A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
BMO suggests that household debt deleveraging has hit the Canadian economy with debt growing more slowly than income. The process also includes mortgage debt growth plumbing 40-year lows
“Overall household credit outstanding, which includes all forms of borrowing and looks at all types of lenders, eased to a 3.7% y/y pace in August. In perspective, total household disposable income is up 3.9% y/y, not far from what we would view as its underlying trend. The biggest chill has been in mortgage growth (not surprisingly), which has softened to a 3.6% y/y clip from an average growth rate of about 6% in the past two years. We are on the cusp of seeing the slowest growth in mortgage balances outstanding since the early 1980s.”
“@SBarlow_ROB BMO: "We are on the cusp of seeing the slowest growth in mortgage balances outstanding since the early 1980s."” – (research excerpt) Twitter
“Toronto housing market’s hot rebound cools in September” – Report on Business
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The Financial Times, using research from energy consultant Wood Mackenzie, argues that the world will run out of the materials necessary to make batteries before the electric vehicle revolution fully ramps up,
“For example, the idea of an endless supply of metals for millions of EVs globally has left us scratching our heads. The current generation of batteries will certainly be used for the next wave of EV models but post 2025, there will be a shortage of lithium, nickel and cobalt. Higher raw material prices can incentivise new metals production to some extent but this takes time — it can often take up to 10 years to bring a new operation online. And, of course, a high raw materials price environment raises the issue of battery costs.”
“Speed bumps on the road to electrification” – Financial Times (paywall)
Related: “@SBarlow_ROB Citi: lower, then higher for cobalt prices” – (research excerpt) Twitter
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Calling market tops is notoriously difficult (more like impossible), but this didn’t dissuade Maclean’s from calling the end of the cannabis stock mania,
“There’s going to be a lot of disappointed folks when, on October 17, the promise of pot becomes a reefer reality … Grand View Research estimates the legal marijuana industry will be worth $164 billion by 2025. What’s problematic for investors is that it will still be years before these operations see any meaningful results … Scott Willis, head of research at Grizzle, a cannabis-focused investment analysis firm, thinks that Canadian sales estimates are also too optimistic. He says people will continue buying their goods on the black market for at least another year. Why? Because dealers deliver, their product will be less expensive than what’s sold in stores.’
“The pot stock boom is about to bust” – Maclean’s
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Crude prices are off a bit on news that Saudi Arabia and Russia have agreed to export more oil to make up the potential shortfall caused by sanctions on Iran,
“The sources said Saudi Energy Minister Khalid al-Falih and his Russian counterpart Alexander Novak agreed during a series of meetings to lift output from September through December as crude headed towards $80 a barrel. It is now over $85. ‘The Russians and the Saudis agreed to add barrels to the market quietly with a view not to look like they are acting on Trump’s order to pump more,’ one source said.”
“Exclusive: Saudi Arabia, Russia agreed in Sept to lift oil output, told U.S.” – Reuters
“Oil's Next Key Resistance Level Seen at $89, Credit Suisse Says” – Bloomberg
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Tweet of the Day:
Diversion: “The Spooky Genius of Artificial Intelligence: AI doesn’t think—it evolves” – The Atlantic
Newsletter: “'Market likely to signal imminent bear market is acting , well, weird'” – Globe Investor
Scott Barlow