A daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Monday’s strong rally was led by bond proxies – utilities and consumer staples – that benefit from lower borrowing costs. This is a clear sign that the upsurge was driven by expectations for central bank rate cuts.
Bloomberg’s Luke Kawa notes that there has only been one occasion when a more-than 4-per-cent S&P 500 rally was led by these low volatility sectors. That was on Oct. 20, 2008.
“U.S.’ Steven Mnuchin, Powell to lead G7 finance call on coronavirus response” – Report on Business
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National Bank economist Warren Lovely argued that the Bank of Canada has no choice but to cut policy rates this week,
“The rapid spread of COVID-19 globally, deterioration in financial conditions, steep drop in oil prices, not to mention continued transportation disruptions domestically are collectively too much for the Bank of Canada to ignore. In our opinion, a wait and see approach is no longer justified and the BoC should make good on its de facto easing bias from January and provide some immediate relief. We also expect a strong easing bias to remain and the Bank to effectively guide the market to a subsequent April rate cut as well.”
“@SBarlow_ROB NBF (Lovely): Current conditions "collectively too much for the Bank of Canada to ignore" – (research excerpt) Twitter
“Bank of Canada faces pressure to cut interest rates amid coronavirus fears’ – Report on Business
“Foxconn plans to be up and fully running by the end of March” – Bloomberg
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Jim Chanos is arguably the most famous short selling fund manager in the English speaking world.
In a recent podcast, Mr. Chanos outlined how he searches for companies that look fine on the outside but are actually frauds,
“[The model was] developed by Marianne Jennings, a Professor of Legal and Ethical Studies in Business at Arizona State University, which she outlined in her 2006 book, “The Seven Signs of Ethical Collapse”. Here are the seven traits that help to identify fraudulent companies: Pressure to maintain numbers, Fear and silence, Young ‘uns and a bigger-than-life CEO, Weak board of directors, Conflicts of interest overlooked or unaddressed, Innovation like no other company, Goodness in some areas atones for evil in others.”
“Jim Chanos – Financial Frauds and Manias: Past, Present, Future” – The Acquirer’s Multiple (podcast)
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I am a big fan of Collaborative Fund’s Morgan Housel. The pundit and venture capitalist has published numerous insightful columns providing intellectual context for investors. On Monday, he issued a warning regarding coronavirus coverage in the media (my emphasis),
“This is the first global crisis in the social media age. What we’ve learned from social media in the last decade is that 1) information spreads fast, 2) false information spreads fastest because it’s more sensational, and 3) tribal identities are heightened when debates take place online vs. in person, so healthy debate quickly descends to a my-team-versus-yours battle … Uncertainty amid danger feels awful. So it’s comforting to have strong opinions even if you have no idea what you’re talking about, because shrugging your shoulders feels reckless when the stakes are high.”
Corona Panic – Housel, Collaborative Fund
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Newsletter: “ “If you’re Googling ‘Should I sell my stocks?’ it’s usually too late.”” – Globe Investor
New Globe Investor project: “The highest yielding stocks on the TSX, plus risk data” – Inside the Market
Diversion: I like this Youtube channel, hated this list, “Top 20 rock anthems of all time"’ – Rick Beato (video)
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