Recently some people here have accused me of being arrogant and heartless. This is refreshing.
After all, this blog’s constantly being misinterpreted, since everybody loves extremes. The real estate humpers see a future filled with growth and hope. The doomers see one brimming with sorrow and detached body parts. Average folks have no idea what’s going on, but have a vague notion they should be stocking up on tuna.
The news, after all, conflicts. On the same day we heard the economy slipped into negative growth (at least for one quarter), another bank recorded fat profits. CIBC’s take was up 26% from last year – enough to reward stockholders with a higher dividend. So if banks are the harbingers, does this mean we’re okay? And if things are cool, why did the economy shrink?
This confuses the hell out of folks, so they go back to watching the nutcases on ‘America’s Got Talent’. Likewise on this miserable blog, when I predict no depression but warn significant numbers of families will fail, I’m accused of being an inconsistent dickweed. (I wish my mother-in-law would stop posting.)
But this is the world we now have. No 2008. No deep, dark recession or depression. No bank failures. No emergency. However, at the same time, a ton of people will lose most or all of their net worth. An army of Boomers will retire in desperation. Young house hornies will regret the day they closed. And the gap between the struggling and the wealthier will turn into a canyon.
Most people are making fundamental financial mistakes. You know this. They’ve embraced debt, because that’s the only way they can get real estate. It’s the new measure of social status and wealth, even when a house is sucking off so much cash flow that they save nothing. It’s the accumulation of debt that will do them in, just as it has in most other western countries. The outcome is obvious.
These folks think they shun risk by putting money into bricks. But with house prices at historic highs and interest rates at generational lows, both have but one direction in which to travel. This makes real estate (and gold) laced with risk. In comparison, stock and bond markets are boring and predictable.
Why am I heartless?
Maybe because I don’t care. This column, or my books, or my speeches, won’t alter what’s coming, since almost everybody you know worships houses, fears equities, saves nothing and owes much. This is why I’ve said it’s not a social justice blog. It won’t change a tidal wave of stupid. People will succumb to their emotions ten times out of ten. It’s hopeless. I give up.
But what I can do it talk to you, or those who trust me with their wealth.
To you I say the economy will soon resume growth, but it’ll be glacial. Governments seem ready to make some large mistakes. Corporations will make obscene profits because they have this recession thing all figured out. Stock markets will surprise like crazy on the upside. People with money, and liquidity, will see it grow as steadily as families with debt, and one asset, will decline. And those who took time to come here and learn about bank preferreds, real estate investment trusts, corporate bonds, exchange-traded funds, TFSAs, tax-deductible mortgages or income-splitting will do fine.
This is the arrogance part. I know what I’m doing.