Author Topic: Biz Wax/Investing/Economy (BIE)  (Read 60541 times)


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Re: Biz Wax/Investing/Economy (BIE)
« Reply #555 on: February 27, 2018, 08:29:34 AM »
3 more rate hikes and a mid-year market forecasting nightmare ahead
 Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web

Merrill Lynch economist Carlos Capistran predicts that the Bank of Canada will raise rates three more times in 2018 thanks to a fiscal "sugar rush" emanating from the south,

"We expect the Bank of Canada (BoC) to hike four times this year to bring the overnight rate target to 2% by year-end 2018. The BoC will likely respond to the sugar rush from US fiscal candy, that is, to stronger growth and higher inflation in Canada but also to a US Fed that may need to hike faster. After the BoC hiked 25bp in January, we expect it to hike again in April, July and October."

"@SBarlow_ROB ML: Canada CPI to 2.7% thanks to 'sugar rush' from U.S." – (research excerpt) Twitter

"Corporate America's new dilemma: raising prices to cover higher transport costs" – Reuters


Rate hikes on both sides of the border are setting investors up for a bit of a forecasting nightmare for the middle of 2018.

As Morgan Stanley strategist Andrew Sheets points out, global economic growth is expected to slow beginning in April (as measured by global manufacturing purchasing manager surveys), while inflation pressure and wages continue to climb.

Domestically, the effects of housing market regulation may further depress economic growth forecasts by this point.

"@SBarlow_ROB MS: End of PMIs up, Inflation Down" – (presentation slide) Twitter


Nick Maggiulli, a new and important voice in U.S. financial blogging, discusses portfolio 'margins of safety' as the most important and difficult dilemma for investors,

"Despite all of the evidence I just discussed about how much purchase price matters in investing, I still think you should mostly ignore this advice if you are an average retail investor. Why? Buying when things are cheap requires you to time the market to some extent. This is difficult, because you could buy when you think something is cheap"

"A Margin of Safety" – Maggiulli , Of Dollars and Data


There is a huge infrastructure upgrade for mobile telecom underway and it's going to be my job to figure out which companies will be selling the equipment necessary,

"FCC Chairman Ajit Pai said in a speech in Barcelona, Spain, that he plans to hold an auction of spectrum in the 28 GHz band in November, followed immediately by an auction of spectrum in the 24 GHz band, but must first get congressional approval by May 13 to proceed. 'We aspire to lead the world in 5G,' Pai said at the Mobile World Congress. 'I am hopeful that we'll be able to kick off a major spectrum auction in November.'"

"U.S. telecom agency plans new spectrum auction to speed 5G networks" – Reuters


The Financial Times writes that, for many speculators in energy markets, fundamentals don't matter,

"Who is driving oil positions higher? Newly prominent oil speculators are not necessarily reacting to news about supply and demand or utterances from Riyadh. Instead, they may be buying and selling oil based on moves in currencies, interest rates or the price of oil itself.

"There are large investors in energy, and they don't care about talking to people who deal with fundamentals. They have no interest in it," says Ed Morse, global head of commodities research at Citigroup. His research team suggested in a note that so-called macro investors were becoming a "commodities whale".

"Fundamentals do not matter to new breed of oil speculator" – Financial Times


Tweet of the Day (SocGen FX analyst Kit Juckes): "@kitjuckes I think everyone is bearish [on CAD], not sure justified, inflated view of the terrors of housing mostly. It's cheap relative to oil, but really, frustration is that fair value's probably 1.20-1.25. I got caught out sticking with it after the 1.37-1.21 move last year." – Twitter

Diversion: "LU organizing a tasty talk on ancient beer" – TB News Talk


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Re: Biz Wax/Investing/Economy (BIE)
« Reply #556 on: March 02, 2018, 06:38:17 AM »
All today’s news is bad for the Canadian economy

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

Domestic gross domestic product growth data was released this morning at 8:30 a.m. ET, and it fell well below consensus estimates.

Forecasts pointed to 2.0 per cent quarterly growth (annualized) and the actual number was 1.7 per cent. Bloomberg writes,

"What may be worse is that fourth-quarter GDP figures were exaggerated by temporary factors in housing. Spending on residential structures surged in the last three months of 2017 to an annualized 13.4 percent, the strongest quarterly increase since 2012. The gain was led by stronger-than-expected new home construction, and as buyers rushed to get ahead of tighter mortgage qualification rules that came into effect Jan. 1."

