A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
The Economist describes the drivers behind the ongoing commodity price rally and adopts a "good for the short term, not so great in longer term" forecast,
"The delay in the price increases is the easiest part to explain. Years of strong production of oil, base metals and grains left the global economy with huge surpluses … OPEC, the oil cartel, agreed to restrain production in order to drain the surpluses and eventually put prices under upward pressure. China also applied the same principle to certain sectors … The rally's likely length is trickier to assess. The short-term outlook for the global economy is highly encouraging…But in the longer term, prices may weaken."
"Why commodity prices are surging" – The Economist
"Here's Why Investors Can't Get Enough of Oil With $70 in Sight" – Bloomberg
"Gold and Copper May Have More Room to Run in 2018, Bank of China Says" – Bloomberg
"Hype Meets Reality as Electric Car Dreams Run Into Metal Crunch" – Bloomberg
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The last few days has seen the adoption of a consensus view that high yield bonds are the "canary in the coal mine" for a potential disorderly rupture in fixed income markets. Janus' Bill Gross now holds short positions in high yield debt, but readers should brace themselves for an even odder read than we're used to from Mr. Gross.
"Bill Gross Investment Outlook: Bonds, Men, It's About Time" – Janus
"New Deutsche ETFs Let You Bet on Junk-Bond Market's Death Throes" – Bloomberg
"Going Bust Is Out of Style and Junk Bonds Are Hunky Dory" – Gadfly
"The bears are starting to sniff around the bond market" – Report on Business
"High-Yield Bond Outlook: Investor Skittishness Will Shift to Telecom Due to Projected M&A Activity" – Leveraged Loan
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I'm not sure what to say about NAFTA negotiations at the moment. Two reports arose late yesterday that domestic officials were expected a U.S. withdrawal from the trade agreement but sources are now popping out of the woodwork to deny this. Bond markets did not take the apparent risk increase seriously,
"@LJKawa The early market verdict is that yesterday's Nafta [headlines] were mostly a nothingburger for the BoC" – (chart) Twitter
"Canada Raises Alarm on Trump Leaving Nafta" – Bloomberg
"Nafta's Dead. Long Live Nafta. A Look at Most Likely Outcomes" – Bloomberg
"No more Mr. Nice Guy: Ottawa invokes Plan B on trade with the U.S." – Report on Business
"@sdonnan Going to close today's #Nafta withdrawal discussion... Canadian government official to me just now: It is "100% inaccurate" to say they expect US to trigger withdrawal soon." – Twitter
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A Macquarie strategist made a bold, bullish call on the future of cryptocurrencies, comparing them to autos in 1920,
"By the 1920s, investment in the surviving automakers would have yielded considerable returns while buying buggies (even at low PERs) would have led to losses … As discussed (here), unlike fiat currencies, cryptos are more difficult to inflate, cost money & time to produce and are built around mathematics rather than fraud or politics. Hence, they already reflect the essence of money better than existing money."
"@SBarlow_ROB Macquarie gets out the pom poms for cryptocurrencies" – (research excerpt) Twitter
"It Is Silly Season in the Land of Cryptocurrency" – The Atlantic
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Tweet of the day: "EddyElfenbein Wish me luck!! I'm taking my Certified Market Guru (CMG) Level III exam tomorrow. It mostly deals with marketing, clickbait and alarmism." – Twitter
Diversion: The fun part here is thing to identify all the movies,
"The 25 Greatest Films of the 21st Century" – Film School Rejects
Scott Barlow