Buy The Dip? Not So Fast

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Buy The Dip? Not So Fast

October 26, 2022

“For the patient investor, we are talking about a values realignment and this notion that we’re only in the first phase of a bear market. We still have two phases left. You have to focus on asset preservation. And your two means of doing so are not in the bond market, by the way, but some combination of cash and gold. And with a high dollop of patience, I think you’re setting yourself up for immense success in the decade ahead.” — David McAlvany

Kevin: Welcome to The McAlvany Weekly Commentary. I’m Kevin Orrick along with David McAlvany. 

Our audience, especially those who’ve listened for a while, know that we take time each Monday night to go over to a restaurant in Durango. It was called Ken & Sue’s for years. They sold recently. It’s now 636 Maine. But we have a table, table 30. We sit back in the back, and we actually have a scotch that we enjoy. We enjoy it straight up neat, both glasses and soda back. Straight up neat, no ice. We had a metaphor last night occur, Dave, that made me think a little bit of inflation. I guess it was the first time in 15 years there was a faux pas, a serious faux pas, but it was a metaphor for inflation, wasn’t it?

David: It was the last bit of Talisker. That in itself is a sad story, but even sadder still is that it was served on ice with the soda in one glass.

Kevin: And that—that is inflation.

David: I looked and I thought surely somebody didn’t order apple juice because that’s what it looked like when it was served.

Kevin: Yeah. It wasn’t quite the same, and we had to send it back, but we can’t send inflation back.

David: Nope.

Kevin: We just had the McAlvany Wealth Management meeting. Doug was over here, came in to town to give his talk. I know, for those who missed that, you can still tune in on Thursday, the Tactical Short Call. This is quarter three coming up.

David: That’s right. So we’ll review the third quarter, look towards the end of the year, and the title of our presentation is “Prelude to a Market Accident.” Very bright and cheery, almost like running out of Talisker. So this is an important conversation, particularly as we look at the unwinding of a number of major financial structures. We’re talking about the UK, China, Japan. There is literally an unraveling taking place here in recent weeks, and it’s fascinating to me as I tune in to CNBC and Bloomberg—nary a comment on those things which are very high drama.

Kevin: This is why it’s so important, Dave, that we look at the financial, moving to the economic, moving to the political, moving to the geopolitical or geostrategic. I was looking at famous quotes from the last few years about investing and buy the dip, sell the tip. Buy the dip, sell the tip. Buy the dip, sell the tip. Most people who don’t necessarily look at the geopolitical situation are going to probably continue to buy the dip, but there are times when that doesn’t work.

David: A number of weeks ago, we brought Robert Rhea and Hamilton and of course Charles Dow into the conversation. These are Dow theory legends. We have John Hussman who quoted Rhea over the weekend. And got a lot of respect for John. He framed the current market set up very well with this quote from Robert Rhea, quote from 1932. I think it shines a bright light into the current trading setup. Rhea said this. “There are three phases of a bear market. The first represents the abandonment of the hopes upon which stocks were purchased at inflated prices. The second reflects selling due to decreased business and earnings. And the third is caused by distress selling of sound securities regardless of their value by those who must find a cash market for at least a portion of their assets.”