A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web
CBC collected arguments from economists who believe that the end of NAFTA wouldn't be a big deal to the domestic economy,
"It is a 'manageable risk' that businesses, markets and policymakers would adjust to fairly quickly, BMO says in recently released report. ... BMO says a NAFTA termination means growth in Canada's real gross domestic product would be between 0.7 per cent and 1.0 per cent lower than would otherwise be expected over a five-year period. Additionally, consumer prices in Canada would be expected to rise roughly 0.8 percentage points, due to a weaker exchange rate and modestly higher tariffs."
"NAFTA's potential end would hurt, but BMO says it's a 'manageable risk'" – CBC
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Oil markets are skittish as OPEC delegations arrive in Vienna for a meeting that is expected to result in a continuation of production cuts,
"Futures dropped as much as 1.2 percent in London, extending Monday's decline. Uncertainty over the outcome of Thursday's meeting is creating the risk of a slide in prices, which have gained on assumptions that the curbs will be prolonged for nine months, according to Goldman Sachs Group Inc. OPEC backs such an extension but is still waiting for commitments from Russia."
"Oil Extends Declines Before OPEC Meeting on Output-Cut Extension" – Bloomberg
"Just How Big Is Oil's Invisible Friend?" – (nat gas outlook) Gadfly
"Goldman Says Oil Bulls Beware as Uncertainty Grips OPEC Meet" – Bloomberg
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Deutsche Bank global financial strategist Masao Muraki provides his theory on why equity valuations remain so high,
"The earnings yield in Japan, the US, and Europe can mostly be explained by the term premium observed in bond market (the yield premium for long-term bonds due to price fluctuation and illiquidity risk) and the risk neutral rate (average forecast short-term interest rate over the next 10 years). A one standard deviation decline in term premium causes stock prices to rise 2.5% in the US, 1% in Europe, and 5% in Japan."
Shorter version: The yield curve is flat, so investment assets are diverted from longer term bonds to equities.
"@SBarlow_ROB D.B.: the reason for high PE ratios" – (research excerpt) Twitter
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JP Morgan published a giant tome called "An Investors' Guide to Artificial Intelligence" wherein they provided stock ideas to benefit from this potentially transformative trend. From the summary,
"AI can be used by enterprises to: 1) Drive sales and customer engagement – AI can improve the overall customer experience in a multi-channel world with the use of recommendation systems, virtual assistants, chatbots and AI-managed marketing platforms. 2) Improve operational efficiencies – AI functions are enhancing quality control, predictive maintenance and prescriptive responses, 3) Enhancing products with embedded AI, and 4) generate new insights and enable new business models."
"@SBarlow_ROB JPM : The scope of AI proliferation" – (research excerpt) Twitter
"@SBarlow_ROB JPM: Biggest winners from AI expansion' – (stock ideas) Twitter
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Motley Fool attempts to answer an important question: Why does Bitcoin have value?,
"Bitcoin originally was just a peer-to-peer payment platform, but increasingly it's becoming the reserve currency for all other cryptocurrencies, and that means it's also becoming a store of value. And when something becomes a store of value [like gold], the most important metric is the number of believers."
"A Cryptocurrency Primer: Why Does Bitcoin Have Value?" – Motley Fool
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Tweet of the Day: "@michaelbabad What to watch for in Bank of Canada financial system review (subscribers) theglobeandmail.com/report-on-busi… " – Twitter
Diversion: "The best films of 2017" – Marginal Revolution
Scott Barlow