Retail and commercial downsize picking up

The credit bubble enabled a massive overbuild in the scale of housing as well as the retail and commercial sector.  The mean reversion began in 2008 and then was stalled for a time by excess liquidity driven by QE and indiscriminate investor flows looking for yield.  The end result has been the addition of even more excess capacity which is now having to shutter and repurpose.

As anyone can see in the growing retail and commercial vacancies all around us, the downsizing wave is now picking up pace.  It has much further to go.  See:  Sears warns of ‘substantial doubt ‘about company’s future. 

Here is a direct video link.

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Smartflower–sun tracking solar receptor

This is what smart looks like…You can read more here.  The future is so bright.

Smartflower – the world’s first all-in-one solar system. Here is a direct video link.

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Spending years making back losses is not wise capital management

After losing ground in 2008, 2011 and 2015, North American equity markets moved higher in the second half of 2016, and buy and hope has become popular again.  Nine years since the last cyclical bear market began however, the next is overdue, and would-be investors should be risk-averse and cautious.  Instead, most participants have become complacent, willfully blind and unduly confident once more.

As pointed out by Peter Boockvar this month, the current spread of 61.2% of bulls in the weekly Investors Intelligence Survey versus bears of just 17.5%, has only been seen a few times over the past few decades, all at, or near, cycle tops.

The truth is that, typical of previous secular bear periods, over the past 20 years, markets have spent most of their time making back cycle losses, rather than making net gains.   And therein lies the rub of massive overvaluation periods.  We can buy and hope, but we can’t make back the time and angst wasted in our efforts to grow our savings.

Here is a snapshot of the Canadian TSX since 2008, prices spent the entire 8 years to October 2016 within the red box, just trying to recover prior cycle losses.  And even this poor performance took 8 years of unprecedented policy intervention and trillions in central bank injections, to coax.  The next plunge into the red, will take prices back below 2008 levels once more.  Then what help will buy and hold strategies and products boast?

Next is a similar look at the S&P 500 since 2007.  This red box highlights the 5 1/2 year period from October 2007 to April 2013 which holders had to waste, trying to make back the 2007-09 cycle losses.  Again, another dip into the red box is now overdue.  And with holders 10 years older than in 2007, they will have even less time and patience to wait for the next recovery after that.  Making matters worse, asset prices typically take a full 10-20 years to reclaim their previous cycle peak once a secular bear has completed.  This means that the market peaks of 2007 and 2016, may not be revisited until 2027, or even later.

Beware of all the passive managers, funds and ETFs, boasting of long always strategies again today as they did in 2000 and 2008  They are due to look dumb and reckless once more.

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America the miserable?

Americans are less healthy, more indebted and more frustrated with their government and prospects.  We look forward to a mean reversion (up) of this trend in the future.  But first, some major overhauls are needed in several key areas

Chances are, if you live in the U.S., you feel worse today than you did 10 years ago. Don’t worry, it’s not you. This is a national problem: America’s rank on the happiness scale is falling.

When it comes to happiness, the U.S. ranked 19th among the 34 countries in the Organization for Economic Cooperation & Development in 2016, down from third among 24 countries on a similar measure in 2007, according to the World Happiness Report, produced by the Sustainable Development Solutions Network and funded by the Ernesto Illy Foundation.  Here is a direct video link.

Canada also slipped in the rankings this year to 7th overall from its past 5th or 6th spot.

Norway nabbed the top spot out of 155 countries, followed by Denmark (last year’s no. 1), Iceland, Switzerland and Finland. The United States fell to 14th place, continuing its slide down the list in recent years. See World Happiness Report 2017.

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More nightmare stories about predatory financial advice

More bank employees and customers are coming forward with stories of unethical practices and harmful financial recommendations dubbed ‘advice’ in Canada’s big banks. None of this is new, similar practices were rampant in the 1920’s leading up to the financial crash and depression thereafter.   As well as in the Savings and Loan Crisis of the 1980s, that led to more than 1000 bank failures and several hundred arrests and bankruptcies.

But beware, non-bank financial conglomerates will be using this wave of bank revelations to promote their services as ‘independent’ because not bank owned.  Make no mistake:  the lion share of other mutual fund, insurance, broker/dealers dispensing financial products and recommendations in Canada today, are just as aggressive, sales-focused, self-serving and financially harmful, as the banks.  In many cases, their fees (embedded and otherwise) are even higher than in bank products.  What makes banks particularly harmful, is that they are given privileged inside access to see the cash we hold in our bank accounts and the equity we may hold in our homes, by virtue of them being our bank.  On top of that, we the taxpayers, are expected to backstop banks who get into financial trouble through reckless financial practices.  So they literally hold us financially hostage, in the present system.

This problem of profit-maximizing practices, parading as professional advice is across the financial sector and worldwide. It is even present in many buy-side or fiduciary asset management companies, where the firm collects a higher fee percentage on client funds that are allocated to equity and other so called ‘hi-yield’ products like preferred shares and corporate debt, rather than government bonds, GICs, cash and the least risky deposit instruments.  The urge to collect higher fees, often naturally pushes advisors to recommend a higher risk exposure than may be desireable for a client’s capital.  This is especially dangerous, late in each market cycle, where like now, asset valuations are at historic highs, and ‘buy and hold’ firms mandate a perpetual exposure to risky assets despite the high probability of deep capital drawdowns that take years to recover, if they do at all, in the client’s finite lifetime.

The first part of the fix is to stop financial product underwriters and sellers from calling themselves advisors, while separating taxpayer-backed deposit-taking institutions, from those who create and sell securities.  This separation was done in the 1930’s and then rolled back again as memory faded in the 1980’s and ’90’s.  A very costly mistake, the re-consolidation helped usher in the Great Financial Crisis of 2008, and the global debt crisis that has compounded in severity since.  This is why we must reinstate Glass-Steagall divisions as already proposed in 2013.

 In emails to Go Public, past and present call centre employees for TD, RBC, BMO and CIBC (none from Scotiabank) said they’re expected to use the same high-pressure sales tactics as those their branch colleagues recently revealed to CBC News — and face the same threat of being fired if they fail to consistently upsell customers. Here is a direct video link.

Also the CBC did another radio call in show on unethical sales tactics in Canada’s big banks. Here is a direct audio link.

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Europe sees the light: doubling down on international power grid

The European union was envisioned by its banker architects as a union of currency, enabling a financial transaction/leverage superhighway that extracted profits for a few multinational conglomerates.  The model greatly enriched and empowered the banksters over the past 20 years, while helping to billow a massive global debt bubble that now cripples most households and countries.  Debt saturated, meaningful financial recovery going forward, depends on new ideas:  not adding more debt and increasing profits for the few, but rather increasing efficiency and reducing prices to increase quality of life and disposable cash flow for consumers everywhere.

The three main constants of household spending are shelter, food and transport.  Implicit in all of these are energy costs.  In lowering energy costs (full costs that include pollution, climate degradation, water shortages and illness), we directly improve the health and stability of life on earth for humans.  A great many people are now seeing that implicit in this goal, is enabling the collection of all kinds of clean energy directly where it is consumed, as well as seamlessly sharing excess via intercontinental power grids that upload energy from millions of producers and sources so that it may be drawn down wherever needed.  No more waste and burning off excess power in some regions, while others go without.  The Trump government may be trying to pull America back to the energy dark ages, but Europe and most of the world is seeing the light.  See: Europe’s renewable energy revolution:

This is just part of a quiet revolution in renewable energy across Europe. An international power grid is gradually developing, using power interconnectors to trade surplus energy across national electricity networks, allowing big wind power producers in northern Europe, for example, to trade electricity with large solar energy generators in southern Europe.

The UK has already plugged into the network through interconnectors to Ireland, Belgium, the Netherlands and France, and there is a proposal for a highly ambitious project to connect Britain to Iceland’s abundant supply of geothermal and hydroelectric power using a subsea cable around 1,000km long.

This international power grid gives more reliable supplies, helping to smooth out the intermittent power produced from renewables such as wind and solar energy. It also gives Britain more secure power sources as old nuclear and out-of-favour coal plants are shut down.

Also see Let’s get real about alternative energy for some context on the growth potential for alternative fuels and technologies.  This is a massive, productive, smart investment area that will create excellent jobs and world-improving efficiency and growth.  And in accordance with Moore’s Law, output and efficiency are leaping every year.  All win, win.

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