Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
An interesting report from Credit Suisse identifies market sectors that are most and least at risk for technological disruption. Surprisingly, the research team believes health care is among the sectors most at risk,
"Sectors that look most at risk from disruption include Energy, Autos, Pharmaceuticals, Semiconductors, and Health Care Equipment. Sectors that appear to be most insulated include Household & Personal Goods, Transport, Telecoms, and Food, Beverage & Tobacco."
"@SBarlow_ROB CS on Disruption: Who's at risk, who's safe? pic.twitter.com/ewCyb5OrYV " – (research excerpt) Twitter
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I read a 25-page Goldman Sachs report yesterday called 'Credit Tremors' in which credit experts attempted to ascertain whether the U.S. credit cycle is rolling over. U.S. retail investors are obviously ignoring these concerns,
"Investors poured a 'monster' $5.8 billion into high yield funds in the week to March 2, BAML said, the most on record in nominal terms and the highest as a percentage of assets under management since July 2013. They also pulled a net $2.4 billion from government and Treasury bond funds, the biggest outflow in 16 weeks, it said in its weekly flows report this week titled: 'It's Back On in Credit.'""
The reach for yield theme has resumed, at least for now.
"High-yield bond funds draw 'monster' $5.8 billion, largest inflow ever: BAML" – Reuters
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Two interesting tidbits on the energy sector this morning. UBS research has concluded that the recent rally in the oil commodity price is entirely the result of short covering by speculative investors (the report excerpt is on Zero Hedge, but investors are free to ignore the Tyler Durden hyperbole that accompanies the analyst remarks),
"There is no doubt that the performance today is TOTALLY short-squeeze led… Positioning and sentiment very biased to the short side/ underweight. …Despite high oil inventories (and still building), most upstream producers (from Exxon on down) have guided to lower than expected production as a result of lower capex."
(Far) more optimistically, Reuters reminds markets that global oil demand is still climbing and the massive recent cuts in exploration and development spending will eventually lead to scarcity of supply,
"The oil industry cut investment spending by more than $100 billion last year and another round of major cuts this year is expected to hit the production outlook, the International Energy Agency's chief economist said on Friday.Laszlo Varro told Reuters in Budapest that in the next five years, oil demand was expected to rise by 1.2 million barrels per day on average and even though Chinese oil demand growth was slowing it was "still a sizeable oil demand growth".
"UBS: "There Is No Doubt That The Move In Oil Is TOTALLY Short Squeeze Led", Here's Why" – Zero Hedge
"More oil industry spending cuts to hit production outlook: IEA" – Reuters
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Software to protect networks from hacking is among my top sector picks for the next decade (even though I have not bought any stocks yet). For me, the proliferation of cloud computing virtually assures (you see what I did there) big revenue gains for the sector. Unfortunately, cybersecurity is not yet mature and stock picking is difficult – companies that look promising could completely flame out the following year. For what it's worth, Palo Alto Networks is the stock I'm following most closely.
"A 'cyber-security' productivity paradox *alert*" – Kaminska, FT Alphaville
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I'm tempted to believe the conclusion of the Financial Times report "Commodity prices signal market bottom" but I can't make myself do it yet. There's been so many head fakes in recent years – interest rates, U.S. economic growth acceleration, temporary oil price recoveries – that I'll admit being skittish and more likely to be late than early on any rally in risk assets like commodities.
"After a momentary wobble, oil prices started to climb as the weekly report from the Department of Energy was brushed aside by investors who are increasingly prepared to bet the worst of a 20-month long price rout is over. If their instincts are correct — and it remains a big if — it could mark a turning point in a vicious downturn that has shredded the budgets of producing countries, upended central bank policies and stoked fears of a deflationary spiral. "
"Commodity prices signal market bottom" – Financial Times
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Tweet of the day: "@Convertbond Copper: Bear Market Rallies 2011: 29% , 2015: 18% , 2012: 17%, 2016: 14%, 2014: 11% , 2013: 10% " – Twitter
Diversion: "Here Is What We'll be Eating in 2050—and What We Won't" – Gizmodo
Scott Barlow