Juggling Dynamite

Former California Governor Arnold Schwarzenegger (R) was on The Messy Truth with Van Jones last night and explained why he couldn’t vote for Donald Trump. Refreshing when people stand up for the issues that matter to all of us, rather than just mindlessly endorsing party heads.

This segment on immigrant workers in California’s food belt was also insightful.

CNN’s Van Jones spoke with farmers in California about their fear that the fields will be raided by federal agents and they will lose their workforce of undocumented labor.

The longer/further price gains go above the long term average (5% a year line below) the longer/further they will spend laboring beneath it.  Moonshots like the past year over year move in Toronto prices, is a 4 standard deviation event above the long term mean, and that’s a bad sign.  This chart since 1990, offers some insight on scope and scale.  The payback period after this one, is set up to be long and hard, potentially unprecedented.

Unfortunately madness and mayhem is not “contained” to Toronto. The ‘average’ Canadian home price nationally is now about $613k or nearly 8 x the average national household income–the long term multiple generally considered healthy/affordable/sane is 3x household income.  Froot Loops anyone?

For many, the dream of home ownership has become a nightmare of extreme indebtedness and insufficient cash flow to cover living expenses never mind savings for the future. The resulting deficits will be a problem for families, businesses, social programs and taxpayers across the country.  Read the below table of gains over just the past year, and weep.  Much pain and suffering lies ahead when our debt-addicted nation goes into rehab once more.  See:  Home price surges across the GTA in March.

While the US central bank cites official unemployment under 5% and inflation near 2% as mission accomplished on their dual monetary mandate, the reality is that the labor force participation rate is the lowest since 1978, and especially for the critical worker bee cohort (ages 25-54) who are supposed to be paying into all the benefit programs the boomers are drawing on as they age. And then there are all the very expensive properties and financial assets that the boomers want to sell at peak valuations to younger folks, in order to raise cash for their retirement years. Older folks can’t keep their jobs into their 70’s, collect all the benefits, and sell all their assets at peak levels…something has to give… younger people need some wage growth and savings as well as lower asset prices, if they are to be buyers and taxpayers.  This discussion is on point.

Gary Shilling, president at A. Gary Shilling & Co. and Bloomberg View columnist, examines the shortfalls he sees in the U.S. economy with a focus on the labor force. Here is a direct video link.