The disconnect

RYAN  By Guest Blogger Ryan Lewenza
.

I’m not sure how I follow up Garth’s recent blog post “The implosion”, but here it goes…

The US equity markets have been rockin’ and rollin’ since the US election in November, with the S&P 500 and Nasdaq up 15% and 21.5%, respectively. While Prez Trump and his administration would like to (and have) take all the credit for these strong gains, the reality is that the rebound in corporate profits has contributed to the gains which we’ve covered in recent posts.

That said, Trump does deserve some of the credit as his pro-growth, pro-business agenda has helped to ignite “animal spirits” among investors. The expectation is that his policies will help to spur growth and inflation thus propelling financial assets higher. The problem as we see it is: 1) does the recent failure by Congress/Trump (sorry Trump but some of this is on you!) to repeal Obamacare diminish the odds that Trump will be able to advance the rest of his pro-growth agenda; and 2) some recent economic data shows a waning of “Trumpflation” resulting in a “disconnect” between the recent equity gains and the incoming economic data. The question then is, how does this “disconnect” get resolved?

US Equity Price Returns Since US Election

Source: Bloomberg, Turner Investments

Trump’s pro-growth agenda of corporate tax reform, deregulation, and infrastructure spending engendered hopes of higher economic growth and inflation. This was seen in an immediate jump in inflation expectations and bond yields. However, some of this “bloom is off the rose” as we’ve seen a deterioration in some important economic indicators.

Yes, key data like nonfarm payrolls and ISM Manufacturing data has remained robust, but we’ve seen a softening in other key economic indicators. For example, below we chart US retail sales Y/Y and CPI which have both rolled over since January. We believe this recent weakness does not dovetail with the strong equity gains seen since Trump won the election, thus making the markets vulnerable to a short-term “air pocket” should economic data continue to disappoint.

Retail Sales and Inflation Are Rolling Over

Source: Bloomberg, Turner Investments

Despite this we remain optimistic about the US economy and equity markets in H2/17 for the following reasons. First, the US economy is notoriously weak in the first quarter with a bounce back typical in the following quarters. For example, since 1985 US GDP has averaged 1.9% in Q1 versus 3.3% and 2.9% for Q2 and Q3, respectively. Second, one of my favourite economic indicators – the Citigroup Economic Surprise Index – is at a level where it typically bottoms and begins to rebound. This great indicator measures whether economic data is coming in above or below economists’ expectations.

Sorry economists, but you often exhibit a “herd mentality”, raising your economic forecasts as data comes in better than expected and vice versa. This index has dropped significantly in recent months capturing the trend of weaker economic data. But I believe economists may now have become too cautious in their outlook and we should start to see economic data coming in above expectations in the coming months. If correct, this positive economic momentum should support stocks in the second half and is why we see more upside in this bull market.

US Citigroup Surprise Index Is About To “Hook Up”

Source: Bloomberg, Turner Investments

Trump or no Trump, we see the US economy continuing to improve. But if the recent equity gains have in part been driven by optimism over Trump’s policies then it makes sense that we could see some unwinding of this if there is a delay in passing his pro-growth policies. Putting my own personal views of Trump aside, I want him to succeed and get some of his key polices passed so that the US economy can get out of second gear and back above 3%+ GDP growth.

I think JP Morgan CEO Jamie Dimon said it perfectly in a recent quarterly earnings call:

“Since the Great Recession, which is now 8 years old, we’ve been growing at 1.5 to 2 percent in spite of stupidity and political gridlock, because the American business sector is powerful and strong. I don’t buy the argument that we’re relegated to this forever. We’re not. If this administration can make breakthroughs in taxes and infrastructure, regulatory reform —we have become one of the most bureaucratic, confusing, litigious societies on the planet. It’s almost an embarrassment being an American citizen traveling around the world and listening to the stupid s— we have to deal with in this country. And at one point we all have to get our act together or we won’t do what we’re supposed to [do] for the average Americans.”

So President Trump listen to Jamie Dimon’s message, put down your phone and stop tweeting, and instead focus on your agenda, since there’s some good stuff there. If not, this apparent “disconnect” between the strong equity gains and waning economic momentum will get resolved and likely to the downside.

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.

117 comments ↓

#1 Fake News Again on 07.22.17 at 4:00 pm

For all you “don’t be against America” people:

https://www.youtube.com/watch?v=4n1dnk7jMeo

Chris Hedges…..

#2 Ace Goodheart on 07.22.17 at 4:02 pm

RE: “1) does the recent failure by Congress/Trump (sorry Trump but some of this is on you!) to repeal Obamacare diminish the odds that Trump will be able to advance the rest of his pro-growth agenda”

No it likely means that low income Americans, the sick, the elderly and the disabled, will still have health care.

The final result is of course due to the three female Republican Senators refusing to simply repeal Obamacare without a replacement (which would have meant that anyone who could not either afford an expensive private health care plan – $10,000 to $15,000 per year – or who did not have one through their employment – would no longer be able to see a doctor or have a necessary operation).

As it is, Americans now for the most part still have some form of health insurance.

It is still very odd for me to imagine that anyone would think that removing the ability of 1/3 of a country’s population to see a doctor when they are sick, would in some way inspire economic growth or make society better.

I remember going down to Florida when I was in my 20s and visiting Disney Land. I got to talking to some of the employees down there about how Canada’s taxes are much higher than the taxes that they pay. These people argued with me, and eventually convinced me that I was wrong.

They said sure, income taxes are higher, but we are all paying $10,000 per year for health insurance, if we can afford it, and that is a tax too. You guys just pay your taxes, and your health care is free.

They were right…….

#3 For those about to flop... on 07.22.17 at 4:03 pm

Hey InfLewenza, I will help pump your numbers up the kiddies like these ones.

CONFIRMED PINK SNOW

I was told that these guys got back what they paid for it and so I was surprised that they took such a loss and so it proves it ain’t over til the fat realtor sings.

The details…

Paid 1.9 April 2016

Sold 1.75 April 2017

Roughly 8% loss and 13% after expenses…

M43BC

955 Forest Hills Drive, North Vancouver

Nov 7:$2,199,000
Feb 9: $1,999,000
Change: – 200000.00 -9%

https://www.zolo.ca/index.php?sarea=955%20Forest%20Hills%20Drive,%20North%20Vancouver&filter=1

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

#4 kabloona on 07.22.17 at 4:07 pm

Wow, what a bunch of self-serving nonsense….

How was Trumpy’s “reverse Robin Hood” agenda ever gonna be “pro-growth”….?

Steal (health care) from the poor and give (tax cuts) to the rich…?

Yeah, that’ll work….maybe for your clients, Ryan.

;-)

Better to give money to the working class and the poor….

Because they SPEND it….

That’s what reflates an economy – not tax cuts for Ivanka, Jared, Don Junior and Paris Hilton.

#5 Ace Goodheart on 07.22.17 at 4:10 pm

Oh and if peeps think that only sick people need doctors, remember it costs around $150,000 to have a baby in the USA, from the time you start seeing doctors until the delivery date. More if there is a C-Section or other complications.

#6 Former Fool on 07.22.17 at 4:15 pm

Thanks again for the post Ryan. I enjoy reading your views.

I am wondering if you follow Danielle Park? She is the President of Venable Park Investment Counsel Inc. and is regularly interviewed on This Week in Money. As a CFA and LLB, I’d say she has some solid credentials under her belt.

In a nutshell, she believes that we are due for a severe mean reversion (to the downside) in equities and real estate. The root cause for such a mean reversion is central banks who have inflated asset prices with record low interest rates, causing people to borrow to excess. I believe this is true for real estate in Canada and people will learn shortly the inverse correlation between interest rates and home prices.

However, in regards to equities, what is the risk in your mind of a severe correction in the near future, as a result of central banks starting to raise interest rates and scaling back on propping up of equity prices? I’m not sure I understand all of Park’s arguments, but I think the crux of it is “we’ve had a long bull market and we are due for a mean reversion, and upcoming central bank policies are going to accelerate that”. So simply restated – what is the risk to equity markets given past and upcoming central bank policies?

Thanks in advance for your reply!

#7 Entrepreneur on 07.22.17 at 4:30 pm

At least the States are talking about correcting their universal health care, a step in the right direction. Maybe take what is popular from both sides, name it, then make the rest doable but doable for the people. Divide and conquer.

As for the disconnect that will take some time as in any big changes. Dreams and aspirations create middle class and small businesses which makes a strong nation.

Talk is on the table.

#8 TurnerNation on 07.22.17 at 4:40 pm

From the Freedom First files.
A card and a cad. A win for the lawyers.

http://nationalpost.com/news/canada/this-man-would-rather-go-to-jail-than-pay-his-ex-wife-10-million-in-epic-divorce-battle/wcm/f89ec1d9-9229-42c6-993f-a5599a8f3c3b

#9 Andrewski on 07.22.17 at 4:44 pm

The U.S. Economy will keep chugging along, at least those companies that are financially sound, so stuff your RSP’s full of whatever U.S. stocks, ETF’s or Funds that your research deems as prudent, as it’s way better than having your money languishing in a bank account earning virtually nothing.

#10 TurnerNation on 07.22.17 at 4:44 pm

Cause they is BROKE! A nasty cwash wealtors.
Now you’se can’t leave.

https://www.theglobeandmail.com/real-estate/toronto/torontos-new-housing-market-reality-non-buyers-remorse/article35732115/

House hunters in the Toronto area lamented for years that sellers had a tight grip on the market. Now that tension has eased and buyers often wield the power.

It’s hard to fathom why so few are seizing it, according to real estate agent Geoffrey Grace of ReMax Hallmark Realty Ltd.

#11 For those about to flop... on 07.22.17 at 4:48 pm

Also Ryan, I noticed you supplied your own photo.

Is this because last week I gave you a quote of $117.50 U.S plus tax , per photo used just after quoting your buddy Robax 50 cents CAD no tax and the boss of this blog a free lifetime supply as long as we are both sucking wind.

So far I have you marked down for 5 photos.

If you have to sell one of your wife’s necklaces to pay this bill I’m sure she will understand…

M43BC

#12 TurnerNation on 07.22.17 at 4:49 pm

P.s anybody spending 2million+ for a house in this pathetic city that’s not in Rosedale or Forest Hill will get their arse handed to them in the Coming Crash.
Old money always wins out. Faux Riche is gauche.

#13 Questions on 07.22.17 at 4:51 pm

I’m still bullish USA. Betting on a reduction in drama and some pragmatism for the next year or so politically.

#14 Penny Henny on 07.22.17 at 4:53 pm

Long story short- Sell in May and go away.
It worked for Toronto housing this year.

#15 saskatoon on 07.22.17 at 5:02 pm

#4 kabloona

health care is not being stolen from poor people.

poor lefties steal funds thru violent taxation to pay for themselves.

tax cuts are an effective reduction of this theft.

#16 TurnerNation on 07.22.17 at 5:03 pm

A bit more colour here. I use Reddit as a news aggregator (aggravator?) site (Handily beats CBC with its daily strategy of tension and Outrage over gender/identity/snowflakes).

Now you’se can’t leave:

https://www.reddit.com/r/toronto/comments/6ow89j/torontos_new_housing_market_reality_nonbuyers/?st=j5frd391&sh=22b0d9c1

“they bought new house with a no condition offer again under the advice of real estate agent… now they are stuck because now they cant sell the old house and bank won’t give them enough mortgage on the new house because the price they offered is not inline with the bank property assessment”

….
“I’m a real estate lawyer in Toronto and we’re seeing more and more of this exact same situation happening.”

#17 Jacques Strappe on 07.22.17 at 5:10 pm

Thank you for the afternoon bathroom reading Mr Influenza.

I have half my portfolio in US equities, and I like that I can invest in the US market without having to live there. I moved to US equities years ago when the CDN dollar was close to par, and the $CDN now seems to be swinging back. Do you ever take currency exchange into account when allocating for foreign assets? Do you guys have a particular view on that now?

Thanks.
JS

#18 For those about to flop... on 07.22.17 at 5:13 pm

In my attempt to get InfLewenza over the century mark to boost his fragile confidence i will leave this here and Ryan if you get bored you might want to put down your Earl Grey tea and take a squiz…

M43BC

“When talk is of U.S. foreign trade, the focus tends to be on China and Mexico. While those are indeed America’s #1 and #3 trading partners, the #2 usually gets left out – perhaps because our trade deficit with the Canadians relatively small ($10.9 billion in 2016), while it runs to double that with Mexico, and into the hundreds of billions with China. And yet in total volume, trade with Canada equaled $544.9 billion last year, almost $20 billion ahead of Mexico ($525.1 billion) and less than $35 billion behind China ($578.6 billion). While China takes up 15.9% of all U.S. imports and exports and Mexico 14.4%, Canada represents a solid 15%. In fact, while Canada is America’s #3 import country, it is #1 for exports: $266.8 billion in 2016, over $35 billion more than to Mexico, and more than double the amount America exports to China.”

Top Exporters to Canada (in billion)
1. Michigan – $23.7

2. Texas – $20

3. Ohio – $19.2

4. California – $16.2

5. Illinois – $15.9

6. New York – $15

7. Indiana – $11.5

8. Pennsylvania – $10

9. Tennessee – $8.7

10. Kentucky – $7.5

https://howmuch.net/articles/states-most-dependent-on-trade-with-canada

#19 Looney Baloney on 07.22.17 at 5:22 pm

Mr. G,

How come both your top advisors are dudes? Maybe you should take a cue from our ‘gender balanced’ PM’s cabinet, and either hire one of their trophy wives, or one of the Amazons giving you a back massage.

Oh and make sure they are paid the same fair wages.

#20 Ryan Lewenza on 07.22.17 at 5:30 pm

Ace Goodheart “It is still very odd for me to imagine that anyone would think that removing the ability of 1/3 of a country’s population to see a doctor when they are sick, would in some way inspire economic growth or make society better.”

I totally agree. I actually don’t want them to repeal the ACA rather fix the problems (ie lack of insurers, being to purchase plans across state lines). My point was more about what it says about Congress and Trump being unable to pass other important legislation like tax reform if they cant pass a bill to repeal a law that all Republicans dislike. It just shows further dysfunction and a complete inability to compromise to get things done. – Ryan L

#21 Raging Ranter on 07.22.17 at 5:33 pm

I’ve seen markets crash and markets boom under different presidents and sometimes do both under the same president. In every instance, people pay way too much attention to government. Those “animal spirits” have never been domesticated by any politician ever, unless you count the dictatorial regimes that haven’t just tamed them, but killed them dead. I therefore find it rather pointless that analysts spend so much time speculating on what Trump – or any other leader – is going to do. It simply isn’t worth the time. Yellen has more influence over the US (and global) economy in her sleep than Trump will ever have in his life.

#22 Mark on 07.22.17 at 5:34 pm

The US economy is historically leveraged heavily to consumer consumption and to falling long-term interest rates. Both of which acted as an extreme tailwind helping US equities outperform most other equities globally over the past 30-35 years of falling short-term and long-term interest rates.

As the rate cycle turns, which it inevitably will, the US economy will likely underperform. The rest of the world, especially the nations that have run trade surpluses with the United States, will probably outperform.

I am wondering if you follow Danielle Park? She is the President of Venable Park Investment Counsel Inc. and is regularly interviewed on This Week in Money. As a CFA and LLB, I’d say she has some solid credentials under her belt.

I enjoy listening to Ms. Park on the TalkDigitalNetwork interviews. The problem I have with her is that she’s awfully generic, and does not differentiate between, say, Canadian equities and US equities. The Canadian market, for instance, trades at a significantly lower CAPE P/E multiple and hasn’t grown in nearly a decade. The US indices, in contrast, are far more bubbly. But Ms. Park generically throws out there that “equities are overvalued” (paraphrasing), which may cause a Canadian listener to think that their TSX-heavy portfolio (maybe some XIU, for instance) is vulnerable to a market correction to the same extent that a US portfolio would be.

Of course, listening to commenters on radio shows is no substitute for situation-specific professional advice, but she also has been, it seems, a strong advocate for higher bond allocations in portfolios, which is yet another problem that Canadian investors suffer (over-allocation to fixed income).

#23 Ryan Lewenza on 07.22.17 at 5:36 pm

Kabloona “Wow, what a bunch of self-serving nonsense….
How was Trumpy’s “reverse Robin Hood” agenda ever gonna be “pro-growth”….? Steal (health care) from the poor and give (tax cuts) to the rich…?

See my earlier comment. I don’t want the ACA to be repealed. It’s more about the message it sends to voters that Trump can’t deliver on his stated promises. But I do agree with lowering US corporate tax rates since they are too high. – Ryan L

#24 BobC on 07.22.17 at 5:51 pm

#2 ACE

Nobody went without seeing a doctor and died in the streets before Obamacare. Hospital ER’s were required by law to treat anybody that came through the door.
Companies had group insurance plans that were affordable. As illegals flooded in and unemployment rose more and more got free medical care through ER’s and government welfare Medicaid. As medical cost rose it was passed on to companies with higher policy rates. Soon it really started to effect the companies payroll budgets which included benefits.
So the big companies grabbed their checkbook and went off to Washington.
They came up with Obamacare. Now the middle class picks up the tab and cannot afford medical care. For example my ex-wife pays $385.00 a month here in low cost Indiana with a $6500.00 deductible. If she gets a bad cold or flu it cost her $285.00 to see a doctor. She pays 100% of all cost until it adds up to $6500.00 in a calendar year. The $385.00 a month is to pay for other people’s insurance. Nothing changed for the free $hit people and nothing would change if they repealed Obamacare.
Now instead of companies picking up the tab and spreading the cost the working poor must by law pick up the tab.
I forget the % nationwide but 72% of births in New Mexico was paid for by taxpayers. Think of the millions of illegals coming here, invited with open arms so they can give birth for free who then become natural born citizens.

#25 Penny Henny on 07.22.17 at 5:51 pm

Another reason some want Trump gone-“President Trump, according to numerous reliable Washington sources, has decided to end US arms supplies and logistics support to Syria’s jihadist rebels that have fuelled the bloody six-year conflict.”

https://ericmargolis.com/2017/07/trump-end-the-syria-war-now/

#26 BS on 07.22.17 at 6:19 pm

Former Fool on 07.22.17 at 4:15 pm

I am wondering if you follow Danielle Park? She is the President of Venable Park Investment Counsel Inc. and is regularly interviewed on This Week in Money. As a CFA and LLB, I’d say she has some solid credentials under her belt.

In a nutshell, she believes that we are due for a severe mean reversion (to the downside) in equities

Danielle Park has been calling for a severe mean reversion in equities since 2010 and has recommended to have nothing in equities while the S&P 500 has tripled. Once an adviser takes the doomer position there is no turning back. It is not like she could come out today and recommend to her clients now is the time to buy equities after sitting out of the bull market for 7 years. She pretty much has to stick with the crash is just around the corner until it happens.

#27 Anon on 07.22.17 at 6:23 pm

#24 BobC, you seem to have some really swell opinions. I would love to hear what you think about the negro.

Seig heil buddy
A

#28 For those about to flop... on 07.22.17 at 6:29 pm

This thread is showing signs of life.

Get the paddles…

M43BC

“Is America’s Economy Headed for a Great Car Crash?
Back in 2007, so many Americans defaulted on their mortgages that it plunged the world into the Great Recession. Ten years later, we could be looking at a repeat of that crisis – only this time it’s with car loans. Six million Americans are in immediate danger of having their car repossessed. And that may just be the tip of the iceberg.

Around 6 million Americans are currently 90 days or more behind on their car payments – the period of time after which they are in danger of having their vehicle repossessed. For many working-class Americans on the brink, losing their car can be the beginning of a precipitous drop into poverty. The car is often indispensable to get to work. Without a car, they also lose their work. The repossession earns them a bad mark on their credit report, which will make it harder for them to get other loans, or even to find affordable housing.”

https://howmuch.net/articles/americas-car-debt-boom

#29 BobC on 07.22.17 at 6:56 pm

#27 Anon
Your comment totally confuses me. What are you saying?

#30 BobC on 07.22.17 at 7:06 pm

#27 Anon
Never mind I get it. If I could edit my comment I would replace the word illegal with undocumented. Then we would be cool right?

#31 For those about to flop... on 07.22.17 at 7:15 pm

In the upcoming shark week extravaganza Michael Phelps is going to race a shark in what they have dubbed the GOAT (Greatest Of All Time) versus the G.W.S ( Great White Shark).

This is clearly not an even contest ,and so after Shark Week is over I am proposing Phelps race Donald Trump driving beside a pool in a golf cart.

As fair a contest as you will see.

G.o.a.t versus Goat…

M43BC

#32 Mark on 07.22.17 at 7:32 pm

“For many working-class Americans on the brink, losing their car can be the beginning of a precipitous drop into poverty.”

Or maybe the car is partially the cause of poverty. I personally believe, as a rule, people don’t properly estimate the costs of owning and running a car (witness all the people driving for Uber!). Even amongst the people I know, they think they’re getting such a good deal when their employer pays them 50 cents a km or whatever, but when they consider all of the costs of owning the vehicle (including capital costs at a reasonable IRR), in many cases that 50 cents employer reimbursement is less than their all-in per km cost.

If someone is owning/maintaining a car, and they can’t afford to keep the car, then perhaps they need to rationalize the kind of job they’re doing, or the inputs to their job. I think its a more honourable proposition to admit that working isn’t making you money, net of expenses, and not work (ie: go on welfare, or change your work so you have more reasonable input costs). Than to work and go broke trying to work, destroying your personal wealth.

As for 6 million vehicles, the vendors or the financiers don’t want them back, and most likely won’t take them back. I’d be surprised if a non-trivial number of them actually were repossessed. However, the impact systemically on the vehicle financing market from that many defaults with minimal recoveries likely will have significant contagion on the rest of the auto finance sector, and the auto producers themselves. More deflation ahead for the sector, in other words!

#33 Willy H on 07.22.17 at 7:37 pm

“Since the Great Recession, which is now 8 years old, we’ve been growing at 1.5 to 2 percent …. And at one point we all have to get our act together or we won’t do what we’re supposed to [do] for the average Americans.”

CEO, Jamie Dimon
___ ___ ___ ___ ___ ___ ___

A bit rich coming from a Wall Street scammer who wants to roll back Sarbanes-Oxley*. Yes, the same banksters fraudsters that ran Moodys, S&P, and Fitch enabling Wall Street to peddle billions in almost worthless mortgage-backed paper (with triple A ratings) to some of the worlds most powerful banks and financial institutions. Why? So, they could make as much money as possible for their 2%’er clientele. They sold just enough of this worthless paper to almost take down the world economy during the 2008 World Financial Crisis. Taking advice from Jamie Dimon on how to run the worlds most powerful economy is like asking a wolf how to better run the hen house!

*Corporate Governance regulations that came into existence after the Enron debacle.

#34 For those about to flop... on 07.22.17 at 7:39 pm

#32 Mark on 07.22.17 at 7:32 pm
“For many working-class Americans on the brink, losing their car can be the beginning of a precipitous drop into poverty.”

Or maybe the car is partially the cause of poverty. I personally believe, as a rule, people don’t properly estimate the costs of owning and running a car (witness all the people driving for Uber!). Even amongst the people I know, they think they’re getting such a good deal when their employer pays them 50 cents a km or whatever, but when they consider all of the costs of owning the vehicle (including capital costs at a reasonable IRR), in many cases that 50 cents employer reimbursement is less than their all-in per km cost.

If someone is owning/maintaining a car, and they can’t afford to keep the car, then perhaps they need to rationalize the kind of job they’re doing, or the inputs to their job. I think its a more honourable proposition to admit that working isn’t making you money, net of expenses, and not work (ie: go on welfare, or change your work so you have more reasonable input costs). Than to work and go broke trying to work, destroying your personal wealth.

As for 6 million vehicles, the vendors or the financiers don’t want them back, and most likely won’t take them back. I’d be surprised if a non-trivial number of them actually were repossessed. However, the impact systemically on the vehicle financing market from that many defaults with minimal recoveries likely will have significant contagion on the rest of the auto finance sector, and the auto producers themselves. More deflation ahead for the sector, in other words!

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

It’s got to more than a coincidence that I start talking about goats and then you pipe up…

M43BC

#35 Raging Ranter on 07.22.17 at 7:45 pm

@#30 BobC, ignore Anon. He’s calling you a racist and a Nazi because you told some truths that are counter to his SJW mindset. He probably studies in some liberal arts program at university (or he used to) and he’s one of those gullible half-wits who believed every word his professor told him. You know the type. Can’t think for himself, but he sure does know that everyone who disagrees with the SJW position is a racist. He knows this deep in his heart. Being on the side of virtue means he never has to think through his opinions or explain them.

#36 Ryan Lewenza on 07.22.17 at 7:48 pm

Former Fool “However, in regards to equities, what is the risk in your mind of a severe correction in the near future, as a result of central banks starting to raise interest rates and scaling back on propping up of equity prices?”

Yes I know Danielle Park. I once produced a TV show for Patricia Lovett-Reid and I booked Danielle for a spot. She’s one smart cookie. There’s no doubt this bull market is getting old, and a 9x VIX is a bit worrying. But we invest based on long-term trends and both fundamental (eg earnings) and technicals remain demonstrably bullish. Once this changes we will change our tune. – Ryan L

#37 For those about to flop... on 07.22.17 at 8:01 pm

#175 An Old Bird on 07.22.17 at 6:42 pm
Flop…

Your two items on Hollybridge sold at the new listing prices of $578,000 and $569,000 within about three days after having been terminated at $689,000 earlier in the year…so your percentages hold.

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

Thanks for doing this Old Bird.

Greatly appreciated.

The market will do what it’s gonna do ,but there is no reason that we can’t show people what is happening in real time.

People have been asking me about losses on condos and so here are some results.

They were both purchased for 593k in late 2014 and the best part of three years later they take the loss because the pre-sale number was too high for the markets liking.

The assessments despite being explosive for most owners never did catch up.

4 units in this complex have now taken losses and there is another two stages.

Old Bird if your numbers hold it is roughly a 9% loss after expenses for one and 7.5% give or take for the other,plus the money was tied up for a fair while.

I will show this in a few months when it becomes CONFIRMED PINK SNOW…

M43BC

#38 Ole Doberman on 07.22.17 at 8:05 pm

Lewenza is forgetting something important in this equity rally – as rates rise capital flows are coming out of bonds and going into equities.

Bond market is 25 times the size of the stock market – imagine the impact, see ya folks are 40,000K DOW…..Trump or no Trump!

#39 espressobob on 07.22.17 at 8:06 pm

Passive global index investors don’t bother with market timing. Rebalancing helps to keep one from being too concentrated in any particular asset class.

Mr. market is impossible to predict. Corrections provide opportunities. Works every time.

#40 For those about to flop... on 07.22.17 at 8:11 pm

These are the two cases Old Bird just helped me with…

M43BC

5001-5511 Hollybridge Way ,Richmond SOLD at ask.

Dec 18:$689,000
Jul 10: $578,000
Change: – 111000.00 -16%

5003-5511 Hollybridge Way, Richmond SOLD at ask.

Dec 18:$689,000
Jul 10: $569,000
Change: – 120000.00 -17%

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==

#41 Danny on 07.22.17 at 8:28 pm

Ryan
One of your best blogs.
But…saying “Sorry ” to Trump?
Save your sorry for the many investors and contractors who were fooled by this snake oil salesman and lost millions, How about those investors in Trump Tower in. Toronto….those who invested in his fake University…for those millions in America who are seriously ill many from goal dust and relying daily on Obama care especially the poor…because of losing their jobs because they got sick from work and will not afford the medicine once Obama Care is gone.
Trump is asking for permission to hire foreigners for his American businesses….while talking like a “tough Guy “….about hiring Americans…but not him.
Hold off your “sorry ” for Canadian workers after the new NAFTA….
Stay tuned…..maybe the Republican Party will act on fairness….definitely not Trump.
Looking forward to your thoughts then….October?

