Cracked

Well, it’s happening. The first bank – and the biggest – has dipped its key mortgage rate, which is a shot across Ottawa’s bow. On the weekend RBC trimmed the posted number for its five-year home loan by about a fifth of a point.

Big deal? You bet. The cut is small, but it’s the first time since the stress test came into effect that one of the big boys has done this. By dropping its posted rate the Royal is challenging other banks to follow, which will reduce the hurdle borrowers have to jump.

The move comes literally days after OSFI (the bank cop) and CMHC’s feisty boss argued for the stress test to remain intact, keeping those pesky and house-horny moisters at bay. It also comes just days before the US Fed – which more or less sets interest rates for the entire planet – is due to announce its direction. Given Tariff Man’s unpredictability, Iran, Brexit, the grid in South America, Putin, Kim and a long-in-the-tooth recovery, the odds are fair that cuts will be in the air. Maybe on Wednesday. Maybe not. But soon.

Here’s why. The yield on five-year Canadian government bonds has cratered to the 1.3% level from close to 2% last winter. Despite that plunge (in the bond world, this is epic) posted mortgage rates – and the stress test qualifying rate of 5.34% as a result – have not budged. This is despite the fact on-the-street mortgage costs have dropped to 3% or lower for fivers and down to 1.99% for shorter terms at some crazed credit unions.

The trip down: 5-year gov't bond yield

So the RBC move signals a break, a sign, a harbinger that the entire rate environment is moving south as economic conditions soften and uncertainty rises. Besides, the lenders have been suffering as much as borrowers. The high stress test straddle has sucked the oxygen out of the mortgage business over the past year as consumers qualify to borrow lese or not at all.

If a couple more banks join the Royal (no doubt) then the stress test rate will automatically be reduced – at least by a little. Borrowers will qualify for more debt and in Canada (of course) the bigger the loan, the more you can buy and the richer you are!

A lower posted rate also means a reduced break penalty if you discharge your mortgage early. And, naturally, it will be welcomed by realtors who have been living in the back seats of their Audis, under bridges, for months now. Ironically, real estate in markets like the GTA may be stabilizing a bit, just as economy softens. At least the Raptors can take your mind off that. If not, there’s always that clown called Drake.

Stay tuned Wednesday for the main event from Washington. After nine interest rate increases, we’ve hit the ceiling. As analyst Ed Pennock wrote to clients today:

“Do they cut or Not? Should it be an Insurance Cut, then OK. They should let the Market know that it’s coming in July. If they don’t it’s a huge “Risk Off”. If the economy is weaker than most think then it’s a Big “Whoops”. It can’t even have the Aroma of a FOLD to the Tweets from 45. Going forward, is the Economy really weak or Not? If it isn’t really then We can’t believe that (Fed boss) Powell will Ruin his Credibility by Folding.”

Yes, this Fed meeting will be a critical one. Like the RBC move, it’s a deep indication of what’s coming. Plus it will be a response to Trump, who has been pushing hard for rate cuts in order to compensate for the damage his tariffs are causing. The central bankers don’t want to be pushed around by a politician. But they have to act properly to keep the economy out of the ditch. A rate cut will signal weakness. No cut might look like they don’t get it. Much depends on the words to come, two sleeps from now.

Meanwhile the stress test just cracked. Draw your own conclusions.

130 comments ↓

#1 Caledon dave on 06.17.19 at 4:17 pm

Why is Trudeau at the Raptors Victory celebrations in Toronto? Shouldn’t he be running our Country? At what cost to the tax payer is this photo opportunity costing us? How much carbon based fuel was consumed getting him and his entourage there and back again?

#2 Jimmi on 06.17.19 at 4:19 pm

“Meanwhile the stress test just cracked.”

If Poloz has any balls, increase the BOC rate by 1/4%.

#3 Coastal Zapper on 06.17.19 at 4:26 pm

I’ve been sitting on the proceeds from the sale of my house as prices fall, too close to retirement to make a mistake. I’ll just keep renting the waterfront cabin and see how this shakes out, patience grasshopper.

No championship on the west coast=no hangover Tuesday morning, not saying its a good thing, just a thing

#4 Dave on 06.17.19 at 4:28 pm

In BC, will an interest rate cut re ignite the real estate market?

#5 PA on 06.17.19 at 4:36 pm

#3 I’ve been sitting on the proceeds from the sale of my house as prices fall, too close to retirement to make a mistake. I’ll just keep renting the waterfront cabin and see how this shakes out, patience grasshopper.

——-

Strangely, as of two weeks ago I am exactly in the same place. House sold, renting, sitting on cash to invest…

#6 Re-Cowtown on 06.17.19 at 4:38 pm

#4 Dave on 06.17.19 at 4:28 pm
In BC, will an interest rate cut re ignite the real estate market?

________________________________________

Highly doubt it. The cut is miniscule and the psychology is broken. Fear is a stronger motivator than greed.

#7 Joe on 06.17.19 at 4:42 pm

Go Raptors!!

#8 Shawn Allen on 06.17.19 at 4:44 pm

Interest Rate Differential bank Mortage Breal Fees

A lower posted rate also means a reduced break penalty if you discharge your mortgage early.

**************************************
If I understand correctly, a reduced posted rate means a reduced break fee will apply to a new mortgage taken out under that new lower posted rate regime.

But existing mortgages will, if anything, face higher break fees?

In fairness the break fee should be calculated as the existing mortgage rate minus the current offered market rate on new mortgages over the remaining term. That is the interest that the bank is “out”.

In actuality is it the posted rate at the time the mortgage was taken out minus the posted rate for the remaining term? Or (much) more arduously (lucrative for the banks) the posted rate at the time the mortgage was taken out minus the actual going market offered rate over the remaining term?

You never hear of the competition bureau or any consumer advocate group shining a light on this do you?

#9 Real Estate Agent on 06.17.19 at 4:50 pm

Booyah I can sell more houses now, GTA is going uppa uppa uppa… Prices will go up by 20 percent!!!! Immigrants, low cost mortgage, high paying jobs gta for lifeee

#10 slam on 06.17.19 at 4:51 pm

#4
“In BC, will an interest rate cut re ignite the real estate market?”

Worried about that. The current trend of prices going down and not having to go through bidding wars were pleasantly welcomed. Did not want an interest rate cut to disrupt this current trend.

#11 mortgage rates dropping!?! on 06.17.19 at 4:54 pm

who knew :)

the pundits that said they were on the way up? um, sorry, back down they go

#12 crowdedelevatorfartz on 06.17.19 at 4:58 pm

@#4 Dave
“In BC, will an interest rate cut re ignite the real estate market?”

*****
I doubt it.

A million dollar + mortgage is still a million + dollars

#13 Stan Brooks on 06.17.19 at 5:02 pm

Remind me, what was that about the ‘great economy’ when interest rates at 1.75 % are way too high, inflation is 6-8 % plus, maybe more and GDP ‘grows’ at 0.1 annually (of course it is statistical trick, there is no growth).

Beats me who are he schmucks ‘buying’ government paper at these rates (1.35 % on 5 year).
News flash: Your pensions fund.

Won’t you be better getting USD government bonds at 1 % higher with the US dollar poised to outperform ‘the loonie’? Why not buy quality corporate US mid term bonds at 4 % + guaranteed?

Because the government paper is ‘safe’? Yes, it is absolutely, 1000 % guaranteed that you would loose money on it.

And employment was great and all that jazz (lies) and now we are talking about declining economy and cutting rates?

Another day in the mental institution.
But hey, the Raptors won.

That’s all that matters to the gullible ultra-stupid sheeple.

#14 Keith on 06.17.19 at 5:02 pm

@#1 “Why is Trudeau at the Raptors Victory celebrations in Toronto? Shouldn’t he be running our Country?”

All the leaders of the federal parties are in attendance. If Trudeau didn’t show up, that would be all over the news. I could care less if federal leaders go or don’t go, but there are people that will attach outsized meaning it. So glad I’m not a politician.

#15 Keith on 06.17.19 at 5:05 pm

The whole mortgage rate and stress test scenario makes me wonder how different it would be if mortgage insurance was provided by the private sector.

I wonder how much insurance would be available, how much it would cost, how large of a mortgage would be insured, how much of a down payment would be required, and what kind of verifiable employment income would be needed.

#16 Stan Brooks on 06.17.19 at 5:06 pm

Watch out for gold prices once rate cuts is announced and it becomes evident that uber inflation is already in and is to stay stellar for the next few decades while debt in inflated away along with the loss of your savings, pensions and other benefits.

But hey, taxes will rise, no worries.

