Podcast: Play in new window
- Desperate? Chinese Open Up The Liquidity Flood Gate
- Dock Workers Strike: Headache For Kamala
- Bonds & Gold Signal Inflation Woes
“Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. How have markets responded? The CSI 300, the Shanghai Stock Exchange, up between 20 and 30% in less than a week. I’d say that’s a positive response. Be careful what you wish for.” —David McAlvany
Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.
Last night, Dave, we met and we were talking about what is it that drives us. I’ve been studying the process of the hero’s journey where there’s a call to action and then they encounter some sort of trial and then they come away better. And I was thinking back to just meeting your dad and realizing when I was in my twenties that this place was a place that was driven on ideology. There was a hero’s journey sort of built in to your dad, to your family. It was just interesting because there’s so many financial firms that are out there that really they just want to know how much money they made that day. But there was mission involved in this.
I bring that up, Dave, because not only did we talk about that, but last week you were thrust into the position of Mr. Mom and had to teach a little bit about the American constitution and freedoms and just what makes us different and what we’re fighting for.
David: Yep. Just a rehash of the balance of power, a rehash of thinking through why from a historical perspective it made sense to understand human nature and create this checks and balances between the three branches of government. And the details of when things don’t go right, how you address it. It’s a complex thing. If you haven’t read the Constitution in a while, I would encourage you to take the next couple of weeks and go through each of the main sections and just appreciate what it is. Because I think sometimes not appreciating what we have, you can very quickly fall prey to the modern critique of, it’s an old document and who needs it anyways. We live in a new world with new ideas and we can do better.
Kevin: And I’m looking at this new world that we live in, Dave, everywhere really, but the United States, which still has the Constitution, even though we’re weakly holding onto it. And it concerns me because the Constitution was a sacrificial document that basically said, “Look, we’re going to take coercion and domination out of the hands of the government.” We had free markets. Okay? And what we have now—
Let’s look at China, which is a direct opposite of that. China is doing what Mario Draghi did back in 2011. They’re basically saying, “We’ll do whatever it takes. We’re just going to print a bunch of money.” And as I was thinking about this, Dave, what we do here is try to stick with keeping people free from coercion and domination. How is that done? Well, you have to protect yourself from the very effects of what these central banks and governments are trying to do to control the people.
David: Be careful what you wish for is a phrase that we often hear, and I think this is a perfect case in point this week in China. They will get their 5% GDP growth rate, and they will be successful in that endeavor. At what cost remains to be seen. From last week to this week, the PBOC liquidity spigots have been turned on and left on. Originally it was bank reserve requirements cut by 50 basis points, repo rates cut by 20 basis points, then came direct access by brokers to the PBOC to buy stocks and encouragement, enticement for them to buy stocks.
Insurance companies and corporations themselves by the end of the week had access to the PBOC to do stock buybacks. We had a cut in the down payment requirement for second home purchases. Again, an issuance of up to 142 billion US dollars in special sovereign bonds to directly benefit the big banks. Consumption stimulus program in the form of vouchers, particularly in Shanghai, e-coupons in Shanghai to get consumers going to hotels and restaurants and movies and sporting events. The commitment to boost stock values, according to Bloomberg on the 25th, 340 billion US. How have markets responded? The CSI 300, the Shanghai stock exchange, up between 20 and 30%—
Kevin: That’s amazing.
David: —in less than a week. I’d say that’s a positive response. Be careful what you wish for. We’re not exactly breeding health. This is something that remains to be seen even how durable it is.
Kevin: Inflation in the commodities?
David: For the time being, you’ve got iron ore, one week sprint, 12% higher. Copper, 6% higher. Zinc, seven and a half percent higher. Platinum added two and a half percent. The strongest performance last week by the precious metals. The Bloomberg Commodities Index, in spite of its heavy oil and gas exposure, added 2%. It’s now at an 11-week-high. And Thursday Reuters reported an official pledge to deploy necessary fiscal spending to meet this year’s economic growth target.
Kevin: We will have our 5%?
David: We’ll do whatever it takes. Five percent is not off the table. Animal spirits are being loosed via both monetary and fiscal policy. We come back to a 25% move in Chinese equities in a very short period of time. And have they broken the market malaise? Maybe. Will they accomplish, will they succeed in stimulating economic growth? It remains to be seen. Again the way we count economic growth, deficit spending accounts for economic growth. And you might say, “Well, isn’t that a little bit like the snake eating its tail?” Certainly a healthy diet until you realize you’re cannibalizing yourself. So there is that concern about fiscal stimulus and whether or not the economic growth is of a healthy nature or not. Is it enduring? We shall see.
But jolting from the doldrums, yes, it’s certainly erased in less than a week. And the charts for associated companies jumped double-digit in a uniform fashion.
Kevin: This sounds like desperation to me, Dave.
David: I think that’s the first word that comes to mind. Desperate. That would definitely fit the bill. Panicked. The kinds of measures that were put in place certainly don’t speak to an economic backdrop which is healthy. Never risk credibility if you have a steady hand of management and certainly command and control dynamics from the PBOC and the central committee, they want to convey that they’ve got a steady hand. But you should never risk credibility unless your credibility is failing anyways. And then perhaps all you have is upside taking great risk in the marketplace.
So what they are risking, and I think this is the greatest long-term implication for them with a population over a billion people, risking inflationary fallout, I think, has to be watched. It’s reasonable if you’re already in a deflationary spiral to risk the possible inflationary outcome. We talked about it last week in terms of reining in the inflationary stallion versus being able to spur on to any degree possible the deflationary, dead horse. Panicky? Yeah, I think that word fits the bill. From the CapEx commodities comes a supportive narrative, at least an echo from the bond markets and from gold, as we mentioned last week. Inflation has been flying its flag of surrender. I would suggest it’s a fake flag. It’s not really giving up quite yet. Fight’s not yet finished even as the Chinese stimulate massively.
Kevin: Well, going back to what we were talking about, the Constitution and freedoms, the freedom of choice goes away more and more as inflation comes in or handouts are given out. I think that’s what we fail to realize. Anytime we just print money or see handouts come out, what we’re really doing is we’re buying a leash to domination and coercion. That’s one inch at a time.
I remember what Ben Franklin said. The legend is that after the meeting of what our government would be, Ben Franklin came out and a woman asked, “What did you decide on?” And he said, “A republic, if you’re able to keep it.” Isn’t that pretty close to the quote?
Well, keeping that republic, I think about even military strength, Dave, we’re almost an island unto the world as far as this way of thinking. And we have to be able to support this way of thinking with our military strength. And I know you’ve been reading Jim Grant, and Jim Grant had some things to say about that.
David: Yeah, it’s surprising when you think about, what is it, $860 billion a year we spend on the military that we’re not actually getting $860 billion worth of military hardware. There’s a lot of infrastructure and bureaucracy, likely a lot of graft and grifting that takes place in the military industrial complex.
Kevin: Well, and aren’t we paying even more for the interest on our debt at this point?
David: We are. Grant’s typically focused on interest rates and financial market history. And in his most recent missive, Jim veers into Jane Harman’s report. It’s 113 page defense and military briefing titled “Commission on the National Defense Strategy for the United States.” Why is he interested there? Well, certain assets sniff out inflation. Bonds, gold, and interest rates, certainly, if they’re not suppressed, can be an evidence of inflation or an indicator of inflation being anticipated. The most consistent source of inflation through the millennia has been war.
Kevin: Wow.
David: So the summary of the analysis is basically this: The US last fought a global conflict 80 years ago, and was last prepared for a global conflict going on 35 years ago. So between the theoretical threats from Russia and China, the reality of underpreparedness is revealed in this report, and frankly it was shocking to challenge, again, to reconcile the level of spending we have on defense and what we actually get for it.
Kevin: I am concerned for our military just because we are underprepared. I mean, what would it look like if we had a conflict with China anytime soon?
David: Part of the report looked at the conflict with China. Concludes US munitions inventories would be exhausted in three to four weeks, and to replace them would take years. So the proposed expansion of our naval combatant fleet from the current 287 to 381, that’s already in the books, and it’ll take us till 2042 to complete it. So 18 years to grow the fleet by a mere 32%. Again, it’s just another shocking observation from the report. We’re talking about the industrial scale that exists in China. One Chinese shipyard, just one, and they have many, just one has more capacity than all US shipyards combined.
Kevin: That is amazing. You go back to World War II, and you see what the attack on Pearl Harbor did to unify a country to rebuild, basically, the military. But at this point, a lot of the military is bureaucracy. That’s what you were bringing up before. It’s hard to get bureaucracy to move in one or two or three-month ways. What you were talking is one, or two, or three-decade ways.
David: What we’ve spent the last 30 to 40 years doing is gutting our industrial capacity as we allowed corporations to play labor arbitrage and move production overseas. We’ve lost our industrial base, and that— I think if you think back to World War I and World War II, we were able to convert making toaster ovens to making rifles, making tanks instead of making Model Ts. So we had the lines, we had the employees, we had the labor, and we had the industrial capacity, and we just shifted from what would’ve been consumer goods to military hardware. We don’t have the same industrial capacity today, and that’s what speaks so loudly about that three to four-week exhaustion of munitions and it taking years to replace it. It’s because we don’t have the capacity.
Kevin: Admiral Yamamoto for Japan warned Japan not to attack America for the very reason you’re talking about. He had gone to school here in America, and he had seen the industrial capacity and the can-do spirit of Americans. Like you said, I don’t see that now.
David: We’d better maintain our bluff because we don’t have much more than bluster. Shocking amounts of bureaucratic waste and graft must exist in the defense and contracting industries for us to be the biggest spender in the world with so few resources at our fingertips. Yes, it’s high-tech, and yes, it’s very impressive what it can do, but we don’t have quantities for any extended conflict. It feels like, frankly, another version of our medical and healthcare establishment. It comes at a very high cost, but we don’t score very well. Even our education establishment. We spend a lot of money on education, and yet, we score at the bottom end of industrialized countries in terms of the results that we get. It’s a big pharma, big defense, big grifting machines for the politically connected. What we’re left with is a hollowed-out national health scorecard, a hollowed-out national defense, a hollowed-out educational system.
Kevin: Well, and in these days of just-in-time inventory or no inventory, everything relies on transportation. Why don’t we shift over to the dockworkers strike right now because there’s an impact built into that almost immediately?
David: Right. So we could contrast the shipbuilding capacity between the US and China. Dockworkers strike. This is, I think, a potential source of inflationary pressure—temporary as it may be. Port strike with some 45,000 stevedores and longshoremen, 41% of US container volume is impacted both in the East Coast and Gulf Coast. Five billion a day in cost if not resolved quickly.
I think this creates a political inflection point. If this is not resolved quickly—as in 24, 48 hours—I think the ripple effects could very well determine the election, which is only a few weeks away. I say that because immigration and inflation have been the two biggest hot-button issues in polling. So as you’re taking the temperature, so to say, feeling out what voters care most about, these are the two issues.
Kevin: Now, what about the ICE report? That’s amazing that actually we are seeing these numbers before an election.
David: It’s not seeing a lot of light within the mainstream media, but the ICE report in recent days exposes over 450,000 criminals that have been allowed to come into the US. We’re talking about 13,000, 14,000 people who have been convicted of homicides, people who have been convicted of violent crimes, sexual predators allowed into our country, allowed to roam free, and I think this is flatly damning for Kamala Harris, our supposed border czar.
Mainstream media has blacked out the ICE report for obvious reasons, and I was laughing, chuckling at Mark Cuban’s comment the other day that mainstream media leans to the right. I don’t know what he’s thinking, but when you see silence like this on the ICE report, it always broadcasts opinions at a very high frequency.
So, on the one hand, you’ve got immigration as a problem for Kamala. If you get even the slightest uptick in inflation month-over-month or with year-over-year statistics, this is the inflection point. The imagination of the middle class and the poor will fill the gap, and I think this is because they’ve been traumatized by the recent increases in basic necessities, the cost of goods and services. An uptick, if we have any uptick in the next inflation figures, and that does come prior to the November 4th election, an uptick will be read as a new uptrend.
Kevin: You think the dockworkers, that’s going to probably factor into that?
David: Well, it slows imports, decreases available supply. It adds cost components to get similar products by other means. Yes, it puts upward pressure on consumer prices.
Kevin: So where do you see this going? I mean, are they going to solve this problem?
David: I think that the easy part to solve is wage concessions. So why this might be drawn out a little bit is the 80% in increased wages, that’s what is being demanded. That’s actually the part that you could check the box and move on from pretty quickly. That takes place. It’s staged over a couple of years.
Kevin: But they want to get rid of the robots.
David: I don’t think that’ll happen. The automation and robotics freeze, I think, is off the table. You watch the trends in global ports, and I follow a couple of companies in Hong Kong and Mainland China. Watching the trends in Chinese shipping infrastructure, the automation process is in full swing.
Kevin: Well, in China, you can’t have a strike like we have here in the United States. They’ll just take your life.
David: It’s a different world. So we have labor disputes, and I’m grateful that we can. I mean, yes, I hope we resolve it, but that people can voice their opinions and not be thrown in jail for it, that is of high value. So no labor disputes there. Whenever you have them, the simple and effective response, labor disputes equals labor camps equals reeducation. I’m tongue in cheek, I know, but protests and collective bargaining are not acceptable free speech in the land of sesame credits.
So automation is a global trend, and as we talk about the advance of AI and automation, we have to look and really account for the jobs that will not be around in the decades ahead. This is something that I think about routinely as I consult with and try to distill some wisdom for my own kids heading off to college, and thinking about their lives and their futures. What is most essential? If automation is the trend, and AI is the trend, and the dockworkers know it, wage concessions? Sure, they’ll be generous, but I can’t see US docks voluntarily hamstringing themselves rejecting technological innovation via automation.
How long is it going to take to come to terms, and is that a sufficient timeframe for retailers to get to the point where they have to reprice products? A few days is no big deal. A few weeks, and the price hike migration will be in swing just in time for the election. That’s where I come back to this. If it’s one issue, okay, it’s an election where two people have different takes on different issues. I don’t think Kamala can garner the votes needed through ordinary means if she’s got to deal with those two issues. I think her odds fall off a cliff.
Kevin: You’ve talked often about the bond vigilantes. The bond market has a tendency to do what the dockworkers are doing, and that is say, “No, we don’t agree, and we don’t care what the timing is.” Bonds right now are telling us that they don’t agree with Powell.
David: That’s right. We talked about a little last week, and we know that the Powell Fed is data-driven no more. That seven-day losing streak for US government bonds in which prices have dropped, yields have risen, that losing streak has been broken. So rates are still at the recent highs, but at least they’re not moving the way they were—consistently day after day, rates moving higher and higher and higher in the face of Powell’s lowering rates.
Kevin: Which shows the Federal Reserve only can control short-term rates.
David: And it’s a direct reference to Milton Friedman’s observation. Years ago, he said the central bank cannot control interest rates. That is a mistake. They can control a particular rate, he said, such as the fed funds rate, if they want to, but they can’t control interest rates.
This is an old lesson. It’s being relearned by young and inexperienced asset managers. If inflation is a concern, you’ll see it. You’ll see it in bonds. If inflation is a concern, you’ll continue to see it in gold. And I think both of these, as we mentioned last week, these are important signals.
