The 12 charts above reflect global real estate indices that have been grinding lower. The bears are not hibernating.
World Trade Component Indices Key Findings Full Text
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
"New data shows Trump is lying far more as the midterms approach. More than 1000 lies in October alone, more than any other month of his Presidency." Nov 5, 2018 @TheBeatWithAri
The results of the U.S. midterms tomorrow
will affect our markets. While we wait....
Here is the Hare Psychopathy Checklist. "Each of the twenty items is given a score of 0, 1, or 2 based on how well it applies to the subject being tested. A prototypical psychopath would receive a maximum score of 40, while someone with absolutely no psychopathic traits or tendencies would receive a score of zero. A score of 30 or above qualifies a person for a diagnosis of psychopathy. People with no criminal backgrounds normally score around 5. Many non-psychopathic criminal offenders score around 22."
01. glib and superficial charm
02. grandiose (exaggeratedly high) estimation of self
03. need for stimulation
04. pathological lying
05. cunning and manipulativeness
06. lack of remorse or guilt
07. shallow affect (superficial emotional responsiveness)
08. callousness and lack of empathy
09. parasitic lifestyle
10. poor behavioral controls
11. sexual promiscuity
12. early behavior problems
13. lack of realistic long-term goals
16. failure to accept responsibility for own actions
17. many short-term marital relationships
18. juvenile delinquency
19. revocation of conditional release
20. criminal versatility
Here is the introduction:
With all of the discussions going on about Donald Trump’s ‘narcissism’, I thought I might offer a broader clinical perspective regarding sociopathic narcissism. Clearly there is great ongoing discussion about Donald Trump’s ‘narcissism’, however, I believe what has been errant in the discussion is that Trump is by definition not just ‘narcissistic.’ Trump’s narcissistic manifestations also appear to be well entrenched in sociopathy.
From a pragmatic standpoint an ‘amount’ of narcissism is necessary for being successful as it is for living. What is imperative to understand, is that our now president appears to have a definable mental illness that appears to manifest as a narcissistic personality disorder with sociopathy.
This primitive form of narcissism is by definition an intractable and realistically untreatable mental illness that even under the most ideal of clinical circumstances is only manageable at best. In Mr. Trump’s case it is manifest in apparently shady business dealings and in politically oppressive ways. However, the etiology is not business per se or political by nature but rather psychological. What we see manifest in individuals who are primitively bound within this commingled pathological structure takes on the following dynamics:
Sociopathic narcissism is not a diagnosis that is mysterious or one that looks like magical realism. Rather, like most clinical processes it has a relatively well defined structure (within having almost a complete lack of intrapsychic structure) and is also relatively predictable, once the individual has revealed enough of how their sociopathic narcissistic dynamics manifest. First, as we have seen demonstrated repeatedly, and using Mr. Trump as an example, narcissists seek out others who will behave in an obsequious manner, not just while in their physical presence but also who will parrot their projections while out of their physical presence.
In clinical circles that possess a familiarity of sociopathic narcissistic personalities, there is a slang that refers to those who encircle a sociopathic narcissist, particularly one with power, as ‘pandering whores.’ The term is clearly derogatory, particularly for those who seek to achieve secondary gain from riding the coattails of a sociopathic narcissistic individual or those who also manifest the same psychological structure, but have not been able to, if you will, get the traction to achieve the ‘greatness’ or notoriety of the one that they cling too. In essence, they become ‘great’ only in the shadow of the one they bark for.
A primary source of anxiety that lives within the sociopathic narcissist is a terror of ruinous disillusionment which would ultimately terminate in a catastrophic exposure of what is in essence a fraudulent existence. As the risk of exposure intensifies, be it in a dyad or more macro group structures, their intrapsychic constellation becomes increasing more fragile and their manifest behaviour becomes more erratic.
If you want to get under the hood of the Trumpster's brain, keep reading John Espy's diagnosis, it's worth the effort.
As Timothy L. O'Brien, the executive editor of Bloomberg Gadfly and Bloomberg View succinctly put it: Two things have always driven the president: self-aggrandizement and self-preservation.Bloomberg, May 10, 2017.
Trump's need for self-aggrandizement and self-preservation is the easiest filter to use to put all Trump news through when assessing whether Canada and your income is going to be better off as a result of the news. If it is good for Trump, check your wallet.
In his 1995 essay "Eternal Fascism", Umberto Eco lists fourteen general properties of fascist ideology. [UR-Fascism] He argues that it is not possible to organise these into a coherent system, but that "it is enough that one of them be present to allow fascism to coagulate around it". He uses the term "Ur-fascism" as a generic description of different historical forms of fascism. Eleven of the fourteen properties are as follows:
"The Cult of Tradition", characterized by cultural syncretism, even at the risk of internal contradiction. When all truth has already been revealed by Tradition, no new learning can occur, only further interpretation and refinement.
"The Rejection of modernism", which views the rationalistic development of Western culture since the Enlightenment as a descent into depravity. Eco distinguishes this from a rejection of superficial technological advancement, as many fascist regimes cite their industrial potency as proof of the vitality of their system.
"The Cult of Action for Action's Sake", which dictates that action is of value in itself, and should be taken without intellectual reflection. This, says Eco, is connected with anti-intellectualism and irrationalism, and often manifests in attacks on modern culture and science.