You are delusional. – Garth

#17 Moh on 06.17.19 at 5:11 pm

#1 Caledon dave on 06.17.19 at 4:17 pm

Duh he was on his campaign trail. Free publicty. Why don’t you comment on all the Toronto NBA fans booing Doug Ford.

Doug like I said a good house in Brampton new from builder was a good idea. If you can afford it.

#18 Stan Brooks on 06.17.19 at 5:11 pm


#12 Keith on 06.17.19 at 5:02 pm
@#1 “Why is Trudeau at the Raptors Victory celebrations in Toronto? Shouldn’t he be running our Country?”

All the leaders of the federal parties are in attendance. If Trudeau didn’t show up, that would be all over the news. I could care less if federal leaders go or don’t go, but there are people that will attach outsized meaning it. So glad I’m not a politician.

Yes, T2 and every other politician/lair is there to claim contribution to the success of the AMERICAN/US and international (Spain, Congo) basketball players who won the tile led by a non-Canadian-yet GM.

#19 Stan Brooks on 06.17.19 at 5:16 pm

You are delusional. – Garth

So is Paul Tudor Jones, one of the best hedge fund managers out there/net worth over 5 billions.

https://www.bnnbloomberg.ca/investing/video/gold-is-paul-tudor-jones-s-favorite-trade-for-next-12-24-months~1705674

There is, and will never be in your lifetime, hyperinflation. The gold guys are dream merchants. Always wrong. – Garth

#20 Howard on 06.17.19 at 5:17 pm

Well, Doug Ford marched in a gay pride parade. So can the far-left now shut up already? Of course not. You see, the Premier does not plan to march in *the* pride parade downtown in a couple weeks. He “only” marched in York Region’s itty bitty parade. Not good enough for the far left!

#21 Howard on 06.17.19 at 5:20 pm

#4 Dave on 06.17.19 at 4:28 pm
In BC, will an interest rate cut re ignite the real estate market?

———————————————————

The far more likely reignition key for the BC bubble is renewed capital flight from Hong Kong stemming from Beijing’s encroachment on HK’s affairs.

#22 tccontrarian on 06.17.19 at 5:22 pm

#4 Dave on 06.17.19 at 4:28 pm

In BC, will an interest rate cut re ignite the real estate market?
– – – – – – – – –

Are you kidding?

Would you buy a Porche 911 discounted by 10% (from MSRP: $150,000), if you could only (realistically) afford a Corrola?

There’s no ‘re-igniting’ this bubble – not until it deflates completely, and that’s several years away.

My opinion, of course.

TCC

#23 Flop... on 06.17.19 at 5:28 pm

#9 slam on 06.17.19 at 4:51 pm
#4
“In BC, will an interest rate cut re ignite the real estate market?”

Worried about that. The current trend of prices going down and not having to go through bidding wars were pleasantly welcomed. Did not want an interest rate cut to disrupt this current trend.

/////////////////////////

It’s totally possible that the market could re-ignite,but interest rates have got nothing to do with it.
Here’s the three things to look for.

Step 1) B.C Liberals get voted back in during the next provincial election.

Step 2) North Korea blows up Hong Kong because they don’t like the sight of anyone using an umbrella for any reason beyond its invention, to keep one’s self dry.

Step 3)Real Estate Board of Greater Vancouver (or m.a.g.g.o.t.s for short) Jedi mind funks everyone into thinking the Hong Kongers are coming to buy the house you had your eye on, as the price slowly receded like my hairline…

M44BC

#24 Keith on 06.17.19 at 5:31 pm

@#16 Stan Brooks

“Yes, T2 and every other politician/lair is there to claim contribution to the success of the AMERICAN/US and international (Spain, Congo) basketball players who won the tile led by a non-Canadian-yet GM.”

Your cynical assessment will not attract the brightest and best people into political leadership roles in Canada, one of the reasons why we are facing such a mediocre set of choices this fall.

#25 Cottingham a bargain on 06.17.19 at 5:35 pm

600 grand buys you a two bedroom , 900 sq ft condo in vaughan which fetches around 2700 a month for rent, give or take a hundred bucks.

Subtract maintenance fees at around 70 cents a foot and another 250 for taxes and you are left with 1800 bucks.

Mortgage can be had at 2% through credit unions so your borrowing costs per year around 1000 per month .

Seems like a 5% down cmhc insured mortgage makes for a good investment with a net 700 a month pay down on principle owing, whether or not condo rises or falls in value.

Just saying.

You have ascribed no value to the downpayment. And 5% down on a non-owner-occupied rental unit? I think not. – Garth

#26 Paul on 06.17.19 at 5:45 pm

Yea, Toronto big celebrations two shot multiple stabbings!

#27 Cto on 06.17.19 at 5:48 pm

Garth for a long time you were saying negative interest rates ….never! Logically I would say you’re right.
Sadly the moves of central Bankers today and government policy defy any logic.
I used to believe that the central banks would do the right thing and let the economy weed out the Deadwood.
Sometimes recessions are necessary. But the new breed of Bankers Central bankers economist’s politicians Etc will never except that a recession is required on their watch and will run this thing right down into the ground.
I believe now that interest rates will go negative within the next 3 years and they stay there regardless of the repercussions to the system. To them , credit and debt is our only friend left.

#28 AGuyInVancouver on 06.17.19 at 5:48 pm

Brilliant! Rate cuts now so there will be no tools left in the box when the real recession hits in the next year or two.

#29 Flop... on 06.17.19 at 6:00 pm

I’m o.k with The Metrosexual Messiah attending the parade.

Trudeau should attend a parade everyday.

Isn’t that better than him meeting up with his caucus to come up with a solution looking for a problem…

M44BC

#30 Flop... on 06.17.19 at 6:13 pm

In a mischievous mood today.

Happens every time I shop at Real Canadian Superstore.

They don’t give a crap, why should I…

M44BC

#31 Steady Rate on 06.17.19 at 6:23 pm

Clearly the Fed will keep the interest rate where it is on Wednesday, if they cut (let alone raise) then all market hell will break loose.

#32 MF on 06.17.19 at 6:33 pm

You are delusional. – Garth

-We’ve known that for a while.

MF

#33 MF on 06.17.19 at 6:35 pm

#26 Paul on 06.17.19 at 5:45 pm
Yea, Toronto big celebrations two shot multiple stabbings!

-2 million people had a great time in the sun today. Businesses loved it. The entire organizational workforce and all its spin-offs made money and will continue to make money because of this win.

There literally are no negatives with the Raptors win.

MF

#34 Entrepreneur on 06.17.19 at 6:35 pm

Sometimes we as a system have to let it fall for it to correct not only for us but for earth. We have to let the people decide and go with the flow, like it or not.

As for the debt game, short term only. People are buying houses fixing it with no intentions of paying off the debt by them, only in selling. This is not a healthy way of thinking for a strong community.

Same as filling in middle-class jobs in rural and northern communities because of aging population and birth decline. A system that is trying to keep the labour shortage going. We have to learn to let it go for us to truly correct.

We also have to concentrate on municipal elections. The provincial and federal elections put on a show while municipal elections are barely noticeable. We have to start profiling our mayors and councillors to match our needs, the people on the ground, the taxpayer.

#35 Lost...but not leased on 06.17.19 at 6:38 pm

QUOTE:

If a couple more banks join the Royal (no doubt) then the stress test rate will automatically be reduced – at least by a little. Borrowers will qualify for more debt and in Canada (of course) the bigger the loan, the more you can buy and the richer you are!

A lower posted rate also means a reduced break penalty if you discharge your mortgage early.

========================
IMHO, that’s the Executive Summary …applicable to future economy.

Banks are simply lowering the rates because they fear their “collateral” may go south in value…mortgage holders pushed over the edge…they don’t want to be owning RE by default.

Other side of the coin is again to have people , out of frustration with low GIC etc. rates……gamble on the stock markets.

#36 IM in C on 06.17.19 at 6:41 pm

As long as the rules stay the same, house prices will still spiral up and up. Don’t kid yourself. Oh yes , there will be an occasional ‘blip’ but for the most part , business as usual. When might we see house prices drop? When we see foreclosed houses auctioned on the courthouse steps! Ya right, can’t see this happening in Canada.

#37 Jeff Moore on 06.17.19 at 6:41 pm

Drake…a clown? Really? He got thousands of strangers to hug each other today. That was positive in my book. You…Garth…are a grumpy person. :)

#38 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 06.17.19 at 6:48 pm

Oh God, why is Toronto like this!!??

https://ca.yahoo.com/news/shots-fired-during-toronto-raptors-parade-201031182.html

https://www.cnn.com/2019/06/17/americas/toronto-raptors-parade-shooting/index.html

Now the world knows what has been the truth forever.

