The bear case

RYAN  By Guest Blogger Ryan Lewenza

Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions (e.g., less CNN and more Fox TV). He was of course eviscerated by the blog dogs and given we’re gluttons for punishment I will follow in the same vein this week examining the bear case for the equity markets.

We continue to maintain our bullish view of the equity markets, but like Doug stressed last week, we believe it’s important to consider the other side of the argument. Our base case view is that the bull market will continue in 2017, however, we should be open to factors that could derail the eight year bull-run. This reminds me of a great quote from the influential economist John Maynard Keynes who once said “When the facts change, I change my mind. What do you do, sir?” So let’s outline what could potentially derail the bull market and cause us to re-evaluate/alter our bullish stance.

A key argument from the bearish camp is that valuations are becoming stretched. This is hard to dispute with the S&P 500 trading at a trailing price-to-earnings (P/E) ratio of 21x, which represents a 27% premium to the long-term average of 16.5x. Moreover, the S&P 500 is trading at +1 standard deviation about its long-term average, which we generally define as being “expensive”.

Another valuation metric that is being referenced a lot by the bearish camp is the “Shiller P/E”. This metric compares the S&P 500 to average earnings over a 10-year period, adjusted for inflation. Currently, this sits at 28x, which is well above the long-term average of 16.5x, and is now trading at levels only seen in 1929 and in the late-1990s. We know what happened following these dates.

So stocks are getting expensive. We get it, and it’s in part why we’re keeping an open mind to our bullish outlook, and why we believe it’s important not to fall in love with our forecasts/outlook.

“Shiller P/E” At Elevated Levels

Source: Bloomberg, Turner Investments

Another support for the bear camp is that this bull market is getting old. Since 1970 the average bull market has lasted 57 months with a total return of 187%. Since the March 9, 2009 low when the S&P 500 hit an intraday low of 666 (yes, you read that correctly that the S&P 500 bottomed to the point at the Number of the Beast), the S&P 500 has experienced a total return of 259% and has lasted 94 months. So the current bull market is getting old from a historical perspective and, in fact, is the second longest bull market on record.

While this fact should keep us on alert, it doesn’t mean the end is near and we need to rush out and sell all of our equities. We believe this current bull market cycle will be longer than normal given how deep the Great Recession was and how much central bank stimulus has been injected into the global financial markets. As we like to say, “bull markets don’t die of old age”. Bull markets end as a result of an oncoming recession and/or exogenous shock. We see a low probability of a recession over the next 12 months and shocks are difficult to predict.

Length of S&P 500 Bull Markets Since 1970

Source: Bloomberg, Turner Investments

And that leads us to the last major argument from the bears. Many of them believe that the phenomenal gains seen since 2009 are solely the result of central banks and their money printing. Below is a great chart that reinforces this argument. I’ve overlaid the S&P 500 with Federal Reserve Total Assets and it shows a 98% correlation. The thinking is that the Fed has pumped record amounts of liquidity into the system through their quantitative easing policies and that this has solely boosted asset prices. Therefore when this ends, the stock market rally ends.

While we concede that Fed actions surely helped to stabilize the economy and boost share prices, we believe it is not the ONLY factor, as corporate profits (the most important fundamental driver of stock prices) have more than doubled since the 2009 lows. So in our opinion it has been a mix of central bank activity and improving fundamentals that helped to drive the US equity markets to new all-time highs.

Fed’s Balance Sheet and US Stock Prices

Source: Bloomberg, Turner Investments

So there you have it. The bears point to an end of Fed stimulus, high valuations and the length of this current bull market that will culminate in a near-term peak in the equity markets. We disagree with this view and see the bull market continuing in 2017. In our next blog post we present our counterargument to the bear case.

Ryan Lewenza, CFA,CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

128 comments ↓

#1 For those about to flop... on 02.04.17 at 11:26 am

Pink Snow falling in Vancouver.

This is one of the 4 flips nearby where I live that are in trouble.

They paid 1.32m in March 2016 and at first glance at the numbers it looks like there is still some money to be made ,but unfortunately for these guys they spent months and most likely 150/200k in renovations,totally re-doing the place.

The plan last Spring most likely would have been to get close to 2 million for this place,which the market supported at the time but now they are bailing water out of the canoe…

M42BC

5310-5312 St. Catherines Street, Vancouver

Jan 12:$1,699,000
Feb 3: $1,649,500
Change: – 49500.00 -3%
http://www.rew.ca/properties/R2130218/5310-st-catherines-street-vancouver-bc

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAwMjdQSg==

#2 crowdedelevatorfartz on 02.04.17 at 11:30 am

An excellent topic of the day.
Thanks Ryan

#3 Ace Goodheart on 02.04.17 at 11:34 am

Interesting argument backed up by good research.

I have had a hard time finding stocks that are underpriced (and therefore buy-able). I invest as a contrarian, so I am looking for undervalued stuff that has a lot of upside. Recently I have not been able to find anything in the stock market. I’m not a graph investor, I’m a metrics person. So I don’t look at graphs to figure out what might happen to my chosen company’s share price. I just run the metrics and then google the company’s product line, and come to a conclusion as to what the stock is actually worth. My conclusion recently has been that every stock I have looked at has been over priced.

However this is not the end of the investing world. When I can’t find common stock that I like, I look into preferreds and bonds, and let me tell you, there are some amazing, once in a lifetime deals in this area. Why is everyone giving their bonds away now? And what is so hard about valuing a preferred share? At any rate, if you dig into bonds and preferreds right now you will find a lot of underpriced stuff that is really high end stuff, the kind of items you would want to own and have in your portfolio, all for yard sale prices.

Now is the time to be selling your common stock and buying preferreds and bonds.

#4 Deplorable Communications on 02.04.17 at 11:34 am

Fox TV….. dude, no wonder your predictions are wrong.. fox has become a liberal wasteland….

BREITBART and GAB, and all will be clear

#5 Alex on 02.04.17 at 11:44 am

Bull market oldness is a BS. Every one pretend we do not HAD a “bear” market in 2015 and on start of 2016 just because -19.5% decline “do not count” as a bear market, lol, because of artificial rule of -20%

#6 Randy on 02.04.17 at 11:53 am

The markets are correlated to debt. If the debt continues to go up, the markets will continue to rise in the longer term.

#7 Exilled on 02.04.17 at 11:54 am

Dear Ryan, Sir Garth:
Early riser?

#8 Toronto1 on 02.04.17 at 12:03 pm

sorry for the off topic post- i was typing this in yesterdays comments, it wont let me post? says duplicate comment?

anyway here it is

Was pondering a some things this week after seeing the house in Etobicoke sell for 1.2 million on the wrong side of Eglinton.

im putting on my tin foil hat for this so take it with a grain of salt.

lets say i wanted to control the RE market in a given locale (ie. Van city, GTA etc..) how would i do it?, is it even possible? here is my what my tin foil hat says:

If i had access to credit- say 100 million levered up at 8-1 at say 2% that has a minuscule bond payment 3-4-5 years out I would have 800 million dollars. Or I could simply issue a bond certificate that pays nothing 1.5-2% and get the capital lump sum, with a coupon payable to 3-4 years out.

take that 800 million and purchase 30 homes in select postal – real estate areas ( ie. C1,C2,C3 etc..) a few years ago- stagger the purchases, 10-15 per year etc… lets say i started this 3 years ago when houses in GTA where in the 600-800k range- call the average 700K, i could now purchase 30 houses per area (W6,W7,W8 etc..) at a cost of 21 million- available credit is 800 million so i could purchase approx 1000 homes in this time frame (a tiny minuscule % of the market)

set up a legal frame work of multiple shell companies- holding companies, trust companies etc.. capital would flow offshore into these entities and would trickle down to the shell companies making the purchases, there would be multiple shell companies not to raise any suspicions etc..

Sell a few those properties to other shell companies at 20% increase, let nature take over and watch the idiots who think they will be priced out forever push the existing market up to that level- wait 9 months, do it again- sell a few homes for 1.2 million, same thing happen again etc… open houses mean nothing, market fundamentals mean nothing– i already have a buyer for my properties

if the stock of properties worth 800 million goes up 30% NET over a few years, thats a profit of 240 million minus my bond payment of 2%. Greece bonds pay 6% and the only idiots buying that are central banks and govts. etc…

if it goes bad, the management fees are still enough to make a nice profit alone and the bond holders take the hit. Would only take a few lawyers, RE brokers and some accountants to run and it can be run from anywhere in the world, as Canada does not have (Van city last year) any restrictions on foreign ownership.

Now that a very simplified write up but its the classic pump and dump scam in stocks that was rampant in the late 90’s and 2000’s, expect its a much longer time frame and can run into perpetuity as long as credit is cheap and available.

not saying it happens or has happened, just pondering

im taking my tin foil hat off now, smoking man needs it back……………..

#9 Souvereigninternational on 02.04.17 at 12:04 pm

Not a fan of Keynes over all, but it is one of his best quotes.The problem is there is an even better quote that should be kept in mind from Mark Twain “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” If your willing you can change your mind in the face of new facts, but remember that your facts are 80/20 gray/BW. And even that 20 can further be split 80/20 etc. Also can’t deny some validity to cycles and which roughly run somewhere between 7-9 years. Yes the bull may run much longer Than anticipated, but it is a risky trade at this point. P/E of PM stocks look much more attractive than overall market. But thread carefully and buy good stocks that did not keep up with the 2016 average PM run e.g. Pershing Gold, Lydian, Skeena.It is not that complicated buy what is low, sell higher. Maximize your potential when downside risk is low.

#10 Ponzius Pilatus on 02.04.17 at 12:05 pm

Great stuff, Ryan.
Presenting the two sides of the coin, that’s what makes a great presentation.

#11 Md on 02.04.17 at 12:10 pm

Good post. It’s great that you look at both sides of the argument. Hope you’re right about the bull run.

#12 Catalyst on 02.04.17 at 12:14 pm

Well laid out, I look forward to tomorrow’s post.

#13 Souvereigninternational on 02.04.17 at 12:28 pm

On analysis:

http://news.gold-eagle.com/article/stock-market-ain%E2%80%99t-gonna-crash/499

#14 Souvereigninternational on 02.04.17 at 12:47 pm

Do we have a bubble in passive investing?Your Thoughts?

http://www.zerohedge.com/news/2017-02-04/jpm-turning-points-market-trends-are-occurring-fastest-pace-history

#15 Exilled on 02.04.17 at 12:49 pm

Sir Garth, Dear Ryan:
How does ” Bitcoin ” factor into this? This is not a question to embarrass . Is it not a possibility?

#16 Free bird on 02.04.17 at 12:53 pm

Can Garth and team comment on these posts:

https://beta.theglobeandmail.com/globe-investor/globe-wealth/five-ways-the-wealthy-become-wealthier-with-real-estate/article33866460/

https://beta.theglobeandmail.com/globe-investor/retirement/unravelling-rrsp-myths/article16902315/

The second would be good for those who are in a lower income bracket and will prob be there at retirement and are trusting TNLB a little too much.

Thanks

#17 crossbordershopper on 02.04.17 at 12:56 pm

i hope everyone stops thinking about money and watches the game tomorrow. i am going to try the salt and pepper wings, never tried them,
so stocks are expensive today, ok, who cares, rich people problems.
everyone is going to be watching the superbowl.
5 rings for the brady man.

#18 Exilled on 02.04.17 at 1:00 pm

Sir Garth, Dear Ryan:

Would a critical part of our portfolio’s be destroyed. The big Banks? Along with the dividends, and stocks? Martin Armstrong, Max Keisker? what if they are right? You dont have to post this, or the last comment. just asking!

#19 paulo on 02.04.17 at 1:04 pm

#8 toronto1
interesting thought, likely actually happening on a smaller scale. the recently noted sale on this blog looks like a pump and dump action.
Ryan: good article well researched and thought out as usual.
What about the “wild card” : the terminator seriously de stabilizing the markets buy way of multiple short sighted protectionist actions?

#20 Shawn on 02.04.17 at 1:08 pm

What is the current forward p/e ratio for the S&P500? Few are anticipating earnings acceleration.

How would you compare overvaluation in the bond market compared to the equity market? What do you think is currently undervalued?

Thanks for the post!

#21 Ben on 02.04.17 at 1:30 pm

One of your best articles Ryan.

Thanks for sharing and for the good research behind. Very helpful info.

#22 John Smith on 02.04.17 at 1:31 pm

What is interesting in this article if one subscribes to the thesis that the vast lion’s share of gains in widely held, US dollar yield-producing equities has already occurred in an 8 year US general equity bull market, there were no reallocation strategies presented to position for either a) a weakening US dollar b) a rotation to commodities which typically occurs in the latter stages of a secular bull market, or c) less common but potentially complimentary strategies by hedging with pure or managed short positions.

Perhaps including ‘what we would do for our clients based on this thesis’ would be useful in future posts.

#23 BS on 02.04.17 at 1:48 pm

The S&P 500 is expensive but certainly not in bubble territory. I have this suspicion this bull market does not end until it blows off in a bubble. I can see a 10% correction coming in the short term with everyone freaking out over Trump’s tweets. Plus that is what markets normally do in the first 6 months of a new president. After that, some of Trumps pro business policies will kick in. Then the S&P 500 takes off.

I compare it to Canada’s real estate market in 2007. In 2007 RE prices were expensive but nowhere near the bubble levels we have now. After a correction in 2008/09 and then favorable policy changes for RE (unprecedented rate cuts plus loose credit) we had an 7 or 8 year run from expensive to massive bubble. Of course you need to have sold last year in YVR and will need to sell this year in YYZ to take full advantage.

Is the S&P 500 where Canadian RE was in 2007? If it is you don’t want to be out of the market and miss out on what could be a massive bull run driven by unprecedented Trump pro business policies. All bubbles start out as “expensive”.

#24 TCContrarian on 02.04.17 at 1:58 pm

Good post Ryan!

But… in my opinion you have done a good job showing that the ‘bear’ case has ‘bigger teeth’ than the ‘bull’ case. But you, and most financial advisers out there it would seem, suffer from the psychological pitfalls which comes from being…human.
Recency bias is telling you that “staying long has worked out, so why change stance now- and be contrarian?”

In my view, even though I concede that the SP500 ‘could’ continue it’s long bull market for several more months, the risk/reward is skewed so as to NOT make it a worthwhile ‘bet’. In other words, the upside potential is limited while the downside risk is significant – not a scenario I want to participate in.

Moreover another metric is even more telling: the median price-revenue ratio of S&P 500 components.

https://twitter.com/hussmanjp/status/825752513508958208/photo/1?ref_src=twsrc%5Etfw

Personally, I’m gradually increasing my short positions in the SP500 components while holding onto my long positions in precious metals, energy (including Uranium), and other commodities (which are the benefactors of inflationary expectations).
My portfolio performance in 2016 would put most ‘professionals’ to shame so I won’t post it here. Like one of my favourite personalities likes to say,

“You are either a contrarian, or a victim”. – Rick Rule

TCC

#25 For those about to flop... on 02.04.17 at 2:03 pm

Hey Selfie, thanks for the loss report on the condominiums that I posted this morning with the owners eating Pink Snow.

It was more professional and organized than my postings, but I am more concerned with getting the information out to the public than aesthetics.

Keep doing your loss reports as you see fit.
I appreciate the help.

As I admitted the other day , I am not the best candidate to do this, but I started noticing things falling apart last Autumn and I decided I was going to try document some of my findings on this blog.

I know a lot of people on this blog know that it is extremely risky to be buying real estate at this point of the game, but instead of just saying that the market is down 20% or whatever, I am trying to do it so you guys if you choose can educate people with real examples,in real time.

This blog has been going on for the best part of a decade and has been warning that what is currently happening could be a possibility and in Vancouver a massive market correction is underway and I am just trying to do my part in documenting it one painful case at a time and giving it the respect it deserves.

Like I said in a previous post ,there are still a lot of Crealievers that have not woken up to what is going on…

M42BC

#26 diharv on 02.04.17 at 2:06 pm

Eight year bull market ? Where does this come from ? My supposedly balanced portfolio did nothing but shed value from August 2014 through January 2016. The last year has been very good so I’m calling this a one year bull market.

#27 diharv on 02.04.17 at 2:11 pm

# 5 Alex I agree totally.

#28 Gasbag Boomer on 02.04.17 at 2:15 pm

Thanks Ryan, as always, very thought provoking.

#29 For those about to flop... on 02.04.17 at 2:35 pm

Here’s a scenario that I know of in Vancouver that is still waiting to play out the final chapter.

I will round the numbers and keep the developments anonymous as in the end it is irrelevant.

Two young guys bought a knockdown for 2 million and then spent 1 million building a new house.

They sold the first house for 6 million and then purchased a second knockdown for 2 million and spent another 1 million building another new house.

Now the music has stopped and they have not been able to sell the second house.

How much money have they made…

M42BC

#30 hope & ruin on 02.04.17 at 2:57 pm

(e.g., less CNN and more Fox TV)
_____________

That’s like choosing between chicken flavoured tofu or beef flavoured tofu, It’s still tofu.

Try: BBC, Al-jazeera (not joking), CBC, Globe & Mail, Toronto Sun (this can be hard but gives perspective), New York Times, CNN, HuffPost (requires a nose pinch too).

You know what they say: “A different news source each day, keeps the bias away.”

#31 conan on 02.04.17 at 3:11 pm

Oh oh….cardinal sin here. I don’t think its correct to say 1929 in a financial blog. Many consider it bad luck.

It is like saying Macbeth instead of the Scottish Play, or that Nolan Ryan has a no hitter going into the 8th inning.

Sell!! Sell!! Sell!! It is all Ryan’s fault : (

https://www.youtube.com/watch?v=i2uu6NF2inY

#32 bdwy sktrn on 02.04.17 at 3:16 pm

#95 A belieber on 02.04.17 at 10:48 am
Back-to-back Adele and Bieber concerts
…………………………

Garth, I get the feeling that you’re trying to drop hints, you want to come Sept. 5th, don’t you? I know a secret belieber when I see one, Bdy sktn’s daughter is still first choice tho.

———————————
i caught her listening to one of his newer tunes the other day.

a betrayal not to be tolerated.

on monday i see the lawyer to sign the new will – she’s out.

and although only 16 , she needs a new place to live starting next week!

#33 Kevin's Fanzone on 02.04.17 at 3:18 pm

A foot of snow here in a valley now. Snow in UAE. Snow in Greece. Snow in most of Europe. Record snow in India. Snow records being broken worldwide. How is the climate change working out? Biggest scam in the history of the world. C’mon Donald, please do something Mr President.

Or you can keep believing the “snowflakes and pink pussy cat hats” protesting in the streets.

#34 bdwy sktrn on 02.04.17 at 3:21 pm

any takers on the big game?

i’ve got 50bux on the falcons, even though the Pats are ‘trump’s team’ and on a roll.

2 deadly potent offences.
one great and one very good defence.

the very good D will lose.

#35 Ryan Lewenza on 02.04.17 at 3:27 pm

diharv “Eight year bull market ? Where does this come from ? My supposedly balanced portfolio did nothing but shed value from August 2014 through January 2016. The last year has been very good so I’m calling this a one year bull market.”

Bull markets are defined by prolonged up markets without a 20% decline. Once markets drop 20% they are bear markets until the next recovery. So by this definition we’ve been in a bull market since March 2009. Alex commented (#5) that there was a bear market in 2011 (not 15) since the S&P 500 lost 19.5%. In principal he’s right but based on strict definitions this was not a bear market. Now with respect to 2014 to Jan 2016, yes this was a challenging time with the TSX down -8.5% in 2015, and SPX flat. When oil falls from $100 to a low of $27 in early 2016, clearly this is going to result in challenging markets and returns for Canadian investors. That’s why you have to take a longer term perspective and focus on returns over a longer period (i.e. 5 year periods). But that same balanced portfolio should have returned 7-8% last year. They can’t all be winners. – Ryan L

#36 bdwy sktrn on 02.04.17 at 3:29 pm

1260 E 14TH AVENUE $1,2280 sell $1,380 sold – jan 27

sold in 2 days – over ask , 1.38 not bad for tear down on a 30’lot.

#37 Ryan Lewenza on 02.04.17 at 3:34 pm

TCContrarian “In my view, even though I concede that the SP500 ‘could’ continue it’s long bull market for several more months, the risk/reward is skewed so as to NOT make it a worthwhile ‘bet’. In other words, the upside potential is limited while the downside risk is significant – not a scenario I want to participate in.”

Well first we don’t just invest in the S&P 500. We have a balanced portfolio so if you’re right and equities head south our bonds will benefit from this limiting the downside of the overall portfolio. Second, as I’ll outline in 2 weeks there are some real positives for the markets, with a strong expected rebound in corporate profits being a key one. Also if Trump/congress lower the corporate tax rate, over night corporate earnings increase dramatically, which would send the current P/Es much lower. Third, we also look at technicals or price trends in determining our outlook. These remain very bullish and supportive of our bullish fundamental outlook. So I agree there are some negatives which I address, but the weight of evidence points to further gains so we’re sticking with our 60% weight to equities (for now). – Ryan L

#38 bdwy sktrn on 02.04.17 at 3:36 pm

flop these are centred on your hood – all sfh sales past 2 weeks

5251 ST. CATHERINES STREET$1,200 sell $1,105

5548 SHERBROOKE STREET $1,388 sell $1,230

452 E 44TH AVENUE $998 sell $998 (duplex)

319 E 40TH AVENUE $1,699 sell $1,668

1827 E 40TH AVENUE $1,289 sell $1,429

a bit softer than comm. dr area, but is this really bloodshed of just a scrape on the knuckle?

#39 AK on 02.04.17 at 3:43 pm

” The bears point to an end of Fed stimulus, high valuations and the length of this current bull market that will culminate in a near-term peak in the equity markets.”
——————————————————————–
Current P/E for financials are not that stretched.
JPM P/E Ratio 14.1x
MS P/E Ratio 15.2x
BAC P/E Ratio 15.8x
C P/E Ratio 12.2x
USB P/E Ratio 16.5x
GS P/E Ratio 14.7x

#40 mstnkl on 02.04.17 at 3:45 pm

Man, I love this anonymous uber pessimist blogger:

“Last Friday, GDP growth missed Trump’s 4% target by a factor of 100% while he announced his Muslim Travel ban. The dollar imploded and on Monday the S&P gapped down for its worst day since the election. This Friday, wage growth missed by a factor of 200%, Amazon imploded due to weak revenue, and Trump rolled back Wall Street regulations. Therefore, next week we’ll watch the dollar final implode which is all Trump’s plan – the long awaited event that will bring about mega capital implosion. And, while capital is imploding in real-time, ZeroClue’s cabal of boy-men will keep us informed on how many McJobs are being lost to robots serving jobless consumers.
In other words, Globalization in a nutshell: the pyrrhic victory of capital over labour, leading to total collapse caused by lack of wage income aka. “revenue”.” (Ponzi World)

#41 Bank of Millenial on 02.04.17 at 3:48 pm

#3 Ace Goodheart

Not many great deals out there in the junior securities. The cheaper issues are cheap for very, very good reasons. Going to resign myself to a balanced portfolio this year and accept the average.

#42 Ryan Lewenza on 02.04.17 at 3:56 pm

Exiled “How does ” Bitcoin ” factor into this? This is not a question to embarrass. Is it not a possibility?”

From an investing standpoint I would rather invest in gold over bitcoin. While I’ll be the first to admit that I really don’t “get” bitcoin (yes people can mine for more bitcoin) but I don’t really get it since it’s not a product or service so how does it have value. It has value since people buy it pushing up the price, and people see it as an alternative to fiat currencies. But I can’t really value it and I can’t really see it. Most people that believe/invest in bitcoin see the end of fiat currencies. So in this scenario I think gold is a better option. And we would never buy bitcoin for clients since it doesn’t make sense for them and we can’t anyways. No bitcoin for us. I think one day this fad/cryptocurrency thing blows up. – Ryan L

#43 Euro observer on 02.04.17 at 4:01 pm

http://globalnews.ca/news/2909453/canadas-housing-market-nears-extreme-bubble-warns-ex-lehman-brothers-trader/

Canada’s housing market nears ‘extreme bubble,’ warns ex-Lehman Brothers trader

The average home price in all of Canada is over $500,000 and this is with the average income at $40,000

Debt to disposable income for consumers is 165 per cent which is much higher than it was in the U.S. at the top of our housing bubble.

Dillian said while there’s a perception high home prices are being driven by off-shore money, including Chinese foreign investors, this only represents about 10 per cent of the activity in Vancouver and Toronto.

“A lot of it really is Canadian citizens who are stretching to buy homes in the low seven figures,” he said “The levels of debt are very, very high and it’s all on the [Canada Mortgage and Housing Corporation] balance sheet.”

Dillian also warned that the Canadian dollar, reeling from low oil prices, could fall to $1.60 or $1.70 against the US dollar. He added that shorting the Canadian dollar is “one of the best macro opportunities over the next couple of years.”

the verdict is in, let the dead enter the courthouse.

#44 For those about to flop... on 02.04.17 at 4:09 pm

Hey Broadway, I have already documented the one on St Catherine’s.

They had it on for 1.4 and it slowly worked its way down to 1.1 and I acknowledged it could still yet prove to be a good buy and they got it 20% less than assessment.

Three months ago my neighborhood of Fraser and your neighborhood of Grandview were roughly the same in the zolo rankings.

Since then your neighborhood has stayed hotter than most and mine has come back to reality.

Most of the transactions that are going down in Vancouver are ones that the people are cashing in.
The people that bought from January 2015 onwards to flip are watching to see what happens this Spring before crystallizing a loss.

How much money did the people lose at 2273 Graveley….100k …200k?

There is still a lot of money being made in Vancouver real estate… No doubt.

As I stated the other day a lot of houses around here were bought for 1.2 /1.3 and were being rehabilitated while the market when downwards and now they have to make a decision to cut their losses or wait for Cabbage Patch Clark to pull a rabbit out of her bum…

M42BC

#45 technical analyst? on 02.04.17 at 4:11 pm

this is what passes for technical analysis? what happened to price charts? moving averages? trend lines?

all i see is useless fundamental garbage…

#46 Renter's Revenge! on 02.04.17 at 4:13 pm

Great post, Ryan. I think this kind of analysis is what a lot of dogs come to this blog for. Thank you.

Only the paranoid survive.
– Andy Grove

#47 Euro observer on 02.04.17 at 4:14 pm

http://globalnews.ca/news/2851418/what-a-real-estate-crash-could-mean-for-canadians/

The federal agency in charge of supervising Canada’s banks released a revised stress test guideline Tuesday, suggesting banks test if they could weather a 50 per cent drop in real estate values in Vancouver, a 40 per cent drop in Toronto and 30 per cent fallout elsewhere in Canada.

#48 Al on 02.04.17 at 4:18 pm

Re: #1; The BC Assessment website is a 100 times better than what we get from the MPAC (Ontario Assessment) website. Amazing how one jurisdiction welcomes homeowners to access as much data as they need to ensure accurate property tax assessment values whereas another jurisdiction in the same country hides as much as they can to prevent challenges of their assessed values!

#49 TurnerNation on 02.04.17 at 4:18 pm

Economists are loons. I mean one of em even came after Gartho.
No the only way to do it is becoming your own BSD and knock off a couple of round turn trades each week until you learn positive expectency and money management. They don’t teach you this in school.
Dump 1/2 into convertable debentures for income and margining purposes. Michael Milken taught us a basket of junk debt can be safe.

All this makes you better able to balance on the beach ball of capitalism. At times you’ll list and slip but hop back on.

#50 Euro observer on 02.04.17 at 4:23 pm

#42 Ryan Lewenza

If there is a leveraged ETF on short Canadian real estate market/Canadian dollar, long silver/gold stocks, I am getting all in.

#51 Penny Henny on 02.04.17 at 4:47 pm

#29 For those about to flop… on 02.04.17 at 2:35 pm
Here’s a scenario that I know of in Vancouver that is still waiting to play out the final chapter.

I will round the numbers and keep the developments anonymous as in the end it is irrelevant.

Two young guys bought a knockdown for 2 million and then spent 1 million building a new house.

They sold the first house for 6 million and then purchased a second knockdown for 2 million and spent another 1 million building another new house.

Now the music has stopped and they have not been able to sell the second house.

How much money have they made…

////////////////////////

What ever the second house sells for is profit. Less transaction costs

#52 For those about to flop... on 02.04.17 at 4:47 pm

Also Broadway if you show the sale price against the assessment instead of the asking you get the following results in no particular order in rounded numbers.

-16%
-10%
-10%
-10%

I thought I was seeing a pattern until I saw that the person in the duplex only got 1% less.

I will keep practicing…

M42BC

#53 Penny Henny on 02.04.17 at 4:58 pm

#34 bdwy sktrn on 02.04.17 at 3:21 pm
any takers on the big game?

i’ve got 50bux on the falcons, even though the Pats are ‘trump’s team’ and on a roll.

2 deadly potent offences.
one great and one very good defence.

the very good D will lose.

///////////////////////

two good defences?

I’ll bet you.
What is a bux?

M51ON

#54 For those about to flop... on 02.04.17 at 5:02 pm

18 pm
Re: #1; The BC Assessment website is a 100 times better than what we get from the MPAC (Ontario Assessment) website. Amazing how one jurisdiction welcomes homeowners to access as much data as they need to ensure accurate property tax assessment values whereas another jurisdiction in the same country hides as much as they can to prevent challenges of their assessed values!

Hey Al,good to know.
I don’t see why we can’t see all sales history but even if they changed the recent sales on each house to 5 years instead of 3 would help in a lot of cases.

Also I have noticed something else going on during my research with the assessments regarding recent sales .

Some of the ones that went that well under assessment in October/November have not been updated and the ones that went over or near have.

Coincidental or deliberate only time will tell…

M42BC

#55 Freedom First on 02.04.17 at 5:04 pm

Thank you Ryan. Excellent Post!

Yes. These are the reasons I went overweight cash over the past 6-8 weeks. I have no fear and no greed. I simply pay attention to facts and act accordingly. Never had a problem buying very cheap RE or anything else in dead markets or selling into very profitable Bulls. Happy with the results over the past 40 years.

Ryan, I am looking forward to the counterargument. Learning is what I do. My Freedom First is always #1. Garth made a great decision bringing you and Doug into the fold.

#56 Penny Henny on 02.04.17 at 5:08 pm

#42 Ryan Lewenza on 02.04.17 at 3:56 pm
Exiled “How does ” Bitcoin ” factor into this? This is not a question to embarrass. Is it not a possibility?”

No bitcoin for us. I think one day this fad/cryptocurrency thing blows up. – Ryan L
\\\\\\\\\\\\\\\\\\\\

I don’t necessarily get bitcoin either and I would never invest in it.
But I do think blockchain currencies do have a large future.
Do some more redin Ryan.

#57 Kelowna on 02.04.17 at 5:40 pm

Great post Ryan! Thanks for the intelligent and thoughtful analysis. I can’t imagine when it was more important to have a well balanced portfolio than right now!!

#58 Andrew Woburn on 02.04.17 at 5:41 pm

Remember when you could actually buy a mansion for two mill?

http://www.timescolonist.com/business/historic-mansion-in-rockland-sold-for-1-8-million-in-court-bid-1.9713387

#59 Ponzius Pilatus on 02.04.17 at 5:43 pm

The Superball is the most hyped up sports event on the Planet. Clever marketing, for sure.
But as for sport content, pretty mediocre.
3 seconds of play followed by 5 minutes of replays and commercials.
Even baseball is more entertaining.
I understand, that Canadians can now watch the American commercials.
Should be busy around the water coolers on Monday.
Sheep.

#60 Ryan Lewenza on 02.04.17 at 5:45 pm

technical analyst? “this is what passes for technical analysis? what happened to price charts? moving averages? trend lines? all i see is useless fundamental garbage…”

Why so much hate for fundamentals? It always cracks me up how the fundamental investors rip on the technical analysts and the technicians rip on the fundamental analysts. I try to combine the two and have never understood the animosity between the two camps. Second, the piece was about the bear case and if you’re properly reading the charts you can’t build a bear case from the technicals. Hence why I never included them. But patience as I’ll include them in the next blogpost as the technicals support our bullish outlook. – Ryan L

#61 Self Directed on 02.04.17 at 6:11 pm

Thanks Ace Goodheart for your response yesterday regarding Bonds.

I think you are saying… the bond market is undervalued now because everyone moved out of bonds and into stocks.

Is this why bond ETF share prices tanked late last year? A “one-time” event, and now because of that, they are undervalued?

Garth (or his entourage of 2) usually don’t predict what is going up or down, only to be balanced. With exception of Preferreds. Garth must have been confident about that one.

#62 A Yank in BC on 02.04.17 at 6:25 pm

I’m a devoted couch potato investor, but from past experience, I know that a bull-market has run its course when I hear my barber, or my house painter, or simply the guy who lives next-door (he’s an idiot), brag about how they are making a killing in the stock-market. That’s the time to re-balance and lower exposure.

Very nice column Ryan. You and Doug knock-it outta the park on Saturdays.

#63 InvestorsFriend on 02.04.17 at 6:25 pm

A 98% correlation S&P 500 to Fed Balance sheet?

A 98% correlation is almost perfect correlation. But the S&P 500 has had its downs as well as ups while the Fed Balance sheet has almost no dips and is much smoother.

Is this 98% based on yearly data? I can’t believe it is 98% based on monthly or certainly daily data. (Fed would only report monthly, I suspect).

I will say though that the correlation on the chart, whatever it is, is shockingly strong.

Correlation however is not necessarily causation. But I suppose the Fed bought bonds driving down interest rates which pushed up the stock market. So maybe it is causation.

Now, should we fear that the Fed will sell all those bonds and reduce its balance sheet driving stocks down? Well, if they try to sell bonds they will be like the investor who cornered the market in some penny stock and pushed its price way up. Finally he called his broker and said, okay sell and let’s take all these profits. Said the broker, “Sell to whom? you were only one buying.”

#64 Guillaume on 02.04.17 at 6:28 pm

DELETED

#65 Ace Goodheart on 02.04.17 at 6:32 pm

#60 Ryan Lewenza:

“Why so much hate for fundamentals? It always cracks me up how the fundamental investors rip on the technical analysts and the technicians rip on the fundamental analysts.”

This is cool. I like to rip on both.

Seriously though just have a look at the individual companies. And I don’t mean looking at graphs and charts and trying to figure out new “break out points” and that sort of nonsense.

Fundamental rule of investing is: own the means of production, of the products consumed by the masses. That is how you get rich. Your “indexes” are made up of the companies that produce those products.

So figuring out if an index is over valued is easy. Just pick companies, examine them to determine what they are selling, how much it is costing them to make it, and whether there is upside or downside to their markets. Look at their debt structure, their share structure. A simple thing like a large amount of dividend obligations and a rapid drop in sales can destroy a company. The indexes are just made up of these individuals, all producing stuff that we all use and consume.

The flaw in stock markets is that people view them as you are doing, as entities with upside to value where the value has nothing to do with the fundamentals. In other words, an index is worth what people are willing to pay for its constituent parts. Then people start drawing graphs and charts, plotting prices and making predictions based on their geometry.

Right now, the stocks that make up the various indexes, are over priced. We know that, by looking at individual companies and realising that the share values are way beyond any of the fundamentals. They are like this, because everyone has started flooding out of the bond and fixed markets and back into the stock markets, creating demand and artificially pricing the securities.

This problem is then added to by people doing the exact opposite that they should be doing in this situation, which is holding onto their stocks, as they appreciate, rather than selling them. This creates higher prices as there is more demand than supply.

We know all of this is happening, by looking at fundamentals of individual stocks in the indexes and seeing that they are all currently over valued.

