Daily Commentary

MarketMinder’s View: First, this article quotes one major multinational oil & gas producer’s Australia region head, so please keep in mind that we don’t make individual security recommendations. And it discusses political matters, so remember that we favor no politician nor any political party. Our interest is in the debated policy change Down Under that would slap a windfall profits tax of 25% on liquefied natural gas (LNG) exports. While we can understand the appeal of this approach given high prices’ pinch on households and Australian businesses, this policy is wrongheaded to put it mildly. Australia, a major LNG exporter, produces far more gas than it needs—and serves as a major, stable, reliable supplier across Asia. Many of those economies are being pinched today because their other chief suppliers are Qatar, the UAE and Kuwait, hammered by the Strait of Hormuz’s closure. Slapping a windfall profits tax on exports could lead producers to jack prices up further to recoup the costs—and dissuade investment in further production. As this notes, “The oil and gas sector says higher global LNG prices will already flow through to Australians via higher tax receipts under the existing profit-based tax regime, the Petroleum Resources Rent Tax. Australian Energy Producers, an industry group, argues the push for a 25 per cent tax would push effective tax rates to ‘around 80 or 90 per cent for some companies, destroying Australia’s ability to compete for global investment’.” A sensible government response should be to encourage greater production. Not discourage it. Of course, this debate is still unfolding and it isn’t clear an export tax will follow. But it is a matter worth watching.

MarketMinder’s View: This is a pretty misperceived mish-mosh of advice that winds up giving you no clear guidance or any way to actually think about “buying the dip,” the tactic of holding cash in your portfolio to deploy when stocks inevitably endure volatility. It first cautions that you don’t know the current volatility is over, which is true but would literally always be true. You never know if an upturn will last. You never know anything about the next couple days of trading, so the simple fact is you shouldn’t overrate it in your investment approach. Ditch that line of thought. It then runs through a litany of advice about ways to approach holding “dry powder” and such, but only one nugget seems sensible to us: “Of course, hoarding cash while waiting for rock-bottom prices before entering the market can also be risky, experts say. There’s a cost to missing the market’s best-performing days, which often closely follow the worst days, according to JPMorgan Asset Management research.” Yep. So here are the actual considerations you should weigh: One, what are your longer-term goals? Two, what rate of return do you need over time to achieve them? Most people need growth, which prioritizes stocks over other assets, especially low-to-no-return cash. Three, do you know something—anything—about market movement others don’t that justifies deviating from assets likely to deliver long-term returns commensurate with your goals? Absent that, you should likely be invested in keeping with your long-term mix of stocks, bonds, cash and other securities. Dip buying is a dangerous practice that hides myopic loss aversion in a cloak of offensive investing. Don’t be fooled.

MarketMinder’s View: Yes, as this piece details, the flash eurozone March Consumer Price Index reading jumped to 2.5% y/y from 1.8% in February, as a sharp, war-driven spike in energy costs pushed the rate above the ECB’s 2% target. But before you presume inflationary doom will necessitate a flurry of hikes, consider: This climb was smaller than expected, and the core rate (excluding food and fuel) cooled as did the services prices the ECB has long hyperventilated over as “sticky.” We don’t diminish the potential pain some households may feel from rising fuel and energy costs, but this piece goes too far in drawing implications from it. Taking the data for what they are, this supports the ECB staying on hold. But all the talk of hikes herein shows you how far sentiment and expectations have swung. There is a lot of room for bullish surprise here, in our view.