A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
This is not good news at all.
Goldman Sachs economist Jan Hatzius, arguably the most respected sell side economist in the Unites States, points out that Canadians are living beyond their means, dependent on asset sales and debt to maintain current lifestyles,
“The private-sector financial balance -- an economy’s total income minus the spending of all households and businesses -- has proven more powerful in predicting crises than the current-account balance, Goldman analysts led by Jan Hatzius, the bank’s global head of economics, wrote in an Aug. 23 research note. ‘The good news is that the biggest DM economies -- the U.S., the Euro area, and Japan -- are all running healthy private sector surpluses,’ they wrote. ‘The not-so-good news is that some of the smaller DM economies -- especially Canada and the U.K. -- are running sizable deficits and appear vulnerable to higher interest rates and weaker asset markets.’”
“Canada should fear this economic indicator flashing red, Goldman Sachs says” – BNN Bloomberg
CIBC parsed a CNBC interview with Bank of Canada governor Stephen Poloz, who seems well aware of the risks outlined by Mr. Hatzius,
“[Mr. Poloz is] comfortable that the spike in CPI to 3% is temporary, as reflected in core sitting near 2%. He still sees rate hikes ahead, but they will also be watching the data closely given that higher levels of debt will make the economy more sensitive to hikes.”
@SBarlow_ROB CIBC's Shenfeld on Poloz, Cdn household debt” – (research excerpt) Twitter
I should note that equity futures are higher Monday morning before providing the link below, which offers another scare story on debt levels, this time for U.S. corporations,
“Considering the leveraged loan and junk corporate bond market together, highly indebted nonfinancial companies owe about $2.7 trillion. Their debts have been accumulating quickly as creditors have significantly eased underwriting standards. As interest rates rise, so too will financial pressure on these borrowers. Despite all this, global investors appear sanguine, as credit spreads in the CLO and junk corporate bond market are narrow by any historical standard.
Regulators are undoubtedly nervous—they issued guidance to banks to rein in their leveraged lending in 2013—but an increasing amount of the most aggressive lending is being done by private equity, mezzanine debt, and other institutions outside the banking system and regulators’ purview… while there are significant differences between leveraged lending and subprime mortgage lending, the similarities are eerie.”
“Significant Differences, Eerie Similarities” – Moody’s
Canada remains on the outside looking in where NAFTA negotiations are concerned, but Mexico is trying to help out,
“[Canadian Foreign Minister Chrystia] Freeland said the three countries had agreed Canada would rejoin the talks once Mexico and the United States resolve bilateral matters. Mexican and U.S. representatives are meeting in Washington. ‘Once the bilateral issues get resolved, Canada will be joining the talks to work on both bilateral issues and our trilateral issues,’ Freeland told reporters. ‘And will be happy to do that, once the bilateral US-Mexico issues have been resolved.’"
“Canada to rejoin NAFTA talks once U.S., Mexico resolve bilateral issues: Freeland” – Reuters
“Where is Canada? #Mexico and the U.S. are working to wrap up their bilateral issues and reincorporate @cafreeland -- but the clock is ticking...” – Bloomberg
Tweet of the Day:
#Temperature anomalies 1880-2017 by country 🌡. No matter how you visualize it, it looks scary! #GISTEMP #dataviz #climatechange #globalwarming— Antti Lipponen (@anttilip) August 25, 2018
Download / watch hi-res 🎞: https://t.co/ZdGPVTM5yO pic.twitter.com/cAn9wG8FPU
Diversion: “10 Things You May Not Know About the Great Depression” – A Wealth of Common Sense