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A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web

Joachim Klement is a U.K. -based investment strategist and author of the Klement on Investing website. His daily missives are often enlightening, as Tuesday’s discussion of analyst ratings and stock price targets highlighted,

“[A study] found that the buy and sell recommendations of the analysts were biased and typically too optimistic. Similarly, target prices of analysts had little correlation with, let’s call it “reality”. These biases, together with the bias of analysts to recommend glamour stocks and chase price momentum have been well-documented for years. Thanks to regulatory changes, the excessive optimism of analysts has declined after 2000 but their recommendations are still far from being unbiased”

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The main point for investors is that they can safely ignore stock price targets.

“The Virtuous Investor: Rule 15” – Klement on Investing

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Writing for the Financial Times, economist Megan Greene argued that economic inequality can’t be solved by wealth taxes,

“Whatever your moral views on soaking the rich, history shows wealth taxes do not usually work… About a dozen OECD countries have tried them. They did not raise much money: as little as 0.2 per cent of gross domestic product a year. Only four [countries] still have them… The extra revenue is often offset by administrative costs… The French government estimated that 10,000 people with €35bn in assets left the country for tax reasons between 2002 and 2017, when France scrapped its wealth tax in favour of a levy on real estate.”

“Wealth taxes will not solve inequality” – Financial Times (paywall)

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National Bank economist Krishen Rangasamy noted the S&P 500’s increasing dependence on non-U.S. revenue in a Wednesday research report,

“Latest Q3 data from the Bureau of Economic Analysis suggests U.S. corporate profits were roughly flat on a year-on-year basis as gains in the “rest of the world” component (+6.5%) offset declines from domestic industries (-3.1%). So much so that the “rest of the world” share of U.S. corporate profits is on track to reach almost 26% this year…excluding the extraordinary 2008 event when domestic profits collapsed amid the Great Recession, that’s the highest share ever recorded for corporate profits generated abroad. The White House would be wise to note this increased reliance of U.S. corporations on foreign operations because any further escalation of its trade wars would likely jeopardise overall corporate profits.”

“@SBarlow_ROB NBF: "U.S.: Corporate profits increasingly reliant on foreign operations" – (excerpt) – Twitter

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There is a consensus building among Wall Street analysts that 2020 will feature a rebound in global growth that will benefit commodity and other cyclical stocks. Evidence of this pattern beginning is not easy to find, however,

“The recent retreat in leading government 10-year yields and loss of momentum for steeper yield curves and the failure of industrial metals to rally in a convincing manner after a sharp slide for much of November. Also of note is gold holding the line at $1,450 an ounce (an area last sustained in 2013), or some 13.5 per cent higher for the year. Among emerging market currencies, there are a number of spot fires (see Brazil) and EM carry strategies have been under pressure for much of this month. Again, not affirming hopes of a gathering rebound in global growth”

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“Merrily ignoring the warning shots” – Financial Times (paywall)

“Global trade may shrink through the end of the year as countries around the world continue to grapple with a manufacturing-led slowdown” – Bloomberg

“Deere & Co. delivered a more cautious outlook than expected for the year ahead” – Bloomberg

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Newsletter: “With his figurative tongue firmly and grimly in cheek, Mr. Wolf adds that the 1930s “are also a lesson of what happens when great countries fall into the hands of power-hungry lunatics” – Globe Investor

Diversion: “The world’s largest chip is now being used to develop precision cancer drugs” – M.I.T. Technology Review

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