The handoff

RYAN   By Guest Blogger Ryan Lewenza
.

Hey, do you want the inside scoop on the stock market? Do you want to know with a high probability where the S&P 500 will be in a year from now and what will be the main driver of this move? Well, you’re in luck! Below I provide the most important chart that investors need to be following over the next 9-12 months. Interestingly enough, I used to cite the importance of this chart during the recovery from the 2008 financial crisis. It’s funny how history repeats.

During economic recessions central banks respond by adding monetary stimulus to help reflate their economies and engineer an economic recovery. Historically, the main policy tool used by central bankers was lowering interest rates. This changed in the financial crisis as the Federal Reserve (Fed) took rates down to zero but with little effect. Given the severity of the downturn and damage done by the financial crisis, the Fed initiated a new policy tool, known as ‘quantitative easing’ (QE).

QE simply entails the Fed printing money and with the newly printed dollars they turn around and purchase bonds. They do this to help drive long-term interest rates lower.

During the financial crisis the Fed implemented a number of rounds of QE and now they are back at it and this time they are not messing around. Every single month the Fed is purchasing US$120 billion of government bonds and for the first time, corporate bonds. In total, since Covid-19 hit, the Fed has printed and injected over US$3 trillion into the US financial system. Just breathtaking figures.

What’s the connection with the stock markets?

Stocks love Fed money printing and QE. There’s two key reasons for this. First, the bond buying drives bond yields lower, which makes stocks more attractive, on a relative basis. Second, the message this sends to market participants is that the Fed has our back and they will do whatever it takes to reflate the economy.

Below I capture this relationship between the Fed’s bond buying and the S&P 500. Note the tight relationship and correlation of the S&P 500 and the Fed’s expanding balance sheet. So, given the Fed will continue its bond buying program, likely for the remainder of the year, this should help to keep driving the equity markets higher.

S&P 500 and Federal Reserve Bond Buying

Source: Bloomberg, Turner Investments

Now this can’t last forever, and likely doesn’t need to as the stimulus from this bond buying and low interest rates should help lead to an economic recovery over the next few years. Effectively we should see a ‘handoff’ from all the Fed money printing and support, to the US economy then strong enough to grow on its own without the need for all the stimulus. I’ve been using the analogy of a relay race where the baton will pass from one runner (the Fed) to the next runner (the overall economy). That’s exactly what happened during the 2008 financial crisis/recession.

In total the Fed implemented three rounds of QE from 2008 through to 2013. In the above chart you can see this with the green line (Fed balance sheet) rising from roughly US$2 trillion in 2009 to over US$4 trillion by 2013.

Then the ‘handoff’ occurred.

Finally the US economy was strong enough to stand on its own two feet and no longer required these emergency policy measures. The Fed ended its QE policies and we then started to see the economic recovery pick up.

Below I chart S&P 500 earnings and US total people employed from this time. You can see from 2013 (when Fed ended their QE policies) up till 2019 that S&P 500 earnings rose from $100/share to over $150/share. Similarly, total US persons employed rose from 135 mln to over 150 mln. Essentially, there was a successful handoff from the Fed to the economy and I see the same thing playing out this go around.

I believe the Fed will continue these emergency policy measures with them buying additional bonds for the remainder of the year. Then as the economy rebounds with the recovery really taking hold, the Fed will then curtail their bond buying (expect a market correction when this happens), effectively resulting in a ‘handoff’ from the Fed to the economy.

So now you know the most important chart to be watching and how we see the next year or two playing out. You’re welcome! And if I’m wrong just blame Garth. He was crazy enough to let me on here.

Fundamental (Jobs and Earnings) Improved following end of QE

Source: Bloomberg, Turner Investments
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.

 

97 comments ↓

#1 LewenzaCountry aka Prince Polo on 02.27.21 at 8:31 am

Ah – the juices flowing early on a weekend morning with all this talk of QE. I have also seen some of the talking heads on CNBC mention that the US unemployment rate could be sub-5% by end of 2021. Now that’s a rockin’ economy!!!!

Question: when will Canadian banks be allowed to bump up their juicy divvies, so I may fund a trip to Vegas?

#2 SnowOwl on 02.27.21 at 8:41 am

Good morning, Ryan. Are you saying now is a good time to start buying corporate bonds, and if yes, can you recommend a good ETF in the USA to do that. Also, what is your stance on buying PFF in the USA as my understanding is that these are perpetuals, and not rate resets? Appreciate your insights. Enjoy the Porsche!

#3 T-Rev on 02.27.21 at 9:42 am

What’s the price trajectory of used Harley’s?

#4 Johnny Long on 02.27.21 at 9:44 am

DELETED

#5 Tarot Card on 02.27.21 at 9:44 am

Thanks for the blog Garth
Thanks for the post Ryan
Very good analysis.
There are lots of ya buts, overall I believe you are correct.

If you have time can you help explain this debate a few friends are having.
Over the past several months there have been what I believe are conflicting statements stated on this blog.
First people are gorging themselves on debt.
Second people have record savings.
How can we have both at the same time?

Have a great weekend.

#6 Love_The_Cottage on 02.27.21 at 10:08 am

Muskoka is now in lockdown! All you local hicks just stay home! Don’t come down to our cities you virus infested hillbillies!

https://globalnews.ca/news/7665840/simcoe-muskoka-thunder-bay-lockdown-march-1/

#7 Rook on 02.27.21 at 10:08 am

“Effectively we should see a ‘handoff’ from all the Fed money printing and support, to the US economy then strong enough to grow on its own without the need for all the stimulus.”

Has that happened at all since 2007?

#8 Andrewski on 02.27.21 at 10:14 am

Appreciate your easy to understand analysis Ryan.

#9 Flop... on 02.27.21 at 10:44 am

I’m pretty sure the handoff photo is an image of Tiger Woods handing over the golf baton to Brooks Koepka…

M46BC

#10 Joe on 02.27.21 at 10:58 am

Problem is whenever they try to “handoff” the next runner crashes. Sooner or later the Fed will be too exhausted to keep running. Cue the Popcorn.

#11 Penny Henny on 02.27.21 at 11:04 am

Anyone looking for a ground floor opportunity to move into prestigious Bloor West Village in Toronto for only $800,000?
Potential? You betcha!
Here is a garage for sale on 2200 sq ft of land (it may have even been a house at one point in time).
Yes loads of potential. Can you build a house on that land you ask, who knows cause it doesn’t front onto the street there is only laneway access. I betcha if you jump through a bunch of hoops and give the city a $250,000 development fee then you’re golden.
And best of all, No bidding wars $800,000 and it’s all yours.

https://www.realtor.ca/real-estate/22727317/627a-durie-st-toronto-runnymede-bloor-west-village

#12 crowdedelevatorfartz on 02.27.21 at 11:10 am

@#5 Tarot
“First people are gorging themselves on debt.
Second people have record savings.
How can we have both at the same time?”

+++++

People buying overpriced houses with obscene multi decade mortgages.
The same people that have been cooped up for a Covid lockdown year have , for the first time in a very long time, some extra cash in the bank.
Big debt. plus some savings

#13 KNOW IT ALL on 02.27.21 at 11:13 am

OH BOY….. I’m ALL-IN!

#14 Flop... on 02.27.21 at 11:22 am

There was a bit of moaning about whether Canadians are still a friendly bunch or not.

Thursday evening my vehicle conked out at a major Vancouver intersection.

It went total dead, hazard lights wouldn’t even stay on, so I got out of the vehicle to check the battery connection so at least all the people behind me could see what was going on.

A young fella jumped out of a one tonne truck and asked if I wanted a jump start, I didn’t think it would work as the battery was new but thought he might as well.

That didn’t work, and by now there was a huge lineup.

We started pushing the car backwards and to the side and a young couple leapt out of nowhere to start pushing as well.

It was safely pushed out of the way, I said my grateful thank you’s and waited for the tow truck driver to arrive.

Because of COVID you are not allowed to ride in the tow truck anymore, so I called my wife who doesn’t drive and she suggested her Dad would pick me up.

Upon arrival I told them just to wait ten minutes and then to take me to the mechanics for the handoff, my Father In Law slipped on a manhole cover that had ice on it from the earlier snowfall and hit the deck hard.

Blood coming out of his hand and cheek, all the while my vehicle was being loaded onto a flatbed in the background, in an image now seared into my mind.

The BCAA guy did a really good job and was friendly about the whole situation.

Yesterday I couldn’t go to work while they put a new fuel pump and a few other things into the car, so I offered to take my Father in law to the doctors.

He said he was scared and a little bit shaken up, but his main concern was getting his glasses straightened, which were bent when his head hit the ground.

He is nearly 80 now, and physically not too bad but mentally is losing it, so it was no surprise when he told me to go to the wrong optometrists shop.

The guy stated that it was impossible for the glasses to be sold from there as they don’t stock the frame, and initially suggested we go to another optometrist down the street as that possibly was the place of purchase.

My Father in law was all confused by now, so I just asked the guy if he would fix the glasses instead going on a wild goose chase.

He reluctantly agreed but said it was not his responsibility if it broke due to metal fatigue.

Obviously we thanked in advance for at least trying and said it was our fault.

The guy spent five minutes straightening the glasses out and then when he handed them back over, making conversation perhaps out of curiosity, he asked how did the glasses get so bent?

My Dad raised his right hand with the bloody gauze still attached from the day before, and I explained how he took a tumble.

The man then refused to take payment as he realized my Father In Law was having a rough time of it.

As we left the store I suggested to him that’s where he should buy his next pair of glasses to repay the kind gesture.

It was a bit of a train wreck 24 hours, but I am happy to confirm there is still good in this world…

M46BC

#15 Sail Away on 02.27.21 at 11:26 am

#10 Penny Henny on 02.27.21 at 11:04 am

Re: Real estate turd

…best of all, No bidding wars $800,000 and it’s all yours.

https://www.realtor.ca/real-estate/22727317/627a-durie-st-toronto-runnymede-bloor-west-village

————

Ah, nostalgia. I saw plenty of houses like that while hiking the Appalachian trail in the deep depressed south. Can’t remember if the neighbourhoods were referred to as ‘prestigious’… maybe God fearin’

#16 Dharma Bum on 02.27.21 at 11:27 am

The Sounds of Incompetence!

https://mail.google.com/mail/u/0/?tab=rm&ogbl#inbox/FMfcgxwLsdKnWgmvjlPZfwxkFDzqxgSM?projector=1

With apologies to Simon & Garfunkel.

#17 Dr V on 02.27.21 at 11:46 am

Paging shawn allen, paging shawn allen – cleanup on comment 5 (tarot card)

That is all…..

#18 TurnerNation on 02.27.21 at 11:47 am

TLT.US long bond ETF made a move yesterday which cannot be ignored, imo. A rare Big bold move, off a bottom – a long time coming.

……
Ontariowe is locking down again, Ottawa and Muskoka. Prepping us for the UBI?
Of course our elite rulers are blaming us. It’s because we travelled and did not #stayhome! Always the attack on our travel and movements rights. They want us locked down in our UN Smart Cities. In yours Red or Grey war-zone?

So, why the perpetual rolling Economic Lockdowns? What happened to ‘protecting the vunerable and getting on with our lives’? New study says that would have have been sound practice.

https://www.ahajournals.org/doi/full/10.1161/JAHA.120.019259
Originally published25 Feb 2021
CONCLUSIONS
A substantial proportion of US COVID‐19 hospitalizations appear attributable to major cardiometabolic conditions. These results can help inform public health prevention strategies to reduce COVID‐19 healthcare burdens.

……

As people have pointed out, per the new language everywhere we are just “arms” to our our rulers. Not humans. NewSpeak.

But why? Why would we require a UBI in the coming years?

https://www.youtube.com/watch?v=g6zv8IYFxcY&feature=youtu.be
Human Workers to Be Replaced by Flying-Robot-Harvester That Picks Ripe Fruit
Israeli company, Tevel Aerobotics Technologies, has developed a flying autonomous robot (FAR) that works day and night to pick fruit. Artificial intelligence embedded within the FAR determines the ripest fruit to pick through sensors and computer vision. –

#19 Pikachu on 02.27.21 at 11:55 am

The Liberal Government and the Bank of Canada could start paying off mortgages for people to continue propping up housing, because it’s 2021.

Housing is too big to fail in the GTA. The government doesn’t care about us in Canada.

Why would a cottage in Innisfil, Ontario be worth ten times the price of a similar sized house in Texas or Florida?

#20 Ponzius Pilatus on 02.27.21 at 11:56 am

Is this a stick of dynamite?
Giving the volatility, it would be appropriate.

#21 Faron on 02.27.21 at 12:00 pm

#95 Russ on 02.26.21 at 9:58 pm

Faron on 02.26.21 at 8:11 pm

#78 Ed on 02.26.21 at 7:15 pm

40 Sail Away on 02.26.21 at 3:24 pm

#33 Faron on 02.26.21 at 3:02 pm

More mainsheet info at comment #65, clarifies that the main boom is most important off the wind on a monohull, not upwind as you hypothesize.

Cheers, Russ

I like the simplicity of their rig. No boom takes away all kinds of failure points and dangerous bits. Overall I agree with your thesis that stripping away various bits doesn’t leave you with an unsailable boat. And the trade off is probably smaller than most think.

