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Is economic growth slowing down permanently?


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I would think the low income earner would jump on that bandwagon first, is not NIRP another way to make socialism work? The low income people can be paid to borrow money, buy a house, car, what ever crap they desire. The wealthy who have invested in themselves and worked hard, made lifestyle adjustments as needed moved to pursue opportunities and were fiscally responsible get the benefit of paying money to keep their savings.

That's not how negative interest rates work. No individual person is ever going to get paid money to borrow. Rather, it is that the central bank will charge other banks money to stash money at the central bank or for keeping excess reserves on hand. Paying this extra cost means banks will need to make up this cost in other ways, generate more revenues... such as charging depositors fees to keep their money in the bank. So no, individuals won't see negative rates on their mortgages, but what they will potentially see is negative interest rates (or fees, or simply deposit caps) on their savings accounts.

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I have been a saver all my life, put my self through tech school that way, bought my car that way, invested in business that way. But now someone with no ability to manage their life at all will be able to live the life they always wanted the government to give them.

Hopefully by being a saver your whole life you don't mean you've been keeping all your money in savings accounts all your life. Presumably, what you mean is you've spent less than you made, and put the surplus into a diversified set of investments including yourself (education, business, etc), stocks, bonds, etc. If this is the case, you won't be hurt by negative interest rates because stocks and dividends should not be adversely affected by lower rates (if anything, negative interest rates would further inflate the asset bubble, causing stocks to reach higher valuations).

Edited by Bonam
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I know what you say msj, it is hard to see both sides of the same coin at the same moment. I dont intend to purposely speak negatively but when one looks at the basic fact that negative interest rates are becoming the norm and talk of more negative rates and not less (this is open talk, not fear mongering doomsdayers saying more NIRP is coming) then it is hard to be optomistic and say everything is ok so go spend your money.

An economy runs on people earning a dollar for their efforts and spending it where they desire. When an entity wants more spending they offer credit, when they want more spending yet they offer cheap credit, when they want more spending yet they pay you to take credit. At some point in this escalation it should be possible to step back and see some degree of concern. Though i expect there will be many who celebrate that they are being paid to borrow money.

Don't worry about other people quick to criticize any negative thought, as if bad things never happen in the markets or economy. They tend to have knee jerk responses which only reveal fear and worry.

When things are looking bearish, the shrewd person is objective enough to recognize it and act accordingly, which is the exact same thing the shrewd person does when things are bullish.

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Don't worry about other people quick to criticize any negative thought, as if bad things never happen in the markets or economy. They tend to have knee jerk responses which only reveal fear and worry.

When things are looking bearish, the shrewd person is objective enough to recognize it and act accordingly, which is the exact same thing the shrewd person does when things are bullish.

This is not about knowing whether to be bullish or bearish which is really only understood properly in hindsight.

You don't know any better than anyone else if the markets are going to be up next week, next month, next year.

What people do know is that timing the markets rarely is successful so better to spend time in the markets than try to time the markets.

Yes, someone may be able to get lucky and get out of the market prior to a big pull back; only to not get back into the market until after a big run up.

Yes, we all try to time the markets to some extent: I do it with my philosophy of "buy what is cheap right now" while I sit on my other investments. So yes, as I buy parts of Europe and emerging markets and certain sectors, I am timing them in that I think they are cheap right now.

That's about as much forecasting that I'm willing to do as I think that's all anyone can do.

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I know what you say msj, it is hard to see both sides of the same coin at the same moment.

It's not hard at all if you read something like this each week: http://ritholtz.com/2016/02/succinct-summation-of-weeks-events-2-19-16/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+TheBigPicture+%28The+Big+Picture%29

Looking at negative and positive facts each week provides lots of perspective so one does not become a permanent-bear or perma-bull.

At the same time it is also a good idea to minimize politics too: http://feedproxy.google.com/~r/TheBigPicture/~3/mXD6-eTmc1c/

Edited by msj
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This is not about knowing whether to be bullish or bearish which is really only understood properly in hindsight.

You don't know any better than anyone else if the markets are going to be up next week, next month, next year.

What people do know is that timing the markets rarely is successful so better to spend time in the markets than try to time the markets.

Yes, someone may be able to get lucky and get out of the market prior to a big pull back; only to not get back into the market until after a big run up.

Yes, we all try to time the markets to some extent: I do it with my philosophy of "buy what is cheap right now" while I sit on my other investments. So yes, as I buy parts of Europe and emerging markets and certain sectors, I am timing them in that I think they are cheap right now.

