A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.
Financial pundit and frequent CNBC guest Josh "The Reformed Broker" Brown wrote a helpful post using Warren Buffett to warn investors not to panic and sell their investments in volatile markets. This is excellent advice – but only if your portfolio looks like Berkshire Hathaway Inc.'s.
Warren Buffett's stock selection method is based on minimal risk through non-cyclical companies – Coca-Cola Co. is a good example - that have proven they can grow earnings no matter what the economic backdrop. Mr. Buffett does not, for example, invest in junior oil companies where, if the stocks aren't sold near the top of the cycle, they form a crater in the portfolio that could take a decade to crawl out of.
"The first casualty of a bear market " – Reformed Broker
Canadian Imperial Bank of Commerce economist Avery Shenfeld published a report estimating the negative economic effects of the greatly reduced oil price on the Canadian economy. While domestic investors are still subject to the Pavlovian impulse to bottom fish in the energy sector, Canada's economic outlook is now much more sedate,
"Some aggregates, like real GDP, will see a smaller hit than many who think of Canada only as North America's resource hub might conclude. But within that story lie major sectoral and geographic wins and losses, and a much larger terms of trade hit to nominal GDP, national income and the fiscal performance of oil-exporting provinces. "
"No barrel of fun: What weaker crude means for Canada " - CIBC
Bloomberg continues to ramp up its multi-media campaign with "Pessimists Guide to 2015." It makes for uncomfortable reading at times – recognizing the Middle East, China and Russia as potential market flashpoints – but the report forms a good antidote to the annual barrage of overly optimistic sell-side market forecasts.
"Pessimists Guide to 2015" – Bloomberg
University of Alberta professor and social media gladiator Andrew Leach wrote a tremendous summary of what's gone wrong with oil sands profitability estimates. This is a must-read for investors concerned with the effects of lower energy prices on sector earnings growth,
"What went wrong? Costs…At today's prices, of approximately $50 U.S. WTI prices and an 85 cent U.S. dollar, the 2006 report would have expected a rate of return on capital invested for such a project of about 20 per cent. At today's capital and operating cost, such a project would likely have an expected rate of return in the one to three per cent range."
"Oil sands cost inflation coming back to bite us now" – Macleans
FT Alphaville's Dan McCrum reports that ridiculous valuations still abound in the venture capital and initial public offering areas despite extreme levels of market volatility. Mr. McCrum details a recent hot IPO, OnDeck Capital,
"From our perspective, the market valuation of about $1.3-billion seems nuts for a far simpler reason, which requires reading 15 words in the prospectus:
We have a history of losses and may not achieve consistent profitability in the future."
"At a loss" – McCrum, FT Alphaville
Tweet of the Day: Technical analysis expert J.C. Parets finds the volatility in the Canadian dollar completely explicable – "A non-random walk through Canadian dollars allstarcharts.com/non-random-wal… $USDCAD $FXC $STUDY pic.twitter.com/HJENl8v4fZ "
Diversion: "The 100 best tracks of 2014 " – Pitchfork Music
Follow Scott Barlow on Twitter @SBarlow_ROB
Scott Barlow