MARKET NEWS / MCALVANY RECAP / MARKET NEWS

Keeping It Real

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Sep 25 2023
Keeping It Real
MPM Posted on September 25, 2023

Truth vs. falsehood, signal vs. noise, gold vs. tailings or dross, wheat vs. chaff or weeds, and the list goes on. Separating the important from the unimportant, the valuable from the worthless, the true from the false—it’s a key life skill, and one that is on the wane. Hucksters and snake oil salesmen have never had it so good.

The sheer number of metaphors, similes, analogies, parables, and aphorisms dealing with the subject of truth vs. untruth is indicative of its immense weight. Truth matters. Yet there are millions of people who dedicate their lives, fortunes, and not-so-sacred honor to propagating lies.

Why? The answer is primarily spiritual, but for the purpose of this post we’ll say that those who celebrate and perpetrate lies have something to gain by it. They do not care for the strictures, disciplines, and character elements demanded or developed by natural or divine law. Humility, moderation, reality, and others-orientedness are not their cup of tea. They prefer pride, power, fantasy, and selfishness.

We see these traits writ large in the lives of many billionaires and high-level politicians and activists throughout the world. They have more money and influence than most people could thoughtfully use in many lifetimes, but, with apologies to Pierce Brosnan, the world is not enough.

A full accounting of their lies here would sound like a political screed, but the culture of lies has trickled down to every element of society. Politics is largely comprised of lies. The business world is likewise substantially dedicated to the untrue. Product advertisements are nine parts hype to one part reality, the dishwasher repairman will be here Tuesday at 10 and the thingamajig will cost only $x and fix the problem (sure it will), many online articles and youtube videos are worthless if not harmful, hundreds of millions of social media posts are not only untrue but clearly produced by persons in full-on idiot mode. It’s a sad state of affairs.

But all of this is preparatory to the real point here. Money has been called “condensed life,” and it’s crucial for good, honest living. But it is also power and things, and power and things are the meaning of life for many people. Money brings out the liar, schemer, and manipulator in many people, including many you would never suspect.

Money is the reason we have the Federal Reserve System. It’s the reason we have the IRS, the Treasury, and markets for equities, bonds, real estate, art, collectibles, and commodities, among others. And in one place or another in all of those institutions or markets, despite value in many of them, there are lies, misrepresentations, misdirection, or theft of one kind or another.

This is always the case, but the lies become epidemic when they become part of the fabric of the society. Clearly that is becoming the case as radicals who reject absolute truth capture more and more of our institutions and government.

In the midst of such a culture of lies, there are some who still dedicate themselves to the truth. And while it’s dangerous to put oneself forth as any kind of standard of truth (obviously much of untruth in fallible human beings is unintentional—due to ignorance or error), it is honorable to seek truth and to do so diligently—to conquer ignorance and correct errors as far as possible.

We have listed the hallmarks of truth seekers here before, things like humility, standing on the shoulders of giants and acknowledging those giants for their work, diligence, verification, care, association with other truth tellers, and so forth. You will see these hallmarks in abundance in the publications summarized below. If truth matters to you, and it should, these publications are good places to seek it.

Key Takeaways:

  • Central banks lose mojo
  • Remember, Fed tightening is a response to too much Fed loosening
  • Fed head runs, not walks, from expectation of soft landing
  • Chart shows gold is compressed and ready to move

The McAlvany Weekly Commentary: David and Kevin effectively argue this week that the credit bubble threatening the American economy is not the only bubble affecting Americans. They are also affected by an information bubble that keeps them safe from troubling thoughts—such as that fiat currencies might not always retain their value. No such bubble insulates people in China, Japan, and India—with populations that together approach half of the world total. Gold reached new all-time highs last week in these countries. “What that suggests is that enough people have concluded the credibility of the central bank as an institution is cratering and that cash deposits are at jeopardy for their losses.” Will Americans’ information bubble pop in time to protect them from the popping of the credit bubble? The hosts also look at the “strong” dollar, and ask the all-important question, “compared to what?” An Olympic weightlifter might look powerful next to a grasshopper, but put him next to an earthquake or hurricane and his power seems puny by comparison. So, too, the dollar. As part of their extensive research on many fronts, the MWM team members seek to take the relativism out of the dollar’s weekly print and assign it a meaningful indication of true value. With this information in hand, they can look at the price of gold vis-à-vis the dollar more accurately, along with companies affected by the gold price.

Credit Bubble Bulletin: Doug excels at explaining complex scenarios in understandable terms. Today’s national and international economies are as complex as they get. Fed Chair Jerome Powell reflects that complexity with the uncertainty of his comments. Other central bank leaders utter similarly uninspiring and ambiguous comments. Not so, Doug. His review of the past few years sheds light on a very shadowy landscape. Representative of his analysis: “The collapse of SVB precipitated over $700 billion of combined liquidity injections from the Fed and FHLB. Importantly, this bailout unfolded quickly—before de-risking/deleveraging had mustered momentum. Essentially, another shot of liquidity was provided to a system highly over-liquefied from unprecedented pandemic monetary and fiscal stimulus. Not only was the Washington liquidity backstop (‘Fed put’) further validated, but the banking bailout also demonstrated that the Fed would respond more urgently than ever to heightened systemic stress… Basically, crisis management operations usurped the tightening cycle.” Read his post this week to see where he goes from there.

Hard Asset Insights: Morgan applies similarly understandable analysis to equally complex events in different aspects of the economy (compared to Doug’s analysis summarized above). The focus of his comments is the gradually dawning realization within the investing community that the Fed actually intends to keep interest rates higher for longer. Investors have been convinced that the goldilocks moment is upon us, but it appears that the bear family has returned—and is not happy. In fact, notes Morgan, when a questioner asked if Powell maintained a soft landing as a base expectation, the chairman quickly and vigorously replied in the negative. Markets sold off for the rest of the week in response. Morgan further notes that, “For the soft-landing potential to upgrade from ‘fairytale’ to ‘possible,’ interest rates would have to drop, drop aggressively, and drop soon. However, the exact opposite is happening.”

Golden Rule Radio: Tory and Rob rejoin Miles for the program this week. They note that gold is acting in a very encouraging way. It typically goes down when the dollar, interest rates, and bond yields go up, but it’s not doing so now. Instead, it has been trading roughly sideways, forming a pennant or compression zone that often precedes a breakout. There were some signs of such a breakout at program time. Miles shows a chart of the dollar, which has moved in textbook fashion from a compression zone to a breakout to the upside. Its new lows are its previous highs, so the progression is much akin to climbing a flight of stairs. He expects gold to move similarly. He also talks about a trend he has noticed in which people are less concerned about getting a return on their principal than they are about getting a return of their principal. This is also a very bullish sign for gold. Tory further makes some very important observations on gold vs. real estate and how to invest in each with regard to the other.

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