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. Inside the Market delivers up-to-the-minute insights on market news as it develops.
Here are our editors’ picks of some of the best reads available to Globe Unlimited subscribers this week.
Yellen’s call no stretch at all
A few market watchers sneered at Fed chief Janet Yellen’s comments that the valuations of some biotech and social media stocks were “stretched,” particularly given the fact the Federal Reserve chair’s job is supposed to be confined to keeping inflation at bay while maximizing employment. And as Facebook and Twitter stocks rocketed after her comments, one business blog went so far as to sniff at her pronouncements as “embarrassing.” But they’re anything but, says David Berman in Inside the Market, as he explains how her comments have been misinterpreted and why a comparison of P/E ratios demonstrates she’s on pretty solid ground.
Reasons to be cheerful
This last week was a pretty rocky one for stocks, but cheer up, things aren’t as bleak as they look. Equities took a bit of a drubbing because of – wait for it – good economic news. A surprise jump in labour costs, a fall in unemployment claims, a solid jobs report and a three-year high ISM reading on manufacturing activity are reasons to celebrate. While low interest rates and high unemployment may have created a cozy environment for corporate profits that investors will eventually have to wean themselves off, Ian McGugan explains in ROB Insight why the latest trends point to a longer-term picture that’s much brighter.
Home Capital a bear slayer
While economists and analysts have been warning of a serious correction in Canadian housing, and hedge fund Emrys Partners once pointed its finger directly at alternative mortgage provider Home Capital Group as one of the most susceptible lenders, the company has managed to defy the naysayers. The warning, and moves by short sellers, took the wind out of Home Capital’s shares last year, but 14 months later the shoe appears to be on the other foot, explains Jacqueline Nelson in Streetwise. Not only has Emrys closed shop, but Home Capital’s shares have rebounded and are essentially more than double what they were before the warning.
Bricks or stocks?
The roof over your head may well be one of the best investments you’ll ever make, right? Nope, at least not according to portfolio manager, analyst and author Mebane Faber, who insists that “historically, and broadly, after inflation, housing appreciation is zero.” That sounds like a pretty hard circle to square, especially when taking into account the rock-bottom interest rates of recent years and the feeding frenzy in the real estate market, writes Scott Barlow in Inside the Market. While the cyclical nature of both markets makes it difficult to make definitive statements, inflation plays a major role in determining how the two investments stack up.
A legend far beyond Bay Street
The passing of G. Raymond Chang last week marked the loss of a man deeply respected in both financial and philanthropic circles. Emigrating to Canada from Jamaica in 1967, Mr. Chang was instrumental in building CI Financial into Canada’s third-largest investment fund company, with a market cap today of more than $10-billion, writes Anna Nicolaou in Streetwise. But he was equally known off Bay Street for his charitable work, donating more than $20-million in recent years to causes as diverse as Ryerson University and the Centre for Addiction and Mental Health, and for founding a fellowship for West Indian doctors and providing start-up capital to farmers in the country. Mr. Chan also served as a board member at Toronto General & Western Hospital Foundation and held a chair at the University of Toronto in internal medicine. The renowned philanthropist received the Order of Jamaica in 2011 and the Order of Canada in 2014.