I see what you mean about going down wind boomless in a monohull v the cat. If the main is sheeted far enough aft to at all be able to put tension on the leech and the foot then downwind enough line will be out that the main will just fold inwards despite the width of the sheeting.

Going upwind, a boom allows independent tuning of the leech and foot of the main for best upwind vmg. Again, all of this is helpful, but not required. The folks on the cat don’t need peak performance as that’s, admirably, not the point of their cruising.

#22 There is lots ... on 02.27.21 at 12:18 pm

#13 Flop… on 02.27.21 at 11:22 am
It was a bit of a train wreck 24 hours, but I am happy to confirm there is still good in this world…
—————————————
of good left in this world and plenty of good people. See it all the time … best to your FIL.

#23 Outrage on 02.27.21 at 12:30 pm

Yes ,what has worked before will work again. No worries.
Its only printed money ,hard assets skyrocketing and hyperinflation. Why have taxes when you can easily just print the money just like buying unwanted bonds ?

#24 TurnerNation on 02.27.21 at 12:34 pm

What’s really going on while we are being distracted with Health and Security Theatre? Will it be going away? Note all the new laws against us after Sept 11 still are in place: unlimited surveillence and detention; secret no-fly lists; groping and nude scanners. This time our free-travel rights were ended for good.

Worldwide economic shut down of the Former First World Countries continues. Shall we agree 2022-23 is at least the timeline?

– Czech PM declares new state of emergency after deputies reject extension (again) – never ending lockdowns.

– Belgium denies loosening restrictions, “Hospitals must again keep half of all intensive care beds available for corona patients” (vrt.be)

– New Zealand Government locks down country for a week after one new community case. (nzherald.co.nz)

– Brazil’s capital goes into lockdown to quell COVID-19 surge (reuters.com)

………

Why the focus on children in this New System? Schools are the main battleground in this WW3. Who gains? The other week I posted a blog that covered this, how education is now a data mine; kids will interact and be tracked, trained via screens and A.I. based learning programs. Hedge funds will finance it. We are the Internet of Things. Much profit.

– Gates again! And he owns the most farmland of anyone, in the USA. What is planned for us…they wasted no time last year with the New System roll out did they:
https://www.governor.ny.gov/news/amid-ongoing-covid-19-pandemic-governor-cuomo-announces-collaboration-gates-foundation-develop
MAY 5, 2020 Albany, NY – Amid Ongoing COVID-19 Pandemic, Governor Cuomo Announces Collaboration with Gates Foundation to Develop a Blueprint to Reimagine Education in the New Normal

— Microsoft again, your new Papers Please. Children first, natch:

https://abc7.com/lausd-app-covid-daily-pass/10361964/
LOS ANGELES (CNS) — The Los Angeles Unified School District on Monday announced the launch of “Daily Pass,” the first comprehensive system in the nation that coordinates health checks, COVID-19 tests and vaccinations in one online tool.
Daily Pass was developed with support from Microsoft Corp. and can be accessed from any mobile phone, tablet or a computer, the district said.

#25 leebow on 02.27.21 at 12:42 pm

#20 Faron

I’d be worried about ripping the clue in irons.

Another thing is balancing the center of drive. I find that having good balance is more important than a marginal improvement in trim. That could be an issue in boomless setup.

#26 JSS on 02.27.21 at 12:49 pm

Hi Ryan, can we expect 10% per year return in S&P500, going forward. Thanks

#27 willworkforpickles on 02.27.21 at 12:51 pm

In the last decade QE was useful in keeping the lid on rates. New debt creation in that time span didn’t require additional new debt to service existing debt as it does now.
Has the point of no return arrived?.

Additional stimulus just approved takes us further down the debt death spiral where we are funding debt to pay more debt.
There is no digging out of this hole.

We as a nation/s are down in the hole with a massive and growing mechanical debt monster burying us from above… and all we have are hand shovels trying to dig out faster than this monster buries us with far outmatched speed and mechanical leverage from above.

Few seen to understand the difference between then and now. The grave difference.
Where did all the talk of the last decade go of because of our kicking the can of debt down the road, the outcomes will be so much worse later on.
Well here we are…arriving… the later on part, but few want to see it or even/ever face it.
That won’t help matters any…refusing to see the reality now on the doorstep.
Infusions of cash culminating in the debt driven economy of the last decade to keep everything moving has had its day.
That plan did and can only work and work until it does not, can not work any longer.
Cannot work any longer culminating in the need to create ever more escalating levels of debt just to pay the interest alone on the existing growing debt monster.

None of any new debt creation by government/s can even go toward real growth creation now. NOW as opposed to the then of recent times past. …(get it?)

The debt death spiral is here and escalating.

Nearly all new debt/cash created from nothing now will be needed just to service what’s already been created.
…in itself this may all be well and fine…(Debt Creation/ QE to Infinity)…but the holders of new debt (and old) won’t stand for the risk and uncertainty it poses.
Confidence will be restored among debt holders continuing to purchase new and holding vast amounts of national debt when interest rates are eventually restored to historical average rate levels.
That time is approaching beyond the exuberance of pent up demand about to unleash like a storm. Just beyond 2021 when much of average consumers savings are spent and the uptick of 2021 exuberance fizzles.

#28 DON on 02.27.21 at 12:56 pm

Ryan…thank you for sharing your analysis.

Flop…Unforunate, but good story.

My sister’s car stalled while driving a week ago…two hours away from me. But off i went with parts in hand. And her mechanic life friend available via text and an easu drive away. Good people always step up. Between the two of us and by the grace of sensible engineers we were able to easilt install a new fuel pump and distributor. I also got her a new battery…piece of mind.

Have a relaxing day Flop!

#29 SoggyShorts on 02.27.21 at 12:57 pm

#51 Stone on 02.25.21 at 6:02 pm
#37 Faron on 02.25.21 at 4:41 pm

Since you’re asking…my B&D is at 5.37% YTD. Down 1.10% today from yesterday.

***************
Hey Stone, hopefully you don’t mind me asking, but what was your total return for 2019?

#30 mark on 02.27.21 at 12:58 pm

Hi Ryan, Favorite blogger for sure.
If one is using broad based etf’s, and building a portfolio how can one estimate the potential largest/deepest drawdown based on their asset allocation on a percent basis. There has to be some accurate software for this based on what broad ETFs one holds? Thanks in advance.

#31 Dogman01 on 02.27.21 at 1:01 pm

#47 truefacts on 02.26.21 at 4:05 pm

#38 Keith…
A company in Calgary was on track to produce a vax but Trudeau denied them.
Moderna got $1 billion – US vaxing over 1 million/day.
This company asked for a fraction of that. DENIED. We’ve vaxed in two months what US does in 1 day.
https://calgaryherald.com/opinion/columnists/corbella-covaccine-solution-was-right-here-in-calgary-while-trudeau-looked-to-china
Now we rank NUMBER 57 globally!
Blame the leadership, which is TRUDEAU.

———————————————

More and more I come to this conclusion: The powers behind Trudeau want:
– access to China
– weakening of what was a rising robustness in Western Canada

If you view it as Feudal it makes sense. The Baron’s of Canada want to hitch their star to China, a massive growing market. They are threatened by a growing powerbase in their own Lands, Western Canada. Their top priority is preserving their position in their fiefdom then secondly increasing power relative via China.

Expect what appears to be sabotage of Western Canada and then a lot of pandering to China.
It is not about Canadians, and not about Canada, it is about their relative power over their fiefdom of Canada. In general the prosperity of Canadians is just a pleasant side effect of their pursuit of entrenchment and wealth. This is one of those rare moments where you see the agenda so clearly at odds with the interests of Canadians, and it leaves you a bit confused.
This is why rational people can’t understand the constructive destruction of energy sector wealth in Canada, does that not hurt Canada, yes but its continuation will alter the power balance not in the favor of the current Barons of Canada. So it must be stopped.

#32 Ryan Lewenza on 02.27.21 at 1:12 pm

SnowOwl “Good morning, Ryan. Are you saying now is a good time to start buying corporate bonds, and if yes, can you recommend a good ETF in the USA to do that. Also, what is your stance on buying PFF in the USA as my understanding is that these are perpetuals, and not rate resets? Appreciate your insights. Enjoy the Porsche!”

It was a great time to be buying corporate bonds last spring/summer just after the Fed announced their QE/bond buying programs. For example, we added bank loans around this time since they were trading at 90 cents on the dollar on average. But yes this is generally a good time to be buying corporate bonds as they tend to outperform government bonds in a rising rate environment. This is why we recently trimmed our government bonds and added to corporates. Sorry I can’t give specific recommendations but just Google corporate bond ETFs and you will find lots of info on this. Also Rob Carrick just did an article highlighting the best Canadian bond ETFs. For PFF we still like it but in a rising rate environment Canadian prefs should outperform US prefs given our heavy weight of fixed resets. So I like PFF more when rates of falling. – Ryan L

#33 Ryan Lewenza on 02.27.21 at 1:19 pm

Tarot Card “Thanks for the blog Garth
Thanks for the post Ryan
Very good analysis.
There are lots of ya buts, overall I believe you are correct.

If you have time can you help explain this debate a few friends are having.
Over the past several months there have been what I believe are conflicting statements stated on this blog.
First people are gorging themselves on debt.
Second people have record savings.
How can we have both at the same time?”

Savings focuses on the money in our bank accounts. With Covid the only thing we’re spending money on is groceries, more alcohol (in my home at least), an occasional Amazon purchase and maybe a bathroom reno. So collectively we are flush with cash and hence the high savings rates. But at the same time people are buying homes at breakneck speed due to the very low interest rates. So you can have record savings (in bank accounts) and record outstanding mortgage debt at the same time. – Ryan L

#34 neo on 02.27.21 at 1:19 pm

Please….We’ve been waiting for a “handoff” since 2009 and it hasn’t occurred yet. When fixed mortgage are 4-5% again you can start talking handoffs there Ryan.

#35 willworkforpickles on 02.27.21 at 1:26 pm

US unemployment levels stated at around 10% do not take into consideration the other close to 20% unemployed fallen through the cracks no longer on gov. stat radar screens.
Real actual unemployed numbers in the US are in the upper 20% range…Canada would likely show similar numbers on a per cap basis.
Many of the job losses of the past year will not easily be restored…less likelier still with spend thrift governments ballooning national debt just to service ballooning national debt…cause and effect effectively hindering even shutting real growth out of the equation.

#36 joblo on 02.27.21 at 1:38 pm

Penny Henny,
Burning daylight yesterday, so i made your bread.
It’s AWESOME, Thanks!

#37 Penny Henny on 02.27.21 at 2:15 pm

#35 joblo on 02.27.21 at 1:38 pm
Penny Henny,
Burning daylight yesterday, so i made your bread.
It’s AWESOME, Thanks!
///////////////

and easy peasy too.
One tip to make it even simpler. Instead of preheating the dutch oven simply preheat the regular oven to 450 and turn it down to 425 when you place the dutch oven and bread in.
Glad you liked it.

#38 Rogerhomeinspector on 02.27.21 at 2:19 pm

Does anyone else look at what’s happening in the Canadian economy and think “huh- this doesn’t feel like things are adding up?” How do we continue to build massive amounts of “wealth” while providing nothing more in terms of value?

I was always taught that wealth comes from adding value to the lives of people and businesses in the economy. For example- I build an addition onto someone’s home. It increases the square footage of the building perhaps making it more livable and desirable to more potential buyers. Or an electrician comes in and wires up a new piece of equipment for a factory to increase their productivity. Or the grocer down the street sells you food so you can live and work.

I don’t feel this is the basis of the economy anymore. It feels like we create wealth by pushing buttons and buying and seeking each other ever inflating assets that are no more productive today than they were yesterday? It doesn’t feel like there’s a focus on creating real and tangible value.

Anyone else get that sense?

#39 Dr V on 02.27.21 at 2:31 pm

5 Tarot card – Ryan’s response is incomplete. It includes only the savings from government issued dollars.

The mortgage funds provided from a bank to a purchaser become savings to the seller. So one person’s debt is another person’s savings.
They can then work their way thru the economy but remain accounted for as someone’s savings.

#40 Bond malaise on 02.27.21 at 2:58 pm

From the Oracle….

“Overall, the insurance fleet operates with far more capital than is deployed by any of its competitors worldwide. That financial strength, coupled with the huge flow of cash Berkshire annually receives from its non-insurance businesses, allows our insurance companies to safely follow an equity-heavy investment strategy not feasible for the overwhelming majority of insurers. Those competitors, for both regulatory and credit-rating reasons, must focus on bonds.

And bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981? In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future.”

#41 ogdoad on 02.27.21 at 3:21 pm

Giving money to people so they spend and the economy doesn’t go ‘kaputt’.
Most certainly sounds like history is repeating. Again and again. Heaven forbid someone wouldn’t be able to buy their Youtube lighting, skinny jeans or arm tats. Is there nothing else?
Maybe its time for capitalism to take a bow. Someone will achieve a few moments of elation after buying the new iPhone – the same feeling will last longer if you gave that iPhone away.
hmm, greater powers at work, through which we blindly turn the wheels of industry.

Great post as always!

