Juggling Dynamite

Yesterday marked the best stock market bounce at the end of a quarter since September 2008. Far from an all-clear sign, bounces like that are most common during bear markets (shown below, courtesy of Bespoke).

Mean reversion has made some progress in the sell-off to date, but Berkshire Hathaway is not parting with its cash pile just yet :).The pile grew from ~$128B at the end of 2019 to a peak of $381.7B in Q3 2025 (dark blue above) — a near sevenfold increase — as Buffett sold stakes in Apple and Bank of America while finding few acquisitions worth current pricing. The Q4 2025 figure dipped slightly to $373.3B, and the most recent filing (Q1 2025 in the 10-Q) shows cash at $343B.

Warren Buffett is waiting for a larger move to the downside 🤯👀 He says March was nothing 👻📉 pic.twitter.com/qJXfimB7NP

— Barchart (@Barchart) April 1, 2026

The Middle East war is making matters worse, and we hope for a quick resolution. But when it comes to markets and liquidity strains, problems go far deeper and will not be solved by an end to oil constraints.

Market bottoms don’t come while the masses are still feeling optimistic enough to buy every dip. As retired market analyst Wally Deemer wisely quipped: “When it’s time to buy, you won’t want to.”  That is when cash will be king, once more.

Canada’s economy has generated no economic growth in five months and no job growth in eight months. Meanwhile, the household wealth effect is in reverse, with home sale prices nationally down 20% over the past 4 years and the stock market negative year-to-date.

The S&P 500 and Canada’s TSX are both off more than 7% and back to their levels last July and December 2025, respectively. Financials are falling. The US small-cap index is off more than 9% and back where it was in November 2024. Tech is making matters worse with the Nasdaq off more than 12%. International exposure isn’t helping; the MSCI all-country stock index, which covers large and mid-cap stocks across 23 developed and 24 emerging markets, is -8% since February and back to where it was last August. No shelter from the storm: defence and health care stocks are off double digits, too. Still, more mean reversion is due: thus far, equities and home prices remain at the high, unattractive end of historic valuation levels.

Against this backdrop, fears of persistent oil-price inflation have caused Treasury yields to rise as the futures market is pricing in two Bank of Canada rate hikes in 2026, with a 30% chance of a third. This has driven up interest rates so that Canadian households are borrowing at an average rate of 4.8% or 3.0% in real terms (CPI at 1.8% in February)–70 bps above the average for the past three decades.

Since the start of the war in Iran, gasoline has been up approximately 30%, and diesel has been up around 40% across Canada, according to the Canadian Fuels Association.

No one knows how long fossil fuels will remain elevated, but housing accounts for a larger share of Canada’s cost of living index — the largest single component at 30%. The race is on to see how long central banks can watch from the sidelines as the job and asset markets weaken. The discussion below is on point.

David Rosenberg, founder and president at Rosenberg Research & Associates, joins BNN Bloomberg to discuss the BoC’s rate roadmap and the Mideast conflict. Here is a direct video link.

Over the past decade, private equity has leveraged insurance companies’ balance sheets, increasing financial risk for all of us. Read An Open Letter to Speaker Johnson. The essay goes into specific numbers. Here are some of the big picture implications:

When a PE firm raises a fund, the capital has a defined life. Ten years, maybe twelve. Insurance liabilities are different. When a 62-year-old retired teacher buys a fixed annuity, that money sits on the balance sheet for decades. It cannot be recalled. Pension buyout contracts last until the last beneficiary dies. McKinsey called it “an enticing form of permanent capital.” By 2024, PE-backed insurers controlled 25% of all U.S. individual annuity liabilities.

I want to be precise about what this means for the teacher. Her $200,000 — saved over thirty years — lands on a balance sheet levered 69 to 1. Invested in a portfolio that is 72% privately placed. Managed by Apollo, which earns fees on both sides. She was sold safety. She got leverage. She will never know unless somebody tells her.

That is what “permanent capital” means. Her money is permanent. The safety is not. Because the permanence is not conditional on a crisis. It is conditional on ignorance.

There is a concept in engineering called a margin of safety. A bridge designed to hold ten tons is built to hold thirty. The extra twenty tons is the acknowledgment that the engineers do not know everything. Finance has no margin of safety. It has a margin of extraction. Every dollar of surplus capital is a dollar that could be earning fees. And so the systems we build are bridges designed to hold exactly their load, with the surplus steel sold for scrap, and a sign at the entrance that says: Capacity: 419%.

The sign is not lying. It is measuring the right thing in the wrong unit.

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” — Upton Sinclair