US Recession Going Retail

The bulls were doing cartwheels after January retail sales were released. The consumer is back, they said, after a weak holiday season. Now, not so much. February retail sales were released today and the news is not good.

First, the February data included a revision to the January numbers, a BIG downward revision, from +0.2% to -0.4% month-over-month. February data was also down a further -0.1%. Here are the numbers:


Released On 3/15/2016 8:30:00 AM For Feb, 2016

Prior Prior Revised Consensus Consensus Range Actual
Retail Sales – M/M change 0.2 % -0.4 % -0.1 % -0.6 % to 0.4 % -0.1 %
Retail Sales less autos – M/M change 0.1 % -0.4 % -0.2 % -0.6 % to 0.5 % -0.1 %
Less Autos & Gas – M/M Change 0.4 % -0.1 % 0.3 % 0.1 % to 0.6 % 0.3 %


This chart tells you why retail stocks have recently led to the downside. Lately, they have recovered somewhat. Time to sell them again?These are historically recessionary numbers suggesting that markdowns in first quarter GDP growth are on the way.

Retail Sales

Margin Debt Signalling a Top?

As we have noted many times, bull and bear markets are defined by investor psychology. There is no better indicator of investor sentiment than margin debt. When people are willing to borrow to buy stocks, they have to be bullish.

The New York Stock Exchange publishes end-of-month data for margin debt back to 1959. Here’s what the historical data tells us. Margin debt soared in late 1999 and peaked in March 2000, the same month that the S&P 500 hit its then all-time daily high, although the highest monthly close was five months later in August. A similar surge in margin debt began in 2006, peaking in July 2007, three months before the market hit its peak.

This is logical: When investors start to wind down their leverage, the market comes under pressure. At the end of a bull market, everybody is already in. Now you get the speculative excess, the weak buyer on margin. When the marginal buyer starts to leave the market, there aren’t enough buyers to keep things elevated.

Conversely, margin debt hit a trough in February 2009, a month before the March market bottom. It then began another major cycle of growth.

The Latest Data

NYSE margin debt data is a few weeks old when it is published. The latest debt level (for January) is down 2.9% month-over-month and 11.8% off its real (inflation-adjusted) record high set in April 2015.

NYSE Margin Debt











The above chart shows the percentage growth of the ‘real’ S&Ps and the ‘real’ NYSE margin debt from the same 1995 starting date. Real simply means it is inflation-adjusted. The yellow tags show the peaks. Margin debt grew at a similar rate to the market from 1995 to late summer of 2000 before soaring into the stratosphere. The two then fell together in early 2001. After the tech crash, margin debt gradually returned to its usual rate of growth until September of 2006 when it went ballistic again, finally peaking in the summer of 2007, about three months before the market.

After the market low of 2009, margin debt again went on a tear until the contraction in late spring of 2010. The summer doldrums promptly ended when Chairman Bernanke hinted at more quantitative easing in his August, 2010 Jackson Hole speech. This immediately brought the margin buyer back into the market and the appetite for margin accelerated to a similar pace as 2007 along with ongoing Fed easing until April of last year. With QE now history, margin debt in declining and there have been no new highs in the S&Ps. Is this 2000 and 2008 all over again? In my opinion, the answer is yes.

Moving towards mortgage freedom

Good news!  It may only take small changes for you to become mortgage free and save thousands of dollars in interest in the process.  In December, Mortgage Professionals Canada released its annual state of the housing market report and found that, on 2015, 36% of homeowners took actions to reduce their mortgage debt.

While many homeowners think in terms of lump-sum payments, which are a great option, there are other ways to save money and pay down that debt including the following:

  • Refinancing for a lower interest rate
  • Renegotiating for a lower interest rate
  • Switching to accelerated bi-weekly payments
  • Increasing amount of regular payments
  • Lump-sum payments

According to the report about 950,000 mortgage holders voluntarily increased their regular payments during the past year. The average amount of increase was about $340 per month, for a total of almost $4 billion per year. In addition, voluntary increases that were made in prior years continue to contribute to accelerated repayment of mortgages. Increasing your payment by just $20 a month can have a positive impact simply because the extra money is applied directly against the mortgage principal. This decreases the amount of interest you will pay over the life of the loan

Also in 2015, seven per cent of mortgage holders (about 400,000) increased the frequency of their payments.  Just over one million made lump sum payments during the past year. The average amount was about $15,300, for combined repayment estimated at $15.5 billion.

