Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
Kevin Ferry is now semi-retired to California wine country after founding Cronus Futures and trading interest rate derivatives for almost the entirety of his adult life in Chicago. On Thursday, Mr. Ferry published an important warning to investors in bond ETFs, particularly those holding longer term issues,
"In a world of government mandated low volatility, negative yields outside the U.S., and long duration U.S. funds delivering money market like returns; How much of Ma and Pa's "cash" has been transformed into wonderful financial innovations like [iShares 20+ Year Treasury Bond ETF] ? … We believe many Bond Market holders (renters) actually do not know or understand what they've been pushed into. "
The summary, one that I agree with for what it's worth, is that many bond ETF holders often have no idea how much risk they're taking.
"TLT" – Ferry, Contrarian Corner
"U.S. Long Bonds Give Traders Lesson in Risk With September Rout" – Bloomberg
"Junk bond funds see largest outflows since January" – Financial Times
"@JP_RGMP @SBarlow_ROB HY and Sr Loans are no place to be a passive indexer." – Twitter
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The true madness of the Vancouver real estate markets are being revealed daily since the Globe and Mail's brilliant "Out of the shadows" feature by Kathy Tomlinson. The latest dispatch, that a group of nine students now own almost $60-million in Vancouver real estate although they have not detailed the source of the cash,
"The properties include a $31-million mansion that Canaccord Genuity founder Peter Brown sold earlier this year to a buyer whose occupation was listed on the title document as 'student.' Four of the sales to student buyers were covered by mortgages from three major banks – a fact that underscores how Canada's banks are inflating the region's housing market, said NDP housing critic David Eby, who provided data from his provincial riding."
"'How did the students qualify for mortgages? Where did that money come from?' Mr. Eby said at a news conference on Wednesday at which he handed out photos of the homes that included the address and the purchase price."
"Incomeless students spent $57-million on Vancouver homes in past two years" – Globe and Mail
"Nine Students Own $57 Million of Property in Vancouver" – Vice Canada
"@dbcurren 1/2 BMO: plunge in #Vancouver #housing sales-to-listing ratio shows buyers have gained more control almost overnight pic.twitter.com/MGDxMRsPu2 " (chart) Twitter
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Investors in individual stocks can fret about the internal goings on at their companies all they want, but a Citi research chart shows that 80 per cent of market returns have been the result of macroeconomic developments.
"@SBarlow_ROB good luck breaking down balance sheets, it's all macro now (Citi) - ftalphaville.ft.com/2016/09/16/217… pic.twitter.com/EUMWE3mNqG " – Twitter (chart)
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Like it or not, next week's financial news will be "all Fed, all the time." As always, the writer to read on the subject is Bloomberg's Matthew Boesler,
"This year, the Fed's ability to use forward guidance has been significantly reduced, and the next bout of market turmoil may take it away entirely. When the U.S. central bank hiked rates in December for the first time in nearly a decade, pricing in bond markets was consistent with seven more quarter-percentage point increases over the next five years. That number has since shrunk to just three. Longer-term interest rates plummeted when investors took fright amid global market volatility early in the year, and took another step down in June when Britain unexpectedly voted to leave the European Union."
"Fed Running Out of Forward Guidance as Markets Exhaust Key Tool" – Boesler, Bloomberg
"The Fed Is About to Make a Mistake" – Kocherlakota, Bloomberg
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Tweet of the Day: "@econbuttonwood The investment themes for the next 35 years, according to Deutsche Bank's long-term asset return study pic.twitter.com/MAICvAD6T0 " – Twitter
Diversion: "Why Do Americans Distrust the Media?" – The Atlantic
Scott Barlow