Friday Farrago

By Kevin Muir of the Macro Tourist

On Canada housing, bonds, SNB & BoJ

https://i2.wp.com/themacrotourist.com/images/2017/09/20170922-dog.png?resize=617%2C338

Today’s post will be all over the map, so let’s just jump in.

Many a pundit has made a name for themselves screaming at the top of their lungs about the massive bubble in the Canadian real estate market. And yeah, I get it. It certainly seems scary. There is no shortage of frightening charts that show the massive over-indebtedness of us crazy Canucks. Like this one for example.

https://i2.wp.com/themacrotourist.com/images/2017/09/20170922-percent.jpg?resize=400%2C400

Holy Tim-Hortons! Grab a stack of pink tickets and get the latest short sell recommendation from Marc Cohodes, that’s a disaster in the making!

And don’t mistake me as some overly optimistic naive hoser, we have our share of troubles. Housing is stretched, and due for a correction. But before you get all apocalyptic, have a look at this chart.

https://i2.wp.com/themacrotourist.com/images/2017/09/20170922-household-debt.jpg?resize=600%2C400

Not making any judgment about the investing merits, or societal decisions, of either the US or Canada. Just making sure as traders, you have all the facts.

The Canadian economy might in fact be due for a big wake-up call, but make sure you compare apples to apples when looking at our debt load. Our healthcare costs are embedded into our taxes, so you need to adjust for that rather large difference when comparing to our American neighbours.

But don’t worry too much about Canada, our Prime Minister is making sure the important stuff gets taken care of.

https://i1.wp.com/themacrotourist.com/images/2017/09/20170922-hamill.png?resize=300%2C600

Trump might have his long ties, but Justin has his Chewbecca socks. May the force be with us (lord knows I think we will need it.)

The bubble is in stocks?

I love Top Down Charts’ Callum Thomas’ work. And this next chart is one of my favourites.

https://i0.wp.com/themacrotourist.com/images/2017/09/20170922-top-down.jpg?resize=600%2C400

I know the prevailing wisdom is that the bubble is in stocks, but I beg to differ. People are reaching for yield, stocks are just being carried along for the ride. And the really scary part? It seems to be getting worse!

https://i2.wp.com/themacrotourist.com/images/2017/09/20170922-fi-flows.jpg?resize=600%2C400


Central Banks trade?

File this in the absurd category. Two of the most active Central Banks have equity listings that trade. Yes, you can buy a piece of the Swiss National Bank.

https://i1.wp.com/themacrotourist.com/images/2017/09/20170920-snb.png?resize=750%2C460

Why bother with hedge funds when you can buy the SNB? They print Swiss Francs and invest the proceeds in stocks. Add in some serious leverage, and you have the ultimate speculative vehicle.

But what about the Bank of Japan?

https://i1.wp.com/themacrotourist.com/images/2017/09/20170920-boj.png?resize=750%2C460

It’s getting left behind. An undiscovered gem? The greatest spread trade of all time? Or a signal that Kuroda needs to branch out and buy S&P 500 futures instead of Japanese ETFs?

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