"Canada Economy Slowed More Quickly Than Expected in Second Half" – Bloomberg


I won't bother readers with my feelings about the recent White House announcement of tariffs, vehement though they may be, but will point out that I have yet to see a credible economist on any part of the left/right political spectrum who thinks it's a good idea.

The U.S. rhetoric is pointed at China but it's Canada that will suffer most from the cross border tax. Hope remains that domestic aluminum and steel companies will get an exemption but trying to predict what this administration will do is a waste of time,

"Stocks Roiled on `Trade War' Talk; Bonds Advance: Markets Wrap" – Bloomberg

"U.S. unveils steep tariffs, raising peril of trade war" – Report on Business

"Factbox: Top steel exporters to the United States" – Reuters

"@RobinWigg RBC's Tom Porcelli: "In plain language these tariffs are a terrible idea." – (research excerpt) Twitter

"National Security Is a Good Reason for Protection. But Not of Steel and Aluminum" – Business Week

"@paulvieira FYI, BMO Capital Markets with more data on who loses with US steel tariffs. Not Beijing, but ... Ottawa, Seoul, Mexico City & Brasilia cc " – (research excerpt) Twitter

"Trump Roars; China Yawns" – Gadfly


The news flow has been very bad for the domestic economy. In addition to today's GDP and trade news, new statistics show that foreign investors are not interested in investing in Canada,

"'Uncertainty isn't good for investment and uncertainty is high,' Royal Bank of Canada senior economist Nathan Janzen said by telephone from Toronto. 'The concern with business investment is always more what it means for growth this year, the year after that, in terms of potentially slower productivity.'

"Energy companies are chopping their budgets even as global oil prices climb back from a crash, and may lose about C$16 billion ($12.4 billion) of revenue this year because of discounts on Alberta's heavy crude -- a problem blamed on a lack of pipeline space. Foreign direct investment in Canada, meanwhile, has fallen to the lowest since 2010."

"Investment Chill Grips Canada Amid Oil Woes and Trump Threats" – Bloomberg


The Financial Times provided a glimmer of hope for investors in the energy sector,

"Many commentators have failed to factor in strong "demand stickiness" for fossil fuels in the near term when considering the trajectory for oil consumption … In the passenger vehicle sector all the hype is around electric vehicles (EVs), but despite 55 per cent sales growth last year, the actual number amounts to less than 2 per cent of new car sales, and less than 0.2 per cent of the total fleet.

"Today's 3m EVs displace less than about 60,000 barrels a day of oil consumption, or less than 0.06 per cent of total global demand."

"Reports of oil demand's death have been greatly exaggerated" – Financial Times


Tweet of the Day: "@movement_cap CAD/USD spec & dealer positioning hasn't been this extreme in 7 years " – Twitter

Diversion: "People Don't Actually Know Themselves Very Well" – The Atlantic


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Re: Biz Wax/Investing/Economy (BIE)
« Reply #557 on: March 02, 2018, 06:42:30 AM »
 :oBefore the Bell: Dow, TSX futures sink on trade war fears


Dow futures point to a triple-digit loss of more than 150 points at the open Friday after U.S. President Donald Trump said the U.S. would impose steep tariffs on aluminum and steel that raised the spectre of a global trade war. TSX futures were also down.

That sent global stocks tumbling on Friday and sent investors in search of safety in government bonds and the Japanese yen.

Mr. Trump said duties of 25 per cent on steel and 10 per cent on aluminum would be formally announced next week, sparking concerns of retaliatory moves from major trade partners such as China, Europe and neighbouring Canada.

Europe's STOXX 600 index fell over 1 per cent early on, following sharp declines on both Wall Street and Asia.

Britain's FTSE was off 0.9 per cent, Germany's DAX dropped 2.3 per cent and France's CAC fell 1.7 per cent.

"It is a real worry because Europe is a open global economy so it isn't just about U.S. versus China," with Ian Ormiston, European equity fund manager at Old Mutual Global Investors. "And we will see retaliation there are no two ways about it."

Europe's early drop came amid caution anyway ahead of crunch few days of politics.

Britain's under-fire Prime Minister Theresa May will flesh out her Brexit plans later, while Germany will find out if it finally has a coalition government and Italy holds elections on Sunday.

The anxiety over tit-for-tat moves was underscored by Canada's quick response, with officials in Ottawa saying they will retaliate.

