The unthinkable

PAINT modified

If Canadian interest rates head lower Wednesday morning, history will be rebuffed. It would be one of the most overtly political moves ever for a central bank. The fallout will be intense. And while there’s supposedly an iron curtain between the PMO and the central bank, you can bet Mr. Harper’s guys have been all over this issue like a rash.

Here are four reasons why the Bank of Canada should not chop.

First, as stated, there’s history. Over the last quarter century Canadian and American fiscal and monetary policy has become more indistinguishable and tedious than the Property Brothers. In fact, with free trade in place and de facto economic integration, what else would you expect? So it shouldn’t surprise you to know that 89% of the time our central bank policy has aped theirs, with rates here moving in virtual lockstep with those to the south.

When it comes to the Canadian bond market, it’s even more profound. Over 25 years, bond yields here have moved with American bonds 97% of the time. How do you think the market will react if we go weird now? Because of an election?

This brings us to the dollarette, currently struggling to stay above the 78 mark.  It swooned from a value of 86 cents US on the last day of 2014 to just 78.5 after the Poloz poodles hacked our interest rate a quarter point a few weeks later. Since then the big bank dog called our economy “atrocious”, then likened it to “a heart patient on life support.” In trying to justify the currency-killing and inflation-goosing move of last winter, he’s hardly inspired confidence.

Another move down on Wednesday? That would be looniecide.

Key to all this is reason three. The Fed. On Friday US central bank chair Janet Yellen made it clear, just in case you didn’t hear her the last 14 times that she said it: rates will rise in 2015. So we’re still on track for one or two quarter-point increases, after which the trend higher will be gradual but consistent, adding about 1% a year for the next two. With the Greeks now slapped around and China behaving, the odds of this happening are about 100%.

Yellen will probably reinforce this message when she testifies before Congress at about the same time Poloz is addressing reporters in Ottawa. She will matter. He won’t.

Finally, a rate reduction this week would take the prime to about 2.6%, five-year fixed mortgages to 2.2% and secured lines of credit to 3%. When you consider that Canada’s core inflation rate is 2.1%, it’s obvious we are in uncharted territory. How much closer can it be for people to get free money when they can borrow $800,000 for the same cost as the principal itself is inflating?

This is why we’re steeped in debt, loaded to the gills with loans and pickled in HELOCs. Canadians are snorfling and chomping their way through billions more in mortgages each month, buying houses in record numbers  (at least in 416 and YVR), at record prices. If Mrs. Yellen lives up to her word (she will) and if the historic correlations between US and Canada bond markets hold (count on it), then people borrowing now at 2.5% will be renewing at 5%.

Given that undeniable outcome, how could the Big Dog be so irresponsible as to drop rates now for a few months, encourage more loans, further inflate house prices and murder the dollar?

Simple. He can’t. But might.

***

A week ago the steerage section of this pathetic blog was full of people moaning and pissing about the imminent demise of the financial world. As always, it didn’t happen. We didn’t even get a decent correction out of the Greek-China-volatility funk. In terms of worrying about an actual bear market (a minimum 20% decline), you have a greater chance of finding a scorpion in your shorts.

And while the situation drags on in Greece (politicians have to approve what last week’s referendum denied), the issue’s dead. So are the theatrics in China, squished by a government that just made panic selling against the law. So there.

Here are some year/year returns you might find interesting. The Dow and the S&P are both up 6-7%. In Europe the German market has gained 18%. London is ahead 3%. In China the Shanghai market (despite the recent temporary plop) has returned 94%. Among the losers are Athens (down 34%) and Toronto (off 3.8%). So, feel sorry for most Canadian investors, since their home country bias means 70% of them have every dollar in domestic assets.

The more you have a balanced, globally-diversified portfolio, the more you mitigate risk and plot a predictable path forward.

Or, you can run around screaming and dripping. Tough choice.

236 comments ↓

#1 Nemesis on 07.13.15 at 5:22 pm

#ScorpionInYourPants?!? #EadyPeasy….

http://youtu.be/oK2r-O2cjXo

#2 The steerage section on 07.13.15 at 5:29 pm

Unfortunately, them’s the ones that went down with the titantic.

#3 Brydle604 on 07.13.15 at 5:31 pm

Oh No, what now, a White Wash?

#4 Bill Gable on 07.13.15 at 5:39 pm

If History repeats, the great unwashed will do absolutely the wrong thing.
So with the puppy at the BOC.

I bet on a CUT.

Our Genial Host knows how pleasant Mr. Harper can be, first hand.

I rest my case.

#5 whitey on 07.13.15 at 5:43 pm

Whoever ends up taking over after Herr Harper is going to have one hell of a mess to clean up. One can only hope that rates go up a quarter point instead of down.

#6 Balmuto on 07.13.15 at 5:45 pm

Economists surveyed by Bloomberg are split right down the middle with 50% saying no cut and 50% saying a 25bps drop. This one’s a real coin toss.

I say they hold. Simply because a) it would be too much of a flip-flop from their last statement b) reluctance to go in opposite direction from the Fed and c) not to sink the loonie any further.

I see them taking a wait-and-see approach until the Sept. meeting.

#7 pwn3d on 07.13.15 at 5:47 pm

A $25,000 house in 1969, adjusted for inflation, would equal $203,000 today. His basic costs (financing, maintenance, property tax, insurance, selling commission) over 46 years would be at least $158,000. That leaves a net of $89,000 in inflation-adjusted dollars from a sale price of $450,000. It looks like his annual return was about 1%. Yup, gravy train. — Garth
—————-

Don’t do that – when you talk about market returns you don’t subtract inflation, fees, taxes ect. If you did that 7% you normally mention would be laughably low, like how you’re implying housing is.

The fact is both housing and equities do well over the long term. No need to play with numbers to make that point.

With an investment portfolio there are no insurance or maintenance costs, no property tax, no 5% commission to sell, no utilities or mortgage payments. Plus it delivers income, can easily be rebalanced to adjust to current conditions and within a shelter delivers tax-free gains. You’re right. No comparison. — Garth

#8 onlythebankerslaugh on 07.13.15 at 5:48 pm

Bet on a fully political decision! Maybe take it down in September to give everyone a feeling of higher net worth cause of real estate and nothing else. Anything else would actually surprize me. What was our record low dollar? Count on an explanation of competing in export markets.

#9 Mike S on 07.13.15 at 5:50 pm

5 yr bond rates as of today:
Canada – 0.78%
US – 1.72%

The correlation seems to be lost in the recent couple of months

#10 pwn3d on 07.13.15 at 5:51 pm

Should a bankrupt government be paying for child care? — Garth
————

Subsidizing, yes. This way is much more cost effective than what the NDP would try to do and the disaster of all day kindergarten in Ontario. And no it should not be means tested. We want rich people to have kids as much (if not more) than poor people. Besides, it is taxable so rich people give half back. Seems fair to me.

#11 Suede on 07.13.15 at 5:52 pm

At least Justin Trudeau has nice hair.

But what the herd doesn’t get is that Mulcair’s carefully crafted beard speaks directly to the young, social hipster generation.

If he starts combing his hair to the side, look out and all hail the new PM.

#12 ben on 07.13.15 at 5:53 pm

Ok look – FTSE is *slightly* up but when you factor in GBP vs USD you are down down down. Also for the EU you have to factor in FX of EUR. EUR is down nearly 20% over a year against the $.

That’s why you buy in C$. — Garth

#13 MSM-free Zone on 07.13.15 at 5:53 pm

“….And while there’s supposedly an iron curtain between the PMO and the central bank, you can bet Mr. Harper’s guys have been all over this issue like a rash…..”
_________________________

A rash? There are antibiotics for those.

Harper? Terminally ill, vegetative state, on an I.V. drip (or deluge) of pre-writ campaign tax dollars, 3 months at best.

An orange can of paint would be more fitting.

#14 Rainclouds on 07.13.15 at 5:54 pm

The Poodle is in a tough spot.

Rt Hon PM Tubby is an angry dude when riled (How else will the smartest guy in the room and worlds greatest economist hang on to the only job he has ever had )

oh right, there are terrorists everywhere….

#15 Mike S on 07.13.15 at 5:55 pm

Toronto condo prices seems to be loosing steam lately (asking price for selected condos going down a couple k$ vs. previous asking)

Will a rate cut be enough to save the day? Let’s see

#16 pwn3d on 07.13.15 at 5:59 pm

At least Justin Trudeau has nice hair.

But what the herd doesn’t get is that Mulcair’s carefully crafted beard speaks directly to the young, social hipster generation.

If he starts combing his hair to the side, look out and all hail the new PM.
——————-

Problem with that is young people don’t vote, and there aren’t enough of them. Looking like a Conservative minority if not better.

#17 Mike S on 07.13.15 at 6:01 pm

Prudent BoC policy would be waiting for the RE to correct about 5%-10%+ before adding any more stimulus

Otherwise what tools will they have once the RE starts to correct?
What is to stop a significant RE crush from happening down the line?

#18 Danger Dan on 07.13.15 at 6:04 pm

Harper promised responsible policy, time for BoC to deliver

#19 Victoria Real Estate Update on 07.13.15 at 6:04 pm

The debt-induced economic problems of a country (example: Canada in 08-09 and earlier) are not fixed by piling on years of cheaper and cheaper debt.

The US economy was able to reset after house prices corrected there and household debt was reduced.

Canada’s economy is faltering in comparison.

Sky-high (bubble) house prices and extreme, growing (record) debt levels are bad for a country’s economy.

Canadian 5-year fixed mortgage rates will begin moving higher later this year.

House prices fall as rates rise.

Buying a house at peak or near-peak (bubble) prices when rates are about to begin rising (1% per year) at a time when the Canadian economy is faltering is obviously a bad idea.

#20 Honest Accounting on 07.13.15 at 6:07 pm

Wow Garth, that is some quite disingenuous representation of how buying a house in 1969 worked out. How did you manage to skip the fact that up to 550 months of rent were collected as income from this property? Either tax free, if owner lived in it, or taxable after expenses, if it was rented to someone else.

I did not include the imputed cost of thousands of hours of labour maintaining it, either. It was a simple accounting of the performance of this asset. Not impressive. — Garth

#21 alf on 07.13.15 at 6:09 pm

Of course we must all continue to believe in the omnipotence of the central banks and applaud the value of state interference in the market place; according to Garth. I am also waiting for my million dollar cheque from some all caring Government institution.

#22 ben on 07.13.15 at 6:10 pm

And when you sell Garth?

#23 Squeals from the steerage on 07.13.15 at 6:11 pm

Freetrade with Ukraine will solve everything.

http://www.theglobeandmail.com/news/politics/canada-ukraine-agree-to-free-trade-deal/article25486492/

#24 Balmuto on 07.13.15 at 6:12 pm

#17 Mike S

“Toronto condo prices seems to be loosing steam lately (asking price for selected condos going down a couple k$ vs. previous asking)”

Yep, I’ve been noticing that as well. Seems like the downtown condo market has hit a plateau. I think it’s a supply issue. Not getting the impression that it’s a correction yet but it could be the beginnings of one.

#25 Frank on 07.13.15 at 6:16 pm

With an investment portfolio there are no insurance or maintenance costs, no property tax, no 5% commission to sell, no utilities or mortgage payments. Plus it delivers income, can easily be rebalanced to adjust to current conditions and within a shelter delivers tax-free gains. You’re right. No comparison. — Garth

You’re missing out on rent. Housing is a basic need. Rents in major cities have risen faster than inflation over the same time period. Not sure what the overall number is but it helps the ‘own a house side’.

#26 Leo Trollstoy on 07.13.15 at 6:16 pm

Now that the core inflation rate shows that there’s no deflation in Canada, I have no idea what the BoC will do.

I’m hoping for an irresponsible cut that will drag tha CAD lower, but sometimes you have to be careful what you wish for…

#27 ben on 07.13.15 at 6:18 pm

If BoC take rates down again CAD is gonna hurt. Also if they spend time below 0.5% when the US goes up (and they have to follow) it’s going to ream a whole bunch of people who got in at ultra-ultra-low.

Is that a cloud in the distance or lots of chickens coming home to roost…

#28 S.Bby on 07.13.15 at 6:21 pm

The Greeks still don’t get it:

She speculated that some restaurant owners will likely respond by ignoring the tax altogether, leaving sales tax off the bill for cash-only transactions and not reporting the transaction.
“That way they don’t have to pay the tax for the business or for the customer,” she said. “It’s good for both sides.”

Utility company office worker Alexandros Logothetis said he is “furious” that working-class and middle-class Greeks will end up bearing the brunt of the tax increases.
“Regular people will pay more, not the big fishes like the media tycoons and the shipping magnates,” said Logothetis, 58. “I wanted a deal where the rich people would pay off our debt.”

http://www.news1130.com/2015/07/13/greeks-relieved-they-will-stay-in-eu-but-years-of-financial-hardship-await/

#29 johnyk on 07.13.15 at 6:24 pm

A $25,000 house in 1969, adjusted for inflation, would equal $203,000 today. His basic costs (financing, maintenance, property tax, insurance, selling commission) over 46 years would be at least $158,000. That leaves a net of $89,000 in inflation-adjusted dollars from a sale price of $450,000. It looks like his annual return was about 1%. Yup, gravy train. — Garth

But if he had paid rent for 46 years, let’s say average $500/month, he would have paid out about $275 grand. It cost him $158 thou to live there in addition to purchase price. Shouldn’t we add (275-158) $117 grand to
his net gain then?

#30 Steerage people count too on 07.13.15 at 6:25 pm

#20 Honest Accounting on 07.13.15 at 6:07 pm

Wow Garth, that is some quite disingenuous representation of how buying a house in 1969 worked out. How did you manage to skip the fact that up to 550 months of rent were collected as income from this property? Either tax free, if owner lived in it, or taxable after expenses, if it was rented to someone else.

I did not include the imputed cost of thousands of hours of labour maintaining it, either. It was a simple accounting of the performance of this asset. Not impressive. — Garth
———————————-
But many of us are pretty darn handy and add value to the property. Sometimes it’s just nice to have your own place.

#31 Mike S on 07.13.15 at 6:26 pm

“Yep, I’ve been noticing that as well. Seems like the downtown condo market has hit a plateau. I think it’s a supply issue. Not getting the impression that it’s a correction yet but it could be the beginnings of one.”

We had an almost correction in the townhouse/detached segment, but then Poloz lowered the rates and it went crazy for a few months

The problem with the rate cuts is that instead of having oversupply in the condo segment and slight oversupply in the other categories, we are going to end with major oversupply across the board. Then a big crush will be inevitable

Why the PC wants to win this election anyway? Are they the ones that want to be held responsible once the correction happens?

#32 Greg on 07.13.15 at 6:26 pm

Bagel at tim’s was $1.29 this morning. Was 99 cents not long ago. Not representative of prices in general but there sure seems like lots of examples of 20-30% price inflation out there.

#33 Brian Ripley on 07.13.15 at 6:30 pm

The 10 year less 2 year Canadian Bond spread has been incrementally widening since about the beginning of the year; chart: http://www.chpc.biz/yield-curve.html

Notice that at the same time, the TSX Real Estate index momentum continues to drop with the widening yield spread.

The previous major yield spread widening coincided with the severe real estate and financial assets plunge into March 2009.

I doubt the BoC will raise rates and I doubt the bond market wants to sell off forcing yields higher unless contagion from the periphery forces margin clerks to their sell switches.

#34 Charley McCoy on 07.13.15 at 6:31 pm

Poloz has surrounded himself with a think tank of iron ore Magnates from NFLD….and the iron ore bid-ness is in a world of hurtin’. If they can get the loon dow to 50 cents or less thay will make hay…otherwise…they may have to compete with upgrading pant and machinery and that’s expensive. ….not to mention it’s hard on the gray cells….businessmen would have to get smarter…..and it’s un-Canadian to ask them to be on the ball.

Poloz said day one that his goal was to tank the loon…he has been consistent with that threat. Clown Boy is dancing on the loons grave….you bet’cha.

#35 El Chapo on 07.13.15 at 6:41 pm

Just like Mexico there is political corruption even in Canada. The BOC is supposed to be independent of the Federal Government.

Garth is so right that a decrease in rates will be the most politically obvious move in recent memory. If Steve pulls the trigger and lowers, say Hello to NDP.

And I’m moving to Mexico.

#36 Llewelyn on 07.13.15 at 6:44 pm

#7 Pnd3d

I have come to the conclusion that Garth has chosen to underplay the role that inflation plays in the historical rate of return on equities to support the profile of his chosen profession. I am pretty sure most sophisticated investors recognize that past performance of the stock market incorporated an inflation component.

Several days ago I tried to make the point that achieving a 7% rate of return over the next ten years without a more significant contribution from inflation will be difficult. My concern is that avarice could cloud judgement as investors try to achieve unrealistic targets. Bernie Madoff fooled quite a few very smart, but greedy, people chasing an unrealistic target. Not all balanced portfolios are created equal.

If I thought it would make any difference to the confidence game surrounding the purchase of equities I could comment on the impact of ‘buybacks’ on share prices within the Dow Jones or how the creative use of derivatives has inflated market value.

Garth graciously provides an open forum for all kinds of diverse opinions so if he chooses to down play the role inflation played on rate of return for equities over the past ten years so be it. I leave this truth to be self-evident.

#37 prairiecassandra on 07.13.15 at 6:45 pm

Read comments and blog daily..newbie since june 2015
Learn alot and often, much appreciated laugh…

Rest of time is spent shaking my head here in Winnipeg…which had, in my opinion, one of the least justified prop value jumps in Canada…it was a perfect storm of agressive provincial recriting of immigrants, returning tip of spear first wave Boomers feeling rich having sold their house in 2006 or 2007 in Calgary or Toronto for chunk of equity after being out of Manitoba for years, decades to pursue career, bank of Mom and Dad and Manitoba mentality that renters are subhuman. Perfect storm that is now deflating with 30k drop from original list before even an offer not rare in cabover world of suburbia. Rent since 2009 when i broke even on a 1920s 590 sq ft house…and ran for my life..literally.
Bought nov 2006 for 102k, did nothing but pray foundation would not implode in fertile Winnipeg gumbo prior to selling..which I did in sept 2009 for 107k cut a deal with real estate commish, broke even and ran..

Flipper couple paid 107k put in 11k cosmetics no foundation work sold 3 months later dec 2009 for 169k..

Jealous..no way..grateful to have broken even..renting as these way past their prime houses come back onto market listed at 139k..hundreds of stories like this in Winnipeg…there will be blood in the snow at forty below..

#38 El Chapo on 07.13.15 at 6:47 pm

Politcal corruption in Canada too.

#39 Ole Doberman on 07.13.15 at 6:48 pm

Great analysis as usual Gartho – you da man.

But do you think the government bond market is heading off the cliff due to the excess debt around the world? This is what is goosing the stock markets – capital flows from bonds to stocks.

Thx

#40 Obvious Truth on 07.13.15 at 6:48 pm

What a cave in by Tsipras. Was Fifa involved?

Reminded me of Leonard v Duran. No mas.

It’s always the regular folk that pay the price. Some call it austetity and others just get plain devalued.

#41 Blacksheep on 07.13.15 at 6:59 pm

“How do you think the market will react if we go weird now? Because of an election?”
———————————————
A better question might be:

How badly do you think Harper wants to retain power?

S.P. drops to 0.5%, and J.Y. raises to 0.5%, equalization nirvana ensues, then we’ll all be singing Kumbaya.

#42 Smoking Man on 07.13.15 at 7:00 pm

I’m willing to bet Greece got the hair cut they wanted and a much better deal than MSM is advertising. Reason, the populations of the Bond hollers would lose there shit.

I bet the real deals will be shared in private with Greek law makers. If this gets good support in the Greek parliament. It’s what happend.

Poloz has to chop, counter the effects of Wynees madness.

Otherwise bye bye what’s left of the auto industry.

#43 Suede on 07.13.15 at 7:01 pm

Pwned…

Mulcair + Trudeau = coalition minority… Duh

Young people vote when cool Facebook videos make them. Watch for them. Bill c51 was a test idea

#44 Shawn on 07.13.15 at 7:06 pm

Diversification?

ben on 07.13.15 at 5:53 pm
Ok look – FTSE is *slightly* up but when you factor in GBP vs USD you are down down down. Also for the EU you have to factor in FX of EUR. EUR is down nearly 20% over a year against the $.

That’s why you buy in C$. — Garth

**************************************
So diversification is good except when it comes to currency?

Yes. FX is far too volatile for most investors. Holding 20% in US$ is plenty. — Garth

#45 Cici on 07.13.15 at 7:07 pm

I did almost the exact same thing to my Dad when I was a kid. He had just finished building a window seat out of expensive wood that I found drab and in need of a spruce of colour. I “enhanced” it with various felt-tip markers (probably Crayola Sniff, for colour and aromatherapy). I was pretty proud and thought he’d be delighted. I got a whack on the ass for my efforts and there is no “cute” picture documenting that episode in our family history. In fact, I think my Dad is still mad about it!

#46 Jennifer Stamonas on 07.13.15 at 7:08 pm

I miss the many years that CMHC and the government under Flaherty tightened mortgage rules.

The Bank of Canada should not cut interest rates and mortgage rules should be made much tougher.

One that would obviously do it is shorter amortization periods from 30 or 25 years to 20 or 15 years.

Also, down payments pushed up to 15% at the very least.

If you borrow from non-government financial institutions in Canada then your mortgage financing will not qualify.

#47 omg the original on 07.13.15 at 7:09 pm

A week ago the steerage section of this pathetic blog was full of people moaning and pissing about the imminent demise of the financial world. As always, it didn’t happen.
———————

There is hope for those poor sad people that hang ohm every word of every doomer.

Yes I was once one of them.

Remember the late 1980s/early 90s when Canada’s debt was so high that the Canadian government was sure to default. Plus the US was going to war with Iraq which was almost certain to trigger WW3.

I bought it all and left all my money in safe things – mutual funds of US bonds, t-bills etc. (Funds charging charging 2-2 1/2% annual fees!)

Well the world went on nicely – Canada got its debt under control thanks to dropping interest rates. The war with Iraq was a cakewalk.

Equities markets soared in the early 1990s and I missed out on some really good years for equities.

I was lucky in a way – I didn’t have a lot of money to invest back then and the bond funds did OK.

But I started doing some reading of really accomplished investors as opposed to idiots that see the end of the world in every micro-political event.

I taught me an important lesson.

Most major global political events can be spun into “end of world scenarios”. But if you look at history very, very few global crisis have much of an impact on global markets over the long run.

Take the GFC for example – the biggest financial crisis since 1929.

Six years later and its becoming a footnote to one of the biggest bull markets of the last 50 years. 20 years from now it will just be a “dip” on a chart of the long-run returns of the S&P.

Oh, you say, the GFC is not over. The chickens will come home to roost yet. US banks are insolvent, Europe is teetering on massive sovereign debt default, all the returns of the S&P companies are financial engineering……..

OK…maybe some of you are beyond hope.

#48 Waterloo Resident on 07.13.15 at 7:10 pm

If they cut rates its because they are trying to keep the real-estate fire red hot in an attempt to re-stoke the dead economy (which WON’T work).

My feeling is that they are going to cut rates.

My feeling is that interest rates on Canadian bonds will soon be like Switzerland: NEGATIVE.

http://www.bloombergview.com/quicktake/negative-interest-rates

I know what Garth is going to say, he will say “Dream on.” Well, if the bank cuts rates again we will have officially entered the ‘Twilight Zone’ where anything is possible. Lets just hope that doesn’t happen.

#49 99 Days to an NDP Government! on 07.13.15 at 7:11 pm

Poloz’s proclivity for being swayed by Harper’s handlers will be yet another reason for the public to turf the Tories.

To quote our host, what was also once ‘unthinkable’ is now the most probable outcome of October 19.

#50 Freedom First on 07.13.15 at 7:13 pm

Election coming and Canadians are leveraged to their snouts. There will be 1, and maybe even 2 rate cuts before the election. H is a master at getting elected. Anything goes.

#51 Obvious Truth on 07.13.15 at 7:15 pm

#39 Smoking Man

Tsipras was quiet. He let the Germans control to media. They have to sell it.

Have to agree with you.

#52 omg the original on 07.13.15 at 7:24 pm

pwn3d

The fact is both housing and equities do well over the long term. No need to play with numbers to make that point.
———————-

I have had a few rentals over the years and have done really well on all.

But I bought at a time when you could actually buy “revenue properties” – that is they actually paid a monthly net AFTER ALL COSTS.

Now I haven’t been looking hard in Victoria over the past few years but my sense is that you cannot buy a positive cash-flow property here unless you go into a multiunit building.

Of course there are all kinds of properties advertised with positive cap rates – but when you look at the numbers they are the BS real estate agent cap rates – no maintenance costs, low vacancy assumptions, no accounting for cost of capital.

I may buy rental income again at some point but only if it makes sense from a cash-flow basis.

Right now I am OK with my money tied up in fully liquid equities which do not call me at 3 AM with a toilet overflowing.

#53 Mike T. on 07.13.15 at 7:25 pm

so tell us again who is on the hook for all this mortgage debt from all the idiots buy houses they cannot possibly afford

the people in Greece are guilty of the same thing people everywhere are guilty of, listening to bad advice and letting the greed/fear part of the mind control things

now Brussels controls their banks? HA!

I wonder what the elites are going to do with their shiny new development bank?

http://thebricspost.com/100bn-brics-monetary-fund-to-be-operational-in-30-days/#.VaRIX2PH9Mu

i’ll be the first to come back if i’m wrong, but holy convenient timing

there is something about a pipeline Russia and Turkey want to build as well

#54 Siva on 07.13.15 at 7:27 pm

Canada is on the brink of a full-blown recession

Read more: http://www.businessinsider.com/canada-on-brink-of-full-blown-recession-2015-7

#55 Trojan House on 07.13.15 at 7:28 pm

Chinese government making it a law that you can’t panic sell. Plunge Protection Team in the US. I guess this fixes everything.

Question: Why are these things needed?

Follow up question: Doesn’t anyone ever question why governments think they have to and can regulate this stuff?

#56 Shawn on 07.13.15 at 7:32 pm

Tomorrow’s Market Mover?

Probably a down day on doubts that the Greek parliament will pass the deal. If so, time to pick up a few bargains.

#57 Mark on 07.13.15 at 7:37 pm

“It would be one of the most overtly political moves ever for a central bank.”

Overtly political? Going into an economy which is rapidly losing velocity, with house prices declining, consumers decelerating their spending, credit spreads expanding, the O&G industry in tatters, and little else to take its place.

I don’t get it. The numbers, whether they be inflation, or economic, clearly call for a rate cut. It is the Bank of Canada’s job to act on the data to ensure that monetary policy retains its credibility. There’s nothing political about this. If anything the rate hikes that occurred a few years ago were proven to be unnecessary as the BoC has now been shown to be “behind the curve” in providing sufficiently stimulative monetary policy.

“But do you think the government bond market is heading off the cliff due to the excess debt around the world? This is what is goosing the stock markets – capital flows from bonds to stocks.”

“goosing the stock markets”? Do you mean the ‘stock markets’ that are barely even back to the levels of 2007? And in some cases, like Canada, not even if you adjust for currency?

Very little money has cycled from bonds to stocks as the result of QE or low interest rates. Most of it has just gone back into chasing the bond bubble. Which is why we see bond yields at incredibly low rates especially at the longer end of the curve. If money had actually cycled into equities/stocks as the result of all the low interest rates and stimulus policy of the past 7-8 years, the job of monetary policy makers would be a lot easier.

Consumer credit is increasing, not contracting. House prices are not yet declining. The energy industry is not in tatters. There is no deflation. The central bank’s policy is intensely stimulative already. And low rates have absolutely increased equity values. Say goodnight, Mark. It’s over. — Garth

#58 ben on 07.13.15 at 7:41 pm

When you buy into a foreign index you are implicitly exposed to the ccy that index is denominated in.

You might read your quote in CAD but it’s popping up and down in, say for the FTSE, GBP and then backed out into CAD when you close out.

So when EUR falls (vs CAD) by more than whichever European borse index you are in goes up you just got less CAD back. Or you just look at the CAD rate and see it went down and don’t see the two components.

I’m not saying don’t invest in foreign indexes simply that it’s parts of the game once you step out of CAD you are in FX and the index itself.

I’d surely agree with *not* day trading FX!

#59 CHERRY BLOSSOM on 07.13.15 at 7:41 pm

Canadians against mandatory increase in CPP…they should look at their paycheques. They pay 3 times more a week in union dues than they do to CPP.

#60 Nosty, etc. on 07.13.15 at 7:43 pm

#176 Smoking Man on 07.13.15 at 8:55 am — “Number one tweet trending #thisisacoup. Greek crap is not settled. Here comes the neo Nazis…”

Not just Greece — ECB fascism — also Spain, too.

Happy belated BDay, SMan. Next year, yours truly celebrates one full Chinese cycle (12 animals, times 5 elements per animal = 60). Anything beyond is a major bonus, ‘tho to some extent I am looking forward to moving back into the next worlds (where we all originally came from), as my physical body is slowing down.

Recently read an interview with John Cleese (74 now), and he’s looking forward to his next adventure. Can’t do the Ministry of Silly Walks anymore, body is breaking down. Cheers!

#61 Steve French on 07.13.15 at 7:47 pm

China is the second largest economy in the world and just suspended trading on half their stock market, and made urgent selling of the other stocks illegal.

Hey- like magic– the Chinese stock market will never go down!

What on earth could go wrong with that ?

By the way you wil be arrested if you question this policy.

What a joke…

China did not suspend trading. Companies requested it. — Garth

#62 nonplused on 07.13.15 at 7:48 pm

I’m going to take the over on the rate move (ie. no change to maybe a 0.25% increase to support the C-dollar.)

Manipulating the C-dollar down from here would play havoc with consumer prices. Sure it’s supposed to be good for exports but you can only fight the globally commodity sell-off so much before you are hurting more people than you are helping.

Plus I don’t want Rachel thinking money is free. Yikes!

#63 Latest scam on 07.13.15 at 7:54 pm

In other news central banks aren’t the only ones scamming the public out there. As is probably intuitive, always be wary of services (window cleaning, driveway sealing, arborists, etc.) offering a deal because they are in the area. You need a written quote and never agree to anything based on sqft unless they have measured before hand and given you the total.

I am not even sure driveways need to be sealed other than for aesthetic reasons. Just say “no” unless they have given you a final total price that you will pay in advance and pay nothing more.

#64 IM in C on 07.13.15 at 7:56 pm

He can’t. But might.

He will !!

#65 Nagraj on 07.13.15 at 7:59 pm

I’m thinking of GT’s “The Unthinkable” as a pre-opening write-up for “The Wednesday Show”, GT being, in this case, a a theatre critic wielding a particularly poisonous pen and superbly skilled in killing with laughter. (Cf “Addison DeWitt”)

So I’m going to be disappointed if the big bank dog doesn’t commit loonicide (even if the Harpies have been all over – like a rash) because GT’s review of the Big Dog murdering the dollar would be epic.

[The most damning Canadian review I ever read was by William Littler trashing a promising home-grown talent making its Toronto debut, “People may be forgiven for not knowing what they stepped into. You have a right to ask for your money back.”]
[And then there was a chubby Elizabeth Taylor playing Regina Hubbard Giddens in NYC, “repeatedly crisscrosses the stage for no discernible reason as if on a pogo stick.”]

IF on Wednesday this Poloz character does chop, please, let nothing hold you back. For example, “I don’t actually recall being taken away in a straightjacket while screaming uncontrollably . . . “

#66 My Life is a Pile of Shit on 07.13.15 at 8:00 pm

Garth, I know you’ve made it clear you’re sold on the Fed’s BS about a rate hike. If the Fed can move, it would have moved already. What is it waiting for? If the Fed doesn’t move this year, or even by September, you are going to be a sucker on an enormous scale. As Indians would tell you, the only thing you can count on from the US government is broken promises.

Yellen says U.S. rates will rise. Go bug her. — Garth

#67 Steve French on 07.13.15 at 8:02 pm

Now New Zealand is carping on about mainland Chinese property investors…

“NZ war erupts over Chinese property buying”

http://www.macrobusiness.com.au/2015/07/war-erupts-in-nz-over-chinese-property-buying/

#68 Smoking Man on 07.13.15 at 8:04 pm

#49 Obvious Truth on 07.13.15 at 7:15 pm
#39 Smoking Man

Tsipras was quiet. He let the Germans control to media. They have to sell it.

Have to agree with you.
……

Game theory, as the resident PhD in Herdonomics it’s the only explanation.

The whole shit deal for Greece is a scam. Let’s face it , money printing can go on forever. The guy had 61% go f yourself mandate.

Too much to lose. Bond holders get dick, CDS kick in who knows who’s your counter party. Russia comes in. And the whole Euro dream goes to shit.

The test, if he gets wide spread support in government on wed.

The Germans will be happy, take that you lazy picks your going to pay dearly now. Spain Italy, going wow the EU dont mess around. Let’s not mess with them.

We all know building 7 fell, we all saw the 30mm holes in MH17 cockpit a year ago yet no voice record tower to plane.

You can’t beat the Machine.

#69 Andrew Woburn on 07.13.15 at 8:07 pm

One reason the lower dollar isn’t helping Ontario much.

“Chrysler CEO tells Kathleen Wynne hydro costs making Ontario too expensive for businesses”

http://news.nationalpost.com/news/824051

#70 John on 07.13.15 at 8:10 pm

All’s quiet across Athens. Imagine the streets of Baltimore and Toronto if the ATMs were emptied last week.

#71 earthboundmisfit on 07.13.15 at 8:13 pm

“Simple. He can’t. But he might.”

Oh but, he will. Because the sanctimonious, hypocrite turd of a P.M. will tell him to it.

#72 Latest scam on 07.13.15 at 8:14 pm

Oh and I forgot Bitcoin. I can’t see how that isn’t a scam. Where do the Bitcoins come from? And what backs them? It looks more like a rogue electronic banking system to me. The orange guy without regulatory oversight.

#73 Andrew Woburn on 07.13.15 at 8:15 pm

“As one of Canada’s largest alternative mortgage lenders, Home Capital Group Inc. is a popular target for investors looking to short the Canadian housing market.

Nearly 20 per cent of Home Capital’s free float is shorted, making it the fourth most-shorted stock in Canada, according to Bloomberg. These housing bears have been burned by Home Capital’s stock in the past, which had risen on the strength of the Canadian real estate market. But Monday’s plunge in the company’s share price went in their favour for a change, sending the stock price to its lowest level in nearly two years.

Home Capital’s shares fell almost 19 per cent Monday on news that the volume of single-family mortgages applications plummeted 27 per cent in the second quarter from a year earlier – even as home prices continued to soar in major markets.”

http://www.theglobeandmail.com/globe-investor/home-capital-plunges-most-since-2008-as-new-mortgages-decline/article25482492/

#74 John on 07.13.15 at 8:16 pm

Another 6500 net jobs down the toilet…. Maybe Polez should just mark time and extend and pretend like Janet. Afterall, the Germans are now running the show over there and everyone gets it. With the Euro now heading closer to beinyg @ par with the US$…. maybe everyone should just sit tight and not move any rates…

#75 Doug in London on 07.13.15 at 8:17 pm

Lower interest rates on Wednesday you say? Now you know why Garth has been telling us, over and over and over and over, why you should have international exposure with your investments, and generous exposure to the USA. In this kind of environment, even GREK-NY is looking pretty good as an investment. Hey, don’t laugh, at least it can’t go much lower.

#76 John on 07.13.15 at 8:19 pm

And then there’s Ontario with it’s finanacial ratings slashed lower making it’s dollars owed an even larger slice of the pie. pftt. Poloz pftt. Odds he does nothing.

#77 nnso on 07.13.15 at 8:25 pm

70 % home ownership. In Toronto and Yvr, we are all money lenders and landlords. The government bring half a million people per year to us. We borrow at 2% and lend to the unfortunate for 10%. We buy 5000 sq home and rent it to 5 families or students. Even the 15% interest would not hurt us all. nice try quarter percent..
http://globalnews.ca/news/2103177/gallery-worst-apartment-ever-for-rent-ad-ridiculed-on-social-media/

#78 Andrew Woburn on 07.13.15 at 8:28 pm

#11 Suede on 07.13.15 at 5:52 pm
At least Justin Trudeau has nice hair.

But what the herd doesn’t get is that Mulcair’s carefully crafted beard speaks directly to the young, social hipster generation.
==========================

Interesting point. But on the other hand, is Mulcair’s beard really a cool ironic statement or does it making him look a dweeb who secretly aspires to a Nobel prize for economics. Worse, it might be the kiss of death if he is perceived as an old guy trying to look hip. No self-respecting millennial would tolerate that.

#79 John on 07.13.15 at 8:30 pm

Oh and the government of China just froze half of the stocks listed on the Shanghai………. How would that look if the TSX or Dow froze 1/2 of the candy… ??? Greek mythology without the Greek. Poloz will know when to ‘hold’.

The Chinese government did not freeze any stocks. Companies requested a trading halt and it was granted. — Garth

#80 VICTORIA TEA PARTY on 07.13.15 at 8:34 pm

IT TAKES A PILLAGE…

…to put those tax scofflawing Greeks in line doesn’t it?
Let ’em swing in the hot Mediterranean wind. Who cares?

At least that’s how Greece’s chief paymeister Germany, and its various larger cohorts, must be thinking.

Sure the Greece “issue’s dead”, says Garth.

Or maybe not.

It all depends on how the locals there will react to additional years of economic dross, including higher youth jobless rates. What are those kids gonna be doing between now and then?

Any ideas?

The EU’s ongoing QE program allows their bigger economies and markets the insulation they need, with all of that low interest debt, to function “normally.”

At the same time those Eurocrats and legislators, who’ve punted Greece onto an economic slagheap, are carefully dodging their own mountainous debt issues.

Those are roosting just about everywhere on that besotted continent. Nevertheless their actions reek of monetary hypocrisy of the worst kind.

We await the inevitable and nasty fall-out.

OUR LOW INTEREST RATE OBSESSION’S GONNA MAKE US LOOK BAD

As for our national obsession with ongoing maintenance and preservation of low interest rates, at all costs, all I can think is that the BoC’s upcoming rate decision would have to have been “governed” by politics, if the rate is cut.

Does Mr. Poloz worry that not touching the rate might reflect badly on the outcome of the next federal general election, for government currently in power?
If so, then a righteous sacking would be the only obvious outcome, as the result of any rate cut. But just when? After the fall vote?

Canadian monetary policy must not only seem to be pristine, but it actually must be as well. The slow-growing world economic order is still suffering from the slings and arrows of 2008. It’s just too chancy out there to be anything but straight up.

It always pays off for Canada, in the end, to keep monetary policy free from political hopes of our elected betters. If other sovereign states’ governments manipulate their central banks, then let them.

Our Canadian economy is just too small and vulnerable, especially with still-crashing commodity prices, to endure such a possible tainting of our vaunted monetary policy at any time.

#81 Hhoyghf on 07.13.15 at 8:34 pm

Another “the is the last time BoC will ever lower rates” prediction in the dust bin.

faith in central bankers – you should rethink this.

#82 Linda on 07.13.15 at 8:38 pm

I’m betting on either a hold on current rates or a cut. This being a purely political move. There is an October election; at best they will hold current rates even if the rest of the world markets were shooting up like a space shuttle. At worst they will drop by as many percentage points as they deem are required to soothe the huddled masses & secure their vote later this year. The Canadian economy could be a zombie infested heap of rubble & they still would not hike rates until the election was over. Then if they lost they could blame all the woes they created on whoever ‘won’. The only good outcome I see is that those who do reduce their debt during this period will pay the minimum amount of interest while improving their balance sheets.

#83 Sheane Wallace on 07.13.15 at 8:40 pm

At this point it already does not matter what BOC will do. The dice was cast and the bridge was crossed 6 years ago in 2009 with Flaherty’s 40 years, 0 down mortgage.

There is no economy except some grain production, some depressed commodities, some depressed manufacturing.
Everything is FIRE sector and some supporting services.

We live a lifestyle we can not afford with the highest personal debt in the world vs. GDP.

CHMC guarantees is the equivalent of 80-100 billions per year in money creation, we have constantly increasing trade deficit.

Put it bluntly – we do nothing except moving some houses around and some grain production, little manufacturing. That’s it.

Why? It is simple – everything goes to the FIRE sector, thee is no money left anywhere else, huge capital miss-allocation and dead economy. We don’t even have a tourism like Greece.

The only ‘light in the tunnel’ is that we can print our money at will.
Take a note, savers. Ca dollar going down big time with strongly negative interest rates.

Cheers retirees,

And kids, get ready for menial jobs. Harper’s Canada.
send him a thank you note.

#84 Retired Boomer - WI on 07.13.15 at 8:41 pm

Looking to see what Wednesday might bring. My best guess is to do nothing is smartest. That said, I doubt that will be allowed to happen.

Time will determine how much the present administration is willing to sell the Canadian citizenry down the poop hole for a vote.

So, being the foreigner here, I’m going to think a rate cut IS in the cards to satisfy the “producers” interests.

Lobbying does have its effects, look at us with TPP. A disastrous piece of legislation in my humble opine (from what little scraps I have seen).

Our state governor, Scott Walker announced his bid for the republican nomination for president in 2016. I hope he doesn’t have a shot, as he has been a dud as a governor.
Deficit is higher, but HE says the budget is balanced.

Oh really?

Even your Harpo might be a better choice than our Walker.

Americans don’t look under the hood as it were, and then we vote for the worst evil of the lessors.

You pick your poison in Oct. we pick ours next November.
Who will be the choices? Much can happen in a year.

In the meantime, I’ll stay in the balanced market, thanks.

#85 Sheane Wallace on 07.13.15 at 8:42 pm

Poloz will cut. It is written on the wall.

#86 Sheane Wallace on 07.13.15 at 8:48 pm

#12 ben

Euro is much more stable than CAD in long run, just invest in European equities. VGK.

#87 Sheane Wallace on 07.13.15 at 8:53 pm

If Poloz has qualifications to run BOC and is independent then I am a sperm whale.

The guy can not even talk and his press conferences are pathetic.

I would not touch CAD or bond with a stick while this guy is in charge. Calling him honourable is insult to everyone’s intelligence. Ask all politicians and their lap dogs to take IQ test. The guy’s IQ is probably 60.

Is that more or less than a sperm whale? — Garth

#88 drydock on 07.13.15 at 8:57 pm

Gee when Mark first came on the scene you used to defend him,what happened?

I actually do not recall that but, if so, it was an error. — Garth

#89 Shawn on 07.13.15 at 8:58 pm

Home Capital

It was the second straight quarter Home Capital has missed analysts’ expectations.

*****************************************
That is backwards it should read more like “It was the second straight quarter where analyst forecast earnings estimates were no where near close to the actual results”

Companies have nothing to do with analyst expectations (unless there is a leak) and therefore cannot possibly “miss” these estimates that the had no part in.

Just another example of how the whole financial community seems to accept nonsense or spout expressions that are clearly wrong.

Other examples:

Investors sold off stocks today (who bought them?)

The industry calls chart reading “technical analysis”

And here is a weird one

CAD/USD is reported as 0.784.

Clearly it is the other way around The USD dollar is 78.4 cents per Canadian dollar so USD/CAD = 0.784.

Where did this industry go to school?

#90 Sheane Wallace on 07.13.15 at 9:00 pm

Is that more or less than a sperm whale? — Garth

Sperm whales are actually quite intelligent. At least they have not invented CMHC, Yet.

#91 Smoking Man on 07.13.15 at 9:01 pm

#58 Nosty, etc. on 07.13.15 at 7:43 pm

Great attitude about the other side. I saw thing about Spain. .

1984 lives. Good news, when it gets down to this level you know the guillotine will be dusted off soon. And powerfull heads will be looped off.

You can do a lot of shit to a man.. but when you try and tell him and his village to shut up… history shows that’s when they lose it and come after you.. only a matter of time with 50% of the young people out of work.

#92 Sheane Wallace on 07.13.15 at 9:03 pm

It is apparently less…

Are cetaceansツ’ brains superior to humansツ’ brains?
Comparisons of synaptic geometry, dendritic field density and neural connectivity reveal that the cetacean brain is superior to the human brain. In addition, the centralization and differentiation of the individual cerebral areas are higher than the human brain.

http://www.jref.com/forum/threads/are-whales-dolphins-more-intelligent-than-humans.23299/

#93 Shawn on 07.13.15 at 9:03 pm

FIRE economy?

Sheane said:

There is no economy except some grain production, some depressed commodities, some depressed manufacturing.

Everything is FIRE sector and some supporting services.

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

And what is the problem with FIRE. Is finance not a needed service and the very greace of any economy? (ask Greece)

Is insurance not a needed service?

Is real estate not one of the three basic necessities of life (food, clothing, shelter)

Look around, the most notable characteristic of any developed economy and of any City is a ton of real estate development (in place and under constant development). Yet you are dismissive of it.

#94 Show Me The Money on 07.13.15 at 9:05 pm

Garth

How would the market react to a cut vs no cut? any buying opportunities in either scenario?

Show Me The Money Garth

#95 Garth knows all on 07.13.15 at 9:10 pm

> Here are four reasons why the Bank of Canada should not chop.

The economy is weak and getting even weaker, and we would be staring deflation in the face if it wasn’t for the CAD becoming so terribly devalued.

Nonetheless, I predict a rate drop.

Why?

The Bank of Canada does not have a mandate to serve property owners in Vancouver and Toronto. Its express monetary policy objective is

http://www.bankofcanada.ca/core-functions/monetary-policy/

to keep inflation “low, stable, and predictable,” which in practice means it targets a 2% inflation rate within a 1% range on either side.

If inflation falls below that rate or is projected to do so over the medium term, then the Bank of Canada must cut interest rates or otherwise conduct monetary easing.

Monetary policy is a very blunt tool. It cannot be used to fine-tune the composition of an economy, which is what these “housing bubble” arguments implicitly argue for. Not properly setting monetary policy to avoid a housing bubble is akin to setting Loblaws on fire to reduce junk food consumption.

What’s worse is that this argument ignores recent history.

The Bank of Sweden (Riksbank) attempted to do just this. It raised the policy interest rate by about 2% between 2010 and 2011, on fears of unsustainable levels of debt (especially including household and housing debt).

http://www.riksbank.se/en/Press-and-published/Chat/2010/Chat-with-Stefan-Ingves-15-December-2010/

At the time, the Riksbank was unconcerned with the fragility of a recovery and the currently-low inflation rate.

Following textbook economics, the Swedish economy entered into a renewed recession. This one was so deep that the Riksbank had to undo all of its interest rate increase and more, officially entering the realm of negative interest rates earlier this year. That housing bubble got even more pronounced, and the Swedish people endured years of unnecessary suffering for all that “success.”

If we as a society are so blooming concerned with a housing bubble that we’re willing to bludgeon the economy to death, then we should regulate the damn market before that more drastic solution. Reduce mortgage amortization periods to 15 years on 5-year mortgages, and the government will stop any housing bubble in its tracks without a rate change.

The true risk of a housing bubble isn’t in some mysterious “pop”, it’s in what happens when mortgage payments become unaffordable. That risk is magnified for long-amortization, low-interest mortgages, where a small change in the rate can result in a large payment change at mortgage renewal.

Nice essay, but core inflation has been at or above the central bank’s target range now for 10 months. We are nowhere near deflation. — Garth

#96 Chris on 07.13.15 at 9:12 pm

I bet there would be another rate cut. I mean who can resist Harper, or rather stand up to Harper. Those who want to but cannot have already resigned. Poloz has not resigned so I bet he will cave. There was not as much pressure on him earlier this year and yet he lowered rate then.

#97 sideline sitter on 07.13.15 at 9:13 pm

The condo down the street from me (I live in Yorkville) is *almost* completed — there are a few people who live there, but the building is still undergoing major work — and there is about 50 lock boxes outside… Yikes.

Talk about losing steam!

#98 Sheane Wallace on 07.13.15 at 9:15 pm

#90 Shawn

Every third world country produces their own food, has shelters (nobody lives in basements, except in Canada in the whole world), and we produce no clouding except the ‘famous’ Canadian geese which does not sell anywhere else for obvious reasons.

Insurance is not service that drives economy’s developments, it is supplemental service.

We produce substandard wooden particle homes and glass condoes. Go to the closest mall, nothing there is manufactured in Canada and at the grocery stores 50 % of the food is imports.

You are very welcome to go to Berlin, Rome, London, Losana, Zurich, New York, Tokio and count the number of new building projects in each, probably as total are less then in Toronto only.

#99 Smoking Man on 07.13.15 at 9:17 pm

#58 Nosty, etc. on 07.13.15 at 7:43 pm

It sucks when the body starts going kaput. So long as you have your mind you can find ways to entertain yourself.

Pops is 97 can walk briskly. But his mind is completey gone. Makes mumbling sounds. Smiles and frowns in the same sentence. It’s kind of heart breaking. Still visit a few times a week but he don’t know me.

If I don’t tap him on the shoulder he just looks out the window. He has no idea he’s old, or alive or where the hell he is.

It’s not easy visiting.

Enjoy the view while you can..

#100 Irent on 07.13.15 at 9:20 pm

Hi Garth, is situation in Canada as bad as Greece’s in your assessment or are we in better position. How long can it take us to recover if there is a recession.
Please share your thoughts.

#101 Ret on 07.13.15 at 9:26 pm

Re: #53
“Chrysler CEO tells Kathleen Wynne hydro costs making Ontario too expensive for businesses”

Good luck with that. Sergio Marchionne might as well close his Canadian plants now. The Wynne government is all about windmills, bike lanes, public transit and intensification.

Hydro rates are only one of about twenty headwinds facing a manufacturer in Ontario. Chrysler already has plants in Mexico and has operated there for decades.

I give the Brampton plant 5-8 years given that the products made there are not segment leaders or technologically innovative enough for the global market. Legacy costs for CAW negotiated pensions and health benefits don’t help the bottom line.

Fiat can only survive if it can make vehicles with global appeal and quality for a competitive price.

#102 burdaloit on 07.13.15 at 9:46 pm

#151 Mark on 07.13.15 at 12:34 am
…..Why do you constantly make stuff up? I don’t get it. Okay, you don’t like me, but that’s no reason to make stuff up.
#111 Mark on 07.12.15 at 9:51 pm
….. In a nutshell, one cannot own Canadian RE as a Canadian citizen and be a non-resident.”

Mark I think YOU are the one making stuff up or are just plain stupid. What you have written is incorrect and you should check the facts before posting. I would post a link for you, but it might be a good homework assignment for you to go check out the facts and report back to this readership with a link yourself.
To paraphrase the old quote, better to keep your mouth and be thought a fool, than to open it and remove all doubt…..

Garth, rather than keeping this poster around as a perennial whipping boy maybe you should send him to the cyber-hoosegow for a 10 minute quiet time misconduct!

#103 Harper is Desperate on 07.13.15 at 9:48 pm

You can almost guarantee a rate cute on Wednesday. Harper is desperate and needs to keep the floundering economy greased just long enough to still have a heartbeat come election time this fall. He will use every tool in the bag regardless of it being good or bad for the economy to stay in power. You watch. We are moving into uncharted waters with downside risk like the country has never seen before.

#104 rk usa on 07.13.15 at 9:50 pm

re: First, as stated, there’s history. Over the last quarter century Canadian and American fiscal and monetary policy has become more indistinguishable

but Canada has decoupled themselves from the general US economy by casting off manufacturing and becoming primarily an energy supplier

or in Harper’s word’s an “energy superpower”

Canada’s economy has diverged from the US and so will its monetary policy

#105 Cooler King on 07.13.15 at 9:52 pm

“And while there’s supposedly an iron curtain between the PMO and the central bank,…Garth”

Iron curtain? Yikes!!! Garth, I hereby nominate you as head of the tunneling committee, as you have a certain Steve McQueen quality about you.

#106 Eric on 07.13.15 at 10:00 pm

Garth,
Is the BoC subordinated to the PMO?
Why does the BoC comply with the government when it doesn’t make economic sense? Please illustrate us.
Erick

#107 Iwill on 07.13.15 at 10:00 pm

Garth, your spin on the financial markets its just as bad as the spin from the real estate board on the real estate market. You keep quoting positive return on S&P and TSX based on year over year but you know damn well they are negative on the YTD. but that would be bad for business wouldn’t it.

The Dow and S&P are positive YTD. Thanks to oil, the TSX is not. — Garth

#108 Bottoms_Up on 07.13.15 at 10:05 pm

#32 Greg on 07.13.15 at 6:26 pm
—————————–
Part of timmies increases is because they are now owned by burger king. BK is trying to appease shareholders.

#109 Pass da Ouzo on 07.13.15 at 10:08 pm

#79 John on 07.13.15 at 8:30 pm
Oh and the government of China just froze half of the stocks listed on the Shanghai………. How would that look if the TSX or Dow froze 1/2 of the candy… ??? Greek mythology without the Greek. Poloz will know when to ‘hold’.

The Chinese government did not freeze any stocks. Companies requested a trading halt and it was granted. — Garth

Garth,

I hate to be a cynic, but I am willing to bet that the companies were strong-armed to bow and politely request that the government help them, else be shipped off to the gulag….that’s how communism works!

On another note, I would not get too excited about the agreement with Greece, as it is actually way worse for the Eurozone and the world economy to keep force-feeding a free-loader economy….it is an ongoing and unpredictably strain on future growth for eons to come…

#110 Bottoms_Up on 07.13.15 at 10:08 pm

#36 Llewelyn on 07.13.15 at 6:44 pm
——————————-
What would you rather have, 25k to invest in the stock market in 1969, or 450k today (plus a couple decades of no rent)? Garth rests his case.

#111 Steve French on 07.13.15 at 10:09 pm

This one for Smoking Man [should have spelled it “Sobar Look”]

http://soberlook.com/2015/07/canadas-atrocious-turn-of-events.html

“To avoid the technical measure of a recession, the [Canadian] economy needs to record increases of 0.2% and 0.3% in May and June, respectively—- a tall order given the performance to date. Analysts are whispering among themselves on the probability of a full recession by the end of the summer.”

#112 gut check on 07.13.15 at 10:12 pm

“The Chinese government did not freeze any stocks. Companies requested a trading halt and it was granted. — Garth”

Granted by who? A non-governmental agency of some sort? I can’t figure this out because this is what is says on Bloomberg:

“China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.”

http://www.bloomberg.com/news/articles/2015-07-08/china-bans-stock-sales-by-major-shareholders-for-six-months

A trade halt and a trading ban are separate entities. — Garth

#113 observer on 07.13.15 at 10:14 pm

The banks will cut, the Canadian Economy is stuck together with duct tape and wd40.

The banks has stop it from falling apart before the next election. Garth your in politics, you know its not for the good of the people (even if they are debt/ cocaine addicts) Its all about power and staying in power.

They will do anything to get into power or stay in power. After that, well, do they really give a damn about the common people?

#114 Smoking Man on 07.13.15 at 10:16 pm

#102 burdaloit on 07.13.15 at 9:46 pm
#151 Mark on 07.13.15 at 12:34 am
…..Why do you constantly make stuff up? I don’t get it. Okay, you don’t like me, but that’s no reason to make stuff up.
#111 Mark on 07.12.15 at 9:51 pm
….. In a nutshell, one cannot own Canadian RE as a Canadian citizen and be a non-resident.”

Mark I think YOU are the one making stuff up or are just plain stupid. What you have written is incorrect and you should check the facts before posting. I would post a link for you, but it might be a good homework assignment for you to go check out the facts and report back to this readership with a link yourself.
To paraphrase the old quote, better to keep your mouth and be thought a fool, than to open it and remove all doubt…..

Garth, rather than keeping this poster around as a perennial whipping boy maybe you should send him to the cyber-hoosegow for a 10 minute quiet time misconduct!
……

That’s just censorship. Everyone should have the right of opinion. So the guys makes shit up.. you don’t think I do…what’s different.

Well

I’m handsome and charming, all the amozone chics secretly want me inspite of my rotting teeth.

The minute we go down the road of banishing and censorship we are no better than the machine.

If the dude says something you don’t agree with, duel the bastard in a word smith and weston gun fight.

He never chirps me, smart enough to recognize alfa.

#115 Mukadi on 07.13.15 at 10:17 pm

Nostradamus cannot be wrong. I order for the interest rate to be at (-1) % by the year end, somebody has to do something stupid.

So, the rate going down is guaranteed.

[Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.]

#116 Bottoms_Up on 07.13.15 at 10:18 pm

#59 CHERRY BLOSSOM on 07.13.15 at 7:41 pm
————————————————-
Not sure what world you live on, but most peoples CPP contribution is closer to 3x their union dues, not vice versa.

#117 Lee on 07.13.15 at 10:22 pm

77 nnso

Do you think maybe that unit is a plant by the real estate industry? 1300 sft apartments in reputable rental buildings in High Park rent for under $2000 a month. Try calling to see if it’s actually available to rent. I bet you the unit is “rented” but the ad will persist as long as it gets media attention. Toronto’s rental market is easy. Ask all the empty condo owners.

#118 Bby604 on 07.13.15 at 10:24 pm

Janet yellen: “everything is awesome but not awesome enough”
They should of raised 2 years ago when they had the chance, now they can’t it’s just a big charade and most seem to have fell for it ,
What is she waiting for ? 2015 will come and go and rates will still be in the gutter

#119 Tree of wisdom on 07.13.15 at 10:24 pm

> Nice essay, but core inflation has been at or above the central bank’s target range now for 10 months. We are nowhere near deflation. — Garth

I suspect the poodles are currently considering 2 things:
1. whether medium term projections do show a risk of deflation, thus demanding a rate cut (not looking only at the last 10 months or the present)
2. whether inflation projections have enough room to permit a rate drop, allowing a stimulation of consumer demand vis-a-vis the R word

Whether or not there is political interference from the paternal autocrat who seems to have had the world figured out in his 20s, you would probably know more about that than anyone on this blog. I suspect that regardless of how much influence dear leader may or may not have over the poodles, they will at least attempt to avoid the *appearance* of political interference. Which makes right now just about the last time they can cut before November without making it seem like they’re doing it because the election is coming. It all depends on their projections, not the present or the past.

I’m sticking by my prediction Garth, the poodles will cut. Possibly more than a quarter point. Yea, the horror, I know.

You’ll probably be surprised and disappointed in a couple of days.

But that’s nothing compared to how surprised you’ll be in October. For some reason you still seem to be in denial that the winds of change are blowing, and blowing hard. If you stick to your guns and blame Canadians for being… well.. human, you probably won’t be liked any more than Jimmy in Alberta. You gotta remember Garth, every country is made up of people, not robots, not “logical actors”. People with feelings and dreams, sometimes good health and sometimes illnesses, sometimes talents and sometimes not, who see good times and bad times, who have relatives to help them but other times relatives that need help, and so on and so on. Very very diverse. Greed and fear are both part of the human psyche, for some individuals more than others, but always present in a crowd. You’ll never breed it out, least of all through “education”.

Every day you berate Canadians that are making poor economic choices for their own lives. But the solution on a macro scale is action by government, not education. There is a reason the regular readers of this blog are more or less part of the 1%. People being super-logical isn’t normal. You can’t assume the average Canadian can, or ever will, think about this stuff the way you do. And before you start saying something about hiring quality advisers, keep in mind there are a ton of Canadians with rotting teeth right now simply because healthcare doesn’t cover dental. Services like yours are at the bottom of a very long wish list for most Canadians, sorry to tell you.

Idealistic theories (like conservatism) are based on inaccurate and simplistic models of how people behave, and thus always lead to poor economic outcomes – like the outcome we’re having now after almost a decade of doing things Steve’s way. You can never educate people to behave in a way that makes your political framework optimal. You can only adjust your political theory so that it is at least realistic if not optimal, given how people work. Some day you’ll have an epiphany, Garth, you old conservative salt. :)

#120 Leo Trollstoy on 07.13.15 at 10:29 pm

Of course there are all kinds of properties advertised with positive cap rates – but when you look at the numbers they are the BS real estate agent cap rates – no maintenance costs, low vacancy assumptions, no accounting for cost of capital.

It’s been difficult to find a rental that makes sense for me as well.

As a broad rule of thumb, the monthly rent collected needs to be AT LEAST 1.1% of the purchase price to give the landlord a decent shot of positive cash flow.

I hate when realtors quote cap rates for the same reason as the above poster – namely that they ALWAYS, omit expenses. Always.

During the U.S. real estate downturn the monthly rent of a good property in a good area was 1.15% to 1.19% of total property cost. Unheard of.

An investor who spent $1m CAD back then would have a monthly cash flow of $15k to $19k USD a month today.

In addition most of the properties in FL have recovered to approximately 90% of peak. That is, that $1m CAD spent in 2009 would be worth almost $1.9m USD (or $2.4m CAD) today.

One of my richer friends bought a 50 unit building for a little over $2.2m USD (he was American; from Minnesota). On that singular building he has made a righteous killing.

#121 Bottoms_Up on 07.13.15 at 10:30 pm

#72 Latest scam on 07.13.15 at 8:14 pm
——————————————–
You can create bitcoins by performing complex mathematical tasks. Computers are needed for this, thus those with the biggest computers get the most bitcoin. The number of bitcoins available is regulated. Its backed only by people believing it has value, much like dollar bills.

Dollars are backed by the power to tax. Bitcoins? Nah. — Garth

#122 45north on 07.13.15 at 10:33 pm

picture of girl covered with paint: CNN has this story. She is Aniston Farmer – cleans up good.

Given that undeniable outcome, how could the Big Dog be so irresponsible as to drop rates now for a few months, encourage more loans, further inflate house prices and murder the dollar?

Simple. He can’t. But might.

dropping rates would be the equivalent of doubling down. I don’t think he will.

ben: If BoC take rates down again CAD is gonna hurt. Also if they spend time below 0.5% when the US goes up (and they have to follow) it’s going to ream a whole bunch of people who got in at ultra-ultra-low.

that it is

Mike S: Prudent BoC policy would be waiting for the RE to correct before adding any more stimulus

Otherwise what tools will they have once the RE starts to correct?

What is to stop a significant RE crash from happening down the line?

It ( Bank of Canada ) is afraid that once a correction gets started it will be impossible to stop. It’s more afraid of having to reverse itself which would be admitting a mistake.

omg: Right now I am OK with my money tied up in fully liquid equities which do not call me at 3 AM with a toilet overflowing.

pretty funny

#123 meslippery on 07.13.15 at 10:35 pm

Greg @32
Bagel at tim’s was $1.29 this morning. Was 99 cents not long ago. Not representative of prices in general but there sure seems like lots of examples of 20-30% price inflation out there.

Yes and as I was working in my home shop on home maintenance the radio said the bar patio some where was offering domestic beer @ only $5.00
My Sleeman Macays is only $1.23 @ the beer store.
Oh and I can smoke on my patio.

#124 Bottoms_Up on 07.13.15 at 10:38 pm

#73 Andrew Woburn on 07.13.15 at 8:15 pm
————————————-
Interesting that you chose not to post that a large part of Home Capital’s drop was due to them cutting ties with rogue mortgage brokers in ontario, thus reducing Q2 mortgage originations.

#125 Mark in Guelph on 07.13.15 at 10:44 pm

“Janet Yellen made it clear, just in case you didn’t hear her the last 14 times that she said it: rates will rise in 2015. So we’re still on track for one or two quarter-point increases, after which the trend higher will be gradual but consistent, adding about 1% a year for the next two.” -Garth

Sure thing Garth. The last 56 times we heard it rates were rising in 2013 and 2014. The Fed hasn’t raised rates in 9 years, but now the boom is upon us and that US economy needs cooling off. She lies. September will be moved to December, and then 2016.

Why not just raise them now? She keeps saying “later this year.” What’s going to change over the next month to warrant a September hike that is so fragile the hike can’t come right now?

#126 debtified on 07.13.15 at 10:54 pm

Garth, is it wise to start preparing for US$ -> CAD$ now? If the BoC cuts and The Fed raises plus the TSX being depressed, I see opportunities for value investments here at home. I followed your CAD$ -> US$ advice and I have quite a bit of US$ now ready for better opportunities closer to home. I still like Canada despite all of the issues highlighted here in your blog. This could be sort of a rebalancing act.

Thanks.

#127 Bottoms_Up on 07.13.15 at 11:01 pm

Choices. We should be careful how much personal responsibility we ask the state to shoulder. Nothing is free. — Garth
————————————————
Agreed. I’m just looking for similar treatment. The state is really the taxpayer right? Well the taxpayer subsidizes university to the tune of 30%. Lord knows what elementary and high school are subsized at (perhaps 80%)? Daycare for average families are subsized at about 10%, and I’m suppose to be careful asking for more?

#128 Leo Trollstoy on 07.13.15 at 11:03 pm

Personally I don’t understand the rationale behind a rate cut now except to try and juice the economy long enough to secure re-election.

It makes no sense.

The CAD would continue to falter, it appears unlikely that the hollowed out manufacturing sector can compensate and indebtedness would increase.

And then what happens when you win the election? What’s the play after that? Follow the Fed by raising rates and nuke the population?

It makes no sense.

#129 what bubble? on 07.13.15 at 11:16 pm

Harper will cut rates since Keynesian economics calls for this and no one dares to admit that the theory doesn’t work.

#130 the Jaguar on 07.13.15 at 11:29 pm

Garth…what happened on post #57?
Did Mark get banned again?
Serves him right for pissing off Billy Bob yesterday.
Don’t mess with the Billy Bob.

#131 Shawn on 07.13.15 at 11:30 pm

Dollars are backed by what?

Dollars are backed by the power to tax. Bitcoins? Nah. — Garth

****************************************
Bitcoin, that is so 2012 or whenever that was…

Canadian dollars have value because they are needed for payment of taxes and they are egal tender for all debts and exchanges of value in Canada.

Every Canadian accepts payment in dollars today because they are confident that every other Canadian and Canadian business and Canadian government will still be accepting them tomorrow and next year. And Canadians are confident that there will be only modest inflation (decline in value of dollars) if said dollars are not immediately spent.

So called fiat money is a wonderful system and has served the world well and certainly has served Canadians well.

The Bank of Canada counts currency as a liability but it’s a strange liability since the only thing they will give you for a $20 is change for it like two tens.

In a sense the liability for all cash in circulation is a collective liability from the economy. One who holds a $20 “bill” has a claim check on goods and services produced by the economy.

There is no absolute guarantee that your $20 will buy you any certain quantity of goods and services but there is a collective confidence that a $20 will buy tomorrow and next month about the same as it buys today.

As to what it will buy in 30 years, that will be less but only a fool keeps cash under the mattress. It is easy to invest to offset inflation.

More than the power to tax, you can thank the Bank of Canada for maintaining the value of a Canadian dollar by keeping inflation low.

If heavy inflation set in, the power to tax would not maintain the value of a dollar.

#132 West Coast on 07.13.15 at 11:36 pm

#80 VICTORIA TEA PARTY
“Sure the Greece “issue’s dead”, says Garth.
Or maybe not.
It all depends on how the locals there will react to additional years of economic dross, including higher youth jobless rates. What are those kids gonna be doing between now and then?”
Any ideas?

They are playing online poker …………

http://www.gamingzion.com/poker/greece
“There are fortunately several large international internet sites that offer their poker game in Greek . There are in fact, thousands of Greeks who play online poker, and the numbers grow every year.:

#133 Trading Naked on 07.13.15 at 11:38 pm

#89 Shawn on 07.13.15 at 8:58 pm

And here is a weird one

CAD/USD is reported as 0.784.

Clearly it is the other way around The USD dollar is 78.4 cents per Canadian dollar so USD/CAD = 0.784.

Where did this industry go to school?
===============================

Ummm that’s just a convention. When I turn on Bloomberg they report USD-CAD at around 1.27 because 1 USD turns into 1.27 loons. Flip the ratio around and you get CAD/USD quoted at 0.784. I always read the first in a currency pair as “1 of…”

#134 Nagraj on 07.13.15 at 11:51 pm

#115 TREE OF WISDOM: “Someday you’ll have an epiphany, Garth”

Well, one time our old gay rector brought in this pompous idiot assistant curate, only because this boy was well built. In his first meeting with some of us [I must interject here that I’m an atheist but a social Christian] the idiot decided to impress us with a tale about the epiphany he’d had. As he was leaving the room I said, “Looks like he’s still got his epifanny.”

[Since Wednesday is such a nailbiter . . . I dedicate this charade to SMOKING MAN (I learned it from my even more irreligious fellow bass chorister friend “Chuckles”. Say “What’s this?” and then put the palm of your hand to your mouth and pretend you’re gnawing it. Answer: Jesus bitin’ his nails.

I could go on –

Seriously though, TREE OF WISDOM, if Garth changes his mind – it’ll probably be incrementally.

#135 family beagle on 07.14.15 at 12:19 am

“Another move down on Wednesday? That would be looniecide.”

I will proudly pay more sales taxes on imported goods with the devaluation of the CAD. Are you suggesting we have a Jackson Pollock style fiscal policy? Take a moment to see the artisanship. Btw, I heard on CBC that the CRA let 4 Billion loons skip town last year.

#136 JohnL on 07.14.15 at 12:24 am

Wow Garth you kicked the hornets nest with that one.
My 2 cents,
He will,
She won’t,
SHCOMP ain’t fixed……JPM moment circa 1929……..didn’t work then, we will see in a week two if the central managed juggler gets some balls in the head.
I really enjoy your blog…?.comments are huge entertainment, keep up the good work.

#137 Winterpeg on 07.14.15 at 12:38 am

So diversification is good except when it comes to currency?

Yes. FX is far too volatile for most investors. Holding 20% in US$ is plenty. — Garth

I’m looking at a BMO growth equity mutual fund (MER .7% in D class) which holds 7 ETFs. As I dig into it, it looks the holdings are weighted more to U.S. (+50%) and Foreign (34%). Too aggressive I guess?
A problem would be that I can’t rebalance this like I could if I held the ETFs individually. Correct?
Also, how would FX rates affect the return?

#138 easy as 123 on 07.14.15 at 1:01 am

BOOK IT NO RATE CUTS.

#139 TRT on 07.14.15 at 1:31 am

Hope BoC cuts this month. Let the loonie burn.

#140 TRT on 07.14.15 at 1:31 am

A cut is coming regardless of when.

#141 Spectacle on 07.14.15 at 1:41 am

#60 Nosty, etc. on 07.13.15 at 7:43 pm
#176 Smoking Man
Happy belated BDay, SMan. Next year, yours truly celebrates one full Chinese cycle (12 animals, times 5 elements per animal = 60). Anything beyond is a major bonus, as my physical body is slowing down .
————-
Hey : happy birthday, glad you still celebrate! Your addition to the big picture here is welcome by me!

Speaking of birthdays, Just had a life first, a baby boy arrive Saturday , great birthing effort by my wife! Healthy, happy.

Blog Question: does anyone have personal strategy suggestion on inheritance: what is the best way for both parties to give/disperse a family residence? Early inheritance.

Sell now & call it an early inheritance now? We’re realizing the peak prices it is perfect time to sell the asset . Vancouver west side property , crazy prices if it’s sold now. Parents don’t need it as a principal residence now, and it makes greater asset transfer/preservation if we (kids) get it now. We want what’s best for parents tax strategy as well, they are aging, but very active, busy grandparents. 1%ers they are.
Regards all,

#142 Jon B on 07.14.15 at 2:09 am

Going out on a limb here. The BoC will raise the overnight rate by 0.25%

#143 Andrew Woburn on 07.14.15 at 2:22 am

#124 Bottoms_Up on 07.13.15 at 10:38 pm
#73 Andrew Woburn on 07.13.15 at 8:15 pm
————————————-
Interesting that you chose not to post that a large part of Home Capital’s drop was due to them cutting ties with rogue mortgage brokers in ontario, thus reducing Q2 mortgage originations.
========================

Maybe it’s because I’m working for Soros and Agenda 21 to enslave Canadian minds.

Maybe it’s because the article I posted says:

“Home Capital also said it ended relationships with some mortgage brokers after an internal review, which “caused an immediate drop in originations.”

Sources familiar with the company’s mortgage broker business say Home Capital cut ties with several brokers in Ontario, its largest market, after an internal audit found some brokers weren’t providing proper documentation for new mortgage applications. Company officials did not reply to requests to comment.”

Of course we don’t do liar loans in Canada cause we’re different and the Queen wouldn’t be amused. But what if, just imagine, there were little words in the CMHC docs that said they wouldn’t pay out if the mortgagee falsified his credit application. Nah, that’s too sensible for government work.

#144 bruce on 07.14.15 at 2:33 am

lowering rates is a short term fix. it won’t boost manufacturing as this is not the 80s. the manufacturing sector is in decline.

boosting housing prices even further will just set up a larger ticking time bomb. the boc is running out of bullets. balls up boc governer and finance minister and tell the public how they and especially the previous crew messed things up big time for the average canadian living in the major cities in Canada. these guys are idiots and 60% of the time economist are wrong. the guy that used to run the boc is smart…he ran off to the uk and passed the buck on to some other sucker. the boc and finance minster are just PR extensions of Harper…they are there as much for economic reasons as they are for political reasons and PR. They should let the rate float like it used to and have the dollar trade within a certain range maybe +/- 10cent range. 90+% of the time interest rate
and bond rates mimic what the usa does anyways.

what it will do is make people go into higher debt. the ‘real’ life inflation is rising fast and as the dollar drops in value, the cost of living is getting higher. sure it might hold off the so called ‘soft’ landing of the housing sector…or should i say an implosion of the sector….but for how long.

with china slowing and russia in an economic beatdown, the ham and putin money and persian oil money is flowing slower. it might be brewing into the perfect storm or maybe they can delay the storm until the election is over. eitherway, there are no sunny skys left in the long term forecast.

voting should be mandatory and ridings should be gone and the senate needs to be abolished. this country has turned in to a dictatorship

#145 Herf on 07.14.15 at 2:55 am

#66 My Life is a Pile of Shit

With a name like yours, maybe you should invest in toilet paper, a septic system or a shovel.

#146 DON on 07.14.15 at 3:01 am

#128 Leo Trollstoy on 07.13.15 at 11:03 pm

Personally I don’t understand the rationale behind a rate cut now except to try and juice the economy long enough to secure re-election.

It makes no sense.

The CAD would continue to falter, it appears unlikely that the hollowed out manufacturing sector can compensate and indebtedness would increase.

And then what happens when you win the election? What’s the play after that? Follow the Fed by raising rates and nuke the population?

It makes no sense.
********************

It makes perfect sense to an incumbent politician. The nuking of the population will be early in the new 4 year term. Blame it on those who over borrowed. Jimmy Prentice “look in the mirror”. I can’t believe Prentice said that before the election and not after. Guess he was trying to play the good father figure with harsh but necessary reflection and medicine standing on the platform that we are the only game in town, yes corrupt, but the only viable game in town.

I used to think this world was complicated and intelligent. Hopefully, our sister planet is.

SM and Nosty thank you for the exchange always welcome.

Geezus…stupid is abound.

#147 Exurban on 07.14.15 at 3:36 am

#59 Cherry Blossom

Canadians against mandatory increase in CPP…they should look at their paycheques. They pay 3 times more a week in union dues than they do to CPP.

