The Second Coming

LOONIE

– Illustration by Gary Clement, @garyjoelclement

The last time central bankers cut the rate was in April of 2009. You remember that, right?

How could you not? Just weeks earlier stock markets had hit the lowest point of the financial crisis, plunging the most in 80 years. Investors saw 55% of the value of equities erased, Meanwhile the auto sector was being decimated, with mass layoffs happening there and across the economy. Wall Street banks were smoky black holes. Credit markets were seized. The media was running pictures of hollow-eyed people from the 1930s.

We’ve now had the lowest interest rates ever for six years. The result? Household debt has exploded, savings and investments have decreased, the economy sucks and house prices have largely doubled. If cheap money was intended to create a myopic society based on people borrowing their brains out to buy ever-inflating houses from each other, it was spectacularly successful. If it was meant to retool, rebuild and re-employ, it failed.

Six years later, there’s an economic shock as oil loses half its value. Now a detached piece of junk in Van costs $1 million, listings in Calgary bloat by 70%, half of us say we can’t save a dime because of excessive mortgage debt, and what does the bank do? Right. It cuts rates. It makes loans cheaper to acquire.

Because 70% of Canadian homeowners have fixed-rate mortgages, the move means nothing. None of their payments drop. Borrowers with lines of credit, and some variable-rate home loans benefit. But a 0.25% nip on a $200,000 LOC means a weekly saving of $9.60. Wow.

Meanwhile you can bet that every Audi-leasing, bottom-feeding, frenzied, buy-now-or-never realtor will be making this BoC move sound like the Second Coming. Like a mess of crazed posters here yesterday, they’ll claim it’s fuel for the housing bonfire, that prices will launch as a result, and it’s never been a better time to buy. Add to that the voracious bankers. Remember the awesome debt-creating offers of last Spring, capped by the 1.99% two-year special? Imagine what lies ahead in a month or two.

In short, the rate cut does diddly to ease our epic debt load. But it could do a lot to increase it. So why would the prunes at the central bank do such a thing? Why send the borrowing binge over the edge while making houses even less affordable and punishing savers with GIC rates soon to be pounded to sand?

Simple. Deflation. It’s out there, and it seems to be winning.

The Bank of Canada’s move was not unique. Last week the Swiss shocked markets with a deflation-fighting currency move. The Japanese central bank just pumped up its lending program. The Bank of England has thrown in the towel on a rate increase. Tomorrow the European Central Bank will unveil a trillion-euro stimulus package.

Inflation is most places is on the ropes. In Europe it’s now negative. In Britain it will soon be zero. In Japan it’s expected to drop by half. Growth has slowed in China by the most in 24 years. And now the collapse in oil, which fuels the world, is massively deflationary, especially as it carves $24 billion from expansion plans in Canada and throws people out of jobs. It was this, more than anything, that freaked Stephen Poloz and his Bank of Canada poodles.

The move shocked a lot of people. Bloombeg polled 22 economists prior to the move and the number predicting it was zero. By taking such rash and potentially destructive action, Poloz managed to cream the dollar, guaranteeing indebted families will be paying a lot more for their lettuce, hi-def televisions and Kias.

Not long ago smart Maples were taking my advice to buy cheap houses in Phoenix with $1.10 loonies. Today those houses cost 50% more and the dollar’s worth 25% less. Given the central bank’s admission we’re now a desperate economy with leaders unprepared to support the currency, there’s probably more to come.

Of course, if the bank just ends up costing you more without protecting your job, while encouraging bigger borrowing, this was a dumbass move. It won’t restore the price of oil or lure new investment capital here. It doesn’t slash anybody’s lending costs. Houses don’t get cheaper. But it’ll certainly increase debt. You can smell that. The aroma was all over this blog yesterday like a monetary fungus.

The question now seems simple. Will the real estate cartel and omnivorous lenders act responsibly? Will they remind people that snorfling more debt with deflation looming is like inviting your GF over while your wife’s napping? It may be thrilling. It’s also fatal.

No, I did not see this coming. What a rube.

405 comments ↓

#1 MEANWHILE IN FRANCE on 01.21.15 at 7:42 pm

Maybe time to invest in a family compound round YYC soon. Have something the kids can go to.

#2 TurnerNation on 01.21.15 at 7:44 pm

This weblog is alive in infamy.

#3 mark on 01.21.15 at 7:46 pm

MiLs currently strong-arming daughters to browbeat SiLs everywhere.

#4 Babblemaster on 01.21.15 at 7:46 pm

Look at Japan the last 25 years. That’s Canada’s housing fate to a large extent.

#5 MissisaugatoVancouver on 01.21.15 at 7:46 pm

Is Kelowna next for the drop…ie. Calgarian/Edmontonians now exit this vacation property market? I just notices the first $350K home on a half acre lot go on the Kelowna market yesterday…and has a water view to boot

#6 Cici on 01.21.15 at 7:46 pm

If cheap money was intended to create a myopic society based on people borrowing their brains out to buy ever-inflating houses from each other, it was spectacularly successful.

Answer – Yes, it’s the new brand of feudalism, except this time round people are renting houses that they think they own from their feudal lords instead of farmland.

If it was meant to retool, rebuild and re-employ, it failed.

No, the 1% currently controls close to 50% of all wealth, with the goal being to control all of it rather than retool, rebuild and re-employ.

#7 Cici on 01.21.15 at 7:47 pm

Oh, nice picture…love it ;-)

#8 Big Mike on 01.21.15 at 7:47 pm

It has already begun.

http://www.cbc.ca/news/canada/british-columbia/bank-of-canada-interest-rate-drop-may-boost-vancouver-housing-market-1.2922045

#9 Babblemaster on 01.21.15 at 7:48 pm

“So why would the prunes at the central bank do such a thing? Why send the borrowing binge over the edge while making houses even less affordable and punishing savers with GIC rates soon to be pounded to sand?” – Garth

—————————————————-

Because they do the bidding of their political masters who don’t care a whit about the long term health of Canada. They’re just looking at the election cycle and what’s good for them in the short term.

#10 George on 01.21.15 at 7:48 pm

First!
Too bad, as a saver was looking toward an increase.

#11 bbc on 01.21.15 at 7:48 pm

Stephen Harper is a great leader and economist…

…jk

..jk

#12 crowdedelevatorfartz on 01.21.15 at 7:49 pm

Dead cat bounce before the inevitable rekoning?

#13 Mark on 01.21.15 at 7:49 pm

Creditworthiness is now the big issue. And it appears to be such a big issue that the chartered banks aren’t even bothering to drop “Prime”.

Remember that, even back in the heyday of the Canadian housing market in 2006-2007, “Prime” was generally 150bp + BoC target. Against policy rates of 3-4%. Today, we have 225bp + BoC target.

Consumer/retail borrowers need to understand that consumer credit-worthiness is going to take many, many years to return. The ultra-low spreads experienced in the mid 2000s may never return. Consumers were hooked into abnormally cheap credit, hook, line, and sinker, and as time goes on, such credit will become abnormally expensive. A golden age of bank profitability is likely upon us. Deflation tends to be better for bankers than inflation, as deflation implies that loans are paid back with more valuable money.

#14 Brooks on 01.21.15 at 7:49 pm

Hey Garth,

Are you working for the Liberal party again???

#15 Peter on 01.21.15 at 7:49 pm

Obviously this is the signal that people should start going into debt! If anything, this is the start of cutting rates down to 0.25%. Kiss housing correction goodbye – maybe a correction over the next 30 years.

If you bought before now, you’re golden. The rest of us are screwed. Including me.

Sorry Garth. Can’t trust economists anymore. Doesn’t seem like they know much.

#16 Chris on 01.21.15 at 7:49 pm

And, of course, the news outlets here in Ottawa wasted no time in trotting out the local real estate shill telling everyone this meant housing markets would improve as a result.

Shaking my damn head.

#17 Dominoes Lining Up on 01.21.15 at 7:50 pm

No, I did not see this coming. What a rube.

—————————————————

Don’t feel too bad, Garth.

I didn’t see it coming either, and I studied economics at one of the best universities going, Universite de Moncton.

I guess I should have spent more of my library time there hitting the books instead of…..

https://www.youtube.com/watch?v=hSwSIALZZqE

#18 Babblemaster on 01.21.15 at 7:51 pm

“Will the real estate cartel and omnivorous lenders act responsibly?” – Garth

————————————————

Brad Lamb should answer that question.

#19 tomsjob on 01.21.15 at 7:51 pm

take a quick look at a chart of gold in any currency other than the us …these are very difficult times…so far the swiss and canadians have blinked….who is next

#20 Lillooet, BC on 01.21.15 at 7:52 pm

A quarter percent drop is miniscule and won’t make any real difference to anybody. Seems almost pointless.

Speaking of deflation, there is deflation in certain goods and services and inflation in others:

deflation:
– oil, gasoline, natural gas, copper, gold, silver
– electronics, computers, TVs, phones
– movie rental (i.e. Netflix and free online movies)
– minimum-wage and middle-class wages (they increase a percent per year but are not keeping up with inflation so are therefore deflationary)
– air-travel
– long distance telephone rates
– the cost of houses in small towns is flat or falling

inflation:
– high-speed internet, regular land-line phones
– property taxes, user fees, insurance (home, business, auto)
– dentist fees, most other professional fees
– electricity rates, water rates, postage rates
– medical premiums
– the cost of rent and houses in most large cities keeps on increasing

So, the average person will gain on some and lose on others, probably breaking even in the end.

#21 JSS on 01.21.15 at 7:53 pm

I’m gonna buy me a bigger house, newer car, and a boat. Gonna party with free money!

#22 don on 01.21.15 at 7:54 pm

Hi Garth. Avoiding deflation in western economies after our credit behaviour in the past thirty years is like jumping off a cliff and wondering how to avoid the bottom.

#23 Herf on 01.21.15 at 7:56 pm

So much for not seeing the BOC cutting rates, but what about your prediction for rate increases in the U.S.? Will the Fed still start bumping up rates there this year? And if so, isn’t Canada kind of forced to follow suit just to try and keep investment flowing into or from fleeing Canada?

Back in ’82/’83 when mortgage rates hit 19-20%, I recall the political storm happening in the House of Commons (“Show you care, get rid of Pierre!” was the shout from across the floor). Not that I was well informed or paid close attention to what was happening with rates, mortgages, the economy, etc. (I was a scum-of-the-earth student with a job at the time, so life was good). But looking back, it seems the BOC at the time was caught between a rock and a hard place regarding its ability to reduce interest rates, with the sorry result being indebted home owners paid dearly while the economy remained in what was probably the most depressing funk since WWII.

Here we go again?

#24 TheRealTruth on 01.21.15 at 7:56 pm

Debt is a ZERO sum game.

More debt means more money for others. Are you the creditor or debtor?

Housing in YVR will have the strongest spring on record in terms of price gains. Much overseas money will be traded overseas for dollars here…to store in Real Estate that’s suddenly 20% off.

It’s not about the local incomes anymore in Vancouver or Toronto. Watch and witness this in 90 days.

#25 Babblemaster on 01.21.15 at 7:56 pm

Dumbass move?????????????

Yes, but they’re just trying to keep the housing bubble inflated. They will do anything to keep the prices at these elevated level. I bet they’ll lower the rate to zero if they have to. They’ll even be handing out out grants if it comes to it. Housing simply cannot be allowed to wither in Canada.

#26 North Burnaby on 01.21.15 at 7:57 pm

Weaker CDN$ means that our real estate markets are undervalued??

#27 Cici on 01.21.15 at 7:59 pm

#31 Mark

Some idiots in Vancouver and Toronto with credit-worthy parents willing to plump them up with downpayment monies are most certainly going to take the plunge.

But I doubt it will be enough to save the Canadian economy.

#28 TheRealTruth on 01.21.15 at 7:59 pm

The overseas money is never transferred via financial institutions. You pay Yaun you have in China to someone in China who arranges someone in Canada to pay dollars to you.

Expect billions to arrive in the next few months. Not trolling here. Am serious. Watch and see.

#29 Mark on 01.21.15 at 8:00 pm

“Look at Japan the last 25 years. That’s Canada’s housing fate to a large extent.”

I agree. The recent media portrayal of low rates being ‘good’ for consumers and the housing market is bizarre to say the least.

But then again, we still have quite a few people who believe that house prices are still going up. And the media continues that line of propaganda as well. The really unfortunate part of it all is that some very good people, albeit perhaps a bit naïve when it comes to economics, will be severely damaged here.

#30 Losinurtouch on 01.21.15 at 8:00 pm

You think u are so different from us metal heads, but you are not!!!! You complain about the same guys we do-the bankers who are destroying money. Ok you were right about stocks for the last number of years, but you have been wrong about gold, about real estate and money in general. We need to live somewhere. Try being a renter under thyoke of some of these crazy landlords especailly when you want a family. And by the way in 2000 gold was what 300 bucks – it climbed to 1900 and now the SECOND COMING is of gold— what is it in Canadian dollars about 1500??? at least 2000 bucks Canadian comin soon…. admit you are wrong!!! A RE plomp aint comin, in fact the EU does QE tomorrow and no rate hike in the US

#31 Steezin Geezers on 01.21.15 at 8:01 pm

re: lower rates, some dogs saw it coming.

Also, the yellow stuff that pays no interest shines in global environment of negative interest rates.

#32 Cici on 01.21.15 at 8:01 pm

#15 Peter,

They still know a lot more than you.

#33 groovin123 on 01.21.15 at 8:02 pm

Hardly unexpected. Maybe a bit premature with the timing. Apparently 0 of 22 economists can read a bond chart? Ready for the next big “surprise”? American trade deficit soars, GDP takes a dump, and for the 6th year in a row imminent rate hike is pushed back. Meanwhile, the rotation of the metals continues.

#34 Editrix on 01.21.15 at 8:02 pm

When I came to your page today, I was expecting to see the a picture of the Titanic sinking. But good choice anyway, Garth.

#35 Fizzo on 01.21.15 at 8:03 pm

All in all, when Harper canned you, and then the electorate canned you, we lost out hugely. I sure hope you live to 200 years of age and never retire.

Oh, shit. — Garth

#36 Smoking Man on 01.21.15 at 8:04 pm

No, I did not see this coming. What a rube.- Garth

I saw it and put on a wee forex bet. Only 10 contracts. LONG USDCAD

Being a seasoned gambler, poker player. It’s all about the man. Playing just the Cards you won’t win. You got to play the player

I will re iterate my take.

Poloz, X ruler of export development, his buddies and former colleuge gain a huge export advantage with a low dollar that was a nasty trade number on Monday. Way below expectations.

In case you where asleep last few weeks a currency war was started by the Swiss, followed by the Danes in a shocking way. What was left to stop us. Currency war on.

It’s an election year, my take, central bankers more pals with Neocons than tree hugging liberals and communists.

Cowtown about to go under water, this was a life boat. A cushion.

Like Gartho says, the savings and impact in real dollars, not that big a deal.

But realtors and mortgage brokers armed with this news… Served up strong by MSM

Well, it’s going to be a nasty bidding war this spring realtors, a nasty one.

#37 Lastline on 01.21.15 at 8:05 pm

We’re Doomed! Doomed I say!

#38 Retired Boomer - WI on 01.21.15 at 8:06 pm

Dear Rube Garth-

The blog gave plenty of warnings! Even myself, hardly the most skilled when it comes to money matters, but brought up by parents who grew up in the depression era. They taught me to get tighter than a frog’s bottom in times of uncertain actions. ( A frog’s bottom is water-tight for the unschooled).

So, Yellen will NOT raise rates anytime soon, Canada just went limp, and the yellow medal is on a bounce.

Meanwhile, every economist if pointing in every direction with no conviction. I’m out of Scotch and Brandy, and low on smokes. It’s snowing. What else do you think can go wrong today?

Oh right, I could walk the dog. RANT DONE now…

#39 Marco on 01.21.15 at 8:08 pm

Thanks Garth,

Would it be right to suggest this will only speed up deflation? With the falling loonie and higher cost of consumer good essentials like groceries. Won’t this weaken consumer confidence and thus put pressure on house prices. With supply out weighing demand on big ticket items. Are they chasing deflation to 0%?
Cheers.

#40 Barry on 01.21.15 at 8:09 pm

Yippee!

I’m not in debt and my interest rate sensitive utility, infrastructure, pipeline and bank stocks took off like there was no tomorrow.

Couldn’t care less about the dumb schmucks who consume, consume and consume by leverage. And three years ago I told anyone who lives by the border like me to change a whack of Loonies into US dollars since 70% of our trade goes south and a high CDN buck was unsustainable no matter what the nanosecond analysts say. No one in my circle listened. This morning I tanked up in Bellingham, Wash. at 48 cents a liter using my Xchange rate of 2011 @ CDN$.99 = US$1.

#41 Smartalox on 01.21.15 at 8:09 pm

So I have an opportunity to earn a USD denominated paycheque, and I’m wondering what is the best way to manage my RRSP and TFSA if I decide to commute to work in the states 3 days a week and the Missus and the family stay here to hold down the fort.

Anything that I should know, or look out for?

#42 jean on 01.21.15 at 8:09 pm

Bloomberg calls it like it is. Well, now we know where the government stands. Go ahead and buy houses, buy two or three. Poloz has your back.

“Bank of Canada Cuts Rates to Protect Its Hot Housing Market”

http://www.bloomberg.com/news/2015-01-21/bank-of-canada-cut-shows-housing-another-worry-from-oil.html

#43 Goldie on 01.21.15 at 8:09 pm

Bloomberg brazenly called this move an attempt to shield the Canadian housing market from the drop in oil prices.
Could be… Sure hope not.

There was also an article today about the explosive growth in private mortgage lending in Canada. When people can’t qualify for bank loans they’re heading over to their local pawnshop or independent mortgage broker.

#44 Fed-up on 01.21.15 at 8:10 pm

So good to see the severely mentally challenged are running our central bank as well as our federal government. It has become instantly apparent that this country has no intention of raising bottom-feeder-enticing interest rates even if it turns our dollar back into the arctic Peso it was in the late 90’s.

I give up on this frozen banana republic.

#45 Kuato Lives on 01.21.15 at 8:13 pm

I guess they’re looking at fast food workers to prop up the Calgary housing market now. Logical though, considering they’ll be the only demographic still with jobs around here by the spring. Someone’s gotta buy …

#46 Freedom First on 01.21.15 at 8:14 pm

I said this week the United States is drunk, the rest of the world is drunker and that Canada is plastered. Poloz lowering the rate is no biggie surprise, hell, even the Smoking Man called it. Poloz or any other Politician is not going to stop the economic $$$historm from increasing in velocity in Canada, the same as the Politicians in the U.S., Europe, Japan, etc., were unable to stop their RE and economic meltdowns.

That being said, most unfortunately, many Canadians are already being economically challenged. You ain’t seen nothing yet. There is many many many more ways to protect yourself, which you won’t find on this blog. Takes having creativity and being able to think for yourself. Like Smoking Man said, and I agree, the education system does not teach that. Biggest oxymoron in the world: “common sense”. Fact. Garth is trying, as I am, but common sense is difficult to teach. That is why people can not learn the most basic principle: Always do only what is good for you, as I do, and always, do as I do, put your own freedom first. No charge.

#47 Willy H on 01.21.15 at 8:15 pm

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Winston Churchill
___ ___ ___ ___
The end of the beginning of our insatiable lust for over valued bricks and mortar.

#48 blobby on 01.21.15 at 8:17 pm

Wont this cause massive inflation on “every day” goods? You know – as in the food we import from the states, etc?

#49 back to the future on 01.21.15 at 8:18 pm

I am one of those rare millenial unicorns who saves and invests (but not in real estate). My family suffered through the real estate crash in the early 1980s. My parents spent our formative years digging themselves out of debt for a house they no longer owned. Back then, there were all kinds of social supports in place – social housing, free summer camp, and a generous food bank. I’m scared and sad for the many families who have overindulged in debt, and whose careers may not be as stable as they had originally thought.

#50 Jeff Hodgson on 01.21.15 at 8:18 pm

What we are seeing was bound to happen to some degree anyway. Interest rates were never going to rise this year. Not with an election in October.
I wrote this article 1 year ago explaining Harper’s masterplan for re-election. He’s going to follow the Nixon strategy. Read more here…http://www.poletical.com/harper-and-interest-rates.php
It’s not unlikely that we’ll see another rate cut before May.
2016, however, is when the pain will arrive.

#51 Chaddywack on 01.21.15 at 8:24 pm

Any thoughts from anyone on the outlook of preferred shares in light of this BOC surprise?

#52 Apple on 01.21.15 at 8:25 pm

Rumour has it that price of iPhone 6 going up from $749 to $899.

#53 Mister Obvious on 01.21.15 at 8:25 pm

#15 Peter

“If you bought before now, you’re golden. The rest of us are screwed. Including me.”
—————————–

Yeah, but… look at those markets, eh?

If you sold your RE in the last few years then proceeded to sensibly invest all that puffed-up equity you are now in the best shape of all.

#54 Dual Citizen in Canada on 01.21.15 at 8:28 pm

Ah, the herding of more cattle to the slaughter.
“There’s a sucker born every minute”
“Caveat Emptor”
“To each his own”
“Learn to become a leader, not a follower”
“If something looks too good to be true, it probably is”

#55 Mister Obvious on 01.21.15 at 8:28 pm

20 Lillooet

“A quarter percent drop is miniscule and won’t make any real difference to anybody. Seems almost pointless”
——————————————

The ‘point’ was to send a message. That worked.

