Insider Trading: “Some Animals Are More Equal Than Others”

Weekly Commentary • Nov 24 2020
Insider Trading: “Some Animals Are More Equal Than Others”
David McAlvany Posted on November 24, 2020
  • Your local small businesses need help – buy deliberately local.
  • Covid brings massive changes to norm, will some be “creative destruction”?
  • CARES Act money used for mask enforcement versus help for small business.
  • https://www.govtrack.us/misconduct


The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick

Insider Trading: “Some Animals Are More Equal Than Others”
November 25, 2020

“There still is a recognition that somethin’ ain’t right back in D.C. I just don’t think we will see any real substantive change in that geography when it comes to ethics and conduct until the cycle of excess is behind us. Easy money breeds easy ethics, and ample justification for any and all actions.”

– David McAlvany

Kevin: I was thinking this week, and I should be thinking all the time just how thankful I am for the provision we have, Dave. Even in these tough times, if we really look below the surface of mainstream media and below the narratives, we actually see a lot of provision right now. We’re seeing a lot of market activity right now, too. You’ve been talking for the last three or four weeks that we were probably going to experience a D-wave correction. That’s a technical term in the chart world. Gold goes up on an A-wave pattern, B on a down, up on a C, and sometimes has a D-wave right after that, and it starts the pattern again. But it’s always good to look back and say, “This is not unexpected, this is just a buying opportunity. What is your thought on the markets right now?

David: You are right about gratitude and the importance of being thankful. I think for anyone who has been around the block, not just the markets, clearly, but life, gratitude is an antidote to so many things. When we look at the markets these days, there is a lot going on. We got, in the high-yield market, to 4.5 to 6% last year. That is a new low in the yield, which means a new all-time high in the price, taking out the highs of June 2014. So you have a trend in high-yield which is very risk-on in nature. We see the same thing in the stock market.

And lo and behold, gold drops on the other side of that. Where we have risk-on, there is no need for gold it would seem, at least for the time being. Not a reason for concern in our view, simply because we look at all markets from both a cyclical perspective and a secular perspective, cyclical being short-term, secular being the long-term trends. And the long-term trend for gold is, in a very healthy fashion, up. And we look at the cyclical trends – those are the shorter-term trends – and as you said, it’s A, it’s B, it’s C, it’s D, and then that pattern is repeated. So A and C are the strong up-waves, C being the dominant, really strong up-wave, and B and D are the down-waves. D, the one that we are in now, is the worst. And if we looked at time and price, we might have a few weeks left of that.

We ask the question, if on a short-term basis, we’re putting in a low for gold, it makes sense to probably be adding to positions in here. Just like we said last week, getting down to around $1800-1820, is to be expected, and that is probably when actions should be taken. So we thought it would come, and here we are.

Kevin: As many of our listeners know, we look at finance, and we look at a person’s liquid assets in the form of a triangle, the base of the triangle being gold, which is just the preservation aspect. And yes, as the dollar continues to go down, gold will continue to go up. But also, the left side of the triangle is the managed side where you are trying to grow. McAlvany Wealth Management would be one of those elements. And actually, 3rd quarter was very kind to McAlvany Wealth Management.

Of course, the right side of the triangle is cash. That’s never good because they keep printing so much. But going back to the left side, Dave, hard assets, even when you are buying stocks in the stock market, if they represent hard assets, there are definitely times when the financials rotate into those, and this has been one of those times.

David: Yes the 1st quarter was interesting because we had Covid shutting down production and we weren’t sure when a lot of that production would come back on line. And gradually, as we came through the 2nd quarter we did see quite a few companies come back on line. And then here in the 3rd quarter, last week we had our third quarter call for the McAlvany Wealth Management MAPS accounts, and the 3rd quarter was, indeed, kind to us. Year-to-date performance in hard assets has been solid, no pun intended. But the fascinating aspect of the current market environment is that stock prices are situated sort of far to the upper right of hope. If you’re looking at a chart, things that go high and right generally a good thing. But I think we are to the upper right on the hope chart, even as Covid continues to cast a shadow of despair across the global economy, with particular concern remaining in the small businesses everywhere across our country.

Kevin: I have noticed the hope that comes into the market right now when we see these market jumps, when the Dow goes above 30,000, it’s almost all based on the hope for a vaccine, but the reality is, right now, even looking at Durango, this could be the death knell for small businesses, at least in the form that they are in right now.

