Don’t cry! Argentina gets the largest IMF bailout in history. Market creep? Mortgage rates move from 3% to almost 5%. European Central Bank exercises painful political persuasion with Italy. Can Bank of Japan’s unlimited liquidity float the whole world? Thanks for listening to this week’s McAlvany Weekly Commentary.
Don't Cry! Argentina Gets The Largest IMF Bailout In History
Welcome to the McAvaney weekly commentary on Geben Orrick along with David McAvaney. We mentioned the smoke from the fire last week Dave but now we're on day 12 of a fire that's made national and international news. But what an incredible almost militaristic military operation on fighting a fire. The coordination the back burns the over 800 people who were involved the you know 15 to 20 major aircraft that are continually working the lines and they're not trying to put it out. They're actually directing the fire. Hopefully the direction that they want while saving they haven't lost a single structure yet was a fascinating illustration of exponential growth. I mean we were sitting here last week talking about a fire that was 2500 to 3000 acres which is not a small fire by any means. And now it's over 23000 acres tenfold increased tenfold increase. And you're right it is interesting to watch professionals handle themselves with a skill and we've got the best we get the best in the country fighting the fire and are grateful for that. Well Dave we've just passed an anniversary one of the most influential military operations maybe in world history it changed at least the 20th century the direction that the war was going and I'm of course thinking of the day I sat at the dinner table last week and my nine year old reminded me of what day it was and the day it nearly slipped by. There we are in the evening. Seventy four years ago was the D Day invasion onto the beaches of Narnia The Seventeenth anniversary.
You guys went out actually to Normandy took the boys and the deaths was with you too right. No just the voice. Okay just boys and it had slipped my mind last week as I'm sure it might have for many but four years ago on the seventieth anniversary we visited the beach in Normandy and we walked to the small towns which the US airborne liberated and I think my boys will always remember that trip they because we do like to eat and fix various things as a family. They often mention the rabbit that we bought at a butcher shop the entire thing. Big guy but the butcher shop there and some Eric Leese and turned it into a rabbit tie and you know I hope they really remember the speech we sat there at point to go back and read a speech that Reagan had given on the fortieth anniversary of D Day. And it's so well done and it's so presidential. I wanted to include the link so that anybody who hasn't heard that speech we took a written copy and I stood right there in front of the pillar and read it to the boys and we were there with some friends and we all read it together. It's important to remember isn't it. I mean Memory is such an important part of developing a forward history. I think it's important to teach our children to remember to because apparently sometimes we forget. So I was just grateful.
Yeah nine year old voices to ask me that blue jeans today today's and I'm like I don't know what today is is like well this is the anniversary of D Day and like oh you know I've even noticed as you go through the Bible if you look at the word remember it's almost always tied with obedience and prosperity and when they would forget if you look at the word forget all through the Bible you see that it's almost always tied to disobedience and a loss of prosperity. But you know I'm going to shift to this week because we have had a free ride for the last decade at least with interest rates and that seems to be changing not just here in the United States but the European Central Bank is also talking about tightening. This is a big week because we're going to see something different than expected from what the Fed has told us about and or even different than what they've already done. Now six times here in recent years but when tightening the flow of credit when you do that via higher interest rates there are thresholds that change things and changing sentiment is a very delicate thing. Mood tends to shift and sometimes it's sort of based imperceptibly on small changes within the environment that you're in in the context that you're in. But as the mood shifts so does the capital allocation process and you've heard it in terms of sort of risk on and risk off right kind of that the harsh you know bifurcated I'm in the market or I'm out of the market and those are kind of the facts that define bull markets and bear markets. But we may well be at one of those thresholds this week on the table as the seventh increase in rates. And you know you don't have to look too far. Consider the real estate market.
Just to illustrate the point mortgage rates have risen from a little over 3 percent to a hair under 5 percent. So if you're combining high asking prices of real estate given supply and demand dynamics and higher financing costs you're looking at affordability. At this juncture which is you know setting records but you know not because it's affordable because it's almost not affordable for anyone to something has to give. At the same time you've got the ECB the European Central Bank meeting on the 14th this week.