Gabriela Ramos, OECD Chief of Staff and Sherpa overseeing the Organisation’s work on Inclusive Growth, presented in more details the main findings of the report, saying “our analysis delivers a bleak picture and a call for action. The middle class is at the core of a cohesive, thriving society. We need to address their concerns regarding living costs, fairness and uncertainty.”
Marc Goldfried, head of Canoe Financial Fixed Income talks with BNN Bloomberg about dropping yields confirming a weakening economy.
The Bank rate has been 2% for the last five months but the Bank of Canada 2yr and 10yr benchmark bond yields are indeed inverted to the Bank Rate as I have noted on my Yield Curve chart (FEB 2019)
On march 11th 2019, David Larock an independent full-time mortgage broker laid out his "Case for Lower Canadian Mortgage Rates", below edited, but read the whole feature report at MoveSmartly.com
The Bank of Canada acknowledged that our current economic slowdown is now “more pronounced and widespread” than it had previously forecast.
On this last item, my Household Debt chart is in agreement.
Thanks to Jesse Felder @jessefelder and
Tuomas Malinen @mtmalinen for the charts above.
Today, March 13th 2019, the live
Canadian Productivity Chart exhibits a slowdown.
Vancouver, whose house prices accelerated to a double-digit rate relative to last year, has a ballooning index score. Higher stamp duties for foreign investors proved futile in braking its boom. By contrast, Toronto’s price dynamics have slowed considerably and its index score declined somewhat from last year’s. In both cities, valuations have trended upward since the late 1990s. Neither the financial crisis nor weakening commodity prices has dragged them down. But rising rates, stricter market regulations or an economic downturn could turn the lights out on the party given the high valuations and strained affordability.
Peak Consumption in Canada
The low rate leaves Canadians more vulnerable to an economic shock, according to Brian DePratto at Toronto-Dominion Bank. “It’s concerning that households aren’t building up buffers and prepping for retirement like they used to,” the Toronto-based senior economist said by email. “The extent to which Canadians turn around their priorities when it comes to their financial situation could also mean less money for consumer spending.”
“It doesn’t bode well for consumption spending moving forward,” National Bank Financial’s Krishen Rangasamy
While we wait for the November Real estate data to come in, the World Trade Organization has released their November 26, 2018 World Trade Outlook Indicator.
Their Trade Indicator has dropped to the lowest level since October 2016.
NOTE that the Canadian National MLS Real Estate sales peaked three months later in January of 2017.
World Trade Component Indices Key Findings Full Text
This report covers new trade and trade-related measures implemented by G20 economies between 16 May and 15 October 2018. It shows a number of important trends in global trade policy-making. While G20 economies continued to implement trade-facilitating measures, the figures show a significant increase in the number and coverage of trade-restrictive measures. This provides a first factual insight into the trade‑restrictive measures imposed in the context of current trade tensions.
G20 economies applied 40 new trade-restrictive measures during the review period, including tariff increases, import bans and export duties. This equates to an average of eight restrictive measures per month.
During the review period, the estimated trade coverage of the import-restrictive measures (US$ 481 billion) was more than six times larger than that recorded in the previous period and is the largest since it was first calculated in 2012.
G20 economies also implemented 33 measures aimed at facilitating trade during the review period, including eliminating or reducing import tariffs and export duties. At close to seven trade‑facilitating measures per month, this is in line with the 2012-17 trend.
The trade coverage of import-facilitating measures (US$ 216 billion) has also risen significantly during this period but is just half that of trade-restrictive measures.
On trade remedy measures, the review period saw a decrease in initiations of investigations by G20 economies and a stagnation of terminations compared to the previous period. Initiations of anti-dumping investigations remain the most frequent trade remedy action, accounting for almost three-quarters of all initiations. The trade coverage of trade remedy initiations (US$ 25 billion) has fallen significantly compared to the previous period. The trade coverage of trade remedy terminations remained equivalent to the previous review period at US$ 6 billion.
The proliferation of trade‑restrictive actions and the uncertainty created by such actions could place economic recovery in jeopardy. Further escalation would carry potentially large risks for global trade, with knock-on effects for economic growth, jobs and consumer prices around the world.
