Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Some deaths just make you feel old.
I was never a particular fan of David Bowie and would still put at least two of his songs in the upper half of a Top 100 of the 20th Century list. This is the Report on Business, not the life section, so I'll just remind readers that David Bowie, in addition to having a huge impact on music and culture, was also a financial trailblazer.
"A short history of the Bowie Bond" – McCrum, FT Alphaville
"David Bowie was as innovative a financier as he was a musician" – Quartz
"These were David Bowie's 100 favourite books of all time" – Gigwise
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Market news out of China remains unrelentingly terrible as assets flee the country and indications that leadership has lost control of economic events become increasingly apparent. The big concern is not falling equity prices, but the ocean of (potentially non-performing) debt that lies behind the trend,
"Important economic reforms to the real economy and state monopolies have stalled, or succumbed to inertia and pushback. Policies designed to develop new sectors have not been matched by those needed to tackle problems in larger ones, such as poor productivity, chronic overcapacity and now a fourth consecutive year of producer price deflation. Tellingly, China's most serious problem — the relentless accumulation of debt — received passive attention at most."
"China's credit binge is the real concern" – Financial Times
"The broadening of Chinese capital outflows" – Keohane, FT Alphaville
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Christopher Balding, an economics professor at Peking University and a staunch bear on China in the short term, believes the government will continue to do everything in its power to prevent a debt meltdown,
"The current leadership is acutely aware of its place in history and the comparisons to the USSR. They are absolutely determined to not suffer the same fate. Despite talk of delveraging, credit growth continues to expand far more rapidly than GDP growth because quite simply, they are not willing to tolerate any type of official real growth slowdown. Given their concern over this, it isn't that China will never see a crisis of some type but rather that they will exhaust every means necessary before they yield to something they just cannot stop."
"Why We Shouldn't Overestimate the Probability of a Chinese Financial Crisis" – Balding's World
See also: "Apparatchiks Losing Control in China" – Across the Curve, Wall Street Journal
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Economics weakness in China is cited among the reasons for a second major U.S. dealer, J.P. Morgan, to predict a $20 (U.S.) per barrel West Texas Intermediate Crude price. Goldman Sachs was the first and, of course, investors laughed.
"Oil Seen Heading to $20 by Morgan Stanley on Dollar Strength" – Bloomberg
Related: "@boes_ Wild stat: the *consensus* forecast for oil is a 72% gain this year (h/t @parrmenidies) pic.twitter.com/zpPvC7SXQt " – Boessler, Twitter
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A sentence written on the Risk Reversal investing site is among the most important an investor can read in my opinion, "It ain't hard these days to have a digital bull horn and become a financial pundit, but it is important for the investing public to have a sense for what exactly are the incentives of those on tv or the web shouting at you."
Every portfolio manager on tv has an agenda, and sometimes it does not include investors' best interests.
"MorningWord 1/7/16: These Aren't the Pundits You're Looking For" – Risk Reversal
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The Telegraph U.K.'s occasionally hyperbolic Ambrose Evans-Pritchard cited research from the Bank of International Settlements that I immediately applied to Canada's economic travails,
"Bubbles leave a long toxic legacy after the bust hits. This takes eight years or so to clear. "The occurrence of a crisis greatly amplifies the impact of previous misallocations," said the paper, racily titled "Labour reallocation and productivity dynamics: financial causes, real consequences".
"Crippled economies have to make the switch back to healthier sectors against the headwinds of a credit crunch and a broken financial system, and typically amid austerity cuts in public investment."
"Is the whole theory of secular stagnation a hoax?" – Evans-Pritchard, Telegraph U.K.
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Tweet of the Day (including research excerpt): "@TheStalwart Deutsche Bank says that people who ask why the US should care about Chinese growth are ignorant fools. pic.twitter.com/IaYKOyZA1j " – Twitter
Diversion: "The House of Cards Season 4 Trailer is a Creepy Frank's Greatest Hits" – Gizmodo
Scott Barlow