Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Canadians value the loonie in Canadian to U.S. dollar terms – currently around 75 cents – but the rest of the world sees this as a quaint, or less charitably provincial, practice. Global investors and traders watch the U.S. dollar to Canadian dollar value which is now $1.33. Foreign Exchange trader Ken Veksler of Accumen writes, "the real risk is for continued selling pressure to mount in the Greenback. If this is indeed the case, keep an eye on the USDCAD which is roughly 1 per cent away from where things begin to get interesting on the downside."
Mr. Veksler is saying that the U.S. dollar to Canadian dollar level is near levels where, in the past, leveraged money becomes involved, and this means the loonie could be set for an at least temporary rally.
"@SBarlow_ROB Veksler: "USDCAD is 1% away from where things get interesting to the downside" – (research excerpt) Twitter
National Bank economist has a different, more pessimistic forecast for the Canadian dollar for the mid term,
"The Canadian dollar is set for a challenging 2017. The persistence of soft oil prices and the Bank of Canada's dovish rhetoric could cause a further widening of U.S.-Canada interest rate spreads. The large current account deficit is also a concern for the loonie, more so considering it is being financed entirely by short-term foreign capital flows which can reverse on a whim. And here, we have portfolio flows in mind. Recall that last year, the Canadian dollar benefitted from record foreign inflows into equities. But as today's Hot Charts show, the TSX's valuation looks stretched, and hence it's unclear if foreigners will find Canadian equities as attractive this year."
"@SBarlow_ROB National Bank on CAD, TSX' – (research excerpt) Twitter
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A Wall Street Journal report suggests that optimism in crude markets is overdone and the oil price is set for a pullback,
"U.S. crude prices have soared nearly 20 per cent after the Organization of the Petroleum Exporting Countries and other major producers agreed on Nov. 30 to an output cut amounting to about 2 per cent of global oil supply… Investors are now more bullish on oil prices than they've been since the summer of 2014, the last time oil prices were over $100 (U.S.) a barrel… This extreme positioning puts the oil market in a vulnerable state, some analysts said. Cuts from OPEC members may end up disappointing investors. Any sign that OPEC is not following through could set off a 'cascade of selling.' "
"Oil Bulls Come Out in Force" – Wall Street Journal
See Also; "Will OPEC Deliver Its Output Cut Deal? Here's How We'll Know" – Bloomberg
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Producers of lithium, a key ingredient in lithium ion batteries (duh) used to store power generated by solar and wind power (as well as electric cars), are attracting a lot of investment – enough that the market sector shows all the hallmarks of an investing bubble according to the Financial Times,
"The average price of lithium has jumped threefold since 2014 and gained 60 per cent last year, according to an index from London-based Benchmark Mineral Intelligence , boosting the share prices of leading producers… For some, these gains reflect real demand and a recognition that the age of the pure electric vehicle is rapidly arriving. For others, the metal is showing all the signs of a speculative bubble. Geologically there is no shortage of lithium in the earth's crust. As such, some commentators say the mining industry will rise to the supply challenge. "There's nothing inconsistent in our view that lithium prices can fall over the medium and long term even as you see this massive uptick in adoption of electric vehicles," analysts at Bernstein Research argued in a recent report."
"Lithium: the next speculative bubble?" – Financial Times
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Macleans magazine argues that carbon tax-related inflation fears are largely unfounded,
"Overall, for the average Alberta and Ontario household in 2017, direct costs will likely be on the order of $150 to $200 annually and indirect costs will add an additional $80 to $100 or so."
"The cost of carbon pricing in Ontario and Alberta" – Macleans
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Tweet of the Day: (oil inventories still high) "@chigrl Last chart #EIA Cushing Crude Oil Stocks (actual WTI contract) #OOTT" – Twitter
Diversion: "The Farrelly Brothers' Oral History of "Kingpin," Twenty Years Later" – Fast Company
Scott Barlow