MARKET NEWS / MCALVANY RECAP

Reality Matters

MARKET NEWS / MCALVANY RECAP
McAlvany Recap • Jul 08 2024
Reality Matters
MPM Posted on July 8, 2024

A popular saying assures us that “it ain’t what you don’t know that gets you into trouble, it’s what you know for sure that just ain’t so.” The saying has been ascribed to many people, but its source is unknown. Suffice it to say that while the first part of it is not entirely true (ignorance can kill), the second part is emphatically and completely true. More than that, it could be the defining truth of our generation.

In one sense its message is unsurprising. The human battle against superstition, myth, untruth, lies, and every other form of what “ain’t so” is as old as humanity. In another sense, it’s shocking. In the age of information, untruth is more prevalent than ever—and it’s never been rare.

Perhaps the most surprising thing is the degree to which people use untruth to further their own interests. They lie to promote their products, steal, cover their misdeeds, hinder or destroy their competitors, attain their goals, make themselves look better or others look worse, and far, far more.

Obviously this is Human Nature 101, but reinforcing basic truths can be helpful at times. Perhaps a year when 88 national elections occur across the face of the globe is one of the best of those times. The old saw that you can tell a politician is lying because his lips are moving might be hyperbolic, but it’s also funny. And of course it’s funny because it should be a complete lie but it’s so very far from that. Lies and politicians go together like mosquitoes and summertime—especially in election years.

It’s typical of the upper class and the elite that they believe ignorance and superstition are the province of the lower classes. Barack Obama said of such lowly creatures that, “They get bitter, they cling to guns or religion or antipathy to people who aren’t like them, or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.” In other words, according to him, they believe lies.

Hillary Clinton said of the deluded masses that, “you could put half of Trump’s supporters into what I call the basket of deplorables. Right? The racist, sexist, homophobic, xenophobic, Islamophobic—you name it.” All those categories are her names for people who believe particular lies, as she sees it.

But the greatest danger to society is when the rich and powerful believe lies. And the biggest danger of all is when the lies they believe in are orchestrated and uniform. Then they pool their wealth and power to act according to what they believe. That’s when wars, revolutions, economic upheavals, famines, and more occur. That’s the greatest danger to most people, not poor people who believe it’s wrong for illegal immigrants to take their taxes and job and education opportunities.

What kinds of lies do the rich and powerful believe? That America is the epitome of evil. That merging America with the rest of the world in a socialist utopia would bring untold benefits to everyone. That debt doesn’t matter. That humans create morality. That people who believe these things are the best of us and should rule the rest of us. And much, much more.

It should be apparent from all the foregoing discussion—not to mention the nightly news—that lies dominate our world right now. Reality has seldom in history been regarded so poorly. Fantasy reigns in just about every area of human endeavor. And there’s a price to be paid for that. It’s not a small one. Reality is the most valuable commodity there is.

In contrast to all this, the analysts below labor under the radar. They work long, hard hours to remarry truth and human belief. None of them claims to have a lock on veritas, but they earnestly seek it in ways that are creditable and recognizable by kindred souls. They constantly talk with, read, or listen to the wisest and most learned minds in a given field. They have open and earnest conversations with those who hold opposing views. They study the fundamentals and the nuances of their trade. They pay attention to data, studies, surveys, life lessons, and anecdotal evidence to form a picture of things as they truly are.

Then they assimilate all this and present it to you in organized form, either daily or weekly, year-in and year-out. That is of immense value, and it’s for your benefit. It’s completely free of both cost and obligation on your part, and it gives strong testimony to the integrity and commitment to quality of those who produce it. And of course—just in case it’s of interest—these diligent analysts bring the same attributes to their work on the McAlvany Financial Group’s products and services.

And that’s the truth.

Key Takeaways:

  • The end of an era—a very, very pleasant era
  • All eyes on France
  • Are we at an inflection point?

The McAlvany Weekly Commentary: The Economic “Sweet Spot” Reversal

To start the program, David and Kevin return to a familiar theme this week: the amazing 30 to 40-year era through which we have just passed. Despite the massive amount of money injected into the system, the entry of China and Eastern Europe into the world’s trading structure made the period one of both abundant money and falling prices. It was like a three-decade party with easy money and cheap booze. What’s not to like? Except the debt and the hangover when it’s over. Well, we’re there, as the hosts describe. Inflation will likely be with us for quite some time. In light of that fact, the hosts advocate having an investment policy statement that includes goals, expectations, plans, and how to get to the desired place in life by retirement age. From there they transition to next week’s interview of Charles Goodhart, author of The Great Demographic Reversal. Charles has been on the Commentary before, discussing an earlier book he wrote. In this most recent book, “There’s compelling evidence to support the case for higher interest rates, higher rates of inflation, lower real growth, and he makes the case that this is going to be the state of affairs for decades to come.” Given that Charles is a former central banker and highly accomplished economist and author, his thoughts on these matters carry some weight. David’s interviewing of people with divergent opinions from his is “not an attempt on our part at sort of a fairness doctrine or some sort of a multicultural buffet. I think truth is like gold. A gram of high-value product comes from a ton of throwaway material, and it’s labor-intensive to discover the good stuff. The podcast provides us with a venue to explore and to mine for high-value truth.”

Credit Bubble Bulletin: Nothing Matters

As is characteristic of him, Doug informs readers of key economic data elements for the week, and then offers his analysis of the data. It’s a potent form of dots and connections that allows the reader to follow his thought process and understand the reasons for his conclusions. Given the extensive nature of the data he provides from well-placed sources, it’s high-confidence information. This week he observes that, “The grossly imbalanced U.S. economy may be weaker—but not weak. It is certainly vulnerable. Yet I remain unconvinced that we are observing the start of a major downturn. Financial conditions remain exceptionally loose. Meanwhile, the bond market has developed a propensity for lower yields. Stronger data tend to be ignored, while yields quickly fall after weaker economic reports.” There’s more—and it’s incisive—before he begins presenting key news excerpts on the subject of the French election. Though Marine Le Pen’s National Rally was projected to fall far short of an absolute majority (and did so, though gaining far more seats than ever before), Doug’s conclusion remains that, “The global populism movement is just gathering momentum.” From there he presents more critical data points and more media excerpts on the varied topics that are the subjects of his weekly analysis.

Hard Asset Insights: Inflection Point

As is his wont, Morgan avoids the popular press in favor of more informed reporting in trade sources and exclusive information streams. He focuses on high-level analysts with excellent track records, extremely successful investors, experts in germane fields, statements from upper-level Fed and government officials, and key surveys and indexes. These sources often tell a different tale than the popular fare on television, in newspapers, or online. Where his sources contradict each other, Morgan so notes and makes clear—as in last week’s letter on AI. Where they sing in tune, he notes that as well. This week there’s a lot of harmony, though the song is an ominous one. HAI favorite economist and prescient market strategist Dr. John Hussman states, “I may as well just say it. Based on the present combination of extreme valuations, unfavorable and deteriorating market internals, and a rare preponderance of warning syndromes in weekly and now daily data, my impression is that the speculative market advance since 2009 ended last week.” San Francisco Fed head Mary Daly and Goldman Sachs Chief Economist Jan Hatzius both warned that the economy is at an inflection point. And Stephanie Loomis, head of an international global logistics company, notes in regard to the supply chain that, “I’m lovingly calling the market now ‘Covid junior’ because in a lot of ways we’re right back to where we were during the pandemic… It’s all happening again.”

Golden Rule Radio

The crew members from GRR take a break this week for the holiday, and look forward to spending time with you again next week on the regularly scheduled program.

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