Other highlights from the report include:

  • About 660,000 households lived in homes that they purchased during the past year (newly-constructed or resale). The average price is $408,800, for a total value of $270 billion.
  • Among these recent homebuyers, there had been an estimated total of $35 billion in mortgages on existing homes that they sold (which would have been discharged or transferred at the time). The combination of $188 billion in financing on purchased homes minus $35 billion on prior dwellings means that home purchases in 2015 have resulted in a net credit growth of $153 billion.
  • About 100,000 Canadian homeowners fully repaid their mortgages during 2015 (up to the date of the fall survey). A further 40,000 expect to fully repay their mortgage before the end of the year. In combination, about 140,000 mortgages will have been fully repaid during the year.

The freedom that being completely debt-free brings is a dream for many Canadians. If you’re unsure of what your next step should be, let’s talk. Together we can review your mortgage, look at your financial picture and devise a mortgage-reduction plan that works for you.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at WWW.GUYTHEMORTGAGEGUY.COM

Three Strikes and You’re Out

Can the economic news get any worse? Today, February 29, we got three reports of new data and they were all terrible. Now I know why they call this a leap year, as in leap off a cliff.

We started with the Chicago PMI, which lurched from expansion in January to contraction in February. The Chicago PMI is compiled by the Institute for Supply Management from a survey of business conditions in the Chicago area including both manufacturing and non-manufacturing firms. At a headline 47.6, Chicago’s PMI fell well below the consensus range. Production is down sharply, backlogs are in a 13th month of straight contraction, employment is down and in its fifth month of contraction, and prices paid are contracting at the fastest pace since 2009. Here’s the headline data:

Chicago PMI:

Prior Consensus Consensus Range Actual

Business Barometer Index Level

55.6  52.9  48.0  to 55.0  47.6 

Next, we got the pending home sales data which slowed in January, down an unexpected 2.5 percent.

Finally, we got the Dallas Fed Manufacturing Survey and the data was dreadful.

Dallas Fed Mfg Survey:

Prior Consensus Consensus Range Actual
Production Index -10.2  -8.5 
General Activity Index -34.6  -30.0  -32.4  to -18.0  -31.8 

In the detail, new orders contracted a further 8.4 points in the month to minus 17.6 for their lowest reading since 2009 in what is a very ominous signal for the months ahead. Unfilled orders are also in contraction as are production and shipments. Price contraction deepened for both raw materials and selling prices. Inventories are down as is employment. All 17 current components of the index are in contraction.

Investors beware: The stock market is not priced for this data.

You Should be a Seller

In my opinion, the stock market is now in the first stages of a bear market that will eventually test the March 2009 S&P low of 666. Meanwhile, the market is on a tear to the upside over the past few trading days so I must be an idiot, right?

Wrong. This is not a rally to buy. This is a rally to sell, a gift from the heavens to get you out while others are buying. Because if you finally decide to sell when everyone else does, you will feel nothing but pain, lots of it. In my opinion, this is likely the last hurrah before the bear comes for you and all your friends and family.

Why is the market up so hard? Because that’s what bear market rallies look like. There is no good news out there driving the market. There is, right now, a huge short position in stocks because the smart guys are getting positioned for a major downdraft. The data from Investor’s Intelligence is clear: the small investor is very bullish while the professionals are not. Who do you think is right? But the smart guys may be a little early, so we have the potential for the mother-of-all-short-covering-rallies while we wait for the market to break. It’s time to sell, or go short if you know how to play the short side (not recommended for most of you).

In the last two months, the NYSE Short Interest has risen 4.5%, back over 18 billion shares and near the historical record highs of July 2008. The short interest is up seven of the last nine months. That’s why the market is bouncing.

NYSE Short Interest
Chart: Bloomberg

Cold Fusion: The Latest Insane Idea in Monetary Policy

Cold fusion used to be a zany term in the physics lab for generating endless cheap energy.  Alas, no longer. Now it is the latest nutty idea from economists to create endless amounts of free money. Hold onto your wallets, this is an idea from the twilight zone.

World-wide, central banks have engineered 635 interest-rate cuts since the financial crisis of 2008 and purchased more than $23 trillion of assets, primarily sovereign bonds, according to Bank of America Corp. Nonetheless, the global economy is sliding into recession. Again this month, the IMF and other major international agencies have cut global growth estimates. So, when a policy of flooding the financial system with cheap money clearly doesn’t work, whether in Japan or Europe or America, what do you do? Why, more of the same of course! Are you kidding me?

According to Stephen Englander, global head of currency strategy at Citicorp., the answer is to focus policy more on boosting demand rather than just increasing liquidity in the hope that consumers and companies will find a need for it and borrow more. He advocates what he calls “cold fusion” in which politicians would cut taxes and boost spending with central banks covering the resulting rise in borrowing by purchasing even more bonds. “The next generation of policy tools is likely to be designed to act more directly on final demand, using persistently below target inflation as a lever to justify policies that would be anathema otherwise,” Englander said. I have news for Steve; they are anathema now.

In a similar vein, Hans Redeker, head of global foreign exchange strategy at Morgan Stanley, says it’s time for central banks to begin using Quantitative Easing to buy private assets having previously focused on government debt. “I would actually look into the next step of the monetary toolbox,” Redeker said in a Bloomberg Television interview. “We need to fight demand deficiency.” He wants to put more money directly into the hands of consumers.

Dear reader, please understand what this means. To boost the economy, they are prepared to destroy the currency. What is more, curing the problems of too much debt with more debt is why the economy is slowing down in the first place. Encouraging borrowing and consumption–fighting demand deficiency, as Redeker calls it—is working in precisely the wrong direction. Savings and investment drive growth, not consumption.

Cold fusion= more confusion. My answer is gold, something they can’t print. Keeping money in the bank is a bad idea as I will explain tomorrow.

Here’s what can effect your credit score

Okay, you’ve worked hard to build up your credit score. You pay all your debts on time, have focused on getting out of debt –maybe even closed a few of those accounts because you don’t need them or want them anymore. Then one day you apply for a loan and there are issues. What???

Everyone understands the need to pay down debt and pay bills on time but there are a few wonky things that affect your credit score. Remember those cards you cancelled? Well as counterintuitive as that sounds closing accounts can hurt your score. The reason for the ding is that closing an account drops your global credit limit, which increases the percentage of debt in relationship to the limit. For example, you have two credit cards with a limit of $1000 each, for a total of $2000. You owe $500 on one card and $800 on the other. That debt load is 65% of the global limit. So you decide to pay off the $500 and close the account. That reduces the global limit to $1000 with an $800 balance. Now the percentage of debt is up to 80% and your credit score takes a hit. The ideal percentage between global limit and debt owed is 30% to 35% – the lower, the better.

Here’s another stunner:  Having a credit card or line of credit and not using it. Yep, having too much unused credit can have a negative impact — a creditor can’t tell how you manage credit payments if you don’t use it.

Here’s something I know you’ve done in the past. You’re in your favourite store and you’re offered an amazing discount if you open a credit account. As tempting as that is, just say no. Store cards carry much higher interest rates than major credit cards and your credit score may take a hit. An inquiry can drop your credit score between five points and 35 points, depending on your credit profile.

Shopping around for the best rates on anything – a car, or a mortgage or any other big purchase affects your score.  Each time you apply for credit, it creates a hard inquiry, which lowers your score. If there are a lot of “inquiries” within a short period of time, it doesn’t look good. Shopping around for rates is not a bad thing to do especially at mortgage renewal time, but let me do it for you – your credit report gets pulled only once as we review multiple options for you.

So how do you get a keep a really high score? Here are a few tips:

  • Length of credit history – 30 year plus.
  • Two major credit cards with no more than 15% balance
  • Two store or gasoline cards with no more than 15% balance
  •  A  car loan or another secured loan
  • No late pays
  • No bankruptcy
  • No judgments

If you’d like more information about your credit score, call me today.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at WWW.GUYTHEMORTGAGEGUY.COM

Looking forward to 2016

This past year we saw many challenges in the housing sector. There were the recent changes to down payment minimums; we saw housing prices increase in some areas of the country while in other areas we saw a slowdown of housing activity, in part due to falling oil prices.  We read media reports about bubbles…again. The Canadian dollar is trading at approximately 72 cents to the US dollar (at the time of this writing). And we have a new Liberal majority Government in Ottawa.  There is no doubt that we Canadians are resilient. Despite gloomy predictions, despite increasing debt loads, despite all the changes we have endured, we continue to look on the bright side and consumer confidence is high.

While the housing market did slow somewhat in many parts of the country in the early part of the year, the summer and fall months showed signs of life in most areas of the country. While there are still some issues surrounding affordability for first time home buyers, many economists believe the market will self-correct in the upcoming years.

The economy is still creating jobs. The U.S. economy, which has a definitive impact on our economy, is also growing and home prices there rose 5.5% from a year earlier, boosted by job growth and low mortgage rates.  The Canadian Real Estate Association (CREA) is forecasting that low interest rates will continue to support overall national sales and prices in 2016.

If you’ve put off a home purchase or refinancing, then it may be a good time to review your goals for the upcoming year. If it’s a renewal year for your mortgage, there are decisions to make.

Many homeowners simply renew with their current lender, but that may not be the best strategy for your situation. You probably did a lot of research when you originally bought your home – making sure you got the best mortgage product for your situation. It makes sense to do the same when renewing your mortgage. Since a mortgage payment is the biggest expense you’ll likely have, discussing your goals is a good first step to help move you toward them.

If you’re thinking of buying a new home, I can help you through the entire process and let you know how much house you can afford.  If it’s debt consolidation you need or are considering a renovation project, then refinancing your current mortgage may be a good option.

It’s also a good time to discuss any financial changes to your household and if and how that will affect your mortgage. Together, we will review your financial situation and tailor a mortgage product that works for you.

Wishing you health, happiness, and prosperity in 2016.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at WWW.GUYTHEMORTGAGEGUY.COM

Decline the Bank Mortgage Insurance

“Would you like fries (mortgage insurance) with that (mortgage)?”
– A McDonalds sales technique

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

When you go into the Bank to finalize your mortgage, a bank employee will most likely as you to consider purchasing mortgage insurance protection.  You may be told – “it will pay your mortgage if you die; just a few medical questions; it’s inexpensive”.  While that Bank person may have had the best of intentions, he or she probably lacked the training needed to make you aware of important contractual details and how Bank coverage compares with other insurance protection options.

Here are some important things you should know about most mortgage insurance policies:

Bank, Credit Union or Trust Co. (“Bank”) Mortgage Insurance Characteristics

1. Policy ownership

Bank mortgage insurance is a Group Policy that is owned by the bank, not by you.  As such,the Bank can, in certain circumstances:

(i) cancel your coverage without your consent.

If your health worsens but then on mortgage renewal or in the event your mortgage needs change, you then may have to re-qualify for insurance (you may then be declined for insurance).  What if your financial situation worsens (let’s say you fall behind in payments) but still need insurance?

(ii) increase your premium – i.e. it is not guaranteed to be fixed for your lifetime

(iii) Coverage may terminate at age 70 even if you still have an insurance need.
(Most Banks restrict mortgage insurance to clients age 65 or younger, with coverage terminating at age 70).

2. Policy cost

(i) The cost is based on the entire group of the Bank’s insured mortgages. Generally, no distinction is made between smokers and non-smokers.  Non-smokers and healthy individuals are penalized with higher premiums!

(ii) The Bank is not providing you mortgage insurance policy quotes from several competitors.  As such, Bank insurance premiums tends to be less competitive.

3. Qualification for Coverage

(i) Policy is underwritten after death! Generally, at time of your death, your qualification for insurance is then reviewed and your application scrutinized.  As such there is no guarantee of mortgage repayment.

(ii) You may be required to re-qualify upon renewal of your mortgage.

(iii) Mortgage insurance is only in effect for as long as your current mortgage contract.  If you renegotiate your mortgage (maybe you want to finance a large renovation) or move to a new lender, you’ll likely lose your protection.  Hopefully you are healthy at that time.  You may also be subject to the current rate charged by the new Bank which likely may be substantially higher.

Personal Term Life Insurance

1. Policy ownership

You own the policy:

(i) You have freedom by not being tied to your lender – you can move your mortgage whenever and wherever you can get a better rate without jeopardizing your coverage.

(ii) Your insurance premiums may be guaranteed not to change over the life of your policy

(iii) Your policy may be non-cancellable

(iv) You may be able to modify your coverage to fit your changing circumstances – examples:

  • You have children and want additional monies available for them in the event of your death
  • If you become diagnosed with a terminal illness, coverage can be maintained for life where the coverage can be fixed and not decline with a declining mortgage balance.

(v) You choose your beneficiary and may be able to change the beneficiaries in the future

2. Policy cost

(i) The cost is based on your individual health. If you qualify for insurance, the cost can be substantially cheaper – could be as much as 40% cheaper

  • If you are a non-smoker, you benefit compared to the bank which doesn’t distinguish between smokers and non-smokers
  • If you live a healthy lifestyle, you may benefit by getting specially reduced premium

3. Qualification for Coverage

Underwriting (qualification of insurance) is done at time of application.  Once qualified, you are not at risk of losing your insurance in the future because of a change in your health.

The Next Step

See the difference?  Tell the bank you need to think about it and come see me.  After we get you better coverage for less, you can go back to the bank and tell them NO THANK YOU!   You can reach me at: (778) 878-6643 or by email:

Choosing a Trustee

Written by Steve Nyvik, BBA, MBA ,CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.


You’ve gotten advice on estate planning and have found that, through establishing a Trust,  you may be able to:

  • save income taxes over the lifetime of your loved ones,
  • save on inheritance or estate taxes,
  • creditor protect assets, or
  • protect your family members from themselves by limiting their ability to ‘spend away’ their inheritance.

What then becomes the challenge is choosing the right person or persons to act as Trustee.  Here are some factors you might take into consideration in making your decision:

1. Family First

Your spouse and adult children are your family and most likely may be inheriting most or all of your assets.  Unless there is a good reason, they should be managing their inheritance.  To help them carry out their duties, they can hire whatever professionals needed to advise them.  Such persons might include an estate lawyer, tax accountant, investment advisor, realtor or property manager, etc.

If your surviving spouse cannot manage even with the use of professionals, or having your spouse directly involved would adversely impact your estate planning objectives, then you might consider your spouse acting jointly with an adult child as co-trustees.

Should your spouse predecease you or die thereafter, then it may make sense for one competent adult child (especially if they live near you and the others don’t), who is honest and fair, to act as Trustee on behalf of one or more siblings.  If not, then consider the children (when they become adults) to act jointly as co-Trustees.  For siblings to act jointly, this may remove any perceived concern as to whether one child might attempt to act inappropriately to benefit themselves.  Where siblings don’t get along, by being co-trustees, they will have to come together to make decisions.  The danger of sibling co-trustees are that this could invite gridlock where nothing gets done, decisions made are sub-optimal, or decisions are not made in a timely manner.

2. Family Friend or Financial Professional

Going outside of the family requires you to rely on the goodwill of a family friend or paying a financial professional (like a business colleague, financial planner, investment advisor, or accountant in addition to your estate lawyer and bank trust officer) to act.  Trouble is that these persons normally don’t do their job for free – and some, like bank Trustees can be incredibly expensive.  Here you need to weigh the cost of the service to the value of having the Trust.  If the benefits don’t outweigh the cost, then don’t have a Trust.

Where you need to use a family friend or financial professional, besides the cost, consider the following:

  • Honesty and Integrity: If you don’t have trust in your Trustee to act honestly and according to your wishes, you have the wrong person.
  • Competency, Wisdom and Sound Judgement: The person you choose as your Trustee should have good financial decision making skills.  This person should spend time with you while you’re alive and of sound mine to understand you, your family situation and your wishes.  Some of the duties your Trustee will handle include: paying your bills, make decisions on keeping, selling, disposing, gifting or distributing property you may own to beneficiaries, complete your final tax return and Trust Tax Returns, make tax elections, make a probate application to court, safeguard your assets, enter into contracts, deal with an estate lawyer, interpreting your wishes and possibly defending them, and make decisions on beneficiary short term versus long-term needs relative to Trust assets.  Your Trustee should be empathetic to appreciate each beneficiary’s situation and be strong enough to make decisions in the face of conflicting beneficiary demands – even if one beneficiary is threatening to go to court.
  • Organized: Your Trustee must be organized and keep proper records. Your Trustee needs to document all transactions using prescribed forms as well as document reasons for any decision that is made.
  • Managing family relationships: With your death, hurtful childhood feelings or sibling rivalry may no longer remain contained.  Your Trustee needs to be able to deal with these unleashed feelings and the conflict and suspicion that comes with it.  Where children are suspicious of each other, it may not make sense to name one child as Trustee; instead name two, or all of your adult children as co-Trustees.  If there is a potential for mistrust or for abuse of Trustee power, it may make better sense to name someone independent as Trustee and avoid adding fuel to the fire at a period when your loved ones are facing extreme emotional stress.
  • Nearby: Ideally, at least one of your Trustees should live close to you, so he or she can perform duties efficiently and economically.
  • Would they be willing to serve: The role of Trustee in some cases can last for several years and involve significant personal legal liability.  Your Trustee can also be on the receiving end of anger and frustration of your beneficiaries that have been ‘held in-check’ all those years.  Once a potential Trustee appreciates the difficulties and risks, he or she may not even want to accept the role.  So you better ask them whether they would be willing to serve before appointing them.  You should discuss with them how much you will pay.  And you better have a plan as to how future successor Trustees will be selected.
  • Age: Will they die before the need for the Trust comes to an end?  Maybe you need to look for someone younger than you who can serve in that role for 20 or more years if the Trust might be needed for that length of time.

Where we fit in

For our clients, we are willing to support your Trustee or, if you have no spouse nor competent adult children, then we would be willing to help if you would like us to act as a Trustee.  For the role of Executor or Trustee, we charge 1% which you’ll find to be very competitive and typically much less than a bank Trustee.

Our interest is to make sure that your goals are carried out in accordance to your wishes as we hope that not only will you be happy with our services, but also your children and future generations.