Complexity is fascinating to study and mesmerizing to watch. Whether it’s a sidewinder moving across the sand, a strand of DNA, the movement of the ocean, or major markets in action, life and its convoluted processes are really quite wonderful.
But complexity involves so many variables that predicting the course of a complex system is difficult. Many times it’s impossible, at least with current technology and knowledge. If you throw a soccer ball into the ocean at San Francisco, where will it end up?
Still, we want answers. Anyone who knows the future has an advantage, and we all want an advantage—especially when it comes to health, money, and the lives of our loved ones. So we spend an inordinate amount of time, effort, and money trying to gain for ourselves more time, effort, and money. It’s not as crazy as it sounds—at least if it’s done right.
Warren Buffet, Jeff Bezos, Steve Jobs, Mark Zuckerberg, Larry Page, and Sergey Brin all saw certain sectors of social activity clearly in terms of the direction they were moving. Those people put businesses in place to take advantage of that knowledge, and they got very wealthy in the process.
If you asked any of those men to explain the theory of relativity or personally build a supercomputer, they would likely be at sea. Certainly if you asked them to build a country like the USA, they would strike out. But over the past 60 years they stuck to their fields of knowledge, saw where societal trends were headed, and gained an advantage.
The analysts at McAlvany are extremely dedicated students of markets. They have particular expertise in precious metal, equity, and bond markets, but if it’s traded and germane, they study it. But they also study people and their relationships with markets. As Ludwig von Mises asserted in his book by the same name, economics is about human action. So are markets.
Why study these things? To gain an advantage. But there’s one thing that sets the McAlvany analysts apart from many other students of the markets: they believe in insurance. Not just hedging—insurance. Precious metals are not dependent on human action. They exist and have value for their qualities, which have never diminished below a certain, still very valuable point. Every society that has complex markets values gold and silver.
When you look at the billionaires in a society, you don’t usually look at the would-be billionaires—the people who tried to do something similar to Apple, Facebook, or Google, but failed. There are many, many more of them than there are success stories. It’s true in every field, including investing. And that’s why you have insurance—in life, in business, and certainly in investing. For that purpose, the metals are unmatched.
Key Takeaways:
- The world economy continues to struggle
- The course the Fed must follow is clear
- The consumer is on the ropes
- The metals are down, but far from out
The McAlvany Weekly Commentary: The program went to the birds this week as David and Kevin discussed eagles, turkeys, and chickens. Beginning with eagles soaring high, the hosts examined Nvidia’s recent price action, along with that of other generative AI stocks. The stocks have truly taken off on an almost impossible climb into the stratosphere. They’re so high it’s hard to see— Is that an eagle, or is that Icarus? Next the hosts discuss Turkey—the nation, actually, not the bird. Blessed with key geography and rich natural resources, it has nonetheless been mismanaged into the ground—being deeply in debt to other countries with rapidly appreciating (against the lira) currencies. And last of all the hosts discuss the US government’s cowardly retreat from fiscal responsibility with the latest raising of the debt ceiling. Clearly, it’s not the Commentary that has gone to the birds, it’s the world’s economy.
Credit Bubble Bulletin: As the country at large channels Hamlet with regard to Fed policy—to raise rates or not to raise rates—Doug suffers from no such schizophrenic uncertainty. “It’s not a close call. If the Fed ‘skips’ policy tightening at the June 14th FOMC meeting, it will be yet another big policy mistake.” Clarity of thought meets clarity of expression. But that’s just the opening salvo. He follows his unequivocal assertion with facts, reason, and logic. For those of us who, like Harry Truman, long for a one-handed economist (no “on the one hand, this; on the other hand, that”), here he is. He has uncovered the facts, followed the trends, studied the field, and come up with a conclusion. One major indicator after another proves clearly that rumors of inflation’s death have been greatly exaggerated. Follow Doug as he follows the facts where they lead.
Hard Asset Insights: Morgan also discusses the possibility of a Fed “skip” in its interest-rate raising process. The latest jobs report was stronger than expected and the S&P 500 is showing great strength. Even given the buoying effect of what Morgan calls the “generative AI 5” on the “S&P 495,” there are signs that the rally is widening and strengthening—in the short term. But “beyond the short term,” he assures us, “little has changed.” Copper and WTI crude prices are staying low despite supply constraints. “What could commodity markets be looking at that U.S. equity investors are not yet concerned with? Perhaps global commodity markets are taking note of signals being sent by the US consumer.” And the US consumer is responsible for 70% of the country’s GDP. The long term definitely holds some concerns.
Golden Rule Radio: Tory and Miles dissect the latest pullback in the gold price—an event they anticipated. They believe the price could decline further before heading back up. The pullback took away about 50% of the recent price rise, which is normal price action—and silver has moved in a very similar manner. Platinum and palladium have both made more significant moves lower. Tory remains sanguine about platinum, saying its recent price movement is “stable and encouraging to [him], and you’re always one geopolitical event away from that being the trade of the year.” Miles builds on that point by pointing out the shortage in supply of platinum. The hosts also touch on Dow and dollar charts, as well as a particularly interesting chart comparing the price of gold with the dollar over the past year.