#42 MSM-Free Zone on 07.22.17 at 8:49 pm

“…..and at one point we all have to get our act together or we won’t do what we’re supposed to [do] for the average Americans….” – JP Morgan CEO Jamie Dimon
___________________________________

Quoting a CEO from one of the many infamous U.S. financial institutions responsible for blowing up the entire financial world in 2008, wiping out the equity of millions of ‘average Americans’?

That’s rich, Ryan, really rich.

There is one, and only one reason, these home grown financial terrorists are lobbying for deregulation, and, as history has repeatedly proven, it is most definitely not in the interest of ‘average Americans’.

#43 Victor V on 07.22.17 at 9:04 pm

Collapse in Toronto home prices may pressure Ottawa to hold off tightening: Toronto home prices have plunged more than 17% since their peak in April, which analysts say should delay changes that would make it harder for consumers to borrow

http://business.financialpost.com/real-estate/collapse-in-toronto-home-prices-pressures-ottawa-to-hold-off-tightening/wcm/1bd4443b-0387-45c1-ad32-bd2edbdf3eff

#44 Victor V on 07.22.17 at 9:22 pm

http://business.financialpost.com/news/retail-marketing/fedex-office-stores-closing-in-canada-at-the-cost-of-214-jobs/wcm/90bf5cd5-6208-4818-8248-a010211b6925

TORONTO — Shipping giant FedEx is closing its FedEx Office stores in Canada after 32 years in the country.

Spokeswoman Stacey Sullivan says FedEx Office will close its 24 stores, a manufacturing plant in Markham, Ont., and its head office in Toronto.

The move will result in the loss of 214 jobs, but will not affect FedEx’s shipping business in Canada, she said, adding the decision was made after assessing current and future business prospects.

Eighteen of the stores are in Ontario, five in B.C. and one in Nova Scotia. The closings are to begin in August.

FedEx Office shops offer a range of business services including copying and printing, sign making, office supplies sales and packaging services.

#45 waiting on the westcoast on 07.22.17 at 9:46 pm

Hey Flop,

With the Hollybridge properties, do you know if there is some major structural things that need to be done on the property (ie roof, exterior seal, etc). The reason I ask is that it seems odd that the only part of the RE Van market that had life is in condos and townhouses… so you would think they would not be falling?!?

Love your posts… Especially since they are starting to validate my view that the market needs to come down! Now if Victoria can start losing steam… ;-)

#46 Tony on 07.22.17 at 9:54 pm

Re: #22 Mark on 07.22.17 at 5:34 pm

The TSX will follow the major U.S. indexes in lockstep unless the central bankers let gold and silver rise 5 or 10 fold in the next year or two. The central bankers know the volumes will continue to diminish even if they let the market drop a bit volumes will still continue to fall. The central bankers have waited far too long. I buy deep out of the money puts with the shortest duration each month knowing the bankers are watching the daily volumes shrink.

#47 Sunburned canuck on 07.22.17 at 9:54 pm

I laugh at the pundits on this block and the liberal media.
“If Trump cannot pass a health care plan, or if Trump can’t get the travel ban implemented, or infrastructure passed, he is a failure”. All this negative press about him is BS since the American deep state machine is hell bent with corruption to BLOCK any initiative in moving the country forward. The Republicans and Democrats don’t want their comfy feather nests disturbed!
All of the nauseating specter of Russian collusion, fake news and false narrative news stories are created by Americas worst enemy- Americans themselves.
(At least they don’t have Trudeau sitting in a US congressional seat)
Make no mistake, and I am serious…. the True Trump supporters are unwavering and rock solid steadfast to support the nation.
If the US folks ever saw Obama issuing a $10mm lottery check to a convicted Gitmo terrorist like Omar Khadir you would see the biggest civil riot in history.

#48 crossbordershopper on 07.22.17 at 10:05 pm

after 48 years in this hellwhole country called canada, where they rob you of your destiny and future, i have seen presidents and prime ministers come and go.
when the guy at the convenience store who works 11 hours a day 7 days a week for free milk as he saids he does you ask why you are here, i was born here, how bad could it have been that he came here. he saids, in retrospect he should never have come. in retrospect i should of left for the us at 18.

#49 Smoking Man on 07.22.17 at 10:35 pm

#48 crossbordershopper on 07.22.17 at 10:05 pm
after 48 years in this hellwhole country called canada, where they rob you of your destiny and future, i have seen presidents and prime ministers come and go.
when the guy at the convenience store who works 11 hours a day 7 days a week for free milk as he saids he does you ask why you are here, i was born here, how bad could it have been that he came here. he saids, in retrospect he should never have come. in retrospect i should of left for the us at 18.
……………………
Took me 58 Years to figure that out.

I hung the flag high, I wish I saw the hurt of the lesbionic cult, the pain of the bath house raids.

They were victims, they organized, reached parity for justice. they got it and wanted more once the feasted on the blood of victory.

Now the old white men who were not paying attention are in their same vengeful shoes.

Life is a cycle of winners and losers. Ying needs to keep yang in check.

It’s justice time again.

https://www.youtube.com/watch?v=rayCtT27Kwc

#50 For those about to flop... on 07.22.17 at 10:43 pm

#45 waiting on the westcoast on 07.22.17 at 9:46 pm
Hey Flop,

With the Hollybridge properties, do you know if there is some major structural things that need to be done on the property (ie roof, exterior seal, etc). The reason I ask is that it seems odd that the only part of the RE Van market that had life is in condos and townhouses… so you would think they would not be falling?!?

Love your posts… Especially since they are starting to validate my view that the market needs to come down! Now if Victoria can start losing steam… ;-)

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

Hey Waiting, I will try to answer your questions to the best of my ability.

Firstly these units are only a few years old and as I alluded to the person simply paid too much and had no assessment report or market support to get them out of it.

These two units, I feel confident in declaring were owned by the same person or realtor because of the sales history and listing arrangements.

As I wrote I a post yesterday or the day before you can get an extra bedroom and I think bath for not much more than theses people were asking.

From my memory this complex was called Ora and it has 3 buildings simply titled Ora 1 ,Ora2 and surprise,surprise Ora 3.The four losses are all in the Hollybridge unit but the other 2 have different street names and I intend to revisit my notes on these complexes in the winter time.

I also vaguely remember writing some notes and finding some cause for concern about the complex above the skytrain station out there.

Secondly, and this might come as a bit of a shock to a few people despite spending less time looking at them as they have gone to the next level, I have as many CONFIRMED PINK SNOW cases as I do for detached,most likely just because of sheer volume.

Also these people perhaps got off lightly as I have two cases in Richmond where they are on the hook for over 3million and last year their assessments actually went backwards when everyone else’s was on steroids.

I have seen people in trouble from the 300k price range right up until my highest case that clocks in at 15 million.

In all cities,in all price points ,you can find someone in trouble even if that segment of the market is going gangbusters or if the city itself has yet to figure out that the forces have its hands around its throat and is about to bitchslap some people because you messed up its manicure…

M43BC

#51 Adios on 07.22.17 at 10:56 pm

In reference to #48 maybe you could graduate high school in Lackawanna.

#52 acdel on 07.22.17 at 10:57 pm

Ryan, I think what you wrote is fairly decent; but why does everybody ignore the fact on how bad the U.S. economy really is. I have posted links in the past on how bad the retail sector and the record amount of retail debt and closures that are currently happening and yet nobody seems to report on that??

Trump, definitely not perfect but unfortunately he will never be given the chance on what his ideals really are.

The naysayers give it a rest already, I am not really a Trump and definitely not a Hillary (thank god) supporter. What I hope is that the U.S. congress can get by this really child behavior and do what is right; then I woke up from a pleasant idealistic dream, man, I am an idiot!!

#53 Smoking Man on 07.22.17 at 10:59 pm

#47 Sunburned canuck on 07.22.17 at 9:54 pm
I laugh at the pundits on this block and the liberal media.
“If Trump cannot pass a health care plan, or if Trump can’t get the travel ban implemented, or infrastructure passed, he is a failure”. All this negative press about him is BS since the American deep state machine is hell bent with corruption to BLOCK any initiative in moving the country forward. The Republicans and Democrats don’t want their comfy feather nests disturbed!
All of the nauseating specter of Russian collusion, fake news and false narrative news stories are created by Americas worst enemy- Americans themselves.
(At least they don’t have Trudeau sitting in a US congressional seat)
Make no mistake, and I am serious…. the True Trump supporters are unwavering and rock solid steadfast to support the nation.
If the US folks ever saw Obama issuing a $10mm lottery check to a convicted Gitmo terrorist like Omar Khadir you would see the biggest civil riot in history.
.

He was a stupid 15-year-old kid with a mental case father who had no choice but to follow, got tortured and abused at south side Cuba. But I have no problem with the right trying to exploit this to destroy Globalism.

I see the future as demonstrated in the archives. A one world show of unelected suck ups to billionaires will not end well for the tax farm slaves.

#54 InvestorsFriend on 07.22.17 at 11:08 pm

The Myth of Caital Flows from one asset class to another

#38 Ole Doberman on 07.22.17 at 8:05 pm
Lewenza is forgetting something important in this equity rally – as rates rise capital flows are coming out of bonds and going into equities.

Bond market is 25 times the size of the stock market – imagine the impact, see ya folks are 40,000K DOW…..Trump or no Trump!

******************************************
Not sure about 25 times but bonds are bigger because the typical big company is financed with bonds to roughly the same extent it is financed with equity. And governments issue only bonds and not equity.

So yes, bond market total market capitalization is bigger than equity. But not 25 times. Certain government treasuries are traded at hyper speed so trading volume may be 25 time higher but not the market value.

Now about investors as a population pulling money out of bonds and having it flow to equities. Sorry, no can do. Impossible.

An individual investor can move from bonds to equities of course. But to do so he must sell his bonds to another bond investor.

The corporations and government do not redeem bonds on request, only at maturity.

So there is no net flow from bonds to equities.

That flow myth is repeated in the financial news repeatedly and is simply a false characterization.

What it really means is investors can bid down the price of bonds as some sell and bid up the price of equities.

IF more people want to sell bonds than buy, the price must drop until demand and supply are precisely equal.

There is never a day in which bond investors as a population are net sellers since they must sell to buyers.

Industries often use jargon. Funds flow is jargon and is misleading. It can’t happen. Not in the trading market.

Traders trade with each other not the issuers. In the trading market that is. IPOs and transactions direct with the issuers are a different matter. Investors as a population can slow their bond buying at issue time and become more receptive to equity IPOs. But that is not what is meant by fund flows in the trading markets.

#55 Smoking Man on 07.22.17 at 11:16 pm

DELETED

#56 For those about to flop... on 07.22.17 at 11:19 pm

Hey Old Bird,I don’t want to work you too hard but if you find the time could you supply the icing to these recent sales or removals.

No rush, I’ll be here waiting…

M43BC

1401-38 1st Ave W Vancouver..Paid 1.32 asking 126

447 232 st.Langley paid …4.15 asking..4.88

4302-4508 Hazel st.Burnaby paid 1.38 ask 1.5

106-388 w 1st Ave Vancouver paid 728 ask 759

275 Rabbit Lane West Vancouver paid 1.9

4368 Cambridge st. Burnaby paid 1.41 ask 1.49

6291 Bellflower Dr. Richmond paid 2.2

4405 Sophia st. Vancouver paid2.23

5688 Sussex Ave Burnaby paid 1.96 ask 1.68

1607 Balmoral Ave. Coquitlam paid 1.3 ask 1.39

4468 Blair Dr Richmond paid 1.15 ask 998

26290 126 Ave. Maple Ridge paid 2 ask 2.26

4655 Mahood Dr Richmond paid 2.04 ask 1.88

1470 Camelot Rd. West Vancouver paid 4.6 ask 4.99

4250 Chelsea Cres. North Vancouver paid 3.15 ask3.23

#57 Smoking Man on 07.22.17 at 11:30 pm

If you worship a Hollywood monkey might as well get a revolver with a hollow point bullet, aim it at your head, pull the trigger. No damage will be done, cause nothing is in there, to begin with.

The machine has every corner covered. they have limitless resources.

And a wild dog to deal with, that would be me.

If they say I killed myself. you know it’s bull shit.

My wife’s toes are constantly itchy, I would never let her down.

#58 A Reply to #47 Sunburned canuck on 07.22.17 at 11:30 pm

“the [t]rue Trump supporters are unwavering and rock solid steadfast to support the nation….”

Facts and evidence are ignored or dismissed, and critical thinking skills are nonexistent.

#59 gumby on 07.22.17 at 11:36 pm

trump is best thing ever in usa only a loser would talk shit

Sigh. — Garth

#60 ANON on 07.22.17 at 11:58 pm

When in disconnect, always try digging deeper. The problem is most likely there. :)

#61 Oft deleted and much maligned bur successful stock picker on 07.23.17 at 12:18 am

I don’t understand why Trump hasn’t yet fired every Obama era civil servant and replaced them with patriots. I believe this will come in spite of his initial attempts to negotiate a peace with the far left. There is obviously no national interest in the Democratic Party community and Trump should concede this point and drain the swamp.

I repeat……don’t single out a leftist org like Bloomberg as a unbiased source of critical thinking. Bloomberg is a good information provider but they do so in such a far left spin that most editorial is generally gobbledegook sentiment rather that objective……take their charts…yes…..take their opinion at face value …no. Bloomberg is a politically motivated plank in the globalist juggernaut. As an investor you need to remain clear headed. I mute the commentary and the talking heads resemble Disney characters while I spin through the scrolling statistics.

#62 ulsterman on 07.23.17 at 12:24 am

ACE Goodheart: Your numbers for an American birth just seemed to high ($150,000 – how would 95% of Americans have kids?) so i did a bit of googling and from the BBC in 2015:

Natural delivery US$9k / Caesarean $15k

Total cost including pre and post delivery is:

“But the $30,000 (£20,000) invoice that I was so afraid of is what an American woman gets billed on average for giving birth naturally. The total bill for a Caesarean section, meanwhile, tops $50,000, according to Truven Health Analytics.”

http://www.bbc.com/news/business-31052665

#63 ulsterman on 07.23.17 at 12:27 am

What i simply don’t get about the Trump administration is that they plow ahead with proposed legislation that everyone else knows won’t pass – why bother? I thought Trump considered himself the big deal maker?

#64 Something afoot in YVR RE? on 07.23.17 at 12:55 am

‘Been reading Flops posts about major YVR RE price reductions and decided to visit My Realty Check to see if anything has changed in list prices.

Many more list price changes, 45% more than the usual amount (typically about 1000 price changes):

Total of 1452 list price changes.
1020 down
432 up

Net $ value of list price changes: -$106,062,858.
Average Change Amount: -$73,046.

That’s a lot of wealth lost in homes there, a lot. About 12,800 homes for sale in Greater Vancouver (per Zolo.ca).

Average list price changes vary from -$202,000 for Vancouver to -$31,000 for Langley. Surrey the only positive at +$1,700.

Maybe just a temporary blip, who knows?

Suffice to say, not good.

#65 And we complain about foreign investment on 07.23.17 at 1:33 am

How much of this heloc?

http://www.cbc.ca/amp/1.4216906

#66 Sydneysider on 07.23.17 at 2:31 am

#3 etc. Flop

I tell my daughters to steer clear of people who gaily mispronounce Polish names. It is a sure sign of a simpleton. If in doubt, ask.

#67 Smoking Man on 07.23.17 at 7:28 am

Watch “The Rise of Robots and the Coming Demographic Crisis | David Rosenberg” on YouTube

https://youtu.be/YCy-2LNPvOY

#68 Wrk.dover on 07.23.17 at 7:52 am

Fed Ex storefront closure comically predictable!

They ship stuff in to Canada from E-Bay and so on. Not much going the other way, so close the storefront. We don’t need to sell you a stinking cardboard box.

I tried to arrange a pickup from which courier I can’t remember, but it didn’t happen because I did not have an account! How to not win new customers! They deliver to an address with out an account, but do not pickup with out an account, where money awaits.

One of the couriers that comes to my door doesn’t take credit cards for their added on fees to overseas deliveries. In 2017!

My favourite shipping business model is RockAuto’s, they truck from the USA to Ontario, then use mail for the rest of the journey. I can get two heavy car coil springs shipped from Texas to NS for $15, which is less than I can send the empty box to the next nearest post office for.

The sucking sound of NAFTA.

#69 Howard on 07.23.17 at 8:22 am

#27 Anon on 07.22.17 at 6:23 pm
#24 BobC, you seem to have some really swell opinions. I would love to hear what you think about the negro.

Seig heil buddy
A

———————————

Opposing illegal immigration is tantamount to Nazism now?

Are you sure you’re in the right place? Did you mistake this site for a forum populated by 1st-year York U sociology student wannabe SJWs?

#70 A Reply to #66 Sydneysider on 07.23.17 at 8:28 am

“I tell my daughters to steer clear of people who gaily mispronounce Polish names. It is a sure sign of a simpleton.”

Yowza! Booyah! Bingo! ;)

#71 The Lewler on 07.23.17 at 8:41 am

We’ve all beat this horse to death.

I don’t like socialized medicine because by running your medical care through a tax funded system, you surrender your independent rights and choice over your care.

If you don’t control the dollars, you dont control your health care, it’s that simple. Someone else can say , no, you can’t have that treatment , or you have to wait for that treatment.

We haven’t even discussed the immorality of the suggestion that you have a right to health care. Who provides health care? Doctors/nurses etc.

Do you have an absolute right to their labour? No. No you don’t.

#72 A Reply to #61 stock picker on 07.23.17 at 9:11 am

“I don’t understand why Trump hasn’t yet fired every Obama era civil servant and replaced them with patriots.”

Trump is at best an unwitting agent of the Russian government.
https://en.m.wikipedia.org/wiki/Agent_handling

The Senate voted in an overwhelming majority to sign into law new sanctions on Russia, undermining Donald Trump’s ability to lift them and signalling that Republicans and Democrats are putting “politics aside”.
http://www.independent.co.uk/news/world/americas/us-politics/russia-sanctions-us-senate-vote-trump-power-lift-a7792501.html

It’ll be interesting to see if Trump vetoes the bill! I’d bet even money that he does!

