MarketMinder
Daily Commentary

Providing succinct, entertaining and savvy thinking on global capital markets. Our goal is to provide discerning investors the most essential information and commentary to stay in tune with what's happening in the markets, while providing unique perspectives on essential financial issues. And just as important, Fisher Investments MarketMinder aims to help investors discern between useful information and potentially misleading hype.

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What We're Reading

For the Markets, It’s Not Just the Debt Ceiling

By Jeff Sommer, The New York Times, 5/26/2023

MarketMinder’s View: We more or less agree with the very end of this piece that argues now is a time for patience and diversification for stock investors, although that is pretty evergreen advice. The rest hypes a bunch of either false or old fears markets have long since dealt with, starting with the topic du jour, the debt ceiling. Look, we have beaten you over the head with reasons that the debt ceiling will overwhelmingly likely be lifted, doesn’t really risk default and is vastly overrated as a threat. So is a downgrade. This even overstates the risk of default (which it claims is a sub-5% chance) by citing calculations based on the highly illiquid, thinly traded market for US sovereign credit-default swaps (insurance contracts against bond default). This math doesn’t equal logic, which requires digging into the government’s finances, constitutional requirements and legal precedents, and doing that reveals default risk is microscopic. Even a deal cutting government spending, which it touts as a threat, is overstated, considering the talks surround a freeze at last year’s levels—which are historically quite high. Beyond this, the article rehashes worries over the Fed, Ukraine war and—wait for it—a new COVID strain. Stocks have risen alongside Fed hikes since October—the shock is gone. The other two are so old and so well-known that any impact on efficient, forward-looking markets is nearly non-existent. The environment is not pristine. But the real risks here are less-watched factors, like potential unintended consequences of bank or crypto regulation. Nobody can rule out short-term volatility—a constant in markets. But the ideas touted here look like an array of bricks in the wall of worry stocks ordinarily climb.

The Stock Market Is Not a Casino

By Ben Carlson, A Wealth of Common Sense, 5/26/2023

MarketMinder’s View: Yes! This post accomplishes two highly sensible things: One, gutting the misguided analogy that compares stock market investing to gambling; two, proving that overseas investing isn’t materially worse or different than US-only. On the former, this shows—using empirical data—that the longer your holding period, the more likely an investor is to reap positive returns. That is the opposite of a casino, where more time spent is generally worse for you (financially, maybe fun accounting is different). All analogies have holes and very often obscure reality. But that is especially true with this one, which is why we agree with the author’s notion that his “least favorite description of the stock market is that it’s just a casino where the house always wins.” As for the rest, it illustrates the fact that global markets tend to move concurrently but with rotations in leadership.

Analysis-US Airlines Gear up for ‘Super Bowl’ of Travel Season

By Rajesh Kumar Sing, Doyinsola Oladipo and David Shepardson, Reuters, 5/26/2023

MarketMinder’s View: Memorial Day is the unofficial start of summer, and the airline industry is expecting an influx of travelers this weekend. (As a reminder, MarketMinder doesn’t make individual security recommendations, and any companies mentioned here are coincident to a broader theme we wish to highlight.) “The Transportation Security Administration said Friday it screened 2.658 million passengers on Thursday, the highest number in a single day since November 2019. Industry group Airlines for America estimates a record 256.8 million passengers will fly in the June-August quarter, up 1% over the 254.6 million passengers in the same period in 2019. … Overall, 42.3 million Americans are estimated to travel over the May 29 U.S. Memorial Day holiday weekend, AAA estimates. The Federal Aviation Administration estimates nearly 313,000 flights will operate over the seven-day period ending May 30, up 4.5% from 2022 and just below 2019 pre-pandemic levels. Demand is stronger for international trips this summer, driving up airfares to Europe and Asia to the highest level in more than five years, said online travel agency Hopper.” There isn’t a direct investment takeaway from these travel projections, but they highlight an overlooked positive, in our view: the return to pre-pandemic norms. Nobody likes traffic, long lines and delays, but after a challenging past few years, getting back to past practices is a reason for cheer. And, yes, cancellations and delays probably will happen. This article touches on possible government-mandated reimbursements for airline-caused interruptions, but that seems unwise to us: If they are forced to compensate passengers by government directive, airlines will very likely raise prices for everyone. Thankfully, we aren’t there yet and hopefully won’t be. So for now, enjoy Memorial Day. Oh, and safe travels if you are hopping on a plane or going on a road trip this weekend!

