More
Presented by Doug Noland since 2012
* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.David, my wife reminds me often. She says, "Kev, it's summertime. Don't you remember? You've done this now almost 40 years. You should be able to quiet down because your clients have." So I think there are times when you have to back away and go, "You know, I don't know that we always have to be looking for the next newest thing." And summer is a good time to not do that.David: Summer is typically a quieter season in financial markets, not because there's less happening in the world, but because investors are paying attention to other things. School, families, travel, routines change and vacations replace the trading desks, if you're talking about Wall Street. So pull up a volume chart on almost any major index and you'll see it. Participation fades as summer progresses.Kevin: You know what's interesting, though, you asked me this last night when we were talking. You said, "Kevin, when has been the best time to buy precious metals?" And thinking back, it's like, you're right, June and July, I guess after 40 repetitions, we should probably start learning the patterns. This is really a great time because it is quiet.David: The same seasonal pattern generally applies to precious metals. There've been a few notable exceptions since 2015, if you want to stretch back through that 30 or 40 years. But over the last 30 or 40 years, gold and silver have often drifted through the summer in a period of relative indifference. Markets simply lose mind share to other things.Kevin: Well, yeah, to going out into the pool, maybe swimming in the ocean. What do you think?David: Absolutely. The neighbors are coming over. The grandchildren arrive next week. We'll look at the portfolio after vacation. Those are things that press other things to the periphery. And if you're in Europe, perhaps after vacation, it's not next week, it's next month. August is effectively a national holiday across much of the continent. My colleagues and I long ago learned not to schedule business trips to Paris or Brussels or Hamburg in August. Many of the decision makers simply aren't there.Kevin: Well, and especially in the precious metals markets because these guys go on six-week holiday, it seems, the last part of—well, August to early September, but quiet can change.David: It's quiet until it isn't. And when traders return, volume increases, reactions to headlines become more pronounced, and markets begin to move—and it's not always higher.Kevin: I think about the stock market. It usually gets quiet in the summertime. And then when the fireworks start, it usually is early fall or mid-fall.David: When you have major equity market corrections, and that doesn't happen that often, but off of all time highs, when you have a rollover or a top being put in, it's very common. It's very common that it happens in the fall, and the summer that preceded it was an increase in price on low volume. So historically, some of the largest equity corrections have emerged after low summer volume rallies, and prices continue climbing while participation steadily declines.That leaves markets vulnerable once liquidity returns in the fall, or I should say once participants return and liquidity evaporates. So that pattern has preceded not only the routine 10 to 20% corrections, but several of the major bear markets of the last century.Kevin: It was something that you brought up that when you have these all-time highs, but it's on lower volume, that can sometimes be a signal.David: Current scorecard looks something like this. You've got the Dow Industrials that have pushed to another all time high, but on declining volume. Meanwhile, the Dow transports have yet to confirm with a new high. That leaves a classic Dow theory non-confirmation in place. You generally want to see both of those moving at the same time or confirming each other in the price action. One has moved, the other has not.Breadth, however, has broadened considerably. In recent months, we've talked about how there was such concentration in just a few names, and we've begun to see that spread out a bit, which is healthy. So cap weighted, S&P 500 reached new highs in early June. You've got the equal weighted S&P, which broke to fresh highs on July 2nd. Mid-cap stocks reached new highs on June 30th, both the S&P small cap 600 and the Russell 2000.Again, these are your smaller-share indices, followed with new to all-time highs on July 1st. And you look at Barron's. According to Barron's, small caps just completed their strongest first half in 35 years.Kevin: Well, and that's not [unclear]. I love the fact that you're talking about breadth increasing for at least the short term. That's quite a bit healthier than having everything in the Mag 7.David: Right. You've also got the value line index, posted a new all time high on July 2nd. So a lot of things happening there in the early part of the month. NASDAQ, NASDAQ-100, they peaked in early June and have largely moved sideways since then. Sector leadership is becoming more nuanced. You've got consumer staples. They peaked back in February. Consumer discretionary stocks, they topped in May. An indication that parts of the consumer economy may already be weakening.Healthcare recently registered new highs, financials are approaching new highs. Maybe most encouraging is the S&P 500 advance-decline line, which also reached a new all-time high on July 2nd. Again, that's a measure of breadth, an important statistic because breadth almost always peaks before or alongside major market tops. So over the last month, anticipation has improved as leadership broadened beyond the Mag 7. Capital has rotated to a wider range of stocks.It's a healthier market structure than one driven by only a handful of mega cap technology names.Kevin: So could that be a signal that the market could go higher? I mean, does breadth tell us the direction of a market?David: I think what I would say is that we should look for the advance-decline line. If it turns lower and prices are moving higher, then we've got a significant issue afoot. They both move together, you've got something of a confirmation that higher prices are going to materialize. If the prices move higher, but the advance-decline line doesn't, that would be a telltale that this is a market top. For now, that remains constructive, but it's something to monitor closely.Again, should the advance-decline line begin making lower levels or lower highs while the major averages continue climbing, history suggests the market is approaching a more meaningful top.Kevin: What we've seen in the past is that bubbles have a tendency to move. So you can be in the AI sector for a while, and then it moves to semiconductors. So why don't we look at how that bubble is moving right now?David: Yeah. Well, the big story, the narrative has been AI. Whereas they ran, the question was what's going to feed the beast? And you've got to have the equipment, you've got to have the semiconductors. And the semiconductors were getting squeezed in terms of supply with what was viewed as infinite demand coming from AI. They could charge whatever they wanted. So semiconductors, they inherited the momentum leadership from the Mag 7 and the AI names. The question now becomes whether expectations have become impossible to satisfy.Kevin: Well, and aren't we seeing that this week with Samsung?David: Yeah. Samsung Electronics provided a reminder this week. The company projected roughly an 1800% increase in profits. Again, if you're selling the data centers, you've got the chips, 1800% increase in profits. And yet on the announcement the shares fell 7%, dragging down much of the South Korean market. And so that's what happens when expectations outrun fundamentals.Kevin: And this goes away from value investing and more toward momentum investing. You've talked about the differences in the past. So when you have momentum going into a market, everybody is making money. But when you have momentum shifting and coming back out, it can go away real quick.David: When momentum finally reverses, you get today's eager buyers, they become tomorrow's desperate sellers. So 7% declines have a habit of becoming much larger when positioning has been crowded, and it has been crowded. So does 50 to 75% declines sound like an extreme call at this point? You look at Micron, you look at Western Digital, you look at Sandisk, and you have to wonder if those charts are telling you it's over already. In a period of 10 days, you are 25 to 35% off the all-time highs.And again, you roll the clock back two weeks ago, and if you'd said, "Hey, we could see a 35% decline in these names," you would've been laughed at. And yet in the 10-day period, that much is gone. You duplicate that kind of decline over the next 10 days, you're 50% in less than a month. And that happens with highly cyclical stocks.Kevin: So let's move to the precious metals because I had made the comment, if I was just smart over the last 39 or 40 years, I would put most of the money that I put into the precious metals throughout the year, I would do it right about this time. And you had mentioned the 65-week moving average last week. Let's talk about that because the precious metals may be, could they be finding a floor right now?David: Last week, precious metals quietly found their footing. Gold stabilized just above its 65-week moving average after briefly trading below 4,000 an ounce. Silver likewise held support between 57, $58. It remained above its own 65-week moving average. Among the precious metals miners, the HUI, the Gold Bugs Index successfully tested its 65-week moving average, held above it, while the XAU, another miners index, actually never reached that level during the correction. It held above the 65-week without testing it.Technically, a weekly close above 4,150 in gold and—call it 63 bucks, within a dime's throw of that—would provide encouraging evidence that the correction has ended.Kevin: Okay. So we're talking about the correction ending. How about the resumption of the bull market? Are there some technical numbers that you're looking for?David: A weekly close over the 50-day moving average—a weekly close, which this week would be roughly 4,400 and next week 4365—would be considerably more significant, suggesting that the primary bull market has resumed, setting the stage for a retest of the January highs before year-end. So Michael Oliver, a previous guest of the Commentary, looks for that cross of the 50-day moving average this week or next as the all clear signal.Kevin: Okay. So seasonality is truly in play at this point. Dave, you mentioned the Indian wedding season. That comes up, what is that? Is that in September?David: Yeah, August, September, you've got harvest and in an agrarian, largely agrarian culture with the largest population on the planet, with a cultural predilection to own gold, it matters that we come into what's affectionately known as the love trade. So additional weakness can't be ruled out, but seasonally, time is beginning to favor the metals. We're running out of calendar for the traditional summer lull.And historically, if you're looking at the strongest months of the year in terms of performance, just one month performance, January is a strong month. August, September, November, those are strong months. August and September are usually the strongest months of the year. Three of those four months remain ahead of us.Kevin: Which means that you want to buy in the weak months. You're telling us the strong months, but if you're looking to add to positions, June and July really have been a very, very good time to do that.David: Absolutely.Kevin: So if deploying fresh capital, where would you go right now?David: I think as investors return from vacation over the coming weeks, where are they likely to deploy fresh capital? They're probably going to put it into what has been working. So momentum investors naturally gravitate towards stocks that have made new highs. They believe that they're going to make new highs again. Today, that's largely in the AI space. The challenge, Kevin, I think is that hedge funds are already there. I think you look at those charts, momentum may be breaking down, not continuing up.So AI-related positions amongst hedge funds now represent just shy of 10% of all hedge fund assets. It's one of the highest concentrations on record. So when momentum finally shifts, retail investors won't simply be selling into an empty market. They'll be competing with professional money managers trying to exit the same crowded positions. In some respects, it reminds me of the old campfire joke about outrunning a bear. You don't have to outrun the bear, you just have to outrun the next person.Hedge funds are wearing track shoes. Retail investors are wearing flip-flops. When everyone heads to the exits, I think we know who's going to get eaten by the bear.Kevin: So can you make a prediction as to when the volatility will return? It's kind of quiet right now.David: Yeah, I don't know precisely when volatility returns, but given the current concentration in both AI equities—and going back to the hedge funds for a minute, their huge concentration in Treasury positions. I suspect that the eventual move in volatility will be larger than most investors expect. And so, are we starting that now? Do we have to wait until the end of August? It remains to be seen. But if I were looking for the next major rotation, personally I'd be reducing exposure to crowded AI trades while liquidity is still plentiful, and quietly accumulating precious metals and mining shares while competition remains remarkably limited.Kevin: So you would say, again, you're tending towards value investing, moving away from the momentum trade while things are fairly quiet, and going back into the value side.David: I can't help myself. There is a value investor deep inside me, and I like things when they're cheap and I really don't like chasing things when they're expensive. Momentum investors by contrast will likely require— If you're thinking about the metals, they're going to require some price confirmation first. So should gold begin strengthening into its favorable August seasonal window, that price action could attract an entirely new wave of momentum capital into the precious metals complex.Kevin: Dave, I try to share with clients, and yesterday was another example. When they're buying gold, I try to move them away from looking at price because, to be honest with you, over the last four decades working with the family and working in gold, the reason I get up in the morning really isn't price action at all. The reason I get up in the morning is because there's a preservation aspect to gold that just overpowers everything else. And I think the central banks right now are seeing that. They're not really watching the price, are they? I mean, is China watching the price before they make their next transaction?David: Well, I mean, they've been buying consistently for the last 20 months in a row. So to some degree, if you look at the volume of purchases, it tends to increase with lower prices, but they've been consistent buyers. And I don't think that they're afraid of either marginally higher—and certainly it's more attractive if they're adding with lower—prices. But I don't think that's their primary motivation. I mean, seasonality is a part of the picture for retail investors.I think the underlying demand story for gold, it continues to improve. Central banks are obviously a part of that. Purchases in the month of May, which is the most recently updated statistics, 41 tons of gold in May, another solid month of official sector buying. More impressive, however, were China's import figures. And so obviously, we capture some of the central bank buying—10 tons by the Chinese central bank. But China's total imports for the month, 163 tons of gold during May alone. That brings total imports for the first five months of 2026 to 692 tons. That is a remarkable 76% increase from a year earlier.Kevin: How does that factor into global production every year? What percentage is that?David: It's between 3,000 and 3,500 tons of mine supply each year that gets fed into the market. So you look at the 692 tons that were imported by China in the first five months, you're talking somewhere between 19 and 23% of annual global mine production absorbed by one country in five months. It's more than 22 million ounces quietly migrated from weak hands to strong hands.Kevin: So this goes back to the momentum side of things. The momentum investor is missing that completely.David: Right. Western momentum traders have largely reduced their exposure to gold during the correction. They were buying starting at the mid-year last year, 2025, got very interested as the price action was supportive through January of this year. And if you look at COT statistics, commitment of traders reports, and sentiment statistics, daily sentiment index for gold, and many other measures that would suggest they're gone. The hot money has left. They're not interested.So again, the Western momentum trader, they're out on this correction. Meanwhile, you've got the long-term Chinese buyers that have been accumulating those same ounces at lower prices. That transfer of ownership matters. And when we say it's gone from weak hands to strong hands, these are strong hands that are pretty sticky. They own it, they have it. And I don't know what price they're willing to let go of it, but it's nowhere between here and probably eight or $10,000 an ounce.Kevin: And they're not likely to sell based on a profit. David, I'll never forget April 12th, 2013. It was the one day I said, "Okay, let's go fish at Lake Powell." The head trader and I and a couple of other guys, we were out of the office, and sure enough, there was a bear raid. Merrill Lynch and Goldman Sachs had sold 400 tons, a naked short into the market on a Friday, April 12th. It caused the market to go way down, the gold market. And then Monday it went down further. And what we didn't know was there was a transfer of wealth going on at close to the bottom of the market.David: Right. Well, you go back to 2013, 2014 when the market was breaking down. The ultimate lows were December 2015. But that period, 2013 and 2014, the movement of ETF ounces, so Western liquidations, those gold bars moved to Switzerland for refining to kilo bars, and then final delivery to Shanghai and Hong Kong. Ounces that are today not available. So one major difference between then and now, yes, we still see the migration of ounces from West to East.But one major difference between then and now is the increased appetite for gold in China for very different purposes, for net trade settlement purposes. As more global trade is invoiced in Chinese currency terms, gold is a neutral trade settlement mechanism, has a huge new source of demand. You can see this driven in large part by the migration of trade invoicing. The Chinese are wanting to be paid in their own currency.Trade in Chinese currency, according to the Wall Street Journal, has increased fourfold over the last three years. It now is at 8% of global trade being invoiced in RMB. The US Treasury Department. If you just look at this major shift that these structural dynamics— A part of this has to do with central banks wanting to hold a stable reserve.That's what we saw in 2022 when Russia invaded Ukraine, US Treasury weaponized the dollar, and all of a sudden reserve asset managers said, "We can't just sit in Treasuries. We can't be in the above-ground financial universe where the Treasury can target and take what they want." Instead, when the US Treasury Department chose to weaponize the dollar, the world responded and has responded by making the dollar decreasingly relevant.The dollar is a threat, and gold is increasingly the market's expression of preference in a new order for trade and reserve management, both. But that trade feature is really, I think, significant as you look at the ramp-up for gold demand, not only in Asia, but amongst the trading partners with China in particular.Western investors are not going to appreciate these structural changes until gold is marching towards 10,000 an ounce. And then, I think you'll see the preference for a new monetary regime is obvious and reported by CNBC, discussed by Bloomberg, and the new market reality for the metals.Kevin: Well, and it strikes me that even I and you, our entire adult lifetime, what we've been doing when we buy gold is we've been hedging against the devaluation of what is the complete reserve currency of the world. I mean, the dollar was a 100% reserve currency as far as at least oil was concerned. Even guys like us, Dave, are going to have to start thinking differently because we're not just hedging a world reserve currency and the inflation that comes, but we're actually preparing for a major structural change, something we haven't actually experienced in our lifetime. It's a monetary structural change.David: Yeah, the petrodollar recycling certainly reinforced the dollar's role as a reserve currency. And this is different in this particular chapter where we're talking trade invoicing and the option of using a different currency—manufacturer to the world, their currency. And to avoid volatility or changes in the controlled nature of their currency system, with capital control still very much in place, net settlement in ounces is an elegant solution.So I think we quickly forget the structural changes taking place in the gold market. We can lose track of them and be blinded by short-term price action. Indifference to these major structural changes, it's going to be costly for policymakers, and it's going to be a lost opportunity for Western investors. Those who are seeing the opportunity now, Asian investors, they seem, according to the import numbers, to be paying attention, very much paying attention.Kevin: So as we wrap up, Dave, I know you're trying to relax with the family. I asked you if you're getting much relaxation time in, but between relaxation time for the person who's watching this show, what would you encourage?David: Well, I mean, as summer reaches its end, equity market speculators realize they are too concentrated in themes that are now sputtering. Precious metals may again capture mind share again as they did in late 2025. Until then, pay attention to the markets, but enjoy the pool, enjoy the beach, enjoy the family, the grandkids, buckle up for a very volatile second half of the year.* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. You can find us at McAlvany.com and you can call us at 800-525-9556.* * *
This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.David, my wife reminds me often. She says, "Kev, it's summertime. Don't you remember? You've done this now almost 40 years. You should be able to quiet down because your clients have." So I think there are times when you have to back away and go, "You know, I don't know that we always have to be looking for the next newest thing." And summer is a good time to not do that.David: Summer is typically a quieter season in financial markets, not because there's less happening in the world, but because investors are paying attention to other things. School, families, travel, routines change and vacations replace the trading desks, if you're talking about Wall Street. So pull up a volume chart on almost any major index and you'll see it. Participation fades as summer progresses.Kevin: You know what's interesting, though, you asked me this last night when we were talking. You said, "Kevin, when has been the best time to buy precious metals?" And thinking back, it's like, you're right, June and July, I guess after 40 repetitions, we should probably start learning the patterns. This is really a great time because it is quiet.David: The same seasonal pattern generally applies to precious metals. There've been a few notable exceptions since 2015, if you want to stretch back through that 30 or 40 years. But over the last 30 or 40 years, gold and silver have often drifted through the summer in a period of relative indifference. Markets simply lose mind share to other things.Kevin: Well, yeah, to going out into the pool, maybe swimming in the ocean. What do you think?David: Absolutely. The neighbors are coming over. The grandchildren arrive next week. We'll look at the portfolio after vacation. Those are things that press other things to the periphery. And if you're in Europe, perhaps after vacation, it's not next week, it's next month. August is effectively a national holiday across much of the continent. My colleagues and I long ago learned not to schedule business trips to Paris or Brussels or Hamburg in August. Many of the decision makers simply aren't there.Kevin: Well, and especially in the precious metals markets because these guys go on six-week holiday, it seems, the last part of—well, August to early September, but quiet can change.David: It's quiet until it isn't. And when traders return, volume increases, reactions to headlines become more pronounced, and markets begin to move—and it's not always higher.Kevin: I think about the stock market. It usually gets quiet in the summertime. And then when the fireworks start, it usually is early fall or mid-fall.David: When you have major equity market corrections, and that doesn't happen that often, but off of all time highs, when you have a rollover or a top being put in, it's very common. It's very common that it happens in the fall, and the summer that preceded it was an increase in price on low volume. So historically, some of the largest equity corrections have emerged after low summer volume rallies, and prices continue climbing while participation steadily declines.That leaves markets vulnerable once liquidity returns in the fall, or I should say once participants return and liquidity evaporates. So that pattern has preceded not only the routine 10 to 20% corrections, but several of the major bear markets of the last century.Kevin: It was something that you brought up that when you have these all-time highs, but it's on lower volume, that can sometimes be a signal.David: Current scorecard looks something like this. You've got the Dow Industrials that have pushed to another all time high, but on declining volume. Meanwhile, the Dow transports have yet to confirm with a new high. That leaves a classic Dow theory non-confirmation in place. You generally want to see both of those moving at the same time or confirming each other in the price action. One has moved, the other has not.Breadth, however, has broadened considerably. In recent months, we've talked about how there was such concentration in just a few names, and we've begun to see that spread out a bit, which is healthy. So cap weighted, S&P 500 reached new highs in early June. You've got the equal weighted S&P, which broke to fresh highs on July 2nd. Mid-cap stocks reached new highs on June 30th, both the S&P small cap 600 and the Russell 2000.Again, these are your smaller-share indices, followed with new to all-time highs on July 1st. And you look at Barron's. According to Barron's, small caps just completed their strongest first half in 35 years.Kevin: Well, and that's not [unclear]. I love the fact that you're talking about breadth increasing for at least the short term. That's quite a bit healthier than having everything in the Mag 7.David: Right. You've also got the value line index, posted a new all time high on July 2nd. So a lot of things happening there in the early part of the month. NASDAQ, NASDAQ-100, they peaked in early June and have largely moved sideways since then. Sector leadership is becoming more nuanced. You've got consumer staples. They peaked back in February. Consumer discretionary stocks, they topped in May. An indication that parts of the consumer economy may already be weakening.Healthcare recently registered new highs, financials are approaching new highs. Maybe most encouraging is the S&P 500 advance-decline line, which also reached a new all-time high on July 2nd. Again, that's a measure of breadth, an important statistic because breadth almost always peaks before or alongside major market tops. So over the last month, anticipation has improved as leadership broadened beyond the Mag 7. Capital has rotated to a wider range of stocks.It's a healthier market structure than one driven by only a handful of mega cap technology names.Kevin: So could that be a signal that the market could go higher? I mean, does breadth tell us the direction of a market?David: I think what I would say is that we should look for the advance-decline line. If it turns lower and prices are moving higher, then we've got a significant issue afoot. They both move together, you've got something of a confirmation that higher prices are going to materialize. If the prices move higher, but the advance-decline line doesn't, that would be a telltale that this is a market top. For now, that remains constructive, but it's something to monitor closely.Again, should the advance-decline line