Og

#42 Ellis Mae on 02.27.21 at 3:39 pm

Remember to wear your masks and stay indoors! Plz don’t use the internet to post hate speech against women!

Love
Ellis

#43 Jimmy Zhao on 02.27.21 at 3:39 pm

I predict People flush with CERB Cash and Cabin Fever will go crazy for Vacations. I bet all the tourist hotspots will be booked solid. Everything will be sold out. Airlines & AirBNB will roar back to life.

#44 Faron on 02.27.21 at 3:49 pm

#38 Dr V on 02.27.21 at 2:31 pm
#5 Tarot Card on 02.27.21 at 9:44 am

You also have different groups saving than indebting.

In the US, the top 25% have done almost all of the saving. The bottom 25% have reduced savings. I would guess the indebted are middle to low earners. The idea that CERB and the US equivalent has been a direct flow to savings accounts of recipients is absurd.

#45 Cal on 02.27.21 at 4:09 pm

Oh and Uncle Warren has done lots of buybacks for BRK – go read his latest letter.

#46 Baba Novac on 02.27.21 at 4:10 pm

Hey Ryan,

I am perpetually amazed at your team’s “think-in advance” calls on strategically adjusting portfolio allocations to what you perceive are the evolving market conditions at the time.

With this in mind, may I ask if your recent bullish foray into biotech at 3% was at the cost of (or in addition) to your views on a 3% holding in the US health-care sector?

Thanks for all the insights.

#47 Dr V on 02.27.21 at 4:20 pm

43 Faron – hmmm… how about deferring the mortgage and saving your CERB to pay it when the deferral expires?

I wonder if anybody actually did this??

#48 Dogman01 on 02.27.21 at 4:20 pm

#37 Rogerhomeinspector on 02.27.21 at 2:19 pm
Does anyone else look at what’s happening in the Canadian economy and think “huh- this doesn’t feel like things are adding up?” How do we continue to build massive amounts of “wealth” while providing nothing more in terms of value?

——————————————-
Yes, same thoughts here , look at these trade numbers:

The latest data http://www.chpc.biz/household-debt.html
Here is the 10 Year Change of Canadian:
Negative Net Trade: UP 476%

With respect to the NOV 2020 NET TRADE data; in the last 12 years, 83% of the monthly data have been negative.

“Our deeply negative 12 years of Balance of Trade data suggest; we buy more than we sell, hence we supply net income to entities outside our “borders” financed and subsidized by our own cheap credit and our willingness to hock the future.”

Let’s repeat that – Our willingness to “hock the future”

Destruction of our Oil and Gas sector well underway.

Like the old school aristocracy selling the manor bit by bit as a long term strategy….so sad

#49 AB on 02.27.21 at 4:30 pm

#30 Dogman01
You are spot on! And take notice where CPP’s Machin went to get his “ vaccine”. It would have been much easier and simpler to go to Florida. I smell B.S. !!

#50 Dogman01 on 02.27.21 at 4:45 pm

A few quotes for those concerned about fundamentals of an economy and investing today:

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance.” – Chuck Prince’s Investing in a Bubble

“Lots of times you have to pretend to join a parade in which you’re not really interested in order to get where you’re going.” – Christopher Darlington Morley

“If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.” – John Maynard Keynes

“You can’t always measure the eventual outcome of an action by what has happened thus far. If a man jumps off a 45 storey building, nothing has really changed during the first 40 floor freefall, it’s the last few that make it interesting and we all know what the final outcome is.” – Warren Buffet

“You have brains in your head.
You have feet in your shoes.
You can steer yourself any direction you choose.
You’re on your own.
And you know what you know.
And you are the guy who will decide where you go.”

#51 SnowOwl on 02.27.21 at 5:03 pm

Thank you so much for the reply, Ryan! I kind of figured that about PFF, too. At my age, I really dont require fixed income yet. So the only long duration stocks that I am not afraid to buy right now are utilities.
Have a great evening!

#52 Old Man on 02.27.21 at 5:21 pm

In September 2019, the Federal Reserve began conducting its fourth quantitative easing operation since the 2008 financial crisis; on 15 March 2020, it announced approximately $700 billion in new quantitative easing via asset purchases to support US liquidity in response to the COVID-19 pandemic.[51] As of mid-summer 2020 this resulted in an additional $2 trillion in assets on the books of the Federal Reserve.[52]

#53 Old Man on 02.27.21 at 5:39 pm

The US economy was in bad shape *before* SARS-CoV2. QE4 started in September 2019 then kicked into high gear in March 2020:

https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm

Repo intervention began in September 2019 as well:

The repo market came under stress in September as demand for funds to settle Treasury purchases and pay corporate taxes overwhelmed loans available.

Interest rates in U.S. money markets shot up to as high as 10% for some overnight loans, more than four times the Fed’s rate.

Since September, the New York Federal Reserve has offered daily operations where it injects liquidity into the overnight market, in addition to frequent offerings of longer-term loans. It is the Fed’s first major market intervention since the financial crisis more than a decade ago.

#54 NOSTRADAMUS on 02.27.21 at 6:31 pm

LOW RATES,
And high liquidity have never been an incentive to reduce imbalances, but rather a clear incentive to increase debt. Sooner, rather than later my concern regarding the monetary madness being pursued by the Central Banks will, unfortunately, for the over indebted be validated.
A great number of over-indebted households will shortly be subject to special treatments, ranging from high and tight haircuts to a total buzz cut.
The vast amount of liquidity inflating all asset prices at the slightest downtick, is ultimately fabricating a sort of stability under the surface. Too much money will one day be followed by too many tears.

#55 Guelph Guru on 02.27.21 at 6:33 pm

Beautiful charts Ryan.
The first one shows that QE was effective and Keynesian economics works.
Would be interesting to hear the Austrian take on this.

#56 Faron on 02.27.21 at 6:38 pm

#47 Dr V on 02.27.21 at 4:20 pm

43 Faron

Yeah, for sure. My post was overly simplistic, but any three sentence description of gross debt up, savings up numbers will be. Needs way more analysis. That will come. Not from me.

#57 Nonplused on 02.27.21 at 7:16 pm

Biden’s America is back! Back to bombing Syria that is.

I don’t think we need any more evidence that it doesn’t matter who is president. If TPTB don’t like whoever gets elected they filibuster with phony impeachments until they can get their own guy in.

Apparently Trump did little to “drain the swamp”. The swamp creatures just hid in the trees until he was gone and now they have slithered back.

#58 Flop... on 02.27.21 at 7:47 pm

I’ll try and put some more content up.

Stage one, buy a block of land near Bragg Creek Alberta.

Stage 2, drop into your local IKEA store and spend 60k buying a house.

Don’t forget the soft serve ice cream on the way out…

M46BC

“Ikea is now creating Tiny Houses — but they are not made for the claustrophobic.

Imagine the instructions required for a purchase like this?

Furniture giant Ikea has turned their focus to something small for a change, and are now in the business of making tiny houses.

And luckily for triggered millennial furniture owners everywhere, you won’t need that disposable allen key either. It’s already built.

The Swedish furniture company is experimenting with prefab houses through their Ikea Tiny Home Project, designing a 17.5 sqm abode on a flatbed trailer.”

https://www.realestate.com.au/news/ikea-is-now-creating-tiny-houses-but-they-are-not-made-for-the-claustrophobic/

P.S, thanks Donnie.

#59 Ryan Lewenza on 02.27.21 at 7:47 pm

Baby Novac “ Hey Ryan,

I am perpetually amazed at your team’s “think-in advance” calls on strategically adjusting portfolio allocations to what you perceive are the evolving market conditions at the time.

With this in mind, may I ask if your recent bullish foray into biotech at 3% was at the cost of (or in addition) to your views on a 3% holding in the US health-care sector?

Thanks for all the insights.”

You’re very kind! We switched from our broad based healthcare ETF for one focused on the biotech sector, which we are very bullish on. We think this might be one of our biggest winners over the next 1-2 years. I’m still bullish on the broader healthcare sector but particularly the biotech sector, hence the switch. We also get broad healthcare exposure through our S&P 500 positions. – Ryan L

#60 Flop... on 02.27.21 at 8:10 pm

Average credit card debt is down in The States, here is the generational breakdown of who owes what.

Generation Z 18-23….$1,963

Millies 24-39…$4,322

Gen X 40-55…$7,155

Baby Boomers 56-74…$6,043

Silent Generation 75+….$3,177

My credit card debt is $0 as I have found it extremely hard to rack up any debt if you don’t even have a credit card…

M46BC

———————————————-

“Visualizing the Sharp Decline in Credit Card Debt Around the U.S.

Consumers have some good news to celebrate despite the COVID-19 pandemic. With the government sending out stimulus checks and the coronavirus keeping a lot of people at home, people are paying down their credit card debt at a very high rate.

* On average, credit balances decreased $879 or 14% from 2019 to 2020.

* Every state across the country has seen average credit card debt decline by double digits except North Dakota (-8%) and West Virginia (-9%).

* Alaskans paid down their debt at one of the highest rates in the country (-18%), but still carry the highest overall debt load ($6,617).

* Generation X has the highest overall credit card debt at $7,155, but the Silent Generation is paying it down at the highest clip (-16%).”

https://howmuch.net/articles/average-credit-card-balance-by-state-2020

#61 Left Gta on 02.27.21 at 8:29 pm

I wondered if any of you can help me with something? My parents have their investments with a bank inv advisor. They are being charged over 2% to manage each acct. My mom was disappointed in the overall performance so I told her lets change your tfsa to self directed and I will invest it 60/40 bal. My Dad was reluctant to have me do this to his tfsa but said wait to see for 6 months how it does compared to his. They have the same amount invested. Ofcourse mine outpreformed the banks. So Dad said he was going to have me do the same. Because of Covid we never had the chance to do it. When we spoke to the bank the first time the advisor was not too happy. Now Dad is in hospital and needs a lot of care. Nursing home is not an option at the moment so I will be taking time from work to care for him with some help. I am a nurse. Dad is suffering from cognitive issues and Mom has POA so I told her we will need to increase the cash flow to cover the new expenses we will be incurring as we will be hiring some help. She called the bank and asked if she could change to Dad’s tfsa to self directed so we can manage it and withdraw funds for his care. The bank advisor was not too happy and said to my Mom I would be careful about that as you are the beneficiary. Is this an issue? I understand the bank wants to protect my Dad’s investments but my mom and I think we are acting in Dad’s best interest. Just wondering what we should do as the tfsa was supposed to be for their emergency money which this is. Now it seems my mom has to call the bank to ask to withdraw money from Dad’s tfsa it seems so odd seeing as it is their money. I like the idea of seeing all the investments online and just being able to sell as needed. Is the bank advisor being unreasonable or is he just protecting my dad’s investments because that’s what I thought mom as poa is for? Any help would be appreciated. I am treading into new waters, and it looks like Dad will need ongoing care.

#62 AR on 02.27.21 at 8:31 pm

Can you explain why it’s always the Democrats that have to save the economy? Coincidence?

First deregulation of banks and now completely ignoring a global pandemic.

Both required QE and in both cases Dems made it happen.

#63 westcdn on 02.27.21 at 8:36 pm

I miss a woman who will strike back – guys do not worry. I can handle a heavy punch. Woman can be inciteful.

My problem with my wife and mother was to keep them apart – they would just butt heads. It could be fun as their emotions came out. I actually stood with my wife more first. I was just an umpire.

I only keep a few friends. They are close. Sometimes I need to talk things out and is good to have a different perspective. One guy likes to cut me down – I have my suspicions why. I do not need affirmations and I will get by. He tracks things I ignore and haunts me with my former is doing. I wonder about his motive yet it refreshes me. Makes me stronger and can beat him if I want.

#64 Left GTA on 02.27.21 at 8:37 pm

One more thing I could use help with Dad got covid while in hospital and developed pneumonia. He survived but his lung are damaged they will take xrays in a couple more months to see the damage left. In the meantime he needs to be taken care of at home. Am I entitled to the care giver covid pay. This is what it says:

The CRCB provides $500 per week for up to 26 weeks per household for workers:

unable to work for at least 50% of the week because they must care for a child under the age of 12 or family member because schools, day-cares or care facilities are closed due to COVID-19
because the child or family member is sick and/or required to quarantine or is at high risk of serious health implications because of COVID-19. Anyone know if I would qualify?

#65 Ed on 02.27.21 at 8:45 pm

I’m not leaving the dock without a boom on the main…in fact I don’t leave the dock without a Hoyt boom on my staysail.

Of course no biggi if all you want to do is motor or drift imo. (PNW anyone lol.)

#66 S.Bby on 02.27.21 at 8:55 pm

Good analysis Ryan. I see several problems with this QE bond buying frenzy perpetrated by the FED…
#1 creating asset bubbles in the stock market and real estate causing market distortions.
#2 potential inflation down the road.
#3 consolidation of resources to a narrower range of society (the haves and the have nots).
#4 increased government deficits and ultimately higher taxes in the future.
#5 propping up of zombie companies who would not otherwise survive without cheap money.

I’m sure there are other reasons that I’ll think of later.

#67 crowdedelevatorfartz on 02.27.21 at 9:15 pm

@ willworkforpickles
“Just beyond 2021 when much of average consumers savings are spent and the uptick of 2021 exuberance fizzles.”

++++

Apocalypse 2022 I presume……

#68 DON on 02.27.21 at 9:38 pm

50 Dogman01 on 02.27.21 at 4:45 pm

“You have brains in your head.
You have feet in your shoes.
You can steer yourself any direction you choose.
You’re on your own.
And you know what you know.
And you are the guy who will decide where you go.”

…..
Dr. Seuss rules!

#69 S.Bby on 02.27.21 at 9:43 pm

As predicted:

https://globalnews.ca/news/7659698/fixed-mortgage-rates-increasing-canada/

we don’t buy real estate, we buy the payments.

#70 Faron on 02.27.21 at 9:49 pm

Thanks for the great post again Ryan. I’ve read that the Fed does not like bond volatility. The move in bond vol over the past couple weeks was huge despite ongoing QE and arguably was the driver of the recent turmoil in equities. How will that interplay with any coming handoff? Interesting to that the fed bought LQD (investment grade corporate bond ETF) as part of it’s bond buying program and was way ahead on it, but it has plummeted since August. Will they grow that position to prop up corporate bonds as well?

#71 Faron on 02.27.21 at 9:55 pm

#65 Ed on 02.27.21 at 8:45 pm

I’m not leaving the dock without a boom on the main…

Ha, I’m trying to picture the decision making. Maybe asking dockmates. Maybe I’ll try that next time I go out.

Of course no biggi if all you want to do is motor or drift imo. (PNW anyone lol.)

Yeah, inland waters get pretty glassy around here in summer. Plenty of wind in the strait and offshore though! Ed, you must be on the great lakes? Looks like there’s some incredible cruising to be done thattaway.

Anyone read “The Boat who Wouldn’t Float” by Mowat? Top notch hilarity.

#72 Sail Away on 02.27.21 at 10:13 pm

#61 Left Gta on 02.27.21 at 8:29 pm

Re: father’s TFSA with POA

———–

Your mother could take $ out of her own TFSA to cover emergency costs. That will likely be the simplest route.

#73 Ed Niblock on 02.27.21 at 10:22 pm

Ryan, What is the maximum QE the Fed can do?

#74 Nonplused on 02.27.21 at 11:03 pm

#62 AR on 02.27.21 at 8:31 pm
Can you explain why it’s always the Democrats that have to save the economy? Coincidence?

First deregulation of banks and now completely ignoring a global pandemic.

Both required QE and in both cases Dems made it happen.

————————

Are you saying Trump didn’t do any QE? You’d be right but are you saying the Fed didn’t do any QE while Trump was president? I think they did more than they ever have.

In theory, the Fed’s mandate is independent of who is president or controls congress. Monetary policy is set by the Fed. Now, congress does control fiscal policy but there is no evidence Trump spent less than any other president. He might have the record for a 4 year period.

#75 Nonplused on 02.27.21 at 11:11 pm

#55 Guelph Guru on 02.27.21 at 6:33 pm
Beautiful charts Ryan.
The first one shows that QE was effective and Keynesian economics works.
Would be interesting to hear the Austrian take on this.

——————————

Even Keynes admitted his economics didn’t work in the long run, but “in the long run we are all dead”.

Anyway nobody follows Keynesian economics any more. His idea was that governments could smooth the economic cycles by borrowing and spending when the economy slowed and repaying the debt when the economy recovered. The new way to do things (MMT) is to borrow and spend when the economy slows and then keep borrowing and spending when the economy recovers.

#76 Nonplused on 02.27.21 at 11:25 pm

#104 Dmitry on 02.27.21 at 3:02 am
#80 Nonplused on 02.26.21 at 7:28 pm

“Friendly? We invented hockey so our kids could fight to the death on skates while their parents cheered them on. We are no better than a bunch of drunk Irish when the pubs close.”

I used to train as a hockey player when I was a kid. I would not describe what I was engaged in as “fight to death”. Today I would not watch adults play, but when kids play it this is sport, not a fight.

And yes, Canadians were genuinely friendly and caring a year ago. Much more so than average European for example. Now many act out of fear of the invisible.

———————————–

“Fight to the death” was hyperbole, but the fact is the kids do fight and the parents cheer them on. And it is not harshly punished because the NHL and minor leagues rely on the fights to sell more tickets. Even the NHL and CFL, which I would consider even more violent than hockey during regular play, do not tolerate fighting.

Around the world most sports fans are astounded by the level of violence in hockey and football. “Rugby is pretty violent”, you might say, but it is nothing compared to hockey and football. In rugby if you want to tackle somebody you must hold on and go to the ground with him, so something like a body check wouldn’t be allowed. That’s why they don’t need shoulder pads.

And then of course there is the world’s most popular sport by far, football (we call it soccer). It is a fairly physical sport, but checking (they call it “charging”), tackling, tripping, and fighting are forbidden. Can cost your team the game if the dreaded red card comes out. Ya, they dive a lot, but that’s mostly because if you can fool the ref just once you might win the game. The stakes are too high for there to be complete honesty.

#77 USD CAD question on 02.28.21 at 12:12 am

So does QE decrease the value of USD?

I’m wondering about usd/cad over 2021 (QE ongoing) and 2022 (no QE perhaps).

#78 Stealth on 02.28.21 at 12:12 am

Hi Ryan,
Thanks for the article.

What does QE mean for emerging markets? Even international developed conceptually speaking?

Thank you

#79 USD CAD on 02.28.21 at 12:13 am

So does QE decrease the value of USD?

I’m wondering about usd/cad over 2021 (QE ongoing) and 2022 (no QE perhaps).

#80 Nasty Nate on 02.28.21 at 12:43 am

Fed officials said in a set of quarterly economic projections that they “expect to keep rates at zero through 2023. ”

Fed actions are the 1st, 2nd and 3rd most important factor in current markets. No exaggeration…way more important than earnings or growth. It’s weird right? But absolutely true.

Fed meetings for the next couple years are going to be all the same…no action. They are committed to letting the economy run super hot coming out of the pandemic.

I expect this tiny pullback in the markets we are currently experiencing will be overwhelmed with money pouring into stocks.

Don’t fight the Fed.

Please count me as being super bullish.

#81 willworkforpickles on 02.28.21 at 1:32 am

C-Fart –
apocalypse 2022?

…not on North American soil…but it gets real next year.

#82 short horses on 02.28.21 at 2:31 am

Thanks for the great post today, Ryan! This ranks among the best posts I’ve seen on the blog in the 5-6 years that I’ve been visiting.

#83 Nonplused on 02.28.21 at 2:56 am

#63 westcdn on 02.27.21 at 8:36 pm

“I miss a woman who will strike back – guys do not worry. I can handle a heavy punch. Woman can be inciteful.”

