Daily Commentary
Get a weekly roundup of our market insights.
Sign up for our weekly e-mail newsletter.
By Alan Rappeport, The New York Times, 4/19/2024
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.
Retail Sales in Great Britain Flatline as Households Continue to Feel Squeeze
By Jane Croft, The Guardian, 4/19/2024
MarketMinder’s View: Flat retail sales volumes aren’t great news, but saying “consumers cut back” on spending seems like odd framing. If retail sales rose in February and held steady in March, that doesn’t seem like cutting back. Rather, based on the underlying details, higher prices hit sales at food shops and department stores while sales rose at clothing, furniture and hardware stores as well as gas stations. The ups and downs canceled one another out, leaving the inflation-adjusted total flat. But sales still rose in Q1 overall, and nothing seems out of sync with the other signs of green shoots after two straight GDP drops. Besides, most consumer spending goes to services, which the retail sales report doesn’t capture.
The Headache at the End of the Costco Gold Rush
By Katherine Hamilton, The Wall Street Journal, 4/19/2024
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).
By Alan Rappeport, The New York Times, 4/19/2024
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.
Retail Sales in Great Britain Flatline as Households Continue to Feel Squeeze
By Jane Croft, The Guardian, 4/19/2024
MarketMinder’s View: Flat retail sales volumes aren’t great news, but saying “consumers cut back” on spending seems like odd framing. If retail sales rose in February and held steady in March, that doesn’t seem like cutting back. Rather, based on the underlying details, higher prices hit sales at food shops and department stores while sales rose at clothing, furniture and hardware stores as well as gas stations. The ups and downs canceled one another out, leaving the inflation-adjusted total flat. But sales still rose in Q1 overall, and nothing seems out of sync with the other signs of green shoots after two straight GDP drops. Besides, most consumer spending goes to services, which the retail sales report doesn’t capture.
The Headache at the End of the Costco Gold Rush
By Katherine Hamilton, The Wall Street Journal, 4/19/2024
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).