A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
China released economic growth data showing accelerating activity but some economists and pundits are viewing the report as a sign of weakness rather than strength. The economy was rescued by yet another surge in credit growth despite the government's previous admission that this strategy risked the longer term health of the Chinese financial system.
"[The government's] commitments to let the market, and not the Party, determine where capital should flow signal that they're very aware that the biggest problem facing China right now is the government's addiction to lending. Its moves to juice investment—and therefore growth—is tempting either a debt crisis or a Japanese-style "lost decade" or two."
The Financial Times chimed in with the evocative metaphor that , "China's economic playbook is looking dog-eared" and the Economist's highly-respected new hire Simon Rabinovitch adds, "Easier credit conditions provided fuel for the rebound. But they also led to a rise in Chinese debt levels. China's stock of credit reached a dubious milestone in the second quarter: it is now equivalent to exactly 200% of GDP."
"China knows it has a problem, but it just can't kick the investment habit" – Quartz
"200% and counting" – The Economist
See Also: "China banks said to have $3. 2-billion exposure in Qingdao probe – Bloomberg
Federal Reserve Chairwoman Janet Yellen warned investors of highly frothy conditions in high yield debt but investors decided they'd rather "whistle past the graveyard" and blithely ignore her. Lower quality debt is reaching expensive levels last seen just before the financial crisis giving rise to tongue in cheek descriptions like "return-free risk."
CNBC reports that analysts "see some reasons for concern over junk bonds. Bank of America-Merrill Lynch's survey of fund managers for July found U.S. high-yield debt is considered the most crowded trade.
'Security selection will be more critical than in the past,' [Kapstream Capital analyst Steve] Goldman said. 'A lot of dogs are coming out now.'"
"What Yellen said on junk bonds isn't what the market heard" – CNBC
Officials in Helsinki, Finland are embarking on an ambition public transportation plan that would largely end personal car ownership in the city by 2025. The Guardian reports the strategy will "allow people to purchase mobility in real time, straight from their smartphones. The hope is to furnish riders with an array of options so cheap, flexible and well-coordinated that it becomes competitive with private car ownership not merely on cost, but on convenience and ease of use."
"Helsinki's ambitious plan to make car ownership pointless in 10 years" – Guardian
The huge surge in shale oil production has not been accompanied by lower crude prices. At first glance, this seems to contradict the laws of supply and demand. The Financial Times explains:
"The great advances in U.S. shale have coincided with political upheaval in big oil-producing countries… Were it not for the new production in the U.S., which has cut the country's imports sharply, there would probably be talk of another world oil crisis."
"Energy: The indispensable country" – Financial Times (subscription may be required)
Many of the most common investing mistakes arise from the psychological fear of randomness. Our abhorrence for situations where anything could happen causes investors to see patterns that aren't there in an effort to feel more in control of results. This causes investment losses.
Psy-Fi blog covers this phenomenon well in a recent post, "We're not built to handle uncertainty so learning to deal with it is difficult - but essential, because markets are full of the stuff. Uncertainty is why no one can really predict anything very much in the short-term and why we need to operate on the basis that something bad is quite likely to happen quite soon."
This sounds very much like Not-Stupid investing.
"U is for uncertainty" – Psy-Fi
Diversion: "The best books of 2014" – Telegraph
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow