Signs advertising homes for sale fill a street corner in Rancho San Diego, California, U.S., on Sunday, Nov. 25, 2007.JACK SMITH
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web.
Jason Kirby from Macleans has accomplished a vital public service by collecting 50 charts representing what economists believe are the most important economic drivers of domestic gross domestic product growth.
All of them are interesting, but I was particularly struck by the contribution from Phillip Cross of the McDonald Laurier Institute. It shows the sharp decline in real per capita disposable income in Ontario relative to the rest of the country. Disposable income is a key driver of housing prices and the chart throws a big question mark at the red-hot Toronto housing market.
"The most important charts for the Canadian economy in 2016" – Kirby, Macleans
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No one's blinking yet in the global oil patch. Bloomberg reports that despite the renewed swoon in crude prices, and stubbornly high U.S. oil production levels, OPEC oil production has climbed to a three year high:
"Output from the Organization of Petroleum Exporting Countries rose by 230,100 barrels a day in November to 31.695 million a day, the highest since April 2012, as surging Iraqi volumes more than offset a slight pullback in Saudi Arabia. The organization is pumping about 900,000 barrels a day more than it anticipates will be needed next year."
The bad news doesn't stop there. Think tank Oil Intelligence Institute predicts that the global oil glut will climb by 1.17 million barrels per day in 20126.
"OPEC Says Crude Production Rose to Three-Year High in November" – Bloomberg
(OMI dated reported on twitter by pseudonymous trader @energyrosen_ - Twitter
Related : "Shale Doesn't Swing Oil Prices—OPEC Does" – Bloomberg
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Written for a U.S. audience, Bloomberg's "There's No Place Like Home" provides a chilling reminder to indebted Canadian homeowners – your house is not a good long-term investment:
"So how did homes get confused with goldmines? It turns out that a short-lived period of unusually high returns is to blame. As expected, that period coincides with the boom years of the real estate bubble, but the seeds were planted during the tech bubble that preceded it. This becomes apparent when looking at the NHPI's rolling ten-year real returns. The average annual ten-year return was 1.1 percent -- the same as the NHPI's long term annual return. The standard deviation, or volatility, of ten-year returns was 1.9%. This means that 95 percent of the time, the ten-year returns can be expected to be between -0.8 percent and 3.0 percent."
"There's No Place Like Home" – Bloomberg
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I'm trying to keep my head here, but signs of worldwide credit stress are everywhere in recent days. Standard and Poors projected that both sovereign and corporate financial distress are set to intensify in 2016. As I've mentioned before, the post-crisis equity market rally was built on easy money. The punchbowl is being taken away and the global economic backdrop remains sluggish.
"U.S. Corporate Credit Outlook: Less Easy Credit Ahead" – Standard and Poors
"Commodity Prices Cast A Shadow On Credit: Canadian Corporate Outlook For 2016" – Standard and Poors
"@standardpoors We expect corporate credit quality will deteriorate in 2016 with #European default rates to more than double bit.ly/1U6GHQm " – Twitter
"Mining Company Debt Is Fool's Gold" – Abramowicz, Bloomberg
"Gulf Bonds Under Stress as Lower-for-Longer Oil Outlook Sets In" – Bloomberg
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Tweet of the day: "@Schuldensuehner The risk of leverage in one chart: Default probability of highly geared mining comps have jumped on commodity rout. pic.twitter.com/pEIXfwO1Vj " – Twitter
Diversion: "Can you tell the difference between what's real and what's not in these amazing illusions?" – Gizmodo
Scott Barlow