To QE Infinity & Beyond! - a podcast by McAlvany ICA

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The McAlvany Weekly Commentary

with David McAlvany and Kevin Orrick



To QE Infinity & Beyond!

March 25, 2020



"Guess what the Fed is doing? They’re buying it all. Does that support what we have said all along, that the Fed has peered into a financial abyss and has panicked? They are willing to support everything, including the purchase of ETFs that buy the aforementioned assets. We are talking, cumulative, 4-5 trillion dollars in these various commitments. Is that a way of them saying, ‘We’re all in’?



- David McAlvany



 



Kevin: David, last night when we were sitting and talking about the show we actually were reminiscing because we have some good friends who have been on this show. Ian McAvity was on the show and he talked to us about times like these coming. He didn’t get a chance to see them. Richard Russell wrote extensively through his lifetime, into his 90s, about what to expect when we come to a debt bubble collapse. And then I remember Howard Onstatt, who I used to call my free market mentor. Last May before he passed away I said, “Howard, do you have any words of wisdom?” He said, “Yes, the cycle prevails.” Well, surely, we are seeing that the cycle prevails, Dave.



David: So if the cycle prevails, it shouldn’t come as a surprise that not only have we seen a massive increase in the value of stocks and bonds and real estate in recent years, but here, frankly, the only thing surprising about it is how fast it has happened – 22-27 trillion dollars in global market value lost in a very short period of time, three to four weeks. The cycle does prevail.



As we have said, there is more than meets the eye. Certainly we have the challenges of Covid-19, but we’re afraid that the Fed is trying to use the same tools that they did from the last crisis, when in fact, if you wanted to look at it from the standpoint of public health infrastructure and a slowdown of the economy, because of what is happening with Covid-19, then I would suggest to you that the medicine that they are doling out is not exactly suitable to the issue, itself. This is a different kind of shock altogether. On the other hand, as we have pointed out, C-253 may, in fact, be the bigger issue. A burst bubble requires extreme measures, and when you look at the crisis from the standpoint of Credit-253 and the global credit pandemic, then perhaps their playbook makes a little bit more sense.



This week we have a rebound in equities. It begs the question. After having been through a couple of weeks of real challenge and stress and strain, do you now appreciate having risk controls applied to your portfolio? And if you’re asking, “Risk controls? What risk controls?” I think that is a conversation that you need to have with your broker or financial advisor. Do they even exist, or have you discovered yet again that it is sort of buy and hold, which is the only strategy your financial advisor understands?



What about deliberately positioning in cash? Is that something so anathema to someone who sees the world only from one perspective, and perhaps, as we suggested three to four weeks ago, this is the blindness of a particular personality – gifted, fantastic, important, but also blind to certain things, given a certain propensity to see the world a certain way. What about hedging with gold?



Kevin: Dave, this bubble is the largest bubble in world history, and actually, we were talking about the bubble coming apart starting in September, but a burst bubble really requires extreme measures, and we are seeing that. I’m wondering, like I asked last night,

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