A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web.
The Financial Times linked to a column on the Canadian housing market from The Macro Tourist website. I am familiar with Macro Tourist, but not intimately familiar, so credibility-wise readers can judge for themselves.
The upshot of the analysis is that regulatory efforts to curb housing prices in British Columbia will be 'too successful,'
"Don't mistake me for some sort of unapologetic delusional Canadian housing bull. I think prices are nuts. But what I think is even more insane is the amount of balance sheet expansion from global Central Banks. We must always remember – the Canadian real estate bears are fighting against the authority that has the power to dictate the quantity of the asset in which we price all these other assets in… [new regulations] won't generate anywhere near $200-million a year in revenue because foreigners are going to dump their real estate faster than Lindsay Lohan downs pomegranate vodka martinis at the Oscars pre-party… I suspect this policy will be successful at cooling house prices – too successful."
No one is going to shed any tears if Vancouver home prices, or Toronto prices for that matter, fall 10 per cent. A bigger decline poses risks in terms of underwater mortgages, and lender and construction-related bankruptcies.
"The Pricking of the Canadian housing bubble?" – Macrotourist
Goldman Sachs is directly blaming 'the machines' – algorithmic funds called Commodity Trading Advisors – for recent volatility in crude prices,
"The decline of managed money positioning during the sell-off was concentrated in products, in which CTAs tend to over-index… Unlike other 'traditional' speculators, trend-following funds are not attempting to reprice the curve based on informed views of future supply and demand. As such, as they become an increasingly large driver of managed money positioning and volatility, commodity prices are increasingly at risk of becoming temporarily dislocated from fundamentals: we see the latest sell-off as a case in point, given fundamentals remain robust."
"SBarlow_ROB GS: Blame the machines for oil price volatility" – (research excerpt) Twitter
There was a time in the 2000s when the number of mutual funds exceeded the number of stocks in the index, a sign of fund manager oversupply. The exchange-traded fund (ETF) boom has created a similar situation in that Bloomberg is reporting that there are now more indexes to base ETFs from than stocks.
The Financial Times warns that index addiction probably won't end well for investors because comparisons with the past are likely meaningless,
"A different problem with index-based analysis is that it glosses over huge changes in the component parts of these benchmarks over time. This becomes particularly problematic for those who rely on historical average valuation multiples for an index to draw conclusions about today. Elroy Dimson, Paul Marsh and Mike Staunton of the London Business School have shown how in 1900 over 60 per cent of the value of listed U.S. equities was in rail. Today much of this value is accounted for by technology."
"Modern finance must kick its addiction to indices" – Financial Times
"Investing in Index Funds Is No Longer Passive" – Bloomberg
Tweet of the Day: This whole thread on Canadian business investing is worth reading,
"@LJKawa At the very least, this is a body blow to the 'Canada in a sweet spot' narrative." – Twitter
Diversion: "With this DNA dating app, you swab then swipe for love" – Wired