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There is way too much information out there.

Your money is precious, but your time and attention is more valuable. How do you make the most of your time and attention? Focus.

Let us deliver a curated set of the biggest business news, economic and investment stories that you need to know on a weekly basis.

Interesting Links: Solar Rush, Investing In Africa, Economists

Germany’s Angela Merkel tells Spain and Portugal to invest more in solar. Could we see a solar rush in Europe? Germany’s Merkel Encourages Spain, Portugal to Invest in Solar.

Looking for private equity deals? Go to Africa. No, seriously! In Africa, the opportunism of private-equity investors aligns nicely with improving social welfare.

Economists, Please! Economists have to let go of the delusion that they have all the answers.

Canada Housing Market Bubble: Just Look How Big It Has Gotten

Last week, we talked about how the Canadian housing market bubble is getting bigger, and few cities are seeing absurd home price increases.

Well, just recently, Bloomberg did a great piece on home prices in Toronto “Toronto Home Prices Just Jumped Another 33%”. It’s really worth a read.

In March, home prices in Toronto jumped 33% year-over-year. This was 4+ standard deviation move…

U.S. Fires Missiles At Syria, Defense Stocks Soar

Investors Rush To Defense Stocks As U.S. Bombs Syria

All of a sudden, defense stocks are investors’ favorite.

This is mainly because, on Friday, U.S. launched an attack on Syria with 59 Tomahawk missiles. This was in retaliation to a chemical attack that Syrian regime supposedly perpetrated on its own people. The missiles target Syrian army base near Homs.

Regarding this attack, President Trump said “On Tuesday, Syrian dictator Bashar al-Assad launched a horrible chemical weapons attack on innocent civilians. Using a deadly nerve agent, Assad choked out the lives of helpless men, women and children. It was a slow and brutal death for so many. Even beautiful babies were cruelly murdered in this very barbaric attack.”

Now, on the night the attack was announced, we saw wild panic on the market. Overnight, we saw futures drop and precious metal soar. A sign that investors were ditching risk, and leaning towards safety.

Next morning, as markets opened, it felt like nothing really happened. Indices like the S&P 500 and NASDAQ just showed minute losses. If you followed the precious metals throughout the data, they sold-off.

XAU/USD (Gold Spot) 5 minute chart
XAU/USD (Gold Spot) 5-minute chart

With this news event, as bad as it may sound, there was one sweet spot – defense stocks. They rallied, especially the maker of those Tomahawk missiles – Raytheon (NYSE:RTN). The RTN stock soared 1.47% on the day.

Looking from the bigger perspective, please look at the chart of SPDR S&P Aerospace & Defense ETF (NYSE:XAR) – an ETF that holds aerospace and defense stocks.

XAR with 50-day moving average applied
50-day moving average applied

On the chart above, investors should be watching the 50-day moving average as represented by the blue line. This line has been acting as a support area for defense stocks. On Friday, we saw 50-day moving average act as a support again. Going forward, we will not be shocked if defense stocks see another leg to the upside.

Some Questions to Ponder

Know that over the past few years, Russia has been very involved in Syria. As the U.S. commits this attack, one must question what happens next. Russia was not happy about it. What will the U.S. and Russian relationship be like going forward?

Another factor to consider is how Donald Trump’s approval will be following these actions. He ran on a platform of “America is first, and not the world police”. He also just went back to the drawing board on his tax plan, and markets had been rallying on that premise earlier. Lower taxes + fewer regulations should translate to better business and better returns on stocks.

How will these factors play into your investment portfolio?

We could go further but we are not in the business of political commentary. Our focus is on how these geopolitical events can affect the flow of capital and investment decisions.

Canada Housing Market Bubble: Charts Foretell Scary Tale

Canada Housing Market Bubble Becomes Scarier

Alright, you may or may not have heard about it, but there’s a bubble like behavior happening in the Canadian housing market. More specifically, in major cities like Toronto and Vancouver.

