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March 11, 2022 | Cost of Crude Oil Could Start a Recession

A doubling in the price of crude oil in a short period of time (a year or less) has been a reliable predictor of recession. In fact, every time in the post-WWII period when oil has doubled, there has been a recession. Will there be a recession after the current jump in oil prices? The […]

February 25, 2022 | Rising Inflation Could Signal The End of this Bull Market

Persistent increases in inflation signal the end of this bull market. The increase in inflation will push interest rates higher and stock market valuations will come down. The Markets Live segment of Bloomberg published a chart a few days ago that caught my eye. The chart shows the relationship between Manufacturing Business Prices Paid and […]

February 18, 2022 | An Invasion by Russia into Ukraine Could Rattle Stock Markets

The potential military conflict between Russia and Ukraine continues to escalate. Military conflicts usually cause markets to get more volatile for a time. But would an invasion of Ukraine by Russia precipitate a market crash?   Members of Ukrainian forces in an urban combat training exercise on Friday February 11, 2022. Source: Bloomberg Finance LP […]

February 11, 2022 | Inflation Expectations are Still Too Low

Economists are underestimating inflation. The consensus is for inflation to drop to 2.9 percent by the end of 2022. But that consensus should be viewed with suspicion. How should investors act if we get higher inflation instead? The consensus of economists has inflation dropping from 7 percent to sub-3 percent by the end of 2022. […]

February 4, 2022 | Grantham Makes a Bold and Scary Prediction

The end of this bull market has arrived. Recently Jeremy Grantham described how this extreme valuation in the stock market, bond market and some housing markets is a very rare event. And he claims that it is over. Grantham first came to my attention at a conference in 2003. He was a keynote speaker and […]

January 28, 2022 | The End of Easy Money is Near

The Federal Reserve has been promoting asset bubbles for years. This easy money policy has created a series of booms, widened income and wealth inequality and added massive debt to the system. This week the Fed signaled it is ready to end this misguided policy. Will the Fed have the backbone to stop promoting asset […]

January 21, 2022 | The End of the Property Bubble in China

The end of the property bubble in China has arrived. The likely next stage is liquidation, with the government deciding who writes off the bad debts that have been created. China’s property bubble is second to none. The size of total debt, the scale of investment in property and the participation of households are all […]

January 14, 2022 | Concentrated Markets are Irrational

The U.S. stock market is at record highs. But only a few stocks are responsible for driving the majority of the recent gains. Is a concentrated stock market a healthy market? Most people are aware that the U.S. stock market has been gaining strength for several years. The valuation of the main index, the S&P […]

January 7, 2022 | Tesla Will Face Major Competition Soon

Tesla, the world’s leading electric automobile manufacturer, announced a sales record for the quarter ending December 31. The share price of Tesla is up about 10-fold since March 2020. Is competition from Volkswagen and Toyota about to derail Tesla’s dominance? The stock market valuation for Tesla hit $1 trillion, around the same time Apple’s total […]

December 17, 2021 | Shelter Costs are about to Hit the CPI, Finally

The Canadian housing mania is two decades old. During that period various house prices are up to three to four times in most cities while the largest CPI component — shelter — is up only marginally. How is such a flawed method of calculating housing costs used in the CPI? The largest component of the […]

December 10, 2021 | The U.K. Stock Market is for Contrarians Only

The stock markets in Europe are much cheaper than the U.S. In fact, based on price-earnings (P/E) ratios, some European indices like the U.K. FTSE 100 are at the cheapest level ever in relation to the U.S. benchmark, the S&P 500. Is this a buying opportunity, or a value trap? Source: Bloomberg The U.K. index, […]

December 3, 2021 | A Major Policy Mistake

  Policy makers in the U.S., and elsewhere, are in the middle of making a dangerous policy mistake, according to Martin Barnes, a prominent economist. The Federal Reserve is “caught in a trap of its own making”. Martin Barnes, formerly chief economist of BCA Research, is now retired. But he still writes occasional reports, and […]

November 26, 2021 | The Bank of Canada is Ignoring the Risks

Recently the Deputy Governor of the Bank of Canada, Paul Beaudry, made a speech about the resilience of the Canadian financial system. He discussed several serious vulnerabilities threatening the system but claims that financial institutions will be fine, even if those risks trigger a financial crisis. Is the Bank of Canada ignoring the risks? The speech was […]

November 19, 2021 | Gold Could be a Hedge Against a Fed-Induced Financial Crisis

Gold bullion and gold mining shares are about as depressed as they ever get in relation to bonds and stocks. Gold and gold mining equities used to be considered a hedge against inflation and the debasement of paper money. With the Fed reluctant to take strong measures to fight inflation will gold finally have its […]

November 12, 2021 | The Federal Reserve Ignores the Biggest Risk to the Economy

The Federal Reserve issues a financial stability report twice a year that assesses the resilience of the financial system and highlights near-term risks. Is the Fed failing to see the biggest risk? As the report says, “In an unstable financial system, adverse events are more likely to result in severe financial stress and disrupt the flow […]

November 5, 2021 | The Fed Risks Triggering Another Taper Tantrum

The Federal Reserve announced that the quantitative easing (QE) program that has been in place for more than a decade will be phased out gradually. In 2013 when the Fed tried to exit the QE program the markets threw a tantrum, government bond yields jumped from 2 percent to 3 percent and the Fed backed […]

October 29, 2021 | Elon Musk is the Wealthiest Billionaire on Earth

Elon Musk, CEO of Tesla and Space-X has become the world’s wealthiest billionaire. He recently passed Jeff Bezos, founder of Amazon, to reach the number one spot. Will Musk become the first person to reach $1 trillion? As Tesla shares reached a peak of $1,000 on Monday, and the value of the company on the […]

October 22, 2021 | Canadian CPI massively underestimates housing costs

Canada’s statistics bureau, StatsCan, says that CPI-measured inflation is running hot. Year-over-year gains were 4.4 percent for September 2021, one of the fastest rates among developed countries. News reports highlighted rising food and gasoline prices, but house prices are soaring, by 18 percent from a year ago. Why is CPI inflation only 4.4 percent with […]

October 15, 2021 | Rapidly Building Inflation Threatens

Inflation is threatening to get out of control and central banks could be asleep at the switch. In the U.S. the Fed remains supremely confident of its ability to control rising prices, if needed. Is the Fed overconfident? US inflation CPI hit a 13-year high this week at 5.4 percent growth year-over-year, but central bankers […]

October 8, 2021 | Tesla Results are Electrifying

Tesla released outstanding sales for the third quarter ending September 30, 2021. At 240,000 vehicles over three months, Tesla deliveries will soon reach 1 million vehicles annually. The rest of the auto industry remains in a deep slump. Is Tesla’s rapid growth proof that the future is all-electric? Tesla sales remain relatively small in comparison […]

October 1, 2021 | Twin Growth Challenges in China will Test the World

China is being hit by the double whammy of a real estate slowdown and electrical power shortages. The Chinese system will be put to a severe test. Will China’s twin challenges impact the world economy? Since China was initiated into the WTO in 2001 the Chinese economy has led the world in economic growth. In […]

September 24, 2021 | China Evergrande is not Lehman Brothers

The China Evergrande debacle continues to worsen. China Evergrande, the second largest property developer in China and the most indebted in the world, missed loan payments this week, triggering a technical default. Is the China Evergrande crisis like the Lehman Brothers bankruptcy? Lehman failed in 2008 with $630 billion in liabilities and $600 billion in […]

September 10, 2021 | Irrational Exuberance is Here Again

Irrational exuberance is a term introduced by Alan Greenspan in a speech in December 1996. In 2021, the degree of enthusiasm for financial assets is at an extreme seldom seen before throughout history. Will this episode of irrational exuberance lead to a crisis in markets? Some market analysts and economists are very concerned about the […]

September 3, 2021 | Corporate Debt Threatens the Recovery

Corporate indebtedness has been increasing at a steady rate for years. The rate of increase has even accelerated since 2008. This amount of debt in the corporate world makes the economy more vulnerable to new shocks. Will elevated corporate debt trigger the next financial crisis? From the FT.com (paywall) “Unhedged” Robert Armstrong writes: “Corporate debt has never […]

August 27, 2021 | Stock Market Speculation Soars

Speculation in stock markets has been growing for many months. But the latest review of several reliable indicators of speculation shows that a shocking amount of speculative fever has appeared in stock market activity. Does this degree of speculation always lead to a stock market crash? The highly respected GMO LLC quarterly letter compiled a […]

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