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For car shoppers, buying used has never made more sense

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

One of the simplest rules of personal finance is "never buy a new car" – let someone else deal with the immediate depreciation when the vehicle leaves the lot for the first time. This advice is even more applicable now after a long period of easy financing for car buyers has led to a glut of cars for sale and lower prices.

"With so many new cars rolling out of dealerships lots and instantly becoming used cars, the secondary market is glutted and the pace of depreciation is rapidly accelerating…The average used car lost 17 percent of its value in the past 12 months, dropping from $18,400 to $15,300, according to data from Black Book, an auto analytics company. That annual depreciation figure has been increasing steadily, too. The average used car today depreciates nearly twice as fast at it did in 2014, when the annual rate was just 9.5 percent."

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"Your Car Is Now Worth Less Than You Think" – Bloomberg

See also: "How Far Does $1 Million Go in Retirement?" – Bloomberg

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The only days I'm not distracted by U.S. political upheaval are the days I'm distracted by desperately trying to avoid all political news. The relentless flow of crazy has overshadowed the fact that global economic growth has rarely been this positive.

"Activity data paint a picture of growth in the industrialized world that has only been achieved twice in the past two decades: during the tech boom of the late 1990s and the mid-2000s… only two industrial economies posted negative growth in Q1 2017 (Ireland, Iceland) and only one did so in Q4 2016 (Greece). No industrialized economy is in recession. The number of industrialized economies that have experienced negative growth in any given quarter has steadily declined since 2012. The economic expansion is about as synchronized as it gets."

This trend is clearly positive for global economically-sensitive assets like commodities.

"@SBarlow_ROB Barclays: global expansion 'about as synchronized as it gets'" – (research excerpt, chart) Twitter

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The Financial Times reports that an increasing number of U.S. companies are borrowing in bond markets to fund their pension shortfalls. In my opinion, this will be a consistent long-term theme even if tax legislation changes.

"The prospect of lower tax rates next year is motivating an increasing number of companies to boost their pension contributions. Such payments are tax deductible, allowing companies to lock-in savings at the current 35 per cent rate. Should the Republican-controlled Congress succeed in cutting corporate taxes, future deductions companies can take on pension fund contributions would also fall.

"'The math speaks for itself,' Glenn Landau, the chief financial officer of International Paper, told the Financial Times. 'That is a tax deductible contribution. And in case of any future tax rate changes — and we don't know more than you know — it at least locks in the 35 per cent rates we have today.'"

"More companies sell bonds to fund pension obligations" – Financial Times

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Tweet of the day: "@adam_tooze Incredible graph from matt king @Citi showing global balance of QE: its all about Asia and then ECB. Fed barely figures. " – Twitter

Diversion: We need more of these kinds of heroes. Instead of emoting on social media, India's Jadav Payeng planted a tree on stripped land every day for almost 40 years, and the results are amazing.

"@GoogleFacts Man plants a tree in the same place every day — 37 years later, the world is amazed by the result " – (short video) Twitter

Video: Carrick Talks Money: Is Canada returning to an 'inflation nation'?
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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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