Skip to main content

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading on the World Wide Web.

Few things can throw a chill into the average investor like a breakdown in so-called "blue chip" stocks, but that appears to be what's happening south of the border. Poor earnings from the previously trustworthy bellweathers like Coca-Cola, IBM and AT&T have one hedge fund manager tweeting, hopefully with tongue in cheek, "If you are an adviser who's stuffed all your clients into high dividend yielding 'good companies' I suggest you panic."

At the very least, investors in U.S. large cap stocks are going to have to be far more selective in the companies they pick – what worked in the past may not work going forward.

"Clouds darken for America's blue-chip stocks " – Wall Street Journal (subscription may be required)

Goldman Sachs seems to be in the same kind of pessimistic mood this morning as they publish a report hinting that global equity markets have been defying fundamental values and are set for a major correction. The FT's Alphaville blog helpfully summarizes all ten reasons why Goldman is nervous, but numbers two and four specifically caught my eye:

"2013 was one of the strongest years on record for the equity markets. The U.S. managed a price return of 30 per cent and the Sharpe Ratio of the S&P 500 ranked in the 98th percentile since 1962…

"Despite the ongoing European crisis and economic stagnation, the Stoxx 600, for example, has managed a 14 per cent annualized return since its relative trough in 2012. In Spain and Italy, it has been 22 per cent and 17 per cent, respectively."

"That was nuts, what's next? Goldman edition" – FT Alphaville (registration but not subscription required)

This daily links recap is designed to highlight important reads outside of the ROB but David Parkinson's report today is too important to omit. Mr. Parkinson summarizes the remarks that Bank of Canada governor Stephen Poloz would have made had yesterday's tragedy not resulted in cancellation of his press conference.

In effect, Mr. Poloz hinted that a decline in the loonie is not enough to cause a recovery in domestic manufacturing because the businesses simply aren't there anymore. Mr. Poloz's planned, uncharacteristically blunt comments would have been front page news:

"We have found that the value of exports from about a quarter of them has fallen by more than 75 per cent since the year 2000," he said. "By correlating these findings with media reports, we could see that many were affected by plant closures or other restructurings. In other words, capacity in these sub-sectors has simply disappeared."

"Straight-talking Poloz sounds a wake-up call" – ROB Insight

A Reuters report highlights the ongoing tension between technology advancement and high unemployment levels in developed countries. In the coming years, technology will create productivity gains that will slowly but inexorably replace the need for human labour. New policy solutions must be found (I increasingly favour Universal Basic Income, for instance) to ensure that efficiency gains spread throughout developed economies while technology continues to advance.

Reuters Breakingviews's Andy Mukherjee writes, "Reallocating displaced labout is a messy process. The industrial revolution required colonial conquests to create demand. .. [Adam] Smith's intellectual vicorty depended on these social devices, which allowed workers to keep part of the income from mechanisation. Robotics will force societies to make similarly deep changes, but far more quickly."

This is not an issue Canadians can sweep under the table. Using the U.S. economy as an example, a recent Oxford University study concluded that almost half of jobs are at risk of obsolescence from automation and computerisation.

"Robonomics" – Reuters Breakingviews

Tweet of the Day: @Timharford "The awkward secret behind Google's self-driving cars - and why real-world versions may not happen for decades dlvr.it/7HmzQ5"

Diversion: I'm a sucker for any research on how the human brain works without our conscious brain knowing anything about it. This Atlantic report highlights how basic facial structures influence how we feel about people we've just met.

"What we think introverts and extroverts look like" – The Atlantic

Follow Scott Barlow on Twitter @SBarlow_ROB

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe