Daily Commentary

MarketMinder’s View: As always, MarketMinder is politically agnostic, preferring no politician nor any party. We assess developments for their potential economic and market impact only, and we like that this piece takes the same nonpartisan approach to the potential for the incoming administration to launch a strategic bitcoin reserve. President-elect Trump has mulled seeding this with tokens confiscated in criminal cases—and simply holding them as an investment rather than selling them. “But a bill introduced by crypto-friendly Senator Cynthia Lummis would go much further, requiring the government to purchase another million Bitcoin over five years and then hold the stockpile for at least another 20.” This piece explains the many flaws. Unlike other things the government strategically stockpiles (e.g., oil and gold), bitcoin has no use. It would be a taxpayer-funded, leveraged play on a speculative digital commodity that doesn’t pay dividends or interest, doesn’t generate earnings and doesn’t power society. “Creating such a reserve would, however, vastly enrich owners of existing Bitcoin. The post-election crypto rally offers a glimpse of what might happen, as buyers rushed to get ahead of the government’s purchases. If the world’s investors allocated even a small piece of their holdings to Bitcoin, the roughly 20 million tokens in existence would quickly rise in value, especially since only a fraction of those tokens actually trades. The government, meanwhile, would be playing the greater fool — at a cost potentially in the hundreds of billions of dollars.” Bitcoin’s big volatility cuts both ways, up and down. A bitcoin reserve would just be a massive subsidy to existing owners that would leave Uncle Sam at risk of big losses. The enthusiasm for it strikes us as a pocket of outlandish sentiment.

MarketMinder’s View: Japanese GDP grew 1.2% annualized in Q3, faster than the initially reported 0.9% as business investment fell less than originally reported and net trade detracted less. Digging into the latter, import growth was revised from 8.5% annualized to 7.5%, but exports improved from 1.5% to 4.5%. It is hard to disentangle the weak yen from these stats, but it seems clear domestic demand is recovering while global demand is helping support growth. Consumer spending did get revised down from 0.9% annualized to 0.7%, but its recovery continues. The article spends most of its space exploring what this means for monetary policy, but we don’t think this is predictable. Bank of Japan head Kazuo Ueda is one of many global central bankers to veer from forward guidance in recent years, and it is impossible to know how policymakers will interpret incoming data. Mostly, we see the report as another indication Japan is still contributing to global growth and earnings.

MarketMinder’s View: This piece rounds up anecdotal reports of fund managers selling French bonds and declaring Italian and Spanish bonds a better buy in the high-quality sovereign debt world. It all gives the impression of a run on French assets amid the country’s political crisis. Thing is, someone forgot to tell the market: French bond yields are still inching lower. As we write, the 10-year OAT fetches 2.87%, down from a recent high of 3.18% on November 7 (per FactSet). In our view, this seeming disconnect is easy to explain: For every seller there is a buyer. When fund managers sell French bonds, they don’t dump them on a shelf to gather dust. Rather, they sell them to other investors and dealers, who are delighted to buy. When yields fall, bond prices rise, which means the eagerness to buy outweighs the eagerness to sell. Seems to us the market thinks rumors of France’s implosion are greatly exaggerated.