Good morning. On Fortune’s radar today:
Fortune’sradar today:
- Exclusive: Venezuela likely to go for dollarization of its currency to cure hyperinflation.
- Bond traders say Bessent’s ‘band-aid’ is ‘a heinous financial crime.’
- Markets: Bitcoin is back! (A bit.)
- The 60/40 portfolio, RIP.
- What 5 million tons of seaweed did to Mexico’s hotel industry.
- Tim Cook added $32 million per hour to Apple’s market cap, every single hour of his 15-year tenure.
- Seafood truck crash creates 8-hour-long ‘Squidpocalypse.’
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ONE BIG THING
Exclusive: Venezuela, sick with hyperinflation, engages ‘money doctor’ Steve Hanke for a dose of dollarization
Over four decades, Steve Hanke has pursued a worldwide quest to tame the hyperinflation that so frequently ravages developing nations. His solution: tying their currencies to the U.S. dollar so their governments are no longer free to unleash an avalanche of currency to fund their giant overspending, at the expense of their citizens, who pay for the blowout in rocketing bills for rent, medicine, and groceries.
The professor of applied economics at Johns Hopkins University has advised governments across three continents—whether achieving straight “dollarization” or establishing Hong Kong-like currency boards that fix their monies to the greenback.
Now, the “Money Doctor” is making the most important house call of his career. Venezuela’s National Assembly has just named him Special Adviser on Economic, Monetary, and Energy Affairs, tasking him with curing hyperinflation now running at a 400% annual clip — the worst in the world — as the country tries to rebuild after the ouster of Nicolás Maduro. Hanke’s fix: a full dollarization law that would abolish the bolivar and the central bank outright. He told Fortune’s Shawn Tully he puts the odds of passage at 50% to 80%.
BOND-AID
The bond markets believe Bessent’s ‘band-aid’ is ‘a heinous financial crime’
U.S. Treasury Secretary Scott Bessent’s big move on bonds didn’t last long. Yields on the 30-year Treasury are climbing back up to where they started on Wednesday, when Bessent announced he would double the Treasury’s purchases of long-dated bonds to at least $4 billion “per operation” in hopes of reducing their interest yield.
Chart via CNBC
The intent of the program is to use the bond market to lower interest rates, thus making credit more available for consumers and businesses.
But Wall Street just didn’t take it seriously. The U.S.’s national debt just passed $40 trillion. A $4 billion weekly purchase looks like a rounding error when compared to the big fiscal picture.
Commentary from multiple investment bank analysts over the last 24 hours has been scathing:
“Many commentators seem to be treating this week's US Treasury intervention in bond markets as a heinous financial crime,” ING’s Chris Turner told clients this morning.
Peter Sidorov and his colleagues at Deutsche Bank said in an email, “investors are viewing the Treasury’s steps more as a band-aid than a structural solution.”
“Bond investors seem to feel that four billion dollars is not terribly impressive,” UBS’s Paul Donovan advised clients today.
And that was from the moderates.
The “band-aid” metaphor came up repeatedly. Nomura’s Charlie McElligott told the FT it was a “band-aid on a bullet hole” and “not be enough to placate market forces.”
“We don’t think this [intervention] can succeed, in isolation,” Eoin Walsh of TwentyFour Asset Management said. “Interventions such as this look like a sticking plaster.”
And on it went:
Jim Caron, chief investment officer at Morgan Stanley Investment Management: “The Treasury simply can’t control long-term yields.”
Robert Tipp, head of global bonds at PGIM: “It’s a finger in the dike.”
“It’s a little bit like paying your mortgage with your credit card,” James Sullivan, JPMorgan’s co-head of global fundamental research, told CNBC.
The atmosphere will make life complicated for Fed Chairman Kevin Warsh next week. He is scheduled to give his annual speech at Jackson Hole. He has publicly pledged not to give “forward guidance” to the markets, because he doesn’t believe the Fed should be guiding the bond market. But the entire intent of Bessent’s intervention was to signal that the Treasury is able to stabilize yields if it wants to—a position that seems to contradict Warsh.
