy persons do lose their fortunes, the biggest losers in both of these situations are inevitably those at the bottom of the socioeconomic ladder. They want communism, but usually get some form of fascism, where government and big businesses collude to gain power and money from the masses.

This author can’t help but think this something-for-nothing desire is a factor in the current AI boom. Current automated systems are severely limited, and are often more trouble than they’re worth (press one for English, press two…). We want virtual people who can “think” and act intelligently, but work for free and don’t have sick days or dying grandmothers. We want excellent products again, but without the difficulty of working for them. In short, we want to be rich without effort.

There are many problems with that concept, but perhaps the biggest one is that riches without effort are extremely corrosive to character. America is already so “wealthy” on money it has borrowed from its future that character has been visibly impacted on a massive scale. One shudders to think of a nation full of spoiled rich people scheming night and day to defraud each other of their possessions—because enough is never enough.

In open opposition to this concept of something for nothing, the analysts below advocate open and honest exchanges of value—work for pay, payment for product or service, savings for security, investment for return, kindnesses done and virtues upheld for character built, and so on. It’s not a novel concept. It’s a tried-and-true form of good living.

If this is the kind of world you’re drawn to, you should know that the analysts whose work is summarized below are not attracted to gold as Midas or Scrooge McDuck were. They advocate gold because it is a referee in the dirty game of dog-eat-dog. When honest money enters the scene, transactions tend to become honest. When transactions are honest, neighbors are more inclined to be honest with each other. The knock-on effects are society-wide, and they are salutary.

Gold is no panacea, but it is a positive influence. And the desire for honest money is often an expression of the desire for honest living. You’ll hear this desire elucidated in many ways in these forums, and we hope they strike a note in you, as well.

Key Takeaways:

  • Another strong advocate of gold
  • Just the facts—lots of them
  • AI—appreciation of investment or asset incineration?
  • It’s all relative—the power of ratios

The McAlvany Weekly Commentary: Gold Will Play A Role In The New Monetary Regime

The MWC is a program dedicated to finding and propounding the truth. To do this, it interviews a wide variety of guests. David’s thoughts on gold, good, governance, globalism, and lots of things that don’t start with G are subjected to the contradiction and differentiation of high-level thinkers with varying—and often opposing—viewpoints. The estimable Sir Paul Walker, former central banker, is but one recent example of same. There are many more. This week, however, conversation returns to the ranks of the righteous (if this were a personal communication, we would put a humor-indicating emoji here). David interviews Stephanie (Steph) Pomboy, founder of MacroMavens, a macroeconomic trends analysis firm. Steph is a fellow believer in the virtues of precious metals, and shares a number of economic views with David. Thus, rather than challenging the views commonly presented on the program, she facilitates a deep dive into the subject of economics in general and gold in particular. Steph is that rare combination of winsome eloquence, expansive knowledge, and humble self-awareness that makes learning from her enjoyable and greatly illuminating. While others obsess over metrics and trends (which she also monitors), her approach is different: “In terms of actually looking at the data right now, my starting point, because I like to keep things simple, is really to start by focusing on the US consumer because so far the consumer continues to be the engine of growth, really, for the US economy.” Seminal economic thinker Ludwig von Mises, author of Human Action, would be pleased.

Credit Bubble Bulletin: Just the Facts

The title of this week’s CBB says it all. Doug presents the weekly rise or fall around the world in bourses, sectors, bonds, and equities indexes. He then presents an extensive collection of key articles on currencies, commodities, the Middle East, Ukraine, the EU/France, Taiwan, market instability, the global credit bubble, the AI bubble, bubbles and manias in general, global banking, deglobalization, inflation, the Biden Administration, the Federal Reserve, the US economic bubble, fixed income, China, central banks, economic bubbles around the world, Europe, Japan, emerging markets, leveraged speculation, and geopolitics. This treasure trove of information brings together articles from some of the most well-known media sources on some of the most pressing issues and developments of the day. If you want to be truly well informed in this fast-moving and eventful time, this is your one-stop shop. Doug’s efforts here are staggering, and of immense value.

Hard Asset Insights: A New Era

Along with Steph Pomboy, Morgan focuses on the human element of current events. People who operate in financially dangerous territory tend to develop slogans to soothe their fears. In the 1927-9 period just before the stock market crash, the phrase to justify crazy stock valuations was that we were in a “new era.” The old laws were suspended. New laws rendered newfound riches safe. Well, we all know how that turned out. And just to be clear, this is the 1920s we’re talking about, not today. Except that Morgan makes the obvious connection and observes that history is repeating itself. Much of the current mania is over AI, or AGI (artificial general intelligence), so Morgan references the key thinking of three experts on the subject. One of them thinks we are only three years away from AI becoming nearly human in its learning capabilities while maintaining its vast advantage in speed. The other two believe that such thinking takes inadequate stock of the obstacles and limitations inherent in the field. What’s not in question is the amount of money being spent in the process—literally trillions. “Whether those trillions ever turn a profit is a very serious question that will impact the fate of all AI bubble stocks, as well as the broad market in the future.” Morgan quotes Jim Covello of Goldman Sachs, “We estimate that the AI infrastructure buildout will cost over $1tn in the next several years alone… So, the crucial question is: What $1tn problem will AI solve? Replacing low wage jobs with tremendously costly technology is basically the polar opposite of the prior technology transitions I’ve witnessed in my thirty years of closely following the tech industry.”

Golden Rule Radio: Optimize Your Ratio Trading

True to form, Miles, Tory, and Rob begin the program by reviewing weekly action in gold, silver, platinum, and palladium. The first two are down, the latter two, up. From there, Miles takes a look at the chart for gold, and shows how it has formed a trading bottom for the time being at right around its price at recording time. Such analysis by the hosts can make crucial sense of metals price movement day to day and week to week. Though they have no crystal ball when it comes to determining future events, they do have immense historical knowledge of the metals markets and the human behavior that creates and drives markets. When neophyte investors hear that gold is in a bull market, for instance, they might expect perhaps rough but consistent upward movement in the price. The pullbacks, sideways trading, and wild swings that characterize reality can try the patience of even the most seasoned of pros, but it can make newbies crazy. Miles notes that gold is still strongly bullish, and Tory points out that it is still immensely undervalued. The perspective the hosts provide can be immensely helpful in sorting the signal-to-noise ratio. It can also be helpful in sorting the ratios of precious metals to each other. Ratio trading is a specialty of the McAlvany Precious Metals company, and there are some very ripe setups in metals ratios that the hosts discuss. You won’t find this discussion elsewhere, and ratio trading is a very low-risk way to set yourself up for big profits.

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