Juggling Dynamite

The trouble with people like ex-banker-turned-Treasury Secretary Mnuchin, is that intellectual dishonesty is their main operating system.  Lying and tricking (and worse?) have been the backbone of their career, and they have been promoted and grotesquely enriched by it.  Mnuchin amassed a $300 million net worth this way, why would he change now?

Mnuchin says that he (and Trumpco) were not aware that the bi-partisan 21st Glass-Steagall Act proposed in 2013 separates commercial from investment banking? Laughable and an insult to intelligent people everywhere.  People are gullible and easily manipulated by those without conscience, Mnuchin’s success is living proof.

Senator Elizabeth Warren questioned Treasury Secretary Steven Mnuchin about his reversal of support for the Glass-Steagall Act in the May 18, 2017 Senate Banking Committee hearing.  Here is a direct video link.

Sociopath: An Antisocial Personality Disorder characterized by a disregard for the feelings of others, a lack of remorse or shame, manipulative behavior, unchecked egocentricity, and the ability to lie in order to achieve one’s goals.

Danielle was guest today with Jim Goddard on Talk Digital Network talking about recent developments in the world economy and markets. You can listen to an audio clip of the segment here.

On an ex-dividend basis, the Canadian Real Estate Investment Trust Index (XRE) is today some 9% lower than its prior cycle peaks in both March 2007 and April 2013, and has fallen 3% since the Home Capital meltdown intensified last month.

But if past cycles are prologue, the price-indiscriminate capital that flooded into this sector, desperate for yield the past 4 years, faces much further downside ahead.  The problems here go way beyond Home Capital, to a sector that has been grossly over-built, over-bought and over-valued.

The REIT index lost 62% of its value between March 2007 and 2009.  Eight years of excessively rising debt and property prices since, have set the sector up for another cycle of deep disappointment.  After mean reversion, buyers will find yields about double current levels with a fraction of the current capital risk.  In the meantime though, downside risks are due.  See: Hit bottom on Home Capital?:

Problems at Canada’s REITs go beyond Home Capital’s woes. A slump in oil prices has hurt demand for property in Alberta, the country’s big cities are seeing rents fall far behind price gains, which dents revenue, and online shopping has shrunk traffic at malls. Finally, in times of broad market stress, REITS behave more like stocks rather than safer bonds, according to Pavilion Global Markets Ltd.

“We find the risk-reward in Canadian REITs to be quite poor in the current environment,” Alex Bellefleur, an analyst at Montreal-based Pavilion, wrote in a strategy note Wednesday. “In the context of Canada’s property bubble, we would stay away from this asset class.”