A roundup of what The Globe and Mail’s market strategist Scott Barlow is reading today on the Web
U.S. earnings reports were mixed Wednesday.
Blackrock Inc. disappointed, Ford Motor Co. guided lower, but both Bank of America and Goldman Sachs exceeded profit forecasts,
“BofA beats profit estimates on higher interest income, loan growth” – Reuters
“ Ford forecasts weaker-than-expected fourth quarter profit” – CNBC
“BlackRock profit misses as market turmoil hits bottom line” – Reuters
“Goldman Sachs reports higher fourth-quarter trading revenue” – Reuters
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Canada featured prominently, for all the wrong reasons, in an in-depth Citi research report called, “Flashing Red, Green, or Yellow? – House Price Risks to the Global Economic Outlook”,
“Even when adjusted for trends in household income, economies with the largest price rises since the GFC still appear relatively expensive. These include Canada, Australia, New Zealand, Scandinavia, and Israel. … Rising interest rates would strain debt servicing obligations. The BIS found that the debt service ratio (DSR) and other financial cycles indicators better predicted recessions than did the yield curve… A separate BIS study reveals that elevated DSRs can also signal a financial crisis on the horizon. Our research suggests that the households in high home price and household debt economies of Australia, Canada, Norway, and Sweden are the most at risk from rising DSRs … our economists believe that there is a significant probability of house price declines this year in 11 economies: Australia, Canada, China, Czech Republic, Hong Kong, New Zealand, South Korea, Sweden, Switzerland, Thailand, and the UK.”
“@SBarlow_ROB C: "Our research suggests that the households in high home price and household debt economies of Australia, Canada, Norway, and Sweden are the most at risk from rising DSRs" – (research excerpt) Twitter
“ @SBarlow_ROB C: Canada debt service ratios” – (chart) Twitter
“ @SBarlow_ROB C: Canada has biggest housing price increase since GFC” – (chart) Twitter
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The Atlantic’s Derek Thompson is one of my favourite columnists. His most recent “The ‘Age of Tech’ Is Over” has some valuable perspective in my view,
“Print is dead, live TV is dead, and Millennials killed American cheese; but you can still read a print newspaper with the TV on while eating a cheeseburger. Under the latter definition, tech stocks really do look like goners. Publicly traded companies that are classified as “tech” now trade at one of the smallest premiums in history, according to a recent JP Morgan analyst note … if Netflix and Walt Disney both use technology to stream video, why is only Netflix trading at infinity-times earnings? And if Tesla and BMW ‘both use battery technology to power luxury cars,’ Deluard writes, ‘why should the former trade at 42 times forward earnings when the latter fetches 5.6 times trailing earnings?’
“Some of the largest tech companies have exhausted their main markets. Apple and Samsung may have reached the smartphone plateau, as phone sales seem to have peaked. Facebook and Google have grown to dominate digital advertising. But in the U.S., overall ad spending has historically averaged no more than 3 percent of GDP. How do you grow forever in an sector that isn’t growing? That’s easy: You don’t.”
“The ‘Age of Tech’ Is Over” – Thompson, The Atlantic
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Tweet of the Day:
Diversion: These visual aids for understanding probability math is a huge public service to investors,
“Seeing Theory: Basic Probability” – Brown University
Newsletter: The best investment ideas aren’t sellable – Globe Investor
Scott Barlow