The critical consumer

RYAN By Guest Blogger Ryan Lewenza

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My son and I like to play the game Jenga. That’s the popular game where you strategically pull blocks out from the tower and the one who pulls the last block that causes the tower to fall loses (generally me). Playing this recently made me realize that Jenga is a good metaphor for Trump’s ongoing trade war and its impact on the global economy.

As the two countries go tit-for-tat, escalating the trade war, blocks are starting to be pulled out from the tower (i.e. global economy). These ‘blocks’ are currently concentrated in the business sector, while the critical consumer has so far been largely unscathed.

The impact of Trump’s trade war is being felt on the business side, particularly declining global trade volumes, a slowing manufacturing sector and contracting business investment.

Look at the chart below. This tracks manufacturing activity across the globe and you can see that manufacturing activity has been in steady decline since early 2018 – Trump started the trade war with China in March 2018 when he announced tariffs on China steel and aluminum and other Chinese goods. Coincidence?! I think not!

Manufacturing Has Been Declining Since Early 2018

Source: Bloomberg, Turner Investments

All this trade uncertainty is causing businesses to pull back on spending, with business investment contracting in the second quarter – the first time since 2016. Despite Trump’s tweet this week suggesting the Fed is at fault for the slowdown in the manufacturing sector, this just doesn’t jive with reason and the data.

US Business Investment Contracts in Q2

Source: Bloomberg, Turner Investments

This is not good and I believe is a direct consequence of Trump’s trade war. The concern then is if the slowdown starts to spread, impacting consumer spending. If that goes, we have a recession. And Trump is then likely out on his butt come 2020.

So what is the outlook for the US consumer?

The consumer actually looks pretty good, which is critically why we’re still in the bullish camp and believe a recession is unlikely over the next 9-12 months. Here’s what the US consumer has going for them:

  • The US labour market is on fire! Since 2015 the US economy has added 200k jobs per month on average, pushing the unemployment rate to a 50-year low of 3.7%. If you have a job then you have income to spend.
  • Now you only spend that income if you’re confident about the economy and your job. The Consumer Confidence index currently sits at a high 135, well above the long-term average of 93, a positive sign for consumer spending.
  • Finally, unlike us Canadians, our friends south of the border have been tightening up their belt by reducing their debt levels and improving their balance sheet. Currently, the US debt to disposable income ratio sits at 126% compared to us profligate Canadians at 170%.

Putting it all together I believe the US consumer looks very strong, which is key as they represent nearly 70% of US economic activity.

US Consumer Accounts for 68% of Economic Activity

Source: Bloomberg, Turner Investments

As long as Trump’s trade war doesn’t spillover into the consumer, resulting in job losses and hits to consumer confidence, I think they will keep spending at the malls and on Amazon. This should then allow us to avoid a recession, and the US/global economy toppling over like my Jenga game with my boy. I only wish someone would share this with Trump! Since he “knows the biggest words” I think he’ll grasp this metaphor.

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.

 

56 comments ↓

#1 More To Consider on 08.31.19 at 4:01 pm

Judging whether or not a trade war is a wise decision should not merely be based on the performance of financial markets. If that were the only consideration, then many countries that opposed Nazi germany would have sided with them. While one cannot compare China with Nazi germany, there are certainly important issues to consider when trading with a (quasi) dictatorship. To ignore those altogether just on the basis of market risk is not exactly a nuanced perspective. Without going into what a nuanced perspective would be, can you at least acknowledge that negative market impact is not necessarily a valid reason to reject a trade war?

#2 expat on 08.31.19 at 4:15 pm

Thank you for your opinion.

I do believe that inverted yield curve has a near perfect record on predicting recessions going back decades..

I’ll stick with that one I think because I don’t think it’s different this time….

And this generation certainly isnt any smarter than the last 6.

Besides the EU is collapsing
China is collapsing
Australia is collapsing

Alot of collapsing going on…
imho

#3 Alessio on 08.31.19 at 4:21 pm

Hey Ryan

Why can’t the strong economy handle super tiny interest rate hikes?

