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Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web

Whenever Bloomberg's Matthew Boesler, the media's best central bank-focused journalist (in my opinion, of course) turns his attention to the Bank of Canada, it's a clear sign our central bank is a big deal globally. It's not an exaggeration to say that bond traders across the world will be watching for today's interest rate decision, even if they need to drink coffee and stay up late in Asia. Deutsche Bank analysts helpfully detail the reasons behind the increased relevance,

"Should the Bank of Canada tighten they will be the first G10 Central Bank outside the Fed to hike official rates since the RBNZ [Reserve Bank of New Zealand] raised rates three years ago.. .The market will view a rate hike in the context of other recent comments from other Central banks (notably the ECB [European Central Bank] and BOE [Bank of England]) that a removal of extreme accommodative policies may be warranted… A BoC rate hike will take place in the context of extremely well-behaved goods and services inflation. How a rate hike is justified by the BoC will illuminate how other Central banks may explain policy tightening in similar circumstances."

"@SBarlow_ROB "There are a number of reasons why BoC decision has global relevance" – (research excerpt) Twitter

"The Bank of Canada Is About to Test Central Bank Convergence" – Boesler, Kawa, Bloomberg

"Hopes for a 'beautiful deleveraging'" – Barlow, Report on Business

"Interest rates likely to increase today: How that could affect your loans" – CBC

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U.S. portfolio manager Ben Carlson describes the '4 Signs of a Bubble' and Toronto real estate seems to qualify on at least the first three counts,

"(1) Everyone around you is talking about stocks (or real estate or whatever the fad asset of the day is). And you should really start worrying when the people talking about getting rich in certain areas of the market don't have a background in finance. (2) When people begin quitting their jobs to day trade or become a mortgage broker. (3) When someone exhibits skepticism about the prospects for stocks and people don't just disagree with them, but they do so vehemently and tell them they're an idiot for not understanding things. (4) When you start to see extreme predictions. The example Bernstein gives is how the best-selling investment book in 1999 was Dow 36,000."

"4 Signs of a Bubble" – Carlson, A Wealth of Common Sense

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Nomura's prominent economist Richard Koo, in an otherwise non-alarmist research report, sees the potential for Fed monetary tightening to cause a global bond market crash,

"The fact that the process of winding down QE [quantitative easing] will take four to five years also means the upward pressure on interest rates will continue and will actually increase throughout this period, as the amount that cannot be reinvested gradually rises. Investors who understand this will naturally delay the purchase of bonds whose prices are almost certain to decline. Bond prices could crash if enough delay their bond purchases or become active short sellers. But the BOJ [Bank of Japan] will be unable to buy the bonds these investors are selling if inflation is already running at 2 per cent. Doing so could cause inflation to accelerate, triggering a further crash in bond prices."

"@SBarlow_ROB Koo: QE exit could 'potentially trigger a bond market crash' " – (research excerpt) Twitter

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Hedge fund manager and former economist for the U.S. Treasury Department Mark Down doesn't write often, but when he does it's worth reading,

"Central Bank normalization means they have won and the doomsday scenarios lost. Basically. This too drags on precious metals over time. Grinding global growth means 'slower for longer' in the equity market. Up over time with earnings, down with the occasional (and lately infrequent) corrections. Not sexy. But positive – more positive than prevailing market sentiment at least – and certainly not tragic."

"Of Currency Markets and Central Banks" – Dow, Behavioral Economics

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Tweet of the day: "@pete_schultz Everyone in Trump's orbit is like a husband on Dateline who googled "undetectable poisons + wife" then bought a shovel with a credit card" – Twitter

Diversion: "Young Men Give Up Work for Video Games? Be Skeptical" – Smith, Bloomberg View

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