Juggling Dynamite

Which countries stand to hurt the most from plunging commodity prices? That’s easy: the same countries who benefited the most as prices rose 2001-2011. Unfortunately most of them, like Canadians, became over-confident during the boom and went deeply into debt. Now they will struggle over the next several years during the ‘payback’ period. ‘Twas ever thus. Universal life lesson to be learned for future cycles: use boom periods to pay down debt and build up savings. Not the opposite.

Deltec Chief Investment Officer Atul Lele discusses his outlook for commodities. Here is a direct video link.

For those who would like a recap on the reasons behind current trends, I explained it in detail in this interview last January.  The Canadian financial index is the next part of the story to reprice, and that seems to be now underway. Look out below. Canadian bank shares and REITS fell more than 50% in both of the last two US recessions. This time could potentially be worse. Believe it or not…

Less spending on insurance premiums and auto repairs means more cash staying in the pockets of consumers. All of this will help households to pay down debt and build up savings once more. Then there are all the accident injuries that won’t be happening from human error and inadvertence. Win, win for consumers, and taxpayer funded health care.

Three insurance suppliers and an auto parts maker have warned in their most recent annual reports that driverless cars and the technology behind them could one day disrupt the way they do business.Here is a direct video link.

Faber made many useful observations in this interview this morning.

The U.S. stock market could “easily” drop 20 percent to 40 percent, closely followed contrarian Marc Faber said Wednesday—citing a host of factors including the growing list of companies trading below their 200-day moving average.

In recent days, “there were [also] more declining than advancing stocks, and the list of 12-month new lows was very high on Friday,” the publisher of The Gloom, Boom & Doom Report told CNBC’s “Squawk Box.”

“It shows you a lot of stocks are already declining.”

Faber said U.S. stocks are on the “high side” right now, despite Tuesday’s decline, and expectations are quite high, which can lead to big disappointments…

CNBC broke his appearance up into 3 segments of just over a minute each. Here is a direct video link to part 1.

Here is Part 2 and here is Part 3.

Faber doesn’t refer to Canada in this discussion, but his comments apply to the great white north in spades.  The Canadian stock market has been falling slowly over the past year, but presently remains dangerously overvalued on banks and REITS. The downside from here is easily as big (or bigger) as for the S&P 500.