A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The natural gas and crude oil businesses have important differences, but oil patch investors are being forced to consider the extent to which the current oil glut resembles the natural gas oversupply of just a few years ago. In the case of natural gas, an investment and credit boom led to oversupply, which led to lower prices, which led to more oversupply, which continues to this day.
The New York Times published an excellent feature in 2010 called "After the boom in natural gas" and it's a chilling exercise to re-read the piece and replace "natural gas" with "oil" and recognize how familiar it sounds.
Bloomberg's Bradley Olson wrote a column Tuesday citing expert opinions that the oil price will follow the same regrettable path as natural gas.
"The current oil market is an echo of the 2012 natural gas crash, in which shale producers inadvertently created a glut that hasn't yet been resolved. In that instance, even after prices fell to the lowest level in more than a decade, gas output continued to grow…. That reflected the industry's ability to adapt to lower prices by improving productivity and reducing expenses."
Toronto investor Alexander Macdonald mentions an important caveat, however – a significant portion of the natural gas produced since 2012 is a residual of oil drilling, which changes the equation somewhat.
"After the boom in natural gas" – New York Times
"L-shaped oil recovery flattens v-shaped market optimists" - Bloomberg
"Despite falling oil prices, Texas oil output surged in December to the highest level since the 1970s" – American Enterprise Institute
See also: "Commodities explained: Hedging oil volatility" – Financial Times
Goldman Sachs Group Inc. issued a tremendously informative (and very pretty) report on the potential effects of the millennial generation on the U.S. economy. Important facts – that millennials are an even larger demographic than the baby boom, for example – are covered in detail. Projections on housing demand, auto "access, not ownership" and health consciousness were, for me, the important points.
"Millennials: Coming of age" – Goldman Sachs
Readers are likely getting just as tired of "dire outlook for the Canadian economy" stories as I am of writing them. Things will change, but right now, that's where we're at and I'd rather make a reader marginally more grumpy than be positive for positivity's sake and have them lose money. Moods change quickly; investment principal is much harder to replace.
Today's addition to the dogpile of economic misery comes from pollster Frank Graves writing for iPolitics:
"Never in our time tracking public opinion in Canada have we seen such a sombre outlook on our economic future. Never have we seen Canadians' sense of progress so low. The point isn't that Canada is in a state of privation and economic distress – it clearly isn't. The point is that the factors that produced progress and success don't seem to be working in the same way anymore. And the problem gets worse as we move down the generational ladder."
Okay, but there's a problem with the post, at least in my opinion. For Mr. Graves, the root cause of Canada's poor outlook is economic inequality. But, while the plight of the middle and lower classes is a major policy issue in Canada that needs addressing, it is nowhere near the crisis levels in the United States, as Laval University professor Stephen Gordon noted in Macleans. Canadians, saturated with U.S. media, often assume that the situation in the U.S. is the same here. That is decidedly not the case.
"Middle-class gloom might be 2015's sleeper issue" - iPolitics
"Higher taxes on Canada's rich won't generate much new revenue" – Macleans
Tweet of the Day (on Canada versus U.S. infrastructure spending): "@stephenfgordon This chart was supposed to go with today's @nationalpost piece on infrastructure: http://t.co/8k7qQHj7DM http://t.co/vlWpYIrmAb"
Diversion: "Does playing video games make you smarter?" – Marginal Revolution
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow