A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
As Warren Buffett famously predicted, the hedge fund industry is devolving into a shell game where managers become billionaires at the expense of pension clients. Mr. Buffett bet that index funds would beat the average hedge fund and he's turning out to be right yet again.
But pension fund managers are ignoring the data, and continue to allocate more client funds into these expensive, underperforming products. The Financial Times's Dan McCrum writes, "first note the proportion of pension fund fees going to the alternative investment fund managers. Never have so few been paid so much by so many for doing so little."
There are many successful individual hedge funds on both sides of the border but in general this is one of those maddening, stupid things about the industry – a select few getting crazy-rich by mismanaging other people's money, because it's temporarily trendy.
"The hare gets rich while you don't. Back the passive tortoise" – FT Alphaville (registration required)
A sharp surge in Chinese manufacturing activity suggests a bounce for commodity prices may be in the offing. The government has again opened up the credit spigots to support growth which will one day make the inevitable slowdown worse, but in the short term the imports of copper in particular are likely to climb.
"China manufacturing gauges improve in July" – Wall Street Journal
I'm not that worried yet about yesterday's selloff but the Wall Street Journal details the one area where I am, and have been, concerned about market stability – corporate bonds. The weakest U.S. sectors yesterday were the top performers for the year, notably health care and energy, which suggests a healthy market correction.
The 0.8 per cent decline in the iShares iBoxx $ High Yield Corporate Bond ETF is another matter. The mammoth ETF is now lower by 2.6 per cent for the month and Lipper reports investors are fleeing the sector. Widening of corporate bond spreads holds painful repercussions for equities and profits and investors need to follow the situation closely.
"Junk bonds sink on fears rally will end as economy picks up" – WSJ
"Debt markets' 'lunacy' threatens equity investors" – Inside the Market
There are few technological developments more likely to change our everyday lives than driverless cars. Individual car ownership, cab drivers and truck drivers, for instance, could eventually become a thing of the past. Vox tried on Thursday to assess whether the United States is prepared for the proliferation of auto piloted vehicles.
"Are Americans ready for self-driving cars?" – Vox
Tweet of the Day: I don't believe this but the chart is chilling enough to forward. From @ChrisWeston_IG "So where are we in the cycle? I'd say most will today say 'anxiety'...." pic.twitter.com/ruL9uiyosI
Diversion: When the front section of the newspaper strongly implies the world's going to hell, I like to remind myself there are really smart people trying to make the world a better place, and succeeding.
"Engineered biomaterial may regenerate damaged skeletal muscle: A biomaterial that can regenerate damaged skeletal muscle" – Kurzweil
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow