Daily Commentary

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: This article namedrops some individual companies (public and private), so please keep in mind MarketMinder doesn’t make individual security recommendations—our interest is the higher-level theme. That theme: One of capitalism’s most underappreciated traits is its adaptability—and that is on display here, as the firms noted share methods they are developing to avoid reliance on Chinese rare-earth metals, which are commonly used in magnets, semiconductors and more. These technologies are too far removed from reality to really have any investment implications today. But there have long been fears of the world’s reliance on China for these metals (which aren’t really rare) potentially giving it leverage over manufacturing and technology. This is fostering the growth of mining for rare earths outside China, but this article illustrates this isn’t the only possible solution to the issue—another way is to find ways to create tech tools that don’t need rare earths. We applaud the creativity and innovative spirit at work here.

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.