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​Credit booms are followed by credit busts and as the chart shows, Canadian Residential Mortgage Credit (%Y/Y lending) has been shrinking dramatically since the July 2008 Crude Oil Peak and the Crash into the March 2009 Pit of Gloom (6 Metros Chart).

"There hasn’t been a serious economic downturn in Canada since the 1990s; the last time that mortgage credit grew as slowly as now. Unfortunately bank lending is pro-cyclical, so lenders will tighten credit conditions just as real estate borrowing stops growing, which will make the downturn worse. This boom/bust cycle is inevitable as long as lenders focus on lending for real estate investment and speculation rather than more productive investments. To change that focus, a new set of rules and regulations that govern lending is needed.” Quote included in Jason Kirby and MACLEAN's Most Important Charts to Watch in 2019

​Canadian Banks on "Credit Doomsday Watch" CIBC

The CIBC analysts said that Canadian banks appear to be headed for their weakest credit cycle since the oil price collapse, which caused related loan losses to jump in 2016. While their prediction is “not a coming apocalypse,” the report said the banks’ loan losses last quarter had a “one-off feel to them” that could become more frequent. “For reference, the actual doomsday clock sits at two minutes to midnight,” the analysts said.

​ Well it could easily be one o'clock in the morning as weak hands cut their losses. Hat Tip to @Hutchyman​

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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

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

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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​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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​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

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While we wait for the September real estate sales, inventory and price data to be released next week, Chris Kimble today makes the observation that real estate proxies in the equity markets are behaving à la 2007. ​

Says Chris Kimble Sept 28, 2018:

"This 4-pack (chart above) compares the price action of today with the price action of the 2007 highs in the Dow Jones Home Construction Index, Bank Index & Real Estate.

Before the S&P peaked in 2007, Home Construction, Banks and Real Estate started creating a series of lower highs, diverging with the S&P.

Joe Friday Just The Facts Ma’am– Divergences similar to 2007 are taking place of late.

The long-term trend for each of these Stock indices reams up at this time! Stock market bulls hope that it’s different this time and that these divergences are just noise."

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Hilliard MacBeth "When the Bubble Bursts"
Top 5 predictions for Canada's housing markets in 2018
​BNN Interview September 28, 2018

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"With portfolios still weighted towards equity, but overweight in cash and shorter-duration fixed income, we can afford to sit still into next week and allow the market to choose its path."

Intermediate-Term Picture Remains Bearish

​On a intermediate-term basis, both of our weekly “sell signals” remain, and as shown below, the market once again failed at its overhead trend line last week as well as the downtrend resistance from the previous peaks. These failures keep downward pressure on the market as prices continue to follow the “path of least resistance.”

The weekly chart also shows the rare “buy” and “sell” signals issued on a longer-term basis. Currently, as the market struggles with its current correction process, it is also very close to triggering a more important “sell signal” which could indicate a further correctionary process over the next several months.

Over the last 25-years, these sell signals have only been triggered 5-other times.

1. At the peak of the market prior to the “Asian Contagion”
2. Just prior to the peak of the market in 2000
3. At the peak of the market in 2007
4. At the peak of the market 2011 as QE-2 ended and the U.S.was facing the “debt ceiling debate.” 
5. Near the peak of the market from the collision of the end QE-3, the “taper tantrum” and “Brexit.”

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It is clear that some sort of correlation exists between stock values and real estate values.  Stocks started their recent bull run in 2009.  As you can see from the chart above, real estate values didn’t start moving up steadily until 2012.  So there is a lag here.  But what is interesting is the correction in stock values in 2008 matched up with real estate values.  In fact, real estate values started trending lower before the market crash. DoctorHousingBubble.com

In ​January 2018 the S&P 500, DOW and TSX peaked.

Toronto real estate peaked in 1Q 2017 although condo prices hit a new price high last month. Vancouver prices peaked 3Q 2017 and like Toronto, strata prices are still peaking as of last month. ​ Calgary prices peaked 2Q 2017 with condo prices hitting their high back in 3Q 2016

​U.S. vs Canada Private Debt to GDP

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Steve Keen "Can we avoid another financial crisis?"

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As we wait for the first week of April to unfold and the March real estate data to come in, questions about the stock market's melt-up comes via  @anilvohra69

Bubbles have a blowoff phase lasting 21 months. Using a 5% threshold, the run from Feb 16 to Dec 17 was 22 months.

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​During Toronto's 21 month "melt-up", listing levels crashed as the fear of missing out kept sellers out of the market. Post melt-up, Toronto sales are testing the lows as buyers fear getting in.  ​​Markets are related. Real Estate valuations are not immune.

