Not normal

Markets don’t give a fig about collusion. Or Lavalin. So let’s jump to what matters.

Last week we talked about an American inverted yield curve. That’s when short-term interest rates (like the central bank benchmark) are greater than what most bonds pay. Especially l-o-n-g bonds – a decade or more. So investors can reap the same returns by investing money for a few months as for an entire decade. That’s not normal.

Why is it happening?

Because Mr.Market believes future interest rates will be lower as inflation and economic growth erode. So long bonds currently available become more valuable (the price rises) since they carry a higher coupon rate than ones to be issued later. As bond prices increase, the yield decreases. And now 10-year ones pay less than 90-day deposits. (If your head hurts a little, you’re normal. Bonds are weird.)

So this has just happened in Canada, too. First time in 12 years – since before the credit crisis hit.

Canadian interest rates have crashed more than almost any other western country over the past six months. There is a 50-60% decline in five-year and 10-year Government of Canada yields. In other words, the sunny ways projection contained in last week’s federal budget was, well, er, ah, more faerie poop. At least, the market ain’t buying it. Neither should you.

Retail sales have dropped. Household debt is at epic levels, and continues to rise. The mortgage business is in tatters because of the stress test, tapped-out households, wobbly housing markets and ill-conceived taxes on buyers from out of the country, secondary homes and high-end houses. (Now Toronto is close to slapping a new uber-transfer tax on $3 million+ properties. It never ends.) The sum of all fears is that families have gorged on too much debt, spent their brains out and will retrench to try and save or pay of borrowings. Since two-thirds of the economy depends on you buying stuff, it’s bad news.

Next: reduced credit as lenders pull up the drawbridge to reduce risk and the ultimate house-killer – rising unemployment. All this has generated a massive turnaround in expectations. The market’s giving 32% odds of a Bank of Canada rate cut in September and even a 24% chance the bank will fold in July. Wow. Just 90 days ago we were being told to expect two more hikes in 2019.

Meanwhile global trade has dropped almost 2% in the last three months (the biggest in a decade). Brexit is a total, bleeding mess. And now 45’s all cocky and puffed-up again, which bodes badly for the China trade talks.

So, yeah, no more rate hikes in Canada. If the yield curve inversion continues (it may not) then we could be about a year and a half from a recession. In advance of that you can expect monetary or fiscal stimulus – rate cuts or increased government spending. The trouble with Canada is that rates are still very low (the bank rate’s just 1.75%, even after five hikes compared to the Fed’s 9 increases) and Ottawa’s already spending tens of billions more than it collects annually. Our economy has shrunk in three of the last four months. This could explain why beaver bond yields have crapped out more than elsewhere.

Anyway, here’s what it means to everyday life.

First, GIC and high-interest savings rates will be falling. Second, so will fixed-term mortgage costs. Thus, third, you might want to go with a variable-rate home loan or lock into one of those cheapo spring specials now being unveiled. Fourth, none of this is long-term good news for real estate. Sure, loans will cost less, but wounded consumer confidence is a bigger determinant of property sales. People worried about jobs don’t buy houses.

Now, lest all the pantywaists who read this pathetic blog over-react, go to cash and head for their bunkers packed with Cottonelle, Milkbones and Star-Kist, be aware. The yield curve thing might once again banana. A mortgage war and motivated sellers could deliver a far better rutting season than we saw last year. And financial markets have soared so far in 2019, with no reason to expect an abrupt reversal. In other words, if you require a house and can afford one, buy it with cheap financing. And if you’re not yet a multi-millionaire and need to grow your money for retirement, well, don’t stop. Ever.

133 comments ↓

#1 Reddy on 03.25.19 at 3:25 pm

Gic and bonds. There must be more intersting things out there.. Like forex ;)

#2 crowdedelevatorfartz on 03.25.19 at 3:48 pm

@#78 amused
“Being older gents you’d think these guys would have a little more decorum…”

*****
My name wasnt your first clue?

#3 Anything Else To Add on 03.25.19 at 3:50 pm

Well we may as well keep dancing if that is all there is, or is there more to come?
https://www.youtube.com/watch?v=_I8aJTxy8DY

#4 crowdedelevatorfartz on 03.25.19 at 3:51 pm

@#67 AK
“Turn off CNN and MSNBC.”

****
Dont watch either.
I cut the cable over 3 years ago.

I come here for my entertainment…….

#5 PeterfromCalgary on 03.25.19 at 4:02 pm

Markets do not care about SNC-Lavalin but voters should! SNC Lavalin is accused of bribing Muammar Gaddafi and family to gain lucrative construction contracts.

It is corruption like this which fuels the poverty, wars and terrorism in Africa.

Think about that next time you see a broadcast of a starving African baby, a dead victim of a terrorist attack, or a polling station!

#6 the ryguy - In cabo on 03.25.19 at 4:49 pm

#98 Tater on 03.25.19 at 3:40 pm
Your seem obsessed with this uranium story and yet, don’t have the slightest understanding of it. Here’s some reading for you: https://www.politifact.com/truth-o-meter/article/2017/oct/24/what-you-need-know-about-hillary-clinton-and-urani/
—————————————————————-

Dude this is a direct quote from the article you sent “We couldn’t independently verify Giustra’s claim, but if he is telling the truth”. Yeesh you just read that and carry on?

Uh huh, nothing to see here folks. Dont worry about the secret server tucked away in a residential bathroom. Ignore the bleach bit use on electronic devices, ignore the hammer smashed blackberrys, dont worry about the BILLIONS in donations…”Tater” up in Canada says its all good.

#7 Herman Linkholm on 03.25.19 at 4:58 pm

Garth, just wondering how gold been doing this year? Time to add it to the portfolio?

Sure, if you like gambling and losing capital. But you can stroke it. – Garth

#8 Dave on 03.25.19 at 5:02 pm

You all have been duped that didn’t buy real estate.

A house in Vancouver that was going for $500,000 back in 2005 is now $2,500,000. Sure there is a correction, when its all said and done that house will bottom out in price around $1,700,000.

Election is coming, pick the guy that will punish real estate. The rest of the political promises will not apply to you.
Want a house, then debt slave for life with voting freedom is the new Canada.

#9 Tater on 03.25.19 at 5:06 pm

#6 the ryguy – In cabo on 03.25.19 at 4:49 pm
#98 Tater on 03.25.19 at 3:40 pm
Your seem obsessed with this uranium story and yet, don’t have the slightest understanding of it. Here’s some reading for you: https://www.politifact.com/truth-o-meter/article/2017/oct/24/what-you-need-know-about-hillary-clinton-and-urani/
—————————————————————-

Dude this is a direct quote from the article you sent “We couldn’t independently verify Giustra’s claim, but if he is telling the truth”. Yeesh you just read that and carry on?

Uh huh, nothing to see here folks. Dont worry about the secret server tucked away in a residential bathroom. Ignore the bleach bit use on electronic devices, ignore the hammer smashed blackberrys, dont worry about the BILLIONS in donations…”Tater” up in Canada says its all good.

L oh effin L
————————————————————–

Or believe the guy who doesn’t know what proceeds mean. Or that the uranium can’t be exported from US soil. Or that 9 different agencies approved it. Yep, you’ve uncovered a massive conspiracy.

#10 Guy Incognito on 03.25.19 at 5:13 pm

Garth, do you advocate holding preferred share ETFs during the accumulation phase? And/or only in nonreg accounts?

Always hold them, in the recommended weighting (15%). In a non-reg account you collect the dividend tax credit. – Garth

#11 renter in Surrey on 03.25.19 at 5:17 pm

Household debt is at epic levels, and continues to rise.

—————————————————————————————–

It’s kind of hard for Canadians to compete with Medellin Cartel drug lords and Hezbollah war lords.

https://globalnews.ca/news/5084587/hezbollahs-canadian-money-laundering-ops/?fbclid=IwAR0jDe4goc-AX1I0w4XqOVzgKTEmfKXQTwQdzLRn8QGh1V55Uq6gSA5myMk

I know, I know. It’s is Canadians who outbid themselves, it’s their fault.
Foreign dudes are just a urban myth.

Everybody should just move to Saskatoon and free space to our new overlords.

#12 Penny Henny on 03.25.19 at 5:23 pm

Well, five-year variable-rate loans are available for as little as 2.35%, but with five-year fixed mortgages now at 2.99% (and four-years at 2.7%), it’s hardly worth the additional risk. Without question, interest rates will be higher by 2019, likely (say most bank economists) by about 2%.-March 28, 2014
////////////////////

those bank economists they be wrong. Hey but we know it’s not a science

The five-year-old post turned out to be correct. You had a point? – Garth

#13 Yellow Vest on 03.25.19 at 5:30 pm

ALL DAY TODAY….the news has been going nuts. They had Sam Cooper on. Talked about Andy Yan and his investigation. Apparently foreign ownership of RE and criminal money laundering in YVR RE has been VASTLY underestimated.

Garth you have been telling us it is not “Chinese dudes” and most purchases are “local”. Can you please call Global BC and do an interview? It would be swell if you could set them there investigators straight.

Who actually cares? You might as well try to change the weather. – Garth

#14 Dolce Vita on 03.25.19 at 5:40 pm

Well, this Friday we will find out how the January 2019 GDP went. Probably negative due to the weather. I think the plucky Canadian economy has 1 positive or near 0 month in it for 1st Qtr 2019.

Having said that we are in a technical recession for reasons discussed in the Blog today. We will find this out some time in 2nd Qtr 2019 right smack dab in the middle of the PEAK RE SALES period. Some sales sure. Resurrect RE sales and prices?

Fat chance, snow balls hope in hell, when a recession has just been announced.

I believe this recession will be HIDEOUS. This RE bubble amounts to GIGANTOR vs. all prior bubbles. Far too much of GDP is devoted to it, FIRE et. al. Far too much of our DEBT is secured by it. It will be for once, unprecedented, different this time in the worst possible way.

Like Economists, Mr. Market has predicted 9 of the last 6 recessions – including your yield curve Garth.

The Canadian Consumer on the other hand, gets it right every time. Mr. Market is nothing more than the Canadian Consumers BITCH. And, the Canadian Consumer is in one bitch of a mood.

Get used to it. Plan for recession. Let the BLAME GAME begin.

Ciao d'[*]Italia.

*recessione tecnica (hopefully, misery does not like company Canada)

#15 Kurt on 03.25.19 at 5:46 pm

#13 Yellow Vest on 03.25.19 at 5:30 pm – I concur with Garth. News media determine which story will sell, and then write it. People can’t buy the house they think they deserve? Rather than look at themselves as entitled or their neighbours as stupid, they’d much rather blame the Yellow Peril or some such garbage. Hence, where data has even the slightest ambiguity, that’s the story they will buy. Don’t worry about it, you know the truth. Rent until it’s cheaper to buy when you factor in all costs as well as market risk for the property.

#16 Hawk on 03.25.19 at 5:52 pm

What I don’t understand about the yield curve inversion, is that…….if interest rates are going to be lower in the months and years ahead, ……..shouldn’t that further boost RE/Stocks/assets as opposed to sink them?

#17 Hugh Jassel on 03.25.19 at 5:53 pm

“Garth, just wondering how gold been doing this year? Time to add it to the portfolio?

Sure, if you like gambling and losing capital. But you can stroke it. – Garth”

With all due respect, I don’t think you’re seeing the elephant in the room. The US isn’t raising rates because it CANT. It never could with its debts as large as they are. They’ll pop this “everything” bubble and they know it.

Get ready for wild times because here comes stagflation – and gold will do very well.

Buy an asset when everyone hates it – well, what do people hate more than gold right now…..

#18 the ryguy - In cabo on 03.25.19 at 5:57 pm

#9 Tater on 03.25.19 at 5:06 pm
Yep, you’ve uncovered a massive conspiracy.
—————————————————-
Secret Server – Illegal
Bleach bit on electric devices – Post Subpoena
Smashed Blackberrys – Post Subpoena

Totally normal behavior, you’re right Tater, it’s all legit.

Agree to disagree then, enjoy your day :)

#19 Dolce Vita on 03.25.19 at 6:04 pm

You had a point? – Garth

Who actually cares? You might as well try to change the weather. – Garth

OUCH. OUCH.

On the past I agree Garth. We can’t change the past BUT we can change the future, dwell on the latter, not the former I say.

Then again, pain in the buttocks historians want to get it right and keep wafting their theories out there hoping that ONE OF THEM STICKS with the populace.

You know, a lot like the +100 Measures Liberal Budget…

#20 MF on 03.25.19 at 6:05 pm

“The market’s giving 32% odds of a Bank of Canada rate cut in September and even a 24% chance the bank will fold in July. Wow. ”

-So low interest rates caused this situation to develop in the first place, yet these morons believe the cure will be lower interest rates again?

Wow is right. Wow they are stupid.

Higher rates are needed to maintain the structure of the central banking system, especially after ten years of rates being too low for too long. Seriously. All the radicals, naysayers, doomers and anarchists’ extreme views appear vindicated with any downward rate moves. All anyone has to do is read the comments here daily, or any other comment section to feel the frustration and anger. There are a lot of dangerous people who dislike the current financial system (because they aren’t part of it) and a move downward just encourages their populism and discontent.

But do the central banks care?? Are they listening? Rate increases (a pause is okay) are what is actually needed to maintain the integrity of the financial system. Keep them coming, even through some slight necessary short term pain.

MF

#21 David Pylyp on 03.25.19 at 6:19 pm

Sure, you can buy up to a Million with CMHC Insurance. That’s 10% to 19.9% down as long as you pass the B20 Test. Over a Million, there are more properties available but the Banks want 35 – 40% down and you still need to pass the B20.

http://BuyinginToronto.ca

Be careful shopping

#22 MF on 03.25.19 at 6:40 pm

#11 renter in Surrey on 03.25.19 at 5:17 pm

Wow that was a chilling article.

Thanks for the post.

MF

#23 Willy H on 03.25.19 at 6:50 pm

“Because Mr.Market believes future interest rates will be lower as inflation and economic growth erode.”

Are the markets calling this correctly?

Could it be that Trump’s meddling with global trade partly triggered this contraction in trade?

Interesting times.

There is little doubt Canada is overdue for a recession that resets markets (corrects housing prices) yet very few analysts up until a few weeks ago were mentioning the “R” word.

It was only after Canada’s Q4 data went all mushy.

#24 Re,11 on 03.25.19 at 6:50 pm

DELETED

#25 Bruce MacLachlan on 03.25.19 at 6:53 pm

The dog picture is amazing

#26 Captain Uppa on 03.25.19 at 7:06 pm

Garth, would it have killed you to throw in a “uppa, Uppa, UPPA” within today’s post?

#27 Smoking Man on 03.25.19 at 7:13 pm

Oh O, like I’ve been saying mini ice age on the way.

https://dailycaller.com/2019/03/25/global-warming-glaciers-climate/

James you’ve been very quite, it’s been a terrible day for Trump Haters. I total understand your grief.

#28 Jane Stuart on 03.25.19 at 7:17 pm

Do people on this blog even know what interest rates are? It seems to me that this story about no to low interest rates is the same old thing. Why are you talking about the same old thing guys.

By the way, if you guys are so happy about interest rates being low, I hope you like a Japan economy with a stock market 30 years later at still 45% lower. Be careful waht you wish for.

Don’t say it is different this time, you can’t be math.

#29 Oakville Sucks on 03.25.19 at 7:28 pm

we’ve known about an impending recession for the past 12 months. Rate drops will have no effects to the economy. Zero zip zilch.

This recession will be a mother of all recession and we’re in deep doodoo. Already so many countries are going down economically and since we’re globally conected we are going down bigger!

#30 TRUMP 2020 on 03.25.19 at 7:37 pm

NOT NORMAL!!!!!!

TAKE A LOOK AT TRUDEAU AND WILSON-RAYBOULD LOOKING IN EACH OTHER’s EYES

Know THAT AIN’T NORMAL

https://www.bnnbloomberg.ca/trudeau-says-he-wilson-raybould-had-cordial-conversation-about-next-steps-1.1234373

#31 Neo on 03.25.19 at 7:38 pm

#16 Hawk on 03.25.19 at 5:52 pm
What I don’t understand about the yield curve inversion, is that…….if interest rates are going to be lower in the months and years ahead, ……..shouldn’t that further boost RE/Stocks/assets as opposed to sink them?

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

Not if you lose your job or fear losing your job because of said recession. That’s the whole point bud. People retrench and either cut down spending or pay down debt or both. None of which is good for housing or the economy.

#32 Deplorable dude on 03.25.19 at 7:51 pm

Best Monday EVAH……I’m all outta popcorn…..

Creepy Porn Lawyer can resume his Presidential Bid….in about 40 years when he gets out of prison.

Potus mentioned the ‘T’ word for the first time in a Presser today……pretty unprecedented for a President to be talking about Treason….the mother of all counter punches is about to be let loose…..

Smokey beat me to the news about that inconvenient Iceland Glacier doing a 180 and getting bigger…the climate scientists are ‘shocked’…shocked I tell ya.

Someone get on the blower to Al Gore and let him know.

#33 Nonplused on 03.25.19 at 7:51 pm

“No collusion” will probably be good for the markets. It means US politics will be relatively stable for the next 6 years with the Tweeter in Chief firmly in charge and no risk of impeachment. Well, I suppose stable isn’t the right word.

