TFMR Podcast #26 - David McAlvany of McAlvany Financial Group

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I met David McAlvany last month at FreedomFest in Las Vegas. I asked him to come on for a podcast and he happily obliged. I'm glad he did.

At FreedomFest, I showed up the first morning to hear presentations from John Browne and Peter Schiff, both of EuroPacific Capital. They were terrific but so was this other guy who I'd never heard of before. His name is David McAlvany and I was immediately struck by the feeling that here was someone who "gets it".

Since I'm often asked if I "know any good financial advisors", I thought that David would be a good person to introduce to Turdville. He seems to see the world as we do and he is doing his level best to warn the masses of the coming disasters. His firm is producing a three-part video series that promises to be educational and informative. The first video came out a few months ago and is linked below. I strongly encourage you to take some time to watch the video once you've finished listening to the podcast.

If you suspect that David and his company can help you in any way, more information can be found at https://www.mcalvany.com.

The Fuse is Lit | European Perils | Part 1

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Magpie
Aug 26, 2012 - 1:00pm

@Strongside

That's some serious research!

I think there are some cultural differences at play. There's a lot of farming, ranching, and mining in this area. People around here won't sell their used tractor, their horse, or even a dozen pullets for anything other than cash. The lady I buy my organic eggs from doesn't take checks. Some places will give me a discount for cash, if I ask. If I go to Wally World, swipe my debit card and ask for $100 cash back, I can always get a large bill. The ladies at my bank know my name, and greet the other customers by name when they enter.

I'm so grateful I don't live in an urban area!

Mickey
Aug 26, 2012 - 12:09pm

Further on FRN's

just go to your local grocery and observe how many people pay by FRN, Checks or plastic--most are checks or plastic. (I have not seen anybody use SNAP but then again I do not stare at the card used).

The only time I see cash used is 1) when the purchase is small, 2) if business surcharges the use of plastic, and 3) if its someone I know who has a cash business (meaning they do not report all their income) and thus do not want to leave a spending trail for IRS)

so to me its no surprise banks and businesses do not have much cash on hand. Go to an art fair and you see even there the dealers have credit card machines.

I'll qualify all these observations in that I do live in an upper end area, and thus isolated a bit from reality. Restaurants are busy and money is being spent-not the same elsewhere I know. Sometimes I want to poll the high net worth folks to see how many understand or have Physical in possession or even have more than a token investment in paper PM. I doubt that number would be high based on what I see from friends and relatives.

May friends and relatives just do not want this "shit" in their portfolios. That tells me they do not understand what is happening and their brokers and advisors have gotten to them (I am an advisor where my clients run the gamut-from a low of 20% allocation to PM to 95% with the more involved ones saying they can handle the volatility but they actually do not want more than a small amount of cash in accounts. And yes-they have Physical).

I also know big aggregators of assets have little if nothing allocated to the commodity sector at all. Most that manage assets of the high net worth direct money to hedge funds that are totally opaque to their clients. These clients are going to be hurt big time and are getting an unfair deal anyway-risk reward wise as their managers get 2 and 20 for taking huge risks with OPM. Note: not all hedge funds are problematic--some-especially venture capital/PE work hard, are smart/talented and do well, rather than taking big risks or do algo trading.

Got to be carefully whose coattails you are riding.

Mickey
Aug 26, 2012 - 11:51am

Just in time frn's

I'll add to my prior post that in the 80's 90's we became a just in time society-no need to keep extra inventory around.

So we now have banks that keep a just in time inventory of cash on hand.

I do think this can be complicated by liquidity issues in banks that have weak balance sheets. That skews the problem to the big banks.

I know owners of some small local midwest banks with strong ethics and values. They are very hands on and are street smart about what they invest in and how much leverage they use. They were not too happy in 2008-09 when the FDIC started assessing bigger fees and hogher capital infusions because they felt (where have we heard this) they bore extra costs to help the big banks which over leveraged and over "bonused" staff incl execs.

These banks were lending smart--to individuals and businesses they knew. Not some wild ass investments which eventually would blow up like the game of musical chairs. They are smart because its their own money--they are not playing around with other peoples money like the big banks (and governments for that matter).

Mr. Fix
Aug 26, 2012 - 11:33am

@Mickey,

I think it is interesting the way you compare cash to perishable goods.

In today's environment, there really isn't much distinction.

The only difference I can see, is that at least you get a “best if sold by” or some other kind of expiration date on most perishable goods.

We know by now that cash has a limited lifespan, for a variety of reasons.

What we don't know, is how long that lifespan is.

But thinking in terms of perishable goods when looking at our cash in the bank,

is definitely a worthwhile mental pursuit.

The only thing worse as a store of value as cash in your pocket,

is cash in the bank.

I tend to keep my balance as low as possible,

and cash reserves also as low as possible.

Only the powers that be know when this entire system will implode.

At that particular point in time, cash in the bank will cease to exist,

cash in your pocket will have a very short shelf life,

and large quantities of precious metals will be the only true store of value left.

Mickey
Aug 26, 2012 - 11:05am

Cash

it appears that for a while now local banks and branches just do not have a lot of cash on hand.

Let me suggest its a reaction to the electronic and plastic environment. Fewer and fewer folks use cash today. People charge most everything if for no other reason than miles or discounts. In essence cash, specifically fiat paper cash, is becoming a relic. Bullion is too difficult to carry around.

So we have a bifurcated issue. The issue between fiat paper and real money. And the transition to an electronic society. Many folks I know now have their checking accounts auto debited for the credit card statement, mortgages, utilities, cell phones, internet, --you name it.

I do know those transfers even if into the 5 digits go flawlessly. Even when I transfer between accounts, no problem.

I think statistically the banks-and I mean your ordinary corner local bank-have figured out how much cash they need just like an airline overbooks flights and once in a while they have to rebook and give vouchers. Or your local grocery store has only the perishables they think they will sell in the short time frame.

They only hold what they think they need.

Of course, this presents a problem if there is a statistical variance. A snowstorm in winter which closes roads stops the supply pipeline in grocery stores--when people go out and stock up. A trucker strike could cause problems, An oil embargo could cause problems.

So I think the issue is far more complex. Its not all that difficult to up the printed FRNs, is it?

StrongsidejediMagpie
Aug 26, 2012 - 10:01am

@Magpie - Bank branch cash withdraw limits

@Magpie-

My friends and I began noticing erratic behavior at bank branches where the teller or branch manager would cite "company policy" and claim that there was a limit on the cash withdrawals from the branch.

Because we are business people with multiple accounts (both personal and business checking, savings, or money market accounts under our control) and because we have those accounts set up with multiple banks, we began triangulating fire on the specific bank branches in order to identify if the same behavior by different people resulted in the same response.

To our amazement, it did result in the same behavior pattern. We tested major banks like Wells Fargo (yeah, I'm going to name names), Bank of America, Chase, Citi, and several smaller regionals and credit unions. The testing occurred in 2008-2010, depending upon the timing of when the bank began imposing these cash withdrawal limits.

I have previously posted on this blog about how the cash withdraw limits appear to be falling in amount. Some of the business guys would pull $10,000 + at one time in order to distribute cash personally through the small business' various locations personally. Rather than hiring Brinks or some armored car service, the small business guy would randomly pull the cash and then distribute to the local offices or sites.

You are correct that the branches vary in the policy enforcement. We have determined that local bank branches do not carry much cash due to the problems with bank robbery. Our businesses are in an area where a lot of bank heists occur. The local banks sometimes secure down the cash flow by having robotic systems handling the cash for the teller. It's like the ATM is at the teller window. The thing is that small business guys can't stand holding large amounts of $20. With the devaluation of the USD in progress, I've noticed that the $50 is becoming more helpful than holding a $20. So, the larger cash withdraws end up being a combo of $100, $50, and $20's and therefore, the ATM will not work.

Most ATM's limit cash out to a few hundred dollars. This doesn't help the small business that is transacting alot of cash transactions. You may be asking why a bunch of small business guys transact in cash and not using credit card or debit card. Well, we've all looked at the damn credit and debit cards but we have all noticed that the time involved with doing the plastic and the percentage that the card company charges drains profit from the vendor and store. We'd rather not use the cards and prefer cash.

Plus, with cash, we can transact faster because the cards have a lag of 1-3 days prior to posting of the amount to our bank accounts. We'd prefer cash thank you.

Plus, when the banks are limiting cash flow in the community, the bank branch ends up dictating the velocity of money in the small towns where our businesses are located.

So, yes, in Nevada, you will likely see must more rapid cash distribution and cash basis transactions. In this area (I am currently writing from coastal California), no the cash is not moving quickly. In fact, although we are legitimate small and medium sized business owners, we have seen bank branch managers and tellers attempt to limit cash withdrawals at amounts as low as $5000.

We conclude that these attempts to limit cash withdrawals is related to the bank branch manager and the teller not being coordinated on the amount of cash at the window and in the branch for the day. In fact, several banks (BofA, WF, Bank of the West, and Union Bank) have not only stated that we could not have our money, but that these cash transactions would require a formal letter to the bank leadership, an IRS form to be completed, and/or more.

In some cases, some of the men have submitted the letter or IRS form requested. However, when that experience was shared with the others in our group of guys, we realized that something was wrong. Then, we began testing these banks individually and at random times and then reporting back to the group regarding our experience.

I would like to suggest that this board's small and medium sized businessmen do the same. You need to test your bank by doing a cash withdrawal of several thousand dollars in cash in order to identify if it triggers any strange behavior by the branch. When we began testing these things at the various branches, we were told that our prior behavior did not match the transaction request. It is possible that the banks have software algorithms operating that track your financial transactions and are monitoring your behavior.

In fact, interestingly, we began discussing these software routines a few weeks ago when the Aurora theatre massacre brought to light a company in San Diego which writes similar software routines for the banks.

Citizens need to take charge of their cash. Santa (Jim Sinclair) is correct. If you do not have the cash in hand or the stock certificate in hand, you may not own the money. We concluded that when we place money in the bank, the banks begin to think of the money as "theirs" and not "ours".

Therefore, we began refusing to complete any IRS forms and refused to submit any letters to bank executives for cash withdrawals. I've had reports of people (multiple reports) of banks demanding to know why and to know on what the cash was going to be used. The teller or branch managers are asking the account holder to identify why the cash withdrawal is taking place. We find this question to be intrusive, accusatory, and inappropriate. Therefore, we follow the question with the answer of "because its our business". Two guys have had tellers refuse to turn over the cash and both had to meet with the branch manager. Both told the branch managers that if the cash was not given, they would pull all their accounts in cash to be deliverable today. Because they both had several hundred thousand dollars in cash, the bank manager shut up and gave them the $5000 to $10,000 withdrawal amounts.

However, none of us now use those bank branches and we refuse to permit those banks to hold substantial accounts.

There is clearly a paucity of cash bills in our area. I'm seeing signs of this absence of cash when I go to store after store and issue a $50 bill. The cash drawers often do not have enough bills to handle the change.

Think about what I'm saying here. It's important for your security and the security of the nation.

OldFordTrk1leeson_was_framed
Aug 26, 2012 - 6:23am

For those that didn't get it in school...

The Most IMPORTANT Video You'll Ever See (part 1 of 8)
QE to infinitywaxybilldupp
Aug 25, 2012 - 10:54pm

@ waxybilldupp

Yes, it's observed, bank holiday = public holiday in the UK. Doesn't have any meaning, it's just a public holiday. LBMA is closed, banks are closed, schools are closed (when it's term time, they are closed now anyway), doctors' surgeries are closed (except emergency), most shops are closed (though don't have to close, so large stores are often open), etc.

Somebody did mention it somewhere on this site that LBMA will be closed on Monday, I think it was in the new thread.

QE to infinitywannabe
Aug 25, 2012 - 10:48pm

Maybe this has been discussed

Maybe this has been discussed here at some point but wanted to get peoples opinion on holding allocated goods out of the country. Does it really matter in that big brother will know how much and where it is anyway. Do these companies have to state this to government? If it is held outside and they wanted to have a piece of it wouldn't there be such a long paper trail that it would not matter anyway.

Of course it matters! Sorry, but I find the attitude that the government of one particular country (even the US) can easily grab anything anywhere in the world, so "it doesn't matter" pathetic. Don't mean to be personal, but I feel very strongly about it, so can't find softer words.

Even during Roosevelt's gold confiscation it was only confiscated if it was held within the US, foreign-held gold was letf alone, legally.

Even where the governments would want to grab everything everywhere, it's much harder for them to do, if it's not under their direct control. The assets in your home country can be grabbed (frozen) under slightest pretext very quickly, depending on which country you live in, reaching across jurisdictions is much harder to do. Of course, it is preferable to keep your assets in a reasonably safe jurisdiction, where its own government doesn't decide to grab it, but it does provide risk diversification.

It will also help a lot to have assets stored outside your home country BEFORE capital controls are introduced/tightened. Otherwise, you may be unable to buy cheap foreign investments when the time comes, or to take anything with you, if you decide to get out, like those Jews who were only allowed to take a few pennies with them or something, before they were not allowed to get out at all. And unlike then, it is going to be difficult to get gold/silver out sewn in your clothes nowdays, what with X-rays, porno-scans, TSA searches etc.

It's happening already to some extent - Greek government helps themselves to money in Greek bank accounts on "suspicion" of unpaid taxes (no court order necessary), but they can't get at the money held abroad. Except it's apparently already getting difficult to open a bank account abroad if you have a Greek passport.

Governments don't really need to go through a lot of efforts to steal foreign-held assets if there are enough assets to steal within their easy reach, they'll grab those first. Every government does that. The further your assets are removed from your government, the safer they (and you) are.

Magpie
Aug 25, 2012 - 8:04pm

@strongside

I live in rural NV. I've been in my local bank several times where I've seen some very large withdrawals take place......two were for livestock purchases over $5K. Now maybe the bank had been notified in advance, but there was no hesitation by the bank to fork over the cash. I've made withdrawals for $2500 and not had any problems. Maybe it's the bank's policies, not the regulations?

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