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What headline to write when the financial system changes before our eyes…

But there are questions that every one of us should be asking.

I bumped into a woman today while grocery shopping. Don’t worry, it was a light bump and she started it. She recognized me despite looking like I was on my way to the operating room and asked if it was OK to ask me about a few investment and economic questions.

I said, “sure, but my experience is that people are interested in brief, superficial answers to the deep structural variables that are driving social, economic and financial changes.”

The problem is, if you don’t at least have an inkling about these historic changes you have absolutely no chance of understanding what’s been happening, and more importantly, what’s going to happen – until it hits you right between the eyes financially.

So what does historic change look like anyway? Well, how about the central banks taking over private banking in some countries, or the break-up of some nations as regionalism grows at the subnational level?

The other big obstacle most people have to overcome is a tendency to politicize any discussion, which misses the whole point. For example, the US municipal and state pension crisis is coming whether Trump or Biden won. Whatever party you support or is in power will make no difference in the face of up to $277 trillion in global debt. The size of that global debt, including the $500 billion in provincial and federal deficit Canada is adding this year, has consequences regardless of your political preferences.

The Pivotal – Life Changing Question

The big question – make that the question of a lifetime – is how is it going to play out? What are the consequences of the massive debt build-up?

Getting that answer right will literally determine your investment success going forward, but also your standard of living.

How are governments going to handle debt of this magnitude? We’ve already seen the first answer and that is central banks will buy up the debt. Then the question becomes what does the financial world look like if they continue and what does it look like if they’re not successful in controlling those markets?

The second answer is more straightforward. Interest rates will go through the roof. Government finances will be destroyed. Private sector bankruptcies in some industries will overwhelm much of the banking sector and those people who have lots of debt will be in big trouble. It would also be massively deflationary with asset prices taking a huge dive.

Not a nice prospect, which is precisely why the central banks have pumped trillions of dollars into the credit markets to keep them functioning since mid September 2019. The pandemic just exacerbated the problem. Let me give you an example of how aggressive the central banks have been. Between March and the end of May, the US Federal Reserve bought about $2.3 trillion worth of government bonds and asset backed securities while promising to buy an unlimited amount of virtually every other kind of debt. In Canada, the central bank bought about $400 billion worth of government debt and mortgage backed securities while promising to buy a boatload of provincial and corporate bonds if needed.

I could give you other examples from around the world but you get the idea. And there’s no end in sight, so determining the consequences is key. What does the financial world look like and what are the implications for you personally as this program of creating trillions of dollars out of thin air continues?

Alternatively, let me share one example of a consequence that could make you a lot of money. About 18 months ago, without much company, I thought one of the major consequences of the massive debt build-up was that it could form the foundation of a new commodity bull market, which is why we kicked off last year’s World Outlook Financial Conference with a special section called, “The Coming Commodity Bull Market.”

What’s Next

I now feel even stronger about the 3 to 5 year prospects for commodities than I did last year. That’s mainly because, while we talked about the pandemic and Martin Armstrong warned about the panic selling that would hit stocks starting in the last week in February with a bottom coming on March 23rd, I never anticipated the unprecedented amount of money the Feds and other central banks would be willing to create – i.e. Unlimited.

(By the way, the Armstrong model’s call for a bottom on March 23rd – made months in advance – was amazing. He’ll be back at this year’s Conference in February and I have a lot of questions about stocks, gold, base metals, the US and Cdn dollars.)

One of the principal consequences of this level of money creation is that all paper currencies will be devalued against not just gold and silver but also base metals like copper, zinc, nickel. They’re all up quite bit since last year’s Outlook Conference – but I think commodities have got a lot further to go because of the massive proposed infrastructure spending and the renewal energy revolution. Both mean huge increases in demand for aluminum, copper, iron ore, copper, silver, nickel, cobalt, graphite etc. etc.

Let me share one question that you’ll hear at the 2021 Outlook Conference next month but I doubt you’ll hear anywhere else. And that is – will high “in demand” commodities like copper be seen as a better way to hedge against the debasement of paper currencies than gold…maybe even Bitcoin?

For the record, Mark Leibovit recommended Bitcoin at last year’s conference when it was $10,000 (now $34,000). Note: I didn’t buy any. I’m too old school – and now I’m just too old to take the risk of government intervention. I worry that governments won’t like anyone else honing in on their currency monopoly but we’ll see. My guess is that governments will start adding regulatory restrictions – like you must report your Bitcoin holdings three times a year – in order to diminish the attraction of crypto currencies. It’s obvious that this environment is all about more government control and that’s the major risk to crypto currencies.

Sorry, I’m digressing from the more important questions surrounding how do we protect ourselves in this kind of environment. For example, I think there’s a growing probability governments will mandate that pools of capital like the Canada Pension and other pensions are forced to buy Government bonds in order to finance spending.

Who knows for sure, but that’s my point. There’s a ton of uncertainty as we navigate through this period of historic change.

Our goal is straightforward. We want to protect you from the changes that are coming as well as profit from them. That’s why I am so pleased with the performance of our recommendations at last year’s Conference. The 2020 World Outlook Conference Small Cap Portfolio is up 27%. Pretty good, but that’s not nearly as good as the 2019 WOFC Small Cap Portfolio which is up 220%.

In the last two years 15 of the 16 recommendations are up double digits with the big winner – XPEL Inc. recommended at the 2019 Outlook at $5.10 – trades today at over $58.

Obviously, that’s spectacular but there are lots of other winners. At last year’s conference we went big into renewable energy with Nuveen ESG ETF up 50%, Investco Solar ETF up 103%, Investco Wind ETF up 210% and Ballard Power up to 207%. There are other big winners but you get the idea – it was a heck of a year. And I’m certainly not suggesting that kind of performance can be repeated, but at the same time, we put the odds in our favour by having speakers like Greg Weldon, BT Global’s Paul Beatty, Investment Strategist extraordinaire Dr James Thorne, and RAI Advisor’s Chief Strategist, Lance Roberts.

What A Surprise

In case you haven’t guessed by now, I want you to join us at this year’s Conference.

Maybe one of the best calls we made in the last year was when, sitting around in June, we all agreed there was no way we’d be filling a room with 1200 people for the 2021 World Outlook Financial Conference like other years. Wasn’t that tough to predict a second wave given November through March is called the flu season.

So this year’s conference is online. No travel, no parking, no wardrobe decisions and instant access to your fridge. And you won’t just be able to watch the Conference broadcast on February 5 and 6th but you’ll also be able to review every part of the conference for months afterwards. Plus we’re able to feature more analysts given there’s no room size restrictions or travel considerations.

I’m really looking forward to it. I am absolutely sincere when I say that I’d pay to hear the recommendations of any one of our analysts – let alone the whole group. I know what some of them get paid to privately consult for mutual funds, investment firms and pension funds – and I can say with 100% certainty that the access pass to the 2021 World Outlook Financial Conference is a heck of a deal.

But you decide. After decades of broadcasting I certainly understand that a lot of people aren’t interested in economics or even their personal finances, (too bad so many work in the media.) As the old saying goes – “change brings opportunity”, and it sure as heck helps to know what’s coming.
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I hope you and your family are doing as well as can be expected in what author, Christopher Kock describes as “the year of living dangerously.”

My sincere best wishes,

Mike

PS – The 2021 World Outlook Financial Conference starts broadcasting Friday afternoon Feb 5th and all day Saturday, Feb. 6th plus the on-demand video archive offers unlimited access immediately following the broadcast. Your access pass includes both options. To order and for other details CLICK HERE.

Today’s Investor Needs a Robust Strategy

There is little need to tell you that markets are, and will continue to be, VOLATILE, as geopolitical and financial upheavals continue. This does not mean that there are few opportunities for the savvy investor. Now is the time for all investors to employ a broader range of strategies to anticipate, respond to, and capitalize on market volatility.

