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.
A wealth transfer that begins at home
While older homeowners cheer each new headline about galloping home prices, the news becomes increasingly depressing for would-be first-time buyers. As those who bought into the market before the mid-nineties now sell and lock in huge gains, new buyers are subsidizing the sellers’ profits with prices that have soared to a whopping five times annual disposable income. So the members of the under-30 crowd who do manage to get their own roof over their heads are finding they also have an anchor on their feet. In ROB Insight, Ian McGugan looks at a not-so-great wealth shift that is seeing the older set sell out at the expense of the younger one.
The Big Six part ways
For decades, the Big Six Canadian banks have been somewhat indistinguishable for stock investors, each churning out reliable returns and increasing dividends, despite any individual bank’s bumps along the road. That’s all changing now, as highly leveraged households have pretty much tapped out the domestic market for the time being, forcing the banks to look past Canada’s borders for opportunities. And that’s where investors will want to take notice. Although international operations still account for relatively modest proportions of their business, the banks are chasing very different strategies. In Streetwise, Tim Kiladze looks at the diverging paths the Big Six are heading down in the search for growth.
Stocking up for inflation
Remember that thing called inflation? It’s been a while since we’ve seen much of it, but as surely as spring follows winter (well, in some parts of Canada, anyway), it’ll be back, and could potentially throw your investment portfolio off balance. U.S. inflation rose more than expected in May, which alarmed some economists and left investors wondering if their portfolios are properly positioned. Bonds are one thing that could suffer if yields go up, but what about equities? In Inside the Market, David Berman looks at a list of stocks from a UBS strategist that should perform well in an inflationary environment if in fact higher prices are on the cards.
Has Putin gained the upper hand?
Russian President Vladimir Putin generated outrage throughout much of the developed world, and has been frozen out of the G8, over his country’s annexation of Crimea. The potential economic consequences for Russia are great enough that he has turned his gaze east to strike a long-term energy deal with China, despite the two neighbours’ uneasy relationship. It will be some time before that deal bears fruit, so the mid-term outlook for Russian energy exports appeared to grow a little dimmer as eastern Europe begins to look for alternative sources. But even that recent shift has been upended by the new bloody sectarian conflict in Iraq. In ROB Insight, Carl Mortished looks at the politics of energy, the new cards Mr. Putin has been dealt, and the repercussions of a major disruption in Middle East oil supply.
Congress hears Canada’s Katsuyama
Canadian banker Brad Katsuyama testified before a U.S. congressional subcommittee this week in the wake of controversy surrounding high-frequency trading. Mr. Katsuyama, as you recall, cut a heroic figure in author Michael Lewis’s recent Flash Boys, the widely publicized exposé about alleged rigging of the HFT market. One-time presidential candidate Senator John McCain quizzed him directly on whether he thought there is funny business going on, but the Markham, Ont., native pulled his punches, depriving viewers of the fireworks he contributed to in a recent CNBC TV debate about the practice. In Streetwise, Joanna Slater walks readers through four specific conflicts of interest he says are inherent in the current system that need to be addressed in order to create a level playing field.
An energy play worth noting
Despite the outlook for pretty solid energy demand, stocks in the sector can vary wildly in their quality. In Inside the Market, Gordon Pape looks at one play that has a particularly bright outlook, with international exposure in light oil and natural gas, strong exploration and development prospects, rising production, an increasing dividend payout, and strong recent quarterly results. Of course, it’s no guarantee of future performance, but the stars certainly appear to be aligning for this producer.