A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
U.S.-based financial pundit Walter Kurtz spends a lot more time thinking about Canada than most Americans but today Canadians might wish he didn't bother. In a chart-heavy post titled "If energy prices remain near current levels, Canada's economy is in trouble," Mr. Kurtz lays out the numerous reasons – not just low energy prices – why the domestic economy is likely to slow.
These include lower oil-related investment and production activity, the effects of higher household debt levels on consumption and a slowdown in the housing market.
"What's clear is that this exposure to energy is going to damage the labor markets, squeezing the nation's overextended households. And the knock-on effect won't be limited to a severe slowdown in residential construction growth. Consider for example the expenditures on renovations - something that's been supporting parts of manufacturing and other sectors. This is not going to end well."
I really wish I could blow this off, but even though I'm not as pessimistic as this post, I share a number of the same concerns.
"If energy prices remain near current levels, Canada's economy is in trouble" - Kurtz, Sober Look
Every reputable study on investing shows that passive, index-based investors outperform active investors over almost any time period. Every one. Yet, as The Economist reports, the size of the actively managed mutual fund industry at $27-trillion (U.S.) is more than ten times larger than the market for exchange traded funds.
For me, the continued popularity is indicative of the large numbers of investors who are (likely subconsciously) more interested in entertainment – the challenge of beating the market – than maximizing returns.
"Like books and music, the investment industry is being squeezed" – The Economist
Shadenfreude is not really in the festive spirit but that hasn't stopped a lot of the U.S. media from giggling at the apparent closure of Meredith Whitney's hedge fund company. Ms. Whitney rose to prominence with a controversial but correct call on Citigroup cutting their dividend during the financial crisis but has since given back a lot of that capital with an overly pessimistic forecast for the U.S. municipal bond market.
"Whitney's Fund Said to Drop 11% as Office Put on Market" – Bloomberg
The Wall Street Journal is reporting that the Chinese government is investigating whether the recent surge in the country's equity market is the result of manipulation.
"The securities commission is focusing its investigation on a practice that involves groups of investors pumping up prices of certain targeted stocks. Such practices were common during the early and mid-2000s … The practice, which is illegal under Chinese law, "is making a comeback," said one of the officials."
China is attempting to attract more foreign investment to offset a curb on broader credit growth but between stories like these and consistent issues with corporate accounting, it's hard to see a rush of investment heading for the Shanghai Exchange.
"China Investigates Possible Stock-Price Manipulation" – Wall Street Journal (subscription may be required)
"The penny is starting to drop for investors in China" – Reuters BreakingViews
See Also: "What BMW's China sales really say about the country's slowing economy" – Quartz
Tweet of the Day: "@voxdotcom Economists are terrible at predictions, in one bit.ly/1z4KJfB pic.twitter.com/e7XytZBQuD"
Diversion: "Which Jobs Have the Highest Rates of Depression?" – The Atlantic
Scott Barlow