Toronto is a violent, mediocre shithole.

And it’s barely begun its downward spiral.

What horrific people.

#39 Cottingham a bargain on 06.17.19 at 6:51 pm

#25 cottingham a bargain on 06.17.19 at 5:35 pm
600 grand buys you a two bedroom , 900 sq ft condo in vaughan which fetches around 2700 a month for rent, give or take a hundred bucks.

Subtract maintenance fees at around 70 cents a foot and another 250 for taxes and you are left with 1800 bucks.

Mortgage can be had at 2% through credit unions so your borrowing costs per year around 1000 per month .

Seems like a 5% down cmhc insured mortgage makes for a good investment with a net 700 a month pay down on principle owing, whether or not condo rises or falls in value.

Just saying.

You have ascribed no value to the downpayment. And 5% down on a non-owner-occupied rental unit? I think not. – Garth

————-

Ok your points taken and understood.

Therefore I would say that 100 thousand down, approximately 20%, with an ascribed value of 6% per year as you often describe is still a relatively small opportunity cost given the simple scenario I laid out above. Makes the investment still a solid bet

I would add that lower rates coming down the pipeline, as confirmed by both you and David Rosenberg on Friday only makes it a an even stronger bet going forward .

#40 MF on 06.17.19 at 6:52 pm

31 Steady Rate on 06.17.19 at 6:23 pm

“Clearly the Fed will keep the interest rate where it is on Wednesday, if they cut (let alone raise) then all market hell will break loose.”

-Exactly. Rates are still too low of course. A rate cut will signal a big loss of confidence in the economy by the FED. This is after we were told the economy is “so strong” for so long by successive FED chairs so they could sell their stupid slow normalization strategy.

Also, a rate cut runs the risk of making the FED appear partisan to politicians like Trump who have no business in influencing monetary policy.

All in all, it’s a stupid move that they would be really short sighted to do…actually, when I think about it, maybe we should expect a rate cut then.

MF

#41 Gulf Breeze on 06.17.19 at 7:01 pm

Stan Brooks,

Gold was how much in the mid 90’s? Think it was under 300.00 And I believe it hit 1800.00 in Canadian dollars the other day.

Amazing return on investment if you were smart enough to buy at that time.

The problem is most people are so ignorant of gold’s value they don’t realize that it’s price is always quoted in American funds.

In recessionary times you want to hold cash and hedge with gold. It just makes sense. If you need income from dividends, understand that if a company is eating way at its own reserves or going into debt to pay dividends, its problematic. Stay away.

Wholly inappropriate for almost all investors. No interest. No dividends. Tax on any gains. Purely a speculative play. Down $600 an ounce over the last eight years. Stay away. – Garth

#42 acdel on 06.17.19 at 7:02 pm

#34 Entrepreneur

We also have to concentrate on municipal elections. The provincial and federal elections put on a show while municipal elections are barely noticeable. We have to start profiling our mayors and councillors to match our needs, the people on the ground, the taxpayer.

——————————————————-

You hit the nail on the head with your comment regarding municipal elections; they are creating so much unnecessary hardships to the average persons bank account due to them either being on Home builders boards or thinking that they will save the world by implementing very stupid rules and laws that costs city tax payers millions if not billions; we will never know due to it being hidden in numbers. That is the real crime; until we wake up and demand change it will never work.

I wish Provincial counterparts spend a few million to audit and investigate on what is really happening in cities and towns. If guilty of fudging the numbers; one way ticket to jail. Just imagine the savings?? I am delusional but I am correct! My dream!

Good post by the way Garth; very interesting!

#43 Bob Dog on 06.17.19 at 7:02 pm

Fiddling with the new Mac Stock app today. Over 5 years the TSE has returned virtually nothing. If you factor in fees it’s negative. As long as the world is on the verge of war and trump is at the helm, I’m staying on the sidelines with a 60% cash position.

TSE June 16 2014 : 15,019
TSE June 17 2019 : 16,353

0.91842% return over 5 years.

This is a very small gain for the massive potential loss that could occur.

Up 13% in the last six months. – Garth

#44 Tater on 06.17.19 at 7:05 pm

#25 Cottingham a bargain on 06.17.19 at 5:35 pm
600 grand buys you a two bedroom , 900 sq ft condo in vaughan which fetches around 2700 a month for rent, give or take a hundred bucks.

Subtract maintenance fees at around 70 cents a foot and another 250 for taxes and you are left with 1800 bucks.

Mortgage can be had at 2% through credit unions so your borrowing costs per year around 1000 per month .

Seems like a 5% down cmhc insured mortgage makes for a good investment with a net 700 a month pay down on principle owing, whether or not condo rises or falls in value.

Just saying.

You have ascribed no value to the downpayment. And 5% down on a non-owner-occupied rental unit? I think not. – Garth

————————————

No one is paying 2700 a month for a 900 sqft condo in Vaughn.

#45 jess on 06.17.19 at 7:06 pm

shadow brokers /liar loans

‘Breathtaking’: Fake mortgage broker case reveals widespread problems

Mortgage cases expose widespread network of licensed individuals and customers willing to bend rules
Jason Proctor · CBC News · Posted: Jun 04, 2019 4:00 AM PT | Last Updated: June 4

https://www.cbc.ca/news/canada/british-columbia/mortgage-fraud-real-estate-corruption-1.5160842

#46 Bob Dog on 06.17.19 at 7:19 pm

Oops.. Zeros all turned about.

9.1% over 5 years. Still pretty bad.

#47 PastThePeak on 06.17.19 at 7:26 pm

I thought that Powell has already folded…now it is just a question of how much his suit gets wrinkled…

#48 Paul on 06.17.19 at 7:46 pm

#33 MF on 06.17.19 at 6:35 pm
#26 Paul on 06.17.19 at 5:45 pm
Yea, Toronto big celebrations two shot multiple stabbings!

-2 million people had a great time in the sun today. Businesses loved it. The entire organizational workforce and all its spin-offs made money and will continue to make money because of this win.

There literally are no negatives with the Raptors win.

MF
———————————————————————————————
I guess you or a family member didn’t get shot or stabbed, party on and gab the money!

#49 oh bouy on 06.17.19 at 7:47 pm

@#1 Caledon dave on 06.17.19 at 4:17 pm
Why is Trudeau at the Raptors Victory celebrations in Toronto? Shouldn’t he be running our Country? At what cost to the tax payer is this photo opportunity costing us? How much carbon based fuel was consumed getting him and his entourage there and back again?
_____________________________

dude, grow up already.
so petty.

#50 Shawn Allen on 06.17.19 at 8:00 pm

Bank deposit interest rates now going down

TD Direct investors can park cash in TDB8150 to earn a bit of interest.

The rate has been 1.75% for quite a few months (maybe the past year or longer?). Today it is showing 1.6%.

Presumably, interest rates paid on bank deposits in general are heading down once again at this time. At least we are still well above zero though.

Higher interest rates have been predicted steadily since at least 2009. Instead, every attempted rise – especially in mortgage rates has largely fissled out. Strange Days Indeed.

#51 Democracy Is Mob Rule on 06.17.19 at 8:02 pm

#12 crowdedelevatorfartz on 06.17.19 at 4:58 pm
@#4 Dave
“In BC, will an interest rate cut re ignite the real estate market?”

*****
I doubt it.

A million dollar + mortgage is still a million + dollars

——————————————————————

https://www.cbc.ca/news/canada/british-columbia/home-prices-vancouver-twice-what-millennials-can-afford-1.5172388

Home prices in Vancouver are quadruple what average millennial can afford

Housing affordability is still far out of reach for millennials across the country, a new report says, with the average price of a house in Vancouver perched a particularly unattainable four times higher than what those prospective buyers could safely afford to pay.

#52 ZIRP on 06.17.19 at 8:08 pm

https://www.bnnbloomberg.ca/u-s-already-in-recession-fed-will-cut-interest-rates-back-to-zero-david-rosenberg-1.1273419

U.S. already in recession, Fed will cut rates to zero: Rosenberg

The world’s biggest economy is already in a recession, according to prominent Canadian economist David Rosenberg, who says the U.S. Federal Reserve will begin cutting interest rates all the way back to zero starting this summer.

His 84th. – Garth

#53 Spaccone on 06.17.19 at 8:09 pm

Hi guys, I’m trying to figure out the trend or how a rate decline/cut will affect prefs.

