Dare to Think on this one, Recession Watch
Dear readers, some weekend food for thought. And welcome, thank you to all new smart, savvy and contrarian investors to my substack.
Trump's tariffs were stopped by a district court on Wednesday and then back on the next day after an appeal from a circuit court. Think about it, why is what ever Trump tries to do, there are countless legal challenges in the courts. No other country had legal challenges to tariffs they implemented in this trade war. In Canada, under Trudeau counter tariffs were implemented and under Carney more tariffs were enacted and Canada's parliament was not even in session. It was prorogue by Trudeau and during an election.
It is clear that the U.S. legal system is politicized. I don't have to think about that anymore.
I explained in my May 29th report how the U.S. court system works and it was the circuit court that over ruled the district court that tried to stop Trump tariffs. It is all nonsense by the far left. Geez the guy won the election on his America first agenda, let him try his plan. The people voted for it. I can only conclude that the far left is in deep fear that the plan might work.
I also explained the other day how these legal disputes can finally find there way to the Supreme Court and the ruling is final. As far as I can recall, I think this is the first Trump dispute that made it to the Supreme Court so far, And guess what. It was ruled in Trump's favor.
BREAKING on Friday: A 7-2 Supreme Court ruling *allows* the Trump administration to end temporary protections and work authorizations for more than 500,000 migrants from Cuba, Haiti, Nicaragua and Venezuela pending a court challenge. Sotomayor & Jackson dissent. #SCOTUShttps://t.co/1RnbtXeeUQ pic.twitter.com/mzEQm1Q3as
Recession Watch
The recent U.S. economic data smells a lot like recession, but short term many indicators were distorted by tariff responses so the next couple months will be key.
In the last 2 weeks of May. Oil has fallen from $63 to close under $61 on Friday with slow demand fears and too much supply.
In yet another sign the U.S. housing market is rolling over, is a -6.3% decline in the Pending Home Sales Index. It is a leading indicator of housing activity, measures housing contract activity.
According to NAR Chief Economist Lawrence Yun, "At this critical stage of the housing market, it is all about mortgage rates. Despite an increase in housing inventory, we are not seeing higher home sales. Lower mortgage rates are essential to bring home buyers back into the housing market."
As you know, I believe Central Bank's hands are tied and we will not see much in rate relief. With government excess spending, rates could even go higher.
Musk and Dodge left town in disappointment
Leaving Washington pretty much as he found it. “I was disappointed to see the massive spending bill, frankly, which increases the budget deficit, not just decreases it, and undermines the work that the DOGE team is doing,” Musk said in an interview with CBS News.
Dodge found billions that could be cut like ‘foreign aid’ programs, where the money never left the Washington DC area. Elon’s team even found $4.7 trillion in payments that were practically untraceable. Musk thought he was doing the country a favor and this new government really wanted to curb US debt. As it turned out, they didn’t. They are too addicted to corrupt spending.
Canada Real Estate
In a globe and mail article, Equifax reports for mortgage debt in Ontario, the severe delinquency rate rose to 0.24% in the first quarter of the year, a hefty 72% increase since the same period in 2024, the data shows. This is not a big deal yet, but it will get much worse, as I recently posted.
The article also highlights a lot of retirees who’ve held on to family cottages for decades are now looking to sell - for some, in part to help fund their retirement. But they’re facing a tough reality: it’s a buyer’s market. I checked cottages for sale on one of may favourite lakes and they are down a couple hundred thousand from 2 years back.
Also the best mortgage rates were posted and were around 4% to 4.5% which means a double or more for all those renewing their ultra low <2% mortgages coming due this year and next.
It was also noted that speculators who bought homes in the Toronto boom are flooding the market with rentals because they are trying to cover losses.
Back to U.S. economy
The PCE index, the Fed’s preferred inflation gauge, rose a scant 0.1% last month, the Bureau of Economic Analysis said Friday. Inflation was flat in April. The back-to-back monthly inflation readings were the softest since the pandemic in 2020. The 12-month rate of inflation, meanwhile, slowed to 2.1% from 2.3% and also matched the lowest level since the pandemic.
Personal spending rose a modest 0.2% last month, the government said Friday, matching the forecast of economists polled by The Wall Street Journal.
We are not out of the woods yet. Short term I expect some softer inflation numbers with lower oil prices but it is also can be a signal of softer demand. Lower inflation but along with a weak economy still means that nasty stagflation is alive and well.
A very nasty number with the Business Barometer. Business activity in the Chicago area contracted at a faster pace this month, as trade and economic uncertainty weighed on demand and production, according to a monthly survey published Friday. The Chicago Business Barometer, compiled by MNI Indicators, declined to 40.5 in May from 44.6 in April, weaker than expectations from economists polled by The Wall Street Journal that it would in fact tick up to 45.0.
The below-50 reading, the lowest since January, means activity has been contracting for 18 consecutive months.
The market will start paying attention to this number but we got short term distortion with start of tariffs. The U.S. trade deficit in goods narrowed 46% to $87.6 billion in April from a record $162.3 billion in March, according to the Commerce Department’s advanced estimate released Friday. The deficit was much narrower than the $143 billion deficit forecasted by economists according to an Econoday survey. Average of the last two months would be $125, still a low number.
The U.S. economy continues to weaken, but to end on some better news.
The Trump administration recently approved Anfield Energy’s proposed Velvet-Wood uranium mine project in Utah after a rapid 14-day environmental review as part of a new process to fast-track permitting of energy and mining projects. Such studies typically take years because of the large potential environmental consequences of uranium mining.
The Canadian company’s project is the first approved under an emergency process for the Interior Department to permit energy facilities on federal lands.
“This approval marks a turning point in how we secure America’s mineral future,” Interior Secretary Doug Burgum said in a statement.
This is would needs to be done in Canada. Even if it could come down to 90 to 120 days, a vast improvement over 5 to 10 years. We can only dream, because Net Zero Carney needs to change his feathers.
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