Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Everyone in finance is biased by their formative years in the industry. In my case, everything looks like the tech bubble and this is an urge I have to fight. The generation before me used resource stocks to dodge the adverse market effects of inflation and find themselves reaching for commodity companies to this day.
I admit this bias to introduce a terrific column by the ROB's Tim Kiladze expressing his incredulity at the continued popularity of energy stocks. To me, and I just admitted I could be biased, it looks similar to buying Cisco Systems in March of 2000:
"Too many energy investors … they haven't realized this recent crash was a classic case of a bubble popping. When crude oil prices first started tumbling, people turned to Saudi Arabia, hoping the Middle East oil barons would solve the problem by curtailing production. It was a knee-jerk reaction."
"What the energy industry needs most: a reality check" – Kiladze, Report on Business
Bank of America quantitative strategist Savita Subramanian is extremely good at her job and Ms. Subramanian was on Bloomberg television this morning with some surprising thoughts on interest rates and equity performance. Based on market history, Ms. Subramanian expects that a U.S. Federal Reserve rate hike will actually be positive for equities. In the past, rate hikes have accompanied multiple expansion – higher price earnings ratios – that have boosted returns. This is a decidedly out of consensus view.
"Fed Rate Hike Won't Hurt Equity Markets: Subramanian" – Bloomberg (video)
The Psy-Fi blog is an indispensable resource for uncovering the ways in which human psychology makes most of us terrible investors. The most recent post serves as a reminder that the "con" in con man stands for confidence:
"We're very keen on people who are very definite about things – even if it subsequently turns out they're wrong or delusional (or both). We're less interested in people who are less certain about things… Unsurprisingly we're wrong about this. The ambivalent investor is sometimes that rare thing, a genuinely sensible expert in a field dominated by loud mouthed, impossibly certain charlatans. And mostly it doesn't matter which side of the fence you favour, you'll be better off sitting on it."
"Gaia and the Ambivalent Investor" – Psy-Fi
His economic eminence Paul Krugman posted fascinating analysis on the economic importance of air conditioning that has significant implications for the Canadian economy. Mr. Krugman is concerned that air conditioning-driven population growth in the sweaty, Republican south will threaten his left-leaning political advocacy but for Canadians, the danger from the trend is far more tangible. Logistical transport issues means that population growth in the south increases the attractiveness of Mexico (over Canada) as a destination for global manufacturing investment.
"Charlatans, Cranks, and Cooling" – Krugman, New York Times
Tweet of the Day: "@auaurelija Commodity currency resilience to China numbers tells you something. Buckle up! #AUD #NZD #RUB #CAD" http://bit.ly/1GPAEsw
Diversion (brace yourselves, readers): "There Are Untold Sums Of Money Hiding In Your [Sewage]" – i09
Scott Barlow