David: In some respects, the small business community is bracing for last rites. There is little agreement from legislators on any more direct assistance, and that may change in January when political brinksmanship comes off the boil and we’ve gotten fiscal measures which are re-engaged.

Last week was very curious, with the Treasury Department, specifically, Steve Mnuchin, pulling back, requesting back 454 billion dollars in CARES Act money that was supposed to be spent by December 31st. And there are a whole host of questions that are reasonable to ask. Why has the Fed not used those funds yet? Why is Mnuchin pulling them back now? And frankly, what would the small business community have done with that assistance here in 2020?

Kevin: Especially with the lockdowns that we have. As you know, when I was in college, before I came to work for your dad, Dave, I was a toy store manager for a company called Children’s Palace. It was big, like Toys R Us, and actually, three-quarters of the year we just barely survived as a toy store, but we made 75% of our income from Thanksgiving through Christmas. That is exactly right now when the shutdowns have occurred. What does retail and small business look like without what they call Black Friday?

David: I think that is the challenge from this week through the end of the year. You have many small businesses that typically make their money for the year, and as you describe, they have been treading water up to Black Friday. And that short window, post Thanksgiving to Christmas, is the annual profit season. And so, a lot of small businesses, perhaps certain sectors, you mentioned one, feel that to an even greater degree. But after an already tough year on Main Street, and massive consolidation by your online retailers, already you have a host of brick and mortar legends which have filed bankruptcy in 2020. And now, with Covid wave 2 lockdown measures being re-implemented, that solidifies the trend of online purchases, strangely, to the detriment of mom and pop shops across the country.

Kevin: But I can’t help but wonder, being an American and being full of hope, and loving the fact that there are entrepreneurs out there and there are people who are continually thinking creatively, and I’m hoping that that is continuing. I just wonder, after World War II, Dave, and after the Great Depression, we had an amazing amount of innovation and change. Do you think small business is going to change through this, and innovate, and see that entrepreneurial spirit in ways we would have never predicted if things would have continued the way they were?

David: Yes, it’s an economic question. It’s also a cultural question. It will be interesting to see what the nature of entrepreneurship is over the next decade after experiencing, to some degree, the death of small business in 2020 to 2021. If you look at the recent FAQ section, the Frequently Asked Questions from the Small Business Association, small businesses are responsible for 48% of private sector employment. It’s about 57 million out of, call it, 120 million employees, 41.2% of private sector payroll, and they consistently create between 60% and 70% of new jobs.

The only exception to that is during times of recession. That is no surprise, both in terms of the job creation part, but also because government tends to step in and you do have some job creation in government for those timeframes. So one in five small businesses is family owned, and two out of three are owned by women and minorities. And so, yes, it’s a pretty important segment in our economy.

I should say, the death of small business as we know it, because I think there is that Schumpeterian creative destruction, it might just be a different landscape in which a different model of business works quite well, even if an older model moves toward extinction. I think maybe we can learn from the age of newspapers, where certainly the hard copy newspaper has transitioned to a world of information online. And although we have seen the death of one thing, it is not as if we haven’t had something almost more dynamic take its place.

Kevin: You see just the amazing impact that small business has. Dave, I know that you don’t always go for the most convenient answer. Oftentimes you go for the most deliberate answer. You’ve taught us all that, and you talk about it on the Commentary. Even with our Christmas party this year, I’ve been here 33 years, this would have been my 33rd Christmas party but that had to be cancelled because of the Covid lockdowns. I loved the response that you had, Dave. You said, “Okay, well, let’s go help the restaurants. We’re not going to just let this Christmas party go.”

There are a handful of restaurants here in Durango that are just right on the edge. They are very much suffering. They’re great restaurants but they’re losing their business because of the shutdowns. And I want to thank you. You’ve giving us gift certificates to these various restaurants with a deliberate action. And you’re encouraging that with small businesses all around town. Rather than just go the easy way and click the Amazon Buy Now, which I’m very habitually addicted to, it’s better to stop and say, “Can I buy that now, here, or even wait, and maybe support local business?”

David: Yes, when I thought about the Christmas party this year, I thought the main issue is that we want to, as a family, express appreciation for everybody who has put in a huge effort. It’s fun to get dressed up once a year to the nines, get out on the town and all get together at once. But the main point was appreciation. And although it looks and feels a little bit different to have a gift certificate that lets you go out with just your spouse, or your family, or what have you, it’s a little bit different, but I thought it was important.

I recommend being very intentional about spending locally this year, and you’re right, it’s Amazon and it’s Walmart who are going to come through this period of economic stress just fine. But it’s your local purveyors of goods and services who may not. So yes, we had to pivot with our governor’s mandates in the State of Colorado in terms of our company agenda. But that’s okay, I think the restaurant owners will certain appreciate it.

Our city council, as I was trying to figure out how to engage this, I sat in on long, long city council talks, and kind of less than impressive, in my opinion, in their efforts to support the business community. The best suggestion they could come up with for using the remaining CARES Act money, about $700,000 at their disposal, and it’s all designated to help small business owners – the best they could come up with was to, number one, hire a bevy of enforcement officers for a mask mandate city ordinance, and then hire a marketing group to design posters intended on shaming people into wearing masks.

I’m thinking CARES Act here, and I’m thinking, small business owners. Do they even know what it’s like to be in that seat, and what their needs actually are? I guess you could call that creative, but (laughs) maybe not.

Kevin: I remember going to Washington, D.C. with you, Dave, during the last recession. I think it was 2010 or 2011, something in that neighborhood. The rest of the country was really hurting. It was a very difficult time, yet Washington D.C., because the money was coming in from the outside, you would have never known there was a recession. Sometimes I think about these CARES Acts and this printing of money. It can either be used as a help or as a hammer. Frederic Bastiat, who wrote The Law back in the mid-1800s, which we have talked about often on this program, and all of our listeners should listen to it. The law can either help preserve your rights, or it can be a hindrance. And actually, like you said, a hammer, where that money, the $700,000 in this area, instead of being used for small business owners, actually being used to be a hammer to enforce the mask.

David: That conversation was really fascinating to me, again, just as kind of fly on the wall. The mayor and other city council members were disappointed that they couldn’t, with immediate effect, start pulling business licenses if the business owners weren’t acting aggressively to enforce the mask mandate in their stores. Basically, somebody walks in with one and you just ask them to leave straightaway. They don’t leave, you call the police so that the police can enforce trespass. That’s what they wanted to see on display in every downtown store, and if they didn’t get that then they were threatening to pull the business licenses. Due process was not a concern.

Thankfully, I was sitting there listening as the city attorney reminded them that a license is a property interest and due process is required. So they couldn’t punitively patrol and enforce. I guess my point is that real creative solutions, both for Covid and for the health of the business community, if we ever thought they were coming from government, I think that’s kind of misguided. We will come up with solutions. There is a dynamism within the business community, and a creativity amongst we the people that I think is very, very remarkable and encouraging.

Kevin: I said I have hope for America because I’ve seen what America has done before, but you are exactly right. You said, we the people. We’re talking so much about our disappointment with government, we are forgetting that this country was built by people. The strongest social unit in America is the family, not the large government. That again goes, Dave, to what we are talking about today and what you have been trying to do with the office, and that is, encourage deliberately helping focus dollars locally.

David: Think about the business owners that you know by name and think about the fact that they are trying to make ends meet, take care of their own families. If you don’t focus your dollars locally I think we are guaranteed in 2021 and beyond to see retail at the local level gutted. My friend Karen, I know she is stressed. Another gal locally, Sue, of course she is stressed, and ready to close up shop. There are a number of other business owners that I know are at a breaking point, and I think we can make an effort to be the difference for them between hope and despair.

So if you’re shopping online, go to the direct retailers. Go to the ones that you like and even be willing to pay shipping to do so. Amazon picks more pockets with that free shipping gimmick and we continue to neglect how we are negatively impacting our local communities. Even businesses – it doesn’t have to be a local business, but I think of those giants, and they really don’t need our cash.

Kevin: I would like to focus on the markets now because the markets are showing hope, and something that might be false hope. There is a lot of money that is being made on the side, possibly illegally, with some of the announcements on vaccines. We have seen three Mondays in a row where the market has rallied starting on Sunday night based on the fact that there was going to be some announcement on a vaccine working. Is that misplaced hope, Dave?

David: To some degree, the reason for market hope is a vaccine, but as I mentioned last week, we were less than 2% from all-time highs prior to the vaccine announcements. So all we have done is take a very high price, and a very high valuation, and just bumped it up even higher. So the reality is, easy money has been the market’s version of a vaccine for a whole lot longer. You still have powerful short covering which is continuing. You have many of the largest hedge funds which are getting killed, not because of being short, but because of really violent sector rotations which are catching them off balance, $53 billion, which month-to-date, has come into stocks. Really unreal.

But just a quick comment on those announcements by the vaccine companies, the pharmaceutical companies. You are right, three weeks in a row, a different drug company has announced hopeful results on a vaccine. It was Pfizer, then Moderna, and now AstraZeneca. And you have the Monday announcements in each case which have been preceded by pre-market activity, and positive pre-announcement trading activity suggestive of trading on non-public information, and it’s illegal.

Kevin: Well no, wait a second. Wait a second. Illegal. No, no, no. Some people have special privilege. They might even have the gift of prophecy, Dave, where just hours before one of those announcements somehow, someway, an angel from somewhere – maybe it’s a phone call, maybe it’s a Zoom call, I don’t know, but strangely enough. Let’s don’t call it illegal, let’s just call it special privilege.

David: It’s insider activity, basically. Our guest, Bill King, has commented on this each of the past three weeks, and as an active trader it has caught his attention as a very sort of unhealthy peculiarity. You have executives who are talking to someone, and someone is buying and profiting handsomely from the post announcement market moves. So of course, where decorum fails, where there is not a natural check on behavior on auto one, on a personal basis, the SEC should be there. Will they be involved? I don’t know. I guess we may not know. But let’s not forget, and I think this is what you were suggesting, is the reality from Animal Farm, “All animals are equal, but some animals are more equal than others.”

Kevin: Right. It is interesting to me, sometimes you have these ironies in the market, or paradoxes. We would call insider trading like that illegal, but there is actually a legal version of that called insider trading where you literally are just looking at the corporate heads and seeing what their buying and selling patterns are. And even those right now betray that there must be some forward knowledge.

David: In the case of Pfizer, you had team Biden which was being told about the progress on the vaccine on the 8th. That was a Sunday. Surprise, surprise, the S&P futures markets started rallying that Sunday night prior to the market announcement on Monday.

So the news flow is Monday, but there is a private announcement to the Biden team. Who on the Biden team wanted to walk from that meeting and not monetize the opportunity? Someone did. And then, of course, Monday the Pfizer CEO sells a slug of stock, just shy of $6 million in the midst of Pfizer shares going parabolic. It’s fascinating. It’s what the markets have become. But the White House only heard about Pfizer’s progress on Monday in the press release. It seems to me, even if you know Biden will be president in January, you still follow the typical protocols and alert the White House first. Again, some animals are more equal than others, I guess.

Kevin: It’s hard not to be jaded on this because you and I both remember September 11, 2001. Everyone does who was alive. The airline stocks, strangely, were shorted, massively shorted, three days before 9/11. So I guess there is a little bug out there that tells some people some things. And it is unfortunate.

David: Regardless of the side you chose in the presidential race, you would be correct in reflecting on the bi-partisan efforts to fleece the public. And I will unabashedly be a little cynical here. But that consolidation of power for themselves or their team, it will be offensive to you if you are center right or center left, but the farther out you go on the spectrum of political views, there is a reality that perhaps the further out you go the greater the willingness to allow ends to justify means. And I would see that as bi-partisan. Call it equal opportunism politics.

Kevin: I have to ask you a question, and I have my own opinion of the answer. It is amazing when I read some of what looks like voter fraud and then I read the address to that from the other side and they say there is absolutely no voter fraud. Let me ask you Dave. Fraud – real or imagined?

David: I’ve laughed out loud when people suggest that no voter fraud exists in America. It has existed in every election since we held elections. That’s why I quoted Napoleon III last week. It is not only universal, it is timeless. The question is not if, the only question is, to what degree? I think democracy maintains legitimacy to the degree that fraud is peripheral. I’ve been waiting to see what the courts would say on the evidence provided, that it is a core issue in the 2020 election, and so far the courts have determined it is not a core issue.

I thought it was very interesting Trump distancing himself from Sidney Powell in the last few days. I don’t know what that suggests, but perhaps courts are not looking at substantive evidence to weigh in on. I’m not sure, but so far it’s not a core issue. For the modern American iterations of election fraud, and for those who would say it just doesn’t happen here, it’s better than a third world country, Chicago is pretty third world. It provides a pretty handy playbook where I think the cemetery role call occurs on a multi-year cycle without missing a beat. It may be missing a heartbeat.