You crazy man. Nobody should be hitting anybody. “Strike back” indicates you were striking first. Don’t be doing that. And if she strikes first, divorce her now before she fakes an event that lands you in jail.

It doesn’t really matter why, if people are hitting each other they must separate. And I’d say if they are yelling at each other and using foul names probably then too.

The second your wife calls you a c*&$ sucker you divorce her. It won’t get better. But do not respond with all the names you can think of. Just file.

#84 Dunk Rosebern on 02.28.21 at 9:22 am

China kills its truth-tellers outright. Trudeau Liberals buy off media to cover up the incompetence and subsequent dead. Sycophants and Lickspittle conspire to keep Justines secret Covid prisons rapes silenced. Covid dead are spilling out of the morgue.

https://edition.cnn.com/interactive/2021/02/asia/china-wuhan-covid-truthtellers-intl-hnk-dst/

Maggots on a carcass eh Garth? What a country you’ve left behind.

#85 QE to infinity? on 02.28.21 at 10:00 am

QE will last only as long as the bond market allows it. IF/ONCE there are no buyers for US bonds, the game is over.

#86 Faron on 02.28.21 at 10:21 am

#77 USD CAD question on 02.28.21 at 12:12 am

The USD is as heavily shorted as its been in a decade. So, consensus is that it falls. Contrarians tend to see consensus as an inverse signal…

Note that all major currencies printed heavily, so on a relative basis, values shouldn’t change.

#87 Ryan Lewenza on 02.28.21 at 10:25 am

USD CAD “So does QE decrease the value of USD?

I’m wondering about usd/cad over 2021 (QE ongoing) and 2022 (no QE perhaps).”

Yes since there are more US dollars sloshing around. But most central banks are doing the same thing (low interest rates and QE) so its a race to the bottom. Note how the US dollar index peaked in March last year and has been declining ever since. For the CAD/USD I continue to view it as range bound and with it at the top of its range I think its near a short-term top. – Ryan L

#88 Ryan Lewenza on 02.28.21 at 10:30 am

Stealth “Hi Ryan, Thanks for the article. What does QE mean for emerging markets? Even international developed conceptually speaking?”

It’s good for EM stocks. A big driver of EM stock performance is the US dollar. A weak US dollar is generally good for EM stocks. That’s one reason why EM stocks have done well since Covid hit and one reason we see EM stocks doing better over the next few years.
– Ryan L

#89 Ryan Lewenza on 02.28.21 at 10:39 am

Ed Niblock “Ryan, What is the maximum QE the Fed can do?”

Impossible to say. Obviously its not unlimited since then the US would be like Zimbabwe with 500% inflation. I don’t know what the dollar amount is but yes there is a maximum amount of QE. – Ryan L

#90 Cheese on 02.28.21 at 10:52 am

EM index dropped 10% in two days, minor panic on my end.

But found a video that reminded me how mad our current housing market is, but its in New York. Thought I would share.

https://www.youtube.com/watch?v=FJb7PyiIz_c

#91 Foggy on 02.28.21 at 11:05 am

“I’ve been using the analogy of a relay race where the baton will pass from one runner (the Fed) to the next runner (the overall economy). That’s exactly what happened during the 2008 financial crisis/recession.”

The QE may have ended but the ever increasing debt did not. Between the Financial Crisis and the Covid Crisis there was one of the longest consecutive periods of economic growth (10+ years), yet the government never balanced the budget, never paid down any debt so they could borrow again for a rainy day.

This crisis is worse than the last one with regards to the amount of accumulated debt, world wide. The odds of governments balancing their budgets and ever paying a cent down on this debt over the next 10 years is zero in my opinion. The debt will just keep growing.

When does every increasing debt matter Ryan/Garth?

Do we just keep turning a blind eye to it and pretend it doesn’t exist?

What happens when the next crisis hits, be it financial, pandemic, war, environmental etc.?

I’m not a doomsayer, but honestly, when does our spiraling debt accumulation matter?

#92 EdwardBear on 02.28.21 at 11:39 am

The photo reminded me of a learned friend who says, “Here, hold this stick of dynamite while I go play a trick on someone…”

#93 crowdedelevatorfartz on 02.28.21 at 11:41 am

@#84 Dunk

Let me guess.
The full moon instructed you to comment?

#94 John Doe on 02.28.21 at 2:50 pm

I predict that nothing much will change.

Panicked home buyers who can, will overpay and buy in. Those left over, will be priced out. Markets will turn bearish. Housing will slowly stagnate. Debtors with no cash flow will be squeezed ever so slowly out onto the streets. Markets will correct. Businesses will continue to fail as we pull out of the pandemic. Inventories will be bought for pennies on the dollar and help fuel new start-ups. Goods will be manufactured cheaper and repackaged in smaller quantities. Prices will fall accordingly and nobody will be fooled into thinking they are getting a “great deal”.

The economy and markets will pick up. Over priced houses will take it out of the hide of their new owners. Folks with “equity” will make less profit when they sell.

Central Banks will continue their low interest rate tactics because it allows them to print money with few if any negative side effects. Besides, why pay interest when you’re lending to yourself?

Interest, is what people who borrow from banks pay and those who do, have a built in safety net! Central banks can’t afford to charge themselves any interest, so they can hardly charge borrowers that much more!

So, it’s a win – win world for spenders.

For savers, they continue to face the challenge of keeping their cash safe in a low interest world full of predators. So, nothing much will have changed for savers. Savers who refuse to “take a seat” in the game of stock market or real estate musical chairs, will continue to save their cash.

Life will go on.

#95 Mike from Canmore on 02.28.21 at 3:45 pm

#18 TurnerNation on 02.27.21 at 11:47 am
Human Workers to Be Replaced by Flying-Robot-Harvester That Picks Ripe Fruit
Israeli company, Tevel Aerobotics Technologies, has developed a flying autonomous robot (FAR) that works day and night to pick fruit. Artificial intelligence embedded within the FAR determines the ripest fruit to pick through sensors and computer vision. –

*******
Does this mean less e-coli on our fruits and vegetables? No more squatting down in the lettuce field to do #2 and of course nowhere to wash your hands. Less or maybe even no e-coli on my food? Bring it on :-) But that harvester seems to be dropping the fruit from too high, adjustment needed.

#96 Dunk Roseburn on 02.28.21 at 8:16 pm

DELETED

#97 Dimon on 02.28.21 at 10:42 pm

Hi Ryan,
When you are talking about EPS, what would be your take on the P/E ratio? As far as I understand it is currently sitting at 38, the third all-time high. There were only two occurrences of higher ratios: 123 in 2009 and 46 in 2002. Are you seeing any possibility of it returning to its long term average in the nearest future?