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August 10, 2018 | Elon Musk squeezes Tesla short sellers

Elon Musk, CEO of Tesla, Inc., is causing trouble for the myriad of speculators who are betting against Tesla. By announcing that he is thinking about buying all publicly traded shares at $420 per share, he sent a chill down the spines of many short sellers. If Tesla goes private at $420, what would it […]

August 3, 2018 | U.S. Escalates the Trade War with China

The U.S. administration escalated the trade war with China this week. Previously, they had announced 10 percent tariffs on some Chinese goods to take effect on August 31. The U.S. upped the ante with a threat to raise the proposed tariff rate to 25 percent on $200 billion worth of Chinese products. Does this escalation […]

July 27, 2018 | Facebook Flop Raises Questions

Facebook reported results that were a shock to the market, causing a sell-off that saw the social media giant trading 18 percent lower on Thursday morning. The FAANG stocks, (Facebook, Apple, Amazon, Netflix and Google) represent a large share of the S&P 500. Is Facebook’s stumble a warning for the broader market, or an isolated […]

July 20, 2018 | The Thoughts of Ayn Rand and U.S. Politics

The philosopher Ayn Rand’s worldview continues to influence key U.S. authorities long after her death in 1982. Her most famous follower is Alan Greenspan, who served as Chairman of the Federal Reserve for almost two decades. Shortly after Greenspan retired in 2006, the U.S. experienced its most severe financial crisis since the 1930s. Rand espoused […]

July 13, 2018 | Bank of Canada Rates and House Prices

The Bank of Canada (the Bank) raised its overnight interest rate to 1.5 percent this week, as expected. And there was a strong hint from the Bank that there are more increases on the way, with another one or two likely before the end of 2018. Did the Bank’s policy until now promote a dangerous […]

July 6, 2018 | Millennials Overtake Baby Boomers

The number of people in the Millennial generation is greater than those who are labeled as Baby Boomers. This demographic shift will have profound implications for many facets of society, such as housing, elections and employment. The younger generation is more different than most people realize, making it inevitable that there will be some unforeseen […]

June 29, 2018 | Europe Still Dependent on Russian Natural Gas

Russia is the main supplier of natural gas to Germany and other parts of Europe. The largest Russian energy company, Gazprom, holds about 35% market share of natural gas imported into Europe in 2018. Will Germany and other European countries remain dependent on Russia for their natural gas supplies for decades to come? At a […]

June 22, 2018 | The Fog of a Trade War

Media references to an all-out global trade war are spiking. China and the U.S. exchange threats almost daily, with announcements of new tariffs on a wide range of goods like steel, aluminum and soybeans that are traded internationally. European countries are planning to impose tariffs on U.S. goods in retaliation. Is the U.S. pushing the […]

June 15, 2018 | The Fed will Keep Hiking Rates

The U.S. Federal Reserve hiked rates again and signaled that there will be more increases to come as the U.S. economy continues to gain strength. The second hike of this year came this week. Now most observers expect two more increases before 2018 draws to a close. Will the Fed continue hiking rates for too […]

June 8, 2018 | Mother Nature, Not a Bubble

Canadian housing myths are plentiful. But a new myth popped up recently in the form of a suggestion that “mother nature” is pushing house prices higher in Vancouver and Toronto. Is “mother nature” driving house prices in those two large cities? Does that mean it’s not a bubble? Many people, including former Ministers of Finance, […]

June 1, 2018 | Trudeau’s Risky Play with Trans Mountain

The government of Canada purchased the Trans Mountain Expansion Project (TMEP) for C$4.5 billion from Kinder Morgan Canada Limited. Prime Minister Justin Trudeau made this controversial move despite substantial political and financial risks. This government purchase ensures that planning and construction work for the project will continue and that the “great national economic benefits” of […]

May 25, 2018 | Lending Growth Slows Abruptly in Canada

Changes to the rules for qualifying for mortgages in Canada have been introduced in several stages recently. And these rules, on a cumulative basis, are starting to have a noticeable impact on lending to households and the housing market. Since availability of credit to finance a home purchase is arguably the single biggest factor in […]

May 18, 2018 | U.S., Mexico and Canada miss NAFTA deadline

The deadline to resolve the impasse in negotiations to amend the North American Free Trade Agreement (NAFTA) passed without a resolution of the issues. The negotiators were not talking as of Wednesday. If the NAFTA agreement is canceled by the President of the U.S. and ratified by Congress, there will be serious consequences for the […]

May 11, 2018 | Crude Oil Price Surges Lead to Recessions

The price of crude oil pushed above $70 in the last week, bringing back memories of previous oil shocks that shook the world. In decades past, oil price surges have been highly correlated with the onset of economic downturns. Is this latest move to higher oil prices going to interrupt the economic recovery this time? […]

May 4, 2018 | Bank of Canada Governor Poloz Speaks About Household Debt

Bank of Canada Governor Poloz spoke in Yellowknife, N.W.T., on May 1, 2018. He explained that household debts are large and increasing and represent a threat to the stability of the Canadian financial system. He concluded the speech with, “There is good reason to think that we can continue to manage these risks successfully. “ […]

April 27, 2018 | U.S. Government: Deep Tax Cuts and Deficits

The U.S. government recently enacted deep tax cuts that were designed to boost the economy. But tax cuts could mean smaller government revenue, and projections for deficits in government spending indicate huge increases in total government debt over the next decade and beyond. Will tax cuts be a plus or a minus for the US […]

April 20, 2018 | Energy Fails to Perform in a Benign Environment

The Toronto S&P/TSX index was down about 5 percent in the first quarter of 2018, while the important energy sector index (S&P/TSX Capped Energy) was down even more, by 8 percent. This was during a time of higher oil prices worldwide. In the US, energy companies listed on the stock market show a similar pattern […]

April 13, 2018 | Loss Aversion Could be a Very Costly Human Quirk

Loss Aversion is the human preference to avoid taking losses. This powerful force can cost people a great deal of money when it comes to trading stocks and buying and selling real estate. Can humans overcome their desire to avoid taking losses? I wrote about “loss aversion” as it comes into play when trading stocks in […]

April 6, 2018 | Inverted Yield Curves Predict the Future

A flattening yield curve, based on the difference between the 2-year and 10-year (or 30-year) US Treasury bonds, contains valuable information about the future. The recent rapid increase in short-term interest rates means that the short-term rate is catching up to the 10-year rate. The spread between the two is 50 basis points, narrow by […]

April 5, 2018 | Battery-Based Electricity Storage is Disrupting Electricity Production

  There is significant and growing interest in electricity storage, sometimes for a very short period measured in minutes. Battery storage systems are gaining followers. Storage allows electricity that is produced by renewable energy such as solar and wind to be used later, at a time of peak demand. Will advances in storage disrupt companies […]

March 16, 2018 | Canadians Lose Their Thirst for More Debt

The Bank of Canada release says: “The Bank continues to monitor the economy’s sensitivity to higher interest rates. Notably household credit growth has decelerated for three consecutive months.” Note that the Bank is saying that the growth in credit has slowed, not that Canadians, en masse, are paying back their loans. Canadians have just slowed […]

March 2, 2018 | B.C. Risks Unintended Consequences

Here’s a recap of some history: Stephen Harper was elected with minority government status in 2006 and by the end of that year Finance Minister Jim Flaherty pushed through changes to Canada Mortgage and Housing Corporation (CMHC) rules that allowed 40-year amortization of mortgage loans and zero down payments, in spite of warnings from some […]

February 23, 2018 | U.S. Stock Market is Obscenely Overvalued

The U.S. equity market is very expensive, according to most measures of stock market pricing. According to James Montier of GMO, the U.S. market is “obscenely” overvalued. Why are money managers still buying? James Montier wrote a 7 page piece called “The Advent of a Cynical Bubble” on the valuation of the U.S. market. It […]

February 17, 2018 | Higher Inflation Here To Stay

Inflation reported in the core CPI and the headline CPI on Wednesday February 14 was not a message of love for Valentine’s Day. It was a wake-up call. The so-called goldilocks scenario called for rates to rise slowly, at 25 basis points per meeting, with a target of 2 to 2.50% for the Fed Funds […]

February 9, 2018 | CNN Says That NAFTA Talks Could Collapse

As the Canadian prime minister visits the United States for four days and presumably is pushing really hard to save the NAFTA talks, the mood is somber. The probability of saving the agreement is estimated at less than 50 percent. One of the problems with expecting the U.S. to change course and agree to a […]

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