Daily Commentary

MarketMinder’s View: This is a good, detailed look at a new push by a number of individual banks to create an interbank money transfer network on the blockchain, which many refer to as a stablecoin. (The coverage touches on several individual banks, so keep in mind we don’t make individual stock recommendations.) These banks, leveraging the network built by The Clearing House, the unseen system behind direct deposit transactions, are stepping up efforts to produce a potentially instantaneous, low-cost, maybe even international system allowing for secure money transfer on the blockchain. Many have long talked of stablecoins and the blockchain as revolutions that could upend the existing banking system, but the reality was always reversed: Banks were much more likely to adopt blockchain technology and block out new entrants, just as in past innovations like the development of Zelle, noted herein. This also follows last month’s announcement that traditional payment technology firms will dive into OUSD, a consortium of 140 financial firms and payment tech companies using the blockchain. Existing firms simply have trust, relationships, networks and assets that can leverage this technology very effectively. All in all, nothing in this is a huge source of future profit. This is more about enhancing service and crowding out a potential source of competition.

MarketMinder’s View: This article touches on a hot-button political issue and wades into electoral politics in the process, so please note MarketMinder favors no party nor any politician. The hot-button issue? Construction and permitting of data centers, cloud-computing hubs central to AI development and growth. Data centers gobble up power and water, so the attendant fear is they will drive up voters’ utility bills—and they are unpopular as a result. Hence, New York Governor Kathy Hochul is bending to legislative pressure and implementing a one-year moratorium on large data center permits (although those already in process will proceed). It is the nation’s first statewide pause, although local blowback is common. While we get the idea of this, there is a counterpoint: Investment into these facilities—while not the only factor driving economic growth—is a notable contributor to it. If such cancellations and broad bans become more widespread, it could interrupt this investment, which tallies into the trillions of dollars. Markets, which already see that investment, could see a shock from sweeping cancellations. While the current scale is too small to wallop stocks, this is a possible risk we are watching.

MarketMinder’s View: “In a draft of the report seen by the FT, the [European] Commission says it will propose removing ‘Pillar 2 capital requirements related to the leverage ratio’. The requirements are discretionary add-ons that supervisors, such as the ECB, can impose if they believe that other capital requirements do not sufficiently address a lender’s level of risk.” Look, if this draft becomes a reality, it would be an incremental plus for eurozone banks, who would face more consistent and less arbitrary capital rules, which are arguably too high on the Continent now, unnecessarily acting as a brake on bank lending and, therefore, economic activity. But will this become a reality? The matter has been debated back and forth for so long that we have our doubts. Just a few weeks ago, the ECB urged regulators not to change capital rules. So who wins out? We don’t know. It is a matter worth watching and we think this proposal is sensible on its face, but this saga is seemingly a boring sequel to the excellent 1980s movie, “The NeverEnding Story.”