Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
I have a pleasant investing dilemma this morning as a long term holder of SABMiller PLC stock. Reports indicate that the company has been approached by Anheuser-Busch InBev NV for a $245-billion merger and the stock surged 20 per cent in U.K. trading.
The original investment thesis was that SABMiller would serve as a stealth play on emerging markets consumption growth. Beer sales in developed markets remain sluggish but the company owns half of the company making the top selling beer in China and also dominates beer sales in Africa. The takeout bid offers a chance to sell.
"Brewing megadeal nears as AB InBev approaches SABMiller" – Report on Business
"AB InBev to make an offer for rival SABMiller" – Reuters
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In a report sure to enrage vast swathes of Report on Business readership, Morgan Stanley economists (detailed by FT Alphaville, which is free to read with registration) published a report advocating reducing the political and economic power of the elderly:
"The two key cohorts of the labour force – the prime working age population and the aged – are likely to find themselves in a political battle. As the ranks of the aged swell, their political clout will increase significantly. The prime working age population will not have quite the same ability to grow its influence through numbers. However, what they will have on their side is a declining supply of a commodity – labour – whose price is likely to be on an upward trend."
In Canada, generational warfare will be less of an issue than south of the border but not for the best reasons. The U.S. millennial generation is equal in size to the baby boomers and will, at some point, have huge political leverage. Canada's demographics are nowhere near as positive – Canadian millennials are a far smaller cohort – so the political power of the boomers will likely remain entrenched here.
"Kill the old, Piketty and demographics edition" – FT Alphaville
"Kill the Old" – FT Alphaville (2009)
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Merrill Lynch believes that market action yesterday provided a go-ahead to the U.S. Federal Reserve to raise interest rates at its meeting Thursday:
" 'The seemingly outsized sell-off in Treasuries is consistent with the market rationally expecting accelerated Chinese intervention to stem outflows in a Fed rate hiking cycle,' the strategist wrote, adding that both swap spreads and credit default swap spreads tightened on the day.
And for the S&P 500, the gap between the performance of financials and utilities, [Hans] Mikkelsen, [head of investment grade credit strategy] noted, was proof that the foundation of the equity rally came from higher rates.
The combination of higher rates and stock market gains would seem to suggest that the market won't be roiled by the commencement of a tightening cycle."
"BofAML Says Tuesday's Action in Stocks and Bonds Proves the Market is Ready for Liftoff" – Bloomberg
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A sharp decline in global trade activity has been a negative part of the global investment backdrop for at least two years. The Economist tackles the importance of the trend with some even-handed perspective:
"A continuation of the current period of slow trade growth might not presage a global recession. Many of the world's biggest traders – the U.S., China, India – are not especially reliant on their external sectors for growth. However, trade plays an important part in economic progress. The standard development model still involves economies exporting primary products as their first step up the value chain. A long period of lower demand for commodities or basic manufactures would make it more difficult for low-income countries to become richer. The world economy has not yet exhausted the benefits to reducing trade tariffs and harmonising procedures; trade could still recover through the liberalising zeal of politicians. But with so many other economic difficulties lurking (and economic nativism ascendent) trade will struggle to find its way back on to the agenda."
"What slowing trade growth means for the world economy" – The Economist
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Tweet of the Day: "@LJKawa Foreigners sold $9.7B worth of Canadian equities in July, more than any one month since February 2013. #cdnecon #cdnpoli" – Twitter
Diversion: "Don't Have Sex With Robots, Say Ethicists" – Gizmodo
Scott Barlow