What Works vs. What’s So

McAlvany Recap • Dec 23 2023
What Works vs. What’s So
MPM Posted on December 23, 2023

Key to the survival of a civilization is its ability to function in the face of disagreements. Any group of people will contain a variety of opinions, some of which might differ fundamentally. If disagreements on them cause their holders to turn their attention from the job at hand to thwarting or destroying those holding opposing opinions, nothing constructive can be accomplished.

The revolutionary coterie currently in political and cultural power in America has attained its position by destroying its enemies. Engaging in cancel culture, this group takes no prisoners. If you publicly disagree with them, they will do everything they can to destroy your life—get you fired from your job, disgraced among your friends and acquaintances, and disenfranchised from the public square.

This should be a strong hint as to this group’s nature. Truth tends to win out in a fair exchange. Prevaricators are the players that must clear the field of opposition. Despite a raft of exceptions, politics and debate in America have been predominantly characterized by a fair exchange of ideas followed by a shaking of hands and a peaceable parting of ways.

No more. Now, it’s war.

In strong contrast to this attitude, we present the below publications. Each of the authors is possessed of exquisitely researched and presented opinions based on volumes of research and thousands of hours of inquiry. Each author is confident based on such efforts, but equally possessed of the knowledge that there is more to learn. Errors are possible, and further effort is needed to move the ball down the field.

What they do not do is assassinate their opponents in word or insinuation. Disagreements can be sharp, follies called out, and agendas identified—debate on the issues of life is a full-contact sport—but there is no cancel culture here. Truth is allowed its day in court. If it stumbles, that’s because of its bearer. It will be borne better next time.

If that appeals to you, good. It’s a healthy thing. If not, just turn on the TV or read the paper. Cancel culture is alive and well in the public square. Just remember that bread and circuses are substitutes for living, not its substance.

Key Takeaways:

  • The pressure to be all-in
  • When lots of little things become very big things
  • Now it’s become Whac-A-Monster
  • What is the chart’s true message?

The McAlvany Weekly Commentary: Reflecting on the likely consequences of Fed chair Jerome Powell’s policy pivot last week, David and Kevin discuss inflation and its probable course over the coming years. They note many of the inflationary factors that are baked into the current situation, including recent salary increases that effectively cannot be taken back, and observe that the very strong bias at this point in time is inflationary. With Powell throwing in the towel, we’re likely to see some significant moves on the inflation meter. Looking at history the hosts note that inflation often comes in waves, so we should be prepared for that kind of movement in the future as well. The hosts also note that equities are collectively at the highest ratio of price to sales they have ever been. And David provides personal experience from serving on a governing board in Europe regarding the extraordinary pressure being exerted on funds of various types to be completely invested in equities.

Credit Bubble Bulletin: Senator Everett Dirksen is reputed to have pithily observed that, “A billion here, a billion there, and pretty soon you’re talking real money.” His attention would doubtless have been drawn to the basis trade Doug describes in this week’s installment of the CBB. This trade is not always in the news, but it’s huge. “The so-called ‘basis trade’ is simultaneously mundane and utterly phenomenal. Hedge funds buy Treasury bonds while shorting a corresponding Treasury futures contract, capturing a tiny spread between the yields on the two instruments. Done for decades and not a big deal, except when the moon and stars align late in the cycle, with the ‘basis trade’ inflating into one of history’s greatest levered speculations—in the most important market in the world.” This trade largely occurs under the radar, yet is an immense element of late-cycle dynamics in this critical juncture in world finance. Don’t miss Doug’s detailed and insightful analysis.

Hard Asset Insights: Morgan provides further evidence that the Fed is trapped in a situation of its own making, unable to make absolute progress toward fiscal stability, instead trading progress in one area for regress in others—Whac-A-Mole writ large. Goldilocks is clearly the goal and assumed (by markets) destination, but when one step forward on equity valuations results in two steps back on inflation, Goldilocks is just not in the cards. Morgan discusses two possibilities in regard to what Jay Powell might be trying to do, and what the obstacles to each course of action are likely to be.

Golden Rule Radio: Miles, Rob, and Tory dive into the precious metals markets and markets closely associated with the metals. Miles begins with a look at recent trading activity in the gold market, giving clear guidance as to what levels would represent upward pressure going forward, and, conversely, what levels indicate downward pressure. He notes that gold has made five all-time highs in the past few years, so is looking very strong. Tory brings in the fundamental factors affecting the gold price, such as dollar index strength, Treasury yields, the stability of other markets, geopolitics, debt, deficit spending, and much more. Dominant this week is politics. Though the Fed is supposed to be apolitical, it is clearly acting in a political capacity as it abandons the effort to contain inflation in an election year.

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