Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I wrote "Why I'm looking for buying opportunities in this market turmoil " yesterday which outlined my explanation for market volatility and explained why I was looking to buy select U.S. equities in either health-care equipment or Cloud-based technology stocks. In the interests of putting my money where my keyboard is, I did add a very small position in a technology stock in the afternoon. I don't want to divulge the name because 1) even though I've researched in depth in the past I didn't have time to read enough recent research, so I don't want readers following me and 2) I have no interest in answering charges of front-running all weekend even though the stock is too big for me to have any effect on it whatsoever.
For investors looking for ideas in these two sectors, the other stocks I looked at quickly were Thermo Fisher, Zimmer Biomet Holdings, Stryker, Microsoft, and VMWare. The stock I really wanted to buy Red Hat (an excellent back door play on cloud, in my opinion), but it's too expensive for me.
I also received a number of "how can you buy U.S. stocks when the loonie is so weak?" e-mails.
I'll save a detailed answer for later but, in short form, I think the path of least resistant for the Canadian dollar is lower for the foreseeable future. Also, I prefer to buy the best growth opportunities I can find and let the currency levels work itself out (or, in this case, hedge later with precious metals.)
"Why I'm looking for buying opportunities in this market turmoil" – Barlow, Inside the Market
Related: "The US tech sector is really small" – Klein, FT Alphaville
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CBC News detailed "5 reasons Toronto house prices won't crash in 2016."
I'm not sure I agree with the contention that 'there's no bubble to burst' but I'm not expecting a crash either,
"'Toronto's not a bubble by any definition,' [Realosophy President John] Pasalis said.
"[Conference Board of Canada economist Robin] Wiebe described a bubble as "when people buy houses purely for speculative reasons, with the sole motive of making money." He said that's not what's driving Toronto's market now.
"The time that Toronto's bubble truly burst was in the early 1990s. That followed a crazy period when the average house price doubled in just three years. GTA house prices have not risen at anywhere near that pace anytime in the past two decades."
"5 reasons Toronto house prices won't crash in 2016" – CBC News
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I am likely to repeat this over and over: it is not an unreasonable position to believe that the domestic economy would benefit from federal infrastructure spending while simultaneously not trusting the government to do it intelligently or without extreme favoritism.
"Liberals face increasing pressure to spend on infrastructure" – Report on Business
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Chinese markets settled down overnight – the Shanghai Exchange finished higher by two per cent.
I'll stick by what I wrote yesterday – Chinese equities don't matter that much to Canadian investors. But, I also agree with Stony Brook economics professor Noah Smith, who warns that Chinese debt loads are a far bigger investment threat than equity markets,
"Debt crashes inflict harm on the financial system, creating major recessions that take years to repair. Equity crashes, meanwhile, merely reduce paper wealth…. The problem with China is that the stock market crash looks like it's only the most visible sign of a much deeper and broader distortion in the country's financial markets... China probably also has a debt problem. Chinese banks, local governments and many companies have relied heavily in recent years on various debt instruments sold directly to individual Chinese people through a system of so-called shadow banks."
"Be Scared of China's Debt, Not Its Stocks" – Smith, BloombergView
"Three wise men: Ageing reformists diagnose the [Chinese] economy's ills" – The Economist
"Falling oil prices and a darker global economic outlook" – HSBC economist Stephen King, Financial Times
"China can't inflate yet more speculative bubbles to disguise the structural problems in its economy" – Xie, South China Morning Post
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Tweet of the Day: "@mark_dow Best breakdown of current market concerns I've seen today, feat. @elerianm bloomberg.com/news/videos/20… " – Twitter
Diversion: Wired magazine listed their favourite gizmos from the mammoth Consumer Electronics Show while also highlighting that some of the most impressive developments are contained in refigerators.
"Best of CES 2016: Our Favorite Gadgets From This Year's Show" – Wired
"Looking for CES's Most Cutting-Edge Tech? It's in the Fridge" – Wired
Scott Barlow