Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Equity futures are higher Tuesday morning and crude prices continue to defy the Doha-related sceptics, but, in truth, there's not a ton going on in markets today.
To start links off, I reached back to a recent report from the Harvard Business review warning that climate change means that, for many, pension income is going to be a lot smaller than they were led to believe,
"Unchecked climate change, Citi said, could cost the world $72-trillion by the middle of the century. But the big surprise in Citi's report was the cost of building the low-carbon economy: the world can spend $2 trillion less in total on energy infrastructure and ongoing fuel costs than it would in the business-as-usual scenario. So we save $2-trillion and avoid losing up to $72-trillion in economic activity…Holding global warming to 2-degrees Celsius will require keeping huge quantities of fossil fuels in the ground. These so-called "stranded assets," sitting on petro-company balance sheets, are essentially worthless. And thus those companies are massively overvalued."
"The Data Says Climate Change Could Cost Investors Trillions" – Harvard Business Review
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Citigroup chief U.S. strategist and Montreal native Tobias Levkovich has tempered his bullishness on U.S. equities because he doesn't see a catalyst for upside,
"It may be appropriate to think about the old Wall Street adage of 'Sell in May and Go Away' if we are so close to our mid-year 2016 target, but we also wonder if an earnings inflection keeps that seasonal trading pattern from emerging this year as the negative 1Q16 trend reverses and 2H16 profits show gains," he said. "Nonetheless, with limited near-term upside, we can understand if investors hold back a bit this summer."
"The biggest issue facing the stock market right now" – Yahoo Finance
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Report on Business' Tim Kiladze wrote a great piece on the Trudeau government's standoff with Bombardier over financial support,
"An equity injection is the most likely outcome. But, by its very definition, equity means ownership, which means the government gets to call some shots. Even if Ottawa invests solely in the C Series – rather than the entire corporation, which includes Bombardier's train division – two Canadian governments would own the entire project. (Quebec bought a 49-per-cent stake for $1-billion in the fall.)
Bombardier, of course, is fighting back. The latest word on the negotiations: The two sides are at an impasse, largely over the ownership issue. Breaking news for Mr. Trudeau: This is a poker game and you're sitting on a pretty big stack right now. Smoke the other guys out."
"Trudeau can play hardball with Bombardier: Bay Street has his back" – Kiladze, ROB Streetwise
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Also from the ROB, Tim Shufelt highlights Goldman Sachs' new list of top dividend stock ideas. Stocks include Best Buy Inc., Coca-Cola Enterprises, Lockheed Martin and Honeywell International.
"Seventeen stocks Goldman is adding to its dividend growth basket" – Shufelt, Report on Business
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China's $3-trillion (U.S.) corporate debt market appears to be in some serious trouble,
"Spooked by a fresh wave of defaults at state-owned enterprises, investors in China's yuan-denominated company notes have driven up yields for nine of the past 10 days and triggered the biggest selloff in onshore junk debt since 2014. Local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone, and Standard & Poor's is cutting its assessment of Chinese firms at a pace unseen since 2003."
Credit markets are the driving force behind China's ascension to the world's second largest economy. An unravelling of the credit binge would be a huge hurdle for global growth.
"It's All Suddenly Going Wrong in China's $3 Trillion Bond Market" – Bloomberg
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Tweet of the Day: "@PolemicTMM As mkt prices scream higher today in the face of all the doom theory, I now realise why there aren't many rich academics." – Twitter
Diversion: This video is bizarre. Six Chinese heavy machinery operators decide to angrily re-enact the final battle of a Transformers movie,
"Watch Six Bulldozers Battle Each Other on the Streets of China in the Craziest Fight Ever" – Sploid
Bonus Diversion: This interview with Nicolas Taleb is almost ten years old but new to me. It includes Mr. Taleb's top life tips, which includes "It's not a good idea to take advice from someone wearing a tie".
"Nassim Nicholas Taleb" – BryanAppleyard.com
Scott Barlow