FS in radio it’s all about next go to financial survival network.
com and sign up for your free weekly newsletter you’ll also get three free reports the financial survival network it’s all about what’s next welcome you are listening to the financial survival Network I’m Kerry Lutz it’s April 10th 2018 hey as always join the show join the dialogue join.
The discussion either and leave a message on our hotline nine one four.

Four two four four one four two or email us at KL at Carey Lutz comm well it looks like volatility has replaced risk-on risk-off.

On Wall Street looks like we’re in for lots more of it but more importantly have governments reached the point US Canada China and all the others where they can no longer inflate prices and prices of assets just have to come down well a resident expert at least in Canada is Danielle Park Danielle hey welcome back hey welcome thank you and I’m.

In the middle of a snowstorm in April up here again so all.

Is the same as far as that goes well you know what’s good about that though when the housing sales come in low for April they have a built an excuse they just said well.
Bad weather and April and March.

And the homebuyers you know they’re very frightful lot and they just don’t like to come out when it’s snowing and when the temperature is cold they need nice weather it’s like retail sales if it’s raining that’s good for retail sales if it’s nice out that’s good for retail sales except when it isn’t right absolutely that’s that’s the thing they always come up with an excuse it could never be that prices are insane that that.

Levels are crushing that people’s income are faltering to keep up with the rising rates that’s happened in.

The past year no it’s none of that it’s just a whether it’s always the weather you know because it’s the one thing that we really can’t do anything about although if you read the conspiracy boards we’re doing chemtrails and polluting the atmosphere trying to change things I don’t quite know what it’s doing if it’s doing any good but that’s what that’s what the rumor mill is on the internet are implying but there’s no chemtrails.

Going on in the financial markets here it’s very clear for anyone to see if you just take a closer look right well you have to really look through the mainstream you know marketing machine that proliferate saal of the.

Media outlets and that all the experts so to speak who are paraded in from the various sales firms to assure everyone that you know that a business cycle never end that credit can always expand and that everything is coming up roses yeah well I think we’re gonna go from ABB always be buying to ABS always be selling.
Probably sooner rather than later well you.

Know it’s starting to happen in things like the Canaan real estate market you know we’ve been talking about that off and on and it’s been inflating dramatically for the past several years the past decade in particular but year-over-year numbers now are definitely coming in in some of the hotter areas north.

Of Toronto for example where I live prices sale prices average sale prices are off about 20 percent from this.

Time last year so it’s definitely in process I think and you know the difficulty is we know that that levels are extreme we know that canned is now being listed as you know along with China and Australia and a couple other places as the most at-risk pockets of population anywhere in the world for over leveraged coming into a housing downturn so you know I know you.

Have had some definite appreciation in your housing market in the past five years again but in many areas you’re still not back to where you were at the peak of the Oh 607 cycle and that’s actually pretty typical right of a of a secular burst mean reversion process a decade later you’re very often.

Not back to where you were and then prices can be stagnant.

And sideways for a long long time and unfortunately you know Candace.

Still got most of that all ahead of us because we’ve really just begun into the mean reversion process back from this secular expansion in our consumer credit.

Yeah well you know these booms and busts are demographic for sure because we’re for instance in in in the Northeast here baby boomer is retiring.

And looking to cut their costs their cost of living and you sell and you move down south whether.

It’s Florida Tennessee or Texas the three states in in the south with no income tax or even some of the other states like South Carolina that have smaller state income taxes but the cost of living is less than half in these places so you know.

If for no other reason demographic trends but then you.

Got the financial cycles and you.

Really can’t fight the cycle can you no well I don’t you know you shouldn’t try you should try and assess with an octave I where we are in in expansions now the difficulty I think in bubble phases.

Is that you can make a rational assessment about where things might be able to get in a particular cycle and then have them go far past that on the upside but that also then means they go far past that on the correction or downside so I think you know it just takes people to be pragmatists in you.

Know not believing in fairy tales and just looking at their own balance sheet I know I say this so much but it is so essential that you manage things from the balance sheet perspective first you know everybody talks about the income statement everyone’s always you know boasting about you know.

What income level they may have at a particular time either as a bit you know businesses their revenue and income expands typically.

With the credit cycle and they tend to be you know boasting about that and.

Not looking at how to put away enough you know stored fat for the winter so to speak and households do the same thing you know they’re all about what they can consume and buy and what debt service payments they can make but they don’t appreciate that it just takes a you know a.

Drop in income or a you know interruption in income or anything like health marital you know just normal run-of-the-mill life stuff can be impossible to absorb never mind.

That’s you know a rate increase even a small rate increase when you’re highly.

Leveraged is very difficult so we’re seeing the Pistons kind of start to blow across the board carry we’re seeing it through the auto loan mass where you know banks have been lending their you know in your market so maybe they.

Haven’t as levered on on residential real estate this cycle but they’ve super levered on to other consumer debt forms.

You know auto loans debt loans and they’ve been securitizing them and selling them to.

Quote investments and all that sort of thing so I think that the contagion effect is going to be you know very widespread and I don’t think any particular asset market can be really protected and yet from this process because they’ve borrowed against real estate to buy stocks again for example they’ve borrowed against stocks to buy more stocks to board against shares to buy corporate.

Debt so you really have this you know collaborative event where everything went up together everything was levered together and.

Then everything mean reverts together and that of course has a very significant way or a magnified impact on the economy in the tax base and that’s why you know it’s felt.

In the form of a deeper recession then you would have had had you not had that much debt in the system yeah well we never learned from the past and the only.

A bust it seems that the policymakers know is just to start printing up more money and then somehow everything’s going to take care of itself right well you know no doubt that’s the playbook and that seems to be the only model that the political appetite will tolerate or.

The central Inc academics will.

No doubt if we have the same people they’ll try the same tactics but you.

Know again not without prices having to come down a great deal just because they start buying assets again doesn’t mean no bill to arrest.

The process they didn’t arrest the process you know in twenty nine it didn’t erect the rest of the process and the last two major downturns it just perhaps truncates the bottom but we’ll see we’ll see how effective it is the next time around and seeing softness in these strong markets they’re just.

A precursor to deeper financial problems.

I mean everything is so much more levered Danielle you know equity seems to be a lost concept here so it’s really you know what Carrie – it’s the behavioral impact right it’s the easy money people have been making easy money by doing.

Reckless things and not really and thinking that makes them intelligent for doing that not managing as I say worrying about savings worrying about paying down debt a great deal of people have been taking on more and more risk and they have been rewarded for it I mean think of the Bitcoin bubble.

That we were talking about at the end of last year you know when it was above nineteen.

Thousand and it’s now corrected something like 65 percent the people that were you know proclaiming their own genius back in December are you.

Know in many cases wiped out completely or just you know gone.

Other people who are in the cycle longer.

Have come down with it and perhaps they didn’t have the leverage they were just holding some money in that maybe they will survive through this massive correction.


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