There aren’t really any universal definitions of how a bubble in housing should look or how it can be quantified.

That said, my sense is that a housing bubble is a rise towards a peak that will be significant enough that if one were to look at time elapsed between the equivalent prices on either side of the peak, it will be around a decade. I call this the “flat price” period.

“Flat prices” for a decade, whether it is real estate or securities, is enough to seriously impair the financial reality of people who are significantly exposed to the bubble. For most, life has enough twists and turns over a decade that financial flexibility is necessary. Losing that flexibility because of exposure to an asset price roller-coaster is deeply impacting to the point that it will likely have a permanent effect on a person’s investment psyche.

So, according to my definition, the chart above shows that Vancouver saw a real-estate bubble from late 1988 to early 1990 as the period of “flat prices” extended for 12 years around the initial peak. There was a secondary peak, but this one did not have a “flat price” period that was as long. Also, retracing a recent bubble upwards again over a short period of time does not constitute a 2^nd bubble in my opinion. It was bounce that was merely an aftershock of the 1988-1990 bubble.

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP Limited or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. 

Richardson GMP Limited, Member Canadian Investor Protection Fund.

Richardson is a trade-mark of James Richardson & Sons, Limited. GMP is a registered trade-mark of GMP Securities L.P. Both used under license by Richardson GMP Limited.

In this week’s issue:

• Weekly Commentary
• Strategy of the Week
• Stocks That Meet The Featured Strategy

Stockscores Market Minutes Video
Some traders only want to look at the market once a week. You can do this by seeking stocks making good chart breaks on the three year weekly chart. This week, Tyler shows how to set up the Market Scan to find these stocks plus he provides his regular market analysis for the last time in 2013. View the video by clicking here.

Things You Must Do To Be Successful in 2014
2013 was a Beta year for the market. That means that the large cap stocks all went up and you made good profits if you simply owned the index. It was one of those rare difficult years to beat the market because the overall market did so well.

I expect that 2014 will require a lot more stock picking acumen. Investors are going to have to seek out the real leading individual stocks that can beat the market.

Here are five things that all investors and traders, whether long or short term, must do to beat the indexes in 2014.

Understand Reward for Risk
Most traders focus on the stock but you will be far more successful if you focus on the reward for risk profile of the trade. Risk is the difference between your entry and stop loss price. Reward is the difference between a profitable exit and the entry price. The tighter you can make your stop with lowering your probability of success, the higher the reward for risk ratio can be. Seek out trades that have a lot more upside potential than downside risk.

Focus on Abnormal Behavior
The best way to beat the market is to trade on inside information. Most of us don’t get quality inside information but it is not that hard to follow those that do. When there is significant fundamental change underway in a company, the stock will often trade abnormally. Prove it to yourself by looking at the stocks that made big gains last year. You will see that most of these market beating trends started with abnormal price action.

Learn to Read Chart Patterns
Most market beating stocks start with abnormal activity but not all abnormal activity leads to market beating trends. The important qualifier is the chart pattern. Stocks making abnormal activity out of predictive chart patterns have a good chance of going in to market beating trends.

Limit Losses, Let Profits Run
Imagine you do 10 trades. On five of them, you lose $100. On three of them, you make $100. On the final two, you make $1000 each. After 10 trades you have made a very good profit because you limited the size of your losses and let your profits run.

Ignore Public Information
Public information is useless because it is already priced in to the stock. It may be interesting, it may make you feel good about the stock that you own but it has no value to your investment decision. In fact, it may be destructive because we often fall in love with the public story, causing us to hold on to losing stocks with the “hope” that the stock will turn around. 

STOCKS THAT MEET THE FEATURED STRATEGY

1. T.HSE
Money is starting to flow back to the Energy sector, Husky’s chart is breaking out this week to four year highs after spending most of 2013 trading sideways below $32 resistance. Historical yield is 3.66%

2. T.PPL
I featured T.PPL earlier this week to readers of the Tradescores.com daily newsletter, it has continued higher since and looks likely to continue its long term upward trend after building a base for the past 7 months. Historical yield is 4.59%

References

• Get the Stockscore on any of over 20,000 North American stocks.
• Background on the theories used by Stockscores.
• Strategies that can help you find new opportunities.
• Scan the market using extensive filter criteria.
• Build a portfolio of stocks and view a slide show of their charts.
• See which sectors are leading the market, and their components.

