Here we analyze a selection of third-party news articles—both those we agree and disagree with.
Please note: Though we make every effort to source articles from freely available sites, we will also regularly include articles on sites that have limited content for non-subscribers. Doing so is increasingly unavoidable, as more and more financial media is published behind paywalls.
MarketMinder’s View: A disclaimer: This article wades into partisan waters and may stir an emotional reaction depending on your political leanings. We urge readers to put those feelings aside, as we share this piece to highlight a common misperception. As always, MarketMinder is politically agnostic, favoring no party or politician and assessing political developments only for their potential economic effects. The primary thrust of this argument presumes the nascent US economic recovery—allegedly powered initially by fiscal and monetary stimulus—risks fizzling unless Congress opens up the purse strings again. In our view, this is misperceived. Consider: Several CARES Act relief measures expired at July’s end, and an August Executive Order replenished some of the benefits only partially. Yet retail sales and personal consumption expenditures show ongoing growth—signaling many consumers aren’t in the dire straits some economists fear. We don’t deny a new relief bill would help those still in a tough spot, and we are empathetic to their situations. But more government spending isn’t necessary for the recovery to continue.
MarketMinder’s View: Please note, MarketMinder’s analysis is nonpartisan, as we believe political bias blinds and can lead to investing mistakes. Our focus here is solely on potential policies’ market impact—or lack thereof. Additionally, MarketMinder doesn’t make individual security recommendations. Companies this article mentions serve only to illustrate a broader point we wish to highlight, namely: The likelihood of antitrust actions negatively hitting Big Tech isn’t as high as suggested here. The article argues a “blue wave” election could bring Democratic Senators willing “to make substantial changes to antitrust law and advocate breakups of the largest American tech companies ...” But that first presumes Democrats sweep—not a given at this point. The election will depend on both parties’ success at mobilizing turnout, which we think is too early to determine. Besides that unknown, will it be a priority for the incoming administration? When asked about the actions of a potential Democratic Congress and White House, one expert quoted here noted Big Tech-related legislation, “... may get lost with actions to reverse actions over the past four years on health care, education policy, trade, climate change and everything else.” Moreover, while regulatory chatter could always stir short-term uncertainty, pols have been discussing these ideas for years—likely sapping some potential negative surprise power. For more, please see Fisher Investments Research Analysts Timothy Schluter and Warner Jacobs’ column, “Breaking (Up) Bad (Tech)?”
MarketMinder’s View: This article provides some helpful perspective on fears global trade gains are reversing. “While global trade volumes have inevitably fallen as the world plunged into recession and travel restrictions and social distancing curtailed the movement of people, the economic ties built up by successive waves of globalisation are proving more resilient than some thought.” Although politicians have espoused protectionist rhetoric, practical considerations have generally trumped moves to reorder global supply chains on nationalist grounds. As a former WTO official here notes, “The reason there will be more talk than walk is simple – it’s costly ... Globalisation is efficient and painful. De-globalisation is inefficient and painful.” Concerns protectionism is overtaking globalization and freer commerce remain overwrought, in our view.
MarketMinder’s View: Canada’s parliament voted in favor of Prime Minister Justin Trudeau’s economic plan by a count of 177-152, with the New Democratic Party providing the support for Trudeau’s Liberal minority government. This may quell rumblings about a snap election for now, although Trudeau’s government remains on shaky ground—suggesting Canada’s political environment isn’t conducive to great legislative action, much less radical change.
MarketMinder’s View: This argues the combination of disproportionately higher job losses (and the associated loss of health insurance and retirement account contributions) for workers in their late 50s and early withdrawals from retirement savings thanks to the pandemic will lead to about half of folks age 55 or older today being forced to live off of $20,000 annually when they retire. We won’t argue these hardships aren’t real, but the thesis smacks of recency bias—the tendency to extrapolate the present far into the future. (We would think 2020 would be a lesson in why that doesn’t work, given all the year’s unpredictable surprises, but we digress.) That usually leads to error as conditions change in ways people can’t imagine today. Plus, we aren’t even convinced present data support this dire extrapolation. According to the St. Louis Fed’s FRED database, the employment rate for folks age 55 – 64 dipped from about 64% pre-pandemic to a low of 55.5% in April … and has already recovered to almost 61%. That is higher than the entirety of the 1980s and 1990s, and we don’t recall that leading to massive elder poverty. So yes, follow the article’s advice and ensure you have an emergency fund, but don’t let pessimistic projections like this fool you into taking excess risk or moving to a portfolio allocation that may not match your long-term goals and needs.
MarketMinder’s View: While we award two points to this article for not arguing either presidential candidate or party is inherently bullish or bearish, we don’t think its advice to buy certain stocks for a Biden win and others for a Trump win is helpful. Stocks don’t have pre-programmed reactions to events, and any speculation about which industries benefit from which candidates is likely already priced in given how widely discussed it is. Trump’s victory four years ago was supposedly a boon for coal stocks, but that didn’t pan out—not by a mile. Rather than try to pick specific winners and losers based on political rhetoric, we recommend looking at broad market fundamentals and the totality of drivers for each sector.
MarketMinder’s View: This is an interesting piece documenting the decline of single-state municipal money market funds, formerly a favorite place for high-tax-bracket folks to stash cash. The saga begins with money market reforms that stemmed from the Reserve Primary Fund breaking the buck (money market’s fixed $1 share price) in 2008—municipal funds’ share prices now float, with only Treasury funds being fixed. Furthermore, the low interest rate environment has hit these funds with a double-whammy. For one, low rates make tax efficiency much less attractive, since taxable interest is down regardless. But also, “Money managers are now struggling to find enough municipal securities in some markets for their funds to invest in. With interest rates near zero, municipal governments are taking advantage of cheap long-term financing, shifting away from short-term debt and floating-rate bonds that reset at short-term rates. Some municipalities are refinancing floating-rate debt at fixed rates….” The lack of liquid, short-term muni debt in some states makes these funds unmanageable.
MarketMinder’s View: The COVID angle to this is an obvious attempt to attract clicks, but we will forgive this article that much because it relates a valuable point. In the form of several anecdotes, this highlights the frustration and angst surviving family members face when a loved one dies without a will. It can easily drive many hours of work for your heirs, potentially including probate court. In one extreme example recanted here, a decedent’s nephew could have been rendered homeless due to co-op leasing rules in his state. These troubles are, thankfully, easy to avoid. It isn’t pleasant, but writing a will is a simple and relatively inexpensive fix. Online legal counsel can help you navigate your state’s peculiarities, too. Even beyond this, we think it is helpful to ensure your heirs know where your will is and are familiar with what is in it. We have seen too many situations where a will exists, but people can’t locate it—adding unneeded stress to grief.
MarketMinder’s View: We have often noted on these pages that the risk of a renewed COVID wave triggering strict lockdowns that wallop stocks anew is a factor worth watching—but one that can’t be forecast as such decisions are entirely political. Lately, many are watching European governments like the UK’s and Spain’s, which have reintroduced limited, targeted lockdowns to quell COVID’s spread. Here is an interesting case of the opposite, in which Irish officials—dealing with a virus uptick—elected not to ratchet up restrictions to the highest level. Instead, they opted for a vastly looser level. As noted herein: “Prime Minister Micheál Martin said moving to the strictest level would cause massive economic damage but the chief medical officer, Tony Holohan, said this was the ‘only opportunity to get this disease back under control.’ This is the first time the government has eschewed its experts’ advice.” Of course, this could change—but it highlights officials’ growing intolerance for broad restrictions. Also: The Central Bank of Ireland now projects GDP, buoyed by exports, will contract only -0.4% in 2020—down from its earlier estimate of -9.0%. Just a forecast, of course, but that is a heckuva revision!
MarketMinder’s View: We share this piece because it illuminates some widely ignored truths about Environmental, Social, Governance (ESG). For instance, as noted here, ethical is always in the eye of the beholder, and there is no universally agreed upon criteria for whether a company scores highly on ESG matters. So if you want to hop on the bandwagon, it is crucial to investigate the manager or fund’s methodology and, if that is your goal, ensure their values actually aligns with yours. Perhaps most important of all, ESG funds don’t always under- or outperform (depending on your bent) traditional diversified funds. Everything has its day in the sun and the rain, and markets will often reward profitable companies that, in some investors’ opinions, aren’t doing so hot on the E, S or G front. Lastly: “There’s no question that investors get an emotional benefit by divesting stocks of companies that are inconsistent with their values. But do they do good for others? For instance, do investors deprive tobacco companies of money by divesting their stocks, thereby constraining the production of tobacco products and limiting the harm they do? Well, maybe. Socially responsible investors who divest stocks of tobacco companies don’t submit them to these companies for redemption, as they do with mutual funds stocks. Instead, they sell their stocks to conventional investors. Therefore, divesting stocks doesn’t deprive tobacco companies of money directly.”