#56 lawboy on 01.21.15 at 8:31 pm

What’s the reasoning behind this? Trying to juice the economy enough to stop the bottom falling out, and keep the CONS afloat for a few months, until the ballots are cast?

#57 stage1dave on 01.21.15 at 8:33 pm

Oh great, since they can pull the economy down with a string, should be able to shove it up with the same string, right?

At least I’ll be gettin’ more money for all those t shirts sold in US bux.

In the meantime, I be waiting for the Crimson Permanent Assurance to show up again…time for real charades instead of fake ones!

Besides, they’re actually funny…

#58 Catalyst on 01.21.15 at 8:34 pm

0/22 professional economists predicted a rate slash but several on this basement dwelling virgin blog did. What a world we live in. 25 bips wont make CFO’s go on a hiring binge nor intice manufacturers to setup long term ops here.Its a short term play to encourage borrowing to win one last election.

Since I don’t get to post as often, I wanted to say your blog continues to be my favourite source of daily reading. NP story attracted 200 ish posts on the boc move and your blog (on a day old post) had nearly 400. Per your previous guidance on 1% leaving posts I dare say you risk entering MSM territory soon.

#59 Paul on 01.21.15 at 8:34 pm

No, I did not see this coming. What a rube.
————————————————————-
Not a rube as we all know, but that’s what happens when the real Rube’s are in charge.

#60 The Second Coming | Realties.ca on 01.21.15 at 8:34 pm

[…] Source: http://www.greaterfool.ca/2015/01/21/the-second-coming/ […]

#61 Nottarealtor on 01.21.15 at 8:35 pm

Well, it’s going to be a nasty bidding war this spring realtors, a nasty one.

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Ridiculous and ignorant comment.

The worm has turned. Lots more bad news than good over this winter.Potential buyers will be very aware that an emergency measure has been enacted to prop up the economy and especially housing. Sobering.

This alone will make buyers much more self-aware of over-exuberance and the risks involved.

Calgary and Alberta’s collapse won’t be helped by this.

Household debt will now pass its own tipping point. It’s just human nature.

Expect more fault lines to open up, including more media reporting a bit more objective about the bubble and debt levels.

Poloz just pointed to the elephant in the room. That image won’t be going away anytime soon.

#62 Flamen Lupanares on 01.21.15 at 8:35 pm

It is already hitting the fan. The hangover will be really something to see. Just got this in email:

Lock in now!
5-Year Variable Rates From 1.84% | 5-Year Fixed Rates From 2.58%
Well that was a surprise – today the Bank of Canada stunned markets by cutting the overnight interest rate by 1/4%! That’s the first interest rate move by the Bank in over four years, and it’s fantastic news for Canadian borrowers – mortgage rates on our site have fallen to levels we’ve never seen! Yada, yada…

#63 everythingisterrible on 01.21.15 at 8:36 pm

#17 Dominoes Lining Up

“I studied economics at one of the best universities going, Universite de Moncton.”
———————————————————–
You’re being sarcastic right?

#64 Godth on 01.21.15 at 8:36 pm

Duh Garth. What else could they do? Apparently you’ve failed to grasp the true nature of exponential curves. Do you want the short story: it will end in a smoking ruinous heap, not just in Canada.

Meanwhile the band plays on…
http://www.counterpunch.org/2015/01/20/are-plunging-petrodollar-revenues-behind-the-feds-projected-rate-hikes/

#65 Partying like it is 1999 on 01.21.15 at 8:37 pm

Garth,

As many of us said, forget about the rate increase in the US as well. There will be more QEs that Rocky movies, that is what Peter Shiff said and he has a point, Q4 is coming baby.

This is another example why we should not believe Central banks, the Swiss confirmed that last week, now Canada.

#66 For those about to flop... on 01.21.15 at 8:39 pm

The BoC today has made a HUGE MISTAKE.
It should have signalled an intent to RISE interest rates 0.25% later this year so in the meantime anyone on the fence about where this is going would not jump in
and get burnt.
They should have talked in political speak about how the party is over and it’s time to grab your coat and go home.
What they did today is just making things worse and delaying the inevitable .
They should be preaching austerity instead they are drunk on Champagne.

#67 ANON on 01.21.15 at 8:40 pm

Don’t beat yourself over it, Garth! Of course they will try to increase it. Math, being a riot, but no fun at parties, decrees:

Owed = Emitted × (1+rate)^years

The economists, and all of us I might add, must abide to this law, or the amount “owed” is suddenly discovered being missing in action, and we don’t particularly like that perspective (trust me on this). If “rate” goes up, big bad D, who’s ramming the door at the moment, gets teleported in the middle of the room with brand new spare battering rams.
Thus, the only way to prolong The Great (unavoidable) Revelation of “owed” being very MIA, is by lowering “rate”. During this period, prayer and great gatherings help tremendously, but also haruspex, bones and sheep’s intestines readings, waving at cameras, broad smiles and nods, are known to have some effect, until they don’t
There is another way to keep some amount “owed” in live action as opposed to missing. Changing the “years” to longer, promising “owed” will be paid, just a bit later on. But that will be after the prayers are unanswered, the Revelation occurs, the poo and the fan get together. When the amount of “owed” will be diminished, praying that “owed” does not disappear entirely will be absolutely essential at all levels. Choirs and hymns are also recommended.

#68 Linda on 01.21.15 at 8:40 pm

Don’t know about the chartered banks passing along any rate decreases, however small. TD has already said it will consider NOT dropping their lending rate to reflect the BoC decrease. Which figures if (can someone confirm please?) that by not dropping their rate means that the chartered banks will ‘gain’ whatever profit the 0.25% drop would have given the consumer…. If this is indeed the case, owners of bank stocks should be seeing record profits & presumably nice dividends once again.

#69 Henry Simpson on 01.21.15 at 8:40 pm

My friend bought a condo just 3 months ago and is now looking at a variable rate mortgage.

He is anticipating that he will save about $62 a month in interest per year.

However, he just got a notice of a maintenance fee increase of $45 a month over the next 2 years so really a $90 total monthly fee grab.

There goes the benefit of lower interest rates!

#70 Nomad on 01.21.15 at 8:40 pm

Last year I posted that the government will always make decisions that please voters. That, and rates wouldn’t be much higher at the beginning of 2016. I never thought they would be lower though.

If you don’t have a house, you must invest, because this move will make all assets go up in value. You have to ride on at least one trend, otherwise you will be left behind. Your savings will underperform assets prices.

Bubbles can be maintained much longer than people think. We all know this but today reminds us of this. A new bull phase on house prices in Ontario will begin. It’s a blow to those who live within their means.

Poloz was saying only a few weeks ago that levels of debt of canadians is concerning, so, no one could have predicted this. A bluff at best. A lie maybe.

#71 Ray Skunk on 01.21.15 at 8:41 pm

Bloomberg brazenly called this move an attempt to shield the Canadian housing market from the drop in oil prices.
Could be… Sure hope not.

Sounds like it to me. A lot of Canadians have only their precious home equity these days – their salary and disposable may be in the toilet, but they’re sitting pretty on six figures of unrealized paper gains. If that started to crumble before the next election then Harper is toast.

The can has been kicked just a little bit further down the road…

#72 Yuus bin Haad on 01.21.15 at 8:42 pm

What a rube? Garth, … I passed on broccoli the other day at $2.49 thinking it was too expensive! Even with 100 PC Plus points on the dollar!!!

#73 Joseph R. on 01.21.15 at 8:42 pm

More important: what does the loonie drop mean for our NHL teams? The Jets back to Atlanta?

#74 Calgarian BBQ squirrel on 01.21.15 at 8:45 pm

Harpo’s toast.. then we get 2.0 and we’re all toast.

#75 not 1st on 01.21.15 at 8:48 pm

Garth, just so you aren’t blindsided again.

No US fed rate increase in 2015. You can take that to the bank.

#76 lou on 01.21.15 at 8:54 pm

Garth, before you have a stroke/coronary maybe it’s time to head south to the land of conscious consumerism, at least for half the year. You can ride pillion on my hog….

#77 2017-2018 News on 01.21.15 at 8:55 pm

2017 Bank of Canada News

Don’t take too much debt because rates are going up (hot air)

Due to increasing Oil prices, we see headwinds to the economy (result – Cut rate by 0.25%)

2018 News

Don’t take a mortgage you can’t afford because rates are definitely ‘going up.’

Due to the demographic pressures and the retirement wave, Canada faces exceptional headwinds (result – cut rate by 0.25%)

2020 News

Due to out record debt ratio, raising rates will cause systemic risk to Canada’s economy (result – rates will be at 0%).

–> If you haven’t figured out how our Gov er Banks run our country, then i feel sorry for you.

#78 NoName on 01.21.15 at 8:58 pm

2015 Canada’s economic outlook
http://goo.gl/fcVapP
to bad to have nation with coolest passport won be able to afford travel
http://goo.gl/7zw02E

#79 Vamanos Pest on 01.21.15 at 8:59 pm

#15 Peter

If I understand you, and I think that I do, on the basis of a 0.25% interest rate drop,

(ZERO….POINT….TWO-FIVE….PERCENT!)

no matter what you’re financial plan was otherwise, or what your financial situation is, it is thus proven that:

-debt is good (doesn’t matter what you’re worth or what you own, get into debt beeyatch, they just dropped interest a quarter!)

-housing will not correct (doesn’t matter where you live, what oil prices do, what incomes and jobs do, HOUSING IS GOING UP. If you own zero houses, buy one now. If you own one, buy another.)

-the entire field of economics is invalidated by its failure to call this rate drop. (No way could have been stupid for Stephen Poloz, and that’s why no credible economist predicted it. No, it’s because economists as a group have nothing credible to add to a conversation about the economy)

Ok, just one question:

Are you a crazy person?

#80 Greg on 01.21.15 at 8:59 pm

The central bank is concerned about high personal debt levels yet feeds everyone more rope? This has an odour of desperation about it.

#81 BG on 01.21.15 at 8:59 pm

My only question is: How can we – liquid assets people – benefit from this?

You did today. Big time. — Garth

#82 Kreditanstalt on 01.21.15 at 9:01 pm

But…but…the “coming rate hikes”??

Isn’t this an “economic recovery”?

This blog has been spouting on about the supposed certainty of higher rates in both Canada and the US for years now.

Not going to happen. The Keynesian idiots who run this Ponzi system are in a box of their own making: this economy NEEDS lower and lower debt costs coupled with higher an higher asset “values” and any rise in rates would bankrupt large swathes of debtors.

#83 tkid on 01.21.15 at 9:03 pm

I have been listening to you on gold, Garth, but if the CBs don’t have control of deflation, gold might be the way to go. And I’m officially out of the real estate market; rental is far too fraking expensive, and owning is far too expensive and dodgy (windows that will need replacing after 10 years, ouch, plus whatever else is wrong with the building).

But if I hadn’t been in dlr.u this am, I would have been out 4 to 5 g’s by this evening. As it is I am really pissed at seeing the price of gas go up 6 cents a litre in 6 hours.

#84 Frank le skank on 01.21.15 at 9:03 pm

So OSFI made some changes over the holidays to make it harder for buyers to get mortgages…. And now BoC lowers the interest rate to more or less reverse that change. Seems very unorganized and reactive to me, just what we need in these difficult times.

#85 Poloz on 01.21.15 at 9:05 pm

Government of Canada 5 year bond yield down to a record low of 0.86%.

$1 Million mortgage can be had for $4200 per month in a few weeks time. Don’t worry about your income, CMHC never checks it with CRA. Go ahead and buy.

Make sure you vote Conservative in the fall and tell non-believers to split the NDP/Liberal vote.

#86 Waterloo Resident on 01.21.15 at 9:06 pm

Hey Garth; remember 3 days ago I told you that our interest rates were going down, and soon we would be having NEGATIVE RATES just like Switzerland?

You said it was the “idiotic comment of the year”. Well, guess what just happened today; interest rates fell.

What does that tell you about the chance of interest rates falling to negative (for bank deposits) ?

close to 100% right?

Still idiotic. — Garth

#87 DreaminInTechnicolour on 01.21.15 at 9:07 pm

The race to the bottom – it will be faster than you think.

#88 Mark on 01.21.15 at 9:07 pm

“Not going to happen. The Keynesian idiots who run this Ponzi system are in a box of their own making: this economy NEEDS lower and lower debt costs coupled with higher an higher asset “values” and any rise in rates would bankrupt large swathes of debtors.”

I agree. The economy is ‘trapped’ and future interest rate cuts/QE/whatever, probably won’t actually filter through to actual retail consumer borrowers. The only thing that is likely to fix the economy is investment demand taking off in a sector with long-term under-capacity and emerging long-term future demand.

I like the precious metals mining sector for these characteristics, personally. But certainly if you put on your proverbial “thinking cap”, it might be possible to find other sectors. For example, railway infrastructure investment has been very lacking for the better part of the past 100 years.

In a nutshell, its the 1930s all over again.

#89 screwed on 01.21.15 at 9:08 pm

Not all bad news

Hollywood North will benefit. Lumber sales will benefit.

Microsoft opened an office in Vancouver. Maybe other tech companies will follow and utilize the cost Dollar advantage. Vancouver sure has enough techies to draw from.

Biggest disadvantage of Canada in general and BC in particular are the “one trick pony” governments which cannot think beyond the oil&gas horizon and the easy revenue stream from royalties.

Time they get off their butts and start working for the economy. The gravy train feeding the bloated public service sector and its salaries, benefits and pensions has stopped.

Cry me a river.

#90 Adam Smith on 01.21.15 at 9:08 pm

It’s a well-known fact that capitalist systems will always suffer a lack of aggregate demand as capitalists cut wages and automate in order to compete with each other. This leads to inequality and a lack of consumer demand.

Keynesianism dealt with it through redistribution and a strong welfare net, ensuring there was always demand. After stagflation hit, heavily exacerbated by the OPEC oil shocks, we moved away from Keynesianism to a large extent and relied on borrowed money to maintain sufficient consumer demand. This failed in 2008.

This still seems to be the only answer anyone can think of now. Make borrowing as cheap as possible so that people will buy on credit. But that’s not going to work. Governments and people are too indebted while business is sitting on mountains of cash they can’t find anywhere to invest profitably because no one has money to buy their stuff. Much of this cash will be used on speculation that destabilizes the whole system.

It took a New Deal to fix it for any length of time last time around. Nothing was actually fixed after 2008 and we will hit the same situation again although maybe not as bad since governments are willing to just print money. But at some point, people will remember that capitalism requires people have money to buy stuff.

#91 Jimmy on 01.21.15 at 9:10 pm

Jimmy says all in well in YYC.
Still plenty of Lululemon.

#92 dienekes on 01.21.15 at 9:11 pm

I think it is clear to everyone that the government (do you actually think Poloz is making these descisions) will do ANYTHING to keep housing inflated. They will lower rates until the election.
The slide in housing is inevitable now. No matter what smoking man says, everyone is spooked by the drop in oil prices. Even home buyers in Toronto, especially when they see the upcoming disaster that will be the spring selling season in Alberta.
If I was Garth, I would say to hell with it, quit this blog, and come back in December with one posting stating I Told you so.

#93 drydock on 01.21.15 at 9:13 pm

You can’t unwind a ponzi scheme.

#94 screwed on 01.21.15 at 9:14 pm

One more thing… BoC is protecting the Canadian economy and our revenues from foreign buyers of Canada’s debt which would have leeched on a higher rate like stink on a monkey.

ECB is injecting 1.1 trillion Euros or 50 billion Euros a month into their decrepit economy. The Euro is depreciating. Lots of fresh Euro capital to chase yield anywhere it can be earned. Canada’s higher debt rate would have been a prime buying target.

Consider yourselves lucky that the BoC is not paying out of our pots into the pockets of foreign investors. More of our buck stays here.

#95 Nomad on 01.21.15 at 9:15 pm

“There’s a risk the surprise rate cut may encourage Canadians to increase their debt burden, Peter Routledge, an analyst at National Bank Financial, said.”

You think?
Not good. Not good at all.

http://www.bloomberg.com/news/2015-01-21/bank-of-canada-cut-shows-housing-another-worry-from-oil.html

#96 Villagemoron on 01.21.15 at 9:15 pm

When numbers show that fewer fish are qualifying for / or able to refinance their loans and mortgages – just drop the interest rate to keep the ones you have stuck on the hook.

#97 Wildrose nutter on 01.21.15 at 9:16 pm

It’ll all be over in a jiffy I tell ya..

http://calgaryherald.com/opinion/columnists/yager-oil-prices-will-rebound-by-this-summer

#98 Devore on 01.21.15 at 9:17 pm

Twitter abuzz about rumours that TD Bank is going to set its savings account rate at a negative -0.10%.

#99 Chickenlittle on 01.21.15 at 9:17 pm

NOTTAREALTOR:

“This alone will make buyers much more self-aware of over-exuberance and the risks involved.”

Will it?!?! We HOPE….but be honest. You know better!

#100 Victor V on 01.21.15 at 9:22 pm

http://www.theglobeandmail.com/report-on-business/economy/poloz-risks-fuelling-overheated-housing-market-with-record-level-debt/article22569652/

“At the end of the day, if you’re a consumer or a homeowner and you see what essentially now amounts to zero or slightly negative real interest rates, you’re going to go out and borrow, probably no matter how much the bank is telling you not to,” said Bank of Montreal senior economist Robert Kavcic.

A rate cut will be “unambiguously good” for the Canadian housing market, particularly outside Alberta, said Toronto-Dominion Bank economist Diana Petramala. Consumers seemed to echo that sentiment yesterday, with real estate brokerage Zoocasa reporting that traffic to its online listings website jumped 20 per cent after the bank’s announcement.

A cut to the central bank’s overnight lending rate will make it cheaper for the roughly 30 per cent of home buyers with short-term or variable-rate mortgages, said Bank of Nova Scotia economist Derek Holt.

#101 lou on 01.21.15 at 9:23 pm

I’m looking forward to 50 yr interest-only NIRP loans, now we’re talk’in….

#102 LH on 01.21.15 at 9:25 pm

Just got my bonus.
Tough year for the industry in 2014.
My total comp cracks seven figures in cad for the first time. (Approx 1.2 pre tax)
I am the 0.1%

#103 calgaryPhantom on 01.21.15 at 9:25 pm

My only question is: How can we – liquid assets people – benefit from this?

You did today. Big time. — Garth

——————————————————————-Oh yes, Big Big time. Specially if you had more weightage in international markets without a currency hedge. And you still can but into US and intl markets without hedging adaint currency. Canadian dollar will fall further .

#104 not 1st on 01.21.15 at 9:25 pm

Wonder if Garth secretly upped his PM holdings today and took delivery at the bunker.

#105 Leo Tolstoy on 01.21.15 at 9:26 pm

Not long ago smart Maples were taking my advice to buy cheap houses in Phoenix with $1.10 loonies. Today those houses cost 50% more and the dollar’s worth 25% less.

I was one of those Maples! That was Garths best call by a Canadian mile. Our family purchased a winter vacation home in Phoenix. 4 bed 3 bath, 2600 sq ft short sale for $150k USD. We didn’t quite get the $1.10 exchange rate though. It was closer to parity. Maybe $1.02. Can’t recall. It seems like a lifetime ago.

We haven’t checked recently but I’m sure it’s worth more now.

#106 Andrew Woburn on 01.21.15 at 9:26 pm

No, I did not see this coming. What a rube.
===============

If you’re a rube then so are all those presidents of Swiss corporations who were plainly flabbergasted to have their asses handed to them by their friendly local SNB. There are only 8 million Swiss and the GDP is 70% export based. Wouldn’t you think the presidents of Swatch or Nestle might have expected better treatment?

We like to think that central banks are “independent” of the politicians but this is probably naive, especially in a quasi-democracy like Canada. Your conviction that the Bank wouldn’t drop rates was based upon financial logic but that means nothing in an election year.

This was just another blow to the credibility of central banks. “Forward guidance” and “jaw-boning” are over.

#107 Chickenlittle on 01.21.15 at 9:28 pm

Garth:

You are not a rube.

You have given us all excellent, FREE advice. IF we are smart we would do what you told us : be liquid, pay off debt, and diversify. IF we have done all of that then a pox upon the rate hike. What does it matter? Rates go up and down like Smoking Man doing shots.
You, sir, have offered us the gift of financial freedom to weather such storms.

#108 JO on 01.21.15 at 9:29 pm

Not surprised. It is a disastrous move.
Just a few weeks ago the governor was
Warning their junk models were warning
That housing is 10-30 % overvalued and all
The so called warnings of high debt and
What do they do ? Lower rates !
This action dramatically increases the
Odds of a Greece/Spain type collapse by 2020 at
The latest. The masses are financially illiterate
And are confusing money illusion with
Wealth. This will very likely end up in
A tragic collapse. They are hoping to buy
some time and have business investment
And exports take over. History will show
These quack PhDs will have made it
All up and never knew what they were doing. The game is to keep the debt bubble growing at all costs.
The government and financial sector elites
Are now in desperation and looking to
Take whatever is left prior to the endgame
I made good money in usd and stocks
And I should be happy today but I am angry
Unfortunately the masses are being led to slaughter
As I write this I just got home after working on a 7 figure mortgage app

Lowering interest rates creates stronger deflation
Once the temporary credit increase comes to an end and the weakened currency then helps create stagflation as imported inflation combined with growing unemployment slowly destroys what is left after
The government and FIRE sectors siphon off whatever remains.
We will survive but it will be ugly. No need for it.
These politicians and central bank leaders and senior finance execs are going to have to flee once the endgame arrives

#109 Raincouver on 01.21.15 at 9:29 pm

Spoke to a realtard and told him that this decrease will increase debt for some Canadians. He said that he was fine with it, as long as its Real Estate debt…WOW!!

#110 X on 01.21.15 at 9:29 pm

The rate move really should have been done in conjunction with other moves to reinforce prudent lending in regard to mortgages and LOC’s…..

#111 Andrew Woburn on 01.21.15 at 9:30 pm

Here’s a present to all our resident conspiracy theorists. It’s a list of the Canadians attending Davos. Let us know which ones are hiding their Illuminati tattoos.

Gregory Boland
President and Chief Executive Officer, West Face Capital Inc.
Vaclav Smil
Distinguished Professor Emeritus, University of Manitoba
Marcia M. Smith
Senior Vice-President, Sustainability and External Affairs, Teck Resources Limited
Don Lindsay
President and Chief Executive Officer, Teck Resources Limited
Steve Williams
President and Chief Executive Officer, Suncor Energy Inc.
Robert G. Card
President and Chief Executive Officer, SNC-Lavalin Group Inc.
Kim Samuel-Johnson
Director, Samuel Group of Companies
Thomas Jenkins
Chairman, Open Text Corporation
Ron Mock
Chief Executive Officer, Ontario Teachers’ Pension Plan
Rob ten Hoedt
Executive Vice-President and President, EMEA and Canada, Medtronic Inc.
Michael H. McCain
President and Chief Executive Officer, Maple Leaf Foods Inc.
Don Tapscott
Adjunct Professor of Management, Joseph L. Rotman School of Management, University of Toronto
Jacques Daoust
President and Chief Executive Officer, Investissement Québec
Brandt C. Louie
Chairman and Chief Executive Officer, H. Y. Louie Co. Limited
Charles A. Jeannes
President and Chief Executive Officer, Goldcorp Inc.
Brent Bergeron
Senior Vice-President, Corporate Affairs, Goldcorp Inc.
David Walmsley
Editor-in-Chief, The Globe and Mail
Benoit Daignault
President and Chief Executive Officer, Export Development Canada (EDC)
Monique F. Leroux
Chair of the Board, President and Chief Executive Officer, Desjardins Group
Frank Sobey
Chairman, Crombie REIT
Ronald N. Mannix
Chairman, Coril Holdings Ltd
Brett House
Senior Fellow, Centre for International Governance Innovation (CIGI)
Charles Sirois
Chairman of the Board, Canadian Imperial Bank of Commerce (CIBC)
John Manley
President and Chief Executive Officer, Canadian Council of Chief Executives
Mark Wiseman
President and Chief Executive Officer, Canada Pension Plan Investment Board
Michael J. Sabia
President and Chief Executive Officer, Caisse de dépôt et placement du Québec
Sylvain Lévesque
Vice-President, Corporate Strategy, Bombardier Inc.
Pierre Beaudoin
President and Chief Executive Officer, Bombardier Inc.
Kevin Lynch
Vice-Chairman, BMO Financial Group
David Jacobson
Vice-Chairman, BMO Financial Group
Sonja Bata
Chairman, Bata Shoe Foundation
Rupert Duchesne
Group Chief Executive, Aimia
John M. Beck
Executive Chairman, Aecon Group Inc.
Stephen S. Poloz
Governor of the Bank of Canada
Renée Maria Tremblay
Visiting Professional, International Criminal Court, Ottawa
Philippe Couillard
Premier of Quebec, Canada
John Baird
Minister of Foreign Affairs of Canada
Joe Oliver
Minister of Finance of Canada
James Moore
Minister of Industry of Canada
Ed Fast
Minister of International Trade of Canada
Christian Paradis
Minister of International Development and Minister for La Francophonie of Canada
Jonathan T. Fried
Ambassador and Permanent Representative of Canada to the WTO, Geneva

#112 realtor are useless and liars on 01.21.15 at 9:30 pm

A cut of 0.25% is meaningless you uneducated high school drop out realtors. The economy is going down as investments and jobs are leaving Canada so fast that the idiot BoC moron is in a panic. The canadian dollar is falling which means money is leaving Canada. Investors are not going be buying overvalued houses as Those who bought the last three years just took a 20% haircut via exchange rate. People losing their jobs will be losing their houses not buying houses. Realtors and those indebted are toast.

#113 45north on 01.21.15 at 9:35 pm

Smoking Man: Poloz, former head of export development, his buddies and former colleuge gain a huge export advantage with a low dollar that was a nasty trade number on Monday. Way below expectations.

In case you where asleep last few weeks a currency war was started by the Swiss, followed by the Danes in a shocking way. What was left to stop us. Currency war on.

It’s an election year, my take, central bankers more pals with Neocons than tree hugging liberals and communists.

Cowtown about to go under water, this was a life boat. A cushion.

the savings and impact in real dollars, not that big a deal.

But realtors and mortgage brokers armed with this news… Served up strong by MSM

Well, it’s going to be a nasty bidding war this spring realtors, a nasty one.

six out of six! well five out of six – spring’s not here yet

#114 Mark on 01.21.15 at 9:35 pm

“Twitter abuzz about rumours that TD Bank is going to set its savings account rate at a negative -0.10%.”

Isn’t that already the case, with the service fees and such?

#115 Cato the Elder on 01.21.15 at 9:37 pm

I’m back to explain this in black and white.

Like all good client states of the empire, we are importing US created inflation through our rate cut. We’ve devalued our dollar, just like the Australians have, to help our southern neighbor.

Switzerland was also doing something similar by importing Euro-zone inflation by artificially suppressing the value of their currency. Now with the strengthening of their currency, the average Swiss citizen is much richer. They did the right thing, which is rare for a central bank to do. I expected nothing less from the ONLY REAL democracy on the planet.

What does the rate cut REALLY mean for Canada? EVERYTHING Canadians buy will become more expensive. PERIOD.

This is nothing more than indirect theft by the central bankers. Destroying the purchasing power of every person that earns Canadian dollars.

It is a crime that should be met with the death penalty due to the scale of it’s damage, but instead is met with praise by everyone from academia to government to industrialists.

If only they knew…

#116 Mike on 01.21.15 at 9:37 pm

The era of tightropes and high hopes,
Interest rate rouse and currency blows,
If you didn’t buy till now, just hold your nose,
One way or the other, It’ll get ugly, history shows.

#117 ronh on 01.21.15 at 9:38 pm

I’m going shopping. Who’s with me?

#90 Adam Smith

capitalism requires people have money to buy stuff.

Tell that to the bankers.

#118 Smoking Man on 01.21.15 at 9:39 pm

So many groomers on here. Woried about real estate..

Damn it, ww3 around the corner.

Lighten up people, enjoy yourselfs while you still have a self..

#119 LOL Canada on 01.21.15 at 9:40 pm

Here’s the deal. Harper loves AB and oil. Oil get smacked and Alberta housing prices start dropping.
What does any prairie loving west based PM do? Drop rates and screw the rest of the country to protect Alberta.

Expect to see higher prices on everything. Our dollar is dropping like a prom dress.

#120 Mark on 01.21.15 at 9:40 pm

“A cut to the central bank’s overnight lending rate will make it cheaper for the roughly 30 per cent of home buyers with short-term or variable-rate mortgages, said Bank of Nova Scotia economist Derek Holt.”

The gentleman seems so sure of that. His employer, well, begs to differ:

http://www.scotiabank.com/ca/en/0,,1070,00.html

“Scotiabank Prime Lending Rate 3.000%
Effective 9 September 2010

I am still find it amazing that everyone in the media has just blindly made the assumption that the chartered banks will pass the policy rate cut through to customers.

#121 Not a Tiger on 01.21.15 at 9:41 pm

Full disclosure, I am not a realtor, I do not own any real estate, and I do invest much like GT promotes so eloquently on this forum.
However, I have no doubt, and will go on record, RE in Lotus land WILL be substantially more expensive in one years time. And unfortunately I disagree with GT at the cause. My family has been in the development business in Vancouver for over 50 years, and there absolutely no doubt what is driving the real estate prices here. The only thing that will change the situation in the lower mainland (not just Vancouver) is strong action by Master Xi. If his first attempt at capturing escaped funds into Australia, look for an agreement with the folks in Ottawa to follow.

#122 Smoking Man on 01.21.15 at 9:43 pm

1,700 Private Jets Descend on Davos Economic Forum to Discuss Climate Change.

Wow tree hugging pays.. Where do I sign up, I won drama awards in high school. I can do this.

#123 Joe2.0 on 01.21.15 at 9:44 pm

Nope the RE cartel won’t act responsible, why start now?
REmax projected increased home sales and values last week, they probably knew what was coming.

It’s 20+% cheaper to buy here now for certain foreign soon to be canadians who will be paying an average housing tax based on the 1 million average of around 5k (BC) a year.

That translates to a massive amount of money, as does the 600,000$ to start or buy a business.

Vancouver and other parts of Canada have been priced out due to immigration policies.
There are thousands of foriegn million/billionaires who will and are moving to Canada.

The upside is many of these foriegn buyers rent their houses out for a good price and are just happy to have parked money here.

I know I rent from one buyer from China and since I’ve known him the mandate is to get as many friends and family members into Canada or California as possible.
To start business that can open the doors for others.
And they are doing it.

Been to the British Properties lately?
Scads of renovated rented or empty homes.

That’s why RE prices are ridicous in certain parts of Canada.

#124 Alex on 01.21.15 at 9:45 pm

Been reading your blog for some time now – insightful, but at times quite opinionated and I can’t help but feel the “other side” of debt and real estate does not get a fair shake. Let me elaborate.
Recently bought an investment property in Hamilton, ON for approx $225k with closing costs – paid $60k for the renovation and addition of a separate basement unit – appraisal was $335k (after reno) and financed it at 80% locking in a $268k mortgage for 5 yrs @ 2.89% … Bottom line is after the refi I am $17k invested and my NET income is such that I earn an annual cash on cash ROI of 118% !! AND my tenants are paying down the mortgage (quite rapidly I may add based in my low int rate)
These historic low interest rates have allowed me to accumulate in excess of 200 doors over the last 4 years making myself (and family) very comfortable and financially independent.
I also do not care about the value of my real estate (well maybe I do because it looks great on a spreadsheet) but I consider every door a unit of cashflow – if the house above gets appraised at $285k next year (a drop in value of $50k) it really does not reduce my cashflow – in fact, in bad economic times there is less vacancy (more renters).
There is a contingent of Canadians that simply make bad financial decisions but I assure you they make those bad decisions regardless of price of oil or interest rate levels – the system is such that we require booms and busts, they are inevitable – I personally want real estate to crash so I can buy more at lower prices … Just not happening so I adapt and become more selective.
Garth, I really enjoy your blog and will be a reader for life – just wanted to sprinkle some “positivity” on the rates and real estate in general. There is a path to greener pastures through this jungle … I wish I could say I want more canadians to make better decisions and take advantage of the current situation, but I don’t, as it would mean more competition and quite frankly would make me feel less brilliant !!
Did I just say that out loud?

#125 Smoking Man on 01.21.15 at 9:45 pm

#102 LH on 01.21.15 at 9:25 pm
Just got my bonus.
Tough year for the industry in 2014.
My total comp cracks seven figures in cad for the first time. (Approx 1.2 pre tax)
I am the 0.1%
……….

Welcome to the club…

#126 Country Girl on 01.21.15 at 9:46 pm

Once again, Smoking Man outsmarts the economists.

#127 DW on 01.21.15 at 9:53 pm

The ships going down every man for imself!!!!

#128 Kreditanstalt on 01.21.15 at 9:53 pm

It’s hard to imagine central bankers with less imagination than the Keynesian twits with which we are blessed…

#129 Darryl on 01.21.15 at 9:55 pm

Snow Boid
I’m glad to hear that you have made out well on your Arizona winter home. I believe I remember you saying you paid cash. 84k or so? Maybe I’m wrong.
I was actually thinking more about someone who would have taken out a mortgage and rented the property.

#130 Victor V on 01.21.15 at 9:56 pm

Why Stephen Poloz can’t justify the Bank of Canada’s rate cut

http://business.financialpost.com/2015/01/21/why-stephen-poloz-cant-justify-the-bank-of-canadas-rate-cut/

When Bank of Canada Governor Stephen Poloz declared the end of the era of forward guidance last year, nobody thought the first thing the central bank would do this year is turn the concept upside down. Welcome to the bank’s new policy of forward confusion and strategic misdirection.

That’s certainly how economic forecasters now see the bank after Mr. Poloz shocked the financial world with an interest rate cut. Claiming to be rescuing Canada from the potential ravages of low oil prices, the BoC cut its key interest cut to 0.75% from 1%. The impact was immediate. Having a floating currency is one thing, blowing it out of the water is another.

Within minutes of the announcement, the Canadian dollar dipped into US80¢ territory — as the bank knew it would — and members of the understandably baffled community of professional forecasters let loose. “Never, ever listen to a central bank, because they will use you and abuse you,” said Eric Green, head of U.S. economic research at TD Securities in New York.

#131 Saskatchewan Skeptic on 01.21.15 at 9:57 pm

Brilliant posts this week Garth. I think my bottom feeding roommate is now even interested in spending a few minutes on your blog – starting today. Can you give a shout out to us sparse prairie folk this week? The people from Regina to Winnipeg seem to ignore any headlines with the word “Calgary” in it.

Go Riders.

#132 Ollie on 01.21.15 at 9:58 pm

“…is like inviting your GF over while your wife’s napping…” ROFLMAOUID.

For the geniuses who would do this, not so bad an idea. The secret hope would be a “tree sam” (to pull a Smoking Man). The outcome, “worced”.

#133 bigtown on 01.21.15 at 9:58 pm

It is a challenge to see how there will be any deflation given that our currency has dropped 20% below our major and main trading partner America. All imported prices will be much higher and there will be no benefit to consumers. I don’t see any upside to this slashing our loonie down 25% in less than a year.

#134 Saskatchewan Skeptic on 01.21.15 at 9:58 pm

I should specify, I’m a renter and the term ‘bottom feeding’ was used with light-heartedness, hahah

#135 Roadrunner12 on 01.21.15 at 9:59 pm

Roadrunners December 2015 prediction-Garth will let his hair down and the upcoming December caption will feature a rock band called Garth and the metalheads.

The more I know, the more I realize that I dont know anything but I believe it is a stretch the U.S. will raise interest rates in 2015. I would bet more on another round of QE. Nearly 50 million on food stamps, another 14 million on disability. A deficit that will never be paid and only increased. Europe is a mess, China slowing down big time and on and on.

Looking forward to seeing that Garth metalhead rock band. Gold at 1600/ounce Cdn.

#136 TurnerNation on 01.21.15 at 10:00 pm

Today is National Smoking Man day for his heroic call.

This blog would have been well served joining for beers at Southside Johnny’s.

In these lean times Dollarama shall become known as Harperama. As in: Dear, stop by Harperama and pick us up some hogfat candles from China. For tonight’s dinner party.

#137 Future on 01.21.15 at 10:01 pm

So it is crystal clear now. No correction for the foreseeable future. At least we have stability now.

#138 Entrepreneur on 01.21.15 at 10:01 pm

Like the loonie picture…actual drawing, good job.
Harper would look better if only he would tell the truth about the economy. The people would appreciate a bit of truth. Watched Obama’s State of the Union speech last night, like him and even nodded yes a few times. P.S. We may be born on Canadian soil but we watched American shows growing up. Does that make us AmeriCan, he, he.

Watched a documentary on Dam C on the Peace River
area. Peace River area can maintain food for most of B.C. That will be all gone with Dam C. So much for the people. Governments have to watch out what they wish for, Dam C or food.

#139 Smoking Man on 01.21.15 at 10:04 pm

#118 Country Girl on 01.21.15 at 9:46 pm
Once again, Smoking Man outsmarts the economists.
…..

Thank you County Girl..
Attention other hedge fund company’s, I’m cheap, won’t take much for me to switch teams.

My same rate, its enough to get me to cross the street,

But I would need weekly helicopter rides to Senica and back, we depart Friday night at 5, and pick up at 2pm
Sunday nights.

They 99% ers buying up Hamilton is screwing up my drive.

#140 weedeater on 01.21.15 at 10:05 pm

The word ‘gobsmacked’ was created just for announcement’s like Poloz’s. My chin hit the desk. In awe of his obtuseness. Is that a word?

#141 RayofLight on 01.21.15 at 10:07 pm

All I know is my portfolio went up by 5 digits on the currency move alone, let alone the move from the US growth stocks.

#142 notagreaterfool on 01.21.15 at 10:07 pm

The BoC’s go forward planning assumptions were rosey.$60 oil price when we are sub $50 and no sign from the Saudis they will relent anytime soon is just setting itself up for subsequent downgrades to it future outlooks.

Low rates for some time.

The Big O will need to grow a set now to curb the housing market. CMHC changes coming.

#143 Dd on 01.21.15 at 10:12 pm

Told you in 2010. Now … The U.S. will not increase interest rate this year and even push it out even more.

Keep those asset prices elevated.

#144 Predictions2015! on 01.21.15 at 10:13 pm

Real estate agents scream “location, location, location!”
Central bankers speak “stimulus, stimulus, stimulus!”

I’m expecting the US Fed Reserve to put off interest rate hikes indefinitely given all the negative growth forecasts around the globe. In fact, given all the surprises we are having in 2015, I would not be surprised if the US Fed Reserve implements QE4 by the time we’re through with this year. You can quote me on this when we’re counting down to 2016.

Hold on to your investments and purchasing power, it’s going to be unforgettable financial year!

#145 Observer on 01.21.15 at 10:15 pm

“Because 70% of Canadian homeowners have fixed-rate mortgages, the move means nothing. None of their payments drop. Borrowers with lines of credit, and some variable-rate home loans benefit. But a 0.25% nip on a $200,000 LOC means a weekly saving of $9.60. Wow.”
——————————
Garth you’ve been beating the drum about how devastating even a small interest rate hike would be by the Fed. It would effectively start the slow death of the housing market by plunging millions of new mortgage holders into an unaffordable situation.

Now you’re saying that a quarter point reduction won’t have any positive impact. It seems to me that you’re only choosing to use the data to justify your prognostications. Show me how I’m wrong?

Whether it’s right or wrong the housing market will continue to rise for a while. While everybody was bracing for the next mortgage rates to creep higher, they’re dropping lower. So even though rates have only dropped a point, physiologically, they’ve reversed from an expected increase. So it will be seen as an even bigger drop. What you got right tonight is that the banks, brokers and realtors will make a big deal of this. As they say, play on. The game just got more time added to the clock.

#146 Franco on 01.21.15 at 10:16 pm

No one forecast that oil was going to drop by half and going down lower and dollar will soon be worth 65 cents.

#147 triplenet on 01.21.15 at 10:22 pm

Two years ago the new Gov said he was going to demonstrate that he would protect and support a commodity driven export economy.
Time to rebalance and anticipate government interference in a market economy.

#148 Industrial Guy on 01.21.15 at 10:23 pm

Let’s hope a rising tide raises all boats and the growing US economy drags us along. US GDP Growth is at an eleven Year High (2014 numbers , 4.5% to 5%).

Unemployment is at 2.3% in some states and YES they do count people who are not receiving unemployment benefits. Colorado’s unemployment rate is at 4.1%. Pot pays? Maybe Justin Trudeau has a point.

Capt. Harper and his Calgary School friends have driven this ship onto the rocks. I guess the 61% minority who voted against the Conservatives in the last Federal were right all along.

#149 cdog on 01.21.15 at 10:26 pm

I read that TD bank was thinking about not lowering their prime rate. Is this a possibility?

#150 Just Saying on 01.21.15 at 10:26 pm

“But a 0.25% nip on a $200,000 LOC means a weekly saving of $9.60. Wow.” -Garth

Now, just pretend the rates were raised 0.25% – Let’s see how you would have spun it.

Perhaps something like – I told you so, !! Horror !! now everyone will be out on the street because they can’t afford the mortgage !! Correct ? – Yes ?

The point is simple. Too little to help mitigate the effect of oil or household debt. Yet enough to spur even more debt. Bad move. — Garth

#151 debtified on 01.21.15 at 10:27 pm

Garth, while lowering interest rate is a well used antidote to deflation by policy makers (whether it actually works is arguable), I side on your second best creation, Smoking Man, on this. This move has nothing to do with deflation – it is all about relationships.

Here are my “Smokin Man” calls of what happens next:

1. Balanced Budget is presented
2. Early elections are called
3. Harper wins again

I am not big fan of Stevie just like you but he is a very good politician. He knows how to win. Sucks to be us!

#152 Bill Gable on 01.21.15 at 10:28 pm

The Swiss blinked, and that really was a shock – but Poloz has to be in desperation mode, with this move.

He sees the real numbers and with the Oil collapse and the leverage among the great unwashed, and an election looming – Poloz did the expedient thing. Gee, what a surprise.

Realtors are going really start with the hyperbole.

No, I did NOT see this coming.

