Daily Commentary

MarketMinder’s View: The data in this piece—which show America’s consumer price index rose 2.3% y/y in April, a touch cooler than March’s 2.4%—are fine. And, hey, egg prices tumbled. The seemingly requisite reminder that these figures don’t reflect the full suite of Trump tariffs is also fair, we guess, as it could be too early to see the 10% universal tariff’s effects (and perhaps the Canada, Mexico and China early rounds, too). But the analysis—opinions—about where inflation heads and how much it accelerates late in this piece are much dodgier, in our view. Companies don’t all have pricing power to pass every tariff on to consumers, and many won’t try. Absent a spike in money supply, aggregate demand likely isn’t sufficient to blow out prices economywide, and we don’t have a spike now. Don’t get us wrong: Tariffs aren’t good policy. But they aren’t as inflationary as many fear, which is one avenue where reality can deliver positive surprise.

MarketMinder’s View: First, this article touches on political matters, so please note MarketMinder favors no politician nor any political party. This is an interesting and overall sensible article, in our view, arguing that, while Fed independence from politics is positive, nations would likely be better off if central banks (and central bankers) were subject to a good deal more scrutiny over policy decisions—and held more accountable for their effects as a result. It runs through some recent history, which we have a few quibbles with but nothing terribly significant, to highlight the fact decisions like massive quantitative easing in 2020 spurred inflation later—decisions the Fed (and others) really haven’t had to reckon with very much at all. We would suggest an avenue toward increased accountability would be to release the Fed’s meeting transcripts far earlier than the current five-year legal lag. If we did that, it would be much easier to see what officials actually thought and argued at the time—like the fact the Bernanke Fed forced Lehman Brothers to fail in 2008 out of fear of moral hazard. No one at the central bank ever faced accountability for this even though the transcripts make this error crystal clear. Why? They didn’t see the light of day until 2014. By that time, the narrative was set. Now, of course, we also think the Fed isn’t as apolitical as this paints it, given the nomination cycle. And we don’t think Trump’s recent criticisms were all that big a deal. But the push here for more accountability at the Fed? We are here for that.

MarketMinder’s View: This is an interesting piece looking at one major unintended consequence stemming from China’s embargo on rare earth mineral exports, including gallium. This metal is a tiny piece of the global economic ecosystem, but it is increasingly used in high-tech semiconductors for use across a range of industries. So when China banned its export, many presumed there would be big fallout. And there have been effects! Gallium prices doubled. But herein lies the rub: When prices go up this much, you incent two things: One, transshipping. Two, production elsewhere, as rare earths are, in reality, anything but rare. In some cases, like a couple featured here, existing production of bauxite (used in aluminum production) has a high tendency to yield gallium in wastewater. Now companies have incentives to capture it. While firms still have some distance to travel to produce rare earths outside China at scale, high prices suggest that hurdle won’t be so very hard to clear. This article does run through what some individual firms are doing in the space, so please keep in mind MarketMinder doesn’t make individual security recommendations—our interest here is that higher-level theme, which is quite fascinating. It shows how prices make capitalist economies self-correcting mechanisms.