Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
The global strategy team at Citi sees a lot more downside to world equities,
“We think the next global EPS recession is about to begin, the 8th in the past 50 years. Our models suggest the MSCI World index is already pricing in a 5-10% earnings contraction, well below the 5% increase predicted by the analyst consensus for 2023. A global EPS recession similar to the last 7 (-31% average) would imply a further 20-30% off the MSCI World. We remain concerned that interest rate obsessed equity markets have yet to price in the true earnings impact of a full-blown economic slowdown… We think MSCI World trailing EPS have peaked and are set to fall in 2023 as the global economy slows and commodity stock profitability fades.”
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BMO chief economist Doug Porter highlights a close connection between money supply growth and inflation and a strong implication that consumer prices are about to fall quickly,
“All but cast aside as a serious economic indicator in the past few decades, the money supply has returned with a vengeance this year. In days of yore, the BoC used to focus on a broad measure, specifically M2++. (Briefly, this includes currency in circulation, deposits at all sorts of institutions, money market mutual funds, among other items.) When inflation was low in the period from the early 1990s up to 2020, the relationship between money supply and inflation didn’t look particularly robust, so it was typically ignored. However, the spike in money in the early stages of the pandemic did indeed prove quite prescient at foreshadowing the big run-up in inflation. True, the fit is not perfect, and money leads inflation by 12-18 months (we used 16 in this chart). The “good” news is that the more recent steep pullback in money supply growth points to a quick retreat in inflation by next year. If that proves correct, money supply may become a closely watched indicator yet again.”
“Money supply and CPI (BMO)” – (research excerpt) Twitter
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A new mining technique could help alleviate shortages of rare earth metals,
“The idea behind the new work was to use an electrical current to simplify the process. The standard leaching relies on the flow of an ion-rich solution through the ore to move the rare earth elements out of it. But once that solution displaces these elements from the ore, they return to being ions in a solution. In that state, an electrical current should drive them to the oppositely charged electrode. In theory, this should mean that less of the leaching solution is needed to get material out of the ore, and thus there should be fewer environmental issues afterward.
This sort of electricity-driven purification has been used to decontaminate soils with high levels of metals. But it’s not been tried on this sort of mining before. The idea worked even better than the researchers expected.”
“Toxic cleanup technique can get more rare earth metals out of ores” – ArsTechnica
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Diversion: “These are the most popular Christmas songs of all time” – A Journal of Musical Things
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