Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
A series of illuminating charts from Bloomberg shows that the prominence of the Canadian economy is fading on the global stage. This is the price we pay for a cyclical economy that benefits tremendously when global growth is strong and suffers more than other G7 nations when things slow down. The report, however, takes a more political slant which surprised me at first. Then, I read the small print – the writer was a former staffer for the Liberals:
"Individually, any of these economic indicators could perhaps be explained away as the result of adverse circumstances, or just plain bad luck. Taken together, they force the question of how exactly the Conservative government has strengthened Canada's economy after almost a decade in power."
"Canada's Economic Slide in Five Charts" – Bloomberg
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A chart from Merrill Lynch highlights the dilemma of global banks worldwide – central bank monetary stimulus is no longer sufficient to drive economic growth. This point was made more strongly by Citi fixed income strategist Matt King who wondered, "If the first $5-trillion of global QE, which saw corporate bond yields in both dollars and euros fall to all-time lows, didn't prompt a wave of investment, what do we think a sixth trillion is going to do?"
"@Jim_Edwards BAML's Michael Hartnett nails it in two charts and one funny caption. http://t.co/5waGVuwDk4 " – Twitter
"Citi strategist is really, really bearish on global markets" – Inside the Market (Mar 27, 2015)
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Canadian investors holding either bonds or dividend stocks should read Matt King's post at FT Alphaville (which is free to read with registration by the way – trust me, it's worth it). The post is long, in-depth and captures the importance of the U.S. yield curve and central bank policy which, in turn, determines the attractiveness of dividend paying equities,
"When the economy is weak and the Fed is stepping on the gas, short rates should be lower than your reasonable expectation of the average for the next ten years. (Like now.) Other times, of course, short rates are higher than your reasonable expectation of the average for the next ten years because the economy is running hot and the Fed is stepping on the brakes. Longer-term yields therefore shouldn't always move with short-term rates."
"Greenspan's bogus 'Conundrum'" – Klein, Alphaville
Related: "@jtepper2 I'm shocked, shocked that an inverted yield curve in Canada predicted a recession there. " – Twitter
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The BBC's Duncan Weldon published a tremendous explanation of the relationship between globalization and inflation. The issue is vital for Canadians because manufacturing has been steadily moving towards emerging markets – Mexico's success in the auto sector has come at our expense to a significant degree – and this is putting downward pressure on domestic employment and wage growth. Mr. Weldon argues, however, that the process of globalization might start working in reverse, and this has implications for developed world inflation,
"Global trade growth has been weaker than global economic since 2008 - a fairly persistent theme of this blog.
In fact the latest figures suggest global trade didn't just grow by less than global output in the first six months of this year - it actually contracted.
"The causes of this trade slowdown are still being debated, but it is at least possible that we have passed "peak globalisation", that in a decade's time global trade as a share of the world economy will be lower and not higher.
Add in a report this week from Deutsche Bank suggesting that the accumulation of reserves by emerging economy central banks may have also peaked, and we are starting to look at a whole new global landscape for inflation."
"Have we passed the peak era of globalisation?" – Weldon, BBC
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Tweet of the Day: This is crazy. U.S. oil storage is orders of magnitude higher than the five year average. "@SoberLook Chart: US Crude oil in storage rose last week, pressuring futures - pic.twitter.com/vK2HzaYLCi " – Twitter
Diversion: "Here's what burgers look like at 16 Michelin-starred restaurants around the [U.S.]" – Business Insider
Scott Barlow