MarketMinder’s View: While this piece is heavy on sociology and employment data are late-lagging economic indicators, this is an interesting deep dive into how labor markets have begun recovering from this winter and spring’s massive job losses. Among the more striking visualizations is the one comparing temporary and permanent job losses. As it shows, most of the job losses early on were temporary, while the number of permanent job losses has increased more recently. The article fairly points this out as a sign of the devastation wrought by lockdowns lasting longer than expected in certain areas. However, the numbers also show a lot of those temporary losses were indeed temporary: The number of people reporting themselves as temporarily unemployed fell by 13.7 million from April to September. Over the same stretch, the number reporting permanent job losses rose by a far smaller 1.7 million. A little back-of-the envelope math shows 12 million people temporarily unemployed and now back at work—a sign of just how far the economy has crawled back since its springtime depths. This genuine improvement is what stocks have priced in, in our view—not far-fetched hopes for “stimulus.” For more, see our 9/9/2020 commentary, “What August’s Jobs Numbers Say About Depression Comparisons.”
MarketMinder’s View: It seems several European countries are keeping their promises and aren’t imposing as strict of lockdowns when faced with a second COVID wave. For example, in Spain, which has the highest virus count of any EU nation currently: “Madrid residents were largely coming and going as normal on Monday despite a prohibition on non-essential travel in the first European capital to return to a coronavirus lockdown due to resurgent infections, which rose above 800,000 nationally. Police said 330 officers were manning 60 checkpoints, but commuters poured into the Spanish capital as usual and few said they had noticed extra controls.” Now, that doesn’t mean the local economy is escaping unscathed, as limitations on restaurants’ service hours prompted tens of thousands of reservation cancellations, and many families voluntarily canceled leisure outings. But this is still a far cry from the cessation of basically all economic activity back in the winter and springtime—exceeding expectations.
MarketMinder’s View: The Institute of Supply Management’s (ISM) September non-manufacturing purchasing managers’ index (PMI)—which includes a broad array of service industries, such as retailers and restaurants—rose to 57.8 from 56.9 in August, its fourth consecutive reading over 50, indicating expansion. Sixteen of 17 industries reported growth—notably, the forward-looking New Orders sub-index rose to 61.5 from 56.8. However, buried in the coverage here is a widespread misperception: that the US economy can’t stage a legit recovery “until every industry is able to restore normal operations and customers’ traffic begins to return to pre-crisis levels. That might not happen until a vaccine or treatment for the coronavirus is found.” While we don’t dismiss the hardship faced by those in industries that haven’t broadly reopened, the data seem to disagree with the thesis as several major series are back at pre-crisis output levels. Society has already adapted extraordinarily to the constraints placed upon it, and we don’t see a good reason that can’t continue even as it takes a while for a vaccine to get approved, much less distributed to the masses. Stocks, meanwhile, are likely looking to that eventuality, rather than the ups and downs along the way.
MarketMinder’s View: In our view, the titular question is exactly the sort of speculation investors should avoid as it relates to President Trump’s recent COVID diagnosis. The article suggests that, if Trump’s case were to prove severe, this might make passing another economic aid package easier if both sides became more conciliatory. On the other hand, it also suggests that his illness could further stoke fear and cause reopenings to stall, halting the recovery. For one, we don’t think the economy needs a savior—no economic aid package will prove such, although we don’t dismiss the benefits for people and businesses in need if something were to pass. Moreover, these are but two of many other contradictory hypotheses we have seen circulate about since the world learned of Trump’s diagnosis. In our view, there is no way to assign probabilities to any of these outcomes. For more, please see our 10/2/2020 commentary, “On Trump’s Positive COVID Test.”
MarketMinder’s View: This offers some sound advice on how to juggle politics when it comes to choosing an investment adviser—in short, when it comes to investment decisions (meaning, which securities to own and when to buy or sell), ensure political biases aren’t motivating you or your adviser. Whether their political opinions align with yours isn’t necessarily crucial. As the article shows, some investors like advisers who view the world the way they do, while others prefer an adviser with differing opinions as a counterbalance against their own biases. Neither is better than the other as long as discipline reigns: “Retirement-planning experts say it’s less important that you have the same 2020 campaign bumper sticker as your adviser than that the adviser be able to articulate why and how events in Washington — tax legislation, regulatory changes, monetary policy and the like — influence his or her investing strategy. … Financial advisers discourage people from letting political news cycles influence their retirement planning strategies. Political winds can shift in a short period, sometimes drastically, whereas saving and investing for retirement are a process that takes place over decades.”
