MARKET NEWS / MCALVANY RECAP / MARKET NEWS

Simple Is Not Always Best

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Dec 04 2023
Simple Is Not Always Best
MPM Posted on December 4, 2023

Americans, we are repeatedly told by the rest of the world, are idiots for not adopting the metric system. And perhaps our retention of American customary units is not among our most stellar decisions. However, as in much of life, what’s obvious is not all that matters.

It’s incredibly easy to use a system based on multiples of 10, as the metric system is. And ease often facilitates accomplishment. But another facilitator of accomplishment is advanced thinking, and advanced thinking comes from difficulty. You can see the paradox—and the irony.

In America, construction workers—who are not typically college graduates, much less PhDs in mathematics—are masters of fractions. They know that 3/16” is less than 1/4”, that a 16 d. (16 penny) nail is 3½” long, and that one board of 6’4” yields three boards of 2’1¼” if cut with a saw having a 1/8” kerf. That’s not simple math, and working with it hundreds of times every day can yield a highly functional mind.

There is a corollary in economics. It’s not exact, but the above example still sets it up well. The corollary is based on this fact: the 20th and early 21st centuries have been times of government-based economics. Adam Smith is out. Karl Marx and John Maynard Keynes are in.

Marx postulates that if government centrally controls all economic activity in order to take from the rich and give to the poor, all citizens will prosper equally. Simple.

Keynes asserts that economic conditions can be quantified, and thereby managed according to formulae. Not quite as simple, but still pretty straightforward in concept.

Smith observes that the market makes millions if not billions of small decisions every day to adjust course, which in the aggregate moves things along most satisfactorily. Government aids the process best by assuring “honest weights and measures,” by providing good infrastructure, and by impartially, justly, and expeditiously adjudicating disputes.

Our analogy is not perfect. The metric system works, while Marxism and Keynesianism do not. But the important point is that, just as in working with fractions, the daily exercise of complex decision-making that market participation requires develops sound thinking—the opposite of what we see in our government/Fed-directed economy today.

So given that we currently operate in a dysfunctional economic system, and that the accumulated dysfunction of many decades seems to be coming to a head, be sure you know the best way to protect yourself and your loved ones financially. The publications below are intended to help you in precisely that pursuit.

Key Takeaways:

  • Is China moving forward or backward?
  • A month to remember
  • When the facts and the trend are moving in opposite directions
  • Can a white metal be a red-headed stepchild?

The McAlvany Weekly Commentary: David and Kevin focus on the world’s two biggest economies this week, noting that China has both king-sized accomplishments and king-sized problems. It is manifesting some of the most significant innovation in the world at the same time that its debt bubble is looking vulnerable. America, too, is drowning in debt. Over 40% of taxes collected in the US are going to payment on its debt. This, in turn, has apparently been a cause of concern for foreign investors, as they have reduced their buying of US Treasurys by 40%. As this race to the bottom in the world of fiat currencies becomes a sprint, and alternatives such as cryptocurrencies are increasingly under regulatory attack, the hosts remind us all of a currency that has helped people in difficult economic times for thousands of years.

Credit Bubble Bulletin: Doug kicks off his weekly wrap-up with a verbal montage of headlines from major news outlets. One after another spotlights the fact that November was one of the most profitable months on record for assets. Stocks, bonds, munis, junk bonds, emerging markets—they all surged. It was a very, very bad month to be a short seller. Alongside such developments, a prominent FOMC member started talking out of both sides of his mouth—being hawkish in his prepared remarks and significantly less so in a response during the follow-on Q&A session. This exacerbated the existing situation in which the Fed talks tough and the market disbelieves the official line. It’s a tug of war with immense implications. This is must-read analysis.

Hard Asset Insights:HAI’s working thesis is that global financial markets are in the late stages of a massive confidence bubble. Amid the insecurity of an incredibly complicated financial market set-up, tucked neatly within an exceptionally complex world of geopolitical fracturing and dramatic secular change, many market participants appear anxious to retreat into the relative comfort of an unquestioned confidence in the efficacy of fiscal and monetary policy status quo.” So begins this week’s missive from the incisive pen of Morgan Lewis. Whether investors’ preferred response to such threatening storm clouds is wise is, of course, the question of the hour. Morgan’s analysis is consistent from week to week, pursuing a deliberate course through a wilderness of conflicting opinions and news reports, and a blizzard of data points that obscure the path for less diligent analysts. The months ahead promise to be highly eventful—perhaps more so than for many decades. Don’t plan for them without considering this crucial analysis.

Golden Rule Radio: Miles, Tory, and Rob take a look at the gold market in light of recent strength. Doing so leads Miles to what he refers to, tongue-in-cheek, as uncharacteristic optimism. While he expects pullbacks along the way, he sees some room for the yellow metal to run. The hosts also take a close look at one of the white metals—palladium. Many of their clients have been asking if this is a good time to get into this metal, so the hosts give some historical perspective on its price along with their expectations for its performance going forward. Also in focus this week are silver and the dollar—specifically their current situation and anticipated performance going forward.

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