This is of course a buying opportunity in waiting, as you know what is going to happen, as soon as the markets start falling. All the people who were holding onto their stocks, when they were appreciating (and they should have been selling them) will start selling their stocks when the prices start to fall (creating an artificial “crash” and resulting in stocks being undervalued).

This is the great thing about the stock market. You can always get in cheap. You just have to do the opposite of everyone else.

I managed to get 20.5% return on my stocks this past year, by doing what I am describing above. This year, my return will not be as good as I am buying bonds and preferreds and re-allocating my gains. However I expect to still get at least 10% and if I am good at this, maybe 15% this year.

#66 InvestorsFriend on 02.04.17 at 6:35 pm

Nobody Can predict the impact of a housing crash

#47 Euro observer on 02.04.17 at 4:14 pm said:

The federal agency in charge of supervising Canada’s banks released a revised stress test guideline Tuesday, suggesting banks test if they could weather a 50 per cent drop in real estate values in Vancouver, a 40 per cent drop in Toronto and 30 per cent fallout elsewhere in Canada.

*****************************************
CMHC would take the biggest hit.

The results of such an arbitrary stress test would be garbage since the banks have no way of actually knowing the extent of the bad loans in that scenario.

If almost everyone continued to pay their mortgages and loans (since they have to or else declare bankruptcy) then the banks and CMHC would have no problem. (Although their share prices would plummet temporarily)

Almost all risk tests like that are garbage. They result in a bunch of precise looking results founded on guesswork.

#67 Entrepreneur on 02.04.17 at 6:36 pm

“When the facts change, I change my mind.” Chuckled at that line but so true. And sometimes change the mind without the facts just for survival mode as we are in whirlwind times.

AB Boxster…I wanted to shake Sir James Goldsmith hand as he is speaking the truth about lost jobs in a country (nation), big corporations moving for cheaper labour, how that created problems. All this is not helping the people within a nation and that is where the system needs correcting.

Dough in London…Prices can go high as the moon now as reality has left. The shock is long gone.

#68 Andrew Woburn on 02.04.17 at 6:38 pm

Thank you for this thoughtful analysis, Ryan.

In my opinion, we are likely in for about six months of Trump induced market destabilization until the Donald finds an uneasy equilibrium with institutional Washington. The establishment exists for a reason and cannot be tweeted away as it represents and balances the competing interests in the US.

Lefties deride Trump’s cabinet choices but retired senior military officers are often very bright, highly educated and respectful of protocol, tradition and the Constitution even if their political opinions are not welcome in Rosedale. Trump’s Supreme Court choice is unlikely to let him trample over the Constitution. About half of Republican Congress critturs are facing elections in less than two years and they are well aware that their pet POTUS is energizing a populist Democrat resurgence that makes the Bernie Sanders wave look like a ripple. Lastly big business hates instability and is probably just waiting to see if Trump can deliver on deregulation and tax cuts before they move to cut him to size.

I expect we will see Trump’s son-in-law running the government after Bannon screws up a few more files while Trump tweets to the gallery and official Washington politely ignores him. This is good because an uncontrolled Trump will soon be seen as bad for business. I take some comfort from this account of how the cabinet is already having some impact (yes, I know it was written for the commie-pinko Washington Post where they all hate real Americans).

https://www.washingtonpost.com/news/josh-rogin/wp/2017/02/04/the-white-house-cabinet-battle-over-trumps-immigration-ban/?utm_term=.70d01f65b167&wpisrc=nl_most-draw8&wpmm=1

#69 Self Directed on 02.04.17 at 6:46 pm

#3 Ace Goodheart on 02.04.17 at 11:34 am
…………………………………………………..
Ace. I’m thinking of adding 10% of VSC to my Unregistered Account. Is this one of the juicy ones you speak of?

Canadian Short-Term Corporate Bond Index ETF (VSC)

MER 0.11%
Net assets : $1.0 billion
12 month trailing yield : 2.90%
Distribution yield: 2.42%
Dividend schedule : Monthly
Currently trading around 24.70

#70 Deplorable hoser on 02.04.17 at 6:53 pm

The beer case is the only thing that truly matters.

#71 Wrk.dover on 02.04.17 at 7:01 pm

I am no expert but, looking at the long term charts of tse, dow, s&p, it looks like there is plenty of time to buy when they are down, except for in a flash crash. And the climb we have been on looks plenty long. Buying opportunity coming, but not Monday.

#72 Spectacle on 02.04.17 at 7:03 pm

Great post gents,
And I second freedoms commentary #55, Great addition to this blog.

Understanding Standard Deviation – Dough
https://www.dough.com › blog › underst…
Oct 6, 2015 – What that means is if an underlying has a yearly forward price of $50.00 and an implied volatility of 10%, a one standard deviation move (68.2%) would be plus or minus $5.00, or said another way, ..

Ryan, I’m not a stats genius by any means, but it might be important to highlight just how very important that 1 standard deviation that you slid in there, can have. Tried to link above. (For those of us sitting by the fire, glass of something, wife and child close by , snow falling deep outside… And nothing else to do :)

All the more reason to be diversified Iran intelligent way, not emotionally driven, as you always wisely counsel us.

Regards, M
.

#73 Questions on 02.04.17 at 7:04 pm

CAPE… I don’t think Schiller himself believes in the validity of that metric.

#74 Rick on 02.04.17 at 7:06 pm

So, you post one argument for a bear market and another for a bull. Save some time; and say you don’t know….have a balanced portfolio. Save us all some time:)

#75 Smoking Man on 02.04.17 at 7:16 pm

Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions (e.g., less CNN and more Fox TV).

…………

The reason you guys got it wrong on Trump and I nailed another home run is because I have a PhD in Herdonomics.

WhIle you guys were getting a MBA and other chart reading certificates I was knocken on doors, sell stuff to Mr and Mrs Jones. Thousands and Thousands over the years. Long before I became a guru code smith and fx trader.

It was a tremendous education. I took loot from the dumbbells and Rocket Scentists.

I sence change, I smell it long before it happens.
And this why I plan on leaving Canada in the near future.

You guys have no idea on how the commies running the govt are going to destroy it.

#76 stockmarket_freak on 02.04.17 at 7:28 pm

@#3 Ace Goodheart on 02.04.17 at 11:34 am
Interesting argument backed up by good research.

“I have had a hard time finding stocks that are underpriced (and therefore buy-able). I invest as a contrarian, so I am looking for undervalued stuff that has a lot of upside.”

how about Tempur Sealy International Inc(NYSE:TPX)? their stock went down more that 30% this week based on the news that they ended their relationship with some mattress store i’ve never heard of, “Mattress Firm”. Apparently sales of Tempur Sealy products at Mattress firm stores account for 20% of Tempur Sealy’s business. but who care, bro? Tempur Sealy is a beloved brand and people would crawl to the ends of the earth, waist deep in manure just to buy one of their mattresses.

#77 Pete from St. Cesaire on 02.04.17 at 7:42 pm

less CNN and more Fox TV
————————————–
(laughter turns into crying and banging my head on the table). How about you try something with real, honest well thought-out content like jimstonefreelance or Breitbart.
FoxTV is just more of the same BS as CNN but supposedly from a different angle.

#78 Andrew Woburn on 02.04.17 at 7:48 pm

My take on Bitcoin/blockchain is:

Bitcoin is a virtual currency based on blockchain technology. It was designed to be an “outlaw” currency that didn’t need a central controlling authority. For this reason, most people in the foreseeable future will not trust it. It is said the major users to date have been Chinese evading currency controls.

The underlying blockchain technology is very efficient in transferring title to goods and cash. It is thought it can dramatically cut the cost of clearing interbank transactions and stock certificates for example. For that reason, sober and conservative institutions like banks are looking at its use in a closed environment with a regulating central authority. This does not mean they are endorsing Bitcoin. Unless there is some undisclosed major flaw in the actual technology, a variant of the blockchain will probably work for international institutions. It could be a huge boost for land titles registry in the third world where registrations can be sketchy. This could free up a lot of real estate equity for domestic investment.

Blockchain enthusiasts claim it is revolutionary to the point it will be bigger than the internet. I haven’t wrapped my head around that but I am willing to be schooled so please respond if you have any thoughts.

If you think blockchain sounds like a lot of hooey, business magazines like Fortune don’t.

http://fortune.com/2016/09/28/blockchain-banks-2017/

#79 Ace Goodheart on 02.04.17 at 7:51 pm

RE: #69 Self Directed :

“Ace. I’m thinking of adding 10% of VSC to my Unregistered Account. Is this one of the juicy ones you speak of?”

Yup I’ve been buying that one. It’s undervalued right now. There are a bunch of others like it. Corporate bonds are getting yard saled right now for no good reason. Why is everyone fleeing to over priced stocks?

#80 ANON on 02.04.17 at 8:10 pm

Thought I was reading the wrong blog, and double checked. Sounded like the Greater Fool circa 2008-2009. A relief that it is not really a view shared by the author, the commentary evisceration is something I personally would have missed.

