Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web.
The Economist chimed in on the Canadian economic outlook and the results were, given recent events, predictably dire,
"Growth is now dangerously dependent on consumer credit and rising house prices, both of which could swiftly drop. The average price of a detached house in Vancouver is C$1.4m ($1.1m); in Toronto it is C$1.1m. The central bank thinks housing is overvalued by as much as 30%; the biggest domestic risk to growth is over-borrowing by consumers, most of which is housing related, it warns. Philip Cross, a former chief economist at Statistics Canada, points out that the share of income that households need to service their debt is at an all-time low. But he worries about what will happen if interest rates or unemployment suddenly rise. Canada, which escaped the worst effects of the rich world's credit bubble, may be creating a smaller one of its own."
"A rough ride" – The Economist
The Financial Times concedes that the crude futures market has a mixed record of preciting the spot commodity price, but at the same time it shows increasing pessimism in the sector,
"The price of West Texas Intermediate crude delivered in December 2016 has fallen below $60 a barrel, the lowest since any exchange listed that futures contract. Between the financial crisis and last year, the contract levitated between $80 and $100.
Of course, futures markets are not predictive. But the fall in this and other later-dated oil contracts suggests that an era of higher prices has ended. The number of outstanding contracts for December 2016 crude has increased even as its price has tumbled, indicating producers are holding their noses and selling barrels forward on the cheap."
"Futures markets have much to say about oil's direction" – Financial Times
There will be jubilation in Goldbugland this morning after the Chinese government announced they had been buying precious metals hand over fist since the financial crisis. Bloomberg reports that central bank stores of gold have jumped 57 per cent in the past five years, bolstering gold's reputation as a stabilizing force in monetary policy.
"China Gold Reserves Top Russia in First Disclosure Since '09" – Bloomberg
Also in China, the authorities continue to make a mockery of the concept of "free market" by continuing to bolster equities by any means possible,
"China has made 2.5 trillion yuan to 3 trillion yuan ($483 billion) of funding available for government agency China Securities Finance Corp. to support the stock market,"
But while government assets flood into the Shanghai Composite, foreign investment is pouring out, as Business Insider notes,
"After piling into Chinese stocks last week global investors dumped them madly this week" – Business Insider
See also: "There's a dead giveaway that China's growth numbers are fake" – Business Insider
Bloomberg's Matthew Boessler has usurped the Wall Street Journal's Jon Hilsenrath as the best source of analysis on the U.S. Federal reserve in my opinion, so when Mr. Boessler writes about the timing of a Fed rate hike, I read it carefully,
"Yellen repeated that she expects the Fed to raise its benchmark rate this year, while emphasizing that the pace of increases after liftoff is likely to be gradual. The Fed has kept its benchmark rate near zero since December 2008 in the depths of the financial crisis.
Yellen, 68, said she expects to see further gains in wages and that the Fed won't wait until inflation reaches its 2 percent goal to raise rates."
"Yellen Favors Tightening in a 'Prudent and Gradual' Manner" - Boessler, Bloomberg
"Fed funds futures, liftoff probabilities, and why the first hike is only 20 bps" (very, very technical) – Boessler, ello
Tweet of the Day: "@JKempEnergy HOW BEARISH is the oil market? Very. Price of Brent for Dec 2016 delivery has fallen close to its lowest-ever level: pic.twitter.com/zYObu7imGb "
Diversion: "Who'd Win In A Fight, The Millennium Falcon Or The U.S.S. Enterprise?" – i09