That's about as much forecasting that I'm willing to do as I think that's all anyone can do.

I saw that you were repeatedly posting right after me whenever I post in this area, so although I've got you on ignore, I thought I'd see if you were being the same overbearing know-it-all that you used to be. Yup, you're still the same. I'm not interested in your odd brand of economics where no one can tell when an economic slow down is coming, and anyone who posts about it is an idiot. We are in the modern age now, and it's easier to see what's plainly in front of you these days. Like when rain clouds are gathering in the lower mainland, I can tell that it's going to rain. So you're staying on ignore, I prefer to talk with those who can discuss things without getting freaked out.

BTW, it's gonna rain, I'd get ready.

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I saw that you were repeatedly posting right after me whenever I post in this area, so although I've got you on ignore, I thought I'd see if you were being the same overbearing know-it-all that you used to be.

Um, I directly quote you above and then I also directly quote that 69cat dude.

If you want to disagree with my points or read the links I have put up and comment on them then please do so: this is a discussion forum after all.

As for me being an overbearing know-it-all: admitting that I, like anyone, is bad at forecasting runs contrary to your narrative.

Yup, you're still the same. I'm not interested in your odd brand of economics where no one can tell when an economic slow down is coming, and anyone who posts about it is an idiot. We are in the modern age now, and it's easier to see what's plainly in front of you these days. Like when rain clouds are gathering in the lower mainland, I can tell that it's going to rain. So you're staying on ignore, I prefer to talk with those who can discuss things without getting freaked out.

BTW, it's gonna rain, I'd get ready.

Sure, Canada isn't doing so well right now.

America could be going into recession for all I know.

But what I do know is that the US is growing right now and 92% of the time this means Canada grows too. An exception, however, is when commodities are going down like the big price change in oil right now.

But these things pass in time. The solution to low oil prices is low prices so things will get better on that front which will help somewhat.

Of course I don't know when oil prices will get better. Maybe the bottom has already hit and we will sit in a consolidation pattern for the next two years until a new uptrend begins?

I don't know. And neither do you.

Now, if all of this is disagreeable to you then fine, lets agree to disagree.

You know the future while I don't. I have no problem on the latter while thinking the former is hubris.

But putting me on ignore for engaging in discussion (or at last trying to) - give your head a shake man.

Are you so sensitive that you cannot engage with someone who has a different opinion than you?

Edited by msj
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Its all just opinion, one persons opinion may tell me a new place to look for further reading.

As to eyeballs opinion on capitalism failing, i see it as government control and a multitude of bad decisions by government to regulate far too many aspects of daily life that leads to the system failing - but that is just my opinion. For instance i would like most all subsidies removed aside from those with a strong indication the investment will pay off. Too big to fail has its limits. The government always there to bail out a company does not lead to a strong company, economy or government.

Yes Bonan, i understand the aspects of NIRP you mention. It is the tinfoil hat people that talk of getting paid to borrow money. I should say people are subsidized to borrow money meaning the savers will provide the stability to the banks as we savers bail into the system so the banks can lend more money to those of questionable ability to manage their money.

The thing with NIRP is that this does very much create a bubble. We see it right now with low interest rates and high stockmarket valuations and can look at low mortgage down payments as another indicator. It is not hard to find companies that have borrowed money to buy back stocks or pay dividends. This works if everything keeps going upwards. And NIRP is another attempt to keep things climbing higher and therefore investing in stocks is a good idea if one is bullish. Myself, i dont see artificially inflated stock values as being a good investment.

To get back on topic, yes i think economic growth is slowing and NIRP should be a sure sign of that in my opinion. We need to let the natural laws of the free market take over instead of feeding more and more money in to avoid a recession/depression. However governments want to be in power so they will continue to feed the system with every tool they have to work with in hopes to keep voter approval ratings up. So we have an entire society expecting government intervention at each turn, this is includes the workers, business owners and the financial sector. Yes, the system may be failing and there is a good reason for it.

Maybe now is a goodtime to put some of my savings into the stock market but i am going to hold off. I really hope there is a greater devaluation coming and a recession as i see that as the better alternative to more investment right now that continues to over inflate the markets. Get the pain over with and then move forward.

Edited by 69cat
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Its all just opinion, one persons opinion may tell me a new place to look for further reading.

As to eyeballs opinion on capitalism failing, i see it as government control and a multitude of bad decisions by government to regulate far too many aspects of daily life that leads to the system failing - but that is just my opinion.

I think capitalism is failing for the same fundamental reason communism is, the inability of those who are governed to adequately control those who govern them. There's nowhere near enough transparency or accountability the result being really lousy quality control that we the public only get to tinker with every 4 - 5 years.

We're governing ourselves with systems that were designed in the horse and buggy era and while they're great for ensuring title, privilege and other olde tyme traditions they're increasingly useless and incompetent at dealing with the issues facing us. We should be running things in a more technocratic expert manner with the sort of robust institutions of accountability surrounding the lobbying and decision making process that would make Orwell blush - with cameras and microphones and a deep souveillance that matches the level of surveillance governments are putting in place for those they govern.

Edited by eyeball
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To get back on topic, yes i think economic growth is slowing and NIRP should be a sure sign of that in my opinion. We need to let the natural laws of the free market take over instead of feeding more and more money in to avoid a recession/depression. However governments want to be in power so they will continue to feed the system with every tool they have to work with in hopes to keep voter approval ratings up. So we have an entire society expecting government intervention at each turn, this is includes the workers, business owners and the financial sector. Yes, the system may be failing and there is a good reason for it.

Maybe now is a goodtime to put some of my savings into the stock market but i am going to hold off. I really hope there is a greater devaluation coming and a recession as i see that as the better alternative to more investment right now that continues to over inflate the markets. Get the pain over with and then move forward.

Hmm appears that you are still trying to time the market based on your economic-political beliefs.

This is strange for a number of reasons:

1) investment opportunities around the world allow one to take advantage of opportunities in 100's of markets. So whatever you may think of the Fed or Draghi, or Poloz, or Carney etc you should be able to find something, somewhere that suits your investment philosophy. (Even though I think it is foolish to mingle politics with investing which I think you are doing here to some extent).

2) no one knows. None of us do. And with the bias of the "recency effect" it is very easy to be negative right now and be dragged into perma-bear psychology. This can be as dangerous as being a perma-bull. Fear of losing capital can be as destructive to returns as fear of missing out.

3) why not stop worrying, admit that we are only human when it comes to forecasting and timing the markets, and admit that by the time we recognize that economic growth has slowed or economic growth has returned, that we missed yet another opportunity which is yet another thing to stress us out and yet another reason to keep capital on the sidelines because maybe the market will go down tomorrow or next week or next month because of NIRP or The Fed or this or that.

4) Why not just dollar cost average while ignoring the market? In fact, it is better to dollar cost average in a volatile market especially when you have big drawdowns: http://servowealth.com/resources/articles/how-great-dollar-cost-averaging-you-dont-know-half-it

5) why not think hard and long as to what you investment strategy is? I love macro economics and I too have railed against the "fools" who couldn't see the great financial recession that the US went through. (Go look up the thread under the US/Canada forum).

In the end, macroeconomic stuff doesn't do much for ones portfolio though.

It just doesn't.

As brilliant as I thought I was back then I didn't have the guts or knowledge nor the patience to short markets to take advantage of what I thought I knew.

Even if I did, I was in no position to wait the market out until I was right. It's not easy shorting markets - it takes money and a stubborn will and often the stubborn will leads to no more money.

Things like putting aside $3,000 per month rather than $2,000 per month has a much bigger role and is something one has more control over by working harder to earn more money to save more and/or budgeting so that one has more money left at the end of the month to contribute more.

Disciplining oneself to contribute especially when the market is going down is also, over the long, generally a good idea. I came across an extra $10k last year as the market was tanking and invested it. The market is lower now than it was then but guess what? I've found some extra dough to contribute now that the market is down again.

I'd rather keep contributing and find ways to get my hands on more money to invest than become paralyzed by fear and not invest at all.

And if you must try to time markets then why not buy ETF's for sectors and/or countries that are cheap?

I know it appears nuts to be buying emerging markets each month right now. Let's see how crazy that is 5 years from now.

Things change, markets change, sentiment change, economies change - and your guess as to which sectors, countries, stocks, bonds, economies will go up or down and when will be mostly wrong - sometimes glorifyingly wrong as a stock you expected to hold for years suddenly surges by 150% thanks to being bought out by BCE/Rogers, for example.

Accept this and you will learn to sleep at night no matter what the market is doing.

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But what I do know is that the US is growing right now and 92% of the time this means Canada grows too. An exception, however, is when commodities are going down like the big price change in oil right now.

I will add another known macroeconomic risk here: private debt.

While Americans have held back thanks to their debt bubble/housing implosion of the mid- 2000's, Canadians have been binging,

The binge is now statistically significant:

CbmmQMWW4AQCy2S.png

Either those Americans have cut back so much that Canadians are still ok, or Canadians have gone gonzo or a bit of both.

What to do with this information if you think it is meaningful to your investment strategy?

Simply don't invest in Canada.

Or short the banks if you have the means.

Or buy Fairfax shares since they have made a big bet on shorting (I think) the S&P 500. After all, if the US goes down then surely things will get worse for Canada therefore it makes sense to short the S&P 500 or some such logic.

As to why have Canadians gone gonzo for borrowing money?

Well, maybe that is related to economic growth slowing and Canadians are borrowing to make up the difference while forgetting that debt needs to be paid back while asset prices can change drastically.

It's probably not so much fun for too many Albertan's right now who have a mortgage of $400,000 while their house is now worth less than that. At least Alberta is a non-recourse province so they can send the bank the keys.

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....Either those Americans have cut back so much that Canadians are still ok, or Canadians have gone gonzo or a bit of both.

....Or buy Fairfax shares since they have made a big bet on shorting (I think) the S&P 500. After all, if the US goes down then surely things will get worse for Canada therefore it makes sense to short the S&P 500 or some such logic.

Krikey...if so much depends on what the Americans are/are not doing, just skip Canadian asset classes altogether and go for the real, American deal.

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I will add another known macroeconomic risk here: private debt.

---SNIP----

Is this all of Canada or is it a combination of hot housing markets and massive over-investment in oil sands? The devil is always in the details when you look at averages. Edited by Charles Anthony
excessive quoting; [---SNIP----]
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Is this all of Canada or is it a combination of hot housing markets and massive over-investment in oil sands? The devil is always in the details when you look at averages.

I believe Canadians have been paying down their non housing debt of late.

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Some good posts made.

To eyeball re government oversight, i think your post is valid but there is no proper solution. We elect people to govern on our behalf as i do not ever expect each voter to be knowledgeable on every subject to provide an informed vote. In a similar fashion i oppose mandatory voting. Therefore the system fails when the government does not govern in the best interest of the country but rather creates a system where the govering party tends to govern based on what is best for its own popularity instead. For that i think deficit budgets should be illegal unless voted on by all parties, history would indicate in 2008 the opposition was certainly pushing for deficits and the CPC caved in so agreement is arguably obtained. Otherwise deficits are most often seen as winning popularity rather than good governance.

To msj, yes timing the market is only possible in hindsight by myself but i still need to go with my gut. For instance your suggestion would also have me buying farmland when it is at an all time high because eventually it will be worth more some day. Dad did that in 1980 and it took 28 years to fulfill that idea, i am getting too old for that. However i do agree with what you say in principle, and even though markets may go down there are good buys right now that should hold value even if we see a significant downturn. I have my wife putting money into her investment account last week and i will be putting some in next month. I have much more i can invest but am sitting back with it to see how things play out going into summer.

There are buys out there but also much uncertainty. Watching a few things over the next couple months will give me another indication of whether i will invest a little more then or sit on sidelines a bit longer. For right or wrong i have some things that i watch before i simply put money in because i have it. I should add i have not pulled out a dime of all my previous investments so am also invested for the long run too.

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Everyone who has ever held a management position knows (or should know) that if you measure dumb things, you'll get dumb behavior. For decades, we've been been measuring the health of economies based on GDP and as a result, we've been rewarding and getting wasteful and counterproductive behavior.

Measuring the health of an economy on the basis of GDP is no different from measuring the health of a hamster solely on the basis of how fast the wheel spins.

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Is this all of Canada or is it a combination of hot housing markets and massive over-investment in oil sands? The devil is always in the details when you look at averages.

No idea. StatsCan is useless as usual - about the best data available is years old.

Banks sometimes have some interesting info based on polls but the problem is this: as an accountant who sees information about clients all the time I can assure you that the typical person really does not know much about their debt loads. They often just think of it in terms of a monthly payment.

Financial illiteracy is a huge problem.

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To msj, yes timing the market is only possible in hindsight by myself but i still need to go with my gut. For instance your suggestion would also have me buying farmland when it is at an all time high because eventually it will be worth more some day. Dad did that in 1980 and it took 28 years to fulfill that idea, i am getting too old for that. However i do agree with what you say in principle, and even though markets may go down there are good buys right now that should hold value even if we see a significant downturn. I have my wife putting money into her investment account last week and i will be putting some in next month. I have much more i can invest but am sitting back with it to see how things play out going into summer.

