More Canadians going broke as interest rates rise

A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Rising borrowing rates are creating a surge in Canadian filings seeking debt relief, according to Bloomberg,

“Hoyes, Michalos & Associates Inc. estimates consumer filings in Ontario rose 1 per cent in 2018, after declining for eight straight years. In a statement on its website, the insolvency firm predicts filings in the nation’s most-populous province will increase by ‘a minimum' of 2 per cent to 5 per cent in 2019, and may jump as much as 8 per cent “if interest rates continue to rise and housing prices fall,” though even at that rate total insolvencies would still be well below the 2009 peak.

“More people are going broke in Canada as interest rates rise” – BNN Bloomberg

“Did Toronto’s Housing Market Have a Soft Landing?” – Move Smartly

“Toronto and Vancouver just saw their worst year for housing sales in at least a decade“ – Bloomberg

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The Financial Times (free to read, with registration) Alphaville site makes the bold claim that ‘technology sector is over’,

“Now that tech is everywhere, the idea of “tech stocks” as a distinct group, just because they were born in the internet era, is outdated. As Vincent Deluard, macro strategist at INTL FCStone, writes in his recent 2019 outlook (emphasis his): “… the more important consequence of the GICS change was the public admission that Technology is no longer special.”

"In its attempts to reinvent the wheel, new tech is mostly repackaging stuff we already have, rather than bringing us anything truly innovative. Where can the world’s most cutting-edge technology be found nowadays? Not at Facebook and Netflix. The most groundbreaking technology is being developed in sectors that are specifically not the tech sector, such as climate science, stem-cell research, aerospace and manufacturing.”

“The tech sector is over” – FT Alphaville

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On Monday, I noted Citi strategist Tobias Levkovich’s belief that analysts’ falling profit expectations were the primary reason for market volatility.

Merrill Lynch chief quantitative strategist Savita Subramanian added more detail to the discussion,

“Estimate cuts accelerated in December, with the three-month (3m) earnings estimate revision ratio (ERR) falling to 0.69 from 0.90, the lowest level in nearly three years. This puts the ratio below its long-term average of 0.87. All sectors except Utilities saw their ERR decline last month, with more cuts than raises to estimates. We use the 3m ERR as one of five inputs in our market outlook, where a ratio below average has generally preceded muted returns… Corporate guidance-a leading indicator of revisions-will be critical this earnings season, where trade is still unresolved, and a broader range of outlooks on China can shed light on whether Apple's guide-down was idiosyncratic or a broader sign of slowing growth”

In short, the U.S. earnings season that starts in a few days is a very big deal for investors, and will set the market tone for the upcoming months.

“@SBarlow_ROB ML: " Earnings revisions weakened across nearly all sectors (except Utilities); the sales forecast revision ratio also weakened"” – (research excerpt) Twitter

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Nomura strategists note that the "machines' – the algorithmic funds that have been blames for late 2018 market volatility – were caught short in the recent rally,

“A sudden rally of the market was apparently unexpected to some of fast-money players, and their short positions in major index futures that had been accumulated in haste may have been squeezed at a fast pace… among a variety of trend-following strategies, some algo-players that follow very short-term momentum (e.g.,, a few days) were likely forced to exit from the market; in the other hand, most typical [commodity trading advisor] that follow longer-term momentum have maintained their bearish stance on major indices such as the S&P500. However, according to Nomura’s real-time estimates, CTAs could soften their bearish stance and start mechanically a short-covering process when S&P500 approaches ~2,600”

“@SBarlow_ROB Nomura: algos caught short (research excerpt) Twitter

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Tweet of the day:

Diversion: “ The Most Anticipated TV Shows of 2019” – The Atlantic