G20 economies must use all means at their disposal to de-escalate the situation. The WTO will do all it can to support its members to this end and leadership from the G20 will be essential. PDF Chart Source
3 of My Charts Echo the WTO Warning
Canadian National MLS sales peaked in January 2017. Two of the six WTO metrics were already in recession.
The 10yr less 2yr yield metric was at its last major wide in January 2017 and now is only 16 bps from inversion.
Since January 2017, there have been 21 unbroken consecutive negative Net Trade prints.
Consider how Canadians have been whipped up into a FOMO real estate frenzy by a combination of our government sponsored ZIRP and NIRP, high ratio loan to value insurance schemes and outright cash helicopter drops all at the expense of you dear taxpayer.
We've all been punked and taken to the cleaners in Canada and weak handed mortgagors are at the highest risk as fear of missing out turns to fear of getting in.
Yes, the speculative boom has kept us employed in the FIRE sector of our economy but we have opened the doors to global forces beyond our societal controls.
THE VANCOUVER MODEL
FOR MONEY LAUNDERING
SPREADS ACROSS CANADA
Analysis by Global News suggests the same extended crime network may have laundered about $5 billion in Vancouver-area homes since 2012. Global News, November 26, 2018
The C.D. Howe Institute study estimates of money laundering in Canada range from $5 billion to $100 billion. C.D. Howe Report, September 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
- 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
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
The public has been goosed into historically high leveraged balanced sheets that looked ok at the peak of Canadian housing prices in 2017 but now a year later, with interest rates and CPI rising (3% CPI at July 2018), and animal spirits fractured by Trump's war on our imports into the U.S., lenders are now purging out the marginal from the credit worthy. Our zeal for consumption is in the cooler.
Half of Canadian jobs will be impacted by automation in next 10 years
"...a growing demand for “human skills” will be more crucial across job sectors. In particular, critical thinking, coordination, social perceptiveness, active listening and complex problem solving — described in the report as “human skills” — were identified as being key characteristics Canadians should develop to prepare for changes to the workforce." Global News March 2018
What is the link between education and earnings?
Conference Board of Canada March 2013
"Canadians with a university degree earned $165 for every $100 earned by Canadian high school graduates. Those with a college degree earned $110 for every $100 earned by high school graduates, and those who did not graduate from high school earned only $80 for every $100 earned by high school graduates... The relatively lower financial returns on university education in Norway and Canada may be due to the dominance of their energy sectors, which offer relatively high-paying jobs that do not require university educations."
"Between 1998 and 2010...students skills deteriorated somewhat. The proportion of students with high-level reading, math, and science skills dropped, while the proportion of students with low-level reading and math skills increased."
"Canada needs to improve workplace skills training and lifelong education. Canada’s adult literacy skills are mediocre, with a large proportion of adults lacking the literacy skills necessary to function in the workplace. Canada gets a “C” and ranks 10th out of 15 peer countries on the indicator measuring adult participation in job-related non-formal education."
"Canada also underperforms in the highest levels of skills attainment. Canada produces relatively few graduates with PhDs and graduates in math, science, computer science and engineering. More graduates with advance qualifications in these fields would enhance innovation and productivity growth—and ultimately ensure a high and sustainable quality of life for all Canadians."
"Canada’s middle-of-the-pack ranking on university completion may reflect the fact that the financial return from investing in university education in Canada is also middle-of-the-pack at best. Many other countries (and the individuals in those countries) get much better returns on their tertiary investments."
"While not reflected in the report card due to lack of data and measurability challenges, there is a “learning recognition gap” in Canada. What this means is that people may hold knowledge and skills that are not formally recognized (through academic credits or trade/organization/professional certification) by employers or credential-granting institutions."
"An obvious example is immigrants whose foreign credentials are not recognized in Canada. The Alliance of Sector Councils stated that “every Canadian is affected by inefficient recognition. Canadians across the country are short of doctors and other health care workers, while thousands of highly educated newcomer health care workers are not allowed to provide the services that so many Canadians want. People with prior learning gained through work and training are similarly hindered by a lack of learning recognition, as are those who transfer between post-secondary institutions or, in the case of licensed occupations, between provinces."
Is Canada’s workforce sufficiently skilled?
Conference Board of Canada June 2014
No. Given that Canada is a leader on post-secondary educational attainment, one might reasonably expect that the country would also be a leader on adult skills. Yet Canada and most provinces do relatively poorly on adult literacy, numeracy, and problem-solving skills, earning mainly “C” and “D” grades.
What accounts for Canada’s poor performance on adult skills? One reason is that literacy and numeracy skills are not “fixed” forever—individuals can lose skills after they leave school, through lack of use.11 The longer someone has been out of the formal education system, the more impact other factors will have on their proficiency, such as their work and social environment. On average, the younger cohort, aged 16–24, have higher literacy scores than adults aged 45–65, and these results hold no matter what level of education the person has.12 In the absence of continuing education or workplace training, it appears likely that, on average, the skills of Canada’s workers diminish over time.
The country’s grades on adult skills, however, are weak and have deteriorated over the past decade. Canada’s other weaknesses are its low numbers of students graduating with PhDs and with degrees in science, math, computer science, and engineering.
China Might Beat The US in Artificial Intelligence
Eric Schmidt November 2017
"LET THEM IN"
"New lending activity and refinancing have contracted significantly since the beginning of 2018, a culmination of regulatory pressure, enhanced scrutiny following the banking royal commission, and the self-fulfilling consequence of slowing house prices driving an investor pullback... A rising cost of credit represents a blunter instrument for slowing lending, since it impacts both owner-occupiers and investors in parallel,"JP Morgan's Henry St John
that's not a quote about Canada;
but these are:
Canadian real estate sales are feeling the pinch of higher interest rates, and consumer credit isn’t far behind. Bank of Canada (BoC) numbers show household debt printed a new record high. Despite the record high, the rate of growth continues to slow for consumer debt levels. The decelerating growth is yet another indicator that the credit cycle has peaked. Better Dwelling, July 2018
Market Rate Outlook: One more hike this year plus two more hikes next year. The market is not fully pricing in the next BoC rate increase until December... Canadians are now more sensitive to higher rates than ever before. That means consumption is slowing faster with every 1/4% BoC rate increase. RateSpy.com Sept 2018
Canada's economy is set to slow down even with a NAFTA deal, economists say:
"Our research finds that even with a NAFTA deal in place, the long-desired rotation in growth towards exports and business investment will be sluggish and won't offset the coming slowdown in household spending and housing activity," Royce Mendes, senior economist at CIBC Capital Markets
Sal Guatieri, senior economist at BMO Capital Markets, is also expecting growth next year to slow to 1.8 per cent, as reduced consumer spending and housing activity will weigh on growth.
RBC senior economist Nathan Janzen said the bank doesn't publish forecasts for 2020, but agrees that growth is shifting lower.
"We do expect a more modest pace of consumer spending going forward, and while housing activity should remain a contributor to growth, this sector as well should see more modest growth relative to the past," said Brian DePratto, senior economist at TD Bank.
Quote Sources: CBC News Sept, 2018
And as my long term chart study of Canadian Debt, GDP, Foreign Direct Investment and Balance of Trade shows, since the credit crash of 2009, Canadian's awesome consumption via debt has not led to higher wage employment production in Canada but to lower wage warehousing and transportation of goods and services that we import to maintain our lifestyles.
"The one-million square foot Toronto centre will be Amazon’s sixth facility in Ontario and ninth in Canada." Financial Post, July 2018
"Stabilization should not be interpreted as the start of another strong rally," they warned (TD Bank economists Derek Burleton and Rishi Sondhi). That's because mortgage rates are on the rise, and home affordability levels have reached their worst levels in a quarter century... in fact historical data shows that over the past half century, inflation-adjusted house prices in Toronto fell for about a third of the time. huffingtonpost.ca, Sept 2018
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
Balance Of Trade
Rent Or Buy