A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
The total return of the S&P/TSX Composite since the 2008 peak is acceptable at 34 per cent, but the simple cumulative return of 0.76 per cent is depressing.
Gluskin Sheff economist David Rosenberg, however, is warning investors not to give up on the domestic equity market,
"You look around the world, and there are not too many places where the forward and trailing multiples are trading below their historical norms. In fact of the major markets, only Japan is trading below its 10-year average. Many pundits like to justify buying U.S. stocks because they have a 300 basis point equity risk premium. Well, I have news for you. That ERP in Canada is closer to 500 basis points!"
"Why Canada's stock market is among the most alluring in the world" – Report on Business
=====
The Macro Man blog is written pseudonymously, but I've been following it long enough to believe the author is an actual portfolio manager and a credible source. The recent post "The short-vol trade: someone forgot to turn off the machine" was informative (in my opinion, of course),
"The real iceberg beneath the surface is the short-vol trade writ large. The short-vol trade goes by a few different names--last October, in an article highlighting the depths of the short-vol monster, Chris Cole at Artemis Capital Management illustrated it as a pyramid (click through for image) … Just like the housing/credit bubble in the mid-00s, the financial system doesn't know how to stop. Just because there was a rich volatility premium in 2012, doesn't mean it is perpetually and always going to exist. In fact...quite the opposite. As markets calmed, the trade worked….and more money flowed into it. Supply and demand swung the opposite direction, but nobody ever turned off the machine."
"The short-vol trade: someone forgot to turn off the machine" – Macro Man
=====
Ritholtz's Ben Carlson discusses a "Permanent Portfolio for Millennials," which consists of 25 per cent in each of cash, gold, long term bonds and the S&P 500,
"The idea behind this portfolio is that it's diversified enough to get you through a wide variety of economic and market environments and simple enough that even a caveman could do it.
"There are holes you could poke in this allocation but that's true of any portfolio or investment strategy. The first step in investing is figuring out a philosophy and strategy that works for you. Steps 2 through 100 are dealing with the drawbacks of said strategy and sticking with it through the rough times when it makes you feel stupid for doing so."
"The New Permanent Portfolio For Millennials" – Carlson, A Wealth of Common Sense
=====
For investors hoping market volatility will subside from here won't be happy with this quote,
"It's testament to the force of the decline, a consequence of surging bond yields and inflation jitters that shocked everyone from individuals to passive fund clients. 'The corporate buying -- they were basically the only buyers last week,'' Matt Maley, a strategist at Miller Tabak & Co, said by phone. 'Whenever we have forced selling take place, the buyers disappear and the sellers have to sell no matter what. And corporate buybacks are not going to be enough.'"
"Goldman's Buyback Desk Was Deluged With Orders as Stocks Plunged" – Bloomberg
"History suggests strong economy can ward off bear market" – Reuters
=====
Tweet of the Day: (I will be writing about this chart shortly): "@SBarlow_ROB Im struggling with this divergence a bit " – (chart) Twitter
Diversion: "The 7 most romantic places in the world, according to Hollywood movies — from Manhattan to Berlin" – Business Insider
Scott Barlow