"The world stands on the brink of a trade war," said Robert Carnell, head of research, Asia-Pacific at ING in Singapore. "Forget the yield curve -- this is how recessions start."

On Thursday, the Dow closed down more than 400 points and the TSX sank nearly 50 points after news of the tariffs was announced.

The trade nerves had dominated Asian market moves.

Japan's Nikkei tumbled 2.5 per cent to end the week down 3.3, while MSCI's broadest index of Asia-Pacific shares excluding Japan dropped 0.9 per cent to take its losses for the week to 2.1 per cent.

Steelmakers were hit the hardest. ArcelorMittal SA, the world's largest, fell 3.5 percent in Europe, South Korea's Posco lost 3.3 per cent and Japan's Nippon Steel ended down 3.8 per cent.

Toyota Motor shares had skidded 2.4 per cent too after the automaker had said the planned tariffs would substantially raise the production costs and therefore prices of cars and trucks sold in America.

The Shanghai index was off 0.6 per cent and the Hang Seng fell 1.5 per cent.

TSX 60 FUTURES904.50-5.10 (-0.56%)
S&P 500 FUTURES2,655.00-23.25 (-0.87%)
DOW FUTURES24,329.00-291.00 (-1.18%)
9:28 A.M., MARCH 2

Oil prices were set on Friday to post their first weekly decline in three weeks following a sell-off in global stock markets after news of planned U.S. tariffs on steel and aluminum raised fears of a trade war.

U.S. crude output slipped in the last month of 2017, but in November hit an all-time high of 10.057 million barrels per day. Weekly data showed another record and further gains are expected.

U.S. crude stocks rose last week even as refineries hiked output, increasing by 3 million barrels, compared with expectations for a gain of 2.1 million barrels.

Still, stocks fell again at Cushing in Oklahoma, with inventories down by 1.2 million barrels in a 10th consecutive week of decline, the Energy Information Administration said this week.

"The market is not showing any obvious signs of turning around the mood. We are being driven by the pick-up in U.S. inventories and in general terms the market went a bit too far too soon," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

"Then we have the volatility in the U.S. dollar and the implications of the tariff news to factor in," he said.

Gold prices rose on Friday as the threat of a global trade war pushed shares and the dollar lower and spurred demand for assets such as bullion that are seen as safer investments.

"The risk of trade wars which could impact economic growth and raise uncertainty plays into the hands of gold," Saxo Bank analyst Ole Hansen said.

Gold was, however, down 0.6 per cent this week and on track for a second consecutive weekly loss.

It touched $1,302.61, the lowest since Jan. 2, on Thursday, pushed down by expectations that the U.S. Federal Reserve will raise interest rates more aggressively than previously thought.

Higher interest rates are negative for gold because they raise bond yields, reducing the attractiveness of non-yielding gold, and tend to boost the dollar.

But the threat of a trade war had overpowered fears of interest rate increases, Hansen said.

"If a trade war becomes a reality it could push inflation up and growth down and that should ease the aggressiveness of the Fed. That's why it has become the focus (of the gold market)," he said.

In other precious metals, silver was down 0.1 per cent at US$16.46 an ounce after touching a two-month low on Thursday. It was 0.5 per cent lower for the week.

Platinum was 0.3 per cent lower at US$963.60 an ounce, near two-month lows and down 3.3 per cent this week.

Palladium was up 0.1 per cent at US$990.30 an ounce but down 5.4 per cent this week after suffering its biggest fall in more than a year on Thursday.

SPOT GOLDUS$1,325.70+20.50 (1.57%)
HIGH GRADE COPPERUS$3.13+0.01 (0.19%)
WTIUS$60.71-0.28 (-0.46%)
9:28 A.M., MARCH 2

Talk of trade wars and tariffs led the Canadian dollar lower, firmly below the 78 cent US mark.

The U.S. dollar pulled sharply back from six-week highs after Mr. Trump's decision to impose tariffs on steel and aluminium took the wind out of the greenback's week-long recovery.

The dollar index against a basket of six major currencies fell 0.1 per cent to 90.194.

The dollar index is down 2.1 per cent this year, dogged by suspicions that the Trump administration prefers a weaker dollar to help narrow the United States' yawning trade deficit.

Worries that Trump's big tax cuts and spending plans will ramp up fiscal deficits to the extent that they undermine confidence in U.S. debt have also hurt the greenback.

U.S. Treasury yields fell as they appeared to push aside considerations of inflation, a major theme that spooked global financial markets earlier this year.

