An update on Covid-19 & MWM

McAlvany Wealth Management Q&A COVID-19

Dear investors,

As we monitor the development of the coronavirus pandemic, we want to reassure you that McAlvany Financial Companies are fully engaged in supporting its employees, clients, and community. In recent weeks, we’ve seen devastation to communities ravaged by this pandemic. The recent market volatility has left investors with considerable uncertainty about the best path forward.

We have withstood the impact of dire situations in the past, such as 9/11 and the financial crisis of 2008, and have helped our clients make sound decisions when facing uncharted territory. We are dedicated to meeting the needs of our clients and partners during this extraordinary time in our history.

We’ve responded to a list of common questions we’ve received. We hope this information will provide some guidance. Please reach out to [email protected] for further information or if you need assistance with any of your investing needs.

David McAlvany

Q. How are you meeting increased demand for gold during the current crisis?

A. The McAlvany Financial Companies and the Vaulted web app are built to handle a very high volume of activity. For example, since Vaulted’s launch in 2018, the app has had a steady rise in accounts with monthly increases. Since March 16, 2020, Vaulted saw a large increase in overall volume and new accounts. In less than two weeks, we have 3-6x the normal number of accounts being opened every day, and our volume has been setting daily records. This month has experienced over 540% more than last month’s total volume. This is all taking place without delays or interruption of service. 

Q. What should I know about a market bubble burst? 

A. The consequences of a market bubble bursting and of the coronavirus spreading globally are important to understand on a daily basis.  We have confirmation of a major asset bubble being pricked by an invisible virus that has become the greatest global pandemic in generations. There are opportunities – and we anticipate more as time goes on.  As we build out portfolio positions, expect us to move incrementally while respecting the force of unstable markets and the radical nature of volatility in a fragile global financial structure that is turning more vulnerable by the day.

Q. Should I be worried?

A. We are not flustered, bothered or upended by the events of the last several weeks – we hope you aren’t either. Market volatility is not necessarily enjoyable, but we are always prepared – the talent on the team has been pressed through professional and personal crucibles through the years to be able to engage with this market environment with poise and professionalism today. Wrestling with ten thousand market riddles and thousands of challenging days in the decades that have preceded what is unfolding now puts us in a position to engage skillfully, work diligently, and with all humility seek to deliver success on your behalf. 

Q. Where can I turn to for more information?

A. We are communicating as actively as we can through Hard Asset Insights, The Credit Bubble Bulletin, and the McAlvany Weekly Commentary – sharing our views on the markets right now.  If you are not availing yourself of these resources on a weekly basis, we strongly encourage you to do so.

Q. How are the financial markets responding to COVID-19? 

A. What we see on display at present is the opposite of the key factors necessary to keep the game going. Economic growth is being sabotaged by mandated behavioral changes required to limit the further spread of the virus. 

We believe a bear market has begun – a real bear market and not a short-term correction. We are only four weeks into what could be a two to three-year process of value destruction, which dictates that patience and discipline are in order. Our cash reserves mitigate risk, while also providing the flexibility to opportunistically enhance existing allocations and prospective long-term returns. We won’t capture the perfect price. Today’s unique backdrop creates both risks and potential rewards. We are balancing today’s extraordinary market risks – risks that have been rising rapidly as illiquidity and dislocation lead to general global market de-risking and panic. We believe it is prudent to employ our dry powder with patience and precision.

Q. What factors are causing uncertainty in the market? 

A. Political, geopolitical and financial market factors each can individually contribute to overall uncertainty. At present, all are significant contributors. The market is now digesting a level of uncertainty it hasn’t confronted in a long time. 

Q. How long would it take to recover from a pandemic like this?

A. This situation is very similar to the 1930s and the ‘08/’09 crises, so we expect similar time frames. We all hope for a quick resolution to the virus outbreak. In that fortunate event, getting back to normal should also be relatively quick. Today, the favorable outcome appears to be a low probability scenario. Obviously, precautions are warranted, particularly for those of us that have friends and family with preexisting conditions or other factors that might increase their risk.  It is a great time to be sensitive to the needs of others.

Q. What has McAlvany Wealth Management been focusing on in light of the current market status?

A. Cash is king, so our focus over the last nine months has been to reduce certain high-risk exposures and increase allocations to two areas; 1) cash and 2) unique companies that offer real asset exposure we believe will be benefited in the years ahead.  Cash leaves us with options and flexibility. We prefer having both options and flexibility, especially in an environment with such extreme uncertainty. We like being able to build out your portfolio positions opportunistically, establishing a favorable cost basis by waiting for our favored market segments to trade at attractive valuations. In this case, we have the whole market getting cheaper, not just certain segments. As a result, we are able to allocate judicially from a position of strength – to become deliberate buyers after others have been panic sellers. Bank of America’s recent survey showed professional investment managers with cash levels at a seven-year low. By contrast, we have been reducing risk and building cash positions systematically in anticipation of significant financial market dislocation. 

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