#153 Darryl on 01.21.15 at 10:29 pm

# 73 Joseph R
“More important: what does the loonie drop mean for our NHL teams? The Jets back to Atlanta?”
————————————————————-
Give them the Leafs instead. We’re done with them.

#154 Smoking Man on 01.21.15 at 10:29 pm

#146 Franco on 01.21.15 at 10:16 pm
No one forecast that oil was going to drop by half and going down lower and dollar will soon be worth 65 cents.
…….
Wrong.
I dident spit out a price call last Sept, but I did say, Russia discover an oil deposit in the artic the size of the gulf of Mexico and oil will get crushed..

It’s in Sept or Oct archives somewhere..

#155 Rexx Rock on 01.21.15 at 10:29 pm

Poloz clearly wants to devalue the cad.In his speech he should have told Canadians that they should buy usd every paycheck to hedge the continuous fall of the cad.He also should have said he has no clue what he’s doing and Canada is becoming a failed state.Time to leave to a more affordable country.

#156 Mark on 01.21.15 at 10:29 pm

“The Big O will need to grow a set now to curb the housing market. CMHC changes coming”

Why? The housing market is already decelerating quite significantly as we speak. We’re now a year and a half into declining prices pretty much across Canada. Today’s policy move by the BoC was quite correct in recognizing that the Canadian economy is deflating. The real fear should be that the BoC remains far behind the curve in battling deflation, although at least they’ve acknowledged that there is a problem. The first step towards coming to a solution.

#157 Retired Gen X on 01.21.15 at 10:33 pm

#102 LH on 01.21.15 at 9:25 pm
Just got my bonus.
Tough year for the industry in 2014.
My total comp cracks seven figures in cad for the first time. (Approx 1.2 pre tax)
I am the 0.1%

Congrats MaxwellMcGee!

#158 Capt. Obvious on 01.21.15 at 10:34 pm

Welcome to the liquidity trap bitches. This is where the whole place burns down and the central bank cannot do anything except pop open the marshmallow bag. The BoC statement even flat out said they don’t see the economy returning to full capacity until sometime in late 2016. Joy.

#159 Edith on 01.21.15 at 10:37 pm

#121 Not a Tiger

“The only thing that will change the situation in the lower mainland (not just Vancouver) is strong action by Master Xi. If his first attempt at capturing escaped funds into Australia, look for an agreement with the folks in Ottawa to follow.”
———————-
As long as Harper and co are in power, they’re never going to make it harder for the Chinese to bring in their money. Last year, it looked like he killed the Investor Immigrant program. But now they’ve bringing back a new program, just one that’s even more lucrative for the government. Anything to keep his pet project real estate ticking.

#160 Smoking Man on 01.21.15 at 10:38 pm

#152 Bill Gable on 01.21.15 at 10:28 pm
The Swiss blinked, and that really was a shock – but Poloz has to be in desperation mode, with this move.

He sees the real numbers and with the Oil collapse and the leverage among the great unwashed, and an election looming – Poloz did the expedient thing. Gee, what a surprise.

Realtors are going really start with the hyperbole.

No, I did NOT see this coming.
……..

That’s because you skip smoking man posts… :)

And I know I’m an annoying idiot when nothing big is iminant, boardom, but I do get sort of serious when it counts..

And Billy Bob, you’ve been here a while. You should know better..

#161 Sheik Yerbouti on 01.21.15 at 10:39 pm

The loonie actually did quite well over the past year……against the ruble!

OTH the deflated dollarette could lead to a lot of foreign interest in the real estate market, including from Uncle Sam and Ham.

#162 Ollie on 01.21.15 at 10:39 pm

Oil gathering strength for another drop… hah. Would push the CAD lower… will end up at 50 cents by the time we ask for unification. Been clustered at their border for quite a while now. It’s called “closure”.

#163 ANON on 01.21.15 at 10:39 pm

#146 Franco on 01.21.15 at 10:16 pm
No one forecast that oil was going to drop by half and going down lower and dollar will soon be worth 65 cents.

Yes they did, for a very long time, on both counts. Even mentioned the CAD was a petro-currency and will sink with the oil price. Garth made a post at one time (December 21st, 2010) regarding a certain percentage they mentioned. It’s a bit on the taboo side, and stirred a lot of comments, so I won’t link, find it yourself. ;)

#164 Timing is Everything on 01.21.15 at 10:43 pm

“If it wasn’t embarrassing enough to be a rate forecaster before [today], it is now. Today’s surprise Bank of Canada rate cut proves for the umpteenth time that “experts’” long-term rate predictions are not only futile, but potentially costly.” – CMT

http://tinyurl.com/kn3zzjy

Just 4 phun…

http://tinyurl.com/l7wyq6d
——————————————

#165 Washed Up Lawyer on 01.21.15 at 10:44 pm

Wild day.

Nothing to offer tonight other than a forecast of 5 degrees Celsius tomorrow in Fort McMurray with a 30% chance of rain. Felt like a Chinook today. Everybody is happy.

#166 Bottoms_Up on 01.21.15 at 10:45 pm

#150 Just Saying on 01.21.15 at 10:26 pm
—————————————————–
Actually on many variable rate mortgages the payment stays the same while the allocation to interest and principal changes to reflect the change in rate. So as Garth points out this interest rate change doesn’t do much but to encourage more debt.

The recent collapse in prices at the pump is putting 10x the amount of money in people’s pockets relative to the piddly savings on LOC interest.

#167 Timing is Everything on 01.21.15 at 10:46 pm

Whoops…Here’s the link to the CMT article/quote…

http://tinyurl.com/kn3zzjy

#168 Nemesis on 01.21.15 at 10:48 pm

“No, I did not see this coming. What a rube.” – HonGT

Come to think of it…. neither did Navin R. Johnson:

http://youtu.be/yJJA6WRpvlg

#169 Bottoms_Up on 01.21.15 at 10:48 pm

#145 Observer on 01.21.15 at 10:15 pm
—————————————————
Garth has used the rate increase as a ‘harbinger’ of things to come (didn’t he just do a post on this?). Pay attention.

A small rate increase would be a signal that many are soon to be in trouble wrt debt repayment.

#170 Two-thirds on 01.21.15 at 10:51 pm

So being contrarian paid off nicely today.

Went fully into CAD gov’t bonds ETF in one RRSP account in 2013 sometime and today it is less than 1% close to its all-time high.

Question for the blog: what would you do next?

Option 1:

Sell 60% and invest it in US and Global ETFs now – therefore creating a 60/40 portfolio

Option 2:

Wait for further gains and assume the currency wars will get worse, sell if/when panic selling in equities begins

Option 3:

Sell it all now, sit on cash, wait-and-see

Sometimes being pessimistic has its rewards ;)

#171 Doug-o on 01.21.15 at 10:52 pm

This move by the BOC – like pissing on a forest fire. I had hoped for more from TPTB. Not in Canada, It’s different here, and it’s definitely not Norway. I’ll be visiting some Nor-Folk in the next week and report back.

#172 diharv on 01.21.15 at 10:53 pm

The Cdn gov’t chastizes the public for going into too much debt by borrowing to live beyond their means.
The Cdn gov’t cuts interest rates to encourage borrowing so the public can go into more debt by borrowing more so they can continue to live beyond our means.
WTF ?!?!?!?!

#173 Sheane Wallace on 01.21.15 at 10:53 pm

well, I saw it coming and I said 10 times: move your money and yourself out of this country.

nobody listened.

#174 Sheane Wallace on 01.21.15 at 10:54 pm

and when they announce expropriation of your registered accounts nobody would have seen that coming either.

Just yours. — Garth

#175 AfterTheHouseSold on 01.21.15 at 10:55 pm

“Will they remind people that snorfling more debt with deflation looming is like inviting your GF over while your wife’s napping?”

This writing, sir, is why I keep coming back for more.

#176 Mike on 01.21.15 at 10:55 pm

This one goes out to those with fat downs on standby (30%+), that want to own in the 416 but just can’t make up their mind.

Interest Rate moves causing confusion, no doubt.

“How will this affect me?”, let’s find out

Are your government coupons in the bank still chillin’

1,2 on a GIC or 60/40 making a killing?

At the end of the day it really won’t matter,

When a cup of coffee hits 5.50, you too will be willing

To part with the digits.. to own a home to live in

Your unique job prospect notwithstanding,

Don’t be the grater fool hoping, pretending

#177 DR on 01.21.15 at 10:57 pm

So 70% of homeowners would NOT be affected with a rate increase….and even with a rate increase the affordability is ridiculously the same.

What is all the fuss about again?

#178 Edward on 01.21.15 at 10:57 pm

Sub 2% mortgages are coming to a bank near you!

“With the average discount on a variable rate product 75 basis points, that means a 2% rate if banks move their prime rate to 2.75% from 3%. Based on the lowest variable available Wednesday, the 25-point reduction would result in a 1.80% rate.

But it’s not just floating rates that are about to fall. Bond yields have been sinking and Mr. McLister said the five-year fixed rate could be as low as 2.35% unless the banks decide to hold onto profits. “Bond yields have been falling like a knife,” he said.”

http://business.financialpost.com/2015/01/21/with-bank-of-canada-rate-cut-sub-2-mortgages-are-coming-to-a-bank-near-you/

#179 debtified on 01.21.15 at 10:58 pm

Garth, you are right about the Feds raising interest rates this year – if that is any consolation. The doomers and gold nuts are wrong.

By the way, hopefully this will cheer you up, I made significant amount of money shorting gold last year using JDST. Looks like there is another great opportunity coming up. So, thank you!

#180 diharv on 01.21.15 at 11:00 pm

This seems to be the actions of a gov’t grasping at straws.as if anything they do will make any positive difference.

#181 Mark on 01.21.15 at 11:01 pm

“The BoC statement even flat out said they don’t see the economy returning to full capacity until sometime in late 2016. Joy.”

I found that part of the statement to be comical. On what planet would the Canadian economy come anywhere near full capacity when there’s a good 5-10 years of RE-led deflation mostly ahead of us? What sector can really rise that quickly out of the ashes and replace the demand lost due to RE and O&G sector deflation.

#182 Smoking Man on 01.21.15 at 11:03 pm

Just got a call from the fat lady that singing.

“Smokey, I took your advice, I went to weight watchers, took up smoking as you suggested, I got game now Smokey, thank you so much. I’ve lost my singing voice, probably do to tabaco, but I look god damn hot.” she said.

Ok dwellers, so much for when the fat lady sings.. She going to be busy.

#183 Kenchie on 01.21.15 at 11:03 pm

#84 Frank le skank on 01.21.15 at 9:03 pm
“So OSFI made some changes over the holidays to make it harder for buyers to get mortgages…. And now BoC lowers the interest rate to more or less reverse that change. Seems very unorganized and reactive to me, just what we need in these difficult times.”

What changes did OSFI make over the holidays?

#184 screwed on 01.21.15 at 11:04 pm

#120 / Mark
I am still find it amazing that everyone in the media has just blindly made the assumption that the chartered banks will pass the policy rate cut through to customers.

Isn’t that part of the contract? They would certainly adjust the rates upwards if Poloz had raised the rates today.

If the banks don’t pass this on either in payment reductions or at least shift the saved interest over to principal (although that should be the mortgagees discretion), then what is the point to adjustable rate mortgages?

#185 Village Idiot on 01.21.15 at 11:05 pm

That’s a gold coin…. knew Gartho had a secret hankerin for the yellow stuff

#186 José on 01.21.15 at 11:07 pm

It seems like many in the media and economists alike are starting to agree with me. Poloz is is way over his head an unqualified for the job.

Hell now Garth even is saying that today’s move was a rube and Poloz can’t be trusted to defend the dollar, only Harper’s sacred housing bubble and political future.

READ:Why Stephen Poloz can’t justify the Bank of Canada’s rate cut.

http://business.financialpost.com/2015/01/21/why-stephen-poloz-cant-justify-the-bank-of-canadas-rate-cut/

#187 VICTORIA TEA PARTY on 01.21.15 at 11:08 pm

FOLLOWING OUR LOWER INTEREST RATE CLIMAX…COMES A COLD SHOWER, FOR SOME: HIGHER OIL PRICES…

While too many Canadians stampede into our favourite national past-time, stacking up ever more cordwoods of debt, they should perhaps think again.

For stirrings of yet more economic change are emerging at an upscale unaffordable-to-most Swiss Alps resort.

Should what’s being said there comes to pass, may well cause discomfort to those who’ve indulged in gas guzzling motor vehicles in the inane idea that oil prices will NEVER go back up.

Davos, Switzerland, is what I’m mentioning here the scene of the annual chit chat, starring the well-dressed elites of our world, all aimed at making life better for the rest of us indebted serfs and the usual colourful array of assorted ne’er-do-wells.

The elites are talking about a return to higher oil prices, soon (it’s OK Alberta, back to the rodeo)!

From Davos, my favourite business columnist, Ambrose Evans-Pritchard of the famed Daily Telegraph newspaper has a goodly report. Here are some snippets:

‘…Rampant speculation by hedge funds and a rare confluence of short-term shocks have driven the price of oil far below its natural clearing level, coiling the springs for a fresh spike this year that may catch markets badly off-guard once again.

“The price will rebound and we will go back to normal very soon,” said Abdullah Al-Badri, Opec’s veteran secretary-general. “Yes, there is an over-supply, but fundamentals don’t justify this 50pc fall in price.”

Experts from across the world – from both the West and the petro-powers – said the slump in fresh investment in 2015 is setting the stage for a much tighter balance of supply and demand, and possibly a fresh oil crunch.

…oil prices have been pushed below their “equilibrium level” deliberately for political reasons, hinting that $70 to $80 would be the non-political price in today’s market. “There are governments that don’t want to reach that level yet, the Saudi government as well,”‘ said one participant.

Here is the full report:

http://www.telegraph.co.uk/finance/financetopics/davos/11361507/Davos-oil-barons-eye-150-crude-as-investment-slump-incubates-future-crunch.html

Should this scenario pan out, what will it mean for Canada?

A number of things, for instance:

-the new interest rate could be forced back up again for macroeconomic reasons;

-resulting in less fire in our real estate belly;

-fewer disposable bucks in Canuck pockets with higher oil prices;

-return to more cross-border shopping affecting Canadian retailers;

-fewer US visitors with the different currency exchange.

-or, holding deflation temporarily at bay in some countries?

On and on.

But for us some kind of economic Armageddon is not in the cards, because the main beneficiary would be an overall stonger Canadian economy, a good thing, and a better chance for the Harper Tories to be re-elected with a larger majority (good or bad which is why the budget presentation is being delayed?).

However, the world’s fondness for not paying back ever increasing debts would remain unresolved and therefore a constant threat to economic stability everywhere (especially with new QE for the EU).

Kind of like what it was like here about a year ago, a few months before oil prices started cascading.

#188 Retired Boomer - WI on 01.21.15 at 11:10 pm

Garth-

You are hardly a Rube. Blindsided by the expedient politician, yes, but no RUBE!!

I can’t see where this rate cut could be beneficial to Canada, but I’m no banker, or politician.

I smell a weakening stock market…

Welcome back CATO THE ELDER…. I missed your input.

#189 Mark on 01.21.15 at 11:12 pm

“Isn’t that part of the contract? They would certainly adjust the rates upwards if Poloz had raised the rates today.

If the banks don’t pass this on either in payment reductions or at least shift the saved interest over to principal (although that should be the mortgagees discretion), then what is the point to adjustable rate mortgages?

Mortgage contracts with banks are usually linked to “Prime”, which is a rate solely set by the lending institution itself. Basically the banker sets the interest rate on the institutions’ whims. There is no contractual requirement that “Prime” follow or even be correlated to the BoC policy rate.

Luckily, for my own personal borrowing, the contract language I negotiated with my lender explicitly references the BoC overnight rate target. Rather than “Prime”. So I get to enjoy the lower rates. But its appearing that people who agreed to contracts that let the banks set the “Prime” rate may not enjoy the benefits of a lower BoC policy rate.

#190 For those about to flop... on 01.21.15 at 11:12 pm

OLIVE BRANCH TIME…..
Garth in the 6 or 7 months I’ve commented on your blog you’ve deleted me ,disagreed with me and helped me.
Just wanted to say there seems to be a lot of “I told you so”today but I think its a small victory in a big world.
Today you got a kick in the shin,but overall you can read between the lines and are right more often than not.
Right now I am giving you a pat on the back and telling you to keep up the good work.
Keep fighting the good fight.

#191 schaudenfreude on 01.21.15 at 11:15 pm

#53 Mister Obvious
Yeah, but… look at those markets, eh?

If you sold your RE in the last few years then proceeded to sensibly invest all that puffed-up equity you are now in the best shape of all.

The missy and I bailed when she thought the time was the high in our area ( 2013 )(rural acreage done to the nines) haven t looked back. Didn t buy back in , have a balanced portfolio paying monthly , life is f#$?ing GRAND , yahoo!! Right now sitting in a warm climate for the next 3 months , will return to Canada when the weather is warmer LOL

#192 Smoking Man on 01.21.15 at 11:16 pm

#184 screwed on 01.21.15 at 11:04 pm

Dandy lions are coming. It’s called market share.. Oh baby, the cut, and the one in March will hit the market.. Trust me.

Although I lie a lot.. Not wrong very often.

#193 Steve on 01.21.15 at 11:18 pm

.75%?

That’s a king and a pawn making one more pointless pre- checkmate move. It’s over. Be polite and die

#194 Not a Realtor on 01.21.15 at 11:19 pm

#156 Mark

“We’re now a year and a half into declining prices pretty much across Canada.”
—————————-
Exactly what planet do you come from Mark? Where have prices across Canada been declining for a year and a half?

#195 Vicpaul on 01.21.15 at 11:20 pm

#36 Smoking Man

Bro’, that was easily the most cogent, on-point, grammatically correct dissemination of what’s going on that you’ve ever posted……nice! It tells me either this dyslexic shtick is your ruse, or the JD doesn’t flow til after 8:00. )

#196 JamesRichardson on 01.21.15 at 11:21 pm

So are still going to get rate increases this year like Garth said/ hammered home into our little brains ?

#197 Ret on 01.21.15 at 11:22 pm

An Alberta sales tax along with an Ontario carbon tax should work wonders to right the Canadian economy.

No dear, those aren’t crows circling around up there. They’re black swans.

If the Chinese unhook their currency from the USD, what will that look like?

Poloz knows right now what 2015 is going to look like. The tool box is empty and this is all he’s got.

Let me guess his next move, another .25% drop from .75 to .50 ????

#198 Sideshow Rob on 01.21.15 at 11:22 pm

” “Never, ever listen to a central bank, because they will use you and abuse you,” said Eric Green, head of U.S. economic research at TD Securities in New York.”

Mainstream economists hang on every word coming from the equally clueless central banks. They jump up and down and giggle like teenage girls at a Justin Beiber concert.

If any economists are actually reading this lowly blog and even worse, the comments…

Did you know gullible isn’t in the dictionary? Seriously look it up

#199 Mark on 01.21.15 at 11:25 pm

“Exactly what planet do you come from Mark? Where have prices across Canada been declining for a year and a half?”

The 2013 CMHC subprime changes in Budget 2013 announced by the late “F” marked the top of the housing market. Its been downhill ever since, albeit slightly disguised, to the naïve, by a substantially altered sales mix.

Even prior the recent oil meltdown, the Canadian economy was weakening and the various stats were pointing to RE deflation (and its concomitant effect on consumer spending) as the root cause. A good argument could have been made for Poloz’s current policy actions to have taken place 6-12 months ago based on the publicly available data.

#200 TurnerNation on 01.21.15 at 11:26 pm

Speaking of Long Branch a buddy bought a pre con townhouse at site of current Beer Store – which will be torm down to make room – it will have a large rooftop terrace. And just down from Sside Johnny’s. Haha maybe I will stick my head in there one day.

#201 Mark on 01.21.15 at 11:28 pm

“Let me guess his next move, another .25% drop from .75 to .50 ????”

Barring an oil recovery to at least >$60, Poloz has basically stated that there will be additional policy action.

#202 Wildrose village idiot on 01.21.15 at 11:29 pm

Prentice floats a new trail balloon every day… they are all popping

http://calgaryherald.com/news/politics/braid-prentice-edges-toward-public-union-pay-cuts

#203 Not a Realtor on 01.21.15 at 11:31 pm

#197 Ret

“Poloz knows right now what 2015 is going to look like. The tool box is empty and this is all he’s got.

Let me guess his next move, another .25% drop from .75 to .50 ????”
—————————-
Well actually, it quite possibly might be coming true soon. And if it does, real estate will really cook. I guess the folks saying you better get in now or never were right after all.

http://business.financialpost.com/2015/01/21/why-the-bank-of-canada-could-cut-its-key-rate-again-soon/

#204 Smoking Man on 01.21.15 at 11:31 pm

#196 JamesRichardson on 01.21.15 at 11:21 pm
So are still going to get rate increases this year like Garth said/ hammered home into our little brains ?
……

In Garths defence, he never said Canadian rates would go up, he’s said USA rates will go up… He’s not wrong, they will. But just once.

Then the fed will go… O shit..

#205 Max Jones on 01.21.15 at 11:34 pm

On the general issue of the economy, today Microsoft announced free upgrades from Windows 7 and 8 to Windows 10 when it is released. What? Was there a disturbance in the force? Did the evil empire blink? Or is it a case of creative thinking for an overpriced product?