What I find interesting and somewhat disturbing is how many Americans seem downright disappointing their president isn’t a proven Russian agent. Cognitive dissidence is a hard affliction to fight. This whole thing shows just to what extent people will go in order to not have to change their minds. “But he asked the Russians to find Hillary’s emails! I saw it with my own eyes!” No he didn’t and no you didn’t, he was making a disparaging joke about how ineffective the FBI had been in locating them. “He called racist “fine people”! I saw it with my own eyes!” No he didn’t and no you didn’t, the full transcript makes it clear he was talking about other people present not the KKK. As the Covington kids thing has shown us, your own eyes are a terrible witness. What happened there was very different than what the 2 minute clip and the news spin originally tried to get us all to believe.

Be careful out there. What you think you know probably just isn’t so.

It’s a sad state of affairs when Fox news turns out to be the only one that got any of the reporting right. But it should be remembered that big “news” organizations are in the business of selling advertisement, not reporting the news. Thus, they pander to the preconceived notions of their viewers. Some news gets in there now and again, but it’s mostly spin.

But I guess wise men have always known that you can’t trust the news. Ever since the invention of the printing press it’s all been fake.

#34 Tony on 03.25.19 at 7:53 pm

Re: #16 Hawk on 03.25.19 at 5:52 pm

In the Vancouver area and the GTA basically there’s no first time buyer. The only buyers would be investors/gamblers. If Australian and American real estate continues to fall in price no one will buy homes in both these areas in Canada.

#35 Hawk on 03.25.19 at 7:55 pm

#31 Neo on 03.25.19 at 7:38 pm

Thank you, that makes sense. No matter how low the cost of borrowing, if people are scared to make purchases it’s all downhill.

#36 tccontrarian on 03.25.19 at 7:59 pm

“Last week we talked about an American inverted yield curve. That’s when short-term interest rates (like the central bank benchmark) are greater than what most bonds pay. Especially l-o-n-g bonds – a decade or more. So investors can reap the same returns by investing money for a few months as for an entire decade. That’s not normal.” GT
——

Previous inversions in: 1989, 1999, and 2007. So, if we use history as a guide, the next recession will be right around the time of the 2020 US elections.

Don’t let the markets fool you like they did in 1999 and 2007. The next recession will be a doozy and will likely change the world as we know it.

If you’re not buying at least some gold now then heed the following:

“Those who do not remember the past are condemned to repeat it.” – George Santayana

TCC

ps I’m gradually trading out of cannabis (with decent gains) and rotating into precious metals, Emerging Markets, Energy. Also will be looking to initiate short positions in the US markets – probably during the next surge up. Careful out there!

#37 The real Kip (Ret) on 03.25.19 at 8:08 pm

The Fed the Fed the Fed. Seems to be the Fed is a little aimless these days. All they’ve talked about is unwinding but is there really an exit strategy? I think not. QE4 coming soon.

#38 Marc Roger on 03.25.19 at 8:17 pm

Thanks, Garth. I like these kinds of posts.

#39 Simon on 03.25.19 at 8:27 pm

#26 Smoking Man on 03.24.19 at 6:29 pm
Expect a huge spike in the markets tomorrow now that Mueller is gone out to paster.
———–
Down again.

#40 It's Normal on 03.25.19 at 8:37 pm

#30 Trump 2002 – He has the same grip and eyes for all of them. This is the feminist way of winning them over unto his vision of reality under his leadership.

https://www.youtube.com/watch?v=SQuDaIbpA1g

#41 js on 03.25.19 at 8:46 pm

“ill-conceived taxes on buyers from out of the country, secondary homes and high-end houses” .. They seem to be working, therefore well conceived…

#42 What I think I might know on 03.25.19 at 8:53 pm

Let me be clear. Interest rates will NEVER again rise significantly. Never. Not unless we have a total financial catastrophe and a financial reset. With all the debt being held at all levels, it is impossible for them to rise. Anyone that says they will is just blowing smoke. So, GTA housing is safe. If you want a house in the GTA, you might as well buy it now because they aren’t going to get any cheaper. Ten years from now, the GTA house you buy today will be much more expensive.

#43 What I think I might know on 03.25.19 at 9:05 pm

GTA RE is also ultra safe because of being jacked up by the foreign money laundering schemes. This is just now coming out in the MSM? What nonsense. The foreign money factor has been obvious for years. Anyone who denies this simply doesn’t want to face reality. GTA RE is a great investment.

#44 Doug Potfield on 03.25.19 at 9:09 pm

Confiscation of bank accounts and all investments, brokerage accounts is the easiest way to keep people going to work and government continuing wasteful spending.

#45 Coulie McFaddyn on 03.25.19 at 9:13 pm

@ Big Smokie, Big Icebergs coming back gotta love it! More Iceberg Vodka to enjoy!!

#46 DON on 03.25.19 at 9:14 pm

Perspective.

I came across this article (2013) again. Thought it too be somewhat relevant to the balance Garth speaks of. Improve if you can and enjoy life.

https://www.businessinsider.com/5-things-people-regret-on-their-deathbed-2013-12

“There was no mention of more sex or bungee jumps.

A palliative nurse who has counselled the dying in their last days has revealed the most common regrets we have at the end of our lives. And among the top, from men in particular, is “I wish I hadn’t worked so hard.”

Bronnie Ware is an Australian nurse who spent several years working in palliative care, caring for patients in the last 12 weeks of their lives. She recorded their dying epiphanies in a blog called Inspiration and Chai, which gathered so much attention that she put her observations into a book called “The Top Five Regrets of the Dying.”

Ware writes of the phenomenal clarity of vision that people gain at the end of their lives, and how we might learn from their wisdom. “When questioned about any regrets they had or anything they would do differently,” she says, “common themes surfaced again and again.”

Here are the top five regrets of the dying, as witnessed by Ware:
1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.

“This was the most common regret of all. When people realise that their life is almost over and look back clearly on it, it is easy to see how many dreams have gone unfulfilled. Most people had not honoured even a half of their dreams and had to die knowing that it was due to choices they had made, or not made. Health brings a freedom very few realise, until they no longer have it.”
2. I wish I hadn’t worked so hard… “

#47 NFN_NLN on 03.25.19 at 9:24 pm

#17 Hugh Jassel on 03.25.19 at 5:53 pm

Buy an asset when everyone hates it – well, what do people hate more than gold right now…..

1. Cryptocurrency

2. Trudeau (already bought though, sorry)

3. Dirty Alberta tar sands

#48 NFN_NLN on 03.25.19 at 9:26 pm

#43 What I think I might know on 03.25.19 at 9:05 pm

The foreign money factor has been obvious for years. Anyone who denies this simply doesn’t want to face reality.

Garth this is one of your favorite topics, comments?

Why bother? People believe what they want. Look south. – Garth

#49 Gg on 03.25.19 at 9:27 pm

The markets just had an abrupt reversal in December.

Scotty only has a little bit of power left in these already low interest rates to divert power to the stock market thrusters Captain.

One last measley boost is all she has left.

Then what?

Get out while you can.

The quivering never stops with some people. No wonder they fall behind. – Garth

#50 DON on 03.25.19 at 9:34 pm

Observation: Confirm if possible.

In general I am noticing that people are getting pissy out there and Spring is in the air. Something has changed, sentiment (walls closing in feeling?).

Then when I search for technical sanity at Bloomberg I get this.

https://www.bloomberg.com/news/articles/2019-03-25/investors-see-more-pain-ahead-as-global-stock-rout-gathers-pace

This has to have some effect on consumer sentiment.

Be diversified and patient are the answers.

But like I said people are pissy out there. Short fuses and lack of any, I say any patience before the scoffs start coming out.

On the way home on a double decker limo in the bus lane of course (no cars) we came to a stop. In front of us and unhindered freedom was a police cruiser in the bus lane driving up beside two rows of slowly crawling traffic fishing for drivers on their phones. They at least got them to pull over at the next light.

The people on the bus were pissed that:
1) the police cruiser was hindering our remarkable progress home and

2) the cops were bottom feeding in bumper to bumper crawl.

#51 Shawn Allen on 03.25.19 at 9:48 pm

Okay, so central banks can control the short term interest rate and have pushed it up to some extent. But
why have longer-term interest rates, which lore has it are set in the market, refused to rise?

Is it because:

1. Borrowers can’t afford to pay more and there is less demand for borrowing which under the laws of supply and demand has pushed down the price of borrowing?

or

2. There is an enormous “supply” of money to be loaned which under the universal laws of supply and demand pushes down the price or interest rate of borrowing until there is enough demand from borrowers to sop up all the this money available to lend?

Essentially, it may be that in our mature western economies there is huge amounts of capital available and because the countries are already largely “built-out” (no big need for that many more houses, roads, buildings or sewers etc.) there is simply not enough demand to borrow and build things unless the interest rate is pushed very low.

Our mature western economies already feature… just about as many cars as adults, more houses per capita than aver in history (that is fewer occupants per home), more toilets than butts.

Something to think about…

#52 Lobster Man on 03.25.19 at 9:52 pm

#16 Hawk….

Normally, commercial banks borrow short to lend long.

When the yield curve inversion occurs, banks are the first to notice. If the inversion continues, banks will curtail their lending, sometimes very severely. And you know what happens to the economy when credits got tightened.

LM

#53 Shawn Allen on 03.25.19 at 9:53 pm

#47 NFN_NLN on 03.25.19 at 9:24 pm
#17 Hugh Jassel on 03.25.19 at 5:53 pm

Buy an asset when everyone hates it – well, what do people hate more than gold right now…..

1. Cryptocurrency

*********************
Is that really an asset?

I guess if it is money it is an asset just as long as enough people agree that it has value (oh dear!)

#54 april on 03.25.19 at 10:07 pm

Today, Ross Kay, Howestreet.com

#55 Asterix1 on 03.25.19 at 10:17 pm

When my parents immigrated to Canada back in 1968, there was an endless supply of opportunities and hope.

My wife immigrated to Canada in 2005, opportunities abound.

Here we are in 2019, T2 pumping in 300,000 new immigrants per year. Are we still selling reality, a dream or a complete mirage?

Spoke with many expats from Europe/South America in my neighborhood (downtown waterfront). Many have had it, too expensive, too many taxes, low wages and low chances to save money for anything. “What’s the point?”, some ask. There is none! Many are on their way out, Toronto is no longer financially attractive.

#56 Basil Fawlty on 03.25.19 at 10:44 pm

Marketwatch indicates that there is currently $9.7T in government bonds yielding zero, or less. If reported inflation of 2% is deducted, this means bondholders are actually paying governments to hold their debt.

In regards to the inverted yield curve, why would anyone continue to purchase long-term debt, which is more risky, when short term debt pays more? If investors were to start selling longer term debt to purchase short term, would interest rates not rise on the long end? If so, this would be a disaster for stocks, bonds and real estate.

#57 Tony Dimonte on 03.25.19 at 11:06 pm

To Basil Fawlty

The Fed and central banks use QE………. forever and keep long term interest rates down forever!

Where have you been for the last 11 years+. U.S. Federal Reserve, ECB, Bank of Canada, Bank of Japan, Bank of England, Bank of Australia etc. all have been doing this for years, some decades….

It is the biggest money cartel in our lifetime and most likely ever. OPEC is nothing.

#58 Sail Away on 03.25.19 at 11:11 pm

#46 DON on 03.25.19 at 9:14 pm
Perspective.

I came across this article (2013) again. Thought it too be somewhat relevant to the balance Garth speaks of. Improve if you can and enjoy life.

https://www.businessinsider.com/5-things-people-regret-on-their-deathbed-2013-12

“There was no mention of more sex or bungee jumps.

A palliative nurse who has counselled the dying in their last days has revealed the most common regrets we have at the end of our lives. And among the top, from men in particular, is “I wish I hadn’t worked so hard.”

—————————————–

This is such a common quote that it’s time for a rejoinder. Let’s assume for the sake of argument that the men hadn’t worked very hard, and their regrets were instead:

“I wish my kids didn’t have to grow up in poverty”
“I wish my wife hadn’t left me for someone more successful”
“I wish I could have afforded, at least once in my life, a fine restaurant meal”

Shall I continue? Maybe, just maybe, regretting working too hard is not a bad thing. If you have to regret something, working too much is pretty benign.

#59 Blacksheep on 03.25.19 at 11:33 pm

L.M. # 52,

#16 Hawk….

“Normally, commercial banks borrow short to lend long.

When the yield curve inversion occurs, banks are the first to notice. If the inversion continues, banks will curtail their lending, sometimes very severely. And you know what happens to the economy when credits got tightened.”
—————————–
Why would chartered commercial banks, “borrow” to lend?

#60 Brian Stocker on 03.25.19 at 11:48 pm

“Now, lest all the pantywaists who read this pathetic blog over-react, go to cash and head for their bunkers packed with Cottonelle, Milkbones and Star-Kist, be aware. ”

You know – I didn’t know what Star Kist were so I looked them up – amazing! I guess I should get out more ! All these new things I am learning on your blog

#61 Smoking Man on 03.26.19 at 12:06 am

I need to reevaluate my bias. This should not be this easy.

Things are falling into place to conveniently.

Trump vindicated,
T2 going down in a blaze of glory.
AOC the laughing stock.
MSM completly discredited.

My pretend (wink) off shore forex accounts cracked 50 million today.

Why do I keep winning.
How is this possible?

Alien DNA im thinking my dogs, no 60 year old drinks and smokes as much as I do while having bacon and eggs twice a day and is surfing on a short board now.

Aliens are real people. Shlong Zumanga has met his match.

The Nictoites dont want him back neither do humans.
Word has it he’s hiding in Soros basement.

DM I want to be freinds again…..

#62 Maybot the 3rd on 03.26.19 at 12:47 am

What a spectacular clustercuck!!

I do recall the host pre-calling the brexit outcome – a yawner was it!

This thing has got 50 possible directions still… wait til the Italians try their Italxit.. the stay in line queuers have outdone them …

#63 Smoking Man on 03.26.19 at 12:56 am

When young dudes have a disagreement it usually turns to punching. After that it’s a long life friendships and biggest conflict is a magic pencil on the golf course.

When chicks hate each other , its slow pins into the eyeballs the opponents constatly evaluating dress size.. The hate lasts for life but too a casual observer they love each other.. They never really reconcile.

Men and woman are diffrent. Deal with it snowflakes.

Your teachers lied..

#64 Figure it Out on 03.26.19 at 1:02 am

“In regards to the inverted yield curve, why would anyone continue to purchase long-term debt, which is more risky, when short term debt pays more?”

If you’re an insurance company or pension fund with long-dated, nominal (i.e. not inflation indexed) liabilities, it’s less risky to purchase a long bond with a matching maturity than to purchase a shorter one and assume you can periodically reinvest it without loss.

If you’re a taxable investor sitting on a long bond with a capital gain, you trigger tax if you sell it to buy a shorter bond.

If you’re using rates or IG credits to reduce the volatility of a portfolio that also includes equities, you need fewer bonds if they’re of long duration.

#65 young & foolish on 03.26.19 at 1:18 am

Don’t worry … Bernie and AOC are going to bring in MMT and there will be money and jobs for everyone!

#66 crowdedelevatorfartz on 03.26.19 at 1:46 am

@#55 Asterix
“There is none! Many are on their way out, Toronto is no longer financially attractive…..”

+++++

Or perhaps it was the unbelievably crappy winter back east that has peeps in the doldrums….

Speaking of “peeps”….. the baby froggies in the park across the way are chirping up a storm this evening.
Spring has arrived.

#67 The Real Mark on 03.26.19 at 1:56 am

“If reported inflation of 2% is deducted, this means bondholders are actually paying governments to hold their debt. “

Indeed. And we wonder why government is bloated and out of control in its size and scope. The paradigm of government being a ‘risk-free’ credit has been an absolute and utter disaster for economic growth. I do think that in the next crisis, this assumption, which is embedded into every economic model and textbook, will have to be fundamentally questioned.

Having said that, inflation is not 2%, its actually less, and trending even lower into deflation.

In regards to the inverted yield curve, why would anyone continue to purchase long-term debt, which is more risky, when short term debt pays more?

The assumption such investors are making is that the central bank is going to come in and chop the rates to zero or even negative. Or even more deeply negative than they already are in places where they’re already negative.

If investors were to start selling longer term debt to purchase short term, would interest rates not rise on the long end?

Sure. But why would they do that if the belief is that rates are going even lower due to deflation?

However, one thing to watch is the spread between private sector debt and government debt. It is likely to expand considerably, as the long-term government bonds in a deflation are viewed as being a sort of safe harbor, while very significant fears of default are present in the corporate bonds due to the deflationary economy. Deflation eventually self-corrects itself, as corporations starved of credit, stop investing and basically liquidate themselves. Thus eventually depleting their ability to produce output which contributes to price stability on the supply side. So the prices of stocks, corporate bonds, and RE can definitely fall significantly even with falling or negative interest rates in such a situation. Its such scenario that makes the precious metals miners look extremely interesting, with examples of extreme outperformance during previous episodes of such occurring in the economy.

#68 The Real Mark on 03.26.19 at 2:18 am

“#51 Shawn Allen on 03.25.19 at 9:48 pm
Is it because:”

Can I present a 3rd option?

“3. Is it because there’s so much confidence in a continuation of the trend of post-early 1980s monetary stability that people are willing to exchange a dollar today, for barely much more than $2 30 years from now?”

After all, there are other options, especially if a belief were to develop that there won’t be monetary stability. For example, the money supply could chase and effectively re-monetize gold. It doesn’t have to chase fixed income.

