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‘Risk is limited’ in Canadian housing market but there’s a catch

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

Deutsche Bank macro strategist Sebastien Galy believes that "risk is limited" in the domestic housing market but there are some important caveats,

"In an environment of robust growth and relatively cheap valuation versus international standards, we believe the risks [for Canadian real estate prices] are limited … The Canadian housing market is expensive mostly on the basis of affordability, that is the amount of savings needed to afford a home. This is normal in a process of convergence from one equilibrium of low growth and valuation to one of higher trend growth and valuation. This matters should the economy slow down, as the debt load may become unsustainable particularly for non-prime buyers… [but foreign buying of Canadian mortgage backed securities] keeps the spread to Canada's tight and hence policy looser than it would otherwise be."

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Mr. Galy is concerned that a stoppage in foreign MBS buying will cause a sharp jump in borrowing costs, increasing risks in the sector.

"@SBarlow_ROB DB: 'risks are limited ' in the Canadian housing market , but there's a catch" – (research excerpt) Twitter

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JP Morgan CEO Jamie Dimon had some surprisingly harsh things to say about cryptocurrencies,

"Bitcoin ' a fraud' and will blow up, Jamie Dimon, chief executive of JPMorgan Chase & Co, said on Tuesday… 'It is worse than tulips bulbs,' Dimon said, referring to a famous market bubble from the 1600s."

"JPMorgan's Dimon says bitcoin 'is a fraud'" – Report on Business
"Jamie Dimon Slams Bitcoin as a 'Fraud'" – Bloomberg
"Bitcoin dropped as soon as Jamie Dimon called its traders "stupid"" – Fast Company

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The International Energy Agency issued its status report on oil markets Wednesday. The coverage remains intense even though the commodity price remains stuck in its narrow $45-$50 per barrel range.

"IEA Says OPEC May Not Dramatically Impact Oil Supply" – (video) Bloomberg
"Oil Climbs as IEA Sees Fastest Demand Growth in Two Years" – Bloomberg
"@chris1reuters #Oil Market Tightening: OECD commercial stocks unchanged at 3.016 bln bbls in July when they normally increase, says @IEA " (chart) Twitter
"@chris1reuters Global #oil demand growth forecast raised 100,000 bpd to +1.6 million bpd for 2017 - @IEA " – Twitter

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A video report from Bloomberg, part of their "Sooner than you think" examination of transformative technologies, argues that the age of batteries is iiminent,

"Bloomberg's Tom Randall does the math on when solar plus batteries might start wiping fossil fuels off the grid." – Sooner Than You Think (video)

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Tweet of the day: "MylesUdland "I don't believe the bond market is going to be treated that well by the next recession." —Gundlach " – Twitter

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Diversion: The headline here is too 'self-helpy' for my taste but the sentiment is useful,

"A Self-Made Billionaire Reveals the 1 Mental Hurdle That You Must Overcome to Reach Your Potential" – Inc.

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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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