A roundup of what the Globe and Mail's market strategist Scott Barlow is reading this morning on the world wide web.
The Federal Reserve is expected to raise interest rates Wednesday afternoon, and the market activity afterwards might be more interesting domestically than for the Americans. Relative two-year bond yields have been driving the Canadian dollar in past two years, and the loonie is likely to move significantly if the new Fed chair provides any surprises.
"Equities, dollar slip as Fed rate path jitters build" – Reuters
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A fascinating research report by Nomura analyst Bilal Hafeez argues that the slide in Facebook's stock price is just the tip of the iceberg.
Facebook's market capitalization is, in large part, a reflection of the value of its data collected by users. Nomura believes the value of this data is massively overstated, and social media stocks in general are set for major declines,
"We don't apply the same scrutiny to the markets and assets we have escaped to [from the financial crisis]. So what are these assets? Simply put, it would be data and platforms. .. [Data and algorithms do] not appear on the balance sheet as an asset … Markets know this and so value the company as if it did have these assets, while the "book value" (accounting value) would not reflect this – the end-result are tech companies with very high price-to-book ratios.'
Mr. Hafeez goes on to list four signs that the data asset bubble is set to burst – 'The cab-driver is talking data/platforms', potential regulation, scrutiny of data usage and sales and 'A move away from global towards regional standards'.
The contrarian view here is that the data is actually valueable, and can be used to create more profits. If this is the case, the recent slide in Facebook's price is a buying opportunity.
'@SBarlow_ROB Nomura: "The bubble you didn't know about could be bursting without you knowing" #BigData " – (research excerpt) Twitter
"Facebook Besieged by Wall Street, Washington and Europe" – Bloomberg
"Canada will study issue of taxing tech giants: Morneau " – BNN
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A recent study by Standard and Poor's found that an embarrassing 92 per cent of large cap U.S. portfolio managers underperformed,
"Over the 15-year investment horizon [ to the end of 2017] , 92.33% of large-cap managers, 94.81% of mid-cap managers, and 95.73% of small-cap managers failed to outperform on a relative basis"
"Study Reveals 95% Of Finance Professionals Can't Beat The Market" – (S&P cited by) Zero Hedge
Counterpoint: "@LizAnnSonders A good year (finally) for active over passive Market Ethos, Richardson GMP, @SoberLook " – (chart) Twitter
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CNBC reports on a Credit Suisse study concluding that investors should buy the current dip in equity markets, although not in the U.S. and Canada, "The Swiss banking giant has been adding stocks to its portfolio and still has an "overweight" position on the asset class, global chief investment officer Michael Strobaek said Tuesday… The bank favored eurozone and emerging markets stocks the most, Strobaek said, as well as the energy, financials, information technology and telecommunications sectors. The least favored markets were the U.S. and Canada, as well as the consumer staples sector, he added."
"The bull market isn't over for investors yet: Credit Suisse" – CNBC
"@SBarlow_ROB CS: Bear market checklist. "Absolute valuations are extreme. However, these have little return forecasting ability on a near-term view" – (CS research excerpt) Twitter
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Tweet of the Day: "@SBarlow_ROB TSX Industry Group Correlation with 5Y CGB Yield (20 years, weekly, banks a surprise) " – (chart) Twitter
Diversion: "The Easy Pickings" – Irrelevant Investor
Scott Barlow