The 10-year U.S. Treasuries yield fell to 2.811 per cent, hitting its lowest level in three weeks and further extending the distance from its four-year peak of 2.957 per cent touched on Feb 21.

The Canadian 10-year bond was lower at 2.165 per cent.

CANADIAN DOLLAR/U.S. DOLLARUS$0.7768-0.0021 (-0.2683%)
1:00 A.M., MARCH 2
9:28 A.M., MARCH 2

Smith & Wesson maker American Outdoor slumped 14 per cent after giving a weak forecast for its fourth quarter starting in February.

Gap Inc. soared 9 per cent in premarket trading after the clothing retailer topped fourth quarter estimates.

A group of underwriters has officially pulled the plug on a planned stock sale by Maricann Group Inc. after the cannabis grower failed to inform investors that the Ontario Securities Commission is investigating trading by three directors. In late January, the company was seeking to raise $70-million by selling units that convert to shares on a bought-deal basis for $4 each. Since that time, Maricann's shares have fallen by nearly 50 per cent amid a broad selloff in pot stocks.

George Weston Ltd.'s profit in the fourth quarter was cut by two-thirds as a result of special items including the cost of a $25 Loblaw Card program launched in compensation for the company's involvement in a price-fixing scheme. The Toronto-based food processing and grocery company says net income attributable to common shareholders of the company dropped to $28-million or 22 cents per share.

Foot Locker reported adjusted quarterly profit of US$1.26 per share, beating estimates by a penny a share. But revenue was below forecasts and comparable-store sales fell 3.7 per cent. It shares fell 5.8 per cent in premarket trading.

Sales at J.C. Penney Co. Inc.'s established stores missed Wall Street targets in the fourth quarter, and its forecast for yearly earnings also lagged expectations, pushing its stock down 9 per cent. Its comparable-store sales rose 2.6 per cent in the fourth quarter ended Feb. 3, missing analysts' average estimate of a 2.94 per cent increase. J.C. Penney forecast full-year earnings of between 5 and 25 cents per share, largely below analysts' average expectation of 20 cents, according to Thomson Reuters I/B/E/S.

Nordstrom Inc., which has said that members of the founding family are looking into a buyout of the department store chain, reported sales and profits late Thursday that fell short of expectations for the quarter that includes the holiday season. Its shares fell nearly 6 per cent in premarket trading.


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Re: Biz Wax/Investing/Economy (BIE)
« Reply #558 on: March 02, 2018, 06:51:03 AM »
CDN:Two single women, two different budgets: What do their retirements look like?


If you're like most people nearing retirement, you're probably hoping for an active post-work life filled with travel, hobbies and memorable moments with family and friends. But since affordability usually has limits, you're also probably wondering what it will cost.

For single Canadians, living well in retirement is often more expensive than it is for couples due to fewer fewer shared costs such as housing and travel. In what follows, we describe how single retirees can live well at two different budget levels, one modest and the other reasonably ample.

(The names of our two retirees have been changed to preserve their privacy.)

A 70-year-old Burnaby, B.C., resident who we'll call Susan enjoys an appealingly active lifestyle while spending a relatively modest $42,000 a year, including taxes. She has to pick and choose carefully how she spends her money, but she also benefits from short-term budgetary "wiggle room."

Linda, also from the Vancouver-area and in her mid-60s, has a more ample budget of $76,100 a year, including taxes, and is able to do more things. But the same overall approach applies to Linda and Susan; both make the most of their spending by economizing on basics that don't add particular value, so they have money to spend purposefully on whatever is important to them. Their budget details are provided in the accompanying table, "The Cost of a Fulfilling Retirement: What Two Singles Spend."

"They're creating the life they want to live within what they have," says Annie Kvick, a fee-for-service certified financial planner with Money Coaches Canada in North Vancouver, B.C., who helped prepare financial plans for both.

How you allocate money beyond the necessities is up to you, but ideally it should help keep you socially engaged with family and friends, physically fit and mentally stimulated. That typically includes spending money on non-essential extras like travel, entertainment, and recreation, but it could include a higher level of spending on basic needs such as clothing and personal care, if enhancing your appearance is a priority.

In setting a single's retirement budget, it is important to realize that you can't just take a couple's budget and divide by two. Couples generally economize by sharing things like living expenses and hotel costs, and they may save on transportation by sharing a car. There's also seniors' pension income splitting, which can help reduce taxes. As a result, singles will generally need to spend more than half of what couples spend to enjoy an equivalent retirement, but the precise proportion will vary.

