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Scott Barlow

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

Maclean's presents a number of charts suggesting that Canada's current housing bubble is larger than the U.S. circa 2006. These include comparisons of household debt to GDP, growth in real home prices, and debt service ratio (debt service payments to disposable income).

I am still in the camp, however, that believes Canada will avoid a financial crisis. A slowdown? Sure, but unlike the U.S. in 2006, the creditor risk for mortgage defaults is clear, and domestic lenders are not playing hot potato with the liability through credit default swaps or other derivatives.

"Canada's housing bubble makes America's look tiny" – Macleans

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A terrific post from Carleton University economics professor Frances Woolley compares pension managers to graveyard owners,

"The care and maintenance of graveyards might seem like an obscure economic problem. But cemetery economics is, from an analytical point of view, pretty much identical to pension economics, except that the 'pension obligations' last forever. With pensions, as with cemeteries, we have chosen to switch from pay-as-you-go funding, combined with direct in-kind transfers from younger generations, to a regime of pre-funded savings plans. Yet both pensions and cemeteries are exposed to the same risks of moral hazard on the part of providers, and of the funds set aside proving to be in inadequate, especially in a low-interest rate regime."

"A Grave Problem" – Woolley, Worthwhile Canadian Initiative

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I do not envy energy traders in the current environment. The market is notoriously volatile, but recent weeks have been even worse. I will just list the headlines on recent stories, which show how choppy – the industry term is "whipsawed" - the market has become,

"Oil's Heading to $40 If OPEC Fails, Says Goldman" – Bloomberg
"US crude output up in August for first time since March" – Financial Times
"OPEC Chief Says Oil Producers On Course to Deliver Supply Deal" – Bloomberg
"Oil Trades Near One-Month Low as U.S. Stockpiles Seen Increasing" – Bloomberg
"U.S. Gasoline Jumps Most Since 2008 After Pipeline Blast" – Bloomberg
"@JavierBlas2 ICYMI, this is how Exxon sees the #oil market right now (spoiler: they aren't bullish) #OOTT #OPEC $XOM " – (report excerpt) Twitter

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Apple Inc. is not Blackberry, but deterioration in profit margins was among the first indicators that Blackberry's business was in deep trouble. Profit margins are now declining for Apple, as Gadfly reports,

"Apple continues to swim in profits, generating more net income than any company in the world, it's wringing less from each dollar of sales. The company's operating margin - or the share remaining after paying to make its products and run the business - was 27.8 per cent in the past 12 months, the lowest in seven years."

"Apple's Margins Lose Their Shine" – Bloomberg Gadfly

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I have argued numerous times that "inflation/no inflation" is by far the most important portfolio strategy call for 2017. A rising inflation and bond yield environment will require a wholesale change in dividend and income-oriented portfolios to prevent heavy losses.

I'm not ready to answer this question with any confidence, but stronger than expected data from China was the catalyst for a bond sell-off and higher yields overnight, and the fact that China may no longer be exporting deflation makes an inflationary market more likely for developed markets.

"Bond Market Selloff Resumes After Chinese Data" – Bloomberg
"@C_Barraud #China | The most important point is that PMIs showed both Input and output prices are ⬆ sharply. China is no longer exporting deflation" – Twitter

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Tweet of the Day: "@SwedishCanary Ironically, the Internet was created to save us time. ' – Twitter

Diversion: I firmly believe that the U.S. election and the tragic epidemic of opioid abuse and overdoses are related,

" How North America Found Itself in the Grips of an Opioid Crisis" – Vice

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