My best guess from the below is that there’s so much fear and weak hands leaving that it’s good for prefs, maybe someone smmarter than me might extrapolate a different outcome but this is what I base my positive outcome on:

-rates up/bonds down –> prefs down
-rates down/bonds up –> prefs down
-stocks up –> prefs down
-stocks down –> prefs down
-major new issue –> prefs down
-major called issue –> prefs down
-prefs up –> prefs down

#54 april on 06.17.19 at 8:11 pm

Listen to Ross Kay, HoweStreet.com ‘Secrets hidden in Canada’s Housing Market in May” June 16

#55 Raging Ranter on 06.17.19 at 8:11 pm

Your second to last paragraph identifies everything wrong with central banking today. Powell should never have to care about his credibility. It never should have been on the table that he might cave to a mouthy president or to the crybabies on Wall Street.

There was a time when central bankers made it clear that their job was to administer tough medicine regardless of whining from borrowers, politicians, or Wall Street traders. John Crow used to openly taunt backbenchers crying for rate relief when testifying before Parliament. And I recall his predecessor Gerald Buouy circa 1982 telling an auditorium full of angry broke Edmontonians about to default on their mortgages that “it’s not my job to help you hang onto your homes.” And I recall Paul Volcker’s Saturday Night Massacre, when he deliberately waited for IBM to complete it’s record $1 billion bond offering before announcing a full point increase in the Fed rate, thereby slaughtering the bond market and costing every pension fund in the world its returns for the year.

There was a time when central bankers did not fear collateral damage; they accepted it, embraced it, as an unpleasant but unavoidable consequence of doing their job properly. Now, they fuss over how the markets will react, what the president will say, and the bleetings of fund managers whose quarterly performance bonus depends on a rate cut. And we wonder why goldbugs exist?

#56 Yukon Elvis on 06.17.19 at 8:15 pm

There have been six cases of dogs being bitten by rattlesnakes in the Central Okanagan this year – and a local veterinarian says that number is sure to go up.
Dr. Steve Ganton at Fairfield Animal Hospital in Kelowna says vets in the area typically see a couple of cases a month in the summer, and will probably continue to do so through September or October.
“It’s about par for the course,” says Ganton.
The incidents typically happen once warm weather arrives and dogs are off leash on trails in natural areas.

#57 TurnerNation on 06.17.19 at 8:20 pm

Get ready for more taxation the sell job is on. A snow job.
The Castro Broadcasting Corp (CBC) reportedly mentions ‘climate change’ 18 (eighteen) times on its web page:

https://i.redd.it/u4izuhoakw431.png

#58 Democracy Is Mob Rule on 06.17.19 at 8:21 pm

https://www.theglobeandmail.com/real-estate/vancouver/article-new-study-shows-almost-half-of-vancouver-condos-investor-owned/

New study shows almost half of Vancouver condos investor owned

https://www.vancourier.com/real-estate/close-to-half-of-vancouver-condos-aren-t-occupied-by-owners-1.23855594

Forty-six per cent of Vancouver condos are “not-owner occupied,” according to the latest analysis by Andy Yan, director of Simon Fraser University’s city program. Yan looked at new figures from the Canadian Housing Statistics Program published June 11.

In Richmond, 37 per cent of condos are not-owner occupied, in Pitt Meadows it’s 37 per cent, in Coquitlam it’s 36 per cent, in Surrey it’s 35 per cent and in Burnaby it’s 33 per cent.

In Toronto, the figure sits at 38 per cent.

Aren’t you happy they’re providing rentals? This is fake news. – Garth

#59 Sherri on 06.17.19 at 8:42 pm

Hi Garth. Read your blog most days. You’re a smart dude. I agree with much of the advice you give, except for one. And, that’s gold. Hey everyone to their opinion. Years ago in one of your books you suggested a minimal amount of total assets in gold. I sense you’ve wavered some since then. But that’s not why a good part of my portfolio is in gold. You know all the reasons why according to the gold bugs, bless their golden hearts! Forget about the fact it pays no interest Garth. Anyone who
bought Gold 20 years ago has done well. Forget about interest. Yes some investments have done better but a lot have provided meager or worse returns.. But, who knew 20 years ago which investments would do the best 2 decades from then? No one. In any event, hope you don’t mind me using your continued remarks on gold as a contrary indicator:) What does trouble me some is that you may soon start to get gold friendly :) But I agree, a balanced portfolio helps one sleep at night.. Keep up the good work. Sherri in Salmon Arm. BC

No sense arguing with the afflicted. – Garth

#60 The TIDE has turned on 06.17.19 at 8:51 pm

“In BC, will an interest rate cut re ignite the real estate market?”

Go out to English Bay and tell us if you have ever seen a tanker suddenly shift directions in the middle of a tidal change. Same thing. The tide real estate tide is 6 years long

#61 Democracy Is Mob Rule on 06.17.19 at 9:06 pm

Aren’t you happy they’re providing rentals? This is fake news. – Garth

They didn’t say the units were vacant.

Rented condos could be listed for sale by the owners, potentially reducing resale prices. It seems more likely that investors would panic and try to sell during a recession than owners who occupy their condo.

You have no idea what you are talking about. – Garth

#62 Tony on 06.17.19 at 9:07 pm

Re: #4 Dave on 06.17.19 at 4:28 pm

No unless there’s a trade deal agreement between China and America Vancouver area properties will continue to fall in price irrespective of interest rates.

#63 Cto on 06.17.19 at 9:12 pm

55 Raging Ranter
“Your second to last paragraph identifies everything wrong with central banking today. Powell should never have to care about his credibility”

THE BEST COMMENT TODAY

#64 Tony on 06.17.19 at 9:20 pm

Re: #40 MF on 06.17.19 at 6:52 pm

Powell will do whatever Trump tells him. Powell isn’t running for the presidency in 2020 Trump is. This is the new norm.

#65 Gulf Breeze on 06.17.19 at 9:40 pm

In Canadian funds gold has surpassed its 2011 peak. It is poised to go even higher. An excellent hedge and if it keeps doubling in value as it has over the last 25 years who cares about dividends?

It’s a hedge against the devaluation of the CANADIAN dollar for those who live in Canada or invest in Canada or who work for Canadian dollars. Be practical logical and resist the appeal to emotion that stock bugs offer on the eve of recession. And bonds? Pfffftttt be careful!

People can run but they can’t hide from reason.

If you want a C$ hedge, get US$. Unlike gold, it actually buys stuff. You guys are nuts. – Garth

#66 MF on 06.17.19 at 9:46 pm

48 Paul on 06.17.19 at 7:46 pm

No, thankfully. But, again, that also doesn’t change the fact that 2 million people had a great time in the sun and the win is good for business.

That shooting had nothing to do with the raptors or Toronto.

That’s what I mean.

MF

#67 MF on 06.17.19 at 9:48 pm

#38 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 06.17.19 at 6:48 pm

Sh** hole?

Go away already you trollolol.

MF

#68 Ace Goodheart on 06.17.19 at 10:00 pm

A lot of gold bugs on here today.

Just in the off chance that anyone under the age of 35 reads this: All the new taxes that the younger generation wants, so as to make stuff more affordable for them.

Yeah, taxes make stuff more affordable. That is the new religion among the young folks.

The guy who runs Mattamy Homes had something to say about why housing is so expensive in the GTA.

They won’t let him build any.

Or anyone else for that matter. The government makes it very difficult, to impossible, to build a new neighbourhood. Or a new condo. Huge amounts of red tape. No approvals. Years spent on litigation and various tribunals, just to get a permission to put something up.

Why?

Because the same young folks who all desperately need housing, don’t believe in suburbs. Or condos. They like green fields and grass and trees.

And they believe that if you tax everything to death, it will get cheaper. The more taxes, the less stuff costs.

Just as long as you restrict almost all new construction.

#69 Bloc Quebecois supporter, take off the hijab and niqab! on 06.17.19 at 10:04 pm

DELETED

#70 BigAl (Original) on 06.17.19 at 10:11 pm

#15 Keith on 06.17.19 at 5:05 pm
The whole mortgage rate and stress test scenario makes me wonder how different it would be if mortgage insurance was provided by the private sector.

I wonder how much insurance would be available, how much it would cost, how large of a mortgage would be insured, how much of a down payment would be required, and what kind of verifiable employment income would be needed.
=====================
Genworth is the private mortgage insurer. They mostly just copy CMHC’s policies.

http://genworth.ca/en/products/product-overview.aspx

#71 Gulf Breeze on 06.17.19 at 10:12 pm

You know it’s funny thing. Gold converts to cash so you can buy things. And as my income is all in American funds I have plenty of US cash. In the event the current three horsemen of the American econopalypse becomes four my Canadian AND American funds are properly hedged. The downside for gold is minimal. The upside could surprise.
I am with Sherri, the day you get behind gold in a big way, I will sell.
Thanks for having the cajones to print this. I do all in all respect your point of view.