Zip-lining grandma

One of the things that retirees of modest means have going for them is that many fun, social, active pursuits are inexpensive. This fact has helped Susan pack a lot in to a modest budget since retiring three years ago.

In the last few years, Susan has transformed herself from "basically a couch potato" to a highly social fitness buff who exercises with friends five days a week. Typical weekly group activities include 1-1/4 hour walks "at a good clip," 25-kilometer bike rides and fitness classes.

Susan was divorced many years ago when her two daughters were young, and so she raised them largely as a single parent, a financial stress which contributed to her relatively modest retirement nest egg. These days she loves doing active things with her adult daughters and two grandkids, now ages 11 and 13. "Two summers ago, I took (the grandkids) bike riding around Stanley Park and zip-lining and I'm like the 'hero grandma' now." Many of Susan's activities are cheap, like walks followed by coffee, but others are pricier, like following up a workout with a restaurant meal.

Susan budgets $26,590 on the basics, not counting payments on a small mortgage, or $31,320, with mortgage payments included. Her spending on basics is at a fairly reasonable level, although she chooses to spend relatively ample amounts on clothing and personal care, as well as phone and communications.

Susan's budget allows $7,500 for extras. That includes $1,800 for travel, sufficient to pay airfare for several trips to visit her daughters in the U.S. However, she wanted flexibility in the first few years of retirement. As a result, as part of her financial plan, she set $30,000 aside in what Ms. Kvick describes as "an extra bucket of money to give her a little wiggle room in the first few years."

In 2017, Susan spent about $10,000 from this separate bucket for travel with friends, including a "once in a lifetime" cruise from Mumbai, India through the Suez Canal to Athens, Greece. "With travel, you've got to do it when you're young enough and fit enough," Susan says.

Planning for the long run

If you have an ample budget, you can afford to do more, and you don't have to prioritize as carefully, as Linda has found out. Linda retired four years go and spends $43,400 on the basics, $18,000 on the extras, and a total of $76,000 overall, including taxes. She spends a lot of time working with siblings to look after an ailing parent and recently went through a divorce, so she is still figuring out and adapting her retirement plans.

"(Divorce) changes everything in life," she says. "You have to rethink your future." Fortunately for Linda, she was left with ample finances after the split and could afford a larger budget than she has now, if she wanted it.

Linda is fairly frugal with much of her day-to-day spending, but also allows for many nice-to-haves. She loves spacious surroundings and gardening, so after the divorce she bought a three-bedroom house even though it is "far more than I need." The house purchase is mortgage-free but comes with a hefty amount of repair and refurbishment expenses (reflected in her "shelter" and "home and garden" budget items).

She enjoys having her two grown children over for family meals. She drives a recent-vintage mid-level car, but also keeps an old BMW for summer jaunts. She runs regularly to stay fit, but also engages a personal trainer and coach. She has run several recent half-marathons and a full marathon four years ago.

Linda enjoys the freedom of being able to pay for fun activities when they come up without worrying about money. While she budgets $5,500 for travel, she knows she can adjust the budget upwards if the right opportunity arises. "It is nice to know that if my sisters and I wanted to go on one of those $10,000 cruises, I could say, 'let's go'. That's pretty neat."


Shelter (Excl. mortgage payments) **   $5,170   $13,400
Mortgage payments   $4,730   $0
Vehicle transportation   $4,680   $8,000
Groceries   $3,600   $4,800
Health and dental   $2,580   $2,300
Home and garden   $960   $8,600
Clothing and personal care   $3,480   $1,200
Phone and communication   $4,320   $2,400
Personal insurance and financial services   $1,560   $2,600
Local transportation   $240   $100
Subtotal   $31,320   $43,400
Recreation and entertainment   $1,620   $6,000
Restaurants, alcohol, tobacco   $2,520   $2,000
Travel   $1,800   $5,500
Charitable and personal gifts   $1,260   $3,000
Miscellaneous   $300   $1,500
Subtotal   $7,500   $18,000
TOTAL (Excluding tax)   $38,820   $61,400
Income taxes   $3,200   $14,700
TOTAL (Including tax)   $42,020   $76,100
* Annual budgeted spending. Annie Kvick of Money Coaches Canada prepared financial plans for Susan and Linda and helped estimate these figures. Names have been changed to preserve privacy.
** "Shelter" includes property taxes, utilities, maintenance, repairs, home insurance. "Home and garden" includes the cost of furnishings, appliances, cleaning supplies, garden supplies and gardens services.