I suspect that a number of “over priced products” are due for a correction as tapped out consumers stop buying. Windows 10 is an easy one to devalue – software has an incremental cost of production of zero. And Microsoft has billions in unpaid dividends ripe for seizure under US tax laws. Looking for accounting losses is just good business.

As they shift from selling their to renting their products, MS will be offering services to rent by the month, all based on Windows 10. So you should now add in a Microsoft line item to your monthly budget calculation when applying for a mortgage.

$5 / month for Windows per device (my guess)
$10 / month for Office 365 for Home – current price
$5 / month for Xbox Gold for each account in your family – current price
$ ?? / month for Windows 10 phone

Sort of looks like the cable bill I was paying back in 1980. Today its $180 /m for cable TV, Internet and a phone. Don’t know where its heading, but it looks familiar.

#206 quebec economist on 01.21.15 at 11:34 pm

Shocked here.

I think that the move by the BOC was fatally wrong. It will hurt the loonie. I think outside pressure played here, to hurt the loonie helping to make the oilsands some $. But other sectors will be hurt, including banking, households (price of imports) and technology startups, I doubt that the falling dollar (…0.76 in a month) will do much to make the oilsands profitable…Poloz biggest mistake.

I am an economist but this view is not held by many, 80% of those i talked to think BOC was the right move….but economist are like sheep…

cheers.

#207 JuliaS on 01.21.15 at 11:35 pm

#179 debtified

Gold was 2nd best performing currency last year. In USD it appreciated only 1.3% less than DJIA.

Please enlighten us how you were able to short it so successfully against a %15+ depreciation in CAD?

Gold is not a currency. — Garth

#208 Smoking Man on 01.21.15 at 11:36 pm

#200 TurnerNation on 01.21.15 at 11:26 pm
Speaking of Long Branch a buddy bought a pre con townhouse at site of current Beer Store – which will be torm down to make room – it will have a large rooftop terrace. And just down from Sside Johnny’s. Haha maybe I will stick my head in there one day.

Dude the characters in that joint, a dyslexic writers dream.. Rich, colourful people.. Damn it.. If only I could write.

The place has spirt, you can see the paint brush of life all over their faces. Their stories.. The wins, and the loses.

I love it there…

#209 Not a Realtor on 01.21.15 at 11:36 pm

#199 Mark

““Exactly what planet do you come from Mark? Where have prices across Canada been declining for a year and a half?”

The 2013 CMHC subprime changes in Budget 2013 announced by the late “F” marked the top of the housing market. Its been downhill ever since, albeit slightly disguised, to the naïve, by a substantially altered sales mix.

Even prior the recent oil meltdown, the Canadian economy was weakening and the various stats were pointing to RE deflation (and its concomitant effect on consumer spending) as the root cause. A good argument could have been made for Poloz’s current policy actions to have taken place 6-12 months ago based on the publicly available data.
—————-

WTF?

Mark you should go into politics. First, you never answered the question. Second, what did you say?

#210 Sideshow Rob on 01.21.15 at 11:36 pm

Something tells me the talks in Davos will have nothing to do with climate change. Draghi is going to announce a European version of QE tomorrow. That much is known. What if the world calls his bluff?

#211 Bottoms_Up on 01.21.15 at 11:37 pm

#350 nej jen on 01.21.15 at 4:53 pm
———————————————–
1) Buying a house possibly just got a bit more difficult (more expensive in the ‘gross debt’ department). If the rate cut is passed on to consumers, variable rate mortgages will be cheaper and borrowers will be able to borrow more (and therefore pay more for a house). But it also depends how you look at it…your ‘competition’ just got ‘wealthier’…but, now you also might be able to afford a bigger mortgage.

2) Oil may go down more. Nothing crazy there. It could stimulate another interest rate cut, while at the same time being a ‘harbinger’ of reduced global demand, that is, reduced global economic output (see the ‘deflationary’ discussion of Garth’s post).

3) Government jobs in Ontario? Likely safe.

#212 Dominoes Lining Up on 01.21.15 at 11:37 pm

If the first 10 minutes of CBC national news with Parson Mansbridge is any indication….

…this is devastating news. Real estate included.

The emphasis in reporting was on how bleak the economy was to have such an emergency rate cut. Poloz looked awful in his conference, confused and uncertain.

This is how the market will view it. This will suck the air out of real estate sales pretty quick.

This is like the country being only a few dollars away from maxing out its credit card, and finding out “you’ve just been approved for a credit limit increase”.

#213 Led on 01.21.15 at 11:40 pm

I was one of the few guys on here yelling at you that you were wrong on the interest rate direction. Sadly, I am not happy about being right – it just means that deflation is here, and even with all that money printing all we could do was inflate commodities. And now they have popped.

There needs to be a genius out there who can realize what needs to be done. Money has to get into the every mans hands. Debt has to be forgiven. As the jews used to call it Jubilee.

Until then, we are all screwed.

I did not say Canadian rates would go up or down. I expected no change. I still expect the Fed will hike by mid-year. — Garth

#214 Jimmy on 01.21.15 at 11:40 pm

So, Garth, what can we do now? House is not going to correct? Money is depreciating…

No, money is appreciating. Financial assets win big. — Garth

#215 JamesRichardson on 01.21.15 at 11:45 pm

It’s a race to the bottom and canada just slammed on the throttle

#216 Mark on 01.21.15 at 11:46 pm

Please enlighten us how you were able to short it so successfully against a %15+ depreciation in CAD?

It sounds like he took a short position against the mining shares (or an ETF comprised of the mining shares), which have experienced severely negative returns since reaching a peak in 2Q, 2014, and more generally, have collapsed 80-90% since the 2011 apex.

With energy prices cratering, labour costs falling, and mining equipment now “on sale”, things are setting up nicely for a series of earnings blow-outs in the precious metals mining sector. If the 1930s are any indication, the precious metals mining sector could turn out to be a ray of sunshine amidst the economic carnage of deflation.

#217 Larry1 on 01.21.15 at 11:51 pm

Garth, with all due respect why do you take your positions with such confidence and conviction? Like the certainly that rates will rise in 2015.

My financial adviser buddy always points out how wrong you (and I and him) have been over the years on Canadian housing (think IG speaking engagements in the early 2000s). This just adds to his ammunition. In the long term, I believe in your message but the thing with bubbles is they go on and on for longer than most rational people expect.

You hang with an Investors Group guy? Explains a lot. — Garth

#218 Kreditanstalt on 01.21.15 at 11:51 pm

“I did not say Canadian rates would go up or down. I expected no change. I still expect the Fed will hike by mid-year. — Garth”

Yes, but I’d love to hear your reason WHY…that would speak volumes.

a)because the mythical six-year-promised self-starting US “recovery” is underway, good jobs are being created and REAL economic growth is occurring…?

or b)because the Fed knows that QE has had no effect whatsoever except to enrich financial asset-holders and beggarize the middle classes, and they know it must end…?

Which is it?

#219 Snowboid on 01.21.15 at 11:52 pm

#129 Darryl on 01.21.15 at 9:55 pm…

We did buy with cash, but paid a bit over $ 100K.

We know about 15 Canadian couples in our immediate area and another dozen or so in nearby communities. All but a couple paid cash, and the other ones used Canadian HELOCs.

None of them rent out their Phoenix homes, although three have cashed out since last summer and are now renting themselves.

Like I said we won’t start watching our budgets closely until the CAD is down to .70 US – but most everything would still be less expensive here.

#220 devore on 01.21.15 at 11:55 pm

Savers have been getting creamed (on real returns) for nearly a century now, so that’s nothing new. That’s why you invest.

#221 Valkyrie on 01.21.15 at 11:57 pm

#91
Jimmy says all in well in YYC.
Still plenty of Lululemon.

Ha Ha, Jimmy, you nailed it!

#222 meslippery on 01.21.15 at 11:57 pm

Yet Mish thinks real estate will bust.

A bust of the Canadian real estate bubble, one of the biggest in the world, is also on the way.
Read more at http://globaleconomicanalysis.blogspot.com/2015/01/currency-wars-pick-up-steam-today-with.html#06mbySrpoJ5qhvFH.99

#223 martha on 01.22.15 at 12:12 am

CTV is saying tonight that “Now is the time to buy that new car!”…. *rolls eyes*

#224 Cici on 01.22.15 at 12:15 am

Sorry for overabusing your blog real estate tonight Garth…just came across an interesting article penned by your friend Rob Carrick, who seems to be echoing your mantra:

It is getting cheaper to borrow, but also scarier.

Falling oil prices have undercut the economy, and the Bank of Canada has taken steps to address that with a surprise cut in its trendsetting rate of one-quarter of a percentage point – from 1 per cent to 0.75 per cent.

The idea of a rate cut is to encourage consumers and businesses to spend and invest.

Message to all the consumers out there: don’t.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/resist-the-urge-to-borrow-more/article22549247/

#225 gut check on 01.22.15 at 12:16 am

@ #68 Linda on 01.21.15 at 8:40 pm

that’s my feeling. The banks are going to keep the difference in their pockets. I honestly don’t think lending in Canada will get any easier or cheaper for the vast, vast majority of people and small businesses.

I do think that based on the dropping loonie foreign money will keep on flowing in – they get a sale on their safe-deposit boxes.. oops I mean condo boxes… in Canada.

#226 Smoking Man on 01.22.15 at 12:19 am

Damn, hammered out of my mind.

Will be at the tax farm at 6:15.

I will be totally unless.. God thank you for acting skills.

I’ll figure it out, I always do.. Night, night dogs.

#227 ANON on 01.22.15 at 12:20 am

#213 Led on 01.21.15 at 11:40 pm
There needs to be a genius out there who can realize what needs to be done.

=========
I think they did, and it was a lot of fun while it lasted.
If you mean undoing it, no genius can outsmart math and the laws of thermodynamics. Some crazies have tried outsmarting the latter to much dismay, but no one is crazy enough to even think of challenging the former.

#228 TurnerNation on 01.22.15 at 12:20 am

Smoking man do they have Molson Export beer at Johnny’s? My secret pleasure when I can find it. It was my teeenaged beer. I hang out anywhere esp. With live muisc. From 2 star to 5 star. Used to know the old Upfront bar near Jarvis. In fact tmr will see stops along King west and Shangri-la, and Trump’s club.

#229 Smoking Man on 01.22.15 at 12:21 am

#224 martha on 01.22.15 at 12:12 am
CTV is saying tonight that “Now is the time to buy that new car!”…. *rolls eyes*

Welcome to the machine, it’s on the buds

#230 KG on 01.22.15 at 12:28 am

rube ?

#231 Snowbird on 01.22.15 at 12:40 am

Purchased an oceanfront condo in Florida in 2009 for 110k when the exchange rate was close to par. Sold it 2 months ago for 260k. Still have all the USD. Might convert when the CAD hits 0.60. No rush. Renting right now and couldn’t be happier.

Life is good.

#232 Obvious Truth on 01.22.15 at 12:45 am

Hilarious. You could see it coming with the inverted yeild curve. Which is still inverted. One more cut?

The report today reads like an economic eulogy. Not to mention that some of the economic issues would seem to be government policy issues. Likely beyond what a CB can solve or even appropriately influence.

I don’t think lending increases in this environment. The lady that cuts my hair was telling me about all her clients that work in Alberta for 21 days and come back to ontario for a week. But not any more. I don’t think all Canadians understand the full impact of the low oil price on our economy. It’s huge. And likely not replaceable. The report outlines all of this. No sugar coating. About as honest as a central banker can be. Credit for that.

#233 devore on 01.22.15 at 12:49 am

#145 Observer

Garth you’ve been beating the drum about how devastating even a small interest rate hike would be by the Fed. It would effectively start the slow death of the housing market by plunging millions of new mortgage holders into an unaffordable situation.

You missed the point, I don’t think you’ve even read it.

A small rate increase would not have increased debt service costs for Canadians very much, but it would have chilled the demand for new debt significantly. A small decrease does likewise: doesn’t lower borrowing costs, but does fuel the demand.

At these interest rate levels, it is more about sending a signal, than effecting any real change directly.

#234 dosouth on 01.22.15 at 1:03 am

I believe that the young woman who couldn’t catch her ferry because she was late they wouldn’t stop the world for her displayed what is going to happen to many of the Gen XYZer’s when the free money machine (low interest rates) comes to a screaming halt with the bank of mom and dad (aunt/uncle) etc also won’t stop the world for them…

I’m so mad…you people

http://tinyurl.com/nno4ncp

#235 Kenchie on 01.22.15 at 1:05 am

#124 Alex on 01.21.15 at 9:45 pm

Well said. Good job on accumulating your cash flow.

#236 TheRealTruth TRT on 01.22.15 at 1:23 am

Going forward,

This rate cut will ignite housing (especially in Vancouver). The Bank of Canada has put itself in a corner and could never raise rates for at least 5 years.

There will be a mad rush for housing (just like 2009-10) especially when people think they will be priced to forever if they don’t buy now. Then rates won’t be raised to protect these debtors.

I’m sure The Bank thought this through. ZIRP is the new normal going forward.

I just feel sorry for the Canadian dollar…60 cents maybe. If your younger than 35 and no inheritance heading your way, for god’s sake emigrate to the USA.

#237 Dave on 01.22.15 at 1:31 am

Always enjoy your perspective. Posted it on Reddit for the fine readers there: http://www.reddit.com/r/RealEstateCanada/comments/2t9d0t/the_second_coming_canada_cuts_the_interest_rate/

#238 Kilby on 01.22.15 at 1:33 am

Seems this move was influenced by the “All in the oil basket” prime minister. 1/4% drop seems to be focussed on one province with big mortgages and big trucks and up until a couple of weeks ago a big attitude. Wonder what the payments are on a $85,000 F-350?

This is going to have an immediate effect on real estate in the East Kootenay, Kelowna and Vancouver Island. Already been house deals collapsing in Alberta due to job losses.

#239 palebird on 01.22.15 at 1:34 am

#210 The world will call his bluff and that is when things get really interesting.

#240 6,000 years and counting... on 01.22.15 at 1:36 am

Re #28 TheRealTruth
The overseas money is never transferred via financial institutions. You pay Yaun you have in China to someone in China who arranges someone in Canada to pay dollars to you.
Expect billions to arrive in the next few months. Not trolling here. Am serious. Watch and see.
====================================

I will promise to “watch and see” but I also always wondered what came first – the hen or the egg?
Perhaps you will be able to help me here.

Person “A” arranges for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “B” here in Canada

But inquiring mind like me wonder how this person “B” got these million $$$ waiting to be deployed.

Ah forgot – person “B arranged for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “C” here in Canada.

And that person “C” got his millions by arranging for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “D” here in Canada.

And that person “C” got his millions by arranging for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “D” here in Canada.

And that person “C” got his millions by arranging for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “D” here in Canada.

And that person “C” got his millions by arranging for someone in China to pay in yuans to someone and in return he gets a few million $$$ from person “D” here in Canada.

And that person “D” got his millions by arranging for someone in China to pay in yuans to someone …
…..
…..
and billions arrive here in the next few months.

Finally got it.

#241 Tom from Mississauga on 01.22.15 at 1:43 am

So is a stimulus election budget on the way too? Money for Smart Track? Got John Tory elected. Maybe rekindle the Home Reno Tax Credit?

#242 Musty Basement Dweller on 01.22.15 at 1:44 am

Seems to be a consensus in the mainstream media (for what it’s worth) that poloz’s move to lower rates today was a bozo move that benefits almost nobody. I would agree with that. Maybe he was trying to be cool or interesting or something??

#243 Ollie on 01.22.15 at 1:49 am

For you, Smoky: http://i.imgur.com/0nSKXkA.jpg
Cheers!

#244 Industrial Guy on 01.22.15 at 1:50 am

The Petro-Loonie.
How far will it sink?

#245 VB on 01.22.15 at 1:52 am

re L.H

Who cares ?? loser

#246 Oceanside on 01.22.15 at 1:55 am

#119 LOL Canada on 01.21.15 at 9:40 pm
Here’s the deal. Harper loves AB and oil. Oil get smacked and Alberta housing prices start dropping.
What does any prairie loving west based PM do? Drop rates and screw the rest of the country to protect Alberta.

Expect to see higher prices on everything. Our dollar is dropping like a prom dress

Why not do away with the pretence that the BOC operates at arms length from the federal government. Harper could just fire Mr. Poloz and appoint himself Governor at least things would be out in the open….

#247 Oil Is Sticky on 01.22.15 at 2:14 am

#220 Snowboid on 01.21.15 at 11:52 pm

Like I said we won’t start watching our budgets closely until the CAD is down to .70 US – but most everything would still be less expensive here.

———

What does that tell you about Canada. It really makes you wonder why people flock to the most expensive place in the world to live (I don’t count HK. That’s just a tiny big city).

#248 Waterloo Resident on 01.22.15 at 2:19 am

HERE’S WHAT I SAID JANUARY 16:

((” Has anyone heard about how the Swiss have just dropped their central rate down to a MINUS 0.75% ? Yes, that’s right; NEGATIVE RATES.

With Canada’s oil and mining sectors in the dumps, out housing market is the only thing keeping us out of recession, and I think soon we too will be finding our interest rates falling, perhaps even going negative. ” ))

———————————-

WELL, GUESS WHAT JUST HAPPENED?

#249 Deman on 01.22.15 at 2:24 am

Help! Here’s my situation…living in a small townhouse in Surrey BC with about $70k equity in it. 1st Kid coming soon, was planning to sell this place in the Spring and purchase a ‘modest’ house in the $500-$600k range ideally with a mortgage helper. New Mortgage (with the helper) and a bigger down payment would then only be 2-3 hundred dollars more a month than what I’m paying currently paying (manageable). And I would be able to refinance at bank at a much better interest rate as we’ll for next 5 years. After reading comments in this blog, one would think I am crazy for even considering this and I should be selling and then renting a place, waiting for market to correct. Is that what the majority of you would do?

#250 JL on 01.22.15 at 2:37 am

“Last week the Swiss shocked markets with a deflation-fighting currency move.”

Garth seems to contradict himself frequently. When the Canadian dollar falls he says that’s inflationary, hence the inverse of that would be a rising Canadian dollar would do the opposite.

But when the Swiss make a move that STRENGTHENS their currency by 20-30% that’s a move to fight deflation? Huh?

#251 Pablo on 01.22.15 at 2:42 am

So again, for those who have been saving and waiting in the RE market, when does one buy? 2016? 2020? Never?

#252 JL on 01.22.15 at 2:43 am

“Will the real estate cartel and omnivorous lenders act responsibly? Will they remind people that snorfling more debt with deflation looming is like inviting your GF over while your wife’s napping? ”

As a Realtor it’s NOT my job to give advice to buyers or sellers on what they should or should not do in regards to buying or selling real estate. That job is for either the individual themselves or a personal financial planner or perhaps a life coach.

IF an individual approaches me to either sell or buy a property, than in THAT specific context I will do my best to get them the best deal possible, explain to them what is happening in the market and provide all the information I can about a property, location, etc..

#253 Deflation-Promoting in the Case of Switzerland, Actually on 01.22.15 at 2:55 am

Re: “Last week the Swiss shocked markets with a deflation-fighting currency move.”

Actually, the Swiss Central Bank’s action strengthened the franc which is deflation-promoting, not deflation-fighting.

But you’re correct in noting the turmoil roiling the currency markets. It’s going to be a tumultuous year.

#254 Toronto on 01.22.15 at 2:59 am

They only need to keep the party going until after the next election — that’s when the hangover will kick in.

#255 NEVER GIVE UP on 01.22.15 at 3:07 am

#410 James on 01.21.15 at 10:46 pm

With in excess of 35 years experience of watching the FX markets and the interplay of monetary policy and the C$, this is the first time I have seen the BoC act irrationally. They are giving the green light to the FX markets to short the dollar. Next major support is around 74 cents, if that breaks it can go much lower & yes, Virginia, that will raise the price level significantly. This was a colossal blunder.
—————————————————————
Your right it is a colossal blunder, but not to the Cons who are fooling the electorate again.

Fool me once, Shame on you,
Fool me twice, Shame on me!

It is election year. As long as they can contain damage until the election and win, Then who cares what happens.
Once your drunk with power, The little people matter not in your quest.

#256 windows10 on 01.22.15 at 3:20 am

Race to the currency bottom.

CAD is now @ $1592/oz gold

#257 jane24 on 01.22.15 at 4:32 am

I have to disagree with many of the posters here, RE will not go up. The RE market is all about how folk feel. They feel good then they take risk, they feel nervous then they don’t. The actual monetary sums have little to do with it.

Canada has been one bad financial news story after the next these last few weeks. People do’t feel rich any more, they feel threatened. Threatened folk draw back and don’t pile on more risk by buying bigger houses.

The Spring RE market will be a bust. The tap in people’s minds is now turned off.

#258 juno on 01.22.15 at 5:17 am

Plus the government is trying to hide the fact, that they can’t balance the budget.

Look guys this is a Hail Mary move of desperation by the government. Its basically do or die. Save the other bubble (real estate) which the government is on the hook from.

When you look at the situation, it really all they can do because they are at the end of the road and what lays in front… Oh Yeah! a freakin Cliff

#259 live within your means on 01.22.15 at 6:40 am

Our portfolio increased yesterday. Thanks Garth.

#260 Not Spending on 01.22.15 at 7:29 am

The rate cut was on Australian news tonight, even indicating we’ll have a rate cut as early as February.