I’m a union member making approximately 80k a year. I pay $2356.20 to the CPP every year. That is the maximum contribution, paid by everyone making over $51,100 a year. My union dues last year, which are tax-deductible in the sense of reducing my taxable income, were $992. There are some unions with higher dues, such as faculty associations at B.C. colleges, but the highest I have ever heard of is about $2,000 a year.

#148 ILoveCharts on 07.14.15 at 4:02 am

*** Breaking news. Iran just made a rate cut a certainty.

His hands are tied. Economy is in a technical recession. Government refuses to enact stimulus. Iran will guarantee an extended period of cheap oil.

He does have one other option: Quantitative easing. I doubt he has the balls to pull that move though.

#149 Londoner on 07.14.15 at 5:21 am

“…US central bank chair Janet Yellen made it clear, just in case you didn’t hear her the last 14 times that she said it: rates will rise in 2015.”

Close but not quite correct. What she said was that based on her own outlook for the economy and inflation that it would be appropriate to raise rates later this year. But she hastened to add “I want to emphasize that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step”.

She also admitted that there are some factors that continue to restrain economic growth and that the pace of normalization would be gradual and that monetary policy would need to be “highly supportive” of economic activity for some time.

Finally, she stated that should progress towards their goals be slower than anticipated, then the Fed may move more slowly in normalizing policy.

So, rates will not necessarily be rising in 2015 and no guarantees that the trend will be consistent. However, she did state that the pace would be gradual.

#150 OttawaMike on 07.14.15 at 6:59 am

I find Stephen Harper to be a very outgoing Prime Minister.

#151 Sheane Wallace on 07.14.15 at 7:09 am

It seems CAD is already discounting the rate cut, down again today.

#152 Todd on 07.14.15 at 7:15 am

Is there an ETF that mirrors Iran’s TSE 30? Can’t seem to find one. The lifting of sanctions is certainly a huge opportunity to invest in a potentially huge economy.

#153 Bob on 07.14.15 at 7:23 am

I love how someone on this blog writes how he notices that condo prices are starting to soften in Toronto. Then another person agrees with him and then someone else notices all the lock boxes located in a Yorkville condo meaning everyone is selling. Meanwhile in the real world I just sold my Toronto condo in two weeks. I had two offers and many of the people showing up for viewings were Chinese and a few older couples who I think were downsizing. Anyway I will be renting now so let’s see where this goes.

#154 pbrasseur on 07.14.15 at 7:29 am

Boc will stay put, that’s what I believe.

Sure there’s some inflation but if they lower rates the CAD will suffer more and that will create more inflation, not less.

If they do «chop» it has nothing to do with inflation, it would be simply to propup consumption and the RE market, that would be borderline criminal IMHO.

#155 Herb on 07.14.15 at 7:47 am

Worth reading (and kicking ourselves in the ass) –

http://www.cbc.ca/news/world/farewell-america-canada-could-learn-a-few-things-from-you-1.3143760

#156 El Chapo Guzman on 07.14.15 at 8:12 am

Allo, Senor Garth :)

I am berry mucho ‘appy to be in the company of so many canadienses this week!

You may have heard I am taking a bit of a, como se dice? – ‘sabbatical’ from my life in Mexico running the Sinaloa Cartel.

I have come here to learn how some of the world’s best cartels are run, so I will be studying TREB and CREA before I return home. (Mucho amo these amigos already – everyone is scared of them and they control the entire industry without even having to buy ammunition! Muy inteligente!!)

They told me this would be a safe place to hang out undercover, since everyone in Canada is house horny and no one reads blogs like yours.

So I will relax and enjoy things with you for a while, Senor Garth, gracias.

Cerveza, por favor….rapidamente.

#157 Herb on 07.14.15 at 8:16 am

Rate cut, because the “Government” does not want to rattle homeowners who might care to vote, or lose the support of the FIRE industry. It will be 2008 all over again, see no evil until the day after the election, with the excuse for discovering recession on 20 October already stated: it’s a big, bad world out there.

Raising rates would be heroic, but political suicide for Harper. The next four years don’t matter to a politician on a mission like him. Staying in power does.

#158 gladiator on 07.14.15 at 8:22 am

A rate cut is guaranteed in my view.
Today, I saw “news” on the elevator TV saying that some “poll” results says that 93% of Canadians will not borrow more if the rates are lowered.
We are being prepped for the rate cut.
Somehow, the outcomes of the previous rate cuts are not an indicator of what will happen if they cut again. Let’s base our decisions on a “poll”, and if TSHTF, we’ll blame the “poll”, right?

#159 fancy_pants on 07.14.15 at 8:44 am

until the Federal Reserve/Yellen actually does raise rates, it is all hot air. Different dog, same bark. Same spiel, different park.

and for us here, I think the BofC will stand pat tomorrow. I will be very surprised if they lower as that will simply fuel import inflation – exactly opposite what they are trying to control. But, since I am not convinced this is their sole or primary agenda, I reserve such a call.

#160 Llewelyn on 07.14.15 at 8:47 am

#148 Ilovecharts

Quantitative easing for Canada? Not Likely!

Who would our financial institutions lend to other than households that might decide to purchase over valued accommodation and that objective can be met by adjusting the overnight rate.

The interest earned on Canadian bonds are already at historic lows and based on our declining GDP I am not sure the purchase of additional bonds by the Bank of Canada could drive interest rates much lower.

The theory behind quantitative easing is the purchase of assets by a central bank lowers interest rates and stimulates economic growth. At some point in time the assets purchased by a central bank must be sold back into the expanded economy.

If Canada cannot find a way to become more diversified quantitative easing could result in billions of dollars of assets sitting on the books for a very long time.

There is a reason why the Bank of Canada stuck with conventional monetary policy and that reason is a lack of confidence in our future. The only thing the Bank of Canada and the Government of Canada can effectively stimulate these days is the purchase of accommodation through lower mortgage rates and immigration. Not a very large toolbox in my view.

#161 Bottoms_Up on 07.14.15 at 8:53 am

#157 Herb on 07.14.15 at 8:16 am
————————————-
Right, they really should be raising rates especially with our low dollar and debt levels. And cutting rates would be assinine and political pandering. This is why they wont do anything tomorrow, they will stay the course.

#162 MF on 07.14.15 at 8:55 am

I think they cut simply because it is the wrong thing to do and I think they are idiots.

MF

#163 Smoking Man on 07.14.15 at 8:56 am

Disaster, US retail numbers. This just about kicks a fed hike to the middle of 2016. Hell q4 anyone.

Teranet numbers out. Hamilton kicking ass , Calgary and Edmonton holding there own.

#164 MF on 07.14.15 at 9:00 am

#153 Bob on 07.14.15 at 7:23 am

It’s true they are softening.

I live in the GTA and I am 32. A lot of my friends bought condos in the last 5-10 years and they are now all house horny. Everyone says “condos are a bad investment”.

That’s beginning to become the prevailing sentiment out there whether you like it or not. It’s also been backed up by statistics saying the gap between condos and SFH is widening faster and faster.

All it takes is a walk downtown to see the amount of towers coming online to see how this is an unmitigated disaster in the making.

MF

#165 George S on 07.14.15 at 9:09 am

According to the polls there is more or less an even 3 way division of support for the three main political parties. The party that wins needs about 35 to 37%.The conservatives have a hard core support of about 25 to 30% that will vote for them no matter what they do because being a conservative is like their religion and they will never change no matter what because they support them for other than economic reasons (guns; tough on crime, terrorism, perceived socialism).
The conservatives are going to do whatever it takes to get the extra 7 to 10% of the voters that they need to win and they are going to do it for the smallest possible group of voters that they can to win the next election. So whether or not there is an interest rate manipulation will depend on who’s votes they think they need to secure a win in the election.

With all the gloom and doom predictions being forecast about electing a non-conservative government, I wonder if people would have believed that electing a conservative(actually reform) government would have resulted in such a giant real estate bubble and economic mess.
Sometimes non-conservative governments get a bad reputation for the stuff they have to do to clean up the previous conservative government’s mess. (for example closing or repurposing 55 hospitals and raising taxes)

Almost all economic policy and political things are a matter of opinion and for sure all are an uncontrolled experiment. You never know what would have happened if you would have done something else in a given situation because there will never be an exact duplicate of that situation to try something else on. That is why the Nobel prize in economics is a pretend Nobel prize that is funded by someone else because economics is not scientific at all.

There are many Simpson’s quotes that have application to world events. One of my favourites is when Marge asks Ranier Wolfcastle how he can sleep at night knowing that his movies are making society so violent and increasing violent crime. His reply was: “On a big pile of money with many beautiful women”
The world’s biggest problem is exactly this. We somehow perceive that people in power all have morals and are there to serve the public good but often their only goal is to get all the money/women/power for themselves and sometimes their friends.

#166 Holy Crpa Wheres The Tylenol on 07.14.15 at 9:41 am

God Bless America. Their west coast and north east is just about as stupid as ours. Just in time for a hold on rates?

http://www.msn.com/en-us/money/realestate/are-we-entering-housing-market-bubble-20/ar-AAcWe0j

#167 Rational Optimist on 07.14.15 at 9:53 am

Hey, why are people so interested in how well or poorly somebody who bought a house in 1969 did? I bet he did pretty well, but either way I just checked my calendar again today, and it’s still not 1969. Maybe tomorrow.

I’m not sure how useful it is to know whether buying a home in 1969 is a good idea or not. Worry about whether it’s a good idea 2015, and realize that it is not.

Also, Statistics Canada has all the inflation data you could want, and it’s easily accessed. No need to try to remember when Tim’s last increased their prices, and no need to try to guess whether Whole Foods is moving in lockstep with the entire industry, or just identifying an opportunity to further stick it to you. Read Stats Can (or, better yet, don’t) and realize that there’s no deflation, and certainly no 20% inflation.

#168 Holy Crpa Wheres The Tylenol on 07.14.15 at 9:57 am

#114 Smoking Man on 07.13.15 at 10:16 pm
#102 burdaloit on 07.13.15 at 9:46 pm
#151 Mark on 07.13.15 at 12:34 am
…..Why do you constantly make stuff up? I don’t get it. Okay, you don’t like me, but that’s no reason to make stuff up.
#111 Mark on 07.12.15 at 9:51 pm
….. In a nutshell, one cannot own Canadian RE as a Canadian citizen and be a non-resident.”

Mark I think YOU are the one making stuff up or are just plain stupid. What you have written is incorrect and you should check the facts before posting. I would post a link for you, but it might be a good homework assignment for you to go check out the facts and report back to this readership with a link yourself.
To paraphrase the old quote, better to keep your mouth and be thought a fool, than to open it and remove all doubt…..

Garth, rather than keeping this poster around as a perennial whipping boy maybe you should send him to the cyber-hoosegow for a 10 minute quiet time misconduct!
……
That’s just censorship. Everyone should have the right of opinion. So the guys makes shit up.. you don’t think I do…what’s different.

Well I’m handsome and charming, all the amozone chics secretly want me inspite of my rotting teeth.
The minute we go down the road of banishing and censorship we are no better than the machine.
If the dude says something you don’t agree with, duel the bastard in a word smith and weston gun fight.
He never chirps me, smart enough to recognize alfa.
__________________________________________
Smoking Man are you sure about your choice of words? So your into deviant art? http://amozone.deviantart.com/
Your gun fight would be a one way loss without the gun as Smith & Weston are only the holsters. You may want to add a Smith & Wesson to help.
http://www.smith-wesson.com/webapp/wcs/stores/servlet/CustomContentDisplay?langId=-1&storeId=750001&catalogId=750051&content=11001
https://www.etsy.com/ca/listing/237422964/smith-and-weston-mp-shield-holster
So now your a car? Alfa Romeo https://www.alfaromeo.ca/
Perhaps you want to be the Alpha? https://en.wikipedia.org/wiki/Alpha

Anyway always entertaining keep up the great work on totally destroying the English language. By the way chicks do not dig a guy with rotting teeth just like Aqualung.
https://www.youtube.com/watch?v=d8RbhbZuDnc

#169 Nora Lenderby on 07.14.15 at 9:58 am

#150 OttawaMike on 07.14.15 at 6:59 am
I find Stephen Harper to be a very outgoing Prime Minister.

You get this morning’s Coffee-Exhaled-Thru-the-Nose award, Mike! Congratulations!

(*choke*)

#170 Edmonton Fool on 07.14.15 at 10:07 am

Downtown Edmonton condo owners on the hook for $2.3M repair

http://globalnews.ca/news/2108816/downtown-edmonton-condo-owners-on-the-hook-for-2-3m-repair/

#171 Kilby on 07.14.15 at 10:25 am

Poloz and Oliver, our financial leaders……Running a country based on home building and sales, I hope the BOC has enough self determination to ignore Dear Leader and hold steady on the .75 but do not have much faith….Sad.

#172 Balmuto on 07.14.15 at 10:31 am

#153 Bob

“Meanwhile in the real world I just sold my Toronto condo in two weeks.”

Just out of curiosity, what part of Toronto was your condo in, how many bedrooms and what was the square footage? What I’ve been noticing is that the 2 bedroom or 1+den segment in the downtown core is crowded now and units are sitting on MLS for longer. That’s just my impression but maybe your experience was different.

#173 waiting on the westcoast on 07.14.15 at 10:32 am

SM – happy belated birthday…

Mark – remember – IMHO

Garth – as we did this last time, I again vote to let Mark stay although it is tiresome pointing out the flaws in his arguments. I am a true libertarian!

While it’s a pathetic move (but not as pathetic as all of us reading/commenting here), I think the BoC will cut. Great for the hornies and the politicians and a sad day for the country not taking leadership on doing what’s right for the economy even if it hurts short-term.

Our productivity numbers continue to slip relative to the US and lowering the dollar is not going to help us in the long run.

The US has to raise. I realize the data is a patchwork, but everything I am hearing/seeing on main street is the economy is picking up steam.

If 2/3 of the various reports are positive monthly… I think it is indicative of a broad spectrum of growth. Sure you can pick retail this month or jobs a few months ago or whatever else is weak but the majority outdoors each month positive.

#174 Squirrel meat on 07.14.15 at 10:44 am

#168 Holy Crpa Wheres The Tylenol on 07.14.15 at 9:57 am

#114 Smoking Man on 07.13.15 at 10:16 pm
#102 burdaloit on 07.13.15 at 9:46 pm
#151 Mark on 07.13.15 at 12:34 am
…..Why do you constantly make stuff up? I don’t get it. Okay, you don’t like me, but that’s no reason to make stuff up.
#111 Mark on 07.12.15 at 9:51 pm
….. In a nutshell, one cannot own Canadian RE as a Canadian citizen and be a non-resident.”

Mark I think YOU are the one making stuff up or are just plain stupid. What you have written is incorrect and you should check the facts before posting. I would post a link for you, but it might be a good homework assignment for you to go check out the facts and report back to this readership with a link yourself.
To paraphrase the old quote, better to keep your mouth and be thought a fool, than to open it and remove all doubt…..

Garth, rather than keeping this poster around as a perennial whipping boy maybe you should send him to the cyber-hoosegow for a 10 minute quiet time misconduct!
……
That’s just censorship. Everyone should have the right of opinion. So the guys makes shit up.. you don’t think I do…what’s different.

