A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
University of California Berkeley economics professor Brad DeLong is extremely concerned about U.S. employment, particularly for younger age groups. He notes that females in the 25-54 demographic have only recovered one-ninth of the jobs relative to before the financial crisis and males in the same cohort have only recovered 40 per cent of the jobs.
Mr. DeLong concludes, "I am afraid. I am very afraid."
"Male and female prime-age employment rates since 2000" – Brad DeLong's Grasping Reality
See also Mr. DeLong's "In which i make myself very confused about cyclical recovery " – Equitable Growth
Raymond James market strategist Jeff Saut outlines the knee-jerk, highly successful investment strategy being employed throughout the asset management community – backing up the truck on S&P 500 stocks every time the index falls five per cent or more.
There is definitely a feeling of herding behaviour here as portfolio managers concerned about trailing the index and losing their jobs just keep blindly repeating the strategy. Mr. Saut quotes one portfolio manager, "'Since I tend to be a trend follower, I am inclined to buy the 5-7 per cent dips until the strategy stops working.'"
"The ridiculously easy strategy that professional traders are using to make money right now " – Business Insider
One big lesson from the financial crisis was that the worst kinds of market risk often emanate from obscure depths of credit markets. The problem is transparency. Credit default swap prices, for instance – the big tip-off that something awful was afoot in 2007 – are almost impossible to find without thousand dollar-per-month Bloomberg terminals.
The terrific Matthew C. Klein does investors a major service this morning by describing how financial and credit risk begins with the repo market. The post, which is long but important for investors, suggests that financial stability will remain an investment risk until repos and other shadow banking markets are better regulated.
"People want money" – FT Alphaville
The Economist details the drivers of this year's surprising (for almost every economist and strategist) decline in global bond yields and also describes corporate America as a "snake eating its own tail."
The post lists overly-optimistic equity investors, weakening global growth, low inflation in Europe, and the Fed's tapering as the reasons behind feverish bond buying and lower rates.
The article suggests the equity market is living on borrowed time. Apologies for the long excerpt, but this is an excellent summary:
"Another factor [behind the equity rally] has been companies' use of their spare cash to buy back their stock. This makes earnings per share rise faster. American firms announced buy-backs worth $671-billion last year, or about 3.9 per cent of GDP, and have made plans for nearly $300-billion this year, according to TrimTabs, a data service. That is more than four times the money placed into equity funds by retail and institutional investors.
Like a snake swallowing its own tail, the corporate sector is absorbing its own equity."
Tweet of the day is from U.K. portfolio manager @TKaaber: "Solar boom driving first global panel shortage since 2006" bloom.bg/1tgpkQf
Diversion: I grew up white in Canadian suburbs so when events like those in Ferguson, Mo. happen, I wait for The Atlantic's Ta-Nehisi Coates to publish his take. I disagree with Mr. Coates vehemently at times, but for this kind of perspective, and brilliant writing, TNC is very hard to beat.
"Reparations for Ferguson" – The Atlantic
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow