HISTORY & READINGS at Brian Ripley's Canadian Housing Price Charts & Plunge-O-Meter

Cash Flow

10/29/2018

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While we wait for the October data to come in, the reminder of this chart is about cash flow yield and as Henry McVey, KKR's head of Global Macro & Asset Allocation says as we switch from monetary to fiscal policy...

...own more assets that have cash flowing yields...

Hat Tip to @carlquintanilla

Here's my back of the napkin yield calculator for CAD$12.
It pays for hosting and domain blog costs; thanks.

...more than half of fund managers have never experienced a prolonged bear market... @Hipster_Trader

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Millennials who did not 'catch' FOMO might be very relieved at this point in the business cycle.

Canada Has a Broken Housing System and It Has Fucked Over Millennials - Vice, Oct 2018

SNIPPET: In the 2017 edition of the Angus Reid-CIBC housing poll, many millennial homeowners expressed regret about buying a house because of the financial difficulties, and about half of them said they never expect housing prices to go down.) According to an April 2018 Angus Reid-CIBC poll, significantly fewer millennials own homes compared to the same age cohort in 1981.

Commodity Super Cycle

10/24/2018

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As I have been pointing out on my chart of TSX INDEXES for Energy, Real Estate, Financial Services, Gold and the Bank of Canada Commodities in $CAD, that...

...the Thompson Reuters CRB chart embedded in the chart shows that global commodities measured in USD has been dropping since 2008, although recently since September (2018), there has been a near term rally in commodities... BUT

...since Oct 3, 2018, the Thomson Reuters/CoreCommodity CRB Index has been coiling down (MarketWatch.com).

On my Twitter Feed from @hks55 came their chart suggesting that the commodity super cycle is poised for another leg down due to China's slowdown in credit creation that had spurred the commodity boom as Kyle Bass illustrates in this comparison between Chinese credit creation and their GDP (the link includes the 41 second video).

CLICK TO GO TO ORIGINAL POST

China’s Slower Credit Growth
Underscores Worries Over Economy
Bloomberg, Aug 2018

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Equities and Bonds

10/14/2018

Why The Stock Market Is Heading For Disaster
In this presentation, Clarity Financial's economic analyst Jesse Colombo explains why the U.S. stock market is experiencing a dangerous bubble that is going to burst violently and cause serious damage to the underlying economy. Published on Oct 11, 2018

Hat tip to Jesse Colombo for the following 14 minute video that includes the following 20 long term charts:

S&P 500 since 1997
Percent equity gains since 2009
Interest rates since 1997
Real Fed Funds rate since 1990
U.S. corp debt since 1980
U.S. corp debt as a percent of GDP since 1980
Buybacks and dividends paid vs S&P 500 value since 2000
S&P 500 vs NYSE margin debt as percent of GDP since 1997
Retail investor allocation to stocks vs cash since 1997
CBOE volatility index (VIX) since 1997
St Louis financial stress index since 1997
BAML U.S. high yield spread since 1997
Cyclically adjusted P/E ratio since 1980
U.S. stock market capitalization to GDP ratio since 1971
Tobins Q ratio since 1902
U.S. net corp profits as a percent of GNP since 1947
FAANG stocks vs S&P 500 since 2009
Fed Funds rate and recessions since 1997
Financial banking crises and recessions since 1977
10-2 year treasuries spread since 1976

Trump Is Completely Misguided On Interest Rates

If the Fed or other central bank voluntarily abandons further credit expansion (most commonly by raising interest rates), the credit and asset bubble will experience a deflationary bust. Deflationary episodes entail credit busts, falling consumer prices, bear markets in stocks and housing prices, and falling wages. If the central bank decides to never put an end to the credit expansion (for example, if the Fed never raised rates), however, the result would be a runaway credit and asset bubble that leads to a severe decrease in the value of the currency and high rates of inflation. The latter scenario is what would occur if President Trump got his way – hardly a desirable outcome for the economy. To summarize, the Fed is crazy – they’re crazy for creating such a large bubble in the first place via loose monetary policy, but not for raising interest rates and normalizing their monetary policy. Jesse Colombo, Oct 17, 2018

Market Bear Hussman Says Stocks Could Lose $20 Trillion

To state the obvious, bull markets do not last forever, and inevitably are followed by bear markets. Likewise, economic expansions also must end at some point, followed by recessions, and recessions typically are accompanied by bear markets. John Hussman, Oct 15, 2018

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The table above from current stock market bears is warning about a pending major stock market correction of 20%, 30%, 40%, 50% or 60% while past major corrections came in at 83% in 1929, 34% in 1987, 49% in 2000, and 57% in 2007.

My fantasy Plunge-O-Meter for September 2018 is showing a potential 51% average drop for Canadian housing prices for the 6 biggest markets in Canada if buyers go on strike.

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Buyers outside of Canada in other housing bubble cities are thinning in number.

There's trouble ahead in the global housing market
Source: Business Insider July 2018

Toronto: Prices clearly peaked in early 2017. Prices are now down 3% vs last year. (Toronto SF Detached are down 17% from the peak. See the Sept 30, 2018 Plunge-O-Meter)

Syndey: Compared to last year, prices are now down 5% and supply has ballooned 22%.

Stockholm & Vancouver: Over a recent 6-month period, prices in the luxury property market fell 9% and 7.6%, respectively.

New York City: In Q1 2018, prices were down 8% YoY and sales were down 25%. NYC's luxury properties fared even worse.

San Francisco: After hitting a record price high in January, the city has seen a rare spring decline in prices, while rents across the SF Bay Area are starting to "cool off"

Bond King Gundlach predicts yields
much higher before this move ends

"If you look at the charts and you look at the way the market's behaving and you think about the trends that are underneath the bond market, it wouldn't be surprising at all to see the 30-year [yield] go to 4 percent before this move of the breakout above 3.25 percent is over," he said on "Halftime Report" Thursday. CNBC, Oct 11, 2018

Bond King Gundlach predicts yields are headed much higher before this move ends from CNBC.