Daily Commentary

MarketMinder’s View: This article focuses on the UK experience, but we find its takeaways applicable to America, too, as it explores several drawbacks of relying on residential real estate as your main nest egg. (Also our interest here is only in the titular discussion; the news roundup following it is beyond our scope.) While many view real estate as a tried-and-true ticket to wealth, the data paint a different picture: “Over the past five years, the average UK house price has risen by 3.3% a year. That’s significantly below inflation, at 5.1%. Global equities by contrast have returned 10.9% a year, even before you consider reinvested dividends. Over 20 years, the contrast remains. If you’d bought a home for £100,000 in December 2005, and its price had grown in line with the average UK house price, then by December 2025 it would be worth £182,000. The equity portfolio would have been worth £450,000, again without dividends. With reinvested dividends, the equity portfolio would be worth £728,000.” Sure, a national average housing price isn’t necessarily indicative of every investor’s experience, but even after adding in rental income, real estate lags. Also don’t forget maintenance and repair costs, homeowners’ insurance and property taxes when making (after-tax/fee) comparisons to stock returns—keeping in mind many dedicated retirement accounts also carry tax advantages that physical real estate usually doesn’t. Then, too, managing a property portfolio properly can be a full-time job, which might be the last thing you would want to undertake in retirement: “If you are looking to invest for retirement in a relatively low-effort way, there is simply no comparison. Investing via your pension or ISA [British equivalent of a 401(k)] is just so much easier, while giving you returns that—based on history—are at least as good. I have no ideological bias against investing in property. There are good and bad landlords, but I don’t think landlordism itself is to blame for our dysfunctional housing market. But being a landlord is a business, and you have to treat it as such. Relative to a portfolio of equities, it is simply much harder and more time intensive to manage.” While a house is great for living in, its benefits as a long-term investment are frequently overstated.

MarketMinder’s View: Following a “study” on Brazil’s trade practices, the US Office of the Trade Representative is proposing a new 25% tariff on imports from there under Section 301 of the Trade Act of 1974, which governs unfair trading practices. There is talk here about politics and personalities potentially motivating this (and as always, note that MarketMinder doesn’t favor any politician or political party), although the ostensible grounds are a lack of intellectual property protections, unfair practices in the ethanol market and deforestation. But before you wring your hands over the potential impacts on Brazil, America or future probes, consider: “The new levies would be at half the level they were before the Supreme Court struck down global tariffs the Trump administration had issued under the International Emergency Economic Powers Act.” And that is before you consider exemptions, which will cover more than half of goods imported from Brazil. “Those tariffs excluded products that could cause ‘economy wide disruptions’ if hit by levies. They also exempted goods that can’t be made in size in the U.S., such as beef, pineapples, coffee, certain minerals, and aircraft parts.” (You had us at coffee.) And petroleum products. And metals. And nuts. And coal. And certain chemicals and oils. And … and … and. These latest Brazil tariffs’ bark is far worse than their actual bite, assuming they take effect after a public hearing and a July 15 deadline for Brazilian officials to respond to the study’s findings. That is the broad story involving trade over the past year—a story markets are well aware of and have largely moved on from at this point.

MarketMinder’s View: Not so very long ago, many investors saw bitcoin as a potential hedge against inflation and government instability, largely because “Unlike fiat currencies, which can be expanded by central banks, only 21 million Bitcoin will ever exist. For years, supporters argued that scarcity would make the token a digital equivalent of gold when inflation accelerated.” Now, a couple things about this. One, gold isn’t an effective inflation hedge, as we wrote in May … 2021! Two, we don’t think the Iran war or spiking oil prices really threaten the broad inflation this piece takes for granted. But the idea crypto hedges anything defies logic and evidence. Yes, supply of bitcoin is limited. But other coins? Literally limitless. And derivatives? “Meanwhile, crypto critics have pointed out that variants on Bitcoin — the numerous ETFs that have been built around the token; as well as the derivatives, and the derivatives built on top of derivatives — belie the argument that its supply is limited. There might only ever be 21 million coins mined — but there will be various contracts and offshoots built around Bitcoin to trade perpetually.” Yep. And ethereum. And dogecoin. And solana. (We could go on, which proves the point.) Hence, it shouldn’t really shock that bitcoin is down this year despite fears of rising inflation and upticks in the consumer price index. There just isn’t evidence anything beyond speculation drives crypto.