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When Both/And Beats Either/Or

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Sep 18 2023
When Both/And Beats Either/Or
MPM Posted on September 18, 2023

As women have entered the work force in high numbers over the past 50 or 60 years, they have changed the division of labor families have most commonly employed for millennia. Whether that change is good or bad is beyond the scope of this discussion. The point here is that, with both men and women dividing work between home and another workplace, there has been a great deal of emphasis on “work-life balance.”

That balance is not always easy to find. It’s similar in a way to the military, which must also balance two very important things: accomplishing a very dangerous mission and keeping its people safe. To try to keep that balance, the military has a saying: Mission first, people always.

Given that the military is supposed to serve the nation, and the nation is comprised of people, the motto makes good sense. In essence, it says, “the people we serve are our first priority; the people we serve with are always a priority.” In practice it means that if push comes to shove we will sacrifice the people we serve with to protect the people we serve, but we will do all we reasonably can to keep everyone safe.

Family breadwinners face a similar paradox. They serve with coworkers to earn money and benefits for their families. Most workers would say their families are or should be their first priority, while those they serve with on the job (and the work itself) are always a priority as well. Even in the best of times this is a difficult balance to maintain, but it’s very important to do so.

David talks briefly about this aspect of life early in the McAlvany Weekly Commentary this week. Given his predisposition to take the long view of life generally and family and investing specifically, he applies some lessons learned at a conference to one of his favorite subjects—legacy.

Many of us want to leave valuable financial assets to our children when we die, but we will leave much more than that. The habits and values we impart to them intentionally—or even through neglect—will have an impact for generations.

King Solomon, the wisest and perhaps the richest man to ever live, advised those who also want to increase in wealth to: “Be diligent to know the state of your flocks, and attend to your herds; for riches are not forever, nor does a crown endure to all generations.”

In other words, if you want to obtain, preserve, and build valuable assets, you must always know their condition and deal with them intentionally and well. That most certainly applies to our most important “assets”—our families and loved ones.

And it applies to other assets as well. As you read or listen to the below communications each week, you will get information that impacts your life and your investments. The publications deal with facts and thoughts not typically available in the major media, and with an emphasis and depth that is extremely hard if not impossible to find in the alternative media.

No surprise then that a company that deals in always-valuable real asset investments also emphasizes family and human connection along with the virtues that build and sustain strong societies and individual legacies.

Key Takeaways:

  • A crisis narrowly averted
  • The ECB ups its interest rate
  • Energy impacts inflation a lot
  • Banks are still in the doldrums

The McAlvany Weekly Commentary: After starting their analysis with the relational element of life, David and Kevin turn their attention to the importance of expertise in one’s work. After attending a conference with other CEOs, David acknowledges the gravity and dignity of each person’s accomplishments, while pointing out that beyond such common traits each person possesses individual proficiency in a unique field. He gives as examples the extremely exacting and esoteric requirements of portfolio management in his own case. From there he segues into some of the important trends the MWM team is seeing. The economy, he notes, is driven by three things: how individuals, corporations, and the government spend money. All three of these elements are apparent in the Fed’s Z.1 report, which David carefully dissects. He also looks at Warren Buffet’s famed measure of equity valuation—market cap-to-GDP, as it applies today—along with the Q ratio and the Shiller PE. Each tells a story. And David then tells of a close call in currencies: “We were up to the line. This is when you’re peering into an abyss and you think, “Boy, we really shouldn’t cross this line.” We were on that line last week.” Sound important? It is. Don’t miss this Commentary.

Credit Bubble Bulletin: Doug begins his analysis this week with the spotlight on Europe. After the ECB’s recent raising of the interest rate, European doves and hawks each trotted out their comments as to how they believe things will go from here. Doves announced we’re done here as hawks conceded enough for now while believing another hike will perhaps be needed in December. Despite the ECB downgrading economic forecasts and becoming more dovish in outlook, Spanish, Greek, and Italian 10-yr bonds rose 10-12 bps. Doug concludes his European focus by observing that “Economies throughout Europe have weakened meaningfully of late.” Turning to the U.S., he notes that though CPI and core inflation prints show inflation is turning up again, “August inflation data offered something for doves and hawks alike. Most analysts focus on what they view as encouraging underlying trends. I see ‘sticky.’”

Hard Asset Insights: After putting all the relevant inflation data in formation and commanding it to “Pass in Review,” Morgan concludes that the troops are in trouble. Like the good soldiers they are, though, they are uniform in their message. And perhaps that message is most clearly told in the form of energy prices. “Energy prices eventually get into everything. Energy is the great inflation force multiplier. If you have an energy price problem, you have a consumer price inflation problem—full stop. Right now, already 44% off the summer lows, oil prices are rising, and they’re rising for good reason.” Good generals issue their orders in such a way that they can’t be misunderstood. It’s pretty hard to misunderstand that quotation. Morgan notes that consumers are already up against the wall in terms of being able to afford the basics. They’re increasingly turning to credit, but credit is increasingly turning away. It’s expensive and hard to get, and becoming more so. Next, while conceding that the highly unlikely could happen, Morgan doubles down on his recession expectations with commentary from eminent authorities on the subject. In short, buckle up and put your head down. This “soft landing” is likely to knock your fillings out.

Golden Rule Radio: Miles is alone in the studio this week, and he decides to depart from the usual narrative explaining that gold is in a trading range, we’re waiting for a decisive breakout, it didn’t happen this week, rinse and repeat. So he spends some time instead on the question most asked by clients: Is my bank safe? There’s no one-size-fits-all answer to that question, but he puts it in perspective by asking the bigger question as to why so many banks are in trouble. In answer, he asks why people would keep money in a bank account or CD with low interest rates when they could buy Treasurys more safely and with higher returns. He also notes that consumer lending at banks has gone up 23% since April 2021 as consumers increasingly deal with price inflation via debt increases. Interest rates for consumer credit are also going up, which cause debtors to have trouble making payments on their debt. This increases the number of non-performing loans banks have, in addition to other pressures they face. Miles returns to some chart analysis, looking specifically at stocks and real estate, before spending a moment on Warren Buffet’s contrast of investing with baseball. It’s a keen insight from someone who practices what he preaches.

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