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The resignation of Gary Cohn as top White House economic adviser roiled markets Wednesday, sending the dollar down against the yen and U.S. stock futures lower. While global equities recovered from a trade-induced blow last week, graver concerns are emerging.

The White House said late Wednesday that Cohn is leaving his post, a move that followed his apparent loss in a battle to halt U.S. tariffs on aluminum and steel. A separate report showed President Donald Trump's administration is considering imposing tariffs on a broad range of Chinese imports for its alleged theft of intellectual property – a further sign of protectionist advocates' influence on the agenda.

The following are a selection of comments from analysts and investors:

'Voice of Reason'

Paul Donovan, chief economist at UBS Wealth Management: "The departure signals the defeat of anti-protectionism, or reduces the influence of anti-protectionism." "Any tax on trade, in any country, means consumers are going to be purchasing goods they would not chose to buy, at prices that are higher than they should have to pay, to subsidize less efficient companies."

Regulatory relief

Peter Boockvar, chief investment officer of Bleakley Financial Group: "From a major policy perspective, the heavy lifting was done via the tax bill. A limit on regulatory reform will continue regardless of Cohn's presence. Thus, the only thing left of importance for Cohn in my view was him being a firewall against dumb and damaging economic initiatives. Tariffs qualified as such."

Wag the dog

Tim Ash, a senior emerging market strategist at BlueBay Asset Management LLC in London: "Something seems to have changed Trump's decision set – perhaps that is the ever tightening net from the Mueller Russia inquiry with Jared's increasing difficulties and the departure of Hope Hicks. Perhaps what we saw with the steel/aluminium tariff announcement last week was another attempt by Trump to deflect attention from problems within the White House, and Mueller."

'Most meaningful'

Michael O'Rourke, chief market strategist at JonesTrading Institutional Services: "Of all the Trump administration resignations, this will be the one most meaningful for markets."

"Cohn was the administration official financial markets had the most confidence in. This opens the environment up to whole new wave of uncertainty. The likelihood of a trade war just jumped dramatically."

Treasury tremors

Rabobank strategists led by Richard McGuire: "We would challenge the oft-cited view that protectionism is bearish for USTs as it promises higher import costs (and, thus, inflation) while also portending a possible divesture of U.S. debt by China in retaliation." "We would instead argue that higher import costs, in representing a negative supply shock will ultimately weigh on demand. Tit-for-tat trade measures, meanwhile, point to lower world trade volumes which, in turn, promises lower global growth."

Retaliation risk

Ben Emons, chief economist at Intellectus Partners LLC: "Not only countries may retaliate, reciprocal trade is not a 1 for 1 trade, especially when tariffs are placed on high quality/low cost foreign goods that are a benefit to the domestic consumer." "The favorable global synchronization theme from 2017 is morphing into a de-synchronizing theme that can impact markets negatively."

Faith in earnings

James Soutter, a fund manager at K2 Asset Management Ltd. in Melbourne: "Markets will see this as another negative in the Trump presidency and will move lower on the news in the short term, but this doesn't have an impact on the broader earnings growth story that equities are experiencing."

'More chaos'

Alan Patricof, a venture capitalist and managing director of Greycroft LLC who had backed Hillary Clinton against Trump, said: "We need a grown up in the White House, that's the problem, and it gets worse every day," with the latest news indicating "more chaos."

"The market doesn't like uncertainty, the market doesn't like surprises. All we've gotten for the last 15 months is surprises, and yet the market went up. At some point the market has got to be spooked by the fact that they just don't know what's going to happen tomorrow." "I feel it so many times – I Tweet it myself – this is it we've hit the inflection point. But "the market defies me, then we get another crazy move." But this time, "Gary Cohn has been a grown up in the White House, and now he's gone."

Bark vs. bite

Terry Haines, a managing director at Evercore ISI: The narrative will be that protectionists "will be in the ascendant" and Treasury Secretary Steven Mnuchin, "the lone remaining 'free trader,' will be in eclipse." Even so, "there is more bark than bite in the Trump protectionist story line of the last few days." "Investors should understand the Cohn departure as the end of his influence in a difficult White House, but not to overreact to it."

Rates impact?