begin making lower levels or lower highs while the major averages continue climbing, history suggests the market is approaching a more meaningful top.Kevin: What we've seen in the past is that bubbles have a tendency to move. So you can be in the AI sector for a while, and then it moves to semiconductors. So why don't we look at how that bubble is moving right now?David: Yeah. Well, the big story, the narrative has been AI. Whereas they ran, the question was what's going to feed the beast? And you've got to have the equipment, you've got to have the semiconductors. And the semiconductors were getting squeezed in terms of supply with what was viewed as infinite demand coming from AI. They could charge whatever they wanted. So semiconductors, they inherited the momentum leadership from the Mag 7 and the AI names. The question now becomes whether expectations have become impossible to satisfy.Kevin: Well, and aren't we seeing that this week with Samsung?David: Yeah. Samsung Electronics provided a reminder this week. The company projected roughly an 1800% increase in profits. Again, if you're selling the data centers, you've got the chips, 1800% increase in profits. And yet on the announcement the shares fell 7%, dragging down much of the South Korean market. And so that's what happens when expectations outrun fundamentals.Kevin: And this goes away from value investing and more toward momentum investing. You've talked about the differences in the past. So when you have momentum going into a market, everybody is making money. But when you have momentum shifting and coming back out, it can go away real quick.David: When momentum finally reverses, you get today's eager buyers, they become tomorrow's desperate sellers. So 7% declines have a habit of becoming much larger when positioning has been crowded, and it has been crowded. So does 50 to 75% declines sound like an extreme call at this point? You look at Micron, you look at Western Digital, you look at Sandisk, and you have to wonder if those charts are telling you it's over already. In a period of 10 days, you are 25 to 35% off the all-time highs.And again, you roll the clock back two weeks ago, and if you'd said, "Hey, we could see a 35% decline in these names," you would've been laughed at. And yet in the 10-day period, that much is gone. You duplicate that kind of decline over the next 10 days, you're 50% in less than a month. And that happens with highly cyclical stocks.Kevin: So let's move to the precious metals because I had made the comment, if I was just smart over the last 39 or 40 years, I would put most of the money that I put into the precious metals throughout the year, I would do it right about this time. And you had mentioned the 65-week moving average last week. Let's talk about that because the precious metals may be, could they be finding a floor right now?David: Last week, precious metals quietly found their footing. Gold stabilized just above its 65-week moving average after briefly trading below 4,000 an ounce. Silver likewise held support between 57, $58. It remained above its own 65-week moving average. Among the precious metals miners, the HUI, the Gold Bugs Index successfully tested its 65-week moving average, held above it, while the XAU, another miners index, actually never reached that level during the correction. It held above the 65-week without testing it.Technically, a weekly close above 4,150 in gold and—call it 63 bucks, within a dime's throw of that—would provide encouraging evidence that the correction has ended.Kevin: Okay. So we're talking about the correction ending. How about the resumption of the bull market? Are there some technical numbers that you're looking for?David: A weekly close over the 50-day moving average—a weekly close, which this week would be roughly 4,400 and next week 4365—would be considerably more significant, suggesting that the primary bull market has resumed, setting the stage for a retest of the January highs before year-end. So Michael Oliver, a previous guest of the Commentary, looks for that cross of the 50-day moving average this week or next as the all clear signal.Kevin: Okay. So seasonality is truly in play at this point. Dave, you mentioned the Indian wedding season. That comes up, what is that? Is that in September?David: Yeah, August, September, you've got harvest and in an agrarian, largely agrarian culture with the largest population on the planet, with a cultural predilection to own gold, it matters that we come into what's affectionately known as the love trade. So additional weakness can't be ruled out, but seasonally, time is beginning to favor the metals. We're running out of calendar for the traditional summer lull.And historically, if you're looking at the strongest months of the year in terms of performance, just one month performance, January is a strong month. August, September, November, those are strong months. August and September are usually the strongest months of the year. Three of those four months remain ahead of us.Kevin: Which means that you want to buy in the weak months. You're telling us the strong months, but if you're looking to add to positions, June and July really have been a very, very good time to do that.David: Absolutely.Kevin: So if deploying fresh capital, where would you go right now?David: I think as investors return from vacation over the coming weeks, where are they likely to deploy fresh capital? They're probably going to put it into what has been working. So momentum investors naturally gravitate towards stocks that have made new highs. They believe that they're going to make new highs again. Today, that's largely in the AI space. The challenge, Kevin, I think is that hedge funds are already there. I think you look at those charts, momentum may be breaking down, not continuing up.So AI-related positions amongst hedge funds now represent just shy of 10% of all hedge fund assets. It's one of the highest concentrations on record. So when momentum finally shifts, retail investors won't simply be selling into an empty market. They'll be competing with professional money managers trying to exit the same crowded positions. In some respects, it reminds me of the old campfire joke about outrunning a bear. You don't have to outrun the bear, you just have to outrun the next person.Hedge funds are wearing track shoes. Retail investors are wearing flip-flops. When everyone heads to the exits, I think we know who's going to get eaten by the bear.Kevin: So can you make a prediction as to when the volatility will return? It's kind of quiet right now.David: Yeah, I don't know precisely when volatility returns, but given the current concentration in both AI equities—and going back to the hedge funds for a minute, their huge concentration in Treasury positions. I suspect that the eventual move in volatility will be larger than most investors expect. And so, are we starting that now? Do we have to wait until the end of August? It remains to be seen. But if I were looking for the next major rotation, personally I'd be reducing exposure to crowded AI trades while liquidity is still plentiful, and quietly accumulating precious metals and mining shares while competition remains remarkably limited.Kevin: So you would say, again, you're tending towards value investing, moving away from the momentum trade while things are fairly quiet, and going back into the value side.David: I can't help myself. There is a value investor deep inside me, and I like things when they're cheap and I really don't like chasing things when they're expensive. Momentum investors by contrast will likely require— If you're thinking about the metals, they're going to require some price confirmation first. So should gold begin strengthening into its favorable August seasonal window, that price action could attract an entirely new wave of momentum capital into the precious metals complex.Kevin: Dave, I try to share with clients, and yesterday was another example. When they're buying gold, I try to move them away from looking at price because, to be honest with you, over the last four decades working with the family and working in gold, the reason I get up in the morning really isn't price action at all. The reason I get up in the morning is because there's a preservation aspect to gold that just overpowers everything else. And I think the central banks right now are seeing that. They're not really watching the price, are they? I mean, is China watching the price before they make their next transaction?David: Well, I mean, they've been buying consistently for the last 20 months in a row. So to some degree, if you look at the volume of purchases, it tends to increase with lower prices, but they've been consistent buyers. And I don't think that they're afraid of either marginally higher—and certainly it's more attractive if they're adding with lower—prices. But I don't think that's their primary motivation. I mean, seasonality is a part of the picture for retail investors.I think the underlying demand story for gold, it continues to improve. Central banks are obviously a part of that. Purchases in the month of May, which is the most recently updated statistics, 41 tons of gold in May, another solid month of official sector buying. More impressive, however, were China's import figures. And so obviously, we capture some of the central bank buying—10 tons by the Chinese central bank. But China's total imports for the month, 163 tons of gold during May alone. That brings total imports for the first five months of 2026 to 692 tons. That is a remarkable 76% increase from a year earlier.Kevin: How does that factor into global production every year? What percentage is that?David: It's between 3,000 and 3,500 tons of mine supply each year that gets fed into the market. So you look at the 692 tons that were imported by China in the first five months, you're talking somewhere between 19 and 23% of annual global mine production absorbed by one country in five months. It's more than 22 million ounces quietly migrated from weak hands to strong hands.Kevin: So this goes back to the momentum side of things. The momentum investor is missing that completely.David: Right. Western momentum traders have largely reduced their exposure to gold during the correction. They were buying starting at the mid-year last year, 2025, got very interested as the price action was supportive through January of this year. And if you look at COT statistics, commitment of traders reports, and sentiment statistics, daily sentiment index for gold, and many other measures that would suggest they're gone. The hot money has left. They're not interested.So again, the Western momentum trader, they're out on this correction. Meanwhile, you've got the long-term Chinese buyers that have been accumulating those same ounces at lower prices. That transfer of ownership matters. And when we say it's gone from weak hands to strong hands, these are strong hands that are pretty sticky. They own it, they have it. And I don't know what price they're willing to let go of it, but it's nowhere between here and probably eight or $10,000 an ounce.Kevin: And they're not likely to sell based on a profit. David, I'll never forget April 12th, 2013. It was the one day I said, "Okay, let's go fish at Lake Powell." The head trader and I and a couple of other guys, we were out of the office, and sure enough, there was a bear raid. Merrill Lynch and Goldman Sachs had sold 400 tons, a naked short into the market on a Friday, April 12th. It caused the market to go way down, the gold market. And then Monday it went down further. And what we didn't know was there was a transfer of wealth going on at close to the bottom of the market.David: Right. Well, you go back to 2013, 2014 when the market was breaking down. The ultimate lows were December 2015. But that period, 2013 and 2014, the movement of ETF ounces, so Western liquidations, those gold bars moved to Switzerland for refining to kilo bars, and then final delivery to Shanghai and Hong Kong. Ounces that are today not available. So one major difference between then and now, yes, we still see the migration of ounces from West to East.But one major difference between then and now is the increased appetite for gold in China for very different purposes, for net trade settlement purposes. As more global trade is invoiced in Chinese currency terms, gold is a neutral trade settlement mechanism, has a huge new source of demand. You can see this driven in large part by the migration of trade invoicing. The Chinese are wanting to be paid in their own currency.Trade in Chinese currency, according to the Wall Street Journal, has increased fourfold over the last three years. It now is at 8% of global trade being invoiced in RMB. The US Treasury Department. If you just look at this major shift that these structural dynamics— A part of this has to do with central banks wanting to hold a stable reserve.That's what we saw in 2022 when Russia invaded Ukraine, US Treasury weaponized the dollar, and all of a sudden reserve asset managers said, "We can't just sit in Treasuries. We can't be in the above-ground financial universe where the Treasury can target and take what they want." Instead, when the US Treasury Department chose to weaponize the dollar, the world responded and has responded by making the dollar decreasingly relevant.The dollar is a threat, and gold is increasingly the market's expression of preference in a new order for trade and reserve management, both. But that trade feature is really, I think, significant as you look at the ramp-up for gold demand, not only in Asia, but amongst the trading partners with China in particular.Western investors are not going to appreciate these structural changes until gold is marching towards 10,000 an ounce. And then, I think you'll see the preference for a new monetary regime is obvious and reported by CNBC, discussed by Bloomberg, and the new market reality for the metals.Kevin: Well, and it strikes me that even I and you, our entire adult lifetime, what we've been doing when we buy gold is we've been hedging against the devaluation of what is the complete reserve currency of the world. I mean, the dollar was a 100% reserve currency as far as at least oil was concerned. Even guys like us, Dave, are going to have to start thinking differently because we're not just hedging a world reserve currency and the inflation that comes, but we're actually preparing for a major structural change, something we haven't actually experienced in our lifetime. It's a monetary structural change.David: Yeah, the petrodollar recycling certainly reinforced the dollar's role as a reserve currency. And this is different in this particular chapter where we're talking trade invoicing and the option of using a different currency—manufacturer to the world, their currency. And to avoid volatility or changes in the controlled nature of their currency system, with capital control still very much in place, net settlement in ounces is an elegant solution.So I think we quickly forget the structural changes taking place in the gold market. We can lose track of them and be blinded by short-term price action. Indifference to these major structural changes, it's going to be costly for policymakers, and it's going to be a lost opportunity for Western investors. Those who are seeing the opportunity now, Asian investors, they seem, according to the import numbers, to be paying attention, very much paying attention.Kevin: So as we wrap up, Dave, I know you're trying to relax with the family. I asked you if you're getting much relaxation time in, but between relaxation time for the person who's watching this show, what would you encourage?David: Well, I mean, as summer reaches its end, equity market speculators realize they are too concentrated in themes that are now sputtering. Precious metals may again capture mind share again as they did in late 2025. Until then, pay attention to the markets, but enjoy the pool, enjoy the beach, enjoy the family, the grandkids, buckle up for a very volatile second half of the year.* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. You can find us at McAlvany.com and you can call us at 800-525-9556.* * *
This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick along with David McAlvany.Well, David, you are in a different location than the studio right now. Isn't it nice? I mean, technology we can just talk like we did last night. We had a Talisker and we're looking at each other, what, probably 1200 miles from each other. And today we'd like to talk about the Dow hitting all-time highs.David: Yeah. It's like a redo from COVID. We can still hang out and sip a scotch and have a conversation and here we are today. The Dow reached another all-time high this week, and gold continued to test lower levels. Looking only at nominal prices, you could easily conclude that stocks have been the superior investment over the past quarter century.Kevin: Isn't it amazing though, Dave? The Dow is down 70%, actually, relative to gold. Even with gold's correction, the Dow's down 70% over the last 25 years, but like you said, nominally it may not look like that. So explain the Dow/gold ratio.David: The more important measure is not price. It's relative value. And the Dow-to-gold ratio currently stands at roughly 13-to-1. 25 and a half years ago is approximately 43-to-1.Kevin: I remember that.David: It has gone from 11,300 to more than 52,600. It's a gain of 4.6 times. Its value measured in gold has fallen by nearly 70%. So in real money terms, the Dow has not kept pace. Gold's been the winner. It's been the winning trade for almost two decades—more than two decades. And I think the ratio will continue its long-term compression towards the low-single digits, where it has repeatedly bottomed throughout history.Kevin: You know, you had talked to Pierre Lassonde a couple of years ago and he made a call for the Dow-to-gold ratio to get to about 2-to-1. He also predicted a price, didn't he?David: Yeah. I met him at Jim Grant's conference, the Interest Rate Observer author, and he does a great conference at the Plaza Hotel in New York every fall. And Pierre was a featured speaker there last year. So he suggested that gold could ultimately reach 17,250 an ounce, with the Dow-to-gold ratio compressing to 2-to-1. And whether those exact numbers prove correct, I think that's less important than the framework itself. A 2-to-1 ratio could occur through substantially higher gold prices or lower equity prices or some combination of both. If you just held the Dow constant at prices today, you'd be talking about a 2-to-1 ratio and gold price per ounce at around 26,000 an ounce. So I mean, alternatively Lassonde's 17,250, that gold target would imply a Dow of around 34,500 and those are the numbers that he had in mind roughly one-third below current levels.Kevin: I think it's good to go back and just say the Dow-to-gold, ratio when we've seen gold peaking relative to the Dow, has either been 1-to-1 or 2-to-1 each time. So 1896 when it was first being measured, it was at 1-to-1. 1932, it was at 2-to-1. 1980, it got back to about 1-to-1. And so there's nothing wrong with actually saying that we could see that again, but I think we also want to encourage our clients to be willing to let go of some of their gold when we get to those ratios, because that's a good time to buy stocks.David: Yeah. Regardless of the precise path, long-term gold owners, I think they remain on the favorable side of that relative value trend. And to your point, our hope is that investors will eventually be willing to reduce their gold holdings opportunistically when the ratio reaches those historically attractive levels. Ironically, that will likely be difficult psychologically. So gold's strongest advances have historically coincided with periods of financial stress and economic uncertainty. When that fear is fully reflected in equity markets, buying stocks and selling gold will feel exactly backward, even though history suggests that is the correct long-term decision.Kevin: Well, it's exactly against what your emotions are because at that time stocks will look terrible. But oftentimes I'll talk to some of my clients' stockbrokers and explain the Dow/gold ratio to them. It's amazing, professionals, these guys are in this every day and they have a hard time understanding the underperformance of the Dow relative to gold.David: Comes as a surprise. And I was reminded of this several times over the past month. Two professional money managers that I spoke with expressed genuine surprise when I pointed out that gold has outperformed equities over the last 25 years. To them, what is gold? It's an irrelevant commodity. It's a portfolio afterthought. Their preferred allocations remain private equity, private credit. Today's most popular equity trades, what's ever working is what's at the tip of their tongue. So of course there's extraordinary exceptions in terms of outperformance, even relative to gold. Bitcoin since inception, NVIDIA over the last several years, investors who entered those trades early achieved remarkable returns.Kevin: It's interesting you'd say that, too, though, because gold has been sort of the idiot-proof investment. You just go, "I buy a little bit of gold every two weeks." And I know your dad, we've talked about it for 54 years, your dad would buy usually at the highs, whatever the high was at the time, he would end up buying it and he's done just fine. With bitcoin, yeah, there are guys who got into bitcoin early, but think of how many other investments are out there like bitcoin that people got into early and then they just disappeared. So that's not an idiot-proof investment.David: Right. Well, and as we talked about with last week's guest, the contemplation of buying something really cheap. Then the question is, what was your justification for continuing to hold it? Once you had seen it go up 100%, 300%, 500%, 1,000%, most investors have already hit the exits if they were the adopters. But the experience of the average investor is often very different. Once a compelling narrative becomes widely accepted, prices have already appreciated dramatically, and it's that past performance that begins to attract capital precisely when future returns are becoming less attractive. Momentum becomes the siren song, investors flow in. They just can't say no, but it obviously is at a place where you've got much higher cost basis.Kevin: Well, and a lot of people over the last few years have been buying bitcoin at a higher cost basis.David: Yeah. Michael Saylor, who runs Strategy, the company which was MicroStrategy before the rebrand, they own approximately 847,000 bitcoins. That's [unclear]. But their average purchase price is around 75,000 per bitcoin. Even the largest institutional buyer has accumulated much of its position at prices far above those available to the earliest adopters. And that stands in sharp contrast to the handful of investors who accumulated meaningful positions when bitcoin traded below two bucks. Yeah, I know one gentleman who was buying upwards of $100,000 worth of bitcoin at a 1.50 per bitcoin. He's an early adopter. That's not the Michael Saylor story. He's a little bit late to the game with a cost basis of 75,000 and above.Kevin: It reminds me of some of the stories that you hear with multi-level marketing companies. You see these people get fabulously rich because they told five friends who told five friends, who told five friends, but rarely ever do those companies yield much result for anybody who comes in late.David: It works very well for the first five and then there's everyone else.Kevin: That's right.David: The lesson extends beyond cryptocurrency. Late cycle investors, rarely compound wealth at the same rate as those early entrants. And the same principle applies to richly-valued equity markets. Starting valuations matter, putting money to work in the equity markets today, you are talking about very, very costly investments.Kevin: So, speaking of equities, idiot-proof, let's go back to idiot-proof. You buy gold, but you also watch the ratio, right? The Dow/gold ratio is very simple. Anybody can calculate it. You divide the price of the Dow by the price of an ounce of gold. That's pretty idiot-proof. And as you get close to 1 or 2-to-1, you start saying, "All right, maybe it's a good time to buy some stock."David: Yeah, that's why I like using the Dow-to-gold ratio. It largely removes the need to predict absolute prices. So whether gold really reaches 5,000 an ounce or 15,000 or 50,000, it matters less than its purchasing power relative to productive assets. The ratio provides an objective framework for exchanging one asset for another based on relative value rather than, frankly, what can get involved when you're talking about nominal prices: emotion.Kevin: Well, and we were at 42 or 43-to-1 back 25 years ago. Now we're at 13-to-1, but if we go from 13-to-1 down to 1 or 2-to-1, how much does that compound the amount of stock that you can buy?David: Yeah. It really makes the next leg of the trade the very attractive trade. So a move from today's 13-to-1 ratio to 2-to-1 would increase the number of Dow shares purchasable with the same ounces of gold by roughly 550%. That's a lot more shares. All else being equal, that would imply dramatically higher future dividend income and a much more attractive basis from which to compound your equity returns. So the Dow/gold ratio when it gets to those very attractive levels, you are talking about buying basically trough levels in the Dow, which again allows you to compound growth off of that low basis. And in this case, it would be with 550% more shares, 550% more horsepower, so to say.Kevin: Well, and that can happen with the Dow falling either a lot further than we would expect or it can happen with gold rising. Either way, it doesn't matter because we're looking at a ratio.David: Yeah. It's also worth remembering that Lassonde's illustration assumes only a modest bear market in equities. And you might say, "Well, 34,500, that doesn't sound very modest compared to 52,000. That's a big haircut." But historically, major bear markets have followed the extended bull markets, and we're now 17 years into a bull market. We think it could go considerably deeper. Reference points being 1906 to 1921, the Dow declined roughly 69%. From 1929 to 1932, it was approximately an 81% drawdown. From 1937 to 1949, about 68% loss. And from 1968 to 1982, an approximately 63% loss in nominal terms and nearly 80% after adjusting for inflation. And even the most recent secular bear market from 2000 to 2009 produced a decline of roughly 60%.Kevin: So the moves that we're seeing right now, like with the gold correction since January in gold and silver, those are cyclical moves. And the difference between cyclical and secular, because you used the words, "secular bull market," when we're talking about the Dow/gold ratio, we're talking about secular markets, much longer horizon-markets, right?David: Yeah. Robert Rhea and Richard Russell were very keen on describing the difference between secular trends and cyclical trends like the tide coming in or going out. Tide coming in or going out is the secular trend, and then catching a set of waves is like that cyclical trend. So if you can imagine being a surfer getting out on the ocean, and you're waiting for the perfect set. Well, first of all, you don't go out if the tide is out because there's no waves to catch. So you've got to wait for a favorable macro, larger-picture environment. And I think that's where we see gold in a secular long-term trend, bullish trend. And if you get a short-term cyclical period of time where we're just waiting, we're waiting for the next set of waves. The tide is in.Kevin: So catch a wave on gold right now. I mean, as far as the correction, how far do you think it might go down?David: Yeah, I would say that the tide is in. The waves we wait for, and so we're having to be paddling around, waiting. And your question of how low the price of gold goes, I don't know. Corrections take on a life of their own, just like increases in price take on a life of their own. Sometimes they go too far in either direction.I would say this: you can count the downside in hundreds of dollars, the upside in thousands. And that seems like a pretty good balance in terms of risk versus reward. Yep. You could have a few hundred dollars' downside from here, and you've got a few thousand dollars' upside from here as well. And by few thousand, Lassonde's right, it's more than a few thousand.Kevin: Maybe many thousand.David: Exactly. So will gold retrace 50% of its advance? Will it retrace 61.8%? These are your classic Fibonacci numbers. Deeper correction, does it give back the entire move? No one knows, but we're, again, likely discussing hundreds of dollars, not thousands. And I think, for long-term investors, the more important questions are strategic rather than technical.So do you own enough gold if the global monetary system is entering another period of