Sweden massages its data and is shocked by high household debt

Oops!   Sweden's central bank has adjusted its figures.   They had been concerned that the ratio of household debt to disposable income was 174%, one of the highest levels in Europe.  (In the US it’s more like 120%.)  Delving deeper, they noticed that when one excludes the households with no debt at all, the ratio is 313% of disposable income.  They are shocked.  (Reuters 5/7) 

It seems that the countries that avoided the financial crisis are destined to have one.  Debt and housing prices are soaring in Australia, Canada, Sweden, Holland, and other countries.  Global easy money is undermining the heretofore healthy economies.

Below-average central bankers: The Yellen Years

Janet Yellen testified today before the Joint Economic Committee of Congress.  Sen. Bernie Sanders of the Vermont Progressive Party asked her if the US were an “oligarchy or a capitalist democracy.” Yellen said she doesn't know how to describe our system but she, like Bernie, is troubled by the fact that everybody doesn't have the same amount of money.  (CNBC)

If she doesn't know what our economic system is, wouldn’t she find it difficult to lead monetary policy?

Keep and eye on Tony Blair: His kind are money launderers, say the Feds

JP Morgan is closing the accounts of 3,500 "politically-exposed persons" because new US regulations aimed at squelching money laundering are imposing too many costs and liabilities.  Included among those whose accounts are being terminated are Jose Antonio Campos, former Colombian finance minister and candidate for president of the World Bank, and Tony Blair, a British politico on JP Morgan’s payroll.  (FT, p13)

It appears that the federal bureaucracy thinks all foreigners are bad.

The Zen of the Oligarch: think money

The new Ukrainian governor of Odessa, an oligarch, has adopted a creative way to stifle dissent.  He is planning to offer bounties of $1,000 to $100,000 for the capture of political protesters, following the example of a fellow oligarch governor further east. Oligarchs are limited in their communications ability: they can only speak the language of money. The local police, too, apparently. (FT, p2)

The Bank of England has introduced new rules requiring banks to spend two hours interviewing each mortgage applicant, which is an ingenious way to slow down borrowing.  

Canadian housing prices approach the ozone layer

A survey of 56 countries by Frank Knight shows that world house prices rose more than 8 percent last year. Prices in eleven countries rose by double digits. (FT 5/6. P2)  Shortly after I read this, someone sent me a chart comparing US and Canadian housing prices.  After a slight tremor when the US cracked, Canadian house prices soon resumed their upward trend.  The high price of housing in Canada has long puzzled me.  It is, after all, the second largest country in the world by area and sparsely populated. 

 

For example, Yonge Street in Toronto, which extends north from Lake Erie toward the pole, was listed in the Guinness Book of World Records as the longest street in the world until it was displaced by the Pan American Highway, which runs from Alaska to Chile, in 1999.  Yonge Street is 1,178 miles in length.  It was built in the 1790’s and named after Sir George Yonge, the British Secretary of War at the time and, was designed so that the capital could be evacuated northward in the event of a US invasion. 

(Given the length of the road, the British were clearly contemplating a worst case scenario. -- The route’s straightness belies the legend that it was built by prisoners arrested for inebriation.)  One would think it possible to have a prestigious Yonge Street address fairly cheaply somewhere.  But prices are twice the US level.

Overvalued market going even higher: a technician thinks so

A friend sent me a comment by Richard Russell of the Dow Theory Letters, which Russell has been writing since 1954.  (He’s getting old.)  Russell refers to Robert Shiller’s price-earnings ratio, in which “p” is the current price and “e” is the average inflation-adjusted earnings of the past ten years.  Russell states the following:

“We are now 53.3% above the average P/E of the preceding decade. There have been only three times when valuations calculated by this method were higher -- the late 1920s, the late 1950s and 2007 just before the bull market ended. Judging from current valuations, we are either near the beginning of a bear market -- or facing a decade of sub-par performance from stocks."

 

Paradox: As a technician, Russell nonetheless sees the potential of a big upside breakout in the Dow.