Thanks –

#4 Lost In Space on 08.31.19 at 4:28 pm

Could you remind me again (and others on this pathetic blog) why I would consider adding a preferred share ETF to my portfolio at this time? I don’t need all the details of what a pref share is. Just an explanation of why I would consider this given the abysmal track record of most pref shares over the last decade and especially of late.

(a) Fat dividend. (b) Tax-efficient cash flow. (c) You’re buying low. (d) No credit risk. (e) Big upside when rates reverse (and they will, unless the business cycle has died). Or you can wait and pay more later when people are piling in. – Garth

#5 Yukon Elvis on 08.31.19 at 4:40 pm

A once-unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns — putting the financial security of future retirees in jeopardy.

U.S. institutions managing trillions of dollars in retirement savings — including the California Public Employees’ Retirement System — have been ratcheting down return expectations. Japan’s Government Pension Investment Fund, the world’s largest, has warned that money managers risk losses across asset classes. In Europe, pension funds may be forced to cut benefits in part thanks to the decline in rates.

“The true madness is pension funds being forced to invest in assets which will be guaranteed to lose, such as in the case of long dated inflation-linked gilts at real yields of -3%,” said Mark Dowding, chief investment officer at BlueBay Asset Management, which has pension-fund mandates. “It is financial vandalism and the government and central banks need to wake up to this.”

#6 Shawn Allen on 08.31.19 at 5:09 pm

Good question on savings rate

#67 Renter’s Revenge! on 08.31.19 at 12:37 pm
#20 Shawn Allen on 08.30.19 at 6:28 pm

I agree with what you said.

I’m also wondering if they changed the way the “savings rate” was calculated at some point in the past. For example, maybe debt repayments used to be counted as savings, but not any more, lowering the “savings rate”.

Mathematically though, shouldn’t the savings rate always be zero? I.e. one person’s savings always becomes another person’s (or bank’s) debt or disposition? Otherwise where would the money go? Tin cans and mattresses?

*************************
I too was wondering about that math, as one man’s savings does tend to become another man’s debt at least in many cases.

#7 The critical consumer – Trump Slump World on 08.31.19 at 5:18 pm

[…] Click here to read the full story http://www.greaterfool.ca […]

#8 Yanniel on 08.31.19 at 5:54 pm

Nice metaphor. One can only hope that’s not the game Trump and Xi are playing. The ultimate goal of Jenga is to make the structure crumble and it is a game played until the end.

#9 Tyberius on 08.31.19 at 5:58 pm

“As long as Trump’s trade war doesn’t spillover into the consumer, resulting in job losses and hits to consumer confidence, I think they will keep spending at the malls and on Amazon. This should then allow us to avoid a recession,…” R.L.

In response to post #3:

“(a) Fat dividend. (b) Tax-efficient cash flow. (c) You’re buying low. (d) No credit risk. (e) Big upside when rates reverse (and they will, unless the business cycle has died). Or you can wait and pay more later when people are piling in.” – Garth

——

I’m confused!

Ryan, you’re still bullish and seem to think that the US is going to ‘avoid a recession’ (unless Trump does all those horible things), yet Garth thinks that normal business cycles are still in place and to be expected.
So, isn’t a recession ‘normal’ after a decade of economic expansion?

Thanks

#10 DINK on 08.31.19 at 6:20 pm

You got your blind eye on the periscope captain

https://moneymaven.io/mishtalk/economics/personal-income-up-0-1-spending-up-0-6-what-s-the-problem-YVjYZhfJ6UeJhnDw0256qg/

We are having deflation in pricing

#11 the Jaguar on 08.31.19 at 6:25 pm

From todays G&M. (sooooo Toronto centric)

‘CN to buy Quebec-New York Rail Line from CSX’

Kids, this is the third significant ‘rail’ purchase in the past six months. I sense something is ‘afoot’. I sometimes wonder if clever people create distractions such as Hong Kong, only to draw our attention away from more significant events that will have positive future financial impacts (provided one ‘gets in on it’) on everything we know, or don’t know. I appreciate my musings sound a little vague, but why do I have this feeling that ‘rail’ is about to known as the ‘Comeback Kid’? Given our history we must have a serious advantage.

My fellow citizens, I give you ‘RAIL’. The future of transport. Especially when your kiwi fruit and other exotic items become too expensive to arrive on your breakfast table as a result of escalating petroleum prices. Fake News and other propaganda. We will wonder why we were so gullible and did not see it coming. Those who live simple lives enriched by old values will be in the best position to survive.

#12 Wait There on 08.31.19 at 6:54 pm

I’m keeping an eye on what’s happening in Hong Kong. The repercussions I think are underestimated. If China moves in and occupies, I think it will be China’s Afghanistan. At this point, one hopes it will cool down but the embers will remain. Who in their right mind wants to live under the CCP? Remember much of the HK population are descendants of a generation that fled communist China. Their teaching to their descendants : Never Trust Communists.

#13 Dolce Vita on 08.31.19 at 6:55 pm

#67 Renter’s Revenge! on 08.31.19 at 12:37 pm
#20 Shawn Allen on 08.30.19 at 6:28 pm

Hope below is the calculations you were looking for…

Household Savings Rate as calculated by StatCan = Household net saving ÷ Household disposable income

For example, in Q2 2019 these number were (x 1,000,000):

Household net saving = $20,980
Household disposable income = $1,271,464
∴ the Household saving rate = 1.65%

StatCan rounded it up to 1.7% in the Q2 2019 Report. By the way, I posted the above calculation in March of this year when I went on a tirade about how StatCan changes the Household Saving Rate, willy nilly it seems. Recall from my post yesterday as example (Household Saving Rate 1st Qtr 2018):

4.5% then revised in a quarterly report to 1.3% and then AGAIN in a later report to 1.9%

…will the Real Slim Shady please stand up…

From the source data report (follows), with its myriad of numbers, HOW ON GOD’S GREEN EARTH DID STATCAN change that Household Saving Rate so many times?????

Source Data (StatCan, “Current and capital accounts – Households, Canada, quarterly”):

https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610011201

————————————————-

Ryan today quoted that 70% of the US economy is due to Consumer Spending, if I read him correctly. In Canada, we are not that far behind and here is how to calculate it (Q2 2019, $ Millions):

GDP* = 1,969,135
Household final consumption expenditure = 1,295,280 (source data from above report link)
% CANADIAN CONSUMER SPENDING = 65.8%

In Q1 2019 it was = 60.4%

Canadians are spending MORE, that can’t be all bad. Canadians may have more debt than Americans, but you wouldn’t know from the:

+5.4% increase

in Canadian Consumer Spending from Q1 –> Q2 2019.

*GDP source, StatCan:

https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3610043401

————————————————-

Ciao d’Italia.

#14 Janes on 08.31.19 at 7:03 pm

#51 Smoking Man on 08.31.19 at 12:20 am
The untouched. Waves of over eating oozing out of every crevist of a mist placed braw strap..

The un loved.. It’s not about the feast. It’s about how you value your self.

Look into mirror, no matter what is says back…

———-
Its good to show that world who you really are.

#15 Religion of Peace on 08.31.19 at 7:07 pm

DELETED

#16 Eternal hope on 08.31.19 at 7:11 pm

Son. I think you need to concentrate more on your technical analysis rather than this fundamental mumbo jumbo.

1. Is the trend in stocks still up? Is the market still above the important moving averages ? Yes/No?

If yes, hold
If no, get out

Everything else is pretty much a waste of time

This is where you go wrong. When things break down, you get out and ask questions later. That’s why preferred shares were not a buy last October, or December or even now…. They broke trend, and collapsed. Why waste your time and hold them?

Same with your previous calls on emerging markets two years back. Oil stocks last year or so. Fundamental analysis … Waste of time.

In the mean time, you missed out on a 40%+ gain in metals stocks since May .. again, trend up… Go long. Not very hard.

Stop thinking too much about what might happen. Doesn’t work. You’re not a gypsy to figure out the future.

#17 Ryan Lewenza on 08.31.19 at 7:13 pm

Tyberius “I’m confused! Ryan, you’re still bullish and seem to think that the US is going to ‘avoid a recession’ (unless Trump does all those horible things), yet Garth thinks that normal business cycles are still in place and to be expected. So, isn’t a recession ‘normal’ after a decade of economic expansion?”

Yes recessions are normal and I do believe we will see one over the next few years. My current no-recession call is specific to the next 9-12 months. Could we see one in 2021, sure, but lets not put the cart before the horse. – Ryan L

#18 Ryan Lewenza on 08.31.19 at 7:26 pm

Eternal Hope “Son. I think you need to concentrate more on your technical analysis rather than this fundamental mumbo jumbo.

1. Is the trend in stocks still up? Is the market still above the important moving averages ? Yes/No?

If yes, hold
If no, get out

Everything else is pretty much a waste of time

This is where you go wrong. When things break down, you get out and ask questions later. That’s why preferred shares were not a buy last October, or December or even now…. They broke trend, and collapsed. Why waste your time and hold them?

Same with your previous calls on emerging markets two years back. Oil stocks last year or so. Fundamental analysis … Waste of time.

In the mean time, you missed out on a 40%+ gain in metals stocks since May .. again, trend up… Go long. Not very hard.

Stop thinking too much about what might happen. Doesn’t work. You’re not a gypsy to figure out the future.”

Forecasting is so easy eh? Like your metals call. GDX is at the same level it was in 2016. But I’m sure you bought at the low in the spring and realized the 40% gain. Classic Monday morning quarterback. With respect to my other calls, if you think me or anyone else can go 10 for 10, then you’re dreaming. If I go 6 for 10 that’s good enough for me and our clients. Maybe we should hire you to manage our client portfolios, since like you say “not very hard”. – Ryan L

#19 Dolce Vita on 08.31.19 at 7:33 pm

About that +5.4% increase in Canadian Consumer Spending, Q1 2019 –> Q2 2019,

RE:

GDP = 1,969,135
Household final consumption expenditure = 1,295,280
% CANADIAN CONSUMER SPENDING = 65.8%

In Q1 2019 it was = 60.4%

Besides Canadian’s emerging from their Winter Den’s to spend (after having paid off Christmas excesses) I wonder WHERE THAT MONEY CAME FROM?

Trudeau says he is fattening Canadian wallets, not so Justin – liar, pants on fire.

“Current and capital accounts – Households, Canada, quarterly” says you raked in more taxes:

Personal income tax (x 1,000,000)
Q1 2019 = $276,580
Q2 2019 = $282,484

Basically, all Gov’s BAD (i.e., more money went out Qtr over Qtr):

To general governments (x 1,000,000)

Q1 2019 = $393,680
Q2 2019 = $400,436

OK, so nobody including pants on fire Justin is giving more money out to the Canadian Consumer as of late (they took more out of your pocket).

So, where the hell is that extra money Canadians are spending coming from?

Oh…there it is:

Net lending or net borrowing (x 1,000,000)

Q1 2019 = -$93,956
Q2 2019 = -$85,996

…Canadians borrowing more money to fund their lavish lifestyle.

Who knew?

Well, at least it’s been decreasing as of late:

Q2 2018 = -$104,752
Q3 2018 = -$110,664
Q4 2018 = -$97,760
Q1 2019 = -$93,956
Q2 2019 = -$85,996

…if Consumer Spending is about 66% of the Canadian economy, I’d say it’s going to “slow down” as we are borrowing less and income has not increased that much.

Primary household income from Q1 to Q2 2019:

+1.55%

That doesn’t account for a +5.4% increase in spending from Q1 to Q2 2019.

A SLOW DOWN it is.

And that is what I said yesterday using a whole different set of numbers.

—————————————–

‘Outta here.

#20 Bezengy on 08.31.19 at 8:05 pm

I’ve often joked with friends that the trade war is all part of plan for the US to write off the 7 trillion owed to China. I thought Trump would launch some law suit against China over Fentanyl or something that would equal the 7 trillion owed. Perhaps today I found the something. Game changer?

-a sum roughly equivalent to China’s holding of US treasuries.

https://www.bnnbloomberg.ca/businessweek/trump-s-new-trade-war-tool-might-just-be-antique-china-debt-1.1308485

#21 jim on 08.31.19 at 8:11 pm

The Chinese market for many Canadian-made manufactured goods is being blocked by a high tariff wall, which makes the cost of these products prohibitive for Chinese consumers…..

http://www.bcchamber.org/policies/canada-china-trade-tariff-gap

Ryan Lewenza…yup trade situation is all Trumps fault…you can take your childish one dimensional blinders off at any time and have a chat with some of these Canadian producers.

#22 crowdedelevatorfartz on 08.31.19 at 8:11 pm

@#75 Ace
“You know the libs have about as good a chance of winning the next election ….”
++++
Don’t be too cocky.
The election isn’t in the conservative bag yet.
Even with Trudeau’s nauseating, politically correct, double speak…… we have ……

http://338canada.com/

“Smirking” Scheer…..worst choice ever….
Benedict Bernier would have this thing locked up if he was leading the Cons.
Too bad Scheer had more delegates in his back pocket.

#23 Angie on 08.31.19 at 8:21 pm

Hi, Ryan
Which one do you think will be better in non-registered account , preferred shares etf or canadian dividend eft like xdv or xei ? Thx

#24 Camille on 08.31.19 at 8:54 pm

I bought preferred shares based on historically lower variance, and partly because of this blog. This was not the case (lower variance). Explanations for this so far are not adequate. Nor is any general pricing model I have seen. So I basically dont understand them. I think they are possibly a very flawed product, hit front and back by both rising and decreasing interest rates, and do well in slow moving quasi stable environments. But I now believe they will appreciate as interest rates decline and there being no alternative. I hope some other action, buybacks?, doesn’t surprise me. I’ve reduced exposure (and overall stock exposure) but still hold them.

#25 Paul on 08.31.19 at 8:58 pm

“[M]anufacturing activity has been in steady decline since early 2018…”

I don’t believe that is an accurate statement. The rate of growth in manufacturing activity has been in a fairly steady decline, but that’s a much different thing than saying that activity has been in a decline. Growth is still positive, which means that manufacturing activity continues to grow.

#26 acdel on 08.31.19 at 9:57 pm

Whether one is a fan of Trump or not; he is doing exactly what he said prior to his elected state; fight back, get jobs back to America and heh, has not created one war!

#27 Sydneysider on 08.31.19 at 10:03 pm

“The consumer actually looks pretty good”

Page A4 of today’s WSJ: “US household sentiment fell in August from the prir month amid concerns about a trade war…”

People are concerned about losing their jobs, or their kids’ failures to get jobs. That is down to the sentiment of managers, which all agree, is more pessimistic. A world recession is happening now outside N. America. I doubt we can avoid it, but perhaps we have six months to prepare.

#28 Doolittle Maggie on 08.31.19 at 10:07 pm

Ryan and Garth, If you like preferreds here, do you suggest an overweight holding?

#29 Grunt on 08.31.19 at 10:43 pm

Presidential tweets where would Bay Street be without them?

#30 att on 09.01.19 at 12:08 am

DELETED

#31 Marcus on 09.01.19 at 1:12 am

China must be completely and utterly crushed never to rise again. I get so sick of people talking economics and profit and stock portfolios when they make their profits off of the backs of slaves in China. The communist regime MUST BE DESTROYED. Globalists absolutely love
China and see them as the leaders for the future model of humanity. With their social credit score and brutal tactics like reeducation camps. If they proceed with their invasion of Hong Kong it will be their end. China will be crushed and divided up into three separate zones and never be permitted to rise again.

#32 Canuck not Globalist on 09.01.19 at 2:06 am

Globalists don’t get it. Why should America suffer do that China can create jobs for it’s slaves? Canada is suffering because Trudeau is strangling the economy with globalist ideology. None of the taxes collected in putting Canadians back to work. Sure, let’s have highways in Jordan and give billions to dictators, we’re so nice.

American is sizzling under Trump, the globalist picture is not. Canadians needs to learn a lesson from the MAGA camp. America is building, Canada is self destructing.

Trump is not the problem. Globalist socialism is the problem. Frankly, the Middle East and Africa needs to hit bottom so that people finally get the message. Just like alcoholics , bad religion and miltant greed is keeping those people desperate and violent. Canada is not in a position to encourage more of the same.

Trudeau hasn’t built a single road or school . Why are taxpayers not demanding a return on thier taxes, like jobs in energy, mining and agriculture? Trump hasn’t kept Canada from expanding. In fact he’s the only guy keeping the soup pot boiling. If not for Trump Canadians would be starving. Stop the Trump bashing.

#33 Stan Brooks on 09.01.19 at 2:34 am

#19 Dolce Vita on 08.31.19 at 7:33 pm

Primary household income from Q1 to Q2 2019:

+1.55%

That doesn’t account for a +5.4% increase in spending from Q1 to Q2 2019.

A SLOW DOWN it is.

And that is what I said yesterday using a whole different set of numbers.

That gross increase of 1.55 % translates to less than 1 % net income increase while spending is north of 5 %, with inflation above 6-8%.. (due to buying less but paying more for it)

The sheeple sinking deeper in debt… That is made up money, backed by no savings.

———————————

Ryan, I did not see a reply on why when the economy is so strong, rates at very low levels historically are being cut even lower, on its way to negative nominal rates.

Failure in monetary policy? Incompetent central bankers? Share your thoughts.

#34 oh bouy on 09.01.19 at 8:03 am

@#32 Canuck not Globalist on 09.01.19 at 2:06 am
Globalists don’t get it. Why should America suffer do that China can create jobs for it’s slaves? Canada is suffering because Trudeau is strangling the economy with globalist ideology. None of the taxes collected in putting Canadians back to work. Sure, let’s have highways in Jordan and give billions to dictators, we’re so nice.

American is sizzling under Trump, the globalist picture is not. Canadians needs to learn a lesson from the MAGA camp. America is building, Canada is self destructing.

Trump is not the problem. Globalist socialism is the problem. Frankly, the Middle East and Africa needs to hit bottom so that people finally get the message. Just like alcoholics , bad religion and miltant greed is keeping those people desperate and violent. Canada is not in a position to encourage more of the same.

Trudeau hasn’t built a single road or school . Why are taxpayers not demanding a return on thier taxes, like jobs in energy, mining and agriculture? Trump hasn’t kept Canada from expanding. In fact he’s the only guy keeping the soup pot boiling. If not for Trump Canadians would be starving. Stop the Trump bashing.
________________________________

LOL.
Sigh.

#35 Ryan Lewenza on 09.01.19 at 8:03 am

Alessio “Hey Ryan. Why can’t the strong economy handle super tiny interest rate hikes? Thanks”

First I wouldn’t say the US economy is strong. It’s been growing around 2-2.5% on a trend basis below the long-term average of 3.3%. I would say the US economy is growing a decent but not strong clip. Second I don’t think the Fed should be cutting. I believe the Fed is cutting rates on the fear that the global slowdown will start to weigh on the US economy and due to Trump’s tweets. Lastly, we live in a world of excessive debt. So small increases in interest rates will be a bigger drag on growth than in past cycles. If I were running the Fed and BoC I would be on hold for now and wait for more data before cutting. – Ryan L

#36 Ryan Lewenza on 09.01.19 at 8:06 am

Doolittle Maggie “Ryan and Garth, If you like preferreds here, do you suggest an overweight holding?”

We recommend a 15% weight currently in portfolios. – Ryan L

#37 Ryan Lewenza on 09.01.19 at 8:09 am

Paul “I don’t believe that is an accurate statement. The rate of growth in manufacturing activity has been in a fairly steady decline, but that’s a much different thing than saying that activity has been in a decline. Growth is still positive, which means that manufacturing activity continues to grow.”

There are different measures of manufacturing activity but the key ones are PMIs (purchasing manager indices). Below 50 indicates contraction of manufacturing activity. Most PMIs around the world are below 50 so I disagree with this. – Ryan L

#38 Wait There on 09.01.19 at 8:31 am

China wants to see Trump lose the next election. Stop and think why you’d want the same thing they want. Financial advisors always talk of REBALANCING or resets. Is Trump’s position with China a time for a reset or rebalancing. Think about it. The other thing is that the West is very naive about China.
Nobody has stopped and thought about why Pro Democracy protests were stopped in Canada because of threats against them. Is this not terrorism by the Pro China faction. Should they not be rooted out like terrorists? No action, money and influence in the background folks. Wake up. Yet a racing tirade by a person leads to arrest and charges. Canada is already down the tubes, CSIS has already warned and the media dissed it.

#39 expat on 09.01.19 at 8:33 am

Raoul Pal provides a very cogent and intelligent argument for what he believes may be coming in terms of recession…

I’m not trying to counter an opinion. I’m trying to add to the discussion…

https://www.youtube.com/watch?v=V7zEXiqiiqA

#40 crowdedelevatorfartz on 09.01.19 at 9:33 am

@#31 Marcus,
@#32 Canuck not Globalist

I didnt think the Full Moon was until Friday the 13th…..

#41 dharma bum on 09.01.19 at 9:45 am

Consumers.

Can’t live with ’em.
Can’t live without ’em.

The U.S. (and Canada, for the most part) consider its inhabitants to be nothing more than units of consumption.

That’s all that matters.
If anyone thinks that there is any humanity left in the world, or that we matter to “the system” in any context other than our individual and collective penchant for paying for stuff (i.e., giving your hard earned money to someone else for some sort of goods or services), they are sadly mistaken and hopelessly naive.

Our entire society is based on designing more efficient systems to brainwash its subjects into mindlessly craving and consuming stuff in perpetuity. The moolah needs to keep on flowing, baby! It’s the ONLY thing that matters. The velocity of money is the life blood of existence in the capitalist world.

Excessive consumption is at once our salvation and our demise.

Easy credit is designed to encourage profligate consumption for the good of the economy as a whole. Ironically, it instigates individual poverty, bankruptcy, and ultimately recession and depression.

Saving your money helps yourself while harming others (i.e., they’re not getting your money). Spending your money helps others, while you impoverish yourself.

The paradox of thrift.

It’s a vicious circle, man. Like having a tiger by the tail.

#42 reynolds531 on 09.01.19 at 10:34 am

Ryan I asked this a week or so ago and got no answer from Garth.

What happens to preferred shares in a negative interest rate world?

#43 Doug t on 09.01.19 at 10:55 am

KEEP ON SHOPPING EVERYONE – sad just sad – soon to be headed to the local landfill- people buy so much senseless useless sh*t that eventually ends up in the dump and we call that progress? We sadly rely on “consume”r’s to go out and keep buying more and more sh*t that they truly don’t need just to prop up this financial model. We are CHOKING on all this manufactured crap the world over and yet we continue to be told to BUY MORE SPEND MORE – pathetic

#44 Preferred on the brain on 09.01.19 at 11:02 am

#36 Ryan Lewenza on 09.01.19 at 8:06 am

Doolittle Maggie “Ryan and Garth, If you like preferreds here, do you suggest an overweight holding?”

We recommend a 15% weight currently in portfolios. – Ryan L
..

Ryan – why do you think Canada has become so stuffed with these rate rest preferreds rather than perpetuals?

Given the small market they are so sensitive to interest rates – they’ve been on sale for 10+ years basically…..it will take many many years for these to raise back up….. PFF does what you would want in fixed income.. it is yielding 5.57% and steady as a rock.. of course we don’t get tax friendly part with that…. so not good that way.

I get they are massively on sale and can’t resist buying them, but still they are by far the worst performing part of my portfolio… it would be nice if we had a better balance between resets and perpetuals.

Thanks for any thoughts!

#45 NoName on 09.01.19 at 11:58 am

Interesting read

https://www.forbes.com/sites/michaelshellenberger/2019/08/30/forget-the-hype-forest-fires-have-declined-25-since-2003-thanks-to-economic-growth/#5c0c0b3f163d

#46 Capt. Serious on 09.01.19 at 1:57 pm

Despite Trump’s tweet this week suggesting is at fault for the , this just doesn’t jive with reason and the data.

^^Reworked Ryan’s sentence for universal usage.

#47 crowdedelevatorfartz on 09.01.19 at 2:45 pm

@#77 Ace Goodheart

Michael Crichton’s book “State of Fear” was one of his worst but the premise of the book was well worth considering.
Govts., big business, the media, etc. ….. all rely on the population being afraid.

People wont hesitate to elect “leaders” who promise more border protection, more jobs, to protect the environment, their organic food, their water, on and on and on…. keep them scared and they would vote for the Devil to bail them out.

A conspiracy?
Probably not.
A huge money maker?
Definitely.

#48 Ryan Lewenza on 09.01.19 at 3:00 pm

Preferred on the brain “Ryan – why do you think Canada has become so stuffed with these rate rest preferreds rather than perpetuals?”

Believe it or not they were created as a response to perpetuals being hurt by rising rates. Perps don’t do well when rates rise so the bankers created resets to benefit from rising rates. They thought they solved a big problem but they (and the rest of the world) underestimated how low and how long rates would stay low. – Ryan L

#49 SoggyShorts on 09.01.19 at 3:07 pm

#31 Marcus on 09.01.19 at 1:12 am
China must be completely and utterly crushed never to rise again. I get so sick of people talking economics and profit and stock portfolios when they make their profits off of the backs of slaves in China.
*********************************
I’m impressed that you own 100% Canadian products with zero purchases of things made anywhere in Asia.

Of course, you must also be eating 100% locally grown food as well which is also impressive.

But I think what impresses me the most is that you somehow found a way that “Utterly crushing China” would help out the “slaves” over there making goods for export.

Bravo.

#50 Tony on 09.01.19 at 3:53 pm

Trade War = Negative Interest Rates = Decimation Of The U.S. Banking Sector = Endless Recession For America Just Like Japan And Europe

#51 Tony on 09.01.19 at 3:57 pm

Re: #44 Preferred on the brain on 09.01.19 at 11:02 am

Buy them near the end of April 2020 and sell them near the end of September 2020. I’m buying TBT and selling gold short during that time-frame.

#52 ts on 09.01.19 at 3:58 pm

@43 Doug

“We sadly rely on “consume”r’s to go out and keep buying more and more sh*t that they truly don’t need just to prop up this financial model. We are CHOKING on all this manufactured crap the world over and yet we continue to be told to BUY MORE SPEND MORE – pathetic”

So true! A lot of useful sh*t people buy also ends up in garage sales, which is great if you’re a thrifty type. Just this past weekend bought NIB garage door opener – 1 year old for $45 (retails for $250). In the past also purchased lawn mower (lasted 15 years), endless supply of garden tools, (high quality- not like the crap they make nowadays), endless number of kids’ furniture, toys, games (all in excellent condition) for a fraction of retail price; however, there is also a lot of stuff that probably ends up in landfill – home decor items and cheap furniture, etc.

#53 Tony on 09.01.19 at 4:06 pm

Re: #39 expat on 09.01.19 at 8:33 am

This is also one of his better videos for the expansion of the balance sheet in America in the future.

https://www.youtube.com/watch?v=5OFaZcC0lRU

#54 TC on 09.01.19 at 10:05 pm

The free market if allowed to function will reshore those jobs possibly with robotics/automation and eliminate the need for low skilled low pay labor. Geez its getting nauseating listening to the chicken littles screaming the world is coming to an end because Trump is standing up to China. Lets not forget that China is still a COMMUNIST country…………….we really don’t want to be doing any business with them!

#55 Spectacle on 09.02.19 at 1:01 am

” I think they will keep spending at the malls and on Amazon”

C/o Ryan on the 31 of August 2019.

——————————
Ryan, loved your Jenga example of economy movement!

My 5 year old plays Jenga , (do the same with coloured shaped blocks). A perfect example of how an economy fragments, moves and responds to market change/forces. Perfect use of an example Ryan.

Take Commercial real estate ( up and holding) versus Residential real estate ( huge downward movement plus stagnation) , and the market fluctuations.

Huge differences, same game. Until all the pieces fall apart….

#56 TRUMP2020 on 09.02.19 at 3:53 pm

TRUMP DIDN’T START THE TRADE WAR!!

It was started 30 years ago … UNCLE KEN can tell you all about it.

Manufacturing and intellectual property has been swepted from the feets of Americans and Canadians alike.

It’s just now that a US president has stepped up to the plate and had the ballz to do something about it.

It’s going to get worse before it gets better but if Trump does nothing we’ll all be eating every meal with chop sticks in the next couple of decades.

Remember Ryan!! He is doing it so your SON can live a decent life and have a decent career here in Canada without him having to learn Mandarin.