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Oil <23

12/31/2018

 
Oil less than USD$23
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As we wait for the December real estate data, let's look at some year end charts. 

First up is Henrik Zeberg @HenrikZeberg who is suggesting that the price of oil is headed down to less than USD$23.

​Notice where oil was trading in 2001-2002 and 2016.

​As the U.S. Energy Information Admin EIA.gov noted in their December 12, 2018 report:
"...concerns about the pace of global economic growth in coming months have led to related concerns about the pace of oil demand growth."
China Debt
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The economic slowdown in China is on, being driven by "risky lending and a rapid rise in debt levels". That sounds familiar to me and I have plotted it out on my Canadian Household Debt, GDP, Balance of Trade and FDI chart.

After decades of sharp expansion, the Chinese economy is slowing down. Growth in 2018 is set to be the weakest since 1990. And 2019 looks even worse. The world's second largest economy is feeling the effects of a darkening trade outlook and government attempts to rein in risky lending after a rapid rise in debt levels. "The drivers of China's slowdown have yet to have their full impact on the economy, and the combination of both is unprecedented," analysts at Moody's wrote in a research note this month. "This creates a high degree of uncertainty and risk. CNN Business December 30. 2018
​
The Canadian Dollar continues to plunge. That means our import costs go up and our net trade has been negative 8 out of the last 11 prints; ie: we Canadians buy more than we sell which is ok if we have the income to service the debt, but as the Chinese economy slows and they buy less of our resources, our incomes as well as other countries incomes are going to diminish.
​​ 
​
CAD
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The USD which is the "senior currency" continues to go up in value when measured against other currencies. That is having a profound effect on global foreign debt holders that have to raise US dollars to repay their loans with their "depreciating" local currencies.
USD Foreign Debt
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As Rick Ackerman reminded his clients on December 30, 2018:
A further, significant strengthening in the dollar will tell us when the Deflationary endgame for the global economy is gathering force. It will crush debtors, bankrupt creditors and lop at least four or five zeroes worth of funny money from the banking system’s quadrillion-dollar shell-game. I have written extensively on why hyperinflation is extremely unlikely to settle debts that have become vastly too large to repay. If you cannot understand why, let me pose this question: Do you actually believe the banksters will let you pay off your mortgage with a few hundred-thousand-dollar bills that you’ve peeled from your wallet? If you answered in the negative, you are implicitly a deflationist. 
Since the start of ZIRP and NIRP it has been difficult to "be a deflationist" as we watched the global bubble of everything inflate; resource assets, equities, debt and of course real estate which Canadians with the help of foreign laundry services have pushed real estate prices into the top tiers of global pricing. In November 2018, I posted "Dirty Real Estate" which highlighted the "Vancouver Model" that has spread throughout Canada. 
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
e don't even know what the "value" of the crime is, but we know what the effect has been in terms of FOMO debt taken on by Canadians. Real estate prices have peaked in Canada and as they drop, the FOMO crowd has a tough choice to make: turn debt into equity quickly by selling the asset or stay in for the long haul and meet the amortization obligation. If it's the former, look for price drops to happen quickly as vendors compete for a diminishing supply of buyers; if it's the latter look for a slow Japanese style deflation and a return to savings as noted in my 2012 post "What Do You Do During a Housing Bust".

A return to savings will eventually allow the pendulum of capital investment to return to productive use. But asset deflation is in view now and we don't yet know it's future length of trend.

One asset class that retains value and even grows during a broad deflationary event is precious metals; and that canary in the coal mine is happening now. See my ongoing chart study of "real" gold and real estate.​
And below, see Chris Kimble's
December 31, 2018 note to clients:​
Gold/USD ratio
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Strength in Gold of late has it (the Gold/USD ratio) breaking above the top of this trading range at (2). What the ratio does at this resistance test will send an important message to the metals sector for the next few months.​
​CLICK HERE if you want a free trial of Chris Kimble's peerless financial market technical research.

Inflation Deflation Conflation

6/22/2018

 
Inflation Deflation Conflation
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The OECD released their May 2018 Canadian Economic Forecast Summary. Their charts to the left conflates our usual obsession with "flation" which in Latin means to "blow". We worry about whether our investments in production and consumption are going to blow or suck.

Chris Kimble released a June 21st chart triptych "​​3 Key Economic Indicators May Be Flashing Caution Here"

The monthly charts of Commodities, Crude Oil and U.S. 10 Year Treasuries are at "Long-Term” Fibonacci retracement levels at the same time ​and could be creating reversal patterns."
"I have a simple goal for my investment research - help people to enlarge portfolios regardless of market direction by looking for patterns at extreme points of "exhaustion" with a high probability of reversing." Chris Kimble
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Energy Bar

5/2/2016

 
Commodities 1980-2016 & High Yield Defaults
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While we wait for the April real estate data to dribble in, let's look at the commodity sector that peaked in 2011 and is now threatening to break a major uptrend channel and possibly retest the 2006 lows; a time when the Yield Curve inverted and soon after the BoC and U.S. Fed etal went on a ZIRP to NIRP bender in an effort to spark inflation. Clearly low rates have not produced CPI inflation but a speculative frenzy for Yield.

​The top panel in the mashup above is the Thomson Reuters Commodity Index chart since the 1980's provided by Kimble Charting Solutions. The commodity index is made up of 18% Energy, 24% Metals, 29% Softs and 29% Agriculture.

​The bottom panel is from ZeroHedge and their post underscores that energy junk bonds are at an all time default rate high.
...the energy high-yield default has soared to a record 13% rate, surpassing the 9.7% mark set in 1999, according to Fitch Ratings.
​"...energy companies now account for approximately 20 percent of the junk bond market." Michael Snyder, Global Research, December 2014
​
AND THIS from Bloomberg May 1, 2016 Saudi Arabia's determination to keep pumping more oil into global markets brings to mind its former oil minister Sheikh Yamani, who said back in 2000 that the Stone Age did not end for a lack of stones, and the oil age will not end for a lack of oil.Those working for him at the time, interpreted this as a warning to OPEC about the pursuit of high oil prices: namely, that it would just speed up the development of alternative technologies and drive away customers, leaving oil sitting beneath the ground without buyers.Sixteen years later, the kingdom's leaders seem to have heeded his warning. Both Deputy Crown Prince Mohammed bin Salman and oil minister Ali al-Naimi have said they will no longer subsidize high-cost oil production by limiting supply. If there's oil to be left under the ground, they're determined it won't be Saudi Arabia's.
Electric Vehicle Battery Cost Decline
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Battery Powered Homes

Rhythms and Rhymes

3/13/2014

 
PictureCLICK CHART TO ENLARGE
Stocks After 5 Years
Real Estate After 7

In case you missed my query on my Real 10 Year Canadian Yield chart 'Is this the start of a "Seven Year Itch"?' Here it is again.
Periodicity: the quality or character of being periodic; the tendency to recur at intervals.

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    "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​​
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Data reporting changes by Real Estate Boards and other data collection notes are listed on the DATA SOURCES page.

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  • Home
  • Chart Book
    • 6 Canadian Metros
    • Vancouver Housing
    • Calgary Housing
    • Toronto Housing
    • Compare Toronto & Vancouver
    • Housing Price Momentum
    • Real Price of Housing
    • Sales Listings
    • MAR-MOI
    • TSX Indexes
    • Millionaire Metric
    • Real Price of Gold & RE
    • Canadian Housing in USD
    • Bitcoin Gold & RE
    • Housing Starts
  • Plunge-O-Meter
    • Real Interest Rates
    • Real 10yr Rate
    • Interest Rate Spread
    • Yield Curve
    • Yield Calculator
  • Earnings Employment
    • Household Debt
    • Affordability
    • Demographia
    • Census
  • History Readings
  • Contact
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