transition? Do you own enough if the Federal Reserve finds itself constrained between persistent inflation and excessive government debt? Do you own enough relative to historically expensive equity markets? Do you own enough in an environment where inflation remains structurally biased upward? I think those are the questions that matter.Kevin: So we've got Kevin Warsh in now, and so the topic again is interest rates. You've got Trump saying that interest rates have to come down. Kevin Warsh has already said that he's going to try to stabilize the inflation rate. So how does that happen?David: Yeah, this is such a fascinating setup, Kevin, because on the one hand, if we get any weakness in the equity markets, you typically see a move towards bonds and you may well see sort of a snap judgment for a week, a day, what have you, looking for a safe haven. But interest rates are already in a very curious place. They continue to reshape the valuation of virtually every asset class, and whether policymakers would prefer lower rates or not, inflation continues to place upward pressure on long-term yields. Yield curve control may eventually become a part of the policy response, but until then, the long end of the Treasury curve remains the market's best estimate of future inflation-adjusted returns. Today, those real yields remain very compressed.Just go back one year ago. One year ago, real yields ranged from 1.2, 1.3% to upwards of 2.5%, and that's across the entire yield curve. Today they're negative. They're negative out until the seven-year mark. And even if you go out to 30-year Treasuries, they offer only modestly real returns in the 60-to-70 basis-point range.I enjoy following those kinds of long-term trends, a resource that I continue to recommend is Ron Griess's Chart Store. Ron produced charts for Ian McAvity back in the day. He was an early Commentary guest, and he provided those charts for him for many years, and his weekly chart service remains one of the best technical resources available, and much of the yield curve work that I was just discussing comes directly from his weekly chart blog.Kevin: We were talking today with Drew, and Drew's been with the company 40-some-odd years. And he said, "All I know is the 65-week moving average is a safe place always to buy." And that's not predicting a bottom in the market, but down where we're at right now, it seems like this is a good place to add some gold.David: Yeah. When you're in a secular uptrend in the metals market and the price gets to the 65-week moving average, it can go lower. But now you're talking about sort of the rubber band stretching on the downside. There's a natural energy which below the 65 week begins to draw it back up.If you already own enough gold, consider whether there's opportunities to compound those ounces through disciplined ratio trades. Over the last six months, we've completed several successful swaps between gold and silver as relative values shifted. Those opportunities will continue to emerge.This is a great time. Again, if you already own enough ounces, talk to your advisor about what's next, because I think as those opportunities emerge, it's worth looking at your portfolio construction because those critical decisions allow for investors to increase their ounces over time without adding new capital.Kevin: We've talked about pricing things in gold and just being able to see what those ratios are. So we talked about the Dow. We also price silver in gold, but isn't the key, Dave, in life and in investing is knowing what to hold at what time, but it needs to be real. So watching these ratios is a way of eliminating worry about the devaluing dollar because you're not basing it in dollars, you're basing it in other real things.David: Yeah. I mean, ultimately wealth preservation is not simply about owning the right asset. It's about exchanging assets when relative values become extraordinarily favorable. The right asset to own is always changing. Well, I take that back. I think gold has never been the wrong asset. The question would be appropriate proportions within a portfolio. We mentioned Richard Russell earlier, and I grew up reading the Dow Theory Letter, and he would often refer to the sort of benchmark for high-net-worth or ultra-high-net-worth families. Everyone should have 3,000 ounces of gold. Now, at 4,000 an ounce today, that's a lot of money, but he was having this conversation when gold was $300 an ounce, and it was just, yeah, it was a ballast asset as a store of value. I think there is an aspect in which gold is always the right asset to own, but there are opportunities when its current market value makes sense to trim it back and migrate it over.We're not there today, but what we're talking about with the Dow/gold ratio is anticipatory. It's in anticipation of making that kind of move, and I think that's still a few years out, but I think we'll get there relatively quickly.Kevin: Well, and we have to keep in mind we're of the generation where the dollar was the reserve currency, bar none. And at this point, what we're seeing is an unofficial reassertion of the gold standard. So what are the trends that you're seeing right now that would continue this secular trend for quite a while?David: Yeah. Two themes stood out to me this week. The first was the growing problem of global economic imbalances. And the second was how those imbalances are accelerating the search for a new international trade settlement system. So we sometimes think about the role that gold plays as a reserve asset amongst central banks, or even for individual investors, that it is their own reserve asset. They can be their own central bank, so to say. But this is a little bit different. This is not just reserves to have sort of a rainy-day fund at the national level, or like you might for your own family. This is a means of playing a different game within the trade system. Michael Pettis consistently provides one of the clearest analyses of the Chinese economy. In his latest essay, he examines China's persistent trade surplus and the unavoidable arithmetic that they impose on the rest of the world.And what he's getting at is that when one country makes a policy choice, it actually forces a policy choice onto other countries as well. One country's surplus necessarily becomes another country's deficit. So China's trade surpluses are enormous, and it corresponds to deficits in other countries. So, roughly $280 billion of surplus with the United States, a combined 360 billion with the European Union, 115 billion with India, 100 billion with Vietnam. And the pattern repeats across much of the global economy.Kevin: But this is a policy decision, Dave, isn't it? I mean, China wants to run surpluses, and it forces everyone else into a deficit.David: That's right. These imbalances are not accidental. They are the result of deliberate policy choices. Beijing has consistently prioritized investment in manufacturing over household consumption, and that ensures that China remains the world's dominant industrial producer. So capital flows into factories rather than towards consumers or various social safety nets which favor households, and that increasing production capacity ends up suppressing domestic demand. The consequence is predictable. You've got surplus production, and it has to be exported abroad. Any surprise that the countries that I just listed have massive trade deficits.Kevin: Right. And so you've heard Trump basically say, we need to bring manufacturing back, but the entire world economy has been reshaped over the last 40 years.David: Yeah. And I think the exports from China have reshaped the global economy. Cheap products—often subsidized Chinese manufacturing—have reinforced dependence on imported goods, and that has steadily eroded competitiveness of domestic manufacturing in the United States and Europe and many emerging economies. This is frequently described as the outcome of free markets, but I think that characterization is really incomplete. Markets cannot be considered fully free when production is heavily influenced by state subsidies, by directed credit, by industrial policy.Kevin: Again, this is a policy decision, like you said, industrial policy.David: Right. What we do see is that Trump and Bessent are working that back, and would like to, if you want to put it in terms of capturing more export market share, you can, but really it's of a strategic nature in terms of onshoring and bringing back manufacturing to the United States.Pettis argues that economic imbalances are fundamentally the result of policy choices. So one country's domestic policy inevitably creates external consequences for its trading partners. China's decision to promote production over consumption has effectively become the industrial policy of much of the developed world. So every Chinese trade surplus requires a corresponding deficit elsewhere. As China exports excess production, other countries import both the goods and the hollowing out of their own manufacturing sectors.Where that becomes critical, think about post conflict with Iran. Kevin, you might recall that we were talking about Department of Defense papers that were published a year, two years ago with a growing concern that we didn't have the ability to replace our own munitions, that there were strategic critical minerals which are only processed in China. And so, to be able to integrate those into the supply chain was already a concern.Now, post the Iran conflict, we've gone through a lot of munitions. How do we replace them? We're talking about a five to seven-year cycle to replace what was just spent, and there is this unhealthy dependence. So, the critical nature of onshoring, it is one of security, national security, and it's something that is not lost on the White House. It is not lost on Scott Bessent. And so, the imperative to onshore, very much there.What that means is that we're making a policy choice that runs at odds with the policy choices of the Chinese, and how are those going to balance each other out? Do they cancel each other? Not really, but they're in direct conflict.Kevin: It reminds me, I remember when I was a kid we were visiting an aunt and an uncle in another state, and I was down in the basement. And the first time I watched Frankenstein, it scared me to death because it was like, "Oh my gosh, he created something that's now on a killing spree." I remember I was a very little kid, and it was not a familiar environment. So, the whole thing was perfect. I'm glad it happened that way because I still thrill at that. But I remember when Nixon went to China, I was a kid. I was about 10 or 11 years old when Nixon went to China. Don't we take the blame a little bit for this reshaping this whole surplus deficit thing? We probably helped design it.David: Yeah. I mean, the irony is that the West helped create the system. 25 years ago the United States and Europe enthusiastically shifted productive capacity to China after China entry into the World Trade Organization. And this was some combination of labor arbitrage, which improved corporate margins. It lowered consumer prices. It boosted multinational profits. And so, of course, corporate America and corporate Europe, they were all over it. They loved it. The Berlin Wall fell, and it set in motion a series of daisy chain events, which led to this great opportunity and caused this boom, a massive boom. At the time, the arrangement appeared mutually beneficial.And at the time, we weren't considering China as a chief competitor, but what has changed in 25 years, now they very much are. And so, today those efficiencies increasingly look like strategic vulnerabilities.Kevin: Yeah. And so, Scott Bessent is saying we need to change that.David: Yeah. Recently summarized what the G7 now broadly recognizes as three interconnected global imbalances, and they play very well into Michael Pettis's comment about these massive global imbalances. Chronic under-consumption in China is one, inefficient productive investment in Europe, and unsustainable fiscal deficits in the United States. These are three things that have to be resolved, and each imbalance reinforces the others. So, China needs a larger consumer economy, but will they do anything? I mean, we've been talking about that. In fact, we've been talking about rebalancing the Chinese economy directly with Michael Pettis.I remember doing an interview with him in China, and he's been on the Commentary a couple of times. That's been a theme that we've been discussing for 15 years, and the consumption share of GDP has not budged in that time frame. China still needs a larger consumer economy. Europe needs to rebuild its productive capacity, as does the United States because of these strategic vulnerabilities. The United States must restore fiscal discipline while rebuilding critical industries at home.Kevin: But as China's grown larger, the one thing that has shifted is our trust. I mean, you talked about vulnerabilities. We're now vulnerable even for our own defense to China.David: Yeah. I mean, underlying all of this is a deeper shift in the basis of trust. Within the global trading system, there's distrust of the US dollar as it has been demonstrated as a weapon in the modern world. The United States increasingly views excessive dependence on Chinese manufacturing not simply as an economic issue, but as a national security risk. Critical supply chain, strategic industries, essential technologies, they can no longer be evaluated solely on the basis of cost. So, again, when we built the system, post-WTO or the inclusion of China into the WTO, it was with the idea of labor arbitrage and improved margins and a better cost for goods delivered. It just seemed to make sense.Kevin: But the Frankenstein grew, and now we're having to deal with the Frankenstein.David: Yeah, it's a different monster. So, that is the fundamental objective behind the Trump administration's trade agenda. They've got tariffs, they've got reshoring, they've got industrial policy, which are all attempts to reduce strategic dependence on China and restore domestic productive capacity. Whether those policies ultimately succeed is an open question, but the diagnosis is becoming increasingly difficult to dispute. The global trading system that emerged over the past quarter-century produced efficiencies, but it also created structural imbalances and strategic dependencies that are now proving increasingly difficult to sustain.Kevin: Yeah. So, Scott Bessent is basically expressing what the Trump administration plan is. And you have, I think, a quote from Bessent that's probably worth reading just so that we can discuss it afterwards.David: It's a long quote, but it comes from his presentation to the Economics Club of New York, and it really gives you a sense for what they're after, which I think is very, very important.He says:Kevin: But, in summary, global trade has to be balanced somehow, and with China running the surpluses that they're running, how does that factor in for gold? Let's go ahead and talk about how this unofficial reassertion of the gold standard has something to do with this.David: Yeah. Balancing global trade is essential. Reducing America's dependence on Chinese imports is essential. And while Treasury Secretary Scott Bessent and Michael Pettis, they approach the problem from very different perspectives, I think both ultimately recognize that the global economy requires a significant rebalancing. So, from Pettis's perspective, failure to rebalance leaves the world vulnerable to an increasingly destabilizing Chinese debt crisis. Their debt to GDP numbers are now second highest in the world. I think my concern is somewhat different.Rebalancing the US trade deficit is a strategic necessity, and that does require reshoring production, rebuilding industrial capacity, restoring supply chain resilience. The difficulty is that we're attempting this transition with roughly 40 trillion in debt. So, you go back to Bessent's comment earlier: among these benefits of leadership are lower borrowing costs. Maybe, but I mean, what they're asking is for the Federal Reserve to lower them now. Don't make the mistake of your predecessor. Get rates down now. Lower rates are good for everybody. Get it done now.And I'm not sure that that's entirely the case. It may be good for asset prices. It may be good for the wealthy you have fat balance sheets and lots of assets to grow in that context, but lowering interest rates when you have inflation in the mix is a dangerous, dangerous thing specifically for American households.Kevin: So, if you're between a rock and a hard place, is there a rabbit that they could pull out of their hat, something that we're not really planning on because you've got high deficits, we can't have a strong currency and bring manufacturing back. What would be the magic cure?David: Yeah. I mean, again, this is where it gets tricky. 40 trillion in federal debt, rising interest rates, an ever-growing interest burden that increasingly impedes fiscal flexibility, that makes industrial policy extraordinarily difficult, perhaps possible without a meaningful improvement in productivity. And so, waiting in the wings, the explanation for this massive improvement in productivity both from Bessent and Kevin Warsh, is that artificial intelligence—Kevin: Ah, that's going to cure it.David: So, if AI produces a sustained productivity boom, the economy could grow faster. We don't have to worry about reigniting inflation. And in that case, we will reshore, we'll reindustrialize. All of that becomes achievable. It remains a plausible, but I think a far from certain, outcome.Kevin: So, if that doesn't happen, where are we as far as this balance of payments? Because we've talked about how the dollar recycling has turned into gold recycling, and it has something to do with this.David: Yeah. I mean, what seems much less debatable is that today's global economic imbalances are approaching a breaking point. And it's difficult to identify another major government attempting to address those imbalances as directly as the Trump administration. Reading through Pettis's article, he basically said the Chinese officials are saying it's not their problem and it's not their policy choice that's causing these imbalances. It's US consumers consuming too much. The US consumer is consuming too much of what? Chinese goods. Other things too, but I mean, it's one thing to push the blame away. I think this is again where you see the Chinese are not addressing this issue head on.The Trump administration, for all its foibles and frailties, for all the things that you can throw at them in terms of criticisms, they are directly trying to address the imbalances. I think it's a low probability event that it works. Its strategy so far has relied on tariffs to alter trade incentives. Simultaneously, they're seeking greater control over strategic natural resources. It certainly was a part of the play in Venezuela, might have been a part of the play in Iran—if not control, then influence.I think that Trump and Bessent appear to believe that lower interest rates would materially improve the chances of implementation of their industrial policy.So cheaper capital reduces financing costs for manufacturing investment. It eases the government's own debt burden. Everything can be done with cheap money.Kevin: Yeah, but cheap money is inflation. How do they do this without higher inflation?David: Right. And that's the question. Do you add fuel to the inflationism fire at this stage in a market cycle, and what risks are you taking in doing so? Whatever good is felt, whatever benefit is dealt out from an increase in asset prices, we're already in bubble territory. And in some segments of the financial markets, you could describe it as a super bubble.Kevin: So you lower interest rates in this environment, Dave. How do they do that?David: Yeah. The challenge is that pursuing lower rates during a period of persistent inflation, that's the dangerous part, because unquestionably it's supportive of asset prices, but it risks undermining inflation credibility.And this is where I don't know that Bessent and Trump are going to get what they want from the new Warsh leadership at the Federal Reserve. Listening to Kevin Warsh last week, one could reasonably conclude that preserving the Federal Reserve's credibility on inflation is his foremost priority.If that's correct, Bessent and Trump may not ultimately receive the monetary policy support that they're hoping for. And I think they probably need that monetary policy support to have an odds-on chance of winning in terms of their policy implementation.Kevin: So let's talk about the increase of the use of the yuan over the last few years. I mean, 15 years ago, world trade, cross border trade with China was zero in yuan. They just had their own currency within their own country.Now I think it's up to about 8%, which, what is that? A 4X increase from what it was just a couple of years ago. Petrodollar, the same thing. The dollar used to buy all the oil. Now, what is it? About 20 or 25% of the transactions are in other currencies with oil. So how does that affect it?David: Yeah. There was an interesting article from the Financial Times this last week titled "Why Sinodollars Outweigh the Petroyuan." And they're making the case that, look, we're not going to see the same kind of thing that happened with the US dollar becoming the petrodollar. It's not going to replace the US currency as the reserve currency. The authors contend that China's persistent trade surpluses prevent the renminbi from becoming a true reserve currency.And so under the logic of Triffin's dilemma, reserve currency issuers must supply liquidity to the world by running persistent trade deficits. And that's something that China has consistently refused to do. The policy choice was surpluses. You can't be a reserve currency unless you're running deficits. That's the old Triffin dilemma logic.Kevin: Okay. But bring in Jeff Curry, because this brings the gold side of it in it. They can actually continue to run surpluses and do international trade with the yuan if it can be converted to a neutral currency like gold.David: Yeah. So there is an appeal to being able to dismiss the Chinese currency as running in competition with the US dollar—the loss of hegemony and the dedollarization trade and the concerns around the dollar losing reserve currency status and what does that mean for US investors and consumers?If you look at the reserve currency through a different lens, there is a possibility, and I think this is what Jeff Curry was getting at. Gold recycling allows for a neutral reserve asset in the settlement of trade, and it does not have to be recycled into whether it's the US dollar or in this case into the yuan or RMB, which would increase the value of their currency and make them less trade-competitive. So today somewhere between a third and half of China's exports are settled in renminbi.That creates what the Times article was describing as sinodollars.Conventional assumption is that the renminbi serves as the natural repository for China's trade surpluses. Yet Beijing's capital controls and exchange rate management make the currency poorly suited to becoming the world's dominant reserve asset.They need to keep a lid on the value, and where gold enters the equation, I think, is where it gets very interesting. Rather than forcing China to abandon its surplus-driven economic model, excess trade balances could increasingly be recycled into gold.Net trade imbalances could then be settled in ounces of gold rather than through continual accumulation of dollars or a broad internationalization of the renminbi.Kevin: So basically that's the cure for Triffin's dilemma with China.David: Yeah. A framework like that would allow for China to maintain its export surplus without placing sustained upward pressure on its own currency.At the same time, it would gradually reduce reliance on the dollar as the world's sole settlement asset. So this suggests kind of an intriguing possibility. Diminishing the dollar's role in global trade—again, we think about gold as a reserve asset, but this is really thinking about currencies and the trade functionality—diminish the dollar's role in global trade does not necessarily require the renminbi to replace it one for one. Instead, a growing share of net settlement could migrate to gold reserves held by trading partners. In that framework, gold functions not as a currency but as the neutral reserve asset that clears persistent imbalances between nations.Kevin: Yeah. So it's an exchange out of the currency. So when a country's paid in yuan or renminbi, it can be exchanged then for gold, and then it becomes an internationally traded currency just like the dollar was—where the dollar was for decades.David: Without creating undue pressure on the currency itself, requiring extreme manipulation to keep a lid on it and not requiring them to compromise on their policy choice to run persistent surpluses.So the question worth asking is whether China is in effect attempting to solve Triffin's dilemma, not by internationalizing the renminbi, but by increasingly using gold as the ultimate settlement mechanism.So the gold story is still being written. When we think about current volatility, these are massive structural shifts in not only the world of reserves but also the world of trade. And this story has a lot longer and a lot farther to go, driven by reserve dynamics, driven by trade dynamics, driven by financial market dynamics, public policy dynamics, but both here in the United States and abroad.Kevin: You know, Dave, before we finish up today, we are at our country's 250th anniversary, and it's an amazing country. You were telling us a story this morning, just talking to your family, and encouraging all of us to tell the story of this amazing country.So you and I talk often about various things that might be vulnerabilities in this country, but there's still nothing like this in the world, is there?David: We're celebrating the 250th year for our country. This is a special week, a unique 4th of July. I think the enduring legacy of the United States is not simply that over that 250-year period it became the world's largest economy, or it became the issuer of the reserve currency to the world. Its greatest legacy has been that the creation of an institutional framework that consistently transformed freedom into opportunity.For those who think we have an immigration problem, who wouldn't want to be here?Kevin: Right.David: There is a reason people want to be here and not someplace else. Has there ever been a place at any time in history that has harnessed the ability of ordinary people to create extraordinary wealth and promote human flourishing?You can look at other periods in history and there was vast wealth, but it was not the ordinary person who had opportunity. It was only the well-connected.Kevin: It was royalty and family names. Yeah.David: Throughout our history, it's immigrants, it's entrepreneurs, it's inventors, it's investors. They have all found a country where success depended less on family lineage than on talent and on hard work, willingness to take risk.And I think behind that, the deeper legacy is a society that combined liberty, property rights, entrepreneurship, scientific curiosity, relatively open markets in an extraordinarily powerful engine for human growth.Kevin: And there was a deeper, deeper philosophical backbone to this country that had to do with values and goodness.David: Yeah. I think that's where sometimes, whether it's in the Commentary or just in conversations reflecting on what was versus what is. Today we could look at this as an era of fiscal deficits. We can focus on political polarization. There is clearly declining trust in institutions. There's a growing sense of entitlement.I think it's easy to forget or to overlook what has made us great as a nation. My dad used to quote, I think it was Aleksandr Solzhenitsyn, and the quote with something like this, "America is great because she's good. And if America ever ceases to be good, America will cease to be great."So, to our deepest legacy, we see it is based on values which have dignified every person, uplifted the downtrodden, protected the innocent and the vulnerable, and our greatness stems from values which, if forgotten, if neglected, will write the last chapter as tragedy.And if they're remembered, if they're elevated, if our stories are told, we'll extend our story another hundred years or 250 years.Kevin: Yeah. So happy 250th.David: Happy 250th. God bless America, land of the free, home of the brave. I'm grateful to have been born here.In my remarks before the Economic Club of Dallas, I detailed how the structural vulnerabilities that we allowed to accumulate over time precipitated a drift into dependence. And last month I noted that under President Trump America has awoken to the risks that we can no longer ignore and is now attuned to the responsibilities we can no longer neglect.
So, tonight, I would like to take the next step and describe our strategy for economic statecraft, by which I mean the disciplined use of America's economic power in service of our sovereignty. We opened a market because it helped to create a more prosperous world, and we tolerated imbalances because American economic strength appeared unassailable.
Over time, however, these choices hardened into habits, habits into assumptions, and assumptions left unexamined into vulnerabilities. We came to believe that access to the American market could be extended without condition and therefore without consequence, and to repair those imbalances with the world is not to retreat from it.
On the contrary, it is to engage on terms that make America stronger. It is to insist on trade that is fair, reciprocal, and consistent with our national interest, and it is to more closely bind what we should have never allowed to cleave our economic and national security.
So, tonight, guided by those priorities, I want to organize our approach to economic statecraft under President Trump into five core principles.
The first is that economic security begins with national capacity. The nation that depends on its adversaries for critical inputs is not truly sovereign, and the nation that reduces its economics to consumption is not truly prosperous.
The second principle is that America's openness will be matched by reciprocity, which is the basis of durable cooperation.
The third principle is that America will write the rules of the next economy.
The fourth principle is that our financial leadership is a central instrument of statecraft. Of course, that leadership role bestows enormous advantages, among them lower borrowing costs, deeper capital markets, enhanced sanctions capabilities, and great influence across the global financial system.
The fifth and most important principle is that economic statecraft must serve the American people. The purpose of American economic statecraft is to connect national power with household prosperity.
* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick along with David McAlvany.You can find us at mcalvany.com and you can call us at 800-525-9556.* * *
This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.
Dave Allman began learning about money at age 11 while working summers on the Boardwalk in Atlantic City, New Jersey. At 19, he graduated from the University of Maryland with a degree in mathematics and bought his first house the following year just outside Atlantic City. After the casino gambling referendum passed and real estate prices began to boom, Dave’s interest in markets quickly overtook his original plans for a career as an actuary.Dave has worked closely with Bob Prechter since 1983. He has lectured around the world on the Wave Principle, Fibonacci relationships, and investor psychology, and has taught advanced Elliott Wave classes to hundreds of investors. "February 1966 is when the Dow peaked, both on a nominal basis and on an inflation-adjusted basis. On a nominal basis it got cut in half. On an inflation-adjusted basis it dropped from 1966 until 1982. And now you got Musk in 2026 being the first trillionaire. To me, those things, there's a rhyming there. It's not anything specific, but to me it's the kind of thing that, as I would say, is really going to look good when you put a couple of arrows on the chart. And if 2026 ends up being a high, and SpaceX ends up being a peak, this doesn't end well. We all know that. But what we don't know is when does it end?" —Dave Allman* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.Dave, we've got a guest today, another Dave. Tell us about him.David: Dave Allman has been in the world of technical analysis for 50 years, and has had the opportunity since 1983 to be working with Bob Prechter. Through the early 2000s—late '90s and early 2000s—he conducted a series of interviews which have been put into a book called Wall Street Uncut: Unconventional Interviews with Giants of Technical Analysis.I love it, Kevin. I think it is a great introduction to the various methodologies, the things that have worked for various traders through time. And there's many of these aspects that weave their way into the way that we manage money, indicators and thresholds and rules for risk mitigation that are absolutely imperative. And so, I look forward to the conversation with Dave.Kevin: I'm also looking forward to hearing what books he reads. I know he is a voracious reader.* * *
David McAlvany: Dave Allman, you've worked closely with Robert Prechter since 1983. And reading your recent book, Wall Street Uncut: Unconventional Interviews with Giants of Technical Analysis, I thought I was reading a Norton's literature anthology of technical analysis. It was fabulous. Where do we start?Your book is not the anthology, like thousand pages plus, it comes in a more modest 250 pages, but the breadth is still staggering. I went to the table of contents, and to be honest, my first question was, where's Bob Prechter, where's Louise Yamada, where's Alan Shaw? And of course, I did find Shaw eventually buried in Chapter 12. I was grateful.These are interviews conducted 25 years ago. And so our listeners might ask, "Are they still relevant after all that time?" And I would say, "Well, is the truth still relevant after 25 years, after 250 years or 2,500 years?" I think the answer's yes. So thank you for opening so many varied lines to the truth, and lining out facts of the marketplace. Welcome.Dave Allman: Thanks, David. And thank you for the very kind and generous introduction. I appreciate it. And thank you. I still have a copy of my Norton's Anthology from when I was at high school, I think. And I didn't finish reading that either.So we decided—we being Bob and I—kicking it around one day, going, "The only time technical analysts get interviewed are on Wall Street Week." And Wall Street Week has a bit of an attitude about technical analysts, and we've come a long way since the year 2000, let alone 25 years prior to then. So we just wanted to try something a little bit different where we let the technical analysts shine and talk about their methodologies more than they were getting to do on Wall Street Week. And that was the inception of the show and it just went from there.David McAlvany: You know what I loved about the book is you've got 16 interviews with technical analysts that share a love for measurement, calculation, deep regard for price action. And all of them share in common charts, capturing history, reflecting bias, revealing belief, showing psychology, and maybe even at times the market psychosis. I'd love to start with your story. From the '80s till now you've operated as something of a charts linguist. You're studying the universal language of investor choice, and we see it in lines, we see it in the technical indicators. Where did that start for you?Dave Allman: Well, I grew up on the boardwalk in Atlantic City. And in 1974, the gambling referendum in Atlantic City failed, and in 1976 it passed. And in May of 78 they opened the first casino in the hotel a half a block away from where I'd spent all my formative summers from when I was 11 years old, right across from Steeplechase Pier. And I got hooked on the gambling stocks. The gambling stocks back then were a less roided up version of bitcoin or AI nowadays. (You used to say they were a less roided up version of biotechs back in the late '90s or dotcoms in the '90s, but now you got to talk AI and cryptos.)And essentially you could throw a dart at anything that had anything at all to do with gambling stocks, and the stocks were just going up. Just up, up, up. And it was a few months until I learned that stocks actually could go down. And that was an interesting lesson, being on margin and finding out that, wait a second, you just lost a lot of money.David McAlvany: Markets can move both directions.Dave Allman: Yeah, but I was absolutely hooked, and that's what led me to get involved in technical analysis. Essentially, Joe Granville, who was hot as a pistol back then, was touring, and he was primarily in the Northeast, and that's Philly and Jersey and et cetera. And Granville was not only a major proponent of technical analysis, he was also an incredibly entertaining, iconoclastic presence, and he was touring. So everything about him drew me into the business.David McAlvany: We've got a number of interns this summer who are learning about equity analysis. And there's fundamental analysis, which we're starting them with, just so that they understand the difference between a balance sheet and an income statement and various metrics, whether it's price earnings ratios or price to book. But the keystone for the summer will be a big book on technical analysis, and for them to bring that synthesis. What was your gravitational pull towards technical analysis as opposed to fundamental analysis?Dave Allman: Well, fundamental analysis didn't work, and there were any number of things that you would see. The basic one is, a stock comes out with good earnings, good guidance, good everything, and it goes down. Or vice versa, stock comes out with bad news, bad this, bad that, and it goes up. There was no rhyme or reason to how that— That didn't work.And there are many, many other examples that we can look at throughout history. I mean, look at how the Federal Reserve Board, for example, who are supposed to be guys who get paid for their opinions and paid to know what to do, and yet completely missed inflation, completely missed the rise in interest rates, were theoretically in charge as interest rates skyrocketed to close to 20% back in 1980, 1981. So it wasn't that difficult to go, "Gee, fundamental analysis probably really doesn't get it. What else is there? Oh, let's check out technical analysis."The first book that I ever read, and what really got my attention because I'm a math guy, was How Charts Can Help You in the Stock Market. The book is by Bill Jiler. It's just a very, very basic—I don't want to say watered down or dumbed down—version of Edwards and Magee. But that was what did it for me, was the first time looking at charts and going, "Oh my gosh, there's a history here. Look at this. And look, there's not just a history that goes back three months or six months or in some cases 10 years or even longer than that, and you can see what happened and how stocks absolutely— Wow, this stock really came from nowhere, or oh my gosh, look, this stock has dropped 80% four other times in its history."You don't get that from fundamental analysis on Wall Street. You don't get that from people who don't look at historical charts and get a sense of what has come before. And if you were asking me, "Hey, Dave, I got a group of interns who I'm trying to teach about the stock market." Man, teach them to look at a chart, teach them to look at history and see what has happened, and not to take what they hear anywhere at face value. Do the research yourself and check it out.I don't want to get too tangential, but one of my pet peeves is when you'll hear some commentator report a number as though it's a big deal number. In fact, a lot of what you see nowadays are numbers that are reported as: this number just set a record, that number just set a record, record number of this, et cetera, et cetera.And you go to read the article— That's the headline— You go to read the article and you see that it's a record because their dataset only goes back five years. Well, this market's been around for 50 years or 100 years. How can you make that statement? And it's because they are casual and sloppy about it. One thing that you would not say about any of the people that are in the book or any of the people that I interviewed over the years was that they were casual or sloppy, because they absolutely, positively were not.And one of the cool things for me about all these people is how old-school things were back then. I used to be the youngest guy in the room, I'm not anymore. But back then we didn't have computers on everybody's desk. You had to use a payphone if you wanted to dial up your broker, and hopefully you could get through so that you could get a quote, and a lot of these people did charts by hand. I think that there's something to the idea that you get more of a read, more of a sense of the market, back then when these guys were plotting and in some cases—Justin Mamis, for example—hundreds of charts a day by hand. He knew whether stocks were moving, were feeling heavy, or whether there was something else happening.David McAlvany: Well, you've got the 16 interviews, and with so many methodologies for technical analysis, is there a Rosetta Stone that ties them all together?Dave Allman: Not that I'm aware of. What I've told people over the years, because I've talked to a lot of guys who trade and a lot of guys who are looking for the Holy Grail and this, that, or the other, and for some guys it's percent R, for some guys it's stochastics, for some people it's SMACD, other people it's Elliott Wave or candlesticks, et cetera.What I've always and ever told anybody is two things: One, if you've got something that works, don't let anybody talk you out of it, no matter how ridiculous it may sound when you've tried to explain it to someone. If it's working for you, then just continue doing it until it doesn't.And the other thing is, you only need one thing. So if you've figured out how to use a moving average crossover and that works for you, use it. If you figured out that, man, I just like to trade breakouts from triangle patterns, and that works for you and you know how to manage the risk and how to allocate your assets accordingly, then use that. I think it's whatever works for the individual.David McAlvany: You curated a list of technical analysts for this book, and I wonder why these analysts, and what do they bring together collectively? Because frankly, being the person who put together the "anthology," my guess is that there was some benefit to you of seeing maybe a little cross pollination or how these systems can in fact work in a complimentary way.Dave Allman: I would love to have some eloquent answer to that, and say that I based the selection on this, that, or the other. Over the course of about a year and a half, I conducted somewhere between 50 and 60 interviews, and they were people who were interesting, who were important to the field of technical analysis, and were active and were interesting and had done something that was unique and worth talking about. And as far as narrowing that list down for the book, I didn't use a specific methodology for saying, "I need this person." Granville's in there because he's Granville. I mean, he's the guy. He was, of all the technical analysts on the planet—ever, I think—he's the one who had the biggest presence—the biggest personality, for certain—and his contributions are significant.But everybody else in the book is in there and has— I think anybody could glean at least one important lesson, insight, value from any one of the interviews and use it to their benefit. And I think that the history's very cool. A lot of these people contributed things that we take for—when I say "we", anybody looking at charts today, anybody using an online trading platform—takes for granted. For example, anytime you go to a trading platform or pretty much even just a— Well, Schwab's a trading platform, I guess, not to just name Schwab, or Interactive Brokers or anybody else. You have a choice of pulling up a line chart or a bar chart or a candlestick chart.In the old days, if you wanted to plot anything, you had to draw that on a piece of graph paper and you had to grab the high and the low and the open, if you wanted it, and the close, and put your own hash marks on the chart, let alone doing candlestick charts. Now all of that's programmed, so somebody like Steve Nison—who pretty much was responsible for making, for popularizing candlesticks in the United States—should be credited for having done that. People take the 200-day moving average like it's some magical indicator; that was Granville. Stage Analysis is Stan Weinstein. Ned Davis took the Weekly Hotline and turned it into a major institutional research firm.And then I guess there's some people in here who I'd consider a little bit more esoteric. Someone like Evelyn Browning, whose dad, Iben Browning, came up there absolutely, going to see that, oh well, he forecast a volcano that didn't destroy the world and that's what people like to talk about, of course. We see that happen in a lot of different areas. But Browning made some very, very insightful comments about long-term climate cycles and climate change and things like that that put everything that is on the top of people's minds today about global warming in a much better perspective.People forget that back in 1975 the big worry was global cooling. They're worried about the next mini ice age. And again, look at the chart. Somebody like Browning, or his daughter who continues his work, look at charts going back centuries and demonstrate climate cycles so that you can see, oh, this has happened before, oh, this isn't that strange, oh, it's not that this was happening a thousand years ago and, gee, we weren't flying airplanes and theoretically destroying the ozone layer then, so maybe it's not us.David McAlvany: There's a common theme throughout your interviews that I picked up on, which is to be a successful trader— And of course, they're using technical analysis to trade and make money. But the common theme seems to be, or themes, risk management and adaptability. Why are those important for investors? How does technical analysis support them?Dave Allman: I think that technical analysis— There's a book by a fellow named Dave Aronson called Evidence-Based Technical Analysis. And I've commented over the years that I wish that somebody had insisted that I read that book before I got involved in the career of looking at charts and technical analysis and being involved in the market. Because basically it's easy, it's so easy for people to look at a chart of, let's just say a moving average crossover. Everybody's familiar enough with that, and go, "Oh, I'd have bought them when the fast moving average crossed over the slow moving average here, and I'd have sold them where the fast moving average crossed over the slow moving average here or maybe down through zero or what have you. And gee, I'd have caught this move and I'd have caught that move and I'd have done this and I'd have made a lot of money." No, you wouldn't.And the reason you wouldn't have is because the mind seems to have a tendency to overlook all those areas where the decision that you would have had to make half a dozen times in real time as that same moving average cost up and then down and then back up and then back down again before it finally crossed up and the move finally occurred, and you weren't there for it because you were burnt out and your discipline had withered a little bit. And I know the question is about risk, and I think that even with any form of technical analysis there has to be an additional layer of, how am I going to risk the funds that I have to put at risk, how am I going to allocate, how am I going to place a wager, how am I going to determine how much money I can lose?I think there are numerous ways to do that incorrectly, and there are numerous ways to do it correctly. I don't know what the holy grail to that is, but it's something that, again, people should not summarily or casually ignore. It's something that has to be dealt with. And as you point out, a number of the guys in here—Stan Weinstein, Justin Mamis, I think specifically Earl Hadady—all talk about risk, but I don't think that any one of them has, "Hey, here's a golden formula that's going to guarantee that you make money."David McAlvany: It seems like there's a rules-based system when it comes to technical analysis, and those rules could be as simple as cutting losses and letting profits run. Those risk mitigators could be back to position limits and what you're describing about, how do you allocate funds, what's too much, what's too little? The unique thing seems to be lack of ego. When I think of the adaptability piece, if the market moves against you, price action is not supportive, you break a particular trend line or what have you, what's the next thing that you do?You don't convince yourself that you're right, you don't even try to justify the position that you've taken, you go ahead and reverse course. And that adaptability seems to fly in the face of a lot of the ways that investors approach the markets, where they get enthusiastic about something, they buy into an idea or a narrative, or going back to our earlier conversation about fundamentals, develop this case that this is the greatest stock ever to own, only to discover you're losing money, but you remain unconvinced that you're wrong—can't be wrong. There's perhaps a little bit of ego involved. I love the adaptability built in.Dave Allman: Right. And if you're not humble, the market has a way of providing that humility, I've found, over the years.David McAlvany: Oh, yeah.Dave Allman: Right? That sounds right.David McAlvany: Oh, yeah.Dave Allman: Again, I don't know if there's a methodology out there. For example, what methodology out there told you that you should buy Micron a year ago, let alone back anywhere coming off the lows in 2009? I mean, the stock was $2 on a split-adjusted basis. It's over 1,000 today. What combination tells you you need to be buying this $2 stock as opposed to another $2 stock? For me, after being in the markets for, I'm pushing 50 years, that's still a question. It's largely a matter of individual makeup.Take bitcoin for example. Forget buying it if you bought it at 10 cents or when it was— Here's a question. In the year 20— What was it? 2010, bitcoin's coming out, it's a new currency, it's trading at 10 cents. And at that point, I had a couple of dollars to rub together. Is that the expression? Not like in 1980 when I had my brief, failed stint as a stockbroker because I wanted to be near the stock market and this is great, they'll pay me and I can be near the stock market and sit and watch quotes all day. But I quickly learned that sales wasn't my forte. It was more technical analysis. And interest rates were at 20%. It'd be great to lock some of that in, but didn't have any money.Why didn't I put 100 or $1,000 in bitcoin in the year 2010 and leave it there? Even if you had, and I've had my share of, I bought this stock. Well, I bought it at a dollar, maybe I'd put a few dollars into it, but there was no way. There's no way that if I had a position in a stock like Micron near the lows in 2010 at $2, that I'd still own anywhere close to that position here in 2026 with the stock at 1,000. It's just not happening. So, what in terms of asset allocation or money management or just discipline tells you or allows you to stay in that stock? I don't think that there will ever be an algorithm that does that for people. I don't think that's possible.David McAlvany: I think it was Ralph Acampora who basically said, "Prudential hired me to get in early and to get out early." And it didn't have to be perfect. You didn't have to be there for the entire move, but you were looking for signals to do something to take action, and that could either be growth oriented or risk mitigation oriented.Many of the interviewees that you have in the book I either know personally or have met at conferences or have read or read about over the past 25 years. And there's no bibliography at the back of the book, but there is reference made to dozens of books throughout.I wondered if you would pick top three, top five that have influenced your thinking and trading practice within this genre of technical analysts.Dave Allman: Personally, like I said, Jiler was not in the book because he wasn't around to interview, but if people could find a copy, I would read that. Granville's New Key to Stock Market Profits was 1960, plus or minus a couple of years, and I think people should read that just to see what the state of technical analysis was way back then. And again, I realize I should be promoting the book, but I would encourage people to read Dave Aronson's book, Evidence-Based Technical Analysis. I think that's important that they read that. Stan Weinstein's book is a great overview and a great presentation of technical analysis on a practical basis.And then I guess the other book that influenced me significantly was not written by Evelyn Browning, but by her dad, Iben Browning, Past and Future History. I think that's an important book as well because it deals with climate and it deals with the influences that climate can have on economies and on people. And I think also because it underscores that there's data and charts going back thousands of years in some cases, and to ignore that data is to be out there playing a game without all the tools available to you to do your best job. And I think that's true as far as markets are concerned too.David McAlvany: Well, to illustrate that point, you mentioned Micron. So, it goes from a $100 billion market cap last year to a trillion dollars this year. Significant move. Does it go to four trillion? Well, one thing we do know is that semiconductors run in pretty radical cycles. We've had 14 cycles since the 1960s, and they tend to be very boomy and very busty. They go up like a rocket and then when the rocket runs out of steam, they roll over hard.If you were looking at a one year chart, you don't have enough data. You don't understand that this is a whole sector that gets sucked up into a fervor and tends to overproduce and then deals with inventory gluts. And you don't see inventory gluts in the charts, but that's what's behind the scenes. You just can't sustain it. The interest and activity in the stock wanes, price suffers, and you start to cycle all over again. But you go back 50, 60 years, and, yeah, 14 cycles for semiconductors.Dave Allman: Right. And sure, you can look at the chart and you go, "Oh, well, it's a parabolic rise, and parabolic rises always end poorly." But something could be parabolic at 200 and then you change the scale and, gee, it looks even more parabolic. It's really parabolic here at 500. And now look, it's at a thousand, now that's a parabola. You still don't know if it's over or not. And in the meantime, you got a couple of margin calls between $200 and $1,000 if you were short the name, right?David McAlvany: Yep.Dave Allman: Hey, I used to read your dad religiously. Can I just mention one thing about something that has stayed with me all these years?David McAlvany: I'd love to hear it. I had no idea. This is great.Dave Allman: It's positive. Anyhow, your dad's on. Back in, I want to say it was 1989, I'm pretty sure that that was the year, but he wrote a piece. He had his regular newsletter. It was like a beige color, right?David McAlvany: Yep.Dave Allman: The paper that it was printed on, because his business is significantly different than it was 40 years ago. But your dad wrote a piece about Russia and about the Russian deception, et cetera. And it was just really so well done talking about the history in Russia and their methodology for combat and for world conquest. And they would say one thing and do something else, and they had a long-range game. I've read thousands of articles over the years, and it's one of the dozen or so that stayed with me. And I just wanted to mention, I always enjoyed reading your dad's stuff, and that piece in particular stayed with me.David McAlvany: Well, if you've got kids, be encouraged. The older your kids get, the smarter you become. And as I look back and go through the archives, I kind of shake my head. I'm like, "Wow, that's my dad. That's amazing." Well, I wanted to thank you for saying that. I appreciate that.Dave Allman: Yeah, it was very cool. Very cool.David McAlvany: At a high level, there's a couple out of this 16 that I think have probably made an impression on you. If there's some things that you could glean or distill down for our listeners, for instance, somebody doesn't know Joe Granville. What is the importance to technical analysis? More interesting to me, frankly, is how he shaped your approach to the markets, what impression he left on you. He's an influence. And this whole principle of ad fontes, go back to the fountainhead. I'm interested in Dave Allman's mind. To get into your mind, I need to know what's been in your mind. Where did it come from? So share with me Joe Granville, Stan Weinstein, Ned Davis. The ones out of the 16 that really shaped your thinking and your approach.Dave Allman: I think Granville, for me at least, was "take nothing for granted. If something is obvious, it's obviously wrong." That was Granville's line. And the market basically took no prisoners. I don't know that Joe would consider himself jaded and cynical. I would absolutely describe myself that way. But Joe didn't cut anybody any slack as far as the market is concerned. He had his song, The Bag-holder Blues. And he had a little sock puppet that he would lecture with. He was a bank credit manager. And Wall Street and the financial establishment— He was anti-establishment. That the establishment was always late to the game, and always after the big run-up in the stock had occurred, they would say, "Give me that bag." And they'd just ride it all the way back down. So Granville was a big influence, a very big influence.David McAlvany: How about Stan Weinstein?Dave Allman: I knew Stan a little bit better because he and Bob were friendly. They were both in the touring lectures circuit pretty much the same time that they would run into it. I used to listen to Stan's update. I used to wait for, I'm going to say it was Friday night. If I find out in hindsight that it was Tuesdays, then oh well. But used to wait to listen to what Stan had to say about the market on his hotline that he would record once a week. That was a paid-for service. You got the letter, professional tape reader which he bought from Justin Mamis. And talk about the markets and whether stock was in stage one, two, three, or four, and what that meant, and not to stray from that.But Stan also, I'd spoken to him a couple of times, and I had just started going out on the lecture circuit, and this is a while ago, and he said, "Dave, be honest, be pithy, have fun." We've spoken, I guess I talked to him sometime in the last few months because of the book, and he's just always been such a great guy, just a great guy.David McAlvany: Before we move on to the next one, I'm curious if his stage analysis, stage one, two, three, and four, can you apply that to an index as well as a stock?Dave Allman: Oh yeah, absolutely.David McAlvany: Where would he put the S&P in stage analysis today?Dave Allman: I don't want to put words in Stan's mouth, and I don't know. I'll tell you where it's not. It's not in stage 4A or 4B. Absolutely not. Nor is it in stage 1 or even stage 2. So I guess that narrows it down, but each stage has an A and a B so we'll leave that there, though.David McAlvany: It's a helpful reference point. It remains inconclusive. That's fine. As you go through your book, there's a lot of these guys that'll reference things like stock market capitalization to GDP. And Jim Bianco was talking in his chapter about how we'd reached an all-time high. It was crazy, never seen before at 150%. This was meaningful to him, not necessarily as a market timing tool, but you know you're in the neighborhood of elevated levels when you're up in this space. Well, that was 150, and that was the year 2000, and now we're 219. And if it was rich then, it's rich now.Combine that with a stage 3-ish. With Weinstein, you begin to build a composite, and I just wonder if that's not a part of the value of reading your book is to say there may be one thing that you trade with, one tool that you use, but there's also a benefit to this composite. If you can create a mosaic of indicators, what does that tell you?Dave Allman: Are you asking what does it tell me today now about the market or in general? As I was putting the book together over the course of the last part of 2025 and the first part of this year, and I'm going through the interviews, many of which I hadn't really looked at for a quarter of a century.And went for a walk with Bob, and I said, "This is really a great collection. There's not a bad interview in here. Everybody has something to contribute. Everybody has something unique to talk about." And I'll be honest, I don't have a "this is the perfect mix" recipe of things you put together. I think that everything that people talk about, all the different techniques and methodologies and approaches that the interviewees discuss are worthwhile. I think everyone brings something to the table, and I think all the stories are very, very interesting. It was a significantly different time when many of these people were coming up in the industry and in the marketplace.David McAlvany: And yet what we see after 25 years is that truth ages well, truth ages well. I read it, and it was refreshing. I've got lots of marginalia in my copy, and some of it is a conversation about current market dynamics. Some of it is historical in nature, kind of tying points made in theory to things that I've observed in the charts through the years, and that's the reality, is truth ages well. So what you put down 25 years ago, what you structured into this book, it's very informative. So we talked about Joe, we talked about Stan Weinstein. Ned Davis, anybody else make the short list?Dave Allman: I've read Jim Stack's newsletter InvesTech Research for gosh, close to 40 years, maybe a little bit longer, close to 40 years. And Jim manages, I used the word runs and he corrected me and said, "manages, Dave." And manages a nice chunk of change these days. And if I were directing someone to a newsletter that I thought was balanced and did a great job looking at history and a great job assessing all the indicators and putting a composite together and is actually doing it in real time, as I say, he's managing money actively. Jim Stack's InvesTech newsletter would be in my top three absolutely. I don't think Jim has a book out himself.David McAlvany: What does make me wonder, if Jim's top three, who are the other two?Dave Allman: Well, I've worked with Bob since 1983. When I first read Bob's newsletter, I got it from a friend who worked with Bob Nurock at Butcher and Singer up in Philadelphia. Nurock was at Butcher and Singer. I was at Janney back then, and I read Bob's newsletter about the Elliott Wave Theory and I said, "Of all the stuff that I've read, technical analysis, this guy's different." And it was different because it was based more on pattern recognition. And at the time, I'm in my 20s, I'm like, "This guy's got to be old the way he writes." And he wasn't, he's only a few years older than I am, and I've been very, very fortunate to have been able to work with Bob for as long as I've been at work with Bob.Back then I told my friends, because I'm in the Northeast and they're like, "Why are you moving to Georgia?" And I said, "Well, it's kind of like I'm interested in physics and I'm getting to go work with Einstein." And I still feel that Bob has a passion for the market—and like I say, he's a few years older than I am—that some people never have in any industry. I mean, the guy still looks at one-minute charts and tick divergences and breadth statistics every day in and out. Some days it's actually daunting, and he's been prolific. So I'm going to put the Elliott Wave Theory in there because I think that people should read that because I think it's a very good perspective.David McAlvany: I read every copy that comes out, and Bob Prechter— It's such a great synthesis, again, of technical analysis—of course, of what he describes as socionomics and cultural insights being brought to bear into a market analysis. It ties into a question I have, maybe something a little bit esoteric. Many of your guests made a correlation between the worlds of music and that of markets. And I was at dinner, this is probably five years ago, and my wife's in a local theater group, and one of the guys that's in that theater group, he's a retired Treasury trader.So over dinner, we're talking about the Treasury markets and we're talking about interest rates, and he starts riffing on his love of Elliott Wave, and I'm like, "I'm going to have dinner with Bob Prechter in about two months." We met up down in New Orleans and had great dinner, and he's like, "Wait a minute, you know Bob Prechter?" And he goes into this story about how he made this big pitch, an institutional pitch in London, and he brings in this full mock-up of a model in a super short skirt, and of course all these very stiff collared London bankers are wondering what the heck is he doing with this rather attractive paperboard life-size model, and she's very—not well covered, I guess you could say.And he goes in and he starts talking about the Treasury market, and he talks about these market indicators. And all this to say, we're sitting there at my friend's house, and he's talking about Bob, and I see all these guitars around his living room, and he loves music. So here's a Treasury trader who loves music. I know Bob absolutely is a fanatical music connoisseur, musician, himself, and there's a couple people in your book as well that there's this connection between the worlds of mathematics, the world of music, and the world of markets. What are your thoughts on that?Dave Allman: I think, is that left brain or right brain? It's left brain, isn't it? Music and math? There's a structure to music and there's a structure to markets, and at the same time, I think Granville talked about it, he would bring up piano when he would do his lectures. Then he wouldn't bring one, they would provide one, and Joe would play it and talk about how there was a pattern to the markets just as there's a pattern in Bach or in Beethoven, and you can tell if a note is out of place. And maybe that's true in the markets with charts as well. So I can [unclear]. I don't have much of a bucket list. I have no desire to play golf or to travel, but I'd really like to play piano better than I do. Archie Andrews played piano at one of the major cycles conferences, which is another book people should read, book on cycles from many decades ago.David McAlvany: Yeah. There was the comments from Connie Brown, and she's talking about octaves and the connection between octaves and Gann lines. And again, I think it is this pattern recognition that fits well. I think for many people the first thought of technical analysis is it's somehow voodoo. It's not tied to reality. It's actually more tied to reality, whether you're talking about Fibonacci sequences, octaves, Gann lines, the interconnection, the deeper realities there.Dave Allman: Technical analysis has come a long way in the last 40 years when it was really, really the ugly stepchild off in the corner, and that is not the case any longer. A lot of that credit goes to guys like Ralph Acampora and Connie Brown. Connie was very active in IFTA and Ralph was one of the founders of the MTA, in getting technical analysis recognized as a discipline pretty much by the New York Stock Exchange, and getting the CMT exam and licensing to be up there with the CFA. So it's the old Virginia Slims: We've come a long way, baby. Yeah.Connie, unfortunately, was very young and she passed away last year. She worked with Elliott Wave International for a while, and Connie could be very, very intense. The book talks about, she was a world-class swimmer and incredibly disciplined and incredibly focused, and she brought that to the markets, too. You don't want to get in between a trader and their focus. The only advice I would give to somebody, yeah.David McAlvany: Well, so we talked about the connection, perhaps esoteric connection, between music and the markets. Now to sort of a practical application. This is as we wrap up our conversation today. Your views on markets, drawing from technical insights, you could give a two-sentence answer, however much you want to go into this. But your insights on US equities, bonds, thinking of Treasuries, precious metals, real estate, the big categories of investments. Technical analysis tells you what about those big asset classes today?Dave Allman: I think a traditional read of technical analysis, stocks are incredibly overextended. But you could have made that statement, as you pointed out, a year ago, or several years ago. When you get an index like price to sales and you go, wow, it was 1.5 in 1987—and I'm making that number up—and it was 2.5 in 2000 and now it's at 4.6. How high is high?David McAlvany: Well, it would be SpaceX at over 110, with the long-term median being 1.6.Dave Allman: I look at things that strike me as— Since you mentioned SpaceX. Bob just wrote this up in the newsletter, but we had talked about it earlier this week. Musk is the first trillionaire, et cetera, et cetera. Everybody knows that. But it got me thinking, because Howard Hughes, right? He was a billionaire and he had something to do with planes and he had long fingernails and went off by himself. When was Hughes popular? And I dug it up. I just Googled it a little bit. And Hughes's peak fortune was— Guess a year. Guess what year Hughes's peak fortune was?David McAlvany: This might be late. I'm thinking of the popularity of airplanes, 1937.Dave Allman: No, no. That's too early. Okay.David McAlvany: Too early.Dave Allman: But he was big then. To be honest, I was thinking Hughes, I was thinking, yeah, he must have been '40s and '50s, right? Anyhow, Howard Hughes's peak fortune was in 1966.David McAlvany: Oh, that's classic.Dave Allman: Now 1966, I'm sure you know, but for the listeners, I mean February of 1966 is when the Dow peaked both on a nominal basis and on an inflation-adjusted basis. On a nominal basis, it got cut in half. On an inflation-adjusted basis, it dropped from 1966 until 1982. Now you got Musk in 2026 being the first trillionaire. To me, those things— There's a rhyming there. It's not anything specific, but to me it's the kind of thing, as I would say, that's really going to look good when you put a couple of arrows on the chart. If 2026 ends up being a high and SpaceX ends up being a peak— I mean you can't have extreme— This doesn't end well. We all know that. But what we don't know is when does it end?David McAlvany: Right.Dave Allman: Technical analysis is going to give you, whether it's pattern recognition and you're counting to five with Elliott Wave or whether you're looking at moving averages and you're using a cross, or whether you're looking at a divergence on a stochastics or an RSI or Williams %R or whatever, there will be a signal, and that signal might be on the five-minute basis or the 10-minute basis or a 15 or a 60, or a daily or a weekly, whatever.What you don't know is is that the big kahuna? What did I just reel in? Did I reel in, okay, this is just another two-day top and they're going to scream to a new high next week and I better get out of the shorts that I just put on, or did you catch something bigger and you're going to, as you said earlier, cut your losses, let your profits run? How do you know?So do you trail a stop? Do you use moving averages? What period moving average do you use? Do you try to count to five and count to three and then count to five again? Which one of those is going to work out for you? Sometimes it works out and sometimes it doesn't.As far as bonds are concerned, I have a personal bias. I would love to see rates go into double digits, because I'd like the T-bill interest now that I have a couple of shekels that I could actually collect interest on.David McAlvany: What about real estate? People tend to think of that as a safe place to be. I had that question asked yesterday on a call with 500 people, and they're like, "Yeah, but what about real estate?"Dave Allman: Yeah, real estate's not a safe place to be. Everything cycles. Real estate does the same thing. I have a very difficult time, because my kids both bought property sometime in the last few years, and after me saying prices are awfully expensive. It used to be $100 a square foot would buy you a very nice interior to a home back 30, 40 years ago, maybe even more recently depending on when. Now you get barely builder grade, and they're charging $300 a square foot for it, and people are fighting over it.Now that's changed a little bit over the course of the last couple years as the market's changed and interest rates are no longer 3% to get a mortgage, and people are just like, "I can't afford to pay that." But those things cycle. Real estate's going to come back.It can be a store of wealth, but that depends on whether or not it's a consumable or whether you're looking at it as a speculation. If you look at any long-term chart of real estate prices and you believe at all in reversion to the mean, you know that one of two things are going to happen. Either real estate is going to sit here and prices are not going to go higher for the next 15 years while that average catches up to them, or real estate prices are going to drop 30 to 50%—which, I get it, gee, how could that possibly happen—in order to get back to what's traditional mean level?David McAlvany: Well, there's the mean reversion suggestion, but there's your comments on US Treasuries as well. You see the 10-year march towards 6, 7, 8%, let alone the double digits that you are dreaming and hoping for. If we get them, where do you think real estate is? I mean this is a levered asset.Dave Allman: I don't think they have to go together. Higher interest rates don't need to take real estate prices higher. I would point to 1981, 1982 when real estate was definitely in the doldrums. I was there, I know, and rates were sitting at 20%.David McAlvany: And that's what I meant. It's like the other end of the seesaw. The higher the rate goes, the lower the home value goes, particularly if there's debt attached to it. So the last one, just to get an idea of where you think metals are today and what their future holds as a technical analyst.Dave Allman: If you took Weinstein's approach, I think the metals are certainly in stage three somewhere and haven't quite finished that up where they're ready to launch again, and the plethora of radio ads from a variety of celebrities that came out when gold was 5,000, pushing 5,500 kind of said it's done for a little while.I know the guys who do the Elliott Wave stuff at the office who spend a lot of time with gold are looking— Did a good job calling it or were looking for a correction, and I think for a little bit lower before it gets its feet underneath it again and then heads higher on an intermediate term basis. So I'll defer to them.David McAlvany: Yeah. We've talked to Steve Hochberg, and the impression that I got was short term correction; intermediate, long term, it's got legs. But they also take it a day at a time.Dave Allman: Right, exactly. You've got to give credit to the guys—I think your dad would have been one of them—who were long term gold bugs when gold was— After it peaked at 850 in January of 1980 and it's come down, it's trading $250, $300, $350 an ounce. Long term, the guys are like, "This is real money, this is it. This is where you got to be," and you got to buy gold.You have to respect a guy who had not just the vision but the conviction to say, "I believe that gold is real money and that everything else is fiat, and gold is where I'm going to put my money," and who has acquired and accumulated and held onto gold for the last 30 years, and owns it at less than a tenth of where it's trading today. You have to respect somebody for being correct and acting on that conviction.David McAlvany: It's amazing to have that conversation with my dad. He's got ounces at 35, he's got ounces at 197.Dave Allman: Yeah.David McAlvany: He's got ounces at 102 in the context of the correction from 197 to 102 on its way to 400 and then 875. He owns more ounces at 450 off the correction of 875. And he's really not particularly perturbed by the fact that he has ounces at 850-ish and 450-ish and 102 and 197.Dave Allman: Yeah. That's the whole we're not worthy. You got to look at a guy like that and you go, "Well done. Well played."David McAlvany: Well, Dave, thank you. I'm going to say the same. Well done and well played. I appreciate your book. I appreciate the effort that you put into the interviews a couple decades ago and the effort to put it together into a book format. It's a great primer into the various methodologies and technical analysis. It broadens the scope and I think is going to create a good bit of stir. So I appreciate that. Thank you very much, and thanks for joining us on the Commentary.Dave Allman: David, thank you for taking the time and guiding the interview. I appreciate it very much.David McAlvany: Dave, if people are interested in finding more about your work and ordering a copy of the book Wall Street Uncut, where can they find it?Dave Allman: It's elliottwave.com/mwc. That will take them directly to a link for the book. I can say with certainty the book is better than I've represented in this interview.David McAlvany: Oh, this has been fun. This has been fun. Dave, I look forward to a dinner in Atlanta. Next time I'm through town, I'd love to get together.Dave Allman: Okay, terrific. Thank you, David. Very nice talking to you.* * *
Kevin: What an interesting interview, and I think it was a shock to you, Dave, that David Allman was also reading your dad probably when you were just a child.David: Well, I actually have some recollection of that particular newsletter—Kevin: I do, too.David: —because it was the look at Glasnost and Perestroika and the very complicated and well thought-out program of opening up and bringing in foreign direct investment into the Soviet Union to sort of refortify and retool for the next stage of progress towards world domination. Now outside of the Cold War that might sound a little bit crazy, but that was the world we lived in, and that was the letter my dad wrote, and it does put a smile on my face.Kevin: He really had so much respect for your dad too, because here's a technical trader. Prices mean a lot to technicians. Yet when it came to gold, he just basically said of your dad, well done and well played. For a guy to go all the way back to 1972 and just see what gold is, whether you buy it low or whether you buy it high, it didn't matter, and he appreciated that.David: Yeah. No, that's a reminder of what my father's legacy is.* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany and our guest today, Dave Allman. You can find us at mcalvany.com and you can call us at 800-525-9556.* * *
