Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the Web
I argued yesterday that Canada's housing market will not cause a 2008-level financial crisis, but that doesn't mean real estate values are safe.
Macquarie analyst David Doyle, who recently wrote a report warning "Winter is Coming" for the Canadian economy, detailed the ways in which the current domestic housing market resembles the United States just before the crisis,
"Canada's dependence on housing now appears to be equally as stretched as it was in the US in 2H05. Alarmingly, the breakdown in contribution has followed a similar path. In recent quarters, nearly all of Canada's residential investment growth has come from 'brokers' commissions & other ownership transfer costs.' A similar dynamic occurred in the US in 2H05 … Equally as troubling is the degree to which new mortgages have become reliant on risky borrowers. In its last two financial system reviews, the BoC found that the increase in household debt was i) concentrated amongst the heavily indebted, ii) riskier borrowing was most prominent in Toronto and Vancouver."
"@SBarlow_ROB Macquarie: it's 2005 for Canadian housing market" – (research excerpt) Twitter
"Alternative lenders face 'major changes' in wake of new housing rules" – Report on Business
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The gold price is slightly higher this morning but had an extremely tough Tuesday, falling more than three per cent. Speculative traders are leaving the sector as fast as they can and one strategist believes bullion is still 25 per cent over valued,
"tThis [week] could be a prelude to a bigger sell-off, according to Deutsche Bank AG Chief Global Strategist Binky Chadha. 'The way we think about it is, gold looks to be 20 to 25 percent overvalued,' Chadha said in an interview with Bloomberg TV on Tuesday. 'Positioning is very, very long." When he analyzed how gold is valued relative to the U.S. dollar and global growth, he found that the asset stood out in the entire oil and commodity complex.'"
"Gold Looks 25% Overvalued According to Deutsche Bank's Chief Global Strategist" – Bloomberg
"Wounded Gold Bull Market Steadies After Worst Slump in a Year" – Bloomberg
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The news is much more positive in the oil sector as commodity prices sneak up on the $50 per barrel level after a report on U.S. inventory levels showed a larger draw than expected,
"Futures rose as much as 1.9 per cent in New York after slipping 0.3 pe rcent Tuesday. Inventories dropped by 7.6 million barrels last week, the American Petroleum Institute was said to report."
In related news, a smaller energy firm has reported a gigantic find in Alaska, "Alaska's oil reserves may have just gotten 80 percent bigger after Dallas-based Caelus Energy LLC announced on Tuesday the discovery of 6 billion barrels under Arctic waters. The light-oil reserves were found in the company's Smith Bay leases between Prudhoe Bay and Barrow along the Arctic shore, according to a statement from Caelus. As much as 2.4 billion barrels is estimated as recoverable, according to a release issued by the company. That compares with the state's proved reserves of 2.86 billion barrels in 2014."
"Crude Rises to Three-Month High After U.S. Stockpiles Plunge" – Bloomberg
"Alaska Oil Known Reserves May Have Just Grown 80% on Discovery" – Bloomberg
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Tweet of the Day: "@NicolaSturgeon We seem to have woken up with a UKIP government. Depressing doesn't even begin to cover it." – Twitter (including graphics)
Diversion: "The 25 Best Films of the 21st Century, And Where to Watch Them" – Lifehacker
Scott Barlow