Corona Virus Causing Supply Chain Disruption “For The Want Of A Nail” - a podcast by McAlvany ICA

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The McAlvany Weekly Commentary

with David McAlvany and Kevin Orrick



Corona Virus Causing Supply Chain Disruption “For The Want Of A Nail”

February 26, 2020



"Verbal intervention moves psychology and investor expectations. But those interventions fall on deaf ears when the factors in play are existential in nature. Financial risk is real, but it’s not as worrisome as something like mortality. So money printing, in the end, is not the same as a vaccine, and it’s not a cure for health risks."



- David McAlvany



Kevin: David, I’ve told you I was a toy store manager, but actually, before that I managed in a hardware store. And I will never forget how sad people were when they came in to do a project, they thought they could buy all the parts and pieces, and we were missing just one piece. I have learned there are an awful lot of projects that can’t be finished at all without every part. And that seems to be what we’re running into with this coronavirus. There are supply chain disruptions that are affecting much larger economies.



David: The new model of developing a product and producing a product is to find the best places to have each part and piece manufactured, and then bring it together. And you may even have Made In America stamped on it, but the parts and pieces are done on a just-in-time basis, delivered to you, so that you’re not having an overstock of inventory. There is nothing like having too much inventory, regardless of the business that you’re in. And so, that’s where we have solved the inventory problem, and the risk of slowing business cycles by increasing the stress put on that sort of, “We need it – we need it now,” that just-in-time inventory delivery.



Kevin: I’ve heard that some of these manufacturing companies are sneaking pieces out of China in luggage. I reminds me of Ben Franklin’s quote – I know you are familiar with it. It’s been stated by a lot of people, but I like the way he said it. “For the want of a nail, the shoe was lost. For the want of a shoe, the horse was lost. For the want of a horse, the rider was lost. For the want of a rider, the battle was lost. And for the want of a battle, the kingdom was lost. And all for the want of a horseshoe nail.”



And in a way, when we’re talking about economics, we’re saying that we may not have seen the economic effect of this – maybe it’s not a pandemic, maybe they’ll solve the problem, but some of the damage has already been done as it works its way down the supply chain.



David: And that’s what we discussed a few weeks ago. This is either a big issue or it’s not a big issue based on duration. The longer it lingers, then the greater the consequence for individual companies, and countries, and even the global economy.



Kevin: Let’s look at the geopolitical then. Looking at it from a worldwide view, there are global concerns right now that this could be a pandemic that will affect economics and the financial markets.



David: I think even beyond the geopolitical, there are these three categories of concern that we have been talking about – uncertainty, what I called a number of weeks ago the uncertainty trifecta, where you have political uncertainty in 2020. We don’t know who gets the Democrat nomination. But the markets can be roiled by, not only the nomination, but the result in 2020. There is geopolitical uncertainty, yes. It is global concerns, up to and including a pandemic, and then financial market uncertainties.



Kevin: Look at the 1,

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