A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
Money Week is the self-proclaimed “best-selling financial magazine” in the U.K., and their writers turned their attention to Canada on Wednesday by reporting some bizarre claims about the TSX,
“Crescat Capital – one of the top hedge funds in the US last year – is also shorting the [Canadian] banks. Not only do they have to contend with falling house prices, notes the fund, but Canadian firms are among the most vulnerable to recession in the world, with most failing to make enough free cash flow to support themselves.”
What? It’s true that some corners of the domestic microcap market can be a cesspool of shell companies with missing underlying businesses, but to claim “most” Canadian companies are on the verge of insolvency is ridiculous.
Instead of acting as stenographer for a hedge fund manager talking their book, they might have asked for some proof.
“Steve Eisman: short Canada” – Money Week
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I mentioned Wednesday that Citi had ranked Canada among the world’s least attractive global markets and now have more details on the methodology,
“@SBarlow_ROB C’s methodology for Canada ranking near bottom of world’s most attractive equity markets “ – (report excerpt) Twitter
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Semiconductor stocks, often a leading indicator for the broader technology sector, are climbing on hopes of a resolution in the U.S. China trade dispute,
“White House economic adviser Larry Kudlow said talks between the United States and China have progressed and both sides hope to get closer to a deal this week. Shares of chipmakers, which rely heavily on China for revenue, especially benefited. The Philadelphia Semiconductor index jumped as much as 3% to a record high. The index ended 2.3% higher. Advanced Micro Devices Inc shares gained 8.5%, the most on the S&P 500, and Intel Corp shares rose 2.0% after Nomura Instinet started coverage of both the stocks with “buy” ratings.”
“U.S. chip stocks surge on trade deal hopes, Wall Street edges up” – Reuters
“U.S. sets 2025 target for China to fulfill trade pledges: Bloomberg” – Reuters
“ Trump will meet Liu He at The White House today” – Bloomberg
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I am less concerned about the economic implications of inverted North American yield curves than most, but the Financial Times is on the other side of that debate (although the counter arguments are detailed in the column) ,
“there have always been various plausible reasons offered for why the yield curve is obsolete, and yet its record is spookily good — in fact, much better than the Fed’s. Prof Fisher points out that the only recession that the central bank has ever successfully forecast was the one it deliberately caused in the early 1980s, when then-chairman Paul Volcker ratcheted up interest rates to record levels to kill off inflation. The New York Fed’s yield-derived model for calculating the probability of a recession over the next 12 months indicates that the odds on an economic downturn have shot up to 29 per cent, the highest since the beginning of 2007 — a higher probability than was seen a year ahead of five of the past seven recessions, according to Credit Suisse.”
“Has the yield curve predicted the next US downturn?” – Financial Times (paywall)
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Tweet of the day:
Diversion: “It Isn’t Just Meat That’s Killing You” – Bloomberg
Thursday Print column: “5 charts to predict which direction markets will break next” – Barlow, Inside the Market
Scott Barlow