Daily Commentary

MarketMinder’s View: Some politics early on here, so please note MarketMinder is nonpartisan, preferring no politician nor any party, and we don’t believe in generalizing based on state or ZIP code. Our only focus here is the overarching theme: Relocating for retirement can be pricier than you think. This piece starts by running through one couple’s experience, which included multiple unexpected moves tied to several previously unconsidered factors. Though data suggest this problem is actually quite common. “According to research from the Transamerica Center for Retirement Studies, almost 40 percent of U.S. retirees move after they retire. HireaHelper.com, a platform that offers moving resources and advice, found in a 2021 survey of its users that 28 percent of those who moved for retirement in the previous year regretted it.” So, if you are planning to move for retirement, we would check out the tips at the end here. To summarize them, soon-to-be retirees should set realistic expectations for their new lifestyle after moving, plan for potentially unseen costs associated with the move (e.g., rising insurance premiums) and ensure their destination has the resources they need to live healthily and happily. The article’s tip to test-drive a new locale by staying at a short-term rental for several weeks during the worst weather of the year is particularly handy and could be a necessary reality check. So is the reminder to factor in high utility bills if you are moving from a place where you didn’t need to run the heater or air conditioner much. Doing these things can help avoid another move and save some of your hard-earned cash, as well as the disappointment of reality not living up to the idealized vision in your head.

MarketMinder’s View: Credit rater S&P Global issued an unscheduled downgrade of French government debt Friday, just one day after its government finally materialized. Citing the country’s high uncertainty over next year’s budget, it cut France’s rating from AA- to A+, marking the third rating agency in a month to strip the country of its “double A” status. Folks, we continue to wonder why any of this is news. Since the developed world downgrade-o-rama started about 15 years ago, there is a treasure trove of evidence showing these decisions are backward-looking. They don’t predict trouble for bond markets (yields often fall afterward), nor do they mean debt crises are nigh. Rather, they amount to raters issuing opinions based on things everyone already knows—things markets have already long since worked through. Consider: France’s latest budget saga basically started when President Emmanuel Macron called a snap election, setting up the hung Parliament that has splintered over budgets multiple times since last year. Breaches of EU deficit limits are similarly well known. Nothing here is new or shocking to markets.

MarketMinder’s View: If you can tune out the incorrect use of the word “bubble,” this piece makes some salient points about gold’s recent rise and historical tendency to boom and bust spectacularly when the alleged reasons to own it prove hollow. Now, we take issue with calling these “bubbles,” as a true bubble happens when speculative demand leads to a massive, unsupported supply increase—think Dutch tulips, dot-coms 25 years ago, baseball cards in the early 1990s, NFTs earlier this decade and the like. Gold doesn’t qualify because supply is relatively fixed, with a glacial growth rate in the long run. You just don’t get the massive investment in new mines that you get with other cyclical commodities that have industrial uses. If there were an ocean of securities being created tied to gold, then we think you could maybe make that case better, but that doesn’t appear to be happening today. So no, not a bubble. But gold is prone to sentiment-fueled booms, which the article notes this has all the hallmarks of being. Yes, people today cite fundamental use cases, but those don’t hold up. Consider: “The basic case for gold is that the world needs an alternative to the dollar. The shift into gold started with the freezing of Russian reserves after Russia invaded Ukraine, prompting central banks in developing countries to question how secure claims on Western governments would be in a crisis. Investors joined in this year as they worried about the independence of the Federal Reserve, the scale of government debt and the risk that politicians take the easy route and choose inflation over repayment. Other currencies bring their own political risks, as the French government is demonstrating. All these worries were around in the past two big run-ups, though. Both times the fears proved unfounded. In 1980, Fed Chairman Paul Volcker jacked up interest rates and used double-dip recessions to crush inflation. In the 2010s, it turned out even negative interest rates in much of the world weren’t enough to generate inflation.” And we would add that, as 2022 proved, gold isn’t even a reliable inflation hedge anyway. And with people bandwagon-jumping on gold’s rising price, at some point, there will be no more “greater fools” willing to buy gold at a higher price, and the bust will start. When is unknowable, but that is how this always goes.