A Statoil field worker looks at oil well heads on a well pad at the company’s oil sands operation near Conklin, Alta.TODD KOROL/Reuters
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Private trading company PVM describes itself as "world's leading broker of oil instruments and has been the world's leading crude oil broker for the last 40 years." In a recent note to clients, PVM succinctly described the carnage in global oil futures markets: "The contracts are in a vicious down trend. Rallies that started the day looking promising are ending in tears. It will take a lot to turn this down trend and it will need more than the odd hopeful close to confirm a change of direction. It is not advised to be long."
"Down-trend – Watch the key supports carefully today" – PVM
Former investment bank executive and U.K. pundit Frances Coppola restated a basic, undeniable fact about global debt levels that is nonetheless messing with the heads of economists and investors worldwide.
Responding to the dire outlook on global debt presented by the latest Geneva Report, Ms. Coppola notes that for no matter how high the debt levels rise, there is an equal number of creditors and debtors. In other words, too much debt equals too much savings.
This notion is an obvious accounting identity but it caused a violent online reaction from the "we're all gonna die from debt" crowd. Ms. Coppola writes, "The global debt glut described in this report, and the global saving glut described by [former Fed chair Ben] Bernanke, are the same thing…. When you buy bonds, you are spending, not saving. Your money goes to someone else and you have no right to its return."
The whole post is worth reading.
"Debt hysteria" – Coppola Comment
See also: Matthew Klein's post on global banks, "Illiquid, insolvent, what's the difference?" – FT Alphaville
The Japanese market just endured what is probably the biggest "fat finger" trading mistake of all time. Bloomberg reports:
"More than 40 requests to transact shares totaling 67.78 trillion yen ($617-billion) – greater than the size of Sweden's economy – were voided at 9:25 a.m. in Tokyo before they could be matched, according to data compiled by Bloomberg from the Japan Securities Dealers Association… The biggest order was for 1.96 billion shares of Toyota Motor Corp. (7203), or 57 per cent of outstanding shares in the world's biggest carmaker."
The mistaken trades didn't cause a huge upheaval because they weren't filled (ie no other sides for the transactions were found), but Hong Kong trader Gavin Perry makes a salient point: "It's not rocket science that there was a fat finger here, but it reopens the question about accountability."
"$617-billion in Japan stock orders scrapped after error" – Bloomberg
U.S. high yield and corporate bond markets are falling after a multi-year rally. Twitter's pre-eminent regional debt and public finance expert Kristi Culpepper writes that the correction could be severe because "unsticky" retail investor assets now dominate the sector. According to Citigroup research, retail investors have purchased 84 per cent of corporate debt issues since 2012.
Ms. Culpepper wrties, "Why is this change a big deal? Two reasons: (1) Inflows from 'non-dedicated' money are not as sticky as pensions and insurance; and (2) These investors have been seeking out lower-rated borrowers, which is probably a position they won't want to hold for much longer… it is difficult not to wonder how messy an exit can get."
"How significant are shifts in investor base?" – Medium
Tweet of the day: "@yahoofinance Emerging deflation in one handy dandy image finance.yahoo.com/tumblr/photose "
Diversion: Robot homebuilding in Japan brings up an interesting question: If everything Japanese is becoming automated, how do they keep unemployment so low?
"20 shades of beige: Lessons from Japanese prefab housing" – The Conversation
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow