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McAlvany Weekly Commentary

AI Tech Bubble Says, "Feed Me"! How Will Trump Respond To Financial Instability? The Fed Can't Get Longer Maturity Interest Rates To Go Down "This is one of the factors which is super bullish for gold. Bond markets are signaling a divergence for monetary policy, and implicitly saying that either fiscal commitments are already too great or inflation is coming back. Perhaps it's a combination of the two, but either way, yields are telling you where rates are headed next, and it's not lower. The implication is that financial market stability is very much in the cross hairs." —David McAlvany Kevin: Welcome to the McAlvany Weekly Commentary. I'm Kevin Orrick, along with David McAlvany. David, I was just going back and looking at discussions we've had in the past on catastrophe math. Zeeman made that very famous back in the 1960s, 1970s, and what it basically boils down to is, certain factors build to a tension point, like a bridge. A bridge may work for 40 or 45 years and then suddenly collapse. And the question is, is there any math behind that? Is there any predictability in the timing behind that? And you've just brought up in our meeting the sand pile effect, same type of thing. Let's talk about that a little bit because there are some tensions building right now in one direction that can't hold forever. David: Well, first of all, welcome back. You had more eventful weekend than I did, and I'm glad you're in— Kevin: Speaking of catastrophe. Yeah. David: Yeah. You're in good repair, stitches and all. Kevin: Yeah. Yeah, emergency appendectomy, but boy, am I happy that we have a medical system that can actually get that kind of thing out. David: Well, looking ahead to two weeks out, we can put it on the calendar. January 30th, Doug and I will tackle perhaps the toughest analytical mashup ever on our quarterly Tactical Short call. Starting 2025, there is a confluence of major concerns—and this is to your point, Kevin. When you start looking at the various factors, you don't know, considering that sand pile effect, which grain is the culprit for the slide, but there's a confluence of major concerns, whether it's fiscal, economic, financial market—encompassing both equities and bonds, geopolitical and strategic considerations that make this Tactical Short call a feast for the inquisitive. And, I think, full of opportunity, if you are observant and in the markets and agile, assuming you can get a few of these macro themes right. I think the difference could be between your best performance in a calendar year or your worst, and 2025 is shaping up to be very, very interesting. Of great consequence long-term are the impacts on society as a larger expression of your own balance sheet expansion or balance sheet compression because there is a mirror, there is an echo, a reflection. Kevin: Yeah. We just heard Morgan give the update to our meeting today, and he said we have two major, major issues right now, inflation and a debt problem, the interest that we have to pay on our debt. And he calls that a debt spiral. It gets to the point where the Federal Reserve has lost control and we talk about catastrophe. You can have inflation and manage inflation if you don't have too much of a debt problem. You can have a debt problem if you don't have inflation, but when the two come together, it creates a major issue. And I know you've got some other major issues. I would imagine one of the issues you guys are going to talk about is the bond market, which reflects that. David: Well, again, one of the key issues there is with debt being at the level it's at, typically the way that you would fight inflation is by raising rates, except if you're raising rates because of how much debt we already have in play, the interest component is already at an overwhelming level. So to raise interest rates just piles on even more to the deficit via the interest component. And that is unique because typically a debt crisis can...