I don't know much about farmland other than I have a few clients who have been selling it as they come out to BC to retire.

Based on this anecdotal evidence I would think it has been a decent time to sell farmland rather than buy it. Although maybe prices have been dropping lately along with the prices of corn, wheat, commodities.

If that's the case then who knows where and when the bottom will occur.

Prices can go up and go down for long periods of time. That's the problem with trying to short markets - if you are wrong then you can be wiped out in a hurry.

Whereas if you go long you may be able to wait for the market to recover - so you were just early.

This is why I mentioned that I am picking up emerging markets right now - they are no where near their all time highs. Some markets (Brazil) are off significantly and it is as if the world is going to come to an end. That's when I like to buy.

I may be early still but what do I know about timing bottoms (or tops for that matter)?

Nothing.

Does that mean I just hold onto my cash and do nothing?

Of course not, I admit that I don't know but I do know certain markets are hitting extreme levels so it's time to buy.

Sure, don't want to catch a falling knife. But also don't see other markets as appealing from a cheapness point of view.

As I stated earlier, I don't know farmland that well so I would never attempt to buy any anyways even if the prices dropped significantly. Just not my thing.

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Wasnt attemting to test your knowledge of farmland msj, meant it as a point that sometimes one has to go with what he thinks based on info at hand. I dont disagree with what you are saying about the emerging markets as that is why i (wife) do have money going into investments right now. I have an investment management company doing these things and they are focused in emerging markets and Europe, next to nothing for Canadian small cap, some Canadian large Cap and some US but not a lot. I used to buy stocks on my own but got too personally involved and never made some trades i should of. I understand it is not easy to do but certainly dont discourage someone from doing it. Some days i think i should buy some stocks on my own right now but will stick with what i learned previously in that regard and let someone else do that for me. I simply try to keep up on trends and make some larger money management decisions.

As to Reefer, yes i dont agree with the measurements used. I think that speaks to my underlying thinking that parties do not necessarily do what is best for the country. Instead they latch onto a statistic that they can use to defend their spending. I personally dont think we need deficits right now but that is a topic discussed in other threads so lets not drag that up. But it speaks to your point on focus on gdp and my point on winning voter favor.

Regarding numbers, i am sure everyone knows about unemployment numbers, but if not here is a short primer.

COSTELLO: I want to talk about the unemployment rate in America.

ABBOTT: Good Subject. Terrible Times. It’s 5.6%.

COSTELLO: That many people are out of work?

ABBOTT: No, that’s 23%.

COSTELLO: You just said 5.6%.

ABBOTT: 5.6% Unemployed.

COSTELLO: Right 5.6% out of work.

ABBOTT: No, that’s 23%.

COSTELLO: Okay, so it’s 23% unemployed.

ABBOTT: No, that’s 5.6%.

COSTELLO: WAIT A MINUTE. Is it 5.6% or 23%?

ABBOTT: 5.6% are unemployed. 23% are out of work.

COSTELLO: If you are out of work you are unemployed.

ABBOTT: No, Obama said you can’t count the “Out of Work” as the unemployed.

You have to look for work to be unemployed.

COSTELLO: BUT THEY ARE OUT OF WORK!!!

ABBOTT: No, you miss his point.

COSTELLO: What point?

ABBOTT: Someone who doesn’t look for work can’t be counted with those who look for work.

It wouldn’t be fair.

COSTELLO: To whom?

ABBOTT: The unemployed.

COSTELLO: But ALL of them are out of work.

ABBOTT: No, the unemployed are actively looking for work.

Those who are out of work gave up looking and if you give up, you are no longer in the ranks of the unemployed.

COSTELLO: So if you’re off the unemployment roles that would count as less unemployment?

ABBOTT: Unemployment would go down. Absolutely!

COSTELLO: The unemployment just goes down because you don’t look for work?

ABBOTT: Absolutely it goes down. That’s how it gets to 5.6%. Otherwise it would be 23%.

COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?

ABBOTT: Two ways is correct.

COSTELLO: Unemployment can go down if someone gets a job?

ABBOTT: Correct.

COSTELLO: And unemployment can also go down if you stop looking for a job?

ABBOTT: Bingo.

COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to

have people stop looking for work.

ABBOTT: Now you’re thinking like a Democrat.

COSTELLO: I don’t even know what the hell I just said!

ABBOTT: Now you’re thinking like Hillary.

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