A few scenes worth your attention:

• High-powered Bay Street bond traders talked to me this week about what the new year’s likely to bring. They figure the central bank will hold the trigger on a rate increase until mid-year, just so Mark Carkey’s creds are not further shredded, but then let ‘er rip. The first hike will be “at least a half, and probably a full load”. That could raise VRMs overnight by 1% – or a little more than 44%. Ouch.

• But BMO disagrees, at least a little. Senior economist Michael Gregory says the first jump will be more like a third of a point – also coming in the summer – and that by this time a year from now BoC rate will be sitting at almost 1.6%, higher than today by 1.3%. That doesn’t sound like a lot, but it puts the lowest VRM at 3.55% – which increases the monthly on a $400,000 loan by $300. A five-year mortgage would like go for close to 7%. Barn door. Horse.

• Well, that little David Rosenberg buddy of mine, now chief economist at Gluskin Sheff, has sure joined Bubble City here on the banks of the always-fragrant Don River. In a note to clients, and then repeated to the media, Rosy said, “we found that housing values are anywhere between 15% and 35% above levels we would label as being consistent with the fundamentals. If being 15% to 35% overvalued isn’t a bubble, then it’s the next closest thing.”

And just imagine, as I said last week, if the real estate market in Toronto or Vancouver declined by the amount Rosey has identified. That would take average home prices down by $68,000 to $158,000 in Toronto, and tank the value of a SFH in Van by $140,000 to $325,000.

• So, is that what Carney was talking about in his GTA speech yesterday? You bet it was. It is now obvious that even a mild real estate correction – say 10% – would kick the slats out from under tens of thousands of recent buyers, putting them in tortuous negative equity and perhaps turning the thumbscrews on CMHC. Or, as he chose to phrase it: “A shock to economic conditions could be transmitted to the broader financial system through deterioration in the credit quality of loans to households. In such an event, increased loan-loss provisions and reduced quality of the remaining loans could lead to tighter credit conditions more broadly.”

The BoC will raise rates. The real estate market will be impacted. A ton of households will feel it bad. Consumer spending will take a hit, and just as the HST arrives. And meanwhile Obama readies both tax increases and spending cuts, which will rally the greenback, sink gold, drop oil prices and bring five years, at least, of range-bound markets and investor danger.

This is exactly why a thesis of my new book is that we are in but Act One.

There are two more to come.