A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
My column here detailed the negative implications of Canada's remarkably flat yield curve and I thought it was nice of the Bank of Montreal to support my thesis in less than 24 hours with a deeply disappointing set of quarterly profit results. BMO reported fourth quarter earnings per share of $1.53, a dime below consensus expectations. According to Bloomberg, the net interest margin (NIM) – basically the profit margin on the basic banking business of loans – came in very skinny at 1.55 per cent. The NIM is a direct function of the flat yield curve – the interest the bank receives on longer term debt is low relative to short term rates at which banks borrow funds.
"BMO profit misses estimates on impact of 'unsettled environment' – Berman, Report on Business
There will be great rejoicing in the more goldbuggy corners of the Internet after reports that the U.S. Justice Department will investigate potential price fixing in precious metals markets. Gold investors have long suspected an array of conspiracies – missing bullion, and secret market manipulation by the Federal Reserve – keeping the gold price lower. A similar regulatory probe in Europe, however, failed to find any financial system misdeeds.
"Big banks face scrutiny over pricing of metals" – Wall Street Journal
The ROB's Tamsin McMahon tracked the ongoing glut of unsold condominium units in Canada which, surprisingly, is more focused in smaller markets where price appreciation has been slower relative to major centers.
"The downturn has been most painful in Quebec, where the boom in condo construction started in 2011 and 2012 as young buyers, armed with cheap mortgages, flocked to the housing market.
Similar problems have plagued markets such as Moncton and Halifax, according to a recent housing market forecast from Re/Max. In Regina and Saskatoon, the number of unsold housing units hit a 30-year high, Canadian Mortgage and Housing Corporation said, the majority of them condos."
"In many Canadian cities, unsold condos are stacking up" – McMahon, Report on Business
A Goldman Sachs report on the hedge fund industry argues that sector returns are very much dependent on the performance of Apple Inc.,
"Its size and popularity means Apple will be a key driver of hedge fund returns as well as broad U.S. equity performance and earnings growth."
The findings are interesting in light of analysis from Bank of America quantitative strategist Savita Subramanian. Ms. Subramanian's work (cited on Josh Brown's Reformed Broker site) concluded that "we found that the 10 most underweight stocks in the S&P 500 by large cap active managers outperformed the 10 most overweight stocks by managers by 32ppt in 2014."
"The performance of many hedge funds just comes down to owning Apple" – Bloomberg
"Why active management fell off a cliff – perhaps permanently" – Brown, Reformed Broker ( February 17, 2015)
Diversion: Bloomberg predicts the world's next great wine regions and, like most people my age, I can't help thinking of Monty Python's famous "Australian Table Wines" skit which features a fine Côte de Rod Laver.
"The world's next big wine regions" – Bloomberg
Follow Scott Barlow on Twitter @SBarlow_ROB