A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Nigel D’Souza, financial services analyst at Veritas Investment Research, is not excited about the short-term outlook for Canadian bank stocks. Mr. D’Souza mentioned some alarming statistics in a BNN Bloomberg interview Monday.
The analyst cited a ‘constrained outlook for economic growth’ in Canada which is causing ‘elevated levels of credit losses.' For RBC and CIBC, credit losses are climbing at a 45 per cent year-over-year pace because of ‘the fastest levels of commercial insolvencies since the financial crisis.’
“Don’t buy banks today: Financials analyst” – BNN Bloomberg (video)
“Scotiabank raises dividend as international banking strength gives profit a boost” – Report on Business
“ BMO profit edges higher as loan losses swell amid slower retail banking growth” – Report on Business
“What profits at Canada's big banks are saying about the odds of a recession” – CBC
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There has been a tide of negative forecasts from Wall Street firms lately despite reasonably constructive market activity. UBS joined the pessimistic chorus Monday,
“The most common way to look at earnings in our industry is to analyze the year-over-year growth rate. An alternative approach, however, is to focus on earnings breadth by looking at the number of companies with negative earnings growth. At this stage, growth and breadth both reveal that earnings are in a precipitous slowdown and Leading Economic Indicators (LEIs) argue there is more to come … a full 70 per cent of world PMIs are now in contraction territory (i.e., below 50) and global earnings expectations are already in negative territory … There are now 137 companies in the S&P 500 with negative earnings growth compared to 68 at the beginning of 2019.”
“@SBarlow_ROB UBS really bearish on SPX earnings” – (research excerpt) Twitter
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It’s too early to get really excited but a Scottish company has developed a method of replacing petroleum inputs with unrecyclable plastics to build roads. I have a lot of questions, the main one involves whether the process of turning plastic into asphalt is more or less energy intensive and environmentally harmful than the existing method.
If it really works though, it will be a massive game changer, creating a market for unrecyclable plastic and significantly reducing oil demand.
“ The company turning waste plastic into roads” – CNBC (video)
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Lithium mining stocks have been a popular investor pick ahead of an expected ramp up in electric vehicle sales (lithium is used in the batteries that power the cars). But it appears that lithium production, thanks to the surge of investor capital, is outpacing demand by a wide margin so far,
“Prices for the industry’s core product, lithium carbonate, have sunk 13 per cent, according to Benchmark Mineral Intelligence, knocking profits for the largest producers and wiping out most of the leading producers’ share price gains since the beginning of 2016. Chile’s SQM, the world’s second-largest producer, last week said its earnings for the second quarter almost halved, to $70.2-million, due to lower lithium prices… The market has been swamped by new supplies of lithium following a rapid expansion of mines in Australia. At the same time, a cut in government subsidies for buyers of electric vehicles in China has weakened demand in the world’s largest electric car market.“
“Lithium hit by oversupply and electric vehicle subsidy cuts” – Financial Times (paywall)
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Tweet of the day: “@adam_tooze In winter of 1952–1953, coal smoke, soot, and sulfur dioxide killed Londoners at roughly twice the rate the Luftwaffe managed during the blitz of 1940–1941. McNeill, The Great Acceleration:” – Twitter
Diversion: “Tattoos and time preferences” – Marginal Revolution
Newsletter: “The best investor of all time” – Globe Investor
Column: “Want to know where the loonie’s headed? Ask the Fed” – Barlow, Inside the Market