A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
There is investment advice everywhere, but investors should pay more attention to commentary from people who make their money from actual investments rather than public appearances. Cronus Futures co-founder Kevin Ferry is one of those who has actual monetary bets behind his views.
Tuesday, Mr. Ferry wrote, "Meanwhile, media pundits yammer on about the Funds Rate and FF futures concept of 'the first rate hike.' Dino….meet the Tar Pit." Mr. Ferry believes that we are now in "Financial System 2.0" where the Federal Reserve's lowering and raising the Fed Funds rate no longer matters.
The full post is complicated and technical, as we'd expect from an insider's insider, but Mr. Ferry presents a compelling and vital argument that the credit market landscape has changed for good.
"All You Need to Know" – Kevin Ferry, Contrarian Corner
A report on U.S. auto sales brought very good news for economies on both sides of the border. Bill McBride took time out from his excellent coverage of the U.S. housing market to note, "light vehicle sales were at a 16.9 million [annual rate] in June. That is up 7% from June 2013, and up 1% from the 16.7 million annual sales rate last month."
The news carries positive implications for U.S. consumer spending and for Canadian auto production.
"U.S. Light Vehicle Sales increase to 16.9 million annual rate in June, Highest since July 2006" – Bill McBride, Calculated Risk
Credit Suisse global strategist Andrew Garthwaite, formerly the top-ranked strategist in the world according to Institutional Investor, released a report concluding that "China has the 3rd biggest credit bubble of all time and biggest investment bubble."
I'm still trying to acquire the full report but @csresearch posted the most relevant charts on Twitter.
"China housing prices look vulnerable after the fall in property transactions" – Twitter
"China Investment share of GDP considerably higher than pre-crisis peaks in Japan and Korea." – Twitter
The first half of 2014 saw record issuance of high quality U.S. corporate bonds. Investors skittish about equity market valuations continue to inflate a bubble in corporate bonds and this is the type of ironic market behaviour that eventually causes steep downdrafts in portfolio performance.
The only upside in these bonds at current levels beyond the minimal nominal yield is if U.S. interest rates fall further, which is unlikely, or yields in the sector fall closer to Treasuries, which is also unlikely. The tongue-in-cheek phrases being used for corporate debt markets recently are "return-free risk" and "Yield Hunger Games."
The Wall Street Journal writes, "companies sold about $642 billion of debt, according to data provider Dealogic, which has records going back to 1995. That is more than the $560 billion sold in the first half of last year and outstrips the previous record set in 2009, when $612 billion of bonds was sold."
"Highly Rated Corporate Debt Sales Set Record in First Half" – WSJ
See also: "Debt market lunacy threatens equity markets" – Inside the Market
Tweet of the Day: from @economistmeg, chief economist at research firm Maverick Intelligence: "Drugs and prostitution contribute more to UK GDP than agriculture, yet we still subsidise farmers. Clearly a gap bw pol/econ #campalphaville" – Twitter
Diversion: There is a secret ingredient in your burgers: wood pulp – Quartz
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow