A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web.
I'm happy to report that my anxiety about Canadian bank earnings was completely misplaced, at least so far. Bank of Nova Scotia and bank of Montreal both reported profits well ahead of expectations Tuesday morning and BMO even raised their dividend. Scotia's beat was the more pleasant surprise – it is the bank with the most emerging markets exposure.
"BMO boosts dividend as quarterly profit rises 13 per cent" – Berman, Report on Business
"Scotiabank fourth-quarter profit climbs, beats estimates" – Berman, Report on Business
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Citi research published a surprisingly bullish report on global commodities, although they did recommend caution. Edward L. Morse, the firm's global head of commodities research writes:
"There is plenty of opportunity ahead for investors resulting from where the forward curve is pricing most commodities… the copper forward curve in particular is well out of line with Citi's price deck."
On oil, the research team is not expecting a strong recovery in 2016, but are optimistic about 2017,
"Even at $45, It's Not the Time to get Bullish just Yet… 2016 looks to be a banner year for industry consolidation, starting in Q2 and ratcheting up. Smaller producers in the US should be a target… 3Q'16 looks like the prime period for this to take place, as high-yield company hedges roll off… company values and oil prices could see a price run-up."
"@SBarlow_ROB Citi on oil: bearish for '16, bullish on '17 pic.twitter.com/P1jhEk1kpk " – Twitter
"@SBarlow_ROB "copper forward curve in particular is well out of line with Citi's price deck" pic.twitter.com/psIC3ZhtBO " – Twitter
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The Zero Hedge blog is prone to exaggeration, to put it mildly, so their coverage of the U.S. oil patch should be taken with a grain of salt. On the other hand, the quotes on this specific post come from sources that are usually more objective and too alarming to skip. It's also the case, as Ive written previously, that domestic oil producers and the commodity price should benefit from U.S. bankruptcies in the sector:
""I could see a wave of defaults and bankruptcies on the scale of the telecoms, which triggered the 2001 recession," Timothy Smith, president of consultancy Petro Lucrum, told a Platts energy conference in Houston last week… "Quite frankly it's a lot of gloom and doom," says Thomas Watters, managing director of S&P's oil and gas ratings. "I lose sleep over what could unfold.""
""On The Cusp Of A Staggering Default Wave": Energy Intelligence Issues Apocalyptic Warning For The Energy Sector" – Zero Hedge
Related; "More big writedowns seen in mining sector: Blackrock " – Reuters
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Statistics Canada is releasing its report on domestic third quarter GDP growth which was in-line with economists' expectations. The -0.5 per cent contraction in September was a bit disquieting, but we'll need to wait for a full breakdown.
The ROB's Michael Babad highlights the generally gloomy view on economic growth for the remainder of 2015,
"Economists aren't counting on a particularly strong showing for the fourth quarter, or for 2016… "Over all, the economic impact of lower oil prices is likely to prove longer lasting and further reaching than was originally expected," said Toronto-Dominion Bank economist Diana Petramala, who believes Canada will struggle for economic growth of just 2 per cent next year."
"Today may be as good as it gets for Canada's economy" – Babad, Report on Business
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I try not to do this often, but every once in a while I write about a topic that I really, really believe in and I can't resist the temptation to link to it here (brace yourselves, I'm even including an excerpt). In Tuesday's column, using 2500-year-old advice, I outline how investors' biggest enemy is not China, Saudi Arabia, inflation, or the economy – it's their own human psychology,
"I suspect that anchoring, which Psy-Fi calls 'the mother of all behavioural biases,' is the most pervasive investing mistake among Canadian investors in the current environment. Simply put, anchoring involves comparing the current price of an asset to a price from the past instead of looking forward to assess where the price is going from here.
"The most obvious example of investor anchoring occurred in the Canadian energy sector in 2015. Early in the year, investors ignored glut conditions in the North American oil markets and bought energy stocks in the belief that, 'they're down 45 per cent from last year. They must be cheap!' These investors were anchored to a 2014 asset value that reflected an environment that no longer existed."
"Strategy advice for 2016: Analyze yourself first, not markets" – Barlow, Inside the Market
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Tweet of the Day: "@business Whose health-care system is least efficient? bloom.bg/1XrZgDW pic.twitter.com/eovjg9gSQA " – Twitter
Diversion: "Architecture Builds on the Intricate Structure of Bone" – Wired
Scott Barlow