Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Bond yields have been climbing in recent days, and a continuation of this trend threatens the "reach for yield" investing theme that has dominated investor portfolios in the post-crisis era. Higher bond yields create losses for bond holders – particularly those holding bond ETFs – and also income generating equity sectors.
Pseudonymous finance professional Macro Man believes, however, that rising yields are a temporary phenomenon and now is a good buying opportunity for investors looking for income,
"Given that global rates have been beaten like a rented mule this week, it doesn't require a particularly vivid imagination to see how a disappointing GDP figure could engender yet another nasty short squeeze in fixed income. Macro Man is therefore placing his bets on the nature of the market by taking some of them off the table. Short G4 rates have been a fantastic trade over the last few weeks, and while it's certainly possible that this is still the beginning, it seems more likely that it's closer to some sort of interim end. Ringing the register therefore seems advisable. "
"Fixed income: beginning of the trend or beginning of the end?" – Macro Man
"Who's scary now? The bond market is transformed: fewer vigilantes; more forced buyers" – The Economist
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FT Alphaville's David Keohane features Macquarie research pointing in the same non-inflationary, slow economic growth direction,
"Whether we examine core CPI, core PCE or core PPI, there are few (if any) signs of any significant inflationary pressures. For example, in the US, core CPI remains broadly flat at around 2.2%-2.3% vs. the historic average of 3.8% over the 1960-2015 period or 2.8% average between 1985 and 2015. Similarly, PPI final demand remains stuck between 0% and 1% whilst the PPI final demand ex Food & Energy remains broadly flat at ~1.1%-1.2%. The same applies to trimmed PCE (1.6%-1.7%) as well as core PCE. Thus, even though headline CPI levels are very likely to exceed the Fed's target of 2% in 1Q2017, it seems unlikely that core inflation gauges will reflect much pressure."
"You show me your inflationary impulse and I'll show you mine" – Keohane, FT Alphaville
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Hedge fund investors are apparently as skeptical as I am on the rally in global metals prices,
"Researcher eVestment counts just three dedicated base-metals players in its database of more than 8,000 hedge funds. The exodus has contributed to weaker trade on the No. 1 metals bourse, with activity on the London Metal Exchange set for its largest annual drop since at least 2008, figures compiled by Bloomberg show."
"Hedge Fund Exodus Sets Mr. Copper's Business on Lonely Road" – Bloomberg
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Equity issuance in the U.S. energy sector threatens to smother the upward trend in producer stocks,
"The oil business has been cutting back on everything -- except when it comes to selling stock. Average oil prices are at their lowest since 2004, but this is by far the biggest year for equity issuance by U.S. E&P companies as far back as Bloomberg tracks the data."
"U.S. Oil Companies Are Pumping ... Stocks" – Gadfly
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Tweet of the Day: "@JeffMacke $AMZN & $GOOG account for 65% of total S&P500 mkt cap gains since 2014 (~$435b of $675b). Both report tonight. Godspeed." – Twitter
Diversion: A brilliant, sad profile of trailblazing sportswriter Jennifer Frey who went from the very top of her profession to succumbing to alcoholism and tragically dying at 47 years old. "The Writer Who Was Too Strong To Live" – Deadspin
Scott Barlow