A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
The Chinese government has pledged to fully open its equity markets to foreign investment but it's difficult for me to view the news with anything but cynicism. Widespread accounting problems are one issue – investors should never buy anything unless they can trust the financial statements – but the timing is an even bigger problem.
The federal government's crackdown on corruption has resulted in significant capital flight as wealthy Chinese look to move assets offshore. Allowing foreign investment while this is occurring looks a bit convenient, a way to provide bids allowing rich Chinese to cash out.
"What foreigners need to know before diving into the China stock market " – China RealTime, WSJ
I'm not going to pretend to have an informed view on Scottish independence but I admit to being confused by the Scots' apparent persecution complex. Analysis by the BBC's Paul Mason definitely helped. There's a lot of x'ed out NSFW language, but the country's reverence for a speech from Irvine Welsh's Trainspotting highlights how deeply-felt the issue can be for the "No" side of the debate – feelings strong enough to ignore the obvious economic risks of separation.
"Scottish #Indyref and the 'Renton test'" – Mason, BBC
"Why big banks fear an independent Scotland, in their own words" – Quartz
"Scottish independence is a matter of identity" – McArdle, BloombergView
Canada was not mentioned by name but a Matthew Klein column on the risks of housing bubbles and possible ways to prevent financial disaster when they falter is clearly relevant to Canadians.
Mr. Klein cites a recent report by the Brookings Institute which concludes that "strategic" mortgage defaults are the prospect to avoid at all costs and that mortgage refinancing is the best solution to the end of a housing bubble, "the simplest [solution] is to refinance existing mortgages into new ones with much lower interest rates and much longer maturities."
The post also features an excellent review of the failures of U.S. policymakers after 2008 and provides Canadians with a good template of what to expect if our housing market endures a significant correction.
"How to avoid another housing crisis (maybe)" – FT Alphaville (registration but not subscription required)
I am desperately trying to understand why Pacific Investment Management Co LLC's Bill Gross and Citigroup's highly-respected debt research department would both advocate an investment strategy of leveraging up in the corporate debt and government bond market. Credit spreads are wafer thin in corporate debt markets, offering little yield advantage over far safer Treasury bonds. Corporate bond markets have been on fire in the post crisis period and I can't believe the added risk of leverage is being suggested for a rally that's already gone on so long.
"Pimco's Gross says good time to lever up on credit investments " – Bloomberg
"Don't hate credit, just use leverage for 10 per cent returns, says Citi " – Bloomberg
Tweet of the Day: "@QZ The Italian police just saved the world from 220,000 bottles of bad wine qz.com/264046 (Reuters) pic.twitter.com/oMnZxOy92G
Issues: The term "Diversion" suggests the frivolous and it's not really suitable for a discussion of domestic violence, so I've ditched it for the day. The ongoing discussion of the NFL's (mis)handling of the Ray Rice situation is important far beyond the sports world. Grantland's Bill Simmons, arguably the most prominent voice in U.S. sports, used his regular reader e-mail roundup for a complete and utter excoriation of the NFL Commissioner Roger Goodell. The piece concludes with a heartbreaking personal account of domestic abuse.
"The Goodell-Must-Go Bag" – Grantland
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Scott Barlow