I think corrupt Chicago politics is a fine-tuned thing. I don’t know if you remember Blagojevich in Illinois who got caught. The question is, how many are not caught? He was auctioning off a Senate seat, or wanted to, the one vacated by Barack Obama. Ironically, it was Trump who came in and pardoned Blagojevich. I would love to sit and talk with him. I would love to ask him, as the two-time Illinois governor, what he knows about raising the dead.

Kevin: Yes, some names come to mind when it comes to voter fraud – Richard Daly, being Chicago mayor. But let’s just look at some of the people who have just been pretty open about it. Remember what Rahm Emmanuel said? “Never let a good crisis go to waste.” Didn’t he work with Richard Daly?

David: Fascinating. Back in the 1980s both David Axelrod and Rahm Emmanuel worked with Richard Daly. Daly was one of those guys who figured out how to take other people’s money and make it work for him and make it work for his friends. Sometimes when we pick on corruption in politics and think of Daly politics in Chicago, Daly in both senses, it’s because the playbook was set by a guy who spent 22 years as mayor. The fact is, in the 1980s, both Axelrod and Rahm Emmanuel worked for him, and I would have a hard time thinking that there wasn’t a lot learned, not just how to get elected, but what you do once you are elected.

I think it would be interesting to look at legislative misconduct since 2016, if we move from Illinois to the larger stage of the nation, which includes everything from bribery to sexual harassment. The scorecard, according to govtracks.us and we’ll include the link if you want to look at this in your free time, but if you look at that period from 2016 to 2020, this is what I mean by sort of equal opportunism politics – 16 Democrats, 17 Republicans, with violations. It’s about neck and neck. Who does a better job? In this time slice, Republicans slightly more corrupt than the Democrats.

From 2010 to 2020 you have bribery and corruption which was only slightly behind sexual harassment, and ethics violations, you’re talking about a fairly broad category. That was the largest in this ten-year period to have 62 different issues, again ethics violations, followed only by concerns with campaigns and elections, which tallied 32 in the same period of time. So what are the instances where no one found out, or again, cookies were taken from the jar but no one got caught with their hand in the cookie jar? That we will never know. There are only the accusations and the defense and what was ultimately determined.

But again, govtrack.us/misconduct. A very fascinating site. What it says to me, Kevin, is that we are at the end of a cycle. We’re at the end of a credit cycle, we’re at the end of a business cycle, and we’re at the end of a social and political cycle that is best typified by grotesque expressions of self-interest, and beyond the pale corrupt practices. Global debt is rising faster than ever.

Kevin: That’s what I’m wondering, Dave. Is this not just a predictable outcome of the ability to, in an undisciplined way, create money out of thin air, and literally take debt to the moon? We have talked about this before, but one of the reasons governments and power bases hate a gold standard is because it requires a balance of payments, which just simply requires you only spend the amount of wealth that exists, not wealth that doesn’t exist. Isn’t this just an outcome of easy money?

David: I think, to a large degree, it is reflective. Does art reflect culture? That question is often asked. Do politics reflect the designs of the electorate or the people who are putting someone in power? There is a coincidence here that I think is worth nothing. 2016 to the present you have the Financial Times reporting that global debt is up $52 trillion versus only $6 trillion in the period between 2012 and 2016. So now the total is expected to reach $277 trillion by the end of the year. And we are looking at huge growth in the developed markets, where at 432% of GDP versus the emerging markets, further down the totem pole, so to say, at about 250% debt-to-GDP. Next year, they’ve got their own issues, emerging markets left $7 trillion of debt to roll over.

Kevin: This credit excess – remember our guest, Minxin Pei?

David: Yes, he was a teacher at Claremont McKenna and he said something about unethical behavior coming at the end of a period of time. In fact, I think he was referencing Chinese government officials on the eve of forced retirement. It was one of those things where he said lots of staplers go missing. I forget what the rule was that he called to reference that by, but as you get to the end of a period of time, there is a certain desperation. “We’ve got to do what we’ve got to do, while we can still do it.” So this is probably staplers on a larger scale, but there is all kinds of behavior that gets justified end of cycle. And we are at the end of a cycle. We are at the end of a credit cycle. We are at the end of a business cycle. We are at the end of a social and political cycle.

