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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

January 19, 2017 | Second Thoughts

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Can’t let inauguration day pass without a few words, now can we? While I’m personally excited to see the Bikers for Trump arrive and form their ceremonial Wall of Meat, financial markets have been less enthralled with things.

Trump starts his presidency with an approval rating of just 44% (Obama was almost double that), which reminds us that he lost the popular vote to a woman most Americans would like to back over. His cabinet nominees have flubbed some key lines during their confirmation hearings, a few recent POTUS Tweets have been rash and shallow and Republicans have already started to dismantle Obamacare, with no replacement plan. In short, lots of investors having sober second thoughts.

Need proof? Look at this:

Click chart to enlarge

After the giant rally following election night, the Dow has not only stalled within sight of the 20,000 mark but lost ground in each of the five sessions before the big event  Friday, trading in a narrow 1% range – the tightest in history. Lots of people, clearly, have lost some confidence in what happens next. Gazillionaire George Soros said as much on Thursday, warning of an end to investor euphoria and presaging lots of volatility to come.

What were investors expecting after the shocking Trump win? A blast of government stimulus spending, quick corporate tax cuts, slashed business regulations, tough trade talk and an agenda leading to more growth, higher inflation and protectionism. They may still get some of it, but clearly not all of it. And probably not fast. Plus, it will come peppered with late-night Tweets that can, in mere minutes, destroy the shares of pharma companies, upset the forex market or crash GM stock.

So the same rebellious little puddle of testosterone that inspires five thousand Harley-hog owners to thunder into Washington also now powers the commander-in-chief. Craving attention has always been a Trump characteristic. But if that’s all we get, then – as Kevin O’Leary has proven – watch your wallet.

$     $     $

Home prices in Toronto (our last remaining bubble market) are rising wildly at the moment due to a lack of inventory. It’s leading to enhanced house lust, media hyperventilating and increasingly worried realtors. With each day of idiocy, the end draws closer. Just look at this headline from Thursday’s Toronto Star. Classic porn.

The ugly half-house in question jumped from $850,000 when it last sold 25 months ago to $1.375 million. To his credit, veteran realtor John Pasalis had this comment while everyone else was clucking and drooling: “When you see appreciations of 30 per cent a year it generally doesn’t end well. That’s a concerning thing.”

As this pathetic blog has mentioned enough times to kill roaches, prices don’t always go up. Toronto (like all cities) has suffered some momentous house price declines, the last corker being the crumble of the earlier 90s which took a decade to shake. As prices hit historic highs each month – yet the economy staggers, wages fall below the rate of inflation, debt soars and lending regs tighten dramatically – it becomes clear the status quo won’t hold. Either listings surge (which won’t happen because few can now afford to move), or buyers run out of gas trying to purchase at these insane levels.

As mentioned, there are more worried voices being heard within the real estate establishment. One belongs to agent Marisha Robinsky whose insightful charting hit the media this week. Her conclusion is that Toronto’s in the midst of a repetitious house price pattern that will shock and surprise many people. History shows  valuations routinely soar above the mean, then always sink back in years of funk. Check this out:

Remember what I’ve telling you about not expecting a US-style crash, but rather a correction followed by a long melt? Well, Marisha’s work shows that, adjusted for inflation, prices have declined a third of the time – 23 of the last 63 years.

So what’s it like to be a buyer right now? “Horrible,” she says.

When realtors talk like that, take cover.

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January 19th, 2017

Posted In: The Greater Fool

One Comment

  • Avatar Holly Hallston says:

    Turner seems to forget that the approval polls he quotes are from the same jack asses who told us last April that Trump had zero chance of gaining the Republican nomination, never mind the Presidency. Readers will also note the chilling elitist slant of Turner’s blog and rants; for those of you who actually have had dirt under your fingernails that should be a wake up call as to what sort of condescending parasites have and still occupy the seats of power, i.e. government, in Canuckistan. While Turner and his ilk are still reeling in an attempt to figure out how their political propaganda machine known as the corporate media failed to deliver that shrieking Harpie Clinton, the sane population down here doesn’t waste time looking for irrelevant answers. We already know the answer; socialism, which is just communism in disguise (or government authoritarianism no matter what the label), socialism is a complete and utter failure because it’s entire premise is based on theft and the institution of an autocratic bureaucracy while pretending democracy. Fortunately, we do not live in a democracy, we have a Republic, a distinction that Turner and the rest of his elitist friends do not wish to dwell on. For if people truly knew the difference, and how it protects the individual from the overreach of dictatorial government, they would never even consider the nonsense of, so called, democracy. That’s all claptrap to a malt swilling, look down his nose at the plebiscite character such as we have with Turner. He’s been wrong the entire time about Trump and, in the vein of a true politician, will never admit it. So how’s things going up there with Clinton acolyte T2 Turner? Got your airsick bag out yet? Ya, I thought so.

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