A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
It looks like the Canadian housing market has more of a structural issue than previously understood.
Amidst a slowing overall economy, Bank of Montreal economists note a near-record spike in national rental costs,
“After being stable and mild—bizarrely mild— for years, the rent component of the Canadian CPI is suddenly blasting higher. A change in StatsCan’s methodology (i.e., moving somewhat closer to reality) has led to a sudden acceleration. After averaging just 1.2% annualized gains over the past 15 years, rents have jumped 2.7% y/y. That’s the biggest rise in this component since 1992, and we’re likely headed much higher, since the six-month trend is 4%”
“@SBarlow_ROB BMO: Canadian rent costs spike higher” – (research excerpt) Twitter
BNN Bloomberg reports that cannabis sales are slowing while inventory levels climb. There are seasonal issues involved, but these are still not good signs for related stocks that are already extremely expensive based on price to sales ratios,
“Canadians bought 6,671 kilograms of cannabis in February, down about nine per cent from the prior month, and the lowest level since legalization, according to figures released by Health Canada. The decline is largely attributed to fewer days in February, said Health Canada. The average daily sales of dried cannabis in February actually increased by one per cent compared to January - from 236 to 238 kilograms. However, the total amount of inventory of finished and unfinished dried cannabis held by cultivators, processors, distributors and retailers totaled 144,470 kilograms in February – approximately 21.7 times the amount of total sales in the month – as produces looked to stock up on marijuana ahead of the launch of edibles later this year. “
“Canadian pot sales in February down as inventory levels continue to climb’ – BNN Bloomberg
“The cost of cannabis” – Marginal Revolution
Global economic data took another negative turn in the early hours of Thursday,
“Activity in Germany’s services sector rose to a seven-month high in April, but investors focused on the 44.5 reading for the manufacturing sector, well below the 50.0 mark separating growth from contraction even if it was above the 44.1 reading last month… The weak surveys out of Europe added to a reading of Japanese manufacturing activity which showed new export orders fell at the fastest pace in almost three years.’
“Poor PMIs wipe week's gains off global shares” – Reuters
Canadian economist William White is the former chief economist at the Bank of International Settlements.
In a recent interview, Mr. White argued that the global economy is in a “debt trap,”
“With public and private debt at record highs, we are in a debt trap. When you are in a debt trap it means: you know that you want to raise rates to bring the expansion of debt to an end, but you can’t because raising rates will cause all sorts of problems, for example hurt growth and increase debt servicing costs. There are also political-economy-constraints. High government debt and deficits mean that higher rates are going to hit the government.”
The responses are good fodder for the kind of Fed-hating that I don’t share, but the perspective is relevant.
“Central banks are biased towards loose policy” – Finanz und WirtSchaft (translated to English)
Tweet of the Day:
The percentage of loss-making companies listing shares for the first time has reached tech bubble proportions of about 80% of all IPOs. Bernstein: pic.twitter.com/GK9DuPcvUz— Tracy Alloway (@tracyalloway) April 18, 2019
Diversion: “CRISPR has been used to treat US cancer patients for the first time” - M.I.T. Technology Review
Column: Should Canadian investors sell utilities and buy financials? - Barlow, Inside the Market
Newsletter : “Disney and the future of the media landscape” - Globe Investor