ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION
January 20, 2024 | Employment Cycling Down
Unemployment spikes as recessions begin, but before that, early warning signs are fewer job openings and a shorter work week. The latest December jobs report showed spreading cyclical weakness. Year over year, Indeed job postings fell 15% in 2023. See Finding a New Job is Getting Harder.Under the hood, postings for lower-paying positions increased while higher-paying […]
January 19, 2024 | Yield Curve Signals Recession in 2024
The US 10-year Treasury yield has been below the 3-month yield since November 2022 (14 months and counting). This rare yield ‘inversion’ has preceded each recession (grey bars) since 1982, with no false signals. As usual, equity bulls perpetually bet this time will be different. In past cycles, the US Fed stopped hiking when […]
January 18, 2024 | Canadian Home Prices and Rents Amid Much Needed Mean-Reversion
Canadian home prices are retreating. In previously hot areas, properties are selling up to 20% below 2022 prices, but nationally, the average sale price was just -11.4% in the latest quarter. After an outrageous 59% average price increase nationally between Q1 2020 and Q1 2022, the mean-reversion prospects remain big from here. As shown below, courtesy […]
January 17, 2024 | Outlook Weakening Under Equity Market Optimsim
January US Empire Manufacturing reading this morning was -43.7, much worse than the -5 estimated and much weaker than during the 2008 financial crisis/great recession. Meanwhile, the analyst consensus is for S&P earnings per share growth of more than 10 percent over the next 12 months (red line below since 2000, courtesy of Mikael Sarwe) even […]
January 16, 2024 | Rate Cuts Come as Demand-Driven Economy Slows
The Bank of Canada’s (BOC’s) Business Outlook Survey for the fourth quarter of 2023 found that 40% of Canadian companies were experiencing a slowdown in sales. Indicators of future sales – including order books, advance bookings, and sales inquiries – remain subdued. See: Bank of Canada surveys show weak business environment, lower inflation expectations. The dour outlook […]
January 12, 2024 | Rate Cuts Come in Response To Intensifying Financial Strife
With inflation cooling and unemployment rising, rate cuts are coming into view. Permanent job losses have already accelerated in line with the onset of the past three recessions since 1995 (see arrows and grey bars below, courtesy of Game of Trades). Since 1969, the longest Fed pause time between the last rate hike and […]
January 11, 2024 | Prices Fall and Home Listings Rise as Canadians Struggle with Overhead
When Canadians sell a property for less than is owed in the mortgage, lenders are entitled to pursue any balance remaining plus interest, fees, and legal costs; this includes garnishing bank accounts and income. For those in debt strife, it’s wise to speak with an Insolvency Trustee to consider if you may be a candidate […]
January 10, 2024 | Financial Predation is Major Throughline
There are so many incredible developments in financial markets right now it isn’t easy to choose what to write about. And there are so many complex interconnections. Suffice it to say the throughlines are rampant financial fraud and unusually high capital risk, with very few people positioned to prosper in 2024. Just one area of […]
January 9, 2024 | Speculative Builds Adding To Deflationary Pressure in Real Estate
During the supply disruptions of the pandemic, stockpiling became an international obsession and warehouse space was in high demand. That’s reversing now. In the fourth quarter of 2023, the US had 5.2% of warehouse space empty versus 4.7% in 2019. Construction doesn’t turn on a dime, though. Hundreds of millions of new square footage are […]
January 8, 2024 | Recession Alarm with No False Positives
There has never been an incidence in history where the US Conference Board Leading Economic Index (LEI) had a six-month average growth rate sub -4.5%, and the US economy did not enter an NBER-defined recession. The six-month smoothed LEI growth rate in November was -7.5% (chart below since 2000, courtesy of ISABELNET.com) and has been […]
January 5, 2024 | Financial Cycle Behavior is Consistent
In June 1999, the US Fed began an 11-month rate hiking cycle that took the overnight rate from 4.75 to 6.5% by May 2000. Amid tech-mania-inspired irrational exuberance, the S&P 500 hit 1527 by March 2000, sold off into the summer, and rebounded to double top at 1521 by September on soft-landing forecasts. What unfolded […]
January 4, 2024 | Home Listings Rise as Sales Stagnate
Rebounding Treasury bond prices have lowered mortgage rates from their cycle high in October, but home prices at current mortgage rates are still painfully unaffordable for most. The Bank of Canada estimates that 45% of Canadian homeowners saw their mortgage payments rise in 2023, and 50% of mortgages initiated before March 2022 will face higher […]
January 3, 2024 | 2024 Starts Rough
Assets bid up by irrational amounts eventually end up on clearance sale. Always. This is something to remember with the seven most expensive tech companies ending 2023 at their October 2021 price peaks (chart shown below, courtesy of All Star Charts), even while the Fed funds rate has moved from .25 to 5.5% and earnings […]
December 28, 2023 | Bonds are Pricing Storm Clouds That Equities are Ignoring
Bonds are betting that falling inflation and rising unemployment will prompt policymakers to cut interest rates next year aggressively. After selling off in 2021 and 2022, the world’s bond market has rebounded sharply into year-end. The Bloomberg Global Aggregate Total Return Index (shown below) has risen nearly 10% over November and December, its best two-month run in […]
December 27, 2023 | EPB: Employment Trends Recessionary into 2024
Explore the Sahm Rule, a key recession indicator by economist Claudia Sahm, signalling economic downturns when the unemployment rate’s 3-month average rises by over 0.5%. Currently, at 0.3%, its upward trend sparks speculation about a potential 2024 recession. Here is a direct video link.
December 22, 2023 | Peace
Wishing you love, light, and, above all, inner peace. May we make wise choices and have the strength and commitment to see them through. May 2024 be a year of revelation and enlightenment. I love the beauty and simplicity of this quartet. No gimmicks needed. Here is a direct video link.
December 20, 2023 | Debt Defaults Leaping
Canadian debt delinquencies, insolvency proposals, and bankruptcies are all rising sharply for households and businesses. Equifax president Sue Hutchison discussed the latest data on BNN yesterday. We are in the early days of this distress cycle with three-quarters of pandemic-era low-rate mortgages to reset at higher rates in 2024 through 2026: “We expect to see tremendous […]
December 19, 2023 | China Offers Warning on Euphoric Asset Prices Elsewhere
China’s economy is struggling through a multi-year downturn in the property market, a slump in manufacturing activity and falling exports. Other countries and markets should take note. A triple whammy of falling real estate and stock prices amid credit defaults has hurt household net worth and consumer confidence. See, China’s real estate meltdown is battering the […]
December 18, 2023 | The Equity Bear Market is Likely Only Started
Asset markets leapt last week as the US Fed (and Bank of Canada) held monetary policy unchanged for the 5th consecutive month, having hiked last in July. US Chair Powell fueled euphoria when he said the Fed was talking about rate cuts in 2024–the crowd went wild. Just weeks before, Powell had said they were […]
December 15, 2023 | Fed Holds Policy Rate at 22-year High–That’s The Good News
As expected, the US Fed did not hike yesterday and held its policy rate at a 22-year high while signalling rate cuts to start in 2024. Asset markets are jubilant across the board. Relief rallies are typical at the end of central bank hiking cycles. Optimism makes sense for government bonds, which become more valuable […]
December 14, 2023 | No shame in seeking debt help
A generation of people has been devastated by monetary and fiscal policies aimed at ‘helping’ them to borrow financially suicidal sums for housing. Grave mistakes have been made, encouraged by many well-meaning family members, policy-makers and commissioned realtors and lenders. In many cases, costs will be impossible to sustain even as interest rates retreat because […]
December 13, 2023 | Consumer Spending and Employment Downturn in 2024
Consumer spending drives some 58% of Canada’s economic growth and 68% in America, so when households are blindsided by higher carrying costs and deteriorating employment, financial weakness compounds through the economy to lower revenues for companies and governments. See more on the current US job cycle in ECRI, Unveiling the Cyclical Reality of Jobs Growth: Our […]
December 12, 2023 | Yield Curve Screaming Bear Market in Process
The US yield curve’s last 17 months of inversion has been the second longest in history (2-10 curve inversion lengths shown below since 1941 courtesy of The Daily Shot). Ditto for Canada, where the 2s-10s curve has also been inverted since July 2022. Only four other times in history have seen this degree of inversion, […]
December 11, 2023 | Markets Have Not Yet Priced New Normal of Slower Growth China
Our September 30, 2021, client letter “Shifting Foundations” highlighted the default of Chinese property developer Evergrande as a turning point in the real estate-centric China growth story with broad implications for the global economy: China’s property sector has been the largest driver of its economic growth over the past decade and a significant driver of global growth. […]
December 10, 2023 | Danielle on CBC Weekend Business Panel
Danielle was a guest on the CBC Weekend Business Panel, talking about the Bank of Canada rate decision, grocery prices and McDonald’s efforts to increase sales. You can watch a video clip of the segment here.