A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
The strategy team at Citi has updated their bear market checklist of 18 factors that have provided warning signs for investors before sustained market sell-offs,
"Some of our factors are shorter term and can move quickly (eg credit spreads, yield curve), but others are longer term and move slowly (eg capex, RoE). This keeps the BMC relevant, but also stops it over-reacting when the inevitable corrections occur. It told us to hold our nerve during sharp global sell-offs in 2011-12 and 2015-16. Both were nasty, but neither marked the beginning of the next major bear market. As for now, we are reassured. Only 3/18 factors are flashing sell compared to 17.5/18 in 2000 and 13/18 in 2007."
"@SBarlow_ROB Citi methodology for bear market checklist" – (research excerpt) Twitter
"@SBarlow_ROB Citi bear market checklist says rally not over yet" – (full table) Twitter
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I don't have an opinion on whether cryptocurrencies will become widely accepted – it involves a debate of the term "moneyness" which economists have found to be a black hole with no conclusions. The speed at which cryptocurrencies are rising recently does, however, include some red flags,
"Blockchain of fools" – The Guardian
"Welcome to the newest investing bubble" – ROB Magazine
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I've been watching domestic retail sales results for signs that high household debt levels are beginning to crimp overall economic growth. September data was not weaker than economists expected, but not dire,
"Retail sales rise less than expected in September; auto sales fall" – Report on Business
"Retail Sales Disappoint Again as Canadian Growth Slows" – Bloomberg
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Josh 'The Reformed Broker' urged investors to toss out all the investing rules of thumb in a changing world, citing Benjamin Graham's 1954 realization that aspects of his revered value investing theory needed to be trashed,
"Rules of thumb, in the investment sphere, are at best worthless and at worst destructive for returns.
"Because the environment changes and the future doesn't always respect the past. Blind, slavish adherence to our own experience and the mental shortcuts we've created can work against us and make us look foolish or, worse, miss out on generational opportunities that do not knock twice."
"Rules of Thumb are Worthless" – Reformed Broker
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Robin Wigglesworth from the Financial Times compares the proliferation of financial indices, and an accompanying explosion in the number of passive investment instruments to cockroaches,
"If 'Rocket Man' and 'The Donald' ever trigger a nuclear apocalypse between North Korea and the US, the only survivors will probably be cockroaches and financial indices.
"The latter have certainly demonstrated a roach-like ability to proliferate. As a recent Bernstein report noted, there are now more than 1m indices but just 43,000 stocks — and that number is on the wane. While there are many more bonds, in reality the number of tradeable securities is much lower. "We can only watch with amusement and despair as people find new ways to arrange the same list of stocks," Bernstein analyst Inigo Fraser-Jenkins sighs in the report."
"Mushrooming stock indices reveal market revolution" – Financial Times
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Tweet of the Day: "@C_Barraud Based on the historical relationship between WTI prices and U.S rig count, the latter should continue its rebound in the coming months." – Twitter
Diversion: "The simple statistical analysis that explains the entire history of popular music" – Quartz
Scott Barlow