What We're Reading

For the Markets, It’s Not Just the Debt Ceiling

By Jeff Sommer, The New York Times, 5/26/2023

MarketMinder’s View: We more or less agree with the very end of this piece that argues now is a time for patience and diversification for stock investors, although that is pretty evergreen advice. The rest hypes a bunch of either false or old fears markets have long since dealt with, starting with the topic du jour, the debt ceiling. Look, we have beaten you over the head with reasons that the debt ceiling will overwhelmingly likely be lifted, doesn’t really risk default and is vastly overrated as a threat. So is a downgrade. This even overstates the risk of default (which it claims is a sub-5% chance) by citing calculations based on the highly illiquid, thinly traded market for US sovereign credit-default swaps (insurance contracts against bond default). This math doesn’t equal logic, which requires digging into the government’s finances, constitutional requirements and legal precedents, and doing that reveals default risk is microscopic. Even a deal cutting government spending, which it touts as a threat, is overstated, considering the talks surround a freeze at last year’s levels—which are historically quite high. Beyond this, the article rehashes worries over the Fed, Ukraine war and—wait for it—a new COVID strain. Stocks have risen alongside Fed hikes since October—the shock is gone. The other two are so old and so well-known that any impact on efficient, forward-looking markets is nearly non-existent. The environment is not pristine. But the real risks here are less-watched factors, like potential unintended consequences of bank or crypto regulation. Nobody can rule out short-term volatility—a constant in markets. But the ideas touted here look like an array of bricks in the wall of worry stocks ordinarily climb.

The Stock Market Is Not a Casino

By Ben Carlson, A Wealth of Common Sense, 5/26/2023

MarketMinder’s View: Yes! This post accomplishes two highly sensible things: One, gutting the misguided analogy that compares stock market investing to gambling; two, proving that overseas investing isn’t materially worse or different than US-only. On the former, this shows—using empirical data—that the longer your holding period, the more likely an investor is to reap positive returns. That is the opposite of a casino, where more time spent is generally worse for you (financially, maybe fun accounting is different). All analogies have holes and very often obscure reality. But that is especially true with this one, which is why we agree with the author’s notion that his “least favorite description of the stock market is that it’s just a casino where the house always wins.” As for the rest, it illustrates the fact that global markets tend to move concurrently but with rotations in leadership.

Analysis-US Airlines Gear up for ‘Super Bowl’ of Travel Season

By Rajesh Kumar Sing, Doyinsola Oladipo and David Shepardson, Reuters, 5/26/2023

MarketMinder’s View: Memorial Day is the unofficial start of summer, and the airline industry is expecting an influx of travelers this weekend. (As a reminder, MarketMinder doesn’t make individual security recommendations, and any companies mentioned here are coincident to a broader theme we wish to highlight.) “The Transportation Security Administration said Friday it screened 2.658 million passengers on Thursday, the highest number in a single day since November 2019. Industry group Airlines for America estimates a record 256.8 million passengers will fly in the June-August quarter, up 1% over the 254.6 million passengers in the same period in 2019. … Overall, 42.3 million Americans are estimated to travel over the May 29 U.S. Memorial Day holiday weekend, AAA estimates. The Federal Aviation Administration estimates nearly 313,000 flights will operate over the seven-day period ending May 30, up 4.5% from 2022 and just below 2019 pre-pandemic levels. Demand is stronger for international trips this summer, driving up airfares to Europe and Asia to the highest level in more than five years, said online travel agency Hopper.” There isn’t a direct investment takeaway from these travel projections, but they highlight an overlooked positive, in our view: the return to pre-pandemic norms. Nobody likes traffic, long lines and delays, but after a challenging past few years, getting back to past practices is a reason for cheer. And, yes, cancellations and delays probably will happen. This article touches on possible government-mandated reimbursements for airline-caused interruptions, but that seems unwise to us: If they are forced to compensate passengers by government directive, airlines will very likely raise prices for everyone. Thankfully, we aren’t there yet and hopefully won’t be. So for now, enjoy Memorial Day. Oh, and safe travels if you are hopping on a plane or going on a road trip this weekend!