The Senate

#73 For those about to flop... on 07.23.17 at 9:26 am

Sydneysider on 07.23.17 at 2:31 am
#3 etc. Flop

I tell my daughters to steer clear of people who gaily mispronounce Polish names. It is a sure sign of a simpleton. If in doubt, ask.

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

You think I can’t pronounce Ryan Lewenza’s name?

This is Greaterfool ,where we all have weird and wonderful nicknames and have a laugh as we learn.

As long as you also told your daughters that your a dickhead I think we’re good…

M43BC

#74 Ryan Lewenza on 07.23.17 at 9:27 am

Jacques Strappe “Thank you for the afternoon bathroom reading Mr Influenza. Do you ever take currency exchange into account when allocating for foreign assets? Do you guys have a particular view on that now?”

I’m happy I could contribute to your Saturday. Yes we do take F/X into account when constructing portfolios and making investment changes. Currently we think the CAD is short-term overbought and should pullback following it’s recent rally. The USD looks oversold against most currencies right now. So we see a bounce coming for the US dollar index. But longer term I think the top might be in for the USD. Historically when the Fed begins to tighten policy that has usually resulted in a top for the USD, contrary to what most people think should happen when the Fed begins to hike rates. This is something were watching closely in client portfolios. – Ryan L

#75 Ryan Lewenza on 07.23.17 at 9:31 am

Ole Doberman “Lewenza is forgetting something important in this equity rally – as rates rise capital flows are coming out of bonds and going into equities. Bond market is 25 times the size of the stock market – imagine the impact, see ya folks are 40,000K DOW”

Yes but up to a point. Once bond yields get to such an attractive level (say 5%) then bonds start to look attractive again which then leads to investors redirecting capital away from stocks (which are generally expensive at this time) back to bonds which are providing this higher juicy yields. This is the beautiful dance between these two asset classes. – Ryan L

#76 Asterix1 on 07.23.17 at 9:53 am

#43 Victor V on 07.22.17 at 9:04 pm
Collapse in Toronto home prices may pressure Ottawa to hold off tightening: Toronto home prices have plunged more than 17% since their peak in April, which analysts say should delay changes that would make it harder for consumers to borrow

http://business.financialpost.com/real-estate/collapse-in-toronto-home-prices-pressures-ottawa-to-hold-off-tightening/wcm/1bd4443b-0387-45c1-ad32-bd2edbdf3eff
____________________________________________

It’s a terrible article, once again using garbage quotes from extremely biased players.

*Shawn Zigelstein, a Royal LePage Real Estate Services representative.
* Robert Hogue, senior economist with Royal Bank of Canada

This will not change the gov’t policy stance! The rest of Canada (apart of Vancouver/area) will not see falling prices, just the bubble areas.

Average GTA price will probably end up in the 560,000$ range in less than 1 year. A 40% drop from highs.

This will unfold very quickly!

#77 SW on 07.23.17 at 9:53 am

Interesting post, Mr. L. We do live in interesting times!

One reason interest rates have to be pushed up is to give the central banks scope to lower rates when the next recession arrives. If some players in the economy can’t take it (consumers and home-owners strung-out on debt) that’s just an unfortunate by-product of bad judgement.

Mark Thoma on the subject:
http://www.thefiscaltimes.com/Columns/2017/07/17/Here-s-Why-We-re-Not-Prepared-Next-Recession

I’m not sure I buy his reading of the graph – a bit obscure – but it is worth a read.

#78 Dups on 07.23.17 at 10:09 am

Good post. How is Canada going to fair on the H2 of 2017? How about CAD vs USD in the second half?

#79 Doug in London on 07.23.17 at 10:10 am

@crossbordershopper, post #48:
Well then pack up and leave Canada. While years ago I would have considered going elsewhere (most likely the USA) if I got a good job offer there, I’ve done quite well by staying here. Personally I think I won the lottery by being born here in Canada.

#80 Ret on 07.23.17 at 10:29 am

The obsession on this blog with Trump continues. This pleases progressives greatly.

He is leader of the largest global economy. Figure it out. — Garth

#81 NoName on 07.23.17 at 10:39 am

#28 For those about to flop… on 07.22.17 at 6:29 pm

The car is often indispensable to get to work. Without a car, they also lose their work. The repossession earns them a bad mark on their credit report, which will make it harder for them to get other loans, or even to find affordable housing.

—-

few yrs back i stumble across blog post that “talks” about importance of car for “low earners” and how one mishap with car with will turn someones form manageable bad to very bad…

i cant remember exactly what went wrong with duds car but basically over few months few relatively inexpensive repairs brought guys on it knees. He managed with no car for few months until winter came and with first snow everything started going down hill.

#82 NoName on 07.23.17 at 11:09 am

Self driving car/truck

As soon as self driving car/truck hit the road that will with in few yrs make, close to 6 million driving jobs will be gone forever…

Where i was going with, dont know but i wonder how self driving car will affect social mobility, i hope it will have positive impact but we wont know until later.

there is no shortage of immigrants and immigration social mobility study, believe it or not i did read few, and basically what it boils down to it where you find you self 10 yrs later there are very good chances that you will stay there for reminder of life in that country. it makes me wonder how scale looks like, here is mine mock up from lo to hi.

nolife
lowlife
working stiff level 1
working stiff level 2
working stiff level 3
working level 1
working level 2
working level 3
other are working for you
dont have to work but work anyways (ultimate goal)

#83 Rain on 07.23.17 at 11:14 am

Why would say “sorry” to Trump?

#84 Renter's Revenge! on 07.23.17 at 11:15 am

This is the beautiful dance between these two asset classes. – Ryan L

Did anyone else read this comment in the voice of David Attenborough, or just me?

#85 jess on 07.23.17 at 11:21 am

cum cum /cum ex

…” Banks, stockbrokers and lawyers spent years ensuring that shareholders were refunded money they weren’t owed. In particularly egregious cases, they received several refunds on taxes that were only paid once. In industry jargon, the dividend-stripping schemes are known as cum-cum and cum-ex, and according to reporting by ZEIT ONLINE, ZEIT and German public broadcaster ARD, they resulted in the German state losing a vast amount of money.

http://www.zeit.de/wirtschaft/2017-06/cum-ex-scandal-tax-evasion-dividend-stripping-germany

…”individual banks and funds have likewise shorted the state billions of euros. To do so, they engaged in circular trading, repeatedly claiming tax refunds from state coffers.

Total amount of refunds claimed by a single American pension fund from the German state on the basis of repeatedly issued tax credits: €53,882,080.94
Number of beneficiaries of this pension fund: 1

Number of German banks that participated in the presumably illegal deals: 40
Banks and funds around the world alleged to have taken part in these activities: more than 100

Amount of money that 7 banks and funds have thus far paid back: about 1,000,000,000 € (1 billion)

How the Damages to Taxpayers Were Calculated
http://www.zeit.de/wirtschaft/2017-06/cum-ex-scandal-tax-evasion-dividend-stripping-germany

#86 For those about to flop... on 07.23.17 at 11:33 am

Hey NoName, thanks for not using your native Croatian name as I would apparently not be able to pronounce it.

You seem to be making a good fist of your migration.

Keep on truckin’ brother…

M43BC

This is another interesting quote from that article that I posted.

“Only five years ago, 80 million Americans had outstanding auto debt. According to data recently released by the Federal Reserve Bank of New York, that figure has now risen to 107 million. To put that in context: that is 43% of the adult population of the entire U.S. It’s almost as if Americans, burned by the subprime home mortgage crisis of a decade ago, have collectively moved one item down on the list of big-ticket items on their wish list.”

#87 Ronaldo on 07.23.17 at 11:37 am

#64 Something afoot in YVR RE? on 07.23.17 at 12:55 am

‘Been reading Flops posts about major YVR RE price reductions and decided to visit My Realty Check to see if anything has changed in list prices.

Many more list price changes, 45% more than the usual amount (typically about 1000 price changes):

Total of 1452 list price changes.
1020 down
432 up

Net $ value of list price changes: -$106,062,858.
Average Change Amount: -$73,046.

That’s a lot of wealth lost in homes there, a lot. About 12,800 homes for sale in Greater Vancouver (per Zolo.ca).

Average list price changes vary from -$202,000 for Vancouver to -$31,000 for Langley. Surrey the only positive at +$1,700.

Maybe just a temporary blip, who knows?

Suffice to say, not good.
————————————————————–
Huge difference between asking prices and assessments. The days of putting any price at all on a house and a greater fool would bite at it are coming to an end. This is why we are seeing such large drops in the asking prices. All the so called wealth being lost was not there to begin with. It is all an illusion. How can you justify a house rising 33% in a year? It’s all “Greater Fool” driven. Those days are coming to an end. Expect at least a 40% drop in prices over the next year or so. And that may just be the beginning. There is nothing to justify the insanity that has been driving these price increases int To and Van. How little we learn from the past.

#88 -=jwk=- on 07.23.17 at 11:54 am

@ #13
#4 kabloona

health care is not being stolen from poor people.

poor lefties steal funds thru violent taxation to pay for themselves.

tax cuts are an effective reduction of this theft.
———————————————
Yes all the wealthy blue states steal from themselves to provide healthcare to the poor red states. But now the red states are fighting back -‘stop giving us healthcare,keep your money, we want you to be even richer’ they say.

