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

My theory has always been that the primary force behind Canada's commodity-intensive recovery from the financial crisis was China's massive credit and infrastructure expansion that began in 2008. This means that domestic investors have to pay close attention to the ongoing slide in the Middle Kingdom's economy.

Reuters reports Wednesday that Chinese home prices have fallen for the first time in two years in month-over-month terms. The slowdown is particularly acute in Beijing where the Want China Times reports an alarming 35 per cent year-over-year drop in Beijing home sales.

The problem in China isn't necesarily a matter of household finances – most individual Chinese homebuyers start with large down payments. The issue that could become enormous is the use of apartment buildings and the like for loan collateral. The more the collateral falls in value, the greater the likelihood that these loans will be called by the bank, setting off a scramble for cash.

"China new home prices fall m/m in May - first drop in two years" – Reuters

"Home sales in Beijing slumped 34.9% y/y n the first five months of 2014" – Want China Times

The other distressing China story is highlighted in a South China Morning Post article, "Citic Resources says half its alumina stored at Qingdao missing." If this is an isolated incident limited to the port of Qingdao, it's not really a problem – another report estimates the potential Citic losses at $40-million (U.S.), which for them is just pocket change. But if the improper use of metal inventories as loan collateral is found to be widespread, it could be another trigger for a rush of loan defaults and bankruptcies.

"Citic Resources says 100,000 tonnes of alumina stored at Qingdao missing" – South China Morning Post

"Foreign banks ask China: Where's our copper?" – Marketplace

Cullen Roche's Pragmatic Capitalism blog backs up my thesis in Tuesday's post on Warren Buffett's "Not-Stupid" investing style. Mr. Roche presents another telling Buffett quote highlighting the defensive nature of the Berkshire Hathaway investing approach: "Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market." – Warren Buffet

"Warren Buffett's Biggest Losses" – Pragmatic Capitalism

Franklin Templeton bond guru Michael Hasenstab warns of impending losses in fixed income markets during an interview with the Financial Times: "I think the ability to generate positive returns in core fixed-income markets – whether it's in the U.S. or Europe – is very limited."

Mr. Hasenstab expressed a desire to be positioned for rising U.S. interest rates and since Canadian rates get dragged in whatever direction Treasuries go, domestic investors (and mortgage holders) should start preparing for a rising interest rate environment.

"Bond star Michael Hasenstab warns on U.S. debt" – Financial Times (registration required)

U.S. mortgage applications fell sharply last week in another sign that hopes for a robust second-half recovery in the U.S. economy may be dashed yet again in 2014. The larger issue, one that is confounding economists, is that low interest rates have not translated into sharply higher demand for loans. There's a sale on money, and no one's buying.

"U.S. Mortgage Applications Drop Sharply" – Business Insider

Tweet of the Day (includes chart): @M_McDonough China: Newly Built Residential Prices YoY Avg – Twitter

Diversion: "Previously unknown Picasso painting discovered underneath a Picasso painting" – Gawker

Follow Scott Barlow on Twitter at @SBarlow_ROB.