ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION
November 15, 2023 | Inflated Risk Assets Mean Central Banks Tighter For Longer
A flat October US CPI release yesterday inspired both equities and bonds to rally on a growing belief that inflation is decreasing, and the US and Canadian central banks, on hold since July, are done hiking policy rates this cycle. The most abrupt monetary tightening in many decades has thrown a ton of drag on heavily indebted […]
November 14, 2023 | Consumer Spending Plans at Recessionary Levels
The University of Michigan Consumer Survey for November found a fresh low in spending intentions. Consumers citing interest rates as preventing them from buying an automobile (36%) and a home (67%) were the highest since the 1981 and 1982 recessions when the Fed funds rate was 12 and 10 percent, respectively, versus 5.5 percent today. […]
November 13, 2023 | WeWork Bankruptcy Accelerates Real Estate Dominoes
As WeWork filed for bankruptcy last week, billions in commercial real estate leases, loans and property values are up for price discovery. The discussion below connects some of the dots. Danielle DiMartino booth Joins The Replay Booth. Here is a direct video link.
November 11, 2023 | Self-Inflicted Recession in Motion
This segment includes an articulate explanation of the yield curve inversion and its implications. I would add: it’s not just ‘normalizing’ interest rates that has sparked cardiac arrest through the economy, it’s the years of excessive credit creation that preceded it. Now we have the take back phase. Campbell Harvey, Duke University professor of finance, […]
November 10, 2023 | For Sale Inventory on the Rise
The four Ds drive real estate listings: death, divorce, default, and discretionary. The first three tend to trigger regardless of market conditions. ‘Discretionary’ and default listings tend to rise with interest rates– both are escalating now. Ted Oakley discusses real estate with property market expert Ivy Zelman. Here is a direct video link. For those who […]
November 9, 2023 | Lube That Greases World Economy Reflects Global Downturn
US lubricant consumption has fallen to the lowest level in at least 42 years, according to Bloomberg Opinion calculations based on data from the Energy Information Administration and reflects a cyclical slowdown globally. See The Lube that Greases the World Economy Says Beware 2024: Wherever one looks, from Europe to the US to China to India, […]
November 8, 2023 | “Serious slowdown” as Global Liquidity Contracts
This discussion offers insight into the origins of QE and what follows as fund flows reverse (QT). Richard Werner, Professor of Banking and Economics at the University of Oxford, regarded as the “Father of Quantitative Easing”, discusses the future of monetary policy. Here is a direct video link. Of course, it is not just quantitative tapering […]
November 7, 2023 | Dash for Cash Intensifying
More than a decade of near-zero interest rates spawned a generation of bonkers financial decisions. Now, we are in the reveal and clean-up phase. Unlike fixed-term mortgages, other forms of credit quickly change with overnight policy rates set by central banks. As shown below, since 1960, courtesy of the Daily Shot, non-mortgage interest payments now […]
November 6, 2023 | Fed on Hold as Economy Weakens
Danielle DiMartino Booth, CEO and Chief Strategist at QI Research, joins Bloomberg Radio to discuss the FOMC decision. Here is a direct video link.
November 2, 2023 | Lacy Hunt on The Impending Recession and Implications
A worthwhile review in this 1-hour segment. Legendary economist Dr. Lacy Hunt joins Julia La Roche on episode 115 for a wide-ranging discussion on the economy and why we’re facing an impending recession. Here is a direct video link.
November 1, 2023 | What Interest Rates Say About Home Prices
The average home price in Canada ($757k) is about 141% higher than what is considered affordable for the average household income. In the highest-population areas, like the Greater Vancouver and Toronto Areas, where incomes and home prices are higher than the national average, the affordability numbers are much worse. Price-to-income ratios in the mid-west and […]
October 31, 2023 | China’s Real Estate Bust Has Global Implications
The International Monetary Fund warned this month that the downdraft in China’s real estate sector has contagion implications globally: In the near term, the sharp adjustment in China’s heavily indebted property sector and the resulting slowdown in economic activity will likely spill over to the region, particularly to commodity exporters with close trade links to China. Beyond […]
October 30, 2023 | Stock Market Likelihood is Lower for Longer
The average time from a yield curve inversion (long-interest rates below short) to the onset of recession has been ten months historically, ranging from 11 to 22 months. October marks the eighteenth month of curve inversion this cycle. Moreover, since June, the yield spread has been flattening out. As we start this trading week, […]
October 28, 2023 | Re-Steepening Yield Curve Signals Financial Trauma in Motion
In the past few months, short-term treasury yields have risen more than long-term such that the yield curve, which has been inverted since April 2021, is now un-inverting. This move typically signals the near-term onset of recession and the worst stock market losses. The chart below from my partner Cory Venable shows the move in […]
October 27, 2023 | Canadian Recession is Here
David Rosenberg, founder & president of Rosenberg Research and Ed Devlin, founder of Devlin Capital, senior fellow at C.D. Howe Institute and former head of Canadian portfolio management at PIMCO, join BNN Bloomberg to discuss their economic outlook. They say that even as many believe a soft landing is still accomplishable, there are some metrics […]
October 26, 2023 | Luxury Losing Its Luster
What about wealthy people not being hurt by higher debt payments? Nonsense, as usual! As financial markets tumble, luxury spending follows. The slowdown is ubiquitous, folks. CNBC’s Robert Frank reports on spending pull backs from the luxury consumer and what it could be signaling for the economy at large. Here is a direct video link. Bank […]
October 25, 2023 | A Case of Overkill
It is not just rapid hikes in the overnight rate (525 basis points in 18 months by the US Fed and 475 basis points in Canada), which are contracting credit and slowing spending through the real economy. The drop in equity and bond prices, along with the jump in fossil fuel costs and the US […]
October 24, 2023 | Phase Change Disruption in Energy, Transport and Food
The Saudis see where the puck is going. Does Canada? Tony Seba updates on Phase Change Disruptions of Energy, Transportation, Food & Implications for Humanity. Here is a direct audio link.
October 23, 2023 | Real Estate Getting a Comeuppance
Pops and financial wipeouts are the historical norm when a billowing housing bubble meets dramatically higher interest rates. On the upside, the pendulum is finally moving in favour of renters and future buyers. Buying housing has rarely been this unattractive relative to renting. The chart below shows that the average new US mortgage payment is […]
October 20, 2023 | Bonds Offer Capital Defence, Equities Do Not
Unlike bonds, equities offer no return of principal dates nor contractually prescribed income payments. Contrary to the investment sales hype bombarding us daily, dividend-paying equities are not capital ‘defensive.’ Defensive for whom, we should ask. From present valuation levels, equities are priced to underperform government bonds by 6.5% annualized over the next ten years […]
October 19, 2023 | Liquidation Mode
Welcome asset price deflation: motivated sellers are listing everything, everywhere, all at once. And this is with unemployment just starting to rise. Wait for it…
October 18, 2023 | Increasing The Primary Residence Housing Stock
All the talk about needing to deflate the cost of housing is finally getting serious. This week, B.C.’s NDP government tabled the Short-Term Rental Accommodations Act that, if passed, will ban most short-term rentals that aren’t within an operator’s principal residence. Effective May 1, the new restriction would apply in municipalities with a population of […]
October 17, 2023 | Pandemic Buyers Struggling To Unload Properties
Leverage on leverage on leverage, who would have thought? John Fincham, broker at Re/Max Parry Sound Muskoka Realty, joins BNN Bloomberg to discuss the Ontario cottage market. He says that many cottage owners who bought during the pandemic are now struggling to unload those properties. And as interest rates drive down prices he says cottages […]
October 16, 2023 | Small Caps Leading Lower
The economically-sensitive Russell 2000 stock index (RUT) has given back all of its early 2023 rebound and is now negative year to date, -29% from its cycle peak in October 2021 and just 1% higher than where it was in August 2018. The more concentrated US small-cap 600 index (SML in green below since April […]
October 13, 2023 | Resisting Financial Sentinels
Investment banks are having a rough year. Sharply higher interest rates are taking a toll. Falling asset prices since 2021 have reduced fees tied to assets under management just as bad debts are rising. Underwriting fees are not helping: year-to-date investment banks have sold 22% fewer Initial public offerings (IPOs) to the public than in 2022, and […]