So, what needs to be included in a broad and robust investing strategy? The answers may surprise you, as many investors typically put too many of their eggs in one basket, hoping they will hatch into substantial gains. Hope is not a strategy, and this helps to explain why most investors do not make gains in…Click for full article.

Canada’s Largest Real Estate Markets Are Still Far From Seeing Employment Recover

Canada’s largest real estate markets aren’t even close to seeing employment recover. Statistics Canada (Stat Can) data shows the number of employed people in the country slipped in December. The largest real estate markets moved in various directions last month. However, all have significantly fewer jobs than they did last year.

Canadian Employment Slipped Lower In December

Canadian employment slid lower last month, causing a minor setback in the recovery. Stat Can estimates there were 18.59 million people employed in December, down 20,500 jobs (-0.11%) from the previous month. This represents a drop of 560,500 jobs (-2.93%), when compared to the same month last year. The decline is the first rollback since employment bottomed last June…CLICK for complete article

Bitcoin Whales Kept Accumulating During Monday’s Crash

Large bitcoin (BTC) investors, popularly known as whales, look to have bought Monday’s price dip, indicating confidence in the ongoing bull market.

The number of bitcoin (BTC, +12.79%) “whale entities” – clusters of crypto wallet addresses held by a single network participant holding at least 1,000 BTC – rose slightly to a new record high of 2,140 on Monday. The increase came even as the cryptocurrency’s price collapsed by more than 20% to hit a low of $30,305.

The violent sell-off was fueled by heavy selling in the spot market and was accompanied by record trading volumes. That, however, did not deter big players from accumulating the cryptocurrency, which rallied by 300% in 2020 and hit a record high of $41,962 over the weekend…CLICK for complete article

Anemic Detached Inventory Pushed Home Values Higher in 2020, Will This Continue in 2021?

The Greater Vancouver real estate detached market was seriously deprived of inventory during 2020. Resulting in the lowest amount of homes for sale in the past 15 years. The total amount of available detached properties achieved just 50,225. Which is down nearly 30% from the 15 year average of 70,082. 2020 was by far and away the lowest total active listings. Recent history shows during 2016 there was 58,650 active listings, 2017: 65,974, 2018: 75,459, 2019: 69,630. Comparing 2020 to 2018, there was a drop of 33% available properties.

Some analysts believe the increased prices were due to the increased demand, we disagree. The 2020 total sales completed with over 10,800. This data point indicates an increase compared to the previous 2 years of data but well below the 15 year average of 12,748 sales.

Eitel Insights believes the increased prices resulted directly from anemic levels of inventory, along with lower interest rates, which resulted with increasing home values. The statistical anomaly of not being able to surpass 5000 active listings in any month during 2020 will not likely occur again in 2021. The increase to the number of mortgage in arrears will likely result with increased inventory, due to need based sellers. Add in the struggling economy with continually increasing personal debt, just as government stimulus wanes.

All in all, there is a possibility the market can sustain current pricing levels, if the inventory does continue to buck historical norms. The more likely outcome is inventory increases along with a diminished demand for the detached homes, due to the pulled forward sales which occurred during 2020.

This low level of inventory combined with sudden demand to own a detached properties combined for the perfect storm and forced prices the highest price of 2020 during December. Achieving a 1.770M average sales price across Greater Vancouver, the highest sales price since May 2018. During the upcoming year, if inventory remains virtually non-existent, prices can be sustained into 2021.

As the majority of detached homes are owner occupied, the thought of having buyers come through your home during the pandemic was not acceptable to most. Even though prices increased over $190,000 from the May 2020 low of $1.586M to over $1.770M in December. The inventory hit its 15 year low of just 2,762 active listings in December 2020. Typically inventory increases as the prices rise. With prices back into the upper third of the current market cycle, and a vaccine en route, the notion of selling will become acceptable again.

Those who are willing to list will reap the rewards, the December low data point not only broke below 3000 active listings for the 2nd time in 16 years but the data broke the longer term uptrend which was established during 2015. Is the historic low of December due to the recent shutdown measures imposed by the government or will the low levels persist?