Well I’m handsome and charming, all the amozone chics secretly want me inspite of my rotting teeth.
The minute we go down the road of banishing and censorship we are no better than the machine.
If the dude says something you don’t agree with, duel the bastard in a word smith and weston gun fight.
He never chirps me, smart enough to recognize alfa.
__________________________________________
Smoking Man are you sure about your choice of words? So your into deviant art? http://amozone.deviantart.com/
Your gun fight would be a one way loss without the gun as Smith & Weston are only the holsters. You may want to add a Smith & Wesson to help.
http://www.smith-wesson.com/webapp/wcs/stores/servlet/CustomContentDisplay?langId=-1&storeId=750001&catalogId=750051&content=11001
https://www.etsy.com/ca/listing/237422964/smith-and-weston-mp-shield-holster
So now your a car? Alfa Romeo https://www.alfaromeo.ca/
Perhaps you want to be the Alpha? https://en.wikipedia.org/wiki/Alpha

Anyway always entertaining keep up the great work on totally destroying the English language. By the way chicks do not dig a guy with rotting teeth just like Aqualung.
https://www.youtube.com/watch?v=d8RbhbZuDnc
——————————————–

The master of drunkenness and rotten teeth.

https://www.youtube.com/watch?v=kfVsGapy5vQ

#175 waiting on the westcoast on 07.14.15 at 10:47 am

Wow – while the current rate applies for a manageable housing market, another .25% cut will push us into the abyss. So says Royal LePage…

http://www.financialpost.com/m/wp/news/blog.html?b=business.financialpost.com/personal-finance/mortgages-real-estate/royal-lepage-warns-rate-cut-could-over-stimulate-housing-market-and-spur-difficult-correction&pubdate=2015-07-14

#176 Paul Sanders on 07.14.15 at 10:57 am

To Sheane Wallace

In your many previous posts just a few months ago you were saying how that interest rates will be much higher and now you are talking about negative interest rates.

It seems you are trying to confuse people. You keep changing your stance.

#177 Capt. Obvious on 07.14.15 at 10:57 am

until the Federal Reserve/Yellen actually does raise rates, it is all hot air. Different dog, same bark. Same spiel, different park.

So incorrect. The FED has been prepping markets for a rate rise for several months now. In much the same way as they kept telling the markets they were not going to raise rates for many many months during the GFC and fallout. The FED communicates very clearly. If you do not think they’re going to raise rates later this year, you’re just plain misunderstanding the situation.

Classic case of recency bias.

#178 some guy on 07.14.15 at 10:59 am

Yellen doesn’t actually saw she’s raising rates…

She says rates will go up if the US economy warrants an increase. Based on today’s economic stats, consumer’s aren’t spending and inflation is nil. Pretty clear there will be no increase..

#179 Just buy it on 07.14.15 at 11:01 am

Meanwhile in Vancouver you are bombarded with house flipping workshops 1 800 262 7713 is what i remember from my car radio. This is insane another rate drop will destroy this city, my only hope is that will signify a real recession and job losses will start the bloodbath.
Iranian deal is the end of Alberta’s hopes for oil above 60$. It’s not happening, not because the demand is shrinking(globally is on the rise) but because supply is going 2% higher in the last year. We have a deflation in raw materials, because of excess supply build in last 10 years.
Just call these guys and flip some condos, everything will be ok!

#180 Mister Obvious on 07.14.15 at 11:32 am

#167 Rational Optimist

“Hey, why are people so interested in how well or poorly somebody who bought a house in 1969 did?”
————————–

The reason one might be interested is for purposes of comparison.

This blog talks a lot about various investment outcomes over the very long term. For most people, a ‘very long term investment’ means only one thing: A house.

The point is that in our society other realistic possibilities exist. The way to make that point clear is through examination of other more liquid investments vs residential real estate over long time frames.

It helps to expand one’s financial horizons and look beyond the myopic view of the masses.

#181 saskatoon on 07.14.15 at 11:44 am

#127 Bottoms_Up

“The state is really the taxpayer right?”

deluded commie logic: one of the primary reasons canada is sinking.

more theft and violence to benefit ME = fairness

#182 LL on 07.14.15 at 12:03 pm

….”On Friday US central bank chair Janet Yellen made it clear, just in case you didn’t hear her the last 14 times that she said it: rates will rise in 2015″….

And they never rise…(instead they continue to go lower! Trouver l’erreur!!!!)
It has been delayed (again…probably for ..14 times) for September!

And why she advice IR will rise 9 months in advance?
I call BS on that!
Talk is cheap!

#183 OttawaMike on 07.14.15 at 12:21 pm

Good link Herb. I passed it onto my expat American pal.

Hard to disagree with anything in that op-ed.
——————

Nora,
I was down at the Upper Canada yacht club. Got a smoking deal on a Dinghy. I looked for you but couldn’t find you. I had Ninjas with me. ;>)

#184 Sheane Wallace on 07.14.15 at 12:21 pm

#176 Paul Sanders

Here is it for 5th grader:
1. Real interest rates are negative as inflation (‘official’> 2 %) is higher than the nominal interest rate (0.75 % in Canada, 0.5 % in US).

2. Nominal interest rates will be raised (maybe to 1 % in Canada, someday, 0.75 in US) but will be lower then inflation.

Is is clear now? Nominal interest rates rising in mid to long terms, inflation being higher so real interest rates (nominal – inflation) are negative?

#185 Linda on 07.14.15 at 12:26 pm

I just heard Phil Soper on Toronto am radio explaining himself.

He said there is “absolutely no comparison” between our real estate situation and what happened in the U.S.A a few years back.

OK………..

Then he said we are becoming a “condo nation” and so there is no overbuilding of condos in Toronto. In fact, he said, we are more likely facing “an undersupply” looking forward.

Hmmm…..

#186 Sheane Wallace on 07.14.15 at 12:30 pm

#176 Paul Sanders

no offence, but over 80 % of the people I know are financially illiterate, it seems to be the norm here,

#187 jess on 07.14.15 at 12:36 pm

…”The company now apparently has only eleven plumbers for a 2,300 kilometers network. Most of the work is done by sub-contractors, often for a higher price. The quality of service and the condition of the system have progressively gotten worse, despite the hike in water rates.
http://multinationales.org/Forced-Privatizations-in-Greece
===========

Trade in Services agreements – TISA – expands the deregulation and privatization of public services.

http://www.stlamerican.com/news/local_news/article_42c066bc-65ae-11e2-8cb1-0019bb2963f4.html

…”refused to accept responsibility, saying it had contracted out waste disposal to third parties, who were told it was toxic. In a statement to the Ecologist the company still refuses to accept liability, but expressed a willingness to ‘play a minor role’ in cleaning up the site.

=

Residents Fight Back Against Pittsburgh’s Privatized Water Authority
By Aaron Miguel Cantú, Truthout | Report
http://www.truth-out.org/

Tom Levitt for The Ecologist
Monsanto, BP and Veolia agree to pay for cleanup of contaminated Welsh site
The Guardian‎ – 7 hours ago
Monsanto, BP and Veolia have agreed to pay to contribute to the cleanup of a former quarry
———————-

#188 SWL1976 on 07.14.15 at 12:38 pm

#47 omg the original

The war with Iraq was a cakewalk.

Maybe you are uniformed, as the war in Iraq is still going on.

#60 Nosty, etc.

I am looking forward to moving back into the next worlds (where we all originally came from), as my physical body is slowing down.

My saying goes… Earth, enjoy your stay, and make your mark.

I always look forward to your spin on the world around us, and I am always inspired by older people (than myself) who can see through the deception.

#68 Smoking Man

We all know building 7 fell, we all saw the 30mm holes in MH17 cockpit a year ago yet no voice record tower to plane.

You can’t beat the Machine.

There is no fighting the machine at this point in the game. However, that does not mean we should just become mindless drones in the madness.

Being aware of what’s going down is the first step

We need evolution not revolution at this point

Queue… Forty six and two

#189 Balmuto on 07.14.15 at 12:38 pm

“Home Capital’s shares fell almost 19 per cent Monday on news that the volume of single-family mortgages applications plummeted 27 per cent in the second quarter from a year earlier – even as home prices continued to soar in major markets.”

This, by the way, is a warning to all those who think our banks our protected from a housing downturn because of the CMHC guarantees. The default risk isn’t the biggest risk they face. The biggest risk is revenue shortfall risk, i.e. the plunge in mortgage originations as they run out of greater fools to lend to. This will be especially pronounced if it occurs in a rising rate environment where the refinancing business will be drying up at the same time.

#190 Leo Trollstoy on 07.14.15 at 12:40 pm

Mark was banned from RFD for posting ridiculous things without any credible source. Then booted off this blog. Now he’s set up shop at the FP and posting with a vengeance!

http://business.financialpost.com/investing/its-time-for-stephen-poloz-to-swallow-his-pride

#191 Republic_of_Western_Canada on 07.14.15 at 12:42 pm

#83 Sheane Wallace on 07.13.15 at 8:40 pm
[…]
We live a lifestyle we can not afford with the highest personal debt in the world vs. GDP.

That’s personal choice and collective naivity, not necessity.

Government policy must not lead to a situation where every individual is mandated to put on a helmet every morning, everywhere because a few characters slipped on ice in February.

Walking, ice, and debt have been around for thousands of years. A petty nanny-state only recently.

If you want to improve the debt situation, discourage dangerous behavior through education and example instead. Show what bad personal financial behaviour and walking around in the winter without your cleats will do. The rest is up to the people.

If low rates are needed to bring industry and exchange rates up to a competitive standard, so be it.

The true moral hazard is the mediocre product design, and bad quality and inefficient manufacturing on the industrial side which has characterized Ontario for the last half century. And the blatant non-value added exploitation of raw western resources, exported to Ontario and various world markets.

People have much more control over their own lives than employment situations. If they insist on screwing up with massive debt to consume unnecessary crap, and by promoting negative social behaviour such as political correctness and reclusiveness based on e-media & marriage, or witless time behind video games, or obesity that is their individual problem. Not the government’s.

#192 Bob on 07.14.15 at 12:43 pm

# 172 Balmuto
My condo is in the King and Spadina area. Slightly over 1000 sf with 2 bedrooms. I had a pretty good response.

#193 Llewelyn on 07.14.15 at 12:44 pm

One last thought about the Bank of Canada

All that monetary policy can influence is inflation.

Important issues such as employment or stimulating economic growth are influenced by fiscal policy set, at least in theory, by the Government of Canada.

The silence of Cabinet during Canada’s economic slide has become deafening. We get the odd sound byte from our Minister of Finance but all other Ministers are keeping their opinions to themselves.

Inflation does not seem to be much of a problem these days so I am curious why so much attention has been directed towards monetary policy set by the Bank of Canada while fiscal policy set by Cabinet has faded into the shadows.

More action on this blog these days than we see coming from Ottawa.

While Garth is providing very sound advice investing in global equities is not going to increase our GDP.

#194 gut check on 07.14.15 at 1:02 pm

@ #177 Capt. Obvious on 07.14.15 at 10:57 am
until the Federal Reserve/Yellen actually does raise rates, it is all hot air. Different dog, same bark. Same spiel, different park.

So incorrect. The FED has been prepping markets for a rate rise for several months now. In much the same way as they kept telling the markets they were not going to raise rates for many many months during the GFC and fallout. The FED communicates very clearly. If you do not think they’re going to raise rates later this year, you’re just plain misunderstanding the situation.

Classic case of recency bias.
————————————————————-

An example of this very clear communication, I believe, is found here, at the conclusion of a very lengthy statement by Yellen herself in March 2015:

“Conclusion
To conclude, let me emphasize that in determining when to initially increase its target range for the federal funds rate and how to adjust it thereafter, the Committee’s decisions will be data dependent, reflecting evolving judgments concerning the implications of incoming information for the economic outlook. We cannot be certain about the underlying strength of the expansion, the maximum level of employment consistent with price stability, or the longer-run level of interest rates consistent with maximum employment. Policy must adjust as our understanding of these factors changes. However, if conditions do evolve in the manner that most of my FOMC colleagues and I anticipate, I would expect the level of the federal funds rate to be normalized only gradually, reflecting the gradual diminution of headwinds from the financial crisis and the balance of risks I have enumerated of moving either too slowly or too quickly. Nothing about the course of the Committee’s actions is predetermined except the Committee’s commitment to promote our dual mandate of maximum employment and price stability.”

It is practically crystal in its clarity, wouldn’t everyone agree?

The Fed is so very on point and Yellen’s pronouncements so very precise that journalists are simply wasting their time with articles like the following which attempt to explain why we plebs just might not get what she’s saying:

http://www.newyorker.com/news/john-cassidy/janet-yellens-awkward-day

#195 El Chapo on 07.14.15 at 1:03 pm

Political corruption in Mexico?

Just as much in Canada!

#196 Leo Trollstoy on 07.14.15 at 1:04 pm

#172 Balmuto

I’ve been noticing is that the 2 bedroom or 1+den segment in the downtown core is crowded now and units are sitting on MLS for longer. That’s just my impression but maybe your experience was different.

That seems unlikely.

http://www.chpc.biz/uploads/9/7/9/5/9795010/5378302.png?714

But I’m willing to look at whatever data you might have on this supposedly slowing of sales of 2 bed/1+den.

#197 Leo Trollstoy on 07.14.15 at 1:12 pm

In honour of Mark, who is now posting in Financial Post comment sections (which would be funny if it weren’t so sad), I will continue on with the nickname that he christened for me. It’s a fabulous name!

Cheers Mark! May you be happy posting in the comment sections about deflation, the fall of the USD, declining Tor/Van RE prices, gold, or whatever your mind decides to conjure up!

#198 Barry in Pickering on 07.14.15 at 1:23 pm

Victoria house prices up 4% YOY, according to Royal LePage House Price Survey. Average house prices up 6% across Canada YOY.

http://www.ctvnews.ca/business/average-price-of-home-to-increase-6-1-per-cent-this-year-royal-lepage-1.2467834

#199 Sheane Wallace on 07.14.15 at 1:24 pm

#191 Republic_of_Western_Canada

You are theoretically correct. The problem is that in practice you are dragged down by the greatest fools around and their choices. Good luck trying to be prudent in Greece. Can you access your bank accounts? No, Is it your fault? No. Are you going to pay for other people’s folly? Yes.

Same here, CMHC liabilities will stay and we would need to pick that tab,

Not to mention that excessive credit creation drives up prices causing inflation and with the idiots at BOC keeping real interest rates as negative you have little choice but to invest or simply move you money out.

#200 Bottoms_Up on 07.14.15 at 1:34 pm

#190 Leo Trollstoy on 07.14.15 at 12:40 pm
——————————————————-
My theory is he is conducting research into ‘blog mentality’ and how long it takes to get booted off when posting such nonsense.

#201 Bottoms_Up on 07.14.15 at 1:36 pm

#181 saskatoon on 07.14.15 at 11:44 am
—————————————————-
No, quite the opposite, all the more reason for fiscal prudence.

Ok, let’s reverse the idea, universities and elementary and high school should only be subsidized to 10% MAX.

Then you would see marches in the streets.

#202 S.Bby on 07.14.15 at 1:48 pm

Heard on the radio today that Phil Soper is saying the BoC should NOT cut rates again because it could lead to an even bigger correction. I was thinking: did I hear that right?

#203 MF on 07.14.15 at 1:51 pm

#197 Leo Trollstoy on 07.14.15 at 1:12 pm

Lol I saw that today.

