Every day ROB Insight delivers exclusive analysis on breaking business news and market-moving events. Streetwise offers news and analysis on Bay Street and the world of finance. Insight the Market delivers up-to-the-minute insights on developing market news.
Here are our editors’ picks of some of the best reads available to Globe Unlimited subscribers this week.
China poised for its ‘Bear Stearns moment’
The Canadian economy and domestic equities were rescued in 2008 by an unprecedented credit expansion in China. Now with that bubble fully inflated, it looks like the Middle Kingdom’s own “Bear Stearns moment” has arrived. And don’t say you haven’t been warned. The Globe’s Scott Barlow has been signalling the forces at work for months, warning of the threat of the growing credit bubble, the imminent day of reckoning, the concerns of even the most bullish China watchers, and the country’s addiction to cheap credit. Canadian investors need to take note and act accordingly, says Mr. Barlow in ROB Insight, with resource stocks and commodities most at risk of getting flattened by a collapse.
Innvest battle opponents sharpen their knives
The trustees of Innvest REIT are putting up the barricades as activist Orange Capital steps up its campaign to turf them. Orange has “serious concerns” over the direction of the REIT and has tabled a plan to boost the company’s stock, which Innvest says contains “nothing of substance” and is just “empty rhetoric,” writes Boyd Erman in Streewise. Orange has two large institutional shareholders on its side, and is pushing for a vote to be held as soon as possible. Don’t expect a happy ending for both sides in this story.
The buyer’s guide to oligopolies
You’ve long been thinking of getting your very own oligopoly, but just don’t know where to start. Don’t fret, Inside the Market’s David Berman has assembled a easy-to-follow manual (thanks to tips gleaned from Goldman Sachs) to walk you through the process and help you avoid all the pitfalls. First, pick your sector: Cable companies, cement producers, generic pharmaceutical firms, hospitals, food staples and trucking firms are a few of the better choices – in industries that are mature, commoditized and rife with cutthroat competition. The deals that have panned out recently through the process of “disruptive consolidation” include everything from beer to container-board stocks to airlines.
Chalk up another one for the bitcoin trashers
The very medium that gave birth to bitcoin (that’d be the Internet, in case you didn’t know) is now one of the sources of the digital currency’s greatest woes. It used to be just pesky governments giving bitcoin grief by restricting trade, arresting some favourite users, or threatening to ban it, but now two of its exchanges were temporarily laid low by technical problems, writes Brian Milner in ROB Insight. But they may be the least of bitcoin’s worries. The mighty Apple – the banner-carrier of all things cutting edge in tech land – is nixing the apps needed to carry out transactions from its devices. Seems it’s tough to get respect when you’re only virtual.
The activist investor picture in Canada
Ah, Canada – the land of milk and honey and an activist investor’s utopia. That may be the received wisdom among many, but in reality it’s a very different picture, says Patricia Olasker, a senior partner at Davies Ward Phillips & Vineberg. The lag time on filing a required report on when a 5-per-cent position is reached in the U.S. – compared with the hard stop at 10 per cent in Canada – means a U.S. investor can build an even bigger stake in the interim. Other hurdles are that the ability of Canadian investors to force a vote comes with so many caveats, and insider information laws are stricter than those in the U.S., both make it difficult for an activist investor to rally support, writes Jacqueline Nelson in Streetwise.
So you think you’re diversified?
Mutual and exchange-traded funds are a great way to ensure your portfolio is diversified, but it’s worth taking a closer look to see what you’re actually holding, Rob Carrick writes in Inside the Market. Many of these funds track indexes such as the TSX and the S&P 500, but by their very natures these benchmarks are focused on big companies. That may be where you’re most comfortable putting your money, but be aware that you’re missing out on an important chunk of the market: small and mid-cap companies. Companies offering ETFs are beginning to tailor a range of products that address that gap in investment offerings, and although the segment can enhance a portfolio’s performance, bear in mind that they can do the same for risk.