PodCasts Archives - McAlvany Weekly Commentary

Powell's .75% increase: ain't Volcker, but it's somethin' Europe deploys "anti-fragmentation" grenade China & Empire... Rolls out third aircraft carrier   Everything Bubbles & Endless Summers... End June 21, 2022 “We had speculative darlings that got crushed last week, tech and cryptos under the most pressure, 20, 30, 40%, but everything got sold, right? Now what do we get? Do we get a summer rally? Do we get the month end, quarter end rally attempt? Do we have endless summers? Is that what we’re back to? Hey, the nightmare of the first two quarters is behind us. Now all we have is blue skies and perfect waves.” — David McAlvany Kevin: Welcome to the McAlvany weekly commentary. I’m Kevin Orrick, along with David McAlvany.  I was thinking, we had the everything bubble provided by the central banks for a long time, and it reminded me of a movie, Dave, that came out at exactly the perfect time in American history, called Endless Summer. And this movie was the dream movie for teenagers because it’s guys who were— It was 1966 that it came out, and it was a documentary of surfers going from Australia to New Zealand, then to Tahiti, Hawaii, Senegal, Ghana, Nigeria, South Africa. They just chased summer and surfed all the time. And that’s sort of what we’ve had.  Unfortunately, winter does come, and endless summer, unless you can travel the world and chase the summer all the time, winter comes. I know it’s the summer solstice this week. And so, yes, we’re at the peak of summer. That got me thinking about it. But if we don’t start preparing for winter now, it comes as a shock. And there was nowhere to hide last week. I mean, winter, almost, it was sort of shocking, wasn’t it? The everything bubble wasn’t looking so everything. David: Yeah, it was reality setting in for those who had been on vacation chasing the perfect waves. Reality, even for the trustafarians. Kevin: Trustafarians. David: No place to hide last week, certainly that was the case. It’s often said that in a bear market everyone loses, and the person that loses the least, that’s the winner. And for us, it’s tough to feel great about losing less. I would rather own hard assets with cash flow than anything else in this environment. Kevin: Yeah. But how about losing one or 2% versus 20%? Yeah, I think I’d rather lose one or 2%. David: Sure, sure. The credit markets are in a tough spot. You’ve got sovereigns, sovereign debt, which has suffered in many cases even more than corporate debt, and I don’t think that’ll always be the case. Right now, you’re beginning to see the credit default swaps, what it costs to ensure against default, beginning to move, both for investment grade and high yield debt. And investment grade bond funds had their 12th week in a row of outflows. And as we know, as goes corporate credit, so go corporate equities. Kevin: Mm-hmm (affirmative). David: So new issuance, this is really key. Corporations have gotten used to sort of rolling debt. It comes due, they issue more, it’s at a cheaper price. It’s all good. They continue to debauch their balance sheet but it doesn’t matter because it’s always on better and better terms. So watching new issuance of debt is key to markets, seeing how they’re functioning, that they’ve been functioning so well is something we now take for granted. And we are now dependent on continued securitization and new issuance in the form of junk and investment grade debt. If those markets slow, if they halt, we begin to see major, major problems, and that’s when you’ve got something of a catastrophe in both the bond market and the stock market. Kevin: Well, I’m wondering if it’s going to affect the confidence in the central banks? David: Dislocations in the credit markets are a game ...

3.2 Trillion in leveraged bets to unwind this week Gold in relative terms up 50% vs Bitcoin, up 20% in Yen Powell’s Rock and Hard Place question: Implode or Inflate?   Market Horror: Three Witches and a Slice of Fruitcake June 14, 2022 “You do have this growing probability not only for a significant market decline from here, but a whole adjustment phase, where if we are in a new cycle where inflation sticks around and interest rates have to go a lot higher, we haven’t even begun to see the extent of adjustments to take place in the stock and bond market. Do you want liquidity, which is a form of optionality in that eventuality? The answer’s a solid yes.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.  David, I love our listeners, and sometimes it hurts a little bit. I’ve got friends who listen and they’re like, “I listen to the show every week, but you guys are really missing it in this area or that area.” I don’t want to hear that too often, but I want to listen to him. One of them, one of our listeners, he contacted me. He says, “You’re not getting the whole story across with Ukraine. You guys are reading just a little bit too much of the media.” Now I had an idea that maybe he was right, but now the Department of Defense is admitting something that was just conspiracy theory two weeks ago. David: Well, right. I mean, I think this is where if you have studied Elliott Wave or studied the ideas related to socionomics, there’s a sociological and a psychological impact when you get to the end of a credit cycle. It starts showing itself in weird places, like the length of a skirt, the design of a car, the kind of lies that are told and how boldly. Kevin: And how many biochemical labs or what bioengineering labs are in Ukraine. David: That’s what I’m getting at because the lie factor, the deception factor doesn’t matter if you have an MD or a PhD, or you’ve got some other three letters as an acronym that should justify yourself as an authority. So where do we start today? How good of the Department of Defense and the Pentagon to admit not six labs, what they originally denied, but 46 bio labs in Ukraine. Kevin: 46. David: 46 bio labs. Peaceful cooperation, it’s all straightforward scientific stuff. You wouldn’t understand, but just move along. It was Russian fake news until the admission this week at defense.gov. Then we wonder why the DOJ, the CDC, the DOD just mentioned, and every other extension of government is having credibility issues. Let’s not forget the quasi governmental as well, the Fed, also three letters. All of these could be four letters, frankly. But it’s telling when your reputation is doing the toilet dance and the best an administration can come up with is Department of Homeland Security is to partner with big tech and refine the narratives and the news feeds on everything from election rigging, climate change, and anything else that doesn’t fit a prepackaged storyline. Kevin: This is why you have to seek the truth yourself. You had mentioned all of the misinformation, but sometimes you can coat over truth if you can just print money and get away with it. Jim Grant is somebody that we’ve had on the show a number of times. We’ve read his books. You take his letter called the Grant’s Interest Rate Observer and to be quite honest, for 10 years, Interest Rate Observer should have been Interest Rate Tranquilizer, Interest Rate Bedtime Read because interest rates, even though this sounds like a very boring read, but interest rates actually tell you the cost of the risk of money. It was coated over, a little bit like the Department of Defense lack of admitting what they knew, for about a decade. That’s changing this week, Dave. I mean, it’s been changing,