#89 Howard on 07.23.17 at 11:54 am

#71 The Lewler on 07.23.17 at 8:41 am
We’ve all beat this horse to death.

I don’t like socialized medicine because by running your medical care through a tax funded system, you surrender your independent rights and choice over your care.

If you don’t control the dollars, you dont control your health care, it’s that simple. Someone else can say , no, you can’t have that treatment , or you have to wait for that treatment.

We haven’t even discussed the immorality of the suggestion that you have a right to health care. Who provides health care? Doctors/nurses etc.

Do you have an absolute right to their labour? No. No you don’t.

—————————–

All for socialized medicine as long as we’re talking about life-threatening maladies (I mean, who would deny care to a cancer patient?).

I think SJWs have infiltrated socialized medicine with their own agendas, however, such that even sex-change operations are now paid for by taxpayers,
in Ontario anyway. That little ditty was enacted by George Smitherman.

#90 -=jwk=- on 07.23.17 at 12:03 pm

@ #54 Investors Friend
The corporations and government do not redeem bonds on request, only at maturity.

So there is no net flow from bonds to equities.
—————————-

I just lost it at this comment. wow. You think once a corporation or government sells a bond it can never be resold until maturity. Oy.

Protip: there is a flow. it moves markets. you should be aware of it.

#91 For those about to flop... on 07.23.17 at 12:13 pm

#81 NoName on 07.23.17 at 10:39 am

i cant remember exactly what went wrong with duds car but basically over few months few relatively inexpensive repairs brought guys on it knees. He managed with no car for few months until winter came and with first snow everything started going down hill.

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

Also NoName,here is a reminder for today’s English lesson.

Dud is not the same as a dude.

If you ever get confused here is a foolproof reminder.

Garth is a dude.

Flop is a dud…

M43BC

#92 El Joko on 07.23.17 at 12:21 pm

Ah yes, Jamie “I crashed the economy, but if it wasn’t for that damned dastardly regulation, I’d have really leveled it with the ground in 2008” Dimon.

Do you guys know what kind of snakes you’re holding up as idols?

#93 Dissident on 07.23.17 at 12:26 pm

#4 kabloona on 07.22.17 at 4:07 pm

Could not agree with you more. Give money to the wealthy and they’ll just invest it to grow more money for themselves, and it will never be ‘liquid’ or support economic growth, it will be frozen (it will only falsely prop up and overinflate stock markets, which people will read as a false sign of economic health).

Give money to the middle class and poor, and they will spend it, and stimulate the economy creating real growth. The money will literally “trickle up”.

Imagine the former like energy given to a tree full of apples and the apples grow fat and red but they never fall or participate in the decomposition and re-seeding of more trees. Eventually, the tree continues to exist there with its plump red apples, but no further little trees grow and the middle class/poor do not eat any apples.

Imagine the latter like energy given to an apple tree seed which grows and travels upwards and bears apples that actually do fall and continue the cycle of growth, feeding the greater populace.

#94 Lottery? on 07.23.17 at 12:30 pm

#79 Doug in London on 07.23.17 at 10:10 am
I’ve done quite well by staying here. Personally I think I won the lottery by being born here in Canada.

More like being born in a Bingo hall actually.

#95 InvestorsFriend on 07.23.17 at 12:35 pm

Imagine No Jobs

#82 NoName on 07.23.17 at 11:09 am
Self driving car/truck

As soon as self driving car/truck hit the road that will with in few yrs make, close to 6 million driving jobs will be gone forever…

******************************************
Imagine a post-jobs economy where everything is automated and there is no need for anyone to work.

Garden of Eden?

#96 waiting on the westcoast on 07.23.17 at 1:11 pm

Jacques Strappe “Thank you for the afternoon bathroom reading Mr Influenza. Do you ever take currency exchange into account when allocating for foreign assets? Do you guys have a particular view on that now?”

Careful about spending time reading on the potty…

https://www.squattypotty.com/blog/5-problems-with-sitting-on-your-toilet/

#97 HaHaHA on 07.23.17 at 1:14 pm

#1 No offence but Chris Hedges? Good reporter but like Noam Chomsky bias towards lefties. Nothing wrong with having an opinion. But when all these reports about poor people in the U.S. spew out they also leave out lots of facts. Choices. Just guessing but I bet Worst choice to poverty would be drugs and booze. Lefties always leave this out. Its not enough to admit outright laziness also. So whether it be the corporate class, Bilderburgs, Clintonites, Trumponians, Masons or other scapegoat…… look in the mirror. The deck for sure is stacked against a lot of citizens for sure. But cmon. CHOICES

#98 13 yrs old flipper on 07.23.17 at 1:16 pm

Bubble?

https://au.news.yahoo.com/a/36468003/akira-ellis-one-of-australias-youngest-property-investors/#page1

#99 InvestorsFriend on 07.23.17 at 1:17 pm

Money Does NOT Flow out of Bonds and into Equities when people sell bonds to buy equities

#90 -=jwk=- on 07.23.17 at 12:03 pm
@ #54 Investors Friend
The corporations and government do not redeem bonds on request, only at maturity.

So there is no net flow from bonds to equities.
—————————-

I just lost it at this comment. wow. You think once a corporation or government sells a bond it can never be resold until maturity. Oy.

Protip: there is a flow. it moves markets. you should be aware of it.

******************************************
Thank you for responding but that’s not what I said or implied. What I am saying is that when one bond investor sells a bond he must sell to another bond investor. Cash out of the bond market by the seller is precisely equal to cash put back in by the buyer. Nothing flows out of bonds in the net. The issuing institution continues to hold the money it got when it issued the bond and is unaffected by the trading.

Investors as a population are completely powerless to pull money out of one asset class and flow it into another through trading. An individual investor can pull money out only by finding a replacement to buy the asset and so zero dollars flow out in the net.

Waning popularity of bonds and increased popularity of equities DOES affect markets by driving the price of one down and the other up.

The notion of net capital flows when investors simply trade with each other seems to be a convenient way to describe what is happening to prices. It is however a complete and impossible myth.

There is truth to the notion of flows when it comes to redirecting new money to issuers. Bond issues could become less popular while equity issues by companies could attract more cash. THAT is not what is typically meant by funds flow however. The erroneous claim is that investors as a population can pull money out of (say) bonds by selling their bonds. Completely impossible.

#100 InvestorsFriend on 07.23.17 at 1:20 pm

Impossible Capital Flows

And when house prices fall, zero dollars will be pulled out in the net. Wealth as measured in dollars will simply evaporate in the net. Strange but true.

#101 For those about to flop... on 07.23.17 at 1:27 pm

Pink Lemonade stand in Burnaby .

Here’s another one for the Burnaby Boys on the blog.

This gem was picked up in March 2016 for 1.2 with an assessment that came in similar later in the year.

This drastic drop is guaranteed to get some fresh eyeballs on it.

Who knows what’s gonna happen with the market,but these guys better Holdom…

M43BC

130 N Holdom Avenue, Burnaby

Mar 21:$1,380,000
Jul 19: $1,088,000
Change: – 292000.00 -21%

https://www.zolo.ca/index.php?sarea=130%20N%20Holdom%20Avenue,%20Burnaby&ptype_condo=1&ptype_house=1&filter=1

https://evaluebc.bcassessment.ca/Property.aspx?_oa=QTAwMDAzV1dYTg==

#102 For those about to flop... on 07.23.17 at 1:41 pm

Pink Lemonade stand in Port Coquitlam.

This one is a new build and has different dates on the documents and an incomplete assessment,but they are asking less than what they paid for it so up she goes and we’ll see what happens.

They paid 1.2 in Feb 2016 and they will be hoping its long gone before the new updated assessment comes in the mail.

Haven’t had much action in Poco and so maybe these guys are going to learn that the Coast isn’t clear…

M43BC

3826 COAST MERIDIAN RD Port Coquitlam

Mar 1:$1,200,000
Jul 21: $1,149,000
Change: – 51000.00 -4%

https://www.zolo.ca/index.php?sarea=3826%20Coast%20Meridian%20Road,%20Port%20Coquitlam&ptype_condo=1&ptype_house=1&filter=1

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

#103 Wrk.dover on 07.23.17 at 1:45 pm

#88 -=jwk=- on 07.23.17 at 11:54 am

Yes all the wealthy blue states steal from themselves to provide healthcare to the poor red states. But now the red states are fighting back -‘stop giving us healthcare,keep your money, we want you to be even richer’ they say.

——————————————-

This is the most accurate assessment that can be conjured.

Can’t even be even dismissed by accounting for gerrymandering.

#104 NoName on 07.23.17 at 2:21 pm

#95 InvestorsFriend on 07.23.17 at 12:35 pm

There are two possible outcomes for humanity kind, star track depict one and second one is depicted in mad max 1234.
If we as a species keep doing what we do now I give 50% chances for second outcomes.

But on another hand horse manure crisis of NYC in 1984 looked unsolvable at the time.

#105 NoName on 07.23.17 at 2:21 pm

Hey smoking man hu is white house later Jared or Trupm assistant Reena? And one more question, is under Trupm us sending strong massage to russia for ocupation of krimea.

