Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I have been among the more sanguine watchers of the great Canadian housing bubble but a recent table presented by the Financial Post is so stark that I may have to change my view. The table shows that Canadian households are more indebted – ie leveraged – than U.S. households in early 2007 by every measure.
I stand by the view that there will be no U.S.-style credit crisis in Canada because derivative-related madness like CDO-squareds seemingly, but not, protected against default by credit default swaps is not apparent here. But, household debt is a problem and a deleveraging process that will significantly slow domestic borrowing and consumption is almost inevitable and will slow national economic growth. Hopefully this process happens gradually – if Canadian wallets all slam shut at once an abrupt economic slowdown would cause all kinds of problems.
"@SBarlow_ROB Oof RT @JohnWake: Great summary of bubble signs in Canadian real estate. From November. buff.ly/2iWVvb9 pic.twitter.com/yBdsHGIh9o" – (table) Twitter
"The Canadian Economy's Unhealthy Addiction to Real Estate" – VanCity Condo Guide
"Toronto: You can't get a house but you can get a job and a hairy commute" – Babad, Report on Business
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The oil price is sharply lower this morning on fears that increased U.S production will fully offset OPEC production limits, continuing global glut conditions,
"'We see the optimism surrounding OPEC and non-OPEC production cuts being counterbalanced by fears of higher U.S. crude production as the higher rig count of last Friday still weighs,' said Hans van Cleef, senior energy economist at ABN Amro … Last week, U.S. energy companies added oil rigs for a 10th week in a row to 529, Baker Hughes data showed, extending a recovery in activity into an eighth month."
"Oil down on concerns rising U.S. production could dampen output cut deal" – Reuters
"Oil companies may boost E&P spending after two years of declines: Barclays" – Reuters
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The fiercest debate among global economists and strategists concerns the extent to which bond yields will climb in the coming months. Bloomberg cites experts arguing that fixed income demand from an aging developed world population will keep yields low,
"The generation now approaching retirement is both bigger and wealthier than all the other age groups in most of the developed world. So even if cyclical factors such as rising inflation in the U.S. boost the mid-term appeal of stocks over bonds, the longer-term demand for fixed income will remain high, according to Fredrik Nerbrand, global head of asset allocation at HSBC Bank Plc in London. 'If you believe in follow the money, you need to follow the baby boomers,' Nerbrand said in a phone interview. 'Bond yields may not revert back to their historical averages even if inflation were to rise because the structural story is still there.'"
This view is also good news for dividend investors as low bond yields will be no competition for equity yields, and dividend payers should continue to outperform.
"Don't Worry Bond Investors, Baby Boomers Have Got Your Back" – Bloomberg
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The amazing technological advancement is happening gradually so it often falls below the radar. But solar power is now the cheapest form of energy in over 60 countries and it's clear that the current pace of development threatens future fossil fuel demand.
"Solar power is now the cheapest form of energy in almost 60 countries" – Science Alert
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Tweet of the Day: "@BaldingsWorld This is why Beijing absolutely will not let the real estate drop by any real amount ftalphaville.ft.com/2017/01/09/218 " – Twitter
Diversion: "Just Some of the Cool Gadgets We Spotted at CES 2017" – Wired
Scott Barlow