MarketMinder’s View: We would categorize this report as overall mixed. Job gains slowed from August’s 857,500 to 661,000 and unemployment improved to 7.9%, but the labor force participation rate dropped from 61.7% to 61.4%. “However, a separate, more encompassing [unemployment rate—the U6 rate] that counts discouraged workers and those working part-time for economic reasons also saw a notable decline, falling from 14.2% to 12.8%.” Additionally, one big headwind was last-minute extended school closures, which drove government payrolls’ 216,000 decline—a policy decision, not an after-effect of economic problems. Overall, slower hiring doesn’t surprise as the pace of reopening slows. Jobs data are also late-lagging indicators, so none of this is predictive for stocks, even if the data aren’t quite as disappointing as headlines imply.
MarketMinder’s View: Well, don’t get carried away here. Yes, eurozone CPI dipped into deflationary territory at -0.2% y/y in August. But that is due almost entirely to oil prices’ renewed drop, which pulled down energy and fuel costs across the board. Most other categories of consumer goods and services experienced continued modest price increases. The one notable exception to that is hotel accommodation, where it doesn’t surprise that proprietors would discount in order to attract patrons while COVID fears persist. As for the broader thesis about the ECB being out of ammunition to stimulate growth and prices, we agree quantitative easing (QE) is feckless. We find it rather perplexing that policymakers aren’t focused more on the split between this spring and summer’s massive money supply increases and stalling money velocity. We think QE explains this, as it flattens the yield curve—well-documented to slow money’s movement throughout the economy by discouraging lending. Will central bankers worldwide ever learn this lesson, end QE, and get back to basics? That is a long-term academic question, but in the meantime, absent a second sweeping global lockdown, the recovery should continue, albeit perhaps not at the swiftest pace imaginable, and that growth plus rock-bottom interest rates should help eurozone nations continue servicing their debt.
MarketMinder’s View: By walking through the art market’s many quirks, this illustrates a key point: If you buy art as an investment, you are speculating on how changing tastes and fashions evolve over time. That is not a market-based function—not by a mile. “If the value of a piece of art ever goes up, it usually does so through a small number of traditional, surprisingly predictable channels: art dealers who persuade their wealthy clients to spend more; auction houses that entice wealthy collectors to bid higher; wealthy collectors themselves buying and selling art to each another; and finally through an ecosystem of curators, scholars, critics and tastemakers who contribute, in whatever elliptical way, to perceptions of worth. The rest of us are left to buy art that will almost certainly lose value — and never gain it back — the second we hang it on the wall. In other words, don’t stress out about buying art as an investment, because it’s generally a bad one.” That includes fractional investing: “Aside from that highly dubious logic (see above) there are some unavoidable downsides to fractional art investing, the most important of which is that investors never take physical possession of the art. That alone obviates the primary draw of art collecting, namely looking at, and enjoying, the thing you own.” If you want to buy art to enjoy, then this piece has some handy tips on doing so.
MarketMinder’s View: This very, very, very long piece makes some decent points and debunks some long-running myths—namely that inflation is good for gold and always bad for stocks. In actuality, stocks have largely been the best inflation hedge, overall and on average, as inflation generally doesn’t become a market risk until it gets out of hand and central banks yank on the purse strings to contain it. Then it is the resulting contraction, not the inflation itself, that generally knocks stocks. Where this piece runs aground, however, is in trying to identify the specific winners and losers at a sector level for the next time inflation strikes. However sound the logic may look in places, it all depends on one certain set of variables. In reality, how various sectors react depends on all the other economic variables and political factors at work—inflation is only part of the story. Moreover, with money velocity exceedingly low and yield curves globally largely flat, inflation looks a ways off—too far off to foresee all the other conditions, making it premature to think about sector positioning when it arrives, in our view.
MarketMinder’s View: Based on the article’s titular sentiment and first three paragraphs detailing some banks’ planned transitions from the UK to the EU, a financial services exodus might appear to be underway before the Brexit transition period expires December 31. Yet here is some telling context (italicized emphasis ours): “More than 7,500 financial-services jobs have migrated from the U.K. to the European Union since Britons voted in 2016 to leave the European Union, according to latest figures from EY, including 400 announced in recent weeks. That is still a fraction of total financial services jobs in London, which is widely expected to remain the region’s biggest financial center.” As the article also notes, one American multinational bank plans to move 100 employees to the EU—yet it employs 6,000 people in London. As banks plan for a post-Brexit world, the transition may include some bumps and still-to-be resolved issues (e.g., passporting, which allows firms regulated in the UK to sell their products and services to EU customers). However, projections of Brexit unleashing sweeping disruptions to the UK economy and its financial sector haven’t broadly panned out—reality has been more benign than feared.