Daily Commentary

MarketMinder’s View: To many, 2025’s surging gold, silver and bitcoin prices fit the narrative of investors fleeing dollar-denominated assets on fears of volatile policy and attempts to “debase” the dollar’s value. The narrative gained popularity in recent weeks as gold pierced $4,000 per ounce and silver broke through record prices existing since 1980. But here is the problem. If this narrative were true, you should see US stocks and bonds plunging. We don’t. “The benchmark 10-year yield is down nearly 60 basis points this year. Even the 30-year yield, which is much more sensitive to the de-anchoring of long-term inflation expectations, has fallen around 20 basis points this year, hardly a sign investors are running for the hills. It’s a similar story in ‘TIPS’. The breakeven inflation rate on 10-year TIPS, essentially an estimate of where bond investors see inflation a decade from now, last week fell to 2.275%, the lowest since June. More significantly, the 30-year TIPS breakeven inflation rate fell to 2.21%, the lowest since May.” And, as this goes on to note, even the “weakness” in the dollar itself has stalled since roughly April. Even what dollar weakness exists isn’t so extreme if you compare it with past Republican presidencies including President Donald Trump’s first term. October 20 was this year’s 209^th trading day and the US dollar was down -9.1% versus a trade-weighted currency basket, per FactSet data. Through 209 trading days in 2017, it was down -8.8%. What about that looks so noteworthy? So all in all, we agree that the “Debasement Trade” is a narrative seeking a trend.

MarketMinder’s View: This article is long on metaphor, analogy and alleged historical connection and light on actual evidence. In discussing the failure of two teensy private companies both engaged in the automotive space that drew small losses for some regional US banks, Bank of England Governor Andrew Bailey warns it could be a prelude to a new financial crisis, comparing it to subprime mortgages in 2008. There are just a few small problems with this comparison. Beyond simply scope, the issue in 2008 was less loan quality and more about how those loans were accounted for on bank balance sheets. You see, a new accounting rule (FAS 157) required US banks to mark any and all assets to market—including illiquid, securitized loans. This exaggerated losses by orders of magnitude, a fact made clear by the Fed’s profit on “toxic” subprime assets. The tale Bailey recounts here is a popular one, but wrong. Two, much of the financial crisis was vastly exacerbated by governments’ haphazard actions—like America’s decision to force Lehman Brothers’ failure after brokering a deal for Bear Stearns, a nearly identical firm. The uncertainty then was vast. Nothing here compares, in our view.

MarketMinder’s View: First, this article deals in politics, so please keep in mind we favor no politician nor any party, assessing matters solely for their potential market and economic effects. With Japan’s Sanae Takaichi winning election as prime minister, many fixate on her economic agenda—which largely echoes the late Shinzo Abe’s—aimed at reforms and stimulus like tax cuts to boost Japan’s economy. After sealing a coalition with the Japan Innovation Party, Takaichi won a majority in the Diet’s vote Tuesday. This does lower uncertainty in Japan, which is bullish. That factor we can see as a positive for markets. That said, it is likely a mistake to take this too far. Most of the low-hanging reform fruit was picked in Abe’s days. Beyond this, much of the stimulus talk is really about ineffectual things like monetary policy or fiscal actions that rarely pack much punch. And lastly, that all assumes she will be able to legislate these ideas into reality, which is highly unclear. Her new coalition is two seats short of a majority and has internal divides, both of which will likely complicate passing bills—and she really needs to try and bolster the Liberal Democratic Party’s popularity, crushed in the fundraising scandal under her predecessor’s predecessor, Fumio Kishida. So while it is bullish that Japan’s revolving door has stopped turning, it is likely a mistake to assume the “Takaichi Trade” will turbocharge the TOPIX.