A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web.
Left-leaning U.K. economist Chris Dillow published "The harm of high housing costs" which has obvious and important implications for Canadians. Mr. Dillow lists five reasons real estate rallies are eventually bad for economic growth: household debt, low productivity, declining entrepreneurship, NIMBY-ism, and a trend towards productivity-harming long commutes. I found the segment on entrepreneurial activity most interesting and new,
"[Property speculation] diverted potential entrepreneurs … away from perhaps more socially useful activity; has encouraged people to regard their house as their pension and so diverted capital away from business investment and formation."
"The Harm of high housing costs" – Stumbling and Mumbling
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Many Canadian investors are not going to like this sentiment, but I think it's mostly true,
"Commodities Are Meant For Trading, Not Investing. ... Over the past 10 years, the Bloomberg Commodities Index is down 6.5 percent per year for a total loss of almost 50 percent. Over that same time frame, the S&P 500 is up a total of close to 100 percent, or a 7 percent annual return… There is also no financial reason that dictates that commodities must exhibit mean reversion. They provide no dividends or income. They don't have earnings. Commodities are more of an input than a financial asset. In many ways, a bet for commodities is a bet against technology and innovation."
"Commodities Are Meant For Trading, Not Investing" – A Wealth of Common Sense
"@tbiesheuvel Iron ore is getting smashed again. Down another 5% " – (chart) Twitter
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Oil markets are providing a counterpoint to the anti-resource sentiment above as clear signs of falling crude inventories become apparent,
"Total SA, Vitol Group and Mercuria Energy Group Ltd. are selling crude they hoarded in Saldanha Bay, South Africa, during the 2015-2016 glut when the market effectively paid traders to store oil, according to people familiar with the matter, who asked not to be named discussing private operations. Crude demand is now seasonally outstripping supply, tightening the physical market for some crude varieties to levels not seen in the last two years and encouraging traders to sell their stored oil. "The market is selling inventories from everywhere," Mercuria Chief Executive Officer Marco Dunand said in an interview in Geneva."
"Oil Traders Empty Key Crude Storage Hub" – Bloomberg
"Thirst for oil returns in wealthy nations" – Financial Times
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Must-read of the day in economics argues that loose monetary policy has backed central banks into a corner,
"Policymakers believed that rising wages from higher employment would help low to middle-income households keep up with policy-induced asset price inflation, thereby keeping and the income and wealth gaps between asset owners and the asset-less in check. Unfortunately, broad-based wage growth did not materialize … social discontent — partly due to the perceived distributional impact of expansionary monetary policy — has already generated political — and hence economic — outcomes in the form of Brexit and rise of anti-establishment movement. "
"Central Bank Quantitative Easing as an Emerging Political Liability" – FT Alphaville
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Tweet of the Day: "@JWH1895 Road to electric car paradise paved with handouts reut.rs/2fCzmvH " – Twitter
Diversion: "Obesity Is Always and Everywhere an Insulin Phenomenon" – Confessions of a Supply Side Liberal
Scott Barlow