A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
I am a worrier both by temperament and design in the hopes to assist readers with risk management and as a counterpoint to reliably bullish sell-side research. The problem now is that there's an embarrassment of "riches" in terms of ominous signs for the domestic economy.
For one, Canadians are getting fired, and from places like Canadian Imperial Bank of Commerce and Tim Hortons Inc. that have long histories of stability.
Two, the Canadian yield curve is pointing to serious unpleasantness, as Report on Business' Luke Kawa noted yesterday.
"The inversion of the overnight rate and the five-year yield is a relatively rare phenomenon, and often bodes ill for the economy. The two previous periods in which this occurred were in the run-up to the Great Recession and in 2000-01 as the dot-com bubble was bursting."
JPMorgan Chase & Co. is piling on to the Canada-centric pessimism as Michael Babad reports:
"[JPMorgan] is warning Canadians what to expect from the rout in the oil market: 'There will be blood.'"
"Bond yields sending ominous signal about Canada's economy" – Kawa, Report On Business
"'There will be blood' in Canada from oil price collapse, JPMorgan warns" – Babad, Report on Business
The Financial Times' venerable John Authers reports adds to the misery, with his opinion that as bad as things have been in the oil patch, markets still haven't priced in how bad they're going to get.
"Markets have failed to price in the full impact that the fall in the oil price will have on energy companies' earnings" – Authers, Financial Times, video
Canada's stable financial system played an important role in the country's recovery from the financial crisis, but in my opinion, the real hero was China's mammoth infrastructure-related spending spree that boosted resource demand.
Why am I bringing this up now? Because a repeat performance by China as Canada's economic lifeguard is unlikely in the future. The Financial Times reports:
"When ancillary industries are taken into account, real estate construction makes up about a quarter of China's $10-trillion [U.S.] economy, a higher proportion than the U.S., Ireland or Spain at the height of their property bubbles last decade. Nearly a decade of frantic building has created massive overcapacity and left vast belts of empty apartment blocks ringing most Chinese cities."
The FT report includes this terrifying chart.
Tweet of the Day: "@barnejek Your standard day in [emerging markets]: CNH blows up, Russia cuts rates, ZAR 5y rates up 15bp. And it's not even midday. EM rocks!"
Diversion: Left-leaning columnist Johnathan Chait set off a vicious inter-progressive firestorm over the prevalence (or not) of "political correctness." The resulting commentary by (also progressive) academic Fredrik deBoer contains some NSFW language but is too important to ignore for those interested in the politics of free speech.
"I don't know what to do, you guys" - DeBoer
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow