Shortly after yesterday’s rate hike by the Bank of Canada, its first since 2010, we warned that as rates in Canada begin to rise, the local economy which has seen a striking decline in hourly earnings in the past year, which remains greatly reliant on a vibrant construction sector, and where households are the most levered on record, if there is anything that can burst the local housing bubble, it is tighter monetary conditions. And a bubble it is, as the chart below clearly demonstrates… one just waiting for the pin, which as we suggested yesterday in “”Canada Is In Serious Trouble” Again, And This Time It&...
I was chatting with an acquaintance the other day about the resilience of credit in the face of multiple political land mines that, under normal circumstances, would have caused spreads on IG and HY to widen materially. [What? Isn’t that something you talk to your friends about?] We both agreed that while suppressed equity vol. grabs all the headlines, it is in fact credit’s Teflon performance that wins the John Gotti prize for “most bulletproof asset class.” Indeed, if you would have correctly predicted every political outcome over the past 12 months and traded accordingly in credit, you would have been wrong every time. Needless to ...
A friend was lamenting about the difficulty he was having getting “look through” information on closed end funds and ETFs, specifically bond funds, and calling into his online brokerage firm for help didn’t yield much better results. Closed end funds not necessarily being transparent isn’t news and while I am surprised he had the same difficulty with ETFs. Perception is reality so perhaps he perceived a lack of information for the ETFs he was interested in. A few weeks ago, Barron’s ETF column was titled Finding the Best Alternative ETFs with the context being what would help if both stocks and bonds crashed. One strategy the auth...
As central banks have pumped trillions of QE liquidity into the financial system since 2008, money supply (green) increased along with household debt (in red), but economic output (green) has maintained its downward trend along with wages and salaries (black). This is a big problem, because credit bubbles have always burst–every one (see chart below)–evaporating the appearance of wealth as asset prices collapse and debts remain. When the Canadian debt bubble is finished mean reverting, this chart showing the relative overshoot in Canadian home prices versus the US since 2008 gives a sense of how far prices are likely to retrace. A similar...
Week 27 of 2017 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. The economically intuitive sectors slowing continues. Analyst Opinion of the Rail Data We review this data set to understand the economy. If coal and grain are removed from the analysis, rail over the last 6 months been declining around 5% – but this week it grew 0.4 % (meaning that the predictive economic elements declined year-over-year). Also, consider total rail movements are below 2015 levels – even though they are above 2016 levels. This week the one year rolling...
Barclays downgraded Seagate (STX) to Underweight, its equivalent of a sell rating, from Equal Weight. The company’s cost cutting initiatives have largely come to an end, while it is losing share to its rival, Western Digital (WDC), in the high margin hard disk drive market, Barclays believes. Furthermore, Western Digital looks increasingly like it could acquire Toshiba’s (TOSBF) memory unit, which could lead more investors to sell Seagate and buy Western Digital, Barclays warned. COST CUTTING NEAR DONE: Seagate’s cost cutting story is “mostly over,” as it has already “streamlined its manufacturing capacity,...
For investors looking for high-quality dividend stocks, the Dividend Aristocrats is a great place to begin your research. The Dividend Aristocrats Excel spreadsheet has 51 stocks with 25+ consecutive years of dividend increases. Health care giants Johnson & Johnson (JNJ) and Medtronic (MDT) are both on the list. J&J is a member of an even more exclusive club: the Dividend Kings. It has increased its dividend for 55 years in a row, compared with 40 years for Medtronic. The Dividend Kings Excel spreadsheet has just 19 stocks, each with 50+ years of consecutive dividend increases. This article will attempt to find out which of these ...
Although I cover my retail stocks early this morning (M, JWN, DDS) I am still cheerfully short a different kind of “retail”, which are casual dining establishments (AKA places I would never, ever want to eat). Here they are……….Fiesta Restaurant Group: Brinker International………. And, home of the Grand Slam, Denny’s……….. ...
In last week’s Insight, I analyzed the current geopolitical situation and concluded that it was now in the interest of the Shanghai Cooperation Organisation to break from the US dollar completely, by establishing a new monetary and banking system. By linking the yuan and rouble to gold, the SCO’s principal currencies would be insulated from manipulation by means of dollar currency rates, and their use as a weapon to undermine the Sino-Russian partnership. This article addresses some of the practical difficulties of establishing such a sound monetary system. A return to sound money will require a radical reform of financial markets, as we...
US equity markets are ramping higher (aside from Small Caps) this morning as it appears the word “uncertain” – uttered ubiquitously by Fed Chair Yellen in the last two days – has a different meaning in stock-land… VIX hammered to a 9-handle, sending stocks soaring… Oh, and decliners are outpacing advancers… Headlines: Everything is awesome. pic.twitter.com/XH4Vg3V3D1 — Sven Henrich (@NorthmanTrader) July 13, 2017 ...