   

  Disclaimer
  This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.

Rosenberg thinks the U.S. economy will surprise to the upside next year.

Gluskin Sheff’s David Rosenberg, who has been turning increasingly bullish, has published his 2014 outlook.

In fact, the title of his note is “The Year of the Horse: The one that’s about to break out of the gate.”

Here’s a brief summary of his ten major calls for 2014:

1. There is more upside potential in 2014 than downside risks. Rosenberg thinks in 2014, the “upside macro surprise shifts from the UK to the U.S.” 1984, 1994, and 2004 ended up being surprise years, and Rosenberg writes that investors should “beware of all years that end with a ‘4’, since they “all fit this bill of economic acceleration.”
2. The stock market suggests that economic growth will improve in 2014. The market is seen as a leading indicator of growth. In the last 60 years, real GDP growth has always been positive when the S&P 500 climbed 60%. Any surprise in growth will be to the up side.
3. Fiscal headwinds will subside and business spending could emerge as the key catalyst for growth next year. 2013 was rough with the “early year tax bite, the sequestering and the government shutdown.” But things are picking up. “The deceleration to 0% productivity growth, which has a direct link to profit margins, will finally incentivize the business sector to invest organically in their own operations with belated positive implication for capes growth.”
4. The U.S. economy does not suffer from secular stagnation. The economy had so far been held back by household and federal government balance sheet repair. Rosenberg expects the economy to surprise “to the high side after a prolonged period of unsatisfactory post-recession growth.” But he points out that “the upside for next year from a business or economic perspective as opposed from a market standpoint is considerable.”
5. The capital stock is very old and will be replaced. “The last time the corporate sector allowed its capital stock to get this old and obsolete was back in 1958 and then annual growth rate in volume capital spending rise to from -6% to 13.5%,” writes Rosenberg. “Revived capex growth is likely going to emerge as a key bullish cyclical theme for 2014.”
6. With the housing recovery’s role in supporting the economy, the torch will have to be handed over to the consumer. “The flow of savings into the household sector is now running in excess of a $600 billion annual rate, up 6.4% from year-ago levels, and serving up a nice cushion for the spending outlook.”
7. Job market and consumer confidence improve. Rosenberg thinks we are two or three months from see jobs outside of the financial sector hit a new all-time high.
8. Future returns in the stock and bond markets will be muted. In the bond market, coupons are low and banks have been trying to fight deflation and this “limits the potential for future yield declines, that it seems hardly likely that there will be any capital gains down the road.” The stock markets in the U.S. has had 25% gains “in what has turned into a backdrop almost exclusively reliant on multiple expansion.” Instead he thinks returns will have to be found in “yield curve plays to credit strategies to sector rotation.” 
9. The Fed will fall behind the curve. “There was always this symbiotic relationship — the Fed would lead the bond market, and then pay heed to what the market was saying in return,” writes Rosenberg. “The problem now is that it is next to impossible for the Fed to heed a message from a market that is trying to dominate.”
10. Expect volatility as Janet Yellen prepares to take over from Ben Bernanke. Volatility always becomes a “watchword” during a transition of Fed chairs. What’s more, at least six Fed governors and bank presidents are set to step down as well, which also means a new FOMC. 

Here they are: the most important charts of the year. 

We asked our favorite portfolio managers, strategists, analysts, and economists across the Street for the charts that they deem the most important right now, and this is what they sent us.

Much of the focus is on the 10-year Treasury yield — where does it go, and what is the read-across for other financial markets around the globe? Many are focused on the stock market as well, the consensus being that indices will rise to new highs again in 2014.

But there are a lot of other things going on as well.