Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
In the spirit of the Halloween season, Bloomberg has compiled "the charts that scare Wall Street," a collection of charts that concern prominent strategists and economists most. There are a ton of fascinating observations to choose from – Torsten Slok's concern about financial stability, S&P 500 earnings declines as a harbinger of recession and Brean Capital's prediction of a sharp jump in bond yields, just to name three – but TD's Brian DePratto's Canadian real estate chart is the most relevant for the domestic audience,
"'Canadians seem to love housing, with real estate near its highest-ever share of the economy (although the history is quite short),' notes DePratto. 'With new measures to cool the housing market in play, it can be scary to think what might happen if Canada were to lose this driver of growth.'"
"These Are the Charts That Scare Wall Street" – Bloomberg
=====
Also from Bloomberg, an expert estimate that even if OPEC is successful in cutting crude production, it won't be enough to burn through the existing global inventory glut,
"The Organization of Petroleum Exporting Countries aims to shrink the world's bloated oil inventories with its first production cut in eight years, according to Secretary-General Mohammed Barkindo. Yet the bloc's own data show that even the maximum reduction under consideration would barely dent record stockpiles next year."
"OPEC May Need Help to End the Global Glut of Oil" – Bloomberg
=====
"Inflation or no inflation" remains the most important question for investors going in to 2017, in my opinion. Inflation and higher bond yields would cause untold misery for domestic portfolios as any investment that pays a yield or provides income will likely fall significantly in value. Economists, maddeningly as usual, remain split on the issue. Citi economist Willem Buiter believes that inflationary forces are temporary, and reflect how terrible things were last year more than a new period of stronger growth,
"The rise in AE inflation is due mostly to base effects, rising oil prices and diminishing other external drags, as EM growth bottoms and average [advanced economy] rates remain relatively stable (with some exceptions, notably Japan) in contrast to average appreciations (against EM FX) in previous years. Upside risks to oil and other commodity prices over the next 12 months present some (temporary) upside risk to headline inflation over the next year or so. But global disinflationary pressures remain quite high, in our view, as inflation expectations remain low and output gaps close only slowly, likely keeping underlying AE inflation low for the foreseeable future."
"@SBarlow_ROB Citi: it's just base effects, deflation pressures persist " – (research excerpt) Twitter
"More on the return of advanced economy inflation" – Kaminska, FTAlphaville
=====
George Mason economics professor Tyler Cowen writes "I would not be surprised if China's 1929 moment still awaits." He provides excellent context to concerns about the world's second largest national economy, as the biggest source of demand for most commodities.
"China Can Resist a Crash But Can't Prevent One" – Cowen, Bloomberg
=====
Tweet of the Day: "@paul_dobson While #stocks folks scrutinize earnings reports, #bonds are quietly rolling over. Global wrap: bloom.bg/2eSTszh via @markets " – Twitter
Diversion: I am a perpetual evangelist for this show, "Sundance's Rectify could be The Wire for small-town America" – Vox
Scott Barlow