PHD Central Bankers slapped with "NO Confidence" vote by Bond Markets The FED is 700 basis points behind the curve Trade settlement in Rubles and Yuan up 1067% in 100 days Bond Markets Revolt against Central Banks June 7, 2022 “This notion of no confidence, this notion of fear, I think it has to do with being unmoored, being undone, and there being no one to help in that situation. My view, and yours as well, is that education has so much to do with the re-mooring, it has so much to do with the anchoring, it has so much to do with confidence that remains, even when you’re in a circumstance of no confidence.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary, I’m Kevin Orrick, along with David McAlvany.  Dave, your dad and mom were in town from the Philippines a couple of weeks ago, and he told a funny story. He was in the Air Force back in the sixties and he was a medic, but there was a reason he was a medic. They actually wanted him to be an aircraft mechanic until he took the test, and I think he got, what, 4% on the test for aircraft mechanics? And so they made him a medic. Now, I’m just wondering, I heard the story this weekend about what happened to you with the diesel engine. Did you inherit your dad’s mechanical skills? David: Well, I think if it’s the mechanics of interest rates and currencies, maybe we’ve got that down a little bit more than the actual physical world of nuts and bolts and gears and things of that nature. I will say my dad’s first day on the job as a medic, he was given a needle and there’s a guy who needs a shot in his butt and he managed to bend his first needle. I don’t know that the 4% grade on the mechanic immediately slotted him towards 100 hundred percent success rate as a medic. He did enjoy serving, I’m sure it beat the alternative of washing dishes. Kevin: If you can just tell, in short order, what happened with you and your family this weekend? It actually was pretty heartwarming, but it started out sort of scary. You had gone up to Denver for a school conference for your kids, and on your way back, you were pulling the Airstream trailer and you started smelling diesel. Tell the story from there? David: What a weekend, getting to see friends and our kids’ friends, and then going to see Dear Evan Hansen, a play that many have probably seen. Then driving back, and our engine breaking down on Wolf Creek Pass. I thought I overfilled the gas tank, so there was a little smell of diesel. But then it starts to smell worse, and we think, well, maybe we should just turn off the AC and open the windows. Then it’s even worse, we get down to Pagosa [Springs, CO], pull over, and we’ve got a small geyser under the hood and diesel’s going everywhere. I go and search for a little J-B Weld, because, I mean, that’ll fix anything, won’t it? Kevin: That’s sort of scary, Dave, the very thought that you thought that would fix it. David: Yeah, well, I mean, there’s a hole. How do you plug a hole? A little J-B Weld will do the job.  Anyways, I meet this young guy, and he’s from North Carolina. It’s his first day in Colorado, and he has it. The convenience store that I went to didn’t. There were very few places open at that point of the day. I could not get over to the auto parts store, which was about five miles away, and so he bails us out. Calls me 10 minutes later and says, “Why don’t I just haul you back to Durango?” So, AAA took the truck into the dealership and he came with his truck, and an hour later, hauled us to Durango. It was just a remarkable bit of kindness, not something that I’m accustomed to seeing, but something I’m incredibly grateful for.  I think if you reflect on the upside down nature of the world we live in, and the degrees and illustrations of unkindness, an occasional reminder of someone stepping outside of their own personal priorities and time schedules,...

Oversold stock market bounces... (dead cat)? Russia & China fly joint "nuclear-capable," bombers near Japan & South Korea Only 5 months ago the predicted inflation rate was 2.2%... oops Inflation Now Four Times Higher Than Experts’ Estimates May 31, 2022 “Be careful how the herd gathers and runs. It’s not always rational, it’s not always safe, and it’s not always safe for an investor to play when the herd is gathering. So we’ve got that paradox of herding. It’s in effect here, and it’s in a time where you have greater economic, financial, and geopolitical destabilization emerging. Investors are continuing to ignore these factors at their peril. As an investor, it’s pretty critical that you gain your own version of strategic clarity.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.  David, while you were top gunning from the top of Red Mountain Pass down into Silverton, I was sitting in a theater watching Top Gun. I’ve got to admit, it was a lot more comfortable sitting where I was than where you were. But you got to tell the audience what you were doing this weekend, because the 50th anniversary of the Iron Horse is something that obviously only happens once every 50 years. But you got to ride the opposite direction, and it was even more exciting than the normal Iron Horse. David: Leave it to two brothers with a little too much testosterone and maybe a little too much ego. Kevin: 1972. David: And here they are challenging each other. One’s an engineer with the train here in Durango. Kevin: Yeah. David: And the other says, “I can beat you on my bicycle going from Durango to Silverton.” So ensues the race, and it’s been done every year since then. And so we know those guys and— Kevin: Yeah, Tom rode on Saturday. David: It’s great. Kevin: Yeah, he did. 50 years later, and he’s a good friend. David: Yeah. And so they opened up a new race this year from Ouray to Silverton, it’s a shorter race, a steeper climb, and perhaps the only year they’re going to do it. So if it’s the first of many, that’d be great, if it’s the only one they ever do, I wanted to make sure and do that. Kevin: Okay, so I texted you and asked you about it, and you said it was epic. One thing, just say one thing about the epicness of it, just— David: Well, I went there and back, and that gave me 5,000 feet of climbing and 5,000 feet of descending. Kevin: Wow. David: And there’s nothing like 5,000 feet of descending. There’s a lot of things that you can rather do than 5,000 feet of climbing. Kevin: You sent me the emoji of praying hands. Was it a little bit dicey there for a little while? David: It’s the Million Dollar Highway, and I’ve been on that road with my mother-in-law, where you’ve got those handles inside a car— Kevin: Right. David: To help you get into a car. She just about ripped it out as we’re going 25 miles an hour on a clear day, no weather. Kevin: If you go over the edge, you don’t hit for a while either. David: No, it’s pretty intense. Kevin: Yeah. David: So coming down that hill was also intense. And probably I think my top speed was 45, but there’s certain turns where— Kevin: 45 with no guardrail, yeah. Yeah. David: You’ve got to— Well, you have to slow down quite a bit more than that on a number of those turns. Kevin: Okay, yeah. David: But it was exhilarating, it’s beautiful. Kevin: Yeah. David: It’s absolutely one of the most beautiful places in America. They call it the Switzerland of America, and for good reason. The vistas are spectacular, the waterfalls coming down off of the mountains, absolutely stunning. And we had the road completely cleared, all the cars are gone, so it’s you and the road.

Inflation is the next global pandemic China's Debt to GDP 280% & that's an understatement For every $1 of productivity, $50 goes to the rich When Is Enough Enough … Or Not Enough? May 24, 2022 “When you combine inflation with economic stagnation, you get stagflation, something Stephen Roach most recently has been talking about with CNBC and saying, “No, you’d be a fool to think that inflation has peaked, and stagflation is all but inevitable.” Everyone is being forced back to the basics on the basis of budgetary constraints, but it’s everyone but the leviathans.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.  I was reading Exodus 5 this morning, and that’s the story where Pharaoh takes the straw away from the Hebrews and tells them to make as many bricks as they did before. What was happening before, of course, was they were being given the straw while they made bricks, but now they had to go out and find the straw. And I was talking to my wife at breakfast and I said, “Gosh, that is a lot like inflation.” David: It totally is. It’s the frustration factor of someone who was already busting their tail and was having a hard time getting done what needed to get done. Kevin: Now they have to have a second job. They can’t be with the kids. I mean, it’s just wearing them out. Inflation does that to all of us, doesn’t it? David: Well, that’s right. And it’s one of those factors that impacts psychology in a very meaningful way. And it’s one of the things that central banks are very resistant to see take root. They don’t want to see the psychology shift because they know that it changes human behavior in a dramatic form. Kevin: It hit me too, though, Pharaoh was worried that the people had overwhelmed the Egyptian people. In other words, they had multiplied. And if you want to keep people from being able to unify in anger with the government, you just keep them busy and you wear them out. Now I’m not saying that’s necessarily the goal with inflation, but you look at China right now, Dave, and I would imagine leadership in China at this point needs to keep the people very, very busy because things are changing. David: When is enough enough? Or if you’re talking about the numbers that we’re seeing out of China, maybe it’s not enough. China’s now up to $5.3 trillion in stimulus money. And that’s the quantity of dollars coursing through the veins of their economy this year. That might not be sufficient. You’ve got Covid zero policies closing large parts of a $17 trillion economy, on top of the already dynamic declines in the credit markets, which have been led by the real estate development sector being in a real dire place. And that puts Beijing leadership in a dangerous position. But can you imagine $5 trillion in stimulus being inadequate? Kevin: They’re printing money out of thin air, but they’re telling people they can’t go to their job. They can’t do something. So in a way, it’s a different way of taking straw away. Now they just can’t go work, so let’s just print money. Ultimately it does create the inflation, however. $5.3 trillion, you don’t just “stimulus” that into the economy, without it creating inflation down the road. David: Where there’s danger, there’s also opportunity, and the politics of the Communist Party are anything but boring today. You have Xi Jinping, who may have his election victory buttoned up later this year, and he may not. You’ve got party infighting. That’s increasing. And all of a sudden the political engineering that Xi has orchestrated over the past five years, while it has left him in a stronger position, it has not provided a guaranteed path to a third term. This would be unprecedented since the ’90s. Kevin: Yeah. Our Federal Reserve at times feels like they can control the markets,