"Disagreement Is Treason" – Fascism devalues intellectual discourse and critical reasoning as barriers to action, as well as out of fear that such analysis will expose the contradictions embodied in a syncretistic faith.
"Fear of Difference", which fascism seeks to exploit and exacerbate, often in the form of racism or an appeal against foreigners and immigrants.
"Appeal to a Frustrated Middle Class", fearing economic pressure from the demands and aspirations of lower social groups.
"Obsession with a Plot" and the hyping-up of an enemy threat. This often combines an appeal to xenophobia with a fear of disloyalty and sabotage from marginalized groups living within the society (such as the German elite's 'fear' of the 1930s Jewish populace's businesses and well-doings; see also anti-Semitism). Eco also cites Pat Robertson's book The New World Order as a prominent example of a plot obsession.
Fascist societies rhetorically cast their enemies as "at the same time too strong and too weak." On the one hand, fascists play up the power of certain disfavored elites to encourage in their followers a sense of grievance and humiliation. On the other hand, fascist leaders point to the decadence of those elites as proof of their ultimate feebleness in the face of an overwhelming popular will.
"Pacifism is Trafficking with the Enemy" because "Life is Permanent Warfare" – there must always be an enemy to fight. Both fascist Germany under Hitler and Italy under Mussolini worked first to organize and clean up their respective countries and then build the war machines that they later intended to and did use, despite Germany being under restrictions of the Versailles treaty to NOT build a military force. This principle leads to a fundamental contradiction within fascism: the incompatibility of ultimate triumph with perpetual war.
"Contempt for the Weak", which is uncomfortably married to a chauvinistic popular elitism, in which every member of society is superior to outsiders by virtue of belonging to the in-group. Eco sees in these attitudes the root of a deep tension in the fundamentally hierarchical structure of fascist polities, as they encourage leaders to despise their underlings, up to the ultimate Leader who holds the whole country in contempt for having allowed him to overtake it by force.
"Everybody is Educated to Become a Hero", which leads to the embrace of a cult of death. As Eco observes, "the Ur-Fascist hero is impatient to die. In his impatience, he more frequently sends other people to death."
"Machismo", which sublimates the difficult work of permanent war and heroism into the sexual sphere. Fascists thus hold "both disdain for women and intolerance and condemnation of nonstandard sexual habits, from chastity to homosexuality."
"Selective Populism" – The People, conceived monolithically, have a Common Will, distinct from and superior to the viewpoint of any individual. As no mass of people can ever be truly unanimous, the Leader holds himself out as the interpreter of the popular will (though truly he dictates it). Fascists use this concept to delegitimize democratic institutions they accuse of "no longer represent[ing] the Voice of the People."
"Newspeak" – Fascism employs and promotes an impoverished vocabulary in order to limit critical reasoning.
...inarticulate sounds without any meaning at all.
JUST FANCY THAT!
"The superiority of his genius consists in nothing else but an inexhaustible fund of political lies, which he plentifully distributes every minute he speaks, and by an unparalleled generosity forgets, and consequently contradicts, the next half hour. He never yet considered whether any proposition were true or false, but whether it were convenient for the present minute or company to affirm or deny it... the only remedy is to suppose that you have heard some inarticulate sounds, without any meaning at all."
From Jonathan Swift's essay "The Art of Political Lying", published in The Examiner, 9, November 1710
While we wait for the October data to come in, the reminder of this chart is about cash flow yield and as Henry McVey, KKR's head of Global Macro & Asset Allocation says as we switch from monetary to fiscal policy...
...own more assets that have cash flowing yields...
Hat Tip to @carlquintanilla
It pays for hosting and domain blog costs; thanks.
...more than half of fund managers have never experienced a prolonged bear market... @Hipster_Trader
Millennials who did not 'catch' FOMO might be very relieved at this point in the business cycle.
Canada Has a Broken Housing System and It Has Fucked Over Millennials - Vice, Oct 2018
SNIPPET: In the 2017 edition of the Angus Reid-CIBC housing poll, many millennial homeowners expressed regret about buying a house because of the financial difficulties, and about half of them said they never expect housing prices to go down.) According to an April 2018 Angus Reid-CIBC poll, significantly fewer millennials own homes compared to the same age cohort in 1981.
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
...since Oct 3, 2018, the Thomson Reuters/CoreCommodity CRB Index has been coiling down (MarketWatch.com).
On my Twitter Feed from @hks55 came their chart suggesting that the commodity super cycle is poised for another leg down due to China's slowdown in credit creation that had spurred the commodity boom as Kyle Bass illustrates in this comparison between Chinese credit creation and their GDP (the link includes the 41 second video).
China’s Slower Credit Growth
Underscores Worries Over Economy
Bloomberg, Aug 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
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."
"In August 2018 Vancouver, Calgary and Toronto SFD price momentum hovered about the flat line while the TSX Real Estate Index cash buyer momentum ticked back up to the nearby highs."
Notice on my chart of August 2018 below, the July 2007 TSX Real Estate Index tested its highs yet on the ground in the physical world, the price momentum of Calgary Single Family Detached Prices plummeted, while Vancouver SFD prices coiled their way towards the eventual lows and while Toronto's SFD prices made their eventual way towards their 2008 lows to be followed by Vancouver and Calgary into their 2009 lows. Is it different this time? Stay tuned.
Hilliard MacBeth "When the Bubble Bursts"
Top 5 predictions for Canada's housing markets in 2018
BNN Interview September 28, 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
"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