BTW, I don’t agree, even for a moment, that there’s been true satiation of all of the infrastructure needs and desires in the western economies. So I soundly reject option #2.

The problem of #1 hints at an economy that is a poor allocator of capital, and has become so inefficient at allocating capital that many investment-unworthy endeavours receive an excess of capital (ie: government, no-earnings dot-coms, the excesses in the FIRE sector), while many very worthy sectors are starved of capital. Investors going forward will do very well by identifying sectors of the economy that have been chronically starved of capital and investing accordingly as the next recession liquidates excess allocations to the previous bubbles, and re-allocates to areas of the economy in a legitimate state of undercapacity. The opportunities to create new “Warren Buffets” are nearly unprecedented going forward, but existing “Warren Buffets” might not do so well if they just stick with their previously winning strategies.

#69 Gordon on 03.26.19 at 3:14 am

Well well well , although we see a great many Trump Haters screaming in pain, the fact is you ain’t heard nothing yet. Mueller has handed Trump a guaranteed win in the hundreds of lawsuits against the hundreds of media and political pundits who made oath that Trump was absolutely guilty of treason and collusion. Saying those things publicly , without using the proper legal weasel words like ‘alleged’ and ‘ without predudice’ to try and infuriate Trump was really really really stupid. The slander alone will profit Trump billions from the networks who held meetings and colluded to spin stories that they knew in full conscience that what they were broadcasting wasn’t true. You can’t slander someone with malicious intent, period. Meullers report has handed Trump exculpatory and irrefutable evidence that he is innocent. Trumps legal team has what lawyers love to call ‘the biggest pile of files’. The accused can now only try to prove that Meullers report is all lies, all 2800 subpoenas and 650 witnesses who testified under oath. Trump might end up owning CNN, MNSBC, CBS, The Washington Post. There is no peivelage for Democratic Senators , newspaper / network owners and Hollywood stars. But what I think he’ll likely do is settle with them after a very public lambasting and drive them all into Chapter 11. It’s a new day for Trump. Long will he prosper from the idiot slander of leftist fruitcakes.

https://nationalpost.com/news/world/he-wants-this-investigated-trump-allies-switch-from-defence-to-offence-after-release-of-mueller-report

#70 Notbad on 03.26.19 at 3:41 am

This blog is the best !

#71 Headhunter on 03.26.19 at 7:11 am

“I wish my kids didn’t have to grow up in poverty”
“I wish my wife hadn’t left me for someone more successful”
“I wish I could have afforded, at least once in my life, a fine restaurant meal”

_____________________________________________
1# determining factor of success in life (monetary) is the family you were born into. Period. I felt sad reading your comment.

“things””externals” dont make people that happy its just a fact. Thats why the deathbed confession(s)

#72 Headhunter on 03.26.19 at 7:19 am

#55 Asterix1 on 03.25.19 at 10:17 pm
When my parents immigrated to Canada back in 1968, there was an endless supply of opportunities and hope.

My wife immigrated to Canada in 2005, opportunities abound.

Here we are in 2019, T2 pumping in 300,000 new immigrants per year. Are we still selling reality, a dream or a complete mirage?
___________________________________________

I see this EVERYDAY in my business. Highly educated new comers going back whence they came or just a better destination.

Smokey put a chart on I.T. salary comparisons. Smart ones go to the USA. Ones that dont get a USA gig try to come here.

Sugar coat it all you want but its not better here for most highly educated immigrant newbies.

#73 maxx on 03.26.19 at 7:51 am

A year and a half is a loooooong time in this economic quagmire. It could be far and away worse, given the epic stupidity of current “sunny ways”government. Sunny ways for whom?

Every time I think about it, I’m reminded of the genetic mess in the movie Fly 2.

Debt is so enduring. Crazy difficult to get rid of, but so quick to run up.

In a healthy economy, money should be streaming in to people from a multitude of sources, including, yes, GICs.

Pity those who’ve overpaid for re and/or are pickled in debt, because that quicksand is nigh on impossible to get out of.

And with a global gig economy, AI and robotics in their infancy, watch out.

#74 not 1st on 03.26.19 at 7:57 am

When rates are rising in a high debt environment like we have and are probably always will, people stop spending on consumer items as well as being reluctant to lock into long term mortgages.

But the worse effect of it is that people who do have extra cash will choose to pay down debt instead of invest it. People will take a guaranteed 3.5% on debt reduction rather than risk it to make 5% in a wonky market. Without mom and pop in the stock market, the whole thing teeters. Institutional support can only go so far.

#75 maxx on 03.26.19 at 7:57 am

@ #11

Or hop on the next SpaceX flight……it leaves tomorrow. :-)

#76 Tater on 03.26.19 at 8:07 am

#18 the ryguy – In cabo on 03.25.19 at 5:57 pm
#9 Tater on 03.25.19 at 5:06 pm
Yep, you’ve uncovered a massive conspiracy.
—————————————————-
Secret Server – Illegal
Bleach bit on electric devices – Post Subpoena
Smashed Blackberrys – Post Subpoena

Totally normal behavior, you’re right Tater, it’s all legit.

Agree to disagree then, enjoy your day :)
—————————————————————–
Every day is a good day when your mind isn’t cluttered with nonsense conspiracy theories based in a country you don’t live in.

#77 MF on 03.26.19 at 8:12 am

#72 Headhunter on 03.26.19 at 7:19 am

The immigrants leaving fake news story has already been debunked a few times on here.

Were you paying attention? Probably not. Doesn’t matter.

It’s just a deflection (I’m doing poorly because of Canada it’s not my fault), or as an attack on current leadership (see look how bad the liberals are doing).

Despite your fake anecdotes, there is no evidence that immigrants are leaving.

Deal with it.

MF

#78 mitzerboyakaQueencitykidd on 03.26.19 at 8:22 am

That little thingy going on in the home of the brave will not be over til the lady sings

#79 crowdedelevatorfartz on 03.26.19 at 8:39 am

@#75 maxx

Speaking of “outer space”

+++++

The latest trend in Vancouver Real Estate sales….

https://www.citynews1130.com/2019/03/25/vancouver-vegan-real-estate-company/

“We put 10% of our commission into a bucket and they get to choose where we invest”…..”save a pig”….”save a dog”…..

What are their customers eating?
Only in the Lower Brain land.

#80 n1tro on 03.26.19 at 9:00 am

#52 Lobster Man on 03.25.19 at 9:52 pm
#16 Hawk….

Normally, commercial banks borrow short to lend long.

When the yield curve inversion occurs, banks are the first to notice. If the inversion continues, banks will curtail their lending, sometimes very severely. And you know what happens to the economy when credits got tightened.
——————–
Actually, we don’t know what happens because the event was not allowed to pass. If it did, I’m thinking poor people would be poorer, diversified people would become rich as current rich people would lose their stuff. Can’t let that happen so there was a kicking of the can down the road and now we may get a glimpse of what can happen. Can’t wait.

#81 Figure it Out on 03.26.19 at 9:02 am

“A palliative nurse who has counselled the dying in their last days has revealed the most common regrets we have at the end of our lives. […] Ware writes of the phenomenal clarity of vision that people gain at the end of their lives […]”

I must say, this doesn’t ring true. She’s selling a feel-good, self-help book. I haven’t sat at as many death beds as she has, but I haven’t seen a lot of phenomenal clarity of vision. Take a middling IQ, subtract five or ten points for senility, another five or ten from the haze of opioids, and add in fear of the imminent unknown, and you don’t get Epictetus.

Still, most of them remained self-aware enough that if the nurse said “I’m writing a book. Any last regrets?” they wouldn’t have said “I wish I’d schtupped my sister-in-law.”

#82 too true on 03.26.19 at 9:03 am

@#46 DON on 03.25.19 at 9:14 pm
Perspective.

I came across this article (2013) again. Thought it too be somewhat relevant to the balance Garth speaks of. Improve if you can and enjoy life.

https://www.businessinsider.com/5-things-people-regret-on-their-deathbed-2013-12

“There was no mention of more sex or bungee jumps.

A palliative nurse who has counselled the dying in their last days has revealed the most common regrets we have at the end of our lives. And among the top, from men in particular, is “I wish I hadn’t worked so hard.”
__________________________________

work smarter not harder as they say.
Time is far more valuable than $$.

#83 Q2 Class No. 6131 on 03.26.19 at 9:06 am

Good article Garth. Clearest explanation I’ve ever seen of an inverted yield curve.

Bonds don’t give me a headache – never have. If you’re good with numbers, bonds are a snap. If you aren’t – get out the Aspirin.

#84 Penny Henny on 03.26.19 at 9:11 am

Trump invites Russian Captain to White House.

https://www.rt.com/sport/454744-ovechkin-trump-meeting-stanley/

#85 PastThePeak on 03.26.19 at 9:16 am

#65 young & foolish on 03.26.19 at 1:18 am
Don’t worry … Bernie and AOC are going to bring in MMT and there will be money and jobs for everyone!
++++++++++++++++++++++++++++++++++

You won’t have to work. There will be an income for those that don’t want to work.

Paradise for all, and all it requires is printing trillions of dollars every year. Its so simple, you wonder why no one has thought of it before…

#86 PastThePeak on 03.26.19 at 9:19 am

#74 not 1st on 03.26.19 at 7:57 am
When rates are rising in a high debt environment like we have and are probably always will, people stop spending on consumer items as well as being reluctant to lock into long term mortgages.

But the worse effect of it is that people who do have extra cash will choose to pay down debt instead of invest it. People will take a guaranteed 3.5% on debt reduction rather than risk it to make 5% in a wonky market. Without mom and pop in the stock market, the whole thing teeters. Institutional support can only go so far.
++++++++++++++++++++++++++++++++++

There has been no indication yet that Canadians (as a whole) are planning to pay down any debt (as the debt-to-income level keeps rising).

And rates aren’t going to rise any further. The next leg is down, and you can be sure it will come before the federal election.

#87 n1tro on 03.26.19 at 9:23 am

#69 Gordon on 03.26.19 at 3:14 am
Well well well , although we see a great many Trump Haters screaming in pain, the fact is you ain’t heard nothing yet. Mueller has handed Trump a guaranteed win in the hundreds of lawsuits against the hundreds of media and political pundits who made oath that Trump was absolutely guilty of treason and collusion.
——————–
I hate the talking heads of MSM but pretty sure any slander lawsuits by Trump against MSM will not win. Trump isn’t the first hated public figure and there have been cases that established that print coverage of public figures are exempt from these types of lawsuits as they are treated like opinions worthy for the general public to decide.

#88 crowdedelevatorfartz on 03.26.19 at 9:40 am

Two things.

The 6pm News last night mentioned that BC School districts have expanded the Spring Break to 2 weeks instead of one week.
“Since the Provincial Govt cut education revenue to Municipalities the only way they can save money is to reduce class times. Surrey is saving $100 grand a day during this 2 week break.

Is this typical across Canada now?
2 weeks for Spring Break?
2 weeks at Christmas.
Pro-D days every month.
All the stat holidays tossed in .
And
2 months in the summer?
What are teachers working now?
8 months out of 12?

Second Thing.
It is unbelievable how much less traffic there is on Lower Brainland roads during Spring Break.
I’d say a 50% reduction in vehicles.
Driving is actually enjoyable.
How does parents driving brats to school by car, teachers commuting to work, etc. and University kids commuting add up to so much extra traffic?

#89 Figure it Out on 03.26.19 at 10:29 am

“Without mom and pop in the stock market, the whole thing teeters. Institutional support can only go so far.”

Mom and pop haven’t been in the stock market for a long time. Look at the financial facelift and retirement readiness columns in the Mop & Pail and the Notional Past. Lotsa real estate, not much equities. What they do have is either in pension assets or high fee mutual funds, neither of which suggests market timing.

When Alberta hit the skids I thought the Canadian stock market broadly (i.e. not just energy) might take a beating, as as Canada’s highest income households drew down savings to pay expenses. Didn’t really happen.

Equities are no longer a middle class asset class.

#90 Sweet Life on 03.26.19 at 10:38 am

Good morning from Italy,

I am going to share my financial and cultural opinion, from italy, where I expatriated to, after a life in Canada

Bond rates are lower on the long end than the short which may or may not signal a recession, but I digress. I first must italy so you may not be confused about why I italy in italy about italy which is mainly in, italy, such as I am today.

Anyway, Ciao,
Buenos Noches
(from italy)

#91 Headhunter on 03.26.19 at 10:43 am

#77 MF on 03.26.19 at 8:12 am
Were you paying attention? Probably not. Doesn’t matter.

____________________________________________
just realtime info from my desk.

not here to argue with you as I am “in the know” as I speak with these types of people everyday. Highly skilled (young)immigrants who cannot get into their field here leave. GTA is not the #1 destination for highly skilled immigrants. Canada in general. Sorry.

It blows through your “everyone wants to come/live here” lens and thats OK with me.

Why get so testy more to the world than the GTA.. or is it misery loves company?

#92 IHCTD9 on 03.26.19 at 10:53 am

#72 Headhunter on 03.26.19 at 7:19 am
#55 Asterix1 on 03.25.19 at 10:17 pm
When my parents immigrated to Canada back in 1968, there was an endless supply of opportunities and hope.

My wife immigrated to Canada in 2005, opportunities abound.

Here we are in 2019, T2 pumping in 300,000 new immigrants per year. Are we still selling reality, a dream or a complete mirage?
___________________________________________

I see this EVERYDAY in my business. Highly educated new comers going back whence they came or just a better destination.

Smokey put a chart on I.T. salary comparisons. Smart ones go to the USA. Ones that dont get a USA gig try to come here.

Sugar coat it all you want but its not better here for most highly educated immigrant newbies.
_____

Same thing I see. Economic class immigrants have a pretty tough time if they can’t snag a job in the public sector.

Every immigrant I’ve ever worked with had the USA as destination #1, but in all cases they had a chance to come here first – so they did.

Canada’s emigration numbers are 5X that of the USA. The longer they’ve been here, and the more educated they are – the more they leave.

#93 Lee on 03.26.19 at 11:02 am

Re: #89’s comments – does anyone know what percentage of equities are in the hands of hedge funds and pension funds?

#94 Remembrancer on 03.26.19 at 11:12 am

#88 crowdedelevatorfartz on 03.26.19 at 9:40 am

Here’s the calendar for Toronto District School Board, surrounding GTA probably follow the same give or take a day or two… The Friday before March break seems to be creeping in as a unofficial skip day / parents pulling kids out for travel but no way a 2-week spring break…

https://tdsb.on.ca/About-Us/Calendar

#95 Damifino on 03.26.19 at 11:14 am

#88 crowdedelevatorfartz

It is unbelievable how much less traffic there is on Lower Brainland roads during Spring Break.
———————————-

I’ve noted this effect on long weekends. I’d never travel anywhere out of Vancouver on a long weekend. It’s one of the few times the city gets relatively peaceful.

Thousands will caravan eight hours to the interior on Friday night then eight hours back on Monday night.

How relaxing… for me, that is.

#96 not 1st on 03.26.19 at 11:16 am

#89 Figure it Out on 03.26.19 at 10:29 am

Almost seems like the govt and CB support housing with all sorts of policy shenanigans and interest rate machinations which just get people into debt thinking their house is an rising asset, but the real support is in the equity market which has far fewer middle class people invested and serves the rich and corporations.

I guess if everything is manipulated anyway, that pretty much explains the place to be.

#97 not 1st on 03.26.19 at 11:23 am

#77 MF on 03.26.19 at 8:12 am
—-

Some immigrants are leaving. look up how many returned their permanent residence card and left the system. For some its as simple a thing as our brutal weather. Many try to go to the states from here.

But many are facing the same obstacles we are but much more intense. Imagine landing from another country to see this Canadas housing, cost of living and education expenses and imagine you are going to get up to speed on English, retrain, land a good job, get a nice house and then proceed to have 4 kids. Its not happening that way, if at all.

A lot of these people may eventually enter the Canadian underclass. Canada is to the world what Vancouver or Toronto are to Canada. Bring cash and lots of it.

#98 Sail away on 03.26.19 at 11:26 am

#81 Figure it Out on 03.26.19 at 9:02 am

“A palliative nurse who has counselled the dying in their last days has revealed the most common regrets we have at the end of our lives. […] Ware writes of the phenomenal clarity of vision that people gain at the end of their lives […]”

I must say, this doesn’t ring true. She’s selling a feel-good, self-help book. I haven’t sat at as many death beds as she has, but I haven’t seen a lot of phenomenal clarity of vision. Take a middling IQ, subtract five or ten points for senility, another five or ten from the haze of opioids, and add in fear of the imminent unknown, and you don’t get Epictetus.

Still, most of them remained self-aware enough that if the nurse said “I’m writing a book. Any last regrets?” they wouldn’t have said “I wish I’d schtupped my sister-in-law.”

————————————–

Haha… yes, missed sex will always be a top regret for every guy. Although you might not say that to the lady interrogating you on your deathbed.

#99 MM on 03.26.19 at 11:32 am

Hey Garth,

Could you direct me to an old blog post that outlines investments and recommended weightings?

Thanks! I found your blog about two months ago and now it is a must-read every morning.

#100 45north on 03.26.19 at 11:35 am

Andrew Coyne: The usual anonymous sources are now whispering to reporters that the reason Jody Wilson-Raybould was fired as minister of justice and attorney general in January had nothing to do with her refusal to kill the prosecution of a Liberal-friendly firm in a province critical to the party’s election chances, as the prime minister and a phalanx of top officials had pressured her to do. No, according to reports by Canadian Press and CTV, it was because of her pick for a judicial appointment.

It seems Wilson-Raybould, in 2017, recommended Glenn Joyal, chief justice of the Manitoba Court of Queen’s Bench, to replace the retiring Beverley McLachlin as chief justice of the Supreme Court — a recommendation Justin Trudeau ultimately rejected. Bilingual, Oxford-trained, a former Crown attorney with 20 years’ experience on the bench, Joyal was on a short-list prepared by the prime minister’s own “independent, non-partisan” advisory board for the occasion.

https://nationalpost.com/opinion/andrew-coyne-the-latest-tactic-to-suppress-wilson-raybould-smear-a-judge?video_autoplay=true

sounds about right

#101 mike from mtl on 03.26.19 at 11:37 am

#93 Lee on 03.26.19 at 11:02 am

Re: #89’s comments – does anyone know what percentage of equities are in the hands of hedge funds and pension funds?
///////////////////////////////////////////////////////////////////

I would take a guess that number is pretty high. Consistently the top institutional holders tend to be mututals. Very very few have the cash to hold significant share quantities (100k+) of individual corps who tend to NOT be business leaders.

You’d have to dig into the top holders of 1000s of traded corps to find that out.

#102 IHCTD9 on 03.26.19 at 11:41 am

#77 MF on 03.26.19 at 8:12 am
#72 Headhunter on 03.26.19 at 7:19 am

The immigrants leaving fake news story has already been debunked a few times on here.

Were you paying attention? Probably not. Doesn’t matter.
_____

I was paying attention. You are the only one trying to “debunk” the facts on this one. Your SC link consisted of retention numbers for immigrants who were here for only up to 5 years.

Of course, the numbers looked good because 5 years is not long enough for someone to move here, try to get established, and then make an informed decision that there is no opportunity for them here.

After 5 years, you’re still fighting and scratching trying to make a go of things, and still here.

Look at some of the NGO efforts that delve a little deeper at folks bailing out of the country. These indicate that 40 per cent of immigrants who entered Canada in the skilled worker or business class left Canada within their first 10 years. Also indicated is that one-third of male immigrants (aged 25 to 45 at the time of landing) left Canada within 20 years after arrival. More than half of those who left did so within the first year of arrival. 75% of international students bail after getting educated here – even as studies show 70% of them had originally hoped to stay in Canada.

The only debunking done on this topic is that young skilled/educated immigrants take longer than 5 years to get beat into the ground before they start packing up.

#103 Shawn Allen on 03.26.19 at 11:59 am

Why do banks “borrow” to lend?

#59 Blacksheep on 03.25.19 at 11:33 pm asked

Why would chartered commercial banks, “borrow” to lend?

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Well, a bank holding a deposit that is owned by the depositor (no matter if it was created by the bank making a loan to the depositor) has “borrowed” that deposit from the depositor. The depositor is free to spend that deposit (and it will end up in a different bank) even if it was created by the bank lending the depositor money. The banks are today once again paying interest on much of their deposits.

Blacksheep, do you know why banks need to compete to attract deposits and why they pay interest on them?

Has the Bank of England (staff paper) told you why?

#104 Dogman01 on 03.26.19 at 12:01 pm

#51 Shawn Allen on 03.25.19 at 9:48 pm

“Essentially, it may be that in our mature western economies there is huge amounts of capital available and because the countries are already largely “built-out””

I have been thinking that for years, little is new and little significant mass innovation, it is all at the edges and minor.

Last big thing was Personal Computer\Internet and most everything derivative after that. A lot of refinement but little new.

So much money looking for a big thing, hence Cannabis and Crypto mania.

Where is the new thing that will change the mass market?

#105 Braj on 03.26.19 at 12:12 pm

#99 MM on 03.26.19 at 11:32 am
Hey Garth,

Could you direct me to an old blog post that outlines investments and recommended weightings?

Thanks! I found your blog about two months ago and now it is a must-read every morning.

***

It varies, although it consists of the same components. I would use google to search previous posts.

#106 Yellow Vest on 03.26.19 at 12:17 pm

Yellow Vest on 03.25.19 at 5:30 pm
ALL DAY TODAY….the news has been going nuts. They had Sam Cooper on. Talked about Andy Yan and his investigation. Apparently foreign ownership of RE and criminal money laundering in YVR RE has been VASTLY underestimated.

Garth you have been telling us it is not “Chinese dudes” and most purchases are “local”. Can you please call Global BC and do an interview? It would be swell if you could set them there investigators straight.

Who actually cares? You might as well try to change the weather. – Garth

++++++++++

Who cares? And you wonder why the 1% elitist group are despised. Especially those who have committed criminal money laundering and driven up the RE prices in YVR where people are barely scratching out a living.

#107 Gravy Train on 03.26.19 at 12:19 pm

#23 Willy H on 03.25.19 at 6:50 pm
“Could it be that Trump’s meddling with global trade partly triggered this contraction in trade?” ‘Ya’ think? :)

#108 Yellow Vest on 03.26.19 at 12:28 pm

crowdedelevatorfartz on 03.26.19 at 9:40 am
Two things.

The 6pm News last night mentioned that BC School districts have expanded the Spring Break to 2 weeks instead of one week.
“Since the Provincial Govt cut education revenue to Municipalities the only way they can save money is to reduce class times. Surrey is saving $100 grand a day during this 2 week break.

Is this typical across Canada now?
2 weeks for Spring Break?
2 weeks at Christmas.
Pro-D days every month.
All the stat holidays tossed in .
And
2 months in the summer?
What are teachers working now?
8 months out of 12?

Second Thing.
It is unbelievable how much less traffic there is on Lower Brainland roads during Spring Break.
I’d say a 50% reduction in vehicles.
Driving is actually enjoyable.
How does parents driving brats to school by car, teachers commuting to work, etc. and University kids commuting add up to so much extra traffic?

+++++++++++

Saved money that is plowed directly into the underfunded teachers pension plan. They could give a crap about education and parents that are FORCED to find child minding while all these teachers get a good paid rest.

#109 James on 03.26.19 at 12:35 pm

#27 Smoking Man on 03.25.19 at 7:13 pm

Oh O, like I’ve been saying mini ice age on the way.

https://dailycaller.com/2019/03/25/global-warming-glaciers-climate/

James you’ve been very quite, it’s been a terrible day for Trump Haters. I total understand your grief.
___________________________________________
Sorry to disappoint you Old Man but I was preoccupied with a large deal that netted me enough money to buy your large size Depends™ for a thousand years until your alien cohorts return to seize you. I just returned from business in Munich and it is beautiful. BTW and they have never heard of you Old Man. The general consensus in Europe is that Trump is a bumbling fool and that no matter what he says everyone thinks he is in bed with the Russians. So pfftt, Trump is an old man like you and will soon be dust. Just a bad blot on America’s time line.

#110 Mtl_One on 03.26.19 at 12:52 pm

#88 crowdedelevatorfartz on 03.26.19 at 9:40 am

Are you a teacher? Are you speaking from experience?

While I am not a teacher myself, my better half is, high school – grades 11-12 advanced math.

Not sure about the other provinces , but for starters MB has some of the largest class sizes (not a small as in ONT even after Ford’s latest phased in increases.)

On average 3 classes of 35+ students = many late nights making up exams, marking exams, entering in what are now mandatory comments into report cards, etc. Exams are not multiple choice bubble sheets fed into a reader. 3*35*7 pages per exam = WTF!!!!

While I always tell her to work smarter not harder, it doesn’t help when the report card requirements and class sizes keep on increasing. Also time helping out the kids before and after classes.

7 sick days taken in 20 years of teaching, definitely not the norm. Yes, I am aware many teachers abuse the system to their advantage, but their are many as well devoted to their craft and advancing the education of our future generations.

So for 10 months of the year, I’ve learned to keep my mouth shut and have the house cleaned and supper ready for when she gets home with the kids, cause it isn’t me who’ll be up to 1am marking or whatever. I doubt it’s you either.

Off my soapbox now.

#111 Sold Out on 03.26.19 at 1:39 pm

#110 Mtl_One, #88 CEF

The constant teacher bashing in this blog’s comment section is rather transparent; the usual suspects are generally anti-knowledge, and particularly anti-Trudeau. I went to 7 different schools between grades 1 – 12, and was subjected to one or two educators that belonged in jail for their treatment of students, but society judged physical and emotional abuse to be acceptable in the shaping of young minds, at the time. Far more numerous, and memorable, were the teachers who went above and beyond, even taking vulnerable students into their own homes so their education could continue. You would think the profession of teaching would be viewed as making important contributions to the lifelong growth and well-being of the young, while providing its deserving workers with good pay, benefits and pensions. Bad teachers don’t last, nor should they, but every teacher who puts up with today’s helicopter parents and labours under the strain of special needs students and bloated classes, earns their keep.