In fact so called “Newspaper Economists” are predicting we may get 2 rate cuts this year. Just what we need.

Anyway, texture from Reuters re: Canada rate cut.

http://www.reuters.com/article/2015/01/21/us-canada-cenbank-housing-analysis-idUSKBN0KU2W020150121

#261 Musty Basement Dweller on 01.22.15 at 8:19 am

Just talked to a buddy last night who is trying to sell two average type one bedroom condos of his, one in Victoria and one in Courtenay on Vancouver Island.

He bought them both about 6 years ago and has put a fair bit of maintenance into both. He’s had them for sale for more than six months. Crickets.

He figures once all is said and done and they sell he will lose at least $100 K net despite the rental income.

A sad investment. Typical guy who tried to cash in on the mania but is getting burned like many more to come. Doesn’t matter what Mr poloz does.

#262 asp on 01.22.15 at 8:29 am

Excessive and misdirected debt is the fault of bank regulators and government policies, not of low interest rates and Central Banks.

Independent Central Banks have been trying hard to fulfil their mandate. The politicians and regulators have been screwing up and not doing their side of the job.

#263 Musty Basement Dweller on 01.22.15 at 8:31 am

Thanks for the umbrella Captain Stevens (Poloz and Harper).
-From a Titanic passenger

#264 LOL Canada on 01.22.15 at 8:33 am

The value of dollar has been shredded from our highs of 1.10. Based on boc moves, in a global sense, your income, house value, savings, anything held in CAN has been lowered by at least 20% in value. This is because everything you own in CAD is now lower. On the other hand, debt is valued at less as well. Debtors win.
The problem here is that everything imported will start to cost much more. We may be able to get a few jobs out of it though. Just not retail.

#265 drydock on 01.22.15 at 8:36 am

Lower interest rates….check.
Print skads more money….check.
Create debt saturation….check.
Drive down barrel of crude….check
Drive up cost of housing,food,education etc….check.
Offshore manufacturing industries….check.

What could go wrong.

#266 Edward on 01.22.15 at 9:13 am

This rate decrease won’t make the housing market catch fire. But what it will do is keep it moving forward. New buyers will still get in, it will give current owners a chance to lock in cheaper and buy the economy some time until oil rebounds a bit.

Combined with the falling $, Ontario will blossom and the housing market will remain buoyant and grow.

Vancouver will also remain strong with a listing shortage and strong demand especially in SFH’s and more affordable condos.

Alberta, the impact will be muted.

So even though this rate drop won’t light the market up, it will keep it on a stable footing, grow in some parts and allow a softer landing in others.


The rate cut does not apply to fixed-rate mortgages, which 70% of people have. So nobody can ‘lock in’ at the reduced rate because at this point it only influences variable-rate loans. — Garth

#267 fancy_pants on 01.22.15 at 9:21 am

so Canada was caught swimming naked when the tide when out. the economy is pushing daisies. but the buggers are still in denial phase. H and co. would prefer to sell out the rest of Canada to save the tar sands oil export industry. maybe it’s time to pack up the one trick pony show

#268 crowdedelevatorfartz on 01.22.15 at 9:27 am

@#256 Never Give Up

“It is election year. As long as they can contain damage until the election and win, Then who cares what happens…….”
+++++++++++++++++++++++++++++++++++

total agreement

#269 fancy_pants on 01.22.15 at 9:38 am

cheer up Alberta, you have low oil but we (Ontario) have this: http://www.torontosun.com/2015/01/22/wynne-near-bottom-of-fraser-institute-fiscal-policy-ranking

Ontario is good at blossoming daisies and flowering taxes. nothing more.

#270 Incubus on 01.22.15 at 9:40 am

With the oil war the Saudis have wake up the Kraken of deflation.

When the money runs out, they will have trouble to keep peace in their kingdom.

#271 Edward on 01.22.15 at 9:40 am


The rate cut does not apply to fixed-rate mortgages, which 70% of people have. So nobody can ‘lock in’ at the reduced rate because at this point it only influences variable-rate loans. — Garth”
——–
True, but bond yields that do effect long term fixed rates are also dropping. That’s wht most economists in Canada see a lower 5 year in Canada’s future.

#272 TurnerNation on 01.22.15 at 9:46 am

300th? This blog’s lack of omniscient prescience was a surprise.

Glad I rotated even more funds out of Treasury Blondes yesterday. Into TSX, natch. Bonds got trashed again today.

#273 Dominoes Lining Up on 01.22.15 at 9:46 am

Some sensible comments here from folks who seem to grasp what sentiment means to the market.

#256 juno

Look guys this is a Hail Mary move of desperation by the government. Its basically do or die. Save the other bubble (real estate) which the government is on the hook from.

#233 Obvious Truth

The report today reads like an economic eulogy.

#255 jane24

People don’t feel rich any more, they feel threatened. Threatened folk draw back and don’t pile on more risk by buying bigger houses.

The Spring RE market will be a bust. The tap in people’s minds is now turned off.

——————————————————————

This smells of Harper pandering to his western base just long enough to get to the election.

It also, rather stunningly, is a vote of non-confidence in the rest of the economy to pick up the slack, and an admission therefore of how undiversified and resource-dependent we have become, according to Harper’s plan.

For every greater fool pumping real estate, there will now be an enormous “BUT” in every conversation.

A game changer for buyer confidence.

A big domino has just fallen.

#274 BigM on 01.22.15 at 9:54 am

@265 LOL
the exchange rate of 1.10 wasn’t a reflection of how good the Canadian economy was, but rather showed how BAD the US was doing.

That has now changed.

#275 Jean-Luc on 01.22.15 at 9:57 am

Garth,

will you publicly apologize to all those commenters to your blog posting that you verbally abused and hacked down whenever they said that Canadian rates would not go up but down? Will you? That would be a true sign of a real man, something you seem to treasure.

Regards,
JL

Real men don’t ask anyone to apologize. — Garth

#276 Jean-Luc on 01.22.15 at 9:58 am

“posting” should be “postings”, clearly.

#277 BigM on 01.22.15 at 10:00 am

ECB will do QE to the tune of over a trillion Euros.
60 Billion every month, that’s more than predicted.

Interest rates stay at 0.05 %

#278 Jean-Luc on 01.22.15 at 10:01 am

PS I do love your blog, to be sure – lots of relevant timely news, presented in a concise and at times humorous manner. Do keep up the good work, Garth!

#279 rosie "moving forward" in the knowledge that, "this won't end well" on 01.22.15 at 10:03 am

This is what we have to look forward to. A generation of home ownership shy renters. MSM pumping has had little impact in the States, even though it makes sense to own, at least that’s the message.

http://www.marketwatch.com/story/the-700000-mistake-nearly-6-in-10-millennials-may-make-2015-01-22?dist=beforebell

#280 bdy sktrn on 01.22.15 at 10:04 am

“Under this expanded programme the combined monthly purchases of public and private sector securities will amount to 60 billion euros,

———————
Private sector?

#281 SHawn Allen on 01.22.15 at 10:09 am

Why Garth dares to predict the future

Larry 1 at 218 asked:

Garth, with all due respect why do you take your positions with such confidence and conviction? Like the certainly that rates will rise in 2015.

************************************

I often wondered about that as well.

But think about it, this Blog feeds on controversy and debate.

Saying that interest rates MIGHT rise in 2015 or house prices MIGHT fall is hardly going to create an irresistible urge to jump to the keyboard to agree or argue in most people. The exception of course, is Mark, he never met a sentence yet with which he did not feel absolutely compelled to disagree.

#282 maxx on 01.22.15 at 10:11 am

This rate cut will do absolutely nothing to aid, or propel forward to resolution, the colossal mess that this government and central bank have crafted:

– savers will not change, they will double and triple down;

– whatever savings people have will be preserved like the life raft they need for a very uncertain tomorrow- and there is no tomorrow for at minimum one generation, particularly when they are encouraged to work for nothing and cannot even begin to build their dreams;

– real estate is a misappropriated and practically unlegislated disaster in this country- the only thing keeping prices aloft, not value, mind, is the endless barrage of CB mind games, underpinned by our “current” government which FIRE makes a banquet of;

– the real economy will continue to hurt, and hurt more going forward, which will continue to impact commodity exports- check-mate;

– the CB and government have absolutely nothing left in their bag of tricks to get them out of the corner they’ve slowly and methodically painted themselves into; attempting to “buy time” with futile rate reductions in the vain hope of “emerging into the sunlight” without pain, paying the piper or doing the work required will never work;

– skewing the economy in favour of business, rather than employing a balanced distribution approach still doesn’t work- business talks a powerful game, the only goal of which is to ceaselessly stack the odds in its favour, whilst hoarding cash and laying off so as to maintain a saleable balance sheet;

– as anyone with wealth knows, the road to it is not in the least bit sexy, takes time and always flows back into the real economy. The main economic fuel today is consumer debt accumulation, past its best before date;

– the economic action plan is an ongoing disaster, unless it was almost entirely a play for social stability;

-oh, and we’re waaaay past RECESSION. It’s called a DEPRESSION. What msm calls it is irrelevant. We’re in it now, certainly economically, but perhaps more importantly, in the soul of this nation.

#283 liquidincalgary on 01.22.15 at 10:47 am

Smoking Man says:

I’m cheap, won’t take much for me to switch teams.

==========================================

AND he still bends over for pennies!

#284 John Rickett on 01.22.15 at 10:48 am

My property taxes are going up $150, water bill is going up $75, electricity bill is going up $110, auto and home insurance is going up $125, food bill is going up at least another $300, internet and cable is going up $100, except for gas for now but wait until spring, summer 2015.

This is not including things that creep up like car repairs, house repairs etc.

When you all add it up, me saving $600 a year in interest will not really do much in the end.

#285 Victor V on 01.22.15 at 10:51 am

PRICE DROP #4 – 52 Heath Street East – DEER PARK

http://themashcanada.blogspot.ca/2015/01/price-drop-4-52-heath-street-east-deer.html

I first posted this 5+2 bedroom, 8 bathroom house on a 29 x 132 foot lot at 52 Heath Street East in Deer Park more than a year ago.

It had already been listed since November 2013…

For $3,449,000.

It didn’t sell and the price was dropped in March to $3,399,000.

It was still waaaaaay too high and the price was dropped in June to $2,950,000.

Still too high.

So there was another drop in November to $2,789,000.

It has just had another drop…

To $2,699,000.

#286 debtified on 01.22.15 at 10:53 am

#207 JuliaS

Gold was 2nd best performing currency last year. In USD it appreciated only 1.3% less than DJIA.

Please enlighten us how you were able to short it so successfully against a %15+ depreciation in CAD?

Gold is not a currency. — Garth

**********************************************

First, as Garth said, gold is not a currency.

Normally I would not bother replying to someone who calls gold a currency. I am sure it is going to be a waste of my time. But I am feeling charitable this morning so here it goes: (numbers used are for simplification but they are a fairly accurate representation of actual transactions)

1. On Sep. 2014 I transferred CAD$1.1 to my US account to get US$1
2. I bought JDST with the US$1 on the same day
3. I sold same JDST in Nov. 2014 for US$3
4. I still have the US$3 in my US account but if I exchange that to CAD$ today, I would probably get CAD$3.3
5. So, my original CAD$1.1 could easily be worth CAD$3.3 today.
6. I am planning to buy a brand new Harley with the money I made, with some cash left over to spend at the Rockies while I tour in it with my new bike next Summer. You know, to help the Canadian economy ;)
7. Or maybe I’ll get back into JDST again. It’s only US$0.50 now. So JuliaS, how about you buy more gold and I buy more JDST and let’s chat again before end of the year to compare results?

Have a nice day!

#287 waiting on the westcoast on 01.22.15 at 10:56 am

Mark – kudos on your rate pick! I am still genuinely stunned at the announcement.

Did everyone see this?… Gorman at Morgan says the Fed should raise rates.
http://www.cnbc.com/id/102359192

#288 Grantmi on 01.22.15 at 10:59 am

Oliver says HE DIDN’T KNOW THE RATE CUT WAS COMING YESTERDAY!!!

Horse Pucks!!!!

#289 CalgaryRocks on 01.22.15 at 11:07 am

This smells of Harper pandering to his western base just long enough to get to the election.

I thought low CAD$ is good for the Ontario manufacturing sector.

Now you’ve got it and you’re still not happy.

#290 CJ on 01.22.15 at 11:16 am

Mark,

I live in Calgary. I’m going skiing on Saturday. I have a job. I own a house. Life is good.

I think you need to stop worrying.

Doom and gloomers are funny people. They waste their lives telling us the world is about to end. And then they wake up one day and they’re 90 years old, likely wondering what the hell just happened.

#291 Blacksheep on 01.22.15 at 11:19 am

All but a handful Dogs don’t understand what’s happening. The interest rate drop by the BoC is not about:

1) Enticing any one to buy a home.
2) Saving .25% interest for those, already in debt.
3) Pushing RE values higher.
4) Making it easier for virgins to qualify.
5) Allowing bigger LOC’s

It is ALL about PERCEPTION.

Canada has been recognized as having a huge housing bubble for a while now. Every one from foreign banks to the IMF states our home prices are to high when compared other cities, most recently, Hong Kong.

Guess what, In all those real world comparisons, we just got 20 % cheaper!

Yes Harpers system will reap many other benefits from a very weak CAN $, but this was the primary reason the dollar is in free fall…and I don’t think it’s over.

Housing crash averted. Harper is a hero.

#292 poundingsandinPeachland on 01.22.15 at 11:22 am

Why send the borrowing binge over the edge while making houses even less affordable and punishing savers with GIC rates soon to be pounded to sand?…Garth you missed me didn’t you, come on admit it

#293 sentry on 01.22.15 at 11:25 am

This is sickening…more evidence that the Harper Government has no other concerns except to be RE-ELECTED at any cost,including the future of Canada.We cannot afford this or any of the other promises.The time is now for the Liberals to appeal to common sense and get elected on a platform of truth about the financial health of the country,and the moves required to correct the path of these ‘Merican Puppets.I am old enough to remember when we were a sovern nation,a peace keeping nation…..oh,but we have strayed so far in so short of a time.

#294 oldmac on 01.22.15 at 11:28 am

Well well well…. when all the under-educated millennials are stressing over their mortgage debt and 2 new cars – I’ll be working on my off grid palace.

Want to save for the future? Insulate yourself against economic shocks? Few things are better than not paying a mortgage or utility cost. I’ll keep changing the oil myself on my used car; so I’m not worried about that. And yes if it gets more complicated than that – no problem.

Was it easy to get here? Absolutely not. Nearly 15 years of research, training, learning from others who went before me. It seems strange to me that so few people come to this very logical conclusion. In 5 years I’ll be able to live comfortably off $1000 / month for my entire family. Pretty sure I could sell just organic potatoes and make that comfortably. (No I won’t be buying thousands of acres and subsidized farm equipment with massive loans. I’ll be using hard-learned permaculture concepts that often cost nothing or very little, thanks).

Meanwhile the rest of the plebs will be trying to outsmart a much manipulated global financial market. They’ll try to ignore the BRICS trying to overthrow the dollar as the reserve. They’ll talk about the 7% on their portfolio they earned last year, meanwhile struggling with their massive debt load. They’ll chase the hummers they don’t need and don’t know how to drive. They’ll be buying the latest iDevice that has little more functionality than the one released 5 years ago. They’ll wait in line to get that $5.50 chai tea latte while I wake up late and make one in my mountain facing kitchen.

They will worry about their heating costs while my passive solar, well insulated house costs 0$/month. They’ll worry about the job that a few 18 year old kids did replacing their roof while I rest easy under my steel one that’ll be good for the next 75 years. They’ll be installing 15 pot lights in their renovated kitchen to try to give some ambiance; because it’s really hard to artificially create a space that looks inviting when you’re just a couple of meters away from the next house over. They will wonder why they have mold in their 8 year old house; while my only encounters with a humid environment will be at the beach – or picking chanterelle mushrooms in the back 40.

Sometimes the smartest thing is not trying to outsmart the existing broken system – it’s making your own. When will the rest of you realize this? Well if everyone could get past their need to exceed their neighbor and put their ego down – it would become self evident; like any other truth. Keep running on that wheel folks; for if you step off you might garner the perspective that the wheel leads nowhere.

#295 David on 01.22.15 at 11:36 am

There is no magic elixir for the great oil bust.Considering that oil and natural gas have been a big part of Canada’s exports so there is some big pain in store. Its bad enough south of the medicine line right now but domestic oil and gas production stays at home.

http://davidstockmanscontracorner.com/the-great-american-oil-bust-massive-debt-overhang-will-kill-drillingjobs-but-boost-short-term-production/

#296 Larry1 on 01.22.15 at 11:41 am

You hang with an Investors Group guy? Explains a lot. — Garth

Haha. Yeah. Everyone’s ex-IG now. Grew their books there, got their CFAs and went to real financial shops. Better place to start than the banks I’d say.

#297 CJ on 01.22.15 at 11:46 am

The cynic in me says the rate drop was at least partly driven by a desire to keep house prices artificially inflated so the government can continue to collect high(er) property taxes.

Raise rates, reduce property values, tax revenue drops, no?

#298 Toronto_CA on 01.22.15 at 11:48 am

Now Joe Owe is telling people that they will still give a balanced budget, despite lower growth and low oil & gas tax revenues and a bunch of promises. Well, at least if they balance the budget I’ll get my 11,000/year TFSA room. Oh, wait, I’m sure that will be the one election promise they renege on.

“In an interview with The Canadian Press at the World Economic Forum in Davos, Oliver said he’s rejecting suggestions that a small federal budget deficit would be economically acceptable and he insisted the government won’t return to a deficit.”

#299 Rational Optimist on 01.22.15 at 11:52 am

50 Jeff Hodgson on 01.21.15 at 8:18 pm

That was interesting, thanks. I have no strong opinions about the Bank’s independence or not. I share your skepticism about its being full and complete, though, and wonder what pressures the government might be able to exert on them. I think that your theory is plausible. If it’s accurate, they’re buggers to say the least.

My question for everyone is: what options does the Bank of Canada have when the U.S. raises its short-term rates?

#300 Peace Love Unity Respect on 01.22.15 at 11:52 am

Canada’s real estate market is NOT like Japan. Japan has almost zero immigration and a falling birthrate. Canada has wide open immigration, and no limits on foreign ownership.

I know Garth doesn’t buy the HAM thing, but everyone who actually lives in Vancouver knows it’s real (and that’s why the government refuses to keep track of how much foreign ownership there is). The real estate market will be consistently propped up by foreign money. The tanking dollar just makes that easier and easier.

Future prediction: Harper offers free instant citizenship to anyone who will buy a house over $1 million.

#301 waiting on the westcoast on 01.22.15 at 11:52 am

Garth – most comments ever?

#302 Mark on 01.22.15 at 11:53 am

“The rate cut does not apply to fixed-rate mortgages, which 70% of people have. So nobody can ‘lock in’ at the reduced rate because at this point it only influences variable-rate loans. — Garth”

And at this point, its not even influencing variable rate loans, as the Canadian banks are refusing to move their “Prime” rate downwards to match, as traditionally has been the case.

Which makes the cut a big nothing in terms of the already declining housing market.

What a bunch of jokesters in the media yesterday suggesting that it would actually be cheaper for consumers to borrow.

#303 Victor V on 01.22.15 at 11:55 am

https://ca.finance.yahoo.com/blogs/balance-sheet/the-bank-of-canadas-surprise-interest-rate-cut-111220886.html

TD Bank economist Leslie Preston doesn’t see consumers rushing out to buying big-ticket items and racking up debt based solely on the 25-point basis cut from the Bank of Canada.

She also says the household debt-to-income ratio, while at a record as of the third quarter, has been growing at a slower pace than in recent years, which is a sign it’s getting under control.

“Despite these continued very low levels of interest rates Canadians have already pared back their pace of debt accumulation,” Preston says.

If the bank didn’t increase rates, she says the debt-to-income ratio may have increased anyway as more people in the oil patch lose their jobs have trouble making ends meet.

“The cut was to help consumers out there … deal with the debt burden they already have,” Preston says.

“While some Canadians might ramp up debt a bit, there are a lot of people who aren’t going to be able to spend because they are either losing their job or uncertain about their income because of uncertainty in the oil patch.”

#304 Toronto_CA on 01.22.15 at 11:59 am

“#252 Pablo on 01.22.15 at 2:42 am
So again, for those who have been saving and waiting in the RE market, when does one buy? 2016? 2020? Never?”

Follow Garth’s rule of 90, make sure you plan to stick in the place for at least 5-7 years, and can afford a potential interest rate hike to your mortgage (which now seems further off than a few days ago). Don’t plan on house price appreciation beyond inflation, and prepare yourself mentally and financially for a possible decline of up to 30% in value.

#305 For those about to flop... on 01.22.15 at 12:06 pm

GOOD MORNING SPORTS FANS.
What is the difference between the Bank of Canada and the New England Patriots?
The New England Patriots know how to let the air out of something slowly!

#306 Mike S on 01.22.15 at 12:11 pm

“Barring an oil recovery to at least >$60, Poloz has basically stated that there will be additional policy action.”

If that were to happen, and the US were to raise rates

What is your opinion on switching some of the Canadian bonds to CAD-hedged US bonds, for instance the new VBU etf?

