Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The annual Ira Sohn charitable conference in New York features the biggest of the big hedge fund managers and is usually a rich source of investment ideas. This year's cavalcade of heavyweights included David Einhorn of Greenlight Capital Inc. (who's presentation made the biggest market impact), Leon Cooperman from Omega Advisors Inc., David Tepper, Founder of Appaloosa Management, William Ackman of Pershing Square Capital, and the new Bond King, Jeffrey Gundlach from DoubleLine Capital LP.
The sheer volume of interesting investment ideas makes it impossible to list them all but thankfully, Josh "The Reformed Broker" Brown took copious notes. As mentioned, David Einhorn's extremely bearish view on U.S. shale oil producers was the biggest market mover, sending Pioneer Natural Resources skittering lower in the middle of the trading session.
"Notes from the 2015 Ira Sohn Conference, Part II" – Reformed Broker
"Meet the Frackers" – Einhorn, full Greenlight presentation
Canadian investors have digested the fact that China's economy is slowing and the country's demand for commodities is no longer the path to portfolio outperformance in resource stocks. Investors are now completely ignoring news from China and I think this is a huge mistake – a major slowdown in the world's second largest economy has the potential to blindside domestic portfolios.
As the Washington Post notes, Chinese policy makers are furiously stickhandling to keep the economy functioning during the slowdown:
"China isn't cutting rates to try to make the economy grow more than it already is, but instead to try to keep the economy growing as much as it already is. That might just seem like a word game, but it's not. China realizes that its economy is going to inevitably slow down, and it's not trying to fight that. It's just trying to keep it from happening all at once."
"This is how China is trying to save its economy" – O'Brien, Washington Post
"China migration: At the turning point" – Financial Times
"The great fall of China" – Macleans
Goldman Sachs sounded a distinctly bearish note on U.S. equity markets Monday by noting that multiple expansion will end when the U.S. Federal Reserve raises rates. Goldman estimates the first rate hike will occur in September:
"Multiple expansion 'will likely end when interest rates rise,' Goldman strategists led by David Kostin wrote in a report to clients dated May 1. In the past three Fed tightening cycles, price-to-earnings ratios contracted by an average 8 per cent in the three months following initial rate increases as the benchmark gauge slid an average 4 per cent, Goldman found."
"Goldman: Expansion in Stock Valuations Will End When the Fed Raises Rates" – Bloomberg
Tweet of the Day: "@NewtonGroupSM The most important things Warren Buffett and Charlie Munger said at Berkshire's annual meeting https://t.co/Q48vXww7Id"
Diversion: This is incomprehensible to me. The Florida government has a contest called "The Python Challenge" where they send people into the Everglades to catch 20-foot-long, 200-pound Burmese Pythons that have invaded the ecosystem. Are they managing the snake population or the human population?
"Pythons Take Over Florida, Are Busted By GPS" – Gizmodo
Scott Barlow