What’s a bubble? A ‘bubble’ is essentially when asset prices increase rapidly, in a very short period of time. At some point when prices get too expensive, and no investors/individual want to buy, it causes the bubble to deflate – referred to as a bust. In other words, bubbles (rapid increasing prices) are followed by extreme price corrections (rapid decline in prices).

One of the most recent examples of a bubble was the U.S. housing market. This housing market bubble went bust in 2007 when homeowners could not afford to pay their mortgages, and there weren’t as many investors out there willing to invest in homes in the U.S.

You can read all about it here: United States housing bubble (Use this link as a starting point only. If you want to research this in detail, make sure you look at other sources too.)

Home Price Escalation In Toronto And Vancouver

Now back to the bubble forming in the Canadian housing market.

Over the past few years, home prices in Canada have been, in the nicest words possible: crazy. They are increasing in double digits – especially in major cities like Toronto and Vancouver.

For example, if you live in Toronto, the average home price was very close to $900,000 in February.

In Vancouver, the average price of a detached home stands at well over $1.0 million.

Remember how we said earlier that bubbles are followed by busts.

We question really hard if Canadians are getting nervous, and if housing market could face some problems.

It must be made very clear here: home prices, at their core, are a function of income, interest rates, and economic growth.

As it stands, incomes in Canada are increasing. But, they are nowhere close to the way the housing market is moving.

Not too long ago, even the International Monetary Fund (IMF) showed concerns about spiking home prices in Canada and advised on what could be done.

Canadian GDP growth isn’t that great either.

Yes, interest rates are low, but if home prices are ridiculously high, do low interest rates really matter to a person who doesn’t have enough money saved up, and her/his job doesn’t pay well?

3 Charts Everyone Must Pay Attention To

Here’s another thing; over the past few years, Canadians weren’t that concerned about skyrocketing home prices. Now, we see them turning slightly concerned, and it should be taken very seriously.

One of the ways, to see what Canadians are feeling about the housing market, is to pay attention to Google searches, Even though, this may not be a great indicator, but it provides some perspective.

We searched “Canada Housing Market,” and this is the chart we got.

Know that 100 on the chart means peak popularity.

We searched for “Toronto Housing Market,” and this is what we got.

Notice the spike?

To spice things a bit, we searched “Toronto Housing Bubble,” and we saw something similar.

That’s a massive spike in search volumes regarding the Canadian housing market and Toronto housing market.

Where’s The Next Big Trade?

Hey, know this; bubbles can go on for a while and so can the Canadian housing market continue for a while, too.

But, if it does bust, know that it’s going to end very badly.

It will not be a shock to us if Canadian banks like the Royal Bank of Canada (NYSE:RY) , Bank of Montreal (NYSE:BMO) , TD (NYSE:TD), and Canadian Imperial Bank of Commerce (NYSE:CM), plunge in value once the Canadian housing market busts.

Also, watch out for the Canadian dollar as well. It could drop severely.

P.S. we know what we covered here is not enough. We just wanted to keep it short, simple and easy to read. We will be touching on this subject in near future.

Precious Metals Prices Soaring, Dollar Dropping

Momentum Says Gold Prices Could Hit $1,350+

There’s something interesting happening. We warned about it last week as well; with interest rates being raised higher, the U.S. dollar is dropping and gold prices are going higher.

If you follow basic economic principles, you can expect an inverse relationship of the dollar rising and gold prices dropping – given the interest rate hike. Instead, we are seeing the complete opposite of economics 101 here.

What’s next for gold prices?

If you look at the gold price chart, momentum suggests, we could see much higher price ahead.

gold daily chart
Spot Gold (XAU/USD) Daily Chart. Resistance at current levels.

If we just look at the daily gold price chart, there’s some resistance at $1,250 area. If the precious metal price is able to break above it, it wouldn’t be shocking to see gold prices soar to $1,350.00 an ounce or more, eventually.

What To Do When Gold Prices Move Higher?