Here is small refreser.
http://www.foxnews.com/politics/2014/03/17/visa-bans-asset-freezes-among-possible-sanctions-against-russia.html

Today code word
Adaption means
“Sanction against Russia”

http://www.foxnews.com/politics/2017/07/08/donald-trump-jr-and-jared-kushner-respond-to-meeting-with-russian-lawyer.html

“It was a short introductory meeting. I asked Jared and Paul to stop by. We primarily discussed a program about the adoption of Russian children that was active and popular with American families years ago and was since ended by the Russian government, but it was not a campaign issue at that time and there was no follow-up,” said Donald Trump Jr.

#106 For those about to flop... on 07.23.17 at 2:43 pm

CONFIRMED PINK SNOW

This is one of the ones I asked Old Bird to help me with but I just realized it had been updated.

They managed to get more than they paid for it but it wasn’t enough.

The details…

Paid 3.15 in April 2016

Sold 3.2 in May 2017

This is one of them ones where someone might want to sharpen my numbers but I’ll go with roughly a 4% loss or 125k after expenses…

M43BC

4250 CHELSEA Crescent, North Vancouver.

Mar 27:$3,388,000
May 2: $3,238,000
Change: – 150000.00 -4%

https://www.zolo.ca/index.php?sarea=4250%20Chelsea%20Crescent,%20North%20Vancouver&filter=1

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

#107 Renter's Revenge! on 07.23.17 at 3:05 pm

#95 InvestorsFriend on 07.23.17 at 12:35 pm

Imagine a post-jobs economy where everything is automated and there is no need for anyone to work.

Garden of Eden?

===================

Yes and no. Assuming the output of the economy is available to everyone to some degree. I guess that’s why some people are discussing Basic Income schemes. The problem is how much does everyone get? And will there still be some reward for work people choose to do? What if, due to human nature, no one appreciates what they get, because they didn’t have to work for it? Or they get jealous that some still get more than others? What if they get bored because there’s nothing useful for them to do? Or depressed because there’s nothing left to compete for? Homo sapiens may have to evolve into a new species before this actually works! Other solutions may include prescribing drugs such as MDMA (I think) so that everyone feels love towards each other and the planet and stops feeling bored, jealous and competitive. Maybe we’ll never solve our problems and end up destroying the environment and our species will turn out to be an evolutionary dead end. Lots of species have come and gone during the history of the earth. Woah, my comment took a weird turn at some point! Lol

#108 Entrepreneur on 07.23.17 at 3:41 pm

Maybe try other avenues for doctor/hospital bills. Make a list of ten possible solutions even if they might not work. Then go through them and cross them off. If none of those work think of ten more solution. And yes you can do it!

As for Trump: He does not drink; he does not smoke cigarettes; he does not smoke marijuana. To me that is a role model.

Had enough of the news of Russia involvement with the election, turn the station. And time is up on the jokes too etc., or else it is not a joke anymore but turned into revenge. One or two is fine but on and on, omg.

#109 Stan Broock on 07.23.17 at 4:06 pm

#38 Ole Doberman on 07.22.17 at 8:05 pm
Lewenza is forgetting something important in this equity rally – as rates rise capital flows are coming out of bonds and going into equities.

Bond market is 25 times the size of the stock market – imagine the impact, see ya folks are 40,000K DOW…..Trump or no Trump!
—————————-

Restated:

Due to low returns on bonds/that will stay low in long term despite all the hype with the increasing rates/, retirees in search of a yield will dump bonds and jump in on the stock market where dividends will be providing higher yield than bonds.

DOW 40 k is a no brainer.

The above apply to markets with retirees having actually money to invest.

So it applies to much lower extent to Canada where nobody especially retirees has any money, as all the ‘wealth’ is in credit driven real estate.

#110 A Reply to #107 Renter's Revenge! on 07.23.17 at 4:16 pm

Your vision of the future reminded me of the plot to the book Brave New World by Aldous Huxley. (The drug was called soma.)

#111 Tony on 07.23.17 at 4:28 pm

Re: #78 Dups on 07.23.17 at 10:09 am

Canadian GDP should be very strong or increasingly strong (the next two months, July and August) from all the renovations in the GTA to try to sell houses. Whether or not it ends up like Alberta where fixing up everything never does anything because everyone does the same thing and nothing ever sells ever I don’t know.

#112 A Reply to #99 InvestorsFriend on 07.23.17 at 5:09 pm

Bonds can be callable, puttable, and convertible.
https://en.m.wikipedia.org/wiki/Bond_(finance)
https://en.m.wikipedia.org/wiki/Callable_bond
https://en.m.wikipedia.org/wiki/Puttable_bond
https://en.m.wikipedia.org/wiki/Convertible_bond

The fair price of a bond is determined by such factors as the current market interest rates, the length of the term, and the creditworthiness of the issuer.
https://en.m.wikipedia.org/wiki/Bond_(finance)#Bond_valuation
https://en.m.wikipedia.org/wiki/Bond_valuation
https://en.m.wikipedia.org/wiki/Bond_duration
https://en.m.wikipedia.org/wiki/Bond_convexity

#113 deplorable on 07.23.17 at 6:53 pm

sorry but….The purpose of tax incentives for businesses is to encourage the creation of employment and to stimulate economic activity. They are meant to help small business grow.

Self employed people, such as IT consultants, do not create any jobs. They are taking advantage of tax loopholes for their own benefit. They sprinkle their income amongst their families for further benefit.

T2 is simply getting rid of these loopholes so that ordinary tax payers are not at a disadvantage to the self employed.

Yes, self employed persons do not have the same job security but they are compensated for that in their higher rates. If they require more compensation for not having as much job security, they should be asking a suitable rate not asking tax payers to subsidise their pay. In fact, given todays environment, full time employees especially in private sector, do not always have a lot of job security either.

Ignorant people throw out the word socialism whenever someone talks about anything that will touch the topic of getting rid of tax breaks for those with higher paying jobs. Having low and middle income taxpayers pay more taxes so loopholes can be provided for self employed folks is socialism for the self employed.

It has nothing to do with jealousy of the rich. It has everything to do with fairness.

If self employed folks want to start their own business and hire employees and pay them benefits and such, then great, they should get tax incentives. They can even hire their own family members provided the family members are actually doing work for the company.

I am neither liberal nor conservative, republican nor democrat, socialist nor capitalist. I think the correct path is somewhere in between. I believe in fairness for all.. for the poor, middle, and the wealthy. Capitalism on it’s own would destroy itself as would socialism.

I am in agreement with some of the things you post on this blog. For instance, I also think housing could be in a bubble and that folks shouldn’t be taking on so much debt. I am afraid of what lies ahead for Canada. The non-socialist me, thinks that people will need to take responsibility for their actions and not have the gov’t bail them out if we get into trouble. But the banks, and private corps should not be bailed out with taxpayer dollars either ,should the economy go totally south along with housing. Bailing out corps with dollars from taxpayer dollars is corporate socialism. You can’t use the term socialism to demonise taxpayers and not the other way around.

#114 Tony on 07.23.17 at 7:21 pm

Re: #109 Stan Broock on 07.23.17 at 4:06 pm

Retirees are trying to reduce risk not increase risk. Stocks are risk on, bonds are risk off. Whenever America tells you interest rates will increase you can be assured interest rates will fall.

#115 LS in Arbutus on 07.23.17 at 10:55 pm

Flop, this one is out of my ‘hood, but popped up on my facebook feed so I took a peek. E-value BC shows it having *just* been sold on June 21st, *2017* and now it’s relisted. Must be cold feet?

4443 Glencanyon Drive, North Vancouver.
http://www.steveburk.ca/ActiveListings.php/Details/444/4443-glencanyon-drive-north-vancouver-bc#viewdetail

Listed: $2,399,000
Last sold June 21, 2017: $2,241,500
Assessed: $1,785,000 but there have been lots of apparent renos

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

#116 Doug in London on 07.24.17 at 11:45 am

@Lottery?, post #94:
You compare being born here in Canada to being born in a bingo hall? When I read that comment I recall the saying that when opportunity knocks a lot of people complain about the noise, and you appear to be one of them. About a year ago I struck up a conversation with a young man, from India, working at a gas station. I asked, what are your first impressions about Canada? He said: Canada is a country that is politically stable, prosperous, and you can do well here if you are willing to work. That’s the key, willingness to work. To quote another saying, the secret to success is hard work, and that’s why it’s remained a secret for so long. Myself, I finished high school then went on to get a college diploma. I worked different places in my field around Ontario, was wise to save up some of what I made, wisely invested it (not bailing out of stocks when they dropped, as many people have done, but rather buying more of stocks or whatever else was on sale) and now I’m pretty much retired. In short I took advantage of opportunities, which were many in this great country and have done all right. Not a multi millionaire, but not bad either. Pretty good for someone who failed a college economics course many years ago.

I find when someone like myself does all right, or others who have done even better than I, there’s resentment from those who didn’t make the choices and sacrifices I’ve made, thinking that somehow I cheated or unfairly got what I have. I read a lot of it right here on this blog. That happens everywhere, but it seems to be especially a trait among Canadians. The impression I get from commenters there is more positive, the idea of if you can do it (accumulate wealth) , so can I.

#117 Doug in London on 07.25.17 at 1:09 pm

Something I forgot to post in my above comment. Another blog I follow is http://www.mrmoneymustache.com . The comments on that blog are the more positive yes I can type I mentioned above.