In some quarters, Trudeau’s enduring legacy will be a deep and abiding hatred of teachers.

#112 Figure it Out on 03.26.19 at 1:41 pm

“Andrew Coyne: [mumbles mumbles whispers whispers] It seems Wilson-Raybould, in 2017, recommended Glenn Joyal, chief justice of the Manitoba Court of Queen’s Bench, to replace the retiring Beverley McLachlin as chief justice of the Supreme Court”

Am I the only sane person who finds this almost completely implausible? How often does someone get elevated from junior A to NHL team captain at a stroke?

And what’s Coyne’s game? Does he believe this may have happened? Or is he just repeating, loudly and widely, a silly rumour which he OF COURSE does not believe?

Meanwhile, a few pages over and a few days back, Connie Black says Minister JWR signed away all of Canada on a bar chit to the First Peoples, and that’s the real crime.

Are Coyne and Black supporting the patriarchy against party and ideological loyalties? Asking for a snarky friend.

#113 NoName on 03.26.19 at 1:44 pm

@ immigrants, social mobility, Gatsby curve and few deep thoughts.

It would be interesting to see Great Gatsby curve chart in untits that i can understand with fall of point when people give up.

Usually rule of the thumb is whre you find yourself after ten yrs that is where majority will stay.

This Gatsby chart i just don’t get it, index on both axis… Interesting to see that canada is so low on a scale what i extrapolate that everyone is equally poor, or that rich are so rich that regular folks can even fatom how to get there.

https://en.m.wikipedia.org/wiki/Great_Gatsby_curve#/media/File%3AThe_Great_Gatsby_Curve.png

Now that Gatsby is mentioned, press play.
https://youtu.be/IgcuBOVMGsg

#114 Ubul on 03.26.19 at 1:48 pm

#109 James on 03.26.19 at 12:35 pm
The general consensus in Europe is that Trump is a bumbling fool and that no matter what he says everyone thinks he is in bed with the Russians.

True. They are as invested in the Russian collusion myth for local brainwashing as the Democrats and their friends in the globalist camp around the world.

Generally they also have the “European supremacy privilege” when it comes to judge the “American intellect”, as a whole. It goes back to decades, if not longer.

#115 not 1st on 03.26.19 at 1:58 pm

Garth still waiting for those nice words about our PM. Got any?

https://calgaryherald.com/news/local-news/corbella-future-of-banff-skiing-threatened-in-liberals-budget-bill-avalanche

#116 Brett in Calgary on 03.26.19 at 2:10 pm

#89 Figure it out

Equities are no longer a middle class asset class.
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Sadly I think you’re correct.

#117 Yellow Vest on 03.26.19 at 2:20 pm

DELETED

#118 Ubul on 03.26.19 at 2:23 pm

#116 Brett in Calgary on 03.26.19 at 2:10 pm

#89 Figure it out

Equities are no longer a middle class asset class.
—————————————————-

Sadly I think you’re correct.

The new equity asset of the middle-class is owning equity in public debt.

#119 NoName on 03.26.19 at 2:33 pm

#116 Brett in Calgary on 03.26.19 at 2:10 pm
#89 Figure it out

Equities are no longer a middle class asset class.
—————————————————-

Sadly I think you’re correct.

—-

No you are wrong, equities are only thing left for middle class. Ok maybe bonds too.

#120 Lobster Man on 03.26.19 at 2:45 pm

#59 and #106,

Shawn,

Thanks for your response.

I guess some people never ever “lent” money to any charted bank in their life.

LM

#121 Exurban on 03.26.19 at 2:51 pm

Re the immigrants leaving or not controversy … there is a definite situation where highly skilled immigrants tend to get frustrated with the high costs/low wages of the Lower Mainland/GTA and leave, generally to the USA. However, most people don’t understand how heavily our immigrant mix is skewed to the low-skilled “family reunification” class. Regardless of what politicians say in media, most immigrants to Canada are low-skilled people from tropical countries (and China which is both tropical and other) who will not be leaving because conditions in Canada even at the bottom are so much better than where they came from. This is how our population becomes less and less productive.

#122 Mtl_One on 03.26.19 at 3:09 pm

#111 Sold Out on 03.26.19 at 1:39 pm

I would not want to be a teacher in the past, present or future. Much respect for those in the profession looking after our nation’s kids on a daily basis, hopefully instilling some knowledge, wisdom and kindness.

I always ask my better half is she’s ready to tap-out and change professions. She remains steadfast in her decision.

Having to deal with any of the following every year would have worn me out very early:

– student mental health issues
– student’s dealing with their parents’ mental health/or illnesses
– teen pregnancies
– helicopter parents
– parents who don’t care about their kid’s grades
– etc
– etc

Most will quip about the time off and pension, but most of the pensions plans are so underfunded where the pension contributions are going through the roof for something that may not even be there in 15+ years.

I’ll keep my political views to myself though.

Peace!

#123 Remembrancer on 03.26.19 at 3:11 pm

#116 Brett in Calgary on 03.26.19 at 2:10 pm
#118 Ubul on 03.26.19 at 2:23 pm
#119 NoName on 03.26.19 at 2:33 pm
———————————
I think you’d find Traditional Middle Class assets were housing (that you actually lived in yourself, mortgaged at a low to mid single digit multiple of income) a paid for car, and savings / chequing accounts and maybe GIC / high interest savings then along came RRSP and mutual funds…

I’d say ownership of income producing assets outside of work salary / employer pension plans is a relatively recent addition for the real “middle class” and stagnation or loss of the latter is reinforcing the growing gap…

Overall, “middle class” is a broad term these days with a fairly stark range between lower and upper…

#124 Tater on 03.26.19 at 3:13 pm

#121 Exurban on 03.26.19 at 2:51 pm

This is how our population becomes less and less productive.
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This is a particularly dumb take: https://data.worldbank.org/indicator/NY.GDP.PCAP.KN?locations=CA-US

#125 Blacksheep on 03.26.19 at 3:16 pm

Shawn of the banks # 103,

Shawn Buddy, (see, I capitalized buddy out of respect) you don’t know when to quit.

Surely you don’t want me to copy and paste (saved em all) every time I forced you to admit the 2014 Bank of England doc. is indeed FACT and your constant attempt to discredit this globally accepted resource, describing how charted commercial banks, actually operates, just made you look foolish?

Besides, I was offering help to Lobster dude to see the light, if wanted. You already suffer from full blown, ‘old school bank indoctrination theory’ and are thus pointless to debate with.

Here the link Lobster Man, enlighten yourself:

chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-econo

#126 Blacksheep on 03.26.19 at 3:19 pm

Here is the BoE link that works:

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy

#127 Reddy on 03.26.19 at 3:25 pm

Teacher talk

I was a teacher. Toughest job I ever had. Lots of hours put in. But most rewarding. I do miss the career, but left it for more money, less hours in IT programming…

#128 Reddy on 03.26.19 at 3:27 pm

Smokey with 50 Mil forex?

I almost Beleive you. Is that the leveraged amt?

#129 The Great Gatsby on 03.26.19 at 3:36 pm

A good book and movie too, but did he ever exist in real life? The answer is yes. He lived in Montreal and was the next door neighbour. A man who I will never forget by the name of John Canton.

#130 Lobster Man on 03.26.19 at 4:25 pm

#125 and #126 Blacksheep,

I am aware of the Modern Money Creation Theory, particularly after modern QE. Japan started QE almost two decades ago.

That is where the MAJORITY of money is coming from. Banks still need the retail depositors etc. just to start the “Creation”.

Just ask any bankers if they ever need to borrow.

LM

#131 Shawn Allen on 03.26.19 at 4:54 pm

Why do banks pay interest on deposits?

Blacksheep apparently does not know that the answer is “competition for deposits” and is not able to say why and resorts to pasting in links.

I believe as between Blacksheep and I, only one of us is a registered professional accountant who can (and has many times) read a bank balance sheet and recognize that a deposit (howsoever created) is a liability of the bank and a debt (or a borrowing from the deposit owner) of that bank.

Be assured that nothing in the Bank of England paper contradicts the plain fact that bank deposits represent debts owed by banks to the owner of the deposit – no matter how the deposit was created.

Despite the nature of fractional reserve banking, every bank annual report discusses at length its “funding sources” (mainly deposits) and funding costs.

Lobstermen tend to be big depositors and big borrowers at different stages of their careers and even at different times of the season. So they are a bit familiar with this.

#132 life is good on 03.26.19 at 6:19 pm

one word : optionnality

The cash option need to stay, period !

Two options (cash or digital) is way better then one option (digital)

#133 Lobster Man on 03.26.19 at 6:29 pm

#131 Shawn,

It has been more than a good season this year, thanks to Trump’s trade war.

Have to get busy and help guard the traps….

https://www.macleans.ca/economy/lobster-theives-east-cost/

LM