A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Mammoth California-based bond fund manager PIMCO has turned its attention to the Canadian economic outlook, and they don’t like what they see longer term,
“Consumption and residential investment have accounted for more than 92% of Canada’s real GDP growth since the global financial crisis (see Figure 1), against an average of approximately 80% for the previous 25 years … we do not believe this growth model is sustainable. Just as our American friends did before the crisis, Canadians have essentially used their homes like piggy banks (if not to the same degree, or in exactly the same way) by refinancing their mortgages and taking out home equity lines of credit (HELOCs) … we believe the Bank of Canada … may not be able to normalize (i.e., hike) interest rates to the same degree and pace as the U.S. Federal Reserve. Our consumers and housing markets simply cannot handle substantially higher interest rates.”
“Canada’s ‘Rudest Awakening’ May Come From Debt‑Saddled Consumers” – PIMCO
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Year-ahead market previews have never been very accurate, but this year was particularly bad, with almost every common forecast exactly wrong,
“Emerging economies began the year as a market darling only to be toppled by a surge in the dollar and rising political risks. A brewing trade war has dashed expectations synchronized global growth would keep pumping up equities. China, long seen as the world’s growth engine, slipped into a bear market. … ‘Six months ago you had a lot of people with a high conviction that global growth would be spectacular in 2018,’ said Max Kettner, a cross-asset strategist at Commerzbank AG in London. ‘Much of that had to do with two themes: global synchronized growth and a flat dollar. They both turned out to be completely wrong.’”
“Wall Street Left Reeling as 2018 Upends Almost Every Bet” – Bloomberg
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The state government in Minnesota has approved Enbridge’s Line 3 pipeline in a big win for Alberta’s energy industry,
“Regulators in Minnesota approved Enbridge Inc.’s massive Line 3 pipeline project on Thursday, infuriating Indigenous tribes and environmentalists while buoying hopes in Alberta’s long-suffering oil industry… the approval inches Line 3 closer to fruition and is a salve for Alberta‘s ailing oil patch… Enbridge says replacing the [previous pipeline] would restore capacity to 760,000 barrels per day and help ease shipping constraints that have harmed Minnesota refiners and dented investor confidence in the oil sands.”
“Enbridge clears major hurdle for Line 3 expansion” – Report on Business
“Canada’s oil industry just moved one step closer to getting some relief from its pipeline woes “ – Bloomberg
“Oil steadies as market tightens on lost supply” – Report on Business
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There are increasing signs of stress in the Chinese economy. I still think the government will just print another giant wall of money to make the problems go away for a while, but ,just in case, investors should probably be aware of the issues,
“A dollar shortage in Asia is a political question” – Bloomberg
“250 Chinese Investment Funds Liquidated in First Half, Exceed Total Closures for 2014 – 2017” – China Banking News
“Kevin Rudd on Xi Jinping, China and the Global Order” – Asia Society Policy Institute
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Tweet of the Day:
Diversion: “In with the Out Crowd: Contrarians, Alone and Together” – Hedgehog Review
Scott Barlow