#72 Cottingham a bargain on 06.17.19 at 10:16 pm

#44 tater

2 bedroom units , hwy 400 and Rutherford area , “Bellaria”, maybe a 1000 square feet 2500 to 2800 all day every day

#73 Ian Dawson on 06.17.19 at 10:23 pm

“If you want a C$ hedge, get US$. Unlike gold, it actually buys stuff. You guys are nuts. – Garth”

The problem is the US$ loses purchasing power. Like 97% since 1913. Gold retains purchasing power. Why do you think Russia and China are purchasing by the tonne? This ain’t rocket science.

Funny. Inflation has been struggling to hit 2%. Now falling in the US. You guys are nuts. – Garth

#74 Paul on 06.17.19 at 10:25 pm

#66 MF on 06.17.19 at 9:46 pm
48 Paul on 06.17.19 at 7:46 pm

No, thankfully. But, again, that also doesn’t change the fact that 2 million people had a great time in the sun and the win is good for business.

That shooting had nothing to do with the raptors or Toronto.

That’s what I mean.
————————————————————————————————
The shooting was in Toronto at a Raptors event.
If it happened in L.A. or Chicago it would have something ‘to do with the cities. I mean four people shot at least three stabbed when you see the news news on American stations first comment ‘ Raptors parade multiple people shot. We can close our eyes but the would doesn’t.

#75 Ronaldo on 06.17.19 at 10:26 pm

#65 Gulf Breeze on 06.17.19 at 9:40 pm
In Canadian funds gold has surpassed its 2011 peak. It is poised to go even higher. An excellent hedge and if it keeps doubling in value as it has over the last 25 years who cares about dividends?
————————————————————–
Actually gold still has a 6.5% to go to reach its 2011 peak of $1913.

I was just looking at 5 of the biggest etf’s (US) that contain some of the biggest gold producers and I see that they all bottomed on Sept. 11/18 and are now up in value from 34.9% to 41.5%. The only one that I have (Horizons fund) also bottomed Sept. 11/18 and is now up 35.3%. I would tread cautiously on expecting much further gains from here. The big 5 pay dividends ranging from .4 to 1%. The one I hold is paying around 5% right now but has paid up to 6% and greater when the price was trading lower. I will be dumping it shortly as the trend seems to be turning down. I will be looking at picking it up again after a 20% drop. When I hear the experts starting to push I figure its time to take profits. They were wrong in 08 and have been wrong many times afterwards.

#76 Westley Boneham on 06.17.19 at 10:33 pm

Garth, gold up yuge this year, bitcoin doubled? Very quiet on those asset classes. “Never exit an asset class.” I have heard before on this blog. I hope oil can be up yuge because if oil is being used, it’s being used for something probably GDP related, yeah?

Neither belong in the portfolios of normal people. – Garth

#77 Greg on 06.17.19 at 10:57 pm

Anyone know what EFA was down over a dollar today while a Canadian dollar hedged version XIN.to was flat?
Both track EAFE Index and fx was flat today.

Euro and Asian markets also fairly flat so why was EFA down so much?

#78 TRUMP on 06.17.19 at 10:58 pm

YUP…. TOLD YA SO

#79 SNOOP DOG on 06.17.19 at 11:04 pm

Sure..Blame Trump.

Cuz Obama didn’t want to put the whole country on welfare.

And the Bush’s didn’t reap the rewards from sending the troops into the Middle East.

JUST CALL IT FOR WHAT IT IS.

A SOCIETY BUILT FOR THE RICH BY THE RICH!!!

#80 MF on 06.17.19 at 11:08 pm

#74 Paul on 06.17.19 at 10:25 pm

“The world” is a combination of largely totalitarian states and banana republics.

I’d say they have their own things to worry about.

Closest city to Toronto is probably Chicago. Are there any shootings in Chicago?

MF

#81 dosouth on 06.17.19 at 11:16 pm

It will be good to see another year of indecisiveness driving housing prices down along with interest rates. The sidelines are a great place to watch this game from…..for now.

#82 Stan Brooks on 06.17.19 at 11:24 pm

There is, and will never be in your lifetime, hyperinflation. The gold guys are dream merchants. Always wrong. – Garth

1. I never said that we will experience hyperinflation.
2. I am not a gold bug.

You need no hyperinflation to lose significant part of the purchasing power of your savings.

8 % + real inflation on yearly bases for 2-3 decades with interest rates at 0 is enough, losing 80 % of the purchasing power of money vs. 100 %. Big deal.

#83 Nonplused on 06.18.19 at 12:09 am

They can cut rates to zero and it won’t help YVR or YYZ at this point. The whole point of a bubble is that the economics are driven by the expected future gains, not the value proposition of the underlying asset. That is mostly out of the market now. Might ease conditions in some of the less bubbly markets but I don’t think it’ll drive price increases. Some of these markets, like YYC, haven’t gone anywhere in 10 years despite rates having been really low the whole time.

The deflation will continue. Lower rates might soften the landing and provide enough fuel to circle the airport one more time, but we are still looking at an arrival not a departure. And let’s hope we aren’t on a 737 Max and some computer gets things wrong and down we all go.

———————

The biggest risk in the market right now is the Iran crisis made larger by the tanker attacks in the Gulf of Oman. Whether Iran was behind the attacks or not, and the evidence is not clear even the Japanese are reluctant to make that conclusion, it doesn’t matter because we live in a society where truth doesn’t matter. If the US want to attack Iran, they will do so regardless of any facts that may be referred to as “the truth”, same as they did to Afghanistan, Iraq, Libya and Syria. They will manufacture their own “truth”. We live in a world where everyone has their own “truth” and facts are merely used occasionally as garnish like spice on a steak. The facts don’t really matter.

There are many different ways that psychologists have discovered over the years to prove that the human brain isn’t very good at facts or “truth” and subject to propaganda. The brain evolved to quickly detect and respond to threats, to compete sexually and thus for status, and to find or hunt food. But so did the brain of a bee. It is not a super computer. It is easily fooled, but nature doesn’t care as long as survival resulted.

This is easy to prove just by looking at purchasing decisions. Do all these city dwellers really need an SUV? Is a 60 inch TV really better than a 52 inch? Is a Harley really worth twice as much as a V-Star? Is a 50 year old house really worth over a million dollars? These are not logical decisions based on fact, but emotional decisions based on trends.

Anyway, to get to the point, war with Iran will be bad, and if it starts it will be too late to save your portfolio. Many learned minds know that energy and the economy are synonymous, and any disruption in energy supplies that results and drives the price of oil back up to $140 a barrel will cause another 2008 like event, but this time probably worse. No economies on the planet, save the oil exporters like Russia and Saudi Arabia, can survive high energy prices. The economy just doesn’t work that way.

Also why would Iran do it? Why would they provide the Americans with a reason to attack? They would have to be stupid. And why are they so incompetent that they couldn’t even sink a ship? And why was their fire boat putting out the flames and rescuing sailors? It doesn’t add up.

All logic points to some other entity being behind this unless Iran’s leaders actually want to turn their country into another Iraq and end up hanged like Hussien.

So the question is, who benefits from these attacks, assuming that only someone who would benefit would carry them out?

Well, ISIS, Iran has been fighting them in Syria for some time now and even in Iraq.

Israel doesn’t really like Iran at all.

The Houthis don’t like Saudi Arabia at all. This one is interesting to think about because if it was the Houthis, who are supported by Iran, they may have been off the playbook since Iran wouldn’t want that sort of thing to occur, I presume. But as was the case with ISIS, you can’t always control your proxies. Once you give them a weapon, you don’t really know where they will use it.

And of course there is Bolton. He wants war with Iran bad. Could he have set up a false flag?

The only thing we can know for sure is if the Iranians did it, they are idiots. They should know that bringing down the might of the US air force and Navy would be a very bad idea. Therefore I conclude they did not do it. Otherwise they are complete and utter idiots.

#84 Gulf Breeze on 06.18.19 at 12:17 am

Ronaldo,

Thank you. You’re right about 2008 and experts being totally wrong. Gold should have been the ultimate safe haven but didn’t perform that role.

And that’s not the first time that’s happened in the last decade.
But I feel that it actually has been performing this role recently and it may be due to a lack of synchronized policy efforts on the part of the Chinese and American central banks.

I am careful careful. As Garth notes women tend to be risk averse and that is me. So I only have enough gold to keep me from destitution of the sh** hits the flan. A real recipe for disaster, so to speak.

