- the source for market opinions


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 […]

February 2, 2018 | Generating Income with Junk Bonds

Source BofA Merrill Lynch, retrieved from FRED, St. Louis Fed I’m using the more provocative term “junk” because it gives a sense of the risk but you are more likely to see the euphemism “high-yield”. They mean the same thing. A junk bond is a corporate bond that has a Moody’s, DBRS or S&P rating […]

January 26, 2018 | What to do with Expensive Stock Markets

Robert K. Shiller examined stock prices and earnings of the companies in that index back to 1881 and, after adjusting for inflation and using a ten-year average, this is what he got: Source: Robert Shiller Today’s valuations are second only to the 1999-2000 period. There has been four peaks similar to today, in 1899, 1929, […]

January 19, 2018 | What Keeps Central Bankers Awake at Night?

Source: The Bank of Canada Governors of the Bank of Canada have a tough job. When the time in the cycle comes to remove the punch bowl and end the debt-fueled consumption party they face a difficult task. Because of this, central bankers often lose their nerve before their actions start to bite. In fact, […]

January 12, 2018 | The Bond Bear Market Might Have Started in 2016

Some respected bond market gurus are worried that much higher rates are just around the corner, which would have serious implications for markets — both bonds and stocks. Source: St. Louis Fed/FRED Rates bounced from the same low point twice, in 2012 and mid-2016, which could mean a change from bull market to bear market […]

January 6, 2018 | The Mania for Cryptocurriencies Continues

My associate Fraser Betkowski wrote a post in September 2017 that describes the basics of the cryptocurrency world. In revisiting the same topic so soon I note that in the cryptocurrency world three months might be the equivalent of several years of normal evolution. During the Christmas break I was asked at every social gathering about either […]

December 29, 2017 | The Electric Power Grid Must Deal with Rapid Change

Gretchen Bakke, PhD in Cultural Anthropology and Professor at McGill University, in a fascinating book called “The Grid: The Fraying Wires between Americans and Our Energy Future,” outlines the history of the power grid and its vulnerability. She describes the battles that were fought in the early days between advocates for privately owned, small, special […]

December 22, 2017 | China’s Dangerous Debt Bubble

China’s debt growth is a truly astounding phenomenon. Those debts are mostly in the corporate sector making China’s corporate sector debt ratio, at 170 percent of GDP, the highest in the world. Other countries like Canada have a higher total private sector debt ratio because the household sector is more eager to borrow. But in […]

December 15, 2017 | The Federal Reserve’s Slow Approach to Raising Rates

The Federal Reserve hiked the Fed Funds rate by 0.25 percent. No one on Wall Street was surprised, as the Fed had hinted at the move and news on the U.S. economy has been consistently positive. Some have wondered why the Fed has not raised rates more aggressively given the unemployment rate at 4.1 percent, […]

December 1, 2017 | OPEC Met to Extend Production Cuts

The OPEC (and some non-OPEC) countries met on Thursday this week and decided to extend the production cuts agreed in October 2016. That meeting was unique because Russia, a large non-OPEC producer, joined the attempt to control the supply of oil on the market by asking members to cut production. As I wrote last December, OPEC’s […]

November 24, 2017 | The Keystone XL pipeline was approved this week

This week Nebraska’s regulator made a decision approving the Keystone XL pipeline. The decision approved the line based on a new route, known as the “alternative mainline route”, not TransCanada’s “preferred” route. So this approval, although a key step, might mean a lengthy process of negotiations with different landowners on the new route and, possibly, […]

November 17, 2017 | Flaws of Neoliberalism are showing

Some readers might not be familiar with the term “neoliberalism” and its exact meaning. That’s because the media seldom uses this word to describe an economic and political philosophy. Instead, media writers often refer to Adam Smith’s “invisible hand” that is purported to guide the economy without any human intervention. In a recent Guardian piece, […]

November 10, 2017 | The Retail Industry is in Big Trouble

A Bloomberg story about difficulties in the retail industry caught my eye, as I’ve written about struggles of retail stores and shopping malls before, in a Weekend Note in December 2015. At that time, shares of the on-line behemoth Amazon Inc. were trading on the stock market at $666. Recently they touched $1,135, a total value […]

November 3, 2017 | Trump Tax Reform, Will it be Enough?

Under this current tax reform proposal the center piece is the reduction in the corporate tax rate from 35% to 20%. There’s also an increase in exemption for the estate tax to $11.2 million or $22 million for a couple. Above that amount people would pay 40% on their estate although the estate tax would […]

October 27, 2017 | The Bank of Canada Cannot Decide Which Way To Go

Following Wednesday’s announcement the Loonie traded a full cent lower against the US dollar. That move tells us that the announcement caught traders by surprise. Source: Thomson ONE It has been quite a roller coaster ride for the Loonie since May 3 when it closed below 73 cents, early September at 82 cents and now […]

October 21, 2017 | The Last Big Loophole Closes on Canadian Housing Finance

The Canadian housing market’s been on a tear for almost twenty years. Prices have tripled since 2000. Easy credit conditions have been feeding fuel to the fire. Source: Bank for International Settlements, The MacBeth Group In an October 3 speech regulator-in-chief Rudin issued a clear warning to aggressive lenders: “We clearly see the potential risks […]

October 13, 2017 | Richard Thaler Prize in Economics

Source: Geoff Pugh Mainstream economics assumes that every economic agent has certain attributes that are far from human. For example, the rational agent acts rationally, has perfect knowledge of the future, acts selfishly, lives forever, never has to repay loans, never spends more than he can afford and so on. This approach is called “rational […]

October 7, 2017 | The Chair of the Fed is up for Grabs

Janet Yellen challenged President Trump in public after he was elected but before his inauguration. As I noted here in January, she said in her press conference after hiking rates on December 14, 2016: “So I would say that fiscal policy is not obviously needed to provide stimulus to help us get back to full employment. […]

September 29, 2017 | Koo Balance Sheet Recession in Canada

Let’s start by taking a look at what happened in Japan. The bubble that burst in Japan’s stock market was massive while the real estate bubble was comparable to more recent housing bubbles in Canada and Australia. Source: Bank for International Settlements, The MacBeth Group In an interview with Richard Koo, published in MacLean’s in […]

September 22, 2017 | The Federal Reserve Announced the End of QE

Source: St. Louis Fed – FRED The base money, which is mostly securities owned by the Fed, ballooned to more than $4 Trillion in 2014, from a much lower level of $800 billion in 2008. A five-fold increase in six years. This expansion came to be known as Quantitative Easing (QE), although the Fed prefers […]

September 15, 2017 | Money Creation is Not What People Think

Basic introductory economics uses a description of the lending process called “banks as financial intermediaries”. In this version banks take deposits from savers, and then loan that money out to others, while keeping a portion in reserve as required by regulators. Some people are savers, wealthy people who have excess funds. The bank loans their […]

September 8, 2017 | Cryptocurrency Mania

Sources:, The MacBeth Group If you held $1,000 of Bitcoin in July 2010 and kept it, you would be worth $40 million today. But buyers today, at these prices, are betting that there will be a bigger fool to bid up the value even further later, much like tulip bulbs in 1600 or Toronto […]

September 1, 2017 | The Brexit Process

Sources: ThomsonOne, The MacBeth Group The British Prime Minister, Theresa May, triggered the Brexit process in late March 2017.  Since then the march to Brexit, and possibly a “hard” Brexit, has continued. The pound sterling looks headed for parity with the Euro, compared to a high of 1.42 before the referendum. How did things get […]

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