Weekly Market Comment: Saturday, March 27th
Has the Loonie gone crazy?
The Bank of Canada is poised to be the first major central bank to taper (ease) their supporting purchases of government bonds (known as quantitative easing, or QE), according to a speech this week from Deputy Governor Toni Granvelle. Emergency programs involving the purchases of struggling corporate bonds are now done. “We will eventually get down to a pace of QE purchases that maintains, but no longer increases, the amount of stimulus being provided.”
Those routing for a return to truly free markets will have to wait a while. Canada easing its QE much sooner than the Americans should further boost the value of the Loonie (currently almost 80 cents in USD terms).
In the meantime, America’s jobless claims fell to their lowest level since the pandemic began. They, too, will eventually curb their QE.
(source: US Labor Department, New York Times)
“Diversity is the one true thing we all have in common. Celebrate it every day.” – Winston Churchill
Markets going up and down is normal, but too much serial correlation (all stocks moving in the same direction at the same time) can portend a destabilizing boom or bust cycle. What’s preferable, healthier, and more durable, is a market where there is some sector rotation. Money leaves one corner of the market, only to flow into another.
Lately, we’ve seen money leaking out of high-flying growth areas of the market (namely technology), into more value-based stocks that are dependent on an economic rebound. Sectors like manufacturing, retail and banks, are more profitable when interest rate spreads, so they increase in value as they have been.
It is also is rewarding investors that are more risk adverse, while at the same time making some of the exciting growthier names less expensive for incumbent investors.
At length did cross an Albatross
Global supply chains are tight as it is, a combination of record online demand and Covid-stunted factory output. But a massive 400 meter container ship running aground in the Suez Canal has blocked over 100 ships from crossing what normally handles 10% of global supply routes. We’re talking about a boat that can handle up to 20,000 20-foot containers and, if stood upright, would be taller than the Empire State Building.
Day after day, day after day,
We struck, nor breath nor motion;
As idle as a painted ship
Upon a painted ocean.
(source: Bloomberg)
Noteworthy links:
- You can now buy a Tesla with Bitcoin
- Toilet paper is next likely victim of world’s shipping container crisis
- Are electric cars really better for the environment?
- Trudeau’s carbon tax upheld by Canada’s top court
- Langley home sells for $500,000 over asking
- What Joe Biden said in his first presidential press conference
- Opinion: China doesn’t respect us anymore – for good reason (Tom Friedman)
- Ellen DeGeneres loses 1 million viewers after apologies for toxic workplace
- ‘Assignment Russia’ book review
- Best printers for home – say goodbye to ink cartridges
- First images of magnetic fields at the edge of black hole in M87 Galaxy
- Elon Musk says SpaceX will land rockets on Mars ‘well before 2030’
Musings Beyond The Markets
From Warren Buffett’s latest annual letter to shareholders. Working smarter trumps working harder.
Charlie and I want our conglomerate to own all or part of a diverse group of businesses with good economic characteristics and good managers. Whether Berkshire controls these businesses, however, is unimportant to us.
It took me a while to wise up. But Charlie – and also my 20-year struggle with the textile operation I inherited at Berkshire – finally convinced me that owning a non-controlling portion of a wonderful business is more profitable, more enjoyable and far less work than struggling with 100% of a marginal enterprise.
For those reasons, our conglomerate will remain a collection of controlled and non-controlled businesses. Charlie and I will simply deploy your capital into whatever we believe makes the most sense, based on a company’s durable competitive strengths, the capabilities and character of its management, and price.
If that strategy requires little or no effort on our part, so much the better. In contrast to the scoring system utilized in diving competitions, you are awarded no points in business endeavors for “degree of difficulty.” Furthermore, as Ronald Reagan cautioned: “It’s said that hard work never killed anyone, but I say why take the chance?”
Word of the Week
whataboutism (n.) - an attempt to discredit an opponent’s position by charging them with hypocrisy without directly refuting or disproving their argument. “Whatboutism is always popular with the leaders and supporters of autocracies because they have no answers for their own crimes.” – Garry Kasparov.