One place investors need to pay extra attention to are mining stocks. As gold prices go higher, mining stocks provide leveraged returns. They are one of the best investments in this sense, and there’s enough data to prove it.

Are all mining companies going to do well as gold prices move higher? To a certain extent, sure. When the tide goes up, all boats float. But, not all companies are equal.

For example, look at Vista Gold Inc. (NYSE:VGZ) below:

(NYSE:VGZ) Daily Chart

In the past one year, it has increased 117% as gold prices have only increased 0.34%. Keep in mind, we totally hand picked a stock, and this is not a recommendation to buy the stock.

How to pick a gold stock?

We know mining companies are very difficult to understand. For investors that are starting out, they could look at exchange-traded funds like the Vaneck Vectors Gold Miners ETF (NYSE:GDX). This exchange-traded fund tracks the performance of mining companies. Investors get diversification with it.

For investors, who are willing to take little bit more risk, picking individual mining companies would be the best option as gold prices soar. To pick individual companies, somethings investors must pay attention to are costs of production, where the mining companies are located, cash on hand, and management.

Interesting Links: Amazon Just Starting Out; Emerging Markets; Canadians Making These Mistakes

If you are bullish on Amazon.com Inc., (NASDAQ:AMZN), here’s one more argument for you: Amazon, the world’s most remarkable firm, is just getting started.

Emerging markets have outperformed S&P 500. Can the emerging market bull run continue?

Canada focused article that can apply to American readers as well: Three common financial mistakes that too many people make

The Next Big Trade: Bond Market Collapse

bond marketAs it stands, interest rates in the U.S. are starting to move higher. With more (suggested) rate hikes on the way, one asset class that could come under fire are bond markets. As interest rates move higher, bond prices go lower.

Since the financial crisis, bonds have been favored by investors and it made sense for them to buy them too. Interest rates were going lower, and bonds do well in those times when you are just seeking appreciation of bond prices.

You really have to question what’s next for bonds as interest rates move higher. Pay attention, because we aren’t just talking about U.S. treasury bonds.

We are not too optimistic.

One place we are paying close attention to are bonds with “junk” status, or ones issued by companies that are graded by rating agencies as near default.

Why?

With lower interest rates, the yields on investment-grade bonds have been low. In search of higher yields, investors flocked towards junk bonds. After all, with an investor taking on the higher risk of a default in that bond, they want to be paid a higher yield.

It wouldn’t be surprising if these bonds face the most scrutiny as interest rates move higher.

There’s an exchange traded fund that investors could use to take advantage of falling junk bond prices if it actually happens. It’s called ProShares Short High Yield (NYSE:SJB).

Let us be very clear here: this is not a recommendation to buy, rather just an example. If you’re going to buy, make sure you’ve done your due diligence.

U.S. Interest Rates Move Higher, Dollar Drops

interest rates

Federal Reserve Raises Interest Rates

If you have taken Economics 101, you are shown that as interest rates move higher, the value of currency increases. The idea being that investors around the world would want to hold their money in a currency that would return them a higher rate of return (interest rate) than another currency.

On Wednesday March 15th, the U.S. Federal Reserve raised the federal funds rate. Think of these interest rates as the most basic interest rate in the economy. The target rate went from 0.75% to 1.00%, and the Fed also made it clear that there could be several interest rate hikes this year.

With this move, one would expect the U.S. dollar to jump relative to other major global currencies. However, this did not happen.

Did basic economics just fail here? No.

You see, there’s one investment strategy that works great at times and it goes something like this: buy on rumor, sell on news.

The idea behind this investment strategy is simple; you buy in anticipation of some event, and sell once the event actually occurs. It’s basic market psychology in play. Would you rather want to react to something and buy after the fact, or speculate in anticipation of something?

We saw this happen on the greenback. The U.S. dollar started to strengthen well in advance of actual interest rate hike.

USD-index
USD Index

The dollar dropping isn’t anything surprising to us. Here’s a thought: now that we are hearing the actual news, it will be interesting to see how the greenback reacts.

Watch these currencies as interest rates jump…

With all this said, we are watching two currencies in particular: Canadian dollar and the Euro.

If the U.S. dollar continues to drop as the Federal Reserve raises rates, currencies like the Canadian dollar and the Euro could gain strength. But, what’s interesting to note here is that the central bank of Canada and the European Central Bank don’t want their currencies to move higher. They want their economies to excel and lower currency value helps them to do that.

It wouldn’t shock us if we hear from these central banks, and try to talk down their currencies with interest rate rhetoric.

Also, watch the precious metals as well. If U.S. dollar loses value, gold and silver could see a solid move to the upside.

Interesting Links: Goldman Sachs Buys Bad Debt; Millennial Issues; Wall Street Bonuses Soar

The Goldman Sachs Group, Inc. (NYSE:GS) is buying delinquent mortgage debt: Goldman Sachs, Fannie Mae’s biggest buyer of non-performing loans

Millennials struggling to pay rent: Why American millennials may never get to live alone. We wouldn’t be shocked if the conditions are worse for millennials in other countries. If you have any links about this, share!

Wall Street is at it again, making more money: Wall Street bonuses may show first uptick since 2009, firm says

Interesting Chart: Bitcoin Better Than Gold?

This past week, the price of one Bitcoin surpassed the price of one ounce of Gold.  Let that simmer in your head. This is significant.

Here’s what must be understood: gold is regarded as a store of value, and something that protects wealth in times of uncertainty. Historically, that has been the case with gold. Bitcoin is being dubbed as a new alternative to currency and something that’s similar to gold – it is not centrally controlled by a governing body.

Going forward, it will be interesting to see how gold and bitcoin trade.

Look at the charts below of Gold and Bitcoin.

BTC/USD:

btcusd chart
Bitcoin in USD, Daily Chart

XAU/USD:

xauusd chart
Gold in USD, Daily Chart

The trends on display are intriguing, and should not be taken lightly.

Switzerland To Start Printing Money?

Central banks around the world are doing something so crazy that if normal people did it, they would get into a lot of trouble. They are printing money out of thin air. The U.S. Federal Reserve and Bank of England have done it. European Central Bank and Bank of Japan are currently doing this. But you probably know this isn’t news. “Printing money” by way of quantitative easing (the more sophisticated term for it…although technically, there’s more to it than literally printing money) has existed for a few years now.

Why? Their economists believe that by printing money, they can devalue their currency. With lower currency, they believe their goods will become cheaper for others and spur trade. So, more people buy their goods, and this gives a boost to their economy. Theoretically at least.

One of the notorious central banks that’s been focused on lowering its currency is the Swiss National Bank. It pegged its currency to keep it lower, and then implemented a negative interest rate policy.

Just recently, we heard the chairman of the Swiss National Bank saying the Swiss Franc is “significantly” overvalued.

What could this mean? It’s a hint towards potential action. Don’t be shocked if Swiss National Bank starts to print. Hey, there could be a trade for currency investors here.

Snapchat IPO: Stock Soars 60%, Did You Make $24.00 Million In Profit?

Snap Inc. (NYSE:SNAP), the parent company of Snapchat debuted on the stock market this week. The SNAP stock opened at $17.00 and ended the week at $27.09. In other words, it increased close to 60% in value.

If you were lucky enough to get the SNAP stock for $17.00 (chances are you weren’t) and sold at $27.00 on Friday. You’d be sitting on a gain of, no surprise, $10.00 per share. 100 shares would have made you $1,000. Great, right?

Nope. Nope. Nope.

A private Catholic high school made $24 million of Snap Inc.’s IPO. Guess what? The school made $15,000 in seed investment back in 2012. That’s a return of 159,900% in a matter of few years.

Now, here’s what we know; usually when a company does an initial public offering (IPO), in the first few days, stock prices usually explodes higher. Eventually, the stock price drops. Why? Because those who owned the stock (through the years even when the company wasn’t public) tend to take some profits off the table. IPO gives them opportunity to do this.

We wouldn’t be startled if in the coming weeks, SNAP stock sees some sort of a crash. Obviously, we shall know more with time. Even more interesting is where this stock will be in a few years. Will it be another Twitter (NYSE:TWTR) or turn into a major force like Facebook (NASDAQ:FB)?

If one thing is for sure, Facebook has definitely been gunning for Snapchat’s base ever since a Snapchat IPO was on the horizon. Snapchat will need to continue expanding its base and into different spaces.

Let’s see.

Interesting Reads: Miserable Economies

These economies could have a dire outlook in 2017: Venezuela tops the list as most miserable.

Chinese economy could slow further: China aims to expand its economy by around 6.5 percent in 2017. In 2016, Chinese economy grew at the slowest pace in 26 years!

Podcast episode about the Dodd-Frank Act. Must. Listen. This act came in midst of the Financial Crisis of 2008-2009. It could be on the line with current U.S. administration.

Precious Metals Looking Good, So Are The Indices…

S&P 500, Dow Jones Industrial Average, and NASDAQ closed awfully close at their all-time highs. It looks like nothing stopping them for now.

Why? The new U.S. administration has promised to cut taxes, but we don’t have anything in written just yet. So Wall Street is running ahead of it, and buying. The reason behind the buying is very simple: with lower taxes, companies are going to earn higher profits. As a result their stock price must go higher.

We see the momentum is solid to the upside. But, remember the old adage: buy on rumor and sell on news. Don’t be shocked if markets fall for a bit when the actual news is announced.

Precious metals are looking solid as well. Gold and silver are getting a lot of attention. Silver is up about 15% year-to-date, and gold is up close to 9%.

Here’s what we could see in precious metals: silver prices could outperform gold prices this year. Next level on silver we are keeping a close eye on, $21.00. If it breaks, $25 could be next and then $32.00. Obviously, as time goes, we will know more.

Also, it wouldn’t hurt to keep a close eye on mining companies. They could provide solid returns as precious metal prices rise.

Interest Rates On The Rise In The U.S.: Biggest Victim = Housing Market? Possible.

This is basic economics: when interest rates rise, consumption gets hurt.

Currently, the U.S. Federal Reserve is getting ready to increase the interest rates (the federal funds rate, the most basic kind of interest rates), and be aggressive about it. Know this; as the most basic interest rates in the U.S. rise, it will cause other rates to go higher; be it on mortgage, credit cards, line of credits and so on so forth.

Housing market is already seeing impacts of upcoming rise in the interest rates. Over the past few months, activity hasn’t been as stellar. For example, in January, new homes sales in the U.S. ran at annual rate of 555,000. This was 3.7% higher than a month year, but well off how it was in July, August and September of 2016.

Yes, we know what you are thinking: July, August and September are summer months, and housing market is general hot in those months? Mind you; the January figures mentioned earlier are seasonally adjusted. So, it’s comparable.

This is what you have to know, mortgage rates are increasing; In January, 30-year fixed mortgage rate stood at 4.15%. In January of 2016, it was 3.87%.

Now, as mortgage rates increase, you have to question what will happen to buyers. It’s not outrageous to think that the demand in the U.S. housing market could decline, and could bring down home values.

The play: if housing market faces headwinds, mortgage lenders, homebuilders, and home renovation companies could come under fire from Investors.

Interesting Reads: If You Are A Trader, Would You Like A Break During Trading Hours?

Singapore Exchange Ltd. is considering closing its stock exchange again between the hours of 12:30 PM, and 2:00 PM. One of the well-known stock markets in Asia, ended this break back in 2011. It wanted to boost trading.

Robert Shiller, well-known economist and Nobel Prize winner, says stock valuations are high, and could be time to reduce your holdings.

Want to know how global markets have done since 1900? Solid research done by Credit Suisse. Its 60 pages long, read at your convenience.

This is what happens when hedge funds hire data scientists to increasing their returns.