#85 baloney Sandwitch on 06.18.19 at 12:18 am

Falling interest rate. Wow. I bought 100K of US 20+ yrs treasuries today. Theory is that as interest rates drop long bond go up – a lot. Double digits return by December.

#86 Midnights on 06.18.19 at 12:21 am

Wow, Garth are you possibly saying that “Eisman the Great” might be right? Nothing wrong with being wrong it’s admitting it that people have problems with.

#87 Midnights on 06.18.19 at 12:26 am

The Motley Fool for the Greater Fools

https://www.fool.ca/2019/06/17/are-canadas-banking-stocks-ready-to-crash/

#88 Jon on 06.18.19 at 12:54 am

Aren’t you happy they’re providing rentals? This is fake news. – Garth

Garth you often refer to Europe and how everyone there is happy with rentals. In Europe you have the right to stay in your rental for years or decades.

However the “rentals” we should be happy about here in Vancouver don’t have the same rights as you’re force to move if someone buys and wants to move in.

I’d be happy if I didn’t have to compete with speculators to buy a condo. For now though I’ll let them buy them at ridiculous prices and rent them for a price that can’t come close to covering the mortgage costs, let alone other costs including the value of the downpayment.

#89 Wallflower on 06.18.19 at 12:59 am

Investor owned condos does not = rentals.
And determining the actual percentage of vacant/rented would be revealing.
I know a couple who bought Yaletown condo last year. Twenty years old condo.
Never lived in.

#90 Smoking Man on 06.18.19 at 1:10 am

Gravy Train on 06.17.19 at 6:50 am
#42 Smoking Man on 06.17.19 at 12:34 am
“Love everyone you meet no matter what. It’s pure happiness. Melts your heart. Don’t hate just love.” Does this new attitude of yours mean that you no longer hate Mexicans, Muslims, blacks, Jews, gays, lesbians, transgendered and others scapegoated and discriminated against by Donald Trump? Does this also mean that you disavow Donald Trump and his hatemongering? Have you given up fascism, neo-Nazism, and white supremacy? If all of the above, then there is hope for you yet! :)

That’s a shit load of hate, might as well tose cow shit into my face.

So I had a God moment for a change. You want to ruin that?

I like small govt, deregulation, lower taxes. May the best dodge ball player win the trophy.

You bleeding heart govt paid teat suckers who never experienced the thrill of selling a glass of lemonade that cost you 5 cents to make, and you sold it for a buck.

It’s an amazing feeling.

Pay your taxes bitch so I , me. The obidance certificate collecter, can lecture a risk taker how fk evil he is.

My loot is safe. Yours even your pension is not safe with the spend freaks you so adore. Let that sink in idiot.

The fact that you cant think. Proves over Scholling is over rated.

I’m drunk again and proud. I should organize a proud drunk parade where many words go.

Dr Smoking Man
PhD Herdonomics.

#91 data keluaran sgp on 06.18.19 at 1:39 am

It is really a double-pool lottery, that is certainly, the winning combination is derived that from two separate number drawings. No more to oldsters have to endure the continual chant of “Are we there yet. While, the battle was anticipated to be quicker to make a decision the winner as Mueller had been in 4:1 chip advantage, but it went otherwise and turned into one of probably the most entertaining heads-up matches from the WSOP.

#92 millmech on 06.18.19 at 2:16 am

#76
Haha, gold up huge, frigging funny, co worker bought in 2011 and still has not broke even yet. Eight years of losses just to say I told you so, in those same eight years my investments doubled and then some. I bet in the next eight years flat returns for gold, investments doubling again.

#93 Bob Dog on 06.18.19 at 2:18 am

Trying to explain gold to a central banker is futile. Even in the face of historical fact the central banker will just point out that the market is up 15% over the last 6 months and ignore the fact that the market was down 30% over the previous 6 months.

#94 Oh Canada, I weep. on 06.18.19 at 2:26 am

Even more important is the launch of Jordon Peterson’s censor free site.

https://www.theguardian.com/technology/2019/jun/13/jordan-peterson-launches-anti-censorship-site-thinkspot

Let freedom reign.

Oh right, and as of today Canada has now entered the “climate emergency” twilight zone. Do you note the difference? Take heart, no one else did either.

#95 Captain Uppa on 06.18.19 at 6:39 am

So people here would rather own gold than real estate? Rather gold than compounding diversified equity/bond portfolios that pay dividends?

I’m with Garth, you’re all nuts.

#96 Midnights on 06.18.19 at 7:06 am

Only in Canada…
https://www.armstrongeconomics.com/world-news/taxes/taxing-you-on-what-your-should-have-done-with-your-property-but-didnt/

#97 Remembrancer on 06.18.19 at 8:05 am

#94 Oh Canada, I weep. on 06.18.19 at 2:26 am
Even more important is the launch of Jordon Peterson’s censor free site.
—————————-
Or anyone so disposed could just go away and wallow in Breitbart’s comment section…

#98 Tater on 06.18.19 at 8:17 am

#72 Cottingham a bargain on 06.17.19 at 10:16 pm
#44 tater

2 bedroom units , hwy 400 and Rutherford area , “Bellaria”, maybe a 1000 square feet 2500 to 2800 all day every day
————————————————————-

In the last year, only 2 have rented for 2600 or more. One at 2600 for 1000 sqft, the other 1100 for 2700. Call it 2.50 a sqft. So you’re 900 sqft place would be 2300 ish. Funny enough, right where #1508 was rented.

So, 2300 seem right, which is well below your 2700.

Luckily for you, they don’t cost 600k. More like 550k. With 20% down, mortgage is around 2100 a month. Property taxes another 230, and maintenance at 630. So, your cashflow is negative by 660 per month.

In 5 years, if prices go up 3% a year, condo is now worth 640k, 375k remains on the mortgage and you’ve invested another 40k to make up negative cash flow.
Add in LTT when you bought, commission when you sell and your return on cash is about 6.5%. And to get it, you need a massive bull market in prices to limp higher for another 5 years.

If prices are flat, you lose money. If they go down, well, just 3% a year and it gets very very ugly.

#99 Headhunter on 06.18.19 at 8:18 am

doesnt matter if interest rates are zero.. horses are gone too late to close the barn doors. Incomes do not support asking prices in most of the “hot spots”

“The central bankers don’t want to be pushed around by a politician.” Truth drop large Mr Turner!! Tacit admittance that democracy really is just a word and has always been smoke/mirrors..

TPTB dont care about the people/country.. Non elected people making money out of thin air and charging interest on it.

Maybe we should try to sweep our porch instead of bitching on The Pres of the USA. Guy must be doing something right as the “establishment” has gone ape [email protected]#$ over the guy.

#100 crowdedelevatorfartz on 06.18.19 at 8:23 am

@#95 Captn Uppa
“I’m with Garth, you’re all nuts.”

*****

I believe the Full Moon last night might explain it.

#101 dharma bum on 06.18.19 at 8:25 am

#53 Spaccone

-rates up/bonds down –> prefs down
-rates down/bonds up –> prefs down
-stocks up –> prefs down
-stocks down –> prefs down
-major new issue –> prefs down
-major called issue –> prefs down
-prefs up –> prefs down
——————————————————————-

Prefs are for yield, not capital appreciation.
Buy ’em, hold ’em, let the dividends keep flowing.
Prefs down, yield up.
Hang on long enough, they get called, and you get your money back.
Prefs = free money making machine.

#102 dharma bum on 06.18.19 at 8:34 am

#87 Midnights

The Motley Fool for the Greater Fools
——————————————————————-

Never trust an article that spells “border” b-o-a-r-d-e-r.

#103 crowdedelevatorfartz on 06.18.19 at 8:39 am

@#38 50 years of TO
“Oh God, why is Toronto like this!!??

++++
More people were hurt by being trampled while running in panic , than the gunshots.
Large crowds render the police virtually useless.
Large crowds allow criminality to flourish.
Nothing new there.
What the idiot with the gun doesnt realize is.
In this day and age.
You’re ALWAYS on camera.

Unlike the good old days

For example.
25 years ago this week, Vancouver rioters burned , looted and smashed their way through downtown Vancouver after Game 7 in the Stanley Cup went to the other team.
Not many were charged.

2011 Stanley Cup riots were almost as messy ($5 million in damage, 140 hurt) but the big difference was the video evidence.
The police took a lot of lessons from that exercise in stupidity.

I expect the “shooter” to be caught in less than a week.

As one ex VPD sargeant commented 25 years ago.

“I love the smell of tear gas in the morning….it smells like……. victory”

#104 MF on 06.18.19 at 9:17 am

83 Nonplused on 06.18.19 at 12:09 am

Among the anti American (and her Mid East ally) propaganda in that post is the fact that there is a large community in Iran that wants their government toppled.

This, plus the fact it is well known that Iran is supporting regional radical militias that have no purpose other than instigating violence.

It is the support of these militias, in addition to the threat of nuclear capability that is the problem.

The Mid East is complicated yes, but not with this issue. Let stay focused.

MF

#105 not so liquid in calgary on 06.18.19 at 9:21 am

@#1 “Why is Trudeau at the Raptors Victory celebrations in Toronto? Shouldn’t he be running our Country?”

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

Was I the only one cringing at PM Trudeau’s campy speech?

#106 fancy_pants on 06.18.19 at 9:24 am

Common sense can see right through the excuses. The real reason is EVERY gear and cog in the giant economic hamster wheel RELIES on cheap financing now. And low rates are an excellent hidden tax on savers anyways.

At least Wall street isn’t complaining. Thankfully money isn’t toxic yet; we have not yet entertained negative interest rate policies but the fact that some central banks have reveals how far the debt-driven systems are broken.

and if nothing else, dovish policies fit the socialist leaning political narrative; everyone is special and deserves home ownership and a car in the driveway. The take home message is that saving is for losers, it deviates too far from totalitarian control and reliance

#107 crowdedelevatorfartz on 06.18.19 at 9:46 am

@#96 Midnights
“Only in Canada…

https://www.armstrongeconomics.com/world-news/taxes/taxing-you-on-what-your-should-have-done-with-your-property-but-didnt/

That reminds me of an artist in the mid 1980’s named Tony Onley

Revenue Canada decided that since he was a famous artist his new, unsold paintings, were worth thousands $$$.
He argued that they werent worth anything until they were sold and he wasnt able to deduct the cost of producing them until they sold.
Revenue Canada disagreed.
So he announced that he was having a bonfire on Wreck Beach the following week and all were welcome to watch him burn 1000 of his paintings.
The reporter interviewing him said, ” You’re just bluffing. You’re really not going to burn all your paintings are you?”

Onley held up a painting estimated to be worth about $1500 in 1985 dollars and lit it.
It was gone in seconds.

“They’re mine, and I can do what I want with them.
Come to Wreck beach next week for a bonfire and see if I’m bluffing.”

The tax boys had an emergency meeting with him and backed off.

https://vancouversun.com/news/staff-blogs/art-from-the-archive-toni-onley-versus-revenue-canada

#108 crowdedelevatorfartz on 06.18.19 at 9:48 am

@#105 Calgary
“Was I the only one cringing at PM Trudeau’s campy speech?”

+++++
All his speeches are cringe worthy.

#109 Tim L on 06.18.19 at 9:50 am

What’s with the weird use of capital letters in Ed Pennock’s message?

#110 PastThePeak on 06.18.19 at 10:31 am

#53 Spaccone on 06.17.19 at 8:09 pm
Hi guys, I’m trying to figure out the trend or how a rate decline/cut will affect prefs.

My best guess from the below is that there’s so much fear and weak hands leaving that it’s good for prefs, maybe someone smmarter than me might extrapolate a different outcome but this is what I base my positive outcome on:

-rates up/bonds down –> prefs down
-rates down/bonds up –> prefs down
-stocks up –> prefs down
-stocks down –> prefs down
-major new issue –> prefs down
-major called issue –> prefs down
-prefs up –> prefs down
++++++++++++++++++++++++++++

It is actually pretty straight forward:
– Rate reset Prefs will rise in value as BoC 5-year yield rises, as this is what the “reset” is based on. In a falling yield environment (now), the value falls as the Pref will reset (likely) at a lower value.

– Perpetual Prefs fall in value as interest rates / bond yields rise, as the “risk free” yield in bond becomes enticing. Perpetuals *rise in value* when the yields fall (now), as a 5-6% yield as rates head to 0 sounds pretty good.

You own Prefs for the dividend distribution and diversification, not capital appreciation. Unless company goes bankrupt of severely impaired, the dividends will flow each quarter. Purchase from solid companies. Purchase for long term, and buy when that class is out of favour. During the wealth build phase, you use the distributions to fund other asset purchases.

#111 meslippery on 06.18.19 at 10:59 am

Duke University’s Canine Cognition Center
————-
https://www.theatlantic.com/science/archive/2019/06/domestication-gave-dogs-two-new-eye-muscles/591868/?utm_source=pocket-newtab

#112 Renter's Revenge! on 06.18.19 at 11:06 am

#77 Greg on 06.17.19 at 10:57 pm
Anyone know what EFA was down over a dollar today while a Canadian dollar hedged version XIN.to was flat?
Both track EAFE Index and fx was flat today.

Euro and Asian markets also fairly flat so why was EFA down so much?

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

I’ve always been confused about the price behavior of international index ETFs, so I just ignores dem.

However, I do have some theories for their weird price changes:
– The ETF was pregnant with a dividend, and then gave birth. The price dropped in proportion to the yield it just paid out.
– Index ETFs have a market price and a net asset value (NAV). The price can deviate from the NAV quite a bit some days because of trading.
– International index ETFs that trade in North America trade at different times of the day than when their underlying assets are trading. The market price is a combination of what happened yesterday and speculation about what is going to happen tomorrow.
– EAFE has like 50 currencies to trade in. So looking at FX rates and trying to understand price changes will make your head explode.

#113 Ronaldo on 06.18.19 at 11:24 am

#82 Stan Brooks on 06.17.19 at 11:24 pm
There is, and will never be in your lifetime, hyperinflation. The gold guys are dream merchants. Always wrong. – Garth

1. I never said that we will experience hyperinflation.
2. I am not a gold bug.

You need no hyperinflation to lose significant part of the purchasing power of your savings.

8 % + real inflation on yearly bases for 2-3 decades with interest rates at 0 is enough, losing 80 % of the purchasing power of money vs. 100 %. Big deal.
————————————————————-
Ok Stan, here is a question for you. 50 years ago (1969) a million dollars could purchase 100 homes in British Properties in West Vancouver. Today that same million would only get you 1/5th of that same home.

What percentage of purchasing power has been lost in those 5 decades?

#114 Shawn Allen on 06.18.19 at 11:34 am

Buying Long Bonds to Benefit From Lower Rates

#85 baloney Sandwitch on 06.18.19 at 12:18 am
Falling interest rate. Wow. I bought 100K of US 20+ yrs treasuries today. Theory is that as interest rates drop long bond go up – a lot. Double digits return by December.

***********************
That will work if long rates fall from the current 2.4% to some materially lower level. You seem very sure that will happen.

But it is interesting to note that over the next 20 years that $100k 20 year bond will return only that 2.4%. Let’s assume you effectively bought a new 20 year bond at face value. New bonds are issued at face value. That bond will likely change hands many times with some holders making a capital gain and some a loss. Ultimately it will mature at its face value of $100k and will pay only the $2,400 per year for 20 years.

You are playing a game where you will win if rates fall in the short term and you sell. But if you sell above $100k face value then some holder down the line will lose what you gain. Not like stocks which are generally expected to keep rising. The bond must, like a spawning salmon, return to its home, in this case $100k.

I wish you good luck in your short-term bet on interest rates.

#115 jess on 06.18.19 at 12:18 pm

Supreme Court Hands Democrats A Win On Racial Gerrymandering In Virginia

June 17, 201911:30 AM ET
https://www.npr.org/2019/06/17/733389132/supreme-court-hands-democrats-a-win-on-racial-gerrymandering-in-virginia

mitch mc connell
https://www.mprnews.org/story/2019/06/17/npr-tobaccos-special-friend-what-internal-documents-say-about-mitch-mcconnell

Michel Platini, Europe’s Former Soccer Boss, Is Arrested As Part Of Qatar Inquiry

June 18, 20198:01 AM ET

#116 Remembrancer on 06.18.19 at 12:24 pm

#104 MF on 06.18.19 at 9:17 am
83 Nonplused on 06.18.19 at 12:09 am

Among the anti American (and her Mid East ally) propaganda in that post is the fact that there is a large community in Iran that wants their government toppled.

