A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Business Insider highlights a report that will be kryptonite in corporate board rooms. An academic study completed by professors from Cambridge University, The University of Utah and Purdue University found that highly paid CEOs are indicative of stocks investors should avoid.
BI's Elena Holodny writes, "CEO pay is negatively related to future stock returns for up to three years after sorting on pay. In other words, the more CEOs get paid, the worse the stock performs."
"The Highest Paid CEOs Are The Worst For Investors" – Business Insider
A terrific chart from Nordea Markets shows why investors need to be very careful with the term "inflation." Energy and food prices are climbing on both sides of the border, but this isn't the 1970s and it's not a wage/price spiral. When higher energy and food costs cause downward pressure on overall spending and the costs of everything else households buy, the effects are ultimately deflationary, not inflationary.
"If energy prices keep rising at this rate... forget about 'more stuff' " - Aurelija Augulyte, Twitter
There are two global stories that are, in my opinion, under-represented in global commodity prices. The first is the missing metals inventory in China which, if the problem widens in scope, risks causing a credit freeze for the Chinese economy. HSBC became the latest bank in the region to sound the alarm, this time on the potential for a sharp fall in copper prices.
"HSBC the Latest Bank to Warn over Qingdao Metals Fraud Investigation" – International Business Times
The second under-respected news in the market is the political collapse of Iraq which has so far had little effect on global energy prices. Ezra Klein's news site Vox notes that although the ISIS terrorist organization is currently surrounding oilfields that are solely used to supply domestic consumption, the larger, export-oriented facilities are far from safe – yet oil prices have barely budged.
"ISIS surrounded Iraq's largest oil refinery. Why aren't oil prices spiking?" - Vox
Every country complains about their politicians but it would be a mistake to dismiss the economic importance of America's rabid disgust with their congressional leaders. Renowned Massachusetts Institute of Technology economics professor Daren Acemoglu has made this issue his life's work, writing the bestseller Why Nations Fail. In short, when a populace doesn't trust their leaders, or their financial system, long-term growth slows.
"America's Trust Deficit" – Andrew Sullivan
"Confidence in Congress drops to lowest of any institution ever in Gallup poll" – Twitter (chart)
"Why Nations Fail" – Daren Acemoglu (blog)
Tweet of the Day – I'll commit to not doing this too often, but one of my tweets caused a bit of a stir (and a ton of RTs) yesterday. It wasn't me, it was the chart from Citi's Matt King: "Oh Dear. Bond investors working without a net." - Twitter
Diversion: "Top 10 Worst Plot Mistakes in Back to the Future" – Youtube
Follow Scott Barlow on Twitter at @SBarlow_ROB.
Scott Barlow