“We do not think it is hyperbole to say that this break in communication strategy reduces the overall credibility of their guidance,” said Thomas Simons, chief US economist at Jefferies.
THE MARKETS
Bitcoin is showing signs of life
Bitcoin, the OG cryptocurrency, spent much of the last year in a long, humiliating decline from its all-time high of around $126,000 down to the low-$60,000 range, where it has remained for most of this year. Until recently. BTC has gained 23% in the last five days and is up 19% this month. As always, it’s not clear why. But CNBC says declining prices in the bond market have traders looking elsewhere for potential gains. Elsewhere, stocks were mixed globally and U.S. futures were up moderately before the opening bell in New York.
- S&P 500 futureswere up 0.34% this morning. The index lost 0.87% yesterday.
- In Europe,the Stoxx 600 was up slightly by 0.08% in early trading and the U.K.’s FTSE 100 was flat before lunch.
- Asia:South Korea’s KOSPI was up 0.88%. Japan’s Nikkei 225 was down 0.3%. India’s Nifty 50 was up marginally by 0.08%. China’s CSI 300 was up 0.57%.
- Brent crudewas $94 per barrel this morning, same as yesterday.
- Bitcoinwas at $77.7K, up 23% in the last five days.
The 60/40 portfolio is as dead as a dodo
It’s old news, but it’s nice to see it in a chart: For decades, personal finance professionals handed out a standard piece of investing advice: Split your portfolio 60/40 between stocks and bonds. It was thought that the two move in roughly opposite directions as the markets go up and down, and thus hedge each other against excessive losses.
But as this graph from Bespoke Investment Group shows, that has not been true for a long time. The 60/40 people have lost a lot of money compared to people who were 100% in stocks.
“Stocks have left 60/40 in the dust after nearly two decades of equity market gains and a struggling fixed income market since the post-COVID inflation surge,” the group said in an email. The iShares 60/40 ETF rose 325% since 2009, but an S&P 500 ETF would have got you more than a 1,000% return.
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CHART OF THE DAY
The impact of 5 million tons of seaweed on the hotel industry
It has been another great summer for the hotel business globally, according to Jefferies’ John Colantuoni and his team. The world’s overnight hospitality industry saw sales grow by 8% across the planet in July. Sales were up everywhere except the Middle East, Africa, and Mexico. You can probably guess why travelers avoided the Gulf region more than usual. But what happened in Mexico?
Turns out that a wave of riots and violence by cartels in February initially scared travelers away. And then a massive amount of brown sargassum seaweed—5 million metric tons!—washed up on many beaches on Mexico’s Caribbean coast, according to Travel Weekly, deterring tourists.
NUMBER OF THE DAY: Let him cook
$32 million per hour
“Under Tim Cook, Apple has created market cap growth at a rate of roughly $32 million an hour, every hour, for nearly 15 years or a total of $4.5 trillion overall.”—Wamsi Mohan of Bank of America.
THE FRONT PAGES TODAY
Here's how America's $40 trillion debt can hit your wallet - Axios
Anthropic Expects to Match or Top SpaceX’s Record IPO Size - Bloomberg
ONE MORE THING
Seafood truck crash in Rhode Island created 8-hour-long ‘Squidpocalypse’
It was a warm, sunny day in the coastal town of Narragansett when a tractor-trailer rollover sent a truckload of squid spilling into a Rhode Island roadway, leaving a stench as they sat in the road for hours in the summer heat. Local authorities have dubbed it the “Squidpocalypse of ’26,” the AP reports.
Narragansett Police Capt. Ryan Prest said he was told that the scene “started to smell bad as the squid sat out in the sun for a few hours.”
The fully loaded trailer was taking the squid to a processing facility out of town when the trailer dislodged and tipped on its side as the driver was navigating a turn, spilling a “substantial portion” of its calamari cargo, the police department said. Police responded at 9:27 a.m., and the intersection wasn’t reopened until 5:15 p.m.
They found massive piles of squid on the road.
“Squid has a distinctive odor to it,” Richard Stevens, a Narragansett resident and fisherman, told WJAR. “Especially if it lands on the road and stays there for a while.”
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