Jim Grant notes that maybe the larger picture is one of systemic concerns over global cooperation and peace. He brings in this issue of war and the potential of war because frankly, war’s not that far off. We had a conversation earlier this year with Neil Howe. The fourth turning is here. So civil war, world war, these are things which can’t be ruled out with historical precedent being clear and with de-globalization trends unfolding in real time.
In fact, just this week we had yet another record set for air incursions across Taiwanese airspace from the Chinese. They’re beginning to get more and more aggressive. One day, I don’t know when that will be, but one day it’s not going to be a mere exercise, a training exercise.
Kevin: I’m reading a book on the sand pile effect. I think it’ll be something we both have to read at some point. But the reference to when you watch a sand pile build up like in an hourglass, you can’t really predict whether it’s going to slowly fall back down or whether it builds and builds and then collapses.
And the man who wrote this book is also comparing it to Sarajevo in 1914, where you had an assassination of an archduke and his wife that led to a triggering of events all over the world. And I think about the connections between Iran and Russia, the Ukraine and the United States and Europe, and then I think about the Asian connections. But what’s going on in Israel right now, Dave? We are entering the weekend, which is the anniversary of the Gaza attack, the horrible Gaza attack one year ago, but things are accelerating right now to a degree we haven’t seen.
David: Yeah, and I think in the last two weeks, Israel has shifted the balance of power in the Middle East. Nasrallah assassination, Hezbollah, and the growing conflict between Israel and Hamas points towards a final sweep of what Israel has read as an existential threat. You’ve got the Iranian proxies, which have long been a thorn in their side, and the thorn’s being removed. So waiting in the wings are the Yemeni Houthis, the Iranian strong reactions yet to be seen. But I think, again, I’d say, waiting in the wings.
The US election is weeks away, and with that in mind, there is sort of a window for Israel to finish off Hamas and Hezbollah, and I think that window is closing, and Iran has yet to offer a response to the decapitation of its proxy fighters in Gaza and Lebanon. So seems unavoidable.
Intensification is not coming. It’s here. And the next steps, that’s what’s the mystery. So anything is possible in the next 30 days, including a strike on Iranian nuclear facilities. And again, I say this is a shift in the balance of power in the Middle East. While the Saudis can’t praise Israeli actions in Gaza, they will quietly applaud any direct action in Iran and Yemen. Remember, it was only last year that Saudi Arabia was in direct conflict with Yemen themselves. So from an Arab perspective, from a Saudi perspective, they too are winners from the shift in the balance of power.
Kevin: And the rhetoric of the politicians, both in Europe and the United States, has been to tell Netanyahu to back down, but his response has been anything but that.
David: The oil markets are something that also are very interesting at this juncture because with the potential continuation or intensification of conflict in the Middle East, you could say, well, maybe this is positive pressure for the oil markets. In fact, we’ve seen the opposite. And this is where the US has become the sort of guarantor of energy security for the globe, and that’s marginalized Saudi Arabia and OPEC, and I think that reassertion of control in the oil markets, or influence in price, is certainly in the midst of unfolding.
We have Saudi promising to increase, or talking about anyways, increasing supplies of oil, and of course that puts downward pressure on the price. But why would they do that? Again, this is a game of power and who has it, who will have it next? They sense an opportunity.
You mentioned Benjamin Netanyahu, he’s responded to the US and European requests for rapprochement—not with rhetoric. This is actually fascinating to me to see him show up at the UN Convention and what he did deliver was rhetoric, but behind the rhetoric was action. Beyond the rhetoric was action. And actually there was a bit of a ruse where he’s there as a distraction.
Kevin: Well, and wasn’t he even threatened politically, his power, as early as three weeks ago?
David: Yeah. I mean we’re talking about domestic politics. Yeah. Three weeks ago, his political survival was in question. Today, he’s regained the confidence of the Israeli military, the intelligence community, the general population. His military leaders and intelligence services were actually advising him against eliminating Nasrallah because that’s what I’ve seen in reports. He chose otherwise, and he finished what Ehud Olmert set out to do 16 years ago when he was serving as Prime Minister. So what happened with Nasrallah is pretty pivotal, again, to this sort of shift in the balance of power in the Middle East.
Kevin: And if you live in Lebanon and you didn’t really like the influence of Hezbollah up there, could this be a return to what Lebanon used to be?
David: I think certainly it’s an opportunity for the Lebanese military to reassert control. I mean, keep in mind, Hezbollah operates as a military force in the country, but they are distinct and separate from the Lebanese military. And it’s not as if Hezbollah is the government of Lebanon.
Kevin: But they almost replaced the government of Lebanon, didn’t they?
David: That’s right. And so as Hezbollah comes under pressure, there is this possibility for the Lebanese military to reassert control of their own country, for the government to sort of take the reins back again. There’s many in Lebanon who certainly support Hezbollah. I think many more still remember Beirut as the Paris of the Middle East as recently as 1975. One of the most beautiful, sophisticated, and liberal—if you want to use that word—societies in the Middle East. And I think there are many in Lebanon who had relish the opportunity to establish economic stability, social and religious moderation, and move out from under the influence of a terror organization, away from the control, frankly, of Iran.
Kevin: And when you talk about liberal in the sense of the word, you’re talking about the liberal that we would’ve understood a hundred or 200 years ago, correct? A more free society.
David: That’s right. Yeah. The classical liberal expression. That’s correct.
Kevin: So let’s go to the United States stock market because we just continue to see more and more rise. We talk about the everything bubble, but it seems like the everything bubble has no end, and I wonder how much the stimulus that came out of China has affected our own hopes and dreams here in America for stock prices.
David: In the last week to 10 days, we’ve had options expiration, which is always an opportunity for market manipulation to the upside, we had the 50 basis point decrease from the Fed, a surprise from what most would’ve considered more reasonable, 25 basis points, and it covers over the very frail, the very fragile nature of the financial markets. It was only August 5th that we had a few moves in terms of central bank policy, Bank of Japan and the U.S, and all of a sudden a rupture occurred across asset classes and across the globe. That fragility still exists, it’s just literally papered over. And so below that paper surface is something that is really quite challenging to invest in.
Kevin: So from the cyclically adjusted price earnings index, which we talk about all the time, the Shiller PE, we are way, way overvalued.
David: 36.6 is, I would say, way overvalued. On that basis, if you’re projecting forward ten-year returns, it’s a very unimpressive near-zero percent. And that would be positive returns in a number of those years of the decade and very negative returns to get you to an average of zero or 1% positive returns. So again, you look at the enthusiasm in equities and it’s not very well supported by geopolitics. It’s not very well supported by much of anything other than the promises of easy money, and I think ultimately those are fairly hollow.
Kevin: Not everybody wants to use the cyclically adjusted price earnings ratio, though. Sometimes that slants us a little bit too much toward fear.
David: Yeah, and I think pundits prefer to use the normal PE, not the cyclically adjusted ten-year rolling average—what we sometimes refer to as the Shiller PE. Robert Shiller came up with that, or popularized it, rather, when he was at Yale. So they like the current PE. It mitigates concerns about current market overvaluation, whereas you look at CAPE of 36.6 and it’s pretty rich.
Kevin: All you have to do is look it up online. You can simply look up the Shiller PE over the last few decades and see what the stock market does. It always points out the next crash.
David: The forever bear strategist at Société Générale, Albert Edwards, says that you think of overvaluation on the US market. Some 90% of sectors are in their top quartile of historical valuation. That’s back to the extreme at the end of 2021, prior to the market sliding. Kevin, you referred to the everything bubble earlier. There’s certainly a reminiscence, if you will, from late 2021 here again in late 2024.
Kevin: What do you think would trigger another August 5th?
David: I’m not sure. I’m not sure what triggers a cascade in asset prices like that, but we’re further down the road and we’re farther into dangerous territory. The bond market’s protesting Powell’s easing of rates. Gold is telling you the same thing. We know that we’re on an unsustainable fiscal path. And that’s even without a recession, that’s just assuming the very best of times. If you assume that we avoid a recession for the next 10 years, we don’t avoid, according to the Congressional Budget Office, adding at least $17 trillion to the existing stock of $35. So that’s under the best case scenario with no recession. Factor in a recession and you have a fiscal blowout of epic proportion.