This has been the McAlvany Weekly Commentary. The views express should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick along with David McAlvany.David, today we were just sitting in our meeting with everyone and I was thinking, who gets this every week? I just have to pinch myself. I've done this almost 39 years. I used to think that with your dad before you ever took over. I was like, how do we get such amazing market analysis? And so many people don't.David: I wondered what you were grinning about. You're sitting there with a big grin on your face.Kevin: I was listening to Morgan Lewis, and I was just going, "Wow, he's giving me information about the 'Warshing machine,'" is I think what you said. Kevin Warsh coming in. And you were talking about this memorandum of understanding that's coming up here. And I was thinking anybody who would really want to hear what's going on would want to be in the room at that time. And there's going to be an opportunity for that today.David: Yeah. Yeah. Before we begin our comments today, just to invite you to our conversation taking place Wednesday, June 17th, 2:00 PM Mountain Time, I'll be joined by Morgan Lewis, Philip Wortman, Robert Draper, the McAlvany Wealth Management Team, for a live webinar titled "When Old Assumptions Fray: Positioning for the New Market Order."The conversation will examine what happens when the assumptions investors have relied on for decades begin to break, and we'll connect the forces shaping debt, inflation, currencies, commodities, and real assets, and discuss what those changes may mean for the way investors think about risk and about opportunity, portfolio strategy, all of those things in the years ahead.To register, you can use the link in the description of this YouTube video, and if you're listening through a podcast app you'll find the registration link in the show notes. So even if you're hearing this after the live event, I still encourage you to register. You'll receive access to the recording, to the transcript, the slide deck, which is, I think, very important, and of course the highlights, summary of the presentation.Kevin: David, it's interesting. We've been broken into two camps as a society. You've got people who are going to get their news from CNN, if you want to call it news, or they're going to get their news from Fox, if you want to call it news. Either way, everybody has their way of analyzing the headlines. So let's talk about the headlines because this is a week of major headlines.David: It is. The headlines drive market assumptions, and we know how fast those headlines can change, of course. At least for now, we've got risk-on in the marketplace. Risk indicators are in line with the headlines, and expectations are for some form of resolution in Iran. So stress in the financial markets is almost nonexistent, with liquidity measures extremely loose, with great enthusiasm over the SpaceX launch last week, and the first trillionaire has been minted.Kevin: Well, okay, so let's go back to the headlines on Iran. Is this going to be the first time in our recent history that we actually have an agreement with Iran, or is this just really for political reasons that we're being told that?David: The headlines Saturday, Sunday, heralding peace in the Middle East, and what is it truly? I think you could describe it as the super TACO. Trump always chickening out is the acronym for TACO, and capitulation is really what you have from the administration, and the perception by the world is that in the wake of this memorandum of understanding, Trump is the greatest paper tiger in US history.Kevin: Yeah. So they still have the uranium. They still are at war. They still have the old regime in power. So I'm wondering what exactly got accomplished.David: Yeah. I mean, the US ability to leverage change in the Middle East, it's done. Domestic political priorities have displaced finishing the engagement with Iran, where a radical regime has less control and influence than before the conflict began. You could argue that given the cooperation with Oman, they have more control and influence in the region and instead, this influence that Iran has, they're essentially dictating the terms of agreement.Kevin: Well, they're calling it an agreement, but it's a memorandum of understanding, isn't it? I mean, what is that?David: Yeah. A signing ceremony is slated for this Friday, and immediately following the signing of the MOU, the straits are scheduled to open. So Trump originally said that the strait would open immediately, and then he backtracked to Friday and the signing of the MOU. Pakistan says that it is a permanent termination of military operations.Kevin: I'm glad Pakistan thinks that.David: Well, and of course they've been a part of the negotiation. So they have sort of the insider view, they've seen all of the talking points, they've seen the agreement, except it's not really an agreement. So if you read it less generously, we have a 60-day ceasefire extension in which discussions for a final deal will continue. So we've got 60 days to discuss what it looks like. We still don't know what it actually looks like.Kevin: Yeah. But what happens to the frozen assets?David: Yeah. During that time frame, the 60 days, Iran will be able to export oil—all throughout that extension—with the US naval blockade ending, and of course with that ending, Iran will be able to import goods of any kind. The US is expected to release billions in frozen assets.Kevin: Right.David: And again, there's the difference of opinion on what is actually going to happen. You've got the deputy foreign minister of Iran saying that only then, when they receive the frozen assets, will they be discussing the nuclear issue.Kevin: Well, I hate to say it. I remember 2015 quite well, and it was like Obama just caved and gave a lot of money to Iran, which it sounds like they still have the uranium.David: Well, what has shifted dramatically, Trump's original unconditional surrender, and this is just a hundred days ago. Well, there is no immediate requirement to remove nuclear material. There is no unconditional surrender. In fact, he's talking about the nuclear material as nuclear dust, and according to Trump, there's no rush to deal with that because it's harmless.It makes you think, what was the justification for US involvement in Iran if the nuclear issue is now a minimal concern? Is it that we bombed them into the Stone Age? I don't think so. I don't think so. Because even two weeks ago there was a discussion of putting troops on the ground in order to go get what was a very existential threat, not only to Washington, DC but to the world, and the proclamations to leadership in Europe. You should be grateful for what we've committed to. We're saving you from a nuclear Holocaust. And now it is nuclear dust, it is harmless, it is trivial.Kevin: Could you imagine what Trump would have said about anyone who said that it was trivial or harmless three weeks ago, four weeks ago?David: Yeah. And he's also saying that Iran will not receive cash funds, which again is not the same thing as what Iran's deputy foreign minister has very clearly stated, but we will lift sanctions so that there's— I guess what I'm saying is not everybody is on the same page. Cash refunds released, enriched uranium. The list goes on.Kevin: Well, we don't take cash, but we take released sanctions, right? Yeah. Relieved sanctions.David: The wild card in the mix remains Israel. Israel, according to the Wall Street Journal, was caught off guard by Trump's saying that there would be no more attacks in Lebanon from Israel, as if that hadn't been discussed or vetted. In fact, Trump has demanded that Netanyahu halt all firing on Lebanon and begin withdrawals of the IDF forces, both demands which Netanyahu has completely rejected.Kevin: Well, and I'm wondering what right does he have to demand anything of another head of state? At that point you start to go, "Okay, well, who's boss here?" And Trump says he's boss.David: Well, there's some irony because if you go back and look at the history of Reza Pahlavi and the overthrow of the Shah and putting Khomeini in power, it was our presumption that we could and would tell the Iranian regime exactly what to do. And it was the nationalist interests of the Shah which were at odds with what we wanted to see happen in the Middle East. And so we put our man in place.Kevin: Yeah, the Ayatollah.David: Correct. And it didn't turn out so well. But again, it's this presumption that what we want, we get. And there's a senior Israeli cabinet minister who said this week that, "As far as we're concerned, Iran is Trump's issue and he has the right to pursue an agreement, but Lebanon is ours, and we must not agree to the Iranian equation even at the cost of severe confrontation with the US." I think Israel is preparing for there being a parting of ways.Kevin: Do you think Israel sees the nuclear dust as harmless?David: There's a real difference of perspective between Trump seeing nuclear dust as harmless and Israeli leadership still seeing it as an existential threat, and Israel is not going to give up the freedom to strike Iran to stop its nuclear program, regardless of how the US president characterizes it. So Trump assumes that he makes the calls. Whatever he says, goes. He said in a Financial Times interview, "I call the shots. He," speaking of Netanyahu, "won't have any choice." And again, this is what he told the Financial Times. "I call the shots. I call all the shots. He doesn't call the shots." And it was interesting, the day those quotes were printed in the Financial Times Israel was bombing Lebanon. So it was very clear like, "Really? You call which shots?"Kevin: Okay. So within his own administration, though, we're talking about the difference between Netanyahu and Trump seems to be stark right now, but how about within his own administration?David: Bessent has said basically we should not lift sanctions. Number one, it's having a good effect. It's having the kind of effect that they want to see, pressuring Iran, and to re-implement them is difficult. You've got Rubio and Hegseth, which think that the pressure campaign is working, and that is the right way to achieve surrender or regime capitulation. And all of a sudden those things are not on the radar for Trump. What is on the radar is the November election.Kevin: Well, and I heard an interview this morning, my wife had Glenn Beck on, and Vance was on, and Vance has always been against any kind of use of military. So they're obviously, they've got to be happy.David: Yeah. It's Vance, it's Kushner, it's Witkoff that are advocating for a deal, and Trump is going for the deal. November is getting closer. The midterms in the US are more of a priority than a durable settlement with Iran. And again, it's not even clear what that settlement will be. It will be determined over a 60-day period in the context of a ceasefire.Kevin: There was a movie that I remember watching years ago called "Vantage Point." I don't know if you remember that, but it was the same story told from seven—I think it was seven—different directions. And the story was quite different each time you looked at the different— I'm wondering if the story that Iran is seeing right now unfold versus the story the US is seeing unfold, and then how about Israel? We've got a lot of different lenses going on right now, don't we?David: Yeah. And I mean, seen through the lens of the Iranian regime, they have survived an assault from the world's greatest military power and are forcing the terms of this negotiation. The things that were originally priorities for Trump are now no longer priorities.Kevin: How does that not strengthen their resolve going forward?David: Yeah. So in summary, Trump sees the negotiation through one lens. Iran sees it through another. Israel, yet another lens, and none of them are operating with the same assumptions. So be aware that headlines will continue to change, very much like the weather, and certainly that has implications in terms of volatility within the markets.Kevin: Dave, you own multiple businesses, and what that means is there are times when you have to sit down and you negotiate with various parties. When you do that, don't you lay out something where everybody sees the negotiation somewhat the same so that you understand what you're agreeing to?David: Yeah. And so, you lay it out very clearly, "This is what we want." And then, the other party says, "All right, well, this is what we want." And then, you begin to figure out what you can actually agree to. So in a negotiation, it's important to be working off the same term sheet. It's very important to get clear on definitions and assumptions and meaning. If anything is clear in this situation, it's that no one has agreed to terms, and no one is operating on the same assumptions.So that seems to me to be a setup for headlines that quickly reverse. If you've got Pakistan's interpretation of what we have this week and what will be signed Friday as a permanent termination of military operations, I think it would be a better description of what they want, versus what is actually in play—no more than a period of temporary restraint. Is this anything more than a temporary pause where everybody gets to reload, regroup, re-arm? That's what it seems to me.Kevin: Well, and what could trigger something even worse? I mean, let's say Israel does strike back in self-defense. Would that be seen as a violation of the agreement?David: Well, again, Israel's view is that the US can do what it wants with Iran, but we're going to do what we need to do in Lebanon, and this is a separate issue altogether. Iran will view any Israeli action as a violation of the ceasefire. While Iran has made it clear that the US is not negotiating on its behalf, and if necessary it'll address all relevant threats from wherever they come.Kevin: It seems like Trump is the one who really needs the deal. I mean, we've got an election year coming over the next few months.David: Yeah. And I think negotiating from a position of strength is where you don't need a deal. But if you do need a deal, that means that you maybe want something more than the other party does.Kevin: And they sense that.David: That's right. That's right.Kevin: Yeah.David: So that's clear to me that Trump needs the deal, and the desire is to ease inflationary pressures from global energy shock. So setting the time frames in this negotiation, he's put himself in a position of weakness as far as negotiations are concerned. Trump wants peace on a time frame that gives Iran a strategic advantage in that peace process. Trump needs resolution, frankly, more than Iran does.Kevin: Okay. So I brought up 2015 when Obama was "negotiating" with Iran, and Iran came out just shining like a rose. It was amazing what they came away with, and then they applied that toward what we've been fighting against since then. What are your thoughts?David: There was criticism of the Obama administration being too eager to complete a deal back in 2015.Kevin: And they were.David: And the current negotiations are setting up to be similar. From Trump's own lips, if you go back to 2020 and play the reel, this is January 3rd of 2020, "Iran never won a war, but never lost a negotiation."Kevin: Now that's Trump saying that. "Iran never won a war, but they never lost a negotiation."David: And I wonder if he remembers saying that because that's precisely what's unfolding.Kevin: Wow. Okay. So this is not some sort of resolution. This is a memorandum of agreement.David: This week's events, an MOU, a memorandum of understanding, is a framework for negotiations.Kevin: Memorandum of understanding. Okay, MOU.David: It's not a deal. It is the framework for getting to a deal.Kevin: There was a house in our neighborhood that was for sale, and I asked the realtor, because we had heard that someone had bought the house, and I asked the realtor and she looked at me and she said, "Oh, it ain't done yet. It ain't done yet, hon."David: Well, so that might be, somebody's made an offer.Kevin: That's right.David: Doesn't mean the offer has been accepted—Kevin: And the sign didn't come off the yard.David: Yeah. Well, as of Friday, nothing is finalized, and we are extending negotiations for a deal. Markets seem not to care about the difference. As far as they're concerned, we already have—Kevin: It's done.David: Yeah, it's done. So Israel has emphatically and explicitly made clear it is not a party to any agreement with Iran arranged by the US, and at best we get 60 days of a ceasefire. So in that time frame oil will flow through the Strait of Hormuz, and the agreement, as we understand it, there'll be no tolls charged during that time frame, which is interesting to think about because essentially the choke point still exists and the pressure that Iran has over the global economy and over inflationary dynamics, that doesn't go away.Kevin: It's just for this period of time.David: For this period of time.Kevin: Okay. But oil has stopped now for how long? I mean, inflation, if inflation is the big issue that's pushing this, that inflation isn't going to go away for a long time.David: No, it doesn't go away and what is more durable than the MOU or the ceasefire is the inflationary impact of losing millions of barrels a day in oil supplies for over 100 days.Kevin: Yeah.David: So we've got CPI at 4.2%. Last week, we mentioned 3.8 just on the eve of the new inflation stat. Later in the week, we got the producer price index at 6.5%. That makes the policy rate of the Fed between three and a half and three and three quarters percent, maybe the second paper tiger.Kevin: You think Warsh is going to address that?David: Rates have not been set to address the price stability mandate in over five years.Kevin: Right.David: So they've done a better job at managing towards full employment, but if you looked at the rates that are set, interest rates compared to the inflation rate, they're not winning. And so Warsh makes his debut Wednesday of this week, and the bond market would like to see a little discipline. They're pricing in rate increases. Question will be, does Warsh satisfy the bond market or does he satisfy the president's expectations for a rate cut?Trump's credibility is shot through with holes. The question, will the Treasury market and the Fed as an institution, will its credibility follow in the same vein, will it follow suit?Kevin: There was a book that you had me read, and you read, that was fabulous, called Treasury's War, and it talked about how a lot of our hegemony worldwide is actually managed by how we let people use the US dollar. But what actually gives it the power underneath is our military. The hegemony militarily worldwide, it allows us to set the terms of how people use the US dollar. Do you see what's going on right now with Iran and this rushing to "an agreement" as a possible loss of credibility for the hegemony?David: Yeah. From a military standpoint, if the US loss of military hegemony is in play, which I think it is, what does that mean for asset prices? What does it mean for Treasuries? What does it mean for the dollar, for gold? We've talked about how important the military is for that hegemony. We've also talked about how important currency credibility, Treasury market credibility, is.Kevin: That's the Treasury side of it.David: And that's the other part of our global monetary hegemony. To some degree, there's been no alternatives. We've talked about the CIPS program where China is seeking to displace the capital flows and the control that we have over the currency pipes, so to say, in the financial markets. The US controls that via the SWIFT system. At the same time, we have Beijing launching mBridge, which is a cross-border currency platform backed not only by, of course, the People's Bank of China, but by Hong Kong, Thailand, the United Arab Emirates, and Saudi Arabia as well.Kevin: They've been working towards that for the last 10 or 12 years, haven't they?David: Yeah. And this is the digital currency platform, which is designed really to also compete with the dollar's role as a trade settlement vehicle. And so, we've got trade settlement which is being undercut. We've got reserve management where central banks are moving out of Treasuries and towards gold. We've got military hegemony which is very much in play. Again, in the same week, we've got the Fed making decisions that are equally relevant to the dollar's role as a currency hegemon.What does that mean for asset prices? If some of the sheen is taken off of the dollar, does that impact the way people view Treasuries? Does it impact the stock market? Does it impact gold? I think the answer is yes, it impacts all of those assets.Kevin: Well, I was talking to a client yesterday who has banking experience. In fact, they own a bank. And we were talking about how in a strange way the balance of payment system is returning worldwide. You're seeing that with the Central Bank's stocking up on gold and owning more gold than they own Treasuries. The old balance of payment system back from the 1800s up until 1914, when a country had a deficit, they had to ultimately satisfy it in something that was real, and that was a beautiful period of time.That was the industrial revolution. Then of course we broke that and we tried to make the dollar the replacement for that. How much, right now, Dave— From a foreign standpoint, how much are we really needing the foreigners to hold Treasuries?David: All of this takes place in the context of deglobalization. We've answered the question, what do central banks want to hold? And the math would suggest that it's gold. The second part of that—not only what, but where—is also in play. We talked about that last week, and having it on hand where it cannot be absconded with, it cannot be taken from you. That's also a reason why gold as a physical asset is more and more important.Kevin: Close to home.David: Yeah. You look at the rest of world holdings of US financial assets. Some of this is central bank, some of this is investor capital, but if you add up both the equity holdings, their investment in US stocks as well as US debt instruments, it sums to 65 trillion dollars, 65.18 trillion. Debt holdings are—Kevin: Foreign money in.David: Yeah. And that's 15.92 trillion in a combination of corporate debt agencies, Treasury securities, probably nine, just shy of 10 trillion in Treasuries. A Federal Reserve—and I think this is why this week is so important—a federal serve that ignores inflation takes for granted the stability of that investor base.A foreign investor in US assets is looking at a variety of things. One, what is the return on capital? Maybe that's a less important concern for central banks, but certainly from an investor standpoint you'd like to know what interest rates, what the compensation is for loaning money to, again, corporates, agencies, the Treasury itself.Kevin: Plus they need the currency that it's invested in to stay somewhat strong.David: That's the other piece is that weakness in the dollar is sort of the double whammy. Rates that aren't sufficient to justify the allocation, and a currency that is in question, it's very, very relevant. The Federal Reserve has a lot at stake if they choose to ignore inflation. They were late to address their inflation concerns. They considered them to be a transitory—the word that got used over, and over, and over, and over again. And is this another version of transitory?Well, again, judging by where the target rate is, three and a half to three and three quarters percent, and where the inflation rate is, not only is it transitory, but they're not doing enough to get it in line. They have not tamed it in five years. So that in itself is a credibility issue in terms of the decisions they're making, the policy choices.Yes, it's been favorable for employment. No, it has not been favorable towards those who may still be employed but are having a hard time paying their bills, running out of money before they run out of month.Kevin: So there's an expectation this week with Warsh.David: Yeah. A bond investor cares about income, cares about currency stability. The Fed's recent record has been to do too little, too late in the fight against inflation, and Warsh can change that record. But the cost, the cost for Warsh will be either an angry equity investor base—you start to shift rates higher and there's a real implication for the stability within the equity markets.Kevin: And watch Trump react, too.David: And that's the other thing is that if it's not an angry investor base, equity investor base, you may have a very angry president. Recall his comments in the Financial Times about Netanyahu. "I call the shots. I call all the shots." Well, the bond market wants confirmation that the Federal Reserve is not a shadow White House operator. They want to know that the institution has independence. And if it doesn't, there's massive implications in terms of higher rates priced into long end of the curve. Warsh has to choose this week, and of course in future months, who he wants to be reviled by. He is not in an enviable position. This is not a great role. Popularity, you got to kind of check that at the door. So Trump plus the stock market, do you want them to be on your side, or the bond market, which would include the nearly 16 trillion in foreign capital sitting in US fixed income assets?Kevin: The game seems to have been, for many years, this financial repression is to have negative real rates of return so that you can work your debt off. You can inflate your way basically out of a situation. But it reminds me of sleight of hand, Dave. When somebody is really good at sleight of hand, what they get you doing is always looking at the wrong hand. But there's a point when you know the trick and you can just watch the hand and go, wait a second. This is repression. This is negative real rates of return. I'm losing money. Could this be a shifting, a turning point right now with a new Fed chairman?David: It seems like yesterday and yet it was almost two decades ago that we were talking with Carmen Reinhart on this program, and she was describing how, from a policy perspective, it was necessary to corral investors. And the process of financial repression was one of choosing winners and losers.Kevin: She called it a captive audience. Create a captive audience.David: That's right. And it was interesting that after that conversation, I think it was actually after the recorded comments, we were talking about, what do you do personally? She's paying down debt, making sure their real estate had no debt associated with it.Kevin: Buying some gold.David: Owning hard assets, maybe even own some gold was her comment. Well, negative real yields may serve the interest of the Treasury department. Again, that would be where you've got inflation above the target rate.Kevin: Watch this hand.David: That's financial repression. It's a policy tool used to alleviate the pressure on US debt and from US deficits. But bond investors, I think they remain uninspired by being that captive audience, by being treated as grist for the mill. So how you keep them happy is going to be a real trick for Warsh. And that sleight of hand, it'll be interesting to see what he focuses on.Just to reiterate, inflation has been allowed to run hot. If it increases, and inflation rates run higher than the current yields across the yield curve, effectively investors are losing money, and the disincentive to hold fixed income assets becomes more apparent. I think this is the setup which Mike Wilson from Morgan Stanley was getting at. Why is the 60/40 portfolio broken?And again, this is a part of our conversation when old assumptions fray, what we'll be talking about later on Wednesday. There are a whole set of assumptions which are shifting. And some on Wall Street have seen that structural shifts are afoot, Mike Wilson being one of them.Kevin: And maybe Warsh as well. I mean, to be honest with you, you said he's a very capable guy. He's not missing it.David: No, absolutely. But when a country is drowning in debt, there is a strategic advantage to running inflation hot and suppressing interest rates, either by keeping the policy rate low or by buying down the yield curve, which you can do through what we've called yield curve control.Kevin: Which is inflationary, ultimately.David: Should be. Yeah. But repression is essentially choosing the winners and losers in the marketplace. In this case, it's the saver. It's the investor. It's the person with the 60/40 portfolio, or as somebody's getting closer to retirement who has actually even more than the 40% allocated to bonds. Who's the winner? The net winner's the Treasury, who gets to pay off debt with cheaper currency units and is managing, with the help of the Fed, managing those interest payments to a lower level.Kevin: So we've rolled back the time scale sometimes back to Volcker because just about everybody has heard Volcker's name because he did something that was very unpopular. He raised rates. And Volcker was the Fed chairman. It was his last year as Fed chairman when I first started with this company. He was considered tough, but he had a different environment. If Warsh raises rates, what does that look like?David: Well, some experts would see that the fiscal position of the US is already too far gone, even if you're raising rates to battle inflation. Charles Goodhart was quoted in last week's Hard Asset Insights, and this came from the Financial Times, stating that, "fiscal policy has become so unsustainable and so precarious that monetary policy cannot easily work."Kevin: Right. So what Volcker did, that was monetary policy. It doesn't work like it does now.David: Yeah. Particularly not in its regular form of raising interest rates. This is what Goodhart said, "Central banks are going to be subject to much greater pressure. Their freedom to use interest rates as they might want, to bring inflation back to target, is not going to be the same as it was earlier."So again, whether it's Goodhart or Mike Wilson at Morgan Stanley, these are structural shifts. And I can only speculate what Goodhart was thinking as the element that restricts the central bank's freedom. It seems that interest expense could fit near the top of the list. You raise rates, and your interest expense compounds negatively against you. It moves higher and further raises the bar you must reach fiscally.Kevin: I think it was two or three years ago. Didn't you actually have dinner with Goodhart, in England, right?David: Yeah. Yeah. Over dinner, Charles and I had a fabulous conversation about the Suez Canal and his time in the service. So he was in the military in '56. And near the end of the dinner, he commented that it seemed like gold was a great place to allocate savings. His comment was, "It must be a great time to be in the business you're in."Kevin: And guy was a central banker and he was London School of Economics. You would not expect that from those guys.David: Right. Coming from one of the more tenured central bankers in London, ever, and I think he ran the finance department at the London School of Economics for 20-plus years. It was a bit surprising, and he had sort of this wry smile on his face.Kevin: Probably winked.David: Probably a good business to be in. I think people should own some gold.Kevin: That sort of