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While we wait for the July Canadian housing data to trickle out, let's return to Japan and their housing price experience after nearly 20 years of ZIRP and NIRP. I have posted charts about Japan since 2012 to illustrate the folly of global central banks and their monetary policies of instituting ZIRP & NIRP to stimulate inflation > consumption > production, the by-product of which, has been the manic search for yields as the underlying asset class values became stretched to perfection under pressure from the FOMO crowd. Instead of using fiscal policy which requires long term planning and socially cohesive agreements directed towards production and well being, the quarterly knob twiddling monetary policy has in part, along with the rise of a digitized global financial network, unleashed "megabyte" money laundering which the UNODC  estimates at 2-5% of global GDP per year. It has also crushed the incentive to save for a future funding of investment into productive assets.   The Household Saving Rate in Canada has decreased to 1.1% in the first quarter of 2019. ​​

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​Commodity Super Cycle - 10 Years into the Bear

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Here is a chart I published in a 2012 post "What Do You Do During a Housing Bust". The answer is "save". ​ If the CRB chart above has correctly identified a cyclical swing between bull and bear commodity production, then we should expect another "lost decade" of balance sheet repair especially in the over-speculated and now depreciating housing asset markets of Canada.

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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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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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While we wait for the Brexit vote, here is Patrick Ceresna's hour long video explaining in detail his argument for what will trigger the Canadian real estate market selloff. My bullet points from the video are below and the chart (left) shows credit is tightening.

Are You Ready For a Canadian Real Estate Crash?
Patrick Ceresna Chief Derivative Market Strategist
​LearnToTradeGlobal.com (1 hr. 4:35 min)

Bullet Points from the Video Above

June 9, 2016: Bank of Canada Governor Stephen Poloz cautioned that climbing real estate prices have outpaced local economic fundamentals like job creation, immigration and income growth.

June 13, 2016: Financial markets are worried about China because its debt has surged to a record 237% of gross domestic product.

Here's Why China's Economy Will Be So Hard to Fix

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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 energy high-yield default has soared to a record 13% rate, surpassing the 9.7% mark set in 1999, according to Fitch Ratings.

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.

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Battery Powered Homes

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First In ~ First Out According to StatsCan, in 2001 after the dot.com blowout and the markets then turned to commodities, there were +/- 329,129 employees working in the Oil, Gas & Mining industries per year in Canada and in full year 2014 that number had increased by 60.8% to 529,248. ​This includes "support activities" but not the peripheral jobs in the general economy that depend on the spending by those oil, gas and mining employees.

“The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.”

Some energy experts are even beginning to express concerns that sovereign wealth funds of Saudi Arabia and other wealthy Persian Gulf and oil-producing countries will redeem their money from investment firms in the coming year to shore up their balance sheets. If they do, the moves could initiate more instability in global equity and debt markets.

Credit lines drying up for oil companies?

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​Distress (bonds trading over 1,000bps) has been spreading across the HY space. From its starting point in energy a year ago, it has now reached other commodity-sensitive areas such as transportation, materials, capital goods, and commercial services. But it did not stop here and is also visible in places like retail, gaming, media, consumer staples, and technology – all areas that were widely expected to be insulated from low oil prices, if not even benefitting form them.

​In other words, what was until a year ago a purely "energy" phenomenon is now an "everything" phenomenon, despite promises by every prominent economist that plunging energy prices are great news for the economy.

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Imagine $35 Oil for 5yrs A US-Style Canadian housing correction possibility is a potential that CMHC's CEO Evan Siddall discussed at a private audience presentation in New York, November 30, 2015 if oil remained at an average price of USD$35 per barrel for 5 years. The top chart are oil prices since the OAPEC (Arab members of OPEC plus Egypt & Syria) oil embargo. Note the 22 year period of sub-$35 oil prices not long ago.

Donald Sadoway "Science Serving Society"

Energy 2064 with Professor Donald R. Sadoway

The Bill Gates Backed Canadian Building a Better Battery

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Spending Slowdown On both sides of the border, manufacturer's inventory levels are rising and retail sales are dropping; the trend is accelerating.

"The drop in oil prices looks as if it may be quite persistent. This will have a permanent effect on the spending decisions of the average Canadian, translating into a drop in real domestic demand. Total aggregate demand could only remain on its previous trend to the extent that net exports increase permanently. While they will recover from their disappointing recent performance, a permanent increase is unfeasible. Total demand is on a lower trend than before the oil price shock." Read the whole article by Steve Ambler.

Alberta's Boom Time Hangover 
VICE NEWS June 1, 2015 

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This Bird Has Flown Alberta's so called "progressive" conservative governments; 7 consecutive iterations since 1971, have squandered their provincial energy resources leaving their treasury with a CAD 12 billion dollar debt and a 500 million dollar deficit. (The Tyee)

The Beatles - Norwegian Wood (This Bird Has Flown)

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Dollar Depreciation Canada Edition  Stats Can Headlines via Trading Economics: > Canada Trade Gap increased in December of 2014 > Canada Trade Deficit Widens in November 2014 > Canada Trade Surplus Narrows in October 2014

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Global oil demand growth remained at a relatively suppressed 585 kb/d y-o-y in 4Q14. There are several reasons why lower crude oil prices so far seem to have failed to stimulate demand. Those include heightened deflationary risks in both Europe and Japan; adverse revenue impacts on net-oil-exporters; a global trend towards reductions in energy price subsidies and/or increases in oil consumption taxes; and the heavy falls experienced by many currencies, versus the US dollar, negating the impact of lower crude prices in domestic currency terms. Reflecting the downwardly revised macroeconomic backdrop, mid-January saw the World Bank revise down its 2015 global economic growth forecasts to 3.0%, versus 3.4% in June 2014, still an acceleration on 2014 (+2.6%) but notably less-so than previously assumed. (International Energy Agency‌)

New Record Lows on the Baltic Dry Index Chart

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