#307 Larry1 on 01.22.15 at 12:11 pm

You hang with an Investors Group guy? Explains a lot. — Garth

Actually, come to think of it I still know one guy who works there. The only advisor I know who makes 7 figures. Selling high MER funds to dumb rich people pays well I guess.

#308 CalgaryRocks on 01.22.15 at 12:13 pm

Off the grid guy….Was it easy to get here? Absolutely not. Nearly 15 years of research, training, learning from others who went before me. It seems strange to me that so few people come to this very logical conclusion. In 5 years I’ll be able to live comfortably off $1000 / month for my entire family.

It’s really not how much you spend in terms of absolute $$$ but how much you spend compared to how much you earn.

If every month you had X$ coming in doing something you enjoy (like for example, collecting dividends is enjoyable to many), then you wouldn’t care if you spent .75X$ and saved .25X$.

So, IMHO, it is more productive to work on your earning power rather than spending the same amount of effort trying to reduce your monthly spent to 0$.

You have much more control over the first than you do, the second.

So, with that in mind, maybe sharing the knowledge you’ve accumulated over the past 15 years could turn into a lucrative business for you which will bring in much more than than organic potato farming.

#309 BlackDog on 01.22.15 at 12:15 pm

@oldmac, I admire what you are doing, although you do come off a bit cocky. Parents of my daughter’s friend live off the grid also. I sort of wish I could do it too, but the other half would never want to go there, and I’m not sure I would have the initiative anyway – no doubt it took a lot of research, work and planning. Good for you.

#310 Ray Vasquez on 01.22.15 at 12:17 pm

Anyone that is looking for a 5 year GIC, RRSP, RRIF, TFSA , 3.10% at Luminus Financial.

Seems the highest for GIC rates today considering what is going on!

Luminus? Seriously? — Garth

#311 Ret on 01.22.15 at 12:17 pm

#202
Jim Prentice would like the unions to take a pay cut. They probably would with one condition, that he takes the same cut that they take for the same length of time.

Not much chance of that. Talk is cheap, leadership and action takes guts and courage. So what’s it going to be Mr. Prentice?

#312 Mark on 01.22.15 at 12:19 pm

“So again, for those who have been saving and waiting in the RE market, when does one buy? 2016? 2020? Never?””

I’m thinking it will take roughly a triple of the stock market (ie: TSX) relative to the housing market to make rotating from stocks into RE a viable investment proposition in Canada at current prices. After all, currently stocks are at a P/E of roughly 15, while houses are at a P/E of 35. Stocks logically should have a higher P/E on account of the much higher earnings growth rates implied.

This could, of course take many forms. Ranging from stocks tripling, housing remaining flat, to stocks remaining flat, housing going down by 66%. And lots of scenarios inbetween. But trading investment equity for home equity would at least require, IMHO, equivalent implied returns to make it even look remotely interesting to trade from a diversified and highly liquid asset class (ie: stock index ETFs), to an illiquid, concentrated, and very illiquid asset class (residential RE).

#313 Stoopid Idiot on 01.22.15 at 12:21 pm

Gold in every currency ( except the U.S. Dollar) … just keeps going up

Free Markets Have Been Completely Obliterated-Michael Pento
By Greg Hunter On January 21, 2015
Money manager Michael Pento says, “We live in a world now where free markets have been completely obliterated. You can’t find a free market left on the planet, and that goes for commodities, equity markets, currencies and particularly goes for the bond markets. The bond markets now do not represent any vestige of reality whatsoever. That should be apparent to anyone with a pulse or an IQ better than a retarded ameba.”

http://usawatchdog.com/free-markets-have-been-completely-obliterated-michael-pento/

Are Central Bankers Losing The Plot: “The SNB Move Signals A Spectacular Loss Of Nerve”
Submitted 01/21/2015

It signals a spectacular loss of nerve when you have a country like Canada with the worst household debt levels in the developed world and an overheated housing market.
The expected cut in 2015 GDP forecast looks optimistic, when one considers that the energy sector accounts for 25% of business investment in GDP terms, and one might suggest that the GDP forecast should be closer to 1.0%, on the basis that there is likely to be a much broader fall-out from the energy sector to “stall” (housing, transport, employment, etc).
As the evidence on this accumulates through the year, there appears to be considerable risk that the BoC’s forecasts look foolish – primarily in GDP terms, but quite possibly in CPI terms too, if the CAD starts a slide to USD 1.30 and the BoC’s deflation problem evaporates. At which point memories of the very undistinguished period of Gordon Thiessen’s stewardship of the BoC may come back to haunt it.

http://www.zerohedge.com/news/2015-01-21/are-central-bankers-losing-plot

#314 NorthOf49 on 01.22.15 at 12:32 pm

“Oil drops under $47 as supplies hit highest levels in 80 years” <- Yes, that headline says eighty!!!

SAN FRANCISCO (MarketWatch) — Crude-oil futures dropped further on Thursday after a weekly supply report showed a larger-than-expected increase in crude inventories, and U.S. stockpiles were at the highest in eight decades. The U.S. Energy Information Administration said crude inventories rose by 10.1 million barrels on the week ended Jan. 16. Analysts polled by Platts had expected an increase of 2.5 million barrels for the week. Moreover, at 387.9 million barrels, U.S. crude oil inventories "are at the highest level for this time of the year in at least the last 80 years," the EIA said in the report. Gasoline stockpiles increased by 600,000 barrels, while distillates inventories declined by 3.3 million, the EIA said. The analysts surveyed by Platts had expected gasoline stocks up 1.05 million barrels and distillate stocks, which include heating oil, up 167,000 barrels. Crude for March delivery was off $1.57, or 3.4%, at $46.11. It had traded at $47.14 moments before the EIA report was released.

http://www.marketwatch.com/story/oil-drops-under-47-as-supplies-hit-highest-levels-in-80-years-2015-01-22?link=MW_home_latest_news

#315 TurnerNation on 01.22.15 at 12:34 pm

XRE on fire, to 18 today. Morguard announced share buyback.

#316 Rusty Venture on 01.22.15 at 12:38 pm

@ Rational Optimist

The US will raise their overnight rate eventually, but the question is when? Look at the yield for 30 year T-bills

https://ca.finance.yahoo.com/echarts?s=^TYX#symbol=^TYX;range=5y

#317 rentin on 01.22.15 at 12:39 pm

“Not long ago smart Maples were taking my advice to buy cheap houses in Phoenix with $1.10 loonies.”

Ah ah ah…. tsk, tsk…. you were advising people sell Canada, buy USA for more than a single day.

Easy on the indulgence…..

#318 BlackDog on 01.22.15 at 12:44 pm

From the GlobeandMail:

A rate cut will be “unambiguously good” for the Canadian housing market, particularly outside Alberta, said Toronto-Dominion Bank economist Diana Petramala. Consumers seemed to echo that sentiment yesterday, with real estate brokerage Zoocasa reporting that traffic to its online listings website jumped 20 per cent after the bank’s announcement.

http://www.theglobeandmail.com/report-on-business/economy/poloz-risks-fuelling-overheated-housing-market-with-record-level-debt/article22569652/

#319 mid20millenial on 01.22.15 at 12:50 pm

#252 Pablo
So again, for those who have been saving and waiting in the RE market, when does one buy? 2016? 2020? Never?

Given the returns on the stock market the last few years, I don’t think those people are even tempted to buy a house at this point.

#320 Ron Miller on 01.22.15 at 12:53 pm

Are we supposed to vote Liberal in the fall?

#321 Dual Citizen In Canada on 01.22.15 at 12:58 pm

To all the local owners of RE in Toronto and Vancouver, list your home and wait for the suckers (HAM, whoever), to buy and then bolt from this country with your loot. The buying herd is ripe for the pickings. The real purpose of HAM should be to make all local Canadians rich. Then let the buyers deal with the fallout of the bubble when it pops.

#322 Victor V on 01.22.15 at 1:00 pm

http://www.theglobeandmail.com/news/politics/finance-minister-vows-balanced-budget-in-2015-despite-oils-slump/article22573028/

Finance Minister Joe Oliver says he will not budge from his plan to deliver a balanced budget come April, even with the recent decline in crude oil prices.

In an interview with The Canadian Press at the World Economic Forum in Davos, Oliver said he’s rejecting suggestions that a small federal budget deficit would be economically acceptable and he insisted the government won’t return to a deficit.

Oliver’s comments came a day after the Bank of Canada shocked the business world by dropping a key lending rate by one-quarter of a percentage point in response to the huge decline in crude oil prices since November.

The Finance Minister said that he wasn’t aware in advance of the Bank of Canada’s decision to cut its trend setting rate Wednesday to 0.75 per cent, but added he was “not surprised” by the announcement.

#323 Nottarealtor on 01.22.15 at 1:08 pm

#292 Blacksheep

“Housing crash averted. Harper is a hero.”

I trust you are being sarcastic.

The meaningful measures of affordability have little to do with international comparisons the way you suggest.

Price to income, price to rent ratios are all internal, expressed in C$.

But…if you are serious, then there may be a public relations job waiting for you with the Harper cons. They respect the ability to bullshit with no inhibitions.

#324 Oil Is Sticky on 01.22.15 at 1:14 pm

#269 crowdedelevatorfartz on 01.22.15 at 9:27 am
@#256 Never Give Up

“It is election year. As long as they can contain damage until the election and win, Then who cares what happens…….”
+++++++++++++++++++++++++++++++++++

total agreement

———

x2

Problem is….who do you vote for?

We have Dumb, Dumberer and Dumbererer. You decide who is whom but it’s the truth. This is why I don’t even vote.

#325 Mike S on 01.22.15 at 1:19 pm

“Canada has been one bad financial news story after the next these last few weeks. People do’t feel rich any more, they feel threatened. Threatened folk draw back and don’t pile on more risk by buying bigger houses.

The Spring RE market will be a bust. The tap in people’s minds is now turned off.”

Don’t agree about the tap in people’s mind turned off yet (at least not in Toronto) but there are a few interesting developments that should happen by spring

– Seems like no saving Alberta, unless the oil rebounds quickly

– Bank earnings were already disappointing in the last quarter, with some business tied to O&G it would be interesting to see how they are going to keep that profitability without employment reductions & bigger loan spreads (BoC seems to help a bit with the rate move)

– For Toronto market, which is already officially in decline (see detached sector according to TREB) to present a usual/”all is normal” growth of 7% YoY (April to April), it means the detached prices have to shoot up ~15% by Spring. would be interesting to see that happen

#326 Victor V on 01.22.15 at 1:20 pm

#301

Future prediction: Harper offers free instant citizenship to anyone who will buy a house over $1 million.

No need to predict. A new immigrant investor program is being launched this month. In order to qualify, the investor will require a net worth of $10M and along with other criteria, will need to invest $2M into a ‘non guaranteed’ VC fund for 15 years.

http://www.cic.gc.ca/english/immigrate/business/iivc/index.asp

#327 Mike S on 01.22.15 at 1:27 pm

“In short, the rate cut does diddly to ease our epic debt load. But it could do a lot to increase it”

Some thoughts about the Debt/Income rates in Canada (~1.63 the last time I checked)

– Debt was going to continue increasing, no matter what the BoC did, simply because there are many “in construction” projects that are not yet financed. so even if all new deals stop, we still have several months-years for the old buyers to get the keys and that new mortgage

– The other side of the story is incomes. These were already in danger because of the looming cuts in the O&G/Mining sector, which again means debt/income to shoot up

There is no good solution for Poloz. Why do you think Mark Carney left?

#328 Blacksheep on 01.22.15 at 1:33 pm

And regardless of what they say:

It’s not about oil’s decline. As many have already commented here, the chances are very high, this functionally irrelevant, but currency debasing, rate decline, will never make it through the banks to the consumer.

So what changes?

PERCEPTION.

#329 Mike S on 01.22.15 at 1:35 pm

“Combined with the falling $, Ontario will blossom and the housing market will remain buoyant and grow.”

Are you sure about that?
Did you check the Ontario’s USD denominated debt maturing in 2015-16?

#330 Rick on 01.22.15 at 1:37 pm

You know what’s funny Garth, your hubris when it comes to your predictions. You make for a fun read, but lately you’ve been losing a lot of credibility with your doom and gloom.

Also, you are just as bad as the real estate community that you claim makes up stats. Your Calgary Deathwatch is constantly throwing around numbers that have no context except to prove how right you are.

Instead of just saying Calgary listings have bloated 70%, maybe you should use some historical averages. The last winter period was affected by the flooding and had some very low inventory figures.

According to CREB, single family inventory in March 2014 was the lowest level since 2006. I can already see your March headline: “CALGARY IS DEAD and I WAS RIGHT!!!”.

The Calgary stats come directly from the local real estate board. Complain there. — Garth

#331 For those about to flop... on 01.22.15 at 1:45 pm

What is the difference between the New England Patriots and the Bank of Canada?
The New England Patriots know how to let the air out of something slowly!

#332 Dub on 01.22.15 at 1:46 pm

Has anyone noticed lately the efficiency of the gasoline has gone down. Last tank I drove 250 kms with 3/4 of a tank. I usually do close to half. I wonder if the gasoline has more fillers now to make up for the losses ?????? Anyone?

Release the parking brake. — Garth

#333 Oshawa on 01.22.15 at 1:59 pm

Last!

#334 Snowboid on 01.22.15 at 2:02 pm

#248 Oil Is Sticky on 01.22.15 at 2:14 am…

Some examples of items that would still be less expensive in Phoenix if the Canadian dollar went down to 70 cents US:

Fuel – 40.5%
HOA/Strata – 50.8%
Milk – 55.8%
Clothing – 47.7%
Groceries – 26.5%
Beer/Spirits/Wine – 62.7%
Building Supplies – 34.2%
Major Appliances – 28.2%

In fact, we would only start to see select expenses equal to Canadian (BC) costs if the dollar fell to 60 cents US. A few would be more at this exchange rate – notably utilities such as power and water – as well as property taxes.

Of course there is more competition here, with the greater Phoenix area having a population about the same as all of British Columbia.

But is it any wonder that over 550,000 Canadians spend all or part of the winter in Arizona?

#335 Paul on 01.22.15 at 2:07 pm

#333 Dub on 01.22.15 at 1:46 pm

Has anyone noticed lately the efficiency of the gasoline has gone down. Last tank I drove 250 kms with 3/4 of a tank. I usually do close to half. I wonder if the gasoline has more fillers now to make up for the losses ?????? Anyone?

Release the parking brake. — Garth
=====================================
That’s funny
It’s because the dollar is down 20% what did he expect
better mileage?

#336 I'm Still Around on 01.22.15 at 2:11 pm

It’s disappointing that the BOC would cut rates…it’s just gonna encourage people to continue to borrow their brains out and the dollar is just gonna keep on sliding. Seems like they just keep kicking the can further down the road without facing the music. This won’t end well.
Thanks for all your great advise Garth. Love reading your blog!

#337 Emma Zaun - GreaterFool Unpaid Intern #007 on 01.22.15 at 2:12 pm

No surprise, the Doomsday Clock is now the closest it has been to global catastrophe since 1984 and 1953.

http://www.usatoday.com/story/news/nation/2015/01/22/doomsday-clock-three-minutes-to-midnight/22158457/

“In 2015, unchecked climate change, global nuclear weapons modernizations and outsized nuclear weapons arsenals pose extraordinary and undeniable threats to the continued existence of humanity,” the Bulletin of the Atomic Scientists said in a statement.

“World leaders have failed to act with the speed or on the scale required to protect citizens from potential catastrophe. These failures of political leadership endanger every person on Earth.”

World leaders have screwed up, yes.

But so have dickhead bosses like you, Garth.

Jeezuz – 411 posts to screen yesterday and almost 350 so far today!!

How about some washroom breaks? Or some snacks, you bastard!?

I hope the apocalypse hits your house first, that’s all I’m saying…..

#338 Matt on 01.22.15 at 2:13 pm

Garth, not sure where you are getting these stats from previous post:

“a detached house in 416 today ($859,672) is worth less than it was a year ago ($894,654).”

Toronto Real Estate Board, mid-month reports Jan/15 and Jan /14. — Garth

#339 Ray Skunk on 01.22.15 at 2:15 pm

#333 Dub

Not sure if you noticed but it’s winter out there.

It may shock you to discover that you burn more fuel on a frigid, snowy morning than on a nice, comfortable, late summer evening.

#340 Victor V on 01.22.15 at 2:17 pm

I love the smell of REITs in the afternoon:

https://ca.finance.yahoo.com/q/bc?s=XRE.TO&t=5d&l=on&z=l&q=l&c=

And especially the scent on this one:

https://ca.finance.yahoo.com/q/bc?s=HR-UN.TO&t=5d

#341 greg on 01.22.15 at 2:17 pm

DELETED

#342 Kenchie on 01.22.15 at 2:30 pm

Proverbial poo hits the fan in Q2, according to this…

http://www.bloomberg.com/news/2015-01-22/oil-drillers-going-to-die-in-2q-on-crude-price-swoon.html

#343 Ray Skunk on 01.22.15 at 2:32 pm

Loving this hot REIT action. ZRE now oversold.

Almost touching the levels before the big REIT crap-out of ’13.

#344 screwed on 01.22.15 at 2:36 pm

What does the variable rate mortgage contract state in terms of BoC rate adjustments and the charter banks?

Make no mistake. Had the BoC announced a rate increase, the banks would have adjusted their prime and the variable mortgage rates within minutes post the announcement.

Now they are dragging their heels or outright refusing to pass on the rate reduction?

Is it time to consider hiring a legal team and preparing a class action suit?

#345 Blacksheep on 01.22.15 at 2:42 pm

#292 Blacksheep

“Housing crash averted. Harper is a hero.”
———————————————————–
Notta # 324,

“The meaningful measures of affordability have little to do with international comparisons the way you suggest.”

“Price to income, price to rent ratios are all internal, expressed in C$.”
————————————————————
In certain cities like Vancouver, I have been forced to accept, standard metrics don’t apply.

Don’t believe it?

I will await your explanation as to how a city with a pre tax income of 70K manages to support an average home value exceeding 1,000,000 $ ?

There simply HAS to be “other sources” of non conforming income. Period.

1) Foreign money:
China, Russia, India, Pakistan, the list goes on and on.

2) Drug money:
Lived here for 50 years and I can confirm, weed is grown pretty much everywhere.

3) Multiple occupancy money:
4 incomes in 1 house = 280K income per said household, totally skewing the pretend figure of 70 K per.
———————————————————–
Notta # 324,

“I trust you are being sarcastic.”
———————————————————–
Dead serious.

Having sold my home in 2008, I didn’t believe it for years. Look into the archives, I was an ardent housing bear that put my money where my mouth was. I bought back in into the RE market at the end of 2013 after being forced to accept the reality of my situation.

If you make the wrong call, sticking with said wrong call cause ‘you made it’, just makes the mistake, that much bigger. I year later things are going my way because getting back into the market was the best move I could make.

#346 Blacksheep on 01.22.15 at 2:43 pm

DELETED

#347 Got Something to say about Bloated Smoking Fart Man on 01.22.15 at 2:49 pm

I deleted it myself Garth! Jesus he is full of himself!

#348 A Yank in BC on 01.22.15 at 2:52 pm

Garth,

#338

C’mon. Not respectful.

#349 Blacksheep on 01.22.15 at 3:02 pm

# 347 Blacksheep

“DELETED”

Finally…I get a deleted.

I didn’t know, all I had to was call the PM names : ]

#350 Nemesis on 01.22.15 at 3:03 pm

#SalaciousThursday’s… #LowRentTales’O… #SecondComings… #”O”Faces… #CowGirlsOfTheWildWildWest… #&Fonda’sGoldenOkies…

[Tyee] – Low-Rent Mansion Living? In Vancouver? Really?

“There’s lots of big houses, including mansions, for rent,” he explains. This one happens to be a big property bought by an overseas Chinese development corporation. “I don’t know if they’re waiting to flip it, sell it or develop it. They’re just looking for somebody to rent the place until then — it was advertised on Craigslist, a normal rental listing.”

http://www.thetyee.ca/News/2015/01/19/Low-Rent-Mansion-Living/

[ChinaDaily] – Ontario highlighted in China’s high-level overseas investment forum

…”With 650,000 Chinese immigrants and 12,000 Chinese students, Ontario has been a vibrant destination for Chinese and proven attractive for investment from China.”…

http://usa.chinadaily.com.cn/world/2015-01/22/content_19372974.htm

[UK Indpendent] – Ruth Wilson claims actresses are treated unfairly in sex scenes: ‘Why do I always have to do the orgasm face?’

“I kept insisting, ‘Why have I always got to do the orgasm face? There should be a male orgasm face. Why is it always the woman who’s orgasming? Let’s analyse the male orgasm,’ she said.

http://www.independent.co.uk/arts-entertainment/tv/news/ruth-wilson-claims-actresses-are-treated-unfairly-in-sex-scenes-why-do-i-always-have-to-do-the-orgasm-face-9995948.html

[UK Telegraph] – ‘Woman on top’ is most dangerous sex position, scientists conclude: Scientists have found that the ‘cowgirl’ position is responsible for half of all penile fractures during sexual intercourse

http://www.telegraph.co.uk/news/science/science-news/11359960/Woman-on-top-is-most-dangerous-sex-position-scientists-conclude.html

[CBC] – Jane Fonda sex comments resonate with Kelowna, B.C. seniors

…”After asking the women at the art class about senior sex, Richards asked one of the men in the class how he would feel if he never had sex again.

“I would die, and I’m 80,” he answered.”…

http://www.cbc.ca/news/canada/british-columbia/jane-fonda-sex-comments-resonate-with-kelowna-b-c-seniors-1.2921663

#351 Mr Stats on 01.22.15 at 3:04 pm

The big 5 won’t lower prime, and thus variable rates, because they want people going into 5 year fixed rates.

But media will portray them as being responsible.

Most sheep will believe it. Got to love Canada.

#352 Mr Stats on 01.22.15 at 3:07 pm

Black sheep,

MOST people have a window to buy when aged 25-35. Miss this and your finances are screwed for life.

And MOST people don’t have 6 figure portfolios or incomes.

#353 Incubus on 01.22.15 at 3:11 pm

Deflation is not a period of generally falling prices; it is a period of contraction in the total amount of money plus credit. Falling prices in an environment of stable money is indeed a good thing. In fact, in a real-money system, it is the norm, because technology makes things cheaper to produce. But when debt expands faster than production, it becomes overblown, then wiped out, and prices rise and fall in response.

The Elliott Wave Theorist, January 2015

#354 Oil Is Sticky on 01.22.15 at 3:15 pm

Notta # 324,

“I trust you are being sarcastic.”
———————————————————–
Dead serious.

Having sold my home in 2008, I didn’t believe it for years. Look into the archives, I was an ardent housing bear that put my money where my mouth was. I bought back in into the RE market at the end of 2013 after being forced to accept the reality of my situation.

If you make the wrong call, sticking with said wrong call cause ‘you made it’, just makes the mistake, that much bigger. I year later things are going my way because getting back into the market was the best move I could make.

——-

I have heard this argument for years and I rarely see anyone defending the 4 points Blacksheep makes as being false. One of my friends is a home builder so coming from the horses mouth these homes are built for 10 or more people. NOT the family of 4 our govt is set up for. And this 10 people per house thing has been slowing killing metro Vancouver for years. The system is not set up for that with schools, hospitals, roads etc etc mostly because of so much tax revenue leakage in these monster homes.

#355 Dub on 01.22.15 at 3:17 pm

US DOW growth is based more on economy improving and the CAD TSX growth is based on lower rates. It should tell you which economy is going to be in better shape the coming year.

#356 tkid on 01.22.15 at 3:27 pm

#226 gut check,

If you owned a condo, or condos, purely as a way to stash money in Canada, just how long would you tolerate a falling dollar before you attempted to sell those condos?

I’d want to have my money in another currency. Love Canada, but losing 3% of my kitty with more losses to be expected – I would want to sell and be out.

Toronto’s condos, yes, there might be blocks of condos suddenly on the market. It all depends on how much of the market is actually driven by foreigners who bought Cdn condos as a way of stashing money in a country considered a safe haven.

#357 Thecomingdepression on 01.22.15 at 3:38 pm

DELETED

#358 footydiver on 01.22.15 at 3:42 pm

I honestly don’t think the BoC decision has anything to do with election year.

#359 Rick on 01.22.15 at 3:49 pm

The Calgary stats come directly from the local real estate board. Complain there. — Garth

I’m not complaining about the stats, but the way you are cherry picking the numbers. Using a 70% number for an inventory increase can be true, but you use that data as validation that Calgary has exorbitant inventory levels now that spell doom.

You’re an investment advisor and should know that using short-term stats as truths are dangerous. I appreciate your blog, but I find it a lot more compelling when it’s a little more even handed — Calgary Deathwatch is more sensational than informative.

#360 Mike T. on 01.22.15 at 3:52 pm

‘Are we supposed to vote Liberal in the fall?’

It doesn’t matter.

Kermit and Big Bird could stand around in photos and read speeches written by other people the same way our leaders do now.

Politics = show business for ugly people

the shadow gov. has the power – you didn’t get to vote for them, they just exist

#361 JSS on 01.22.15 at 4:19 pm

#345 screwed on 01.22.15 at 2:36 pm

“Is it time to consider hiring a legal team and preparing a class action suit?”


A cheaper approach would have been to buy Canadian bank stocks. For example, RBC today would buy you a 4% dividend yield.

#362 Daisy Mae on 01.22.15 at 4:21 pm

#66 For Those About to Flop: Heres’ your answer.

“As an election approaches there is a clear incentive for politicians to inflate the economy. However, post ­election, this causes an accelerating inflation which, if unchecked, would endanger the government’ s reelection chances in the new period. To maximize its chances under short or decaying voter memory, it will want to shock the economy into decelerating expectations as quickly as possible so that a high enough VV curve remains attainable. The pattern that emerges is inflation that continually worsens, and unemployment that continually improves, over the electoral cycle , with an abrupt turnaround immediately following an election. Clearly the flatter the short-run trade offs, the stronger are the cycles.”

— Page 29 of Stephen Harper’s Master Thesis, 1991

#363 Mark on 01.22.15 at 4:25 pm

“What does the variable rate mortgage contract state in terms of BoC rate adjustments and the charter banks?”

Every contract I’ve seen makes it very clear that “Prime” is a rate that is set at the banks’ sole discretion. Some smaller lower-tier lenders often have clauses in their mortgage contracts that allow for an averaging of the “Prime” rates as set by the major chartered banks.

So doubt any sort of lawsuit would have any legs to stand on, and would be dismissed in due course as an abuse of process with costs.

There are lenders that will agree to fix the loan to a spread above the Bank of Canada overnight rate. I happen to use one, so luckily I am enjoying the lower rates.

#364 Sideshow Rob on 01.22.15 at 4:27 pm

#331 Rick
Garth is right. You are wrong. Again. Deal with it.

creb.com

#365 jimmy on 01.22.15 at 4:50 pm

#333 Dub

Ethanol sucks.

For small engines (like your mower and blower) and your vintage vehicles you want to get that sheeeet out.

Last I checked, Shell V Power Premium is ethanol free.
(website FAQ=”Shell V-Power premium gasoline in Canada does not contain ethanol.”)

You can check using something like this:
http://www.aircraftspruce.ca/catalog/appages/gasoholTester.php

Any aviators on the blog building kit planes/homebuilts?
Does the word Oshkosh get you excited?

Gartho, if you continue with Cowtown for Calgary, then you should know your history and use Hogtown for Toronto.

#366 rosie "moving forward" in the knowledge that, "this won't end well" on 01.22.15 at 4:55 pm

Inflation is low so no problem, right?

http://www.huffingtonpost.ca/2015/01/22/income-cities-provinces-canada_n_6524982.html

#367 Daisy Mae on 01.22.15 at 4:58 pm

#218 Larry1:

Garths’ reply: “You hang with an Investors Group guy? Explains a lot.”
************************

Does it ever. Just ask me!

#368 Big D on 01.22.15 at 5:00 pm

#102 LH on 01.21.15 at 9:25 pm
Just got my bonus.
Tough year for the industry in 2014.
My total comp cracks seven figures in cad for the first time. (Approx 1.2 pre tax)
I am the 0.1%
……….
#125
Welcome to the club…
………

Some sort of “Super Douche Club”? Did your mothers not hug you enough?

#369 Kilby on 01.22.15 at 5:05 pm

0 CalgaryRocks on 01.22.15 at 11:07 am
This smells of Harper pandering to his western base just long enough to get to the election.

This seems SO obvious…Everybody around here seems to be in agreement that the BOC is NOT “arms length” from Mr. Harper, maybe that is why Poloz looked so uncomfortable reading out his cut, like he knew it was wrong but he had no choice….

#370 Debtfree on 01.22.15 at 5:08 pm

Winnipeg is number one . Congrats . You must be so proud of yourselves . So glad I never have to work or live there ever again . 29 years since I’ve been there . Not long enough .

#371 Daisy Mae on 01.22.15 at 5:13 pm

#331 Rick: “….but lately you’ve been losing a lot of credibility with your doom and gloom.”

*********************

Not at all. I guess some “can’t handle the truth” but I’d rather know it and prepare as best I can.

#372 Ray Vasquez on 01.22.15 at 5:13 pm

There is 3.00%, 5 year GIC’s for RRSP’s, TFSA’s at ICICI Bank of Canada, State Bank of Canada, CDIC insured.

These are India’s 2 biggest banks.

#373 Kilby on 01.22.15 at 5:16 pm

#324 Nottarealtor on 01.22.15 at 1:08 pm
#292 Blacksheep

“Housing crash averted. Harper is a hero.”

I trust you are being sarcastic.

Stalling the inevitable until after the election (if he is lucky to keep things propped up that long)

#374 Frank le skank on 01.22.15 at 5:28 pm

#183 Kenchie on 01.21.15 at 11:03 pm

What changes did OSFI make over the holidays?
—————————————-
It was actually after the holidays, take a look at Garth’s Jan 13th post.

#375 debtless on 01.22.15 at 5:32 pm

Theory: BOC rate cut to .75 is intended to inflate imported goods (most consumer
purchases) and gasoline price for tax revenue.

#376 NoName on 01.22.15 at 5:36 pm

#345 screwed on 01.22.15 at 2:36 pm

Unless govt. “invite” competition and prevents big 5 from buying smaller players, we wont see any changes how big5 conduct their business, but on an other hand it doesn’t help that an average consumer is in state of confusion…
No amount of lawsuits will hurt big5 in banking sector or big3 in telecom, they are enjoying monopoly propped and backed buy govt.

#377 T on 01.22.15 at 6:00 pm

Garth

You probably wont post this because its just another poster who disagrees with you.

There have been many things you have called wrong. Why don’t you put up the post of the bond yields back about a year ago? When they blipped up and you mentioned rates are going nowhere but up.

Garth, like many others said. The reasons why people are posting like me is because you are posting with such certainty.

Right now we are in a period, like I said time and time again similar to JAPAN. Yes. You will shoot this down but for god sakes man why don’t you just consider it possibly?

Right now I believe we will be getting ANOTHER cut. And, we are heading to .70 cent dollar.

After that we will be at a low rate policy for the next several years. Why?

Cause the only economy on this planet here out just ENDED the QE.

We will soon be starting ours.

#378 Happy Renting on 01.22.15 at 6:01 pm

For all those wondering “most comments ever?” for the Jan 20 and 21 blog entries, sure, blog dogs like to get in a tizzy over the surprise BoC cut (~400 comments per post), but more people commented to express well-wishes when Garth broke his leg (500+)

http://www.greaterfool.ca/2014/01/16/walking-the-dog/

… and even more came to anonymously brag about how rich they are (800+).

http://www.greaterfool.ca/2014/06/19/who-are-you/

Well, at least we have priorities!

#379 mitzerboy aka queencity kid on 01.22.15 at 6:09 pm

party on blogdogz
u 2 garth

#380 Shawn Allen on 01.22.15 at 6:11 pm

Best Floating Rates Ties to Bank of Canada Rates

Mark said:

There are lenders that will agree to fix the loan to a spread above the Bank of Canada overnight rate. I happen to use one, so luckily I am enjoying the lower rates.

****************************************
So tell us which lender, otherwise we may assume it’s the Bank of Mom and Dad.

#381 Blacksheep on 01.22.15 at 6:20 pm

Mr Stats # 353,

“MOST people have a window to buy when aged 25-35. Miss this and your finances are screwed for life.”
——————————————————–
And I’m just like most. I’m now 51 and bought my first home, four houses ago at 26. I’ve owned the whole time other than the 5 years I bailed, cause like Garth, my rational brain said RE gonna crash and it would have, without systemic intervention.

That was my first mistake as there is no friggen rational involved. This is all emotion and group think. I’m a big proponent of: “Only dead fish swim with stream” theory, but unfortunately in this case, it just doesn’t apply.
———————————————————-
“And MOST people don’t have 6 figure portfolios or incomes.”
———————————————————-
100 % Agree…So how the hell is “MOST people” paying for RE in Vancouver?

This is a round hole, square peg issue, it just doesn’t fit.

#382 Rick on 01.22.15 at 6:22 pm

#365 Sideshow Rob
Garth is right. You are wrong. Again. Deal with it.

creb.com
——————————————————
I never said that those stats were not accurate. Again, I simply stated that a statistic can be true, but not a good representation of anything.

Using a 5 year baseline of January inventory levels in Calgary is a much more useful comparison than using just January 2014; Calgary still had low inventory due to the flood that occurred and pent up demand.

#383 Alex on 01.22.15 at 6:29 pm

You do know that 76.45% of all stats are made up on the spot … Don’t you?

#384 Block on 01.22.15 at 6:33 pm

I think that the Bank of Canada is predicting a housing price crash in Alberta so they have lowered rates to allow the chartered banks to support the housing market there.

#385 Rick on 01.22.15 at 6:36 pm

#331 Rick: “….but lately you’ve been losing a lot of credibility with your doom and gloom.”

*********************
#372 Daisy Mae

Not at all. I guess some “can’t handle the truth” but I’d rather know it and prepare as best I can.
———————————————————

Daisy, I can definitely handle the truth. However, we should all keep in mind that anything that hypes one extreme or the other can soon become rhetoric.

Saying that Calgary’s real estate market is done or that it is doomed is extremely one sided and is a blanket statement. I CAN’T say with certainty that Calgary will be okay, but at least I can admit to what I don’t know.

#386 The American on 01.22.15 at 6:44 pm

Simple observation: I’ve cut way back in my participation in this Blog for about six months or so. Just recently, I see an absolute surge in commentary. The correlation I witness? As nearly all of Garth’s commonsensical investment savvy is coming to fruition, the people are arriving in masses with their two cents (or $0.016 USD). It is quite obvious the Canadian economy is beyond stressed at this time, especially given the recent events in oil prices, real estate prices in decline, listings clearly on the rise, massive job losses, Canadian banks being shorted, savings nearing an all-time low, and consumer debt at an all-time high. Apart from the little oil thingy, does any of this sound familiar circa U.S. 2007? Hmmmmmmmmm. Yes, I would say it does. Only MUCH, MUCH worse. Hang on to your asses, folks. Seriously. The slide only processes from here. So, for everyone wondering why or how it happened in the U.S. and making comment as to why or how it would never happen in Canada, I say to you to grab your bucket of popcorn and watch.

#387 aL pacino on 01.22.15 at 6:47 pm

#12 crowdedelevatorfartz on 01.21.15 at 7:49 pm
Dead cat bounce before the inevitable rekoning?

*****************************************

Stop inhaling those potent farts you idiot, it’s making you babble with nonsensical gibberish…

#388 Squad on 01.22.15 at 6:53 pm

Sounds to me like the government wants to keep the housing market going – let the people borrow more with such low rates!! I would imagine the last thing they want is for the housing market to implode right now and lose all the jobs associated with it.

#389 Edward on 01.22.15 at 6:54 pm

#383 Rick

“Using a 5 year baseline of January inventory levels in Calgary is a much more useful comparison than using just January 2014; Calgary still had low inventory due to the flood that occurred and pent up demand.”
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Rick is right in his assessment that a 70% annual increase in listings from last year appears to be stunning and not quite a true reflection of long term averages. But it’s not so bad when you compare it to the longer term averages. January can be indicative of many factors and can exagerate a market shift.

However, let’s wait and see what transpires in the next few months. If the January trends continue for increasing listings and decreasing sales, price deflation will occur.

#390 IMPORTANT ADVICE TO BLOG DOGS on 01.22.15 at 6:55 pm

Notice how everyone who comments here posts as a ‘know it all’ on this blog? A very small minority asks questions but the vast majority just dictate their own “facts”.

Please realize you only truly know the “facts” if your track record proves your predictions. ‘It will happen’ just doesn’t cut it.

Good Luck.

#391 Village Idiot on 01.22.15 at 7:03 pm

It’s 76.5%.. roundup be positive.

#392 Blacksheep on 01.22.15 at 7:04 pm

Kilby #374,

““Housing crash averted. Harper is a hero.””

“I trust you are being sarcastic.”

“Stalling the inevitable until after the election (if he is lucky to keep things propped up that long)”
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First off let me be clear, I’m no fan of Harpers. (or any other politico) But one must acknowledge the tactical way in which he manipulates.

As for the inevitable, it’s already happened.

If you own Canadian RE, YOU already lost 20% of it’s real world value. Sure, you wanna be a child and pull the covers over you face and bleat: ‘But if I don’t leave the country’ go ahead.

In real world $’s, it’s already gone. You should be worrying about how much more your going lose, cause I don’t see oil hitting $ 60 any time soon and we all know what Stevie P. said.

You can write yesterdays date down as the day the Canadian RE bubble, officially deflated.

#393 The Future Is So Bright I Have to Wear Shades on 01.22.15 at 7:06 pm

http://www.cbc.ca/news/canada/british-columbia/williams-moving-and-storage-filing-for-bankruptcy-after-86-years-1.2928099

#394 Sideshow Rob on 01.22.15 at 7:21 pm

#371
Nothing wrong with Winnipeg. It’s a nice place. Winnipeg even has an NHL team. Maybe some day Toronto will have one too.

#395 Village Idiot on 01.22.15 at 7:23 pm

Yikes…
http://calgaryherald.com/business/energy/southern-pacific-seeks-court-protection-from-creditors

#396 Bytor the Snow Dog on 01.22.15 at 7:30 pm

In a real and just world all interest rates charged by banks et cetera would drop in concert with the BOC’s announcement. Unfortunately we live in this world.

The boilerplate allows them to screw us. Just try to scratch a clause or two out of your mortgage/loan agreement before signing if you have the balls and see what happens. You’ll be “negotiating” with the next lender.

More of us need to do it to make these f’ers notice.

#397 Bytor the Snow Dog on 01.22.15 at 7:33 pm

Sorry, the rates would rise and fall for those with variable rate mortgages/loans. Left that out.

#398 Phil Kessel on 01.22.15 at 7:48 pm

#394 Sideshow Rob

Nothing wrong with Winnipeg. It’s a nice place. Winnipeg even has an NHL team. Maybe some day Toronto will have one too.

#################

Must be nice having outdoor ice skating twelve months a year in Winnipeg, huh?

Even your mosquitoes lace ’em up.

#399 Mark on 01.22.15 at 7:49 pm

“The boilerplate allows them to screw us. Just try to scratch a clause or two out of your mortgage/loan agreement before signing if you have the balls and see what happens. You’ll be “negotiating” with the next lender.”

This is why a balanced portfolio is so important, as Garth constantly espouses. If an economic condition arises where the bank can ask for an excess spread, then at least holding the diversified balanced portfolio acts as a hedge. After all, the extra 25bp that the banks will be collecting over the policy rate post-BoC announcement will flow directly to the bottom line of the shareholders.

Diversity in borrowing sources is also important if one is a borrower. Just as its dumb to put all of one’s eggs in one basket for investing, its equally dumb to do the same for borrowing.

#400 Mark on 01.22.15 at 7:55 pm

http://www.cbc.ca/news/business/target-s-package-for-ex-ceo-matches-package-for-all-17-600-canadian-workers-1.2927893

$5.1B default by Target, with very little in terms of marketable assets available for recovery.

No wonder the BoC had to cut and the banks aren’t passing on a dime of such. The possibility of contagion is quite real just from that event alone.

Even LTCM only created a $3.6B hole in the overall financial system when it went bust in 1998. This is so much bigger.

#401 mitzerboy aka queencity kid on 01.22.15 at 8:01 pm

Saudi King Abdullah Is Dead

#402 KOthar on 01.22.15 at 8:01 pm

THE KING IS DEAD…..LONG LIVE THE NEW KING!

http://www.theglobeandmail.com/news/world/saudi-arabias-king-abdullah-dies-new-ruler-is-brother-salman/article22590062/

#403 Ray Vasquez on 01.22.15 at 8:32 pm

Our Canadian dollar to the U.S. dollar has fallen from 1.10 to 0.8082 in what 6 months or so.

This is about a 26.52% drop and we get lower interest rates that are already very low in probably 60, 70 years.

Russia’s currency, ruble loses 43% to the U.S. dollar and they get a 17% bank rate and 10% to 25% bond yields.

As the the Bank of Canada probably cuts at least another 25 basis points maybe 50 more basis points in 2015, I would not be surprised to see a 70 cent dollar to the U.S.

This means a 37% total decline against the U.S dollar when it is all said and done.

We have the worse of both worlds!

#404 Daisy Mae on 01.22.15 at 9:13 pm

Wow! Over 400 comments! People are emotional! LOL

#405 jess on 01.22.15 at 9:29 pm

Canada is not the only central bank to cut rates
Denmark’s peg?
http://www.wsj.com/articles/denmark-cuts-main-interest-rate-1421940429
http://wallstreetonparade.com/

“Mario Draghi, president of the European Central Bank, has announced that he will pump €1.1tn at a rate of €60bn (£46bn) a month into financial markets until September 2016…In a concession to the Germans, Draghi promised that national central banks would bear most of the risk of their governments defaulting, with just 20% of the new bond-purchases subject to “risk-sharing”. Draghi also warned that, “some additional eligibility criteria will be applied in the case of countries under an EU/IMF adjustment programme”. That could allow the ECB to exclude Greek bonds from QE if, for example, a future Syriza government ditched the austerity programme imposed by its creditors.”
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bank leverage –
http://www.whitehouse.gov/the-press-office/2015/01/17/fact-sheet-simpler-fairer-tax-code-responsibly-invests-middle-class-fami
http://www.theguardian.com/business/2015/jan/21/obama-dodd-frank-tax-reform-banks-financial-crisis