A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Domestic bank earnings have been very strong this quarter but even banks' management are concerned about the sustainability of current trends. Recent gains have been driven by wealth management and capital markets profits which are, to a large extent, dependent on equity and bond market performance.
There's no reason for concern in the short term – history shows there's rarely been a bad time to buy domestic bank stocks in the past 20 years. Longer term, however, investors should watch for signs that bank balance sheets and earnings are becoming more dependent on markets, and thus more volatile.
The seminal paper on this subject is "Liquidity and Leverage" by Princeton professor Hyun Song Shin and the New York Federal Reserve's Tobias Adrian. It is an important read for Canadian bank stock investors concerned about rising household debt levels and the potential for a correction in the housing market.
"Liquidity and Leverage" – International Monetary Fund (Shin, Tobias)
The National Football League unveiled its new digital network Wednesday but I sincerely doubt it will ever be available in Canada. In my case, live sports is the only reason I still have cable – Apple TV and Netflix take care of all my other needs. So, if live NFL games were available online, I would immediately cancel my cable subscription, an eventuality that would not surprise the domestic cable operators who, as a result, will likely resist the expansion of the NFL's new product into Canada.
"The National Football League has announced its new NFL Now network" – Gizmodo
Institutional Investor presented their 2014 Money Masters awards in a highly useful way. Instead of just naming the top money managers (encouragingly, there are a lot of female winners) and quoting performance, the story also describes how each manager is coping with the current slow growth environment.
"2014 Money Masters: Profiting in a Slow Growth Economy" – Institutional Investor
Climateer Investing highlights a Bloomberg report sounding the alarm on the U.S. shale boom. Three years ago, the New York Times presented evidence that the explosion in shale gas was more of a financial bubble than a sensible expansion of energy production. Bloomberg suggests that the same thing is happening with U.S. oil production: "Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent."
"Insiders Sound an Alarm Amid a Natural Gas Rush" – New York Times, June 25, 2011
In Asia, the Financial Times' Alphaville blog argues that the Chinese government is about to attempt U.S. Federal Reserve-style quantitative easing to combat the country's economic slowdown.
"Chinese QE turns American?" – FT Alphaville
Diversion 1: "Driverless cars will mean the end of mass car ownership" – Vox
Diversion 2: "Tell me aliens don't exist after watching this gif" – Facts.FM
Follow Scott Barlow on Twitter at @SBarlow_ROB.
Scott Barlow