"Perception management tool" is failing politicians Strawman? Biden pins inflation blame on wealthiest corporations Consumer Sentiment Plummets... Inflation Dragon Now Too Big To Hide May 17, 2022 “Here in the U.S., the most significant issue pressing on the polls and agitating voters is not abortion, it’s not the Supreme court, it’s not climate change, but inflation and cost escalation, number one. Polls register a growing concern with, again, household budgetary pressures. And so now you get politicians who are like, how do we dance around this? It’s a reality we can’t control, and how do you manage perceptions with it? You’ve got to find somebody to blame.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.  I’m really looking forward to Friday. We’re celebrating the 50th anniversary of the company. Basically, it was your mom first that started this company back in 1972— David: That’s true. Kevin: And your mom and dad are in from the Philippines. They live at one of the orphanages that they help with, and they came back to Durango for this and the 16th birthday of your eldest son. Wow. David: Right? Well, I mean, of course, to see the rest of their kids too. My sister in California, the rest of the family towards the east coast. And it’s great to see them. We spent the weekend tent camping in Arches National Park, which I don’t think they’ve been in a tent in 50 years. Kevin: I didn’t even know you could camp there. I’ve been there and I thought you had to leave after five. But you guys had the permit, huh? David: We head to Moab twice a year with the five families, we call them the five families. Sounds like sort of a mob gathering or something. It is a mob when you start counting all the kids and sort of the mayhem that happens over— Kevin: The red rock, the desert, and the kids, and the noise— Is there water there? David: Sometimes we’re floating the river. Arches, it’s more about hiking. Other trips we’ll take mountain bikes and various levels and various ages. So we kind of scatter and then re-gather for meals. Kevin: You were a little worried, your mom and dad, you weren’t sure when the last time was that they tent camped. Now, they’re pretty tough. They do missions work all around the world, but tent camping, was this the first time for your mom in what, 50 years? David: I think so. Yeah, to end the weekend, it was thank you for the invitation, we look forward to coming back next year. Kevin: So they said that they liked it? David: Yeah. So I guess we will invite them. Kevin: Well, good. Well, Friday, the company gathers, and again, we’re very, very thankful. We have— David: 50 years. Kevin: 50 years. And we were talking to shift this thing over to economics because your dad— When Nixon closed the gold window in 1971, your dad knew enough about economics and he was a broker at the time, a stock broker and a bond broker. He understood that that was the beginning of the death of the dollar. And since that period of time, since 1971 when Nixon closed the gold window and then ’72, when Don and Molly opened this company, the dollar’s lost 99% of its buying power. So I guess that he was right. If you look at it, gold was 35 bucks an ounce when they started. David: You know, there’s a life cycle to everything. And when you look at the dollar and you look at the changes that were happening in 1970s, you could say it was creative genius. I mean, there were things that were going on that had to happen. They set the stage for a tremendous credit expansion, 40 years of tremendous asset appreciation and real estate and stocks and bonds unloosed fr...

Powell: Hawk, Dove, or maybe both? Bitcoin breaks down through major support level Momentum Speculators of today should learn from RCA of yesterday If You’re Addicted To Gain, Prepare For Pain May 10, 2022 “Budgets are being squeezed now. We know that. Gasoline prices, gallon of milk, pound of ground beef, whatever it may be, it’s not that people are spending less. It just means that they are spending 100% just to get by. And that actually is the Keynesian dream. You don’t have savings. So you make adjustments. You limit where the funds flow, and it’s just the essentials that remain. All the fluff gets taken out. We’re back to the basics.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.  I brought up last week that we’re back meeting at Ken and Sue’s, back at table 30 on Monday nights, sipping on our Talisker. You came in last night, and of course you’re in training. So you ordered, what are they called, lollipop wings. And we had stickers. David: Pot stickers. Kevin: Yeah, pot stickers. I just always yield. When you’re in training, it’s like, why don’t you go ahead and eat? You eat more than me because you’re trying to fill that body, all those calories getting ready to go. David: And I feel guilty, but I don’t linger. Kevin: Yeah. I noticed you took me up on that. But what you didn’t tell me was that you had just come from a bakery and had eaten this blueberry thing that you talked about with everybody this morning. You didn’t tell me that you had already filled the palate and the stomach with—what was it? A blueberry muffin at a record store. So, it was a combination bakery, an LP vinyl record store. David: My friend Josh is a motorcycle maniac. At least he was before he had a young daughter, and he and his wife are a really dynamic couple. And they love vinyl. They love baking. And she is a master baker. This was not a muffin. I don’t know what it was, but it had a blueberry compote on top. And it was one of the best things I ever put in my mouth. So anybody coming through Durango, look for Toast. That’s the name of the place. They’ve got a great listing of vinyls. Kevin: Didn’t you just buy your wife Buena Vista Social Club on vinyl? David: It is such a great listen. It’s such a great listen. Kevin: It’s interesting. I was thinking about it, Dave. Isn’t it strange the things that we took boxes down to the thrift store 20 years ago, our vinyl albums, now we’re going back and we’re paying premiums on those? You think about how music— We’ve got a grand piano in our house. My mom has a grand piano. My grandmother had a grand piano. Because years ago, that was the only way you had music in your house. But there was a revolution that occurred back when the long play— Or actually, even before the long play, when just the album and the record player— You remember RCA Victor? David: Oh, sure. Kevin: Yeah. The symbol with the— I think it had the dog, and he was sitting and listening to an old Victrola. Right? David: Mm-hmm. Kevin: Wasn’t that RCA Victor? David: That’s right. Kevin: Yeah. And so you think, all things seem to come back, don’t they? David: Well, all things do come back around. It was college 20-something years ago that we used to have on a Saturday morning, once a month, something called Waffle Fest. Me and three other guys would sit and listen to the Buena Vista Social Club and make waffles and more bacon than you can imagine. And we would just eat for four hours. Kevin: So you’ve always associated baking and LP albums. David: Of course, of course.  Well, Bitcoin broke support at 35,000 this week.

FED Loses $500 billion in Q1 Netflix down 70% from peak, Amazon 30% down Japanese Yen loses 80% relative to gold in 22 years The McAlvany Weekly Commentary with David McAlvany and Kevin Orrick Mortgage Rates Explode… Housing Affordability Threshold? April 3, 2022 “The speed and ferocity of reducing a mammoth size presence in the fixed income markets that is shrinking the balance sheet, that’s what they probably tinker with. While the Fed need not worry for its own solvency, you and I have to. Others have to worry about their solvency. We get marked to market every day, and we lack the flexibility to print ad infinitum. They’ve got that going for them too. We plebes operate with a different set of rules. And so, with rising rates and the “stagging flation,” I think these are things that we have to pay attention to.” — David McAlvany Kevin: Welcome to the McAlvany weekly commentary. I’m Kevin Orrick, along with David McAlvany.  A lot of our stories Dave, come from your travels. I love sitting— We were sitting at Ken & Sue’s restaurant last night, again. For the first time in two years, we actually got to be live with each other instead of doing the FaceTime, because they opened up for us on Monday nights. And we looked back and we said, “Gosh, we’ve done this for over a decade.” Sat, had a Talisker, just talked about life, our family, the markets, the things we’re going to talk about. It was so nice to do that. And also talk about, again, your travels. David: Well pretty busy between the Energy Conference in Florida to meeting with a group of guys, business leaders from around the country for a couple of days of fly fishing in Montana. Kevin: I got the pictures. I got the pictures. Well, I’ll tell you what, I’m glad though. I’m glad that the accident that you guys were caught in, one, didn’t turn out to be fatal. It certainly could have been. It sounds like it was a terrible accident between a little RAV4 and a semi truck. And you said that the semi truck looked like it was worse for the wear. David: Exactly. Coming back from Montana, we went straight to Santa Fe, New Mexico, and on our return trip, we were stuck in traffic and sat there for three hours. And a RAV4 and a semi, you’d think, this is not going to be a good story. No fatalities, but a big mess in a pinched canyon. Kevin: But you adapted quickly. David: I looked at Mary Catherine. I was like, “We could be here forever. Why don’t I go for a run?” So I ran up the road. I ran past the mess, they let me go by. And I was like, “You pick me up. If traffic breaks free, you can pick me up. I’m going to keep on running.” Kind of a Forrest Gump moment. Kevin: Yeah. Yeah. Just, keep running. You said that your wife also brought a book to read a little of, and she ended up reading the whole book while you waited. David: Oh yeah. Oh yeah. Kevin: Okay. So as we look at this, I think about your travels, Dave, because you have a tendency— That’s just part of the resiliency that your family tries to build in. You wrote the book on legacy. You could also add resiliency to that. And that is, take the situation, make the most of it.  I think about Christopher Blattman last week. You met him on one of your trips. Literally it wasn’t one of those things where you had figured out, “Oh, I want to talk to somebody about why we go to war.” I think you met him and his wife in a hot tub. You came back and you said, “I have a guest for the Commentary.” And it really, it turned out to be a very timely, a providential type of interview. I really enjoyed it. David: Yeah. Well he said it was probably the most interesting conversation he’s ever had in a hot tub. Well, I thought, it just pays to be engaged and ask questions,

The five causes of prolonged warfare The pathways to avoiding prolonged warfare Realizing the economics of the War decision can lead to peaceful compromise Why We Fight: Interview with Christopher Blattman April 26, 2022 "Narratives can unravel this interdependence and they can actually accentuate our misperceptions. They are very powerful, so they work both ways, and our leaders construct them. And it goes back to the uncheckness problem, is that the unchecked leader with a private interest in war will construct a narrative to pursue their private interests, and you have to hope it’s one of interdependence and not one of inflicting suffering." - Christopher Blattman Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.  Well, I’ve been waiting for this interview for about a month, Dave. You introduced me to a book. Fortunately, I got a chance to read it before it came out, Why We Fight. And one of the things that I really enjoyed about Christopher Blattman’s book is that he’s not coming at it from a normal war book perspective. It’s not why we fight and let’s find out the good things about war. It really is mainly why we don’t fight. David: Yeah, because most rivals loathe one another in peace. They look at the cost of war and they figure out how to keep a peace, and it doesn’t mean they don’t fight on occasion, but all out war is something that happens actually more rarely than you’d think. And that’s a part of the conversation is to explore how is it that we fixate on war when actually peace is more of a common theme. Again, peace does not mean that everyone gets along perfectly, but there are some things that keep rivals from compromising. Kevin: Something I really enjoy about knowing you, Dave, is you travel a lot and you really try to meet the people that— When you’re traveling, you try to talk to them, get into their heads. Rarely ever, though, do you meet someone that later you find out is an author and we can have on the show. You love books. You love people. David: Yeah. As regular listeners know, I believe books are an amazing opportunity to learn and discover gaps in our thinking and in our knowledge base. So to find out there are aspects of complexity you’ve never considered is both frightening, but it’s also thrilling.  Meeting Christopher Blattman and entering into a casual conversation suggested that he brought something unique to our conversation. He reminded me— He seemed like the main character in Mark Helprin’s book Memoir from Antproof Case. There’s this economist who has muddy boots. He’s got a farmer’s tan, he’s constantly gathering information and he is paid to do so from taxi drivers, sitting in cafes and talking to people, hanging out with gang members and talking to unconventional entrepreneurs. Economists generally live in sort of a removed and sanitized world of numbers and analysis, but not that character, and not Christopher Blattman.  I’d be remiss in not mentioning Jeannie Annan from their serendipitous meeting at an internet cafe in Nairobi through her PhD program in psychology and Chris’s PhD program in economics. Now their shared adventure and life together with kids in Chicago.  Why we fight. I actually got to see something very interesting as it relates to their whole family. It was fabulous to meet them both and to see their kids negotiate peace over Sour Patch Kids and Dr. Pepper. So we were dealing with scarce resources and parents know that that’s either bargaining chips or the source of the next skirmish, and occasionally could be linked to an outbreak of war. So Chris, welcome to the program. Christopher Blattman: Thanks for having me. And now I have a new book on my reading list. David: Well, I’ve read your book. I think our listeners should, too. They can easily order it at Amazon. It’s hot off the press as of April 19th.

From loose, looser, loosest policy to tight, tighter, tightest? Ukraine agricultural harvests will be cut in half this year Is China signaling preparation for war with the west?

Rates on 30 year mortgages rising at fastest pace since 2003 Gold up 13% over 12 months Ex-FED President Dudley "The Fed will have to shock the markets"   The McAlvany Weekly Commentary with David McAlvany and Kevin Orrick Inflation Makes You The Designated Loser April 11, 2022 “Eight-point-five is not comparable to what we had under Volcker. In fact, if you’re talking about the Volcker era measures, you’d be closer to 13. So I go back to gold. Gold’s up 13% over the last 12 months. Basically, it’s got you at break even. It’s interesting because your alternative stinks. Your alternative is a guaranteed loser. Again, you have been— in the policy suite being chosen and implemented in the economy, you have been designated the loser.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.  Now, Carmen Reinhart a few years ago was a co-author of a book called This Time Is Different. And I think a lot of times, Dave, when we look back at history, we go, okay, well, the only way we can predict the future is based on something that we’ve seen in the past. What we would change from the past or what we would do the same. But what we’ve had recently, Dave, this inflation, along with the overvalued markets, along with the potential for recession, it may be different this time. And the Bank of International Settlements is saying we cannot sustain this. David: Those are famous last words, and of course, Reinhart and Rogoff were using that as sort of a play on words that no, maybe it’s not different. It’s only different in the sense, Kevin, that there’s a lot of people who don’t know what we’re talking about when you talk about inflation, because it’s been an entire era. It’s been a gen— more than a generation. Kevin: I was a teenager. David: Ninety-five percent of asset managers today have never managed money in the context of inflation. They don’t know what changes. Frankly, corporate executives don’t know what changes and what’s the different approach that needs to be taken in light of balance sheet management with inflation in the mix. You like the idea of being able to raise prices, and sometimes you can, but there are also thresholds to that as well.  The Bank of International Settlements is the central bank to central bankers. And they said this week, “We may be on the cusp of a new inflationary era. The forces behind high inflation could persist for some time, and the structural factors that have kept inflation low in recent decades may wane as globalization retreats. That change requires a broader recognition in policymaking that boosting resilient long-term growth cannot rely on repeated macroeconomic stimulus, be it monetary or fiscal. It can only be achieved through structural policies that strengthen the productive capacity of the economy.” Kevin: So it’s what you’ve said over and over. You cannot run an economy just with quantitative easing. And the transitory episode, which is what we’ve been sold, is actually a long-term era, is what BIS is saying right now. David: Yeah. So it’s noteworthy because it is the bank to the central bankers, and they’re considering an inflationary era, not just a short inflationary episode. And I think one of the things that is getting baked into the larger conversation today is the impact of inflation on lower income economic strata. Kevin: Well, look at inflation now. I mean, what is it? It’s over eight. David: Yeah, fresh CPI print this week at 8½%, that’s up from 7.9%. Core was not quite as bad as expected, but the headline was supposed to be eight-four, and it came out at eight-five. That places the 10-year Treasury at the most negative, real yield in US financial market history. Kevin: Wow. David: So the PPI, producer price index, is going to come out later this week and we’ll also hav...

Is Russia/Ukraine an energy heist? Putin "will sell oil for Rubles" - Ruble rebounds Stimulus money still a coiled spring, only 30% has been spent https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2021-full-report.pdf https://www.iea.org/reports/ukraine-energy-profile/energy-security The McAlvany Weekly Commentary with David McAlvany and Kevin Orrick For Lack of an Affordable Nail… April 5, 2022 “Words are signals, signals are useful for creating impressions with a particular audience, it’s psychological engagement. It’s not truth telling. Again, when you hear the words, safeguarding, security, peace, looking for democracy, a democratic world order, just, mulipo— This is not truth telling, this is psychological engagement. Just? Just to whom?” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.  We were talking last night as we always do on a Monday night, with Talisker, and you explained to me something that we should know intuitively, and that is the price of nails and how that actually tells us more about economics, probably, than a number of PhDs can today. So for want of a nail, the shoe was lost. For want of a shoe, the horse was lost. For want of a horse, the knight was lost. For want of a knight, the battle was lost. For want of a battle, the kingdom was lost. So a kingdom was lost, all for the want of a nail. David: The fun thing about taking an interest in economics is that it takes you to so many various rabbit holes, and the National Bureau of Economic Research had a working paper from December of 2021 on the price of nails since 1695. And “A Window into Economic Change” was the subtitle. And it’s interesting in the same way that the Big Mac Index is interesting. The Big Mac Index tells you, on the street level, what’s inflation doing. If you’re in Turkey, what’s a Big Mac cost you. Kevin: I think that was Richard Russell, wasn’t it? The Big Mac Index. He was the one who reported on that, I think. David: Maybe it is. The idea is that you’ve got some gauge of pricing and so, the story of the nail from 1695 to the present is also intriguing because it tells you something about the benefits of deflation over time. Now, there’s a few factors. There’s a decline in price for nails from the 1700s to the 20th century, and a part of that is that material prices are coming down, part of it is that productivity is increasing, and that’s through a variety of factors, manufacturing, specialization, what have you. And as GDP grows, as you have greater wealth, the scale and scope of what nails contribute to GDP is shrinking through time. Then all of a sudden, mid-century, the 20th century, we see real nail prices start to rise, and they’re still rising. So, just like the Big Mac Index is telling you something, the price of nails does too. Kevin: Do you want to tell us what it is telling you? I mean, I think I have an idea. When money is stable, you start to become more and more efficient as a society in manufacturing nails, and you grow as an economy, so like you said, the percentage of the use of nails as far as the growth of the economy goes away, the percentage drops down. But when you take gold or when you turn a currency into something that’s not stable, you start stealing that increased productivity and putting it in the pockets of inflation. David: Since the 1930s, we’ve had this notion that deflation is bad because we experienced a catastrophic asset price deflation, and now all deflation is bad. But if you go through the history of money and the British Empire, and in the early American Empire, you see that there is a positive deflation where your dollar is buying you more, not less, through time. Kevin: Which is good for us as consumers, not bankers,

The $500 trillion Interest Rate house of cards Stocks rally & bonds crumble Consumer Pessimism highest since WWII The McAlvany Weekly Commentary with David McAlvany and Kevin Orrick China Stockpiles 80% of World’s Copper & 70% of the World’s Corn & Oil March 30, 2022 “Inflation’s going to run out of gas before we run out of options. That’s got to be an assumption that Powell’s running on, not really reflecting on the phase shift from low expectations for inflation. We’re talking about human beings here, and sentiment. We’re talking about a phase shift from low expectations of inflation to stubbornly entrenched consumer expectations for much more of the same. And frankly, for as far as the eye can see.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick, along with David McAlvany.  Last week you were traveling, Dave, and I got a chance to meet with you last night. And as we were meeting, you said, “Well, I didn’t eat lunch. I had a really busy day, and I’m trying to get a swim in before my wife gets in, and I’ve got to run. Maybe I can get that in between 11:30 and midnight.” David: I did. I squeezed it in just before midnight. Kevin: Yeah. And I’m thinking, “All right, so this is what training for a triathlon is. And still being a dad and still being a business owner and all the stuff you were doing last week.” So to me, that’s a form of insanity. And so I’m just going to segue to this right now because we’ve got the VIX on the stock market. Stock market right now is looking like it’s just as hot as it can be. Okay. And it’s forgotten Covid. It’s forgotten the Ukraine. The bond market— I remember when your dad one time tried to put things in perspective. He says, “Let me show you something.” He said, “Imagine a bathtub full of water.” Okay. “Now, imagine a shot glass. The stock market is the shot glass.” He says, “The bond market is the tub full of water. So you want to watch because the bond market actually is what is telling you what the economy’s doing.” Stocks—they don’t don’t necessarily rhyme or reason, do they? David: Right. And I mean, in terms of scale and scope, actually, they’re not that different in size. Kevin: Right. David: But in terms of importance and the messaging, that is pretty key. And so you mentioned the VIX, the volatility index, and that would suggest, as the number keeps on coming down, that all is well. That the stock market is going back to an even keel. And the equivalent index for bonds continues to move higher. So you’ve got a disturbing disconnect, where the bond market and the credit market is saying one thing and the stock market, with great enthusiasm—not a lot of careful thought, I don’t believe—but nevertheless sending a message all is well. Kevin: And now the stock market reminds me a little bit right now of the person who was on the Titanic and never heard the hit. Okay? They never heard the iceberg hit. The guy who did, he’s the bond market right now. And that seems to be what we’re seeing; the cycle from bonds to stocks. David: A fascinating week last week and into this week. A massive rotation from bonds to stocks. And that continues unabated, with carnage mounting for your bond investors. So this is the worst quarterly returns in the bond market since 1990. Kevin: Hmm, wow. David: And into this week, you’ve got stocks filling in the performance hole created by January, February, March, and the downside volatility that you had. Now, I mean, think of this: A 45% rally in Tesla shares in 10 days. And Apple moves to just over 7% of the total of the S&P 500’s capitalization. There has never been a company that has had a larger percentage capitalization of the S&P 500. If you go back to the periods of past sector excess, where technology was just, man, really flying, Microsoft and IBM filled those top slots.

