An undated photo made available by the University of Leicester, England, Feb. 4 2013 of the skull found at the Grey Friars excavation in Leicester. Tests have established that a skeleton found , including this skull, are "beyond reasonable doubt" the long-lost remains of England's King Richard III, missing for 500 years.University of Leicester/The Associated Press
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The European Central Bank has been criticized for inaction on regional deflationary pressures and this morning it came out swinging with a bold new experiment in central bank monetary policy – negative interest rates.
ECB President Mario Draghi announced that the central bank will start charging the banks to hold their funds, instead of paying interest on deposits held on behalf of European banks as the Fed does. The move is designed to motivate European banks to stop hoarding reserves and start lending aggressively.
U.K.-based economist Frances Coppola believes the policy will do more harm than good. "Negative interest rates are a tax on bank reserves. They are therefore intrinsically contractionary. The argument is that banks will try to get rid of reserves rather than pay the tax, so will have an incentive to lend more. But the evidence seems to suggest the opposite."
"Why Negative Rates Won't Work In The Euro Zone" – Forbes
Investors have been burned so many times by alternative energy stocks (*cough* Ballard Power *cough*) that they have been understandably slow in reacting to the rapid proliferation of solar power. But solar power is rapidly becoming a legitimate option in many parts of the United States, as Bloomberg reports using Bernstein Associates research,
"A note by Bernstein Associates said that among utility executives who spoke at a recent industry conference, the issue of whether solar is going to ramp in the U.S. was not raised. Instead, the discussion from utilities themselves went directly to the issue of how to reach an accommodation with this rapidly expanding and disruptive technology."
"Obama Isn't Killing Power Plants. The Sun Is" – Bloomberg
In China, the use of industrial metals as collateral for lending in the shadow banking system has been a concern for some time, though one that's difficult to measure. This week, allegations emerged that some Chinese companies were overstating the amount of metals they hold.
Regulators are now scrambling to verify the contents of every company's warehouses. The danger is that some of these companies were using reported metals inventories as collateral for loans. And if the collateral is not actually there, the loans would be called immediately, setting off a rush for funds.
"The first casualty of China's missing metals probe may be a $765 million bank deal" – Quartz
Also in China, the Financial Times' Alphaville blog reports that companies are increasingly borrowing from overseas as domestic credit tightens. There's no immediate danger, but if the practise continues, the possibility of currency mismatches similar to South Korea in 1997 become more likely.
"Chinese debt — going external" – FT Alphaville (registration, but no sub required)
See Also: "China May data to show economy still wobbly" – Reuters
Cullen Roche of Pragmatic Capitalism backs up my warnings on the U.S. high yield bond sector. I spoke with a bond market insider yesterday who agrees that valuations in the sector are excessive, but who thinks it can go on for a while. I'm not that concerned about whether we're in the eighth or ninth inning of the high yield rally – it's still time to sell.
"Don't Skip the Homework: High Yield's Overlooked Risks" – Pragmatic Capitalism
Tweet of the Day from @auaurelija : "A minute of silence for German savers, please."
Diversion: America's favourite foods in four charts – Vox
Follow Scott Barlow on Twitter at @SBarlow_ROB.
Scott Barlow