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There’s a high chance you’re reading this while practicing social distancing, or while your corner of the world is under some type of advised or enforced lockdown.
While these are necessary measures to contain the spread of the COVID-19 pandemic, such economic interruption is unprecedented in many ways—resulting in some surprising side effects.
The Evidence is in NO₂ Emissions
Nitrogen dioxide (NO₂) emissions, a major air pollutant, are closely linked to factory output and vehicles operating on the road.
As both industry and transport come to a halt during this pandemic, NO₂ emissions can be a good indicator of global economic activity—and the changes are visible from space.
These images from the Centre for Research on Energy and Clean Air (CREA), as well as satellite footage from NASA and the European Space Agency (ESA), show a drastic decline in NO₂ emissions over recent months, particularly across Italy and China…CLICK for complete chart
“If you own 10% equities, as we do, and the market falls 100%, you will lose 10%. That said, you have 90 cents on the dollar to buy equities for free.” – Michael Lebowitz
Let me explain his comment.
Last week, we wrote a piece titled: Risk Limits Hit. When Too Little Is Too Much in which we discussed reducing our equity risk to our lowest levels.
For the last several months, we have been issuing repeated warnings about the market. While such comments are often mistaken for “being bearish,” we have often stated it is our process of managing “risk,” which is most important.
Beginning in mid-January, we began taking profits out of our portfolios and reducing risk. To wit:
‘On Friday, we began the orderly process of reducing exposure in our portfolios to take in profits, reduce portfolio risk, and raise cash levels.’
Importantly, we did not ‘sell everything’ and go to cash.
Since then, we took profits and rebalanced risk again in late January and early February as well.
On Friday/Monday, our ‘limits’ were breached, which required us to sell more.”
A supermarket in Denmark got tired of people hoarding hand sanitizer, so came up with their own way of stopping it. 1 bottle kr40 ($10.00) 2 bottles kr1000 ($280.00) each bottle. Hoarding stopped!
Eitel Insights continues to outperform the competition. Not a single time have we suggested purchasing a detached home or condo property. On the contrary, we have been suggesting selling into this short lived reality of optimism. Most every other analysts said 2019 was the bottom. 2 months into 2020 they are running scared. Eitel Insights has never wavered from saying the market is going lower for longer.
Eitel Insights uses Technical Analytics to provide actionable intelligence to the market. Fundamental analysts will never catch a “Black Swan” because they need the event to occur before they see the ramifications. Technical Analysts use metrics to show that the market is at too lofty of a position and a correction is upcoming. Just like we did during 2017.
The latest Black Swan no one saw coming is the Stock Market recession and the Corona Virus. Now Eitel Insights did not have a name for these events, however we did state that the technical showed further losses upcoming.
The detached market currently sits at 1.6 Million on an average sales basis. Down 13% from the peak in 2017 or -$230,000. As we have advised our clients this current market cycle will test 1.4 Million in 2020 which would be a total correction of 23% or -$430,000 from the peak. If that does not hold firm the next echelon tested will likely be 1.225 Million.
Here is a quote from the Eitel Insights update last month “We advise to the sellers who will be in that need based situation begin to sell now before onslaught of similar stories hit the market. Need based selling will become necessary in 2020, propelling the market lower in price. Simultaneously the buyer’s trepidation will skyrocket. The only way to mitigate their pessimism will be time. Which is not something every seller will be able to afford in the upcoming market. ”
We certainly hope you took our advice in the last installment. If you disregarded it and purchased based on the recommendations of the “usual advisors”, looking at the chart notice the whipsaw effect you are in now.
The sales totals from February for the detached market were 686 in Greater Vancouver. We have projected a sales threshold which has an artificial top around 950. Given our new reality, we believe the artificial top will hold firmly in place until the market correction is over.
While inventory still came in on the light side with only 4100 active listings. The numbers are continuing to climb from previous months. Now with the stock market crashing and over 400 Billion dollars lost in the TSX. Expect to see hard assets begin to be sold off. The housing market will definitely feel this impact. We have been stating 2020 would begin the onslaught of foreclosures and to date there are 49 foreclosures. Expect that number to rapidly rise by the end of the year, as we predicted
The one shining light of this dreary market is that the properties that are selling, are selling in quicker time. Properly priced listings have been getting sold. We had said list before the onslaught. While the onslaught appears to be on us; listing sooner rather than later offers a chance to receive a higher priced sale. As the time continues to pass and the inventory builds up, prices will decline further. For some it could be list now or have the bank list it for you in the upcoming future.
Not all markets are created equal while some fall other rise. Become an Eitel Insights client and receive Actionable Intelligence on Real Estate across Canada, visit us at eitelinsights.com .
Watch Eitel’s latest video:
Mike talks about what could be the biggest financial story in your lifetime – and no one’s talking about it. We talk gold and silver with top analyst, David Morgan while Ozzie talks the impact on real estate of Friday’s surprise interest rate cut vs the corona scare.
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I know Mike is a very solid investor and respect his opinions very much. So if he says pay attention to this or that - I will.
~ Dale G.
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I've started managing my own investments so view Michael's site as a one-stop shop from which to get information and perspectives.
~ Dave E.
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Michael offers easy reading, honest, common sense information that anyone can use in a practical manner.
~ der_al.
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A sane voice in a scrambled investment world.
~ Ed R.
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