CLICK TO ENLARGE CHART
Negative real rates in the past have always led to asset bubbles.
David Rosenberg Chief Economist and Strategist for Gluskin-Sheff makes the case here via Zero Hedge and Lance Roberts of Street Talk Live.
Rosenberg's Potemkin (fake) Rally "coffee table" presentation at the 10th annual Strategic Investment Conference presented by Altegis Investments and John Mauldin, is loaded with charts and he makes a persuasive argument for a sea change.
Says Rosenberg: "There has been a secular decline in Potential GDP (U.S.) growth. Here is a question for you. How does 1.8% GDP growth rate over the last year drop the unemployment rate by 60 basis points from 8.1 to 7.5%? That math simply doesn't work."
Remember, Roesnberg's view is U.S. centric and the U.S. has already witnessed a huge correction in real estate and a massive financial market sector bail out; something we have not seen in Canada.
Canadian real estate in the bubbly metro markets do not have positive yields and if we are to see a shift to rising rates as Roseberg suggests, then yield chasers don't need the risk of a "slow asset" like real estate.
I track Canadian "real" interest rates here, and they did shift to rising two years ago and are up over 200 beeps. That's a potential sell signal.
History, Charts & Curated Readings
"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'
"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