He was debating his deflation theory with a poster who is knowledgeable and someone else interjected: “Mark you got your butt handed to you on Garth’s blog and now you getting the same thing here”.

I admire his tenacity. I like the guy.

MF

#204 Sheane Wallace on 07.14.15 at 1:57 pm

http://www.bnn.ca/News/2015/7/8/Bank-of-Montreal-and-RBC-join-Bank-of-Canada-rate-cut-call.aspx

BMO and RBC aks for BOC rate cut.

It is done deal folks. Would it be 0.25 or 0.50?

#205 Jack Hanson on 07.14.15 at 1:59 pm

To Sheane Wallace

It takes one to know one! Take a position and stop flip flopping. You are not on the campaign trail!

#206 Axhead on 07.14.15 at 2:04 pm

Bottoms_Up et al:

Considering the abysmal performance of our educational system, a reduction in funding is justified; and again, day care is not a ‘right’ and best fully funded by parents, not the state.

Just wondering…why doesn’t the BOC release two interest rate values: one for business and another for all other borrowers?

#207 Leo Trollstoy on 07.14.15 at 2:35 pm

During the U.S. real estate downturn the monthly rent of a good property in a good area was 1.15% to 1.19% of total property cost. Unheard of.

1.5% to 1.9%

My bad. Brain fart.

#208 april on 07.14.15 at 2:54 pm

#198 – I saw that too but it’s coming from the real estate industry…believable ??? Those buying at these inflated prices can only be those who have a huge down payment or are down sizing which would be a minority by now. I find it hard to believe anything info that comes from a corrupt industry

#209 Crypto Currency on 07.14.15 at 3:01 pm

#72 Latest scam

Hardly a scam. In fact, the opposite. Banks are the scammers. They now want to control digital currency and are trying to buy out the Bitcoins of the world – either to eliminate competition, or make themselves even more profitable, or both.

You really should google Bitcoin for 90 seconds before you rattle of a scam claim like that! The concept of digital currency will eventually take over, in some form or another.

#210 Blacksheep on 07.14.15 at 3:01 pm

Axhead # 206,

“Considering the abysmal performance of our educational system, a reduction in funding is justified”
—————————————————
Think about it, do you believe children’s grades nationally dropping has anything to do with funding? I mean were talking basic math skills, yet they are clearly, in decline.

How can this be explained?

#211 Julie K. on 07.14.15 at 3:05 pm

Daughter’s BF’s bro and his roommate, two 20-something bucks without any, were laid off early this year from what I understand were junior/entry level gigs (ie only making measly $100K/yr) in the oil patch. Both men got calls from their bosses in last few days. One has been told to return to camp next week for start-up; the other was told to be on stand-by as his call back is imminent.

Surprising news, no?

#212 Monica Delong on 07.14.15 at 3:11 pm

To Sheane Wallace

Nominal interest rates mid to long are not rising. They are at almost their lowest point in Canadian history.

A Canada 30 year bond yields was 3.25% just about 18 months ago and 3.81% just about 5 years ago and now is 2.32%.

Canada 10 year bond yields were around 2.85% just 18 months ago and about 3.25% just about 5 years ago and now are 1.67%.

Know what nominal interest rates, mid to long bond yields are before stating your comments not based on true data.

#213 pwn3d on 07.14.15 at 3:26 pm

#163 Smoking Man on 07.14.15 at 8:56 am
Disaster, US retail numbers. This just about kicks a fed hike to the middle of 2016. Hell q4 anyone.

————-

but June was really cold… and there was a strike somewhere… lulz

#214 Monica Delong on 07.14.15 at 3:26 pm

Actually, the Canada 10 year bond yield is even lower than 1.67%, it is currently 1.64%.

#215 Joe2.0 on 07.14.15 at 3:33 pm

Sometimes you come across that the banks actually have ethics.

Let’s think this through.

– Greece is in debt.
-Greece borrows billions of dollars.
-Greece is in bigger debt.
-Greece borrows billions more dollars.

Q-Why would the banks allow Greece to get so indebted?
A-So that they would essentially own Greece.
A land and resource grab that comes with serfs.

France- Italy- Spain….
Rinse and repeat.

People why do the banks lend so much money when there’s NO way it will be paid back with collapse on the iminant horizon?

Naive sheeple.

Try it with your bank sometime, tell them you have no money to pay your debts and see what happens.

It’s an orcastrated takeover.
And it’s going to end in cilvil unrest once people see how they have been taken to the cleaners.

Greece owes the bulk to the IMF, not banks. — Garth

#216 Holy Crap Wheres The Tylenol on 07.14.15 at 3:43 pm

#188 SWL1976 on 07.14.15 at 12:38 pm
#47 omg the original
The war with Iraq was a cakewalk.
Maybe you are uniformed, as the war in Iraq is still going on.
#60 Nosty, etc.
I am looking forward to moving back into the next worlds (where we all originally came from), as my physical body is slowing down.
My saying goes… Earth, enjoy your stay, and make your mark.
I always look forward to your spin on the world around us, and I am always inspired by older people (than myself) who can see through the deception.

#68 Smoking Man
We all know building 7 fell, we all saw the 30mm holes in MH17 cockpit a year ago yet no voice record tower to plane.
You can’t beat the Machine.
There is no fighting the machine at this point in the game. However, that does not mean we should just become mindless drones in the madness.
Being aware of what’s going down is the first step
We need evolution not revolution at this point
Queue… Forty six and two
____________________________________________
One has to acknowledge that Nature no longer controls our evolution. We decide our biological future. Natural selection has been replaced by artificial selection.
We are in firm control of our future. We can eradicate an undesired gene in one generation if we want to, and hereditary diseases will soon disappear. We will very soon be at a level where we can tailor our genes as we please. We can easily do it now, but we dare not do it before we know the ultimate effects of the manipulation. In the future, human beings will be tailored to contemporaneous norms. But one thing is certain: we will not continue to be as we are now. Scary….
https://www.youtube.com/watch?v=_mLLZ9gn8T0

#217 retired Boomer - WI on 07.14.15 at 3:47 pm

A RANT on low rates…

So what if rates in Canada Are cut? Could the ‘effect’ on the borrowing mentality be countered by higher required minimums down, as well as perhaps shorter terms?

Certainly this could be controlled by the government?

While OI personally would love to see the BOC raise by .25% off setting their bad move this spring, and front running Yellin’s promise to “raise rates.”

One must understand Janet Yellin operating much as the Popeye character Wimpy, who was always wanting a hamburger today, and he promises to ‘gladly pay you Tuesday.’ She promises to ‘raise rates’ someday… in 2015 IF… yadda, yadda, yadda…. Kind-a, sort-a, yeah-maybe,,,

Greece, not over with yet. Another bailout, with what for the lenders? Spain, Italy, Portugal looking on to see what ‘better deal’ the Greeks might get?

Strange, that the EU community can enjoy 6 weeks vacation, 35 hour work weeks, little new product development, and yet bitch at Greece for their lack of productivity.

Yup, sure don’t quite understand the myth of reality.

#218 Nosty, etc. on 07.14.15 at 4:04 pm

#141 Spectacle on 07.14.15 at 1:41 am — “Early inheritance. Sell now & call it an early inheritance now?” Hi Spectacle — congrats to you and yours!

Follow Garth’s advice. Sell and rent, invest the net proceeds so a constant monthly income is coming in, max out RESPs. The less stuff one has to keep doing around the home, the better.

#188 SWL1976 on 07.14.15 at 12:38 pm — “My saying goes… Earth, enjoy your stay, and make your mark.”

Having a blast before I check out!

#219 Greg Thompson on 07.14.15 at 4:07 pm

To #213 Retired Boomer WI

What if Canada’s real estate and housing market falls 25% to 40%. So be it.

What if more and more desperate Canadians in debt mostly faults of their own depend more and more on shadow banking and semi-regulated payday loans, unsecured high interest loans. So be it.

What if over indebted governments will have to cut pensions, benefits, sick days etc. So be it.

By the way, many Canadians in the public sector, enjoy very similar benefits, days off, vacation pay, pay, pensions like you mentioned in the Eurozone.

#220 Sheane Wallace on 07.14.15 at 4:11 pm

#212 Monica Delong
or should I call you Mark?

The rates will rise. If you don’t trust me, ask Garth.

The ONLY reason to buy mid to long term bonds (at the quoted levels) is expected further rate cuts by BOC that will further appreciate your bonds (in short term). It is carry trade with limited potential.

BOC cuts short term, this drives rates in mid/to long term down and voila, your bonds appreciate.

The scary part is when (not if) they lose control of the long term yield curve, then these bonds will turn to trash.

So careful with bonds. The only investors that will buy thee bonds at these levels are mandated institutional investors (e.g. pension funds).

Incorrect. Bonds reduce portfolio volatility and add stability. They provide income and are negatively correlated with equities. Every balanced portfolio should contain them – but the right kind and the proper duration. — Garth

#221 DON on 07.14.15 at 4:12 pm

#211 Julie K. on 07.14.15 at 3:05 pm

Daughter’s BF’s bro and his roommate, two 20-something bucks without any, were laid off early this year from what I understand were junior/entry level gigs (ie only making measly $100K/yr) in the oil patch. Both men got calls from their bosses in last few days. One has been told to return to camp next week for start-up; the other was told to be on stand-by as his call back is imminent.

Surprising news, no?
*************************

MY BIL got the same phone call – he just moved back from Alberta (months prior to his lay off – family decision) went back to fly in fly out routine. After a 3 month lay off without being paid the full amount of the final bonus…company called told him he could have his job back if he moved back to Red Deer. He declined as they are not sure how long it will last.

I am hearing that more layoffs are to come.

#222 TurnerNation on 07.14.15 at 4:21 pm

Breaking….Monica Delong name anagrams into “Genial Condom.”

Marko’s sickness knows no bounds. :(
Worse than DA’s

#223 Sheane Wallace on 07.14.15 at 4:24 pm

Incorrect. Bonds reduce portfolio volatility and add stability. They provide income and are negatively correlated with equities. Every balanced portfolio should contain them – but the right kind and the proper duration. — Garth
———————
The logic is generally correct but whether that is the case in the current situation/without historical precedent/ after 7 years of zero interest rates?

I doubt it.

Any meaningful increase of rates will wipe out bond holders.

Some hard cash (not much) is a better option.

#224 Sheane Wallace on 07.14.15 at 4:32 pm

http://seekingalpha.com/article/1582722-stocks-and-bond-yields-are-positively-correlated-right-not-so-fast

It is amazing how thanks to lose monetary policies in the last years actually bond prices (inverted from bond yeilds) and equities are actually not negatively but positively correlated (since 2010).

So better get equities, the yield is higher.

#225 Bottoms_Up on 07.14.15 at 4:34 pm

#210 Blacksheep on 07.14.15 at 3:01 pm
——————
Its bexause they started teaching exploratory math and got away from memorization. A huge mistake that will now be corrected.

#226 Greg Thompson on 07.14.15 at 4:37 pm

Sheane Wallace

If you look at every 5 year period in Canada, U.S, Europe, Japan, they are staying low and going lower.

Bond yields rise and then fall and if people are waiting for a 3.5%, 4%, 5%, 6% government bond yield, GIC rates then they will be sorrily disappointed.

They are what they call a dead cat bounce.

They have it all under control and when economists, analysts or anyone else say they can’t go lower, surprise, they do.

How else are they going to push up real estate and equities.

#227 Greg Thompson on 07.14.15 at 4:40 pm

Remember the Fed’s favorite economic theory, the wealth affect.

Increases in real estate, stocks and equities and bond values to a lesser extent.

It is the same old Fed’s merry go round.

#228 Sheane Wallace on 07.14.15 at 4:42 pm

#226 Greg Thompson

I won’t bet my hard earned money on that. If you believe that rates will keep moving lower, good luck.

I will stay on the sidelines with bonds and wait it out. Then I will short it.

#229 S.Bby on 07.14.15 at 5:35 pm

Lots for $10 each in Delia AB. Where?

http://globalnews.ca/news/2110525/10-lots-in-delia-alberta-sell-out-in-just-a-few-days/

#230 old gringo on 07.14.15 at 5:45 pm

Garth, please do not make jokes about “scorpions in your shorts”.
This could be a tender subject south of the border.
Life’s a beach!

#231 Lisa Moretti on 07.14.15 at 7:45 pm

There are now about 10 European countries that have true, nominal not real, after inflation bond yields.

Go to http://www.investing.com/rates-bonds/world-government-bonds.

Just 1 year ago or so this was unthinkable and it should not happen. It did. This means that another big economic downturn or meltdown and it is even easier for interest rates to go lower because the new normal rates will be lower than past normal rates.

Even if nominal or stated interest rates do not go negative, U.S 1%,10 year bond yields and 2%, 30 year bond rates are real possibility.

Look at Kessler on http://www.wealthtrack.com. This is what he mentioning about lower U.S. treasury bond rates.

#232 Lisa Moretti on 07.14.15 at 7:47 pm

Correction, there are now about 10 European countries that have true, nominal, stated, negative bond yields.

They are not negative bond yields because of being real rates with inflation taken into account. They are negative as stated.

#233 kommykim on 07.14.15 at 8:10 pm

RE: #88 drydock on 07.13.15 at 8:57 pm
Gee when Mark first came on the scene you used to defend him,what happened?
I actually do not recall that but, if so, it was an error. — Garth

I used to believe in what Mark wrote in the past too, until he started to write about things that I know something about. After reading many posts containing flawed logic from Mark, now I simply read them for their entertainment value.

#234 gut check on 07.14.15 at 9:30 pm

“”#112 gut check on 07.13.15 at 10:12 pm
“The Chinese government did not freeze any stocks. Companies requested a trading halt and it was granted. — Garth”

Granted by who? A non-governmental agency of some sort? I can’t figure this out because this is what is says on Bloomberg:

“China’s securities regulator banned major shareholders, corporate executives and directors from selling stakes in listed companies for six months, its latest effort to stop the nation’s $3.5 trillion stock-market rout.”

http://www.bloomberg.com/news/articles/2015-07-08/china-bans-stock-sales-by-major-shareholders-for-six-months
———————-
A trade halt and a trading ban are separate entities. — Garth

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

The Chinese Securities Regulator BANNED big players from trading certain stocks.

I don’t know the difference between a ban and a halt and a freeze but even if there is something more than a semantic difference it is clear that what actually took place was that the government stepped in and placed the ban, enforcing it under penalty of law.

#235 LL on 07.14.15 at 10:18 pm

194 – So incorrect. The FED has been prepping markets for a rate rise for several months now.

You mean several years?

#236 rentin on 07.17.15 at 1:42 am

You know all this crazy monetary policy just mimics the general public.

There won’t be any rate cuts left to save any financial disaster.

Complete financial recklessness.

Garth – I really liked your term looniecide. Very well crafted.

But people will be reckless too, cashing in their savings (those who haven’t already) to pay for their houses as they run out of work, or to cover increasing payments as interest rates rise.

I think the only way the house market will correct is through a series of defaults. People will hang onto their house like an overturned boat in the ocean. Not dare let go or risk being ridiculed by their friends and family.

They will be shamed into bankruptcy. It will be a life changing event. And once houses are cheaper to buy than rent (as they were in 2001) I will re-enter that game in full force.