The data accumulated in the initial 6 months of the 2021 market will likely set the tone for years to come. If the inventory remains at extreme lows, prices can be sustained at the current level with a possibility of achieving a new all-time high. If this occurs, the growth cycle will have been born through the lack of supply. We anticipate this to be the less likely scenario of the two. Longer term, yes, prices will eventually escape the market cycle that Vancouver has been in since 2016, but in the short term we believe the impact of a deteriorating economy will force the home prices back lower in the market cycle to test previously established price points.

Interesting point, when there is an anomalous low data point, the market historically reacts with a much higher set of data, in an effort to counter act the anomaly. This implies inventory could rebound heavily in 2021.

Prices were volatile during 2020. Home values began the year with an average sales price of 1.590M in January. During February there was a spike higher with the average sales price achieving 1.710M. After the first lock down, prices fell back to 1.586M in May. Then like a shot out of a cannon, home values rapidly increased back up to the February high and beyond. With the December price reaching 1.770M that indicates prices have re-entered the upper third of the market cycle, only down 3% form the all-time high of 1.830M experienced during April of 2017.

Home values rose due to the serious lack of options, the peak of inventory during 2020 could not rise above 5,000 active listings. In the past 16 years, 2020 was the first instance where not one single month of active listings was able to achieve above 5,000 detached properties for sale. The limited inventory forced buyers to compete with each other for the very few new listings that came out each month. Until inventory begins to dramatically improve, prices will have an artificial bottom which could propel the market higher.

The detached market finished 2020 with over 10,800 sales. A relatively high number considering there was only 393 sales during April 2020. This unusual activity given historical seasonal norms, meant the spring market was pushed into the summer, summer to fall and so on.

Taking the year as a whole, rather than using year over year monthly indicators which were heavily affected by the initial lock down, the data become much less impressive. Sales rose to 10,832 during 2020 which is down 15% from the 15 year average of 12,748. The 2020 sales were higher than the 2019 & 2018 totals, but below the 2005, 2006, 2007, 2009, 2010, 2011, 2013, 2014, 2015, 2016, and 2017.

Greater Vancouver detached achieved the 5th lowest sales total in the past 16 years. Again to the earlier point, the increase of home values during 2020 had less to do with the sales, and everything to do with the inventory.

Going forward the key to the detached market can be reduced to one factor, supply. With home prices back up to the 2016 levels coupled with an economy is not recovering nearly as fast as the housing market would indicate. The Covid vaccine is seemingly on the way, coupled with higher prices than 2019 and 2020, owners who put selling their property on the back burner, may refocus during 2021. Again the current inventory is only at 2,762 signaling the lowest level on the 15 year chart. This creates an excellent selling opportunity for home owners.

Dane Eitel, Eitel Insights

See Eitel’s latest video here:

Tesla Slips As More Apple EV Plans Reported, B of A Upgrades

Tesla is sinking on Monday despite a new upgrade and a raised price target from Bank of America. The pressure on Tesla stock appears to be due to further evidence that Apple is, in fact, working with Hyundai on electric cars. We had first reported that Apple was elbowing its way into the EV world last Friday.

This morning, rumors of Apple and Hyundai working together got another shot in the arm when it was reported that the two companies would announce a partnership deal in March, according to StreetInsider.com.

The two companies “plan to start production around 2024 in the United States,” the report says. “The first media report that appeared over the weekend in South Korea noted the companies plan to use Kia Motors’ factory in Georgia, or alternatively, build a new factory in the United States.”

It is being reported that the partnership has a goal of producing 100,000 vehicles in 2024. 

Last week, after rumors first swirled about the partnership, Hyundai issued a statement backing away from the report and saying it had been contacted by “a number of potential partners” for EV development on Friday morning. Hyundai instead said last Friday “it received requests for potential cooperation from a number of companies,” according to Bloomberg.

Last Thursday evening, it was reported that an internal discussion at Hyundai about a partnership with Apple had already been complete and was awaiting the Chairman’s approval. Hyundai and Apple were reported to be working on Apple Car production, self-driving and battery development together…CLICK for complete article