Michael McCarthy, Sydney-based chief strategist at CMC Markets Asia Pacific Pty. "It's clear at the moment the markets are likely to price the worst-case scenario on tariffs." "Markets are very concerned about the impact on global growth," given the "potential for tit-for-tat" protectionist moves in the wake of Europe's retaliation threat following the move on U.S. steel and aluminum tariffs. "Higher interest rates could be off the table if this does escalate." An important signal for markets is still pending -- the exact scope of the steel and aluminum tariffs, with the potential that exclusions and exceptions diminish the impact.

'Brutal' worries

Johan Jooste, chief investment officer at Bank of Singapore Ltd.: "The really important next thing is how do other countries react to this. If the response is fairly brutal, if it's really strong, without Cohn there you'd imagine the White House reacts in kind. Then we get into the kind of thing the market is probably now starting to discount as a greater probability, which is not a good outcome for stocks."

'Grandstanding Behavior'

Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd.: "I view this as grandstanding behavior by Mr. Trump, with the aim to have more negotiating cards in his deck." "In markets, we are closer to a durable low than we were after the first leg down in markets in early February."


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Today March 13/18
« Reply #560 on: March 13, 2018, 12:19:52 PM »
No safe haven leaves investors with ‘diversification desperation’
 Scott Barlow
A roundup of what The Globe and Mail's market strategist Scott Barlow is reading today on the Web

U.K.– based Goldman Sachs strategist Ian Wright asks the important investor question "is anything safe?" and concludes that, outside of cyclical stocks, very few asset classes won't be hit by rising equity market volatility,

"When Goldilocks was in full force, little could shake the pro-growth market performance. Now, with rates and inflation - and rates and inflation volatility - picking up, Goldilocks appears to be fading, even though growth remains strong … As the macro backdrop has evolved, so has "safe haven" performance … No safe havens - and no assets or equity sectors - have had a positive beta to the VIX recently, and few have had a positive beta to 10-year yields (notably, equity cyclicals have had a positive beta to 10y yields), leading to diversification desperation."

"@SBarlow_ROB GS: No safe havens leads to 'diversification desperation'" – (Research excerpt) Twitter

"Havens Just Aren't Safe Anymore, Goldman Says" – Bloomberg


Credit Suisse assures investors that a large scale global trade war is unlikely,

"The interconnectivity of the US economy across national borders implies that a trade war would clearly be counterproductive. Illustrating this, the US has five times more FDI in China than the other way around… We think it is non-tariff barriers that are, on the whole, more damaging than tariffs. Moreover, tariffs tend to hit manufacturing, which is 80% of all trade, but manufacturing is now just 12% of US GDP compared to 25% in the 1960s."

"@SBarlow_ROB CS: no big Trade war ahead" – (research excerpt) Twitter


I can pretty much guarantee Geoff Salomons's inbox is a mountain of bile this morning after he published "It's time for environmentalists to move on from the Trans Mountain pipeline" in Maclean's,

"The problem is that both sides feel that they are right. What's worse, in this particular instance, is that they are. The immediate, short-term loss in revenue is a significant hit to Alberta and the oilsands companies that will ultimately do little to affect global oil demand in the long term. And the long-term consequences of climate change and the need for aggressive, immediate action is needed."

"It's time for environmentalists to move on from the Trans Mountain pipeline" – Maclean's


During the financial crisis, we re-learned the lesson that market problems tend to appear in credit markets before equities. Bloomberg today noted stress appearing in global money markets,

"The London interbank offered rate, or Libor, and rates on Treasury bills are around levels not seen since 2008. The Federal Reserve's move to tighten policy forms the backdrop for the increase, but an added force behind the surge this year has come from a deluge of supply as U.S. deficits widen…. "We are in a new paradigm," said Jerome Schneider, head of the short-term and funding desk at Pacific Investment Management Co. "The clear focus for the market is where will incremental demand come from to meet this supply.""

Domestically, I'm not expecting big financial stress in commercial or mortgage-backed paper, or money markets even in the event of a disorderly drop in housing prices. My view would change quickly if this stress appeared.

"Sea Change Is Underway in Money Markets for Banks, Investors" – Bloomberg

"Authers' Note: Precarious credit markets" – Financial Times


Tweet of the Day: "@washingtonpost BREAKING: Trump ousts Secretary of State Rex Tillerson, will replace him with CIA Director Mike Pompeo " – Twitter

Diversion: "How Psychopaths See the World" – The Atlantic