A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Oil prices continue to skid lower Thursday, and the Saudis are to blame. Saudi Arabian state-owned Saudi Aramco announced steep price cuts on oil deliveries to Asia in an effort to retain market share at a time when Russia is desperate to deliver oil anywhere, at almost any price, to shore up their stumbling economy.
Petroleumworld writes, "traders said the fourth-straight monthly reduction made it appear Saudi Arabia may be trying to start a 'price war' with rival producers. Regional oil rival Iran may face a budget deficit due to lower prices and Western sanctions.
Saudi slashed its flagship Arab Light selling price by $1 a barrel versus October to a discount of $1.05 a barrel to the Oman/Dubai average. Traders had been expecting a cut no bigger than 70 cents."
"Saudi Aramco cuts official crude oil prices in battle for market share" – Petroleumworld
Reuters reports that the global multinational oil companies were already struggling for profitability before September's commodity price decline, "National oil companies control so many attractive fields that the traditional majors tend to end up with expensive projects.... Among the big companies, only Exxon and Shell will cover their dividend from free cash flow this year, according to Citi estimates."
"Double trouble" – Reuters
Illinois-based Sears Holdings Corp. is attempting to sell its stake in Sears Canada to shareholders who already owned it. I can't imagine a bidding frenzy here, but Canadian retail stocks like Rona Inc. and Canadian Tire Corp. Ltd. were performing well before the latest downdraft, so who knows?
"Sears to sell most of its Sears Canada stake through rights offering" – Report on Business
Portfolio manager and former insurance company executive David Merkel addresses the potential for an ETF-led meltdown in bond markets with a highly informative blog post. There have been numerous warnings about the "illusion of liquidity" in bond ETFs – the ETFs themselves look liquid but big chunks of the underlying portfolio, primarily in the high yield area, may not be. This raises the possibility of a rapid "no bid" downdraft in riskier bond sectors.
Mr. Merkel advises, "If you own bond ETFs, know what you own, and how much of the portfolio is less liquid. Have a passing familiarity with how the [net asset value] is calculated, and how units get created and liquidated. Try to have a sense as to how 'jumpy' investors are in the asset sub-class you are investing in, to know whether your fellow investors are likely to chase market momentum. They may cause prices of the ETFs to vary considerably versus NAVs if a large number of them take the same action at the same time."
"Possible bond ETF problems" – Aleph Blog
So far, the protests in Hong Kong are much more of a political story than market story. Investors, however, should at least prepare for this to change.
The Economist presented some important historical context to the dispute and urges the mainland government to show more restraint than it has in the past. (Professionally speaking, this opening sentence is brilliant):
"Of the ten bloodiest conflicts in world history, two were world wars. Five of the other eight took place or originated in China.... the combination of exhortation, co-option and tear gas have so far failed to clear the streets. Now the government is trying to wait the protesters out. But if Mr. Xi believes that the only way of ensuring stability is for the party to reassert its control, it remains possible that he will authorise force. That would be a disaster for Hong Kong, and it would not solve Mr. Xi's problem. For mainland China, too, is becoming restless."
"The Party v the people" – The Economist
Tweet of the day: @mella_TA "@optionshawk S&P hits the 120 [moving average] today, close to every bottom on corrections pic.twitter.com/v9LFUrFphf" too many eyes on this now"
Diversion: "Notorious Mexican drug lord Hector Beltran Leyva finally captured at seafood restaurant in holiday town" – ITV
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Scott Barlow