A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Most investors are aware of record levels of Canadian household debt, but a new report from DBRS highlights an important development in the make-up of these liabilities.
According to the report, there’s been a disquieting major spike in HELOC (Home Equity Lines of Credit) borrowing since the beginning of 2016.
The increase in HELOC debt growth rate is a bit of a mystery. It could be that these funds are being used to back alternative lender mortgages that aren’t covered in the data collection, or it could be a sign of consumer financial stress,
“@SBarlow_ROB DBRS: Big jump in HELOC debt” – (chart) Twitter
“@SBarlow_ROB DBRS: “Between 1990 and 2017 year-end, household liabilities (including mortgages, consumer credit, bank loans and trade receivables accounts) increased by 506%, while personal disposable income (PDI) grew by 208%.” – (chart) Twitter
“@SBarlow_ROB: “DBRS: “consumer credit has grown on average by 4.7% in 2017, making it the year of the largest acceleration in the past decade.”” – (chart) Twitter
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There is weakness through most of the commodity complex this week.
On Tuesday, a report on U.S. oil inventories showed a surprise inventory build, and there are signs of a global copper glut that doesn’t bode well for either that commodity price or continued global economic growth,
“Traders said most pressure [on oil prices] ensued after the American Petroleum Institute (API) on Tuesday reported a surprise 5.3 million barrels rise in crude stocks in the week to March 23, against expectations for a decline of to 430.6 million barrels.”
“Oil retreats from 2018 highs above $70 a barrel” – Reuters
“Global Copper Stocks Are Rising at a Record Rate as Demand Lags” – Bloomberg
“@chigrl Copper and Iron ore have declined c.10% ytd” – (chart) Twitter
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More positively, Goldman Sachs is not concerned that rising levels of equity market activity signal an imminent bear market and the end of the cycle,
“We do not believe that this is consistent with an imminent bear market because of the wide spread in the underlying variables. Current very low levels of unemployment and strong growth momentum would normally be associated with other risks - in particular tighter monetary policy, a flatter yield curve and rising core inflation. But these remain subdued and without these risks rising, the prospect of a recession and ‘cyclical’ bear market is low. Structural bear market risks are also modest given the absence of major financial imbalances.”
“@SBarlow_ROB GS: No imminent bear market” – (research excerpt) Twitter
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Stocks for U.S. technology giants took another beating Tuesday, but BlackBerry is bucking the trend today after a strong earnings report,
“BlackBerry Ltd. shares are rising in premarket action after it narrowed its fourth-quarter loss and it posted record revenue from software and services amid its ongoing transformation. The shares were up almost 5 per cent heading into the North American open.”
“BlackBerry on the rise” – Babad, Report on Business
“Tech meltdown sparks late-day market plunge” – Reuters
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Tweet of the Day:
Diversion: “Concert Halls of Fame: History’s greatest music venues.” – Lapham’s Quarterly
Scott Barlow