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‘Five signs Canada is in the grips of real estate mania’

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web

Oil prices are higher Monday on supply disruptions in Libya and, much more importantly, signs that global crude inventories are falling. Reuters' Chris Johnson reported that global oil inventories have declined 42 million barrels in the past month and floating storage has also declined. U.S. oil stocks remain high, and climbing, but traders are hoping the upcoming U.S. summer driving season will start a major drawdown in supply.

"@chris1reuters Global #oil inventories have fallen 42 million barrels in last 4 weeks with floating storage down 12.1 million barrels – SEB #OPEC #OOTT – Twitter
"Libya Halts Sharara Oil Loadings as Biggest Field Stops Pumping" – Bloomberg
"Oil rises further above $55 on Libyan field shutdown, Syria" – Reuters

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A Maclean's profile notes that Canada's economic growth is very much dependent on real estate while, at the same time, the sector shows all the classic signs of a frantic asset bubble,

"Canada is a country deeply reliant on real estate. The industry accounts for roughly 12 per cent of its gross domestic product. In British Columbia, real estate and related fields such as construction and finance make up an astounding 40 per cent of GDP. Vancouver is seeing prices rise again after numerous efforts to cool the market. And in Alberta, not even a recession and a nine per cent unemployment rate did much damage to house prices in Calgary and Edmonton. "It's surprising how well it has held up, given the severity of two years of contraction," says Todd Hirsch, chief economist at ATB Financial."

"How Canada completely lost its mind over real estate" – Maclean's
"5 signs Canada is in the grips of real estate mania" – Maclean's


Bloomberg reports that mall owners are tired of hearing about the "retail apocalypse" and the death of malls but there are signs that online shopping is putting a dent in U.S. employment growth,

"But the biggest drop [in employment] ame in the retail sector, which lost 30,000 jobs and has been struggling with economic forces that show little sign of easing. Retail jobs have been shed due to a string of recent bankruptcies, which are heading toward their highest level since 2009. Meanwhile, the supply of brick-and-mortar stores outweighs demand, leading several major retailers like Macy's and Sears to announce widespread store closings in an effort to boost productivity.'

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"The slow death of the retail industry hammered the jobs report' – CNBC
"America's Retailers Are Closing Stores Faster Than Ever" – Bloomberg
"The retail apocalypse is having a terrifying impact on one corner of Wall Street" – Business Insider
"The Whole 'Malls Are Dying' Thing Is Getting Old, Say Mall CEOs" – Bloomberg


Scotia research published the highly useful results of a Canadian portfolio manager survey. The summary:

" According to our most recent survey (March 27-30, 2017; 155 participants), institutional investors raised cash in Q1/17 (higher net cash buying than in Q3/16) . Bonds and equities (more modest) saw net selling in Q1/17, with U.S. equity exposure declining the most. Weighting in Canada inched lower, while investors were net buyers of EAFE/EM/LatAm. Energy and Financials were again voted the top two sectors most likely to outperform (fourth consecutive quarter), while equity sentiment modestly eased from Q4/16 optimism but remained favourable. Investors are looking for rising yields and commodities. The outlook for the C$ has shifted, with a majority of respondents now looking for the C$ to appreciate."

"@SBarlow_ROB Scotia research Canadian PM survey summary" – (research excerpt) Twitter
"Scott Barlow @SBarlow_ROB Canadian PMs all in on reflation trades" – (chart) Twitter


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Tweet of the Day: "@BluegrassCap "The Shiller CAPE has been wrong, for so long, so many times, that anyone should know not to use it for any kind of timing." - Ken Fisher " – Twitter

Diversion: The best thing I read all weekend was a restaurant review of an ultra-high end Parisian establishment. This excerpt will give readers an idea of the tone, "The dining room, deep in the hotel, is a broad space of high ceilings and coving, with thick carpets to muffle the screams."

"Le Cinq, Paris: restaurant review" – Guardian U.K.

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More


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