#81 developer fraud on 02.04.17 at 8:10 pm

http://vancouversun.com/news/local-news/real-estate-developer-guilty-of-fraud-securities-commission-hearing

#82 Tony on 02.04.17 at 8:11 pm

Corporate profits are flat at best since 2009. All that I’ve seen is cost cutting and creative accounting zero increase in profits. The first chart reinforces the truism that we are still in a long term bear market dating back to the dot-com crash. If there’s any bull market I don’t see it.

#83 Deplorable hombre on 02.04.17 at 8:18 pm

#75 Smoking Man on 02.04.17 at 7:16 pm
Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions (e.g., less CNN and more Fox TV).

…………

The reason you guys got it wrong on Trump and I nailed another home run is because I have a PhD in Herdonomics.

WhIle you guys were getting a MBA and other chart reading certificates I was knocken on doors, sell stuff to Mr and Mrs Jones. Thousands and Thousands over the years. Long before I became a guru code smith and fx trader.

It was a tremendous education. I took loot from the dumbbells and Rocket Scentists.

I sence change, I smell it long before it happens.
And this why I plan on leaving Canada in the near future.

You guys have no idea on how the commies running the govt are going to destroy it.


Maybe in Ecuador you can con someone into buying your book. Lol.

#84 Brian Ripley on 02.04.17 at 8:35 pm

We disagree with this view (about the bear argument) and see the bull market continuing in 2017. Ryan Lewenza

If sentiment is a factor, I would say that there is a mood swing building after 2 weeks of the Trumpster.

On my momentum chart http://www.chpc.biz/housing-price-momentum.html

Vancouver SFD price momentum is gathering energy to the downside and has been since July 2016 when it peaked.

Toronto and Calgary SFD prices are still drifting higher. BUT over the 15 year period of the chart we can see that they all eventually get in line with a general mood that develops over time.

If the Trump WH continues with its big stick approach for another month we might lose the few bulls that are left.

I’m assuming algorithm trading does not represent a lot of people only a lot of machines controlled by a few people.

#85 Ana on 02.04.17 at 8:51 pm

Technical analysis:

I watched this youtube video this morning that uses different weekly moving averages to identify bull/bear markets. It was interesting, and agrees with Ryan that we are in a bull market still for now.
https://www.youtube.com/watch?v=oLxvA_xtLq0&feature=youtu.be

#86 For those about to flop... on 02.04.17 at 9:06 pm

Pink Snow falling in Richmond

These guys overpaid early last year forking out 685k for this condo last February.

After trying to get the bulk of their money back it has had two price reductions and is currently on for 648k.

Could be in for a 50/100k loss ,depending on if they can find a desperado…

M42BC

6019-5511 HOLLYBRIDGE WAY RICHMOND

https://www.zolo.ca/richmond-real-estate/5511-hollybridge-way/6019

https://evaluebc.bcassessment.ca/Property.aspx?_oa=RDAwMDBOQjRDSw==

#87 Smoking Man on 02.04.17 at 9:49 pm

#83 Deplorable hombre on 02.04.17 at 8:18 pm
#75 Smoking Man on 02.04.17 at 7:16 pm
Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions (e.g., less CNN and more Fox TV).

…………

The reason you guys got it wrong on Trump and I nailed another home run is because I have a PhD in Herdonomics.

WhIle you guys were getting a MBA and other chart reading certificates I was knocken on doors, sell stuff to Mr and Mrs Jones. Thousands and Thousands over the years. Long before I became a guru code smith and fx trader.

It was a tremendous education. I took loot from the dumbbells and Rocket Scentists.

I sence change, I smell it long before it happens.
And this why I plan on leaving Canada in the near future.

You guys have no idea on how the commies running the govt are going to destroy it.


Maybe in Ecuador you can con someone into buying your book. Lol.
…….

My book is the best thing written since Fear and Loathing in las vegas. I suck at marketing and don’t care. It’s out there for everyones enjoyment. The fact that ive sold barley over 100 copies does not bother me.

I don’t need book sales to fly first class in a private Gulf Stream jet that I sort of own if one was a good onion cutter

But I’m proud of the achievement. Like till I found this blog writing every day I would spell my name wrong.

This site helped me huge. And I’ve helped others on here. Made 7 new millionaires that I know of.

#88 Yanniel on 02.04.17 at 9:54 pm

Very instructive. Thanks Ryan.

#89 Smoking Man on 02.04.17 at 10:06 pm

The whole reason I moved to long branch I wanted to feel the pain of the hard done by sitting at the table to the right of me at south side Johnnys and the arrogance of the rich plumber with that lake house on Lake promenade.

This is a diverse hood with begged and spray painters just look at my fence at 57 james street.

I’m going to miss it. But got enough book food to last 20 life times. The shit one does when he’s drunk and thinks he’s better thañ Hunter S Thompson. I’m not better. He set the bar high.

And I’m not ashamed of trying to breach it. Will I probably not. But it sure is fun trying.

Do you lefty loons understand a competitive spirt. I think not. Just victims blaming others for you lack of effort.

#90 InvestorsFriend on 02.04.17 at 10:22 pm

Blockchain Blockheads

#78 Andrew Woburn on 02.04.17 at 7:48 pm said:

“Blockchain enthusiasts claim it is revolutionary to the point it will be bigger than the internet. I haven’t wrapped my head around that but I am willing to be schooled so please respond if you have any thoughts.”

*******************************

I am with you. I bought a book called the block chain revolution. It was maybe 200 pages but had maybe 25 pages of actual material. It was pretty clear the authors had no real clue about blockchain except they were pretty sure it was great stuff. I seldom fail to finish any book I start but this one was not worth finishing.

“Everyone can see everything in the ledger and it’s totally anonymous…” yeah that makes sense.

If Bitcoin were a crypto currency with a value tied to dollars but anonymous, that might make some sense.

Pretty soon paper cash will be obsolete so an electronic money (in actual dollars) that can’t be traced would be quite useful for example in purchasing certain umm personal services.

#91 Smoking Man on 02.04.17 at 10:24 pm

DELETED

#92 WUL on 02.04.17 at 10:32 pm

I just got off the phone with my crafty 21 year old daughter. A germ of an idea. She spotted a California legal precedent that could shake up the workplace for youngsters facing the job churn gig economy in AB.

Could be a winner. Certainly newsworthy. Stay tuned.

I’ll Crowdfund ($650/hour – she gets $250 – full disclosure).

Now, if Garth will vet my writs and pleadings as my co-counsel, we’ll be off to the races. We’ll see employers in Court. I’m energized.

#93 GFC v2.0 on 02.04.17 at 10:54 pm

Coming to a stock market near you:
GFC v2.0, The Sequel
One more argument for the long-term bears:

“….U.S. President Donald Trump on Friday ordered reviews of major banking rules that were put in place after the 2008 financial crisis, drawing fire from Democrats who said his order lacked substance and squarely aligned him with Wall Street bankers….

Trump and other critics of the Dodd-Frank law say its regulations have hindered lending. At the meeting with CEO’s on Friday Trump said, “I have so many people, friends of mine, that have nice businesses that can’t borrow money…because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank.”

(Classic Trump, hypocritically making up his own fake news to support his infantile, thumb-sucking lies. Then again, what more would you expect from a sand-box bully with the attention span of a seedless watermelon).

Despite such criticisms, recent data from the Reserve Bank of St. Louis showed U.S. commercial-bank lending at a 70-year high, climbing steadily since late-2010.

Democratic Senator Elizabeth Warren who lobbied for the creation of the Consumer Financial Protection Bureau accused Trump of forsaking middle and lower-income individuals to help banks.

“The Wall Street bankers and lobbyists whose greed and recklessness nearly destroyed this country may be toasting each other with champagne, but the American people have not forgotten the 2008 financial crisis – and they will not forget what happened today,” she said in a statement….”

– Reuters

#94 For those about to flop... on 02.04.17 at 10:56 pm

More Pink Snow in Richmond.

So after being tipped off about the other condo owner being in trouble by way of multiple price reductions, I dug a little farther into that building and I found two more units that were bought with the same dollar amount and were put back on the market to flip on the exact same day and are now in trouble.

The reasonable conclusion is that these two units were purchased by the same person/group and now because it has passed through one less set of hands there is a chance they get the bulk of their money back.

They paid more than what the assessment is now 2 years later.

Selfie ,see if you come to the same conclusion.

I stated a month ago that I suspected Richmond to be one of the messiest areas to be affected by a real estate correction and from what I’ve seen the last couple of weeks that is looking to be the case…

M42BC

https://www.zolo.ca/richmond-real-estate/5511-hollybridge-way/5003
https://evaluebc.bcassessment.ca/property.aspx?_oa=RDAwMDBOQjRVQw==

https://www.zolo.ca/richmond-real-estate/5511-hollybridge-way/5001

https://evaluebc.bcassessment.ca/property.aspx?_oa=RDAwMDBOQjRVOQ==

#95 Long Branch Hombre on 02.04.17 at 11:33 pm

#87 Smoking Man on 02.04.17 at 9:49 pm

#83 Deplorable hombre on 02.04.17 at 8:18 pm
#75 Smoking Man on 02.04.17 at 7:16 pm
Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions (e.g., less CNN and more Fox TV).