turned out, didn't it? I mean, that was a couple of years ago.David: Well, I hope he was personally allocating at the time. I don't know if he was or not, but it is interesting to reflect back on the conversations with Carmen Reinhart—for the Commentary—and that dinner conversation with Charles Goodhart. There's a recognition that things are different and there's other constraints in play.And so I don't envy Warsh and the calls that he has to make in leadership. Of course, he's not making them alone, but the markets are going to have to adjust to a new style of leadership, and a part of that is that he's not interested in forward guidance. He doesn't like the dot plots. He doesn't want to tell the financial markets what the next moves are going to be by the central bank.And I think some of that comes from his direct experience in the financial markets. He made a good bit of money working as, I guess you could call him protege, Stanley Druckenmiller at Duquesne Capital, one of the finest investors of our lifetime, and kind of made a name for himself originally as one of the chief traders for Soros's Quantum Fund. And then running his own family office, Duquesne Capital. That's where he and Warsh overlapped for a good many years.So the desire to move away from telling the market what you're going to do is with an awareness that the markets will use that information to their advantage. And it makes it even more difficult to accomplish what you want from a monetary policy standpoint if you're just feeding the financial market beast.Kevin: And that was an older policy. I remember when I was taking economics in college, my professor, Dr. Cochran, he would say, "Read the Wall Street Journal. Anything that a Fed chairman says, write it out word for word opposite," because that was back in the day when the Fed didn't tell you what they were going to do. He said, "Just make sure that you don't get caught thinking that they're telling you the truth. They've got their own game to play." Doesn't that give credibility to the Fed if they do things more that way than telling the markets what you're going to do and then letting the market discount it?David: I think it's credibility, yes, but it's also volatility for many market participants because you have the element of surprise. If you don't know what's coming, then you have to make a mid-course correction for the bets, and particularly the leveraged bets, that you've put in play. And so fast, quick, violent reversals within the marketplace come with the diminishment of forward guidance, which is one of the reasons why people have said that the Fed has adopted a third closet mandate or silent mandate, which is sort of managing the financial markets, and forward guidance allows you to do that by guiding expectations.Kevin: So they won't have as much control over the market based on what they do because they're doing it for a different reason.David: Right. Effective monetary policy implementation, I think, is a part of the scheme that he wants to harken back to, maybe more in line with the Volcker era or the Greenspan era.Kevin: So let's go back to Goodhart for a moment because it is interesting that he told you that gold was a good thing to be buying.David: No, it was a couple of years ago. I think that common has aged well. And gold, for central banks, of course, has captured the limelight. They're very interested. They're allocating, they're spending their money accordingly. And I think investors, too, will move gold from the shadows, maybe not even allocating anything to the asset class, very much into a prominent place within their portfolios as they realize what we have for a number of years now, that the Fed is trapped. The Fed is trapped.Central banks more generally face the same constraints. It's not just the Federal Reserve, but it's other central banks that are in a similar position with rising inflation and the classic tools of raising interest rates to battle inflation being less effective or more consequential for the Treasury. Those tools may not be implemented, certainly not to the degree that they were under Volcker. So as inflation enters its second wave, policymakers have both a more limited set of options, and those options are in the current environment less effective, as Goodhart was commenting.Kevin: Okay. So for shorter term, we've had somewhat of a correction in gold here over the last few months. Do you think that some of the events that are coming up right now, do you think we're turning, in the metals? Maybe not quite the bottom, but do you think we're close?David: Closer.Kevin: Closer.David: Yeah. So have we made the turn in metals? Last week we suggested that there were several sentiment measures that had reached levels sufficient to signal a turn, or at least satisfy criteria that have been a part of past positive reversals. So we've met those criteria.Kevin: It's the Hey Mikey criteria. Do you remember Life Cereal had that? It was like, "Oh, Mikey won't like it. He hates everything." And then Mikey likes it. They hate gold right now. It's the Mikey criteria.David: Yeah.Kevin: But that's the sentiment that you want, to be buying gold.David: From a contrarian perspective, yes. So it doesn't mean that we have turned, but it does suggest that the process of putting in a bottom on the precious metals in this precious metals market correction is well underway. I think that caution is warranted with headlines continuing to shift from one day to the next, and traders on again, off again with their bets. Certainly volatility is not behind us.But I also suggested last week that with some follow through to the upside, momentum would create a more sustainable uptrend, and I think we'll know that by the end of the month, and maybe the end of this week, but I think certainly by the end of the month. So if metals prices are finding their feet here in June, gather some momentum in July, the year-end finish may well take out the previous highs that we set in January.Kevin: Wow. So it could really come back. Okay, but this week let's just focus on today, first of all, because you guys have this webinar that everyone should watch if you can, and you can ask questions on this webinar too. So sign up for that.David: Yeah. I mean, we've got over 500 people registered for the call. I think we've got 50 questions in play and about 40 minutes allocated for those questions. So submit your questions, realize that we may run out of time and we're happy to address those questions one-on-one in a personalized format. But this week we look at the, if you want to call it the washing machine to see if monetary policy impacts market expectations and what are those expectations going to lead to? Is it a market melt up? Is it a market meltdown? Or do his policy suggestions create a real crack in the bond market?Again, expectations are so much a part of this, where the bond market has already said rates should be moving in the direction of 25, even 50 basis points higher by the end of the year. The bond market doesn't get what it wants. Again, it's a question of who will revile the new Fed chair, and who is he more concerned with? The approbation and praise of the president, or affirmation of the bond market that, yes, the Federal Reserve is a legitimate organization and is bringing some discipline to this problem?Kevin: And willing to fight inflation.David: What will he do in real terms to fight inflation? Andy Haldane was writing in the Financial Times this last week and he said, "Please don't make the mistake that was made prior to 2008. Please don't make the mistake that was made prior to the run-up inflation in 2022. If you underestimate inflation, you will pay a greater price. And actually the people who pay the greatest price are the people that cannot afford it at all. That is Joe and Susie Lunchbox. That's the average American, the average voter all around the world who is faced with, whether it's food inflation or fuel inflation, or inflation creeping into other areas as well, that's already a price that they can't afford to pay."Kevin: When the question's no longer, can we eat out, but can we eat?David: Exactly. So we may have metals responding in a volatile fashion, one direction or the other. Is it because the MOU really means nothing and this is not peace? This is a ceasefire, and anything can happen in the context of negotiating a lasting peace. Those headlines can shift moment by moment, but Warsh and new style and new tone, a new tenor, from the Fed can also have a similar impact, a dramatic impact, and the direction is not clear.Kevin: So don't place a leveraged bet anytime in the next few days.David: I would say that's a good call.Kevin: Either direction.David: That's a good call. So we have an overloved and overowned US equity market. Valuation suggests that this is an unreasonable time to be very, very, very long, and particularly leveraged, in the stock market. I sat with a gal yesterday and we talked about, what does it mean to be between two and a half and three standard deviations from the mean in terms of stock market valuation? It means that less than three tenths of a percent of all stock market history have you found the stock market more expensive than it is today. So 99.97. 99.97% of the time—Kevin: That's amazing.David: —the stock market is cheaper. There's still this rarefied air where yes, it has been more expensive, but it's very, very rarefied. And in terms of statistics, you should pay attention to the greater likelihood of mean reversion. Is there a catalyst? Do we need a catalyst? Actually, we don't need a catalyst. But what I'm saying is that headlines could provide one, and they won't be the cause. The cause is overvaluation. The cause is overindebtedness. The cause is the trigger. These are all the structural things that exist. We just need an excuse to sell or an excuse to buy. So contrast the overloved and overowned US equity market with an underloved, underowned precious metals complex.I think money allocated now with a two to three year time horizon faces a very different path, whether you're going equities or going towards metals. There is a carve-out within the hard asset space, which we're going to be talking about on the call, where yes, with a surgical precision allocations within the equity market can make sense because there are still pockets of undervaluation, pockets where there's been less investment and less capital flowing for better than a decade, decade and a half. And we'll try to unearth some of those value opportunities as well.Kevin: You’d better have a steady hand.David: Yeah. But I'm still betting on the metals coming out on top. If you say, two to three years out, do you want to be invested in the NASDAQ and the S&P or gold?, I'll take the gold, thank you very much.* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. You can find us at mcalvany.com, and you can call us at 800-525-9556.* * *
This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.* * *
Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany.David, after listening to Morgan this morning, sometimes an axiom or something that you think is absolutely a fact is more like a theory, and then it breaks down to maybe a hypothesis and then it breaks down to just being pure error. As we look at today's society and as we look at the markets, we can't treat the dollar as if it was gold like we did back in the 1970s, right after coming off of the gold standard.David: We can't treat the 60/40 portfolio like it's the standard for portfolio construction. There's a number of things that are tried and true, except they're less true and they're still being tried. I think that's an important thing to keep in mind. The world is quickly changing.Kevin: One of the things that I love about the team you've put together though, Dave, is that they're willing to rethink what they thought were axioms in the past and go, "Well, maybe that's an error right now. So let's rethink and let's test all things and hold fast to that which is good."David: Yeah. Well, we've got an opportunity for you, the listener, a week out. The webinar June 17th is 2:00 PM Mountain Time. The title for the presentation is "When Old Assumptions Fray: Positioning for the New Market Order."Kevin: Well, and Morgan's going to be talking, Philip Wortman's going to be talking. Who else are we going to have on the call?David: Robert will be on the call—Kevin: Robert's going to talk.David: —and I'll be on the call.Kevin: So don't miss that, that's always a great way to hear from multiple perspectives what's going on and what we're thinking.David: For those of you who are watching on YouTube, these are not new glasses. These are readers, it's what happens when you're 50-plus. I'm wearing my—Kevin: You need cataract surgery. That takes care of everything.David: Oh, I see. I see. Well, last week was interesting. Last week was a bruiser all around, particularly for precious metals and related shares. It is in my opinion, my strong opinion, that the metals' multi-decade secular bull trend remains intact, and this is the kind of correction needed to tame animal spirits, to curb excessive enthusiasm on the way to considerably higher prices.The massive move of 2025, which was a 2,800, $2,900 move, depending on whether you count spot pricing or futures pricing, it has corrected beyond the 38% Fibonacci levels nearly to the 50% retracement level. That was back in March. To touch the 50% retracement level, we would need to get to about 4,020 per ounce.Kevin: So we're not far from that.David: Unpleasant as that may sound, this resets the trajectory for a further move higher, wiping out all of your late comer sentiment and opening the door to our anticipated eightfold move off of the 2015 lows at 1,050.Kevin: Yeah, and it's interesting. I want you to talk about open interest going forward because we actually, the open interest on those contracts dipped below that 2015 bottom when we hit 1,050. That was a great signal that it's a good time to enter the market.David: Yeah, we're below those levels now, already open interest in the futures market at 332,000 contracts, 13-year low, bullish sediment in mining shares that's reached less than 3% back in March, down from 100%. I mean, it was a sure win thing as we headed into December and January.Kevin: 100%, yeah, sentiment, and now down to—David: Dropped to three.Kevin: Now we're at what, seven, eight?David: Currently sitting at 7.6. Revisiting the low single digits would, from a contrary indicator perspective, from that standpoint, would be the kind of environment from which a next leg higher would commence. Lastly, the daily sentiment index for gold has hovered in the low 30s, which is neutral to negative, and it has on rare occasions hit the single digits. Every time it has hit the single digits, it's marked the lows prior to a recovery. We're not there, but we are close.Kevin: Right, but you are saying and you're repeating that the actual structural theme of a bull market, you are bullish.David: Oh, very bullish. Very bullish. That's based on a variety of macro factors which haven't shifted at all. We are bullish, and I guess a part of our position as asset managers, we've already defensively trimmed positions. Now we're patiently waiting to get to full aspirational targets. Averaging in at these levels and continuing to process around further lower support levels is what we would advise, whether it's the physical metals or the kinds of things that we're invested in on the asset management side.Kevin: So the short term bulls, they're not there right now.David: No, they're not.Kevin: But the long term bulls?David: The short term bulls, the hot money crowd, they're on the run. Bears have the upper hand. That continues to be the case, but we're getting very close to those lows. Again, strong support levels, and central banks like the People's Bank of China are acting as if they can read our minds. In the past months they've added to their holdings for the People's Bank of China. This is the 19th month in a row with 320,000 ounces, or roughly 9.95 tons, added most recently. So you've got investor outflows, which drew down about 2% of ETF holdings, still showing a net gain for the year of 17 tons year-to-date, sitting in aggregate of 4,121 tons. That's just slightly off the record highs of 4,176 tons.Kevin: Something you said in our meeting before we started this today was that right now in the precious metals market, the investor is somewhat insignificant. It's the central banks, it's the guys who are buying 19 months in a row, they're the ones who are actually influencing the bottom of this market. At some point it can't go lower because they're buying every day.David: Consistent buying for structural and fundamental reasons, for a whole host of reasons, which we'll get to, and they pick up the pace when the price is lower.Kevin: Oh, they love it.David: People's Bank of China trimmed back the pace of purchases as we got into December and January. Then with prices selling off February, March, April, May, they're back to more aggressive.Kevin: You know what the central banks are not buying? Technology ETFs right now.David: Or Treasuries, for that matter.Kevin: Oh yeah, they're selling Treasuries.David: Yes, but since January it comes as no surprise that as gold has sold off, technology ETFs have captured inflows, hot money moving from one trade to the next.Kevin: Talk again about what you call hot money.David: We're talking about pretty significant inflows. 39 billion has doubled in the last two months to about 84 billion going into ETFs, actually leveraged ETFs.Kevin: Wow.David: That was the amount just going into leveraged ETFs on the AI trade.Kevin: That's on the one-for-one basis, then it leverages from there.David: Yeah, two, three, four times.Kevin: Wow, wow. So hot money, let's go back and talk about hot money. You sometimes talk about value investing, that's early money. Would you consider hot money late money?David: It is. It's the momentum crowd, and that includes some hedge funds. That includes a lot of investors who are probably less thoughtful about the world we live in and just looking at the screen and saying, "That looks green, give me some." Part of the reason we remain unconcerned by the precious metals market volatility is that hot money is in fact late money, and it's motivated primarily by momentum. Losing that audience is temporary, with a very firm base of central bank acquirers and long term holders more focused on structural changes around the globe. Gold is rising in recent years because the world is repricing trust.Kevin: That was Morgan's point. On certain things that we've assumed in the past, they don't trust the dollar.David: Yeah. I mean, it's trust in sovereign balance sheets. It's trust in reserve currencies. Gold is repricing trust in central bank policy and trust in paper claims. Central banks are not chasing yield, they're buying optionality. They're positioning and buying neutrality, and they're focusing on final settlement. Wall Street's higher price targets by year-end, they assume that private investors, that hot money crowd, they will eventually follow the official sector into the same trade.Kevin: When we talk about central bank buying, for most of the years that I have been with the company, which is close to 40 years, the central banks had more US Treasuries than they had gold. Now that's reversed. We've got central banks holding larger reserves in gold at this point, and continuing to add, and they're subtracting their Treasuries.David: Yeah, it's central banks making critical decisions with billions in capital to address a rapidly fracturing world. First, they want reserve diversification. Gold recently at 27% of foreign reserves, again, these are the assets of central banks, versus 22% of those reserves held in US Treasuries. It's evidence of that, again, this repositioning for a fracturing world. The March TIC data, Treasury flow data, showed China dumping an additional 41 billion in Treasuries and Japan dumping 47.7 billion in Treasuries.Kevin: So there's outflow with Treasuries and inflow into the central bank's coffers with gold.David: Right, reserve diversification. Certainly you could look at currency support in the case of Japan. In either case, we're looking at a reprioritization and a reconfiguration of reserve assets for a different world.Kevin: You were talking about repricing of trust, but it's not just in the repricing, it's in the repositioning, isn't it? They want to know where that is. Remember about a decade ago that Germany asked for a fifth of their gold that we had here in America?David: Right.Kevin: Remember that was about 300 tons, if I remember.David: That's right. That has become sensitive. Central banks are concerned about trade fragmentation. They're also concerned about custody, where in the world their assets are held and by whom. Settlement and seizure risk became something that was very front-of-mind for them following 2022 when the U.S. Treasury seized half of Russia's reserve assets.Kevin: Yeah. What a signal you send when you basically take away that security by weaponizing the dollar.David: Yeah. It doesn't take a PhD in mathematics to figure out that the U.S. has a fiscal credibility problem. And so this is another issue and motivation by central banks to say, "Maybe the reason we're not interested in your paper IOUs is because we don't think it's the same kind of bet that it used to be." Debt levels are high, deficits are untamed, interest expense continues to rise. And with rates creeping higher, interest rates creeping higher, so will the interest cost associated with debt being rolled over this year, which is about a third of the total.Kevin: Well, the thing is, you don't have a lot of alternatives because the U.S. dollar is the reserve currency of the world. But look at some of the other currencies that people have gone to in the past, like the British pound.David: Yeah. Japanese yen, the euro. Our treasury is not alone. So when we think about the fiscal concerns or there being a credibility problem with various treasuries around the world, UK debt levels are growing at the fastest pace globally of any country. Well, with one exception, Botswana.Kevin: Oh, Botswana.David: Yeah, Botswana.Kevin: There's your option.David: Japan sits with debt-to-GDP north of 200% and is on the horns of a dilemma. Support the bond market or support—Kevin: Or your currency.David: —the currency market. And so despite a $78 billion yen intervention last month, which was followed by a brief respite from decline, the yen is back over 160 to the U.S. dollar. Robin Brooks from the Brookings Institute says, what would be a bond market crisis without the Bank of Japan has morphed into a currency crisis. One way or another, Japan's debt overhang is making itself felt.Kevin: Yeah. So, one of the things that we watch and have been watching for years is, what is the opportunity cost of holding something in a certain area? And what we're talking about is real rates of return, not nominal rates of return on interest. But what kind of interest do they have to pay to be able to save the currency?David: Well, I mean, when you think again about central bank motivation to own gold or to own some alternative, central banks are keenly aware of real yields. News outlets in recent weeks, almost on a daily basis from the Wall Street Journal or the Financial Times or Barron's, CNBC, Bloomberg, they've claimed that gold weakness in this period since January 28th is in anticipation of higher yields in the U.S. And it's not higher nominal yields that matter, it's real yields—Kevin: It's real.David: —net of inflation.Kevin: Well, and so that brings us to something that you've talked about for years. You read years and years ago the Summers-Barsky thesis, which said that real rates have to be substantially higher than what the inflation rate is for someone to sell their gold and buy Treasuries.David: That's right. So Summers-Barsky demonstrated decades ago that extremely positive real yields act as catnip to capital flows. And when there's too much opportunity cost, it weighs on gold demand as capital migrates towards a positive yield, positive real yield. So, the opportunity cost of holding gold has to be significant enough to warrant a reallocation. But wait, we have PCE and CPI, both at 3.8% coincidentally. We've got PPI at 6%, and these are numbers—Kevin: That's producer price.David: Yeah. The wholesale price index. These are numbers that match the level of the yield curve out to one year, and only provide 35 basis points of benefit against the opportunity cost of holding gold—35 basis points of benefit if you go out to two-year maturities, 76 basis points if you go out to 10 years. That is not a sufficient difference to be seen as real opportunity.Kevin: That's close to breaking even. And if you're paying tax on that interest, you're not. Yeah.David: So if you measure against PPI, all yields are negative out to the 30-year mark on the yield curve. So, where do we go from here from the standpoint of real yields? We've repeated this over and over. PPI, the producer price index, bleeds into CPI and PCE over time. You've got wholesale cost inputs that ultimately get passed on through the consumer on a lag. Ergo expect a few basis points of positive yield to disappear by year-end as CPI and PCE get moved higher.Kevin: Dave, a lot of trades are done these days at lightning speed, sometimes 500, 600 trades a second going on, and they're algorithmically decided. This was happening even before we had the talk about artificial intelligence. Those algorithms, though, don't really take into account long history, do they? They're trading on maybe what happened last month, what happened last year, maybe over the last three or four years. But long-term history, this is where we go back to, does an axiom become an error?David: Yeah. The businesses, news outlets, and algorithmic headline traders, they don't know a deep enough history to get what is going on here. Real rates and dollar vulnerability are something that central banks are keenly aware of. And central banks, like us, also have an insurance lens that we see gold through. It's not merely a momentum money maker lens like the hot money crowd. Gold protects against both inflation and it protects against fiscal dominance, financial repression. These are all policy tools, which history will record I think as policy errors. So in essence, gold serves as insurance against policy error, which is again, it's not lost on the central bank community.Kevin: Right. Yeah. So you're talking about central banks, and they do have to look at the long term because they're also looking at the stability of the country for actual currency trading and currency reserves. So with that, though, the central banks are buying gold, selling Treasuries. We've said that earlier in the program. That seems to be a floor in this market. You want to pay attention to them instead of the hot money crowd, which is the late money crowd.David: Yeah. I mean, the central banks create a structural bid in the gold market.Kevin: It's built in. It's like a framework or a scaffolding.David: For as long as they have reasons to be reallocating capital, which those reasons seem to be increasing over time, not decreasing, not diminishing. There is an appetite that hasn't found its limits yet. This is why we've said