Monetary Zirpitude Update

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WE'RE ALL IN!

The Canadian current account balance as a percent of GDP provides an indication on the level of international competitiveness of a Canada. Currently it's negative at -3.7% close to the historic low. 

From 1980 until 2012 the Current Account to GDP averaged -1.18% with a record high of +2.7% in December 2000 after the .com blowout and a record low of -4.20% in December 1981 after the interest rate peak.

A current account deficit means we import more than we export, have low savings and high personal consumption rate as a percentage of disposable income. 

Not pictured in the charts above and adding stress to the system is the Unemployment Rate in Canada which increased in March 2013 to 7.2% which is what it was in the fall of 2000.

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WE'RE ALL IN DEUX!

Thanks to Doug Short and Chris Kimble, we have this chart on "Margin Debt Hitting Levels Only Seen ONE Other Time in History!", the tech bubble back in 2000. 

Negative net worth is the situation when investors have large amounts of money borrowed on margin and little cash in their brokerage accounts (2000, 2007, 2011 & now)

• S&P 500 dropped 50% in 2000-2002
  
• S&P 500 dropped 50% in 2007-2009
• S&P 500 dropped 17% in 2011

My phrase "Monetary Zirpitude" is a play on "Moral Turpitude". 

From Wikipedia: "Moral turpitude is a legal concept ... that refers to conduct that is considered contrary to community standards of justice, honesty or good morals." and "an act of baseness, vileness, or depravity in the private and social duties which a man owes to his fellowmen, or to society in general, contrary to the accepted and customary rule of right and duty between man and man."

The main character in Vladimir Nabokov's 1935 novel "Invitation to a Beheading" is found guilty of "gnostical turpitude." 

From Wikipedia: "The novel takes place in a prison and relates the final twenty days of Cincinnatus C., a citizen of a fictitious country, who is imprisoned and sentenced to death for "gnostical turpitude." Unable to blend in and become part of the world around him, Cincinnatus is described as having a "certain peculiarity" that makes him "impervious to the rays of others, and therefore produced when off his guard a bizarre impression, as of a lone dark obstacle in this world of souls transparent to one another." Although he tries to hide his condition and "feign translucence," people are uncomfortable with his existence, and feel there is something wrong with him. In this way, Cincinnatus fails to become part of his society."

ZIRP, the "lone dark obstacle" makes the true cost of money "impervious to the rays" of price discovery. As noted many times on these pages, I recommend that if you are or intend to be a landlord, you should do a yield analysis on the cash flow from your property.

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