Skip to main content

Scott Barlow

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

There are few active hedge fund managers more revered than Ray Dalio, bazillionaire founder of Bridgewater and Associates (even if many are disquieted by the cult-like office culture at the firm).

On Tuesday, Mr. Dalio warned of a major inflection point in global bond markets as the end of the long-term debt cycle approaches,

"We are in situation where [central banks] want to drive you out of cash out of bonds by making them so terrible. We have not experienced the bad returns of that debt … The historical parallel is 1935-45 … Like, there's no doubt that you can slow the world economy [ with a Fed interest rate hike], the U.S. economy. Tightening will work. Okay? And when we look at the inflation pressures, you know, this is a global thing. And you look at the demographics. All of those things means that the risks are so much more on the downside."

"Are We At Long Term Debt Cycle End? Delivering Alpha Conference" – Value Walk
"Bridgewater's Dalio: There's a 'dangerous situation' in the debt market now" – CNBC

=====

Previously, Mr. Dalio published a short animated, investor-friendly description of how he believes global economic cycles function. I highly recommend watching.

"How the economic machine works" – Economic Principles

=====

Bank of Canada senior Deputy Carolyn Wilkins gave a speech in the U.K. that for Canadians, sounded a lot like "you better eat your vegetables,"

"Carolyn Wilkins said Wednesday that means changing investment strategies and risk-management practices to reflect lower rates of return. 'For households, this may mean saving more before retirement or planning for a lower post-retirement income,' Wilkins said in a prepared text of her speech. 'It also means acknowledging a reduced capacity to grow out of existing debts. The faster we do this, the safer the financial system will be.'"

"Save more for retirement or plan for less income, BoC official says" – Report on Business

=====

I don't usually focus on merger and acquisition deals because they tend to matter solely to the shareholders involved. Wednesday's $66-billion (U.S.) announced merger of Bayer AG and Monsanto Co. may, however, have larger implications.

A fascinating report from Morgan Stanley strategists note that their proprietary indicator is showing the U.S. market cycle is ending and asset prices are set to head lower (this is the reverse view of the company's economists, importantly). Takeover activity, the strategists note, often peaks with the market cycle, along with employment, S&P 500 earnings, and ISM surverys,

"The Morgan Stanley Cycle Indicators are now flagging the risk that [developed ] markets have entered a 'downturn' phase, even as our economics team grows more optimistic about the outlook. Is this a true cycle turn, or a 'false peak' like 1965, 1984 and 1994? … M&A volume and the unemployment rate are more or less following the trends around previous cycle turns. On the other hand, behaviour of loan growth, ISM and S&P EPS look very different."

"Bayer clinches $66-billion Monsanto takeover" – Report on Business
"@SBarlow_ROB MS "MS Cycle Indicators are now flagging risk DM markets have entered a 'downturn' phase" pic.twitter.com/x5mu6bRxcx " – (research excerpt) Twitter

======

Tweet of the Day: "@lisaabramowicz1 More than $1 billion has been withdrawn from HYG, the biggest HY ETF, in the past week: Bloomberg data " – Twitter

Diversion: There are some stunning observations in The Atlantic's " The Free-Time Paradox in America" ,

"Erik Hurst, an economist at the University of Chicago, … told students that one 'staggering' statistic stood above the rest. 'In 2015, 22 percent of lower-skilled men [those without a college degree] aged 21 to 30 had not worked at all during the prior twelve months,' he said.

"The Free-Time Paradox in America" – Thompson, The Atlantic

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe