Juggling Dynamite

As cryptocurrencies continue to tank, this cycle’s most deliriously valued ‘FAANG” stocks also took another big whack today, as shown here courtesy of CNBC.

Not surprisingly, as shown below, these much-loved and widely owned names have, so far, fallen more than 20% from their recent 52-week highs.  If past mania cycles are prologue, these stocks might be halfway through their eventual decline, as die-hard fans buy dips all the way down, before abandoning them in horror near cycle lows.

Those of us who have learned through decades of real-life investment cycles to adhere to a value discipline have been out of favour longer-than-average this time, and it has been tedious for some to wait.  But as I wrote here last year Value’s long winter will end in spring again–bank on it.   Great opportunity is coming, and it is very exciting to anticipate.

A great perk of early morning work is seeing the sunrise from our window. You would almost think all was well in Canada this morning.

Unfortunately, Canada’s susceptibility to economic pain and debt crisis are surely higher today than at any point in the past couple of decades.  We have credit abuse and short-sighted, destructive financial planning, along with aging demographics to thank for our woes.

On the upside,  the population is coming to a generational epiphany on what not to do with money and how to diversify an economy away from dependence on fossil fuels and real estate bubbles.   Several countries will be going through this learning process of necessity with us, but there will not be much comfort in the company.  For individuals and small businesses, moving ahead of the pack to lower financial leverage (debt and risky-assets) and raise liquidity, sooner than later, will be key to outcomes through this period.

As Canadian crude fathoms a record low this week (chart below), we have news today that Canadian home sales fell further in October.

Heavily indebted and unprepared, the global downturn is coming at a particularly vulnerable time for Canada.  Even worse, what savings and pensions households do own have been funnelled into over-valued corporate securities and funds that are also falling in value.  This is a very destructive way to manage a business cycle.

The segment below covers many of the factors working against Canada today but also makes the classic error of blaming Trump (rather than self-destructive behaviours and policies adopted in Canada), as well as suggesting Canadian banks may somehow be protected from downside as global markets drop.

Canadian financial shares lost 50% in the last two bear markets, and they are more risk-exposed today than either of those cycles.  Beware the usual false narratives from mainstream commentators, defensive they are not.  Here is a direct video link.