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June 24, 2022 | Retail Capitulation Yet To Come

Lived experience tends to influence thinking, especially regarding financial decisions. Whether the latest memories are smooth sailing or adversity, it’s typical to expect more of the same, discounting the undulation of cycles. The March 2020 market freefall was highly unusual in its brevity. As the world economy unexpectedly shut down, many found a windfall of […]

June 23, 2022 | How Do Bubbles Form? Tulips, GameStop (and Crypto) Help Explain

The video below from the Wall Street Journal offers a helpful refresher on how asset bubbles move. Worth the 7 minutes. Asset bubbles are easy enough to define, but not so simple to identify. WSJ’s Gunjan Banerji explains what bubbles are exactly, how they form and what happens when they burst. Here is a direct video […]

June 22, 2022 | Big Bounces Par for Bear Market Course

Cryptocurrencies are bid this morning, and US markets are reopening with a bounce following the steepest losses since March 2020 (the S&P fell 5.8% last week, -10% this month so far). As shown below, courtesy of The Daily Shot, the Dow Jones Industrial Average (supposed to be more ‘conservative’) has fallen 11 of the past […]

June 21, 2022 | Home Prices Dropping–as They Should

There’s now much talk of home prices “crashing,” but few were ringing alarm bells as they leapt 50% over the prior two years. Housing has always been a cycle driven primarily by credit. Because the latest boom went on longer than average, most people stopped thinking of housing as a cycle, which was an error. […]

June 20, 2022 | Bear Market Update

Starting a new week with US markets unplugged today offers a moment to review the bear market progress to date. From their most recent highs: S&P 500 -23% Nasdaq -32% Russell 2000 small caps -32% TSX -14% Cdn $/USD -7.8% Canadian financials -17% Canadian oil and gas stocks -15% US oil and gas stocks –20% US Banks: –32% Asset manglers managers –37% […]

June 19, 2022 | Danielle on CBC Weekend Business Panel

Danielle appeared on CBC’s Weekend Business Panel talking about the federal budget, Bank of Canada, crypto crash and readjusting to in person work. Here is a direct video link.    

June 17, 2022 | Deflation To Overcome Inflationary Pressures?

Worthwhile discussion to mull. Inflation remains the center-stage villain in the economy right now, with the latest Consumer Price Index coming in at a 41-year high of 8.6% But is there a bigger bad lurking behind the scenes? Could deflation be the real threat here, just waiting to pounce after today’s hot inflation has burned […]

June 16, 2022 | Easy Credit Comeuppance

After leaving base rates in the banking system at zero for two whole years (March 2020 to March 2022), the US Fed hiked yesterday for the third time in as many months, this time going a panicked .75– the first such single increase since 1994. It’s now expected that the Bank of Canada will follow […]

June 15, 2022 | Return of Principal Matters Most

The policy-inspired and behaviour-driven ‘everything bubble’ is fulfilling its destiny, morphing into the everything bust. Cryptocurrency grand-daddy Bitcoin is off 70%, and others in the space are faring worse. Two trillion in sketchy market valuation has been vaporized in the crypto space alone. The much-hyped Purpose Bitcoin ETF, Canada’s first crypto ETF touted as an “innovation” […]

June 14, 2022 | Hypothetical Returns Designed to Disappoint

It is important to understand that advertised investment returns typically assume that all interest and dividends are reinvested with no withdrawals for fees or spending–ever. In this way, as charted below and here, the notional annual compound return of Canada’s investable TSX 60 index (XIU) over the 14 years to June 10, 2022, was advertised as […]

June 13, 2022 | Taking Shelter and Looking Forward

As the air deservedly comes out of asset bubbles globally, companies and households need to focus on weathering the financing crunch/bear market/recession and looking forward to opportunities that will arise from it. Excellent companies and products are routinely horrible investments if bought at too high a price, so timing is a critical factor in outcomes. […]

June 11, 2022 | Easy Money Boondoggle Coming to Predictable Close

Venture capital, private equity firms, and hedge funds (traditionally more hubris than hedged) used to be fringe players working with the high-risk pieces of ultra-wealthy portfolios. However, as traditional investment yields (net rental, dividends and interest) tumbled through years of aggressive monetary intervention (zero interest rate policies and QE), individuals and institutions sought ‘alternatives’ for […]

June 10, 2022 | Pain For Buy-Now-Pay-Later Loan Investors

Consumer layaway plans were popular in the debt-fueled boom before the market and economic crash of 1929. Every cycle, finance rolls out old leverage tricks enabling a near-term consumption bump by selling sketchy debts to indiscriminate investors. Same junk another day. Nothing new here; see Funding squeeze at buy-now-pay-later firm flashes warning: Some of the riskiest […]

June 9, 2022 | Housing Downturn in Motion

The higher the ratio of investors and secondary buyers in a housing market, the less stable prices tend to be. In urban areas within an hour’s drive of Toronto (broad GTA), the average sale price topped $1,000,000 in February 2022, and so-called investors bought an estimated 40% of properties sold over the prior two years. […]

June 8, 2022 | Next Phase: Liquidation Mode

Target joined other major retailers and warned this morning that its profits will take a hit as it takes aggressive steps to eliminate excess inventory. See Target shares fall 8% as it expects squeezed profits from aggressive plan to get rid of unwanted inventory: The retailer slashed its profit margin expectations for the fiscal second quarter […]

June 7, 2022 | Debt Elevates Stress, Negatively Affects Health

As home prices have gone skyward, it’s increasingly less typical for people to pay off their mortgages before retiring and the proportion of non-mortgage debt outstanding has ballooned.  Research confirms that debt can have a negative effect on health, especially as we age (no surprise). Elevated health problems and medical expenses join lost productivity to […]

June 6, 2022 | Not ‘There’ Yet

The investment marketing world urges that every day is a valuable buying opportunity and fear of missing out is a formidable bait. This is especially true since many participants have never lived through a typical bear market (where the average S&P 500 decline was 29% over 12 months if the economy was not in recession […]

June 3, 2022 | Liquidity Risk and Capital Allocation Mistakes

Useful insight in this discussion on consumer spending, ETF/mutual fund liquidity risks, common allocation mistakes in housing and investment portfolios, and the value-add lacking in mainstream financial advisory services. Worth listening. Ted Oakley interviews Danielle DiMartino Booth about her outlook on global economics, inflation, U.S. housing, Federal Reserve policy, and how it will affect investors. […]

June 2, 2022 | Zombies and Ponzi Operators Losing the Cover of Dumb Money

When money is cheap/low-yielding, the masses tend to borrow and overspend while investment capital is ploughed into dumb, counter-productive things. With money virtually free for a decade, a historic era of financial madness has ensued. Zombie companies and Ponzi schemes are similar in that neither generates enough cash flow to meet their commitments. They can […]

June 1, 2022 | NASDAQ Warns of Larger Than Average Loss Cycle

Yesterday’s month-end close for the NASDAQ Composite Index of 12,081 officially breached its 26-month moving average by more than 1%. My partner Cory Venable’s chart below highlights that this was the 5th such breach on a monthly close since 1987. The previous four occurrences marked recessions and major bear markets. The last two, 2000-02 and […]

May 27, 2022 | Tighter Financial Conditions Enforcing Some Much Need Realism

Honesty and discipline tend to rise and fall with the ease of financial conditions. The last decade has been counter-productive and wasteful in so many ways.  Thank goodness we are back in a sobering-up phase.   For some lucid insight read Delivery Apps ignored business basics to super-charge growth–and now they’re facing layoffs, stock crashes and […]

May 26, 2022 | Grim Home Affordability Finally Starting to Dent Buyer Demand

Sales of new US homes plummeted last month to the slowest rate since April 2020 as buyer ability shrank under the weight of inflated home prices, higher rates, food and fuel.  See Business Insider: New Home Sales just plunged to pandemic era lows.   At the same time, the unsold inventory of new homes suddenly doubled […]

May 25, 2022 | Crypto Crash: Suicide of the Ignorant Led by the Reckless

In October 2017, Bitcoin rose to $19,376 before plunging to $3200 by December 2018 and trading below $5300 to March 2020.  Then, pandemic lockdowns, government subsidies and payment deferrals enabled financial speculation as an international obsession. As shown below, the price of Bitcoin exploded to $67,000 by last November as a world of cling-on companies, […]

May 24, 2022 | What’s Happening in Mortgage Land?

News from the mortgage frontline in Canada…worth a listen. What’s Happening to Mortgages Now That Rates Are Up? with Ron Butler | DFI30 | Well it appears that real estate prices are down in many parts of Ontario after record increases. Not surprising since the Bank of Canada has indicated it will raise rates again. […]

May 23, 2022 | This Asset Bust Combines the Worst of the 2000 and 2008 Cycles

Since its peak at the end of 2021, nearly $8 trillion in market cap has been knocked off the S&P 500 alone.  This comes with a 24% loss in the average NASDAQ stock and a 55% drop in Bitocoin, not to mention even larger declines in many individual stocks and crypto-currencies globally. Asset bubbles give, […]

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