A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Professional money managers and traders often use the derisive term "dumb money" to describe retail investors but a recent study shows that the alleged smart money isn't that bright either. High net worth client management firm Northern Trust recently published a study, summarized by the Climateer investing blog:
"Institutions turning toward various strategies that focus on everything from momentum investing to volatility and yield may not actually know the real risk levels of their investments."
The post links to the full Northern Trust report which, using wonky language, is much more scathing.
"Northern Trust survey says institutional investors are idiots" – Climateer, Northern Trust
U.S. asset management behemoth BlackRock Inc. believes the U.S. corporate bond market is broken, and needs a massive overhaul. As it happens, I have a personal stake in cheering them on. One of my favourite trade ideas from 2013 was U.S. corporate debt issued by global mining firms. It worked great, but now I can't sell the position which is up between 15 and 20 per cent in Canadian dollar terms.
My broker, who will be only happy to take $1.50 or so off the price of the bond for commission, can't find a buyer. And, in Canada there's no place else to go – the only buying and selling happens through bank bond inventory accounts at more or less whatever price they decide.
"BlackRock urges changes in 'broken' corporate bond market" – Bloomberg
I still think agricultural stocks will be among the best performing market sectors in the coming decade but I also believe that it's too early to buy them. A depressed U.S. corn price and the end of a global fertilizer cartel are depressing profits.
Thing may be changing however. The New York Times reports that two fertilizer firms, CF industries Inc. and Norway's Yara International, are considering a merger of equals that will increase pricing power in the sector.
"Fertilizer makers Yara and CF Industries discussing 'merger of equals' " – New York Times' Dealbook
The ROB's Jacqueline Nelson has the full scoop on new U.S. legislation to prevent tax inversions, the strategy Burger King is (at least in part) using with its takeover of iconic Canadian dough nut provider Tim Horton's.
"Merger unaffected by U.S. tax law move, filings show" – Report On Business
Economics professors Kaiji Chen of Emory University and Yi Wen of St. Louis Federal Reserve are not confused by a Chinese housing bubble where rising prices are accompanied by empty buildings an excess supply. The Wall Street Journal's China RealTime blog reports, "when a state-owned economy turned into a largely private-owned one – gobs of money flow into the real estate market.
That pushes up prices and profits as investors keep bidding up property. But it also pushes up vacancies because buyers aren't purchasing property to live in; they are buying apartments as speculative purchases."
"China's housing bubble puzzle isn't so confusing after all " – WSJ, China RealTime
Tweet of the Day is a bit alarming. "@lebullmarche 6 years after Lehman collapse.. Via BAML pic.twitter.com/quZtRX8UAV "
Diversion: Pseudonymous, Japan-based investment banker Nihon Cassandra presented some fascinating perspective on the "one per cent"'s relationship with the rule of law, "the idea that the rule of law is vastly underpriced by those who benefit most should be anything but contentious."
"The rule of law is vastly under-priced " – Cassandra Does Tokyo
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow