Cycles

RYAN   By Guest Blogger Ryan Lewenza
.

Who’s excited to talk about cycles? Just me! Ok, then let’s get started.

In developing my economic and market outlook, a key component of this exercise are the different cycles that I track. In fact, I would argue the ‘business cycle’ is one of the most important things that I focus on in trying to forecast the direction of the economy and equity markets. Today I’m going to review the key cycles that I follow with many of them pointing to better days ahead and additional stock market gains.

First, the business cycle, which captures the fluctuations in an economy. All economies go through periods of growth/expansion followed by periods of contraction/recession. Then rinse and repeat.

We can then break up the business cycle into four distinct phases – early, mid, late and recession – with each one having different implications for the economy and stock market.

Coming into 2020 I was of the view that we were ‘late cycle’ believing we were getting closer to a recession. This was why Doug and I had been reducing risk in client portfolios for the last year or two (e.g., low volatility ETFs, healthcare stocks, no small caps). Then the pandemic hit with this shock sending the global economy into a deep recession.

As seen in the chart below, which comes from Fidelity and perfectly illustrates the typical business cycle, I believe we’ll soon be exiting the recession and move into the early phase of a recovery. As I keep saying to clients, the question is not if the global economy will emerge from this recession, rather when and how robust the recovery will be.

In the ‘early’ phase of the cycle we typically see a rebound in economic activity, low interest rates and easy monetary policies, and a rapid rise in corporate profits. This phase often delivers the strongest equity market returns as we transition from peak pessimism to recovery. During this period stocks historically return more than 20% during this phase, which typically lasts around 12 months. If I’m correct that the US/global economy is transitioning from recession to early cycle, this bodes well for equity markets over the next year.

The Typical Business Cycle

Source: Fidelity

The next bullish cycle that I track is the ‘secular’ or long-term equity cycle. I’m a strong believer that the US equity markets go through these long-term bull and bear cycles, each lasting roughly 15 years. This can be seen in the long-term chart of the Dow Jones Industrial Average below.

The secular bear markets are captured in the red boxes and the secular bull markets can be seen with the blue arrows. Let’s look a bit closer at this chart.

Since the Great Depression there have been three secular bull cycles – 1942-1966, 1982-2000 and the current one which started in 2009. The current secular bull cycle is 11 years in, well below the 1942-66 cycle (lasted 23.8 years) and the 1982-2000 cycle (lasted 17.4 years). If history repeats then that would imply another 6 to 12 years left in this secular bull cycle.

Now it’s important to stress that even during these long-term bull cycles the equity markets will still endure market sell-offs or what I would ‘cyclical’ bear markets. For example, in the 1982-2000 secular bull market we had the terrible 1987 market crash. But that looks like a blip on the charts in the context of a secular bull cycle.

I believe we entered a new secular bull cycle in March 2009 and see it lasting for a number of years. What does this mean for US stock market returns? The long-term average return for the S&P 500 including dividend is around 9% annually. In secular bull cycles average returns are closer to 16% annually, which is exactly what the S&P 500 has returned annually since March 2009. Giddy up!

Secular Cycle for the Dow Jones Industrial Average

Source: Bloomberg, Turner Investments

The last cycle I track is the average performance of the US stock markets over the calendar year. The strongest seasonal period for equities is the November to May period. This can been seen clearly in the chart below. On average the S&P 500 returns 7.5% in the November to May period, and only 0.5% for the June to October period. You may have heard the “sell in May and go away” expression and this chart speaks to this.

Ned Davis, one of the research providers we utilize, recently noted in a report that 81% of the time the equity markets deliver a positive return in the fourth quarter or the October to December period.

Given these very bullish stats I believe post the election we could see the stock market regain its footing and start rallying into year-end and into H1/21. As covered in my last blog topic, November could be a bit bumpy if Trump losses and contests the US election, but once this is resolved we could be off to the races based on this strong seasonal cycle.

S&P 500 Average Daily Performance over the Calendar Year

Source: Bloomberg, Turner Investments

Cycles are around us (calendar, weather, planetary, astronomical etc.) and they have real consequences on our lives. Well, there also economic and market cycles, which impact our lives and based on my understanding and interpretation of these different cycles, I see better days ahead for the global economy and equity markets.

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.

 

87 comments ↓

#1 Steerage on 10.24.20 at 11:07 am

Speaking of cycles…
Wave three looks fun!

https://twitter.com/neuroicudoc/status/1319815604933521408?s=19

#2 crowdedelevatorfartz on 10.24.20 at 11:15 am

“Buy in October until the fields grow clover.”

#3 KNOW IT ALL on 10.24.20 at 11:30 am

What is going to come about of all the DEBT!

Gamechanger: Paypal now accepts BITCOIN!

#4 Joe on 10.24.20 at 11:40 am

Hi. Is this recovery for the top 10% or for everyone? For example the top 10% never experienced a recession. They’re purchasing homes, stocks and more. Working remotely etc. Do we need a “K” style chart?
Second question is how will the trillions upon trillions of printing press money impact this potential recovery?

#5 Chris P on 10.24.20 at 11:53 am

Think we are are at the beginning to middle of the recession still.

#6 earthboundmisfit on 10.24.20 at 11:54 am

Hey Steerage ….. I would respectfully suggest that if you are bright enough to be reading this blog, you should also be bright enough to recognize that twitter is a societal evil best avoided.

#7 Robert B on 10.24.20 at 11:55 am

Ryan nice article.

I’ve been hooked on cycles from the master of cycles , Martin Armstrong. He says the business cycle is 8.6 years. That is Pi x 1000……Paul Volcker – his book ” The rediscovery of the business cycle” is a must read also..

Martins “Socrates” computer is all cycles combined. 72 different cycles converging to make one ultimate cycle.

#8 mike from mtl on 10.24.20 at 12:17 pm

Over the long term yes inflation assets like Equites and RE trend upwards. So long as cheap debt is available and getting even cheaper, no reason to believe things to change.

Though, displaying the DOW is a just bit misleading, it’s a handful of US corps that loosely represent the market – SP500 is slightly more realistic. Why not show the TSX longterm, not too pretty?

Though to be fair that’s not how most investors are, vast majority is in mutuals that generally achieve nowhere close to that, or single names they like, tell that to the ones who bought AC at 50$ a share!

As well those 20-ish years are most of a useful lifetime for an individual investor. Who knows? We could just a likely be heading for an epic two decade crash that’s been barely kept at bay in no small part courtesy of the Fed.

#9 Steegage on 10.24.20 at 12:21 pm

#6 earthboundmisfit on 10.24.20 at 11:54 am

Hey Steerage ….. I would respectfully suggest that if you are bright enough to be reading this blog, you should also be bright enough to recognize that twitter is a societal evil best avoided.
…………….

Yeah I guess the covid cycles are just a hoax space cadet….. surf those waves

https://ourworldindata.org/coronavirus-data-explorer?zoomToSelection=true&minPopulationFilter=1000000&time=2020-02-01..latest&country=AUS~USA&region=World&casesMetric=true&interval=smoothed&aligned=true&perCapita=true&smoothing=7&pickerMetric=location&pickerSort=asc

#10 Flanneur on 10.24.20 at 12:22 pm

Great post! Thanks for making such a clear and useful overview of market trends. Appreciate it!

#11 FreeBird on 10.24.20 at 12:25 pm

First, that picture does not bring back good memories for some of us but does remind me of March market drop – most screaming (and well tossing cookies) wanting off and others hands up and tossing in money for the next wave up. As Garth and the guys say just don’t get off FGS. Hang on and put your head down. It’s all good.

Second, fun astronomical facts for 2020: rare Halloween BLUE full moon due just before US election. And 200 year cycle change on Dec 21/20 the winter solstice. It’s the weekend so good time for less serious topics.

https://www.google.ca/amp/s/www.almanac.com/news/almanac/musings/halloween-moon-whats-moon-phase-halloween%3famp

#12 Andrewski on 10.24.20 at 12:31 pm

Another great analysis Ryan.

This is my favourite cycle:

https://www.youtube.com/watch?v=xt0V0_1MS0Q&has_verified=1

#13 Stone on 10.24.20 at 12:53 pm

Over and over and over, we are told:

“Past performance is not an indicator of future performance.”

And yet, that’s all we ever get because hindsight is 20/20.

#14 Stone on 10.24.20 at 12:57 pm

#4 Joe on 10.24.20 at 11:40 am
Hi. Is this recovery for the top 10% or for everyone? For example the top 10% never experienced a recession. They’re purchasing homes, stocks and more. Working remotely etc. Do we need a “K” style chart?
Second question is how will the trillions upon trillions of printing press money impact this potential recovery?

———

From where I’m standing, all I see is a V shaped recovery. For others, I suppose it’s a limp L shaped non-recovery.

Next question.

#15 lonely at the top on 10.24.20 at 1:06 pm

“The markets go up and down. So in some loose sense of the word there are cycles. The problem is that you can fit sine waves pretty closely even to purely random patterns.

Rigorous statistical techniques, such as Fourier analysis, demonstrate that these alleged cycles are practically random.”

– William Eckhardt

#16 TurnerNation on 10.24.20 at 1:49 pm

What the globalists have in store for us.
April 16th..how’d they know CV could do that?

PPP is the buzzword for Privatize the Profits, Socialize the Losses:
https://en.wikipedia.org/wiki/Public-private_partnerships_in_Canada

https://www.businessinsurance.com/article/20200416/NEWS06/912334084/Public-private-partnerships-key-to-covering-pandemic-risks-FERMA-Federation-of-#
April 16, 2020
The Federation of European Risk Management Associations on Thursday urged the European Commission to back the development of public-private partnerships to cover future pandemic risks.

Is this Time magazine’s new cover: the Great Reset?
Remember now longer is there any news, if there was; it’s all predictive programming. Shutting down the Old System, the New System began in March 2020.

https://twitter.com/TIME/status/1319563867345879040/photo/1

#17 TurnerNation on 10.24.20 at 1:52 pm

What else is coming with Carbon tax #2 and Public Private Partnerships, get to know this new concept:
Travel will be further limited due to cost. This is the goal.

https://en.wikipedia.org/wiki/Fuel_poverty
A household is said to be in fuel poverty when its members cannot afford to keep adequately warm at a reasonable cost, given their income. The term is mainly used in the UK, Ireland and New Zealand, although discussions on fuel poverty are increasing across Europe,[1] and the concept also applies everywhere in the world where poverty and cold may be present.

#18 TurnerNation on 10.24.20 at 2:14 pm

Shutting down the old system. Hundreds of thousands in GTA to be out of work; this is how they usher in UBI for Q1 2021. See how the game is played?

For your your health Comrade. Shut down the economic engine of ON and re-direct this flow to the US/Globalist companies: Uber, Lyft food delivery; Walmart, Amazon.
I feel healthier already!

https://www.cbc.ca/news/canada/toronto/covid-19-coronavirus-ontario-october-23-numbers-report-1.5774133
Ford doubles down. More lockdowns on the way: Halton and Durham next for the chop. (www.cbc.ca)

#19 Debtslavecreator on 10.24.20 at 2:23 pm

Thanks for sharing Ryan
Based on what look at we will likely see a brief sharp correction into January that potentially could be 20-25% but long term your prognosis is spot on
Unfortunately as governments eventually raise cap gains and dividends taxes and possibly limit registered plan foreign currency holdings the after tax/after inflation gains will be a fraction of the solid nominal gains

I dream of a re test or a dip slightly below the March 20 lows but not likely

Long term cycles pointing up

Canada undervalued

#20 Ponzius Pilatus on 10.24.20 at 2:26 pm

According to your analysis, Trump is right saying that the economy will go gangbusters in 2021.
Too bad for him, he’ll have to watch from his exile in Poland while his golf courses and hotels will be auctioned off to pay off his debt.
Just heard that his buddy, the Polish PM Duda has Covid

#21 AM in MN on 10.24.20 at 3:32 pm

From yesterday…

News reports indicate the Minneapolis police department budget was cut by $1.5 million, or 1%. Exaggerate much? – Garth

—————————————————–

The spending hasn’t been reduced, but there are a couple of interesting lawsuits going on right now to force the city to maintain police levels as per their charter.

So many have taken injury/sick/stress leave, and many working off their built up vacation and sick time as they start retirement, that the actual number of police hours spent on the street patrolling or answering calls (like when you call 911 because you just got car-jacked) is down about 40% from a year ago, which was in line with their obligations.

It’s like two different worlds if you travel 5 miles, out of the city boundary to one of the dozens of suburban towns with their own police forces.

The city of 400,000 people is now looking for a $500M bailout from the less disfunctional parts of the state or country to bail them out and help rebuild from the rubble. Get used to the “new normal”. One day the money printing party ends, then the real action starts.

#22 Pandemic my derriere on 10.24.20 at 4:06 pm

More Covid19 porn….I am puking and feel sorry for the cretinous human race

#23 Ryan Lewenza on 10.24.20 at 4:10 pm

Joe “Hi. Is this recovery for the top 10% or for everyone? For example the top 10% never experienced a recession. They’re purchasing homes, stocks and more. Working remotely etc. Do we need a “K” style chart? Second question is how will the trillions upon trillions of printing press money impact this potential recovery?”

The recovery speaks to the overall economy, but I agree this recovery has been uneven with lower income households being disproportionately hurt by the pandemic, hence the new ‘k shaped’ term. I believe the recovery will be fueled by all the deficits and debt, but one day all the debt will come back to bite us. I think we can kick the debt can down the road for a while (5-10 years) but one day there will be a day of reckoning for all this accumulated debt. – Ryan L

#24 Capt. Serious on 10.24.20 at 4:17 pm

US large caps have been on a tear the past 10 years. I would be hugely surprised if they have another amazing 10 year run. Something in between the 2000s (terrible) and the last 10 years would be a nice outcome. It’s all on earnings growth to keep propelling this market because we’ve had just about as much tailwind as we’ll ever get from falling interest rates and multiple expansion.

#25 Drinking on 10.24.20 at 4:58 pm

Either all countries forgives one’s (including theres’) debts or we are in for a world of hurt; there is no getting around this unless some miracle happens; cannot squeeze blood out of a rock!

#26 crowdedelevatorfartz on 10.24.20 at 5:07 pm

@#25 Drinking
“cannot squeeze blood out of a rock!”

++++

Tell that to the CRA.

#27 Drinking on 10.24.20 at 5:39 pm

#26 crowdedelevatorfartz

I get it, but even you will have to admit that there is a limit until people say “enough is enough”; the irresponsible one’s should learn a lesson but those who have done everything right, paid the price should not be punished for the irresponsible one’s!

How do we differentiate; people buying now although Garth and many others have stated it is not a good time unless one has the resources to withstand the pitt falls lying ahead; if so, then take care of yourselves and do not rely on others to bail you out!

#28 Flop... on 10.24.20 at 5:47 pm

Rhino, I was a good boy, and let the A-listers of this comment section have a chance to respond to your post, now it’s time for this Z-lister to talk about Sports.

A little bit of COVID, but mainly sports.

A lot of people seem to yearn for a return to normalcy.

What if the old normal never comes back?

Did things ever stay the same each calendar year?

Maybe this is all about adapting and overcoming, instead of a return to perceived normalcy?

Anyway, in a normal year 100,000 people would have crammed into a sporting venue in Melbourne, in the state of Victoria, to watch Australia’s version of the Super Bowl.

Instead 30,000 souls were allowed to watch the game in a 42,000 seat stadium in Brisbane, in the Covid friendly state of Queensland.

Unlike the Super Bowl, the Australian Grand Final is always held at the same stadium, I actually went to the last one that wasn’t at the Melbourne Cricket Ground, in 1991, which was held at another Melbourne stadia due to a major ground revamp being undertaken at the MCG.

Here is the highlights package of yesterday’s game, I did not see any masks in the crowd.

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

One guy gets absolutely smoked at the 5:30 and gets knocked out cold.

I was never knocked out, but featured in hundreds of such collisions and is probably why I am unable to mount a coherent argument about anything.

Upon death, my wife should probably donate my brain to science to study the damage of concussions.

She has a hard time talking about that sort of thing.

She still can’t decide if she’s gonna bury or burn me…

M46BC

#29 Faron on 10.24.20 at 6:00 pm

Great post Ryan.

Regarding seasonality, there are multiple lines of evidence that everyone is betting on the November bounce. When everyone thinks something is a good idea, a flinch in the opposite direction can lead to fast panic.

–Typical seasonality
–post-US election bump
–hedge funds are all-in on equities
–AAII bear index approaching Feb values
–%short at yearly low
–VIX puts far outweighing call on VIX.

Seems the market is pricing in a Biden sweep, or at least a smooth election and transition.

#30 Drinking on 10.24.20 at 6:40 pm

Looks like these Russian’s finally said to themselves “the hell with it”, this will be the future! :)

https://www.dailymail.co.uk/news/article-8874975/Moment-drunk-Russian-soldiers-smash-tank-metal-fence-Volgograd-airport.html

#31 Ponzius Pilatus on 10.24.20 at 7:01 pm

#26 crowdedelevatorfartz on 10.24.20 at 5:07 pm
@#25 Drinking
“cannot squeeze blood out of a rock!”

++++

Tell that to the CRA.
—————
CEF
Got tax issues?
Don’t fight them.
See what it did to Trump.

#32 Cow Man on 10.24.20 at 7:07 pm

Love your article. One change over the historical data of cycles covered, is quantitative easing. QE did not manipulate the past cycles as it is doing now. If no one allows the “air to come out of the balloon”, how can it ever go into a re-inflation cycle?

#33 Mark on 10.24.20 at 7:20 pm

Awesome go to cash in May and rebuy in November.
Great research find.

Nice post.

#34 Steve French on 10.24.20 at 7:21 pm

Ryan: ummm.. you really believe that your life is affected by astronomical cycles?

i.e….. changes in the earth’s tilt, wobble and orbit, that occur over the timespan of tens of thousands of years?

[… backing away from this blog slowly…]

#35 Nonplused on 10.24.20 at 7:24 pm

There are other factors that can kick off cycles, especially energy availability. When coal production in Britain peaked in 1913 WWI followed soon after. The period from WWII (about 1945) to the late 70’s saw the US economy boom as it became the world’s largest oil producer. US conventional oil production peaked in or about 1971 (almost exactly when Hubbert predicted it would) and then we got the 80’s. The price of oil went way over $100/bbl in the mid-2000’s which led to the financial collapse. Then came shale oil and the US economy was off to the races again and total production is well above where it was in 1971.

Right now, with oil at around $40, which is pretty low when inflation adjusted, it speaks well for US economic growth (sans covid).

A big part of the “Chinese miracle” was not just the cheap labor but also the cheap energy provided by China’s vast coal reserves. Production went from next to nothing in 1950 to 3,500 million metric tons per year in 2012, making China the world’s largest producer. So while we in the west have been trying to phase out coal and nuclear power, China has been building plants like crazy. Had it not been for the massive offshoring of jobs to China and the resulting buildout of Chinese coal generation, the west would not have been able to shut their coal plants down.

The Norwegian miracle is also based on oil production and export, eastern Canada being a major customer.

So when doing macro economics or geopolitics, energy is always the first place you start. The energy picture drives everything else. Cheap energy leads to a growing economy, expensive energy causes a contraction.

This is why the dreaded Trudeau carbon taxes are going to be a long term drag on the Canadian economy. In July and August of this year, I paid more in carbon taxes than I did for the gas I used in my home (delivery charges not included). What kind of way is that to run an economy? And what does Trudeau expect me to do about it? I already have high efficiency everything and decent insulation. Pretty much all the lighting is LED. I could maybe change out the windows for a marginal improvement but that would run $30,000 or more. The only cost effective solution is to blow more insulation in the attic, but it isn’t bad now.

The carbon taxes are going to reduce carbon consumption in Canada, no doubt about it. Whenever you tax something it discourages consumption. However it is also going to mean reduced economic growth, because the price of energy is the price of everything.

—————————–

No, solar and wind won’t save us. They aren’t energy dense enough. And what to do with the solar panels and windmills at the end of their life is a big problem. They only last about 20 years, and after that they go to the landfill. The composite blades cannot be recycled and they wear out. And people are worried about straws.

#36 S.Bby on 10.24.20 at 7:30 pm

We are not in a typical business cycle downturn; we are in a health crisis which has caused a de facto depression. Without CBs propping up worldwide economies we’d be out in the streets. Unfortunately IMO the CBs are only kicking the 2008 can down the road and eventually (maybe soon) we’ll face a financial reckoning.

#37 Faron on 10.24.20 at 7:34 pm

#154 zoey on 10.24.20 at 6:41 pm

Agree 100% Garth …everybody chill.

It will take a few more months before reality hits RE I think.

I’m having to fight hard to convince my partner that this is the case. Obviously, we don’t know it’s the case with much certainty, but I can’t shake that the housing market headwinds are strong and building and now is just not a time to buy. Garth argues convincingly that this is the case and more and more media is popping up with some warning signs (but maybe that’s just my google bubble). To look at it another way, why not wait? What’s the argument against waiting? Pissing away rent is the only legit one, but that doesn’t hold if there’s equal likelihood that buying will piss away the down payment.

Oh, and US sales are approaching levels that preceded the GFC. Also not a good sign.

#38 gimme stuff on 10.24.20 at 7:41 pm

Needs a period of M&A in there too. (Mergers and Acquisitions.)

#39 Nonplused on 10.24.20 at 8:06 pm

#4 Joe on 10.24.20 at 11:40 am
Hi. Is this recovery for the top 10% or for everyone? For example the top 10% never experienced a recession. They’re purchasing homes, stocks and more. Working remotely etc. Do we need a “K” style chart?

—————————–

I really wish this “top 10%” or “1%” thing would go away. When adjusted for age and including all assets including pensions the disparity is still there but it is not as bad as it looks. A young doctor that just finished med school is likely to have a net worth that is highly negative, whereas a retired doctor is likely to be in the top 10% or higher. But over a lifetime it is the same doctor.

The big difference, it seems to me, is that the millennial generation expects to be born on the finish line. They expect to be granted the same house and car and RV and maybe boat their parents had when the millennials were teenagers. But there is no evidence that Gen X or the Boomers had any more money at the same age. I didn’t. I camped in a tent I bought for $10 at a garage sale. And prayed it didn’t rain. The generation that came before the boomers had a lot less.

Sure, the retort goes, “But they had more opportunity!” Did they? For the most part they did not have the opportunity to “learn to code”.

My dad is not a well educated man (and sometimes it shows), he brags about his grade 9 education. But he always fails to mention that he went to SAIT and got his journeyman’s certificate. Then he worked far from home in the cold and the mud for many years and went bankrupt before things started going well for him.

My grandfather’s story is even sadder. He was lucky to have a modest paid for house and CPP and OAS when he retired at 65.

The wealth gap is largely a construct. It does not exist across the 99%, at least over time. Sure, the top 1% are extremely wealthy, but it is mostly a result of mark to market shenanigans in the markets. Tesla could not be sold for $340 billion, except to Robinhood traders but they could not absorb the full volume.

So folks, when you argue for “taxing the rich” or a “wealth tax”, you are being really pessimistic if you don’t realize you are arguing for higher taxes on your future self. Even those who argue for taxing capital gains on primary residences must understand that they are arguing to spend their own declining years in a chicken coop rather than a home. But I guess the pressures of today always seem more pertinent than the challenges of tomorrow.

——————————

A further complication to this “wealth gap” thing is that it just doesn’t consider whether the poor are really worse off today than they were in the past, physically. All we are doing is looking at Bezos and Gates “net worth”, which is a mark to market fabrication, and starring in astoundment at the numbers. But even the poor are checking out the horridness of it all on their smartphone. When I was a kid, I had friends who were still on “party lines”, if any of you can remember what those were.

#40 Karlhungus on 10.24.20 at 8:08 pm

Ryan
The problem with evaluating business cycles is which one do you look at ? Pre covid , Canada was booming yet Alberta was in recession. It would seem to be to look local. As a country, it almost doesn’t matter which part of the cycle we’re in, what matters is what cycle the province is in.

#41 Nonplused on 10.24.20 at 8:24 pm

#25 Drinking on 10.24.20 at 4:58 pm
Either all countries forgives one’s (including theres’) debts or we are in for a world of hurt; there is no getting around this unless some miracle happens; cannot squeeze blood out of a rock!

—————————-

The problem with debt forgiveness is that there are always 2 parties to a debt. Sure the lender might seem faceless because it’s all packaged through a bank, but to forgive a loan you must also expunge the lender’s asset. Thus a bunch of pension funds and many retirees will suddenly be broke.

Debt forgiveness is not dissimilar in practice to that “keep your rent” guy stealing his landlord’s property.

#42 Dr V on 10.24.20 at 8:42 pm

“When I was a kid, I had friends who were still on “party lines”, if any of you can remember what those were.”

Yes I can! And the phone had a round thing you put your finger in!!

#43 Ryan Lewenza on 10.24.20 at 8:51 pm

Karlhungus “Ryan. The problem with evaluating business cycles is which one do you look at ? Pre covid , Canada was booming yet Alberta was in recession. It would seem to be to look local. As a country, it almost doesn’t matter which part of the cycle we’re in, what matters is what cycle the province is in.”

I primarily focus on the US business cycle since the US economy is the largest economy in the world and the main driver of the CAD economy. My focus is on the economy and stock market. Sorry but Alberta’s economy has no impact on the US economy and the business cycle. – Ryan L

#44 Flop... on 10.24.20 at 8:53 pm

Commuting this week I saw lots of out-of-province license plates.

California, Georgia, New Brunswick and Alberta among them.

The young Alberta dude had written a message on his back window.

‘Just moved here for work, please be kind, peace & love.’

Good luck, son…

M46BC

#45 Karlhungus on 10.24.20 at 10:23 pm

Ryan
Maybe you misunderstood, I’m not saying albertas economy affects anything. The US economy could be booming – what difference does that make to me as an Albertan if the Alberta economy is in the gutter.

#46 Stan Brooks on 10.24.20 at 10:31 pm

It seems we are missing the most important cycle here, the credit cycle.

I thought we were at peak credit for quite some time, this is why we moved into outright monetization of the deficits.

The long term trend of structural unemployment due to AI and outsourcing was simply escalated by the virus.

For real recovery we need to boost the demand side that was at it’s peak just before the virus hit/due to the peak credit/ and that has to be organic growth.

Yes, we will see most likely stock markets growing further. Some more, some less.

But the excessive monetization with zero rates has it’s limits.

The inflation of essentials as it seems will be significant, the long term trend of reduction in economic activity incentivized by official policies – including the carbon taxes, the move to green economy is not going away and will be exacerbated by the lockdowns and permanent decline in certain sectors that are not coming back – tourism, restaurants, housing.

The guaranteed base income is not the solution, if somebody thinks that government will forever hand out money so you can go on vacation, travel the world, live the life without working, they need their heads checked.

That structural shift in economic activity in my mind is non-reversible. We will most likely consume less and pay more for it for quite a while.

Yes, stock markets will go up in a mere escape from an ever depreciating currency.

Yes, due to mismeasurement of inflation we will be reporting ‘growth’. But will life be better? Hardly.

The move away from the big cities will only accelerate.
The equalization of standard of living worldwide will continue. All that spells bumpy road ahead for our middle class/or whatever is left from it.

For how long would we be able to continue to abuse monetary policies screwing retirees and savers? Hard to say as the resilience of the system has surprised me big time but the ability of the economy to support large number of unemployed and retirees for extended period of time is certainly not unlimited.

The last straw breaks the camel back and it usually ‘comes out of a sudden’ as ‘nobody was able to foresee it’.

The ability to run zero rate policies for extended period of time while cost of living skyrockets due to excessive monetization, with very little real economy left is very limited.

Cheers,

#47 Stan Brooks on 10.24.20 at 10:45 pm

At no time in history was there a situation with such high total debt combined with such low rates and structural changes in the economy due to automation, AI, outsourcing, the move to green economy. Also combined with such unaffordability of essentials and lack of quality jobs. Those trends are not going away even if we beat the virus tomorrow.

Whatever new normal comes out from this will be very different from the old normal. Paradigm shift in labour markets, standard of living. Rich will live the dream live, but the rest….

The problem is that these trends are experienced on global scale. It is not the case with just Japan from the past and the rest of the world absorbing the shock.

Cheers,

#48 Tom from Mississauga on 10.24.20 at 11:04 pm

Hi Ryan
Great read! Hold US stocks for sure. Question: noticed grain prices are surging, got shares of NTR but is there an ETF that you suggest, maybe toss up a chart.

#49 Phylis on 10.24.20 at 11:07 pm

#35 Nonplused on 10.24.20 at 7:24 p
Please add toxic batteries to your list.

#50 TurnerNation on 10.25.20 at 1:15 am

What’s really going on. I called this as WW3 back in April.
Apparently, the World Bank or whomever, agrees – as quoted in this pathetic weblog, the other week.
How long do world wars last? 4-5 years.
Some blog dogs wag that All Wars Are Bankers Wars.
Watch what happens.
Will the assets of the (former) First World countries be stripped via Public Private Partnerships?
Aka socializing losses and privatizing profits?

Why are economies worldwide being shut down ‘for our health’?
Simple.
In 2008 (GFC) the bankers killed Supply (of Credit).
In 2020-2021 they killed Demand (for services, travel).

Three words. U. B. I. Plus communism. The shut downs will continue until morale disproves.
In the “news” Denmark limits gatherings to 10, down from 25. Science yo
And stops serving alcohol at a 10pm.
Same plan as Toronto’s. The globalists are just playing us at this point. Science yo. This control mechanism is NOT going away. Agenda 2030 is coming. Google it.
Lockstep. Oh yes the virus sleeps at 10:01 science proves it! No fun allowed in the New System.
Only work Comrade. We have new debts to pay.
The telescreens are truth.

#51 Faron on 10.25.20 at 1:41 am

#39 Nonplused on 10.24.20 at 8:06 pm

You are about as out of touch as one would expect of a middle class Calgarian suburb dweller. If you think having a smartphone makes you wealthy and thus anyone who has one has it easier than your forefathers you are utterly mistaken. A smartphone is simply a tool of life today, is as cheap your grandfather’s hammer and as necessary. Furthermore, intoning that the 1% dont have wealth because of your “mark to market” idiocy is utterly laughable. When Elon, for example, is handed stock options worth hundreds of millions he could immediately sell them for cash and the share price would hardly blink aside from insader sales concerns. There are marlet makers who help unload large troves of shares without skewing prices. If nothing else, he has credit up the wazoo and with 1/8th of a brain cell could capitalize on the access to millions handsomly. And if Tesla fails, he walks away with a golden parachute and no liability. The 10% both have money and have eaay access to further dollars at very low rates and you are a blind fool to think otherwise. That’s radically different from the growing population of people holding down a minimum wage job (if any) who have almost no ability to obtain credit at any decent rate to begin to take part in common leveraged asset purchases like homes, education or reliable cars that almost uniformly further ones apparent and financial standing. But sure, feel good about the state of the US and Canada because they have cell phones amd maybe can buy plastic garbage from walmart if that helps you sleep at night.

#52 NSNG on 10.25.20 at 1:41 am

I just learned that Ric Ocasek, leader of the popular ’80’s band The Cars, was worth $5 million at his death.

That is shocking considering he was at the top of the music world, many times, in the ’80’s. Clearly he was not one for a B&D portfolio.

Where did it all go? Up his nose?

#53 Nonplused on 10.25.20 at 3:42 am

#43 Ryan Lewenza on 10.24.20 at 8:51 pm

“Sorry but Alberta’s economy has no impact on the US economy and the business cycle. – Ryan L”

Mostly true but they are negatively correlated. When energy demand in the US is strong, Alberta prospers. When energy demand in the US is weak Alberta suffers. When there is a boom in Alberta it usually means there will soon be problems in the US. When Alberta goes bust it usually means recovery in the US. When the Alberta economy is even-Steven then it means reasonable growth for all involved. But you are absolutely correct Alberta is the cart, not the horse.

Of course the shale oil boom messed up the relationship, but I only see that lasting medium term. Oil is a depleting resource so sooner or later Fort Mac will be back. They will play around with their toy windmills but that isn’t going to cut the mustard. In fact, by diverting money to toy windmills and solar rather than small nuclear, they are just laying the groundwork for another energy crisis. Oil, gas, and coal will have to save the day once again while we put these childish wastes of money behind us.

But eventually the fossil fuels will no longer be economic. If we aren’t all nuclear by then it is back to hunting and gathering. Nuclear energy, unfortunately, cannot be built by people hunting deer with sharpened sticks, so it is either get it going soon or the experiment will end. Not in my lifetime. Probably not in my kid’s lifetime. But my grandchildren?

Remember, it is all about EROEI (energy return on energy invested). Almost no other factor matters as much.

#54 Nonplused on 10.25.20 at 3:57 am

#42 Dr V on 10.24.20 at 8:42 pm
“When I was a kid, I had friends who were still on “party lines”, if any of you can remember what those were.”

Yes I can! And the phone had a round thing you put your finger in!!

———————–

What’s strange about it in retrospect is that back then we didn’t realise we needed Facebook in our pocket.

I can’t remember what I used to do before Netflix but I think it involved dirt bikes, camping, and fishing. And skiing. And soccer twice a week so thus I wasn’t so fat and out of shape. Our version of Facebook was beers with the team after the game. Is this progress?

Maybe we would be better off with rotary phones.

#55 Damifino on 10.25.20 at 7:22 am

#53 Nonplused

They will play around with their toy windmills but that isn’t going to cut the mustard. In fact, by diverting money to toy windmills and solar rather than small nuclear, they are just laying the groundwork for another energy crisis. Oil, gas, and coal will have to save the day once again while we put these childish wastes of money behind us.
—————————————–

I could not agree more. Blasphemous, but true. And yes, nuclear is next. Probably thorium reactors.

Energy must get denser, not more rarefied. There is no escape from this. But it’s actually good news.

#56 SOMETHINGS UP!! on 10.25.20 at 7:25 am

Much of the global population is SUFFERING.
While 1% enjoy 99% of the world’s richess.

For far too long our system has been controlled by a few.
The DENCENTRALIZED finance system is in the making.

This will allow for everyone to enjoy the world’s richess.
Change is coming like a steamroller down the tracks.

….and it can’t be ignored anymore.

#57 Conservative Populationist on 10.25.20 at 7:42 am

Toronto in 10 years. Do you want Canada to become another -stan country?:
https://www.reddit.com/r/overpopulation/comments/ib83ho/i_know_it_mustve_been_normal_for_them_but_i_cant/

#58 tkid on 10.25.20 at 8:00 am

Why do you believe the current recession is almost over? From what I can see, it has just started.

#59 maxx on 10.25.20 at 8:02 am

@ #25

Wishful thinking. Debt can be recovered. Squeeze slowly at first and those who wish to hang onto their “assets” will find ways to tighten the old belt.

Far too many think they can get something for nothing and the days of reckoning will arrive – sooner or later, but they will arrive.

Having said that, TPTB’s motives for cheap money can easily be impugned.

That’s what maintains this chronic global economic mess.

“A chicken in every pot” has morphed into “a house (or two….) for every debtor”.

Profligate borrowing and spending should never be rewarded: most especially with the laughable idea of debt “forgiveness”.

#60 Phylis on 10.25.20 at 9:11 am

54 Nonplused on 10.25.20 at 3:57 am
#42 Dr V on 10.24.20 at 8:42 pm
“When I was a kid, I had friends who were still on “party lines”, if any of you can remember what those were.”

Yes I can! And the phone had a round thing you put your finger in!!

———————–

What’s strange about it in retrospect is that back then we didn’t realise we needed Facebook in our pocket.

I can’t remember what I used to do before Netflix but I think it involved dirt bikes, camping, and fishing. And skiing. And soccer twice a week so thus I wasn’t so fat and out of shape. Our version of Facebook was beers with the team after the game. Is this progress?

Maybe we would be better off with rotary phones.

——————
it was fun to talk over the busy signal too, the original chat room.

#61 Dharma Bum on 10.25.20 at 9:39 am

Speaking of cycles…

In the magical kingdom of Trudeauland, we will all shortly be experiencing the RINSE cycle, to be followed by the SPIN cycle.

Hang on to your wallets, suckers!

#62 gfd on 10.25.20 at 9:41 am

https://financialpost.com/moneywise/mortgage-rates-may-rise-as-bank-of-canada-ends-emergency-pandemic-rogram

#63 crowdedelevatorfartz on 10.25.20 at 9:48 am

@#56 Somethings Up
“This will allow for everyone to enjoy the world’s richess.
Change is coming like a steamroller down the tracks.”

++++

I presume Millennial Surrealist has perfected cloning OR………
A Communist Chinese comment bot prepping us for the war in Taiwan……

#64 HUNGRY BEAR on 10.25.20 at 9:49 am

Ryan – since your analysis of “history repeats” is of topic I’d like to point out an observation on your chart.

In every BEAR market there seems to be 3 dips of similar magnitude off the highs that reaches similar lows with the exception of the 20’s which was dramatic due to the similar economic fall-out we are witnessing today.

So if history and cycles follow a pattern then we have 1 more tumble to take and by the looks of where these overvalued markets are today it is going to be similar to a 20’s crash. You’ll have to expand your “red box” when this occurs.

For the past 10 years this economic expansion has not been created organically but instead propped up by money printing…. a practice that simply can’t go on forever.

Caveat Emptor! Ensure you have taken profits and have large cash reserves. We are sitting on the heals of another bargains of a lifetime opportunity.

#65 crowdedelevatorfartz on 10.25.20 at 10:05 am

@#50 Turner Nation.
“How long do world wars last? 4-5 years.
Some blog dogs wag that All Wars Are Bankers Wars.
Watch what happens.”

++++

Well, if the Gulf War “skirmishes” were any indication.
The first stage of most modern wars are over within a few days or weeks of pinpoint destruction.

Then the age old urban warfare “slog” begins.
Guerilla style warfare with ambushes, boobytraps, etc that goes on for years and destroys everything….
( Lets see how long it takes the Taliban to close all the schools again and publicly execute “infidels” once the US pulls out of Afghanistan after 19 YEARS of fighting)

It will be interesting to see if China is willing to risk it’s naval fleet in skirmishes all over the planet now that they have the largest navy in the world.
( They surpassed the Americans in Naval tonnage this year. First time thats happened since WWII).
As one US official stated, “They are turning out navy ships like we make sausages”

The Thucydides Trap grows ever closer.

WWIII now?
With a world full of Nukes and the accurate ICBM’s to deliver them?
Most modern wargames have found that the “losing side” reverts to nukes pretty quick when pushed into a corner and defeat is inevitable…….

“WWIV will be fought with sticks and stones”, Albert Einstein….

#66 Ryan Lewenza on 10.25.20 at 10:10 am

tkid “Why do you believe the current recession is almost over? From what I can see, it has just started.”

First, let’s look at the economic data. In the US they lost 20 mln jobs in Mar/Apr but has since added back over 11 mln. In Canada we lost 3 mln jobs and have added back 2.3 mln. So we’ve recouped 50-60% of lost jobs so far. Manufacturing is coming back strong with the ISM index now well above 50. Housing markets in North America are rebounding and are quite strong. So we’re seeing key areas of the US/global economy rebounding. The areas that remain weak are the travel and leisure industries, restaurants and small businesses. When looking at the overall economy we saw a massive contraction in Q1 and Q2 GDP, but Q3 is expected to bounce back strongly (the Atlanta Fed GDP model is predicting Q3 GDP to bounce back to 32%). I see Q4 GDP also being positive so based on the definition of recessions (2 quarters of negative GDP growth) we should be out of recession by end of year. I see a vaccine/medical treatment coming out in the first half of the year so this should start to get control of this pandemic. Lastly, the amount of stimulus has been unprecedented, which will help boost the economy big time next year. So yes we’re still in recession, but I see us coming out of it in the coming months. Unless Covid leads to another complete shutdown like March in the coming months then we should be on the road to recovery. As Gretzky is famous for saying “go where the puck is going”, so focus on the future rather than the present. – Ryan L

#67 Ryan Lewenza on 10.25.20 at 10:21 am

Karlhungus “Ryan, Maybe you misunderstood, I’m not saying albertas economy affects anything. The US economy could be booming – what difference does that make to me as an Albertan if the Alberta economy is in the gutter.”

Agree on this point. We live in local communities and if your community is in the dumps it has a much larger impact on your life than the global economy. But as the US/global economy recovers this will increase oil demand and global oil prices. If we could then get a PM that gives a damn about AB and our energy sector then we could then see a nice rebound in Calgary and AB economy. – Ryan L

#68 NoName on 10.25.20 at 10:22 am

And just when i tought that it cant get any funnier, this…

No toster oven for you!

https://www.zerohedge.com/political/welsh-people-blocked-buying-non-essential-items-due-lockdown

#69 MF on 10.25.20 at 10:23 am

#51 Faron on 10.25.20 at 1:41 am

Hit it out of the park. Like usual.

MF

#70 crowdedelevatorfartz on 10.25.20 at 10:32 am

Well Premier Horgan’s gamble paid off.
The NDP have been re-elected with a strong majority for socialist leanings ( Trudeau Liberal Party apparatchiks take note).
He got his majority before the proverbial “doo doo” hits the economic fan
Lets see how popular the NDP is this time next year when we are in the cold grip of a nasty recession and the Ottawa cash cow is dry….

#71 Steerage on 10.25.20 at 11:29 am

#52 NSNG on 10.25.20 at 1:41 am
I just learned that Ric Ocasek, leader of the popular ’80’s band The Cars, was worth $5 million at his death.

That is shocking considering he was at the top of the music world, many times, in the ’80’s. Clearly he was not one for a B&D portfolio.

Where did it all go? Up his nose?

As the saying goes..

I spent all my money on women, booze and drugs… the rest was wasted.

Seems like he didn’t do a good enough job!

#72 Karlhungus on 10.25.20 at 11:31 am

#67 Ryan
Agree 100%!

#73 Dr V on 10.25.20 at 11:33 am

51 Faron

” The 10% both have money and have eaay access to further dollars at very low rates and you are a blind fool to think otherwise. That’s radically different from the growing population of people holding down a minimum wage job (if any) who have almost no ability to obtain credit at any decent rate….”

I might be part of the 10%. But I am 61, and am a partner in a professional firm. I should by all measures be where I am today. Higher if I had made other career,
life, and location choices.

And we pay well above minimum wage. The majority of our employees own homes, including one recently purchased.

We actually lost one employee last week. A newly legalized industry lured him away.

So I see nothing but opportunity for younger people. The only drawback is the cost of RE here on the island.
Though cheaper than Van, Vic and Toronto, it is still well above Saskatchewan.

#74 Dr V on 10.25.20 at 11:48 am

52 Nsng – $5m is still a decent amount of wealth. Hopefully not all tied up in a house. I think the better question is what does society value performers at? Or athletes? Maybe too high?

#75 Xavier Hardcastle III on 10.25.20 at 12:10 pm

Trudeau and Butts crazy idea about killing energy and mining is the thinking of children .

https://www.facebook.com/JohnStossel/videos/652367732225333/

#76 NSNG on 10.25.20 at 12:28 pm

#74 Dr V on 10.25.20 at 11:48 am

52 Nsng – $5m is still a decent amount of wealth. Hopefully not all tied up in a house. I think the better question is what does society value performers at? Or athletes? Maybe too high?

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

Yes, I agree. The lifesavers of our world should get paid like the rock stars and vice versa.

That said, these guys were on top of the world. I remember seeing them in concert when I was a kid. They were touring the world and were on the forefront of the MTV video revolution. They had quite a few hits of the pop variety so they had to be rolling in the dough.

Sadly, people think it will never end and they spend accordingly. He did end up with a supermodel wife

Here is a mini-tribute to him

https://nypost.com/2019/09/16/5-ways-ric-ocasek-changed-the-pop-rock-music-world/

#77 Bob Dog on 10.25.20 at 12:29 pm

Just incase any of you clowns are confused about just how deeply corrupt your puppet government is.

CBC: Golden visas: Are wealthy foreigners taking advantage of Quebec’s immigration program?

https://www.youtube.com/watch?v=kFZSkSBnFBY&t=988s

#78 Frank Santos on 10.25.20 at 12:29 pm

It is different this time, Ryan Lewenza, Canada is becoming Argentina, cycles will not matter or be useful anymore.

#79 Steerage Doggo on 10.25.20 at 12:41 pm

That was awesome Ryan

https://www.instagram.com/reel/CGcPZJbHGod/?igshid=psz3aislj3jx

#80 Ace Goodheart on 10.25.20 at 12:47 pm

Re: fuel poverty:

Fortunately for the more resourceful among us, “wokies” and their new system supporters seem to be mostly rich folk and city kids.

These people think fire wood is expensive stuff you buy at Home Depot to barbeque with in the summer.

I own more than one wood lot that could, if cut, supply my two wood stoves for longer than I am likely to live.

As the kids and the 20-30 somethings drive electric cars that can’t make it out here into the woods on one charge, and the government doesn’t seem to know that these places exist, I am not worried.

Besides, the “wokie” communists are all about cutting down trees for fuel.

Apparently this is “carbon neutral” cause, hey, they just “grow back”

#81 Apocalypse2020 on 10.25.20 at 1:06 pm

The photo on this blog entry perfectly demonstrates where humanity is today.

PREPARE

#82 Faron on 10.25.20 at 1:26 pm

#73 Dr V on 10.25.20 at 11:33 am

It sounds like you take the responsibility to ensure the people who work for you are well values. That’s commendable. Unfortunately, it doesn’t disprove the point overall. The wealth gap and the K are real and problematic and result in populist/nationalist political movements like Trumpism. Canada at least has a bare bones social safety net so the worst off can get their basic needs met. This is a big help. But erode those and let income disparity grow and the People’s Party will transition from fringe to mainstream at the seeming blink of an eye.

#83 Faron on 10.25.20 at 1:45 pm

#55 Damifino on 10.25.20 at 7:22 am

#53 Nonplused

Regarding “toy” windmills and solar panels. Ha! If you wrote that from Germany there’s a better than 50% chance that green energy fueled the computer you naively typed those words into. The material waste and carbon cost of solar and wind are factored into their cradle to grave CO2 impact. If composites cant be recycled, they at least represent a small carbon sink. But, epoxy is labile at high temperatures. It’s not hard to imagine a heat and chemical process that extracts cured resin from the supporting matrix and reuses it for fuel at the very least. Never underestimate human enginuity. And if you would have taken my advice posted repeatedly here and bought ICLN or TAN you would have been handsomly rewarded for your efforts up 70 and 110% YTD respectively. Xeg? -50%. Double your money with a toy or halve it with REAL INDUSTRY. Pffff. That said, there is a bit of mania in the clean energy names, so they are likely to correct some. You are welcome to leave the paleolithic at any time. We will welcome you with open arms, woke hugs, and a cup of chai.

#84 BillyBob on 10.25.20 at 2:06 pm

#69 MF on 10.25.20 at 10:23 am
#51 Faron on 10.25.20 at 1:41 am

Hit it out of the park. Like usual.

MF

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

Yes, the standard of living was better 100 years ago, and it was so much better to be poor then.

Give your heads a shake.

Amazing how thoroughly you both missed the point. The average citizen in Canada today lives like a king from hundreds of years ago. A smartphone is only one tiny indication.

#85 espressobob on 10.25.20 at 2:12 pm

As a global investor its not worth the effort of worrying or timing a whole lot of anything at any time. Easier to sit back and enjoy the ride.

Having said that, I have a funny feeling the markets will soar to the upside when a vaccine for covid is approved by the governing bodies.

So totally don’t want to be in cash if that happens.

#86 Faron on 10.25.20 at 3:00 pm

#84 BillyBob on 10.25.20 at 2:06 pm

The wellbeing of the wealthiest was also worse 100 years ago.

From the demise of laissez faire raw capitalism through the sixties, the wellbeing of the lower and middle class improved dramatically. That happened through regulation and social wellfaire. Since the early 80s that wellbeing among the bottom half has declined or at best stayed flat through an erosion of social services, regulation, globalization and wages. Meanwhile, the wealthiest benefit from all advancements in a monotonic incline. The divergence at issue is that since the 80s and amplified under COVID. Sure, anyone can get life saving cancer treatment now, but some (in the US) will have to go bankrupt to do it. It would be facile to bury you under mountains of data showing this to be the case.

I’d tell you to give your head a shake, but it appears to be too far up your arse for that to be possible.

#87 P.Ooched on 10.26.20 at 2:16 pm

#67 Ryan Lewenza on 10.25.20 at 10:21 am

|| If we could then get a PM that gives a damn about AB and our energy sector then we could then see a nice rebound in Calgary and AB economy. – Ryan L

OK, Ryan so lets assume that you are the new PM. Congratulations! Let’s also assume that you “give a damn” about AB – so now …

What specifically is it that you think a PM could do for our energy sector that would lead to a rebound for the AB economy?