Global Risks 2018
According to the IMF, over the past three decades 53% of countries have seen an increase in income inequality, with this trend particularly pronounced in advanced economies. Furthermore, today’s economic strains are likely to sow the seeds for longer-term problems. High levels of personal debt, coupled with inadequate savings and pension provisions, are one reason to expect that frustrations may deepen in the years ahead. We highlight four concerns: (1) persistent inequality and unfairness, (2) domestic and international political tensions, (3) environmental dangers and (4) cyber vulnerabilities. We conclude by reflecting on the increased dangers of systemic breakdown. World Economic Forum

​Strongest 'Bubble Burst'' Alarm Just Went Off
Jeremy Grantham 2018

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​In December 2017, the 10yr less 2yr Canada Government bond spread narrowed to just 32 beeps away from inversion.

Market history is littered with downturns that followed new Republican presidents: Hoover (1929), Eisenhower (1953), Nixon (1969), Reagan (1981), and Bush (2001). The Trump bubble will likely prove to be the mother of all Republican presidential ebullience bubbles. Trade wars are not positive at all for the markets. They are what exacerbated the Great Depression and they should be one of the key triggers of the bursting of the China bubble.

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Here's Who Could Lose the Most in a U.S.-China Trade War
Bloomberg, January 23, 2017

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It's a big day in the Oil Markets as the price of crude slips below the sentiment price of US$50 the list is growing of oil majors who are withdrawing from further investment in Alberta.  Also yields in the bond markets are continuing their rising trend; ie: the cost to finance is rising.  ​

Al Gore on the Solar Revolution - TED Talk Clip 1.50 min
2 solar home systems sold every minute in Bangladesh

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Dan Loney's February 19, 2017 blog post details an update from Harry Dent about Dent's view on a probable correction low for Vancouver housing prices. I have mashed up Dent's retracement projection with my Plunge-O-Meter fantasy.

A few months ago I spent three days with world renown economist Harry Dent. We had a conversation regarding the state of Vancouver area real estate. He stated that he expected the real estate market to correct 43% in Vancouver from it’s high. This week his office sent me this chart which shows a projected crash of -64%. (FEB 19, 2017)

The Bank of Canada estimated that more than 20 percent of all insured mortgages were contracted by households that have loan-to-income ratios of more than 450 percent. Hilliard MacBeth for MACLEANS October 12, 2016

​On the price chart in the spring of 2005 there was a 4-6 month plateau period while buyers and sellers twitched like a herd. When the credit spreads narrowed and the yield curve began its journey towards inversion, the commodity stampede began. Plunge-O-Meter

Charles Nenner Interview February 21, 2017

Market Crash Recession
by the 5th of November, 2017

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​Peter Leeds summarizes the bear argument below. Notice that Peter's comments on U.S. high end Real Estate applies to the detached market in Vancouver right now.

Yellen Will Raise Rates in March
FEB 15, 2017 BNN Interview of Jim Rickards

March 15, 2017 is the Date to Watch
Everything Will Grind to a Halt
David Stockman FEB 27, 2017

Trumponomics

Moderated by Prof. Sebastian Edwards, a former chief economist of the World Bank; this discussion reveals the surprising insights of UCLA Anderson Forecast economists Prof. Ed Leamer and Prof. Jerry Nickelsburg,  FEB 16, 2017

David Frum on Trump
"This is the most phoney baloney administration ever" 

The election of Donald Trump could mean a gradual shift in the nature of the American political system. The much vaunted checks and balances might be unable to stop a slide into a new kind of authoritarianism. This is how David Frum, senior editor of The Atlantic and a former speech writer, imagines one of the possible futures that await the U.S. He joins The Agenda to talk about political implications under Donald Trump. Published on Youtube Feb 9, 2017

The Rolling Stones - Doom and Gloom

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Chart Above: The biggest stock market declines since the 1980s:

How bad was Monday's stock market crash? 
by Timothy B. Lee (Vox.com) on August 24, 2015

On Monday, August 24, 2015 the stock market posted its largest decline in years, sparking fear that the US is on the verge of another recession. After initially plunging 6.4 percent in a matter of minutes, it recovered some ground and ended the day down 3.6 percent.

The chart by Javier Zarracina is dominated by October 19, 1987, when the stock market plunged by 22 percent. This huge drop wasn't followed by a recession, and the market recovered the lost ground within two years.

There were big declines in October 1997 and August 1998. Again, these proved not to have any broader significance, as the bull market would continue until 2000.

There were three big drops during the 2000-'01 bear market that preceded the recession of the early George W. Bush years.

The stock market suffered 11 big drops in the last four months of 2007, during the Great Recession that was officially under way by then.

In August 2011, the stock market panicked over the possibility that President Obama and congressional Republicans would be unable to resolve the debt ceiling fight, leading to three big declines.

So sometimes a big stock market decline is a sign of deeper economic problems. Other times, it's not. It's too early to say which category Monday's crash is in.