Kevin: One of our guests, Neil Howe, has talked about what we call The Fourth Turning, another great book for our listeners to read if they haven’t done that. This is almost a decision-making phase, Dave, when you have the end of all these cycles coinciding with one another. You can break left, or you can break right, but there is a fork in the road.

David: Look at the chart at the govtracks website. There are more issues with legislator misconduct in each decade since the 1970s, with the last decade being the worst ever recorded. Again, this is a bipartisan issue. What did I say earlier, 16 versus 17? And it is really reflective of larger concerns, larger social, even philosophical issues. In an age of relativism, with the death of truth, should we expect anything less? It didn’t take Donald Trump to reveal the sleaze in politics. You can take that any way you want, but my point is that when he came into office 2016, that whole notion of drain the swamp resonated with an electorate for a reason. It resonated in 2016. It also did in 2020. There was no massive repudiating blue wave. There still is a recognition that somethin’ ain’t right back in D.C. I just don’t think we will see any real substantive change in that geography when it comes to ethics and conduct until the cycle of excess is behind us. Easy money breeds easy ethics and ample justification for any and all actions.

Kevin: But after the pain of the fourth turning comes the first turning. We were talking about entrepreneurship and adaptation. There is a period of time. The pain right now is substantial. Remember when you talked to Dr. McBrayer a few weeks ago, we were just talking about how if you were to Google search something and I were to Google search something and everyone who is listening were to Google search the same word, we would get a different string of recommendations based on what our past inquiries have been. So in other words, truth is being customized to the entertainment value of the person who is looking for it. So Democrats can’t talk to Republicans right now, Dave. Republicans can’t talk to Democrats. It’s amazing. We used to at least be able to have conversations, but what we think are the facts are so different at this point, it’s almost irreconcilable.

David: We ignore what we want to because, after all, facts are not merely facts, they are data points, and they are subject to interpretation. And truthfully, everyone organizes data in a way which is consistent with their viewpoint, with their view of the world. And that is not merely political. You could even say that is metaphysical. It is in every category of truth. Your assumptions drive your conclusions. And once a worldview is accepted, those assumptions are rarely re-analyzed or questioned. So like a scientist that does really good lab work, rarely is that scientist asking the philosophical questions which determine the relevance and important of that work. Instead, the work is being driven by the paradigm assumed already to be acceptable science.

Kevin: When the facts are manipulated and you already have a paradigm that you are analyzing those facts in, Dave, we all have a bias, don’t we? We can’t help that. That’s just part of our nature. But you had me read Thomas Kuhn’s work on scientific revolutions years ago. It was a brilliant work, because basically, even scientists, who are looking at what they consider very objective measurable facts, can still put it into a paradigm that no longer works.

David: Yes, it does take us back to Kuhn, and it also points to one of the flaws in our conversation with Dr. McBrayer. Actually, it was more in chapter 8 or chapter 9 of the book. If we are willing to filter all data according to what is conventionally acceptable, that is, what the sources and authorities on truth limit you to, then Kuhn’s textbook dominance perpetuates itself. What Kuhn is basically saying is, the folks who write the textbook are the ones who define what is conventionally acceptable, and no one is allowed to really venture outside of what is written in the textbook. You can see this in certain ways within the field of science where advancements in science have happened primarily at the periphery of what conventional science regarded as acceptable.

Kevin: Last night you and I were talking. I’m reading a book right now that is looking at parables. Jesus used parables. Also myth. It is mainly about Tolkien and his writing, his Middle Earth writing. But what Tolkien was a master of, and C.S. Lewis was, too, was the ability to communicate universal truths through myth, and not necessarily through actual facts. I think we have to also have that element right now, too, Dave, because our data is being filtered. But there are universal truths that hopefully, even if we are Democrat, Republican, blue, red, mask, no mask, we should be able to agree on those truths that sometimes can only be expressed in parable.

David: I appreciated the listeners’ comments and complaints on conventional thinking, limitation of dialogue. This was a few weeks back following the McBayer interview, basically saying, “Look, if you want to filter perspectives, it is going to prevent progress, ultimately. We should be the ones doing that.” And I think that was correct. Even today you have chemists and biologists who reference an older scientific paradigm, one that does not pay heed to information theory, or to other insights that we gain from physics. And physicists have basically moved beyond because their theoretical explorations have allowed them to, have granted them permission to. In that sense, some of the scientific work being done today is already discredited, but the scientists are doing it and they don’t know that. It is a little bit like economists, clinging to the Phillips curve. The Phillips curve was discredited in the markets back in the 1970s, and yet the curve is still hard-coded in the economic textbooks as an enduring truth.

Kevin: This is why I love the age of the amateur. Some of the great discoveries over the last few hundred years were not by experts who had written Ph.D. papers that had to be defended the rest of their lives, but these were men who were willing to be wrong long enough to find out what was right.

David: It’s up to us, not the media, to sort fact from fiction in a story, and it’s not up to social media scions to selectively present the data, and if they do, we have to do a better job in digging for what is left out. And it is not the professionals who alone should interpret the data for us. Clearly they can assist. We are willing to have professionals on the commentary and we learn a tremendous amount from them, but each of us has to strain to hear the music of the spheres. Do you remember, it was Nietzsche who said, “Those who are seen dancing were thought to be insane by those who not hear the music.” So you have this perspective of, “They’re just crazy. They’re flat crazy. What are they doing? I don’t hear anything. What are they doing?” And so the appearance of insanity to one is just natural movement to the other. That is where I think it is incumbent on us to strain to hear the music and to try to figure out what and why others are dancing.

Kevin: Dave, that’s why I think that is sort of ironic because Nietzsche is not my favorite guy for quotes, but what he says in this case I would agree with. For me, Nietzsche is a guy who didn’t hear the music. He wondered why the people who believed in God were dancing. But actually, isn’t it interesting that we can take truths from people that we disagree with. Nietzsche would be somebody that I mainly would disagree with, but some of the truths that he has brought out are absolutely, positively, as far as I can tell, true.

David: So many of the [unclear] critiques were spot on, and those who were seen dancing were thought to be insane by those who could not hear the music, that’s just reflecting on a social phenomenon. The trend today is instead to dismiss the dancers because we are cosmically tone-deaf, or we are politically biased, and just can’t hear. It’s another sort of tone deafness, or it’s another sort of blindness. We forget that we are in pursuit of truth, but sometimes we stop short and we settle for a point of view.

Kevin: I’m wondering if that deafness isn’t also caused by, again, a larger power base above us that tries to create two sides, and let the two sides work against each other while we’re deaf and missing the true unseen hand.

David: I felt like I got to see some of that at the local political level when I was on that call with our mayor and the town council just last week. You have the danger of right and left identify politics, you’ve got culture war dynamics, and you have politicians who are the most skilled political animals, able to harness the energy, harness the animus of the crowd for their own ends. Sitting there listening to our local mayor talk about the Covid crisis and the newest governor’s mandates in Colorado, and instead of problem solving and discussing what segments of our population are most at risk, and how do we address meeting their needs, it was all about – again, this is a quote from him. There was no targeting relief for small business. This is what he said. “This is a culture war, and right now we need shock and awe.”

So the city was basically saying, “We want to play enforcer,” as if that is the same thing as problem solving. From one point of view it is. If you can stop the spread of Covid then you are problem solving. But is there more complexity to this problem than just wearing a mask. Wear one. Great! No problem. I don’t object. I do, to which some of our listeners will probably object. That’s fine. But there has to be a more creative solution than just playing enforcer. And I think, really, if we don’t see this, we are going to miss an opportunity.

And this is where I think market dynamism has a really significant place. Covid has given us the opportunity to re-imagine and re-invent. Think of education. You can look at this as a cataclysmic event for anyone with a campus, and yet, on the other hand, what does education become on the other side of this? Rather than having hundreds of thousands of dollars in debt, and a small piece of paper tacked into your wall, maybe you have a greater education at less cost, and an ability to engage in your own future, not with the albatross of debt hanging around your head, but with a different kind of vitality.

Creative destruction is a market phenomenon that brings vitality, and my hope is that government control at the end of a cycle doesn’t prevent that kind of economic rebirth.

Stay Ahead of the Market
Receive posts right to your in box.
Greg Weldon: Silver Looks Good Here
An Interview With Charles Goodhart
The Economic “Sweet Spot” Reversal
Gold Will Play A Role In The New Monetary Regime
Apple Mentions A.I. & Gets Free Pass On Falling Earnings
Global Discord: Paul Tucker Interview
Currencies are Tattletales
What if China Ruled the World?
Double your ounces without investing another dollar!