…………

The reason you guys got it wrong on Trump and I nailed another home run is because I have a PhD in Herdonomics.

WhIle you guys were getting a MBA and other chart reading certificates I was knocken on doors, sell stuff to Mr and Mrs Jones. Thousands and Thousands over the years. Long before I became a guru code smith and fx trader.

It was a tremendous education. I took loot from the dumbbells and Rocket Scentists.

I sence change, I smell it long before it happens.
And this why I plan on leaving Canada in the near future.

You guys have no idea on how the commies running the govt are going to destroy it.


Maybe in Ecuador you can con someone into buying your book. Lol.
…….

My book is the best thing written since Fear and Loathing in las vegas. I suck at marketing and don’t care. It’s out there for everyones enjoyment. The fact that ive sold barley over 100 copies does not bother me.

I don’t need book sales to fly first class in a private Gulf Stream jet that I sort of own if one was a good onion cutter

But I’m proud of the achievement. Like till I found this blog writing every day I would spell my name wrong.

This site helped me huge. And I’ve helped others on here. Made 7 new millionaires that I know of.
..
When’s the movie coming out?

#96 oragano on 02.04.17 at 11:47 pm

@#75 Smoking Man on 02.04.17 at 7:16 pm

The reason you guys got it wrong on Trump and I nailed another home run is because I have a PhD in Herdonomics.
——————————————————————-

Or was it MAnomics? I know the three ugly sisters but what about Canada? The far left is getting me worried…

#97 WUL on 02.05.17 at 12:18 am

FLOP at #94:

You dug “further” not “farther”. Australian grammar.

I watched Adelaide play Fremantle in an AFL game on the telly in The Mac last winter. I had to check when the season starts. Appears it is in March. The games are on after my bedtime.

Call me on my White Slimline with your prognostications for the upcoming season. The “Bouquet Residence”. Although, my number is not a Chinese Take Away.

Hang in there Pal.

M60AB but M61AB in 4 days.

#98 State of Washington vs. Donald J. Trump, et al on 02.05.17 at 12:21 am

See the link below for an example of the judicial branch of government checking the power of the executive branch:

http://www.uscourts.gov/cameras-courts/state-washington-vs-donald-j-trump-et-al

#99 Sam on 02.05.17 at 12:47 am

HBP Question. I’m buying vacant land and acting as my own general contractor to build a house. How soon can I withdraw RRSPs under the HBP? Is it sufficient to have just the land purchase agreement or do I have to wait until an agreement with a supplier or sub??

#100 WUL on 02.05.17 at 1:01 am

Ryan:

OK work today but Coach Garth will bag skate you tomorrow in the practice rink in Mississauga (sp.).

FLOP:

I’m sure you recall this classic episode with Hyacinth.

https://m.youtube.com/watch?v=vsZGHxb4caA

#101 Spectacle on 02.05.17 at 1:02 am

Regarding comment by ::
“#94 For those about to flop… on 02.04.17 at 10:56 pm
More Pink”

Love the input by you guys about boots on the street, and pink snow in YVR. Just took a ride into kerrisdale for dinner, way to drop the ball again gregor robertson! Snow, ice…a bus crashed into a pole behind me. Stranded busses everywhere. Another story.

But the traffic was all SUV driving in the snow, and so many dark houses. As you get into that same Richmond real estate market by Verdian Green, TnT market etc, when everybody is stuck home, it’s really quite dark in those buildings. Nobody ever really home.

I noticed that massive Yeunheng development at the top of 3 road is now changed to another company. Hmmm, Any ideas on following that set of developments . These guys are not stupid, but still about 12 cranes on projects, and more to break ground soon. Supply and diminishing demand?

Thanks for your input .

M

#102 PeterE on 02.05.17 at 5:08 am

#78 Andrew Woburn on 02.04.17 at 7:48 pm said:

“Blockchain enthusiasts claim it is revolutionary to the point it will be bigger than the internet. I haven’t wrapped my head around that but I am willing to be schooled so please respond if you have any thoughts.”

*******************************

Hi all, bitcoin expert here.

From my point of view, bitcoin rides on 3 major trends.
1. Switch to cashless society
2. Deflationary currency
3. Immunity to currency control measures.

-Where Bitcoin is on the adoption curve

It is currently going through the mainstream adoption phase with the final hurdle of jumping the adoption chasm and getting legitimized by the bitcoin ETF.

I’ve been discussing bitcoin on online forums for a while now and I can tell you that the immediate reaction from people in the past has been accusation of stupidity and ridicule. Not so much nowadays. People would say they won’t touch it with a 10 foot pole, but at least they don’t attack my intelligence or sanity anymore.

-What a world looks like with mainstream adoption

The Japanese have been toiling away at adapting bitcoin without the rest of the world knowing. Japanese TV news recently ran some investigative reporting on shops that uses bitcoin and it looked like the country that has embraced bitcoin the most. Which, after some thought about its policy on forex, makes perfect sense. Japan, has no currency control at all, which makes bitcoin exchanges thrive and inturn makes business adaptation thrive.

-Bitcoin as a hedge against chaos

With almost 100% correlation, bitcoin price increases whenever a country enact currency control. We saw this with Cyrpus, Greece and most often, China.

People hold bitcoin, in case something bad happens in the future to provide them with a currency that is borderless. They can run away to another country with nothing on their back and convert their bitcoin to the local currency without going through the scrutiny of customs border control or immigration police.

2008, before Hugo Chavez shut down the border. The wealthy elites escaped the country. The ones I knew only managed to escape with $50 000 because that’s the maximum they can take out with them. They had to restart their lives in Canada and apply for refugee status. If bitcoin was widespread back then, they wouldn’t need to lose all their wealth.

-End

There are many challenges to bitcoin adoption ahead, but after 9 years of operation, and having been declared dead by mainstream media every year, I believe bitcoin is way past the phase where it will die.

#103 When Will They Raise Rates? on 02.05.17 at 5:52 am

The “Bull case” – Keynesian madness:

Dow vs US National Debt:

https://i.imgur.com/fXNhYAU.jpg

Dow 2024 projection:

https://i.imgur.com/NXAizWC.jpg

Dow 2028 projection:

https://i.imgur.com/HjDwrFM.jpg

This reminds me of a great quote from the influential economist John Maynard Keynes who once said “When the facts change, I change my mind. What do you do, sir?”

I’ll see your Keynes and raise you Ludwig Von Mises:

“There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved.”

#104 Leo Trollstoy on 02.05.17 at 7:40 am

Wonder how long Toronto real estate prices will continue to climb higher.

Seems endless

#105 Vanrentor on 02.05.17 at 8:41 am

Snake vs Snake

West Vancouver realtor alleges ‘jealous’ rival defamed him

http://www.theprovince.com/news/local+news/west+vancouver+realtor+alleges+27jealous+rival+defamed/12847589/story.html

#106 When Will They Raise Rates? on 02.05.17 at 8:42 am

#104 Leo Trollstoy on 02.05.17 at 7:40 am
Wonder how long Toronto real estate prices will continue to climb higher.

Seems endless
————–

See the last chart in my post above yours…

To the moon!

(or in reality the RE bubble crash is imminent, along with every other asset bubble thats been artificially inflated by runaway cheap debt)

#107 increased willingness to seek out differing opinions on 02.05.17 at 10:09 am

Last week my colleague Doug “ate crow” by acknowledging his/our error in assuming Trump would lose the US presidential election. He also presented a reasoned argument for being more open to opposing views and an increased willingness to seek out differing opinions.

In the profession of making money it is suicidal not actively seek out all available resources.

Just Google who reported that 2 days ago, in Fukushima, the nuclear plant operator discovered a square meter size hole that leaks radioactive fuel into the environment, raising radiation to the highest level since the meltdown of the reactor.

You will be surprised who decided to report it and who didn’t.

#108 Darryl on 02.05.17 at 10:10 am

This site helped me huge. And I’ve helped others on here. Made 7 new millionaires that I know of.””
——————————————————————
Yah but they were billionaires before they met you .

#109 increased willingness to seek out differing opinions on 02.05.17 at 10:19 am

Also make sure to select search everything.

If you search “news” and compare the results, you have an interesting insight of what Google considers a “news source”, filtering out information for the public, injecting their own bias.

#110 ipsoipso on 02.05.17 at 10:22 am

Funny how Ryan is still bullish for 2017 in spite of the article.
Almost all advisors issue a bullish forecast for any given year for a very simple reason.

Average Joe investor is more likely to buy stocks if they are thinking bullish than they are to short stocks if they get a bearish forecast.

Ergo ipso facto, more commissions for brokers and advisors if clients get a bullish forecast for any given year.

Res ipsa loquitur.

We do not sell stocks. We do not collect commissions or any compensation based on asset selection. Noli esse stultus. — Garth

#111 InvestorsFriend on 02.05.17 at 11:15 am

What is the P/E of the S&P 500

#20 Shawn on 02.04.17 at 1:08 pm asked:

What is the current forward p/e ratio for the S&P500? Few are anticipating earnings acceleration.

