A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
There's always been a fervent subset of the Canadian political class that idolizes the Scandinavian economic model and consistently urges "be like Sweden" policy changes. Tyler Cowen, a prominent economics professor at George Mason University, argues that this is likely a bad idea, calling the Swedish economy one of the most overrated in the world. Among his criticisms, de-industrialization seems the most trenchant for Canadians.
"Swedish manufacturing seems to be de-industrializing at a faster than expected pace. And some of Sweden's most successful sectors are exposed to a lot of competition from emerging markets, in particular because they rely heavily on engineering talent. Sweden also has a significant presence in financial services, but they are not an obvious future winner in that area. And do timber, hydropower, and iron — their main commodity exports — have such a promising future?"
"Is Sweden an economically overrated country?" – Cowen, Marginal Revolution
Investor sentiment towards Europe is understandably skeptical in light of consistent deflationary pressures and Greece-related stress on regional politics. There are, however, economic signs that the European Union may be on the verge of a recovery, as bank lending stages a comeback and the Spanish economy regains its footing.
Fredrik Ducrozet, senior economist at Credit Agricole, notes, "the strongest monthly flow of bank credit to the private sector since [Q3 of 2011], with banks expanding credit by €11-billion to nonfinancial corporations… our view is that these positive credit flows, helped by past European Central Bank credit easing measures (rate cuts, forward guidance, TLTROs, CBPP3/ABSPP) could mark the beginning of a proper turnaround in the credit cycle."
Canadian investors don't often look to Europe for investment ideas but the wide variety of large cap regional companies paying big dividends suggests they might want to start.
"Believe it or not, the euro zone credit cycle is turning" – Ducrozet, Credit Agricole
"Euro zone credit cycle" – Berneberg Partnership
See also: "Investors have woken up to Greece's nuclear risk" – Evans-Pritchard, Telegraph U.K.
The Financial Times posted a fascinating energy-related column by Mikhail Fridman, chairman of Russia-based investment banking firm Alfa Group Consortium. Mr. Fridman argues that the decade-long rally in crude prices is unravelling because the widespread perception of future scarcity is now gone.
"The price of oil stayed high only because people believed there was not enough of it to go around. But once people believe that, consumers start looking for an alternative while producers try to pump more of the stuff — and then prices fall."
"Tricks of the mind turned oil into gold" – Fridman, Financial Times
Tweet of the day: "@hjesanderson Slowdown in China commodity demand growth exceeds GDP @WoodMackenzie says http://t.co/f9EoLCSDmi
Diversion: "Every time travel movie ever, ranked" – io9
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow