Real estate

"The challenge to Hillary, if Trump is the nominee and pivots to the center in the general election as a problem-solving, independent-minded, successful 'get it done' businessman is that Democrats will no longer be able to count on his personality and outrageous sound bites to disqualify him in the voters' minds."

"It’s no secret that Alberta’s economy is closely linked to the peaks and craters of oil prices—nominal GDP (not adjusted for inflation) swings in tandem with crude prices. It’s why Fort McMurray is like a wounded beast these days. MacKay’s neighbour got laid off this fall. “I watched the bank come and take his truck,” he recalls—it was that or not feed the kids."

In March 2014 Wall Street’s ex-items S&P 500 earnings forecast for 2015 was about $133 per share; it ended up 20% lower at $106. Yet here they go again - the consensus for 2016 started out at $137 per share last spring, and is just now beginning to make its way back toward the high $120s. It is a barometer of the abject complacency and intellectual sloth that has descended on the casino owing to two decades of Fed coddling and seven year of free money for the carry trades. In the case of Chipotle, it was always just a burrito. In the case of the US and world economy and financial markets, it’s not even that.

Bubbles don’t correct - they burst! Sure, U.S. stocks might have climbed out of the August correction. But too many small- and mid-cap stocks are in the red to say "the coast is clear." And these growing divergences in the market are showing that we are very, very close to bursting.

Two months after the first "Macy's Massacre", the massacre is back with a vengeance, and moments ago the iconic retailer not only reported yet another cut in its guidance, but also announced it would be laying off another boatload of retailers, demonstrating just how strong the "service" economy truly is.

As goes US manufacturing, so goes US services. In a narrative-crushing print, US Services PMI dropped to 54.3 - the lowest since January 2015. Output and New business growth slumped to 11-month lows, optimism dropped, and input cost inflation continued to moderate as "suggests the pace of hiring has slowed since earlier in the year as businesses have become more cautious." Then, confirming  this plunge, ISM Services printed 55.3 - its lowest since March 2014 as unadjusted new orders collapsed to their lowest since February 2014.

Fed policymakers seem to be of the view that the almost zero federal funds rate and their massive monetary pumping has cured the economy, which now seems to be approaching a path of stable economic growth and price stability, so it is held. Yet, manipulations by the Fed could not bring the economy onto a path of stability and prosperity but, on the contrary, set in motion the menace of the boom-bust cycle. This raises the likelihood that the elimination of bubbles as a result of a tighter stance while good in the long-term for wealth generators is likely to trigger a severe economic slump in the near to medium term.

After yesterday's historic -6.9% rout in the Shanghai Composite, which saw the first new marketwide circuit breaker trading halt applied to Chinese stocks (on its first day of operation), many were wondering if the Chinese government would intervene in both the once again imploding stock market, as well as China's plunging and rapidly devaluing currency. And, after the SHCOMP opened down -3%, the government did not disappoint and promptly intervened in both the Yuan as well as the stock market, however with very mixed results which global stocks took a sign that the "national team" is no longer focused solely on stocks, and have resumed selling for a second consecutive day. 

Bill Dudley and the Federal Reserve (Fed), in their efforts to influence economic growth may have created a speculative and consumption driven environment that is crushing productivity growth. Ingenuity, not debt, made America an economic powerhouse. If we are to resume down that path we need the Fed to end their “self-defeating” policies and in its place we must demand ingenuity from them. The Fed, along with government, needs to properly incent productivity. The Fed should start this arduous task by removing excessive stimulus which will take the speculative fervor out of markets and allow asset bubbles to deflate.

"The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance."

The reckless herd has been in control for the last few years, but their recklessness is going to get them slaughtered. Corporate profits are plunging. Labor participation continues to fall. A global recession is in progress. The strong U.S. dollar is crushing exports and profits of international corporations. Real household income remains stagnant, while healthcare, rent, home prices, education, and a myriad of other daily living expenses relentlessly rises. The world is a powder keg, with tensions rising ever higher in the Middle East, Ukraine, Europe, and China. The lessons of history scream for caution at this moment in time, not recklessness. 2016 will be a year of reckoning for the reckless herd.

Though "another Lehman Brothers" isn't likely to happen with banks, it is very likely to happen with commodity firms and countries that depend directly or indirectly on commodity prices.

As we start the new year, there is a debate raging within the market.  No the debate isn’t whether there is weakness in the manufacturing economy, that is taken as a given, especially after Friday’s awful Chicago Purchasing Manager number of 42.9. Instead, the debate boils down to this: 'bears' believe the manufacturing economy and the service economy act in conjunction with each other – that one cannot turn, without the other; 'bulls' view each segment of the economy as relatively independent and they highlight the size of the service economy relative to the manufacturing. The answer lies in the missing cog - the 'wealth' economy.

Important pillars of the bull case evaporated throughout 2015. Global price pressures weakened, the global Credit backdrop deteriorated and the global economy decelerated. The huge bets on central bank policies left markets at high risk for abrupt reversals and trade unwinds – 2015 The Year of the Erratic Crowded Trade. Indeed, a global bear market commenced yet most remain bullish. Serious and objective analysts would view this ominously.

The unfolding correction of the visible excesses of the credit inflation - such as overinvestment and malinvestment - will destroy incomes and profits; the Great Unwind of the less visible effects, such as the sovereign wealth fund liquidations, are a giant pin aimed squarely at the monumental worldwide bubbles in stock, bonds and real estate.