Daily Commentary

MarketMinder’s View: As this article mentions several companies, please note MarketMinder doesn’t make individual security recommendations—we simply wish to highlight a broader theme. That theme: the long-term opportunities that arise thanks to technological gains and the profit motive. America has become the world’s largest oil producer due in large part to the shale revolution. Now US producers are looking to take their act to the Great White North—namely, Western Canada’s Montney basin. “The Montney, which spans 130,000 km across northeast British Columbia and northwest Alberta, is currently dominated by Canadian natural gas drillers … Acquiring land in the Montney is much cheaper than in the Permian [Basin in Texas]. Drilling locations in the U.S. field are as much as six times the price of those in the Montney, said Michael Spyker, principal analyst at Canadian upstream advisory firm HTM Energy Partners.” Now, for context, Montney oil production is relatively small, contributing to about 2% of Canada’s total. But, according to RBN Energy statistics, its output has doubled in the last decade thanks to the horizontal drilling technology that, combined with hydraulic fracturing (fracking), buoyed America’s shale boom. It remains far too early to determine winners and losers, but this development speaks to companies’ ability to adapt and innovate so long as the profit motive is there—worth keeping in mind whenever observers think an industry has exhausted its edge.

MarketMinder’s View: While we disagree with the titular assertion that dissent is “vital,” this piece makes an argument we haven’t seen in most financial outlets: What if disagreements within the Federal Open Market Committee aren’t the negatives so many think they are? As the article details, though most major central banks in developed economies set policy by committee, their procedures vary. The European Central Bank uses a “collegiate” approach, in which all members stand behind a collective decision and individual voting records aren’t publicly shared. In contrast, the Bank of England’s “individualistic” system means committee members are responsible for making the case for their public vote. (Incidentally, that led to a 5-4 split decision for a BoE rate cut Thursday, with head Andrew Bailey casting the deciding vote.) The article points out that while the Fed is an individualistic system, “it has historically placed a high degree of value on collegiality. When Alan Greenspan was chair, he was adept at never losing a monetary policy argument, even using once, as biographer Sebastian Mallaby has put it, ‘a dash of intimidation’ to maintain consensus.” But in our view, a little disagreement isn’t a bad thing, as it is an antidote to groupthink. Does it instill credibility if the Fed collectively agreed on poor policy? Robust debate may help central bankers consider views they may not have before—good practice for investors, too. For more, see Todd Bliman’s column, “‘Independent’ Shouldn’t Mean ‘Beyond Criticism'.”

MarketMinder’s View: Please note MarketMinder is nonpartisan and doesn’t prefer any political party or politician over another—our commentary focuses on politics’ economic and market effects only. Prime Minister Sanae Takaichi is riding high after her coalition passed its supplemental budget as drafted. However, the article also sheds light on the compromises the government needed to make to win the budget’s passage. “In a strategic move to ensure the budget would pass, the government conceded to the requests of the DPFP and Komeito ahead of time, leading to their approval of the initial proposal. … The prime minister and her allies aim to build common ground with the DPFP by raising the annual income barrier, the income threshold for the imposition of income tax. As for Komeito, the government and the LDP have worked hard to maintain relations with the now opposition party, hoping to keep the door open as much as possible for the party to rejoin the coalition in the future.” Compromise is the name of the game in politics, and some pain points are already emerging, as the conclusion alludes to a bill that seeks to reduce the number of seats in the lower house (which could help smaller parties). That bill is sparking heavy debate and disagreement. Japan passed its budget, but gridlock looks likely to reign for the foreseeable future.