Fast Moving Incoming Recession . . . .

[errolanderson]

Friday may be face-the-music day . . . Labour reports released. Some estimates stateside suggest 400,000 jobs lost in January.

Upcoming inflation data may also suggest a peak. Government data always behind the curve.

Atlanta Fed posting tough U.S. GDP estimates of only 0.1 percent growth. Fed may have to back off their rate hike talk, if data shows significant slowdown. Little doubt, Bank of Canada will be at a standstill . . . .

[errolanderson]

Tough week for markets. It’s unusual that stocks, bonds and commodities all drop in-unison. Even oil and wheat down sharply from early week highs. Tech losses now staggering.

Noticeable: Credit markets under-seige. Huge outflow in bonds this week, from junk to high-quality corporate. This is a sign incoming recession gaining momentum . . . .

[Sodbuster]

Most of my managed money is invested in the oil and gas sector, as long as the stupidity of the world to go green keeps going my money will stay there and also doubles as a hedge for diesel.

[errolanderson]

Commodities at-risk as well. If credit markets blow, stagflation turns toward deflation.

Inflation party still rocking even as economy slows, but that can change quickly as the easy money tap gets turned off.

[Hamloc]

Commodities at-risk as well. If credit markets blow, stagflation turns toward deflation.

Inflation party still rocking even as economy slows, but that can change quickly as the easy money tap gets turned off.

My son was helping do a concrete floor in a new shop in the area yesterday. He was talking to one of the builders. He told my son that he thought 3/8 plywood would be $100 a sheet by spring, now that is inflation!!!!

[errolanderson]

Fitting quote for today's markets and incoming recession . . . .

"Bear markets are born on euphoria, grow on grinding economics, mature on recession and die on panic." -Ken Fisher

[errolanderson]

Differential between 3 year and 10 year U.S. treasury yields inverted today.

Apparently, this is a strong indication of recession. Suggests risk of housing market fallout is very real once buyer euphoria comes back down-to-earth. Then a sellers market becomes a buyers market. This transition may occur by 2nd half of 2022.

Oh yah, almost forgot . . . The Fed is expected to hike rates 7 times this year. Go figure . . . .

[Hamloc]

Differential between 3 year and 10 year U.S. treasury yields inverted today.

Apparently, this is a strong indication of recession. Suggests risk of housing market fallout is very real once buyer euphoria comes back down-to-earth. Then a sellers market becomes a buyers market. This transition may occur by 2nd half of 2022.

Oh yah, almost forgot . . . The Fed is expected to hike rates 7 times this year. Go figure . . . .

Personally I don’t consider a central bank rate of .25% or .5% good for long term economic health. 2.5-3% would be far more realistic. But what will governments do when the cost of servicing all this recently acquired debt doubles or triples. It will be quite a wake up call.

[Sodbuster]

I’ve said all along, BOC needs to raise prime rates to fight inflation and these stupid house and land prices, realistically a prime rate between 3% and 4% would be a more realistic number. With these low rates we have created a problem that people are spending beyond their means, buying million dollar houses that they couldn’t afford if they were paying a 5% mortgage. Stocks market is over inflated because it’s the only game in town, no money in GIC’s or bonds. Our government created this mess, now it’s time to clean it up.

[bucket]

Sadly the people thar were careful will pay for it all because those that took the cheap money may not have anything .

[jazz]

CPI is 8% in the US and 6% in Canada. Thats the govt number, the reality is closer to 15%.

They can never raise rate high enough to pull this one back. They are going to get a recession one way or another. And printing their way out is not an option.

Probably some covid or climate lockdown scheme.

[furrowtickler]

Farmers will be soon be paying exhorbitant carbon taxes. Taxes will slam ag. GST. carbon. PST. Capital gains taxes. Death taxes. Municipal. Fishing. Every kind of license fees you can imagine.

The UN will pay your bills on the condition they take your land, and also on the condition you can never buy it back again. Of course Trudeau will have the system all set up for paying off your debt. Canada will become the first post national state of the UN. And lose its stays as a sovereign nation.Trudeau will have fullfilled that promise to his voters.

Canada will get filled with illegals and well-off refugees who complain incessantly about the hardships of their low monthly Govt payments. Eventually farmers will be moved to city low housing areas

Most middle class working Canadians will lose their jobs to robots and will spend most of their time reading pamphlets with instructions on how to be happy. Small businesses will become a thing of bygone times. Billionaires will own the land whom people will depend upon for food. Plus owning the waterways most farmers had been leasing out to Ducks Unlimited.

Most Canadians will wring their hands and wonder why Canadians sat back and watched it happen.

How’s that for a depressing read written in the middle of the night and read over brekfast? Pars.

There are actually a few on here cheering this on
Good to hear from you Pars 👍

[jazz]

The fed will either have to sacrifice main street (housing) or wall street to the economic gods this time.

Guess which one I am betting on.

The US fed raised rates 25bp but didnt stop buying MBS or rollback any QE.

See where this is going.

You still may yet own nothing and be happy.

[Sodbuster]

There is no good way to get out of this, the BOC lowered prime rates to a level that is not sustainable and have waited far to long to start raising rates. On the other side of the ledger governments have racked up a huge debt and spending is out of control with no sign of slowing down. This has been going on for far to long with the present Liberals more than doubling our current debt in just a few short years. Having survived thru 20% interest rates early in my farming career I find these low interest rates ridiculous and think we should get back to 5%-6% mortgages.

[helmsdale]

A working theory... could be 100% wrong, or a couple percent right, who knows.

CB's are boxed into one hell of a corner. Leave rates alone and you're sure to have inflation ruin the economy.

Tackle interest rates with reasonable rates and you're sure to torpedo this debt laden behemoth, and guarantee a ruined economy.

There is no REAL out! So what sort of "soft landing" can they engineer to ensure rates do not have to rise as far as they SHOULD, while at the same time trying to trim speculative investing? Enter government regulation...

I see a day coming where government edict discerns whether you're "elligible" for loan or not. Or at least a low interest loan. They'll let current debtors limp along, but if debt:cashflow or worse yet, debt:freecash doesnt exceed a certain number you're not qualified.

They've kicked the can for 14 friggin years now. This is well beyond a properly functioning "free market economy"! Trust me... they'll kick the can some more.

Worst case I see rates rising with preferential government subsidized rates for those that aren't zombies reliant on equity to back their debt. Errol isnt wrong... He, and for that matter anybody trained in macro econ, knows that this cant continue forever. In the same frame of thought though, continuity is far simpler than radical change, and that's what makes me think "tweaking" in the short term is more likely than impending doom as true free market analysis would indicate.

Bond markets, and the broader stock market for that matter, are at least at this point calling CB's bluff. Seems they're pricing a short runup in rates followed by another round of QE and interest rate cuts. Play your cards right, survive the initial onslaught, and they might be PAYING YOU to borrow and invest... provided you meet government approved baselines of course.