A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
It's a good time to restate the fact that my approach to investing is often coloured by the fact that I'm a worrier by both temperament and design. Loosely following Warren Buffett's first two rules of investing – 1) Don't lose money and 2) Never forget rule number 1 – the first step with any potential investment is to list all of the things that could go wrong. This often leads to comments and emails of the "you're too negative, why do you hate Canada?" variety, but they never bothered me. The approach has worked pretty well for Mr. Buffett and besides, investors with an appetite for market cheerleading have the vast majority of sell-side research to sate it.
All of this is by way of introducing ex-Bond King Bill Gross's newest update, which successfully encapsulated my overriding concern about the global economy,
"Historically, the Fed and almost all other central banks have comfortably relied on a model which assumes that lower and lower yields will stimulate not only asset prices but investment spending in the real economy… [but] Corporate investment has been anemic. Structural reasons abound and I have tried to convey that ever since my well-advertised New Normal, in 2009, which introduced the probability of a future generation of low real growth due to aging demographics, tighter regulations, and advancing technology permanently displacing workers. But there are other negatives which seem to be directly the result of zero bound interest rates… Because BB, B, and in some cases CCC rated companies have been able to borrow at less than 5%, a host of zombie and future zombie corporations now roam the real economy. Schumpeter's "creative destruction" – the supposed heart of capitalistic progress – has been neutered. The old remains in place, and new investment is stifled. "
In short, Mr. Gross is noting that monetary stimulus is everywhere, but there's no growth.
"Say A Little Prayer" – Gross, Janus Capital
Chinese authorities continue to make a mockery of any semblance of free markets in the country. Friday, Reuters reported that China's securities regulators are demanding records of investor short positions, which, given a justice system that tends to the brutal and arbitrary, will more or less end the practise of shorting stock in China.
"Exclusive: China watchdog extends pursuit of short sellers to HK, Singapore" – Reuters
Related: "The "whatever China needs" trade is over" – Keohane, FT Alphaville
"Corporate giants sound profits alarm over China slowdown" – Financial Times
For executives in energy sectors, optimism is more or less a requirement. The belief that the next hole in the ground will uncover untold riches makes the difficult process of seismology and raising millions of investment dollars much easier. But, as The Atlantic's finance site Quartz reports, oil executives and leaders in countries dependent on oil revenue are losing faith in a short term recovery in the sector,
"f prices do stay in their current range of $45 to $55 per barrel—and a lot of analysts believe they will, if not fall even further—some of the world's petro-rulers have tough decisions ahead to stave off serious political instability. In early Asia trading today, internationally traded Brent benchmark futures were as low as $53.01 a barrel…The Arab Spring was a wakeup call that local populations are restive. Without the lubricant of social spending, they may become even more impatient for change."
"Low oil prices are lasting a lot longer than petro-rulers thought they would" – Quartz
"Oil Market Embraces Lower-for-Longer Price View as Futures Sink" – Bloomberg
The Wealth of Common Sense blog posted the tremendous "20 People You Don't Want to Invest With" list Thursday. It's hilarious, accurate and depressing at the same time. My favourite was number nine,
"9. People that try to invest in the markets as they "should be" instead of how they actually are."
"20 People You Don't Want to Invest With" – A Wealth of Common Sense
Tweet of the Day: "@MikePMoffatt Canada's the only country I know where we protect foreign interests against the threat of domestic competitors."
Diversion: "How to Keep a 1,500-Foot Skyscraper From Falling Over" – Wired
Scott Barlow