central banks put in the price floor. So you've got investors, you've got ETF buyers. They add to cyclical upside in the gold and silver markets. They push the price ceiling, but the structural floor is established by central bank buying.Some of those investors, when you think about the dollars that flow in on a temporary basis, they're fickle, they're flighty, and they're already gone. And others are firmly fixed on the fundamentals driving this longer-term trend. Those are folks that probably prefer physical metals to an ETF holding. But we spoke last week about value investing, and just to return to that for a moment—Kevin: The opposite of hot money investing.David: Yeah. Value investors compound off a low basis, and sit uncomfortably at times through periods of unpopularity. And I say this regarding clients that we have helped steward wealth into the metals. Billions of dollars we've positioned in metals, and it's worth many billion more today. They are compounding off of a low basis. And as an encouragement, as a reminder, the most powerful basis compounding comes at the end of the cycle. In essence, the best is yet to come.Kevin: So, a discipline. And now this is a discipline that I've had to learn over the years. Used to be I would check my phone or I would check the computer, I'd see what the gold market was doing. Now I wasn't managing money minute by minute, I was just buying every couple of weeks. But I've developed a discipline, Dave. If you're not managing money professionally, you shouldn't be checking the price all the time. It shouldn't be the first thing you do when you wake up in the morning, right?David: I've traded futures, I've traded options. I've invested in just about every financial instrument imaginable. And it's interesting to see what happens to my own sense of time, depending on the instrument I'm invested in. I buy physical metals and I don't think twice about it ever again. The price is the price.Kevin: It's long term horizon.David: Right. It's a long term horizon. Trading options and futures, I'm interested in the tick by tick change in the price. And I stopped trading options many years ago because I found it negatively impacting my perspective on everything.Kevin: It was shortening it, turning it into just microseconds.David: The only thing that mattered was today.Kevin: Yeah.David: The only thing that mattered was options expiration this week—Kevin: So, what would you advise?David: —or this month or this quarter.Kevin: What would you advise for the person who's wanting to consider themselves a value investor?David: Yeah. Today's market volatility is dizzying. Watch the price action of any asset every day or multiple times a day and it'll drive you crazy. And my advice is: stop it.Kevin: Okay. But like what would you say to the person who says, "All right, I'm not going to check it every day, but what should I be looking at?"David: If you want to know when to worry, worry about the gold price when the Dow/gold ratio is three to one.Kevin: Where are we at now? We're 10 or 11, right?David: 12.Kevin: 12?David: Yeah.Kevin: Okay. Yeah.David: Worry about the Dow gold ratio at three to one when hot money is crowding into gold, and that's sort of with reckless abandon. Again, gold is unique in this way. The panic into gold is usually for the preservation of capital, not usually to capture upside gains.So, what we saw in December and January was opportunistic buying by hot money. It was not what you see characteristic at the end of a bull market when there's a broad base of holders, whether it's central banks or investors, and now there is an external or exogenous catalyst for interest in gold. Could be a currency concern, it could be debt market concern, it could be fragility within the financial markets themselves. It could be concerns over counterparty exposure and risk where you just need to own an asset that isn't going to zero in the context of everything else being questioned on that same basis.Kevin: It's like a life preserver on the Titanic.David: Again, we haven't seen that kind of traffic into the gold market at all yet. So again, the panic to preserve capital, that's very different than the energy and interest that we saw December, January, the fourth quarter, beginning of the first quarter of this year, which was very much the hot money crowd. So I would worry. I would worry when the cocktail party banter includes conversations about Barrick and Newmont mines.Kevin: When your friends are saying, "Hey, what do you think about gold?"David: Instead of Nvidia and semiconductor stocks.Kevin: Right.David: So, speaking of Nvidia, does anyone at the cocktail party today care about Nvidia setting up SPVs, special purpose vehicles, to buy their own product and book them as sales?Kevin: Yeah.David: You can look this up, Valor Compute Infrastructure. The last time we had a fabulously popular Wall Street darling pulling those shenanigans was Enron.Kevin: I have a good friend that I go to church with who lost everything in Enron. He lost his entire retirement.David: I have a good friend who was trading natural gas for Enron, and when they moved to trading dark fiber and wanted to create their own contracts for this new thing, this internet craze was taking hold, right? And you needed to be able to trade fiber optic capacity. And Enron was experimenting with this, and then they started to create these special purpose vehicles to do all kinds of crazy stuff, sort of out of the purview of, well, of everyone.Kevin: But they were buying their own shares.David: Do you know what he did? He sold every share of company stock and quit his job. It was an absolutely bold move.Kevin: Wow.David: And he had colleagues that had 100% of their retirement tied up in Enron shares. That went to zero. So I think there's a lot of investors today dancing with the ghost of Jeffrey Skilling. If you don't know the names Bernie Ebbers, Ken Lay, Jeffrey Skilling, you wouldn't recognize those ghosts as ghosts, and you might not recognize the accounting gimmicks that a company, unsustainable, last gasps of bull markets either.Kevin: Those were the days, Dave, when you were just entering the stock brokerage industry. It had to make a huge impression on you as you were watching that.David: Absolutely. Absolutely.Kevin: So let's go back to the Dow/gold ratio because you were saying at three to one we need to start thinking about moving from gold, some of it, go over into the stock market. Being at, you said about 12 to 1 right now.David: Yeah, 11.79.Kevin: Okay. So where do we go?David: The Dow/gold ratio this morning, 11.79. The gold and silver bull market has another leg higher, which corresponds to the Dow/gold ratio landing in the low single digits. If you want a trigger for selling or reducing your metals exposure, that is it.Kevin: It always has been.David: Yeah.Kevin: Yeah.David: Three to one is what we landed on prior to the Russians invading Afghanistan, and with the assumption that they would march through the Middle East, control the Saudi oil fields, you had 747s loaded with gold exiting the Middle East on its way to Switzerland. That panic into gold—because they were going to lose their cash flowing assets in the Middle East—Kevin: That's what you were talking about earlier.David: That drove the Dow-gold ratio from an economically viable and explainable three to one to a panicked one to one.Kevin: Isn't that amazing?David: And so I don't know that we have a setup—Kevin: When gold equals the Dow, that's one to one.David: And maybe we don't see that. Maybe we don't see that because, again, it took this external geopolitical event, the Russians invading Afghanistan, to take it from a three to one based on economics to a one to one based on geopolitics.Kevin: Who were the guys, who were the investors that were heavily invested in precious metals and commodities that moved—they saw that and they moved out? What was the name of that guy?David: The Bass Brothers.Kevin: The Bass Brothers.David: Yeah. The Bass Brothers had hired a Goldman Sachs alum to advise them on their asset allocation strategies. And they had ridden the hard asset theme hard through the '70s and '80s.Kevin: All the way up.David: All the way up. Rainwater advised that they move to cash, and they sat in cash for 12, 18 months clipping a 16 to 20% coupon. There is interest rates like—Kevin: I remember those days. Yeah.David: And then he advised that they move to equities. They bought the Dow and your large cap stocks in 1982, and—Kevin: We were just off of that one to one ratio. Yeah.David: That's right. So they converted, elevated, inflated, if you will, hard assets into depreciated and cheap paper assets and rode the next paper bull market from '82 to the 2000s.Kevin: And this is what you're talking about right now when we're watching the Dow/gold ratio.David: Yeah. By the way, the operational leverage in the associated shares, if you're talking about gold and silver, they are the place for growth, the growth play of the next several years. I think the commodities will reflect an insurance bid, for the reasons previously mentioned, and they are the safe way to be in that market. There's far more volatility with the producers, but companies digging up that product, they are the growth play.Corrections off of peak levels in January, they're shaping up to offer a great basis to compound off of, whether it's the shares or the physical metals. Of course, we'll let you know if something changes there. Perhaps we will have world peace emerge. We may have liberal democracy prevail. We may have a new period of a geopolitical cohesion emerge. But until then, I think it's safe to assume that geography matters.Kevin: So one can hope, but still buy gold.David: And one can buy gold and keep their eyes open. Things can change.Kevin: Sure.David: And things can change for the better.Kevin: I hope so.David: It's safe to assume at this point that geography matters, that choke point premiums are a thing. We see that in the oil markets and I think we'll see that with more commodities as well. Being in a tier one geography is going to matter a lot more in the years ahead.Kevin: So explain that, the tier one.David: If I own gold in Bolivia, if I own gold in the Democratic Republic of Congo, Cobalt—Kevin: You're talking about gold mining.David: Yes.Kevin: Gold mining. Yeah.David: Or Cobalt in the DRC. That's very different than having the same asset exposure in Canada, really anywhere in North America. And the geography that appreciates and practices, respects, the rule of law.Kevin: Contract law. Yeah.David: Yeah. So again, we're talking about choke point premiums. We're talking about an era of sanctions and tariffs. We're talking about an era of weaponized currencies. These are issues we not only face, but I think we'll continue to face. We will continue to assume that supply chain fragmentation and prioritization of national interests. This is something that is an established trend, not just something we experienced in the fourth quarter of 2025 and now we're onto clean capital flows and a reintegration process in the world. We're talking about resource competition that is going to define the hard asset space in the years ahead.Kevin: What happens if we shrink? I know that they're already revising GDP down, and we're in an election year so there's a lot of lying going on about unemployment and GDP. We always go through that. But if we start to see actual growth shrink in these countries, what's that look like?David: The U.S. is in a substantially better position in terms of risk of recession. Part of that is because we are net exporters of energy, and much of the world are very dependent. So if you created an energy dependency ratio, you'd say these are the countries that are most at risk. And we're at the bottom of that list, not at the top. Nevertheless, we have seen, as you mentioned, a curtailment of growth in the U.S. In late May we had a revision lower in Q1 GDP from 2% to 1.6, and the Atlanta GDPNow has slid from 4%—the estimate for Q2 GDP—it has slid to 3%.Kevin: Which is a 25% difference between four to three.David: Yeah. As GDP estimates shift lower, I think we do need to watch our debt-to-GDP figures. We need to watch stock market capitalization-to-GDP. We talk about the Buffett ratio often. These are numbers that can blow out. We had a similar dynamic to that in the late '90s and early 2000s that occurred with PE ratios. Earnings began to fade even as prices ripped higher, and the PE ratios blew out to all-time highs, ringing the equity bell, so to say. Q1 earnings have been solid, no real concern there, unless we've seen the peak. In fact, you could argue that corporate earnings have never been better. Typically, when you've had a never-than, it's worth keeping in mind kind of where you're at from a historical perspective. It may never have been better, but is it sustainable, and on what basis?Kevin: So I was down in Phoenix about a month ago for Mother's Day, and I saw all the data centers that were being built. These are the largest buildings I've ever seen. I thought the buildings at NASA where they had the Saturn V— These things are gigantic. And I read yesterday that data center expansion, this tech spending, has exceeded everything we're putting into roads and bridges and infrastructure. So is this a boom that could continue?David: I think we certainly have had the data center boom—coming back to earnings for a minute—the data center boom is driving equipment and supplier earnings significantly higher.Kevin: It's got to be.David: The hyperscalers, and I think this continues as long as the hyperscalers are spending hundreds of billions to build out capacity. What's interesting is, those hyperscalers also have an earnings benefit because, from an accounting standpoint, those are costs that are not being recognized immediately.Kevin: They haven't had to pay for it yet.David: Which exaggerates the positive look at their earnings. Of course, on that basis, their share prices are being driven crazy as well. So companies like Google, not only spending more on compute capacity than they're bringing in in revenue, but they're tapping the debt markets for tens of billions of dollars. They're issuing tens of billions in new shares to generate the extra cash needed for the same purpose. And so I think the setup in semiconductors couldn't be more extreme in the opposite from energy. We're building what, in past periods of infrastructure booms—and this is one—may well be overcapacity. When you look at energy, we've under-invested for 10 to 15 years, and the demand has not diminished. As much as the Green Revolution was suggestive of being at peak demand for oil, that has not been the case. We continue to see demographic growth and the 1 to 2% increase in demand every year—Kevin: Are you guys going to talk about that on June 17th?David: Yeah.Kevin: Some of that, that we've got a lot more to go?David: We will. Yeah. And it match that steady increase in demand with supply that is changing. It's not just supply that can be disturbed by geography, which is what we've seen with Hormuz, and of course we have this trend towards nationalization of interests. So if you have it, maybe you don't send it out, or if you send it out, it's at a premium. If it's going through a particular geography and people don't want it to get to its destination, they can charge fees along the way.Kevin: One for you, two for me, one for you, two for me. They're holding back some because, like you said last week—David: The toll system in Hormuz could just as easily be the Chinese doing that through and around the South China Sea. They claim the whole space is theirs. And you've got trillions and trillions of dollars, both of goods and energy supplies, flowing through there. If it's good for the Iranians to charge a toll, maybe it's necessary to charge a toll for safe passage through the South China Sea. There's supply constraints and new added costs that aren't necessarily associated with each marginal barrel of production where geography is absolutely critical. All that is very different than what we have with the semiconductors where we've seen this before. Yes, today hyperscaler demand seems insatiable, so semiconductor companies are responding. What are they doing? They're ramping up production.Kevin: They're spending their money, but they're also borrowing money. You brought that up over the last couple of weeks.David: Yet the likelihood of excess data center capacity is increasing, which suggests that the semiconductor production ramp-up may look like past episodes of cyclical boom and bust in the semiconductor industry. There's a lot of people that aren't going to want to hear that as we have semiconductor companies joining the ranks of the trillion-dollar market cap crowd. We've got 14 companies that are now trillion-plus in market cap, and a good number of those are semiconductor companies that are up only 1000% in the last year. So you could say, "Well, what are they really worth?" Well, given the current data center demand, maybe they're worth a trillion. If data centers are overbuilding for compute capacity, well, we may have an issue. There may be overproduction of semiconductors, and this may be one of the greatest big shorts of all time. I'm not recommending that. But Fred Hickey of The High-Tech Strategist, he recalls, "Since the early 1960s, there have been 14 boom-and-bust semiconductor cycles, and I've experienced at least 10 of them. None of them," he says, "can compare to this one."Kevin: Wow. So this is the biggest of all now. With that being said, okay, this is a huge boom, but when we look at private equity and private credit, some of these guys are gating redemptions right now. So when you see two totally contrasting things going on—you were talking about the difference between the overbuild, possibly, of the capacity of tech versus underbuild of oil—it seems to me like we've got an extreme going on right now where you've got this gigantic boom, trillions of dollars in these companies, yet private equity is saying, "Hey, you can't cash out right now. We're going to gate this."David: Yeah. It's interesting because we originally saw issues in private credit, and the first justification was, look, AI is a real thing. It's changing everything. And yeah, your software-as-a-service companies, we financed a lot of software business, and it looks like that was going to be a bad bet. We financed too much of it. So private credit was giving their mea culpa, too much went to software, but that's the only area where we misstepped.Kevin: Just give us some time.David: As it turns out, there's more than software companies that they're having to mark down, a whole lot more, and we would be remiss if we didn't mention that contagion—contagion is now a thing—moving from private credit to private equity.And specifically, I'm thinking about the capped redemptions, so this is investors who are wanting their money back, and private equity was the first to say, "Well, you asked for 6, 8, 10, 15% of the total assets that we manage, and we've told you that you could only have five in a given period of time, so we're going to cap it at that. And so those of you who are still asking need to stand in line." That was private credit. Now it's private equity.Kevin: And you're saying that's a contagion. It's becoming contagious and it's getting more rapid, more often, more frequently.David: Partners Group out of Zug, Switzerland— If you've never heard of Zug, Zug is a fabulous place to hang out if you're trying to minimize your tax burden. A very interesting fact about Switzerland is each canton in Switzerland will compete for your business and negotiate with you with lower rates of taxation. And Zug happens to be—Kevin: The number one.David: —the number one place, or, in other words, the lowest tax rate in all of Switzerland. So you've got Partners Group, which is headquartered there. They're limiting withdrawals from their flagship European fund. They're also limiting withdrawals from their flagship US fund. And this is not an insignificant group of asset managers. $185 billion private equity shop. It's decent size. So by no means insignificant.So back to private credit, the Wall Street Journal ran an article last week discussing the massive increase in executive- and board-level insurance coverage for private credit operators. This is like your E&O insurance.Kevin: What do they see coming?David: Well, insurers are preparing for a wave of lawsuits and regulatory actions in the private credit industry. And they're now—Kevin: They're seeing the wave.David: Oh, yeah. They're seeing it.Kevin: It's coming.David: So you had Cliffwater, which was added to the list of private credit funds limiting withdrawal requests. Redemption requests hit 17% in the second quarter so far. And again, this is not a small group. 31 billion is their flagship fund. That was followed two days later by Blackstone's flagship $79 billion fund, which has had to hold the line at 5% of withdrawal requests.Under the surface of the markets, Kevin, there's a lot happening. And if you're looking at where the Dow, the S&P, the NASDAQ AI companies are quoted, you would think that not only is all well, things have never been better. And I would just say again, those words, "never been better," are a little bit like, "this time is different." There's a cautionary tale in there. You should look around and see if there's anyone heading to the exits, and if anyone is not heading to the exits, it might be advisable to do so, at least with a part of your capital. There is a lot changing within the structure of the rates market, with interest rates in particular. We talked about Summers-Barsky earlier.Kevin: Right. Could it be a remnant of the past?David: Well, and that's what my colleague Morgan Lewis suggested. He said, "Yeah, that's all well and good. Summers-Barsky does make sense, and yes, it does take real rates of return to draw people away from gold in the kind of environment we have today."Kevin: But what if you don't trust the dollars that are paying the interest?David: What he was basically suggesting is that, different now than the 1970s—or the '80s even—when we had one, two, maybe even $3 trillion in debt, is that Volker could raise rates to double digits and create a very appealing—again, sort of catnip to the capital markets—draw away from gold and into the paper markets and into Treasuries.It's a very different proposition when rates are rising in this environment. With $40 trillion in debt, it takes something that is unsustainable and compounds the unsustainability. It highlights that higher rates in this environment are very different than higher rates in the 1970s and '80s. It is not a destroyer of the gold theme. It actually underscores and reinforces its importance because you're talking about the rot being noticed and drawn into the limelight for investors to say, "Wait a minute, if 40 trillion is unsustainable with a 3.37% interest rate, it's catastrophic at a 5, at a 6, at a 7, at an 8% rate." So rather than higher real rates being the kiss of death to gold, higher rates—nominal, and even real, rates—in this environment are the kiss of death to the bond market, which is like jet fuel to this particular gold market.* * *
You've been listening to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. You can find us at mcalvany.com. And don't forget to check on our June 17th call with the team. You can find it in our notes on this show. Just go ahead and click on that and sign up. Listen, it's free. And you can call us also at (800) 525-9556.* * *
This has been the McAlvany Weekly Commentary. The views expressed should not be considered to be a solicitation or a recommendation for your investment portfolio. You should consult a professional financial advisor to assess your suitability for risk and investment. Join us again next week for a new edition of the McAlvany Weekly Commentary.
The price of silver is down 3%, currently at $58.40 — the biggest mover on the board this week, and not in the direction silver bulls wanted.
Platinum is down 1.8% at $1,575, still holding under the $1,600 mark.
Palladium is essentially flat, down a couple of dollars to $1,206.
Looking over at the paper markets…The S&P 500 is down about 0.33% to 7,482.
And the US Dollar Index is down 0.35%, sitting right around 101 — though it has been climbing over the last several hours.
The price of silver is down 3%, currently at $58.40 — the biggest mover on the board this week, and not in the direction silver bulls wanted.Platinum is down 1.8% at $1,575, still holding under the $1,600 mark.Palladium is essentially flat, down a couple of dollars to $1,206.Looking over at the paper markets…The S&P 500 is down about 0.33% to 7,482.And the US Dollar Index is down 0.35%, sitting right around 101 — though it has been climbing over the last several hours.
The price of silver is up 5.7%, currently at $60 and flirting with that level again after briefly dipping below it last week.
Platinum is up about 2%, sitting at $1,575, still under the $1,600 mark.
Palladium is up 4.5%, sitting at $1,200.
Looking over at the paper markets…The S&P 500 is up about 1%, bouncing around 7,500. The Dow Industrials and Dow Transports are both up roughly 1% as well.
The US dollar index is down 0.1% from last week, sitting near 101.4.
The price of silver is down 17%, falling from about $69 last week to $57.50. That's a big drop, but keep it in perspective — silver is still roughly twice what it was a little over a year ago.
Platinum is down about 10%, sitting at $1,575.
Palladium is down about 12%, currently at $1,160.
Looking over at the paper markets…The S&P 500 is down another 2% to 7,358, continuing its slide of the last couple of weeks.
Interestingly, the Dow held up better and was roughly flat to higher on the week, though the Dow transports have continued to languish. That divergence suggests equities may be running out of steam and getting ready for a breather of their own.The U.S. Dollar Index is up about 1.5% to 101.55, now a point and a half above the 100 level and continuing its strong climb.
The price of silver is up 5.5%, currently at $67.50. Silver was up as much as 12.5% this week prior to the FOMC.
Platinum is up 7.5%, currently sitting at $1,730. Same story — higher a few hours ago.
Palladium is up about 5.5% since our recording last week sitting just under $1,300.
Looking over at the paper markets…The S&P 500 is up 1.8% to 7,420. But interestingly, the index started to slip a couple of days prior to the FOMC meeting.
And finally, the US dollar index is up 0.5%. The difference is the dollar was actually on a downward slide all week until just after the FOMC meeting.
The price of silver is down 12.5%, currently sitting at about $64.
Platinum is down about 10.5% at $1,660 per ounce.
Palladium is down 6.75% sitting at $1,220 — the sister white metal to platinum is actually doing the best out of the metals.
Looking over at the paper markets…The S&P 500 is now down 3.8% since our recording last week, currently sitting at 7,275 points.
And that’s all due to the dollar being up over the last week — most of which happened on Friday at the market open.The US Dollar Index is up about 0.5% to around 100.
Thursday, January 19, 2023 – 4:00pm Eastern / 2:00pm Mountain
Stay connected to market trends with personalized weekly insights — custom to you!
