A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Savita Subramanian, head of quantitative strategy at Merrill Lynch, published a highly useful report detailing the bull and bear cases for U.S. equity markets.
The bear case lists high valuations, the potential end of the market cycle, central bank monetary tightening, corporate debt leverage and rising wage costs.
Bullish investors can point to rising global economic growth, non-U.S. easy money , and equity valuation relative to bond yields.
The key statement for me was "valuation is a terrible short term market indicator,"
"US equites are expensive on almost any metric, but valuation is a terrible short-term indicator. Today's levels suggest lower long-term returns, but even those returns generally stack up well vs other asset classes"
"Good bull/bear summary from ML: "Valuation is a terrible short term indicator"" – (research excerpt) Twitter
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A separate Merrill Lynch report, from global commodity strategist Francisco Blanche, contained a surprising theory – OPEC is not targeting a higher oil price as much as the oil futures curve,
"OPEC is targeting a shift in the term structure of global crude markets and not a specific oil price band. The idea is to penalize forward sellers and squeeze refiners (see OPEC wants a triple-double). But soft demand in India and Mexico, a warm US winter, and an OPEC crude oil production overhang from 4Q16 have gotten in the way of a good plan. Heading into the meeting next week, OPEC faces three distinct choices: maintain output where it is, cut it, or go back to a price war. So what will OPEC do? In our view, the cartel will extend the cuts and pretend that everything is working fine."
"@SBarlow_ROB "OPEC's goal is backwardation, not a specific price level" – ML" – (research excerpt) Twitter
"U.S. Shale Roars Back at OPEC" – Bloomberg
"U.S. plan to sell oil reserves undermines OPEC supply management efforts" – Reuters
"85% of Germany's power just came from renewable energy, setting a new record" – The Independent
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U.S. portfolio manager Adam Grossman talks about finance as "the most overcompensated profession in the history of the universe,"
"Knowing the hotel bill for my family's single room, I can only imagine the total cost for this corporate gathering. The opulence, repeated year after year, is an image I can't shake. It doesn't take much analysis to figure out how they afford this luxury. Some of it is underwritten directly by individual investors, when they buy mutual funds or trade stocks. And a lot of it is earned from institutions, such as pension funds, which hold individual retirees' savings. Ultimately, then, this Wall Street firm's monstrous bill is paid largely by mom and pop investors."
"Footing the Bill" – Humble Dollar
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I had thought I was become desensitized to the rapid development in technology, but then I saw this video advertisement for Amazon's new Echo Show product. It seems an entirely plausible template for the future of computing not because it's awe-inspiring and sophisticated, but because it seems useful and approachable.
"Amazon just gave you a sneak preview of your future" – Reformed Broker
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Tweet of the Day: "@DavidBCollum "One million seconds ago was eleven days ago. One billion seconds ago was 1982. One trillion seconds ago was 30,000 BC." – Twitter
Diversion: "There are people who are successful professionally while managing a food blog, volunteering at the animal shelter, and mastering ballroom dance. Assume you are not one of those people. Balance, in my view, is largely a myth when establishing your career. The slope of the trajectory for your career is (unfairly) set the first five years post-graduation. If you want the trajectory to be steep, you'll need to burn a lot of fuel. The world is not yours for the taking, but for the trying. Try hard, really hard. I have a lot of balance now. It's a function of the lack thereof in my twenties and thirties. "
"No mercy, No Malice" – L2 Daily
Scott Barlow