Kevin: Well, I’m really looking forward to this week, Dave, the end of the week. It rivals holidays for me, to be honest with you, because what I was talking about at the beginning of the program where the whole McAlvany approach has been ideologically oriented all the years that I’ve worked here. And we have clients that have an ideology that’s shared. It’s an ideology of freedom. It’s an ideology of legacy. It’s an ideology oftentimes of swimming upstream. And so we’re going to have Morgan Lewis and we’re going to have Philip Wortman who is presenting. We’re going to have Doug here. It’s nice to have Doug here in the region. And we’re going to have your presentations and Robert Draper. But we’re going to have our clients here. A lot of our clients fly in, they spend what it takes to take that time to get to Durango on this week, and like I said, it’s like a holiday because it really is about relationship. The people who are coming in, it’s nice to talk to people who share some of the same ideals.
David: Yeah, I mean, if it was simply information and returns, it’s easy enough to sit at home and watch our presentations. But I think there is this aspect of, we do operate with purpose and that certainly is at a professional level understood to be the asset management function. But as you suggest, there is purpose beyond that, and it definitely ties us deeply in relationships. This week’s client conference here in Durango is an event we look forward to. Spending time in person with a handful of our clients is a highlight of the year. We love talking about the markets, we love even more directly engaging with people we’ve partnered with for months, for years, even decades.
Kevin: Well, and you talk about partnership. I’ve been doing a lot of reading on the sequence of the hero’s journey, and just thinking about whether it’s Star Wars or the Iliad and the Odyssey or even Tolkien’s work Lord of the Rings— I was thinking about Lord of the Rings, and I was thinking— One of the books is called The Fellowship of the Ring. When you look at these stories, these stories are about great epic adventures and trying to overcome evil oftentimes. But actually it’s in the overcoming of evil or fighting back against the things that are pushing on us where we build relationship, Dave. And the fellowship— This week is not about reference numbers to economics or how much the MAPS program has been making. It’s really about looking people in the eye and saying, “I know you’re a person, I know you’re important, and you have basically given us trust to help you with your goals.”
David: There’s a unique transformation that happens, and it’s in a 24 hour period. Thursday night we gather for a cocktail reception and many of our guests are meeting the other guests for the first time. And by our dinner time on Friday night, they have experienced that fellowship. They’ve experienced a connection where, I’m telling you, when I sit around a long dining or banquet table and look at the interactions, it’s like these are best friends who are just seeing each other again after many years.
Kevin: And it’s very humbling, isn’t it?
David: Very humbling. It’s phenomenal. I love just sitting back and watching and listening because the engagement is really remarkable.
So the mishmash of comments today reflects a fascinating and fracturing world where there’s both risk and opportunity. And our sense from clients is that not only is there engagement with us, rewarding in an obvious way—growth in asset value—but rewarding too in that we are together in a compelling journey. Solving problems and engaging with some of the more fascinating aspects of the financial markets, of culture and historical change. I’ll get to spend time this week with friends as they gather here and meet each other. People I have the deepest respect for.
The weekly disciplines and the processes we engage with serve the ultimate purpose of honoring our relational commitments. We have a set of resources that are available, and we share them with our clients to better position them in a wild world we live in. Change is upon us. And I think the encouragement that we gain from our client interactions is really profound. We’re grateful for the opportunity to serve with the gifts and talents that we’ve been given. We’re grateful for the trust extended to us. And we want to honor that with working as diligently and professionally as we possibly can. This week is a tremendous one, not because gold’s trading near all-time highs or because our returns are healthy as we close out the third quarter, but because at the heart of everything we do is relationship, and we get to fully engage with that this week.
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Kevin: 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 anytime 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.
