Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
The Energy Information Administration released a report Thursday suggesting that the North American oil glut has almost run its course,
"World surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday. Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions."
The Financial Times, however, noted another portion of the EIA release arguing that an OPEC production freeze will have little impact on energy markets or the oil price,
[the EIA] added: "If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited."
"IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop" – Bloomberg
"Oil rebalancing 'taking shape' says IEA" – FastFT
"Deal or No Deal, Oil Freeze Seen Having Little Supply Impact" – Bloomberg
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The huge demand for Tesla Motors Inc.'s new, more affordable electric car has the potential to make lithium miners the next big opportunity in the commodity space,
"[Tesla's] Gigafactory is set to supply batteries for the 500,000 cars Tesla hopes to produce by the end of the decade, as well as to power homes….Tesla will need about 24,000 tonnes annually of lithium hydroxide, according to Benchmark Mineral Intelligence, out of a market last year of 50,000 tonnes."
"Tesla in stand-off over lithium supply" – Financial Times
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The U.S. equity market continues blithely along while seemingly ignoring the fact that it's in the middle of a profits recession. Not only is profit growth expected to be meagre for the current quarter, but a large portion of the growth are being generated by financial engineering in the form of share buybacks. UBS, however, thinks the market is correct not to panic, and expects an earnings recovery in the near future,
"Profits posted by S&P 500 companies are likely to have decreased for the third straight quarter — 5 percent according to our estimates, and 8 percent according to the analysts' consensus estimate by Bloomberg… [at UBS[ we feel U.S. equity earnings are likely to recover in the second half of 2016, and we have recently become more positive on the prospects for U.S. stocks." The report, written for CNBC by UBS global CIO Mark Haefele, goes on to cite stabilizing oil prices and the US dollar, as well as economic improvement, as reasons to be more positive about profit forecasts.
"'Earnings recession' will end soon" – CNBC
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The Financial Post's Andrew Coyne details the Ontario government's $5-billion morass of [often misguided] annual industrial subsidies,
"It isn't that so much of this amount — nearly a third — goes to the 200 largest and most profitable corporations in the province: the companies, as the report found, "least likely to be in need of support." It isn't the lack of transparency surrounding the whole system: the absence of any defined criteria for how grants are to be distributed, or even a complete list of what grants have been awarded. It isn't that many of the recipient companies are also hefty donors to the Ontario Liberal party, or that the distribution of grants, as the Post's analysis shows, tends to skew toward the most hotly contested ridings."
Mr. Coyne's main objection to the subsidy strategy is that is supports incumbent businesses at the expense of innovation and necessary economic transformation. Personally, I wouldn't go so far as to say all subsidies are bad, but more transparency, requiring the government to explain in detail how these handouts are good for the average taxpayer, would be welcome.
"Why Ontario's business support program is a harmful, distortionary waste of money" – Financial Post
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Tweet of the Day: "@IanTalley Global financial risks hit levels not seen since the financial crisis: on.wsj.com/1V1cTZ7 pic.twitter.com/XYQ5PeGjXZ " – Twitter (including chart)
Diversion: "Facebook Has Seized the Media, and That's Bad News for Everyone But Facebook" – Wired
Scott Barlow