****************************************
The S&P 500 closed Friday at 2297.

The forward earnings according to S&P for 2017 on a GAAP basis are $120.57 for a forward P/E of 19.0 (not so terribly expensive)

On an operating earnings basis the 2017 forward earnings are forecast to be $131.11 for a forward P/E of 17.5.

So far so good…

However, on a trailing basis including Q4 (with 56% of companies having reported) the actual trailing GAAP earnings are $98.18 for a bloated P/E of 23.

On a trailing operating basis the earnings are $108.52 for a P/E of 21.

So, actually the analysts that forecast these forward earnings are expecting massive increases of 23% on a GAAP basis and 21% on an operating basis. The problem is that these forward earnings have a history of failing to materialise.

In any case them’s the numbers.

All the earnings numbers above are from S&P (the published spreadsheet that Howard Silverblatt has maintained for years)

#112 conan on 02.05.17 at 11:29 am

More on Fukushima here:

https://www.japantoday.com/category/national/view/record-radiation-level-detected-inside-damaged-fukushima-reactor

Probably not a bad idea if you own a cat, or live on the West Coast to buy a decent one.

https://www.amazon.com/Lab-Geiger-Counters/b?ie=UTF8&node=318143011

Japan builds nice cars, but they might not know how to ask for help.

#113 NoName on 02.05.17 at 11:32 am

very of topic
post not intended to be boomer bashing, i just found it interesting

self medicating with alcohol

The types of alcoholic beverages used as self-medication were brandy (62% of subjects), other spirits (21%), wine (9%), liqueurs (7%) and beer (1%).

The most commonly mentioned conditions for which alcohol was used were cardiovascular diseases (38%) and sleep disorders (Fig. 1).

https://academic.oup.com/fampra/article/25/6/445/481283/Drinking-alcohol-for-medicinal-purposes-by-people

—-

and this

https://www.wsj.com/articles/aging-baby-boomers-bring-drug-habits-into-middle-age-1426469057

—–

and robots

The Changying Precision Technology Company factory in Dongguan has automated production lines that use robotic arms to produce parts for cell phones. The factory also has automated machining equipment, autonomous transport trucks, and other automated equipment in the warehouse.

There are still people working at the factory, though. Three workers check and monitor each production line and there are other employees who monitor a computer control system. Previously, there were 650 employees at the factory. With the new robots, there’s now only 60. Luo Weiqiang, general manager of the company, told the People’s Daily that the number of employees could drop to 20 in the future.

http://www.techrepublic.com/article/chinese-factory-replaces-90-of-humans-with-robots-production-soars/

#114 NoName on 02.05.17 at 11:33 am

forgot to add this link

https://www.wsj.com/articles/aging-baby-boomers-bring-drug-habits-into-middle-age-1426469057

#115 Euro observer on 02.05.17 at 11:50 am

#103 When Will They Raise Rates?

Precisely because of that CAD is doomed. Just look at the head of BOC.

This guy is deciding on the cost of our money. Seriously?

And you will see the writing on the wall for the CAD. The guy is delusional, he still thinks he is managing the Canada export agency.

Pity for the people on fixed income and the retirees. I am hearing Vaseline is becoming expensive and is not covered by the public drug plans (not that there are any in our ‘G7’ country.

#116 Euro observer on 02.05.17 at 12:07 pm

The idea that this idiot is determining the future of our kids is an insult to any intelligence, even the brain frozen one.

http://www.theglobeandmail.com/report-on-business/economy/canadas-service-sector-leading-way-to-economic-recovery-poloz-says/article33083285/comments/

#117 ummmmm on 02.05.17 at 12:16 pm

DELETED

#118 Wack on 02.05.17 at 12:20 pm

Nice to hear someone say stocks may be over priced, not just RE!
Happy that yvr settled down some, crazy price increases not good for anyone’s kids!
Wouldn’t be sad if prices dropped to 2015 levels
Not sad for greedy house flippers that lose money in the mean time
Regular people that buy houses simply need a place to live and renting instead is a simplistic option that doesn’t
Work long term in the majority of cases.

#119 For those about to flop... on 02.05.17 at 12:22 pm

Regarding that development in Richmond,if you scroll down the listings that I put at post 94 it shows you there are actually 7 units that the owners are in various stages of distress.

One owner actually tried to undercut the other owners of comparables by quite a lot and still no sale.

Some of the units as I discussed were bought and relisted with identical dollar amounts and are represented by the same realtors do relisted on the same day,which begs the question.

Did the realtor simply buy these units herself and wait for some appreciation and then when she realized the song had changed try to get her money back?

On another note WULLY yes I am the first to admit my spelling and grammar are not good enough for the scholars on this blog.

One thing I noticed was that having lived in Australia, then Britain and now North America, instead of getting better,I have gotten worse as I get confused with the three variations of the dialect.

As far as further or farther go ,I was purhaps influenced by a conversation I recently had with Garth.

He said ” Flop, I am your farther”

At least that’s what I heard,it would have been easier to understand him if had just taken the bloody mask off…

M42BC

#120 Euro observer on 02.05.17 at 12:41 pm

laughing my behind off:

https://ca.finance.yahoo.com/news/canadian-pension-plan-managers-try-150003624.html

Folks, they ‘found’ the reason why you won’t get your pensions as planned, it is not the boss of BOC and his idiotic policies, but it is global warming.

Testing how brain frozen the populace is. Hey, it might just work this time..

#121 InvestorsFriend on 02.05.17 at 1:54 pm

Some are sure the Canadian dollar is “doomed”

For those so sure of this try to place your bets according.

If really brave short the Canadian dollar on currency futures.

If sure but not stupid enough to bet in the currency markets then buy U.S. stocks.

Who has the low Canadian dollar harmed?

Snowbirds? So stay home. No sympathy. If you can still afford to go south, go ahead. (I did.)

For most Canadians that spend their money in Canada the lower Canadian dollar has minimal impact. Check the inflation statistics and do it by product.

The Bank of Canada’s main job is to control CPI inflation. At that, they have an outstanding record for the past 20 years or so. Certainly compared to the 20 years before that. Only those with “alternative facts” can argue differently.

#122 paul w on 02.05.17 at 1:54 pm

Great stuff, Ryan.
Presenting the two sides of the coin, that’s what makes a great presentation.
——————————————————————–
Amen !

#123 maxx on 02.05.17 at 2:04 pm

“While we concede that Fed actions surely helped to stabilize the economy and boost share prices, we believe it is not the ONLY factor, as corporate profits (the most important fundamental driver of stock prices) have more than doubled since the 2009 lows. So in our opinion it has been a mix of central bank activity and improving fundamentals that helped to drive the US equity markets to new all-time highs.”

Interesting post Ryan.
As opposed to sales profits, any idea of roughly what proportion of total corporate profit since the GFC is comprised of continued job cuts? Operational cuts? QE? Consumer debt?

Corps. are running leaner and meaner than ever and running more efficient platforms is the new reality, but when they’ve shed human ballast to the max (robotics and enhanced automation) is my guess as to when this bull market ends its current cycle.

We need a demographic that has the pockets (not debt) to buy stuff and services.

#124 The Wet Coast on 02.05.17 at 2:10 pm

I don’t think the Chinese impact on real estate has been limited to Vancouver. Everywhere in the world it is being reported that Chinese buyers are walking away from deposits, as they cannot get money out. This is an interesting article on the impact Chinese capital controls may have on New York real estate, and the impact Trump could have on them. If the Chinese don’t get creative getting money out, we have our real estate black swan event.
http://realmoney.thestreet.com/articles/01/27/2017/trumps-stance-china-could-crash-new-york-real-estate

#125 Tony on 02.05.17 at 2:32 pm

Re: #121 InvestorsFriend on 02.05.17 at 1:54 pm

If Trump brings in tariffs (on any large country) shorting the Canadian dollar will be like stealing money. The U.S. dollar looks poised to move from 99 and change to the 140 level.

#126 Kool Aid on 02.05.17 at 3:50 pm

Where are we in the economic cycle?

How do you determine asset and sector long term value in an expanding fiat universe?

Why have zero rate interest or negative rate interest policies emerged recently for the first time ever?

What policies will be enacted in response to diluted labour as technology advances and displaces legacy workflows?

How will a globalized economic system cope with renewed protectionism and decentralization in a dynamic geo-political landscape?

2017 will be full of surprises, mean reversion probility is growing.

#127 first! on 02.05.17 at 4:28 pm

Hey if everybody taxes those undesirable foreigners or even out-of-towners, we’ll all be safe. Go get them cowboys!

#128 maxx on 02.05.17 at 9:01 pm

#48 Al on 02.04.17 at 4:18 pm

“Re: #1; The BC Assessment website is a 100 times better than what we get from the MPAC (Ontario Assessment) website. Amazing how one jurisdiction welcomes homeowners to access as much data as they need to ensure accurate property tax assessment values whereas another jurisdiction in the same country hides as much as they can to prevent challenges of their assessed values!”

Precisely the same experience we had with that sorry bunch after seeing a 37% evaluation increase yoy. Imperious, stonewalling, moneygrubbing twits.
Must be run with the same software as lousy energy floggers and federal loonie-bird pay systems.
Ontariariarioooooowe……