The Mid East is complicated yes, but not with this issue. Let stay focused.
——————————————————-
Stick with complicated. The last time someone thought there was a simple problem / solution was decades, 1000s of lives and trillions of $$ ago…

And as for a large community that wants anything, there are no scenarios where the country comes out like the Dutch in WWII to cheer the liberators / regime changers, so forget that fantasy, you get the breakup of post-Soviet Yugoslavia on steroids or post-war Iraq 2.0, best case…

Appease? No. Contain? Yes. Nukes? No way. As for so-called local allies, that’s a path to be sucked into tribal beefs 100s if not 1000s of years old and being used as mercenaries by potentates not any better…

#117 jess on 06.18.19 at 12:46 pm

the word : “monopsony.”
apple vs pepper
https://www.npr.org/sections/money/2019/06/18/733510647/apples-buying-power-and-the-woman-who-named-it

https://harvardlawreview.org/wp-content/uploads/2018/12/536-601_Online.pdf?utm_source=npr_newsletter&utm_medium=email&utm_content=20190617&utm_campaign=money&utm_term=nprnews&utm_id=15638468

#118 IHCTD9 on 06.18.19 at 1:08 pm

#98 Tater on 06.18.19 at 8:17 am
#72 Cottingham a bargain on 06.17.19 at 10:16 pm
#44 tater

2 bedroom units , hwy 400 and Rutherford area , “Bellaria”, maybe a 1000 square feet 2500 to 2800 all day every day
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In the last year, only 2 have rented for 2600 or more. One at 2600 for 1000 sqft, the other 1100 for 2700. Call it 2.50 a sqft. So you’re 900 sqft place would be 2300 ish. Funny enough, right where #1508 was rented.

So, 2300 seem right, which is well below your 2700.

Luckily for you, they don’t cost 600k. More like 550k. With 20% down, mortgage is around 2100 a month. Property taxes another 230, and maintenance at 630. So, your cashflow is negative by 660 per month.

In 5 years, if prices go up 3% a year, condo is now worth 640k, 375k remains on the mortgage and you’ve invested another 40k to make up negative cash flow.
Add in LTT when you bought, commission when you sell and your return on cash is about 6.5%. And to get it, you need a massive bull market in prices to limp higher for another 5 years.

If prices are flat, you lose money. If they go down, well, just 3% a year and it gets very very ugly.
___

Just looking at rents online for 2 bedroom 1000+ sf rentals at the “luxurious Bellaria”, and if anything 2.50/sf is high. Better than even chance he’ll lose big with these real world numbers.

Cottingham sounds like one of those dudes who buys a place for 500K, sells it 5 years later for 600K, and tells you he made 100K.

#119 Remembrancer on 06.18.19 at 1:27 pm

#115 jess on 06.18.19 at 12:18 pm
Supreme Court Hands Democrats A Win On Racial Gerrymandering In Virginia
—————————————–
Should read as “…hands supporters of democracy a win…”

#120 Greg on 06.18.19 at 2:31 pm

#112 Renter’s Revenge! on 06.18.19 at 11:06 am

Thanks. Looked up the dividend. Went ex-dividend June 17. Dividend is $1.3761. So that explains the drop yesterday relative to other EAFE trackers.

On June 21 I get 1.3761 x # of shares. Pay day

#121 Ronaldo on 06.18.19 at 3:21 pm

An article from a blog that I follow and an article by Michael Ballanger and his thoughts on gold. Michael expresses my same concerns with getting into gold at this time and as I said in a previous post when the big guyz start pushing you to buy, it is probably time to sell.
Don’t be one of those to be sucked in. Enjoy.

https://www.streetwisereports.com/article/2019/06/17/the-golden-moment-of-truth-is-upon-us-1-400-plus-or-not.html?utm_source=delivra&utm_medium=email&utm_campaign=TRR6-18-19&utm_id=37530241&dlv-ga-memberid=941472332

#122 espressobob on 06.18.19 at 3:38 pm

It’s days like this watching rising markets and wondering if one should take some profit from added positions late last year? What to do with all that profit?

Prefs are getting a beating at the moment and seem to be an unloved asset class. I know where all my house money is going. The yield is too attractive to ignore.

#123 T on 06.18.19 at 3:46 pm

#80 MF on 06.17.19 at 11:08 pm
#74 Paul on 06.17.19 at 10:25 pm

“The world” is a combination of largely totalitarian states and banana republics.

I’d say they have their own things to worry about.

Closest city to Toronto is probably Chicago. Are there any shootings in Chicago?

MF

——-

See MF, this is where you just don’t get it.

You don’t compare Toronto to the worst of cities in the US. Of course Chicago has (more) shootings. This is a failed argument. Toronto compares more to Boston, Minneapolis, Denver, etc. This is a narrative brought to you by the countless fools on Reddit, a community of people whom have never travelled and feed off each other’s nonsense.

Toronto is a fairly safe city, but it’s not an incredibly safe one. Gang culture is prevalent and on display at almost any event held in Toronto. There are many comparable cities throughout the US with a similar population which are just as safe.

If you want to compare crime ridden Canadian cities to American try Regina, Winnipeg, Thunder Bay, etc. Obviously they don’t have the population of their comparable US cities, but neither does Canada.

Toronto is just another big city with similar big city problems like any truly comparable city across North America.

#124 coinut on 06.18.19 at 4:15 pm

It is likely that the government will be looking to either raise corporate tax (hi Jagmeet S & T2), or perhaps shut down various write-offs that corporations are currently entitled to. Watch out below!

https://www.cbc.ca/news/business/cra-corporate-taxes-1.5179489

https://globalnews.ca/news/5403203/canadian-corporations-tax-dodge-11-billion-canadian-revenue-agency/

https://www.bnnbloomberg.ca/ottawa-estimates-corporations-dodged-up-to-11-4-billion-in-2014-tax-payments-1.1274971

#125 moh omar on 06.18.19 at 4:51 pm

#17
#1 Caledon dave on 06.17.19 at 4:17 pm

Duh he was on his campaign trail. Free publicty. Why don’t you comment on all the Toronto NBA fans booing Doug Ford.

Doug like I said a good house in Brampton new from builder was a good idea. If you can afford it.

Correction:

#1 Caledon dave on 06.17.19 at 4:17 pm

Duh he was on his campaign trail. Free publicty. Why don’t you comment on all the Toronto NBA fans booing Doug Ford.

Garth like I said a good house in Brampton new from builder was a good idea. If you can afford it.

#126 Mohammad on 06.18.19 at 4:54 pm

#25 Cottingham a bargain

Vaughan is terrible these days.

Cousin of mine (smart guy) is renting a new Semi 2000 square foot for 2600 (lots of money, but still good price)

3 story semi detaches with basement going for $999,999 109,999 however decent (2200 square foot)
Owners own a bunch of houses.

Vaughan doesn’t look good these days. You could get better in Brampton new for the bulder for 730. Good area.

#127 Cottingham a Bargain on 06.18.19 at 5:07 pm

118-IHCTD9

My intention would not be to sell in 5 years but to continue to carry it for a very long period of time in what appears to be a very long period of low interest rates .

Run your numbers objectively going out 15 or 20 years factoring in rental rate increases along with some maintenance fee and prop tax as well if you like and get back to me.

Oh ya hold on to the nonsensical insults

#128 tccontrarian on 06.18.19 at 6:01 pm

“If you want a C$ hedge, get US$. Unlike gold, it actually buys stuff. You guys are nuts.” – Garth
/ / / / / / /

And how does one hedge against the devaluation of ALL ‘fiat’ currencies? I haven’t seen you try to deal with this problem (I’ve been reading this blog for severa years, but I’ve missed a few)

TCC

You invest and grow wealth faster. You don’t buy rocks. – Garth

#129 tccontrarian on 06.18.19 at 7:41 pm

#128 tccontrarian on 06.18.19 at 6:01 pm

“If you want a C$ hedge, get US$. Unlike gold, it actually buys stuff. You guys are nuts.” – Garth
/ / / / / / /

And how does one hedge against the devaluation of ALL ‘fiat’ currencies? I haven’t seen you try to deal with this problem (I’ve been reading this blog for severa years, but I’ve missed a few)

TCC
**
You invest and grow wealth faster. You don’t buy rocks. – Garth

/////

Gosh Garth,

I don’t ‘buy rocks’. Gold is a precious ‘metal’ (because it’s rare), that is extracted from rocks (as are copper, iron, uranium, oil, … etc).
The businesses involved in the extraction of all these are ‘investable’ entities; so I ‘invest’!
‘How’ to invest is the tricky part – for me and for everyone.

TCC

BTW, I just heard someone on BNN who said, “after watching Amazon for 5 years, we decided recently to buy”. I had to laugh! It’s not only the retail investors who like to buy ‘high’; money managers succumb to recency bias as well!

#130 Chris Tanner on 06.19.19 at 10:51 am

Are you kidding me. Private. Anything on the internet or using digital technology is not private. Private Facebook currency is like your information on Facebook is private. Give me a break. We don’t even have private property rights in our constitution in Canada unlike in the U.S.