In Foreboding part I I said that I felt a big wave may be coming towards the financial markets.
In Foreboding part II I explained a few ways that I am rebalancing my portfolio and taking a more conservative approach right now.
After the last two articles, I thought the question on many readers mind might be why I feel there is trouble ahead for the economy.
What worries me.
Canadian real estate is now the third most overvalued in the world. Seventy percent of Canadians own real estate, are deep in debt and have little or no other savings. If the real estate bubble bursts here, our economy is in big trouble.
I am currently reading a book called “The End Of Growth” by Jeff Rubin who was the former chief economist at CIBC World Markets. In the book he explains how cheap oil drives economies.
“Guess what oil prices were doing in 2008 when the world fell into the deepest recession since the 1930s? From trading around $30 a barrel in 2004, oil prices marched steadily higher before hitting a peak of $147 a barrel in the summer of 2008.”
“When oil prices go up, so does inflation.”
“A fivefold bump in interest rates was the last straw for the massively leveraged US housing market. Higher rates popped the speculative housing bubble, which brought down not only several prominent Wall Street investment banks but also the entire global economy.”
There is no reason to expect we will have cheap oil in the future.
But what really keeps me up at night…