A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The Canadian equity market's out-performance over the S&P 500 between 2002 and 2012 obscured the sticky issue of how many domestic stocks Canadians should own – no one cared what the textbook said about portfolio allocation while the TSX left U.S. stocks in the dust.
Times have changed, however. The S&P 500 has been outperforming dramatically in currency-adjusted terms. Prominent investor Meb Faber recently noted that while the average domestic portfolio was weighted 65 per cent in Canadian assets, total Canadian market cap is about five per cent of the global total. This suggests Canadians are woefully under-diversified.
The issue is not quite that simple. Canadians' liabilities – mortgages, credit card payments and the like – are mostly in loonies and too much foreign currency exposure creates unneeded risk.
"@GestaltU_BPG: Canadians own 13x more Cdn equities than warranted by global mkt cap @MebFaber http://t.co/kHflz06mbx - Twitter
"Why so much money is shorting the Canadian dollar" – Babad, Report on Business
A Goldman Sachs research report projects that the oil price will fall to $40 per barrel before staging a late-year rally, according to the Financial Times.
"'We believe that sequentially weaker activity, the end of winter and the end of potential restocking demand, will lead to a sequential deceleration in demand growth as we enter the spring…' Looking further out, Mr Currie says his forecast for crude to average $65 a barrel in 2016 may be too optimistic because of the resilience of the U.S. shale industry"
"Could oil slip to $40 a barrel? Goldman thinks so" – Financial Times
Also in squid-related news, Goldman analyst Simona Jankowski downgraded BlackBerry Ltd. to Sell. Ms. Jankowski believes, "turnaround efforts have reached a challenging phase, as CEO John Chen shifts from cutting costs to driving revenues."
"Goldman Sachs downgrades BlackBerry (BBRY) to sell; Losses will widen, says analyst" – Street Insider
And now, finally, for some good news. Loblaw Co. Ltd. announced a massive $1.2-billion expansion program that the company expects will generate 20,000 jobs. The plan includes 50 new stores and the renovation or rebuilding of another 100 stores.
The news provides a welcome sign that at least some of the announced decline in corporate capital spending in resource sectors will be offset by other industries.
"Loblaw to open 50 new grocery stores as part of $1.2-billion investment" – Report on Business
I'm finding it really difficult to get excited about the new Apple watch and not just because it looks like a more colourful version of an early 1980s calculator watch. There are, however, some interesting possibilities for the device, notably health care applications, as Vox reports.
"The Apple Watch is coming. Here's what you need to know." – Vox
Successful hedge fund manager Cliff Asness makes the terrifying observation that if investors are buying the top-performing funds or assets in the past three to five years, they are likely destined for losses.
"One of the few things we do know is that over three to five years, pretty much everything has shown some systematic, if certainly not dramatic, tendency to mean revert (especially when one accounts for and avoids the powerful effect of momentum at shorter horizons). This means that when we rely on three- to five-year periods to make decisions – favoring things that have done well over this time period and shunning things that have done poorly (note the past tense) – we aren't just using data meaninglessly; rather, we are using data backwards."
"My Top 10 Peeves" – Asness, Financial Analysts Journal
Tweet of the day: "@conorsen You know what it means when payroll growth > rGDP. Suckkkkk it Piketty. "
Diversion: "Wow, this video has totally screwed up my brain" – Sploid
Scott Barlow