A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Reuters reports that Canada is preparing to step up its participation in what Bloomberg infers will be a never-ending global trade war,
“Canada is looking at ways to boost the effectiveness of its retaliatory tariffs against the United States, Foreign Minister Chrystia Freeland said on Tuesday … Canada imposed tariffs on C$16.6 billion ($12.5 billion)worth of U.S. exports in May 2018 after Washington slapped punitive measures on exports of Canadian steel and aluminum. The initial Canadian list included orange juice, maple syrup, whiskey, toilet paper and a wide variety of other products… “We are certainly constantly looking at ways to refresh the retaliation list ... to have an even greater impact,” Freeland told reporters. David MacNaughton, Canada’s ambassador to Washington, told U.S. agricultural reporters on Monday that Canada could announce a new list of targets as soon as next week.’
“Canada looks at fresh tariffs on U.S. goods, silent on details revealed by envoy” – Reuters
“Trump Has a Message for the World: My Trade Wars Aren’t Over Yet” – Bloomberg
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Nothing captures the attention of domestic investors like Americans shorting our bank stocks. The furor continued Tuesday with an appearance by U.S. hedge fund manager Steve Eisman, who does hold short positions on Canadian banks, on BNN Bloomberg,
“'Canada has not had a credit cycle in a few decades,' Eisman, portfolio manager at Neuberger Berman told BNN Bloomberg in a Tuesday interview. ‘I don’t think there’s a Canadian bank CEO that knows what a credit cycle really looks like.” “I just think, psychologically, they’re extremely ill-prepared. And, given how low the risk weights on their balance sheets are. I think they’re unprepared for how much their capital ratios could go down if there’s just a simple normalization of credit, not a calamity, just a simple normalization of credit.’”
Report on Business writers James Bradshaw and Tim Kiladze provided the counterpoint.
I don’t have an opinion on the issue beyond pointing out that Mr. Eisman’s short positions are very expensive to carry because of high dividend yields, so his conviction level on the trade must be high.
“Canada's bank CEOs 'extremely ill-prepared' for credit cycle: The Big Short's Eisman” – BNN Bloomberg
“Why shorting the Canadian banks on housing makes no sense” – Report on Business
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Merrill Lynch energy analysts returned from an industry conference in the U.K. and noted short-term bullishness but mid-term concerns about future crude demand,
“Our annual bull versus bear debate on the oil price outlook ended with our audience survey showing almost half expected Brent oil ending the year above $70/bbl. The consensus bull case was predicated on production curtailments in OPEC+, continued strong global demand (especially in the case of a US-China trade deal) and capital discipline amongst US shale producers … However, scepticism regarding the longer-term outlook received greater support with the 2025 consensus <$55/bbl Brent.
“ESG was a surprisingly key focus at the conference, with >45% of the audience at our ESG panel saying that it “heavily influences” their current investment decisions. This extended into corporate meetings too, with many investors using Big Oil meetings not to focus on traditional businesses or the relatively lower returns in renewable but instead pushing companies to explain why they are not being bolder in ‘new energies’.”
“@SBarlow_ROB ML: "scepticism regarding the longer-term [oil price] outlook received greater support with the 2025 consensus <$55/bbl Brent"” – (research excerpt) Twitter
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Tweet of the Day:
Diversion: “The Democratic Electorate on Twitter Is Not the Actual Democratic Electorate” - The New York Times
Scott Barlow