Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
U.S. markets are closed today and hopefully most large institutional portfolio managers will spend time standing in a corner and thinking about what they've done to equity prices so far in 2016.
Domestically, the big news is the announced marriage between Suncor and Canadian Oil Sands after a tempestuous courtship. Details in reports below, but it looks like Suncor is looking to capitalize on a share price that has avoided much of the steep sell-off in the sector.
"Suncor in COS deal" – Babad, Report on Business
"Suncor Agrees to Buy Canadian Oil Sands After Raising Bid by 12%" – Bloomberg
=====
For oil markets as a whole, it's 'another day, another sell-off' for the commodity price. Iran is likely to blame today for pushing Brent crude below $28, as reports indicate the country has a number of giant oil tankers filled up and ready to dump crude into already-oversupplied markets. Unhelpfully, a twitter user pointed out that a barrel of oil is now worth less than the barrel itself.
"Oil firms after hitting 2003 low on lifting of Iran sanctions" – Reuters
"Brent Trades Near 12-Year Low as Iran Comeback to Swell Glut" – Bloomberg
"@Copernicus2013 "That feeling when a barrel costs more than a barrel of #oil pic.twitter.com/TnJY4Vi8eM " – Twitter
=====
Jayson Myers, chief executive of Canadian Manufacturers & Exporters, is not only advising the Bank of Canada not to cut interest rates next, he is suggesting that Governor Poloz raise rates,
"Exchange rate volatility is putting a chill on business decisions and renewed talk of lower rates is stoking worries about the economy's health, all of which is bad for confidence, he said.
"'My advice right now would be to even take a look at increasing interest rates by a quarter of a point,' Myers said by telephone. 'Interest rates are low already. A little bit of dollar stability would be better.'"
These comments, indicating that a prominent voice for Canadian exporters is more concerned about stabilizing the loonie than providing a larger advantage to his constituents, are bizarre to me. I'm not saying wrong, just really, really surprising.
"Exporters to Bank of Canada: Thanks, But No Thanks on Rate Cut" – Bloomberg
"Analysts warn of further decay as Canadian dollar nears 68¢ before firming" – Babad, Report on Business
=====
Princeton professor Paul Krugman, arguably the world's most prominent economist, presented a view on the oil price's effects on the global economy. The framework has decidedly negative implications for the Canadian economy,
"Small oil price declines may be expansionary through usual channels, but really big declines set in motion a process of forced deleveraging among producers that can be a significant drag on the world economy."
If deleveraging among oil producers can have a chilling effect on the entire global economy, it stands to reason that it will have a much larger negative effect on the Canadian economy, where the energy industry makes up a large portion of asset markets.
"Oil Goes Nonlinear" – Krugman, New York Times
=====
Ending on a more positive note, JP Morgan strategists believes that recent market volatility represents a 'washout,' investor capitulation that should ease selling pressure and pave the way for market recoveries,
"as of last summer, we entered a new phase of fragile sentiment .. [encompassing] frequent swings between optimism and pessimism. The last time we experienced such a phase was 2011 and 2012… such environment prove fruitful for mean reverting trading strategies"
"@SBarlow_ROB JPM implies 'washout' pic.twitter.com/oQRe2m5h4N" – (includes research excerpt) Twitter
See also: "@SBarlow_ROB A highly, and perhaps delusionally, confident Deutsche Bank says 'Buy' pic.twitter.com/MgWe9D5oZA – Twitter (excerpt)
=====
Tweet of the day: "@humenm WOW. Saudi Arabia's crude oil exports in Nov rose to 7.719m per day from 7.364m October - JODI data " – Twitter
Diversion: "11 things ultra-productive people do differently" – Quartz