Daily Commentary

MarketMinder’s View: This is a great explanation of why the long-term winners from new technology are impossible to predict and often aren’t the primary purveyors of the technology itself. But we think it misses on the portfolio implications. The immediate application is to AI, but it is generally true of all new major developments. Whenever something groundbreaking emerges, the initial hype surrounds the developers, then it shifts to the companies that build the infrastructure to spread it far and wide. But in the long run, the real winners are the creative users who dream up ways to apply that technology to solve everyday problems, bringing new or better goods and services to market. And those are always a giant unknown in the early days. So this seems like a reasonable hypothesis: “It will only be when everyone’s computer is running Claude or Perplexity, and we’ve all worked out how to use it, that AI will be transformative. When that happens, the gains accruing to the chip-makers and the builders of the data centres won’t disappear. But an increasing share of the economic value might migrate to the businesses and individuals using cheap and abundant intelligence.” (Which reminds us, MarketMinder doesn’t make individual security recommendations and features this for the high-level themes only.) The article spends most of its pixels on examples from the advent of railroads, electricity, automobiles and the internet. All good stuff! Our only beef is with the parting advice to start planning for all this in your portfolio now. If all the history highlighted here is a reliable guide, all those potential winners are way too far out to identify now, and it will be a long, long time before it starts showing up in their returns. Even those who craft the ETFs mentioned are just guessing, as the tumult around a recent hedge fund run by an AI “expert” illustrates. Markets pre-price the foreseeable future, about 3 – 30 months ahead, not far-flung possibilities.

MarketMinder’s View: This is a good bookend to Ireland’s bad Q1 GDP report, which pulled total eurozone GDP into the red. That was almost entirely a paper problem, stemming from multinationals based in Ireland for tax purposes. It had nothing to do with actual Irish demand, which rose 1.4% q/q based on a bespoke stat called modified domestic demand (MDD). In Q2, all of this flipped. GDP surged 10.8% q/q, but MDD fell -0.8%. Consumer spending rose 1.0% q/q, but fixed capital formation (including business investment) fell -5.2%. The latter has had one-off drops before without triggering or signaling recession, but it is something to keep an eye on, especially if it remains weak and hidden by hot GDP growth. Ireland is tiny, not a major global economic factor, but if investors overlook stealthy weakness it would be a sign of sentiment heating up outside the US. Again, we aren’t there yet, but bear the risk in mind.

MarketMinder’s View: Fear not, dear reader, neither we nor this article are suggesting you lack gumption. But you are human. And because humans are vulnerable to acting on both fear and greed, this is a very timely look at the tradeoffs of leveraged ETFs. Many such funds focus on single stocks, bringing massive daily swings and wrecking diversification. But there are also some that focus on delivering two or three times the daily price movement of an index, and there is a new research report suggesting these are viable long-term investments. The “proof” is that even with the downside magnification, a leveraged fund based on the Nasdaq 100 Index trounced the index itself since 2010 (which reminds us, MarketMinder never makes individual security recommendations and brings you this for the principle only). But here is the kicker: “Who earned that gigantic cumulative return? My best guess is: absolutely nobody. In the worst five weeks of the market’s response to Covid-19 in 2020, the Nasdaq-100 index fell 27.8%. TQQQ lost 69.8%. In 2022, the index dropped 32.4%. TQQQ lost 79%. Between mid-February and early April 2025, the Nasdaq-100 was down 22.8%. TQQQ lost 56.9%. The human mind isn’t made to withstand that much short-term pain, no matter how much greater the potential long-term gain might be.” The article follows with a timely example of South Korean investors who rushed headlong into single-stock leveraged ETFs when they launched in May, then ran for the hills as these vehicles crashed far harder than the Korean stock market this summer, leading regulators to suspend approvals. In late-stage bull markets when euphoria starts simmering, as it seems to be now in the US, greed can blind investors to leveraged tools’ risks. But the panic that kicks in as these vehicles tank in bear markets is real. Keeping your emotions in check and resisting temptation may sound boring when stocks are doing well, but there will likely be benefits later, when they aren’t.