"Control oil & you control nations. Control food & you control people." - Kissinger Russia & Ukraine generate 10% of all global calories Powell raises rates - How much more will he go before reversing again? Collectivists, Dictators, & Technocrats vs. Personal Liberty March 22, 2022 “It’s a perfect world of simple inputs, and there’s so much confidence packed into this because there’s powerful means put at the disposal of the central bank community. It’s no longer a question of what might go wrong. Nobody cares. ‘Well, what could go wrong here?’ What a silly question to ask. There are tools for every possible outcome, probably tools for market stability, even the case of nuclear war. At least there’s the posturing and the rhetoric to support that.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany.  Dave, it’s interesting as we go through preparation for war, whatever that looks like, the polarization is really happening. You and I were talking about just the excluded middle where what we’re seeing with comments from our clients, comments from our listeners, just listening to various news sources, there’s very little middle ground that’s being approached at this point. Most people are taking sides, and it’s difficult to find agreement. Are you finding that as you travel? David: Well, very much so. I think people like certainty when there is more uncertainty, and lean more heavily on definitive statements and strong conclusions. Even though it might not match the reality, it certainly feels better. Kevin: Something that I’m finding is people are sending me must-see YouTubes so that we can understand what’s going on overseas, understand what’s going on with China, understand what’s going on with Russia and the World Economic Forum. What’s interesting is these must-sees, they don’t necessarily agree with each other. So obviously, these must-sees, there’s got to be something different that I’m not seeing. David: For about the last 15 years, the Economist has put together a study which is pretty helpful just to see the shifts in numeric terms in what they consider a measure of democracy. The Economist Intelligence Unit publishes their Democracy Index, and it shows the direction of individual countries and particular geographies, an entire continent, if you will, or parts of the world. That came out this week. Not to anyone’s surprise, China and Russia still rank near the bottom. They’re in the authoritarian category. Russia is number 124. China is 148. That’s out of 167 countries on the index. China was once again laid low on its score in the electoral process and pluralism categories and their nearly nonexistent civil liberties. So you’ve got this 85-pager which starts out by saying that the pandemic has accelerated a creeping authoritarianism on a global basis, and you only have 21 countries that remain in the full democracy category. It’s a really fascinating thing. Kevin: And I’ll bet the US is not on that list. David: That’s right. It’s in the flawed democracy category, which is a separate category, and so it does not even make the full democracy list. That didn’t prevent the US from holding two summits for democracy at the end of 2021, which according to the report elicited cynicism in many parts of the world. So again, the report goes back over the last 15 years, and at least 108 of these 167 countries have recorded the decline in their index scores through that timeframe, or have just stagnated. This is a trend worth watching. The study describes how the last two years, again, going back to Covid, has impacted the way people experience freedom and the way they engage with government, so the Covid strictures, the shutdowns, the mandates. Now post-Covid, it remains to be seen what citizens will expect and what they’ll acquiesce to.

London Metals Exchange cheats the rules & commits suicide for nickel Russia can only continue in Ukraine with China's help German GDP to tumble if energy from Russia is halted https://www.econtribute.de/RePEc/ajk/ajkpbs/ECONtribute_PB_029_2022.pdf Consequence Of The Loss Of Confidence March 15, 2022 “This is exactly what we saw between 1968 and 1982, where inflation endured and it ground us down. And it was painful, particularly as you saw the impact of compounding negative rates. Here we are just at the front edge in terms of time for inflation. And I think we have a lot farther to go. If they’re not going to own the mistakes, then you’ve got to own the only thing that can preserve your purchasing power through what is going to be a long stretch of pain.” — David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary, I’m Kevin Orrick, along with David McAlvany.  You know, David, one of our listeners sort of knows my interests. He knows that I like celestial navigation. He also works at a bookstore that has very rare books. And he contacted me and he said, “I think I’ve got something that you might like.” And I did. It’s a navigation book, a French navigation, celestial navigation book. You know, it’s got the ephemerides of the movement of the stars and the sun, the same thing that I have for current almanac, but it’s from 1794, from Paris, and it is fascinating to get it out. I can’t read French, but I can read the numbers and I can see the maps. And what’s interesting is, that was during the time of the Reign of Terror. Okay. 1794 was when the heads rolled, you remember that? 1793, 1794 in France. That was a very, very volatile time. And war was being fought in many different ways at that time. Part of it had to do with the guillotine. David: Yeah. I collect some currencies, and I’ve got assignats from the 1790s, the French currency before—well, actually during the process of devaluation. Reign of Terror, no surprise. There’s political volatility in the same context as essentially a hyperinflation. What weapons of war? Weapons these days, somewhat unconventional, shall we say? One thing that every country now understands if they’re watching the interactions between the US and Europe and Russia and Ukraine, is that reserve assets, if they’re held outside of your own country, or if they’re tied to another country’s currency, they can lose reserve status quickly.  Yeah, so on display is the case of the $300 billion out of the $640 billion in reserve assets of the Russians. 300 billion basically lost. At least inaccessible. Maybe owned by Russia, but if not controlled directly, it’s not currently a part of their actual liquidity position. So, we’re running out of munitions, maybe running out of money. And certainly we have the Russians, at least according to the Financial Times, crawling to the Chinese for greater assistance. So what’s becoming very clear is that Ukraine is bleeding Putin. And because the invasion was not wrapped up inside a week, the world can see how thin Russia’s resources truly are. Kevin: You know, you see that in war. I think of 1914 really being the end of this wonderful period of the gold standard, where people were operating well. But you know, we came out of that and we saw Germany fight a war that they just plain ran out of money. You know, Hitler was fighting in World War I as a soldier. And when he heard that the Germans had surrendered, he was furious because he was like, “Wait a second, from where I sit, looks like we’re winning.” But no, the truth of the matter is they ran out of money. Now, similar, they printed a lot of money afterwards to make it look like it really wasn’t a problem, and turned to hyperinflation. David: But the blitzkrieg of World War II similarly was about speed. And even though there was massive resources to be found with the capture of Switzerland,