A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The Financial Times' Alphaville blog's Cardiff Garcia presents an extremely interesting theory on why U.S. President Barack Obama has turned against the Keystone XL pipeline. The theory goes that the White Houses' initial ambivalence about Keystone was because they believed that the pipeline would make no difference in the amount of oil imported from the oil sands. But, at lower prices, it may be that the President believes without the pipeline, investment in the oil sands will slow, providing a long term benefit to greenhouse gas emissions.
"When oil falls beneath that lower range, as obviously it already has, there will start to be less new investment in tar sands projects, which means less production in the future…Bottom line: according to the report, which was written well before the prices started falling, prices at current levels represent an environmental tradeoff that didn't exist before last June."
The Keystone issue is only one of the energy-related topics covered in the post – I highly recommend reading the whole thing.
"Five scattered points about oil, crises, Keystone and other stuff" – Garcia, FT Alphaville (registration but not subscription required)
The loonie is becoming one of the world's most hated currencies. Only this morning, the research team at Deutsche Bank recommended shorting the Canadian dollar against both the Mexican peso and Norwegian kronor (the Wall Street Journal's Katie Martin posted the table of trade ideas on Twitter). If that weren't enough, Nordea Bank Norge ASA research piled on with more advice to short CAD/NOK.
A contrarian investor will wonder whether this pessimism is overdone, but until the cratering crude price stabilizes, only the exceedingly brave investor will put their money behind that notion.
"@katie_martin_FX Deutsche FX trades. (Incl buying RUB.... hmmmmm) pic.twitter.com/ROXh4mwKj0 ' – Twitter
"FX trades '15" – Nordea
A disturbing story out of China has local governments buying land from themselves. Previously, local Chinese governments would use special purpose vehicles called Local Government Finance Vehicles (LGFVs) to loan money to real estate developers to buy land from them. Now, with developers struggling, the LGFVs are allegedly buying land directly from the government to keep the money flowing.
The Financial Times reports that "local government financing vehicles in at least one wealthy province, Jiangsu, which borders Shanghai, accounted for more land purchases than property developers did in 2013 – the last year for which data were available – according to research collated by Deutsche Bank.
"The data signal that already cash-strapped local governments are switching money from one pocket to another rather than booking real sales."
The issue is an important one. The story also notes that land sales amount to 25 per cent of government revenues in a lot of regions.
"China's small cities buy up their own land" – Financial Times (subscription may be required)
Tweet of the Day: "@5_min_macro When oil gets smashed every day on the open has nothing to do w geopoliticoeconomic blablah, everything to do w fin types caught way offside"
Diversion: "How nanobiophysics can stop Ebola and other global pandemics" – Wired
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow