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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You Say Bitcoin is Digital Gold? Maybe It’s Digital Pearls

By Jason Zweig, The Wall Street Journal, 2/23/2024

MarketMinder’s View: All analogies are bad analogies, but this one gets pretty close to holding up, in our view. The article starts with an anecdote about a Manhattan family that swapped their Fifth Avenue mansion to a certain Parisian jeweler for a $1 million pearl necklace in 1917. It seemed like a good deal until mass-produced cultured pearls hit the market, destroying prices—all basic supply and demand. The necklace remains well under its initial value, adjusted for inflation, while comparable real estate fetched half a billion in 2016. The lesson: Scarcity matters to prices. Sooooo, is bitcoin scarce, like gold? Or is there potentially infinite supply, like pearls? Bitcoin enthusiasts say gold, since bitcoin’s supply is fixed. There are only about 2 million coins left to mint, which will happen gradually over the next 115 years. But this piece argues convincingly that these limitations are a mirage for a simple reason: While bitcoin’s supply may be fixed, the cryptocurrency universe is infinite, and a competing token could disrupt it at any time. To make the point, the article goes through the long history of initial disruptors getting disrupted and dethroned, with their once-hot technologies consigned to the dustbin of history. (It mentions several companies in doing so, and as always, MarketMinder doesn’t make individual security recommendations.) This possibility guts many of the long-term factors people cite as reasons to speculate on bitcoin now. If you want to take a flyer anyway, that is your prerogative, but it is important to make all such decisions with your eyes open and in consideration of all the relevant information and arguments.


Hopes Rise for Rate Cuts as Energy Price Cap Falls by £238

By Tim Wallace, The Telegraph, 2/23/2024

MarketMinder’s View: We can understand why all the economists quoted in this article would argue the Bank of England (BoE) will cut interest rates once the -12% q/q drop in the household energy price cap takes effect in April. All else equal, that should pull the inflation rate down further, making higher rates unnecessary. But the problem is the BoE, like all central banks, makes its decisions on a range of data—and filters those data through all of its members’ biases and opinions about how prices and the economy work. Lately, BoE Governor Andrew Bailey and other policymakers have stated quite plainly they are focused on wage growth and unemployment, believing these to be inflation’s primary cause. Never mind that reality has repeatedly discredited this wage-price spiral theory and pay has lagged inflation this time as well. So it isn’t as simple as saying lower CPI inflation means rates will fall. The BoE may remain distracted by backward-looking wages. Or it may react to falling GDP with rate cuts before April data are out. It is all completely unknowable. Hence, we suggest not wasting energy on trying to predict what the BoE or any central bank will do. Instead, weigh their actions’ impact as they announce their decisions.


ECB Makes First Loss Since 2004 Due to Higher Interest Costs

By Martin Arnold, Financial Times, 2/23/2024

MarketMinder’s View: How refreshing, an article about central bank “losses” that portrays the situation and mechanics accurately, without handwringing and dire warnings! In short, the ECB has booked an operating loss because it made less money on its bond portfolio than it paid out in interest. Investors have feared this scenario for a while, arguing cash-hemorrhaging central banks will require recapitalization by the state, putting public finances in a bind. But central bank accounting mostly takes this off the table by letting the institutions place a debit on their own balance sheet and slowly chip away at it with future profits. The Dutch central bank is embarking on this, and the ECB is now using this tactic as well. It is all actually pretty boring once you strip away the hyperbole, which is how it should be. For more, see our commentary, “The Fed Is in the Red. And It Doesn’t Matter.”


You Say Bitcoin is Digital Gold? Maybe It’s Digital Pearls

By Jason Zweig, The Wall Street Journal, 2/23/2024

MarketMinder’s View: All analogies are bad analogies, but this one gets pretty close to holding up, in our view. The article starts with an anecdote about a Manhattan family that swapped their Fifth Avenue mansion to a certain Parisian jeweler for a $1 million pearl necklace in 1917. It seemed like a good deal until mass-produced cultured pearls hit the market, destroying prices—all basic supply and demand. The necklace remains well under its initial value, adjusted for inflation, while comparable real estate fetched half a billion in 2016. The lesson: Scarcity matters to prices. Sooooo, is bitcoin scarce, like gold? Or is there potentially infinite supply, like pearls? Bitcoin enthusiasts say gold, since bitcoin’s supply is fixed. There are only about 2 million coins left to mint, which will happen gradually over the next 115 years. But this piece argues convincingly that these limitations are a mirage for a simple reason: While bitcoin’s supply may be fixed, the cryptocurrency universe is infinite, and a competing token could disrupt it at any time. To make the point, the article goes through the long history of initial disruptors getting disrupted and dethroned, with their once-hot technologies consigned to the dustbin of history. (It mentions several companies in doing so, and as always, MarketMinder doesn’t make individual security recommendations.) This possibility guts many of the long-term factors people cite as reasons to speculate on bitcoin now. If you want to take a flyer anyway, that is your prerogative, but it is important to make all such decisions with your eyes open and in consideration of all the relevant information and arguments.


Hopes Rise for Rate Cuts as Energy Price Cap Falls by £238

By Tim Wallace, The Telegraph, 2/23/2024

MarketMinder’s View: We can understand why all the economists quoted in this article would argue the Bank of England (BoE) will cut interest rates once the -12% q/q drop in the household energy price cap takes effect in April. All else equal, that should pull the inflation rate down further, making higher rates unnecessary. But the problem is the BoE, like all central banks, makes its decisions on a range of data—and filters those data through all of its members’ biases and opinions about how prices and the economy work. Lately, BoE Governor Andrew Bailey and other policymakers have stated quite plainly they are focused on wage growth and unemployment, believing these to be inflation’s primary cause. Never mind that reality has repeatedly discredited this wage-price spiral theory and pay has lagged inflation this time as well. So it isn’t as simple as saying lower CPI inflation means rates will fall. The BoE may remain distracted by backward-looking wages. Or it may react to falling GDP with rate cuts before April data are out. It is all completely unknowable. Hence, we suggest not wasting energy on trying to predict what the BoE or any central bank will do. Instead, weigh their actions’ impact as they announce their decisions.


ECB Makes First Loss Since 2004 Due to Higher Interest Costs

By Martin Arnold, Financial Times, 2/23/2024

MarketMinder’s View: How refreshing, an article about central bank “losses” that portrays the situation and mechanics accurately, without handwringing and dire warnings! In short, the ECB has booked an operating loss because it made less money on its bond portfolio than it paid out in interest. Investors have feared this scenario for a while, arguing cash-hemorrhaging central banks will require recapitalization by the state, putting public finances in a bind. But central bank accounting mostly takes this off the table by letting the institutions place a debit on their own balance sheet and slowly chip away at it with future profits. The Dutch central bank is embarking on this, and the ECB is now using this tactic as well. It is all actually pretty boring once you strip away the hyperbole, which is how it should be. For more, see our commentary, “The Fed Is in the Red. And It Doesn’t Matter.”