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Top Links: Waffling Trump raises risk of market correction

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

The Americans are preparing to gorge themselves on football, turkey and Trump-based screaming matches so there's not a lot of market-specific news this morning.

My favourite read for the day is a delightful (for me, anyway) tour de force of controlled savagery as CBC's Robyn Urback takes Ontario premier Kathleen Wynne to task for the Liberal energy policy,

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" Who — with the exception of everyone — could have foreseen that wasting billions of dollars on cancelled gas plants, paying way above market value for green energy contracts, producing too much energy and selling it to other jurisdictions at a loss, and investing in smart meters that didn't actually do what they were supposed to do would translate into skyrocketing electricity bills for everyday Ontarians? ... Earlier measures to reduce that burden have included a pledge to eliminate the provincial portion of the HST on consumers' hydro bills — a move that will save Ontarians roughly $130 a year — which will begin around the time that cap-and-trade measures are introduced — a move that will cost Ontarians roughly $160 a year. "

"Aside from the incessant warnings, Ontario's hydro crisis clearly came out of nowhere: Robyn Urback" – CBC

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The U.S. president-elect appears ready to make good on his pledge to kill the TPP trade agreement, but he is waffling on almost everything else. This increases the likelihood of a market correction in my opinion – bonds yields have jumped and cyclical stocks have soared on the assumption that a bold infrastructure plan will spur U.S. growth and inflation pressures. A lack of commitment in this area would result in these market moves being retraced to some degree.

"Donald Trump's New York Times Interview: Full Transcript" – New York Times
"@LadyFOHF "Expected policies" seems like a leap of faith given current level of waffle." – (includes research excerpt) Twitter

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The Economist's Ryan Avent published a feature on an issue I've stressed a lot about – the decline of trust in primary institutions like government, religion, banking and law enforcement – and it's potential negative effects on future growth. I agree with Mr. Avent that the U.S. election provides a wake-up call in this regard,

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"With the benefit of hindsight, we can see that the crucial question regarding whether or not to use fiscal stimulus was a completely different one — which is more corrosive to the legitimacy of the institutions which make the prosperity of a liberal, global economy possible: a long economic slump, or a short-term stimulus so large that it inevitably leads to spending on low-return projects or lines the pockets of government-friendly firms? We were all tying ourselves in knots working out whether the multiplier on infrastructure spending was 0.7 or 1.2 or 2.5, when what we ought to have been asking was: what course of action is most likely to avert a crisis of institutional legitimacy that will leave everyone much worse off."

"The hole at the heart of economics" – Avent, The Economist
"Are Americans demanding greater wealth redistribution?" – Marginal Revolution
"Don't trust government? You're threatening the economy" – Barlow, Report on Business (July, 2016)

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Wait, Toronto home prices can go down? Looks like they did in October although the blame is being placed on new supply, less lack of demand,

"According to a new report released by the Building Industry and Land Development Association (BILD), the average price of a new Toronto home declined in October … Largely due to an increase in supply, the average price of low-rise detached, semi-detached homes, and townhomes fell to $937,689, declining $54,702 from September. During the same period, the average price per square foot for low-rise housing rose slightly from September numbers, now sitting at $394 … The sale of 1,621 new low-rise homes in October represents a 10-per-cent decline year over year"

"Average Toronto Home Prices Decline in October" – Urban Toronto

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Tweet of the Day: "@Murphy_Jessica_ *Moves sofa. Is disappointed* French heir finds $3.7m gold hoard underneath furniture in house http://www.bbc.com/news/world-europe-38072135 " – Twitter

Diversion: "The rate of dementia is falling" – Marginal Revolution

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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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