Daily Commentary

MarketMinder’s View: The titular headache for those buying gold bars at a certain warehouse store (which, MarketMinder doesn’t make individual security recommendations, and we are here for the broader theme only): selling. Gold isn’t liquid, and the options for selling physical gold is limited. Gold’s spot price may be easy to identify at a given moment, but that doesn’t mean retail gold dealers will give you that spot price (just as those selling physical gold usually mark it up from the spot price). The haircut you have to accept could be a couple hundred dollars, either in fees or a discount to the market price. “As more sellers try to reap profits from rising gold prices, some dealers say they are less inclined to make competitive offers. When asked about gold bars, a Money Metals Exchange representative said they had so many in inventory that they had lowered their offers. Selling gold online has additional costs. Shipping fees can be as much as $40 for an ounce of gold, according to JM Bullion. Insurance on that shipping is another $40 for a $2,000 gold bar, per the U.S. Postal Service.” Choose to hold on? You have safe storage to consider, which may involve fees, too, should you elect to use a safe deposit box or thereabouts. Oh, and in the event you are able to turn a profit, because the IRS treats physical gold as a collectible, it potentially faces a higher rate than other long-term capital gains. These are all tradeoffs we think investors should consider on top of the normal issues with gold (e.g., its subpar long-term returns, higher volatility than stocks and tendency to boom and bust on sentiment).

MarketMinder’s View: For all the brouhaha over March’s bigger-than-expected CPI uptick, the underlying story hasn’t changed: The main driver of elevated CPI remains shelter costs. This piece compares headline CPI and CPI excluding shelter on a rolling 6-month annualized basis: “I note that the 6-mo. annualized rate of inflation less shelter has averaged 1.6% for the past 16 months, and it has been more than 2.0% in only four of those months. Moreover, there is no sign of any meaningful recent acceleration: it has averaged only 2.01% over the past 4 months and it was 2.06% in March ‘24. As for the overall CPI, it has averaged 3.3% over the past 16 months, and it was 3.3% in March ‘24. The difference between the two is due entirely to shelter costs, which, arguably, have been artificially inflated by the way BLS calculates them.” That is, it computes owner’s equivalent rent—a fictional cost no one pays—using home price data a year and a half out of date. This points to shelter costs continuing to fall for the next six months, likely bringing more inflation relief. When the Fed will figure this out is anyone’s guess, as is what decisions this realization will spur. But the market should figure it quickly, likely rendering this pullback a speedbump in a longer bull market.

MarketMinder’s View: As always, we are politically agnostic, so our look here at headwinds facing the Biden administration’s signature industrial policy focuses on the economic and market aspects, not the politics and personalities. When the Inflation Reduction Act passed in 2022 with a raft of subsidies for solar and other so-called “clean energy” companies, cheer over the industry’s prospects abounded. “Green” stocks had rallied bigtime in the run-up to it, and to many, it seemed like the law ratified those high hopes and ensured a bright future. But since then, the industry has learned one of the eternal realities the hard way: Government-directed industrial strategy is a case of the government trying to pick winners and losers, but it doesn’t guarantee those hand-picked winners actually win. Sometimes they run up against competition from another country’s industrial strategy, which seems like the case now with solar. It is hard to manufacture a subsidized boom when another country got a head start on the same and flooded the market. In our view, this is the latest example of the disappointment markets saw coming as green stocks took it on the chin the past couple years. Now the industry is counting on tariffs to level the playing field, but we have our doubts. For one, renewable energy has long faced cost challenges—tariffs will only keep those prices high, impacting installation and generation costs and making other sources (natural gas, coal, etc.) more viable. This highlights how addressing a distorted market by adding more distortions tends not to bear much fruit in the long run and can inflict collateral damage elsewhere. So we see this as a situation to watch, though it is probably in too small a corner of the economy to present a risk to the broader expansion.