Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
Morgan Stanley energy analyst Devin McDermott does not see windfall taxes on U.S. oil companies happening,
“Windfall tax unlikely, could have negative impacts on investment. In a speech this evening, President Biden encouraged Congress to consider a windfall tax on ‘excess profits’ in response to strong 3Q earnings from large energy companies last week. Importantly, any such tax initiative would require legislation and, in our view, would struggle to get the necessary votes (60 in the Senate as stand-alone legislation, or 50 as part of budget reconciliation). Moreover, a tax on profits could further constrain much needed investment in oil & gas at a time when spending and production are still recovering from the Covid-19 pandemic.”
“MS: Windfall taxes on U.S. oil companies unlikely” – (research excerpt) Twitter
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Ivey Business School professor Mike Moffatt, who has been a valuable source of housing-related analysis on social media, wrote a longer article on the subject for Maclean’s centred around Toronto’s housing shortage,
“In the last year alone, around 75,000 people left Toronto, York Region and Peel Region for other parts of the province. Along with surging home prices outside the GTA, there are sure to be larger impacts on the region itself. What are the next generation of teachers, nurses, and skilled trade workers in Toronto going to do if they can’t afford to live there? And how will the region address the growing divide between the haves and have-nots? … Fact is, it doesn’t take that many families moving to rural Nova Scotia or Prince Edward Island to drastically transform a local housing market. And so the trend we saw in Southern Ontario is spreading throughout the country—I call it the “Great Canadian Convergence”—and communities must be prepared for the consequences… The solution, ultimately, is to build more housing. If we create enough affordable housing within the GTA, we will be able to retain more families”
“How Toronto’s housing market is transforming the rest of Canada” – Maclean’s
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Wells Fargo investment strategy analyst Michael Taylor explains why the recent quarter was a ‘black swan’,
“Of the 187 quarters since 1976, there has never been a period of three consecutive quarters with negative quarterly returns for both stocks and bonds: until now. Negative returns for both asset groups have frequently been associated with economic slowdowns, leading investors to question if a recession is looming… Typically, when equity markets fall, investors have tuned to bonds as a perceived safe haven asset, driving bond prices higher and yields lower. Yet this trend has broken, calling into question the role of bonds as a potential portfolio stabilizer… looking ahead, stocks and bonds may continue to struggle with performance if rates rise further and growth wanes as we expect. We believe a well-diversified portfolio … includes exposure to commodities, which have tended to rise with inflation, and alternative investment strategies like macro and relative value. "
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Diversion: “The New History Wars” – The Atlantic
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