MARKET NEWS / MCALVANY RECAP / MARKET NEWS

When Safety Becomes Opportunity

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Aug 28 2023
When Safety Becomes Opportunity
MPM Posted on August 28, 2023

It’s axiomatic on the sales and marketing side of life that you sell the sizzle, not the steak. That’s not so much because everyone involved in those pursuits is lightweight or dishonest, it’s because of human nature. For most people, the steak bores, the sizzle entices. If a businessperson doesn’t want to go broke, they sell the sizzle.

That’s a problem if your product doesn’t sizzle. Gold shines, so it matters to those who like jewelry, but it doesn’t bedazzle investors. It has been called the barbarous relic. Arguably the best investor of the past 50 years has panned it because it offers no yield. And few investment advisors will recommend that you include it in your portfolio. For a metal that once graced the palaces of kings and the most sophisticated and sacred of buildings, gold has fallen on hard times.

In the pursuit of sizzle, investors buy stocks instead. And to get the greatest sizzle, they rely on investment advisory services or newsletters. Or they buy books on how to research stocks or other investments to determine what’s worth buying and when. Many of these things have value, but what they struggle with is the ability to keep investors from giving back in bad times what they gain in good times.

The investor mentioned above—the one who doesn’t like gold—is Warren Buffet. He reads for up to six hours per day. He reads company filings. He reads annual reports. He reads news. And he reads much more besides. Do you?

It’s not an accusatory question. Most of us are not investors by trade. We have other responsibilities, other obligations, other pursuits. So it might not be realistic for us to think or hope we can match Buffet in our investing efforts.

The point in all this is that (some) professionals can operate without a safety net. Most of the rest of us can’t. Risk is real, and many of us miss the hints about the future that reality offers while we’re busy living our lives. By the time we get the memo, we’re late to the meeting. The opportunity has passed, or the disaster has arrived.

For years the McAlvany companies have touted the benefits of the Investment Triangle. If ever there were a concept that lacked sizzle, the triangle is it. It’s as pedestrian as walking. But if walking is not riding in a Ferrari, a bullet train, or a jet airplane, it’s a fairly important thing most of us would never do without.

The base leg of the triangle is its insurance leg—the foundation, the base. Like a net, it insures you never hit bottom. When you fall, it keeps you from harm.

In his Hard Asset Insights this week, Morgan Lewis has much to say about gold. This time, though, he’s not just talking about safety. He’s talking about opportunity. Sometimes walking can put you on the Ferrari, the bullet train, or the jet airplane. Is this such a time? Don’t miss HAI—or any of the communiqués below—this week.

Key Takeaways:

  • The amount of debt in this world is absolutely staggering
  • Mortgage rates high; new home sales also high?!
  • The gold story of the decade!
  • But don’t forget silver!

The McAlvany Weekly Commentary: David cites the Bank of International Settlements’ observation this week that the tally of G20 non-financial debt is $250 trillion. Further, he notes that the Bloomberg Global Aggregate Bond Index has reset by only 50 basis points despite all the Fed’s interest rate increases. The implication is that the vast majority of pain that interest rate increases will inflict has yet to arrive. Given that that’s a lot of interest on a lot of money, it could very well be a lot of pain. To boot, it’s a lot of debtors experiencing that pain: “anywhere you go, in Europe, the US, even parts of Asia, South America, the uniformity is very significant. This is not one central bank problem. This is the world choking on too much debt.”

Credit Bubble Bulletin: After discussing Q3 growth estimates (high) and unemployment rates (low), Doug also notes that new home sales are at a 17-month high. Given that mortgage rates are now at 7.30%—nearly a 23-year high—the home-sales statistic is clearly counterintuitive. Doug then quotes Barron’s on a somewhat strange topic: “One of the buzziest topics heading into the Jackson Hole symposium this year was a fairly wonky one: At what level would the real interest rate be considered neutral? The economy’s surprising strength had sparked a debate over whether the neutral rate, which economists call R-star, or r*, was actually higher than previously thought. That could signal in turn that monetary policy would have to get more restrictive than anticipated, too. The trick with r* is that it is impossible to measure in the moment, so economists were on high alert for whether Federal Reserve Chairman Jerome Powell, in his Friday speech, would tip his hat about where he believed neutral rates were and what that might indicate about how much work the Fed has left to do.”

Hard Asset Insights: Morgan’s entire missive this week is focused on gold. Why? Because there is mounting evidence that gold is at a pivotal point. It’s easy for people who have only casual acquaintance with gold’s ups and downs to miss its bigger story. Indeed, that bigger story plays out over years and even decades, so missing it is easy to do. But Morgan gives the back story, and it’s compelling. This is simply must-read material. At times in the past century, gold has been not only the safest investment but the most lucrative one. Is this another such time? And are there other investments that gold slingshots to even higher peaks than it attains? Read HAI to find out.

Golden Rule Radio: Tory and Rob take a look at both the current activity of gold and silver and that of the past several months. This analysis not only gives expression to the process of charting an investment’s price action, it offers a graphic representation of what Morgan discusses in HAI this week. (The analysts whose work is profiled here often touch on the same subjects, but they do it with different emphases and insights.) The hosts then touch on the meetings ongoing at recording time, both in South Africa (the BRICS countries) and Jackson Hole (central bankers from around the world). Those observations in turn brought up the topics of the highly anticipated BRICS currency and central bank digital currency. From discussion of such lofty topics, the hosts return to some pertinent thoughts on silver, which is showing surprising strength, and could be setting itself up for some exciting price action in the not-too-distant future.

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